After the Ella Cafe agreement expires, does the non-compete for Ella Cafe extend to any other Ella Cafe operating under the System and Marks?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
hip or association with, any fast casual, quick service, or full service coffee house, or retail Coffee House of any type, that offers coffee and/or assorted café items as a primary menu item or that derives more than 25% of its revenue from the sale of coffee and/or assorted café items, other than an Coffee House operated pursuant to a then-currently effective Franchise Agreement with Franchisor, at any location within the United States, its territories or commonwealths, or any other country, province, state, or geographic area in which Franchisor or its Affiliates have used, sought registration of, or registered the Marks or similar marks or operate or license others to operate a business under the Marks or similar marks.
- 10.2. Noncompetition After Expiration or Termination of Agreement. Commencing upon the later of: (a) a transfer permitted under Section 8. of this Agreement, expiration of this Agreement (without renewal), or termination of this Agreement (regardless of the cause for termination); or (b) a final court order (after all appeals have been taken) with respect to any of
the foregoing events or with respect to enforcement of this Section 10.2., and continuing for an uninterrupted period of two years thereafter, Developer will not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, or legal entity, own, maintain, advise, operate, engage in, be employed by, make loans to, invest in, provide any assistance to, or have any interest in (as an owner or otherwise) or relationship or association with any casual, fast-casual, or quick-service coffee house, retail Coffee House, coffee/food truck, kiosk, cart, or store inside store of any type, that offers coffee and/or assorted café items as a primary menu item or that derives more than 25% of its revenue from the sale of coffee and/or assorted café items, other than a Ella Coffee Company, LLC Coffee House operated pursuant to a then-currently effective Franchise Agreement with Franchisor, that: (i) is, or is intended to be, located at the location of the former Location; (ii) is within a five-mile radius of the former Location;
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, after the franchise agreement expires or terminates, the franchisee is restricted from engaging in competitive activities within specific geographic areas. This non-compete extends not only to the location of the former Ella Cafe franchise but also to other Ella Cafe locations operating under the Ella Cafe System and Marks.
Specifically, the franchisee is prohibited for two years from operating or being involved with any casual, fast-casual, or quick-service coffee house, retail Coffee House, coffee/food truck, kiosk, cart, or store inside store of any type, that offers coffee and/or assorted café items as a primary menu item or that derives more than 25% of its revenue from the sale of coffee and/or assorted café items. This restriction applies if the new business is located at the former Ella Cafe location, within a five-mile radius of the former location, or within a five-mile radius of any other Ella Cafe operating under the System and Marks. The geographic scope includes the United States, its territories, and any other area where Ella Cafe or its affiliates have used, sought registration of, or registered their trademarks.
This means that a former Ella Cafe franchisee cannot open a competing coffee business near their old location or near any other existing Ella Cafe franchise. This restriction is in place to protect Ella Cafe's market and brand integrity. The non-compete obligations also apply to any departing owner of the Developer for a two-year period beginning on the date such person ceases to meet the definition of an Owner. The time periods relating to the obligations described in this Section 10.2. will be tolled during any period of noncompliance.