What agreement must an Ella Cafe franchisee sign to obtain multi-unit development rights?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
You do not have the right to establish additional franchised Coffee House unless you sign a MUDA in the form attached as Exhibit C to this disclosure document for at least five units. If you and we sign a MUDA, then you will have the right to establish a mutually-agreed number of additional Coffee Houses on a mutually-agreed schedule. Under the MUDA, your right to develop additional Coffee Houses is subject to the following: (1) you must comply with the mutually-agreed development schedule, (2) you must have sufficient financial and organizational capacity to develop, open, operate, and manage each additional ELLA business, (3) you must be in compliance with all brand requirements at your open Ella Coffee House business(es), and (4) you must not be in default under any other agreement with us. We will approve the location of future sites and territories for those sites, and our then-current standards for sites and territories will apply. You are not obligated to develop additional Coffee Houses under the MUDA, and you may terminate it any time without penalty; however, if you do not meet your development schedule in the MUDA, we have the right to terminate your right to develop additional coffee houses.
If you fail to meet any of your obligations under the MUDA, including the development obligations, we (i) terminate or modify any territorial protections granted to you, (ii) reduce the size of the Development Area, )iii) reduce the number of Coffee Houses which you may establish under the Development Schedule. There are no circumstances that permit us to modify your territorial rights under the MUDA.
Source: Item 5 — INITIAL FEES (FDD pages 9–10)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, a franchisee must sign a Multi-Unit Development Agreement (MUDA) to gain the right to establish additional Ella Cafe locations. This agreement, which is included as Exhibit C to the FDD, allows the franchisee to develop a mutually agreed-upon number of additional coffee houses based on a mutually agreed-upon schedule. The MUDA requires a commitment to develop at least five units.
Under the MUDA, the franchisee's right to develop additional Ella Cafe locations is contingent upon several factors. These include compliance with the development schedule, having sufficient financial and organizational capacity to manage each additional business, adhering to all brand requirements at existing Ella Cafe locations, and remaining in compliance with all agreements with Ella Cafe. The franchisor retains approval rights over the locations of future sites, and the then-current standards for sites and territories will apply.
While the franchisee is not obligated to develop additional coffee houses under the MUDA and can terminate it without penalty, failure to meet the development schedule gives Ella Cafe the right to terminate the franchisee's right to develop further locations. Furthermore, if the franchisee fails to meet any obligations under the MUDA, including development obligations, Ella Cafe can terminate or modify any territorial protections, reduce the development area size, or reduce the number of coffee houses the franchisee may establish under the development schedule. However, Ella Cafe cannot modify the franchisee's territorial rights under the MUDA.