What can Ella Cafe condition its consent on for a transfer?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
and ordinances; provided, however, that any release will not be inconsistent with any state law regulating franchising.
- 8.3. Transfer by Developer and/or Owners. Developer understands and acknowledges that the rights and duties set forth in this Agreement are personal to Developer and that Franchisor has granted rights under this Agreement in reliance on the business skill, financial capacity, and personal character of Developer and its Owners. Accordingly, neither Developer nor any Owner, nor any successor or assign of Developer or any Owner, will sell, assign, transfer, convey, give away, pledge, mortgage, or otherwise dispose of or encumber any direct or indirect interest in this Agreement or in the Business Entity without the prior written consent of Franchisor. Franchisor will not unreasonably withhold its consent to a transfer, but may condition its consent on satisfaction of any or all of the following.
- 8.3.1. Developer has provided Franchisor the following at least 120 days prior to the proposed closing date of the proposed transfer: (a) written request for Franchisor's consent to the transfer; (b) payment of the non-refundable transfer fee in the amount set forth in the Key Terms, plus reimbursement of Franchisor's reasonable attorneys' fees; and (c) a copy of the proposed asset purchase/transfer agreements, including sale terms.
- 8.3.2. The transferee has demonstrated to Franchisor's satisfaction that the transferee meets Franchisor's then-current educational, managerial, and business standards; possesses a good moral character, business reputation, and credit rating; has the aptitude and ability to operate the Coffee House; and meets Franchisor's then-current financial requirements to become an Ella Café developer.
- 8.3.3. All of Developer's accrued monetary obligations and all other outstanding obligations to Franchisor, its Affiliates, and Developer's third-party suppliers (including Developer's landlord) are, or will be at the time of the transfer, current and fully paid and satisfied, and Developer must be in full compliance with this Agreement and any other agreement between Developer and its Affiliates and Franchisor and its Affiliates, Developer's suppliers, and Developer's landlord. Without limiting the foregoing, Developer must have developed, and it or its Affiliates must have in operation at the time of the proposed transfer, at least 50% of the Coffee Houses required to be developed under this Agreement.
- 8.3.4.
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, the company will not unreasonably withhold consent to a transfer of interest. However, Ella Cafe may condition its consent on several factors. These conditions include the developer providing written notice at least 120 days before the proposed transfer date, along with a non-refundable transfer fee (as specified in the Key Terms) and reimbursement for Ella Cafe's attorney fees, and a copy of the proposed asset purchase/transfer agreements.
Ella Cafe also requires that the transferee meet the company's current standards for education, management, and business acumen. The transferee must have a good moral character, business reputation, and credit rating, as well as the aptitude and financial ability to operate the Coffee House. If the transferee is a business entity, each owner must sign Ella Cafe's current personal guaranty form. Negotiated terms in the Development Agreement, such as the Development Fee and initial franchise fees, are not transferable.
Furthermore, the transferee must complete Ella Cafe's initial training program. If the transfer is among existing owners, all requirements still apply, except that the parties won't sign a new Development Agreement, but the remaining owners must sign the current personal guaranty form. If Ella Cafe consents to a transfer but the deal falls through, the developer must cover Ella Cafe's attorney fees related to the abandoned transfer. Any transfer without Ella Cafe's prior written consent is considered void and a material breach of the agreement.