What are the consequences if an Ella Cafe franchisee or any Owner is convicted of a felony?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
- **14.2.
Termination With Notice and Without Opportunity To Cure**.
Franchisor has the right to terminate this Agreement, which termination will become effective upon delivery of notice without opportunity to cure if: (a) Franchisee's Operating Principal or District Manager fails to successfully complete training; (b) Franchisee fails to open the Coffee House for business by the Opening Date; (c) Franchisee abandons the Coffee House (which will be presumed if Franchisee ceases operations for three consecutive days or more without Franchisor's written consent); (d) Franchisee loses any license required to operate the Coffee House or Franchisee loses its right to occupy the Coffee House premises; (e) Franchisee fails to relocate and open, or re-open, the Coffee House that closed due to a Force Majeure event within the required time period; (f) Franchisee or any Owner or District Manager are convicted of, or plead no contest to, a felony, a crime involving moral turpitude, or any other crime or offense that Franchisor believes is reasonably likely to have an adverse effect on the System; (g) there is any transfer or attempted transfer in violation of Section 15. of this Agreement; (h) Franchisee or any Owner fails to comply with the confidentiality or noncompetition covenants in Section 13. of this Agreement; (i) Franchisee or any Owner makes any material misrepresentations in connection with Franchisee's franchise application; (j) Franchisee fails to comply with notification requirements concerning investigations, certain occurrences, and Crisis Management Events; (k) Franchisee understates any payment to Franchisor by 3% or more twice in any two-year period; (l) an imminent threat or danger to public health or safety results from the operation of the Coffee House ; (m) Franchisee knowingly maintains false books or records or submits any false reports or statements to Franchisor; (n) Franchisee offers unauthorized products or services from the Coffee House premises or in conjunction with the Marks or Copyrighted Works; (o) Franchisee purchases from an unapproved source items for which Franchisee has identified Designated Supplier(s) or purchases unapproved items for which Franchisee has identified Approved Products; (p) Franchisee fails to pass two or more quality assurance inspections within any rolling 12-month period; (q) Franchisee violates Franchisor's policies for Coffee House operations, without authorization or permission, on two or more occasions within any rolling 12-month period; (r) Franchisee fails to maintain required hours of operation as required by the Franchisor on two or
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, if a franchisee, any owner, or the district manager is convicted of a felony, pleads no contest to a felony, a crime involving moral turpitude, or any other crime or offense that Ella Cafe believes is reasonably likely to have an adverse effect on the System, Ella Cafe has the right to terminate the Franchise Agreement. The termination will become effective immediately upon delivery of notice, and there is no opportunity to cure the issue.
This means that a criminal conviction of the franchisee, owner, or district manager can lead to the immediate loss of the franchise. The determination of whether a crime or offense is reasonably likely to have an adverse effect on the Ella Cafe system is at the discretion of the franchisor.
This type of clause is relatively standard in franchise agreements. Franchise systems rely heavily on their reputation and brand image, and the conviction of a franchisee for certain crimes could damage that reputation. Prospective franchisees should be aware of this clause and ensure that they, their owners, and their district managers maintain a clean criminal record to avoid potential termination of the franchise agreement.