Can Ella Cafe's current franchise agreement for assignees contain materially different provisions?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
rks, the System, and/or the loss of association with or identification of Ella Coffee Company, LLC as the franchisor under this Agreement. Franchisor's assignment or transfer of its rights and obligations under this Agreement pursuant to this Section 15.1. to any party may be without Franchisee's approval or prior notice to Franchisee, provided that the buyer, assignee or transferee agrees in writing to assume all of Franchisor's obligations under this Agreement. Franchisor and its Indemnitees will not be liable for obligations of the transferee arising after the date of transfer.
- 15.2 By Franchisee. Franchisee acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Franchisor entered into this Agreement in reliance on Franchisee's business skill, financial capacity, personal character, experience, and business ability. Accordingly, Franchisee shall not conduct or undergo a Transfer without providing Franchisor at least 60 days prior notice of the proposed Transfer, and without obtaining Franchisor' consent. In granting any such consent, Franchisor may impose conditions, including, without limitation, the following:
- (i) Franchisor receives a transfer fee of $10,000 ("Transfer Fee") plus any broker fees and other out-of-pocket costs incurred by Franchisor, including attorneys' fees
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, the franchise agreement that a proposed assignee executes may contain materially different provisions than the original franchisee's agreement. This is contingent on the franchisor granting consent for the transfer of the franchise.
Before a transfer can occur, Ella Cafe requires a 60-day prior notice. The franchisor may impose conditions such as receiving a $10,000 transfer fee, plus broker and attorney fees. The assignee must also complete the franchise application process, meet the franchisor's standards for new franchisees, and not be a competitor. All owners of the proposed assignee must provide a guaranty.
This clause allows Ella Cafe to update its franchise agreement with each new franchisee or assignee, which is a fairly common practice in franchising. This ensures that the franchise agreement reflects the current business environment and legal requirements. For a prospective franchisee, this means that if they plan to sell their franchise in the future, the buyer may be subject to different terms and conditions than they were.