How will Ella Cafe determine the amount of royalty fees and other amounts due from the franchisee?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
ting Period.
- 4.8. Payment Terms and Procedures. All payments required by this Agreement must be paid on the day or date Franchisor specifies ("Due Date"). If the Due Date is not a Business Day, then payment will be due on the next Business Day. Franchisor may choose determine the amount of the Royalty Fee and other amounts due under this Agreement by accessing and retrieving Gross Sales data from Franchisee's computer system, as permitted by Section 10. On each Due Date, Franchisor will transfer from Franchisee's commercial bank operating account ("Account") the Royalty Fee, Brand Marketing Fee Contributions, and any other amounts due and owing.
- 4.9 Replacement / Additional Training Fee. If Franchisee sends an employee to Franchisor' training program after opening, Franchisor may charge its then-current training fee. As of the date of this Agreement, the training fee is $350 per day plus reimbursement of our Franchisor's out of pocket costs and expenses.
- 4.10 Non-Compliance Fee. Franchisor may charge Franchisee $500 for any instance of noncompliance with the System Standards or this Agreement (other than Franchisee's non-payment of a fee owed to Franchisor) which Franchisee fails to cure after 30 days' notice. Thereafter, Franchisor may charge Franchisee $250 per week until Franchisee ceases such non-compliance. This fee is a reasonable estimate of Franchisor' internal cost of personnel time attributable to addressing the non-compliance, and it is not a penalty or estimate of all damages arising from Franchisee's breach. The non-compliance fee is in addition to all of Franchisor' other rights and remedies (including default and termination under Section 14.2).
- 4.11 Reimbursement. Franchisor may (but is never obligated to) pay on Franchisee's behalf any amount that Franchisee owes to a supplier or other third party. If Franchisor does so or intends
to do so, Franchisee shall pay such amount plus a 10% administrative charge to Franchisor within 15 days after invoice by Franchisor accompanied by reasonable documentation.
4.12 Payment Terms.
- (a) Method of Payment. Franchisor requires all Royalty Fees, Brand Marketing Fee Contributions, amounts due for purchases by Franchisee from Franchisor, and other amounts due to Franchisor to be paid through an Electronic Depository Transfer Authorization or as Franchisor may specify from time to time (refer to Attachment 5). Franchisee shall open and maintain a single bank account for all its Franchised Business transactions, and none other without Franchisor's written consent, and shall provide Franchisor with continuous access via electronic transfer to such account for the purpose of paying any payments due to Franchisor. Franchisee shall make deposits to the account sufficient to cover amounts owed to Franchisor prior to the date such amounts are due. Franchisee shall execute any documents Franchisor's or Franchisee's bank requires to establish and implement the Electronic Depository Transfer Account. Once established, Franchisee shall not close the Electronic Depository Transfer Account without Franchisor's written consent. Franchisor may change the method of payment by providing 30 days' notice to Franchisee.
- (b) Calculation of Fees. Franchisee shall report weekly Gross Sales to Franchisor by Tuesday of the following week. If Franchisee fails to report weekly Gross Sales, then Franchisor may withdraw estimated Royalty Fees and Brand Marketing Fee Contributions equal to 125% of the last Gross Sales reported to Franchisor, and the parties will true-up the actual fees after Franchisee reports Gross Sales. Franchisee acknowledges that Franchisor has the right to remotely access Franchisee's point-of-sale system to calculate Gross Sales.
- (c) Late Fees and Interest. If Franchisee does not make a payment on time, Franchisee shall pay a $100 "late fee" plus interest on the unpaid amount at a rate equal to 18% per year (or, if such payment exceeds the maximum allowed by law, then interest at the highest rate allowed by law).
- (d) Insufficient Funds.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, the brand has several methods for determining royalty fees and other payments. Ella Cafe may determine the amount of the Royalty Fee and other amounts due by accessing and retrieving Gross Sales data from the franchisee's computer system. Franchisees must also report weekly Gross Sales to Ella Cafe by Tuesday of the following week. If a franchisee fails to report weekly Gross Sales, Ella Cafe may withdraw estimated Royalty Fees and Brand Marketing Fee Contributions equal to 125% of the last Gross Sales reported. After the franchisee reports Gross Sales, the parties will adjust the actual fees.
The standard royalty fee is 7% of gross sales. In addition to royalty fees, franchisees must also pay a brand marketing fee of up to 3% of gross sales and may be charged a local advertising fee of up to 3% of gross sales. If a franchisee does not make payments on time, they will be charged a $100 late fee plus interest on the unpaid amount at a rate of 18% per year (or the highest rate allowed by law). Ella Cafe may also charge $30 for any payment returned for insufficient funds (or the maximum fee allowed by law).
Ella Cafe has the right to define applicable accounting periods for calculating and paying amounts due under the agreement, which may be defined in terms of days, weeks, or months. Ella Cafe can change or modify the definition of an Accounting Period, in its discretion, for its entire franchise system, generally, or for a franchisee specifically, if the franchisee fails to comply with the agreement. Ella Cafe will provide franchisees at least 30 days advance written notice of any change in any Accounting Period. All payments required by the Franchise Agreement must be paid on the day or date Ella Cafe specifies. If the due date is not a business day, then payment will be due on the next business day.
Franchisees must also pay all amounts advanced by Ella Cafe or which Ella Cafe has paid, or for which it has become obligated to pay on the franchisee's behalf for any reason. This also includes the amount of all sales taxes, use taxes, personal property taxes, and similar taxes, which are or may be imposed upon the franchisee and required to be collected or paid by the franchisee because of the franchisee's Gross Sales, or because of Initial Franchise Fees, Royalty Fees, or advertising fees collected by Ella Cafe from the franchisee. Franchisees must also pay all amounts due and owing pursuant to their agreements and contracts with all Designated Suppliers and the franchisee's other trade creditors and the franchisee's landlord.