Can an Ella Cafe developer mortgage their interest in the Franchise Agreement without Ella Cafe's consent?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
h the Business Entity was formed; (c) Developer and its Affiliates are in compliance with this Agreement and all other agreements with Franchisor or its Affiliates; (d) Developer pays
Franchisor its reasonable attorneys' fees incurred to document such transfer; and (e) Developer executes a general release in a form satisfactory to Franchisor of any and all claims against Franchisor and its Affiliates and their respective officers, directors, managers, shareholders, agents, and employees in their corporate and individual capacities, including, without limitation, claims arising under federal, state, and local laws, rules, 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;
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, a developer needs prior written consent from Ella Cafe to mortgage their interest in the Franchise Agreement. However, Ella Cafe states that a developer may grant a security interest in the agreement or franchise only to the limited extent permitted by Section 9-408 of the Uniform Commercial Code.
Any security interest can only be attached to the equipment, fixtures, inventory, and proceeds from the operation of any Ella Cafe location developed. The security interest must not allow the secured party to take possession or operate any Ella Cafe location, or transfer the Developer's interest in the Agreement or Owners' interest in the Business Entity without Ella Cafe's consent.
Any transfer made without Ella Cafe's prior written consent will be considered null and void and will be a material breach of the Development Agreement.