What is the duration of the non-compete period after the cessation or termination of the relationship with Ella Cafe's Franchisee?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
United States, its territories or commonwealths, or any other country, province, state or geographic area in which Franchisor or its Affiliates have used, sought registration of or registered the Marks or similar marks or operate or license others to operate a business under the Marks or similar marks. This restriction will apply for two years after I cease to be an Owner (or two years after termination or expiration of the Development Agreement, whichever occurs first) to any location that: (i) is, or is intended to be, located at the location of any Coffee House developed by Developer or previously operated by Developer of its Affiliate(s) under the terms of a Franchise Agreement; (ii) is within a five-mile radius of any Coffee House developed by Developer or operated by Developer or its Affiliate(s) under the terms of a Franchise Agreement; or (iii) is within a fivemile radius of any other Coffee House operating under the System and Marks that is in existence or under development at any location within the United States, its territories, or commonwealths, or any other country, province, state, or geographic area in which Franchisor or its Affiliates have used, sought registration of, or registered the Marks or similar marks, or operate or license others to operate a business under the Marks or similar marks, at the time of such expiration, termination, or transfer. The time periods relating to the restrictions set forth in this Section 6. will be tolled during any period of my noncompliance.
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Multi-Unit Development Agreement, the non-compete restriction lasts for two years after the termination or expiration of the Development Agreement. This restriction applies to any location that is or is intended to be at the location of any Ella Cafe developed by the Developer, within a five-mile radius of any Ella Cafe developed by the Developer, or within a five-mile radius of any other Ella Cafe operating under the Ella Cafe system. This geographic restriction applies to any location within the United States, its territories, or commonwealths, or any other country, province, state, or geographic area in which Ella Cafe or its affiliates have used, sought registration of, or registered the Marks or similar marks, or operate or license others to operate a business under the Marks or similar marks.
The non-compete clause prevents the franchisee (or former owner) from engaging in or having an interest in any casual, fast-casual, or quick-service coffee house, retail Coffee House, coffee/food truck, kiosk, cart, or store inside store of any type, that offers coffee and/or assorted café items as a primary menu item or that derives more than 25% of its revenue from the sale of coffee and/or assorted café items. This restriction applies to the franchisee themselves, or through any other person or legal entity.
It is important to note that the time periods during which these restrictions are in place may be extended if the franchisee is not in compliance with the agreement. This means that any violation of the non-compete terms could result in the clock being stopped, effectively prolonging the period during which the franchisee is restricted from competing with Ella Cafe. This clause is designed to protect Ella Cafe's market presence and confidential information by preventing former franchisees from directly competing in the same geographic areas for a defined period.