Can Ella Cafe establish a purchasing cooperative and require franchisees to join?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
Franchisor may establish market advertising and promotional cooperative funds ("Market Cooperative") in any geographical areas. If a Market Cooperative for the geographic area encompassing the Location has been established at the time Franchisee commences operations hereunder, Franchisee shall immediately become a member of such Market Cooperative. If a Market Cooperative for the geographic area encompassing the Location is established during the term of this Agreement, Franchisee shall become a member of such Market Cooperative within 30 days. Franchisor shall not require Franchisee to be a member of more than one Market Cooperative. If Franchisor establishes a Market Cooperative:
- (a) Governance.
Each Market Cooperative will be organized and governed in a form and manner, and shall commence operations on a date, determined by Franchisor.
Franchisor may require the Market Cooperative to adopt bylaws or regulations prepared by Franchisor.
Unless otherwise specified by Franchisor, the activities carried on by each Market Cooperative shall be decided by a majority vote of its members.
Franchisor will be entitled to attend and participate in any meeting of a Market Cooperative.
Any Ella Coffee House business owned by Franchisor in the Market Cooperative shall have the same voting rights as those owned by its franchisees.
Each Business owner will be entitled to cast one vote for each Business owned, provided, however, that a franchisee shall not be entitled to vote if it is in default under its franchise agreement.
If the members of a Market Cooperative are unable or fail to determine the manner in which Market Cooperative monies will be spent, Franchisor may assume this decision-making authority after 10 days' notice to the members of the Market Cooperative.
- (b) Purpose.
Each Market Cooperative shall be devoted exclusively to administering regional advertising and marketing programs and developing (subject to Franchisor' approval) standardized promotional materials for use by the members in local advertising and promotion.
- (c) Approval.
No advertising or promotional plans or materials may be used by a Market Cooperative or furnished to its members without the prior approval of Franchisor pursuant to Section 9.1.
Franchisor may designate the national or regional advertising agencies used by the Market Cooperative.
- (d) Funding.
The majority vote of the Market Cooperative will determine the dues to be paid by members of the Market Cooperative, including Franchisee, but not less than 1% and not more than 5% of Gross Sales.
- (e) Enforcement.
Only Franchisor will have the right to enforce the obligations of franchisees who are members of a Market Cooperative to contribute to the Market Cooperative.
- (f) Termination.
Franchisor may terminate any Market Cooperative.
Any funds left in a Market Cooperative upon termination will be transferred to the Brand Marketing Fee.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, Ella Cafe may establish market advertising and promotional cooperative funds, referred to as "Market Cooperative", in any geographical areas. If a Market Cooperative exists for the franchisee's location when they start operating, the franchisee must immediately become a member. If a Market Cooperative is established later, the franchisee must join within 30 days. Ella Cafe will not require a franchisee to be a member of more than one Market Cooperative.
The Market Cooperative will be organized and governed in a manner determined by Ella Cafe, and Ella Cafe may require the Market Cooperative to adopt bylaws or regulations they prepare. Unless Ella Cafe specifies otherwise, the activities of each Market Cooperative will be decided by a majority vote of its members. Ella Cafe is entitled to attend and participate in any meeting of a Market Cooperative, and any Ella Cafe business they own in the Market Cooperative will have the same voting rights as those owned by its franchisees.
The purpose of each Market Cooperative is to administer regional advertising and marketing programs and develop standardized promotional materials for use by members in local advertising and promotion, subject to Ella Cafe's approval. No advertising or promotional plans or materials may be used by a Market Cooperative without Ella Cafe's prior approval. Ella Cafe may also designate the national or regional advertising agencies used by the Market Cooperative.
The members of the Market Cooperative, including franchisees, will determine the dues to be paid by a majority vote, but the dues must be between 1% and 5% of Gross Sales. Only Ella Cafe has the right to enforce the obligations of franchisees to contribute to the Market Cooperative. Ella Cafe may terminate any Market Cooperative, and any funds left upon termination will be transferred to the Brand Marketing Fee.