What is the exception to the non-compete agreement for Ella Cafe, requiring written approval from the Franchisor?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
nor will I directly or indirectly employ or seek to employ any employee of Franchisor or an Affiliate of Franchisor (collectively, "Employers"), unless such employee's employment has been terminated for 120 days or more, or such employee has obtained written consent from Employer that the employee may be hired. The restrictions in this Section 6 do not apply to my ownership of less than a five percent beneficial interest in the outstanding securities of any publicly-held corporation. The time periods relating to the restrictions set forth in this Confidentiality Agreement 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 Franchise Disclosure Document, there is an exception to the non-compete agreement. The restrictions outlined in Section 6 of the Confidentiality Agreement do not apply to the ownership of less than a five percent beneficial interest in the outstanding securities of any publicly-held corporation.
This means that a franchisee can own a small stake in a publicly traded company, even if that company operates a competing coffee shop, without violating the non-compete agreement. However, this exception is specifically limited to ownership of less than 5% of the publicly-held corporation's securities.
It is important for prospective Ella Cafe franchisees to understand the specifics of the non-compete agreement and this exception, as violating the agreement could have legal and financial consequences. Franchisees should consult with an attorney to fully understand their obligations and rights under the agreement.