What is the 'Fee Deferral Requirement' for Ella Cafe franchises in Maryland?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
- In recognition of the requirements of the Maryland Franchise Registration and Disclosure Law, Md. Code Ann., Bus. Reg. §§14-201-14-233, the Franchise Agreement is amended as follows:
Sections 3.2 and 15.2 require Franchisee to sign a general release as a condition of renewal or transfer of the Franchise, such release shall exclude claims arising under the Maryland Franchise Registration and Disclosure Law.
Section 17.1 requires that the Franchise be governed by the laws of the State of Florida however, in the event of a conflict of laws to the extent required by the Maryland Franchise Registration and Disclosure Law, the laws of the State of Maryland shall prevail.
Sections 17.2 and 17.3 requires litigation to be conducted in the State of Florida; the requirement shall not limit any rights Franchisee may have under the Maryland Franchise Registration and Disclosure Law to bring suit in the State of Maryland.
Any Section of the Franchise Agreement requiring Franchisee to assent to any release, estoppel or waiver of liability as a condition of purchasing the Franchise are not intended to, nor shall they act as a, release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.
The Franchise Agreement is amended to the extent that any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within three years after the grant of the Franchise.
- Section 3.1 of the Franchise Agreement is amended to reflect the following:
"Based upon the franchisor's financial condition, the Maryland Securities Commissioner has required a financial assurance. Therefore, all initial fees and payments owed by franchisees shall be deferred until the franchisor completes its pre-opening obligations under the franchise agreement" ("Fee Deferral Requirement"). Therefore, notwithstanding anything to the contrary in this Section 3.1 of the Franchise Agreement, payment of the initial franchise fee and the preopening initial inventory and equipment package fee are due immediately at such time as when Franchisor has met its pre-opening obligations to Franchisee, and Franchisee has commenced operation of the Franchised Business.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, a 'Fee Deferral Requirement' applies to franchises in Maryland. Due to the franchisor's financial condition, the Maryland Securities Commissioner mandates a financial assurance. As a result, all initial fees and payments owed by franchisees in Maryland are deferred.
Specifically, payment of the initial franchise fee and the preopening initial inventory and equipment package fee are not due immediately. Instead, these payments are deferred until Ella Cafe has fulfilled its pre-opening obligations to the franchisee.
Once Ella Cafe has met these obligations, and the franchisee has commenced operation of the franchised business, the initial franchise fee and preopening fees become due. This deferral is intended to protect franchisees in Maryland, given the franchisor's financial situation, by ensuring that franchisees do not pay these fees until the franchisor has provided the necessary support to begin operations.