Does the Ella Cafe franchise agreement require the franchisee's consent for Ella Cafe to reduce the scope of the non-compete provision?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
If all or any portion of the covenants in this Section is held to be unenforceable or unreasonable by any court, then the parties intend that the court modify such restriction to the extent reasonably necessary to protect the legitimate business interests of Ella Coffee Company.
Guarantor agrees that the existence of any claim it or Franchisee may have against Ella Coffee Company shall not constitute a defense to the enforcement by Ella Coffee Company of the covenants of this Section.
If Guarantor fails to comply with the obligations under this Section during the restrictive period, then the restrictive period will be extended an additional day for each day of noncompliance.
- **4.
Modification.** Guarantor agrees that Guarantor's liability hereunder shall not be diminished, relieved or otherwise affected by (a) any amendment of the Franchise Agreement, (b) any extension of time, credit or other indulgence which Ella Coffee Company may from time to time grant to Franchisee or to any other person or entity, or (c) the acceptance of any partial payment or performance or the compromise or release of any claims.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
Based on the 2024 Ella Cafe Franchise Disclosure Document, the franchise agreement does not explicitly state whether Ella Cafe needs the franchisee's consent to reduce the scope of the non-compete provision. However, the document does state that if any portion of the non-compete covenants is deemed unenforceable, the parties intend for the court to modify the restriction to protect Ella Coffee Company's business interests. This suggests a mechanism for adjusting the non-compete terms, but it doesn't specify whether franchisee consent is required for Ella Cafe to initiate such changes outside of court intervention.
Attachment 3 to the Franchise Agreement is a Guaranty and Non-Compete Agreement executed by the guarantor in favor of Ella Coffee Company, LLC. The guarantor's liability is not affected by any amendment of the Franchise Agreement or any extension of time or credit granted to the franchisee. This implies that Ella Cafe can make changes to the franchise agreement, potentially including the non-compete terms, without necessarily requiring the guarantor's or franchisee's consent.
Item 18.20 acknowledges that franchise agreements may vary and that Ella Cafe may grant variations to other franchisees without extending those same variations or privileges to all franchisees. This clause suggests that Ella Cafe retains some flexibility in the terms of its franchise agreements, which could potentially extend to the non-compete provisions. A prospective franchisee should clarify with Ella Cafe the specific circumstances under which the non-compete agreement can be modified and whether their consent is required for such modifications.