Can an Ella Cafe franchisee be employed by a competing coffee house during the term of the agreement?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
or other limited liability company own, maintain, engage in, be employed by, advise, assist, invest in, franchise, make loans to, or have any interest or relationship or association with any casual, fast-casual, or quick-service coffee house, retail Coffee House, 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 within a five-mile radius of any Ella Café Coffee House , 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 Multi-Unit Development Agreement, a developer, or franchisee, is restricted from being employed by or having an interest in a competing coffee house. Specifically, developers cannot own, maintain, engage in, be employed by, advise, assist, invest in, franchise, make loans to, or have any interest or relationship with any casual, fast-casual, or quick-service coffee house, retail Coffee House, 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 within a five-mile radius of any Ella Cafe Coffee House.
This restriction applies during the term of the agreement. The agreement also specifies that developers are prohibited from employing or seeking to employ any employee of Ella Cafe or its affiliates, unless the employee's employment has been terminated for at least 120 days or the employee has obtained written consent from the employer.
However, there is an exception to this restriction. The restrictions 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 a franchisee can own a small amount of stock in a publicly traded competitor without violating the agreement. The time periods relating to the restrictions set forth in the Confidentiality Agreement will be tolled during any period of noncompliance.