Is an Ella Cafe franchisee obligated to develop additional Coffee Houses under the MUDA?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
You do not have the right to establish additional franchised Coffee House unless you sign a MUDA in the form attached as Exhibit C to this disclosure document for at least five units. If you and we sign a MUDA, then you will have the right to establish a mutually-agreed number of additional Coffee Houses on a mutually-agreed schedule. Under the MUDA, your right to develop additional Coffee Houses is subject to the following: (1) you must comply with the mutually-agreed development schedule, (2) you must have sufficient financial and organizational capacity to develop, open, operate, and manage each additional ELLA business, (3) you must be in compliance with all brand requirements at your open Ella Coffee House business(es), and (4) you must not be in default under any other agreement with us. We will approve the location of future sites and territories for those sites, and our then-current standards for sites and territories will apply. You are not obligated to develop additional Coffee Houses under the MUDA, and you may terminate it any time without penalty; however, if you do not meet your development schedule in the MUDA, we have the right to terminate your right to develop additional coffee houses.
Source: Item 12 — TERRITORY (FDD pages 33–35)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, franchisees are not obligated to develop additional Coffee Houses under a Multi-Unit Development Agreement (MUDA). While franchisees do not have the right to establish additional franchised Coffee Houses unless they sign a MUDA for at least five units, they are not required to sign such an agreement.
If a franchisee and Ella Cafe do sign a MUDA, the franchisee gains the right to establish a mutually agreed number of additional Coffee Houses based on a mutually agreed schedule. However, this right is contingent upon several factors, including compliance with the development schedule, sufficient financial and organizational capacity to manage each additional business, adherence to all brand requirements at existing Ella Coffee House locations, and remaining in compliance with all agreements with Ella Cafe.
Importantly, the franchisee can terminate the MUDA at any time without penalty. However, Ella Cafe retains the right to terminate the franchisee's right to develop additional coffee houses if the franchisee fails to meet the development schedule outlined in the MUDA. This provides flexibility for the franchisee while also ensuring that Ella Cafe can maintain its growth strategy.