Does the Ella Cafe Franchisor control or have the right to control the Franchisee's business?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
s, copies of contracts, documents related to litigation, tax returns, copies of governmental permits, and other documents and information related to the Business as specified in the Manual or that Franchisor may reasonably request.
- 10.9 Taxes. Franchisee must promptly pay all taxes due and owing based on its operation of the Coffee House and the Business Entity including, without limitation, sales taxes, income taxes, and property taxes.
ARTICLE 11. FRANCHISOR RIGHTS
11.1 Manual; Modification. The Manual, and any part of the Manual, may be in any form or media determined by Franchisor. Franchisor may supplement, revise, or modify the Manual, and Franchisor may change, add or delete System Standards at any time in its discretion. Franchisor may inform Franchisee thereof by any method that Franchisor deems appropriate (which need not qualify as "notice" under Section 16.3). In the event of any dispute as to the contents of the Manual, Franchisor' master copy will control.
- 11.2 Inspections. Franchisor may enter the premises of the Business from time to time during normal business hours and conduct an inspection. Franchisee shall cooperate with Franchisor' inspectors. The inspection may include, but is not limited to, observing operations, conducting a physical inventory, evaluating physical conditions, monitoring sales activity, speaking with employees and customers, and removing samples of products, supplies and materials. Such inspections may also include, without limitation, conducting any type of audit or review necessary to evaluate your compliance with all required payments, standards, specifications or procedures. We may, from time to time, make suggestions and give mandatory instructions with respect to your operation of your ELLA Coffee House franchise as we consider necessary or appropriate to ensure compliance with the then-current quality standards of the System and to protect the goodwill and image of the System. Franchisor may videotape and/or take photographs of the inspection and the Business. Franchisor may set a minimum score requirement for inspections, and Franchisee's failure to meet or exceed the minimum score will be a default under this Agreement. Without limiting Franchisor' other rights under this Agreement, Franchisee will, as soon as reasonably practical, correct any deficiencies noted during an inspection. If Franchisor conducts an inspection because of a governmental report, customer complaint or other customer feedback, or a default or non-compliance with any System Standard by Franchisee (including following up a previous failed inspection), then Franchisor may charge all out-of-pocket expenses plus its thencurrent inspection fee to Franchisee. Franchisor may also contact suppliers and obtain information about Franchisee purchases and the status of Franchisee's account. Upon termination or expiration, Franchisor can stop access to our proprietary products from any supplier or distributor.
- 11.3 Franchisor' Right to Cure. If Franchisee breaches or defaults under any provision of this Agreement, Franchisor may (but has no obligation to) take any action to cure the default on behalf of Franchisee, without any liability to Franchisee. Franchisee shall reimburse Franchisor for its costs and expenses (including the allocation of any internal costs) for such action, plus 10% as an administrative fee.
- 11.4 Business Data. All customer data and other non-public data generated by the Business is Confidential Information and is exclusively owned by Franchisor. Franchisor hereby licenses such data back to Franchisee without charge solely for Franchisee's use in connection with the Business for the term of this Agreement.
- 11.5 Innovations. Franchisee shall disclose to Franchisor all ideas, plans, improvements, concepts, methods, and techniques relating to the Business (collectively, "Innovations") conceived or developed by Franchisee, its employees, agents or contractors. Franchisor will automatically own all Innovations, and it will have the right to use and incorporate any Innovations into the System, without any compensation to Franchisee. Franchisee shall execute any documents reasonably requested by Franchisor to document Franchisor' ownership of Innovations.
- 11.6 Communication Systems. If Franchisor provides email accounts and/or other communication systems to Franchisee, then Franchisee acknowledges that it has no expectation of privacy in the assigned email accounts and other communications systems, and Franchisee authorizes Franchisor to access such communications.
- 11.7 Delegation. Franchisor may delegate any duty or obligation of Franchisor under this Agreement to an affiliate or to a third party.
- 11.8 System Variations. Franchisor may vary or waive any System Standard for any one or more Franchisor due to the peculiarities of the particular site or circumstances, density of population, business potential, population of trade area, existing business practices, applicable laws or regulations, or any other condition relevant to the performance of a franchise or group of franchises. Franchisee is not entitled to the same variation or waiver.
- 11.9 Temporary Public Safety Closure. If Franchisor discovers or becomes aware of any aspect of the Business which, in Franchisor' opinion, constitutes an imminent danger to the health or safety of any person, then immediately upon Franchisor' order, Franchisee must temporarily cease operations of the Business and remedy the dangerous condition. Franchisor shall have no liability to Franchisee or any other person for action or failure to act with respect to a dangerous condition.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, the franchisor retains significant rights to control various aspects of the franchisee's business. Ella Cafe has the right to modify the operations manual and system standards at its discretion, informing franchisees through any method it deems appropriate. This allows Ella Cafe to make changes to how the business is run, impacting franchisees directly.
Ella Cafe also conducts inspections of the franchisee's premises during normal business hours, which may include observing operations, taking inventory, evaluating conditions, monitoring sales, speaking with employees and customers, and taking samples. These inspections can also involve audits to ensure compliance with required payments, standards, and procedures. Ella Cafe may also make suggestions and give mandatory instructions to ensure compliance with quality standards and protect the brand's goodwill. Failure to meet minimum inspection scores can result in default under the agreement.
Furthermore, Ella Cafe maintains control over technology by requiring franchisees to use approved POS systems and report sales through these systems. The franchisor reserves the right to implement technology initiatives and requires franchisees to incur the costs of computer hardware, software, and support. Ella Cafe can access the computer system to retrieve information related to the Coffee House operation.
Ella Cafe also controls marketing and advertising. Franchisees must spend at least 2% of gross sales each month on local marketing, but Ella Cafe can increase this to 3%. The franchisor has sole discretion to determine what activities constitute marketing. Ella Cafe also has the right to enforce obligations to contribute to Market Cooperatives, where applicable, and can terminate any Market Cooperative, transferring any remaining funds to the Brand Marketing Fee. These stipulations grant Ella Cafe substantial authority over the franchisee's business operations, marketing strategies, and financial obligations.