Can the Ella Cafe Franchisor unreasonably withhold approval for relocation?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
| Franchisee will not relocate the Coffee House without Franchisor’s express | |
|---|---|
| prior written consent. If Franchisee is unable to continue the operation of the Coffee House | |
| Location because of the occurrence of an event of Force Majeure (or for other reasons not | |
| constituting an event of default under this Agreement), Franchisee may request Franchisor’s | |
| consent to relocate the Coffee House to another location in the Designated Area. Franchisor’s | |
| approval may not be unreasonably withheld but may be conditioned upon the payment of an agreed | |
| minimum fee to Franchisor during the period in which the Coffee House is not in operation. |
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, a franchisee cannot relocate their Coffee House without the franchisor's express prior written consent. However, if the franchisee is unable to continue operating at their current location due to an event of Force Majeure or other reasons not constituting a default under the agreement, they can request the franchisor's consent to relocate within their designated area.
The FDD states that Ella Cafe's approval for relocation may not be unreasonably withheld. This provision protects the franchisee from arbitrary denial of relocation requests, providing a degree of security if unforeseen circumstances force a move. However, the franchisor can condition its approval upon the payment of an agreed minimum fee during the period the Coffee House is not in operation.
This condition implies that Ella Cafe may require the franchisee to continue paying some form of fee to compensate for the period of lost operation during the relocation process. A prospective franchisee should clarify what constitutes an 'agreed minimum fee' and under what circumstances this fee would be applied. Understanding these conditions is crucial for assessing the financial implications of a potential relocation.