Is a general release of Ella Cafe required from the franchisee and transferee?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
broker fees and other out-of-pocket costs incurred by Franchisor, including attorneys' fees.
- (ii) the proposed assignee and its owners have completed Franchisor' franchise application processes, meet Franchisor' then-applicable standards for new franchisees, and have been approved by Franchisor as franchisees.
- (iii) the proposed assignee is not a Competitor.
- (iv) the proposed assignee executes Franchisor' then-current form of franchise agreement and any related documents, which form may contain materially different provisions than this Agreement;
- (v) all owners of the proposed assignee provide a guaranty in accordance with Section 2.6;
- (vi) Franchisee has paid all monetary obligations to Franchisor and its affiliates, and to any lessor, vendor, supplier, or lender to the Business, and Franchisee is not otherwise in default or breach of this Agreement or of any other obligation owed to Franchisor or its affiliates;
- (vii) the proposed assignee and its owners and employees undergo such training as Franchisor may require.
- (viii) Franchisee, its Owners, and the transferee and its owners execute a general release of Franchisor in a form satisfactory to Franchisor; and
- (ix) the Business fully complies with all of Franchisor' most recent System Standards.
- 15.3 Transfer for Convenience of Ownership. If Franchisee is an individual or individuals, Franchisee may transfer its interest in this Agreement to a Business Entity for convenience of operation by signing Franchisor's form of assignment and assumption agreement if: (a) the Business Entity is formed solely for purposes of operating the Coffee House (s); (b) Franchisee provides Franchisor a copy of the Business Entity's formation and governing documents and a certificate of good standing from the jurisdiction under which the Business Entity was formed; (c) Franchisee and its Affiliates are in compliance with this Agreement and all other agreements with Franchisor or its Affiliates; (d) Franchisee pays Franchisor its reasonable attorneys' fees incurred to document such transfer;
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, a general release of Ella Cafe is required from the franchisee, its owners, and the transferee and its owners during a transfer of the franchise. Specifically, when a franchisee seeks to transfer their interest in the Franchise Agreement, both the franchisee and the proposed transferee must execute a general release of Ella Cafe in a form satisfactory to the company. This release covers any and all claims against Ella Cafe and its affiliates, including their officers, directors, managers, shareholders, agents, and employees, in both their corporate and individual capacities. These claims include those arising under federal, state, and local laws, rules, and ordinances.
Additionally, if a franchisee who is an individual or individuals transfers their interest in the Agreement to a Business Entity for convenience of operation, the franchisee must execute a general release in a form satisfactory to Ella Cafe. This release covers any and all claims against Ella Cafe and its Affiliates and their respective officers, directors, managers, shareholders, agents, and employees in their corporate and individual capacities, including, without limitation, claims arising under federal, state, and local laws, rules, and ordinances; provided, however, that any release will not be inconsistent with any state law regulating franchising.
This requirement is a standard practice in franchising to protect the franchisor from potential future claims related to the franchise agreement or the operation of the franchise. The FDD also includes a sample form of general release as Exhibit E. A prospective franchisee should carefully review the sample release and understand its implications before signing the franchise agreement. It is advisable to consult with an attorney to fully understand the scope and effect of the release.