For Ella Cafe, what happens if the Developer or its Affiliates are in default of monetary obligations?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
- 9.6. Cross-Default. Any default under any agreement between Developer or its Affiliates and Franchisor or its Affiliates, which Developer or its Affiliates fail to cure within any applicable cure period, will be considered a default under this Agreement and will provide an independent basis for termination of this Agreement.
- 9.7. Additional Remedies. If Developer is in default of this Agreement, in lieu of termination as provided for in Sections 9.2., 9.3., and 9.4., Franchisor may, in its sole discretion, elect to reduce the number of Coffee Houses Developer has the right to establish pursuant to the Development Schedule and or modify the size of the Development Area. If Franchisor elects to exercise the remedy set forth above, Developer will continue to develop Coffee Houses in accordance with its rights and obligations under this Agreement, as modified. Franchisor's exercise of its remedy under this Section 9.7. will not constitute a waiver by Franchisor to exercise Franchisor's option to terminate this Agreement at any time with respect to a subsequent event of default of a similar or different nature.
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, a default under any agreement between the Developer (franchisee) or its affiliates and Ella Cafe or its affiliates, which is not cured within the applicable cure period, will be considered a default under the Development Agreement. This provides an independent basis for termination of the Development Agreement.
In addition to termination, if the Developer is in default, Ella Cafe may elect to reduce the number of coffee houses the Developer has the right to establish under the Development Schedule or modify the size of the Development Area. If Ella Cafe chooses this option, the Developer must continue developing coffee houses according to the modified agreement.
It's important to note that Ella Cafe's decision to reduce the number of coffee houses or modify the Development Area does not prevent them from terminating the Development Agreement later for a subsequent default, whether it's similar or different. This means that even if a franchisee's development obligations are reduced due to a prior default, Ella Cafe retains the right to terminate the agreement for any future defaults.