What happens if an Ella Cafe franchisee or any Owner fails to comply with the confidentiality or noncompetition covenants?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
in, or be engaged or employed by, any Competitor.
- (b) Restriction Post Term. For two years after the Franchise Agreement expires or is terminated for any reason (or, if applicable, for two years after a Transfer by Guarantor), Guarantor shall not directly or indirectly have any ownership interest in, or be engaged or employed by, any Competitor located within five miles of Franchisee's Designated Area or the designated area of any other Ella Coffee House business operating on the date of termination or transfer, as applicable.
- (c) Interpretation. Guarantor agrees that each of the foregoing covenants is independent of any other covenant or provision of this Guaranty or the Franchise Agreement. If all or any portion of the covenants in this Section is held to be unenforceable or unreasonable by any court, then the parties intend that the court modify such restriction to the extent reasonably necessary to protect the legitimate business interests of Ella Coffee Company.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, if a guarantor fails to comply with obligations related to non-competition and confidentiality, the restrictive period will be extended. For each day of noncompliance, an additional day will be added to the restrictive period.
Additionally, the document states that if a court finds any portion of the non-compete covenants to be unenforceable or unreasonable, the intention is for the court to modify the restriction. This modification would be to the extent reasonably necessary to protect Ella Cafe's legitimate business interests. The existence of any claim the franchisee may have against Ella Cafe does not serve as a defense against the enforcement of these covenants.
Ella Cafe also stipulates that the guarantor must cover all costs incurred by Ella Coffee Company, including reasonable attorney fees, in enforcing the Guaranty. If there are multiple guarantors, each bears joint and several liability, meaning Ella Cafe can pursue any or all guarantors for the full amount of the obligation.