If an Ella Cafe franchisee transfers the agreement, when does the non-compete period begin?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
the foregoing events or with respect to enforcement of this Section 10.2., and continuing for an uninterrupted period of two years thereafter, Developer will not, either directly or indirectly, for itself, or through, on behalf of, or in conjunction with any person, persons, or legal entity, own, maintain, advise, operate, engage in, be employed by, make loans to, invest in, provide any assistance to, or have any interest in (as an owner or otherwise) or relationship or association with any casual, fast-casual, or quick-service coffee house, retail Coffee House, coffee/food truck, kiosk, cart, or store inside store of any type, that offers coffee and/or assorted café items as a primary menu item or that derives more than 25% of its revenue from the sale of coffee and/or assorted café items, other than a Ella Coffee Company, LLC Coffee House operated pursuant to a then-currently effective Franchise Agreement with Franchisor, that: (i) is, or is intended to be, located at the location of the former Location; (ii) is within a five-mile radius of the former Location; or (iii) is within a five-mile radius of any other Coffee House operating under the System and Marks, that is in existence or under development at any location within the United States, its territories, or commonwealths, or any other country, province, state, or geographic area in which Franchisor or its Affiliates have used, sought registration of, or registered the Marks or similar marks, or operate or license others to operate a business under the Marks or similar marks, at the time of such expiration, termination, or transfer. If any Owner ceases to be an Owner of Developer for any reason during the Term of this Agreement, the foregoing covenant will apply to the departing Owner for a two-year period beginning on the date such person ceases to meet the definition of an Owner. The time periods relating to the obligations described in this Section 10.2. will be tolled during any period of noncompliance.
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, if a franchisee transfers their agreement, the non-compete period for the franchisee or any owner of the franchisee begins on the date of the transfer. The franchisee is restricted from being involved with any similar coffee business within a five-mile radius of the former Ella Cafe location or any other Ella Cafe location.
Specifically, the non-compete lasts for two years. This restriction applies to owning, maintaining, advising, operating, or being employed by any casual, fast-casual, or quick-service coffee house that offers coffee and/or cafe items as a primary menu item or derives more than 25% of its revenue from such sales.
The non-compete also applies to any owner who ceases to be an owner of the Developer. The time periods relating to the obligations described in this section will be tolled during any period of noncompliance.