If an Ella Cafe franchisee transfers their franchise, when does the non-compete period begin?

According to Ella Cafe's 2024 Franchise Disclosure Document, the non-compete period for a guarantor begins after a transfer. Specifically, for two years after a transfer by the guarantor, the guarantor cannot have any ownership interest in, or be engaged or employed by, any competitor within five miles of the franchisee's designated area or the designated area of any other Ella Coffee House business operating on the date of the transfer. This restriction applies regardless of the reason for the transfer.

This means that if a franchisee decides to sell their Ella Cafe franchise to another party, the guarantor is subject to a two-year non-compete clause. This prevents the guarantor from immediately opening a competing coffee shop nearby or working for a competitor in the same area. The non-compete radius is limited to five miles, which is a fairly standard restriction in the franchise industry.

It is important to note that this non-compete agreement is part of the Guaranty and Non-Compete Agreement that the guarantor signs. The guarantor acknowledges that the covenants within this agreement are independent of any other covenant or provision in the Guaranty or the Franchise Agreement. If any part of the non-compete agreement is deemed unenforceable, the parties intend for the court to modify the restriction to protect Ella Coffee Company's business interests.