factual

For how long after ceasing to be an Owner are restrictions in place for Ella Cafe?

Ella_Cafe Franchise · 2024 FDD

Answer from 2024 FDD Document

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.

  • 10.3. Additional Provisions. The parties acknowledge and agree that Franchisor has the right, in its sole discretion, to reduce the scope of any covenant set forth in Sections 10.1. and 10.2., or any portion thereof, without Developer's consent or the consent of any Owner, effective immediately upon delivery of written notice to the affected party; and Developer and each Owner agree that such person will comply with any covenant as so modified. Developer and each Owner expressly agree that the existence of any claims Developer or any Owner may have against Franchisor, whether or not arising from this Agreement, will not constitute a defense to Franchisor's enforcement of the covenants in this Section 10. Developer agrees to pay all costs and expenses (including reasonable attorneys' fees) incurred by Franchisor in connection with the enforcement of this Section 10.
  • 10.4. Breach of Covenants and Irreparable Injury. Developer acknowledges that its violation of any covenant of this Section 10. would result in irreparable injury to Franchisor for which no adequate remedy at law may be available, and Developer consents to the issuance of, and agrees to pay all court costs and reasonable attorneys' fees incurred by Franchisor in obtaining, without the posting of any bond, an ex-parte or other order for injunctive or other legal or equitable relief with respect to such conduct or action.
  • 10.5. Exception for Publicly Held Companies. The foregoing restrictions will not apply to Developer's ownership or any Owner's ownership of less than a 5% beneficial interest in the outstanding equity securities of any company registered under the Securities Act of 1933 or the Securities Exchange Act of 1934.
  • 10.6. Covenants from Individuals.

Source: Item 23 — RECEIPTS (FDD pages 50–181)

What This Means (2024 FDD)

According to Ella Cafe's 2024 Franchise Disclosure Document, if an owner ceases to be an owner, certain restrictions apply for a period of two years. Specifically, these restrictions are in place for two years after the date the person ceases to meet the definition of an owner, or two years after the termination or expiration of the Development Agreement, whichever comes first.

These restrictions prevent the departing owner from engaging in activities that could harm Ella Cafe's business. This includes soliciting customers, employing Ella Cafe's employees, or owning/operating a competing coffee business within a specific radius. The restrictions apply to any location that is at the location of any Coffee House developed by Developer or previously operated by Developer of its Affiliate(s) under the terms of a Franchise Agreement; within a five-mile radius of any Coffee House developed by Developer or operated by Developer or its Affiliate(s) under the terms of a Franchise Agreement; or within a five-mile radius of any other Coffee House operating under the System and Marks that is in existence or under development.

It's important to note that the time periods for these restrictions can be extended if the departing owner violates the terms of the agreement. This means that any period of noncompliance will not count towards the two-year restriction period, effectively pausing the clock until compliance is restored. This ensures that Ella Cafe can protect its interests and maintain a competitive advantage even after an owner leaves the business.

Disclaimer: This information is extracted from the 2024 Franchise Disclosure Document and is provided for research purposes only. It does not constitute legal or financial advice. Consult with a franchise attorney before making any investment decisions.