Does the Ella Cafe non-compete apply in any country where the franchisor has registered the marks?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
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. This restriction will apply for two years after I cease to be an Owner (or two years after termination or expiration of the Development Agreement, whichever occurs first) to any location that: (i) is, or is intended to be, located 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; (ii) is 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 (iii) is within a fivemile 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. The time periods relating to the restrictions set forth in this Section 6. will be tolled during any period of my noncompliance.
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, the non-compete agreement extends to any country, province, state, or geographic area where Ella Cafe or its affiliates have used, sought registration of, or registered their trademarks. This also applies where they operate or license others to operate a business under similar marks. This restriction is in effect for two years after an owner ceases to be an owner or after the termination or expiration of the Development Agreement, whichever occurs first.
Specifically, the non-compete restricts involvement with any casual, fast-casual, or quick-service coffee house, retail coffee house, coffee/food truck, kiosk, cart, or store inside a store that offers coffee and/or café items as a primary menu item or derives more than 25% of its revenue from these items. This includes owning, maintaining, advising, operating, being employed by, making loans to, investing in, providing assistance to, or having any interest in such establishments. The restriction applies to locations at the former Ella Cafe location, within a five-mile radius of the former location, or within a five-mile radius of any other Ella Cafe operating under the System and Marks.
This means that if Ella Cafe has registered its trademarks in a particular country, a franchisee or former owner is restricted from engaging in competitive coffee-related businesses within that country under the specified conditions. The time periods during which the non-compete obligations are in effect will be suspended during any period of noncompliance, effectively extending the restriction if a franchisee violates the terms.
Prospective franchisees should be aware of the broad geographic scope of this non-compete clause and carefully consider its implications for their future business activities, especially if they plan to operate or invest in similar businesses outside of their franchised Ella Cafe location. It is important to fully understand the extent of Ella Cafe's trademark registrations and usage to assess the potential limitations imposed by this clause.