Does the Ella Cafe non-compete apply in any province where the franchisor has registered the marks?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
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, the non-compete agreement extends to any province, state, or geographic area where Ella Cafe or its affiliates have used, sought registration of, or registered their trademarks. This means that after the franchise agreement expires, is terminated, or the franchisee transfers the business, the franchisee is restricted from engaging in a similar coffee business within specific locations.
The restrictions apply to locations that are 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 Ella Cafe system and marks. This geographic scope includes not only the United States, its territories, and commonwealths but also any other country, province, state, or geographic area where Ella Cafe has registered its marks.
This non-compete obligation lasts for two years, beginning from the date of the triggering event (expiration, termination, or transfer). The time during which the franchisee is not in compliance with the non-compete agreement will not count towards the two-year period, effectively extending the restriction. This broad geographic scope and the tolling provision highlight the importance of understanding the full extent of the non-compete obligations before investing in an Ella Cafe franchise.