Are the owners of the proposed assignee required to provide a guaranty to Ella Cafe?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
rks, the System, and/or the loss of association with or identification of Ella Coffee Company, LLC as the franchisor under this Agreement. Franchisor's assignment or transfer of its rights and obligations under this Agreement pursuant to this Section 15.1. to any party may be without Franchisee's approval or prior notice to Franchisee, provided that the buyer, assignee or transferee agrees in writing to assume all of Franchisor's obligations under this Agreement. Franchisor and its Indemnitees will not be liable for obligations of the transferee arising after the date of transfer.
- 15.2 By Franchisee. Franchisee acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Franchisor entered into this Agreement in reliance on Franchisee's business skill, financial capacity, personal character, experience, and business ability. Accordingly, Franchisee shall not conduct or undergo a Transfer without providing Franchisor at least 60 days prior notice of the proposed Transfer, and without obtaining Franchisor' consent. In granting any such consent, Franchisor may impose conditions, including, without limitation, the following:
- (i) Franchisor receives a transfer fee of $10,000 ("Transfer Fee") plus any broker fees and other out-of-pocket costs incurred by Franchisor, including attorneys' fees
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, if a franchisee seeks to transfer their franchise to a new owner (assignee), the owners of the proposed assignee must provide a guaranty. This requirement is outlined in Section 15.2, which details the conditions Ella Cafe may impose when granting consent for a transfer.
Specifically, one of the conditions is that "all owners of the proposed assignee provide a guaranty in accordance with Section 2.6." This means that the new owners must agree to be personally liable for the financial and operational obligations of the franchise, as detailed in the franchise agreement.
This guaranty protects Ella Cafe by ensuring that the new ownership is fully committed to the franchise and assumes responsibility for its performance. It is a standard practice in franchising to require personal guarantees, especially when transferring ownership, to maintain the integrity and financial stability of the franchise system.