Does the post-term non-compete for Ella Cafe extend to kiosks?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
the foregoing events or with respect to enforcement of this Section 10.2., and continuing for an uninterrupted period of two years thereafter, 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 post-term non-compete agreement does extend to kiosks. Specifically, the agreement states that for two years after the termination or transfer of the franchise, the franchisee cannot be involved with any casual, fast-casual, or quick-service coffee house, retail Coffee House, coffee/food truck, kiosk, cart, or store inside store 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.
This restriction applies if the competing business is located at the former franchise 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. This non-compete extends to any location within the United States, its territories, or commonwealths, or any other country, province, state, or geographic area in which Ella Cafe 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 means that after leaving the Ella Cafe system, a former franchisee is significantly restricted in their ability to operate or be associated with a competing coffee business, including a kiosk, within a defined geographic area. This restriction is in place to protect Ella Cafe's market share and brand recognition. The franchisee should carefully consider the implications of this non-compete agreement before investing in an Ella Cafe franchise, as it could limit their future business opportunities in the coffee industry.