For Ella Cafe, what is the process a Developer must follow before exercising any development right?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
Developer must pay Franchisor an initial franchise fee in the amount set forth in the Key Terms.
4. DEVELOPMENT SCHEDULE AND MANNER FOR EXERCISING DEVELOPMENT RIGHTS
- 4.1. Separate Franchise Agreements. The Franchise Agreement for the first Coffee House to be developed under this Agreement is executed simultaneously with this Agreement. The franchise agreement for the second and each additional Coffee House to be developed will be in the form of Franchisor's then-current franchise agreement, the terms of which may be materially different from the terms of the first franchise agreement, except that the initial franchise fee will be in the amount set forth in the Development Schedule in Attachment A.
- 4.2. Manner for Exercising Development Rights. Before exercising any development right granted hereunder, Developer (or Developer's Affiliate if approved in writing by Franchisor) must apply to Franchisor for a franchise to operate a Coffee House. If Franchisor, in its sole discretion, determines that Developer has met each of the following conditions, then Franchisor will grant Developer a franchise for each respective Coffee House:
- 4.2.1. Operational Conditions: Developer is in compliance with the Development Schedule and this Agreement, and Developer or its Affiliates are in compliance with any other agreement between them and Franchisor or its Affiliates. Developer or its Affiliates are conducting the operation of their existing Coffee Houses, if any, and are capable of conducting the operation of the proposed Coffee House, in accordance with the terms and conditions of the respective Franchise Agreements, and the standards, specifications, and procedures set forth and described in the Manual (defined in the Franchise Agreement).
- 4.2.2. Financial Conditions: Developer, or its Affiliates, and their respective Owners satisfy Franchisor's then-current financial criteria for franchisees and owners of Coffee Houses. Developer, or its Affiliates, and their respective Owners have been and are faithfully performing all terms and conditions under each of the existing Franchise Agreements with Franchisor. Neither Developer nor any of its Affiliates is in default, and have not been in default during the rolling 12 months preceding Developer's request for financial approval, of: (a) any monetary obligations owed to Franchisor or its Affiliates under any Franchise Agreement or any other agreement between Developer or its Affiliates and Franchisor or its Affiliates; or (b) any monetary obligations owed to Developer's or its Affiliates' landlord(s) or other vendors relating to any Coffee House Developer or its Affiliates operate.
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, a Developer must apply to Ella Cafe for a franchise to operate a Coffee House before exercising any development right. Ella Cafe will grant the Developer a franchise if it determines, in its sole discretion, that the Developer has met certain conditions.
The operational conditions that must be met include compliance with the Development Schedule and the Development Agreement. The Developer or its Affiliates must also be in compliance with any other agreement between them and Ella Cafe or its Affiliates. Furthermore, the Developer or its Affiliates must be conducting the operation of their existing Coffee Houses, if any, and be capable of conducting the operation of the proposed Coffee House, in accordance with the terms and conditions of the respective Franchise Agreements, and the standards, specifications, and procedures set forth and described in the Manual.
The financial conditions that must be met include the Developer, or its Affiliates, and their respective Owners satisfying Ella Cafe's then-current financial criteria for franchisees and owners of Coffee Houses. The Developer, or its Affiliates, and their respective Owners must also have been and are faithfully performing all terms and conditions under each of the existing Franchise Agreements with Ella Cafe. The legal condition that must be met is that the Developer has submitted to Ella Cafe, in a timely manner, all information and documents requested by Ella Cafe as a basis for the issuance of individual franchises or pursuant to any right granted to Developer by the Development Agreement or by any Franchise Agreement.
Time is of the essence, and the Developer agrees to exercise its development rights according to the terms outlined in Section 4.2 and the Development Schedule reflected in the Key Terms. Failure to adhere to the Development Schedule constitutes a default under Section 9.2 of the Development Agreement. The Developer may develop more than the minimum number of Coffee Houses required during any Development Period, subject to the terms and conditions of the agreement and with Ella Cafe's prior written consent, which may be withheld at its sole discretion. Any Coffee Houses developed in excess of the minimum requirement will be applied to satisfy the Developer's development obligation during the next succeeding Development Period, if any. However, the agreement does not grant the Developer the right to open or operate more than the cumulative total number of Coffee Houses the Developer is obligated to develop under the Development Schedule.