Must a proposed Ella Cafe assignee not be a Competitor to be approved?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
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, a proposed assignee must not be a competitor to be approved. Specifically, if a franchisee wishes to transfer their franchise to another party, the franchisor's consent is required.
Ella Cafe may impose certain conditions when granting consent for a transfer. One of these conditions is that the proposed assignee must not be a competitor of Ella Cafe. This requirement ensures that the new owner will not use the Ella Cafe franchise to benefit a competing business or undermine the brand.
In addition to not being a competitor, the proposed assignee must also complete Ella Cafe's franchise application process, meet the then-applicable standards for new franchisees, and be approved by Ella Cafe as a franchisee. They must also execute Ella Cafe's current form of franchise agreement, which may contain materially different provisions than the original agreement, and all owners of the proposed assignee must provide a guaranty.