Which provisions of the Ella Cafe franchise agreement survive its expiration or termination?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
- 2.2. Effect of Termination or Expiration. Upon termination or expiration of this Agreement, Developer will have no further right to develop any Coffee Houses for which a Franchise Agreement has not been signed. Termination or expiration of this Agreement will not affect any rights or obligations under any then-existing Franchise Agreement.
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 Development Agreement outlines the effects of termination or expiration. Upon termination or expiration of the agreement, the developer (franchisee) loses the right to develop any further Ella Cafe locations for which a Franchise Agreement has not been signed. However, the termination or expiration of the Development Agreement does not impact any rights or obligations under any Franchise Agreement that is already in effect at the time of termination or expiration. This means that if a franchisee has already opened Ella Cafe locations under signed Franchise Agreements, those agreements remain in force, irrespective of the status of the Development Agreement.
Additionally, the FDD states that for a period of two years after the expiration or termination of the Development Agreement, the developer is restricted from engaging in any competitive business. This includes owning, maintaining, or being involved 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. This restriction applies to locations 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 System and Marks.
Furthermore, these restrictions extend to any 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 non-compete obligation is also applicable to any Owner who ceases to be an Owner of Developer for any reason during the Term of this Agreement for a two-year period beginning on the date such person ceases to meet the definition of an Owner. The time periods relating to these obligations will be tolled during any period of noncompliance.