When Ella Cafe purchases my franchise assets, can Ella Cafe deduct sums owed to them from the purchase price?

According to Ella Cafe's 2024 Franchise Disclosure Document, if Ella Cafe exercises its Call Right to purchase a franchisee's assets, it has the right to deduct certain amounts from the purchase price. These deductions include all amounts the franchisee owes to Ella Cafe, the franchisee's share of any appraisal costs, and amounts Ella Cafe pays or will pay to resolve defaults under the franchisee's lease or debts owed to third parties. This means that if a franchisee has outstanding financial obligations to Ella Cafe or other related parties, these debts will reduce the amount the franchisee receives from the sale of their assets.

Furthermore, Ella Cafe has the option to directly pay a lienholder if the assets are subject to a lien, using a portion of the purchase price. Additionally, Ella Cafe can withhold 25% of the purchase price for a period of 90 days to ensure that all of the franchisee's taxes and other liabilities are settled. This holdback serves as a security measure for Ella Cafe, protecting them from potential liabilities arising from the franchisee's operations.

These provisions provide Ella Cafe with significant financial protection when purchasing a franchise location's assets. By allowing deductions for outstanding debts, lease defaults, and potential tax liabilities, Ella Cafe minimizes its financial risk and ensures that it acquires the assets free and clear of encumbrances. Prospective franchisees should be aware of these conditions, as they directly impact the final amount received from the sale of their franchise assets back to Ella Cafe.