Can Ella Cafe require advertising cooperatives to be formed, changed, dissolved, or merged?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
Currently, no advertising council has been established for the franchise system.
We do not currently have any local or regional advertising cooperatives. We have the right to require you to participate in a local or regional advertising cooperative. We will define the area of the cooperative based on media markets, or other geographic criteria that we deem appropriate. Each franchisee in the area would have one vote per Coffee House (unless the franchisee is in default under its franchise agreement). The amount you must contribute to the cooperative will be determined by vote of the members, but not less than 1% and not more than 5% of Gross Sales. If our own Coffee House are members of a cooperative, they must contribute to the cooperative on the same basis as franchisees, and they will vote on the same basis as other members. We administer the cooperative, but we have the right to delegate responsibility for administration to an outside company such as an advertising agency or accounting firm, or to the franchisee members of the cooperative. We have the right to require the cooperative to operate from written bylaws or other governing documents that we determine. The documents are not currently available for you to review. Cooperatives will prepare annual financial statements which will be made available for review only by us and by the members of cooperative. We have the power to require cooperatives to be formed, changed, dissolved, or merged.
Source: Item 11 — FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING (FDD pages 24–33)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, Ella Cafe retains significant control over advertising cooperatives. While no advertising council has been established yet, Ella Cafe has the right to require franchisees to participate in local or regional advertising cooperatives.
Ella Cafe defines the cooperative's area based on media markets or other geographic criteria. Each franchisee gets one vote per Coffee House unless they are in default of their franchise agreement. The contribution amount is determined by the members' vote, ranging from 1% to 5% of Gross Sales. If Ella Cafe owns a Coffee House within the cooperative, they contribute and vote on the same basis as franchisees. Ella Cafe also administers the cooperative but can delegate this to an outside company or the franchisee members.
Most importantly, Ella Cafe maintains the power to require these cooperatives to be formed, changed, dissolved, or merged. This gives Ella Cafe considerable influence over the advertising strategies and financial contributions of its franchisees at the local and regional levels. Franchisees should be aware that the specific governing documents or bylaws for these cooperatives are not currently available for review, which could introduce uncertainty about their operation.