Is Ella Cafe responsible for cost increases related to increases in material costs when purchasing from Designated Suppliers?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
ARTICLE 8. SUPPLIERS AND VENDORS
8.1 Generally.
Franchisee will purchase only from Franchisor, suppliers, or distributors designated by Franchisor ("Designated Suppliers"): (a) fixtures, furniture, equipment, interior and exterior signage, decor, trade dress (as Franchisor defines trade dress), and Coffee House design consulting services; (b) food products and ingredients, whether or not they are developed by or for Franchisor pursuant to a special recipe, formula, or specifications; (c) all fountain and bottled beverages; (d) uniforms, shirts, memorabilia, and all merchandise and items intended for retail sale (whether or
not bearing our Marks); (e) advertising, point-of-purchase materials, and other printed promotional materials; (f) gift certificates, stored value cards, and other non-cash payment systems; (g) stationery, business cards, contracts, and forms; (h) bags, packaging, and supplies bearing Franchisor's Marks; and (i) all other goods and/or services as Franchisor requires. Franchisor may receive money or other benefits from Designated Suppliers based on Franchisee's purchases. Franchisee agrees that Franchisor has the right to retain and use all such benefits as it deems appropriate, in its sole discretion. Franchisor herby retains the right to add, delete, or modify any items which must be purchased from the Designated Supplier by updating the operations manual. Furthermore, fr
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
The 2024 Ella Cafe Franchise Disclosure Document outlines the franchisee's obligation to purchase goods from designated suppliers. According to Article 8.1, franchisees must purchase specific items from Ella Cafe, its designated suppliers, or distributors. These items include fixtures, furniture, equipment, signage, decor, consulting services, food products, beverages, uniforms, merchandise, promotional materials, gift certificates, stationery, and packaging.
The FDD does not explicitly state whether Ella Cafe is responsible for cost increases from designated suppliers. However, it does state that Ella Cafe may receive money or other benefits from Designated Suppliers based on Franchisee's purchases and that Ella Cafe has the right to retain and use all such benefits as it deems appropriate, in its sole discretion. This suggests that Ella Cafe may have some leverage in negotiating prices with suppliers, but it does not guarantee that they will absorb cost increases.
Given the lack of explicit information regarding responsibility for cost increases, prospective Ella Cafe franchisees should directly inquire with the franchisor about how cost increases from designated suppliers are handled. Understanding the franchisor's policies on this matter is crucial for budgeting and financial planning.