What rights does Ella Cafe reserve regarding the Franchise System that are not specifically prohibited by the agreement?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
to establish, a Coffee House that is the same model as the one operated by Franchisee under this Agreement in the Designated Area during the Term of this Agreement.
- 2.3. Retained Rights. The rights granted to Franchisee under this Agreement are nonexclusive, and Franchisor and its Affiliates have and retain all rights within and outside the Designated Area, except those expressly granted to Franchisee in the Agreement. Accordingly, Franchisor, its Affiliates, and any other authorized person or entity will have the right, among others, (a) to operate, and license others to operate, ELLA Coffee House at any location outside the Designated Area and in any Reserved Area (whether located inside or outside the Designated Area), including ELLA Coffee House that are adjacent to or surrounded by the Designated Area (b) to advertise and promote the System in the Designated Area (c) to operate, and license others to operate, ELLA Coffee House at any locations in any Reserved Area, including Reserved Areas that are in the Designated Area (d) to operate, and license others to operate, other coffee houses, ghost kitchens, or other food service businesses utilizing trademarks other than ELLA COFFEE HOUSE inside and outside the Designated Area and in any Reserved Area (whether located inside or outside the Designated Area and (e) to engage, directly or indirectly, at wholesale, retail, or otherwise, in the production, distribution, license, and sale of any and all food, beverages, or other services and products, under the Marks or under other names or marks through any method of distribution, other than a ELLA Coffee House, regardless of the competitive impact, and including, but not limited to, from vending machines and kiosks, food trucks, grocery stores, and other food retailers and through mail order catalogs and the Internet, regardless of the proximity to, or the competitive impact on, Coffee Houses developed by Franchisee. The Franchisor shall operate or license others to operate a Ghost Kitchen inside of the Designated Area or Reserved Area with Franchisee's prior written consent; however, if such a Ghost Kitchen exists in the Designated Area or Reserved Area at the time of execution of this Agreement, then Franchisee's consent is deemed to have been provided and cannot be revoked. Franchisee understands and acknowledges that, at any time, the Franchisor may develop or authorize someone other than Franchisee to develop and operate ELLA Coffee House in the Reserved Area within the Designated Area. Further, the Franchisor may sell within the Designated Area any products and services that are authorized for sale at ELLA Coffee House, as well as other products and services, under the Marks or other trademarks, service marks, and commercial symbols, provided that such sales are through dissimilar channels, which include, but are not limited to, grocery and other retail stores (including supermarkets), motor vehicles (such as food trucks), the internet, satellite locations, sales or mail order catalogs, temporary locations, carts or kiosks, or through other electronic, internet, or print media.
- 2.4 Franchisee Control. Franchisee represents that Attachment 1 (i) identifies each owner, officer and director of Franchisee, and (ii) describes the nature and extent of each owner's interest in Franchisee. If any information on Attachment 1 changes (which is not a Transfer), Franchisee shall notify Franchisor within 10 days.
- 2.5 Principal Executive. Franchisee agrees that the person designated as the "Principal Executive" on the Summary Page is the executive primarily responsible for the Business and has decision-making authority on behalf of Franchisee. The Principal Executive must have at least 10% ownership interest in Franchisee. The Principal Executive does not have to serve as a day-today general manager of the Business, but the Principal Executive must devote substantial time and attention to the Business.
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, the rights granted to a franchisee are nonexclusive, meaning Ella Cafe retains all rights within and outside the designated area except those explicitly granted to the franchisee in the agreement. Ella Cafe reserves several rights regarding the franchise system. These include the right to operate or license others to operate Ella Coffee Houses outside the franchisee's designated area and in any reserved area, even if these areas are adjacent to or surrounded by the franchisee's territory. Ella Cafe can also advertise and promote the system within the franchisee's designated area.
Ella Cafe also retains the right to operate or license others to operate other coffee houses, ghost kitchens, or food service businesses using different trademarks than "ELLA COFFEE HOUSE" both inside and outside the designated area and in any reserved area. Furthermore, Ella Cafe can engage in the production, distribution, and sale of food, beverages, or other services and products under the Ella Cafe marks or other names through any distribution method other than an Ella Coffee House. This includes sales from vending machines, kiosks, food trucks, grocery stores, and online, regardless of proximity to or competitive impact on the franchisee's Coffee Houses. However, Ella Cafe must obtain the franchisee's prior written consent to operate or license a Ghost Kitchen inside the Designated Area or Reserved Area, unless such a Ghost Kitchen already exists at the time of the agreement.
Ella Cafe also reserves the right to periodically undertake technology initiatives to enhance the franchise system's technology, including enhanced internet capability, proprietary digital applications, and support services. Franchisees are responsible for the costs of obtaining and maintaining the computer system hardware and software, even if these costs are not fully amortizable over the agreement's remaining term, and Ella Cafe has no obligation to reimburse these costs. Ella Cafe also reserves the right to control all internet-based marketing and to enter into agreements with specific regional or national customers to establish National Accounts, even within a franchisee's designated area. If a National Account is established in the franchisee's area, the franchisee must service that account under the negotiated terms. However, Ella Cafe can authorize other franchisees or third parties to service the National Account if the franchisee is deemed incapable or if demand exceeds their capacity.