Does Ella Cafe have sole discretion in requiring a transfer upon permanent disability?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
Upon the permanent disability of Developer (if Developer is a natural person) or any Principal who is a natural person, Franchisor may, in its sole discretion, require such interest to be transferred to a third party in accordance with the conditions described in this Section 8. within six months after notice to Developer. "Permanent disability" means any physical, emotional, or mental injury, illness, or incapacity which would prevent a person from performing the obligations set forth in this Agreement or in any guaranty made part of this Agreement for at least 90 consecutive days and from which condition recovery within 90 days from the date of determination of disability is unlikely.
Permanent disability will be determined by a licensed practicing physician selected by Franchisor, upon examination of the person; or if the person refuses to submit to an examination, then such person automatically will be deemed permanently disabled as of the date of such refusal for the purpose of this Section 8.8.2.
The costs of any examination required by this Section 8.8.2. will be paid by Franchisor.
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, Ella Cafe has the sole discretion to require a transfer of the franchise if the Developer or a Principal becomes permanently disabled. Specifically, if the Developer or a Principal who is a natural person experiences a physical, emotional, or mental injury, illness, or incapacity that prevents them from fulfilling their obligations under the Franchise Agreement for at least 90 consecutive days, and recovery within 90 days is unlikely, Ella Cafe may require the interest to be transferred. This transfer must occur within six months after Ella Cafe provides notice to the Developer.
The definition of "permanent disability" is determined by a licensed physician selected by Ella Cafe, who will examine the person in question. If the person refuses to submit to the examination, they will automatically be deemed permanently disabled from the date of refusal for the purposes of the transfer requirement. The costs associated with this examination are to be paid by Ella Cafe.
This clause is significant for potential Ella Cafe franchisees as it highlights the importance of having a succession plan or disability insurance in place. The franchisee risks losing their business if they become permanently disabled and are unable to operate it, as Ella Cafe has the right to demand a transfer to a third party. Furthermore, if an approved transfer is not completed within the specified timeframe following a permanent disability, Ella Cafe retains the right to terminate the Franchise Agreement.