During the term of the Ella Cafe agreement, can the franchisee divert customers to a competitor?

According to Ella Cafe's 2024 Franchise Disclosure Document, during the term of the Franchise Agreement, the guarantor, which would be the franchisee, is restricted from having any ownership interest in, or being engaged or employed by, any competitor. This is a covenant not to compete that Ella Cafe enforces during the agreement term.

This restriction means that as an Ella Cafe franchisee, you cannot be involved with any competing business, whether through ownership or employment. This restriction is in place to protect Ella Cafe's business interests and prevent franchisees from using the knowledge and resources gained from the franchise to benefit a competitor.

After the franchise agreement expires or is terminated, this restriction continues for two years. During this post-term period, the franchisee cannot be involved with any competitor located within five miles of the franchisee's designated area or the designated area of any other Ella Cafe business operating on the date of termination or transfer. This extended restriction further safeguards Ella Cafe's market position and customer base.

These non-compete clauses are typical in franchising to protect the brand and prevent franchisees from directly applying the franchisor's business model to a competing business, especially in close proximity to existing locations. Prospective franchisees should carefully consider these restrictions and how they might impact their future business opportunities.