Are there exceptions to the 30-day cure period for Ella Cafe franchise agreement defaults?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
or any part thereof, is appointed by any court of competent jurisdiction; (f) proceedings for a composition with creditors under any state or federal law is instituted by or against Developer; (g) a final judgment remains unsatisfied or of record for 30 days or longer (unless a supersedeas bond is filed); (h) Developer is dissolved; (i) execution is levied against Developer's business or property; (j) judicial, non-judicial, or administrative proceedings to foreclose any lien or mortgage against Developer, the Business Entity, or the Coffee House premises or assets or equipment are instituted against Franchisor and are not dismissed within 30 days; or (k) the real or personal property of Developer or the Coffee House is sold after levy thereupon by any sheriff, marshal, or constable.
- 9.2. Termination With Notice and Without Opportunity to Cure. Franchisor has the right to terminate this Agreement, which termination will become effective upon delivery of notice without opportunity to cure if: (a) Developer fails to adhere to the Development Schedule set forth in the Key Terms; (b) Developer or any Owner is convicted of, or pleads no contest to, a felony, a crime involving moral turpitude, or any other crime or offense that Franchisor believes is reasonably likely to have an adverse effect on the System; (c) there is any transfer or attempted transfer in violation of Section 8. of this Agreement; (d) Developer or any Owner fails to comply with the confidentiality or noncompetition covenants in Section 6. and Section 10. of this Agreement; (e) Developer or any Owner has made any material misrepresentations in connection with its application; or (f) Franchisor delivers to Developer three or more written notices of default pursuant to this Section 9. within any rolling 12-month period, whether or not the defaults described in such notices ultimately are cured.
- 9.3. Termination With 10-Day Cure Period. Developer has the right to terminate this Agreement, which termination will become effective upon delivery of written notice of termination, if Developer fails to cure the following defaults within 10 days after delivery of written notice: (a) failure to pay any amounts due Franchisor or its Affiliates; (b) failure to pay any amounts due Developer's trade creditors (unless such amount is subject to a bona fide dispute); or (c) failure to pay any amounts for which Franchisor has advanced funds for or on Developer's behalf, or upon which Developer is acting as guarantor of Developer's obligations.
- 9.4. Termination With 30-Day Cure Period. Except as otherwise provided in this Section 9., Franchisor has the right to terminate this Agreement, which termination will become effective upon delivery of written notice of termination, if Developer fails to cure any curable default within 30 days after delivery of written notice.
Source: Item 23 — RECEIPTS (FDD pages 50–181)
What This Means (2024 FDD)
According to Ella Cafe's 2024 Franchise Disclosure Document, while a 30-day cure period generally applies to franchise agreement defaults, there are specific instances where Ella Cafe can terminate the agreement without offering an opportunity to cure.
Specifically, Ella Cafe can terminate the agreement immediately if the franchisee fails to adhere to the development schedule, is convicted of a felony or a crime involving moral turpitude, attempts an unauthorized transfer of the franchise, violates confidentiality or noncompetition covenants, makes material misrepresentations in their application, or receives three or more written notices of default within a 12-month period, regardless of whether the defaults were ultimately cured.
There is also a 10-day cure period for specific defaults, including failure to pay amounts due to Ella Cafe or its affiliates, failure to pay trade creditors, or failure to pay amounts for which Ella Cafe has advanced funds or acted as a guarantor. Additionally, Ella Cafe can terminate the agreement if an approved transfer is not completed within a specified timeframe following a permanent disability. Any default under any agreement between the franchisee (or its affiliates) and Ella Cafe (or its affiliates) that is not cured within the applicable cure period will also be considered a default under the franchise agreement, providing an independent basis for termination.
These stipulations highlight the importance of adhering to all contractual obligations and maintaining ethical business practices to avoid potential termination of the Ella Cafe franchise agreement. Prospective franchisees should carefully review these termination conditions and seek legal counsel to fully understand their rights and responsibilities.