Under what conditions does Ella Cafe have a right of first refusal regarding the transfer of a franchise?
Ella_Cafe Franchise · 2024 FDDAnswer from 2024 FDD Document
e's approval or prior notice to Franchisee, provided that the buyer, assignee or transferee agrees in writing to assume all of Franchisor's obligations under this Agreement. Franchisor and its Indemnitees will not be liable for obligations of the transferee arising after the date of transfer.
- 15.2 By Franchisee. Franchisee acknowledges that the rights and duties set forth in this Agreement are personal to Franchisee and that Franchisor entered into this Agreement in reliance on Franchisee's business skill, financial capacity, personal character, experience, and business ability. Accordingly, Franchisee shall not conduct or undergo a Transfer without providing Franchisor at least 60 days prior notice of the proposed Transfer, and without obtaining Franchisor' consent. In granting any such consent, Franchisor may impose conditions, including, without limitation, the following:
- (i) Franchisor receives a transfer fee of $10,000 ("Transfer Fee") plus any broker fees and other out-of-pocket costs incurred by Franchisor, including attorneys' fees
Source: Item 22 — CONTRACTS (FDD page 50)
What This Means (2024 FDD)
Based on the 2024 Franchise Disclosure Document, the Ella Cafe franchise agreement stipulates that franchisees cannot transfer their franchise without the franchisor's consent. To obtain this consent, franchisees must provide Ella Cafe with at least 60 days' prior notice of the proposed transfer.
Ella Cafe may impose several conditions when granting consent for a transfer. These conditions include receiving a transfer fee of $10,000, plus any broker fees and out-of-pocket costs, including attorney's fees, incurred by the franchisor. The proposed assignee must also complete Ella Cafe's franchise application process, meet the franchisor's standards for new franchisees, and be approved by Ella Cafe. Additionally, the proposed assignee cannot be a competitor of Ella Cafe.
Furthermore, the proposed assignee must execute Ella Cafe's then-current form of franchise agreement, which may contain materially different provisions than the original agreement. All owners of the proposed assignee must also provide a guaranty. These conditions ensure that Ella Cafe maintains control over who becomes a franchisee and that the new franchisee meets their standards and obligations.