Coffee Bean ordered shut amid legal morass

Israel's 14 branches of the Coffee Bean chain were ordered closed by the international franchise as of yesterday, after local franchise holder City Food violated their agreement and fell behind in payments. The local franchise holder owes several hundreds of thousands of dollars.

But there's a catch: Coffee Bean restaurants in Israel are themselves franchises of City Food. After signing 10-year agreements in January, shutting them down would violate these agreements. The U.S.-based coffee house franchise informed City Food in July that it had until yesterday to shutter the branches.

City Food's franchise holders draw their right to run Coffee Beans from City Food's agreement with Coffee Bean international; therefore if the parent franchise holder loses its rights, they've probably lost theirs too, attorney David Gideoni of the firm Tadmor and Co. told TheMarker.

But the City franchise holders are unmoved. "We have no intention of closing. We have an agreement with City that's valid for 10 years, starting last January, and we have supplies for the next six months at least," said one of the company's franchise holders in Herzliya Pituah. "Plus, we haven't been informed officially. Everything we know is through the newspapers."

While the Herzliya franchise holder said their attorney advised them there would be no problem with continuing to operate, given their agreement with City Food, Gideoni said they were opening themselves up to lawsuits from Coffee Bean International.