How much does an Aroma franchise cost? The lawsuit that reveals the behind-the-scenes of the chain

After operating an Aroma branch for about 20 years, a franchisee is suing the chain for 5 million shekels, revealing in the lawsuit how much it cost to obtain a franchise to operate a branch and how the transfer of rights between franchisees is priced. This comes as he claims that Aroma did not handle the receipt of a permit for exceptional use for years, a matter that prevented him from selling the franchise and caused him heavy damages.

According to a lawsuit filed on July 19 at the Haifa District Court, Eran Hirschfeld received a franchise in 2005 to operate an Aroma branch at the Paz gas station in Guy Iron in Wadi Ara, near Kafr Qara and Harish. Hirschfeld invested, according to him, about 2 million shekels in establishing the branch, underwent a long training period, and operated it for about 20 years. The branch became, according to the statement of claim, a successful branch with significant reputation in the area. However, according to Hirschfeld, Shefa Zichiyonot Ltd., the company that markets Aroma's operating franchises, did not handle the receipt of a permit for exceptional use, a move that made it difficult for him to transfer the rights to a third party.

Hirschfeld claims that in 2005 Aroma presented him with a representation that the property was suitable for operating the branch, and that the handling of permits was the responsibility of Paz. However, two weeks after signing the franchise agreement, Aroma signed a lease agreement with Paz in which it was noted that the property needed a permit for exceptional use. The failure to receive the permit even reached the court in 2014, when there was a fear of receiving a closure order for the branch that was not realized. In 2022, despite the difficulties in receiving the permit, a new lease agreement was signed between Aroma and Paz. According to the lawsuit, Hirschfeld was involved in the process, bore costs, waived claims against Paz, and even signed personal guarantees for Aroma's obligations to Paz. From this, he claims that a legitimate expectation was created for him to continue his activity at the branch.

However, in July 2024, Aroma announced that it would not exercise the option to continue the lease at the station, according to him due to "planning uncertainty," and thus in his view the twenty-year franchise ended. In August 2024, Aroma even sent a letter to the branch in which it claimed fundamental breaches and determined that it would not continue Hirschfeld's franchise, which was supposed at that point to expire four months later, in March 2025. The company claimed against the franchisee that the branch does not meet the standard in terms of service supply and level of cleanliness. According to Hirschfeld, he received in the same month a laboratory test results report that testifies to a high standard of cleanliness of the place (score 88 out of 100). After Hirschfeld's departure, the branch reopened in September 2025. According to the entrepreneur, Aroma distanced him while providing a representation, apparently false, that it was stopping the branch's activity while it chose to operate it itself. In doing so, it apparently benefited from his labor over the years in developing the place.

Aroma Israel, founded in 1994, is one of the largest coffee shop chains in the country and operates hundreds of branches in Israel and abroad, most of them through franchisees. As part of the chain's franchising model, branch owners purchase the right to operate a branch under the brand and pay ongoing royalties, while the chain provides the brand, training, and operational support. According to Aroma, there are almost 200 branches of the chain in Israel.

Hirschfeld's lawsuit reveals the behind-the-scenes of the chain's franchises. According to the agreement attached to the lawsuit, in 2005, an Aroma franchise cost 100 thousand shekels, and in addition 4% of monthly revenues (defined in the agreement as turnover). On turnover exceeding half a million shekels per month, the franchisee will pay 5% to Aroma, and on an amount of 600 thousand shekels turnover will pay 6% and so on. Consulting will cost 50 thousand shekels. Another interesting figure that arises from the lawsuit, which quotes, apparently, the words of the CEO Danny Michel, according to an updated formula of Aroma, the transfer of a franchise to a third party of an operating branch was done according to a valuation calculation of an annual profit multiplier of 4.37. That is, if the branch shows a net profit of one million shekels per year, and the franchisee wants to realize the profits and transfer the franchise to a third party, the franchise costs 4.37 million shekels. Since the branch in Wadi Ara earned 880 thousand shekels per year, in Hirschfeld's view he suffered a loss of 3.8 million shekels from not selling the franchise. Hirschfeld is suing for 5 million shekels for future profits, equipment value, damage to reputation, and emotional distress. Aroma has not yet filed a statement of defense, and the claims will be clarified in court.