Franchisee Sues Aroma Coffee Chain for NIS 5 Million Over License Dispute

Eran Hirschfeld, who operated an Aroma coffee branch in Wadi Ara for about 20 years, has filed a NIS 5 million lawsuit against the Aroma franchise network. The lawsuit, submitted on July 19 to the Haifa District Court, reveals the costs and conditions of obtaining and transferring Aroma franchise licenses. Hirschfeld claims that Aroma failed to secure a necessary special-use permit for the branch, preventing him from selling the franchise and causing significant financial damage.

Hirschfeld received the franchise license in 2005 to run a branch at a Paz gas station in Guy Iron near Kfar Ara and Harish. He invested approximately NIS 2 million in establishing the branch, underwent extensive training, and successfully operated the location for two decades. According to the lawsuit, Aroma represented that the property was suitable for the business and that Paz would handle permits. However, two weeks after signing the franchise agreement, Aroma signed a lease with Paz stating the property required a special-use permit. This issue led to a 2014 court case fearing closure of the branch, which did not materialize.

Despite difficulties, a new lease was signed in 2022 between Aroma and Paz, with Hirschfeld involved and bearing costs, even signing personal guarantees. He claims this created a legitimate expectation to continue operating the branch. However, in July 2024, Aroma announced it would not renew the lease due to "planning uncertainty," effectively ending the 20-year franchise. In August 2024, Aroma accused Hirschfeld of fundamental breaches, citing service and cleanliness deficiencies, though Hirschfeld presented a high cleanliness rating from a recent lab inspection.

After Hirschfeld’s departure, the branch reopened under Aroma’s direct management in September 2025. Hirschfeld alleges Aroma misled him by claiming it was ceasing operations while continuing to run the branch itself, benefiting from his prior investment. The lawsuit details Aroma’s franchise model, including a 2005 license fee of NIS 100,000 plus monthly royalties ranging from 4% to 6% depending on revenue, and a consulting fee of NIS 50,000. It also cites a formula for license transfers based on a 4.37 multiplier of annual net profit, which Hirschfeld says values his branch’s license at about NIS 3.8 million, representing his loss from being unable to sell.

Hirschfeld demands NIS 5 million for lost future profits, equipment value, reputational harm, and emotional distress. Aroma has yet to file a defense, and the case will be resolved in court.