In the year 2003, Jon Favreau was still making his transition from raunchy comedy actor in films like Swingers and Very Bad Things to behind-the-camera director. Fresh off his crime comedy made, he delivered his sophomore effort in a little Christmas movie known as Elf. Arriving in theaters right after actor Will Ferrell had departed Saturday Night Live, the film quickly became a staple of Christmas movies and propelled Ferrell into superstardom (combined with his other 2003 comedy Old School) and put Favreau on the path toward becoming an architect of the Marvel Cinematic Universe. If a new interview is to be believed, Ferrell and Favreau perhaps not liking each other is why Elf 2 never happened.
Speaking in a new interview, Elf co-star James Caan revealed this tantalizing dose of tea, something that is naturally unconfirmed by anyone else involved in the movie. While appearing on Cleveland's 92.3 The Fan's Bull & Fox show (H/T The Wrap), Caan said: "We were gonna do (a sequel) and I thought, 'Oh my god, I finally got a franchise movie, I could make some money, let my kids do what the hell they want to do.' And the director and Will didn't get along very well...So, Will wanted to do it, he didn't want the director, and he had it in his contract, it was one of those things."
Ferrell has not been quiet about having no interest in reprising his role for a sequel in the years since, telling Andy Cohen on Watch What Happens Live back in 2013: "Absolutely not...I just think it would look slightly pathetic if I tried to squeeze back in the elf tights: Buddy the middle-aged elf." He reiterated his position in 2017 in an interview with IGN.
Favreau on the other hand has vocally kept up his interest in returning for a follow-up, saying as recently as 2016: "You can play with the narrative structure and you can play with things in a way where you could do a cool version that the fans would like, and the people that were involved in it might be so charmed by it that they'd be involved in some other capacity."
Should neither party return to the property though their careers will not have suffered. Ferrell continues to lead comedies in theaters and on Netflix while Favreau is guiding the world of Star Wars on the small screen.