UFOC
The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample UFOC
FRANCHISE OFFERING CIRC Jl^&*HS^
JUL 1 3 2006
CBC RESTAURANT CORPORATION
A Delaware Corporation 12700 Park Central Drive Suite 1300
corner Da||as. tx 75251
balCPPV (972)619-4100
^ ^ XV v^ A jf www.cornerbakerycafe.com
CAFE
The franchisee will operate a quick-service restaurant cafe under the name "Corner Bakery Cafe®" offering a limited menu of breakfast, lunch and dinner products and featuring artisan breads, salads, sandwiches, soups and baked goods ("Corner Bakery Cafe").
The Initial Franchise Fee is generally $35,000; however, if you sign an Area Development Agreement, the Initial Franchise Fee is $25,000. You also must pay to us an hourly rate for our opening team of trainers and personnel as well as the cost of their meals, lodging and transportation and other living expenses. The estimated initial investment ranges from approximately $1,177,000 to $2,345,000. This range does not include the cost of buying or renting the business location. If you sign an Area Development Agreement, you will pay a Development Fee equal to $10,000 for each Corner Bakery Cafe that you agree to develop. This is your only initial investment with respect to an Area Development Agreement.
Risk Factors:
1. THE FRANCHISE AND AREA DEVELOPMENT AGREEMENTS PERMIT YOU TO FILE SUIT AGAINST US ONLY WHERE OUR PRINCIPAL OFFICES ARE LOCATED, WHICH CURRENTLY IS TEXAS. OUT-OF-STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT ALSO MAY COST YOU MORE TO FILE SUIT IN TEXAS INSTEAD OF YOUR HOME STATE.
2. THE FRANCHISE AGREEMENT AND AREA DEVELOPMENT AGREEMENTS PROVIDE THAT TEXAS LAW GOVERNS THE AGREEMENTS. THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
3. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
Information comparing franchisors is available. Call the state administrators listed in Exhibit A or your public library for sources of information. Registration of this franchise by a state does not mean that the state recommends it or has verified the information in this offering circular. If you learn that anything in this offering circular is untrue, contact the Federal Trade Commission and the applicable state agency listed in Exhibit A.
Certain states require franchisors to make additional disclosures related to the information contained in this offering circular. These disclosures are contained in Exhibit H to this offering circular. This offering circular is to be used in all states and the District of Columbia.
CBC - UFOC - 06/06
Effective Date: June 30, 2006, except for the following states in which the Effective Date is listed below:
California _________, 2006 North Dakota _________, 2006
Hawaii _________, 2006 Rhode Island _________, 2006
Illinois _________,2006 South Dakota _________,2006
Maryland _________,2006 Virginia _________,2006
Minnesota _________, 2006 Washington _________, 2006
New York _________, 2006
CBC - UFOC - 06/06
CBC RESTAURANT CORPORATION
A Delaware Corporation
12700 Park Central Drive
Suite 1300
Dallas, TX 75251
(972) 619-4100
INFORMATION FOR PROSPECTIVE FRANCHISEES REQUIRED BY THE FEDERAL TRADE COMMISSION
To protect you, we've required your franchisor to give you this information. We haven't checked it. and don't know if it's correct. It should help you make up your mind. Study it carefully. While it includes some information about your contract, don't rely on it alone to understand your contract. Read all of your contract carefully. Buying a franchise is a complicated investment. Take your time to decide. If possible, show your contract and this information to an advisor, like a lawyer or an accountant. If you find anything you think may be wrong or anything important that's been left out, you should let us know about it. It may be against the law.
There may also be laws on franchising in your state. Ask your state agencies about them.
FEDERAL TRADE COMMISSION Washington, D.C. 20580
CBC - UFOC - 06/06
TABLE OF CONTENTS
Item Page
ITEM 1 THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES....................................1
ITEM 2 BUSINESS EXPERIENCE...............................................................................................3
ITEM 3 LITIGATION.....................................................................................................................5
ITEM 4 BANKRUPTCY...............................................................................................................5
ITEM 5 INITIAL FRANCHISE FEE...............................................................................................5
ITEM 6 OTHER FEES..................................................................................................................6
ITEM 7 INITIAL INVESTMENT...................................................................................................12
ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES............................15
ITEM 9 FRANCHISEE'S OBLIGATIONS...................................................................................17
ITEM 10 FINANCING..................................................................................................................19
ITEM 11 FRANCHISOR'S OBLIGATIONS...................................................................................19
ITEM 12 TERRITORY..................................................................................................................28
ITEM 13 TRADEMARKS..............................................................................................................30
ITEM 14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION...............................33
ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE ....................
FRANCHISE BUSINESS...............................................................................................33
ITEM 16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL......................................35
ITEM 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION...................36
ITEM 19 EARNINGS CLAIM........................................................................................................42
ITEM 20 LIST OF OUTLETS........................................................................................................46
ITEM 21 FINANCIAL STATEMENTS...........................................................................................48
ITEM 22 CONTRACTS................................................................................................................48
ITEM 23 RECEIPT.......................................................................................................................48
EXHIBITS
A LIST OF STATE ADMINISTRATORS
B AGENTS FOR SERVICE OF PROCESS
C AREA DEVELOPMENT AGREEMENT
D FRANCHISE AGREEMENT
E GENERAL RELEASE
F CONFIDENTIALITY AGREEMENT
G FINANCIAL STATEMENTS
H ADDITIONAL DISCLOSURES REQUIRED BY CERTAIN STATES
ITEM1
THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES
To simplify the language in this offering circular, "we," "us" or "CBC" means CBC Restaurant Corporation, the franchisor. "You" means the person or legal entity who buys the franchise. If you are a corporation, partnership or limited liability company, certain provisions of this offering circular also apply to your owners and will be noted.
CBC is a Delaware corporation incorporated on September 29, 2005. Our principal place of business is 12700 Park Central Drive, Suite 1300, Dallas, Texas 75251. Our agents for service of process in various states are listed in Exhibit B.
CBC is a wholly-owned subsidiary of II Fomaio (America) Corporation ("II Fornaio"), a Delaware corporation incorporated on March 18, 1997. II Fornaio's principal address is 770 Tamalpais Drive, Suite 400, Corte Madera, California 94925. II Fornaio has never offered franchises in any line of business, nor has it ever owned or operated Corner Bakery Cafes.
We do business under the name "Corner Bakery Cafe®". We have owned and operated Corner Bakery Cafes since our acquisition of the Corner Bakery Cafe System from Brinker International, Inc. ("Brinker") pursuant to an Asset Purchase Agreement dated as of February 2, 2006. As of May 1, 2006, we operated 93 Corner Bakery Cafes, and there were 3 franchised Corner Bakery Cafes.
This is our initial franchise offering. We have not offered franchises in any other line of business, and we do not engage in any business not described in this Item 1. Except as identified in this Item 1, we have no predecessors or affiliates.
Our Predecessor
Brinker is a Delaware corporation, incorporated in Delaware in September 1983, whose principal address is 6820 LBJ Freeway, Dallas, Texas 75240. Brinker owned and operated Corner Bakery Cafes from 1995 to 2006 and, as of February 2, 2006, Brinker had 3 franchised Corner Bakery Cafes in Illinois.
As of February 2, 2006, Brinker operated and franchised three other restaurant concepts including: (1) "Chili's," "Chili's Southwest Grill & Bar," "Chili's Too," "Chili's Bar & Bites," "Chili's Grill & Bar," "Chili's Margarita Bar" and "Chili's Hamburger Grill & Bar" (collectively, "Chili's Restaurants"); (2) "Romano's Macaroni Grill" and "Macaroni Grill" (collectively, "Macaroni Grills"); and (3) "On the Border Mexican Grill & Cantina" and "On the Border" (collectively, "On the Border Restaurants"). Brinker has not offered franchises in any other line of business.
Chili's Restaurants are full-service restaurants featuring Southwestern and Mexican-style cuisine. Brinker has offered franchises for Chili's Restaurants since 1984. As of June 29, 2005 Brinker had 162 franchised Chili's Restaurants. Macaroni Grills are full-service restaurants featuring Italian cuisine. Brinker has offered franchises for Macaroni Grills since December 2002. As of June 29, 2005 Brinker had 6 franchised Macaroni Grills. On the Border Restaurants are full-service restaurants featuring Tex-Mex cuisine. Brinker has offered franchises for On the Border Restaurants since 1994. As of June'29, 2005 Brinker had 18 franchised On the Border Restaurants.
CBC - UFOC - 06/06
Corner Bakery Cafes
We are offering, under the terms of this offering circular, the opportunity to become a franchisee to develop and operate Corner Bakery Cafes. Corner Bakery Cafes are retail bakeries in the traditional, old world bread bakery style. For breakfast, lunch, dinner, and everything in between, Corner Bakery Cafes deliver the choices that keep guests coming back to our recognizable black-and-white awnings. Each Corner Bakery Cafe is a tight-knit community within the broader neighborhood it serves, where "regulars" frequently strike up friendships with each other and employees get to know the "regulars" by name. Breakfast guests enjoy everything from our savory Egg Scramblers to our old fashioned oatmeal and fresh baked cinnamon crumb muffins. At lunch, items like our Loaded Baked Potato Soup and our crisp Harvest Salad are favorites. Delicious sandwiches like the Ham on Pretzel Bread and the hot Corner Club Panini are popular as are the maple pecan bars and decadent fudge brownies. Corner Bakery Cafes also offer seasonal products such as the Summer Trio Salad and Lemon Baby Bundt Cake with fresh mixed berries. Corner Bakery Cafes also offer catering services to businesses and individuals in their neighborhood.
Corner Bakery Cafes operate according to a unique and distinctive system ("System"), whose distinguishing characteristics include distinctive exterior and interior design and layout; special recipes and menu items; and procedures and techniques for food and beverage preparation and service. We have described our mandatory and recommended standards, specifications and operating procedures in our confidential Corner Bakery Operations Manual ("Manual"). We will loan you one copy of the Manual for the term of your franchise. We have the right to change the Manual and the elements of the System.
You can buy a franchise to develop and operate one Corner Bakery Cafe ("Franchised Cafe"), or if you and the area in which you are interested meet certain qualifications, you can buy the rights to develop multiple Corner Bakery Cafes under an Area Development Agreement ("Development Agreement") (Exhibit C) in accordance with an agreed upon Development Schedule. You will sign a Franchise Agreement (Exhibit D) and pay the Initial Franchise Fee (as described in Item 5) after we approve the site for the Franchised Cafe ("Franchised Location"). You should not acquire any interest in a site for the Franchised Cafe until you have been approved as a franchisee and we have accepted the site in writing. If we accept the site, after we receive your signed Franchise Agreement and Initial Franchise Fee, we will sign the Franchise Agreement and provide you a fully-signed original of the Franchise Agreement.
Your receipt of this offering circular does not mean that you will be approved as a franchisee or that you may develop or open a Franchised Cafe. Before you may develop and open a Franchised Cafe, we must approve you as a franchisee and approve the site for your proposed Franchised Cafe in writing, you and CBC must sign the Franchise Agreement; and you and those persons designated by us must attend and successfully complete our initial training program.
Market and Competition
The market for restaurant bakery services is well-established. Restaurants similar to Corner Bakery Cafes primarily attract the age group from 18 to 60 years old. You will compete with a variety of restaurants, bakeries, caterers, grocery stores, take-out restaurants and convenience stores. The restaurant and bakery business is highly competitive based on price,
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service, restaurant location and food quality and is subject to fluctuations in consumer tastes, economic conditions, population and traffic patterns. In each market, we compete with locally owned restaurants and bakeries, as well as national and regional restaurant and bakery chains. Some of our competitors have longer operating histories than ours. The ability of each Corner Bakery Cafe to compete depends on its location, ingress and egress, signage, parking, service, employee attitudes, overhead, changing local market and economic conditions, and many other factors both within and outside your control.
Although we carefully evaluate persons who wish to become our franchisees, no screening process that we implement can conclusively determine whether you will succeed as a Corner Bakery Cafe operator. Similarly, completion of our initial training program does not provide any assurance of success. You must rely on your own assessment of your suitability (in terms of energy, business skill, desire, temperament, people skills, and financial capability, among other things) and your own advisors in deciding whether to become a Corner Bakery Cafe operator.
Industry-Specific Regulations
We are not aware of any laws applicable to a Corner Bakery Cafe that would not apply to restaurant businesses generally. You must comply with all applicable local, state and federal laws and regulations, including health, sanitation, food handling, food preparation, waste disposal, smoking restrictions, discrimination, employment, sexual harassment and advertising laws. Some laws require point of sale disclosures, including statements concerning nutritional and dietary characteristics of the food served at your Franchised Cafe. There are other laws and regulations applicable to businesses generally (such as the Americans with Disabilities Act) with which you must comply. You should consult with your attorney concerning these and other laws and ordinances that may affect the operations of the Franchised Cafe. You must also obtain all real estate permits and licenses and operational licenses.
ITEM 2
BUSINESS EXPERIENCE
President: Michael J. Hislop
Mr. Hislop has served as President of CBC since February 2006. He has also served as Chief Executive Officer of II Fornaio in Corte Madera, California since July 1995.
Chief Operating Officer: James (Jim) D. Vinz
Mr. Vinz has served as Chief Operating Officer of CBC since February 2006. From January 2005 to February 2006, he served as Chief Operating Officer of Brinker (Corner Bakery Cafe) in Dallas, Texas. From July 1998 to January 2005, Mr. Vinz served as Vice President of Operations of Brinker (Corner Bakery Cafe) in Dallas, Texas.
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Chief Financial Officer and Vice President: Sean Maloney
Mr. Maloney has served as Chief Financial Officer and Vice President of CBC since February 2006. He has also served as Chief Financial Officer and Vice President of II Fornaio in Corte Madera, California since October 2003. From January 2001 to October 2003, he was self-employed as a real estate investment and financial consultant in Corte Madera, California.
Vice President of Human Resources: Denise K. Clemens
Ms. Clemons has served as Vice President of Human Resources of CBC since February 2006. From August 2004 to February 2006, she served as Vice President of Human Resources of Brinker (Corner Bakery Cafe) in Dallas, Texas. From January 1998 to August 2004, Ms. Clemons served as Director of Human Resources of Brinker (Corner Bakery Cafe) in Dallas, Texas.
Vice President of Franchising: Paul J. (P.J.) Evans
Mr. Evans has served as Vice President of Franchising of CBC since January 2006. From February 2003 to December 2005, he served as Vice President, Franchise Initiatives, of Noodles & Company in Boulder, Colorado. From June 1999 to June 2002, Mr. Evans served as Vice President of Franchise Development of Panera Bread Company in St. Louis, Missouri.
Vice President of Food and Beverage: Riccardo (Ric) Scicchitano
Mr. Scicchitano has served as Vice President of Food and Beverage of CBC since February 2006. From August 2002 to February 2006, he served as Vice President of Food and Beverage of Brinker (Corner Bakery Cafe) in Dallas, Texas. From May 1998 to August 2002, Mr. Scicchitano served as a Vice President of Commissary Operations of Brinker (Corner Bakery Cafe) in Dallas, Texas.
Vice President of Development and General Counsel: Blake Bernet
Mr. Bernet has served as Vice President of Development and General Counsel of CBC since February 2006. From October 2001 to February 2006, he served as Director of Concept Development of Brinker (Corner Bakery) in Dallas, Texas.
Director of Marketing: Susan M. Larmer
Ms. Larmer has served as Director of Marketing of CBC since February 2006. From July 2002 to February 2006, she served as Director of Marketing of Brinker (Corner Bakery Cafe) in Dallas, Texas. From May 1998 to July 2002, Ms. Larmer was a Regional Marketing Manager of IHOP Corporation in Dallas, Texas.
Senior Director of Training: Vickie Lee Frisbie
Ms. Frisbie has served as Senior Director of Training of CBC since February 2006. From February 2001 to February 2006, she served as Director of Training of Brinker (Corner Bakery Cafe) in Dallas, Texas.
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ITEM 3 LITIGATION
No litigation is required to be disclosed in this offering circular.
ITEM 4
BANKRUPTCY
No person or entity previously identified in Items 1 or 2 of this offering circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code (or comparable foreign law) that are required to be disclosed in this Item.
ITEM 5
INITIAL FRANCHISE FEE
Development Fee
If you enter into a Development Agreement, when you sign the Development Agreement, you must pay to us a Development Fee equal to $10,000 for each Franchised Cafe that you agree to develop. The Development Fee is fully earned by us when paid by you, and it is not refundable in consideration of administrative and other expenses incurred by us and for the development opportunities lost or deferred as a result of the rights granted to you in the Development Agreement. In addition, the Development Fee is not credited against any other fees to be paid to us.
Initial Franchise Fee
If you have not entered into a Development Agreement with us, the Initial Franchise Fee is $35,000. If you sign a Development Agreement, the Initial Franchise Fee is $25,000. You must pay the Initial Franchise Fee to us when you sign the Franchise Agreement. The Initial Franchise Fee is fully earned by us when paid by you, and it is not refundable for any reason whatsoever.
Payments for Goods and Services
Prior to opening the Franchised Cafe, you must purchase certain inventory and supplies from us or our approved or designated suppliers. Items 7 and 8 provide additional information regarding your initial purchase of inventory and supplies and the supplier approval process. The costs you incur may vary depending, in part, on the amounts purchased, the type of inventory and equipment ordered, state and local taxes imposed and shipping costs.
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ITEM 6
OTHER FEES
|
Fee(1) |
Amount |
Due Date |
Remarks |
|
Royalty Fee |
5% of Gross Sales'2' |
Weekly following the end of each Reporting Period by electronic funds transfer'3' |
A Reporting Period is defined as a one-week period commencing on Tuesday and ending on Monday, or such other period that we designate from time to time. |
|
Advertising Production Fee Brand Development Fund(5) Regional Advertising Funds'6' |
Currently, 0.5% of Gross Sales Amount determined by CBC if and when the Brand Development Fund is established Amount determined by CBC if and when each Regional Advertising Fund is established |
Same as royalty fee See Item 11 See Item 11 |
You will have a weekly advertising obligation ("WAO"), which will be allocated among a Production Fee, a Brand Development Fund contribution (once established), a Regional Advertising Fund contribution (if applicable) and Field Marketing expenditures. Currently, the WAO is 2.0%, divided between the Production Fee and Field Marketing expenditures.'4' |
|
Additional Training |
Tuition charge as established by us from time to time |
Within 30 days after receipt of invoice |
We have the right to require certain of your employees as designated by us to attend training programs in addition to the initial training program provided by us. In addition to the tuition charge, you also will be required to pay all travel, living and other expenses incurred by your employees while attending training. |
|
Late Charges and Interest'7* |
Interest on the amount owed from the date due until paid. We also have the right to charge a $500 late charge for each delinquent payment. |
When any payment or report is not actually received by us on or before the date on which such payment is due |
The interest rate is 18% per annum or the maximum rate permitted by law, whichever is less. |
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|
Fee(1» |
Amount |
Due Date |
Remarks |
|
Audit and Inspection Costs |
Amount understated by you, plus interest |
Upon demand |
The interest rate is the same as the interest rate for late payments. If an inspection or audit discloses an understatement in any report of 2% or more of Gross Sales for the audit period, you also must reimburse us for any and all costs and expenses connected with the inspection or audit. |
|
Collection Costs and Expenses |
Our costs and expenses |
Upon demand, if required |
These costs and expenses include, but are not limited to, costs and commissions due a collection agency, reasonable attorneys' fees, costs incurred in creating or replicating reports demonstrating Gross Sales of the Franchised Cafe, court costs, expert witness fees, discovery costs and reasonable attorneys' fees and costs on appeal, together with interest charges on all of the foregoing. |
|
Costs and Attorneys' Fees |
Our costs and expenses |
As incurred |
If we prevail in litigation regarding enforcement of the terms of the Development or Franchise Agreement or if we utilize legal counsel in connection with your failure to comply with these agreements, you must pay our attorneys' fees and costs. |
|
Damages for Employee Raiding |
3 times the annual salary of the person(s) involved |
Upon demand |
Payable if you employ or seek to employ any person who is employed by us or any other Corner Bakery Cafe franchisee or developer, or otherwise induce such person to leave his/her employment. |
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|
Fee(1) |
Amount |
Due Date |
Remarks |
|
Indemnification |
The losses and expenses incurred by CBC and our affiliates |
As incurred |
You must indemnify and hold CBC and our affiliates harmless in all actions arising out of or resulting from the development or operation of your Franchised Cafe, excluding the gross negligence or willful misconduct of CBC. |
|
Lease Review Fee |
Currently $1,500 |
Upon demand |
Payable for our review of the lease for your third and subsequent Corner Bakery Cafes |
|
Management Personnel Fees |
Salaries (including the cost of fringe benefits, which the parties agree equal 20% of salaries), meals, lodging, other living expenses and transportation for the period of time that our management personnel remain at the Franchised Cafe |
As incurred |
If you, at any time, cease to employ 2 management personnel who have completed our initial training program and fail to hire and replace such personnel within 30 days, we have the right to send our personnel to the Franchised Cafe to manage the Franchised Cafe until your replacement personnel have completed the initial training program. |
|
New Product and Supplier Testing |
Our reasonable costs of reviewing the application and inspecting the proposed supplier's facilities, equipment and food products and all product testing costs paid by us to third parties |
In advance of any review of the application |
See Item 8 for a description of the supplier approval process. |
|
Non-Cash Payment Systems |
All costs incurred by us associated with noncash payment systems as they relate to the Franchised Cafe |
As incurred |
You must accept debit cards, credit cards, stored value gift cards or other non-cash payment systems that we specify. |
|
Opening Team of Trainers |
Our then-current hourly rate for trainers. As of the date of this offering circular, that rate is $50/hour. |
As incurred |
If you request an opening team of trainers for the fourth or subsequent Franchised Cafe that you develop, you will be required to pay these charges. |
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|
Fee(1> |
Amount |
Due Date |
Remarks |
|
Quality Control Programs |
If implemented, your proportionate share, as determined by us in our sole discretion, of the costs of any such program |
As incurred |
If implemented, you must participate in any quality control programs that we, in our sole discretion, establish, including a "mystery diner" program or any other consumer experience evaluation programs. |
|
Post-Opening Assistance |
Our per diem fees and charges we may establish. As of the date of this offering circular, our per diem fees are $400/day. |
As incurred |
At your request, we may provide special assistance at the Franchised Cafe for which you will be required to pay these charges. |
|
Reimbursement of Insurance Costs |
Our out-of-pocket costs of obtaining coverage on your behalf |
Immediately upon receipt of invoice |
If you fail to obtain or maintain the required minimum insurance, we may obtain the insurance and charge its cost along with our out-of-pocket expenses to you. |
|
Reimbursement of Required Maintenance Expenses |
Cost of such expenses and the cost of coordinating such repairs |
Upon demand |
If, at any time, the general state of repair, appearance or cleanliness of your Franchised Cafe, or its furnishings, fixtures, equipment or signage does not meet our standards, and you fail to correct such deficiency as we require, we have the right, but not the obligation, to enter the Franchised Cafe and perform such maintenance at your expense. |
|
Relocation |
All reasonable charges actually incurred by us in consideration of your relocation request |
Upon demand, if required |
You may not relocate the Franchised Cafe without our prior written consent, which we may withhold in our sole discretion. We may condition our approval of your relocation request upon, among other things, your payment of an agreed minimum royalty during the period in which the Franchised Cafe is not in operation. |
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|
Fee(1) |
Amount |
Due Date |
Remarks |
|
Space Plan and Signage Plan Fee |
Fee as periodically specified in the Manual |
As incurred |
Payable beginning with the fourth Corner Bakery Cafe that you develop. See Item 11 for additional information regarding the Space Plan and Signage Plan. |
|
Successor Franchise Fee |
50% of our then-current standard initial franchise fee |
At the time you sign the successor franchise agreement |
|
|
Taxes |
You must reimburse us for any sales tax, gross receipt tax or similar tax (other than income tax) imposed on us with respect to any payments to us required under the Franchise Agreement, unless the tax is credited against income tax otherwise payable by us. |
Immediately upon demand |
|
|
Transfer Fee |
Development Agreement: $7,500 for each Franchised Cafe that remains to be developed under the Development Schedule, plus our costs associated with evaluating the transfer Franchise Agreement: $3,500, plus our costs associated with evaluating the transfer |
Prior to consummation of transfer |
Transfers, generally, are subject to our prior written consent. We do not charge a transfer fee for transfers of a minority percentage of your ownership interests; transfers following the death or disability of you, your Owners or your Operating Partner; or, if you are a partnership, transfers to a corporation (or limited liability company) formed for convenience of ownership. |
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|
Fee<1> |
Amount |
Due Date |
Remarks |
|
Web Site Fee |
Fee for developing, |
As incurred |
You may not to promote, offer |
|
reviewing, approving |
or sell any products or |
||
|
and/or hosting your web |
services, or to use any of the |
||
|
site |
Marks, relating to the Franchised Cafe through the Internet or other future technological avenues without our prior written consent, which we may withhold for any or no reason. |
NOTES
(1) Unless otherwise noted, all fees are imposed by and payable to us and are not refundable.
(2) "Gross Sales" include all revenue from the sale of all services and products and all other income of every kind and nature (including stored value gift cards and gift certificates when purchased but not when redeemed, on-premise sales, off-premise sales, catering sales and any other type of sale) related to the Franchised Cafe, whether for cash or credit and regardless of collection in the case of credit. Gross Sales does not include: (a) any bona fide documented federal, state or municipal sales taxes collected by you from customers and paid by you to the appropriate taxing authority; (b) the sale of food or merchandise for which refunds have been made in good faith to customers; (c) the sale of equipment used in the operation of the Franchised Cafe; (d) customer promotional discounts approved by us; and (e) employee meal discounts.
(3) You must participate in our electronic funds transfer program authorizing us to utilize a pre-authorized bank draft system. You must sign and complete the Authorization Agreement attached to the Franchise Agreement to authorize and direct your bank or financial institution to pay and deposit directly to our account, and to charge your business checking account ("Electronic Depository Transfer Account" or "EDTA"), the amount of the Initial Franchise Fee, the royalty fee, marketing fees and contributions and other amounts due and payable by you under the Franchise Agreement ("Sweep"). We have the right to Sweep your account at any time; however, we will not Sweep your account more than once a week so long as you are not in default of the Franchise Agreement or any other agreements with us. We have the right to review your sales numbers within 3 business days following the end of a weekly reporting period and as early as the first business day thereafter, we shall calculate the Royalty Fee and any marketing contributions and fees due under the Franchise Agreement and Sweep such amounts directly from the EDTA. You must pay all costs and expenses of establishing and maintaining the EDTA, including transaction fees and wire transfer fees.
(4) We have the right, following written notice to you, to reallocate and increase your WAO among the Production Fee, Brand Development Fund, Regional Advertising Fund and/or Field Marketing; however, the WAO will not exceed 5.5% of Gross Sales. The marketing fees and advertising funds are further described in Item 11.
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(5) We have the right, in our sole discretion, to establish a Brand Development Fund, and, if we do so, you must contribute to the Brand Development Fund in the amount set forth in the Franchise Agreement.
(6) We have the right, in our sole discretion, to establish a Regional Advertising Fund in the geographic area in which your Franchised Cafe is located, and, if we do so, you must contribute to that Fund in the amount set forth in the Franchise Agreement.
(7) If you fail to timely pay all fees due to us, we may require you to provide a letter of credit from a national bank, on terms set forth in the Manual, equal to 150% of all fees (including royalty fees, marketing contributions and fees, interest and other payments due to us) anticipated to be due annually under all agreements that you have with us.
ITEM 7
INITIAL INVESTMENT
|
Expenditures |
Estimated Costs |
When Due |
Method of Payment'1' |
To Whom Paid |
|
Initial Franchise Fee |
$25,000 - 35,000(Z' |
Upon execution of the Franchise Agreement |
Lump sum |
CBC |
|
Real Property*3' |
||||
|
Grand Opening Marketing*4' |
$15,000 |
As incurred |
30 days before opening to 18 months after opening |
Vendors |
|
Pre-Construction Costs(5) |
$55,000-$210,000 |
As arranged |
As arranged |
Suppliers |
|
Site Work |
$0-$175,000 |
As arranged |
As arranged |
Contractors/ Suppliers |
|
Construction Costs16' |
$400,000 - $850,000 |
As arranged |
As arranged |
Contractors/ Suppliers |
|
Furniture/Fixtures'7' |
$40,000 - $65,000 |
As arranged |
As incurred |
Contractors/ Suppliers |
|
Kitchen Equipment18' |
$150,000-$200,000 |
As arranged |
As incurred |
Contractors/ Suppliers |
|
Smallwares l9) |
$20,000 - $30,000 |
As arranged |
As arranged |
Suppliers |
|
Exterior Signage |
$15,000-$40,000 |
As arranged |
As arranged |
Contractors/ Suppliers |
|
POS m |
$30,000 - $40,000 |
As arranged |
As arranged |
Suppliers |
|
Initial Training111' |
$40,000 - $60,000 |
As arranged |
As arranged |
CBC/Supplier s |
|
Inventory(1Z) |
$10,000-$15,000 |
As arranged |
As incurred |
Suppliers |
12 CBC - UFOC - 06/06
|
Expenditures |
Estimated Costs |
When Due |
Method of Payment'1' |
To Whom Paid |
|
Security Deposits113' |
$2,000-$10,000 |
As arranged |
As incurred |
Contractors/ Suppliers |
|
Additional Funds - 3 months(14) |
$375,000 - $600,000 |
As arranged |
As arranged |
Suppliers |
|
TOTAL ESTIMATED INITIAL INVESTMENT05' |
$1,177,000 - $2,345,000 (does not include real estate costs) |
|||
NOTES
(1) Costs paid to us are not refundable. Whether any costs paid to third parties are refundable will vary based on the practice in the area where your Franchised Cafe is located. If you sign a Development Agreement, the only investment required under that Agreement is payment of the Development Fee, which is described in Item 5.
(2) The manner in which the Initial Franchise Fee is paid is explained in detail in Item 5.
(3) We expect that you will lease the location for the Franchised Cafe, which will vary in size from 3,100 to 3,600 square feet, excluding a patio. We cannot estimate the lease payments that you will make to third party lessors since these payments will vary considerably depending upon the property size, type of transaction and location. You may be required to pay the first and last months' lease payment upon signing your lease agreement. Lease agreements may include the following expenses: taxes, insurance, maintenance, fixed rent (with escalations), percentage rent and other charges related to the operation of the Franchised Cafe.
(4) At least 60 days prior to the opening of the Franchised Cafe, you must submit a Grand Opening Required Spending Plan ("Grand Opening Plan") to us, which outlines your proposal for grand opening marketing and promotion of the Franchised Cafe. You must obtain our written consent to the Grand Opening Plan before you begin to implement it. You must modify the Grand Opening Plan as we request, and, thereafter, you may not make any substantial changes to the Grand Opening Plan without our advance written consent. In addition to the Field Marketing expenditure requirements (as described in Items 6 and 11), you must, during the period beginning 30 days before the scheduled opening of the Franchised Cafe and continuing for 18 months after the Franchised Cafe first opens for business, spend at least $15,000 to conduct grand opening marketing and promotion in authorized advertising media and for authorized expenditures. Within 30 days of each grand opening expense that you incur, you must submit to us evidence (by invoice or sample, if applicable) of such grand opening marketing and promotional expenditures.
(5) This estimate includes pre-construction costs for architectural and related drawings, engineering, testing, permits and fees. Costs may vary significantly by geographic location.
(6) Construction costs include all estimated costs incurred in constructing or remodeling a site to conform to our standards, general contractor and sub-contractor fees and other costs to construct leasehold improvements to conform to our standards. The cost of
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developing a site will vary widely depending upon the location/market, design, configuration, condition of the premises, condition and configuration of existing services and facilities (i.e., air conditioning, electrical and plumbing), the lease terms and the local real estate market. Often, landlords provide allowances for tenant improvements. Tenant improvement allowance figures are not included in this chart as they vary widely. For company-operated Corner Bakery Cafes that opened between May 1, 2005 through April 30, 2006, tenant improvement allowances ranged from approximately $0 to $200,000. Your total net cost to construct a Corner Bakery Cafe may vary significantly from the numbers presented here, depending on the level of tenant improvement allowances received.
(7) This estimate includes all front of house furniture and fixtures for a Comer Bakery Cafe, including a decor package and shipping.
(8) This estimate includes the cost of all kitchen equipment, including ventilation, refrigeration equipment, specialty equipment and sound system.
(9) The estimate includes cooking, serving and other utensils for food preparation.
(10) The figure provided is the cost of a computerized cash accounting and point of sale system, including installation for our company-operated Corner Bakery Cafes. Your costs may vary. We do not require you to use the same system as a company-operated Corner Bakery Cafe, but we will mandate certain aspects of your point of sale system, including, but not limited to, sales and expense reporting in a format acceptable to us.
(11) The estimates include the cost of opening support we may provide.
(12) We estimate that the range will be sufficient to cover inventory needs for the first month of operation.
(13) This item is an estimated range for security deposits, utility deposits, business licenses and other prepaid expenses.
(14) This is our estimate of your expenses for the start-up phase of your business, including professional fees, 3 months of lease payments, the cost of 3 months of inventory (including restaurant equipment and food), payroll, facility expenses such as utilities, insurance, pest control, security, repairs and maintenance, complimentary sales and other costs. The range provided also includes our best estimate of the cash requirements, including salaries for hourly employees and managers (excluding bonus) for the first 3 months of operations. For the purpose of this offering circular, we have estimated the start-up phase to be 3 months from the date the Franchised Cafe opens for business. These figures are estimates, and we cannot assure you that you will not have additional expenses in starting the Franchised Cafe. Your actual cost will depend on factors such as your management skill, experience and business acumen; local economic conditions; the local market for the restaurant; the prevailing wage rate; competition in the market place; and the sales level reached during the start-up phase. These amounts do not include any estimates for debt service. We relied on our experience with our company-operated Corner Bakery Cafes to derive our estimates for these additional funds.
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(15) You should review these figures carefully with a business advisor before making any decision to purchase the franchise. We do not offer any financing directly or indirectly for any part of the initial investment.
ITEM 8
RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
Proprietary Products. We may, from time to time, in our sole discretion, require that you purchase, use, offer and/or promote, and maintain in stock at the Franchised Cafe in such quantities as are needed to meet reasonably anticipated consumer demand, certain proprietary sauces, products, and other ingredients and raw materials that are manufactured in accordance with our proprietary recipes, specifications and/or formulas and/or uniquely specified or sourced ("Proprietary Products"). You must purchase those Proprietary Products only from us or a third party designated and licensed by us to prepare and sell such products (collectively, "Designated Suppliers"). We are not obligated to reveal the recipes, specifications and/or formulas of these Proprietary Products, or the terms and conditions of any supplier or other contracts, to you, non-designated suppliers or any other third parties.
Non-Proprietary Ingredients & Products. We may designate other food products, condiments, beverages, fixtures, smallwares, furnishings, equipment, uniforms, supplies, services, menus, packaging, forms, paper products, software, modems and peripheral equipment and other products and equipment, other than Proprietary Products, that you must use and/or offer and sell at the Franchised Cafe ("Non-Proprietary Products"). You may use, offer or sell only such Non-Proprietary Products that we have expressly authorized, and such products must be purchased or obtained from a producer, manufacturer, supplier or service provider that we have approved ("Approved Supplier") or an alternative Approved Supplier that we have designated or approved.
Each Approved Supplier must comply with our usual and customary requirements regarding insurance, indemnification and non-disclosure, and must demonstrate to our reasonable satisfaction: (a) its ability to supply a Non-Proprietary Product meeting our specifications, which may include, without limitation, specifications as to brand name, contents, manner of preparation, ingredients, quality, freshness and compliance with governmental standards and regulations; and (b) its reliability with respect to delivery and the consistent quality of its products and services.
Our Approved Product and Supplier List is available upon written request. Currently, neither CBC nor any of our affiliates are Designated or Approved Suppliers for any category of goods or services; however, we estimate that the purchase of products that are subject to our standards and specifications represents approximately 90% of your overall purchases in establishing and operating the Franchised Cafe.
Although we do not currently do so, we and our affiliates may, under appropriate circumstances, receive fees, commissions, rebates, royalties or other consideration from suppliers based on sales to franchisees, and we may use any amounts received without restriction and for any purpose we and our affiliates deem appropriate. Since we are a new company with a limited history of operating experience and this is our initial franchise offering, we do not have any historical information regarding franchisee purchases from Designated or Approved Suppliers. We may negotiate system-wide purchasing arrangements, including
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pricing terms, with suppliers for the benefit of all Corner Bakery Cafes. We do not currently have purchasing or distribution cooperatives, but we reserve the right to establish them.
Supplier Approval Process. If you desire to procure Non-Proprietary Products from a supplier other than one previously approved or designated by us, you must deliver written notice to us which must: (1) identify the name and address of such supplier; (2) contain such information as may be requested by us or required to be provided pursuant to the Manual (which may include reasonable financial, operational and economic information regarding its business); and (3) identify the authorized Non-Proprietary Products desired to be purchased from such supplier. We will, upon your request, furnish specifications for such Non-Proprietary Products if the specifications are not contained in the Manual. We may request that the proposed supplier furnish us at no cost to us product samples, specifications and such other information as we may require. We, or our representatives, including qualified third parties, will also be permitted to inspect the proposed supplier's facilities and establish economic terms, delivery, service and other requirements consistent with other distribution relationships for Corner Bakery Cafes.
As a further condition of our approval, we may require a supplier to agree in writing to: (a) provide, from time to time upon our request, free samples of any Non-Proprietary Product it intends to supply to you; (b) faithfully comply with our specifications for applicable Non-Proprietary Products sold by it; (c) sell any Non-Proprietary Product bearing our Marks only to our franchisees and only pursuant to a trademark license agreement in the form prescribed by us; (d) provide to us duplicate purchase invoices for our records and inspection purposes; (e) make the products available to all of our company-operated and franchised Corner Bakery Cafes; and (f) otherwise comply with our reasonable requests.
We will use our good faith efforts to notify you of our decision within 120 days after our receipt of product samples from the proposed alternative supplier and all other requested information. If we approve the supplier, that supplier will be designated an "Alternative Approved Supplier." We reserve the right, at our option, to re-inspect the facilities and products of any Alternative Approved Supplier and to revoke our approval upon the suppliers' failure to continue to meet any of the foregoing criteria. You or the proposed supplier must pay to us in advance all of our reasonably anticipated costs in reviewing the application of the Alternate Approved Supplier and all current and future reasonable costs and expenses, including travel and lodging costs, related to inspecting, re-inspecting and auditing the Alternate Approved Suppliers' facilities, equipment and food products and all product testing costs paid by us to third parties.
We are not be obligated to disclose the terms and conditions, including the pricing, to anyone as to Proprietary or Non-Proprietary Products. We may also determine that certain Non-Proprietary Products (e.g., beverages) will be limited to a designated brand or brands.
Computer Equipment. You agree to purchase or lease, at your expense, such computer hardware and software, required dedicated telephone and power lines, DSL or better transmission lines, modems, printers, and other computer-related accessories and peripheral equipment as we may specify for the purpose of, among other functions, recording financial and customer data and communicating with us. We may require you to use proprietary software and any other computer systems that we may prescribe from time to time, and you agree to sign such agreements as we may require in connection with those systems. We may prescribe a specific point of sale or other computer hardware and software, which you agree to purchase.
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The original documents were scanned as an image. The original file can be downloaded at the link above.