Franchise Agreement
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Sample Franchise Agreement
DECORATING DEN SYSTEMS, INC. FRANCHISE AGREEMENT
THIS AGREEMENT ("Agreement") is entered into by and among
> Decorating Den Systems, Inc., a Missouri corporation ("DDSI")
> The person(s), corporation, partnership or other entity listed in the Signature Page to this Agreement (jointly and severally referred to as "Franchisee"); and,
> If a Regional Director has been appointed by DDSI for Franchisee's Territory, the Regional Director is listed on the Signature Page to this Agreement ("Regional Director").
Recitals:
A. As a result of time, skill, effort and money, DDSI has developed and will manage and supervise the "INTERIORS by Decorating Den System" and the "Marks" for the successful marketing, sale and installation of draperies and drapery hardware, fabric, furniture, accessories, decorative shades, wallpaper, carpet, and all other related home furnishing merchandise, interior decorating services, and labor ("INTERIORS by Decorating Den Products and Services"). The term "Marks" means those proprietary marks registered or pending with the United States Patent and Trademark Office, including without limitation "INTERIORS by Decorating Den , as well as all common law trademarks and service marks, trade names, trade dress, logo types, insignias, designs and other commercial symbols which DDSI now or hereafter is authorized to use and does use or authorizes others to use.
B. DDSI has, by considerable expenditure, created a demand for INTERIORS by Decorating Den Products and Services and has created substantial goodwill associated with the Marks.
C. Franchisee desires to obtain a non-exclusive right to use the Marks in conjunction with the operation of an interior decorating business and desires to obtain experience and know-how with respect to the sale of INTERIORS by Decorating Den Products and Services and the INTERIORS by Decorating Den System.
NOW, THEREFORE, the parties agree as follows:
1. GRANT OF RIGHT
1.1 DDSI hereby grants to Franchisee, and Franchisee hereby accepts, a non-exclusive license and the right to use the Marks and INTERIORS by Decorating Den System in conjunction with the sale of INTERIORS by Decorating Den Products and Services, and the exclusive developmental and promotional rights only within the Zip Code(s) described on the Signature Page of this Agreement (the "Territory").
1.2 The term "INTERIORS by Decorating Den System" shall mean a comprehensive marketing and operational system prescribed by DDSI to be used in the conduct of the franchised business, as set forth in this Agreement and the Policy and Procedure Manual, as amended from time to time. The INTERIORS by Decorating Den System shall include, among other things, the Marks and certain advertising, marketing and sales programs and techniques, DDSI controlled telephone numbers, training programs and materials, artwork, graphics, layouts, slogans, names, titles, text and other intellectual property that DDSI
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makes available to Franchisee. DDSI, in its sole discretion, may improve and/or change the INTERIORS by Decorating Den System from time to time (including adding to, deleting or modifying elements of the INTERIORS by Decorating Den System, establishing categories or classifications of Franchisees and amending the Policy and Procedure Manual) for the intended purpose of making the INTERIORS by Decorating Den System more effective, efficient, economical or competitive; adapting to or taking advantage of competitive conditions, opportunities, technology, materials or local marketing needs and conditions; enhancing the reputation or public acceptance of the INTERIORS by Decorating Den System; and/or better serving the public.
1.3 To maintain exclusive development and promotional rights to the Territory, Franchisee shall meet a minimum annual Gross Sales quota as follows:
|
Year One |
Year Two |
Year Three |
Year Four and Thereafter |
|
$40,000 |
$80,000 |
$120,000 |
$160,000 |
For purposes of this Section 1.3, the term "year one" shall mean the initial twelve (12) full calendar months after the month in which a franchise owner completes PDSS. The gross dollar amounts in the chart are non-cumulative from year to year. In the event Franchisee fails to achieve the applicable level of Gross Sales, DDSI may, at its option, terminate the exclusive developmental and promotional rights granted in Section 1.1 of this Agreement. DDSI shall advise Franchisee of this action by written notice. DDSI reserves the right to increase the sales quotas once each year, but the adjustments may not exceed increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, U.S. City Average (1967=100); or, if such information becomes unavailable, any similar index selected by DDSI, comparing the index as of April 1 of the current year to the index on April 1 of the previous year (referred to in this Agreement as the "CPI").
1.4 The promotional rights described above encompass all forms of advertising and promotion for new customers which can reasonably be restricted to the Territory, including, but not limited to, direct mailings, door leaflets, and localized signs. It further includes any customer leads obtained through group advertising and pooled, centralized telephone arrangements in which Franchisee participates, or as specified in the Policy and Procedure Manual(s). In the event the U.S. Postal Service alters the boundary or number of any assigned Zip Code, Franchisee will keep the same geographic boundaries as shown in the territory map accompanying this Agreement. It is the map accompanying this Agreement at the date of execution that shall set forth the legal boundaries for the Territory under this Agreement. The Franchisee agrees not to solicit sales or actively promote its franchised business outside of the Territory or within territories similarly assigned to other INTERIORS by Decorating Den Franchisees. The developmental rights described above include hiring independently contracted decorators in order to develop the franchised business within the Territory.
1.5 DDSI and Regional Director agree to use Reasonable Business Judgment in the exercise of their respective rights, obligations and discretion under this Agreement, except where otherwise provided in this Agreement. "Reasonable Business Judgment" means that DDSI's or Regional Director's determination shall prevail even in cases where other alternatives are also
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reasonable so long as DDSI and Regional Director intend to benefit or act in a way that could benefit the INTERIORS by Decorating Den System by, among other things, enhancing the value of the Marks, increasing customer satisfaction, or minimizing possible customer brand confusion. Franchisee recognizes and agrees that the long-term goals of the INTERIORS by Decorating Den System, and the long-term interests of DDSI, the Regional Director, Franchisee and all franchisees, taken together, require that DDSI and Regional Director have the latitude to exercise Reasonable Business Judgment.
2. TERM AND RENEWAL
2.1 Initial Term.
Except as otherwise provided in this Agreement, the initial term of this Agreement shall be for a period often (10) years from the date hereof (the "Initial Term").
2.2 Renewal.
This Agreement shall be renewed for additional ten (10) year terms, unless (i) DDSI and Regional Director, on the one hand, or (ii) Franchisee, on the other, delivers to the other notice in writing of its intent not to renew not less than seven (7) months before expiration of the term. The following conditions must be met prior to each renewal:
a. Franchisee shall, at Franchisee's sole expense, conform the ColorVan® to DDSI's then current specifications;
b. Franchisee shall not be in default of any provision of this Agreement or any other agreement between Franchisee, DDSI and/or Regional Director, and have substantially and timely complied with all of the terms and conditions of this Agreement and such other agreements during the terms thereof;
c. Franchisee shall have satisfied all monetary obligations owed by Franchisee to DDSI or Regional Director and their subsidiaries and affiliates pursuant to this Agreement and any other agreement between Franchisee and DDSI and/or Regional Director or their subsidiaries or affiliates, and shall have timely met those obligations throughout the terms thereof;
d. Franchisee shall execute DDSI's then-current form of Franchise Agreement for the renewal term stated herein, which agreement shall supersede this Agreement in all respects, and the terms of which may differ from the terms of this Agreement and may include, without limitation, a higher Service Fee, NMF Fee, and other fees. There is no fee charged by DDSI or Regional Director for a renewal of this Agreement;
e. Franchisee shall execute a release, in form and content prescribed by DDSI, of any and all claims of Franchisee, of whatever nature or kind, against DDSI and Regional Director and their respective shareholders, officers, employee, agents, subsidiaries and affiliates, successors and assigns, including without limitation claims arising under this Agreement and any other agreement between Franchisee and DDSI and/or Regional Director or their subsidiaries or affiliates, and under any federal, state, and local laws, rules, and ordinances; and
f. Franchisee shall meet and be in compliance with DDSI's then-current qualification and training requirements.
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3. INITIAL AND CONTINUING FEES
3.1 Initial Franchise Fee.
In consideration of the rights and privileges granted to Franchisee herein and the initial services to be rendered and material to be provided by DDSI and Field Manager, Franchisee shall pay to DDSI and Regional Director the sum of Twenty-Nine Thousand, Nine Hundred Dollars ($29,900.00), (hereinafter referred to as the "Initial Franchise Fee"). If you are a veteran of the United States armed forces, and qualify under the VetFran program the Initial Franchise Fee shall be Twenty-Six Thousand, Nine Hundred Dollars ($26,900.00). The Initial Franchise Fee is payable at the time of the execution of this Agreement by one of the payment methods described below, shall be deemed earned in full, and is non-refundable.
3.2 Payment Methods.
The Initial Franchise Fee shall be paid in full upon the execution of this Agreement by certified or cashier's check or other check acceptable to DDSI and the Regional Director.
3.3 Service Fees.
a. In addition to the Initial Franchise Fee, Franchisee shall pay to DDSI or Regional Director a recurring service fee ("Service Fee"), equal to and calculated as a specified percentage of Gross Sales (as defined below). Service Fees shall be reported and paid as set forth in Section 7 of this Agreement. The Service Fee shall be Nine Percent (9%) of Gross Sales and may be reduced below Nine Percent (9%) as set forth on the table below.
b. The Service Fee percentage will be reduced below nine percent 9% as follows:
|
CUMULATIVE GROSS SALES (on which Service Fees have been paid) |
SERVICE FEE PERCENTAGE |
|
$0-1,000,000 |
9% |
|
$1,000,001-2,000,000 |
8% |
|
OVER $2,000,000 |
7% Permanently |
The Service Fee percentages are based on cumulative Gross Sales on which Service Fees have been paid over the life of the Agreement, including all renewal terms. The amount of Gross Sales required to cause a reduction in Service Fee percentage may be increased by DDSI once each calendar year, but such increase may not exceed the increases in the Consumer Price Index for the immediately preceding calendar year.
3.4 National Marketing Fund Contribution.
a; Franchisee shall pay to DDSI a recurring advertising and marketing fee (the "NMF Fee") equal to Four Percent (4%) of Gross Sales, calculated weekly, then at the end of each calendar month. If the total NMF Fees are less than the One Hundred Dollar ($100.00)
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monthly minimum (the "Monthly NMF Minimum"), the Franchisee shall pay the difference by the last day of the month. DDSI shall maintain the NMF fees in the National Marketing Fund. The NMF Fees are non-refundable. The NMF Fees so collected shall be placed in the Decorating Den National Marketing Fund Trust and will be segregated from other funds of DDSI.
b. The monies accumulated in the NMF shall be spent on national, regional, or local media, advertising or other marketing techniques or programs designed to communicate the services of INTERIORS by Decorating Den franchisees to the public. In addition, these funds may also be expended for market research and development, test or target marketing, the conducting of surveys, creative and production costs, reimbursement to DDSI for reasonable accounting, administrative and legal expenses associated with the NMF, internal expenses incurred in connection with the operation of the DDSI advertising department, or for other purposes deemed appropriate to enhance and promote the general recognition of the INTERIORS by Decorating Den System and the Marks.
c. The specific use of the NMF for the purposes set forth herein shall be determined and budgeted by DDSI with the advice of the Decorating Den Franchise Owners Board of Advisors, called The Leadership Council. The parties hereby acknowledge and understand that funds of the NMF may be expended in any territory (national, regional, or local) without any requirement that expenditures of the Fund be apportioned in relation to the amount of contributions made by Franchisee.
3.5 Gross Sales.
The term "Gross Sales," as used in this Agreement, shall be defined as the aggregate gross amount of all revenues from whatever source derived billed in Franchisee's retail sales orders, either oral or written, including any installation fees, freight, or other items billed to the customer, less only sales tax, discounts, cancellations or returns allowed. In addition, Gross Sales includes all sales made by decorators, employees or independent contractors whose sales are placed through the Franchisee. "Personal Sales", as defined in the Franchisee Policy and Procedure Manual, are not included in Gross Sales.
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4. OBLIGATIONS OF DDSI AND FIELD MANAGER
4.1 Role of Field Manager.
The term "Field Managers" refers collectively to Regional Directors, Regional Managers and District Developers appointed by DDSI. If a Field Manager has been appointed for the Territory, the Field Manager, with the assistance of DDSI, will provide the services described in this Agreement. If no Field Manager has been appointed, DDSI will provide the services and references to "Field Manager" in this Agreement shall have no effect.
4.2 Additional Role of Regional Director.
If DDSI has appointed a Regional Director for the Territory, the Regional Director shall be a third party to this Agreement and shall provide the services to Franchisee as set forth herein. DDSI reserves the right to appoint a Regional Director and to include an appointed Regional Director as a party to this Agreement at any time during the Agreement term or any renewal term.
4.3 DDSI and Field Manager Services.
a. DDSI and/or Field Manager shall make available to Franchisee training in decorating, marketing, operations, management, and finance, and shall provide instruction for the set up, commencement and continuation of Franchisee's franchised business. The ultimate form, content and extent of the training, programs, and assistance shall be determined by DDSI and Field Manager, but shall include the following:
(i) Loan of a Policy and Procedure Manual to Franchisee during the term of this Agreement, and providing sales and training aids deemed advisable by DDSI and Field Manager from time to time. DDSI shall provide, from time to time, updated information and revisions to the Policy and Procedure Manual as new and improved methods, systems, and procedures are adopted.
(ii) Provide mandatory basic training at the Professional Decorating and Sales School ("PDSS") relating to INTERIORS by Decorating Den Products and Services and the INTERIORS by Decorating Den System. All basic training shall be provided at locations to be determined by DDSI or Field Manager. The tuition cost of PDSS is included in the Initial Franchise Fee, but Franchisee shall pay all travel, lodging, meals, and daily living expenses incurred to attend the training.
(iii) Make available optional "Lifestyle University" training on a continuing basis. Lifestyle University's continuing education program provides Franchisee with education in product knowledge, lifestyle design, sales and marketing, and business management. Franchisee will be charged a fee that, at the time of execution of this Agreement ranges from $75 to $150 per day, and may change. This fee covers the costs of the trainer, instruction materials and manuals, training room and meals or refreshments. Franchisee shall pay for all travel, lodging and daily living expenses incurred in attending Lifestyle University training. This training shall be conducted by experienced, qualified instructors chosen by DDSI and/or Field Manager.
(iv) Make available additional, optional training in areas which may include, without limitation, advanced window product design, measuring and sales techniques, bookkeeping, and introductory instruction for products offered by DDSI. Fees charged
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for the optional training and costs must be borne by Franchisee, as described in Section 4.2.a.(iii), above.
(v) Provide an initial supply of INTERIORS by Decorating Den product samples. Additional samples and supplies may be obtained at Franchisee's expense.
(vi) Provide advertising assistance, planning and programs for promotional pieces, including seasonal and special promotions, layouts for newspapers and recommendations for their use. Franchisee shall pay DDSI for materials and media actually used by Franchisee. The cost of these materials and media is not included in the NMF Fees described in Section 3.4, above.
(vii) Assistance in opening accounts with selected preferred suppliers.
b. The location and scheduling of the services described in this Section 4.3 shall be at the discretion of DDSI and/or Field Manager.
5. FRANCHISEE'S OBLIGATIONS
5.1 Franchisee Organization.
a- In the event Franchisee is a corporation, limited liability company ("LLC") or a partnership, Franchisee represents, warrants, and covenants that:
(i) All of the stockholders, LLC members or partners of Franchisee shall execute the Certification and Guaranty attached to this Agreement as Exhibit 2.
(ii) If Franchisee is a corporation or LLC, Franchisee shall maintain at all times a current list of voting securities in Franchisee. If Franchisee is a partnership, Franchisee shall maintain at all times a current list of all owners of an interest in the partnership. In the event there is a change in such ownership, Franchisee shall provide such information to DDSI within five (5) days subsequent to any such change, and shall execute any documents deemed necessary by DDSI in order to reflect such changes, including without limitation execution by the new owners of a Certification and Guaranty.
(iii) In the event that any officer or director of Franchisee shall cease to serve as such or any individual shall be elected as an officer or director of Franchisee subsequent to the execution of this Agreement, Franchisee shall provide DDSI with notice thereof within five (5) days subsequent to any such change.
b. Franchisee acknowledges and agrees that the representations, warranties, and covenants set forth above in Section 5.1(a), above, are continuing obligations of Franchisee and that any failure to comply with such representations, warranties and covenants shall constitute an event of default under Section 9 of this Agreement.
c. If Franchisee is a corporation, LLC, partnership, or is composed of more than one individual, one shareholder or partner shall own more than a fifty percent (50%) interest in Franchisee, or a majority interest in the franchise business, and that shareholder, partner or individual shall be designated to make all decisions for Franchisee. The designee will have the authority to cast the deciding vote on all Franchisee decisions of any type, where a decision is required. Notice to the designee will be notice to all parties involved or associated with Franchisee.
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5.2 Promotion; Operations.
Franchisee shall use its best efforts to promote actively the sale of INTERIORS by Decorating Den Products and Services, and to maintain and extend, whenever possible, excellent INTERIORS by Decorating Den business relations, goodwill, and reputation with customers, suppliers, and others.
Franchisee shall operate the franchised business in accordance with the Policy and Procedure Manual. DDSI shall have the right to modify the Policy and Procedure Manual at any time by the addition, deletion or other modification of the provisions thereof. DDSI agrees that although such modifications to the Policy and Procedure Manual may be material in that they may have an effect on the operation of the franchised business, they may not conflict with or materially alter the terms of this Agreement. All such additions, deletions or modifications shall be effective (i) five business days after DDSI has deposited notification to Franchisee with the United States Postal Service properly addressed, or (ii) the next business day after verified receipt by Franchisee of electronic mail notification, or (iii) the next business day after notification is posted on DecoNet.
All additions, deletions or modifications to the Policy and Procedure Manual shall be equally applicable to all similarly situated Franchisees. The Policy and Procedure Manual, as modified or amended from time to time, shall not alter Franchisee's fundamental status and rights under this Agreement. As modified from time to time, the Policy and Procedure Manual shall be deemed to be an integral part of this Agreement and references to the Policy and Procedure Manual made in this Agreement, or in any amendments or exhibits hereto, shall be deemed to mean the Policy and Procedure Manual, as amended from time to time.
If DDSI produces a printed version of the Policy and Procedure Manual, DDSI shall lend to Franchisee at no additional charge one copy of the Policy and Procedure Manual. All copies of the Policy and Procedure Manual shall at all times remain the sole, confidential and trade secret property of DDSI. Upon the expiration or termination of this Agreement for any reason whatsoever, Franchisee shall immediately return all printed copies of the Policy and Procedure Manual to DDSI. Except as specifically permitted by DDSI, at no time may Franchisee, or its employees or agents, make, or cause to be made, any copies or reproductions of all or any portion of the Policy and Procedure Manual or disclose the terms thereof to any other person except employees and agents of Franchisee when required in the operation of the Franchised Business.
5.3 Use, Display and Ownership of the Marks.
a. Franchisee shall use only the Marks designated by DDSI and shall use them only in the manner authorized and permitted by DDSI. Any unauthorized use of the Marks shall constitute an infringement of DDSI's rights and an event of default under this Agreement in accordance with Section 9.
b. Franchisee shall use the Marks only for the operation of the INTERIORS by Decorating Den business franchised hereunder or in advertising related to the Franchise, and only during the term of this Agreement. Franchisee expressly agrees to cease use of the Marks after the termination or expiration of this Agreement and shall take appropriate action to remove
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the Marks from Franchisee's ColorVan® vehicle and to cancel any advertising relating to Franchisee's use of the Marks, including yellow pages listings.
c. During the term of this Agreement, Franchisee shall identify itself as the owner of the franchised business in conjunction with any use of the Marks, including, but not limited to, use on invoices, order forms, receipts, contracts, stationery, and business cards. Franchisee shall not use the Marks to incur any obligation or indebtedness on behalf of DDSI. Franchisee shall not use the Marks as part of its corporate or other legal name. Franchisee shall comply with DDSI instructions in filing and maintaining the requisite trade name or fictitious name registrations, and shall execute any documents deemed necessary by DDSI to obtain protection for the Marks or to maintain their continued validity and enforceability.
d. Franchisee shall immediately notify DDSI of any infringement of the Marks or challenge to its use of any of the Marks or claim by any person of any rights in any of the Marks. Franchisee and Franchisee's principals agree that they will not communicate with any person other than DDSI and DDSI's counsel in connection with any such infringement, challenge, or claim. DDSI shall have sole discretion to take such action as it deems appropriate and the right to exclusively control any litigation, or Patent and Trademark Office or other proceeding arising out of any infringement, challenge, or claim, or otherwise relating to any of the Marks. Franchisee agrees to execute any and all instruments and documents, render such assistance, and do such acts and things as may, in the opinion of DDSI, maintain DDSI's interests in any such litigation or Patent and Trademark Office or other proceeding, or to otherwise protect and maintain DDSI's interest in the Marks.
e. Franchisee expressly understands and acknowledges that:
(i) DDSI is the owner of the Marks with exclusive rights to use and license the Marks;
(ii) Franchisee shall not directly or indirectly contest the validity of the Marks;
(iii) Franchisee's use of the Marks pursuant to this Agreement does not give Franchisee any ownership or other interest in or to the Marks, except the license granted by this Agreement. Any and all goodwill arising from Franchisee's use of the Marks in its franchised operation under this Agreement shall inure solely and exclusively to the owner of the Marks, and upon the expiration or termination of this Agreement and the license herein granted, no monetary amount shall be assigned as attributable to any goodwill associated with Franchisee's use of the System or the Marks;
(iv) The right and license of the Marks granted hereunder to Franchisee is nonexclusive, and DDSI thus has and retains the right to grant other licenses for use of the Marks, in addition to those licenses already granted to existing Franchisees, and the right to develop and establish other systems using the Marks or other names or marks, and to grant licenses or Franchises thereto without providing any rights therein to Franchisee;
(v) DDSI reserves the right to add or substitute different Marks for use in identifying the System and the business operating thereunder if DDSI's currently owned Marks no longer can be used, or if DDSI, in its sole discretion, determines that the addition or substitution of different Marks will be beneficial to the System. In such event DDSI may require Franchisee at Franchisee's sole expense to discontinue or modify
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Franchisee's use of any of the Marks or to use one or more additional or substitute Marks.
5.4 Approved Advertising.
All advertising and promotion by Franchisee in any medium shall be conducted in a dignified manner and shall conform to the standards and requirements of DDSI as set forth in the Policy and Procedure Manual, or otherwise. Franchisee shall obtain DDSI's approval of all advertising and promotional plans and materials prior to use, if such plans and materials have not been prepared by DDSI or previously approved by DDSI during the past twelve (12) twelve months. Franchisee shall submit such unapproved plans and materials to DDSI (by personal delivery or through the mail) and DDSI shall approve or disapprove such plans and materials within fourteen (14) days from the date of receipt thereof by DDSL Franchisee shall not use such unapproved plans or materials until they have been approved by DDSI. Franchisee shall promptly discontinue use of any advertising or promotional plans or materials, whether or not previously approved, upon notice from DDSI.
5.5 Approved Products and Services.
Franchisee shall not offer for sale interior decorating products for which Franchisee lacks sufficient skill and knowledge to provide the high level of service associated with the INTERIORS by Decorating Den Products and Services.
5.6 ColorVan® Vehicle and Studio/Warehouse/Retail Locations.
a. Franchisee shall acquire a ColorVan vehicle meeting DDSI specifications, suitable for carrying samples to the customer's home; shall maintain the ColorVan vehicle according to the standards established by DDSI from time to time; and shall make all sales calls in Franchisee's ColorVan® vehicle. DDSI specifications for the ColorVan® vehicle include the make and model of the vehicle, its color, and the style of decoration by, and placement of, permanent decals. Franchisee shall acquire a ColorVan® vehicle, and provide DDSI with a photograph and pertinent specifications prior to attendance at PDSS training. No part of the franchised business may be conducted from a vehicle or place other than the ColorVan vehicle without written permission from DDSI. A representative of DDSI or Regional Director may inspect Franchisee's ColorVan® vehicle during normal business hours, upon forty-eight (48) hours notice to Franchisee.
b. The License granted by this Agreement contemplates that Franchisee shall operate a primarily mobile business utilizing a ColorVan vehicle. Franchisee may, without further approval from DDSI, utilize an office and/or warehouse location not designed for use as a retail location or open to the general public, provided that the office/warehouse is located within the Territory (unless DDSI consents in writing to the office/warehouse being located outside the Territory; and DDSI shall have the right to terminate such consent upon 90 days notice), and provided that DDSI has the opportunity to 'approve in advance any signs appearing on the exterior of the location. Franchisee may not operate a fixed retail location for the sale of INTERIORS by Decorating Den Products and Services, whether inside or outside the Territory, without DDSI's written consent. If DDSI consents to such a fixed retail location, DDSI, Regional Director and Franchisee
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must sign an addendum or agreement governing the location, construction, and operation of the franchised business at the fixed retail location. This addendum or agreement may contain terms and requirements, among other things, for site selection, design and layout, signage, and lease terms.
5.7 Goodwill.
Franchisee shall protect the goodwill of the Marks and the INTERIORS by Decorating Den System, and shall maintain uniform standards of operation, shall pay all financial obligations, whether with DDSI, Regional Director, approved suppliers, or with others, when due and according to their terms, and shall comply with all standards, policies and operating manuals established by DDSI and Field Manager relating to merchandise, vehicles, display materials, and appearance of all sales and installation personnel or other representatives who meet the public.
5.8 Customer Relations and Refund Policies.
Franchisee agrees to follow any and all customer relations policies and/or guarantee and refund policies established in the Policy and Procedure Manual or otherwise in writing from time to time by DDSI.
5.9 Publicity.
Franchisee agrees that DDSI and Field Manager shall have the right to use Franchisee's name and photographic likeness of any type and pictures or other depictions of Franchisee's work, including without limitation film, digital images, video tape, or photograph, in publicity, advertising, marketing or public relations activity by DDSI or Field Manager.
5.10 Training and Certification.
Franchisee shall participate in and successfully complete the basic training, PDSS, which is required by DDSI and Field Manager to achieve DDSI's competency certification, and additionally shall participate in further training as required by DDSI and Field Manager from time to time in order to maintain the Franchise standards, and shall require any employees, partners or independent contractors who render services in the franchised business to complete any and all training required of them in accordance with INTERIORS by Decorating Den policies.
5.11 Sources of Products and Supplies.
DDSI has a preferred supplier program (the "Preferred Supplier Program"). DDSI encourages Franchisee's participation through the offer of product discounts and guarantees; contests and incentive awards; and assistance in the return of products. If Franchisee purchases products and services from suppliers that do not participate in the Preferred Supplier Program, DDSI will not offer Franchisee the aforementioned benefits that are available to franchisees participating in the Preferred Supplier Program. Products or services purchased from unapproved suppliers must comply with specifications and standards established from time to time by DDSI.
5.12 Minimum Performance Standards.
Franchisee shall create a minimum volume of Annual Gross Sales from the operation of
Franchisee's business in the amount of Forty Thousand Dollars ($40,000) in order to retain the
. rights granted herein by DDSI. Failure to achieve the minimum Annual Gross Sales is a ground
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for termination of this Agreement. The term "Annual Gross Sales" shall be defined as the total of Franchisee's Gross Sales during any calendar year, commencing with the first calendar year after the date Franchisee completes PDSS. In DDSI's sole discretion, the required minimum Annual Gross Sales may be adjusted once each year, but the percentage change shall not exceed increases or decreases in the CPI during the previous calendar year. In no event shall the minimum required Annual Gross Sales be reduced below Forty Thousand Dollars ($40,000.00).
5.13 Insurance.
a. Franchisee shall procure, within ten (10) days after execution of this Agreement, and shall maintain in full force and effect at all times during the term of this Agreement at Franchisee's expense, an automobile and commercial liability insurance policy or policies protecting Franchisee, DDSI and Regional Director, and their subsidiaries, affiliates, successors, and assigns and their respective officers, directors, shareholders, LLC members, partners, employees, servants, representatives, and agents, against any demand or claim with respect to bodily injury, or property damage, or any loss, liability, or expense whatsoever arising out of or occurring upon or in connection with the condition, operation, use, or occupancy of the franchised business.
b. Such policy or policies shall be written by a responsible carrier or carriers acceptable to DDSI (e.g., with a Best's Insurance Guide rating of "A" or better) and shall include, at a minimum (except as additional coverage may reasonably be specified by DDSI from time to time), in accordance with standards and specifications set forth in the Policy and Procedures Manual or otherwise in writing, the following:
(i) Comprehensive general liability insurance, including premises, products, and completed operations personal injury, and contractual, liability coverage in amounts not less than $1,000,000 for each occurrence with a general annual aggregate of not less than $2,000,000, and a products and completed operations annual aggregate of not less than $2,000,000;
(ii) Employer's liability insurance, if Franchisee has employees, providing for coverage in amounts not less than $250,000 for each accident, for each employee, and in the aggregate, and Worker's Compensation insurance, if applicable, in amounts provided by applicable law;
(iii) Automobile (including commercial vehicle) liability coverage, including coverage of owned, non-owned, and hired vehicles, with coverage in amounts not less than $1,000,000 combined single limit for both bodily injury and property damage; and
(iv) Any additional insurance coverage which may be required by statute or rule of the state or locality in which the franchised business will be operated.
(v) All liability insurance policies shall (1) name as additional insureds, (2) expressly provide that any interest of same therein shall not be affected by any breach by Franchisee of any policy provisions, and (3) include a waiver of subrogation in favor of, each of DDSI, Regional Director, and their respective subsidiaries, affiliates, successors and assigns, partners, officers, directors, shareholders, LLC members, representatives, agents, and employees.
c. Franchisee may, with the prior written consent of DDSI, elect to have reasonable deductibles in connection with the coverage required under Sections 5.13(b).
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d. AH automobile and commercial liability policies and certificates of coverage shall contain a provision that Franchisee's insurance coverage shall be primary to any coverage maintained by DDSI or Regional Director, and DDSI and Regional Director shall be entitled to recover under Franchisee's policies for any loss occasioned to DDSI or Regional Director, their subsidiaries, affiliates, successors, and assigns, and their respective officers, directors, shareholders, LLC members, partners, employees, servants, representatives, and agents, for whatever reason.
e. At the time of the execution of this Agreement and, thereafter, not less than thirty (30) days prior to the expiration of any insurance policy, Franchisee shall deliver to DDSI and Regional Director certificates of insurance and, if requested by DDSI, copies of the applicable insurance policies, evidencing the coverages with limits not less than those required hereunder. All insurance policies and certificates shall expressly provide that not less than thirty (30) days' prior written notice shall be given to DDSI and Regional Director in the event of a material alteration to or cancellation of the policies.
f. Should Franchisee for any reason fail to procure or maintain the insurance required by this Agreement, as such requirements may be revised from time to time by DDSI in the Policy and Procedure Manual or otherwise in writing, DDSI shall have the right and authority (without, however, any obligation to do so) to immediately procure such insurance and to charge same to Franchisee, which charges, together with a reasonable fee for DDSI's expenses incurred in so acting, shall be payable by Franchisee immediately upon notice. The foregoing remedies shall be in addition to any other remedies at law or in equity that DDSI may have. An election by DDSI not to obtain any insurance under this Section will not be interpreted as negligence or a breach of DDSI's obligations under this Agreement.
5.14 Telephone Service.
a. If the Territory is located in a region where DDSI's or the Field Manager's policy is to require the participation of all or designated groups of INTERIORS by Decorating Den franchisees in a central telephone service, or in which DDSI or the Field Manager adopts such a policy at any time after the execution of this Agreement, Franchisee shall participate in and share the proportionate costs thereof, including, but not limited to, telephone charges, answering services, yellow pages advertising and listings, general advertising, and the costs associated with the collection and distribution of all telephone messages. The central telephone number must be used by Franchisee for all advertising, including, but not limited to, business cards, stationery, invoices, flyers, Internet and on the ColorVan vehicle. The decision of whether, and when, to install a central telephone service in Franchisee's region shall be made by DDSI and Field Manager.
b. If the Territory is located in a region which does not have a local central telephone policy, Franchisee may secure white page, yellow page and information listings only in the name of "INTERIORS by Decorating Den" and the national toll-free 800# shall be displayed. No other proper names or city names may be used in conjunction with any Marks and no additional listings may be used with the telephone number assigned, unless approved in writing in advance by DDSI. All telephone listings, yellow page display advertising, layout, and copy shall be approved in advance in writing by DDSI. Placement of display advertising by the approved Yellow Page Preferred Supplier for Franchisee through the National Yellow Pages Service will constitute automatic approval.
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c. Upon termination or expiration of this Agreement, or upon termination of Franchisee's association with DDSI, Franchisee agrees that Franchisee's right to use the Marks shall immediately cease and that all telephone listings appearing under the name "INTERIORS by Decorating Den" or any other Marks shall immediately become the property of DDSI, and Franchisee does hereby release all rights and use of all telephone numbers under which the INTERIORS by Decorating Den name is listed. Franchisee hereby authorizes the telephone company, upon notification by DDSI that the relationship has been terminated, to disconnect Franchisee's "INTERIORS by Decorating Den" telephone number and to transfer calls coming to the disconnected number to any other telephone number issued by the telephone company to DDSI or Field Manager. Franchisee hereby assigns to DDSI and Field Manager all rights, title, and interest in any telephone numbers and business listings used by Franchisee in connection with its conduct of the franchised business, upon termination or expiration of this Agreement. Franchisee hereby appoints DDSI and Field Manager as its attorneys-in-fact with full power and authority to execute on Franchisee's behalf such documents, if any, as are necessary to effectuate such an assignment of the telephone numbers and listings from Franchisee to DDSI and Field Manager.
d. Franchisee hereby releases and forever discharges DDSI and Field Manager and their successors or assigns from liability of any kind or character which results or may result directly or indirectly from DDSI's or Field Manager's exercise of their rights hereunder or from the telephone company's cooperation with DDSI or Field Manager in effecting the terms of this Section 5.14.
5.15 Licenses.
Franchisee shall obtain, at Franchisee's expense, any licenses that are required under Franchisee's state or local laws in order to operate the franchised business.
5.16 Computer Systems; DecoNet
At all times that this Agreement is in existence, Franchisee shall (i) have and maintain a computer system meeting certain minimum specifications (as prescribed from time to time by the Franchisee Policy and Procedure Manual) to use in connection with the operation of the franchised business, (ii) have access to the Internet provided by an Internet Service Provider (ISP), (iii) subscribe to and regularly access and use DecoNet (the DDSI Intranet) and (iv) pay all costs and fees associated therewith. Any software invented by DDSI will be proprietary to DDSI, and a third party may have contractual rights to provide maintenance, repairs and/or upgrades when necessary. All reports required in the Policy and Procedure Manual may be submitted by Franchisee to DDSI and the Regional Director by electronic means. Neither DDSI nor Field Managers will have independent access to Franchisee's computer system.. Franchisee understands and agrees that DecoNet is the principal means of communication within the INTERIORS by Decorating Den System. As used herein, the term "DecoNet" shall mean a private method of communication for use only by DDSI staff, Field Managers, Preferred Suppliers and Franchisees; DecoNet is an extranet (which will actually transmit information over the Internet, but the system requires a password to access data on the servers used by DDSI).
DDSI has established and maintains DecoNet through which DDSI Corporate staff, Field Managers, Preferred Suppliers and Franchisees may communicate with each other, and through which DDSI may disseminate the Policy and Procedure Manual, updates
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thereto and other confidential information. DDSI shall have sole discretion and control over all aspects of DecoNet, including the content and functionality thereof. DDSI will have no obligation to maintain DecoNet indefinitely, and may dismantle it at any time without liability to Franchisee.
Franchisee shall have the privilege to use DecoNet, subject to Franchisee's strict compliance with the standards and specifications, protocols and restrictions (collectively, "Terms of Use") that DDSI may establish from time to time. Such Terms of Use may relate to, among other things, (i) the use of abusive, slanderous or otherwise offensive language in electronic communications; (ii) communications between or among Franchisees that endorse or encourage breach of any Franchisee's franchise agreement; (iii) confidential treatment of materials that DDSI transmits via DecoNet; (iv) password protocols and other security precautions; (v) grounds and procedures for DDSI's suspending or revoking a Franchisee's access to DecoNet; and (vi) a privacy policy governing DDSI's access to and use of electronic communications that Franchisees post to DecoNet. Franchisee acknowledges that, as administrator of DecoNet, DDSI can technically access and view any communication that any person posts on DecoNet. Franchisee further acknowledges that DecoNet and all communications that are posted to it will become DDSI's property, free of any claims of privacy or privilege that Franchisee or any other person may assert.
If Franchisee breaches this Agreement or any other agreement with DDSI or its Affiliates, DDSI may disable or terminate Franchisee's access to DecoNet without DDSI having any liability to Franchisee, and in which case DDSI shall only be required to provide Franchisee a paper copy of the Policy and Procedure Manual and any updates thereto, if none have been previously provided to Franchisee, unless Franchisee is not otherwise entitled to the Policy and Procedure Manual.
5.17 DDSI Web Site.
DDSI has established and will maintain from time to time the DDSI'web site. DDSI has sole discretion and control over the design and content of DDSI's web site. DDSI may, at its sole option, from time to time, without prior notice to Franchisee: (i) change, revise, or eliminate the design, content and functionality of DDSI's web site; (ii) make operational changes to DDSI's web site; (iii) change or modify the URL and/or domain name of DDSI's web site; (iv) substitute, modify, or rearrange DDSI's web site, at DDSI's sole option, including in any manner that DDSI considers necessary or desirable to, among other things, comply with applicable laws, respond to changes in market conditions or technology, and respond to any other circumstances; (v) limit or restrict end-user access (in whole or in part) to DDSI's web site; and (vi) disable or terminate DDSI's web site without any liability to Franchisee.
DDSI may link DDSI's web site to the web sites of third parties, including electronic service providers, Affiliates and other providers of goods and services. DDSI may also permit third parties to link and frame DDSI's Web site. DDSI may place legal notices, disclaimers, DDSI's corporate logos and slogans, advertisements, endorsements, trademarks, and other identifying information on DDSI's web site, all of which may be modified, expanded, or eliminated at DDSI's option. Further, DDSI may establish or participate in programs whereby DDSI refers end-users to other web sites, or DDSI receives referrals from other web sites. All consideration (monetary and non-monetary) received by DDSI on
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account of the placement or sale of advertisements, endorsements, and sponsorships on DDSI's web site, and all consideration (monetary and non-monetary) received by DDSI on account of affiliate programs, will belong only to DDSI.
DDSI's web site may include one or more interior pages that identify Franchisees operating under the Marks, including the franchised business, by among other things, geographic region, address, telephone numbers, and other appropriate matters. DDSI's web site may also include one or more interior pages dedicated to franchise sales by DDSI.
DDSI has no control over the stability or maintenance of the Internet generally; as a result, DDSI is not responsible for damage or loss caused by errors of the Internet. Furthermore, DDSI is not liable for any direct, indirect, special, incidental, exemplary or consequential damages arising out of the use of, or the inability to use, DDSI's web site or the Internet, including loss of profits, goodwill, or savings; downtime; or damage to or replacement of programs and data, whether based in contract, tort, product liability, or otherwise.
6. COVENANTS
6.1 Confidential Information.
a. Franchisee and each of Franchisee's principals shall not, during the term of this Agreement and thereafter, communicate or divulge to, or use for the benefit of, any other person, partnership, association, LLC or corporation any confidential information, including without limitation any customer lists and sales leads, or any knowledge, or know-how concerning the methods of operation of the franchised business which may be communicated to Franchisee or any of Franchisee's principals or of which they may be apprised by virtue of Franchisee's operation of the franchised business under the terms of this Agreement. Franchisee and each of Franchisee's principals shall divulge such confidential information only to Franchisee's decorators and other personnel as must have access to it in order to assist in the franchised business. Any and all information, knowledge, know-how, techniques, and any materials related thereto which DDSI designates as confidential shall be deemed confidential for purposes of this Agreement. Neither Franchisee nor Franchisee's principals shall at any time, without DDSI's prior written consent, copy, duplicate, record or otherwise reproduce such materials or information, in whole or in part, nor otherwise make the same available to any unauthorized person. The covenant set forth in this Section 6.1 shall survive the expiration or termination of this Agreement and shall be perpetually binding upon Franchisee and each of Franchisee's principals.
b. At DDSI's request, Franchisee shall require its decorators, assistants and any other personnel and any persons having access to any confidential information of DDSI to execute covenants that they will maintain the confidentiality of the information they receive in connection with their relationship with Franchisee. Such covenants shall be in the form required by DDSI in the Policy and Procedures Manual, or otherwise in writing.
c. Franchisee and Franchisee's principals acknowledge that any failure to comply with the requirements set forth in this Section 6.1 shall constitute a material event of default under Section 9 and will cause DDSI irreparable injury. Therefore, Franchisee and Franchisee's principals agree to pay all court costs and reasonable attorneys' fees incurred by DDSI in
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obtaining specific performance, injunctive relief, or any other equitable or other remedy available to DDSI for any violation of the requirements of this Section 6.1. This Section 6.1 shall not apply where prohibited by Franchisee's state law.
6.2 Covenant Not to Compete.
a. Franchisee covenants that during the term of this Agreement, except as otherwise approved in writing by DDSI, Franchisee or its designated manager shall devote full time, energy, and best efforts to the management and operation of the business franchised hereunder.
b. Franchisee and Franchisee's principals specifically acknowledge that, pursuant to this Agreement, Franchisee and Franchisee's principals will receive valuable specialized training, trade secrets, and confidential information, including, without limitation, information regarding the operational, sales, promotional and marketing methods, and techniques of the INTERIORS by Decorating Den System which are beyond the present skills and experience possessed by Franchisee, Franchisee's principals, and Franchisee's managers and employees. Franchisee and Franchisee's principals acknowledge that such training, trade secrets, and confidential information provide a competitive advantage and will be valuable to them in the development of the franchised business and that gaining access to such training, trade secrets and confidential information is, therefore, a primary reason for entering into this Agreement. In consideration for such training, trade secrets and confidential information, Franchisee and Franchisee's principals covenant as follows:
(i) With respect to Franchisee, during the term of this Agreement, or with respect to each of Franchisee's principals during the term of this Agreement or for so long as such individual or entity satisfies the definition of "Franchisee's principal" as described in Section 13.1(f), except as otherwise approved in writing by DDSI, neither Franchisee nor any of Franchisee's principals shall, either directly or indirectly, for themselves, or through, on behalf of, or in conjunction with any person, persons, partnership, or corporation:
(A) Divert or attempt to divert any business or customer of the business franchised hereunder to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with DDSI's Marks and the INTERIORS by Decorating Den System; or
(B) Own, maintain, operate, engage in, or have any interest in any business which is the same as or similar to the franchised business, including any home furnishing or interior decorating business.
(ii) With respect to Franchisee, for a continuous uninterrupted period commencing upon the expiration or termination of this Agreement and for two (2) years thereafter, or with respect to each of Franchisee's principals, for a continuous uninterrupted period commencing upon the earlier of: (i) the expiration or termination of this Agreement or (ii) the time such individual or entity ceases to satisfy the definition of "Franchisee's principal" as described in Section 13.1(f), and :
(A) For two (2) years thereafter, except as otherwise approved in writing by DDSI, neither Franchisee nor any of Franchisee's principals shall, either directly
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or indirectly, for themselves, or through, on behalf of, or in conjunction with any person, persons, partnership, or corporation:
(1) divert or attempt to divert any business or customer of the business franchised hereunder to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Marks and the INTERIORS by Decorating Den System; or
(2) employ or seek to employ any person who is at that time employed by DDSI or Field Manager, or by any other Franchisee or Field Manager of DDSI, or otherwise directly or indirectly induce such person to leave his or her employment; or
(B) For two (2) years thereafter, except as otherwise approved in writing by DDSI, neither Franchisee nor any of Franchisee's principals shall, either directly or indirectly, for themselves, or through, on behalf of, or in conjunction with any person, partnership, LLC, or corporation, (i) own, maintain, operate, engage in, or have any interest in any business which is the same or similar to the franchised business, including any home furnishing or interior decorating business, which business is, or is intended to be, located or operated within fifty (50) miles of the Territory, or (ii) contact for business purposes or solicit home furnishing or interior decorating business from any person or firm that was a customer of Franchisee prior to the date of termination if such person or firm is located or is operating a business within fifty (50) miles of the Territory.
c. The parties agree that each of the foregoing covenants shall be construed as independent of any other covenant or provision of this Agreement. If all or any portion of a covenant in this Section 6 is held unreasonable or unenforceable by a court or agency having valid jurisdiction in an un-appealed final decision to which DDSI or Regional Director is a party, Franchisee and Franchisee's principals expressly agree to be bound by. any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law as if the resulting covenant were separately stated in and made a part of this Section 6.
d. Franchisee and Franchisee's principals understand and acknowledge that DDSI shall have the right, in its sole discretion, to reduce the scope of any covenant set forth in Section 6.2(b) of this Agreement, or any portion thereof, without their consent, effective immediately upon written notice to Franchisee; and Franchisee and Franchisee's principals agree that they shall comply forthwith with any covenant as so modified, which shall be fully enforceable notwithstanding the provisions of Section 13.7 hereof. Any reduction of scope or waiver of any covenant by DDSI in favor of another franchisee shall not affect the enforceability of such covenant with respect to Franchisee.
e. Franchisee and Franchisee's principals expressly agree that the existence of any claims they may have against DDSI or Regional Director, whether or not arising from this Agreement, shall not constitute a defense to the enforcement by DDSI of the covenants in this Section 6. Franchisee and Franchisee's principals agree to pay all costs and expenses (including reasonable attorneys' fees) incurred by DDSI and/or Regional Director in connection with the enforcement of this Section 6.
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f. Franchisee and Franchisee's principals acknowledge that a violation of the terms of this Section 6 would result in irreparable injury to DDSI and Regional Director for which no adequate remedy at law may be available, and Franchisee and Franchisee's principals accordingly consent to the issuance of an injunction prohibiting any conduct by Franchisee or any of Franchisee's principals in violation of the terms of this Section 6. Notwithstanding the foregoing, the provisions of this Section 6.2(f) shall not apply where prohibited by Franchisee's state law.
g. At DDSI's request, Franchisee shall require and obtain execution of covenants similar to those set forth in this Section 6 (including covenants applicable upon the termination of a person's employment with Franchisee) from its decorators, employees, assistants and manager, and any other person who has received or will receive training from DDSI. Such covenants shall be in the form required by DDSI in the Policy and Procedures Manual, or otherwise in writing. Failure by Franchisee to obtain execution of the covenants required by this Section 6.2(g) shall constitute a material event of default under Section 9 of this Agreement.
7. PAYMENTS, REPORTS, ACCOUNTING AND RECORDS
7.1 Reports.
a. Not later than 9:00 PM local time on the 15th and last days of each calendar month, Franchisee shall submit through DecoNet sales report(s) for all Gross Sales made by Franchisee during the preceding period (1st through the 15th day and 16th through the last day, as applicable) containing such information and in such format as DDSI shall specify, including without limitation the complete name, address and telephone number of each customer, broken down by major product categories. If Franchisee has no sales during the applicable period, Franchisee shall submit a No Sales report as provided for in DecoNet
b. On the fifteenth day of each month, DDSI will invoice Franchisee electronically for Service Fees and NMF Fees due from Franchisee's sales made on the first through the fifteenth day of the month, and on the last day of the month DDSI will similarly invoice for sales made on the sixteenth through the last day of the month. Amounts thus invoiced are due within seven (7) business days. Unless other arrangements for payment are provided, DDSI will initiate a direct debit of Franchisee's bank account for such amounts on the due date, utilizing the Automated Clearing House (ACH) function. All bank charges for such electronic direct debit shall be borne by Franchisee. Franchisee shall concurrently with the execution of this Agreement, and from time to time thereafter upon request by DDSI, execute an appropriate authorization agreement for automatic payment to permit a bank designated by DDSI to initiate debit entries to, and to debit, the bank account designated by Franchisee. The current form of the Authorization Agreement for Automatic Payment is attached to this Agreement as Exhibit 3.
c. Failure to submit sales report(s) as required under Section 7.1a, or to make any payment of Service Fees or NMF Fees as required in Section 7.1.b., or to make payment of any other amount required to be made by Franchisee to DDSI or Regional Director shall be an event of default under the terms of this Agreement, and may subject this Agreement to termination for cause as hereinafter set forth. The term "business day" as used in this Agreement is defined as any day other than Saturday, Sunday or a national holiday.
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d. Except as prohibited by applicable local, state or federal laws, any amounts paid to DDSI and/or Regional Director by or on behalf of Franchisee representing Service Fees, NMF Fees or other moneys may be applied by DDSI and/or Regional Director to any outstanding balance due for Franchisee's Service Fees, advertising or other payment obligation.
e. If any payment due under any provisions of this Agreement is not paid by Franchisee when such payment is due, or if any report due under any provision of this agreement is not submitted by Franchisee when due, thereby leading to non-payment by Franchisee of amounts which would have been due under any provision of this agreement had Franchisee submitted such report when due, which amounts shall be considered overdue amounts for purposes of this paragraph, then Franchisee shall pay DDSI or Regional Director, in addition to the overdue amount, interest on such amount from the date it was due until paid, at the rate of eighteen percent (18%) per annum, or the maximum rate permitted by law, whichever is less, as well as DDSI's or Regional Director's reasonable attorney's fees and court costs incurred in the collection of any payment or fee. Any failure to comply with the requirements of this Section 7.1(e) shall be a material event of default under Section 9. Entitlement to such interest shall be in addition to any other remedies DDSI or Regional Director may have at law or in equity, arising under this Agreement or otherwise.
f. Franchisee shall prepare and file with DDSI and/or Regional Director such other reports and compilations of information as set forth below or as DDSI or Regional Director shall require or as may be specified in the Policy and Procedure Manual or other written directions.
g. DDSI shall have the right from time to time to amend the payment processes and procedures by an appropriate amendment to the Policy and Procedure Manual.
7.2 Records and Books of Account.
a. Franchisee shall keep and preserve complete records of all advertising copy and expenses, customer leads, customer appointments, retail sales, supplier orders, installed and completed customer orders, cash receipts and disbursements, and other such records and books of account as necessary for the orderly operation of the business, and to do so in the manner specified by DDSI and Regional Director. Franchisee shall retain all such records and books of account for three (3) years from the assignment, termination, or expiration of this Agreement.
b. Upon request, Franchisee shall submit to DDSI or Regional Director as directed such standard reports as may be specified in the Policy and Procedure Manual, including, but not limited to:
(i) Individual customer sales contracts,
(ii) State sales tax returns and reports, and
(iv) Register of appointments.
c. Franchisee shall adopt and use any computerized financial reporting system which DDSI in its discretion may uniformly require of all franchisees.
7.3 Right to Audit Franchisee's Records.
a. Franchisee shall allow DDSI's and Regional Director's representatives from time to time, at reasonable hours, to inspect Franchisee's systems and controls, advertising materials
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The original documents were scanned as an image. The original file can be downloaded at the link above.