Franchise Agreement
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Sample Franchise Agreement
THE DINNER A'FARE FRANCHISING, LLC FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (the "Agreement") made and entered into as of the date set forth below, by and between The Dinner A'Fare Franchising, LLC (hereinafter referred to as "Franchisor"), a Georgia limited liability company, with its principal place of business located at
5417 Landsdowne Court, Cumming, Georgia 30041 and_________________________________
of______________________________________________("Franchise Owner").
The Effective Date of the Agreement:___________________________________________
WHEREAS, Franchisor is engaged in the business of operating, and of licensing the operation by others, of studio kitchens ("Dinner A'Fare Kitchens") operating under the trade name, trademark and service mark consisting of or containing the words "The Dinner A'Fare" and through the use of certain related trade names, trademarks, and service marks, logos, symbols, words and insignias designated by Franchisor (the "Proprietary Marks"); and
WHEREAS, Franchisor has originated, developed and perfected a unique and successful system for the establishment, operation and merchandising of Dinner A'Fare Kitchens under the Proprietary Marks, which system includes, but is not limited to, site selection, a unique and readily recognizable design, color scheme, decor, layout and signage for the business premises, equipment selection and installation, accounting and bookkeeping methods, merchandising, advertising and promotional techniques, personnel training and a confidential manual (the "Manual") of operating procedures containing specially conceived and designed methods for operating Dinner A'Fare Kitchens (the "System"); and
WHEREAS, Franchisor has made a substantial investment in developing and perfecting the System, and in advertising, promoting and publicizing the Proprietary Marks, both of which are recognized as representing the highest standards of quality, cleanliness, appearance and service; and
WHEREAS, to assist authorized franchise owners operating under the System in commencing business and obtaining favorable results, Franchisor provides ail franchise owners operating under the System with both initial and continuing information, experience, advice and guidance with respect to financing, management, operations and marketing for Dinner A'Fare Kitchens; and
WHEREAS, Franchise Owner desires to establish and operate a Dinner A'Fare Kitchen (the "Studio Kitchens") at the location hereinafter designated, to use the System and the Proprietary Marks in connection with operating the Studio Kitchen and to derive the benefits of Franchisor's information, experience, advice, guidance and customer goodwill; and
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WHEREAS, Franchise Owner recognizes the importance of Franchisor to its other franchise owners operating under the System and to the public of maintaining the integrity, standards, qualities and attributes of products and services associated with the Proprietary Mark and is willing to adhere to certain uniform standards, procedures and policies to maintain such integrity, standards, qualities and attributes.
NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
I. CR ANT OF FRANCHISE
A. Tneatinn of Franchise
Franchisor hereby grants to Franchise Owner and Franchise Owner hereby accepts a franchise under the terms and conditions as set forth herein for the right to operate the Studio Kitchen at a location to be agreed upon between Franchisor and Franchise Owner within an Exclusive Territory described in Attachment "A" (the "Exclusive Territory"). Once agreed upon, the address of the location shall be set forth on Attachment "A." Franchisor also hereby grants and Franchise Owner hereby accepts a license to use the Proprietary Marks, its advertising, and merchandising methods, and the System, provided Franchise Owner shall adhere to the terms and conditions hereof.
B. Exclusive Territory
Franchisor agrees that during the term of the Agreement, provided that Franchise Owner is in frill compliance with the Agreement, Franchisor will not grant a Franchise to others to operate a Dinner A'Fare Kitchen within the Exclusive Territory of Franchise Owner or operate a business utilizing the System at a location within the Exclusive Territory of Franchise Owner.
II. TFRMANnRFNFWAI.
A. Term
Following execution of the Agreement by Franchisor and Franchise Owner, the Agreement shall be effective and binding from the Effective Date for an initial term equal to fifteen (15) years from the Effective Date, unless earlier terminated pursuant to the provisions hereof.
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B. Renewal
Franchise Owner shall have the right to renew this franchise at the expiration of the initial term of the Agreement for two (2) additional successive terms of five (5) years, provided that all of the following conditions have been fulfilled:
1. Franchise Owner has, during the entire term of the Agreement, substantially complied with all its provisions;
2. Franchise Owner maintains possession of the Studio Kitchen and by the expiration date of the Agreement has brought the Studio Kitchen into full compliance with the specifications and standards then applicable for or renewing the Studio Kitchen and presents evidence satisfactory to Franchisor that it has the right to remain in possession of the Studio Kitchen for the duration of any renewal term; or, in the event Franchise Owner is unable to maintain possession of the premises, or in the judgment of Franchisor the Studio Kitchen should be relocated, Franchise Owner secures a substitute premises approved by Franchisor and has furnished, stocked and equipped such premises to bring the Studio Kitchen at its substitute premises into full compliance with then-current specifications and standards of Franchisor by the expiration date of the Agreement;
3. Franchise Owner has satisfied all monetary obligations owed by Franchise Owner to Franchisor and any of its subsidiaries and affiliates and has timely met these obligations throughout the term of the Agreement;
4. Franchise Owner has executed Franchisor's then-current form of franchise agreement (with appropriate modifications to reflect the fact that the said agreement relates to the grant of a renewal franchise), which agreement shall supersede in all respects the Agreement the terms of which may differ from the terms of the Agreement, including, without limitation, a higher continuing Service Fee and/or local advertising expenditure; provided, however, Franchise Owner shall not be required to pay then-current Initial Franchise Fee, but shall pay the renewal fee often percent (10%) of then-current Initial Franchise Fee;
5. Franchise Owner has complied with Franchisor's then-current qualification and training requirements; and
6. Franchise Owner has executed a general release, in a form prescribed by Franchisor, of any and all claims against Franchisor and its subsidiaries and affiliates, if any, and their respective directors, agents and employees.
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III. OF OPFR ATIONS
Franchise Owner agrees to open and commence operation of the Studio Kitchen as soon as practicable after construction and/or remodeling of the Studio Kitchen. At Franchisor's option, the Agreement may be terminated for voluntary abandonment of the Studio Kitchen in the event Franchise Owner fails, within two hundred forty (240) days of the date of the Agreement, to completely construct and/or remodel, equip, furnish and open to the public the Studio Kitchen that is approved by Franchisor in accordance with the Agreement. In the event Franchise Owner does not commence operating the Studio Kitchen within the time period set forth herein, Franchisor may terminate the Agreement and the Initial Franchise Fee may be kept by Franchisor as liquidated damages, and not as a penalty, to reimburse itself for costs and/or expenses. Where Franchise Owner has exhibited due diligence in complying with this Section III of the Agreement, Franchisor may, at its option and in its sole discretion, consent in writing to an extension of time to the period of time specified herein.
IV. OFSION OF FR ANrmSF.D I OrATTON
A. Site Approvnl
Franchise Owner agrees to secure, at its sole expense, a site for the Studio Kitchen, which shall be approved by Franchisor as being suitable for use as a Dinner A'Fare Kitchen under the System.
Franchise Owner agrees to completely construct and/or remodel, equip and furnish the Studio Kitchen in accordance with Franchisor's specifications with respect to design, equipment layout, decor, color scheme and signage, all at the expense of Franchise Owner. Franchisor shall provide construction advice to Franchise Owner (or its selected contractor) for construction and/or remodeling of the Studio Kitchen in accordance with the Agreement. Franchise Owner shall be responsible for and shall pay all expenses associated with transforming Franchisor's construction advice into site blueprints for the Studio Kitchen and in ensuring that such site blueprints comply with all codes, regulations or ordinances that may be applicable to the construction and/or remodeling of the Studio Kitchen.
B. Prior Approval Ry Franchisor
Franchise Owner shall not proceed with construction and/or remodeling of the Studio Kitchen until Franchise Owner has obtained Franchisor's prior written approval of: (i) the suitability of the Studio Kitchen to operate under the System; (ii) the terms of the lease for the Studio Kitchen; and (iii) any plans drafted by Franchise Owner's architect from Franchisor's construction materials. Prior to opening, Franchise Owner shall complete to Franchisor's satisfaction all preparations of the Studio Kitchen in accordance with specifications set forth in the Manual.
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C. Signage
Franchise Owner, at its sole expense, agrees to erect, prominently display and maintain advertising signs of such design, color, number, location, illumination and size as Franchisor may reasonably require. All such signs or sign faces, as the case may be, shall bear the Proprietary Marks. Franchise Owner further agrees to obtain all necessary permits and to comply with all codes, regulations or ordinances applicable to display of the required signage, all at the expense of Franchise Owner. The maintenance and repair of all signs shall be the sole responsibility and obligation of Franchise Owner. Franchise Owner shall not display on the Studio Kitchen any sign or signs not approved by Franchisor, unless Franchisor shall give its prior written consent. Franchise Owner must comply with Franchisor's sign criteria, as more fully set forth in the Manual.
D. T .ease of the Stiirfin Kitchen
After receiving Franchisor's written approval of the location of the Studio Kitchen, Franchise Owner shall execute a lease, the terms of which have been previously approved by Franchisor. Franchisor's approval of the lease for the Studio Kitchen may be conditioned upon inclusion in the lease terms such provisions as Franchisor may reasonably require, including, without limitation:
1. A provision reserving to Franchisor the right, at Franchisor's election, to receive an assignment of the leasehold interest upon termination or expiration of the franchise granted to Franchise Owner;
2. A provision which expressly permits the lessor of the premises to provide to Franchisor with all sales and other information it may have related to the operation of the Studio Kitchen, as Franchisor may request;
3. A provision which requires the lessor concurrently to provide Franchisor with a copy of any written notice of deficiency under the lease sent to Franchise Owner and which grants to Franchisor, in its sole discretion, the right (but not the obligation) to cure any deficiency under the lease, should Franchise Owner fail to do so within fifteen (15) days after the expiration of the period in which Franchise Owner may cure the default;
4. A provision which gives Franchisor, or its designee, the option, upon default, expiration or termination of the Agreement, and upon written notice to the lessor, to assume all of Franchise Owner's rights under the lease terms, including the right to assign or sublease;
5. A provision which evidences the right of Franchise Owner to display the Proprietary Marks in accordance with the specifications required by the Manual, subject only to the provisions of applicable law; and
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6. A provision that the premises shall be used only for the operation of the Studio Kitchen.
Franchise Owner agrees not to modify its lease without the consent of Franchisor if such modification alters Franchisor's rights with respect to the above-noted provisions. In the event of termination of the Agreement for cause, at the request of Franchisor, if Franchise Owner owns the premises, Franchise Owner shall enter into a lease with Franchisor for a term of years equal to the remaining term of the Agreement, if said Agreement had not been terminated.
V. FQTTIPMFNT, FIYTTTRFS AND FTTRNITTTRF
A. T Tse of Proper Fqnipment Fixtures and Furniture
Franchisor may provide Franchise Owner with specifications for brands and typesof any equipment, fixtures, displays, exterior and interior signs and decorating accessories required for the Studio Kitchen, at Franchise Owner's expense. Specifications may include minimum standards for design, appearance and local zoning, sign and other restrictions. Franchise Owner may purchase or lease original and replacement equipment, fixtures, fiirniture, sign and decorating materials and services meeting such specifications from any source, as approved by Franchisor. If Franchise Owner proposes to purchase or lease any item of equipment or any fixture, sign or decorating materials not theretofore approved by Franchisor as meeting its specifications, as set forth in the Manual, Franchise Owner shall first notify Franchisor in writing. Franchisor may require submission of sufficient specifications, photographs, drawings and/or other information and samples to determine whether such item of equipment, fixture, sign or decorating material meets its specifications. Franchisor shall advise Franchise Owner within a reasonable period of time whether such item of equipment, fixture, furniture, sign or decorating material meets its specifications.
B. Specification Standards For Fqiiipment
Franchise Owner shall comply with all specifications for types of equipment used in the Studio Kitchen as provided in the Agreement.
VI. TRATNINO ANT> ASSTSTATVrF RV FRANCHISOR
A. Pre-Opening Training
1. Franchisor will provide a Pre-Opening training program concerning the
operation of the Studio Kitchen consisting of up to fifteen (15) days of training at Franchisor's home office and/or an existing Dinner A'Fare Kitchen. Franchise Owner and one additional person, as chosen by Franchise Owner and approved by Franchisor, shall attend such training program at no charge to Franchise Owner. Franchisor may charge a reasonable fee in the
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event that Franchise Owner sends additional employees to the training program. Franchise Owner shall be responsible for any travel, lodging, meals or other costs for itself and other attendee(s) that it sends to the training program at Franchisor's home office, and/or an existing Dinner A'Fare Kitchen. Franchisor will pay its own out-of-pocket expenses for training at the Studio Kitchen. Franchise Owner must attend the training sessions. Satisfactory completion of all mandatory training sessions is required. Failure to do so shall result in a breach of the Agreement.
2. Franchisor may conduct additional seminars or other training programs for the benefit of Franchise Owner, and Franchise Owner (and/or Franchise Owner's employees) may attend any such seminar or program. Franchisor may charge a reasonable fee for such seminar or program if it is deemed appropriate. Any travel, living and other expenses incurred by anyone attending training on behalf of Franchise Owner shall be paid by Franchise Owner.
3. Franchise Owner may make reasonable requests for additional training, in addition to that specified above, and Franchisor shall, in its discretion, provide such training at Franchise Owner's expense, including, without limitation, any travel, lodging and meals and other related costs. Franchisor may charge a reasonable fee for such additional training, if it is deemed appropriate.
4. Franchise Owner shall complete and shall cause its employees to complete, to Franchisor's satisfaction, such other initial or additional training as Franchisor may reasonably require from time to time.
B. Post-Opening Training
For a period of up to ten (10) business days, Franchisor will furnish to Franchise Owner, at the premises of the Studio Kitchen and at Franchisor's expense, one of Franchisor's representatives for the purpose of facilitating the opening of the Studio Kitchen. During this period, such representative will also assist Franchise Owner in establishing and standardizing procedures and techniques essential to the operation of the Studio Kitchen and shall assist in training personnel, if needed. Should Franchise Owner request additional assistance from Franchisor in order to facilitate the opening of the Studio Kitchen, and should Franchisor deem it necessary and appropriate, Franchise Owner shall reimburse Franchisor for the expenses of Franchisor's personnel and out-of-pocket expenses, as set forth in the Manual.
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C. Non-Completion of Training hy Franchise Owner
If Franchisor determines in its sole discretion that Franchise Owner is unable to satisfactorily complete the training program described above, Franchisor shall have the right to terminate the Agreement in the manner herein provided. If the Agreement is terminated pursuant to this paragraph, then Franchisor may keep the Initial Franchise Fee paid by Franchise Owner to Franchisor as liquidated damages, and not as a penalty, to reimburse itself for costs and/or expenses.
D. Additional Training Requirements
Franchisor from time to time may require that previously trained and experienced franchise owners operating under the System or their managers or employees attend and successfully complete refresher training programs or seminars to be conducted at Franchisor's training facility or at such other locations mutually convenient to the parties hereto, and at Franchise Owner's expense.
VII. OBI IHATTONS OF FRANCHISOR
A. layout of the Studio Kitchen
Provided that Franchise Owner leases or uses space in an existing building, Franchisor will assist Franchise Owner with the layout and design of the Studio Kitchen including location of walls and counters, if any, and the location of equipment and fixtures. The costs of leasehold improvements, signs and fixtures for finishing out the Studio Kitchen are the responsibility of Franchise Owner.
B. Training and Pre-Opening Assistance
Franchisor will provide a training program concerning the operation of Dinner A'Fare Kitchens as set forth in Section VI of the Agreement.
C. Site location
Franchise Owner has sole responsibility in selecting a site for the Studio Kitchen. Franchisor shall review and approve Franchise Owner's site selection and Lease Agreement, based on an analysis of local competing businesses, demographics, visibility, accessibility, suitability of the premises to be leased, and other factors more fully described in the Manual.
D. Operations Manual
Franchisor shall loan to Franchise Owner one copy of the Manual, containing mandatory and suggested specifications, standards and operating procedures prescribed from time to time by Franchisor, and information relative to other obligations of a Franchise Owner, and to the operation of Dinner A'Fare Kitchens.
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This Manual may cover such topics as Pre-Opening Procedures, Systems and Procedures, Personnel Policies, Marketing, Accounting and Bookkeeping and related matters as may be incorporated in such Manual from time to time. The Manual will remain confidential and the property of Franchisor, constitutes a Trade Secret of Franchisor, and may not be loaned out, duplicated, or copied in whole or in part in any manner. Franchisor will have the right to add to and otherwise modify the Manual from time to time, as it deems necessary. Franchise Owner must always follow the directives of the Manual, as may be modified by Franchisor from time to time. Such compliance by Franchise Owner is necessary to protect the integrity and reputation of the System.
E. Continuing Assistance
In addition to the assistance rendered to Franchise Owner prior to opening, Franchisor will provide, as deemed necessary by Franchisor, continuing consultation and advice regarding business, financial, operational, technical, pricing, sales and advertising matters, type of products and services offered, operation of the Studio Kitchen, and development of personnel policies. Franchisor will provide such assistance by telephone or, if the situation warrants, through on-site assistance of appropriate Franchisor personnel.
F. Advertising and Promotion
1. Franchisor may develop and provide creative materials for local and regional advertising and make such advertising materials available to Franchise Owner for publication or distribution in Franchise Owner's market area at Franchise Owner's own expense.
2. Franchisor may provide specific guidelines for advertising initiated by individual franchise owners operating under the System and shall reserve the right to disapprove any advertising that, in Franchisor's opinion, is not in accordance with these guidelines.
3. Immediately upon notification to do so, Franchise Owner shall discontinue any advertising that would, in Franchisor's opinion, be detrimental.
G. Suppliers
Franchisor may assist Franchise Owner in selecting suppliers for the products and services offered by Franchise Owner to its customers. Franchisor shall not limit the suppliers from whom such items may be purchased, so long as such items comply with the standards of quality specified in the Manual or in the Agreement.
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H. Pricing
Franchisor may advise Franchise Owner from time to time concerning suggested retail prices. Franchisor and Franchise Owner agree that any list or schedule of prices furnished to Franchise Owner by Franchisor is a recommendation only and is not to be construed as mandatory upon Franchise Owner. Nothing contained herein shall be deemed a representation by Franchisor that the use of Franchisor's suggested prices will in fact optimize profits.
VIII. FFFS AND PAYMENTS RV FRANPHISF OWNFR
A. Tnitial Franchise Fee
By executing the Agreement, Franchise Owner agrees to become a Franchise Owner and to pay an Initial Franchise Fee equal to Thirty Thousand Dollars ($30,00.00). This fee is payable in two installments. The first installment of Fifteen Thousand Dollars ($15,00.00) is paid upon execution of the Agreement and approval of Franchise Owner by Franchisor. The second installment of Fifteen Thousand Dollars ($15,000.00) is payable to Franchisor upon Franchisor's approval of Franchise Owner's proposed site and Lease Agreement or Purchase Agreement for said site. The Initial Franchise Fee is paid by Franchise Owner to Franchisor by tendering a certified or cashiers check for the amount of each installment of the Initial Franchise Fee described herein. The Initial Franchise Fee is fully earned by Franchisor at the time Franchisor executes the Agreement.
B. Payment nf Service Fees
Franchise Owner agrees to pay to Franchisor a Service Fee (the "Service Fees") according to the following schedule: five percent (5%) of the Studio Kitchen's first $48,000.00 Gross Revenues per month; four percent (4%) of the Studio Kitchen's next $24,000.00 of Gross Revenues per month; and three percent (3%) of all additional Gross Revenues of the Studio Kitchen, or Three Hundred Dollars ($300.00) per month, whichever is greater.
The monthly minimum fee of Three Hundred Dollars ($300.00) will be increased as follows: commencing at the start of the 13th month of the term of the Agreement and ending upon termination of the Agreement, the minimum monthly Service Fees will be increased by five percent (5%) for each additional twelve (12) month period.
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Service Fees are payable in advance on the seventh (7 ) day of each month beginning when Franchise Owner opens the Studio Kitchen. All Service Fees must be paid by check and postmarked by the seventh (7l) day of the month and received by Franchisor no later than the twelfth (12 ) of each month. Service Fees must be based upon the prior month's Gross Revenues and must be sent to Franchisor by Priority Mail of the United States Postal Service.
C. Interest for T .ate Payments
All Service Fee payments, local advertising expenditures, amounts due for purchases by Franchise Owner from Franchisor and/or its affiliated company, and other amounts which Franchise Owner owes to Franchisor and/or its affiliated company, not received on or before the due date shall be deemed overdue. If any payment or contribution is overdue, Franchise Owner shall pay to Franchisor immediately upon demand the overdue amount, a late fee of One Hundred Dollars ($100.00) per incident, plus interest on the overdue amount from the date it was due until paid, at the rate of one and one half percent (15/2%) per month, or the maximum rate permitted by law, whichever is higher. The foregoing shall be in addition to any other remedies Franchisor may possess, as permitted by law.
Franchise Owner acknowledges that this paragraph shall not constitute agreement by Franchisor to accept such payments after they are due or a commitment by Franchisor to extend credit to, or otherwise finance Franchise Owner's operation of the Studio Kitchen. Further, Franchise Owner acknowledges that the failure to pay all amounts when due hereunder shall constitute grounds for termination of the Agreement, as provided herein.
D. Definition of Gross Revenues
The term "Gross Revenues" means the amount of all receipts for the sale of any products or services of the Studio Kitchen and income of every other kind and nature related to the Studio Kitchen, whether for products or services, cash, exchange, or credit, regardless of collection in a case of credit, less any refunds; provided, however, that "Gross Revenues" shall not include any sales taxes or other taxes collected by Franchise Owner for transmittal to the appropriate taxing authority.
E. Franchisor's Right to Apply Franchise Owner Payments
Notwithstanding any designation by Franchise Owner, Franchisor shall have the sole discretion to apply any payments by Franchise Owner to any past due indebtedness of Franchise Owner for Service Fee payments, purchases from Franchisor and any of its affiliates, interest or any other indebtedness.
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IX. ADVFRTTSTNn AND MARKFTTNO
Recognizing the value of marketing and the importance of the standardization of advertising and promotion to the furtherance of the goodwill and the public image of Dinner A'Fare Kitchens, Franchise Owner agrees as follows:
A. Grand Opening Marketing
Franchise Owner shall expend a minimum of Four Thousand Dollars ($4,000.00) for advertising and promotional items. Franchisor may advise Franchise Owner regarding the preparation and placement of such advertising and promotional items. Such monies must be spent either prior to or during the first ninety (90) days after Franchise Owner opens the Studio Kitchen.
If so requested by Franchisor, Franchise Owner shall participate in a joint grand opening program with other franchise owners operating under the System in the same marketing area, who are opening their Dinner A'Fare Kitchens at about the same time as Franchise Owner. With regard to all advertising, Franchise Owner shall use the advertising materials, techniques and concepts of Franchisor and none other unless Franchise Owner obtains the prior written approval of Franchisor to use other materials, techniques and concepts.
B. T nr.al Marketing F.x pen Hiti ires
Franchise Owner shall spend, as a minimum, for local advertising purposes the amount of Two Thousand Five Hundred Dollars ($2,500.00) per month during the first twelve (12) months of the term of the Agreement. This minimum amount of money to be spent for local advertising purposes must be increased by at least five percent (5%) per year for remaining years of the term of the Agreement. Franchise Owner must send to Franchisor, on a quarterly basis, evidence that it has paid such monies for local marketing purposes, according to the procedures described more fully in the Manual.
If one is created, Franchise Owner is also required to join and participate in Franchisor's ADI Advertising Cooperative (Co-op), which is an association of all other franchise owners operating under the System with Dinner A'Fare Kitchens located within Franchise Owner's Area of Dominant Influence ("ADI"). An ADI is a geographic market design that defines a broadcast media market, consisting of all counties in which the home market stations receive a preponderance of viewing. Each Co-op will be organized and governed in a form and manner approved by Franchisor in writing, and will commence operations on a date specified or approved by Franchisor. Franchisee must join and begin participation within thirty (30) days after the date on which the Co-op commences operation. Franchisor will also designate the ADI for each Co-op. Any disputes arising among or between Franchise Owner, other franchise owners in the Co-op, and/or the Co-op, shall be resolved in accordance with the rules and procedures set forth in the Co-op's
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governing documents. Franchise Owner shall submit to the Co-op the amount required of Franchise Owner under this Agreement at such times as determined by Franchisor, together with such other statements or reports as may be required by Franchisor, or by the Co-op with Franchisor's prior written approval.
One function of the Co-op is to establish a local advertising pool, the funds of which are to be used for Franchisor's advertising only to the mutual benefit of each Co-op member. Franchise Owner shall contribute to the pool in accordance with the rules and regulations of the Co-op, as determined by its members. Amounts contributed to the advertising pool by a Franchise Owner may be considered as spent for local advertising, and therefore toward the minimum local advertising requirements as specified in the Agreement.
Franchise Owner shall list and advertise the Studio Kitchen in the principal regular (white pages) telephone directories distributed within his Exclusive Territory, in such directory categories as are specified by Franchisor, as set forth in the Manual, utilizing Franchisor's standard forms of listing and classified directory advertisements. Classified directory advertisements must list all other Dinner A'Fare Kitchens operating within the distribution area of the classified directories. The cost of such advertisements is required to be reasonably apportioned among all Dinner A'Fare Kitchens listed therein. The costs incurred in such telephone directory advertising may be considered as part of the minimum local advertising amount noted herein.
C. T nral Markpting Plan
Franchise Owner shall create a local advertising and marketing plan by which Franchise Owner shall place local advertising in any media it desires, provided that such advertising conforms to the standards and requirements of Franchisor as set forth in the Manual, or otherwise designated by Franchisor.
Franchise Owner may not advertise the Studio Kitchen in connection with any other business, except with Franchisor's prior written approval. Franchise Owner shall obtain Franchisor's prior approval of all advertising and promotional plans and materials that Franchise Owner desires to use at least thirty (30) days before the start of any such plans unless such plans and materials have been previously approved by Franchisor. Franchise Owner shall submit such plans and materials to Franchisor by personal delivery or through the mail, "Return Receipt Requested." Franchise Owner shall not use such plans or materials until they have been approved by Franchisor in writing and shall promptly discontinue use of any advertising or promotional plans and materials upon the request of Franchisor. Any plans or materials submitted by Franchise Owner to Franchisor that have not been approved or disapproved in writing, within thirty (30) days of receipt thereof by Franchisor, shall be deemed disapproved.
D. National Advertising Fees
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1. Franchise Owner must contribute monthly to a National Advertising Fund (the "National Fund") in an amount of money to be determined in the future by Franchisor. This amount shall not exceed 2% of Franchise Owner's Gross Sales.
2. Franchise Owner must make contributions to the National Fund, as required under the Agreement, and must further agree and acknowledge that the National Fund shall be maintained and administered by Franchisor as follows:
a. Franchisor shall oversee all advertising and promotional programs and shall have the sole discretion to approve or disapprove the creative concept, materials, methods, and media used in such programs, and the placement and allocation thereof. Details on this committee appear in the Manual. Franchise Owner agrees and acknowledges that the National Fund is intended to maximize public recognition and acceptance of the Proprietary Marks and System. Franchisor undertakes no obligation in administering the National Fund to make expenditures for Franchise Owner that are equivalent or proportionate to its contribution, or to ensure that Franchise Owner benefits directly or pro-rata from advertising or promotion conducted under the National Fund.
b. The National Fund, all contributions thereto, and earnings thereon shall be used exclusively to meet any and all costs of maintaining, administering, directing and preparing advertising activities (including the costs of preparing and conducting advertising campaigns in various media; sponsorship, marketing surveys and other public relations activities; employing advertising or marketing firms to assist therein; and providing promotional brochures and other marketing materials to franchise owners operating under the System). Any earnings of the National Fund thereon shall be maintained in an account separate from the other monies of Franchisor and shall not be used to defray any of Franchisor's expenses, except for such reasonably related to the administration or direction of the National Fund and advertising programs for the System and franchise owners operating under the System. The National Fund and its earnings shall not otherwise inure to the benefit of Franchisor.
c. It is anticipated that most of the contributions to and earnings
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of the National Fund shall be expended for the purposes described above during the taxable year within which the contributions and earnings are received. If, however, excess amounts remain in the National Fund at the end of such taxable year, all expenditures in the following taxable year shall be made first out of the accumulated earnings from previous years, next out of contributions from previous years, next out of earning in the current year, and finally out of current contributions.
d. A statement of the operations of the National Fund shall be prepared annually and shall be made available at Franchise Owner's request.
e. Although the National Fund is intended to be of perpetual duration, Franchisor maintains the right to terminate the National Fund at any time. The National Fund shall not be terminated, however, until all monies in the National Fund have been expended for the purposes described in the Agreement.
f. The National Fund is not in operation as of the effective date of the Agreement. As a result, Franchise Owner's requirement of contributing to the National Fund is not required at this time. However, Franchisor reserves the right to activate Franchise Owner's contribution to the National Fund and will notify Franchise Owner in writing of such activation, and Franchise Owner's amount of such monthly contribution to the National Fund, at least thirty (30) days prior to the implementation of such requirement.
X. ArrOTTNTINr, ANll ROOKKHFFPINn RECORDS
A. Ronklceeping. Accounting and Records
Franchise Owner shall maintain during the term or terms of the Agreement, and shall preserve for a minimum of seven (7) years thereafter, full, complete accurate records of all sales, marketing activities, closeout sheets, payroll and accounts payable in accordance with the standard accounting system described by Franchisor in the Manual or otherwise specified in writing.
B. Submission nf Financial Statements;
Franchise Owner shall, at its expense, submit to Franchisor, within fifteen (15) days of the end of each calendar month during the term of the Agreement, on forms prescribed by Franchisor, a financial statement, which may be unaudited, for the
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preceding month, including both an income statement and balance sheet. Franchise Owner shall also, at its expense, submit to Franchisor within sixty (60) days of the end of each fiscal year of Franchise Owner during the term of the Agreement, a complete financial statement for the said fiscal year, including, without limitation, both an income statement and balance sheet, which may be unaudited, together with such other information in such form as Franchisor may require. Each financial statement shall be signed by Franchise Owner or by Franchise Owner's Treasurer or Chief Financial Officer, attesting that the statement is true and correct and prepared in accordance with Franchisor's requirements. Franchise Owner shall also submit to Franchisor its current financial statement and other forms, records, reports, information and data as Franchisor may reasonably designate, in the form, and at the times and the places reasonably required by Franchisor, upon request, and as specified from time to time in the Manual or otherwise specified in writing.
C. Franchisor's Right to Audit
Franchisor has the right at any time during business hours and without prior notice to examine, compile, review, or audit all business records, financial and otherwise, relating to the Studio Kitchen. The examination shall be at the expense of Franchisor; provided, however, if the examination results in a discovery of a discrepancy in the Gross Revenues reported by Franchise Owner of 5% or more, then Franchise Owner shall pay or reimburse Franchisor for any and all reasonable expenses incurred by Franchisor in connection with the examination, including, but not limited to, attorneys' and accounting fees and travel expenses, room and board and compensation of Franchisor's employees, as well as interest on the amounts owed at the highest legal rates allowed from the date payment was due.
D. P-nrnnratft Franchise Owner
If Franchise Owner becomes a corporation either prior to executing the Agreement, or at any time during the term of the Agreement, the following requirements shall apply:
1. Copies of Franchise Owner's Articles of Incorporation or Charter, By-laws and other governing documents, and any Amendments thereto, copies of initial shareholder certificates and Shareholder Agreements, if any, and the Resolutions of the Board of Directors authorizing entry into the Agreement as required by Franchisor and set forth in the Manual, shall be promptly furnished to Franchisor;
2. Franchise Owner shall maintain a current list of all owners of record and all beneficial owners of any class of stock of Franchise Owner and shall furnish such list to Franchisor annually;
3. All shareholders of Franchise Owner shall jointly and severally guarantee Franchise Owner's performance hereunder and shall bind themselves to the
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terms of a Guaranty of Franchise Owner's Undertakings in a form approved by Franchisor (see Attachment "B" to the Agreement). However, the requirements of this subsection shall not apply to any corporation registered under the Securities Exchange Act of 1934 (hereinafter known as a "Publicly-Held Corporation"); and
4. The majority shareholder in a corporation that becomes Franchise Owner of the Studio Kitchen, which is the subject of the Agreement, must complete the initial management-training course and all other training courses required by Franchisor and devote full-time best efforts to working at the Studio Kitchen during the first two years of its operation..
E. T .imiteH T lability Company Franchise Owner
If Franchise Owner becomes a limited liability company either prior to executing the Agreement, or at any time during the term of the Agreement, the following requirements shall apply:
1. Copies of the Articles of Organization, the Operating Agreement, and Minutes of the Annual Meeting shall be promptly furnished to Franchisor;
2. Franchise Owner shall maintain a current list of all members of record and shall furnish such list to Franchisor annually;
3. All members with Franchise Owner shall jointly and severally guarantee Franchise Owner's performance hereunder and shall bind themselves to the terms of a Guaranty of Franchise Owner's Undertakings in a form approved by Franchisor (see Attachment "B") to the Agreement;
4. The majority member in a limited liability company that becomes Franchise Owner, which is the subject of the Agreement, must complete the initial management-training course and all other training courses required by Franchisor and devote full-time best efforts to working at the Studio Kitchen during the first two years of its operation.
XI. STANDARDS OF QUALITY AND PFRFORMANrF
Franchise Owner shall comply with the entire System developed by Franchisor including, without limitation, the following:
A. Secure Site and Approval nf Lease Within 1 90 Days
Franchise Owner must obtain from Franchisor, within one hundred twenty (120) days from the date the Agreement is signed, approval of Franchise Owner's
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proposed site and Lease Agreement or Purchase Agreement for said site. Franchise Owner's failure to meet these requirements may result in Franchisor terminating the Agreement and keeping the first installment of the Initial Franchise Fee, as set-forth in the Agreement.
B. Open the Studio ICitrhen in 740 Days
Franchise Owner shall commence operation of the Studio Kitchen not later than two hundred forty (240) days after the execution of the Agreement and approval by Franchisor of Franchise Owner. Prior to such opening, Franchise Owner shall have procured all necessary licenses, permits, and approvals, including, without limitation, construction permits and licenses, and shall have hired and trained personnel, made all leasehold improvements, and purchased and installed necessary equipment, and procured a representative inventory as required by Franchisor. If Franchise Owner for any reason fails to commence operations as herein provided, unless Franchise Owner is precluded from doing so by war or civil disturbance or natural disaster, such failure shall be considered a default hereunder and Franchisor may terminate the Agreement as herein provided without any refund of Franchise Owner's Initial Franchise Fee.
C. Tmage of the Studio Kitr.hen
Franchise Owner agrees to maintain the condition and appearance of the premises of the Studio Kitchen consistent with Franchisor's standards for the image of a Dinner A'Fare Kitchen as an attractive, pleasant and comfortable Studio Kitchen. Franchise Owner agrees to effect such reasonable maintenance of the Studio Kitchen as is required from time to time to maintain or improve the appearance and efficient operation of the Studio Kitchen, including replacement of worn out or obsolete fixtures, furniture and signs, repair of the exterior and interior of the Studio Kitchen and decorating. If at any time in Franchisor's judgment the general state of repair or the appearance of the premises of the Studio Kitchen or its equipment, fixtures, furniture, signs or decor does not meet Franchisor's standards, Franchisor shall so notify Franchise Owner, specifying the action to be taken by Franchise Owner to correct such deficiency. If Franchise Owner fails or refuses to initiate within fifteen (15) days after receipt of such notice, and thereafter continue, and promptly complete, a bona fide program to complete any required maintenance, Franchisor shall have the right, in addition to all other remedies, to enter upon the premises of the Studio Kitchen and effect such maintenance on behalf of Franchise Owner, and Franchise Owner shall pay the entire costs thereof on demand. Franchise Owner's obligation to initiate and continue any required maintenance shall be suspended during any period in which such maintenance is impossible due to war, civil disturbance or natural disaster or other event beyond Franchise Owner's reasonable control.
D. No Alteration to the Studio Kitr.hen
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Franchise Owner shall make no material alterations to the improvements of the Studio Kitchen nor shall Franchise Owner make material replacements of or alterations to the equipment, fixtures, furniture or signs of the Studio Kitchen without the prior written approval by Franchisor.
E. Tkenf Premises
The location of the Studio Kitchen approved by Franchisor in accordance with the Agreement shall be used solely for the purpose of operating the Studio Kitchen under the System.
F. Authorized Products and Services
Franchise Owner agrees that he or she will offer for sale and sell at the Studio Kitchen all types of merchandise, products and/or services that Franchisor from time to time authorizes and that he or she will not offer for sale or sell at the Studio Kitchen any other category of merchandise, products or services, or use such premises for any purpose other than the operation of the Studio Kitchen in full compliance with the Agreement.
G. Sale nf Trademarked or Copyrighted Product T .ines
Franchise Owner agrees, as part of the consideration for the Agreement, that Franchise Owner will carry an adequate supply and maintain a representative inventory of items and merchandise packaged under the Proprietary Marks, if any, and Franchise Owner shall maintain, carry and promote such items and merchandise for sale or lease to the general public in order to meet customer demands as designated by Franchisor.
H. Approved Manufacturers. Suppliers and Distributors
From time to time, Franchisor shall provide to Franchise Owner, a list of approved manufacturers, suppliers, and distributors for all products and services necessary to operate the Studio Kitchen. Franchisor may revise the approved list of manufacturers, suppliers and distributors from time to time in its sole discretion. Such approved list shall be submitted to Franchise Owner as Franchisor deems advisable.
I. Authorized Equipment. Fixtures, and Supplies
All supplies, equipment, materials and related items, forms and other materials used in the operation of the Studio Kitchen shall conform to the specifications and quality standards established by Franchisor from time to time. Franchise Owner shall purchase all inventory, supplies and other products and materials required for the operation of the Studio Kitchen solely from suppliers (including manufacturers and distributors) who demonstrate, to the continuing reasonable satisfaction of
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Franchisor, the ability to meet Franchisor's reasonable standards and specifications for such items; who possess adequate quality control and capacity to meet Franchise Owner's needs properly and reliably; and who have been approved in writing by Franchisor and not thereafter disapproved. If Franchise Owner desires to purchase any items from an unapproved supplier, Franchise Owner shall submit to Franchisor a written request for approval of such supplies, or shall request supplier to do so. Franchisor approval shall not be unreasonably withheld. Franchisor shall have the right to require that its representatives be permitted to inspect the supplier's facility and that samples from the supplier be delivered at Franchisor's option either to Franchisor or to an independent consultant designated by Franchisor for testing. A charge not to exceed the reasonable cost of the inspection and the actual cost of the testing shall be paid by Franchise Owner or the supplier. Franchisor reserves the right, at its option, to reinspect the facilities and products of such approved suppliers, from time to time, and to revoke its approval upon supplier's failure to continue to meet any of Franchisor's criteria for standards and specifications. Franchisor shall be entitled upon request, to periodically review inventory reports from Franchise Owner, including product identification and serial numbers, if applicable, for compliance with the foregoing requirements.
J. Specifications Standards and Operating Procedures
Franchise Owner agrees to fully comply with all mandatory specifications, standards, operating procedures and rules as in effect from time to time relating to:
1. The safety, maintenance, cleanliness, function and appearance of the Studio Kitchen and its equipment, fixtures, furniture, decor and signs and maintenance thereof;
2. Procedures regarding purchasing of any trademarked product line or copyrighted materials and other inventory items;
3. Procedures and techniques regarding merchandising activities;
4. Training, dress, general appearance and demeanor of the Studio Kitchen's employees;
5. Hours during which the Studio Kitchen will be attended and open for business;
6. Advertising and promotional programs;
7. Use and retention of standard forms;
8. Type, quantity and variety of equipment, Trademarked Product Lines and Copyrighted Materials and inventory items;
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9. Use and illumination of signs, posters, displays and similar items;
10. Identification of Franchise Owner as the owner of the Studio Kitchen; and
11. The handling of customer complaints.
Mandatory specifications, standards, operating procedures and techniques and other rules prescribed from time to time by Franchisor in the Manual or otherwise communicated to Franchise Owner in writing, shall constitute provisions of the Agreement, as if fully set forth herein. All references herein to the Agreement shall include all such mandatory specifications, standards and operating procedures and rules.
K. T irenses^ Permits and CerHfieates
Franchise Owner shall secure and maintain in force all required licenses, permits and certificates relating to the operation of the Studio Kitchen and shall operate the Studio Kitchen in full compliance with all applicable laws, ordinances and regulations, including, without limitation, all government regulations relating to occupational hazards and health, consumer protection, equal opportunity, trade regulation, worker's compensation, unemployment insurance, withholding and payment of federal and state income taxes and social security taxes and sales, use and property taxes.
L. ProHnrts with the Proprietary Marks
Franchise Owner shall in the operation of the Studio Kitchen use and display, labels, forms and other paper products imprinted with the Proprietary Marks and colors as prescribed from time to time by Franchisor.
M. Supervision of the Studio Kitehen
Franchise Owner will be directly involved to the management and operation of the Studio Kitchen. Franchise Owner must devote full-time best efforts to working at the Studio Kitchen during the first two years of its operation. In addition, Franchise Owner must have a fully trained manager operate the Studio Kitchen at all times when Franchise Owner is not personally managing and operating the Studio Kitchen. Franchise Owner shall keep Franchisor informed at all times of the identity of any employee(s) acting as manager(s) of the Studio Kitchen. Franchisor shall make training available, as is reasonable and necessary, for all managers designated by Franchise Owner. Franchisor may provide such training at then-current rates charged by Franchisor. Franchise Owner agrees that he or she will at all times faithfully, honestly and diligently perform Franchise Owner's obligations hereunder and that Franchise Owner will not engage in any business or other activities that will conflict with the obligations hereunder.
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The original documents were scanned as an image. The original file can be downloaded at the link above.