Franchise Agreement
Sample Franchise Agreement
FRANCHISE AGREEMENT
BETWEEN
FRIENDLY'S RESTAURANTS FRANCHISE, INC.
1855 Boston Road
Wilbraham, MA 01095
AND
FRIENDCO RESTAURANTS, INC.
1657 Crofton Boulevard
Crofton, Maryland 21114
DATED
July _____ , 1997
FOR
[RESTAURANT STREET ADDRESS]
[STATE, CITY]
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TABLE OF CONTENTS
Section Page
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1. INTRODUCTION AND GRANT OF FRANCHISE 1
A. Introduction 1
B. Grant of Franchise 2
C. Rights Reserved by Company 4
2. TRAINING 5
3. GUIDANCE 6
A. Guidance and Assistance 6
B. Operations Manual 7
4. MARKS 8
A. Goodwill and Ownership of Marks 8
B. Limitations on Licensee's Use of Marks 9
C. Notification of Infringements and Claims 10
D. Discontinuance of Use of Marks 10
E. Indemnification of Franchisee 11
5. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION 11
A. Independent Contractors 11
B. No Liability for Acts of Other Party 12
C. Taxes 13
D. Indemnification 13
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6. CONFIDENTIAL INFORMATION 14
7. FEES 17
A. Initial Franchise Fee 17
B. Royalty Fee 18
C. Definition of Gross Sales 18
D. Interest on Late Payments 19
E. Application of Payments 19
8. RESTAURANT OPERATING STANDARDS 20
A. Condition, Appearance and Operation of the
Restaurant 20
B. Restaurant Menu 21
C. Approved Products, Distributors and Suppliers 22
D. Specifications, Standards and Procedures 25
E. Compliance with Laws and Good Business Practices 26
F. Management and Personnel of the Restaurant 27
G. Insurance 27
9. MARKETING 29
A. By Company 29
B. By Licensee 32
C. By Cooperative 33
10.REPORTS, FINANCIAL STATEMENTS AND FINANCIAL CONDITION 33
11. INSPECTIONS AND AUDITS 35
A. Company's Right to Inspect the Restaurant 35
B. Company's Right to Audit 36
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12. TRANSFER OF FRANCHISE 37
A. By Company 37
B. Franchisee May Not Transfer Without Approval of
Company 37
C. Right of First Refusal 38
D. Conditions for Approval of Transfer 40
E. Transfer to a Wholly-Owned Entity 41
F. Effect of Consent to Transfer 42
13. CONDEMNATION AND CASUALTY 42
14. TERMINATION OF THE FRANCHISE 43
15. DAMAGES 46
16. COVENANT NOT TO COMPETE; RIGHTS AND OBLIGATIONS OF
COMPANY AND FRANCHISEE UPON
TERMINATION OR EXPIRATION OF
THE FRANCHISE 48
A. Covenant Not to Compete 48
B. Payment of Amounts Owed to Company 50
C. Marks and System 50
D. Confidential Information 51
E. Continuing Obligations 52
17. RENEWAL OF FRANCHISE 52
18. ENFORCEMENT 53
A. Severability and Substitution of Valid PROVISIONS 53
B. Waiver of Obligations 55
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C. Force Majeure 56
D. Injunctive Relief 57
E. Rights of Parties Are Cumulative 57
F. Costs and Attorneys' Fees 57
G. Governing Law 58
H. Waiver of Punitive/Exemplary Damages;
Limitation of Actions 58
I. Venue and Jurisdiction 59
J. Waiver of Jury Trial 59
K. Binding Effect 59
L. Interpretation 60
M. Time 61
19. NOTICES AND PAYMENTS 61
20. ACKNOWLEDGEMENTS 62
EXHIBITS:
Exhibit A: Disclosure Acknowledgment Statement...... A-1
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FRANCHISE AGREEMENT
THIS FRANCHISE (the "Agreement") is made and entered into as of _____,
19___ (the "Agreement Date"), by and between FRIENDLY'S RESTAURANTS,
FRANCHISE, INC., a Delaware corporation, whose principal address is 1855
Boston Road, Wilbraham, MA 01095 and FRIENDCO RESTAURANTS, INC. whose
principal address is 1657 Crofton Boulevard, Crofton, Maryland 21114. For
purposes of simplicity, we will sometimes refer to Friendly's as "us", "we"
or the "Company," and we will sometimes refer to you as "you" or "Franchisee."
1. INTRODUCTION AND GRANT OF FRANCHISE
A. Introduction
Through expenditure of considerable time, skill, effort and money, we
have developed a system for establishing, operating and franchising
distinctive, high quality restaurants ("Friendly's Restaurants") serving the
public under the name "Friendly's." A Friendly's Restaurant consists of all
structures, facilities, appurtenances, grounds, landscaping, signs,
furniture, fixtures, equipment and entry, exit, parking and other areas
commonly associated with such a restaurant. The approved food, beverage and
other products served and sold by Friendly's Restaurants (the "Products") for
consumer consumption and not for resale are prepared in accordance with our
standards, specifications and secret recipes. Friendly's Restaurants are
established pursuant to our plans and specifications for construction,
conversion, remodeling, decorating, equipment and layout, and are operated in
accordance
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with our distinctive business formats, construction plans, inspection and
consultation programs, signs, equipment, layouts, methods, specifications,
standards, recipes (including ice cream and other frozen dessert and related
toppings recipes), confidential information, trade secrets, operating
procedures, training programs and materials, guidance, policy statements and
related materials, designs, advertising, publicity, and marketing programs
and other materials (which we may modify from time to time) (collectively,
the "System"). We own, use, promote and license certain trade names,
trademarks, service marks and other commercial symbols, and applications
related thereto, including but not limited to "Friendly's" and "Friendly's
Restaurants" (collectively, the "Marks"), and the confidential information,
copyrights, and business format and related property rights which comprise
the System. We may change, modify or improve the System from time to time to
enhance the operations of Friendly's Restaurants. All improvements and
additions you, we or anyone else makes to the System, whenever made or used
in connection with the system, will inure to us and become our sole property.
We grant, to qualified persons, franchises to own and operate Friendly's
Restaurants pursuant to the System selling the Products and services we
authorize and approve.
B. Grant of Franchise
(1) Grant. You have applied for a franchise to own and operate a
Friendly's Restaurant (the "Restaurant") at, and only at, the location known
as: (the "Premises") and we have approved your application in reliance upon
all of the
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representations and warranties you have made to us in connection with this
Agreement, including but not limited to the information contained in your
application for a franchise and, if the Restaurant is newly constructed and
equipped, the representations and warranties you made to us in the Commitment
Agreement between you and us dated ____________, 19 __ . Subject to the
provisions of the Agreement, and in reliance on such representations and
warranties, we hereby grant to you, effective upon the execution of this
Agreement, a franchise (the "Franchise") to operate a Friendly's Restaurant
at the Premises, and to use the System and the Marks in operating the
Restaurant, for a term of twenty (20) years, beginning on the date of
completion, expiration or termination of the Development Agreement between
you and us dated July 10, 1997, unless this Agreement is sooner terminated as
provided in Section 14 of this Agreement. Termination or expiration of this
Agreement will constitute a termination or expiration of the Franchise.
Except as otherwise provided in the Development Agreement, you may not
conduct your business pursuant to this Agreement from any location other than
the Premises except upon our approval of your application for change of
location, and the payment of the then current change of location fee.
(2) Best Efforts. You agree that you will at all times faithfully,
honestly and diligently perform your obligations under this Agreement and
that you will continuously exert, during the full term of this Agreement,
your best reasonable efforts
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to promote and enhance the business of the Restaurant and the goodwill of the
Marks and the System.
(3) Operation. You agree that you will continuously, from the date you
open the Restaurant for business to the public, operate, occupy and do
business in the Restaurant, 7 days a week, 365 days a year during the hours
of 6:00 a.m. to 11:00 p.m. weekdays, and to 12:00 midnight on weekends (it
being understood that the Restaurant may be closed for business while any
repairs or refurbishments are being undertaken and that different hours of
operation may be approved by the Vice President of Operations of the Company)
and to operate the Restaurant in a manner reasonably calculated to produce
the maximum volume of gross sales (as defined in Section 7C of this
Agreement) and to help establish and maintain a high reputation for the
Restaurant, unless the Restaurant is in the process of being replaced
pursuant to the provisions of any applicable Development Agreement.
C. Rights Reserved by Company
We retain the right, subject to the exercise of good faith, in our sole
and absolute discretion, to: (1) operate and grant to others the right to
operate, Friendly's Restaurants or other restaurants using the System or the
Marks at such locations which may include locations within the Trade Area (as
defined in Section 16A, unless an exclusive territory has been granted
pursuant to a Development Agreement, in which case the terms of the
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Development Agreement will apply) and on such terms and conditions as we deem
appropriate; (2) operate, and grant to others the right to operate
restaurants under other trade names, trademarks, service marks and commercial
symbols different from the Marks, notwithstanding the fact that such
restaurants may be the same as or similar to a Friendly's Restaurant; and (3)
sell the Products or other products identified by the Marks or by other
trademarks in any channel of distribution.
2. TRAINING
Prior to the execution of this Agreement, we have furnished you and your
Restaurant Managers (each as hereinafter defined) training in the operation
of a Friendly's Restaurant. We will require similar training for all
successors to such persons. No person shall be permitted to supervise the
Restaurant until the training has been completed. The training program will
include classroom instruction and field training and will be furnished at our
training facility and/or at a Friendly's Restaurant, and will last for such
duration as we determine to be necessary.
Your Restaurant Managers must complete the training program to our
reasonable satisfaction. If we, in our sole discretion, determine that any
of such persons are unable to complete the training program satisfactorily,
upon our request you agree to hire, as soon as practicable, a replacement who
must complete our training program to our reasonable satisfaction. We may
also offer such refresher or supplemental training programs to you and such
persons as we, from time to time, deem appropriate at such places as we
designate.
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By giving you prior written notice, we will have the right to require
attendance at any refresher or supplemental training program by you or any of
such persons.
No tuition charge will be made for required initial training programs.
You will be responsible for the travel, local transportation, lodging and
meal expenses, and compensation of yourself and your Restaurant Managers
incurred while attending the training program and any refresher or
supplemental training programs we offer to you or require you or such persons
to attend. Reasonable charges may be made by us for training materials and
we may require you to purchase certain equipment to be used in such training.
3. GUIDANCE
A. Guidance and Assistance
We will furnish guidance to you with respect to:
(1)preparation, packaging, sale and delivery of Products authorized for
sale at Friendly's Restaurants;
(2)development, preparation and packaging of new Products we develop for
sale at Friendly's Restaurants;
(3)specifications, standards and operating procedures utilized by
Friendly's Restaurants, and any modification thereof;
(4)approved equipment, furniture, furnishings, signs, food products,
operating materials and supplies;
(5)development and implementation of local advertising and promotional
programs; and
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(6)general operating and management procedures of Friendly's Restaurants.
In our discretion, we will furnish this guidance and assistance to you in the
form of our confidential operations manual, bulletins, written reports and
recommendations, electronic mail or other written or electronic materials
(all of which are hereinafter referred to as the "Operations Manual"),
inspection reports for the Restaurant, refresher training programs and/or
telephonic consultations at our offices or at the Restaurant. If you
request, we will furnish additional guidance and assistance relative to the
operation of the Restaurant at per diem fees and charges we establish from
time to time. If special training of Restaurant personnel or other
assistance in operating the Restaurant is requested by you, and must take
place at the Restaurant, all our expenses for such training, including a per
diem charge and travel, local transportation, lodging and meal expenses for
our personnel, must be paid by you.
B. Operations Manual
We will loan to you during the term of the Franchise one (1) copy of the
Operations Manual which may consist of multiple parts and/or volumes. The
Operations Manual will contain mandatory and suggested specifications,
standards and operating procedures that we prescribe from time to time for
Friendly's Restaurants and information relative to your obligations under
this Agreement and in the operation of a Friendly's Restaurant. We may
modify the Operations Manual from time to time to reflect changes in the
specifications, standards and operating procedures of Friendly's Restaurants,
to disclose information
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concerning new Products and services which we may develop for sale at
Friendly's Restaurants, to specify types, brands and models of equipment
which you must utilize to produce and sell such new Products and services,
and to specify changes in the decor, format, image, Products, services and
operation of a Friendly's Restaurant. You must keep your copy of the
Operations Manual current by immediately inserting all modified pages we
furnish to you and destroying the then obsolete pages. In the event of a
dispute relative to the contents of the Operations Manual, the master copies
we maintain at our principal office will be controlling. You may not at any
time copy any part of the Operations Manual, disclose any part of it to
employees or others not having a need to know its contents for purposes of
operating the Restaurant, or permit its removal from the Restaurant without
our prior approval. In the event a new version of the Operations Manual is
provided to you, you must immediately return the then obsolete version to us.
To the extent the Operations Manual contains any specification, standard or
operating procedure concerning the operation of the Restaurant, such
provision shall be deemed to be incorporated into this Agreement, unless such
provision conflicts with applicable laws or ordinances.
4. MARKS
A. Goodwill and Ownership of Marks
You acknowledge that we have the right to license the Marks, that the
Marks are represented to be valid, and that your right to use the Marks is
derived solely from this Agreement (and the Trademark License Agreement if
applicable) and is limited to your operation of the Restaurant pursuant to
and in compliance with this Agreement and all
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applicable standards, specifications and operating procedures we prescribe
from time to time during the term of the Franchise. Any unauthorized use of
the Marks by you will constitute a breach of this Agreement and may
constitute an infringement of our rights in and to the Marks. You
acknowledge and agree that all of your usage of the Marks and any goodwill
established by your use of the Marks will inure to our exclusive benefit, and
that this Agreement does not confer any goodwill or other interests in the
Marks upon you (other than the right to operate a Friendly's Restaurant in
compliance with this Agreement). All provisions of this Agreement applicable
to the Marks will apply to any other trademarks, service marks and commercial
symbols we later develop, authorize and license you to use.
B. Limitations on Franchisee's Use of Marks
You agree to use the Marks as the sole trade identification of the
Restaurant. You must also identify yourself as the independent owner of the
Restaurant in the manner we reasonably prescribe. You must not use any Mark
as part of any corporate or trade name or with any prefix, suffix or other
modifying words, terms, designs or symbols (other than logos and additional
trade and service marks we license to you under this Agreement), or in any
modified form, nor may you use any Mark in connection with the performance or
sale of any unauthorized services or products or in any other manner we have
not expressly authorized in writing. You must prominently display the Marks
in the manner we reasonably prescribe at the Restaurant, on menus and in
connection with advertising and marketing materials. You must not employ any
of the Marks in signing contracts, applications for licenses or permits, or
in any manner that may imply our responsibility for,
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or result in our liability for, any of your indebtedness or obligations, nor
may you use the Marks in any way not authorized herein. You further agree to
give such notices of trade and service mark registrations as we specify, and
you must obtain such fictitious or assumed name registrations as may be
required under applicable law.
C. Notification or Infringements and Claims
You agree to immediately notify us of any apparent infringement of or
challenge to your use of any Mark, or claim by any person of any rights in
any mark. You agree not to communicate with any person other than us, your
counsel and our counsel in connection with any such infringement, challenge
or claim. We will have sole discretion to take such action as we deem
appropriate in connection with any infringement, challenge or claim, and the
right to exclusively control any settlement, litigation or U.S. Patent and
Trademark Office or other proceeding arising out of the alleged infringement,
challenge or claim or otherwise relating to any Mark. You agree to execute
any and all instruments and documents, render such assistance and do such
acts and things as may, in the opinion of our counsel, be necessary or
advisable to protect and maintain our interest in any litigation or other
proceeding or to otherwise protect and maintain our interest in the Marks.
D. Discontinuance of Use of Marks
If it becomes advisable at any time in our reasonable judgment to modify
or discontinue use of any Mark and/or for the Restaurant to use one (1) or
more additional or substitute trade or service marks, you agree, at your
expense, to comply with our directions
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to modify or otherwise discontinue the use of such Mark, and/or use one (1) or
more additional or substitute trade or service marks, within a reasonable time
after we give you notice.
E. Indemnification of Franchisee
We agree to indemnify you against, and to reimburse you for, and to our
option, to defend you against, all damages for which you are held liable in
any proceeding arising out of your use of the marks "Friendly's" and
"Friendly's Restaurant", pursuant to and in compliance with this Agreement,
and for all costs you reasonably incur in the defense of any such claim
brought against you or in any such proceeding in which you are named as a
party, including reasonable attorney's fees, provided that you have timely
notified us of such claim or proceeding and you have otherwise substantially
complied with this Agreement. We have the right to approve any counsel
employed by you in the defense of any such claim, and in the event we elect
to defend any such claim, the fees and expenses of any separate counsel
employed by you shall not be reimbursable.
5. RELATIONSHIP OF PARTIES/INDEMNIFICATION
A. Independent Contractors
It is understood and agreed that this Agreement does not create a
fiduciary relationship between you and us, that we and you are and shall be
independent contractors, and that nothing in this Agreement is intended to
make either you or us a general or special agent, legal representative,
joint venturer, partner or employee of the other for any purpose
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or to grant either you or us the right to direct or supervise the daily
affairs of the other. You agree to identify yourself conspicuously in all
dealings with customers, suppliers, public officials, Restaurant personnel
and others as the owner of the Restaurant under a franchise granted by us.
You also agree to place such other notices of independent ownership on forms,
business cards, stationery, advertising and other materials as we may require
from time to time. You acknowledge that no agreement we make with any third
party is for your benefit. Neither we nor you will interfere with each
other's contractual relations.
B. No Liability for Acts of Other Party
You agree that you will not employ any of the Marks in signing any
contract, check, legal obligation, application for any license or permit, or
in a manner that may imply that we are responsible, or which may result in
liability to us for, any of your indebtedness or obligations. You further
agree not to use the Marks in any way not expressly authorized by this
Agreement. Except as expressly authorized in writing, neither we nor you may
make any express or implied agreements, warranties, guarantees or
representations, or incur any debt in the name of or on behalf of the other,
or represent that our relationship is other than franchisor and franchisee,
and neither we nor you will be obligated by or have any liability under any
agreement or representations made by the other that are not expressly
authorized in writing. We will not be obligated for any damages to any person
or property directly or indirectly arising out of the operation of the
Restaurant or your business.
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C. Taxes
You agree that except for taxes which we are required to collect from you
in connection with items you purchase from us, we will have no liability for
any sales, use, service, occupation, excise, gross receipts, income, property
or other taxes, whether levied upon you, the Restaurant, your property, use
or the royalty fees which you pay to us, in connection with the sales made or
business conducted by you. Payment of all such taxes will be your
responsibility.
D. Indemnification
You agree, during and after the term of the Agreement, to indemnify,
defend and hold us, our affiliated entities, and their and our shareholders,
directors, partners, officers, employees, agents, representatives, successors
and assignees harmless against and reimburse the Indemnities for all claims,
obligations and damages descried in Section 5B, any and all claims arising
out of the use of the Marks in any manner not in accordance with this
Agreement and all losses, liabilities, claims, taxes, demands, damages,
causes of action, governmental inquiries and investigations, costs and
expenses, including reasonable attorneys' and accountants' fees,
consequently, directly and indirectly incurred, arising from, as a result of,
or in connection with the operation of the Restaurant or any of your actions,
errors, omissions, breaches or defaults under this Agreement or any acts or
omissions alleged or proven to be a result of your negligence or willful
misconduct. Except as provided above, Friendly's and you shall indemnify,
defend and hold each other harmless from laims, demands and causes of action
asserted against the indemnitee by any person for personal
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injury or death or for loss of or damage to property and resulting from the
indemnitor's active or passive negligence or willful misconduct. Where such
injury, death, loss or damage is the result of joint active or passive
negligence or willful misconduct, the duty of indemnification shall be in
proportion to the allocable share of the joint active or passive negligence
or willful misconduct. For purposes of this indemnification, "claims" shall
mean and include all obligations, actual and consequential damages, expenses,
losses, costs and other liabilities reasonably incurred in the defense of any
claim against the Indemnities, including without limitation reasonable
accountants', attorneys' and expert witness fees, costs of investigation and
proof of facts, court costs, other litigation expenses and travel, lodging
and meal expenses incurred in litigation or preparation for litigation,
whether or not litigation is filed. If the indemnities reasonably conclude
that their interests are not being adequately represented by your counsel,
the indemnities will have the right to employ their own attorneys to defend
any claim against them in the manner they deem appropriate or desirable in
their sole discretion, and the indemnification hereunder shall apply to and
include the costs incurred in any such defense. The obligation to indemnify
the indemnities will continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this Agreement.
6. CONFIDENTIAL INFORMATION
We possess certain confidential and proprietary information and trade
secrets consisting of, but not limited to, the following categories of
information, methods,
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techniques, procedures and knowledge we have developed (collectively, the
"Confidential Information"):
(1)methods and procedures related to the development and operation of
Friendly's Restaurants, whether contained in the Operations Manual or otherwise;
(2)secret recipes of ice cream and other frozen desserts and related
toppings, menu analysis and methods of preparation of Products and services
offered in Friendly's Restaurants;
(3)methods, procedures and techniques for preparing, packaging, marketing,
selling and delivering Products and services offered in Friendly's Restaurants;
(4)knowledge of test programs, concepts and results relating to the
planning, development and testing of the System and Products and services
offered in Friendly's Restaurants;
(5)sources of purchase of food, beverages and other ingredients used by
Friendly's Restaurants;
(6) marketing programs and image; and
(7)methods, techniques, specifications, procedures, information, systems
and knowledge of and experience in the development, licensing and operation of
Friendly's Restaurants.
We will disclose the Confidential Information to you during training, in
the Operations Manual and training manuals, and in guidance and assistance
furnished to you during the term of this Agreement. You may also learn
additional Confidential Information and trade secrets of ours during the term
of this Agreement. You acknowledge and agree that you will not acquire any
interest in the Confidential Information, other than the right to utilize it
in the operation of the Restaurant, and that the use of the Confidential
Information in any other business, or the disclosure of the Confidential
Information to any
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other person or entity, would constitute an unfair method of competition with
us and other Friendly's Restaurant licensees.
We claim that the Confidential Information, which we have invested a
substantial amount of money and time in developing, is a valuable asset of
ours, includes trade secrets of ours, and will be disclosed to you solely on
the condition that you agree, and you do hereby agree, that you:
(1)will not use the Confidential Information in any other business or
capacity;
(2)will maintain the absolute secrecy and confidentiality of the
Confidential Information during and after the term of this Agreement (except
as authorized by this Agreement);
(3)will not make unauthorized copies of any portion of the Confidential
Information which is in written, audio, video or other reproducible form; and
(4)will adopt and implement all reasonable procedures we prescribe from
time to time to prevent unauthorized use or disclosure of the Confidential
Information, including requiring your Restaurant Manages and other employees
who have access to the Confidential Information to execute confidential
agreements in the form we approve or prescribe prior to or during their
employment. Furthermore, other than for consumption in the Restaurant or
approved carry-out or retail sales programs, you agree not to sell or provide
to any person or entity other than us or our designee, for use, testing or
any other purpose, any mixes or formulations for preparation of Products you
purchase from us or our designees.
Notwithstanding anything to the contrary contained in this Agreement, the
restrictions on your disclosure and use of Confidential Information will not
apply to the following: (i)
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information, processes or techniques which are or become generally known in
the restaurant industry, other than through disclosure (whether deliberate or
inadvertent) by you; and (ii) disclosure of Confidential Information in
judicial or administrative proceedings to the extent that you are legally
compelled to disclose such information, provided that you have used your best
reasonable efforts, and have afforded us the opportunity, to obtain an
appropriate protective order or other assurance satisfactory to us of
confidential treatment of the information required to be so disclosed.
You will fully and promptly disclose to us, all ideas, concepts,
formulas, recipes methods and techniques relating to the development and/or
operation of the Restaurant, conceived or developed by you and/or your
employees during the term of this Agreement. You acknowledge that such
ideas, concepts, formulas, recipes, methods and techniques shall be our sole
property, and you shall not be entitled to any compensation whatsoever for
the same.
7. FEES
A. Initial Franchise Fee
The initial franchise fee for your first franchise and second franchise
is thirty thousand dollars ($30,000.00) each and the franchise fee for any
additional franchises is twenty-five thousand dollars ($25,000.00)
(collectively referred to as the "Fee"). The Fee is paid as follows:
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Five thousand dollars ($5,000.00) upon submissions of an application for a
franchise. If the application is approved, that portion of the Fee becomes
non-refundable. If the application is withdrawn prior to a decision by
Friendly's, or if the application is denied, the Fee (less Friendly's costs
and expenses in processing the application) is refunded without interest.
Twenty-five thousand dollars ($25,000.00) (or twenty thousand dollars
($20,000.00) in the case of the third or additional franchises) upon your
execution of a Commitment Agreement ("Commitment Agreement").
B. Royalty Fee
You agree to pay to us a royalty fee equal to four percent (4%) of the
Gross Sales (as defined in Subsection C of this Section) of the Restaurant.
The royalty fee shall be payable by electronic funds transfer not later than
the 21st day after the end of each calendar month, based on Gross Sales for
the prior month. Upon the installation of an upgraded processing system by
Franchisee, we may require that the royalty fee be payable by electronic
funds transfer not later than the 14th day after the end of each calendar
month. In any event, no default may be declared for late payment of the
royalty or marketing fees unless and until seven (7) days have elapsed from
the date the payment was due.
C. Definition of Gross Sales
As used in this Agreement, the term "Gross Sales" shall mean gross sales
of all food, beverage, other menu items, merchandise, and goods and other
services sold or performed by or for you or the Restaurant, in, upon, or from
the Premises, or through or by means of the business conducted at the
Restaurant or the Premises, whether for cash or credit. Sales and service
taxes collected from customers and paid to the appropriate taxing authority,
all
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management or employee meals, and sale of cigars, cigarettes and newspapers
as well as income from pay telephones shall not be included in Gross Sales.
The discounted portion of menu prices whether by way of coupons, promotions
or otherwise shall not be included in Gross Sales.
D. Interest on Late Payments
All royalty fees, Marketing Fund contributions (as described in Section 9
of this Agreement), amounts due for your purchases from us or our
subsidiaries or affiliates, and other amounts which you owe to us or our
subsidiaries or affiliates will bear interest beginning on the date due at
the highest applicable legal rate for open account business credit, not to
exceed one and one-half percent (1.5%) per month. This Section 7D does not
constitute an agreement on our part to accept payments from you after the
payments are due or our commitment to extend credit to, or otherwise finance
your operation of, the Restaurant. Further, you acknowledge that your
failure to pay all amounts when due may constitute grounds for termination of
this Agreement, as provided in Section 14 of this Agreement, notwithstanding
the provisions of this Section 7D.
E. Application of Payments
Notwithstanding your designation, we will have sole discretion to apply
any of your payments to any of your past due indebtedness for initial or
royalty fees, Marketing Fund contributions, purchases from us or our
subsidiaries or affiliates, interest or any other outstanding indebtedness in
such order and amounts as we may elect. The acceptance of
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a partial or late payment will not constitute a waiver of any of our rights
or remedies contained in this Agreement.
8. RESTAURANT OPERATING STANDARDS
A. Condition, Appearance and Operation
Of the Restaurant
You agree that :
(1)neither the Restaurant nor the Premises will be used for any purpose
other than the operation of a Friendly's Restaurant in compliance with this
Agreement, unless and until restaurant operations are appropriately
discontinued on the site (pursuant to this Agreement or the terms of a
Development Agreement);
(2)you will maintain the condition and appearance of the Restaurant, its
equipment, furniture, furnishings, signs and the Premises in accordance with
our specifications and standards as in effect from time to time and
consistent with the image of a Friendly's Restaurant as an efficiently
operated business offering high quality food service and observing the
highest standards of cleanliness and sanitation; and will, upon our
reasonable request, add or alter such equipment in the Restaurant so as to
efficiently and hygienically prepare and serve any new menu items approved
for sale throughout the Friendly's Restaurant system;
(3)you will perform all periodic maintenance with respect to the decor,
equipment, furniture, furnishings and signs of the Restaurant and thePremises
that is required from time to time to maintain such condition, appearance and
efficient operation, including, without limitation:
(a)thorough cleaning, repainting and redecorating of the interior
and exterior of the Premises at reasonable intervals;
(b) interior and exterior repair of the Premises; and
(c)repair or replacement of damaged, worn out or obsolete equipment,
furniture, furnishings and signs.
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(4)you will not make any material alterations to the Premises, or to the
appearance of the Restaurant as originally developed, except as required by
applicable real estate codes, local authorities or landlords, without our
prior written approval, which approval shall not be unreasonably withheld;
(5)we have the right to require that you remodel, redecorate, re-equip,
modernize and refurnish in a non-structural manner the Premises and the
Restaurant not more than once in any five (5) year period and only after fifty
percent (50%) of the Company-operated restaurants in the Friendly's Restaurant
system have been so remodeled, redecorated, re-equipped or modernized, to
reflect any changes in Friendly's Restaurants that we prescribe as our
then-current standards and specifications. You understand that such remodeling,
redecorating, re-equipping, modernization or refurnishing may require a
substantial investment on your part and that we cannot make any guarantee of any
particular return on that investment. We have the right to approve the layouts,
designs, and new equipment, furniture and furnishings you use in any remodeling,
redecorating and re-equipping, such approval not to be unreasonably withheld;
and
(6)you will place or display at the Premises (interior and exterior) only
such signs, emblems, lettering, logos and display and advertising materials that
we from time to time approve, such approval not to be unreasonably withheld.
B. Restaurant Menu
You agree that the Restaurant will offer for sale all food and beverage
products and services that we from time to time require. You agree that the
Restaurant will sell only products that we have approved. You agree that the
Restaurant will not sell any Products to any person for resale to any third
person. The Restaurant must not offer for sale or sell at the Premises or any
other location any unapproved products, or use the Premises for any purpose
other than the operation of the Restaurant.
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We have the right to approve the Restaurant's offering of Products or
services on a test basis, which approval we may condition in any reasonable
manner. We will have the right to stop the test at any time after its
commencement, upon reasonable notice.
C. Approved Products, Distributors and Suppliers
The reputation and goodwill of Friendly's Restaurants is based upon, and
can be maintained only by, the sale of distinctive, high quality food products
and beverages and the presentation, packaging, service and delivery of such
products in an efficient and appealing manner. We have developed various
proprietary products which are prepared by or for us according to our
proprietary and secret recipes and formulas. We have developed standards and
specifications for food products, ingredients, seasonings, mixes, beverages,
materials and supplies incorporated in or used in the preparation, cooking,
serving, packaging and delivery of prepared food products authorized for sale at
Friendly's Restaurants. We have and will periodically approve suppliers and
distributors of the foregoing products that meet our standards and requirements,
including, without limitation, standards and requirements relating to product
quality, prices, consistency, reliability, financial capability, labor relations
and customer relations. You agree that for use in the Restaurant you will:
(1)purchase our proprietary ice cream, frozen yogurt and other frozen
desserts and related toppings, muffin and other mixes and batters, and other
products developed by us from time to time pursuant to secret recipes or
formulas, only from us or a third party licensed by us to prepare and sell such
products; and
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(2)purchase all other food products, ingredients, seasonings, mixes,
beverages, materials and supplies used in the preparation of Products; menus,
paper, glassware, china and plastic products; packaging or other materials,
utensils and uniforms that meet our standards and specifications from suppliers
we have approved.
You must at all times maintain an inventory of approved food products,
beverages, ingredients and other products sufficient in quantity and variety to
realize the full potential of the Restaurant.
We may approve a single distributor or other supplier for any Product and
may approve a distributor or other supplier only as to certain of the Products.
We may concentrate purchases with one (1) or more distributors or suppliers to
obtain lower prices and/or the best advertising support and/or services for any
group of Friendly's Restaurants we license and/or operate. Approval of a
distributor or other supplier may be conditioned on requirements relating to the
frequency and delivery, standards of service, including prompt attention to
complaints or other criteria, and concentration of purchases, as set forth
above, and may be temporary, pending our further evaluation of such distributor
or other supplier.
Notwithstanding the above, you have the right to request our approval of
alternative suppliers or distributors and we will consider alternative suppliers
and distributors. Our evaluation of prospective suppliers and/or distributors
will be conditioned upon payment of our reasonable evaluation costs of their
products and/or services. You agree to notify us and submit to us all
information, specifications and samples that we request if you propose
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to purchase any food products, mixes, seasonings, beverages, menus, paper,
glassware, china or plastic products, packaging, uniforms or other materials or
utensils from a distributor or other supplier who has not been previously
approved by us. We will notify you within a reasonable time whether you are
authorized to purchase such products from such distributor or other supplier.
We may, from time to time, conduct market research and testing to determine
consumer trends and the marketability of new food products and services. You
agree to cooperate and assist us by participating in our consumer surveys and
market research programs, test marketing new food products and services in the
Restaurant and providing us with timely reports and other relevant information
regarding such customer surveys and market research.
You may from time to time conduct your own market research and testing to
determine consumer trends and the marketability in your Trade Area of new food
products or services. Prior to undertaking such market research or testing, you
agree to provide us with written notice no less than thirty (30) days prior to
the commencement of such research or testing for our approval of such research
or testing, which approval shall not be unreasonably withheld.
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D. Specifications, Standards and Procedures
You acknowledge that the operation of the Restaurant in compliance with our
high standards is important to us and all other Friendly's Restaurant licensees.
You agree to cooperate with us by maintaining our high standards in the
operation of the Restaurant. You further agree to comply with all mandatory
specifications, standards and operating procedures relating to appearance,
function, cleanliness, sanitation, safety, business hours, delivery services,
new Products, purchasing or leasing new or different equipment for preparation
and sale of new Products, compliance with the decor, format and image, including
equipment, furniture, fixtures and signage, of a Friendly's Restaurant.
Mandatory specifications, standards and operating procedures we prescribe
from time to time in the Operations Manual, or otherwise communicate to you in
writing, will constitute provisions of this Agreement as if fully set forth in
this Agreement unless such provisions conflict with applicable laws or local
ordinances. All references to this Agreement include all such mandatory
specifications, standards and operating procedures. You agree that the
Restaurant will conduct business in the ordinary course seven days a week
(excluding holidays we specify if any) and 17 hours a day, except as we may
otherwise authorize in writing. You acknowledge that approved restaurant hours
may vary from one location to another depending on conditions in the market
where the restaurant is located.
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E. Compliance with Laws and Good Business Practices
You agree to secure and maintain in force in your name all required
licenses, permits and certificates relating to the operation of the Restaurant.
You further agree to operate the Restaurant in full compliance with all
applicable laws, ordinances and regulations, including, without limitation, all
government regulations relating to health and sanitation, workers' compensation
insurance, unemployment insurance and withholding and payment of federal, state
and local income taxes, social security taxes and sales taxes. All of your
advertising must conform to applicable legal standards, be in good taste in our
reasonable judgment and conform to the highest standards of ethical advertising.
You agree that in all dealings with us, your customers, suppliers and public
officials, you will adhere to the highest standards of honesty, integrity, fair
dealing and ethical conduct. You agree to refrain from any business or
advertising practice which may be injurious to our business or to the goodwill
associated with the Marks and other Friendly's Restaurants.
You agree to notify us, by telephone within seventy-two (72) hours followed
within five (5) days by written notification, including copies of any pleadings
or process received of: (i) the commencement of any action, suit or proceeding
relative to the Restaurant; (ii) the issuance of any order, writ, injunction,
award or decree of any court, agency or other governmental instrumentality which
may adversely affect the operation or financial condition of the Restaurant; and
(iii) any notice of violation of any law, ordinance or regulation relating to
health or safety. You agree that you will not accept service of process for us
and on our behalf.
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F. Management and Personnel of the Restaurant
You agree that at all times you will (i) employ on terms reasonably
satisfactory to us a General Manager who shall have principal operational
responsibility for the Restaurant and who shall have such qualifications
and experience as we shall reasonably require and who shall have completed our
training program and (ii) employ on a full-time basis a Manager and an Assistant
Manager, each of whom has completed our training program (collectively, the
General Manager and Manager and Assistant Manager are referred to as "Restaurant
Managers"). The Restaurant shall during all business hours be under the direct
on-premises supervision of a Restaurant Manager. You agree to hire all
employees to maintain a neat and clean appearance and to conform to the
standards of dress and/or uniforms that we specify from time to time for
Friendly's Restaurants. You shall not recruit or hire any of our employees or
any employees of any Friendly's Restaurant operated by us or by a Friendly
Restaurant licensee without obtaining our prior written permission or the prior
written permission of the other licensee unless six months have expired since
such employee's termination of employment with us or the licensee.
G. Insurance
During the term of the Franchise, you agree to comply with all insurance
requirements related to the Restaurant's lease or mortgage and to maintain in
force at all times, under policies of insurance issued by carriers we have
approved:
(1)employer's liability and workers' compensation insurance as prescribed
by applicable law;
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(2)comprehensive general liability insurance (with products, completed
operations and contractual liability and independent contractors and escalators
coverage) and comprehensive motor vehicle liability insurance (for owned and
non-owned vehicles) against claims for bodily and personal injury, death and
property damage caused by or occurring in conjunction with the operation of the
Restaurant (or otherwise in conjunction with your conduct of business pursuant
to this Franchise) under one (1) or more policies of insurance, each on an
occurrence basis, with single-limit coverage for personal and bodily injury,
death and property damage of at least one million dollars ($1,000,000.00) (or
such other amount as we may reasonably require), with no less than a five
million dollar ($5,000,000.00) umbrella liability policy in force;
(3)All-risk building and contents insurance including flood and earthquake,
vandalism and theft insurance for the replacement value of the Restaurant and
its contents;
(4)business interruption insurance for a period adequate to reestablish
normal business operations; and
(5)builders' risk insurance on a completed value non-reporting basis during
the period of any remodeling of the Restaurant.
We may periodically increase the amounts of insurance you will be required
to maintain, and we may require different or additional kinds of insurance at
any time, including excess liability insurance, to reflect inflation,
identification of new risks, changes in law or standards of liability, higher
damage awards, or other relevant changes in circumstances. Each insurance
policy must name us as an additional insured and must provide for thirty (30)
days' prior written notice to us of any material modification, cancellation,
termination or expiration of such policy.
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Prior to the expiration of the term of each insurance policy, you agree to
furnish us with a certificate of insurance or with a certified copy of each
renewal or replacement insurance policy you will maintain for the immediately
following term and evidence of the payment of the premium for the insurance
policy. If you fail or refuse to maintain required insurance coverage, or to
furnish satisfactory evidence of required insurance coverage and payment of the
premiums we, at our option and in addition to our other rights and remedies
under this Agreement, may obtain the required insurance coverage on your behalf.
You must cooperate fully with us in our effort to obtain such insurance
policies, promptly execute all forms or instruments required to obtain or
maintain such insurance and pay to us, on demand any costs and premiums we
incur.
Your obligations to maintain insurance coverage as described above will not
be affected in any manner by reason of any separate insurance we maintain, nor
will the maintenance of insurance relieve you of any obligation under Section 5
of this Agreement.
9. MARKETING
A. By Company
You agree that because of the value of advertising to the goodwill and
public image of Friendly's Restaurants, we may maintain and administer a
marketing fund (the "Marketing Fund") for the marketing program that we
deem necessary or appropriate, in our sole discretion. You agree to contribute
to the Marketing Fund three percent (3%) of Gross Sales
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of the Restaurant calculated in the same manner as, and payable monthly together
with, the royalty fees due under this Agreement.
You agree that we will direct all marketing programs financed by the
Marketing Fund, and we will have sole discretion over the creative concepts,
materials and endorsements used in the programs, and the geographic, market and
media placement and allocation of the programs. You agree that the Marketing
Fund may be used to pay the costs of preparing and producing video, audio and
written advertising materials; administering multi-regional advertising
programs, including, without limitation, purchasing direct mail and other media
advertising, and employing advertising agencies to assist therewith; supporting
public relations, market research, and menu development; and other advertising
and marketing activities that we, in our sole discretion, deem appropriate.
The Marketing Fund will be accounted for separately from our other funds
and will not be used to defray any of our general operating expenses, except for
such reasonable salaries, administrative costs and overhead as we may incur in
activities reasonably related to the administration of the Marketing Fund and
its marketing programs including, without limitations, conducting market
research and menu development, preparing advertising and marketing materials,
and collecting and accounting for contributions to the Marketing Fund
(including, but not limited to, attorneys' and accountants' fees and other
expenses of litigation). You agree that we may spend in any fiscal year an
amount greater or less than the aggregate contribution of all Friendly's
Restaurants to the Marketing Fund in that year
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and the Marketing Fund may borrow from us or from other lenders to cover
deficits of the Marketing Fund or cause the Marketing Fund to invest any surplus
for future use by the Marketing Fund. You authorize us to collect for the
Marketing Fund any advertising or promotional monies or credits offered by any
supplier based upon your purchases. All interest earned on monies contributed
to the Marketing Fund will be used to pay the expenses of the Marketing Fund
incurred in advertising and promotion, including the reasonable administrative
expenses related thereto before other assets of the Marketing Fund are expended.
We will prepare an annual statement of monies collected and costs incurred by
the Marketing Fund within one hundred twenty (120) days after the end of our
fiscal year and will furnish this statement to you upon your written request.
We have the right to cause the Marketing Fund to be incorporated or operated
through a separate entity at such time as we deem appropriate, and if we do so,
that entity will have all of our rights and duties pursuant to this Section 9A.
You understand and acknowledge that the Marketing Fund is intended to
enhance recognition of the Marks and patronage of Friendly's Restaurants and
Friendly's proprietary branded products. Although we will endeavor to utilize
the Marketing Fund to develop advertising and marketing materials and programs,
and to place advertising that will benefit all Friendly's Restaurants, we
undertake no obligation to ensure that expenditures by the Marketing Fund in or
affecting any geographic area are proportionate or equivalent to the
contributions to the Marketing Fund by Friendly's Restaurants operating in that
geographic area or that any Friendly's Restaurant will benefit directly or in
proportion to the
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contributions to the Marketing Fund from the development of advertising and
marketing materials or the placement of advertising. Except as expressly
provided in this Section 9A, we assume no direct or indirect liability or
obligation to you with respect to our maintenance, direction or administration
of the Marketing Fund. You acknowledge that we have the right, and you hereby
authorize us, to settle or otherwise compromise all disputes with regard to the
Marketing Fund.
B. By Franchisee
Until such time as a Cooperative Marketing Fund is established and funded,
you agree we may expend the marketing contribution less administrative expenses
not to exceed one-half percent (1/2%) required in Section 9A in your DMA in
accordance with marketing plans reviewed and approved by Friendly's. Samples of
any advertising and promotional material we have not prepared or previously
approved must be submitted to us for approval prior to your use. You may not
use any advertising or promotional materials that we have not approved or which
we have disapproved. You agree to cooperate in the development of a Cooperative
Marketing Fund and to coordinate any local or DMA advertising with Friendly's.
Local advertising programs approved by Friendly's will be paid for or credited
against the three percent (3%) marketing expenditure required hereunder at the
option of Friendly's.
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C. By Cooperative
Unless your franchise is granted pursuant to a Development Agreement for an
exclusive territory covering an entire DMA, Friendly's reserves the right to
form and you agree to join a cooperative marketing fund organized on a regional
basis. Each franchisee within the affected region may contribute up to two
percent (2%) of its Gross Sales to the cooperative marketing fund in addition to
the marketing and advertising expense obligations under Section 9A and 9B of
this Agreement. Each company operated restaurant within the region of the
cooperative marketing fund shall likewise be required to contribute to the
cooperative fund on a per restaurant basis equal to the franchisee's percentage
of the Gross Sales contribution. Each franchised and company operated
restaurant contributing to the cooperative shall have one (1) vote per
restaurant in determining how the cooperative will apply the funds of such
cooperative.
10. REPORTS, FINANCIAL STATEMENTS AND FINANCIAL CONDITION
Unless otherwise agreed to by us in writing, you agree to adopt the
Company's financial and operational reporting chart of accounts format, as set
forth in the Operations Manual or otherwise furnished to you, which may be
amended from time to time. You also agree to maintain accurate books of
account, governmental reports, register tapes, guest checks, daily reports and
complete copies of all federal and state income tax returns, property and sales
and use tax returns. Such records, reports and returns must be preserved
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for such periods of time as are reasonably specified by us from time to time in
the Operations Manual or otherwise but not less than the minimum time prescribed
by applicable law.
With respect to the operation and financial condition of the Restaurant,
you agree to furnish us, in the form we from time to time prescribe:
(1)by the tenth (10th) day of each month for the preceding calendar month,
a report of the Gross Sales of the Restaurant, other revenues generated at the
Restaurant and other information which we may reasonably request that may be
useful in connection with our marketing and other legitimate functions. This
report must also include a statement computing amounts then due for royalty fees
and Marketing Fund contributions and be certified by you or by your chief
executive or financial officer;
(2)by the twentieth (20th) day of each month for the preceding calendar
month, a profit and loss statement for the Restaurant and be certified by you or
by your chief executive or financial officer;
(3)upon our request, such other data, information and supporting records
for such periods as we from time to time reasonably require; and
(4)within one hundred twenty (120) days after the end of your fiscal year,
a fiscal year-end balance sheet, income statement and statement of changes in
financial position (cash flow) of the Restaurant for such fiscal year,
reflecting all year-end adjustments (audited if available) and a statement of
annual Gross Sales certifying that your Gross Sales for the immediately
preceding fiscal year have been calculated and reported in compliance with the
terms of this Agreement, each of which shall be certified by you or by your
chief executive or financial officer.
If at any time you are delinquent in the payment of any amount owed to us
or our affiliates, you agree: (1) upon our request, to furnish us income
statements and balance sheets for such periods and as of such dates and all in
such detail as we may request, for
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you and each entity affiliated with you, whether or not such entity conducts any
business with the Restaurant, (2) that we may directly contact any lender,
lessor, supplier or vendor for the purpose of obtaining information relating to
the Restaurant and any lease or financial arrangements and you hereby authorize
such persons to disclose all such information to us and, if you are an entity,
you agree that we may contact any of your officers, directors, shareholders or
partners for any purpose reasonably related to your undertakings contained in
this Agreement and (3) to furnish, at our request, books of account,
governmental reports, register tapes, guest checks, daily reports and complete
copies of federal and state income tax returns, property and sales and use tax
returns.
11. INSPECTIONS AND AUDITS
A. Company's Rights to Inspect the Restaurant
To determine whether you and the Restaurant are complying with this
Agreement, and with specifications, standards and operating procedures we
prescribe for the operation of Friendly's Restaurants, we or our agents will
have the right, at any reasonable time, to:
(1)inspect the Restaurant and the Premises;
(2)observe and video tape the operations of the Restaurant for such
consecutive or intermittent periods as we deem necessary;
(3)remove, in reasonable quantities, samples of any food and beverage
product, material or other products for testing and analysis;
(4)interview personnel of the Restaurant;
(5) interview customers of the Restaurant; and
(6)inspect and copy any books, records and documents relating to the
operation of the Restaurant.
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You agree to fully cooperate with us in connection with any such
inspections, observations, video taping, product removal and interviews. You
agree to present to your customers any evaluation forms we periodically
prescribe and to participate and/or request your customers to participate in any
surveys performed by us or on our behalf.
B. Company's Right to Audit
We have the right at any time during the business hours, and without prior
notice to you, to inspect and audit, or cause to be inspected and audited, the
business records of the Restaurant and the books and records and tax returns of
any entity which holds the Franchise granted under this Agreement. You must
fully cooperate with our representatives and any independent accountants that we
hire to conduct any such inspection or audit. If any such inspection or audit
discloses an understatement of the Gross Sales of the Restaurant, you agree to
pay to us, within fifteen (15) days after receipt of the inspection or audit
report, the royalty fees and Marketing Fund contributions due on the amount of
such understatement, plus interest (at the rate and on the terms provided in
Section 7D of this Agreement) from the date originally due until the date of
payment. Further, in the event such inspection or audit is made necessary
due to your failure to furnish us with reports, supporting records, other
information or financial statements, as required by this Agreement, or to
furnish such reports, records, information or financial statements on a timely
basis, or if an understatement of Gross Sales for the period of any audit is
determined by any such audit or inspection to be greater that two percent
(2%), you agree to reimburse us promptly upon notice for the cost of the
inspection or audit, including, without limitation, the charges
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of attorneys and independent accountants, and the reasonable travel, lodging and
meal expenses and applicable per diem charges for our employees. The forgoing
rights will be in addition to all other remedies and rights that we may have
under this Agreement or under applicable law.
12. TRANSFER OF FRANCHISE
A. By Company
This Agreement is fully transferable by us and will inure to the benefit of
any transferee or other legal successor to our interests in this Agreement.
B. Franchisee May Not Transfer Without Approval of Company
The rights and duties created by this Agreement are personal to you. We
have granted the Franchise to you in reliance upon the individual and collective
character, skill, aptitude, attitude, and business ability of the persons who
will be engaged in the ownership and management of the Restaurant, your
financial capacity and the representations and warranties made to us in the
application and the Commitment Agreement, if applicable, and the
representations, warranties and covenants contained in this Agreement.
Accordingly, neither this Agreement nor the Franchise (or any interest therein),
nor any part or all of the ownership of Franchisee (if an entity) or the
Restaurant (or any interest therein), may be transferred, directly or
indirectly, except by operation of legal merger with your corporate parent or
other affiliate (subject to the successor merged entity having a net worth equal
to the net worth of the Franchisee and corporate parent on the effective date
hereof) without
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our prior written approval, and any attempted transfer without our prior written
approval will constitute a breach of this Agreement and convey no rights to or
interests in this Agreement or the Franchise. As used in this Agreement the
term "transfer" means and includes the voluntary, involuntary, direct or
indirect assignment, sale, gift, pledge, grant of security interest or other
transfer by you of any interest in: (i) this Agreement or any related agreement
between you and us; (ii) the Franchise; (iii) the Franchisee; (iv) the
Restaurant or (v) the Premises. This Section 12B shall not apply to any
interest in the Restaurant or the Premises conditionally transferred to any bona
fide lender as collateral security for any loans to you or to any financing or
refinancing structured as a sale-leaseback, provided that upon the sale of the
Restaurant, it is simultaneously leased back pursuant to a Lease Agreement which
is subject to our rights under this Agreement.
C. Right of First Refusal
If at any time during the term of this Agreement and for a period of one
(1) year thereafter, any interest in this Agreement or the Franchise is proposed
to be sold, the seller shall obtain a bona fide, executed, written offer from a
responsible and fully disclosed purchaser and shall submit an exact copy of such
offer to us along with any other information that we may reasonably request to
evaluate the offer and the identity of the proposed purchaser shall be disclosed
to us. We shall have the right, exercisable by written notice delivered to you
within thirty (30) days after the date of delivery of an exact copy of such
offer and all requested information to us, to purchase such interest for the
price and on the terms and conditions contained in such offer. Regardless of
the terms of the offer,
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we may, in our discretion, structure the transaction as an asset purchase,
rather than a stock purchase and to substitute cash for securities or other
property as consideration. If less than the entire interest in this Agreement
or the Franchise is proposed to be sold, we shall have the right to purchase the
entire interest for a price equal to the proposed price plus a pro-rata
increase based on the value of the interest to be purchased. Our credit shall
be deemed equal to the credit of any proposed purchaser and we shall have not
less than ninety (90) days to prepare for closing. We shall be entitled to all
representations and warranties given by the seller to the proposed buyer. We
shall not be obligated to pay any finder's or broker's fee or commission.
If we do not exercise our right of first refusal, the sale or other
transfer may be completed pursuant to and on the terms of such offer, subject to
our approval of the transfer as otherwise provided in this Agreement; provided,
however, that if the proposed sale or other transfer is not completed within one
hundred eighty (180) days after delivery of such offer to us, or if there is
any change in the terms of the proposed transaction, we shall have an additional
right of first refusal for an additional thirty (30) days.
Our right of first refusal shall not apply to the sale or transfer of an
interest in this Agreement or the Franchise, to a member of Franchisee's
immediate family or, if Franchisee is an entity, between or among the owners of
Franchisee or their affiliates provided that such transfer is otherwise
permissible under this Agreement.
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D. Conditions for Approval of Transfer
The proposed transferee and its owners (if the proposed transferee is an
entity) must meet our then applicable standards for Friendly's Restaurant
licensees. In addition, if the transfer is one of a series of transfers which
in the aggregate constitute the transfer of the Franchise, all of the following
conditions must also be met prior to, or concurrently with, the effective date
of the transfer:
(1)the transferee must have sufficient business experience, aptitude and
financial resources to operate the Restaurant;
(2)prior to the effective date of the transfer, you or the transferee must
pay all royalty fees, Marketing Fund contributions and all other amounts owed to
us or our subsidiaries and affiliates, which are then due and unpaid, and cure
all defaults under this Agreement or any other agreement between you and us to
our satisfaction (or make provision for their cure satisfactory to us);
(3)the transferee and its management personnel must have completed our
training program to our satisfaction;
(4)the transferee must apply for a new license agreement in accordance with
our then current standards for a term equal to the remaining term of this
Agreement or for a full term. If the application is approved, we and the
transferee will enter into a commitment agreement to govern the operation of the
Restaurant until commencement of the new license agreement, provided that the
transferee upgrades and modernizes the Restaurant to our then-current standards
and meets the other requirements of the commitment agreement;
(5)you or the transferee must pay us the then current transfer fee to
defray expenses incurred by us in connection with the transfer;
(6)you, and if you are an entity (and have signed the Entity Addendum (the
"Entity Addendum")), your owners, officers and directors must execute a general
release, in a form satisfactory to us, of any and all existing claims against
us, our subsidiaries and affiliates, and our and their officers, directors,
partners, employees and agents;
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(7)we must approve the material terms and conditions of such transfer,
including, without limitation, our determination that the price and terms of
payment are not so burdensome as to adversely affect the subsequent operation or
financial results of the Restaurant;
(8)you and any guarantors must execute a non-competition covenant in favor
of us and the transferee, containing the terms contained in Section 16A;
(9)the lessor and lender, if any, of the Premises must give you its or
their advance written consent to the transfer of the Premises, if required, and
you must provide us with a copy of such consent; and
(10)you and any guarantors must guarantee the transferee's financial
obligations to us in its commitment agreement and license agreement for two
years from the date of transfer.
If the proposed transfer is to or among owners of you, subsection (5) of
the above requirements shall not apply.
E. Transfer to a Wholly-owned Entity
If you are in full compliance with this Agreement, we will not unreasonably
withhold our approval of a transfer to an entity which conducts no business
other than the Restaurant (or other Friendly's Restaurants), which is actually
managed by you and in which you maintain management control and own and control
one hundred percent (100%) of the equity and voting power of all issued and
outstanding securities, provided that you (i) guarantee, in accordance with our
then current form, the performance of such transferee's obligations under this
Agreement, and (ii) execute our current form of Entity Addendum. Transfers of
interests in such entity will be subject to the other provisions of this Section
12.
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F. Effect of Consent to Transfer
Our consent to a transfer of this Agreement, the Franchise, the Restaurant
or an interest in you will not constitute a waiver of any claims we may have
against you (or your owners if you are an entity), nor shall it be deemed a
waiver of our right to demand exact compliance with any of the terms or
conditions of this Agreement by the transferee.
13. CONDEMNATION AND CASUALTY
You must give us immediate notice in writing of any proposed taking of the
Restaurant or the Premises by eminent domain. If we agree that the Restaurant
or the Premises (or substantial parts thereof) will be taken, we will give due
and prompt consideration to transferring the License to a nearby location which
you select within two (2) months of the taking. If we approve the location and
authorize the transfer, and if you open a new restaurant at such location in
accordance with our specifications within eighteen (18) months if the new
restaurant does not have a drive-thru, or if the new restaurant does have a
drive-thru, within two (2) years of the closing of the Restaurant, the new
restaurant will henceforth be deemed to be the Restaurant under this Agreement.
If a condemnation takes place and the new restaurant does not, for whatever
reason, become the Restaurant under this Agreement in strict accordance with
this Section 13 (or if it is reasonably evident that such will be the case), the
Franchise and this Agreement will terminate as provided for in Section 14.
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If the Restaurant is damaged by fire or other casualty, you will
expeditiously repair the damage. If the damage or repair requires closing the
Restaurant, you will immediately notify us, will repair or rebuild the
Restaurant in accordance with our standards, will commence reconstruction within
four (4) months after closing, and will reopen the Restaurant for continuous
business operations as soon as practicable but in no event later than twelve
(12) months after closing of the Restaurant, giving us ample advance written
notice of the date of reopening. If the Restaurant is not reopened in
accordance with this Section 13, the Franchise and this Agreement will terminate
as prescribed in Section 14.
Nothing in this Section 13 will extend the term of this Agreement but you
will not be required to pay us any royalty fee or Marketing Fund contribution
payments for periods during which the Restaurant is closed by reason of
condemnation or casualty.
14. TERMINATION OF THE FRANCHISE
A. Unless cured to our satisfaction, this Agreement shall terminate 30
days from the date notice is given to you in accordance with Section 19, if you
or any guarantor:
(1)fail to report accurately the Gross Sales of the Restaurant or fail to
make payments of any amounts due to us for royalty fees, Marketing Fund
contributions, or any other amounts due to us, our affiliates or our
subsidiaries;
(2)fail to comply with any other provision of this Agreement or any
mandatory specification, standard or operating procedure we prescribe, unless
such failure cannot reasonably be corrected within such thirty (30) day period
and you undertake within ten (10) days after such written notice is delivered to
you, and continue, efforts to bring the
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Restaurant and the Premises into full compliance, and furnish proof acceptable
to us of such efforts and the date by which full compliance will be achieved;
(3)you or any person controlling you, controlled by you, or under common
control with you is in default of any other agreement with us (for purposes of
this clause control means the ownership by a person or entity, directly or
indirectly, of ten percent (10%) or more of another person or entity or the
power to affect the policies of another person or entity);
(4)in our good faith reasonable judgment, fail to use your reasonable
efforts employ on a full time basis qualified Restaurant Managers with
qualifications and experience acceptable to us.
(5)if you violate the Continuous Operation covenant set forth in Section
1B(3) of this Agreement, or there are three (3) or more breaches of any duration
during any twelve-month period.
B. Unless we have notified you in writing to the contrary after
discovering the relevant facts, this Agreement will terminate automatically and
immediately without further action by us or notice to you, if you:
(1)become insolvent or are unable to pay your or their debts as they mature
or make an assignment for the benefit of creditors or an admission of inability
to pay obligations as they become due or file a voluntary petition in bankruptcy
or any pleading seeking any reorganization, liquidation, dissolution or
composition or other settlement with creditors under any law, or admit or fail
to contest the material allegations of any such pleading filed against you, or
are adjudicated a bankrupt or insolvent or a receiver or other custodian is
appointed for a substantial part of your assets or the Restaurant or a final
judgment remains unsatisfied or of record for ninety (90) days or longer (unless
a supersedeas bond is filed), or if execution is levied against any substantial
part of your assets or a tax levy is made, or suit to foreclose any lien or
mortgage against you or the Restaurant is instituted and is not dismissed within
ninety (90) days, or if a substantial part of your real or personal property is
sold after levy of judgment thereupon by any sheriff, marshal or constable, or
the claims of your creditors are abated or subject to a moratorium under any
law;
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(2)except as provided in Section 13, discontinue operating the Restaurant
as a Friendly's Restaurant, or abandon, surrender or transfer control of the
Restaurant without our prior approval;
(3)have made any material misrepresentation or omission in the application
for the Franchise or in the Commitment Agreement or in this Agreement or in any
other material submitted to us on which we have relied in determining whether to
grant you the Franchise.
(4)are, or are discovered to have been, convicted of or plead no contest to
a felony, or other crime or offense that is likely to have a material adverse
effect on your reputation or the reputation of the Company, the System, or the
Restaurant;
(5)make or attempt to make an unauthorized transfer in violation of Section
12;
(6)make any unauthorized use or disclosure of any Confidential Information
or any portion of the Operations Manual;
(7)lose the right to possession of the Premises or a substantial part
thereof, whether or not due to your fault, except as otherwise provided in
Section 13 of this Agreement regarding condemnation and casualty;
(8)take action toward dissolving or liquidating the entity owning the
Franchise, or any such action is taken against you, without providing us advance
written notice or complying with Section 12 of this Agreement;
(9)deny our representatives the right to enter and inspect the Restaurant
or to examine or audit its books and records pursuant to Section 11B of this
Agreement;
(10)make any unauthorized use of the Marks or contest in any court or
proceeding our ownership of the Marks or the System or any part thereof;
(11)fail on three (3) or more separate occasions, for which notices of
default were given, within any period of twelve (12) consecutive months to
comply with this Agreement whether or not such failures to comply are corrected
after notice of default is given, or fail on two (2) or more separate occasions,
for which notices of default were given,
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within any period of twelve (12) consecutive months to comply with the same
obligation under this Agreement whether or not such failures to comply are
corrected after notice of default is given;
(12)you breach a material obligation, representation or warranty contained
in this Agreement and such breach by its nature cannot be cured; or
(13)have made any material misrepresentation to us regarding your
organizational or financial structure of financial condition.
In any judicial proceeding in which the validity of termination is at
issue, we will not be limited to relying on the reasons for termination which
are set forth in any notice sent to you in accordance with this Section 14.
C. You may terminate this Agreement at any time by giving us at least
twelve (12) but not more than fifteen (15) months written notice.
D. Our rights to terminate this Agreement are in addition to all rights
or remedies available at law or in equity in case of any breach, failure or
default, or threatened breach, failure or default, all of which rights and
remedies shall be cumulative and not alternative.
15. DAMAGES
Except as otherwise provided in this Agreement, if this Agreement and the
Franchise granted hereby terminate under any of the provisions of Section 14 of
this Agreement, you agree to promptly pay us (as liquidated damages for the loss
of the benefit bargained for in this Agreement due to premature termination
only, and not as a penalty or as damages for breaching this Agreement or in lieu
of any other payment) a lump sum equal to the royalty
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fees and Marketing Fund contributions payable to us during the thirty-six (36)
calendar months immediately preceding the termination. In the event the
Restaurant shall not have been open for thirty-six (36) months prior to
termination, the monthly average of such payments during such shorter period
shall be multiplied by thirty-six (36) for purposes of this section.
In the event there are fewer than thirty-six (36) months remaining in the term
hereof, the amount that you agree to pay shall be equal to the number of months
remaining in the term of this Agreement multiplied by the average monthly
royalty fees and Marketing Fund contributions payable to us during the
thirty-six (36) months immediately preceding termination. In no event shall the
damages for the termination of this Agreement, if any, exceed the greater of the
liquidated damages set forth above or the actual damages proven by Friendly's.
If we are unable to determine the amount payable to us by you by reason of
your failure to submit some or all of your Gross Sales reports as required
pursuant to Section 10 of this Agreement, you agree that we may estimate the
Gross Sales of your Restaurant for the applicable periods described above for
the purpose of computing the amount payable to us by you under this Section 15.
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16.COVENANT NOT TO COMPETE; RIGHTS AND OBLIGATIONS OF COMPANY AND LICENSE UPON
TERMINATION OR EXPIRATION OF THE LICENSE
A. Covenant Not to Compete
You acknowledge and agree that we have invested a substantial amount of
time and money in developing the System, the Marks, and the Confidential
Information and that we would be unable to protect our System, the Marks,
Confidential Information and trade secrets against unauthorized use or
disclosure and would be unable to encourage a free exchange of ideas and
information among us or our licensees if prospective licensees or licensees were
permitted to hold interests in or perform services for any competing business
and that the following restrictions are reasonably required in order to protect
our information, marketing strategies, operating policies and other elements of
the System from unauthorized appropriation. Therefore, you agree that during
the term of this Agreement, you will not have any direct or indirect or
beneficial interest or perform services as an officer, director, manager,
employee or consultant or otherwise for or in any business which owns, operates,
licenses, franchises or develops any restaurant concept which both (i) has sit
down, table service, and (ii) is a mid-scale priced, family style restaurant,
coffee shop or ice cream/frozen yogurt shoppe (as defined by CREST operators
list as of June 1, 1997) including but not limited to Denny's Shoney's Big Boy,
Country Kitchen, Bob Evans, Cracker Barrel, IHOP, Village Inn, Waffle House,
Dairy Queen, Swensen's, Carvel, Baskin Robbins, TCBY or similar.
Notwithstanding the above, a restaurant concept which is a mid-scale priced
family style restaurant will be deemed competitive if frozen deserts comprise
five percent (5%) or more of the sales mix as measured on any six (6) month
basis. You further
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agree that for a period of two (2) years after the termination or expiration of
this Agreement, you and all of such persons will be subject to the same
restriction on competing activities within the trade area (the "Trade Area") of
the Restaurant or within the trade area (as reasonably determined by us) of any
Friendly's Restaurant operated currently by us or any other licensee of ours,
but in no event within a radius of three (3) miles from any such restaurant.
You and all of such persons also agree during such periods of time not to offer
to employ or employ any person who is then employed by us, our affiliates or any
other licensee. You acknowledge and agree that the Trade Area is an area equal
to a three (3) mile radius with its epicenter at the Restaurant.
You acknowledge that the determination of the Trade Area is based on many
factors, some of which are subjective, and that the Trade Area as described in
this Agreement is reasonable under the circumstances. The restrictions of this
Section shall not be applicable to the ownership of a Friendly's Restaurant
operated pursuant to a License Agreement with us, to the ownership of shares of
a class of securities listed on a stock exchange or traded on the
over-the-counter market that represent five percent (5%) or less of the number
of shares of that class of securities issued and outstanding, or to the
ownership or operation of any restaurant franchised by Wendy's International to
your corporate parent or affiliate.
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You further acknowledge that this Agreement does not confer any rights of
exclusivity on you with respect to your operation of a Friendly's Restaurant
within the Trade Area and will not prevent us from placing another Friendly's
Restaurant or other food service establishment within the Trade Area.
B. Payment of Amounts Owed to Company
You must pay to us within fifteen (15) days after the effective date of
termination or expiration of this Agreement, or such later date that the amounts
due to us are determined, all royalty fees, Marketing Fund contributions,
amounts owed for your purchases from us or our subsidiaries and affiliates,
predecessors, successors and assigns, interest due on any of the foregoing,
and all other amounts owed to us or our subsidiaries and affiliates under this
Agreement or otherwise.
C. Marks and System
You agree that immediately after the termination or expiration of this
Agreement, you will:
(1)not directly or indirectly at any time or in any manner identify
yourself or any business as a current or former Friendly's Restaurant, or as a
franchisee or licensee of, or as otherwise associated with us, or use any Mark
or any colorable imitation thereof in any manner or for any purpose, or utilize
for any purpose any trade name, trade or service mark or other commercial symbol
that suggests or indicates a connection or association with us;
(2)remove from the Premises, discontinue using for any purpose and return
to us (or with our consent, destroy) any and all signs, menus, fixtures,
furniture, furnishings, equipment, advertising, materials,
<PAGE>
stationary supplies, forms or other articles that display or contain any Mark or
that otherwise identify or relate to a Friendly's Restaurant;
(3)remove all Marks that are affixed to uniforms and/or, at our direction,
cease to use all uniforms that have been used in the Restaurant;
(4)take such action as may be required to cancel all fictitious or assumed
name or equivalent registrations relating to your use of any Mark;
(5)change the telephone number of the Restaurant and instruct all telephone
directory publishers to modify all telephone directory listings of the
Restaurant associated with any Marks when the directories are next published;
(6)take such action to alter the physical interior and exterior decor of
the Restaurant as will effectively de-identify and distinguish the Premises from
the System; and
(7)furnish to us, within thirty (30) days after the effective date of
termination or expiration, evidence satisfactory to us of your compliance with
the foregoing obligations.
In the event that you fail to take such actions as required above to our
satisfaction within the thirty (30) days to termination or expiration of this
Agreement, you grant us the right to enter the Premises to remove all items
bearing the Marks and take such actions as we deem necessary to de-identify the
Restaurant from the System without committing any trespass or incurring any
liability for such actions. You acknowledge and agree that you will be
responsible for all costs and expenses that we incur in taking such actions.
D. Confidential Information
You agree that upon termination or expiration of this Agreement, you will
immediately cease to use in any business or otherwise any of our Confidential
Information disclosed to, or otherwise learned or acquired by you, and that you
will return to us all
<PAGE>
copies of the Operations Manual and all other Confidential Information which we
have loaned or made available to you or which is otherwise in your possession.
You must also provide us with any and all supplies of our proprietary frozen
desserts and toppings for which you will be compensated at the lower of their
costs or market value.
E. Continuing Obligations
All obligations of the Company and Licensee which expressly or by their
nature survive the expiration or termination of this Agreement shall continue in
full force and effect subsequent to and notwithstanding its expiration or
termination and until they are satisfied in full or by their nature expire.
17. RENEWAL OF FRANCHISE
You understand that you have the conditional right to renew this Agreement
one time to operate the Restaurant in the System for twenty (20) years beyond
the expiration date provided for in this Agreement. However, if you desire to
obtain a new license upon the expiration of this Agreement, you must apply to us
for a new license agreement at least ninety (90) days, but not more than twelve
(12) months, before expiration of the term of this Agreement. Upon payment of a
renewal fee, which will not exceed our then standard initial license fee, we
will process your application in good faith and in accordance with our
procedures, criteria and requirements regarding upgrading of facilities, credit,
market feasibility and related criteria then being applied by us in issuing new
licenses to use the System. If you fulfill our upgrading and other
then-current requirements, we will grant you
<PAGE>
a new license in the form of agreement then in use by us. If you are granted a
new license, you (and if you are an entity, your owners) will be required to
execute a general release, in a form satisfactory to us, of any and all claims
against us and our subsidiaries, affiliates, partners, agents, employees,
representatives and servants, including claims arising under this Agreement and
federal, state and local laws, rules and regulations. If you are not granted a
new license, we will return the renewal fee less expenses incurred in processing
your application.
During the pendency of your application for the issuance of a new license,
royalty fees and Marketing Fund contributions will be paid at the rate specified
in this Agreement. Upon issuance of the new license agreement, fees must be
paid at the rates specified in the new license agreement, which may be greater
than the rates specified in this Agreement.
18. ENFORCEMENT
A. Severability and Substitution of Valid Provisions
Except as expressly provided to the contrary, each section, paragraph, term
and provision of this Agreement, and any portion thereof, shall be considered
severable and if, for any reason, any such provision of this Agreement is held
to be invalid, contrary to, or in conflict with any applicable present or future
law or regulation in a final, unappealable ruling issued by any court, agency or
tribunal with competent jurisdiction in a proceeding to which we are a party,
that ruling shall not impair the operation of, or have any other effect upon,
such other portions of this Agreement as may remain otherwise enforceable, all
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of which shall continue to be given full force and effect and bind the parties
to this Agreement, although any portion held to be invalid shall be deemed not
to be a part of this Agreement from the date the time for appeal expires, if you
are a party thereto, or otherwise upon your receipt of a notice of
non-enforcement thereof from us. To the extent that any provision of Section
12D(8) or Section 16A is deemed unenforceable by virtue of its scope in terms of
area, business activity prohibited and/or length of time, but could be made
enforceable by reducing any or all thereof, you and we agree that such
provisions shall be enforced to the fullest extent permissible under the laws
and public policies applied in the jurisdiction in which enforcement is sought.
If any applicable and binding law or rule of any jurisdiction requires a greater
prior notice of the termination of or refusal to renew this Agreement, than is
required in this Agreement, or if under any applicable and binding law or rule
of any jurisdiction, any provision of this Agreement or any specification,
standard or operating procedure we prescribe is invalid or unenforceable, the
prior notice and/or other action required by such law or rule shall be
substituted for the comparable provisions of this Agreement, and we will have
the right, in our sole discretion, to modify such invalid or unenforceable
provision, specification, standard or operating procedure to the extent required
to be valid and enforceable. You agree to be bound by any promise or covenant
imposing the maximum duty permitted by law which is contained within the terms
of any provision of this Agreement, as though it were separately articulated in
and made a part of this Agreement, that may result from striking from any of the
provisions of this Agreement, or any specification, standard or operating
procedure that we prescribe, any portion or portions which a court may hold to
be unenforceable in a final decision to which we are
<PAGE>
a party, or from reducing the scope of any promise or covenant to the extent
required to comply with such a court order. Such modifications to this
Agreement shall be effective only in such jurisdiction, unless we elect to give
them greater applicability, and shall be enforced as originally made and entered
into in all other jurisdictions.
B. Waiver of Obligations
You and we may by written instrument unilaterally waive or reduce any
obligation of or restriction upon the other under this Agreement, effective upon
delivery of written notice thereof to the other or such other effective date
stated in the notice of waiver. Any waiver granted by us shall be without
prejudice to any other rights we may have, will be subject to continuing review
by us, and may be revoked, in the good faith exercise of our sole discretion, at
any time and for any reason, effective upon delivery to you of ten (10) days'
prior written notice. You and we shall not be deemed to have waived or impaired
any right, power or option reserved by this Agreement (including, without
limitation, the right to demand strict compliance with every term, condition,
and covenant herein, or to declare any breach thereof to be default and to
terminate the License prior to the expiration of its term), by virtue of any
custom or practice of the parties at variance with the terms hereof; any
failure, refusal, or neglect by you or us to exercise any right under this
Agreement or to insist upon exact compliance by the other with its obligations
hereunder, including, without limitation, any mandatory specification, standard,
or operating procedure; any waiver, forbearance, delay, failure, or omission by
us to exercise any right, power, or
<PAGE>
option, whether of the same, similar or different nature, with respect to any
other Friendly's Restaurant; or the acceptance by us of any payments from you
after any breach by you of this Agreement.
C. Force Majeure
Neither you nor we shall be liable for loss or damage or deemed to be in
breach of this Agreement if a failure to perform particular obligations results
from: (i) transportation shortages, inadequate supply or unavailability from
the manufacturers or suppliers of equipment, merchandise, supplies, labor,
material, or energy, or the voluntary surrender of the right to acquire or
use any of the foregoing in order to accommodate or comply with the orders,
requests, regulations, recommendations, or instructions or any federal, state or
municipal government or any department or agency thereof; (ii) compliance with
any law, ruling, order, regulation, requirement or instruction of any federal,
state or municipal government or any department or agency thereof; (iii) acts
of God; (iv) fire, strikes, embargos, war or riot; or (v) any other similar
event or cause.
Any delay resulting from any of such causes shall extend the time for
performance or excuse performance, in whole or in party, as may be reasonable,
except that such causes shall not excuse payments of amounts owed at the time of
such occurrence or payment of any amounts due thereafter.
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D. Injunctive Relief
You agree that we will have the right to preliminary injunctive relief
to restrain any conduct by you in the development or operation of the Restaurant
that could materially damage the goodwill associated with the System, the Marks
and Friendly's Restaurants. You further agree that we will not be required to
post a bond to obtain injunctive relief.
E. Rights of Parties Are Cumulative
Your and our rights under this Agreement are cumulative and no exercise or
enforcement by you or us of any right or remedy hereunder shall preclude the
exercise or enforcement by you or either of us of any right or remedy hereunder
or which you or we are entitled by law to enforce.
F. Costs and Attorneys' Fees
In any proceeding by either party to enforce or interpret any provision of
this Agreement, or appeal thereof, the party prevailing in such proceeding shall
be entitled to reimbursement of its costs and expenses, including but not
limited to, reasonable accounting and attorneys' fees. Attorneys' fees shall
include, without limitation, reasonable legal and expert witness fees, cost of
investigation and proof of facts, court costs, other litigation expenses and
travel and living expenses, whether incurred prior to or in preparation for or
in contemplation of the filing of any written demand or claim, action, hearing
or proceeding. In any such proceeding involving more than one (1) allegation,
issue or provision of this
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Agreement under circumstances where neither party prevails on all allegations
or issues, the presiding court or other body may apportion costs and expenses
between the parties.
G. Governing Law
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946 OR
OTHER FEDERAL LAW, THIS AGREEMENT AND THE LICENSE SHALL BE GOVERNED BY THE LAWS
OF THE STATE OF DELAWARE WITHOUT REGARD TO CONFLICT OF LAWS RULES.
H. Waiver of Punitive/Exemplary Damages:
Limitations of Actions
THE PARTIES HEREBY WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT
OR CLAIM TO ANY PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER AND AGREE THAT
IN THE EVENT OF A DISPUTE BETWEEN THEM EACH SHALL BE LIMITED TO THE RECOVERY OF
ANY ACTUAL DAMAGES SUSTAINED. ANY AND ALL CLAIMS, EXCEPT CLAIMS FOR MONIES DUE
US OR OUR AFFILIATES, ARISING FROM OR RELATING TO THIS AGREEMENT OR THE
RELATIONSHIP AMONG THE PARTIES SHALL BE BARRED UNLESS AN ACTION OR LEGAL
PROCEEDING IS COMMENCED WITHIN ONE (1) YEAR FROM THE DATE THE CLAIMANT KNEW OR
SHOULD HAVE KNOWN OF THE FACTS GIVING RISE TO SUCH CLAIMS.
<PAGE>
I. Venue and Jurisdiction
YOU AGREE THAT WE MAY INSTITUTE ANY ACTION AGAINST YOU TO ENFORCE THE
PROVISIONS OF THIS AGREEMENT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION IN THE STATE OF DELAWARE AND YOU IRREVOCABLY SUBMIT TO THE
JURISDICTION AND VENUE OF SUCH COURTS AND WAIVE ANY OBJECTION YOU MAY HAVE TO
EITHER THE JURISDICTION OR VENUE OF SUCH COURTS. YOU AGREE THAT ANY ACTION
BROUGHT BY YOU TO ENFORCE ANY PROVISION OF THIS AGREEMENT WILL BE BROUGHT AND
MAINTAINED ONLY IN A STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE
STATE OF DELAWARE.
J. Waiver of Jury Trial
THE PARTIES HEREBY IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER OF
THEM.
K. Binding Effect
This Agreement is binding upon the parties hereto and their respective
executors, administrators, heirs, assigns and successors in interest, and shall
not be modified except by written agreement signed by both you and us.
<PAGE>
L. Interpretation
The preambles and exhibits are a part of this Agreement, which together
with the Commitment Agreement and the Development Agreement, if any, constitutes
the entire agreement of the parties, and there are no other oral or written
understandings or agreements between the Company and the Franchisee relating to
the subject matter of this Agreement except for the Commitment Agreement,
certain portions of which survive the execution and delivery of this Agreement.
In the event of a conflict between this Agreement and the Commitment Agreement
(if applicable), the provisions of this Agreement shall control. In the event
of a conflict between this Agreement and the Purchase and Sale Agreement or the
Development Agreement, the provisions of the Purchase and Sale Agreement shall
first control the interpretation, with the Development Agreement also
superseding this Agreement. This Agreement may be modified only by a writing
signed by both you and us. Nothing in this Agreement is intended, nor shall be
deemed, to confer any rights or remedies upon any person or legal entity not a
party hereto. Except where this Agreement expressly obligates the Company to
reasonably approve or not unreasonably withhold its approval of any action or
request of the Franchisee, the Company has the absolute right to refuse any
request by the Franchisee or to withhold its approval of any action or omission
by the Franchisee. The headings of the several sections and paragraphs hereof
are for convenience only and do not define, limit or construe the contents of
such sections or paragraphs. The term "attorneys' fees" shall include, without
limitation, reasonable legal fees, whether incurred prior to, in preparation
for or in contemplation of the filing of any written demand or claim, action,
hearing or proceeding, including appellate
<PAGE>
proceedings, to enforce the obligations of this Agreement. The term "family
member" as used herein refers to parents, spouses, offspring and siblings, and
the spouses of parents and siblings. The term "affiliate" as used herein means
any person or entity that directly or indirectly owns or controls, or is owned
or controlled by, or is under common ownership or control with, another person
or entity. References to a "controlling interest" in the Franchisee means
fifty-one (51%) or such lesser percentage that may have the power to control the
management and affairs of the Restaurant or the Licensee. The term "Franchisee"
as used herein is applicable to one (1) or more persons, a corporation or a
partnership or other entity, as the case may be, and the singular usage includes
the plural and the masculine and neuter usages include the other and the
feminine. If two or more persons are at any time the Franchisee hereunder,
whether or not as partners or joint venturers, their obligations and liabilities
to the Company shall be joint and several. This Agreement may be executed in
counterparts, each of which shall be deemed an original.
M. Time
Time is of the essence of this Agreement
19. NOTICES AND PAYMENTS
All written notices and reports permitted or required to be delivered
hereunder shall be deemed so delivered at the time delivered by hand, the day of
transmission by facsimile or other electronic system, one (1) business day after
being placed in the hands of a commercial courier service for overnight
delivery, or three (3) business days after placement
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in the United States Mail by Registered or Certified Mail, Return Receipt
Requested, postage prepaid and addressed to the party to be notified at its most
current principal business address of which the notifying party has been
notified. All payments and reports required by this Agreement shall be directed
to the Company at the address notified to the Franchisee from time to time, or
to such other persons and places as the Company may direct from time to time.
Any required payment or report not actually received by the Company during
regular business hours on the date due (or postmarked by postal authorities at
least two (2) days prior thereto) shall be deemed delinquent.
20. ACKNOWLEDGEMENTS
Contemporaneously with the execution of this Agreement, you have carefully
reviewed and executed the Disclosure Acknowledgement Statement attached and
incorporated into this Agreement as Exhibit A.
You acknowledge that, due to the length of time we have been granting
licenses to operate Friendly's Restaurants or other food service concepts using
the Marks, there is more than one form of license agreement in effect between us
and our various licensees and that such agreements contain provisions that may
be materially different from the provisions contained in this Agreement and that
you are not entitled to rely on any provision of any other such agreement,
whether to establish course of dealing, waiver, estoppel or for any other
purpose.
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IN WITNESS WHEREOF the parties hereto have executed and delivered this
Agreement as of the Agreement Date.
FRIENDLY'S RESTAURANTS FRANCHISEE:
FRANCHISE, INC.
By:____________________ By:
Its:____________________ Its: