Franchise Agreement
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Sample Franchise Agreement
Exhibit C to Offering Circular
FRANCHISE AGREEMENT
BETWEEN
GYMBOREE PLAY PROGRAMS, INC.
AND
Gymboree Play Programs, Inc., hereinafter sometimes called "Gymboree," and
__________________________________, hereinafter called the "Franchisee," in consideration of
promises made herein and intending to be legally bound, agree as follows:
In a number of places in this Franchise Agreement, you're asked to initial certain items. Initialing by you confirms, without lessening the importance or binding nature of each of the provisions of this Franchise Agreement, that vou recognize the special significance of those items and the fact that they've been fully discussed with vou, and read, understood and agreed to by vou. Please initial below and at all other points indicated.
Your Initials: __________/__________
1. RECITALS
1.1 Legal Status of Gymboree. Gymboree is a California corporation with its principal office and place of business at 700 Airport Blvd., Suite 200, Burlingame, California 94010.
1.2 Legal Status of Franchisee. Franchisee is a_____________with its principal office
and place of business at_________________________________________________
1.3 Definitions. For purposes of this Franchise Agreement, the following terms have the meanings listed below. Other terms used in this Agreement are defined and construed in the context in which they occur.
"Affiliate" - Any person, company or other entity which controls, is controlled by or is under common control with another person, company or other entity, as well as any spouse, parent, child and/or sibling and any entity controlled by any spouse, parent, child and/or sibling.
"Agreement" - This Franchise Agreement.
"Days" - Unless indicated to the contrary, all references to a number or a period of days in this Agreement shall mean that number or period of calendar days and not business days. When any such number of period of days ends or expires on a weekend or holiday, the number or period of days should be extended to the next following day which is not on a weekend or a legal holiday.
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"Design Standards" - Standards, specifications and other requirements for design, decoration, layout, equipment, furniture, fixtures, signs and other items for a Gymboree Play Center.
"Designated Equipment" - Equipment that meets our requirements and is to obtained and used by you in the operation of your Gymboree Play Center.
"Franchise" - The right to operate a single Gymboree Play Center at the Premises pursuant to the terms and conditions of this Agreement.
"Franchisor" - Gymboree Play Programs, Inc.
"Franchisor-Related Persons/Entities" - Gymboree Play Programs, Inc., the Marketing Fund (and its members), and each and all of the following, whether past, current and/or future: each and all company(ies)/person(s) acting by, through, under, in concert, affiliated and/or associated in any way, with us and/or any of the foregoing, together with each and all of the partners, shareholders, officers, directors, agents, attorneys, accountants, and/or employees of us and/or any of the foregoing, as well as each and all of the successors and/or assigns of us and/or any of the foregoing, as well as Gymboree Corporation and each of its shareholders, officers, directors, agents, attorneys, accountants, and/or employees.
"Good Standing" - You are in "Good Standing" if you (and each of your owners and Affiliates) are not in default of any obligation to us and/or any of the Franchisor-Related Persons/Entities, whether arising under this Agreement or any other agreement between you (and each of your owners and Affiliates) and us (and/or any of the Franchisor-Related Persons/Entities), the Manuals or other System requirements (collectively, the "Obligations"); provided that you are not in Good Standing if you have been in default of any Obligations and such defaults are incurable by nature and/or part of a series of repeated defaults as defined in this Agreement.
"General Release" - A general release, in the then-current form prescribed by us at the time such release is to be delivered, of any and all claims, liabilities and/or obligations, of any nature whatsoever, including those existing as of, and/or arising before, the date of any such release, however arising, known or unknown, whether
against us and/or any or all of the Franchisor-Related Persons/Entities, and whether by you, any owner of you (if you are or become a Business Entity) and/or any Affiliate of any of the foregoing. A copy of our general releasing language as currently used by us (which is subject to change) is attached as Exhibit H and is approved by you.
"Good Standing""Good Standing" includes (but is not limited to) you and each affiliate of yours (a) not being in default or threat of default under this Agreement and/or any other agreement, or any other legal obligation, to us and/or any affiliate of ours and (b) operating oach Gymboree Franchise, in which you and/or any affiliate of yours has any ownership or other interest, in full compliance with the System ond Manuals and all of our other requirements, in each case as they may be modified by us from timo-to-time in our sole and absolute discretion.
"Gymboree Plav Center" - The Gymboree Play Center which you're franchised to operate at the Premises pursuant to this Agreement.
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"Manuals" - One or more handbooks, manuals, bulletins and/or volumes, other written materials, and video, audio and/or software media, (including materials distributed electronically or otherwise) regardless of title, containing (among other things) specifications, standards, policies and procedures prescribed from time-to-time by us and to be followed by you in connection with your operation, marketing or otherwise of your Gymboree Play Center and your performance under this Agreement, including (but not limited to) all goods and services to be sold and/or provided at or from your Gymboree Play Center and/or in association with the Marks. The Manuals include all changes and supplements issued by us in the future, each of which you'll promptly comply with.
"Gvmboree Marks" or "Marks" - The trademarks, service marks and other commercial symbols now and/or in the future owned by us and which we designate, from time-to-time, to be used to identify the services and/or products offered by Gymboree Play Centers, including (but not limited to) the mark "Gymboree", the Trade Dress and certain associated logos.
"Premises" - The physical location leased, rented or owned by you at which you will operate a single Gymboree Play Center and as accepted by us pursuant to this Agreement.
"Products" and "Services" - Products and services designated by us from time-to-time for use, sale, lease, rental or to be otherwise used and/or provided at or from your Gymboree Play Center, and/or in association with the Marks.
"Similar Business" - Any business, or not-for-profit activity, offering or involved with (and any business or not-for-profit activity similar to and/or competitive with businesses offering or involved with) non-therapeutic sensory-motor child-parent play programs, including any business or not-for-profit activity awarding franchises or licenses to others to operate or be involved with such programs, as well as any business or not-for-profit activity that now and/or in the future offers, sells, distributes, provides or is otherwise involved or deals with, whether at wholesale, retail or otherwise, any goods and/or services (including, among others, the Products) now or in the future authorized by us to be offered at or from Gymboree Play Centers, or similar products, including any business or not-for-profit activity awarding franchises or licenses to others to operate or be involved with any such business or not-for-profit activity.
"Site" or "Play Center* - The fixed location at which you will operate a single Gymboree Play Center and its service to the public and as accepted by us pursuant to this Agreement.
"System" - The distinctive format and method of doing business now or in the future developed, used and/or modified by us in our sole and absolute discretion for the operation of a non-therapeutic sensory-motor, child-parent play program [and/or other program(s) designated by us] including (but not limited to) (a) distinguishing characteristics related to the image, design, appearance, layout and color scheme of a Gymboree Play Center, (b) design, style, color and other distinguishing characteristics of fixtures, showcases, signs and furnishings, (c) layout, design and selection of equipment, (d) specifications used in preparing Products for sale, (e) methods used for selecting, purchasing, marketing, displaying and selling Products, (f) operating, marketing and other systems, procedures and standards and (g) the standards of quality, service and cleanliness used in the operation of a Gymboree Play Center.
"Territory" - The geographical area described in Exhibit A.
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"Trade Press" - The Gymboree Play Center design and image developed and owned by us for Gymboree Play Centers, as it currently exists and as it may be revised and further developed by us from time-to-time in our sole and absolute discretion.
"Us," "We," "Our," "Franchisor or "Gymboree" - Gymboree Play Programs, Inc., a California corporation.
"You/' "Your" or "Franchisee" - The individual(s) signing this Agreement as Franchisee. (If there's more than one Franchisee, each is jointly and severally obligated under this Agreement and all other agreements with us.)
1.4 Business of Gymboree. Gymboree has expended considerable time, effort, and money in the creation and development of a "play center" business involving non-therapeutic sensory-motor, child-parent play programs, early childhood music and art programs, birthday parties, theme parties, and story line parties for infants and children in Gymboree specified age ranges, using specially designed equipment and program aids and such other programs as Gymboree develops and/or designates from time to time (hereinafter called the "Gymboree Program") which it desires to establish at locations within the Territory. The Gymboree Program does not include, without limitation, programs
for handicapped children, day-care programs, after-school programs, formal educational programs, exercise programs, programs for children and parents in age ranges other than those set forth as being within the Gymboree Program, programs for parents only, pre-natal care programs, or any other programs offering services other than the services specified in Sections 1.4 and 1.5 as the Gymboree Program. Anything not specifically included in the Gymboree Program, as described above and as Gymboree may change from time to time in our sole and absolute discretion, shall not be deemed part of the Gymboree Program.
Gymboree has expended considerable time, effort, and money in the creation and development of a mobile play program (the "Gymboree On The Go Program"). The Gymboree On The Go Program will bring a play program, which includes components of the Gymboree Program, directly to certain children's institutions, such as preschools. From time to time, Gymboree may design and/or designate additional programs or affiliations which must be offered to the public from the Site. Gymboree may, in our sole and absolute discretion, at any time upon written notice cancel, replace or modify any portions of the Gymboree Program, including the Gymboree On The Go Program. The Gymboree On The Go Program is incorporated by reference into the definition of the "Gymboree Program" throughout this Agreement. Gymboree may at any time upon written notice revise, modify, add or subtract programs from the Gymboree Program in our sole and absolute discretion and with which you'll comply.
1.5 Objective of Franchisee. Franchisee desires to become a licensed operator of the Gymboree Program, thus obtaining the benefits of the methods developed by Gymboree and the right to do business under the mark and name "Gymboree" in the Territory.
2. FRANCHISE AND SERVICES
2.1 Franchise Territory.
(a) The Territory awarded to Franchisee is described in Exhibit A, and is referred to herein as the 'Territory." Gymboree awards Franchisee a license to operate the Gymboree Program and use the Gymboree Marks at the Site or Sites within the Territory while this Agreement is effective.
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Franchisee shall not use the Gymboree Marks or Program at any location not expressly consented to in writing by Gymboree. Gymboree is also licensed to use certain other trademarks and service marks not included in the license granted hereunder and Franchisee acknowledges and agrees that Franchisee shall have no rights to use such trademarks and service marks.
Allr+y Sito or Sites must be located within the Territory. Franchisee is not authorized or permitted to market, offer or sell goods or services outside the Territory-f, except in accordance with Article 6 below). If Franchisee and Gymboree mutually agree to change the Territory or Sites in the Market Plan, or as-if there is a result of a sale-transfer by Franchisee, or if Franchisee desires to open additional sites located either in or outside the Territory, Franchisee, at Gymboree's option, may be required to sign Gymboree's then-current form of franchise agreement, which may contain materially different economic and other terms and conditions from this Agreement, together with a General Release. The term of such franchise agreement shall be the unexpired term remaining under this Agreement, and Franchisee (and each affiliate) will sign a general rcleascGeneral Releases, in form prescribed by Gymboree.
Franchisee may only offer the Gymboree Program (other than the On the Go Program) at the fixed Sites specified in the Market Plan or the Operations Manual. Franchisee must notify Gymboree in writing with respect to the location, dates and times for all authorized Gymboree On The Go Programs or any component thereof. Franchisee agrees to notify Gymboree of the addresses of its fixed Sites prior to opening.
Except as provided in Section 2.2 below, Franchisee shall have no right or license to the following and all rights to each is reserved to Gymboree:
(1) Gymboree reserves the right to market and/or distribute (or license others to market and/or distribute) in or outside the Territory, by itself or through others, consumer products goods and services and other items using the Gymboree Marks or otherwise. Franchisee acknowledges and ogrccs that it shall have no right or license to anything not specifically included in the Gymboree Program.
(2) Other types of programs which may be similar to or contain elements of the Gymboree Program. Gymboree may market and/or operate or license others to market and/or operate, in or outside the Territory, under the Gymboree Marks or under other marksotherwise, other types of programs which may or may not be similar to or contain elements of the Gymboree Program. Franchisee shall have no right or licenses to such programs.
(3) Gymboree further reserves all other rights to Gymboree's trade names, trademarks and service marks, including, without limitation, the right to market by itself or license others to market under the Gymboree Marks any services not included in the Gymboree Program, and the marketing of the Gymboree Program through alternative channels of distribution within or outside the Territory.
(b) Market Plan Requirements. Failure to open and operate all Sites in accordance with the Market Plan may result in termination of the Franchise Agreement by Gymboree. Alternatively, in Gymboree's sole and absolute discretion, (1) if Franchisee fails to open a Site in accordance with the Market Plan, or (2) if Franchisee abandons or closes a Site without Gymboree's consent, then the Site shall be deemed deleted from the Market Plan without refund of the initial franchise fee. If, in our sole and absolute discretion, we determine at any time that it is in the best interests of the
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Gymboree system, Gymboree may modify the Territory to include "buffer zones" and Franchisee will not thereafter open any Play Centers within, or relocate any Sites to, locations within, such buffer zones.
If Gymboree determines prior to execution of this Agreement, or upon renewal, transfer or the acquisition of odditional rights, in its sole and absolute discretion, that the location of Sitca by Franchisee Sites in certain portions of the 'Territory" would not maximizecon tribute sufficiently to the performance of tho overall Gymboree system-wide performance of the Gymboree Program, then the Territory will bo modified to include "buffer zones" will be included in the description of the Territory andwithin which Franchisee shall not open any Sites or bo permitted to relocate within the described buffer zones.
(c) Other Reserved Rights. Notwithstanding the foregoing or anything else in this Agreement or otherwise, Gymboree (and those we may license and/or appoint) retains all rights to market and sell on any terms and conditions and in any format that that we deem appropriate, Gymboree brand (or any other brand) products and services (whether or not competitive), including without limitation the Gymboree Program and its components, to customers located anywhere (including within the Territory) using any channels of distribution other than a physical, "brick and mortar" Gymboree Play and Music Center located in the Territory (including but not limited to non-traditional Gymboree locations and/or other outlets located in or outside the Territory, and/or the Internet, other electronic means, mail order or otherwise). Franchisee acknowledges and agrees that there is no limitation on Gymboree's right to exercise any of such rights, or on those that Gymboree may license and/or appoint to exercise such rights, regardless of the impact on, or vicinity of, your Gymboree Play and Music Center or the number of Gymboree Play and Music Centers or any other outlets or channels of distribution operating in an area or market, and no matter how close to the boundaries of the Territory.
Gymboree retains any and all other rights in and to the Gymboree Marks and the Gymboree Program and except as expressly set forth above, and, if Franchisee is unable or unwilling to service any potential or existing customer(s) in the Territory, Gymboree (and/or its appointees) may service any such customer(s) as Gymboree deems appropriate without any obligation to Franchisee. Except as set expressly forth otherwise in this Agreement, Gymboree retains the right, in its sole and absolute discretion, to operate and/or award to others the right to operate Gymboree and any other businesses on such terms and conditions and at such locations and in any format and channel of distribution as it deems appropriate in its sole and absolute discretion,
Gymboree (and any of the Franchisor-Related Persons/Entities) can acquire, merge, affiliate with or engage in any other transaction with, other businesses (competitive or not), with companies and/or units located anywhere, including in proximity to Franchisee's Play Center. Such transactions may include (but are not limited to) arrangements involving competing outlets and brand conversions (to or from the Gymboree® format). Such transactions are permitted under this Agreement, and Franchisee agrees to fully participate in any such conversion, including all re-branding, all at Franchisee's sole expense.
In spite of any restrictions in this Agreement or otherwise, Gymboree can develop or become associated with other concepts (including dual branding and/or other franchise systems) whether or not using the Gymboree System and/or the Marks, and may award franchises or other rights for locations anywhere.
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Franchisee understands that Gymboree is not granting to Franchisee, and hereby reserves to itself and the Franchisor-Related Parties/Entities, any rights to use the Marks and/or the Gymboree System in connection with the Internet, World Wide Web and/or other electronic media. In addition, Gymboree may, in its sole and absolute discretion, restrict Franchisee's use of the Internet, World Wide Web, other electronic means of marketing and/or mail order (or any other means of distribution), and/or may require that Franchisee deal only with certain customers located in the Territory.
If Franchisee defaults on any obligation to Gymboree or any affiliate, or fails to meet the performance standards set forth in Section 7.3, Gymboree may, in its sole and absolute discretion, reduce, eliminate or otherwise modify Franchisee's territorial rights.
2.2 Selection and Construction of Sites, Equipment Program Aids and Resale Items.
(a) If the site for your Gymboree Play Center has not been identified and purchased (or leased) by you and accepted by us by the time you and we sign this Agreement, then within six (6) months from the date you attended initial training you must purchase or lease (and obtain possession of) a site suitable for the operation of your Gymboree Play Center and acceptable to us. We won't unreasonably withhold our acceptance of a site that meets our standards but we can make no assurance that appropriate sites will be available, the terms on which possession may be obtained or otherwise, all such matters being your sole responsibility. If you are unable to purchase or lease an acceptable site within such periods, we may (but have no obligation to), at any time thereafter, terminate our obligations and your rights under this Agreement, provided we refund to you the lesser of (a) one-half (1/2) of the initial franchise fee paid to us pursuant to this Agreement or (b) the initial franchise fee less ail expenses (including legal fees, commissions, training costs, etc.) incurred in connection with such franchising and termination; and you will concurrently execute documents acceptable to us, providing for (1) continuation of your indemnification, confidentiality and non-competition obligations and the dispute avoidance and resolution provisions of this Agreement, including those of Article 11, together with the provisions of Article 13, and (2) a general rcleasoGeneral Release, in form prescribed by us, of any and all claims, liabilities and/or obligations, of onv nature whatsoever, however arising, known e* unknown, against us and/or any or all of the Franchisor Related Persons/Entities.
You won't make any commitments with respect to any location or operate a Gymboree Program and/or use any of the Marks, from or at any location (nor will you relocate your Gymboree Play Center) until and unless we've accepted such location. If there is any disagreement or dispute relating to any aspect of your site, you and we will resolve it through good faith mediation/arbitration as provided in this Agreement.
While we may, as a courtesy, assist you in evaluating or negotiating any lease (or other documents or arrangements) or otherwise assist you in your efforts to select and obtain a site by providing consultation, evaluation and/or otherwise (including providing references to potential contractors, real estate agents, site selection specialists and other professionals, some of whom may be affiliated and/or associated with us), we strongly recommend that you have all matters related to site selection and securing reviewed by your own independent attorney, real estate broker, architect and other professionals retained by you. While the selection of a site by you is subject to our reasonable consent, and although this franchise may be awarded for a specific existing location, neither we nor any company or person will recommend or approve any particular location or any related services to you. Acceptance by us of any location is in no way a recommendation, approval or endorsement of such location nor a representation or warranty as to its legal or business availability, suitability, appropriateness, success potential or otherwise and we cannot guarantee success for any location.
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You're the only person and/or company with any liability or responsibility for those decisions and matters.
In any case, you understand and agree that the selection and securing of a site, the negotiation of a lease or purchase, the selection of developers, real estate agents, site selection specialists, contractors, etc., financing and all other matters related in any way to your site are exclusively and entirely your sole and ultimate responsibility and that neither we, any of Franchisor-Related Persons/Entities nor any other person or company affiliated or associated with us in any way will have any liability or responsibility with respect to any matters related in any way to the site for your Gymboree Play Center, including (but not limited to) site location, identification, evaluation, selection, lease/purchase negotiation, financing, review of documents, construction, build out, compliance with local requirements, suitability for any use or purpose and/or any other aspect of the development process (and any related steps) or otherwise, all such responsibilities being solely yours.
We may (but have no obligation to), make available to you standard and/or site specific plans and specifications to be utilized by you in the construction or otherwise of your Gymboree Play Center. You'll obtain, at your sole expense, all further qualified architectural and engineering services to prepare surveys, site and foundation plans and adapt any plans and specifications to your location and all applicable laws, regulations and ordinances. Any changes from plans provided by us must be submitted to us for our consent, which we may grant, condition or withhold in our sole and absolute discretion. Neither we nor anv other person or company recommended bv and/or affiliated in any way with us will have anv liability with respect to any plans, specifications and/or other items/services provided to vou and/or to be utilized by you in the construction or otherwise of vour Gymboree Plav Center, or anv deviations or modifications therefrom, nor with respect to the preparation, construction, operation or otherwise of vour Gvmboree Plav Center, whether in accordance with standard plans or otherwise, all such responsibilities being solely vours.
We make no representations, guarantees or otherwise as to the costs of development and build-out (or otherwise) of your Gymboree Play Center, the date on which your Gymboree Play Center will be open for business or otherwise, such matters not being within our sole control. Our review of and/or consent to any plans (or modifications) submitted by you, your development, construction and/or other activities, and our providing of any plans or other assistance, or otherwise, will be solely for the purpose of determining compliance with Gymboree System standards and you are the sole person/entity responsible for constructing and operating your Gymboree Play Center in compliance with all applicable legal requirements.
You agree that without our ability to limit our (and others') liability as set forth in this Agreement (and, in particular, this Section), we wouldn't be willing to award this Franchise to you {and would consider developing the location as a company-owned unit) or to be involved in any way in assisting you in these matters.
Your Initials: __________/
(b) Any lease or sublease for the Premises of the Site must be satisfactory to us in our sole and absolute discretion and shall, in any event:
(1) provide that Gymboree at our sole option, at any time and without further consideration, will receive a transfer of your leasehold interest, whether on termination, cancellation,
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recission or expiration of your rights under any lease/sublease or under this Agreement or otherwise, in each case without the lessor's or sublessor's consent and specifying that the lessor/sublessor will accept us as a substitute tenant on notice from us that we are exercising our rights. (If we exercise this option and you, and each affiliate of yours, are not in default, or under notice of default, and if your rights have not been terminated or expired, under this Agreement or any other agreement with us or any affiliate of ours, we'll sublease the Premises to you on the same terms as we lease it, subject to our usual security deposit and other conditions.) You agree to do all acts necessary or appropriate to accomplish such transfer, on our request and will, at the same time you sign this Agreement, sign the Collateral Assignment of Lease attached as Exhibit "G";
(2) authorize and require the lessor to disclose to Gymboree, upon Gymboree's request, sales and other information furnished to the lessor by Franchisee;
(3) include the lessor's express consent to Franchisee's use of the Marks and initial signage as prescribed by Gymboree for the Site;
(4) provide that the premises for the Site may be used solely for the operation of the Gymboree Program pursuant to a Franchise Agreement in good standing;
(5) prohibit Franchisee from subleasing, assigning, hypothecating, pledging or otherwise, all or any part of its occupancy rights, extending the term or renewing or modifying the lease without Gymboree's prior written approval, which may be withheld in our sole and absolute discretion;
(6) provide that Gymboree has the right to enter the premises of the Site to make modifications necessary to protect the Marks or the System;
(7) provide that the lessor expressly approves and accepts Franchisee's standard interior and exterior premises design. Franchisee shall deliver a copy of the signed lease or sublease to Gymboree within ten (10) days of its execution.
(8) require the lessor/sublessor to concurrently provide us with a copy of any written noticeof default under the lease/sublease and granting us the right (but without any obligation on our part) to cure any default under the lease and providing that if you fail to effect such cure during the time period permitted under the lease/sublease, then within thirty (30) days after the expiration of the period in which you can cure the default, we may (at our option) receive an assignment of your leasehold interest but without any liability for past defaults or other obligations other than those solely related to our period of occupancy; and
(9) provide that no sale, assignment or transfer of your leasehold interest will be approved or otherwise consented to, or any change, addition, or other modification to the lease or other instruments be made, without obtaining our prior written consent, which we may grant, condition or withhold in our sole and absolute discretion.
In any event, you won't execute a lease or sublease, or any modification or amendment, without our prior written consent, which we may grant, condition or withhold in our sole and absolute discretion. If you own or acquire the Premises and we request, you'll enter into a lease with us for a term equal to the term of the Franchise (with matching renewal options) on commercially reasonable terms, and will sublease the Premises from us on the same terms as the prime lease, subject to the requirements of this Section and granting us benefits substantially identical to those set out above.
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If such provisions are not included in the lease or other instruments, we may, without liability and at our sole option at any time (a) require that you immediately cause such provisions to be inserted or (b) terminate your rights and our obligations under this Agreement.
Your Initials: __________/
(c) Prior to beginning initial training you must secure all financing required to fully develop your Gymboree Play Center. Within throo six (36) months from the completion of initial training you must: (1) submit to us for consent any proposed modifications to the Gymboree Design Standards to comply with applicable ordinances, building codes, permit requirements, lease requirements and restrictions (any modifications will be at your expense); (2) obtain all required zoning changes, building, utility, sign, health, sanitation and business permits and licenses and any other required permits and licenses; (3) construct all required improvements in compliance with construction plans and specifications supplied or consented to by us; (4) decorate your Gymboree Play Center in compliance with plans and specifications consented to by us; (5) purchase and install all required equipment, furniture, fixtures and signs (including the Designated Equipment and computer hardware and software); (6) purchase an opening inventory of the Products designated by us; (7) obtain all customary contractors' sworn statements and partial and final waivers of lien for construction, remodeling, decorating and installation services; and (8) open your Gymboree Play Center for business with the general public.
Within such periods you'll also select and employ a licensed contractor reasonably consented to by us and you'll commence construction and/or development as soon as possible and will expeditiously attend to its completion, purchase and pay for all supplies; purchase, pay for and attend to the installation of all fixtures and equipment, train all employees, obtain all required insurance, permits and licenses and do everything necessary for your Gymboree Play Center to open for business. We do not warrant or guarantee that any contractor (even one referred to you by us) is suitable, competent, reliable or otherwise able to perform adequately the tasks for which they are hired, and you're the only person/company with anv responsibility for the work of anv contractor selected and/or employed bv vou. We're unable to provide any assurance as to costs of construction or otherwise, or as to when you may be open for business, since such matters are not within our control.
You agree to comply with the Design Standards that we furnish you. Any changes from plans provided by us must be submitted to us for our consent, which may be provided in our sole and absolute discretion. Your compliance with the Design Standards does not release you from your obligations to ensure that your Gymboree® Play Center is designed, constructed and operated in compliance with all local, state, and federal laws, including (without limitation) the American with Disabilities Act ("ADA"). You agree to execute and deliver to us an ADA Certification in the form attached to this Agreement as Exhibit I
before you open your Gymboree® Play Center to confirm and certify that your Gymboree® Play Center and any proposed renovations comply with all ADA and other requirements.
Your Initials: __________/
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(d) If your lease or sublease for your Gymboree Play Center expires or terminates without your fault, if the Premises are damaged, condemned or otherwise rendered unusable, or if, in your and our judgment, there is a change in the character of the location of the Premises sufficiently detrimental to its business potential to warrant its relocation, you will relocate your Gymboree Play Center and well grant permission for such relocation, to a location and premises acceptable to us in our sole and absolute discretion and without charging you an additional initial franchise fee, but any such relocation will be at your sole expense and you (and each affiliate of yours) will sign a general reloaoeGeneral Released form prescribed by uo, of any and all claims, liabilities ond/or obligations, of any nature whatsoever, however arising, known or unknown, against us and/or any or all of the Franchisor Related Persons/Entities.
Your Initials:__________/
(e) It's your and our mutual expectation and agreement that vour Gymboree Play Center
will always be continuously maintained in the same first-class condition, and presented to the public with the same features, programs, equipment, decor and otherwise, as new Gymboree Play Centers, in order to (among other things) meet competitive challenges, take advantage of strategic opportunities, maximize the goodwill associated with the Marks and achieve and maintain a leading position for all Gymboree operators in the retail marketplace with customers and otherwise, and that vou will, at vour sole expense, promptly undertake all upgrades, repairs, refurbishment, re-eouipping. etc. as are required by us from time to time in our sole and absolute discretion and that additional investment by you will be necessary from time-to-time to comply with these, and other, requirements. Such upgrades, etc. may include (but are not limited to) new equipment, furniture, furnishings, tenant improvements, decor package, signage, compliance with all then-current standards for facility design, software, changing any products and/or services offered, methods of operation and other Gymboree System requirements, plus such renovation and modernization of your Gymboree Play Center, as we may require to reflect the then-current Gymboree System requirements, all at your sole expense. Any upgrades, etc. will be subject to prior approval by us of plans, layouts, designs and otherwise, you will promptly and fully comply with all such requirements and, if you fail to do so, we may do so on your behalf and for your account and you will pay us the cost thereof, together with a reasonable administrative fee, within 10 days of our submission to you of any interim and/or final statement.
You agree that: (1) neither your Gymboree Play Center nor the Premises will be used for any purposes other than the operation of a Gymboree Play Center in full compliance with this Agreement and the Manuals; (2) you'll maintain the condition and appearance of your Gymboree Play Center, its equipment, furniture, fixtures, signs, and the Premises in accordance with our then-current specifications and standards, and consistent with the approved image of a Gymboree Play Center and as provided under the Manuals, as each may change from time-to-time; (3) you will perform such ongoing repair, maintenance and upgrading, with respect to the decor, equipment, furniture, fixtures, signs and otherwise, of your Gymboree Play Center and the Premises, as may be required by us from time-to-time in our sole and absolute discretion, including, without limitation: (a) thorough cleaning, repainting and redecorating of the interior and exterior; (b) interior and exterior repair of the Premises; (c) repair or replacement of damaged, worn out or obsolete equipment, furniture, fixtures, signs and otherwise; (4) you will not make any material alterations to the Premises or other items, or to the appearance of your Gymboree Play Center as originally approved by us, or the products and/or services offered by you, without our prior written approval; and (5) you will place or display at the Premises (interior and exterior), on vehicles, products and otherwise, only (and each of) such signs, emblems, lettering, logos and display and advertising materials as are from time-to-time specified by us.
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Your Initials: __________/
(f) Franchisee agrees to install and purchase or lease telephone and answering equipment, facsimile machine, computer, printer and software, including but not limited to, an e-mail system, and the Gymboree PlaySoft software and support services, as further specified in Gymboree's Operations Manual (as may be amended from time to time in our sole and absolute discretion). Franchisee understands that computer systems are designed to accommodate a certain maximum amount of data and terminals, and that, as such, limits are achieved, and/or as technology and/or software is developed in the future, Gymboree at its sole and absolute discretion may mandate that Franchisee add memory, ports and other accessories and/or peripheral equipment and/or additional, new or substitute software to the original computer system purchased by Franchisee. Franchisee may not use any technology, hardware or software not expressly authorized by Gymboree. Franchisee understands that at a certain point in time it may become necessary for Franchisee to replace or upgrade the entire computer system with a larger system capable of assuming and discharging all of those computer-related tasks and functions as are specified by Gymboree. Franchisee must further agree that computer designs and functions change periodically and that Gymboree may be required to make substantial modifications to its computer specifications, or to require installation of entirely different systems, during the term of the Franchise Agreement, or upon renewal thereof. To ensure full operational efficiency and communication capability between Gymboree's computers and those of all franchised play centers, Franchisee must agree at Franchisee's expense, to keep the computer system in good maintenance and repair, and at Franchisee's expense, and following Gymboree's testing and determination that same will prove economically or systematically beneficial to Franchisee and Gymboree, to install such additions, changes, modifications, substitutions and/or replacements to its computer hardware, software, telephone and power lines and other computer-related facilities as Gymboree directs, and on those dates and within those times specified by Gymboree in its sole and exclusive discretion, in its Operations Manual (as same may be amended from time to time, in our sole and absolute discretion) or otherwise. Franchisee must continuously comply with each of Gymboree's then-current Terms of Use and Privacy Policies (and all other requirements) regarding all computer and other systems, including but not limited to Internet use. Upon termination or expiration of the Franchise Agreement, all computer software, disks, tapes and other magnetic storage media provided to Franchisee by Gymboree shall be returned to Gymboree in good condition (allowing for normal wear and tear).
(g) Franchisee shall be required to purchase all play equipment from Gymboree unless Gymboree, in its sole and absolute discretion, permits otherwise.
(h) Gymboree shall supply the program aids and consumer products to Franchisee at Gymboree's then-current wholesale list price for such goods. Payment for program aids and consumer products provided by Gymboree shall be due and payable in full upon placement of any order with Gymboree or upon such other terms as Gymboree from time to time may specify.
(i) Gymboree may elect to withdraw all or any consumer products from the Gymboree Program at any time and, as provided in Section 2.1(c), above, may elect to market (or have others market) consumer products and other items directly through Gymboree or through other distributors and retailers. So long as Franchisee is required to carry consumer products, it shall at all times maintain an inventory of those items in the minimum quantities specified by Gymboree from time to time.
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(j) The reputation and goodwill of each Gymboree Play Center is based on, and can be maintained only by, the satisfaction of all customers who rely on the availability of a wide variety of quality Designated Equipment, Products and Services, compliance with the Gymboree System and courteous and efficient service provided by all employees of Gymboree Play Centers. We've already specified, and plan to specify in the future, various suppliers of Designated Equipment, Products and/or Services to be used or provided by Gymboree Play Centers and that meet our standards and requirements, in each case in our sole and absolute discretion. Your Gymboree Play Center will purchase, use and offer each of, and only, such types, brands and/or quality of Designated Equipment, Products and Services as we designate and, where we so require, use only suppliers as designated by us. Designated suppliers may include, and may be limited to, us and/or companies affiliated with us.
Gymboree has designated and may, in the future and in its sole and absolute discretion, designate suppliers of the equipment, products and supplies that meet its standards and requirements, including, without limitation, standards and requirements relating to reputation, quality, prices, consistency, reliability, financial capability, labor relations and customer relations. Franchisee agrees that the Gymboree Site will purchase such equipment and products only from suppliers that Gymboree has designated (which may be limited to Gymboree and/or its affiliates). We may designate a single supplier or limited number of suppliers, may designate a supplier only as to certain items and may concentrate purchases with one or more suppliers to obtain lower prices, advertising support and/or other benefits in our sole and absolute discretion. Specification of a supplier may be conditioned on requirements relating to frequency of delivery, standards of service, including prompt attention to complaints, as well as payments, contributions or other consideration to us, our affiliates, the Marketing Fund and/or otherwise, or other criteria, and may be temporary, pending a further evaluation of such supplier by us, in each case in our sole and absolute discretion.
You'll notify us in writing (and submit to us such information, specifications, and samples as we request) if you propose to purchase, use or offer any type, brand and/or quality of items that have not been previously specified by us, or if you propose to use any supplier who has not been previously specified by us for the proposed item and will arrange for pre-payment of reasonable charges connected with our review and evaluation of any proposal. Well notify you within a reasonable time as to whether or not you're authorized to purchase or use the proposed type, brand and/or model of such items or to deal with the proposed supplier. We may, from time-to-time, withhold, condition and/or revoke our approval of particular items or suppliers in our sole and absolute discretion. On receipt of written notice of revocation, you must immediately cease to sell or use any disapproved items and cease to deal with or use items from any such suppliers.
Franchisee must purchase the proprietary consumer products and training products listed in Exhibit B from Gymboree. Franchisee shall not be obligated to purchase any program aids from Gymboree and may purchase the program aids listed in Exhibit B from any source designated by Gymboree in its sole and absolute discretion. If Franchisee desires to purchase program aids from a supplier other than Gymboree, Franchisee shall notify Gymboree thereof along with the name of the supplier, the price of the program aids and any other information Gymboree may require from time to time. Franchisee shall also be required to submit to Gymboree three (3) samples of any proposed item along with drawings, brochures, packaging, tags and related items describing the item proposed for use. Gymboree shall notify Franchisee within ninety (90) days of its receipt of the foregoing of its approval or disapproval of any proposed item. Gymboree's failure to so notify Franchisee within the foregoing time period shall be deemed Gymboree's disapproval thereof. Gymboree will only approve items that conform to the specifications or samples and manufacturers that meet, in its sole and absolute discretion, its standards and requirements, including without limitation, standards and requirements relating to
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product quality, packaging, tags, price, consistency, reliability, financial capability, labor relations and customer relations. Gymboree may disapprove proposed items that meet the foregoing requirements in its sole and absolute discretion. Any approval may be revoked at any time without notice or cause in the sole and absolute discretion of Gymboree provided that Franchisee may sell items purchased prior to revocation unless Gymboree deems such items unsafe. In connection with the foregoing, Franchisee shall reimburse Gymboree for all of its actual direct out of pocket costs in connection with testing and reviewing the proposed items. Upon completion of its testing and review of any samples, Gymboree shall have no obligation to return the same to Franchisee or to reimburse Franchisee for its actual costs of purchasing the proposed items.
(k) In order to assure consistency in the programs and apparatus at all Sites, Franchisee agrees that it will not, nor allow others to: (1) use any equipment, program aids or signs not approved by Gymboree, (2) sell any consumer products not approved by Gymboree nor in any manner not approved by Gymboree, or (3) offer any services not approved by Gymboree. Franchisee further agrees not to use or sell any such items other than in connection with the Gymboree Program and as expressly permitted by Gymboree. To request Gymboree's approval, Franchisee agrees to submit to Gymboree drawings, brochures, samples, and related items describing the item proposed for use or sale. Gymboree reserves the right to withdraw approval of equipment, program aids, consumer products and signs including, but not limited to, equipment, program aids and consumer products Franchisee is required to purchase pursuant to this agreement or otherwise, which in Gymboree's sole and absolute discretion are inconsistent with the Gymboree Program or policies of Gymboree.
(I) WITH RESPECT TO ANYTHING (GOODS, SERVICES OR OTHERWISE) PROVIDED,
APPROVED OR OTHERWISE BY US, THE FRANCHISOR-RELATED PERSONS/ENTITIES AND/OR ANY PERSON/COMPANY AFFILIATED IN ANY WAY WITH AND/OR REFERRED/"APPROVED" BY US OR THEM, OTHER THAN SPECIFIC WRITTEN WARRANTIES EXPRESSLY PROVIDED BY US IN CONNECTION WITH SUCH ITEMS. SUCH ITEMS ARE PROVIDED WITHOUT ANY WARRANTIES, EXPRESS OR IMPLIED. THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPQ5E BEING EXPRESSLY DISCLAIMED, NOR DO THERE EXIST ANY EXPRESS OR IMPLIED WARRANTIES ON THE PART OF US. THE FRANCHISOR-RELATED PERSONS/ENTITIES OR ANY AFFILIATE AS TO THE DESIGN, CONDITION. CAPACITY. PERFORMANCE OR ANY OTHER ASPECT OF SUCH fOR OTHERS ITEMS OR THEIR MATERIAL OR WORKMANSHIP. THERE IS NO SPECIFIC DATE IN THIS AGREEMENT BY WHICH GYMBOREE MUST DELIVER ANY PRODUCTS, EQUIPMENT OR SUPPLIES PURCHASED FROM GYMBOREE OR ANY OPERATIONAL GUIDELINES. Gymboree shall assign to Franchisee any warranty or guarantee Gymboree obtains from the manufacturer or supplier. Franchisee acknowledges that Gymboree is not in the business of manufacturing such items and must rely on the professional ability and workmanship supplied by third parties.
Your Initials: ___________/
2.3 Training Program.
(a) Prior to the opening of the first Site within the Territory, or, in the event of a transfer, on the assumption of control, (i) Franchisee or (if Franchisee is not a natural person) Franchisee's principal operating officer and (ii) Franchisee's "Operations Manager," defined in Section 2.3(h) below, are required to attend and successfully complete an entire initial training program in accordance with the
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training schedule set out in Exhibit C attached hereto and incorporated by this reference. We'll furnish the initial training program at a time and place, and for such period, as we designate in our sole and absolute discretion (we're currently requiring a minimum of 3-7 days of pre-opening training.) If | you've been previously trained, we may elect to not provide training or may require attendance at a revised/shortened training program. We can require successful completion of training by all of your supervisory personnel and we'll furnish such training program at reasonable charges and at such times and places as we designate. In the event that Franchisee's Operations Manager attends an initial training program after the mandatory initial training, Gymboree charges a fee in the amount set forth in Gymboree's then-current or most recent offering circular or Operations Manual. All subsequent training shall be the responsibility of Franchisee; provided, however, that Gymboree may require (i) Franchisee or (if Franchisee is not a natural person) Franchisee's principal operating officer and (ii) Franchisee's Operations Manager and teachers to attend regional training sessions and teacher certification programs from time to time in order to maintain consistency in the Gymboree Program, and to attend remedial training sessions as further provided herein. In connection with regional and remedial training sessions, Franchisee agrees to pay Gymboree a fee representing Franchisee's pro rata share of Gymboree's out-of-pocket costs of conducting such sessions.
(b) If we, in our sole and absolute discretion, determine that you (or a managing partner or shareholder consented to by us) have not successfully completed (or are not making satisfactory progress in) your initial training, we may cancel all of your rights (and all of our obligations) under this Agreement and/or any other agreements with you and return the Initial Franchise Fee (less $10,000) to cover our sales, training and other expenses, among other things) to you, and you will return all manuals and you (and each affiliate of yours) execute documentation providing for a general releaseGeneral Release, in a form prescribed by us, of any and all claims, liabilities and/or obligations, of any nature whatsoever, however arising, known or unknown, against us and/or anv or all of the Franchisor-Related Persons/Entities and we will provide you with a similar release, except that your indemnity, non-competition, confidentiality obligations, and the dispute avoidance and resolution provisions of this Agreement, including those of Article 11, together with the provisions of Article 13, will be preserved. Since the possibility of such termination exists, you understand that if you make any investments or sign any documents prior to completion of training, you are at risk. Alternatively, we can (in our sole and absolute discretion) require you to hire a substitute manager and arrange for him/her to complete the training program to our satisfaction.
(c) Gymboree may conduct an annual seminar for its franchisees to discuss and review new programming ideas and concepts. Gymboree shall provide Franchisee with notice of the time and place of such seminar(s), which time and place shall be designated by Gymboree. Gymboree may hold the same year's annual seminar in different locations and on different dates in which case any given franchisee will only be required to go to one. Gymboree requires (i) Franchisee or (if Franchisee is not a natural person) Franchisee's principal operating officer and (ii) Franchisee's Operations Manager to attend an annual franchisee seminar, if held. Franchisee agrees to pay to Gymboree a fee equal to the per-attendee out-of-pocket costs of conducting an annual seminar times the number of Franchisee's attendees, if held.
(d) All teachers of the Gymboree Program must participate in local, regional and/or national teacher certification programs which may include additional training at Gymboree's principal office or such other locations as Gymboree may designate. Franchisee shall provide to Gymboree periodic reports of participation in the teacher certification programs on behalf of each teacher in such form and manner as Gymboree shall prescribe.
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(e) In addition to the remedial training that may be required pursuant to Section 8.8 hereof, Gymboree may require (i) Franchisee or (if Franchisee is not a natural person) Franchisee's principal operating officer and (ii) Franchisee's Operations Manager to attend additional remedial training programs as specified by the Franchise Operations Department of Gymboree whenever in Gymboree's opinion Franchisee's performance indicates the necessity of supplementary training.
(f) All expenses of travel to and from any training program or seminar, and for meals and lodging during the training or seminar, shall be paid by Franchisee.
(g) From time to time, Gymboree may develop audio or video tapes to update franchisees on new program ideas, procedures, and techniques. Franchisee agrees to purchase such tapes from Gymboree at list cost, plus postage and handling, and to promptly watch and/or listen to such tapes upon Franchisee's receipt thereof.
(h) For purposes of this Agreement, an "Operations Manager" is a person in charge of the day-to-day operations of the franchise or involved with any of the following duties: hiring, training, supervising or dismissing instructors, or implementing or interpreting the Gymboree Program in a supervisory fashion (i.e., other than solely as an instructor).
3. TERM; SUCCESSOR FRANCHISE
3.1 Initial Term. This franchise shall be for an initial term of ten (10) years, commencing
on________________and ending on ______________, unless sooner terminated in accordance
with this Agreement.
3.2 Your Rights. Your rights and our obligations under this Agreement terminate at the expiration of the initial term, but at that time, subject to the provisions below, you will be eligible to be awarded a successor franchise (which may materially differ, in economic and other areas, from this Franchise Agreement and its requirements) for your Gymboree Play Center for a single ten (10) year period, without any further term, successor franchise or right of renewal. In no event shall we be obligated to negotiate or obtain any renewal, extension or otherwise of any lease or sublease, or solicit or accept any proposal from the landlord (or other person/entity controlling the premises) for a renewal, extension or otherwise of any lease or sublease, even if on the same terms and conditions as have previously been applicable to the premises.
3.3 Your Obligations. Any award of the successor franchise must meet aH of the following conditions, each of which are agreed to be reasonable, together with such other conditions as are reasonable at the time:
(1) You (and each affiliate of yours) have fully and continuously complied with this Agreement and all other agreements with us (and/or any affiliate of ours), in each case without any defaults, cured or uncured, during the term (including all of the conditions set out below);
(2) You maintain possession of your Premises and by the expiration date of this Agreement (a) your Gymboree Play Center and its operations must have been brought into full compliance with the specifications and standards then-applicable for new Gymboree Play Centers, including a full upgrade to the same first-class condition as new Gymboree Play Centers, which may include (but is not limited to) new equipment, furniture, furnishings, tenant improvements, decor package, signage,
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compliance with all then-current standards for facility design, software, provision of goods and services, methods of operation and other Gymboree System Standards, plus such renovation and modernization of the Gymboree Play Center as we may require to reflect the then-current standards and image of the System, all at your sole expense (you agree that no monetary or other limitations as to new equipment, etc., whether contained in this Agreement or elsewhere, shall apply to the requirements of this Section or any transfer) and (b) you present evidence satisfactory to us that you have the right to remain in possession of your Gymboree Play Center for the duration of the successor franchise; or, in the event you are unable to maintain possession of the premises, or in our judgment your Gymboree Play Center should be relocated, you secure substitute premises consented to by us and have furnished, stocked and equipped such premises to bring your Gymboree Play Center and inventory into full compliance with our then-current requirements by the expiration date of this Agreement;
(3) You have given written notice of election to obtain the successor franchise to us not less than six (6) months, but not more than twelve (12) months, prior to the expiration of the term of this Agreement. Within ninety (90) days after our receipt of such timely notice, we wiil furnish you with written notice of: (a) any reasons which could cause us not to award the successor franchise, including any deficiencies which require correction and a schedule for correction thereof by you, and (b) our then-current requirements relating to the image, appearance, decoration, furnishing, equipping, stocking and programs of a Gymboree Play Center, and a schedule for effecting such upgrading, modifications or otherwise, as a condition of receiving the successor franchise. Prior to the expiration date of this Agreement, you will fully cure all such deficiencies and fully satisfy all such requirements and conditions. You understand and agree that we may refuse to award a successor franchise if, in our reasonable judgment, you (or any affiliate of yours) have failed to render satisfactory performance as a Franchisee in any operational or other areas (including, but not limited to, safety, compliance with all Manuals, adverse impact on the Marks and associated goodwill, etc.), whether or not such failure constitutes or constituted a default. The award of the successor franchise will be conditioned (among other things) on your (and your affiliates') continued compliance with all the terms and conditions of this Agreement (and all other agreements with us and/or any affiliate) up to the date of expiration and correction of any deficiencies within the periods specified by us.
(4) You (and each affiliate of yours) have satisfied all monetary obligations owed to us and any company affiliated with us and have timely and fully met such and all other obligations throughout the term of this Agreement;
(5) You've executed our then-current form of Franchise Agreement and related documents (with appropriate modifications to reflect the fact that the successor Franchise Agreement relates to the award of a single successor franchise without the right to further successor franchises or renewals), including guarantees, as are then customarily used by us in the award of franchises for Gymboree Play Centers, and the economic and other terms of which may materially differ from the terms of this Agreement, including, without limitation, higher royalty fees and/or marketing contributions; provided, however, you will not be required to pay the then-current initial franchise fee. In our sole and absolute discretion, and to further your and our mutual interests in having consistent documents to cover all of your units, and to update documents to reflect changed competitive and other conditions, we can require you to sign our then-current form of Franchise Agreement to cover all Gymboree Play Centers in which you (or any affiliate) then have an interest;
(6) You've complied with our then-current qualification and training requirements. We may require your personnel to attend and successfully complete any retraining program(s), and at such times and location(s), as we then specify. There will be no charge for any retraining program(s),
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but you'll be responsible for all travel, meals, lodging and other expenses of your personnel.;
(7) You (and each owner and/or affiliate of yours) have executed a general feteaseGeneral Release, in form prescribed by us, of any and all claims, liabilities ond/or obligations, of any nature whatsoever, however arising, known or unknown, against us and/or any or all of the Franchisor Rclotcd Persons/Entities. If you fail to execute such a release, the awarding of a successor franchise will be the equivalent of the granting of such release, since you and we agree that it would be inappropriate and improper for you to continue in a franchise (or other) relationship with us, and have the right to use the Names, Marks and System, if you had any claims, liabilities and/or obligations, of any nature whatsoever, however arising, known or unknown, against us (or other persons/entities covered by such a release) or otherwise failed to execute such a release, particularly in view of the fact that you are not being charged a full initial franchise fee in connection with the successor franchise; and
Failure by you and/or your owners to timely complete such requirements will be deemed an election by you not to obtain the successor franchise.
If, at any time, you or any affiliate is to receive one or more successor, additional, other and/or further franchise(s) from us [we having no obligation to award you any such additional, other and/or further franchise(s)], whether or not a successor franchise, you, each of your affiliates, each owner of the Franchisee, the new franchisee and each owner thereof will at each such time sign a general FeteaseGeneral Release, in form proscribed by us, of any and all claims, liabilities ond/or obligations, of any nature whatsoever, however arising, known or unknown, against us and/or any or ail of the
Franchisor Related Persons/Entities, except (where so required by applicable law) for any claims exclusively related to the offer and sale of the successor, additional, other and/or further franchise(s)A-copy of our current form of releasing language (which is subject to change by us at any time) b attached as Exhibit H for your information.
Your Initials:___________/
4. COMPENSATION
4.1 Franchise Fee.
(a) You'll pay us, on signing this Agreement, an initial franchise fee of ___________
Thousand Dollars ($__________), determined by (among other things) the number of Sites projected for
the Territory and the financing plan elected by Franchisee. The projected number of Sites in the Territory is determined by the market development plan for the Territory, which is hereinafter referred to as "Market Plan" and is set out in Exhibit D attached hereto and incorporated by this reference. The
Market Plan for the Territory covered by this Agreement provides for the establishment of______Sites
in Franchisee's Territory, which is the number of Sites you are limited to under this Agreement. We make no assurance that such (or any other) number of sites can be profitably or effectively operated in the Territory or otherwise. You understand that the initial franchise fee may not be same for all franchisees and may take into account factors such as size of territory, number of sites, number of franchises to be awarded, previous business relationship with us or otherwise.
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The initial franchise fee is fully earned bv us on signing of this Agreement and is entirely nonrefundable fas are all amounts paid to us and/or anv affiliated except for possible partial or other refund (in each case at our sole option) as expressly provided in this Agreement
Your Initials:__________/
(b) Franchisee shall pay the franchise fee according to the fee schedule set out in Gymboree's current or most recent offering circular and incorporated by this reference or a promissory note signed by the Franchisee.
(c) The execution of this Agreement will constitute, and you (and each affiliate of yours, together with each owner of you, if you are a business entity, and/or any affiliate of yours) will, as a condition to the award of this and/or any future or other franchise execute, in a form proscribed by us, a general rolcascGeneral Release, of any ond all claims, liabilities and/or obligations, of any nature whatsoever, however arising, known or unknown, against us ond/or any or all of the Franchisor-Roiatcd Persons/Entities, excepting only (where so required by applicable law) those claims solely related to the offer and sale of the new Franchise, you agreeing that it would be inappropriate from a business standpoint to enter into further franchise relationships with us while there might be a possibility of claims based on a prior relationship. We can make no assurance as to whether additional or future franchises may be awarded to you or the prices, terms or conditions relating thereto. If we should, through inadvertence or otherwise, fail to require such separate release at any time, the execution of this Agreement, and each Franchise Agreement after this one, will be regarded as the equivalent of the granting of such releases.
Your Initials:__________/
(d) Franchisee acknowledges that Franchisee and Gymboree have jointly developed and mutually agreed upon the Market Plan based upon: (1) demographic information available to Franchisee and (2) Franchisee's knowledge of the Territory. Franchisee further acknowledges that demographic studies are not an accurate method of predicting business success, that the ability to successfully open and operate the agreed-upon number of Sites in the Territory includes a number of other variables, such as Franchisee's performance level and the competition, if any, within the Territory and that there can be no assurance as to the number of sites that can be actually opened and/or operated in the Territory, or their economic results. Franchisee further acknowledges that it has been cautioned to make its own determination of the minimum number of Sites that should be included in the Market Plan.
(e) In addition, and in the interests of consistency, efficiency of administration, improved ability to meet competitive challenges and ongoing improvement of the Gymboree System (among other things), on award of this or any other and/or subsequent Gymboree or other franchise to you (and/or any affiliate) by us (and/or any affiliate), and/or as a condition to any transfer (as defined below) or relocation by you (and/or any affiliate) and/or the award of any successor franchise to you (and/or any affiliate), we may require that any or all existing franchise agreement(s) with you (and/or any affiliate) be cancelled and the then-current form of Gymboree Franchise Agreement(s) be executed (using the then-current royalties, marketing fund contributions and other provisions) with respect to each Gymboree unit owned and/or operated by you (and/or any affiliate), with appropriate modifications to reflect the facts that, for such pre-existing units only: (a) where the initial franchisee has
Gymboree Play Programs, Inc. Franchise Agreement - v. 2.2-3 4/1/Q303 19
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been paid in full, no initial franchise fee will be charged, (b) any specific territory awarded to you will be reflected in the new agreement (but all other provisions relating to territory, including, but not limited to, exclusions for alternate channels of distribution, special distribution opportunities, rights to locations outside the Territory, our rights to operate non-Similar Businesses, acquisitions, dual branding or otherwise will be as provided in our then-current form of Franchise Agreement) and (c) the expiration date of the initial term, and the duration of any successor franchise, will not be changed with respect to such pre-existing units as a result of your signing such new agreements). In connection with the execution of such new Franchise Agreement, you (and each affiliate of yours, together with each owner of you, if you are a business entity, and/or any affiliate of yours) will execute, in a form proscribed by ttSy a general rclcascGeneral Release, of any and all claims, liabilities ond/or obligations, of any nature whatsoever, however arising, known or unknown, against us and/or any or oil of the Franchisor Related Persons/Entities, excepting only (where so required by applicable law) those claims solely related to the offer and sale of the new Franchise.
Your Initials:__________/
4.2 Continuing Franchise Fee.
(a) In addition to the franchise fee, Franchisee shall pay to Gymboree a continuing franchise fee of six percent (6%) of Franchisee's Gross Receipts, as hereinafter defined. The term "Gross Receipts" includes all revenues (except sales tax collected and paid when due to the appropriate taxing authority and actual customer refunds, adjustments and credits) which are, or could be, received or earned by you (and/or any affiliate and/or on/for your behalf or benefit) (1) -by or with respect to | your Gymboree Play Center, (and/or at or from the Premises) (2) which relate to the type of products, services or any other items which are or could be provided, sold, rented or otherwise distributed at, through or in association with a Gymboree Play Center [including, without limitation, class fees (including Gymboree On The Go Program and such other programs as Gymboree designates from time to time), membership fees, and revenues from special events and parties], (3) with respect to any products and services which are, or could be, provided, sold, or otherwise distributed in association with any use of the Marks, the Gymboree System, or any related techniques, systems, procedures, or know-how or the operation of any Similar Business (but our receipt, acceptance and/or otherwise of any royalties with respect to any Similar Business will not constitute approval of your, or anyone else's, involvement with any Similar Business) and/or (4) with respect to, any tenants and/or subtenants of yours (including rent and other lease payments) and/or with respect to any co-branding activities. All transactions will be recorded at full list retail selling price and without discount. You'll not divert any business or take any other actions (or fail to take any actions) which would have the effect of reducing the Gross Receipts with respect to which royalties are payable and vou will use vour best efforts to maximize Gross Receipts. All sales and/or billings, whether collected or not, will be included in Gross Receipts, with no deduction for credit card or other charges.
(b) The continuing franchise fee shall be payable in quarterly calendar payments (ending March 31, June 30, September 30 and December 31), based on all Gross Receipts received during each quarter, regardless to which quarter the payments received were attributable. Payments are due thirty (30) days following the end of each calendar year quarter (i.e., on April 30, July 30, October 30, and January 30). Franchisee agrees to keep and maintain, at Franchisee's principal place of business, records of Gross Receipts and expenses. Concurrently with each payment of continuing franchise fees, Franchisee shall deliver to Gymboree a statement of Gross Receipts, expenses, class attendance, and related information for each quarterly session on a form provided by Gymboree as well as any other
Gymboree Play Programs, Inc. Franchise Agreement - v. 2.2-3 4/1/02O3 20
The original documents were scanned as an image. The original file can be downloaded at the link above.