The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample Franchise Agreement
THIS FRANCHISE AGREEMENT ("Agreement") is made this _____ day of
__________________, 200_, by and between HOLLYWOOD PAWS FRANCHISING,
LLC, a California limited liability company, located at 1201 West 5th Street, Suite F-50, Los
Angeles, California 90017 ("Franchisor") and______________________________, located at
WHEREAS, the Franchisor has developed a comprehensive system for the operation of a business offering professional animal acting workshops, extended avocational training programs, professional animal entertainment management services, and the sale of related Products and, if authorized in writing by Franchisor, in Franchisor's sole discretion the opportunity to offer one or more extended Vocational Courses ("Hollywood Paws Business).
WHEREAS, the Hollywood Paws Businesses are operated under a business format per a unique system with high standards of service, including valuable know-how, information, Trade Secrets, Confidential Information, training methods, standards, designs, methods of trademark usage, copyrights, sources and specifications, confidential electronic and other communications, methods of Internet usage, and research and development ("System").
WHEREAS, the distinguishing characteristics of the System include the trademark "Hollywood PawsSM " and other trademarks and trade names, confidential operating procedures, confidential Operations Manual, standards and specifications for equipment, services and products, methods of service, management and marketing programs and sales techniques and strategies. All of these distinguishing characteristics may be changed, improved, and further developed by the Franchisor from time to time. They are the Franchisor's Confidential Information and Trade Secrets and are designated by and identified with the Marks described in this Agreement.
WHEREAS, the Franchisor continues to use, develop and control the use of the Marks in order to identify for the public the source of services and products marketed under the System, and which represent the System's high standards of quality, service and customer satisfaction.
WHEREAS, the Franchisee acknowledges the benefits to be derived from being identified with the System, and also recognizes the value of the Marks and the continued uniformity of image to the Franchisee, the Franchisor, and other franchisees of the Franchisor.
WHEREAS, the Franchisee acknowledges the importance to the System of the Franchisor's high and uniform standards of quality, service and customer satisfaction, and further recognizes the necessity of opening and operating a Hollywood Paws Business in conformity with the System.
WHEREAS, the Franchisee recognizes that in order to enhance the value of the System and goodwill associated with it, this Agreement places detailed obligations on the Franchisee, including strict adherence to the Franchisor's reasonable present and future requirements
regarding the types of products sold, services offered, advertising used, operational techniques, marketing and sales strategies and related matters.
WHEREAS, the Franchisee is aware of the foregoing and is desirous of obtaining the right to use the System and in association therewith, the right to use the Marks, and wishes to be assisted, trained, and franchised to operate a Hollywood Paws Business pursuant to the provisions and within the Territory specified in this Agreement, subject to the terms and conditions contained in this Agreement.
The parties therefore agree as follows:
For the purposes of this Agreement, the following are hereby defined:
(a) "Agreement" - means this agreement, attachments, and all instruments in amendment hereof.
(b) "Affiliate5' - means any person or entity that controls, is controlled by, or is in common control with, the Franchisor.
(c) "Confidential Information" - means all knowledge, know-how, standards, methods and procedures related to the establishment and operation of the System and includes all records pertaining to customers, suppliers, and other service providers of, and/or related in any way to, the Franchisee's Hollywood Paws Business including, without limitation, all databases (whether in print, electronic or other form), all names, addresses, phone numbers, e-mail addresses, customer purchase records, manuals, promotional and marketing materials, marketing strategies and any other data which the Franchisor designates as confidential.
(d) "Franchisor's System" or "System" - means the standards, systems, concepts, identifications, methods, and procedures developed or used by the Franchisor, or which may hereafter be developed or used by the Franchisor, for the sales and marketing of the Franchisor's Services and Products.
(e) "Franchise" - shall mean the business operations conducted or to be conducted using the Franchisor's System and in association therewith the Marks.
(f) "Gross Revenues" - means the total of all receipts derived from all sales of products and services at the Franchisee's Hollywood Paws Business, labor, insurance claims for lost profits to the extent a claim is paid by the insurer, and all other products and services sold or performed by or for the Franchisee or the Franchisee's Hollywood Paws Business or by means of the business conducted under this Agreement, whether the receipts are evidenced by cash, credit, checks, gift certificates, scrip, coupons, services, property or other means of exchange. Gross Revenues do not include:
(i) the amount of any tax imposed by any federal, state, municipal or other governmental authority directly on sales and collected from customers,
provided that the amount of any such tax is shown separately and in fact paid by the Franchisee to the appropriate governmental authority; and
(ii) all customer refunds, valid discounts and coupons, and credits made by the Hollywood Paws Business (exclusions will not include any reductions for credit card user fees, returned checks or reserves for bad credit or doubtful accounts).
Gross Revenues shall be deemed received by the Franchisee at the time the Services or Products from which they were derived, are delivered or rendered or at the time the relevant sale takes place, whichever occurs first, regardless of whether final payment (e.g., collection on a customer's personal check) actually has been received by the Franchisee. Gross Revenues consisting of property or Services shall be valued at the retail prices applicable and in effect at the time that they are received.
(g) "Hollywood Paws Business" - means the business operations conducted or to be conducted by the Franchisee consisting of a business offering professional animal acting workshops, extended avocational training programs, professional animal entertainment management services, the sale of related Products and if authorized by Franchisor, in its sole determination, one or more Vocational Courses using the Franchisor's System and in association with the Marks.
(h) "Lease" - means any agreement (whether oral or written) under which the right to occupy a Training and Educational Facility has been obtained, and any amendment made thereto from time to time, including without limitation, any offer to lease or license a Training and Educational Facility. The Franchisee acknowledges and agrees that before any Lease will be accepted by the Franchisor, the Lease must incorporate the terms of the Lease Addendum attached to this Agreement as Attachment F.
(i) "Marks" - shall mean the trademark "HOLLYWOOD PAWSSM" to the extent
of the Franchisor's rights to same, together with such other trade names, trademarks, symbols, logos, distinctive names, service marks, certification marks, logo designs, insignia or otherwise which may be designated by the Franchisor from time to time as part of the System for use by the Franchisees, and not thereafter withdrawn.
(j) "Operations Manual" - means, but is not limited to, collectively, all directives, books, pamphlets, bulletins, memoranda, order forms, packing slips, invoices, letters, e-mail, Internet or intranet data, or other publications, documents, software programs, video tapes, transmittances or communications, in whatever form (including electronic form) prepared by or on behalf of the Franchisor for use by the franchisees generally or for the Franchisee in particular, setting forth information, advice and standards, requirements, marketing information and procedures, operating procedures, instructions or policies relating to the operation of the Hollywood Paws Business or the operation of Franchises, as same may be added to, deleted or otherwise amended by the Franchisor from time to time. The form and content of the Operations Manual maintained by Franchisor shall prevail in the event of any dispute regarding the form of or content of the Operations Manual between the Franchisor and the Franchisee.
(k) "Products" - means all supplies, material and equipment sold, prepared or otherwise dealt with in connection with the Hollywood Paws Business and associated with the Marks.
(1) "Services" - means the sale and provision of professional animal acting workshops, extended avocational training programs, and professional animal entertainment management services conducted or otherwise dealt with in connection with the Hollywood Paws Business and associated with the Marks and, if authorized in writing by Franchisor, in Franchisor's sole discretion, the opportunity to offer one or more Vocational Courses.
(m) "Software" - means the software that the Franchisor requires the Franchisee to license to operate the Hollywood Paws Business.
(n) "Vocational Courses" - means the one or more extended vocational courses designated by Franchisor.
(o) "Trade Secret(s)" - means information, including a formula, pattern, compilation, program, device, method, training technique or process related to the System that both derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.
(p) Training and Educational Facility means the retail store front, commercial office, or other approved location from which the Franchisee sells Products and provides Services in connection with the Hollywood Paws Business.
1. COVENANTS, REPRESENTATIONS, AND WARRANTIES OF THE
The Franchisee covenants, represents and warrants as follows and acknowledges that the Franchisor is relying upon such covenants, representations and warranties in making its decision to enter into this Agreement.
1.1 The Franchisee acknowledges that it has received, has had ample time to read, and has read this Agreement, and all related agreements with the Franchisor. The Franchisee acknowledges that the Franchisor has advised him to obtain independent legal and accounting advice with respect to this Agreement and the transactions arising out of this Agreement. The Franchisee further acknowledges that it has had an adequate opportunity to be advised by legal, accounting and other professional advisors of its own choosing regarding all pertinent aspects of the Hollywood Paws Business, the Franchisor and this Agreement.
1.2 The Franchisee has, or has made firm arrangements to acquire funds to commence, open and operate the Hollywood Paws Business and it is financially and otherwise able to accept the risks attendant upon entering into this Agreement.
1.3 All statements made by the Franchisee in writing in connection with its application for this franchise were, to the best of its knowledge, true when made and continue to be true as of the date of this Agreement.
1.4 There are no material financial obligations of the Franchisee, whether actual or contingent, which are outstanding as of the date of this Agreement other than those disclosed to the Franchisor by the Franchisee in writing.
1.5 The Franchisee is not a party to or subject to any court or administrative order or action of any governmental authority which would limit or interfere in any way with the performance by the Franchisee of its obligation hereunder.
1.6 The Franchisee is not a party to any litigation or legal proceedings other than those which have been disclosed to the Franchisor by the Franchisee in writing.
1.7 The Franchisee represents that it is not a party to or subject to agreements that might conflict with the terms of this Agreement and agrees not to enter into any conflicting agreements during the Initial Term or any Interim Period.
1.8 The Franchisee agrees and acknowledges that it has not been induced to enter into this Agreement in reliance upon, nor as a result of, any statements, representations, warranties, conditions, covenants, promises or inducements, whatsoever, whether oral or written, and whether directly related to the contents hereof or collateral thereto, made by the Franchisor, its officers, directors, agents, employees or contractors except as provided herein. The Franchisee acknowledges that the Franchise has been granted in reliance upon the information supplied to the Franchisor in the Franchisee's application for a Franchise.
1.9 The Franchisee and its owners agree to comply with and/or to assist Franchisor to the fullest extent possible in Franchisor's efforts to comply with Anti-Terrorism Laws (as defined below). In connection with such compliance, Franchisee and its owners certify, represent, and warrant that none of their property or interests is subject to being "blocked" under any of the Anti-Terrorism Laws and that Franchisee and its owners are not otherwise in violation of any of the Anti-Terrorism Laws.
(a) The Franchisee and its owners certify that none of them, their respective employees, or anyone associated with Franchisee is listed in the Annex to Executive Order 13224 (which Can be accessed at /terrorism.html). Franchisee agrees not to hire (or, if already employed, retain the employment of) any individual who is listed in the Annex.
(b) The Franchisee certifies that it has no knowledge or information that, if generally known, would result in Franchisee, its owners, their employees, or anyone associated with Franchisee to be listed in the Annex to Executive Order 13224.
(c) The Franchisee is solely responsible for ascertaining what actions it must take to comply with the Anti-Terrorism Laws, and Franchisee specifically acknowledges and agrees that its indemnification responsibilities set forth in this Agreement pertain to its obligations under this Section 1.9.
(d) Any misrepresentation under this Section or any violation of the Anti-Terrorism Laws by Franchisee, its owners, agents, its employees shall constitute grounds for immediate termination of this Agreement and any other agreement Franchisee has entered with Franchisor or any of Franchisor's affiliates.
(e) "Anti-Terrorism Laws" means Executive Order 13224 issued by the President of the United States, the Terrorism Sanctions Regulations (Title 31, Part 595 of the U.S. Code of Federal Regulations), the Foreign Terrorist Organizations Sanctions Regulations (Title 31, Part 597 of the U.S. Code of Federal Regulations), the Cuban Assets Control Regulations (Title 31, Part 515 of the U.S. Code of Federal Regulations), the USA PATRIOT Act, and all other present and future federal, state and local laws, ordinances, regulations, policies, lists and any other requirements of any governmental authority (including, without limitation, the United States Department of Treasury Office of Foreign Assets Control and any government agency outside the U.S.) addressing or in any way relating to terrorist acts and/or acts of war.
2. GRANT OF LICENSE
2.1 Subject to all the terms and conditions of this Agreement, the Franchisor hereby grants to the Franchisee, and the Franchisee accepts, for the Initial Term of this Agreement the right and license ("License") to:
(a) Operate a Hollywood Paws Business upon the terms and conditions of this Agreement in 1 territory described in Attachment A ("Territory");
(b) Use the Marks, Software and the System; and
(c) Offer and market ONLY the Franchisor's approved Services and Products, unless the Franchisor approves in writing (such approval to be in the Franchisor's sole and absolute discretion) the Franchisee's request to offer and market complementary and non-competing services or products.
2.2 The License does not include the right to sell products to any vendor who would in turn sell to consumers.
2.3 The Franchisee recognizes that variations and additions to the System may be required from time to time in order to preserve and/or enhance the System. Therefore, the Franchisor expressly reserves the right to add to, subtract from, revise, modify or change from time to time the System or any part thereof, and the Franchisee agrees to promptly accept and comply with any such addition, subtraction, revision, modification or change and to make such reasonable expenditures as may be necessary to comply pursuant to Section 8.
2.4 The Franchisee recognizes that the rights that are granted to the Franchisee are for the specific Territory, defined in Section 4.1 below and no other, and cannot be transferred to an alternate Territory, without the prior written approval of the Franchisor, which approval may be granted or withheld in Franchisor's sole discretion.
3. TERM OF THE AGREEMENT AND LICENSE
3.1 This Agreement and the License granted shall continue for a period of 5 years ("Initial Term"). This Initial Term shall begin on the date this Agreement is executed by the Franchisor, subject, however, to termination in accordance with the provisions of this Agreement. When the Initial Term or the Interim Period expires, the Franchisee shall have the option at the Franchisor's sole and absolute discretion to extend the Franchisee's rights to operate the Hollywood Paws Business for 1 additional term ("Successor Term") of 5 years. The Franchisee must pay the Successor Franchise Fee set forth in Section 3.4(b).
3.2 The Franchisor may refuse to extend Franchisee's rights to operate the Hollywood Paws Business if the Franchisee has:
(a) Failed to remedy any breach of this Agreement specified by the Franchisor in a written notice to the Franchisee as per Sections 17.1 or 17.2; or
(b) Committed and received notice of 2 or more breaches of this Agreement in the 24 months prior to the end of the Initial Term, even if such breaches were timely remedied; or
(c) Failed to meet the Minimum Annual Sales Quota for any year during the Initial Term; or
(d) The Franchisee has not given the Franchisor a written notice of intent to extend its rights to operate a Hollywood Paws Business no less than 6 months or more than 9 months prior to expiration of the Initial Term; or
(e) The Franchisee is not current in payment obligations to the Franchisor or to the Franchisee's, landlord, suppliers, or trade creditors.
3.3 If the Franchisor opts to extend Franchisee's rights to operate the Hollywood Paws Business at the end of the Initial Term, the Franchisee shall execute a new Franchise Agreement ("Successor Franchise Agreement") and all other agreements in the form then being used by the Franchisor in granting new franchises and pay the successor franchise fee set forth in Section 3.4(b). The Franchisor reserves the right to change any term(s) of the Successor Franchise Agreement form to be signed by the Franchisee upon the extension of Franchisee's rights to operate the Hollywood Paws Business (except as specified below). There shall not, however, be another Initial Franchise Fee charged in connection with the extension of Franchisee's rights to operate the Hollywood Paws Business. IN FRANCHISOR'S SOLE DESCRETION, THE FRANCHISEE MAY BE DEEMED TO HAVE IRREVOCABLY DECLINED TO EXTEND ITS RIGHTS TO OPERATE THE FRANCHISE (AND ITS OPTION SHALL THEREUPON TERMINATE) IF IT FAILS TO EXECUTE AND RETURN TO THE FRANCHISOR THE SUCCESSOR FRANCHISE AGREEMENT AND OTHER DOCUMENTS REQUIRED BY THE FRANCHISOR WITHIN THIRTY DAYS AFTER THEIR DELIVERY TO THE FRANCHISEE, OR FAILS TO COMPLY IN ANY OTHER WAY WITH THE PROVISIONS OF THIS SECTION 3.
3.4 As additional conditions to the extension of Franchisee's rights to operate the Hollywood Paws Business, in Franchisor's sole discretion, the Franchisee may be required to:
(a) Execute a general release of all claims the Franchisee may have against the Franchisor, its officers, directors, members, shareholders, agents, Affiliates, and employees, whether in their corporate and/or individual capacities. This release shall include all claims arising under any federal, state, or local law, rule, or ordinance arising out of or concerning this Agreement (to the fullest extent permitted by law) and shall be in a form satisfactory to the Franchisor;
(b) Pay the successor franchise fee ("Successor Franchise Fee") of 10% of the then-current Initial Franchise Fee, which is due and payable to the Franchisor at the time of signing the Successor Franchise Agreement;
(c) Upgrade Franchisee's Training and Educational Facility and computer system to Franchisor's current standards;
(d) Comply with all other provisions contained in the Operations Manual, as modified periodically by Franchisor in Franchisor's sole discretion; and
(g) Provide proof of current licenses, insurance and permits.
3.5 If the Franchisee does not sign a Successor Franchise Agreement prior to the expiration of this Agreement and continues to accept the benefits of this Agreement after the expiration of this Agreement, then at the option of Franchisor, this Agreement may be treated either as (i) expired as of the date of expiration with Franchisee then operating without a franchise to do so and in violation of Franchisor's rights; or (ii) continued on a month-to-month basis ("Interim Period") until one party provides the other with written notice of such party's intent to terminate the Interim Period, in which case the Interim Period will terminate 30 days after receipt of the notice to terminate the Interim Period. In the latter case, all obligations of Franchisee shall remain in full force and effect during the Interim Period as if this Agreement had not expired, and all obligations and restrictions imposed on Franchisee upon expiration of this Agreement shall be deemed to take effect upon termination of the Interim Period.
4.1 During the Initial Term and for so long as the Franchisee is in compliance with all of its obligations hereunder, except as otherwise provided in this Agreement, and subject to the Franchisor's reservation of rights as set forth in Section 4.2 and as provided in Section 4.6 below, neither the Franchisor nor any Affiliate will establish or license another person or entity to establish a Hollywood Paws Business using the Marks licensed to Franchisee within the Territory encompassed by the boundaries set forth in Attachment A, attached hereto and incorporated herein by reference. Except as otherwise specifically provided in this Agreement, this Agreement does not restrict the Franchisor or its Affiliates and does not grant rights to the Franchisee to pursue any of Franchisor's or its Affiliates other business concepts other than the Hollywood Paws Business.
4.2 The Franchisee acknowledges that the Franchise granted hereunder is nonexclusive and that the Franchisor and its Affiliates retain the exclusive right, among others:
(a) to use, and to license others to use, the Marks and System for the operation of Hollywood Paws Businesses at any location other than in the Territory, regardless of proximity to the Territory;
(b) to use, license and franchise the use of trademarks or service marks other than the Marks, whether in alternative channels of distribution or at any location including the Territory, in association with operations that are the same as, similar to or different than the Hollywood Paws Business;
(c) to use the Marks and the System in connection with the provision of other services and products or in alternative channels of distribution such as those described in 4.2(d), at any location including the Territory;
(d) to offer the Services or Products, or grant others the right to offer the Services or Products, whether using the Marks or other trademarks or service marks, through alternative channels of distribution, including without limitation, wholesalers, retail outlets or other distribution outlets (other than Hollywood Paws Businesses), or by Internet commerce (e-commerce), mail order or otherwise, whether inside or outside the Territory;
(e) to any websites utilizing a domain name incorporating one or more of the words "Hollywood" and/or "Paws" or similar derivatives thereof The Franchisor retains the sole right to market on the Internet and use the Marks on the Internet, including all use of websites, domain names, URL's, directory addresses, metatags, linking, advertising, and co-branding and other arrangements. The Franchisee may not independently market on the Internet, or use any domain name, address, locator, link, metatag, or search technique, with words or symbols similar to the Marks or otherwise establish any presence on the Internet without Franchisor's prior written approval. The Franchisor intends that any Franchisee website be accessed only through the Franchisor's home page. The Franchisee will provide the Franchisor with content for the Franchisor's Internet marketing, and will sign Internet and intranet usage agreements, if any. The Franchisor retains the right to approve any linking or other use of its website; and
(f) to acquire businesses that are the same as or similar to the Hollywood Paws Business and operate such businesses regardless of where such businesses are located, including inside the Territory and to be acquired by any third party which operates businesses that are the same as or similar to the Hollywood Paws Business regardless of where such businesses are located, including inside the Territory.
4.3 The Franchisee may be granted, at the Franchisor's sole discretion, express permission to sell or service customers in an unsold territory adjacent to the Franchisee's Territory ("Adjacent Territory"); provided that the Franchisee agrees that when the Adjacent Territory is granted to another franchisee by the Franchisor, the Franchisee will, upon receipt of written notice from the Franchisor, cease all its sales and service efforts within the Adjacent
Territory and return all customer and prospect lists to Franchisor within 10 days of such notice. The Franchisee shall report Gross Revenues from sales in an Adjacent Territory on a separate reporting form. The Franchisee shall pay the Royalty Fee, National and Promotions Marketing Fees, and Individual Advertising Expense for sales in an Adjacent Territory.
4.4 Notwithstanding Franchisor's exclusive right to sell Products and Services on the Internet in accordance with Section 4.2(d), if Franchisor sells Products or Services that Franchisee is required to sell and provide pursuant to this Agreement using the Marks to a customer located in Franchisee's Territory, Franchisor or its supplier or distributor, in Franchisor's sole discretion, may provide Franchisee with a credit against future Royalty Fees or National Marketing and Promotions Fees due to Franchisor in an amount to be determined by Franchisor, in its sole discretion.
4.5 Franchisor will use commercially reasonable efforts to grant only 1 license to a franchisee per" 250,000 people (or incremental portion thereof) residing in a designated geographical location (the "Population Limit"). Franchisor will use the most recent population information available in the U.S. Census Data, or other population statistical sources of Franchisor's choosing to determine populations. Franchisor reserves the right to change, modify, or delete the Population Limit in its sole discretion. Franchisor will establish the boundaries of the Territory using zip codes or geographical elements in Franchisor's sole discretion. The Franchisee acknowledges that it has not and will not rely on this Section 4.5 for any purposes. The Franchisee acknowledges and agrees that once the Territory has been established, it will not be changed regardless of any increase or decrease of the population in the Territory.
4.6 In order to maintain the Territory, Franchisee must meet the Minimum Annual Sales Quota. The Minimum Annual Sales Quota for the first 12 months of operating the Hollywood Paws Business is $250,000 in Gross Revenues, and $500,000 in Gross Revenues for the 13th month of operating the Hollywood Paws Business through the remaining Initial Term and any Interim Period. The Franchisee's failure to satisfy the Minimum Annual Sales Quota may result in the reduction or elimination of the Franchisee's Territory or the termination of this Agreement, in Franchisor's sole discretion. The parties agree that this Minimum Annual Sales Quota is in no way intended to imply or guarantee that Franchisee will generate Gross Revenues of any particular level.
5.1 The Franchisee shall pay the sum set forth on Attachment A plus, if due and payable, all applicable federal, state or municipal taxes, as a non-recurring initial franchise fee ("Initial Franchise Fee") to the Franchisor upon the execution of this Agreement. The Initial Franchise Fee shall be paid by means of cashier's check, money order or wire transfer. The Initial Franchise Fee shall be deemed to have been fully earned by the Franchisor when paid. The Initial Franchise Fee is non-refundable once paid except as provided for in Section 5.2.
5.2 The Initial Franchise Fee will be non-refundable unless the Franchisor terminates the Agreement because Franchisee failed to complete the training program to the satisfaction of the Franchisor (to be determined in the Franchisor's sole discretion).-The Franchisor shall notify the Franchisee in writing that it is exercising its right to terminate"the7 Agreement pursuant to this
Section 5.2, in which case 50% of the Initial Franchise Fee shall be refunded to the Franchisee within 30 days of the Franchisor's notice of termination to the Franchisee.
5.3 The Franchisee shall pay to the Franchisor a Royalty Fee equal to 7.5% of Gross Revenue for such month or partial month.
5.4 The Royalty Fee shall be payable to Franchisor on or before the 10l day of each month for the preceding calendar month and shall be payable through the entire Initial Term of this Agreement and any Interim Period. The Franchisee shall pay the Royalty Fee monthly or in such other frequency as the Franchisor may in its sole discretion require upon written notice to the Franchisee by the Franchisor. The Franchisee shall not subordinate to any other obligation its obligation to pay the Royalty Fee or any other fee or charge hereunder. Each Royalty Fee payment will be accompanied by a report as set forth in Section 5.4(a).
(a) Each Royalty Fee payment shall be, without exception, accompanied by a statement of the previous month's Gross Revenues on a form approved and provided to the Franchisee by the Franchisor. Each failure to include a fully completed statement of the previous month's Gross Revenues with the Royalty Fees payable to the Franchisor when due shall constitute a material breach of this Agreement.
(b) The Franchisor reserves the right to require the Franchisee to remit fees and other amounts due to the Franchisor hereunder via electronic funds transfer ("EFT") or other similar means utilizing a Franchisor approved computer system or otherwise. The EFT Authorization is attached to the Franchise Agreement as Attachment D. If the Franchisor notifies the Franchisee to use such payment method, the Franchisee agrees to comply with procedures specified by the Franchisor and/or perform such acts and deliver and execute such documents, including authorization for direct debits from the Franchisee's business bank operating account, as may be necessary to assist in or accomplish payment by such method. Under this procedure the Franchisee shall authorize the Franchisor to initiate debit entries and/or credit correction entries to a designated checking or savings account for payments of fees and other amounts payable to the Franchisor and any interest charged due thereon. The Franchisee shall make funds available to the Franchisor for withdrawal by electronic transfer no later than the due date for payment therefor. If the Franchisee has not timely reported the Gross Revenues to the Franchisor for any reporting period, then the Franchisor shall be authorized, at the Franchisor's option, to debit the Franchisee's account in an amount equal to (a) the fees transferred from the Franchisee's account for the last reporting period for which a report of the Gross Revenues was provided to the Franchisor as required hereunder; (b) the National Marketing and Promotions Fee; and/or (c) the amount due based on information retrieved from the Franchisor approved computer system.
6. ACCOUNTING, RECORDS, AUDITS AND LATE PAYMENT CHARGES
6.1 The Franchisee shall keep such complete records of its Hollywood Paws Business as a prudent and careful businessperson would normally keep. The Franchisee must use the accounting system and the pre-formatted template required by the Franchisor, if any. The Franchisee shall keep its financial books and records as the Franchisor may from time to time
direct in the Operations Manual or otherwise, including retention of all invoices, order forms, payroll records, cash register tapes, check records, bank deposit receipts, sales tax records, refunds, cash disbursements, journals and general ledgers. The Franchisee shall advise the Franchisor of the location of all original documents and shall not destroy any records without the written consent of the Franchisor.
6.2 The Franchisee shall prepare on a current basis, complete and accurate records concerning all financial, marketing and other operating aspects of the Hollywood Paws Business conducted under this Agreement. The Franchisee shall maintain an accounting system which accurately reflects all operational aspects of the Hollywood Paws Business including uniform reports as may be required by the Franchisor. The Franchisee's records shall include tax returns, daily reports, statements of Gross Revenues (to be prepared each month for the preceding month), profit and loss statements (to be prepared at least quarterly by an independent Certified Public Accountant), and balance sheets (to be prepared at least annually by an independent Certified Public Accountant).
6.3 The Franchisee shall also submit to the Franchisor current financial statements and other reports as the Franchisor may reasonably request to evaluate or compile research and performance data on any operational aspect of the Hollywood Paws Business. The Franchisee shall submit Minimum Individual Marketing Expense statements to Franchisor once each quarter, in Franchisor's sole discretion, beginning July 1 of each year. On or before April 15 of each year, the Franchisee shall provide the Franchisor with a copy of its federal tax return for the previous tax year.
6.4 The records required under this Section 6 pertain only to the Franchisee's operation of the Hollywood Paws Business. The Franchisor has no right to inspect, audit or copy the records of any unrelated business activity the Franchisee may have. The Franchisee shall keep the books and records of the Hollywood Paws Business separate from the records of any unrelated business activity or personal activity.
6.5 From the date the Franchisee and the Franchisor sign this Agreement until 3 years after the end of the Initial Term of this Agreement, including any Interim Period, the Franchisor or Franchisor's authorized agent shall have the right to request, receive, inspect and audit any of the records referred to above wherever they may be located. The Franchisor agrees to do -inspections and audits at reasonable times. The Franchisee agrees to keep all records and reports for 6 years from the date such records are created. Should any inspection or audit disclose a deficiency in the payment of any Royalty Fee, National Marketing and Promotions Fee (as defined in Section 11.5) or other amounts required to be paid under this Agreement, the Franchisee shall immediately pay the deficiency to the Franchisor, without prejudice to any other remedy of the Franchisor under this Agreement. In addition, if the deficiency for any audit period discloses a deficiency in the amount of any Royalty Fee, National Marketing and Promotions Fee or other amounts due by 2% or more, the Franchisee will also immediately pay to the Franchisor the entire cost of the inspection or audit including travel, lodging, meals, salaries and other expenses of the inspecting or auditing personnel. For the purposes of this Section 6.5, an audit period will be each fiscal year. Should the audit disclose an overpayment of any Royalty Fees, National Marketing and Promotions Fees, or other amounts due, the
Franchisor shall credit the amount of the overpayment to the Franchisee's payments of Royalty Fees, and National Marketing and Promotions Fees next falling due.
6.6 If the Franchisee's records and procedures are insufficient to permit a proper determination of Gross Revenues, the Franchisor shall have the right to either require Franchisee to pay the Minimum Royalty or deliver to the Franchisee an estimate, made by the Franchisor, of Gross Revenues for the period under consideration and the Franchisee shall immediately pay to the Franchisor any amount shown thereby to be owing on account of the Royalty Fee, National Marketing and Promotions Fee and other sums due on account of any understatement. Any such estimate shall be final and binding upon the Franchisee.
6.7 To encourage prompt payment and to cover the costs and expenses involved in handling and processing late payments the Franchisee shall also pay, upon demand, a late interest charge equal to the lesser of (i) 1.5% per month; or (ii) the highest legal rate permitted by applicable law, whichever is lower, on all payments due to the Franchisor during the period of time said payments are due and unpaid. Each failure to pay Royalty Fees, National Marketing and Promotions Fees, and other amounts payable to the Franchisor when due shall constitute a material breach of this Agreement. Franchisee acknowledges that this Section 6.7 shall not constitute Franchisor's agreement to accept such payments after same are due or a commitment by Franchisor to extend credit to, or otherwise finance Franchisee's operation of the Hollywood Paws Business. Further, Franchisee acknowledges that failure to pay all such amounts when due shall, notwithstanding the provisions of this Section 6.7, constitute grounds for termination of this Agreement, as provided in this Agreement.
6.8 Any report of the Franchisor's auditor rendered from time to time pursuant to this Section 6, shall be final and binding upon all of the parties hereto.
6.9 The Franchisee hereby authorizes the Franchisor to make reasonable inquiries of the Franchisee's bank, suppliers and trade creditors concerning the Hollywood Paws Business and hereby directs such persons and companies to provide to the Franchisor such information and copies of documents pertaining to the Hollywood Paws Business as the Franchisor may request.
6.10 The Franchisee acknowledges and agrees that the Franchisor owns all business records ("Business Records") with respect to customers and other service professionals of, and/or related to, the Hollywood Paws Business including, without limitation, all databases (whether in print, electronic or other form), including all names, addresses, telephone numbers, e-mail addresses, customer purchase records, and all other records contained in the database, and all other Business Records created and maintained by Franchisee. The Franchisee further acknowledges and agrees that, at all times during and after the termination, expiration or cancellation of this Agreement, Franchisor may access such Business Records, and may utilize, transfer, or analyze such Business Records as Franchisor determines to be in the best interest of the System, in Franchisor's sole discretion.
6.11 To encourage prompt delivery of all Business Records, Certificates of Insurance, Gross Revenue statements and any other documentation or record that may be requested by Franchisor under this Agreement, the Franchisee shall pay, upon demand, a late report fee in the
amount of $100 per record or document requested if Franchisee fails to deliver such record or document when due.
6.12 If the Franchisee pays the Royalty Fee or any other sums due to Franchisor under this Agreement with a check returned for non-sufficient funds more than one time in any calendar year, in addition to all other remedies which may be available, the Franchisor shall have the right to require that Royalty Fee payments and any other sums due to Franchisor under this Agreement be made by certified or cashier's checks. If the Franchisee fails to pay the Royalty Fee or any other sums due to Franchisor under this Agreement by the due date 2 times during the Initial Term or any Interim Period, in addition to all other remedies which may be available, the Franchisor reserves the right to require, in its sole discretion, that the Franchisee pay the Royalty Fee or any other sums due to Franchisor under this Agreement weekly.
6.13 The Franchisee agrees that, during the Initial Term, any Interim Period and for 3 years after the expiration and termination of this Agreement, the Franchisee shall supply to the Franchisor the Franchisee's Hollywood Paws Business location address and telephone number.
7. SERVICES AND ASSISTANCE
7.1 The Initial Franchise Fee and Royalty Fee are paid for the License, which includes the use of the Marks, the System and the use of the Franchisor's Trade Secrets and Confidential Information provided pursuant to this Agreement and for certain services rendered by the Franchisor.
7.2 The Franchisor shall offer the Franchisee initial and continuing services, as the Franchisor deems necessary or advisable in furthering the Franchisee's Hollywood Paws Business and the business of the System as a whole and in connection with protecting the Marks and goodwill of the Franchisor. Failure by the Franchisor to provide any particular service, either initial or continuing, shall not excuse the Franchisee from any of its obligations under this Agreement.
7.3 Currently, initial services provided by the Franchisor prior to Franchisee opening the Hollywood Paws Business shall include:
(a) Designating the Franchisee's Territory as stipulated in Section 4 and in Attachment A.
(b) Approve the Designated Store Manager, if any, and the Designated Training Manager selected by the Franchisee.
(c) Assist Franchise in Franchisee's selection of its Training and Educational Facility by approving and accepting a site for its Training and Educational Facility and reviewing and accepting a final Lease for the Training and Educational Facility.
(d) Furnishing the Franchisee with specifications for all initial and replacement equipment, tools, inventory and supplies required for the operation of the Franchisee's Hollywood Paws Business as stipulated in Section 9.
(e) Within 60 days of the mutual execution of the Franchise Agreement and Franchisee's receipt of all required licenses and permits, providing the Franchisee, or if the Franchisee is an entity, a person designated to manage the Hollywood Paws Business ("Designated Business Manager") and the person designated to manage the training for Hollywood Paws Business ("Designated Training Manager") without extra charge with an initial training program. The initial training program shall be for 5 business days at the Franchisor's facilities in Los Angeles, California (or other location designated by the Franchisor). Training may include a discussion of the System, techniques, procedures, methods of training and operation, advertising, sales techniques, promotional ideas, marketing plans, customer relations, instructions on quality standards and practical experience in the operation of a Hollywood Paws Business. If Franchisee is authorized to offer Vocational Programs by Franchisor, Franchisor will provide, prior to Franchisee offering such Vocational Programs, additional training. There will be no additional training fee for such additional training for the Vocational Program.
(f) Loaning the Franchisee during the Initial Term (including any Interim Period) 1 copy of the Franchisor's confidential Operations Manual containing mandatory and suggested specifications, standards, operating procedures and rules prescribed from time to time by the Franchisor as further stipulated in this Section 7, and containing information relative to other obligations of the Franchisee hereunder. Specifications, standards and operating procedures prescribed from time to time by the Franchisor in the Operations Manual or otherwise communicated to the Franchisee in writing shall constitute provisions of this Agreement as if fully set forth herein. The Franchisee shall operate the Hollywood Paws Business strictly in accordance with the Operations Manual. Failure to comply with the standards set forth in the Operations Manual shall constitute a material breach of this Agreement. The Franchisor reserves the right to provide the Operations Manual and updates to the Operations Manual in electronic form or other form determined by the Franchisor. The Franchisor shall have the right to add to, and otherwise modify, the Operations Manual from time to time to reflect changes in authorized Products and Services, business image or the operation of the Hollywood Paws Business; provided, however, no such addition or modification shall alter the Franchisee's fundamental status and rights under this Agreement. Some of the revisions to the Operations Manual may include changes with respect to: (i) sales and marketing strategies; (ii) equipment and supplies; (iii) accounting and reporting systems and forms; (iv) insurance requirements; (v) operating procedures; (vi) Services; and (vii) Products.
(i) The Franchisee covenants to accept, implement and adopt any such modifications at its own cost, except as provided in Section 8.5 of this Agreement. The Franchisee shall keep its Operations Manual with replacement pages and insertions as instructed by the Franchisor.
(ii) The Franchisee hereby acknowledges that the Operations Manual is loaned to the Franchisee and shall at all times remain the sole and exclusive property of the Franchisor, and upon termination of this Agreement for any reason whatsoever, the Franchisee shall forthwith return the Operations Manual together with all copies of any portion of the Operations Manual which the Franchisee may have made, to the Franchisor.
(g) Providing Franchisee with a set of letterhead, business cards, and other start-up materials determined by Franchisor each at no charge. Additional copies of letterhead, business cards and other start-up materials after the initial inventory may be provided at Franchisee's expense.
(h) At Franchisor's sole discretion, Franchisor may provide pre-opening and grand opening assistance during the first week of operations of Franchisee's Hollywood Paws Business. Franchisor may charge Franchisee a reasonable fee for such services.
7.4 The Franchisee is solely responsible for locating a site from which to operate the Training and Educational Facility and negotiating a Lease for the property. Upon request, Franchisor will provide assistance to Franchisee in analyzing a location and in negotiating a Lease. If Franchisee requests that Franchisor send a representative into Franchisee's Territory to assist Franchisee in the site selection process for the Training and Educational Facility, Franchisor reserves the right to charge a site selection assistance fee ("Site Selection Assistance Fee") in accordance with the fee schedule set forth in the Operations Manual. Franchisor will analyze a location by examining population density, census data, proximity of the proposed site to other Hollywood Paws Businesses, or any other criteria as set forth in Section 8.2(b). The Training and Educational Facility site is subject to Franchisor's written approval, which may be granted or denied in Franchisor's discretion. Franchisee agrees that the location of the Training and Educational Facility is a factor in the potential success of the Hollywood Paws Business and Franchisor may reject any location in its sole discretion. However, Franchisee agrees that Franchisor's assistance in no way constitutes a representation or warranty with respect to the success or viability of the property or the Lease. Franchisee acknowledges that Franchisor's approval of the Training and Educational Facility site indicates only that Franchisor believes that the site falls within acceptable criteria established by Franchisor as of the approval date.
7.5 Currently, the services provided by the Franchisor to the Franchisee after Franchisee opens the Hollywood Paws Business shall include:
(a) Making a representative reasonably available to speak with the Franchisee on the telephone during normal business hours, as Franchisor determines is necessary, to discuss the Franchisee's operational issues and support needs.
(b) Holding periodic conferences to discuss sales techniques, new product developments, bookkeeping, training, accounting, inventory control, performance standards, advertising programs, merchandising procedures and other topics. The Franchisee must pay a conference fee, if any, and all its travel and living expenses to attend. These elective conferences are held at the Franchisor's Los Angeles, California headquarters or at a location chosen by the Franchisor in Franchisor's discretion.
(c) Franchisor may also hold a mandatory annual conference to discuss sales techniques, new Service and Product developments, training, bookkeeping, accounting, performance standards, advertising programs, merchandising procedures and other topics. The Franchisee must pay the conference fee, if any, and all personal travel and living expenses. These mandatory annual conferences are held at the Franchisor's Los Angeles,
California headquarters or at a location chosen by the Franchisor in Franchisor's discretion.
(d) Informing Franchisee of mandatory specifications, standards and procedures for the operations of the Hollywood Paws Business.
(e) Researching new Products, Services and training methods, from time to time, and providing Franchisee with information concerning developments of this research.
(f) Maintaining the National Marketing and Promotions Fund and using these funds to develop promotional and advertising programs and public relations coverage for Hollywood Paws Businesses.
(g) Providing advertising materials to Franchisee in the form of an arts graphics package included in the Operations Manual and as further stipulated in Section 11.
(h) A representative of Franchisor may, in its sole discretion, provide additional assistance. There may be additional charges for this additional assistance. If Franchisor provides additional assistance, the Franchisor and Franchisee must agree in advance on the charges for the visit and the length of the visit.
(i) Providing Franchisee with a monthly newsletter, in Franchisor's discretion.
7.6 If Franchisee believes Franchisor has failed to adequately provide pre-opening services to Franchisee as provided in this Agreement in Sections 7.3 and 7.4, Franchisee shall notify Franchisor in writing within 30 days following the opening of the Hollywood Paws Business. Absent the timely provision of such notice to Franchisor, Franchisee shall be deemed to conclusively acknowledge that all pre-opening and opening services required to be provided by Franchisor were sufficient and satisfactory in Franchisee's judgment.
7.7 Franchisor is not obligated to perform services set forth in this Agreement to Franchisee's particular level of satisfaction, but as a function of Franchisor's experience, knowledge and judgment. Franchisor does not represent or warrant that any other services will be provided to Franchisee, other than as set forth in this Agreement. To the extent any other services, or any specific level or quality of service is expected, Franchisee must obtain a commitment to provide such service or level of service in writing signed by an authorized officer of Franchisor, otherwise Franchisor-shall not be obligated to provide any other services or specific level or quality of services.
8. FRANCHISEE'S DUTIES, OBLIGATIONS AND OPERATING STANDARDS
8.1 The Franchisee shall, consistent with the terms of this Agreement, diligently develop the Hollywood Paws Business and use its best efforts to market and promote the required Services and Products.
8.2 The Franchisee shall complete the construction of Franchisee's Training and Educational Facility, and shall maintain the Training and Educational Facility, in accordance with the following requirements:
(a) The Franchisee shall, at Franchisee's sole cost and expense, complete the interior build-out and install all furniture and fixtures as specified by Franchisor in the Operations Manual, and required by this Agreement.
(b) The Franchisee must purchase or lease the required real property and improvements for the Training and Educational Facility from any source upon terms approved by Franchisor in writing within 45 days after Franchisor approves the location chosen by the Franchisee for its Training and Educational Facility. Proposals for location of the Training and Educational Facility must be submitted to Franchisor within 60 days of the execution of this Agreement or Franchisor may elect to terminate this Agreement in Franchisor's sole discretion. The Franchisee must deliver to Franchisor any traffic, completion and demographic or similar location information relating to any proposed site that Franchisor reasonably requests for review at least 20 days before any proposed Lease signing date. The Franchisee must deliver to Franchisor a copy of the proposed Lease, in a form acceptable to Franchisor, and such Lease must incorporate the terms of the Lease Addendum attached to this Agreement as Attachment E prior to executing the Lease for Franchisor's approval. If Franchisor assists Franchisee in negotiating the Lease or negotiating Franchisor's required Lease Addendum terms into the Lease, or Franchisor requires Franchisee to use an independent third-party or attorney to assist in Franchisee's Lease negotiation, Franchisor may charge Franchisee a lease negotiation fee ("Lease Negotiation Fee") as set forth in the Operations Manual and modified by Franchisor periodically in Franchisor's discretion. The Lease Negotiation Fee will be due prior to the negotiation of the Lease, and is non-refundable once paid, even if the Lease negotiation is not completed. Notwithstanding anything herein to the contrary, Franchisor may, in its sole discretion, extend the time periods set forth in this Section 8.2(b).
(c) Subject to the terms of this Section, Franchisee must at all times comply with Franchisor's standards, specifications, processes, procedures, requirements and instructions regarding the Training and Educational Facility's physical facilities, including the layout of furnishings, fixtures, and training rooms. The Franchisee must maintain the Training and Educational Facility and any parking areas in good and safe condition, as specified in the Operations Manual. The Franchisee must remodel or upgrade the Training and Educational Facility at is sole cost and expenses in accordance with Franchisor's standards as set forth in the Operations Manual, which may be modified by Franchisor at any time in Franchisor's discretion. The Franchisee acknowledges that the costs and expenses of such remodeling or upgrading are not capped or limited by Franchisor in any way.
8.3 Subject to the terms of this Agreement, including Subsections 7.3(e)(i) and (ii), during the Initial Term and any Interim Period, the Franchisee shall strictly comply with all present and future standards, specifications, processes, procedures, requirements, and instructions of the Franchisor regarding the operation of the Hollywood Paws Business and must comply with the following requirements:
(a) Prior to opening the Hollywood Paws Business, the Franchisee or the Franchisee's Designated Business Manager and the Designated Training Manager must attend and successfully complete all initial training programs. If Franchisee is authorized to offer Vocational Courses, Franchisee, its Designated Training Manager or such other member of Franchisee's staff must satisfactorily complete any additional training required by Franchisor prior to offering such Vocational Courses at Franchisee's Hollywood Paws Business. The Franchisee shall be responsible for travel, meals, personal expenses and living expenses incurred by itself or the Designated Business Manager, the Designated Training Manager and additional persons that participate in the initial training program.
(b) The Franchisee or its Designated Business Manager and the Designated Training Manager, if required at the time by Franchisor, must attend mandatory annual conferences at such locations as the Franchisor may reasonably designate, and the Franchisee will pay all salary and other expenses of persons attending, including any conference fees, travel expenses, meals, living expenses and personal expenses.
(c) Subject to Section 8.6, any additional required Service or Product introduced into the System by the Franchisor must be offered for sale on a continuing basis at the Hollywood Paws Business at the time and in the manner required by the Franchisor. Franchisor will provide at least 30 days prior written notice of any new required Service or Product introduced into the System. All equipment, products, supplies, tools and other items necessary to add the newly required Services or Products must be acquired, installed, and utilized at the time and in the manner required by the Franchisor. The marketing of new Services and Products must begin at the Hollywood Paws Business as reasonably required by the Franchisor.
(d) No service or product, except approved Services or Products, may be offered for sale from the Training and Educational Facility or in the Territory, unless the Franchisee receives the prior written consent of the Franchisor (which may be granted or denied in the Franchisor's sole discretion).
(e) Only advertising and promotional materials, services, equipment, tools, inventory, products, signage, supplies, and uniforms that meet the Franchisor's standards and specifications shall be used at the Hollywood Paws Business. Advertising and promotional materials, tools, services, equipment, inventory, products, signage, supplies and uniforms produced or approved by Franchisor for use by the Franchisee may be used only in the manner and during the period specified by the Franchisor.
(f) Equipment, tools, Services, Products, inventory, supplies, signage, uniforms and other items must be added, eliminated, substituted and modified at the Hollywood Paws Business as soon as possible in accordance with changes in the Franchisor's specifications and requirements.
(g) The Hollywood Paws Business and everything related to the Hollywood Paws Business must be maintained in good condition and must be kept clean, neat and sanitary. All maintenance, repairs and replacements reasonably requested by the
Franchisor or needed in connection with the Hollywood Paws Business must be promptly made. All employees must be clean and neat in appearance.
(h) No alterations of the Hollywood Paws Business materially affecting the image of the Hollywood Paws Business may be made except at the Franchisor's request or approval, and any alterations must strictly conform to specifications and requirements established or approved by the Franchisor.
(i) The Hollywood Paws Business and the Services provided and Products sold by Franchisee must comply with all applicable federal, state, and local laws, ordinances, rules, regulations and other requirements applicable to animal training, animal care, and the care and treatment of animal actors on the set, including union requirements and regulations, if any. The Franchisee must obtain all business licenses and permits required by federal, state and local laws, ordinances, rules and regulations before operating its Hollywood Paws Business. If the Franchisee does not obtain all required permits and licenses necessary to operate it Hollywood Paws Business within 6 months after the mutual execution of the Franchise Agreement, Franchisor may terminate this Franchise Agreement.
(j) The employees, equipment, tools, supplies, inventory, products, and other items on hand at the Hollywood Paws Business, must be at all times sufficient to efficiently meet the anticipated volume of business.
(k) All debts and taxes arising in connection with the Hollywood Paws Business, except those duly contested in a bona fide dispute, must be paid when due.
(1) The Franchisee will use its best efforts to ensure customer satisfaction; use good faith in all dealings with customers, potential customers, referral sources, suppliers and creditors; respond to customer complaints in a courteous, prompt and professional manner; use its best efforts to promptly and fairly resolve customer disputes in a mutually agreeable manner; and take such actions as Franchisor deems necessary or appropriate to resolve customer disputes.
(m) The Franchisee shall accept all major credit cards and other the forms of payment specified by Franchisor in the Operations Manual as payment.
(n) The Franchisee shall comply with all terms and pay all fees that may be due under a software license agreement for any software Franchisee is required to use in the operation of its Hollywood Paws Business as prescribed by the Franchisor.
(o) The Franchisee shall comply with the advertising requirements set out in Section 11.
(q) The Franchisee will not use any materials that are false or misleading.
(r) The Franchisee will ensure that all advertising, labeling, packaging and other materials associated with the Services and Products fully conform to all applicable laws and regulations.
(s) The Franchisee will conduct its business operations in accordance with all applicable laws and regulations, including but not limited to, consumer protection laws and regulations. Franchisee will control the quality of the Services and Products to avoid quality problems or product liability claims that could reflect adversely on Franchisee or Franchisor in the minds of consumers
8.4 In prescribing standards, specifications, processes, procedures, requirements or instructions under Section 8.2 or any other provision of this Agreement, the Franchisor will provide guidance to the Franchisee, as required in Franchisor's sole determination, in determining the prices to be charged by the Franchisee for Services or Products. Franchisor shall not have control over the day-to-day managerial operations of the Hollywood Paws Business, and the Franchisee shall be free to establish its own prices.
8.5 Franchisor and Franchisor's representatives will have the right during business hours to inspect the Hollywood Paws Business and all other facilities used for providing Services and selling approved Products. Franchisor and Franchisor's representatives will have the right to observe the manner in which Franchisee is rendering its Services and conducting its operations of the Hollywood Paws Business. Franchisor and Franchisor's representatives will have the right to discuss with the Franchisee, or other personnel the Franchisee may designate, all matters that may pertain to compliance with this Agreement and with the Franchisor's standards, specifications, requirements, instructions and procedures and the Franchisor may video tape or take photographs of the Franchisee's training styles and techniques as it relates to the Hollywood Paws Business. Franchisor and Franchisor's representatives will have the right to have any of the Franchisor's required Services rendered by any employee at the Hollywood Paws Business. The Franchisee shall in all respects cooperate with the Franchisor's rights under this Section 8.4; provided that the Franchisor's exercise of these rights shall not unreasonably interfere with the Franchisee's conduct of the Hollywood Paws Business.
8.6 The Franchisee will not be required to offer or sell new Services or Products as set out in Section 8.3(c) if the Franchisee demonstrates to the Franchisor's reasonable satisfaction that:
(a) A substantial capital improvement not contemplated by this Agreement or in the Operations Manual is required, thereby resulting in a material hardship to the Franchisee; or
(b) A material reduction in sales or profitability would result therefrom. For the purposes of this Subsection 8.6(b), a 40% decrease in sales from the average sales in the prior 12 months would be considered a material reduction in sales, and a 30% reduction in profitability from the average profitability during the previous 12 months would be considered a material reduction in profitability.
8.7 Franchisor may require the Franchisee's compliance with the provisions of this Section 8 even if it does not require such compliance by all franchisees.
The original documents were scanned as an image. The original file can be downloaded at the link above.