The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample Franchise Agreement
JEI SELF-LEARNING SYSTEMS, INC. FRANCHISE AGREEMENT
This Franchise Agreement made this______day of_____________, 20______, is by and between JEI SELF-LEARNING SYSTEMS. INC.. a California corporation, having its principal place of business at 4221 Wilshire Blvd..
Suite 224. Los Angeles. California 90010 ("'Franchisor"), and________________________________________________
________________________________, an individual/partnership/corporation/limited liability company established in
the State of______________________and whose principal address is___________________________________________
WHEREAS. Franchisor has developed or acquired a license to use and sublicense the use of, and is in the process of further developing, a System (as defined herein) identified by the service mark "JEI SELF-LEARNING CENTERS" and relating to the establishment and operation of learning centers (the ''JEI Self-Learning Centers") that offer a nurturing educational environment utilizing the "SELF-LEARNING SYSTEM" of helping students understand theories and concepts by working on their own;
WHEREAS, Franchisor has developed or acquired certain Proprietary Products (as defined herein) which are specially suited for use in the operation of JEI Self-Learning Centers, and which Franchisor shall furnish (o Franchisee and furnishes to other franchisees on a for-profit basis;
WHEREAS, in addition to the service mark, "JEI SELF-LEARNING CENTERS" and certain other Marks (as defined herein), and the Proprietary Products, the distinguishing characteristics of the System include, without limitation, uniform standards and procedures for efficient business operations: products and supplies; procedures and strategies for marketing, advertising and promotion; customer service and development techniques; distinctive interior and exterior design, layout and decor: other strategies; techniques and trade secrets; and the Manual (as defined herein);
WHEREAS. Franchisor grants to qualified persons and business entities the right to own and operate a single JEI Self-Learning Center using the System and the Marks;
WHEREAS, Franchisee has had the opportunity to examine the Uniform Franchise Offering Circular (as defined herein) provided by Franchisor and to investigate the System and the competitive market in which it operates:
WHEREAS. Franchisee desires to establish and operate a JEI Self-Learning Center and has applied for the Franchise and such application has been approved by Franchisor m reliance upon all of Franchisee's representations made in such application: and
WHEREAS. Franchisee understands and acknowledges the importance of Franchisor's high and uniform standards of quality, operations and service and the necessity of operating the Franchised Center (as defined herein) in strict conformity with Franchisor's System.
NOW. THEREFORE, in consideration of the mutual promises, covenants and agreements set forth hereinafter, and other good and valuable consideration, Franchisor and Franchisee, intending to be legally bound, hereby agree as follows:
Whenever used in this Agreement, the following words and terms have the following meanings:
"Affiliate" means any business entity that controls, is controlled by, or is under common control with Franchisor;
"Agreement" means this agreement entitled "JEI SELF-LEARNING SYSTEMS, INC. Franchise Agreement'' and all instruments supplemental hereto or in amendment or confirmation hereof;
"Applicable Law" means all laws, statutes, ordinances, rules and regulations of the United States of America and any foreign country, and each state, commonwealth, city, county, municipality or other political subdivision thereof;
"Approved Location" means the site for the operation of the Franchised Center selected by Franchisee and approved in writing by Franchisor, as identified in Section 2.2;
"Approved Supplier(s)" shall have the meaning given to such term in Section 13.1;
"Competitive Business" means any business which offers (or grants franchises or licenses to others to operate a business that offers) products or services which are the same as, similar to or competitive with those provided by JEI Self-Learning Centers or in which Confidential Information could be used to the disadvantage of Franchisor or its other franchisees; provided, however, that the term "Competitive Business"" shall not apply to any JEI Self-Learning Center operated by Franchisee under a franchise agreement with Franchisor;
"Confidential Information" means any trade secrets or other confidential or proprietary information of Franchisor, regardless of the form or medium of such information or the manner of disclosure, relating to the Franchise, the System, the Marks, the Copyrighted Materials or the Proprietary Products, including, without limitation, know-how, knowledge of and experience in operating a JEI Self-Learning Center, methods, formats, specifications, policies, procedures, information, standards, business management and operating systems and techniques; record keeping and reporting methods; accounting systems; management and personnel training techniques; advertising and promotion techniques; specifications for signs, displays, business forms, and business stationery to be used by franchisees; designs, drawings, and specifications for the Approved Location; the Manual; ideas, research and development; student account data; lists of franchisees and suppliers; suggested pricing and cost information; information relating to computer hardware and software specifications, including, without limitation, technological manuals, system requirements, technological support systems, training programs or techniques; product information: this Agreement and any other information or material identified by Franchisor as confidential or proprietary; provided, however, that Confidential Information shall not include information that (a) is already in the possession of Franchisee at the time of its disclosure to Franchisee by Franchisor, unless provided to Franchisee in connection with this Agreement and provided that such information is not subject to any other confidentiality or non-disclosure agreement; (b) is or becomes generally known to the public other than as a result of a disclosure, directly or indirectly, by Franchisor; or (c) is disclosed to Franchisee on a non-confidential basis by a person other than Franchisor, provided that such person is not in violation of a confidentiality or non-disclosure agreement with Franchisor in making such disclosure;
"Cooperative Advertising" means the combined advertising program of two (2) or more Franchisees established within a common market that Franchisor may require for JEI Self-Learning Centers within a particular region;
"Copyrighted Materials" means any materials provided to Franchisee by Franchisor, in which Franchisor owns and holds the copyright, including, without limitation, certain Proprietary Products, whether or not Franchisor has registered such materials with the United States Copyright Office:
"Designated Area" shall have the meaning given to such term in Section 2.3;
"Director" means the person designated by Franchisee who has primary responsibility for managing the day-to-day operations and affairs of the Franchised Center, provided that if Franchisee is an individual and not a business entity, the Director shall be Franchisee;
"Effective Date" means_________________, 20_____;
"Electronic Depository Transfer Account" means an account established at a national banking institution approved by Franchisor and to which Franchisor shall have access to electronically withdraw any amounts due to Franchisor under this Agreement;
"Franchise" means the right granted to Franchisee by Franchisor to use the System and the Marks;
"Franchise Fee" shall have the meaning given to such term in Section 3.1;
"Franchised Center" means the JEI Self-Leaming Center to be established and operated by Franchisee pursuant to this Agreement;
"Franchisee" means the individual or business entity identified as "Franchisee" in the introductory paragraph of this Agreement;
"Franchisor" means JEI SELF-LEARNING SYSTEMS, INC.:
"Franchisor Indemnitees" shall have the meaning given to such term in Section 21.2;
"Grand Opening Advertising" shall have the meaning given to such term in Section 11.1;
"Gross Sales" means the aggregate of all revenue from the sale of products and/or the provision of services from all sources in connection with the Franchised Center whether or not collected by Franchisee and whether in the form of check, cash, credit or otherwise including, without limitation, all proceeds from any business interruption insurance; provided, however, that Gross Sales shall not include (a) any refunds made in good faith, (b) any sales and equivalent taxes that are collected by Franchisee for or on behalf of any governmental taxing authority and paid thereto, (c) the value of any allowance issued or granted to any student of the Franchised Center that is credited by Franchisee in full or partial satisfaction of the price of any products and services offered in connection with the Franchised Center, and (d) any rebate received by Franchisee from a manufacturer or supplier:
"Gross Sales Reports" shall have the meaning given to such term in Section 12.2;
"Incapacity" means the inability of Franchisee to operate or oversee the operation of the Franchised Center for a period of more than four (4) calendar days by reason of any continuing physical, mental or emotional condition, chemical dependency or other limitation;
"Initial Inventory" means the initial supply of Proprietary Products, which Franchisee shall obtain from Franchisor prior to opening and commencing operations of the Franchised Center;
"Initial Inventory Fee" shall have the meaning given to such term in Section 3.2;
"Initial Term" shall have the meaning given to such term in Section 4.1;
"Internet" means any one (1) or more local or global interactive communications media that is now available, or that may become available, including sites and domain names on the World Wide Web;
"JEI Self-Learning Centers" shall have the meaning given to such term in the recitals to this Agreement:
"Local Advertising" shall have the meaning given to such term in Section 11.2;
"Manual" means the JEI Self-Learning Systems, Inc. Operations Manual, and any other items as may be provided, added to, changed, modified or otherwise revised by Franchisor from time to time that contain or describe the standards, methods, procedures and specifications of the System, including, without limitation, other operations, administration and managers1 manuals and all books, computer programs, password-protected portions of an Internet site, pamphlets, memoranda and other publications prepared by, or on behalf of, Franchisor;
"Marketing Fund" means the System-wide marketing, advertising and promotion fund defined in Section 3.4 and established by Franchisor in Section 11.3:
"Marketing Fund Contribution" shall have the meaning given to such term in Section 3.4;
"Marks" means the service mark "JEI SELF-LEARNING CENTERS" and such other trade names, trademarks, service marks, trade dress, designs, graphics, logos, emblems, insignia, fascia, slogans, drawings and other commercial symbols as Franchisor may designate to be used in connection with JEI Self-Learning Centers. including, without limitation, the following: "Jaeneung," JEI/' JEI Self-Learning Centers," "Jaeneung Classes.7" JEI Self-Learning Systems, Inc.," JEI Self-Learning System," '"Jaeneung Mathematics." Jaeneung Korean," Jaeneung Chinese Character Class."' "Hanja,'" Jaeneung English Class." "Ipsum," "Tendercare," "Thinking Pizzaa" and "A Better Life Through Belter Education;"
"Monthly Royalty Fee" shall have the meaning given to such term in Section 3.3;
"Proprietary Products" means such products and other items for use in connection with JEI Self-Learning Cenlers specified by Franchisor from time to time as Proprietary Products in accordance with Section 13.2 hereof;
"Renewal Term" shall have the meaning given to such term in Section 4.2;
"Royalty Rate" shall have the meaning given to such term in Section 3.3;
"System" means the uniform standards, methods, procedures and specifications developed by Franchisor and as may, from time to time, be added to, amended, changed, modified, withdrawn or otherwise revised by Franchisor, in its sole discretion, for the operation of JEI Self-Learning Centers;
"Taxes" shall have the meaning given to such term in Section 3.5; and
"Uniform Franchise Offering Circular" means Franchisor's Uniform Franchise Offering Circular which Franchisor has provided to Franchisee in connection with this Agreement.
2. GRANT OF FRANCHISE; APPROVED LOCATION
Franchisor hereby grants to Franchisee, and Franchisee undertakes and accepts from Franchisor, upon the terms and conditions herein contained, a revocable, limited, nonexclusive license to operate one (1) JEI Self-Learning Center at the Approved Location using the System, the Marks, the Copyrighted Materials and the Proprietary Products.
2.2 Approved Location
The street address (or detailed description of the premises) of the Approved Location shall be:
23 Approved Location Not Determined
If the Approved Location of the Franchised Center has not been determined as of the Effective Date, then the geographic area in which the Franchised Center may be located shall be restricted to the geographic area described below (the "Designated Area"). When the Approved Location has been determined, its address shall be inserted into Section 2.2. provided that the failure to insert such address shall not automatically affect the enforceability of this Agreement. The Designated Area is delineated for the sole purpose of site selection and does not confer any territorial exclusivity or protection to Franchisee. The following is a detailed description of the geographic area or boundaries of the Designated Area:
Franchisee shall not sublicense the use of the System or Marks to any person or entity to perform any part of the rights or obligations licensed to Franchisee hereunder, or to grant any person or entity the right to act as Franchisee's agent or representative to perform any part of Franchisee's rights or obligations hereunder.
Franchisor does not grant exclusive territories and retains the right to establish JEI Self-Learning Centers at any location Franchisor, in its sole discretion, desires.
2.6 Franchisor's Rights
2.6.1 The Franchise granted under this Agreement is nonexclusive and Franchisor retains all rights and discretion with respect to the System, the Marks the Copyrighted Materials and the Proprietary Products, including, without limitation, the following:
2.6.2 To establish, own or operate, and to license others the right to establish, own or operate, JEI Self-Learning Centers at any location, except the Approved Location, as Franchisor deems appropriate;
2.6.3 To establish, own or operate, and to license others to establish, own or operate, other businesses offering the same or competitive products and/or services utilizing the Marks or other trade names, trademarks or service marks without offering Franchisee any right thereto;
2.6.4 To establish, own or operate, and to license others to establish, own or operate other businesses that utilize trade names, trademarks or service marks other than the Marks at any location, as Franchisor deems appropriate;
2.6.5 To sell or otherwise distribute products and/or provide services similar to or competitive with the products and/or services offered through the Franchised Center, whether using the Marks or other trade names, trademarks or service marks, through any alternate channel of distribution (including, without limitation, the Internet or other distribution channels), under terms and conditions that Franchisor, in its sole discretion, deems appropriate:
2.6.6 To use the Marks in other businesses that are not competitive with JEI Self-Learning Centers;
2.6.7 To acquire businesses that are similar to or competitive with JEI Self-Learning Centers;
2.6.8 To be acquired by any third party which operates businesses similar to or competitive with JEI Self-Learning Centers; and
2.6.9 To engage in any business or other activities not expressly forbidden by this Agreement. 3. FEES
3.1 Franchise Fee
Upon execution of this Agreement, Franchisee shall pay a fee to Franchisor of TWENTY-FIVE THOUSAND DOLLARS ($25,000.00) (the "Franchise Fee"). The Franchise Fee shall be deemed fully earned upon execution of this Agreement and is nonrefundable, except as provided in Section 8.3. The Franchise Fee is payment, in part, for expenses incurred by Franchisor in furnishing assistance and services to Franchisee as set forth in this Agreement and for costs incurred by Franchisor, including, without limitation, general sales and marketing expenses, training, legal, accounting and other professional fees.
3.2 Initial Inventory Fee
Prior to commencing operation of the Franchised Center, Franchisee shall pay a fee to Franchisor of (the 'initial Inventory Fee")- The Initial Inventory Fee is payment for
Franchisee's purchase of the Initial Inventory from Franchisor as described in Exhibit F.
33 Monthly Royalty Fee
Each month, Franchisee shall pay to Franchisor without offset, credit or deduction of any nature whatsoever, so long as this Agreement remains in effect, a royalty fee (the "Monthly Royalty Fee") which shall be the product of the number of subjects multiplied by the Subject Fee plus the Minimum Fee of $250, and the Registration Fee/Diagnostic Test Fee per subject as set forth below:
Number of Subjects
$ 15 per subject
$15 per subject
$ 15 per subject
Should a student take the diagnostic test and not register for a subject or register for a subject and not take the diagnostic test the Registration Fee/Diagnostic Test Fee is still due and payable.
Each payment of a Monthly Royalty Fee shall accompany the monthly Gross Sales Report, as required by Section 12.2, for such monthly period. If Franchisor requires Franchisee to pay Monthly Royalty Fees through electronic transfer, as provided for in Section 3.6, the Gross Sales Reports may be submitted to Franchisor via facsimile transmission or e-mail.
3.4 Marketing Fund Contribution
Franchisor shall have the right, in its sole discretion, to establish and administer a System-wide marketing, advertising and promotion fund ("Marketing Fund"), which shall be funded by contributions from Franchisees. If a Marketing Fund is established by Franchisor. Franchisee shall be required lo contribute on a monthly basis, an amount ("Marketing Fund Contribution") specified by Franchisor to the Marketing Fund. The Marketing Fund Contribution shall not exceed one percent (1%) of Franchisee's monthly Gross Sales. Marketing Fund Contributions shall be made at the same time and in the same manner as Monthly Royalty Fee payments. If established, the Marketing Fund shall be maintained and administered by Franchisor or its designee in accordance with the provisions contained in Section 11.3.
Franchisee shall pay to Franchisor an amount equal to all sales taxes, use taxes and similar taxes ("Taxes") imposed on the fees payable by Franchisee to Franchisor hereunder and on services or goods furnished to Franchisee by Franchisor, whether such services or goods are furnished by sale, lease or otherwise. ; provided,
however, that Taxes shall not include any income taxes assessed on Franchisor for doing business in the state where the Franchised Center is located.
3.6 Electronic Transfer
Franchisor shall have the right to require that Franchisee pay all Monthly Royalty Fees, Marketing Fund Contributions, amounts due for purchases by Franchisee from Franchisor and other amounts due to Franchisor under this Agreement, including any Taxes, through an Electronic Depository Transfer Account. At Franchisor's request, Franchisee shall open and maintain an Electronic Depository Transfer Account, and shall provide Franchisor with continuous access to such Electronic Depository Transfer Account for the purpose of receiving any payments due to Franchisor hereunder.' Every month, Franchisee shall make timely deposits to the Electronic Depository Transfer Account sufficient to cover amounts owed to Franchisor prior to the date such amounts are due. Franchisee shall execute any and all documents required to establish and implement the Electronic Depository Transfer Account. Once established, Franchisee shall not close the Electronic Depository Transfer Account without Franchisor's prior written consent.
3.7 Late Fees
All Monthly Royalty Fees, Marketing Fund Contributions, amounts due for purchases by Franchisee from Franchisor and other amounts due to Franchisor under this Agreement, including any Taxes, that are not received by Franchisor within five (5) business days after the due date shall incur a late fee at a rate of eighteen percent (18%) per annum (or the highest rate allowed by Applicable Law, whichever is lower) from the date such payment is due until the date payment is received by Franchisor. Franchisee shall pay Franchisor for all costs and expenses incurred by Franchisor in the collection of any unpaid and past due Monthly Royally Fees. Marketing Fund Contributions, amounts due for purchases from Franchisor or any other amounts due Franchisor, including, without limitation, reasonable accounting and attorneys' fees. This Section 3.7 shall not constitute an agreement by Franchisor to accept any payments after the due date or a commitment by Franchisor to extend credit to or otherwise finance Franchisee.
3.8 Application of Payments
Notwithstanding any designation by Franchisee, Franchisor shall have the sole discretion to apply any payments received from Franchisee to any past due indebtedness of Franchisee for Monthly Royalty Fees. Marketing Fund Contributions, amounts due for purchases from Franchisor or any other amount owed to Franchisor, including any Taxes.
4. TERM AND RENEWAL
4.1 Initial Term
This Agreement shall be effective and binding for an initial term of five (5) years from the Effective Date, unless sooner terminated pursuant to Section 16 (the "Initiation Term"); provided, however, that the first year of Franchisee's operations is a probationary period (the "Probation Period''). If, at the end of the Probation Period, Franchisee does not have students enrolled in at least fifty (50) subjects, the Probation Period may be extended at Franchisor's sole discretion until such subject enrollment level is reached.
4.2 Renewal Term
Subject to the conditions set forth below, Franchisee shall have the right to renew the Franchise at the expiration of the Initiation Term and any Renewal Term (as defined herein) for an additional term of five (5) years from the date of such expiration (a "Renewal Term"). To qualify for a Renewal Term, each of the following conditions shall have been fulfilled and remain true as of the last day of the then-current term of this Agreement:
4.2.1 Franchisee has, during the entire duration of the then-current term of this Agreement, substantially complied with all material provisions hereof;
4.2.2 Franchisee has access to and, for the duration of the subsequent Renewal Term, the right to remain in possession of the Approved Location, or a suitable substitute location approved by Franchisor, which is in full compliance with Franchisor's then-current specifications and standards, for the duration of such Renewal Term;
4.2.3 Franchisee has, at its own expense, made such capital expenditures during the then-current term as were necessary to maintain uniformity with any Franchisor-required System modifications such that the Franchised Center reflects Franchisor's then-current standards and specifications:
4.2.4 Franchisee has satisfied all monetary obligations owed by Franchisee to Franchisor, and has timely met such obligations during the then-current term of this Agreement;
4.2.5 Franchisee is not in default of any provision of this Agreement or any other agreement between Franchisee and Franchisor;
4.2.6 Franchisee has given prior written notice of the renewal to Franchisor not less than nine (9) months nor more than twelve (12) months prior to the end of the then-current term of this Agreement;
4.2.7 Franchisee has executed Franchisor's current form of Franchise Agreement offered by Franchisor in the grant of Franchises to prospective new franchisees, or has executed the Renewal Agreement attached as Exhibit E hereto, at Franchisor's election (with appropriate modifications to reflect that the Franchise Agreement relates to the grant of a renewal Franchise), which Franchise Agreement or renewal documents shall supersede this Agreement in all respects. The terms of such Franchise Agreement or renewal documents. including, without limitation, the amounts of the Monthly Royally Fees and Marketing Fund Contributions, may vary from the terms of this Agreement; provided, however, that Franchisee shall not be required to pay an additional Franchise Fee in connection with the Renewal Term;
4.2.8 Franchisee has complied with Franchisor's then-current qualifications for a new Franchisee and has agreed to comply with any new or additional training requirements; and
4.2.9 Franchisee has executed a general release, in a form substantially similar to the General Release attached as Exhibit A hereto, of any and all claims against Franchisor, its Affiliates and their respective officers, directors, shareholders, managers, members, partners, owners, employees, agents and representatives. except to the extent prohibited by the laws of the state in which the Franchised Center is located.
5. APPROVED LOCATION
5.1 Selection of Site
Following the Effective Date, Franchisee shall promptly select a site for the Franchised Center and shall notify Franchisor of such selection. If Franchisor approves of such selection, the site shall be designated as the Approved Location. If Franchisor does not approve of such selection, Franchisee shall select and notify Franchisor of such alternative sites for the Franchised Center until such time as Franchisor has approved of a site for the Franchised Center. Franchisor shall provide Franchisee with general guidelines to assist Franchisee in selecting a site suitable for the Franchised Center. Franchisor has the right to approve or disapprove of a proposed location for the Franchised Center based on such factors as Franchisor, in its sole discretion, deems appropriate, including, without limitation, the condition of the premises, demographics of the surrounding area, proximity to other JEI Self-Learning Centers, lease requirements, traffic patterns, vehicular and pedestrian access, proximity to major roads, parking availability and overall suitability. Franchisor shall notify Franchisee of its approval or disapproval of a proposed site for the Franchised Center within a reasonable time after Franchisee notifies Franchisor of the selection of such site. Franchisee shall not locale the Franchised Center on a selected site without the prior written approval of Franchisor. Franchisor does not represent that it, or any of its owners or employees have special expertise in selecting sites for JEI Self-Learning Centers. Neither Franchisor's assistance nor approval in selecting the location for the Franchised Center is intended to indicate or in fact indicates that the Franchised Center will be profitable or successful at the Approved Location. Franchisee is solely responsible for identifying the Approved Location.
5.2 Lease of Approved Location
After the designation of the Approved Location. Franchisee shall execute a lease for. or a binding agreement to purchase, the Approved Location, the terms of which must have been previously approved by Franchisor, which approval shall not be unreasonably withheld. Franchisor's review of a lease or purchase agreement, or any advice or recommendation offered by Franchisor, shall not constitute a representation or guarantee that Franchisee will succeed at the Approved Location nor constitute an expression of Franchisor's opinion regarding the terms of such lease or purchase agreement. Franchisor shall be entitled to require that nothing contained in the lease or purchase agreement is contradictory lo, or likely to interfere with, Franchisor's rights or Franchisee's duties under this Agreement. Franchisee shall take all actions necessary to maintain the lease, if any, of the Approved Location while this Agreement is in effecl. Any default for which the lease may be terminated shall also be deemed a default hereunder and the lime lo cure the same shall expire when the lease is terminated. Franchisor has the right to require that the lease for the Approved Location be collaterally assigned by Franchisee to Franchisor, pursuant to the terms of its standard collateral assignment of lease form, lo secure performance by Franchisee of its obligation under this Agreement. Franchisors approval of a lease or purchase agreement shall be conditioned upon inclusion of terms in the lease acceptable to Franchisor. At Franchisor's option, the lease shall contain such provisions as Franchisor may reasonably require, including, without limitation, the following:
5.2.1 A provision reserving to Franchisor the right, at Franchisor's election, to receive an assignment of the leasehold interest upon termination or expiration of ihe Franchise grant;
5.2.2 A provision expressly permitting the lessor of the premises to provide Franchisor all sales and other information lessor may have obtained or received relaiing to the operation of the Franchised Center, as Franchisor may request;
5.2.3 A provision requiring the lessor to provide Franchisor with a copy of any written notice of deficiency sent by the lessor to Franchisee, and granting to Franchisor, in its sole discretion and at its sole option, the right (but not the obligation) to cure any deficiency under the lease should Franchisee fail to do so within fifteen (15) business days after the expiration of the period in which Franchisee may cure the default;
5.2.4 A provision allowing Franchisee to display the Marks in accordance with the specifications required by the Manual, subject only to the provisions of Applicable Law;
5.2.5 A provision prohibiting the premises from being used for any purpose other than the operation of the Franchised Center;
5.2.6 A provision stating that any default under the lease shall constitute a default under this Agreement; and
5.2.7 A provision stating that upon default of this Agreement, Franchisor or its nominee has the right to take possession of the Approved Location and operate the Franchised Center.
5.3 Development of Approved Location
Franchisor shall make available to Franchisee, at no charge to Franchisee, copies of standard plans and specifications for the development of a JEI Self-Learning Center, including exterior and interior design and layout, fixtures, equipment, decor and signs, (the ''Specifications1")- The Specifications are subject to alteration as may be necessary in Franchisor's sole discretion. Franchisee shall cause the Approved Location to be developed, equipped and improved in accordance with the Specifications within one hundred eighty (180) days after the Effective Date. In connection with ihe development of the Approved Location. Franchisee shall:
5.3.1 Employ a qualified licensed architect or engineer to prepare, subject to Franchisor's approval, preliminary plans and specifications for improvement of the Approved Location adapted from the Specifications:
5.3.2 Obtain all zoning classifications and clearances which may be required by applicable state and local laws, ordinances or regulations, and submit to Franchisor, for Franchisor's approval, final plans for construction based upon the preliminary plans and Specifications required by Section 5.3.1;
5.3.3 Obtain all building, utility, sign, health, and business permits and licenses, and any other permits and licenses required for the build-out and operation of the Franchised Center and certify in writing and provide evidence to Franchisor that all such permits and certifications have been obtained;
5.3.4 Employ a qualified, licensed general contractor approved by Franchisor to complete construction of all required improvements to the Approved Location;
5.3.5 Purchase any supplies or inventory necessary for the operation of the Franchised Center;
5.3.6 Purchase and install all equipment, signs, furniture and fixtures, including, without limitation, any point-of-sale and computer equipment, required for the operation of the Franchised Center; and
5.3.7 Establish Internet access and obtain at least one (1) telephone number and one (1) facsimile number solely dedicated to the Franchised Center.
5.4.1 Before opening the Franchised Center and commencing business, Franchisee must: 5.4. LI Fulfill all of Franchisee's obligations under this Section 5;
184.108.40.206 Furnish Franchisor with copies of all insurance policies required by this Agreement, or by the lease, or such other evidence of insurance coverage and payment of premiums as Franchisor may request;
220.127.116.11 Complete initial training required under Section 8 of this Agreement to the satisfaction of Franchisor;
18.104.22.168 Hire and train such personnel as is necessary or required for the operation of the Franchised Center:
22.214.171.124 Obtain any and all necessary permits and licenses required for the operation of the Franchised Center:
126.96.36.199 If Franchisee is a business entity, cause each of its stock certificates or other evidence of ownership to be conspicuously endorsed upon the face thereof with a statement in a form satisfactory to Franchisor that such ownership interest is held subject to, and that further assignment or transfer thereof is subject to, all restrictions imposed upon transfers and assignments under this Agreement; and
188.8.131.52 Pay in full all amounts due to Franchisor, including, without limitation, the Franchise Fee.
5.4.2 Franchisee shall comply with these conditions and be prepared to open and continuously operate the Franchised Center at the Approved Location within ten (10) months following the Effective Date. The parties acknowledge and agree that time is of the essence under this Agreement.
5.5 Use of Approved Location
Franchisee shall not use, or permit any other person to use, the Approved Location for any purpose other than the operation of a JEI Self-Learning Center in frill compliance with this Agreement and the Manual without the prior written consent of Franchisor, which consent may be withheld for any reason.
Franchisee shall not relocate the Franchised Center without the prior written consent of Franchisor, which consent may be withheld or delayed at Franchisor's sole discretion. If the lease for the Approved Location expires or terminates without the fault of Franchisee or if the Franchised Center's premises are destroyed. condemned or otherwise rendered unusable, or as otherwise may be agreed upon in writing by Franchisor and Franchisee. Franchisor may, in its reasonable discretion, allow Franchisee to relocate the Franchised Center. Any such relocation shall be at Franchisee's sole expense, and shall proceed in accordance with the requirements set
forth in Sections 5.1 through 5.4. Franchisor shall have the right to charge Franchisee for any costs or expenses incurred by Franchisor in providing assistance to Franchisee in relocating the Franchised Center, including, without limitation, accounting and attorneys1 fees. Notwithstanding the foregoing, Franchisor has no obligation to provide relocation assistance to Franchisee. If no proposed relocation site meets with Franchisor's approval, this Agreement shall be terminated as provided in Section 184.108.40.206.
6. PROPRIETARY MARKS
Franchisee's right to use the Marks and Copyrighted Materials is (a) derived solely from this Agreement; (b) is nonexclusive and limited to the conduct of business by Franchisee pursuant to, and in compliance with, this Agreement; and (c) subject to all applicable standards, specifications and operating procedures prescribed from time to time by Franchisor. Any unauthorized use of the Marks or Copyrighted Materials by Franchisee shall be a breach of this Agreement and an infringement of the rights of Franchisor in and to the Marks and Copyrighted Materials. Franchisee's use of the Marks and Copyrighted Materials, and any goodwill created thereby, shall inure to the benefit of Franchisor. Franchisee shall not at any time acquire an ownership interest in the Marks or Copyrighted Materials by virtue of any use it may make of the Marks or Copyrighted Materials. This Agreement does not confer any goodwill, title or interest in the Marks or Copyrighted Materials to Franchisee. Franchisee shall not, at any time during the term of this Agreement or after its termination or expiration, contest the validity or ownership of any of the Marks or Copyrighted Materials or assist any other person in contesting the validity or ownership of any of the Marks or Copyrighted Materials.
6.2 Limitations on Use
Franchisee shall not use any Mark or portion of any Mark as part of any business entity name or trade name, with any prefix, suffix or other modifying words, terms, designs or symbols or in any modified form, without the prior written consent of Franchisor. Franchisee shall not use any Mark or Copyrighted Materials in connection with the sale of any unauthorized product or service or in any other manner not expressly authorized in writing by Franchisor. Franchisee shall give such notices of trademark and service mark registrations as Franchisor specifies and obtain such fictitious or assumed name registrations as may be required under Applicable Law. Franchisee shall not register or seek to register as a trademark or service mark, either with the United States Patent and Trademark Office or any stale or foreign country, any of the Marks or a trademark or service mark that is confusingly similar to any Mark licensed to Franchisee under this Agreement. Franchisee shall not register or seek to register as a copyright, either with the United Slates Copyright Office or any state or foreign country, any of the Copyrighted Materials. Franchisee shall include on its letterhead, forms, cards and other identifying materials, and shall display at the Approved Location, at least two (2) prominent notices stating that the Franchised Center is an "Independently Owned and Operated JE1 Self-Learning Center Franchise." One of the foregoing notices shall be affixed to or near the main entry of the Approved Location.
63 Notification of Infringements and Claims
Franchisee shall immediately notify Franchisor of any (a) infringement of any of the Marks or its Copyrighted Materials; (b) challenges to Franchisee's use of any of the Marks or Copyrighted Materials; or (c) claims by any person of any rights in any of the Marks or Copyrighted Materials. Franchisee shall not communicate with any person other than Franchisor and Franchisor's counsel in connection with any such infringement, challenge or claim; provided, however, that Franchisee may communicate with Franchisee's counsel at Franchisee's own expense. Franchisor shall have sole discretion to take such action, as it deems appropriate and the right to exclusively control any litigation or other proceeding arising out of any such infringement, challenge, or claim relating to any of the Marks or Copyrighted Materials. Franchisee shall execute any and all instruments and documents, render such assistance, and take such other actions as may, in the opinion of Franchisor or Franchisor's counsel, be necessary or advisable to protect and maintain Franchisor's interests in any such litigation or other proceeding or to otherwise protect and maintain Franchisor's interest in the Marks or Copyrighted Materials.
6.4 Reimbursement for Use of Marks or Copyrighted Materials
Franchisor shall reimburse Franchisee for all expenses reasonably incurred by Franchisee in any trademark, copyright or similar proceeding disputing Franchisee's authorized use of any of the Marks or Copyrighted Materials, provided that Franchisee has (a) solely used such Mark or Copyrighted Materials pursuant to the terms and conditions of this Agreement; (b) timely notified Franchisor of such proceeding; and (c) responded to such proceeding according to the terms and conditions of this Agreement and Franchisor's directions. At Franchisor's option, Franchisor or its designee may defend and control the defense of any proceeding arising directly from Franchisee's use of any of the Marks or Copyrighted Materials. Franchisor's obligation to reimburse Franchisee under this Section 6.4 shall not apply to (a) the cost to Franchisee of removing signage or discontinuing use of the Marks or Copyrighted Materials: (b) litigation between Franchisor and Franchisee wherein Franchisee's use of the Marks or Copyrighted Materials is disputed or challenged by Franchisor: or (c) any separate legal fees or costs incurred by Franchisee in seeking independent counsel separate from the counsel representing Franchisor and Franchisee in the event of litigation disputing Franchisor and Franchisee's use of the Marks or Copyrighted Materials.
6.5 Discontinuance of Use
If it becomes necessary, in Franchisor's sole discretion, for Franchisee to modify or discontinue use of any of the Marks or Copyrighted Materials and/or to use one (1) or more additional or substitute trade names. trademarks, service marks or other commercial symbols. Franchisee shall comply with Franchisor's directions in that regard within a reasonable time after notice to Franchisee by Franchisor. Franchisor shall not be required to reimburse Franchisee for its expenses in modifying or discontinuing the use of any of the Marks or Copyrighted Materials or any loss of goodwill associated with any modified or discontinued Marks or Copyrighted Materials or for any expenditure made by Franchisee to promote modified or substitute Marks or Copyrighted Materials.
6.6 Right to Inspect
To preserve the validity and integrity of the Marks and Copyrighted Materials licensed hereunder. and to ensure that Franchisee is properly employing the Marks and Copyrighted Materials in the operation of the Franchised Center, Franchisor and its designees shall have the right to enter and inspect the Franchised Center and the Approved Location at all reasonable times and. additionally, shall have the right to observe the manner in which Franchisee renders services and conducts activities and operations, and to inspect facilities, equipment, accessories, products, supplies, reports, forms and documents and related data to ensure that Franchisee is operating the Franchised Center in accordance with the quality control provisions and performance standards established by Franchisor under this Agreement. Franchisor and its designees shall have the right, at any reasonable time, to
remove sufficient quantities of products, supplies or other inventory items offered for retail sale, used in the preparation of products offered for retail sale or used in rendering services, to test whether such products or items meet Franchisor's then-current standards. Franchisor and its designees shall have the right to observe Franchisee and its employees during the operation of the Franchised Center and to interview students and employees and to photograph and videotape the Franchised Center.
6.7 Franchisor's Sole Right to Domain Name
Franchisee shall not establish, create or operate an Internet site or website using a domain name or uniform resource locator containing any of the Marks or any variation thereof. Franchisor has the exclusive right to advertise on the Internet and create websites using or containing any of the Marks (including "MEI SELF-LEARNING CENTER"). Franchisor is the sole owner of all right, title and interest in and to such domain names, as Franchisor shall designate in the Manual.
7.1 Requirement of Confidentiality
Franchisor shall disclose Confidential Information to Franchisee during the training program. through the Manual, and as a result of guidance furnished to Franchisee during the term of this Agreement. Franchisee shall not acquire any interest in the Confidential Information, other than the right to utilize it in the development and operation of the Franchised Center and in performing its duties under this Agreement. Franchisee acknowledges that the use or duplication of the Confidential Information in any other business venture would constitute an unfair method of competition. Franchisee acknowledges that the Confidential Information is proprietary, includes Franchisor's trade secrets and is disclosed to Franchisee solely on the condition that Franchisee (and all holders of a legal or beneficial interest in Franchisee and all officers, directors, executives, managers and members of the professional staff of Franchisee): (a) shall not use the Confidential Information in any other business or capacity; (b) shall maintain the absolute confidentiality of the Confidential Information during and after the term of this Agreement; (c) shall not make any unauthorized copies of any portion of the Confidential Information disclosed in written or other tangible form; and (d) shall adopt and implement all reasonable procedures prescribed from time to time by Franchisor to prevent unauthorized use or disclosure of the Confidential Information. Franchisee shall enforce this Section as to its employees, agents and representatives and shall be liable to Franchisor for any unauthorized disclosure or use of Confidential Information by any of them.
If Franchisee, during the term of this Agreement, conceives or develops any improvements or additions to the System, copyrightable works, Internet websites, or any other documents or information pertaining or relating to the System or the Franchise, or any new trade names, trademarks and service marks or other commercial symbols related to the Franchise, or any advertising or promotional ideas related to the Franchise (collectively, "Improvements"), Franchisee shall fully disclose the Improvements to Franchisor, without disclosure of the Improvements to others, and shall obtain Franchisor's prior written approval before using any such Improvements. Any Improvement approved by Franchisor may be used by Franchisor and all other franchisees of Franchisor without any obligation to Franchisee for royalties or similar fees. Any and all Improvements shall be deemed the sole and exclusive property of Franchisor and "works-made-for-hire" under this Agreement. To the extent any Improvement does not qualify as a "work-made-for-hire,'' Franchisee shall assign to Franchisor, without charge, any and all rights or interests Franchisee has in such Improvements. Franchisor, in its sole discretion, may make application for, and own, copyrights, patents, trade names, trademarks and service marks relating to any such Improvement and Franchisee shall cooperate with Franchisor in securing such rights. Franchisor may consider such Improvements as the property and trade secret of Franchisor. In return, Franchisor shall authorize Franchisee to utilize any Improvement that may be developed by other franchisees of Franchisor that has been generally authorized for use by such other franchisees.
13 In-Term Covenant Not to Compete
7.3.1 Franchisee acknowledges that Franchisor must be protected against the potential for unfair competition by Franchisee's use of Franchisor's training, assistance and Marks in direct competition with Franchisor. Franchisee further acknowledges that Franchisor would not have entered into this Agreement or shared any information with Franchisee concerning Franchisor's System, absent Franchisee's agreement to strictly comply with the provisions of this Section 7.3. Franchisee, therefore, agrees that Franchisee shall not during the Initial Term or any Renewal Term:
220.127.116.11 Engage in a Competitive Business, directly or indirectly, as a director, owner, proprietor, officer, manager, employee, consultant, representative, agent, independent contractor or otherwise, except under a Franchise Agreement with Franchisor:
18.104.22.168 Have any direct or indirect interest in any entity that is awarded or is awarding licenses or franchises to others lo operate any Competitive Business, except new Franchises under Franchise Agreements with Franchisor; or
22.214.171.124 Directly or indirectly, on behalf of Franchisee or any other person, partnership, company, corporation, proprietorship, or other entity, solicit, divert, take away or interfere with any of the employees of Franchisor or any other franchisee of Franchisor.
7.3-2 Franchisee acknowledges that such restrictions are reasonable and necessary to protect the interests of Franchisor and other franchisees of Franchisor, and that because of the limited nature of the restrictions, they do not unduly restrict Franchisee's ability to engage in gainful employment. The restrictions contained in this=Section do not apply to the ownership for investment purposes of less than five percent (5%) of any class of stock of a publicly traded company that Franchisee would otherwise be prevented from owning under this Section 7.3, provided that Franchisee is otherwise not actively involved in the management or operation of such business and does not serve that business in any capacity other than as a shareholder.
7.4 Non-Disclosure and Non-Competition Agreements with Certain Individuals
On or after the Effective Date. Franchisor shall have the right to require Franchisee to enter into a non-disclosure and non-competition agreement in substantially the form attached as Exhibit B hereto with any holder of a legal or beneficial interest in Franchisee (and any member of their immediate families or households), and any officer, director, executive, manager, employee or representative of Franchisee. Upon Franchisor's request, Franchisee shall provide Franchisor with copies of all nondisclosure and non-competition agreements signed pursuant to this Section 7.4. Such non-disclosure and non-competition agreements shall remain on file at the offices of Franchisee and are subject to audit or review as otherwise set forth herein. Franchisor shall be considered a third party beneficiary under such agreements and shall have the right to enforce covenants contained in such agreements.
7.5 Reasonableness of Restrictions
Franchisee acknowledges that the restrictive covenants contained in this Section are essential elements of this Agreement and that, without their inclusion, Franchisor would not have entered into this Agreement. Franchisee acknowledges that each of the terms set forth herein, including the restrictive covenants, is fair and reasonable and is reasonably required for the protection of Franchisor, the System, the Marks and the Copyrighted Materials.
8. TRAINING AND ASSISTANCE
8.1 Initial Training
Prior to the opening of the Franchised Center, the Director and up to one (1) assistant shall attend and successfully complete, to Franchisor's reasonable satisfaction, an initial training program consisting of not more than ten (10) business days of classroom and on-the-job instruction pertaining to operation of the Franchised Center including, but not limited lo, preparation and presentation of educational programs, sales and marketing methods, financial controls, maintenance of quality standards, customer service techniques, record keeping, and reporting procedures and other operational issues. Franchisor shall conduct the initial training program at its headquarters or at another designated location. Franchisor shall not charge tuition or similar fees for the training required under this Section 8.1; provided, however, that all expenses incurred by Franchisee in attending such program including, but not limited to, travel costs, room and board expenses and employees' salaries, shall be the sole responsibility of Franchisee. Franchisee shall be responsible for training its management and other employees.
8.2 Opening Assistance
In conjunction with, and prior to, the opening of the Franchised Center, Franchisor shall make available to Franchisee for approximately three (3) days, one (1) of Franchisor's representatives, experienced in the System, for the purpose of providing general assistance and guidance in connection with the opening of the Franchised Center. In the event that Franchisee requests additional assistance with respect to the opening or continued operation of the Franchised Center, Franchisor, in its sole discretion, may make available to Franchisee such additional assistance as Franchisor deems necessary and appropriate; provided, however, that Franchisee shall pay Franchisors then-current standard rates, plus expenses, for such additional assistance.
83 Failure to Complete Initial Training Program
If Franchisor determines, in its sole discretion, that the Director is unable to complete the training program to Franchisors reasonable satisfaction, Franchisor shall have the right to terminate this Agreement. In the event that this Agreemenl is terminated pursuant to this Section 8.3. Franchisor shall return to Franchisee fifty percent (50%) of the Franchise Fee paid by Franchisee upon Franchisor's receipt of a general release in substantially the form attached as Exhibit A hereto. If Franchisee is a business entity and the Director fails to complete the initial training program to Franchisors reasonable satisfaction, in Franchisor's sole discretion, Franchisee may be permitted to select a substitute Director and such substitute Director shall complete the initial training to Franchisor's reasonable satisfaction. To the extent that the substitute Director requires training in addition to the initial training required by Section 8.1, Franchisee shall be required to pay Franchisor's then-current rates for such additional training.
8.4 New Director
If Franchisee is a business entity and Franchisee names a new Director following the opening of the Franchised Center, then the new Director shall be required to complete the initial training program to Franchisor's reasonable satisfaction within thirty (30) days after being named as the Director. The new Director may attend the initial training program without charge to Franchisee; provided, however, that Franchisee shall be responsible for all travel costs, room and board and employees' salaries incurred in connection with the new Director's attendance at such training; and provided further that Franchisor shall have the right to require Franchisee to pay all costs of such training if Franchisor determines, in its sole discretion, that the appointment of Directors by Franchisee has become excessive or is caused by poor hiring practices.
8.5 Ongoing Training
From time to time during the term of this Agreement, Franchisor may require the Director to attend ongoing training programs or seminars. Franchisor, in its sole discretion, may charge a fee for any ongoing training
required hereunder. Franchisor shall not require the Director to attend more than one (1) ongoing training session or collectively not more than three (3) days of ongoing training in any calendar year. Franchisee shall be responsible for all travel costs, room and board and employees' salaries incurred in connection with the Director's attendance at such training.
On the Effective Date, Franchisor shall provide to Franchisee one (l)copy of the Manual. Franchisee shall conduct the Franchised Center in strict accordance with the provisions set forth in the Manual. The Manual may consist of one (1) or more separate manuals and other materials as designated by Franchisor and may be in written or electronic form. The Manual shall, at all times, remain the sole property of Franchisor and shall promptly be returned to Franchisor upon expiration or termination of this Agreement.
Franchisor shall retain the right to revise or otherwise modify the Manual from time to time to reflect changes in the specifications, standards, operating procedures and rules prescribed by Franchisor; provided. however, that no such revision or modification shall alter Franchisee's fundamental status and rights under this Agreement. Franchisor shall have the right to make such revisions or modifications without prior notice to Franchisee. Franchisee shall immediately, upon receipt of any revisions or modifications to the Manual, implement or conform to any such revisions or modifications and shall ensure that its copy of the Manual is up-to-date at all times. If a dispute as to the contents of the Manual arises, the terms of the master copy of the Manual maintained by Franchisor at Franchisor's headquarters shall control.
The parties acknowledge and agree that the Manual constitutes Confidential Information under this Agreement and shall be subject to the confidentiality protections set forth in Section 7.1 hereof. Franchisee shall at all times ensure that its copy of the Manual is available at the Approved Location in a current and up-to-date form. Franchisee shall maintain the Manual in a locked receptacle at the Approved Location and shall only grant authorized personnel, as defined in the Manual, access to the key or combination of such receptacle. Franchisee shall not disclose, duplicate or otherwise use any portion of the Manual in an unauthorized manner.
10. FRANCHISE SYSTEM
Franchisee shall strictly comply, and shall cause the Franchised Center to strictly comply, with all requirements, specifications, standards, operating procedures and rules set forth in this Agreement, the Manual or other communications supplied to Franchisee by Franchisor.
10.2 Modification of the System
Franchisor shall retain the right to revise or modify the System from time to time in any manner including, without limitation, by the adoption and use of new or modified Marks or Copyrighted Materials or the purchase and/or use of new or additional computer hardware, software, equipment, products, supplies or techniques. Franchisee shall accept and use any such revisions or modifications to the System as if they were a part of (his Agreement as of the Effective Date. Franchisee shall make such expenditures as such revisions or modifications in the System may reasonably require; provided, however, that Franchisee shall not be required to implement or conform to any such revisions or modifications to the extent that the cost of implementing or conforming to such revisions or modifications would exceed (a) ONE DOLLAR ($ 1.00) during the first (1sl) year of the Initial Term: (b) FIVE THOUSAND DOLLARS ($5,000.00) at any time following the first (Is1) year of the Initial Term, except as provided in subsection (c) of this Section 10.2 (which amounts may be increased consistent with increases to the Consumer Price Index, (U.S. City Average, all items, 1982-84=100), as published by the United States Department of Labor, Bureau of Labor Statistics ("CPI-U")); or (c) ONE DOLLAR ($ 1.00) during the final year of the term of this Agreement provided that Franchisee provides written notice of its intention not to renew this Agreement. Any required expenditure for changes or upgrades to (he System shall be in addition to expenditures for repairs and maintenance as required in Section 13.3.
Franchisor shall have the right, at its sole discretion and as it may deem in the best interests of all concerned in any specific instance, to vary standards or specifications for any franchisee based upon that particular franchisee's qualifications, the peculiarities of the particular site or circumstances, the demographics of the trade area. business potential, existing business practices or any other condition which Franchisor deems to be of importance to the successful operation of any particular JEI Self-Learning Center. Franchisor shall not be required to disclose or grant to Franchisee a like or similar variance hereunder.
11. ADVERTISING AND PROMOTIONAL ACTIVITIES
11.1 Grand Opening Advertising
Franchisee shall spend no less than ONE THOUSAND DOLLARS ($1,000.00) during the first three (3) months of operation of the Franchised Center on local advertisement and promotion of the initial opening of the Franchised Center ("Grand Opening Advertising"). All materials to be used in Grand Opening Advertising must be approved by Franchisor prior to their use pursuant to the requirements of Section 11.2.2. Grand Opening Advertising expenditures shall be in addition to any Local Advertising expenditures and Marketing Fund Contributions.
11.2 Local Advertising
11.2.1 Franchisee shall continuously promote the Franchised Center. Every month, for the first two (2) years of the Initial Term, Franchisee shall spend the greater of THREE HUNDRED FIFTY DOLLARS ($350.00) or two percent (2%) of the previous month's Gross Sales on advertising, promotions and public relations within the immediate locality surrounding the Franchised Center ("Local Advertising'"). For any periods following the first two (2) years of the Initial Term, the required Local Advertising expenditure shall be two percent (2%) of Gross Sales. Such expenditures shall be made directly by Franchisee, subject to the approval and direction of Franchisor. Franchisor shall provide general guidelines to Franchisee for conducting Local Advertising. Within thirty (30) days after the end of each month, Franchisee shall furnish to Franchisor an accurate accounting of its expenditures on Local Advertising for the preceding month.
11.2.2 Franchisee shall submit to Franchisor, for its prior approval, all advertising and promotional materials to be used by Franchisee including, but not limited to, ad copy, coupons, flyers and scripts. Franchisor shall use its commercially reasonable efforts to provide notice of approval or disapproval to Franchisee within twenty (20) days from the date any such materials are received by Franchisor. If Franchisor does not approve submitted materials within twenty (20) days, such materials shall be deemed to not have received the required approval. Franchisee shall not use any marketing or promotional material prior to receiving Franchisor's approval. The submission of advertising and promotional materials to Franchisor for approval shall not affect Franchisee's right to determine the prices at which Franchisee provides services or sells products.
11.3 Marketing Fund
Franchisor has the right (but not the obligation) to establish a Marketing Fund, as defined in Section 3.4. In the event that Franchisor establishes a Marketing Fund. Franchisee shall be required to make monthly Marketing Fund Contributions, the amount of which shall be set by Franchisor and may be adjusted from time to time; provided, however, that the Marketing Fund Contributions shall not exceed one percent (1%) of the previous month's Gross Sales. Franchisor shall notify Franchisee at least thirty (30) days prior to implementing or changing Marketing Fund Contribution requirements. The Marketing Fund shall be maintained and administered by Franchisor or its designee according to the following requirements:
11.3-1 Franchisor shall oversee all marketing programs, with sole discretion over the creative concepts, materials and media used in such programs, and the placement and allocation thereof. Franchisor does not warrant that any particular franchisee will benefit directly or pro rata from expenditures by the Marketing Fund. The program(s) may be local, regional or System-wide.
11.3.2 Franchisee's Marketing Fund Contributions may be used to meet the costs of producing. maintaining, administering and directing consumer advertising (including, without limitation, the cost of preparing and conducting television, radio, Internet, magazine, newspaper, and direct mail advertising campaigns and other public relations activities; developing and/or hosting an Internet web page or site and similar activities; employing advertising agencies to assist therein; and providing promotional brochures and other marketing materials to franchisees). All Marketing Fund Contributions shall be maintained in a separate account from the monies of Franchisor and shall not be used to defray any of Franchisor's general operating expenses, except for such reasonable costs and expenses, if any, that Franchisor may incur in activities reasonably related to the administration of the Marketing Fund.
11.3.3 Franchisor shall endeavor to spend all Marketing Fund Contributions on marketing programs and promotions during Franchisor's fiscal year within which such contributions are made. If excess amounts remain in any Marketing Fund at the end of such fiscal year, all expenditures in the following fiscal year(s)
shall be made first out of such excess amounts, including any interest or other earnings of the Marketing Fund, and next out of prior year contributions and then out of current contributions.
11.3.4 Although Franchisor intends the Marketing Fund, if established, to be of perpetual duration, Franchisor has the right to terminate the Marketing Fund at any time. The Marketing Fund shall not be terminated, however, until all Marketing Fund Contributions have been expended for advertising and promotional purposes or returned to Franchisee and other franchisees on a pro rata basis based on total Marketing Fund Contributions made in the aggregate by each franchisee.
11.3.5 Each JEI Self-Learning Center operated by Franchisor shall make Marketing Fund Contributions at the same rate as Franchisee or other franchisees of Franchisor.
11.3.6 An accounting of the operation of the Marketing Fund shall be prepared annually and shall be available to Franchisee upon request. Franchisor shall retain the right to have the Marketing Fund audited on an annual basis, at the expense of the Marketing Fund, by an independent certified public accountant selected by Franchisor.
11.3.7 Franchisee acknowledges that the Marketing Fund is not a trust and Franchisor assumes no fiduciary duty in administering the Marketing Fund.
11.4 Cooperative Advertising
Franchisor shall have the right, but not the obligation, to create a Cooperative Advertising program for the benefit of JEI Self-Learning Centers located within a particular region. Franchisor shall have the right to (a) allocate any portion of the Marketing Fund to a Cooperative Advertising program; and (b) collect and designate all or a portion of the Local Advertising for a Cooperative Advertising program. Franchisor shall have the right to determine the composition of all geographic territories and market areas for the implementation of each Cooperative Advertising program and to require that Franchisee participate in such Cooperative Advertising programs when established within Franchisee's region. If a Cooperative Advertising program is implemented in a particular region, Franchisor shall have the right to establish an advertising council composed of franchisees within such region to self-administer the Cooperative Advertising program. Franchisee shall participate in the council according to the council's rules and procedures and Franchisee shall abide by the council's decisions.
11.5 Internet Advertising
Franchisee may not establish a presence on. or market using, the Internet in connection with the Franchised Center without Franchisor's prior written consent. Franchisor has established and maintains an Internet website at the uniform resource locator ("URL") (the "Website'') that provides information about the System and the services that Franchisor and its franchisees provide. Franchisor may (but is not required to) include on the Website an interior page containing information about the Franchised Center. If Franchisor includes such information on the Website, Franchisor shall have the right to require Franchisee to prepare all or a portion of the page, at Franchisee's expense, using a template that Franchisor provides. All such information shall be subject to Franchisor's prior written approval. Franchisor shall retain the sole right to market on the Internet, including, without limitation, the use of websites, domain names. URL's, linking, search engines (and search engine optimization techniques), banner ads. meta-tags, marketing, auction sites, e-commerce and co-branding arrangements. Franchisee may be requested to provide content for Franchisor's Internet marketing programs and shall be required to follow Franchisor's intranet and Internet usage rules, policies and requirements as set forth in the Manual. Franchisor shall retain the sole right to use the Marks and the Copyrighted Materials on the Internet. including on websites, as domain names, directory addresses, search terms and meta-tags. and in connection with linking, marketing, co-branding and other arrangements. Franchisor shall retain the sole right to approve any linking to, or other use of, the Website.
The original documents were scanned as an image. The original file can be downloaded at the link above.