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Sample Franchise Agreement
KIDS 'R' KIDS INTERNATIONAL. INC.
THIS FRANCHISE AGREEMENT (the "Agreement") made effective this___day of_____,____,
by and between KIDS 'R' KIDS INTERNATIONAL, INC., d/b/a KIDS 'R' KIDS, a Georgia corporation, with its principal office at 1625 Executive Drive South, Duluth, GA 30096 (the
"FRANCHISOR") and____________, a (state) resident/corporation, whose principal address is
_______________________ (the "FRANCHISEE"), for a Kids 'R' Kids Center located at
_______________________,________________(the "Center Site").
A. FRANCHISOR has acquired and developed a unique system for the establishment and operation of a child care center (the "Kids *R' Kids System"); and
B. The name KIDS 'R' KIDS is a name registered with the U.S. Patent and Trademark Office; and
C. FRANCHISOR owns through common law and licenses through contractual rights certain trade names and commercial symbols in connection with the operation of Kids 'R' Kids Centers; and
D. FRANCHISEE has applied to FRANCHISOR for a franchise to operate a Kids 'R' Kids Center (the "Center") and desires to acquire a license to operate a Center using the business format, methods, specifications, standards, operating procedures, operating assistance, advertising services and the Common Law and other Licensed Marks; and
E. FRANCHISEE has read this Franchise Agreement and FRANCHISOR'S Federal Trade Commission Offering Circular and has been given an opportunity to clarify any provision that FRANCHISEE did not understand. FRANCHISEE understands and accepts that the terms, conditions and covenants contained in this Franchise Agreement are reasonably necessary to maintain FRANCHISOR'S high standards of quality and service and the uniformity of those standards at all Kids *R' Kids Centers and thereby to protect and preserve the goodwill of the Marks; and
F. FRANCHISOR desires to grant FRANCHISEE a license on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the privilege of conducting a business under this Franchise, the mutual obligations contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:
SECTION 1. KIDS 'R' KIDS
The Kids 4R' Kids System is a comprehensive system for the operation of a child day care Center. The foundation of the Kids 'R' Kids system and the essence of this Franchise is the adherence by FRANCHISEE to all of the standards and policies of FRANCHISOR, including those providing for the uniform operation of all Kids 'R' Kids Centers; the use of only approved equipment and building layout and designs; and strict adherence to FRANCHISOR'S prescribed standards of quality, service, and care in FRANCHISEE'S operation. Compliance by FRANCHISEE with the Kids 'R' Kids standards and policies in conjunction with the use of the Kids 'R' Kids System provides the basis for the valuable goodwill and wide acceptance of the Kids 'R' Kids System. FRANCHISEE'S accountability for performance of the obligations contained in the Franchise and its adherence to the tenants of the Kids (R' Kids System constitute the essence of this Franchise Agreement.
FRANCHISEE understands and acknowledges that every detail of the Kids 'R' Kids System is important to FRANCHISEE, to FRANCHISOR, and to other FRANCHISEES in order to develop and maintain high and uniform operating standards. Therefore:
(1) The provisions of this Franchise Agreement shall be interpreted to give effect to the intent of the parties stated in this Section 1, at the Kids *R' Kids Center, as hereinafter defined and as specified. This Franchise shall be operated in conformity with, and through strict adherence to, FRANCHISOR'S standards and policies as they exist now and as they may from time to time be modified, amended or expanded.
(2) FRANCHISEE represents, warrants, and agrees that it alone actually owns the complete equity interest in this Franchise and the profits from the operations of the Kids *R' Kids Center, and that it shall maintain such interest during the term of this Franchise, except only as otherwise permitted pursuant to the terms and conditions of this Franchise Agreement. FRANCHISEE agrees to furnish FRANCHISOR with such evidence as FRANCHISOR may request, from time to time, for the purpose of assuring FRANCHISOR that FRANCHISEE'S interest remains as represented herein
SECTION 2. GRANT OF LICENSE, AREA, & LOCATION
A. Grant of License. Subject to the terms and conditions set forth herein, FRANCHISOR, as agent for the owner of the Marks, hereby grants to FRANCHISEE during the term of this Franchise Agreement the nonexclusive right and license (the "License) to use the Kids 'R' Kids System and related service marks, trademarks and other marks (the "Marks") solely in connection with the operation of one Kids 'R' Kids Center at the Center Site. The only Marks which FRANCHISEE is entitled to use pursuant to this license are solely the Marks described on Exhibit A, which may be changed or supplemented from time to time by FRANCHISOR.
The license herein granted is limited to the operation of one Kids *R' Kids Center and nothing herein contained shall be deemed to grant to FRANCHISEE the right to purchase, own or operate additional Kids 'R' Kids Centers.
B. Use of Marks. Consistent with Section 5, Paragraph P, FRANCHISOR, as agent for the owner of the Marks, retains the sole and exclusive right and authority to control the nature and quality of each and every use of the Marks by FRANCHISEE, and FRANCHISEE shall comply with and abide by any and all such requirements or restrictions. The marks shall be used solely in connection with the services provided at the Center Site and only to identify products and services designated by FRANCHISOR. FRANCHISEE shall include the center number assigned to the Center Site by FRANCHISOR as a part of its trade name, and such center number shall be included as a part of FRANCHISEE'S telephone listings and referenced in all written communications or agreements with FRANCHISOR and any third parties. In the event it becomes advisable at any time, in FRANCHISOR'S sole discretion, to modify or discontinue the use of any one or more of the Marks or to use one or more additional or substitute marks, FRANCHISEE agrees at its sole expense to immediately comply with the instructions of FRANCHISOR in that regard, including without limitation replacing sign faces and otherwise physically complying with this obligation.
C. Area - FRANCHISEE'S Exclusive Territory. FRANCHISOR grants to FRANCHISEE the exclusive right to operate FRANCHISEE'S Center within the territory described in Exhibit B attached hereto and made a part hereof (the "Exclusive Territory"). In the event of renewal of the License, FRANCHISOR may redefine the Exclusive Territory based on the factors then used by FRANCHISOR in determining exclusive territories for its Kids 'R' Kids Center Franchisees. During the term of this Franchise Agreement and subject to the terms of this Franchise Agreement, FRANCHISOR shall not own, operate, sell or issue a license for any other Kids 'R' Kids Center to be located within the Exclusive Territory.
D. Adjustment to Exclusive Territory. FRANCHISOR reserves the right to adjust the Exclusive Territory from time to time if, in FRANCHISOR'S sole discretion, the population and demographics of the Exclusive Territory change to enable the Exclusive Territory, or any portion thereof, to support another Kids 'R' Kids Center. FRANCHISOR shall, in its sole discretion, determine the exclusive territory of the additional center, which may be limited to the radius or boundary initially established as the exclusive territory for the pre-existing Center. In the event that FRANCHISOR determined to change the Exclusive Territory at renewal, FRANCHISOR will give FRANCHISEE thirty (30) days written notice of such change, which shall set forth Franchisee's adjusted Exclusive Territory and which shall offer FRANCHISEE an option to purchase a new License to operate the Kids *R' Kids Center which FRANCHISOR proposes will service all or any portion of the remainder of the Exclusive Territory. Any such purchase shall be pursuant to the terms contained in FRANCHISOR'S then-current Franchise Agreement, with any modifications thereto deemed necessary by FRANCHISOR, which must be executed by FRANCHISEE prior to the end of such thirty (30) day period. If FRANCHISEE does not execute such then-current Franchise Agreement within such thirty (30) day period, FRANCHISOR may open or license another Franchisee to open such new Kids 'R' Kids Center. In any event, effective as of the end of such thirty (30) day period, the Exclusive Territory shall be adjusted as set forth in the notice from FRANCHISOR to FRANCHISEE described above.
E. Location. FRANCHISEE shall operate its Center from the following location only: ________________________________(the "Approved Location").
The Approved Location as used herein means the place of business within the area that
FRANCHISEE exclusively uses to carry out FRANCHISEE'S obligation in operations under this Agreement. FRANCHISEE acknowledges that FRANCHISOR'S acceptance or approval of said Center does not constitute any representation, warranty or guarantee by FRANCHISOR that said Approved Location will be a successful location for the operation of a Kids *R' Kids Center. FRANCHISEE may not operate the Center from any other Location or any additional locations without the prior, written approval of FRANCHISOR.
SECTION 3. INITIAL FRANCHISE FEE
A. Franchise Fee. In consideration of the issuance of this Franchise and concurrently with the execution of this Franchise Agreement, FRANCHISEE shall pay FRANCHISOR at its principal offices, or at such other place as FRANCHISOR may designate, in cash, by cashier's check, or by certified check, unless otherwise permitted in writing by FRANCHISOR, an initial Franchise Fee in the total sum of Fifty Thousand Dollars ($50,000) (the "Initial Franchise Fee") which shall be payable pursuant to the terms of Paragraph B herein.
For each additional Franchise purchased from FRANCHISOR, FRANCHISOR will charge FRANCHISEE a Franchise Fee of Twenty-Five Thousand Dollars ($25,000).
B. Manner of Payment. The Initial Franchise Fee shall be paid by FRANCHISEE to FRANCHISOR as follows:
(1) Execution of Franchise Agreement. Simultaneously with the execution and delivery of this Franchise Agreement, FRANCHISEE shall pay to FRANCHISOR the sum of Twenty-Five Thousand Dollars ($25,000) or Twelve Thousand Five Hundred Dollars ($12,500) in the case of any additional franchises). After such payment by FRANCHISEE, such portion of the Initial Franchise Fee shall not be refundable.
(2) Commencement of Improvements. Prior to or on the date FRANCHISEE signs a lease with respect to the Center Site or the date of commencement of the improvements or construction of the Center Site, whichever is earlier, FRANCHISEE shall pay to FRANCHISOR the sum of Twenty-Five Thousand Dollars ($25,000) (or Twelve Thousand Five Hundred Dollars ($12,500) in the case of additional franchises). After such payment by FRANCHISEE, such portion of the Initial Franchise Fee shall not be refundable.
(3) Additional Franchise. For each additional Franchise purchased from FRANCHISOR, FRANCHISEE shall pay one-half (1/2) of the Initial Franchise Fee as described in Subparagraph 3.B(1) and the balance as described in Subparagraph 3.B(2) herinabove, for the Franchise Agreement governed by the such Franchise(s).
C. Consideration Earned. FRANCHISEE hereby acknowledges and agrees that the grant of the License and the undertakings and agreements of FRANCHISOR contained in this Franchise Agreement constitute the sole and only consideration for the payment of the Initial Franchise Fee. The Initial Franchise Fee shall be deemed fully earned by FRANCHISOR as hereinabove specified, and no portion thereof shall be refundable to FRANCHISEE except as specifically provided for herein.
SECTION 4. TERM, RENEWAL, AND HOLDOVER
A. Term of Franchise. The initial term of this Franchise Agreement shall be for a period of Twenty-Five (25) years, commencing on the commencement date of this Franchise Agreement, unless this Franchise Agreement is executed pursuant to an assignment or other transfer arrangement, in which case, the term shall be the remaining portion of the term specified in the respective assignor's or transferor's Franchise Agreement and/or Lease Agreement. The term of this Franchise Agreement may be earlier terminated by FRANCHISOR, as provided in this Franchise Agreement.
The date this Franchise Agreement is executed by FRANCHISOR is the commencement Date of this Franchise Agreement. The Expiration Date of this Franchise Agreement shall be the date Twenty-Five (25) years after the execution of this Franchise Agreement by FRANCHISOR, unless terminated at an earlier date as otherwise provided herein.
Within one (1) year after execution of this Franchise Agreement, FRANCHISEE shall commence operations of the Center Site. FRANCHISEE'S failure to commence operation of the Center Site by the end of such time period shall be grounds for the termination of this Franchise Agreement.
B. Renewal. Upon the expiration of the initial term hereof, FRANCHISEE shall have the option to renew the Franchise for an additional ten (10) year period, or, if less than 10 years, for the time in which FRANCHISEE'S lease for the Center Site remains in effect. This option to renew shall be subject to the following terms and conditions:
(1) FRANCHISEE shall deliver to FRANCHISOR written notice of FRANCHISEE'S intent to renew not more than 360 days and not less than 180 days prior to the Expiration Date of the term under which FRANCHISEE is then operating, and
(2) FRANCHISEE shall make such improvements as may be required to modernize, renovate, equip and decorate the Center, specifically including, but not limited to, cleanliness, paint, carpet and the condition of equipment, so as to reflect the then current standards of FRANCHISOR; and
(3) FRANCHISEE shall have the right to remain in possession of Location, or other location acceptable to FRANCHISOR for the new term; and
(4) FRANCHISEE shall execute a new Franchise Agreement on the form then being used by FRANCHISOR, which may differ as to royalties, advertising contributions and other material terms and conditions. FRANCHISEE shall execute the then current form of transfer Franchise Agreement not less than thirty (30) days prior to said Expiration Date of this Franchise Agreement; and
(5) FRANCHISEE at the beginning of the new term shall pay to FRANCHISOR, franchise fee equal to ten percent (10%) of the then prevailing franchise fee for new franchises; and
(6) At the time of the execution of the new Franchise Agreement, FRANCHISEE shall not be in default of any term or condition of the existing Franchise Agreement or any other Agreement or obligation FRANCHISEE may have with FRANCHISOR, including, but not limited to all obligations to timely pay royalties, advertising contributions, interest and late charges and other properly chargeable amounts.
C. Holdover. If FRANCHISEE continues to operate after the end of any term hereof without exercising an option to renew, FRANCHISEE shall be deemed to be operating on a month-to-month basis under the terms and conditions of the Franchise Agreement then being offered by FRANCHISOR to new FRANCHISEES. However, in such event, FRANCHISEE may be terminated at any time upon ten (10) days written notice from FRANCHISOR. If local law requires that FRANCHISOR give notice to FRANCHISEE prior to the expiration of the term, this Franchise Agreement shall remain in effect on a month-to-month basis until FRANCHISOR has given FRANCHISEE such notice.
SECTION 5. OBLIGATIONS OF FRANCHISEE
A. Name of Franchise. FRANCHISEE shall operate under the trade name "Kids *R' Kids" with the identifying number of the Center and, except as specified in the Kids 'R* Kids Confidential Operating Manual (the "Manual"), shall use no other name in connection with any operation conducted from the Approved Location specified in Section 2 hereof, without the prior, written approval of FRANCHISOR.
The right herein granted to use the name "Kids 'R' Kids" is nonexclusive, and the privileges herein granted are applicable only to the Approved Location and not elsewhere. FRANCHISEE shall display the aforementioned trade name Trade Mark symbol for all purposes, including but not limited to office signs, stationery, business cards and advertising materials which reflect the current image of FRANCHISOR, and shall maintain strict compliance with the requirements set forth in FRANCHISOR'S Manual.
All rights in and to the name "Kids 'R' Kids" and any part thereof or addition thereto and the use thereof shall be and remain the property of FRANCHISOR, and FRANCHISEE shall assign transfer, and convey to FRANCHISOR, by such instrument in writing as may be requested, all additional rights which may be acquired, if any, by reason of the use of such name by FRANCHISEE. Any application for registration by FRANCHISEE to use the name "Kids 'R' Kids," which may be required by the statutes or laws of any governing body, shall specify that FRANCHISEE'S use of such name is limited to such premises and limited as well by the terms of this Franchise Agreement. No property right in or privilege to use such name is created which will extend beyond termination of this Franchise Agreement. FRANCHISEE shall not interfere with nor attempt in any manner to prohibit the use or registration of the name "Kids 'R' Kids" by FRANCHISOR or any other FRANCHISEE of FRANCHISOR.
FRANCHISEE expressly acknowledges that the use of any other trade name in conducting such business of this Franchise is strictly prohibited, and that FRANCHISEE shall not permit the trade name "Kids (R' Kids" or any substantially similar style or spelling thereof, to be used for any other purpose, including but not limited to the formation of corporations, partnerships, business associations or any form of business organization.
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B. Start-Up Obligations. Prior to opening and operating a Center under FRANCHISOR'S franchised trade name, FRANCHISEE shall complete all of the following at FRANCHISEE'S expense, which obligations shall be continuing obligations throughout the term of this Franchise Agreement:
(1) FRANCHISEE shall complete development of the Center and shall have the Center ready to open and commence the conduct of its business no later than one year from the date this Franchise Agreement is executed by FRANCHISOR.
(2) After obtaining possession of the site for the Center, FRANCHISEE shall promptly: (a) cause to be prepared and submit for approval by FRANCHISOR a site plan and any modifications of FRANCHISOR'S basic architectural plans and specifications for the Center (including requirements for dimensions, exterior design, materials, interior layout, equipment, fixtures, furniture, signs, and decorating) required for the development of the Center at the site leased therefore, provided that FRANCHISEE may modify FRANCHISOR'S basic plans and specifications only to the extent required to comply with all applicable ordinances, building codes and permit requirements and with prior notification to and approval by FRANCHISOR;
(b) purchase or lease equipment, fixtures, furniture and signs as hereinafter provided; (c) complete the construction and/or remodeling, equipment, fixture, furniture and sign installation and decorating of the Center in full and strict compliance with plans and specifications approved by FRANCHISOR and all applicable ordinances, building codes and permit requirements; and (d) obtain all customary contractors' sworn statements and partial and final waivers of lien for construction, remodeling, decorating and installation services.
(3) FRANCHISEE shall purchase or lease all necessary furniture, fixtures, and equipment which comply with the standards and specifications set forth in FRANCHISOR'S Manual.
(4) FRANCHISEE shall attend and complete, to the reasonable satisfaction of FRANCHISOR, the Training Program offered by FRANCHISOR, as set forth in Section 6.
(5) FRANCHISEE shall obtain FRANCHISOR'S written approval that the Center is in compliance with FRANCHISOR'S requirements for opening and operating the Center.
(6) FRANCHISEE shall conduct business from the Approved Location only if and when the Center premises have been improved, decorated, furnished, and equipped with equipment, furnishings and supplies which meet FRANCHISOR'S specifications, standards and current image. The completed Center must be decorated, furnished, and equipped according to specifications approved by FRANCHISOR as determined by an inspection by a FRANCHISOR representative.
(7) FRANCHISEE shall obtain all certificates, licenses, bond: necessary for the operation of the business contemplated herein.
(8) FRANCHISEE shall establish to the reasonable satisfaction of FRANCHISOR that FRANCHISEE has or can assure the availability of the capital necessary to open and operate the Center Site, including sufficient working capital of at least $75,000, or other such similar or reasonable amount, as determined by FRANCHISOR.
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(9) FRANCHISEE shall execute the Kressa School Leader Software Program Agreement; properly install in the proscribed computer system and ensure the ongoing working order of the Kressa School Leader Software Program, specifically including paying for all amounts due for the Software Program and all related fees; and submit a voided check from FRANCHISEE'S Center operating account to FRANCHISOR.
C. Insurance. FRANCHISEE shall secure and maintain insurance coverage, including general and products liability, property damage, building coverage, children's accident coverage, transportation coverage, if applicable, and any additional insurance required by FRANCHISOR with insurance carriers acceptable to FRANCHISOR and in accordance with FRANCHISOR'S current insurance requirements as set forth from time to time in the Manual. FRANCHISEE shall provide evidence of obtaining such insurance in the form of a certificate of insurance thirty (30) days after the execution of this Franchise Agreement or, with respect to a certificate of insurance for transportation services, prior to the commencement of transportation services. The coverage shall commence when FRANCHISEE first takes possession of the Center Site or, with respect to coverage for transportation services, prior to the commencement of transportation services. The coverage shall comply with the requirements of any lease or financing for the Center Site, and shall include coverage for such risks, and in such amounts, and subject to such policy limits and deductible amounts as FRANCHISOR shall determine, from time to time. In any event, the amount of coverage provided under any general liability insurance shall not be less than $ 1,000,000 per each occurrence with a $2,000,000 Annual Aggregate. Also including not less than a $1,000,000 umbrella policy. All insurance coverage, including all addenda and endorsements thereto, shall be written only on an occurrence form of coverage and not on claims made forms of coverage. The amount of liability coverage provided under any automobile insurance policy with respect to transportation services shall not be less than $1,000,000 per each occurrence. FRANCHISEE shall also carry such Workers' Compensation insurance as may be required by applicable law. In addition, FRANCHISOR may, in its discretion, require as a condition to approval of any supplier that such supplier include FRANCHISOR and FRANCHISEE as additional named insureds on such supplier's product liability insurance.
FRANCHISOR must be included as additionally named insured on all of the above liability policies. The certificate of insurance furnished by FRANCHISEE must provide for a twenty (20) day minimum notice of cancellation for all Liability, Worker's Compensation, and/or Auto Liability coverage and shall be written with insurers carrying an A.M. Best rating of A or better and licensed in the respective state. FRANCHISEE shall submit to FRANCHISOR annually a copy of the certificate or evidence of the renewal or extension of each such insurance policy.
FRANCHISOR reserves the right to specify reasonable changes in the types and amounts of insurance coverage required by this Paragraph C. Should FRANCHISEE fail or refuse to procure the required insurance coverage from an insurance carrier acceptable to FRANCHISOR or to maintain it throughout the term of this Franchise Agreement or any renewal thereof, FRANCHISOR may, in its sole discretion, but shall not be obligated to, procure such coverage for FRANCHISEE in which event FRANCHISEE agrees to pay the required premiums and/or to reimburse FRANCHISOR therefore immediately upon receipt of FRANCHISOR'S invoice therefore.
D. Ongoing Obligations. In addition to the above referenced start-up obligations, concurrent with the opening of the Center, and continuing throughout the term of this Franchise Agreement, FRANCHISEE agrees to undertake and carry out diligently all of the following obligations:
(1) Operate and manage its Center within the System in accordance with the standards; specifications, instructions, and procedures as set forth in the then current Manuals that have been made available to FRANCHISEE. FRANCHISEE acknowledges that FRANCHISOR has reserved the right, pursuant to Section 7 herein, to make changes to the System and FRANCHISEE agrees to be bound by any and all changes that may hereafter be made, after Thirty (30) Days written notice. The changes may include revisions to Manuals, store improvements, franchise procedures and operational refinements in the System, as well as revisions to FRANCHISOR'S management policies and product lines.
(2) Participate in the advertising programs of FRANCHISOR for local, regional, and/or national advertising and pay a proportionate part of the cost and expense of such advertising programs, as determined and set forth in Section 8, Paragraph G herein.
(3) Pay to FRANCHISOR in a timely manner all money due and owing, including, but not limited to, the initial franchise fee, royalties, product purchases or any other item, in order to maintain its Franchise.
(4) Keep and maintain records and reports as are prescribed by FRANCHISOR, including without limitation sales, inventory and expense information, and timely send copies of such reports and records to FRANCHISOR as set forth in Section 8, Paragraph E and Section 12 herein.
(5) Allow FRANCHISOR to make inspections, without prior notice thereof, of FRANCHISEE'S Center and records at any reasonable time, and to make FRANCHISEE'S books, bank records, tax returns and all other business records available for inspection and audit by FRANCHISOR during normal working hours. FRANCHISOR'S right to audit shall include the right to examine books, tax returns and records of other businesses owned, in whole or in part, or operated by FRANCHISEE to determine whether all revenue reported by FRANCHISEE has been properly reported by FRANCHISEE and that appropriate fees and contributions have been paid. FRANCHISOR has established a uniform list of accounts and/or a uniform bookkeeping system for all of its FRANCHISEES. FRANCHISEE agrees to maintain its books and records in the manner required by FRANCHISOR. In the event an audit of FRANCHISEE'S books discloses that royalties have been underpaid, by two percent (2%) or more, in any one (1) month period, FRANCHISOR may, in addition to any other remedy available under this Franchise Agreement or by law, require FRANCHISEE to pay the audit fees and any expenses, including attorneys' fees, incurred by FRANCHISOR in collecting the past due royalties and/or advertising contributions. Furthermore, the audit costs and related charges shall be in addition to the interest and/or late charges that would be owing for delinquent royalties, advertising contributions and related charges, which are accrued from the date they should have been paid had FRANCHISEE properly and timely reported the relevant transactions and otherwise complied with this Franchise Agreement to the date said amounts are paid, at the rates specified in this Franchise Agreement.
(6) In order to protect FRANCHISOR and its FRANCHISEES from wrongful appropriation of accounts, unfair competition and loss of trade secrets, have all corporate officers, shareholders, partners and employees sign an employment and non-competition agreement in a form acceptable to FRANCHISOR
(7) Not operate any other business and/or engage in any activity from the Approved Location, either under FRANCHISEE'S Franchised trade name or under any other name without the prior, written consent of FRANCHISOR.
(8) Place and display, in the lobby of the Center, a conspicuous sign or plaque which indicates that "Kids 'R' Kids" is Independently Owned and Operated as a Franchise."
(9) Not place the Kids <R' Kids logo or any of FRANCHISOR'S Marks or have any reference to Kids *R' Kids in any manner on any product not furnished or approved by FRANCHISOR.
(10) Advertise only in a manner, e.g., newspaper, TV, radio, magazines, etc., that will develop customer confidence in FRANCHISEE and FRANCHISOR'S products and program, and not use any advertising which may mislead or deceive the public. FRANCHISEE further agrees to discontinue any advertising that FRANCHISOR may reasonably find to be injurious to FRANCHISOR'S business or likely to deceive or mislead the public. All advertising and promotions to be employed independently by FRANCHISEE must be submitted to and approved in writing by FRANCHISOR prior to the use thereof, which approval shall not be unreasonably withheld.
(11) Exercise full and complete control over, and have full responsibility for any and all labor relations, including the hiring, firing, disciplining, compensation, and work schedules of employees.
(12) Pay promptly when due all taxes, accounts, liabilities and indebtedness of any kind incurred by FRANCHISEE, including but not limited to all suppliers, in the conduct of the Center.
(13) Not depart from the substance or manner of sale and presentation of FRANCHISOR'S product, except as authorized by FRANCHISOR, the Manuals or any other documents made available by FRANCHISOR, without prior written approval of FRANCHISOR.
(14) Make all sales on the basis of cash or credit card. Cash includes U.S. currency, personal checks (with proper identification), and travelers' checks (with proper identification). FRANCHISEE shall be solely and entirely responsible for the collection of the proceeds of sales and services.
(15) Obey all federal, state and local laws pertaining to the operation of the Center.
(16) Within ten (10) days of FRANCHISEE'S receiving notice of actual or proposed litigation, notify FRANCHISOR in writing of any and all litigation in which FRANCHISEE may become involved subsequent to the execution of this document or which may affect either party's rights in this Franchise Agreement. If said litigation involves FRANCHISOR'S trade name and/or Marks, FRANCHISOR shall assume the litigation from FRANCHISEE and shall prosecute the
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same at its own expense, unless the litigation concerns some negligent or willful act of FRANCHISEE. In that event, FRANCHISOR shall have the right to prosecute the action, but FRANCHISEE shall have the obligation to reimburse FRANCHISOR for any and all costs, including but not limited to attorneys' fees and court costs.
(17) Maintain the interior and exterior of the Center Site and the surrounding area in the highest degree of cleanliness, orderliness and sanitation and comply with the requirements of the Manual regarding the upkeep of a Kids 'R' Kids Center.
(18) Operate the Center Site during the hours and on the days prescribed in the Manual.
(19) Maintain an approved parental viewing internet system in and at the Center Site at all times throughout the term of the Franchise Agreement.
(20) Provide FRANCHISOR, immediately upon FRANCHISOR'S request and demand, with any and all parental viewing internet system passwords and/or any master password, so that FRANCHISOR may have access to and inspect FRANCHISEE'S parental viewing internet system and Center Site; and obtain, on the forms and in the manner so designated by FRANCHSIOR, all parental consents for this disclosure to FRANCHISOR.
(21) Cooperate with FRANCHISOR in ensuring the proper ongoing operation, use and maintenance of the Kressa SchoolLeader Software Program, and/or any other similar software program which FRANCHISOR may require from time to time, specifically including, but not limited to, the payment of all amounts due for the Software and for services relating to the software and to FRANCHISOR and the submission of all reports and fees, in the manner and as required by FRANCHISOR from time to time.
E. Direct Supervision. FRANCHISEE acknowledges that it is a material consideration to FRANCHISOR in granting this franchise that FRANCHISEE'S Center shall be under the direct, on-premises supervision of FRANCHISEE or, in the case where FRANCHISEE is a corporation or a partnership, by a principal thereof who has been approved in writing in advance by FRANCHISOR, unless otherwise specifically approved by FRANCHISOR in writing. FRANCHISEE (or the pre-approved person designated) shall devote its entire time (excluding reasonable vacation periods) which shall be no less than thirty (30) Hours per week to the management of the Center; provided however, that if FRANCHISEE shall own more than one (1) Kids 'R' Kids Center, each center owned by FRANCHISEE shall be under the direct, on-premises supervision of a principal of FRANCHISEE with at least a ten percent (10%) ownership interest in the profits and losses of FRANCHISEE (a) who shall have completed, to the satisfaction of FRANCHISOR, such training as FRANCHISOR shall specify; (b) whose identity shall have been disclosed to FRANCHISOR; and (c) who shall have executed upon request by FRANCHISOR, an agreement in form satisfactory to FRANCHISOR agreeing not to divulge any trade secret, confidential or proprietary information, including the contents of the Manual or to engage in or have any interest in any other child care center.
F. Management. FRANCHISEE or the pre-approved Center Director will assume
responsibility for the day-to-day management and operation of the Center Site and supervision of personnel FRANCHISEE or at least one Center Director shall be required to be present at the Center Site during all hours of operation. FRANCHISEE may replace any Center Director and FRANCHISOR may, at its option, require any such replacement employee to complete FRANCHISOR'S training program as described in Section 6, Paragraph A hereof.
G. Personnel. FRANCHISEE shall hire, train and supervise Center Site employees in accordance with the specifications set forth in the Manual. All personnel employed by FRANCHISEE at the Center Site must meet every requirement imposed by applicable law and by FRANCHISOR as a condition to their employment at the Center Site. All persons employed by FRANCHISEE having access to any confidential information, knowledge or know-how concerning the Kids *R' Kids System shall execute a noncompetition and nondisclosure agreement in a form satisfactory to FRANCHISOR in its sole discretion. FRANCHISEE shall be liable to FRANCHISOR for any unauthorized disclosure by any of FRANCHISEE'S affiliates, shareholders, directors, officers, employees or agents or such other persons or entities obtaining access through FRANCHISEE.
H. Menu. FRANCHISEE agrees that it will serve up to 2 meals and 2 snacks per day and will serve both hot and cold meals. FRANCHISEE understands that FRANCHISOR provides FRANCHISEE with suggested menus of the food items to serve; however, FRANCHISEE is solely responsible for and must comply with any and all state guidelines regulating menu standards. FRANCHISOR must approve the quality of the food served and/or any vendors which are not pre-approved suppliers.
I. Opening. FRANCHISEE shall complete development of the Center and shall have
the Center ready to open and commence the conduct of its business no later than one (1) year from the date which FRANCHISOR executes this Franchise Agreement (the "Opening Date"). If FRANCHISEE shall not complete all required training and open the Center by the Opening Date, then this Franchise Agreement and the Franchise granted hereby may; at the sole option of FRANCHISOR, be terminated upon the giving of written notice to FRANCHISEE by FRANCHISOR. Thereafter, FRANCHISEE shall have no further nor other rights, claims, or causes against FRANCHISOR arising out of the grant of this Franchise, or any matter related to the facts causing or allowing such termination.
J. Approved Products. In order to assure a uniform, standardized image with which the
public may associate the Kids 'R' Kids System and its trade name, logo and Marks, FRANCHISEE must sell all the products and services which FRANCHISOR requires from time to time, and shall sell no product, service or other item at the Center Site other than items approved by FRANCHISOR. FRANCHISEE shall not, without FRANCHISOR'S prior written consent, sell, dispense, give away or otherwise provide services, FRANCHISOR'S products or any products bearing the Marks. FRANCHISEE shall maintain a supply of fresh and packaged food products sufficient to meet the daily demands of the children and teachers at the Center Site. All supplies and materials used in the operation of the Center shall conform to the specifications and quality standards established by FRANCHISOR from time to time.
(1) Equipment. FRANCHISOR shall provide FRANCHISEE with specifications for menu items, dispensing, storage and display equipment, fixtures, furniture, exterior and interior signs and decorating required for the Center. Specifications may include minimum standards for performance, warranties, design and appearance and local zoning, sign and other restrictions. FRANCHISEE may purchase or lease original and replacement equipment, fixtures, furniture, signs and decorating services meeting such specifications from any source. FRANCHISEE must purchase its Initial Equipment Package from our approved supplier, Childish Creations. Thereafter, if FRANCHISEE proposes to purchase lease any item of equipment or furniture or any fixture or sign not theretofore approved hy FRANCHISOR as meeting its specifications, FRANCHISEE shall first notify FRANCHISOR and FRANCHISOR may require submission of sufficient specifications, photographs, drawings and/or other information and samples to determine whether such item of equipment, furniture, fixture or sign meets its specifications. FRANCHISOR shall advise FRANCHISEE within ninety (90) days whether such item meets its specifications.
(2) Approved Suppliers. FRANCHISEE must purchase the Approved Equipment from suppliers approved and designated by FRANCHISOR (the "Approved Suppliers"). Unless elsewhere provided for in the Manual or in this Franchise Agreement, FRANCHISEE may purchase equipment, supplies, forms and food products required under this Franchise Agreement from any source, provided the supplier meets the standards established from time to time by FRANCHISOR and is an Approved Supplier and provided that the items to be purchased are in strict accordance with the standard specifications of FRANCHISOR, all as more specifically described in this Franchise Agreement and in the Manual. If FRANCHISEE purchases any of the Approved Equipment, supplies or novelty items from FRANCHISOR, FRANCHISOR may require FRANCHISEE to execute a Supply Agreement in substantially the same form as Exhibit H attached hereto.
If FRANCHISEE proposes to use in or purchase for the operations of the Center Site any product, supply, material, equipment or furnishing not accepted by FRANCHISOR, FRANCHISEE shall first notify FRANCHISOR and request the approval of FRANCHISOR which shall be in FRANCHISOR'S sole discretion. Upon FRANCHISOR'S request, FRANCHISEE shall submit to FRANCHISOR sufficient information regarding such product, supply or material to FRANCHISOR and/or samples for examination by FRANCHISOR. FRANCHISOR shall also have the right to require that its representatives be permitted to inspect such supplier's facilities. FRANCHISOR shall notify FRANCHISEE within ninety (90) days of its approval or disapproval. As a condition for acceptance of any new supplier, FRANCHISEE shall reimburse FRANCHISOR for its expenses in connection with any such examination, testing or inspection.
Nothing contained in the Franchise Agreement or Offering Circular shall be deemed to require FRANCHISOR to accept an inordinate number of suppliers for a given item which acceptance in the reasonable judgment of FRANCHISOR would result in higher costs generally to FRANCHISOR'S FRANCHISEES or prevent the effective and economical supervision of its approved suppliers by FRANCHISOR.
K. Refurbishing and Repairs. FRANCHISEE agrees to affect such refurbishing of the Center (in addition to regular maintenance and repair), within three (3) months of its receipt of notice from FRANCHISOR, as FRANCHISOR from time to time requires to maintain or improve the appearance and efficient operation of the Center and/or increase its sales potential or to comply with FRANCHISOR'S standards and identity. Refurbishing may include: (a) replacement of worn
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out or obsolete equipment, fixtures, furniture and signs; (b) the substitution or addition of new or improved equipment, fixtures, furniture and signs; (c) redecorating, (d) repair of the interior and exterior of the premises and repair and resurfacing of parking facilities; and (e) structural modifications and remodeling of the premises. FRANCHISEE shall not be required to make aggregate expenditures for refurbishing in excess of three percent (3%) of the gross sales of FRANCHISEE'S Center from the date of its opening to the date of any required refurbishing or to affect any refurbishing of the Center during the last twelve (12) months of the term of the Franchise.
L. Prices. FRANCHISOR may from time to time offer guidance to FRANCHISEE relative to prices for the products and services of the Center that in FRANCHISOR'S judgment constitute good business practice. FRANCHISEE shall have the sole right to determine the minimum prices charged.
M. Manual. In order to maintain uniform standards of operation for a Kids 'R' Kids Center and to protect the goodwill of FRANCHISOR, the Kids 'R' Kids System and the Marks, FRANCHISEE agrees to follow the methods and standards of operation established by FRANCHISOR and set forth in the Manual, as amended from time to time. FRANCHISOR shall lend FRANCHISEE one copy of the Manual prior to the opening of the Center Site. FRANCHISEE shall treat the Manual as confidential, and shall be liable to FRANCHISOR for any unauthorized disclosure by FRANCHISEE or any of FRANCHISEE'S affiliates, shareholders, principals, directors, officers, employees, agents or other such persons or entities obtaining access through FRANCHISEE. FRANCHISOR, at its sole discretion, shall require FRANCHISEE, its principals, affiliates, shareholders, directors, officers, employees, agents or all other persons or entities obtaining access of any confidential information, knowledge or know-how, including but not limited to information in FRANCHISOR'S Manual, to execute a noncompetition and nondisclosure agreement in a form satisfactory to FRANCHISOR in its sole discretion.
N. Specifications and Procedures. FRANCHISEE agrees to fully comply with all specifications, standards and operating procedures and rules from time to time prescribed for the Center, including, without limitation, specifications, standards, and operating procedures and rules relating to: (a) the safety, maintenance, cleanliness, sanitation, function and appearance of the Center premises and its equipment, fixtures, furniture, decor and signs; (b) qualifications, dress, grooming, general appearance and demeanor of FRANCHISEE and all employees of FRANCHISEE and the Center; (c) advertising and promotion; (d) use of standard forms; (e) use and illumination of exterior and interior signs, posters, displays, and similar items; (f) the handling of customer complaints; and (g) the posting of signs identifying FRANCHISEE as the owner of the Center in accordance with FRANCHISOR'S requirements.
O. Compliance with Ordinances. FRANCHISEE shall secure and maintain in force all required licenses, permits and certificates and shall operate the Center in full compliance with all applicable laws, ordinances and regulations, including without limitation all government regulations relating to: occupational hazards and health, consumer protection, unfair and deceptive practices, trade regulation, workers' compensation, unemployment insurance and withholding, and payment of federal and state income taxes; social security taxes; property taxes; and sales and use taxes.
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FRANCHISEE agrees to pay when due all amounts payable by FRANCHISEE pursuant to any provision of this Franchise Agreement or any other agreement with FRANCHISOR or its affiliates or subsidiaries or pursuant to any agreement with any other creditor or supplier of the Center.
P. Marks. Consistent with and in addition to the terms and conditions regarding FRANCHISOR'S marks set forth in Section 2, Paragraph B, FRANCHISEE acknowledges that FRANCHISOR is the Registered and Common Law owner of all Trade Names and/or Marks licensed to FRANCHISEE by this Franchise Agreement and all usage thereof by FRANCHISEE and any goodwill established thereby shall inure to the exclusive benefit of FRANCHISOR. FRANCHISOR has registered the Kids 'R' Kids Mark with the U.S. Patent and Trademark Office. FRANCHISEE agrees to use each Mark in full compliance with rules prescribed from time to time by FRANCHISOR. FRANCHISEE shall not use any Mark as part of any corporate name or with any prefix, suffix or other modifying words, terms, designs or symbols (other than logos licensed to FRANCHISEE hereunder), nor may FRANCHISEE use any Mark in connection with the sale of any unauthorized product or service or in any other manner not explicitly authorized in writing by FRANCHISOR. FRANCHISEE shall immediately notify FRANCHISOR of any infringement of or challenge to FRANCHISEE'S or FRANCHISOR'S use of any Mark or claim by any person of any rights in any Mark, and FRANCHISEE shall not communicate with any person other than FRANCHISOR and its counsel in connection with any such infringement, challenge or claim. In the event any of FRANCHISOR'S trademarks are challenged by third parties claiming infringement of alleged prior or superior rights in such marks, FRANCHISOR shall have the option and right to modify or discontinue use of the trademarks and adopt substitute trademarks in FRANCHISEE'S geographical business areas and in such other areas as FRANCHISOR chooses. FRANCHISOR'S liability to FRANCHISEE under such circumstances shall be limited to the cost of replacement of FRANCHISEE'S signs and advertising materials in effecting such modifications, discontinuance or adoption of substitute trademarks.
Q. Transportation Services. FRANCHISEE may not provide transportation services to or from the Center Site for children, teachers or other personnel or persons without the prior written approval of FRANCHISOR, which approval may not be unreasonably withheld or withdrawn by FRANCHISOR. FRANCHISEE may provide transportation services only in strict accordance with FRANCHISOR'S specifications, as set forth below and in the Manual. FRANCHISOR may initially and from time to time limit the geographic area in which FRANCHISEE may provide transportation services in connection with the Center Site. In addition to and not in limitation of the foregoing, all transportation services shall be in accordance with the following terms and conditions:
(1) Authorization. FRANCHISEE may only provide transportation services to and from the Center Site and for Center-related field trips with and for the children. FRANCHISEE shall not provide any other transportation services without FRANCHISOR'S prior, written approval.
(2) Geographic Scope. No FRANCHISEE is specifically limited to providing transportation services within its Exclusive Territory, and any Franchisee may provide transportation services within another Franchisee's Exclusive Territory.
(3) Compliance with Laws. FRANCHISEE agrees to comply with all applicable laws, rules and regulations of the State Department of Human Resources and any other governmental agency in connection with the provision of transportation services by FRANCHISEE, including submitting vehicles used by FRANCHISEE for inspection and approval by the State Department of Human Resources and/or such other governmental agencies. FRANCHISEE shall perform regular maintenance with respect to each vehicle used in FRANCHISEE'S business and shall keep each vehicle in good operating condition and repair, normal wear and tear excepted. In no event shall FRANCHISEE use any vehicle which is not then currently in good condition and repair and/or which imposes any safety hazard to any person.
(4^ Insurance. Prior to commencing transportation services FRANCHISEE shall secure and maintain the insurance coverage with insurance carriers acceptable to FRANCHISOR and in accordance with FRANCHISOR'S insurance requirements as specifically set forth in Section 5, Paragraph C herein and in the Manual. FRANCHISEE shall provide to FRANCHISOR evidence of obtaining such insurance prior to commencing transportation service and on an annual basis thereafter. FRANCHISOR may require additional types or specify the amounts of insurance in addition to that required by Section 5, Paragraph C hereof which FRANCHISEE must obtain prior to the commencement of transportation services. Any such additional requirements or specifications may be provided by FRANCHISOR to FRANCHISEE in writing and shall be controlling in all cases and in the event of any conflict between such requirements and specifications and those required by Section 5, Paragraph C.
(5) Drivers. FRANCHISEE agrees that each of its employees serving as drivers in connection with the provisions of transportation services shall have (a) acquired a Commercial Drivers License; and (b) completed and executed with FRANCHISEE, FRANCHISOR'S most current form of Driver Agreement, a copy of which is attached hereto as Exhibit J. FRANCHISEE shall send a copy of the Driver Agreement executed by and between FRANCHISEE and each of FRANCHISEE'S employees serving as a driver to FRANCHISOR within five days following its execution. FRANCHISEE shall require each of its drivers to obtain and maintain insurance for at least the coverage and the amounts as required by FRANCHISOR from time to time for Kids 'R' Kids System drivers. FRANCHISEE shall be solely responsible for the hiring and supervision of all of its drivers.
SECTION 6. OBLIGATIONS OF FRANCHISOR
Provided that FRANCHISEE has fully complied with the terms and conditions of this Franchise Agreement and all other agreements between FRANCHISEE and FRANCHISOR or any affiliate, FRANCHISOR agrees during the term of this Franchise Agreement to provide the following services:
A. Training and Assistance.
(1) Initial Training Program. Prior to opening of the Franchise Center, but after
FRANCHISEE either acquires the Center Site or enters into a lease approved by FRANCHISOR for the Center Site, FRANCHISOR shall provide FRANCHISEE (or a pre-approved principal of FRANCHISEE) and one (1) additional person who has been designated by FRANCHISEE to be the Center Director or assistant center director responsible for the day-to-day operation of the Center Site and accepted in advance in writing by FRANCHISOR, with training in the operation of a Kids 'R' Kids Center. FRANCHISEE'S expenses incurred in attending such training program include, without limitation, costs for FRANCHISEE'S and the additional person's wages, meals, lodging and transportation. Such training will be conducted at a Kids 'R' Kids child care center located in the metropolitan Atlanta, Georgia area or at another location designated by FRANCHISOR for approximately six (6) full consecutive days, or as otherwise deemed appropriate by FRANCHISOR. FRANCHISOR shall bear the cost of such training except for any cost and expenses attributable to transportation, room and board, wages and other personal expenses of such individuals. In the event that any of such person fails to complete FRANCHISOR'S training program to the satisfaction of FRANCHISOR, FRANCHISEE shall have the option, at its sole cost and expense, of sending a replacement to FRANCHISOR'S initial training program in place of each such individual An employee of FRANCHISEE who has successfully completed FRANCHISOR'S initial training program to the satisfaction of FRANCHISOR shall be referred to herein as a "Qualified Employee." Successful completion of such initial training program by FRANCHISEE or its principal and one (1) Center Director or assistant center director as described above is a condition to the opening of Center Site to the public.
(2) Center Opening Assistance. In addition to FRANCHISOR'S initial training program, FRANCHISOR shall also provide one operational supervisor for a period of up to ten (10) business days to assist in the opening of FRANCHISEE'S Center Site. FRANCHISOR shall bear the cost of such training.
(3) Additional Training. If, at any time after the opening of the Center Site, FRANCHISOR determines that FRANCHISEE or the Qualified Employee requires additional training, or if FRANCHISEE hires an additional or replacement employee for a Qualified Employee and FRANCHISOR determines in its sole discretion that FRANCHISEE is unable to adequately train the new employee, or if there has been a sale of the Center Site or assignment of Franchise Agreement and FRANCHISOR determines in its sole direction that additional training is required, FRANCHISOR may require that the new employee satisfactorily complete such training as may be designated by FRANCHISOR. FRANCHISEE shall pay FRANCHISOR the then current training fee charged by FRANCHISOR for any additional training designated by FRANCHISOR or requested by FRANCHISEE. FRANCHISEE shall also be responsible for the costs and expenses of FRANCHISEE and any of its employees, as described in this Section 6, and any costs and expenses of FRANCHISOR and any of its employees, in connection with such additional training.
B. Inspections. FRANCHISOR may, but shall not be obligated to, inspect the Center Site and interview FRANCHISEE'S employees at any reasonable time without prior notice to determine that the Center Site is being operated in accordance with the terms of this Franchise Agreement, the Manual and other applicable rules of FRANCHISOR, as well as applicable federal state and local laws, regulations, rules and ordinances. FRANCHISOR may elect to inspect FRANCHISEE'S Center Site at any time and from time to time, via FRANCHISEE'S parental viewing internet system. FRANCHISOR shall notify FRANCHISEE in writing of any unsatisfactory conditions discovered, and FRANCHISEE agrees to correct or repair any such
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conditions immediately upon being advised of the same. FRANCHISEE shall pay FRANCHISOR'S reasonable and customary travel expenses with respect to one inspection visit by FRANCHISOR per calendar quarter, including FRANCHISOR'S travel, lodging, meals and other out-of-pocket expenses incurred in connection with such inspection visit.
C. Products. Supplies and Materials. Following the execution of this Franchise Agreement, FRANCHISOR shall use reasonable efforts to make available for purchase from FRANCHISOR'S designated manufacturers or suppliers the Approved Equipment and all other products required or approved by FRANCHISOR for use in connection with the Center Site, all to the extent FRANCHISOR'S suppliers are able to supply the same. FRANCHISEE shall purchase the Approved Equipment and all other products required from a supplier who complies with FRANCHISOR'S supplier acceptance. guidelines as described in Section 5, Paragraph J of this Franchise agreement.
D. Manual. FRANCHISOR shall without charge, lend to FRANCHISEE one copy of FRANCHISOR'S Confidential Operating Manual all amendments, revisions and supplements thereto, which contain specifications, standard operating procedures, requirements, bookkeeping methods, marketing and advertising techniques and other rules prescribed from time-to-time by FRANCHISOR. All Manuals shall remain confidential and the property of FRANCHISOR. FRANCHISEE shall pay to FRANCHISOR Five Hundred Dollars ($500.00) for each and every Manual or any part of it that is not returned to FRANCHISOR upon termination or transfer of this Franchise Agreement.
E. Operating Assistance. FRANCHISOR shall furnish to FRANCHISEE such reasonable operating assistance in connection with the operation of the Center as FRANCHISOR determines from time to time to be necessary. Operating assistance may include advice and guidance with respect to: (a) hiring and training employees; (b) formulating and implementing advertising and promotional programs; and (c) the establishment and maintenance of administrative, bookkeeping, accounting, and general operating procedures. FRANCHISOR shall advise FRANCHISEE from time to time of operating problems of the Center disclosed by reports submitted to or inspections made by FRANCHISOR. FRANCHISOR shall make no separate charge to FRANCHISEE for such operating assistance, provided that FRANCHISOR may make reasonable charges for forms and other materials supplied to FRANCHISEE and for operating assistance made necessary, in the judgment of FRANCHISOR, as a result of FRANCHISEE'S failure to comply with any provision of this Franchise Agreement or any specification, standard or operating procedure prescribed by FRANCHISOR, or operating assistance requested by FRANCHISEE in excess of that normally provided by FRANCHISOR. At any time, during the term of the Franchise Agreement, if FRANCHISEE desires the "on hand" assistance of trained FRANCHISOR personnel, FRANCHISOR, upon written request by FRANCHISEE shall provide corporate representative(s) to assist FRANCHISEE at FRANCHISEE'S Center. Such assistance will be provided to FRANCHISEE pursuant to Paragraph A(3) herein. FRANCHISOR may charge a reasonable fee in satisfaction of these services, not to exceed Five Thousand Dollars ($5,000) for services provided within one calendar quarter.
F. Site Transfer Assistance. Upon Franchisee's request, FRANCHISOR may provide FRANCHISEE with assistance in identifying a qualified purchaser to purchase FRANCHISEE'S Franchise and Center Site. FRANCHISOR may also provide FRANCHISEE with assistance in identifying improvements which FRANCHISEE should make in order to
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facilitate the transfer of FRANCHISEE'S Franchise and Center Site. FRANCHISOR has the right and privilege not to provide any such services to FRANCHISEE. Prior to providing any such services, FRANCHISEE must sign FRANCHISOR'S then current form of Franchise Site Transfer Assistance Agreement and pay FRANCHISOR a flat fee of Thirty Thousand Dollars ($30,000).
SECTION 7. RIGHTS RESERVED BY FRANCHISOR
FRANCHISOR reserves the right to modify the Kids 'R' Kids System and the Manuals at any time, and from time to time by the addition, deletion or other modification to the provisions thereof, provided that such modification shall be made only to the extent necessary or desirable and in the sole judgment of FRANCHISOR to protect FRANCHISOR'S Marks and goodwill, to comply with any applicable law, statute, judicial or administrative decision, or to improve the quality of products and services offered to the public.
SECTION 8. ROYALTIES AND OTHER PAYMENTS
A. Royalty Fees. In consideration of the rights granted to FRANCHISEE under this Franchise Agreement, FRANCHISEE agrees to pay FRANCHISOR a Royalty Fee of five percent (5%) on the total Tuition Sales and Drop-in Sales, as defined below, generated from the operation of the Center (the "Royalty Fee" or "Royalties"). FRANCHISEE'S obligation to make Royalty payments to FRANCHISOR shall commence on the earlier of ninety (90) days after the Opening Date of the Center or on the date when the Center reaches its first enrollment of 125 children, whether said children are full or part time. All Royalties paid to FRANCHISOR are nonrefundable.
B. Definition of Tuition and Drop-in Sales. Tuition Sales and Drop-in Sales, as used in the Franchise Agreement, shall mean, but shall not be solely limited to, those total revenues derived by FRANCHISEE for the care of children enrolled in the Center on a full-time basis or on a part-time basis or for the care of children who may attend the center on a periodic or drop-in basis. Such Tuition and Drop-in Sales also include any sales made for cash, check credit or otherwise, including any sales made or services provided in connection with barter or counter trade, if any, without reserve, offset or deduction for inability or failure to collect the same. Tuition and Drop-in Sales shall not include any sales made for food, goods, wares and merchandise in connection with the Kids 'R' Kids Center; rebates approved by the FRANCHISOR; refunds to customers; or the amount of any taxes which FRANCHISEE may be required or shall be required in the future to collect from customers to be paid to any federal, state or local taxing authority. Such tax, however, shall not include any property or franchise tax, but shall only include those taxes, if any, to be collected from the customers of FRANCHISEE. (Tuition Sales and Drop-in Sales shall hereinafter collectively be referred to as "Gross Sales")
C. Manner of Payment. FRANCHISEE shall pay the Royalties to FRANCHISOR by electronic funds transfer, in cash or by check, as required by FRANCHISOR, to be received by FRANCHISOR not later than Friday of each week. Such Royalties shall be calculated from the Gross Sales of the immediately preceding calendar week, which week shall end at the close of business on Saturday. FRANCHISOR may require FRANCHISEE to use and pay for all required computer software programs and accompanying services, including the Kressa SchoolLeader Software Program, to calculate amounts due, prepare and submit the required weekly and other reports, and/or remit the Royalties due under this Franchise Agreement. FRANCHISEE is required to cooperate with FRANCHISOR in the use of any software program and in the payment of all amounts due hereunder.
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D. Late Payments. Pursuant to the terms of the Franchise Agreement, any delinquent Royalty payment shall bear simple interest until received by FRANCHISOR (computed at the highest interest rate allowed by law or at the rate of one and one half percent (1.5%) per month, whichever is less). To compensate FRANCHISOR for the increased expense incurred in connection with the late payment of any Royalty payment, FRANCHISEE shall pay, upon demand, in addition to any interest or other charges, a late charge of twenty-five Dollars ($25.00) for each delinquent Royalty payment. Such late charge is not to be construed as interest but is solely to compensate FRANCHISOR for increased costs due to the late payment of such Royalty Fee. In addition, FRANCHISEE must reimburse FRANCHISOR for all costs and expenses, including reasonable attorney fees, incurred in collections and determination of amounts due hereunder, where permitted.
At any time that FRANCHISEE is seven (7) days in arrears in the payment of a weekly Royalty Fee, an invoice for materials and/or products purchased from FRANCHISOR, and/or the fling of reports due FRANCHISOR hereunder, FRANCHISOR, in its sole discretion, without thereby canceling or terminating this Franchise Agreement and without thereby prejudicing FRANCHISOR'S other rights and remedies including the right to terminate this Franchise Agreement for the same cause or for any one or more causes, may cease providing FRANCHISEE with the services and products including promotional materials herein provided for until such time as FRANCHISEE is current in the payment of fees and filing of reports. The failure of FRANCHISOR to provide such services during that period shall not be deemed a breach of this Franchise Agreement.
FRANCHISOR reserves the right to demand all late payments be paid by cash, certified check, cashier's check, money order, or wire transfer.
E. Weekly Reports. Payments of the weekly Royalty Fee must be received by FRANCHISOR at its principal offices, or such other place as FRANCHISOR may designate and must be accompanied by weekly reports on forms designated by FRANCHISOR setting forth a complete accounting of FRANCHISEE'S Gross Sales revenues and such other information as may be required by FRANCHISOR. Said payments shall be accompanied by fully executed copies of the following documents:
(1) Weekly Revenue Reports
(2) Marketing Reports, if applicable
(3) Advertising Tear Sheets and/or Advertising Invoices
(4) Such other reports as may be reasonably required from time to time by FRANCHISOR, all on forms designated by FRANCHISOR, together with any supporting documentation required by FRANCHISOR.
FRANCHISOR reserves the right to request or download reports from FRANCHISEE'S computer system.
F. Payment for Products purchased from FRANCHISOR. Payment for products, supplies, promotional materials and forms purchased by FRANCHISEE from FRANCHISOR shall be prepaid in cash (unless other agreement has been entered into with FRANCHISOR.)
FRANCHISEE shall pay all collection charges.
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G. Advertising and Marketing.
(1) Advertising and Marketing. Recognizing the value of advertising for the furtherance of the goodwill and public image of FRANCHISEE and the Franchise System, in those states where FRANCHISOR has not established a Kids 'R' Kids Advertising Fund (the "Advertising Fund"), described in Sub-Paragraph (3) herein, FRANCHISEE shall expend on advertising during each calendar month an amount equal to at least one and one-half percent (1.5%) of Gross Sales for the preceding month. In states where FRANCHISOR establishes and for so long as FRANCHISOR maintains the Advertising Fund, FRANCHISEE may expend any amount on local advertising which FRANCHISEE in its sole discretion determines.
(2) Advertising bv FRANCHISEE. All advertising by FRANCHISEE shall be conducted in a dignified manner and shall conform to the standards and requirements prescribed by FRANCHISOR. All local and any other form of advertising by FRANCHISEE must be approved in advance in writing by FRANCHISOR. FRANCHISEE shall continuously maintain white pages telephone directory listings and yellow pages display advertisement, of a size no less than two inches by six inches (2.5" x 6"), in the Bell Companies telephone book(s) which cover the area in which the Center Site is located (the "Area"). Further, FRANCHISEE shall be required to jointly advertise within the Area on a pro rata basis in the Area yellow page display advertisement.
FRANCHISOR periodically provides various marketing items which FRANCHISEE may purchase to be distributed to customers at their Center. FRANCHISOR will make these items available to FRANCHISEE at FRANCHISOR'S cost plus a minimal handling charge not to exceed twenty percent (20%). FRANCHISEE has the option of refusing to purchase any promotional product provided by FRANCHISOR.
(3) Advertising Fee. Notwithstanding anything contained herein to the contrary, FRANCHISOR may, but is not obligated to, establish an Advertising Fund, as described herein below, only in states which have five (5) or more Kids 'R' Kids Centers. Immediately after FRANCHISOR establishes and for so long as FRANCHISOR maintains the Advertising Fund described below, FRANCHISEE shall pay FRANCHISOR as sum equal to one percent (1%) of Gross Sales for the previous week (the "Advertising Fees"). FRANCHISOR shall be entitled to increase the percentage amount contributed by FRANCHISEE to the Advertising Fund by notification in writing to FRANCHISEE, provided that the Advertising Fees shall not exceed two percent (2%) of Gross Sales for the previous week. All Advertising Fees shall be paid by FRANCHISEE by Friday of each week and shall accompany and be paid in the same manner as all Royalty Fees, including the use of any software programs designated by FRANCHISOR. Advertising Fees are calculated from the tuition and drop-in sales of the immediately preceding calendar week, commencing with the week in which the Fund is established or in which the Center is opened and continuing for the term of the Franchise Agreement. FRANCHISOR shall deposit Advertising Fees in a separate account under the control of FRANCHISOR, but designated the "Kids 'R' Kids Advertising Fund." The Advertising Fees shall be used by FRANCHISOR to provide regional and/or national advertising and promotion for the Kids *R' Kids Centers. FRANCHISOR has complete discretion over the type, quality, quantity, geographic location, timing, placement and choice of agency or media with respect to such advertising and whether to continue the Advertising Fund. In administering the Fund, FRANCHISOR undertakes no obligation to make expenditures for FRANCHISEE which are equivalent or proportional to FRANCHISEE'S
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The original documents were scanned as an image. The original file can be downloaded at the link above.