The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample Franchise Agreement
MELT - GELATO ITALIANOtm FRANCHISE AGREEMENT
This Franchise Agreement is made this ____ day of____________, 20__ between Melt
Franchising, LLC, a limited liability company with its principal business located at 45320 Corte Palmito,
Temecula, CA 92592 ("we" or "us"), and _____________________________________, a(n)
__________________________________________ whose principal business address is
___________________________________("franchisee" or "you"). If the franchisee is a corporation,
partnership, limited liability company or other legal entity, certain provisions to this Agreement also apply to its owners.
A. Melt Inc., our parent company ("Parent"), has developed a distinctive system for operating gelato bars that feature a large selection of Italian style gelato, sorbetto, smoothies, Italian coffees, Italian sodas, pastries and similar food items;
B. Our Parent has a pending application for the MELT - gelato italiano™ trademark and design and uses other trademarks in connection with the operation of a gelato bar;
C. Our Parent has granted us the right to sublicense the right to develop and operate MELT -gelato italiano gelato bars;
D. You desire to develop and operate a MELT - gelato italiano gelato bar and we, in reliance on your representations, have approved your franchise application.
In consideration of the foregoing and the covenants and consideration below, you and we agree as follows:
1. For purposes of this Agreement, the terms below have the following definitions:
A. "Gelato Bar" means the Gelato Bar you develop and operate pursuant to this Agreement under the MELT - gelato italiano trademark or other trademarks we authorize through Appendix A.
B. "Gross Sales" includes the total revenues and receipts from the sale of all products, services and merchandise sold in or from your Gelato Bar whether under any of the Trademarks or otherwise, including any vending or similar activities in your Gelato Bar or on its premises. Gross Sales excludes sales taxes.
C. "Manual" means our confidential and proprietary Operations Manual, which collectively may include one or more separate volumes or other written materials regarding System standards, procedures and techniques relating to, among other things, product preparation, menu, customer service and other matters as set forth in subparagraph 6.1 of this Agreement.
D. "Menu Items" means the gelato, sorbetto, smoothies, coffees, sodas, pastries, cakes, and other products and beverages, as we set forth on Appendix A or
otherwise authorize you to offer for sale at your Gelato Bar. We may modify and change Appendix A from time to time.
E. "Principal Owner" means any person who directly or indirectly owns a 51% or greater interest in the franchisee when the franchisee is a corporation, limited liability company or a similar entity other than a partnership entity. If the franchisee is a partnership entity, then each general partner is a Principal Owner, regardless of the percentage ownership interest. If the franchisee is one or more individuals, each individual is a Principal Owner of the franchisee. Each franchisee must have at least one Principal Owner. Your Principal Owner is identified on the Ownership and Management Addendum attached to this Agreement.
F. "Store Manager" means the individual who (i) personally invests his or her full time and attention and devotes his or her best efforts to the on-premises general management of the day-to-day operations of the Gelato Bar, (ii) meets our prior gelato bar or retail management experience requirements, and (iii) does not participate in the active operation or management of any business other than the Gelato Bar.
G. "System" means the Melt Gelato Bar System, which consists of distinctive food and beverage products with distinctive storage, preparation, service and delivery procedures and techniques, offered in a setting of distinctive exterior and interior layout, design and color scheme, signage, furnishings and materials and using certain distinctive types of ingredients, supplies, business techniques, methods and procedures, all of which we may modify and change from time to time.
H. "Trademarks" means the MELT - gelato italiano Trademark and the other
trademarks, service marks and trade names set forth on Appendix A, as we may modify and change from time to time, and the trade dress and other commercial symbols used in the Gelato Bar. The primary Trademark you will use to identify your Gelato Bar will be MELT - gelato italiano or MELT - cafe & gelato, depending on your Menu items and as further noted in Appendix A. Any reference in this Agreement to MELT - gelato italiano will mean MELT - cafe & gelato if that is the primary Trademark you use. Trade dress includes the designs, color schemes, image, and overall look and feel we authorize you to use in the operation of the Gelato Bar from time to time.
GRANT OF LICENSE
2. The following provisions control with respect to the license granted hereunder:
A. Authorized Location. We grant to you the right and license to establish and operate a
retail Gelato Bar identified by the Trademarks identified on Appendix A, to be located
________________________________or a location to be designated within 60 days
from the date of this Agreement (the "Authorized Location"). When a location has been designated and approved by you and us, it will become part of this subparagraph 2.A as if originally stated. If an Authorized Location is not designated within 60 days from the date of this Agreement, we have the right to declare this Agreement null and void without the return of any Initial Franchise Fee or other amounts paid to us. You accept the license and undertake the obligation to operate the Gelato Bar at the Authorized
Location using the Trademarks and the System in compliance with the terms and conditions of this Agreement.
B. Opening. You agree that the Gelato Bar will be open and operating in accordance with the requirements of subparagraph 5.A within 6 months after the date of this Agreement, unless we authorize in writing an extension of time.
C. Nonexclusivitv: Our Reservation of Rights. You have no protected area or exclusive territory around your Authorized Location. The license is limited to the right to develop and operate one Gelato Bar at the Authorized Location only, and does not include (i) any right to sell products and Menu Items identified by the Trademarks at any location other than the Authorized Location or through any other channels or methods of distribution, including the internet (or any other existing or future form of electronic commerce), (ii) any right to sell products and Menu Items identified by the Trademarks to any person or entity for resale or further distribution, or (iii) any right to exclude, control or impose conditions on our development of future franchised, company or affiliate-owned gelato bars at any time or at any location.
You acknowledge and agree that (i) we, our Parent and our affiliates have the right to grant other franchises or develop and operate company or affiliate-owned MELT gelato bars and offer, sell or distribute any products or services associated with the System (now or in the future) under the Trademarks or any other trademarks, service marks or trade names at any location, including the same mall or facility as your Authorized Location, all without compensation to any franchisee; and (ii) we, our Parent and our affiliates have the right to offer, sell or distribute our gelato or other products or services associated with the System (now or in the future) or identified by the Trademarks, or any other trademarks, service marks or trade names, through any distribution channels or methods, without compensation to any franchisee. The distribution channels or methods include, without limitation, grocery stores, gift and specialty stores, club stores, restaurants, convenience stores, wholesale or the internet (or any other existing or future form of electronic commerce).
TRADEMARK STANDARDS AND REQUIREMENTS
3. You acknowledge and agree that the Trademarks are our Parent's property. You further
acknowledge that your right to use the Trademarks is specifically conditioned upon the following:
A. Trademark Ownership. The Trademarks are our Parent's valuable property, and it is the owner of all right, title and interest in and to the Trademarks and all past, present or future goodwill of the Gelato Bar and of the business conducted at the Authorized Location that is associated with or attributable to the Trademarks. Your use of the Trademarks will inure to our affiliate company's and our benefit. You may not, during or after the term of this Agreement, engage in any conduct directly or indirectly that would infringe upon, harm or contest our affiliate company's rights in any of the Trademarks or the goodwill associated with the Trademarks, including any use of the Trademarks in a derogatory, negative, or other inappropriate manner in any media, including but not limited to print or electronic media.
B. Trademark Use. You may not use, or permit the use of, any trademarks, trade names or service marks in connection with the Gelato Bar except those set forth in
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Appendix A or except as we otherwise direct in writing. You may use the Trademarks only in connection with such products and services as we specify and only in the form and manner we prescribe in writing. You must comply with all trademark, trade name and service mark notice marking requirements. You may use the Trademarks only in association with products and services approved by us and that meet our standards or requirements with respect to quality, production, preparation and sale, and portion and packaging.
C. Gelato Bar Identification. You must use the name MELT - GELATO ITALIANO or other marks we designate as the trade name of the Gelato Bar and you may not use any other mark or words to identify the Gelato Bar without our prior written consent. You may not use the words Melt - GELATO ITALIANO or any of the other Trademarks as part of the name of your corporation, partnership, limited liability company or other similar entity. You may use the Trademarks on various materials, such as business cards, stationery and checks, provided you (i) accurately depict the Trademarks on the materials, (ii) include a statement on the materials indicating that the business is independently owned and operated by you, (iii) do not use the Trademarks in connection with any other trademarks, trade names or service marks unless we specifically approve in writing prior to such use, and (iv) make available to us, upon our request, a copy of any materials depicting the Trademarks. You must post a prominent sign in the Gelato Bar identifying you as a franchisee in a format we deem reasonably acceptable, including an acknowledgment that you independently own and operate the Gelato Bar and that the MELT - GELATO ITALIANO Trademark is owned by our affiliate company and your use is under a license we have issued to you.
D. Litigation. In the event any person or entity improperly uses or infringes the Trademarks or challenges your use or our use or ownership of the Trademarks, we will control all litigation and we have the right to determine whether suit will be instituted, prosecuted or settled, the terms of settlement and whether any other action will be taken. You must promptly notify us of any such use or infringement of which you are aware or any challenge or claim arising out of your use of any Trademark. You must take reasonable steps, without compensation, to assist us with any action we undertake. We will be responsible for our fees and expenses with any such action, unless the challenge or claim results from your misuse of the Trademarks in violation of this Agreement, in which case you must reimburse us for our costs and expenses and any judgment amount resulting against us.
E. Changes. You may not make any changes or substitutions to the Trademarks unless we direct in writing. We reserve the right to change the Trademarks at any time. Upon receipt of our notice to change the Trademarks, you must cease using the former Trademarks and commence using the changed Trademarks, at your expense.
TERM AND RENEWAL
4. The following provisions control with respect to the term and renewal of this Agreement:
A. Term. The initial term of this Agreement is 7 years unless this
Agreement is sooner terminated in accordance with Paragraph 13. The initial term commences upon the Effective Date of this Agreement. We may extend this initial term
in writing for a limited period of time not to exceed 6 months to take into account the term of any applicable lease for the Authorized Location.
B. Renewal Term and Conditions of Renewal. You may renew your license
for two renewal terms (the first renewal term is 7 years; the second renewal term is 7 years), provided that with respect to each renewal: (i) you have given us written notice of your decision to renew at least 6 months but not more than 12 months prior to the end of the expiring term; (ii) you sign our then-current form of franchise agreement (modified to reflect that the agreement relates to the grant of a renewal), the terms of which may differ from this Agreement, including higher fees; (iii) you have complied with the provisions of subparagraph 5.E regarding modernization, unless we determine that you should relocate your Gelato Bar because your Authorized Location no longer meets our then-current site criteria, in which case you must comply with the relocation requirements of subparagraph 5.D; (iv) you are not in default of this Agreement or any other agreement pertaining to the franchise granted, have satisfied all monetary and material obligations on a timely basis during the term and are in good standing; (v) if leasing the Gelato Bar premises (and not subject to relocation under (iii) above), you have renewed the lease and have provided written proof of your ability to remain in possession of the premises throughout the renewal period; (vi) you comply with our then-current training requirements; and (vii) you and your Principal Owner and guarantors execute a general release of claims in a form we prescribe.
FACILITY STANDARDS AND MAINTENANCE
5. You acknowledge and agree that we have the right to establish, from time to time, quality
standards regarding the business operations of MELT gelato bars and stores to protect the distinction, goodwill and uniformity symbolized by the Trademarks and the System. Accordingly, you agree to maintain and comply with our quality standards and agree to the following terms and conditions:
A Gelato Bar Facility; Lease. You are responsible for controlling the site selection
process, although we must approve to the location of your Gelato Bar. We will find potential development sites through third party brokers and request that you consider available sites. We may assist in negotiating the basic terms of the lease with the developer, and after review by you and your attorney, you will sign the lease documents. You must provide us with a copy of the signed lease or sale documents. We have no responsibility for the lease. You are not allowed to locate a site or negotiate the terms of a lease or sale without our written permission. You also must reimburse us in an amount not to exceed $15,000, for expenses we incur in assisting you in finding a site and reviewing your lease. In the event that your lease expires, we will renegotiate your lease. You must pay us a fee to renegotiate your lease (as described in subparagraph 9.D.). We make no guarantees concerning the success of the Gelato Bar located on any site that we suggest to you or approve.
You may not open your Gelato Bar for business until we have notified you in writing that you have satisfied your pre-opening obligations as set forth in subparagraphs 5.A and 5.B and we have approved your opening date. We are not responsible or liable for any of your pre-opening obligations, losses or expenses you might incur for your failure to comply with these obligations or your failure to open by a particular date. We also are entitled to injunctive relief or specific performance under subparagraph 12.C for your failure to comply with your obligations.
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B. Construction; Future Alteration. You must construct and equip the Gelato Bar in strict accordance with our current approved specifications and standards pertaining to equipment, inventory, signage, fixtures, accessory features and design and layout of the premises. You may not commence construction of the Gelato Bar until you have received our written consent to your building plans.
Without limiting the generality of the prior paragraph, you must promptly after obtaining possession of the site for the Gelato Bar: (i) retain the services of one of our approved architects; (ii) retain the services of a contractor; (iii) have prepared and submitted to us a site survey and basic architectural plans and specifications consistent with our general atmosphere, image, color scheme and ambience requirements as set forth from time to time in the Manual (including requirements for dimensions, exterior design, materials, interior design and layout, equipment, fixtures, furniture, signs and decorating); (iv) purchase or lease and then, in the construction of the Gelato Bar, use only the approved equipment, fixtures, furniture and signs; (v) complete the construction and/or remodeling, equipment, fixtures, furniture and sign installation and decorating of the Gelato Bar in full and strict compliance with plans and specifications we approve and all applicable ordinances, building codes and permit requirements without any unauthorized alterations; (vi) obtain all customary contractors' sworn statements and partial and final waiver; (vii) obtain all necessary permits, licenses and architectural seals and comply with applicable legal requirements relating to the building, signs, equipment and premises, including, but not limited to, the Americans With Disabilities Act; and (viii) obtain and maintain all required zoning changes, building, utility, health, sanitation, and sign permits and licenses and any other required permits and licenses. It is your responsibility to comply with the foregoing conditions.
Any change to the building plans or any replacement, reconstruction, addition or modification in the building, interior or exterior decor or image, equipment or signage of the Gelato Bar to be made after our consent is granted for initial plans, whether at the request of you or of us, must be made in accordance with specifications that have received our prior written consent. You may not commence such replacement, reconstruction, addition or modification until you have received our written consent to your revised plans.
C. Maintenance. The building, equipment, fixtures, furnishings, signage and trade dress (including the interior and exterior appearance) employed in the operation of your Gelato Bar must be maintained and refreshed in accordance with our requirements established periodically and with any of our reasonable schedules prepared based upon periodic evaluations of the premises by our representatives. Within a period of 15 to 30 days (as we determine depending on the work needed) after the receipt of any particular report prepared following such an evaluation, you must perform the items of maintenance we designate, including the repair of defective items and/or the replacement of irreparable fixtures or signage. If, however, any condition presents a threat to customers or public health or safety, you must affect the items of maintenance immediately, as further described in subparagraph 6.G. If you fail to make any improvement or perform the maintenance listed above, we may, in addition to our other rights in this Agreement, effect such improvement or maintenance and you must reimburse us for the costs we incur.
D. Relocation. If you need to relocate because of condemnation, destruction, or expiration or cancellation of your lease for reasons other than your breach, we will grant you authority to do so following the site selection process outline in 5A above; provided that you are open and operating within 120 days from the closing of the Gelato Bar, all in accordance with our then-current standards. If you voluntarily decide to relocate the Gelato Bar, your right to relocate the Gelato Bar will be void and your interest in this Agreement will be voluntarily abandoned, unless you have given us notice of your intent to relocate not less than 30 days prior to closing the Gelato Bar, within 15 days after closing the prior Gelato Bar have procured a site pursuant to the site selection process outlined in 5A above, have opened the new Gelato Bar for business within 60 days of such closure and complied with any other conditions that we reasonably require. You must pay the costs of any relocation, and we reserve the right to charge you for any reasonable costs that we incur, including attorneys' fees.
In the event your Gelato Bar is destroyed or damaged and you repair the Gelato Bar at the Authorized Location (rather than relocate the Gelato Bar), you must repair and reopen the Gelato Bar at the Authorized Location in accordance with our then-current standards for the destroyed or damaged area within 60 days of the date of occurrence of the destruction or damage.
You do not have the right to relocate in the event you lose the right to occupy the Gelato Bar premises because of the cancellation of your lease due to your breach; rather, the cancellation of your lease due to your breach is grounds for immediate termination under subparagraph 13.B.2.
E. Modernization or Replacement. From time to time as we require, you must effect items of modernization and/or replacement of the building, premises, trade dress and equipment as may be necessary for your Gelato Bar to conform to the standards for similarly situated new Melt - GELATO italiano gelato bars. The maximum cumulative amount (the "Maximum Modernization Amount") that you will be required to spend during the initial term of this Agreement is established as follows. You will be required to spend no more than $10,000 during the initial term of this Agreement.
Notwithstanding the prior paragraph, we will not require you to make any modernization expenditures during the first year of this Agreement. Thereafter, however, you must complete to our satisfaction any changes we require within 3 months from the date you are notified of any required changes.
The Maximum Modernization Amount does not include any required expenditures for equipment or leasehold improvements necessary to prepare new product offerings. Furthermore, you must perform general, continued maintenance and refreshing of the Gelato Bar premises whenever necessary as set forth in subparagraph 5.C and at a cost not included in the Maximum Modernization Amount. Each and every transfer of any interest in this Agreement or your business governed by Paragraph 11 or renewal covered by Paragraph 4 is expressly conditioned upon your compliance with these requirements at the time of transfer or renewal without regard to the Maximum Modernization Amount.
You acknowledge and agree that the requirements of this subparagraph 5.E are both reasonable and necessary to insure continued public acceptance and patronage of MELT - GELATO ITALIANO gelato bars and to avoid deterioration or obsolescence in connection with the operation of your Gelato Bar.
F. Signage. The exterior signage at your Gelato Bar must comply with our
specifications, which we may modify and change from time to time due to modifications to the System, including changes to the Trademarks. You must make such changes to the signage as we require, at your expense, which will be included in the Maximum Modernization Amount under subparagraph 5.E.
PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
6. You must implement and abide by our requirements and recommendations directed to
enhancing substantial System uniformity. The following provisions control with respect to products and operations:
A. Authorized Menu. Your business must be confined to the preparation and sale of only such Menu Items and other food and beverage products as we designate on Appendix A or as we otherwise authorize in writing from time to time. You must offer for sale from the Gelato Bar all items and only those items listed as Menu Items and other approved food and beverage products. We have the right to revise Appendix A or make modifications to these items from time to time, and you agree to comply with any modifications. You may not offer or sell any other product or service at the Authorized Location without our prior written consent.
B. Authorized Products and Ingredients. You must use in the operation of the Gelato Bar and in the preparation of Menu Items and other food and beverage products only the proprietary and non-proprietary ingredients, recipes, formulas, techniques and processes and supplies, and must prepare and serve Menu Items and products in such portions, sizes, appearance, taste and packaging, all as we specify in our Manual or otherwise in writing. You also must sell all retail products as we specify in our Manual. You acknowledge and agree that we may change these periodically and that you are obligated to conform to the requirements. All supplies, including containers, cups, plates, eating utensils, and napkins, and all other customer service materials of all descriptions and types must meet our standards of uniformity and quality. You acknowledge that the Gelato Bar must at all times maintain an inventory of ingredients, food and beverage products and other products, material and supplies that will permit operation of the Gelato Bar at maximum capacity.
C. Approved Supplies and Suppliers. We will furnish to you from time to time lists of approved supplies or approved suppliers. You must only use approved products, inventory, equipment, fixtures, furnishings, signs, marketing materials, trademarked items and novelties, and other items (collectively, "approved supplies") in the Gelato Bar as set forth in the approved supplies and approved suppliers lists, as we may amend from time to time. Although we do not do so for every item, we have the right to approve the manufacturer of approved supplies. You acknowledge and agree that certain approved supplies may only be available from one source, and we, our Parent or our affiliates may be that source. You have the right to use alternative suppliers provided that we approve the suppliers in writing in advance. You will pay us for any
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costs associated with evaluating possible suppliers, such as due diligence, research or testing. All inventory, products, materials and other items and supplies used in the operation of the Gelato Bar that are not included in the approved supplies or approved suppliers lists must conform to the specifications and standards we establish from time to time. ALTHOUGH APPROVED BY US, WE, OUR PARENT COMPANY AND OUR AFFILIATES MAKE NO WARRANTY AND EXPRESSLY DISCLAIM ALL WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR PURPOSE, WITH RESPECT TO PRODUCTS, EQUIPMENT (INCLUDING WITHOUT LIMITATION ANY REQUIRED COMPUTER SYSTEMS), SUPPLIES, FDCTURES, FURNISHINGS OR OTHER APPROVED ITEMS.
D. Computer System. You must purchase and use any computer system that we develop or select for the Gelato Bar, including all future updates, supplements and modifications (the "Computer System"). Any updates, supplements or modifications are not subject to or part of the Maximum Modernization Amount defined in subparagraph 5.E. The Computer System may include all hardware and software used in the operation of the Gelato Bar, including electronic point-of-sale cash registers and back office programs used to record, analyze and report sales, labor, inventory and tax information. The computer software package developed for use in the Gelato Bar may include proprietary software. You may be required to license the proprietary software from us, an affiliate or a third party and you also will be required to pay a software licensing or user fee in connection with your use of the proprietary software. All right, title and interest in the software will remain with the licensor of the software. The computer hardware component of the Computer System must conform to specifications we develop. We reserve the right to designate a single source from whom you must purchase the Computer System. You acknowledge and agree that we will have full and complete access to information and data entered and produced by the Computer System. You must allow us to log into your Computer System periodically to perform maintenance and updates. You also will be required to install a minimum of two web based cameras at your Authorized Location, from which you and us will have access at all times. You must have at the Authorized Location Internet access with a form of high speed connection as we require and you must maintain an email account for our direct correspondence with the Store Manager.
E. Serving and Promotional Items. All sales promotion material, customer goodwill items, containers and paper goods, eating and serving utensils, and customer convenience items used in the sales promotion, sale and distribution of products covered by this Agreement are subject to our approval and must, where practicable, contain one or more of the Trademarks. You must carry and offer for sale in the Gelato Bar a supply of approved trademarked clothing and other novelty items, including all special promotional items that we develop and market from time to time.
F. Health and Sanitation. Your Gelato Bar must be operated and maintained at all times in compliance with any and all applicable health and sanitary standards prescribed by governmental authority. You also must comply with any standards that we prescribe. In addition to complying with such standards, if the Gelato Bar is subject to any sanitary or health inspection by any governmental authorities under which it may be rated in one or more than one classification, it must be maintained and operated so as to be rated in the highest available health and sanitary classification with
respect to each governmental agency inspecting the same. In the event you fail to be rated in the highest classification or receive any notice that you are not in compliance with all applicable health and sanitary standards, you must immediately notify us of such failure or noncompliance and take immediate steps to rectify the situation.
G. Evaluations. We or our authorized representative have the right to enter
your Gelato Bar at all reasonable times during the business day for the purpose of making periodic evaluations and to ascertain whether the provisions of this Agreement are being observed by you, to inspect and evaluate your building, land and equipment, and to test, sample, inspect and evaluate your supplies, ingredients and products, as well as the storage, preparation and formulation and the conditions of sanitation and cleanliness in the storage, production, handling and serving. If we determine that any condition in the Gelato Bar presents a threat to customers or public health or safety, we may take whatever measures we deem necessary, including requiring you to close immediately the Gelato Bar until the situation is remedied to our satisfaction.
H. Period of Operation. Subject to any contrary requirements of local law,
your Gelato Bar must be opened to the public and operated at least 8 hours each day of the year, although you have the option to close your Gelato Bar on certain holidays as noted in the Manual. If your Authorized Location is within a mall, you must be open during all normal mall hours, even if this exceeds 8 hours a day. Any variance from this provision must be authorized by us in writing. You acknowledge and agree that if your Gelato Bar is closed for a period of 2 consecutive days or 5 or more days in any 12-month period without our prior written consent, such closure constitutes your voluntary abandonment of the franchise and business and we have the right, in addition to other remedies provided for herein, to terminate this Agreement. Acts of God, war, strikes, riots or other force majeure cause preventing you temporarily from complying with the foregoing will suspend compliance for the duration of such interference.
I. Operating Procedures. You must adopt and use as your continuing
operational routine the required standards, service style, procedures, techniques and management systems described in our Manual relating to product preparation, menu, customer service, storage, uniforms, financial management, equipment, facility and sanitation. We will revise the Manual and these standards, procedures, techniques and management systems periodically to meet changing conditions of retail operation in the best interest of gelato bars operating under the Trademarks. Any required standards exist to protect our interests in the System and the Trademarks and not for the purpose of establishing any control or duty to take control over those matters that are reserved to you.
You acknowledge having received one copy of the Manual on loan from us for the term of this Agreement. The Manual at all times is our sole property. You must at all times treat the Manual, and the information it contains, as secret and confidential, and must use all reasonable efforts to maintain such information as secret and confidential. We may from time to time revise the contents of the Manual and you expressly agree to comply with each new or changed requirement. You must insure that your copy of the Manual is kept current and up to date, and in the event of any dispute as to the contents of said Manual, the terms of the master copy of the manual that we maintain are controlling. You acknowledge and agree that the Manual and other system
communications may only be available on the Internet or other online or computer communications.
J. Confidential Information. You, the Principal Owner, and the Store
Manager may not, during the term of this Agreement or thereafter, communicate, divulge or use for the benefit of any other person or entity any Confidential Information, except to such employees as must have access to it to operate the Gelato Bar. For purposes of this Agreement, "Confidential Information" means proprietary information contained in the Manual or otherwise communicated to you in writing, verbally or through the internet or other online or computer communications, and any other knowledge or know-how concerning the methods of operation of the Gelato Bar. Any and all Confidential Information, including, without limitation, secret formulas and recipes, methods, procedures, suggested pricing, specifications, processes, materials, techniques, and other data, may not be used for any purpose other than operating the Gelato Bar. We may require that you obtain nondisclosure and confidentiality agreements in a form satisfactory to us from any persons owning a minority interest in the franchisee, the Principal Owner, the Store Manager and other employees. You must provide executed copies of these agreements to us upon our request.
K. Catering; Vending Services. You may provide catering services only
with our written permission and in accordance with our standards. You may not install or maintain on the premises of the Gelato Bar any newspaper racks, video games, jukeboxes, gum machines, vending machines, or other similar devices without our prior written approval. Any income from vending services in the Gelato Bar or on its premises, regardless of which person or entity collects the money, must be included in Gross Sales for purposes of your Royalty Fee and Marketing Fee.
L. Compliance with Law; Licenses and Permits. You must at all times
maintain your premises and conduct your Gelato Bar operations in compliance with all applicable laws, regulations, codes and ordinances. You must secure and maintain in force all required licenses, including all permits and certificates relating to your Gelato Bar.
You acknowledge that you are an independent business and responsible for control and management of your Gelato Bar, including, but not limited to, the hiring and discharging of your employees and setting and paying wages and benefits of your employees. You acknowledge that we have no power, responsibility or liability in respect to the hiring, discharging, setting and paying of wages or related matters.
You must immediately notify us in writing of any claim, litigation or proceeding that arises from or affects the operation or financial condition of your MELT - GELATO ITALIANO business or Gelato Bar, including any notices of health code violations.
M. Participation in Internet Web Sites or Other Online Communications. We reserve the right to require you to participate in our web site, any intranet or extranet system we may develop or other online communications, at your expense and upon 60 days' notice. We may require you to pay to us or a third-party supplier a monthly fee to cover our costs in developing, maintaining and/or hosting the web site and intranet systems and any other online communication or reporting systems. We will give you 60 days' written notice of the implementation of this fee. We have the right to determine
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the content and use of our web site and any intranet or extranet system we may develop and will establish the rules under which franchisees may or must participate. You may not separately register any domain name containing any of the Trademarks or operate any web site marketing or selling products or items similar to that of a MELT - GELATO ITALIANO gelato bar. We retain all rights relating to our web site and any intranet or extranet system we may develop and may alter or terminate our web site, intranet or extranet system. Your general conduct on our web site, intranet and extranet system or other online communications and specifically your use of the Trademarks or any marketing is subject to the provisions of this Agreement. You acknowledge that certain information related to your participation in our web site, intranet or extranet system may be considered Confidential Information, including access codes and identification codes. Your right to participate in our web site, intranet and extranet system, or otherwise use the Trademarks or System on the internet or other online communications, will terminate when this Agreement expires or terminates.
N. System Modifications. You acknowledge and agree that we have the right to modify, add to or rescind any requirement, standard or specification that we prescribe under this Agreement to adapt the System to changing conditions competitive circumstances, business strategies, business practices and technological innovations and other changes as we deem appropriate. You must comply with these modifications, additions or rescissions at your expense, subject to the requirements of subparagraph 5.E and any other express limitations set forth in this Agreement.
O. Suggested Pricing Policies. We may, from time to time, make
suggestions to you with regard to your pricing policies. Notwithstanding any suggestions, you have the sole and exclusive right as to the minimum prices you charge for the services offered at the Gelato Bar. We retain the right to establish maximum prices to be charged by you for sales promotions or otherwise, but any exercise of that right will be specifically set forth in writing. Any list or schedule of prices we furnish to you may, unless otherwise specifically stated as to the maximum price, be treated as a recommendation only and failure to accept or implement any such suggestion will not in any way affect the relationship between you and us.
PERSONNEL AND SUPERVISION STANDARDS
7. The following provisions and conditions control with respect to personnel, training and
A. Supervision. You must have a Store Manager at all times during the term of this Agreement. The Store Manager must ensure that the Gelato Bar is operated in accordance with the terms and conditions of this Agreement, although this in no way relieves you of your responsibilities to do so. You or your Store Manager also must be readily and continuously available to us. The Store Manager must attend and successfully complete all required training, as set forth in subparagraphs 7.B and C. During all hours of operation, the Gelato Bar must be under the direct, on-site supervision of you or a manager that has complied with all required training.
B. Training. You must, at your expense, comply with all of the training requirements we prescribe. You and your Store Manager must attend training and complete training to our satisfaction. We will provide on-site assistance during your first
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week open for business for up to 5 days. The training requirements and our on-site assistance may vary depending on the experience of the Store Manager or other factors specific to the Gelato Bar. If you are given notice of default as set forth in subparagraphs 13.A and B and the default relates, in whole or in part, to your failure to meet any operational standards, we have the right to require as a condition of curing the default that you and the Store Manager, at your expense, comply with the additional training requirements we prescribe. Any new Store Manager must comply with our training requirements within a reasonable time as we specify. Under no circumstances may you permit management of the Gelato Bar's operations on a regular basis by a person who has not successfully completed to our reasonable satisfaction all applicable training we require.
C. Ongoing Training. We may require you, the Store Manager and other employees of the Gelato Bar to attend, at your expense, ongoing training at our training facility, the Authorized Location or other location we designate. In addition, we may develop and require you to purchase an in-gelato bar training program.
D. Staffing. You will employ a sufficient number of competent, energetic, friendly and trained employees to ensure efficient service to your customers. You must require all your employees to work in clean uniforms approved by us, but furnished at your cost or the employees' cost as you may determine. No employee of yours will be deemed to be an employee of ours for any purpose whatsoever.
E. Attendance at Meetings. You must attend, at your expense, all annual franchise conventions we may hold or sponsor and all meetings relating to new products or product preparation procedures, new operational procedures or programs, training, restaurant management, sales or sales promotion, or similar topics. If you are not able to attend a meeting or convention, you must so notify us prior to the meeting and must have a substitute person acceptable to us attend the meeting.
8. You agree to actively promote your Gelato Bar, to abide by all of our marketing
requirements and to comply with the following provisions:
A. Marketing Fund. You must pay to us a Marketing Fee as set forth in subparagraph 9.C. All Marketing Fees will be placed in a Marketing Fund that we own and manage. On behalf of our affiliate-owned gelato bars, we will pay the same Marketing Fee as the franchised gelato bars in the same local marketing area. The Marketing Fund is not a trust or escrow account, and we have no fiduciary obligation to franchisees with respect to the Marketing Fund. We have the right to determine the expenditures of the amounts collected and the methods of marketing, advertising, media employed and contents, terms and conditions of marketing campaigns and promotional programs. Because of the methods used, we are not required to spend a prorated amount on each gelato bar or in each advertising market. We have the right to make disbursements from the Marketing Fund for expenses incurred in connection with the cost of formulating, developing and implementing marketing, advertising and promotional campaigns. The disbursements may include payments to us for the expense of administering the Marketing Fund, including accounting expenses and salaries and benefits paid to our employees engaged in the marketing functions. If requested, we will
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provide you an annual unaudited statement of the financial condition of the Marketing Fund.
B. Required Local Expenditures, Approved Materials. You must use your best efforts to promote and advertise the Gelato Bar and participate in any local marketing and promotional programs we establish from time to time. You are required to spend 1 % of your Gross Sales on approved local marketing and promotion. On a quarterly basis you must provide us with itemization and proof of marketing and an accounting of the monies that you have spent for approved local marketing. If you fail to make the required expenditure, we have the right to collect and contribute the deficiency to the Marketing Fund. You must use only such advertising and marketing materials as we furnish, approve or make available, and the materials must be used only in a manner that we prescribe. Furthermore, any promotional activities you conduct in the Gelato Bar or on its premises are subject to our approval. We will not unreasonably withhold approval of any sales promotion materials and activities; provided that they are current, in good condition, in good taste, accurately depict the Trademarks and used in a manner that we have prescribed.
C. Gift Cards, Certificates and Checks. You must use and honor only system-wide gift cards, certificates and checks that we designate and you must obtain all certificates, cards or checks from an approved supplier.
D. Grand Opening Promotion. You must conduct certain marketing and public relations activities in connection with the opening of your Gelato Bar, as we specify in writing. Depending on your Authorized Location, we may require you to spend, in addition to the required local marketing contribution described above, $3,000 for such grand opening activities.
FEES. REPORTING AND AUDIT RIGHTS
9. You must pay the fees described below and comply with the following provisions:
A. Initial Franchise Fee. You must pay to us a nonrefundable Initial Franchise Fee of $25,000. The Initial Franchise Fee, payable in full on the date you sign this Agreement, is earned upon receipt and is in consideration for our expenses incurred and services rendered in granting you the franchise rights.
B. Royalty Fee. In addition to the Initial Franchise Fee, during the full term of this Agreement and in consideration of the rights granted to you, you must pay to us as a weekly Royalty Fee an amount equal to 6% of Gross Sales.
C. Marketing Fee. You must pay to us a weekly Marketing Fee of 1% of Gross Sales. We reserve the right to increase the Marketing Fee up to 2% of Gross Sales, upon 60 days' written notice.
D. Lease Renewal Fee. At the end of your lease term, we will renegotiate the basic terms of the lease with your landlord. You must pay to us a fee of $5,000 for providing you with this service.
E. Computations and Remittances. Except for the Initial Franchise Fee, you must compute all amounts due and owing at the end of each week's operation and remittance for the amounts must be made to us on or before the Wednesday of the following week, accompanied by the reports required by subparagraph 9.1 of this Agreement. You must certify the computation of the amounts in the manner and form we specify, and you must supply to us any supporting or supplementary materials as we reasonably require to verify the accuracy of remittances. You waive any and all existing and future claims and offsets against any amounts due under this Agreement, which amounts you must pay when due. We have the right to apply or cause to be applied against amounts due to us, our parent company or any of our affiliates any amounts that we, our parent company or our affiliates may hold from time to time on your behalf or that we, our parent company or our affiliates owe to you. Further, if you are delinquent in the payment of any amounts owed to us, we have the right to require you to prepay estimated Royalty Fees and Marketing Fees.
F. Electronic Transfer of Funds. You must sign an electronic transfer of funds authorization, attached as Appendix C, to authorize and direct your bank or financial institution to transfer electronically, on a weekly basis, directly to our account or our parent company's or our affiliates' account and to charge to your account all amounts due to us, our parent company or our affiliates. You must maintain a balance in your account sufficient to allow us, our parent company and our affiliates to collect the amounts owed when due. You are responsible for any penalties, fines or other similar expenses associated with the transfer of funds described in this subparagraph. If, at any time, we, our parent company or our affiliates attempt to transfer funds and there are insufficient funds in your account, you will be fined $100.00 per occurrence. Pursuant to subparagraph 13.B.2, it is considered a default of this Agreement with no option to cure if there are insufficient funds in your account 2 or more times within any 12-month period.
G. Interest Charges. Any and all amounts that you owe to us, our parent company or to our affiliates will bear interest at the rate of 18% per annum or the maximum contract rate of interest permitted by governing law, whichever is less, from and after the date of accrual. A payment is delinquent for any of the following reasons: (i) we do not receive the payment on or before the date due; or (ii) there are insufficient funds in your bank account to collect the payment by a transfer of funds on or after the date due.
H. Financial Planning and Management. You must record daily all sales on
a cash register tape point-of-sale software or similar device that we approve. You must keep books and records and submit reports as we periodically require, including, but not limited to, a monthly profit plan, monthly balance sheet and monthly statement of profit and loss, records of prices and special sales, check registers, purchase records, invoices, sales summaries and inventories, sales tax records and returns, payroll records, cash disbursement journals and general ledger, all of which accurately reflect the operations and condition of your Gelato Bar operations. You must compile, keep and submit to us the books, records and reports to us on the forms and using the methods of bookkeeping and accounting as we periodically may prescribe. The records that you are required to keep for your Gelato Bar must include detailed daily sales, cost of sales, and other relevant records or information maintained in an electronic media format and methodology we approve. You must provide this information to us according to
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reporting formats, methodologies and time schedules that we establish from time to time. You also must preserve and retain the books, records and reports for not less than 36 months. You must allow us electronic and manual access to any and all records relating to your Gelato Bar.
I. Reports and Audit. You must verify the accuracy of the Gross Sales
figure on Wednesday of each week for the preceding week. Within 10 days after the end of each month, you must submit to us a report with respect to the preceding calendar month in the form and content as we periodically prescribe. The report must include, but not be limited to, the following information for the preceding month: (i) amount of Gross Sales and gross receipts of the Gelato Bar, amount of sales tax and the computation of the Royalty Fee and the Marketing Fee; (ii) quantities of products purchased and the sources from which each were obtained; (iii) if we request, copies of your most recent sales tax return, monthly sales summary and monthly balance sheet and statement of profit and loss, including a summary of your costs for utilities, labor, rent and other material cost items; and (iv) if requested by us to verify your Gross Sales, all such books and records as we may require under our audit policies published from time to time. You also must, at your expense, submit to us within 90 days after the end of each fiscal year a detailed balance sheet, profit and loss statement and statement of cash flows for such fiscal year, prepared on an accrual basis including all adjustments necessary for fair presentation of the financial statements. We may require that the annual financial statements be reviewed by a certified public accountant. You must certify all reports to be true and correct. You acknowledge and agree that we have the right to impose these requirements on you regardless of whether we impose the same requirement on our other franchisees.
We or our authorized representative have the right at all times during the business day to enter the premises where your books and records relative to the Gelato Bar are kept and to evaluate, copy and audit such books and records. We also have the right to request information from your suppliers and vendors. In the event that any such evaluation or audit reveals any understatement of your Gross Sales, Royalty Fees or Marketing Fees or a variance of 2% or more from data reported to us in respect to any other item that is material to the computation of fees or to the analysis of the operation, you must pay for the audit, and in addition to any other rights we may have, we have the right to conduct further periodic audits and evaluations of your books and records as we reasonably deem necessary for up to 2 years thereafter and any further audits and evaluations will be at your sole expense, including, without limitation, professional fees, travel, and room and board expenses directly related thereto. Furthermore, if you intentionally understate or underreport Gross Sales, Royalty Fees or Marketing Fees at any time, or if a subsequent audit or evaluation conducted within the 2-year period reveals any understatement of your Gross Sales, Royalty Fees or Marketing Fees or a variance of 2% or more from data reported to us in respect to any other item that is material to the computation of fees or to the analysis of the operation, in addition to any other remedies provided for in this Agreement, at law or in equity, we have the right to terminate this Agreement immediately. In order to verify the information that you supply, we have the right to reconstruct your sales through the inventory extension method or any other reasonable method of analyzing and reconstructing sales. You agree to accept any such reconstruction of sales unless you provide evidence in a form satisfactory to us of your sales within a period of 14 days from the date of notice of understatement or variance.
We will keep your financial books, records and reports confidential, unless the information is requested by tax authorities or used as part of a legal proceeding or in a manner as set forth in subparagraph 11 .D.9 or where your information is grouped with similar information from other gelato bars to produce shared results like high-low ranges or average gross sales or expenses on a system-wide or regional basis.
YOUR OTHER OBLIGATIONS: NONCOMPETE COVENANTS
10. You agree to comply with the following terms and conditions:
A. Payment of Debts. You agree to pay promptly when due: (i) all payments, obligations, assessments and taxes due and payable to us, our parent company and our affiliates, vendors, suppliers, lessors, federal, state or local governments, or creditors in connection with your business; (ii) all liens and encumbrances of every kind and character created or placed upon or against any of the property used in connection with the Gelato Bar or business; and (iii) all accounts and other indebtedness of every kind incurred by you in the conduct of the Gelato Bar or business. If you default in making any such payment, we are authorized, but not required, to pay the same on your behalf and you agree promptly to reimburse us on demand for any such payment.
B. Indemnification. You hereby waive all claims against us for damages to property or injuries to persons arising out of the operation of your Gelato Bar. You must fully protect, indemnify and hold us and our owners, directors, officers, successors and assigns and our parent company and our affiliates harmless from and against any and all claims, demands, damages and liabilities of any nature whatsoever arising in any manner, directly or indirectly, out of or in connection with or incidental to the operation of your Gelato Bar (regardless of cause or any concurrent or contributing fault or negligence of us, our parent company or our affiliates) or any breach by you or your failure to comply with the terms and conditions of this Agreement. We also reserve the right to select our own legal counsel to represent our interests, and you must reimburse us for our costs and attorneys' fees immediately upon our request as they are incurred.
We hereby waive all claims against you for damages to property or injuries to persons arising out of the operation of our company or affiliate-owned gelato bars. We must fully protect, indemnify and defend you and your affiliates and hold you and them harmless from and against any and all claims, demands, damages and liabilities of any nature whatsoever arising in any manner, directly or indirectly, out of or in connection with or incidental to the operation of our company or affiliate-owned gelato bars (regardless of cause or any concurrent or contributing fault or negligence of you) or any breach by us or our failure to comply with the terms and conditions of this Agreement.
C. Insurance. You must purchase and maintain in full force and effect, at your expense and from a company we accept, insurance that insures both you and us, our parent company and our affiliates and any other persons we designate by name. The insurance policies must include, at a minimum: (i) property damage coverage forms (sometimes called "All Risk coverage") on the Gelato Bar and all fixtures, equipment, supplies and other property used in the operation of the Gelato Bar, for full repair and replacement value of the machinery, equipment and improvements, including full coverage for loss of income resulting from damage to the Gelato Bar without any co-
insurance clause, except that an appropriate deductible clause is permitted; (ii) business interruption insurance covering a minimum 12 months loss of income, including coverage for our Royalty Fees with us named as a loss payee with respect to those fees; (iii) comprehensive general liability insurance, including product liability insurance, with minimum limits of $1,000,000 per occurrence and $2,000,000 aggregate; (iv) "Per Location" aggregate limits when multiple gelato bar locations are insured under one comprehensive general liability policy; (v) personal injury insurance, including minimum limits of $1,000,000 per occurrence and $2,000,000 aggregate; (vi) automobile liability insurance, including owned, hired and non-owned vehicle coverage with a minimum combined single limit of $1,000,000 per claim; (vii) workers' compensation and employer's liability insurance covering all of your employees; (viii) umbrella liability insurance, employers liability and automobile liability, with minimum limits of $2,000,000 per occurrence; (ix) us, our parent company and our affiliates as named additional insureds on all liability policies required by this subparagraph; and (x) any other such insurance coverages or amounts as required by law or other agreement related to the Gelato Bar.
The required insurance coverage must commence as of the date the building lease or building purchase agreement has been signed for your Authorized Location. You must deliver to us at commencement and thereafter annually or at our request a proper certificate evidencing the existence of such insurance coverage and your compliance with the provisions of this subparagraph. The insurance certificate must show our status as an additional insured (as noted in (viii) above) and provide that we will be given 30 days' prior written notice of material change in or termination or cancellation of the policy. We also may request copies of all policies. We may modify the required minimum limits from time to time and by written notice to you, as conditions require, to reflect changes in relevant circumstances, industry standards, experiences in the MELT system, standards of liability and higher damage awards. If you do not procure and maintain the insurance coverage required by this Agreement, we have the right, but not the obligation, to procure insurance coverage and to charge same to you, together with a reasonable fee for the expenses we incur in doing so, payable by you immediately upon notice.
D. Noncompete Covenants. You agree that you will receive valuable training and Confidential Information that you otherwise would not receive or have access to but for the rights licensed to you under this Agreement. You therefore agree to the following noncompetition covenants:
1. Unless otherwise specified, the term "you" as used in this subparagraph 10.D includes, collectively and individually, you, all Principal Owner, guarantors, officers, directors, members, managers, partners, as the case may be, and holders of any ownership interest in you. We may require you to obtain from your Store Manager and other individuals identified in the preceding sentence a signed non-compete agreement in a form satisfactory to us that contains the non-compete provisions of this subparagraph 10.D.
2. You covenant that during the term of this Agreement you will not, either directly or indirectly, for yourself, or through, on behalf of, or in conjunction with any person or entity, own, manage, operate, maintain, engage in, consult with or have any interest in any gelato bar or food business other than
one authorized by this Agreement or any other agreement between us and you, except if, at the Effective Date of this Agreement, you operate or hold an interest in a restaurant or food business other than a quick service restaurant.
3. You covenant that you will not, for a period of 2 years after the expiration or termination of this Agreement, regardless of the cause of termination, or within 2 years of the sale of the Gelato Bar or any interest in you, either directly or indirectly, for yourself, or through, on behalf of, or in conjunction with any person or entity, own, manage, operate, maintain, engage in, consult with or have any interest in a restaurant that sells or offers to dispense prepared food products or retail items and merchandise the same as or similar to the type sold in MELT gelato bars: (i) at the premises of the former Gelato Bar; (ii) within a 5-mile radius of the former Gelato Bar; or (iii) within a 5-mile radius of the location of any other business or restaurant using the MELT System, whether franchised or owned by us, our parent company or our affiliates.
4. You agree that the length of time in subpart (3) will be tolled for any period during which you are in breach of the covenants or any other period during which we seek to enforce this Agreement. The parties agree that each of the foregoing covenants will be construed as independent of any other covenant or provision of this Agreement.
TRANSFER OF FRANCHISE
11. You agree that the following provisions govern any transfer or proposed transfer:
A. Transfers. We have entered into this Agreement with specific reliance
upon your financial qualifications, experience, skills and managerial qualifications of you and the Principal Owner as being essential to the satisfactory operation of the Gelato Bar. Consequently, neither your interest in this Agreement nor in the Gelato Bar may be transferred or assigned to or assumed by any other person or entity (the "assignee"), in whole or in part, unless you have first tendered to us the right of first refusal to acquire this Agreement in accordance with subparagraph 11 .F, and if we do not exercise such right, unless our prior written consent is obtained, the transfer fee provided for in subparagraph 11 .C is paid, and the transfer conditions described in subparagraph 11 .D are satisfied. Any sale (including installment sale), lease, pledge, management agreement, contract for deed, option agreement, assignment, bequest, gift or otherwise, or any arrangement pursuant to which you turn over all or part of the daily operation of the business to a person or entity who shares in the losses or profits of the business in a manner other than as an employee will be considered a transfer for purposes of this Agreement. Specifically, but without limiting the generality of the foregoing, the following events constitute a transfer and you must comply with the right of first refusal, consent, transfer fee, and other transfer conditions in this Paragraph 11:
1. Any change or series of changes in the percentage of the
franchisee entity owned, directly or indirectly, by the Principal Owner which results with the Principal Owner owning less than 51% of the franchisee entity; or
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2. For purposes of this subparagraph 11.A, a pledge or
seizure of any ownership interests in you or in the Principal Owner that affects the ownership of 25% or more of you or Principal Owner, which we have not approved in advance in writing.
In the event of your insolvency or the filing of any petition by or against you under any provisions of any bankruptcy or insolvency law, if your legal representative, successor, receiver or trustee desires to succeed to your interest in this Agreement or the business conducted hereunder, such person first must notify us, tender the right of first refusal provided for in subparagraph ll.F, and if we do not exercise such right, must apply for and obtain our consent to the transfer, pay the transfer fee provided for in subparagraph 11 .C, and satisfy the transfer conditions described in subparagraph 11 .D. In addition, you or the assignee must pay the attorneys' fees and costs that we incur in any bankruptcy or insolvency proceeding pertaining to you. Further, even if an individual transfer of a 5% or more interest does not trigger the transfer conditions set for the in subparagraph 11 .D, you still must receive our prior written approval to the transfer of the 5% or more ownership interest in accordance with our policies, and the individual acquiring the interest must sign a personal guarantee.
You may not place in, on or upon the location of the Gelato Bar, or in any communication media or any form of marketing, any information relating to the sale of the Gelato Bar or the rights under this Agreement, without our prior written consent.
B. Consent to Transfer. We will not unreasonably withhold our consent to transfer, provided we determine that all of the conditions described in this Paragraph 11 have been satisfied. Application for our consent to a transfer and tender of the right of first refusal provided for in subparagraph ll.F must be made by submission of our form of application for consent to transfer, which must be accompanied by the documents (including a copy of the proposed purchase or other transfer agreement) or other required information. The application must indicate whether you or a Principal Owner proposes to retain a security interest in the property to be transferred. No security interest may be retained or created, however, without our prior written consent and except upon conditions acceptable to us. Any agreement used in connection with a transfer shall be subject to our prior written approval, which approval will not be withheld unreasonably. You immediately must notify us of any proposed transfer and must submit promptly to us the application for consent to transfer. Any attempted transfer by you without our prior written consent or otherwise not in compliance with the terms of this Agreement will be void and will provide us with the right to elect either to default and terminate this Agreement or to collect from you and the guarantors a transfer fee equal to two times the transfer fee provided for in subparagraph 1 l.C.
C. Transfer Fee. You must pay to us a transfer fee, equal to sixty percent (60%) of the then-current Initial Franchise Fee, at the time you submit an application for consent to transfer. We will waive the transfer fee if the assignee is an existing franchisee, although you must pay our costs associated with the transfer, said amount not to exceed $2,500.
D. Conditions of Transfer. We condition our consent to any proposed transfer, whether to an individual, a corporation, a partnership or any other entity upon the following:
1. Assignee Requirements. The assignee must meet all of our then-current requirements for one of the franchise development programs we are offering at the time of the proposed transfer.
2. Payment of Amounts Owed. All amounts owed by you to us, our parent company or any of our affiliates, your suppliers or any landlord for the Gelato Bar premises and Authorized Location, or upon which we, our parent company or any of our affiliates have any contingent liability must be paid in full.
3. Reports. You must have provided all required reports to us in accordance with subparagraphs 9.H and I.
4. Modernization. You must have complied with the provisions of subparagraph 5.E.
5. Franchise Agreement. At our option, the assignee must sign (i) a written assignment agreement assuming and agreeing to perform all of the franchisee obligations under this Agreement or (ii) our then standard form of Franchise Agreement, together with any ancillary agreements we may require, for the term ending on the expiration date and with such renewal term as provided by this Agreement. The then standard form of Franchise Agreement may contain different terms and conditions, including higher or additional fees.
6. Guarantee. In the case of an installment sale for which we have consented to you or the Principal Owner retaining a security interest or other financial interest in this Agreement or the business operated thereunder, you or such Principal Owner, and the guarantors, are obligated to guarantee the performance under this Agreement until the final close of the installment sale or the termination of such interest, as the case may be.
7. General Release. You, each Principal Owner and each guarantor must sign a general release of all claims arising out of or relating to this Agreement, your Gelato Bar or the parties' business relationship, in the form we designate, releasing us, our parent company and our affiliates.
8. Training. The assignee must, at your or assignee's expense, comply with the training requirements of subparagraph 7.B.
9. Financial Reports and Data. We have the right to require you to prepare and furnish to assignee and/or us such financial reports and other data relating to the Gelato Bar and its operations as we deem reasonably necessary or appropriate for assignee and/or us to evaluate the Gelato Bar and the proposed transfer. You agree that we have the right to confer with proposed assignees and furnish them with information concerning the Gelato Bar and proposed transfer without being held liable to you, except for intentional misstatements made to an assignee. Any information furnished by us to proposed assignees is for the sole
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The original documents were scanned as an image. The original file can be downloaded at the link above.