UFOC
Sample UFOC
UePartment ofr«
LosAng6%ps0rati°ns
INFORMATION FOR PROSPECTIVE FRANCfflSEES REQUIRED BY THE FEDERAL TRADE COMMISSION
MRS. FIELDS FRANCHISING, LLC
28S5 East Cottonwood Parkway
Suite 400
Salt Lake City, Utah 84121
(801) 736-5600
Effective Date: See Exhibit 2
To protect you, we've required your franchisor to give you this information. We haven't checked it and don't know if it's correct. It should help you make up your mind. Study it carefully. While it includes some information about your contract, don't rely on it alone to understand your contract. Read all of your contract carefully. Buying a franchise is a complicated investment. Take your time to decide. If possible, show your contract and this information to an advisor, like a lawyer or an accountant. If you find anything you think may be wrong or anything important that's been left out, you should let us know about it. It may be against the law.
There may also be laws on franchising in your state. Ask your state agencies about them.
FEDERAL TRADE COMMISSION
Washington, D.C. 20580
MFFUFOC~3/<0S>[M
FRANCHISE OFFERING CIRCULAR FOR PROSPECTIVE FRANCHISEES
MRS. FIELDS FRANCHISING, LLC
2855 East Cottonwood Parkway
Suite 400
Salt Lake City, Utah 84121
(801) 736-5600
The name of the franchisor is Mrs. Fields Franchising, LLC. If you become a Mrs. Fields Cookie Store franchisee, you will have the right to operate a Mrs. Fields Cookie Store which will offer a variety of specially prepared food items, such as cookies, brownies, muffins and beverages.
The standard initial franchise fee for a Mrs, Fields Cookie Store is $30,000, although it may be less if you are an existing qualified franchisee developing an additional store, or <(b):>[ifj you are purchasing the assets of an existing store. The estimated fees and amounts payable to us or our Affiliates before your store opens, including the initial franchise fee or transfer fee, is from $30,200 to $31,000 if you are developing a new store, and $8,000 to $<458.-Q00>[lg8,QQQ] if you purchase the assets of an existing store. The estimated initial investment required for a franchise, including the initial franchise fee, is from $<43»QQ>[ 183.4001 to $<354T400?>[2^SJJlfl] if you are
prefabricated baking kiosk: and $36.400] to $<526,lQQr>L2Qf JOp,] if you purchase the assets of an existing store. These sums do not include real estate lease costs or any franchise fees payable to our Affiliates for any co-brand you develop at your Store. You must pay us a $5,000 initial fee if we allow you to operate a Non-Baking Kiosk <i&-conneGtion >with one of your full-service Mrs. Fields Cookie Stores. This is the only amount payable to us or our Affiliates before you open your Non-Baking Kiosk. The estimated initial investment required for a Non-Baking Kiosk, excluding real estate lease costs, ranges from $9,000 to $50,000. These sums are not your total investment in your franchise. For a detailed explanation of your total investment, you should consult Items 5 through 7 of this Offering Circular.
Risk Factors:
THE FRANCHISE AGREEMENTS REQUIRE THAT ALL DISAGREEMENTS BE SETTLED BY ARBITRATION IN SALT LAKE CITY, UTAH. OUT OF STATE ARBITRATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT. IT MAY ALSO COST YOU MORE TO ARBITRATE WITH US IN UTAH THAN IN YOUR HOME STATE.
THE FRANCHISE AGREEMENTS STATE THAT UTAH LAW GOVERNS THE AGREEMENTS, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
ALTHOUGH THE FRANCHISE AGREEMENTS SET FORTH THE ARBITRATION AND GOVERNING LAW PROVISIONS DESCRIBED ABOVE AND FURTHER DISPUTE RESOLUTION PROVISIONS THAT WOULD ALLOW US TO SUE YOU IN UTAH UNDER CERTAIN CIRCUMSTANCES, LOCAL LAW MAY GOVERN THESE REQUIREMENTS IN YOUR STATE. PLEASE REFER TO ANY STATE-SPECIFIC ADDENDUM THAT MAY BE ATTACHED TO THE OFFERING CIRCULAR FOR DETAILS.
THE FINANCIAL STATEMENTS PROVIDED AT EXHIBIT 13 TO THIS OFFERING CIRCULAR ARE THOSE OF OUR PARENT, MRS. FIELDS FAMOUS BRANDS, LLC ("MFFB"). AS EXPLAINED IN NOTE 1 TO THE FINANCIAL STATEMENTS, THE FINANCIAL STATEMENTS ARE PRESENTED IN A "CARVE-OUT" FORMAT THAT ASSUMES THAT MFFB HAD EXISTED AS A SEPARATE LEGAL ENTITY FOR ALL PERIODS PRESENTED, AND MAY NOT PROVIDE A COMPLETE PRESENTATION OF THE FINANCIAL POSITION OF MFFB HAD IT OPERATED AS AN INDEPENDENT STAND-ALONE ENTITY FOR ALL PERIODS PRESENTED. ALTHOUGH OUR FINANCIAL STATEMENTS ARE NOT INCLUDED IN THIS OFFERING CIRCULAR, MFFB HAS
PROVIDED A GUARANTEE OF PERFORMANCE OF OUR OBLIGATIONS. PER THE AUDITED BALANCE SHEET DATED <JANIJARY 1>[DECEMBER 31.1 2005, MFFB HAD A NET WORTH DEFICIENCY OF X<4 3.501.00Q:>[81.762.000.]
THE FRANCHISEE WILL NOT BE GRANTED ANY EXCLUSIVE TERRITORY.
FRANCHISES ARE GRANTED FOR A SPECIFIC LOCATION AND ARE NOT EXCLUSIVE. THE FRANCHISOR RETAINS THE RIGHT TO SELL AND GRANT OTHERS THE RIGHT TO SELL PRODUCTS AND SERVICES AND RETAINS THE RIGHT TO OWN, OPERATE AND GRANT OTHERS THE RIGHT TO OWN OR OPERATE STORES OR OTHER BAKED GOOD OR SNACK FOOD BUSINESSES UNDER THE TRADEMARKS AND SERVICE MARKS ON ANY TERMS AND CONDITIONS AND AT ANY LOCATIONS WHICH IT DEEMS APPROPRIATE. THESE ACTIVITIES MAY COMPETE WITH YOU.
BY ENTERING INTO THE FRANCHISE AGREEMENT, YOU AGREE TO BE HELD RESPONSIBLE AND MAY BE HELD IN BREACH OF THE FRANCHISE AGREEMENT FOR ACTS OR FAILURES TO ACT OF THIRD PARTIES OVER WHOM YOU EXERCISE NO LEGAL CONTROL.
THERE MAY BE OTHER RISKS CONCERNING THESE FRANCHISES.
Information comparing franchisors is available. Call the state administrators listed on Exhibit 2 to this Offering Circular or your public library for sources of information.
Registration of these franchises by a state does not mean that the state recommends them or has verified the information in this Offering Circular. If you learn that anything in this Offering Circular is untrue, contact the Federal Trade Commission or the state administrator in your state.
Effective Date: See Exhibit 2
NOTICE REQUIRED
BY
STATE OF MICHIGAN
THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
Each of the following provisions is void and unenforceable if contained in any documents relating to a franchise:
(a) A prohibition on the right of a franchisee to join an association of franchisees.
(b) A requirement that a franchisee assent to a release, assignment, novation, waiver, or estoppel which deprives a franchisee of rights and protections provided in this act. This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims.
(c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.
(d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee's inventory, supplies, equipment, fixtures, and furnishings. Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the franchise business are not subject to compensation. This subsection applies only if: (i) the term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months advance notice of franchisor's intent not to renew the franchise.
(e) A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.
(f) A provision requiring that arbitration or litigation be conducted outside this state. This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.
THE MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.
(g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from exercising a right of first refiisai to purchase the franchise. Good cause shall include, but is not limited to:
(i) The failure of the proposed transferee to meet the franchisor's then-current reasonable qualifications or standards.
(ii) The fact that the proposed transferee is a competitor of the franchisor or sub franchisor.
(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
(h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).
(i) A provision which permits the franchisor to directly or indirectly convey, assign, or otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless provision has been made for providing the required contractual services.
The fact that there is a notice of this offering on file with the attorney general does not constitute approval, recommendation, or endorsement by the attorney general.
Any questions regarding this notice should be directed to the Department of Attorney General, State of Michigan, 670 Williams Building, P.O. Box 30213 Lansing, Michigan 48913, telephone (517) 373-7117.
THE MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.
TABLE OF CONTENTS
Item
Page
ITEM 1. THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES^............................................................1
ITEM 2. BUSINESS EXPERIENCE.-.........__........._........._.............._.............._......_...............__.........._........____......,...............<iO>[ll]
ITEM 3. LITIGATION................................_............................_........_..............................................._.....................................................<W>[H]
ITEM 4. BANKRUPTCY............_...................................................................................................................................._.......................<±$>[M\
ITEM 5. INITIAL FRANCHISE FEE........_._............._............................._._....................._................................................<U>[M]
ITEM 6. OTHER FEES...........................__........................................................................................_....................................................<4S>[12]
ITEM 7. INITIAL INVESTMENT................................................................................................................................. ...............-<34>[25]
ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES........................................<29>[21]
ITEM 9. FRANCHISEE'S OBLIGATIONS.........................................................................................................................<33>[3S
ITEM 10. FINANCING..........................................................................._.................._...........................................................................<3>[22]
ITEM 11. FRANCHISOR'S OBLIGATIONS......................................................_._.......................................................<36>[22]
ITEM 12. TERRITORY. _.................................................................................................................................._.........................<44>\M\
ITEM 13. TRADEMARKS..............................................................................._....._......................._.................................................<45>[Z]
ITEM 14. PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION........._..........................<46>[42]
ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE
FRANCHISE BUSINESS................._..............................._...._................................._......................................<48>E1]
ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL.............. ..............................<49>[2J
ITEM 17. RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION..................<$$>[]
ITEM 18. PUBLIC FIGURES.................._.............................................................................................................................................<&>[&!]
ITEM 19. EARNINGS CLAIMS..........................................................................................................................................................<$9>\f\
ITEM 20. LIST OF OUTLETS..............................................................................................................................................................<$9>[fi2]
ITEM 21. FINANCIAL STATEMENTS......................................................................._..............................................................<64>IM]
ITEM 22. CONTRACTS..........................._.................................................... ............_..................................._............_........__......._<5>[Z]
ITEM 23. RECEIPT..........._................................................._..........................._......................._............__.....................__.........._....................<$$>[L}
STATE-SPECIFIC ADDENDA - CALIFORNIA, ILLINOIS, MARYLAND, MINNESOTA, NEW YORK, NORTH DAKOTA, RHODE ISLAND, SOUTH DAKOTA AND WASHINGTON
EXHIBITS
EXHIBIT 1 DEFINITIONS
EXHIBIT 2 STATE ADMINISTRATORS/AGENTS FOR SERVICE OF PROCESS
EXHIBIT 3 FRANCHISE AGREEMENT WITH ACKNOWLEDGEMENT ADDENDUM,
OWNERSHIP ADDENDUM, GUARANTY, APPENDIX A (AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS (DIRECT DEBITS)), STATE-SPECIFIC ADDENDA AND RIDERS - CALIFORNIA, ILLINOIS, MARYLAND, MINNESOTA, NEW YORK, NORTH DAKOTA, RHODE ISLAND, SOUTH DAKOTA AND WASHINGTON, AND RENEWAL ADDENDUM
EXHIBIT 4 NON-BAKING KIOSKS ADDENDUM TO FRANCHISE AGREEMENT
EXHIBIT 5 CONFIDENTIALITY AGREEMENT
EXHIBIT 6 ASSIGNMENT, ASSUMPTION AND CONSENT
EXHIBIT 7 TERM PRE-PURCHASE ADDENDUM
EXHIBIT 8 LEASE ADDENDUM
EXHIBIT 9 PURCHASE OPTION AGREEMENT AND ADDENDA
EXHIBIT 10 ASSET PURCHASE AGREEMENT; SUBLEASE AGREEMENT
EXHIBIT 11 OPERATIONS MANUALS TABLE OF CONTENTS
EXHIBIT 12 FRANCHISEE INFORMATION
-1-
PART 1 - LIST OF MRS. FIELDS FRANCHISEES
PART 2 - LIST OF MRS. FIELDS FRANCHISEES TERMINATED, CANCELLED,
NOT RENEWED, OR THAT HAVE CEASED DOING BUSINESS
EXHIBIT 13 FINANCIAL STATEMENTS
EXHIBIT 14 EARNINGS CLAIM
NOTICE
UNLESS OTHERWISE INDICATED, THE INFORMATION APPEARING IN THIS OFFERING CIRCULAR APPLIES TO MRS. FIELDS COOKIE STORE FRANCHISES. UNLESS OTHERWISE INDICATED, THE TERMS OF ALL FRANCHISE OFFERS ARE THE SAME.
ITEM 1. THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES
Description of the Franchisor and its Predecessors and Affiliates.
To simplify the language in this Offering Circular, "we", and similar words, refer to Mrs. Fields Franchising, LLC, the franchisor; "MFFB" means our parent, Mrs. Fields Famous Brands, LLC; "MFOC" means Mrs. Fields' Original Cookies, Inc.; "MFHC" means Mrs. Fields' Holding Company, Inc.; "MFCI" means Mrs. Fields' Companies, Inc.; "MFDC" means Mrs. Fields Development Corporation; "MFC" means Mrs. Fields Cookies; "MFl" means Mrs. Fields Inc.; "New MFBI" means The Mrs. Fields' Brand, Inc., which has owned the Mrs. Fields Trademarks since March 16, 2004; "Old MFBI" means The Mrs. Fields' Brand, Inc., which previously owned the Mrs. Fields Trademarks; "MFC-Canada" means Mrs. Fields Cookies (Canada) Ltd.; "MFC-Australia" means Mrs. Fields Cookies Australia; "OCC" means the Delaware corporation formerly known as The Original Cookie Company, Incorporated; "GACCF" means Great American Cookie Company Franchising, LLC; "GAM" means Great American Manufacturing, LLC; "GACC" means Great American Cookie Company, Inc.; "PTF" means Pretzel Time Franchising, LLC; "PTI" means Pretzel Time, Inc.; "PMF" means Pretzelmaker Franchising, LLC; "PMI" means Pretzelmaker, Inc.; "Pretzelmaker-Canada" means Pretzelmaker-Canada, Inc.; "HSC" means the Delaware corporation formerly known as Hot Sam Companies, Inc.; "TCBY" means TCBY Systems, LLC; "TCBY Enterprises" means TCBY Enterprises, LLC; and "Juice Works" means Juice Works Development, Inc. "You," and similar words, <means->[mean) the person or persons, including a corporate or other legal entity, individually and collectively, buying a franchise from us; and "your Store" means the Mrs. Fields Cookie Store that you will operate if we enter into a Mrs. Fields franchise agreement with you. We have also attached as Exhibit 1 a list of additional defined terms used in this Offering Circular. If a capitalized term is not defined in the body of this Offering Circular, please refer to Exhibit 1 for the definition.
We are a Delaware limited liability company organized on February 4, 2004. We are a wholly-owned subsidiary of MFFB, a Delaware limited liability company organized on February 4, 2004, which is a wholly-owned subsidiary of MFOC, a Delaware corporation incorporated in February 1996. MFOC is a wholly-owned subsidiary of MFHC, a Delaware corporation incorporated in July 1996, which is a wholly-owned subsidiary of MFCI, a Delaware corporation incorporated in August 2001 under its former name, Mrs. Fields Famous Brands, Inc. We do business under the name Mrs. Fields Cookie Stores (or variations of that name) and Mrs. Fields Bakery Cafes (or variations of that name). Our Affiliates do business under the names Mrs. Fields Cookie Stores, Mrs. Fields Bakery Cafes, <Original Cookie Company Stores>, Great American Cookie Company Stores, Pretzel Time Stores, Pretzelmaker Stores, <Hot Sam Pretzel and Bakory>[I]ffl Stores, and <TGB>[Xayjjia] Stores (or variations of those names). Our principal business address is 2855 East Cottonwood Parkway, Suite 400, Salt Lake City, Utah 84121, and our telephone number is 801-736-5600. The principal business address and telephone number of MFCI, MFHCI, MFOC, MFFB, New MFBI, Old MFBI, MFC-Canada, MFC-Australia, GACCF, GAM, GACC, PTF, PTI, PMF, PMI, Pretzelmaker-Canada, TCBY, TCBY Enterprises and Juice Works are the same as ours. Our agents for service of process are listed on Exhibit 2 to this Offering Circular.
We acquired a substantial portion of our assets from MFOC, who in turn acquired a substantial portion of its assets from MFDC, MFC, OCC and HSC,
In keeping with a business strategy of separating franchise activities from company store operations, on March 16, 2004 MFOC and a number of its Affiliates contributed their franchising activities to MFFB and, ultimately, to newly formed subsidiaries of MFFB (the "Contributions"). In anticipation of the Contributions, we were formed by MFFB to act as the franchisor of the Mrs. Fields franchise system, which was previously operated by MFOC. As part of the Contributions, MFOC
-1-
contributed the Mrs. Fields Trademarks to MFFB and, ultimately, to New MFBI. New MFBI is a Delaware corporation incorporated on February 4, 2004 and a wholly owned subsidiary of MFFB. Immediately <thereafter>[after]. New MFBI granted to us a perpetual, fully paid license to use the Mrs. Fields Trademarks< in eonneetion> with all franchised Mrs. Fields Retail Outlets. Also as part of the Contributions, MFOC contributed all of its other franchise-related assets, including all existing Mrs. Fields franchise agreements, to MFFB. Immediately <thGroaftcr>[aft^rl. MFFB contributed these other franchise-related assets to us. At the same time, we entered into a franchise agreement with MFOC to license it to continue to operate Mrs. Fields Retail Outlets. In addition, as part of the Contributions, all franchise-related assets of MFC-Canada, if any, were transferred to us. MFC-Canada is an Ontario corporation incorporated on May 24, 1984, and a wholly owned subsidiary of MFOC. As a result of the Contributions, we are now the franchisor of the Mrs. Fields franchise system, and MFOC operates all company-owned Mrs. Fields Retail Outlets. Although we are the franchisor of the Mrs. Fields franchise system, MFFB employees perform the day-to-day operations of the franchise system and provide services to our franchisees. <Prior to>[Before] the Contributions, MFOC and its predecessors operated the Mrs. Fields franchise system in the United States, and MFOC and/or MFC-Canada and its predecessors operated the Mrs. Fields franchise system in Canada. MFC-Canada no longer acts as the franchisor of the Mrs. Fields franchise system in Canada. While MFOC will continue in the near term to operate all company-owned Mrs. Fields Retail Outlets and the company-owned stores of a number of our Affiliates, MFOC also will continue its ongoing strategic review of company-owned store performance, with identified Mrs. Fields Retail Outlets and other stores being sold to new or existing franchisees or closed. Accordingly, MFOC anticipates a reduction in its total number of company-owned Mrs. Fields Retail Outlets and other retail stores over time with a corresponding reduction in its involvement in related company-store operations.
As part of the Contributions, MFOC also contributed the Original Cookie Company Trademarks and Hot Sam Trademarks to MFFB and, ultimately, to New MFBI. Immediately <thereafter>[aflexj, New MFBI granted to us a license to use the Original Cookie Company Trademarks and Hot Sam Trademarks. We have in turn licensed the use of these Trademarks to MFOC<. Accordingly, MFOC
MFOC. MFOC no longer operates anvl Original Cookie Company <and>[firj Hot Sam Stores. There are no franchised Original Cookie Company or Hot Sam Stores*^MFOC continues to evaluate the performance of these stores and expeota that during 2005 and 2006, substantially all Original Coolcie-Companv and Hot Sam Storcs>[r and tfie small numfrer of licensed locations] will either be closed or franchised and converted to another concept franchised by us or our Affiliates.
MFOC acquired a substantial portion of its Mrs. Fields-related assets from MFDC and MFC. MFC is a California corporation incorporated on July 22, 1977. MFI is a Delaware corporation incorporated on May 2, 1986. On May 12, 1986, MFI acquired the Mrs. Fields Trademarks, including the marks "Mrs. Fields" and "Mrs. Fields Cookies," from MFC, and MFC became a wholly-owned subsidiary of MFI. MFDC is a Delaware corporation incorporated on September 6, 1990. MFDC, MFC and MFI are all inactive and no longer conduct business. On June 19, 1991, MFI transferred the Mrs. Fields Trademarks to MFDC. On June 30,1994, MFDC acquired all of the stock of MFC. In September 1996, MFOC purchased all of the assets of MFC and all of the assets of MFDC except the Mrs. Fields Trademarks. At that time, MFDC transferred the Mrs. Fields Trademarks to Old MFBI. From August 1996 to November 2002, Old MFBI granted MFOC a perpetual, fully paid license to use the Mrs. Fields Trademarks <in connection >with all Mrs. Fields Retail Outlets. In November 2002, Old MFBI merged with and into MFOC, and MFOC survived the merger. As a result, MFOC owned directly the Mrs. Fields Trademarks from November 2002 until the date of the Contributions, when MFOC transferred and assigned the Mrs. Fields Trademarks to MFFB and, ultimately, to New MFBI, as described above.
-2-
MFOC acquired a substantial portion of its Original Cookie Company-related assets from OCC. OCC was incorporated on March 19, 1986 as a division of General Host Corporation ("General Host"). On May 16, 1986, Rowntree Mcintosh, Inc. ("Rowntree") acquired control of OCC from General Host. On January 27, 1989, Chocoamerican Pretzel, Inc. ("Chocoamerican") acquired all of the outstanding shares of OCC from Rowntree. In September 1996, MFOC purchased certain assets of OCC, including the Original Cookie Company Trademarks. As a result, MFOC owned directly the Original Cookie Company Trademarks from September 1996 until the date of the Contributions, when MFOC transferred and assigned the Original Cookie Company Trademarks to MFFB and, ultimately, to New MFBI, as described above.
MFOC acquired a substantial portion of its Hot Sam-related assets from HSC. HSC was incorporated on March 19, 1986 as a division of General Host. On May 16, 1986, Rowntree acquired control of HSC from General Host. On January 27,1989, Chocoamerican Pretzel, Inc. acquired all of the outstanding shares of HSC from Rowntree. In September 1996, MFOC purchased certain assets of HSC, including the Hot Sam Trademarks. As a result, MFOC owned directly the Hot Sam Trademarks from September 1996 until the date of the Contributions, when MFOC transferred and assigned the Hot Sam Trademarks to MFFB and, ultimately, to New MFBI, as described above.
We have a number of Affiliates that offer franchises or provide products or services to our franchisees.
GACCF and GAM are both Delaware limited liability companies formed by MFFB on February 4, 2004. GACCF was formed to act as the franchisor of the Great American Cookie Company franchise system, and GAM was formed to own and operate the batter facility (as <further >described below in this Item 1). As part of the Contributions, GACC contributed all of its franchise-related assets, including all existing franchise agreements, Great American Cookie Company Trademarks, and the batter facility to MFFB. Immediately <thercaftcr>[atSlJ, MFFB contributed the franchise agreements, Trademarks and related assets to GACCF and the batter facility and related assets to GAM. Also as part of the Contributions, GACCF entered into a franchise agreement with MFOC to license it to continue to operate company-owned Great American Cookie Company Stores. As a result of the Contributions, GACCF is now the franchisor of the Great American Cookie Company franchise system, and MFOC operates all company-owned Great American Cookie Company Stores. Although GACCF is the franchisor of the Great American Cookie Company franchise system, MFFB employees perform the day-to-day operations of the franchise system and provide services to GACCF's franchisees. <Prior to>[fififat] the Contributions, GACC and its predecessors operated the Great American Cookie Company franchise system and the batter facility.
PTF is a Delaware limited liability company formed by MFFB on February 4, 2004 to act as the franchisor of the Pretzel Time franchise system. As part of the Contributions, PTI contributed all of its franchise-related assets, including all existing franchise agreements, area development agreements and Pretzel Time Trademarks, to MFFB. Immediately <thereafter>[after]. MFFB contributed these assets to PTF. Also as part of the Contributions, PTF entered into a franchise agreement with MFOC to license it to continue to operate company-owned Pretzel Time Stores. As a result of the Contributions, PTF is now the franchisor of the Pretzel Time franchise system and a party to the existing area development agreements (as <further >described below in this Item 1), and MFOC operates all company-owned Pretzel Time Stores. Although PTF is the franchisor of the Pretzel Time franchise system, MFFB employees perform the day-to-day operations of the franchise system and provide services to PTF's franchisees. <Prior to>fBefore] the Contributions, PTI and its predecessors operated the Pretzel Time franchise system.
-3-
PMF is a Delaware limited liability company formed by MFFB on February 4, 2004 to act as the franchisor of the Pretzelmaker franchise system. As part of the Contributions, PMI contributed all of its franchise-related assets, including all existing franchise agreements and Pretzelmaker Trademarks, to MFFB. Immediately <thereafter>[after]. MFFB contributed these assets to PMF. Also as part of the Contributions, PMF entered into a franchise agreement with MFOC to license it to continue to operate company-owned Pretzelmaker Stores. In addition, as part of the Contributions, all franchise-related assets of Pretzelmaker-Canada, if any, were transferred to PMF. Pretzelmaker-Canada is an Ontario corporation incorporated on September 26, 1996, and a wholly owned subsidiary of PMI. As a result of the Contributions, PMF is now the franchisor of the Pretzelmaker franchise system, and MFOC <operates>[pperate<fl all company-owned Pretzelmaker Stores<T>[ until the jas{ on? was, francjiised in ■June 2005.] Although PMF is the franchisor of the Pretzelmaker franchise system, MFFB employees perform the day-to-day operations of the franchise system and provide services to PMF's franchisees. <PfkH^4e>[Before1 the Contributions, PMI and its predecessors operated the Pretzelmaker franchise system in the United States, and PTI and/or Pretzelmaker-Canada and its predecessors operated the Pretzelmaker franchise system in Canada. Pretzelmaker-Canada no longer acts as the franchisor of the Pretzelmaker franchise system in Canada.
TCBY is a Delaware limited liability company organized on May 30, 2000. TCBY has been the franchisor of the TCBY franchise system since July 2000, and, <prie^4e> &&!] this date, TCBY's predecessors, including TCBY Enterprises (a Delaware limited liability company) and TCBY Systems, Inc. (an Arkansas corporation), operated the TCBY franchise system. As part of the Contributions, TCBY Enterprises exchanged its 100% ownership interest in TCBY to MFOC for shares in MFOC. Immediately <thereaftor>Iafter]. MFOC contributed 100% of its ownership interest in TCBY to MFFB. As a result, TCBY is currently a wholly-owned subsidiary of MFFB. At the time of the Contributions, the management agreement between TCBY and MFOC was terminated, and MFFB employees now perform the day-to-day operations of the TCBY franchise system and provide services to TCBY's franchisees.
MFCI, MFHC, MFOC, MFFB, New MFBI, Old MFBI, MFC-Canada, MFC-Australia, GACCF, GAM, GACC, PTF, PTI, PMF, PMI, Pretzelmaker-Canada, TCBY and TCBY Enterprises are separate entities and, except as described in Item 21 of this Offering Circular, are not liable to you for any actions taken or obligations incurred by us. OCC and HSC are no longer doing business under their former names and are not and never have been, affiliated with us or our Affiliates.
Description of the Franchises Offered.
We offer franchises (the "Franchises") for Mrs. Fields Cookie Stores[r including modular. prefab ricafefl baking kiosks.| offering various Mrs. Fields Products in accordance with the terms of our Mrs. Fields franchise agreement (the "Mrs. Fields Franchise Agreement" or "Franchise Agreement").
A copy of the Franchise Agreement is attached to this Offering Circular as Exhibit 3. If you enter into a Mrs. Fields Franchise Agreement, you will be authorized to use the Mrs. Fields System under which Mrs. Fields Cookie Stores operate. In establishing your Store, MFOC may sell you one or more of its existing Mrs. Fields Cookie Stores. (See Item 5 of this Offering Circular). If you do business as an Entity, each of your Entity Owners must guarantee your obligations under the Franchise Agreement by signing the Guaranty attached to the Franchise Agreement, a copy of which is included in Exhibit 3 to this Offering Circular.
We also may grant you the right to operate a non-baking kiosk ("Non-Baking Kiosk")<-m-oonneotion> with one of your full-service Mrs. Fields Cookie Stores (the "Host Store"). fA Non-Baking Kiosk mav not be operated with a modular, prefabricated baking kiosk. 1A Non-Baking Kiosk is a stationary or mobile kiosk, cart, wagon or similar unit that you operate within the same
-4-
shopping mall or center as the Host Store, but away from the Host Store's actual premises. We do not consider a temporary, promotional holiday display case or decorating table to be a Non-Baking Kiosk, although you must get our approval to operate one under the Franchise Agreement for your Host Store. A Kiosk sells products that you actually produce at the Host Store. If we grant you the right to operate a Non-Baking Kiosk, you must sign our non-baking kiosks addendum ("Non-Baking Kiosks Addendum") to the Franchise Agreement for the Host Store. A copy of the Non-Baking Kiosks Addendum is attached to this Offering Circular as Exhibit 4.
The Market.
Your Mrs, Fields Cookie Store will offer a variety of Mrs. Fields Products to the general public, and you will have to compete with bakeries, some fast-food restaurants, other specialty retail cookie stores (including Great American Cookie Company Stores and Original Cookie Company Stores), snack food stores, convenience stores, and facilities owned or managed by us or our Affiliates, all of which offer specialty retail desserts, snack foods and beverages. You will also have to compete with other Mrs. Fields Retail Outlets selling various Mrs. Fields Products and other products and services (such as refrigerated ready-to-bake cookie dough sold through various retail outlets) under the Mrs. Fields Trademarks or other trademarks or service marks. In addition, you will have to compete with other individuals and entities in the search for suitable store locations, managers, and employees. Sales at Mrs. Fields Cookie Stores tend to be seasonal, with the highest sales typically occurring during November and December, although the difference in sales from season to season varies depending upon the climate where a particular cookie store is located.
Some states may require franchisees to obtain restaurant, business, occupational, food products, and miscellaneous licenses. Some states also have laws regarding who may secure certain of these licenses. You may also have to obtain health licenses and to comply with health laws and regulations that apply to restaurant and food product sales establishments. We urge you to make inquiries about these laws and regulations.
The Business of the Franchisor, its Predecessors, and Affiliates.
Since March 2004, we have been in the business of granting licenses and franchises for the operation of Mrs. Fields Retail Outlets to franchisees or licensees who successfully complete our application process and qualify to purchase a franchise or license. As <further >described above, we acquired a substantial portion of this business from MFOC.
From September 1996 to February 2004, MFOC was in the business of granting licenses and franchises for the operation of Mrs. Fields Retail Outlets. Since September 1996, MFOC has been in the business of owning and operating Mrs. Fields Retail Outlets. As <further >described above, MFOC entered into a franchise agreement with us at the time of the Contributions<. and now operatosM for operation of] its Mrs, Fields Retail Outlets< as our single largest franchisee.SineeM. From! September <19Q&>ri996 to November 2005.] MFOC <has>[wjs] also<-beea> in the business of owning and operating Original Cookie Company Stores. An Original Cookie Company Store offers a variety of specially prepared food items, such as cookies, brownies, muffins and beverages. As <further >described above, <MFOC now operates its>[we have granted MFOC tfte rjght to sublicense ^ few remaining] Original Cookie Company Stores< as a licensee of us>[T whiyH will eventually he closed or converted to another concent franchised hv us or one of our Affiliates. 1 See the table below in this Item 1 and Item 20 of this Offering Circular for a summary of Mrs. Fields Retail Outlets (and Mrs. Fields Bakery Cookie Cafes) <and Original Cookie Company Stores >in the United States which are owned and operated by MFOC.
-5-
<In certain situations, you may be able to purchose an existing Original Cookie Company Store location and its physical assets from MFOC and oonvcrt the location to a Mrs. Fields Cookie Store of the type offered in this Offering Circular. You must negotiate any acquisition of an existing Original Cookie Company Store looation and assets from MFOC on on individual basis. If the location is converted, you will need to enter into a Mrs. Fields Franohise Agreement with us. This Offering Circular makes no disclosures or representations regarding the terms and conditions of any such transaction you may negotiate with MFOC>
Since August 1998, MFOC has been in the business of owning and operating Great American Cookie Stores <wki6h>[that~| it purchased or acquired from GACC franchisees. Since November 1997, MFOC has also been in the business of owning and operating Pretzel Time Stores <whi6h>rthat1 it purchased or acquired from Pretzel Time franchisees or Area Developers. Since November 1998, MFOC has also been in the business of owning and operating Pretzelmaker Stores <whieh>[that] it purchased or acquired from Pretzelmaker franchisees[, though 8S ftf the date, of this Offering Circular. MFQC does not own or operate any Pretzelmaker Stores], As< further> described above, MFOC now operates its company-owned Great American Cookie Stores<T>[ aqfl] Pretzel Time< Stores and Pretzelmaker> Stores pursuant to separate franchise agreements with GACCF<?>[ and] PTF< and PMF>. See table below in this Item 1 for more information regarding these company-owned Great American Cookie Company Stores<7>[_aad] Pretzel Time< Stores and Pretzelmaker> Stores.
In certain instances, you may be able to enter into a co-branding arrangement with one or more of our Affiliates. In <sueh>[thatl case, you will enter into a Mrs. Fields Franchise Agreement with us for the Mrs. Fields Cookie Store, and a separate franchise agreement with each our respective Affiliates for each brand you are co-branding with the Mrs. Fields Cookie brand. These locations may, in some cases, be developed as a Mrs. Fields Bakery Cookie Cafe, which generally includes a Mrs. Fields Cookie Store and one or more additional concepts of our Affiliates as well as other approved products, such as sandwiches and soups. Our Affiliates may also offer co-branding arrangements with their franchisees that do not include the Mrs. Fields Cookie brand. All of these co-branded locations may compete with you.
We or one of our Affiliates may establish a new business or franchise system or acquire an existing business or franchise system (which may be one of your competitors) operating under trademarks, service marks and trade names other than the Mrs. Fields Trademarks. The new or existing business or franchise system may compete with you.
We or one of our Affiliates may enter into co-branding arrangements with other snack-food companies. In <sueh>[J^ojseJ cases, we or our Affiliates may or may not allow you to offer co-branded products from your Mrs. Fields Cookie Store, depending on <saeh->factorsf such] as the terms of the co-branding arrangement, the terms of your Mrs. Fields Franchise Agreement, applicable geographic restrictions and our and our Affiliates' other rights and obligations. These co-branding arrangements may compete with you.
In November 2000, MFOC entered into a master lease with Wal-Mart, a large, discount retail chain. From November 2000 to September 2002, as a result of this leasing arrangement, MFOC owned and operated stores located within the chain as company-owned units operating under trademarks and commercial symbols of our Affiliates. Additionally, in certain isolated instances, MFOC constructed, built-out and developed a store at a particular Wal-Mart, then sold the assets of the store and subleased the store premises to a franchisee. MFOC no longer offers these Wal-Mart franchised locations, and all stores previously operated by MFOC located within Wal-Marts have been closed. We or our Affiliates
-6-
may, however, enter into similar arrangements with other retailers in the future. These arrangements may compete with you.
For more than 20 years, MFOC and its predecessors, and other of our Affiliates, including MFC-Australia, a Utah corporation incorporated in June 1983, have offered international master franchise agreements, franchise agreements and other types of licensing agreements for the Mrs. Fields brand and other brands in foreign countries. As of <Ianunry 1 >[T)ecemher 31.1 2005, there were <$2>[S2] Mrs. Fields locations in <44>[JJJ foreign countries, <4>[afleJ Great American Cookie Company <locations>[location] in one foreign country, 7 Pretzel Time locations in <§>[! foreign countries, <40>[4Z] Pretzelmaker locations in 2 foreign countries, and <308>[18ffl TCBY locations in <20>[H] foreign countries. As a result of the Contributions, going forward, we will offer international master franchise agreements, franchise agreements and other types of licensing agreements in foreign countries for the Mrs. Fields brand (although MFC-Australia may still provide some services to franchisees or licensees in Australia), and GACCF, PTF, PMF and TCBY will offer international master franchise agreements, franchise agreements and other types of licensing agreements in foreign countries for their respective brands. Licenses and franchises for Mrs. Fields Retail Outlets in other countries may be under different terms and conditions than are described in this Offering Circular.
Between January 1991 and September 1996, MFDC was in the business of granting licenses and franchises for the operation of Mrs. Fields Retail Outlets. MFDC is not currently engaging in any business activity relating to franchising, owning or operating Mrs. Fields Retail Outlets.
From September 1996 to November 2002, MFBI owned the Mrs. Fields Trademarks and granted to MFOC a license to use the Mrs. Fields Trademarks <in connection >with all Mrs. Fields Retail Outlets. As discussed above, in November 2002, MFBI merged with and into MFOC, and as a result of this merger, MFOC owned directly the Mrs. Fields Trademarks until March 2004, when as part of the Contributions the Mrs. Fields Trademarks were assigned to MFFB and, ultimately, to New MFBI, and licensed to us. Each of us, MFBI, MFDC and MFOC have entered into various agreements licensing third parties to market Mrs. Fields Products and other products and services using the Mrs. Fields Trademarks under different terms and conditions than are described in this Offering Circular. We may grant licenses and franchises to market Mrs. Fields Products and other products and services using the Mrs. Fields Trademarks under different terms and conditions than contained in this Offering Circular.
Between July 1977 and September 1996, MFC was in the business of owning and operating Mrs. Fields Retail Outlets. Between May 1986 and June 1991, MFI was in the business of granting licenses and franchises for the sale of various Mrs. Fields Products through Mrs. Fields Retail Outlets. Neither MFC nor MFI are currently engaging in any business activity relating to licensing the Mrs. Fields Trademarks, or franchising, owning or operating Mrs. Fields Retail Outlets.
Since the Contributions in March 2004, GACCF has been in the business of granting licenses and franchises for the operation of Great American Cookie Company Stores, and GAM has been in the business of operating the batter facility that produces proprietary batter, dough and other ingredients for making cookies that Great American Cookie Company franchisees must buy from GACCF or GAM. From September 1977 to February 2004, GACC was in the business of granting licenses and franchises for the operation of Great American Cookie Company Stores. Since June 1977, GACC has also been in the business of owning and operating Great American Cookie Company Stores either directly or through its parent MFOC. A Great American Cookie Company Store offers different types of cookies, other baked products and beverages and is typically located in an enclosed shopping mall. In <oertain r.ihinfinnr. n prnr.peotive>[|i|pfteri situations and geographic areas approved hv us and GACCF. vou mav be able to convert vour Mrs. Fields Cookie Store into al Great American Cookie Company Store <lioensee may be able to purchase an existing Original Cookie Company Store location and its physical
-7-
asootfi from MFOC and convert the location to a Great Amerioan Cookie Company Store>[without tfre payment of any additional initial franchise fee or conversion fee]. See table below in this Item 1 for more information regarding franchised and company-owned Great American Cookie Company Stores.
Since the Contributions in March 2004, PTF has been in the business of granting licenses and franchises for the operation of Pretzel Time Stores. From January 1992 to February 2004, PTI or its predecessor was in the business of granting licenses and franchises for the operation of Pretzel Time Stores. From October 1991 to December 1997, PTI's predecessor also was in the business of owning and operating Pretzel Time Stores. As of the date of this Offering Circular, neither PTI nor it predecessor own or operate any Pretzel Time Stores. A Pretzel Time Store offers a variety of freshly baked soft pretzels, complementary toppings, soft drinks and other food products. Under a national sales agreement between Predecessor PTI and a predecessor of TCBY, PTI and its predecessor offered Pretzel Time franchisees the opportunity to add the TCBY concept to a new or existing location under certain circumstances from February 1995 to May 2000. PTI is no longer offering this opportunity to Pretzel Time franchisees under the national sales agreement. Pretzel Time franchisees may, however, be granted the right under certain circumstances to operate a Pretzel Time Store< in conjunction> with a TCBY license or franchise under a different program with either PTF or TCBY. See table below in this Item 1 for more information regarding franchised and company-owned Pretzel Time Stores.fJ
Between January 1992 and March 1998, PTI was in the business of granting area developer rights to certain qualified persons ("Area Developers") under a Pretzel Time area development agreement. As part of the Contributions <&ffther->described above, in March 2004 PTI contributed all of its area development agreements to MFFB, who in turn contributed these assets to PTF. Although the form of area development agreement has varied over the years, Area Developers generally have been granted the right to develop, own and operate a specified number of Pretzel Time Stores at certain approved locations within a defined geographic area. Most Area Developers also have been granted the right to market and service the Pretzel Time System at certain locations within their geographic area, for which they receive a fee. Finally, Area Developers typically have been granted the right under their area development agreements to receive compensation from PTF or its predecessors for finding Pretzel Time franchisees for certain locations within their geographic area. Area Developers, however, do not have the authority to grant the rights to license or operate a Pretzel Time franchise or enter into a Pretzel Time franchise agreement with a potential franchisee. Currently, neither PTF nor PTI is entering into area development agreements with new Area Developers.
Through asset and stock purchases, MFOC and other of our Affiliates have acquired the Pretzel Time area development rights of certain Area Developers. The related area development agreements have been effectively terminated, and any services previously provided to Pretzel Time franchisees located within the geographic areas covered by these area development agreements are now being provided by MFFB.
Since the Contributions in March 2004, PMF has been in the business of granting franchises for the operation of Pretzelmaker Stores. From September 1992 to February 2004, PMI was in the business of granting franchises for the operation of Pretzelmaker Stores in the United States. Since August 1995, PMI has also been in the business of owning and operating Pretzelmaker Stores either directly or through its parent MFOC. In addition, from September 1996 to February 2004, Pretzelmaker-Canada was in the business of granting franchises for the operation of Pretzelmaker Stores in Canada, but is no longer offering these franchises. A Pretzelmaker Store offers soft pretzels, pretzel products and other complementary food and beverages. In some circumstances, a Pretzelmaker Store may also offer branded frozen desserts and coffee products. See table below in this Item 1 for more information regarding franchised and company-owned Pretzelmaker Stores.
-8-
[PTF and PMF are in the process of conducting rest practices and specific strengths of bot
group of Pretzel Time and Pretzelmaker franchisees are potential synergies between the brands and to offer consi stores. One result of these activities has been the development of a single pretzel dough that is now being used to hake pretzels of a single taste and texture (prepared from either a drv doughs bv this group of test stores from hoth systems. PTF and PMF ai dough will be introduced as a required product for hoth systems sometime during 2006. PTF and PMF have also developed a series of promotions, point of purchase and other marketing materials that are being used in stores of both systems. Further results of PTF's and PMF's research and studies may affect hoth the Pret7el Time and Pretzelmaker systems in a number of additional wavs. including the possible future development of pretzel stores and products bv us or our Affiliates under new trademarks and trade names, the possible conversion of one of the systems to the other, and/or the possible conversion of hoth systems to a third pretzel system developed bv us or our Affiliates under new trademarks, trade names and/or trade dress. PTF and PMF will make
Between September 1996 and November 1997, MFOC was in the business of granting licenses and franchises for the operation of Hot Sam Pretzel and Bakery Stores. Currently, neither MFOC nor we are granting Hot Sam Pretzel and Bakery Store licenses and franchises. <Stfiee>[}[rjQjnJ September <4396r>[1QQ6 to November 2005.1 MFOC <has>rwas] also <been->in the business of owning and operating Hot Sam Pretzel and Bakery Stores. As <further >described above, <MFOC now operates ite>rwe have given MFOC the right to grant a limited number of sublicenses to third parties for the operation of the refflajnjng] Hot Sam Pretzel and Bakery Stores <as a licensee of us>[forinerlv owned and operated bv MFOC1. A Hot Sam Pretzel and Bakery Store offers a variety of freshly prepared soft pretzels and pretzel products (including Bavarian and sweet dough pretzel sticks), various toppings and sauces, freshly squeezed lemonade and other food items and beverages. <In certain situations, a prospective franchisee of either PMF or PTF may be able to purohasc an existing Hot Sam Pretzel and Bakery location and its physical assets from MFOC and convert the location to a Pretzelmaker or Pretzel Time Store. See table below in this Item 1 for more information regarding company owned Hot Sam Pretzel and Bakery StoresMWe anticipate that the remaining licensed Jocatiops w\\\ either cflose or
Since July 2000, TCBY has been in the business of offering franchises for TCBY Stores. TCBY's predecessors, including TCBY Enterprises and TCBY Systems, owned and operated and offered franchises for TCBY Stores between October <1981.Currently, there are>[1,ft81 an,d June 3W, Historically. TCBY has offered] 2 types of TCBY franchised Stores: "Traditional TCBY Stores" and "Other Concepts TCBY Stores[,]"<-> A Traditional TCBY Store typically has 800 to 1,600 square feet, seats 10 to 34 customers and caters to both carry-out and eat-in business. In some instances, however, a Traditional TCBY Store may be smaller, having no more than 800 square feet, because it operates as part of a food court or other shared dining opportunity, or serves small urban or even rural communities. Other <Conoept>[Concepts] TCBY Stores involve co-branding arrangements and are sometimes referred to by TCBY as non-traditional TCBY stores. An Other Concepts TCBY Store is located at or within premises operated under trade names or trademarks belonging to another concept, which may include another concept owned and franchised by us or our Affiliates. A franchisee of an Other Concepts TCBY Store typically offers and sells a basic menu of core TCBY products, such as cones, cups and sundaes, but generally will not sell an extended menu, such as cakes or pies.<-r->
ITCBY is in the process of developing and testing in ce identifies a reconceptjng program ( Accordingly, while TCBY will continue to offer franchises for Oth
-9-
after the Reconcepting Test. TCBY does not, as of the date of this Offering Circular, intend to offer franchises for anv new Traditional TCBY Stores during the Reconcenting Test. Tnstead.
Test. TCBY will allow some existing, franchised Traditional TCBY Stores kets and locations it identifies to participate in the Reconcepting Test. TCBY mav also grant single and/or multiple unit franchises for new stores in certain identifies that will participate in the Reconcenting Test. Existing, franchised Tradition; Stores and new franchised stores that participate in the Reconcepting Test are ct to in this Offering Circular as "Test Stores." Test Stores will operate under and use newlv-developed trade dress, trademarks, trade names and service marks TCBY owns and/or registers. which mav include the Berivo trademark (the "New Marks'^. as well as certain existing TCBY trademarks, and will sell certain new proprietary, premium quality smoothies, frozen yogurt products and menu items containing such products (the "Test Products"^. together with some of the menu items TCBY has already approved for sale from TCBY Stores.!
[Tf TCBY determines that the Reconcepting Test has been a success and has resulted in the development of a "Store of the Future" program. TCBY will require all Test Stores to operate as
TCBY Stores of the Future. Tn addition, in the event of a successful
no longer offer Traditional TCBY Store franchises, but will instead focus 01
development «f TCBY "Stores of the Future" operated, in accordance with
Future" program. Tn contrast, if TCBY deteri
CBYwJH
rsiQH and ftf the
success, the Test Stores will be required to purchase and install new sh
materials and other branded elements necessary to make the Test Stores'
other Traditional TCBY Stores operated hv TCBY franchisees in accordance witl
standards. TCBY will reimburse Test Store franchisees for certain costs arising froi
in hranded elements. Further, in the event of an unsuccessful Reconcepting Test. TCBY
again continue offering franchises for Traditional TCBY Stores.]
See table below in this Item 1 for more information regarding franchised and company-owned TCBYf Stores and Test] Stores.
On June 1, 2000, MFOC entered into a management agreement with TCBY, the franchisor of the TCBY system, pursuant to which MFOC managed and operated the TCBY franchise system on a day-today basis from June 2000 to February 2004. As part of the Contributions, that management agreement was terminated in March 2004 and employees of MFFB, the current parent of TCBY, now perform the day-to-day operations of the franchise system and provide services to TCBY's franchisees.
[Since December 2005. TCBY has been in the business of granting single and mi franchises for the operation of Yovana stores ("Yovana Stores'^, in certain limit qualified franchisees. A Yovana Store is a retail meal, treat, snack and beverage outlet that offers a variety of specially prepared food items, such as fresh yogurt. and frozen vogurt treats, granolas. cereals, breads, pastries, premium cottee. es| juices, and other products and beverages. In addition to offering single unit franchis Yovana Stores. TCBY also offers a Yovana multi-unit development program. In the future. TCBY mav develop new Yovana Stores as comoanv-owned stores, or for eventual sale to a new or existing franchisee. All Yovana Store locations mav compete with vou. See table below in this Item 1 for more information regarding franchised and cnmpanv-owned Yovana Stores. 1
Juice Works began franchising Juice Works stores in October 1996 and ceased franchising in February 1998. From February 1998 to December 2002, TCBY or its predecessors offered the right to
-10-
add the Juice Works product line to its franchised TCBY stores under a Juice Works addendum to the TCBY franchise agreement. TCBY no longer offers this program.
The following table summarizes the franchises and licenses offered by us and our Affiliates in the United States that were operating as of <Jamiarv 1 .^December 31.] 2005. All of these franchised and licensed locations may compete with you. While the current franchisors/licensors of each concept are listed in the table below, as <further >described above in this Item 1, these entities did not actually become the franchisors/licensors of their respective concepts until the Contributions in March 2004. Except as described in the table below or elsewhere in this Item 1, as of <January l>[December 31.] 2005, neither we nor our Affiliates have offered franchises in any other lines of business. In addition, except for the company-owned stores operated by MFOC pursuant to franchise agreements with us and our Affiliates, as of <Januarv l>rDecemher 31.1 2005, neither we nor our Affiliates operate any company-owned stores for the concepts listed in the table below.fj
|
Franchisor/ Licensor |
Concept |
Number of Franchises(l) |
Number of Company-Owned Stores Operated by MFOC(2) |
|
Us |
Mrs. Fields <Geekies>[CaoJaeJ (and Mrs. Fields Bakery Cookie Cafes) |
<36a>r372i |
<36>0] |
|
GACCF |
Great American Cookie Company |
<2^>[2Z5] |
<&>m |
|
<ys> |
<Origmal ookie-Company> |
<0> |
<?> |
|
PTF |
Pretzel Time |
<+S>LL2& |
<^>[ifl] |
|
PMF |
Pretzelmaker |
<454>U42] |
<2>[flG |
|
<Us> ITCHY] |
<0>[i] |
<u>w |
|
|
TCBY |
TCBY |
<4086>[22ll(3) |
<44>ffil |
|
Traditional TCBY Stores |
<4m>\423] |
0 |
|
|
Non-traditional TCBY Stores |
<6H>\5M |
<44>[fl] |
(1) This column lists the number of franchises open and operating as of <January 1,>[
31.1 2005, excluding those stores operated by MFOC (which are disclosed in the next column). These numbers include combo units so that the same location may be included in the total for more than one concept.
(2) This column lists the number of stores operated by MFOC as of <Januarv l>[Decemher 31.] 2005. While MFOC operates these stores pursuant to separate franchise agreements with us, GACCF, PTF, PMF and TCBY, we refer to them as "company-owned" rather than "franchised"
-11-
in certain sections of this Offering Circular because MFOC is an affiliate of each of these franchisors.
(3) While there are no longer any Juice Works Stores, as of<January l.>[December31.1 2005, there were <?>[10] Juice Works units operated <in conjunction with>[within] franchised TCBY Stores.
ITEM 2. BUSINESS EXPERIENCE
The following list discloses our managers and principal officers who will have management responsibility relating to the franchises offered under this Offering Circular, and the principal occupation of each of them during the preceding 5 years. Individuals who are our officers or managers may hold the same or equivalent positions with MFFB and other of our Affiliates.
President. Chief Executive Officer and Manager: Stephen Russo
Mr. Russo has been our President and Chief Executive Officer, and one of our Managers since March 2004. He also has held the same or equivalent positions with a number of our Affiliates since May 2003. From July 1997 to April 2003, Mr. Russo was Director, Retail Operations Officer for Allied Domecq, QSR in Randolph, Massachusetts. From January 1978 to June 1997, he served in various capacities for Dunkin' Donuts in Randolph, Massachusetts,
Executive Vice President <General Counael>[Chief Legal Office^]- Secretary and Manager: Michael R.Ward
Mr. Ward has been our Executive Vice President fand Chief Legal Officer ] since <June 2QQ4r>[Fehruarv 2006.1 and our< General Counsel and> Secretary and one of our Managers since March 2004. From [June 2004 to January 2006. he was our Executive Vice President and General Counsel. From IMarch 2004 to June 2004, he was our Senior Vice President^ and General Counsel].
Mr. Ward also has held the same or equivalent positions with a number of our Affiliates since May 2000. He served as Vice President of Administration and Legal Department of a number of our Affiliates from September 1996 to May 2000. From 1991 to 1996, Mr. Ward's responsibilities were overseeing the Legal Department and the Human Resources Department for MFI. Mr. Ward is admitted to practice law in the State of Utah.
<Chicf Financial Officer. Treasurer and >Executive Vice President <of Finance and Administration: Sandra Buffa>
<Mq. Buffa hao boon our Executive Vice Frosidont of Finanoo and Administration since June 2001, and our Chief Financial Officer and Treasurer since March 2001. From March 2004 to June 2001, she was our Senior Vioc President of Finance and Administration.Ms. Buffa also has held the same or equivalent positions with a number of our Affiliates sinoe April 2001. Immediately before joining us, she and hor husband spent a year on sabbatical. From November 1998 to November 1999, Ms. Buffa served as President of Cmbtrce & Evelyn, Ltd., in Waltham, Massachusetts, and as Chief Financial Officer and a direotor of that oompany from March 1998 to November 1998. Between July 1993 and Maroh 1998, she served as Senior vice President, Chief Finaneial Officer, Treasurer and a Director of National Vision Assooiatos in Lawrenceville. Georgia .xExecutivo Vioc President of Operations and DevelopmenPfand,
Mr. Dejbakhsh has been our Executive Vice President [and Chief Operations Officer since Fehruarv 2006. and our Executive Vice President lof Operations and Development <s4nee>[r_onj] June
-12-
<2QQ4,>[2004 to January 2006.] From March 2004 to June 2004 he was our Vice President of Operations. He also has held the same or equivalent positions with a number of our Affiliates since January 2004. Immediately before joining us, Mr. Dejbakhsh spent 6 months on sabbatical. From January 1996 to June 2003, Mr. Dejbakhsh was Area Vice President covering operations, development and field marketing for the western U.S., Canada, Asia Pacific, and Australia for Allied Domecq, QSR in Randolph, Massachusetts.
Executive Vice President <ofMand Chief) Marketingf Officer]: John Lauck
Mr. Lauck has been our Executive Vice President [and, Chief Marketing Officer since February 2006. and our Executive Vice President lof Marketing <s4nee>[|LOja] April <2QQ4t>[2QQ4 tO January 20Qfo]
He also has held the same or equivalent positions with a number of our Affiliates since April 2004. From September 2002 to April 2004, Mr. Lauck served as President and Chief Marketing Officer for Arby's Franchise Association. <Prior to>(Before] joining Arby's, he was on a one-year sabbatical. From February 2000 to July 2001, Mr. Lauck was Senior Vice President and Chief Marketing Officer for Groceryworks.com, a home grocery delivery start-up company in Dallas, Texas. Between November 1998 and January 2000, he was the Senior Vice President and Chief Marketing Officer for Footaction in Dallas, Texas. Mr. Lauck is a director of Shadewell Grove Holdings, LP, one of our licensees.
muting Officer. Senior Vi<
TMr. McBride has ht
Officer. Senior Yicc-f n
Officer. Vice President Conti
J0v4 tft May Z0Q5, he was our Vh
and served in that capacity with a number of our Affiliates since August 2002. Fi
until he joined us. he served as Chief Financial Officer of Ovid Technologies. Inc. in Salt Lake
Citv. Utah. From September 1996 to April 2001. Mr. McBride was the Vice Presit
ITEM 3. LITIGATION
(Tending Litigation:!
[ Mavfare Enterprises. Inc. v. Mrs. Fields Famous Brands. IXC. Mrs. Fields Franchising LLC. et al. (American Arbitration Association Case No. 77-1140046404-VSS filed December 29. 2004V This is a claim brought bv one of our former franchisees, for damages in excess of $50.000. alleging incomplete disclosures and breach of the covenant nf good faith and fair dealing with their purchase of franchises from ns and from our Affiliates. PMF and TCBY. for the development of a triple concept location in Illinois.__The parties have selected an arbitrator and have begun
[ Jayed Rukhari - potential claim
Massachusetts^. We terminated Javt
yariftus outstanding accounts receivables balances,
from the franchisee's, attorney pursuant to Mass, ficn, L... ch. 93A
acts and pn
parent. Mrs. Fields Original Cookies. Inc. We dispute his ?r. No action has vet bet
ts from our
wer to
-13-
[Concluded Utigatton; ]
[ ]Effective May 20, 1996, the Federal Trade Commission ("FTC") entered into a consent order with MFI (In the Matter of Mrs. Fields Cookies, Inc. (FTC File No. 952 3014)). Pursuant to the consent order, MFI agrees to refrain from misrepresenting in any way the existence or amount of fat, saturated fat, cholesterol or calories in any of its bakery food products. MFI also agrees to comply with the regulations promulgated by the Food and Drug Administration governing nutrient content claims. MFI <furthor >agrees to make available to the FTC all materials that it relies upon in labeling or making nutrient content representations regarding its food products. The consent order contains no conclusions of law or fact, and MFI admits no wrongdoing or violation of law with regard to any matter addressed in the consent order.
On June 28, 1996, MFDC filed a Demand for Arbitration with the American Arbitration Association in Salt Lake City, Utah (Mrs. Fields Development Corp. v. Covak. Inc.. Case No. 81-E114-0128-96) to resolve a dispute between MFDC and Covak, Inc. and its owners, Davood and Janet Vakili (the "Vakilis"). The Vakilis purchased a franchise from MFDC in 1995. In communications to MFDC in 1996, the Vakilis alleged that MFDC violated the California Franchise Investment Law and negligently or fraudulently made material misrepresentations to them, thereby inducing them to enter into the franchise agreement. The Vakilis sought rescission of the franchise agreement and recovery of damages in an amount in excess of $50,000. MFDC sought a declaratory judgment that the claims asserted by the Vakilis were not true, and that the Vakilis were not entitled to rescission, damages or any other relief. After many months of inactivity in the case, the arbitration proceedings were dismissed in 1999 with no resolution of the claims between the parties.
Robert and Sheila Goldberg, et al. v. Great American Cookie Co.. The Jordan Co.. Mrs. Fields' Original Cookies. Inc.. and Capricorn Investors. IV t LP (Superior Court of New Jersey, Law Division, Mercer County, Case No. L3502-97). On September 12, 1997, 9 franchisees of GACC filed an action against MFOC and the other defendants because of the possibility at that time that MFOC would acquire the stock of GACC's parent company and thus own the franchisor of the GACC system. <The-plaintiffs>fRobert and Sheild Goldberg's, et al. (the "Goldbergs"!! primary allegations at that time were that MFOC would fail to honor the existing contracts between GACC and its franchisees. <Plaintiffs>[The Goldbergs] also alleged fraud, unlawful sale of GACC franchises, tortious interference with contracts, violation of state unfair trade practices acts, and similar claims against various of the defendants, including MFOC. The <plaintiffs>[Goldbergs]' pleadings in 1997 generally sought an injunction to stop the acquisition and the anticipated future violations, plus anticipated damages and costs. MFOC was prepared to defend the action, but it was later stayed by agreement when the GACC acquisition did not occur in 1997. On August 24, 1998, consummation of the GACC transaction occurred. Contemporaneous with the GACC transaction, <all plaintiffs>[the Goldbergs] agreed to release all claims and dismiss their Complaint in this action with prejudice and without costs, in return for certain contingent, future rights related to the ownership of their franchises.
On November 10, 1997, co-franchisees filed an action in the Superior Court of California, San Diego Judicial District, County of San Diego, against the former franchisee in that franchised location, and against MFOC- (Lalit & Usha Arya v. Peter A. Falonk and Mrs. Fields' Original Cookies, Inc., Case No. 00710985). The franchisees claim that the selling former franchisee inflated the sales figures of the store, and that MFOC should have warned the buying franchisees. The claims against MFOC were for breach of contract, negligent misrepresentation, intentional misrepresentation, and rescission. After MFOC's demand to arbitrate the matter was granted by the California Court of Appeals, a settlement was reached on December 28, 2000, pursuant to which the claims against MFOC were dismissed with prejudice and MFOC paid $5,000.
-14-
Batter Up Cookies v. Mrs. Fields' Original Cookies. Inc.. (Case No. 00-A-143). This arbitration was <commenced>[hegun] by a GACC franchisee!", Pattfr Vv Q10*"^] Wn0 claimed that MFOC had agreed to purchase 2 of its franchised stores, and that MFOC had breached a contract to that effect. <The-olaimanOf Batter Up Cookies! sought to force the purchase and to collect attorney fees. In an arbitration decision issued December 4, 2000, the arbitrator ruled that MFOC had breached an oral agreement to purchase the 2 stores, which the arbitrator said MFOC must purchase for the agreed-upon price. The arbitrator ruled, however, that no attorney fees should be awarded.
Randall Scribner and Carolina Yogurt. Inc. v. Juice Works Development. Inc. and Mrs. Fields* Original Cookies. Inc.. (U.S. District Court for the Eastern District of Arkansas, Case No. 4-01-CV-00344GH, filed May 31, 2001). This is a class action filed <on behalf of>[forl named plaintiffs and all others similarly situated lYcollectivelv the "Scribners"^ Ifor unspecified damages, claiming breach of contract, breach of covenant of good faith and fair dealing, and tortious interference with contract. The <plnintiffs>[gcrihners] are former or current franchisees of TCBY, and were licensed to sell Juice Works products by Juice Works, a subsidiary of TCBY, either directly by a franchise agreement between Juice Works and the franchisee, or through an addendum to an existing TCBY franchise agreement. <Plaintiffc>rThe Scrihnersl claim that Juice Works breached the franchise agreements and the implied covenant of good faith and fair dealing by failing to provide support or assistance, failing to spend advertising contributions on Juice Works advertising, and commingling of advertising funds. They <fttfther->claim that MFOC tortiously interfered with <plaintiffs>[the Scrihnersl' contracts with Juice Works by soliciting and encouraging TCBY and Juice Works franchisees to implement a competing product. <Dofendantfl>r.Tuice Works and MFOC] deny the allegations. <Plaintiffs>rThe Scribners] failed to certify a class and the case proceeded on the regular docket. On January 6, 2003, the parties reached a confidential settlement where the claims against MFOC were dismissed with prejudice and MFOC paid a $37,500 settlement to <plaintiffr,.>[the Scribners. 1
<Mayfaro Enterprises. Inc. v. Mrs. Fields Famous Brands, LLC. Mrs. Fields Franchising LLC, et aL (American Arbitration Association Case No. 77 1140016404 VSS filed December 29, 2004). This is-a claim brought by one of our former franchisees, for damages in excess of $50,000, alleging incomplete disolosurcs and breaoh of the covenant of good faith and fair dealing in connection with their purchase of franchises from us and from our Affiliates, PMF and TCBY, for the development of a triple ooncept location in Illinois. The parties are in the process of agreeing upon an arbitrator and plan to oommonco discovery in the near future. >
Other than these <?>[] actions, no litigation must be disclosed in this Offering Circular.
ITEM 4. BANKRUPTCY
No person previously identified in Item 1 or Item 2 of this Offering Circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item.
ITEM 5. INITIAL FRANCHISE FEE
Initial Franchise Fee:
You must pay an initial franchise fee of $30,000 when you sign a Franchise Agreement for a Mrs. Fields Cookie StoreL either for an in-line Store or a modular, prefabricated haking kiosk]
The franchise fee represents payment to us for the right to use the Mrs. Fields Trademarks and the Mrs. Fields System in the development and operation of your Store. The initial franchise fee also covers the cost of goods and services that we and our Affiliates may provide to you before your Store opens, such as site evaluation and approval, prototypical plans, certain grand opening assistance, marketing materials
-15-
and training. If you acquire an existing Mrs. Fields Cookie Store from MFOC, or you are an existing franchisee in good standing with us or one of our Affiliates, and you qualify to acquire a second or subsequent franchise from us, we have the right, at our option, to reduce or waive the initial franchise fee. [Typically. ]vou must pay the initial franchise fee in a lump sum upon your signing of the Franchise Agreementr. However, we have the option to allow vou to pav a portion of the initial franchise fee when vou sign the Franchise Agreement, and the halance no later than the date that vou ooen vour Store!. If you acquire an existing Mrs. Fields Cookie Store from MFOC or another franchisee, you will not pay an initial franchise fee to us, but will pay us a transfer fee (currently $8,000) as more fully described in Item 6, Note 13 of this Offering Circular.
If F(a> vou fail to obtain a location approved bv us for vour Store within 60 davs from the date vou sign the Franchise Agreement or (b\ Ivou or your initial store manager do not satisfactorily complete the initial training program, we will refund the initial franchise fee less all reasonable expenses incurred by us in preparing the Franchise Agreement and all related agreements, the grant of the Franchise, site selection and approval, and any other services performed by us in establishing and developing your[J Store. However, the total refund will not exceed 50% of the initial franchise fee<T-4n-limited situations, we may refund all or a portion of your franchisee fee if wo agree to do go in writing at tho time you sign your Franchise Agreement, and you fail to obtain a lease for your Store at its approved site within a designated time subsequent to signing the Franohiae AgroemontM. and if you have paid less than 50% of the full initial franchise fee at the time of the refund, no portion of that payment will be refundable under any circumstances]. We will make any refund to you upon your signing of all releases, waivers and other agreements necessary to terminate the relationship between you and us. We do not offer refunds of the initial franchise fee under any other circumstances.
Other Initial Fees:
If you acquire an existing Mrs. Fields Cookie Store from MFOC, you must enter into an Asset Purchase Agreement in the form included in Exhibit 10 to this Offering Circular. The assets purchased typically include trade furnishings and fixtures, such as display cases, signage, shelving, counters and work tables, and equipment, such as ovens, refrigerators, soft drink beverage dispensers, coffee preparation and dispensing equipment and small wares. MFOC sets the purchase price for the Store assets by taking a multiple of store cash flow after royalty and also taking into account other economic factors, such as current operating trends and length of lease term. The purchase price also will include payment for the goodwill and going concern value of the store. You must pay the purchase price upon transfer of the Store assets to you. As <&ffthef->described in d.2 and Note 5 to Item 7 of this Offering Circular, we estimate that the cost of the Store assets (referred to in Item 7 as "Improvements and Equipment") purchased from MFOC, will range from $0 to $<45&QQ0r>n 50.000.1 If MFOC is leasing any of the assets of the Store to you, you must also assume the obligations and make the required payments due under the equipment lease from the date you purchase the assets. You are not entitled to a refund of the purchase price for an existing Store under any circumstances, even if you lose the right to lease or sublease the Store premises after taking possession of the assets. In some instances, you may be required to enter into a Confidentiality Agreement in the form of Exhibit 5 <in conncotion >with your purchase of a franchised or a MFOC-owned Mrs. Fields Cookie Store. No fees are paid to us or our Affiliates <in connection >with the Confidentiality Agreement.
The assets of an existing Store do not include any initial supplies, product inventory, paper goods and other soft goods, accounting forms and systems, and other items necessary to comply with our standards (collectively, the "Product and Soft Goods Inventory"). When you purchase the assets of an existing Store, you must also purchase the store's existing Product and Soft Goods Inventory. The purchase price for the Product and Soft Goods Inventory is determined based on a physical inventory of the Product and Soft Goods Inventory and by multiplying the inventory quantities by the actual unit cost
-16-
for the items. You must pay to MFOC the purchase price for the Product and Soft Goods Inventory when you purchase and pay for the assets of the Store. As< furthor> described in e. and Note 6 to Item 7 of this Offering Circular, we estimate that the cost of the Product and Soft Goods Inventory purchased from MFOC will range from $1,000 to $5,000. You are not entitled to a refund of the purchase price for the Product and Soft Good Inventory under any circumstances.
Under certain circumstances, one of our Affiliates may sublease the premises for your Store to you. If this occurs, you may be required to pay a security deposit to our Affiliate at the time you sign the Sublease Agreement. This security deposit and the conditions under which it may be refundable are explained in Note 8 under Item 6 of this Offering Circular.
If you participate in our optional Resale Facilitation Program and purchase a Mrs. Fields Cookie Store from an existing franchisee, you will pay to us a Resale Facilitation Fee. The Resale Facilitation Fee and Program are <further >described in Note 21 of Item 6.
You must pay us a $5,000 initial fee if we allow you to operate a Non-Baking Kiosk. The $5,000 initial fee is non-refundable and must be paid to us upon your signing of the Non-Baking Kiosks Addendum. See Items 1,7 and 12 of this Offering Circular for more information on Non-Baking Kiosks.
<From time to time>[Periodicallvl. we may offer special incentive programs< in oonjunction> with our franchise development activities. These special incentive programs may include awards, prizes, bonuses, rebates, product discounts and credits, or other types of incentives. We may offer these incentives to any of our existing franchisees who refer a third party to us who subsequently becomes a new Mrs. Fields Cookie Store franchisee within a specified period of time. We have the right, however, to offer, modify, withdraw or reinstate any incentive programs in the future without notice to you.
As <fiirther >described in Item 7, if you are developing a new Mrs. Fields Cookie Store, you <aro required to>[miist] conduct a grand opening advertising and promotion program for at least 7 days, beginning within 30 days after opening of your Store. You also agree to spend at least $5,000 for the grand opening of your Store. In your grand opening advertising and promotion, you <must>[may be required to! purchase from us or our Affiliates the standard marketing and public relations programs and media and advertising materials that we develop for grand opening programs and new store initial operations, flf we develop these materials. ]we will make these materials available to you upon written request, in advance of opening your Store. We estimate that the cost of these materials will range from $200 to $1,000. Neither we nor our Affiliates refund any payments for these materials. You may also incur expenses from other vendors and suppliers in your grand opening promotion.
<Ag further described in Item 1 of this Offering Ciroular, MFOC was the franchisor of the Mrs. Fields franohiGO system until Maroh 16, 2001. Accordingly, during MFOC'g last fisoal year, franohisoos paid to MFOC on initial fee, including the initial franchise foe, any lease or sublease deposits, any oosts associated with the purchase of the assets of an existing Mrs. Fields Store and other fees paid to MFOC ranging from $0 to approximately $635,000.From March 16. 2004 to>[From] January <4-:>r2. 2005 to Decemher 31.] 2005, our franchisees paid us or our Affiliates initial fees ranging from $0 to approximately $50,000, excluding the amounts paid to[ MFOC for assets purchased from] MFOC.
ITEM 6. OTHER FEES
|
Name of Fee |
Amount |
Due Date |
|
a. Continuing fees |
6% of monthly Gross Revenues |
Payable weekly on or before the |
-17-
|
Name of Fee |
Amount |
Due Date |
|
(Note 1) |
close of business on Wednesday of each week for the immediately preceding week (Note 2) |
|
|
b. Marketing fees |
1% to 3% of Gross Revenues (Note 3) |
Same as continuing fee (Note 2) |
|
c. Lease-required advertising fees |
Will vary under circumstances (Note 4) |
When due |
|
d. Cooperative advertising |
Up to 3% of Gross Revenues (Note 5) |
When due (Note 5) |
|
e. Training fee (Note 6) |
See Note 6 |
See Note 6 |
|
f. Refresher training (Note 7) |
See Note 7 |
See Note 7 |
|
g. Sublease (Note 8) |
See Note 8 |
Monthly (Note 8) |
|
h. Special assistance (Note 9) |
See Note 9 |
See Note 9 |
|
i. Late payment fee |
$100 for each delinquent payment. |
When the delinquent payment is due |
|
j. Late reporting fee |
$25 for each delinquent report |
When the delinquent report is due and continuing to be due for each period that the report remains delinquent |
|
k. Interest expenses (Note 10) |
Will vary under circumstances (Note 10) |
When due |
|
1. Audit |
Cost of financial audit plus interest at 1.5% per month or the highest legal rate on any underpayment (Note 11) |
15 days after receipt of audit or inspection report |
|
m. Operations Manuals duplicate (Note 12) |
See Note 12 |
Upon receipt of duplicate copy |
|
n. Transfer fee (Note 13) |
$8,000 or the current transfer fee, whichever is greater; certain transfers qualify for reduced fee |
$2,000 transfer fee deposit payable upon Transfer request, with balance |
-18-
|
Name of Fee |
Amount |
Due Date |
|
of $1,000 or more (Note 13) |
final closing of Transfer (Note 13) |
|
|
o. Relocation Fee (Note 14) |
$2,500, or more (Note 14) |
Payable <prier4e>ffreforei] relocation |
|
p. Additional term (Note 15) |
$2,000 or more for each year of additional term (Note 15) |
Payable <orior to>fhefore1 Transfer or relocation (Note 15) |
|
q. Advertising, marketing and promotional materials |
Will vary under circumstances (Note 16) |
When the materials are ordered and/or delivered (Note 16) |
|
r. Interim management fees (Note 17) |
10% of Gross Revenues |
As incurred |
|
s. UCC filing fees (Note 18) |
As set by state law; varies from state to state |
Upon signing of the Franchise Agreement and at the times UCC continuation statements are filed |
|
t. Costs and attorneys' fees, and indemnification |
Will vary under circumstances (Note 19) |
Upon occurrence |
|
u. Documentation Fee for Franchisee Name Changes (Note 20) |
$500 or more (Note 20) |
Payable upon required notification of name change (Note 20) |
|
v. Resale Facilitation Fee (Note 21) |
Will vary depending upon negotiations between us and the purchasing franchisee (Note 21) |
Payable upon purchase of Store from existing franchisee |
|
\w. Brokerage Servicel |
fNote 22^] |
from existing franchisee! |
|
<w>W. Termination Fee |
Will vary under circumstances (Note <33>[22]) |
When billed |
General Comments:
You must pay these fees to us except as explained in Notes 4,5, 8,17 and 19 below. These fees are non-refundable except as explained in Note 13 below. If we or our Affiliates do not actually receive your payments on the due date, they will be deemed delinquent. These fees do not include any initial
-19-
franchise fees that may be payable to our Affiliates if you are developing your Mrs. Fields Store as a co-brand with one of their concepts.
You must pay all continuing fees, marketing fees, rental payments and other amounts owed to us or our Affiliates by pre-authorized electronic bank transfer from your general account. You must sign and complete the form Authorization Agreement attached to the Franchise Agreement as Appendix A or any other documentation we require <from time to time>[periodicallvl to permit the electronic transfer. The pre-authorized electronic bank transfer requirements are< furthor> described in Section 6.4 of the Franchise Agreement and Appendix A to the Franchise Agreement.
During the course of developing and operating your Store, you will also be required to purchase various items from designated and approved suppliers or in accordance with our standards and specifications. See Item 8 of this Offering Circular for an explanation of these requirements.
Specific Notes:
1. See Exhibit 1 to this Offering Circular for a definition of Gross Revenues.
2. The continuing fee and marketing fee due under the Franchise Agreement and any Non-Baking Kiosks Addendum are payable weekly on or before the close of business day on Wednesday of each week for the immediately preceding week. As described in the General Comments above, these fees must be paid to us by pre-authorized electronic bank transfer from your general account. If you are granted the right to operate a Non-Baking Kiosk, you must submit to us a separate report of the Gross Revenues for your Non-Baking Kiosk, and make separate continuing fee and marketing fee payments based on the Gross Revenues from your Non-Baking Kiosk. See Items 1, 7 and 12 of this Offering Circular for more information on Non-Baking Kiosks.
3. The marketing fee for <3Q05>[20061 is 1% of Gross Revenues. For <2006>[2QQ2] and future years, we will notify you annually of the exact percentage you must pay as a marketing fee, except for any year in which the percentage is to remain unchanged from the preceding year. We establish the percentage of Gross Revenues you must pay as a marketing fee annually, although you will not be required to pay more than other franchisees in your market area. See Item 11 of this Offering Circular for more information on marketing.
4. In addition to the marketing fee described in Note 3 above, you must pay all advertising fees required by your lease and/or sublease and comply with all advertising requirements of your lease or sublease. If you are a sublessee of one of our Affiliates, you must pay to our Affiliate any amounts in addition to the marketing fee necessary to meet all lease requirements. See Item 11 of this Offering Circular for more information on marketing,
5. In addition to the marketing fee and lease-required advertising fees described in Notes 3 and 4 above, if a local or regional advertising cooperative is formed or organized for the market that includes your Store, we have the right to require you to participate in and contribute to the advertising cooperative an amount of up to 3% of your Gross Revenues. In <sueh>[that] case, we will notify you <from time to tiffle>[perindicftHv] of the amount you must pay to the advertising cooperative and the timing of the payments, which may be as often as weekly. See Item 11 for more information on cooperative advertising.
6. You may not attend training <prior to>[befftre] signing your Franchise Agreement. We provide training for you (or one of your Entity Owners, if you are an Entity) and the initial store manager (