Franchise Agreement
The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample Franchise Agreement
THE MUTUAL FUND STORE, LLC FRANCHISE AGREEMENT
This Franchise Agreement (the "Agreement") is made and entered into on
____________________, _____ (the "Effective Date") by THE MUTUAL FUND STORE,
LLC, a Missouri limited liability company ("Company"), and___________________________
("Franchisee") with reference to the following facts:
RECITALS
A. Company owns proprietary and other property rights in and to THE MUTUAL FUND STORE® trade name and service mark, as well as in other trademarks, service marks, logos and commercial symbols which Company uses in connection with the development, operation and marketing of THE MUTUAL FUND STORE® (collectively referred to as the "Proprietary Marks").
B. Company owns the right to use and license distinctive business methods for the development and operation of a fee-based investment management company using the Proprietary Marks. Company's distinctive business methods encompass all aspects of establishing, operating and marketing THE MUTUAL FUND STORES® and are referred to in this Agreement as "TMFS System."
C. Company reserves the right to modify the TMFS System and the Proprietary Marks in its sole discretion as often, and at such times, as it believes will best promote THE MUTUAL FUND STORES® to the public.
D. Franchisee desires to obtain a franchise and license to use the TMFS System and the Proprietary Marks in the operation of one THE MUTUAL FUND STORE®, and Company is willing to grant a license to Franchisee on the terms and conditions of this Agreement.
NOW, THEREFORE, the parties agree as follows:
I. DEFINITIONS
In addition to definitions incorporated in the body of this Agreement, the following capitalized terms in this Agreement are defined as follows:
A. "Accounting Period" means the specific period that Company designates from time to time in the Manual or otherwise in writing for purposes of Franchisee's financial reporting obligations described in this Agreement. For example, an Accounting Period may, in Company's discretion, be based on a (i) calendar month, (ii) Client Accounting Period, (iii) quarterly financial calendar starting on, and measured from, the Opening Date or the Effective Date, (which quarter may, or may not be subdivided into blocks of weeks, e.g., 4 weeks, 4 weeks and 5 weeks), or (iv) shorter or longer time period that Company selects in its discretion.
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Nothing in this Agreement obligates Company to designate the same Accounting Period for Franchisee that Company may designate for other franchisees.
B. "Addendum to Lease" is the written agreement by and between Franchisee and the landlord of the Franchise Location that adds specific terms and conditions required by Company to the Lease and grants Company the right, but not the obligation, to accept an assignment of the Lease under stated conditions.
C. "Advertising Minimum" is 8% of Management Revenue.
D. "Affiliate" means any entity that controls, is controlled by, or is under common control with, a party to this Agreement.
E. "Appearance and Imaging Specifications" refers to Company's current specifications set forth in the Manual for the physical appearance, design, and image of THE MUTUAL FUND STORES® generally, including, without limitation, specifications for signs, interior design, layout, lighting, flooring, computer and office equipment, fixtures, furniture, furnishings, decoration and supplies.
F. "Applicable Law" means the applicable common law and all statutes, laws, rules, regulations, ordinances, policies and procedures established by any governmental authority with jurisdiction over the operation of the Franchise Business or the activities of IARs that are in effect on or after the Effective Date, as they may be amended from time to time. Applicable Law includes, without limitation, those addressing the following subjects: certification or licensing of persons offering and selling mutual funds or investment advisory services to the public; building permits and zoning requirements applicable to the use, occupancy and development of the Franchise Location; general business licensing requirements; hazardous waste; occupational hazards and health; consumer protection; trade regulation; worker's compensation; unemployment insurance; withholding and payment of Federal and State income taxes and social security taxes; collection and reporting of sales taxes; and the American With Disabilities Act.
G. "Broadcast Advertising Minimum" is the amount shown on Exhibit A.
H. "Broadcast Contract Period" is the first 60 days after the Effective Date.
I. "Calendar Year" is the 12-month period starting on January 1 and ending on
December 31.
J. "Client Accounting Period" means the quarterly period starting on, and measured
from, the date that Franchisee opens a brokerage account for a client, or the longer or shorter period that Company may designate in the Manual after the Effective Date. Franchisee understands and agrees that a separate Client Accounting Period will be assigned to each brokerage account opened by a client of the Franchise Business even when client owns more than one account.
K. "Company's Web Site" is the specific URL address on the World Wide Web that Company owns and uses to publicize the TMFS System, THE MUTUAL FUND STORES® and
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franchise opportunities, to communicate with third parties electronically, and for other valid business purposes.
L. "Confidential Information" means, comprehensively, without limitation, all information or knowledge which Company expressly designates as confidential or which concerns any of the following subject matters which Company may disclose or Franchisee may learn about: methodologies for selecting TMFS Select Funds; proprietary investment portfolio strategies and presentation methods; the terms and conditions of Company's material contracts . with the designated Brokerage Custodian; demographic data and strategies relevant to client solicitation, marketing and retention; the names and profiles of clients of THE MUTUAL FUND STORES® whether owned by Franchisee, other franchisees, Company, Company's Affiliate or licensees; computer systems and other technologies; revenue, profit performance and other financial operating results of THE MUTUAL FUND STORES® generally or of particular locations; the results of marketing programs and client surveys; the activities of competitors; and, in general, any information which could, or does, give Company or TMFS System authorized users a competitive advantage, whether or not the information is now known or exists, is acquired, created or developed in the future, or included in the Manual.
M. "Controlling Interest" means the possession, directly or indirectly, of power to direct, or cause a change in the direction of, the management and policies of a business entity.
N. "Covered Person" means (i) the Person who executes this Agreement as Franchisee; (ii) each Franchisee Affiliate; (iii) each officer, director, manager, owner, trustee, or general partner of Franchisee or Franchisee Affiliate; and (iv) each Supervising IAR.
O. "Brokerage Custodian" is Schwab International, its successor, or such other company as Company may designate by notice to Franchisee from time to time.
P. "Effective Date" is the date indicated on page 1 of this Agreement.
Q. "Effective Date of Termination or Expiration of this Agreement" is any of the following dates: (i) the date notice is given based upon an event of default which this Agreement identifies is not curable; (ii) the last day of a cure period based upon an event of default which this Agreement identifies is curable if the defaulting party fails to cure the default; or (iii) the last day of the Term. Termination of this Agreement shall not be effective unless the non-defaulting party gives notice of default in the manner required by this Agreement.
R. "Force Majeure" includes, without limitation, an event caused by or resulting from an act of God, labor strike or other industrial disturbance, war (declared or undeclared), riot, epidemic, fire or other catastrophe, act of any government, and any other similar cause which Company determines is not within Franchisee's control. The determination that an event of Force Majeure has occurred, and the continuation of any deadline, shall be made solely by Company based upon the event causing the delay.
S. "Franchise Business" is THE MUTUAL FUND STORE® which Franchisee operates at the Franchise Location pursuant to this Agreement.
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Franchise Agreement-Exhibit C
T. "Franchise Location" is the business premises identified by Franchisee and approved by Company having the address shown on Exhibit A.
U. "Franchise Location Approval Date" is the date on which Company gives Franchisee notice approving Franchisee's site proposal.
V. "Franchisee's Principal" is the person who owns a Controlling Interest of a Franchisee that is a business entity.
W. "Franchisee's Web Page" is the web page created by Company located on Company's Web Site.
X. "IAR" means "Investment Advisor Representative" and refers to any Person who provides investment advice on Franchisee's behalf to the public.
Y. "Incapacity" is an inability due to medical reasons to devote full time and attention to the administrative and operational activities of the Franchise Business that continues for at least 120 days in the aggregate during any rolling 12 month period during the Term, based upon the examination and findings of a physician selected by Company. A period of Incapacity shall continue without interruption unless and until the person suffering the Incapacity resumes his or her duties on a full time basis for 30 consecutive days.
Z. "Lease" is the written agreement by and between Franchisee and the owner of the Franchise Location granting Franchisee the right to occupy and use the Franchise Location for the operation of the Franchise Business.
AA. "Local Advertisements" include, without limitation, all communications which Franchisee intends for the purpose of advertising or promoting the Proprietary Marks or the Franchise Business, identifying the Franchise Business as part of TMFS System, or soliciting or recruiting new clients or other business relationships. Local Advertisements shall include, without limitation: (i) written, printed and electronic communications; (ii) communications by means of a recorded telephone message, spoken on radio, television or similar communication media; (iii) promotional items or promotional or publicity events; (iv) listings in approved telephone directories; and (v) the use of Proprietary Marks on signs, merchandise, brochures, or other tangible personal property.
BB. "Management Fees" are all fees and other sources of revenue payable to Franchisee by Franchisee's clients for investment advisory services rendered by the Franchise Business.
CC. "Management Revenue" is the aggregate of all Management Fees earned on client brokerage accounts of the Franchise Business.
DD. "Manual" refers collectively to all of the confidential operating manuals and other written materials loaned to Franchisee in confidence during the Term.
EE. "Minimum Asset Level" is the amount set forth on Exhibit A.
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FF. "Opening Date" is the date that the Franchise Business opens for business to the public.
GG. "Operating Year" is a 12-month period beginning on the Opening Date and each anniversary of the Operating Date during the Term. For example, if the Opening Date is June 12, each Operating Year during the Term starts on June 12 and ends on June 11.
HH. "Person" means a natural person, trust or business entity of any kind.
II. "Qualified Transfer" is a transfer by a Franchisee who is an individual of all of his or her right, title and interest under this Agreement to a newly-formed business entity of which Franchisee will own all of the equity and voting ownership interests.
JJ. "Site Approval Period" is a 60-day period beginning on the first to occur of the following dates:
1. The date during the Broadcast Contract Period when Company gives notice to Franchisee that it has entered into a broadcasting contract for THE MUTUAL FUND SHOW, with a local radio station in the Territory, which notice shall also identify Franchisee's Broadcast Advertising Minimum; or
2. If Company fails to negotiate a broadcasting contract for THE MUTUAL FUND SHOW by the end of the Broadcast Contract Period, the first day after the end of the Termination Option Period if neither party gives notice of termination during the Termination Option Period.
KK. "Supervising IAR" means "Supervising Investment Advisor Representative" and refers to an employee whom Franchisee designates who (i) is a duly registered or licensed IAR, (ii) successfully completes Part 1 Training, (iii) devotes full-time and attention to the management and operation of the Franchise Business, and (iv) has primary responsibility for supervising the activities of IARs, and for carrying out the regulatory compliance obligations of, the Franchise Business under Applicable Law. Franchisee, if an individual, or Franchisee's Principal may be designated as a Supervising IAR.
LL. "Termination Option Period" is the first 15 days after the end of the Broadcast Contract Period.
MM. "Territory" is the geographic area identified by Company described on Exhibit A.
NN. "THE MUTUAL FUND SHOW is the radio talk show, which, as of the date of this Agreement, Company produces devoted exclusively to topical subjects concerning mutual funds and investment strategies.
00. "TMFS Select Funds" are the specific mutual funds that Company from time to time designates and may revise in Company's discretion that, as a group, at any time, represent a diversified portfolio of mutual funds with different investment objectives.
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PP. "TMFS System" means Company's distinctive business methods including, without limitation, information and knowledge which the Company classifies as Confidential Information; advertising and marketing programs that promote THE MUTUAL FUND STORES®; operating protocols for conducting trades, maintaining client records, and reporting transactions; use of proprietary software applications; Appearance and Imaging Specifications; and specialized training programs.
QQ. "World Wide Web" means that portion of the Internet used primarily as a commercial computer network by the general public, and any successor technology, whether now existing or developed after the Effective Date, that enables the general public to purchase goods or services from merchant-controlled World Wide Web sites or through other electronic
means.
II. GRANT
A. License. Company hereby grants to Franchisee, and Franchisee accepts, the right and license to use TMFS System and the Proprietary Marks in operating the Franchise Business subject to the terms and conditions of this Agreement. In accepting Company's grant, Franchisee agrees at all times to faithfully, honestly and diligently perform its obligations under this Agreement and to continuously exert its best efforts to promote and enhance the Franchise Business and the goodwill associated with the Proprietary Marks and TMFS System.
B. Territorial Rights.
1. Subject to the provisions of this Agreement, for as long as Franchisee is not in default under this Agreement, Company agrees not to open or operate, or grant others the right to open or operate, a THE MUTUAL FUND STORE® using the Proprietary Marks and TMFS System in the Territory.
2. Except for the rights granted in this subpart, (i) the rights and license awarded to Franchisee are nonexclusive; (ii) nothing in this Agreement grants to Franchisee any other area, market or territorial right or protection of any kind; (iii) Company may use the Proprietary Marks and the TMFS System both within and outside of the Territory for all purposes; and (iv) Franchisee shall have no right to enjoin or be compensated for the opening or operation of another THE MUTUAL FUND STORE® outside of the Territory regardless of its proximity to the boundary of the Territory or to the Franchise Location.
3. The parties agree that Company unilaterally may reduce the size of the Territory anytime after 2 years from the Opening Date if (i) the aggregate market value of the client accounts managed by the Franchise Business at the end of 2 years from the Opening Date is less than the Minimum Asset Level; and (ii) Company determines, in its sole discretion, that the original Territory can support a second THE MUTUAL FUND STORE®. Company shall give written notice of the new boundaries of Franchisee's Territory at least 30 days before Company, or a third Person that Company authorizes, opens a second THE MUTUAL FUND STORE® in the original Territory. The parties agree that the term "Territory" shall be amended to conform to the boundaries identified in Company's notice effective on the date that notice is given.
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Franchise Agreement-Exhibit C
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4. Company expressly reserves the absolute right, directly or indirectly, for itself or its designees, within and outside the Territory, to use the Proprietary Marks (i) to offer and sell the same goods and services as THE MUTUAL FUND STORES® through any channel of distribution except, for as long as Franchisee is not in default under this Agreement, from a physical place of business in the Territory; and (ii) to offer and sell goods and services that Company does not incorporate in the TMFS System. To illustrate, and without limiting, Company's rights, Company may offer and sell the same goods and services as THE MUTUAL FUND STORES® from Company's Web Site.
C. Limitations.
1. Company grants Franchisee no rights other than the rights expressly stated in this Agreement. Franchisee's use of TMFS System or the Proprietary Marks for any purpose, or in any manner, not permitted by this Agreement shall constitute a breach of this Agreement.
2. Nothing in this Agreement (i) gives Franchisee the exclusive right to sell investment advisory services to persons who reside or work in the Territory; (ii) prohibits Franchisee from selling investment advisory services to persons who reside or work outside of the Territory; or (iii) prohibits Company, its Affiliates or other franchisees or licensees from selling investment advisory services to persons who reside or work inside or outside of the Territory; provided, however, Franchisee shall abide by the restrictions set forth in this Agreement on Local Advertisements and focus its client solicitation efforts on, and develop its client base from, persons who reside or work in the Territory.
3. Franchisee understands and agrees that TMFS System is a retail concept that relies on a physical place of business. Except as expressly authorized by Company in writing, Franchisee shall not offer or sell goods or services under the Proprietary Marks at or from any place except the Franchise Location, or at, from or through any channel of distribution of any kind whether now existing or later developed.
4. Nothing in this Agreement gives Franchisee the right to sublicense the use of the Proprietary Marks or TMFS System to others.
5. Nothing in this Agreement gives Franchisee the right to object to Company's award of franchise rights to others.
6. Nothing in this Agreement gives Franchisee an interest in Company or the right to participate in Company's business activities, investment or corporate opportunities.
7. Nothing in this Agreement authorizes Franchisee to use the Proprietary Marks on the World Wide Web, except on Franchisee's Web Page in accordance with this Agreement.
D. Improvements: Duty to Conform to Modifications.
1. Any improvements, modifications or additions which Company makes to TMFS System, or which become associated with TMFS System, including, without limitation, ideas suggested or initiated by Franchisee, shall inure to the benefit, and become the exclusive
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property, of Company. Franchisee hereby assigns to Company or its designee all intellectual property rights, including, without limitation, all copyrights, in and to any improvements or works which Franchisee may create, acquire or obtain in operating the Franchise Business. Franchisee understands and agrees that nothing in this Agreement shall constitute or be construed as Company's consent or permission to Franchisee modifying TMFS System. Any modification which Franchisee desires to propose or make to TMFS System shall require Company's prior written consent.
2. Any goodwill resulting from Franchisee's use of the Proprietary Marks or TMFS System shall inure to the exclusive benefit of Company. This Agreement confers no goodwill or other interest in the Proprietary Marks or TMFS System upon Franchisee, except a license to use the Proprietary Marks and TMFS System during the Term subject to the terms and conditions stated in this Agreement.
3. Franchisee understands and agrees that Company may modify TMFS System from time to time in its sole discretion as often as Company believes, in the exercise of reasonable business judgment, is necessary to best promote THE MUTUAL FUND STORES®, as a chain, to the public. Among other things, Franchisee understands and agrees that changes in TMFS System shall include, without limitation, changes that Company may make in the TMFS Select Funds. In the event of any change to TMFS System, Company shall give Franchisee written notice of the change. Franchisee shall, at its own cost and expense, promptly adopt all changes in TMFS System and use only those parts of TMFS System specified by Company and shall promptly discontinue the use of those parts of TMFS System which Company directs are to be discontinued. Franchisee shall not change, modify or alter TMFS System in any way, except as Company directs.
E. Deviations from TMFS System. Company, in its sole discretion, may allow other franchisees and licensees to deviate from TMFS System in individual cases. Franchisee understands and agrees that it has no right to object to any variances that Company may allow to itself, Company's Affiliates or other franchisees, and has no claim against Company for not enforcing the standards of TMFS System uniformly. Franchisee understands and agrees that Company has no obligation to waive, make any exceptions to, or permit Franchisee to deviate from the uniform standards of TMFS System. Any exception or deviation that Company allows Franchisee must be stated in writing and executed by Company in order to be enforceable against Company.
F. Additional Franchises.
1. Except as expressly set forth in this subparagraph, this Agreement does not grant Franchisee any implied or preferential right of any kind to acquire an additional franchise to operate another Franchise Business either within or outside the Territory.
2. Franchisee may apply in writing to purchase another franchise for a location within the Territory anytime after 2 years from the Opening Date if (i) the aggregate market value of the client accounts managed by the Franchise Business at the end of 2 years from the Opening Date, and on the date of Franchisee's application, is no less than the Minimum Asset Level; (ii) Franchisee is not in default under this Agreement at the time it submits its
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application; and (iii) Franchisee's application includes a comprehensive business plan that demonstrates that the Territory can support a second location and contains the information identified in the Manual including, without limitation, Franchisee's plan to staff, finance, and operate the second location, potential sites for the opening of a second location, existing and prospective clients who would be better served by a second location, competitors serving the Territory, and general marketing conditions. Company shall have sole discretion to approve Franchisee's business plan and to determine if the Territory can support a second THE MUTUAL FUND STORE® and that Franchisee has satisfied the other conditions set forth in this paragraph. Company shall notify Franchisee in writing within 30 days after Franchisee's application is complete of Company's approval or rejection of Franchisee's application, and Company's failure to give timely notice of approval shall constitute rejection. If Company approves Franchisee's application, the parties shall execute Company's then-current form of Franchise Agreement for the second location, which Franchisee understands may materially differ from this Agreement; provided, however, Company shall waive Franchisee's obligation to pay the Initial Franchise Fee for the second location set forth in Company's then-current Franchise Agreement.
III. TERM AND RENEWAL
A. Term. This Agreement shall begin on the Effective Date and shall expire without notice 5 years from the Effective Date, unless this Agreement is sooner terminated as provided herein (the 5-year period is referred to as the "Term").
B. Renewal Term. Provided Company is granting new franchises in the state where the Franchise Business is located at the time when Franchisee is permitted to exercise the renewal option granted by this Agreement, Franchisee may, at its option, renew the franchise for an additional 5 years (the "Renewal Term"), subject to complying with the following conditions:
1. Franchisee must give Company written notice of Franchisee's election to renew (the "Renewal Notice") at least 9 months, but not more than 12 months, before the end of the Term.
2. Franchisee must not be in default under this Agreement when it gives the Renewal Notice or on the first day of the applicable Renewal Term. Further, Franchisee must not have received more than 3 notices of default during any 24-month period during the Term.
3. Franchisee shall execute Company's then-current form of Franchise Agreement for a 5-year term, which agreement shall supersede this Agreement in all respects; provided, however, (i) Franchisee shall have no additional renewal rights even if the renewal Franchise Agreement provides for a renewal option; and (ii) Franchisee shall not be required to pay the Initial Franchise Fee stated in the renewal Franchise Agreement. Franchisee understands and agrees that the renewal Franchise Agreement may be materially different than this Agreement, including, without limitation, requiring payment of additional or different fees to Company.
4. Franchisee shall satisfy Company's then-current training requirements for renewing franchisees.
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Franchise Agreement-Exhibit C
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5. At Franchisee's sole expense, Franchisee shall conform the Franchise Business to Company's then current Appearance and Imaging Standards.
6. Franchisee shall execute and deliver a general release, in form satisfactory to Company, of any and all claims against Company, Company's Affiliate and their respective officers, directors, shareholders, members, managers, employees and agents.
C. Additional Location. As an additional condition to exercising the renewal option, Franchisee understands and agrees that Company may, in its sole discretion, require Franchisee to open an additional location in the Territory, in which case each location shall be treated as a separate franchise and Franchisee shall execute a separate then-current form of Franchise Agreement for each one.
D. Ineffective Exercise of Renewal Option. Franchisee's failure to deliver the agreements and release required by this Paragraph within 30 days after Company delivers them to Franchisee shall be deemed an election by Franchisee not to exercise the renewal option.
E. Extension. If Company is in the process of revising, amending or renewing its franchise disclosure documents or registration to sell franchises in the state where the Franchise Business is located, or, under Applicable Law, cannot lawfully offer Franchisee its then-current form of Franchise Agreement at the time Franchisee delivers the Renewal Notice, Company may, in its sole and absolute discretion, offer to extend the terms and conditions of this Agreement on a day-to-day basis following the expiration of the Renewal Term for as long as Company deems necessary so that Company may lawfully offer its then-current form of Franchise Agreement; provided, however, nothing in this Paragraph shall require Company to extend this Agreement if, at the time Franchisee delivers the Renewal Notice (i) Company is not granting new franchises in the state where the Franchise Business is located, or (ii) Franchisee is in default under this Agreement.
IV. FRANCHISE LOCATION: DEVELOPMENT: OPENING DATE.
A. Designation of Franchise Location. If the parties agree upon the site for the Franchise Location on or before the Effective Date, they shall complete Exhibit A on the Effective Date to set forth its street address. Otherwise, Franchisee shall select the Franchise Location, subject to Company's approval, pursuant to the procedures stated in this Paragraph.
B. Selection of Franchise Location.
1. Franchisee shall be solely responsible for identifying and evaluating one or more potential sites in the Territory for the Franchisee Business meeting Company's demographic and physical criteria set forth in the Manual.
2. To obtain Company's approval of a proposed site, Franchisee shall submit a written site proposal to Company in the form required in the Manual. Franchisee's written site proposal may identify up to 3 potential locations ranked in order of preference. For each site proposed, Franchisee shall include a letter of intent or other evidence satisfactory to Company which confirms the owner of the proposed location's willingness to offer Franchisee a lease and to execute the Addendum to Lease.
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3. Following receipt of Franchisee's written site proposal Company may, in its sole discretion, visit the Territory if it believes doing so would assist it evaluate the written site proposal, the demographic conditions of the surrounding area, and the physical characteristics of each proposed site.
4. Company shall have 21 days following receipt of Franchisee's completed site proposal in which to notify Franchisee in writing of Company's approval or disapproval of the site proposal (or, if Franchisee proposes multiple locations, which, if any, location Company approves). Company's failure to give timely notice of approval shall constitute Company's disapproval of all sites proposed by Franchisee. If Franchisee proposes more than one site, Company need only approve one site, or it may disapprove all proposed sites. If Company approves Franchisee's site proposal, Exhibit A shall be deemed to be automatically amended by the parties to reflect the approved site's street address.
5. If Franchisee fails to obtain Company's site approval by the end of the Site Approval Period, Company may terminate this Agreement in accordance with this Agreement.
6. Franchisee understands and agrees that Company's approval of a site does not guaranty or warrant that operation of the Franchise Business at the site will be successful or profitable or that Franchisee's development, use or occupancy of the site as a THE MUTUAL FUND STORE® will conform to Applicable Law, but signifies only that the proposed site meets Company's site criteria.
C. Lease: UCC Financing Statement. Within 30 days after the Franchise Location Approval Date, Franchisee shall deliver to Company a conformed copy of (i) the Lease and Company's form of Addendum to Lease each duly executed by Franchisee and the owner or master landlord of the Franchise Location; and (ii) an original UCC-1 executed by Franchisee in favor of Company as the secured party identifying as collateral the Franchise Business assets in form satisfactory to Company which Franchisee certifies has been duly recorded under Applicable Law.
D. Relocation.
1. If (i) the Lease expires or terminates for reasons other than Franchisee's breach; (ii) the Franchise Location or building in which the Franchise Business is located is destroyed, condemned or otherwise rendered unusable; or (iii) the parties mutually believe that relocation will increase the business potential of the Franchise Business, Franchisee shall relocate the Franchise Business, at Franchisee's sole expense, to a new location within the Territory that Franchisee selects, subject to Company's approval, to be selected and obtained in accordance with Company's then-current site selection procedures specified in the Manual. The parties agree that if Company approves the new location, Exhibit A shall automatically be amended by the parties to reflect the street address of the new location.
2. At Franchisee's sole expense, Franchisee shall construct and develop the new premises to conform to Company's then-current Appearance and Imaging Specifications for
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Franchise Agreement-Exhibit C
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new THE MUTUAL FUND STORES®, and remove any signs or other property from the old premises that identified the old premises as belonging to TMFS System.
3. Franchisee shall complete relocation without any interruption in the continuous operation of the Franchise Business unless Company's prior written consent is obtained. In the event Company consents to a disruption in operations and operations cease, then Franchisee agrees that, until operations resume at the new location, the term of this Agreement shall not be abated. Relocation shall not excuse Franchisee from obligations for Royalty Fees or Advertising Fees, if any, during the period of closure.
E. Appearance and Imaging Specifications. At Franchisee's sole expense, Franchisee shall retain the services of licensed and qualified construction and design personnel to assist Franchisee adapt the Franchise Location to Company's current Appearance and Imaging Specifications set form in the Manual. Franchisee shall procure and install all items and shall not make any material alterations without first submitting the proposed changes to Company for its approval. Franchisee shall cause all construction and development work to conform with the Lease and Applicable Law, including, without limitation, all government and utility permit requirements (such as, for example, zoning, sanitation, building, utility and sign permits). Franchisee shall complete development of the Franchise Location diligently, expeditiously and in a first-class manner. Franchisee understands and agrees that:
1. Franchisee is solely responsible for selecting competent construction and design personnel, for supervising their performance, and for their acts and omissions. Franchisee shall obtain all customary contractors' lien waivers for the work performed.
2. Company shall have access to the Franchise Location to inspect the work and performance by Franchisee's construction and design personnel. Company's inspection is not for purposes of reviewing or certifying that development is in compliance with the Lease or Applicable Law, but solely to evaluate that development conforms with Company's current Appearance and Imaging Specifications.
3. Franchisee may not open the Franchise Location for business to the public under the Proprietary Marks unless and until the Franchise Location conforms to Company's current Appearance and Imaging Specifications.
F. Opening Date Deadline. As a material condition of this Agreement, Franchisee shall complete development of the Franchise Location in accordance with this Agreement as expeditiously as possible and open for business to the public by no later than 90 days after the Franchise Location Approval Date. Company shall extend the Opening Date deadline if Company determines that the Franchise Location's opening has been, or will be, delayed due to an event of Force Majeure, in which case Company shall promptly determine the new Opening Date deadline in its sole discretion and notify Franchisee of the new deadline in writing.
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V. TRAINING
A. Initial Training Program.
1. As of the Effective Date, Company's initial training program consists of two parts: (i) 5 days of instruction at a mutually scheduled time before the Opening Date, at an operating THE MUTUAL FUND STORE® that Company designates, in TMFS System and other regulatory, operational and administrative subjects ("Part 1 Training"); and (ii) 5 days of on-site instruction at the Franchise Location at a mutually scheduled time during a period that is before or includes the Opening Date ("Part 2 Training").
2. Company shall not charge a fee to provide the initial training program once, before and in connection with the opening of the Franchise Business, regardless of the number who attend on Franchisee's behalf; provided that, except for Franchisee's Principal and any senior management who attend the initial training program, all other enrollees must be IARs.
3. If Franchisee is a business entity, Franchisee's Principal or a member of Franchisee's senior management must successfully complete both Part 1 Training before the Opening Date and Part 2 training in connection with opening of the Franchise Business. If neither one is designated as Franchisee's initial Supervising IAR, a second person who will be Franchisee's Supervising IAR shall successfully complete the same initial training program with Franchisee's Principal or a member of Franchisee's senior management.
4. All IARs who will render services on or after the Opening Date must, at a minimum, successfully complete that portion of Part 1 Training which Company specifies for IARs. Company will not impose a fee for providing Part 1 Training to IARs who attend training with Franchisee's Principal or a member of Franchisee's senior management before the Opening Date. IARs who enroll in all, or the IAR portion, of Part 1 Training after the Opening Date will be charged Company's then-current per person training fees stated in the Manual, which Franchisee must pay before the IAR begins Part 1 Training.
5. After the Opening Date, if Franchisee desires to qualify an IAR as a Supervising IAR and the IAR has not previously successfully completed the entire Part 1 Training program, Franchisee must enroll the IAR in the next available Part 1 Training program and pay Company's then-current per person training fees stated in the Manual before Part 1 Training begins.
6. Company may modify the initial training program at any time without notice, and has sole discretion over the content, duration, manner of, and charges for, the initial training program.
B. Additional Training.
1. Franchisee may request additional training and on-site assistance after the Opening Date. Franchisee understands and agrees that all additional training shall be at mutually scheduled times, subject to space availability and Company's other training commitments, and that, as a condition to receiving additional training, Franchisee must pay Company's then-current per person training fees stated in the Manual. In connection with additional on-site instruction,
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Franchisee shall also reimburse Company for its reasonable travel-related expenses, including, without limitation, expenses for air and ground transportation, lodging, meals, and personal charges.
2. Company may require that Franchisee's Principal or a member of Franchisee's senior management, and, if that person is not an IAR, Franchisee's Supervising IAR, attend specified additional training programs; provided, however, Company shall not require that more than 2 persons designated by Company complete more than one additional training program of up to 3 days during any 12-month period. As a condition to completing mandatory additional training, Franchisee shall pay Company's then current per person training fees.
3. If Company consents to Franchisee's transfer of the franchise in accordance with the procedures set forth in this Agreement, Company agrees, in consideration of Franchisee's payment of the transfer fee identified in this Agreement, to provide an initial training program to the proposed transferee without requiring payment of training fees for such training; provided, however, Franchisee or the proposed transferee shall be solely responsible for all personal expenses, including, without limitation, costs for air and ground transportation, lodging, meals, personal expenses and salaries, for the proposed transferee's employees and others who attend the initial training program on its behalf. Other than the proposed transferee's principal and senior management, all enrollees must be IARs.
C. Additional Provisions.
1. Company shall schedule all training, including, without limitation, on-site assistance, and may limit attendance at any training program due to space availability.
2. Franchisee understands and agrees that (i) it is solely responsible for all personal expenses that it and its staff incur to attend any and all training provided by Company whether before or after the Opening Date, including, without limitation, costs for air and ground transportation, lodging, meals, personal expenses and salaries, and (ii) Company shall pay no compensation for any services performed by trainees in connection with any training program provided by Company.
VI. PROPRIETARY MARKS
A. Ownership.
1. Franchisee understands and agrees that, as between the parties, Company owns the Proprietary Marks and TMFS System, and Franchisee owns no rights in the Proprietary Marks or the TMFS System, except for the license granted by this Agreement.
2. Franchisee shall not contest, or assist any other Person to contest, the validity of Company's rights and interest in the Proprietary Marks or TMFS System, either during the Term or after this Agreement terminates or expires.
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B. Use of Proprietary Marks and TMFS System.
1. In operating the Franchise Business, Franchisee shall (i) use only the Proprietary Marks and elements of TMFS System designated by Company and only in the manner authorized and permitted by Company; (ii) use the Proprietary Marks only to operate the Franchise Business and in connection with no other activities; (iii) display notices of trademark and service mark registrations in the exact manner that Company specifies; (iv) obtain fictitious or assumed name registrations as required by Applicable Law; and (v) prominently post notices to inform clients and the general public that Franchisee is the independent owner of the Franchise Business which it operates under license from Company.
2. Franchisee shall not use any of the Proprietary Marks or any part thereof: (i) if a business entity, in its corporate or legal name; (ii) with any prefix, suffix or other modifying words, terms, designs, colors or symbols; (iii) in any modified form; (iv) in connection with the sale of any unauthorized products or services; (v) in any manner not expressly authorized in writing by Company; or (v) in any manner that may result in Company's liability for Franchisee's debts or obligations.
3. Company reserves the right to: (i) modify or discontinue licensing any of the Proprietary Marks; (ii) add new names, marks, designs, logos or commercial symbols to the Proprietary Marks and require that Franchisee use them; and (iii) require that Franchisee introduce or observe new practices as part of TMFS System in operating the Franchise Business. Franchisee understands and agrees that the term "Proprietary Marks" means the specific names, marks, designs, logos or commercial symbols licensed by Company at any given point in time, subject to Company's right to impose changes. Franchisee shall comply, at Franchisee's sole expense, with Company's directions regarding changes in the Proprietary Marks and TMFS System within a reasonable time after written notice from Company. Company shall have no liability to Franchisee for any cost, expense, loss or damage that Franchisee incurs in complying with Company's directions and conforming to required changes.
4. Franchisee understands and agrees that any unauthorized use of the Proprietary Marks or TMFS System by Franchisee shall constitute both a breach of this Agreement and an infringement of Company's intellectual property rights.
C. Defense of Proprietary Marks and TMFS System.
1. As between the parties, Company shall have the sole right to handle disputes with third parties concerning Company's ownership of, rights in, or Franchisee's use of, the Proprietary Marks or TMFS System.
2. Franchisee shall immediately notify Company in writing if Franchisee receives notice, or is informed, of any: (i) improper use of any of the Proprietary Marks or elements of TMFS System; (ii) use by any third party of any mark, design, logo or commercial symbol which, in Franchisee's judgment, may be confusingly similar to any of the Proprietary Marks; (iii) use by any third party of any business practice which, in Franchisee's judgment, unfairly simulates TMFS System in a manner likely to confuse or deceive the public; or (iv)
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claim, challenge, suit or demand asserted against Franchisee based upon Franchisee's use of the Proprietary Marks or TMFS System.
3. Company shall have sole discretion to take such action as it deems appropriate, including, without limitation, to take no action, and the sole right to control any legal proceeding or negotiation arising out of any infringement, challenge or claim or otherwise relating to the Proprietary Marks or TMFS System.
4. Franchisee shall not settle or compromise any claim, suit or demand asserted against it and agrees to be bound by Company's decisions in handling disputes regarding the Proprietary Marks and TMFS System. Franchisee shall cooperate fully with Company and execute such documents and perform such actions as may, in Company's judgment, be necessary, appropriate or advisable in the defense of such claims, suits or demands and to protect and maintain Company's rights in the Proprietary Marks and TMFS System.
5. Unless it is established that a third party claim asserted against Franchisee is based, directly or indirectly, upon Franchisee's misuse of the Proprietary Marks or TMFS System, Company agrees to defend Franchisee against the third party claim, provided Franchisee has notified Company immediately after learning of the claim and fully cooperates in the defense of the action. Because Company will defend the third party claim, Franchisee is not entitled to be reimbursed for legal or other professional fees or costs paid to independent legal counsel or others in connection with the matter that Franchisee elects to retain. With respect to any claim for which Company defends Franchisee, Company agrees (i) to indemnify and hold Franchisee harmless from any damage or award which Franchisee is held liable to pay to a third party arising from Franchisee's use of the Proprietary Marks in accordance with this Agreement, and (ii) to reimburse Franchisee for costs or expenses to adopt new Proprietary Marks in accordance with a court order or settlement of the third party claim; provided, however, nothing in this Agreement obligates Company to indemnify Franchisee for its lost profits or consequential damages of any kind arising from the third party claim or the duty to adopt new Proprietary Marks.
VII. MANUAL
A. Loan. Company will loan Franchisee one copy of its current Manual for as long as this Agreement is in effect, and Franchisee shall use the Manual subject to the terms of this Agreement. The Manual is, and at all times shall remain, Company's sole property. Franchisee shall promptly return the Manual to Company upon expiration, termination or an assignment of this Agreement.
1. Franchisee shall treat all information contained in the Manual as confidential, and shall use all reasonable efforts to keep the information secret. Franchisee shall not, without Company's prior written consent, copy, duplicate, record or otherwise reproduce the Manual, in whole or in part, or otherwise make it available to any Person not required to have access to its contents in order to carry out his or her employment functions. At all times that the Manual is not in use by authorized personnel, Franchisee shall keep the Manual in a locked receptacle at the Franchise Location and shall only grant authorized personnel, as defined in the Manual, access to the key or lock combination of the receptacle.
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2. The Manual contains both mandatory and recommended specifications, standards, procedures, rules and other information pertinent to TMFS System and Franchisee's obligations under this Agreement. The Manual, as modified by Company from time to time, is an integral part of this Agreement and all provisions now or hereafter contained in the Manual or otherwise communicated to Franchisee in writing are expressly incorporated in this Agreement by this reference and made a part hereof. Franchisee shall fully comply with all mandatory requirements now or hereafter included in the Manual, and understands and agrees that a breach of any mandatory requirement shall constitute a breach of this Agreement and grounds for termination.
B. Updating. Company reserves the right to modify the Manual from time to time to reflect changes that it may implement in the mandatory and recommended specifications, standards and operating procedures of TMFS System. All revisions will be reflected in written supplements to the Manual or in other written communications delivered to Franchisee, and each supplement or communication shall become effective upon receipt or on the later date specified in the writing. Franchisee shall insert any updated pages in its copy of the Manual upon receipt and remove superseded pages and return them to Company within 5 days following receipt. Franchisee shall immediately conform its operations to all revisions in mandatory specifications, standards, operating procedures and rules prescribed by Company.
C. Lost or Destroyed Manual. Franchisee shall promptly notify Company if any volume or part of its copy of the Manual is lost or destroyed for any reason. Provided (i) the loss is not the result of Franchisee's breach of its duty to keep the contents of the Manual confidential, and (ii) Franchisee is not otherwise in default under this Agreement, Company shall furnish Franchisee with the needed replacement copy or portion of the current Manual. Franchisee shall pay Company a replacement fee of $500, plus all shipping expenses, in full within 10 days following receipt of invoice. If either (i) or (ii) is not satisfied, Company may terminate this Agreement on account of the loss or destruction of the Manual or any portion thereof.
VIII. CONFIDENTIAL INFORMATION
A. Terms of Use. Company will disclose Confidential Information to Franchisee in furnishing Franchisee with the Manual and otherwise through the performance of Company's obligations and the exercise of its rights under this Agreement. Franchisee shall acquire no interest in Confidential Information, other than a license to utilize it in the operation of the Franchise Business subject to the terms of this Agreement.
1. Franchisee's use, publication or duplication of Confidential Information for any purpose not authorized by this Agreement constitutes an unfair method of competition by Franchisee and, additionally, grounds for termination of this Agreement.
2. Pursuant to this Agreement, Franchisee shall deliver to Company a separate Confidentiality, Non-Disclosure and Non-Competition Agreement in the form required by Company, executed by Franchisee and by each Person who is now, or during the Term becomes, a Covered Person.
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3. Franchisee agrees to: (i) confine disclosure of Confidential Information to those of its employees and agents who require access in order to perform the functions for which they have been hired or retained; and (ii) observe and implement reasonable procedures prescribed from time to time by Company to prevent the unauthorized or inadvertent use, publication or disclosure of Confidential Information including, without limitation, requiring that employees with access to Confidential Information, who are not otherwise required to sign a Confidentiality, Non-Disclosure and Non-Competition Agreement, execute Company's current form of Confidentiality, Non-Disclosure and Non-Competition Agreement with Franchisee. Upon request from Company, Franchisee shall deliver to Company a copy of each executed Confidentiality, Non-Disclosure and Non-Competition Agreement for its records.
4. Company may terminate this Agreement if Franchisee, or any Person required by this Agreement to execute a Confidentiality, Non-Disclosure and Non-Competition Agreement with Company or Franchisee, breaches the Confidentiality, Non-Disclosure and Non-Competition Agreement.
5. All agreements contained in this Agreement pertaining to Confidential Information shall survive the expiration, termination or Franchisee's assignment of this Agreement.
6. The provisions concerning non-disclosure of Confidential Information shall not apply if disclosure of Confidential Information is legally compelled in a judicial or administrative proceeding, provided Franchisee shall have used its best efforts, and shall have afforded Company the opportunity, to obtain an appropriate protective order or other assurance satisfactory to Company of confidential treatment for the information required to be disclosed.
B. Extraordinary Relief. Franchisee understands and agrees that Company will suffer irreparable injury not capable of precise measurement in money damages if Franchisee breaches the terms of use of Confidential Information and, as a result, Confidential Information is, or may be, obtained by any Person, firm or corporation and is, or could be, used to compete with Company, another franchisee or otherwise in a manner adverse to Company's interests. Accordingly, in the event of a breach or threatened breach of any provision regarding use of Confidential Information, Franchisee, on behalf of itself and each Covered Person, hereby consents to entry of a temporary restraining order or other injunctive relief as well as to any other equitable relief which may be granted by a court having proper jurisdiction, without the requirement that Company post bond. Franchisee further agrees that the award of equitable remedies to Company in the event of such breach is reasonable and necessary for the protection of the business and goodwill of Company.
C. Assignment of Copyrights.
1. Franchisee and Company acknowledge that, during the Term, Company may authorize Franchisee to use certain works in operating the Franchise Business for which Company or Company's Affiliate own a copyright, or own a license to use a copyrighted work granted by a third party (collectively referred to as the "Copyrighted Works"); the Copyrighted Works are, and shall remain, valuable property of Company; and Franchisee shall acquire no interest in the Copyrighted Works, other man a license to use those Copyrighted Works that
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Company designates in the operation of the Franchise Business subject to the terms of this Agreement.
2. Franchisee understands and agrees that the Copyrighted Works may include, without limitation, the Manual, advertising and promotional materials supplied by Company, proprietary software, and other categories of works eligible for protection under federal copyright laws that are created by or for Company or Company's Affiliate and are designated by Company for use in connection with operating a THE MUTUAL FUND STORE®.
3. To the extent Franchisee creates, or arranges to have created for Franchisee's benefit, any improvement or work eligible for protection under federal copyright laws, Franchisee shall execute, or have the creator execute, all documents necessary to assign all intellectual property and ownership rights, including (without limitation) all copyrights, to Company. Franchisee understands and agrees that the consideration for the assignment is the grant of the franchise to Franchisee.
4. Franchisee understands and agrees that nothing in this Agreement shall constitute or be construed as Company's consent to Franchisee modifying, or creating any derivative work based upon, any of the Copyrighted Works. Franchisee must obtain Company's prior written consent before modifying or creating, directly or indirectly, any type of derivative work based on any Copyrighted Works.
IX. ADVERTISING
A. General Restrictions.
1. Franchisee shall not engage in any activity that solicits or recruits new clients by primarily targeting prospects who reside or work outside of the Territory.
2. Franchisee shall not advertise or market the Franchise Business in any media (print, broadcast, electronic, or otherwise) which predominately circulates, airs, is distributed or is otherwise directed to persons who reside or work outside of the Territory unless the Local Advertisement clearly expresses Franchisee's intention to direct the solicitation to persons who reside or work in the Territory.
B. Local Advertisements.
1. Company shall provide Franchisee with written guidelines for Local Advertisements. Franchisee shall not use, disseminate, broadcast or publish any Local Advertisements without first obtaining Company's written approval of the copy, proposed media, method of distribution and marketing plan for the proposed Local Advertisements.
2. To apply for Company's approval, Franchisee shall submit a true and correct copy, sample or transcript of the proposed Local Advertisements, a written business plan which explains the proposed promotional event or use of the Local Advertisements, and any additional information material to the proposal disclosing Franchisee's intended use of the proposed Local Advertisements. Company shall have 30 days from the date of receipt in which
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to approve or disapprove of the submitted materials. If written approval is not received by the end of 30 days, Company shall be deemed to have disapproved the proposed Local Advertisements. If Company issues written approval, Franchisee may use the proposed Local Advertisements, but only in the exact form submitted to Company. Submission of proposed Local Advertisements to Company for approval shall not be for purposes of allowing Company to approve the Management Fees that Franchisee charges its clients.
3. Franchisee shall maintain white and yellow page listings for the Franchise Business in the form approved by Company, in one or more telephone directories in the Territory which Company designates. All telephone directory advertising shall be considered Local Advertisements, subject to Company's prior approval.
4. By no later than the 20th day of each month after the Opening Date, Franchisee shall submit to Company a Local Advertisement Expense Report, in the manner set forth in the Manual, together with appropriate documentation to substantiate Franchisee's expenditures for Local Advertisements during the prior month or partial period.
C. Advertising Minimum; Broadcast Advertising Minimum.
1. Beginning with the first lull calendar month after the end of the first Operating Year, and for every trailing 12-month period for the remainder of the Term, Franchisee shall spend no less than the Advertising Minimum on Local Advertisements.
2. Franchisee shall have discretion in spending the Advertising Minimum on Local Advertisements; provided, however, for every trailing 12-month period, Franchisee shall spend no less than the Broadcast Advertising Minimum to purchase advertising airtime from the radio station that broadcasts THE MUTUAL FUND SHOW in the Territory.
3. In determining if Franchisee has spent the Advertising Minimum in any trailing 12 month period, Company shall (i) compare Franchisee's expenditures on Local Advertisements during the trailing 12 month period with Franchisee's aggregate Management Revenue for the same 12 month period; (ii) credit Franchisee only with expenses that Franchisee can substantiate it paid directly for production and media costs for approved Local Advertisements during the trailing 12 month period; and (iii) exclude Franchisee's general overhead expenses.
4. In determining if Franchisee has spent the Broadcast Advertising Minimum for any period, Company shall credit Franchisee only with expenses that Franchisee can substantiate it paid directly to the radio station that broadcasts THE MUTUAL FUND SHOW in the Territory for the purchase of advertising air time.
5. Franchisee's obligation to spend the Broadcast Advertising Minimum shall be suspended during the period, if any, that live broadcast of THE MUTUAL FUND SHOW in the Territory ceases for any reason other than due to Franchisee's breach of this Agreement. However, the presence or absence of live broadcast of THE MUTUAL FUND SHOW in the Territory during the Term shall not modify the provisions of this Agreement pertaining to the Advertising Minimum.
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The original documents were scanned as an image. The original file can be downloaded at the link above.