Franchise Agreement
The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample Franchise Agreement
PACIUGO FRANCHISING LP FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT ("Agreement"), dated and effective as of the Effective Date specified on the signature page of this Agreement (the "Effective Date") is between PACIUGO FRANCHISING LP, a Texas limited partnership ("we" or "us"), as franchisor, and the person or entity identified on the signature page of this Agreement, as franchisee ("you"). Exhibit D to this Agreement is an Index of Defined Terms, which shows the sections in this Agreement where each relevant term is defined. In consideration of the following mutual promises, the parties agree as follows:
SECTION 1: GRANT
1.1 Grant of Franchise. By virtue of a license from Paciugo Properties LLP, we have the right to use and to license to our franchisees a proprietary and distinctive system relating to the establishment and operation of outlets engaged in the retail sale of gelato, and other food items, beverage items, and other products, and in gelato catering services (the "System"). We also have the right to use and to license to our franchisees certain service marks, trademarks, trade names, trade dress, logos, slogans and commercial symbols used to identify the outlets or particular products and services offered (collectively, the "Marks"). Subject to all of the terms and conditions of this Agreement, we grant to you and you accept the franchise and license (the "Franchise") to use the Marks and the System in the establishment and operation of a Paciugo gelato shop ("Unit" or "Franchised Business"), beginning on the Effective Date and ending on the expiration or termination of this Agreement.
1.2 Trade Name. You will operate the Franchised Business under the trade name "Paciugo," or other trade name that we expressly authorize in writing. You will not adopt alternative, additional or secondary trade names unless you have our prior express written consent.
1.3 Approved Location. The Franchise granted by this Agreement is limited to a single Unit at the specific location ("Approved Location") set forth on Exhibit A, and for the type of Unit (stand-alone or kiosk) set forth on Exhibit A. The Unit must be located at the Approved Location. If a particular site has not been selected and approved at the time of execution of this Agreement, Exhibit A will describe the Approved Location in general terms. In that case, after we have approved a location for your Unit, the specific address of that location will automatically become the Approved Location as if originally set forth in Exhibit A instead of the general description. Other than in connection with approved catering operations pursuant to the System, you have no rights under this Agreement to use, and you will not use, the System or Marks at any other location, without our prior express written consent. You will not relocate the Unit without our prior express written consent.
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1.4 Territory.
(a) Protected Territory. During the term of this Agreement, neither we nor any of our affiliates will establish or operate, or franchise any entity to establish or operate, a Unit using the Marks and System at any location within the market area ("Protected Territory") set forth on Exhibit A, subject to certain exceptions below. If a particular site has not been selected and approved at the time of execution of this Agreement, Exhibit A will describe the Protected Territory in general terms. In that case, we may unilaterally substitute a more detailed description of the relevant market area after we have approved a location for your Unit, and, if we do, the detailed description will automatically become the Protected Territory as if originally set forth in Exhibit A in place of the general description. You acknowledge and agree that the Franchise is nonexclusive. Other than the limited rights expressly granted to you under this Agreement in the Protected Territory, we (on behalf of our affiliates and us) reserve all rights to use the Marks and System, including the following rights, in any manner and on any terms and conditions we deem advisable, and without granting you any rights, accommodation or compensation:
(1) to own, acquire, establish and/or operate, and license others to establish and operate, businesses using the Marks and System outside the Protected Territory (even if there may be some impact to your business within the Protected Territory);
(2) to own, acquire, establish and/or operate, and license others to establish and operate, businesses under other proprietary marks or other systems, at any location within or outside the Protected Territory (even if these businesses are in competition with you);
(3) to sell or distribute, at retail or wholesale or otherwise, directly or indirectly, or license others to sell or distribute, any products which bear any proprietary marks, including the Marks, outside the Protected Territory;
(4) to wholesale products, to own, acquire, establish and/or operate, and license others to establish and operate, businesses using any proprietary marks or systems (including the Marks and System) at any airport, train station, other transportation facility, arena, ballpark, stadium, racetrack, other sports facility, theater, auditorium, concert hall, theme park, amusement park, cruise ship, casino, or other entertainment facility, or within any grocery store, within or outside the Protected Territory; and
(5) to acquire, or be acquired by, any competing system, including a competing system that has one or more units within your Protected Territory.
(b) Catering Territory. If you choose to offer catering services, we will assign to you a territory in which you will be authorized to offer and provide catering services under the System ("Catering Territory"). You have no rights under this Agreement to offer or provide, and you will not offer or provide, catering services outside your
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Catering Territory, without our prior express written consent. You acknowledge and agree that we may unilaterally reduce or otherwise adjust your Catering Territory at any time, effective upon written notice to you.
1.5 Franchised Business and System Standards. The Franchise granted by this Agreement is limited to the operation of a Unit in strict accordance with the provisions of this Agreement and the standards we specify in writing, as they may be periodically amended, modified, supplemented or deleted, which we impose on our franchisees in connection with participation in the System, including all mandatory and suggested specifications, policies, rules, designs, layouts, techniques and procedures we promulgate about System operation or usage (collectively, the "System Standards"). You have no rights under this Agreement to use, and you will not use, the System, Marks or Unit premises in connection with any other business, activities, or unapproved products or services. You acknowledge and agree that, because absolute uniformity is not possible, we have the right to vary standards for any franchisee based on particular circumstances without granting any other franchisee similar variances. The Franchise granted by this Agreement is limited to the selling of the approved products and services at retail. You have no rights under this Agreement to sell, and you will not sell, any products at wholesale or to any purchaser whom you know (or have reasonable grounds to suspect) intends to resell the products.
1.6 Initial Term. The initial term of this Agreement begins on the Effective Date and will be continue for a term of 10 years, unless terminated sooner by either party. You have no rights under this Agreement to use, and you will not use, the System or Marks after expiration or termination of this Agreement. Some of your duties and obligations under this Agreement will survive after expiration or termination of this Agreement.
1.7 Renewal Option. You have the option to renew the Franchise for up to 2 additional terms of 5 years each, if you satisfy each of the following conditions:
(a) At least 6 months (but no more than 9 months) before the end of the initial term or the first renewal term, as the case may be, you must give us written notice of your desire to renew, and you must pay us a renewal fee of $15,000.
(b) At least 2 months (but no more than 6 months) before the end of the initial term or the first renewal term, as the case may be, you must upgrade your Unit to make it consistent with the then-current System Standards for new Units.
(c) At the time that you give us your renewal notice and at the end of the initial term or the first renewal term, as the case may be, you must not be in default of any provision of this Agreement or any other agreement you have with us or any of our affiliates, and you must have substantially complied with all the provisions of this Agreement and any other relevant agreements during their respective terms.
(d) At least 1 month before the end of the initial term or the first renewal term, as the case may be, you must sign the then-current version of our franchise agreement,
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which will completely supersede this Agreement. The provisions of that agreement may be significantly different from the provisions of this Agreement, and they might not be as favorable to you; however, you will not be required to pay the then-current initial franchise fee, the initial term of the renewal agreement will be for 5 years, and there will not be any additional options to renew the Franchise (other than the 2 option periods originally granted by this Agreement).
(e) At the end of the initial term or the first renewal term, as the case may be, you (and your Manager, if we require) must satisfy our then-current qualification and training requirements.
(f) At least 1 month before the end of the initial term or the first renewal term, as the case may be, you (and your owners, if we require) must sign and deliver to us a general release in a form we provide of all claims you may have against us and any of our affiliates (and their respective officers, directors, partners, owners, agents, and employees).
1.8 Owner Agreement. To induce us to enter into this Agreement, you must have each of your owners sign and deliver to us the Owner Agreement in the form attached as Exhibit C ("Owner Agreement"), if you are an entity.
SECTION 2: LOCATION AND LEASE
2.1 Site Selection. You are responsible for locating and leasing a suitable site for the Unit. Before leasing or purchasing space for your Unit, you must: submit to us a written description of the proposed site for our approval; provide to us other information regarding the proposed site according to the System Standards or as we reasonably request; and verify to us in writing that the proposed site meets our site selection criteria. We will then approve or disapprove the proposed site. If we disapprove the proposed site, you must select an alternate site and repeat the site approval process until we approve a proposed site for your Unit. You acknowledge and agree that our approval of a site does not constitute a representation or warranty that the proposed site will be a profitable location for your Unit.
2.2 Lease Provisions. If you will be leasing the approved site, we require that certain provisions be in your written lease agreement for our protection. You must provide us with a copy of your proposed lease agreement for approval before you sign it. You will not sign the proposed lease agreement until after you have our express written approval. All leases relating to the Unit's premises must contain the following provisions in contractual language acceptable to us:
(a) The use of the leased premises will be restricted solely to the operation of a Unit.
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(b) The landlord, upon termination or expiration of the lease, consents to your removal (at your own expense) of the exterior and interior signs and trade fixtures, so long as you make repairs caused by the removal of these things.
(c) The landlord agrees to provide to us (at the same time they are sent to you) a copy of all lease amendments and assignments, and a copy of all letters and notices sent to you relating to your lease or the leased premises.
(d) We will have the right to enter the leased premises to make any modifications or alterations, at our own cost, necessary (in our opinion) to protect the System and the Marks and to cure, within the time periods provided by the lease, any default under the lease, all without being guilty of trespass or other tort.
(e) You may assign the lease to us (or our designee) with the landlord's consent (which consent will not be unreasonably withheld) and without payment of any assignment fee or similar charge or increase in any rent.
(f) The landlord agrees that, before the effective date of any assignment of the lease to us (or our designee), you will be solely responsible for all obligations, debts and payments under the lease.
(g) The landlord agrees not to amend or otherwise modify the lease in any manner that would affect any of the foregoing requirements without our prior written consent (which will not be unreasonably withheld).
(h) The total possible term of the lease (including the initial term and all renewal terms that are at your option) must be for at least 10 years.
This provision will not apply to any kiosk Unit to be located in a space that you already own or lease in connection with an existing business.
2.3 Buildout. Promptly after obtaining possession of the approved site for the Unit, you will: (a) select and submit to us for our approval a qualified architect and general contractor, if required for your Unit type; (b) following our approval, retain the services of the approved architect and approved contractor, if required for your Unit type; (c) have prepared and submit to us plans for the buildout of the site using our standard Unit plans and consistent with the System Standards and applicable law; (d) obtain all required permits, licenses, and zoning variances; (e) purchase all required equipment, furnishings, fixtures, signs (including menu boards) and decor as required by this Agreement and the System Standards; (f) complete the construction, buildout, and/or remodeling of the Unit premises consistent with the approved plans, the System Standards, and applicable law; (g) obtain al! customary contractors sworn statements and waivers of liens; (h) install all necessary equipment, furnishings, fixtures, signs (including menu boards) and decor; and (i) otherwise have the Unit ready to open for business as required by this Agreement and the System Standards. You may not deviate from our System Standards relating to plans, layout, equipment, furnishings,
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fixtures, signs (including menu boards) or decor, or otherwise relating to the appearance and other aesthetics of your Unit, unless you have our prior express written consent.
2.4 Alteration. You will not make any material alteration to the Unit's premises, equipment, furnishings, fixtures, signs (including menu boards) or decor without our prior express written approval.
SECTION 3: YOUR OPERATING OBLIGATIONS
3.1 Management. At all times during the term of this Agreement, you will employ a manager who will meet our educational, managerial and business experience standards, and who will devote full time, energy, attention and best efforts to the management and operation of the Unit ("Manager"). If you are an individual, you may serve as the Manager. You will designate to us in writing the identity of your initial Manager within 2 months after the Effective Date of this Agreement, and you will designate to us in writing the identity of each successor Manager as soon as possible after the prior Manager ceases to serve as Manager.
3.2 Opening the Unit. Unless we agree in writing to a later opening date, you will open the Unit and begin business within 6 months after the Effective Date of this Agreement. Before opening, you will complete all necessary construction and build out of the Unit, including installation of furnishings, fixtures, equipment and signs (including menu boards), pursuant to the System Standards and our approved plans and specifications, and your initial Manager must have successfully completed the initial training program. You must obtain our written approval before opening the Unit, and you must schedule the opening date for a mutually convenient date. If your Unit is not ready for opening on the scheduled opening date, you will pay us a per diem fee of $500 per day per person for each of our opening representatives for time lost, and you will reimburse us for any additional expenses we incur as a result of the delayed opening.
3.3 Manager Training. Your initial Manager must, before the opening of the Unit, attend and complete to our satisfaction the initial training program we require. Any successor Manager you later employ must also satisfactorily complete the initial training program we require before (or as soon as we require after) being designated as Manager of the Unit. We will provide instructors, facilities and training materials for the training of your initial Manager free of charge. All other expenses incurred in your initial and successor Managers' training, including the cost of travel, transportation, meals, lodging and any wages, will be your responsibility. You will pay to us our then-current tuition (or then-current per diem fee) and expenses incurred by us for the initial training of any successor Manager you later employ, including the reasonable travel, transportation, meals and lodging expenses we incur if we elect to provide this training at your Unit.
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3.4 Other Training. You and your Manager must attend any additional or refresher training programs that we designate as mandatory for franchisees and managers, respectively. You will be responsible for all travel, transportation, lodging, meals and incidental expenses and compensation of the people you send for additional or refresher training programs we offer, and you will pay us the cost of providing you the training materials (if any), and any tuition we may impose under Section 4.5. All training materials are confidential, and will remain our property.
3.5 Employee Training. You will maintain competent and conscientious personnel to operate the Unit in accordance with this Agreement and the Manual. You will train or cause the training of all your personnel as and when required by prudent business practices, our System Standards, or this Agreement. Throughout the term of this Agreement, beginning on the day your Unit first opens for business, you must have a trained production person on staff who will be responsible for making gelato, so that you are freed up for managerial duties, marketing and customer interaction.
3.6 Marketing.
(a) Marketing Programs. You will participate in all advertising, public relations, promotion, market research, and other marketing activities we may implement for the System ("Marketing Programs"). We may require you to pay for the production of marketing materials to be used in your market area (in addition to your contribution of Marketing Fees).
(b) Local Marketing. In order to provide your Unit with the best chance of success, you must spend at least 2% of your monthly Gross Sales on your own local advertising, public relations, promotional and other marketing programs for your Unit within your Protected Territory. You must submit to us proof of these expenditures within 30 days after the end of each month using the forms we require. Your marketing materials must use the Marks correctly, comply with System Standards and applicable law, and be expressly approved by us in writing before use. Upon our request, you will immediately stop using any marketing materials or programs that we, in our sole opinion, deem to be outdated, false, misleading, illegal, in violation of this Agreement, inconsistent with the System Standards, harmful to the System or Marks, or potentially harmful to the goodwill, reputation or customer relations of our franchisees, us or our affiliates.
(c) Press Releases. You will not issue any press release without our prior express written approval.
(d) Contributions and Donations. You will not make any contributions or donations of products, services or money to any individual or entity, or provide any type of other benefit to any charitable, religious, political, social, civic or other type of organization (or to any individual on behalf on any organization), without our prior express written consent.
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(e) Cooperative Marketing. We may, in our discretion, form local or regional marketing cooperatives covering your Protected Territory and the territory of at least one other franchisee or company-owned or affiliate-owned Unit for the purpose of developing and implementing local or regional marketing programs. If we require you to join a local or regional marketing cooperative (the "Co-op"), then you must: join the Coop; participate with other franchisees in the Co-op's marketing programs; and pay your share of the Co-op's marketing expense up to 2.5% of your monthly Gross Sales. Any payments you make for the Co-op's marketing will be applied toward your required minimum local marketing expenditures, but will not affect your obligation to pay marketing fees under this Agreement. The Co-op's marketing expenses will be allocated among its members based on the number of participating Units or on some other reasonable basis as we may determine. We or our designee will be responsible for administering the Co-op; however, we may delegate this authority to a committee of franchisees. The Co-op will operate under written governing documents prepared by us or our designee, which will be made available to you upon reasonable request. An accounting of the operation of the Co-op will be prepared annually by the Co-op, at the Co-op's expense, and made available to Co-op members upon request. We have the right, in our sole discretion, to modify, merge or dissolve any Co-op upon written notice to its members; however, a Co-op will not be dissolved until all of the money in the Coop has been spent for marketing purposes.
(f) Internet Marketing. You will not, directly or indirectly, create or maintain an internet web page, web site address or internet directory listing relating in any way to your Unit, or which uses any Marks.
(g) Grand Opening Marketing. You must implement a grand opening marketing program for your Unit according to System Standards in connection with your opening.
3.7 Approved Menu Items, Products and Services. You will offer all approved menu items and other approved products and services pursuant to the System Standards for your Unit type, and no other menu items, products or services. You may not deviate from our approved flavors or offer unapproved flavors. You will prepare and offer for sale all required menu items using the recipes, ingredients, serving sizes, decorations, nomenclature and presentation exactly in accordance with the System Standards. If you desire to offer any unapproved menu items, flavors, products or services, you must first obtain our prior express written consent. You will refrain from deviating from our System Standards by the use or offer of non-conforming items or differing amounts of any items, without our prior express written consent. You will maintain at the Unit, at your expense, all inventory and supplies as required by the System Standards for your Unit type.
3.8 Hours of Operation. You will keep the Unit open and in normal operation for the minimum hours and/or days as required by the System Standards for your Unit type.
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3.9 Maintenance of Unit. You will install and maintain at the Unit, at your expense, all furnishings, fixtures, equipment, and signs (including menu boards) as required by the System Standards for your Unit type. You will not install or permit to be installed on or about the Unit premises any furnishings, fixtures, equipment, signs, decor, vending machines, video games, or the like not previously approved by us. You will not display or distribute on or about the Unit premises any magazines, brochures, posters, business cards or other marketing materials for any other business not previously approved by us. You will maintain the Unit premises, and all furnishings, fixtures, equipment and signs (including menu boards) in a clean, attractive condition, and in good working order and repair. If we notify you of any deficiency as to the general state of repair or appearance of the Unit's premises, furnishings, fixtures, equipment, signs or decor, you must undertake the action we reasonably specify to correct the deficiency within the time period we specify.
3.10 Refurbishing the Unit. Within 6 months after our request, you will: (a) remodel, redecorate, and refurbish the Unit at your expense, to conform to the decor, color schemes, and presentation of trademarks and service marks consistent with our then-current image; and (b) upgrade, modify and/or replace furnishings, fixtures and equipment to conform to our then-current System Standards. You will not be required to make significant capital expenditures in this regard during the first 3 years of the term of this Agreement, but you may be required to purchase equipment necessary to prepare new menu items.
3.11 Lease Compliance. You will comply with all of the terms of your lease, sublease, and other agreements authorizing your use of the Unit premises, and will refrain from any activity which may jeopardize your right to remain in possession of, or to renew the lease or sublease for, the Unit premises.
3.12 Compliance with Laws and Good Business Practices. You will obtain and maintain in force, as and when needed, all governmental permits, licenses and approvals required by applicable law to establish and operate the Franchised Business at the Approved Location. You will pay when due (or properly and timely contest) all federal, state and local payroll, withholding, unemployment, permit, license, property, ad valorem, use, sales, gross receipts, income, property and other taxes, assessments, fees, charges, penalties and interest, which may be charged or levied against you as a result of your business operations, and will file when due all required governmental returns, notices and other filings. You will conduct your business operations under this Agreement in full compliance with all applicable laws, ordinances, regulations, rules, administrative orders, decrees and policies of any local, state, or federal government, governmental agency or department. You will, in all dealings with us, suppliers, customers and public officials, adhere to the highest standards of honesty, integrity, fair dealing and ethical conduct. You will refrain from any business practice which may harm our business, System or Marks, or other franchisees' businesses. You will cause your affiliates, employees, owners, representatives and agents to strictly comply with the provisions of this Agreement. You will notify us promptly if you obtain any
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information that any aspect of the System does not comply with any applicable law, rule or regulation.
3.13 Reports and Accounting. You will prepare written periodic reports, in the forms required by the System Standards, containing the information we require about your operations during each reporting period. You will submit all monthly reports to us within
10 days after the month to which they relate, and all other reports within the time period required by the System Standards. You will prepare and submit other reports and information about your operations as we may reasonably request in writing or as required by the System Standards. We may require, at our option, that certain reports you submit be certified as true and correct by you, your owners or your chief financial officer, and that certain reports be submitted using the forms, formats and communication media that we specify. You will obtain, install and maintain any computer software we require for this purpose or for obtaining relevant information directly from your point-of-sale system or computer system. You will maintain accounting books and records in accordance with generally-accepted accounting principles, subject to this Agreement and other reasonable accounting standards we may specify periodically. You will prepare and submit to us your annual and semiannual financial statements. We do not require that your financial statements be independently audited, but if you have them audited you will provide us with a copy of your audited statements. You will retain copies of all reports, and originals or copies of all other information, books, records, and other materials relating to operation of the Franchised Business for a period of 5 years following their respective dates.
3.14 Insurance. You will obtain before opening and maintain in force throughout the term of this Agreement, at your sole expense, insurance coverage from an insurance company acceptable to us, which complies with the System Standards for your Unit type specified in the Manual or otherwise by us in writing, as of the Effective Date and each time the policy is renewed. If you offer catering services, you must obtain and maintain additional insurance coverage in compliance with System Standards for these operations. Your policies must: name us as an additional insured; contain a waiver of the insurance company's right of subrogation against us; and provide that we will receive at least 30 days prior written notice of termination, expiration or cancellation of the policy. You will promptly provide us with current and updated certificates of insurance. Your obligations under this Section 3.14 are not limited in any way by reason of any insurance that we maintain, and your indemnity obligations under Section
11 are not affected by your insurance obligations under this Section 3.14.
3.15 Conferences. You (or, if you are an entity, one of your owners or officers) or your Manager will attend each franchisee conference and pay the conference fee we set for our franchisees, if and when we sponsor a franchisee conference. Mandatory training for our franchisees or their managers may be held at a conference. The conference fee we set will be the same for all of our franchisees. You will receive reasonable notice of each franchisee conference. You will be responsible for all travel, transportation, lodging, meals, and incidental expenses and compensation of the people you send to any franchisee conference.
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3.16 Purchasing. You will purchase or procure certain designated items (including furnishings, fixtures, equipment, signs (including menu boards), inventory and supplies) and services in compliance with any minimum standards or specifications we may periodically establish, and from only the suppliers that we approve. You may purchase or procure any other approved goods or services for the Franchised Business from any competent source you select, so long as the goods and services meet or exceed our System Standards.
3.17 Goodwill. You will use reasonable efforts to protect, maintain and promote the trade name "Paciugo" (or other trade name approved by us) and its distinguishing characteristics, the other Marks and the System. You will not permit or allow your officers, directors, owners, Managers, employees, representatives or agents to engage in conduct which is unlawful or damaging to the goodwill or public image of the Marks or System. You will participate in all quality assurance, customer service and customer satisfaction programs we require in good faith. You will follow System Standards for identification of your operations and for you to avoid confusion on the part of customers, creditors, lenders, investors and the public as to the ownership and operation of the Franchised Business.
3.18 Non-Competition. You (and, if you are an entity, your officers, directors, and owners) and your Managers will not engage in, assist, acquire, advise, consult with, be employed by, own, or become associated in any way with, any business whose methods of operation, trade dress or business concept is the same as or similar to that of the System or the Marks, or which makes or sells gelato, other than the Franchised Business, unless you have our prior express written consent. You will not solicit or otherwise induce our employees or the employees of any of our affiliates or other franchisee to leave their employment. You will not divert or attempt to divert any business or customer of ours or any of our affiliates or franchisees to any competitor. You will, upon our request, require that your officers, directors and Managers sign covenants of non-competition regarding the matters specified in this Section 3.18 and in Section 14.7, and these covenants will be in a form acceptable to us and will identify us as a third-party beneficiary, with the independent right to enforce them.
3.19 Quality and Customer Service Standards. All products and services you provide under this Agreement will be of high quality, and will conform to the quality and customer service standards we may establish from time to time. If we determine, in our sole discretion, that any of the products and services you have provided are not in the conformance with our quality standards, we will give you written notice specifying in reasonable detail the facts and circumstances of your default. After you receive this notice, you will immediately undertake and diligently pursue the efforts we deem necessary to remedy the default, and to bring the products and services you offer into conformance with our quality standards within 1 month from your receipt of our notice. If, after this 1-month period, the products and services at issue do not, in our sole opinion, conform to our quality standards, then we have the right, at our option, to terminate this Agreement in its entirety, upon 1 month's written notice.
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3.20 Telephone. You will obtain a telephone number for exclusive use in connection with the Franchised Business, and this telephone number will be deemed to be our property.
3.21 Directory Listings. You will obtain and maintain at your expense white pages and yellow pages listings for the Franchised Business, as required by System Standards, and in the form provided by or expressly approved by us, in the principal telephone directory serving your Approved Location. If other businesses franchised by us are served by the same directory, we may require a group listing of all relevant franchised businesses, and in that event the costs of this listing will be reasonably allocated among the applicable franchised businesses.
3.22 Point-of-Sale System and Computer System. You will, at your expense, purchase and maintain, any point-of-sale system, remote monitoring / remote management system, computer hardware and software, communication equipment, communication services, dedicated telephone and power lines, modems, printers, and other related accessories or peripheral equipment that we may specify from time to time for use in the Franchised Business. You will provide any assistance we require to connect your point-of-sale system, remote monitoring / remote management system or computer system with our computer system. We will have the right at any time to retrieve data and other information from your point-of-sale system or computer system as we, in our sole discretion, deem necessary or desirable. You will strictly comply with our standards and specifications for all items associated with your point-of-sale system, remote monitoring / remote management system, computer system and communication equipment and services. You will keep the point-of-sale system, remote monitoring / remote management system, computer system and communication equipment in good maintenance and repair, and you will promptly install, at your expense, any additions, changes, modifications or substitutions to your point-of sale system, remote monitoring / remote management system, computer hardware, software, communication equipment, telephone and power lines, and other related accessories or peripheral equipment, and related services, as we may specify periodically. We may require that you license from us proprietary computer software for use in the Franchised Business, and, if so, you will sign the software license agreement we specify, and you will comply with all of its terms and conditions. You will utilize the point-of-sale system, remote monitoring / remote management system, computer system and communication equipment and services in connection with the Franchised Business pursuant to the System Standards.
3.23 Notification of Legal Proceedings. You will notify us in writing within 5 business days of the commencement of any action, suit, or proceeding, and of the issuance of any order, writ, injunction, award, or decree of any court, agency, or other governmental instrumentality, of which you become aware, and which may adversely affect the operation or financial condition of the Unit.
3-24 Catering. You have the option to offer gelato catering services in connection with the Franchised Business. If you choose to offer these services, you must offer
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them pursuant to the applicable System Standards, which include requirements for the purchase of additional equipment and insurance. If you receive information relating to a possible opportunity for gelato catering services outside of your Catering Territory, you must refer that information to us, and we, in turn, will refer it to the appropriate franchisee or affiliate-owned Unit.
3.25 Uniforms. Your employees will wear uniforms as required by the System
Standards.
3.26 Music. You will, at your expense, purchase or lease, maintain and use, any music system that we may specify from time to time for use in the Franchised Business, and you will use this music system to play music that we have approved, and no other music. If we require, you will enter into music service agreements for subscription music programming, at your expense.
3.27 Gift Cards. If we require, you will accept stored-value gift cards or other noncash payment methods that we may specify from time to time for use in the Franchised Business to enable customers to purchase products and/or services offered by the Unit without cash. You will, at your expense, purchase or lease, maintain and use, any necessary hardware and/or software that we may specify in connection with these noncash systems.
SECTION 4: OUR SERVICES AND OBLIGATIONS
4.1 Unit Location. We will provide you with our site selection criteria and standard Unit layout plans and specifications for your Unit type. We will also provide you with the assistance and consultation we deem advisable regarding the location, placement and layout of the Unit at the Approved Location.
4.2 Checklist. We will provide you with a detailed checklist (referred to as "Paciugo Turnkey") covering substantially all of the operating steps required to establish and open the Unit. It is your responsibility to ensure compliance with all applicable laws relating to the establishment and operation of the Franchised Business at the Unit premises.
4.3 Unit Construction. We will provide you with standard plans and specifications for construction and/or build out for the Unit, which you will have adapted to your Approved Location. We will provide you with the assistance and consultation we deem advisable regarding constructing, remodeling or decorating the Unit, and regarding the installation of equipment.
4.4 Manager Training. We will provide initial training for your initial Manager and each successor Manager, provided, however, that we may, in our sole discretion, elect not to provide the initial training to your Manager if your Manager has at least 6 months' prior experience in the management and operation of one or more Units. All initial
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training we provide will be offered, in our sole discretion, at a Unit operated by a franchisee or an affiliate, at our training facility, at your Unit, or at some other location in the United States we select, and will be subject to the provisions of Section 3.3.
4.5 Other Training. We may in the future offer or require additional or refresher training for you or your Manager, if we determine, in our sole discretion, that this training is necessary or appropriate. Additional and refresher training will be held at one or more locations in the United States determined by us, and may be held in conjunction with a franchisee conference. We may charge you for the cost of providing you the training materials (if any), and a tuition for any additional or refresher training program. All additional and refresher training we provide will be subject to the provisions of Section 3.4.
4.6 Pre-Openinq and Opening Assistance. We will provide you with pre-opening assistance and consultation we deem advisable. We will provide to you, at no charge, on-site assistance and supervision in connection with the opening of your Unit by 1 representative for 7 days, at times as may be mutually convenient to you and us. We will provide, at your expense, materials for an opening promotion and initial marketing for the Unit, which promotion and marketing will be conducted at your expense.
4.7 Marketing Programs.
(a) Marketing Activities. We will implement one or more Marketing Programs, and we (or our designee or affiliate) will administer the Marketing Programs. We will determine in our sole discretion: the nature and type of program; the nature and type of media placement; the allocation (if any) among national, regional and local markets; the nature and type of advertising copy and other marketing materials; and all other aspects of the Marketing Programs. We do not promise that you will benefit directly or proportionately from any Marketing Programs.
(b) Marketing Fees. We will use marketing fees we collect from our franchisees to pay for the Marketing Programs and to reimburse our reasonable direct and indirect costs, overhead and other expenses (and those of our designee or affiliates) of providing services and materials relating to the Marketing Programs. We are not obligated to supplement the marketing fees; however, Units owned and operated by our affiliates currently intend to contribute to the Marketing Programs on the same basis as our franchisees (except that affiliate-owned kiosk Units will not contribute).
(c) Duration. We have the right to terminate any Marketing Program, at our discretion. However, any termination will not be effective until all marketing fees we have collected for the Marketing Program have been expended.
4.8 Purchasing. Although you are responsible for purchasing or procuring goods and services for use in connection with the Franchised Business, we and/or our affiliates may offer optional assistance to you with purchasing or procuring goods or
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services. We may require minimum standards or specifications for goods and services, specify approved goods and services, and restrict the suppliers authorized to sell or provide certain goods and services in order to control quality, provide for consistent service or obtain volume discounts. We will provide you with our System Standards for goods and services, our list of approved items, and our list of approved suppliers.
4.9 Continuing Consultations. We will assist you to understand your obligations under the System Standards and this Agreement, provide you with other continuing consultation, and may provide you with new proprietary methods and formulas relating to approved menu items or operation of the Unit, all on terms as we deem appropriate. To the extent possible, we will provide consultation during inspections and audits, through the System Standards, at training sessions (if any), and during franchisee conferences (if any). If you request additional operating assistance or services, we may require that you pay us our then-current per diem fee and the expenses we incur in providing additional assistance to you.
4.10 Suggested Retail Prices. We will provide you with suggested retail prices for the products and services offered by the Franchised Business; however, you are not bound by our recommended prices. In determining your prices, you must consider the general image of the Unit and the System.
4.11 Conferences. We may sponsor periodic conferences for our franchisees, at which seminars, workshops and other training may be conducted. We may require you (or one of your owners or officers) and/or your Manager to attend each conference. We may charge you a fee for any conference to cover our expenses.
4.12 Loan of Manual. With 15 days after execution of this Agreement, we will loan to you for the term of this agreement a copy of our current operations manual, and we will later provide you with all periodic modifications thereto and any other manual we develop specifying the System Standards (collectively, the "Manual"). If the copy of the Manual we loan to you is lost, stolen or destroyed before you return it to us, you will pay us a replacement fee of $5,000, and we will loan you a replacement copy.
SECTION 5: FEES
5.1 Franchise Fee. Contemporaneously with the execution of this Agreement, you will pay us an initial franchise fee of $30,000. The initial franchise fee will be deemed fully earned and nonrefundable when paid, in consideration of administrative and other expenses we incurred in entering into this Agreement, and for our lost or deferred opportunity to enter into a franchise agreement with others for the Approved Location or Protected Territory.
5.2 Royalty Fee. During the term of this Agreement, you will pay to us a continuing weekly royalty fee of 4.5% of each week's revenue you receive from the sale of all products and services, including the sale of food, beverages and merchandise, catering,
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and all other income of every kind and nature related to the Unit, whether for cash or credit, and regardless of collection in the case of credit, but not including any sales taxes or other taxes you collect for transmittal to the appropriate taxing authority ("Gross Sales"). Your royalty fee payments must be made without any offset, credit or other deductions of any nature.
5.3 Marketing Fee: During the term of this Agreement, you will also pay to us, on a weekly basis, a marketing fee of 2.5% of each week's Gross Sales for the Unit.
5-4 Taxes. You will pay to us when due any federal, state or local sales, gross receipts, use, value added, excise or similar taxes levied or assessed against us on all fees and other payments to us under this Agreement, but not including any income tax, franchise or other tax levied or assessed against us for the privilege of doing business in your State.
5.5 Late Payment Penalty. All fees and other payments due to us under this Agreement but not timely paid by you will be subject to a late payment penalty after the due date at the rate of 1.5 % per month or the maximum rate permitted by applicable law, whichever is less, accruing until the amount is paid in full. This provision does not permit or excuse late payments.
5.6 Place and Method of Payment. You will pay us, without billing or demand, all weekly fees required by this Agreement, by Friday at 5 pm of the following week for the Gross Sales during the preceding calendar week. You will submit your weekly payments to us together with any weekly statements and reports required under Section 3.13. For any purchases of ingredients or other items or services from us or our affiliate, you will pay us or our affiliate within 48 hours after receipt of the relevant items or services. All fees and other payments due us under this Agreement will be made to us at our headquarters in Dallas, Texas, or as otherwise specified by us in writing. We have the right to require you to transmit fees and other payments to us by means of electronic fund transfers or other methods in accordance with procedures that we may establish in the Manual or otherwise specify in writing. If we require alternate means of payment, you will sign all documents we reasonably require, establish and maintain any required accounts, and otherwise cooperate with us to effectuate these means.
5.7 Catering Referral Fees. If you receive a lead from us that originated from another franchisee or affiliate-owned Unit that results in your performing catering services within your Catering Territory, you must pay the then-current catering fee to the originating party within 30 days after the completion of the relevant catering services.
SECTION 6: SYSTEM STANDARDS AND MANUALS
6.1 System Standards. At present, our System includes (a) the Marks; (b) trade secrets and other intellectual property, including Confidential Information (as defined in Section 8), the Manual and know-how; (c) marketing, advertising, publicity, public
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relations and other promotional materials and programs; (d) System Standards; (e) training programs and materials; and (f) universal service quality and customer satisfaction standards and programs. You acknowledge and agree that every detail of the System is important to you, us, and other franchisees in order to develop and maintain high and uniform operating standards, increase the demand for the products and services marketed by all franchisees, and protect1 our reputation and goodwill. You will maintain our high System Standards with respect to your Unit's premises, facilities, equipment, services, products, and operations. You will strictly comply with all of the mandatory System Standards in the Manual or that we otherwise provide to you in writing. We may, in our sole discretion, by written notice, permit deviations from System Standards, based on local conditions and our assessment of the particular circumstances involved.
6.2 Modification of the Manual. In our sole discretion, we may change, delete from or add to the System, including any of the Marks or System Standards, by providing you with written notice thereof, or by modification of the Manual. You will implement any modifications promptly after written notice from us, provided that no addition or modification will alter your fundamental rights or status under this Agreement. If there is a dispute as to the contents or meaning of any part of the Manual, the version maintained by us at our principal office will be controlling. The Manual is confidential and will remain our property.
6.3 Ownership of the System. We own all rights, title and interest in and to the System. You will not acquire any proprietary interest in the System. Your rights to use the System are derived solely under this Agreement. Unauthorized use of the System by you will constitute a material breach of this Agreement.
6.4 Inurements. All present and future distinguishing characteristics, improvements and additions to, or associated with, the System by us, you or others, and the associated goodwill will be our property, and will inure to our benefit.
SECTION 7: MARKS
7.1 Ownership of the Marks. You acknowledge that our affiliate owns all rights, title and interest in and to the Marks. You will not acquire any proprietary interest in the Marks, and you will not challenge our ownership of the Marks or our right to use the Marks. Except as expressly provided herein, you will not acquire any rights in the Marks. Your rights to use the Marks are derived solely under this Agreement, and constitute a non-exclusive license.
7.2 Registration. We have taken and will take all steps reasonably necessary, in our sole opinion, to preserve and protect our ownership of, and the validity of, the Marks. You will not apply for governmental registration of the Marks, or contest the registration status of the Marks. You will display the Marks, and give notice of trademark registration and claims in the following manner: "Paciugo Italian Gelato
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Renaissance®" (or as otherwise required in the Manual). You will cooperate fully and in good faith with us for the purpose of maintaining registrations and prosecuting applications for the Marks, and otherwise securing and preserving our rights in and to the Marks.
7.3 Use of the Marks. You will not use the Marks without our prior express written consent. Before each intended use of any material of any nature which bears any of the Marks, you will submit to us samples of the materials. You will use the Marks only as expressly authorized by this Agreement, our Manuals or as otherwise provided by us in writing. Unauthorized use of the Marks by you will constitute a breach of this Agreement, and an infringement of our rights in and to the Marks. You will take all steps necessary or appropriate to preserve the goodwill and prestige of the Marks. You will use the Marks only in connection with the Franchised Business. You will not use any Mark in your corporate name or legal name, but you may use a Mark in an assumed business or trade name if you have our prior express written consent. You will not use any Mark with any prefix, suffix or other modifying trademarks, logos, words, terms, designs.or symbols or in any modified form. You will not use any Mark in connection with any unauthorized product or service, or in any manner not expressly authorized under this Agreement.
7.4 Inurements. All usage of the Marks and any goodwill associated with the Marks will inure exclusively to the benefit of our affiliate or us. All present and future service marks, trademarks, copyrights, service mark registration and trademark registration used or to be used as part of the System, and the associated goodwill, will be the property of us or our affiliate, and will inure to the benefit of our affiliate or us.
7.5 Infringements and Litigation. You will promptly notify us in writing of (a) any adverse or infringing uses of the Marks (or names or symbols confusingly similar), Confidential Information (as defined in Section 8) or other System intellectual property, and (b) any threatened or pending litigation related to the Marks or System against (or naming as a party) you or us, of which you become aware. We will handle disputes with third parties concerning use of all or any part of the Marks or System in any manner we deem appropriate, in our sole discretion. You will cooperate fully and in good faith with our efforts to resolve these disputes. We may bring suit in your name or join you as a party to the relevant proceedings. We may resolve any dispute by obtaining a license of the property for you at no expense to you, or by requiring that you discontinue using the infringing property or modify your use to avoid infringing the rights of others. We need not initiate suit against imitators or infringers who do not, in our sole opinion, have a material adverse impact on the Franchised Business, and we need not initiate any other suit or proceeding to enforce or protect the Marks or System in a matter we do not believe, in our sole opinion, to be material. We will defend you against any third-party claim, suit, or demand arising out of your use of the Marks. If we, in our sole discretion, determine that you have used the Marks in accordance with this Agreement, we will bear the cost of this defense, including the cost of any judgment or settlement. If we, in our sole discretion, determine that you have not used the Marks in accordance with this Agreement, you will bear the cost of this defense, including the cost of any judgment or
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settlement. If there is any litigation relating to your use of the Marks, you will sign any documents and do whatever acts as may, in our opinion, be necessary to carry out this defense or prosecution, including becoming a nominal party to any legal action. Except to the extent that litigation results from your use of the Marks in a manner inconsistent with the terms of this Agreement, we will reimburse you for your out-of-pocket litigation costs in cooperating with us in the litigation.
7.6 Substitution of Marks. We reserve the right to substitute different proprietary marks for use in identifying the System, the businesses operating under the System, and/or the products or services offered, if the Marks no longer can be used, or if we, in our sole discretion, determine that substitution of different proprietary marks will be beneficial to the System. In these circumstances, the use of the substituted proprietary marks will be governed by the terms of this Agreement, and we will not compensate you for any substitution. You will promptly implement any substitution, at your expense.
SECTION 8: CONFIDENTIAL INFORMATION
8.1 Confidential Information. We possess certain nonpublic trade secrets, proprietary information, technical data, or know how which relate to our business, System, services or products, or to a Franchised Business, including the Manual, recipes, specialized preparation methods, quality-control systems, training materials, and information regarding salary, research, products, services, developments, inventions, processes, techniques, designs, marketing, finances, field operations, and computer hardware and software (collectively, "Confidential Information") that we will provide to you, and you will obtain other Confidential Information during the term of this Agreement. You acknowledge that your entire knowledge of the operation of a gelato shop, including the method of preparing gelato, recipes, specifications, standards, and procedures involved in the operation of a Unit is derives solely from Confidential Information we disclosed to you.
8.2 Protection of Confidential Information. You will use the Confidential Information only in the operation of your Franchised Business, and you will not disclose Confidential Information to others, except as expressly authorized by this Agreement. You will take all appropriate actions to preserve the confidentiality of all Confidential Information. Access to Confidential Information must be limited to only your employees who need the Confidential Information to perform their jobs and who are subject to your general policy on maintaining confidentiality as a condition of employment or who have first signed a confidentiality agreement. You will not copy or permit copying of Confidential Information. Your obligations under this section begin when you sign this Agreement and continue for trade secrets as long as they remain secret, and, for other Confidential Information, for as long as we continue to use the information in confidence (even if edited or revised) plus 3 years. We will respond promptly and in good faith to your inquiry about continued protection of any Confidential Information.
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8.3 Disclosure of Confidential Information. Notwithstanding anything to the contrary in this Section 8, you may disclose Confidential Information if you are required by law to disclose it, provided that you give us at least 10 days notice, if feasible, of your intent to disclose. You may also disclose Confidential Information to your attorneys, accountants, financial and investment advisors, bankers or lending institutions, and other advisors and consultants of a similar nature, provided that any disclosure is only to the extent necessary for your advisors to perform their services for you, and provided that these persons have the obligation to, or otherwise agree, to keep the Confidential Information confidential. You will, upon our request, require that your officers, Managers, employees, agents and representatives who may have access to Confidential Information sign covenants to maintain the confidentiality of any information, and these covenants will be in a form acceptable to us and will identify us as a third-party beneficiary with the independent right to enforce them.
SECTION 9: INSPECTIONS AND AUDITS
9.1 Inspections and Audits. You will permit our employees, representatives and agents access to your offices, Unit premises, and other places of business, to perform inspections of your operations (including Unit premises, storage areas, furnishings, fixtures, equipment, signs, inventory and supplies) files, documents, records, products and Mark usage, and to audit your financial and operating books and records (including tax returns) relating to the Franchised Business, with or without prior notice of the inspection or audit. The inspections and audits will occur during normal business hours, although we may observe your operations and accounting activity at any time. You, your officers, Managers, employees, agents, and representatives will cooperate with our inspectors and auditors in the performance of their duties and you will permit us, our representatives and agents to, among other things: take photographs, movies, videotapes or sound recordings; interview your Managers, employees, agents, and representatives; interview your customers; make copies of your books, records and other documents relating to the Franchised Business; and take samples of documents, inventory, supplies, products and other materials relating to the Franchised Business.
9.2 Payments. You will pay us any underpayment of, and we will pay you or credit your account for any overpayment of, royalty fees or marketing fees discovered by an audit. You will pay the reasonable travel, lodging and meal expenses, and costs of our inspection or audit if you fail to cooperate with our auditors or inspectors, or if the audit reveals that you paid us less than 97% of the correct amount of fees for any month. We may publish or disclose the results of our inspections and audits. Our rights under this Section 9 survive for 2 years after termination of this Agreement.
SECTION 10: RELATIONSHIP OF THE PARTIES
10.1 Independence. You are an independent contractor. You are not our legal representative or agent, and you have no power to obligate us for any purpose
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whatsoever. We and you have a business relationship based entirely on and circumscribed by this Agreement. No partnership, joint venture, agency, fiduciary or employment relationship is intended or created by reason of this Agreement. You will exercise full and complete control over and have full responsibility for your contracts, daily operations, labor relations, employment practices and policies, including the recruitment, selection, hiring, disciplining, firing, compensation, work rules, and schedules of your employees. At all times, including in connection with all uses of any of the Marks, in connection with the operation of the Franchised Business, and in connection with all dealings with customers, suppliers, public officials, the general public, and others, you will conspicuously indicate your status as an independent contractor, including in all contracts, advertising, publicity, promotional and other marketing materials, and on any signage and uniforms, and in the manner as specified in the Manual or otherwise by us in writing from time to time. You will not make any express or implied agreements, guarantees or representations, or incur any debt in our name or on our behalf. You will not represent that the relationship between you and us is anything other than a franchise relationship. We will not be obligated by or have any liability under any agreements or representations made by you, and we will not be obligated for any damages to any person or property directly or indirectly arising out of the operation of the Franchised Business.
10.2 Joint Status. If you comprise 2 or more persons or entities (notwithstanding any agreement, arrangement or understanding between or among these persons or entities), the rights, privileges and benefits of this Agreement may only be exercised and enjoyed jointly. The liabilities and responsibilities under this Agreement will be the joint and several obligations of all these persons or entities.
SECTION 11: INDEMNIFICATION
11.1 Your Indemnification of Us. Independent of your obligation to procure and maintain insurance, you will indemnify, defend and hold us and our affiliates, the respective officers, directors, partners, shareholders, employees, agents and contractors of these entities, and the successors, assigns, personal representatives, heirs and legatees of all these persons or entities, (collectively, the "Indemnitees") harmless, to the fullest extent permitted by law, from and against all payments or obligations to make payments either (a) to or for third party claimants by any Indemnitees, including refunds, or (b) incurred by any Indemnitees to investigate, respond to or defend a matter, including investigation and trial charges, costs and expenses, attorneys' fees, experts' fees, court costs, settlement amounts, judgments and costs of collection (collectively, "Losses and Expenses"), incurred by any Indemnitee for any investigation, claim, action, suit, demand, administrative or alternative dispute resolution proceeding, actually or allegedly, directly or indirectly, relating to, arising out of, or resulting from or in connection with: any transaction, occurrence or service involving the Franchised Business; your marketing, selling, or serving of products and services; and any breach or violation of any agreement (including this Agreement), or any law, regulation or ruling by, or any act, error or
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The original documents were scanned as an image. The original file can be downloaded at the link above.