The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample Franchise Agreement
PARTY AMERICA® FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (this "Agreement") is made and entered into this_____day of
______________, ______, by and between Party America Franchising, Inc., a ________________
corporation ("Franchisor"), and___________________________________________________________
A. Franchisor franchises PARTY AMERICA® specialty retail stores which feature party products and paper for home, office and commercial use. Franchisor uses and licenses the name "PARTY AMERICA" and such other trade names, trademarks, service marks, logos and commercial symbols, as Franchisor may designate for use in the operation of PARTY AMERICA stores (collectively, the "Marks"). PARTY AMERICA stores use Franchisor's standards, specifications, methods, procedures, techniques and the Marks (all of which are collectively referred to as the "Business System"), which Franchisor may periodically improve, further develop or otherwise modify.
B. Franchisee has had a full and adequate opportunity to be thoroughly advised of the terms and conditions of this Agreement and has had sufficient time and opportunity to evaluate and investigate the Business System and the procedures and financial requirements associated with the Business System as well as the competitive market in which it operates.
C. Franchisee desires to operate a PARTY AMERICA retail store which will conform to the uniform requirements and quality standards of the Business System.
The Franchisor and Franchisee agree as follows:
1. GRANT OF FRANCHISE: FRANCHISED LOCATION
A. Grant of Franchise. Subject to the terms and conditions herein, Franchisor grants to Franchisee a personal license and franchise to operate a PARTY AMERICA store (the "Store") in
conformity with the Business System at the following location__________________________________
__________________________(the "Franchised Location"), and Franchisee undertakes the obligation
to operate the Store under the Business System in strict compliance with the terms and conditions of this Agreement. The rights and privileges granted to Franchisee under this Agreement are applicable only to this location, are personal in nature, and may not be used elsewhere or at any other location by Franchisee. Franchisee shall not have the right to subfranchise or sublicense any of its rights under this Agreement. Franchisee shall not use the Franchised Location for any purposes other than the operation of a Party America store.
B. Designated Area. Franchisee must locate and operate the Store at a Franchised Location within the area described in Schedule B (the "Designated Area"). Franchisor and its affiliates will not locate and operate or grant to anyone else a franchise to locate and operate a Party America store within the Designated Area so long as this Agreement is in effect.
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C. Nonexclusivitv: Franchisor Reservation of Rights. The license is limited to the right to develop and operate one Store at the Franchised Location located in the Designated Area, and does not include (i) any right to sell services and products identified by the Marks at any location other than the Franchised Location, or through any other channels or methods of distribution, including the internet (or any other existing or future form of electronic commerce), (ii) any right to sell services and products identified by the Marks to any person or entity for resale or further distribution, or (iii) any right to exclude, control or impose conditions on our development of future franchised, company or affiliate owned stores at any time or at any location other than as stated in Section 2(B) above.
Franchisee acknowledges and agrees that (i) Franchisor and its affiliates have the right outside of the Designated Area to grant other franchises or develop and operate company or affiliate owned PARTY AMERICA stores and offer, sell or distribute any services or products associated with the System (now or in the future) under the Marks or any other trademarks, service marks or trade names or through any distribution channel or method, all without compensation to any franchisee; and (ii) Franchisor and its affiliates have the right to operate and franchise others to operate stores or any other business within and outside the Designated Area under trademarks other than the PARTY AMERICA Trademarks, without compensation to any franchisee.
Although Franchisor and its affiliates will not develop, operate or franchise a PARTY AMERICA store within the Designated Area, Franchisor and its affiliates have the right to offer, sell or distribute, within the Designated Area, party supplies, related seasonal merchandise, greeting cards and other products associated with the System (now or in the future) or identified by the Marks, or any other trademarks, service marks or trade names, through any distribution channels or methods, without compensation to any franchisee. The distribution channels or methods include, without limitation, mail order, or the internet (or any other existing or future form of electronic commerce). For instance, Franchisor's affiliate currently operates an online store at www.partyamerica.com, through which the public can purchase products without any compensation to Franchisee.
D. Relocation or Expansion. If, for any reason, Franchisee desires to relocate the Store to another location or expand the Store to adjacent, vacant space, Franchisee must obtain Franchisor's prior written consent. Franchisor will not consent to any relocation or expansion unless the proposed new location or expanded space, as the case may be, has been reviewed by Franchisor and meets all of Franchisor's then-current standards. In the event of a proposed relocation or expansion, Franchisee shall pay Franchisor a fee of $1,500 or Franchisor's actual, reasonable expenses, whichever is less, to cover Franchisor's costs in evaluating the new location.
2. TERM OF FRANCHISE; RENEWAL RIGHTS
A. Term. The term of this Agreement shall be for 10 years, commencing on the date of this Agreement.
B. Renewal. Franchisee shall have the right to renew its PARTY AMERICA franchise for the Franchised Location for continuing 10 year terms, provided that the following conditions have been met:
1. Franchisee has given Franchisor written notice at least 180 days prior to
the end of the term of this Agreement (or any renewal term) of its intention to renew;
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2. Franchisee has complied with all of the material terms and conditions of this Agreement and has complied with Franchisor's material operating and quality standards and procedures;
3. All monetary obligations owed by Franchisee to Franchisor have been satisfied prior to renewal, and have been timely met throughout the term of this Agreement;
4. Franchisee has, at its expense, made such reasonable capital expenditures necessary to remodel, modernize and redecorate the business premises and to replace and modernize the supplies, fixtures, and equipment used in the Store so that the Store reflects the then-current physical appearance of new PARTY AMERICA stores;
5. Franchisee has paid a renewal fee to Franchisor at least 30 days prior to the expiration of the initial (or renewal) term of this Agreement in an amount equal to 10% of the then-current Initial Franchise Fee;
6. Franchisee executes the standard Franchise Agreement then being used by Franchisor; provided that Franchisee will not be required to pay the Initial Fee stated in the then-current Franchise Agreement; and
7. Franchisee is able to secure a renewal or extension of the lease for the Franchised Location upon terms acceptable to Franchisee and Franchisor or able to relocate to a site accepted by Franchisor.
OWNERSHIP AND USE OF MARKS
A. Ownership. Franchisee acknowledges the validity of the Marks and acknowledges that they are the sole property of Franchisor. Any and all improvements by Franchisee relating to the Marks and Business System shall become the sole property of Franchisor who shall have the exclusive right to register and protect all such improvements in its name. Franchisee's right to use and identify with the Marks and Business System shall exist concurrently with the term of this Agreement and only so long as Franchisee is in complete compliance with Franchisor's quality standards.
B. Use. Franchisee agrees that its nonexclusive personal right to use the name Party AMERICA as the name of Franchisee's business and its right to use the Marks and Business System applies only to the Franchised Location and only so long as Franchisee shall fully perform and comply with all of the provisions of this Agreement. Franchisee shall not have or acquire any rights in any of the Marks or Business System other than the right of use as governed by this Agreement. Franchisee shall have the right to use the Marks and Business System only in the manner directed and approved by Franchisor in writing. If, in the judgment of Franchisor, the acts of Franchisee infringe upon or demean the goodwill, standards of uniformity or quality, or business standing associated with the Marks and Business System, Franchisee shall immediately, upon written notice from Franchisor, modify its use of the Marks and Business System in the manner prescribed by Franchisor in writing. Franchisee shall not, during or after the term of this Agreement, do anything, directly or indirectly, which would infringe upon, harm, or contest the rights of Franchisor to the Marks or Business System or which would otherwise confuse the public with respect to the use of the Marks.
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C. Promotion. Franchisee must operate the Store so that it is clearly identified and advertised as a PARTY AMERICA store. The style, form and use of the words PARTY AMERICA in any advertising, written materials or supplies must have the prior written approval of Franchisor. Franchisee must use the name PARTY AMERICA and the other Marks which now or hereafter may form a part of the Business System, on all advertising materials, signs or other articles in the identical combination and manner as may be prescribed by Franchisor in writing. Franchisee must, at its expense, comply with all notices of registration required by Franchisor and must, at its expense, comply with all trademark, trade name, service mark, copyright or patent notice marking requirements.
D. Identity. Franchisee shall not use the words Party AMERICA in its corporate or partnership name. Franchisee shall hold itself out to the public as an independent contractor operating its business pursuant to a license from Franchisor. Franchisee shall clearly indicate on its business checks, stationery, purchase orders, business cards, receipts, promotional materials and other written materials that Franchisee is the owner of the business and that Franchisee is a PARTY America franchisee. Franchisee shall display a sign which is clearly visible to the general public indicating that the Store is independently owned and operated.
E. Substitutions. If there is a claim by any party that its rights to use any of the Marks are superior and if Franchisor determines that such claim is legally meritorious, then upon receiving written notice from Franchisor, Franchisee, at its expense, must immediately make such changes and amendments to the Marks as may be required by Franchisor. Franchisee may not make any changes or amendments in or to the use of the Marks and Business System unless directed by Franchisor in writing.
F. Litigation. Franchisee has no obligation to and shall not, without the written consent of Franchisor, defend or enforce the Marks in any court or other proceedings for or against imitation, infringement, any claim of prior use, or any other allegation. Franchisee must, however, immediately notify Franchisor of any claims or complaints made against Franchisee with respect to the Marks and must, at its expense, cooperate in all respects with Franchisor in any court or other proceedings involving the Marks. The cost and expense of all litigation incurred by Franchisor specifically relating to the Marks, shall be paid by Franchisor. Franchisor's legal counsel shall have the right to control and conduct any litigation relating to the Marks.
4. INITIAL FEE
A. Fee. Franchisee shall pay Franchisor an Initial Fee of $_______, $5,000 of which is
payable upon the execution of this Agreement. If Franchisee is unable to secure a suitable retail location or obtain the necessary financing within 6 months following the execution of this Agreement, the $5,000 shall be refundable to Franchisee, after Franchisor has deducted all of its costs and expenses incurred in connection with site evaluation, lease negotiations, market research, selling costs and similar services. All of Franchisor's out-of-pocket expenses incurred in connection with performing these services shall be deducted from the initial payment, including all travel, lodging, telephone and related costs. In addition, Franchisor shall deduct from the $5,000 any fees for providing such services, which shall be computed at the rate of $75 per hour. After the 6-month period following the execution of this Agreement expires, the $5,000 shall be nonrefundable and Franchisor shall have the right to retain the entire amount. The
balance of the Initial Fee ($_________________) shall be payable on the date Franchisee signs a lease
for the Store or otherwise secures suitable retail space for the Store. The Initial Fee payable by Franchisee is payment to Franchisor for the costs that it will incur to get Franchisee into business including costs incurred by Franchisor for training, opening assistance, site evaluation, business overhead
INITIALS: Franchisee:____ Franchisor:____
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costs, travel costs, miscellaneous costs, and for the other initial services rendered by Franchisor to Franchisee.
B- Refund. Franchisor shall have the right to terminate this Agreement at any time prior to
the time that Franchisee opens for business at the Franchised Location if Franchisor determines that (1) any financial, personal or other information provided by Franchisee to Franchisor is materially false, misleading, incomplete or inaccurate; or (2) Franchisee or Franchisee's Manager is not qualified to properly operate the Store or has not successfully completed Franchisor's training program. If Franchisor terminates this Agreement pursuant to this Section 4(B), the Initial Fee shall be refunded to Franchisee after deducting $2,000, plus all of the out-of-pocket expenses including travel expenses incurred by Franchisor in processing Franchisee's application and providing training and other assistance to Franchisee.
5. CONTINUING FEE
A. Continuing Fee. In addition to the Initial Fee, Franchisee shall, upon the opening of the Store, pay to Franchisor a monthly Continuing Fee equal to 4% of Franchisee's Gross Sales (as defined below). Subsequently, for purposes of calculating Gross Sales, the "twelve-month period" will begin each February and run through the following January. If Franchisee reaches $2,000,000 in Gross Sales within the twelve-month period, Franchisee will pay a Continuing Fee of 2% of Gross Sales over $2,000,000 for the remainder of the twelve-month period. Beginning each February, Franchisee will resume paying a Continuing Fee of 4% of Gross Sales until and unless Franchisee reaches $2,000,000 within the twelve-month period. Franchisee's obligation to pay Franchisor the Continuing Fee under the terms of this Agreement shall remain in full force and effect until this Agreement has expired or is terminated in accordance with the provisions herein.
B. Payment. The Continuing Fee shall be paid to Franchisor monthly on or before the seventh business day of each month for the previous month. Any unpaid amounts owed to Franchisor including Continuing Fees, Advertising Fees, amounts owed for merchandise and any other unpaid invoices shall bear interest at the rate of 15% per annum simple interest or the maximum legal rate allowable in the state in which the Store is located, whichever is less.
C. Gross Sales. "Gross Sales" shall mean the gross revenue of the Store from all cash, credit, charge and other sales made at or from the Store. "Gross Sales" shall not include sales taxes or customer refunds.
6. ADVERTISING AND PROMOTION
A. Advertising Fee. Franchisor reserves the right to require Franchisee to pay an Advertising Fee to Franchisor in an amount not to exceed 1% of Franchisee's Gross Sales, which, if collected, shall be payable on or before Wednesday of each week for the preceding week (Saturday through Friday). Any Advertising Fees not paid as required herein shall bear interest at the rate of 15% per annum or the maximum rate permitted by law, whichever is less. At such time as Franchisor requires Franchisee to pay an Advertising Fee, Franchisor will provide Franchisee with at least 60 days' prior notice. All Advertising Fees shall be placed in an Advertising Fund managed by Franchisor. Reasonable disbursements from the Advertising Fund shall be made solely for the payment of expenses incurred in connection with the general promotion of the Marks and Business System, including the cost of formulating, developing and implementing advertising and promotional campaigns; and the reasonable
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cost of administering the Advertising Fund, including accounting expenses and the actual cost of salaries and fringe benefits paid to Franchisor's employees engaged in administration of the Advertising Fund. The methods of advertising, media employed and contents, terms and conditions of advertising campaigns and promotional programs shall be within the sole judgment of Franchisor. If requested, Franchisor shall provide Franchisee an annual unaudited statement of the financial condition of the Advertising Fund. Franchisor will have no fiduciary duty to Franchisee with respect to the collection or expenditure of the Advertising Fees, and any advertising fund will not be a trust or escrow account.
B. Required Expenditures. In addition to the Advertising Fee that Franchisor may collect, Franchisee is required to spend, each calendar year, a minimum of 4% of the Gross Sales of the Store or $30,000, whichever is greater, on approved advertising and promotion in Franchisee's geographic area. Satisfaction of the requirements under this Section 6(B) shall not eliminate Franchisee's obligations under Section 6(C) below. All advertising must be approved in writing by Franchisor prior to its use. Local advertising expenditures made by Franchisee will include advertising, sales promotion and other forms of advertising at the local level. On or before January 31 of each year, Franchisee will provide Franchisor with an accounting of the monies that it has spent for approved local advertising for the preceding calendar year (January through December). If Franchisee has failed to spend at least 4% of the Store's Gross Sales or $30,000, whichever is greater, for the calendar year for approved local advertising as required under this Section, then Franchisee shall be required to deposit in the Advertising Fund the difference between what it should have spent for advertising during the calendar year and what it actually spent for advertising during the calendar year. Franchisor shall spend this amount for any type of advertising or promotion that Franchisor deems to be in the best interests of Franchisee's business.
C. Cooperative Advertising. Franchisee shall also be required to participate in and contribute a proportionate share of the cost of local, cooperative advertising campaigns to the extent agreed upon by a majority of PARTY AMERICA Stores in Franchisee's regional advertising market. Franchisee's PARTY America Store generally shall be deemed to be a part of an advertising market if the Store is located within the designated TV market area (DMA) for that geographic area, as determined by the Nelson independent ratings service. Franchisor reserves the right to designate regional advertising markets, to establish regional advertising councils and to establish the rules under which such councils will operate. Amounts spent for cooperative advertising shall be credited toward Franchisee's advertising requirements described in Section 6(B) above.
D. Grand Opening Promotion. Franchisee shall conduct certain advertising and public relations activities in connection with the opening of the Store. Franchisee shall obtain Franchisor's approval prior to conducting such advertising and public relations activities. If the opening of the Store occurs simultaneously with a scheduled system-wide promotion, Franchisee must participate in such promotion. If the opening of the Store does not coincide with a scheduled system-wide promotion, Franchisee shall spend, for approved advertising and public relations activities, $5,000. Amounts spent for grand opening promotion and advertising under this Section shall not be credited toward Franchisee's minimum advertising requirements described in Section 6(B) above.
E. Ongoing Promotion. Franchisee shall use its best efforts to promote and advertise the Store and shall participate in all advertising and promotional programs established by Franchisor. Franchisee shall advertise in the Yellow Pages of its local telephone directory. Franchisor and Franchisee acknowledge and agree that Franchisee shall have the right to advertise and sell its products at whatever prices Franchisee determines.
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7. FRANCHISOR OBLIGATIONS
A. Location. Franchisor will provide Franchisee with services and assistance with respect to site location and evaluation for the Store. Franchisee acknowledges that Franchisor's consent to the location of the premises does not constitute a representation or guaranty by Franchisor that the location will be a successful location for Franchisee's PARTY AMERICA Store.
B. Construction and Design. Franchisor shall designate the standard design, color scheme and motif for Franchisee's premises and shall furnish construction drawings and specifications for the premises.
C. Equipment, Supplies and Inventory. Franchisor shall designate the standard fixtures, equipment, supplies, signs and initial inventory for use in the Store.
D. Training. Franchisor will, at its expense, provide a training program in Alameda, California, to educate, familiarize and acquaint Franchisee and its manager with the business of operating a Party AMERICA Store. The training program will include instruction on basic operating skills, sales and marketing, and other topics selected by Franchisor. Franchisee and its manager must successfully complete the training program. The period of the training program shall be at the judgment of Franchisor but generally shall be for not less than 5 days and shall be scheduled by Franchisor in its sole judgment. If Franchisee or its manager fails to successfully complete the training program, they will not be permitted or authorized to manage the Store. If Franchisee is opening its third or subsequent PARTY AMERICA Store, Franchisee and its manager will not be required to complete Franchisor's training program. Franchisee must pay for all travel, lodging and related costs, as well as the salaries, fringe benefits and other expenses for Franchisee and its manager, and must comply with all applicable state and federal laws pertaining to employees. If Franchisee hires a new manager, the new manager must complete Franchisor's training program and pay the then-current training fee.
E. Opening Assistance. Franchisor will assist in scheduling the opening of the Store. Franchisee shall not open or commence business operations until Franchisor has approved the opening. Franchisor will, at no charge, provide at least one person to assist Franchisee in preparing for the opening of the Store for at least 5 days. In addition, Franchisor will provide advertising materials and public relations materials for Franchisee's opening.
F. Operations Manual. Franchisor shall loan Franchisee one copy of the Operations Manual wherein Franchisor shall describe its operational policies, standards, requirements and practices. Franchisor shall also loan Franchisee one copy of its "Vendor Book" which details inventory merchandising and buying information. All dollar amounts contained in the Vendor Book are listed in United States Dollars. Franchisee is required to comply with all provisions of the Operations Manual. Franchisor reserves the right to add, delete, revise or combine the Operations Manual at any time.
G. Additional Initial Assistance. In addition to the usual initial assistance and supervision provided by Franchisor to all franchisees, Franchisor and Franchisee may mutually agree that Franchisor will provide additional management assistance and other services for additional mutually agreed upon compensation.
H. Ongoing Assistance. During the operation of the Store, Franchisor will: (1) make available to Franchisee accounting and business procedures; (2) inspect the Store as often as Franchisor
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deems necessary to review compliance with Franchisor's uniform requirements and quality standards; (3) render, upon the written request of Franchisee, advisory services pertaining to operation of the Store; (4) make available to Franchisee from time to time all changes, improvements and additions to the Business System to the same extent as made available to other franchisees; (5) provide Franchisee with all supplements and modifications to the Operations Manual; (6) sponsor periodic merchandise and promotion meetings for all PARTY AMERICA franchisees; (7) provide Franchisee with updated information from time to time (generally through updates in the Vendor Book) respecting suppliers, pricing and inventory assortment; and (8) establish buying relationships with suppliers for the benefit of the PARTY AMERICA System. Franchisee acknowledges and agrees that the payment and credit terms offered to Franchisee by suppliers will depend primarily upon Franchisee's particular circumstances, including Franchisee's prior retail experience and credit history. Franchisor does not warrant that suppliers will extend credit to Franchisee. If Franchisor receives any advertising allowances or cooperative advertising funds from suppliers, Franchisor shall have the right to use such funds in any manner it deems appropriate.
8. OPERATION OF FRANCHISEE BUSINESS
Franchisee recognizes that the Marks and Business System licensed to Franchisee represent valuable goodwill distinctive of Franchisor's business and reputation. It is also recognized that Franchisor must establish, from time to time, uniform standards of quality and service regarding the business operations of Franchisee's PARTY AMERICA Store so as to protect the distinction, valuable goodwill and uniformity represented and symbolized by the Marks and Business System. Accordingly, Franchisee agrees to maintain the uniformity and quality standards required by Franchisor for all products and services and agrees to the following terms and conditions to assure the public that all PARTY AMERICA stores will be uniform in nature and will sell and dispense quality products and services.
A. Managerial Responsibility. It is agreed that at all times during the term of this Agreement the parties who are signatories to this Agreement shall devote as much time and effort to the active management and operation of the Store as necessary for proper performance and, irrespective of any delegation of authority, shall reserve and exercise ultimate authority and responsibility with respect to management and operation.
B. Design and Appearance of Premises. Franchisee acknowledges that the design and appearance of the exterior and interior of the Store, including signage, are part of the Business System, and that it is essential to the integrity of the Business System that as great a degree of uniformity as possible be maintained among the various premises of PARTY AMERICA franchisees. Franchisee agrees that: (1) no change, addition, or alteration of any kind shall be made to the Store premises without the prior written consent of Franchisor, (2) the decor and fixtures will be maintained in such manner and form as may reasonably be prescribed by Franchisor; (3) all reasonable instructions of Franchisor with respect to layout and character of interior furnishings will be followed; (4) only such signs, emblems, logos, lettering, and artwork as may be reasonably prescribed or provided by Franchisor from time to time, will be displayed on the Store premises; and (5) all replacement fixtures and equipment must conform to Franchisor's quality standards and must be approved in writing.
C Advertising Materials. Franchisee may use only approved advertising and promotional
materials. If Franchisee desires to use any unapproved advertising or promotional materials bearing the
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name PARTY AMERICA or other Marks, Franchisee must obtain written approval from Franchisor prior to using any such materials.
D. General Operation. Franchisee must use the Marks and Business System in strict compliance with the standards, operating procedures, specifications, requirements and instructions required of all PARTY AMERICA stores, which may be amended and supplemented by Franchisor from time to time.
E. Products. Franchisee may sell only those products and services approved by Franchisor in writing and must offer for sale all products and services prescribed by Franchisor. Franchisee must conform to all quality and customer service standards prescribed by Franchisor in writing. Franchisee must purchase only such types, models or brands of fixtures, furniture, equipment, signs, inventory and supplies that Franchisor approves for PARTY AMERICA Stores as meeting its standards and specifications for quality, design, warranties, appearance, function and performance. FRANCHISOR AND/OR ITS AFFILIATE DISCLAJMS ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE IN CONNECTION WITH FRANCHISOR'S (AND/OR AN AFFILIATE'S) SALE OF ANY GOODS, EQUIPMENT, FURNITURE, SIGNS OR SUPPLIES TO FRANCHISEE. If Franchisee desires to purchase any products which have not been approved by Franchisor, Franchisee shall submit samples and specifications to Franchisor for testing to determine whether the products comply with Franchisor's standards and specifications. The prior written approval of Franchisor must be obtained by Franchisee prior to the time that any unapproved products are sold by Franchisee.
F. Maintenance of Premises. Franchisee must, at its expense, repair, paint and keep in an attractive, clean and sanitary condition the interior and exterior of the Store premises. All equipment shall be kept in good working order by Franchisee at all times and shall meet Franchisor's quality standards.
G. Compliance with Laws. Franchisee must, at its expense, comply with all applicable local, state, federal and municipal laws, ordinances, rules and regulations pertaining to the operation of the Store.
H. Payment of Liabilities. Franchisee must timely pay all of its obligations and liabilities
due and payable to Franchisor, suppliers, lessors and creditors. Franchisee's failure to comply with this provision shall be deemed a material breach of this Agreement. Furthermore, Franchisee acknowledges and agrees that Franchisor has the right to confer with suppliers, lessors and creditors and furnish them with information about the Store without being held liable to Franchisee, except for any intentional misstatements made by Franchisor.
I. Taxes. Franchisee shall be exclusively responsible and liable for the prompt payment of
all federal, state and local taxes, including individual and corporate income taxes, sales and use taxes, franchise taxes, gross receipts taxes, employee withholding taxes, F.I.C.A. taxes and personal property and real estate taxes payable as a result of Franchisee's business. Franchisor shall have no liability for these or any other taxes and Franchisee must indemnify Franchisor for any such taxes that may be assessed or levied against Franchisor that arise or result from Franchisee's business. It is expressly agreed by the Personal Guarantors to this Agreement that their personal guaranty applies to the prompt payment of all taxes which arise or result from Franchisee's business.
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J. Standardization. Franchisee must require its employees to wear such uniforms as may be
designated by Franchisor and must comply with such programs of standardization as may from time to time be promulgated by Franchisor to promote the common business image and to protect the goodwill associated with the Marks and Business System.
K. Personnel. Franchisee must, at all times when open for business, have a person designated as a management person on duty who shall be responsible for the business operations of Franchisee's business. Franchisee must employ and maintain a sufficient number of adequately trained and competent employees to guarantee efficient service to Franchisee's customers.
L. Hours of Operation. Franchisee's Store must be open for business for such days and
hours as Franchisor designates.
M. Photographs. Franchisor will have the right to photograph the premises and employees at the Store at all reasonable times.
N. Operations Manual. To protect the reputation and goodwill of Franchisor and to maintain uniform operating standards under the Marks and Business System, Franchisee shall conduct its business in accordance with Franchisor's Operations Manual (the "Manual"), one copy of which Franchisee will have on loan from Franchisor for the term of this Agreement. Franchisee shall at all times treat the Manual, any other manuals created for or approved for use in the operation of the Store, the Vendor Book and the information contained therein as confidential, and shall use all reasonable efforts to maintain such information as secret and confidential. Franchisee shall not at any time, without Franchisor's prior written consent, copy, duplicate, record, or otherwise reproduce the foregoing materials, in whole or in part, nor otherwise make the same available to any unauthorized person. The Manual shall at all times remain the sole property of Franchisor. Franchisor may from time to time revise the contents of the Manual and Franchisee expressly agrees to comply with each new or changed standard. Franchisee shall at all times insure that its copy of the Manual and Vendor Book is kept current, and in the event of any dispute as to the contents of the Manual or the Vendor Book, the terms of the master copy of each of the Manual and Vendor Book maintained by Franchisor shall be controlling.
O. Lease. Franchisee's lease or sublease for the Store premises must be approved by Franchisor prior to its execution. Franchisee's lease must require that the premises be used only for a PARTY AMERICA business and must grant Franchisor the absolute right, but not the obligation, to take possession of the premises and assume the lease in the event of a termination of this Agreement or a threatened termination of the lease as a result of a breach by Franchisee.
P. Franchisee Meetings. Franchisee shall be required to attend up to 2 franchisee
meetings/seminars per year sponsored by Franchisor.
Q. Point-of-Sale System. Franchisor recommends that Franchisee utilizes in the Store a point-of-sale system that meets Franchisee's needs for the Business System, including any future updates, supplements and modifications in response to business operations, marketing conditions and changes in technology. Franchisee shall have the responsibility of purchasing or leasing any and all computer hardware which is compatible for use with the recommended computer software system. Franchisor may require that Franchisee use a designated computer software system at such time that Franchisor determines, in its sole judgment that such system is essential to the operation of the Store. Franchisee shall receive at least 6 months' written notice from Franchisor before such requirement is imposed.
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Franchisee may be required to enter into a computer software license agreement specified by the supplier of the proprietary elements of the computer software system. Franchisor reserves the right, upon prior written notice to Franchisee, to access information and data produced by Franchisee's point-of-sale system.
R. Participation in Internet Web Site or Other On-line Communications. Franchisor may
require Franchisee, at Franchisee's expense, to participate in a PARTY AMERICA web site, intranet or extranet system or other on-line communications. Franchisor will determine the content and use of a web site, intranet or extranet and will establish the rules under which franchisees may or will participate in such web site, intranet or extranet or separately use the internet or other on-line communications. Franchisor will retain all rights relating to the web site, intranet or extranet and may alter or terminate the web site or intranet or extranet system. Franchisee's general conduct on the web site, intranet or extranet or other on-line communications and specifically its use of the Marks on the web site, intranet or extranet or other on-line communications (including the domain name and any other Marks Franchisor may develop as a result of participation in the web site, intranet or extranet or other on-line communications) will be subject to the provisions of this Agreement. Franchisee is prohibited from selling or offering for sale party supplies, related seasonal merchandise, greeting cards, balloons and paper products through the internet or other on-line communication without the prior written consent of Franchisor. Franchisee acknowledges that certain information obtained through its participation in the web site, intranet or extranet may be considered confidential information, including access codes and identification codes. Franchisee's right to participate in the web site or otherwise use the Marks or Business System on the internet or other on-line communications will terminate when this Agreement expires or terminates.
S. Improvements. Franchisor shall have the right to use and incorporate into the Business
System for the benefit of other franchisees of Franchisor or company-owned businesses, any modifications, changes, and improvements, in whole or in part, developed or discovered by Franchisee or its employees or agents in connection with the Store, without any liability or obligation to the developer thereof.
9. CONFIDENTIAL INFORMATION
A. Non-Disclosure of Confidential Information. Franchisee, any Store Manager and those individuals who have signed the Personal Guaranty attached as Schedule A shall not, during or after the term of this Agreement, communicate, disclose or use for the benefit of any other person or entity any confidential information, knowledge or know-how concerning the Business System which may be communicated to Franchisee. Franchisee shall disclose such confidential information only to such of its employees as must have access to it in order to operate the Store. Any and all information, knowledge and know-how, including the Manual, any other manuals created for use in the operation of the Store, the Vendor Book, methods, supplier lists, procedures, specifications, techniques, computer programs and other data which Franchisor copyrights or designates as confidential will be deemed confidential for purposes of this Agreement.
B. Confidentiality Agreements. All of Franchisee's employees who have managerial duties with respect to the Store, as well as all corporate officers, directors and owners if Franchisee is a corporation (all partners if Franchisee is a partnership), must sign agreements in a form satisfactory to Franchisor, agreeing to maintain the confidentiality, during the course of their agreement and thereafter, of all information copyrighted or designated by Franchisor as confidential and proprietary. Copies of the executed agreements must be submitted to Franchisor upon request.
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Franchisee alone shall be responsible for all loss or damage arising out of or relating to the operation of the Store or arising out of the acts or omissions of Franchisee or any of its agents, employees or contractors in connection with the preparation and sale of products by Franchisee, and for all claims for damage to property or for injury or death of any persons directly or indirectly resulting therefrom, and Franchisee agrees to indemnify and hold Franchisor harmless against and from any and all such claims, loss, and damage, including costs and reasonable attorneys' fees. Franchisee shall obtain and at all times during the term of this Agreement maintain in force and pay the premiums for products liability insurance and public liability insurance with complete operations coverage with minimum limits of $1,000,000 per person and $1,000,000 per occurrence, "All-Risk" coverage on stock, equipment and leasehold improvements of not less than 90% of replacement costs and business interruption insurance and other insurance in such types and amounts as reasonably required by Franchisor. Said policies of insurance shall expressly name and protect both Franchisee and Franchisor and shall require the insurer to defend both Franchisee and Franchisor in any action. Franchisee shall furnish to Franchisor a certificate of insurance as set forth above, naming Franchisor as an additional insured, and providing that such policy shall not be canceled, amended or modified except upon 30 days' prior written notice to Franchisor. Maintenance of the insurance requirement shall not relieve Franchisee of the obligations of indemnification set forth in Section 11 below. If Franchisee fails to procure or maintain in force any insurance as required by this Section or to furnish the certificate, Franchisor may, in addition to all other remedies it may have, procure such insurance or certificates, and Franchisee shall promptly reimburse Franchisor for all premiums and other related costs incurred. Franchisee will make provision for any statutory Worker's Compensation Insurance, Social Security unemployment compensation, disability, or other required matters:
11. INDEPENDENT CONTRACTORS: INDEMNIFICATION
A. Relationship. Franchisor and Franchisee are independent contractors. Neither Franchisor nor Franchisee shall make any agreements, representations, or warranties in the name of or on behalf of the other or that their relationship is other than Franchisor and Franchisee and neither Franchisor nor Franchisee shall be obligated by or have any liability under any agreements, representations or warranties made by the other nor shall Franchisor be obligated for any damages to any person or property directly or indirectly arising out of the operation of the Store, whether caused by Franchisee's negligent or willful action or failure to act.
B. Indemnification. Franchisee agrees to indemnify Franchisor against and to reimburse Franchisor for all obligations and damages arising out of the operation of the Store for which Franchisor is held liable and for all costs reasonably incurred by Franchisor in the defense of any such claim brought against it or in any action in which it is named as a party, including reasonable attorneys' fees, costs of investigation and proof of facts, court costs, other litigation expenses and travel and living expenses. Franchisor shall have the right to defend any such claim against it. Franchisor agrees to indemnify Franchisee against and to reimburse Franchisee for any obligations or liability for damages attributable to agreements, representations or warranties of Franchisor, or caused by the negligence or willful action of Franchisor, and for costs reasonably incurred by Franchisee in the defense of any such claim brought against it or in any action in which it is named as a party, provided that Franchisor shall have the right to participate in and, to the extent Franchisor deems necessary, to control any litigation or proceeding which might result in liability of or expense to Franchisee subject to such indemnification. The indemnities and
INITIALS: Franchisee:____ Franchisor:____
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assumptions of liabilities and obligations set forth in this Agreement shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement.
12. SALES REPORTS. FINANCIAL STATEMENTS AND AUDIT RIGHTS
A. Sales Reports. Franchisee must maintain an accurate written record of daily Gross Sales in such form as Franchisor may prescribe from time to time. Franchisee must submit a signed sales report and a photocopy of each day's cash register tape to Franchisor with the monthly Continuing Fee. Franchisor reserves the right to modify or substitute the prescribed forms and to impose additional recordkeeping procedures.
B. Financial Statements. Franchisee must, at its expense, provide Franchisor with monthly and annual financial statements, monthly sales tax returns and such other financial reports as Franchisor specifies using the forms and chart of accounts prescribed by Franchisor. Franchisee also must provide, upon request of Franchisor, a verified copy of all federal and state income tax returns filed by Franchisee. All financial information provided to Franchisor under this Section must be presented in the exact form prescribed from time to time by Franchisor in writing. The monthly financial information shall be delivered to Franchisor by Franchisee by the 15th day of each month for the preceding month. The annual financial statement must be provided within 90 days of Franchisee's fiscal year end.
C. Audit Rights. Franchisee must make all of its books and records available to Franchisor or its designated representative at all reasonable times for review and audit by Franchisor or its designee, and the books and records for each fiscal and calendar year shall be kept in a secure place by Franchisee and shall be available for audit by Franchisor for at least 5 years. In the event that an audit by Franchisor results in a determination that the Continuing Fees paid to Franchisor are deficient (underpaid) by more than 2%, Franchisee shall pay Franchisor for all costs and expenses (including salaries of Franchisor's employees, travel costs, room and board, and audit fees) that it has incurred as a result of the audit. If pursuant to audits, the Continuing Fees have been deficient by more than 2% twice or more within any 5 year period, this shall be considered a material breach of this Agreement and grounds for termination.
13. FRANCHISOR'S RIGHT OF FIRST REFUSAL TO PURCHASE
A. Restrictions. Franchisee will not sell, assign, trade, transfer, lease, sublease, or otherwise dispose of any interest in or any part of (1) Franchisee's business, (2) the Franchised Location or the Store, (3) the assets of the Store, or (4) this Agreement, without first offering the same to Franchisor in writing, at a stated price and on stated terms. Franchisee's written offer to Franchisor must contain all material terms and conditions of the proposed sale or transfer. Upon receipt by Franchisor of written notice specifying the proposed price and terms of a proposed sale or transfer of Franchisee's business, Franchisor will give Franchisee written notice within 15 business days thereafter which will either waive its right of first refusal to purchase, or will state an interest in negotiating to purchase the business according to the proposed terms. If Franchisor commences negotiations to purchase Franchisee's business as set forth herein, Franchisee may not sell the business to a third party for at least 60 days or until Franchisor and Franchisee agree in writing that the negotiations have terminated, whichever comes first. If Franchisor waives its right to purchase, Franchisee shall have the right to complete the sale or transfer of the business according to the terms set forth in the written notice to Franchisor; however, any such sale, transfer or assignment to a third party is expressly subject to the terms and conditions set forth in Section 14 below. Franchisee's obligations under this Agreement including its obligations to pay the Continuing Fee and to operate the business as a PARTY AMERICA
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Store, shall not be affected or changed because of Franchisor's nonacceptance of Franchisee's written offer.
B. Corporate Franchisee. If Franchisee is a corporation or other similar legal entity, the
ownership shares of Franchisee ("Ownership Interests"), may not be sold, pledged, assigned, traded, transferred or otherwise disposed of by the owners until the Ownership Interests have been first offered to Franchisor in writing, although rather than the Ownership Interests, the offer shall be for Franchisee's interest in this Agreement, and the building equipment, inventory, fixtures, and leasehold interest used in the operation of the Store. An amount and terms of purchase shall be established by a qualified appraiser selected by the parties. If the parties cannot agree upon the selection of such an appraiser, one shall be appointed by the American Arbitration Association upon petition of either party to appoint an appraiser to establish such price in accordance with the rules and procedures of the Association. Notwithstanding the terms of this Section, an owner of Franchisee may bequeath, sell, assign, trade or transfer his Ownership Interests to the other owners of Franchisee because of death or permanent disability without first offering it to Franchisor; however, Franchisee must provide Franchisor with written notice of all such transactions. All shares of Ownership Interests issued by Franchisee's corporation or other similar entity to its owners must bear the following legend on the reverse side of each issued and outstanding certificate or similar legend if the Franchisee is a legal entity other than a corporation:
The shares of ownership interests represented by this certificate are subject to a written Franchise Agreement which grants Party America Franchising, Inc. a right of first refusal to purchase these shares of ownership interests from the owner.
14. ASSIGNMENT OF FRANCHISE AGREEMENT
A. Bv Franchisor. This Agreement may be assigned and transferred by Franchisor by giving 30 days prior written notice to Franchisee and shall benefit Franchisor's successors and assigns. Any such assignment or transfer shall require the assignee to fulfill Franchisor's obligations under this Agreement.
B. Corporate Franchisee. If Franchisee is an individual, this Agreement may be transferred or assigned by Franchisee to a corporation or other similar entity which is owned or controlled by Franchisee, provided that Franchisee and all of the owners of the assignee corporation or other similar entity owning a 10% or greater interest in the assignee sign or have signed the Personal Guaranty attached as Schedule A and agree to be bound by the terms and conditions of this Agreement, and further provided that Franchisee furnishes prior written proof to Franchisor substantiating that the assignee entity will be financially able to perform all of the terms and conditions of this Agreement. Franchisee must give Franchisor 15 days written notice prior to the proposed date of assignment or transfer of this Agreement to an entity owned or controlled by Franchisee; however, the transfer or assignment of this Agreement shall not be valid or effective until Franchisor has received the legal documents which its legal counsel deems necessary to properly and legally document the transfer or assignment of this Agreement to the entity as provided herein.
C. Conditions to Other Transfer or Assignment. Franchisee (and its partners and owners) shall not transfer, assign or otherwise dispose of any interest in the Store, the Franchised Location, all or substantially all of the assets of Franchisee's business, this Agreement or any controlling interest (a "controlling interest shall include a proposed transfer of 50% or more of the Ownership Interests of a
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franchisee) without Franchisor's prior written consent. Franchisor shall not unreasonably withhold its consent to a transfer, subject to any or all of the conditions set forth below which Franchisor may, in its sole judgment, deem necessary. The conditions which Franchisor may impose prior to the time of transfer, including any transfer by a trustee in bankruptcy or transfer upon death or disability, are as follows:
1. All of Franchisee's accrued monetary obligations to Franchisor shall have been satisfied, and Franchisee shall not be in default under this Agreement.
2. Franchisee shall have executed a written agreement in a form satisfactory to Franchisor, in which Franchisee covenants to observe all applicable post-term obligations and covenants contained in this Agreement.
3. The transferee-franchisee shall be personally liable to discharge all of Franchisee's obligations under this Agreement, and if so required by Franchisor, shall enter into a written agreement in a form satisfactory to Franchisor assuming and agreeing to discharge all of Franchisee's obligations and covenants under this Agreement.
4. The transferee-franchisee shall have been approved by Franchisor and shall have demonstrated to Franchisor's satisfaction that he meets Franchisor's managerial, financial, and business standards for new franchisees, possesses a good business reputation and credit rating, and has the aptitude and ability to conduct the Franchised Business (as may be evidenced by prior related business experience or otherwise).
5. Prior to the date of transfer the transferee-franchisee and its manager shall have successfully completed any training prescribed by Franchisor.
6. Prior to the date of transfer Franchisee has, at its expense, made such reasonable capital expenditures necessary to remodel, modernize and redecorate the Store and to replace and modernize the supplies, fixtures, and equipment in the Store so that the Store reflects the then-current physical appearance of new Party America stores.
D. Transfer Fee. If this Agreement is assigned, transferred or bequeathed to another person or entity, or if the Ownership Interests of Franchisee is transferred to another person or entity, or, if any partnership interest in Franchisee is transferred, other than pursuant to Section 14(B) above, then Franchisee must pay Franchisor a transfer fee equal to the lesser of 10% of the then-current Initial Franchise Fee or the actual, reasonable expenses incurred by Franchisor in the transfer, including the costs of any required training.
FRANCHISOR'S TERMINATION RIGHTS
A. Grounds. In addition to the other rights of termination contained in this Agreement, Franchisor shall have the right and privilege to terminate this Agreement, as provided herein, if (1) Franchisee fails to open and commence operations of the Store at such time as the premises are ready for occupancy or within 6 months after the execution of this Agreement, whichever occurs first; (2) Franchisee violates any material provision, term or condition of this Agreement, including failure to pay
INITIALS: Franchisee: Franchisor:
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any monetary obligations to Franchisor; (3) Franchisee or any of its managers, directors, officers or majority stockholders are convicted of, or plead guilty to or no contest to (a) a charge of violating any law relating to the Franchised Business or (b) any felony; (4) Franchisee fails to conform to the Business System or the standards of uniformity and quality for the products and services promulgated by Franchisor in connection with the Business System; (5) Franchisee fails to timely pay Continuing Fees, Advertising Fees or any other obligations or liabilities due and owing to Franchisor or its affiliates or fails to timely pay any advertising cooperative obligations; (6) Franchisee is insolvent within the meaning of any state or federal law; (7) Franchisee makes an assignment for the benefit of creditors or enters into any similar arrangement for the disposition of its assets for the benefit of creditors; (8) Franchisee fails to purchase and pay for the equipment, fixtures or supplies required for the business operations of the Store;
(9) Franchisee voluntarily or otherwise "abandons" (as defined below) the Store, as defined herein; or
(10) Franchisee is involved in any act or conduct which materially impairs the goodwill associated with the name PARTY America or any of the Marks or the Business System. The term "abandon" means Franchisee's failure to operate the Store for a period of 2 consecutive days without Franchisor's prior written consent unless such failure is due to an act of God, war, riots or strikes.
B. Notice of Breach. Except as set forth in Section 15(D) and Section 15(E) of this Agreement, Franchisor shall not have the right to terminate this Agreement unless and until written notice describing the alleged breach has been given to Franchisee by Franchisor, and after been given the written notice of breach, Franchisee fails to correct the alleged breach within the period of time specified by applicable law. If applicable law does not specify a time period to correct an alleged breach, Franchisee shall have 30 days after having been given written notice to correct the alleged breach. If Franchisee fails to correct the alleged breach within the applicable period of time, then this Agreement may be terminated by Franchisor as provided in this Agreement. For the purposes of this Agreement, an alleged breach of this Agreement by Franchisee shall be deemed to be "corrected" if both Franchisor and Franchisee agree in writing that the alleged breach has been corrected.
C. Notice of Termination. If Franchisor has complied with the notice provisions of this Section and Franchisee has not corrected the alleged breach set forth in the written notice within the time period specified in this Section, then Franchisor will have the absolute right to terminate this Agreement by giving Franchisee written notice stating to Franchisee that this Agreement is terminated, and in that event, unless applicable law provides to the contrary, the effective date of termination of this Agreement will be the day such written notice is given.
D. Grounds for Immediate Termination. Franchisor will have the absolute right and privilege, unless prohibited by applicable law, to immediately terminate this Agreement if: (1) Franchisee fails to comply with one or more requirements of this Agreement three times in any one 18-month period; (2) the nature of Franchisee's breach makes it not curable; (3) Franchisee willfully and repeatedly deceives customers relative to the source, nature or quality of goods sold, or (4) any default under items (3), (6), or (10) in Section 15(A) above, or (5) Franchisee willfully and materially falsifies any report, statement, or other written data furnished to Franchisor. Any report submitted pursuant to Section 12 shall be conclusively deemed to be materially false if it understates Gross Sales by more than 4%.
E. Notice of Immediate Termination. If this Agreement is terminated by Franchisor pursuant to Section 15(D) above, Franchisor will give Franchisee written notice that this Agreement is terminated, and in that event, unless applicable law provides to the contrary, the effective date of termination of this Agreement will be the day such written notice is given.
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F. Damages. In the event this Agreement is terminated by Franchisor pursuant to Section
15. or if Franchisee breaches this Agreement by a wrongful termination or a termination that is not in accordance with the terms and conditions of Section 16 of this Agreement, then Franchisor will be entitled to seek recovery from Franchisee for all of the damages that Franchisor has sustained and will sustain in the future as a result of Franchisee's breach of this Agreement, which will include damages based upon the Continuing Fees, Advertising Fees and other fees that would have been payable by Franchisee for the remaining term of this Agreement.
G. Other Remedies. Nothing in this Section or this Agreement will preclude Franchisor from seeking other damages or remedies under common law, state or federal law or this Agreement against Franchisee including, but not limited to, attorneys' fees, punitive damages and injunctive relief.
16. FRANCHISEE'S TERMINATION RIGHTS
A. Grounds. Franchisee shall have the right and privilege to terminate this Agreement, as provided in this Agreement, if Franchisor violates any material provision, term or condition of this Agreement.
B. Notice of Breach. Franchisee shall not have any right to terminate this Agreement unless and until written notice setting forth the alleged breach in detail has been given to Franchisor by Franchisee and Franchisor fails to commence the actions necessary to correct the alleged breach or violation within 30 days after receiving written notice, or to correct the alleged breach within 120 days after having been given such written notice. If Franchisor fails to commence the actions necessary to correct the alleged breach as provided herein within 30 days after having been given such written notice, or to correct the alleged breach within 120 days after having been given such written notice, then this Agreement may be terminated by Franchisee as provided for in this Agreement. For the purposes of this Agreement, an alleged breach of this Agreement by Franchisor will be deemed to be "corrected" if both Franchisor and Franchisee agree in writing that the alleged breach has been corrected.
C. Waiver. Franchisee must give Franchisor immediate written notice of an alleged breach or violation of this Agreement after Franchisee has knowledge of, determines or is of the opinion that there has been an alleged breach or violation of this Agreement by Franchisor. If Franchisee fails to give written notice to Franchisor as provided for herein of an alleged breach or violation of this Agreement within one year from the date that Franchisee has knowledge of, determines, is of the opinion that, or becomes aware of facts and circumstances reasonably indicating that Franchisee may have a claim under any state law, federal law or common law, then the alleged breach or violation will be deemed to be condoned, approved and waived by Franchisee, and Franchisee will be barred from commencing any legal or other action against Franchisor for that alleged breach or violation.
17. FRANCHISEE'S OBLIGATIONS UPON TERMINATION
A. Post-Term Duties. If this Agreement is terminated for any reason, Franchisee will (1) within 5 days after termination, pay all amounts due and owing to Franchisor under this Agreement; (2) return to Franchisor by first class prepaid United States mail all operations and other Manuals, the Vendor Book, advertising materials, and all other printed materials pertaining to the operation of the Store; (3) notify all vendors with whom Franchisor conducted business that this Agreement and Franchisee's right to hold itself out as a Party AMERICA franchisee has terminated; (4) immediately
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cancel all assumed or fictitious name filings; and (5) comply with all other applicable provisions of this Agreement. Upon termination of this Agreement for any reason, Franchisee's right to use the name PARTY AMERICA and the other Marks and the Business System shall terminate immediately.
B. Redecoration. If this Agreement is terminated for any reason, and Franchisee remains in
possession of the Store, Franchisee will, at its expense, alter, modify and change, both the exterior and interior appearance of the business premises so that they will be easily distinguished from the standard appearance of PARTY AMERICA stores. At a minimum, such changes and modifications to the premises will include: (1) repainting the premises with totally different colors; (2) removing all signs and other materials bearing the name PARTY AMERICA and other Marks; (3) removing from the premises all fixtures which are indicative of Party AMERICA stores and (4) discontinuing use of all packaging and confidential information regarding the operation of the Store.
18. FRANCHISEE'S COVENANTS NOT TO COMPETE
A. During Term. Franchisee (and the Personal Guarantors) may not, during the term of this Agreement, on their own account or as an employee, consultant, partner, officer, director, or owner of any other person, firm, entity, partnership or corporation, own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in, or assist any person or entity engaged in any other paper or party products business, (including, but not limited to, selling paper or party products through the Internet or other on-line communication) except with the prior written consent of Franchisor.
B. After Termination. Franchisee (and the Personal Guarantors) may not, for a period of 2 years after the expiration or termination of this Agreement, on their own account or as an employee, consultant, partner, officer, director, or owner of any other person, firm, entity, partnership or corporation, own, operate, lease, franchise, conduct, engage in, be connected with, have any interest in or assist any person or entity engaged in any paper or party products business which is located within a 10 mile radius of the Store or any other Party AMERICA store. Franchisee expressly agrees that the 2 year period and the 10 mile radius are the reasonable and necessary time and distance needed to protect Franchisor if this Agreement expires or is terminated for any reason. Covenants not to compete upon termination are generally unenforceable in the State of North Dakota. Franchisee's right to participate in the PARTY America web site or otherwise use the Marks and Business System on the internet or other on-line communications will terminate when this Agreement expires or terminates.
C. Injunctive Relief. Franchisee agrees that in case of any alleged breach or violation of this Section by it, Franchisor shall have the right to seek injunctive, in addition to all other remedies that may be available to Franchisor at equity or law.
19. DISPUTE RESOLUTION
A. Disputes Subject To Arbitration. Except as expressly provided in Section 19(B), all
disputes and controversies between Franchisor and Franchisee and their officers, directors and owners or partners and the Personal Guarantors, including allegations of fraud, misrepresentation or violation of any state or federal laws or regulations, arising under, as a result of, or in connection with this Agreement, the Franchised Location or Franchisee's PARTY AMERICA Store will be submitted to binding arbitration under the authority of the Federal Arbitration Act and will be arbitrated in accordance with the then-current Commercial Rules and Regulations of the American Arbitration Association. All arbitration hearings will take place exclusively in Alameda, California.
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B. Powers of Arbitrator. The authority of the arbitrator(s) will be limited to making a finding, judgment, decision and award relating to the interpretation of or adherence to the written provisions of this Agreement. The arbitrators) will not have the authority or right to add to, delete, amend or modify in any manner the terms, conditions and provisions of this Agreement. All findings, judgments, decisions and awards of the arbitrators) will be limited to the dispute set forth in the written demand for arbitration, and the arbitrator(s) will not have the authority to decide any other issues. The arbitrators) will not have the right or authority to (1) stay the effectiveness of any pending termination of this Agreement; (2) make any award which extends, modifies or suspends any lawfiil term of this Agreement; or (3) award punitive damages to Franchisor or Franchisee or their officers, directors, owners or partners and the Personal Guarantors, and Franchisor and Franchisee and their officers, directors, owners or partners, and the Personal Guarantors expressly waive their rights to plead or seek punitive damages. All findings, judgments, decisions and awards by the arbitrator(s) will be in writing and will be final and binding on Franchisor and Franchisee. The written decision of the arbitrators) will be deemed to be an order, judgment and decree and may be entered as such in any court of competent jurisdiction by either party.
C. No Collateral Estoppel or Class Actions. All arbitration findings, conclusions, orders and awards made by the arbitrator will be final and binding on Franchisor and Franchisee and their officers, directors, owners or partners, and the Personal Guarantors; however, such arbitration findings, conclusions, orders and awards may not be used to collaterally estop either party from raising any like or similar issues, claims or defenses in any other or subsequent arbitration, litigation, court hearing or other proceeding involving third parties or other franchisees. No party except Franchisor, Franchisee, and their officers, directors, owners or partners, and the Personal Guarantors will have the right to join in any arbitration proceeding arising under this Agreement, and, therefore, the arbitrator will not be authorized to permit or approve class actions or to permit any person or entity that is not a party to this Agreement to be involved in or to participate in any arbitration hearings conducted pursuant to this Agreement.
D. Injunctive and Other Relief. Notwithstanding Section 19(A), Franchisee recognizes that the Store is one of a large number of stores identified by the Marks and similarly situated and selling to the public similar products, and hence the failure on the part of a single ftanchisee to comply with the terms of its agreement could cause irreparable damage to Franchisor and/or to some or all other franchisees of Franchisor. Therefore, it is mutually agreed that in the event of a breach or threatened breach of any of the terms of this Agreement by Franchisee, Franchisor shall forthwith be entitled to an injunction restraining such breach and/or to a decree of specific performance, without showing or proving any actual damage, together with recovery of reasonable attorneys' fees and other costs incurred in obtaining said equitable relief, until such time as a final and binding determination is made by the arbitrators. Similarly, it is mutually agreed that in the event of a breach or threatened breach of any of the terms of this Agreement by Franchisor, Franchisee shall forthwith be entitled to an injunction restraining such breach and/or to a decree of specific performance, without showing or proving any actual damage, together with recovery of reasonable attorneys' fees and other costs incurred in obtaining said equitable relief, until such time as a final and binding determination is made by the arbitrators. The foregoing equitable remedies shall be in addition to, and not in lieu of, all other remedies or rights which the parties might otherwise have by virtue of any breach of this Agreement by the other party. Finally, Franchisor and its affiliates reserve the right to commence a civil action against Franchisee or take other appropriate action for the following reasons: to collect sums of money due to Franchisor; to compel Franchisee's compliance with trademark standards and requirements to protect the goodwill of the Marks; to compel Franchisee to compile and submit required reports to Franchisor; or to permit evaluations or audits authorized by this Agreement.
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E. Payment of Costs and Expenses. The non-prevailing party will pay all costs and
expenses, including attorneys' fees, deposition costs, expert witness fees, investigation costs, accounting fees, filing fees and travel expenses actually incurred by the prevailing party any arbitration or court proceeding arising under, out of, in connection with, or in relation to this Agreement or the operation of the Store.
20. GENERAL PROVISIONS
A. Applicable Law: Venue and Jurisdiction. Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Section 1051 et seq.), this Agreement and the relationship between the parties shall be governed by and interpreted in accordance with the laws (statutory or otherwise) of the state in which the Franchised Location is located. Franchisee waives, to the fullest extent permitted by law, the rights and protections that may be provided through the franchise or business opportunity laws of any state other than the state in which the Franchised Location is located. This Agreement shall be deemed to be amended from time to time as may be necessary to bring any of its provisions into conformity with valid applicable laws or regulations. Any cause of action, claim, suit or demand allegedly arising from or related to the terms of this Agreement or the relationship of the parties that is not subject to arbitration under Section 19 hereof, shall be brought in the Federal District Court for the Northern District of California or in the Superior Court of California, County of Alameda. Both parties hereto irrevocably submit themselves to, and consent to, the jurisdiction of said courts. The provisions of this Section 20(A) shall survive the termination of this Agreement. Franchisee is aware of the business purposes and needs underlying the language of this Article 20(A), and with a complete understanding thereof, agrees to be bound in the manner set forth.
B. Severability. All provisions of this Agreement are severable and this Agreement will be interpreted and enforced as if all completely invalid or unenforceable provisions were not contained herein and partially valid and enforceable provisions will be enforced to the extent valid and enforceable. If any applicable law or rule of any jurisdiction requires a greater prior notice of the termination of or refusal to renew this Agreement than is required hereunder or the taking of some other action not required hereunder, or if under any applicable and binding law of any jurisdiction, any provision of this Agreement or any specification, standard or operating procedure prescribed by Franchisor is invalid or unenforceable, the prior notice or other action required by such law or rule will be substituted for the notice requirements hereof, or such invalid or unenforceable provision, specification, standard or operating procedure will be modified to the extent required to be valid and enforceable. Such modifications to this Agreement will be effective only in such jurisdiction and will be enforced as originally made and entered into in all other jurisdictions.
C. Waiver. Franchisor and Franchisee may, by written instrument signed by Franchisor and Franchisee, waive any obligation of or restriction upon the other under this Agreement. Acceptance by Franchisor of any payment by Franchisee and the failure, refusal or neglect of Franchisor to exercise any right under this Agreement or to insist upon full compliance by Franchisee of its obligations hereunder including, without limitation, any mandatory specification, standard or operating procedure, will not constitute a waiver by Franchisor of any provision of this Agreement. Franchisor will have the right to waive obligations or restrictions for other franchisees under their Franchise Agreements without waiving those obligations or restrictions for Franchisee and, except to the extent provided by law, Franchisor will have the right to negotiate terms and conditions, grant concessions and waive obligations for other
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franchisees of Franchisor without granting those same rights to Franchisee and without incurring any liability to Franchisee whatsoever.
D. Continuing Fees. Franchisee agrees that it will not, on grounds of the alleged nonperformance by Franchisor of any of its obligations hereunder, withhold payment of any Continuing Fees or any other amounts due Franchisor.
E. Franchisor's Rights Cumulative. The rights of Franchisor of this Agreement are cumulative and no exercise or enforcement by Franchisor of any right or remedy will preclude the exercise or enforcement by Franchisor of any other right or remedy or which Franchisor is entitled by law to enforce.
F. Binding Effect. This Agreement is binding upon the parties hereto and their respective executors, administrators, heirs, assigns and successors in interest.
G. Entire Agreement. The Background section is a part of this Agreement, which constitutes the entire agreement of the parties. This Agreement supersedes and terminates any prior oral or written understandings or agreements between Franchisor and Franchisee relating to the subject matter of this Agreement. The term "Franchisee" as used herein is applicable to one or more persons, a corporation or a partnership, as the case may be, and the singular usage includes the plural. References to "Franchisee," "assignees" and "transferees" which are applicable to an individual or individuals shall mean the principal owner or owners of the equity or operating control of Franchisee or any such assignee or transferee if Franchisee or such assignee or transferee is a corporation or partnership. If Franchisee consists of more than one individual, all individuals shall be bound jointly and severally by the terms and conditions of this Agreement.
H. Joint and Several Liability. If Franchisee consists of more than one person, their liability under this Agreement will be deemed to be joint and several.
I. Headings: Terms. The headings of the Sections and the provisions of this Agreement are
for convenience only and do not define, limit or construe the contents of such Sections. The term "Franchisee" as used herein is applicable to one or more individuals, a corporation, a partnership, a limited liability company or other entity, as the case may be. References to "Franchisee," "assignee" and "transferee" which are applicable to an individual or individuals will mean the principal owner or owners of the equity or operating control of Franchisee or any such assignee or transferee if Franchisee or such assignee or transferee is a corporation, partnership, limited liability company or other entity. If Franchisee consists of more than one individual, then all individuals will be bound jointly and severally by the terms and conditions of this Agreement.
J. Effect of Wrongful Termination. If either Franchisor or Franchisee takes any action to
terminate this Agreement or to convert Franchisee's PARTY AMERICA Store to another business, and if such action was taken without first complying with the applicable terms and conditions (including the notice and opportunity to cure provisions) of this Agreement, then such action will not relieve either party of, or release either party from, any of its obligations under this Agreement, and the terms and conditions of this Agreement will remain in full force and effect and the parties will be obligated to perform all terms until such time as this Agreement expires or is terminated in accordance with the provisions of this Agreement and applicable law, as determined by an arbitration or a court of competent jurisdiction.
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The original documents were scanned as an image. The original file can be downloaded at the link above.