Franchise Agreement
The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample Franchise Agreement
EXHIBIT A TO
PINKBERRY FRANCHISING COMPANY
OFFERING CIRCULAR
FRANCHISE AGREEMENT AND EXHIBITS
Franchise Agreement Number:
PINKBERRY FRANCHISING COMPANY FRANCHISE AGREEMENT
Date of this Agreement: ________________________________
Expiration Date: _______________________________________
Franchisor: Pinkberry Franchising Company
Franchisee: ___________________________________________
In a number of places in this Franchise Agreement, you are asked to initial certain items to show that they have been fully discussed with you, and read, understood and agreed to by you. Initialing those areas does not lessen the importance of other areas or mean they're not fully enforceable. Please initial below and at all other points indicated.
Your Initials: __________/
1. INTRODUCTION.
1.1 Introduction.
A. We have developed methods of operating Pinkberry Stores which provide a health conscious themed, relaxed and simple, environment specializing in natural frozen yogurt with fresh fruit and other toppings, and offer a choice of yogurt, yogurt drinks and related products and services. We refer to these businesses as "Traditional Pinkberry Stores."
B. To simplify this Agreement and make it easier to read and understand, we have defined certain terms used in this Agreement in Article 22. When you see a capitalized word, or if you do not understand the meaning of a particular pronoun reference, look at Article 22 to see whether the term has been defined. Capitalized words that are not defined in Article 22 are defined in the section where they first appear.
C. You applied for a franchise to own and operate a Traditional Pinkberry Store and your application has been approved by us in reliance on the information you gave us.
D. Your Pinkberry Store franchise is a licensing arrangement, awarded under specific terms and conditions. You must comply fully with this Agreement and the Manuals in order to use the Pinkberry Store, Marks, System and other Intellectual Property.
E. You agree that it is critical to you, us and each Franchisee for the System to be flexible to respond to commercial opportunities and challenges. An inability to change the System could adversely affect ah Pinkberry Store Franchisees. You, therefore, agree and anticipate that the Manual and the
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System may be changed by us. from time to time in our Business Judgment. You agree to comply with the Manuals and the System as they are changed by us.
F. Every detail of your Pinkberry Store Franchised Business is important — not only to you, but to us and to all Pinkberry Store Franchisees — to increase and maintain the value of the Marks and the businesses associated with them. Therefore, during the Term of this Agreement, you must at all times develop, maintain and operate your Pinkberry Store Franchised Business in accordance with each Pinkberry Store System Standard, as modified and supplemented by us from time to time in our Business Judgment, and understand that such changes may require additional investments and/or changes by you in operations and other areas of your Franchised Business.
G. Without your commitment to the System and to fulfill each of the obligations detailed in this Agreement, we would not form this franchise relationship with you.
2. AWARD OF FRANCHISE.
2.1 Award of Franchise: Term. Your Basic Commitment.
A. We are pleased to award you a franchise to operate a single Traditional Pinkberry Store at a single location in the Territory and to be approved by us, and to use the Marks and the Pinkberry Store System in the operation of that Traditional Pinkberry Store. If this Agreement is awarded in connection with a new franchise, the franchise is awarded for a term of five years, commencing on the date of this Agreement; but if the lease or sublease for the Premises is terminated or expires before the end of such franchise term {and no substitute location has been consented to by us in writing and occupied by you before the termination/expiration of such lease/sublease), we can Terminate this Agreement as of the termination/expiration of such lease/sublease.
B. If this Agreement is awarded in connection with your acquisition of an existing franchised Traditional Pinkberry Store then the Term of this Agreement will, at our option, either:
1) end on the expiration date of the franchise agreement granted to the party from whom you acquired the franchise; or
2) be for the Term provided in Section 2.1 (A);
in each case subject to earlier termination upon termination/expiration of the relevant lease/sublease as described in Section 2.1 (A), above. The applicable Expiration Date is noted on the first page of this Agreement.
C. If this Agreement is awarded in connection with the grant of a successor franchise, then the Term of this Agreement will be governed by the successor provisions of the franchise agreement under which you operated during the initial term (which is now expired). The applicable Expiration Date is noted on the first page of this Agreement.
D. The Franchise awarded to you by this Agreement is to operate the Pinkberry Store and to use the Marks and the System only for purposes of conducting a business in accordance with the provisions of this Agreement, the Manuals and other communications from us. You must not conduct the business of the Pinkberry Store, use the Marks and/or distribute the Products/Services from any location other than the Premises, or for any purpose other than as approved by us in writing. You must not conduct any activities from the Premises other than the operation of your Pinkberry Store without our prior written consent. You will not engage in any other business or activity that may conflict with your obligations under this Agreement or reduce the Gross Revenue of your Pinkberry Store.
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2.2 Territory.
A. Subject to our rights as set forth anywhere in this Agreement and for its term; we will not enter into a Franchise Agreement licensing a Traditional Pinkberry Store, or open a Franchisor-owned Traditional Pinkberry Store, inside the area described in Exhibit 2.2. The Territory population may vary depending upon the characteristics related to the particular Territory in our Business Judgment. Should boundaries of any zip code designated on the Territory Schedule change due to political re-districting, or other such action, your Territory will be deemed the same geographic boundaries as those designated for that zip code on the Commencement Date of this Agreement. Your rights in the Territory are exactly (and only) as expressly set forth in this Section 2.2. Except for the location of a Traditional Pinkberry Store within the Territory, you have no right to exclude, control or impose conditions on the location or operation of present or future Pinkberry Store (or any other brand) units or distribution channels of any type, franchised or Pinkberry Store-owned, regardless of their location or proximity to the Premises. The Franchise does not grant you any rights with respect to other and/or related businesses, products and/or services, in which we or any Franchisor Related Persons/Entities may be involved, now or in the future.
B. We and the Franchisor-Related Persons/Entities expressly reserve all other rights, and can (along with anyone we designate):
1) own and/or operate ourselves, and/or authorize others to own and/or operate:
a) any kind of business in the Territory, except for a Traditional Pinkberry Store, whether or not using the Pinkberry Store Marks and System; and
b) any kind of business outside of the Territory, including without limitation, a Traditional Pinkberry Store, whether or not using the Pinkberry Store Marks and System;
2) sell Pinkberry Store brand (or any other brand) Products and Services (whether or not competitive), to customers located anywhere (including within the Territory) using any channel of distribution other than a Traditional Pinkberry Store located in the Territory;
3) develop or become associated with other concepts {including dual branding and/or other franchise systems), whether or not using the Pinkberry Store System and/or the Marks, and award franchises under such other concepts for locations anywhere;
4) acquire, be acquired by, merge, affiliate with or engage in any transaction with other businesses (whether competitive or not), with units located anywhere. Such transactions may include (but are not limited to) arrangements involving competing outlets and brand conversions (to or from the Pinkberry Store Marks and System). Such transactions are expressly permitted under this Agreement, and you agree to participate at your expense in any such conversion as instructed by us.
C. You understand that a "Traditional Pinkberry Store is defined in Article 22. The term does not include non-Traditional Pinkberry Store or other distribution opportunities. A non-Traditional Pinkberry Store concept may include (but is not limited to) limited square footage outlets like an "express" unit or a kiosk; units housed within other retail facilities, such as a department store, airport, hotel or casino; Internet sites and/or direct mail operations.
D. Our current policy is to allow you and other Pinkberry Store Franchisees to accept orders from any customer located anywhere, but we can change this policy in our Business Judgment. You agree to comply with any policy changes.
E. Exhibit 2.2 will state if the location and Territory for your Traditional Pinkberry Store has not been identified by the date of this Agreement. If applicable, we will identify the Territory on a
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document to be initialed by you and us within 48 hours from our notice to you of our acceptance of the location for your Traditional Pinkberry Store. |f:
1) you disagree with such Territory; and
2) you provide us with written notice of your disagreement within 48 hours of your receipt of the Territory boundaries; and
3) you and we fail to arrive at a mutually acceptable Territory definition; then,
we will cancel ail of our obligations under this Agreement and receive from you (and each Affiliate of yours) a General Release. The Post Termination Provisions of this Agreement will survive such cancellation.
F. If you are not in Good Standing, we can reduce, eliminate or otherwise modify your
territorial rights. We do not make any representation or assurance that you can or will achieve such performance minimums contained in this Agreement.
2.3 E-Commerce/Email Business and Special Accounts - Current Policies.
A. Your use of the Internet, World Wide Web, and other electronic or other means of marketing and distribution of goods and/or services can be restricted by us in our Business Judgment. You will not market or sell through such venue{s) or any channel of distribution other than your Traditional Pinkberry Store without our written permission, which we can grant, condition or deny in our Business Judgment. You agree not to deal with Special Account(s), as we may specify from time to time.
B. We, the Franchisor-Related Persons/Entities and anyone we designate may offer/provide any Products and/or Services or otherwise through the Internet, World Wide Web, direct mail and/or other similar venues (no matter where the Customer is located), whether or not in connection with any use of the Marks and/or System.
2.4 Essential Personnel.
The person(s) named below are of crucial importance to the Franchised Business, the franchise would not have been awarded in the absence of their involvement with the Franchised Business and the Franchisee (as specified below) and, if with respect to any of them, one or more of them is no longer holding the position(s) listed, or has had his or her equity interest in the Franchisee reduced, we can, in our Business Judgment, elect to cancel all of your rights and our obligations under this Agreement within 30 days after receipt of written notice of such change. You will execute a General and Unlimited Release and Indemnity in favor of us (and all affiliated persons/entities) of and from any and all claims and/or obligations, of any nature whatsoever, however arising, known or unknown, and your post-termination obligations, including but not limited to those of indemnity, confidentiality and non-com petition, will survive such cancellation of this Agreement.
Name Position Equity Ownership Percentage
________________________________________________________________%
%
I have read Sec. 2.1, 2.2, 2.3 and 2.4, understand them, and agree with them.
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Your Initials: __________/
3. DEVELOPMENT AND OPENING OF YOUR PINKBERRY STORE
3.1 Site Selection.
A. You must have a site acceptable to us within 3 months from the date of this Agreement, receive the opening notice from us described in Section 3.6, below, and do everything necessary for your Pinkberry Store to open for business within 6 months from the date of this Agreement. You must not operate a Pinkberry Store, use any of the Marks from or at any location, or make any commitments about a site until you have our written site acceptance. We will not unreasonably withhold our acceptance. Acceptance by us of any location is not a recommendation, approval or endorsement of such site. We make no representations or warranties as to the success of any site or as to any other matter of any kind relating to the site.
B. If you fail to acquire a site within the time provided in 3.1 (A), above, then we can Terminate this Agreement.
C. If, in our Business Judgment, you were not able to acquire a site within the time provided in the Territory due to special circumstances within the Territory, then we may offer you an alternate Territory and amend this Agreement accordingly. In those special circumstances, which shall only occur in our Business Judgment, the payment of the Initial Franchise Fee will be credited against the payment for the new Territory, but only if you sign a General Release and a Franchise Agreement Amendment document acceptable to us.
C. All matters related in any way to your site are your sole responsibility, regardless of any
assistance we may choose to provide. You are responsible for obtaining any architectural and engineering services required for your facility and for ensuring its compliance with local law. Neither we, nor any Franchisor-Related Persons/Entity, nor any other person or company associated with us will have any liability for any site-related matter. You agree not to make any claims against us and/or any of the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC with regard to such matters.
3.2 Lease of Premises.
A. You agree to submit any lease and all site-related documents to us for our review prior to
their execution by you. You will use commercially reasonable efforts to arrange for the inclusion of provisions in the Lease Addendum or other appropriate site-related documents which:
1) Obligate the lessor to provide us on request with sales and other operations information related to your Pinkberry Store;
2) Permit you to operate your Pinkberry Store in accordance with this Agreement and the Manuals;
3) Provide that the Premises will be used only for the operation of a Pinkberry Store, and prohibit you from assigning or modifying any of your lease rights, or extending the term without our prior written consent;
4) Require the lessor to concurrently provide us with a copy of any written notices (whether of default or otherwise) to you under the lease and give us the right to cure any default if we so choose;
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5) Provide us with a right to take assignment and possession of your Pinkberry Store, without the lessor's consent or any additional consideration. If we exercise this right, we will not have any liability for any obligations incurred prior to our occupancy. You agree to take whatever actions are necessary to accomplish such assignment and will, when you sign this Agreement, also sign the Collateral Assignment of Lease attached as Exhibit 3.2. If you lose your lease rights to the Premises in connection with any bankruptcy, the lessor will, on our request, enter into a new lease with us on essentially the same terms as the terminated lease;
6) Provide that the lessor consents to the use of the Marks, Trade Dress and other aspects of the System, as modified from time to time, and gives us the right to enter the premises during normal business hours for purposes of inspection to take steps to protect the Marks and Trade Dress and/or prevent/cure any default.
You will not execute a lease or sublease, or any modification or amendment, without our prior written consent, which we can grant, condition or withhold in our Business Judgment. You must deliver a copy of the signed lease or sublease to us within 5 days after it is signed.
3.3 Pinkberry Store Design Standards. You agree to comply with any standards, specifications and other requirements (the "Design Standards") that we furnish you for design, decoration, layout, equipment, furniture, fixtures, signs and other items for your Pinkberry Store. Any changes from plans provided by us must be submitted to us for our consent, which may be provided in our Business Judgment. Your compliance with the Design Standards does not release you from your obligations to ensure that your Pinkberry Store is designed, constructed and operated in compliance with all local, state, and federal laws, including {without limitation) the Americans with Disabilities Act ("ADA"). You agree to execute and deliver to us an ADA Certification in the form attached to this Agreement as Exhibit 3.3 before you open your Pinkberry Store to confirm and certify that your Pinkberry Store and any proposed renovations comply with the ADA and other requirements.
3.4 Development for Your Pinkberry Store. You must select and employ a licensed contractor approved by us as our design and construction information and requirement are Confidential Information and a part of our Intellectual Property.
3.5 Equipment Furniture. Fixtures and Signs. You will use only Designated Equipment and suppliers approved by us in the development and operation of your Pinkberry Store as we may require. We and/or our Affiliates may be such approved suppliers.
3.6 Pinkberry Store Opening. You will open your Pinkberry Store for business immediately upon our notice to you that:
A. all of your pre-opening obligations have been fulfilled;
B. pre-opening training has been completed;
C. all amounts due us (and/or any Affiliate) have been paid; and
D. copies of all insurance policies {and payment of premiums), leases/subleases and other required documents have been received.
3.7 Grand Opening Program - Initial Launch - Marketing. You agree to spend at least $2,000 on a grand opening marketing program. We will furnish advice and guidance to you with respect to such program that you agree to follow. It is recommended that you budget to spend an additional $2,000 per month on an Initial Launch Program of marketing for the first three months after your Grand Opening. We will furnish advice and guidance to you with respect to such program.
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3.8 Relocation of Pinkberry Store Premises. Any relocation:
A. must be to a location within the Territory (unless waived by us);
B. requires our prior written consent, which we can grant, condition or withhold in our Business Judgment (and which may be withheld, in any case, if you are not in Good Standing);
C. will be at your sole expense; and
D. will require that you (and each Affiliate and owner of yours) sign a General Release.
If your Pinkberry Store is damaged, condemned or otherwise rendered unusable, or if, in your and our judgment, there is a change in the character of the location of your Pinkberry Store sufficiently detrimental to its business potential to warrant its relocation, you agree to relocate your Pinkberry Store.
4. COMPUTER HARDWARE AND SOFTWARE SYSTEMS.
A. You must purchase, use, maintain and update at your expense the point of sale, software, computer and other systems (including point of sale and back office systems) meeting our specifications, as we may modify them. You agree to maintain your systems online to allow us access to system data and information. You agree to comply with our then-current Terms of Use and Privacy Policies and any other requirements regarding all computer and other systems, including Internet usage. Supplier and/or licensor charges for use, maintenance, support and/or updates of and to the required systems are payable by you upon receipt.
B. Neither we nor any of the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC will have any liability and/or obligation (and neither you, nor any Affiliate of yours, will make any claims) about any failures, errors or any other occurrences relating to any computer or system hardware or software without an express written warranty from us, even if recommended or specified by us.
5. TRAINING AND GUIDANCE. 5.1 Training.
A. You and each Pinkberry Store manager must successfully complete our initial training program before operating your Pinkberry Store. The Initial Franchise Fee covers an initial training program for either one or two individuals, who must include you and the initial Pinkberry Store manager, who may be you. There is no reduction or refund of any part of the Initial Franchise Fee if one individual attends the initial training program. We can charge a reasonable fee for training of additional and/or subsequent managers. We can choose to eliminate or shorten training for persons previously trained or with comparable experience.
B. The initial training program will be at a time and place, and for such period, as we specify in our Business Judgment. You will be responsible for all travel, living, incidental and other expenses for you and your personnel attending the initial training program and any other voluntary or mandatory training programs, seminars or meetings, unless otherwise agreed to by us in writing. We can charge a tuition fee for any optional training programs.
C. If we, in our Business Judgment, determine that you have not successfully completed (or are not making satisfactory progress in) your initial training, we can either: (a) require that a substitute manager complete the training, or (b) Terminate this Agreement and you and your Affiliates will return the Manuals and sign a General Release and a document acceptable to us that preserves the Post
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Termination Provisions of this Agreement. On performance of all of your obligations to us under this subsection, we will release you from your obligations to: (a) operate the Pinkberry Store which is the subject of this Agreement and (b) pay royalties and Marketing Fund contributions relating to periods after the date of Termination.
D. You and your manager must attend additional and/or refresher training programs,
including national and regional conferences, conventions and meetings, as we may reasonably require to correct, improve and/or enhance your operations, the System and its members. In addition, we can require successful completion of training by your personnel as specified by us from time to time.
5.2 Guidance and Assistance. We will provide guidance in the operation of your Pinkberry Store. This guidance can be furnished in whatever manner we consider appropriate in our Business Judgment, including electronically, in writing or telephonically, through training programs and/or on-site consultations, among other methods. We may {but are not required to) provide on-site consultations at your Pinkberry Store, based on notice, availability of personnel and your payment of reasonable travel, food, incidental and lodging expenses. We can elect to charge a reasonable fee for any such on-site consultations. If we believe in our Business Judgment that your operations warrant it, we can require that a manager or other person designated by us (and compensated by you) be placed in your Pinkberry Store to supervise its day-to-day operations until operations meet System standards.
5.3 Manuals. During the Term of this Agreement, we will loan you (or allow you electronic or other access to) one copy of the Manuals. If we advise you that all or part of the Manual or other specifications, standards and operating procedures are posted on a Website, you agree that it is your responsibility to monitor the Website for any changes, additions or deletions in the information provided. You will continuously comply, at your sole expense, with all provisions of, and additions/ deletions/ changes to, the Manuals. Any such additions/deletions/changes will take precedence over all prior communications. Mandatory specifications, standards and operating procedures prescribed from time to time by us in the Manuals, or otherwise communicated to you electronically or otherwise, are a part of this Agreement. In the event of a dispute, the master Manuals maintained at our office will control. The Manuals and the information and data that they contain will at all times remain our sole and exclusive property. It is your sole responsibility to establish, with respect to your employees, appropriate personnel and security-related policies and procedures (provided that we always have the right to terminate your rights by declaring a breach under this Agreement for conduct by you which threatens the goodwill associated with the Marks.) You and we acknowledge and agree that we neither dictate nor control labor or employment matters for you and your employees, including {but not limited to) hiring, firing and/or discipline of employees, nor control the manner and means by which they carry out their duties. You and we agree that neither of us are, or will be deemed to be, a joint employer with the other and you will indemnify us with respect to any such or similar claims against us.
6. MARKS.
6.1 Goodwill and Ownership of Marks. You have a non-exclusive right to use the Marks and only as expressly authorized by us under this Agreement. We have all rights in and to the Marks. AH goodwill belongs exclusively to us. and you will not obtain any goodwill in the Marks as a result of this Agreement, your operation of the Franchise or for any other reason. Any unauthorized use of the Marks is a breach of this Agreement and an infringement of our proprietary rights. You agree that if you breach any obligation regarding the Marks, we would have no adequate remedy at law and that we will be entitled to equitable relief. You will not oppose, or engage in any acts or omissions inconsistent with, our rights in and to the Marks. This Agreement applies to all trademarks, service marks and other commercial symbols that we authorize you to use throughout its term.
6.2 Limitations and Use of Marks. You will use the Marks as the sole identification for your Pinkberry Store. You will not use any Mark, or modified version or derivative of a Mark, or any other mark or form of commercial identification confusingly similar to the Marks or Trade Dress, as part of any
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business or trade name or in any other manner not expressly authorized by us in advance and in writing. Prior to adoption and/or use, any proposed corporate and/or trade name must be approved by us in our Business Judgment. You will give such trademark and other notices (including notices of independent ownership) as we direct and will, at your expense, obtain fictitious or assumed name registrations as may be required under law. You will display the Marks as required by us and will not use the Marks so as to negatively affect their goodwill. You will not use any Mark in connection with the performance or sale of any unauthorized services or products or at any location or in any other manner not expressly authorized in writing by us.
6.3 Notification of Infringements and Claims. You will take such actions as we consider important in our Business Judgment to protect the Marks. You will not take any action that jeopardizes our interests in, or the validity or enforceability of, the Marks. You agree to immediately notify us of any apparent or actual infringement of, or of any challenge to your use of, the Marks. You will not communicate with any third party with respect to such a claim. We will take such action as we deem appropriate in our Business Judgment. As owner of the Marks, we have the exclusive right to control any settlement, litigation or proceeding arising out of or related to any such matters.
6.4 Discontinuance of Use of Marks. You agree to comply at your expense with any directions from us to discontinue, modify, substitute or add Marks. We cannot and do not make any guaranty that a modification, discontinuance or otherwise will not be required for any reason. In such event, we will have no liability or obligation to you. You agree to make no claim in connection with any modification, discontinuance or other action, and/or with any dispute regarding the Marks. There is always a possibility that there might be one or more businesses using a name and/or marks similar to ours and with superior rights. We urge you to research this possibility, using telephone directories, local filings and other means, prior to signing any documents or making any payments or commitments
7. RELATIONSHIP OF THE PARTIES: INDEMNIFICATION.
7.1 Independent Contractor. You will always identify yourself to all persons and in all dealings of your Pinkberry Store as an independent owner under a Pinkberry Store franchise, clearly indicating that your Franchised Business is separate and distinct from our business. You will include notices of independent ownership on such forms, business cards, stationery, advertising, signs and other materials as we require from time to time. Subject to the requirements of this Agreement and the Manuals, you will have complete operational control of your business, including the right to hire and fire each employee.
7.2 No Liability for Acts of Other Party. You will not represent that your and our relationship is other than that of independent Franchisor and Franchisee. Neither you nor we will have any liability under any acts, omissions, agreements or representations made by the other that are not expressly authorized in writing.
7-3 Taxes. Payment of all taxes related to your Franchised Business is your sole responsibility. We have no liability for any taxes on the sales made and/or business conducted by you (except for any taxes we are required by taw to collect from you with respect to purchases from us).
7.4 Responsibility. Indemnity, etc.
A. You will indemnify and hold us and all of the Franchisor-Related Persons/Entities, the
Marketing Fund and the FAC harmless from all fines, suits, proceedings, claims, demands, actions, losses, damages, costs, fees (including attorneys' fees and related expenses) and/or any other liability of any kind or nature, however arising, growing out of or otherwise connected with and/or related to any act, error and/or omission of yours (including, but not limited to, your ownership and/or management of your Pinkberry Store and/or any transfer of any interest in this Agreement or your Pinkberry Store). We will have the right to control all litigation, and defend and/or settle any claim, against and/or including us
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and/or the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC, or affecting our and/or their interests, in such manner as we deem appropriate in our Business Judgment, without affecting our rights under this indemnity.
B. Any goods and/or services provided by us, the Franchisor-Related Persons/Entities, the
Marketing Fund and/or the FAC and/or any "approved" person/company/referral are provided without any warranties, express or implied, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE BEING EXPRESSLY DISCLAIMED, absent a specific written warranty expressly provided in connection with a particular item or service.
I have read Sec. 7.4, understand it, and agree with it. Your Initials: __________/__________
7.5 Disclosure. We can disclose, in offering circulars and other places we designate, and/or as required by law, any information relating to your Pinkberry Store, including your name, any address and/or phone number(s), revenues, expenses, results of operations and/or other information. Any disclosure by us will be for reasonable business purposes.
8. CONFIDENTIAL INFORMATION: EXCLUSIVE RELATIONSHIP.
8.1 Confidential Information - Non-Disclosure and Non-Use.
A. "Confidential Information" includes all information {current and future) relating to the operation of a Pinkberry Store or the System, including, among other things, all: (i) Manuals, training, techniques, processes, policies, procedures, systems, data and know how regarding the development, marketing, operation and franchising of Pinkberry Store; (ii) designs, specifications and information about Products and Services, and (iii) all information regarding customers and suppliers, including any statistical and/or financial information and all lists.
"Confidential Information" is not intended to include any information that:
1) is or subsequently becomes publicly available other than by breach of any legal obligation,
2) was known by you prior to you becoming an Pinkberry Store Franchisee, or
3) became known to you other than through a breach by you of a legal obligation.
You agree that we own and control all domain names and URLs {"Uniform Resource Locator") relating to any Pinkberry Store Franchised Businesses, as well as all information, lists and data related to past, present and future customers of your Pinkberry Store Franchised Business. Your only interest in any of this proprietary and/or Confidential Information is the right to use it pursuant to this Agreement. You have the burden of proof and of going forward in any dispute between you and us involving the proprietary or confidential nature of any information.
B. Both during the Term of this Agreement and for 5 years after the end of the Term (except for trade secrets, which are subject to your permanent obligation), you agree:
1) to use the Confidential Information only for the operation of your Pinkberry Store
Franchised Business under a Pinkberry Store Franchise Agreement;
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2)
to maintain the confidentiality of the Confidential Information;
3) not to make or distribute, or permit to be made or distributed, any unauthorized copies of any portion of the Confidential Information;
4) not to alter, appropriate, use or distribute any Pinkberry Store Equipment designs or specifications, or any substantially similar designs or specifications; and
5) to implement all prescribed procedures for prevention of unauthorized use or disclosure of the Confidential Information.
However, notwithstanding the foregoing, if an item is not merely confidential Information but constitutes a trade secret under applicable law, the above obligations will apply without any time limit.
C. You agree to disclose to us all ideas, techniques, methods and processes relating to a Pinkberry Store which are conceived or developed by you and/or your employees. We will have the perpetual right to use, and to authorize others to use, such ideas, etc., without payment to you.
D. You will cause each of your employees, agents, principals and Affiliates to sign a form of confidentiality agreement containing substantially the same provisions as are set forth in this Section and as may be approved by us. You will provide us copies of the same upon request.
E. If your Pinkberry Store is to be located and/or operated within, in conjunction with, or as part of another business, you will first arrange for the other business and its personnel (as specified by us) to enter into appropriate arrangements to protect our Intellectual Property and other interests, including (but not limited to) signing of agreements with us regarding non-competition, confidentiality, nonsolicitation of employees and customers and indemnity/insurance arrangements.
8.2 Exclusive Relationship. Restrictions on Similar Businesses During Franchise Term and After Transfer. Termination. Expiration, etc.
A) In Term Restrictions: During the Term of this Agreement and any successor franchise,
neither you, nor any Affiliate of yours, nor any shareholder, member or partner of yours (if you are or become a business entity), nor any Immediate Family member of any of the foregoing, will:
1) have any direct or indirect interest anywhere in any Similar Business, or in any entity awarding franchises or licenses or establishing joint ventures or other business enterprises for the operation of Similar Businesses; or
2) perform any services anywhere as an employee, agent, representative or in any capacity of any kind for any Similar Business, or for any entity awarding franchises or licenses or establishing joint ventures to operate Similar Businesses; or
3) employ or try to employ any employee of ours, of a Franchisor-Related Person/Entity or of any other Pinkberry Store Franchisee, without providing notice to the respective employer and obtaining their prior written consent.
If you violate Section 8.2 (A) 3 during or after the Term of this Agreement, then our remedies will include (but not be limited to) payment to us by you of $75,000, such amount having been mutually agreed on by you and us in view of the extreme difficulty in accurately determining the damages suffered as a result of such breach.
B. Post Term Restrictions: For 2 years after the later of the following terminating events: (i)
any transfer and/or Termination of this Agreement; (ii) the expiration of this Agreement (if a Successor
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franchise or renewal term is not granted); and/or (Hi) the date on which you stop operating your final Pinkberry Store or using the Marks and/or System, all of the persons and entities named in Section 8.2 (A), above, you:
1) will not accept or solicit any person, firm or company that has been a Pinkberry customer during the period 12 months prior to termination, nor try to divert any such customers from any Pinkberry Store or Pinkberry enterprise of any kind (including any operations owned by any Franchisor-Related Persons/Entity); and
2) will be subject to all of the restrictions stated in Section 8.2 (A), above, with respect to Similar Businesses located, and/or services to be performed, in the Territory and in the marketing area of any Pinkberry Store ("Marketing Area"). For the purposes of this Agreement, a Marketing Area for a Franchisee-operated Pinkberry Store is the Territory defined by such Franchisee's franchise agreement. For a Pinkberry Store owned by us or an Affiliate, or if a Franchisee does not have a designated Territory, the Marketing Area is defined as the geographic area within a 25 mile radius of such Pinkberry Store. However, the 2 year period following such terminating event will be extended for one additional year if, during the first 2 years a Pinkberry Store is located in a portion of your former Pinkberry Store Marketing Area. You and we intend to provide any such newly established Pinkberry Store a reasonable period of time in which to launch its operations in a new market without unfairly being competitively disadvantaged by having a party familiar with and experienced in the Pinkberry Store System operating in the same Marketing Area.
3) You are responsible for learning whether or not a particular location is within a Pinkberry Store Marketing Area by providing us a written request for such information. Any and all determinations that we make regarding the Marketing Area will be final and binding on you.
4) You and we have expressly bargained and agreed that it is your obligation under this Agreement to ensure the compliance of each of the persons identified in Section 8.2 (A), with the restrictions described in this Section 8.2. The foregoing notwithstanding, we will use reasonable judgment in evaluating whether or not the conduct of an Immediate Family member warrants our exercising any rights under this provision, considering your actual relationship to such member and his/her activities, among other factors. The restrictions of this Section do not apply to the ownership of shares of a Similar Business (of a class of securities listed on a stock exchange or traded on the over-the-counter market) which represent less than 3% of the number of shares of that class issued and outstanding.
5) You and we share a mutual interest in ensuring compliance with the limitations on competition described in this Section 8.2. A Pinkberry Store Franchisee's non-compliance with these restrictions would damage you, us and other Pinkberry Store Franchisees and unfairly limit reasonable expansion alternatives open to us and Pinkberry Store System members. You acknowledge and agree that such protections can enhance the value of the Pinkberry Store System to you as a Franchisee, represent a reasonable balancing of your and our respective interests and have been expressly bargained for. You confirm that you possess valuable skills unrelated to the Franchised Business and have the ability to be self-supporting and employed regardless of the competitive restrictions described in this Section 8.2. You and we also acknowledge that the restrictions of this Article 8 will not generally prevent you from practicing a lawful profession, trade, or business and are limited to the express restrictions on solicitation of customers and operation of a Similar Business in certain limited geographical areas as detailed herein.
6) If you violate any of the foregoing restrictions, our remedies will include (but not be limited to) the right to obtain equitable relief and to receive all profits generated in connection with the operation of any Similar Business until the date you cease to violate such restrictions. All competitive restrictions will be extended for the length of time that any breach of the Post Termination Obligations is ongoing. If any of the restrictions of this Section are determined to be unenforceable to an extent because of excessive duration, geographic scope, business coverage or otherwise, they will be reduced
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to the level that provides the greatest protection to us and the Pinkberry Store System, but which is still enforceable, notwithstanding any choice of law or other provisions in this Agreement to the contrary.
I have read Sec. 8.1 and 8.2, understand them, and agree with them.
Your Initials: __________/__________
9. FEES.
9.1 Initial Franchise Fee. Releases, etc.
A. An Initial Franchise Fee of $40,000.00 is fully earned by, and payable to, us on signing of this Agreement. The fee is entirely nonrefundable (as are all amounts paid to us and/or any of the Franchisor-Related Persons/Entities). The Initial Franchise Fee {and other amounts charged) may not be same for all franchisees, depending on prior relationship, number of franchises awarded and other factors.
B. If you and we have, or have had, a pre-existing franchise relationship prior to the execution of this Agreement, the language of the General Release attached as Exhibit 1.2 is incorporated in and effective upon the signing of this Agreement, excepting only those claims solely related to the offer and sale of this Franchise where such releases are expressly prohibited by applicable law.
C. As a condition to the occurrence of any of the following events {the "Events"), you and/or any affiliate/owner of yours will sign a General Release, excluding only (where such releases are expressly prohibited by applicable law) those claims solely related to the offer and sale of the new Franchise:
1) the awarding of any future, additional or other franchise;
2) the renewal of this franchise and/or awarding of a successor franchise;
any assignment or transfer (as defined in this Agreement) by you and/or any affiliate/owner of you; and/or
3) any other event described in this Agreement as being conditioned in whole or in part upon such a General Release (as defined in Article 22.)
If we fail to request or obtain from you any General Release(s), at the occurrence of any of the foregoing Events, then the occurrence of the Event itself will constitute the grant of such General Release.
D. You and we have agreed on these provisions considering that: (i) the releases to be provided in the future will be effective as of future dates only, (ii) the release requirement generally is triggered by a discretionary choice made by you to receive various future benefits (e.g. an award of an additional, successor, assignment franchise, etc.), and (iii) you providing a release to us (and we informing you of possible known claims by us) is a practical business approach if you and/or we propose to change, extend, expand or otherwise modify our relationship at a future date. You and we agree that setting mutual expectations for the receipt of such future releases and assenting to grant them now is more productive than being surprised by such requirements at a later point in our relationship.
9.2 Internet Service Fee. You may be required to pay an internet fee pursuant to section 11.3(c) below.
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9.3 Royalty - Percentage and Minimum. Payment Dates.
A. Royalty. You must pay us without offset, credit or deduction of any nature, a monthly Royalty Fee equal to 3% of the Gross Revenues or the then prevailing Monthly Minimum (as defined below) whichever is greater. The Royalty Fee will be paid and reported monthly as specified in section 12.2 below or as otherwise prescribed in the Manuals from time to time. Minimum and/or percentage royalties are to be paid by the tenth day after each royalty period. Royalty payments are due commencing with the royalty period in which you open your Pinkberry Store or 180 days after the Effective Date of this Agreement, whichever is earlier. The current royalty period is a calendar month, but the time covered by a royalty period may be changed by us in our Business Judgment to any other period. If such change is made, any amounts, including minimums, which are paid based on, or calculated in relation to, a royalty period will be appropriately adjusted, as will any related matters. You must use vour best efforts to maximize Gross Revenues.
B. Minimum Royalties. We may choose in our Business Judgment to require you to pay the Minimum Royalties for Pinkberry Store Franchises. The Minimum Royalties will be implemented and become effective upon 30 days written notice to you. The Minimum Royalties shall not be implemented until there are at least 10 Pinkberry Store Franchises open and operating for a period of at least 6 months.
|
Period Open* |
Minimum Royalties (adjusted every 6 months) | |
|
Less than Six Months |
5% of PUA** |
|
6 months or more |
6%0fPUA** |
*Measured from the earlier of: actual opening date, or the date by which the Store is required to be open.
**"PUA" or "Per Unit Average": The average Gross Revenues for all Pinkberry Store Franchises in the United States during the most recent 6 month period before the measuring date.
C. We can require that various Designated Equipment, Products and/or Services only be
supplied by us, a Franchisor-Related Person/Entity and/or a designee of ours and we and/or one or more Franchisor-Related Person/Entities may derive additional revenues (and possibly profits) as a result of your purchases of such Designated Equipment, Products/Services. You and we have agreed on the foregoing royalty rates based, in part, on your commitment not to use and/or obtain any such Designated Equipment, Products and/or Services from any source other than the source we require. The possibility of such arrangements, and your and our mutual expectations that you will faithfully observe your obligations to purchase such items as provided herein, and that the provisions of this subsection will be fully enforceable, form part of the underlying financial and business model on which your relationship with us, and the economic provisions of this Agreement, including Royalty rates, are based.
9.4 Electronic Funds Transfer. You must participate in our then-current electronic funds transfer and reporting program(s). All royalties owed and any other amounts designated by us must be received or credited to our account by pre-authorized bank debit by end of business on the 10th day after a royalty period. You authorize us to debit your account by an amount equal to the minimum continuing royalty if a royalty payment is not received when due, and to collect the balance of any amounts owed in accordance with this Agreement. Any such non-payment or late payment of the actual amount due is a breach of this Agreement. We can also require that any amounts owed or to be owed to us and/or any of the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC be paid by charges against your credit card, and you must provide us with appropriate authorizations on our request.
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9.5 Interest and Late Fees on Late Payments and/or Reports. All amounts you owe us and/or our Affiliates bear interest at the highest applicable legal rate for open account business credit, but not to exceed 1.5% per month. Additionally, we can require you to pay an administrative late fee of $50.00 for each late report and/or late payment. The foregoing amount is subject to inflation adjustment under Section 9.7, but will not exceed any applicable legal restrictions. If we experience repeated late payments by you, then we can require you to pay all amounts by cashier's check.
9.6 Application of Payments. Set-Offs etc. As to you and/or any Affiliate of yours, we can:
A. apply any payments received to any past due, current, future or other indebtedness of any kind in our Business Judgment, no matter how payment is designated by you, except that Marketing Fund contributions may only be credited to the Marketing Fund;
B. set off, from any amounts that may be owed by us, any amount owed to us or any marketing fund; and
C. retain any amounts received for your account (and/or that of any Affiliate of yours), whether rebates from suppliers or otherwise, as a payment against any amounts owed to us.
We can exercise any of the foregoing rights in connection with amounts owed to or from us and/or any Franchisor-Related Person/Entity.
9.7 Inflation Adjustments. Amounts specified as being subject to inflation adjustment may be adjusted by us annually in our Business Judgment in proportion to the changes in the Consumer Price Index (U.S. Average, all items) maintained by the U.S. Department of Labor (or any successor index) as compared to the previous year. We will notify you of any such percentage adjustment.
9.8 Mandatory Convention Attendance. Possible Fee. You are required to attend alf meetings designated by us as mandatory (including without limitation the Pinkberry Store annual convention), unless otherwise excused by us. One management-level individual must attend on behalf of each of your Pinkberry Stores. We will not charge any attendance fee for one person per Pinkberry Store for each mandatory meeting. You will bear all other costs of attendance.
10. YOUR PINKBERRY STORE — IMAGE AND OPERATION.
10.1 System Compliance. Regular Upgrading.
A. You agree to operate your Pinkberry Store in full compliance with the then-current Pinkberry Store System and the Manuals. You agree to promptly comply at your expense with all then-current requirements, standards and operating procedures relating to every aspect of a Pinkberry Store and its operations {including without limitation, use of specified equipment, Products and Services, computer hardware and software; supplier programs and operating systems; signs, logos, designs and advertising/marketing materials and forms; website designs and formats), including upgrading of your Pinkberry Store and its operations, etc.
B. You must maintain your Pinkberry Store at your expense, according to all Pinkberry Store standards for new Pinkberry Stores and promptly undertake all changes as are required by us from time to time in our Business Judgment. If you fail to do so, we can do so on your behalf. You agree to reimburse us within 10 days of our delivery of an account statement. You will not make any alterations to your Pinkberry Store or its appearance as originally approved by us without our prior written approval.
C. You agree at your sole expense, that you and your employees will wear then-current Pinkberry Store career apparel.
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10.2 Designated Equipment. Products. Services and/or Suppliers.
A. Your Pinkberry Store must purchase, use and offer such Designated Equipment, Products and Services, as are specified by us from time to time. We can designate single or multiple suppliers for any given item or service and may concentrate purchases with one or more suppliers in our Business Judgment. Such suppliers may include, and may be limited to, us and/or companies affiliated with us. You will not offer or deal with any products or services not approved by us. If we disapprove a particular item, you will not use it.
B. Designation of a supplier may be conditioned on factors established by us in our Business Judgment, including without limitation performance relating to frequency of delivery, standards of service, and payment or other consideration to us or parties designated by us. We can approve, or revoke or deny approval, of particular items or suppliers in our Business Judgment.
C. You can request the approval of an item, service or supplier by notifying us in writing and submitting such information and/or materials we request. We can require you to pre-pay any reasonable charges connected with our review and evaluation of any proposal. We will notify you of our decision within a reasonable time.
D. You will not make any claims against us with respect to any supplier and/or related Products/Services (and/or our designation of, or our relationship with, any supplier/Products/Services). Claims by you with respect to any supplier-related and/or similar matters will be made only against the supplier in question. You must provide us with written notice prior to taking any action in connection with such a claim. We will use diligent efforts to assist you in resolving any disputes with suppliers approved and/or designated by us. We have the right to audit any supplier to review both the supplier's relationship with us and the quantity and frequency of goods ordered and delivered to you.
10.3 Purchasing Cooperative. We can require that you join and make required purchases/leases through a Pinkberry Store purchasing cooperative or other entity designated by us. Such entity may adopt its own bylaws, rules, regulations and procedures, subject to our consent in our Business Judgment. We can require each such entity to submit monthly and annual financial statements, and can require that the annual financial statements be audited, all at the expense of such cooperative. Your failure to timely pay amounts due to, or comply with the bylaws, rules, regulations and procedures of such cooperative is a breach of this Agreement. We can offset against amounts we owe to you the amount of your unpaid cooperative obligations.
10.4 Compliance with Laws and Ethical Business Practices.
A. You will operate your Pinkberry Store in full compliance with all applicable laws, ordinances and regulations. Among other things, you will not engage in any illegal discriminatory practices. We make no representations or assurances as to what (if any) licenses, permits, authorizations or otherwise will be required in connection with your Pinkberry Store. It is your sole responsibility to identify and obtain all authorizations necessary to your operation. You will maintain high standards of honesty, integrity, fair dealing and ethical conduct in your business activities. You will notify us in writing within 5 days of the commencement of any proceeding and/or of the issuance of any governmental order or action impacting you and/or your Pinkberry Store.
B. You agree to comply and/or assist us in our compliance efforts, as applicable, with any and all laws, regulations, Executive Orders or otherwise relating to antiterrorist activities, including without limitation, the U.S. Patriot Act, Executive Order 13224, and related U.S. Treasury and/or other regulations. In connection with such compliance efforts, you agree not to enter into any prohibited transactions and to properly perform any currency reporting and other activities relating to your Franchised Business as may be required by us or by law. You are solely responsible for ascertaining what actions must be taken by you to comply with all such laws, orders and/or regulations, and
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specifically acknowledge and agree that your indemnification responsibilities as provided in Section 7.4 pertain to your obligations hereunder.
C. In circumstances designated by us in the Manuals, or where otherwise reasonably required by us, you will give those customers who have made complaints appropriate refunds or otherwise deal with such complaints as we reasonably direct, you and we agreeing that such responses to customer complaints are a vital element in maintaining and enhancing the goodwill associated with the Marks. Policies and procedures (including, but not limited to, refunds and credits) adopted by us for Pinkberry Stores owned and/or operated by us and/or our Affiliates will be conclusively presumed to be reasonable.
D. In the marketing and operation of your Pinkberry Store you must use each of, and only, the contracts, waivers and/or other forms and/or materials as are designated by us from time to time. We may provide you with template or sample forms of such items but it is your responsibility to have all such items which are to be used with prospective and/or actual clients/customers reviewed, at your expense, by an attorney licensed to practice law in the state(s) where your Pinkberry Store will be located and/or operate, for compliance with all applicable state legal requirements. We make no warranty or representation that any contracts, waivers and/or other forms and/or materials, whether supplied by us or otherwise, are in compliance with the laws of any particular state{s). Prior to opening, and prior to use of any such items to be used with prospective and/or actual clients/customers, you must provide us, at your expense, with a letter from such attorney to us indicating that he/she has completed such review and that such items to be used with prospective and/or actual clients/customers meet, or have been modified to comply with, all applicable state legal requirements.
I have read 10.4, understand it, and agree with it. Your Initials: __________/__________
10.5 Management and Personnel of Your Pinkberry Store, Training.
A. You must keep us advised, in writing, of all management and non-management personnel involved in the operation or otherwise of your Pinkberry Store. Your Pinkberry Store must be personally managed on a full-time basis by a person who has successfully completed mandatory training and met then-current standards as specified by us.
B. You are solely responsible for the hiring and management of your Pinkberry Store employees, for the terms of their employment and for ensuring their compliance with any training or other employment related requirements established by us from time to time in our Business Judgment. We require that you ensure that your employees execute covenants of confidentiality and non solicitation, indemnification for you and for us, in a form substantially similar to the form provided by Franchisor from time to time, provided that such covenants must be approved by your local counsel as enforceable and applicable under the law of your State.
C. We have the right to deal with the manager regarding routine operations and reporting requirements. You must ensure that our records for your Pinkberry Store managers/supervisors are kept current.
10.6 Insurance.
A. You will maintain in force policies of insurance issued by carriers approved by us
covering various risks, as specified by us from time to time. We can specify the types and amounts of
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coverage required under such policies and require different and/or additional kinds of insurance at any time, including excess liability insurance. Each insurance policy must:
1) name us and our Affiliates as additional named insureds;
2) contain a waiver of all subrogation rights against us, our Affiliates and any successors and assigns; and
3) provide 30 days' prior written notice to us of any material modifications, cancellation, or expiration of such policies.
B. If you fail to maintain required insurance coverage, we can obtain such insurance coverage on your behalf. You will pay us on demand any costs and premiums incurred by us.
C. Current insurance requirements include the following and are subject to change by us:
1) comprehensive general liability insurance against claims for bodily and personal injury, death and property damage caused by, or occurring in conjunction with, your Pinkberry Store;
2) all risk property and casualty insurance for the replacement value of your Pinkberry Store and all associated items;
3) business interruption insurance providing for continued payment of all amounts due us and/or any Affiliate of ours under this Agreement, and
4) Workers Compensation insurance, according to statute.
10.7 Program Participation. We can condition your participation in any program, or your receipt of any Pinkberry Store System benefits, on your being in Good Standing.
10.8 Continued Payment of Royalties, etc. During Closure. You must immediately notify us of any closure of your Pinkberry Store for any reason and submit a plan for re-opening. All financial obligations of yours to us or to any Franchisor-Related Person/Entity (including royalties) will remain in effect during such closure period. Any such closure not authorized and/or excused by us will be a default of this Agreement, entitling us to all remedies available hereunder, at law and in equity.
10.9 Customer Satisfaction. Quality Controls, etc. We can institute various programs for auditing customer satisfaction and/or other quality control measures. We can require you to pay for such program costs. You agree to request your customers to participate in any surveys performed by or on behalf of us, using forms prescribed by us from time to time.
10.10 Franchisee Advisory Council and Selection. We can, in our Business Judgment, elect to form a Franchisee Advisory Council ("FAC") to provide Input to us. The FAC will consist of Franchisees in Good Standing, each of whom will represent their distinct geographical region (the "Region"). Each FAC member will be elected by a majority of Pinkberry Store franchisees in Good Standing within his/her respective Region. The geographical area of each Region will be established by us, with due consideration given to achieving a representative group of Pinkberry Store franchisees for each Region. The number of Regions and their respective boundaries will be subject to adjustment from time to time to reflect growth and franchisee population changes, among other appropriate factors. Each Pinkberry Store Franchisee will be entitled to one vote. We will have the right to appoint one representative to participate in all FAC meetings and activities as a non-voting participant.
The FAC may adopt its own bylaws, rules, regulations and procedures, subject to our consent. While we are not required to do so (except as stated in this Agreement), any matter we submit for FAC
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approval for which approval is granted, will be binding on you.
11. MARKETING.
11.1 Marketing Fund.
A. We can, in our Business Judgment, elect to establish an advertising, publicity and marketing fund (the "Marketing Fund") to promote Pinkberry Store and the Brand. You must contribute to the Marketing Fund 2% of Gross Revenue per royalty period, subject to inflation adjustment. Such percentage will be calculated and payable at the same time and in the same manner as percentage and minimum royalties.
B. We have sole discretion over ajl matters relating to the Marketing Fund, operational, marketing or any other matter (consistent with its purposes and the provisions of this Agreement). The Marketing Fund may be used for (among other things) product development; signage; creation, production and distribution of marketing, advertising, public relations and other materials in any medium, including the Internet; administration expenses; brand/image campaigns; media; national, regional and other marketing programs; activities to promote current and/or future Pinkberry Store and the Brand; agency and consulting services; research; any expenses approved by us and associated with FAC or other Franchisee advisory groups. Among other things, Marketing Fund Contributions may be used for web site development/operation and to pay Internet, Intranet, URL, 800 or similar number, and other charges, fees and/or expenses. A brief statement regarding the availability of Pinkberry Store franchises may be included in advertising and other items produced using the Marketing Fund.
C. We and/or any Franchisor-Related Persons/Entities can provide goods, services, materials, etc. (including administrative services and/or "in-house advertising agency" services) and be compensated and/or reimbursed for the same by the Marketing Fund, provided that any such compensation must be reasonable in amount. We can arrange for goods, services, materials, etc. (including administrative services) to be provided by independent persons/companies and all related costs, fees, etc. will be paid by the Marketing Fund. While we are not required to do so (except as stated in this Agreement), any matter we submit for FAC approval for which approval is granted, will be binding on you.
D. The Marketing Fund will be accounted for separately and may be used to pay all administrative and other costs of the Marketing Fund related to its activities and purposes and/or as authorized by the relevant Franchise Agreements. All taxes of any kind incurred in connection with or related to the Marketing Fund, its activities, contributions to the Marketing Fund and/or any other Fund aspect, whether imposed on us, the Marketing Fund or any other related party, will be the sole responsibility of the Marketing Fund. We will prepare financial statements for the Marketing Fund annually, which will be furnished to you upon written request. Such statements may be audited and any related accounting/auditing costs will be paid by the Marketing Fund. Funds in the Marketing Fund must be expended, prior to termination of the Marketing Fund, only for the purposes authorized by the relevant Franchise Agreement(s). No profit, gain or other benefit will directly accrue to us from the Marketing Fund. All interest earned on monies contributed to, or held in, the Marketing Fund will be remitted to the Marketing Fund and will be subject to the restrictions of the relevant Franchise Agreement(s).
E. Financial management of the Marketing Fund will be our sole responsibility. We can, in our Business Judgment, do any of the following:
1) compensate ourselves and/or any Franchisor-Related Person/Entity for salaries,
administrative costs, overhead and other expenses incurred in Marketing Fund related programs/activities, including but not limited to production, research, insurance, and collection expenses, as well as any legal expense related to the activities and purposes of the Marketing Fund (consistent with the provisions of this Agreement);
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2) charge the Marketing Fund for attorneys' fees and other costs related in any way to claims against us and/or any of the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC, regarding the Marketing Fund. However, we will be required to reimburse the Marketing Fund for any attorneys' fees and/or costs paid by the Marketing Fund in connection with any action in which we are finally found to have acted unlawfully or to be guilty of wrongdoing with respect to the Marketing Fund;
3) spend in any fiscal year an amount greater or less than the aggregate contributions to the Marketing Fund in that year, and the Marketing Fund may borrow from us or other lenders to cover deficits of the Marketing Fund or cause the Marketing Fund to invest any surplus;
4) collect for remission to the Marketing Fund any advertising or promotional amounts offered by any supplier based upon franchisee purchases. Any such contributions, whether or not made with respect to purchases by you, will not count toward your required Fund contributions;
5) pay the advertising, marketing, public relations and related costs involved in any co-branding, dual franchising or other such multi-sponsor programs;
6) revise marketing and other programs, and/or make expenditures from the Marketing Fund, to take account of cultural and other differences {and/or we can delegate management of a portion of the Marketing Fund in connection therewith);
7) defer, waive and/or compromise claims for current/future contributions to, and/or claims against or with respect to, the Marketing Fund and fund the same with the Marketing Fund;
8) take legal or other action against any Franchisee in default of their obligations to the Marketing Fund;
9) merge the Marketing Fund with any marketing fund otherwise established for Pinkberry Stores for use as described in this Section 11.1, so long as the restrictions of the relevant Franchise Agreement(s) continue to apply to contributions made by Franchisees under such arrangements;
10) maintain Marketing Fund assets in one or more accounts designated as "trust accounts" for purposes of protecting such assets from claims of third-party creditors (however, such action will not be deemed to create any "trust," "fiduciary relationship" or similar special arrangement);
11) incorporate the Marketing Fund or operate it through an entity separate from us, which is subject to all rights and duties of ours relating to the Marketing Fund;
12) take such other actions in connection with the Fund as we consider to be appropriate and as are consistent with the provisions of this Section 11.1.
F. You acknowledge and agree that we have no obligation to ensure that expenditures bv
the Marketing Fund are or will be proportionate or equivalent to contributions to the Marketing Fund bv Pinkberry Stores operating in any geographic area, or that any Pinkberry Store will benefit directly. indirectly or in proportion to its contribution to the Marketing Fund. We have no obligation to cause other Pinkberry Stores to contribute to the Marketing Fund or engage in local marketing, and we can permit a Franchisee to make direct advertising expenditures in place of contributions to the Marketing Fund, You understand that some Pinkberry Store Franchisees may have Marketing Fund obligations that are different from yours, if any. However, all Pinkberry Stores owned by us will make contributions to the Marketing Fund as if they were subject to the then-current form of Franchise Agreement.
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G. Neither we (nor any of the Franchisor-Related Persons/Entities, including the Marketing Fund and/or the FAC) will be liable for any act or omission in connection with the Marketing Fund which is consistent with this Agreement or which is done in subjective good faith. You and we expressly agree that none of the relationships with you in connection with the Marketing Fund are in the nature of a "trust," "fiduciary" or similar special arrangement.
H. Subject to the express requirements of this Agreement that your contributions will only be
spent as authorized herein, you agree that we can deny access to any and all programs and/or materials created by, and benefits of, the Marketing Fund to you and to any Franchisees who are not in Good Standing.
11.2 Your Participation in the Marketing Fund. You agree to participate in all Marketing Fund programs. You have the right to set your own prices, except that we can specify maximum prices for goods or services to the greatest degree permitted by law. You must fully honor all coupons, price reduction and other promotions/programs as directed by us. The Marketing Fund may furnish you with marketing, advertising and promotional materials; however, we can require that you pay the cost of producing, shipping and handling for such materials.
11.3 Your Local Pinkberry Store Marketing Activities.
A. You must spend for local advertising and promotion of your Pinkberry Store each royalty period 2% of Gross Revenue, subject to inflation adjustment as set forth in Section 9.7. If we request it, you will submit verification of your expenditures in a form prescribed by us in our Business Judgment. Appropriate local advertising expenditures may include, but are not limited to, classified telephone directory listings and advertising. Discounts and/or products or services given without charge wilt not be considered to meet your local advertising obligation under this Section.
B. Your advertising must be in good taste and conform to ethical and legal standards and our requirements. You may not use coupons at any time. Samples of all advertising and promotional materials (and any use of the Marks and/or other forms of commercial identification) for any media, including the Internet, World Wide Web or otherwise, must be submitted to us for our review and consent prior to use, which approval we can condition or withhold in our Business Judgment. You agree not to use any materials or programs disapproved by us at any time in our Business Judgment and you must use all materials and programs designated by us as mandatory. We can require that a brief statement regarding the availability of Pinkberry Store franchises be included in advertising used by you and/or that brochures regarding purchase of Pinkberry Store franchises be displayed in your Pinkberry Store.
C. Any use of the Internet, World Wide Web or other electronic media by you in connection with your Pinkberry Store will be as specified by us in our Business Judgment from time to time, whether in the Manuals or otherwise. Among other things, we can require that any such use be through us, using a designated Internet/Intranet Service Provider (which can be us or an Affiliate), and that all pages be accessed through a designated site and/or meet our specifications. In such an event, we can require you to pay by credit card, bank autodraft, or other method required by us, an Internet/Intranet Service Fee of $50 per month, which we can collect in advance on an annual or other basis. Such Fee is subject to annual adjustment by us.
12. STORE RECORDS AND REPORTING.
12.1 Bookkeeping. Accounting and Records. Cash Register. Computer and Other Systems. You must obtain and maintain at your sole expense accounting, sales, reporting and records retention systems conforming to any requirements prescribed by us from time to time, including electronic systems with online access for us. Such systems may include, but are not limited to, electronic cash register, computer and point of sale systems, and software programs, and may have components only
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available from us, a Franchisor-Related Person/Entity and/or designated suppliers. We reserve the right to use, and to have full access to, all cash register, computer and any other systems, and the information and data they contain. We can charge a reasonable fee for the license, modification, maintenance or support of software or any other goods and/or services that we furnish to you in connection with any of the systems.
12.2 Reports. Financial Statements and Tax Returns.
A. You will provide to us such information regarding the sales and operation of your Pinkberry Store, and in such form and format, as we specify from time to time in our Business Judgment. We can elect to obtain such information through a variety of methods, including direct online access, facsimile transmissions and written copies. Current information requirements include, but are not limited to, the following, and are subject to change by us:
1) Sales and operations reports for each royalty period, which are due at the same time as the corresponding royalty payment; and
2) within 45 days after the end of each fiscal year, an unaudited fiscal year-end balance sheet and income statement for your Pinkberry Store, prepared in accordance with generally accepted accounting principles, and verified and signed by you;
3) retention of all records of or relating to your Pinkberry Store, including all income, sales and other tax returns, for the Term of this Agreement and one year thereafter.
B. You agree to provide such other data, information and supporting records for your Pinkberry Store as we reasonably may request from time to time, including without limitation, copies of your sales tax returns and those portions of your income tax returns relating to your Pinkberry Store. We can require you to provide us, at your expense, with an annual audited financial statement prepared by a certified public accountant.
13. INSPECTIONS AND AUDITS.
13.1 Our Inspections, etc. We and/or our agents will have the right, at any time during business hours, and without prior notice to you, to:
A. inspect your Pinkberry Store and related activities and items and record the same;
B. remove samples for testing and analysis;
C. interview personnel;
D. interview customers;
E. conduct inventories; and
F. confer with the staffs of government agencies with respect to matters related to the Franchised Business and to share any information in our possession, as we deem appropriate in our Business Judgment.
You will cooperate fully in connection with such matters. We can require you or an individual designated by us to meet at our headquarters or other location designated by us, for the purpose of discussing and reviewing your Pinkberry Store's operations, financial performance and other matters.
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13.2 Audit. We and/or our agents will have the right at any time during business hours, and without prior notice to you, to inspect and/or audit business records relating in any way to your Pinkberry Store and the books and records of any person(s), corporation or partnership which holds, or does business with, the Franchise. Such business records may include, but are not limited to, bookkeeping and accounting records, sales and income tax records and returns, cash register tapes, invoices, and deposit receipts. Our right to audit includes the right to access all cash registers, computers and other equipment by electronic means. You will cooperate fully with such an audit. Notwithstanding any provision to the contrary in this Agreement or otherwise, our audit rights will continue in effect for two years after the termination, expiration, transfer or otherwise of this Agreement and/or any successor franchise.
13.3 Gross Revenue Understatements. If any inspection or audit discloses an understatement of Gross Revenue, you must pay to us the royalties and marketing contributions due on the understated amount, plus interest, from the date originally due until the date of payment. We can require you to reimburse us for the cost of the inspection or audit, including, without limitation, the charges of any independent accountants, and related travel and per diem charges for our and their employees, if:
A. any inspection or audit is necessary because of your failure to timely furnish required information/reports; or
B. Gross Revenue is understated for any period by more than 2%.
In addition to all other remedies and rights of ours hereunder or under applicable law, we may Terminate this Agreement if:
C. Gross Revenue is understated for any period by more than 5%; or
D. any understatement is determined by us to be intentional.
14. TRANSFER.
14.1 Transfers by Us. This Agreement, and any or all of our rights and/or obligations under it, are fully transferable by us in our Business Judgment, in whole or in part, without your consent; provided that any such transferee appears at the time of the transfer to have financial resources reasonably appropriate to fulfill its obligations under this Agreement. For the purposes of this Section 14.1, we will be entitled to rely upon financial statements provided to us by the transferee. If we transfer this Agreement, only the transferee will have obligations to you and our obligations (and those of any of the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC) will be extinguished.
A. You specifically acknowledge and agree that we can:
1) be sold and/or we can sell any or all of our intellectual property and/or other assets (including the Marks);
2) go public;
3) engage in a private or other placement of some or all of our securities;
4) merge, acquire other entities and/or assets (competitive or not);
5) be acquired by a competitive or other entity;
6) and/or undertake any refinancing, leveraged buy-out and/or other transaction.
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You agree that we will have no liability to you resulting from our entering into any transactions permitted hereunder. We also may, on a permanent or temporary basis, delegate any or all of our duties to another company to perform. In such event, you will look only to such other company for the performance of such duties.
14.2 Transfers by You.
A. The rights and duties created by this Agreement are personal to you (or your owners, if the Franchisee is a Business Entity). We have awarded the Franchise relying on the individual integrity, ability, experience and financial resources of you or such owners. Therefore, neither this Agreement, the Franchise, the Franchisee nor your Pinkberry Store, (or any interest in, or the assets of, any of them) can be transferred without our prior written approval. Any transfer or attempted transfer without our approval is null and void.
B. The term "transfer" includes (but is not limited to) any voluntary or involuntary assignment, sale, gift, pledge or any grant of any security or other interest (whether partial or whole, or direct or indirect), by you (or your owners, if the Franchisee is a Business Entity).
A transfer also includes the following events:
1) any transfer of ownership of capital stock or any partnership or similar interest;
2) any merger, consolidation or issuance of additional securities representing an ownership interest in the Franchisee;
3) any sale of voting stock of the Franchisee or of any security convertible to voting stock;
4) any transfer in a corporate or partnership dissolution, divorce, insolvency proceeding or otherwise by operation of law;
5) any transfer of any interest in any revenues, profits, or assets of your Pinkberry Store and which is not in the ordinary course of business; or
6) any transfer to a business entity and/or a trust or similar entity.
A transfer of ownership, possession or control of your Pinkberry Store, or of its assets, can only be made with a transfer of the Franchise. Any transfer in the event of death or disability will be governed by Section 14.5.
14.3 Conditions for Approval of Any Transfer.
A. All of the following conditions must be met prior to, or concurrently with, the effective date
of any transfer. We can waive any condition in our sole and absolute discretion.
1) You must be in compliance with this Agreement, the Manuals, all other agreements between you and us (including any of our respective Affiliates), and all leases/subleases with any party, and the transferee must expressly assume all obligations under all such agreements; and
2) The transferee and its owners must meet our then-current requirements for new franchisees, including but not limited to business experience, aptitude and financial resources; and
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3) You must meet all payment and reporting obligations under the Franchise Agreement and any other agreements between you and us (and any of our respective Affiliates). Promissory notes will be accelerated and paid in full; and
4) All obligations to third parties in connection with your Pinkberry Store must be satisfied or assumed by the transferee; and
5) Your Pinkberry Store and its operations must have been brought into full compliance with the Manuals and specifications and standards then-applicable for new Pinkberry Store; and
6) At our option, the transferee must successfully complete, or agree to complete, our training program for new franchisees; and
7) The transferee must, at our option, (a) agree to be bound by all the terms and conditions of this Agreement for the remainder of the Term, or (b) execute our then-current form of Franchise Agreement and ancillary documents (including lease/subleases and guarantees) as are then customarily used by us in the award of franchises for Pinkberry Store {which may, among other things, provide for higher royalties, advertising fund/marketing contributions and materially different rights and obligations than are provided in this Agreement and may not include the terms of any amendments or addenda to this Agreement); provided, however, that no Initial Franchise Fee will be required (in our sole discretion, we may require the transferee to sign a Franchise Agreement and other documents for the full term then being offered and pay the pro rated initial fee as provided in Article 9, above, in addition to any transfer or other fees.) The term of such new Franchise Agreement will, at our option, be either for the balance of the Term of this Agreement or for the full term generally awarded to new franchisees as of the time of the transfer; and
8) The transfer must be completed in compliance with the terms of any applicable leases and other agreements and with all applicable laws, including but not limited to licensing and operations-related laws and/or laws governing franchise sales; and
9) You or the transferee must pay us with your application for a transfer a nonrefundable transfer fee of 20% of the then-current Initial franchise fee (minimum of $8,000), subject to inflation adjustment as provided in Section 9.7, above
10) You and each of your owners and/or Affiliates, and the transferee (and each owner and/or Affiliate of the transferee), must sign a General Release; and
11) Any grant of a security or similar interest in connection with a transfer (which grant may or may not be permitted by us in our Business Judgment), will be subordinated to our rights and the rights of any Franchisor Related Person/Entity under the Franchise Agreement or any other agreement; provided that we can refuse to allow you or anyone else to grant or receive a pledge, mortgage, lien or any security or similar interest in and/or to the Franchise or the Franchised Business (or any of its assets) if, after having expended commercially reasonable efforts in discussions with lenders or other applicable parties, we are unable in our Business Judgment to obtain appropriate protections for our rights under this Agreement and/or for Pinkberry Store System interests; and
12) You must agree with the transferee not to compete after the transfer in accordance with restrictions acceptable to us and substantially similar to those described in Section 8.2 (B), above, to the maximum extent permitted by law. We will be named a third party beneficiary of such agreement; and
13) We can (but are not required to) withhold or condition our consent to any transfer in our Business Judgment, particularly if we believe that the terms of transfer jeopardize the economic
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viability of the franchise or based on other circumstances of the transfer, and/or if we would not normally directly award a franchise in such a situation.
B. You agree that we can (but are not required to) discuss with you and/or the proposed transferee any matters related to any transfer and/or proposed transfer at any time which we consider to be appropriate in our Business Judgment without liability (including our opinion of the terms of sale, performance of your franchise, etc.). You expressly consent to any such discussions by us.
C. Neither you nor any transferee will rely on us to assist in the evaluation of the terms of any proposed transfer. You acknowledge and agree that an approval of a proposed transfer will not be deemed to be an approval of the terms, nor any indication as to any likelihood of success or economic viability.
14.4 Additional Conditions for Transfer to a Business Entity. We will consent to a transfer from you to a Business Entity entirely owned by you and formed for the sole purpose of operating the Pinkberry Store if the conditions described in 14.3, above, and the following conditions are met. Such a transfer will not relieve you of your obligations under this Agreement. You will remain jointly and severally liable to us for your and the Business Entity's obligations.
1) The Business Entity's stock certificates (and/or other applicable evidences of ownership and all documents of formation/governance) must recite that any ownership interest in the Business Entity is restricted by the terms of this Agreement; and
2) You must have (and continue to maintain) management control and ownership of at least 51 % of the Business Entity and personally manage its affairs; and
3) The individual Franchisee (or, if the Franchisee is a partnership, at least one of the partners) must be and remain the chief executive officer, chief operating officer or chief financial officer and meet our then-current training requirements. If the Franchisee is or becomes a corporation, LLC, partnership or other business entity, the chief executive officer, chief operating officer or chief financial officer of such entity must always meet all of our then-current training and other standards; and
4) The transferee must enter into an approved form of assignment in which the Business Entity assumes ail of the Franchisee's obligations under this Agreement and any other agreements with us and/or a Franchisor-Related Person/Entity, and any other documents we can require as provided in 14.3 (A) 7, above; and
5) All current and future owners of the Business Entity must agree in writing to comply with this Agreement and any other agreements with us and/or any Franchisor-Related Persons/Entities, including the Marketing Fund. We can, at our option and in our Business Judgment, require any and all owners to jointly and severally guarantee (in a written form approved by us) any such obligations of the Business Entity under any such agreements. The current approved form of Owner's Guaranty is attached as Exhibit 1 to this Agreement; and
6) No public offerings of debt or equity ownership in the transferee entity can be conducted, and no shares of any type issued, without obtaining our prior written consent; and
7) We can require that each of the present and/or future shareholders, directors, and/or officers execute confidentiality and non-com petition agreements with terms substantially similar to those described in Sections 8.1 and 8.2, respectively.
8) In any event, we can withhold or condition our consent to any transfer as we deem appropriate in our Business Judgment, based on the circumstances of the transfer or otherwise.
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14.5 Death or Disability of Franchisee.
A. If the Franchisee, or if the owner of the Franchisee with a controlling interest, dies or is permanently disabled, then his or her interest in this Agreement, the Franchise and/or the Franchisee will be transferred to a third party subject to all of the provisions of this Article 14. A "permanent disability" occurs if you are not able to personally, actively participate in the management of your Pinkberry Store for 6 consecutive months. Any transfer under this Section must be completed within 6 months from the date of death or permanent disability. If no transfer occurs, the Franchise will automatically terminate at the end of such period, unless a written extension is granted by us in our Business Judgment.
B. We can (but are not required to) operate the Franchised Business on your behalf and at your expense in the event of your death, disability or absence. We can pay ourselves a reasonable amount for our management services and other costs. We will use reasonable efforts and business judgment in managing the business, but will in all cases be indemnified by you {and/or your estate) against any costs and/or liabilities related in any way to our management and the operation of the Franchised Business. We are expressly authorized by you to manage in good faith and on terms that we consider appropriate in our Business Judgment, including payment of any past, current and/or future obligations to us or to any other creditor out of assets and/or revenues of the Franchised Business,
14.6 Effect of Consent to Transfer. Our consent to a transfer is not a waiver of any claims we may have against you, and you are not relieved of any obligations to us or any Franchisor-Related Persons/Entities and/or the Marketing Fund (including any defaults by any transferee). Any dispute regarding any proposed or completed transfer will be resolved through the dispute resolution provisions of this Agreement. Neither we nor any Franchisor-Related Persons/Entities, or the Marketing Fund and/or the FAC, will have any liability to you or any proposed or actual transferee in connection with our examination and/or possible consent or withholding of consent involving any transfer or proposed transfer, or our exercise of any right of ours, which is consistent with this Agreement. You agree to indemnify and hold us harmless from any liability to you, the proposed transferee or otherwise.
14.7 Our Right of First Refusal.
A. We have a right of first refusal regarding any proposed transfer subject to this Agreement, excluding only those transfers which are subject to Section 14.4. For each non-excluded proposed transfer, you will provide us with a true and complete copy of the offer received by you (and any ancillary agreements), and the conditions to transfer described in Sections 14.3 and 14.4, as applicable, will be met. The offer and the price and terms of purchase must apply only to an interest in this Agreement, the Franchise, your Pinkberry Store or the Franchisee. Any value attributable to the goodwill of the Marks, Pinkberry Store System elements, Confidential Information or any other assets, tangible or intangible, related to the Pinkberry Store Brand and System will be excluded from the purchase price, but goodwill related solely to the value of your Pinkberry Store as a going business will be included, if we are purchasing your Pinkberry Store as a going business.
B. We will give you written notice of our decision to exercise our right of first refusal within 30 days from the date of our receipt of the offer and ancillary documents. If any of the assets to be purchased do not meet the standards we then apply to new Pinkberry Stores, or if you are in default, we can require that the Pinkberry Store be brought into compliance and any defaults cured before the 30-day period begins. We can substitute cash for any form of payment proposed in such offer and will have a reasonable period of time in which to prepare for the close of the transaction, generally 60 days. The purchase price to be paid by us will be the price specified in the proposed transfer, less the value attributable to the goodwill of the Marks, Pinkberry Store System elements, Confidential Information or any other assets, tangible or intangible, related to the Pinkberry Store brand and System. We will be entitled to purchase any interest subject to all Customary Representations, Warranties and Agreements. We can require that the closing of the sale be through an escrow. You and we will comply with any applicable bulk sales and/or similar laws, and you will maintain all insurance policies until the date of
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02
closing. We will have the right to set off against any amount of money payable by us all amounts due from you and/or your Affiliates to us and/or our Affiliates. We will also have the right, in our Business Judgment, to pay any amount otherwise payable to you directly to your creditors in satisfaction of your obligations. If you violate any of your obligations that expressly or by their nature survive this Agreement, we will not be obligated to pay any amount otherwise due or payable to you thereafter. In connection with such purchase, you and each transferor (and your respective Affiliates) will sign a General Release.
C. If we do not exercise our right of first refusal, you or your owner can complete the sale to
such purchaser on the exact terms of such offer, subject to the conditions of this Article 14. If there is a material change in the terms of the sale, we will have an additional right of first refusal on the same terms and conditions as are applicable to the initial right of first refusal. Our rights under this or any other Section are fully assignable.
15. SUCCESSOR FRANCHISE.
15.1 Your Rights
A. If you are awarded this Agreement for the initial term of your franchise, then this Agreement Terminates at the expiration of the initial term. At that time, subject to the provisions of this Article 15, you will be eligible to be awarded a Successor franchise. The Successor Franchise Agreement may {and probably will) differ materially from this one in financial and other ways and terms. The Successor term will be for successive 5 year periods but if the lease or sublease for the Premises is terminated or expires before the end of such Successor term (and no substitute location has been consented to by us in writing and occupied by you before the termination/expiration of such lease/sublease), we can Terminate the Successor agreement as of the termination/expiration of such lease/sublease.
B. If we {1) make an announcement (at any time) that we have made a determination that continued franchising (on a national, regional or other basis) is not appropriate in our Business Judgment and that we do not intend to continue to regularly award franchises and maintain a franchise program for Pinkberry Stores in your state, and (2) do not open or award franchises for Pinkberry Stores in your state for 12 months after the date of such announcement, (provided that we can award renewal or successor franchises where an older form of Franchise Agreement or otherwise requires us to do so, and/or continue to service existing Franchisees under outstanding agreements), then we will not be required to offer you any Successor franchise, or renewal or similar rights and will have no liability or obligation to you with respect thereto. You agree that if any statute or court decision requires "good cause" {or any similar standard) for non-renewal, compliance by us with the provisions of this subsection will be considered to be good cause.
C. You agree that these provisions are commercially reasonable because commercial and other developments may make further participation in franchising by you or us inappropriate. Therefore, just as you have the option to not accept a Successor franchise, we have the option to no longer award Successor or other franchises, or grant renewals, in the circumstances discussed in this Agreement.
15.2 Notice of Election.
A. You must give us written notice of election to obtain the Successor franchise not less
than 6 months, but not more than 12 months, before the expiration of the initial term of this Agreement. Within 90 days after our receipt of the notice, we will give to you in writing:
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1) any reasons which could cause us to not award the Successor franchise, including any deficiencies requiring correction; and
2) our then-current requirements relating to the image, appearance, decoration, furnishing, equipping, stocking and programs for a Pinkberry Store {collectively, the "specifications and standards then-applicable for new Pinkberry Store and with the Manuals").
B. If you are subject to a Correction Process under Section 16.5 when (1) you provide us
with notice of your intent to obtain a Successor franchise, or (2) the Successor franchise would be awarded, then we can, in our Business Judgment, choose to defer the award of any Successor franchise until you have successfully complied with the applicable Pinkberry Store System Standards and Financial Standards.
15.3 Conditions to the Award of a Successor Franchise. Any award of the Successor franchise must meet all of the following conditions, together with the then-current standards applicable to Successor franchisees, each of which are agreed to be reasonable:
A. You (and each Affiliate of yours) must be in Good Standing; and
B. Your Pinkberry Store and its operations must fully comply with all specifications and standards then-applicable for new Pinkberry Store and with the Manuals by the expiration of this Agreement; and
C. You must present evidence satisfactory to us that you have the right to remain in possession of your Pinkberry Store for the duration of the Successor franchise. If you fail to maintain possession of your Pinkberry Store, or in our Business Judgment your Pinkberry Store should be relocated, you must have obtained our consent to and secured substitute premises by the expiration date of this Agreement. Such premises must comply with all specifications and standards then-applicable for new Pinkberry Store and with the Manuals; and
D. You {and each Affiliate of yours) must have paid all amounts owed to us, any Franchisor-Related Persons/Entities and/or the Marketing Fund; and
E. You must have executed our then-current form of Franchise Agreement and related documents then customarily used by us (with appropriate modifications to reflect the fact that the Franchise Agreement to be awarded relates to a single Successor franchise as contemplated by this Agreement). You will not be required to pay the then-current Initial Franchise Fee, and we will not be required to provide you any site location, initial training or other "start-up" services in connection with the award of any Successor franchise; and
F. You must have complied with our then-current qualification and training requirements. We can require your personnel to successfully complete any retraining program(s), at such times and location(s) as we then specify. There will be no charge for any retraining program{s), but you will be responsible for all travel, meals, lodging and other expenses of your personnel; and
G. You {and each owner and/or Affiliate of yours) must have executed a General Release, except for any claims exclusively related to the successor franchise {where expressly so required by applicable law); and
H. You must have paid us a successor fee equal to 20% of our then-current Initial Franchise
Fee for a first franchise (but not less than $8,000, which minimum amount is subject to adjustment as described in Section 9.7). The fee must be received from you at the time of your election and is nonrefundable unless we do not grant a Successor agreement to you.
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Failure by you and/or your owners to timely complete such requirements will be deemed an election by you not to obtain the successor franchise.
16. TERMINATION OF THE FRANCHISE.
16.1 Defaults with No Right to Cure. This Agreement will automatically Terminate upon delivery of our written notice of Termination to you in compliance with Article 20 {without further action by us and without opportunity to cure) if you (or any of your owners):
A. fail to timely meet the site selection, development, opening and other requirements provided in this Agreement, any other Franchise Agreement, any Area Development Agreement, or otherwise;
B. abandon or fail to operate your Pinkberry Store for more than 7 consecutive calendar days, or lose the right to possession of the premises and do not relocate your Pinkberry Store in accordance with this Agreement;
C. make any material misrepresentation or omission in your application for the Franchise, including {but not limited to) failure to disclose any prior litigation or criminal convictions (other than minor traffic offenses);
D. are judged bankrupt, become insolvent, make an assignment for the benefit of creditors, fail to pay your debts as they become due, or a petition under any bankruptcy law is filed by or against you {or any of your owners) or a receiver or other custodian is appointed for a substantial part of the assets of your Pinkberry Store;
E. are convicted of, or plead no contest to, a felony, or to any crime or offense that is likely to adversely affect the reputation of the Franchisee or any owner, your Pinkberry Store, us or the goodwill associated with the Marks;
F. engage in any misconduct which unfavorably affects the reputation of the Franchisee or any owner, your Pinkberry Store, us or the goodwill associated with the Marks (including, but not limited to, child abuse, health or safety hazards, drug or alcohol problems, or permitting unlawful activities at your Pinkberry Store);
G. make, or attempt to make, an unauthorized "transfer" as defined in this Agreement or surrender control without our prior written approval;
H. make an unauthorized use of the Marks or any unauthorized copy, use or disclosure of
any Confidential Information;
I. violate any of the In Term or Post Term Restrictions against competition provided in
Section 8.2, above (or any other person identified therein commits such a violation);
J. commit any act or omission of fraud or misrepresentation, whether with respect to us, any
of the Franchisor-Related Persons/Entities and/or the Marketing Fund and/or any third party, including {but not limited to) any misrepresentation of Gross Revenue;
K. have 5 or more material customer complaints with respect to your Pinkberry Store in any
12 month period, whether or not resolved. Complaints which unfavorably reflect on the reputation of the Franchisee or any owner, your Pinkberry Store, us or the goodwill associated with the Marks, including but not limited to: health and/or safety issues, customer service matters, product quality, legal compliance, and others, will be conclusively regarded as material - other complaints can be material depending on the circumstances;
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L. fail to permit or cooperate with us or our designee in any audit or inspection or fail to
retain (or to produce on request) any records required to be maintained by you.
16.2 Defaults with Right to Cure. This Agreement will automatically Terminate on delivery of our written notice of Termination to you in compliance with Article 20 (without further action by us and without further opportunity to cure beyond that set forth in this Section):
A. 10 Day Cure. If within 10 calendar days after delivery of our written notice to you, you (or any of your owners) do not cure any:
1) failure to maintain required insurance;
2) failure to correct any condition that, in our reasonable judgment, might pose a danger to public health and/or safety;
3) failure to report accurately Gross Revenue or fail to submit any other report due under this Agreement or any lease/sublease in accurate and complete form and when required;
4) failure to make payments of any amounts due us, any Franchisor-Related Person/Entity, any designee of ours and/or any supplier/creditor of yours);
5) failure to maintain any bank account, which is to be used for pre-authorized bank debits for amounts to become due us, or any of our affiliates or designees, as open and funded sufficiently to meet all reasonably anticipated debits and charges; provided that you can close any such account if (a) you provide us with 30 days' prior written notice, (b) immediately establish and adequately fund a replacement account, (c) execute and deliver to us and the bank all documents reasonably requested by us and/or the bank with respect to the new account so as to, among other things, allow us to make debits as authorized by this Agreement or otherwise, and (d) comply with all other reasonable requirements and procedures of ours.
6) failure to comply with any of the dispute resolution provisions of this Agreement.
With respect to subsections 16 (A) 1 and/or 16 (A) 2 above, we can require you to immediately cease all operations until such defaults are fully cured.
B. 30 Day Cure. If within 30 calendar days after delivery of our written notice to you, you (or any of your owners) do not cure any:
1) default under the lease or sublease for your Pinkberry Store within the applicable cure period set forth in the lease or sublease. If the applicable cure period set forth in the lease or sublease is less than 30 days, then that applicable cure period will apply;
2) delinquency in your obligations to taxing authorities, landlords, equipment lessors, suppliers or others;
3) failure to comply with any other provision of this Agreement, any other agreement with us and/or any Affiliate of ours, or any specification, standard or operating procedure or rule in the Manuals or otherwise prescribed by us in writing which does not provide for a shorter notice period.
If a default under this Section 16.2 (B) cannot reasonably be corrected within 30 days, then you must undertake diligent efforts within the 30-day period to come into full compliance. On our request, you must furnish proof acceptable to us of such efforts and the date full compliance will be achieved. In any
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event, all such defaults must be fully cured within 60 days after delivery to you of the initial written notice to you of Termination.
16.3 Repeated Defaults. This Agreement will automatically Terminate upon delivery of our written notice of Termination to you in compliance with Article 20 {without further action by us and without opportunity to cure) if you or any Affiliate has committed 2 or more applicable defaults within any 12 consecutive months, or 3 or more applicable defaults within any 24 consecutive months. An "applicable default" is a single breach of any obligation under this Agreement and/or the Manuals, or under any other agreement with us and/or any of our Affiliates, whether or not such default is cured, or is the same as or similar to a prior event of default.
16.4 Cross-Defaults. Any default by you (or any owner or Affiliate of yours) under this Agreement can be regarded by us as a default under any other agreement between us {or any Franchisor-Related Persons/Entities and/or the Marketing Fund) and you (or any owner or Affiliate of yours). Similarly, any default by you (or any owner or Affiliate of yours) under any other agreement or any other obligation between us (or any Franchisor-Related Persons/Entities and/or the Marketing Fund) and you (or any owner or Affiliate of yours) can be regarded as a default under this Agreement. Any default by you (or any owner or Affiliate of yours) under any lease, sublease, loan agreement, or security interest relating to the Franchised Business can be regarded as a default under this Agreement, regardless of whether or not any such agreements are between you (or any owner or Affiliate of yours) and us (or any Franchisor-Related Persons/Entities).
16.5 Performance Standards.
A. You and we have a shared interest in your Pinkberry Store not performing below Pinkberry Store System Standards, or failing to achieve an appropriate level of Gross Revenue, and we would not have entered into this franchise relationship if we had anticipated that you would not meet these Performance Standards. "Performance Standards" includes both Pinkberry Store System Standards and Financial Standards as described below.
B. Pinkberry Store System Standards. "System Standards" are the criteria we establish, and can modify, in our business Judgment, from time-to-time through the Manuals or other written means, relating to the operation, marketing and otherwise of Pinkberry Stores. You and we agree that your meeting all System Standards is critical to the success of your Pinkberry Store, that of the Pinkberry Store system as a whole and to the maintenance of the goodwill and value associated with the Pinkberry Store brand, since the failure of any Pinkberry Store to meet System Standards requirements would reflect negatively on all Pinkberry Stores, and undermine customer confidence and positive brand recognition. We can, therefore, in our Business Judgment, choose to evaluate your Pinkberry Store for compliance with Pinkberry Store System Standards using various methods (including, but not limited to, inspections, field service visits, customer comments/surveys and secret shopper reports). So as to be consistent and fair, in conducting such an evaluation we will use the same methods and scoring system then in use by us for evaluating any Pinkberry Store owned and/or operated by us and/or our Affiliates. Your Pinkberry Store will be assigned System Standards Scores for categories being scored at that time. Your scores will be compared with the average score in each such category achieved by all Pinkberry Stores in the United States (including those franchised and/or owned and/or operated by us and/or our Affiliates), or such other geographic area as we reasonably believe to be appropriate for evaluation purposes.
C. Pinkberry Store Financial Standards. You and we agree that an adequate level of financial performance is also critical to the success of the Pinkberry Store system. Understanding that, you and we jointly believe that use of arbitrary financial performance standards might be inappropriate and that a better way to evaluate unit-level financial performance is to apply a comparative standard, comparing the financial performance of your Pinkberry Store with that of other Pinkberry Stores. Therefore, we can, in our Business Judgment, compare your Gross Revenue with the then-current
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"Financial Standard". If we make such an election with respect to your Pinkberry Store, we won't do it any more frequently than as of every six months. The Financial Standard will be determined as follows:
|
Period Open* |
Financial Standards (adjusted every 6 months) |
|
Less than Three Years |
50% of PUA** |
|
Three Years or More, But Less Than Four Years |
65% of PUA** |
|
Four Years or More |
75% of PUA** |
*Measured from the earlier of your actual opening date, or the date by which your Pinkberry Store is required to be open.
**"PUA" or "Per Unit Average": The average Gross Revenue for all Pinkberry Stores in the United States during the most recent 6 month period before the measuring date.
D. We reserve the right to make reasonable revisions to elements of the Financial or System Standards upon 6 months' written advance notice to you. Such revisions can include, but are not limited to, changes in PUA percentages, measurement periods or geographical areas.
E. We can (but are not required to) implement the correction process described in Section 16.5 (F), below, if your:
1) System Standards Score in a scored category is lower than the average System Standards Score; or
2) Gross Revenue for the applicable measurement period does not equal the then-current Financial Standard.
As noted below, the correction process includes our attempts to help you meet all applicable standards, but since your Pinkberry Store is your business, it's ultimately your responsibility to meet those standards.
F. Correction Process
1) To allow an appropriate period of time for you and us to work together to help you resolve any Performance standards issues, if we notify you of your failure to meet the then-current average System Standards Score in a scored category and/or the applicable Financial Standard, then you will have six months from our delivery of written notice to you to meet all applicable Financial and System Standards.
2) Since it's in your and our mutual interest to have you resolve any Performance Standards issues, we will reasonably cooperate with and assist you in your efforts to meet your performance objectives. Our assistance may include, but is not limited to, on-site consultations, meetings at our headquarters, and/or retraining activities or programs at designated locations. You are responsible for any costs associated with such activities, including travel, meals, lodging and any other related expenses and will participate in the those additional activities, programs, etc., on our request. Among other things, we can:
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a) require you and/or your manager to attend and successfully complete a re-training seminar at our then-current headquarters, with you to pay all related travel, meals, lodging and incidental expenses, or
b) send a trainer to your location to present a re-training seminar, which you and your manager must successfully complete, with you to pay us a $500 per day retraining fee (maximum: $1,500), subject to inflation adjustment.
G. If, at the end of the six month Correction Period, your Pinkberry Store does not meet the average Pinkberry Store System Standards score for any category and/or the then-applicable Financial Standards, then we can elect to Terminate this Agreement. You will have 90 days after the end of the six month Correction Period to complete a safe of your franchise to a third party if:
1) You provide us, within 10 days of the expiration of the six month Correction Period, with (a) a written notice of your desire to sell your franchise, and (b) a General Release signed by you and each of your owners and Affiliates; and
2) Any such transfer meets all requirements of this Agreement, including those provided in Section 14.3, above.
H. If you do not provide us with the items described in Section 16.5 (G) 1, above, or
complete an authorized sale within the 90 day period provided in Section 16.5 (G), above, then we can Terminate this Agreement immediately upon delivery of written notice to you in accordance with Article 20, below.
I. Nothing in this Section is intended to limit or diminish in any way any rights or remedies
provided us under this or any other agreement, at law or in equity. The fact that any correction process may be ongoing will not prevent us from exercising any such rights and/or remedies, including any right to Terminate this Agreement for another default under this or any other agreement.
16.6 Non-Exclusive Remedies. Whenever we have a right to Terminate this Agreement, we (and any Franchisor-Related Person/Entity) will have all remedies allowed at law and in equity. No right or remedy which we and/or any Franchisor-Related Person/Entity may have under this Agreement or otherwise (including Termination) is exclusive, and we and/or any Franchisor-Related Person/Entity may pursue any rights and/or remedies available at law and/or in equity. If we have the right to Terminate this Agreement, we can elect in our Business Judgment to cancel any and/or all of your territorial or similar rights (including, but not limited to, any rights of first refusal), whether arising under this Agreement or in any other manner or document.
16.7 No Equity on Termination, etc. Your rights regarding the Franchise are controlled by the provisions of this Agreement. You will have no equity or any other continuing interest in the Franchise, any goodwill associated with it, or any right to compensation or refunds at the expiration and/or Termination of the Franchise.
16.8 Extended Cure Period. Notwithstanding anything to the contrary in this Agreement, we reserve the right to grant to you in our Business Judgment an extended cure period for any breach. You acknowledge that our decision to grant such an extended cure period will not operate as a waiver of any of our rights and that we can choose to condition such any such an extension upon the signing of a General Release by you, each owner and Affiliates of yours.
16.9 Management of the Pinkberry Store After Issuance of Notice of Default.
A. If we issue a notice of default, we will have the right (but not the obligation) to manage
your Pinkberry Store until you have cured all defaults. All revenues received by the Pinkberry Store while
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we (or our designee) are managing it will be kept in a separate fund. All Pinkberry Store expenses, including compensation, travel and living expenses for our appointed manager, may be paid out of such fund. We will be paid $500 per day as a management fee (subject to adjustment as provided in Section 9.7). If such fund is insufficient to pay Pinkberry Store expenses, we will notify you. You must, within 5 business days, deposit such amounts as will be required by us to attain a reasonable fund balance.
B. Operation of the Pinkberry Store by us during any such period will be on your behalf;
provided that we will only have a duty to use reasonable efforts and will not be liable to any creditor of yours or for any debts, losses or obligations incurred by the Pinkberry Store. This Section 16.9 will not limit our right to Terminate this Agreement as herein provided or affect any of our indemnity or other rights under this Agreement.
16.10 Our Right To Discontinue Supplying Items Upon Default. If we deliver a notice of default to you, we and/or each Franchisor-Related Persons/Entity have the right to (a) require that you pay C.O.D. (i.e., cash on delivery) or by certified check for goods/services and/or (b) stop selling and/or providing any goods/services to you, including the support services described in Section 5.2, until you have cured all defaults. No such action by us and/or any Franchisor-Related Persons/Entity shall be a constructive termination of this Agreement, change in competitive circumstances or similarly characterized, and you agree that you will not be relieved of any obligations under this Agreement because of any such action.
16.11 Prompt Notice of Claims by You. You understand that you are not permitted to terminate this Agreement for any default committed by us, except as permitted by applicable law. If you claim that such a default exists (or that you have any other basis for terminating your obligations and our rights under this Agreement or making any other claim against us), you must give us written notice and 30 days to cure; any action by you to terminate will not proceed until we have had such notice and an opportunity to cure. If we cannot reasonably cure within such 30 day period, and we are diligently continuing efforts to cure, then we will have 90 days to cure; provided that:
A. any dispute regarding our withholding consent with respect to a proposed transfer by you, or any other dispute in which defay may cause you significant harm or loss, may be immediately processed as provided in Section 19.1; and
B. any claim for equitable relief with respect to a dispute under Section 19.1 (H) will not be subject to this Section 16.11. Any applicable statutes of limitations will be tolled during such 30 and 90-day periods.
17. RIGHTS AND OBLIGATIONS ON TRANSFER, TERMINATION AND/OR EXPIRATION OF THE FRANCHISE.
17.1 Payments of All Amounts Owed, etc. You must pay all royalties, marketing contributions and all amounts of any kind owed to us and/or any Franchisor-Related Persons/Entities, and the Marketing Fund, within 10 days after the Termination or expiration of the Franchise, or from a later date when the amounts due can be determined.
17.2 Intellectual Property. Confidential Information. Trade Dress, etc. After any Transfer, Termination or expiration of the Franchise:
A. You agree to immediately and permanently discontinue your Pinkberry Store business
and any use of the Intellectual Property and/or the Confidential Information, as defined in Article 22, and will not use any similar or derivative marks, or materials, or colorable imitations of any of the Intellectual Property in any medium or manner or for any purpose;
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B. You must return to us or (at our option) destroy all software, Manuals, forms, materials, signage and any other items containing any Intellectual Property or Marks, or otherwise identifying or relating to a Pinkberry Store (to the extent they have not been assigned in connection with an authorized Transfer);
C. You must take such actions as may be required to cancel all fictitious or assumed name or equivalent registrations relating to your use of any Mark which have not been assigned in connection with an authorized Transfer;
D. You must remove from the Premises any distinctive signage, physical and/or structural features associated with the Trade Dress of Pinkberry Store, so that the Premises are clearly distinguished from other Pinkberry Stores and do not create any public confusion (to the extent they have not been assigned in connection with an authorized Transfer);
E. You agree not to identify yourself, or any business you may operate or in which you may become involved, or to advertise or promote yourself in any manner, as a present or former Pinkberry Store franchisee;
F. You must furnish to us within 30 days satisfactory evidence of your compliance with the obligations described in this Section 17.2 and in Section 17.3, below. If you operate any business using any of the Intellectual Property, Marks, Confidential Information or any aspect of the System, our remedies will include {but not be limited to) recovery of the greater of (1) ail profits earned by you in the operation of such business, or (2) all royalties, advertising contributions and other amounts which would have been due if this Agreement remained in effect with you.
17.3 Telephone and Other Directory Listings. Internet Sites.
A. You understand and agree that we own all telephone numbers, domain names, Internet addresses/sites and/or other communications services links (collectively, the "Numbers"), and any related directory listings/advertising, used in connection with the operation of your Pinkberry Store. We can, in our Business Judgment, require you to sign an assignment of such Numbers prior to training or at another time. After any Termination and/or expiration of the Franchise, you must promptly transfer, call-forward, discontinue or otherwise deal with the Numbers and any related directory listings/advertising as we direct. You agree to sign any documents and/or pay any amounts required by a telephone/communication services provider as a condition to our exercising any rights under this Section. By signing this Agreement, you irrevocably appoint us your attorney in fact to take any such actions regarding the Numbers and any related directory listings/advertising if you do not do so yourself within 10 days after the Termination or expiration of this Franchise. Such companies may accept this Agreement as conclusive evidence of our exclusive rights in such Numbers and related directory listings, web pages and advertising/marketing.
B. If we choose at any time to be direct billed by a provider for any account for the Numbers and/or directory listings/advertising, you agree to pay us all amounts due such providers within 10 days of our written notice to you. If you fail on 2 or more occasions to pay any such amounts to us when due, then we can require you to maintain a deposit with us in an amount reasonably determined by us based upon usage history and other relevant factors.
17.4 Continuing Obligations.
A. All obligations and rights which expressly or by their nature survive the Transfer,
Expiration or Termination of this Agreement will continue in full force and effect until they are satisfied or by their nature expire (including but not limited to indemnity, non-competition and confidentiality rights and
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obligations; obligations to pay and the provisions of Articles 19 and 21). These obligations continue notwithstanding any rejection of this Agreement in a bankruptcy proceeding or otherwise.
B. "Non-competition, non-solicitation, non-hire/engagement, non-use, confidentiality, and
protection of the Marks and indemnity/hold harmless obligations, and all other Post Termination Provisions provided in this Agreement will survive the expiration and/or Termination of this Agreement according to their terms."
I have read Sec. 17.1-17.4, understand them, and agree with them.
Your Initials: __________/__________
18. GRANT OF SECURITY INTEREST.
For valuable consideration, as security for the payment of all amounts owing or to be owed by you {and/or any Affiliate of yours) to us (and/or any Affiliate of ours) under this Agreement or any other agreements, and your performance of all obligations thereunder, you hereby grant to us a security interest in all proceeds of your Pinkberry Store and in all of the assets, including equipment, furniture, fixtures and signs, used by, at or in connection with, your Pinkberry Store and its related business and (the "Collateral"). You wilf not remove the Collateral or any portion thereof without our prior written consent. You represent and warrant that the security interest granted is prior to all other security interests in the Collateral except for (i) bona fide purchase money security interests and (ii) the security interest granted to a third party in connection with your original financing for your Pinkberry Store, if any. In connection with any request for our approval of a security interest, we will make commercially reasonable efforts to accommodate reasonable lender's requirements, including the subordination of our interests to the lender's and/or lessor's, as applicable, in our Business Judgment, bearing in mind the interests of the borrower, lender, ourselves and the System. On the occurrence of any event entitling us to Terminate this Agreement or any other agreement between the parties, or if we reasonably determine that we are not assured that your (and/or any Affiliates') obligations will be timely and fully paid and/or performed, we will have all the rights and remedies of a secured party under the Uniform Commercial Code of the State in which your Pinkberry Store is located, including, without limitation, the right to take possession of the Collateral. You must execute and deliver to us financing statements and/or such other documents as we reasonably deem necessary to perfect our interest in the Collateral within 10 days of your receipt of such documents from us.
I have read Art. 18, understand it, and agree with it. Your Initials: __________/__________
19. DISPUTE AVOIDANCE AND RESOLUTION.
For the purposes of this Article 19, "you" will be deemed to include your owners, Affiliates and their respective employees, and "we" will be deemed to include "Franchisor-Related Persons/Entities."
19.1 MEDIATION AND MANDATORY BINDING ARBITRATION. WAIVER OF RIGHT TO TRIAL IN COURT, etc. You and we believe that it is important to resolve any disputes amicably, quickly, cost effectively and professionally and to return to business as soon as possible. You and we have agreed that the provisions of this Article 19 support these mutual objectives and, therefore, agree as follows:
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A. Claim Process: Any litigation, claim, dispute, suit, action, controversy, or proceeding of any type whatsoever including any claim for equitable relief and/or where you are acting as a "private attorney general," suing pursuant to a statutory claim or otherwise, between or involving you and us on whatever theory and/or facts based, and whether or not arising out of this Agreement, ("Claim") will be processed in the following manner, you and we each expressly waiving all rights to any court proceeding, except as expressly provided below at Section 19.1 (H).
1) First, discussed in a face-to-face meeting held within 30 days after either you or we give written notice to the other proposing such a meeting.
2) Second, if not resolved, submitted to non-binding mediation for a minimum of 4 hours before (a) Franchise Arbitration and Mediation, Inc. ("FAM") or its successor {or an organization designated by FAM or its successor), (b) any other mediation organization approved by all parties, or (c) by Judicial Arbitration and Mediation Service ("JAMS") or its successor (or an organization designated by JAMS or its successor), if FAM cannot conduct such mediation and the parties cannot agree on a mediation organization. We will pay the costs of the first 4 hours of any mediation, and no mediation is required to extend beyond such 4 hour period. Any mediation/arbitration (and any appeal of arbitration) will be conducted by a mediator/arbitrator experienced in franchising. Any party may be represented by counsel and may, with permission of the mediator, bring persons appropriate to the proceeding.
3) Third, submitted to and finally resolved by binding arbitration before and in accordance with the arbitration rules of FAM or its successor (or an organization designated by FAM or its successor); provided that if such arbitration cannot be heard by any such organizations, then the arbitration will be conducted before and in accordance with the arbitration rules of JAMS or its successor (or an organization designated by JAMS or its successor); provided that, in any case, arbitration may be filed prior to a face-to-face meeting and/or mediation, with such face-to-face meeting and/or mediation to follow as quickly thereafter as possible. All arbitrators must be experienced in franchising. On election by any party, arbitration and/or any other remedy allowed by this Agreement may proceed forward at the same time as mediation. Judgment on any preliminary or final arbitration award will be final and binding, and may be entered in any court having jurisdiction (subject to the opportunity for appeal as contemplated below). The arbitrator's award will be in writing. On request by either party, the arbitrator will provide to all disputants a reasoned opinion with findings of fact and conclusions of law and the party so requesting will pay the arbitrator's fees and costs connected therewith.
4) Fourth, a final award by an arbitrator (there will be no appeal of interim awards or other interim relief), may be appealed within 30 days of such final award. Appeals will be conducted before a 3-arbitrator panel appointed by the same organization as conducted the arbitration, each member of which must be experienced in franchising. The arbitration panel will not conduct any trial de novo or other fact-finding function. Such panel's decision will be in writing, may be entered in any court having jurisdiction and will be binding, final and non-appealable. On request by either party, the arbitration panel will provide to all disputants a reasoned opinion with findings of fact and conclusions of law and the party so requesting will pay the arbitration panel's fees and costs connected therewith.
B. Confidentiality: The parties to any meeting/mediation/arbitration will sign confidentiality agreements, excepting only public disclosures and filings as are required by law.
C. Location and Attendees: Any meeting/mediation/arbitration (and any appeal) will be conducted exclusively at a neutral location in the county in which our then-current headquarters is located, which may change from time to time, and be attended by you and us, and/or designees authorized to make binding commitments on each of our respective behalfs; provided that if any court determines that this provision is unenforceable for any reason, mediation/arbitration (and any appeal) will be conducted at a location near your unit.
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D. Arbitration Authority: Arbitrators in any proceeding under this Article 19 will apply all applicable law, and a failure to apply the applicable law in accord with Section 19.14 will be deemed an act in excess of authority. The arbitrator will decide any questions relating in any way to the parties' agreement (or claimed agreement) to arbitrate, including but not limited to applicability, subject matter, timeliness, scope, remedies, claimed unconscionabiiity and any alleged fraud in the inducement. The arbitrator may issue summary orders disposing of all or part of a claim and provide for temporary restraining orders, preliminary injunctions, injunctions, attachments, claim and delivery proceedings, temporary protective orders, receiverships and other equitable and/or interim/final relief. Each party consents to the enforcement of such orders, injunctions, etc. by any court having jurisdiction. The subpoena powers of the arbitrator with respect to witnesses to appear at the arbitration proceeding will not be subject to any geographical limitation.
E. Discovery: The disputants will have the same discovery rights as are available in civil actions under the state law selected in Section 19.14.
F. Compulsory Counter-claims: Each participant must submit or file any claim which would constitute a compulsory counter-claim (as defined by the applicable rule under the Federal Rules of Civil Procedure) within the same proceeding as the claim to which it relates. Any such Claim which is not submitted or filed in such proceeding will be forever barred. In no event may offers and/or other communications made in connection with, or related in any way to, mediation, possible settlement or other resolution of a dispute be admitted into evidence or otherwise used in any arbitration or other proceeding, and any arbitration award in violation of this provision will be vacated by the arbitration appeal panel (described above) and/or any court having jurisdiction.
G. Fees and Costs: Subject to the provisions of Section 19.7, the parties will bear their own fees and costs, including attorneys' fees; provided that for matters not settled through agreement of the parties, the arbitrator may assess all, or any portion, of the fees and costs incurred in connection with any arbitration and/or appeal (but not any attorneys' fees) against the party who does not prevail.
H. Disputes Not Subject to the Mediation/Arbitration Process: Claims or disputes relating
primarily to the validity of the Marks and/or any Intellectual Property licensed to you may be subjected to court proceedings or to the Process outlined in 19.1 (A), above, at our sole election; provided that only the portion of any claim or dispute relating primarily to the validity of the Marks and/or any Intellectual Property licensed to you and requesting equitable relief will be subject to court action, and any portion of such claim seeking monetary damages will be subject to the Process outlined in 19.1 (A). Any action to compel a party's compliance with Section 19.1 must be consistent with Section 19.2, below.
I. Your and Our Intentions: You and we mutually agree (and have expressly had a meeting
of the minds) and expressly intend that, notwithstanding any contrary provisions of state, provincial or other law, and/or any statements in our Offering Circular required by a state/province as a condition to registration or for some other purpose:
1) all issues/disputes relating to arbitrability of issues (including whether or not any
particular Claim, issue or otherwise is to be submitted to face-to-face meeting/mediation/arbitration), arbitration, waiver of jury trial, limitation of damages, venue, choice of laws, shortened periods in which to bring Claims, jurisdiction, choice-of-laws and/or the interpretation/enforcement of any of the dispute resolution-related provisions of this Agreement (including, but not limited to all of the provisions of Articles 19 and 21) will be decided by the arbitrator (together with any Claims that this, or any other, agreement, and/or their terms, were procured by fraud or uneven bargaining power, are or were unconscionable, were not subject to negotiation, or similar claims) and governed only by the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and the federal common law of arbitration and exclusive of state statutes and/or common law;
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2) all provisions of this Agreement (including, but not limited to, Articles 19 and/or 21) will be fully enforced, including (but not limited to) those relating to arbitration, waiver of jury trial. limitation of damages, venue, choice of laws, shortened periods in which to bring Claims;
3) you and we intend to rely on federal preemption under the Federal Arbitration Act (9 U.S.C. § 1 et seq.) and, as a result, the provisions of this Agreement will be enforced only according to its terms;
4) vou and we each knowingly waive all rights to a court trial (except as expressly provided in this Agreement), understanding that arbitration may be less formal than a court or jury trial, may use different rules of procedure and evidence and that appeal is generally less available, but still strongly preferring mediation and/or arbitration as provided in this Agreement;
5) the terms of this Agreement (including but not limited to this Article 19) will control with respect to any matters of choice of law; and
6) notwithstanding the fact that a party to this Agreement is or may become a party to a court action or special proceeding with a third party or otherwise, and whether or not such pending court action or special proceeding (1) may include issues of law, fact or otherwise arises out of the same transaction or series of related transactions as any arbitration between or involving the parties to this Agreement, (2) involves a possibility of conflicting rulings on common issues of law, fact or otherwise, and (3) such pending court action or special proceeding may involve a third party who cannot be compelled to arbitrate, the agreement of the parties to this Agreement shall be enforced according to its terms and any party to this Agreement may bring an action to compel a face-to-face meeting, mediation and/or arbitration, you and we strongly preferring arbitration to court actions and wishing to have a single entity (the arbitrator) determine all issues of fact and law between or involving us, except as expressly provided otherwise in this Agreement.
19.2 Venue. Without in any way limiting or otherwise affecting your and our obligations under Section 19.1, above, you and we agree that any litigation will be held in the United States District Court encompassing our then-current headquarters (the "Proper Federal Court"). Proceedings will be held only in the Proper Federal Court, subject to the following exceptions:
A. if a basis for federal jurisdiction does not exist, then any such proceeding will be brought exclusively before a court in the most immediate state judicial district encompassing our then-current headquarters and having subject matter jurisdiction (the "Proper State Court");
B. proceedings to remove or transfer a matter to the Proper Federal Court and/or to compel arbitration as contemplated by this Agreement may be brought in the court where the applicable action is pending and/or the Proper State or Federal Court; and
C. any action primarily with respect to any real and/or personal property (including any action in unlawful detainer, ejectment or otherwise) may be brought in any court of competent jurisdiction and/or the Proper State or Federal Court.
19.3 Terms Applicable to All Proceedings. Waiver of Trial by Jury. Class Action Rights.
With respect to any arbitration, litigation or other proceeding of any kind, you and we:
A. Knowingly waive all rights to trial bv iurv:
B. Will pursue any proceeding on an individual basis only, and not on a class-wide or multiple plaintiff basis: provided that if this provision is not enforceable for any reason, then you and we agree that with respect to any multiple plaintiff or class action, a court will supervise the procedural aspects directly related to the multiple plaintiff/class nature of the proceeding (e.g. certification of the
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class, appropriateness of class representation, approval of attorneys' fees incurred on behalf of the class, approval of any settlement, etc.) and the arbitrator will decide all substantive matters related to the actual claims, including liability and damages.
19.4 Limitations on Damages and/or Remedies. Waiver of Punitive Damages. Your liability to us and/or to any of the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC, for any and all claims, whenever brought, together with that of any and all Affiliates of yours, will be limited to a maximum total amount equal to the then-current level required for Federal diversity jurisdiction (currently $75,000), plus $1,000 for any and all claims, whenever brought, subject to inflation adjustment (liability for the present value of all payments which normally would have been owed by you if the franchise had continued in existence for its full term, together with any past due payments owed to us and/or any Affiliate, are subject to and part of such total limit); provided that there will be no limitation on indemnity obligations. Our maximum liability, together with that of any and all of the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC, will also be limited to the same amount, for any and all claims, whenever brought. In any event and to the fullest extent permitted by law, you and we (and your Affiliates and the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC) each knowingly waive any right to or claim for punitive, exemplary, multiple or similar damages against the other party and agree that, in the event of any dispute, you and we (and your Affiliates and the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC) shall be limited to recovery of any actual damages sustained by the injured party, unless otherwise expressly stated in this Agreement; provided that no such waiver or limitation shall apply to amounts owed under any indemnification obligation provided in this Agreement. To the extent that any provision of this Section 19.4 is invalid or unenforceable, you and we intend that such provision shall be severed and the remainder of this Agreement shall remain in full force and effect.
19.5 Periods In Which to Make Claims. No arbitration, action or suit (whether by way of claim, counter-claim, cross-complaint, raised as an affirmative defense, offset or otherwise) by either you or us will be permitted against the other, whether for damages, rescission, injunctive or any other legal and/or equitable relief, in respect of any alleged breach of this Agreement, or any other Claim of any type, unless such party commences such arbitration proceeding, action or suit before the expiration of the earlier of:
A. 1 year after the date on which the state of facts giving rise to the cause of action comes to the attention of, or should reasonably have come to the attention of, such party; or
B. 2 years after the initial occurrence of any act or omission giving rise to the cause of action, whenever discovered.
The above periods may begin to run, and will not be tolled, even though the claiming party was not aware of the legal theories, statutes, regulations, case law or otherwise on which a claim might be , based. If any federal, state or provincial law provides for a shorter limitation period than is described in this Section, then such shorter period will govern. The time period for actions for indemnity will not begin to run until the indemnified party(ies) have been found liable and any time for appeals has run in the underlying action.
19.6 Survival of Obligations.
A. Each provision of this Article 19, together with the provisions of Article 21, will be deemed
to be self-executing and continue in full force and effect subsequent to and notwithstanding the expiration, Termination, rescission, or finding of unenforceability of this Agreement (or any part of it) for any reason; will survive and will govern any Claim for rescission; and will apply to and govern any Claim against, or with respect to, the Marketing Fund. Notwithstanding any bankruptcy or other proceeding, you and we wish to have the dispute avoidance and resolution provisions of this Agreement strictly enforced according to their terms.
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00
B. Non-competition, confidentiality, protection of the Marks and indemnity/hold harmless
obligations, and all other Post Termination Provisions provided in this Agreement will survive the expiration and/or Termination of this Agreement according to their terms.
19.7 Costs and Attorneys' Fees. Except as expressly provided regarding recovery of attorneys' fees as part of indemnification rights hereunder, or in this Section, or as otherwise expressly provided in this Agreement, the parties will each bear their own costs of enforcement and/or defense {including but not limited to attorneys' fees), including those matters resolved pursuant to a settlement agreement between the parties. However, if any case is summarily disposed of in an arbitration or litigation proceeding for lack of merit (such as by summary judgment or award, judgment on the pleadings, judgment n.o.v., non-suit, motion to dismiss, directed verdict or similar disposition in arbitration or court), the party bringing such case will pay for the other party's costs of enforcement and/or defense (including, but not limited to, attorneys' fees).
19.8 Binding Effect. Modification. This Agreement is binding on the parties hereto and their respective executors, administrators, heirs, assigns, and successors in interest, and will not be modified or supplemented except by means of a written agreement signed by both you and our President or one of our Vice Presidents. However, you and we understand and agree that changes to the Manuals made in accordance with this Agreement are binding and do not require any acceptance by you, written or otherwise, to be effective and enforceable. No other officer, field representative, salesperson or other person has the right or authority modify this Agreement, or to make any representations or agreements on our behalf, and any such modifications, representations and/or agreements will not be binding.
19.9 Our Exercise of "Business Judgment" and/or Meaning of "Sole Discretion": Express Agreement.
A. When we use the phrases "sole and absolute discretion," "sole discretion" and/or "Business Judgment," whether in this Agreement or elsewhere, and whenever we exercise a right, prescribe or forbid an act or thing, or otherwise make a choice or use discretion, you and we agree that we have the wholly unrestricted right to make decisions and/or take (or refrain from taking) actions as we deem appropriate, except that we will not act arbitrarily. We shall use our judgment in exercising such discretion based on our assessment of the interests we consider appropriate and will not be required to consider or defer to your individual interests or the interests of any other Franchisee^). The ultimate decision-making responsibility with respect to the System must be vested in us, since you, we and all other Franchisees have a collective interest in working within a franchise system with the unrestricted flexibility to quickly adjust to changing business conditions, including but not limited to the competitive environment, new regulatory developments and emerging business opportunities. We have this right even if a particular decision/action may have negative consequences for you, a particular franchisee or group of franchisees. So long as we act in compliance with the requirements of this Agreement, we will have no liability for the exercise of our discretion in accordance with the provisions of this Agreement.
B. You and we execute this Agreement in the belief that it is the basis for a long-term business relationship and should be enforced according to its express provisions. Neither you nor we have any expectation, nor is it your or our intention or desire, that the rights and obligations set out herein will be defined or determined to be other than as expressly written, or that additional or different obligations be imposed on you or us by any court, arbitrator or otherwise which you or we have not expressly agreed to in writing. It would be contrary to your and our mutual intentions and expectations that any court, arbitrator or otherwise use any doctrine and/or rule of interpretation (such as an "implied covenant of good faith and fair dealing") to impose additional or different obligations on you or us.
19.10 Construction, etc.
A. Section and Article headings are for convenience only and do not define, limit, or
construe such provisions.
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B. References to a "controlling interest" are to a shareholder, membership or partnership interest, as applicable, which enables the holder(s) of such interest to determine the outcome of a decision making process for the applicable entity.
C. This Agreement will be executed in multiple copies, each of which will be deemed an original.
D. Each of us have carefully reviewed and thought about each provision of this Agreement. Therefore, you and we agree that it should be deemed to have been drafted equally and that no presumptions or inferences concerning terms or interpretation will result because we initially prepared this Agreement.
19.11 Non-Retention of Funds. Neither party has the right to offset or withhold payments of any kind owed or to be owed to the other against amounts purportedly due as a result of any dispute of any nature or otherwise, except as authorized by an arbitration award.
19.12 Severability: Substitution of Valid Provisions. Each provision of this Agreement, and any portion of any provision, is severable (including, but not limited to, any provision related to dispute resolution). Each party reserves the right to challenge any law, rule or judicial or other construction which would have the effect of varying or rendering ineffective any provision of this Agreement. To the extent that any provision of this Agreement, or any specification, standard or operating procedure prescribed by us, is invalid or unenforceable, you and we agree that such provisions will be modified or enforced to the fullest extent permissible under, and to be compliant with, governing law. This Agreement will be deemed automatically modified to comply with governing law if such law requires: (i) a greater time period for notice of the Termination of, or refusal to renew, this Agreement; or (ii) the taking of some other action not described in this Agreement. Such modifications to this Agreement will be effective only in such jurisdiction. You and we agree that the unenforceability of any provision of this Agreement will not affect the remainder of this Agreement. If any limitation on your and/or our rights (including, but not limited to, any limitation on damages, waiver of jury trial, shortened period in which to make any claim or otherwise) is held unenforceable with respect to one party, then such limitation will not apply to the other party.
19.13 Waivers: Cumulative Rights. Subject to the provisions of Section 19.5, no waiver by either party of any breach, default or unfulfilled condition under this or any other agreement between the parties will be deemed a waiver of any subsequent or other breach, default or unfulfilled condition. No waiver will be effective unless in writing and signed by an authorized representative of the signing party. The rights and remedies provided in this Agreement are cumulative. Except as expressly provided in this Agreement, no party will be prohibited from exercising any rights or remedies provided under this Agreement or permitted under law or equity.
19.14 Choice of Laws. You and we agree on the practical business importance of certainty as to the law applicable to your and our relationship and its possible effect on the development and competitive position of the System. Therefore, you and we also agree that, except with respect to the applicability of the Federal Arbitration Act, 9 U.S.C. § 1 et seq. and the effect of federal pre-emption of state law by such Act, and except to the extent governed by the United States Trademark Act and other federal laws and as otherwise expressly provided in this Agreement, this Agreement and all other matters, including, but not limited to respective rights and obligations, concerning you and us, will be governed by, and construed and enforced in accordance with, the laws of California.
You and we agree that this provision will be enforced without regard to the laws of such state relating to conflicts of laws or choice of law; except that the provisions of any law of that state regarding franchises (including, without limitation, registration, disclosure, and/or relationship laws) will not apply unless such state's jurisdictional, definitional and other requirements are met independently of, and without reference to, this Section.
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19.15 Application of Agreement to Parties and Others: Joint and Several Liability.
A. The rights and obligations of this Agreement run directly between you and us and are not intended to create any third-party beneficiary or similar rights or obligations unless specifically expressed in this Agreement; except that the protections which apply to us relating to indemnification and/or releases will also apply to any past, current and/or future Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC as if they were expressly named beneficiaries thereof.
B. We have the right to elect in our Business Judgment to not enforce (or to selectively enforce) any provision of this or any Agreement, standard or policy, whether with respect to you and/or any other franchisee or other person, in a lawful manner without liability.
C. If 2 or more persons are at any time the Franchisee or the Franchisee owners, all of their obligations and liabilities under this or any other agreement with us and/or any Franchisor-Related Persons/Entities and/or the Marketing Fund will be joint and several.
19.16 Fundamental Business Intention to Mediate and/or Arbitrate. Severability of Dispute Resolution Provisions, Federal Arbitration Act Governs, etc.
Irrespective of any statute, regulation, decisional law or otherwise, it is your and our fundamental agreement and intention that vou and we do not wish to engage in any court proceedings (except as expressly provided for in the rare instances specified in this Agreement), viewing the dispute resolution mechanism established by this Agreement (including, particularly, mediation and binding arbitration) to be superior from a business standpoint, less expensive, faster, more confidential, more likely to generate creative business-oriented solutions and compromise, and more accommodating to our business relationship and the needs of an evolving and diverse franchise system. Therefore, if any provisions of this Article 19 are deemed by a court to be unenforceable for any reason, you and we agree and intend that such provisions will be (i) modified so as to be enforceable or (ii), if that cannot be done, severed and, in any event, any remaining portions of this Article 19 will remain in full force and effect. You and we agree that such remaining portions will still form an appropriate and complete dispute resolution mechanism. You and we acknowledge that your and our activities relating to the franchise relationship are in interstate commerce and that this Agreement is governed by the Federal Arbitration Act.
I have read Sec. 19.1-19.16, understand them, and agree with them.
Your Initials: __________/__________
20. NOTICES AND PAYMENTS.
All written notices and reports to be delivered by the provisions of this Agreement or of the Manuals will be deemed so delivered when delivered by hand, immediately on transmission by facsimile transmission or other electronic system, including email or any similar means, one business day after being placed in the hands of a commercial courier service for overnight delivery, or 3 business days after placement in the United States Mail by Registered or Certified Mail, Return Receipt Requested, postage prepaid and addressed to us at Pinkberry, Inc., 2212 West Washington Boulevard, Los Angeles, CA90018 (or our then-current headquarters), to the attention of the President, and to you, at your Pinkberry Store. Until your Pinkberry Store has opened for business, we can send you notices at any address appearing in your application for a franchise or in our records. Any required payment or report
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not actually received by us during regular business hours on the date due will be deemed delinquent. Notice to any one Franchisee, or owner of the Franchisee, will be deemed effective as to all Franchisees under this Agreement and all owners of the Franchisee(s). Any party may change its address for receipt of notices by providing prior written notice of such change to the other party.
BE SURE YOU READ THE FOLLOWING ARTICLE 21 CAREFULLY. IT IS IMPORTANT AND IT IS IN THIS AGREEMENT TO MAKE SURE THAT NEITHER YOU NOR WE HAVE ANY MISUNDERSTANDINGS.
21. ACKNOWLEDGMENTS AND REPRESENTATIONS. ENTIRE AGREEMENT. NO FIDUCIARY RELATIONSHIP. ETC.
A. You and we agree that your and our relationship is not a fiduciary or similar special relationship, but rather is an ordinary commercial relationship between independent business people with arms length dealings.
B. You acknowledge that you (and each of your owners, if you are a Business Entity) have had the opportunity and been advised by us to have this Agreement and all other documents reviewed by your own attorney, and that you have read, understood, had an opportunity to discuss and agreed to each provision of this Agreement. You agree that you have been under no compulsion to sign this Agreement.
C. You and we expressly acknowledge and agree that the provisions of Article 19, above, (whether relating to arbitration, mediation, waiver of jury trial, venue, limitations on damages, prohibition against multiple plaintiff-class actions, shortened statutes of limitation, and/or otherwise) may require you to travel to a distant location to resolve a dispute, expend additional funds, and/or raise challenges for you and/or us in prosecution of claims/actions. You and we view these provisions in the context of a diverse franchise system with both large and small, sophisticated and unsophisticated participants, and.that reguires uniformity and predictability. As such, vou and we knowingly accept such provisions and limitations as justified bv business necessities and representative of a reasonable balancing of your and our interests, and those of the System as a whole, and not as unfair or burdensome.
D. You and we agree that this Agreement contains the final, complete and exclusive expression of the terms of your and our agreement [along with concurrently signed writings, such as but not limited to, personal guarantees, Statement of Prospective Franchisee, addenda, exhibits, releases and any other related documents (collectively, the Related Documents)] and supersedes all other agreements and/or representations of any kind or nature. Any understandings, agreements, representations, or otherwise (whether oral or written) which are not fully expressed in this Agreement and the Related Documents are expresslv disclaimed by vou and us, including but not limited to any promises, options, rights of first refusal, guarantees, and/or warranties of any nature (excepting only the written representations made bv you in connection with your application for this franchise). Neither you nor we believe it to be fair or reasonable for the other party to have to deal with allegations about understandings, representations, etc. not fully expressed in writing in this Agreement. Where this Agreement (or anything else) indicates that we (and/or any affiliate or designee of ours) may or can do something, the meaning is permissive and we (and/or the affiliate or designee of ours) will not be required to do that thing.
E. You specifically acknowledge that you have not received or relied on (nor have we or anyone else provided) any statements, promises or representations that you will succeed in the franchised business or at any location; achieve any particular sales, income or other levels of performance; earn any particular amount, including any amount in excess of your Initial Franchise Fee or other payments to us; or receive any rights, goods, or services not expressly set forth in this Agreement.
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F. You represent, warrant and agree that no contingency, prior requirement, or otherwise
(including but not limited to obtaining financing) exists with respect to you fully performing any or all of your obligations under this Agreement. You further represent to us, as an inducement to our entering into this franchise relationship, that you have made no misrepresentations or material omissions in obtaining the Franchise.
I have read Sec. 21 (A)- (F), understand them, and agree with them.
Your Initials: __________/__________
G. You acknowledge that you have not received or relied on (nor have we or anyone else
provided, except as may have been contained in the Uniform Franchise Offering Circular received by you):
1) any sales, income or other projections of any kind or nature; or
2) any statements, representations, charts, calculations or other materials which stated or suggested any level or range of sales, income, profits or cash flow; or
3) any representations as to any profits you may realize in the operations of the Franchised Business or any working capital or other funds necessary to reach any 'break-even' or any other financial level.
If any such information, promises, representations and/or warranties have been provided to you, they are unauthorized and inherently unreliable. You agree to advise us of the delivery of any such information. You must not rely upon any such information, nor will we be bound by it. We do not, nor do we attempt to, predict, forecast or project future performance, revenues or profits of any you or any franchisee. We are unable to reliably predict the performance of a Pinkberry Store even operated by us, and certainly cannot predict results for your Pinkberry Store. You understand and agree that Pinkberrv Store Franchisees are separate and distinct from us and are independently owned and operated, and that while we strongly encourage you to speak with such Franchisees in connection with your evaluation of this franchise opportunity, they do not act as our agents or representatives in providing any information to vou and we will have no obligations or liabilities with respect to (and vou should not rely on) anv information, opinions or otherwise they may provide to you.
I have read Sec. 21 (G), understand it, and agree with
it.
Your Initials: __________/__________
H. You acknowledge and agree that the success of the business venture contemplated to be
undertaken by you is speculative and will be dependent on your personal efforts, and success is not guaranteed. Vou further acknowledge that we have just recently begun franchising, we are not an experienced franchisor, our franchise system is relatively unproven and our business model is still under development. You acknowledge and represent that you have entered into this Agreement and made an investment only after making an independent investigation of the opportunity, including having received a list with your Uniform Franchise Offering Circular of others currently operating, or who have operated, our franchises.
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I. You acknowledge that you (and each of your owners) has received, fully read and
understood, and all questions have been answered regarding, (1) a copy of our Uniform Franchise Offering Circular with all exhibits at least 10 business days prior to signing any binding documents or paying any sums (whichever occurred first), and (2) a copy of this Agreement and all other agreements complete and in form ready to sign at least 5 business days prior signing any binding documents or paying any sums (whichever occurred first).
I have read Sec. 21 (H)- (I), understand them, and agree with them.
Your Initials: __________/__________
J. You understand, acknowledge and agree that (1) we may have offered franchises in the
past, may currently be offering franchises and/or may offer franchises in the future, on economic and/or other terms, conditions and provisions which may significantly differ from those offered by this Agreement and any related documents and (2) we can, from time to time, deal with our Franchisees on differing economic and/or other terms (including making special arrangements for payments of amounts due, waiving defaults and/or otherwise) to suit individual business circumstances, in each case in our Business Judgment and without being required to offer similar terms to other Franchisees, such flexibility being a practical necessity to respond to distinct business situations.
I have read Sec. 21 (J), understand it, and agree with
it.
Your Initials: __________/__________
K. You understand that we are reiving on you to bring forward in writing at this time any
matters inconsistent the representations contained in this Article 21. You agree that if any of the statements or matters set forth in this Article 21 are not true, correct and complete that vou will make a written statement regarding such next to your signature below so that we can address and resolve any such issue(s) at this time.
I have read Sec. 21 (K), understand it, and agree with
it. Your Initials: __________/__________
L. You acknowledge and agree that the officers, directors, employees, and agents of the
Franchisor act only in a representative capacity and not in an individual capacity, and that no other persons and/or entities other than the Franchisor has or will have any duties or obligations to you.
I have read Sec. 21 (L), understand it, and agree with
it. Your Initials: __________/__________
22. DEFINITIONS.
The following definitions apply to terms used this Agreement:
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"Affiliate" - Any person or entity which controls, is controlled by or is under common control with another person or entity; in addition, as to the Franchisee, any owner of any interest in the Franchisee or the Franchise, any employee or agent of the Franchisee, and/or any independent contractor performing functions for, or on behalf of, the Franchisee, and any entity controlled by any of the foregoing.
"Agreement" - This Franchise Agreement.
"Attorneys' Fees" - Includes, without limitation, legal fees, whether incurred in preparation of the filing of any written demand or claim, action, hearing, arbitration, or other proceeding to enforce the obligations of this Agreement, or during any such proceeding, plus all costs incurred in connection therewith.
"Brand" - The Pinkberry Store and Pinkberry™ brand, as applied to various goods and/or services as authorized by us from time to time.
"Business Entity" - Includes a corporation, partnership, joint venture, limited liability company, limited partnership, or other form of business recognized in any jurisdiction. If you are a Business Entity, then we can require each of your owners in our Business Judgment to guaranty your performance. Our current form of Owners Guaranty is attached as Exhibit 1 of this Franchise Agreement.
"Business Judgment" - Means that we are allowed to exercise our judgment however we consider to be appropriate in our sole and absolute discretion, except that we will not do so arbitrarily. You and we agree that we have the unrestricted right to make decisions and/or take (or refrain from taking) actions, (except that we will not do so arbitrarily) and we have this right even if a particular decision/action may have negative consequences for you, a particular franchisee or group of franchisees. You understand and agree that the exercise of Business Judgment is critical to our role as Franchisor and to our goals for its continuing improvement. This is a defined term for the purposes of this Agreement and is not intended to incorporate principles related to the application of the business judgment rule in a corporate law context.
"Customary Representations. Warranties and Agreements" - Includes commitments generally made by a transferor in connection with a transfer of a business and/or related assets, including but not limited to: representations as to ownership, condition and title to stock and/or assets, liens and encumbrances relating to the stock and/or assets, validity of contracts, and liabilities, contingent or otherwise, relating to the business/assets/entity to be acquired; full indemnification obligations and non-competition covenants by the transferor and each Affiliate, substantially similar to those required in Sections 7.4 and 8.2 of this Agreement; the delivery at closing of instruments transferring good and merchantable title to the assets purchased, free and clear of all liens and encumbrances (other than liens and security interests acceptable to us in our Business Judgment), and demonstrating that all sales, transfer and/or similar taxes are to be paid by the transferor through escrow if we so require; the transfer at closing of all licenses and permits which may be assigned or transferred.
"Designated Equipment" - Equipment that meets our requirements and which you must obtain and use in the operation of your Pinkberry Store.
"Franchise" - The right to operate a single Pinkberry Store at the Premises under the terms of this Agreement.
"Franchise Advisory Council" or "FAC" - The advisory group selected (or which may be selected) in accordance with this Agreement, which will provide Input as provided in this Agreement and as we may request from time to time.
"Franchised Business" - The business operations conducted by, at or in connection with your Pinkberry Store.
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"Franchisor-Related Persons/Entities" -Pinkberry Inc., Pinkberry Production Company, Iceberry, Inc, Baby Yogurt, Inc, and each and all of the following, whether past, current and/or future: each and all company(ies) and/or person(s) acting through, in concert with us and/or any of the foregoing, and/or as Affiliates of ours and/or of any of the foregoing; each and all of the Affiliates, partners, shareholders, officers, directors, agents, attorneys, accountants, and/or employees of us and/or any of the foregoing; and each and all of the predecessors, successors and/or assigns of us and/or any of the foregoing.
"General Release" - A general release, in the then-current form prescribed by us at the time such release is to be delivered, of any and all claims, liabilities and/or obligations, of any nature whatsoever, including those existing as of, and/or arising before, the date of any such release, however arising, known or unknown, whether against us and/or any or all of the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC, and whether by you, any owner of you {if you are or become a Business Entity) and/or any Affiliate of any of the foregoing. A copy of our general releasing language as currently used by us (which is subject to change) is attached as Exhibit 1.2 and is approved by you.
"Good Standing" - You are in "Good Standing" if you {and each of your owners and Affiliates) are not in default of any obligation to us and/or any of the Franchisor-Related Persons/Entities and/or the Marketing Fund, whether arising under this Agreement or any other agreement between you (and each of your owners and Affiliates) and us (and/or any of the Franchisor-Related Persons/Entities and/or the Marketing Fund), the Manuals or other System requirements {collectively, the "Obligations"); provided that you are not in Good Standing if you have been in default of any Obligations and such defaults are incurable by nature and/or part of a series of repeated defaults as defined in this Agreement.
"Gross Revenue" - Gross Revenue includes all charges and/or revenues which are, or could be, received or earned by you {and/or any Affiliate):
1) by, at or in connection with your Pinkberry Store;
2) relating to the kinds of goods or services available now or in the future through a Pinkberry Store and/or distributed in association with the Marks or the Pinkberry Store System;
3) relating to the operation of any Similar Business;
4) with respect to, any tenants and/or subtenants of yours on the Premises (including rent and other lease payments); and/or
5) with respect to any co-branding activities.
All sales and/or billings, whether collected or not, will be included in Gross Revenue, with no deduction for credit card or other charges. Gross Revenue does not include sales tax collected and paid when due to the appropriate taxing authority and actual customer refunds, adjustments and credits.
"Immediate Family" - With respect to any person, "Immediate Family" includes that person's spouse and/or domestic partner and each of their respective parents, guardians, grandparents, siblings, children, grandchildren, aunts, uncles, cousins, nieces and/or nephews.
"Input" - Advice and suggestions regarding specified matters. When we receive Input from the FAC or any other franchisee group we will retain the ultimate decision-making authority and responsibility for all matters for which Input is sought. FAC (or any other franchisee group) Input, votes or other collective actions will not be binding on us unless we have otherwise agreed in writing. FAC {or any other franchisee group) approval or consent will not be required as a pre-condition to any decision and/or action we may take.
"Intellectual Property" - Includes, regardless of the form or medium involved:
1) all Pinkberry Store proprietary software (if any), including the data and information
processed or stored thereby;
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2) the Manuals and all other directives, policies or information we issue from time to time;
3) all customer relationships and information;
4) the Marks;
5) the Trade Dress;
6) all Confidential Information and our trade secrets; and
7) all other proprietary, copyrightable and/or Trade Secret information and materials developed, acquired, licensed or used by us in our operation of the System.
"Manuals" - Specifications, standards, policies and procedures prescribed by us and published to you in any media {including electronic) and which are to be followed in the operation of your Pinkberry Store as they may be changed or eliminated by us in our Business Judgment.
"Marketing Fund" - The fund established and defined under Section 11.1.
"Marks" - The trademarks, service marks and other commercial symbols now and/or in the future owned by (or licensed to) us to identify the services and/or products offered by Pinkberry Store, including {but not limited to) "Pinkberry Store", the Trade Dress and other logos and identifiers designated by us from time to time.
"PUA" or "Per Unit Average" - The average Gross Revenue for all Pinkberry Stores during the most recent 6 month period before the measuring date.
"Post Termination Provisions" - Those promises contained in this Agreement that survive its expiration, Transfer or Termination for any reason, including, without limitation, the confidentiality, non-competition, indemnification, and dispute resolution and other provisions contained in Articles 19, 20 and 21, and all provisions related to (a) de-identification and/or return or destruction of various items and (b) audits.
"Premises" - The facility in which you will operate a single Traditional Pinkberry Store.
"Products" and "Services" - Goods, products and services designated by us from time to time for use, sale or otherwise to be provided (and/or used) at and/or from your Traditional Pinkberry Store and/or in association with the Marks.
"Similar Business" - Any enterprise that offers, is otherwise involved in, or deals with any goods, products and/or services, which are substantially similar to those goods, Products and/or Services now or in the future authorized by us to be offered at or from Pinkberry Stores (including any such enterprise and/or entity awarding franchises or licenses to operate or be involved with any such business). Our receipt of any royalties with respect to any Similar Business is not an approval of your involvement with any Similar Business.
"Special Accounts" - Classes of special customers {which may include national accounts, other large businesses, government agencies, and/or otherwise) as designated by us from time to time in our Business Judgment.
"System" - The distinctive format and method of doing business developed and used for the operation of a Pinkberry Store, and subject to change by us at any time in our Business Judgment.
"System Standards" - Standards prescribed by us in our Business Judgment from time to time, in the Manuals or elsewhere, for the operation, marketing and otherwise of Pinkberry Stores.
"Terminate" or "Termination" - "Terminate" or "Termination" when used in this Agreement means the Termination or cancellation of your rights and our obligations under this Agreement for any reason before the initial term expires. All of our rights are not cancelled on Termination since you have certain
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obligations that survive the ending of the Agreement in any manner, such as, but not limited to certain promises regarding non-competition, confidentiality and indemnity. Both of us are bound by the dispute resolution provisions (Article 19) of this Agreement, even after the Agreement is ended for any reason.
"Territory" - The geographic area described in Exhibit 2.2 wherein you are authorized to operate a single Pinkberry Store Franchise Business.
"Trade Dress" - The Pinkberry Store design and image authorized by us and subject to change by us at any time and in our Business Judgment.
"Traditional Pinkberry Store" - A "Traditional Pinkberry Store" means a full, standard size, "brick and mortar" retail facility located in a free-standing building or a shopping center accessible to the general public and using the Marks and Pinkberry Store System.
"Transfer" - Defined in Section 14.2.
"Us," "We," "Our" or "Franchisor" - Pinkberry, Inc., a California corporation.
"Pinkberry Store" - The Traditional Pinkberry Store you are franchised to operate by this Agreement.
"You," "Your," or "Franchisee" - The parties signing this Agreement as Franchisee. (If there is more than one Franchisee, each is jointly and severally obligated under this Agreement and ali other agreements with us, the Franchisor-Related Persons/Entities and/or the Marketing Fund). The term "you" is applicable to one or more persons or a Business Entity, as the case may be.
IN WITNESS WHEREOF, you and we have executed and delivered this Agreement in __________counterparts on the day and year first above written.
THIS AGREEMENT WILL NOT BECOME EFFECTIVE UNLESS AND UNTIL SIGNED BY THE PRESIDENT OR A VICE PRESIDENT OF FRANCHISOR. NO FIELD REPRESENTATIVE OR OTHER PERSON IS AUTHORIZED TO EXECUTE THIS AGREEMENT FOR FRANCHISOR.
FRANCHISOR:
Pinkberry, Franchising Company, a California corporation
By:____:______________________
Hye Kyung Hwang Title: President
FRANCHISEE (Individual)
Signature Signature
Printed Name Printed Name
FRANCHISEE (Corp., LLC or Partnership)
Legal Name of Franchisee Entity
Pinkberry Franchising Company — Franchise Agreement — v2 2006
Page 51
a
Jurisdiction of Formation Corporation, LLC or Partnership
By:_________________________________
Name
Signature
Title
Pinkberry Franchising Company — Franchise Agreement — v2 2006 Page 52
PINKBERRY FRANCHISING COMPANY.
EXHIBIT 1
OWNER'S GUARANTY AND ASSUMPTION OF BUSINESS ENTITY FRANCHISEE'S OBLIGATIONS
In consideration of, and as an inducement to, the execution by Pinkberry, Franchising Company., a California corporation, ("Franchisor") of a franchise agreement of even date herewith (the "Agreement")
between Franchisor and ________________________, a(n) _______________ (state/province of
formation) ______________ (type of entity: LLC, LLP, corporation, etc.) (the "Business Entity
Franchisee"), each of the undersigned hereby personally and unconditionally, jointly and severally.
1) guarantees to Franchisor, its Affiliates, the Franchisor-Related Persons/Entities and the Marketing Fund (as such terms are defined in the Agreement) and each of their successors and assigns, for the Term of the Agreement, and for any renewal/successor franchise term, and thereafter as provided in the Agreement, that the Business Entity Franchisee will punctually pay and perform, each and every undertaking, agreement and covenant set forth in the Agreement, as currently set forth and as amended and/or otherwise changed in the future, including any successor franchise agreement;
2) agrees to be personally bound by, and personally liable for, the breach of, each and every provision in the Agreement (including all confidentiality, non-competition, indemnity and Post Termination Provisions), as currently set forth and as amended or otherwise changed in the future, including any successor franchise agreement; and
3) agrees to be personally bound by, and personally liable for, each past, current and/or future obligation of the Business Entity Franchisee to Franchisor, its Affiliates, the Franchisor-Related Persons/Entities and/or the Marketing Fund, and each of their successors and assigns.
The undersigned intending that the guarantees and other obligations herein be unqualifiedly general and without limitation in scope, nature and/or effect. Franchisor, and/or its Affiliates, the Franchisor-Related Persons/Entities and/or the Marketing Fund, and each of their successors and assigns, need not bring suit first against the undersigned in order to enforce this guarantee and may enforce this guarantee against any or all of the undersigned as it chooses in its/their sole and absolute discretion.
Each of the undersigned waives: presentment, demand, notice of demand, dishonor, protest, nonpayment, default and all other notices whatsoever, including (without limitation): acceptance and notice of acceptance, notice of any contracts and/or commitments, notice of the creation and/or existence of any liabilities under the Agreement or otherwise and of the amounts, terms or otherwise thereof; notice of any defaults, disputes or controversies between the Franchisor and the Business Entity Franchisee or otherwise, and any settlement, compromise or adjustment thereof; any right the undersigned may have to require that an action be brought against Franchisor, Business Entity Franchisee or any other person as a condition of liability, and any and all other notices and legal or equitable defenses to which he or she may be entitled.
Each of the undersigned consents and agrees that:
1) his or her direct and immediate liability under this guaranty will be joint and several;
2) he and/or she will render any payment or performance required under the Agreement on demand if the Business Entity Franchisee fails or refuses to do so punctually;
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3) such liability will not be contingent or conditioned on pursuit by Franchisor or otherwise of any remedies against the Business Entity Franchisee or any other person;
4) such liability will not be diminished, relieved or otherwise affected by any extension of time, credit or other indulgence which Franchisor or otherwise may from time to time grant to the Business Entity Franchisee or to any other person, including, without limitation, the acceptance of any partial payment or performance, or the compromise or release of any claims, none of which will in any way modify or amend this guaranty, which will be continuing and irrevocable during the Term of the Agreement and any renewal/successor franchise term;
5) the liabilities and obligations of the undersigned, whether under this document or otherwise, will not be diminished or otherwise affected by the Termination, rescission, expiration, renewal, award of a successor franchise, modification or otherwise of the Agreement;
6) terms not defined in this document will have the meanings assigned in the Agreement; and
7) the provisions of Articles 18 through 22 of the Agreement are incorporated in and will apply to this document as if fully set forth herein and will apply to any dispute involving the Franchisor, its Affiliates, the Franchisor-Related Persons/Entities , the Marketing Fund and/or the FAC and each of their successors and assigns and any of the undersigned.
In connection with such guarantee and the Franchisor (a) not requiring that the Franchise be initially awarded in the name of one or more of the Guarantors and/or (b) not requiring the payment of a full transfer fee in connection with any related transfer from the undersigned to the Business Entity Franchisee, each of the undersigned hereby grants a General Release of any and all claims, liabilities and/or obligations, of any nature whatsoever, however arising, known or unknown, against the Franchisor, its Affiliates, the Franchisor-Related Persons/Entities, the Marketing Fund and/or the FAC and each of their successors and assigns.
IN WITNESS WHEREOF, each of the undersigned has here unto affixed his or her signature on the same day and year as the Agreement was executed.
GUARANTOR(S) PERCENTAGE OF OWNERSHIP
OF BUSINESS ENTITY FRANCHISEE
^_______________________________________________________%
%
%
%
Business Entity Franchisee;
________________________, a______________corporation.
By___________________________________
Its___________________________________;
Franchise Agreement Number:_______
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PINKBERRY FRANCHISING COMPANY.
EXHIBIT 1.2
CURRENT FORM OF
RELEASING LANGUAGE
(SUBJECT TO CHANGE BY FRANCHISOR)
Release - General Provisions. The Franchisee(s), jointly and severally, hereby release and forever discharge each and all of the Franchisor-Related Persons/Entities (as defined below) of and from any and all causes of action, in law or in equity, suits, debts, liens, defaults under contracts, leases, agreements or promises, liabilities, claims, demands, damages, losses, costs or expenses, of any nature whatsoever, howsoever arising, known or unknown, fixed or contingent, past or present, that the Franchisee(s) (or any of them) now has or may hereafter have against all or any of the Franchisor-Related Persons/Entities by reason of any matter, cause or thing whatsoever from the beginning of time to the date hereof (the "Claims"), it being the mutual intention of the parties that this release be unqualifiedly general in scope and effect and that any Claims against any of the Franchisor-Related Persons/Entities are hereby forever canceled and forgiven.
THE FRANCHISEE (S) ACKNOWLEDGE THAT THEY ARE FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
THE FRANCHISEE(S), BEING AWARE OF THIS CODE SECTION, HEREBY EXPRESSLY WAIVE ALL OF THEIR RIGHTS THEREUNDER AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT OF ANY APPLICABLE JURISDICTION, INCLUDING, WITHOUT LIMITATION, CALIFORNIA AND/OR JURISDICTIONS OF FRANCHISEE(S)' RESIDENCE AND LOCATION OF FRANCHISED UNIT.
Provided that if this Release is given in connection with the award of a franchise, then this release will not apply to Claims relating to the offer and sale of such franchise under the California Franchise Investment Law or any rule or order issued thereunder
The Franchisee(s) expressly assume the risk of any mistake of fact or fact of which they may be unaware or that the true facts may be other than any facts now known or believed to exist by Franchisee(s), and it is the Franchisee(s) intention to forever settle, adjust and compromise any and all present and/or future disputes with respect to all matters from the beginning of time to the date of this document finally and forever and without regard to who may or may not have been correct in their understanding of the facts, law or otherwise. All releases given by the Franchisee(s) are intended to constitute a full, complete, unconditional and immediate substitution for any and all rights, claims, demands and causes of action whatsoever which exist, or might have existed, on the date of this document. The Franchisee(s) represent and warrant that they have made such independent investigation of the facts, law and otherwise pertaining to all matters discussed, referred to or released in or by this document as the Franchisee(s), in the Franchisee(s) independent judgment, believe necessary or appropriate. The Franchisee(s) have not relied on any statement, promise, representation or otherwise, whether of fact, law or otherwise, or lack of disclosure of any fact, law or otherwise, by the Franchisor-Related Persons/Entities or anyone else, not expressly set forth herein, in executing this document and/or the related releases.
Franchisee(s) Initials:_________________
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No Assignment or Transfer of Interest. The Franchisee(s) represent and warrant that there has been, and there will be, no assignment or other transfer of any interest in any Claims that the Franchisee(s) may have against any or all of the Franchisor-Related Persons/Entities, all Claims having been fully and finally extinguished, and the Franchisee(s) agree to forever indemnify and hold the Franchisor-Related Persons/Entities harmless from any liability, claims, demands, damages, losses, costs, expenses or attorneys' fees incurred by any of the Franchisor-Related Persons/Entities as a result of any person asserting any interest in any of the Claims and/or any voluntary, involuntary or other assignment or transfer, or any rights or claims under any assignment, transfer or otherwise. It is the intention of the parties that this indemnity does not require payment by any of the Franchisor-Related Persons/Entities as a condition precedent to recovery against the Franchisee(s) under this indemnity.
Franchisee(s) Initials:_________________
Attorneys' Fees. If the Franchisee(s), or anyone acting for, or on behalf of, the Franchisee(s) or claiming to have received, by assignment or otherwise, any interest in any of the Claims, commence, join in, or in any manner seek relief through any suit (or otherwise) arising out of, based upon or relating to any of the Claims released hereunder or in any manner asserts against all or any of the Franchisor-Related Persons/Entities any of the Claims released hereunder, the Franchisee(s) agree to pay all attorneys' fees and other costs incurred by any of the Franchisor-Related Persons/Entities in defending or otherwise responding to said suit or assertion directly to the Franchisor-Related Persons/Entities incurring such costs.
Franchisee(s) Initials:_________________
"Franchisor-Related Persons/Entities." Franchisor, Franchisor's affiliates, any advertising fund, including the Marketing Fund, any Franchisee Advisory Group/FAC and each of the following, whether past, current or future: companies and/or persons acting through and/or in concert with us and/or with any of the foregoing; partners, shareholders, officers, directors, agents, attorneys, accountants, and/or employees of ours and/or of any of the foregoing; and predecessors, successors and/or assigns of ours and/or of any of the foregoing.
Franchisee(s) Initials:_________________
Date of Releases, Joint and Several Liability. The releases granted hereunder will be deemed effective as of the date hereof. The liabilities and obligations of each of the Franchisee(s) {and any other person/entity providing releases to the Franchisor-Related Persons/Entities) will be joint and several.
Franchisee(s) Initials:_________________
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PINKBERRY FRANCHISING COMPANY
EXHIBIT 2.2
TERRITORY
The "Territory" is as follows:
Note: Boundary lines include only the area within the boundary line and extend only to the middle of the boundary demarcation (for example, only to the middle of a street or highway.) You have no rights under this Agreement or otherwise with respect to a facility on the other side of the boundary line, street or highway or otherwise, and no matter how close to such boundary a facility may be, regardless of the distance from, impact on, or vicinity of, your Pinkberry Store or the number of Pinkberry Store, other outlets or otherwise in any area or market. Your rights are limited as set forth in the Franchise Agreement.
FRANCHISOR: FRANCHISEE:
Pinkberry Franchising Company.
a California corporation Signature
Printed Name
By:__________________________ ___________
Hye Kyung Hwang Signature
Title: President
Printed Name
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PINKBERRY FRANCHISING COMPANY. EXHIBIT 3.2
COLLATERAL ASSIGNMENT OF LEASE
THIS COLLATERAL ASSIGNMENT OF LEASE (this "Assignment") is entered into as of
___________________________________________________________, 200__between
______________________________________ {"Franchisee") and Pinkberry Franchising Company., a
California corporation {"Franchisor.")
Subject to the provisions hereof, the Franchisee, to secure its obligations to the Franchisor under the franchise agreement between the Franchisor and the Franchisee for the operation of a
______________ franchise, dated _______________, 200_ (the "Franchise Agreement"), hereby
assigns, transfers and sets over unto Franchisor [and/or such person(s)/entity(ies) as Franchisor may from time-to-time designate] all of Franchisee's right, title and interest, whether as tenant or otherwise, in, to and under that certain lease (the "Lease"), a copy of which is attached to this Assignment, dated
_________, 200_, between Franchisee and ________________________________________
("Landlord"), respecting that property commonly known as __________________________
_________________________(the "Premises"). The Franchisor shall have no liabilities or obligations of
any kind arising from, or in connection with, this Assignment, the Lease or otherwise {including, but not limited to, any obligation to pay rent and/or other amounts) until and unless the Franchisor, in its sole and absolute discretion, takes possession of the Premises pursuant to the terms hereof and expressly (and in writing) assumes the rights and obligations of Franchisee under the Lease, the Franchisor only being responsible for those obligations accruing after the date of such assumption.
The Franchisee agrees to indemnify and hold harmless the Franchisor from and against all claims and demands of any type, kind or nature made by the Landlord or any third party that arise out of or are in any manner connected with the Franchisee's use and occupancy of the Premises subject to the Lease.
The Franchisee represents and warrants to the Franchisor that the Franchisee has full power and authority to assign the Lease and its interest in the Lease.
The Franchisor will not take possession of the Premises until and unless the Franchisee defaults {and/or until there is a termination, cancellation, rescission or expiration of the Franchisee's rights) under the Lease, any sublease, the Franchise Agreement or other agreement between the Franchisee and the Franchisor {or any affiliate). In such event, the Franchisor (or its designee) shall have the right, and is hereby empowered, (but has no obligation) to take possession of the Premises, expel Franchisee therefrom, and, in such event, Franchisee shall have no further right, title or interest in or under the Lease or to the Premises, all such rights thereby passing to the Franchisor or its designee, in each case without the Landlord's further consent. The Franchisee agrees to do all acts necessary or appropriate to accomplish such assignment on the Franchisor's request. The Franchisee will reimburse the Franchisor for the costs and expenses incurred in connection with any such retaking, including, without limitation, the payment of any back rent and other payments due under the Lease (whether such payments are made by a separate agreement with the Landlord or otherwise), attorney's fees and expenses of litigation incurred in enforcing this Assignment, costs incurred in reletting the Premises and costs incurred for putting the Premises in good working order and repair.
Franchisee agrees that it will not suffer or permit any surrender, termination, amendment or modification of the Lease without the prior written consent of Franchisor. Throughout the term of the Franchise Agreement, Franchisee agrees that it shall elect and exercise on a timely basis all options to
Pinkberry Franchising Company — Franchise Agreement — v2 2006 Page 58
extend the term, or renew or assume in bankruptcy, the Lease, unless Franchisor otherwise agrees in writing. Upon failure of Franchisee to so elect to extend or renew or assume the Lease, Franchisee hereby appoints Franchisor as its true and lawful attorney-in-fact to exercise such options in the name, place and stead of Franchisee for the sole purpose of effecting any extension, renewal or assumption, in each case for the account of the Franchisee and without any liability or obligation of the Franchisor.
Failure of the Franchisor to exercise any remedy hereunder shall not be construed or deemed to be a waiver of any of its rights hereunder. The rights and remedies of the Franchisor under this Assignment are cumulative and are not in lieu of, but are in addition to, any other rights and remedies which the Franchisor shall have under or by virtue of the Franchise Agreement or otherwise. The terms, covenants, and conditions contained herein shall bind the Franchisee and its successors and assigns, and inure to the benefit of the Franchisor and its successors and assigns. In the event of any dispute between the parties regarding this Assignment, or any matter related in any way to it, the dispute resolution provisions (including, but not limited to, mediation, binding arbitration, waiver of jury trial and limitation of damages) of the Franchise Agreement between the Franchisor and the Franchisee shall apply. The arbitrator in any such proceeding shall have the full power and authority to grant an appropriate award to give full effect to this Assignment, expelling the Franchisee from the Premises and awarding possession to the Franchisor, as well as granting such other relief as may be proper and fair at law and by equity. If there is more than one Franchisee, their obligations hereunder will be joint and several.
This Assignment, any memorandum hereof or any financial statement related hereto may be recorded by, and at the expense of, the Franchisor. The Franchisee hereby appoints the Franchisor as its attorney in fact to execute any and all documents and to take any and all such actions, as are necessary or appropriate to record such instrument referenced above.
Notwithstanding anything to the contrary contained herein, the Franchisee agrees to indemnify, defend and hold harmless the Franchisor with respect to all obligations and liabilities, including, without limitation, the obligations to pay all rent and other monies due under the Lease, that arise after the date of any assignment of the Lease that transpires under this Assignment; provided, however, nothing hereunder shall affect any obligations or covenants of the Franchisee owed under its Franchise Agreement with the Franchisor, including, without limitation, any post-termination covenant not to compete.
FRANCHISEE:
Signature Signature
Printed Name Printed Name
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LANDLORD APPROVAL:
The undersigned Landlord hereby consents to and approves of the above-described Collateral Assignment of Lease by the Franchisee to the Franchisor and further agrees that immediately upon notice to the Landlord, the Franchisor shall have the right to succeed the Franchisee as the tenant under the Lease without further action or consent by any of the parties hereto; provided, however, nothing in the Assignment or in the consent and approval by the Landlord to the Assignment shall affect any other rights of the Landlord under the Lease.
LANDLORD FRANCHISOR
By: _____________________________ By:
Its ____ Its
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PINKBERRY FRANCHISING COMPANY.
EXHIBIT 3.3
ADA AND RELATED CERTIFICATIONS
Pinkberry, Inc. ("Franchisor") and__________________("Franchisee") are parties to a franchise
agreement dated________, 20__(the "Franchise Agreement") for the operation of a Pinkberry Store
at__________________________________________________________(the "Store"). In accordance
with Section 3.3 of the Franchise Agreement, Franchisee certifies to Franchisor that the Store and its adjacent areas comply with all applicable federal, state and local accessibility laws, statutes, codes, rules, regulations and standards, including but not limited to the Americans with Disabilities Act and all local zoning regulations and building codes. Franchisee acknowledges that it is an independent contractor and the requirement of this certification by Franchisor does not constitute ownership, control, leasing or operation of the Store. Franchisee acknowledges that Franchisor has relied on the information contained in this certification. Furthermore, Franchisee agrees to indemnify Franchisor and each and all of the Franchisor-Related Persons/Entities the Marketing Fund and the FAC, in connection with any and all claims, losses, costs, expenses, liabilities, compliance costs, and damages incurred by the indemnified party(ies) as a result of any matters associated with Franchisee's compliance (or failure to comply) with the Americans with Disabilities Act, all local zoning regulations and building codes and otherwise, as well as the costs, including attorneys' fees, related to the same.
FRANCHISEE
By:______________________________________
Printed Name:___________________________
Title: Date:
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PINKBERRY FRANCHISING COMPANY
EXHIBIT 8.1
PINKBERRY STORE FRANCHISEE EMPLOYEE CONFIDENTIALITY. ETC. AGREEMENT
(Note to Franchisee: This is a form which has not been checked by us for compliance with local laws and should be reviewed by your attorney for your protection and to maximize enforceability. You are responsible for ensuring that the terms of the agreement used by you comply with all applicable laws, since they may vary from one state or province to another.)
As an employee of ____________________ [Name of Franchisee] ("Company") and in
consideration of the compensation and benefits from my employment, I agree as follows:
For purposes of this Agreement, the term Confidential Information means information of any type that the Company considers confidential and is not generally known by the public about the Company and/or the Company's Franchisor, Pinkberry, Franchising Company., and its/their business, processes, services, products, suppliers, customers, decisions, or plans, which information is used or useful in the conduct of the Company's business, or which confers or tends to confer a competitive advantage over one who does not possess it, whether or not marked confidential. Confidential Information includes recipes, business plans, customer lists, business records and files, sales and marketing reports, technical data, prices and costs, designs and formulas, software, databases, personnel and payroll records, mailing lists, accounting records, and other business information.
1. During my employment by the Company, I will not disclose or make use of any Confidential Information except as authorized by the Company and necessary for the performance of my duties as a Company employee.
2. After .my employment with the Company has terminated, I will not disclose or make use of any Confidential Information for any purpose, either on my own or on behalf of another business.
3. During my employment by the Company, I will not make use of any trade secrets or other material belonging to another employer or other third party without the express approval of the Company and such employer or other third party.
4. I represent that I am not subject to any other confidentiality agreements) with any other party that would prevent me from performing all my assigned duties as an employee of the Company.
5. I understand and agree that the products of my labor as a Company employee shall belong solely to the Company.
6. I hereby assign to the Company all rights that I may have to any inventions, works of authorship, developments, improvements, or trade secrets that I may develop during the course of my employment.
7. I understand and agree that all works of authorship to which I contribute during my employment shall be considered "works made for hire" and shall be the sole property of the Company.
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8. I will keep adequate records of all inventions and works of authorship to which I
contribute during my employment, and will make such records available to the Company on request.
. 9. I will cooperate with the Company and do whatever is necessary or appropriate to
obtain patents, copyrights, or other legal protection on projects to which I contributed, and if I am incapacitated for any reason from doing so, I hereby authorize the Company to act as my agent and to take whatever action is needed on my part to carry out this Agreement.
10. Upon termination of my employment for any reason, I will immediately assemble all property of the Company in my possession or under my control, and return it unconditionally to the Company.
11. During my employment, I will devote all of my working time and energy to the business of the Company, and will not render services to anyone outside the Company, accept competing employment, or make preparations to compete with the Company!
12. During and for a period of twelve months after my employment, I will not solicit or induce any employee or consultant of the Company to quit their employment or cease doing business with the Company, unless I am specifically authorized to do so by the Company.
13. I understand and agree that a violation of this Agreement may cause harm to the Company's reputation, customer relationships, and other aspects of its business for which an award of money damages would not be adequate. I therefore agree that the Company shall be entitled to a court order as appropriate to prevent me from violating this Agreement, in addition to any claims for money damages or other relief.
14. For purposes of enforcing this Agreement, I hereby consent to jurisdiction in the
Superior Court of____________for the County of____________in the State of_________, as well as
any other jurisdiction allowed by law. This Agreement shall be governed by the laws of the State of
15. If any legal action is necessary to enforce this Agreement, the prevailing party shall be entitled to recover attorneys' fees.
16. This Agreement does not guarantee me any term of employment, or limit my or the Company's right to terminate my employment at any time with or without cause.
17. This Agreement may be amended only in writing, signed by the parties. If any provision of this Agreement is invalid, all other provisions shall remain in effect.
18. This Agreement is binding on my successors and assigns, and will benefit the successors and assigns of the Company.
The parties indicate their agreement to these terms by signing below:
EMPLOYEE FRANCHISEE COMPANY NAME
Print Name Print Name
Sign Name Sign Name
Dated Dated
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PINKBERRY FRANCHISING COMPANY FRANCHISE AGREEMENT
Franchisee
Location
Date of Agreement
Pinkberry Franchising Company Franchise Agreement - 2006
TABLE OF CONTENTS
Section Page
1. INTRODUCTION..............................................................................................................................1
1.1 Introduction.........................................................................................................................1
2 AWARD OF FRANCHISE................................................................................................................2
2.1 Award of Franchise, Term, Your Basic Commitment..........................................................3
2.2 Territory...............................................................................................................................4
2.3 E-Commerce/Email Business and Special Accounts..........................................................4
2.4 Essential Personnel.............................................................................................................4
3 DEVELOPMENT AND OPENING....................................................................................................5
3.1 Site Selection......................................................................................................................5
3.2 Lease of Premises...............................................................................................................5
3.3 Pinkberry Store Design Standards......................................................................................6
3.4 Development for Your Pinkberry Store................................................................................6
3.5 Equipment, Furniture, Fixtures and Signs...........................................................................6
3.6 Pinkberry Store Opening.....................................................................................................6
3.7 Grand Opening- Initial Launch - Marketing.......................................................................6
3.8 Relocation of Pinkberry Store Premises..............................................................................7
4. COMPUTER HARDWARE AND SOFTWARE SYSTEMS..............................................................7
5. TRAINING.........................................................................................................................................7
5.1 Training................................................................................................................................7
5.2 Guidance and Assistance....................................................................................................8
5.3 Manuals...............................................................................................................................8
6. MARKS.............................................................................................................................................8
6.1 Goodwill and Ownership of Marks.......................................................................................9
6.2 Limitations and Use of Marks..............................................................................................9
6.3 Notification of Infringements and Claims.............................................................................9
6.4 Discontinuance of Use of Marks..........................................................................................9
7. RELATIONSHIP OF THE PARTIES; INDEMNIFICATION..............................................................9
7.1 Independent Contractor.......................................................................................................9
7.2 No Liability for Acts of Other Party.......................................................................................9
7.3 Taxes...................................................................................................................................9
7.4 Responsibility, Indemnity, Etc..............................................................................................9
7.5 Disclosure..........................................................................................................................10
8 CONFIDENTIAL INFORMATION; EXCLUSIVE RELATIONSHIP................................................10
8.1 Confidential Information - Non-Disclosure and Non-Use..................................................10
8.2 Exclusive Relationship, Restrictions on Similar Business During Franchise Term...........11
9. FEES..........................................................................................................................................13
9.1 Initial Franchise Fee, Releases, etc...................................................................................13
9.2 Internet Service Fee..........................................................................................................14
9.3 Royalty - Percentage and Minimum..................................................................................14
Pinkberry Franchising Company Franchise Agreement - 2006
9.4 Electronic Funds Transfer.................................................................................................14
9.5 Interest and Late Fees on Late Payments and Reports....................................................15
9.6 Application of Payments, Setoffs, etc..............................................................................15
9.7 Inflation Adjustments........................................................................................................15
9.8 Mandatory Convention Attendance, Possible Fee.............................................................15
10 YOUR PINKBERRY STORE - IMAGE AND OPERATION...........................................................15
10.1 System Compliance, Regular Upgrading...........................................................................15
10.2 Designated Equipment, Products, Services and/or Suppliers...........................................16
10.3 Purchasing Cooperative....................................................................................................16
10.4 Compliance With Laws and Ethical Business Practices....................................................16
10.5 Management and Personnel of your Pinkberry Store, Training.........................................17
10.6 Insurance...........................................................................................................................18
10.7 Program Participation........................................................................................................18
10.8 Continued Payment of Royalties, etc. During Closure.......................................................18
10.9 Customer Satisfaction, Quality Controls, etc....................................................................18
10.10 Franchisee Advisory Council and Selection.......................................................................18
11. MARKETING..................................................................................................................................19
11.1 Marketing Fund..................................................................................................................19
11.2 Your Participation in the Marketing Fund...........................................................................21
11.3 Your Local Pinkberry Store Marketing Activities................................................................21
12 STORE RECORDS AND REPORTS.............................................................................................22
12.1 Bookkeeping, Accounting and Records.............................................................................22
12.2 Reports, Financial Statements and Tax Returns...............................................................22
13 INSPECTIONS AND AUDITS........................................................................................................22
13.1 Our Inspections, etc...........................................................................................................22
13.2 Audit...................................................................................................................................23
13.3 Gross Revenue Understatements.....................................................................................23
14. TRANSFER....................................................................................................................................23
14.1 Transfers by Us.................................................................................................................23
14.2 Transfers by You...............................................................................................................24
14.3 Conditions for Approval of Any Transfer............................................................................24
14.4 Additional Conditions for Transfer to a Business Entity.....................................................26
14.5 Death or Disability of Franchisee.......................................................................................27
14.6 Effect of Consent to Transfer.............................................................................................27
14.7 Our Right-of-First-Refusal.................................................................................................27
15. SUCCESSOR FRANCHISE...........................................................................................................28
15.1 Your Rights........................................................................................................................28
15.2 Notice of Election...............................................................................................................29
15.3 Conditions to the Award of a Successor Franchise...........................................................29
16. TERMINATION OF THE FRANCHISE...........................................................................................30
16.1 Defaults with No Right to Cure..........................................................................................30
16.2 Defaults with Right to Cure................................................................................................31
16.3 Repeated Defaults.............................................................................................................32
16.4 Cross Defaults...................................................................................................................32
Pinkberry Franchising Company Franchise Agreement - 2006
16.5 Performance Standards.....................................................................................................32
16.6 Non Exclusive Remedies...................................................................................................34
16.7 No Equity on Termination, etc...........................................................................................34
16.8 Extended Cure Period.......................................................................................................34
16.9 Management of the Pinkberry Store After Issuance of Notice of Default..........................35
16.10 Our Right to Discontinue Supplying Items Upon Default...................................................35
16.11 Prompt Notice of Claims by You........................................................................................35
17 RIGHTS AND OBLIGATIONS ON TRANSFER, REPURCHASE, TERMINATION AND/OR
EXPIRATION OF THE FRANCHISE..............................................................................................35
17.1 Payment of All Amounts Owed..........................................................................................35
17.2 Intellectual Property, Confidential Information, Trade Dress, etc......................................35
17.3 Telephone and Other Directory Listings, Internet Sites.....................................................36
17.4 Continuing Obligations.......................................................................................................37
18. SECURITY INTEREST...................................................................................................................37
19 DISPUTE AVOIDANCE AND RESOLUTION................................................................................37
19.1 Mediation and Mandatory Binding Arbitration, Waiver of Right to Trial.............................38
19.2 Venue................................................................................................................................40
19.3 Terms Applicabfe to All Proceedings, Waiver of Trial by Jury, Class Action Rights..........40
19.4 Limitations on Damages and/or Remedies, Waiver of Punitive Damages........................41
19.5 Periods In Which to Make Claims.....................................................................................41
19.6 Survival of Obligations.......................................................................................................41
19.7 Costs and Attorneys' Fees.................................................................................................42
19.8 Binding Effect, Modification...............................................................................................42
19.9 Our Exercise of "Business Judgment" and/or Meaning of "Sole Discretion".....................42
19.10 Construction, etc................................................................................................................43
19.11 Non-Retention of Funds.....................................................................................................43
19.12 Severability, Substitution of Valid Provisions....................................................................43
19.13 Waivers; Cumulative Rights..............................................................................................43
19.14 Choice of Laws..................................................................................................................43
19.15 Application of Agreement to Parties and Others...............................................................44
19.16 Fundamental Business Intention to Mediate and/or Arbitrate............................................44
20. NOTICES AND PAYMENTS..........................................................................................................44
21. ACKNOWLEDGMENTS AND REPRESENTATIONS...................................................................45
22. DEFINITIONS.................................................................................................................................48
Pinkberry Franchising Company Franchise Agreement - 2006
EXHIBITS
Exhibit 1 Owner's Guaranty..........................................................................................53
Exhibit 1.2 Current Form of Releasing Language............................................................56
Exhibit 2.2 Territory..........................................................................................................58
Exhibit 3.2 Collateral Assignment of Lease.....................................................................59
Exhibit 3.3 ADA and Related Certifications......................................................................61
Exhibit 8.1 Pinkberry Store Franchisee Employee Confidentiality...................................63
Exhibit 13.1 Employee Confidentiality Agreement.............................................................45
Pinkberry Franchising Company Franchise Agreement - 2006
The original documents were scanned as an image. The original file can be downloaded at the link above.