UFOC
Sample UFOC
RECEIVED
MAR 21 2006
Department of Corporations Los Angeles
INFORMATION FOR PROSPECTIVE FRANCHISEES
REQUIRED BY THE FEDERAL TRADE COMMISSION
PRETZELMAKER FRANCHISING, LLC
2855 East Cottonwood Parkway
Suite 400
Salt Lake City, Utah 84121
(801)736-5600
Effective Date: See Exhibit 2
To protect you, we've required your franchisor to give you this information. We haven't checked it and don 't know if it's correct. It should help you make up your mind. Study it carefully. While it includes some information about your contract, don't rely on it alone to understand your contract. Read all of your contract carefully. Buying a franchise is a complicated investment. Take your time to decide. If possible, show your contract and this information to an advisor, like a lawyer or an accountant. If you find anything you think may be wrong or anything important that's been left out, you should let us know about it. It may be against the law.
There may also be laws on franchising in your state. Ask your state agencies about them.
FEDERAL TRADE COMMISSION Washington, D.C. 20580
PMFUFOC-3/<0S>[Q]
FRANCHISE OFFERING CIRCULAR FOR PROSPECTIVE FRANCHISEES
PRETZELMAKER FRANCHISING, LLC
2855 East Cottonwood Parkway
Suite 400
Salt Lake City, Utah 84121
(801)736-5600
The name of the franchisor is Pretzelmaker Franchising, LLC. If you become a Pretzelmaker Store franchisee, you will have the right to operate a Pretzelmaker Store from which you will offer soft pretzels, other pretzel-related products, pretzel toppings, beverages and other food products.
The initial franchise fee for a Pretzelmaker Store is $25,000, although it may be less if <(a)->you are an existing qualified franchisee developing an additional store<, (b)-you are developing a Pretzelmaker Store as a location co hrandedwith a concept-owned bv one of our Affiliates. or-Cc>>[ or if] you are purchasing the assets of an existing store. The estimated fees and amounts payable to us or our Affiliates before your store opens, including the initial franchise fee or transfer fee, is from $25,200 to $26,000 if you are developing a new store, and $8,000 to $<S5&QQO>r9.00Ql if you purchase the assets of an existing store. The estimated initial investment required for a franchise, including the initial franchise fee, is from $<4497$00>[i5S»flOJl] to $<2^500?>[MLSS2.] if you are developing a new [ioJineJsto^raftd-$44.500 to $3n.5QO. if vou purchase the assets-of an existing r,tore>r: and S15.1.000 to $225.50n. jf vou are developing a new modular, prefabricated kiosk]. These sums do not include real estate lease costs or franchise fees payable to our Affiliates for any co-brand you develop at your Store. You must pay us a $5,000 initial fee if we allow you to operate a Non-Baking Kiosk<- in connection>rjJ with one of your full-service Pretzelmaker Stores. This is the only amount payable to us or our Affiliates before you open your Non-Baking Kiosk. The estimated initial investment required for a Non-Baking Kiosk, excluding real estate lease costs, ranges from $9,000 to $50,000. These sums are not your total investment in your franchise. For a detailed explanation of your total investment, you should consult Items 5 through 7 of this Offering Circular.
Risk Factors:
THE FRANCHISE AGREEMENTS REQUIRE THAT ALL DISAGREEMENTS BE SETTLED BY ARBITRATION IN SALT LAKE CITY, UTAH. OUT OF STATE ARBITRATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT. IT MAY ALSO COST YOU MORE TO ARBITRATE WITH US IN UTAH THAN IN YOUR HOME STATE.
THE FRANCHISE AGREEMENTS STATE THAT UTAH LAW GOVERNS THE AGREEMENTS, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
ALTHOUGH THE FRANCHISE AGREEMENTS INCLUDE THE ARBITRATION AND GOVERNING LAW PROVISIONS DESCRIBED ABOVE AND FURTHER DISPUTE RESOLUTION PROVISIONS THAT WOULD ALLOW US TO SUE YOU IN UTAH UNDER CERTAIN CIRCUMSTANCES, LOCAL LAW MAY GOVERN THESE REQUIREMENTS IN YOUR STATE. TO THE EXTENT NOT GOVERNED BY LOCAL LAW, YOU MUST CONSENT TO LITIGATION BEING BROUGHT AGAINST YOU IN UTAH. PLEASE REFER TO ANY STATE-SPECIFIC ADDENDUM THAT MAY BE ATTACHED TO THE OFFERING CIRCULAR FOR DETAILS.
THE FINANCIAL STATEMENTS PROVIDED AT EXHIBIT 13 TO THIS OFFERING CIRCULAR ARE THOSE OF OUR PARENT, MRS. FIELDS FAMOUS BRANDS, LLC ("MFFB")- AS EXPLAINED IN NOTE 1 TO THE FINANCIAL STATEMENTS, THE FINANCIAL STATEMENTS ARE PRESENTED IN A "CARVE-OUT" FORMAT THAT ASSUMES THAT MFFB HAD EXISTED AS A SEPARATE LEGAL ENTITY FOR ALL PERIODS PRESENTED, AND MAY NOT PROVIDE A COMPLETE PRESENTATION OF THE FINANCIAL POSITION OF MFFB HAD IT OPERATED AS AN INDEPENDENT STAND-ALONE ENTITY FOR ALL PERIODS PRESENTED. ALTHOUGH OUR FINANCIAL STATEMENTS ARE NOT INCLUDED IN THIS OFFERTNG CIRCULAR, MFFB HAS
PROVIDED A GUARANTEE OF PERFORMANCE OF OUR OBLIGATIONS. PER THE AUDITED BALANCE SHEET DATED <JANUARY 1.>TDECEMBER 31.1 2005, MFFB HAD A NET WORTH DEFICIENCY OF &<13.501.000>[81.762.QQQ.1
THE FRANCHISEE WILL NOT BE GRANTED ANY EXCLUSIVE TERRITORY.
FRANCHISES ARE GRANTED FOR A SPECIFIC LOCATION AND ARE NOT EXCLUSIVE. THE FRANCHISOR RETAINS THE RIGHT TO SELL AND GRANT OTHERS THE RIGHT TO SELL PRODUCTS AND SERVICES AND RETAINS THE RIGHT TO OWN, OPERATE AND GRANT OTHERS THE RIGHT TO OWN OR OPERATE STORES OR OTHER BAKED GOOD OR SNACK FOOD BUSINESSES UNDER THE TRADEMARKS AND SERVICE MARKS ON ANY TERMS AND CONDITIONS AND AT ANY LOCATIONS WHICH IT DEEMS APPROPRIATE. THESE ACTIVITIES MAY COMPETE WITH YOU.
BY ENTERING INTO THE FRANCHISE AGREEMENT, YOU AGREE TO BE HELD RESPONSIBLE AND MAY BE HELD IN BREACH OF THE FRANCHISE AGREEMENT FOR ACTS OR FAILURES TO ACT OF THIRD PARTIES OVER WHOM YOU EXERCISE NO LEGAL CONTROL.
THERE MAY BE OTHER RISKS CONCERNING THESE FRANCHISES.
Information comparing franchisors is available. Call the state administrators listed on Exhibit 2 to this Offering Circular or your public library for sources of information.
Registration of these franchises by a state does not mean that the state recommends them or has verified the information in this Offering Circular. If you learn that anything in this Offering Circular is untrue, contact the Federal Trade Commission or the state administrator in your state.
Effective Date: See Exhibit 2
NOTICE REQUIRED
BY
STATE OF MICHIGAN
THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
Each of the following provisions is void and unenforceable if contained in any documents relating to a franchise:
(a) A prohibition on the right of a franchisee to join an association of franchisees.
(b) A requirement that a franchisee assent to a release, assignment, novation, waiver, or estoppel which deprives a franchisee of rights and protections provided in this act. This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims.
(c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawfiil provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.
(d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee's inventory, supplies, equipment, fixtures, and furnishings. Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the franchise business are not subject to compensation. This subsection applies only if: (i) the term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months advance notice of franchisor's intent not to renew the franchise.
(e) A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.
(f) A provision requiring that arbitration or litigation be conducted outside this state. This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.
THE MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.
(g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise. Good cause shall include, but is not limited to:
(i) The failure of the proposed transferee to meet the franchisor's then-current
reasonable qualifications or standards.
(ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.
(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
(h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).
(i) A provision which permits the franchisor to directly or indirectly convey, assign, or
otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless provision has been made for providing the required contractual services.
The fact that there is a notice of this offering on file with the attorney general does not constitute approval, recommendation, or endorsement by the attorney general.
Any questions regarding this notice should be directed to the Department of Attorney General, State of Michigan, 670 Williams Building, P.O. Box 30213 Lansing, Michigan 48913, telephone (517) 373-7117.
THE MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.
TABLE OF CONTENTS
Item Page
ITEM 1. THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES......................................................1
ITEM 2. BUSINESS EXPERIENCE..................................................................................................................................................10
ITEM 3. LITIGATION...................................................................................................................................................................................11
ITEM 4. BANKRUPTCY........................................................................_...............................................................................................12
ITEM 5. INITIAL FRANCHISE FEE................................................................................................................................................12
ITEM 6. OTHER FEES..................................................................................................................................................................................14
ITEM 7. INITIAL INVESTMENT......................................................................................................................................................22
ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES....._.....................................27
ITEM 9. FRANCHISEE'S OBLIGATIONS..............................................................................................................................30
ITEM 10. FINANCING..............................................................................................................................................................'.... <32>[23]
ITEM U. FRANCHISOR'S OBLIGATIONS..............................................................................................................................34
ITEM 12. TERRITORY................._....................................................._.....................___..._....................................... ...........<4>[1J
ITEM 13. TRADEMARKS..........................................................................................____...................................................<44>[42]
ITEM 14. PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION..........................<46>[M\
ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF
THE FRANCHISE BUSINESS..............................____............................................................................<4%>[M\
ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL.......................................<4S>[4]
ITEM 17. RENEWAL, TERMINATION, TRANSFER AND DISPUTE
RESOLUTION..................................................................................................................................____...............<49>[Z3
ITEM 18. PUBLIC FIGURES.......................................................................................................................____.................<59>152]
ITEM 19. EARNINGS CLAIMS...........................................................................................................................................<S9>[52]
ITEM 20. LIST OF OUTLETS____..................................____........................................................._..........................<S9>[52]
ITEM 21. FINANCIAL STATEMENTS..........................................................................................................................<2>M\
ITEM 22. CONTRACTS............................................................................................................................_................................<&>M\
ITEM 23. RECEIPT......................................................................................................................................................................_.<63>[1]
STATE-SPECIFIC ADDENDA - CALIFORNIA, ILLINOIS, MARYLAND, MINNESOTA, NEW YORK, NORTH DAKOTA, RHODE ISLAND, SOUTH DAKOTA AND WASHINGTON
EXHIBITS
EXHIBIT 1 DEFINITIONS
EXHIBIT 2 STATE ADMINISTRATORS/AGENTS FOR SERVICE OF PROCESS
EXHIBIT 3 FRANCHISE AGREEMENT WITH ACKNOWLEDGEMENT ADDENDUM,
OWNERSHIP ADDENDUM, GUARANTY, APPENDDC A (AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS (DIRECT DEBITS)), STATE-SPECIFIC ADDENDA AND RIDERS - CALIFORNIA, ILLINOIS, MARYLAND, MINNESOTA, NEW YORK, NORTH DAKOTA, RHODE ISLAND, SOUTH DAKOTA AND WASHINGTON, AND RENEWAL ADDENDUM
EXHIBIT 4 NON-BAKING KIOSKS ADDENDUM TO FRANCHISE AGREEMENT
EXHIBIT 5 CONFIDENTIALITY AGREEMENT
EXHIBIT 6 ASSIGNMENT, ASSUMPTION AND CONSENT
EXHIBIT 7 TERM PRE-PURCHASE ADDENDUM
EXHIBIT 8 LEASE ADDENDUM
EXHIBIT 9 PURCHASE OPTION AGREEMENT AND ADDENDA
EXHIBIT 10 ASSET PURCHASE AGREEMENT; SUBLEASE AGREEMENT
EXHIBIT 11 OPERATIONS MANUALS TABLE OF CONTENTS
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EXHIBIT 12 FRANCHISEE INFORMATION
PART 1 - LIST OF PRETZELMAKER FRANCHISEES
PART 2 - LIST OF PRETZELMAKER FRANCHISEES TERMINATED, CANCELLED, NOT RENEWED, OR THAT HAVE CEASED DOING BUSINESS EXHIBIT 13 FINANCIAL STATEMENTS
EXHIBIT 14 EARNINGS CLAIM
NOTICE
UNLESS OTHERWISE INDICATED, THE INFORMATION APPEARING IN THIS OFFERING CIRCULAR APPLIES TO PRETZELMAKER STORE FRANCHISES. UNLESS OTHERWISE INDICATED, THE TERMS OF ALL FRANCHISE OFFERS ARE THE SAME.
ITEM 1. THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES
Description of the Franchisor and its Predecessors and Affiliates.
To simplify the language in this Offering Circular, "we", and similar words, refer to Pretzelmaker Franchising, LLC, the franchisor; "MFFB" means our parent, Mrs. Fields Famous Brands, LLC; "PMI" means Pretzelmaker, Inc.; "Pretzelmaker-Canada" means Pretzelmaker-Canada, Inc.; "PHI" means Pretzelmaker Holdings, Inc.; "MFOC" means Mrs. Fields' Original Cookies, Inc.; "MFHC" means Mrs. Fields' Holding Company, Inc.; "MFCI" means Mrs. Fields' Companies, Inc.; "PTF" means Pretzel Time Franchising, LLC; "PTI" means Pretzel Time, Inc.; "MFF" means Mrs. Fields Franchising, LLC; "New MFBI" means The Mrs. Fields' Brand, Inc. "MFC-Canada" means Mrs. Fields Cookies (Canada) Ltd.; "MFC-Australia" means Mrs. Fields Cookies Australia; "GACCF" means Great American Cookie Company Franchising, LLC; "GAM" means Great American Manufacturing, LLC; "GACC" means Great American Cookie Company, Inc.; "TCBY" means TCBY Systems, LLC; "TCBY Enterprises" means TCBY Enterprises, LLC; and "Juice Works" means Juice Works Development, Inc. "You", and similar words, means the person or persons, including a corporate or other legal entity, individually and collectively, buying a franchise from us; and "your Store" means the Pretzelmaker Store that you will operate if we enter into a Pretzelmaker franchise agreement with you. We have also attached as Exhibit 1 a list of additional defined terms used in this Offering Circular. If a capitalized term is not defined in the body of this Offering Circular, please refer to Exhibit 1 for the definition.
We are a Delaware limited liability company organized on February 4, 2004. We are a wholly-owned subsidiary of MFFB, a Delaware limited liability company organized on February 4, 2004, which is a wholly-owned subsidiary of MFOC, a Delaware corporation incorporated in February 1996. MFOC is a wholly-owned subsidiary of MFHC, a Delaware corporation incorporated in July 1996, which is a wholly-owned subsidiary of MFCI, a Delaware corporation incorporated in August 2001 under its former name, Mrs. Fields Famous Brands, Inc. We do business under the name Pretzelmaker Stores (or variations of that name). Our Affiliates do business under the names Pretzelmaker Stores, Pretzel Time<-Storcs, Hot Sam Pretzel and Bakery> Stores, Mrs. Fields Cookie Stores, Mrs. Fields Bakery Cafes,<-Original Cookie Company Stores,>[,] Great American Cookie Company Stores, <and->TCBY[ Stores. and Yovanal Stores (or variations of those names). Our principal business address is 2855 East Cottonwood Parkway, Suite 400, Salt Lake City, Utah 84121, and our telephone number is 801-736-5600. The principal business address and telephone number of PMI, Pretzelmaker-Canada, MFCI, MFHCI, MFOC, MFFB, PTF, PTI, MFF, New MFBI, MFC-Canada, MFC-Australia, GACCF, GAM, GACC, TCBY, TCBY Enterprises and Juice Works are the same as ours. Our agents for service of process are listed on Exhibit 2 to this Offering Circular.
We acquired a substantial portion of our assets from PMI, a Utah corporation incorporated in August 1992, and Pretzelmaker-Canada, an Ontario corporation incorporated in September 1996.
In keeping with a business strategy of separating franchise activities from company store operations, on March 16, 2004 MFOC and a number of its Affiliates contributed their franchising activities to MFFB and, ultimately, to newly formed subsidiaries of MFFB (the "Contributions"). In anticipation of the Contributions, we were formed by MFFB to act as the franchisor of the Pretzelmaker franchise system. As part of the Contributions, PMI contributed all of its franchise-related assets, including all existing franchise agreements and Pretzelmaker Trademarks, to MFFB. Immediately <thereafter>[afex], MFFB contributed these assets to us. Also as part of the Contributions, we entered into a franchise agreement with MFOC to license it to continue to operate company-owned Pretzelmaker Stores. In addition, as part of the Contributions, all franchise-related assets of Pretzelmaker-Canada, if any, were transferred to us. As a result of the Contributions, we are now the franchisor of the
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Pretzelmaker franchise system, and MFOC <oporatos>[op crated] all company-owned Pretzelmaker Stores<:>[ the ^ast one was franchised in June 2005.1 Although PMF is the franchisor of the Pretzelmaker franchise system, MFFB employees perform the day-to-day operations of the franchise system and provide services to our franchisees^ Before] <Prior to >the Contributions, PMI and its predecessors operated the Pretzelmaker franchise system in the United States, and PMI and/or Pretzelmaker-Canada and its predecessors operated the Pretzelmaker franchise system in Canada. Pretzelmaker-Canada no longer acts as the franchisor of the Pretzelmaker franchise system in Canada. <Whilc MFQC will continue in the near term to operato all company owned Protzolmakcr Retail Outlets and the company owned stores of a number of our Affiliates, MFOC also will eontinue its ongoing strategic review of company owned store performance, with identified Protzolmakcr Retail Outlets and other stores being sold to now or existing franchisees or closed.Accordingly, MFOC anticipates a reduction in its total number of company owned Protzolmaker Retail Outlets and other retail stores over time with a corresponding reduotion-in its involvement in related company store operations.>
Our predecessor, PMI, incorporated on August 31, 1992 under the name Four Pretzels, Inc. PMI changed its name to Pretzelvania, Inc. on September 23, 1992, and to its current name on December 17, 1992. PMI has no predecessors. Up until April 2000, PMI was wholly-owned by PHI, a Colorado corporation. PHI also owned interests in Pretzelmaker-Canada, which was formed to offer services to franchisees located in Canada. On November 19, 1998, MFOC acquired all of the stock of PHI. As a result of the merger, PHI became a wholly-owned subsidiary of MFOC. On April 5, 2000, MFOC merged PHI with and into PMI. As a result of the merger, PMI became a wholly-owned subsidiary of MFOC and Pretzelmaker-Canada became a wholly-owned subsidiary of PMI.
We have a number of Affiliates that offer franchises or provide products or services to our franchisees.
PTF is a Delaware limited liability company formed by MFFB on February 4, 2004 to act as the franchisor of the Pretzel Time franchise system. As part of the Contributions, PTI contributed all of its franchise-related assets, including all existing franchise agreements, area development agreements and Pretzel Time Trademarks, to MFFB. Immediately <thereafter>[after]. MFFB contributed these assets to PTF. Also as part of the Contributions, PTF entered into a franchise agreement with MFOC to license it to continue to operate company-owned Pretzel Time Stores. As a result of the Contributions, PTF is now the franchisor of the Pretzel Time franchise system and a party to the existing area development agreements (as< further>[J described below in this Item 1), and MFOC operates all company-owned Pretzel Time Stores. Although PTF is the franchisor of the Pretzel Time franchise system, MFFB employees perform the day-to-day operations of the franchise system and provide services to PTF's franchisees. <Prior to >[Before ]the Contributions, PTI and its predecessors operated the Pretzel Time franchise system.
MFF is a Delaware limited liability company formed by MFFB on February 4, 2004 to act as the franchisor of the Mrs. Fields franchise system. As part of the Contributions, MFOC contributed the Mrs. Fields Trademarks to MFFB and, ultimately, to New MFBI. New MFBI is a Delaware corporation incorporated on February 4, 2004 and a wholly owned subsidiary of MFFB. Immediately <thereafter>rafterl. New MFBI granted to MFF a perpetual, fully paid license to use the Mrs. Fields Trademarks< in connection>[_] with all franchised Mrs. Fields Cookie Store. Also as part of the Contributions, MFOC contributed all of its other franchise-related assets, including all existing Mrs. Fields franchise agreements, to MFFB. Immediately <theroafter>[after]. MFFB contributed these other franchise-related assets to MFF. At the same time, MFF entered into a franchise agreement with MFOC to license it to continue to operate Mrs. Fields Cookie Stores. In addition, as part of the Contributions, all franchise-related assets of MFC-Canada, if any, were transferred to MFF. MFC-Canada is an Ontario corporation incorporated on May 24, 1984, and a wholly owned subsidiary of MFOC. As a result of the
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Contributions, MFF now the franchisor of the Mrs. Fields franchise system, and MFOC operates all company-owned Mrs. Fields Cookie Stores.<>[ While MFOC wil| continue in jhe near term to operate all companv-owned Mrs. Fields Cookie Stores and the companv-owned stores of a number of our Affiliates. MFOC also will continue its ongoing strategic review of companv-owned store performance, with identified stores being sold to new or existing franchisees or closed. Accordingly. MFOC anticipates a reduction in its total numher of companv-owned stores over
] Although MFF is the franchisor of the Mrs. Fields franchise system, MFFB employees perform the day-to-day operations of the franchise system and provide services to MFF's franchisees. <Prior to >fBefore ]the Contributions, MFOC and its predecessors operated the Mrs. Fields franchise system in the United States, and MFOC and/or MFC-Canada and its predecessors operated the Mrs. Fields franchise system in Canada. MFC-Canada no longer acts as the franchisor of the Mrs. Fields franchise system in Canada.
As part of the Contributions, MFOC also contributed the Original Cookie Company Trademarks and Hot Sam Trademarks to MFFB and, ultimately, to New MFBI. Immediately <thoreafter>rafter]. New MFBI granted to MFF a license to use the Original Cookie Company Trademarks and Hot Sam Trademarks. MFF has in turn licensed the use of these Trademarks to MFOC<. Accordingly, MFOC operates all company owned>[. and MFOC has granted a small number of licenses to third parties
MFOC. MFOC no longer operates any] Original Cookie Company <Storos and>[firj Hot Sam Stores.
There are no franchised Original Cookie Company or Hot Sam Stores<. MFOC continues to evaluate the performance of these stores and expects that during 2Q05 and 2006, substantially all Original Cookio Company and Hot Sam Storon will >f. and the small numher of licensed locations will, leither be closed or franchised and converted to another concept franchised by us or our Affiliates.
GACCF and GAM are both Delaware limited liability companies formed by MFFB on February 4, 2004. GACCF was formed to act as the franchisor of the Great American Cookie Company franchise system, and GAM was formed to own and operate the batter facility (as< furthor>[J described below in this Item 1). As part of the Contributions, GACC contributed all of its franchise-related assets, including all existing franchise agreements, Great American Cookie Company Trademarks, and the batter facility to MFFB. Immediately <thoroaftor>[after]. MFFB contributed the franchise agreements, Trademarks and related assets to GACCF and the batter facility and related assets to GAM. Also as part of the Contributions, GACCF entered into a franchise agreement with MFOC to license it to continue to operate company-owned Great American Cookie Company Stores. As a result of the Contributions, GACCF is now the franchisor of the Great American Cookie Company franchise system, and MFOC operates all company-owned Great American Cookie Company Stores. Although GACCF is the franchisor of the Great American Cookie Company franchise system, MFFB employees perform the day-to-day operations of the franchise system and provide services to GACCF's franchisees.f Before] <Prior to->the Contributions, GACC and its predecessors operated the Great American Cookie Company franchise system and the batter facility.
TCBY is a Delaware limited liability company organized on May 30, 2000. TCBY has been the franchisor of the TCBY franchise system since July 2000, and, <prior to >fBefore ]this date, TCBY's predecessors, including TCBY Enterprises (a Delaware limited liability company) and TCBY Systems, Inc. (an Arkansas corporation), operated the TCBY franchise system. As part of the Contributions, TCBY Enterprises exchanged its 100% ownership interest in TCBY to MFOC for shares in MFOC. Immediately <the*ea&er->[aftex], MFOC contributed 100% of its ownership interest in TCBY to MFFB. As a result, TCBY is currently a wholly-owned subsidiary of MFFB. At the time of the Contributions, the management agreement between TCBY and MFOC was terminated, and MFFB employees now
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perform the day-to-day operations of the TCBY franchise system and provide services to TCBY's franchisees.
MFCI, MFHC, MFOC, MFFB, PMI, Pretzelmaker-Canada, PTF, PTI, MFF, New MFBI, MFC-Canada, MFC-Australia, GACCF, GAM, GACC, TCBY and TCBY Enterprises are separate entities and, except as described in Item 21 of this Offering Circular, are not liable to you for any actions taken or obligations incurred by us.
Description of the Franchises Offered.
We offer franchises (the "Franchises") for Pretzelmaker Storesf, including modular. prefabricate^ baking friosks.] offering various Pretzelmaker Products in accordance with the terms of our Pretzelmaker franchise agreement (the "Pretzelmaker Franchise Agreement" or "Franchise Agreement"). A copy of the Pretzelmaker Franchise Agreement is attached to this Offering Circular as Exhibit 3. If you enter into a Pretzelmaker Franchise Agreement, you will be authorized to use the Pretzelmaker System under which Pretzelmaker Stores operate. In establishing your Store, MFOC may sell you one or more of its existing Pretzelmaker Stores. (See Item 5 of this Offering Circular). If you do business as an Entity, each of your Entity Owners must guarantee your obligations under the Franchise Agreement by signing the Guaranty attached to the Franchise Agreement, a copy of which is included in Exhibit 3 to this Offering Circular. A Pretzelmaker Store is customarily located in a shopping mall, but may be approved to be located in an alternative leased facility or non-traditional location.
We also may grant you the right to operate a non-baking kiosk ("Non-Baking Kiosk")<-in-oonneotion>[_] with one of your full-service Pretzelmaker Stores (the "Host Stnre"1f. A IVnn-ftakinff Kiosk mav not he operated with a modular, prefabricated baking kiosk I, A Non-Baking Kiosk is a stationary or mobile kiosk, cart, wagon or similar unit that you operate within the same shopping mall or center as the Host Store, but away from the Host Store's actual premises. We do not consider a temporary, promotional holiday display case or decorating table to be a Non-Baking Kiosk, although you must get our approval to operate one under the Franchise Agreement for your Host Store. A Kiosk sells products that you actually produce at the Host Store. If we grant you the right to operate a Non-Baking Kiosk, you must sign our non-baking kiosks addendum ("Non-Baking Kiosks Addendum") to the Franchise Agreement for the Host Store. A copy of the Non-Baking Kiosks Addendum is attached to this Offering Circular as Exhibit 4.
The Market.
Your Pretzelmaker Store will offer a variety of Pretzelmaker Products to the general public, and you will have to compete with bakeries, some fast-food restaurants, snack food stores, convenience stores (including Pretzel Time Stores), and facilities owned or managed by us or our Affiliates, all of which offer specialty retail snack foods and beverages. You will also have to compete with other Pretzelmaker Retail Outlets selling various Pretzelmaker Products and other products and services (such as frozen pretzel dough sold through various retail outlets) under the Pretzelmaker Trademarks or other trademarks or service marks. In addition, you will have to compete with other individuals and entities in the search for suitable store locations, managers, and employees. Pretzelmaker Products appeal to persons of all ages.
We and our Affiliates are engaged in the business of the sale of pretzel mix and dough, pretzel products and other food products in the food service industry. We and our Affiliates are interested in market penetration by distribution of pretzels and other dough products, including frozen pretzels, to alternative locations such as airports, amusement parks, schools, hospitals, office work sites, military
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facilities, grocery stores, convenience stores, supermarkets, entertainment or sporting facilities and/or other similar facilities and eventual food service distribution in non-franchised outlets at or from which we, in our absolute discretion, authorize. We and our Affiliates intend to distribute pretzels for sale in other non-franchised and non-company-owned outlets. We and our Affiliates are interested in developing, marketing, and/or distributing other food products in the food service industry.
As discussed elsewhere in this Item 1, our Affiliate, PTF, operates the Pretzel Time franchise system which serves principally pretzel products and may compete with you. During the effective period of this Offering Circular, we and PTF <will be>[are in the process of] conducting research<-> and studies to identify best practices and specific strengths of both the Pretzel Time and Pretzelmaker systems. <As a part of this process, we and PTF may share information, develop and test products, trade dress, operations, marketing, and other oyotcm features and standards that are the oamo or similar for both brands, and may ask franchisees of both systems to work together to provide data to us and our Affiliates. The results of those aotivitiesMA selected group of Pretzel Time and Pretzelmaker franchisees are participating in tests to determine potential synergies hetween the brands and to offer consumers a similar experience in both types of stores. One result of these activities has heen the development of a single pretzel dough that is now being used to hake pretzels of a single taste and texture (prepared from either a drv mix or frozen doughs bv this group of test stores from both We and PTF anticipate that this single dough will be introduced as a required produc systems sometime during 2006. We and PTF have also developed a series of promotions. purchase and other marketing materials that are being used in stores of both systems. Further results of these studies and tests] may affect both the Pretzel Time and Pretzelmaker systems in a number of [additional ]wavs. including the possible future development of pretzel stores and products by us or our Affiliates under new trademarks and < tradenames [trade names, the possible conversion of le systems to the other, and/or the possible conversion of both systems to a third pretzel >ed hv us or our Affiliates under new trademarks, trade names and/or trade dress. :e anv decisions after consultation and advice from franchisee representatives l\. If you become our franchisee, you may be asked to participate in this process, and will be affected by any resulting changes.
Some states may require franchisees to obtain restaurant, business, occupational, food products, and miscellaneous licenses. Some states also have laws regarding who may secure certain of these licenses. You may also have to obtain health licenses and to comply with health laws and regulations that apply to restaurant and food product sales establishments. We urge you to make inquiries about these laws and regulations.
The Business of the Franchisor, its Predecessors, and Affiliates.
Since March 2004, we have been in the business of granting licenses and franchises for the operation of Pretzelmaker Stores to franchisees or licensees who successfully complete our application process and qualify to purchase a franchise or license. We acquired a substantial portion of this business from PMI and Pretzelmaker-Canada.
From September 1992 to February 2004, PMI was in the business of granting licenses and franchises for the operation of Pretzelmaker Stores in the United States. In addition, from August 1995 to <fanuarv 2000.>[.Tune 2005.] PMI was also in the business of owning and operating Pretzelmaker
1998 to June 2005.] our Affiliate, MFOC, <has>owned and operated Pretzelmaker Stores<:As-faftbef>r. and it mav reacquire Pretzelmaker stores from franchisees periodically. As 1 described above, MFOC entered into a franchise agreement with us at the time of the Contributions^ and now operates itQ>f for the operation of its companv-owned] Pretzelmaker Stores< as our franchisee^ From
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September 1996 to February 2004, Pretzelmaker-Canada and/or PMI offered franchises for Pretzelmaker Stores in Canada. As< further>[J described above, as a result of the Contributions, we are now the franchisor of the Pretzelmaker franchise system. See the table below in this Item 1 and Item 20 of this Offering Circular for more information regarding franchised <and company owned >Pretzelmaker Stores. As of the date of this Offering Circular, neither we, PMI<-ner->[,] Pretzelmaker-Canadaf nor MFOC] own or operate any Pretzelmaker Stores.
In certain instances, you may be able to enter into a co-branding arrangement with one or more of our Affiliates. In <stteh->fthat lease, you will enter into a Pretzelmaker Franchise Agreement with us for the Pretzelmaker Store, and a separate franchise agreement with each our respective Affdiates for each brand you are co-branding with the Pretzelmaker brand. These locations may, in some cases, be developed as a Mrs. Fields Bakery Cookie Cafe, which generally includes a Mrs. Fields Cookie Store and one or more additional concepts of us or our Affiliates (including the Pretzelmaker concept) as well as other approved products, such as sandwiches and soups. Our Affiliates may also offer co-branding arrangements with their franchisees that do not include the Pretzelmaker brand. All of these co-branded locations may compete with you.
We or one of our Affiliates may establish a new business or franchise system or acquire an existing business or franchise system (which may be one of your competitors) operating under trademarks, service marks and trade names other than the Pretzelmaker Trademarks. The new or existing business or franchise system may compete with you.
We or one of our Affiliates may enter into co-branding arrangements with other snack-food companies. In <sueh->rthose leases, we or our Affiliates may or may not allow you to offer co-branded products from your Pretzelmaker Store, depending on<-stteh>[J factors [such ]as the terms of the co-branding arrangement, the terms of your Pretzelmaker Franchise Agreement, applicable geographic restrictions and our and our Affiliates' other rights and obligations. These co-branding arrangements may compete with you.
For more than 20 years, PMI and its predecessors and other of our Affiliates have offered international master franchise agreements, franchise agreements and other types of licensing agreements for the Pretzelmaker brand and other brands in foreign countries. As of <Jonuarv 13.>[Decemher 31-] 2005, there were <4Q->f47]Pretzelmaker locations in 2 foreign countries, 7 Pretzel Time locations in <>[4] foreign countries, <82>[871 Mrs. Fields locations in <45>I111 foreign countries, <4->[flfl] Great American Cookie Company locations in one foreign country, and <3G&>[1$] TCBY locations in <30>[JL23 foreign countries. As a result of the Contributions, going forward, we will offer international master franchise agreements, franchise agreements and other types of licensing agreements in foreign countries for the Pretzelmaker brand, and PTF, MFF, GACCF and TCBY will offer international master franchise agreements, franchise agreements and other types of licensing agreements in foreign countries for their respective brands, and MFC-Australia (a Utah corporation incorporated in June 1983) may still provide some services to Mrs. Fields, franchisees or licensees in Australia. Licenses and franchises for Pretzelmaker Retail Outlets in other countries may be under different terms and conditions than are described in this Offering Circular.
Since the Contributions in March 2004, PTF has been in the business of granting licenses and franchises for the operation of Pretzel Time Stores. From January 1992 to February 2004, PTI or its predecessor was in the business of granting licenses and franchises for the operation of Pretzel Time Stores. From October 1991 to December 1997, PTI's predecessor also was in the business of owning and operating Pretzel Time Stores. As of the date of this Offering Circular, neither PTI nor it predecessor own or operate any Pretzel Time Stores. A Pretzel Time Store offers a variety of freshly baked soft pretzels, complementary toppings, soft drinks and other food products. Under a national sales agreement
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between Predecessor PTI and a predecessor of TCBY, PTI and its predecessor offered Pretzel Time franchisees the opportunity to add the TCBY concept to a new or existing location under certain circumstances from February 1995 to May 2000. PTI is no longer offering this opportunity to Pretzel Time franchisees under the national sales agreement. Pretzel Time franchisees may, however, be granted the right under certain circumstances to operate a Pretzel Time Store< in conjunotion>[J with a TCBY license or franchise under a different program with either PTF or TCBY. See table below in this Item 1 for more information regarding franchised and company-owned Pretzel Time Stores.
Between January 1992 and March 1998, PTI was in the business of granting area developer rights to certain qualified persons ("Area Developers") under a Pretzel Time area development agreement. As part of the Contributions<-fer4her>[J described above, in March 2004 PTI contributed all of its area development agreements to MFFB, who in turn contributed these assets to PTF. Although the form of area development agreement has varied over the years, Area Developers generally have been granted the right to develop, own and operate a specified number of Pretzel Time Stores at certain approved locations within a defined geographic area. Most Area Developers also have been granted the right to market and service the Pretzel Time System at certain locations within their geographic area, for which they receive a fee. Finally, Area Developers typically have been granted the right under their area development agreements to receive compensation from PTF or its predecessors for finding Pretzel Time franchisees for certain locations within their geographic area. Area Developers, however, do not have the authority to grant the rights to license or operate a Pretzel Time franchise or enter into a Pretzel Time franchise agreement with a potential franchisee. Currently, neither PTF nor PTI is entering into area development agreements with new Area Developers.
Through asset and stock purchases, MFOC and other of our Affiliates have acquired the Pretzel Time area development rights of certain Area Developers. The related area development agreements have been effectively terminated, and any services previously provided to Pretzel Time franchisees located within the geographic areas covered by these area development agreements are now being provided by MFFB.
Since November 1998, MFOC has been in the business of owning and operating Pretzelmaker Stores <whieh>rthat1 it purchased or acquired from Pretzelmaker franchisees |\ though as °fine date of
1997, MFOC also has been in the business of owning and operating Pretzel Time Stores which it purchased or acquired from Pretzel Time franchisees or Area Developers. MFOC now operates its company-owned< Pretzelmaker Stores and>[] Pretzel Time Stores under [a ]separate franchise <agrooments>Iagreement] with us and PTF. See table below in this Item 1 for more information regarding these company-owned< Protzolmaker Stores and>[J Pretzel Time Stores.
Between September 1996 and November 1997, MFOC was in the business of granting licenses and franchises for the operation of Hot Sam Pretzel and Bakery Stores. Currently, neither MFOC nor any other of our Affiliates are granting Hot Sam Pretzel and Bakery Store licenses and franchises. <&mee>[From] September <W6=>M996 to November 2005.] MFOC <has>[wasl also <been->in the business of owning and operating Hot Sam Pretzel and Bakery Stores.< MFQC now operates its>f We have given MFOC the right to grant a limited numher of sublicenses to third parties for the operation of the remaining] Hot Sam Pretzel and Bakery Stores <as a liconr.oQ of MFFMformerlv owned and operated hv MFOC1. A Hot Sam Pretzel and Bakery Store offers a variety of freshly prepared soft pretzels and pretzel products (including Bavarian and sweet dough pretzel sticks), various toppings and sauces, freshly squeezed lemonade and other food items and beverages. <See table below in this Item 1 for more information regarding oompanv owned Hot Sam Pretzel and Bakery Stores.>[We
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<In certain situations, you-may be able-to-purchase an-existing-Hot Sam Pretzel and Bakery Store location and its physical assets from MFOC and convert the location to a Protzclmakor Store of the typo offered in this Offering Circular. The acquisition of the existing Hot Sam Prctzol and Bakery location and assets from MFOC will bo negotiated between you and MFOC on an individual basis, independently, separately and in addition to your entering into a Pretzelmaker Franchise Agreement with us to operate a Pretzelmaker Storo. This Offering Circular makes no disclosures or representations regarding the terms and conditions of any suoh transaction you may negotiate with MFOC.In certain situations, a prospective franchisee of PTF also may be able to purchase an existing Hot Sam Pretzel and Bakery location and its physical assets from MFOC and eon vert the location to a Pretzel Time Store.>
Since the Contributions in March 2004, MFF has been in the business of granting licenses and franchises for the operation of Mrs. Fields Cookie Stores. From May 1986 to February 2004, MFOC or its predecessors were in the business of granting licenses and franchises for the operation of Mrs. Fields Cookie Stores. Since July 1977, MFOC or its predecessors have been in the business of owning and operating Mrs. Fields Cookie Stores. MFOC now operates its company-owned Mrs. Fields Cookie Stores under a franchise agreement with MFF. Mrs. Fields Cookie Stores offer a variety of specially prepared food items, such as cookies, brownies, muffins and beverages. <Sine>rFroml September <496t>|"1996 to November 2005.] MFOC <has>[was"| also<-been>[J in the business of owning and operating Original Cookie Company Stores. An Original Cookie Company Store offers a variety of specially prepared food items, such as cookies, brownies, muffins and beverages. <MFOC now operates its->[We have granted MFOC the right to sublicense a few remaining ]Origina1 Cookie Company Stores< as a licensee of MFF>[. whjch will eventually be closed or converted to another concept franchised bv us or one of our Affiliates. ] See the table below in this Item 1 for a summary of the Mrs. Fields Cookie Stores (and Mrs. Fields Bakery Cookie Cafes, which are Mrs. Fields Cookie Stores operated< in conjunction>[_] with Pretzelmaker or Pretzel Time Stores and/or TCBY Stores)<-and-Original Cookie Company- Stores> in the United States which are owned and operated by MFOC.
In November 2000, MFOC entered into a master lease with Wal-Mart, a large, discount retail chain. From November 2000 to September 2002, as a result of this leasing arrangement, MFOC owned and operated stores located within the chain as company-owned units operating under trademarks and commercial symbols of our Affiliates. Additionally, in certain isolated instances, MFOC constructed, built-out and developed a store at a particular Wal-Mart, then sold the assets of the store and subleased the store premises to a franchisee. MFOC no longer offers these Wal-Mart franchised locations, and all stores previously operated by MFOC located within Wal-Marts have been closed. We or our Affiliates may, however, enter into similar arrangements with other retailers in the future. These arrangements may compete with you.
Since the Contributions in March 2004, GACCF has been in the business of granting licenses and franchises for the operation of Great American Cookie Company Stores, and GAM has been in the business of operating the batter facility that produces proprietary batter, dough and other ingredients for making cookies that Great American Cookie Company franchisees must buy from GACCF or GAM. From September 1977 to February 2004, GACC was in the business of granting licenses and franchises for the operation of Great American Cookie Company Stores, Since June 1977, GACC has also been in the business of owning and operating Great American Cookie Company Stores either directly or through its parent MFOC. A Great American Cookie Company Store offers different types of cookies, other baked products and beverages and is typically located in an enclosed shopping mall.<In certain situations, a prospective Groat Ameriean Cookie Company Storo licensee may be able to purchase an existing Original Cookie Company Storo location and its physical assets from MFOC and convert the
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location to a Great American Cookie Company Store.>[__] See table below in this Item 1 for more
information regarding franchised and company-owned Great American Cookie Company Stores.
Since August 1998, MFOC has been in the business of owning and operating Great American Cookie Company Stores, <whi6h>[lhal] it purchased or acquired from GACC franchisees. MFOC now operates its company-owned Great American Cookie Company Stores under a franchise agreement with GACCF. See table below in this Item 1 for more information regarding these company-owned Great American Cookie Company Stores.
Since July 2000, TCBY has been in the business of offering franchises for TCBY Stores. TCBY's predecessors, including TCBY Enterprises and TCBY Systems, owned and operated and offered franchises for TCBY Stores between October 1981. Currently, there are 2 types of TCBY franchised Stores: "Traditional TCBY Stores," and "Other Concepts TCBY Stores." A Traditional TCBY Store typically has 800 to 1,600 square feet, seats 10 to 34 customers and caters to both carry-out and eat-in business. In some instances, however, a Traditional TCBY Store may be smaller, having no more than 800 square feet, because it operates as part of a food court or other shared dining opportunity, or serves small urban or even rural communities. Other <ConGepi>|"Concepts] TCBY Stores involve co-branding arrangements and are sometimes referred to by TCBY as non-traditional TCBY stores. An Other Concepts TCBY Store is located at or within premises operated under trade names or trademarks belonging to another concept, which may include another concept owned and franchised by us or our Affiliates. A franchisee of an Other Concepts TCBY Store typically offers and sells a basic menu of core TCBY products, such as cones, cups and sundaes, but generally will not sell an extended menu, such as cakes or pies. See table below in this Item 1 for more information regarding franchised and company-owned TCBY Stores.
On June 1, 2000, MFOC entered into a management agreement with TCBY, the franchisor of the TCBY system, under which MFOC managed and operated the TCBY franchise system on a day-to-day basis from June 2000 to February 2004. As part of the Contributions, that management agreement was terminated in March 2004 and employees of MFFB, the current parent of TCBY, now perform the day-to-day operations of the franchise system and provide services to TCBY's franchisees.
>een in the
leand
Mi
itores"). in certain limited markets, to snack and heveragf
30P5. TCI franchises for the operation of Yovana qualified franchisees. A Yovi
a variety of specially prepared food items, such as fresh v< and frozen yogurt treats, eranolas. cereals, hreafls, pastries, prom in in coffee, espresso and teas. juices, and other products and beverages. In addition to offering single unit franchises for new Yovana Stores. TCRV also offers a Yovana multi-unit development program. In the future. TCBY
franchisee. Ail Yovana Store locations mav compete with vou. See table helow in this Item 1 for more information regarding franchised and companv-owned Yovana Stores.]
[ ]Juice Works began franchising Juice Works stores in October 1996 and ceased franchising in February 1998. From February 1998 to December 2002, TCBY or its predecessors offered the right to add the Juice Works product line to its franchised TCBY stores under a Juice Works addendum to the TCBY franchise agreement. TCBY no longer offers this program.
The following table summarizes the franchises and licenses offered by us and pur Affiliates in the United States that were operating as of <January l>[December 31.] 2005. All of these franchised and licensed locations may compete with you. While the current franchisors/licensors of each concept are listed in the table below, these entities did not actually become the franchisors/licensors of their
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respective concepts until the Contributions in March 2004. Except as described in the table below or elsewhere in this Item 1, as of <Januarv 1 >[Decemher 31.] 2005, neither we nor our Affiliates have offered franchises in any other lines of business. In addition, except for the company-owned stores operated by MFOC under franchise agreements with us and our Affiliates, as of <Januarv l.>[December 31.1 2005, neither we nor our Affiliates operate any company-owned stores for the concepts listed in the table below.[J
|
Franchisor/ Licensor |
Concept |
Number of Franchises(l) |
Number of Company-Owned Stores Operated by MFOC(2) |
|
Us |
Pretzelmaker |
<454>[142] |
<$>\m |
|
PTF |
Pretzel Time |
<±&S>[195] |
<33>[1Q] |
|
<MFF> |
<Hot Sam Pretzel and Bake*y-> |
<0> |
<44> |
|
MFF |
Mrs. Fields Cookies (and Mrs. Fields Bakery Cookie Cafes) |
<360>22] |
<26>[1] |
|
GACCF |
Great American Cookie Company |
<^>[2251 |
<22>[4] |
|
<MFF>[1 BX3 |
<Qriginal Cookie-Companv>[Yovana] |
<0>[1] |
<7>[fl] |
|
TCBY |
TCBY |
<m&>\m]0) |
<+4>ffil |
|
Traditional TCBY Stores |
<469>r4231 |
0 |
|
|
Non-traditional TCBY Stores |
<6W>[548] |
<U>\$] |
(1) This column lists the number of franchises open and operating as of <Januarv l>rDecemher 2L] 2005, excluding those stores operated by MFOC (which are disclosed in the next column). These numbers include combo units so that the same location may be included in the total for more than one concept.
(2) This column lists the number of stores operated by MFOC as of <Januarv l.>fDecemher 31.] 2005. While MFOC operates these stores under separate franchise agreements with us, PTF, MFF, GACCF and TCBY, we refer to them as "company-owned" rather than "franchised" in certain sections of this Offering Circular because MFOC is an Affiliate of each of these franchisors.
(3) While there are no longer any Juice Works Stores, as of January I, 2005, there were <7>[lfl] Juice Works units operated< in oonjunotion>[_] with franchised TCBY Stores.
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ITEM 2. BUSINESS EXPERIENCE
The following list discloses our managers and principal officers who will have management responsibility relating to the franchises offered under this Offering Circular, and the principal occupation of each of them during the preceding 5 years. Individuals who are our officers or managers may hold the same or equivalent positions with MFFB and other of our Affiliates.
President. Chief Executive Officer and Manager: Stephen Russo
Mr. Russo has been our President and Chief Executive Officer, and one of our Managers since March 2004. He also has held the same or equivalent positions with a number of our Affiliates since May 2003. From July 1997 to April 2003, Mr. Russo was Director, Retail Operations Officer for Allied Domecq, QSR in Randolph, Massachusetts. From January 1978 to June 1997, he served in various capacities for Dunkin' Donuts in Randolph, Massachusetts.
Executive Vice President. <Gcncral Gatmsel>[Chief f ,egal Officer], Secretary and Manager: Michael R. Ward
Mr. Ward has been our Executive Vice President [and Chief Legal Officer ]since <June 3QQ4t>[February 2006.] and our< General Counsel and> Secretary and one of our Managers since March 2004. From [June ?Q04 to January 2006. he was our Executive Vice President and General Counsel. From ]March 2004 to June 2004, he was our Senior Vice President and General Counsel.].
Mr. Ward also has held the same or equivalent positions with a number of our Affiliates since May 2000. He served as Vice President of Administration and Legal Department of a number of our Affiliates from September 1996 to May 2000. From 1991 to 1996, Mr. Ward's responsibilities were overseeing the Legal Department and the Human Resources Department for MFI. Mr. Ward is admitted to practice law in the State of Utah.
<Chief Financial Officer. Treasurer and->Executive Vice President <of Finance and Administration: Sandra Buffa>
<Ms. Buffa has been our Executive Vice President of Finance and Administration since June 200*1, and our Chief Financial Officer and Treasurer since March 2001. From March 2004 to June 2001, she was our Senior Vice President of Finanoo and Administration.Ms. Buffa also has held tho same or equivalent positions with a number-of our Affiliates since April 2001. Immediately before joining us, she and her husband spent a year on sabbatical. From November 1998 to November 1999, Ms. Buffa served as President of Crabtroo & Evelyn, Ltd., in Waltham, Massachusetts, and as Chief Financial Officer and a director of that company from March 1998 to November 1998. Between July 1993 and March 1998, she served as Senior vice President, Chief Financial Offioer, Treasurer and a Diroctor of NationalVisionAssociatesmLawrence vi 11 e.xExecutive Vice President of Operations'-and' Dcvolopmcnt>[and Chief Operations Officer]: Para Dejbakhsh
Mr. Dejbakhsh has been our Executive Vice President [and Chief Operations Officer sjn^e February 2006. and our Executive Vice President ]of Operations and Development <sme>[from] June <3QQ4,>[2004 to January 2006.1 From March 2004 to June 2004 he was our Vice President of Operations. He also has held the same or equivalent positions with a number of our Affiliates since January 2004. Immediately before joining us, Mr. Dejbakhsh spent 6 months on sabbatical. From January 1996 to June 2003, Mr. Dejbakhsh was Area Vice President covering operations, development and field marketing for the western U.S., Canada, Asia Pacific, and Australia for Allied Domecq, QSR in Randolph, Massachusetts.
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Executive Vice President <e>fand Chief) Marketing! Officer]: John Lauck
Mr. Lauck has been our Executive Vice President [and Chief Marketing Officer sin< and niir Executive Vice President ]of Marketing <siftee>[fxflffi] April <2004.>[^ 2006.1 He also has held the same or equivalent positions with a number of our Affiliates since April 2004. From September 2002 to April 2004, Mr. Lauck served as President and Chief Marketing Officer for Arby's Franchise Association. <Prior tn >[Before ]joining Arby's, he was on a one-year sabbatical. From February 2000 to July 2001, Mr, Lauck was Senior Vice President and Chief Marketing Officer for groceryworks.com, a home grocery delivery start-up company in Dallas, Texas. Between November 1998 and January 2000, he was the Senior Vice President and Chief Marketing Officer for Footaction in Dallas, Texas. Mr. Lauck is a director of Shadewell Grove Holdings, LP, a licensee of one of our Affiliates.
Officer. Senior Vice-Presid« [Mr. McBride has been nnr Chief Acer
larkMcBridel Vice-President and
Since mr Interim Chief Accounting Officer. Vice President Controller and Interim ;r since Mav 2005. From March 2004 to Mav 2005. he was our Vice President Controller. lat capacity with a number of our Affiliates since August 2002. From June 2001 until he joined us. he served as Chief Financial Officer of Ovid Technologies. Inc. in Salt Lake
)01. Mr. M^ffride was the Vice President. Corporate trporate Secretary of Evans & Sutherland Computer Corporation in Salt Lake Htv. Utah. 1
ITEM 3. LITIGATION
[Pending Litigatjon:]
prises. Inc. v. Mrs. Fields Famous Brands. LLC. Pi
»r Franchising No. 77-1140046404-VSS filed December 29. 20041 This is a claim h, fought hv one of our former franchisee^ for damages in excels pf $50.000. alleging incomplete disclosures and breach of the covenant of good faith and fair dealing with their purchase of franchises from us and from our Affiliates. MFF and TCBY. for the development of a triple concept location in Illinois. The parties are in the process of agreeing upon an arbitrator and plan to begin discovery in the near future. 1
[Cftnclwttetl Litigation;]
Gecko Enterprises. Inc. v. Pretzelmaker, \nc.<v>[ ](District Court of the 17th Judicial District, Tarrant County, Texas, August 30, 2001, Case No. 17-186535-01). This petition was filed by a former Pretzelmaker franchisee and alleges breach of its Pretzelmaker franchise agreement, tortious interference with contract, and a violation of the Texas Deceptive Trade Practices Act, arising out of PMI's termination of the franchise agreement. The plaintiff sought an unspecified amount of general and special damages for a sum within the jurisdictional limits of the court including a recovery of punitive damages, prejudgment interest, attorney's fees, post-judgment interest, costs of suit and such other relief to which they may be entitled. PMI denied the allegations. On July 8, 2002, the parties entered into a settlement agreement under which the plaintiff dismissed the claims with prejudice in exchange for PMFs payment to them of $35,000.
Superstition Pretzel. Inc. v. Pretzelmaker. Inc. and Don Cox<=> (Superior Court of Arizona, Maricopa County, July 16, 1996, Civil Action No. 96-CV-12386). On July 16, 1996, a Pretzelmaker franchisee,
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Superstition Pretzel, Inc., filed a Complaint against PMI and Don Cox, PMI's former President and Chairman of the Board, asserting that PMI breached the franchise agreement and PMI's duties of good faith and fair dealing by failing to grant Superstition Pretzel a specific mall location. Superstition Pretzel also alleged that PMI and Don Cox misrepresented to the mall developer the financial capability of Superstition Pretzel and its shareholders, that PMI and Don Cox interfered with its contractual opportunity, that Don Cox interfered with the contract between PMI and Superstition Pretzel, and that PMI and Don Cox committed consumer fraud. Superstition Pretzel sought unspecified consequential and punitive damages and specific performance. PMI denied all allegations. In November 1997, the parties settled this matter after PMI arranged for the assignment of the rights to the specific mall location to Superstition Pretzel, and PMI agreed to waive 2% of Superstition Pretzel's 5% royalty fee up to a $25,000 maximum amount.
<Mayfare Enterprises, InOvV: Mrs. Fields Famous Brands. LLC. Pretzelmaker Franchising LLGr-et-al-. ■ (American Arbitration Association Case No. 77 1110016101 VSS filed December 29, 2001). This is a claim brought by one of our former franchisees,-for damages in excess of $50,000, alleging inoomplete-disolooures and breach of tho covenant of good faith and fair dealing in oonnoction with their purohase of franchisee from us and from our Affiliates, MFF and TCBY, for tho development of a triple concept location in Illinois. The parties are in the process of agreeing upon an arbitrator and plan to commence discovery in the near future. >
Other than these 3 actions, no litigation must be disclosed in this Offering Circular.
ITEM 4. BANKRUPTCY
No person previously identified in Item 1 or Item 2 of this Offering Circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item.
ITEM 5. INITIAL FRANCHISE FEE
Initial Franchise Fee:
You must pay an initial franchise fee of $25,000 when you sign a Franchise Agreement for the Pretzelmaker Storef. either for an in-line Store or a modular, prefabricated baking kiosk]. The initial franchise fee represents payment to us for the right to use the Pretzelmaker Trademarks and the Pretzelmaker System in the development and operation of your Store. The initial franchise fee also covers the cost of goods and services that we and our Affiliates may provide to you before your Store opens, such as site evaluation and approval, prototypical plans, certain grand opening assistance, marketing materials and training. If you <acquirc an existing Pretzelmaker Store from MFOC, or you >are an existing franchisee in good standing with us or one of our Affiliates, and you qualify to acquire a second or subsequent franchise from us, we have the right, at our option, to reduce or waive the initial franchise fee. [Typically. ]you must pay the initial franchise fee in a lump sum upon your signing of the Franchise Agreement. [However, we have the ontinn to allow vou to pav a portion of the initial franchise fee when vou sign the Franchise Agreement, and the balance no later than the date that you open vour Store. ]If you acquire an existing Pretzelmaker Store from< MFOC or> another franchisee, you will not pay an initial franchise fee to us, but will pay us a transfer fee (currently $8,000) as more fully described in Item 6, Note 13 of this Offering Circular.
If [(a) vou fail to obtain a location approved hv us for vour Store within 60 davs from the date vou sign the Franchise Agreement, or (b\ Ivou or your initial store manager do not satisfactorily complete the initial training program, we will refund the initial franchise fee less all reasonable expenses incurred by us in preparing the Franchise Agreement and all related agreements, the grant of the
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Franchise, site selection and approval, and any other services performed by us in establishing and developing your Store. However, the total refund will not exceed 50% of the initial franchise fee<V-En-limitod situations, we may refund all or a portion of your franchise fee if we agree to do so in writing at the time you sign-your-Franchise Agreement, and you fail to-obtain-a lease for your Store at its approved r.ita within n designated time subsequent to signing the Franchise- Agreement. >[r and if vnu have paid less than 50% of the full initial franchise fee at the time of the refund, no portion of that payment will he refundable under anv circumstances.. ]We will make the refund to you upon your signing of all releases, waivers and other agreements necessary to terminate the relationship between you and us. We do not offer refunds of the initial franchise fee under any other circumstances.
Other Initial Fees:
<Tf vnu acquire an existing>fAlthough MFOC does not currently own anv Pretzelmaker Stores, it mav reacquire stores from franchisees in the future. If that occurred, and vou purchased
a] Pretzelmaker Store from MFOC, you <rm±st>[would he required to! enter into an Asset Purchase Agreement in the form included in Exhibit 10 to this Offering Circular. <Thc assets purchased typically includo trade furnishings and fixtures, such as display cases, signage, shelving, counters and work tables, and equipment, such as ovons, refrigerators, soft drink beverage dispensers, coffoo preparation and dispensing equipment and small wares. MFOC sets the purchase price for tho Store assets by talcing a multiple of otoro cash flow after royalty and also taking into aocount other economic factors, such as current operating trends and length-o4ease term. The purchase prioe-also-will4nelude payment for the goodwill and going concern value of the store. You-must-pay-the-purchase price upon transfer of the Store assets to you.As further desoribed in d.2 and Note 5 to Item 7 of this Offering Circular, we estimate that the cost of tho Store assets (roforred to in Item 7 as "Improvements nnd Equipment") purchased from MFOC, will range from $0 to $250,000. If MFOC is leasing any of the assets of tho Store to you, you must also assume the obligations and make the required payments due under the equipment lease from the date you purchase tho assets. You are not entitled to a refund of the purchase price for an existing Store under any circumstances oven if you lose the right to lease or sublease the Store premises after taking possession of the assets.. In some instances, you may bo required to enter into a Confidentiality Agreement in the form of Exhibit 5 in connection with your purohase of a franchised or a MFOC owned Pretzelmaker Store.No foes arc paid to us or our Affiliates in connection with the Confidentiality Agreement.>
<Tho assets of an existing Store do not include any initial supplies, product inventory, paper goods and other soft goods, accounting forms and systems, and other items necessary to comply with our standards (collectively, the "Product and Soft Goods Inventory"). When you purchase the assets of an existing Store, you must also purohase tho store's existing Product and Soft Goods Inventory.T-he-purchasc price for the Product and Soft Goods Inventory is determined based on a physical inventory of the Product and Soft Goods Inventory and by multiplying tho inventory quantities by the actual unit cost for tho itoms. You must pay to MFOC the purchase price for the Product and Soft Goods Inventory when you purchase and pay for the assets of tho Store.As further described in Item 7 of this Offering Ciroular, wo estimate that the oost of the Product and Soft Goods Inventory purchased from MFOC will range from $1,000 to $5,000. You are not entitled to a refund of tho purohase price for the Product and Soft Good Inventory under anv circumstances. >[MFOC does not anticipate reacquiring or selling anv Pretzelmaker Stores during 2006. Also. ]under certain circumstances, one of our Affiliates may sublease the premises for your Store to you. If this occurs, you may be required to pay a security deposit to our Affiliate at the time you sign the Sublease Agreement[ in the form included in Exhihit 10 to this Offering Circular]. This security deposit and the conditions under which it may be refundable are explained in Note 8 under Item 6 of this Offering Circular.
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If you participate in our optional Resale Facilitation Program and purchase a Mrs. Fields Cookie Store from an existing franchisee, you will pay to us a Resale Facilitation Fee. The Resale Facilitation Fee and Program are< furthor>[J described in Note 21 of Item 6.
You must pay us a $5,000 initial fee if we allow you to operate a Non-Baking Kiosk. The $5,000 initial fee is non-refundable and must be paid to us upon your signing of the Non-Baking Kiosks Addendum. See Items 1, 7 and 12 of this Offering Circular for more information on Non-Baking Kiosks. [J
<From time to timo>[Per|pdicaHv]. we may offer special incentive programs< in conjunotion> with our franchise development activities. These special incentive programs may include awards, prizes, bonuses, rebates, product discounts and credits, or other types of incentives. We may offer these incentives to any of our existing franchisees who refer a third party to us who subsequently becomes a new Mrs. Fields Cookie Store franchisee within a specified period of time. We have the right, however, to offer, modify, withdraw or reinstate any incentive programs in the future without notice to you.
As <further >described in Item 7, if you are developing a new Pretzelmaker Store, you must conduct a grand opening advertising and promotion program for at least 7 days, beginning within 30 days after opening of your Store. You also agree to spend at least $5,000 for the grand opening of your Store. The grand opening promotion may not be required when you purchase an existing Pretzelmaker Store from us. In your grand opening advertising and promotion, you <ffl**st>fmav he requjrefl ft"] purchase from us or our Affiliates the standard marketing and public relations programs and media and advertising materials that we develop for grand opening programs and new store initial programs. [If we develop these materials, lwe will make these materials available to you upon written request, in advance of opening your Store. We estimate that the cost of these materials will range from $200 to $1,000. Neither we nor our Affiliates refund any payments for these materials. You may also incur expenses from other vendors and suppliers in your grand opening promotion.
<As further described in Item 1 of this Offering Circular, PMI was the franchisor of the Pretzelmaker franchise system until March 16, 2001.Accordingly, from March 16. 2Q01 toMFroml January <4^>[2. 2005. to pecember 31.] 2005, franchisees paid us or our Affiliates initial fees ranging from $0 to approximately $25,000, excluding amounts paid to MFOC[ for assets purchased from MFOC.1.
ITEM 6. OTHER FEES
|
Name of Fee |
Amount |
Due Date |
|
a. Continuing fees |
7% of monthly Gross Revenues (Note 1) |
Payable weekly on or before the close of business on Wednesday of each week for the immediately preceding week. (Note 2) |
|
b. Marketing fees |
1% to 3% of Gross Revenues (Note 3) |
Same as continuing fees (Note 2) |
|
c. Lease-required advertising fees (Note 4) |
Will vary under circumstances (Note 4) |
When due |
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|
Name of Fee |
Amount |
Due Date |
|
d. Cooperative advertising |
Up to 3% of Gross Revenues (Note 5) |
When due (Note 5) |
|
e. Training fee (Note 6) |
See Note 6 |
See Note 6 |
|
f. Refresher training (Note 7) |
See Note 7 |
See Note 7 |
|
g. Sublease (Note 8) |
See Note 8 |
Monthly (Note 8) |
|
h. Special assistance (Note 9) |
See Note 9 |
See Note 9 |
|
i. Late payment fee |
$100 for each delinquent payment. |
When the delinquent payment is due |
|
j. Late reporting fee |
$25 for each delinquent report |
When the delinquent report is due and continuing to be due for each period that the report remains delinquent |
|
k. Interest expenses (Note 10) |
Will vary under circumstances |
When due |
|
1. Audit |
Cost of financial audit plus interest at 1.5% per month or the highest legal rate on any underpayment (Note 11) |
15 days after receipt of audit or inspection report |
|
m. Operations Manuals duplicate (Note 12) |
See Note 12 |
Upon receipt of duplicate copy |
|
n. Transfer fee (Note 13) |
$8,000 or the current transfer fee, whichever is greater; certain transfers qualify for reduced fee of$l,000ormore (Note 13) |
$2,000 transfer fee deposit payable upon Transfer request, with balance payable <priorto>rhefore1 or upon final closing of Transfer (Note 13) |
|
o. Relocation Fee (Note 14) |
$2,500, or more (Note 14) |
Payable <prior to>fhefore] relocation |
|
p. Additional term (Note 15) |
$<2W>mj&] or more for each year of additional term (Note 15) |
Payable <prior to>[before] Transfer or relocation (Note 15) |
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Name of Fee
Amount
Due Date
q. Advertising, marketing and promotional materials
Will vary under the circumstances (Note 16)
When the materials are ordered and/or delivered (Note 16)
r. Interim management fees (Note 17)
10% of Gross Revenues
As incurred
s. UCC filing fees (Note 18)
As set by state law; varies from state to state
Upon signing of the Franchise Agreement and at the times UCC continuation statements are filed
t. Costs and attorneys' fees, and indemnification
Will vary under circumstances (Note 19)
Upon occurrence
u. Documentation Fee for Franchisee Name Changes (Note 20)
$500 or more (Note)
Payable upon required notification of name change (Note 20)
v. Resale Facilitation Fee (Note 21)
Will vary depending upon negotiations between us and the purchasing franchisee (Note 21)
Payable upon purchase of Store from existing franchisee
^ [[
[Will vary under circumstances
TPavable upon purchase of Store from existing franchisee]
x* <Wr-Termination Fee
Will vary under circumstances (Note <23>[22])
When billed
General Comments:
You must pay these fees to us except as explained in Notes 4, 6, 9 and 20 below. These fees are non-refundable. If we or our Affiliates do not actually receive your payments on the due date, they will be deemed delinquent. These fees do not include any initial franchise fees that may be payable to our Affiliates if you are developing your Pretzelmaker Store as a co-brand with one of their concepts.
You must pay all continuing fees, marketing fees, rental payments and other amounts owed to us or our Affiliates by pre-authorized electronic bank transfer from your general account. You must sign and complete the Authorization Agreement form attached to the Franchise Agreement as Appendix A or any other documentation we require <from time to time>fperiodicallv] to permit the electronic transfer. The pre-authorized electronic bank transfer requirements are< further> described in Section 6.4 of the Franchise Agreement and Appendix A to the Franchise Agreement.
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During the course of developing and operating your Store, you will also be required to purchase various items from designated and approved suppliers or in accordance with our standards and specifications. See Item 8 of this Offering Circular for an explanation of these requirements.
Specific Notes:
1. See Exhibit 1 to this Offering Circular for a definition of Gross Revenues.
2. The continuing fee and marketing fee due under the Franchise Agreement and any Non-Baking Kiosks Addendum are payable weekly on or before the close of business on Wednesday of each week for the immediately preceding week. As described in the General Comments above, these fees must be paid to us by electronic bank transfer from your general account. If you are granted the right to operate a Non-Baking Kiosk, you must submit to us a separate report of the Gross Revenues for your Non-Baking Kiosk, and make separate continuing fee and marketing fee payments based on the Gross Revenues from your Non-Baking Kiosk. See Items 1, 7 and 12 of this Offering Circular for more information on Non-Baking Kiosks.
3. The marketing fee for <200S>[2Jftflfi] is 1.5% of Gross Revenues. For <2006>[2fiQ2] and future years, we will notify you annually of the exact percentage you must pay as a marketing fee, except for any year in which the percentage is to remain unchanged from the preceding year. We establish the percentage of Gross Revenues you must pay as a marketing fee annually, although you will not be required to pay more than other franchisees in your market area. See Item 11 of this Offering Circular for more information on marketing.
4. In addition to the marketing fee described in Note 3 above, you must pay all advertising fees required by your lease and/or sublease and comply with all advertising requirements of your lease or sublease. If you are a sublessee of one of our Affiliates, you must pay our Affiliate any amounts in addition to the marketing fee necessary to meet all lease requirements. See Item 11 of this Offering Circular for more information on marketing.
5. In addition to the marketing fee and lease-required advertising fees described in Notes 3 and 4 above, if a local or regional advertising cooperative is formed or organized for the market that includes your Store, we have the right to require you to participate in and contribute to the advertising cooperative an amount of up to 3% of your Gross Revenues. In <stt6h>[halj case, we will notify you <frnm time to time>|"perindically] of the amount you must pay to the advertising cooperative and the timing of the payments, which may be as often as weekly. See Item 11 for more information on cooperative advertising.
6. You may not attend training <prior to>fbefore1 signing your franchise agreement. We provide training for you (or one of your Entity Owners, if you are an Entity) and the initial store manager (if different from you or your Entity Owner) free of charge at our training facility in Salt Lake City or any other location we designate. As <furthcr >described in Item 11, one of our Affiliates or an existing franchisee may also make an optional (or in the future a mandatory) in-store work experience available to you at its Pretzelmaker Store. Currently, neither we or our Affiliates, nor the host franchisee plan to charge you a fee for any in-store work experience you attend, but we have the right to do so in the future. Currently, we also will provide training for any additional managers from your store free of charge. We have the right, however, to charge a tuition fee in the future for each additional manager that attends our training. In the case of a proposed Transfer, we will provide training to the proposed transferee and its attendees at our training facility in Salt Lake City or any other location we designate. The proposed transferee and its attendees may also be given the option of attending, or required to attend, an in-store work experience either at the Store being transferred or at another existing Pretzelmaker Store.
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Currently, neither we or our Affiliates, nor the host franchisee plan to charge you or your transferee a fee for any training we provide or for the in-store work experience, but we have the right to do so in the future. See Note 6 to Item 11 of this Offering Circular for <furthor information regarding training and a description of exceptions to free training. You <are responsible for>[must pav] all travel and living expenses for your trainees. Travel and living expenses are described in Item 7 of this Offering Circular.
7. We have the right to require you and/or previously trained and experienced managers and employees to attend periodic refresher courses at the times and locations we designate. Your Store must at all times be managed by an individual who is certified by us as having completed our training program. You <will be-roquired to>[must] pay the fees that we are then charging for these refresher courses.
8. If you sublease the premises to be used as your Store from one of our Affiliates (sometimes referred to in this Offering Circular as the "Sublessor"), you must sign a standard Sublease Agreement in the form included in Exhibit 10 of this Offering Circular. If you are an Entity, the Sublessor has the right to require that each of your Entity Owners sign a Guaranty in the form attached to the Sublease Agreement. The rent and other amounts due under the Sublease Agreement will be the same as the rent and other amounts due from the tenant under the Sublessor's lease (the "Master Lease") of the premises from the landlord. The rent due will vary with the location of the premises. Typically, monthly rental payments will be based on factors such as the current market value of similar properties and the perceived market value of your Store based <epen>[on] its location and traffic patterns, sales volumes, and so forth. You must pay the monthly rent under the Sublease Agreement directly to us or the Sublessor, as designated by the Sublessor, and we or the Sublessor will then pay the rent to the landlord under the Master Lease. However, we may require you to make the payments to us or the Sublessor at least 30 days in advance of the date the payments are due under the Master Lease (10 days in advance, for percentage rental payments). As described in the General Comments above, rental payments must be paid to us or the Sublessor by electronic bank transfer from your general account. Rental payments are typically non-refundable. Depending on our and the Sublessor's evaluation of your credit-worthiness, the Sublessor has the right to require you to pay a security deposit (typically, the equivalent of one month's rent) under the Sublease Agreement. Upon termination of the Sublease Agreement, the Sublessor will refund the security deposit to you if you have fulfilled all of your obligations under the Sublease Agreement.
9. We make no charge for the operating assistance and guidance we customarily provide to all of our franchisees. However, we have the right to occasionally make special assistance programs available to you for which you must pay the daily fees and charges that we establish.
10. You must pay all business debts, liens and taxes promptly when due. If you fail to do so, we have the right, at our option, to pay the same and then be entitled to immediate reimbursement from you. Unpaid debts owed to us bear interest from the due date until paid at the lesser of 1.5% per month or the maximum contract rate permitted by the law of the state in which your Store is located.
11. You must pay the costs of the audit or inspection only if you fail to furnish us with reports, financial statements, tax returns or schedules, or if the audit results show an understatement of Gross Revenues of more than 2% or if the need for an audit was a result of your default under the Franchise Agreement in failing to provide records and reports in a timely manner.
12. We will loan you one copy of the Operations Manuals free of charge, as< further> described in Item 11. If you lose your copy of the Operations Manuals, you must obtain a replacement copy from us at our then current charge for replacement copies.
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13. As noted in the table above, a $2,000 transfer fee deposit must be paid to us at the time you submit your request for Transfer, with the balance of the transfer fee payable to us no later than the closing of the Transfer. The transfer fee deposit is non-refundable, except that it will be returned to you under the following circumstances: (i) we exercise our right of first refusal; or (ii) we do not approve the proposed Transfer. In addition, we have the right to require the payment of an additional transfer fee deposit if the proposed Transfer does not occur within 12 months from the date we received the initial transfer fee deposit. To complete a Transfer, you will enter into an Assignment, Assumption and Consent with us and the transferee in the form included in Exhibit 6 of this Offering Circular, and the transferee will, at our option, either operate under your old Franchise Agreement for the remainder of its current term, or enter into our then current form of Franchise Agreement for the remainder of the current term of your old Franchise Agreement. During the effective term of this Offering Circular, we will charge a reduced transfer fee of $1,000 for the following Transfers, provided all other conditions of
Transfer are satisfied: (i) Transfers to your parent, spouse<-er>[,__]child[. or kev managerial
employee], where you also remain personally liable on the Franchise Agreement; (ii) Transfers among existing Entity Owners of you, where the transferor will no longer be one of your Entity Owners following the Transfer; and (iii) Transfers involving multiple individual franchisees under your franchise agreement where one or more individuals will no longer be obligated under your franchise agreement following the Transfer. In the case of the Transfers described in (ii) and (iii) in the immediately preceding sentence, the remaining individual franchisees or Entity Owners must meet our then-current qualifications for new franchisees. We will not charge a transfer fee if the Transfer is among existing Entity Owners of you and the identity of all Entity Owners remains the same following the Transfer. During the effective term of this Offering Circular, we will waive payment of the Transfer Fee and instead charge a documentation fee of $500 for Transfers to a wholly-owned corporation under Section 12.4 of the Franchise Agreement. If you acquire an existing Pretzelmaker Store from <MFOC or >another franchisee, you will not pay an initial franchise fee to us, but will pay us our then current transfer fee. In addition, if you Transfer a co-branded location with 2 or more of our or our Affiliates' concepts, you <will be required to >[m,y$t jpay the highest then current transfer fee among the concepts being transferred. These deposits will be handled in the same manner as the transfer fee deposit
described above.<Further, for a period of time>[__] During <30Q5r>r2006.1 we may allow certain
existing franchisees to transfer their franchise agreements for a lower transfer fee.
14. Should it become necessary to relocate your Store on account of the condemnation of your Store premises or the exercise of a relocation right by your landlord or for some other reason approved by us in writing, we will consent to <sueh>rthel relocation at a site that meets all of our then current site criteria for the development of new Pretzelmaker Stores and is acceptable to us <provided that>[|fl you pay to us our then current relocation fee (which is $2,500 as of the date of this Offering Circular) and satisfy all of the other conditions in Section 4.7 of the Franchise Agreement, including the requirement that you have sufficient term remaining under the Franchise Agreement, or purchase from us sufficient additional term under the Franchise Agreement, to satisfy our then current policy on remaining term requirements for relocations (see Note 15 for a <furthor description of this requirement). We also have the right to require you to sign, in lieu of the Term Pre-Purchase Addendum, a new form of Franchise Agreement< in-conneotion> with any approved relocation where you are also required to purchase additional term.
15. We have the right to require, as a condition of our approval of a proposed Transfer, that your transferee purchase additional term under the Franchise Agreement. Similarly, we have the right to require, as a condition of our approval of a proposed relocation of your Store, that you purchase additional term under the Franchise Agreement. Currently, we will not require your transferee or you to purchase additional term if there are 4 or more years of term remaining under the Franchise Agreement at the time of a proposed Transfer or relocation. If, however, there are less than 4 years of term remaining under the Franchise Agreement at the time of a proposed Transfer or a proposed relocation of your Store,
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we have the right to require your transferee (in the case of a Transfer) or you (in the case of a relocation) to buy additional term under the Franchise Agreement. We will not require your transferee or you to purchase more additional term than necessary to make the term remaining under the Franchise Agreement equal 7 years. For the purposes of this Offering Circular, "term remaining under the Franchise Agreement" means the remainder of any initial term plus the remainder of any renewal term under the Franchise Agreement. For example, if you have 5 years left on your initial term and a renewal term of 10 years, the term remaining under the Franchise Agreement is 15 years. Similarly, if you have already renewed and have 2 years remaining on your renewal term, the term remaining under the Franchise Agreement is 2 years.
Even if we do not require the purchase of additional term upon a proposed Transfer or a proposed relocation of your Store, we may, at our option, allow your transferee or you to purchase additional term from us as part of the Transfer or relocation. The purchase of any additional term by your transferee or you, however, may not result in the term remaining under the Franchise Agreement to be more than 14 years.
Upon the purchase of additional term, your transferee or you will enter into our then current form of Term Pre-Purchase Addendum to the Franchise Agreement ("Term Pre-Purchase Addendum"). A copy of our current Term Pre-Purchase Addendum is attached as Exhibit 7 to this Offering Circular. As <furthcr >described under the Term Pre-Purchase Addendum, any additional term your transferee or you purchase from us will become effective upon the expiration of any term remaining under the Franchise Agreement, <providod that>[ifl your transferee or you meet all of our then current conditions for renewal, except for the payment of a fee.
We have the right to change the fees we charge for additional term and our requirements for when and how much additional term must be purchased upon a proposed Transfer or relocation. In addition, although the current requirements for when additional term must be purchased are the same for Transfers and relocations, we have the right to have different requirements in the future for these situations. We also have the right to require you or your transferee to sign a new form of franchise agreement for a term equal to the term remaining under the Franchise Agreement, plus any prepurchased term, in lieu of having you or your transferee sign the Term Pre-Purchase Addendum.
16. We may provide you with copies of advertising, marketing and promotional formats and materials for use in your store, which we have prepared using the marketing fees described in Item 11 of this Offering Circular. You are only required to pay shipping and handling costs for these items or, if you want additional or replacement copies, our direct cost of producing <sHeh>rthose1 items together with any related shipping, handling and storage charges. In addition to these items, we may offer you the option of purchasing other advertising, marketing and promotional formats and materials that we have prepared and that are suitable for use at local Pretzelmaker Stores. We may provide samples, copies or information explaining these items to you <from time to time>[periodicalIv1. If you elect to purchase any <saeh>[of those] items from us, we will provide them to you at our direct cost of producing them plus any related shipping, handling and storage charges. In addition, we have the right to develop and market special mandatory promotional items for Pretzelmaker Stores and require you to maintain a representative inventory of these promotional items to meet public demand. In <sueh>[l^at] case, we will make these items available to you at our cost plus a reasonable mark-up and any shipping, handling and storage charges.
17. If we elect to manage your Store pending our purchase of that store, as permitted by Section 14.5(e) of the Franchise Agreement or we assume management of your Store in the case of your
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voluntary abandonment, as permitted by Section 13.S of the Franchise Agreement, we have the right to charge a management fee of 10% of the Gross Revenues of that store during the period of management.
18. Article 16 of the Franchise Agreement grants us a security interest in the collateral described in that Section. Upon your signing of the Franchise Agreement, you must sign the necessary Uniform Commercial Code financing statements and reimburse us for the costs of filing those statements with the appropriate government agencies. You must also sign continuation statements when required by law and reimburse us for the costs of filing those continuation statements.
19. If we or our Affiliates prevail in any arbitration proceeding or litigation against you, you must pay the costs and attorneys' fees incurred. You and each of your Entity Owners also have certain indemnification obligations to us and our Affiliates, as referenced in Item 9 of this Offering Circular.
20. If you change your name, or your Entity changes its name or entity type, but no Transfer occurs as a result, you must notify us promptly following the change, provide us with any documentation we reasonably request to verify the name change, and pay us our then-current documentation fee (which is $500 as of the date of this Offering Circular) to defray our costs associated with documenting the change.
21. We offer an optional Resale Facilitation Program to existing franchisees who want to sell their Pretzelmaker Stores. If an existing franchisee (the "Selling Franchisee") desires to participate in the Resale Facilitation Program as a possible way of selling its Pretzelmaker Store, the Selling Franchisee must notify us in writing. We will then attempt to negotiate with the Selling Franchisee an exclusive option (the "Purchase Option") to purchase its Pretzelmaker Store for a particular price (the "Purchase Price") during a particular period of time (the "Option Period"). If we and the Selling Franchisee agree on the details of a Purchase Option for the Selling Franchisee's Pretzelmaker Store (including the Purchase Price and Option Period), we will enter into a purchase option agreement ("Option Agreement") with the Selling Franchisee. A copy of our current Option Agreement is attached to this Offering Circular as Exhibit 9. Under the Option Agreement, we have the right, but not the obligation, during the Option Period to exercise the Purchase Option and purchase the Selling Franchisee's Pretzelmaker Store for the Purchase Price. We also have the right to assign the Option Agreement to a third party (the "Buying Franchisee"), pursuant to the form of option assignment agreement ("Option Assignment Agreement") attached to the Option Agreement and included in Exhibit 9 of this Offering Circular. If we enter into an Option Assignment Agreement with a Buying Franchisee, the Buying Franchisee will then have the right, but not the obligation, during the Option Period to exercise the Purchase Option and purchase the Selling Franchisee's Pretzelmaker Store for the Purchase Price. Under the terms of the Option Assignment Agreement, the Buying Franchisee must also pay to us a Resale Facilitation Fee if it exercises the Purchase Option. The Resale Facilitation Fee is due to us upon the Buying Franchisee's purchase of the Selling Franchisee's Pretzelmaker Store and is in addition to the Purchase Price payable to the Selling Franchisee. The Resale Facilitation Fee is consideration for the Option Assignment Agreement, the resale facilitation services and any other services we provide to the Buying Franchisee, and any other value-added products or benefits we provide to the Buying Franchisee.
Under the Resale Facilitation Program, we do not represent any Selling Franchisee or Buying Franchisee, nor do we have an obligation to purchase or find a purchaser for a Selling Franchisee's Pretzelmaker Store. The Resale Facilitation Program is just one of the possible options that may be available to an existing franchisee that wants to sell its Pretzelmaker Store and a prospective franchisee that wants to buy a Pretzelmaker Store. See the Option Agreement and Option Assignment Agreement for <further information regarding the rights and obligations of us, the Selling Franchisee and Buying Franchisee under these documents.
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that wants to sell its Pretzel Time Store and a prospective franchisee that wants to buv a Pretzel
wants to sign a non-exclusive listing agreement with us. These services mav include (a^
store on one or more websites sponsored or affiliated with us. (hi ii
to potential buyers. (c\ providing advice about marketing the store for sale, or advertising it
franchise fees, development rights, or similar items. The fee will only he paid to us if we successfully complete a sale of the store, and the transfer is suhject to all other transfer procedures as more fullv described in paragraph 13 of this Item 6. 1
<22->f23. Hf we terminate the Franchise Agreement with cause, or you terminate the Franchise Agreement without cause, you must pay us a termination fee equal to the present value (using the then current 30 year Treasury Bond rate) of the continuing fees you would have paid us on the product of your Store's average monthly Gross Revenues during its most recent 12 months of operation (or shorter period if open less than 12 months) before the termination multiplied by the number of months remaining in the Franchise Agreement's current term had we or you not terminated it. The termination fee is compensation to us for anticipated and reasonably estimated lost profits.
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ITEM 7. INITIAL INVESTMENT
Description
Amount
Method of Payment
When Due
To Whom Payment Is to Be Made
a. Initial franchise fee (Note 1)
Initial fee for Non-Baking
Kiosk
(General Comments)
$25,000 (Note 1)
$5,000 if granted right to operate a Non-Baking Kiosk (General Comments) [J
Lump sum
Upon signing Franchise Agreement, or Non-Baking Kiosk Addendum in the case of a Non-Baking Kiosk
Us
b. Travel and living expenses while training (Note 2)
$1,500-53,000
Lump sum, as incurred
As incurred during training
Airlines, hotels, and restaurants
c. Real estate lease
Note 3
Note 3
Note 3
Note 3
d.<4-> Improvements and equipment, if constructing a new store (Note 4)
[____Improvements and
Fniiinment. If installing 3 modular, prefabricated baking kiosk (Note §)]
Equipment if granted right
to operate a Non-Baking
Kiosk
(General Comments)
s<35TaaQ>[i lo.ooo].
$175,000
As agreed with the contractors and suppliers providing labor, materials, or equipment
As incurred
Various independent contractors and suppliers
$4,000 to $<44^QOQ>r45.0001
<d;3Improvements and equipment,- if-flequiFmg the-assets of an existing store-froi (Note 5)>
<$0 $250,000>
<Lump sum>
<Upon acquisition>
<MF©G>
e. Opening Product and Soft Goods Inventory (Note 6)
$1,000-55,000
As agreed with suppliers <er-lumpsumiftoMFOO
As incurred <or upon acquisition of the store assets if'
you purchase on existing store from MFOO
Suppliers<, including MFQC if you purchase- art-existing store from MFOO
f. Grand opening promotion,
$5,000
Us, and various vendors and
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Description
Amount
Method of Payment
When Due
To Whom Payment Is to Be Made
if opening a new store
(Note 7)
Lump sum
As incurred
suppliers<j-
requiredif you purchase an-
existing Store from MFOC>
Security deposits, utility deposits, business licenses, and other deposits and prepaid expenses (Note 8)
$1,000-55,000
Lump sum
Before opening
Landlord, utility companies, suppliers, and government agencies
h. Professional fees (Note 9)
$500-$1,500
Lump sum
As incurred
Attorneys, accountants, and other consultants
i. Insurance (3 months) (Note 10)
$2,500-53,500
Lump sum or installments, as determined by insurance carriers
Before or upon signing of Franchise Agreement
Insurance carriers
j. Computer hardware and software (Note 11)
$<0>3,500|-
Lump sum
As incurred<; if we require you to-purchose computer hardware-and software or if you do not havc-the required-access to the Intemet>
Various vendors and suppliers
k. Additional funds (3 months) (Note 12)
$8,000-512,000
Lump sum, as incurred
As incurred
Employees, suppliers, utilities and other vendors
Totals
%<U^4QQ>\ 158.0001 -$<^8_500T>[^fiI5fiPJ] if constructing a new Pretzelmaker Store (not including real estate lease costs); $<44,500 $313,500, if acquiring the assets of an existing-Freteelmaker-Storo from MFOOfl53.000 tn S225.50Q. if installing a ipw modular. nrefahricatpH baking kiosk] (not including real estate lease costs);f_andl
-25-
|
Description |
Amount |
Method of Payment |
When Due |
To Whom Payment Is to Be Made |
|
$9,000 to $50,000 if granted right to operate a Non-Baking Kiosk (not including real estate and lease costs) |
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General Comments:
We have based the estimates provided in the chart above upon our 10 years in the retail pretzel business and our experience in establishing and operating in-line] Pretzelmaker Stores; however, we do not guarantee that your costs will not be higher than described above. You should review these figures carefully with a business advisor before making any decision to purchase the Franchise.
These estimates assume that you are developing a traditional Pretzelmaker Store operated independently of any co-branded concept, such as one offered by one of our Affiliates. Therefore, the estimates do not include any initial franchise fees, continuing fees, buildouts, labor, equipment, or any other costs or expenses associated with any co-branded concept that you might seek to develop at your Pretzelmaker Store.
All payments you make to us or our Affiliates are non-refundable unless otherwise stated. Payments you make to parties other than us or our Affiliates may be refundable at the option of the other party. Because we do not know who these third parties are, we cannot state when or if payments made to these third parties will be refundable.
Neither we nor our Affiliates finance any portion of the initial franchise fee. In addition, except as described in Item 10, neither we nor our Affiliates offer any other financing, directly or indirectly.
The estimates in the above chart do not include continuing fees or marketing fees payable to us during the operation of your Store since these fees are payable out of the Gross Revenues of your Store. See the information in Item 6 for an explanation of the continuing fees and marketing fees.
We also may grant you the right to operate a Non-Baking Kiosk in the same shopping mall or center as a Host Store for an initial fee of $5,000.<-> (See Item 5 of this Offering Circular.) In <sueh>[that] case, you must acquire the necessary equipment for a Non-Baking Kiosk. We estimate the cost for this additional equipment to range from $4,000 (for example, for a small display cart) to $45,000 (for example, for a semi-permanent kiosk or large cookie cart). Your costs will depend on the type of Non-Baking Kiosk you operate and your equipment source. You will pay for this equipment according to the terms you work out with the supplier. Based on this information, we estimate that the initial investment required for a Non-Baking Kiosk, including the initial fee and equipment, but excluding real estate lease costs, ranges from $9,000 to $50,000.
Specific Notes:
1. $25,000 is the standard initial franchise fee for a new Pretzelmaker franchise. If you purchase the assets of an existing store from <MFQG> [another franchisee], there is no initial franchise fee, but you will pay a transfer fee. See Item 5 of this Offering Circular for an explanation of the range of initial franchise fee, the transfer fee, and the conditions when a portion of the initial franchise fee may be refundable.
2. You <are-responsible>[must pay] for< paying> any incidental expenses that you and your manager and any other trainees incur while attending our initial training program, including car rental, gas, airline tickets, meals, hotel room, entertainment, and salaries.
3. If you do not currently own adequate space, you must lease the space for your Store. The typical Pretzelmaker Store is located in a shopping mall or retail area and is either an in-line store or kiosk. The average Pretzelmaker Store requires between 200 to 850 square feet of space. A typical Non-Baking Kiosk will use between 50 and 150 square feet. We cannot estimate the amount of your monthly
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rental payments, since rental amounts vary greatly from site to site and are affected by a number of factors, including location, size, visibility, accessibility, and competitive market conditions. In addition to rental payments, your lease may obligate you to make other payments to the landlord, such as payments for shopping center or building operating expenses, common area maintenance expenses, food court expenses, merchants' association assessments, assessment for shopping center promotion and advertising, and the like. Your lease may also require you to spend a certain amount on advertising and promotion for your particular store. Again, because these payments vary widely from lease to lease, we cannot estimate the amount you may be required to pay for these or other similar items. You will make rental payments to the landlord, unless you sublease the premises from one of our Affiliates. In that case, you will make rental payments to our Affiliate, as explained in Note 8, under Item 6 of this Offering Circular.
4. These estimates include construction costs (labor and material) for typical tenant
improvements and remodeling necessary to prepare a site for operation of a Pretzelmaker Store, as well as the estimated costs for necessary trade fixtures, such as display cases, menu board and signage, counters and work tables, and equipment, such as ovens, refrigerators, beverage dispensers, smallwares and cash registers. The estimates also include construction management costs, general conditions, builders risk/liability insurance and financing costs. If you develop a new store, you must also employ and pay an architect or engineer to prepare a site plan and other construction documents. Although we will provide you with prototypical plans and specifications at no additional cost to you, you must pay an architect or engineer to adapt these plans and specifications to city, state and local building codes and to the specific site chosen for your Store. These estimates do not include lease costs. Your actual construction costs will depend on numerous factors, such as the condition of the premises, duration of the building process (delays), union labor requirements, contractors' fees, signage, availability of materials and equipment, interest rates, and the insurance coverage you choose.[ 3
<r As explained in Item 5 of this Offering Circular, you may have the opportunity to aoquiro the assets of an existing Pretzelmaker Store from MFQC. In that case, you would pay the purchase prioe for the store assets and would not incur the construction and development expenses described in Note-4-above. The method of determining the purchase price for the assets of an existing store-is-described4n-Itcm 5 of this Offering Circular; however, the range of prices is typically as disclosed in the chart above. A portion of the price is attributable to goodwill and going concern value of the store. >
operated within a mall, shopping center or other site, hut is not a permanent, in-line structure. It
many prefabricated components that are built off-site, often at a savings over traditional
6. This estimate includes supplies, opening inventory, accounting forms and systems, soft
goods, such as napkins, cups, and other paper goods, utensils, packaging materials, and other items required to operate under the Pretzelmaker System. The costs will vary depending upon your inventory levels and storage space.<If you purchase the assets of an existing store from MFOC, MFOC may require you to pay $1,500 toward the purchase price of the Product and Soft Goods Inventory at your closing. Once a physical count of the Product and Soft Goo do Inventory is completed, you must pay the
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balance of the purchase price.However, if the actual purchase price of the Product and Soft Goods Inventory is less than $1,500, MFOC will refund the difference to you.>[J
7. As explained in more detail in Item 5 of this Offering Circular, if you are opening a newly developed Pretzelmaker Store, you <are required to>|"must] spend at least $5,000 on a grand opening promotional program. At least a portion of this amount must be paid to us or our Affiliates to cover the cost of the materials that we or our Affiliates develop and provide to you for the grand opening programs. You may also incur expenses from other vendors and suppliers in conducting your grand opening promotion.
8. You may be required to pay a security deposit under your real estate lease and other deposits for utilities and insurance premiums. Lease security deposits are typically due upon signing the lease and are typically refundable if you do not default on your lease. Your lease may also require you to pay the last month's rent in advance. Deposits for utility services are typically required at the time the service is applied for, and may or may not be refundable. You must confirm all of the specific deposits required. The amount for licenses and permits can vary significantly in different areas, and you should verify specific amounts with local authorities.
9. You may find it necessary to retain an attorney to review the real estate lease or sublease, the franchise documents, or to assist in forming a corporation, partnership, or limited liability company. You may also retain an accountant for advice in establishing and operating your franchise business and filing necessary tax forms and returns.
10. We require you to obtain and keep in force the following insurance coverages on a primary non-contributory basis, with us and our affiliates named as an additional insured on each policy:
(a) Property Insurance. Property insurance for all of your goods, fixtures, furniture, equipment, and other personal property located on your Store premises providing insurance to the extent of 100% of the full replacement cost against loss or damage from fire and other risks normally insured against in special cause of loss coverage. You wilt also maintain business income and extra expense coverage to cover loss of income and extra expenses for at least one year.
(b) Liability Insurance. Liability insurance on an occurrence basis, insuring against all liability resulting from damage, injury, or death occurring to persons or property in or about your Store premises (including products liability insurance and broad form contractual liability coverage), the liability under this insurance to be at least $1,000,000 for one person injured, $ 1,000,000 for any one accident, and $ 1,000,000 for property damage.
(c) Workers' Compensation and Employers' Liability Insurance. You must maintain and keep in force all workers' compensation insurance on your employees that is required under applicable workers' compensation laws of the state where your Store is located. You must also maintain and keep in force employers' liability insurance on your employees, with liability limits of no less than $100,000 per accident for bodily injury by accident, and $100,000 per employee for bodily injury by disease, with no less than a $500,000 policy limit for bodily injury by disease.
(d) Other Insurance Policies. Any additional insurance policies that a prudent franchisee in your position would maintain or as we may reasonably require.
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Your real estate lease may also impose requirements for insurance coverage in addition to the requirements that we impose. The chart contains the estimated cost of required insurance coverage for a 3 month start-up period; however, the cost of insurance varies, depending upon the insurance company you select, lease requirements, variances in the cost of insurance from city to city and state to state, and other factors. Whether or not amounts paid for insurance premiums are refundable will be determined by individual insurance carriers and the terms of the insurance policies.
11. As of the date of this Offering Circular, we <do not require you to-use-any computer hardware or software in the operation of your Store and, therefore, your initial investment for this item may be $0. If wo do, however, require you in the future to purchase, install and use computer hardware and software whioh meet our specifications and standards, we estimate that you will incur costs of $1,250 to $7.500 or moro>rhave designated the Trearware point of sale software system bv Innovative Computer Systems. Inc. ("TCS"^ and Dell Optiple* 1701, Computers with Windows XP Professional. PC Anywhere 11.5 Software and a Dell Photo Printer- A922. as the required point of sale and computer system for use in vour Store. The Dell Computers also act as vour registers. operating with the ICS Treatware software. We estimate that the initial cost of this POS software and computer system is from $3.500 to $4.500. In addition to this initial cost, vou will he required to pav to ICS or its designee a monthly maintenance and subscriber fee of from $65 to $75.1 We also currently require that you have <aecess to-the>[wireless] Internet <frem>[access in,] your Store premises [for use bv vour customers and ]in order to submit reportsf for vour Store], including Gross <Revenue>[Revenuesl reports and financial statements< for your Store>[J to us electron!callv[. and to
maintain a valid email address and authorize us to communicate with you by that method at the address. IThe initial cost for wireless Internet installation is approximately $150 with a subscription rate of $200 per year or more, depending on vour service provider, and these fees are not included in the $3.500 to $4.500 initial costs described above in this Note 11. though thev are included in the ranges in the table. ]See Item 11 of this Offering Circular for more information on our right to require you to purchase, install and use computer hardware and software in the future.[J
12. This amount represents the range of your initial start-up expenses over the first 3 months of operation. These figures include estimated payroll costs. However, they do not include the salary for the store manager, on the assumption that you will manage the store. The figures also do not include inventory. These figures are estimates and we cannot guarantee that you will not have additional expenses starting your business. Your costs will depend upon factors such as how well you follow our methods and procedures; your management skill, experience, and business acumen; local economic conditions; the demand for specialty food and snack goods and services in your area; the prevailing wage rates; competition; the time of the year your Store is opened; and the sales level reached during the initial period.
ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
Purchases of Pretzelmaker Products and Other Items. Pretzelmaker Products:
You must use only the products, materials, equipment, smallwares, paper products, and supplies that we require and have approved for Pretzelmaker Stores as meeting our specifications and standards for quality, design, appearance, function and performance. You must purchase products, materials, equipment, smallwares, paper products and supplies from suppliers and distributors designated or approved by us as detailed in the Operations Manuals.
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The recipes, formulations, and specifications for all Pretzelmaker Products are trade secrets belonging exclusively to us and our Affiliates. We or our Affiliates have the right to license manufacturers <from timo to time>rperiodicalIv1 to manufacture frozen pretzel dough<, pretzel mix>, and other Pretzelmaker Products following our secret recipes, formulations, and specifications. We or our Affiliates may also license with various paper manufacturers or distributors to produce branded or proprietary paper products that you must purchase for your Store. We also have the right to require you to purchase frozen pretzel dough<. pretzel mix>, and other Pretzelmaker Products from us or our Affiliates, or our designated supplier or suppliers. We have currently licensed Layton Bakery/Kroger Manufacturing, Inc. to manufacture Pretzelmaker frozen pretzel dough, and have designated Dawn Food Products as our current primary distributor, though we may <have designated othor>("designate new or additional] distributors <to service certain geographical areas.>l"in the future!.
We and our Affiliates participate in a nationwide marketing program sponsored by Coca-Cola Fountain or its affiliates. You must participate in the program and purchase Coca-Cola products for use at your Pretzelmaker Store. You may purchase Coca-Cola products from any authorized Coca-Cola distributor. Coca-Cola Fountain or its affiliates currently pays us or our Affiliates amounts based <upea>[on] purchases by each franchisee. These funds may be used to develop and implement marketing and promotional activities designed to benefit the entire Pretzelmaker System, and to increase the sale of Coca-Cola products at all Pretzelmaker Stores. Any amounts received by us or our Affiliates from Coca-Cola Fountain or its affiliates will not reduce the payments you <are required to>[muji] make to us under the Franchise Agreement,
In addition to purchasing frozen pretzel dough, pretzel mix and other Pretzelmaker Products from us or our Affiliates, or our designated supplier or suppliers and Coca-Cola products from any authorized Coca-Cola distributor, you are also obligated to purchase or lease all other products, services, materials, equipment, smallwares, paper products and supplies required for the operation of your Store from manufacturers, suppliers or distributors either designated by us or approved by us as meeting all of our System Standards. We approve suppliers based on their ability to meet our System Standards as to quality, composition, taste, finish, appearance and service, ability to demonstrate their capacity and facilities to supply your needs in the quantities, at the times and with the reliability required for an efficient operation.
Except as described above in this Item 8, if you wish to buy from a supplier or distributor not approved by us or purchase products, services, materials, equipment, smallwares, paper products or supplies not approved by us as meeting our System Standards, then you must first submit a written request to us. We may require submission of sufficient information and samples to determine if the products, services, materials, equipment, smallwares, paper products, supplies suppliers or distributors meet our System Standards. Upon your submission of a written request to us and any sufficient information and samples we require, we will evaluate whether the materials, supplies, suppliers or distributors meet our System Standards and advise you of our decision within 90 days of your submission. We do not charge any fee for evaluating the materials, supplies, suppliers or distributors described in this paragraph that you propose to us.
During <3004T>[2Q25J we and our Affiliates recognized approximately «1.^1QQ.QQQ>("3.899.000] received from our suppliers and vendors based <t*pen>[on] arrangements for purchases by us, our Affiliates, and our and their respective franchisees and licensees, and/or referrals from us and our Affiliates of franchisees and licensees to suppliers and vendors (excluding amounts received by our Affiliates from suppliers and vendors based <apoft>[on] purchases of required yogurt and ice cream products by TCBY franchisees, and excluding amounts received by our Affiliates for
-31-
purchases of required cookie batter by Great American Cookie Company franchisees). This amount represents approximately <5rl>[4.4|% of MFFB and its subsidiaries' total revenues for <2004r>[2flflL]
We and our Affiliates had the right in the past, and we and our Affiliates have the right in the future, in addition to the amounts received from distributors and suppliers as described above in this Item 8, to receive rebates or other payments from distributors and suppliers, based (directly or indirectly) on sales to franchisees and company-owned stores, and from other service providers. These payments have ranged or may range from less than 1% up to 15% or more of the amount of those purchases by franchisees. We do not negotiate purchase arrangements from suppliers or service providers for the benefit of franchisees. We do not participate in any purchasing or distribution cooperatives.
Location of your Store: Real Estate Lease
You must locate a site for your Store that is approved by us, and you may not sign a lease for the site until we have given our approval in writing. When you sign your lease, we may also require that you and your landlord sign a Lease Addendum in the form included in Exhibit 8 of this Offering Circular. We approve locations on a case-by-case basis, considering items such as size, appearance, and other physical characteristics of the site, demographic characteristics, traffic patterns, competition from other businesses in the area (including other Pretzelmaker Retail Outlets) and other commercial characteristics, such as purchase price, rental obligations and other lease terms. In certain circumstances, you may be able to lease a site from one of our Affiliates, but you are not required to sublease premises from any of our Affiliates. In <sueh>[ihai] case, you must enter into a Sublease Agreement with the Sublessor. Rent received under a Sublease Agreement is passed through to the landlord. Neither we nor our Affiliates recognize revenues as a result of a sublease arrangement.
Development of your Store
You must construct and develop your Store. We will furnish you with prototypical plans and specifications for your Store, including requirements for exterior and interior materials and finishes, dimensions, design, image, interior layout, decor, fixtures, furnishings, equipment, color schemes and signs. You must develop your Store in accordance with these plans and specifications. You must prepare all required construction plans and specifications to suit the shape and dimensions of your site and to ensure that the plans and specifications comply with applicable ordinances, building codes and permit requirements and with lease requirements and restrictions. You must submit construction plans and specifications to us for our approval before you begin construction of your Store, and you must submit all revised and "as built" plans and specifications to us during the course of construction. <You may,-but arc not required-t-e-, use MFFB ?s-Construction Assistance Program as more fully described in
[If vnu purchase a modular, prefabricated haking kiosk, which is assembled using many prefabricated components that are built off-site, vou must purchase these prefabricated components from the vendor or vendors we designate.]
Fixtures. Furnishings. Equipment and Signs
In developing and operating your Store, you must use only the fixtures, furnishings, equipment (which <may in the future >include computer hardware and software, as< further> described in Item 11) and signs that we require and have approved as meeting our specifications and standards for quality, design, appearance, function and performance. You may only display at your Store the signs, emblems, lettering, logos and display materials that we approve in writing. We have the right to install all required signs at the Store premises at your expense, although our current practice is to allow you to install the
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signs. You may purchase these items from any supplier who can satisfy our standards and specifications. Currently, Bintz Equipment Company, an unaffiliated entity, is an equipment and smallwares supplier that meets our standards and specifications. Bintz offers equipment and smallwares to our and our Affiliates' franchisees. In some instances, Bintz may be the only source of supply for certain items of equipment and smallwares that satisfy our standards and specifications. You are not obligated, however, to purchase equipment or smallwares from Bintz if, as described above, you propose, and we approve, an alternative supplier.
ilar. we have designated the Treatware
lired point of sale a
system hv ICS.
11.5 Software and a Dell Photo Printer -for use in voiir Store. See Items 7 and 11 for more information. While vou mav obtain this
dealer
with one or more vendors to provide discounts or incentives that mav reduce voi the equipment. We will provide vou with details on anv discoi
icess for approving plans for constructing or remodeling vour Store.]
Proportion of Designated Purchases
The estimated proportion of the required purchases from designated vendors to all purchases by you of goods and services in establishing and operating the franchised business (except for construction and build-out costs) exceeds 90%.
For purposes of this Item 8, references to your Store include any [modular, prefabricated hqkjnff kiosk, and anv ]Non-Baking Kiosk you operate under a Non-Baking Kiosks Addendum. You must purchase your Non-Baking Kiosk and related signage from an approved supplier, and such items must meet our then current standards and specifications.
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>ITEM9. FRANCHISEE'S OBLIGATIONS
THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AGREEMENT AND OTHER AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR.
|
Obligation |
Section in Franchise Agreement(l) |
Item in Offering Circular |
|
a. Site selection and acquisition/lease |
Sections 4.1 and 4.2; also see Sublease Agreement; Option Agreement |
Items 6, 7, 8, 11 and 12 |
|
b. Pre-opening purchases/leases |
Sections 4.2, 4.3, 4.4, 4.6 and 7.1; also see Asset Purchase Agreement |
Items 5, 6, 7, and 8 |
|
c. Site development and other pre-opening requirements |
Sections 4.3,4.4,4.5, 7.1 and 7.8; |
Items 6, 7 and 11 |
|
d. Initial and on-going training |
Article 5 |
Items 6, 7 and 11 |
|
e. Opening |
Sections 4.5 and 4.6 |
Items 5, 6, 7 and 11 |
|
f. Fees |
Sections 3.2,4.6,4.7, 5.1, 5.2, 5.3, 6.1,6.2,6.3,6.4,6.5,8.3,9.1,9.3, 12.3(0, 13.5, 14.2, 14.6 and 16.2; Sections 1.4, 2.5, 3.4, Article 4, Article 5, and Sections 12.3, 12.4, and 12.5 of Sublease Agreement; Option Agreement |
Items 5, 6, 7, 11, and 17 |
|
g. Compliance with System Standards and other standards and policies/operating manual |
Article 4 and Sections 5.1, 5.2, 7.1, 7.2, 7.3, 7.4, 7.5, 8.1, 8.2, 9.2 and Article 10 |
Items 6, 7, 8,11, 13,14, 15, and 16 |
|
h. Trademarks and proprietary information |
Section 4.7, Article 10 and Sections 12.3(1), 13.1(d), 14.3 and 14.4; Article 7 of Asset Purchase Agreement; see also Confidentiality Agreement and Option Agreement |
Items 8, 13,14, and 17 |
|
i. Restrictions on products/services offered |
Sections 2.1, 7.1, 7.3, 9.2 and 10.7 |
Items 1,8, 14, and 16 |
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|
Obligation |
Section in Franchise Agreement(l) |
Item in Offering Circular |
|
j. Warranty and customer service requirements |
Sections 4.1,4.2(d), 5.3, 7.1, 7.5, 15.2 and 15.6; Acknowledgment Addendum to Franchise Agreement; Article 5 of Asset Purchase Agreement |
Item 11 |
|
k. Territorial Development and Sales Quotas |
None |
None |
|
1. Ongoing product/service purchases |
Sections 4.4 and 7.1 |
Items 8 and 11 |
|
m. Maintenance, appearance and remodeling requirements |
Sections 3.2,4.4,4.6, 7.1, 9.2 and 14.6; Article 2 and Article 8 of Sublease Agreement |
Items 11, 13, and 17 |
|
n. Insurance |
Sections 4.5(e), 7.9 and 14.5(e); Article 8 of Sublease Agreement |
Items 6, 7 and 11 |
|
o. Advertising |
Sections 4.6, 7.1, Article 9 and Article 10 |
Items 5, 6, 7, 11, and 13 |
|
p. Indemnification |
Sections 7.8, 10.5 and 15.6; Sections 2.5(a), 3.4,6.7, 6.9 and 8.1 of Sublease Agreement; Sections 7.3 and 7.4 of Asset Purchase Agreement; Section 5.3 and Exhibit B of Option Agreement; Section 7 of Assignment, Assumption and Consent |
Item 6 |
|
q. Owner's participation/ management/staffing |
Sections 5.1, 7.1, 7.2, 7.7, 7.8 and 13.5 |
Items 11 and 15 |
|
r. Records and reports |
Sections 7.1, 7.4, 7.6, 7.7, 8.1, 8.2 and 10.4 |
None |
|
s. Inspections and audits |
Sections 7.5 and 8.3; Section 2.6 of Sublease Agreement |
Item 6 |
|
t. Transfer |
Section 4.7, Article 12 and Section 13.1(b); Article 11 of Sublease Agreement; Section 8.1 of Asset |
Item 17 |
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|
Obligation |
Section in Franchise Agreement(l) |
Item in Offering Circular |
|
Purchase Agreement; see also Option Agreement, Assignment, Assumption and Consent and Term Pre-Purchase Addendum |
||
|
u. Renewal |
Section 3.2; Renewal Addendum |
|
|
v. Post-termination obligations |
Sections 6.5, 7.8, 8.2, 8.3, 10.5, 10.8,11.2 and 12.3(1), Article 14, Section 15.6, Article 16 and Article 18; Sections 2.5(a), 3.2, 3.3, 3.4,6.7, 6.9, 8.1 and 13.12 of Sublease Agreement; Sections 7.3, 7.4 and 8.10 of Asset Purchase Agreement |
Item 17 |
|
w. Non-competition covenants |
Article 11 and Sections 12.3(j) and 12.5(c) |
Item 17 |
|
x. Dispute resolution |
Article 16 and Sections 17.1,17.2, 17.3, 17.4, 17.5, 17.6 and 17.7; Section 7.2 of Option Agreement |
Item 17 |
(1) Unless otherwise noted, Section references are to the Franchise Agreement.
ITEM 10. FINANCING
Except as described below, neither we nor our Affiliates offer direct or indirect financing to franchisees. Neither we nor our Affiliates guarantee any note, lease or other obligation which you may enter into or incur.
As explained in Item 6 of this Offering Circular, one of our Affiliates (sometimes referred to in this Offering Circular as the "Sublessor") may sublease the premises for your Store to you. In <sti6fl>[that1 case, you must sign a standard form of Sublease Agreement included in Exhibit 10 to this Offering Circular. If you are an Entity, the Sublessor has the right to require that each of your Entity Owners guaranty payment and performance of your obligations under the Sublease Agreement by signing a Guaranty in the form attached to the Sublease Agreement.
You must pay rent and other amounts due under the Sublease Agreement in the same amounts as the rent and other amounts due from the tenant under the Master Lease of the premises from the landlord (Article 1 and Article 4 of the Sublease Agreement). You must always pay us or the Sublessor, as directed by the Sublessor, the full amount of all rental payments due. You may not deduct any amount for any claim you may have against us, the Sublessor or any of our other Affiliates. The rent due will vary with the location of the premises, and neither we nor our Affiliates can estimate that amount. Typically, monthly rental payments will be based on factors such as the current market value of similar properties, the perceived market value of your Store based <apen>[on1 its location and traffic patterns, sales volumes, and so forth.
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The Sublessor has the right to require you to pay a security deposit under the Sublease Agreement (Section 1.4(c) and Section 5.1 of the Sublease Agreement). Typically, a security deposit will be the equivalent of one month's rent.
The Sublease Agreement does not contain any prepayment penalties.
If you do not make your rental payments within 10 days of the due date or if you commit another breach of the Sublease Agreement or the Master Lease and do not remedy the breach within the time periods specified in the Sublease Agreement, the Sublessor has the right to re-enter the premises and relet the premises either with or without terminating the Sublease Agreement, and the Sublessor has the right to sue you to collect any unpaid rent or other amounts due (Section 12.2 of the Sublease Agreement). The Sublessor can collect our costs of enforcement and collection, including court costs and attorneys' fees (Section 13.2 of the Sublease Agreement). The Sublessor also has the right to charge a $100 late fee for each delinquent payment (Section 12.4 of the Sublease Agreement). In addition, late payments will bear interest from the due date until paid at a rate equal to the lesser of the highest applicable legal rate for open account business credit, or 1.5% per month (Section 12.3 of the Sublease Agreement).
Your breach of the Sublease Agreement and loss of possession of the premises is also a default under the Franchise Agreement and would permit us to terminate the Franchise Agreement (Section 13.1(f) of the Franchise Agreement).
In Section 8.7 of the Sublease Agreement, the Sublessor and you mutually waive our respective rights of recovery against each other and the "Related Parties" (as defined in Section 2.5(a) of the Sublease Agreement) for losses or damage insured against under the insurance required to be maintained under Article 8 of the Sublease Agreement, even if the loss or damage is caused by negligence.
In Sections 12.5 and 12.6 of the Sublease Agreement, you waive any right to claim that certain actions by the Sublessor, such as making payments on your behalf to cure a default, the Sublessor's waiver of a previous breach, or the Sublessor's course of conduct in accepting rental payments or partial rental payments during periods of default constitute a waiver of any of the Sublessor's legal rights. Even though you make a payment to us or our Affiliates accompanied by a statement that acceptance of the payment will constitute an accord and satisfaction of the full amount due, we or our Affiliates may accept the payment without the payment being deemed to be an accord and satisfaction and without waiving any of the Sublessor's rights to recover the balance of any amount due or to pursue other remedies for your breach of the Sublease Agreement.
Neither we nor our Affiliates have any past or present practice or intention to sell, assign or discount all or part of any financing arrangement to any third party. Neither we nor our Affiliates receive any payments for the placement of financing.
ITEM 11. FRANCHISOR'S OBLIGATIONS
Except as described below, neither we nor our Affiliates need provide any assistance to you. Our obligations relating to Pretzelmaker Stores. Before Opening:
Before you open your Store, we or our Affiliates will:
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1. We will approve or disapprove a site proposed by you for your Store within a reasonable period of time determined by us. We are not obligated to approve or disapprove a site within any specified time period. You must have selected the site for your Store and obtained our approval for the site before signing of the Franchise Agreement. We may refer you to a recommended broker in your geographic area to assist you in finding a site, although you are not required to use the broker. In evaluating a proposed site, we may inspect the site and may consider a variety of factors, including demographic characteristics, traffic patterns, parking, character of the neighborhood, competition from other dessert, snack food and bakery outlets in the area, the proximity to other businesses (including other Pretzelmaker Retail Outlets, the nature of other businesses in proximity to the site and other commercial characteristics (including the purchase price, rental obligations and other lease terms for the proposed site), and the size, appearance and other physical characteristics of the proposed site (Franchise Agreement, Section 4.1). Our approval of a site and any information given to you regarding proposed sites do not constitute an express or implied representation or warranty of any kind as to the suitability of the proposed sites for your Store or for any other purpose. Our approval indicates only that we believe that the particular site falls within our criteria as of the time period encompassing the evaluation. Application of site criteria that have been effective for other sites may not be predictive of the potential for any specific site and after our approval of a site, demographic and economic factors, including competition from other dessert, snack food and bakery businesses, included in or excluded from our site criteria could change, altering the potential of a site. The uncertainty and instability of the factors included in these criteria are beyond our control, and we will not be responsible for the failure of a site approved by us to meet expectations as to potential revenue or operational criteria (Franchise Agreement, Section 4.1).
2. One of our Affiliates will sublease your Store site to you or assign an existing lease for the site to you if the site approved by us for your Store is a site currently being operated by our Affiliates as a Pretzelmaker Store and you purchase the assets of that store, as explained in Item 5 of this Offering Circular. The terms of the Sublease Agreement are explained in Item 6 of this Offering Circular, under Note 8, and in Item 10 of this Offering Circular. If one of our Affiliates elects to assign an existing lease to you, you must obtain the release of our Affiliate from its obligations under the lease, and the lease must comply with the requirements in the Franchise Agreement for third party leases generally (Franchise Agreement, Section 4.2(b)). If one of our Affiliates is not currently leasing the site, you must negotiate an acceptable lease for the site from an independent third party, sign the Lease Addendum attached as Exhibit 8 to this Offering Circular, obtain our approval of the lease (Franchise Agreement, Section 4.2(a)). Neither we nor any of our Affiliates own the real property of any existing Pretzelmaker Stores.
3. If you are developing a new Pretzelmaker Store, we will provide you with prototypical plans and specifications, including requirements for exterior and interior materials and finishes, dimensions, design, image, interior layout, decor, fixtures, furnishings, equipment, color schemes and signs. We will provide these materials to you following your signing of the Franchise Agreement (Franchise Agreement, Section 4.3(a) and Item 8 of this Offering Circular).
4. We will provide you, through the Operations Manuals and other materials to be furnished or made available to you after you sign the Franchise Agreement, the standards and specifications for the fixtures, furnishings, equipment (which may in the future include computer hardware and software) and signs that we require and have approved as meeting our specifications and standards for quality, design, appearance, function and performance and which you must use (Franchise Agreement, Sections 4.4 and 5.2 and also Item 8 of this Offering Circular). At our option, we will furnish or make available to you these items in the form of paper copies, electronic copies on computer diskette or CD Rom, or electronic copies accessed through the internet or other communication systems.
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5. If you are developing a new store, we will provide our standard grand opening marketing and public relations programs and media and advertising materials to you at least 10 days before store opening, upon your payment to us for those materials, as explained in Item 5 of this Offering Circular (Franchise Agreement, Section 4.6).
6. You may not attend training until you have signed your franchise agreement. We will provide an initial training program for you (or if you are an Entity, for one of your Entity Owners) and for your initial store manager (if different from you). You (or one of your Entity Owners) and any manager of your Store must successfully complete all phases of the training program. All training occurs at our facilities in Salt Lake City, Utah, or any other location designated by us. The initial training program lasts <5>[2] days. We offer training classes as required, but no more often than monthly. In addition to the in-class training described below, a typical trainee will spend several hours during the course on recommended homework. We distribute training materials, which include our Operations Manuals, handouts and media presentations at various times during the training course. Al! of the training sessions are supervised or taught by Susan Stewart, our Training Specialist. Ms. Stewart has 5 years of experience working with franchisees in our training department, the last 2 years as a Training Specialist for our pretzel concepts. We may waive a portion of the initial training program or alter the training schedule if we determine that you (or your Entity Owners) and/or any store manager have had sufficient prior experience and/or training, or have had previous training within the franchise systems of one of our Affiliates. One of our Affiliates or an existing franchisee may also make an optional (or in the future a mandatory) 7-10 day in-store work experience available to you at its Pretzelmaker Store. Currently, neither we or our Affiliates, nor the host franchisee plan to charge you a fee for any in-store work experience you attend, but we have the right to do so in the future. In the case of a proposed Transfer, we will provide training to the proposed transferee and its attendees at our training facility in Salt Lake City or any other location we designate. The proposed transferee and its attendees may also be given the option of attending, or in the future required to attend, an in-store work experience at the Store being transferred. Currently, neither we or our Affiliates, nor the host franchisee plan to charge you or your transferee a fee for any training we provide or for the in-store work experience, but we have the right to do so in the future.
<Aa of the date of this Offering Circular, the initial>fThe Pretzel cover the following areas:
training program will
<S«bjeet>
<Location>
<Day 1>
<8:00a.m. > <9:00 a.m>
<Training Department
<Introduction of Trainers & Trainees History of Company
Discuss Program Outline-&-Expectations Pass'Out Pretzelmaker Knowledge Assessment Tour Facility & Training Kitchen>
<TrainingRoom-&----------Training
Kitchen>
<9:00 a.m. 12:00 p.m>
<Trainer>
<Prepping & Proofing Dough Introduction to Toppings Calibration of Drink Station Practicewith Training Ropes>
<Training Kitchen>
<1:00 p.m. > <5:00 p.m>
<Trainer>
<Care & Maintenance-Qven Rolling, Twisting & Baking Pretzels Specialty -Pretzels>
<Training-Kitchen>
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<S«bj«et>
<Pay 3>
<8:Q0 a.m. 12:00 p.m.>
<Director of Training>
<Introduction Budgets & P&L Human Resources Interviewing & Hiring Food Cost>
<Training Room>
<1:00 p.m. > <5:00 p.m>
<Trainer>
<Introduction to Baking & Prepping in Training Manual Sales Analysis Report Waste & Shrink Control
Hourly-Sales & Transaction Analysis Worksheet Inventory Loss Prevention &-Cash Handling>
<Training Room>
<Day 3>
<8:00 a.m. 13:00 p.m.>
<Trainer>
<Introduction to Customer-Service & Suggestive
Selling Film: The Guest
Introduction to CustomeF-Complaints Film: I'll Be Back Introduction to Sampling Film: Sampling & Suggestive Selling Gleaning and Sanitation Training & Motivation/Coaching Report Opening & Closing the Store>
<T-r-ainingRoom and Kttchen>
<1:00 p.m. > <5:00 p.m.>
<Marketing, Purchasing, Accounting and-Gonstrue-tion-Departments>
<Review Merchandising Guide/Communications
Marketing Department-Speaker Placing & Receiving Orders Defective Product Purchasing & Distribution-Speakers Accounts-Receivable Speaker Pretzelmaker- Construction Speaker>
<Training Room>
<&ay-4>
<3:00 p.m. Glese>
<Trainer>
<TrainingRoom-arid-Kitehen>
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97
<Bay-5>
<8:Q0 a.m. 12:00 p.m.>
<Trainer>
<Store Opening Operations (Mall)
■ Store Opening
■ Product Production
■ Customer Service ■-Saaapling-&-Suggestive-SeHing
■ Administrative Paperworks
<TrainingRoem-and Kitchen>
<l:00p.m. > <l:30p.m.>
<:Fraifler>
<Final Review & Questions on Knowledge Assessments
<3:raining-Room>
<l:30p.m. 3:00p.m.>
<:Frainer>
<Final-Kflowledge-Assessment>
<Training -Room>
<3:00p.m. > <5:00 p.m.>
<Trainer>
<Evaluations
Receive-In Store Assignments
Hand In:
■ Self Evaluations
»-Glass-Evaluations>
<Training Room>
<5:QQ p.m.>
<Training-Department>
<Graduation>
[ Time]
LautUl]
[Hours of] [Instruction]
[hQMHim]
TOav1 1
CL2S
fTrainii
[DaUl
[Review Homework: Franchisee Product Review. Lemonade. Breezers.
Purchasing Presentation. 1
\&s\
ri>av31
jework; Placing & Reviewing Orders-
Retail Team. Vendor Presentationl
GJ5]
[Training Facility]
[Dav 4]
Homework: Customer
Service]
m\
[Dav 5] [Financial Management. Loss
POS System Training
ri^i
fTraining Facilitvl
fPay 6 ] fTour of the Franchise
Center. Insurance Presentation-Construction Presentation. Credit/Deh|t Card Presentation*.
&25]
Franchisee
C/eqter]
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[
Xime]
[Hours of) [Instruction]
[Location)
Tn-Store Experience]
USaxI]
Graduation!
QLfi]
TTraininp Facility:
Local Pretzel Time
Storel
[Approximately three quarters of these hours are spent conductin) instruction. 1
lining in the
We provide training for you (or one of your Equity Owners, if you are an Entity) and the initial store manager (if different from you) free of charge; however, you <are responsible for >l"must pav lall travel and living expenses incurred during the training program. Store manager training is mandatory and must be completed before store opening. All training must be completed to our satisfaction and must be completed no more than 45 days before the opening of your Store. In rare cases, we may in our sole discretion, agree to provide training on-site. If we do so, we may charge a reasonable fee to cover our costs of providing any on-site training, including living expenses for our employees or agents who provide the training. Replacement store managers must also complete the initial training; however, you may be required to pay a tuition fee for that training, as explained in Item 6 of this Offering Circular (Franchise Agreement, Section 5.1). Replacement store managers are also responsible for living and travel expenses during training. Under no circumstances should you permit your Store to be managed by a person who has not been certified by us as having completed all phases of your training program to our satisfaction (Franchise Agreement, Section 5.1).
During Operation:
During the operation of your franchised business, we will:
1. Loan you one copy of our store operating standards manual and one copy of our product procedures manual (the "Operations Manuals"), as described in Section 5.2 of the Franchise Agreement. We have the right, at our option, to furnish or make available to you the Operations Manuals in the form of a paper copy, an electronic copy on computer diskette or CD Rom, or an electronic copy accessed through the internet or other communication systems. The Operations Manuals will contain mandatory and suggested specifications, standards and operating procedures that we require for your Store and information about your other obligations. We may modify the Operations Manuals to reflect changes in the image, specifications, standards, procedures, Pretzelmaker Products and "System Standards" (as defined in Section 1.2(n) of the Franchise Agreement and discussed in Section 7.1 of the Franchise Agreement). However, we will not make any addition or modification that will alter your fundamental status and rights as a franchisee. The Operations Manuals are confidential and will remain our property. You may not copy any part of the Operations Manuals, either physically or electronically. If your copy of the Operations Manuals is lost, destroyed or significantly damaged, we will provide you with a replacement copy, at our then applicable charge (Franchise Agreement, Section 5.2). The Tables of Contents of the Operations Manuals and the number of pages devoted to each subject as of <January 3. 2QQ1>[Decemher 31. 2005.] as well as the total number of pages in the Operations Manuals, are included in Exhibit 11 to this Offering Circular.
2. Provide training for any replacement store managers, as explained above (Franchise Agreement, Section 5.1). In addition, we may, at our option, conduct one seminar annually at a location
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to be determined by us, to discuss relevant business trends and share new information about the Pretzelmaker System. Attendance at the seminar is optional unless we give you at least 30 days written notice of the seminar, in which case you (or if you are an Entity, one of your Entity Owners) or your store manager must attend. We do not require that you attend any on-going training program more than once a year. We offer mandatory training without charge of a tuition or fee but you are responsible for any and all transportation and living expenses.
3. Furnish you guidance and operating assistance, at your request, about (a) methods, standards, specifications and operating procedures to be utilized in your Store; (b) purchasing required fixtures, furnishings, equipment, signs, materials, supplies, Pretzelmaker Products; and (c) advertising and promotional programs. Although we do not have an obligation to do so, we may advise you of operating problems of your Store that come to our attention. We may furnish or make available this guidance and assistance in the form of references to the Operations Manuals, bulletins and other written materials, electronic computer messages, telephonic conversations or consultations at our offices or at your Store. We will not be liable to you or any other person, and you waive all claims for liability or damages of any type (whether direct, indirect, incidental, consequential, or exemplary), on account of any guidance or operating assistance offered by us, except <to the cxtcnt>[jf] caused by our gross negligence or intentional misconduct. We will make no separate charge to you for the operating assistance and guidance we customarily provide to our franchisees generally. Occasionally, we may make special assistance programs available to you, however, for which you <will bo required to>[must] pay the daily fees and charges that we establish (Franchise Agreement, Section 5.3).
4. Provide you with the System Standards referred to above. We may modify the System Standards periodically and the modifications may obligate you to invest additional capital in your Store and to incur higher operating costs. We will not obligate you to invest additional capital at a time when the investment cannot in our reasonable judgment be amortized during the remaining term of the Franchise Agreement (Franchise Agreement, Section 7.1). We may furnish System Standards in the form of references to the Operations Manuals, bulletins and other written and electronic materials.
5. Provide advertising and marketing services to you as explained below.
We and our Affiliates currently utilize point of purchase printed advertising for the sale of Pretzelmaker Products, goods and services at Pretzelmaker Retail Outlets. We do not currently utilize electronic media such as radio or television. Our advertising is done at the local store level, although the materials used are produced for national distribution at all Pretzelmaker Retail Outlets including those owned and operated by our Affiliates. We may also conduct coupon promotions. In <sueh>[that] case, we may require you to accept coupons that are issued by us or our Affiliates and presented at your Store by your customers. You will receive certain compensation for these coupons when you tender them to us in accordance with our System Standards. We typically conduct coupon promotions on a regional basis. We currently use national advertising firms for the production of advertising materials.
We are not required to spend any particular amount on advertising in the area in which your Store is located.
You may use advertising materials prepared by you if the materials (a) comply with the requirements of Articles 8 and 10 of the Franchise Agreement, (b) are completely clear and factual and not misleading, and (c) conform to the highest standards of ethical marketing and promotion policies which we have the right to prescribe. Before use, you must submit to us for approval all press releases and policy statements and samples of all local advertising, marketing and related materials not prepared or previously approved by us. We will not unreasonably withhold our approval. You may not advertise your Store or the Pretzelmaker Products over the Internet (or any other form of electronic commerce) or
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establish a related World Wide Web Site without our prior written consent. In addition, you may only use pamphlets, brochures, cards or other promotional materials offering free Pretzelmaker Products, if prepared by us, unless otherwise approved in advance by us. However, we will give favorable consideration to your use of free product cards developed by you, if the cards clearly state that they may only be redeemed at stores owned by you. If we do not give you written approval of any advertising or other promotional materials within 15 days from the date of receipt by us of the materials, we will be deemed to have disapproved the submission. You may not use any advertising, marketing or related materials that we have disapproved. You must list your Store in the principal telephone directories distributed in your metropolitan area (Franchise Agreement, Section 9.2).
You must pay to us a weekly marketing fee of 1% to 3% of your Store's Gross Revenues. The marketing fee for <2OO5>[20061 is 1.5% of Gross Revenues. For <3QQ6>[20071 and future years, we will notify you annually of the exact percentage you must pay as a marketing fee, except for any year in which the percentage is to remain unchanged from the preceding year. As the result of previous franchise agreements we entered into in the past, other franchisees in your market area may pay a higher or lower percentage of Gross Revenues as a marketing fee. You must pay marketing fees weekly by pre-authorized electronic bank transfer, at the same time that you pay continuing fees (Franchise Agreement, Sections 6.3,6.4 and 9.1(a)). Pretzelmaker Stores owned by us or our Affiliates in the same market area as you will contribute marketing fees on the same basis as you (Franchise Agreement, Section 9.1(a)).
As of the date of this Offering Circular, we do not form, organize, maintain or otherwise make use of advertising cooperatives, nor do we require you to join one. We have the right, however, in the future to form, organize, maintain and otherwise make use of local or regional advertising cooperatives. As< further> described in Item 6 of this Offering Circular, if a local or regional advertising cooperative is formed or organized for the market that includes your Store, we have the right to require you to participate in and contribute to the advertising cooperative an amount of up to 3% of your Gross Revenues, which is in addition to your marketing fees and any lease-required advertising fees. Each <Mrr. Fieldr. Cno1cie>[Pretzelmqfcpr] Store located within an advertising cooperative, including <Mro. Fields Cookie>[Pretzelmaker] Stores owned by us or our Affiliates, will be a member of the advertising cooperative and have one vote per Store. Each advertising cooperative will be required to adopt written governing documents that meet our approval. A copy of the governing documents for your local advertising cooperative (if one has been established) is available upon your request. The members of each advertising cooperative and their elected officers will be responsible for all administration of the advertising cooperative. Each advertising cooperative will engage the services of a professional advertising agency, public relations firm or similar service that meets with our approval and has expertise in their market. Each advertising cooperative will be required to have an independent CPA prepare quarterly and annual financial statements, which will be made available to us and all <Mrs, Fioldo ftflkie>\Pretzelmaker] Store franchisees in the advertising cooperative. We have the right to require local and regional advertising cooperatives to be formed, changed, dissolved or merged.
We will administer the marketing fees we collect and direct all marketing programs financed by the marketing fees, and have the right to determine the creative concepts, materials and endorsements used and the geographic, market and media placement and allocation. We have the right to use the marketing fees we collect to meet any and all costs of maintaining, administering directing and preparing advertising materials and marketing programs, including: purchasing direct mail and other media marketing; employing advertising, promotion and marketing agencies; supporting public relations; conducting market research; implementing and testing Trade Dress and design prototypes; and other advertising, promotion and marketing activities. We have the right, at our option, to use marketing fees to prepare, furnish and/or offer for sale to you advertising, marketing and promotional formats and materials, as <further >described below.
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We will account for the marketing fees we collect separately from our other funds, although we are not required to establish a separate marketing fund or bank account for <sueh>[lb2S] fees. We have the right to use the marketing fees we collect to defray the salaries, employee benefits, administrative costs and overhead we or our Affiliates may incur in activities related to our marketing programs, including conducting market research, preparing advertising, promotion and marketing materials and collecting and accounting for the marketing fees we collect. On your prior written request made within the first quarter of any calendar year, we will make available to you no later than 120 days after the end of each calendar year, an annual statement of moneys collected and costs incurred for our marketing programs. No independent audit is required< in oonnoction>[J with this statement or the marketing fees we collect. We have the right in the future to create a marketing fund to be operated by us or through another form of entity separate from us (Franchise Agreement, Section 9.1(c)). Any marketing fees we collect but do not spend in the fiscal year in which they were accrued will be carried forward to the following fiscal year.
We intend to use the marketing fees we collect to maximize recognition of the Pretzelmaker Trademarks as well as to increase patronage of Pretzelmaker Stores. Although we will endeavor to utilize the marketing fees to develop advertising and marketing materials and programs and to place advertising that will benefit all Pretzelmaker Stores, we cannot ensure you that our expenditure of marketing fees in or affecting any geographic area will be proportionate or equivalent to the marketing fees paid to us by Pretzelmaker Stores operating in that geographic area or that any Pretzelmaker Store will benefit directly or in proportion to the marketing fees it pays to us from the development of advertising and marketing materials or the placement of advertising (Franchise Agreement, Section 9.1(d)).
We may provide you with copies of advertising, marketing and promotional formats and materials for use in your Store, which we have prepared. You are only required to pay the shipping and handling costs for these items. We may also offer you the option of purchasing other advertising, marketing and promotional formats and materials prepared by us that are suitable for use at local Pretzelmaker Stores. If you elect to purchase such items from us, we will provide them to you at our cost plus a reasonable mark-up and any shipping, handling and storage charges. Finally, we may develop and market special mandatory promotional items for Pretzelmaker Stores. You may be required to maintain a representative inventory of these promotional items to meet public demand. We will make these items available to you at our cost plus a reasonable mark-up and any shipping, handling and storage charges. You will have the right to purchase alternative promotional items if the alternative items conform to the specifications and quality standards we establish and you obtain our prior written approval. All payments to us for the items described in this paragraph are nonrefundable and cannot be applied against the weekly marketing fees that you are required to pay to us, as further described in Item 6 of this Offering Circular and above (Franchise Agreement, Section 9.3).
In <3QQ4r>[2005.] marketing fee contributions have been used as follows: (i) prodiictinn/<merchandinin^ 49%: and>[mertia: 50%i] (ii) administration: <51%. In 2001.>f49%: and other expenses, including costs related to new store design and trade show fees: 1%. In 2005.1 we
did not spend any of the marketing fee contributions that we received for advertising that was primarily a solicitation for the sale of franchises, nor do we intend to do so in <2QQ5r>r2006.1
In addition to the marketing fees you pay to us, you must also spend on advertising any amount required under your lease or sublease. Those amounts typically vary from lease to lease, and therefore, franchisees are not obligated to spend the same amount on local advertising and marketing (Franchise Agreement, Section 9.2). If you are developing a new Pretzelmaker Store, you must also conduct a grand
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opening advertising and promotion program as explained above in this Item 11 and in Item 5 of this Offering Circular.
In addition to the information provided in this Item 11 about advertising and marketing, you should review the material in Items 6, 8 and 9 of this Offering Circular.
<6t In operating your Store, you must purchase-and use the number of-eleetronio cash registers necessary for the size of your store. Currently, we-do-not require that you-purchase a particular-brand-or-model of electronic cash register, although any eleotronio cash register you use must be capable collecting and generating sales data and category totals and transaction count totals. In the future, you will be responsible for any and all upgrades to your electronic cash registers, as we determine to be necessary. In addition, we have the right to independently acooss the information and data you collect
and gather.-----We currently require that you have access to the Internet in order to submit reports,
including Gross Revenue reports and financial statements, for your Store to us electronically via the Intcrnet>
6. <7^-As of the date of this Offering Circular, we <do not require you to use any computer
hardware or softwaro>[require vou to use the Treatware point of sale s (Innovative Computer Systems^ as the point of sale system in your Store. In addition, we
Professional. PC Anywhere 11.5 Software and a Dell Photo Printer - A9221 in the operation of your
Store<. although vou munt have the capability to aoocoo the Intemot an described in Note 6 above>r. The
Dell Computers also act as vour registers, operating with the ICS Treatwan
currently require that vou have wireless Internet access in vour Store
customers and in order to submit reports for vour Store, includim
financial statements, to us electronically, and to allow us to access information directh
POS system. In addition, we require vou to establish and maintain a valid email address and
authorize us to communicate with vou hv that method at the address] Currently, you may use any
Internet service provider <and any computer hardware and software >that allows you to access the
system, and wireless Internet access. }We have the right<, howovor,> to require you in the future to purchase, install and use[ different] computer hardware and software which meet our specifications and standards, as modified by us. You must purchase, install and begin using any required computer hardware and software in your Store within 60 days of our notice to you. You will be allowed to purchase any required computer hardware and software from any supplier who can satisfy our standards and specifications.[J The principal function of any required computer hardware and software will be to facilitate the reporting requirements under the Franchise Agreement. <Ao of the date of this Offering Circular?-we have not established any specifications-or- standards for computer hardware or software.-Consequcntly, we arc unable to designate a brand or type of computer that moots our specifications and standards. >We have the right to require you, at your sole expense to upgrade any required computer hardware and software<, once ostablishcd,> to meet our then<->[=]current standards and specifications. There is no limitation on the frequency and cost of this requirement. We also have the right to independently access the information and data you collect and gather using any required computer hardware and software.
<^>[L] If you are developing a new Pretzelmaker Store, we estimate that there will be an
interval of between 60 to 180 days between the signing of the Franchise Agreement and the opening of your Store. The interval may vary depending upon factors such as the weather, the location and condition of the site, your ability to obtain any necessary financing and building, zoning or other permits and approvals, construction delays, and so forth. If you are acquiring the assets of an existing Store, the
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interval between your signing of the Franchise Agreement and opening your Store is typically 30 to 120 days. Also, you may not open your Store for business until: (a) we approve the store for opening; (b) pre-opening training of you and the store personnel has been completed to our satisfaction; (c) the initial franchise fee and all other amounts then due to us have been paid in full; (d) the lease documentation has been signed and all other documentation for development of your Store has been completed; and (e) we have been furnished with copies of all required insurance policies or other evidence of insurance coverage and payment of premiums as we require. Subject to your compliance with these conditions, you must open your Store for business within 180 days after the Franchise Agreement is signed or on or before the date specified in any lease or sublease for the Store premises, whichever is earlier (Franchise Agreement, Section 4.5). Because Pretzelmaker Franchises are granted for a specific location and the specific location is designated in the Franchise Agreement before it is signed, the Franchise Agreement does not have any provision that addresses the consequences if a site is not agreed upon.
ITEM 12. TERRITORY
Right Granted to Pretzelmaker Franchisees:
Franchises are granted for a specific location and are NOT exclusive. You may not operate your Store at any other site without our prior written consent. In addition, you may only offer and sell finished, approved Pretzelmaker Products over the counter to retail customers from your Store, and may not sell approved Pretzelmaker Products or any materials, supplies, or inventory bearing the Pretzelmaker Trademarks at any other location or through any alternative channel of distribution without our prior written consent. Alternative channels of distribution include the operation of a food cart or kiosk, sales through the Internet (or any other form of electronic commerce), and mail order and telephone sales. You may, however, offer and sell approved Pretzelmaker Products as part of off-site catering events and may offer samples of approved Pretzelmaker Products at or directly in front of your Store.
You may not relocate your Store unless or you relocate your Store as a result of condemnation, the exercise of a relocation right by your landlord or for some other reason approved by us in writing (Franchise Agreement, Section 4.7). If you lose the right to possess the premises where you are operating your Store and do not have the right to relocate, we have the right to terminate your Franchise Agreement. Also, as a franchisee, you do not have any right to acquire additional Pretzelmaker Stores or franchises.
As <furthcr >described in Items I, 5 and 7 of this Offering Circular, we may grant you the right to sell some or all of the products that you produce at the Host Store from a Non-Baking Kiosk, provided you enter into our Non-Baking Kiosks Addendum with us. As <further >described in the Non-Baking Kiosks Addendum, you may only operate a Non-Baking Kiosk< in eonnection> with, and in the same shopping mall or center as, the Host Store. Your right to operate a Non-Baking Kiosk, however, always will be subject to the primary landlord's consent and any conditions it imposes. If the landlord withdraws its consent, you must stop operating the Non-Baking Kiosk immediately. Except as provided in the Non-Baking Kiosks Addendum, the Franchise Agreement controls your operation of Non-Baking Kiosks. You may not begin operating a Non-Baking Kiosk until we notify you in writing that it meets our standards and specifications. We may terminate the Non-Baking Kiosks Addendum if we decide to establish or allow you or others to establish other Mrs. Fields Cookie Stores in the same shopping mall or center as the Host Store. (See Item 17.)
Rights Reserved to Us and Our Affiliates
We and our Affiliates have the right to do the following: (1) franchise, license and/or own and operate Pretzelmaker Retail Outlets (including Pretzelmaker Stores), Pretzel Time Stores, Hot Sam
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Pretzel Stores, Mrs. Fields Cookie Stores, Mrs. Fields Bakery Cookie Cafes, Great American Cookie Company Stores, Original Cookie Company Stores, <and->TCBY Stores<-am*s->[. Test Stores and ypyana Stores ]at any locations, including locations near your Store, and on any terms and conditions as we or our Affiliates deem appropriate; (2) sell and license and franchise others to sell Pretzelmaker Products and any other products or services under the Pretzelmaker Trademarks, or any trade names, trademarks, service marks, trade dress or other commercial symbols of our Affiliates, through alternative channels of distribution (including Internet, mail-order and telephone sales, the sale of refrigerated ready-to-bake pretzel dough to retail outlets, the sale of refrigerated ready-to-bake cookie dough and proprietary batter, dough and other ingredients for making cookies to retail outlets, and the sale of frozen yogurt, frozen yogurt mix, premium ice cream and ice cream specialty products to a variety of customers, including hotels, restaurants, clubs, independent ice cream stores, department stores, supermarkets and grocery stores); and (3) franchise, license and/or own and operate businesses (including dessert and snack food businesses) at any locations, including locations near your Store, and on any terms and conditions as we or our Affiliates deem appropriate, or distribute products or services through alternative channels of distribution which are similar to the Pretzelmaker Products under trade names, trademarks, service marks, trade dress or other commercial symbols other than the Pretzelmaker or those owned by us or our Affiliates. These activities may compete with you.
Further, as discussed in Item 1, we or one of our Affiliates may acquire or actively seek to acquire businesses or franchise systems that are your competitors and <su6h>fthose] competitors may have locations near your Store, including locations within the same shopping mall. In addition, as discussed in Item 1, we or one of our Affiliates may enter into co-branding arrangements. These activities may compete with you.
We enter into licensing and franchising arrangements with other individuals and entities, granting those individuals and entities exclusive territorial rights which may restrict your rights to locate your Store in certain locations. Any restrictions in effect will be explained to you as part of the site selection process for your Store.
ITEM 13. TRADEMARKS
Under the Franchise Agreement, we license you to use the Pretzelmaker Trademarks, as defined in Exhibit 1, in the operation of your Store. The following is a summary of the principal Pretzelmaker Trademarks, all of which are registered on the Principal Register of the U.S. Patent and Trademark Office.
|
Service Mark |
Registration No. |
Registration Date |
Comments |
|
PRETZELMAKER WORLD'S BEST SOFT PRETZEL (and Design) |
1,818,250 |
January 25, 1994 |
Renewed January 25,2004 |
As< iurthcr> described in Item 1 of this Offering Circular, as part of the Contributions which took place on March 16, 2004, PMI contributed the Pretzelmaker Trademarks to MFFB and, ultimately, to us, the new owner of the Pretzelmaker Trademarks.
There are no currently effective material determinations of the U.S. Patent and Trademark Office, trademark trial and appeal board, the trademark administrator of any state, or any court, nor are there any pending interference, opposition or cancellation proceedings or any pending material litigation,
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involving the registered Pretzelmaker Trademark described above. There are no agreements currently in effect which significantly limit our rights to use or franchise the use of the Pretzelmaker Trademark.
Your right to use the Pretzelmaker Trademarks is derived solely from the Franchise Agreement and is limited to your conduct of business in compliance with the Franchise Agreement and all applicable standards, specifications, operating procedures and rules that we require. Your unauthorized use of the Pretzelmaker Trademarks will constitute a breach of the Franchise Agreement and an infringement of our rights in the Pretzelmaker Trademarks. Your use of the Pretzelmaker Trademarks and any goodwill established by your use will benefit us and our Affiliates exclusively. The Franchise Agreement does not confer any goodwill or other interests in the Pretzelmaker Trademarks on you other than the right to operate your Store in compliance with the Franchise Agreement. All rights in and goodwill from the use of our trademarks accrue solely to us and our Affiliates. All provisions of the Franchise Agreement applicable to the Pretzelmaker Trademarks will apply to any additional proprietary trade and service marks and commercial symbols that we authorize for use by you in the future.
You must use the applicable Pretzelmaker Trademarks as the sole identification of your Store, and you must identify yourself as the independent owner in the manner we require. You may not use any Pretzelmaker Trademark as part of any corporate or trade name or with any prefix, suffix or other modifying words, terms, designs or symbols (other than logos franchised to you under the Franchise Agreement), or in any modified form, nor may you use any Pretzelmaker Trademark in performing or selling any unauthorized services or products or in any other manner not expressly authorized in writing by us. You may not use any Pretzelmaker Trademark as part of an electronic mail address or on any sites on the Internet or World Wide Web. You may not use or register any of the Pretzelmaker Trademarks as an Internet domain name. You must display the applicable Pretzelmaker Trademarks prominently at your Store, on supplies or materials designated by us, and on packaging materials, forms, labels and advertising and marketing materials. You must display all applicable Pretzelmaker Trademarks in the manner we require, and you must use the registration symbol 'V'<-> in using any of the registered Pretzelmaker Trademarks. You must refrain from any business or marketing practice which may be injurious to our business and the good will associated with the Pretzelmaker Trademarks or Pretzelmaker Stores.
We have the right to require you to modify or discontinue use of any Pretzelmaker Trademark or use one or more additional or substitute trade or service marks if we determine that it becomes advisable at any time. In< suoh> case, you must comply with our directions to modify or discontinue the use of the Pretzelmaker Trademark or use one or more additional or substitute trade or service marks within a reasonable time after notice from us. We will reimburse you for your reasonable direct expenses in modifying or discontinuing the use of a Pretzelmaker Trademark and substituting a different trademark or service mark. However, we are not obligated to reimburse you for any loss of goodwill associated with any modified or discontinued Pretzelmaker Trademark or for any expenditures made by you to promote a modified or substitute trademark or service mark.
You must immediately notify us of any apparent infringement of or challenge to your use of any Pretzelmaker Trademark or claim by any person of any rights in any Pretzelmaker Trademark, and you must not communicate with any person other than us or our counsel about the infringement, challenge or claim. We or our Affiliates have the right to take the action we deem appropriate and control exclusively any litigation, U.S. Patent and Trademark Office proceeding or any other administrative or court proceeding concerning any Pretzelmaker Trademark. You must sign any instruments and documents, render assistance and do those things as, in the opinion of our legal counsel, may be necessary or advisable to protect and maintain our interests in any litigation or U.S. Patent and Trademark Office or other proceeding or otherwise to protect and maintain our interests in the Pretzelmaker Trademarks.
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We will indemnify you against and reimburse you for all damages for which you are held liable in any proceeding arising out of your authorized use of any Pretzelmaker Trademark and for all costs you reasonably incur in defending any claim brought against you or any proceeding in which you are named as a party, if you have timely notified us of the claim or proceeding and have otherwise complied with the requirements of the Franchise Agreement. At our option, we and our Affiliates are entitled to defend and control the defense of any proceeding arising out of your authorized use of any Pretzelmaker Trademark.
To our actual knowledge, there are no superior prior rights or infringing uses which could materially affect your use of any Pretzelmaker Trademark in any state.
ITEM 14. PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION
Except as noted below, we and our Affiliates do not own any patents or copyrights which are material to the Franchise.
We claim copyrights in the Operations Manuals, construction plans, specifications and materials, printed advertising, promotional, sales, training and management materials and in related items you will use in operating your Franchise. We have not registered these copyrights with the U.S. Registrar of Copyrights. You may use the Operations Manuals and other materials during the term of the Franchise Agreement.
There are currently no effective determinations of the U.S. Copyright Office or any court regarding any of the copyrights. There are no agreements currently in effect which significantly limit our rights to use or franchise the copyrighted materials. Also, there are no superior prior rights or infringing uses actually known to us which could materially affect your use of the copyrighted materials in any state.
Your right to use the copyrights is derived solely from the Franchise Agreement and is limited to your conduct of business in compliance with the Franchise Agreement and all applicable standards, specifications, operating procedures and rules that we require. Your unauthorized use of the copyrights will constitute a breach of the Franchise Agreement and an infringement of our rights in the copyrights. Your use of the copyrights and any goodwill established by your use will benefit us exclusively. The Franchise Agreement does not confer any goodwill or other interests in the copyrights upon you other than the right to operate your Store in compliance with the Franchise Agreement. All rights in and goodwill from the use of the copyrights will accrue solely to us. All provisions of the Franchise Agreement applicable to the copyrights will apply to any additional copyrighted materials that we authorize for use by you in the future.
We have the right to require you to modify or discontinue use of any of the materials in which we claim copyrights if we determine that it becomes advisable at any time. In <sueh>[that1 case, you must comply with our directions to modify or discontinue the use of those materials within a reasonable time after notice from us. We will reimburse you for your reasonable direct expenses in modifying or discontinuing the use of those materials and in substituting different materials specified by us. However, we are not obligated to reimburse you for any loss of goodwill associated with the modification or discontinuation of any materials in which we claim copyrights or for any expenditures made by you <*h-conneotion >with your use of those materials.
You must immediately notify us if you learn that any person may be using our copyrighted materials without our consent or authorization. You must also immediately notify us of any challenge to your use of any copyright or claim by any person of any rights in any copyright. You must not
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communicate with any person other than us or our counsel about any challenge or claim to any copyright. We and our Affiliates have the right to take the action we deem appropriate and the right to control exclusively any litigation, U.S. Copyright Office proceeding or any other administrative proceeding concerning any copyright. You must sign any instruments and documents, render assistance and do those things as, in the opinion of our legal counsel, may be necessary or advisable to protect and maintain our interests in any litigation or Copyright Office or other proceeding or otherwise to protect and maintain our interests in the copyrights.
We will compensate and reimburse you for all damages for which you are held liable in any proceeding arising out of your authorized use of any copyright and for all costs you reasonably incur in defending any claim brought against you or any proceeding in which you are named as a party, if you have timely notified us of the claim or proceeding and have complied with your obligations under the Franchise Agreement. At our option, we or our Affiliates are entitled to defend and control the defense of any proceeding arising out of your use of any copyright.
We also own the Confidential Information and claim copyrights in the Confidential Information. The Confidential Information includes trade secrets and is our proprietary information. Portions of the Confidential Information required in the operation of your business will be communicated to you. However, you will not acquire any interest in any Confidential Information, other than the right to utilize Confidential Information disclosed to you in operating your Store during the term of the Franchise Agreement. The use or duplication of any Confidential Information in any other business will constitute an unfair method of competition and a violation of your Franchise Agreement. We only disclose the Confidential Information to you on the condition that you agree:
(i) Not to use Confidential Information in any other business or capacity;
(ii) To maintain the absolute confidentiality of Confidential Information during and after the term of the Franchise Agreement;
(iii) Not to make unauthorized copies of any portion of Confidential Information disclosed in written or other tangible form; and
(iv) To adopt and implement all reasonable procedures that we require to prevent unauthorized use or disclosure of Confidential Information, including restrictions on disclosure of Confidential Information to your employees and to comply with requirements that we may impose that certain key employees sign confidentiality agreements as a condition of employment.
We and our Affiliates will own and have the perpetual right to use and authorize other Pretzelmaker Stores to use, and you must fully and promptly disclose to us, all ideas, concepts, formulas, recipes, methods and techniques about the development or operation of a pretzel bakery, dessert or retail snack food business conceived or developed by you or your employees during the term of the Franchise Agreement. You must not, however, test, offer or sell any new products without our prior written consent.
ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS
We recommend that you participate personally in the direct operation of your Store, although you are not specifically obligated to do so by the Franchise Agreement. However, you must either manage your Store yourself, or use a full time "on premises" manager. The manager need not have an ownership interest in a franchisee that is an Entity. [Both vou (or one of vour Entity Owners, if vou
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Intity^ and ]the manager of your Store must be certified by us as having completed all phases of our training program to our satisfaction and must participate in all other activities required to open your Store. We also require all replacement managers to satisfactorily complete all phases of our training program.
If you are an Entity, each Entity Owner must guarantee your obligations under the Franchise Agreement by signing the Guaranty attached to the Franchise Agreement, a copy of which is included in Exhibit 3.
[During the term of the Franchise Agreement, vou (or if you are an entity, an Entity Owner
English language to adequately communicate and correspond with us and vour employees. customers, manufacturers, suppliers, vendors and distributors, and to effectively manage and/or oversee the management of vour Store. During the term of the Franchise Agreement, vou for if vou are an entity, an Entity Owner who manages or oversees the management of vour Stored also
condition of entering into a Franchise Agreement, yob (or if yon are an gntity. the Entity Owner
who will manage or oversee the management of vour Stored will he required to successfully pass a workplace appraisal test in the English language, and to provide proof satisfactory to us of vour for vour Entity Owner's! authority to work in the U.S. without sponsorship hv us or one of our
We have the right to require each manager of a Pretzelmaker Store to sign a confidentiality agreement in our favor as a condition of employment as a store manager. In addition, we have the right to require each manager of a Pretzelmaker Store to agree to the non-competition covenants described in Item 17 of this Offering Circular.
You and each other Restricted Person will be bound by the non-competition covenants described in Item 17.q. and Item 17-r. of this Offering Circular.
ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
In operating your Store, you may offer for sale only those Pretzelmaker Products that we approve for you to sell at the Premises. The Operations Manuals explain the Pretzelmaker Products that you initially are authorized to offer at your Store. In the future, we have the right to change or add to the Pretzelmaker Products that you are authorized to offer at the Premises. We typically base our determination of whether to allow you to offer an expanded line of Pretzelmaker Products on our evaluation of your compliance, over time, with the System Standards described in Section 7.1 of the Franchise Agreement, with particular emphasis on those related to quality. We do not base our determinations on sales or marketing quotas, volumes or results. You should also refer to Item 8 of this Offering Circular for information <with respect toMregardingl required purchases of certain items.
Your lease may also impose other obligations or restrictions <with respect to>[oji] the types of products that you may offer from your premises, and you must comply with those restrictions and obligations even if they would prevent you from offering certain Pretzelmaker Products that we have approved for you to offer.
There is no limitation on our right to require you to offer or refrain from offering certain products and services, except that we will not obligate you to invest additional capital at a time when the investment cannot in our reasonable judgment be amortized during the remaining term of the Franchise
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Agreement. You must offer all Pretzelmaker Products that we authorize you to sell. However, we are not required to authorize you to sell all available Pretzelmaker Products.
You are generally not restricted in the retail customers to whom you may sell products and services. However, without our prior written consent, you may not offer Pretzelmaker Products approved for sale or services of your Store or any materials, supplies, or inventory bearing the Trademarks at any site other than your Store premises (other than catering events and the offering of Pretzelmaker Product samples at or directly in front of your Store) or through any alternative channel of distribution (as<-furthor>[J described in Item 12). In addition, you may not offer for sale any materials, supplies or inventory used in the preparation of any of the Pretzelmaker Products. You may only sell finished Pretzelmaker Products that have been approved for sale at your Store and only to retail customers, and you may not sell any Pretzelmaker Products to any person or entity purchasing the Pretzelmaker Products for resale. In addition, you may not use the site of your Store for any purpose other than the operation of a Pretzelmaker Store.
You may use only pamphlets, brochures, cards or other promotional materials offering free Pretzelmaker Products that we have prepared, unless otherwise approved by us in advance. However, we will give favorable consideration to your use of free product cards developed by you, if the cards clearly state that they may only be redeemed at Pretzelmaker Stores owned by you.
We and our Affiliates will have the perpetual right to own and use and authorize other Pretzelmaker Stores to use, and you will fully and promptly disclose to us, all ideas, concepts, formulas, recipes, methods and techniques about the development or operation of a bakery, dessert or snack food business conceived or developed by you or your employees during the term of your Franchise Agreement. You may not test, offer, or sell any new products without our prior written consent.
ITEM 17. RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION
The following table lists important provisions of the Franchise Agreement and other related agreements pertaining to renewal, termination, transfer and dispute resolution. You should read these provisions in the Franchise Agreement and other agreements attached to this Offering Circular.
|
Provision |
Section in Franchise Agreement(l) |
Summary(l) |
|
a. Term of the Franchise Agreement |
Sections 3.1; Sections 3.1, 3.2 and 3.4 of Sublease Agreement; |
Initial term is 7 years. Unless renewed, Franchise Agreement will terminate on expiration of initial term. Unless otherwise terminated under its terms, the term of the Sublease Agreement will continue until expiration of Franchise Agreement or one day before termination of Master Lease. |
|
b. Renewal or extension of the term |
Section 3.2; Renewal Addendum to Franchise Agreement; Term Pre- |
You have the right to renew for 1 additional 7-year term if you are |
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|
Provision |
Section in Franchise Agreement(l) |
Summary(l) |
|
Purchase Addendum; Section 3.1(b) of Sublease Agreement |
not in default. In certain circumstances, you may also be required or allowed to pre-purchase additional term under the Franchise Agreement. If you are not in default of Sublease Agreement and Master Lease would expire before the Franchise Term ends and Master Lease contains renewal options, Sublessor will exercise the renewal options at your request. |
|
|
c. Requirements for you to extend or renew |
Section 3.2 |
You give us at least 180 days prior notice; you sign new Franchise Agreement (which may include different or additional fees and performance criteria) and our then current Renewal Addendum (which will establish that you have no additional renewal rights and contain a general release); at our request, you refurbish and remodel the premises; you have complied with all agreements with us during the initial term; you have satisfied all monetary obligations; you retain the premises for the renewal term; and follow our then current renewal process, which may require additional training and delivery of certain financial statements and records. |
|
d. Termination by you |
Section 13.4 |
You have the right to terminate if we are in default. |
|
e. Termination by us without cause |
Section 13.3; Section 6.1 of Asset Purchase Agreement; Paragraph 7.1 of Construction Agreement |
We have the right to terminate if you fail to satisfactorily complete the required training or if you fail to begin your Store operations within 180 days after signing of Franchise Agreement; see also "17.a." above. MFOC has the right to terminate Asset Purchase Agreement if you do not enter into the Franchise |
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|
Provision |
Section in Franchise Agreement(l) |
Summary(l) |
|
Agreement. |
||
|
f. Termination by us with cause |
Sections 13.1 and 13.2; Section 12.2 of Sublease Agreement |
We have the right to terminate if you are in default of Franchise Agreement or any other agreement with us or our Affiliates; see also "17.o." below. Sublessor has the right to terminate Sublease Agreement if you are in default. |
|
g. "Cause" defineddefaults which can be cured |
Sections 13.1 and 13.2; Section 12.1 of Sublease Agreement |
Curable defaults: (1) failure to comply with certain System Standards and health requirements must be cured within 48 hours of notice; (2) failure to make payments may be cured within 10 days of notice of nonpayment; and (3) any other default of Franchise Agreement or any other agreement with us or our Affiliates not listed above or in "17.h." below may be cured within 30 days after written notice of default. Involuntary bankruptcy or other involuntary insolvency events are defaults if not discharged within 60 days. Curable defaults under Sublease Agreement: (1) monetary defaults may be cured within 10 days of due date; (2) involuntary bankruptcy or other involuntary insolvency events are defaults if not discharged within 60 days; and (3) any other default of Sublease Agreement not listed above or in "17.h." below may be cured within 15 days after written notice. |
|
h. "Cause" defineddefaults which cannot be cured |
Sections 13.1 and 13.2; Section 12.1 of Sublease Agreement |
Non-curable defaults: (1) voluntary bankruptcy or other voluntary insolvency events; (2) unauthorized transfers; (3) material misstatements or omissions; (4) you are convicted or plead no contest to a felony; (5) you engage in detrimental conduct; (6) unauthorized use of the |
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|
Provision |
Section in Franchise Agreement(l) |
Summary(l) |
|
Pretzelmaker Trademarks or Confidential Information; (7) abandonment of or failure to actively operate your Store; (8) you are in breach of your obligations under your lease or sublease of the Store premises or you lose the right of possession of your Store premises; (9) failure to pay uncontested taxes; (10) repeated defaults, even if cured; or (11) you default on any financing obligations. Non-curable defaults under Sublease Agreement: (1) voluntary bankruptcy or other voluntary insolvency events; (2) unauthorized assignment of Sublease Agreement or granting of subleases<-thereunder>; (3) abandonment of or failure to actively operate your Store; (4) breach of Master Lease or Franchise Agreement; or (5) repeated defaults, even if cured. |
||
|
i. Your obligations on termination/nonrenewal |
Sections 6.5, 7.8, 8.2, 8.3, 10.5, 10.8,12.3(1), 14.2, 14.3, 14.4, 14.6,14.7, 15.6 and Article 18; Sections 3.2 and 3.3 of Sublease Agreement |
Pay all amounts due, including any late charges and interest; pay termination fee; continue to honor all guarantees, releases and waivers; retain records and permit audits; not disclose Confidential Information; discontinue use of Pretzelmaker Trademarks; deliver to us all signs, equipment, supplies and materials displaying the Pretzelmaker Trademarks; cancel any fictitious or assumed name certificates; make required changes to premises; assign telephone listings; dispose of non-returnable supplies and materials; honor indemnification requirements; and continue to honor and be bound by general provisions; see also "17.o." and "17.r." below. Upon termination or nonrenewal of Sublease Agreement, you must surrender the Store premises and |
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|
Provision |
Section in Franchise Agreement(l) |
Summary(l) |
|
repair damage caused by removal of personal property. |
||
|
j. Assignment of contract by us |
Section 12.1; Article 6 of Option Agreement; Section 11.3 of Sublease Agreement |
No restriction on our right to assign Franchise Agreement and Option Agreement, Sublessor's right to assign Sublease Agreement and MFOC's right to assign Asset Purchase Agreement. |
|
k. "Transfer" by you definition |
Section 1.2(p); Sections 11.1 and 11.2 of Sublease Agreement |
Includes transfer of Franchise Agreement or ownership change. No assignment of Sublease Agreement or sublease of Store premises without Sublessor's consent. |
|
1. Our approval of transfer by you |
Sections 4.7, 12.2, 12.3 and 12.4; Assignment, Assumption and Consent; Section 8.1 of Asset Purchase Agreement; Sections 11.1 and 11.2 of Sublease Agreement |
We have the right to approve all transfers but will not unreasonably withhold approval if specified requirements are met. Transfers to a wholly-owned corporation do not require our consent. You may not, however, transfer interest in Franchise Agreement during any period of time your Store is closed for relocation. MFOC has the right to approve all transfers of Asset Purchase Agreement. Sublessor has the right to approve all proposed assignments of Sublease Agreement and any subleases of Store premises. |
|
m. Conditions for our approval of transfer |
Section 12.3; Assignment, Assumption and Consent; Term Pre-Purchase Addendum |
60 days prior written notice to us in a form satisfactory to us; transferee qualifies; your obligations are paid and you are not in default; transferee completes training; you, transferee and us sign an Assignment, Assumption and Consent, which contains a release of claims against us; at our option, transferee signs our then current Franchise Agreement and guaranty (if applicable) for remaining term |
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|
Provision |
Section in Franchise Agreement(l) |
Summary(l) |
|
of Franchise Agreement being transferred; you or your transferee pays transfer fee; we approve terms of transfer; you subordinate any obligations of the transferee to you to the transferee's obligations to us; you obtain any required landlord consents; you agree not to use the Pretzelmaker Trademarks; you or your transferee agrees to any refurbishment we require; you have sufficient term under the Franchise Agreement, or the transferee has agreed to purchase from us sufficient additional term under the Franchise Agreement, to meet our standard for transfers; you and transferee use a licensed escrow professional to conduct the closing of the transfer; and you comply with any other conditions we reasonably require; See also "17.r." below. |
||
|
n. Our right of first refusal to acquire your business |
Section 12.5 |
We can match any offer for your business or for a Controlling Interest in you; see also "17.r." below. |
|
o. Our option to purchase your business |
Section 14.5 and Article 16; Option Agreement |
We have the right, at our option, to purchase your Store upon termination of Franchise Agreement unless we are in default. Under the security agreement contained in Article 16 of the Franchise Agreement, we can foreclose and acquire the assets of your Store if you default. In addition, at your request, we may enter into an optional Option Agreement with you for the potential purchase of your business by us or our assignee. |
|
p. Your death or disability |
Section 12.6 |
You must transfer your interest in Franchise Agreement or your Controlling Interest in an Entity developer within 6 months, to a transferee approved by us. |
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|
Provision |
Section in Franchise Agreement(l) |
Summary(l) |
|
q. Non-competition covenants during the term of the Franchise Agreement |
Sections 11.1, 11.3, 11.4 and 18.1 |
No interest in or services for a Competitive Business within I mile of your Store or within 1 mile of any Pretzelmaker Retail Outlet; no solicitation of employees. |
|
r. Non-competition covenants after the Franchise Agreement is terminated or expires |
Sections 11.2, 11.3, 11.4, 12.3G), 12.5(c) and 18.1 |
No interest in or services for a Competitive Business within 1 mile of your Store or 1 mile of any Pretzelmaker Retail Outlet, for 1 year, if we don't purchase your Store (see "17.o." above) or for 3 years, if we do purchase your Store (including after a transfer or exercise of your right of first refusal, for a 3 year period). |
|
s. Modification of the Franchise Agreement |
Sections 11.4, 18.1, 18.2 and 18.8; Section 13.13 of Sublease Agreement |
Subject to automatic modification to conform to mandatory provisions of applicable law. Other modifications require mutual consent. Modifications of Sublease Agreement must be in writing and signed by all parties. |
|
t. Integration/merger clause |
Section 18.15; Section 13.13 of Sublease Agreement; Section 10 of Assignment, Assumption and Consent; Section 12 of Confidentiality Agreement |
Only the terms of Franchise Agreement, Assignment, Assumption and Consent, Confidentiality Agreement and Sublease Agreement are binding (subject to state law). Any other promises may be unenforceable. |
|
u. Dispute resolution by arbitration or mediation |
Section 17.4 |
Except for certain claims not subject to arbitration, all disputes must be arbitrated in Salt Lake City, Utah. |
|
v. Choice of forum |
Section 17.6 |
You consent to jurisdiction in the State of Utah for any claims brought against you which are not subject to arbitration. |
|
w. Choice of law |
Section 17.5; Section 8.5 of Asset Purchase Agreement; Section 13.9 of Sublease Agreement |
Utah law applies to Franchise Agreement, Asset Purchase Agreement, Option Agreement and Confidentiality Agreement, unless |
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|
Provision |
Section in Franchise Agreement(l) |
Summary(l) |
|
governed by applicable federal law. Sublease Agreement is governed by the law of the state in which the Store premises are located. |
(1) Unless otherwise noted, Section references and summaries are to the Franchise Agreement.
These states have statutes which may supersede the Franchise Agreement, Asset Purchase Agreement, Sublease Agreement and other agreements in your relationship with us or our Affiliates, including the areas of termination and renewal of your franchise: f ALASKA fStat. Sections 45.45.700-45.45.7901. ^ARKANSAS [Code Sections 4-72-201 - 4-72-210], CALIFORNIA [Bus. & Prof. Code Sections 20000-20043], CONNECTICUT [Gen. Stat. Sections 42-133e - 42-133h], DELAWARE [Code Sections 2551 - 2556], [FLORIDA (Stat. Section 542.3351. 1HAWAIT [Rev. Stat. Section 482E-6], IDAHO [Code <Se6tkms>rSection1 29-<WO>[JJLfl]], ILLINOIS [815 ILCS Sections 705/<4 and 705/17>[l] - <705/20>[44]], INDIANA [Code Sections 23-2-2.7-1 - 23-2-2.7-7], IOWA [Code Sections 523H.1 - 523H.17 and 537A.10], MICHIGAN [Stat. Section 19.854(27)], MINNESOTA [Stat. Sections 80C.14 and 80C.21], MISSISSIPPI [Code Sections 75-24-51 - 75-24-63], MISSOURI [Rev. Stat. Sections 407.400 - 407.413 and 407.420], NEBRASKA [Rev. Stat. Sections 87^01 - 87-410], NEW JERSEY [Rev. Stat. Sections 56:10-1 - 56:10-12], [NORTH CAROLINA IGen. Stat. Section 22B-3I. ]RHODE ISLAND [Stat. Sections 19-28.1-14 - 19-28.1-16; Section 19-28.1-14 of the Rhode Island Franchise Investment Act provides that "A provision in a franchise agreement restricting jurisdiction or venue to a forum outside this state or requiring the application of the laws of another state is void with respect to a claim enforceable under this Act"], SOUTH DAKOTA [SDCL Sections 37-5A-51 and 37-5A-51.1], VIRGINIA [Code Sections 13.1-557 - 13.1-574], WASHINGTON [Rev. Code Section 19.100.180], WISCONSIN [Stat. Sections 135.01 - 135.07]. These and other states may have court decisions which may supersede the Franchise Agreement, Asset Purchase Agreement, Sublease Agreement and other agreements in your relationship with us or our Affiliates, including the areas of termination and renewal of your franchise.
ITEM 18. PUBLIC FIGURES
We do not use any public figure to promote our franchise.
ITEM 19. EARNINGS CLAIMS
Except as attached as Exhibit 14, we do not furnish or authorize our sales persons to furnish any oral or written information to prospective franchisees concerning the actual or potential revenues, sales, costs, income or profits of a Pretzelmaker Store. Actual results vary from store to store, and we cannot estimate the results of any particular franchise.
Attached as Exhibit 14 to this Offering Circular is an Earnings Claim, which includes, as qualified in Exhibit 14, gross revenues by quartile of the <69>[74] fully-reporting franchised Pretzelmaker Stores located in the United States that were operated for the entire <3QQ4>[2005] fiscal year (January <3, 2001January L>[2. 2005 to December 31- .1 2005). Your financial results may
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differ from the information included in Exhibit 14. Substantiation of all data illustrated in Exhibit 14 will be made available to you upon reasonable demand.
The earnings claim figures in Exhibit 14 do not reflect the cost of sales, operating expenses, or other costs or expenses that must be deducted from the gross revenue or gross sales figures to obtain your net income or profit. fWe do not include data about costs or expense because we do not currently
will incur in operating your Store. Franchisees or former franchisees, listed in this Offering Circular, may be one source of this information.
ITEM 20. LIST OF OUTLETS
PRETZELMAKER STORES - FRANCHISED STORES STATUS SUMMARY FOR YEARS l2flfl&]2OO4/2OO3</2003> (1)
|
State |
Transfers |
Cancelled or Terminated by Us(2) |
Not Renewed <bv ««>iai] |
Reacquired by Us<<3>141) |
Left the System/ Other |
Total from Left CoIumns(<4 >I51) |
Franchises Operating at Year End (<§X>6)(7)(8) |
|
Alabama |
8/<7>rai/7 |
||||||
|
Arizona |
[242/CX& > |
[flfll/3<4-> |
[2/]3/3</2> |
Ofl7/8</9> |
|||
|
lArJiansajl |
\wm |
||||||
|
California |
> |
[2fl678</7> |
\wm |
[&]7/12</8> |
f2I/121/23<a 9> |
||
|
Colorado |
[S]l/0<^0 > |
[4/]0/2<A> |
[4/]l/2<rt> |
11/11/11 |
|||
|
District of Columbia |
[flZ]i/o</o > |
[fl/Jl/O</0> |
1/1/1 |
||||
|
Florida |
<n/n/fl> |
[Dill/0</0> |
roiii/o</o> |
3/<4>[3J/4 |
|||
|
Georgia |
<4>0/l[Q 1 |
0/<4>[fi]/l |
[flfli/i<a> |
3/3/<4>[3J |
|||
|
Hawaii |
> |
[0i]3/0^O> |
[l/]6/0<&> |
8/<4n>[)/io |
|||
|
Idaho |
<^>[5V3/3 |
||||||
|
Illinois |
«m&> |
rszii/o</o> |
fPiii/(Ka> |
<2>[ai/2/2 |
|||
|
Indiana |
2/2/2 |
||||||
|
Iowa |
[3/0/0] |
\1Q3/0<M> |
[4/]3/0<^0> |
[Ul]li/14<A-4> |
|||
|
Kansas |
f i/o/oi |
u/o/ai |
4/4/4 |
||||
|
Kentucky |
0/<4->[fll/l |
o/<t>ruvi |
1/1/<2>[11 |
||||
|
Louisiana |
f2fll/0</Q> |
||||||
|
<Massachusett s> |
<Wi> |
<GW> |
<0/0/4> |
||||
|
Minnesota |
«m&> |
l/<0>fll/0 |
flZll/0<fl> |
<6>r51/676 |
|||
|
Michigan |
rP2U/l</0> |
[Oil i/i <&> |
[izjo/i^a> |
||||
|
Missouri |
rsii/o<^> |
roiii/o<^> |
o/<t>ravi |
||||
|
Montana |
1/1/1 |
||||||
|
Nebraska |
4/4/4 |
||||||
|
Nevada |
i/<o>rn/o |
\M\m<&> |
[H12/2<^0> |
2/2/<4>r21 |
|||
|
North |
2/2/2 |
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|
State |
Transfers |
Cancelled or Terminated by Us(2) |
Not Renewed <bj- |
Reacquired by Us(<3>[4J) |
Left the System/ Other |
Total from Left Columns(<4 >rsi) |
Franchises Operating at Year End <<5X>6)(7)(8) am |
|
Carolina |
|||||||
|
North Dakota |
r2/o/oi |
[2/0/01 |
<6>\&\/6/6 |
||||
|
Ohio |
r i/o/oi |
r l/o/oi |
<4->f0J/l/l |
||||
|
Oklahoma |
2/2/2 |
||||||
|
Oregon |
i/i/<o>rn |
\imm |
[2Zll/l</0> |
ra/]6/7</6> |
|||
|
South Carolina |
2/<t>[2]/l |
||||||
|
South Dakota |
i/<a>nyo |
<qmi> |
\UWQ<A> |
4/4/4 |
|||
|
Tennessee |
[fl]0/l<^0 > |
[fl]l/0</0> |
[flflI/l</Q> |
0/<±>[PJ/l |
|||
|
Texas |
[fi/]0/l</0 > |
<0/>l/0[ii] |
wm\ |
<0/>2/0[Z2] |
[2flll/ll<A3 > |
||
|
Utah |
<0/OA> |
roiii/i</4> |
fflZll/l<^> |
9/<40>f21/10 |
|||
|
Virginia |
[Pi]2/0</& > |
WM\ |
[l/]2/0</0> |
<3>[2]/3/3 |
|||
|
Washington |
<y>o/\usL i |
<m&> |
[flfll/0</2> |
l/<2>U]/2 |
|||
|
West Virginia |
1/1/1 |
||||||
|
Wisconsin |
4/4/4 |
||||||
|
Wyoming |
3/3/<2>rai |
||||||
|
TOTALS |
[iJi]14/6< |
U4Z]22/21<4- g> |
<0>[2]/0/0 |
0/0/0 |
0/0/0 |
[2gfl36/27<^ 26> |
F149/U54/166 |
(1) The numbers are as of [December 31. 2005. ]Jantiarv 1, <3QO^>[2005 and] January 3, <20Q4 and December 28, 2002.>[20J4^] As of each of these dates, PMI was the franchisor of the Pretzelmaker franchise system. As a result of the Contributions on March 16, 2004 (which are further described in Item 1 of this Offering Circular), we are now the franchisor of the Pretzelmaker franchise system and a party to the franchise agreements for all existing Pretzelmaker Stores listed on this chart.
(2) Includes Pretzelmaker Stores that have been closed by mutual agreement between PMI and the respective franchisee. [
(1) [The numbers in this column include both franchises not renewed bv us and franchises not renewed bv the franchisee.]
(4) <(3)-The numbers in this column indicate the Pretzelmaker Stores reacquired by MFOC or PMI, the franchisor of the Pretzelmaker franchise system for the 3-year period covered by this chart. As further described in Item 1 of this Offering Circular, we are now franchisor of the Pretzelmaker franchise system.
5) <(4)-The numbers in the "Total" column may exceed the number of stores affected because several events may have affected the same store. For example, a store may have had multiple owners.
(6) <(5)-This chart only includes Pretzelmaker Stores franchised by PMI in the United States. The chart does not include the Pretzelmaker Stores in the United States operated by our Affiliate,
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MFOC, which are included in the MFOC-Owned Store chart below, nor Pretzelmaker Stores franchised by us or our Affiliates for locations outside of the United States, including the <3*»r46] Pretzelmaker Stores that Pretzelmaker-Canada had franchised in Canada as of <Januarv l>[Pccemher 31.1 2005. As of the date of this Offering Circular, we are now the franchisor of the Pretzelmaker franchise system in Canada.
Cfl <(6)-Includes 15 Pretzelmaker Stores (1 in Alabama, 2 in Arizona, <5>[| in California, 1 in Florida[r 1 in Illinois]. 1 in Kansas, 1 in North Carolina, 2 in Oregon, 1 in South Carolina and 1 in Wisconsin) that are combo locations with Mrs. Fields Cookie Stores.
(8) <(7)-Includes <44>ri41 Pretzelmaker Stores (5 in Alabama, 1 in Florida, 1 in Indiana, 1 in Iowa, 1 in <Nobraoka, 1 in >Louisiana, 1 in INehraska. 1 jn ]Oklahoma. 1 in <West Virginia, 1 in >South Dakota and <>[2J in Texas<?>)[,] that are combo locations with Great American Cookie Company Stores.
() <(8)Does not include <1 Pretzelmaker- Store -inCaliforniathat is temporarily closed for relocation, 1 Pretzelmaker Store in Utah temporarily closed for the season and 1 Pretzelmaker tere>[3 Pretzelmaker Stores il in Utah. 1 in Oregon and 1] in Washington^] that <is>rare1 temporarily closed< ponding a transfer of ownerships
PRETZELMAKER STORES - MFOC-OWNED STATUS SUMMARY FOR YEARS 12flnZ]2004/2003<#003> (1)
|
State |
MFOC-Owned Stores Transferred During Year |
MFOC-Owned Stores Closed During Year |
MFOC-Owned Stores Opened During Year |
Total MFOC-Owned Stores Operating at Year End(2) |
|
Arkansas |
rizflZQi |
<±>[fll/l/l |
||
|
Colorado |
r2/io/i</©> |
ffl/10/l<^0> |
<©/0/±> |
|
|
Idaho |
<G/0A-> |
<©/0/4-> |
<fi/0/fl> |
|
|
Iowa |
<0/0S> |
|||
|
Louisiana |
M/ai |
fflZll/O</0> |
fQll/2^a> |
|
|
Michigan |
rizozai |
<4>rovm |
||
|
Montana |
<0/0/2> |
<n/o/o> |
||
|
Virginia |
rfl/u/o</o> |
o/<+>iavi |
||
|
Total |
<o>rayo/o |
rfi/i2/i<^> |
o/<-t>rfli/i |
f0/13/5</6> |
(1) The numbers are as of fDecemher 31. 2005. Uanuarv 1, <3QQ5,>[2005 and] January 3, <2004-and December 28, 2002.>[2fli&]
(2) This chart only includes the Pretzelmaker Stores owned and operated by MFOC in the United States, and does not include any Pretzelmaker Stores owned and operated by MFOC or any of our other Affiliates outside of the United States. As of the date of this Offering Circular, we do not own or operate any Pretzelmaker Stores in the United States or elsewhere.
As of<Januarv l.>[pecemhey fl1r] 2005, there were <444>Q423 franchised Pretzelmaker Stores open and operating in the United States< (excluding those operated by MFOC)>, and <3>[na] Pretzelmaker Stores operated by MFOC in the United States. Part 1 of Exhibit 12 to this Offering Circular discloses these Pretzelmaker Stores, the franchisees< (including MFOC)>, store addresses, and telephone numbers. <Pnrt 1 of Exhibit 12 to this Offering' Circular is divided into 2 lists, one for
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franchised Pretzelmakcr Store locations (excluding MFOC operated locations), and one for franchised Prctzolmakor Store looationo operated by MFOC. Although wo treat the MFOC operated locations as "company owned" locations for the purpose of Items 1 and 20 (givon that MFOC is one of our Affiliates), we have included thorn in Part 1 of Exhibit 12 because MFOC now operates these locations under a franchise agreement with us. (See Item 1.) >Part 2 of Exhibit 12 to this Offering Circular is a list of every Pretzelmaker franchisee <(inoluding MFOC) >who, during the <26Q4>[20051 fiscal year (which ended <Januarv l>[Decemher 31.] 2005), had an outlet terminated, cancelled, not renewed, or otherwise voluntarily or involuntarily ceased to do business under the franchisee's franchise agreement or who has not communicated with us or our Affiliates within 10 weeks of the date of this Offering Circular.
PRETZELMAKER STORES PROJECTED OPENINGS For Fiscal Year Ending <Januarv l.>[Decei
2006
(projections as of <Januarv LMDecember 31.1 2005)
|
State |
Franchise Agreements Signed But Store Not Opened(l) |
Projected Franchised New Stores at Fiscal Year End(l) |
Projected MFOC-Owned Openings at Fiscal Year End(l) |
|
California |
<2> |
3 |
<o> |
|
Idaho |
<4> |
1 |
<©> |
|
<tHiftois>ripjal |
<Z> |
<3>ril |
<©> |
|
Nevada |
1 |
<4> |
<0> |
|
[Tennesseel |
m |
||
|
Totals |
<?>rn |
<*>[6i |
0 |
(1) The projected numbers are estimates only. The actual number of openings at the end of our <3QQ4>[2005] fiscal year may be more, less, or the same number as projected in this chart. We offer franchises in a wide geographical area. We cannot predict precisely how many franchises will be granted in any particular state.
ITEM 21. FINANCIAL STATEMENTS
Attached as part of Exhibit 13 to this Offering Circular are the consolidated balance sheets of our parent MFFB as of <Januarv l>[Decemher 31-] 2005 and January <3. 2001_>|'L 2005.] and the related consolidated statements of operations and comprehensive income (loss), member's deficit and cash flows for the fiscal years ended (December 31. 2005.1 January 1, 2005, [and 1 January 3, <200<1 and December 28. 2002.>[2004.1 together with the Report of Independent Registered Public Accounting Firm. As< further> described in the accompanying notes[ to the financial statements], the consolidated financial statements of MFFB <prior to>[beforel the formation of MFFB on March 16, 2004 <inoludo the accounts of TCB>[were prepared solely to present the assets contributed and the liabilities
certain assets and liabilities of MFOC and subsidiaries, and all of the assets and liahilll
IVfFOC. include the accounts of MFFj and the franchising, licensing and mail order segments of MFOC, and[ Accordingly, consolidated financial statements] have been prepared as if the Contributions described in Item 1 of this Offering Circular had occurred on December <30, 2001>Q2L 2002] (the beginning of fiscal <2002.) Accordingly, the consolidated financial statcmonto>[
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assume that MFFB, for all periods presented, had existed as a separate legal entity with the following <fow>[ltt] business segments: franchising, fgjfts and ]licensing<. mail order and retail food salor,>. The consolidated financial statements, which have been carved out from the consolidated financial statements of MFOC and <TGB>[MFF prior fo the Contributions] using the historical results of operations and assets and liabilities of these businesses and activities and which exclude the company-owned stores segment of MFOC, reflect the accounting policies adopted by MFOC and <TB>fMFF1 in the preparation of their consolidated financial statements and thus do not necessarily reflect the accounting policies which MFFB might have adopted had it been an independent-^ stand-alone> company< for all periods presontod>. The historical consolidated financial statements of MFFB include those accounts specifically attributable to MFFB, substantially all of the indebtedness of MFOC and <TB>fMFF]. and allocations of expenses relating to shared services and administrative functions incurred at MFOC.
Separate stand-alone financial statements of us (Pretzelmaker Franchising, LLC) are not included in this Offering Circular. Should we fail to fulfill our obligations to our franchisees, however, MFFB absolutely and unconditionally guarantees to fulfill <sueh>[those] obligations. In states where we have registered this franchise offering, a copy of the written guarantee may be on file in the office of the administrator of the state franchise law.[J
ITEM 22. CONTRACTS
The following agreements proposed for use regarding the offering of a Pretzelmaker Franchise are attached to this Offering Circular:
Exhibit 3 Franchise Agreement with Acknowledgment Addendum,
Ownership Addendum, Guaranty, Appendix A - Authorization Agreement For Prearranged Payments (Direct Debits), State-Specific Addenda and Riders - California, Illinois, Maryland, Minnesota, New York, North Dakota, Rhode Island, South Dakota and Washington, and Renewal Addendum
Exhibit 4 Non-Baking Kiosks Addendum to Franchise Agreement
Exhibit 5 Confidentiality Agreement
Exhibit 6 Assignment, Assumption and Consent
Exhibit 7 Term Pre-Purchase Addendum
Exhibit 8 Lease Addendum
Exhibit 9 Purchase Option Agreement and Addenda
Exhibit 10 Asset Purchase Agreement; Sublease Agreement
ITEM 23. RECEIPT
The last page of this Offering Circular is a detachable document acknowledging your receipt of this Offering Circular. The Federal Trade Commission requires that you promptly sign and return one copy of the Receipt to us. This does not obligate you to purchase a franchise and it does not obligate us to sell you a franchise.
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CALIFORNIA ADDENDUM TO THE OFFERING CIRCULAR PRETZELMAKER FRANCHISING, LLC
NOTE: THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE OFFERING CIRCULAR.
As a supplement to the information disclosed in this Offering Circular, the following additional paragraphs are added:
1. No person identified in Item 2 of the Offering Circular is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Act of 1934, 15 U.S.C.A 78a et seq., suspending or expelling such person from membership in such association or exchange.
2. California Business and Professions Code Sections 20000 through 20043 provide rights to you concerning termination or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.
3. The Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq)
4. The Franchise Agreement contains a covenant not to compete which extends beyond the termination of the franchise. This provision may not be enforceable under California Law.
5. The Franchise Agreement requires binding arbitration. This arbitration will occur at Salt Lake City, Utah, with the costs being borne by the nonprevailing party in the arbitration. You are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code Section 20040.5, Code of Civil Procedure Section 1281, and the Federal Arbitration Act) to any provisions of a franchise agreement restricting venue to a forum outside the State of California.
6. The Franchise Agreement requires application of the laws of the State of Utah. This provision may not be enforceable under California law.
7. [The Franchise Agreement requires the parties to waive anv and all rights to a trial hv jury in the event of litigation. This provision mav not he enforceable under
[Sj ]The Franchise Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
<&>[2J You must sign a general release if you transfer your franchise. California
Corporations Code 31512 voids a waiver of your rights under the Franchise Investment Law (California Corporations Code 31000 through 31516). Business and Professions
Code 20010 voids a waiver of your rights under the Franchise Relations Act (Business and Professions Code 20000 through 20043).
<ft>ri0.1 Section 31125 of the California Corporations Code requires the Franchisor to
give the Franchisee a disclosure document, in a form and containing such information as the Commissioner may by rule or order require, prior to a solicitation of a proposed material modification of an existing franchise.
<44r>ri 1.1 With respect to the franchises governed by California law, we will defer collection of all initial fees described in Item 5 until we have completed our initial obligations under the franchise agreement.
<44t>[1L3 THE CALIFORNIA INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE OFFERING CIRCULAR. SECTION 31125 OF THE FRANCHISE INVESTMENT LAW REQUIRES US TO GIVE TO YOU A DISCLOSURE DOCUMENT APPROVED BY THE COMMISSIONER OF CORPORATIONS BEFORE WE ASK YOU TO CONSIDER A MATERIAL MODIFICATION OF YOUR FRANCHISE AGREEMENT.
OUR WEBSITE HAS NOT BEEN REVIEWED OR APPROVED BY THE CALIFORNIA DEPARTMENT OF CORPORATIONS. ANY COMPLAINTS CONCERNING THE CONTENT OF THIS WEBSITE MAY BE DIRECTED TO THE CALIFORNIA DEPARTMENT OF CORPORATIONS AT www.corp.ca.gov.
ILLINOIS ADDENDUM TO THE OFFERING CIRCULAR PRETZELMAKER FRANCHISING, LLC
1. The following is inserted after the third paragraph under the sub-heading "Risk Factors" at the cover page of this Offering Circular.
"The Risk Factors set forth above may be affected by Illinois law, 815 ILCS §§ 705/4 and 705/41."
2. The following is added to Item 5:
"Based on our financial condition, the Illinois Attorney General has imposed a fee deferral requirement with respect to the franchises governed by Illinois law. We therefore will defer payment of the initial fees described in Item 5 until we have completed our initial obligations under the Franchise Agreement."
3. The following paragraphs are inserted at the end of Item 17:
"The conditions under which your franchise can be terminated and your rights upon nonrenewal may be affected by Illinois law, 815 ILCS 705/19 and 705/20."
"Provisions regarding jurisdiction and venue and choice of law may be affected by Illinois law, 815 ILCS §§ 705/4 and 705/41, respectively.
MARYLAND ADDENDUM TO THE OFFERING CIRCULAR PRETZELMAKER FRANCHISING, LLC
As a supplement to the information disclosed in this Offering Circular, the following additional paragraph is added to Item 5 of the Offering Circular:
1. With respect to franchises governed by the Maryland Franchise Registration and Disclosure Law, we will defer payment of the initial fees described in Item 5 until we have completed our initial pre-opening obligations under the Franchise Agreement.
2. With respect to the offer and sale of franchises governed by the Maryland Franchise Registration and Disclosure Law, we will not require the signing of a release or waiver as a condition of any refund of the initial franchise fee.
As a supplement to the information disclosed in this Offering Circular, the following additional paragraph is added to Item 11 of the Offering Circular:
1. On your prior written request, we will make available to you no later than 90 days after
the end of the quarter during which you make a request, a statement of moneys collected and costs incurred for our marketing programs through the end of that quarter.
As a supplement to the information disclosed in this Offering Circular, the following additional paragraphs are added to Item 17 of the Offering Circular:
1. Any release executed in connection with the Franchise Agreement is not intended to, nor shall it act as a release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.
2. The Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.)
3. Any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of your franchise.
4. Any provision in the Franchise Agreement restricting jurisdiction or venue to a forum outside of Maryland or requiring the application of the laws of another state is void with respect to a claim arising under the Maryland Franchise Registration and Disclosure Law.
5. Any claims under the Maryland Franchise Registration and Disclosure law may be brought in the State of Maryland.
6. Pursuant to COMAR 02.02.0816L, the general release required as a condition of renewal, sale and/or assignment/transfer will not apply to any liability under the Maryland Franchise Registration and Disclosure Law. Further, in the event of a transfer, you will sign the Assignment, Assumption and Consent included as an exhibit to our Offering Circular, which contains a release.
MINNESOTA ADDENDUM TO THE OFFERING CIRCULAR PRETZELMAKER FRANCHISING, LLC
As a supplement to the information disclosed in this Offering Circular, the following additional paragraphs are added:
1. Any release executed in connection with the Franchise Agreement shall not apply to any claims arising under Minnesota Statutes 1973 Supplement, Sections 80C.01 to 80C.22, providing that a franchisee cannot be required to assent to a release, assignment, or waiver that would relieve any person from liability imposed by such statutes; provided, however that this shall not bar the voluntary settlement of disputes.
2. With respect to the franchises governed by Minnesota law, we will comply with Minnesota Statute Sec. 80C.14, subdivisions 3, 4 and 5 which require, except in certain specific cases, that we give you 90 days notice of termination (with 60 days to cure) and 180 days notice for non-renewal of the Franchise Agreement
3. No action may be commenced against us pursuant to Minn. Stat. § 80C.17 more than three years after the cause of action accrues.
4. Minnesota Statute Sec. 80C.21 and Minnesota Rule 2860.4400J prohibit us from requiring litigation to be conducted outside Minnesota. In addition, nothing in the Offering Circular or Franchise Agreement can abrogate or reduce any of your rights as provided for in Minnesota Statutes, Chapter 80C, or your rights to a jury trial or any procedure, forum, or remedies provided for by the laws of the jurisdiction.
5. With respect to the franchises governed by Minnesota law, we will defer payment of the initial fees described in Item 5 until we have completed our initial obligations under the Franchise Agreement.
NEW YORK ADDENDUM TO THE OFFERING CIRCULAR PRETZELMAKER FRANCHISING, LLC
As a supplement to the information disclosed in this Offering Circular, the following additional paragraphs are added:
1. Except as disclosed in Item 3 of the Offering Circular, neither we, our predecessors, affiliates or any person identified in Item 2 of this Offering Circular:
A. Has any administrative, criminal or material civil action (or a significant number of civil actions irrespective of materiality) pending against it or him alleging a violation of any franchise law, securities law, fraud, embezzlement, fraudulent conversion, restraint of trade, unfair or deceptive practices, misappropriation of property or comparable allegations.
B. Has been convicted of a felony or pleaded nolo contendere to a felony charge or within the ten (10) year period immediately preceding the application for registration, been convicted of a misdemeanor or pleaded nolo contendere to a misdemeanor charge or been held liable in a civil action by final judgment or been the subject of a material complaint or other legal proceeding if such misdemeanor conviction or charge or civil action, complaint or other legal proceeding involved violation of any franchise law, securities law, fraud, embezzlement, fraudulent conversion, restraint of trade, unfair or deceptive practices, misappropriation of property or comparable allegations.
C. Is subject to any currently effective injunctive or restrictive order or decree relating to franchises or under any federal, state, or Canadian franchise, securities, antitrust, trade regulation, trade practice law, or any national securities association or national securities exchange (as defined in the Securities and Exchange Act of 1934) suspending or expelling such person from membership in such association or exchange as a result of a concluded or pending action or proceeding brought by a public agency.
2. Except as disclosed in Item 4 of the Offering Circular, during the fifteen (15) year period immediately preceding the date of this Offering Circular, neither we, our predecessors, affiliates or any person identified in Item 2 of this Offering Circular has been adjudged bankrupt or reorganized due to insolvency or been a principal officer of any company or a general partner in any partnership at or within 1 year of the time that such company or partnership was adjudged bankrupt or reorganized due to insolvency or is otherwise subject to any pending bankruptcy or reorganization proceeding.
3. You will not be required to indemnify us for any claims arising out of a breach of the Franchise Agreement by us or other civil wrongs committed by us.
4. We will not make any changes to the Operations Manuals which would impose an unreasonable economic burden on you or unreasonably increase your obligations under the Franchise Agreement.
5- Item 17 i. However, no assignment will be granted except to an assignee who in our
good faith judgment is willing and able to assume our obligations under the Franchise Agreement.
6. Item 17 w. The foregoing Choice of Law should not be conferred upon you or us by the General Business Law of the State of New York, Article 33.
7. Any release executed in connection with the Franchise Agreement is subject to the proviso that all rights enjoyed by you and any causes of action arising in your favor from the provisions of Article 33 of the General Business Law of the State of New York and the regulations issued thereunder shall remain in force; it being the intent of this proviso that the non-waiver provisions of Sections 687.4 and 687.5 of the General Business Law of New York State be satisfied.
8. You may terminate the Franchise Agreement and any ancillary agreements upon any other grounds available by law.
NORTH DAKOTA ADDENDUM TO THE OFFERING CIRCULAR PRETZELMAKER FRANCHISING, LLC
As a supplement to the information disclosed in this Offering Circular, the following additional paragraphs are added:
1. Covenants not to compete upon termination or expiration of a franchise agreement are generally unenforceable in North Dakota, except as provided by law.
2. Any release executed in connection with the Franchise Agreement will not apply to any claims that may arise under the North Dakota Franchise Investment Law.
3. Any arbitration required by the Franchise Agreement will be conducted in the state where your Store is or will be located.
4. With respect to the franchises governed by North Dakota law, we will defer payment of the initial fees described in Item 5 until we have fulfilled all of our initial obligations under the Franchise Agreement or other documents and you have commenced doing business pursuant to the Franchise Agreement.
5. Note 23 in the Item 6 chart is deleted in its entirety.
RHODE ISLAND ADDENDUM TO THE OFFERING CIRCULAR PRETZELMAKER FRANCHISING, LLC
1. Item 17 of the Offering Circular is supplemented with the following:
Section 19-28.1-14 of the Rhode Island Franchise Investment Act provides that "A provision in a franchise agreement restricting jurisdiction or venue to a forum outside this state or requiring the application of the laws of another state is void with respect to a claim otherwise enforceable under this Act."
SOUTH DAKOTA ADDENDUM TO THE OFFERING CIRCULAR PRETZELMAKER FRANCHISING, LLC
As a supplement to the information disclosed in this Offering Circular, the following additional paragraphs are added:
1. With respect to the franchises offered to residents of, or to be located within the
State of South Dakota, we will defer payment of all of the initial fees described in Item 5 until we have completed our initial obligations under the franchise agreement and you have opened your store for business.
WASHINGTON ADDENDUM TO THE OFFERING CIRCULAR PRETZELMAKER FRANCHISING, LLC
1. In any arbitration involving a franchise purchased in Washington, the arbitration site shall be either in the state of Washington, or in a place mutually agreed upon at the time of the arbitration, or as determined by the arbitrator.
2. In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW, shall prevail.
3. A release or waiver of rights executed by you shall not include rights under the Washington Franchise Investment Protection Act except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, or rights or remedies under the Act may not be enforceable.
4. Transfer fees are collectable to the extent that they reflect our reasonable estimated or actual costs in effecting a transfer.
5. With respect to franchises governed by the Washington Franchise Investment Protection Act, we will defer payment of the initial fees described in Item 5 until you have received our initial training and open your Store for business.