UFOC
Sample UFOC
RECEIVED
MAR 2 f 2005
INFORMATION FOR PROSPECTIVE FRANCHISEES REQUIRED BY THE FEDERAL TRADE COMMISSION
PRETZEL TIME FRANCHISING, LLC
2855 East Cottonwood Parkway
Suite 400
Salt Lake City, Utah 84121
(801) 736-5600
www. p
Effective Date: See Exhibit 2
To protect you, we've required your franchisor to give you this information. We haven 7 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
PTFUFOC-3/<05>IM]
FRANCHISE OFFERING CIRCULAR
FOR PROSPECTIVE FRANCHISEES
PRETZEL TIME FRANCHISING, LLC
2855 East Cottonwood Parkway
Suite 400
Salt Lake City, Utah 84121
(801) 736-5600
www. p
The name of the franchisor is Pretzel Time Franchising, LLC. If you become a Pretzel Time Store franchisee, you will have the right to operate a Pretzel Time Store from which you will offer a variety of freshly baked, hand-rolled soft pretzels prepared according to our unique recipe, other pretzel-related products, toppings, beverages and other food products.
The standard initial franchise fee for a Pretzel Time 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 Pretzel Time Store as a location co-branded-with a concept owned by one of our Affiliates7-or-{o)>[ojJfJ 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 $258,000 if you purchase the assets of an existing store. The estimated initial investment required for a franchise, including the initial franchise fee, is from $<449r5QQ>f 158.0001 to $<242j500T>B4pJ5ftOJ if y°u are developing a new <otoro, and $11,500 to $317,500,>[ifl: line store: $153.000 to $225.500. if vou are developing a new modular. prPfabribed kiosk: and $48.000 to $315.500.] if you purchase the assets of an existing store. These sums do not include real estate lease costs or any 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 connectiea>fJ with one of your full-service Pretzel Time 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 14 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 OFFERING CIRCULAR, MFFB HAS PROVIDED A GUARANTEE OF PERFORMANCE OF OUR OBLIGATIONS. PER THE AUDITED BALANCE SHEET DATED <JANUARY 4,>rDecember31.1 2005, MFFB HAD A NET WORTH DEFICIENCY OF $<43.501.000.M81.762.000.1
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 lawful 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.
Item
TABLE OF CONTENTS
Page
ITEM1. ITEM 2. ITEM 3. ITEM 4. ITEM 5. ITEM 6. ITEM 7. ITEM 8. ITEM 9. ITEM 10. ITEM 11. ITEM 12. ITEM 13. ITEM 14. ITEM 15.
ITEM 16. ITEM 17.
ITEM 18. ITEM 19. ITEM 20. ITEM 21. ITEM 22. ITEM 23.
THE FRANCHISOR, ITS PREDECESSORS, AND AFFILIATES
BUSINESS EXPERIENCE.____..........._........................................................ .......
LITIGATION............_...........___................................................................... ........................
BANKRUPTCY......................_..... ..................................__.............................................
INITIAL FRANCHISE FEE.____................................___..................._._..........
............._.........................1
...............<W>[11]
-----..............<«>U3]
..........--.....<«>[ld]
................_<W>[ld]
OTHER FEES..................................................................... ___..__._..........................._............................_........................._........_16
INITIAL INVESTMENT..............-........................................____................._......................................_...<24>[2fl
RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES.._.................<39>Q1]
FRANCHISEE'S OBLIGATIONS........................................................._....................................................<U>\M\
FINANCING......................................................................................................._._.....................................................<34>[2U
FRANCHISOR'S OBLIGATIONS.. ................................ ................................ ..................<^>[2S]
TERRITORY............ ............................ .............................. ____............................ ........................<4>[4fi]
TRADEMARKS............................_........................................................................._____..........._.................<44>[4Z]
PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION............____..........<A6>\42\
OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF
THE FRANCHISE BUSINESS................................_..................................____..............._.................__<48>[5fl]
RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL......................................<4S>1]
RENEWAL, TERMINATION, TRANSFER AND DISPUTE
RESOLUTION......___.........................._......................................................................................................_.....<49>[52]
PUBLIC FIGURES.......................................................................____...............................................................<59>[2]
EARNINGS CLAIMS..................--........................................................................._.....................................<59>[&]
LIST OF OUTLETS...............................___........................................................................ ................<59>[fi2]
FINANCIAL STATEMENTS.........______................................. ............................_____..........-<&>M1
CONTRACTS......................._...........___..........................................................._............................................<^>W\
RECEIPT..............................................................................................____.....................................................<64>[fi2]
STATE-SPECIFIC ADDENDA - CALIFORNIA, ILLINOIS, MARYLAND, MINNESOTA, NEW YORK, NORTH DAKOTA, RHODE ISLAND, SOUTH DAKOTA AND WASHINGTON
EXHIBITS
EXHIBIT 1 EXHIBIT 2 EXHIBIT 3
EXHIBIT 4 EXHIBIT 5 EXHIBIT 6 EXHIBIT 7 EXHIBIT 8 EXHIBIT 9 EXHIBIT 10
DEFINITIONS
STATE ADMINISTRATORS/AGENTS FOR SERVICE OF PROCESS
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
NON-BAKING KIOSKS ADDENDUM TO FRANCHISE AGREEMENT
CONFIDENTIALITY AGREEMENT
ASSIGNMENT, ASSUMPTION AND CONSENT
TERM PRE-PURCHASE ADDENDUM
LEASE ADDENDUM
PURCHASE OPTION AGREEMENT AND ADDENDA
ASSET PURCHASE AGREEMENT; SUBLEASE AGREEMENT
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EXHIBIT 11 OPERATIONS MANUALS TABLE OF CONTENTS
EXHIBIT 12 FRANCHISEE INFORMATION
PART 1 - LIST OF PRETZEL TIME FRANCHISEES
PART 2 - LIST OF PRETZEL TIME FRANCHISEES TERMINATED, CANCELLED, NOT RENEWED, OR THAT HAVE CEASED DOING BUSINESS EXHIBIT 13 LIST OF PRETZEL TIME AREA DEVELOPERS
EXHIBIT 14 FINANCIAL STATEMENTS
EXHIBIT 15 EARNINGS CLAIM
NOTICE
UNLESS OTHERWISE INDICATED, THE INFORMATION APPEARING IN THIS OFFERING CIRCULAR APPLIES TO PRETZEL TIME 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 Pretzel Time Franchising, LLC, the franchisor; "MFFB" means our parent, Mrs. Fields Famous Brands, LLC; "PTI" means Pretzel Time, Inc.; "MFOC" means Mrs. Fields' Original Cookies, Inc.; "MFHC" means Mrs. Fields' Holding Company, Inc.; "MFCI" means Mrs. Fields' Companies, Inc.; "PMF" means Pretzelmaker Franchising, LLC; "PMI" means Pretzelmaker, Inc.; "Pretzelmaker-Canada" means Pretzelmaker-Canada, 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 Pretzel Time Store that you will operate if we enter into a Pretzel Time 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 Pretzel Time Stores (or variations of that name). Our Affiliates do business under the names Pretzel Time Stores, Pretzelmaker Stores, <Hot Sam Pretzel and Bakery Stores, >Mrs. Fields Cookie Stores, Mrs. Fields Bakery Cafes,<-Original Coolde Company Storos,>[J Great American Cookie Company Stores, <aftd->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 PTI, MFCI, MFHCI, MFOC, MFFB, PMF, PMI, Pretzelmaker-Canada, 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 PTI, a Utah corporation incorporated in January 2000, who in turn acquired a substantial portion of its assets from Predecessor PTI (as further described below in this Item 1).
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 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 <thcreafter>[after]. 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 Pretzel Time Retail Outlets. As a result of the Contributions, we are now the franchisor of the Pretzel Time franchise system and a party to the existing area development agreements (as<-
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fether>[J described below in this Item 1), and MFOC operates all company-owned Pretzel Time Retail Outlets. Although we are the franchisor of the Pretzel Time franchise system, MFFB employees perform the day-to-day operations of the franchise system and provide services to our franchisees. <Pr4ef> [Before] to the Contributions, PTI and Predecessor PTI operated the Pretzel Time franchise system. While MFOC will continue in the near term to operate all company-owned Pretzel Time Retail Outlets and the company-owned stores of a number of our Affiliates, MFOC also will continue its ongoing strategic review of company-owned store performance, with identified Pretzel Time Retail Outlets and other stores being sold to new or existing franchisees or closed. Accordingly, MFOC anticipates a reduction in its total number of company-owned Pretzel Time Retail Outlets and other retail stores over time with a corresponding reduction in its involvement in related company-store operations.
Our predecessor, PTI, acquired a substantial portion of its assets from Pretzel Time, Inc., which was a Pennsylvania corporation incorporated in May 1991 ("Predecessor PTI"). Predecessor PTI originally incorporated under the name Mr. Pretzel, Inc., but shortly after its incorporation changed its name to Pretzel Time, Inc. In September 1997, MFHC, acquired 56% of the common shares of Predecessor PTI. At the same time, MFHC and Predecessor PTI entered into a management agreement under which MFHC agreed to provide, either by itself or through one of its Affiliates, management services to Predecessor PTI. In November 1997, MFHC assigned all of its interest in the common shares of Predecessor PTI to MFOC. Following this assignment, MFOC acquired an additional 4% of the common shares of Predecessor PTI in January 1998, 10% of the common shares of Predecessor PTI in June 1998 and 30% of the common shares of Predecessor PTI in December 1998. As a result of these acquisitions, MFOC acquired 100% of the common shares of Predecessor PTI. In January 2000, MFOC merged Predecessor PTI with and into PTI and PTI is the surviving entity.
We have a number of Affiliates that offer franchises or provide products or services to our franchisees.
PMF is a Delaware limited liability company formed by MFFB on February 4, 2004 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>rafterl. MFFB contributed these assets to PMF. Also as part of the Contributions, PMF 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 PMF. Pretzelmaker-Canada is an Ontario corporation incorporated on September 26, 1996, and a wholly owned subsidiary of PMI. As a result of the Contributions, PMF is now the franchisor of the Pretzelmaker franchise system, and MFOC <operates>roperated] all company-owned Pretzelmaker Stores<T>r until the last 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 PMF's franchisees. <Prior to>[Before] 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.
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 <thoroaftcr>[afterj. New MFBI granted to MFF a perpetual, fully paid license to use the Mrs. Fields Trademarks< in conneotion>L] 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.
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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 Contributions, MFF now the franchisor of the Mrs. Fields franchise system, and MFOC operates all company-owned Mrs. Fields Cookie Stores. 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>[Before] 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 <thereaftor>rafter1. 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 ownod>r. and MFOC has granted a small number of licenses to third parties to operate Original Cookie Company and Hot Sam Stores formerly owned and operated bv MFOC. MFOC no longer operates anvl Original Cookie Company <Storos and>[flLj Hot Sam Stores. There are no franchised Original Cookie Company or Hot Sam Stores<. MFOC eontinuos to evaluate the performance of these Gtorca and cxpeota that during 2005 and 2006, substantially all Original Cookie Company and Hot Sam Stores will >[. and the small number of licensed locations will, ^either 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 <further >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 <thercaftcr>[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. <Prior to>rBefore1 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>[heiafg] 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 <thereafter>["after1. 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.
MFC1, MFHC, MFOC, MFFB, PTI, PMF, PMI, Pretzelmaker-Canada, 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 Pretzel Time Stores[. including modular. prefabricated hakinfl kiosks.] offering various Pretzel Time Products in accordance with the terms of our Pretzel Time franchise agreement (the "Pretzel Time Franchise Agreement" or "Franchise Agreement"). A copy of the Pretzel Time Franchise Agreement is attached to this Offering Circular as Exhibit 3. If you enter into a Pretzel Time Franchise Agreement, you will be authorized to use the Pretzel Time System under which Pretzel Time Stores operate. In establishing your Store, MFOC may sell you one or more of its existing Pretzel Time 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.
We also may grant you the right to operate a non-baking kiosk ("Non-Baking Kiosk") <m-oonnection >with one of your full-service Pretzel Time Stores (the "Host Store")!". A Non-Baking Kiosk mav not he operated with a modular, prefabricated baking kioskl. 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 Pretzel Time Store will offer a variety of Pretzel Time Products to the general public, and you will have to compete with bakeries, some fast-food restaurants, snack food stores, convenience stores (including Pretzelmaker 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 Pretzel Time Retail Outlets selling various Pretzel Time Products and other products and services (such as frozen pretzel dough sold through various retail outlets) under the Pretzel Time 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. Pretzel Time Products appeal to persons of all ages, but particularly appeal to families with children and to adults between the ages of 21 and 60.
We and our Affiliates are engaged in the business of the sale of frozen pretzels and other food products in the food service industry. We and our Affiliates are interested in market penetration by distribution of frozen dough products, including frozen pretzels, to alternative locations such as airports, amusement parks, schools, hospitals, office work sites, military 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.
-4-
We and our Affiliates intend to distribute frozen 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, PMF, operates the Pretzelmaker franchise system which serves principally pretzel products and may compete with you. During the effective period of this Offering Circular, we and PMF <w4U-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 prooess,-we and PMF may share information, develop and test produets,-trade-droGO, operations, marketing, and other system features and standards that are the same or similar for both braads, and-may-ask franchisees of both systems to work-together to provide data to us and our Affiliates. Thn rer.ultr, nf thor.o activities A selected group of Pretzel Time and Pretzelmaker franchisees are participating in tests to determine potential synergies between the brands and to offer consumers a similar experience in both types of stores. One result of these activities has been the development of a single pretzel dough that is now being used to bake pretzels of a single taste and texture (prepared from either a drv mix or frozen doughl hv this group of test stores from both systems. We and PMF anticipate that this single dough will be introduced as a required product for both systems sometime during 2006. We and PMF have also developed a series of promotions, point of 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 lwavs. 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 one of the systems to the other, and/or the possible conversion of both systems to a third pretzel system developed hv us or our Affiliates under new trademarks, trade names and/or trade dress. We and PMF will make anv decisions after consultation and advice from franchisee representatives from both systems]. 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 Pretzel Time 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 fromPTI.
From January 1992 to February 2004, PTI (or Predecessor PTI) was in the business of granting licenses and franchises for the operation of Pretzel Time Stores. From October 1991 to December 1997, Predecessor PTI was also in the business of owning and operating Pretzel Time Stores. As< further>[J described above, MFOC entered into a franchise agreement with us at the time of the Contributions<raHd-now operates its>r for the operation of its companv-ownedl Pretzel Time Stores< as our single largest franchisee.Sfflee->I". From ]Novemher 1997, MFOC has also been in the business of owning and operating Pretzel Time Stores <whi6h>rthatl it purchased or acquired from Pretzel Time franchisees or Area Developers. See the table below in this Item 1 and Item 20 of this Offering Circular for more
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information regarding franchised and company-owned Pretzel Time Stores. As of the date of this Offering Circular, neither we, PTI nor Predecessor PTI own or operate any Pretzel Time Stores.
Under a national sales agreement Predecessor PTI entered into with a predecessor of TCBY, Predecessor PTI and PTI offered Pretzel Time franchisees the opportunity to add the TCBY concept to a new or existing Pretzel Time Store under certain circumstances from February 1995 to May 2000. Neither we nor PTI are offering this opportunity to Pretzel Time franchisees under the national sales agreement. You may, however, be granted the right under certain circumstances to operate a Pretzel Time Store in conjunction with a TCBY license or franchise under a different program with either us or TCBY.
In certain instances, you may be able to enter into a co-branding arrangement with one or more of our Affiliates, m <sHeh>fthat| case, you will enter into a Pretzel Time Franchise Agreement with us for the Pretzel Time Store, and a separate franchise agreement with each our respective Affiliates for each brand you are co-branding with the Pretzel Time 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 Pretzel Time 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 Pretzel Time 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 Pretzel Time 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 <SHeh>[those] cases, we or our Affiliates may or may not allow you to offer co-branded products from your Pretzel Time Store, depending on<-sueh>[J factors [such ]as the terms of the co-branding arrangement, the terms of your Pretzel Time Franchise Agreement, applicable geographic restrictions and our and our Affiliates' other rights and obligations. These co-branding arrangements may compete with you.
Between January 1992 and March 1998, PTI (or Predecessor 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 further described above, in March 2004 PTI contributed all of its area development agreements to MFFB, who in turn contributed these assets to us. 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 (the "Territory"). Most Area Developers also have been granted the right to market and service the Pretzel Time System at certain locations within their Territories, for which they receive a fee. Finally, Area Developers typically have been granted the right under their area development agreements to receive compensation from us or our predecessors for finding Pretzel Time franchisees for certain locations within their Territories. 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 we nor PTI is entering into area development agreements with new Area Developers. We may, however, offer some other form of area development grants for Pretzel Time Stores <whi6h>[that] permit the development and operation of multiple Pretzel Time franchises in designated geographic areas. We will offer area development rights through separate offering circulars, if at all. As of the date of this Offering Circular, there were 4 Area Developers, who hold the rights to separate Territories. See Item 2 and Exhibit 13 for
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a list of our Area Developers and their respective Territories. These Area Developers are independent contractors. As <further >described in Item 11 of this Offering Circular, an Area Developer may be obligated to provide certain services to you if your Store is located within such Area Developer's Territory.
Through asset and stock purchases occurring over the past 7 years, MFOC and other of our Affiliates have acquired the Pretzel Time area development rights of certain Area Developers. As of the date of this Offering Circular, the related area development agreements have been effectively terminated, and any services previously provided to Pretzel Time franchisees located within the Territories covered by these area development agreements are now being provided by MFFB.
For more than 20 years, PTI and its predecessors and other of our Affiliates have offered international master franchise agreements, franchise agreements and other types of licensing agreements for the Pretzel Time brand and other brands in foreign countries. As of <Januarv l>rDecember 31.] 2005, there were 7 Pretzel Time locations in <>|jl] foreign countries, <4G>[^2] Pretzelmaker locations in 2 foreign countries, <S2>[8Z] Mrs. Fields locations in <44>[jJJ foreign countries, <4>[one] Great American Cookie Company <looations> rio catio nl in one foreign country, and <20&>[1S] TCBY locations in <20>[12] 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 Pretzel Time brand, and PMF, 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 Pretzel Time 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, PMF has been in the business of granting franchises for the operation of Pretzelmaker Stores. From September 1992 to February 2004, PMI was in the business of granting franchises for the operation of Pretzelmaker Stores in the United States. Since August 1995, PMI has also been in the business of owning and operating Pretzelmaker Stores either directly or through its parent MFOC. In addition, from September 1996 to February 2004, Pretzelmaker-Canada was in the business of granting franchises for the operation of Pretzelmaker Stores in Canada, but is no longer offering these franchises. A Pretzelmaker Store offers soft pretzels, pretzel products and other complementary food and beverages. In some circumstances, a Pretzelmaker Store may also offer branded frozen desserts and coffee products. See table below in this Item 1 for more information regarding franchised and company-owned Pretzelmaker Stores.
Since November 1997, MFOC has been in the business of owning and operating Pretzel Time Stores <wh4eh>[that] it purchased or acquired from Pretzel Time franchisees or Area Developers. Since November 1998, MFOC has also been in the business of owning and operating Pretzelmaker Stores <whieh>[that1 it purchased or acquired from Pretzelmaker franchisees. MFOC now operates its company-owned Pretzel Time Stores and Pretzelmaker Stores under separate franchise agreements with us and PMF. See table below in this Item 1 for more information regarding these company-owned Pretzel Time Stores and Pretzelmaker 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>[isj granting Hot Sam Pretzel and Bakery Store licenses and franchises. <SfflGe>rFroml September <449fe>ri996 to November 2005.1 MFOC <has>b^s] also <feeen->in the
business of owning and operating Hot Sam Pretzel and Bakery Stores.<MFOC now operates ito>[__
MFF has given MFOC the right to grant a limited number of sublicenses to third parties for the
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operation of the remaining] Hot Sam Pretzel and Bakery Stores <as a liomnoo of MFFr>fformerlv owned and operated hv MFOC. 1 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 thia Item 1 for more information regarding oompanv owned Hot Sam Protzol and Bakery Stores.>[We anticipate that the remaining licensed locations will'either close or convert to another concept franchised bv ns or one of our Affiliates during 2006.1
<In certain situations, you may bo able to purchase an existing Hot Sam Pretzel and Bakery Store location and ito physioal assets from MFOC and convert the location to a Protzol Time Store of the type offered in this Offering Circular. The acquisition of the existing Hot Sam Pretzel and Bakery location and assets from MFOC will be negotiated between you and MFOC on an individual basis, independently, separately and in addition to your entering into a Pretzel Time Franchise Agreement with us to operate a Protzol Time Store. This Offering Circular makes no disclosures or representations regarding the terms and oonditiono of any ouoh transaction you may negotiate with MFOC.In oortain situations, a prospective franchisee of PMF also may be able to purchase an existing Hot Sam Pretzel and Bakery location and its physioal assets from MFOC and convert the location to a Protzelmaker 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. <Sm6e>fFrom1 September <44)96t>F1996 to November 2005.] MFOC <has>[w^a] also <been->in the business of owning and operating Original Cookie Company Stores< An Original Cookie Company Store offers a variety of specially prepared food items, ouoh as oookios, brownies, muffins and beverages. MFOC now operates its Original Cookie Company Stores as a licensee of MFF>. 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 oonjunotion>LJ with Pretzel Time or Pretzelmaker Stores and/or TCBY Stores) <and Original Coolde Company Stores >in the United States <whi6h>[that] 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
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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 oortain situations, a prospective Great American Cookie Company Store licensee may bo able to purchase an existing Original Cookie Company Store location and its physioal assets from MFOC and convert the
location to a Great American Cookie Company Storo.>[__] 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, which 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>[1981 and .Tune 2000. fTistoricallv. TCBY has offered! 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 Concept 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.
rTCBY is in the process of developing and testing in certain markets and locations it identifies a reconcepting program (the "Reconcepting Test"! for Traditional TCBY Stores. die TCBY will continue to offer franchises for Other Concents Stores during and Test. TCBY does not, as of the date of this Offering Circular, intend to offer franchises for anv new Traditional TCBY Stores during the Reconcepting Test. Tnstead. opting Test. TCBY will allow some existing, franchised Traditional TCBY Stores irkets and locations it identifies to participate in the Reconcepting Test. TCBY mav also grant single and/or multiple unit franchises for new stores in certain markets and locations it identifies that will narticipate in the Reconcepting Test. Existing, franchised Traditional TCBY Stores and new franchised stores that participate in the Reconcepting Test are collectively referred to in this Offering Circular as "Test Stores." Test Stores will operate under and use newlv-develoned trade dress, trademarks, trade names and service marks TCBY owns and/or registers. which mav include the Berivo trademark (the "New Marks"!, as well as certain existing TCBY trademarks, and will sell certain new proprietary, premium quality smoothies, frozen vogurt products and menu items containing such products (the "Test Products"!, together with some of the menu items TCBY has already approved for sale from TCBY Stores.l
rif TCBY determines that the Reconcepting Test has been a success and has resulted in the development of a "Store of the Future" program. TCBY will require all Test Stores to operate as TCBY Stores of the Future. Tn addition, in the event of a successful Reconcepting Test. TCBY will "" 'onger offer Traditional TCBY Store franchises, but will instead focus on the conversion and development of TCBY "Stores of the Future" operated in accordance with the "Store of the Future" program. Tn contrast, if TCBY determines that the Reconcepting Test has not been a
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snccess. the Test Stores will he required to purchase and install new signage, point of purchase materials and other hranded elements necessary to make the Test Stores' branding consistent with other Traditional TCBY Stores operated hv TCBY franchisees in accordance with it then-current standards. TCBY will reimburse Test Store franchisees for certain costs arising from this change in hranded elements. Further, in the event of an unsuccessful Recnncenting Test. TCBY mav once again continue offering franchises for Traditional TCBY Stores.1
See table below in this Item 1 for more information regarding franchisee! and company-owned
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.
[Since December 2005. TCBY has been in the business of granting single and multiple unit franchises for the operation of Yovana stores ("Yovana Stores"!, in certain limited markets, to Qualified franchisees. A Yovana Store is a retail meal, treat, snack and beverage outlet that offers a variety of specially prenared food items, such as fresh vogurt. smoothies, drinkahle vngurt blends and frozen vogurt treats, granolas. cereals, breads, pastries, preminm coffee, espresso and teas. juices, and other products and beverages. Tn addition to offering single unit franchises for new Yovana Stores. TCBY also offers a Yovana multi-unit development program. In the future. TCBY mav develop new Yovana Stores as companv-owned stores, or for eventual sale tn a new or existing franchisee. All Yovana Store locations mav compete with vou. See table below 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 our Affiliates in the United States that were operating as of <Jnnuary 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 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.>[Decemher 2L] 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 |
Pretzel Time |
<4S&>[195] |
<^>[1Q] |
|
PMF |
Pretzelmaker |
<454>tt421 |
<Mfil |
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|
Franchisor/ Licensor |
Concept |
Number of Franchises(l) |
Number of Company-Owned Stores Operated by MFOC(2) |
|
<ffi> |
<Hot Sam Pretzel and Bakery >L1 |
<0> |
<44> |
|
MFF |
Mrs. Fields Cookies (and Mrs. Fields Bakery Cookie Cafes) |
<M0>[222] |
<26>[ij |
|
GACCF |
Great American Cookie Company |
<^>[225] |
<&>W |
|
<&fl>[I |
<Original Cookie Companv>[Yovana1 |
<0>tl] |
<7>ffi] |
|
TCBY |
TCBY |
<4086>r2Zll(3) |
<44>ffll |
|
Traditional TCBY Stores |
<449>[i21] |
0 |
|
|
Non-traditional TCBY Stores |
<6W>[54S] |
<44>[fl] |
(1) This column lists the number of franchises open and operating as of <January 1,>[ 31.1 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 <January l.>[December 31r] 2005. While MFOC operates these stores under separate franchise agreements with us, PMF, 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 <Januarv l.>fDecember 31.] 2005, there were <?>[lfl] Juice Works units operated <in cnniunotion with>rwithin] franchised TCBY Stores.
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,
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QSR in Randolph, Massachusetts. From January 1978 to June 1997, he served in various capacities for Dunkin' Donuts in Randolph, Massachusetts.
Executive Vice President <General Gomsel>[Chief Legal Officer]. Secretary and Manager: Michael R. Ward
Mr. Ward has been our Executive Vice President fand Chief Legal Officer lsince <&me-aOQ4r>fFehruarv 2006.] and our< General Counsel and> Secretary and one of our Managers since March 2004. From fJune 2004 to January 2006. he was our Executive Vice President and General Counsel. From IMarch 2004 to June 2004, he was our Senior Vice President and Genera} 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 Finanoial Officer. Treasurer and Executive Vioe President of Finance and Administration: Sandra Btt*&>
<Mo. Buffa has been our Executive Vioe President of Finanoe and Administration since Juno 2004, and our Chiof Finanoial Officer and Treasurer sinoe March 2004. From March 2004 to June 2001, she was our Senior Vioe President of Finanoo and Administration.Mo. Buffa also has hold the same or equivalent positions with a number of our Affiliates since April 2001. Immediately boforo 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 Chiof Finanoial Officer and a dirootor of that company from March 1998 to November 1998. Between July 1993 and March 1998, she served as Senior vice President, Chiof Finanoial Officer, Treasurer and a Director of National Vision Associates in Lawrcnceville. GeorgiaXExcoutivc Vice Prosidont of Operations and Developments Executive Vice President and Chief Operations Officer!: Para Deibakhsh
Mr. Dejbakhsh has been our Executive Vice President [and Chief Operations Officer since February 2006. and our Executive Vice President ]of Operations and Development <sin6e>[fEm] June <3QQ4,>[2004 to January 2006.] 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.
Executive Vice President <e>[and Chief] Marketing Officer]: John Lauck
Mr. Lauck has been our Executive Vice President [and Chief Marketing Officer sjnce February 2006. and our Executive Vice President ]of Marketing <s4fi6e>[fxamj April <3QQ4r>f2004 to January 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 toMBefore] 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.
rChief Accounting Officer. Senior Vice-President and Treasurer: Mark McBride]
[Mr. McBride has been our Chief Accounting Officer. Senior Vice-President and Treasurer since March 2006. and our Interim Chief Accounting Officer. Vice President Controller and Interim Treasurer since Mav 2005. From March 2004 to Mav 2005. he was our Vice President Controller. and served in that 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 Citv. Utah. From Sentemher 1996 to Anril 2001. Mr. McBride was the Vice President. Corporate Controller and Cornorate Secretary of Evans & Sutherland Computer Corporation in Salt Lake
city. Utah]
Our Area Developers are as follows:
Area Developer - Southern New York. New Jersey. Rhode Island and Connecticut: Pretzel Time of New York. Inc.
President: Alan Fleisher
Mr. Fleisher is the area developer for the southern part of the state of New York, New Jersey, Rhode Island and Connecticut and also is a franchisee. From 1989 to 1992, Mr. Fleisher was President of Professional Laundry Systems, Inc. a New York based distributor of coin-operated laundry equipment. Mr. Fleisher was on the Board of Directors of Pretzel Time from 1993 until May of 1996.
Area Developer - Ohio. Northern New York, and Western Pennsylvania: Kal Enterprises. Inc.
Co-Chairman: AlanGick
Mr. Gick has been self-employed as co-chairman of Kal Enterprises, Inc. of Fairview, Pennsylvania since September of 1988. Kal Enterprises owns and operates several retail food shops including Orange Julius, Dairy Queen and Karmelkorn. Since March of 1993, Kal Enterprises, Inc. has been the area developer for the above Pretzel Time territory.
Area Developer - Kansas and Missouri: Mid Continent Enterprises. Inc.
President: Bernard W. Mazzoni
Mr. Mazzoni has been president of Mid Continent Enterprises, Inc. since June 1992, which is a franchisee of Pretzel Time. From February 14, 1990, through July 31, 1992, he was the division
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controller of Clarostat Manufacturing, Inc. in Dover, New Hampshire. From 1982 through 1990, Mr. Mazzoni was controller of Ericsson Wire and Cable, Inc., in Richardson, Texas.
Area Developer - North Carolina: Pretzel Time of North Carolina. Inc.
President: Stuart Miller
Mr. Miller is the President of Pretzel Time of North Carolina, Inc. which has been a franchisee and Pretzel Time Area Developer for North Carolina since July 1993. From July 1987 until September 1993, Mr. Miller held the position of General Manager of Auto Lighting for General Electric in Cleveland, Ohio. This $100 million North American business focused on the retail and aftermarket channels of the automotive lighting industry. Mr. Miller managed all marketing, strategic planning, market research, advertising, promotion, and sales and production oversight.
ITEM 3. LITIGATION
<State of Maryland v. Pretzel Time. Inc. (Before the Offioo of the Attorney General of Maryland File Number FR930900) On December 11, 1992, the Maryland Division of Securities notified PTI that it had offered or sold franchises in Maryland in violation of Maryland franchise law without being registered under Maryland franohiso law. On February 6, 1995, PTI entered into a consent agreement and, although it was not required to pay a fine, PTI offered 2 franchisees rescission rights under Maryland franchise
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<Stato of Now York v. Pretzel Time, bio. (Supremo Court of the State of New York. June 17. 1993. Index Number 404832/93). Botwcon April 13, 1992 and March 19, 1993, PTI sold 4 franchises in violation of Now York franchise law by selling franchises without being registered under New York franchise law. PTI entered into a consent judgment and paid a fine of $8,000.>
[None]
fCnncluded Litigation:!
Schroeter. et al v. Pretzel Time of Independence. Inc. et al. (Superior Court Civil Action No. 95-1394D in the Commonwealth of Massachusetts). On March 13, 1995, Robert A. Schroeter, Gina Schroeter, Tulio Cabrera and Josephine Cahreraf (the "Schrneters and Cabreras"}]. filed suit against Pretzel Time of Independence, Inc., Patricia Krukoff, Steven Krukoff, Andrew Economopoulas, A.S.A.P. Construction, Bay Bank Boston, N.A., P.S. Pretzel Time of Watertown, Inc., Pretzel Time of New England, and PTI. To the best of PTI's knowledge, the <nlaintiffo>fSchroeters and Cabreras] were shareholders in a corporation that they alleged was a Pretzel Time franchisee at Independence Mall in Kingston, Massachusetts. The <plaintiffs> [Sen meters and Cahrerasl claimed to have lost $50,000 based upon the alleged fraudulent misrepresentations, unjust enrichment, wrongful termination, unfair and deceptive trade practices of various parties, including PTI. PTI was sued on an agency theory «plaintiffc>[Schroeters and Cahrerasl contended that PTI was liable for the acts of its former Massachusetts "area developer" because that person was allegedly PTI's "agent" in name, but PTI denied any liability and had Massachusetts counsel file pleadings to answer <plaintiffs'>[the1 allegations). The matter was settled for $20,000. After the settlement, <p1aintiffc>|the Schrneters and Cahrerasl have admitted that PTI was not liable for any damages.
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Tony's Frozen Yogurt. Inc. v. Pretzel Time. Inc.. (Superior Court of New Jersey, September 29, 1998, Docket No. L 4997-98). On September 28, 1998, <thc pitiintiffMTony's Frozen Yogurt! filed this action against PTI for wrongful termination and breach of contract. The franchisee's claims were that PTI allegedly failed to provide a supply of parbaked pretzel product. Unspecified damages were sought. PTI answered the complaint and sought to have the matter dismissed. In March of 2000, the parties reached an agreement in principle to settle the case. Under the settlement, PTI agreed to pay $25,000.
Joseph and Eileen Siegel v. Pretzel Time. Inc.. (Circuit Court for the Twelfth Judicial Circuit, Sarasota County, Florida, February 6, 2004, File No. 2004CA1223NC). The plaintiffs, <collectively a >former Pretzel Time <franohifiee>[franchisees]. filed suit against PTI alleging PTI effectively abandoned their franchise agreement and otherwise breached the terms of the franchise agreement by refusing <the>[loJ negotiate a renewal lease on their behalf and failing to provide them with certain advertising materials. <Plaintiffs prav>fThe Siegels asked] for rescission and fargued ]that PTI [should jrestore them to their pre-contractual position by paying <plaintiffs>mtgjnj an unspecified amount equal to all consideration paid to PTI under the franchise agreement. PTI <will denv>[denied] each of <plaintiffB>rSiegelsV claims in its answer! In Octoher 2004. the parties entered into a Mutual Release. Termination and Settlement Agreement, and the Siegels naid SI .512.39 in royalties owed to PTf.1
Other than these <5>[1] 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 a Pretzel Time Storef. either for an in-line Store or a modular, prefabricated haking kiosk] The initial franchise fee represents payment to us for the right to use the Pretzel Time Trademarks and the Pretzel Time 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 acquire an existing Pretzel Time 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. fHowever. we have the option to allow vnu to oav a portion of the initial franchise fee when vou sign the Franchise Agreement, and the halance no later than the date that
If you acquire an existing Pretzel Time 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 14 of this Offering Circular.
If an Area Developer has the rights to the Territory in which your Store is located, we are contractually obligated, under the applicable area development agreement, to pay the Area Developer 25% of the initial franchise fee you pay to us. This payment is to reimburse the Area Developer for its expense in providing certain services to you, as further described in Item 11 of this Offering Circular.
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See Items 1 and 2, and Exhibit 13 of this Offering Circular for a further description of our Area Developers.
if [(a) ypw foil tp obtain, a tocatiQn approved by us for your Store within 6Q flays from the
date vou sign the Franchise Agreement, or flrilvou 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 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<r-fe-limited situations, we may refund all or a portion of your franchisee fee if we agree to do go in writing at the time you sign your Franchise Agreement, and you fail to obtain a lease for your Store at its approved nito within a donignatcd time nuhncquont to nigning the Frunohino Agreement. >[. and if vou have paid less than 50% of the full initial franchise fee at the time of the refund, no portion of that payment will be refundable under anv circumstances.. ]We will make any 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:
If you acquire an existing Pretzel Time Store from MFOC, you must enter into an Asset Purchase Agreement in the form included in Exhibit 10 to this Offering Circular. The assets purchased typically include trade furnishings and fixtures, such as display cases, signage, shelving, counters and work tables, and equipment, such as ovens, refrigerators, soft drink beverage dispensers, coffee preparation and dispensing equipment and small wares. MFOC sets the purchase price for the Store assets by taking a multiple of store cash flow after royalty and also taking into account other economic factors, such as current operating trends and length of lease term. The purchase price also will include 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 <IUfthe^->described in d.2 and Note 5 to Item 7 of this Offering Circular, we estimate that the cost of the Store assets (referred to in Item 7 as "Improvements and Equipment") purchased from MFOC, will range from $0 to $175,000. If MFOC is leasing any of the assets of the Store to you, you must also assume the obligations and make the required payments due under the equipment lease from the date you purchase the assets. You are not entitled to a refund of the purchase price for an existing Store under any circumstances even if you lose the right to lease or sublease the Store premises after taking possession of the assets. In some instances, you may be required to enter into a Confidentiality Agreement in the form of Exhibit 5 <in oonneotion >with your purchase of a franchised or a MFOC-owned Pretzel Time Store. No fees are paid to us or our Affiliates< in oonneotion> with the Confidentiality Agreement.
The 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 purchase the store's existing Product and Soft Goods Inventory. The purchase 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 the inventory quantities by the actual unit cost for the items. You must pay to MFOC the purchase price for the Product and Soft Goods Inventory when you purchase and pay for the assets of the Store. As <further >described in Item 7 of this Offering Circular, we estimate that the cost 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 the purchase price for the Product and Soft Good Inventory under any circumstances.
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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. This security deposit and the conditions under which it may be refundable are explained in Note 9 under Item 6 of this Offering Circular.
If you participate in our optional Resale Facilitation Program and purchase a <Mro. Fields ftflkie>[Pretzel Time] Store from an existing franchisee, you will pay to us a Resale Facilitation Fee. The Resale Facilitation Fee and Program are< further> described in Note 22 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. [_]
<From time to timo>[Periodicallv]. we may offer special incentive programs< in conjunotion>[J 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 <Mrti. Fields Cookie Store>fPretzel Timel 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< furthor>[J described in Item 7, if you are developing a new Pretzel Time 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 Pretzel Time Store from us. In your grand opening advertising and promotion, you <must>jmav he required tol 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, flf we develop these materials. Iwe 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 doQeribcd in Item 1 of this Offering Circular, PTI woo the franchisor of the Pretzel Timo franchise system until Moroh 16, 2001 Accordingly, during PTFo last fisoal year, franchisees paid to PTI an initial foe, including tho initial franohise fee, any lease and sublease deposits, any costs associated with the purchase of the assets of an existing Pretzel Timo Storo and other foes paid to PTI, ranging from $0 to approximately $118.750. From Maroh 16. 2001. tn January 1>F From January 2. 2005. to December 31.1 2005, franchisees paid us or our Affiliates initial fees ranging from $0 to approximately $25,000, excluding amounts paid to MFOC<T>r 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. |
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|
Name of Fee |
Amount |
Due Date |
|
(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 |
|
d. Cooperative advertising |
Up to 3% of Gross Revenues (Note 5) |
When due (Note 5) |
|
e. Surcharge on product (Note 6) |
Will vary under circumstances (Note 6) |
Upon date of invoice |
|
f. Training fee (Note 7) |
See Note 7 |
See Note 7 |
|
g. Refresher training (Note 8) |
See Note 8 |
See Note 8 |
|
h. Sublease (Note 9) |
See Note 9 |
Monthly (Note 9) |
|
i. Special assistance (Note 10) |
See Note 10 |
See Note 10 |
|
j. Late payment fee |
$100 for each delinquent payment. |
When the delinquent payment is due |
|
k. 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 |
|
1. Interest expenses (Note 11) |
Will vary under circumstances |
When due |
|
m. Audit |
Cost of financial audit plus interest at 1.5% per month or the highest legal rate on any underpayment (Note 12) |
15 days after receipt of audit or inspection report |
|
n. Operations Manuals duplicate (Note 13) |
See Note 13 |
Upon receipt of duplicate copy |
|
o. Transfer fee |
$8,000 or the current transfer fee, |
$2,000 transfer fee deposit payable |
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|
Name of Fee |
Amount |
Due Date |
|
(Note 14) |
whichever is greater; certain transfers qualify for reduced fee of$l,000ormore (Note 14) |
upon Transfer request, with balance payable <prior to>rhefore1 or upon final closing of Transfer (Note 14) |
|
p. Relocation Fee (Note 15) |
$2,500, or more (Note 15) |
Payable <prior to>rhefore1 relocation |
|
q. Additional term (Note 16) |
S<3=QQQ>[1.785] or more for each year of additional term (Note 16) |
Payable <prior to>[hefore] Transfer or relocation (Note 16) |
|
r. Advertising, marketing and promotional materials |
Will vary under the circumstances (Note 17) |
When the materials are ordered and/or delivered (Note 17) |
|
s. Interim management fees (Note 18) |
10% of Gross Revenues |
As incurred |
|
t. UCC filing fees (Note 19) |
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 |
|
u. Costs and attorneys' fees, and indemnification |
Will vary under circumstances (Note 20) |
Upon occurrence |
|
v. Documentation Fee for Franchisee Name Changes (Note 21) |
$500 or more (Note 21) |
Payable upon required notification of name change (Note 21) |
|
w. Resale Facilitation Fee (Note 22) |
Will vary depending upon negotiations between us and the purchasing franchisee (Note 22) |
Payable upon purchase of Store from existing franchisee |
|
Service] |
[Will varv under circumstances |
rPavable unon purchase of Store from existing frapcjijsee ] |
|
fNote2ftl |
||
|
j* <*r-Termination Fee |
Will vary under circumstances (Note <^>U4j) |
When billed |
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General Comments:
You must pay these fees to us except as explained in Notes 4,6,9,18 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 Pretzel Time 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>fperiodicaHv] 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.
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 <2ftO5>r20061 is 1.5% of Gross Revenues. For <3006>[2flQ2] 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 to 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 <sa6h>rthatl case, we will notify you <frnm tirno to time>rperinriicallv1 of the amount you must pay to the advertising cooperative and the
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timing of the payments, which may be as often as weekly. See Item 11 for more information on cooperative advertising.
6. The surcharge will vary. The surcharge is payable to the designated distributor from whom Pretzel Time franchisees purchase flour or frozen dough products when payment for these items is due. We have the right to supply some of our own flour and frozen dough to certain franchisees of Pretzel Time Stores and other food service distribution points.
7. You may not attend training <prier-te>[before] 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 Pretzel Time 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 Pretzel Time Store. 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>fmust pavl all travel and living expenses for your trainees. Travel and living expenses are described in Item 7 of this Offering Circular.
8. 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 bo roauirod to>[must] pay