Franchise Agreement
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Sample Franchise Agreement
QUIZNOS FRANCHISING II LLC
FRANCHISE AGREEMENT
TABLE OF CONTENTS
Page
1. PURPOSE ............................................................................................................................ 1
2. GRANT OF FRANCHISE .................................................................................................. 1
2.1 Grant of Franchise .................................................................................................... 1
2.2 Scope of Franchise Operations ................................................................................ 1
3. FRANCHISED LOCATION ............................................................................................... 2
3.1 Franchised Location ................................................................................................. 2
3.2 Limitation on Franchise Rights ................................................................................ 3
3.3 Non-Traditional Restaurants .................................................................................... 3
3.4 Special Products ....................................................................................................... 3
3.5 Franchisor's Reservation of Rights .......................................................................... 3
4. INITIAL FEES ..................................................................................................................... 3
4.1 Initial Franchise Fee ................................................................................................. 3
5. ROYALTIES ....................................................................................................................... 4
5.1 Royalty ..................................................................................................................... 4
5.2 Gross Sales ............................................................................................................... 4
5.3 Royalty Payments .................................................................................................... 4
5.4 Electronic Funds Transfer ........................................................................................ 4
5.5 Application of Payments .......................................................................................... 4
6. DEVELOPMENT OF FRANCHISED LOCATION .......................................................... 5
6.1 Approval of Franchised Location ............................................................................ 5
6.2 Lease Approval ........................................................................................................ 5
6.3 Schedule ................................................................................................................... 6
6.4 Conversion and Design ............................................................................................ 6
6.5 Signs ......................................................................................................................... 6
6.6 Equipment ................................................................................................................ 7
6.7 Permits and Licenses ................................................................................................ 7
6.8 Commencement of Operations ................................................................................ 8
7. TRAINING .......................................................................................................................... 8
7.1 Initial Training Program .......................................................................................... 8
7.2 Additional Training Programs ................................................................................. 9
8. OPERATIONS MANUAL .................................................................................................. 9
8.1 Operations Manual ................................................................................................... 9
8.2 Changes to Operations Manual ................................................................................ 9
9. DEVELOPMENT ASSISTANCE ..................................................................................... 10
9.1 Franchisor's Development Assistance ................................................................... 10
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9.2 Responsibilities of Area Director ........................................................................... 10
10. OPERATING ASSISTANCE ............................................................................................ 11
10.1 Franchisor's Assistance .......................................................................................... 11
11. FRANCHISEE'S OPERATIONAL COVENANTS .......................................................... 11
11.1 Business Operations ............................................................................................... 11
12. ADVERTISING ................................................................................................................. 14
12.1 Approval and Use of Advertising .......................................................................... 14
12.2 Grand Opening ....................................................................................................... 14
12.3 Marketing and Promotion Fee ............................................................................... 14
12.4 Local Advertising ................................................................................................... 15
12.5 Regional Advertising Programs ............................................................................. 16
12.6 Local Advertising Cooperative .............................................................................. 16
13. QUALITY CONTROL ...................................................................................................... 16
13.1 Standards and Specifications ................................................................................. 16
13.2 Inspections ............................................................................................................. 17
13.3 Restrictions on Services and Products ................................................................... 17
13.4 Approved Suppliers ............................................................................................... 17
13.5 Request for Change of Supplier ............................................................................. 17
14. MARKS, TRADE NAMES AND PROPRIETARY INTERESTS ................................... 18
14.1 Marks ..................................................................................................................... 18
14.2 Licensed Methods .................................................................................................. 18
14.3 Trademark Infringement ........................................................................................ 18
14.4 Franchisee's Business Name .................................................................................. 19
14.5 Change of Marks .................................................................................................... 19
15. REPORTS, RECORDS AND FINANCIAL STATEMENTS .......................................... 19
15.1 Franchisee Reports/Bookkeeping Services ............................................................ 19
15.2 Financial Records Use and Access ........................................................................ 21
15.3 Books and Records/Maximum Borrowing Commitment ...................................... 21
15.4 Audit of Books and Records .................................................................................. 21
16. TRANSFER ....................................................................................................................... 22
16.1 Transfer by Franchisee ........................................................................................... 22
16.2 Pre-Conditions to Franchisee's Transfer ................................................................ 22
16.3 Franchisor's Approval of Transfer ......................................................................... 24
16.4 Right of First Refusal ............................................................................................. 24
16.5 Transfer by Franchisor ........................................................................................... 24
16.6 Franchisee's Death or Disability ............................................................................ 25
17. TERM AND RENEWAL .................................................................................................. 25
17.1 Term ....................................................................................................................... 25
17.2 Renewal .................................................................................................................. 25
17.3 Exercise of Renewal .............................................................................................. 26
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18. DEFAULT AND TERMINATION ................................................................................... 26
18.1 Termination by Franchisee .................................................................................... 26
18.2 Termination by Franchisor - Effective Upon Notice ............................................. 26
18.3 Termination by Franchisor - Thirty Days Notice .................................................. 28
18.4 Late Fee .................................................................................................................. 28
18.5 Failure to Comply with Reporting Requirements .................................................. 28
18.6 Right to Repurchase ............................................................................................... 29
18.7 Obligations of Franchisee Upon Termination or Expiration ................................. 30
18.8 State and Federal Law ............................................................................................ 31
18.9 Assumption of Management .................................................................................. 31
19. BUSINESS RELATIONSHIP ........................................................................................... 32
19.1 Independent Businesspersons ................................................................................ 32
19.2 Payment of Third Party Obligations ...................................................................... 32
19.3 Indemnification ...................................................................................................... 32
20. RESTRICTIVE COVENANTS ......................................................................................... 32
20.1 Non-Competition During Term ............................................................................. 32
20.2 Branded Business ................................................................................................... 33
20.3 Post-Termination Covenant Not to Compete ......................................................... 33
20.4 Additional Remedies for Breach ............................................................................ 34
20.5 Confidentiality of Proprietary Information ............................................................ 34
20.6 Confidentiality Agreement ..................................................................................... 34
21. DISPUTES ......................................................................................................................... 35
21.1 Governing Law/Consent to Venue and Jurisdiction .............................................. 35
21.2 Waiver of Jury Trial ............................................................................................... 35
21.3 Remedies ................................................................................................................ 35
21.4 Limitation of Claims .............................................................................................. 35
22. SECURITY INTEREST .................................................................................................... 36
22.1 Collateral ................................................................................................................ 36
22.2 Indebtedness Secured ............................................................................................. 36
22.3 Additional Documents ........................................................................................... 37
22.4 Possession of Collateral ......................................................................................... 37
22.5 Remedies of Franchisor in Event of Default .......................................................... 37
22.6 Special Filing as Financing Statement ................................................................... 37
23. MISCELLANEOUS PROVISIONS .................................................................................. 37
23.1 Modification/Exercise of Judgment ....................................................................... 37
23.2 Entire Agreement ................................................................................................... 38
23.3 Delegation by Franchisor ....................................................................................... 38
23.4 Agreement Effective .............................................................................................. 38
23.5 Review of Agreement ............................................................................................ 38
23.6 Attorneys' Fees ....................................................................................................... 39
23.7 Injunctive Relief ..................................................................................................... 39
23.8 No Waiver .............................................................................................................. 39
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23.9 No Right to Set Off ................................................................................................ 39
23.10 Invalidity ................................................................................................................ 39
23.11 Notices ................................................................................................................... 39
23.12 Survival .................................................................................................................. 39
23.13 Acknowledgment ................................................................................................... 40
23.14 Miscellaneous Information to be Completed.. ....................................................... 40
23.15 Statement of Ownership ......................................................................................... 41
ATTACHMENT
Guaranty and Assumption of Franchisee's Obligations
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THIS AGREEMENT (the "Agreement") is entered into between QUIZNOS FRANCHISING II LLC, a Delaware limited liability company located at 1475 Lawrence Street, Suite 400, Denver, Colorado 80202 ("Franchisor"), and the person(s) or entity listed as the Franchisee on the signature block of this Agreement ("Franchisee"), as of the date signed by Franchisor and set forth opposite Franchisors signature on this Agreement (the Effective Date).
1. PURPOSE
1.1 Franchisor and its affiliates have developed methods for establishing, operating, and promoting restaurants offering submarine sandwiches, salads, other food products and beverages, and related restaurant and carry out services ("QUIZNOS Restaurants" or "Restaurants"), which include the use and license of certain valuable trade names, service marks, and trademarks (the "Marks") owned by an affiliate of Franchisor and licensed to Franchisor, including the Mark "QUIZNOS," and the affiliate's distinctive techniques, expertise, and knowledge in establishing, operating, and promoting restaurants and related licensed methods of doing business (the "Licensed Methods").
1.2 Franchisor grants the right to others to establish and operate Restaurants under the Marks and using the Licensed Methods.
1.3 Franchisee recognizes and acknowledges the benefits to be derived from being identified and associated with Franchisor, and being able to utilize the Restaurant system and concepts, and therefore desires to establish a Restaurant at an approved location. Franchisor is willing to grant Franchisee the right to operate a Restaurant under the terms and conditions contained in this Agreement.
2. GRANT OF FRANCHISE
2.1 Grant of Franchise. Franchisor grants to Franchisee, and Franchisee accepts from Franchisor, the right to use the Marks and Licensed Methods in connection with establishing and operating a Restaurant at the location described in Section 3. Franchisee agrees to use the Marks and Licensed Methods, as they are changed, improved, and further developed by Franchisor and its affiliates from time to time, only in accordance with the terms and conditions of this Agreement.
2.2 Scope of Franchise Operations. Franchisee agrees at all times faithfully, honestly, and diligently to perform its obligations under this Agreement, to use best efforts to promote its Restaurant, and not to engage in any other business or activity that conflicts with the operation of the Restaurant in compliance with this Agreement. Franchisee agrees to utilize the Marks and Licensed Methods to operate all aspects of Franchisee's Restaurant in accordance with the methods and systems developed and prescribed from time to time by Franchisor, all of which are a part of the Licensed Methods. Franchisee's Restaurant shall offer all products and services designated by Franchisor. Franchisee shall implement any additions and changes to the products and services offered by its Restaurant that Franchisor requires.
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3. FRANCHISED LOCATION
3.1 Franchised Location. Franchisee is granted the right to own and operate a Restaurant at a specific address and location ("Franchised Location") which will have been approved by Franchisor pursuant to this Section and Section 6 of this Agreement. Franchisee shall select and propose to Franchisor for approval a specific site for the Franchised Location. Franchisor, at its option, may also present sites to Franchisee for consideration. Franchisor will approve or disapprove a proposed location in accordance with the terms of this Agreement and Franchisors then-current site selection and approval criteria and procedures. Franchisor may use a variety of criteria and procedures to evaluate a site Franchisee proposes and, if more than one franchisee is seeking a site in a particular area, to determine which franchisee will operate a Restaurant at a particular location. Franchisor may change its procedures from time to time. Franchisee agrees that, if Franchisor identifies a general area in which Franchisee is to concentrate its efforts to search for an acceptable site for the Franchised Location, this area is designated simply for purposes of focusing Franchisees search and is not the grant of, or right to, an exclusive or protected territory. If Franchisee is unable or refuses to locate or secure a site that meets Franchisors criteria within that area within the timeframe Franchisor specifies, Franchisor may allow another franchisee to search for a site in that area. In addition, if Franchisee is presented with a site that meets Franchisors criteria, as determined in its sole discretion, and Franchisee refuses to secure the site for any reason, including because Franchisee does not agree with the lease provisions Franchisor negotiates on Franchisees behalf, Franchisor may present the site to another Franchisee. Nothing contained herein obligates Franchisor to continue to utilize the procedure described above. Franchisor makes no guaranty or assurance that any particular site in which Franchisee has expressed an interest prior to signing this Agreement will be available or approved by Franchisor, and Franchisee agrees that its obligations under this Agreement are not conditioned upon securing any particular site. There are no restrictions on Franchisor in any area, either before or after the Franchised Location is selected and approved, as provided in Section 3.5 below.
Franchisor has the right to designate a real estate broker whom Franchisee must use to contact the landlord of a proposed site, in which case Franchisee may not contact the landlord directly without Franchisor's approval.
Franchisee acknowledges and agrees that the Franchised Location will be a specific numbered street or mall address at which Franchisee's Restaurant will be physically located. The "Franchised Location" cannot and will not under any circumstances be defined as a geographic area or be described in terms other than a specific numbered street or mall address. During the term of this Agreement, the Franchised Location shall be used exclusively to operate a Restaurant.
Franchisee further acknowledges and warrants that Franchisors approval of the Franchised Location does not constitute a guarantee, recommendation, or endorsement of the Franchised Location and that the success of the Restaurant to be operated at the Franchised Location depends upon Franchisees abilities as an independent businessperson. Once Franchisor has approved the Franchised Location, Franchisor will be deemed to have complied with its obligations under this Agreement to assist Franchisee by providing criteria for the
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Franchised Location and determining fulfillment of the requisite criteria for the Franchised Location, such determination based on information provided by Franchisee.
3.2 Limitation on Franchise Rights. The rights granted to Franchisee are for the specific Franchised Location and cannot be transferred to any other location, except with Franchisor's prior written approval. The Marks and Licensed Methods are licensed only for the Franchised Location.
3.3 Non-Traditional Restaurants. Franchisee may not operate a Restaurant located within a host facility (such as a gas station, convenience store, airport, stadium, university, or hotel), in another "non-traditional" venue, or at any other location where the operation of the Restaurant will, because of its location, vary from the operation of a traditional Restaurant (all referred to as "Non-Traditional Restaurants"), except with Franchisor's prior written consent. Franchisor and Franchisee shall execute an Addendum for Non-Traditional Restaurant if the Restaurant will be located in a convenience store, gas station or other non-traditional or non-standard facility as determined by Franchisor. Franchisor will determine whether a proposed Restaurant should be classified as a Non-Traditional Restaurant.
3.4 Special Products. From time to time, Franchisor may offer supplemental programs to be incorporated in certain Restaurants ("Special Products"). Franchisee may not offer a Special Product except with Franchisor's prior written permission, in which case Franchisor and Franchisee shall execute an addendum to this Agreement specified by Franchisor.
3.5 Franchisor's Reservation of Rights. Franchisee acknowledges that the franchise granted under this Agreement is nonexclusive, that Franchisee has no territorial protection, and that Franchisor and all of its affiliates retain the right: (1) to use, and to license others to use, the Marks and Licensed Methods for the operation of Restaurants at any location other than the Franchised Location; (2) to use the Marks and Licensed Methods in connection with services and products, in connection with promotional and marketing efforts or related items, or in alternative channels of distribution, without regard to location; (3) to use and license the use of alternative proprietary marks or methods in connection with the operation of restaurants or other businesses under names which are not the same as or confusingly similar to the Marks, which businesses may be the same as, or similar to, or different from Restaurants; and (4) to engage in any other activities not expressly prohibited in this Agreement.
4. INITIAL FEES
4.1 Initial Franchise Fee. Franchisee agrees to pay to Franchisor, concurrently with signing this Agreement, an initial franchise fee ("Initial Franchise Fee") in the amount set forth in Section 23.14. Franchisee acknowledges and agrees that the Initial Franchise Fee represents payment for the initial grant of the right to use the Marks and Licensed Methods, that Franchisor has earned the Initial Franchise Fee upon receipt, and that the Initial Franchise Fee is not refundable to Franchisee after it is paid.
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5. ROYALTIES
5.1 Royalty. Franchisee will pay to Franchisor a weekly royalty ("Royalty") equal to seven percent (7%) of the total amount of its Gross Sales, defined in Section 5.2, generated from or through its Restaurant.
5.2 Gross Sales. "Gross Sales" is defined as sales of any kind for all services or products from or through the Restaurant, including any sale of services or products made for cash or upon credit, or partly for cash and partly for credit, regardless of collection of charges for which credit is given, and regardless of whether such sale is conducted in compliance with or in violation of the terms of this Agreement, or whether such sale is at the Franchised Location or off-site, but exclusive of discounts, sales taxes, or other similar taxes and credits. Gross Sales also include the fair market value of any services or products received by Franchisee in barter or exchange for its services and products and all insurance proceeds received by Franchisee for loss of business due to a casualty to or similar event at the Franchised Location.
5.3 Royalty Payments. Royalty payments will be paid weekly and sent to Franchisor or for Franchisor's and its affiliates' benefit by electronic funds transfer, due on Thursday (for the preceding Monday through Sunday period) or such other specific day of the week which Franchisor designates from time to time ("Due Date").
On the Due Date each week, Franchisee shall report by telephone, electronic means, or in written form, as Franchisor directs (as more fully described in Section 15), Franchisee's Gross Sales and such additional information requested by Franchisor. Franchisor shall have the right to verify such Gross Sales reports from time to time as it deems necessary in any reasonable manner. If Franchisee fails to have sufficient funds in its account or otherwise fails to pay any Royalties due as of the Due Date, Franchisee shall owe, in addition to such Royalties, a late charge equivalent to two percent (2%) per month of any late Royalty payment; provided, however, in no event shall Franchisee be required to pay a late payment at a rate greater than the maximum commercial contract interest rate permitted by applicable law.
5.4 Electronic Funds Transfer. Franchisee authorizes Franchisor and its affiliates to initiate debit entries and credit correction entries to Franchisees checking, savings or other account for the payment of Royalties, Marketing and Promotion Fees, and any other amounts due from Franchisee under this Agreement or otherwise. Franchisee shall comply with Franchisors and its affiliates' procedures and instructions in connection with the direct debit process, and shall sign any document or take any action that may be required to effect this authorization.
Franchisor may require Franchisee to pay the Royalty, Marketing and Promotion Fees, and other amounts due under this Agreement or otherwise by means other than automatic debit whenever Franchisor deems appropriate, and Franchisee agrees to comply with Franchisor's payment instructions.
5.5 Application of Payments. Notwithstanding any designation Franchisee might make, Franchisor may apply any payments made by Franchisee to any of Franchisee's past due indebtedness to Franchisor or its affiliates. Franchisee acknowledges that Franchisor has the
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right to set-off any amounts Franchisee owes Franchisor or its affiliates against any amounts Franchisor or its affiliates might owe Franchisee.
6. DEVELOPMENT OF FRANCHISED LOCATION
6.1 Approval of Franchised Location. Franchisor, either directly or through its affiliate, shall make the final determination to approve or reject any site which Franchisee proposes to Franchisor. That determination may be based on various criteria and procedures which may change from time to time in Franchisors discretion. If Franchisee proposes a site, and Franchisor determines that it does not meet its criteria, it will be rejected, and Franchisee will be required to propose an alternative site. Franchisee may operate a QUIZNOS Restaurant only at a site approved by Franchisor. Franchisee shall follow Franchisor's site selection procedures in locating a Franchised Location for the Restaurant, as provided in Section 3.1 above. Franchisee shall submit a completed site submittal package, including demographics and other materials requested by Franchisor, containing all information reasonably required by Franchisor to assess a proposed Franchised Location. The Franchised Location shall be deemed approved upon approval by Franchisor of the site and lease pursuant to this Section 6.
6.2 Lease Approval. Unless Franchisor approves otherwise, its affiliate or designated representatives will negotiate the terms of Franchisees lease, including review by our affiliate for the benefit of the QUIZNOS system to ensure that it meets minimum QUIZNOS requirements. When a negotiated lease is presented to Franchisee, Franchisee will have the option of proceeding with or passing on the site. Franchisee acknowledges that it has been advised to obtain the advice of its own professional advisors before Franchisee signs a lease. If Franchisee does not agree with the lease provisions that Franchisors affiliate or representative has negotiated, Franchisee may elect not to sign the lease, but Franchisee would then have to find another suitable site for the Franchised Location. If Franchisee rejects a site because Franchisee does not agree with the lease provisions that Franchisors affiliate or representative has negotiated, Franchisor may permit another franchisee to enter into a lease for such site, whether on the terms rejected by Franchisee or on other terms, or to search for a site in Franchisees initially identified area. Franchisee will then have to search for another suitable site, which may be in that area or outside of that area. Franchisee must not, without Franchisors prior written consent, enter into any contract to purchase or lease the premises Franchisee intends to use as a Franchise Location. Franchisee acknowledges that doing so may result in its being obligated on a lease for premises which Franchisor will not allow to be developed as a QUIZNOS Restaurant.
Franchisee acknowledges that Franchisors lease negotiations and approval of locations are for Franchisors sole benefit and are not intended to imply or guarantee the success or profitability of the Franchised Location, and Franchisee agrees that it is not relying on Franchisors lease negotiations or site approval for such purposes. Upon submission of a proposed Franchised Location for the Restaurant, Franchisee shall pay Franchisor or its designated supplier (which may be an affiliate of Franchisor) a lease review fee of One Thousand Four Hundred Fifty Dollars ($1,450) for a full lease review, or Five Hundred Dollars ($500) for a cursory review (if the lease meets certain criteria) ("Lease Review Fee"). The Lease Review Fee pays the expenses incurred to review and (if Franchisor so chooses) to negotiate certain provisions of the lease. Franchisee is not a third-party beneficiary of the lease
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negotiation or review. Franchisee agrees that Franchisor does not guarantee that the terms, including rent, will represent the most favorable terms available in that market. Franchisor shall charge Franchisee only one (1) Lease Review Fee unless Franchisee refuses to sign a lease that Franchisor has certified as acceptable for the Franchised Location, and Franchisor then is required to engage in one or more additional lease reviews for the Franchised Location (or for a different Franchised Location if Franchisee refuses to sign any lease for the first proposed Franchised Location), in which case Franchisee shall pay Franchisor or its designated supplier a Lease Review Fee for the first lease review as well as a Lease Review Fee for each additional lease review.
6.3 Schedule. Franchisee acknowledges and agrees that it has twelve (12) months from the Effective Date of this Agreement within which to obtain an executed lease for the Franchised Location, complete the initial training program described in Section 7.1, perform all other pre-opening obligations and commence operation of the Restaurant. If Franchisee does not commence operation of the Restaurant by the end of such twelve (12) month period, and Franchisor determines, in its sole discretion, that Franchisee is making reasonable and continuing efforts to actively and diligently obtain a site acceptable to Franchisor so that Franchisee can reasonably be expected to open the Restaurant within twenty-four (24) months from the Effective Date of this Agreement, Franchisor will extend the deadline to commence operation for another twelve (12) months so long as Franchisee continues to actively and diligently seek to obtain a suitable location and/or lease and otherwise pursue the opening of the Restaurant. Franchisee acknowledges and agrees that, unless Franchisor extends the deadline, Franchisor may terminate this Agreement any time after the expiration of the first twelve (12) month period if Franchisee has not commenced operation of the Restaurant. Franchisee further acknowledges and agrees that, if Franchisor extends the deadline and Franchisee fails, in Franchisors sole discretion, to actively and diligently pursue the opening of the Restaurant during such period, Franchisor may, upon notice, rescind the extension and terminate this Agreement. Franchisor also has the right to terminate this Agreement upon the expiration of the twenty-four (24) month period. Any lease for the Franchised Location shall be collaterally assigned to Franchisor as security for Franchisee's performance of its obligations under this Agreement. Franchisee shall deliver a copy of the signed lease for the Franchised Location to Franchisor within five (5) days after it is signed.
6.4 Conversion and Design. Franchisee acknowledges that the layout, design, decoration, and color scheme of Restaurants are an integral part of the Licensed Methods, and, accordingly, Franchisee shall convert and decorate the Franchised Location in accordance with Franchisor's plans, designs, and specifications. Franchisee also shall obtain Franchisor's written consent to any conversion, design, or decoration of the Franchised Location before remodeling or decorating begins, recognizing that such remodeling and decoration, and any related costs, are Franchisee's sole responsibility.
6.5 Signs. Franchisee shall purchase or otherwise obtain for use at the Franchised Location and in connection with the Restaurant the maximum number and size of signs allowed by applicable building codes, which signs shall comply with Franchisor's standards and specifications. It is Franchisee's sole responsibility to ensure that all signs comply with applicable local ordinances, building codes, and zoning regulations. Any modifications to
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Franchisor's standards and specifications for signs due to local ordinances, codes, or regulations shall be submitted to Franchisor for prior written approval. Franchisee acknowledges that the Marks, or any other name, symbol, or identifying marks on any signs, shall be used only in accordance with Franchisor's standards and specifications and only with Franchisor's prior written approval.
6.6 Equipment. Franchisee shall purchase or otherwise obtain for use in connection with the Restaurant the equipment, including delivery vehicles (if the Restaurant is approved to offer delivery services) and computer hardware and software, of a type and in an amount which complies with Franchisor's and its affiliates' standards and specifications and only from suppliers or other sources approved and/or designated by Franchisor and its affiliates. Franchisor and its affiliates may approve one or more suppliers for certain items and/or may designate a single supplier for certain items. Franchisor and/or its affiliates may be an approved or the designated supplier for certain items. Franchisee acknowledges that the type, quality, configuration, capability, and performance of the Restaurant's equipment are all standards and specifications which are a part of the Licensed Methods. Franchisee shall purchase or lease (as Franchisor and its affiliates designate) for use in the Restaurant an electronic cash register or computer system, a music system, and a credit card processing system (the "Systems") approved by Franchisor and its affiliates. The cash register or computer system must accurately record every sale or other transaction. Franchisee shall purchase, or Franchisor or an affiliate may license to Franchisee for the license fee it determines, software to be used by Franchisee in conjunction with the Systems. Franchisee shall submit any required reports in a format designated from time to time by Franchisor. Franchisee grants Franchisor and its affiliates the right to access the Systems and to obtain sales, sales mix, and revenue information directly by modem or otherwise. Franchisee acknowledges that Franchisor and its affiliates will use information from required reports primarily to make business and marketing decisions. Franchisee shall be obligated to upgrade or update the Systems and the software, and any other equipment, at Franchisee's sole cost, to meet Franchisor's and its affiliates' then-current standards and specifications and to address technological developments or events. Franchisor and its affiliates have no obligation to reimburse Franchisee for any of these costs.
6.7 Permits and Licenses. Franchisee agrees to obtain all permits and licenses required for the lawful construction and operation of its Restaurant together with all certifications from government authorities having jurisdiction over the Franchised Location that all requirements for construction and operation have been met, including, without limitation, zoning, access, sign, health, fire, and safety requirements; building and other required construction permits; licenses to do business; fictitious name registrations; sales tax permits; health and sanitation permits; and ratings and fire clearances. Franchisee agrees to obtain all customary contractors' sworn statements and partial and final lien waivers for construction, remodeling, decorating, and installation of equipment at the Franchised Location. Franchisee shall keep copies of all health department, fire department, building department, and other reports of inspections on file and available for inspection by Franchisor. Franchisee shall immediately forward to Franchisor any such reports or inspections in which Franchisee has been found not to be in compliance with the underlying regulation.
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6.8 Commencement of Operations. Franchisee shall obtain the written consent of Franchisor prior to commencing operation of the Restaurant, which consent shall not be unreasonably withheld, but cannot be granted until Franchisor has approved the Franchised Location and Franchisee has: (1) successfully completed the initial training program; (2) paid all fees and other amounts due to Franchisor and its affiliates; (3) furnished copies of all insurance policies required by this Agreement; (4) built out and equipped the Franchised Location in accordance with Franchisor's and its affiliates' standards and specifications and received a QUIZNOS certificate of occupancy from Franchisor; (5) purchased an inventory of approved products and supplies; and (6) otherwise completed all other aspects of developing the Restaurant as Franchisor has reasonably required. Notwithstanding the foregoing, Franchisee agrees to commence operation of the Restaurant within the deadline for commencement of operation described in Section 6.4 hereof and within ten (10) days after Franchisor has approved the Franchised Location for commencement of operation.
7. TRAINING
7.1 Initial Training Program. Franchisee (or, if Franchisee is a corporation, partnership, or limited liability company, its managing shareholder, partner, or member ("Managing Owner")) and the person designated by Franchisee to assume primary responsibility for managing the Restaurant ("Designated Manager") must attend and successfully complete the initial training program offered by Franchisor at one of Franchisor's designated training facilities. The Managing Owner must own at least twenty-five percent (25%) of the voting and economic interest of the franchisee entity. Franchisee acknowledges that successful completion of the initial training program will require, among other things, that each attendee be able to demonstrate that he/she can perform basic math and can read, write, and converse in English by passing a basic skills test. The Managing Owner and the Designated Manager (if designated at the time) must take and pass the basic skills test when Franchisee signs this Agreement and receive a passing score. Franchisee agrees that the Designated Manager will be fluent in the English language. Up to three (3) individuals (including the Managing Owner and Designated Manager) are eligible to participate in Franchisor's initial training program without paying any tuition or fee. Franchisor may require Franchisee (or its Managing Owner) and/or the Designated Manager (each a Trainee) to pass certain tests prior to attending certain portions of the training program. These tests include the basic skills test, which each Trainee must have passed before he/she begins training (and which the Managing Owner must have taken and passed when Franchisee signed this Agreement). Franchisor may require a Trainee to take these tests at facilities operated by Franchisor and its affiliates or at test facilities operated by independent third parties. Any costs related to taking these tests, including travel, lodging or test administration fees charged by third parties, will be borne by Franchisee. Franchisee shall be responsible for any and all travel and living expenses incurred in connection with attending the training program as well as wages or salaries, if any, of the person(s) receiving training or undergoing testing. Franchisee (or its Managing Owner) and the Designated Manager must successfully complete the initial training program before Franchisee begins operating the Restaurant. Franchisor reserves the right to waive all or a portion of the training program or alter the training schedule.
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Franchisee (or its Managing Owner) and its Designated Manager may request additional training during the initial training program, to be provided at no additional charge, if Franchisee (or its Managing Owner) and the Designated Manager do not feel completely trained in the operation of a QUIZNOS Restaurant. However, if Franchisee (or its Managing Owner) and the Designated Manager satisfactorily complete Franchisor's initial training program, and do not inform Franchisor in writing at the end of the initial training program that Franchisee (or its Managing Owner) and the Designated Manager do not feel completely trained in the operation of a QUIZNOS Restaurant, then Franchisee will be deemed to have been trained sufficiently to operate a QUIZNOS Restaurant.
7.2 Additional Training Programs. Franchisor reserves the right to conduct training programs or seminars at locations to be determined by Franchisor to discuss relevant business trends and share new information relating to the Restaurant business. Attendance at periodic market meetings by Franchisee (or its Managing Owner) or its Designated Manager is required. All such mandatory training will be offered without tuition or a fee; provided, however, Franchisee will be responsible for any and all transportation and living expenses incurred in attending such additional training programs or seminars.
8. OPERATIONS MANUAL
8.1 Operations Manual. Franchisor agrees to loan to Franchisee one (1) or more manuals, technical bulletins, or other written or videotaped materials (collectively referred to as "Operations Manual") covering the Restaurant's operating and marketing techniques and any Special Product(s) applicable to the Restaurant. Franchisee agrees that it shall comply with the Operations Manual, as amended from time to time, as an essential part of its obligations under this Agreement. Franchisee shall at all times be responsible for ensuring that its employees and all other persons under its control comply with the Operations Manual in all respects. Franchisee shall not duplicate the Operations Manual nor disclose its contents to persons other than employees or officers who need the information to perform their jobs. If Franchisees copy of the Operations Manual is lost, destroyed, or significantly damaged, Franchisee agrees to obtain a replacement copy from Franchisor at Franchisors then applicable charge.
At Franchisors option, Franchisor may post some of all of the Operations Manual on a restricted Website, intranet, or extranet to which Franchisee will have access. (For purposes of this Agreement, Website means an interactive electronic document contained in a network of computers linked by communications software, including, without limitation, the Internet and World Wide Web home pages.) If Franchisor does so, Franchisee agrees to monitor and access the Website, intranet, or extranet for any updates to the Operations Manual. Any password or other digital identification necessary to access the Operations Manual on a Website, intranet or extranet will be deemed to be Franchisors proprietary information, subject to Section 20.5 below.
8.2 Changes to Operations Manual. Franchisor reserves the right to revise the Operations Manual from time to time as it deems necessary to update operating and marketing techniques or standards and specifications in any manner, including updates contained in monthly newsletters. Franchisee shall in turn update its copy of the Operations Manual as
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instructed by Franchisor and conform its operations with the updated provisions. Franchisee acknowledges that the master copy of the Operations Manual maintained by Franchisor at its principal office controls in the event of a dispute over its contents.
9. DEVELOPMENT ASSISTANCE
9.1 Franchisor's Development Assistance. To assist Franchisee in establishing the Restaurant, Franchisor and/or its designated representatives (which may include its affiliates) shall provide the following:
(a) Assistance related to accepting a site for the Restaurant, although Franchisee acknowledges that Franchisor has no obligation to select or acquire a site on behalf of Franchisee. Franchisor's assistance will consist of, at a minimum, providing general criteria for a satisfactory site, determining whether a proposed site fulfills the requisite criteria prior to formal acceptance of a site selected by Franchisee, and (at Franchisor's election) designating a real estate broker whom Franchisee must use to contact the landlord of a proposed site. Site selection, acquisition, and development shall be the sole obligation of Franchisee, except as set forth in this Agreement or any other written agreement executed by Franchisor. Franchisee acknowledges that Franchisor is under no obligation to provide additional site selection services other than as set forth in a written, executed agreement and that Franchisor's acceptance of the site does not imply or guarantee the success or profitability of the site in any manner whatsoever.
(b) Standards and specifications for the build out, interior design, layout, floor plan, signs, designs, color, and decor of the Restaurant.
(c) Advice regarding the standards and specifications for the equipment, supplies, and materials used in, and the menu items offered for sale by, the Restaurant and advice regarding selecting suppliers for and purchasing such items.
(d) Guidance in implementing advertising and marketing programs, operating and sales procedures, and bookkeeping and accounting programs.
(e) The initial training in accordance with Section 7.1.
(f) Opening assistance consisting of one (1) or more representatives on site at the Franchised Location for not less than five (5) days to assist Franchisee in opening the Restaurant; provided, however, that Franchisee shall hire and be exclusively responsible for the training, compensation, and control of its employees.
(g) One (1) copy of the Operations Manual, as described in Section 8, which shall be loaned to Franchisee during the term of this Agreement.
9.2 Responsibilities of Area Director. Franchisor reserves the right to retain the services of an area director ("Area Director") or other representative (including one or more of its affiliates) in the geographic area in which Franchisee's Restaurant will be located. In such event, the Area Director or other representative, on behalf of Franchisor, will perform certain sales, site assistance, and/or supervisory services directed by Franchisor. Franchisee agrees in
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advance to any such delegation and assignment by Franchisor of any portion or all of Franchisor's obligations and rights under this Agreement. Franchisee also acknowledges that it is not a third party beneficiary of any Area Director Marketing Agreement or other agreement between Franchisor and any Area Director or other representative.
10. OPERATING ASSISTANCE
10.1 Franchisor's Assistance. Franchisor agrees that, during Franchisee's operation of the Restaurant, Franchisor and/or its designated representatives (which may include its affiliates) shall make available to Franchisee the following assistance:
(a) Upon the reasonable request of Franchisee, telephone consultation regarding the continued operation and management of a Restaurant and advice regarding Restaurant services, product quality control, menu items, and customer relations issues.
(b) Access to advertising and promotional materials developed by Franchisor and its affiliates through the Marketing and Promotion Fund (as defined below).
(c) On-going updates of information and programs regarding menu items and their preparation, the Restaurant business, and related Licensed Methods, including information about special or new services or products developed and made available to franchisees of Franchisor.
(d) The initial training program to replacement or additional Designated Managers during the term of this Agreement. Although Franchisor does not currently charge a tuition or fee, Franchisor reserves the right to charge a tuition or fee, payable in advance, commensurate with the then-current published prices of Franchisor for such training. Franchisee shall be responsible for all travel and living expenses incurred by its personnel during the training program.
11. FRANCHISEE'S OPERATIONAL COVENANTS
11.1 Business Operations. Franchisee acknowledges that it is solely responsible for the successful operation of its Restaurant and that its continued operation depends on, among other things, Franchisee's compliance with this Agreement and the Operations Manual. In addition to all other obligations contained in this Agreement and the Operations Manual, Franchisee agrees that:
(a) Franchisee shall maintain a clean, safe, and high quality Restaurant operation and promote and operate the business in accordance with the Operations Manual and otherwise conduct itself so as not to detract from or adversely reflect upon the name and reputation of Franchisor and the goodwill associated with the QUIZNOS name and Marks.
(b) Franchisee will conduct itself and operate its Restaurant in compliance with all applicable laws, regulations, and other ordinances and in such a manner so as to promote a good public image in the business community and to enhance the goodwill of QUIZNOS Restaurants, QUIZNOS name, and the Marks. Franchisee will be solely and fully responsible for
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obtaining any and all licenses to operate the Restaurant. Franchisee shall keep copies of all health department, fire department, building department, and other similar reports of inspections on file and available for inspection by Franchisor and its affiliates. Franchisee shall immediately forward to Franchisor and/or its designated representatives (which may include its affiliates) any such reports or inspections in which Franchisee has been found not to be in compliance with the underlying regulation.
(c) Franchisee acknowledges that proper management of the Restaurant is important and shall ensure that Franchisee (or its Managing Owner) or a Designated Manager who has completed the initial training program will be responsible for managing the Restaurant after commencement of operations and be present at the Franchised Location during its operation. Franchisee (or its Managing Owner) or the Designated Manager must work full-time at the Restaurant.
(d) Franchisee acknowledges that the franchise requires and authorizes Franchisee to offer only authorized products and services as described in the Operations Manual, which may include, without limitation, submarine and other sandwiches, salads, other authorized food and beverage products, and related restaurant and carry out or delivery services. Separate certification or approval may be required from time to time in order to be authorized to offer certain products or services. Franchisee shall maintain at all times a sufficient supply of all menu items and related food and paper products to ensure, insofar as possible, that such items are at all times available to its customers. Franchisee shall offer all types of services and products from time to time prescribed by Franchisor and shall not offer any other types of services or products, or operate or engage in any other type of business or profession, from or through the Restaurant, unless Franchisor's written consent is first obtained. Franchisor may prescribe the maximum prices that Franchisee may charge customers for products and services offered and sold by the Restaurant, and Franchisee agrees to comply with these maximum prices.
(e) Franchisee shall promptly pay when due all taxes and other obligations owed to third parties, including, without limitation, all federal, state, and local taxes and any and all accounts payable or other indebtedness incurred by Franchisee in operating the Restaurant.
(f) Franchisee shall comply with all agreements with third parties related to the Restaurant, including, in particular, all provisions of any premises lease or Sublease.
(g) Franchisee agrees to renovate, refurbish, remodel, or replace, at its own expense, the real and personal property and equipment used in operating the Restaurant when reasonably required by Franchisor in order to comply with the image, standards of operation, and performance capability established by Franchisor from time to time. If Franchisor changes its image or standards of operation, it shall give Franchisee a reasonable period of time within which to comply with such changes.
(h) Franchisee shall at all times during the term of this Agreement own and control the Restaurant. Upon request of Franchisor, Franchisee shall promptly provide satisfactory proof of such ownership to Franchisor. Franchisee represents that the Statement of Ownership in Section 23.15 below is true, complete, accurate, and not misleading. Franchisee
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shall promptly provide Franchisor with a written notification if it wishes to change any of the information contained in the Statement of Ownership at any time during the term of this Agreement and shall comply with the applicable transfer provisions contained in Section 16. Franchisee acknowledges that, if Franchisee is other than an individual(s), Franchisor may require that the individual owners or members of Franchisee guarantee the performance of Franchisee and sign the Guaranty and Assumption of Franchisee's Obligations attached to this Agreement.
(i) Franchisee shall at all times during the term of this Agreement keep its Restaurant open during the business hours designated by Franchisor from time to time in the Operations Manual. Any deviations from the required hours first must be approved in writing by Franchisor which approval may be revoked or rescinded by Franchisor at any time on notice.
(j) Franchisee shall procure, maintain, and provide evidence of insurance for the Restaurant and its operations of the types, in the minimum amounts, and with such minimum terms and conditions as Franchisor from time to time prescribes in the Operations Manual or otherwise. All of the required policies of insurance shall name Franchisor, and any affiliates of Franchisor that Franchisor periodically designates, as additional insureds and provide for thirty (30) days' advance written notice to Franchisor of their cancellation or modification. Franchisee acknowledges that, by establishing required minimum insurance, Franchisor is not advising Franchisee that such minimum insurance is sufficient or all that Franchisee needs or should procure for its business or the Restaurant. Franchisee agrees to seek the advice of its insurance advisor with respect to the sufficiency of such insurance.
(k) Franchisee will provide proof of insurance to Franchisor before beginning operations at its Restaurant. This proof will show that the insurer has been authorized to inform Franchisor in the event any policies lapse or are canceled or modified. Franchisor has the right to change the insurance Franchisee is required to maintain by giving Franchisee reasonable prior notice. Noncompliance with these insurance provisions shall be deemed a material breach of this Agreement. If Franchisee fails to provide proof of insurance or in the event of any lapse in insurance coverage: (i) Franchisor or its affiliates may obtain insurance coverage for Franchisee, and Franchisee must pay the premiums by electronic funds transfer from Franchisee's bank account; and (ii) in addition to all other remedies, Franchisor may demand that Franchisee cease operations of the Restaurant until coverage is reinstated.
(l) Franchisee will participate in promotion campaigns and advertising and other marketing programs periodically established or approved by QUIZNOS Restaurants by the Marketing Fund, as described in section 12 below, whether on a national, regional or local basis. In some instances, while participation in a particular marketing program may be mandatory, Franchisor may, on written notice, allow Franchisee to participate at price points which are different than that described in the program, subject to Franchisors right to set maximum pricing as set forth in paragraph (d) above.
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12. ADVERTISING
12.1 Approval and Use of Advertising. Franchisee shall obtain Franchisor's prior written approval of all written advertising or other marketing or promotional programs not previously approved by Franchisor regarding the Restaurant, including, without limitation, "Yellow Pages" advertising, newspaper ads, flyers, brochures, coupons, direct mail pieces, specialty and novelty items, radio and television advertising, Internet "web" pages, and other home pages or domain names on any common carrier electronic delivery system. Any proposed uses not previously approved by Franchisor shall be submitted to Franchisor or its affiliates at least ten (10) days prior to publication, broadcast, or use. Franchisee acknowledges that advertising and promoting the Restaurant in accordance with Franchisor's and its affiliates' standards and specifications are essential aspects of the Licensed Methods, and Franchisee agrees to comply with all advertising standards and specifications. Franchisee also agrees to participate in any promotion campaigns and advertising and other programs that Franchisor and its affiliates periodically establish.
12.2 Grand Opening. Franchisee agrees to conduct a grand opening advertising and promotional program for the Restaurant at the time and in the manner specified by Franchisor and agrees to spend a minimum of Six Thousand Dollars ($6,000) for the grand opening program. Franchisee agrees to provide Franchisor with a summary of grand opening program expenditures within one hundred twenty (120) days after the Restaurant opens. Franchisee's grand opening program will utilize the marketing and public relations programs and media and advertising materials that Franchisor has either developed or approved.
12.3 Marketing and Promotion Fee. Franchisee agrees to pay to Franchisor or its designee (which may be one or more of Franchisor's affiliates), in addition to Royalties, a Marketing and Promotion fee ("Marketing and Promotion Fee") of one percent (1%) of the total amount of Franchisee's Gross Sales. The Marketing and Promotion Fee shall be in addition to and not in lieu of Franchisee's Local Advertising Fee. The following terms and conditions will apply to the Marketing and Promotion Fee payment:
(a) The Marketing and Promotion Fee shall be payable weekly, concurrently with the payment of the Royalties, based on Gross Sales (as defined in Section 5.2) for the immediately preceding reporting period. Franchisee shall execute such forms that Franchisor and its affiliates require to allow preauthorized payment of Marketing and Promotion Fees by electronic transfer of funds from Franchisee's bank account to the bank account designated by Franchisor. Any Marketing and Promotion Fee collected by or for Franchisor will be deposited in one (1) or more separate accounts (referred to collectively as the "Fund"), all designated as "QUIZNOS Marketing and Promotion Fund." The Marketing and Promotion Fees will be subject to the same late charges as the Royalties. Upon written request by Franchisee, Franchisor or its affiliates will make available to Franchisee, no later than one hundred twenty (120) days after the end of each calendar year, an annual unaudited financial statement for the Fund which indicates how deposits to the Fund have been spent. Franchisor and its affiliates have the right to deposit into the Fund any advertising, marketing, or similar allowances paid by suppliers who deal with Restaurants and with whom Franchisor and its affiliates have agreed that they will (or if Franchisor and its affiliates otherwise choose to) so deposit these allowances.
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QUIZNOS Restaurants that Franchisor or its affiliates own will contribute to the Fund on the same basis as franchisees.
(b) The Fund will be administered and controlled by Franchisor or its designated representatives (which may be one or more of Franchisor's affiliates) and may be used for production and placement of media advertising, direct response literature, direct mailings, brochures, collateral advertising material, surveys of advertising effectiveness, other advertising or public relations expenditures relating to advertising QUIZNOS Restaurants services and products, providing professional services, materials, and personnel to support the marketing function, and creating, producing, and implementing websites for Franchisor and/or its franchisees. Franchisor may reimburse itself or its designated representatives (which may be one or more of Franchisor's affiliates) for administrative costs, independent audits, reasonable accounting, bookkeeping, reporting, and legal expenses, taxes, and other reasonable direct and indirect expenses incurred by Franchisor or its representatives in connection with the programs funded by and the administration and operation of the Fund. The Fund will not be Franchisor's asset. Franchisor and its representatives will not be liable for any act or omission that is consistent with this Agreement and done in good faith. Franchisor and its representatives may spend in any fiscal year more or less than the aggregate contribution of all Restaurants to the Fund in that year, and the Fund may borrow from Franchisor or others (including Franchisor's affiliates) to cover deficits or invest any surplus for future use. All interest earned on monies contributed to the Fund will be used to pay advertising costs before other assets of the Fund are expended. Franchisor may cause the Fund to be incorporated or operated through a separate entity at such time as Franchisor deems appropriate, and such successor entity, if established, will have all rights and duties specified in this Section. Franchisor and its representatives undertake no obligation to ensure that the Fund benefits each Restaurant in proportion to its respective contributions. The Fund's primary purpose is to support sales by the entire QUIZNOS System and to build brand identity. Franchisee agrees to participate in any promotion campaigns and advertising and other programs that the Fund periodically establishes.
(c) Franchisor and its representatives have the right, but no obligation, to use collection agents and institute legal proceedings to collect Fund contributions at the Fund's expense. Franchisor and its representatives also may forgive, waive, settle, and compromise all claims by or against the Fund. Franchisor and its representatives may at any time defer or reduce contributions of a franchisee and, upon thirty (30) days' prior written notice to Franchisee, reduce or suspend Fund contributions and operations for one (1) or more periods of any length and terminate (and, if terminated, reinstate) the Fund. If the Fund is terminated, all unspent monies will be distributed to the contributors in proportion to their respective Fund contributions during the preceding twelve (12) month period.
12.4 Local Advertising. Franchisee agrees to spend not less than three percent (3%) of the total amount of its Gross Sales each calendar quarter for local advertising ("Local Advertising Fee"). Franchisor may request that Franchisee prepare and submit a quarterly report to Franchisor which accounts for the use of the Local Advertising Fee no later than ten (10) days following the end of each calendar quarter during the term of this Agreement. Franchisor may collect and designate all or a portion of the Local Advertising Fee for the Marketing and Promotion Fund.
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12.5 Regional Advertising Programs. Although not obligated to do so, Franchisor or its designees (which may be one or more of Franchisors affiliates) may create a regional advertising program ("Regional Advertising") for the benefit of the Restaurants located within a particular region. Franchisor has the right to (i) allocate any portion of the Marketing and Promotion Fund to the Regional Advertising program; and (ii) collect and designate all or a portion of the Local Advertising Fee for a Regional Advertising program. If a Regional Advertising program is established, Franchisor may increase the Local Advertising Fee by one percent (1%); provided that in no event shall Franchisee be required to spend more than a total of five percent (5%) of its Gross Sales, in the aggregate, for the Local Advertising Fee, Regional Advertising, and Marketing and Promotion Fee contributions, including Yellow Pages advertising. Franchisor and its designees have the right to determine the composition of all geographic territories and market areas for the implementation of Regional Advertising and promotion campaigns and to require that Franchisee participate in such Regional Advertising programs as and when established. The fees designated to the Regional Advertising programs may be used to pay regional, multi-regional or national marketing expenses, including, but not limited to, administrative costs of Franchisor and/or its designees (including its affiliates) incurred in maintaining and administering the Regional Advertising programs. Franchisor and its designees also reserve all other rights with respect to the use of Regional Advertising fees, and the conduct of Regional Advertising programs, as those retained in Section 12.3 above with respect to the Marketing and Promotion Fund. Franchisor and its designees may at any time, upon thirty (30) days' prior written notice to Franchisee, suspend a Regional Advertising program for one (1) or more periods of any length and terminate (and, if terminated, reinstate) the Regional Advertising program.
12.6 Local Advertising Cooperative. Franchisor may develop a program to permit QUIZNOS Restaurants in a geographical area to establish a local advertising cooperative (Local Advertising Cooperative) in accordance with the policies prescribed by Franchisor from time to time. If Franchisor develops and implements such a program, formation of a Local Advertising Cooperative will be at the option of the franchisees of QUIZNOS Restaurants in the geographical area. However, each Local Advertising Cooperative will be organized and governed in the form and manner that Franchisor determines in advance and all advertising, marketing or promotional plans or materials will be subject to Franchisors prior written approval.
Any contributions made to a Local Advertising Cooperative shall be in addition to, and not in lieu of, Franchisees obligations under Sections 12.1 through 12 .5 of this Agreement.
13. QUALITY CONTROL
13.1 Standards and Specifications. Franchisor will establish, and Franchisee shall comply with, standards and specifications for services and products offered at or through the Restaurant and the uniforms, recipes, materials, forms, menus, items, and supplies used in connection with the franchised business. Franchisor and its affiliates reserve the right, from time to time, to change standards and specifications for services and products offered at or through the Restaurant or for uniforms, recipes, materials, forms, items, and supplies, and Franchisee agrees to comply with such changes as they are communicated by Franchisor.
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The original documents were scanned as an image. The original file can be downloaded at the link above.