UFOC

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Sample UFOC

FRANCHISE OFFERING CIRCULAR

SFO FRANCHISE DEVELOPMENT LTD

an Ohio limited liability company

9150 South Hills Blvd., Suite 225

Broadview Heights, Ohio 44147

Phone: (440)717-9450x103

The Franchise offered is for a "San Francisco Oven" fast casual eatery which specializes in the sale of brick oven pizzas, soups, salads and sandwiches prepared according to Our recipes and specifications.

The initial franchise fee for a Restaurant is $25,000. If You enter into a development agreement to develop more than one Restaurant, upon signing the Development Agreement You will pay a development fee equal to $25,000 for the first Restaurant to be developed plus $10,000 multiplied by each additional Restaurant to be developed under the Development Agreement. The development fee is applied pro rata to the initial franchise fees due. The estimated initial investment required to establish one Restaurant, including the initial franchise fee, is $474,100 to $807,300. This sum may not represent Your total investment in the Franchised Business (see Items 5-7 of this Offering Circular for further explanation concerning the total investment).

RISK FACTORS:

1.          THE FRANCHISE AGREEMENT AND AREA DEVELOPMENT AGREEMENT REQUIRE THE FRANCHISEE TO ARBITRATE WITH THE FRANCHISOR ONLY IN OHIO. OUT OF STATE ARBITRATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO ARBITRATE WITH THE FRANCHISOR IN OHIO THAN IN YOUR OWN STATE.

2.          THE FRANCHISE AGREEMENT AND AREA DEVELOPMENT AGREEMENT STATE THAT THE LAW OF THE FRANCHISOR'S HOME STATE GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.

3.          THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

INFORMATION ABOUT COMPARISONS OF FRANCHISORS IS AVAILABLE. CALL THE STATE ADMINISTRATOR LISTED ON ATTACHMENT A OR YOUR PUBLIC LIBRARY FOR SOURCES OF INFORMATION.

REGISTRATION OF THIS FRANCHISE WITH THE STATE DOES NOT MEAN THAT THE STATE RECOMMENDS IT 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 AND THE APPROPRIATE STATE AGENCY LISTED ON ATTACHMENT A.

Effective Date: April 26, 2004

FOR USE ONLY IN THE STATE OF CALIFORNIA

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TABLE OF CONTENTS

Page

ITEM1........................................................................................................................................................................1

FRANCHISOR, ITS PREDECESSORS AND AFFILIATES....................................................................1

ITEM 2........................................................................................................................................................................3

BUSINESS EXPERIENCE................................................................................................................................3

ITEM 3........................................................................................................................................................................4

LITIGATION........................................................................................................................................................4

ITEM 4..........................................:.............................................................................................................................4

BANKRUPTCY....................................................................................................................................................4

ITEM 5........................................................................................................................................................................4

INITIAL FRANCHISE FEE..............................................................................................................................4

ITEM 6........................................................................................................................................................................5

OTHER FEES.......................................................................................................................................................5

ITEM 7........................................................................................................................................................................8

INITIAL INVESTMENT....................................................................................................................................8

ITEMS......................................................................................................................................................................13

RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES..................................................13

ITEM 9......................................................................................................................................................................17

FRANCHISEE'S OBLIGATIONS.................................................................................................................17

ITEM 10....................................................................................................................................................................18

FINANCING........................................................................................................................................................18

ITEM 11....................................................................................................................................................................18

FRANCHISOR'S OBLIGATIONS................................................................................................................18

ITEM 12....................................................................................................................................................................27

TERRITORY.......................................................................................................................................................27

ITEM 13....................................................................................................................................................................30

TRADEMARKS..................................................................................................................................................30

ITEM 14....................................................................................................................................................................31

PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION.................................................31

ITEM 15....................................................................................................................................................................32

OBLIGATIONS OF FRANCHISEE TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISED BUSINESS....................................................................................................................32

ITEM 16....................................................................................................................................................................33

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RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL...........................................................33

ITEM 17....................................................................................................................................................................35

RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION...................................35

ITEM 18....................................................................................................................................................................41

PUBLIC FIGURES............................................................................................................................................41

ITEM 19....................................................................................................................................................................42

EARNINGS CLAIMS........................................................................................................................................42

ITEM 20....................................................................................................................................................................42

LIST OF OUTLETS...........................................................................................................................................42

ITEM 21....................................................................................................................................................................44

FINANCIAL STATEMENTS..........................................................................................................................44

ITEM 22....................................................................................................................................................................44

CONTRACTS......................................................................................................................................................44

ITEM 23.....................................................................................................................................................................44

RECEIPT.................................................................................................................................................................44

EXHIBITS

A-        FINANCIAL STATEMENTS

B -       DEVELOPMENT AGREEMENT

C -       FRANCHISE AGREEMENT

D-       FRANCHISEE LIST

E -       TABLE OF CONTENTS OF OPERATIONS MANUAL

F -       STATE SPECIFIC ADDENDUM

G -       LIST OF FRANCHISE BROKERS

ATTACHMENTS

A - LIST OF STATE ADMINISTRATORS/AGENTS FOR SERVICE OF PROCESS

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1TEM1 FRANCHISOR. ITS PREDECESSORS AND AFFILIATES

Franchisor

SFO Franchise Development Ltd. (referred to in this Offering Circular as "San Francisco Oven," "We," "Us," or "Our") was formed as an Ohio limited liability company in July 2002. Our principal place of business is 9150 South Hills Blvd., Suite 225, Broadview Heights, Ohio 44147, and we do business as "San Francisco Oven". In this Offering Circular, We refer to the person or entity that will be signing the Franchise Agreement (defined below) as "You" "Your," or "Franchisee."We have been offering franchises since the Spring of 2003 and have previously never offered franchises in this or any other lines of business.

We have written the Offering Circular in "plain English" in order to comply with legal requirements. Any differences in the language in this Offering Circular describing the terms, conditions or obligations under the Franchise Agreement, Development Agreement or any other agreements is not intended to alter in any way Your or Our rights or obligations under the particular agreement.

Our agents for service of process are listed in Attachment A.

Our Predecessors and Affiliates

We are wholly owned by our predecessor, San Francisco Oven, LLC, which is an Ohio limited liability company located at our headquarters, which was formed on May 8, 2001 ("Predecessor") and which is majority owned by our principals, Matt Harper and Eddie Cerino. Our Predecessor owns the proprietary mark, through an assignment from Mariana Enterprises Inc. on January 14, 2003, "San Francisco Oven Brick Oven Pizza" and sublicenses its use to us on a perpetual, royalty free, sublicensing arrangement.

We have an affiliate, SFO Willoughby, Ltd., which is an Ohio limited liability company formed on May 10, 2001, and is also wholly owned by our Predecessor. Our affiliate owns a "San Francisco Oven" Restaurant located at 34601 Ridge Road, Willoughby, Ohio 44094 which was opened in November, 2001 and which we operate under an operations services arrangement. This Restaurant also serves as our Corporate Test Kitchen and Training Center.

Description of Franchise

We offer franchises for the right and license to establish and operate "San Francisco Oven" Restaurants to be primarily located in retail shopping centers or urban locations under the Marks and the System, according to the terms of a Franchise Agreement ("Restaurant" or "Franchised Business"). We may, however, consider sites such as train stations, sports arenas, airports, university campuses or other captive market spaces on a case by case basis ("Non-Traditional Location"). The marketing strategy of the Restaurant is to utilize the themes and attractions of San Francisco throughout the Restaurant to provide a unique dining experience. Each Restaurant will typically offer a menu of brick oven pizza, soups, salads and sandwiches prepared according to Our proprietary recipes and ingredients. Restaurants will typically range in size between 2,800 and 3,500 square feet.

The Restaurants are established and operated under a comprehensive and unique system (the "System"). The System includes distinctive signage, interior and exterior design, decor and color scheme; special recipes and menu items, including proprietary products and ingredients; uniform

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standards, specifications, and procedures for operations; quality and uniformity of products and services offered; inventory, management and financial control procedures (including point of sale and financial tracking systems); training and assistance; and advertising and promotional programs; all of which We may change, improve, and further develop, in Our discretion. Certain aspects of the System are more fully described in this Offering Circular and the Manuals that are provided to You as a franchisee (described in Item 11).

We offer the rights to develop one or more Restaurants within a specifically described geographical Territory ("development rights") under the terms of an Area Development Agreement (the "Development Agreement"), Exhibit B to this Offering Circular. We will determine and include a description of the Territory in the Development Agreement before You sign it. The Development Agreement requires You to establish one or more Restaurants within the Territory according to a development schedule, and to enter into a separate single unit Franchise Agreement (the "Franchise Agreement"), for each such Restaurant established when a site acceptable to Us has been selected. The size of the Territory will vary depending upon local market conditions and the number of Restaurants to be developed (see Item 12). Upon signing the Development Agreement, you will be referred to as the "Developer'1. Developers may be an individual, corporation, partnership, limited liability company, or other form of legal entity. Under the Development Agreement, certain parties are characterized as Developer's Principals (referred to in this Offering Circular as "Your Principals"). The Development Agreement is signed by Us, by You, and by those of Your Principals whom We designate as Controlling Principals. In most instances, We will designate Your principal equity owners and executive officers, and certain affiliated entities as Controlling Principals. By signing the Development Agreement, Your Controlling Principals agree to be individually bound by certain obligations in the Development Agreement, including covenants concerning confidentiality and non-competition, (see Item 15). Depending on the type of business activities in which You or Your Principals may be involved, We may require You or Your Principals to sign additional confidentiality and non-competition agreements. You must also designate an "Operating Principal" who will be the primary individual responsible for Your business. If You are an individual, You will be the Operating Principal. If You are not an individual, the person You designate as Your Operating Principal must maintain an equity interest in You. The Operating Principal must sign the Development Agreement as the Operating Principal and as one of Your Controlling Principals (see Item 15). The Operating Principal must individually make certain covenants in the Development Agreement.

The Franchise Agreement for each Restaurant developed under the Development Agreement will be in the form contained in Attachment A to the Development Agreement attached as Exhibit C to this Offering Circular amended only to the extent mandated by State or Federal Law. We will deliver to You a Franchise Agreement after we have approved the site You have selected for the Restaurant. You will be required to sign the Franchise Agreement within 10 days after we deliver it to You. The Franchise Agreement contains concepts similar to the Development Agreement involving the "Franchisee's Principals," Controlling Principals of Franchisee, and an Operating Principal of Franchisee. For purposes of this Offering Circular, the terms Your Principals, Controlling Principals and Operating Principal include those persons having similar obligations identified in both the Development Agreement and Franchise Agreement, and the terms You, Your, and Franchisee also include the Developer under the Development Agreement, unless We have noted otherwise. Any reference to the "Agreements" means the Development Agreement, and the Franchise Agreement, as applicable.

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Competition

The market for the brick oven pizza, soup, salad and sandwich food products and services offered by the Restaurants is highly competitive. Our competitors include casual dining and fast casual restaurants such as California Pizza Kitchen, Panera Bread, Atlanta Bread Company, Baja Fresh and Chipotle. However, We believe Our competitive position is enhanced by Our operational format and by the food products offered by the Restaurants. We plan to continue controlled expansion into areas that We determine can support the Restaurants to improve name recognition and the reputation of the System through ftanchised businesses.

Industry Regulations

The restaurant industry is regulated on the federal, state and local levels. The preparation and handling of food is federally regulated by the Pure Food and Drugs Act of 1906; the Federal Food, Drug and Cosmetic Act and by rules and policies of the Food and Drug Administration. State requirements relating to food safety typically pertain to sanitation and handling. Local inspectors may also enforce sanitation and handling rules created on the state and/or local level.

Among the licenses and permits You may need are: Zoning or Land Use Approvals, Sunday Sale Permits, Liquor Licenses, Sales and Use Tax Permits, Special Tax Stamps, Fire Department Permits, Food Establishment Permits, Health Permits, Alarm Permits, County Occupational Permits, Retail Sales Licenses, and Wastewater Discharge Permits. There may be other laws, rules or regulations which affect Your Restaurant, including minimum wage and labor laws along with ADA, OSHA and EPA considerations. We recommend that You consult with Your attorney for an understanding of them.

ITEM 2 BUSINESS EXPERIENCE

President and Chief Executive Officer: Matthew Harper

Mr. Harper has been the President and CEO of San Francisco Oven, located in Broadview Heights, Ohio, since May 2001. He is also the Vice President of Mariana Enterprises, located in Brecksville, Ohio, since June 1993 to the present.

Vice President and Executive Chef: Edward Cerino

Mr. Cerino has been the Vice President of San Francisco Oven, located in Broadview Heights, Ohio, since November 2001. He is also the owner of Mariana Enterprises, located in Brecksville, Ohio, since June 1993 to the present. Mr. Cerino is also a graduate of the Culinary Institute of America in Hyde Park, New York.

Chief Financial Officer: R. Gene Dover

Mr. Dover has been Chief Financial Officer of San Francisco Oven , located in Broadview Heights, Ohio, since July, 2004. He is also a Certified Public Accountant (not in public practice) and managing principal of the Dover Consulting Group, located in Westlake, Ohio, since 1997 to the present.

Vice President, Marketing & Brand

Development:

Lynne Abramovich

Mrs. Abramovich has been Vice President for Marketing and Brand Development of San Francisco Oven, located in Broadview Heights, Ohio since January, 2005. She was employed by Malone Advertising, located in Akron, Ohio from 1978 to 2005.

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Treasurer: Shirley Harper

Ms. Harper has been the Treasurer of San Francisco Oven, located in Broadview Heights, Ohio, since November 2001. She is also the Accountant of Mariana Enterprises, located in Broadview Heights, Ohio, since April 1993 to the present.

We have a Regional Developer in Florida, SFO Support Group, LLC, whose Operating Principal, Tim Curtis, has been the owner and of Houligan's Irish Sports Pub located in Ormond Beach, Florida since its inception in 1990.

We employ an outside broker to sell our franchises. Exhibit G discloses any sales agents affiliated with our company.

ITEM 3 LITIGATION

No litigation is required to be disclosed in this Offering Circular.

ITEM 4 BANKRUPTCY

No person previously identified in Items 1 or 2 of this Offering Circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code or comparable foreign law required to be disclosed in this Item.

ITEM 5 INITIAL FRANCHISE FEE

Development Agreement: When You sign the Development Agreement for Territories located outside of the State of Florida, You must pay us a development fee equal to $25,000 for the first Restaurant to be developed plus $10,000 for each additional Restaurant to be developed under the Development Agreement. For Territories located within the State of Florida, the development fee is $35,000 for the first Restaurant to be developed plus $10,000 for each additional Restaurant to be developed under the Development Agreement. The development fee must be paid in a lump sum and is non-refundable. The estimated initial investment under the Development Agreement shall be the same as for the single unit franchise, $474,100 to $807,300.

Franchise Agreement: When you sign a Franchise Agreement for the right and license to operate each Restaurant established within Territories located outside of the State of Florida, you must pay Us an initial franchise fee of $25,000. Within the State of Florida, the initial franchise fee is $35,000. For the first Restaurant You develop under the Development Agreement, we will reduce the initial franchise fee by a portion of the development fee equal to 100% of the initial franchise fee. For each Restaurant developed after the first, We will apply $10,000 of the development fee toward the initial franchise fee due under the Franchise Agreement. The balance of the initial franchise fee due is payable immediately upon execution of the Franchise Agreement for the Restaurant. We also reserve the right to adjust this formula depending upon the size of the Territory and the financial ability of Our developer.This fee is used in part for Our working capital and in part for Our profit. If You cannot obtain possession of the licensed location for the Restaurant or are denied the required permits, licenses, variances or approvals to operate the Restaurant within six months after You have signed the Franchise Agreement, We have the right to terminate the Franchise Agreement. If we terminate the Franchise Agreement under these circumstances, we will reinstate and reschedule your right to develop the

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Restaurant within the Territory at an alternative location under the Development Agreement; and apply 75% of the initial franchise fee that you paid with the Franchise Agreement toward the initial franchise fee that will be due when you sign the Franchise Agreement for the Restaurant at the alternative location. This policy may be revoked by Us at any time. If We decide to revoke this policy, We will provide written notice to franchisees that have executed a Franchise Agreement to establish a single Restaurant at least 60 days before the revocation takes effect. This is the only refund provision available to you at this time.

In the State of Illinois only, we will defer the payment of the initial franchise fee, development fee and any other initial payment until all of our material pre-opening obligations have been satisfied. The initial franchise fee and development fee are deferred until you open your business and it is operating. However, you must execute the Franchise Agreement prior to looking for a site or beginning training.

The deferral requirement has been imposed by the Illinois Attorney General's Office based on the Franchisor's financial condition.

ITEM 6 OTHER FEES

Fees (1)

Amount

Due Date

Remarks

Royalty Fee (2)

5% of Gross Sales; 6% of Gross Sales in the State of Florida

Weekly on Wednesday

We will initiate an electronic debit transaction (EFT) to your designated bank account to withdraw and pay the Amounts due.

Creative Fund (3)

1% of Gross Sales

Weekly on Wednesday

We will initiate an electronic debit transaction (EFT) to your designated bank account to withdraw and pay the Amounts due.

Local Advertising

2% of Gross Sales

Monthly - as incurred by You

Your contributions to an Advertising Cooperative are credited against Your local advertising obligations.

Cooperative Advertising (4)

Maximum -1 lA% of Gross Sales

As determined by Cooperative

Your Cooperative contribution may be allocated by Us to the Creative Fund. We will initiate an electronic debit transaction (EFT) to your designated bank account to withdraw and pay the Amounts due.

Advertising &

Promotional

Materials

Varies, depending on Your advertising needs

When billed

See Items 7 and 11. We will initiate an electronic debit transaction (EFT) to your designated bank account to withdraw and pay the Amounts due.

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Fees(l)

Amount

Due Date

Remarks

Interest

18% or highest rate allowed by applicable law

On demand

Interest may be charged on all overdue amounts.

Prohibited Product or Service Fine

$250 per day of use of unauthorized products or services

If incurred

In addition to other remedies available to us

Additional Assistance

If You request additional assistance, You must pay the current per diem charge for Our employees used to provide the assistance and Our associated costs. Current per diem $250.

When billed

We provide opening assistance for the First Restaurant established under the Development Agreement without additional charge (see Item 11). Any additional assistance You request is billed at the current per diem rate. Amounts due will be withdrawn by EFT from Your designated bank account.

Transfer Fee

$5,000 reimburse Us for Our reasonable costs and expenses in reviewing the transfer application

Submitted with transfer application

No fee charged to an individual or partnership franchisee that transfers its rights to a corporation controlled by the same interestholders. A transfer fee of a similar amount is charged under both the Franchise Agreement and the Development Agreement.

Public Offering

$5,000 to reimburse Us for Our reasonable costs and expenses in reviewing the proposed securities offering

When billed

This covers Our cost to review the proposed offering of Your securities. The offering fee is the same amount under both the Franchise Agreement and the Development Agreement.

Additional or Remedial Training

Our cost in providing the training

Before additional training commences

We reserve the right to charge a fee for additional or remedial training that is not mandatory. We do not charge for mandatory training. Cost will vary based on the staff, location, and type of training being offered.

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Fees (1)

Amount

Due Date

Remarks

Inspection and Testing

Cost of inspection or testing

When billed

We may require You to pay Us or an independent laboratory for the cost of inspection or testing if You purchase or lease items used in the Restaurant from sources We have not previously approved (see Item 8).

Audit Fee

Cost of audit

When billed

Payable only if We find, after an audit, that You have understated any amount You owe to Us by more than 2%

Late Payment or Reporting Fee

$50 per day You are late

Daily

If You fail to pay royalties when due, We may charge You $50 per day until the payment is received.

Manual Replacement Fee

$500

When billed

If You request additional or replacement copies of the Manual (see Item 11).

Notes:

1.          All fees described in this Item 6 are non-refundable. Except as otherwise indicated in the preceding chart, We impose all fees and expenses listed and You must pay them to Us. Except as specifically stated above, the amounts given may be increased based on changes in market conditions, Our cost of providing services and future policy changes. At the present time We have no plans to increase payments over which We have control.

2.         For the purposes of determining the royalties to be paid under the Franchise Agreement, "Gross Sales" means the total selling price of all services and products and all income of every other kind and nature related to the Restaurant or otherwise arising out of the Restaurant's operations, including without limitation sales or orders of food, food products, beverages, food preparation services, catering services, and delivery services. Gross Sales shall be determined without regard for the amounts or forms of tender received in connection therewith, except as otherwise provided herein. Gross Sales shall expressly exclude the following:

a.    Vending machine / pay phone revenues. Receipts from the operation of any public telephone installed in the Restaurant, or products from vending machines located at the Restaurant, except for any amount representing Franchisee's share of such revenues.

b.    Sales Tax Collected. Sums representing sales taxes collected directly from customers, based upon present or future laws of federal, state or local governments, collected by Franchisee in the operation of the Restaurant, and any other tax, excise or duty which is levied or assessed against Franchisee by any federal, state, municipal or local authority, based on sales of specific merchandise sold at or from the Restaurant, provided that such taxes are actually transmitted to the appropriate taxing authority.

c.    Sales of Trade Fixtures. Proceeds from incidental sales of trade fixtures not constituting any part of Franchisee's products and services offered for resale at the Restaurant nor having any material effect upon the ongoing operation of the Restaurant required under this Agreement.

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d.    Discounts and Allowances. The value of Customer and employee discounts, coupons redeemed, and complimentary meals;

e.    Employee Meals. The value of meals furnished to Franchisee's employees as an incident to their employment;

f.    Gift Cards. The proceeds from the sale of gift cards, gift certificates, or other similar sales vouchers.

We may authorize certain other items to be excluded from Gross Sales. Any exclusion may be revoked or withdrawn at any time by Us. The royalty fee will be withdrawn from Your designated bank account by electronic fund transfer ("EFT") weekly on Wednesday based on Gross Sales from the preceding week. You are required to maintain sufficient funds in Your designated bank account for the Restaurant to cover Our electronic debit transactions.

3.          Effective in March, 2005, We have established and administer a national creative fund on behalf of the System (see Item 11) to provide national or regional creative materials for the benefit of the System.

4.          Cooperatives will be comprised of all franchised Restaurants located in designated geographic areas. Each Restaurant has one vote in the cooperative. Each Franchisor-owned Restaurant shall also have one vote in the cooperative. The range for such fee shall be between 0 to 1 Vi percent One Cooperative has been established as of the date of this Offering Circular.

ITEM 7 INITIAL INVESTMENT

Expenditure

Actual or

Estimated (Low)

Estimated High

When Payable

Method

of Payment

Whether Refundable

To Whom Paid

Initial Franchise Fee (1)

$25,000

$35,000

On signing Franchise Agreement

Lump Sum

Nonrefundable except as described

below

Us

Leasehold

Improvements

(2)

$255,100

$460,800

As Arranged

As Invoiced

No

Independent Contractors

Lease Payments and other rental expenses (3)

$6,000

$10,000

Monthly

Per Lease

No

Landlord

Equipment (4)

$100,000

$150,000

As Arranged

As Invoiced

No

Designated Vendors

Signage (5)

$15,000

$22,000

As Arranged

As Invoiced

No

Designated Vendors

Initial Inventory (6)

$8,500

$12,000

As Arranged

As Invoiced

No

Designated Vendors

Architectural/ Engineering (7)

$15,000

$25,000

As Arranged

As Invoiced

No

Designated Vendor

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Expenditure

Actual or Estimated

(Low)

Estimated HiRh

When Payable

Method

of Payment

Whether Refundable

To Whom Paid

Point of Sale Computer System (8)

$22,000

$28,000

As Arranged

As

Invoiced

No

Designated Vendor

Facsimile Machine and other office equipment (9)

$500

$1,000

Lump Sum

As Invoiced

No

Designated

Independent

Vendor

Travel, lodging and meals for initial training (10)

$1,500

$12,000

As Incurred

As Incurred

No

Independent Suppliers

Business Supplies (stationery, business cards, menus, gift cards, paper and other materials) (11)

$2,000

$4,000

Lump Sum

As Invoiced

No

Us or

Independent

Suppliers

Business licenses, permits, utility deposits, etc. (for first year) (12)

$2,500

$7,500

As Arranged

As Incurred

No

Various Agencies

Insurance deposits and premiums (for first month) (13)

$1,000

$5,000

As Arranged

As Invoiced

No

Independent Carrier

Grand Opening Advertising (14)

$5,000

$10,000

As Arranged

As Incurred

No

Suppliers

Additional Funds (3 months) (15)

$15,000

$25,000

As Arranged

As Incurred

No

Various Vendors

TOTAL

$ 474,100

$ 807,300

Notes: The initial start-up phase of the franchised business is 3 to 4 months.

(1)        The estimate includes the initial franchise fee of $25,000 which you must pay when you sign a Franchise Agreement for Restaurants located outside of the State of Florida. The initial Franchise fee is $35,000 for Restaurants located within the State of Florida The initial franchise fee is nonrefundable under the terms of the Franchise Agreement, unless you are unable to obtain possession of the Restaurant location or are denied the required permits or approvals for operating the Restaurant in which case we may apply 75% of the initial franchise fee toward the initial franchise fee due when you sign a new Franchise Agreement for an alternative location, (see Item 5). The estimated initial investment under the Development Agreement is the same as for the single unit franchise, $474,100 to $807,300.

(2)        The estimates for leasehold improvements are based upon the landlord providing you with a "vanilla box" consisting of 3,000 square feet of space. They anticipate the cost of adapting Our

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prototypical architecture and design plans and are based on the rates and conditions typically experienced within the Cleveland, Ohio metropolitan area, and in some cases as estimated by US based general contractors, for remodeling and finish-out work. The cost of leasehold improvements will vary from the estimates depending on numerous factors, including: (i) the size and configuration of the premises; (ii) pre-construction costs (e.g., demolition of existing walls and removal of existing improvements and fixtures); (iii) regional differences in the cost or availability of materials and labor within the geographical area in which the Restaurant is located; and (iv) the extent to which certain leasehold improvements included in the estimates may be paid for by the landlord.

(3)        Lease payment estimates are for the first month's base rent and assume that the premises of the Restaurant will consist of 3,000 square feet of space in a strip shopping center or urban location, and that no security deposit is required. They are based on annual base rental rates ranging from $20 to $36 per square foot, plus Your share of shopping center operating expenses such as common area maintenance ("CAM"), real estate taxes, and insurance, estimated from 12% to 20% of the base rent. In addition to base rent, You may also have to pay additional variable rent based on a percentage of your gross sales. The actual amount You pay under the lease will vary from the estimates depending on the size and location of the Restaurant, the types of shopping center operating charges that are allocated to tenants under the lease, the prevailing rental rates within the Restaurant's geographic region, and Your ability to negotiate with landlords.

(4)        These estimates include Your cost for equipment meeting Our specifications to be utilized in Restaurant operations, including refrigerated coolers, a brick oven, dishwasher, walk in cooler, shelving, mixer, microwave oven, work tables, convection oven and other items including smallwares. We have established relationships with equipment vendors for certain equipment used in the Restaurant that meet Our specifications. Refurbished equipment is also available many times.

(5)        These estimates represent Your cost for menu boards, menu panels, neon logo and descriptive signs and other graphics to "brand" both the interior and exterior of the store. Your actual costs may vary from the estimates based on local sign ordinances and Your landlord's signage restrictions, if any.

(6)        These estimates represent Your initial inventory of food supplies and paper goods for use in the initial phase of operating the Restaurant.

(7)        These fees are estimates of Your costs to obtain any architectural and design services necessary for adapting Our prototypical plans and specifications for the construction of the Restaurant, which is a requirement of the Franchise Agreement.

(8)        This estimate represents the cost of hardware and software for the Aloha Quick Service POS System which You are required to install to our exact specifications and use in the Restaurant operations. To ensure uniformity and consistency throughout Our System, we have established relationships with Authorized Aloha POS Partners, to configure and install the POS Systems for all of our Franchisees. You must acquire your System from an Authorized Aloha POS Partner. You are also required to augment and/or upgrade the system software and hardware in order to implement the latest computer technology from time to time as We may require. The System includes at a minimum the following:

■ Aloha Quick Service POS System Software

Software

■ Aloha Electronic Draft Capture (EDC) Software

- Windows XP Pro

■ Norton Anti-Virus

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pcAnywhere

■     QSR Video Software / Aloha Video MX software / Video Software

■     E-card Gift Certificate Software

■     E-Frequency Customer Loyalty Software

■     Aloha Centralized Database Management (CDM) Software

Dedicated Server (1)

■     Intel Pentium 4 - 2.8 GHz Processor (minimum)

■     512 MB RAM

■     80+ GB Hard Drive

■     CD-RW Drive

■     External 56K Baud Modem

■     LCD Flat Panel Monitor

■     Keyboard and Mouse

■      16 Port Switch

■     500VA Uninterruptible Power Supply w/Windows Shut down

■     4-port Cable/DSL Router - If not supplied by ISP

■     Inkjet, Laser or Multifunction Printer

POS Terminals (cash registers) (quantity commensurate with restaurant size, but not less than 2)

■     Radiant Systems 1510 POS Workstation w/ 256MB RAM, 10+HD, Network Card, Magnetic Card Reader, and Windows XP Embedded

■     Epson TM-T88IH Thermal Printer - Grey

■     350V A Uninterruptible Power Supply

■     2 x 20 Customer Display

■     Cash Drawer with Mounting Hardware

Kitchen Monitors (4)

■     15" LCD Flat Panel Monitor

■     QSR Video Display Kit - Bump Bar, ePic I/O Unit, and Cables

Other

■     High Speed Internet Access - DSL or Cable with Static IP Address

■     Category 5e Network Cabling

■     Dedicated and Isolated Power Outlets / Circuits

This cost for this equipment will vary based upon the type of hardware purchased as well as the utilization of flat panel monitors and utilizing refurbished equipment, when available. By purchasing the Aloha POS system you automatically become enrolled into the Aloha Membership Program for a period of one year. Renewals of your Aloha Membership Program will be at an annual fee of 10% ($600-$ 1000 per year), based on your system. We have the right, as described in Item U, to poll Your system at Our discretion. You are therefore required to subscribe to the Aloha "Enterprise" service which will allow constant data communication with the corporate office. You must also sign up for the Aloha "ecard" program which is an automated gift card program. You must pay the cost for the "Enterprise" service and the "ecard" service. We estimate this cost to range from $250 to $750 for initial installation and $200 to $300 per month thereafter. You will be billed monthly by us for this service. Amounts due will be withdrawn by EFT from Your designated bank account. We may also require you to participate in other POS based programs such as frequent diner programs etc. You will be responsible for any costs that are incurred for these programs. You must also keep all software current and up to date. All San Francisco Oven Restaurants must be on the same version of software at all times. We will maintain your software database and schedule all approved software upgrade installations with you. You will be advised about the fees for upgrade installations prior to their being scheduled. All San Francisco Oven Restaurants must be on the same version of software at all times.

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(9)        You must have a facsimile machine to communicate with Us and to accept fax menu/catering orders, and it must be able to cut pages as they are received or print on single sheet paper. It will also be necessary to have a copy machine for general use. You will also need to have a DSL line or other form of high speed internet access for the POS system.

(10)      We provide initial training to Your Operating Principal, General Manager, and one of your other employees at no additional charge. These estimates include only Your out-of-pocket costs associated with the training of these individuals (including travel, room, and board). These amounts do not include any fees or expenses for training any other personnel. Training is for three weeks. These costs will vary depending on Your selection of lodging and dining facilities and mode and distance of transportation.

(11)      You must purchase business cards, brochures and other written materials for use in the franchise business. You will typically purchase amounts that may last as long as six months. You may purchase these materials from Us or independent vendors that have been approved by Us.

(12)      These are estimates of the costs for obtaining local business licenses which typically remain in effect for one year. These figures do not include occupancy and construction permits which were included in the leasehold improvement costs. The cost of these permits and licenses will vary substantially depending on the location of the franchised business. This figure does not include the purchase of a "wine and beer" license from a government authority. The cost for these licenses can vary from city to city and state to state. The estimates also include Your utility deposits. Utility deposits may or may not be needed if you have another operating business.

(13)      These figures are estimates of the cost of the initial deposit/premiums for the insurance You must obtain and maintain for the franchised business as described in Item 8.

(14)      You must spend a minimum of $5,000 on a grand opening advertising campaign. We reserve the right to approve all advertisements used in Your grand opening advertising campaign, and Your campaign must be conducted in the 90 day period comprising 30 days prior to and 60 days following opening of Your Restaurant.

(15)      We have relied on Our 12 years of restaurant experience as well as 3 years of operating a San Francisco Oven, as well as implementing future improvements to our operating system in compiling these estimates. Additional items that will need to be purchased or leased include telephone system, music system, floor mats, uniforms, in store training, needed to cover your expenses for the start-up phase of Your business. You must maintain sufficient funds in your checking account for EFT purposes and other costs. These figures are estimates and We cannot assure You that You will not have additional expenses starting the Restaurant. Your actual costs will depend on factors such as Your management skill, experience and business acumen; local economic conditions; the local market for products; the prevailing wage rate; competition; and the sales level reached during the start-up phase. These amounts do not include any estimates for debt service.

Except as specifically stated above, the amounts given may be subject to increases based on changes in market conditions, Our cost of providing services and future policy changes. At the present time, We have no plans to increase payments over which We have control.

We have not included a separate table for the initial investment if You sign a Development Agreement. Other than the initial fee for the Development Agreement, actual start-up costs pertaining to the actual Restaurants opened under the Development Agreement are as estimated above, subject to

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potential increases over time or other changes in circumstances. If You execute a Development Agreement, Your professional fees such as legal and financial may be higher.

ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

You must purchase or lease and install all fixtures, furnishings, equipment (including the Point of Sale computer system hardware and software), decor items, signs and related items We require, all of which must conform to the standards and specifications in Our Manuals or otherwise in writing (as defined in Item 11), unless You have first obtained Our written consent to do otherwise. You may not install or permit to be installed on the Restaurant premises any fixtures, furnishings, equipment, decor items, signs, games, vending machines or other items without our written consent or do not comply with our specifications. If You lease any of the property described above from a third party, We must approve the lease in writing before it is signed. We will not approve the lease unless it permits Your interest in the lease to be assigned to Us if the Franchise Agreement terminates or expires and that prohibits the lessor from imposing an assignment or related fee on assignment.

To ensure that the highest degree of quality and service is maintained, You must operate the Restaurant in strict conformity with the methods, standards and specifications that We prescribe in the Manuals or otherwise in writing. You must maintain in sufficient supply and use and sell at all times only those food and beverage items, ingredients, products, materials, supplies and paper goods that meet Our standards and specifications. All menu items must be prepared according to the recipes and procedures specified in the Manuals or other written materials. You must not deviate from these standards and specifications by the use or offer of non-conforming items or differing amounts of any items, without obtaining Our written consent first. You must sell and offer for sale only those menu items, products and services that We have expressly approved for sale in writing. You must offer for sale all products and services required by Us in the manner and style We require, including dine-in and carry-out services and the sale of pre-packaged food products. You must not deviate from Our standards and specifications without obtaining Our written consent first. You must discontinue offering for sale any items, products and services We may disapprove in writing at any time. We can, and expect to, modify Our standards and specifications as We deem necessary. We will provide You notice of any changes in the Manuals.

You must permit Us or Our agents, at any reasonable time, to remove a reasonable number of samples of food or non-food items from Your inventory or from the Restaurant free of charge for testing by Us or by an independent laboratory to determine whether the samples meet Our then-current standards and specifications. Besides any other remedies We may have, We may require You to pay for the testing if We have not previously approved the supplier of the item or if the sample fails to conform to Our specifications (see Item 6).

Except for proprietary products and promotional materials provided by Us or Our designated suppliers (or delivery vehicles that You may use in the operation of the Restaurant), You must obtain all food and beverage items, ingredients, supplies, materials, fixtures, furnishings, equipment (including electronic cash register, computer hardware and software), and other products used or offered for sale at the Restaurant solely from suppliers who demonstrate, to Our continuing reasonable satisfaction, the ability to meet Our then-current standards or according to Our standards and specifications. You may use a supplier of Your choice, provided We approve the supplier You choose. Our criteria for supplier approval may be found in the Manuals. Among other things, the suppliers must have adequate quality controls and the capacity to supply Your needs promptly and reliably. If You wish to purchase, lease or use any products or other items from an unapproved supplier, You must submit a written request for approval, or must request the supplier to do so. We have to approve any supplier in writing before You

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make any purchases from that supplier. We can require that Our representatives be permitted to inspect the supplier's facilities, and that samples from the supplier be delivered, either to Us or to an independent laboratory, for testing. You must pay the cost of the inspection, and the actual cost of the test must be paid by You or the supplier (see Item 6). We reserve the right to re-inspect the facilities and products of any approved supplier and to revoke Our approval if the supplier fails to continue to meet any of Our then-current standards. Our supplier approval procedure does not obligate Us to approve any particular supplier. However, We will notify You within 30 days after We complete the inspection and evaluation process of Our approval or disapproval of any proposed supplier.

We require You to offer delivery and catering services and any vehicle that You use to deliver Restaurant products and services to customers must meet Our standards for appearance and ability to satisfy the requirements imposed on You under the Franchise Agreement. You must place the signs and decor items on the vehicle We require and must at all times keep the vehicle clean and in good working order. You must require each person providing those services to comply with all laws, regulations and rules of the road and to use due care and caution operating and maintaining the motor vehicles. Except as noted above, We do not have any standards or exercise control over any motor vehicle that You utilize.

We have and may continue to develop for use in the System certain products which are prepared from confidential proprietary recipes and other proprietary products which bear Our Marks, such as proprietary sauces, soup concentrates, dressings and other specialty food products. Because of the importance of quality and uniformity of production and the significance of those products in the System, it is to Your and Our benefit that We closely control the production and distribution of those products. Accordingly, if those products become a part of the System, You will use only Our proprietary recipes and other proprietary products and will purchase those items solely from Us or from a source designated by Us all of Your requirements for those products. You must purchase from Us for resale to Your customers certain merchandise identifying the System that We require, such as pre-packaged food products and San Francisco Oven memorabilia and promotional products, in amounts sufficient to satisfy Your customer demand. You must also obtain certain upgrades for Your Point of Sale computer system.

All advertising and promotional materials, signs, decorations, paper goods (including menus and all forms and stationery used in the Restaurant) and other items We designate must bear the Marks (see Item 13) in the form, color, location and manner We prescribe. In addition, all Your advertising and promotion in any medium must be conducted in a dignified manner and must conform to the standards and requirements in the Manuals or otherwise. You must obtain Our approval before You use any advertising and promotional materials and plans if We have not prepared or approved them during the 12 months before their proposed use.

You must obtain Our approval of the site for the Restaurant before You acquire the site. You must also obtain Our approval of any lease for the Restaurant before You execute the lease. We will not approve any lease unless an addendum to the lease, prepared by Us, is signed by You, by Us and by the landlord. The addendum will contain the following provisions:

1.          The Landlord will deliver to Us a copy of any notice required or permitted under the lease, including notice of default or termination, at the same time such notice is delivered to You.

2.          You assign to Us, with the Landlord's irrevocable and unconditional consent, all of Your rights, title and interests to and under the Lease if the Franchise Agreement terminates or expires without renewal and We notify both You and the Landlord in writing that We assume Your obligations under the Lease.

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3.          We have the right, but not the obligation, upon giving written notice to You and the Landlord, to cure any breach of the Lease and to also succeed to Your rights, title and interests under the Lease.

4.          The Lease may not be modified, amended, renewed, extended or assigned by You without Our prior written consent.

5.          You and the Landlord agree that We will have no liability or obligation whatsoever under the Lease unless and until We assume the Lease in writing.

6.          If We assume the Lease, We may further assign the Lease to another person or entity to operate the restaurant, subject to Landlord's consent, provided that We remain liable for the performance of the tenant's obligations after the date of assignment.

7.          The Landlord and You acknowledge that We have agreed under the Franchise Agreement that We and our employees or agents have the right to enter the Premises for certain purposes and in certain circumstances, including the termination (without renewal) of the Franchise Agreement; and that the Landlord agrees not to interfere with or prevent us from making such entry, provided that We agree to bear the expense of repairing any damage to the Premises as a result of these activities.

Before You open the Restaurant for business, You must obtain the insurance coverage for the Restaurant specified below. This insurance coverage must be maintained during the term of the Franchise Agreement and must be obtained from a responsible carrier or carriers acceptable to Us.

1.          Comprehensive General Liability Insurance, including broad form contractual liability, broad form property damage, personal injury, advertising injury, dram shop liability, completed operations, products liability and fire damage coverage, in the amount of $2,000,000 combined single limit.

2.          "All Risks" coverage for the full cost of replacement of the Restaurant premises and all other property in which We may have an interest with no coinsurance clause.

3.          Crime insurance for employee dishonesty in the amount of $10,000 combined single limit.

4.          Business Interruption insurance in a sufficient amount to cover profit margins, maintenance of competent and desirable personnel and fixed expenses for a period of at least 90 days.

5.          Automobile liability coverage, including coverage of owned, non-owned and hired vehicles, with coverage in amounts not less than $2,000,000 combined single limit.

6.          Workers' compensation insurance in amounts provided by applicable law or, if permissible under applicable law, any legally appropriate alternative providing substantially similar compensation to injured workers, subject to the conditions set forth in the Franchise Agreement.

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7.         Other insurance required by the state or locality in which the Restaurant is

located and operated.

You may, after obtaining Our written consent, elect to have reasonable deductibles under the coverage required under paragraphs 1-6 described above. Also, related to any construction, renovation or remodeling of the Restaurant, You must maintain builders risks insurance and performance and completion bonds in forms and amounts, and written by a carrier or carriers, satisfactory to Us. All of the policies must name Us and the respective officers, directors, shareholders, partners, agents, representatives, independent contractors, servants and employees of each of them, as additional insureds and must include a waiver of subrogation in favor of all those parties.

We may, when appropriate, negotiate purchase arrangements, including price terms, with designated and approved suppliers on behalf of the System. As of the date of this Offering Circular, there are no purchasing or distribution cooperatives for any of the items described above in which We require You to participate.

We may receive discounts on purchases of Point of Sale Computer hardware and software from approved suppliers, which discounts will be made available to You if You purchase through these suppliers. We may also receive discounts from approved suppliers of equipment for the Restaurant which We will make available to You as well. We may obtain certain materials such as cups, napkins, business cards, stationery, flyers, brochures and other promotional materials and memorabilia using Our Marks that You must obtain from Us or sources approved or designated by Us. You must purchase from Us or sources designated by Us certain proprietary products and trademarked food products. We may sell these items to You or have You purchase mem through designated sources at Our cost, plus shipping, handling, a reasonable mark up by the supplier and an amount to compensate Us for Our administrative overhead in connection with these arrangements.

During our last fiscal year, no revenues were derived from any required purchases or leases.

We expect to derive revenue from franchisees' required purchases from suppliers in the next and following fiscal years through a program of rebates from some of Our designated or approved suppliers. We estimate that these rebates will range from 1% to 5% of such purchases. These rebates serve to partially reimburse Us for Our costs in the initial sourcing, approval and ongoing monitoring of compliance with Our quality standards of Our suppliers. We do not anticipate receiving rebates from all of our designated or approved suppliers because in many cases We will instead negotiate proportional reductions in the invoice price of the products sold to Us. We do not undertake any obligation to negotiate the proportional price reductions as each supplier has their own position on the granting (and tracking/accounting for) of price reductions vs. rebates.

You must purchase or lease virtually all goods and services necessary to establish and operate the Restaurants from Us or Our designees, from suppliers approved by Us, or according to Our specifications. We estimate that Your purchases and leases from Us and Our approved suppliers and according to Our specifications will be approximately 90% to 100% of Your costs to establish and operate the franchised business.

When determining whether to grant new or additional franchises, We consider many factors, including compliance with the foregoing requirements.

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ITEM 9 FRANCHISEE'S OBLIGATIONS

THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AND OTHER AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN OTHER ITEMS OF THIS OFFERING CIRCULAR.

Obligation

Section in Agreement

Item in Offering Circular

a. Site selection and acquisition/ lease

Section VI of the Development

Agreement and Section II of

Franchise Agreement

Items 8 and 11

b. Pre-opening purchases/leases

Sections IX, X, XII and XIII of

Franchise Agreement

Items 5,6,7,8 and 11

c. Site development and other pre-opening requirements

Section IV of Franchise Agreement

Items 1,8 and 11

d. Initial and ongoing training

Section XI of Franchise Agreement

Items 5, 6 and 11

e. Opening

Sections IV, VIII, and XIII of Franchise Agreement

Items 5, 6 and 11

f. Fees

Sections IV and VIII of Franchise

Agreement and Section IV of

Development Agreement

Items 5 and 6

g. Compliance with standards and policies/Manuals

Sections IV, V, DC, X, XI, XII,

XIII, XV, XVI, XVII, and XVIII of

Franchise Agreement and Section

VI of the Development Agreement

Items 11 and 14

h. Trademarks and proprietary information

Sections XIV and XVI and

Attachment D of Franchise

Agreement; and Section XIV and

Attachment B to Development

Agreement

Items 11,13 and 14

i. Restrictions on products/services offered

Section XII of Franchise Agreement

Items 8 and 16

j. Warranty and customer service requirements

Section XII of Franchise Agreement

Item 8

k. Territorial development and sales quotas

Section V of Development Agreement

Item 12

1. Ongoing product/service purchases

Section XII of Franchise Agreement

Items 6 and 8

m. Maintenance, appearance and remodeling requirements

Sections IV, XIIXXI, and Section XXVIII of Franchise Agreement

Items 8 and 11

n. Insurance

Section XVIII of Franchise Agreement

Items 7 and 8

o. Advertising

Section XIII of Franchise Agreement

Items 6, 8 and 11

p. Indemnification

Section XIII of Franchise

Agreement and Section XV of

Development Agreement

Item 6

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The original documents were scanned as an image. The original file can be downloaded at the link above.