UFOC

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Sample UFOC

FRANCHISE OFFERING CIRCULAR

Steak-Out Franchising, Inc.

A Georgia Corporation

3091 Governors Lake Drive,

Suite 500

Norcross, Georgia 30071

(678)533-6000

Steak-Out units specialize in home and office delivery, take-out, and catering of quality meals consisting of charbroiled steaks, chicken, burgers, potatoes, salads, desserts and accompanying items, all using the name "Steak-Out" and the systems prescribed by Steak-Out.

An initial Franchise Fee of $25,000 is payable for each unit franchise. Applicants who are awarded the right to operate multiple stores within an area through an Area Development Agreement must pay the Franchise Fee for their first unit, and a $5,000.00 Reservation Fee, which is credited against subsequent franchise fees (assuming compliance with that agreement), for each subsequent unit they are entitled to build at the time rights are granted.

The estimated initial investment for a unit, as reported to us by Franchisees, ranges from $249,500 to $429,400, including certain working capital, opening inventory and advertising costs.

RISK FACTORS:

THE FRANCHISE AGREEMENT AND THE AREA DEVELOPMENT AGREEMENT ARE GOVERNED BY GEORGIA LAW AND LITIGATED DISPUTES RELATING TO THEM MUST BE FILED IN GEORGIA. AT STEAK-OUT'S ELECTION, ANY DISPUTE ARISING FROM THE FRANCHISE AGREEMENT MUST BE SUBMITTED TO BINDING ARBITRATION IN GEORGIA. THE AGREEMENTS PROVIDE CHOICE OF LAW ELECTIONS. GEORGIA LAW MAY PROVIDE BENEFITS AND PROTECTIONS THAT ARE DIFFERENT FROM THOSE OF YOUR HOME STATE. YOU MAY WANT TO COMPARE THESE LAWS. IT IS POSSIBLE THAT LITIGATING IN A STATE OTHER THAN YOUR HOME STATE WOULD BE MORE COSTLY AND THAT IF YOU CHOSE TO SETTLE THE DISPUTE PRIOR TO A JUDICIAL DETERMINATION THE SETTLEMENT COULD BE LESS BENEFICIAL TO YOU.

THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.

Information comparing franchisors is available. Call the state administrators listed in Exhibit D or your public library for sources of information. Registration of this franchise by a 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 state authority listed in Exhibit D.

Steak-Out's web address is www.steakout.com.

Effective Date: April 30, 2006 (Most States)


TABLE OF CONTENTS

PAGE

THE FRANCHISOR, ITS PREDECESSORS AND

AFFILIATES.....................................................................      1

BUSINESS EXPERIENCE...............................................      2

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

BANKRUPTCY................................................................      5

INITIAL FRANCHISE FEE............................................       6

OTHERFEES...................................................................      7

INITIAL INVESTMENT..................................................      9

RESTRICTIONS ON SOURCES OF PRODUCTS AND

SERVICES......................................................................        12

FRANCHISEE'S OBLIGATIONS...................................       15

FINANCING.....................................................................      17

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

TERRITORY.....................................................................      26

TRADEMARKS...............................................................      28

PATENTS, COPYRIGHTS AND PROPRIETARY

INFORMATION...............................................................      29

OBLIGATION TO PARTICIPATE IN THE ACTUAL

OPERATION OF THE FRANCHISE BUSINESS.........       30

RESTRICTIONS ON WHAT THE FRANCHISEE MAY

SELL...............................................................................        30

RENEWAL, TERMINATION, TRANSFER AND

DISPUTE RESOLUTION................................................      31

PUBLIC FIGURES...........................................................       37


EARNINGS CLAIMS......................................................       38

LIST OF OUTLETS.........................................................       40

FINANCIAL STATEMENTS..........................................       41

CONTRACTS...................................................................      42

RECEIPT...........................................................................      42

STATE ADDENDUM (If any)...........................................     appendix

FORM OF FRANCHISE AGREEMENT

FORM OF AREA DEVELOPMENT AGREEMENT

FORM OF INITIAL DEPOSIT AGREEMENT

LIST OF STATE AGENCIES/AGENTS FOR SERVICE OF PROCESS

FRANCHISE BROKERS WHO MAY BE USED

STEAK-OUT FRANCHISEES WHO HAVE CLOSED A UNIT, OR WHO ARENO LONGER AFFILIATED WITH STEAK-OUT, OR WHO HAVE TRANSFERRED A

UNIT

LIST OF FRANCHISEES

FINANCIAL STATEMENTS


competitors will be restaurants offering delivery of other food items. While the market for food products is developed in most areas, the market for delivery of steak, chicken and burgers is largely underdeveloped. Your ability to compete in the market will depend in large part on your own capabilities and dedication, on the geographical area and site location you choose, and on general economic conditions. While we believe that your affiliation with our system is very beneficial, it does not guarantee you a successful or profitable business operation. Our business is not substantially seasonal, though sales may increase with poor weather, or decrease in summer.

There are no government regulations specific to the operation of a Steak-Out Unit, although you will be required to comply with all local, state and federal food, health and sanitation laws and building and zoning requirements. You will also be subj ect to laws governing your relationship with employees, including minimum wage requirements, overtime, working conditions and citizenship requirements. There may be other laws applicable to your business, and we urge you to make further inquiries to your advisors about these laws. Registered agents for service of process are listed in Exhibit D hereto.

As of April 1,2006 there are 67 Units using the Steak-Out brand, including 3 of which that are owned and operated directly or indirectly by our affiliate, Steak-Out Development Corp. The first Steak-Out restaurant opened in 1986, in Huntsville, Alabama. Steak-Out has been granting franchises since January 1988.

Steak-Out maintains principal offices at 3091 Governors Lake Drive, Suite 500, Norcross, Georgia30071 (678)533-6000. Steak-Out was incorporated in the State of Alabama in 1987 and reincorporated in the State of Georgia in 1995.

We do not have a predecessor or affiliate other than as shown in this document.

Item 2 BUSINESS EXPERIENCE

We invite you to meet the members of our team and to review their wealth of experience for yourself. A few of the various members who will be resources to you are listed below.

President CEO and Director: Donald R. Harkleroad

Mr. Harkleroad serves as the Chief Executive Officer and as a Director of Steak-Out, positions he has held since January, 1995. He became the President of Steak-Out in March, 1995. Mr. Harkleroad practiced law from Atlanta, Georgia for the past thirty years. He has also been involved in the management of various other companies operating in the food, banking, real estate,

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Item!

THE FRANCHISOR, ITS PREDECESSORS AND AFFILIATES

tlds

Steak-Out Franchising, Inc. is the Franchisor. To make references easier in refer to the Franchisor as "Steak-Out", or as "we", or "us", and to the entity to which is granted as "you." Certain agreement provisions also apply to your owners.

Circular we the franchise

We operate and grant franchises for the operation of delivery, take-out, catering and other restaurant units (the "Units") under the service mark "Steak-Out" and other marks th; it we may use. We currently do business under our corporate name and Steak-Out. We currently do r(ot do business or offer franchises under any other name or in any unrelated line of business.

Steak-Out Units sell a limited menu primarily of charbroiled steaks, burgers and chicken sandwiches, baked potatoes, salads, desserts and beverages, featuring home and office delivery and take-out and catering services. Each Unit is characterized by a distinctive system that includes unique menus, equipment layout, paper products and other items, recipes and specifications for preparing and delivering food products. Our operating manuals cover business practices and policies, information systems, inventory methods, merchandising and promotional techniques and personnel training.

We offer 3 kinds of agreements to operate with Steak-Out They are an Initial Deposit Agreement, a Franchise Agreement, and an Area Development Agreement.

Our Unit Franchise Agreement (the "Franchise Agreement") (a form is attached asExhibit A) grants an exclusive right to operate one Steak-Out Unit at a specified location and within a specified Delivery Area and governs the construction and operation of the Unit. We also offer an Area Development Agreement (a form is attached as Exhibit B). which grants a right to develop and operate a certain number of Steak-Out Units in a specified area (the "Permitted Area") at specific locations to be designated in separate Franchise Agreements. The number of Units to be developed in the Permitted Area and the Development Schedule on which those Units are required! to be opened will be determined by agreement between you and Steak-Out as part of the Area Ipevelopment Agreement.

The Initial Deposit Agreement referred to above allows you a territory to develop a single Unit for 60 days while we are processing your application, and during which time you can gather information and obtain financing. A form of the Steak-Out Initial Deposit Agreement is attached as Exhibit O.

The food service industry is intensely competitive with respect to price, service, location and food quality. You will be competing with a large number of national and regional rest* urant chains and local restaurant operators. We believe that your direct competitors are small, single or multi-unit delivery businesses offering delivery of steaks, burgers and chicken, and that your primary indirect

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Item 3

LITIGATION

In the course of its business, Steak-Out sometimes becomes involved in certain litigation, some of which is listed below.

Active Litigation

In Riehtwav Restaurants. Inc. etal. v. Oldfield Eastern Corp. et.al. (Northern District of Alabama Civil Action No. C V-02-S-1331 -NE) Steak-Out asserts a claim for trademark infringement, impermissible activities, failure to adhere to franchise agreements and improper conduct against a former licensee of the Steak-Out Marks (Rightway). Steak-Out filed its claims on February 28, 2003, as a third-party intervenor in a case filed by Rightway Restaurants originally on May 30,2002 against Oldfield Eastern Corporation. The original defendant Oldfield Eastern Corporation, which owns certain shares of Steak-Out's parent company, Steak-Out, Inc., also claims against Rightway for monies due related to misrepresentation, failure of consideration, and otherwise. Rightway Restaurants has not filed any claim against Steak-Out Discovery in this case has been completed. In September, 2003 Oldfield Eastern Corporation filed a motion for summary judgment seeking to dismiss the claims of Rightway, and Rightway filed a cross-motion for summary judgment on its claims against Oldfield Eastern Corporation. Also, in September, 2003 Steak-Out filed a motion for partial summary judgment on its claims for trademark infringement and. breach of contract against Rightway, and Rightway filed a defensive cross-motion for summary judgment seeking to dismiss Steak-Out's claims against it. Those motions remain pending. There is no assurance as to the outcome of the litigation.

Inactive Litigation

The Company asserted claims against a franchisee who filed suit June 14, 1996, in Steaks to Go. Inc.. et al. v. Steak-Out Franchising. Inc.. (Northern District of Alabama Civil Action No. CV-96-H-1818-NE) in which a franchisee sought the right to open new stores without Franchisor approval, a determination whether promotion and development fees paid by it are permitted or required to be returned to it periodically for its own expenditure, and determination whether it has the right to install in its stores equipment that has not been tested or approved by Steak-Out No dollar amount of actual or punitive damages was specified in this suit. Steak-Out moved for summary judgment, and the franchisee failed to respond. The franchisee and one of its co-owners filed bankruptcy. The franchisee has failed to pursue this litigation since 1999, and is no longer a Steak-Out franchisee. .

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internet and natural resources fields, and various domestic and international business, civic and charitable organizations.

Vice President Finance and Accounting: Michael T. Anderson

Mr. Anderson has served as Vice President, Finance and Accounting, with Steak-Out since early July, 1995. Mr. Anderson served as Vice President, Franchise Development, and Vice President, Franchise Administration, with America's Favorite Chicken Company from 1992 to July, 1995, as Manager, Worldwide Reservations, with Holiday Inn Worldwide, Inc. in 1992, and as Vice President, Director Corporate and Site Budgeting, Supervisor of Internal Audit, with Days Inns of America, Inc. from 1986 through 1992. All of these positions were in Atlanta, Gecrgia.

Vice President Corporate Development: Joseph M. McCord

Mr. McCord serves as Vice President, Corporate Development of Steak-Out, a position he has held since March, 1995. He served as Executive Vice President and Chief Operating Officer of Steak-Out from March, 1994 to December, 1994. From April 1992 to August 1993, he served as Senior Vice President of World Business Network, Inc., Atlanta, Georgia. From June 1990 to April 1992, he served as Executive Vice President of Academic Management Services, Inc./ ESSI, Atlanta, Georgia. From 1981 to 1989, Mr. McCord worked for Domino's Pizza, Inc., Atlanta, Qeorgia, where he served as Regional Vice President from 1986 -1989.

Vice President of Marketing: Tim Myers

Mr. Myers serves as Vice President of Marketing of Steak-Out, a position he lias held since March, 2000. From May, 1979 to March, 2000, he worked for Boddie-Noell Enterprises in Rocky Mount, North Carolina in various positions, including Assistant Director of Marketing, Director of Marketing, and Director of Purchasing and Product Development. Boddie-Noell Enterprises is the largest franchisee of Hardee's restaurants, with over 300 units.

We may use a franchise broker as listed on Exhibit E hereto in connection witji our sales of franchises.


Dismissed Litigation

In 1999 Steak-Out settled another lawsuit in which Steak-Out asserted counterclaims against a franchisee for breach of contract, while the franchisee sought a right to certain promotion and development fee revenue, and the right to operate an unapproved computer system. (Aikav v. Steak-Out Franchising. Inc. Civil Action No. CV-96-1819-NE, Northern District of Alabama). The Plaintiff subsequently filed bankruptcy in August, 1998, and a purchaser of its assets settled by paying Steak-Out $95,000 and with the franchisee and its principal agreeing not to engage in a competitive business for two years.

In 1998 Steak-Out won summary judgment of approximately $90,000 against a former franchisee whom Steak-Out sued in January, 1997 for breach of trademark protection for its holdover use of Steak-Out's trademarks and for unpaid royalties. In May, 1997 the former franchisee had unsuccessfully counterclaimed alleging Steak-Out had breached the franchise agreemenfiteak-Out Franchising. Inc. v. Bolooki et.al. (Civil Action No. CV 97-H-0118-NE, Northern District of Alabama).

In Steak-Out Franchising. Inc. v. Bostic & Carr Enterprises. LLC and Robert Carr. (Super Ct. of DeKalb Co. Ga. - Civil Action No. 04 cv 12161 -9) filed in November, 2004, the Company asserts a claim for damages against an ex-franchisee, Bostic & Carr Enterprises, LLC, and a guarantor of that entity's obligations. Bostic & Carr Enterprises, LLC abandoned its operations in December, 2003 without prior notice to the Company. The guarantor has answered the Complaint and admitted that Bostic & Carr Enterprises, LLC owes Steak-Out some amount of money. Bostic & Carr Enterprises, LLC has not answered the Complaint. The guarantor settled the claims against it in August, 2005 by a payment to us. No counterclaim was asserted, and the case has terminated.

Other than these five actions, no litigation is required to be disclosed in this Offering Circular.

Item 4

BANKRUPTCY

No person identified in Items 1 or 2 of this Offering Circular has been a debtor in a proceeding under the United States Bankruptcy Code required to be disclosed in this Item.

5


Item 5

INITIAL FRANCHISE FEE

Upon signing of each Franchise Agreement, you must pay us an initial non-refundable franchise fee in the amount of $25,000.00.

To help assure that your Unit is properly advertised, when you sign the Franchise Agreement, or at such later time before your store opening as we specify, you may deposit with us grand opening advertising costs of $15,000.00, which are non-refundable. If you deposit that money with us, we will disburse such funds for your Unit at your direction according to a grand opening plan that you design and that is in form and content approved by us. If you don't deposit that money with us, you will pay it directly to third-parties to advertise your Unit's grand opening.

The total amount of deposits, fees and payments that may be paid to Steak-Out or for all goods and services prior to the opening of a Unit is up to $40,000.

Under the Area Development Agreement, you must pay us a Reservation Fee of $5,000.00 for each Unit required to be developed in the Permitted Area, after the initial Unit. This fee is paid at execution of the Area Development Agreement, and is not refundable. However (assuming compliance with that Agreement) the future franchise fee to which the Reservation Fee relates will be reduced by $5,000.

If you chose to use the Initial Deposit Agreement method, a partially refundable fee of $5,000 is paid, all of which is also credited against your subsequent Franchise Fee. One half oi the $5,000 is refundable to you if you do not sign a Franchise Agreement within sixty (60) days; the other half of the $5,000 fee is non-refundable.


Item 6

OTHER FEES

NAMEOFFEEl:

AMOUNT

DUE DATE

REMARKS

Royalties

5% of Royalty Sales of the Dnit thereafter.2

Payable on the day of the week we periodically designate.

We will debit your bank account for Royalties due3

Promotion and Development Fee

The amount currently charged is 2% of Royalty Sales of the Dnit. This percentage may be increased periodically to not more than 6%.

Payable on the day of the week we

periodically designate.

We will debit your bank account for the Promotion and Development Fee.

Transfer Fee -

Franchise

Agreement

75% of the then-current Franchise Fee for approved transfer to a new franchisee; 50% of the then-current Franchise Fee for approved transfer to an existing franchisee; 20% of the then-current Franchise Fee for approved transfer of less than substantial or controlling ownership in the Franchisee.

When you apply for our consent to transfer

Transfers require our consent and must meet our criteria.

Renewal Fee

50% of the then-current Franchise Fee; currently the Renewal Fee is $12,500

Dpon renewal of Franchise Agreement

N/A

Communication and Information Systems Fee

Currently SO. You may pay annual software maintenance fees to third-parties that may cost $1,000. See Item 11.

Undetermined at this time

The amount of this fee is set by us periodically based on the services to which it relates.

Software License . Fee

Currently SO

Dpon installation of software on the computer hardware in a Dnit.

The amount of the fee may be increased by us.

Relocation Fee

30% of the then-current Franchise Fee; currently $7,500

When you apply for relocation

You must meet our relocation criteria.

Audit and inspection fee

Cost of audit and inspection.

Immediately upon our request

Payable if audit and inspection show that Royalty Sales exceeded amount reported by you or that you have violated the Franchise Agreement.

Secret Shopper Cost

$50 per visit by secret shopper

Immediately upon our request

We retain a third-party firm to secret shop your store approximately twice a month in the first year of operation.

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NAMEOFFEEl:

AMOUNT

DUE DATE

REMARks

Costs and

Will vary under

As incurred

Payable if incurred by

Attorney's fees

circumstances

us in obtaining injunctive or other relief for the

enforcement of any

term of the Franchise

Agreement J

Indemnification

will vary under

As incurred

You have tjo reimburse us if we are held

circumstances

liable for claims

arising frjom your

Unit's operations.

Interest on all

Daily equivalent of

As incurred

Payable as

incurred.

amounts due from

the lesser of 18% per

any fee not paid

annum or highest rate

in full

permitted by law.<

Confidential

?2,000

Upon re-issue of COM

Payable only if your

Operations Manual

COM is lOS

or

("COM")

destroyed.

Replacement Fee

Non Compliance Fee

S500 per day plus

Immediately upon our

Incurred for

costs of investigation

request

investigating non-

and review

compliance

correction

and

Post-termination

Actual and

Immediately upon

These amounts are not

Damages

consequential damages

termination for a

due unless

your

suffered by us, and

default by you.

Franchise Agreement is

(Incurred only

costs and expenses of

terminated

due to your

upon termination

collection, and

default.

of Franchise

liquidated damages

Agreement due to a

equal to the greater

default by you.)

of (i) $10,000 or (ii) the last 24 months continuing fees, or such lesser number of months as remain on your franchise agreement at the time of termination.

Insurance Premiums

Will vary under

Upon due date of

At our elec

:ion, we

circumstances

premium and

can collect

insurance

periodically if needed

premiums an insurance c

a remit to ompanies

1. Fees payable

to Steak-Out are non-refu

udable.

2. "Royalty Sal

es" are defined in Sectior

l 4.1(w) of the Franchise

Agreement,

as the total

amount derived from any source (including proceeds of insurance or amounts pi id by other parties for business interruption or diminution of sales), without discount or reduction for uncollectible amounts, that arise from business conducted or originated on or off the Premises or the use of the Licensed Marks, including the standard price for all goods and services sold or made available from the business, but not including sales tax, if t lat amount is added to the selling price and actually paid by you to the taxing authority.

Prior to opening the Unit, you must sign and deliver to us and your bank all required documents that permit us to debit your bank account for all fees and expenses due to

8


Steak-Out.

4.         Interest begins from the date of nonpayment or underpayme:

Item 7

mmW OF CORPORIS

YOUR ESTIMATED INITIAL INVESTMENT2*

(Note 1) (Note 2)

DIEGO OFHCE

The following estimates are based on advice given to us by franchisees from time to time. Individual choices made by franchisees affect several of these items, the costs of which can be less than, or in some cases more than, the ranges listed. (Note 2)

AMOUNT (Note 2)

METHOD OF PAYMENT

WHEN DUE

TO WHOM PAYMENT

IS TO BE MADE

Initial Franchise Fee

$25,000 (Note 3)

Lump Sum

No later than signing of Fran. Agreement.

Steak-Out

Travel and Living Expenses while Training

$5,500 to $8,000 (Note 4)

As incurred

During training

Airlines, hotels, restaurants, and other third

parties

Leasehold Improvements {Note 5)

$75,000 to $153,000

As incurred

Prior to opening

Contractors, suppliers and other third parties

Equipment, Fixtures and Signage

$63,500 to $105,000 (Note 6)

Lump Sum

Prior to Opening

Contractors and/or suppliers and other third parties

Opening Inventory (Food, paper and supplies)

$6,300 to $30,000

Lump Sum

Prior to Opening

Third party vendors

First 3 Months

Rent

$4,500 to $9,000

As incurred

Monthly

Lessor

Secret Shopper Costs

$200 to $400

As incurred

Monthly

Third Parties

Security Deposit/Lease

$1,500 to $3,000

Lump Sum

Pre-Opening

Lessor

Utility Deposits

$1,000 to $2,000

Lump Sum

Pre-Opening

Suppliers

Legal and Accounting Costs

$1,000 to $2,500 (Note 7)

As Incurred

Pre-Opening

Steak-Out and Third Parties.

Architectural Drawings and Design Fees

$5,000 to $B,000

As incurred

Pre-opening

Third Parties

Information System (Note B)

$14,500 - $25,000

Lump Sum if purchased; Periodic lease payments if leased

Pre-Opening or Per Lease

Agreement

Steak-Out or approved supplier

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AMOUNT (Note 2)

METHOD OF PAYMENT

WHEN DUE

TO WHOM IS TO

PAYMENT BE MADE

Grand Opening Advertising Costs and Promotional Material

$15,000

Lump Sum

Prior to Opening

May be deposited with :;teak-Out for reimbursement or disbursement to third parties, or paid to third parties

Additional Funds - 3 months (working capital)(Note 9)

$25,000 to $35,000

As incurred

As incurred

Employees, suppliers, other third parties

Insurance (First Year)

$6,500 to $8,500 (Note 10)

Deposit and periodic payments

Prior to and after opening of Unit

Insurance

Company

we

or us if

rec uire

TOTAL

$ 249,500 to $ 429,400

EXPLANATORY NOTES TO TABLE

(1)        Amounts and Total. We have relied on experience in business and information provided to us by our franchisees to compile these estimates. We do not independently verify this information, and your costs may be more or less, depending on the decisions you make.1 Your costs may vary widely based on differences in different markets. You should review these figures carefully with your business advisor before making a final decision to operate a Steac-Out Unit. These estimates do not include finance charges, interest or debt service obligations you may incur if you undertake debt or lease obligation to fund your costs.

The estimates are based on a newly constructed 1800 square foot in-line strip shopping center shell, including standard electrical systems, HVAC systems, drop ceiling and Americans with Disabilities Act - compliant entrance and restrooms.

(2)        Your Initial Investment None of the fees listed above as payable to Steak-Out are refundable once incurred. Financing is generally available from third party banks, leasing companies and other lenders and equity suppliers who are not affiliated with Steak-Out. We do not offer financing for any part of your initial investment, but financing is available from a number of third-party sources. (See Item 10).

(3)        Initial Franchise Fee The initial franchise fee of $25,000 relates to an individual Unit and does not include the $5000 per store that may be paid to reserve future locations under an Area Development Agreement. If you execute an Initial Deposit Agreement, the $5,000 that you pay pursuant to that agreement will be credited against your Initial Franchise Fee. See Items 5 and 12. You are not obligated to execute an Area Development Agreement or an Initial Deposit Agreement, and you are not obligated to pay any fees under those agreements to open a franchise.

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(4)        Travel and Living Expenses While Training This estimate includes lodging, meals and transportation for three persons. These costs may vary, depending on the location of lodging, eating habits and means of transportation you choose. This estimate does not include salaries, payroll taxes and workers' compensation insurance for your employees.

(5)        Leasehold Improvements. You should expect to lease a facility for your initial Steak-Out Unit that is larger than subsequent Units, since you may have your training for subsequent Steak-Out Units out of this Unit. The estimated size of a Steak-Out Unit is 1,600 to 1800 square feet. These estimates relate to an in-line Unit If your Unit is located in a free standing building, you may incur additional costs of improved identity (i.e. signage, painting, awnings, etc.). Costs may vary widely due to local codes, union versus non union labor and local operating procedures.

(6)        Equipment Fixtures and Signage. The high-range estimate includes a pole sign, which we estimate to cost $4,500 to $7,000. Not all Steak-Out Units use a pole sign, since it can be used only in instances where the sign would comply with local sign ordinances. We do not require you to use a pole sign. The total does include new equipment, which is required, general signage and telephone system.

(7)        Legal and Accounting Costs Generally, you will engage your own accountant and your own attorney, if you desire one, to advise you regarding opening your Unit. You may take advantage of any demographic data we have about potential sites, and we will give you certain minimum requirements for your lease.

(8)        Information System. You must install a specific information system for each Unit. The system may be purchased or leased. The cost of the system will vary depending on the configuration of the System you install.

(9)       Additional Funds. Additional funds is an estimate of funds needed to cover other expenses prior to opening, and for a three month period after opening. These expenses include employee wages, licenses, permit costs, uniforms, recruitment, in-store training expense, as well as additional opening capital for other variable costs. Example: electricity, telephone, heat, etc., paper, cleaning and other supplies. These figures are estimates, and we cannot guarantee that you will not have additional expenses starting the business. Your costs will depend on factors such as: the timeliness with which you follow our methods and procedures, your management skill, experience and business ability, local economic conditions, the local market for your products and services, the prevailing wage rates, competition, and the sales level reached during the initial period.

Of Additional Funds, $2,500 to $6,500 is estimated to be spent in the pre-opening costs, and $22,500 to $28,500 is estimated to be spent in the first three months after opening of your Unit.

(10)      Insurance (First Year") . This estimate does not include workers' compensation insurance premiums. Workers' compensation insurance premiums vary according to your payroll and the premium structure of the state in which your business will be located. Because of these

11


variables, it is impractical to state with precision the cost of workers' compensation insurance. You should obtain quotes for workers' compensation insurance from insurance companies of your choice before proceeding. If we require, we will collect by electronic transfer the insurance premiums, and remit those to your insurance company.

Item 8

RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES

Our arrangements provide you with the ability to take advantage of various national buying, promotion and standards compliance programs that simplify and enhance your operatior s. You must purchase and install all fixtures, furnishings, signs, equipment and systems that meet our standards and specifications. These specifications include design, appearance and quality. In addition, you are required to purchase all fixtures, furnishings, signs, equipment, inventory, uniforms^ advertising material and other supplies used in the operation of the Unit from approved suppliers and to coordinate your promotion activities with our specifications. Our evaluation and analysis of approved suppliers is an ongoing process. We make no representation to you as to the se suppliers or their products, all of which may come from the suppliers themselves. We believe the se suppliers to be reputable and beneficial to you, but we do not directly furnish you with any material monetary or other benefit such as renewal or granting of additional franchises for using those suppliers. A list of approved products and suppliers is in our Confidential Operations Manual or is otherwise provided to you in writing. Specifications for goods, products, supplies and equipment are also set-out in our Confidential Operations Manual. Specification changes are reflected in amendments to the Confidential Operations Manual. The approved suppliers can provide you with approximately 80% of your total purchases in connection with the establishment of your Unit, and between approximately 75% and 85% of your total purchases in connection with the operation of your Unit

In evaluating suppliers, we currently examine a number of factors, including: (i) whether the supplier is able to produce goods and products which meet our standards and specifications; (ii) whether the supplier can produce the goods and products in the necessary time frames and quantities; and (iii) whether the supplier meets our service standards. If you wish to vary from our established standards and to purchase an item that we have not previously approved, or purchase from an unapproved supplier, you must submit to us a written request before making such a purchase. We will investigate the supplier and examine the proposed product and may charge you a fee, which will not exceed the cost of our examination. We are not obligated to disclose to you our criteria for supplier approval. However, we will consider requests for disclosure of such criteria if made to us in writing. If we have not specifically approved the request within 30 days, you should c insider the request to be disapproved.

We have negotiated purchasing agreements with most of our suppliers to provide a constant source of products at reasonable prices. However, you are not prohibited from negotiating your own

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terms with those suppliers. We will revoke approval of suppliers if they do not meet or maintain our criteria. You will be notified of any such revocation.

Firefly Technologies, LLC are currently the only approved suppliers for the Unit portion of the Steak-Out Information System. We may derive revenues from the sale or servicing of information systems to our franchisees. (See also Item 11). Last year we did not derive revenue from the sale of information systems or from franchisees for any sale of required product to franchisees. Currently, we are not the approved supplier for any other product used by Steak-Out franchisees. We derive revenue in the amount of the Franchise Fee ($25,000), which covers pre-opening services we perform.

As of the date of this Offering Circular, there are no fixed purchasing and distribution cooperatives in the Steak-Out system. However separate Steak-Out stores often cooperate in

purchasing advertising materials.

If you lease the business premises, the lease is subject to our approval. The lease must contain a collateral assignment of your lease to Steak-Out, and must grant Steak-Out the right to enter the premises to make any modifications necessary to protect our Licensed Marks. In addition, the lease must provide that your landlord give its consent to the collateral assignment and Steak-Out's right to cure certain defaults in your lease should you not do so, and to assume the lease. The Collateral Assignment of Lease Agreement and Consent of Landlord are attached as Exhibit I to the Franchise Agreement.

You will be required to use only business stationery, business cards, marketing materials, advertising materials, printed materials or forms which we have approved in advance. You will also be required to submit for our prior approval samples of all advertising you propose to use that have not been prepared or previously approved by us. Internet websites you may use are subject to restrictions. All advertising and promotion must be completely factual and must conform to the highest standards of ethical advertising. You may not use any marketing or promotional materials which we have disapproved.

The Franchise Agreement also requires you to keep insurance in force with carriers having an A VII or better rating with Alfred M. Best and Company, Inc., and to timely deliver to us certificates of all required insurance. You will have to obtain at least the following amounts and types of insurance: (1) Comprehensive blanket general public liability including products liability insurance of at least $2,000,000, (2) Fire, vandalism, theft, burglary and extended coverage insurance with limits of at least 90% of the replacement value of your leasehold improvements, furniture, fixtures, equipment and inventory, and (3) Worker's compensation and employer's liability insurance in the amount required by state statutes.

At our election, we may collect insurance premiums by wire transfer and remit to insurance companies. See Franchise Agreement, Section 18.5.

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Approved suppliers cooperate with us in the development of joint programs, research and development and promotion, and make services and monetary contributions to our ei forts, which may be based on volume sales derived from Steak-Out Units. From time to time we de: ive revenue as a result of sales of products store units are required to purchase. Thirty-three approved suppliers contributed $283,383.20 to Steak-Out's efforts in 2005 (approximately 8.7% of ourtotil revenues). The approved suppliers sell the following items: Americare (gloves), Barrel O' Fun (potato chips), Berry Plastics (cups), Boca Grande Foods (condiments), Braswell Food Co. (steak sauce), C&M Fine Pack (packaging), CF Sauer (seasoning), ConAgra (oil, soy sauce, and meat), Cookietiree Bakeries (cookies), Darifair (sour cream), Dart Container (packaging), Dispoz-o (cutlery), Filet of Chicken (chicken nuggets), Genpak (foam containers), Heavenly Cheesecake (desserts), Hormel (bacon pieces), Inerplast (plastic bags), Lance Crackers (saltines), Lu-Mar (shrimp), Mid-America/ Dairy Farmers of America (cheese), Modern Packaging (condiments), Mott's / Cadbury Schweppes (applesauce), Naturally Fresh (salad dressing), Naturally potatoes (garlic mashecl potatoes), Pilgrim's Pride (Chicken wings), Reily Foods (tea), Reynolds Metals (foil wrap), Smithfield (Bacon pieces), Solo/Sweetheart Co. (portion cups and packaging), TCB Mfg. (warming bags), Unisource -Cardinal (Straws), Wenner Bread Products (rolls), and Wolverine Packing (beef). Funds received from such sources were used as part of Steak-Out's general operating funds.

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Item 9

FRANCHISEE'S OBLIGATIONS

THIS TABLE REFERS TO 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. YOU SHOULD ALSO REFER TO THE TABLE OF CONTENTS AND SECTION HEADING IN VARIOUS DOCUMENTS.

OBLIGATION

SECTION(S) IN AGREEMENTS

ITEM(S) IN OFFERING CIRCULAR

(a) Site selection and acquisition/lease

Sections 7.1(d) and 9.1 of the Franchise Agreement

Items 6, 7 and 11

(b) Pre-Opening purchases/leases

Sections 9.1, 9.2, 9.4, 9.5, 9.6, 9.18 and 9.26 of the Franchise Agreement

Items 7 and 8

(c) Site Development and other pre-opening requirements

Sections 9.1, 9.2, 9.6, 9.18,10.1(a), 12.3, 18.1 and 18.2 of the Franchise Agreement

Items 7 and 11

(d) Initial and ongoing training

Section X of the Franchise Agreement

Items 7 and 11

(e) Opening

Sections 9.3 and 12.3 of the Franchise Agreement

Item 11

(j) Fees

Section VII and Exhibit D of the Franchise Agreement, Section 5 of the Area Development Agreement, and Sections 4.A., 4.B, 5.A., and 15 of the Information System Agreement

Items 5, 6, 7, and 1

(g) Compliance with

standards and policies/Operations Manual

Sections 3.5, 3.6, 8.6, Section DC, XI, 12.5 and Section XTV of the Franchise Agreement and Sections 3A and 3B of the Information System Agreement

Items 8 and 11

h) Trademarks and

proprietary information

Section VIE and Exhibit J of the Franchise Agreement, Section 10 of the Area Development Agreement and Sections 4. A. and 6 of the Information Systems Agreement

Items 11,13 and 14

(i) Restrictions on

products/services offered

Sections 1.1(b), 1.1(e), 3.4, 9.7, 9.13, 9.15, 9.20, 9.23, 9.24, 9.26,12.5 and 21.9 of the Franchise Agreement

Item 16

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OBLIGATION

SECTION(S) IN AGREEMENTS

ITEM(S)IN OFFERING CIRCULAR

(j) Warranty and customer service requirements

Sections 9.17 and 9.24 of the Franchise Agreement

N/A

(k) Territorial development and sales quotas

None in Franchise Agreement and Section 4 of the Area Development Agreement and Section 1 of the Initial Deposit Agreement

Item 12

0) On-going

product/service

purchases

Sections 3.5, 3.6, Section IX, 10.1, 10.4, 12.2, and 12.5 of the Franchise Agreement

Item 8

(m) Maintenance, appearance and remodeling requirements

Sections 3.5 and 3.6 of the Franchise Agreement and Section 4.D of the Information Systems Agreement

Item 11

(n) Insurance

Section XVIII of the Franchise Agreement

Items 7 and 8

(o) Advertising

Section 9.15 and XII of the Franchise Agreement

Items 5, 11

6, 7 and

(p) Indemnification

Section 20.1 of the Franchise Agreement

Item 6

(q) Owner's participation/

management/staffing

Sections l.lg, 5.2, 9.8,9.9,9.10, 9.11, 10.1, 10.4,14.1 and 14.5 of the Franchise Agreement

Items 11

and 15

(r) Records/reports

Section XIII of the Franchise Agreement

Item 11

(s) Inspections/audits

Sections 7.6,9.1(d), Xm, 21.1 and 21. 9 of the Franchise Agreement

Item 6

(t) Transfer

Section XV of the Franchise Agreement and Section 12 of the Area Development Agreement and Section 4(b) of the Initial Deposit Agreement

Items 6,

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(u) Renewal

Sections 2.2 and 2.3 of the Franchise Agreement

Items 6,

7

(v) Post-terrnination obligations

Section 9.6 and Section XVII of the Franchise Agreement

Item 17

(w) Non-competition covenants

Sections 14.1 and 14.4 of the Franchise

Agreement

Item 17

(x) Dispute Resolution

Section XXI of the Franchise Agreement and Section 9 of the Area Development Agreement

Item 17

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OBLIGATION

SECTION(S) IN AGREEMENTS

ITEM(S) IN OFFERING CIRCULAR

(y) Other Verification and Assurance of Obligation

Sections 13.9 and 21.10 of the Franchise Agreement and Personal Guaranty

N/A

Item 10

FINANCING

Steak-Out does not offer financing to franchisees itself and does not guarantee your note, lease or other obligations. Financing is generally available from third party sources that are not affiliated with Steak-Out. You may choose your own source of financing, and we do not derive revenue from any financing source you may use.

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