The original documents were scanned as an image. The original file can be downloaded at the link above.
Sample Franchise Agreement
THIS FRANCHISE AGREEMENT made and entered into this _____ day of
__________, 200___, by and between Young Rembrandts Franchise, Inc. (the "Company") an
Illinois corporation having its principal office at 23 North Union Street, Elgin, IL 60123 and ___________________________________(the "Franchisee") having its principal office at
ARTICLE I. RECITALS
1.1 Right to License. The Company and Ms. Bette Fetter, the Company's Secretary and Founder, who originally began operating the business in 1988 and incorporated it in Illinois under the name Young Rembrandts, Inc. on March 9, 1988 (the "Affiliate"), along with her husband, Mr. Bill Fetter, the Company's President and Treasurer, have developed, and the Company has the right to license, the uniform formats, systems, methods, procedures and standards (the "System") for establishing, developing and operating a business which offers quality, professional drawing classes including instruction in artistic techniques primarily to preschool and elementary school age children with weekly "lesson plans" in public and private schools, day care centers, Montessori schools, local community recreation departments (the "Business").
1.2 The System. The distinguishing characteristics of the System include a unique, specially developed concept which provides the services and products set forth above; a specially designed method for offering and marketing such services and products by the Franchisee to the customer; operating, instructional and teaching procedures; methods and techniques for financial controls, record keeping, accounting and reporting, sales and sales promotion, marketing and advertising; and the proprietary know how developed by the Company and the Affiliate, any part of which System, services and products may be further developed, improved, changed and modified by the Company from time to time.
1.3 Operation of the Business. The Franchisee will offer and perform the services described above in a diligent, competent and professional manner. The Franchisee is expected to be able to market, make sales of and enter into contracts for such services; to execute the required weekly lesson plans for projects; and to coordinate and oversee the teaching and instruction of the art classes. Invoicing to the customer will be done by the Franchisee who will collect the receivables.
1.4 The Trade/Service Marks. The Company is the owner of and has the right to license the use of the name "Young Rembrandts" and certain trademarks, service marks, logos, trade names, domain names and other commercial symbols now or hereafter used in connection with the System (the "Marks").
1.5 Grant of Licenses. The Company grants to persons who meet the Company's qualifications, and are willing to undertake the investment and effort, a franchise to establish and
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operate a "Young Rembrandts" business within a specific Territory as set forth in Exhibit A to this Agreement and a non-exclusive license to use the Marks in connection therewith.
1.6 Agreement to Obtain/Grant Franchise. The Franchisee desires a franchise to establish and operate a Young Rembrandts business and the Company is willing to grant such a franchise on the terms and conditions hereinafter set forth.
NOW, THEREFORE, the parties, in consideration of the undertakings of each to the other, agree as follows:
ARTICLE II. ACKNOWLEDGMENTS
To induce the Company to enter into this Agreement the Franchisee acknowledges, warrants and represents that:
2.1 Independent Investigation. The Franchisee has had the opportunity to conduct an independent investigation of the business opportunity offered herein and the terms and provisions of this Agreement utilizing the services of counsel, accountants and other advisors (if the Franchisee so elects). The Franchisee recognizes that the nature of the enterprise conducted by a Young Rembrandts business may evolve and change over time, that an investment involves business risks and that the success of the venture depends primarily upon the Franchisee's business ability and efforts.
2.2 Existing Franchisees. Prior to the execution of this Agreement, the Franchisee has had the opportunity to contact existing franchisees of the Company, if any.
2.3 No Representations Regarding Profits of the Franchise. No representations have been made by the Company, the Affiliate, or by their officers, directors, shareholders, employees or agents, and relied upon by the Franchisee, as to future or past income, expenses, sales volume or potential profitability, earnings or income of the Young Rembrandts business franchised hereby, or of any other business of the Affiliate, other than as provided in Item 19 of the Company's Offering Circular.
2.4 Reservation of Rights by the Company. The Company has certain rights reserved to it to own and operate other Young Rembrandts businesses, to operate other businesses offering the same services; to franchise other Young Rembrandts franchisees; and, to otherwise use the System, the Marks, know how, techniques and procedures including, without limitation, those expressly set forth in Section 3.2 of this Agreement.
2.5 Different Franchise Agreements. Other franchisees of the Company have or will be granted franchises at different times, in different situations and under different circumstances and the provisions of such franchise agreements may vary substantially from those contained in this Agreement.
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2.6 Uniform Franchise Offering Circular. The Franchisee has received from the Company a copy of the Company's Offering Circular, together with a copy of all proposed Exhibits and Agreements relating to the sale of the franchise, at the earliest of: the first personal meeting to discuss this Franchise; or ten (10) business days prior to signing this Agreement; or at least ten (10) days prior to any payment to the Company for the sale of this franchise; and has received this Agreement containing all material terms at least five (5) days before the Franchisee has signed this Agreement.
2.7 No Representation Regarding Barriers to Entry. No representation has been made by the Company, or by its officers, directors, shareholders or employees or agents, or by the Affiliate, and relied upon by the Franchisee, regarding (i) the Franchisee's ability to procure any required license or permit that may be necessary to perform any of the services contemplated to be offered by the Young Rembrandts business or (ii) the Franchisee's ability to conduct classes in every preschool, elementary school, private school, day care center or park district.
2.8 The Company's Rights to Sell. The Franchisee affirms and agrees that the Company may sell any or all of its assets, the Marks or the System outright to a third party; may go public; may engage in a private placement of some or all of its securities; may merge, acquire other entities, or be acquired by another entity; may undertake a refinancing, recapitalization, leveraged buyout or other restructuring; and, with regard to any or all of the above transactions (which may involve an entity which is in the business of franchising or sale of services or products similar or identical to such as provided by the Business), the Franchisee expressly and specifically waives any claims, demands or damages arising therefrom or related thereto.
2.9 The Franchisee's Advisors. The Franchisee has been advised to consult with its own advisors with respect to the legal, financial and other aspects of this Agreement, the business franchised hereby, and the prospects for that business. The Franchisee has either consulted with such advisors or has deliberately declined to do so.
2.10 Covenants Not to Compete. The covenants not to compete in this Agreement are fair and reasonable, and will not impose any undue hardship on the Franchisee, since the Franchisee has other considerable skills, experience and education which affords the opportunity to earn income from such other endeavors.
2.11 Franchisee Information. The Franchisee affirms that all information set forth in any and all applications, financial statements and submissions to the Company is true, complete and accurate in all respects, with the Franchisee being aware and expressly acknowledging that the Company is relying upon the truthfulness, completeness and accuracy of such information.
2.12 Franchisee Defined. "Franchisee" means each person executing this Agreement. If the Franchisee is an entity, all owners of such entity shall, concurrently with the execution of this Agreement, execute the Company's standard form guaranty pursuant to which all obligations and duties of the Franchisee are jointly and severally guaranteed by such individuals and the individual Franchisee shall remain liable for full performance. Should the Franchisee be in default, the
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Company may proceed directly against each such signatory, shareholder, member or other owner (the "Guarantors") without first proceeding against the Franchisee and without proceeding against or naming in such suit any other Franchisee, or any of the Guarantors. The obligations of the Franchisee and each such Guarantor shall be joint and several.
ARTICLE III. GRANT OF FRANCHISE
3.1 Grant of Franchise and License. Subject to the terms and conditions herein, the Company hereby grants to the Franchisee, and the Franchisee hereby accepts from the Company, (A) a non-exclusive franchise to open and operate a Business and (B) a non-exclusive license to use the Marks, solely in connection with the operation of the Business within the area described in Exhibit A ("Territory"). Termination or expiration of this Agreement shall constitute a termination of the foregoing franchise and license. So long as the Franchisee is in compliance with the Minimum Annual Gross Revenues requirements set forth in Section 3.3 below, the Company will not establish another franchised or Company-owned or affiliate-owned Business utilizing the Marks in the Territory.
3.2 Retention of Rights. Except as explicitly and specifically granted to the Franchisee herein, all rights in and to the Marks, the System, the Business and the goodwill associated with each of them is hereby reserved to the Company and to the Affiliate. Specifically, but without limitation, the Company and the Affiliate retain the right, but shall not be obligated, to:
A. Franchise and establish Company-owned and Affiliate-owned Young Rembrandts businesses outside the Territory.
B. Establish, operate and franchise the System or any other programs, products and/or services under trade names, trademarks, service marks, or logos other than the Marks within or outside of the Territory.
C. Sell or provide services and products licensed to be provided hereunder, utilizing the Marks, under a different distribution system than franchising, including the Internet, within or outside of the Territory. Specifically, without limitation, the Company or the Affiliate may offer instruction services and products directly to customers on the Internet.
3.3 Territorial Rights; Minimum Gross Revenues.
A. The grant of the franchise and license described in Section 3.1 is limited to the conduct of the Business, utilizing the Marks within the Territory, except as specifically permitted in Section 3.4. In consideration of the grant of the franchise, Franchisee at all times during the term of this Agreement shall use Franchisee's best efforts to promote and increase the sales and services of the Young Rembrandts System and to effect the widest and best possible distribution and sale of Young Rembrandts services and related products and to solicit potential customers and accounts for Young Rembrandts services and related products within the Territory.
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B. Beginning on the one (1) year anniversary from the Opening Date of the Business and through the end of the term, Franchisee must achieve Gross Revenues sufficient to generate an average monthly royalty payment of at least Five Hundred Dollars ($500.00). If over any period of six (6) consecutive months the royalty payments due to the Company from Franchisee do not average at least Five Hundred Dollars ($500.00) per month, if after giving Franchisee six (6) months notice and Franchisee failing to increase Gross Revenues so that the monthly royalty payments average at least Five Hundred Dollars ($500.00) over the previous six (6) consecutive months, the Company has the right to either (1) terminate the Franchisee's franchise, or (2) terminate the Franchisee's exclusive rights to the Territory. In such event, others or the Company may market in and service the Territory.
3.4 Conduct of Business Outside Territory. Franchisee may conduct classes outside of Franchisee's Territory if the classes are located in an area that is not part of a territory granted to another franchisee. Once a franchise is granted for any area in which Franchisee is conducting classes outside of Franchisee's Territory and the new franchisee has completed initial training, Franchisee agrees to cease conducting classes in the new franchisee's Territory as soon as the current class session ends. Franchisees further agrees to provide such information and assistance to the new franchisee as is reasonably necessary in order to increase the likelihood that the new franchisee will be able to retain the customer as a Young Rembrandts customer and continue to conduct sessions at that location in the future. If Franchisee conducts classes outside of Franchisee's Territory in the territory of another franchisee in violation of this Section 3.4, Franchisee will be assessed a fine of Two Hundred Dollars ($200.00) per class conducted, due upon demand. This fine is in addition to any and all other remedies available to the Company for Franchisee's breach of this provision.
ARTICLE IV. TERM AND SUCCESSOR FRANCHISE AGREEMENTS
4.1 Term. The term of this Agreement shall be ten (10) years (the "Term") commencing on the Opening Date of the Business. The "Open Date of the Business" means the first date following the Franchisee's satisfactory completion of the Initial Training on which Franchisee begins soliciting and marketing for customers of the Business .
4.2 Right to Obtain Successor Franchise Agreements. The Franchisee shall have the right to obtain one (1) additional franchise agreement for one term often (10) years (the "Successor Agreement"), provided that the following conditions have been met in each instance:
A. The Franchisee has given the Company notice between one hundred eighty (180) and two hundred seventy (270) days before the end of the Term;
B. Throughout the term of this Agreement, the Franchisee has complied with all the material terms and conditions of this Agreement, including the Minimum Gross Revenues requirements of Section 4.3, and with the Company's material operating and quality standards and
C. All monetary obligations owed by the Franchisee to the Company have been satisfied prior to commencement of such Successor Agreement, and have been met, when due, throughout the Term;
D. The Franchisee has made, at its expense, such expenditures as determined by the Company to upgrade the computer and software to conform to the image of the System prior to the expiration of the term;
E. The Franchisee executes the then current Franchise Agreement, which may have different terms from this Agreement, and pays the Renewal Fee in the amount of One Thousand Five Hundred Dollars ($1,500.00);
F. The Franchisee executes and delivers a general release (except as limited by law) of any and all claims it may have against the Company, the Affiliate and its and their shareholders, officers, directors, employees, agents, and representatives in a form satisfactory to the Company.
ARTICLE V. SERVICES OF THE COMPANY
5.1 Initial Training/Supplemental Initial Training.
A. The Franchisee shall attend and complete, to the Company's satisfaction, the Company's Initial Training Program ("Initial Training"). The Initial Training shall be conducted at the Company's principal offices, and/or at such other place as the Company designates, for up to five (5) days. The Initial Training covers all material aspects of the operation of the Business including, without limitation, techniques to market and sell the Franchisee's services, make proposals to customers, supervise and perform teaching and instruction, maintain an appropriate inventory of art supplies; pre-opening advertising; sales, customer service, bookkeeping, accounting and financial methods and controls, computer and software training, advertising, promotion, sales and marketing techniques, maintenance of quality standards, and other topics selected by the Company. All expenses incurred by the Franchisee in attending the Initial Training including wages, travel, room and board expenses shall be the Franchisee's responsibility. The opening of the Business can commence promptly after satisfactory completion of Initial Training. No person may be employed as a manager of the Business until completion of such Initial Training to the Company's satisfaction. Company will provide the Initial Training Program for up to two (2) people. However, if the second person does not attend the Initial Training with Franchisee, he or she must attend the training within two (2) years of the date of this Agreement in order to receive the training for no additional fee. The Company may charge a training fee for additional persons who attend training. The training of additional persons is subject to availability as determined by the Company.
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B. If the Company terminates this Agreement due to Franchisee's failure to satisfactorily complete Initial Training, the Company will refund the Initial Franchise Fee previously paid by the Franchisee to the Company less a reasonable amount as determined by the Company to cover its costs and expenses of recruiting, qualifying and training the Franchisee, which amount shall not exceed one-half of the Initial Franchise Fee paid. The refund shall be paid to Franchisee upon Franchisee's execution and delivery to Company of a general release (except as limited by law) of any and all claims it may have against the Company, the Affiliate, and its and their shareholders, officers, directors, employees, agents, and representatives in a form satisfactory to the Company. This Agreement thereafter will be null, void and of no effect (except for those post-termination obligations of this Agreement, which by their terms shall remain binding).
C. At the Company's option, the Franchisee shall attend and complete, to the Company's satisfaction, the Company's Supplemental Initial Training during the fourth (4th) or fifth (5th) month of operation ("Supplemental Training"). The Supplemental Initial Training, if required by the Company for Franchisee, shall be conducted at the Company's principal offices, and/or at such other place as the Company designates, for up to two (2) days. The Supplemental Initial Training reviews the subjects covered during Initial Training and other issues relating to the operation of the Business. All expenses incurred by the Franchisee in attending the Supplemental Initial Training including wages, travel, room and board expenses shall be the Franchisee's responsibility.
5.2 Specifications. The Company shall deliver to the Franchisee specifications for the equipment, computer system, art materials and supplies and for other materials necessary for opening and operating the Business and shall consult and advise the Franchisee with respect thereto. The Company shall provide the Franchisee with a list of all such goods and services reasonably necessary for the opening and operation of the Business and, where applicable, with lists of approved vendors, sources of supply, and standards and specifications.
5.3 Confidential Operations Manual.
A. In order to protect the reputation and goodwill of the Company, to maintain uniform standards of the services, programs, products, and operations offered and sold under the Marks, to promote the goodwill of all Businesses and for the mutual benefit of the Company and the Franchisee, the Company at the Initial Training shall lend to the Franchisee one (1) hard copy or CD of, or give Franchisee electronic access to, the Company's Confidential Operations Manual, which may consist of one or more manuals or handbooks ("the Manual").
B. The Franchisee shall conduct the operation of the Business in strict compliance with the Company's operational systems, procedures, policies, methods and requirements as prescribed in the Manual and in any supplements thereto (the "Supplements"), all of which shall be deemed a part of the Manual.
C. In addition to the requirements of Section 5.3A. and B. above, the subject matter of the Manual may include (but need not be limited to nor necessarily include all of) the following
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matters: requirements, duties, standards, procedures, policies, systems, techniques, guidelines and specifications pertaining to the System, to the operation of the Business and/or the products and/or services of the System; staff composition and organization systems; quality assurance programs; supervision systems; record keeping systems and materials; advertising systems and materials; purchasing procedures; proprietary nature of the manual; book-keeping and accounting materials and techniques; management and control systems; revenue reports; display of signs and notices; authorized or required equipment, computers, software, and other items; hours of operation; required uses of the Marks; insurance requirements; license requirements; required attire; required manner of offering and selling System programs and services; standards of maintenance and appearance; customer satisfaction; staff training requirements; training specifications; and, additions to, deletions from, modifications to and variation of the programs, services, and other components constituting the System, including standards and specifications relating thereto.
D. The Company retains the right to prescribe additions to, deletions from or revisions to the Manual which shall become binding on the Franchisee upon being mailed or otherwise delivered to the Franchisee, as if originally set forth therein.
E. The Manual remains the property of the Company. The Franchisee shall keep the Manual in its place of business at all times. The Franchisee, its agents, independent contractors, and employees shall at all times treat the Manual and the information contained therein as confidential, and shall use all reasonable efforts to maintain such information as confidential. The Franchisee, its agents, independent contractors, and employees shall not at any time copy, duplicate, record or otherwise reproduce the foregoing materials, in whole or in part, nor otherwise make the same available to any unauthorized person. Upon the expiration or other termination for any reason of this Agreement, the Franchisee shall return the Manual to the Company.
F. The Franchisee shall ensure that the Franchisee's copy of the Manual is current and up-to-date. In the event of any dispute as to compliance with the Manual, the terms of the master copy of the Manual maintained at the Company's principal office shall control.
5.4 Pre-Opening Advertising. The Company will provide Franchisee with initial advertising copy and lay-out for advertising and marketing materials for Franchisee to customize for Franchisee's Young Rembrandts Business.
Opening and Post Opening
5.5 Additional Training/Annual Conference.
A. The Company from time to time may require that previously trained franchisees or their managers attend and successfully complete refresher training programs to be conducted at the Company's principal offices or at such other location that the Company shall designate. If a manager is required because the Franchisee is granted an additional franchise, the manager must attend additional training. Training for the Franchisee will be conducted at the expense of the Company. The Franchisee and/or the Franchisee's manager, if any, shall attend all additional training at its expense, provided that such attendance outside the Territory will not be required at
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more than one (1) such training program in any calendar year. All expenses incurred in attending such additional training shall be the sole responsibility of the Franchisee.
B. Franchisee shall each year during the term of this Agreement attend the Company's Annual Conference of franchisees if the Company holds an Annual Conference. If a manager is required because the Franchisee is granted an additional franchise, the manager must also attend the Annual Conference. The Annual Conference fee shall be set each year by the Company based on the cost to hold the conference. The Annual Conference fee shall be payable to the Company by Franchisee whether or not Franchisee or a manager .(if required) attends the conference. This provision shall not obligate the Company to hold an Annual Conference of franchisees each year. If no Annual Conference is held, Franchisee shall not be obligated to pay the Annual Conference fee. All expenses incurred in attending the Annual Conference shall be the sole responsibility of Franchisee.
5.6 Guidance. During the operation of the Business the Company will:
A. Render, upon written request of the Franchisee, advisory services;
B. Provide advisory, training, referral and other services as reasonably needed.
C. Make available to the Franchisee, from time to time, all changes, improvements, and additions to the System to the same extent as made available to other franchisees of the System;
D. Provide all Supplements to the Manual;
E. Provide forms to be used by the Franchisee to report to Company all information required by the Company;
F. Provide forms and procedures helpful in operating the Business.
G. Provide the Franchisee with a disk or other methods of Franchisee's development of any advertising materials developed by the Company for the Young Rembrandts System as well as business identification items (business cards, envelopes, stationery as stipulated in the Manual).
H. Make its staff available at its principal offices for consultation about problems relating to the operation of the Business, by telephone or written correspondence, and the Company shall use reasonable efforts to diligently respond to such inquiries; and
I. Send Customer Satisfaction cards and make calls to the Franchisee's
customers to verify that maintenance of satisfactory levels of service is received.
5.7 Inspections. The Company or its designee(s) may enter the premises of the Franchisee's customers and observe the Franchisee's operations to review quality of service, to
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review programs and their implementation, to confer with the Franchisee's employees and customers and to ascertain that the services provided, the quality of the materials, the installation, and the operations are satisfactory and meet the Company's quality and performance standards. The Franchisee will cooperate with the Company and its designees and will promptly undertake to correct any deficiencies brought to the Franchisee's attention. The Franchisee specifically authorizes the Company to situate the Company's personnel, representatives or designees at the Franchisee's or its customers' premises or observe customer calls or classes being conducted, or send Customer Satisfaction cards and make calls to customers, at such times as the Company may determine to be necessary.
5.8 Lesson Plans.
A. The Company, at no additional charge, will loan to Franchisee weekly lesson plans for forty-eight (48) weeks each calendar year and periodic camp lesson plans for use by the Franchisee in camp programs conducted in park districts and other locations. The lesson plans include instructions and drawings for use in teaching Young Rembrandts classes. Franchisee must use and strictly follow the weekly lesson plans and camp lesson plans in providing services to the customers of the Young Rembrandts Business. The Franchisee shall not use any lesson plans developed by the Franchisee or any third party.
B. The lesson plans are owned by Company's Affiliate, remain the property of Company's Affiliate, and are proprietary. The lesson plans are Confidential Information subject to the restrictions as set forth in Article VII below and subject to copyright protection. The lesson plans shall only be used by Franchisee, its employees and independent contracts in conducting Young Rembrandts classes under this Agreement. Franchisees, its employees and independent contractors shall not at any time copy, duplicate, reproduce or publicly display or assist any other person or entity in copying, duplicating, reproducing or publicly displaying the lesson plans, including instructions and drawings, in whole or in part, or any derivative works without first obtaining the written consent of the Company and Company's Affiliate, except for the temporary display of the students' images of the drawings at the site of the Young Rembrandts classes.
C. The Company retains the right to require Franchisee to discontinue using and to return to Company at Franchisee's expense any lesson plans, in part or in whole upon Franchisee's receipt of written notice of the discontinuance.
D. Upon the expiration or other termination for any reason of this Agreement, the Franchisee shall return all lesson plans, including all copies, to the Company.
E. The Franchisee shall immediately notify the Company in writing of any apparent infringement of the Company's Affiliate's lesson plans, including instructions and drawings, in whole or in part, including derivative works. The Franchisee shall not directly or indirectly communicate with any person other than the Company, the Company's Affiliate and its counsel in connection with any such infringement. The Company's Affiliate shall have sole discretion and exclusive right to take such action as it deems appropriate to control any litigation, Copyright Office proceeding or other administrative proceeding arising out of such infringement or otherwise
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relating to the Company's Affiliate's lesson plans. Franchisee shall execute any and all instruments and documents, render such assistance, and do such acts and things as may, in the opinion of the Company's Affiliate's counsel, be necessary or advisable to protect and maintain the interests of the Company's Affiliate in any such litigation, or administrative proceedings, or to otherwise protect and maintain the interest of the Company's Affiliates in the lesson plans.
ARTICLE VI. OPENING AND OPERATION OF THE BUSINESS
6.1 Territory. Except as provided in Section 3.4, the Franchisee shall operate the Business only within the Territory. All classes must be held within the Territory.
6.2 Opening of Business. The Franchisee shall complete Initial Training to Company's satisfaction, obtain the equipment, computer system and supplies necessary to operate the business; obtain all required insurance, permits and licenses and, in general, do all that is necessary for the Business to open for business prior to the Opening Date of the Business, which in no event shall be later than ninety (90) days after signing this Agreement.
6.3 Computer System and Internet. Throughout the term of this Agreement, Franchisee must maintain an active e-mail account and have access to the Internet for communicating with and receiving information from the Company. Franchisee must use the e-mail address provided by the Company for promoting and operating the business and for communicating with the Company. Franchisee must purchase and/or lease and use in its operation of the Young Rembrandts franchise, the computer hardware and software specified by the Company in the Operations Manual. If Company develops and/or custom designs proprietary software for use in the operation of the Business, Franchisee may be required to purchase or lease and use the proprietary software from the Company or a third party designated by the Company, to enter into a software license agreement with the Company or such third party, and/or to purchase ongoing support services for the proprietary software from the Company or such third party. Franchisee is prohibited from making any unauthorized use of the proprietary software or the information contained therein. Franchisee shall be responsible for becoming proficient in the use of any required software programs, including as necessary, arranging for and attending instructional classes. The Company shall have the right to access, for any purpose or use related to its operation, management and/or monitoring of the System, any information or reports generated or stored by the required software. The Company shall have the right to require Franchisee to replace any of the components of Franchisee's computer system (hardware or software) if, in the future, the Company deems the component to be (a) undersized or otherwise insufficient for the efficient operation and management of the Young Rembrandts franchise, or (b) incompatible with the Company's computer hardware or software or the computer hardware or software that the Company designates for franchise network use.
6.4 Maintain Standards. In order to protect the System and to maintain the uniform standards of operation under the Franchise granted herein, the Franchisee shall operate the Business at all times in strict compliance with the requirements of this Agreement and of the Manual.
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6.5 Maintain Appearance. The Franchisee agrees to maintain the condition and appearance of all aspects of the Business consistent with the Company's standards for the image of the Business, including replacement of worn out or obsolete equipment, computer hardware and software, art materials and supplies, and uniforms.
6.6 Purchase of Equipment, Materials and Supplies. The Franchisee shall, in the operation of the Business, use only equipment, materials and supplies which meet the specifications or standards of quality, performance, delivery and warranty established by the Company or are from suppliers which have been approved by the Company. If the Franchisee proposes to use any equipment, materials or supplies that have not been approved by the Company as meeting its specifications and standards, the Franchisee shall submit samples of the supplier's product to the Company, along with a written statement describing why such product or supply should be approved. The Company shall notify the Franchisee within a reasonable time whether such item meets its specifications and standards. The Company shall have the right to reinspect any approved supplier or its products, and revoke its approved status if the supplier or its product fails to meet the Company's standards and specifications.
6.7 Compliance with Laws. The Franchisee shall, at its expense, secure and maintain in force all required approvals, licenses, and business permits, and certificates relating to the operation of the Business and shall operate the Business in strict compliance with all applicable local, state and federal laws, rules and regulations. The Franchisee agrees to refrain from any sales, advertising or promotional practice which is unethical or may be injurious to the business of the Company, other Businesses, the System or to the goodwill associated with the Marks.
6.8 Payment of Liabilities and Taxes. The Franchisee shall pay, when due, all of its obligations, liabilities and taxes to the Company, suppliers, lessors, creditors and taxing authorities. The Franchisee's failure to comply with this provision shall be deemed a material breach of this
6.9 Standardization. The Franchisee will wear and will require its employees to wear such attire as may be designated by the Company and will comply with such programs of standardization as may from time to time be promulgated by the Company to promote the common business image and to protect the goodwill associated with the Business and the Marks.
6.10 Management. The Business shall be at all times under the direct supervision of the Franchisee or of a trained full-time manager who shall have successfully completed the Company's Initial Training. The use of a manager by the Franchisee shall not relieve the Franchisee of its obligation to participate directly in the operation and management of the Business. If the Franchisee conducts operations in more than one Territory or if the Franchisee with the Company's consent does not devote full-time to conducting the Business, at least one trained and competent employee shall act as a full-time manager. The Franchisee shall keep the Company informed at all times of the identity of any manager of the Business. The Company shall make training available, within certain time frames, as is reasonably necessary, for all managers designated by the Franchisee. The Franchisee shall at all times faithfully, honestly and diligently perform the
obligations hereunder, use its best efforts to promote and enhance the Business, and shall not engage in any business or other activity that will conflict with the Franchisee's obligations hereunder.
6.11 Staffing. The Franchisee shall hire and train such employees as are necessary for the operation of the Business in compliance with this Agreement and the standards and specifications set forth in the Manual. Franchisee must carefully screen all employees, including the use of background checks, before employing them, to ascertain their fitness for employment in the child education industry. Specifically, Franchisee must use its best efforts, including taking every action required by applicable laws related to background checks of persons working in the educational field, to ensure that no person is employed who has a record of child molestation or abuse, immoral conduct, drug, alcohol or substance abuse, criminal behavior, or any other pattern of conduct which might jeopardize the welfare of the students in Franchisee's Young Rembrandts classes or reflect adversely on the reputation of the Company's image and System. In the event any customer or facility where classes are conducted notifies the Franchisee of any allegation or claim made against Franchisee or employee relating to physical, verbal or sexual abuse or harassment of any child or other inappropriate or illegal behavior, the Franchisee must immediately conduct an investigation and take such action as is reasonable and appropriate based on the results of the investigation, including but not limited to termination of employment, to protect the customers of the Franchisee and to prevent any material impairment to the goodwill of the Business, the Marks and System.
6.12 Marketing. Franchisee shall promote the Business and market for new customers throughout the term of the franchise. The Franchisee may only directly market in the Territory and is strictly prohibited from direct marketing outside of the Territory. Direct marketing shall include all forms of advertising and promotion to new customers and to new facilities for location of instruction which can reasonably be related to a geographic area, including but not limited to cold calling, telephone solicitation, direct mailings and local media.
6.13 Notice to the Company. The Franchisee shall notify the Company in writing within five (5) days of the commencement of any action, suit, or proceeding and the issuance of any order, writ, injunction, award or decree of any court, agency or other governmental instrumentality which may adversely affect the operation or financial condition of the Business. In the event Franchisee becomes aware that any allegation or claim has been made against the Business, Franchisee or Franchisee's employees which could materially impair the goodwill associated with the Business, the Marks or the System, Franchise shall notify the Company in the manner set forth in the Manual.
6.14 Modifications to the System. The Franchisee understands and agrees that due to changes in competitive circumstances, presently unforeseen changes in the needs of customers, and/or presently unforeseen technological innovations, the System may need to undergo changes in order that it best serve the interests of the Company, the Franchisee and the System. Accordingly, the Franchisee expressly understands and agrees that the Company may from time to time change the components of the System, including, but not limited to, altering the products, services, methods, standards, form, policies and procedures of the System; adding to, deleting from, or modifying those products and services which the Business is authorized to offer; and, changing, improving or modifying the Marks. Subject to the other provisions of this Agreement, Franchisee
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expressly agrees to abide by any such modifications, changes, additions, deletions and alterations, and to make such expenditures as are reasonably required by such modifications, changes, additions, deletions or alterations to the System. However, such changes shall not materially and unreasonably increase the Franchisee's obligations hereunder.
6.15 Scholarship Programs. The Franchisee shall each year provide scholarships to children and shall participate in the Company's scholarship program as set forth in the Operations Manual.
6.16 Entity as Franchisee. If at any time during the term of this Agreement Franchisee is an entity, Franchisee and its owners agree and represent that: (i) the owners will have the authority to execute, deliver, and perform Franchisee's obligations under this Agreement and all related agreements; (ii) the entity shall be duly organized or formed and validly existing in good standing under the laws of its state of incorporation or formation; (iii) the entity's organizational documents, operating agreement, or partnership agreement, as applicable, will recite that this Agreement restricts the issuance and transfer of any ownership interests in the entity, and all certificates and other documents representing ownership interests in the entity will bear a legend referring to this Agreement's restrictions; (iv) subject to Company's rights and Franchisee's obligations under Article XTV, all owners shall sign and deliver to the Company a revised Guaranty and Assumption of Obligations to reflect any permitted changes in the ownership of the entity; and (v) the entity shall conduct no business other than the operation of a Young Rembrandts business.
ARTICLE VII. CONFIDENTIAL INFORMATION
7.1 Confidential Information. The Franchisee specifically understands and affirms that the following, without limitation, are deemed to constitute confidential information, proprietary information and trade secrets of the company; procedures and processes of selling, marketing and promoting the services to customers; all other systems of operation, services, programs, products, procedures, policies, standards, techniques, specifications and criteria which now comprise or in the future may comprise a part of the System; the Manual (as same may be amended from time to time) and supplements and/or amendments to the Manual; lesson plans; records pertaining to customers or billings; methods of advertising and promotion; instructional materials and videos; staff composition and organization systems; quality assurance programs; supervision systems; recommended services; record keeping systems and materials; bookkeeping systems and materials; business forms; general operations materials; revenue reports; activity schedules; job descriptions; advertising, promotional and public relations materials/campaigns/guidelines/philosophy; specifications, systems, standards, techniques, philosophies and materials, guidelines, policies and procedures concerning the System; additions to, deletions from, and modifications and variations of the components constituting the System or the systems and methods of operations which are now, or may in the future, be employed by the Company, including all standards and specifications relating thereto and the means and manner of offering and selling same; and, all other components, specifications, standards, requirements and duties imposed by the Company, or any affiliate, subsidiary or designee. All such confidential information, proprietary information and trade secrets will be referred to this Agreement as "Confidential Information." Confidential Information shall
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not include, however, any information that: (a) is now or subsequently becomes generally available to the public through no fault of Franchisee, (b) Franchisee can demonstrate was rightfully in Franchisee's possession, without obligation of nondisclosure, prior to disclosure pursuant to this Agreement; (c) is independently developed without the use of any Confidential Information; or (d) is rightfully obtained from a third party who has the right, without obligation of nondisclosure, to transfer or disclose such information.
7.2 Requirement of Confidentiality. Franchisee acknowledges that the Company will disclose Confidential Information to Franchisee during the training program, through the Manual, and as a result of guidance furnished to Franchisee during the term of this Agreement. Franchisee shall not acquire any interest in the Confidential Information, other than the right to utilize it in the development and operation of Franchisee's Young Rembrandts business and in performing Franchisee's duties during the term of this Agreement. Franchisee acknowledges that the use or duplication of the Confidential Information in any other business venture would constitute an unfair method of competition. Franchisee acknowledges that the Confidential Information is proprietary and is disclosed to Franchisee solely on the condition that Franchisee (a) shall not use the Confidential Information in any other business or capacity; (b) shall maintain the absolute confidentiality of the Confidential Information during and after the term of this Agreement; (c) shall not make any unauthorized copies of any portion of the Confidential Information disclosed in written or other tangible form; and (d) shall adopt and implement all reasonable procedures prescribed from time to time by the Company to prevent unauthorized use or disclosure of the Confidential Information. Franchisee shall enforce this Section as to Franchisee's officers, directors, managers, and employees, and shall be liable to the Company for any unauthorized disclosure or use of Confidential Information by any of them.
7.3 Additional Developments. All ideas, concepts, techniques or materials concerning the Business, whether or not protectable intellectual property and whether created by or for Franchisee or Franchisee's owners or employees, must be promptly disclosed to the Company and will be deemed the sole and exclusive property of the Company and works made-for-hire for the Company, and no compensation will be due to Franchisee or its owners or employee therefor. The Company may incorporate such items into the System. To the extent any item does not qualify as a "work made-for-hire" for the Company, Franchisee shall assign ownership of that item, and all related rights to that item, to the Company and shall sign any assignment or other document as Company requests to assist us in obtaining or preserving intellectual property rights in the item. The Company will disclose to Franchisee concepts and developments of other franchisees that are made part of the System. As the Company may reasonably request, Franchisee agrees to take all actions to assist the Company in its efforts to obtain or maintain intellectual property rights in any item or process related to the System, whether developed by Franchisee or not.
7.4 Employee Confidentiality. The Franchisee and any manager who is required to successfully complete the Initial Training shall divulge only the Confidential Information as may be necessary, and then only to such of the Franchisee's employees, agents or independent contractors as must have access to it in order to conduct the operation of the Business. The Franchisee shall take precautions to ensure that such employees and other parties retain such information in confidence, and take whatever steps are necessary to accomplish the foregoing, including requiring
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managers and other designated employees to sign confidentiality and non-competition agreements in a form approved by the Company. Franchisee shall provide to Company at Company's request copies of the confidentiality and non-competition agreements signed by Franchisee's employees.
7.5 Return of Confidential Information. Upon the expiration or other termination of this Agreement or the term of any Successor Agreement, the Franchisee shall return to the Company all materials containing Confidential Information including but not limited to books, records, software, manuals and lesson plans and other materials which are in the Franchisee's possession.
ARTICLE vm. TRADEMARKS
8.1 Ownership. The Franchisee acknowledges the validity of the Marks and that they are the sole property of the Company and of the Affiliate. The Franchisee's right to use the Marks is derived solely from this Agreement and is limited to the conduct of the Business by the Franchisee pursuant to and in compliance with this Agreement and all applicable standards, specifications and operating procedures prescribed by the Company from time to time. Any unauthorized use of the Marks by the Franchisee is a breach of this Agreement and an infringement of the rights of the Company. All usage of the Marks by the Franchisee and any goodwill established by the Franchisee's use of the Marks shall inure to the exclusive benefit of the Company and of the Affiliate. All provisions of this Agreement applicable to the Marks apply to any additional trademarks, service marks, logos and commercial symbols hereafter authorized for use by and licensed to the Franchisee.
8.2 Use. Franchisee shall use the Marks as the sole identification of the Business, except as prescribed by the Company for purposes of Franchisee identifying Franchisee as the independent owner of the Business pursuant to this Agreement. The Franchisee shall use the Marks only as authorized, directed or approved by the Company. The Franchisee shall not use the Marks as part of the name of any entity or trade name, or within any prefix, suffix, or other modifying words, terms, designs, or symbols, or in any modified form. Franchisee shall not use the Marks in connection with the sale of any unauthorized product or service or in any other manner not expressly authorized by the Company. The Franchisee shall give such notice of trademark and service mark registration as the Company specifies and obtain such fictitious or assumed name registrations as may be required under applicable law. The non-exclusive personal right of the Franchisee to use the Marks in connection with the Business and its right to use the Marks and the System apply only in the Territory and only so long as the Franchisee shall fully perform and comply with all of the conditions, terms and covenants of this Agreement and the Manual. The Company reserves the right to alter, change, amend or add to the Marks and Franchisee shall comply with the Company's directions relating thereto within a reasonable amount of time after receipt of notice from the Company of the change or addition. If, in the judgment of the Company, the acts of the Franchisee infringe upon or demean the goodwill, standards of uniformity or quality, or business standing associated with the Marks and the System, then the Franchisee shall immediately, upon notice from the Company, modify its use of the Marks and the System in the manner prescribed by the Company. The Franchisee shall not, during or after the Term of this Agreement or the term of any Successor Agreement, do anything directly or indirectly which would
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infringe upon, harm, mislead or contest the rights of the Company and of the Affiliate in the Marks or the System.
The Company's Email address on the Internet's World Wide Web at the Universal Resource Locator of: email@example.com and any other Email address the Company may hereafter acquire (the "YR Email") is the sole property of the Company. The Company has developed a web site (the "YR web site") at www.youngrembrandts.com. The Company may market and sell from the YR web site various products and services worldwide that may compete with the Franchisee and other franchisees within and outside the Territory. The YR web site as it may be developed and changed from time to time is the sole property of the Company. Company may provide to Franchisee a page on the YR web site. The specifications and procedures Franchisee must follow for developing and maintaining a page on the YR web site shall be set forth in the Manual or otherwise in writing.
The Franchisee shall not obtain any domain names for the Internet incorporating the Marks. The Franchisee shall not directly or indirectly create, develop, maintain and/or use its own web site on the Internet using any of the Marks, or use any of the Marks on the Internet in any other manner without the prior written consent of the Company.
8.3 Infringement. The Franchisee shall immediately notify the Company in writing of any apparent infringement of or challenge to the Franchisee's use or Company's ownership of and right to use or license of the Marks and of any claim by any person of any rights in the Marks or in any similar trade name, trademark, service mark or logo of which the Franchisee becomes aware. The Franchisee shall not directly or indirectly communicate with any person other than the Company and its counsel in connection with any such infringement, challenge or claim. The Company shall have sole discretion and exclusive right to take such action as it deems appropriate to control any litigation, U.S. Patent and Trademark Office proceeding, ICANN Uniform Domain Name Dispute Resolution Policy proceeding, or other administrative proceeding arising out of such infringement, challenge or claim or otherwise relating to the Marks. We have the right, but not the obligation, to take action against uses by others that constitute infringement of the Marks. The Franchisee shall execute any and all instruments and documents, render such assistance, and do such acts and things as may, in the opinion of the Company's counsel, be necessary or advisable to protect and maintain the interests of the Company in any such litigation, or administrative proceedings, or to otherwise protect and maintain the interest of the Company in the Marks.
8.4 Indemnification. The Company shall defend and indemnify the Franchisee against and reimburse the Franchisee for all damages (but specifically excluding any consequential damages, including but not limited to, loss of revenue and/or profits) for which it is held liable in any legal proceeding brought against the Franchisee arising out of the Franchisee's authorized use of any of the Marks pursuant to this Agreement, provided, that the Franchisee shall have timely notified the Company of such claim or proceeding and has otherwise complied with this Agreement and, provided further, that the Company shall have had the right to adequately defend any such claim.
8.5 Substitutions. If there is a claim by any third party that its right to any use of the
Marks is superior, or if there is any claim by a governmental entity that use of any of the Marks is objectionable or is prohibited, and if the Company determines that such claim is legally meritorious or if the Company determines, in its sole discretion, that it is advisable for the Company and/or the Franchisee to modify or discontinue the use of any of the Marks, and/or use one or more additional or substitute Marks, then upon notice from the Company the Franchisee will immediately make such changes and amendments to the Marks as may be required by the Company. Company shall reimburse the Franchisee for all reasonable out-of-pocket expenses incurred by the Franchisee in connection with changing the Principal Mark. In no event shall the Company have any liability to the Franchisee for consequential or other damages because of such modification or discontinuance of any of the Marks and the need to substitute other marks for the modified or discontinued Marks.
ARTICLE IX. FEES
9.1 Initial Franchise Fee. Upon the execution of this Agreement, the Franchisee shall
pay to the Company the Initial Franchise Fee in the amount of______________ Dollars
($_________) by certified or cashier's check. The Initial Franchise Fee shall be non-refundable and
deemed fully earned by the Company when paid, except as otherwise expressly stated to the contrary in this Agreement.
9.2 Royalty and Other Fees. In addition to the Initial Franchise Fee, the Franchisee will pay to the Company beginning on the Opening Date of the Business and throughout the term, and without offset, credit, or deduction of any kind, the Royalty Fee, the National Marketing Fee (if and when established) and any other payments due to the Company from the Franchisee in a timely manner (monthly). The monthly Royalty Fee to be paid to Company by Franchisee is ten percent (10%) of Gross Revenues on the first Seventy-Five Thousand Dollars ($75,000) in Gross Revenue for each period from August 1 through July 31 and eight percent (8%) of Gross Revenues in excess of $75,000 for the same August 1 through July 31 period. The monthly Royalty Fee is paid based on the Gross Revenues received in the previous calendar month. Notwithstanding the foregoing, beginning with the first full calendar month that begins at least thirty (30) days after the date Franchisee completes the Initial Training Program, Franchisee must pay a minimum Royalty Fee in the amount of Two Hundred Fifty Dollars ($250.00) per month during the first and second years of operation, in the amount of Four Hundred Dollars ($400.00) per month during the third and fourth years of operation, and in the amount of Five Hundred Dollars ($500.00) beginning in the fifth year of operation and through the end of the Term ("Minimum Royalty Payment").
9.3 Payment. On or before the 10th day of the month for the preceding month, the Franchisee shall submit to the Company on a form and in the manner prescribed by the Company, a correct statement signed by the Franchisee of the Franchisee's Gross Revenues received in the previous month, and shall make payment to the Company in the manner prescribed by the Company, including the right to require payment by electronic funds transfer, based on the Gross Revenues received in the previous month. Once implemented, Franchisee must promptly provide bank and account information to the Company and sign such documents and forms as may be required from time to time by the Company to permit it to withdraw amounts due it and its affiliates from the bank account for the Business. Prior to any change in banks or accounts, Franchisee must
provide to the Company such information and execute such documents and forms as may be necessary for the Company to make electronic funds transfers from the new bank and/or account. Franchisee's failure to provide information on or execute and return documents regarding the new bank or account within five (5) days of a receipt of a request by the Company or your withdrawal of consent for withdrawals by the Company on the old account shall be a breach of this Agreement. If Franchisee fails to report Gross Revenues for any calendar month on a timely basis, the Company has the right to withdraw the Royalty Fee and National Marketing Fee for the unreported calendar month in the amount of the Royalty Fees and National Marketing Fee paid for the most recent reported month or a higher amount if the Company reasonably estimates that the Business is generating higher Gross Revenues than the most recent reported month, provided that any amounts will be reconciled and adjusted as needed when the Company receives actual reports on Gross Revenues from Franchisee. Notwithstanding any designation by the Franchisee, the Company shall have the discretion to apply any payments from customers of the Franchisee to any past due indebtedness of the Franchisee.
9.4 Late Fee. If payment under 9.2 or 9.3 is not received by the fifteenth (15th) day of the month for the preceding month, a late fee of ten percent (10%) of the fees payable will be charged to the Franchisee, plus interest at the highest legal rate up to 114% per month accrues 10 days after payments are due.
9.5 Gross Revenues. "Gross Revenues" means the total receipts of all money or property of any kind, for or in connection with the services rendered by the Franchisee within the Territory or otherwise, directly or indirectly, in connection with the Business. The term shall be deemed to include checks, drafts, money orders, credit card payments, and all other instruments and forms of payment whether received by the Franchisee or by the Company pursuant to billings made by the Company to the Franchisee's customers, whether or not the same are postdated or are later dishonored or rescinded or payment is stopped thereon. Gross Revenues will be deemed received for purposes of this Agreement on the date that payment in whatever form is actually collected and received by the Business. The term shall not include applicable sales, use or service taxes. Rent, incentive fees, refunds or any other amounts paid to the owner or operator of a facility at which Franchisee's services are conducted are not excluded from Gross Revenues.
ARTICLE X. ADVERTISING AND PROMOTION
10.1 Advertising Assistance. The Company may, from time to time, develop advertising, promotional and marketing programs and materials for the Young Rembrandts System that the Company will make available to Franchisee.
10.2 Marketing Programs. Franchisee agrees to implement any promotional programs or services developed and offered by the Company from time to time.
10.3 National Marketing Fee and Fund. When the Company establishes a National Marketing Fund, the Company will, upon sixty (60) days written notice to the Franchisee, begin to
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collect from the Franchisee the monthly National Marketing Fee of up to two percent (2%) of Gross Revenues to be paid into such Fund to be administered by the Company for the benefit of all franchisees. The Company and its affiliate will pay the same National Marketing Fee for its own Young Rembrandts businesses. The Company will give the Franchisee sixty (60) days written notice before increasing or decreasing the percentage of the National Marketing Fee.
The Company shall be entitled to direct all advertising, marketing and promotional programs financed by the National Marketing Fund, with sole discretion over the creative concepts, materials, and endorsements used in them, and the geographic, market, and media placement and allocation of the programs. The Franchisee agrees that the National Marketing Fund may be used to pay the costs of preparing and producing video, audio, written and electronic advertising materials; administering national, regional or local advertising programs including, without limitation, direct mail and other media advertising, and employing advertising agencies to assist in those activities; establishing and maintaining a website for the franchise system; supporting public relations, market research and marketing activities; and providing advertising, marketing and promotional materials to Young Rembrandts franchisees. The National Marketing Fund will furnish you with approved advertising, marketing and promotional materials on the same terms and conditions as such materials are furnished to other Young Rembrandts franchisees.
The National Marketing Fund will be a separate and distinct account, and will be accounted for separately from the other funds of the Company and will not be used to defray any of the Company's general operating expenses, except for any reasonable salaries, administrative costs and overhead the Company may incur in activities reasonably related to the administration of the National Marketing Fund and its advertising, marketing and promotional programs (including, without limitation, conducting market research, preparing advertising, marketing and promotional materials, and collecting and accounting for contributions to the National Marketing Fund). The Company may spend in any fiscal year an amount greater or less than the total contribution of franchisees to the National Marketing Fund in that year. The Company may cause the National Marketing Fund to borrow from the Company or other lenders to cover deficits of the National Marketing Fund or cause the National Marketing Fund to invest any surplus for future use by the National Marketing Fund. All interest earned on monies contributed to the National Marketing Fund will be used to pay advertising, marketing and promotional costs of the National Marketing Fund before other assets of the National Marketing Fund are expended. The Company will prepare an annual statement of monies collected and costs incurred by the National Marketing Fund and will furnish it to the Franchisee on written request.
The Franchisee understands and acknowledges that the National Marketing Fund is intended to maximize recognition of the Marks and patronage of Young Rembrandts franchisees. Although the Company will endeavor to use the National Marketing Fund to develop advertising, marketing and promotional material, and to place advertising in a manner that will benefit all franchisees, the Company undertakes no obligation to ensure that expenditures by the National Marketing Fund in or affecting any geographic area are proportionate or equivalent to contributions to the National Marketing Fund by the franchisees operating in that geographic area or that any franchisees will benefit directly or in proportion to their contribution to the National
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Marketing Fund from the development of advertising, marketing and promotional materials or the placement of advertising. Except as expressly provided in this Section 10.3, the Company assumes no direct or indirect liability or obligation to the Franchisee with respect to the maintenance, direction or administration of the National Marketing Fund.
The Company has the right to discontinue or to reestablish the National Marketing Fund. In the event the Company discontinues the National Marketing Fund, the Company will distribute all unspent amounts existing in the National Marketing Fund on the date of discontinuance to franchisees in proportion to their respective contributions for the most recent six months.
ARTICLE XL RELATIONSHIP OF PARTIES/INDEMNIFICATION
11.1 Relationship of the Parties. This Agreement does not create a fiduciary relationship between the parties. The Franchisee understands and agrees that, under this Agreement, the Franchisee is and shall be an independent contractor of the Company. Nothing in this Agreement is intended to make either party a general or special agent, joint venturer, partner or employee of the other for any purpose.
The Franchisee shall conspicuously identify itself and the Business, and in all dealings with customers, suppliers, public officials, and others, as an independent franchisee of the Company, and shall place such notice of independent ownership on all forms, business cards, stationery, advertising, signs and other materials and in such fashion as the Company, in its sole and exclusive discretion, specifies and requires from time to time in the Manual.
11.2 No Liability for Act of the Other. Except as otherwise expressly authorized by this Agreement, neither party hereto will make any express or implied agreements, warranties, guarantees or representations or incur any debt in the name of or on behalf of the other party, or represent that the relationship between the Company and the Franchisee is other than that of Franchisor and Franchisee. The Company does not assume any liability, and will not be deemed liable for any agreements, representations, or warranties made to or by the Franchisee which are not expressly authorized under this Agreement, nor will the Company be obligated for any damages to any person or property which directly or indirectly arise from or relate to the operation of the Business. The Company shall not have the power to hire or fire the Franchisee's employees and, except as herein expressly provided, the Company may not control or have access to the Franchisee's funds or the expenditure thereof, or in any other way exercise dominion or control over. the Business. The Company shall not be obligated for any damages to any person or party, directly or indirectly, arising out of the operation of the Business whether caused by the Franchisee's negligent or willful action or failure to act. It is expressly understood and agreed that neither the Franchisee nor any employee or independent contractor of the Franchisee whose compensation for services is paid directly or indirectly by the Franchisee may, in any way, directly or indirectly, expressly or by implication, be construed to be an employee of the Company for any purpose, most particularly with respect to any mandated or other insurance coverage, tax or contributions, or requirements pertaining to withholdings, levied or fixed by any state, local or federal governmental
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