Form of Uniform Franchise Offering Prospectus
OFFERING PROSPECTUS
_______________________ (NAME) RESTAURANTS, INC
Information for Prospective Franchisee Information for
Prospective Franchisees Required by Federal Trade Commission
To protect you, we have required your franchisor to give you this information. We have
not checked it, and don't know if it is correct. It should help you make up your mind.
Study it carefully. While it includes some information about your contract, do not rely on
it alone to understand your contract. Read your entire contract carefully. Buying a
franchise is a complicated investment. Take your time to decide. If possible, show your
contract and this information to an advisor, like a lawyer or an accountant. If you find
anything you think may be wrong or anything important that had been left out, you
should let us know about it. It may be against the law.
There may also be laws on franchising in your state. Ask your state agencies
about them.
Effective Date: ____________ Federal Trade Commission, Washington, D.C. 20580
FRANCHISE OFFERING PROSPECTUS FOR PROSPECTIVE FRANCHISEES
REQUIRED BY THE STATE OF ___________________ (Name)
Franchisor: ___________________ (Name)
Trademark of Franchisor
Business: ________________________________________ (Describe)
Franchisee's Initial Franchise Fee: $____________
Effective Date: ____________
THIS OFFERING PROSPECTUS IS PROVIDED FOR YOUR OWN PROTECTION
AND CONTAINS A SUMMARY ONLY OF CERTAIN MATERIAL PROVISIONS OF
THE FRANCHISE AGREEMENT. THIS OFFERING PROSPECTUS AND ALL
CONTRACTS OR AGREEMENTS SHOULD BE READ CAREFULLY IN THEIR
ENTIRETY FOR AN UNDERSTANDING OF ALL RIGHTS AND OBLIGATIONS OF
BOTH THE FRANCHISOR AND THE FRANCHISEE.
ALTHOUGH THESE FRANCHISES HAVE BEEN ACCEPTED FOR FILING, SUCH
FILING UNDER THE ___________________ (Name) LAW, ARTICLE _____ OF THE
STATE OF ___________________ (Name) DOES NOT CONSTITUTE APPROVAL,
RECOMMENDATION OR ENDORSEMENT BY THE ___________________ (Name
of State) DEPARTMENT OF LAW THAT THE INFORMATION PROVIDED HEREIN IS
TRUE. THE DEPARTMENT'S REVIEW DID NOT INCLUDE A DETAILED
EXAMINATION OF THE MATERIALS SUBMITTED. A FALSE, INCOMPLETE,
INACCURATE OR MISLEADING STATEMENT MAY CONSTITUTE A VIOLATION OF
BOTH FEDERAL AND STATE LAW, AND SHOULD BE REPORTED TO BOTH THE
FEDERAL TRADE COMMISSION, WASHINGTON, D.C. 20580 AND THE
DEPARTMENT OF ___________________ (Name of State) STATE, BUREAU OF
INVESTOR PROTECTION AND SECURITIES, ___________________ (Name of
State) . GENERAL BUSINESS LAW, ARTICLE _______ OF THE STATE OF
___________________ (Name of State) MAKES IT UNLAWFUL TO OFFER OR
SELL ANY FRANCHISE IN THIS STATE WHICH IS SUBJECT TO REGISTRATION
WITHOUT FIRST PROVIDING TO THE PROSPECTIVE FRANCHISEE, A COPY OF
THE OFFERING PROSPECTUS, TOGETHER WITH A COPY OF ALL PROPOSED
AGREEMENTS RELATING TO THE FRANCHISE AT THE EARLIER OF (1) THE
FIRST PERSONAL MEETING BETWEEN THE FRANCHISOR OR ITS AGENT AND
THE PROSPECTIVE FRANCHISEE, (2) AT LEAST 10 BUSINESS DAYS PRIOR TO
THE EXECUTION OF A BINDING FRANCHISE OR OTHER AGREEMENT OR (3) AT
LEAST 10 DAYS PRIOR TO THE RECEIPT OF ANY CONSIDERATION IN
CONNECTION WITH THE SALE OR PROPOSED SALE OF A FRANCHISE.
TABLE OF CONTENTS
Item Page
1. The Franchisor and Any Predecessor _____
2. Identity and Business Experience of Persons Affiliated with the
Franchisor; Franchise Brokers _____
3. Litigation _____
4. Bankruptcy _____
5. Franchisee's Initial Franchise Fee or Other Initial Payment _____
6. Other Fees _____
7. Franchisee's Initial Investment _____
8. Obligation of Franchisee to Purchase or Lease from Designated
Sources _____
9. Obligation of Franchisee to Purchase or Lease in Accordance with
Specifications or from Approved Suppliers _____
10. Financing Arrangement _____
11. Obligation of the Franchisor; Other Supervision, Assistance, or Services _____
12. Exclusive Area or Territory _____
13. Trademarks, Service Marks, Trade Names, Logotypes, and
Commercial Symbols _____
14. Patents and Copyrights _____
15. Obligation of the Franchisee to Participate in the Actual Operation of the
Franchise Business _____
16. Restriction on Goods and Services Offered by Franchisee _____
17. Renewal, Termination, Repurchase, Modification, and Assignment of the
Franchise Agreement and Related Information _____
18. Arrangements with Public Figures _____
19. Actual, Average, Projected, or Forecasted Franchisee Sales, Profits,
and Earnings _____
20. Information Regarding Franchises of the Franchisor _____
21. Financial Statements _____
22. Contracts _____
Schedules
A. Financial Statements _____
B. Application _____
C. Franchise Agreement _____
D. Option Agreement _____
Item 1 The Franchisor and Any Predecessor
___________________ (Name) Restaurants, Inc. (Franchisor) is a ___________________
(Name of State) Corporation, incorporated on ___________________ (date) , doing
business under the name of ___________________ (Name) Restaurants, Inc., with
principal offices located at _____________________________________________
(street address, city, state, zip code) .
Predecessor
The Franchisor has no predecessors.
The Franchisor's Business
The Franchisor is a franchising company which sells franchises for the operation of ice
cream parlors and restaurants known as ____________ Restaurants. The locations
engage in the sale of ice cream products and a limited menu of food and beverages.
Restaurant Franchise
A ___________________ (Name) Restaurant franchise is a retail business devoted
primarily to the sale of a variety of ice cream and a limited menu of food. The
emphasis of the retail concept is to offer to customers an extensive selection at
moderate prices.
___________________ (Name) Restaurant's primary market is made up of general
consumer and business customers. This market has been expanding in recent years
with further expansion projected for the future.
A ___________________ (Name) Restaurant franchisee will have to compete with
other retail businesses which may offer similar services.
Prior Business Experience
The principal of the Franchisor has operated three locations of the type to be operated
by the franchisee since ____________, 20___. The Franchisor has not offered
franchises in other lines of business.
Item 2 Identity and Business Experience of Persons Affiliated with the
Franchisor; Franchise Brokers
The following persons are affiliated with the Franchisor and have had the business
experience indicated: _____________________________________________ (Names) .
The Franchisor has utilized the services of the following Franchise Brokers:
__________________________________________________________ (Names) .
Item 3 Litigation
Neither the Franchisor nor any person identified in Item 2 above has pending any
administrative, criminal, or material civil action (or a significant number of civil
actions irrespective of materiality) alleging any violation of any franchise law,
securities law, fraud, embezzlement, fraudulent conversion, restraint of trade, unfair
or deceptive practices, misappropriation of property or comparable allegations.
Neither the Franchisor nor any person identified in Item 2 above has been convicted
of a crime or pleaded nolo contendere to a criminal charge or been held liable in a
civil action by final judgment or been the subject of a material complaint or other
legal proceeding involving a violation of any franchise law, securities law, fraud,
embezzlement, fraudulent conversion, restraint of trade, unfair or deceptive
practices, misappropriation of property or comparable allegations.
Neither the Franchisor nor any person identified in Item 2 above is subject to any
injunctive or restrictive order or decree relating to the franchise or under any federal,
state or Canadian franchise, securities, antitrust, trade regulation or trade practice
law as a result of a concluded or pending action or proceeding brought by a public
agency.
Neither the Franchisor nor any person identified in Item 2 above is subject to any
currently effective order of any national securities association or national securities
exchange (as defined in the Securities and Exchange Act of 1934) suspending or
expelling such persons from membership in such association or exchange.
There are no prior or pending arbitration proceedings which involve the Franchisor,
and no provisions exist within the Franchise Agreement for the settlement of
disputes between the Franchisor and its franchisees through arbitration.
Item 4 Bankruptcy
Neither the Franchisor nor any person identified in Item 2 nor any predecessor, officer
or general partner of the Franchisor has, during the 15-year period immediately
preceding the date of the offering prospectus, been adjudged a bankrupt or reorganized
due to insolvency or was a principal officer of any company or a general partner in any
partnership that was adjudged bankrupt or reorganized due to insolvency during or
within one year after the period that such officer or general partner of the Franchisor
held such position in such company and no bankruptcy proceedings or reorganization
have been commenced.
Item 5 Franchisee's Initial Franchise Fee or Other Initial Payment
The Initial Franchise Fee charged in connection with the franchise is
$____________ and is uniform as to each franchisee. The Initial Franchise Fee is
payable $____________ upon the signing of the Franchise Application, and
$____________ upon the execution of the Franchise Agreement.
The Franchisor will use the Initial Franchise Fee as part of its general revenues.
Proceeds from the Initial Franchise Fee are in part profit to the Franchisor and in
part issued to compensate the Franchisor for expenses such as training, legal, and
general administrative and selling expenses connected with the sale and
establishment of the franchise.
The initial franchise fee is fully earned by the Franchisor and is non-refundable in
whole or in part.
Item 6 Other Fees
Royalty Fee: Pursuant to the terms of the franchise agreement, franchisees are
required to pay a monthly royalty fee of four (4%) per cent of annual gross sales. For
the purpose of definition, gross sales shall mean all sales by the franchisee exclusive of
taxes collected by franchisee. Where franchisee is an agent receiving a commission,
gross sales include the amount of the commission and not the total amount paid for the
goods or services. Royalty Fees shall be paid on the first day of each month for the prior
month's sales.
Advertising Fee: In addition to, and concurrently with, the payment of the royalty fee,
franchisees are required to pay a monthly amount equal to three (3%) per cent of gross
sales to be utilized by the Franchisor for advertising and sales promotion. In addition,
Franchisee shall expend at least a minimum $8,000 per annum for its own local
advertising and sales promotion.
Renewal Fee: Upon the renewal of the franchise, at the expiration of the seven year
term of the Franchise Agreement, franchisees shall pay a franchise renewal fee equal to
ten (10%) per cent of their initial franchise fee, but shall execute a Franchise Agreement
in the then current form.
Audits: The franchisee shall be responsible for the cost of audits in the event of an
understatement of gross sales of five (5%) per cent or more. The franchisee shall also
be responsible for expenses such as travel, lodging, and wages which are reason ably
incurred in conducting an audit in which the above discrepancy is found.
Interest and Attorney's Fees: Any royalty and advertising and sales promotion
contribution not paid when due shall bear interest at the maximum rate allowed by the
law of the state in which the Franchise is located. In any litigation to enforce the
Franchise Agreement, the prevailing party shall be paid by the other party all costs,
including attorney's fees, incurred as a result of the legal action.
Assignment Fee: The franchisee shall, at the time of transfer or sale, pay a fee equal
to ten (10%) per cent of the then current Initial Franchise Fee being charged.
Option Purchase Fee: A franchisee intending to own one or more additional franchises
may purchase option(s) as per the Option Agreement (Schedule D). The option fee of
$____________ is fully earned by the Franchisor and non-refundable in whole or part.
Other Payments: The franchisee shall be responsible for payment of other obligations
it incurs in the normal course of doing business. The above fees are fully earned by the
Franchisor and are non-refundable in whole or in part.
Item 7 Franchisee's Initial Investment
Depending on availability, franchisees rent premises for the franchise of at least
__________ square feet. Because of variations in rental costs, deposit requirements,
leasehold improvements and landlord participation, etc., the exact initial investment can
only be estimated at $____________.
Franchisees Estimated Initial Investment and Other Financial Obligations
Item Paid Amount Method of When Due To Whom
Paid Payment
Initial Franchise $__________ Lump Sum $__________ Franchisor
Fee upon submission
of Franchise
Application
$____________
Upon signing
Franchise
Agreement
Decorating $__________ Lump Sum As Incurred Franchisor
Fixtures, Signs, (Note 1)
and/or Displays,
Approved
Construction,
Suppliers, Equipment
Deposits: Rent, (Note 2) As Incurred As Incurred Landlord,
Phone, Utilities, Utilities,
Insurance, Alarm, etc Ins. Agent
Initial Advertising $__________ As Incurred As Incurred Media
Working Capital $__________ As Incurred As Incurred Attorney,
(Note 3) Accountant,
Employees,
Suppliers,
Etc.
Note 1. This estimate may vary depending upon the amount of landlord participation
in leasehold improvements. Store design, signage, interior decor, and equipment
requirements must conform to Franchisor's standards as defined in the Franchise
Agreement.
Note 2. These items will vary depending upon local real estate values, location size,
utility, and insurance rates.
Note 3. Working Capital is estimated to meet various business needs during the first
four to six months. The franchisee should also estimate personal needs to assure
sufficient working capital.
The Franchisor does not offer, either directly or indirectly, financing to franchisees for
any items.
THERE ARE NO OTHER DIRECT OR INDIRECT PAYMENTS TO THE FRANCHISOR IN
CONJUNCTION WITH THE PURCHASE OF THE FRANCHISE.
Item 8 Obligations of Franchisee to Purchase or Lease from Designated Sources
The franchisee is required to buy hard ice cream from ___________________ (Name) ,
an affiliate of the Franchisor. The franchisee is also required to purchase its paper
goods imprinted with the Franchisor's logo and its equipment from approved sources.
There are no other obligations of the franchisee to purchase or lease from the
Franchisor, or from any designated sources, goods, services, supplies, fixtures,
equipment, inventory, or real estate relating to the establishment or operation of the
franchised business.
Item 9 Obligation of Franchisee to Purchase or Lease in Accordance with
Specifications or from Approved Suppliers
Under the terms of the Franchise Agreement, franchisees are required to purchase
from sources meeting the Franchisor's standards and specifications for goods,
services, supplies, fixtures, equipment, inventory, or real estate relating to the
establishment or operation of the ___________________ (Name) Restaurant
franchise.
Standards are established to assure that the intended image, reputation and good
will of ___________________ (Name) Restaurant locations are maintained through
the products and services offered for sale.
With regard to fixtures and equipment, any source providing timely shipment,
installation, and service meeting or exceeding the quality of fixtures and equipment
currently in use at existing ___________________ (Name) Restaurant locations are
considered approved suppliers.
Franchisees may purchase inventory from the Franchisor or from approved
suppliers.
Standards of approval of alternate suppliers may include, but may not be limited to
reliability of the supplier, its reputation for dependability, ability to make prompt
delivery, assurance of product quality, etc. The Franchisor may require the
submission of samples at the franchisee's expense as part of quality control
procedures for approval of suppliers.
Any supplier meeting the Franchisor's standards is in effect an approved supplier.
The Franchisor provides each franchisee with a confidential list of suppliers that are
currently approved.
Other than hard ice cream, there are no categories of goods, supplies, services, or
inventory for which the Franchisor is the only approved supplier.
The Franchisor will derive income only from purchases made by the franchisee
directly from the Franchisor. The Franchisor will not derive income when the
franchisee purchases directly from approved alternate suppliers.
Item 10 Financing Arrangement
The Franchisor does not guarantee or finance the investment necessary on the part
of the franchisee for the establishment and operation of the ___________________
(Name) .
Restaurant Franchise
The Franchisor does not have any past or present practice or intent to sell, assign,
or discount to a third party, in whole or in part, any note, contract, or other instrument
executed by the franchisee.
The Franchisor does not place financing with anyone and therefore does not receive
any payments for the placing of financing.
Item 11 Obligation of the Franchisor, Other Supervision, Assistance, or Services
Obligations of the Franchisor prior to opening of the franchised business:
1. Pursuant to Paragraph II, B, Page 3, of the Franchise Agreement, the Franchisor
grants an exclusive area in which it will not open a company-owned or another
franchised location of the type to be operated by the franchisee.
2. Pursuant to Paragraph II, C, Page 3, of the Franchise Agreement, the franchisee
is granted a license to operate a ___________________ (Name) retail location
franchise for a period of seven years.
3. Pursuant to Paragraph IV, Page 3, of the Franchise Agreement, the Franchisor
shall provide a pre-opening training program at one of the Franchisor's facilities.
4. Pursuant to Paragraph II, B-5, Page 2, of the Franchise Agreement, the
Franchisor shall provide a confidential list of products, services, and/or sources
to the franchisee used in connection with the franchised business.
Other supervision, assistance, or services is to be provided by the Franchisor prior
to opening, although the Franchisor is not bound by the Franchise Agreement to
provide the same.
As deemed necessary by the Franchisor, the franchisee will be provided with
recommendations relative to selection of a location, hiring of personnel, grand
opening advertising and other general topics relative to the establishment of the
franchise.
The obligations to be met by the Franchisor during the operation of the
franchised business:
1. Pursuant to Paragraph IX, Page 8, of the Franchise Agreement, the Franchisor
grants a right of renewal to a franchisee who is not in default for an unlimited
number of additional seven year periods.
2. Pursuant to Paragraph II,B, 6, Page 2, of the Franchise Agreement, the
Franchisor shall provide such merchandising, marketing and advertising research
data and advice as may be developed from time to time by the Franchisor.
3. Pursuant to Paragraph II, B, 8, Page 2, of the Franchise Agreement, the
Franchisor shall advise the franchisee of new product or service availability and
other developments, techniques and improvements which are relevant to the
operation of the franchise.
4. Pursuant to Paragraph V, B, Page 4, of the Franchise Agreement, the Franchisor
shall administer, at its discretion, an advertising, sales promotion, and public
relations program.
Other supervision, assistance or services is to be provided by the Franchisor,
although not bound to do so by the Franchise Agreement.
As deemed necessary by the Franchisor, the franchisee will be provided with
additional training and recommendations as to advertising, marketing, personnel,
and other general operational topics relative to the franchised business.
Although not obligated to do so, the Franchise Agreement grants to the Franchisor
an unrestricted right to enter and inspect the franchised location to assure
compliance with the Franchise Agreement.
Site Selection
The Franchisor does not select the location for the franchisee. The Franchisor will
provide recommendations and approval as to any proposed location.
The typical length of time between the signing of the Franchise Agreement or the
payment of any consideration for the franchise and the opening of the franchise
business can only be estimated at between 90 and 120 days.
The Training Program
The training program will take place at a ___________________ (Name) Restaurant
location in ___________________ (Name of City) , ___________________ (Name of
State) , or at another mutually agreed upon location. The training program is offered to
the franchisee and will be for a period of one week. The training program will consist
primarily of on-the-job training, during which the franchisee will, under the direction and
guidance of the Franchisor, perform all functions required for the proper operation of the
franchise business. There is no requirement that the franchisee complete the training
program to the satisfaction of the Franchisor.
The training program is an on-going program and the franchisee may commence
training when mutually convenient after execution of the Franchise Agreement.
The Franchisor does not currently maintain a formal training staff. Company
personnel, familiar with retail operations, conduct on-the-job training.
There shall be no charge for training except that the franchisee shall bear all travel
and living expenses while attending training.
The training program is mandatory.
No additional training programs beyond the initial training have been scheduled.
However, in the event the Franchisor deems it necessary to schedule any additional
training for the benefit of its franchisees in the future, the franchisee shall be
required to attend. There shall be no charge for additional training except that the
franchisee shall bear all costs for travel and living.
Item 12 Exclusive Area or Territory
The franchisee will be granted an exclusive territory consisting of an area around the
franchisee's retail location. This area will vary depending upon whether the franchisee is
located in a suburban or urban area. The exclusive area will be defined in writing in the
Franchise Agreement and will be mutually agreed upon by the Franchisor and
franchisee. As a guide, a one mile radius is used for suburban areas and a one-half mile
radius is used in urban areas.
The franchise will be granted for one location only. Relocation or the opening of any
additional locations requires prior approval of the Franchisor. The opening of
additional locations will require additional payments and the signing of separate
franchise agreements.
The Franchisor will not operate a company-owned outlet or grant a franchise for the
operation of a similar or competitive business to be located within the defined area.
Sales by franchisees may be made only at the franchised location, but sales may be
solicited and the franchisee may advertise in any area it is lawfully permitted to do
so. There is no requirement for any franchisee to compensate another franchisee for
sales made at a franchised location that were generated outside the exclusive
territory.
The Franchisor will affect sales only at company-owned locations; it may solicit and
advertise in the same manner as franchisees above.
There is no requirement for compensation to be made by or to franchisees for
company-owned location sales, or for sales generated within a company territory by
a franchisee.
The Franchisor has not established and has no plans to establish other franchises or
company-owned outlets selling similar products or services under a different trade
name or trademark.
Continuation of the franchisee's exclusive area is not dependent upon attainment of
a certain sales volume, revenues or market penetration or other contingency.
Item 1 3 Trademarks, Service Marks, Trade Names, Logotypes, and
Commercial Symbols
The ___________________ (Name) trademark application with the United States
Patent and Trademark Office is pending.
The trademark has not been registered in any State.
There are not presently effective any determinations of the Patent Office, the
trademark administrator of this state or any court, any pending interference,
opposition, or cancellation proceeding and any pending material litigation involving
such trademarks, service marks, trade names, logotypes, or commercial symbols
which is relevant to their use in this state or the state in which the franchise business
is to be located.
There are no agreements currently in effect which limit the rights of the Franchisor to
use or license the name “ ___________________ (Name) . ”
Item 1 4 Patents and Copyrights
There are no patents and copyrights in connection with the franchise.
Item 15 Obligation of the Franchisee to Participate in the Actual Operation of
the Franchise Business
If the franchisee is a corporation, partnership, or individual, the Franchisor requires
the franchisee to devote reasonable time and effort to overseeing the day-to-day
operations of the franchised business. The entire Franchised Location shall be open
for business a minimum of seventy (70) hours per week, fifty-two (52) weeks a year
unless otherwise authorized by Franchisor. The Franchised Location may be closed
on customary holidays and shall be open on days and at times that franchisee
reasonably believes appropriate for maximizing the business of the location.
On-premises supervision by the franchisee is recommended by the Franchisor.
There are no restrictions as to whom the franchisee can or cannot hire to conduct
on-premises supervision as a manager. It is recommended that a franchisee's
manager attend the Franchisor's training program. Although not required by the
Franchise Agreement, it is assumed that the manager's identity will be disclosed to
the Franchisor in the normal course of doing business.
Although not obligated by the Franchise Agreement, it is recommended that the
franchisee enter into an agreement with its manager to maintain trade secrets of the
Franchisor and not to compete with the business of the franchisee during and after
employment.
Item 16 Restriction on Goods and Services Offered by Franchisee
Pursuant to the Franchise Agreement, the franchisee shall offer for sale only those
goods and services which have been approved for sale by the Franchisor. The
franchisee shall be required to offer all goods or services authorized by the Franchisor.
There are no restrictions or limitations as to whom the franchisee may sell goods
and services authorized by the Franchisor. Nor are there any restrictions on other
items which may be offered for sale, so long as they conform to the family
orientation of the restaurant.
Item 17 Renewal, Termination, Repurchase, Modification, and Assignment of
the Franchise Agreement and Related Information
Term of the Franchise
The term of the Franchise Agreement is for a period of seven years commencing upon
the opening of the location for business. The franchisee is obligated to open a
___________________ (Name) Restaurant location within four months of the date of the
Franchise Agreement.
The term of the Franchise Agreement may be affected if the franchisee loses its
lease for reason of franchisee's default or if the lease is terminated for reasons other
than franchisee's default and the franchisee fails to re-establish business operations
at an approved alternate location within six months.
Renewal and Extension
A franchisee who is in good standing may renew the Franchise Agreement under the
then current terms and conditions for additional seven-year periods upon the payment
of a renewal fee equal to ten (10%) per cent of the original franchise fee. Good standing
shall mean that the franchisee shall not have committed an act of default as defined in
the Franchise Agreement and if a right to cure was permitted, the default was cured at
the time of renewal.
Conditions under Which the Franchisor May Refuse to Renew or Extend
The Franchisor may refuse to renew the Franchise Agreement if an act of default as
defined in the Franchise Agreement has occurred, or if a right to cure a default is
permitted and the default was not cured.
Termination by the Franchisor
If an act of default occurs and the franchisee fails to cure the default within the cure
period specified, the Franchisor may, at its option and without prejudice to any other
rights or remedies provided for hereunder or by law, immediately terminate the license
granted herein. If no time is specified to cure a default, the franchisee shall have five (5)
days after written notification to cure any default, but such right to cure shall be limited
to three times within any 24-month period. If any applicable law or rule requires a
greater prior notice of termination, the prior notice required by such law or rule shall be
substituted for the notice requirement herein. Each of the following shall be an act of
default:
1. Franchisee fails to maintain and operate the Franchised Location in accordance
with the standards and specifications established by the Franchisor as to service,
maintenance of inventory, knowingly sells any product or service which does not
conform to the Franchisor's specifications, fails to sell products or services
designated by the Franchisor, sells products or services not approved by the
Franchisor, or deals with vendors and suppliers not approved by the Franchisor.
2. Franchisee fails to pay when due any royalty or advertising and sales promotion
contribution required to be paid under this Agreement.
3. Franchisee fails to submit any financial statement when required, or submits a
financial statement which understates gross sales. Franchisee shall have only
two times during the term of this agreement to cure such default, upon five (5)
days' written notice, except that any understatement of gross sales by more than
five (5%) per cent shall be a default with no right to cure.
4. Franchisee voluntarily abandons the franchise relationship. The cessation of
operation of the franchised location other than with the consent of the Franchisor
shall be considered a voluntary abandonment of the franchise relationship.
5. Franchisee ceases to occupy the Franchised Location. If the loss of possession
is the result of governmental exercise of eminent domain, destruction of the
premises, or termination of lease (except by reason of franchisee's fault), the
franchisee may (with the Franchisor's consent and subject to availability) relocate
to other premises in the same Exclusive Area described in Paragraph 1. Failure
to relocate to other approved premises within six (6) months after loss of
possession due to eminent domain, destruction of premises, or termination of
lease without franchisee's fault, shall constitute an act of default.
6. Franchisee (if franchisee consists of more than one person, the operating partner
or the partnership, and if the franchise has been assigned to an operating
corporation, the corporation) files a petition or application seeking any type of
relief under the Bankruptcy Act or any state insolvency or similar law, or
someone files a petition or application seeking to have franchisee adjudicated a
bankrupt, or seeking other relief against the franchisee under the Bankruptcy Act
or any state insolvency or similar law and the petitioner application is not
dismissed within ninety (90) days after it is filed. The Franchise shall terminate
upon the occurrence of this act of default as if that date were the expiration date
and franchisee expressly and knowingly waives any rights that he may have
under the provisions of the Bankruptcy Rules and consents to the termination of
this Agreement or any other relief which may be sought in a Complaint filed by
the Franchisor to lift the provisions of the automatic stay of the Bankruptcy Rules.
Additionally, the franchisee agrees not to seek an Injunctive Order from any court
in any jurisdiction relating to insolvency, reorganization or arrangement
proceedings which would have the effect of staying or enjoining this provision.
Franchisee admits in writing his inability to pay his debts as they mature or
makes an assignment for the benefit of creditors, or a receiver (permanent or
temporary) for any part of his property is appointed by a court of competent
authority.
7. A final judgment against the franchisee remains unsatisfied of record for thirty
(30) days (unless a supersedeas or other appeal bond has been filed) or if a levy
of execution is made upon the license granted by this Agreement or upon any
property used in the Franchised Location, and it is not discharged within five (5)
days of said levying.
8. Conviction of the franchisee in a court of competent jurisdiction of an indictable
offense punishable by a term of imprisonment in excess of one (1) year.
9. Franchisee utilizes or duplicates the ___________________ (Name) Restaurant in
violation of Paragraph 11 or discloses any confidential proprietary information
provided to it by the Franchisor.
10. Franchisee denies the Franchisor the right to inspect the Franchised Location or
to examine his books.
11. Conduct by the franchisee which is of such a nature that a reasonably objective
person would consider safe to be deleterious to or as reflecting unfavorably on
the franchisee or ___________________ (Name) Restaurant system.
12. Failure by franchisee to maintain a responsible credit rating by failing to make
prompt payment of undisputed bills, invoices, and statements from suppliers of
goods and services to the Franchised Location.
13. The assignment or transfer of any interest of the franchisee in this license in
violation of Paragraphs 3, 14 and 15.
14. Franchisee, without the written consent of the Franchisor, enters into a
management agreement or consulting arrangement relating to the Franchised
Location with any person or with an entity not wholly owned by franchisee.
15. The submission by franchisee of a Franchise Application and/or management
commitment form which contains any false or misleading statements or omits any
material fact necessary in order to make the statements made not misleading.
16. Repeated breaches of provisions of this Agreement.
17. The acquisition of an interest in a competitive business.
18. Failure by the franchisee to comply with any other provisions of this Agreement.
19. Failure by franchisee to open a ___________________ (Name) Restaurant within
four (4) months of the date of this Agreement.
The failure of the Franchisor to terminate this Agreement upon the occurrence of
one or more events of default will not constitute a waiver or otherwise affect the right
of the Franchisor to terminate this license because of a continuing or subsequent
failure to cure one or more of the aforesaid events of default or any other default.
Notice of termination shall be sent to the franchisee in writing via certified mail,
return receipt requested, and shall be deemed delivered and effective on the earlier
of the actual receipt or the third day after being deposited in the U.S. Mail.
Post-Termination Obligations of Franchisee
Upon termination or expiration of the Franchise Agreement, the franchisee's right to the
use of the “ ___________________ (Name) ” name and other marks of the Franchisor
shall terminate. The franchisee shall not identify himself as a franchisee of Franchisor,
or publicly identify himself as a former franchisee or use any of the Franchisor's trade
secrets, operating procedures, promotional materials, marks or any marks confusingly
similar. The franchisee will immediately return to the Franchisor all material containing
trade secrets, operating instructions, or business practices of the Franchisor.
The franchisee shall remove or change signs and buildings to effectively distinguish
the premises from its former appearance and from any other ___________________
(Name) Restaurant.
The franchisee acknowledges that in addition to the above the Franchisor shall have
any other rights or remedies that exist under statute, regulation or common law.
Franchisee's Interests upon Termination
The franchisee's interest upon termination, expiration, or non renewal of the Franchise
Agreement shall be limited to its earnings while operating the franchised business. The
Franchisor is under no obligation to compensate the franchisee for any asset or for
good will.
Franchisor's Right of First Refusal
In the event franchisee receives an acceptable bona fide offer from a third party to
purchase the Franchised Location, he shall give the Franchisor written notice setting
forth the name and address of the prospective purchaser, the price and terms of the
offer together with a franchisee application completed by the prospective purchaser, a
copy of the sales contract and such other information that Franchisor may request in
order to evaluate the offer. Franchisor shall then have the prior option to purchase the
franchisee's interest covered by such offer at the price and upon the terms of such offer.
In addition, the franchisee agrees that, prior to acquiring any other __________________
(Name) Restaurant Franchise which may be offered to him for sale or which he may
offer to purchase, such Franchise will first be offered to the Franchisor on the same
terms, conditions, and price. If the consideration is not money, the purchase price shall
be cash equal to the fair market value of the consideration. Franchisor shall have twenty
(20) working days (excluding weekends and holidays) after receipt of the franchisee's
notice of offer and the furnishing of all requested information within which to notify the
franchisee of its intent to accept or reject the offer. Silence on the part of Franchisor
shall constitute rejection. If the proposed sale includes assets of the franchisee not
related to the operation of franchised ___________________ (Name) Restaurant,
Franchisor may purchase the assets related to the operation of franchised Restaurant
or may also purchase other assets, and an equitable purchase price shall be allocated
to each asset included in the proposed sale. This right of first refusal shall apply to any
transfer, conveyance, assignment, consolidation, merger or any other transaction in
which legal or beneficial ownership of the license granted by this Agreement is vested in
other than franchisee.
Franchisee may request a preliminary determination from the Franchisor with respect to
Franchisor's right of first refusal. Within fifteen (15) days after receipt of such written
request, the Franchisor may notify the franchisee that the Franchisor will require
compliance with the provisions of Paragraph 15 of the Franchise Agreement. If no such
compliance requirement is imposed, the Franchisor shall be deemed to have waived its
rights of first refusal for twelve (12) months thereafter and the franchisee may negotiate
with and convey its franchise rights to a third party without reference to any such rights
of first refusal having been retained by Franchisor.
If the Franchisor has not waived its right of first refusal, the election by the
Franchisor not to exercise its right of first refusal as to any offer shall not affect its
right of first refusal as to any subsequent offer.
Any sale or attempted sale effected without first giving the Franchisor the right of first
refusal described above shall be void and of no force and effect.
If the Franchisor does not accept the offer to purchase the Franchised Location, the
Franchisee may conclude the sale to the purchaser who made the offer provided the
Franchisor's consent to the assignment be first obtained, which consent will not be
unreasonably withheld upon compliance with the following conditions:
1. All obligations of the franchisee to the Franchisor, whether arising under this
Agreement or otherwise, must be satisfied at the time of transfer.
2. Prospective purchasers must complete the Application and be approved through
Franchisor's standard franchise-selection process including satisfactorily
demonstrating to the Franchisor that he meets the financial, character,
managerial, equity ownership, and such other criteria and conditions as the
Franchisor shall then be applying in considering applications for new licenses.
3. Approval by the Franchisor of the terms and conditions in the contract of sale
which affect the sufficiency of cash flow from the business after payment of debt
service necessary for reinvestment in the business for refurnishing, maintaining
and remodeling the premises.
4. Franchisor shall be paid an assignment fee equal to ten (10%) per cent of the
then current franchise fee, for the costs and expenses incurred by the Franchisor
in connection with the transfer and the Assignee shall pay the training cost.
5. Execution by Franchise seller of a general release of the Franchisor in a form
satisfactory to the Franchisor.
Assignment by Franchisee
This Franchise Agreement and license are personal to the franchisee, and the
franchisee shall not sell, assign or transfer the Agreement or any right or interest in the
license granted, nor permit any such assignment or transfer to occur directly, indirectly,
or contingently by agreement or operation of law with out the prior written consent of the
Franchisor. If the franchisee consists of more than one (1) person, the requirement of
the Franchisor's prior approval shall apply to a transfer of all or part of one partner's
interest to another partner. The Franchise Agreement and the license granted may not
be pledged, mortgaged, hypothecated, given as security for an obligation, or in any
manner encumbered. The assignment of any interest, except as provided in the
Franchise Agreement, shall constitute a material breach of the Agreement.
With the prior written consent of the Franchisor, the franchisee may assign the
Agreement to a corporation in which he shall own 50% of the issued stock, subject to
the following conditions:
1. The assignment to a corporation will not relieve the franchisee of personal liability
to the Franchisor for performance of all obligations under the Franchise
Agreement.
2. Any subsequent transfer or issuance of shares of the assignee corporation shall
be subject to the Franchisor's approval. In the case of an acquisition of additional
shares by the operating partner, this requirement shall be satisfied by the
Franchisor being given written notice describing the transaction within seven (7)
days following the transfer or issuance. At no time shall the assigned corporation
have more than five (5) shareholders unless otherwise authorized in writing by
the Franchisor.
3. The assignee corporation shall not engage in any business activity other than
that which is directly related to the operation of a franchised _________________
(Name) Restaurant.
4. Franchisee (operating partner if the franchisee consists of more than one (1)
person) must remain the owner of not less than 50% of the outstanding stock
after any transfer or issuance of shares of Assignee Corporation.
5. The Articles of Incorporation and By-Laws of the corporation shall reflect the
limitation in the number of shareholders, and the issuance and transfer of shares
of stock are restricted and may be issued or transferred only with the written
consent of the Franchisor.
6. All stock certificates shall include the following legend:
The transfer of this stock is subject to the terms and conditions of a Franchise
Agreement with ___________________ (Name) Restaurants, Inc. Reference is
made to such Franchise Agreement and the restrictive provisions of the Articles
of Incorporation and By-Laws of this Corporation.
Assignment by Franchisor
The Franchisor shall have the right to assign the agreement to any person, corporation,
or entity which agrees to assume and perform all of the obligations of the Franchisor
under the Franchise Agreement.
Modification by Franchisee
The franchisee may modify the Franchise Agreement only upon the written consent of
the Franchisor.
Modification by Franchisor
The Franchisor may modify the Franchise Agreement only upon the written consent of
the franchisee.
Right of Franchisee's Heirs upon Death of Franchisee
In the event of the death of a franchisee or, if the Agreement has been assigned to a
corporation, the death of a stockholder, the Franchisor shall consent to a transfer of
decedent's interest to his heirs subject to the following conditions:
1. The heir must complete and be approved through the Franchisor's standard
franchisee selection process including satisfactorily demonstrating to the
Franchisor that he meets the financial, character, and managerial criteria, as well
as equity ownership and such other criteria and conditions as the Franchisor
shall then be applying in considering applications for new licenses.
2. The heir shall agree, in writing, to assume liability for and to perform all the terms
and conditions of the agreement to the same extent as the original franchisee.
3. If the heir is not approved or there is no heir, the deceased's estate shall use its
best efforts to sell the Franchised Location to an acceptable party within six (6)
months from the date of a franchisee's death, and the Franchisor shall have an
option, but not the obligation, to operate and/or manage the Franchised Location
for the account of franchisee's estate until the deceased franchisee's interest is
transferred to another party acceptable to Franchisor. Should the Franchisor
elect to operate and/or manage the Franchised Location, the Franchisor shall
make a complete accounting and shall forward the net income from the operation
to franchisee's estate, less expenses and a reasonable management fee. If the
conveyance of the Franchised Location to a party acceptable to Franchisor has
not taken place within the six (6) month period, Franchisor shall have the option
to purchase the Franchised Location at fair market value.
Covenants Not to Compete During the Term of the Franchise Agreement:
The Franchise Agreement provides that during the term of the Franchise Agreement,
the franchisee will not have any interest in any other competitive restaurant ice cream
business within one mile of the franchised premises.
After Termination or Expiration of the Franchise:
For a period of one year after termination or expiration of the Franchise Agreement, and
within five miles of the premises of the franchised location, the franchisee will not have
any interest in any competitive restaurant ice cream business.
There are no obligations on the part of the Franchisor with respect to enforcement of
any covenant not to compete concerning the repurchase on inventory, equipment,
fixtures or the disposition of the lease for the premises.
Item 18 Arrangements with Public Figures
There are no arrangements with public figures with regard to the franchise.
Item 19 Actual, Average, Projected, or Forecasted Franchisee Sales, Profits,
or Earnings
The Franchisor does not provide actual, average, projected, or forecasted franchisee
sales, profits, or earnings.
Item 20 Information Regarding Franchises of the Franchisor
The total number of franchises, exclusive of company-owned outlets, similar to those
being offered which were operational as of the date of the offering circular: None.
The total number of franchises for which a business is not yet operational although a
franchise agreement has been signed: None.
The estimated number of franchises to be sold during the one year period following
the date of the offering circular: Ten.
As of the date of this offering circular, no franchises have been canceled,
terminated, non-renewed, or reacquired by the Franchisor for any reason.
Item 21 Financial Statements. See Schedule A attached.
Item 22 Contracts
See Schedule B attached: Application.
See Schedule C attached: Franchise Agreement.
See Schedule D attached: Option Agreement.
