Exhibit 10.49
FRANCHISE AGREEMENT
THIS AGREEMENT made this day of <>, ______, by and between Smoothie
Island Co., an unincorporated division of Maui Tacos International, Inc., a
Georgia corporation, located at 0000 Xxx Xxxxxxxx, Xxxxxxx Xxxxxxx, 00000 (the
"Franchisor"), and <> located at <> (the
"Operator," as also defined in Article 10):
DEFINITIONS
In this Agreement the following capitalized terms shall have the meanings
set forth below, unless the context otherwise requires:
(i) A SMOOTHIE ISLAND EXPRESS(TM) Branded Product is any product now
existing or developed in the future that bears Franchisor's Marks and is sold by
some or all SMOOTHIE ISLAND EXPRESS Franchisees or Franchisor or other entities
such as supermarkets, grocery stores or convenience stores.
(ii) A Smoothie Island Express Distribution Point or Distribution Point is
any system other than a SMOOTHIE ISLAND EXPRESS juice bar, where Authorized
Smoothie Island Express Products using Franchisor's Marks are sold, such as
carts, kiosks, vending machines or other product distribution systems developed
now or in the future and authorized by Franchisor.
(iii) A SMOOTHIE ISLAND EXPRESS juice bar is a retail installation,
whether a Traditional or a Nontraditional juice bar, that specializes in the
sale of Authorized Smoothie Island Express Products, as defined below, is
operated under Franchisor's Marks, as defined below, and is authorized by a
Franchise or License Agreement made or approved by Franchisor.
(iv) A Nontraditional SMOOTHIE ISLAND EXPRESS juice bar is located within
another primary business or in conjunction with other businesses, some of which
may be other fast-food type operations. A Nontraditional SMOOTHIE ISLAND EXPRESS
Juice bar will likely be installed within other primary businesses or within a
multi-branded facility where other branded or nonbranded businesses share common
space.
(v) A Traditional SMOOTHIE ISLAND EXPRESS Juice bar is a retail business
premises that exists primarily as a SMOOTHIE ISLAND EXPRESS juice bar. However,
it may also have other types of businesses located in it, but in such case the
SMOOTHIE ISLAND EXPRESS juice bar is the primary business.
(vi) A Smoothie Island Express "System Operation" is a traditional or
non-traditional SMOOTHIE ISLAND EXPRESS juice bar from which Smoothie Island
Express Authorized Products are sold for on-premises and off-premises
consumption and from which Authorized Smoothie Island Express Products may be
delivered for off-premises consumption.
(vii) Authorized Products or Smoothie Island Express Authorized Products
are products approved or authorized by Franchisor in accordance with the
provisions of this
Agreement.
(viii) UFOC is the uniform franchise offering circular received by the
Operator at least 10 business days prior to the execution of this agreement.
WHEREAS, Franchisor is the owner of the trademark "SMOOTHIE ISLAND", which
has been filed for registration with the United States Patent and Trademark
Office of the United States of America, and may, in the future become the owner,
licensee and/or authorized distributor for other trademarks, including logos and
designs, related or unrelated to Franchisor's Marks (referred to in this
Agreement as "Franchisor's Marks"); and
WHEREAS, Franchisor has developed and continues to develop a system for
merchandising Smoothie Island Express authorized products, which system includes
distinctive signs, recipes, uniforms, various trade secrets and other
confidential information, and in some cases also includes architectural designs,
equipment specifications, layout plans, inventory, record-keeping and marketing
techniques (the "System") which are materially reflected in Franchisor's
Operations Manual and other manuals disseminated by the Franchisor
(collectively, the "Manuals"). Franchisor identifies the System by Franchisor's
Marks, and such other Trademarks, service marks, trade names, logos and designs
as may be designated by Franchisor in writing as being authorized for use in the
System. Franchisor's Marks identify for the public the source of the services
rendered in accordance with the standards and specifications established by
Franchisor; and
WHEREAS, the System as used in existing and future Traditional and
Nontraditional SMOOTHIE ISLAND EXPRESS juice bars and Distribution Points have
established or will establish a reputation for quality, cleanliness, appearance
and service, and through such operations and continued marketing and advertising
efforts, have created demand and goodwill for the authorized Smoothie Island
Express food products sold as a result of which the System has acquired valuable
goodwill and a favorable reputation; and
WHEREAS, Operator desires to enjoy the benefits of (i) operating under the
System and using Franchisor's Marks, and (ii) being authorized and licensed to
operate one System Operation as set forth below within the System in strict
accordance with the standards and specifications established by Franchisor; and
WHEREAS, Franchisor is willing to grant Operator a license under
Franchisor's Marks and the System, subject to Operator's strict compliance with
the terms and conditions of this Agreement;
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1. FRANCHISE RIGHT GRANTED, LOCATION.
1.1 GRANT.
In consideration of the issuance of the franchise granted herein, Operator
shall pay to
2
Franchisor the non-refundable sum of $<> (the "Initial Fee"). In
exchange, Franchisor hereby awards Operator the exclusive right to open and
operate, under the terms of this Agreement, one System Operation specializing in
selling high quality limited and specific food items as specified by Franchisor
in Franchisor's Operations Manual, or subsequently added in accordance with
Operations Manual amendments, under the name "SMOOTHIE ISLAND EXPRESS" at a
location to be mutually agreed upon by both parties. No exclusive or protected
market is granted by this Article. The Initial Fee shall be deemed fully earned
by Franchisor upon the execution of this Agreement by Franchisor and Operator
and shall not be refunded, in whole or in part, upon any termination of this
Agreement, or at any other time or under any other circumstances.
1.2 LICENSE.
Franchisor hereby grants and awards to Operator, for the term set forth in
this Agreement, and any renewal term, beginning on the date of this Agreement,
the right and license, and Operator hereby undertakes the obligation, to operate
the business described in this Agreement under Franchisor's Marks and such other
of Franchisor's Marks as may be designated by Franchisor, to operate such
business solely in accordance with the System, and only at the specific location
to be agreed upon by Franchisor and Operator (the "Location").
1.3 LOCATION.
No Location has been agreed upon at the time of the execution of this
Agreement. Upon the leasing of the Location, Operator agrees to sublet the
Location from an independent corporation designated by Franchisor, on the
approved sublease form annexed to Franchisor's UFOC, as further defined in
Article 18. Any material violation of the sublease that is not cured after
notice is given and within the applicable grace periods, as required by the
terms of the sublease for the Location, is a violation of this Agreement. The
signing of the sublease for the Location, or Operator's or any of its principle
stockholder's or officer's written approval of the master lease for the
Location, shall constitute Operator's approval of the Location. Operator shall
engage only in the business of operating a System Operation at the Location and
no other, except with Franchisor's prior written consent. Operator acknowledges
its sole responsibility for finding the Location and that Franchisor is not
obligated to directly or indirectly obtain an approved location for Operator.
Franchisor's area subfranchisor, if any, as identified herein, however, may
voluntarily (without obligation) assist Operator in obtaining an approved
location, as well as other approved locations for other System Operation
operators who have executed existing franchise agreements.
ARTICLE 2. INSTALLATION AND COMMENCEMENT OF BUSINESS.
Operator, at its own expense, shall (i) renovate the Location into a
System Operation; (ii) obtain all necessary governmental permits and licenses
prior to beginning the renovation of its Location into a System Operation and
Operator shall fully complete the renovation, construction and equipping within
a reasonable time thereafter. Operator shall commence operation of each System
Operation no later than thirty (30) days following substantial completion of the
renovation and equipment installation at the Location, and shall give Franchisor
ten (10) days
3
written notice prior to commencing operations. In no event shall Operator
construct or remodel the interior or exterior of any System Operation or make
any improvements which vary from the then-current standards, plans, and
specifications approved by Franchisor, without first obtaining Franchisor's
prior written approval. Operator, at its own expense, shall obtain all municipal
and state licenses necessary to operate Operator's System Operation prior to
commencing business at its System Operation and shall maintain all licenses in
full force and effect during the term of this Agreement.
ARTICLE 3. TRAINING.
3.1 Operator will designate individuals (up to 4 persons) as trainee(s) to
attend Franchisor's training school in Atlanta, Georgia (the "Smoothie Island
Express Training School") or at another training location selected by
Franchisor. Franchisor will offer initial training programs for Operator and its
management employees at times selected by Franchisor. Franchisor will bear the
costs of providing training programs, including the overhead costs of training,
staff salaries, materials, and all technical training tools. Operator shall pay
all traveling, living, compensation, and other expenses incurred by Operator
and/or Operator's employees in connection with attendance at training programs.
The training program and manner of conducting such program shall be at
Franchisor's sole discretion and control. The training course will be structured
to provide practical training in the implementation and operation of a System
Operation as described in the UFOC.
3.2 Operator will not allow any System Operation to be opened or managed by any
person who has not attended and successfully completed the management training
course designated by Franchisor. If Operator is an individual, and does not
manage its System Operation on a day-to-day basis, and in the event its
designated System Operation manager resigns or is terminated, Operator must
arrange to have the successor juice bar manager (i) begin the required training
course within forty-five (45) days of first assuming the duties of a juice bar
manager and (ii) successfully complete the course. If Operator successfully
completes the training program, the required training course conducted at
Franchisor's facilities will not extend beyond two (2) weeks. However, the
course conducted at Franchisor's facilities, requires an additional 40 hours of
operational training in a Franchisor approved System Operation as a
prerequisite.
3.3 If at any time the trainee voluntarily withdraws from, or is unable to
complete its training, or fails to demonstrate an aptitude, spirit or ability to
comprehend and carry out the course of study to the reasonable satisfaction of
Franchisor, then Franchisor shall have the right to require Operator's trainee
to attend other training class(es) or to perform additional operational training
until Franchisor is reasonably satisfied that Operator's trainee has
satisfactorily completed the training course. Operator may not open its System
Operation until training is completed to Franchisor's reasonable satisfaction.
3.4 In the event of a sale to a third party of Operator's System Operation after
opening, the transferee must be trained in the Smoothie Island Express Training
School as a condition of Franchisor's consent to such transfer. All tuition
costs for such training shall be deemed paid upon receipt by Franchisor of five
percent (5%) of the sales price of operator's System Operation due in accordance
with Article 14 herein. In the event of an approved non-sale management
4
transfer to a third party of Operator's System Operation, the transferee shall
attend the Smoothie Island Express Training School and pay to Franchisor the
training fee, which fee shall not exceed $1,500. No System Operation shall open
or re-open until the Smoothie Island Express Training School certifies that the
transferee is approved to operate the respective System Operation.
3.5 Additional training sessions are available at Operator's request and
expense, and at Franchisor's request, at Operator's expense, except for the
initial training course itself. Operator's attendance at additional training
sessions is mandatory if they are scheduled in Operator's state. For this
additional training, Franchisor will provide the instructors and instructional
materials, but Operator must arrange for transportation, lodging and food for
itself and/or its manager. The cost will depend on distance Operator must travel
and the type of accommodation chosen. Additionally, Operator must attend
regional meetings, when and if established by Franchisor, and must attend annual
national conventions, when and if scheduled.
ARTICLE 4. MANUALS AND STANDARDS OF OPERATOR QUALITY, CLEANLINESS AND SERVICE.
4.1 STANDARDS.
In order to promote the value and goodwill of Franchisor's Marks and the
System and to protect Franchisor's Marks and the other SMOOTHIE ISLAND EXPRESS
operators who comprise the Smoothie Island Express franchise system, Operator
agrees to conduct its business in accordance with the standards promulgated by
Franchisor as follows:
4.2 MANUALS.
4.2.1 In the Manuals and other publications, Franchisor will list
authorized products to be sold by Operator, and promulgate standards of
operation for System Operations, including standards of quality, cleanliness,
and service for all product line items, furnishings, interior and exterior
decor, supplies, fixtures, and equipment used in connection with each System
Operation. Operator agrees to operate its System Operation in accordance with
the standards, specifications and procedures set forth in the Manuals, this
Agreement and the sublease for the Location. Operator further agrees that
changes in the menu, or the standards, specifications and procedures may become
necessary from time to time and agrees to accept as reasonable all
modifications, revisions and additions to the Manuals as authorized by
Franchisor. The sale of any product or service at the Operator's Location,
without Franchisor's prior written approval shall constitute a material
violation of this Agreement.
4.2.2 The Manuals and all amendments to the Manuals (and copies thereof)
are copyrighted and remain Franchisor's property. They are loaned to Operator
for the term of the Agreement, and must be returned to Franchisor upon the
Agreement's termination, expiration or nonrenewal. The Manuals are highly
confidential documents which contain certain trade secrets of Franchisor, and
Operator shall never reveal, and shall take all reasonable precautions, both
during and after the term of this Agreement, to assure that its employees or any
other party under Operator's control, shall never reveal any of the contents of
the Manuals or any other publication, recipe or secret provided by Franchisor,
except as is necessary for the operation of
5
Operator's System Operation.
4.3 HOURS.
Franchisor and Operator agree that the hours of operation of Operator's
System Operation are at a minimum, 10:00 am. to 12:00 p.m. (midnight), seven
days per week, and Operator agrees to operate its System Operation during such
hours. If the Location is in a mall or shopping center, the hours of the mall or
shopping center shall control. Operator shall diligently and efficiently
exercise its best efforts to achieve the maximum gross sales possible from its
location, and will be open for business not less than 14 hours per day, seven
days per week, unless additional opening hours are reasonably required to
maximize operations and sales. If such hours are incorrect in relation to the
sales potential of Operator's System Operation, then Franchisor and Operator
shall reasonably adjust such hours by jointly establishing new hours of
operation. It is acknowledged that the hours of other operators will vary in
relation to each respective location, and local legal restrictions, if any.
4.4 APPEARANCE.
From time to time, Operator's System Operation may need a cosmetic
improvement or equipment change or addition in order to comply with the Manuals
and/or to maintain proper operations and an aesthetic appearance and
professional image. Accordingly, Franchisor may require remodeling and
renovation, and modifications to existing equipment and improvements as is
reasonably necessary. Franchisor shall not require any such work at a particular
System Operation less than three (3) years after the opening of the System
Operation except: (i) for additional equipment if authorized product line
preparation methods or products are developed and authorized by Franchisor; (ii)
if repairs or repainting are necessary to maintain the appearance of the
interior and exterior of the Location in a clean and orderly condition
satisfactory to Franchisor; or (iii) upon the sale of the Operator's System
Operation. Within ninety (90) days after receipt of written notice, Operator
shall fully implement and complete such changes to its System Operation
operating under this Agreement.
4.5 PRODUCT LINE AND SERVICE.
Operator agrees to only serve the approved limited product line items
specified by Franchisor in this Agreement or in the Manuals and to follow all
specifications and formulas of Franchisor as to specifications, contents, weight
and quality of products served to its customers from Operator's System
Operation.
4.6 CONTAINERS, FIXTURES AND OTHER GOODS.
4.6.1 Operator agrees that all authorized product line items will be
served in containers bearing accurate reproductions of Franchisor's Marks. All
containers, bags, cups, menus and other packaging and like articles used in
connection with Operator's System Operation shall conform to Franchisor's
specifications, shall be imprinted with Franchisor's Marks and shall be
purchased by Operator from a distributor or manufacturer approved in writing by
Franchisor, as provided in Article 8, which approval will not be unreasonably
withheld.
6
4.6.2 No item of merchandise, furnishings, interior and exterior decor
items, supplies, fixtures, equipment or utensils bearing any of Franchisor's
Marks shall be used in or upon any System Operation unless the same shall have
been first submitted to and approved in writing by Franchisor.
ARTICLE 5. MENUS, UNIFORMS, INSPECTIONS, SIGNS.
5.1 MENUS.
5.1.1 Operator shall not manufacture, advertise for sale, sell or give
away any product unless such product has been approved in the Manuals as an
authorized product for sale in Operator's System Operation and not thereafter
disapproved in writing by Franchisor. All approved products shall be distributed
under the specific name designated by Franchisor. Operator shall establish all
menu prices in its sole discretion. Operator shall offer for sale in its System
Operation only those food products which Franchisor designates as "approved
and/or authorized" or which Franchisor has made available as a "regionalized"
menu or has otherwise specifically approved in writing (each, "Authorized
Product"). No standard product will be removed from the menu unless Operator is
so instructed by Franchisor.
5.1.2 Such "Authorized" and/or "Approved" Products shall be marketed by
approved menu formats to be utilized in Operator's System Operation. The
approved and authorized menu and menu format(s) may include, in Franchisor's
discretion, requirements concerning organization, graphics, product
descriptions, illustrations, and any other matters (except prices) related to
the menu, whether or not similar to those listed. In Franchisor's discretion,
the menu and/or menu format(s) may vary depending upon region, market size, and
other factors. Franchisor may change the menu and/or menu format(s) from time to
time or region to region or authorize tests from region to region or authorize
non-uniform regions or non-uniform System Operation(s) within regions, in which
case Operator will be given a reasonable time (not longer than thirty (30) days)
to discontinue use of any old menu format(s) and implement use of the new menu
format(s).
5.1.3 Operator shall, upon receipt of notice from Franchisor, add any
Authorized Product to its menu according to the instructions contained in the
notice. Operator shall have a minimum of thirty (30) days after receipt of
written notice in which to fully implement any such change. Operator shall cease
selling any previously approved product within thirty (30) days after receipt of
notice that the product is no longer approved.
5.1.4 The Authorized Products sold by Operator shall be of the highest
quality, and the ingredients, composition, specifications, and preparation of
such food products shall comply with the instructions and recipes provided by
Franchisor or contained in Franchisor's Operations Manual, and with the further
requirements of Franchisor as they are communicated to Operator from time to
time.
7
5.2 COMPLIANCE.
Operator shall operate each of its System Operation as a clean, orderly,
legal and respectable place of business in accordance with Franchisor's business
standards and merchandising policies, and shall comply with all applicable
ordinances, laws, statutes and regulations governing the operation of such
premises, including all disability, food and drug laws and regulations. Operator
shall not allow any Location or part of a Location to be used for any immoral or
illegal purpose.
5.3 SIGNS, DESIGNS AND FORMS OF PUBLICITY.
5.3.1 Operator shall maintain a suitable sign or awning at, on, or near
the front of the Location, identifying the Location as a "SMOOTHIE ISLAND
EXPRESS Juice Bar". Such sign shall conform in all respects to Franchisor's
requirements and in accordance with the layout and design plan approved for the
Location, except to the extent prohibited by local legal restrictions.
5.3.2 No exterior or interior sign or any design, advertisement, internet
address, "web page" or world wide web home page, sign, or form of publicity,
including form, color, number, location, and size, shall be used by Operator or
any Association (as defined below) unless first submitted to Franchisor and
approved in writing (except with respect to prices). Any request by Operator for
such approval shall be properly submitted in duplicate to: (i) Franchisor's
Legal Department, Attention: General Counsel, 000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000; and (ii) Franchisor's President, 0000 Xxx Xxxxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxx, 00000. Franchisor shall respond to such request within thirty (30) days
of its receipt. Whenever Operator elects to utilize, in the form supplied,
advertising supplied by Franchisor or any promotional item specifically approved
by Franchisor, no further approval for use of such material is required. Upon
written notice from Franchisor, Operator shall discontinue and/or remove any
objectionable advertising materials or any other materials not suitable for
display, in Franchisor's sole discretion.
5.4 UNIFORMS AND EMPLOYEE APPEARANCE.
Operator shall cause all employees, while working in System Operation, to:
(i) wear uniforms of such color, design, and other specifications as Franchisor
may designate from time to time, and (ii) present a neat and clean appearance.
If the type of uniform utilized by Operator is removed from the list of approved
uniforms, Operator shall have sixty (60) days from receipt of written notice of
such removal to discontinue use of its existing inventory of uniforms and
implement the approved type of uniform.
5.5 VENDING OR OTHER MACHINES.
Operator shall not permit vending or game machines or any other mechanical
device to be installed or maintained in its Location without Franchisor's prior
written approval.
5.6 INSPECTION.
5.6.1 Franchisor's authorized representatives shall have the right to
enter upon the
8
entire main floor and basement of Operator's System Operation during business
hours, without disrupting Operator's business operations, for the purposes of
examining same, conferring with Operator's employees, inspecting and checking
operations, beverages, furnishings, interior and exterior decor, supplies,
fixtures, and equipment, and determining whether the business is being conducted
in accordance with this Agreement, the System and the Manuals.
5.6.2 In the event any such inspection indicates any deficiency or
unsatisfactory condition with respect to any matter required under this
Agreement or the Manuals, including but not limited to quality, cleanliness,
service, health and authorized product line, Franchisor will notify Operator in
writing of Operator's non-compliance with the Manuals, the System, or this
Agreement. Operator shall have twenty-four (24) hours after receipt of such
notice, or such other greater time period as Franchisor in its sole discretion
may provide, to correct or repair such deficiency or unsatisfactory condition,
if it can be corrected or repaired within such period of time. If not, Operator
shall within such time period commence such correction or repair and thereafter
diligently pursue it to completion.
ARTICLE 6. ADVERTISING.
6.1 Operator and Franchisor acknowledge the value of advertising and accordingly
Operator agrees to pay 2% of its gross sales for each and every week of its
operations to Franchisor (the "Advertising Fee"). These funds will be deposited,
at Franchisor's sole discretion, into a segregated advertising account (with
other advertising collections) controlled by Franchisor. Advertising payments
will then be spent for advertising to benefit Operator and/or all or regional
operators of System Operations. The Advertising Fee shall be paid in accordance
with the procedure described in Article 9.
6.2 Franchisor, at its sole discretion, may spend the collected fees directly,
or may authorize payment of the advertising collections for media time,
production of media materials, whether for radio, television, newspapers or
store level materials such as flyers, or posters, or for any other type of
advertising or marketing use. Franchisor is not, under any circumstances,
obligated to contribute to any national or local advertising fund, program or
other organization, any advertising fees or contributions.
6.3 Operator acknowledges receipt of Franchisor's UFOC which refers to (a)
Smoothie Island Express Brand Building Fund, Inc. ("SIBBF"); (b) the Council of
Smoothie Island Express Suppliers; (c) a research and development fund; and (d)
the Grand Opening event as explained below.
6.4 As described in the UFOC, SIBBF is the non-profit entity authorized to
receive marketing allowances and payments from Smoothie Island Express
distributors, manufacturers and other entities that are associated in business,
directly or indirectly, with Franchisor or the System or its operators or any
part thereof. The activities of SIBBF are controlled by the Franchisor subject
to the advice and counsel of the Smoothie Island Express Operator Advisory
Board. By this Agreement, Operator consents to the receipt of such funds by
SIBBF or its successors, as well as the expenditure thereof for advertising and
marketing expenses. These expenses may include costs for personnel, management
fees, advertising agencies, operating
9
expenses, matching fund programs, research and development, administrative
expenses, production of educational or training materials, production of
commercials, focus groups or other studies, the purchase of television or radio
or other media time, print advertising, facility design studies or
modifications, consultants and such other marketing and advertising uses as may
be authorized by the Franchisor.
6.5 By execution of this agreement Operator consents to the formation and
existence of the Smoothie Island Express Brand Building Fund, Inc., its right
and privilege to seek voluntary contributions of 1% to 3% of gross sales, or any
higher fee or a flat fee if a sales percentage is not practical, from all
Smoothie Island Express manufacturers, distributors, vendors and purveyors who
sell products or provide services to the Smoothie Island Express System or
Smoothie Island Express Brand Building Fund, Inc., and the system of authorizing
utilization of these collections and any resulting expenditures thereafter.
6.5.1 The Council of Smoothie Island Express Suppliers is an association
composed of approved manufacturers, distributors and the Franchisor, established
for the purposes of improving communication between manufacturers and
distributors, and improving distribution and development of improved Authorized
Products. This Council reimburses Franchisor for employee and other expenses
involved in the distribution and manufacturing of Raw Materials. Operator
consents to the receipt of such funds by Franchisor;
6.5.2 Franchisor and certain manufacturers have agreed to established a
research and development fund for improvement of specific Authorized Products
and Operator consents to Franchisor's receipt of reimbursement funds arising
from expenses incurred in such research and development.
6.5.3 In addition to the Advertising Fee, Operator agrees to spend a
minimum of $1,000 for its "Grand Opening" promotion as designated by Franchisor.
The "Grand Opening" event is required for all operators and functions to
introduce Operator's System Operation to the public. The application and use of
the "Grand Opening" funds shall be controlled by Franchisor's marketing
department.
ARTICLE 7. COMPANY MARKS AND ADDITIONAL MARKS.
7.1 The license and related rights to use the System, the Manuals, Franchisor's
Marks and any other proprietary products granted by this Agreement are
applicable only with respect to Operator's System Operation at the Location, and
not elsewhere, except in the event of a relocation approved in writing by
Franchisor. This Agreement does not authorize the use of mobile vending
vehicles, carts, kiosks or any other non-traditional delivery systems.
7.2 Operator shall not interfere in any manner with, or attempt to prohibit, the
use of Franchisor's Marks and/or the System by any other Operator of Franchisor
or in connection with Nontraditional SMOOTHIE ISLAND EXPRESS locations,
distribution points or any other system used to distribute Smoothie Island
Express authorized or branded products.
7.3 Franchisor may, from time to time, in Franchisor's sole discretion, obtain
additional
10
trademark and/or service xxxx rights in words and/or designs. In the event of
any of these occurrences, Franchisor may license Operator to use those
trademarks or service marks by giving written notification to Operator that such
marks now form part of Franchisor's Marks. The term of such license will be
coextensive with the term of this Agreement or as otherwise established by
Franchisor, and will be subject to all restrictions with respect to the use of
those rights as set forth in this Agreement and in the notice granting Operator
the license.
7.4 Franchisor is not obligated by this Agreement or otherwise, to protect
Operator's right to use the trademarks, service marks, etc., or to protect
Operator against claims of infringement or unfair competition of the
trademarks/service marks .
ARTICLE 8. DISTRIBUTION, MANUFACTURE, AND PURCHASE OF EQUIPMENT,
SUPPLIES, AND OTHER PRODUCTS.
Operator agrees to use only Franchisor's approved products and portion
control formulas in the preparation of Authorized Products. Operator further
agrees to only buy Raw Materials, as defined below, manufactured in accordance
with Franchisor's specifications from approved manufacturers, distributed by
approved distributors, and sold to Operator as follows:
8.1 DEFINITIONS.
8.1.1 For the purpose of this Agreement, "distributor" is defined as any
entity, except a manufacturer, that directly or indirectly delivers raw
materials to the Operator. A "manufacturer" is defined as the entity that
manufactures and/or sells the Raw Materials to a distributor. Raw Materials
means all of the products purchased from distributors, and/or manufactured or
sold by manufacturers or production entities which are used in the creation of
Authorized Products. Raw Materials include, but are not limited to, sorbets,
yogurt, supplements, cups, printed paper goods (the "Raw Materials").
"Authorized" means approved by Franchisor in accordance with the procedures
established in this Agreement.
8.2 DISTRIBUTORS.
8.2.1 Operator acknowledges that it is generally unrealistic from a cost
and service basis to have more than one distributor in the market area of
Operator's System Operation, and that to obtain the lowest distribution costs,
all regional operators should only purchase from one authorized Smoothie Island
Express distributor. Operator agrees to only purchase all equipment, supplies,
Raw Materials and other products and materials necessary for the operation of
its System Operation solely from Authorized distributors, and other authorized
sources who demonstrate, to the continuing reasonable satisfaction of
Franchisor, the ability to meet Franchisor's then-current standards and
specifications for such items; who possess adequate quality controls and
capacity to supply Operator and all other System operators needs promptly and
reliably; who demonstrate the ability and willingness to work with Franchisor to
provide the assistance needed by the those operators in the region and all other
System Operators; who agree to distribute all authorized Smoothie Island Express
products; who comply with Franchisor's reasonable requirements; and who have
been approved in writing by Franchisor and not thereafter disapproved.
11
8.2.2 If Operator desires to purchase any items from an unapproved
distributor, whom Operator desires to become an Authorized distributor, Operator
shall first submit a written request, in duplicate, for such approval to
Franchisor, addressed to (i) President, 0000 Xxx Xxxxxxxx, Xxxxx 000, Xxxxxxx,
Xxxxxxx and (ii) to Xxxxx X. Xxxxxx, Esq., General Counsel, 000 Xxxxxxxx, Xxx
Xxxx, Xxx Xxxx 00000, accompanied by a similar written request for approval from
the proposed distributor. Franchisor shall have the right to require that the
proposed distributor provide reasonable financial, operational and economic
information regarding its business and that Franchisor's representatives be
permitted to inspect the proposed distributor's facilities and establish
economic terms, delivery, service and other requirements consistent with other
distribution relationships for other System Operations. The proposed distributor
shall pay to Franchisor in advance all of Franchisor's reasonable costs in
review of the application of the distributor to service the Operator as well as
all current and future reasonable costs related to inspecting and reinspecting
the distributor's facilities, equipment, Raw Materials in the distributor's
possession at any time. Franchisor may revoke its approval upon the
distributor's failure to continue to meet any of Franchisor's criteria. Nothing
in this article shall require Franchisor to approve any distributor. Upon the
receipt by Franchisor of Operator and the proposed distributor's request for
approval in full compliance of this article, Franchisor will notify Operator of
its decision within 90 days after receipt thereof. In the event an alternate
approved distributor to the recommended distributor is used by Operator, as a
condition thereof Operator and all other operators shall authorize the alternate
distributor to provide to Franchisor duplicate purchase invoices for
Franchisor's records and inspection purposes and to otherwise comply with
Franchisor's reasonable requests.
8.3 MANUFACTURERS.
8.3.1 The parties agree that Franchisor's product specifications and
portion control system are highly confidential information and are trade secrets
of Franchisor. In order to (i) achieve appropriate pricing, (ii) obtain those
specially formulated Smoothie Island Express authorized Raw Materials for
Operator and all of Franchisor's System Operation, and (iii) establish
consistent uniformity of Smoothie Island Express products, Operator acknowledges
that purchasing by all System or regional operators from approved manufacturers
or raw material is a necessity. Because of the importance of quality and
uniformity of product and the significance of product specifications and portion
control in the preparation of Authorized Products to achieve and maintain such
quality and uniformity, it is to the mutual benefit of the parties that
Franchisor closely control the production and distribution of the Raw Materials
used to produce authorized products sold by Operator. Similar considerations may
also apply to other products which Franchisor may develop in the future.
Operator therefore agrees to purchase only Raw Materials manufactured in
accordance with Franchisor's specifications and quality standards by approved
manufacturers who demonstrate, to the continuing reasonable satisfaction of
Franchisor, the ability to meet Franchisor's then-current standards and
specifications for such items; who possess adequate quality controls and
capacity to meet the needs of Operator and all other System Operators in a given
region or territory promptly and reliably; who demonstrate the ability and
willingness to work with Franchisor and to provide the assistance needed by the
Smoothie Island Express System and who have been approved in writing by
Franchisor and not thereafter disapproved.
12
8.3.2 If Operator desires to purchase any items from an unapproved
manufacturer, who Operator desires to become an Authorized manufacturer,
Operator (i) shall first submit a written request, in duplicate, for such
approval to Franchisor, addressed to President: 0000 Xxx Xxxxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxx 00000 and (ii) to General Counsel, 000 Xxxxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 accompanied by a similar written request for approval from the
proposed manufacturer. Franchisor shall have the right to require that the
proposed manufacturer provide reasonable financial, operational and economic
information regarding its business and that Franchisor's representatives be
permitted to inspect the proposed distributor's facilities and establish
economic terms, delivery, service and other requirements consistent with other
with other manufacturing relationships for other System Operations. The proposed
manufacturer shall pay to Franchisor in advance all of Franchisor's reasonable
costs in review of the application of the manufacturer to service the Operator
as well as all current and future reasonable costs related to inspecting and
reinspecting the manufacturer's facilities, equipment and Raw Materials at any
time. Franchisor may revoke its approval upon the manufacturer's failure to
continue to meet any of Franchisor's criteria. Nothing in this article shall
require Franchisor to approve any manufacturer. Upon the receipt by Franchisor
of Operator and the proposed manufacturer's request for approval in full
compliance of this article and the completion of all of the inspections needed
by Franchisor to evaluate the manufacturer, Franchisor will notify Operator of
its decision within 90 days after completion of such application and
inspections. If an alternate approved manufacturer to the recommended
manufacturer is used by Operator, as a condition thereof Operator and all other
operators shall authorize the alternate manufacturer to provide to Franchisor
duplicate purchase invoices for Franchisor's records and inspection purposes and
to otherwise comply with Franchisor's reasonable requests.
8.4 PURCHASE OBLIGATIONS.
Operator agrees to purchase the following items from the approved distributor
and manufacturer designated by Franchisor:
8.4.1 Cups, frozen fruits (strawberries, blackberries, pineapples,
peaches, etc.), cream branded sorbets, yogurt, Smoothie Island Express-branded
supplements and other branded supplements. Franchisor reserves the right to
authorize exceptions as circumstances warrant.
8.4.2 All Branded Smoothie Island Express Products that bear Franchisor's
Xxxx; Franchisor has a long term strategic plan to create another profit center
for Operator and itself by the sale of Smoothie Island Express branded products
in System Operations, supermarkets, grocery stores, etc. To accomplish this
goal, Franchisor intends to develop such products. To effectuate this long term
strategy, Operator agrees to cooperate with Franchisor with respect to the
purchase, display and sale of any Branded Products authorized for sale by
Franchisor. Operator consents to the receipt by Franchisor of licensing fees
from manufacturers who manufacture Branded Products which will compensate
Franchisor for such use of Franchisor's Marks.
8.4.3 Certain Smoothie Island Express standard exterior and interior
signs; These signs require the prior fabrication of sign molds or advance
production in quantity to be either
13
affordable or promptly available. If Franchisor has entered into an agreement
with approved sign manufacturer(s), granting rights to use Franchisor's Marks in
connection with the signs and to sell such signs to SMOOTHIE ISLAND EXPRESS
operators, Operator agrees to purchase its signs from the authorized sign
manufacturer(s).
8.4.4 Coca-Cola fountain service products: Franchisor has entered into a
five (5) year agreement with the Coca-Cola Company to be the only approved
fountain service beverage supplier to the Smoothie Island Express System. In
Franchisor's judgment, the Coca-Cola Company offered the best economic terms
available for the Smoothie Island Express franchise system. Operator agrees to
only use the fountain service Coca-Cola products authorized by Franchisor and no
other beverages unless approved in writing by Franchisor.
8.4.5 Operator agrees that at such times that Franchisor establishes a
regional or national purchasing program for any of the Raw Materials, which may
benefit Operator by reduced price, lower labor costs, production of improved
Authorized Product(s), increased reliability in supply, improved distribution,
Raw Material cost control (establishment of consistent pricing for reasonable
periods to avoid market fluctuations), improved operations by Operator or other
tangible benefits to Operator, Operator will participate in such purchasing
program in accordance with the terms of such program.
ARTICLE 9. CONTINUING FRANCHISE FEES, REPORTS, BOOKS AND RECORDS.
9.1 CONTINUING FRANCHISE FEES.
9.1.1 Operator shall pay to Franchisor weekly during the term of this
Agreement and any renewals or extensions thereof, 8% of the weekly gross sales
of Operator's System Operation. For the purposes of this Agreement, "gross
sales," means gross revenues (excluding price discounts and allowances) received
by Operator as payment, whether in cash or for credit (and, if for credit,
whether or not payment is received therefor), for all beverages and other goods,
services, and supplies including all sales from approved co-brands as described
in Article 23 sold in or from each of Operator's System Operation, and gross
revenues received by Operator from any other business (including, but not
limited to, all revenues from any mechanical or other device, such as vending or
game machines installed at the Location) operated at the Location, excluding
sales taxes.
9.1.2 At Franchisor's request, Operator shall promptly execute or
re-execute within five (5) days after Franchisor's request, and deliver to
Franchisor appropriate pre-authorized check forms or such other instruments or
drafts required by Franchisor's bank, payable against Operator's bank account,
to enable Franchisor to electronically (draft on Operator's account by
electronic withdrawal), collect the 8% and 2% (see Article 6) of gross sales
payable under the terms of this Agreement. At Franchisor's request, Operator
shall within 5 days from such request promptly perform such acts as to enable
Franchisor or its designee to connect its computers to Operator's computer(s) or
Operator's POS System, so that Franchisor or its designee may electronically
obtain statistical information regarding Operator's business activities that
Franchisor may in its sole discretion request. Operator agrees to not disconnect
Franchisor or its designee from such connection or phone line at any time, for
any reason, without Franchisor's
14
prior written approval. Operator specifically authorizes Franchisor to either
"upload" or "download" information in and from or to its computers, cash
registers or other such devices as allowed by law, as it relates to the System
Operation by internet, intranet, and other networks or other means as it becomes
available.
9.1.3 Operator shall report its gross sales by telephone within two (2)
days after the end of each business week (currently Tuesday) or at such other
times as are established by Franchisor in its sole discretion. Operator shall
submit written weekly summaries showing results of its operations by the
following Saturday. If Operator fails to report its sales on a timely basis,
Franchisor may estimate the amount of Operator's sales. Franchisor will then
deposit or transfer the reported, or in the absence of a report, the estimated,
amounts due into its own account, using the System Operator's pre-authorized
checks or other instruments. If any draft, electronic or otherwise, is unpaid
because of insufficient funds or otherwise, then Operator shall pay Franchisor's
expenses arising from such non-payment, including bank fees in the amount of at
least $30.00, hourly staff charges arising from such default, and any other
related expenses incurred by Franchisor. By the 5th day of each month Operator
shall pay to Franchisor any sums unpaid for the prior month to adjust for sales
owed for any partial week or sales that were unpaid, improperly recorded or not
credited on Operators books and records. Operator hereby agrees to pay any
sales, use or other tax now or hereinafter imposed on franchise fees,
advertising fees or any additional rental collected under the sublease for the
Location, imposed by any Federal, state or local governmental authorities.
Franchisor, at its sole discretion, may collect the taxes in the same manner as
franchise fees are collected herein and if Franchisor collects such taxes,
Franchisor shall promptly pay the tax collections to the appropriate
governmental authority.
9.2 REPORTS AND INSPECTION OF RECORDS.
9.2.1 Operator shall submit to Franchisor a quarterly Profit and Loss
Statement, signed and certified by Operator. The Profit and Loss Statement shall
be prepared by a Certified or Public Accountant, in accordance with generally
accepted accounting principles, and shall provide Operator's sales, expenses and
financial status with respect to Operator's System Operation. Operator shall
submit to Franchisor a copy of the original signed 1120 or 1120S tax form each
and every year or any other forms which take the place of the 1120 or 1120S
forms. Operator shall also provide Franchisor with copies of signed original
sales and use tax forms contemporaneously with their filing with the appropriate
state or local authority. Franchisor reserves the right to require such further
information concerning Operator's System Operation as Franchisor may from time
to time reasonably request.
9.2.2 Upon 10 days prior written notice, Franchisor, its agents or
representatives may audit Operator's books and records in accordance with
generally accepted standards established by certified public accountants. In
connection with such audit(s) or other operational visits, Operator agrees to
keep its cash receipts records, weekly and monthly control forms, accounts
payable records including all payments to Operator's suppliers in its System
Operation or at its business office for three (3) years after their due date,
which records shall be available for examination by Franchisor or its
representative(s), at Franchisor's request. Without any prior written notice,
Franchisor, its agents or representatives may inspect Operator's entire System
15
Operation and Operator's daily, weekly and monthly statistical information
("Redbook Information") which is required under the Operational Manual. Operator
shall make such Redbook Information available for such inspections in
recognition that an operational inspection cannot succeed without review of
essential statistical information.
9.2.3 If any audit or other investigation reveals an under-reporting or
under-recording error of five (5%) percent or more, then in addition to any
other sums due, the expenses of the audit/inspection shall be borne and paid by
Operator upon billing by Franchisor, plus interest at the highest compound rate
authorized by the state in which the System Operation is located, but not to
exceed the rate of fifteen (15%) percent per annum.
9.2.4 Operator acknowledges that Franchisor's Operations Department
regularly reviews ongoing operations at System Operation to ensure consistency
of products and service and compliance with the Manuals and this Agreement.
Operator therefore agrees to promptly complete and submit all forms requested by
Franchisor's Operations Department, whether on a daily, weekly or monthly basis.
Non-compliance with this obligation constitutes a material violation of this
Agreement.
ARTICLE 10. COVENANT REGARDING OTHER BUSINESS INTERESTS.
10.1 For purposes of this Article only, "Operator" shall mean and include the
individual Operator; Operator's spouse and minor children; Operator's
shareholders, officers, and directors, if Operator is a corporation; and any one
or more partners or participants in Operator, if Operator is a partnership or
joint venture, or members, if Operator is an LLC.
10.2 Operator acknowledges that the Smoothie Island Express System is unique and
distinctive and has been developed by Franchisor at great effort, time, and
expense, and that Operator has regular and continuing access to valuable and
confidential information, training, and trade secrets regarding the Smoothie
Island Express System. Operator recognizes its obligations to keep confidential
such information as set forth herein. Operator therefore agrees as follows:
10.2.1 During the term of this Agreement, except with Franchisor's prior
written consent, Operator shall not, in any capacity whatsoever, either directly
or indirectly, individually or as a member of any business organization, engage
in the production or sale at retail or wholesale of any frozen beverage or any
other main course item authorized by Franchisor, now or in the future approved
by Franchisor for use in Operator's System Operation, or have any employment or
interest in any firm engaged in the production or sale of such products.
10.2.2 Upon the termination, expiration or nonrenewal of this Agreement,
or if Operator assigns or transfers its interest herein to any person or
business entity, or if any person identified in the first paragraph of this
Article terminates its relationship with Operator, then for a period of sixty
(60) months thereafter such Operator shall not, in any capacity whatsoever,
either directly or indirectly, individually or as a member of any business
organization, engage in the production or sale at retail of any smoothie type
food product, or have any employment or interest in any firm engaged in the
production or sale at retail or wholesale of any such products, at a site within
16
a radius of five (5) miles of any of Operator's former System Operation or
within five (5) miles of any other System Operation or Distribution Point then
existing, unless Franchisor gives its prior written consent. If Operator
violates the terms of this paragraph, Operator shall pay to Franchisor, as
liquidated damages, an amount equal to $5,000 per month for each month this
covenant is violated, plus 8% percent of the gross sales achieved at the site
during the continuation of such violation.
10.2.3 In the event any portion of the above covenants violates laws
affecting Operator, or is held invalid or unenforceable in a final judgment to
which Franchisor and Operator are parties, then the maximum legally allowable
restriction permitted by law shall control and bind Operator. Franchisor may at
any time unilaterally reduce the scope of any part of the above covenants, and
Operator shall comply with any such reduced covenant upon receipt of written
notice.
10.3 The provisions of this Article shall not limit, restrain or otherwise
affect any right or cause of action which may accrue to Franchisor for any
infringement of, violation of, or interference with, this Agreement, or
Franchisor's Marks, System, trade secrets, or any other proprietary aspects of
Franchisor's business.
ARTICLE 11. INTERFERENCE WITH EMPLOYMENT RELATIONS.
Without Franchisor's prior written consent, during the term of this
Agreement, Operator shall not employ or seek to employ, directly or indirectly,
any person serving in an executive, managerial or operational position who is at
the time or was at any time during the prior six (6) months employed by
Franchisor or any of its subsidiaries. Request for Franchisor's consent shall be
sent in duplicate and addressed in writing to Franchisor's Vice-President of
Operations and to its General Counsel.
ARTICLE 12. SUBFRANCHISORS, SALESMEN.
Inasmuch as this Agreement has not been executed by the Operator at the
office of Franchisor, Franchisor requires certain assurances that this Agreement
has been sold in accordance with applicable laws, rules and regulations.
Accordingly, in order to induce Franchisor to execute this Agreement, Operator
agrees to execute a Rider/Questionnaire to this Agreement that acknowledges that
Franchisor is relying upon the acknowledgments, representations and commitments
of Operator that no other salesman, staff member, entity, or associate of
Franchisor has met Operator regarding this franchise sale or the offer and
acceptance thereof other than those set forth therein. The rider shall identify
all sales persons involved in the sales, negotiation and execution of this
Agreement and shall identify the subfranchisor. Franchisor shall be entitled to
rely on the Rider/Questionnaire, and Operator shall be bound by its contents.
ARTICLE 13. LOCAL MARKETING MANUAL.
Operator acknowledges that Franchisor's local marketing manual and other
marketing and advertising materials emphasize the implementation of marketing
efforts within a mile
17
radius of Operator's System Operation. Such references, suggestions and emphasis
do not directly or indirectly grant to Operator a protected market or other
exclusive right within such 3 mile marketing area, but rather reflects the
reality that Operator's local marketing activities should initially be commenced
in the area immediately adjacent to its System Operation.
ARTICLE 14. NATURE OF INTEREST AND TRANSFER.
14.1 GENERAL PROVISIONS.
14.1.1 This Agreement shall inure to the benefit of the successors and
assigns of Franchisor. Franchisor shall have the right to transfer or assign
this Agreement to any person or legal entity who assumes its terms and agrees to
comply with Franchisor's obligations contained herein. Franchisor shall have no
liability for the performance of any obligations contained in this Agreement
after the effective date of such transfer or assignment.
14.1.2 The rights and duties created by this Agreement are personal to
Operator. Accordingly, except as otherwise permitted herein, neither Operator
nor any person with an interest in Operator shall, without Franchisor's prior
written consent, directly or indirectly sell, assign, transfer, convey, give
away, pledge, mortgage, or otherwise encumber any direct or indirect interest in
this Agreement or, if Operator is a partnership, joint venture, LLC or
corporation, any direct or indirect interest in Operator. Any such purported
assignment occurring by operation of law or otherwise without Franchisor's prior
written consent shall constitute a default of this Agreement by Operator, and
shall be null and void. Except in the instance of Operator advertising to sell
its System Operation pursuant to the terms hereof, Operator shall not, without
Franchisor's prior written consent, offer for sale or transfer at public or
private auction or advertise publicly for sale or transfer, the furnishings,
interior and exterior decor items, supplies, fixtures, equipment, Operator's
sublease or the real or personal property used in connection with Operator's
System Operation.
14.2 CONSENT TO TRANSFER.
For all proposed transfers or assignments of this Agreement, and transfers
of more than 51% of the outstanding and issued stock of Operator by one or more
transfers or any transfer which, directly or indirectly, effectively changes
management control of Operator, Franchisor will not unreasonably withhold its
consent to any transfer or assignment which is subject to the restrictions of
this Article, provided however, Franchisor shall not be required to give its
consent unless all of the following conditions are met prior to the effective
date of assignment:
14.2.1 Upon the execution of this Agreement and upon each direct or
indirect transfer of an interest in this Agreement or in Operator and at any
other time upon Franchisor's request, Operator shall, within five (5) days prior
to such transfer or at any other time at Franchisor's request, furnish
Franchisor with an estoppel agreement indicating any and all causes of action,
if any, that Operator may have against Franchisor or if none exist and a list of
all shareholders or partners having an interest in this Agreement or in
Operator, the percentage interest of each shareholder or partner, and a list of
all officers and directors, in such form as Franchisor may require.
18
14.2.2 Operator's written request for transfer of either a partial or
whole interest in this Agreement or Operator's System Operation must be
accompanied by an offer to Franchisor of a right of first refusal at the same
price offered by any bona fide buyer less five (5%) percent Franchisor shall
have the right and option, exercisable within fifteen (15) days after receipt of
such written notification, to send written notice to Operator or such person
that Franchisor or its third-party designee, intends to purchase the interest
which is proposed to be transferred, on the same terms and conditions offered by
the third party. If Franchisor accepts such offer, the five (5%) percent
transfer/administrative fee due by Operator in accordance with Article 3 shall
be waived by Franchisor. Any material change in the terms of an offer prior to
closing shall cause it to be deemed a new offer, subject to the same right of
first refusal by Franchisor, or its third-party designee, as in the case of the
initial offer. Franchisor's failure to exercise such option shall not constitute
a waiver of any other provision of this Agreement, including any of the
requirements of this Article with respect to the proposed transfer.
14.2.3 The Operator is not in default under the terms of this Agreement,
the Manuals or any other obligations owed Franchisor, and all of its then-due
monetary obligations to Franchisor have been paid in full.
14.2.4 The Operator and its shareholders or members, if the Operator is a
corporation or limited liability company, have executed a general release under
seal, in a form prescribed by Franchisor, of any and all claims against
Franchisor, its affiliates, subsidiaries, shareholders, directors, officers,
subfranchisors and employees.
14.2.5 The transferee/assignee has demonstrated to Franchisor's
satisfaction that it meets all of Franchisor's then-current requirements for new
operators or for holders of an interest in a franchise, including, without
limitation, possession of good moral character and reputation, satisfactory
credit ratings, acceptable business qualifications, and the ability to fully
comply with the terms of this Agreement.
14.2.6 The transferee/assignee has assumed this Agreement by a written
assumption agreement approved by Franchisor, or has agreed to do so at closing,
and at closing executes an assumption agreement approved by Franchisor.
14.2.7 The transferee/assignee, its manager or other employees responsible
for the operation of the System Operation have satisfactorily completed
Franchisor's training program.
14.2.8 The transferee/assignee executes such other documents as Franchisor
may require, including a replacement franchise agreement on the then-standard
franchise agreement form used by Franchisor, in order to assume all of the
obligations of this Agreement, to the same extent, and with the same effect, as
previously assumed by the assignor.
14.2.9 At the completion of Operator's sale transaction, Operator shall
pay to Franchisor an administrative/transfer fee of five percent (5%) of the
gross selling price of Operator's System Operation or in the event of a nonsale
management transfer, a fee of $1,500 to cover Franchisor's training expenses.
This five percent (5%) administrative transfer fee will not be due with respect
19
to any transfer that (together with all other related previous, simultaneous, or
proposed transfers) does not result in the transfer of control of Operator.
14.2.10 Operator's rights may pass to Operator's next of kin or legatee if
they assume Operator's obligations and attend and complete Franchisor's training
program. Upon Operator's disability, Operator may sell the franchise or keep it,
if operated by trained personnel.
14.2.11 Franchisor's consent to a transfer shall not constitute a waiver
of any claims it may have against the transferring party arising out of this
Agreement or otherwise.
14.2.12 If Operator is an individual, Franchisor hereby consents to the
assignment of this Agreement and any and all obligations referable thereto
without any fee charged by Franchisor to a corporation principally owned by
Operator within ninety (90) days after the date hereof. Upon such assignment and
assumption by the corporation along with delivery of executed originals of same
to Franchisor, the individual Operator shall be released from any and all
personal liability.
ARTICLE 15. TERM, DEFAULT AND TERMINATION.
15.1 TERM.
15.1.1 Provided Operator is not in default of the terms and conditions
contained in its Location sublease and this Agreement, this Agreement shall
continue for a period of twenty (20) years or for any longer period coterminous
with the term of the Location sublease.
15.1.2 Operator may renew the rights granted by this Agreement for four
(4) additional terms of five (5) years each, subject to the following
conditions:
15.1.2.1 Operator gives Franchisor written notice of Operator's
election to renew not less than six (6) and not more than twenty-four (24)
months before the end of the then current term;
15.1.2.2 Operator is not in default of any provision of this
Agreement or any amendments to this Agreement, the Location sublease, the
Manuals or any monetary obligation owed to Franchisor or its affiliates; and
15.1.2.3 At Franchisor's request, Operator shall undertake and
complete the reasonable renovation or modernization of its System Operation.
15.1.2.4 Operator shall execute Franchisor's then-current franchise
agreement and related agreements.
15.2 DEFAULTS WITHOUT OPPORTUNITY TO CURE.
Operator shall be in default and Franchisor may, at its option, upon thirty (30)
days written notice to Operator, terminate this Agreement and all rights granted
by it, without affording
20
Operator any opportunity to cure the default, upon the occurrence of any of the
following events:
15.2.1 Operator's knowingly or intentionally maintaining false books or
records, or submitting any false report or payment to Franchisor;
15.2.2 Operator's conduct of the System Operation licensed pursuant to
this Agreement is so contrary to this Agreement, the System and the Manuals as
to constitute an imminent danger to the public health (for example, selling
spoiled food knowing that the food products are spoiled or allowing a dangerous
condition arising from a lack of security for customers to continue despite
Operator's knowledge of such condition), or selling regularly unauthorized
products to the public after notice of default and continuing to sell such
products whether or not Operator has cured the default after one or more
notices;
15.2.3 The conviction of a felony, or a crime involving moral turpitude,
or any other crime or offense that is reasonably likely, in the sole reasonable
opinion of Franchisor, to adversely affect the System, Franchisor's Marks; the
goodwill associated with the System or Franchisor's interest in each of them by
Operator's, or its controlling or operating shareholders or members if Operator
is a limited liability company, or Operator's partners if Operator is a
partnership, excluding non-managing partners
15.2.4 Operator's intentional disclosure or use of the contents of the
Manual, trade secrets or confidential or proprietary information provided to
Operator by Franchisor in violation of this Agreement, excluding acts of
independent employees or others not under Operator's control; or
15.2.5 If Operator repeatedly commits defaults under any provisions of
this Agreement eight (8) or more occasions in any twelve (12) month period, or
sixteen (16) or more occasions in any consecutive twenty-four (24) month period,
even if Operator cured each such prior default, and even if Operator would
otherwise be given an opportunity to cure the current default.
15.2.6 Operator's, without Franchisor's consent, ceasing to operate or
otherwise abandoning its System Operation or, upon destruction of its System
Operation, failure to rebuild and resume operation within a reasonable time.
Cessation of the business shall not constitute a default under this Agreement if
caused by condemnation, expiration of a Location lease pursuant to its terms at
execution, natural, governmental or supplier related causes out of Operator's
control, or when failure to rebuild following destruction of the System
Operation is prohibited by law or the Location lease. In the event of
termination pursuant to this subsection 15.2.6, the written notice period shall
commence five days from the date Franchisor sends written notice to Operator. At
the expiration of this time period, this Agreement shall be deemed terminated.
For purposes of this article, ceasing to operate or otherwise abandoning its
System Operation shall be defined as Operator's failure to open its System
Operation for business for 5 consecutive days.
15.3 DEFAULTS WITH OPPORTUNITY TO CURE.
15.3.1 Except as otherwise provided in this Agreement, Operator shall have
ten (10) days after Franchisor's written notice of default within which to
remedy any default under this
21
Agreement, and to provide evidence of such remedy to Franchisor. If any such
default is not cured within that time period, or such longer time period as
applicable law may require, Franchisor may, at its option, terminate this
Agreement and all rights granted by it, by sending a five (5) day written notice
of cancellation of this Agreement to Operator. Upon the expiration of such five
(5) day period, this Agreement shall end and expire as if it were the day fixed
for termination of this Agreement.
15.3.2 Operator shall be in material default under this Article for any
failure to comply with any of the requirements imposed by this Agreement. Such
material defaults shall include, without limitation, the occurrence of any of
the following events:
15.3.2.1 Operator's failure, refusal, or neglect to promptly pay any
monies owed to Franchisor, its subsidiaries or affiliates, when due, or to
submit the financial or other information required by Franchisor under this
Agreement.
15.3.2.2 Operator's failure to maintain the standards specified by
Franchisor in the Manual or otherwise.
15.3.2.3 Operator's failure, refusal or neglect to obtain
Franchisor's prior written approval or consent as required by this Agreement.
15.3.2.4 Operator's misuse or unauthorized use of Franchisor's Marks
or other material impairment of the goodwill associated therewith or
Franchisor's rights therein.
15.3.2.5 Operator's commencement or conducting of any business
operation, or marketing of any product, under a name or xxxx which, in
Franchisor's reasonable opinion, is confusingly similar to Franchisor's Marks.
15.3.2.6 Operator's default, without cure after the applicable grace
period, under any lease, sublease, sub-sublease, mortgage, or deed of trust
covering the Location.
15.3.2.7 Operator's failure to procure or maintain the insurance
required by this Agreement or in the lease and sublease for the Location.
15.3.2.8 Operator's default in the performance of any term,
condition or obligation in payment of any indebtedness to its landlord or
sublandlord, distributors or suppliers or others arising out of the purchase of
inventory, supplies or purchase or lease of equipment for operation of its
System Operation, and if any such default is not cured within thirty (30) days
after written notice by Franchisor to Operator, unless Operator is determined by
a court of competent jurisdiction to be not in default.
15.4 In the event of a default by Operator, all of Franchisor's costs and
expenses arising from such default, including reasonable legal fees and
reasonable hourly charges of Franchisor's administrative employees shall be paid
to Franchisor by Operator within five (5) days after cure.
15.5 Notwithstanding the obligations of Operator and Franchisor to arbitrate all
disputes and
22
other conflicts, Operator and Franchisor acknowledge that certain defaults
require immediate action to protect the appropriate party. Accordingly,
Franchisor and Operator each hereby consent to and authorize the other party to
apply to any court of competent jurisdiction for judicial assistance in
restraining and enjoining violations of this Agreement. Both Franchisor or
Operator are entitled to an injunction restraining Franchisor or Operator from
committing or continuing to commit any default, breach or threatened breach of
this Agreement, without showing or proving any actual damage sustained by the
party seeking such relief.
15.6 Non-enforcement by Franchisor of any violation of the terms of this
Agreement by Operator shall not constitute a waiver of such violation by
Franchisor nor shall Franchisor be deemed to have waived any of its rights to
enforce compliance by Operator of such breach or any other breach of this
Agreement.
ARTICLE 16. RIGHTS AND OBLIGATIONS UPON TERMINATION.
Upon the termination of Operator's rights granted under this Agreement, (whether
during the term of the Agreement or at its conclusion) the following apply:
16.1 Upon termination of this Agreement by lapse of time or by default,
Operator's right to use Franchisor's Marks, or any other xxxx distributed by
Franchisor or insignia or slogan used in connection therewith, or any
confusingly similar trademark, service xxxx, trade name or insignia shall cease.
Operator shall immediately discontinue use of Franchisor's Marks, System, and
color scheme. Operator shall at its own cost, make cosmetic changes to
Operator's System Operation from Franchisor's proprietary designs including, but
not limited to, the removal of all SMOOTHIE ISLAND EXPRESS identifying materials
and distinctive Smoothie Island Express cosmetic finishes, tile walls, interior
wall coverings and colors, exterior finishes and colors, signage and Smoothie
Island Express counter equipment (which shall be deemed proprietary to
Franchisor) from the Location as Franchisor may reasonably direct.
16.2 Franchisor may retain all fees paid pursuant to this Agreement.
16.3 Any and all obligations of Franchisor to Operator under this Agreement
shall immediately cease and terminate.
16.4 Any and all rights of Operator under this Agreement shall immediately cease
and terminate.
16.5 In no event shall a termination or expiration of this Agreement affect
Operator's obligations to take or abstain from taking any action in accordance
with this Agreement. The provisions of this Agreement which constitute
post-termination covenants and agreements including the obligation of Franchisor
and Operator to arbitrate any and all disputes shall survive the termination or
expiration of this Agreement.
16.6 Operator acknowledges and agrees that rights in and to Franchisor's Marks
and the use thereof shall be and remain the property of Franchisor.
23
16.7 If Operator has registered any of Franchisor's Marks or the name "SMOOTHIE
ISLAND" as part of Operator's assumed, fictitious or corporate name, Operator
shall promptly amend such registration to delete Franchisor's Marks therefrom.
16.8 Operator shall immediately pay any and all amounts owing to Franchisor, its
subsidiaries and affiliates.
16.9 Franchisor shall have the option, exercisable by written notice within
thirty (30) days after the termination of this Agreement, to take an assignment
of all telephone numbers (and associated listings) for Operator's System
Operation. Operator is not entitled to any compensation from Franchisor, if
Franchisor exercises this option.
ARTICLE 17. INSURANCE.
17.1 Operator shall obtain and maintain insurance coverage which shall in each
instance designate Franchisor, and its subsidiaries, as an additional named
insured, with an insurance company approved by Franchisor, which approval shall
not be unreasonably withheld as follows:
17.1.1 Comprehensive general liability insurance (including products
liability and sexual harassment coverage); with coverage of $1,000,000 to
$3,000,000 combined single limit for death, personal injury, and $100,000
property damage coverage.
17.1.2 Business interruption insurance, including Location rentals and
Additional Rentals for twelve (12) months after casualty, in amounts equal to at
least $100,000.
17.1.3 Workers' compensation insurance (coverage B) as required by
applicable law.
17.1.4 Fire, and extended coverage insurance, insuring the construction of
improvements and completed System Operation operated by Operator, for the full
replacement value thereof.
17.1.5 If Operator establishes a delivery service for Authorized Products,
Operator shall obtain separate non-owned auto coverage insurance. Operator may
not directly or indirectly deliver any Authorized Products until such insurance
is obtained and Franchisor named as additional insured therein.
17.2 In the event of damage to the System Operation covered by insurance, the
proceeds of any such insurance shall be used to restore the System Operation to
its original condition as soon as possible, unless such restoration is
prohibited by the Location lease or Franchisor has otherwise consented to in
writing. Upon obtaining such insurance, Operator shall promptly provide to
Franchisor proof of such insurance coverage and/or at such other times upon the
request of Franchisor.
17.3 Operator shall, prior to opening its System Operation, file with
Franchisor, certificates of such insurance and shall promptly pay all premiums
on the policies as they become due. In addition, the policies shall contain a
provision requiring thirty (30) days prior written notice to Franchisor of any
proposed cancellation, modification, or termination of insurance. If Operator
24
fails to obtain and maintain the required insurance, Franchisor may, at its
option, in addition to any other rights it may have, procure such insurance for
Operator without notice and Operator shall pay, upon demand, the premiums and
Franchisor's costs in taking such action.
ARTICLE 18. SOLE OBLIGATIONS OF FRANCHISOR.
18.1 As described in Franchisor's UFOC, received by Operator at least ten (10)
business days prior to the execution of this Agreement, Franchisor has obligated
itself to provide specific services to Operator. Franchisor also provides other
voluntary services at its sole discretion. Franchisor and Operator agree that
the following are the only required obligations of Franchisor:
18.1.1 To approve the Location of Operator.
18.1.2 To reasonably assist Operator with any operational or financial
problem encountered by Operator, after notice to Franchisor in duplicate sent
to: (i) Franchisor c/o General Counsel, 000 Xxxxxxxx - 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000; and (ii) Vice President - Operations, 0000 Xxx Xxxxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxx 00000 by certified mail (return receipt requested) or at any
subsequent addresses established by Franchisor, of Operator's problem and the
type of assistance needed. At no time shall reasonable assistance be interpreted
to require Franchisor to pay any money to Operator. Franchisor, in its sole
discretion, may provide any assistance at Franchisor's designated office or
where Operator is located, at a time to be determined by Franchisor.
18.1.3 To reasonably administer to the advertising program. Operator
acknowledges that pursuant to the advice of advertising and marketing
professionals, advertising collections will at times be aggregated until
sufficient revenues are accumulated to commence or complete an advertising or
marketing program. Reasonable administration shall be deemed to be good faith
attempts to utilize the advertising funds in accordance with the advice and
suggestions of the advertising and marketing staff or outside advertising and/or
marketing companies, consultants or other entities retained for such purpose.
18.1.4 To assist Operator in arranging for the initial financing of its
System Operation, if feasible and necessary (Franchisor is not directly or
indirectly responsible for the failure of Operator to meet the qualifying
standards of such independent financing sources).
18.1.5 To supply to Operator a set of standard decor and layout plans and
to thereafter approve the initial decor and layout of Operator's System
Operation.
18.1.6 To loan Operator a copy of its Operations Manual or computer
diskette thereof which manual contains mandatory and suggested specifications,
standards and procedures. This Manual is confidential and remains Franchisor's
property.
18.1.7 To train Operator in accordance with Article 3 herein, and to
provide representatives of Franchisor to assist in opening the System Operation.
18.2 Franchisor shall not, and can not be held in breach of this Agreement until
(i) Franchisor
25
has received notice of any alleged breach from Operator in duplicate, by
registered mail, sent to the parties set forth in paragraph 18.1.2 of this
Article; and (ii) Franchisor has failed to remedy the breach within a reasonable
period of time after such notice, which period shall not be less than sixty (60)
days. This is a material term of this Agreement and may not be modified or
changed by any arbitrator in an arbitration proceeding or otherwise in any court
of competent jurisdiction.
ARTICLE 19. POINT OF SALE SYSTEM, COLLECTION OF DATA.
19.1 This Agreement and the Manuals require the submission of weekly statistical
control forms as well as other financial, operational and statistical
information required by Operator and Franchisor to: (i) assist Operator in the
operation of its System Operation in accordance with the System; (ii) allow
Franchisor to monitor the Operator's gross sales, purchases, costs and expenses;
(iii) enable Franchisor to develop chainwide statistics which may improve bulk
purchasing; (iv) assist Franchisor in the development of new authorized products
or the removal of existing unsuccessful Authorized Products; (v) enable
Franchisor to refine existing Authorized Products; (vi) generally improve
chainwide understanding of the System; and (vii) obtain new types of information
unknown at this time (collectively, the "Information"). To achieve these
results, cash collection and data processing systems are necessary.
19.2 Operator agrees to purchase and use the point of sale cash collection and
data processing system (the "POS System") and only the specified software
authorized by Franchisor, as specified in the Construction and Equipment Manual
or otherwise by Franchisor in writing. The POS System includes a PC based cash
register, register tape printer, magnetic stripe reader, cash drawer, defined
Franchisor polling and register software and telecommunications equipment.
19.3 Operator agrees to (i) connect the POS System to Operator's telephone
line(s); (ii) maintain it in good working order; and (iii) not disconnect any
POS System connection or phone line at any time, for any reason, without prior
written approval. Operator agrees, at Franchisor's request, to maintain
membership in a designated third party network (such as CompuServe, AOL,
Prodigy, etc.) for the purpose of implementing, transmitting, collecting and
maintaining any Information or data exchange system. Operator specifically
authorizes Franchisor to either "upload" or "download" information in and from
or to its computers, cash registers or other such devices as allowed by law, as
it relates to the System Operation by internet, intranet, and other networks or
other means as it becomes available.
19.4 Operator agrees to pay to Franchisor up to $13 weekly (subject to
reasonable annual increases), in the manner provided under Article 9 herein, for
support service for the POS System software during the term of its franchise and
any renewals. This fee will be collected by Franchisor for payment to 1 or more
3rd party suppliers who are designated by Franchisor to provide the support
service. The 3rd party suppliers will provide 24-hour telephone support and
annual maintenance for any upgrades and enhancements that they make to the
required POS System software. Franchisor may cancel this service on 30 days'
written notice to Operator, and may resume these services at any time with any
supplier Franchisor chooses. Franchisor may revise the POS specifications.
Operator may be required to upgrade or update its POS System recording system.
On Franchisor's request, Operator must apply for and maintain debit cards,
credit cards
26
or other non-cash payment systems to enable customers to purchase products
through these procedures. There is no contractual limitation on Franchisor's
right to receive information through the POS System.
ARTICLE 20. RELATIONSHIP OF PARTIES, DISCLOSURE.
20.1 Franchisor and Operator are not and shall not be considered joint ventures,
partners, or agents of each other, or anything other than Franchisor and
Operator, and neither shall have the power to bind or obligate the other except
specifically as set forth in this Agreement. Franchisor and Operator agree that
the relationship created by this Agreement is not a fiduciary relationship.
Operator shall not, under any circumstances, act or hold itself out as an agent
or representative of Franchisor. Operator agrees to indemnify and hold
Franchisor harmless from any claims, demands, liabilities, actions suits or
proceedings asserted by third parties arising out of the operation of Operator's
System Operation or Operator's breach of any of the terms of this Agreement.
Franchisor agrees to indemnify and hold Operator harmless from any claims,
demands, liabilities, actions, suits or proceedings asserted by third parties
and arising out of Franchisor's operations unless caused by Operator.
20.2 As set forth in the UFOC delivered to Operator as described above, Operator
acknowledges that Franchisor has entered into certain subfranchise agreements
with subfranchisors and/or area developers in certain areas and territories.
Pursuant to these contracts, the subfranchisors of Franchisor are obligated to
provide certain sales, operational and support services for Franchisor. Operator
acknowledges that the relationship between Franchisor and all of its
subfranchisors and/or area developers is strictly contractual and that no
subfranchisor and/or area developer is an agent of Franchisor. Accordingly,
Operator acknowledges and agrees that any past, current or future subfranchisor
is not the actual, express or implied agent of Franchisor, and has no power or
authority to: (i) act on Franchisor's behalf; (ii) enter into or execute any
agreement on Franchisor's behalf; (iii) make any representation or promise on
Franchisor's behalf; or (iv) bind Franchisor in any way. Unless otherwise
specifically agreed to in writing, Franchisor expressly disavows any acts by
others, including subfranchisors, that purport to bind Franchisor in any way.
Operator agrees to waive any claim or defense in any litigation or arbitration
proceeding that a subfranchisor is the express or implied agent of Franchisor.
Operator agrees that any attempt to raise, assert or justify such claim or
defense in any proceeding constitutes a material default of this Agreement.
ARTICLE 21. DISPUTE RESOLUTION: ARBITRATION AND LEGAL PROCEEDINGS.
21.1 Franchisor and Operator acknowledge that disputes or disagreements may
arise during the term of this Agreement and any renewals thereto. Franchisor and
Operator have elected to resolve such disputes or disagreements in a
non-judicial alternative dispute resolution format ("ADR"). An ADR format
minimizes the expense of dispute resolution and generally can be accomplished in
a more expeditious and effective manner. By agreeing to an ADR format, both
Operator and Franchisor are also waiving a number of rights, remedies and
privileges which may arise in a judicial resolution format. In view, however, of
the continuing relationship between Operator and Franchisor over the original
and renewal terms of this Agreement, both Operator
27
and Franchisor agree that an ADR format is the most economical, efficient and
practical way to resolve disputes and disagreements.
21.2 Accordingly, except as otherwise provided in this Agreement, in the event
of any dispute or disagreement between Franchisor and Operator with respect to
any issue arising out of or relating to this Agreement, its breach, its
interpretation or any other disagreement between Operator and Franchisor, such
dispute or disagreement shall be resolved by arbitration. In the event of any
dispute or disagreement, Operator and Franchisor both agree to submit the
dispute to arbitration in accordance with the least expensive procedure of the
American Arbitration Association ("AAA"), and the application for such
arbitration shall be filed in the AAA's New York City office . Franchisor and
Operator agree that the hearing(s) shall be held in the City of New York, State
of New York , before one Arbitrator. This paragraph shall not apply to any
monetary defaults of Operator, including Operator's obligation to pay franchise
and advertising fees to Franchisor, and Franchisor shall be free to utilize any
right or remedy it may have at law or equity.
21.3 Franchisor and Operator agree that this Agreement evidences a transaction
involving interstate commerce and that the enforcement of this arbitration
provision and the confirmation of any award issued to either party by reason of
an arbitration conducted pursuant to this arbitration provision is governed by
the Federal Arbitration Act, 9 U.S.C. ss.1 et seq.
21.4 Punitive or exemplary damages or attorney's fees may not be awarded by the
arbitrator(s), and any such award shall not be enforceable or enforced by any
court. Except as otherwise provided, each party shall bear its own attorney's
fees, expert witness fees, and other court costs incurred in connection with any
legal action or arbitration between Franchisor and Operator. If the waiver of
punitive or exemplary damages or legal fees and related costs are in violation
of the laws of the state where the Operator's System Operation is located, such
claims may be awarded by the arbitrator(s), and any such award shall be
enforceable or enforced in any court of appropriate jurisdiction. This agreement
shall be strictly construed in the arbitration hearing. In no event can the
material provisions of this Agreement including, but not limited to the method
of operation, Authorized Product line or monetary obligations specified in this
Agreement, amendments to this Agreement or in the Manuals be modified or changed
by the arbitrator at the arbitration hearing.
21.5 Except for injunctive relief (including temporary restraining orders,
preliminary injunctions and injunctions or similar relief which must be brought
in an appropriate local forum), any legal proceeding authorized by this
Agreement shall be commenced only in the Federal District Court for the Southern
District of New York and both Franchisor and Operator consent to the
jurisdiction in the Federal District Court for the Southern District of New
York. In the event the parties do not meet the jurisdictional requirements for
Federal Court, the parties consent to jurisdiction in the Supreme Court, New
York County, State of New York. Operator agrees that mailing to its last known
address by certified mail of any process shall constitute lawful and valid
process. In all cases, Operator and Franchisor each waives any right to a trial
by jury. Notwithstanding the foregoing, if the laws of the state where
Operator's System Operation is located requires jurisdiction of the courts of
that state or control by the laws of that state, then this Agreement shall be
deemed modified to comply with the applicable laws thereto.
28
21.6 The terms of this article shall survive termination, expiration or
cancellation of this Agreement.
ARTICLE 22. EXECUTION, REQUESTS, CONSENTS AND WAIVERS.
22.1 This Agreement takes effect upon its acceptance and execution by Operator
and Franchisor, and shall be governed by and construed in accordance with the
laws of the State of New York, USA. Franchisor will consider written requests by
Operator for Franchisor's consent to a waiver of any obligation imposed by this
Agreement. Operator agrees, however, that Franchisor is not required to act
uniformly with respect to waivers, requests and consents as each request will be
considered on a case by case basis, and nothing shall be construed to require
Franchisor to grant any such request. Any waiver granted by Franchisor shall be
without prejudice to any other rights Franchisor may have, will be subject to
continuing review by Franchisor, and may be revoked, in Franchisor's sole
discretion, at any time and for any reason, effective upon ten (10) days prior
written notice to Operator. Franchisor makes no warranties or guarantees upon
which Operator may rely, and assumes no liability or obligation to Operator by
providing any waiver, approval, consent, assistance, or suggestion to Operator
in connection with this Agreement, or by reason of any neglect, delay, or denial
of any request.
22.2 Unless otherwise provided, whenever this Agreement requires Operator to
obtain Franchisor's prior written consent, Operator shall timely address its
written request for such consent in duplicate to the parties set forth in
paragraph 2 of Article 18 or such other persons as Franchisor may designate in
writing. Franchisor will then consider such request and advise Operator of the
decision, in writing, within forty-five (45) days. Franchisor's failure to
advise Operator will constitute Franchisor's consent to such request. The
forty-five (45) day period shall not begin to run, however, until Operator has
provided Franchisor with all information and documentation requested by
Franchisor. Neither Operator nor Franchisor shall be deemed to have waived or
impaired any right, power or option reserved by this Agreement, including,
without limitation, its right to demand strict compliance with every term,
condition, and covenant herein, or to declare any breach thereof a default and
to terminate this Agreement prior to the expiration of its term, by virtue of
any custom or practice of the parties at variance with the terms hereof; by any
forbearance, delay, failure, or omission to exercise any right, power, or
option, whether of the same, similar, or different nature, against Franchisor,
Operator, or any other operator; or by the acceptance of any payments due after
any breach of this Agreement.
ARTICLE 23. MISCELLANEOUS PROVISIONS.
23.1 This Agreement may be executed in any number of counterparts, each of
which, when so executed and delivered, shall be deemed an original, but such
counterparts together shall constitute but one and the same instrument.
23.2 This Agreement (as further explained in the UFOC) contains the entire
agreement of the parties and cannot be modified, changed or amended except in
writing and signed by Franchisor.
23.3 There is no other agreement, representation or warranty made by Franchisor
or any other
29
entity or person associated with Franchisor other than contained in this
Agreement. This Agreement is not subject to or conditioned upon the obtaining of
a Location for Operator's System Operation.
23.4 Except as otherwise provided, each party shall bear its own attorney's fees
arising from the negotiations and execution or lack of execution of this
Agreement, and any expert witness fees, and other court costs incurred in
connection with any violation of this Agreement.
23.5 Each article, paragraph, subparagraph, term, and condition of this
Agreement shall be considered severable. If for any reason, any portion of this
Agreement is determined to be invalid or in conflict with any law or rule in a
final ruling issued by any court, agency, or tribunal with valid jurisdiction in
a proceeding to which Franchisor is a party, that ruling shall not effect the
validity or enforceability of any other portion of this Agreement.
23.6 All notices to Franchisor required by the terms of this Agreement, unless
otherwise provided, shall be sent by certified or registered mail or by
overnight delivery service, addressed to the parties set forth in this
Agreement, or at such other address as Franchisor designates. All notices to
Operator required by the terms of this Agreement shall be sent by certified or
registered mail or by overnight delivery service, addressed to Operator at the
Location, or at such other or additional address as Operator designates in
writing. If Operator refuses acceptance of any certified, registered or
overnight delivery, acceptance shall be deemed to have occurred forty-eight (48)
hours after rejection of such notice.
23.7 Operator acknowledges that the evolution of the System requires the
development of Nontraditional SMOOTHIE ISLAND EXPRESS juice bars, and Smoothie
Island Express Distribution Points and Branded Products.
23.8 For the purpose of this article, a co-brand shall be defined as an
independent operating system owned by another entity (not Franchisor) that is
incorporated as an operational part within the Operator's System Operation.
Subject to Franchisor's prior written approval, Operator may install approved
co-branding marketing systems to be operated in conjunction with Operator's
System Operation. Franchisor shall not be required to approve any co-branding
marketing system unless Franchisor has recognized that co-branding system as an
approved co-brand for operation within its System Operation, either nationally
or regionally. Inasmuch as Operator and its employees will be incorporating the
co-brand within its System Operation, all sales of the co-brand shall be
included within the definition of "gross sales" as defined in Article 9 herein
and Operator shall pay to Franchisor franchise and advertising fees for such
sales.
30
IN WITNESS WHEREOF, the parties hereof have executed this Agreement as of
the date of execution by Franchisor.
Smoothie Island Co.
an Unincorporated Division
of Maui Tacos International, Inc.
By:
-------------------------------- -------------------------------------
Date of Execution Vice President
Executed as of the date first <>
above written.
By:
-------------------------------------
<>, <
