DAIRY QUEEN OPERATING AGREEMENT
"DAIRY QUEEN" OPERATING AGREEMENT
This Agreement entered into this 30th day of October, 1985, by and between
Interstate Dairy Queen Corporation of the city of Atlanta, county of Dekalb, and
state of Georgia, herinafter referred to as "Licensor" and XxXxxxx Investments
of the city of Albuquerque county of Bernalillo, and State of New Mexico herein
after referred to as "Licensee":
WHEREAS, Licensor is the exclusive licensee of American Dairy. Queen
Corporation in certain geographical areas including the territory hereinafter
defined of the right to use, license and permit others to use the "Dairy Queen"
trademark, service xxxx and trade name which has been registered in the United
States Patent Office, in each state of the union and in foreign countries as
well as those trademarks and service marks (hereinafter collectively referred to
as "Trademarks"), a list of which is attached hereto and made a part hereof as
Appendix A; and
WHEREAS, Licensor and its predecessors in interest acting under said
exclusive license instituted, developed, promoted, and established the "Dairy
Queen" franchise business and system in the aforesaid territory which consists
of the sale of dairy products, food products, beverages and other products and
services under said trademarks and utilizing in connection therewith certain
types of facilities, equipment, supplies, ingredients, merchandising and
business techniques and methods together with advertising and promotion programs
developed from time to time; and
WHEREAS, it is the purpose of Licensor to provide to Licensee in a retail
store outlet an organization to control and make uniform the operation of
facilities and equipment together with the quality of products, the use and
protection of the trademarks and-to make available uniform and approved
equipment, supplies, ingredients, merchandising and business techniques and the
advertising and promotional programs of American Dairy Queen Corporation, and
WHEREAS, Licensee desires to engage in the "Dairy Queen" business and
system and to enter into this operating Agreement subject to the conditions and
controls herein prescribed for the purpose of offering to the public products
and services of uniformly high quality and standards to the end of protecting
the interests of Licensee, of Licensor, of American Dairy Queen Corporation and
all other persons engaged in said business.
WHEREAS, it is the intent of both Licensor and Licensee to preserve within
the context of a "Dairy Queen" retail store continuing consumer confidence in
the reliability and quality of all products sold under any of the Trademarks,
and, each party desires that all products sold under any of the Trademarks,
consistently conform to the highest expectations of consumers of such products,
and, whereas, by this Agreement the parties contemplate that Licensee's store,
in addition to the normal "Dairy Queen" food and beverage products may also sell
Permitted Products, as defined hereinafter.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the grant by Licensor of this Operating Agreement and the
payment by Licensee of the participation fees provided in Paragraph 9 hereof, it
is agreed by and between the parties hereto as follows:
GRANT OF LICENSE
Licensor's 1. Licensor hereby grants to Licensee, subject to all the
Grant to terms, conditions and provisions hereof, the right and
License license to:
1.1 Establish and operate a retail store under the name
"Dairy Queen" at I-40 and Rio Puerco (exit 140)
Xxxxxxxxxxx, Xxx Xxxxxx 00000
hereinafter referred to as the "Authorized Location"
(provided, however, in the event an Authorized Location
is not designated on the date hereof, and such location
is not designated herein by Licensor within ninety (90)
days after such date, this Agreement shall become null
and void and all deposit is including the franchise fee
shall be returned to Licensee).
1.2 Use at the Authorized Location the trademark on and in
association with sale of all uniform and approved
products and services as American may authorize from
time to time, with all approved sales promotion
programs relative thereto.
1.3 Use at the Authorized Location the on and in
association with the uniform equipment, supplies, and
ingredients for the products approved by American.
1.4 Employ in the business of said store the merchandising,
advertising, promotion and business methods and
techniques developed, adopted and approved by American.
Acceptance 2. Licensee hereby accepts the above license from Licensor
by Licensee subject to all the terms, by Licensee provisions
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and conditions hereof and agrees that Licensee shall cause
to have a "Dairy Queen" store established within 180 days of
the date hereof (unless an extension of time is expressly
authorized in writing by Licensor), and thereafter
maintained and operated at the Authorized Location, under
Licencee's active and continuous supervision and management
and upon the standards hereinafter provided. Licensee
further expressly acknowledges and agrees:
2.1 American is the owner of all right, title and interest
in and to the trademark, and the good will attributable
thereto of the business in connection with which said
Trademarks have been, and are and will be used at the
Authorized Location. Licensor is the licensee of the
right to use the Trademarks in the territory which
includes the Authorized Location. Specifically, but
without limiting the foregoing, Licensee disclaims any
and all right, title and interest in or to the
Trademarks and to the good will associated with the
Trademarks of the "Dairy Queen" retail store at the
Authorized Location and acknowledges and agrees that
all such good will is the exclusive property of
American.
2.2 The trademarks are valuable property rights owned by
American.
2.3 The trademarks shall be used only in connection with
such products and services as may be approved or
specified by American and shall at all times be used
only in a manner approved by American.
2.4 Licensee's rights to the use of trademarks is
specifically limited to Licensee's retail store
operation at Authorized Location.
2.5 Licensee shall use no other trademarks, trade names or
service marks in said business except those authorized
by American and as set forth in Appendix A except by
the prior written consent of American.
2.6 Licensee shall not use the words "Dairy Queen" as a
part of its corporate or business name unless first
approved in writing by American, and shall use only the
word "Dairy Queen" (and no other words whatsoever) as
the trade name on the store from which the said
products and services are sold. In the event American
does approve the use of the words "Dairy Queen", or any
of the Trademarks, as a part of Licensee's corporate or
business name Licensee shall cause such name to be
changed so as to eliminate those works and Trademarks
from the
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name within thirty (30) days after termination of
this Agreement.
2.7 Licensee shall adopt and follow in good faith the
systems, programs and methods prescribed by Licensor
for Licensee's retail operation in accordance with this
Operating Agreement.
2.8 Neither Licensee nor any person owning an interest
directly or indirectly in Licensee shall directly or
indirectly operate or permit to be operated or hold any
interest (other then 1% or less of any outstanding
stock or debt of any class of any public company) in
any restaurant or fast-food business other than a
Stuckey's Pecan Shoppe or its affiliates at the time of
signing or one authorized by this Agreement without the
prior written consent of Licensor.
TERM
Term 3. The License granted herein shall continue until terminated
by Licensee, with or without cause, on sixty (60) days prior
written notice to Licensor, or until otherwise terminated by
either Licensee or Licensor in accordance with the
provisions of this Agreement.
TRADEMARK STANDARDS AND REQUIREMENTS
General 4. Licensee agrees that nothing in this agreement gives him the
Declarations right to use the Trademarks except the right to use the same
under the terms and conditions of this Agreement and that
Licensee's use there of injures to the benefit of American.
Specifically, but without limiting the foregoing, Licensee
acknowledges and agrees that American has the right and may
distribute for its own account products identified by the
Trademarks through not only "Dairy Queen" retail stores but
through any other distribution method which may from time to
time be established.
Use of 4.1 Licensee shall confine his use the trademarks to the
Trademarks sales promotion programs, sale of products and services
which shall in quality, mode and conditions of
manufacture and sale, comply with such standards as are
established or approved by American. In order to
promote and protect the business interests of each of
the parties, the value of the "Dairy Queen" business
and the business interests of other persons engaged
therein, uniformity shall be maintained in the type,
standard and quality of stores, equipment, supplies and
ingredients used therein, and the conditions of
preparation and the procedures employed in the sale of
said products and services.
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Acknowledge 4.2 Licensee agrees that the provisions, restrictions and
of controls provided in this Operating Agreement are all
Necessity of necessary, reasonable and desirable for such purposes
Uniformity and that Licensee's said business shall be conducted in
accordance with American's uniform requirements with
respect to quality, production, appearance,
cleanliness, service, merchandising and advertising
standards. Licensee acknowledges and agrees that
substantial uniformity in facilities, products,
services and operations are essential to the conduct of
a system such as the "Dairy Queen" system, and
therefore further agrees to honor and implement
recommendations of American and Licensor directed to
enhancing and furthering such uniformity.
Equipment 4.3 Licensee agrees to purchase and use, in the operation
and Supplies of Licensee's "Dairy Queen" retail store, only
equipment, supplies, ingredients and services which are
approved by American or by Licensor. Nothing herein
shall be constructed as an attempt to limit
unreasonably the sources from which Licensee may
procure equipment, supplies, ingredients or services.
Rather, it is the intention of the parties that such
items conform to American's standards and
specifications of consistent quality and uniformity.
Nothing contained herein shall be deemed to require
Licensor to approve an inordinate number of suppliers
of a given item or service w3hich in the reasonable
judgment of American or licensor would result in
licensees or prevent effective and economical
supervision of suppliers by approval of additional
suppliers shall be in writing and shall contain such
information as American and Licensor may reasonably
request. American and Licensor reserve the right to
charge back to Licensee or the proposed supplier all
reasonable expenses incurred in considering requests
for approval.
Approved 4.4 Complete and detailed uniformity under many varying
Adaptations conditions may not be possible or practical and
Licensor reserves the right and privilege, at
American's sole discretion and as American may deem in
the best interests of all concerned in any specific
instance, to accommodate special needs of Licensee's
Authorized Site or that of any other like based on the
peculiar site or location, density of population,
business potential, population of trade area, existing
business practices, requirements of local law, or any
other condition which Licensor deems to be of
importance to the successful operation of a like
business.
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Litigation 4.5 In the event that any person, firm or company, who is
not a licensee or franchisee of American or Licensor,
uses or infringes upon the Trademarks, American shall
control all litigation and shall be the sole judge as
to whether or not suit shall be instituted or other
action taken.
Notice of 4.6 Licensor and American hereby advise Licensee the
Potential licensor, American and /or affiliates of American
American and/or and/or Licensor may from time to time make available to
Licensor Profit Licensee goods, products and/or services for use in
Licensee's "Dairy Queen" retail store in respect to the
sale or provision of which Licensor, American and/or
affiliates of American and/or Licensor may make a
profit. Licensor further advises Licensee that
Licensor, American and/or affiliates of American and/or
Licensor may from time to time receive consideration
from suppliers and /or manufactures in consideration of
such services provided or rights licensed to such
persons by American, Licensor or their respective
affiliates.
FACILITY STANDARDS AND MAINTENANCE
5. The following provisions and conditions shall control with
respect to Licensee's Authorized Location and retail store:
Store Facility 5.1 Licensee agrees that the retail store shall constructed
and equipped in accordance with American's currently
approved specifications and standards in respect to
building, equipment, inventory, signage, fixtures,
location and design and accessory features.
Future 5.2 Any replacement, reconstruction, addition or
Alteration modification in building, equipment or signage, to be
made hereafter, whether at the request of Licensee or
of Licensor, shall be made in accordance with written
specifications approved by Licensor or American.
Licensor and American shall not unreasonably withhold
such approval.
Maintenance 5.3 The building, equipment and signage employed in the
conduct of Licensee's business shall be maintained in
accordance with an annual maintenance list prepared by
Licensor and based upon periodic inspections of the
premises by Licensor's representatives. Within a period
of ninety (90) days after the receipt of such annual
maintenance list, Licensee shall effect the items of
maintenance reasonably provided therein including the
repair of defective items and/or the replacement of
unrepairable or obsolete items of equipment and
signage. Routine maintenance shall be conducted in
accordance with general schedules published by Licensor
or American and made available to Licensee. -6-
Relocation 5.4 Should it become necessary, on account of condemnation,
sale, or other cause, including expiration or
cancellation of lease or rental contract, to relocate
said store, Licensor shall grant Licensee authority to
do so within a radius of 1,000 yards of the Authorized
Location, provided the new site is reasonably suited
for a "Dairy Queen" retail store in accordance with
Licensor's standards for store sites, does not infringe
on rights of another licensee, is reasonably distant
from other "Dairy Queen" retail stores, and the new
retail store is constructed, equipped and opened for
business in accordance with the current standards of
American at that time within one year after
discontinuing operation of a "Dairy Queen" retail store
at the previous Authorized Location.
5.5 Each and every transfer as provided in Paragraph 9.10
hereof shall be expressly conditioned upon Licensee
promptly performing and effecting such items of
modernization and/or replacement of building,
equipment, and signage as may be necessary to permit
the same to conform to the standards then prescribed by
American for similarly situated store operations.
Licensee recognizes and acknowledges that the
requirements of this paragraph 5.5 are both reasonable
and necessary to insure continued public acceptance and
patronage and to avoid deterioration or obsolescence in
the business conducted hereunder.
PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
6. The following provisions shall control with respect to
products and operations:
6.1 Licensee's business shall be confined to the
preparation and sale of only such products as from time
to time are designated or approved by American for sale
by Licensees which are parties to this form of
Operating Agreement. The premises upon which said
business is operated shall not be used for any other
business and there shall not be sold or offered for
sale therefrom any other product or service (excepting
the preparation, storage and sale of Permitted
Products) without the written consent of American.
Specifically, but without limiting the foregoing,
alcoholic or intoxicating beverages shall not be sold
or offered for sale or otherwise handled upon said
premises.
Approved Menu 6.2 Attached hereto as Appendix B is the currently approved
menu for Licensee's retail store. American may from
time to time make reasonable modifications to said
approved menu provided said modifications are made in
respect to all licensees which have this form of
Operating Agreement and are located in similar areas of
the country. In addition, Licensee may from time to
time request variation from
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the currently approved menu. Such variations shall only
be made with the written consent of the American.
Authorized 6.1 Licensee shall use in preparing products only such as
Ingredients, are specified by American and in such portions, sizes
Formulas, and appearance and packaging as set forth in American's
Supplies, most current "Store Management Operations Manual" and
Preparation; "products preparation charts". Copies of the current
Subject to Change "Store management Operations Manual" and "products
by American preparation Preparation; Subject to Change by American
charts" have been supplied to Licensee by Licensor
temporaneously with execution of this Operating
Agreement. Licensee acknowledges and agrees that these
may be changed from time to time by American and that
Licensee is obligated to conform to the requirements as
so changed from time to time. All other supplies,
including cones, cups, containers, eating utensils,
napkins, and all other customer service materials of
all description and types, shall meet the standards of
uniformity and quality as now or hereafter reasonably
set by American. Licensee shall be furnished with lists
of approved equipment, supplies, ingredients and
services.
Serving and 6.4 All sales promotional material, customer "goodwill"
Promotion Items items, cartons, containers, wrappers and paper goods,
eating and serving utensils, customer convenience items
(including napkins, baby bibs, and disposal
containers), used in the sales promotion, sale and
distribution of all products covered by this Operating
Agreement shall, where practicable, contain one or more
Trademarks and indicate that it is produced and sold
under authority of American and shall be subject to
approval by Licensor or American before being used.
Maintenance 6.5 Licensee's said business shall be operated and
and Sanitation maintained at all times in compliance with any and all
reasonable health and sanitary standards prescribed by
American or by governmental authority. In addition to
complying with such standards, if such store shall be
subject to any sanitary or health inspection by any
governmental authorities under which it may be rated in
one or more than one classification, it shall be
maintained and operated so as to be rated in the
highest available health and sanitary classification
with respect to each governmental agency inspecting the
same.
Inspection and 6.6 American, Licensor or its authorized representative
Recommendation shall have the right from time to time to enter
Licensee's store at all reasonable times during the
business day for the purpose of making periodic
inspections to ascertain if all the provisions of this
Operating Agreement are being observed by Licensee
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and to inspect Licensee's said store, lands, equipment,
and to test, sample and inspect his supplies,
ingredients and products, as well as storage,
preparation and formulation thereof and the conditions
of sanitation and cleanliness in the storage,
production, handling and serving thereof.
Period of 6.7 Whenever it shall appear in Licensor's reasonable
Operation judgment that Licensee's said business is not being
operated in compliance with the requirements hereof,
that the volume of business being done is not equal to
the average volume of other businesses similarly
situated, or that the business is not being operated
profitably or efficiently, Licensor, at Licensor's
option: Period of Operation 6.7 Licensee's store shall
be opened to the public and operated twelve months per
year and at least twelve hours each day of the year.
Any variance from this provision must be authorized in
writing by Licensor Acts of God, war, strikes or riots
preventing Licensee from temporarily complying with the
foregoing shall to that extent suspend compliance
therewith.
Notice of 6.8 Licensee acknowledges that he is aware of the fact that
Existence of present licensees of Licensor and American operate
Different Forms under a number of different forms of agreement and that
of License consequently Licensor's and American's obligations and
Agreements rights in respect to their respective licenses may
differ materially in certain instances.
PERSONNEL AND SUPERVISION STANDARDS
7. The following provisions and conditions shall control with
respect to personnel, training and supervision:
Management 7.1 Licensee shall adopt and use as his continuing
System operational routine the standard "Dairy Queen"
management system as well as American's standards with
respect to product preparation, merchandising, employee
recruitment and training, equipment and facility
maintenance and sanitation. From time to time American
will revise these programs to meet changing conditions
of retail operation in the best interest of "Dairy
Queen" retail stores, and Licensee shall adopt and
implement any such changes.
Training 7.2 Licensee shall, at Licensee's expense, attend
American's store management training program, at a
place to be designated by American, prior to the
opening of Licensee's store. In the event Licensee
fails to complete such training to the reasonable
satisfaction of American or Licensor, Licensor may
within thirty (30) days thereafter declare this
Agreement null and void whereupon all deposits
including the franchise fee shall be returned to
Licensee. If during the term hereof Licensee operates
said store with a manager other than himself, Licensee
shall, at Licensee's expense, cause such person to
attend and successfully complete such training program.
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Staffing 7.3 Licensee shall hire and supervise efficient, competent,
sober and courteous operators and employees for the
operation of the business and set and pay their wages,
commissions and incentives with no liability therefor
on American or Licensor. Licensee shall require all his
employees to work in clean uniforms approved by
Licensor but furnished at the cost of Licensee or his
employees as
Internal 7.4 Licensor shall provide or make available to Licensee an
Training in-store training program for all store employees.
Program Licensee shall train and periodically re-train all
store employees using the training aids made available
by Licensor. From time to time, American will revise
such training materials and aids and it or Licensor
make the same available to Licensee for purchase.
Attendance at 7.5 Licensee, or manager of Licensee, at Licensee's
Meetings expense, shall attend at least one national, regional
or approved local marketing area meeting each year
which Licensor and/or American originates for and on
behalf of "Dairy Queen" operators to set forth new
methods and programs in store operation, training,
management, sales and sale promotion programs. Licensor
further strongly recommends that key employees of
Licensee also attend such meetings.
SALES PROMOTION PROGRAMS
Sales Promotion 8.1 Licensor and Licensee, together with other licensees of
Programs and American, shall cooperate in the sales promotion
Payment to programs of approved products. To this end, American
American of has reserved the right to establish and organize sales
Expenses for promotion programs from time to time and Licensee
Administering agrees to pay to Licensor for remittance to American a
Same sales promotion program fee as set forth in Paragraph
9.1 hereof. Licensee acknowledges and agrees that
American has had in the past, and shall in the future
have, the discretion to determine expenditures of funds
collected in respect to sales promotion programs and as
to the selection of the promotional materials and
programs for which said expenditures are made,
provided, however, that American shall make a good
faith effort to expend such funds in the general best
interest of participating licensees. Licensee
acknowledges and agrees that American may compensate
itself and/or its affiliates for the expense of
administering such sales promotion programs. Licensor
shall advise Licensee annually of American's expenses
in administering said sales promotion programs.
Sales Promotion 8.2 Licensee shall only use such sales promotion program or
Materials other advertising materials as are furnished, approved
or made available by or through American. Said
materials shall be used only in a manner prescribed by
American. American shall not unreasonably withhold
approval of any reasonable sales promotion materials.
Yellow Pages 8.3 Licensee shall, if requested by Licensor, list
separately, or participate in a listing, in the Yellow
Pages of his local telephone directory containing such
copy as may reasonably be specified by Licensor. The
cost of such listing shall be paid by Licensee, or by
Licensee and other participating licensees in the case
of a joint listing. Licensor shall not specify an
unreasonably expensive listing.
FEES, REPORTING AND FINANCIAL MANAGEMENT
Service, Set-up, 9.1 Licensee shall pay to Licensor as a service and set-up
Franchise, fee $3,000 of which $3,000 has been paid upon the
License and execution of this Agreement and a balance of $ zero is
Sales Promotion payable in accordance with the terms of Appendix C
Program Fees attached hereto. Said service and set-up fee is
intended to compensate Licensor for its expenses
incurred, and services rendered in establishing and
setting up Licensee's initial operation. In addition to
said service and set-up fee, during the full term of
this Operating Agreement, and in consideration of the
rights granted hereunder, Licensee shall pay to
Licensor as license fee in respect to the rights
granted herein a sums equal to those specified on the
schedule addendum to this paragraph, all of which sums
are based on gross retail sales, exclusive of retail
sales taxes, of all products, goods and wares of every
kind and nature sold from, or in connection with the
operation of, Licensee's "Dairy Queen" retail store,
including, but without limiting the generality of the
foregoing, sales of all products of any of the
Trademarks as well as sales of other merchandise
whether or not identified by other brand names and
which may be authorized for sale by American or
Licensor from time to time; provided, notwithstanding
the foregoing, that no such continuing license fee
shall be payable with respect to sales of Permitted
Products. In addition, mittance to American a sales
promotion fee to be expended in accordance with the
provisions of Paragraph 8.1. The sales promotion fee
shall be a sum equal to not less than 3% nor more than
5% of Licensee's gross retail sales net of sales taxes
(excluding sales of Permitted Products). Licensor shall
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determine and notify Licensee of the exact percentage
prior to the first day of each fiscal year of Licensor
(except no notification will be given with respect to
any year for which the percentage is to be unchanged
from the preceding year). Such percentage shall be the
same as that to be employed during such succeeding year
by the majority of "Dairy Queen" licensees within the
marketing area as determined by American within which
Licensee's store is located.
Computations 9.2 All amount due and owing hereunder shall be computed at
and Remittances the end of each month's operation and remittance for
the same shall be made to Licensor on or before the
tenth day of the following month accompanied by the
reports provided for in Paragraph 9.4 hereof. The
computation of said amounts shall be certified and
sworn to by Licensee in the manner specified by
Licensor and Licensee shall supply to Licensor such
supporting or supplementary materials as Licensor may
reasonably require to verify the accuracy of such
remittances.
Surcharge 9.3 At Licensor's option, Licensor may require Method of
Method of Licensee to pay to suppliers of mix, meat Precollection
Precollection and other products and ingredients used in the conduct
of the business a surcharge on all units of such
commodities purchased by Licensee. Said surcharge shall
be paid to such supplier by Licensee at the time of
purchase of such commodities. Said surcharge shall be
established by Licensor at a reasonable rate so as to
approximate the amount of license fee and sales
promotion fee which will be payable by Licensee. Said
surcharge shall be paid to said supplier or suppliers
for the account of Licensor, the same to be regarded by
the parties as a method of precollection of said
license and sales promotion fees. The amounts so
collected shall be credited by Licensor against the
license and sales promotion fees due from Licensee to
Licensor at the end of each month's operations.
Licensor shall submit to Licensee on a monthly or
quarterly basis a reconciliation of said license and
sales promotion fees account setting forth the credits
to Licensee's account by reason of amounts collected
for Licensor by suppliers by way of the aforesaid
surcharge method. In the event Licensee shall fail to
submit reports in accordance with Paragraph 9.4,
Licensor may make said reconciliation of amounts due in
conformance with its best judgment with regard to said
amounts due and same shall be conclusive as to the
amounts due Licensor from Licensee unless within a
period of ten (10) days after mailing of said
reconciliation to Licensee by Licensor, Licensee
provides evidence in a form satisfactory to Licensor of
the correct amounts due.
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Licensee shall pay such amounts, if any, determined to
be owed pursuant to Licensor's reconciliation within
ten (10) days after a mailing of notice to Licensee by
Licensor. If Licensor determines that Licensee has
overpaid license or sales promotion fees on the
surcharge basis, Licensor shall remit to Licensee an
amount equal to the excess fees collected at the time
the monthly or quarterly reconciliation is provided
Licensee.
Reports and 9.4 Licensee shall keep true records from which all sums
Record payable under this Agreement and the dates of accrual
thereof may be readily determined. Licensee shall make
written reports to Licensor in such form as Licensor
may from time to time prescribe within fourteen (14)
days after the end of each month's operation setting
forth the amount of gross sales of all products from,
or in connection with the operation of, said store and
the business thereof during said month. In addition to
the foregoing, and in addition to such other
information as Licensor may from time to time require,
said monthly report shall accurately set forth the
total number of gallons of mix, the total number of
pounds of meat, and the quantity of other basic
commodities used during said month and the sources from
which said mix, meat and other commodities were
purchased together with a complete statement of
Licensee's cost of labor, utilities, rent and each
other cost of operation. For the purpose of said
reports the date of use of such mix, meat and other
commodities shall be deemed to be the date of receipt
at the store. Licensor, American or the authorized
representative of either shall have the right at all
times during the business day to enter Licensee's
premises where books and records relative to said store
are kept, and to inspect, copy and audit such books and
records. In the event that any such inspection or audit
reveals a variance of 3% or more from data reported to
Licensor or American, in addition to any other rights
it may have, Licensor or American may conduct such
further periodic audits and/or inspections of
Licensee's books and records as it reasonably deems
necessary for up to one year thereafter and such
further audits and/or inspections shall be at
Licensee's sole expense including without limitation
reasonable professional fees, travel and room and board
expenses directly related thereto.
Financial 9.5 Licensee agrees to employ sound financial management
Planning and practices in connection with the operation of said
Management business and to that end Licensee shall maintain on
forms approved or provided by Licensor or American
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a monthly profit plan, a monthly profit and loss
statement and a monthly balance sheet accurately
reflecting the operations and condition of said
business. In addition to the foregoing, Licensee shall
employ such methods of record keeping, bookkeeping and
reporting as Licensor shall from time to time
reasonably require and copies of all monthly profit
plans, profit and loss statements, sales summaries and
breakdowns for the preceding month shall be forwarded
to Licensor on or before the fourteenth day of the
following month.
Payment 9.6 Licensee agrees to pay promptly, when due, all taxes
of Debts and assessments that may be assessed against said
premises or the equipment or supplies used in
connection with Licensee's business, all liens and
encumbrances of every kind and character created or
placed upon or against any of said property and all
accounts and other indebtedness of every kind incurred
by Licensee in the conduct of said business. In the
event Licensee should default in making any such
payment, Licensor shall be authorized but not required,
to pay the same on Licensee's behalf and Licensee's
covenants promptly to reimburse Licensor on demand for
any such payment. to Licensor by the same arise this
Paragraph vision of this interest at 12% per Any and
all amounts owing Licensee hereunder, whether under the
provisions of 9.6 or under any other Agreement, shall
bear interannum or the maximum rate permitted by law,
whichever is less, from and after the date of accrual
thereof.
Timely 9.7 The default by Licensee in the timely payment of any
Payment indebtedness owing to Licensor and/or American, or to
any affiliates of Licensor and/or American, or the
default by Licensee in the payment of any indebtedness
of Licensee
Insolvency, 9.8 In the event that Licensee be declared insolvent or
Etc. bankrupt, or in the event a receiver is appointed, this
Operation Agreement shall automatically terminate as of
the date of such declaration or appointment.
Liability and 9.9 Licensee hereby waives all claims against Licensor
Insurance and/or American for damages to property or injuries to
persons arising out of the operation of Licensee's
business, and Licensee shall indemnify and save
Licensor and/or American and/or the affiliates of
either harmless of and from
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any damage or injury to property or persons arising
from or in connection with the operation of said
business or the consumption of the product thereof.
Licensee further agrees to purchase and maintain in
full force and effect during the term of this
Agreement, at Licensee's sole expense, liability
insurance in an aggregate amount not less than $300,000
insuring Licensee, Licensor and American from li4
ability for any and all such damage or injury and
Licensee further agrees to deliver to Licensor a proper
certificate evidencing the existence of such insurance
coverage and Licensee's compliance with the provisions
of this paragraph and which provides that Licensor and
American will be given thirty (30) days prior written
notice of material change, termination or cancellation
of the policy. Said insurance coverage shall commence
as of the date Licensee commences operating a "Dairy
Queen" retail store or as of the date the Authorized
Location is first identified as a site on which a
"Dairy Queen" retail store will be operated, whichever
shall first occur.
Assignment and 9.10 Licensee agrees not to transfer, assign or alienate his
Transfer interest herein or hereunder in whole or in part
without the prior written consent of Licensor, which
consent shall not be withheld unreasonably, but
Licensor may insist that any proposed assignment be an
assignment of all of Licensee's interest hereunder and
that any proposed assignee, be a person, in Licensor's
reasonable judgment, qualified to provide active
supervision over the operation of said store in
compliance with Licensee's obligations hereunder and
who has sufficient net worth and sources of capital
which meet Licensor's then current requirements for a
store operation of the type contemplated by this form
of agreement. In the event Licensee's said interest
should be so transferred or assigned, Licensee shall
pay to Licensor contemporaneously therewith the sum of
One Thousand Five Hundred Dollars ($1,500), or an
amount equal to one-half of the license fees paid or
payable by Licensee in respect of operations in the
twelve (12) months ending with the month prior to the
month in which the assignment is approved, whichever is
the greater amount, as a fee for the preparation of a
new Operating Agreement in assignee's name, for
Licensor's assistance in reset-up of the retail store
and for any and all other expenses incurred and
services rendered by Licensor in effecting said
transfer. In the event of any such assignment, the
assignee, as a condition of Licensor approving such
assignment, must attend and to the reasonable
satisfaction of Licensor
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successfully complete, at assignee's expense,
American's training program at American's training
center. In the event Licensee is a corporation,
partnership or other entity, any transfer or transfers
of stock (or other form of ownership interest)
constituting in the aggregate a controlling interest in
Licensee shall be subject to the consent, transfer fee
and all other applicable provisions of this Agreement.
Licensor may withhold its consent to any proposed
transfer until all amounts owed by Licensee to
Licensor, American, the affiliates or subsidiaries of
either and approved "Dairy Queen" suppliers have been
paid in full.
Offsets 9.11 Licensee waives any and all existing and future claims
and offsets against any amounts due hereunder, which
amounts shall be paid when due.
CONTRACT VIOLATION
Remedies, 10. In the event of any dispute between the parties hereto
Arbitration arising under, out of, in connection with or in relation to
this Agreement, said dispute shall be submitted by the
parties to binding arbitration in accordance with the Rules
and Procedures and under the auspices of the American
Arbitration Association. The arbitration shall take place at
the capital of the state of the Authorized Location of
Licensee or at such other place as may be mutually agreeable
to the parties. The decision of the arbitrators shall be
finally, and binding on all parties. Notwithstanding the
foregoing, Licensee recognizes that his "Dairy Queen" store
is one of a large number of stores similarly situated and
selling to the public similar products, and hence the
failure on the part of a single licensee to comply with the
terms of his Operating Agreement could cause irreparable
damage to Licensor, American and/or to some or all other
"Dairy Queen" licensees. Therefore, it is mutually agreed
that in the event of a breach or threatened breach of any of
the terms of this Operating Agreement by Licensee, Licensor
shall forthwith be entitled to an injunction restraining
such breach and/or to a decree of specific performance
without having to show or prove any actual damage, together
with recovery of reasonable attorney's fees and other costs
incurred in obtaining said equitable relief, until such time
as a final and binding determination is made by the
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arbitrators. The foregoing equitable remedy shall be in
addition to, and not in lieu of, all other remedies and
rights which Licensor might otherwise have by virtue of any
breach of this Agreement by Licensee.
Breach of 10.1 Licensee shall be in default hereunder if Licensor
Contract determines that Licensee has made any false report to
Licensor, or has failed to pay when due any amounts
owed to Licensor, or has in Licensor's judgment in any
other way breached any of the terms of this Agreement,
including but not limited to, failing to submit
required reports, failing to meet any requirements or
specification established with respect to product
quality, physical property, conditions or equipment or
materials used, products manufactured, menu or use of
approved products, packages or promotional materials.
Failure of Licensee to pay to Licensor any past due
amount owed within fourteen (14) days of Licensor's
written notice of default therein shall be construed as
Licensee's voluntary abandonment of this Agreement and
the franchised business hereunder operated.
10.2 Except as hereinafter provided, failure of Licensee to
cure a default by Licensee hereunder within fourteen
(14) days from the date of a written notice of default
mailed or delivered to Licensee, which notice states
such default, shall give Licensor good cause to
terminate this Agreement. Termination shall be
accomplished by mailing or delivering to Licensee
written notice of termination, which notice shall state
the grounds therefore and shall be effective (i)
immediately in any case of voluntary abandonment of
this Agreement by Licensee of conviction of Licensee of
an offense directly related to the business conducted
hereunder; or (ii) sixty (60) days after the date of
such notice of termination in all other cases;
provided, however, that notwithstanding any other
provision of this Paragraph 10, this Agreement may be
terminated immediately upon failure of Licensee to cure
within twenty-four (24) hours of notice thereof any
default under this Agreement which materially impairs
the good will associated with any of the Trademarks. In
addition to the foregoing, this Agreement may be
terminated by Licensor upon any ground or by any period
of notice as may be permitted from time to time by
applicable law or regulation. Any notice of default of
termination shall be personally delivered or be mailed
by certified or registered mail, return receipt
requested, postage prepaid.
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Land, Building 10.3 Subject to the provisions of Paragraph 5.4 hereof, any
Lease, or Failure failure to rebuild or repair and reopen for operation
to Reopen Licensee's destroyed or damaged store or store whose
lease has been terminated or not renewed within one
year of the date of occurrence of such termination,
destruction or damage, shall automatically terminate
this Operating Agreement.
TERMINATION RIGHTS
11. Upon the termination of this Operating Agreement:
Reverse of 11.1 All rights to the use of the Trademarks and the right
Trademark and license to conduct said business at the Authorized
Rights Location shall revert to Licensor and Licensee shall
immediately cease all use of the Trademarks and pay all
monies due at said date. Licensee shall promptly and at
his own expense remove or obliterate all store signage
and displays furnished to Licensee by Licensor and
shall remove or obliterate and thereafter discontinue
all use of any signage or displays at the Authorized
Location or in his possession bearing any of the
Trademarks or names or material confusingly similar to
any of the Trademarks.
11.2 All right, title and interest of Licensee in and to
this Operating Agreement shall become the property of
Licensor.
Purchase 11.3 Licensor shall haverthesfirst option to purchase any or
all equipment, fixtures, furnishings or supplies, of
whatever kind, owned by Licensee and used by him in the
production of the "Dairy Queen" product, or any of the
other approved products under any of the Trademarks
hereunder at a price determined by a qualified
appraiser selected with the consent of both parties. if
the parties cannot agree upon the selection of such an
appraiser he shall be appointed by a Judge of the
United States District Court of Licensee's Authorized
Location upon petition of either party. Said option to
purchase may be exercised by Licensor at any time
within thirty (30) days from the date of such
termination or within thirty (30) days after the date
of the receipt by Licensor of the appraiser's
determination, whichever shall be the later date, and
shall not be impaired or terminated by the attempted
sale or other transfer of any such equipment or
supplies by Licensee to a third party- Upon the
exercise of such option and tender of payment for any
such equipment or supplies, Licensee agrees to sell and
deliver the same to Licensor free and clear of all
encumbrances, and to execute and deliver to Licensor a
xxxx of sale therefore.
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Non-Compete 11.4 Licensee shall notndirectly or indirectly engage in any
competitive business within 2,000 yards of the
Authorized Location for a period of one year after said
date of termination of this Agreement except through a
Stuckey's Pecan Shoppe or an affiliate in operation at
the time of signing.
PERMITTED PRODUCTS
12. It is mutually understood and agreed that the store
facilities and operations of Licensee hereunder may include
in addition to "Dairy Queen" or "Dairy Queen/Xxxxxxx" food
and beverage service the sale of various other products not
identified or designated by Company's Trademarks, including,
but not limited to, motor vehicle fuel, oil and related
automotive products, souvenir-type products, tobacco
products, sundries, and packaged food products not intended
for consumption on the premises where sold and which are not
competitive with food and beverage products identified or
designated by the Trademarks (all of said products
collectively referred to in this Agreement as "Permitted
Products"). In order to prevent public confusion, preserve
and protect the Trademarks and establish the principles
which shall govern Licensee's sale of Permitted Products and
usage of the Trademarks, the parties agree that
notwithstanding any provision of this or any other Agreement
to the contrary, the following provisions shall control with
regard to Permitted Products:
12.1 Licensee may sell Permitted Products from its licensed
store. Licensee may use in the business operated
hereunder in the manner and to the extent permitted by
this Agreement marks and names identifying Permitted
Products.
12.2 The Trademarks shall not under any circumstances be
used to identify or designate Permitted Products or any
other product(s) for which use of the Trademarks has
not been specifically authorized by American. Permitted
Products shall be sold only from physical facilities
(such as a different area, room or building) which are
clearly distinct and apart from the "Dairy Queen"
retail store.
12.3 No product shall be sold from any part of any
sublicensed store's site which detracts or threatens to
detract from the reputation or goodwill of the "Dairy
Queen" trade name or any of the Trademarks. Licensor
shall have the right to direct Licensee to remove from
the store and discontinue the sale of any product item
or items which in American's good faith judgment
violates the quality standard of the preceding
sentence. No product shall under any circumstances be
sold from the "Dairy Queen" portion of the licensed
store which has not received
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the specific Prior approval of Licensor.
12.4 A building design and related facility standards, based
upon American's existing design and specifications for
"Dairy Queen"/ "Xxxxxxx" stores, shall be developed by
mutual consultation and agreement, which shall take
into account the particular requirements for a "Dairy
Queen" or "Dairy Queen"/"Xxxxxxx" facility to be
situated along an Interstate highway. Licensee shall
comply strictly with the design and facility standards
developed hereunder.
12.5 Notwithstanding Paragraph 8.2 hereof, Licensee may
employ off-site advertising media such as billboards
and radio commercials, provided such advertising is
approved by Licensor and American, and provided further
that no such advertising shall be used which creates or
fosters any confusion as to the identity, source or
quality of goods identified or designated by the
Trademarks. Licensor acknowledges that it may be
necessary to share extant billboard space with an
existing Stuckey's, Wayfara or other store, and
Licensor requires that advertising for the "Dairy
Queen" store be as visually and physically separate
from the other advertising as is feasible.
12.6 Because the "Dairy Queen" store hereunder may also sell
Permitted Products, the parties agree that
notwithstanding any other provision of this Agreement
or any other contract between the parties, Licensor
deems it to be necessary and desirable, to permit the
following:
a. To allow Licensee to sell Permitted Products
in conjunction with a "Dairy Queen" or "Dairy
Queen"/"Xxxxxxx" store;
b. To allow the principal shareholders of
Licensee and members of their immediate
families to own any amount or class of stock
or debt in any Stuckey's Pecan Shoppe
business;
c. To the extent and in the manner permitted
hereunder, to allow Licensee to sell and to
advertise Permitted Products in conjunction
with products identified or designated by the
Trademarks;
d. Subject to Paragraph 6-1 hereof, to relieve
Licensee from the obligation with respect to
Permitted Products, to purchase and use
equipment, supplies, ingredients and services
approved by American;
e. To allow Licensee to construct and equip its
retail store in accordance
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with building design and related facility
standards developed under Paragraph 12.4
hereof;
f. To relieve Licensee: (i) from the obligation
of using, in preparing or selecting Permitted
Products, ingredients, formulas and supplies
specified by American; (ii) from the
obligation to observe, with respect to
Permitted Products, the requirements relative
to portions, sizes, appearance and packaging
set forth in American's "Store Management
Operations Manual" and "product preparation
charts"; and (iii) with respect to Permitted
Products, to allow the use of other supplies
and customer service materials without regard
to standards of uniformity and quality as are
now or hereafter set by American;
g. To allow Licensee its principal shareholders
or members of their immediate families to
engage in a competitive business within 2,000
yards of the Authorized Location of the store
licensed hereunder, as defined in the
Operating Agreement, but only through a
Stuckey's Pecan Shoppe business; and
h. To relieve stockholders of this corporate
Licensee from the obligation of personally
guarantying the obligations of Licensee under
the Operating Agreement. Sale or transfer of
this License to another corporation shall
include the then customary guarantees required
of corporations.
GENERAL PROVISIONS
13.1 In the event any one or more clauses of this Agreement
shall be held to be void or unenforceable for any
reason by any court of competent jurisdiction such
clause or clauses shall be deemed to be separable and
of no force or effect in such jurisdiction and the
remainder of this Agreement shall be deemed to be valid
and in full force and effect, and the terms of this
Operating Agreement shall be equitably adjusted so as
to compensate the appropriate party for any
consideration lost because of the elimination of such
clause or clauses.
13.2 Any waiver by Licensor of any breach or default by
Licensee shall not be deemed to be a waiver of any
other or subsequent breach or default nor an estoppel
to enforce its rights in the event of any other or
subsequent breach.
13.3 This Agreement, and the application form executed by
Licensee requesting Licensor
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to enter into this Agreement, constitute the sole
agreement between the parties with respect to the
entire subject matter of this Operating Agreement and
embodies all prior agreements and negotiations with
respect to the "Dairy Queen" business. There are no
representations of any kind except as contained herein
and in the aforesaid application.
13.4 Except as otherwise provided in this Agreement, any
notice, demand or communication provided for herein
shall be in writing, signed by the party giving the
same, deposited in the registered or certified United
States mail, return receipt requested, postage prepaid,
and;
a. If intended for American shall be addressed to
American Dairy Queen Corporation at 0000 Xxxxx
Xxxxxx Xxxxx, Xxxxxxxxxxx, Xxxxxxxxx, 00000;
b. If intended for Licensor shall be addressed to
Licensor at the address hereinabove set forth;
C. If intended for Licensee, shall be addressed
to Licensee at the Authorized Location
hereinabove designated;
or to such other address as may have been given to the
other party by notification as herein provided.
Notices for purposes of this Agreement shall be deemed
to have been received one business day after being
mailed as provided in this paragraph, or when
personally delivered.
13.5 If Licensee consists of two or more individuals, such
individuals shall be jointly and severally liable and
references to Licensee in this Agreement shall include
all such individuals. Reference to Licensee as male
shall also include a female licensee, partnership or
corporation or any other business entity. Headings and
captions contained herein are for convenience of
reference only and shall not be taken into account in
construing or interpreting this Agreement.
13.6 Subject to the terms of Paragraph 9.10 hereof, this
Agreement shall be binding upon and inure to the
benefit of the administrators, executors, heirs,
successors and assigns of the parties.
13.7 This Agreement shall be effective only when approved by
an officer of American and shall be governed by and
interpreted in accordance with the law of the state in
which the Authorized Location is Located.
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13.8 This Agreement shall be deemed to be amended from time
to time as may be necessary to bring any of its
provisions into conformity with valid applicable laws
or regulations.
IN WITNESS IVHEREOF, the parties hereto have executed the foregoing "Dairy
Queen" Operating Agreement the date first above written.
LICENSEE
XxXxxxx Investments, Incorporated
/s/ Xxxxx XxXxxxx, President
--------------------------------------
--------------------------------------
--------------------------------------
ATTEST:
/s/ Xxxxx Xxxxx
---------------------------
LICENSOR
ATTEST: INTERSTATE DAIRY QUEEN CORPORATION
--------------------------------------
/s/ Xxxxx X. Xxxxxxxx /s/ Signature Illegible
--------------------------- --------------------------------------
Its President
--------------------------------------
APPROVED:
AMERICAN DAIRY QUEEN CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
--------------------------------------
Its V.P.
--------------------------------------
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Date: 10/30/85
Initials:
SCHEDULE ADDENDUM TO PARAGRAPH 9.1 OF
THE "DAIRY QUEEN" OPERATING AGREEMENT
Beginning on the first day of operation as a "Dairy Queen"/"Xxxxxxx" store and
continuing through the following 12 calendar months:
1% of all "Dairy Queen"/"Xxxxxxx" sales not in excess of the "Stuckey's
Pecan Shoppe" restaurant sales for the 12 calendar months preceding
the date of opening as a "Dairy Queen"/ "Xxxxxxx" store (hereinafter
referred to as "existing restaurant sales")
4% of all "Dairy Queen"/"Xxxxxxx" sales in excess of the "existing
restaurant sales."
Second 12 full calendar months of operation as a "Dairy Queen"/"Xxxxxxx" store:
2% of all "Dairy Queen"/"Xxxxxxx" sales not in excess of "existing
restaurant sales"
4% of all "Dairy Queen"/"Xxxxxxx" sales in excess of "existing restaurant
sales."
Third 12 full calendar months of operation as a "Dairy Queen"/"Xxxxxxx" store:
3% of all "Dairy Queen"/"Xxxxxxx" sales not in excess of "existing
restaurant sales"
4% of all "Dairy Queen"/"Xxxxxxx" sales in excess of "existing restaurant
sales."
Fourth 12 full calendar months of operation as a "Dairy Queen"/ "Xxxxxxx" store
and thereafter:
4% of all "Dairy Queen"/"Xxxxxxx" sales.
Compute the above service fees monthly as follows:
1. Determine total "Dairy Queen"/"Xxxxxxx" sales for the month
(Sales A).
2. Determine total "Stuckey's Pecan Shoppe" restaurant sales for the
same month of the base year (Sales B).
3. If (as in a partial first month of operation as a "DQ"/B
restaurant) Sales A are less than Sales B, the service fee due
for the month is *I% of Sales A (* or the applicable 2%, 3% or 4%
rate as specified in the above schedule).
4. If Sales A are more than Sales B, the service fee due for the
month is
*I% of Sales B (.1 or the applicable 2%, 3% or 4% rate as specified (*or
the above schedule).
PLUS 4% of the difference between Sales A and Sales B.
