EXHIBIT 10.47
Master - Base
(SCC)
Revised 10/26/99
SEATTLE'S BEST COFFEE
FRANCHISE AGREEMENT
BETWEEN
SEATTLE'S BEST COFFEE, LLC
AND
____________________________
Unit No.: ______
Dev. Agr. No.: ______
Dated: _______________
[_] Cafe [_] Kiosk
SEATTLE'S BEST COFFEE, LLC
SEATTLE'S BEST COFFEE
FRANCHISE AGREEMENT
TABLE OF CONTENTS
1. APPOINTMENT.............................................. 1
2. TERM..................................................... 2
III. FEES..................................................... 4
IV. ACCOUNTING AND RECORDS................................... 6
V. PROPRIETARY MARKS........................................ 7
VI. OBLIGATIONS OF CORPORATE OR PARTNERSHIP FRANCHISEE....... 9
VII. CONFIDENTIAL OPERATING STANDARDS MANUAL.................. 9
VIII. TRAINING................................................. 10
IX DUTIES OF THE FRANCHISOR................................. 11
X. DUTIES OF THE FRANCHISEE................................. 11
XI. INSURANCE................................................ 15
XII. CONFIDENTIAL INFORMATION................................. 17
XII. COVENANTS................................................ 18
XIV. TRANSFERABILITY OF INTEREST.............................. 20
XV. TERMINATION.............................................. 22
XVI. EFFECT OF TERMINATION OR EXPIRATION...................... 25
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XVII. TAXES, PERMITS, AND INDEBTEDNESS......................... 26
XVIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION............... 26
XIX. APPROVALS AND WAIVERS.................................... 28
XX. NOTICES.................................................. 28
XXI. SEVERABILITY AND CONSTRUCTION............................ 29
XXII. ENTIRE AGREEMENT: SURVIVAL............................... 30
XXIII. ACKNOWLEDGMENTS.......................................... 30
XXIV. APPLICABLE LAW: VENUE.................................... 31
XXV. CORPORATE FRANCHISEE..................................... 32
EXHIBIT A - NOTICE OF COMMENCEMENT DATE
EXHIBIT B - SHAREHOLDERS OF FRANCHISEE
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SEATTLE'S BEST COFFEE
FRANCHISE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this _______ day of
_________________, 20___, by and between SEATTLE,S BEST COFFEE, LLC, a
Washington limited liability company, having its principal place of business at
0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx 00000 ("Franchisor" or
"SEATTLE'S BEST COFFEE") and _________________________________
__________________________________________, [jointly and severally where more
than one], ("Franchisee").
WITNESSETH:
WHEREAS, Franchisor has developed and owns a unique and distinctive system
for the development, establishment and operation of retail Cafes ("SBC Cafes")
and Kiosks ("SBC Kiosks") (collectively, "SBC Retail Units") specializing in the
preparation and sale of specialty coffee beverages, proprietary coffee products
and other menu items developed and owned by Franchisor (the "Seattle's Best
Coffee System", "SBC System" or "System");
WHEREAS, the distinguishing characteristics of the SBC System include,
without limitation, the name "SEATTLE'S BEST COFFEE"; distinctive interior and
exterior design and layouts, decor, color schemes, and furnishings; confidential
food formulae and recipes used in the preparation of food products, formulas and
specifications for preparing specialty coffee drinks and other coffee and non-
coffee-based products; specialized menus; standards and specifications for
equipment, equipment layouts, products, operating procedures, and management
programs, all of which may be changed, improved, and further developed by
Franchisor from time to time;
WHEREAS, Franchisor identifies the SBC System by means of certain trade
names, service marks, trademarks, logos, emblems, and other indicia of origin,
including, but not limited to, the marks "SEATTLE'S BEST COFFEE", "SBC" and such
other trade names, service marks, trademarks and trade dress as are now, or may
hereafter, be designated by Franchisor for use in connection with the SBC System
(collectively referred to as the "Proprietary Marks");
WHEREAS, Franchisor continues to develop, use, and control the use of such
Proprietary Marks in order to identify for the public the source of services and
products marketed thereunder in the SBC System and to represent the System's
high standards of quality, appearance, and service;
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WHEREAS, Franchisee wishes to be assisted, trained, and licensed by
Franchisor as an SBC franchisee and licensed to use, in connection therewith,
the SBC System and to continuously operate one SBC Retail Unit at the location
specified in Section 1.01 herein (the "Franchised Location");
WHEREAS, Franchisee understands the importance of the SBC System and
SEATTLE'S BEST COFFEE's high and uniform standards of quality, cleanliness,
appearance, and service, and the necessity of opening and operating SBC Retail
Units in conformity with the SBC System;
NOW, THEREFORE, the parties hereto agree as follows:
I. APPOINTMENT
1.01. Franchisor grants to Franchisee a franchise to open and operate an
SBC Unit (the "Franchised Unit", or "Franchised Business") at one location
only, such location to be described as:
Store Number: __________________________
Franchised
Location: __________________________
__________________________
__________________________
__________________________
Unit Format: [_] SBC Cafe [_] SBC Kiosk
upon the terms and conditions herein contained and subject to the terms and
conditions contained in the development agreement between Franchisor and
Franchisee, dated ______________, (the "Development Agreement"), which is
incorporated herein by reference; and a license to use in connection therewith
Franchisor's Proprietary Marks and the SBC System. Franchisee may not operate
the Franchised Unit at any site other than the Franchised Location.
1.02. Except as otherwise set forth herein, (a) the franchise granted to
Franchisee under this Agreement is non-exclusive, and grants to Franchisee the
rights to establish and operate the Franchised Unit at only the specific
location set forth hereinabove, (b) no exclusive, protected or other territorial
rights in the contiguous area or market of such Franchised Unit or otherwise is
hereby granted or to be inferred and (c) Franchisor and/or its affiliates have
the right to operate and grant as many other franchises for the operation of SBC
Retail Units, anywhere in the world, as they shall, in their sole discretion,
elect. In addition to the foregoing, Franchisor may sell SBC brand coffee and
related coffee products
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anywhere, including, but not limited to, sales on the Internet, by mail order,
or through wholesale distribution channels, including, but not limited to
independent coffee retailers, department stores, food marts, restaurants, cafes
and grocery stores, during and after the term of this Agreement ("Wholesale
Accounts"). Wholesale Accounts of Franchisor may, in return, sell SBC coffee and
related products under the same or different trademarks.
1.03. Nothing herein shall be deemed to be a grant to Franchisee of any
rights as a commercial agent or distributor of SBC Coffee and/or coffee products
in any jurisdiction. Franchisor reserves the right, in its sole discretion, to
grant such rights to any third party, during or after the term of this
Agreement. Franchisee may not sell any SBC Coffee Products (as defined herein)
and/or any other materials, supplies, or inventory bearing the Proprietary Marks
anywhere except at the SBC Retail Unit, without SBC's prior written consent.
Franchisee shall specifically be prohibited from selling any such items at
wholesale, except as specifically agreed to, in writing, by Franchisor. The
foregoing restriction shall not apply to catering events and/or the offer of
samples of SBC coffee products at or directly in front of the Franchised Unit.
1.04. Franchisee acknowledges that, over time, Franchisor has entered, and
will continue to enter, into franchise agreements with other franchisees that
may contain provisions, conditions and obligations that differ from those
contained in this Agreement, including, without limitation, franchise agreements
for the operation of SBC Retail Units. The existence of different forms of
agreement and the fact that Franchisor and other franchisees may have different
rights and obligations does not affect the parties' duty to comply with the
terms of this Agreement.
II. TERM
2.01. Except as otherwise provided in this Agreement, the initial term of
this Franchise Agreement (the "Term") shall expire on the tenth (10th)
anniversary of the date of commencement of operation of the Franchised Unit. For
all purposes under this Agreement, the date of commencement of operation of the
Franchised Unit shall be the date verified in writing by Franchisor and
delivered to Franchisee in a form substantially similar to the "Notice" attached
hereto as Exhibit "A". Xxxxxxxxxx agrees and shall be obligated to operate the
Franchised Unit and perform hereunder for the full Term of this Agreement.
2.02. Franchisee may, at its option, renew this franchise for one (1)
additional period of five (5) years, provided that, at the time of such renewal:
X. Xxxxxxxxxx gives Franchisor written notice of such election to
renew not less than six (6) months nor more than twelve (12)
months prior to the end of the then-current term. Failure by
Franchisee to timely provide Franchisor the required notice
constitutes a waiver by
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Franchisee of its option to remain a franchisee beyond the
expiration of the Initial Term or the first Renewal Term;
B. Franchisee executes Franchisor's then-current standard form of
franchise agreement, which may include, without limitation, a
higher royalty fee and a higher advertising contribution, if
any, than that contained in this Agreement; and the term of
which shall be the renewal term as specified in Section 2.02.
hereof, but shall contain no further renewal rights;
C. Franchisee shall execute a general release and a covenant not
to sue, in a form satisfactory to Franchisor, of any and all
claims against Franchisor and its subsidiaries and affiliates,
and their respective past and present officers, directors,
shareholders, agents and employees, in their corporate and
individual capacities, including, without limitation, claims
arising under federal, state and local laws, rules and
ordinances, and claims arising out of, or relating to, this
Agreement, any other agreements between Franchisee and
Franchisor and Franchisee's operation of the Franchised Unit
and/or other SBC Retail Units operated by Franchisee;
D. Franchisee is not in default under this Agreement or any other
agreements between Franchisee and Franchisor (or any parent,
subsidiary or affiliate of Franchisor), and Franchisee has
fully and faithfully performed all of Franchisee's obligations
throughout the term of this Agreement; Franchisee is not in
default beyond the applicable cure period under any real estate
lease, equipment lease or financing instrument relating to the
Franchised Unit; Franchisee is not in default beyond the
applicable cure period with any vendor or supplier to the
Franchised Unit; and, Franchisee shall not have been in default
beyond the applicable cure period under this Agreement or any
other agreements between Franchisor and Franchisee more than 3
times during the period 12 months before the date of
Franchisee's notice and 12 months before the expiration of the
Initial Term;
E. Franchisee has paid or otherwise satisfied all monetary
obligations owed by Franchisee to Franchisor and its
subsidiaries and affiliates and any indebtedness of Franchisee
which is guaranteed by Franchisor, and Franchisee has timely
paid or otherwise satisfied these obligations throughout the
term of this Agreement;
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F. Franchisee agrees, at its sole cost and expense, to reimage,
renovate, refurbish and modernize the Franchised Unit, within
the time frame required by Franchisor, including the building
design, parking lot, landscaping, equipment, signs, interior
and exterior decor items, fixtures, furnishings, trade dress,
color scheme, presentation of trademarks and service marks,
supplies and other products and materials to meet Franchisor's
then-current standards, specifications and design criteria for
SBC Retail Units , as contained in the then-current franchise
agreement, Confidential Operating Standards Manual (as defined
herein), or otherwise in writing, including, without
limitation, such structural changes, remodeling and
redecoration and such modifications to existing improvement as
may be necessary to do so;
G. Franchisee shall pay to Franchisor a renewal fee equal to fifty
percent (50%) of Franchisor's standard initial franchise fee in
effect at the date of renewal.
H. Franchisee and its employees at the Franchised Unit shall be in
compliance with the then-current SBC System training
requirements.
I. Franchisee has the right to remain in possession of the
premises of the Franchised Unit, or other premises acceptable
to Franchisor, for the Renewal Term and all monetary
obligations owed to Franchisee's landlord must be current.
2.03. As determined by Franchisor in its sole discretion, Franchisee has
operated the Franchised Unit in accordance with this Agreement and the SBC
System (as set forth in the Manual or otherwise in writing and as revised from
time to time) and has operated all of its other SBC Retail Units that are
franchised by Franchisor in accordance with the applicable franchise agreements.
III. FEES
3.01. In consideration of the franchise granted to Franchisee herein,
Franchisee shall pay to the Franchisor the following:
A. A franchise fee of ___________ Thousand Dollars ($_________)
payable upon execution of this Agreement by Franchisee, less
__________ Dollars ($________), representing the portion of the
Development Fee (as defined in the Development Agreement),
applicable to the Franchise Fee payable hereunder. Such
franchise
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fee shall be fully earned by Franchisor upon execution of this
Agreement by Franchisee and is in addition to any development
fees paid to Franchisor by Franchisee.
B. A recurring, non-refundable royalty fee of four percent (4%) of
Gross Sales (as defined herein) during the term of this
Agreement, payable weekly, on the Gross Sales of the preceding
week (or on such other basis as may be set forth in the
Confidential Operating Standards Manual (as defined herein) or
otherwise agreed to in writing by Franchisor). Upon thirty (30)
days prior written notice, Franchisor may require Franchisee to
authorize Franchisor to make electronic debits from Franchisee's
operating account as a means of paying the royalty fee.
3.02. In addition to the payments provided for in Section 3.01. hereof,
Franchisee, recognizing the value of advertising and the importance of the
standardization of advertising and promotion to the goodwill and public image of
the System, agrees to pay to the SEATTLE'S BEST COFFEE national creative and
production fund (the "NCP Fund") a recurring, non-refundable contribution ("NCP
Fund Contribution") in an amount to be determined by Franchisor, in its sole
discretion, up to three percent (3%) of the Gross Sales of the Franchised Unit,
payable weekly, for the preceding week (or on such other basis as may be set
forth in the Confidential Operating Standards Manual or otherwise agreed to in
writing by Franchisor). Upon thirty (30) days prior written notice, Franchisor
may require Franchisee to authorize Franchisor to make electronic debits from
Franchisee's operating account as a means of paying the Advertising Fund
Contribution. The NCP Fund Contribution shall be expended by the NCP Fund for
national, regional, and/or local advertising and promotional materials and
market research for the SBC System, under the following conditions and
limitations:
A. The NCP Fund, all contributions thereto, and any earnings
thereon, shall be used exclusively to pay any and all costs of
maintaining, administering, directing, producing and preparing
market research, advertising, marketing materials and/or
promotional activities for the SBC System. Franchisee shall pay
the NCP Fund Contribution by separate check made payable to the
NCP Fund. All sums paid by the Franchisee to the NCP Fund shall
be maintained in an account separate from other funds of
Franchisor and shall not be used to defray any of Franchisor's
expenses except as provided herein, and as Franchisor may incur
in activities reasonably related to the administration or
direction of the NCP Fund and advertising and marketing programs
for franchisees and the SBC System. The NCP Fund and its
earnings shall not otherwise inure to the benefit of
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Franchisor. Franchisor shall maintain a separate bookkeeping
account for the NCP Fund.
B. The selection of media and locale for media placement shall be at
the sole discretion of the Franchisor.
C. All reasonable costs incurred by Franchisor or charged to
Franchisor by third parties for market research and the
production and dissemination of advertising, marketing and
promotional materials may be charged to the NCP Fund.
D. Franchisor, upon request, shall provide Franchisee with an annual
accounting of receipts and disbursements of the NCP Fund.
E. It is anticipated that all contributions to and earnings of the
NCP Fund will be expended for market research, costs of creating
and producing advertising materials, marketing and/or promotional
purposes and reimbursement to Franchisor of costs directly
related to the management of the NCP Fund (including personnel
costs) during the taxable year in which contributions and
earnings are received. If, however, excess amounts remain in the
NCP Fund at the end of a taxable year, all expenditures in the
following taxable year(s) shall be made first out of accumulated
earnings from previous years, next out of earnings in the current
year, and finally from contributions.
F. The NCP Fund is not, and shall not be, an asset of Franchisor.
Although the NCP Fund is intended to be of perpetual duration,
Franchisor maintains the right to terminate the NCP Fund;
provided, however, that the NCP Fund shall not be terminated
until all monies in the NCP Fund have been expended for the
purposes stated herein.
G. Franchisee understands that such advertising and marketing is
intended to maximize the public's awareness of SBC Retail Units
and the SBC System, and that Franchisor accordingly undertakes no
obligation to insure that any individual Franchisee benefits
directly or on a pro rata basis from the placement, if any, of
such advertising or marketing in its local market. Franchisee
further acknowledges that its failure to derive any such benefit,
whether directly or indirectly, shall not be cause for
Franchisee's nonpayment or reduction of the required
contributions to the NCP Fund.
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3.03. If any monetary obligations owed by Franchisee to Franchisor and its
subsidiaries and affiliates are more than seven (7) days overdue, Franchisee
shall, in addition to such obligations, pay to Franchisor a sum equal to one and
one-half percent (1.5%) of the overdue balance per month, or the highest rate
permitted by law, whichever is less, from the date said payment is due.
3.04. For the purposes of this Agreement, the term "Gross Sales" shall
mean all revenues generated by Franchisee's business conducted upon, from or
with respect to the Franchised Unit, whether such sales are evidenced by cash,
check, credit, charge, account, barter or exchange. Gross Sales shall include,
without limitation, monies or credit received from the sale of food and
merchandise, from tangible property of every kind and nature, promotional or
otherwise, and for services performed from or at the Franchised Unit, including
without limitation such off-premises services as catering and delivery. Gross
Sales shall not include the sale of food or merchandise for which refunds have
been made in good faith to customers, the sale of equipment used in the
operation of the Franchised Unit, nor shall it include sales, meals, use or
excise tax imposed by a governmental authority directly on sales and collected
from customers; provided that the amount for such tax is added to the selling
price or absorbed therein, and is actually paid by Franchisee to such
governmental authority.
3.05. In addition to the payments otherwise provided for in Section 3.02,
above, Franchisee shall expend each month during the term of this Franchise
Agreement an amount equal to two percent (2%) of the Gross Sales of the
Franchised Unit for the preceding week, which sum shall be expended by
Franchisee for local advertising, which shall be conducted in a dignified manner
and shall conform to such standards and requirements as Franchisor may specify
(hereinafter the "Local Advertising Expenditure"). Franchisee shall not use any
advertising or promotional plans or materials unless and until Franchisee has
received written approval from Franchisor, pursuant to the procedures and terms
set forth in Section 10.09 hereof. Franchisee's Local Advertising Expenditure
shall be reduced by an amount equal to Franchisee's actual contribution, for the
corresponding period, to an Advertising Cooperative established pursuant to
Section 10.06 of this Agreement, if any.
3.06. In addition to the payments provided for in Sections 3.01, 3.02 and
3.05 hereof, Franchisee shall expend at least Seven Thousand and No/100 Dollars
($7,000.00) for grand opening advertising of the Franchised Unit during the
first two (2) months following the opening of the SBC Retail Unit, which
advertising must be approved, in advance, by Franchisor.
IV. ACCOUNTING AND RECORDS
4.01. Accurate Books and Records. During the Term of this Agreement,
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Franchisee shall maintain and preserve, for at least three (3) years from the
dates of their preparation,
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full, complete and accurate books, records and accounts in accordance with
generally accepted accounting principles and in the form and the manner
prescribed by Franchisor from time-to-time in the Confidential Operating
Standards Manual or otherwise in writing. These records shall include, without
limitation, cash register sales tape (including non-resettable readings), meals,
sales and other tax returns, duplicate deposit slips and other evidence of Gross
Sales and all other business transactions.
4.02. Royalty Reports. Franchisee shall submit to Franchisor, weekly
---------------
reports on forms prescribed by Franchisor, accurately reflecting all Gross Sales
during the preceding week and such other forms, reports, records, financial
statements or information as Franchisor may reasonably require in the
Confidential Operating Standards Manual, or otherwise in writing. Even if
Franchisor requires Franchisee to implement an electronic cash register system
that transmits Franchisee's Gross Sales to Franchisor on a periodic basis,
Franchisor may still require Franchisee to submit written reports.
4.03. Quarterly Statement. Franchisee shall, at its expense, submit to
-------------------
Franchisor quarterly, within thirty (30) days following the end of each quarter
during the Term hereof, an unaudited financial statement with such detail as
Franchisor may reasonably require (hereinafter, "Quarterly Statement") together
with a certificate executed by Franchisee stating that such financial statement
is true and accurate. Upon Franchisor's request, Franchisee shall submit to
Franchisor, with each Quarterly Statement, copies of any state or local sales
tax returns ("Sales Tax Returns") filed by Franchisee for the period included in
the Quarterly Statement. In the event Franchisee prepares financial statements
on the basis of thirteen (13), four (4) week periods ("Periods"), the Quarterly
Statements shall be submitted within thirty (30) days following the end of the
third (3rd), sixth (6th), ninth (9th) and thirteenth (13th) Periods.
4.04. Annual Financial Statements. Franchisee shall, at its expense,
---------------------------
submit to Franchisor within ninety (90) days following the end of each calendar
or fiscal year during the Term of this Agreement, an unaudited financial
statement for the preceding calendar or fiscal year with such detail and in a
format as Franchisor may reasonably require, together with a certificate
executed by Franchisee certifying that such financial statement is true and
accurate (hereinafter, "Annual Financial Statements") and such other information
in such form as Franchisor may reasonably require. Upon written request from
Franchisor, the foregoing Annual Financial Statement shall include both a profit
and loss statement and a balance sheet, and shall be prepared in accordance with
generally accepted accounting principles. In the event Franchisee defaults under
this Agreement, Franchisor may require, upon written notice to Franchisee, that
all Annual Financial Statements submitted thereafter include a "Review Report"
prepared by an independent Certified Public Accountant.
4.05. Other Reports. Franchisee shall also submit to Franchisor, for
-------------
review or auditing, such other forms, financial statements, reports, records,
information and data as
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Franchisor may reasonably designate, in the form and at the times and places
reasonably required by Franchisor, upon request and as specified from time-to-
time in the Confidential Operating Standards Manual or otherwise in writing. If
Franchisee has combined or consolidated financial information relating to the
Franchised Unit with that of any other business or businesses, including a
business licensed by Franchisor, Franchisee shall simultaneously submit to
Franchisor, for review or auditing, the forms, reports, records and financial
statements (including, but not limited to the Quarterly Statements and Annual
Financial Statements) which contain the detailed financial information relating
to the Franchised Unit, separate and apart from the financial information of
such other businesses. Franchisee hereby authorizes all of its suppliers and
distributors to release to Franchisor, upon Franchisor's request, any and all of
its books, records, accounts or other information relating to goods, products
and supplies sold to Franchisee and/or the Franchised Unit.
4.06. Equipment. Franchisee shall record all sales on cash registers or
---------
other point-of-sale equipment approved, in writing, by Franchisor (hereinafter
"POS Equipment"). Xxxxxxxxxx agrees that Franchisor shall have the free and
unfettered right to retrieve any data and information from Franchisee's P.O.S.
Equipment and computers as Franchisor, in its sole discretion, deems
appropriate, with the telephonic cost of the retrieval to be borne by
Franchisor, including electronically polling the daily sales, menu mix and other
data of the Franchised Unit.
4.07. Franchisor's Right of Audit. Franchisor or its designated agents
---------------------------
or auditors shall have the right at all reasonable times to audit, review and
examine by any means, including electronically through the use of
telecommunications devices or otherwise, at its expense, the books, records,
accounts, and tax returns of Franchisee related to the Franchised Unit. If any
such audit, review or examination reveals that Gross Sales have been understated
in any report to Franchisor, Franchisee shall immediately pay to Franchisor the
royalty fee and NCP Fund Contribution due with respect to the amount understated
upon demand, in addition to interest from the date such amount was due until
paid, at the rate of one and one-half percent (1.5%) per month. If any such
understatement exceeds two percent (2%) of Gross Sales as set forth in the
report, Franchisee shall, in addition, upon demand, reimburse Franchisor for any
and all costs and expenses connected with such audit, review or examination
(including, without limitation, reasonable accounting and attorneys' fees). The
foregoing remedies shall be in addition to any other rights and remedies
Franchisor may have.
V. PROPRIETARY MARKS
5.01. It is understood and agreed that the franchise granted herein to use
Franchisor's Proprietary Marks applies only to use in connection with the
operation of the Franchised Unit franchised in this Agreement at the location
designated in Section I hereof, and includes only such Proprietary Marks as are
now designated or which may hereafter be
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designated, in the Confidential Operating Standards Manual or otherwise in
writing as a part of the SBC System (which might or might not be all of the
Proprietary Marks pertaining to the System owned by the Franchisor), and does
not include any other mark, name, or indicia of origin of Franchisor now
existing or which may hereafter be adopted or acquired by Franchisor.
5.02. With respect to Franchisee's use of the Proprietary Marks pursuant
to this Agreement, Franchisee acknowledges and agrees that:
A. Franchisee shall not use the Proprietary Marks as part of
Franchisee's corporate or other business name;
B. Franchisee shall not hold out or otherwise use the Proprietary
Marks to perform any activity or incur any obligation or
indebtedness in such manner as might, in any way, make
Franchisor liable therefor, without Franchisor's prior written
consent;
C. Franchisee shall execute any documents and provide such other
assistance deemed necessary by Franchisor or its counsel to
obtain protection for the Proprietary Marks or to maintain the
continued validity of such Proprietary Marks; and
D. Franchisor reserves the right to substitute different
Proprietary Marks for use in identifying the System and the
franchised businesses operating thereunder, and Franchisee
agrees to immediately substitute Proprietary Marks upon receipt
of written notice from Franchisor.
5.03. Franchisee expressly acknowledges Franchisor's exclusive right to
use the marks "SEATTLE'S BEST COFFEE" and "SBC" for restaurant services, coffee
products, and other related food and beverage products; the building
configuration; and the other Proprietary Marks of the System. Xxxxxxxxxx agrees
not to represent in any manner that it has any ownership in the Proprietary
Marks or the right to use the Proprietary Marks except as provided in this
Agreement. Franchisee further agrees that its use of the Proprietary Marks shall
not create in its favor any right, title, or interest in or to the Proprietary
Marks, and that all of such use shall inure to the benefit of Franchisor.
5.04. Franchisee acknowledges that the use of the Proprietary Marks
outside the scope of this license, without Franchisor's prior written consent,
is an infringement of Franchisor's exclusive right to use the Proprietary Marks,
and during the term of this Agreement and after the expiration or termination
hereof, Franchisee covenants not to, directly or indirectly, commit an act of
infringement or contest or aid in contesting the
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validity or ownership of Franchisor's Proprietary Marks, or take any other
action in derogation thereof.
5.05. Franchisee shall promptly notify Franchisor of any suspected
infringement of, or challenge to, the validity of the ownership of, or
Franchisor's right to use, the Proprietary Marks licensed hereunder. Franchisee
acknowledges that Franchisor has the right to control any administrative
proceeding or litigation involving the Proprietary Marks. In the event
Franchisor undertakes the defense or prosecution of any litigation relating to
the Proprietary Marks, Xxxxxxxxxx agrees to execute any and all documents and to
do such acts and things as may, in the opinion of counsel for Franchisor, be
necessary to carry out such defense or prosecution. Except to the extent that
such litigation is the result of Franchisee's use of the Proprietary Marks in a
manner inconsistent with the terms of this Agreement, Franchisor agrees to
reimburse Franchisee for its out of pocket costs in doing such acts and things,
except that Franchisee shall bear the salary costs of its employees.
5.06. Franchisee understands and agrees that its license with respect to
the Proprietary Marks is non-exclusive to the extent that Franchisor has and
retains the right under this Agreement:
A. To grant other licenses for the Proprietary Marks, in addition
to those licenses already granted to existing franchisees;
B. To develop and establish other franchise systems for the same,
similar, or different products or services utilizing
proprietary marks not now or hereafter designated as part of
the System licensed by this Agreement, and to grant licenses
thereto, without providing Franchisee any right therein; and
C. To develop and establish other systems for the sale, at
wholesale or retail, of similar or different products utilizing
the same or similar Proprietary Marks, without providing
Franchisee any right therein.
5.07. Franchisee acknowledges and expressly agrees that any and all
goodwill associated with the System and identified by the Proprietary Marks used
in connection therewith shall inure directly and exclusively to the benefit of
Franchisor and is the property of Franchisor, and that upon the expiration or
termination of this Agreement or any other agreement, no monetary amount shall
be assigned as attributable to any goodwill associated with any of Franchisee's
activities in the operation of the Franchised Unit granted herein, or
Franchisee's use of the Proprietary Marks.
5.08. Franchisee understands and acknowledges that each and every detail
of the SBC System is important to Franchisee, Franchisor, and other franchisees
in order to
12
develop and maintain high and uniform standards of quality and services, and
hence to protect the reputation and goodwill of SBC Retail Units. Accordingly,
Franchisee covenants:
A. To operate and advertise the Franchised Unit, at Franchisee's
own expense, under the name "SEATTLE'S BEST COFFEE," without
prefix or suffix;
B. To adopt and use the Proprietary Xxxxx licensed hereunder
solely in the manner prescribed by Xxxxxxxxxx;
C. To observe such reasonable requirements with respect to
trademark registration notices as Franchisor may from time to
time direct in the Confidential Operating Standards Manual or
otherwise in writing.
5.09. In order to preserve the validity and integrity of the Proprietary
Marks licensed herein and to assure that Franchisee is properly employing the
same in the operation of the Franchised Unit, Franchisor or its agents shall at
all reasonable times have the right to inspect Franchisee's operations,
premises, and Franchised Unit and make periodic evaluations of the services
provided and the products sold and used therein. Franchisee shall cooperate
with Franchisor's representatives in such inspections and render such assistance
to the representatives as may reasonably be requested.
5.10. Franchisee shall not hold out or otherwise employ the Proprietary
Marks to perform any activity, or to incur any obligation or indebtedness in
such a manner as might, in any way, make Franchisor liable therefor, without
Franchisor's prior written consent.
VI. OBLIGATIONS OF CORPORATE OR PARTNERSHIP FRANCHISEE
6.01. If Franchisee, or any successor to or assignee of Franchisee, is a
corporation, or limited liability company:
A. Franchisee shall furnish to Franchisor, upon execution or any
subsequent transfer of this Agreement, a copy of the
Franchisee's Articles of Incorporation, Certificate of
Incorporation, Bylaws and a list of shareholders showing the
percentage interest of each, and shall thereafter promptly
furnish Franchisor with a copy of any and all amendments or
modifications thereto;
B. Franchisee shall promptly furnish Franchisor, on a regular
basis, with certified copies of such corporate records (or
limited liability company records) material to the Franchised
Business as Franchisor
13
may require from time to time in the Confidential Operating
Standards Manual or otherwise in writing; and
C. Franchisee shall maintain stop-transfer instructions against
the transfer, on its records, of any securities with voting
rights, subject to the restrictions of this Agreement, and each
stock certificate of the corporate Franchisee representing each
share of stock, shall have conspicuously endorsed upon it the
following legend:
"The transfer of this stock is subject to the
terms and conditions of a SEATTLE'S BEST
COFFEE Franchise Agreement with SEATTLE'S
BEST COFFEE, LLC dated ___________. Reference
is made to the provisions of said Franchise
Agreement and to the Articles and By-Laws of
this corporation."
6.02. If the Franchisee, or any successor to or assignee of Franchisee, is
a partnership, limited partnership or limited liability partnership, Franchisee
shall furnish to Franchisor, upon execution or any subsequent transfer of this
Agreement, a copy of Franchisee's Articles of Partnership, if any, and
Partnership Agreement, and shall thereafter promptly furnish Franchisor with a
copy of any and all amendments or modifications thereto.
6.03. Franchisee shall, upon execution of this Agreement, furnish to
Franchisor a completed Statement of Legal Composition attached as Exhibit C
hereto as to all the parties with an ownership interest in Franchisee, the
amount of such ownership interests, the jurisdiction in which Franchisee is
legally incorporated or organized, and other information specified. Franchisee
shall thereafter furnish to Franchisor an updated Statement of Legal Composition
promptly when requested by Franchisor. Franchisee shall promptly advise
Franchisor of any change in such information. Franchisee warrants, represents,
and covenants to Franchisor that all of the information furnished in the
completed Statement of Legal Composition is true and correct as of the date of
this Agreement, and when subsequently furnished to Franchisor.
VII. CONFIDENTIAL OPERATING STANDARDS MANUAL.
7.01. In order to protect the reputation and goodwill of Franchisor and
the SBC System and to maintain uniform standards of operation under Franchisor's
Proprietary Marks, Franchisee shall conduct the Franchised Business in
accordance with Franchisor's Confidential Operating Standards Manual
(hereinafter, together with any other manuals created or approved for use in the
operation of the Franchised Business granted herein, and all amendments and
updates thereto, the "Manual").
14
7.02. Franchisee shall at all times treat the Manual, and the
information contained therein, as confidential, and shall use all reasonable
efforts to keep such information secret and confidential. Franchisee shall not,
at any time, without Franchisor's prior written consent, copy, duplicate,
record, or otherwise make the Manual available to any unauthorized person or
entity.
7.03. The Manual shall at all times remain the sole property of
Franchisor.
7.04. In order for Franchisee to benefit from new knowledge information,
methods and technology adopted and used by Franchisor in the operation of the
System, Franchisor may from time-to-time revise the Manual and Franchisee agrees
to adhere to and abide by all such revisions.
7.05. Franchisee agrees at all times to keep its copy of the Manual
current and up-to-date, and in the event of any dispute as to the contents of
Franchisee's Manual, the terms of the master copy of the Manual maintained by
Franchisor at Franchisor's home office, shall be controlling.
7.06. The Manual is intended to further the purposes of this Agreement,
and is specifically incorporated, by reference, into this Agreement. Except as
otherwise set forth in this Agreement, in the event of a conflict between the
terms of this Agreement and the terms of the Manual, the terms of this Agreement
shall control.
VIII. TRAINING
8.01. Franchisee, a partner of Franchisee if Franchisee is a
partnership, or a principal shareholder of Franchisee if Franchisee is a
corporation (or a principal member of Franchisee if Franchisee is a limited
liability company), must complete, to Franchisor's satisfaction, the SEATTLE'S
BEST COFFEE New Franchisee Orientation Program ("NFOP") prior to opening the
first franchised SBC Retail Unit operated by Franchisee. NFOP shall consist of
up to five (5) days of workshops and seminars conducted at a training facility
and designated by Franchisor.
8.02. In addition to completing the NFOP, Franchisee (or a partner,
principal shareholder or principal member of Franchisee), and up to two (2)
designated management employees of Franchisee (and, in all instances, a senior
management employee of Franchisee responsible for daily operations of the
Franchised Unit), must attend and complete, to Franchisor's satisfaction, the
SEATTLE'S BEST COFFEE Cafe management training program ("CMT"), prior to opening
the Franchised Unit. The exact number of Franchisee's management employees
required to attend and complete CMT shall be determined by Franchisor in its
sole discretion, but in no event shall the number be less than one (1). CMT
15
shall consist of up to six (6) weeks of in-store Cafe operations training at a
facility designated by Franchisor (a "Certified Training Facility") and certain
self-directed study programs. A management employee of Franchisee that
successfully completes CMT, shall be certified by Franchisor as an "CMT
Certified Manager".
8.03. Franchisee shall maintain the number of CMT Certified Managers
designated by the Franchisor in the employ of the Franchised Unit throughout the
term of this Agreement, which in no event shall be less than one (1). In the
event that Franchisee or any CMT Certified Manager ceases active employment at
the Franchised Unit, Franchisee must enroll a qualified replacement in the CMT
program within thirty (30) days of cessation of such individual's employment.
The replacement employee shall attend and complete the next regularly scheduled
CMT program to Franchisor's satisfaction.
8.04. The cost of conducting the initial NFOP and Certified Management
Trainer ("CMT") programs (instruction and required materials) shall be borne by
Franchisor. All other expenses during NFOP and CMT, including meals and
lodging, wages and travel, shall be borne by Franchisee.
8.05. Franchisor reserves the right to test any and all CMT Certified
Managers at any time, and may require such individuals to attend and complete
additional training at a training facility designated by Franchisor, and at
Franchisee's sole cost and expense, in the event they fail to achieve a
satisfactory score on such test. Additionally, Franchisor may make available to
Franchisee or Franchisee's employees, from time to time, such additional
training programs as Franchisor, in its sole discretion, may choose to conduct.
Attendance at said training programs may be mandatory. The cost of conducting
such additional training programs (instruction and required materials) shall be
borne by Franchisor. All other expenses during the training period, including
meals and lodging, wages and travel, shall be borne by the Franchisee.
IX. DUTIES OF THE FRANCHISOR
9.01. Franchisor will make available to Franchisee standard plans and
specifications to be utilized only in the construction of the Franchised Unit.
No modification to or deviations from the standard plans and specifications may
be made without the written consent of Franchisor. Franchisee shall obtain, at
its expense, further qualified architectural and engineering services to prepare
surveys, site and foundation plans, and to adapt the standard plans and
specifications to applicable local or state laws, regulations or ordinances.
Franchisee shall bear the cost of preparing plans containing deviations or
modifications from the standard plans.
9.02. Franchisor shall provide consultation and advice to Franchisee as
Franchisor deems appropriate with regard to construction or renovation and
operation of the Franchised
16
Unit, building layout, furnishings, fixtures and equipment plans and
specifications, employee selection and training, purchasing and inventory
control and those other matters as Franchisor deems appropriate.
9.03. Franchisor will make available to Franchisee such continuing
advisory assistance in the operation of the Franchised Business, in person or by
electronic or written bulletins made available from time to time, as Franchisor
may deem appropriate.
9.04. Franchisor, in its sole discretion, may provide opening assistance
to Franchisee at the Franchised Unit.
9.05. Franchisor will loan one (1) copy of the Manual to Franchisee for
the duration of this Agreement, which the Manual contains the standards,
specifications, procedures and techniques of the SBC System.
9.06. Franchisor will continue its efforts to maintain high and uniform
standards of quality, cleanliness, appearance and service at all SBC Retail
Units, to protect and enhance the reputation of the SBC System and the demand
for the products and services of the System. Franchisor will establish uniform
criteria for approving suppliers; make every reasonable effort to disseminate
its standards and specifications to prospective suppliers of the Franchisee upon
the written request of the Franchisee, provided that Franchisor may elect not to
make available to prospective suppliers the standards and specifications for
such food formulae or equipment designs deemed by Franchisor in its sole
discretion to be confidential; and may conduct periodic inspections of the
premises and evaluations of the products used and sold at the Franchised Unit
and in all other SBC Retail Units.
9.07. Franchisor will provide training to Franchisee as set forth in
Article VIII hereof.
X. DUTIES OF THE FRANCHISEE
Franchisee understands and acknowledges that every detail of the System is
important to Franchisor, Franchisee and other franchisees in order to develop
and maintain high and uniform operating standards, to increase the demand for
SEATTLE'S BEST COFFEE products and services, and to protect the reputation and
goodwill of Franchisor. Accordingly, Xxxxxxxxxx agrees that:
10.01. Franchisee shall maintain, at all times during the term of this
Agreement, at Franchisee's expense, the premises of the Franchised Unit and all
fixtures, furnishings, signs, systems and equipment (hereinafter "improvements")
thereon or therein, in conformity with Franchisor's high standards and public
image and to make such additions, alterations, repairs,
17
and replacements thereto (but no others, without Franchisor's prior written
consent) as may be required by Franchisor, including but not limited to the
following:
A. To keep the Franchised Unit in the highest degree of sanitation
and repair, including, without limitation, such periodic
repainting, repairs or replacement of impaired equipment, and
replacement of obsolete signs, as Franchisor may reasonably
direct;
B. To meet and maintain the highest governmental standards and
ratings applicable to the operation of the Franchised Business;
C. At its sole cost and expense, to complete a full reimaging,
renovation, refurbishment and modernization of the Franchised
Unit, within the time frame required by Franchisor, including
the building design, parking lot, landscaping, equipment,
signs, interior and exterior decor items, fixtures,
furnishings, trade dress, color scheme, presentation of
trademarks and service marks, supplies and other products and
materials, to meet Franchisor's then-current standards,
specifications and design criteria for SBC Retail Units,
including without limitation, such structural changes,
remodeling and redecoration and such modifications to existing
improvements as may be necessary to do so (hereinafter, a
"Franchised Unit Renovation"). Franchisee shall not be required
to perform a Franchised Unit Renovation if there are less than
three (3) years remaining on the term of this Agreement, and/or
the lease for the premises occupied by the Franchised Unit.
Nothing herein shall be deemed to limit Franchisee's other
obligations, during the term of this Agreement, to operate the
Franchised Unit in accordance with Franchisor's standards and
specifications for the SBC System, including, but not limited
to, the obligations set forth in this Section X.
10.02. Franchisee shall operate the Franchised Unit in conformity with such
uniform recipes, methods, standards, and specifications as Franchisor may from
time to time prescribe in the Manual or otherwise in writing, to insure that the
highest degree of quality, service and cleanliness is uniformly maintained and
to refrain from any deviation therefrom and from otherwise operating in any
manner which reflects adversely on Franchisor's name and goodwill or on the
Proprietary Marks, and in connection therewith:
A. To maintain in sufficient supply, and use at all times, only
such ingredients, products, materials, supplies, and paper
goods as conform to Franchisor's standards and specifications,
and to refrain
18
from deviating therefrom by using non-conforming items, without
Franchisor's prior written consent;
B. To sell or offer for sale only proprietary "Seattle's Best
Coffee" brand coffee products and such other products and menu
items that have been expressly approved for sale in writing by
Franchisor, meet Franchisor's uniform standards of quality and
quantity and as have been prepared in accordance with
Franchisor's methods and techniques for product preparation; to
sell or offer for sale the minimum menu items specified in the
Manual or otherwise in writing; to refrain from any deviation
from Franchisor's standards and specifications for serving or
selling the menu items, without Franchisor's prior written
consent; and to discontinue selling or offering for sale such
items as Franchisor may, in its discretion, disapprove in
writing at any time;
C. To use the premises of the Franchised Unit solely for the
purpose of conducting the business franchised hereunder, and to
conduct no other business or activity thereon, whether for
profit or otherwise, without Franchisor's prior written
consent;
D. To keep the Franchised Unit open and in normal operation during
such business hours as Franchisor may prescribe in the Manual
or otherwise in writing;
E. To permit Franchisor or its agents, at any time during ordinary
business hours, to remove from the Franchised Unit samples of
any ingredients, products, materials, supplies, and paper goods
used in the operation of the Franchised Unit, without payment
therefor, in amounts reasonably necessary for testing by
Franchisor or an independent laboratory, to determine whether
such samples meet Franchisor's then-current standards and
specifications. In addition to any other remedies it may have
under this Agreement, Franchisor may require Franchisee to bear
the cost of such testing if any such ingredient, products,
materials, supplier or paper goods have been obtained from a
supplier not approved by Franchisor, or if the sample fails to
conform to Franchisor's specifications;
F. To purchase, install and construct, at Franchisee's expense,
all improvements furnishings, signs and equipment specified in
the approved standard plans and specifications, and such other
furnishings, signs or equipment as Franchisor may reasonably
direct
19
from time to time in the Manual or otherwise in writing; and to
refrain from installing or permitting to be installed on or
about the premises of the Franchised Unit, without Franchisor's
written consent, any improvements, furnishings, signs or
equipment not first approved in writing as meeting Franchisor's
standards and specifications;
G. To comply with all applicable federal, state and local laws,
regulations and ordinances pertaining to the operation of the
Franchised Business; and
H. Franchisee shall grant Franchisor and its agents the right to
enter upon the premises of the Franchised Unit at any time
during ordinary business hours for the purpose of conducting
inspections; cooperate with Franchisor's representatives in
such inspections by rendering such assistance as they may
reasonably request; and, upon notice from Franchisor or its
agents, and without limiting Franchisor's other rights under
this Agreement, take such steps as may be necessary immediately
to correct the deficiencies detected during any such
inspection, including, without limitation, immediately
desisting from the further use of any equipment, promotional
materials, products, or supplies that do not conform with
Franchisor's then-current specifications, standards, or
requirements.
10.03. To maintain the quality and distinct characteristics of fine
specialty coffee flavors that customers associate with the SBC System and the
Proprietary Marks, Franchisee shall offer and sell only Seattle's Best Coffee
brand coffee and coffee products at or from the Franchised Unit and must
purchase all of its coffee and coffee products from Franchisor or its designee
("SBC Coffee Products"), and prepare all coffee products at the Franchised Unit
using Franchisor's proprietary recipes and methods of operation. Franchisor will
sell SBC Coffee Products to Franchisee on standard purchase terms that may vary
from time to time, F.O.B. Franchisor's designated distribution center, with all
freight, duties and shipping charges at Franchisee's sole cost and expense.
Franchisor will give prior notice of any material changes in purchase terms.
10.04. Franchisee shall (i) purchase all other ingredients, products,
materials, supplies, and other items required in the operation of the Franchised
Unit which are or incorporate trade-secrets of Franchisor, as designated by
Franchisor ("Trade-Secret Products") only from Franchisor or suppliers
designated by Franchisor.
10.05. Franchisee shall purchase all other ingredients, products,
materials, supplies, paper goods, and other items required for the operation of
the Franchised Business, except
20
SBC Coffee Products and Trade-Secret Products, solely from suppliers who
demonstrate, to the continuing reasonable satisfaction of Franchisor, the
ability to meet Franchisor's reasonable standards and specifications for such
items; who possess adequate quality controls and capacity to supply Franchisee's
needs promptly and reliably; and who have been approved in writing by Franchisor
and such approval has not thereafter been revoked. If Franchisee desires to
purchase any such items from an unapproved supplier, Franchisee shall submit to
Franchisor a written request for approval, or shall request the supplier itself
to seek approval. Franchisor shall have the right to require, as a condition of
its approval, that its representatives be permitted to inspect the supplier's
facilities, and that samples from the supplier be delivered, at Franchisor's
option, either to Franchisor or to an independent laboratory designated by
Franchisor for testing prior to granting approval. A charge not to exceed
Xxxxxxxxxx's reasonable cost of inspection and the actual cost of testing shall
be paid by the supplier or Franchisee. Franchisor reserves the right, at its
option, to reinspect the facilities and products of any such approved supplier
from time to time and to revoke its approval upon failure of such supplier to
continue to meet any of the foregoing criteria.
10.06. Advertising Cooperative. Franchisor shall have the right, in
-----------------------
its sole discretion, to designate any geographic area (which may consist of any
portion of a country or jurisdiction and/or more than one country or
jurisdiction) for the purposes of establishing an advertising cooperative
("Cooperative").
A. If a Cooperative has been established in the
geographic area in which the Franchised Unit is
located, Franchisee shall become a member of such
Cooperative upon commencement of operation of the
Franchised Unit, if the Cooperative is in existence
at that time or no later than thirty (30) days after
the date on which the Cooperative commences
operation. In no event shall Franchisee be required
to be a member of more than one Cooperative with
respect to the Franchised Unit.
B. If a Cooperative has been established, Franchisee
shall contribute an amount, to be determined by the
Cooperative, which shall be not more than two percent
(2%) of the Gross Sales of the Franchised Unit,
payable each week, for the preceding week (or such
other period as may be set forth, in writing, by the
Cooperative).
C. Each Cooperative shall be organized and governed in a
form and manner, and shall commence operations on a
date, approved in advance by Franchisor in writing.
21
(1) Each Cooperative shall be organized
for the exclusive purpose of
administering regional advertising
programs and developing, subject to
Franchisor's approval, standardized
promotional materials for use by its
members in local advertising.
(2) No advertising or promotional plans or
materials may be used by a Cooperative
or furnished to its members without
the prior approval of the Franchisor,
pursuant to the procedures and terms
set forth in Section 10.09 hereof.
(3) Franchisee shall pay its required
contribution to the Cooperative each
week on Gross Sales for the preceding
week, together with such other
statements or reports as may be
required by Franchisor, or by the
Cooperative with the Franchisor's
prior written approval.
D. Franchisor, in its sole discretion, may grant an
exemption to any franchisee for any length of time
from the requirement of membership in a Cooperative,
and/or from the obligation to contribute thereto
(including a reduction, deferral or waiver of such
contribution), upon written request of such
franchisee stating reasons supporting such exemption.
Franchisor's decision concerning such request for
exemption shall be final. If an exemption is granted
to a franchisee, such franchisee shall be required to
expend on local advertising, during each Period, the
same amount as would otherwise be assessed by the
Cooperative, as set forth in Section 10.06 B hereof.
10.07. Franchisor disclaims all express or implied warranties
concerning any approved products or services, including, without limitation, any
warranties as to merchantability, fitness for a particular purpose,
availability, quality, pricing or profitability. Franchisee acknowledges that
Franchisor may, under appropriate circumstances, receive fees, commissions,
field-of-use license royalties, or other consideration from approved suppliers
based on sales to franchisees, and that Franchisor may charge non-approved
suppliers reasonable testing or inspection fees.
22
10.08. All local advertising by Franchisee shall be in such media, and of
such type and format as Franchisor may approve; shall be conducted in a
dignified manner; and shall conform to such standards and requirements as
Franchisor may specify. Franchisee shall not use any advertising or promotional
plans or materials unless and until Franchisee has received written approval
from Franchisor, pursuant to the procedures and terms set forth in Section 10.09
hereof.
10.09. All advertising and promotional plans proposed to be used by
Franchisee or the Cooperative, where applicable, except such plans and materials
that have been previously approved by Franchisor shall be submitted to
Franchisor for Franchisor's written approval (except with respect to prices to
be charged) prior to any use thereof. Franchisor shall use its best efforts to
complete its review of Franchisee's proposed advertising and promotional plans
within fifteen (15) days after Franchisor receives such plans. If written
approval is not received by Franchisee or the Cooperative from Franchisor within
fifteen (15) days after receipt by Franchisor of such plans, Franchisor shall be
deemed to have disapproved such plans.
10.10. Franchisee shall, at Franchisor's request, require all of its
supervisory employees, as a condition of their employment, to execute an
agreement prohibiting them, during the term of their employment or thereafter,
from communicating, divulging, or using for the benefit of any person, persons,
partnership, association, corporation or other entity any confidential
information, trade secrets, knowledge, or know-how concerning the SBC System or
methods of operation of the Franchised Unit which may be acquired as a result of
their employment with Franchisee or other franchisees. A duplicate original of
each such agreement shall be provided by Franchisee to Franchisor immediately
upon execution.
10.11. If Franchisee operates more than five (5) Franchised Units,
Franchisee shall have a supervisor, which may be Franchisee, to supervise and
coordinate the operation of the Franchised Units (hereinafter, a "Supervisor").
In addition to the foregoing, Franchisee shall employ an additional Supervisor
upon the opening of Franchisee's sixth (6th) Franchised Unit and upon the
opening of each successive fifth (5th) Franchised Unit thereafter. Each
Supervisor shall attend and successfully complete the CMT program set forth in
Section 8.02 hereof prior to assuming any supervisory responsibilities and shall
meet such other standards as Franchisor may reasonably impose. No Supervisor
may have supervisory responsibility for more than five (5) Franchised Units.
10.12. If at any time the Franchised Unit is proposed to be operated by an
entity or individual other than the Franchisee, Franchisor reserves the right to
review and approve the operating entity or individual and to require and approve
an operating agreement prior to such party's assumption of operations.
Franchisor may, in its sole discretion, reject either the operating entity, the
individual operator or the operating agreement. If approved by Franchisor, the
operating entity and/or individual shall agree in writing to comply with all
23
of Franchisee's obligations under the Franchise Agreement as though such party
were the franchisee designated therein, on such form as may be designated by
Franchisor. The operation of the Franchised Unit by any party other than
Franchisee, without Franchisor's prior written consent, shall be deemed a
material default of this Agreement for which Franchisee may terminate this
Agreement pursuant to the provisions of Section 15.02 hereof.
10.13. Franchisee shall become a member of any purchasing cooperative
established by Franchisor for the SEATTLE'S BEST COFFEE System and shall remain
a member in good standing thereof throughout the term of this Agreement and
shall pay all reasonable membership fees assessed by such purchasing
association.
10.14. Franchisee shall, within thirty (30) days from receipt of
written notice from Franchisor, at its sole cost and expense, purchase and
install at the Franchised Unit and/or at Franchisee's principal business office
such computer hardware and software equipment, required dedicated telephone and
power lines, modems, printers and other computer related accessory and
peripheral equipment as Franchisor specifies in the Manual or otherwise in
writing (the "Required Computer Equipment"). The Required Computer Equipment
shall include telecommunications devices and may include a single software
program or set of programs, all of which must be obtained in accordance with the
Franchisor's standards and specifications. The Required Computer Equipment shall
permit 24 hour per day electronic communications between Franchisor and
Franchisee including access to the internet and Franchisor's current intranet,
or any successor thereto. Franchisee shall only be required to purchase and
install the Required Computer Equipment at one, central location, which shall
satisfy the conditions of this Section 10.02 (or its equivalent) for all
Franchised Units operated by Franchisee, provided information for all Franchise
Units is maintained at such location.
10.15 Franchisee shall comply with all other requirements set forth in
this Agreement.
XI. INSURANCE
11.01. Insurance Program. Franchisee shall procure, prior to commencement
-----------------
of construction of the Franchised Unit, and shall maintain in full force and
effect during the Term of this Agreement at Franchisee's expense, an insurance
policy or policies protecting Franchisee and Franchisor, and their officers,
directors, agents and employees, against any loss, liability, or expense
whatsoever from personal injury, death or property damage or casualty,
including, fire, lightning, theft, vandalism, malicious mischief, and other
perils normally included in an extended coverage endorsement arising from,
occurring upon or in connection with the construction, operation or occupancy of
the Franchised Unit, as Franchisor may reasonably require for its own and
Franchisee's protection.
24
11.02. Insurance Requirements. Such policy or policies shall be written
----------------------
by an insurance company satisfactory to Franchisor, and shall include, at a
minimum the following coverage:
A. Workers' Compensation Insurance, with statutory limits as
-------------------------------
required by the laws and regulations applicable to the
employees of Franchisee who are engaged in the performance of
their duties relating to the Franchised Unit, including any
pre-opening training programs, as well as such other insurance
as may be required by statute or regulation of the state in
which the Franchised Unit is located.
B. Employer's Liability Insurance, for employee bodily injuries
------------------------------
and deaths, with a limit of $500,000 each accident.
C. Comprehensive or Commercial General Liability Insurance,
-------------------------------------------------------
covering claims for bodily injury, death and property damage,
including Premises and Operations, Independent Contractors,
Products and Completed Operations, Personal Injury,
Contractual, and Broadform Property Damage liability coverages,
with limits as follows:
Occurrence/Aggregate Limit of $1,000,000 for bodily injury,
death and property damage each occurrence and $2,000,000 for
general aggregate or
Split liability limits of: $1,000,000 for bodily injury per
person
$1,000,000 for bodily injury per
occurrence
$ 500,000 for property damage
D. Comprehensive Automobile Liability Insurance, if applicable,
--------------------------------------------
covering owned, non-owned and hired vehicles, with limits as
follows:
Combined Single Limit of $500,000 for bodily injury, death and
property damage per occurrence or
Split liability limits of:
$500,000 for bodily injury per person
$500,000 for bodily injury per occurrence
$250,000 for property damage
25
E. All Risk Property Insurance, on a replacement cost basis, with
---------------------------
limits as appropriate, covering the real property of Franchisee
and any real property which the Franchisee may be obligated to
insure by contract. Such real property may including building,
machinery, equipment, furniture, fixtures and inventory.
11.03. All such policies of insurance shall provide that the same shall
not be canceled, modified or changed without first giving thirty (30) days prior
written notice thereof to Franchisor. No such cancellation, modification or
change shall affect Franchisee's obligation to maintain the insurance coverages
required by this Agreement. Except for Workers' Compensation Insurance,
Franchisor shall be named as an Additional Insured on all such required
policies. All liability insurance policies shall be written on an "occurrence"
policy form. Franchisee shall be responsible for payment of any and all
deductibles from insured claims under its policies of insurance. Franchisee
shall not satisfy the requirements of this Article XI unless and until
certificates of such insurance, including renewals thereof, have been delivered
to and approved by Franchisor. Franchisee shall not self-insure any of the
insurance coverages required by this Agreement, or non-subscribe to any State's
applicable workmen's compensation laws without the prior written consent of
Franchisor. Franchisor shall have the right, at any time during the term of
this Agreement to increase the minimum limits of insurance coverage or otherwise
modify the insurance requirements of this Agreement upon written notice in the
Manual or as otherwise prescribed by Franchisor in writing. If Franchisee shall
fail to comply with any of the insurance requirements herein, upon written
notice to Franchisee by Franchisor, Franchisor may, without any obligation to do
so, procure such insurance and Franchisee shall pay Franchisor, upon demand, the
cost thereof plus interest at the maximum rate permitted by law, and a
reasonable administrative fee designated by Franchisor.
11.04. Insurance Obtained by Xxxxxxxxxx Xxxxx Xx Primary to Franchisor's
-----------------------------------------------------------------
Own Insurance. Franchisee agrees that all insurance policies obtained by
--- ---------
Franchisee pursuant to Sections 11.01 and 11.02 shall be primary coverage, the
applicable limits of which shall be exhausted before any benefits (defense or
indemnity) may be obtained under any other insurance (including self-insurance)
providing coverage to Franchisor. In the event payments are required to be made
under Franchisor's own insurance policies or self-insurance (whether for defense
or indemnity) before the applicable coverage limits for the insurance policies
obtained by Franchisee are exhausted, then Franchisee hereby agrees to
reimburse, hold harmless and indemnify the Franchisor and its insurers for such
payments. Franchisee shall notify its insurers of this Agreement and shall use
best efforts to obtain an endorsement on each policy it obtains pursuant to
Sections 11.01 and 11.02 stating as follows:
The applicable limits of this policy shall be applied and exhausted
before any benefits may be obtained (whether for defense or
26
indemnity) under any other insurance (including self-insurance)
that may provide coverage to Franchisor. All insurance coverage
obtained by Franchisor shall be considered excess insurance with
respect to this policy, the benefits of which excess insurance
shall not be available until the applicable limits of this policy
are exhausted.
11.05. No Limitation on Coverage. Franchisee's obligation to obtain and
-------------------------
maintain the foregoing policy or policies of insurance in the amounts specified
shall not be limited in any way by reason of any insurance which may be
maintained by Franchisor, nor shall Franchisee's performance of that obligation
relieve it of liability under the indemnity provisions set forth in Section
XVIII of this Agreement.
11.06. Issuance of Insurance. Franchisee must obtain the insurance
---------------------
required by this Agreement no later than fifteen (15) days before the date on
which any construction is commenced. The Franchised Unit shall not be opened
for business prior to Franchisor's receipt of satisfactory evidence that all
insurance required by this Agreement is in effect. Upon obtaining such
insurance, and on each policy renewal date thereafter, Franchisee shall promptly
submit evidence of satisfactory insurance and proof of payment therefor to
Franchisor, together with, upon request, copies of all policies and policy
amendments. The evidence of insurance shall include a statement by the insurer
that the policy or policies will not be canceled or materially altered without
at least thirty (30) days prior written notice to Franchisor.
XII. CONFIDENTIAL INFORMATION
12.01. Franchisee shall not, during the term of this Agreement or
thereafter, communicate, divulge, or use for the benefit of any other person,
persons, partnership, association, corporation or other entity, any confidential
information, knowledge or know-how concerning the construction and methods of
operation of the Franchised Business which may be communicated to Franchisee, or
of which Franchisee may be apprised, by virtue of Franchisee's operation under
the terms of this Agreement. Franchisee shall divulge such confidential
information only to such employees of Franchisee as must have access to it in
order to exercise the franchise rights granted hereunder and to establish and
operate the Franchised Unit pursuant hereto and as Franchisee may be required by
law, provided Franchisee shall give Franchisor prior written notice of any such
required disclosure immediately upon receipt of notice by Franchisee in order
for Franchisor to have the opportunity to seek a protective order or take such
other actions as it deems appropriate under the circumstances.
12.02. Any and all information, knowledge, and know-how, including,
without limitation, drawings, materials, equipment, recipes, prepared mixtures
or blends of spices or other food products, and other data, which Franchisor
designates as confidential, and any
27
information, knowledge, or know-how which may be derived by analysis thereof,
shall be deemed confidential for purposes of this Agreement, except information
which Franchisee can demonstrate came to Franchisee's attention prior to
disclosure thereof by Franchisor; or which, at the time of disclosure thereof by
Franchisor to Franchisee, had become a part of the public domain, through
publication or communication by others; or which, after disclosure to Franchisee
by Franchisor, becomes a part of the public domain, through publication or
communication by others.
XIII. COVENANTS
13.01. Franchisee covenants that, during the term of the Agreement,
except as otherwise approved in writing by Franchisor, Franchisee or,
alternatively, one designated management employee if that employee assumes
primary responsibility for the operation of the Franchised Unit, shall devote
full time, energy and best efforts to the management and operation of the
Franchised Business.
13.02. Franchisee acknowledges that, pursuant to this Agreement,
Franchisee will receive valuable specialized training and confidential
information, including without limitation, information regarding the
operational, sales, promotional, and marketing methods, procedures and
techniques of Franchisor and the System. Franchisee covenants that, during the
term of this Agreement, Franchisee (who, unless otherwise specified, shall
include, for purposes of this Section XIII, collectively and individually, (i)
all officers, directors and holders of a beneficial interest of five percent
(5%) or more of the securities with voting rights of Franchisee and of any
corporation, directly or indirectly controlling Franchisee, if Franchisee is a
corporation,; (ii) the general partner and any limited partners, including any
corporation, and the officers, directors and holders of a beneficial interest of
five percent (5%) or more of securities with voting rights of a corporation
which controls, directly or indirectly, any general or limited partner, if
Franchisee is a partnership; and (iii) any members and managers and holders of a
beneficial interest of five percent (5%) or more of securities with voting
rights of any corporation which controls directly or indirectly, any limited
liability company) shall not, either directly or indirectly, for itself or on
behalf of, or in conjunction with, any person, persons, partnership, limited
liability company, association or corporation or other entity:
A. Divert or attempt to divert any business or customer of the
business franchised hereunder to any competitor by direct or
indirect inducements or otherwise, or to do or perform,
directly or indirectly, any other act injurious or
prejudicial to the goodwill associated with Franchisor's
Proprietary Marks and the SBC System;
B. Employ or seek to employ any person who is, at that time,
employed by Franchisor or by any other SEATTLE'S BEST COFFEE
28
franchisee, or otherwise, directly or indirectly, induce
such person to leave his or her employment therewith; or
C. Own, maintain, operate, engage in, or have any interest in
any business that prepares, offers, sells, roasts and/or
distributes specialty coffee products and/or any product or
service substantially similar to those sold within the
SEATTLE'S BEST COFFEE System (a "Specialty Coffee Shop");
provided, however, that the term "Specialty Coffee Shop"
shall not apply to any business operated by Franchisee under
a franchise agreement with Franchisor or an affiliate of
Franchisor. During the term of this Agreement, there is no
geographical limitation on this restriction.
13.03. Franchisee covenants that Franchisee shall not, regardless of the
cause for termination, either directly or indirectly, for itself, or through, on
behalf of, or in conjunction with any person, persons, partnership, limited
liability company, association, corporation or other entity:
A. For a period of two (2) years following the termination or
expiration of this Agreement, own, maintain, engage in, or
have any interest in any Specialty Coffee Shop which is
located within a radius of ten (10) miles of the location
specified in Section I hereof, or the location of any other
SBC Retail Unit under the SBC System, whether owned by
Franchisor or any other SBC franchisee, which is in
existence as of the date of expiration or termination of
this Agreement; or
B. For a period of one (1) year following the termination or
expiration of this Agreement, employ or seek to employ any
person who is, at the time, employed by Franchisor or by any
other SEATTLE'S BEST COFFEE franchisee, or otherwise,
directly or indirectly, induce such person to leave his or
her employment therewith.
13.04. At Franchisor's request, Franchisee shall require and obtain
execution of covenants similar to those set forth in this Section XIII
(including covenants applicable upon the termination of a person's relationship
with Franchisee) in a form satisfactory to Franchisor, including, without
limitation, specific identification of Franchisor as a third party beneficiary
of such covenants with the independent right to enforce them, from any or all of
the following persons:
A. All managers and assistant managers of the Franchised Unit,
and any other personnel employed by Franchisee who have
received or will receive training from Franchisor;
29
B. All officers, directors, and holders of a direct or indirect
beneficial ownership interest of five percent (5%) or more
in Franchisee.
The failure of Franchisee to obtain execution of a covenant required by this
Section 13.04 shall constitute a material breach of this Agreement. A duplicate
original of each such covenant shall be provided by Franchisee to Franchisor
immediately upon execution.
13.05. The parties agree that each of the foregoing covenants shall be
construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Section XIII, is held unreasonable
or unenforceable by a court or agency having jurisdiction in a final decision,
Franchisee expressly agrees to be bound by any lesser covenant subsumed within
the terms of such covenant that imposes the maximum duty permitted by law, as if
the resulting covenant was separately stated in and made a part of this Section
XIII.
A. Right to Reduce Covenants. Franchisee understands and
-------------------------
acknowledges that Franchisor shall have the right, in its
sole discretion, to reduce the scope of any covenant set
forth in Sections 13.02 and 13.03 of this Agreement, or any
portion thereof, without Franchisee's consent, effective
immediately upon receipt by Franchisee of written notice
thereof, and Franchisee agrees that it shall comply with any
covenant as so modified, which shall be fully enforceable
notwithstanding the provisions of Section XXII hereof.
B. Injunctive Relief. The parties acknowledge that it will be
-----------------
difficult to ascertain with any degree of certainty the
amount of damages resulting from a breach by Franchisee of
any of the covenants contained in this Section XIII. It is
further agreed and acknowledged that any violation by
Franchisee of any of said covenants will cause irreparable
harm to Franchisor. Accordingly, Xxxxxxxxxx agrees that upon
proof of the existence of a violation of any of said
covenants, Franchisor will be entitled to injunctive relief
against Franchisee in any court of competent jurisdiction
having authority to grant such relief, together with all
costs and reasonable attorney's fees incurred by Franchisor
in bringing such action.
30
XIV. TRANSFERABILITY OF INTEREST
14.01. Transfer by Franchisor. This Agreement shall inure to the benefit
----------------------
of the successors and assigns of Franchisor. Franchisor shall have the right,
without Franchisee's consent, to transfer or assign its interest in this
Agreement to any person, persons, partnership, association, corporation, or
other entity and Franchisee agrees promptly to execute any documents in
connection therewith. If Xxxxxxxxxx's assignee assumes all the obligations of
Franchisor hereunder and sends Franchisee written notice of the assignment so
attesting, Xxxxxxxxxx agrees promptly to execute a general release of
Franchisor, and any affiliates of Franchisor, from claims or liabilities of
Franchisor under this Agreement.
14.02. Transfer by Franchisee. Franchisee understands and acknowledges
----------------------
that the rights and duties set forth in this Agreement are personal to
Franchisee, and that Franchisor has granted this Agreement in reliance on
Franchisee's business skill and financial capacity. Accordingly, neither (i)
Franchisee, nor (ii) any immediate or remote successor to Franchisee, nor (iii)
any individual, partnership, corporation or other legal entity which directly or
indirectly owns any interest in the Franchisee or in this Franchise Agreement,
shall sell, assign, transfer, convey, donate, pledge, mortgage, or otherwise
encumber any direct or indirect interest in this Agreement or in any legal
entity which owns the Franchised Business without the prior written consent of
Franchisor. Acceptance by Franchisor of any royalty fee, advertising fee or any
other amount accruing hereunder from any third party, including, but not limited
to any proposed transferee, shall not constitute Franchisor's approval of such
party as a transferee or the transfer of this Franchise Agreement to such party.
Any purported assignment or transfer, by operation of law or otherwise, not
having the written consent of Franchisor, shall be null and void, and shall
constitute a material breach of this Agreement, for which Franchisor may then
terminate without opportunity to cure pursuant to Section 15.02 E of this
Agreement.
14.03. Conditions for Consent. Franchisor shall not unreasonably withhold
----------------------
its consent to any transfer referred to in Section 14.02 hereof, when requested;
provided, however, that prior to the time of transfer;
A. All of Franchisee's accrued monetary obligations to Franchisor
and its subsidiaries and affiliates shall have been satisfied;
B. Franchisee shall have agreed to remain obligated under the
covenants contained in Section XIII hereof as if this
Agreement had been terminated on the date of the transfer;
C. The transferee must be of good moral character and reputation,
in the reasonable judgment of the Franchisor;
31
D. The Franchisor shall have determined, to its satisfaction,
that the transferee's qualifications meet the Franchisor's
then current criteria for new franchisees;
X. Xxxxxxxxxx and transferee shall execute a written assignment, in
a form satisfactory to Franchisor, pursuant to which the
transferee shall assume all of the obligations of Franchisee
under this Agreement and Franchisee shall unconditionally
release any and all claims Franchisee might have against
Franchisor as of the date of the assignment;
F. The transferee shall execute the then-current form of SEATTLE'S
BEST COFFEE Franchise Agreement and such other then-current
ancillary agreements as Franchisor may reasonably require. The
then-current form of Franchise Agreement may have significantly
different provisions including, without limitation, a higher
royalty fee and advertising contribution than that contained in
this Agreement. The then-current form of Franchise Agreement
will expire on the expiration date of this Agreement and will
contain the same renewal rights, if any, as are available to
Franchisee herein;
G. The transferee shall agree at its sole cost and expense, to (i)
complete a Franchised Unit Renovation (as defined in Section
10.01.C herein), within the time frame required by Franchisor,
unless a Franchised Unit Renovation was completed within three
(3) years prior to the date of the transfer and (ii) perform such
other scope of work as may be determined by Franchisor.
H. The transferee and such other individuals as may be designated by
Franchisor in the Manual or otherwise in writing, must have
successfully completed the SBC training course then in effect for
new SBC franchisees. If the Franchised Unit is the transferee's
first SBC Retail Unit, the transferee shall pay to Franchisor the
then-standard Training Fee;
I. If the transferee is a partnership or limited liability company,
the partnership agreement or limited liability company
organizational documents shall provide that further assignments
or transfers of any interest in the partnership or limited
liability company, respectively, are subject to all restrictions
imposed upon assignments and transfers in this Agreement;
32
J. Franchisee shall, at Franchisor's option and request, execute a
written guarantee of the transferee's obligations under the
Agreement, which guarantee shall not exceed a period of three (3)
years from the date of transfer; and all principals of the
transferee shall also guarantee Franchisee's obligations
hereunder, and
K. The Franchisee or transferee shall pay to Franchisor a transfer
processing fee of Two Thousand Five Hundred Dollars ($2,500), to
cover Franchisor's administrative expenses in connection with the
transfer and a training fee in the amount of Five Thousand
Dollars ($5,000); however no additional franchise fee shall be
charged by Franchisor for a transfer. If the transferee is (i) a
corporation or limited liability company formed by Franchisee for
the convenience of ownership and in which the Franchisee is the
sole shareholder or limited liability company member, or (ii) an
existing Franchisee under this Agreement, no transfer processing
fee and/or training fee shall be required.
14.04. Grant of Security Interest. Franchisee shall grant no security
--------------------------
interest in this Agreement, the Franchised Business, or in any of its assets
unless the secured party agrees that, in the event of any default by Franchisee
under any documents related to the security interest (i) Franchisor shall be
provided with notice of default and given a reasonable time within which to cure
said default, (ii) Franchisor shall have the right and option to be substituted
as obligor to the secured party and to cure any default of Franchisee or to
purchase the rights of the secured party upon payment of all sums then due to
such secured party, except such amounts which may have become due as a result of
any acceleration of the payment dates based upon the Franchisee's default, and
(iii) the secured party shall agree to such other requirements as Franchisor, in
its sole discretion, deems reasonable and necessary to protect the integrity of
the Proprietary Marks and the SEATTLE'S BEST COFFEE System.
14.05. Transfer on Death or Mental Incapacity. Upon the death or mental
--------------------------------------
incapacity of any person with an interest in this Agreement, the Franchised
Business or Franchisee, the executor, administrator, or personal representative
of such person shall transfer his interest to a third party approved by
Franchisor within twelve (12) months after such death or mental incapacity.
Such transfer, including, without limitation, transfer by devise or inheritance,
shall be subject to the same conditions as any inter vivos transfer. However,
----- -----
in the case of transfer by devise or inheritance, if the heirs or beneficiaries
of any such person are unable to meet the conditions in this Section XIV, the
personal representative of the deceased Franchisee shall have a reasonable time,
but in no event more than eighteen (18) months from Franchisee's death, to
dispose of the deceased's interest in this Agreement and the business conducted
pursuant hereto, which disposition shall be subject to all the terms and
33
conditions for assignments and transfers contained in this Agreement. If the
interest is not disposed of within twelve (12) or eighteen (18) months,
whichever is applicable, Franchisor may terminate this Agreement.
14.06. Right of First Refusal. Any party holding an interest in this
----------------------
Agreement, the Franchised Business or in Franchisee, and who desires to accept a
bona fide offer from a third party to purchase such interest, shall notify
---- ----
Franchisor in writing of such offer within ten (10) days of receipt of such
offer, and shall provide such information and documentation relating to the
offer as Franchisor may require. Franchisor shall have the right and option,
exercisable within thirty (30) days after receipt of such written notification,
to send written notice to the seller that Franchisor intends to purchase the
seller's interest on the same terms and conditions offered by the third party.
In the event that Franchisor elects to purchase the seller's interest, closing
on such purchase must occur within sixty (60) days from the date of notice to
the seller of the election to purchase by Franchisor. Any material change in
the terms of any offer prior to closing shall constitute a new offer subject to
the same rights of first refusal by Franchisor as in the case of an initial
offer. Failure of Franchisor to exercise the option afforded by this Section
14.06 shall not constitute a waiver of any other provisions of this Agreement,
including all of the requirements of this Section XIV, with respect to a
proposed transfer.
In the event the consideration, terms, and/or conditions offered by a third
party are such that Franchisor may not reasonably be required to furnish the
same consideration, terms, and/or conditions, then Franchisor may purchase the
interest in this Agreement, Franchisee, or the Franchised Business proposed to
be sold for the reasonable equivalent in cash. If the parties cannot agree
within a reasonable time as to the reasonable equivalent in cash of the
consideration, terms, and/or conditions offered by the third party, an
independent appraiser shall be designated by Franchisor, and his determination
shall be binding upon the parties.
14.07. Offerings by Franchisee. Securities or partnership interests in
-----------------------
Franchisee may be offered to the public, by private offering or otherwise, only
with the prior written consent of Franchisor, which consent shall not be
unreasonably withheld. All materials required for such offering by applicable
federal or state law shall be submitted to Franchisor for review prior to their
being filed with any governmental agency; and any materials to be used in any
exempt offering shall be submitted to Franchisor for review prior to their use.
No offering of such securities shall imply (by use of the Proprietary Marks or
otherwise) that Franchisor is participating in the underwriting, issuance, or
offering of securities by Franchisee; and Franchisor's review of any offering
shall be limited solely to the subject of the relationship between Franchisee
and Franchisor. Franchisee and the other participants in the offering shall
fully indemnify Franchisor in connection with the offering. For each proposed
offering, Franchisee shall pay to Franchisor a non-refundable fee of Five
Thousand Dollars ($5,000), or such greater amount as is necessary to reimburse
Franchisor for its reasonable costs and
34
expenses associated with reviewing the proposed offering, including, without
limitation, legal and accounting fees. Franchisee shall give Franchisor written
notice at least sixty (60) days prior to the date of commencement any offering
or other transaction covered by this Section 14.07.
XV. TERMINATION
15.01. Franchisee shall be deemed to be in default under this Agreement,
and all rights granted herein shall automatically terminate without notice to
Franchisee, if Franchisee shall become insolvent or make a general assignment
for the benefit of creditors; if a petition in bankruptcy is filed by Franchisee
or such a petition is filed against Franchisee and not opposed by Franchisee; or
if Franchisee is adjudicated bankrupt or insolvent; or if a receiver or other
custodian (permanent or temporary) of Franchisee's assets or property, or any
part thereof, is appointed by any court of competent jurisdiction; or if
proceedings for a composition with creditors under the applicable law of any
jurisdiction should be instituted by Franchisee or against Franchisee and not
opposed by Franchisee; or if a final judgment remains unsatisfied or of record
for thirty (30) days or longer (unless a supersedeas bond is filed or other
steps are taken to stay effectively the enforcement of such judgment in the
relevant jurisdiction); or if Franchisee is dissolved; or if execution is levied
against Franchisee's property or business; or if suit to foreclose any lien or
mortgage against the premises or equipment of the Franchised Unit is instituted
against the Franchisee and not dismissed within thirty (30) days; or if the real
or personal property of any other SBC Retail Unit operated by Franchisee shall
be sold after levy thereon by any sheriff, marshal, or constable.
15.02. Franchisee shall be deemed to be in default and Franchisor may, at
its option, terminate this Agreement and all rights granted hereunder without
affording Franchisee any opportunity to cure the default (effective immediately
upon receipt of notice by Franchisee as described in Section XX hereof) upon the
occurrence of any of the following events:
A. If Franchisee fails to complete construction of the Franchised
Unit and opens for business within one hundred eighty (180)
days of execution of this Agreement. Franchisor may, in its
sole discretion, extend this period to address unforeseen
construction delays, not within the control of Franchisee.
B. If Franchisee at any time ceases to operate the Franchised
Unit or otherwise abandons the Franchised Unit, or loses the
right to possession of the premises of the Franchised Unit, or
otherwise forfeits the right to do or transact business in the
jurisdiction where the Franchised Unit is located; provided,
however, that if, through no fault of Franchisee, the premises
are damaged or destroyed by an
35
event not within the control of Franchisee such that repairs or
reconstruction cannot be completed within one hundred eighty
(180) days thereafter, then Franchisee shall have thirty (30)
days after such event in which to apply for Franchisor's approval
to relocate and/or reconstruct the premises, which approval shall
not be unreasonably withheld, but may be conditioned upon the
payment of an agreed minimum royalty to Franchisor during the
period in which the Franchised Unit is not in operation;
C. If Franchisee is convicted of or pleads guilty to a felony, a
crime involving moral turpitude, or any other crime or offense
that Xxxxxxxxxx believes is reasonably likely to have an adverse
effect on the System, the Proprietary Marks, the goodwill
associated therewith, or Xxxxxxxxxx's interest therein;
D. If a threat or danger to public health or safety results from the
construction, maintenance, or operation of the Franchised Unit;
E. If Franchisee, or any partner, shareholder or member of
Franchisee purports to transfer any rights or obligations under
this Agreement or any interest in Franchisee to any third party
without Franchisor's prior written consent, contrary to the terms
of Section XIV hereof;
F. If Franchisee fails to comply with the in-term covenants in
Section 13.02 hereof or fails to obtain execution of the
covenants required under Sections 10.10 or 13.04 hereof;
G. If, contrary to the terms of Section VII hereof, Franchisee
discloses or divulges the contents of the Manual or any other
confidential information provided to Franchisee by Franchisor;
H. If an approved transfer is not effected as required by Section
14.05 hereof, following the death or mental incapacity of a
person described therein;
I. If Franchisee knowingly maintains false books or records, or
submits any false reports to Franchisor;
J. If Franchisee or any individual, group, association, limited or
general partnership, corporation or other business entity which
directly or indirectly controls, is controlled by, or is under
common control with Franchisee; or which directly or indirectly
owns, controls, or holds
36
power to vote ten percent (10%) or more of the outstanding voting
securities of Franchisee; or which has in common with Franchisee
one or more partners, officers, directors, trustees, branch
managers, or other persons occupying similar status or performing
similar functions ("Affiliate") commits any act of default under
any other Franchise Agreement, Development Agreement (except for
failure to meet the development schedule thereunder), asset
purchase agreement, promissory note or any other agreement
entered into by Franchisee or an Affiliate of Franchisee, and
Franchisor, or any parent, subsidiary, affiliate, predecessor or
successor to Franchisor;
K. If Franchisee, after or during a default pursuant to Section
15.03 hereof, commits the same default again, whether or not such
default is cured after notice; or
L. If Franchisee defaults more than once in any twelve (12) month
period under Section 15.03 hereof for failure to substantially
comply with any of the requirements imposed by this Agreement,
whether or not cured after notice.
M. If Franchisee refuses to permit Franchisor or its agents to enter
upon the premises of the Franchised Unit to conduct any periodic
inspection as set forth in Sections 5.09 and 10.02 H hereof.
N. If Franchisee uses any of Franchisor's Proprietary Marks in any
unauthorized manner or is otherwise in default of the provisions
of Section V hereof.
X. Xxxxxxxxxx discovers that Xxxxxxxxxx made a material
misrepresentation or omitted a material fact in the information
that was furnished to Franchisor in connection with its decision
to enter into this Agreement.
P. Franchisee knowingly falsifies any report required to be
furnished Franchisor or makes any material misrepresentation in
its dealings with Franchisor or fails to disclose any material
facts to Franchisor.
Q. There is a material breach of any representation or warranty set
forth in this Agreement.
R. If Franchisee, at any time, offers for sale from the franchised
Unit any coffee products and/or beverages other than SBC Coffee
Products.
37
15.03. Except as provided in Sections 15.01 and 15.02 of this Agreement,
upon any default by Franchisee which is susceptible of being cured, Franchisor
may terminate this Agreement only by giving written Notice of Termination
stating the nature of such default to Franchisee at least ten (10) days prior to
the effective date of termination if the default is for failure to pay
royalties, NCP Fund Contributions (including Cooperative Contributions, if any
are due, and/or any other financial obligations owed to Franchisor by
Franchisee), and thirty (30) days, prior to the effective date of termination
for any other default, provided, however, that Franchisee may avoid termination
by curing such default to Franchisor's satisfaction within the ten (10) day or
thirty (30) day period, as applicable. If any such default is not cured within
the specified time, this Agreement shall terminate without further notice to
Franchisee effective immediately upon the expiration of the ten (10) day or
thirty (30) day period, as applicable, or such longer period as applicable law
may require. Notwithstanding anything to the contrary set forth in this
Agreement, Franchisee hereby acknowledges that any agreement between Franchisee
and Franchisor relating to past due amounts accruing hereunder, (an "Arrearage
Agreement"), including, but not limited to any promissory note, payment plan or
amendment to this agreement shall be deemed to be a material part of this
agreement and shall be incorporated herein by reference. A default under any
Arrearage Agreement shall be deemed a material default of this Franchise
Agreement, regardless of the reason Franchisee fails to pay the amount which is
the subject of such Arrearage Agreement.
15.04. Franchisee shall indemnify and hold Franchisor harmless for all
costs, expenses and any losses incurred by Franchisor in enforcing the
provisions hereof, or in upholding the propriety of any action or determination
by Franchisor pursuant to this Agreement, or in defending any claims made by
Franchisee against Franchisor, or arising in any manner from Franchisee's breach
of or failure to perform any covenant or obligation hereunder, including,
without limitation, reasonable litigation expenses and attorney's fees incurred
by Franchisor in connection with any threatened or pending litigation relating
to any part of this Agreement, unless Franchisee shall be found, after due legal
proceedings, to have complied with all of the terms, provisions, conditions and
covenants hereof.
15.05 In addition to the other provisions of this Section XVI, if
Franchisor reasonably determines that Franchisee becomes or will become unable
to meet its obligations to Franchisor under this Agreement, Franchisor may
provide Franchisee written notice to that effect and demand that Franchisee
provide those assurances reasonably designated by Franchisor, which may include
security or letters of credit for the payment of Franchisee's obligations to
Franchisor. If Franchisee fails to provide the assurances demanded by Franchisor
within 30 days after its receipt of written notice from Franchisor, this
Agreement shall terminate without further notice to Franchisee effective
immediately upon expiration of that time, unless Franchisor notifies Franchisee
otherwise in writing.
38
XVI. EFFECT OF TERMINATION OR EXPIRATION
16.01. Upon termination or expiration of this Agreement, all rights
granted herein shall forthwith terminate, and:
A. Franchisee shall immediately cease to operate the Franchised
Unit as an SBC Retail Unit, and shall not thereafter, directly
or indirectly, represent to the public that the business is an
SBC Retail Unit;
B. Franchisee shall immediately and permanently cease to use, by
advertising or in any manner whatsoever, any menus, recipes,
confidential food for formulae, equipment, methods,
procedures, and the techniques associated with the System,
Franchisor's Proprietary Marks, and Franchisor's other trade
names, trademarks and service marks associated with the SBC
System. In particular, and without limitation, Franchisee
shall cease to use all signs, furniture, fixtures, equipment,
advertising materials, stationery, forms, packaging,
containers and any other articles which display the
Proprietary Marks;
C. Franchisee agrees, in the event Franchisee continues to
operate or subsequently begins to operate a restaurant, coffee
shop or other businesses, not to use any reproduction,
counterfeit, copy, or colorable imitation of the Proprietary
Marks in conjunction with such other business which is likely
to cause confusion or mistake or to deceive, and further
agrees not to utilize any trade dress, designation of origin,
description, or representation which falsely suggests or
represents an association or connection with Franchisor;
D. Franchisee agrees, upon termination or expiration of this
Agreement or upon cessation of the Franchised Business at the
location specified in Section I hereof for any reason, whether
or not Franchisee continues to operate any business at such
location, and whether or not Franchisee owns or leases the
location, to make such modifications or alterations to the
Franchised Unit premises immediately upon termination or
expiration of this Agreement or cessation of operation of the
Franchised Business as may be necessary to prevent the
operation of any businesses thereon by Franchisee or others in
derogation of this Section XVI, and shall make such specified
additional changes thereto as Franchisor may reasonably
request for that purpose. The modifications and alterations
required by this Section XVI shall include, but are not
limited to, removal of all trade dress, proprietary marks and
other indicia of the SBC System;
39
E. Franchisee shall immediately pay all sums owing to Franchisor and
its subsidiaries and affiliates. In the event of termination for
any default by Franchisee, such sums shall include all damages,
costs and expenses, including reasonable attorneys' fees,
incurred by Franchisor as a result of the default; and
F. Franchisee shall immediately turn over to Franchisor the Manual,
all other manuals, records, files, instructions, correspondence
and any and all other materials relating to the operation of the
Franchised Business in Franchisee's possession and all copies
thereof (all of which are acknowledged to be Franchisor's
property) and shall retain no copy or record of any of the
foregoing, with the exception of Franchisee's copy of this
Agreement, any correspondence between the parties, and any other
documents which Franchisee reasonably needs for compliance with
any provision of law.
16.02. Franchisor shall have the right (but not the duty) to be exercised by
notice of intent to do so within thirty (30) days after termination or
expiration of this Agreement, to purchase any and all improvements, equipment,
advertising and promotional materials, ingredients, products, materials,
supplies, paper goods and any items bearing Franchisor's Proprietary Marks at
current fair market value. If the parties cannot agree on a fair market value
within a reasonable time, an independent appraiser shall be designated by
Franchisor, and his determination of fair market value shall be binding. If
Franchisor elects to exercise any option to purchase herein provided, it shall
have the right to set-off all amounts due from Franchisee under this Agreement
and the cost of the appraisal, if any, against any payment therefor.
16.03. In the event the premises of the Franchised Unit are leased to
Franchisee, Franchisee shall, upon termination or expiration of this Agreement
and upon request by Franchisor, immediately assign, set over and transfer unto
Franchisor, at Franchisor's sole option and discretion, said lease and the
premises, including improvements. Any such lease entered into by Franchisee
shall contain a clause specifying the landlord's consent to assign such lease to
Franchisor or its assignee in the event this Agreement is terminated.
16.04. Franchisee shall pay to Franchisor all damages, costs, and expenses,
including reasonable attorneys' fees, incurred by Franchisor in seeking recovery
of damages caused by any action of Franchisee in violation of, or in obtaining
injunctive relief for the enforcement of, any portion of this Section XVI.
Further, Franchisee acknowledges and agrees that any failure to comply with the
provisions of this Section XVI, shall result in irreparable injury to
Franchisor.
40
16.05. All provisions of this Agreement which, by their terms or intent,
are designed to survive the expiration or termination of this Agreement, shall
so survive the expiration and/or termination of this Agreement.
16.06. Franchisee shall comply with the covenants contained in Section
XIII of this Agreement.
16.07. Franchisee shall execute such documents as Franchisor may
reasonably require to effectuate termination of the franchise and Franchisee's
rights to use the trademarks and systems of Franchisor.
XVII. TAXES, PERMITS, AND INDEBTEDNESS
17.01. Franchisee shall promptly pay when due all taxes, accounts and
other indebtedness of every kind incurred by Franchisee in the conduct of the
Franchised Business under this Agreement.
17.02. Franchisee, in the conduct of the Franchised Business, shall comply
with all applicable laws and regulations, and shall timely obtain any and all
permits, certificates, or licenses necessary for the full and proper conduct of
the businesses operated under this Agreement, including, without limitation,
licenses to do business, trade name registrations, sales tax permits and fire
clearances.
XIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
18.01. This Agreement does not constitute Franchisee an agent, legal
representative, joint venturer, partner, employee or servant of Franchisor for
any purpose whatsoever. It is understood and agreed that Franchisee shall be an
independent contractor and is in no way authorized to make any contract,
agreement, warranty, or representation on behalf of Franchisor. The parties
further agree that this Agreement does not create any fiduciary relationship
between them.
18.02. During the term of this Agreement and any extensions hereof,
Xxxxxxxxxx agrees to take such action as Franchisor deems reasonably necessary
for Franchisee to inform and hold itself out to the public as an independent
contractor operating the Franchised Business pursuant to a franchise from
Franchisor, including, without limitation, exhibiting a notice of that fact at
the Franchised Business in form and substance satisfactory to Franchisor.
18.03 Xxxxxxxxxx agrees to defend, indemnify and hold harmless Franchisor,
its parent, subsidiaries and affiliates, and their respective officers,
directors, employees, agents, successors and assigns from all claims, demands,
losses, damages, liabilities, cost and
41
expenses (including attorney's fees and expense of litigation) resulting from,
or alleged to have resulted from, or in connection with Franchisee's operation
of the Franchised Business, including, but not limited to, any claim or actions
based on or arising out of any injuries, including death to persons or damages
to or destruction of property, sustained or alleged to have been sustained in
connection with or to have arisen out of or incidental to the Franchised
Business and/or the performance of this contract by Franchisee, its agents,
employees, and/or its subcontractors, their agents and employees, or anyone for
whose acts they may be liable, regardless of whether or not such claim, demand,
damage, loss, liability, cost or expense is caused in whole or in part by the
negligence of Franchisor, Franchisor's representative, or the employees, agents,
invitees, or licensees thereof.
18.04 Franchisor shall advise Franchisee in the event Franchisor receives
notice that a claim has been or may be filed with respect to a matter covered by
this Agreement, and Franchisee shall immediately assume the defense thereof at
Franchisee's sole cost and expense. In any event, Franchisor will have the
right, through counsel of its choice, to control any matter to the extent it
could directly or indirectly affect Franchisor and/or its parent, subsidiaries
or affiliates or their officers, directors, employees, agents, successors or
assigns. If Franchisee fails to assume such defense, Franchisor may defend,
settle, and litigate such action in the manner it deems appropriate and
Franchisee shall, immediately upon demand, pay to Franchisor all costs
(including attorney's fees and cost of litigation) incurred by Franchisor in
affecting such defense, in addition to any sum which Franchisor may pay by
reason of any settlement or judgment against Franchisor.
18.05 Franchisor's right to indemnity hereunder shall exist
notwithstanding that joint or several liability may be imposed upon Franchisor
by statute, ordinance, regulation or judicial decision.
18.06 Franchisee agrees to pay Franchisor all expenses including
attorney's fees and court costs, incurred by Franchisor, its parent,
subsidiaries, affiliates, and their successors and assigns to remedy any
defaults of or enforce any rights under this Agreement, effect termination of
this Agreement or collect any amounts due under this Agreement.
XIX. APPROVALS AND WAIVERS
19.01. Whenever this Agreement requires the prior approval of Franchisor,
Franchisee shall make a timely written request to Franchisor therefor, and such
approval or consent shall be in writing.
19.02. Franchisor makes no warranties or guarantees upon which Franchisee
may rely, and assumes no liability or obligation to Franchisee or any third
party to which Franchisor would not otherwise be subject, by providing any
waiver, approval, advice,
42
consent, or suggestions to Franchisee in connection with this Agreement, or by
reason of any neglect, delay, or denial of any request therefor.
19.03. No failure of Franchisor to exercise any power reserved to it in
this Agreement, or to insist upon compliance by Franchisee with any obligation
or condition in this Agreement, and no custom or practice of the parties at
variance with the terms hereof, shall constitute a waiver of Franchisor's right
to demand exact compliance with the terms of this Agreement. Waiver by
Franchisor of any particular default shall not affect or impair Franchisor's
right in respect to any subsequent default of the same or of a different nature,
nor shall any delay, forbearance, or omission of Franchisor to exercise any
power or rights arising out of any breach or default by Franchisee of any of the
terms, provisions, or covenants of this Agreement, affect or impair Franchisor's
rights, nor shall such constitute a waiver by Franchisor of any rights,
hereunder or right to declare any subsequent breach or default. Subsequent
acceptance by Franchisor of any payments due to it shall not be deemed to be a
waiver by Franchisor of any preceding breach by Franchisee of any terms,
covenants, or conditions of this Agreement.
XX. NOTICES
Any and all notices required or permitted under this Agreement shall be in
writing and shall be personally delivered, sent by registered mail, or by other
means which will provide evidence of the date received to the respective parties
at the following addresses unless and until a different address has been
designated by written notice to the other party:
Notices to Franchisor: Franchise Department
SEATTLE'S BEST COFFEE, LLC.
0000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxxxxx, XX 00000
cc: AFC Enterprises, Inc.
Six Concourse Parkway
Suite 0000
Xxxxxxx, XX 00000
ATTN: Legal Department
43
Notices to Franchisee: ____________________________
____________________________
____________________________
All written notices and reports permitted or required to be delivered by the
provisions of this Agreement shall be addressed to the party to be notified at
its most current principal business address (or telefax number) of which the
notifying party has been notified (under the provisions of this Section XX) and
shall be deemed so delivered (i) at the time delivered by hand; (ii) one (1)
business day after sending by telegraph, facsimile, electronic mail or
comparable electronic system with electronic confirmation of receipt; or (iii)
if sent by registered or certified mail or by other means which affords the
sender evidence of delivery, on the date and time of receipt or attempted
delivery if delivery has been refused or rendered impossible by the party being
notified.
XXI. SEVERABILITY AND CONSTRUCTION
21.01. Except as expressly provided to the contrary herein, each
section, paragraph, part, term, and/or provision of this Agreement shall be
considered severable; and if, for any reason, any section, part, term, and/or
provision herein is determined to be invalid and contrary to, or in conflict
with, any existing or future law or regulation by a court or agency having valid
jurisdiction, such shall not impair the operation, or have any other effect
upon, such other portions, sections, parts, terms, and/or provisions of this
Agreement as may remain otherwise intelligible, and the latter shall continue to
be given full force and effect to bind the parties hereto; and said invalid
portions, sections, parts, terms, and/or provisions shall be deemed not to be
part of this Agreement.
21.02. Except as has been expressly provided to the contrary herein,
nothing in this Agreement is intended, nor shall be deemed, to confer upon any
person or legal entity other than Franchisee, Franchisor, Franchisor's officer,
directors, and employees, and Franchisee's permitted and Franchisor's respective
successors and assigns, any rights or remedies under or by reason of this
Agreement.
21.03. All captions in the Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
21.04. All references herein to the masculine, neuter or singular shall
be construed to include the masculine, feminine, neuter or plural, where
applicable, and all acknowledgments, promises, covenants, agreements and
obligations herein made or undertaken by Franchisee shall be deemed jointly and
severally undertaken by all the parties hereto on behalf of Franchisee.
44
21.05. This Agreement may be executed in counterparts, and each copy so
executed shall be deemed an original.
XXII. ENTIRE AGREEMENT: SURVIVAL
22.01. This Agreement, the documents referred to herein, the Development
Agreement, if any, and the exhibits hereto, constitute the entire, full and
complete agreement between Franchisor and Franchisee concerning the subject
matter hereof and supersede any and all prior agreements. Except for those
permitted to be made unilaterally by Franchisor hereunder, no amendment, change,
modification or variance of this Agreement shall be binding on either party
unless in writing and executed by Franchisor and Franchisee. Representations by
either party, whether oral, in writing, electronic or otherwise, that are not
set forth in this Agreement shall not be binding upon the party alleged to have
made such representations and shall be of no force or effect.
I have read this Section 22.01 and agree
that I have not been induced by and am
not relying upon any representation not
contained in this Agreement.
______________________________________,
Franchisee
22.02. Notwithstanding anything herein to the contrary, upon the
termination of this Agreement for any reason whatsoever (including the execution
of a subsequent Franchise Agreement pursuant to the provisions of Sections 2.02
B and 14.03 F), or upon the expiration of the Term hereof, any provisions of
this Agreement which, by their nature, extend beyond the expiration or
termination of this Agreement, shall survive termination or expiration and be
fully binding and enforceable as though such termination or expiration had not
occurred.
XXIII. ACKNOWLEDGMENTS
23.01. Franchisee acknowledges that Franchisee has conducted an
independent investigation of the SEATTLE'S BEST COFFEE franchise and recognized
that the business venture contemplated by this Agreement involves business risks
and Franchisee's success will be largely dependent upon the ability of the
Franchisee as an independent business entity.
(Franchisee must initial each paragraph below)
45
_____ FRANCHISOR EXPRESSLY DISCLAIMS THE MAKING OF, AND FRANCHISEE ACKNOWLEDGES
THAT FRANCHISEE HAS NOT RECEIVED, ANY WARRANTY OR GUARANTY, EXPRESSED OR
IMPLIED, AS TO THE POTENTIAL VOLUME, PROFITS OR SUCCESS OF THE BUSINESS
VENTURE CONTEMPLATED BY THIS AGREEMENT.
_____ 23.02. FRANCHISEE ACKNOWLEDGES THAT FRANCHISEE HAS RECEIVED A COMPLETED
COPY OF THIS AGREEMENT, THE EXHIBITS HERETO, IF ANY, AND THE AGREEMENTS
RELATING THERETO, IF ANY, AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO THE
DATE ON WHICH THIS AGREEMENT WAS EXECUTED.
_____ FRANCHISEE FURTHER ACKNOWLEDGES THAT FRANCHISEE HAS RECEIVED THE
DISCLOSURE DOCUMENT REQUIRED BY THE TRADE REGULATION RULE OF THE FEDERAL
TRADE COMMISSION ENTITLED "DISCLOSURE REQUIREMENTS AND PROHIBITIONS
CONCERNING FRANCHISING AND BUSINESS OPPORTUNITY VENTURES" AT LEAST TEN
(10) BUSINESS DAYS PRIOR TO THE DATE ON WHICH THIS AGREEMENT WAS
EXECUTED.
_____ 23.03. FRANCHISEE ACKNOWLEDGES THAT FRANCHISEE HAS READ AND UNDERSTOOD
THIS AGREEMENT, THE EXHIBITS HERETO, IF ANY, AND AGREEMENTS RELATING
THERETO, IF ANY, AND THAT FRANCHISOR HAS ACCORDED FRANCHISEE AMPLE TIME
AND OPPORTUNITY AND HAS ENCOURAGED FRANCHISEE TO CONSULT WITH ADVISORS OF
FRANCHISEE'S OWN CHOOSING ABOUT THE POTENTIAL BENEFITS AND RISKS OF
ENTERING INTO THIS AGREEMENT.
_____ 23.04. FRANCHISEE RECOGNIZES AND UNDERSTANDS THAT IT MAY INCUR OTHER
EXPENSES AND/OR OBLIGATIONS AS PART OF THE INITIAL INVESTMENT IN THE
FRANCHISED BUSINESS WHICH THE TERMS OF THIS AGREEMENT MAY NOT ADDRESS,
AND WHICH INCLUDE WITHOUT LIMITATION: OPENING ADVERTISING, EQUIPMENT,
FIXTURES, OTHER FIXED ASSETS, CONSTRUCTION, LEASEHOLD IMPROVEMENTS AND
DECORATING COSTS AS WELL AS WORKING CAPITAL NECESSARY TO COMMENCE
OPERATIONS.
XXIV. APPLICABLE LAW: VENUE
46
24.01. Applicable Law. This Agreement takes effect upon its acceptance
and execution by Franchisor and shall be interpreted and construed under the
laws of the State of Georgia which laws shall prevail in the event of any
conflict of law (without regard to, and without giving effect to, the
application of Georgia choice of law or conflict of law rules) except to the
extent governed by the U. S. Trademark Act of 1946, 15 U.S.C. (S) 1051, et seq.
-- ---
(the " Xxxxxx Act") as amended; provided, however, that if the covenants in
Article XIII of this Agreement would not be enforceable under the laws of
Georgia, and the Franchised Unit is located outside of Georgia, then such
covenants shall be interpreted and construed under the laws of the state in
which the Franchised Unit is located. Nothing in this Section XXIV is intended
by the parties to subject this Agreement to any franchise or similar law, rule,
or regulation of the State of Georgia to which this Agreement would not
otherwise be subject.
24.02. The parties agree that any action brought by Franchisee against
Franchisor in any court, whether federal or state, shall be brought within a
court of competent jurisdiction in Atlanta, Georgia. Any action brought by
Franchisor against Franchisee in any court, whether federal or state, may be
brought within any court in the State of Georgia, or in the jurisdiction where
Franchisee resides or does business or where the Franchised Unit is or was
located or where the claim arose. Franchisee hereby consents to personal
jurisdiction and venue in the state and judicial district in which Franchisor
has its principal place of business.
24.03. No right or remedy herein conferred upon or reserved to
Franchisor is exclusive of any other right or remedy herein, or by law or equity
provided or permitted; but each shall be cumulative of any other right or remedy
provided in this Agreement
24.04. Nothing herein contained shall bar Franchisor's right to obtain
injunctive relief against threatened conduct that will cause it loss or damages,
under the usual equity rules, including the applicable rules for obtaining
restraining orders and preliminary injunctions.
24.05. Any and all claims and actions arising out of or relating to this
Agreement (including, but not limited to, the offer and sale of this franchise),
the relationship of Franchisee and Franchisor, or Franchisee's operation of the
Franchised Unit, brought by Franchisee shall be commenced within eighteen (18)
months from the occurrence of the facts giving rise to such claim or action, or
such claim or action shall be barred.
24.06. Franchisor and Franchisee hereby waive to the fullest extent
permitted by law any right to or claim of any consequential, punitive, or
exemplary damages against the other, and agree that in the event of a dispute
between them each shall be limited to the recovery of any actual damages
sustained by it.
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XXV. CORPORATE FRANCHISEE
In the event the Franchisee named herein is a corporation at the time of
execution of this Agreement, it is warranted, covenanted and represented to
Franchisor that:
25.01. All of the issued and outstanding stock of Franchisee is owned,
legally and beneficially, by the person or persons listed on Exhibit "B"
---------------------
attached hereto.
---------------
25.02. The above-named person or persons has (have) individually, and
jointly and severally, executed this Agreement, and such person, or one of such
persons, is and shall be the chief executive officer of the Franchisee
corporation, holding such corporate office or offices as may be necessary to
maintain and exercise the actual power and authority actively to direct the
affairs of the Franchisee.
25.03. Franchisee is validly incorporated and duly existing under the laws
of the State of ________________________, is duly qualified to conduct business
therein, and has its principal place of business at ____________________________
_______. Franchisee shall promptly notify Franchisor in writing of any change
thereto during the term of this Agreement.
(Signatures on Following Page)
48
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have duly executed, sealed, and delivered this Agreement in triplicate on the
day and year first above-written.
WITNESS: FRANCHISOR:
SEATTLE'S BEST COFFEE, LLC.
__________________________ By: __________________________________
Title: ________________________________
__________________________
WITNESS: FRANCHISEE:
__________________________ By: __________________________________
Title: ________________________________
__________________________
{SIGNATURE PAGE TO FRANCHISE AGREEMENT}
49
EXHIBIT "A"
-----------
SEATTLE'S BEST COFFEE
FRANCHISE AGREEMENT
NOTICE OF COMMENCEMENT DATE
---------------------------
Name of Franchisee: _______________________________________________________
Franchise Agreement Dated: ________________________________________________
Franchise Premises Address: _______________________________________________
___________________________________________________________________________
___________________________________________________________________________
Store Number: _____________________________________________________________
NOTICE is hereby given to the abovementioned Franchisee pursuant to Section 2.01
of the Franchise Agreement that the Term of the abovementioned Franchise
Agreement commenced on ________________, 19___, and that the Term shall expire
on ________________, _____, unless the Franchise Agreement is terminated
earlier, pursuant to its terms and conditions.
SEATTLE'S BEST COFFEE, LLC.
By: ______________________________
Title: ___________________________
Date of Notice: __________________
50
EXHIBIT "B"
-----------
SHAREHOLDERS OF FRANCHISEE
--------------------------
(For Corporate Franchisees)
Name of Number of % Ownership
Shareholders Shares of Franchisee Title
------------ ------ ------------- -----
51
EXHIBIT 10.47
AMENDMENT TO FRANCHISE AGREEMENT
(Single Unit Franchise; Development Procedures)
THIS AMENDMENT TO FRANCHISE AGREEMENT (this "Amendment") is made and
entered into this day of ___________________, by and between SEATTLE'S BEST
COFFEE, LLC., a Washington limited liability company, with its principal offices
at 0000 Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx 00000 (hereinafter
referred to as "Franchisor") and ___________________________________, with a
mailing address at _________________ __________________________________
(hereinafter referred to as "Franchisee").
W I T N E S S E T H:
-------------------
WHEREAS, Franchisee and Franchisor entered into a SBC Franchise Agreement
dated ___________ (hereinafter the "Franchise Agreement"); and
WHEREAS, Franchisee and Franchisor desire to amend the terms and conditions
of the Franchise Agreement as hereinafter set forth;
NOW, THEREFORE, in consideration of the mutual covenants and conditions
herein contained, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree to
amend the Franchise Agreement as follows:
1. This Amendment shall be attached to, incorporated in, and become a
part of, the Franchise Agreement. The terms and conditions stated in this
Amendment, to the extent they are inconsistent with the terms and conditions
stated in the Franchise Agreement, shall prevail over the terms of the Franchise
Agreement.
2. The Franchise Agreement is hereby amended by inserting the following
new Section XXVI at the end thereof:
"XXVI. Development Procedures
26.01. Site Acquisition
----------------
A. Within thirty (30) days after execution of this
Franchise Agreement, Franchisee shall submit, in writing to
Franchisor, satisfactory proof to Franchisor that Franchisee:
(i) owns the site at which the Franchised Cafe is to
be developed and operated (the "Franchised Location");
(ii) has leased the Franchised Location for a term
which, with renewal options, is not less than the initial term of the
Franchise Agreement; or
(iii) has entered into a written agreement to purchase
or to lease the Franchised Location on terms provided herein, subject
only to obtaining necessary governmental permits.
1
The proof required by this Section includes, but is not limited to,
submission of executed copies of all leases and deeds, as well as all
governmental approvals if effectiveness of the leases or deeds is
conditioned thereon.
B. If Franchisee proposes to lease or sublease the
Franchised Location, Franchisee shall provide Franchisor with a copy
of the fully-executed lease for the Franchised Location within 30 days
after execution of this Franchise Agreement, but, in any event, prior
to the commencement of construction at the Franchised Location. The
lease or sublease shall not contain any covenants, use clauses or
other obligations that would prevent Franchisee from performing its
obligations under this Franchise Agreement. Any lease, sublease,
letter of intent or lease memorandum for the Franchised Location shall
contain provisions that satisfy the following requirements during the
entire term of the lease, including any renewal terms:
1. The landlord consents to Franchisee's use of the
proprietary signs, distinctive designs and layouts of the SBC System,
the Proprietary Marks, and upon expiration or the earlier termination
of the lease, consents to permit Franchisee, at Franchisee's expense,
to remove all such items and other trade fixtures, so long as
Franchisee makes repairs to the building caused by such removal.
2. The landlord agrees to provide Franchisor (at the
same time sent to Franchisee) a copy of all amendments and assignments
and notices of defau lt pertaining to the lease and the leased
premises.
3. Franchisor shall have the right to enter the
leased premises to make any modifications or alterations, at its own
cost, necessary to protect the Proprietary Marks and the SBC System
and to cure, within the time periods provided by the lease, any
default under the lease, all without being guilty of trespass or other
tort, and to charge Franchisee for these costs.
4. The landlord agrees that Franchisee shall be
solely responsible for all obligations, debts and payments under the
lease.
5. The landlord agrees that, following the expiration
or earlier termination of this Franchise Agreement, Franchisee shall
have the right to make those alterations and modifications to the
premises as may be necessary to clearly distinguish to the public the
premises from a SBC Cafe and also make those specific additional
changes as Franchisor reasonably may request for that purpose. The
landlord also agrees that, if Xxxxxxxxxx fails to promptly make these
alterations and modifications, Franchisor shall have the right to do
so without being guilty of trespass or other tort so long as
Franchisor makes repairs to the building caused by such removal.
6. The landlord agrees not to amend or otherwise
modify the lease in any manner that would affect any of the foregoing
requirements without the prior written consent of Franchisor, which
consent shall not be unreasonably withheld.
7. Franchisee may assign the lease to Franchisor or
its designee with landlord's consent (which consent shall not be
unreasonably withheld) and without payment of any assignment fee or
similar charge or increase in any rentals payable to the landlord.
26.02 Construction of the Franchised Cafe
-----------------------------------
A. Franchised Cafe Development
---------------------------
1. Franchisee assumes all cost, liability and expense
for developing,
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constructing and equipping the Franchised Bakery. Franchisor will
furnish to Franchisee prototypical plans and specifications for a
Franchised Bakery, including requirements for dimensions, design,
image, interior layout, decor, fixtures, equipment, signs,
furnishings, storefront and color scheme. It shall be Franchisee's
responsibility to have prepared all required construction plans and
specifications to suit the shape and dimensions of the Franchised
Location and Franchisee must ensure that these plans and
specifications comply with applicable ordinances, building codes and
permit requirements and with lease requirements and restrictions.
Franchisee shall use only registered architects, registered engineers,
and professional and licensed contractors.
2. Within ninety (90) days of the date of this Franchise
Agreement, Franchisee shall submit proposed construction plans,
specifications and drawings for the Franchised Bakery ("Plans") to
Franchisor which must be in conformity with Franchisor's standards and
specifications for SBC Cafes, as set out in the current Confidential
Operating Standards Manual (as defined in the Franchise Agreement) or
otherwise in writing, and shall, upon the request of Franchisor,
submit all revised or "as built" Plans during the course of such
construction. Franchisor will approve or refuse to approve the Plans
and notify Franchisee within 30 days after Franchisor receives the
Plans. (Approval shall not be unreasonably withheld.). The Plans shall
include, but are not limited to, floor plans, equipment layouts,
decor, and interior and exterior elevations. Once Franchisor has
approved the Plans, no substantial change shall be made to the Plans
without the prior approval of Franchisor, which shall not to be
unreasonably withheld. If, in the course of construction, any such
change in the Plans is contemplated, the approval of Franchisor must
first be obtained before proceeding. Franchisor shall approve or
disapprove Plan changes within 10 business days of receipt.
3. Franchisee may not commence construction of the
Franchised Bakery prior to receiving written notification from
Franchisor that it has approved the Plans. All construction must be in
accordance with Plans approved by Franchisor and must comply in all
respects with applicable laws, ordinances and local rules and
regulations. The Franchised Bakery may not open if construction has
not been performed in substantial compliance with Plans approved by
Franchisor, and this Agreement may be terminated if such non-
compliance is not cured within a commercially reasonable amount of
time. Franchisor may furnish guidance to Franchisee in developing the
Franchised Cafe and may periodically inspect the premises during its
development.
B. Commencement and Completion of Construction
-------------------------------------------
1. No more than thirty (30) days after the Franchisor
approves Franchisee's Construction Plans, Franchisee shall commence
construction or renovation of the Franchised Cafe. If commencement of
construction or renovation is delayed by a cause beyond the reasonable
control of Franchisee, the date upon which commencement of
construction or renovation is to begin may be extended by obtaining
written approval of Franchisor. Prior to the commencement of
construction, Franchisee shall: (1) eliminate or otherwise satisfy all
of the conditions set forth in writing by Franchisor; (2) if not
previously paid, pay Franchisor the balance of the initial fees
required by this Agreement; and (3) provide Franchisor, if Franchisee
leases the Franchised Location, a copy of the fully-executed lease for
the Franchised Location or, if Franchisee owns the Franchised
Location, proof of Franchisee's ownership interest and (4) procure the
insurance coverage provided for in Section XII of the Franchise
Agreement, and maintain such insurance coverage throughout the term of
the Franchise Agreement.
2. Upon commencement of construction or renovation of the
Franchised Unit, Franchisee shall notify Franchisor on such form as
Franchisor may prescribe.
3. Notwithstanding the occurrence of any events, except
events constituting
3
Force Majeure, construction shall be completed and the Franchised Cafe
shall be furnished, equipped and shall otherwise be ready to open for
business in accordance with this Agreement not later than 180 days
after the date of execution of this Franchise Agreement ("the Opening
Date"). If events constituting Force Majeure cause a delay in the
commencement of construction of the Franchised Cafe, Franchisor shall
proportionately extend the Opening Date for the Franchised Cafe.
4. Franchisee agrees, at its sole expense, to do or cause
to be done the following, by the Opening Date:
(a) Obtain and maintain all required building,
utility, sign, health, sanitation, business and other permits and
licenses applicable to the Franchised Cafe.
(b) Construct all required improvements to the
Franchised Location and decorate the interior of the Franchised
Cafe in compliance with the Plans approved by Franchisor.
(c) Purchase or lease and install all specified and
required fixtures, equipment, furnishings and signs required for
the Franchised Cafe.
(d) Purchase an opening inventory for the Franchised
Cafe of only authorized and approved products and other materials
and supplies.
5. Inspection, Cooperation. During the course of
-----------------------
construction and/or renovation of the Franchised Cafe, Franchisee
shall (and shall cause Franchisee's architect, engineer,
contractors, and subcontractors to) cooperate fully with
Franchisor and its designees for the purpose of permitting
Franchisor and its designees to inspect the Franchised Location
and the course of construction and/or renovation of the
Franchised Cafe in order to determine whether construction and/or
renovation is proceeding according to the Plans. Without limiting
the generality of the foregoing, Franchisee, and Franchisee's
architect, engineer, contractors and subcontractors shall: (1)
supply Franchisor or its designees with samples of construction
and/or renovation materials, due diligence environmental studies,
supplies, equipment and other material and reports, if any such
tests, studies or reports indicate there may be material problems
or as Franchisor or its designees may request; and (2) afford
representatives of Franchisor and its designees access to the
Franchised Location and to the construction and/or renovation
work in order to permit Franchisor and its designees to carry out
inspections.
26.03. Limitation of Liability. Notwithstanding the right of Franchisor
-----------------------
to approve the Plans and to inspect the construction and/or renovation work
and the Franchised Cafe, Franchisor and its designees shall have no
liability or obligation with respect to the Franchised Location, the
design, construction or renovation of Franchised Cafe or the furnishings,
fixtures and equipment to be
4
required; the rights of Franchisor being exercised solely for the purpose
of ensuring compliance with the terms and conditions of this Agreement.
26.04 Right to Open the Franchised Cafe
---------------------------------
A. Franchisee shall notify Franchisor in writing at least 30
days prior to the date Franchisee expects construction and/or renovation of
the Franchised Cafe to be completed and a certificate of occupancy issued.
Franchisor reserves the right, after receiving Franchisee's notice, to
conduct a final inspection of the Franchised Cafe and its premises to
determine if Franchisee has complied with this Agreement. Franchisor shall
not be liable for delays or loss occasioned by its inability to complete
its investigation and to make a determination within this period.
Franchisee shall not open the Franchised Cafe for business without the
express written authorization of Franchisor, which will not be granted
unless Franchisee has satisfied the following conditions:
1. Franchisee is not in material default under this
Agreement or any other agreements with Franchisor; Franchisee is not in
default beyond the applicable cure period under any real estate lease,
equipment lease or financing instrument relating to the Franchised Cafe,
Franchisee is not in default beyond the applicable cure period with any
vendor or supplier to the Franchised Cafe and, for the previous 6 months,
Franchisee has not been in default beyond the applicable cure period under
any agreement with Franchisor.
2. Franchisee is current on all obligations due Franchisor
and has paid Franchisor the balance of the initial fees required by this
Agreement.
3. Franchisor is satisfied that the Franchised Cafe was
constructed and/or renovated substantially in accordance with the Plans
approved by Franchisor and state and local codes.
4. If the Franchised Location is leased, Franchisor has
received a copy of the fully-executed lease.
5. Franchisee has obtained a certificate of occupancy and
any other required health, safety or fire department certificates. If
requested by Franchisor, Franchisee shall submit a copy of the certificate
of occupancy to Franchisor.
6. Franchisee has certified to Franchisor in writing that
the installation of all items of furnishings, fixtures, equipment, signs,
computer terminals and related equipment, supplies and other items has been
accomplished and that Franchisee has hired and properly trained its staff.
7. Franchisor has determined that the Franchised Cafe has
been constructed and/or renovated and equipped substantially in accordance
with the requirements of this Agreement and that Franchisee has hired and
trained a staff in accordance with the requirements of this Agreement and
the Franchise Agreement.
8. Franchisor has been furnished with copies of all
insurance policies required by Section XII of this Agreement or such other
evidence of insurance coverage and payment of premiums as Franchisor
reasonably may request.
B. If the Franchised Cafe is Franchisee's first Franchised Cafe
opened hereunder, Franchisor shall provide a representative to be present
at the opening. The Franchised Cafe shall not be opened unless such
representative is present. Should commencement of operation of the
Franchised Cafe be delayed by the failure of Franchisor to provide such a
representative, the
5
date upon which commencement of operation of the Franchised Cafe is
required pursuant to Section 25.02.B.3. of this Agreement, shall be
extended until such time as such assistance is provided by
Franchisor."
3. In the event Franchisee executed a "Preliminary Agreement for a
License to Develop a Single SBC Cafe" prior to executing this Franchise
Agreement, the amount, if any, paid by Franchisee to Franchisor thereunder shall
be applied as a credit to the Franchise Fee payable hereunder, and shall be
reflected in Section 3.01.A of the Franchise Agreement, as if such amount were
the portion of a "Development Fee" applicable to the Franchise Fee payable
hereunder.
4. This Amendment and the documents referred to herein, constitute the
entire, full and complete agreement between Franchisor and Franchisee concerning
the subject matter hereof and supersede any and all prior agreements. No other
representations have induced Franchisee to execute this Amendment, and there are
no representations, inducements, promises, or agreements, oral or otherwise,
between the parties not embodied herein which are of any force or effect with
reference to this Amendment or otherwise. No amendment, change, or variance from
this Amendment shall be binding on either party unless executed in writing.
5. The Franchise Agreement and this Amendment shall be governed by the
laws of the State of Georgia, without regard to application of Georgia choice of
law rules.
6. The Franchise Agreement shall remain in full force and effect except
as specifically amended herein.
IN WITNESS WHEREOF, the parties hereto intending to be legally bound hereby
have executed this Amendment in triplicate on the day and year first written.
WITNESS: FRANCHISOR:
SEATTLE'S BEST COFFEE, LLC.
__________________________ By:________________________________
WITNESS: Franchisee:
__________________________ ___________________________________
