"DAIRY QUEEN" OPERATING AGREEMENT
This Agreement entered into this 1st day of May, 1982, by and between Interstate
Dairy Queen Corporation of the city of Atlanta, county of Xxxxxx, and state of
Georgia, hereinafter referred to as "Licensor" and Xxxxxx'x Inc. d/b/a DQ of
Flying C, of the city of Albuquerque county of Bernalillo, State of New Mexico
herein after referred to as "Licensee":
WHEREAS, Licensor is the exclusive licensee of American Dairy Queen
Corporation (herein after referred to as "American") in certain geographical
areas including the territory which includes the Authorized Location hereinafter
set forth of the right to license others, in accordance with the terms of this
Agreement, to use the "Dairy Queen" trademark, service xxxx and trade name which
has been registered in the United States Patent Office, in each state of the
union and in foreign countries as well as those trademarks and service marks
(hereinafter collectively referred to as "Trademarks"), a list of which is
attached hereto and made a part hereof as Appendix A; and
WHEREAS, Licensor and its predecessors in interest acting under said
exclusive license instituted, developed, promoted, and established the "Dairy
Queen" franchise business and system in the aforesaid territory which consists
of the sale of dairy products, food products, beverages and other products and
services under said trademarks and utilizing in connection therewith certain
types of facilities, equipment, supplies, ingredients, merchandising and
business techniques and methods together with advertising and promotion programs
developed from time to time; and
WHEREAS, it is the purpose of Licensor to provide to Licensee in a retail
store outlet an organization to control and make uniform the operation of
facilities and equipment together with the quality of products, the use and
protection of the trademarks and-to make available uniform and approved
equipment, supplies, ingredients, merchandising and business techniques and the
sales promotional programs of American, and
WHEREAS, Licensee desires to operate a "Dairy Queen" retail store as part
of the "Dairy Queen" system and to enter into this Operating Agreement subject
to the conditions and controls herein prescribed for the purpose of offering to
the public products and services of uniformly high quality and standards to the
end of protecting the interests of Licensee, of Licensor, of American Dairy
Queen Corporation and all other persons engaged in said business; and,
WHEREAS, it is the intent of both Licensor and Licensee to preserve within
the context of a "Dairy Queen" retail store continuing consumer confidence in
the reliability and quality of all products sold under any of the Trademarks;
and, each party desires that all products sold under any of the Trademarks,
consistently conform to the highest expectations of consumers of such products;
and, whereas, by this Agreement the parties contemplate that Licensee's store,
in addition to normal "Dairy Queen" food and beverage products, may also sell
Permitted Products, as defined hereinafter.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the grant by Licensor of this Operating Agreement and the
payment by Licensee of the participation fees provided in Paragraph 9 hereof, it
is agreed by and between the parties hereto as follows:
GRANT OF LICENSE
Licensor's 1. Licensor hereby grants to Licensee, subject
Grant to to all the terms, conditions and provisions
Licensee hereof, the right and license to:
Mailing Address: 1.1 Establish and operate a retail store
DQ of Flying C, NM under the name "Dairy Queen" at Interstate
c/x Xxxxxx'x, Inc. 00, 0xx xxxx Xxxx xx Xxxxxxxxx Xxxxxx (as
136 Louisiana, N. E. indicated on the attached map), New Mexico
Xxxxxxxxxxx, XX 00000 hereinafter referred to as the
"Authorized Location" (provided, however,
in the event an Authorized Location is not
designated on the date hereof, and such
location is not designated herein by
Licensor within ninety (90) days after such
date, this Agreement shall become null and
void and all deposit is including the
franchise fee shall be returned to
Licensee).
1.2 Use at the Authorized Location the
trademark on and in association with sale
of all uniform and approved products and
services as American may authorize from
time to time, with all approved sales
promotion programs relative thereto.
1.3 Use at the Authorized Location the on
and in association with the uniform
equipment, supplies, and ingredients for
the products approved by American.
1.4 Employ in the business of said store
the merchandising, advertising, promotion
and business methods and techniques
developed, adopted and approved by
American.
Acceptance by Licensee 2. Licensee hereby accepts the above license
from Licensor subject to all the terms, by
Licensee provisions and conditions hereof and
agrees that Licensee shall cause to have a "Dairy
Queen" store established within 180 days of the
date hereof (unless an extension of time is
expressly authorized in writing by Licensor), and
thereafter maintained and operated at the
Authorized Location, under Licencee's active and
continuous supervision
[map of area surrounding franchised store]
and management and upon the standards hereinafter
provided. Licensee further expressly acknowledges
and agrees:
2.1 American is the owner of all right,
title and interest in and to the trademark,
and the good will attributable thereto of
the business in connection with which said
Trademarks have been, and are and will be
used at the Authorized Location. Licensor
is the licensee of the right to use the
Trademarks in the territory which includes
the Authorized Location. Specifically, but
without limiting the foregoing, Licensee
disclaims any and all right, title and
interest in or to the Trademarks and to the
good will associated with the Trademarks of
the "Dairy Queen" retail store at the
Authorized Location and acknowledges and
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agrees that all such good will is the
exclusive property of American.
2.2 The trademarks are valuable property
rights owned by American.
2.3 The trademarks shall be used only in
connection with such products and services
as may be approved or specified by American
and shall at all times be used only in a
manner approved by American.
2.4 Licensee's rights to the use of
trademarks is specifically limited to
Licensee's retail store operation at
Authorized Location.
2.5 Licensee shall use no other trademarks,
trade names or service marks in said
business except those authorized by
American and as set forth in Appendix A
except by the prior written consent of
American.
2.6 Licensee shall not use the words "Dairy
Queen", or any of its Trademarks, or any
word or xxxx similar thereto, as a part of
its corporate or business name unless first
approved in writing by American, and shall
use only the word "Dairy Queen" (and no
other words whatsoever) as the trade name
on the store from which the said products
and services are sold. In the event
American does approve the use of the words
"Dairy Queen", or any of the Trademarks, as
a part of Licensee's corporate or business
name Licensee shall cause such name to be
changed so as to eliminate those words and
Trademarks from the name within thirty (30)
days after termination of this Agreement.
2.7 Licensee shall adopt and follow in good
faith the systems, programs and methods
prescribed by Licensor for Licensee's
retail operation in accordance with this
Operating Agreement.
2.8 Neither Licensee nor any person owning
an interest directly or indirectly in
Licensee shall directly or indirectly
operate or permit to be operated or hold
any interest (other then 1% or less of any
outstanding stock or debt of any class of
any public company) in any restaurant or
fast-food business other than a Xxxxxx'x or
its affiliates at the time of signing or
one authorized by this Agreement without
the prior written consent of Licensor.
TERM
Term 3. The License granted herein shall continue until
terminated by Licensee, with or without cause, on
sixty (60) days prior written notice to Licensor,
or until otherwise terminated by either Licensee
or Licensor in accordance with the provisions of
this Agreement.
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TRADEMARK STANDARDS AND REQUIREMENTS
General Declarations 4. Licensee agrees that nothing in this agreement
gives him any title to or interest in the
Trademarks except the right to use the same under
the terms and conditions of this Agreement and
that Licensee's use there of injures to the
benefit of American. Specifically, but without
limiting the foregoing, Licensee acknowledges and
agrees that American has the right and may
distribute for its own account products identified
by the Trademarks through not only "Dairy Queen"
retail stores but through any other distribution
method which may from time to time be established.
Use of Trademarks 4.1 Licensee shall confine his use the
trademarks to the sales promotion programs,
sale of products and services which shall
in quality, mode and conditions of
manufacture and sale, comply with such
standards as are established or approved by
American. In order to promote and protect
the business interests of each of the
parties, the value of the "Dairy Queen"
business and the business interests of
other persons engaged therein, uniformity
shall be maintained in the type, standard
and quality of stores, equipment, supplies
and ingredients used therein, and the
conditions of preparation and the
procedures employed in the sale of said
products and services.
Acknowledgment of Necessity of 4.2 Licensee agrees that the provisions,
Uniformity restrictions and controls provided in this
Operating Agreement are all necessary,
reasonable and desirable for such purposes
and that Licensee's said business shall be
conducted in accordance with American's
uniform requirements with respect to
quality, production, appearance,
cleanliness, service, merchandising and
advertising standards. Licensee
acknowledges and agrees that substantial
uniformity in facilities, products,
services and operations are essential to
the conduct of a system such as the "Dairy
Queen" system, and therefore further agrees
to honor and implement recommendations of
American and Licensor directed to enhancing
and furthering such uniformity.
Equipment and Supplies 4.3 Licensee agrees to purchase and use, in
the operation of Licensee's "Dairy Queen"
retail store, only equipment, supplies,
ingredients and services which are approved
by American or by Licensor. Nothing herein
shall be constructed as an attempt to limit
unreasonably the sources from which
Licensee may procure equipment, supplies,
ingredients or services. Rather, it is the
intention of the parties that such items
conform to American's standards and
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specifications of consistent quality and
uniformity. Nothing contained herein shall
be deemed to require Licensor to approve an
inordinate number of suppliers of a given
item or service w3hich in the reasonable
judgment of American or licensor would
result in licensees or prevent effective
and economical supervision of suppliers by
approval of additional suppliers shall be
in writing and shall contain such
information as American and Licensor may
reasonably request. American and Licensor
reserve the right to charge back to
Licensee or the proposed supplier all
reasonable expenses incurred in considering
requests for approval.
Approved Adaptations 4.4 Complete and detailed uniformity under
many varying conditions may not be possible
or practical and Licensor and American
reserve the right and privilege, at
American's sole discretion and as Licensor
and American may deem in the best interests
of all concerned in any specific instance,
to accommodate special needs of Licensee's
Authorized Site or that of any other like
based on the peculiar site or location,
density of population, business potential,
population of trade area, existing business
practices, requirements of local law, or
any other condition which Licensor and
American deem to be of importance to the
successful operation of a like business.
Litigation 4.5 In the event that any person, firm or
company, who is not a licensee or
franchisee of American or Licensor, uses or
infringes upon the Trademarks, American
shall control all litigation and shall be
the sole judge as to whether or not suit
shall be instituted or other action taken.
Notice of Potential 4.6 Licensor and American hereby advise
American and/or Licensor Licensee that Licensor, American
Profit and /or affiliates of American and/or
Licensor may from time to time make
available to Licensee goods, products
and/or services for use in Licensee's
"Dairy Queen" retail store in respect to
the sale or provision of which Licensor,
American and/or affiliates of American
and/or Licensor may make a profit. Licensor
further advises Licensee that Licensor,
American and/or affiliates of American
and/or Licensor may from time to time
receive consideration from suppliers and
/or manufactures in consideration of such
services provided or rights licensed to
such persons by American, Licensor or their
respective affiliates.
FACILITY STANDARDS AND MAINTENANCE
5. The following provisions and conditions shall
control with respect to Licensee's Authorized
Location and retail store:
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Store Facility 5.1 Licensee agrees that the retail store
shall constructed and equipped in
accordance with American's currently
approved specifications and standards in
respect to building, equipment, inventory,
signage, fixtures, location and design and
accessory features.
Future Alteration 5.2 Any replacement,
reconstruction, addition or modification in
building, equipment or signage, to be made
hereafter, whether at the request of
Licensee or of Licensor, shall be made in
accordance with written specifications
approved by Licensor or American. Licensor
and American shall not unreasonably
withhold such approval.
Maintenance 5.3 The building, equipment and signage
employed in the conduct of Licensee's
business shall be maintained in accordance
with an annual maintenance list prepared by
Licensor and based upon periodic
inspections of the premises by Licensor's
representatives. Within a period of ninety
(90) days after the receipt of such annual
maintenance list, Licensee shall effect the
items of maintenance reasonably provided
therein including the repair of defective
items and/or the replacement of
unrepairable or obsolete items of equipment
and signage. Routine maintenance shall be
conducted in accordance with general
schedules published by Licensor or American
and made available to Licensee.
Relocation 5.4 Should it become necessary, on account
of condemnation, sale, or other cause,
including expiration or cancellation of
lease or rental contract, to relocate said
store, Licensor shall grant Licensee
authority to do so within a radius of 1,000
yards of the Authorized Location, provided
the new site is reasonably suited for a
"Dairy Queen" retail store in accordance
with Licensor's standards for store sites,
does not infringe on rights of another
licensee, is reasonably distant from other
"Dairy Queen" retail stores, and the new
retail store is constructed, equipped and
opened for business in accordance with the
current standards of American at that time
within one year after discontinuing
operation of a "Dairy Queen" retail store
at the previous Authorized Location.
Modernization and/or 5.5 Each and every transfer as provided in
Replacement of Time of Transfer Paragraph 9.10 hereof shall be expressly
conditioned upon Licensee promptly
performing and effecting such items of
modernization and/or replacement of
building, equipment, and signage as may be
necessary to permit the same to conform to
the standards then prescribed by American
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for similarly situated store operations.
Licensee recognizes and acknowledges that
the requirements of this paragraph 5.5 are
both reasonable and necessary to insure
continued public acceptance and patronage
of, and to avoid deterioration or
obsolescence in the business conducted
hereunder.
PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
6. The following provisions shall control with
respect to products and operations:
Authorized Product Line 6.1 Licensee's business shall be confined
to the preparation and sale of only such
products as from time to time are
designated or approved by American for sale
by Licensees which are parties to this form
of Operating Agreement. The premises upon
which said business is operated shall not
be used for any other business and there
shall not be sold or offered for sale
therefrom any other product or service
(excepting the preparation, storage and
sale of Permitted Products) without the
written consent of American. Specifically,
but without limiting the foregoing,
alcoholic or intoxicating beverages shall
not be sold or offered for sale or
otherwise handled upon said premises.
Approved Menu 6.2 Attached hereto as Appendix B is the
currently approved menu for Licensee's
retail store. American may from time to
time make reasonable modifications to said
approved menu provided said modifications
are made in respect to all licensees which
have this form of Operating Agreement and
are located in similar areas of the
country. In addition, Licensee may from
time to time request variation from the
currently approved menu. Such variations
shall only be made with the written consent
of the American.
Authorized, Ingredients, 6.3 Licensee shall use in preparing
Formulas, Supplies, products only such ingredients, formulas,
Preparation; Subject to Change by and supplies as are specified by American
American and in such portions, sizes and appearance
and packaging as set forth in American's
most current "Store Management Operations
Manual" and "products preparation charts".
Copies of the current "Store management
Operations Manual" and "products
preparation charts" have been supplied to
Licensee by Licensor temporaneously with
execution of this Operating Agreement.
Licensee acknowledges and agrees that these
may be changed from time to time by
American and that Licensee is obligated to
conform to the requirements as so changed
from time to time. All other supplies,
including cones, cups, containers, eating
utensils, napkins, and all other customer
service materials of all description and
7
types, shall meet the standards of
uniformity and quality as
now or hereafter reasonably set by
American. Licensee shall be furnished with
lists of approved equipment, supplies,
ingredients and services.
Serving and Promotion Items 6.4 All sales promotional material,
customer "goodwill" items, cartons,
containers, wrappers and paper goods,
eating and serving utensils, customer
convenience items (including napkins, baby
bibs, and disposal containers), used in the
sales promotion, sale and distribution of
all products covered by this Operating
Agreement shall, where practicable, contain
one or more Trademarks and indicate that it
is produced and sold under authority of
American and shall be subject to approval
by Licensor or American before being used.
Maintenance and Sanitation 6.5 Licensee's said business shall be
operated and maintained at all times in
compliance with any and all reasonable
health and sanitary standards prescribed by
American or by governmental authority. In
addition to complying with such standards,
if such store shall be subject to any
sanitary or health inspection by any
governmental authorities under which it may
be rated in one or more than one
classification, it shall be maintained and
operated so as to be rated in the highest
available health and sanitary
classification with respect to each
governmental agency inspecting the same.
Inspection and Recommendation 6.6 American, Licensor or its authorized
representative shall have the right from
time to time to enter Licensee's store at
all reasonable times during the business
day for the purpose of making periodic
inspections to ascertain if all the
provisions of this Operating Agreement arc
being observed by Licensee and to inspect
Licensee's said store, lands, equipment,
and to test, sample and inspect his
supplies, ingredients and products, as well
as storage, preparation and formulation
thereof and the conditions of sanitation
and cleanliness in the storage, production,
handling and serving thereof.
Period of 6.7 Licensee's store shall be opened to the
Operation public and operated twelve months per year
and at least twelve hours each day of the
year. Any variance from this provision must
be authorized in writing by Licensor. Acts
of God, war, strikes or riots preventing
Licensee from temporarily complying with
the foregoing shall to that extent suspend
compliance
therewith.
8
Notice of Existence of 6.8 Licensee acknowledges that he is aware
Different Forms of of the fact that present licensees of
License Agreements Licensor and American operate under a
number of different forms of agreement and
that consequently Licensor's and American's
obligations and rights in respect to their
respective licenses may differ materially
in certain instances.
PERSONNEL AND SUPERVISION STANDARDS
7. The following provisions and conditions shall
control with respect to personnel, training and
supervision:
Management System 7.1 Licensee shall adopt and use as his
continuing operational routine the standard
"Dairy Queen" management system as well as
American's standards with respect to
product preparation, merchandising,
employee recruitment and training,
equipment and facility maintenance and
sanitation. From time to time American will
revise these programs to meet changing
conditions of retail operation in the best
interest of "Dairy Queen" retail stores,
and Licensee shall adopt and implement any
such changes.
Training 7.2 Licensee shall, at Licensee's expense,
attend American's store management training
program, at a place to be designated by
American, prior to the opening of
Licensee's store. In the event Licensee
fails to complete such training to the
reasonable satisfaction of American or
Licensor, Licensor may within thirty (30)
days thereafter declare this Agreement null
and void whereupon all deposits including
the franchise fee shall be returned to
Licensee. If during the term hereof
Licensee operates said store with a manager
other than himself, Licensee shall, at
Licensee's expense, cause such person to
attend and successfully complete such
training program.
Staffing 7.3 Licensee shall hire and supervise
efficient, competent, sober and courteous
operators and employees for the operation
of the business and set and pay their
wages, commissions and incentives with no
liability therefor on American or Licensor.
Licensee shall require all his employees to
work in clean uniforms approved by Licensor
but furnished at the cost of Licensee or
his employees as Licensee may determine. No
employee of Licensee shall be deemed to be
an employee of Licensor or American for any
purpose(s)whatsoever.
Internal Training Program 7.4 Licensor shall provide or make
available to Licensee an in-store training
program for all store employees. Licensee
shall train and periodically re-train all
store employees using the training aids
made available by Licensor. From time to
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time, American will revise such training
materials and aids and it or Licensor make
the same available to Licensee for
purchase.
Attendance at Meetings 7.5 Licensee, or manager of Licensee, at
Licensee's expense, shall attend at least
one national, regional or approved local
marketing area meeting each year which
Licensor and/or American originates for and
on behalf of "Dairy Queen" operators to set
forth new methods and programs in store
operation, training, management, sales and
sale promotion programs. Licensor further
strongly recommends that key employees of
Licensee also attend such meetings.
SALES PROMOTION PROGRAMS
Sales Promotion Programs 8.1 Licensor and Licensee, together with
and Payment to American other licensees of American, American shall
of Expenses for cooperate in the sales promotion programs
Administering Same of approved products. To this end, American
has reserved the right to establish and
organize sales promotion programs from time
to time and Licensee agrees to pay to
Licensor for remittance to American a sales
promotion program fee as set forth in
Paragraph 9.1 hereof. Licensee acknowledges
and agrees that American has had in the
past, and shall in the future have, the
discretion to determine expenditures of
funds collected in respect to sales
promotion programs and as to the selection
of the promotional materials and programs
for which said expenditures are made,
provided, however, that American shall make
a good faith effort to expend such funds in
the general best interest of participating
licensees. Licensee acknowledges and agrees
that American may compensate itself and/or
its affiliates for the expense of
administering such sales promotion
programs. Licensor shall advise Licensee
annually of American's expenses in
administering said sales promotion
programs.
Sales Promotion Materials 8.2 Licensee shall only use such sales
promotion program or other advertising
materials as are furnished, approved or
made available by or through American.
Said materials shall be used only in a
manner prescribed by American. American
shall not unreasonably withhold approval of
any reasonable sales promotion materials.
Yellow Pages 8.3 Licensee shall, if requested by
Licensor, list separately, or participate
in a listing, in the Yellow Pages of his
local telephone directory containing such
copy as may reasonably be specified by
Licensor. The cost of such listing shall be
paid by Licensee, or by Licensee and other
participating licensees in the case of a
joint listing. Licensor shall not specify
an unreasonably expensive listing.
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FEES, REPORTING AND FINANCIAL MANAGEMENT
Service, Set-up, 9.1 Licensee shall pay to Licensor as a
Franchise, License and service and set-up fee $15,000.00 of which
Sales Promotion $7,500.00 has been paid upon the
Program Fees execution of this Agreement and a balance
of $7,500.00 is payable in accordance with
the terms of Appendix C attached hereto.
Said service and set-up fee is intended to
compensate Licensor for its expenses
incurred, and services rendered in
establishing and setting up Licensee's
initial operation. In addition to said
service and set-up fee, during the full
term of this Operating Agreement, and in
consideration of the rights granted
hereunder, Licensee shall pay to Licensor
as license fee in respect to the rights
granted herein a sum equal to 4% of gross
retail sales, exclusive of retail sales
taxes, of all products, goods and wares of
every kind and nature sold from, or in
connection with the operation of,
Licensee's "Dairy Queen" retail store,
including, but without limiting the
generality of the foregoing, sales of all
products of any of the Trademarks as well
as sales of other merchandise whether or
not identified by other brand names and
which may be authorized for sale by
American or Licensor from time to time;
provided, notwithstanding the foregoing,
that no such continuing license fee shall
be payable with respect to sales of
Permitted Products. In addition, mittance
to American a sales promotion fee to be
expended in accordance with the provisions
of Paragraph 8.1. The sales promotion fee
shall be a sum equal to not less than 3%
nor more than 5% of Licensee's gross retail
sales net of sales taxes (excluding sales
of Permitted Products). Licensor shall
determine and notify Licensee of the exact
percentage prior to the first day of each
fiscal year of Licensor (except no
notification will be given with respect to
any year for which the percentage is to be
unchanged from the preceding year). Such
percentage shall be the same as that to be
employed during such succeeding year by the
majority of "Dairy Queen" licensees within
the marketing area as determined by
American within which Licensee's store is
located.
Computations and Remittances 9.2 All amounts due and owing hereunder
shall be computed at the end of each
month's operation and remittance for the
same shall be made to Licensor on or before
the twelfth day of the following month
accompanied by the reports provided for in
Paragraph 9.4 hereof. The computation of
said amounts shall be certified and sworn
to by Licensee in the manner specified by
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Licensor and Licensee shall supply to
Licensor such supporting or supplementary
materials as Licensor may reasonably
require to verify the accuracy of such
remittances.
Surcharge 9.3 At Licensor's option, Licensor may
Method of require Licensee to pay to suppliers of
Precollection mix, meat and other products and
ingredients used in the conduct of the
business a surcharge on all units of such
commodities purchased by Licensee. Said
surcharge shall be paid to such supplier by
Licensee at the time of purchase of such
commodities. Said surcharge shall be
established by Licensor at a reasonable
rate so as to approximate the amount of
license fee and sales promotion fee which
will be payable by Licensee. Said surcharge
shall be paid to said supplier or suppliers
for the account of Licensor, the same to be
regarded by the parties as a method of
precollection of said license and sales
promotion fees. The amounts so collected
shall be credited by Licensor against the
license and sales promotion fees due from
Licensee to Licensor at the end of each
month's operations. Licensor shall submit
to Licensee on a monthly or quarterly basis
a reconciliation of said license and sales
promotion fees account setting forth the
credits to Licensee's account by reason of
amounts collected for Licensor by suppliers
by way of the aforesaid surcharge method.
In the event Licensee shall fail to submit
reports in accordance with Paragraph 9.4,
Licensor may make said reconcilia- tion of
amounts due in conformance with its best
judgment with regard to said amounts due
and same shall be conclusive as to the
amounts due Licensor from Licensee unless
within a period of ten (10) days after
mailing of said reconciliation to Licensee
by Licensor, Licensee provides evidence in
a form satisfactory to Licensor of the
correct amounts due. Licensee shall pay
such amounts, if any, determined to be owed
pursuant to Licensor's reconciliation
within ten (10) days after a mailing of
notice to Licensee by Licensor. If Licensor
determines that Licensee has overpaid
license or sales promotion fees on the
surcharge basis, Licensor shall remit to
Licensee an amount equal to the excess fees
collected at the time the monthly or
quarterly reconciliation is provided
Licensee.
Reports and Records 9.4 Licensee shall keep true records from
which all sums payable under this Agreement
and the dates of accrual thereof may be
readily determined. Licensee shall make
written reports to Licensor in such form as
Licensor may from time to time prescribe
within fourteen (14) days after the end of
each month's operation setting forth the
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amount of gross sales of all products from,
or in connection with the operation of,
said store and the business thereof during
said month. In addition to the foregoing,
and in addition to such other information
as Licensor may from time to time require,
said monthly report shall accurately set
forth the total number of gallons of mix,
the total number of pounds of meat, and the
quantity of other basic commodities used
during said month and the sources from
which said mix, meat and other commodities
were purchased together with a complete
statement of Licensee's cost of labor,
utilities, rent and each other cost of
operation. For the purpose of said reports
the date of use of such mix, meat and other
commodities shall be deemed to be the date
of receipt at the store. Licensor, American
or the authorized representative of either
shall have the right at all times during
the business day to enter Licensee's
premises where books and records relative
to said store are kept, and to inspect,
copy and audit such books and records. In
the event that any such inspection or audit
reveals a variance of 3% or more from data
reported to Licensor or American, in
addition to any other rights it may have,
Licensor or American may conduct such
further periodic audits and/or inspections
of Licensee's books and records as it
reasonably deems necessary for up to one
year thereafter and such further audits
and/or inspections shall be at Licensee's
sole expense including without limitation
reasonable professional fees, travel and
room and board expenses directly related
thereto.
Financial Planning and Management 9.5 Licensee agrees to employ sound
financial management practices in
connection with the operation of said
business and to that end Licensee shall
maintain on forms approved or provided by
Licensor or American a monthly profit plan,
a monthly profit and loss statement and a
monthly balance sheet accurately reflecting
the operations and condition of said
business. In addition to the foregoing,
Licensee shall employ such methods of
record keeping, bookkeeping and reporting
as Licensor shall from time to time
reasonably require and copies of all
monthly profit plans, profit and loss
statements, sales summaries and breakdowns
for the preceding month shall be forwarded
to Licensor on or before the fourteenth day
of the following month.
Payment of Debts 9.6 Licensee agrees to pay promptly, when
due, all taxes and assessments that may be
assessed against said premises or the
equipment or supplies used in connection
with Licensee's business, all liens and
encumbrances of every kind and character
13
created or placed upon or against any of
said property and all accounts and other
indebtedness of every kind incurred by
Licensee in the conduct of said business.
In the event Licensee should default in
making any such payment, Licensor shall be
authorized but not required, to pay the
same on Licensee's behalf and Licensee's
covenants promptly to reimburse Licensor on
demand for any such payment. to Licensor by
the same arise this Paragraph vision of
this interest at 12% per Any and all
amounts owing Licensee hereunder, whether
under the provisions of 9.6 or under any
other Agreement, shall bear interannum or
the maximum rate permitted by law,
whichever is less, from and after the date
of accrual thereof.
Timely Payment 9.7 The default by Licensee in the
timely payment of any indebtedness owing to
Licensor and/or American, or to any
affiliates of Licensor and/or American, or
the default by Licensee in the payment of
any indebtedness of Licensee with respect
to which Licensor or American or any of
Licensor's and/or American's affiliates is
a guarantor, co-signer, endorser or
obligor, shall constitute a breach of this
Operating Agreement, rendering the same
subject to termination in accordance with
the provisions of Paragraphs 10.1 and 10.2
hereof.
Insolvency, Etc. 9.8 In the event that Licensee be declared
insolvent or bankrupt, or in the event a
receiver is appointed, this Operation
Agreement shall automatically terminate as
of the date of such declaration or
appointment.
Liability and Insurance 9.9 Licensee hereby waives all claims
against Licensor and/or American for
damages to property or injuries to persons
arising out of the Operation of Licensee's
business, and Licensee shall indemnify and
save Licensor and/or American and/or the
affiliates of either harmless of and from
any damage or injury to property or persons
arising from or in connection with the
operation of said business or the
consumption of the product thereof.
Licensee further agrees to purchase and
maintain in full force and effect during
the term of this Agreement, at Licensee's
sole expense, liability insurance in an
aggregate amount not less than $300,000
insuring Licensee, Licensor and American
from liability for any and all such damage
or injury and Licensee further agrees to
deliver to Licensor a proper certificate
evidencing the existence of such insurance
coverage and Licensee's compliance with the
provisions of this paragraph and which
provides that Licensor and American will be
given thirty (30) days prior written notice
14
of material change, termination or
cancellation of the policy. Said insurance
coverage shall commence as of the date
Licensee commences operating a "Dairy
Queen" retail store or as of the date the
Authorized Location is first identified as
a site on which a "Dairy Queen" retail
store will be operated, whichever shall
first occur.
Assignment and Transfer 9.10 Licensee agrees not to transfer,
assign or alienate his interest herein or
hereunder in whole or in part without the
prior written consent of Licensor, which
consent shall not be withheld unreasonably,
but Licensor may insist that any proposed
assignment be an assignment of all of
Licensee's interest hereunder and that any
proposed assignee, be a person, in
Licensor's reasonable judgment, qualified
to provide active supervision over the
operation of said store in compliance with
Licensee's obligations hereunder and who
has sufficient net worth and sources of
capital which meet Licensor's then current
requirements for a store operation of the
type contemplated by this form of
agreement. In the event Licensee's said
interest should be so transferred or
assigned, Licensee shall pay to Licensor
contemporaneously therewith the sum of One
Thousand Five Hundred Dollars ($1,500), or
an amount equal to one-half of the license
fees paid or payable by Licensee in respect
of operations in the twelve (12) months
ending with the month prior to the month in
which the assignment is approved, whichever
is the greater amount, as a fee for the
preparation of a new Operating Agreement in
assignee's name, for Licensor's assistance
in reset-up of the retail store and for any
and all other expenses incurred and
services rendered by Licensor in effecting
said transfer. In the event of any such
assignment, the assignee, as a condition of
Licensor approving such assignment, must
attend and to the reasonable satisfaction
of Licensor successfully complete, at
assignee's expense, American's training
program at American's training center. In
the event Licensee is a corporation,
partnership or other entity, any transfer
or transfers of stock (or other form of
ownership interest) constituting in the
aggregate a controlling interest in
Licensee shall be subject to the consent,
transfer fee and all other applicable
provisions of this Agreement. Licensor may
withhold its consent to any proposed
transfer until all amounts owed by Licensee
to Licensor, American, the lailiates or
subsidiaries of either and approved "Dairy
Queen" suppliers have been paid in full.
15
Offsets 9.11 Licensee waives any and all existing
and future claims and offsets against any
amounts due hereunder, which amounts shall
be paid when due. Licensor and American
shall be entitled to apply or cause to be
applied against amounts due to either of
them of any of their respective affiliated
companies any amounts which may from time
to time be held by either of them or their
respective affiliates on Licensee's behalf
for be owed to Licensee by Licensor or
American or their respective affiliates.
CONTRACT VIOLATION
Remedies, Arbitration 10. In the event of any dispute between the
parties hereto arising under, out of, in
connection with or in relation to this Agreement,
said dispute shall be submitted by the parties to
binding arbitration in accordance with the Rules
and Procedures and under the auspices of the
American Arbitration Association. The arbitration
shall take place at the capital of the state of
the Authorized Location of Licensee or at such
other place as may be mutually agreeable to the
parties. The decision of the arbitrators shall be
finally, and binding on all parties.
Notwithstanding the foregoing, Licensee recognizes
that his "Dairy Queen" store is one of a large
number of stores similarly situated and selling to
the public similar products, and hence the failure
on the part of a single licensee to comply with
the terms of his Operating Agreement could cause
irreparable damage to Licensor, American and/or to
some or all other "Dairy Queen" licensees.
Therefore, it is mutually agreed that in the event
of a breach or threatened breach of any of the
terms of this Operating Agreement by Licensee,
Licensor shall forthwith be entitled to an
injunction restraining such breach and/or to a
decree of specific performance without having to
show or prove any actual damage, together with
recovery of reasonable attorney's fees and other
costs incurred in obtaining said equitable relief,
until such time as a final and binding
determination is made by the arbitrators. The
foregoing equitable remedy shall be in addition
to, and not in lieu of, all other remedies and
rights which Licensor might otherwise have by
virtue of any breach of this Agreement by
Licensee.
Breach of Contract 10.1 Licensee shall be in default hereunder
if Licensor determines that Licensee has
made any false report to Licensor, or has
failed to pay when due any amounts owed to
Licensor, or has in Licensor's judgment in
any other way breached any of the terms of
this Agreement, including but not limited
to, failing to submit required reports,
failing to meet any requirements or
specifications established with respect to
product quality, physical property,
conditions or equipment or materials used,
products manufactured, menu or use of
approved products, packages or promotional
16
materials. Failure of Licensee to pay to
Licensor any past due amount owed within
fourteen (14) days of Licensor's
written notice of default therein shall be
construed as Licensee's voluntary
abandonment of this Agreement and the
franchised business hereunder operated.
10.2 Except as hereinafter provided,
failure of Licensee to cure a default by
Licensee hereunder within fourteen (14)
days from the date of a written notice of
default mailed or delivered to Licensee,
which notice states such default, shall
give Licensor good cause to terminate this
Agreement. Termination shall be
accomplished by mailing or delivering to
Licensee written notice of termination,
which notice shall state the grounds
therefore and shall be effective (i)
immediately in any case of voluntary
abandonment of this Agreement by Licensee
of conviction of Licensee of an offense
directly related to the business conducted
hereunder; or (ii) sixty (60) days after
the date of such notice of termination in
all other cases; provided, however, that
notwithstanding any other provision of this
Paragraph 10, this Agreement may be
terminated immediately upon failure of
Licensee to cure within twenty-four (24)
hours of notice thereof any default under
this Agreement which materially impairs the
good will associated with any of the
Trademarks. In addition to the foregoing,
this Agreement may be terminated by
Licensor upon any ground or by any period
of notice as may be permitted from time to
time by applicable law or regulation. Any
notice of default of termination shall be
personally delivered or be mailed by
certified or registered mail, return
receipt requested, postage prepaid.
Land, Building Lease, or 10.3 Subject to the provisions of Paragraph
Failure to Reopen 5.4 hereof, any failure to rebuild or
repair and reopen for operation Licensee's
destroyed or damaged store or store whose
lease has been terminated or not renewed
within one year of the date of occurrence
of such termination, destruction or damage,
shall automatically terminate this
Operating Agreement.
TERMINATION RIGHTS
11. Upon the termination of this Operating
Agreement:
Reversion of Trademark Rights 11.1 All rights to the use of the
Trademarks and the right and license to
conduct said business at the Authorized
Location shall revert to Licensor and
Licensee shall immediately cease all use of
17
the Trademarks and pay all monies due at
said date. Licensee shall promptly and at
his own expense remove or obliterate all
store signage and displays furnished to
Licensee by Licensor and shall remove or
obliterate and thereafter discontinue all
use of any signage or displays at the
Authorized Location or in his possession
bearing any of the Trademarks or names
or material confusingly similar to any of
the Trademarks.
11.2 All right, title and interest of
Licensee in and to this Operating Agreement
shall become the property of Licensor.
Purchase 11.3 Licensor shall have the first option
to purchase any or all equipment, fixtures,
furnishings or supplies, of whatever kind,
owned by Licensee and used by him in the
production of the "Dairy Queen" product, or
any of the other approved products under
any of the Trademarks hereunder at a price
determined by a qualified appraiser
selected with the consent of both parties.
if the parties cannot agree upon the
selection of such an appraiser he shall be
appointed by a Judge of the United States
District Court of Licensee's Authorized
Location upon petition of either party.
Said option to purchase may be exercised by
Licensor at any time within thirty (30)
days from the date of such termination or
within thirty (30) days after the date of
the receipt by Licensor of the appraiser's
determination, whichever shall be the later
date, and shall not be impaired or
terminated by the attempted sale or other
transfer of any such equipment or supplies
by Licensee to a third party- Upon the
exercise of such option and tender of
payment for any such equipment or supplies,
Licensee agrees to sell and deliver the
same to Licensor free and clear of all
encumbrances, and to execute and deliver to
Licensor a xxxx of sale therefore.
Non-Compete 11.4 Licensee shall not directly or
indirectly engage in any competitive
business within 2,000 yards of the
Authorized Location for a period of one
year after said date of termination of this
Agreement except through a Xxxxxx'x or an
affiliate in operation at the time of
signing.
PERMITTED PRODUCTS
12. It is mutually understood and agreed that the
store facilities and operations of Licensee
hereunder may include in addition to "Dairy Queen"
or "Dairy Queen/Xxxxxxx" food and beverage service
the sale of various other products not identified
or designated by Company's Trademarks, including,
but not limited to, motor vehicle fuel, oil and
related automotive products, souvenir-type
18
products, tobacco products, sundries, and packaged
food products not intended for consumption on the
premises where sold and which are not competitive
with food and beverage products identified or
designated by the Trademarks (all of said products
collectively referred to in this Agreement as
"Permitted Products"). In order to prevent public
confusion, preserve and protect the Trademarks and
establish the principles which shall govern
Licensee's sale of Permitted Products and usage of
the Trademarks, the parties agree that
notwithstanding any provision of this or any other
Agreement to the contrary, the following
provisions shall control with regard to Permitted
Products:
12.1 Licensee may sell Permitted Products
from its licensed store. Licensee may use
in the business operated hereunder in the
manner and to the extent permitted by this
Agreement marks and names identifying
Permitted Products.
12.2 The Trademarks shall not under any
circumstances be used to identify or
designate Permitted Products or any other
product(s) for which use of the Trademarks
has not been specifically authorized by
American. Permitted Products shall be sold
only from physical facilities (such as a
different area, room or building) which are
clearly distinct and apart from the "Dairy
Queen" retail store.
12.3 No product shall be sold from any part
of any sublicensed store's site which
detracts or threatens to detract from the
reputation or goodwill of the "Dairy Queen"
trade name or any of the Trademarks.
Licensor shall have the right to direct
Licensee to remove from the store and
discontinue the sale of any product item or
items which in American's good faith
judgment violates the quality standard of
the preceding sentence. No product shall
under any circumstances be sold from the
"Dairy Queen" portion of the licensed store
which has not received the specific Prior
approval of Licensor.
12.4 A building design and related facility
standards, based upon American's existing
design and specifications for "Dairy
Queen"/ "Xxxxxxx" stores, shall be
developed by mutual consultation and
agreement, which shall take into account
the particular requirements for a "Dairy
Queen" or "Dairy Queen"/"Xxxxxxx" facility
to be situated along an Interstate highway.
Licensee shall comply strictly with the
design and facility standards developed
hereunder.
12.5 Notwithstanding Paragraph 8.2 hereof,
Licensee may employ off-site advertising
media such as billboards and radio
19
commercials, provided such advertising is
approved by Licensor and American, and
provided further that no such advertising
shall be used which creates or fosters any
confusion as to the identity, source or
quality of goods identified or designated
by the Trademarks. Licensor acknowledges
that it may be necessary to share extant
billboard space with an existing Stuckey's,
Wayfara or other store, and Licensor
requires that advertising for the "Dairy
Queen" store be as visually and physically
separate from the other advertising as is
feasible.
12.6 Because the "Dairy Queen" store
hereunder may also sell Permitted Products,
the parties agree that notwithstanding any
other provision of this Agreement or any
other contract between the parties,
Licensor deems it to be necessary and
desirable, to permit the following:
a. To allow Licensee to sell
Permitted Products in conjunction
with a "Dairy Queen" or "Dairy
Queen"/"Xxxxxxx" store;
b. To allow the principal
shareholders of Licensee and
members of their immediate families
to own any amount or class of stock
or debt in any Xxxxxx'x business;
c. To the extent and in the manner
permitted hereunder, to allow
Licensee to sell and to advertise
Permitted Products in conjunction
with products identified or
designated by the Trademarks;
d. Subject to Paragraph 6-1 hereof,
to relieve Licensee from the
obligation with respect to
Permitted Products, to purchase and
use equipment, supplies,
ingredients and services approved
by American;
e. To allow Licensee to construct
and equip its retail store in
accordance with building design and
related facility standards
developed under Paragraph 12.4
hereof;
f. To relieve Licensee: (i) from
the obligation of using, in
preparing or selecting Permitted
Products, ingredients, formulas and
supplies specified by American;
(ii) from the obligation to
observe, with respect to Permitted
Products, the requirements relative
to portions, sizes, appearance and
packaging set forth in American's
20
"Store Management Operations
Manual" and "product preparation
charts"; and (iii) with respect to
Permitted Products, to allow the
use of other supplies and customer
service materials without regard to
standards of uniformity and quality
as are now or hereafter set by
American;
g. To allow Licensee its principal
shareholders or members of their
immediate families to engage in a
competitive business within 2,000
yards of the Authorized Location of
the store licensed hereunder, as
defined in the Operating Agreement,
but only through a Xxxxxx'x
business; and
h. To relieve stockholders of this
corporate Licensee from the
obligation of personally
guarantying the obligations of
Licensee under the Operating
Agreement. Sale or transfer of this
License to another corporation
shall include the then customary
guarantees required of
corporations.
GENERAL PROVISIONS
13.1 In the event any one or more clauses
of this Agreement shall be held to be void
or unenforceable for any reason by any
court of competent jurisdiction such clause
or clauses shall be deemed to be separable
and of no force or effect in such
jurisdiction and the remainder of this
Agreement shall be deemed to be valid and
in full force and effect, and the terms of
this Operating Agreement shall be equitably
adjusted so as to compensate the
appropriate party for any consideration
lost because of the elimination of such
clause or clauses.
13.2 Any waiver by Licensor of any breach
or default by Licensee shall not be deemed
to be a waiver of any other or subsequent
breach or default nor an estoppel to
enforce its rights in the event of any
other or subsequent breach.
13.3 This Agreement, and the application
form executed by Licensee requesting
Licensor to enter into this Agreement,
constitute the sole agreement between the
parties with respect to the entire subject
matter of this Operating Agreement and
embodies all prior agreements and
negotiations with respect to the "Dairy
Queen" business. There are no
representations of any kind except as
21
contained herein and in the aforesaid
application.
13.4 Except as otherwise provided in this
Agreement, any notice, demand or
communication provided for herein shall be
in writing, signed by the party giving the
same, deposited in the registered or
certified United States mail, return
receipt requested, postage prepaid, and;
a. If intended for American shall
be addressed to American Dairy
Queen Corporation at 0000 Xxxxx
Xxxxxx Xxxxx, Xxxxxxxxxxx,
Xxxxxxxxx, 00000;
b. If intended for Licensor shall
be addressed to Licensor at the
address hereinabove set forth;
c. If intended for Licensee, shall
be addressed to Licensee at the
Authorized Location hereinabove
designated;
or to such other address as may have been
given to the other party by notification as
herein provided.
Notices for purposes of this Agreement
shall be deemed to have been received on
the earlier of the date of delivery or
first attempted delivery as indicated on
the return receipt (or, in the abscence of
a noted delivery or noted attempted
delivery date, 15 days from noted day of
mailing).
13.5 If Licensee consists of two or more
individuals, such individuals shall be
jointly and severally liable and references
to Licensee in this Agreement shall include
all such individuals. Reference to Licensee
as male shall also include a female
licensee, partnership or corporation or any
other business entity. Headings and
captions contained herein are for
convenience of reference only and shall not
be taken into account in construing or
interpreting this Agreement.
13.6 Subject to the terms of Paragraph 9.10
hereof, this Agreement shall be binding
upon and inure to the benefit of the
administrators, executors, heirs,
successors and assigns of the parties.
13.7 This Agreement shall be effective only
when approved by an officer of American and
shall be governed by and interpreted in
accordance with the law of the state in
which the Authorized Location is Located.
13.8 This Agreement shall be deemed to be
amended from time to time as may be
necessary to bring any of its provisions
into conformity with valid applicable laws
or regulations.
22
IN WITNESS WHEREOF, the parties hereto have executed the foregoing "Dairy Queen"
Operating Agreement the date first above written.
LICENSEE
XXXXXX'X, INC. d/b/a DQ of FLYING C, NM
--------------------------------------------
ATTEST:
By /s/ XXXXXXX X. XXXXXX
---------------------------------------
Xxxxxxx Xxxxxx Subject to reservations
detailed in attached Appendex "D"
---------------------------------------
/s/ XXX X. XXXXX
--------------------------------
Asst. Secretary LICENSOR
INTERSTATE DAIRY QUEEN CORPORATION
--------------------------------------------
By /s/ SIGNATURE ILLEGIBLE
-----------------------------------------
Its President
-----------------------------------------
ATTEST:
/s/ XXXXXXX X. XXXXXXXX
--------------------------------
Sec Treas
APPROVED:
AMERICAN DAIRY QUEEN CORPORATION
--------------------------------------------
By: /s/ XXXXXX X. XXXXXX
----------------------------------------
Its V.P.
----------------------------------------
23
APPENDIX "A"
Licensee has the right and privilege to use the following trademarks and
service marks in accordance with the attached Operating Agreement.
This Appendix "A" may be amended by Company from time to time in order to
make available additional trademarks or service marks or to delete those which
become unavailable. Licensee agrees to use only those trademarks and service
marks which are then currently authorized.
DAIRY QUEEN XXXXXX XXX
XXXXXXX DILLY
MR. XXXXX DQ
MR. XXXXX KISS THE ELLIPSE DESIGN
ROOF DESIGN BROWNIE DELIGHT
LET'S ALL GO TO THE THE CONE WITH THE CURL ON TOP
DAIRY QUEEN
FIESTA DESIGN: THE CONE WITH THE
CURL ON TOP
Each of the above trademarks and, or service marks must be used only in the
manner specified by the Company and in connection with the goods and/or services
specified by the Company. No deviations will be permitted.
00
XXXXXXXX "X"
"Dairy Queen/Xxxxxxx"
Below is listed the approved menu of Company for "Dairy Queen/Xxxxxxx" stores
which is in current use and effect. Licensee is authorized to use this menu in
accordance with the attached Operating Agreement.
This Appendix "B" may be amended by Company from time to time in order to make
available additional products or to delete those ,,,Iiich become unavailable.
Licensee agrees to use only those products which are then currently authorized
for use in "Dairy- Queen Xxxxxxx" stores.
NATIONAL REQUIRED ITEMS NATIONAL REQUIRED ITEMS NATIONAL OPTIONAL ITEMS
----------------------- ----------------------- -----------------------
CONES SANDWICHES HOT FUDGE BROWNIE DELIGHT SUNDAE
DIPPED CONES SUPER "XXXXXXX" SUNDAE SUPREME SUNDAE
SUNDAES THE "HALF POUNDER" STRAWBERRY SHORTCAKE SODAS
"FIESTA" SUNDAE BIG "XXXXXXX" FROZEN NOVELTIES
BANANA SPLIT BIG "XXXXXXX" WITH TOMATO BIG XXXXXX XXX
XXXXXXX SHAKES AND MALTS HOMEPAK BRAIZER WITH CHEESE SANDWICHES
FLOATS HAMBURGER OR BRAIZER SUPER DOG
FREEZES CHEESEBURGER OR XXXXXXX WITH CHEESE SUPER DOG WITH CHILI
"MR. XXXXX" FLOAT HOT DOG SUPER DOG WITH CHEESE
"MR. XXXXX" FREEZES HOT DOG WITH CHILI BARBECUE
FROZEN NOVELTIES HOT DOG WITH CHEESE STEAK SANDWICH
"DILLY" BAR FISH SANDWICH CHILI BOWL
"BAR DQ" FISH SANDWICH WITH CHEESE XXXXXXX CRISPY FRIED CHICKEN
"DQ SANDWICH" FRENCEH FRIES
"DILLYWICH" ONION RINGS
"MR. XXXXX KISS"
"STAR KISS"
DRINKS
THREE APPROVED CARBONATED DRINKS
"MR. XXXXX"
-1-
Each of the above products is to be used only in the rather specified by company
and in connection with the goods and/or services specified by the Company as set
forth in the "Dairy Queen" Store Management Operations @'Manual and the
"Xxxxxxx" Operations Manual of the Company. as changed or attended from time to
time by Company. No deviations will he permitted.
3/77
-2-
Appendix "C"
Licensee shall pay to Licensor as a service and set-up fee $15,000 of which
$7,500 has been paid upon the execution of this Agreement and a balance of
$7,500 Is payable as follows: $1,500 principal payable each June lst (beginning
June 1, 1983 and ending June 1, 1987) and 12% interest per annum on the unpaid
principal payable each June lst.
-1-
APPENDIX "D"
RESERVATIONS TO CERTAIN ITEMS IN
"DAIRY QUEEN" OPERATING AGREEMENT
1 Paragraph 4.6. licensor advises that the purpose of this paragraph is full
disclosure.
2. Paragraph 5.1. Licensee and American have agreed on the plans for remodeling
the existing building to conform to requirements of Paragraph 5.1.
3. Paragraph 6.1 An application to Xx. Xxxxxxxxxx of "Interstate Dairy Queen"
for some optional items to be added to our "DQ" menu has been made. Licensee
will not serve such items, unless and until approved as optional items by
American. Also, in Licensee's store building adjoining the "Dairy
Queen"/"Xxxxxxx" Licensee does sell alcoholic beverages, intended for
consumption off premises. licensee wishes to disclose this so it is no surprise
to Licensor or American later. No alcoholic beverages are sold in the
"DQ"/"Xxxxxxx" building. Licensee acknowledges that the nature of dispensing the
alcoholic beverages is in package sales and Licensee shall not dispense alcohol
intended for consumption on the premises. Licensee operates a full Line novelty
and curio store in the building adjoining Licensee "Dairy Queen"/"Xxxxxxx"
operation. Licensee maintains separate accounting for sales from adjoining store
and "Dairy Queen"/"Xxxxxxx" operations. Sales in Licenisee's merchandise,
novelty, and curio store shall not be subject to continuing license fees or
sales promotion fees.
4. Paragraph 6.1. Licensee may sell the Traditional or Biscuit Breakfast as
provided for by American in the breakfast test program until the test is
discontinued at which time Licensee may apply for a menu deviation which may or
may not be granted by Licensor.
5. Paragraph 9.1. Licensor is obligated to pay monthly sales promotion fees as
provided for in paragraph 9.1 Any deviation or variance from the required
monthly payment shall be of a temporary nature and shall not in any way
prejudice Licensee's obligation to strictly follow Paragraph 9.1 and make
monthly sales promotion fee payments if requested at a later date by Licensor.
In recognition that Interstate Licensees in the past have expended more than 3%
of sales on advertising (primarily in outdoor, the most effective medium for
communicating to highway travelers), American and Interstate have temporarily
without prejudice allowed Licensees to credit monthly advertising expenditures
to sales promotion fee payments each month. If a Licensor does not expend the
required sales promotion fee percentage monthly, the balance must be remitted.
American reserves the right to discontinue this special advertising arrangement
at anytime.
Development of national advertising program and other events in American's and
Interstate's exclusive discretion and judgment may require, and Licensee hereby
agrees to make, full and regular monthly payments of the sales promotion fee to
Interstate.
-1-
Licensee is obligated to pay and participate annually in the Annual Marketing
Program (AMP). In cases where licensee pays sales promotion fee monthly to
Interstate, the AMP fee will be paid from amounts remitted to Interstate. In
cases where Licensee does not pay sales promotion fee monthly to Interstate,
Licensee shall remit the annual fee to Interstate.
6. Paragraph 9.4. Licensee has requested that for reasonable and orderly
availability of data that if 1-icensor or American wishes to audit or took at
T-Licensee books, that Licensor give Licensee at Least 10 days notice prior to
date so data may be readily available to Licensor. T-icensor and American, in
accordance with generally accepted auditing standards, decline to give such
notice.
7. Paragraph 9.5. Licensee already owns an in-house computer that generates a
profit and loss statement for a profit center such as Licensee's "Dairy Queen".
Licensee hereby requests that Licensor accept Licensee's profit and loss report;
as already programmed, which uses profit center identification and consolidated
balance sheet. Licensor has requested and shall be furnished with a "dummy"
statement for consideration.
8. Paragraph 10.1. 10.2, and 13.4. Licensee requires and licensor agrees that
any notices under any contract or agreement shall be mailed certified mail,
return receipt. and that for purposes of this Agreement notice shall be deemed
to have been received on the earlier of the date of delivery or first attempted
delivery as indicated on the return receipt (or in the absence of a noted
delivery date, or noted attempted delivery date, 15 days from noted date of
mailing).
9. Paragraph 12.3. Licensee agrees to not sell Liquor or alcoholic beverages
directly in the "Dairy Queen"/"Xxxxxxx" building of the Xxxxxx'x Flying "C"
Ranch. However, in the Flying "C" Ranch building of Licensee operation, liquor
and alcoholic beverages will continue to be sold, for consumption off the
premises. See Appendix D, Paragraph 3.
-2-
"DAIRY QUEEN"
SUBFRANCHISE DISCLOSURE STATEMENT
ACKNOWLEDGMENT OF RECEIPT
The undersigned hereby acknowledges receipt of a completed subfranchise
disclosure statement concerning the above subfranchise dated December 1, 1981.
/s/ X.X. XXXXXX
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12/15/81
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