EXHIBIT 10.19
ELEPHANT & CASTLE INTERNATIONAL, INC.
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (this "Agreement") is made, entered into and
effective this _______ day of ____________, 19_, by and between Elephant &
Castle International, Inc., a Texas corporation, with its principal office at
0000 Xxxxxxx Xxxxx, Xxxx Xxxxxxx, Xxxxxxxxx 00000 (hereinafter referred to as
"Elephant & Castle"), and _________________________________,
a(n)_______________________________________ (hereinafter referred to as the
"Franchisee");
RECITALS
ELEPHANT & CASTLE-Registered Trademark- RESTAURANT SYSTEM. Elephant & Castle
has developed over time at significant cost and investment a distinctive
restaurant system for operating and franchising restaurants under the name
"Elephant & Castle-Registered Trademark-" which incorporate an Anglo/British
style pub restaurant and Tudor/Victorian decor, and which serve a wide
variety of high-quality food and beverage items featuring English-style
dishes, including fish and chips, shepherds pie, "bangers and mash," and Old
Country soups and desserts (the "Restaurant System"). The Restaurant System
contains distinctive concepts including, without limitation, special
seasonings, recipes and menu items; unique cooking styles and methods; food
line management systems; distinctive building and interior design, decor and
furnishings; specific standards, specifications and procedures for
operations; quality, consistency and uniformity requirements for the foods,
beverages, products and services offered to the public; methods, procedures
and requirements for operations, quality and inventory control, and training
and assistance; and advertising and promotional programs.
ELEPHANT & CASTLE MARKS. Elephant & Castle has widely and extensively
publicized the name "Elephant & Castle-Registered Trademark-" to the public
as an organization of restaurant businesses operating under the Restaurant
System. Elephant & Castle has the right and authority to license the use of
the name "Elephant & Castle-Registered Trademark-," the Elephant & Castle
logo, and other trademarks, trade names, service marks, logos, commercial
symbols, phrases, slogans and tag lines which are now owned or which will be
developed by Elephant & Castle (hereinafter referred to as the "Marks").
Elephant & Castle will continue to develop, use, and control the use of the
Marks in order to identify for the public the source of foods, products and
services marketed under the Restaurant System, and to represent to the public
the high standards of quality, appearance, cleanliness and service of the
Restaurant System.
OPERATION OF ELEPHANT & CASTLE-Registered Trademark- RESTAURANT. The
Franchisee desires to develop, own and operate an Elephant &
Castle-Registered Trademark- restaurant (hereinafter referred to as the
"Elephant & Castle-Registered Trademark- Restaurant" or the "Restaurant") at
the location set forth in Article 2 in compliance with the Restaurant System
and with all of the quality, consistency and uniformity standards and
specifications as established and promulgated from time to time by Elephant &
Castle. The Franchisee understands and acknowledges the importance of the
high standards of quality, appearance, cleanliness and service established by
Elephant & Castle, and the necessity of operating the Franchisee's Restaurant
in strict conformity with the standards and specifications established by
Elephant & Castle.
RIGHT TO USE MARKS AND RESTAURANT SYSTEM. Elephant & Castle is willing to
provide the Franchisee with the recipes, cooking and food preparation
techniques, food line management systems, menu content and design, decor and
color schemes, intellectual property, and other operational, marketing,
advertising, promotional and business information, experience and "know how"
related to the
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FRANCHISE AGREEMENT F-73 426304 9
Restaurant System. The Franchisee acknowledges that it would take substantial
capital and human resources to develop a restaurant business similar to the
Elephant & Castle-Registered Trademark- Restaurant and, consequently, the
Franchisee desires to acquire the right to use the Marks and the Restaurant
System and to own and operate an Elephant & Castle-Registered Trademark-
Restaurant pursuant to the terms and conditions set forth in this Agreement.
The Franchisee acknowledges that Elephant & Castle would not grant the
Elephant & Castle-Registered Trademark- Restaurant Franchise to the
Franchisee or provide the Franchisee with the business information and "know
how" about the Restaurant System unless the Franchisee agreed to comply with
all of the terms and conditions of this Agreement and agreed to pay the
Initial Fee, the Continuing Fees and all other fees specified in this
Agreement.
REVIEW OF AGREEMENT. The Franchisee has had a full and adequate opportunity to
read and review this Agreement and to be thoroughly advised of the terms and
conditions of this Agreement by an attorney or other personal representative,
and has had sufficient time to evaluate and investigate the Restaurant System,
the financial requirements and the risks associated with the Restaurant System.
Pursuant to the above Recitals and in consideration of the mutual promises and
covenants set forth in this Agreement, Elephant & Castle and the Franchisee
agree and contract as follows:
DEFINITIONS
For purposes of this Agreement, the following words will have the following
definitions:
DESIGNATED MARKET AREA.
"Designated Market Area" will mean each television market exclusive of another
based upon a preponderance of television viewing hours as defined by the X.X.
Xxxxxxx ratings service or such other ratings service as may be designated by
Elephant & Castle.
DOLLARS.
"Dollars" will mean United States of America dollars.
FRANCHISE.
"Franchise" will mean the right granted by Elephant & Castle to the
Franchisee authorizing the Franchisee to operate an Elephant &
Castle-Registered Trademark- Restaurant at the Franchised Location in
conformity with the Restaurant System using the name "Elephant &
Castle-Registered Trademark-" and the other Marks.
GENERAL MANAGER.
"General Manager" will mean the individual responsible for the overall
management and operation of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant including, but not limited to, administration, basic
operations, marketing, customer and community relations, record keeping,
employee staffing and training, inventory control, hiring and firing, food
preparation and maintenance of the Franchised Location.
GROSS SALES.
"Gross Sales" will mean the total dollar sales from all customers of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant, and will
include all cash and credit sales made by the Franchisee of every kind and
nature made at, from, by or in connection with the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant business including, but not limited
to, all dollars and income received from the sale of: (a) foods, food
products and food items; (b) alcoholic and non-alcoholic beverages and
drinks; (c) admission or cover charges; (d) telephones, vending machines,
pool tables, dart board machines, video games and all other amusement games;
(e) slot machines and gaming machines; (f) net fees received from automated
teller machines; (g) lotteries, lottery tickets and pull tabs; (h) hats,
shirts, T-shirts,
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sweatshirts and other clothing; (i) cigars, cigarettes, tobacco products,
candies and gum; (j) catering; (k) room service; (l) banquets; (m) carry-out
items; (n) any and all other foods, products, products and services; (o) all
off-premises sales of foods, food products and all other products and
services offered in connection with the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant; and (p) all sales, use or gross
receipts tax rebates. "Gross Sales" will not include any sales, use or gross
receipts tax imposed by any federal, state, municipal or governmental
authority directly upon sales, if the amount of the tax is added to the
selling price and is charged to the customer, a specific record is made at
the time of each sale of the amount of such tax, and the amount of such tax
is paid to the appropriate taxing authority by the Franchisee; the amount of
all discounts and coupons issued to the public by the Franchisee and which
are taken or redeemed at the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant provided that a specific record is made each time a
customer takes a discount or redeems a coupon of the amount of the reduction
in the menu price as a result of such discount taken or coupon redeemed; and,
the amount of all employee meal discounts (E.G., manager meals) taken by
employees of the Franchisee at the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant provided that a specific record is made each time an
employee takes an employee meal discount of the amount of the reduction in
menu price as a result of such discount.
MARKS.
"Marks" will include the name "Elephant & Castle-Registered Trademark-", the
Elephant & Castle logo, "Pub Grub-TM-" and such other trademarks, trade
names, service marks, logos, commercial symbols, phrases, slogans, and tag
lines as Elephant & Castle has or may develop for use in connection with
Elephant & Castle-Registered Trademark- Restaurants.
OWNERSHIP INTEREST.
"Ownership Interest" will mean the share(s) of capital stock if the Franchisee
is a corporation, a membership interest if the Franchisee is a limited liability
company, a partnership interest if the Franchisee is a partnership, limited or
general partnership interests if the Franchisee is a limited partnership and
will include all other types and means of ownership of the Franchisee.
OWNER.
"Owner" will mean any person or entity that owns shares of capital stock in the
Franchisee if the Franchisee is a corporation, a membership interest in the
Franchisee if the Franchisee is a limited liability company, a partnership
interest in the Franchisee if the Franchisee is a partnership, a limited or
general partnership interest if the Franchisee is a limited partnership and will
include all other persons or entities owning any other type or means of
Ownership Interest.
RESTAURANT SYSTEM.
"Restaurant System" will mean the distinctive foods, beverages, food products,
and other products and services which are associated with the trademarks, trade
names, service marks, copyrights, distinctive interior and exterior building
designs, decor, furnishings, menus, uniforms, slogans, signs, logos, commercial
symbols and color combinations of Elephant & Castle. "Restaurant System" will
include all of the quality, consistency and uniformity requirements; the
standards, specifications and procedures for product and services, operations,
cleanliness, sanitation, control, training, advertising and promotion, service,
appearance; and, all instructions, procedures, methods and specifications
promulgated by Elephant & Castle.
WEEK.
"Week" or "weekly" will mean a period of seven (7) consecutive days from Monday
through Sunday.
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GRANT OF FRANCHISE
FRANCHISED LOCATION.
Elephant & Castle hereby grants the Franchisee the personal right to operate
one Elephant & Castle-Registered Trademark- Restaurant in conformity with the
Restaurant System using the name "Elephant & Castle-Registered Trademark-"
and other specified Marks at the following single location__________________
____________________________________________________________________________,
which is referred to as the "Franchised Location."
EXCLUSIVE AREA.
Except as provided to the contrary in this Article, the Franchisee will
receive an "Exclusive Area" consisting of the area within a three (3) mile
radius of the Franchised Location; provided, however, that if the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant is located in
any of the top forty (40) Xxxxxxxxxxxx Xxxxxxxxxxx Xxxxx xx xxx Xxxxxx Xxxxxx
as determined by the United States Department of Commerce, then the
Franchisee will receive an Exclusive Area consisting of the area within a
one-half (1/2) mile radius of the Franchised Location. The Franchisee's
Exclusive Area is exclusive to the extent that Elephant & Castle will not
franchise, license, develop, own or operate ("develop") an Elephant &
Castle-Registered Trademark- Restaurant in the Exclusive Area.
Notwithstanding the foregoing, Elephant & Castle will have the absolute right
to:
(a) Develop other restaurant business concepts under other brand
names even if the locations for the concepts are within the
Exclusive Area;
(b) Develop Elephant & Castle-Registered Trademark- Restaurants
in the Exclusive Area if they are located at or within an
airport terminal, a stadium or arena or other venue for
semi-professional or professional sports, or a college or
university campus;
(c) Market, distribute and sell, on a wholesale or retail basis,
clothing, goods, foods, products or any other items sold under
any of the Marks, by direct sale, mail order, infomercials,
telemarketing or by any other marketing or distribution
method, even if such sales take place in, or are to
distributors, retailers, or consumers who are located in the
Exclusive Area; and,
(d) Advertise, promote and participate in special events and
promotional activities which take place in the Exclusive Area
including, without limitation, parades, holiday celebrations,
cooking, recipe or restaurant competitions, sporting events,
and fund-raising and charitable events, and sell any product
or service, including any product or service sold under any of
the Marks, in connection with such participation.
UNDETERMINED FRANCHISED LOCATION.
If the Franchised Location has not yet been determined as of the date of this
Agreement, then the geographic area in which the Franchisee's Restaurant is
to be located will be described or otherwise defined in an exhibit signed by
the parties and attached to this Agreement. When the address of the
Franchised Location is determined, it will be inserted into this Agreement
and initialed by the parties.
LEASE OR PURCHASE OF FRANCHISED LOCATION.
The Franchisee will not sign any lease, purchase agreement or obtain any
related rights to possession, occupancy or ownership of the Franchised
Location prior to the date set forth on Page F-1 of this Agreement. If the
Franchisee leases the Franchised Location, then the Franchisee will use its
best efforts to negotiate a lease term that coincides with the term of this
Agreement.
RELOCATION.
The Franchisee may, with the prior written approval of Elephant & Castle,
relocate the Franchised Location if (a) the proposed new location does not
compete with any Elephant & Castle-Registered Trademark- Restaurant
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FRANCHISE AGREEMENT F-76 426304 9
operated by Elephant & Castle or any other franchisee, (b) the proposed new
location is within the Franchisee's Exclusive Area, and (c) the proposed new
location does not infringe upon and is not located within the exclusive area
of another Elephant & Castle franchisee, area franchisee, master franchisee
or subfranchisee. The new location of the Restaurant, including the real
estate and the building, must comply with all applicable provisions of this
Agreement and with the then-current image, decor and specifications of
Elephant & Castle. Within ten (10) days after receipt by the Franchisee of
Elephant & Castle's written approval of the relocation of the Franchised
Location, the Franchisee will pay to Elephant & Castle a relocation fee of
five thousand dollars ($5,000).
CONDITIONS.
The Franchisee hereby undertakes the obligation to operate the Elephant &
Castle-Registered Trademark- Restaurant using the Restaurant System at the
Franchised Location in strict compliance with the terms and conditions of
this Agreement for the entire term of this Agreement. The rights and
privileges granted to the Franchisee by Elephant & Castle under this
Agreement are applicable only to the single location designated as the
Franchised Location, are personal in nature, and may not be used elsewhere or
at any other location by the Franchisee.
PERSONAL LICENSE.
The Franchisee will not have the right to franchise, subfranchise, license or
sublicense its rights under this Agreement. The Franchisee will not have the
right to pledge, assign or transfer this Agreement or its rights under this
Agreement, except as specifically provided for in this Agreement.
TERM OF AGREEMENT
TERM.
The term of this Agreement will be for twenty (20) years, commencing on the date
set forth on Page F-1 of this Agreement. This Agreement will not be enforceable
until it has been signed by both the Franchisee and Elephant & Castle.
TERM OF LEASE.
If the term of the lease for the Franchised Location (excluding any renewal
terms) is for a term that is longer than the term of this Agreement, then the
term of this Agreement will be automatically extended to coincide with the
initial term of the Franchisee's lease for the Franchised Location; provided,
however, that if the Franchisee, or any of the Franchisee's Owners, owns, either
directly or indirectly, the Franchised Location, including the business
premises, the real estate or the building, then the term of this Agreement will
be for twenty (20) years.
REACQUISITION OPTION.
At the end of the term of this Agreement, the Franchisee will have the right
and option to reacquire the Franchise for the Franchised Location for one
additional ten (10) year term, provided that the Franchisee has complied with
all material terms and conditions of this Agreement and has agreed to and has
complied in all respects with the following conditions: (a) the Franchisee
has given Elephant & Castle written notice at least one (1) year prior to the
end of the term of this Agreement of its intention to reacquire the Franchise
for the Franchised Location; (b) all monetary obligations owed by the
Franchisee to Elephant & Castle have been paid or satisfied prior to the end
of the term of this Agreement, and have been timely met throughout the term
of this Agreement; (c) the Franchisee has agreed, in writing, to remodel,
modernize and redecorate the Franchised Location, and to replace and
modernize the signs, furniture, fixtures, supplies and equipment used in the
Franchisee's Restaurant so that the Franchisee's Restaurant will reflect the
image portrayed by the then-current image, decor and specifications of
Elephant & Castle (the "Modernization") and has agreed to make such capital
expenditures as are necessary to complete the required Modernization; (d) as
of the date the
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FRANCHISE AGREEMENT F-77 426304 9
Franchisee exercises its option to reacquire the Franchise for the Franchised
Location, the Franchisee either owns the Franchised Location, or the
Franchisee has the right to lease the Franchised Location for a term that
coincides with the term of the then-current standard Elephant & Castle
franchise agreement; (e) the Franchisee (or the Franchisee's Operating
Partner), the Franchisee's General Manager and the Franchisee's Chef have
completed the required training designated by Elephant & Castle for new
franchisees to ensure that the Franchisee is in conformity with the
then-current qualifications and operational requirements established by
Elephant & Castle; and (f) the Franchisee agrees to execute and comply with
the then-current standard franchise agreement being offered to new
franchisees by Elephant & Castle, subject further to the provisions of
Article 3.4 of this Agreement.
TERMS OF OPTION.
The Franchisee will have the option to reacquire the Franchise for the
Franchised Location under the same terms and conditions as are then being
offered to other franchisees under the then-current standard Elephant &
Castle franchise agreement; provided, however, that the term of the franchise
agreement executed by the Franchisee to reacquire the Franchise will be for
ten (10) years, as specified in Article 3.3 of this Agreement. The Franchisee
will be required to pay Elephant & Castle a reacquisition fee equal to
twenty-five percent (25%) of the Initial Fee specified in the then-current
standard Elephant & Castle franchise agreement, which will be payable in full
on the date the Franchisee signs the then-current standard franchise
agreement executed pursuant to this option. The reacquisition fee is payment,
in part, to Elephant & Castle for: (a) training at the time of the
reacquisition for the Franchisee (or the Franchisee's Operating Partner), the
Franchisee's General Manager and the Franchisee's Chef (but not payment for
the travel, lodging, and living expenses, salaries, and all other expenses of
any persons attending such training, which will be paid by the Franchisee);
(b) providing the Franchisee with the then-current standards relating to the
image of Elephant & Castle-Registered Trademark-Restaurants, including decor,
fixtures, furniture and sign specifications; (c) providing the Franchisee
with the then-current specifications for the supplies and equipment to be
used in the operation of the Restaurant; and (d) administrative and
out-of-pocket expenses incurred by Elephant & Castle in connection with the
reacquisition, including employee salaries, attorneys' fees and long-distance
telephone calls. The Franchisee will be required to pay the Continuing Fee
and all other fees at the rates specified in the then-current standard
franchise agreement. The Franchisee will also pay any additional fees
specified or provided for by the terms of the then-current standard franchise
agreement. The Franchisee acknowledges that the terms, conditions and
economics of future franchise agreements of Elephant & Castle may, at that
time, vary in substance and form from the terms, conditions and economics of
this Agreement.
INITIAL FEE; APPROVAL OF FRANCHISEE
INITIAL FEE.
The Franchisee will pay Elephant & Castle an Initial Fee of thirty-five
thousand dollars ($35,000), which will be payable in full on the date the
Franchisee signs this Agreement. The Initial Fee payable by the Franchisee is
payment, in part, to Elephant & Castle for the costs incurred by Elephant &
Castle to operate its business, including costs for general sales and
administrative expenses, travel, long distance telephone calls, training,
opening costs, marketing costs, legal and accounting fees, compliance with
franchising and other laws, and the initial services rendered to the
Franchisee as described in this Agreement.
TERMINATION OF FRANCHISE.
Elephant & Castle will have the right to terminate this Agreement at any time
within one hundred twenty (120) days after the date of this Agreement if: (a)
any required or other financial, personal or other information provided by
the Franchisee to Elephant & Castle is materially false, misleading,
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FRANCHISE AGREEMENT F-78 426304 9
incomplete or inaccurate; (b) the Franchisee has not purchased or leased a
site for the Franchised Location or has done so in a manner not in compliance
with Article 2.4 and Article 11 of this Agreement; (c) the Franchisee fails
to apply for and obtain a valid license for the service of food for its
Elephant & Castle-Registered Trademark-Restaurant from the appropriate
governmental agencies; (d) the Franchisee fails to apply for and obtain a
valid liquor license for its Elephant & Castle-Registered
Trademark-Restaurant from the appropriate governmental authorities; or (e)
the Franchisee (or its Operating Partner), the Franchisee's General Manager
and the Franchisee's Chef fail to complete the Elephant & Castle training
program described in Article 16.1 of this Agreement.
REFUND OF INITIAL FEE.
If this Agreement is terminated by Elephant & Castle pursuant to Article 4.2,
then Elephant & Castle will retain fifty percent (50%) of the Initial Fee paid
by the Franchisee as payment for the administrative and out-of-pocket expenses
incurred by Elephant & Castle including, but not limited to, executives' and
employees' salaries, salespersons' commissions, attorneys' fees, accountants'
fees, travel expenses, training costs, legal compliance, marketing costs and
long distance telephone calls.
CONTINUING FEE
AMOUNT OF CONTINUING FEE; DATE PAYABLE.
In addition to the Initial Fee payable by the Franchisee, the Franchisee will
pay Elephant & Castle a weekly Continuing Fee equal to the greater of: (a)
five percent (5%) of the Franchisee's weekly Gross Sales for the preceding
week; or (b) one thousand two hundred and fifty dollars ($1,250). The weekly
Continuing Fee will be paid to Elephant & Castle by the Franchisee by
Wednesday of each week for the preceding week. The minimum weekly Continuing
Fee of one thousand two hundred and fifty dollars ($1,250) will not be
applicable until the first full week of the seventh month after the date of
this Agreement, and beginning on Wednesday of that week, the Franchisee will
pay the greater of the amounts set forth above.
INTEREST ON UNPAID CONTINUING FEES.
If the Franchisee fails to remit the Continuing Fee due to Elephant & Castle as
provided for in Article 5.1, then the amount of the unpaid and past due
Continuing Fee will bear simple interest at the lesser of the maximum legal rate
allowable by applicable law or eighteen percent (18%) simple interest per annum.
The Franchisee will pay Elephant & Castle an administrative fee of seventy-five
dollars ($75) for each delinquent Continuing Fee payment within ten (10) days
after the delinquent Continuing Fee was due. The Franchisee will also reimburse
Elephant & Castle for any and all costs incurred by Elephant & Castle in the
collection of unpaid and past due Continuing Fee payments including, but not
limited to, attorneys' fees, deposition costs, expert witness fees,
investigation costs, accounting fees, filing fees and travel expenses.
REPORTS.
The Franchisee will maintain an accurate written record of the weekly Gross
Sales for the Franchisee's Elephant & Castle-Registered Trademark- Restaurant
and other information specified by Elephant & Castle, and will submit weekly
reports for the Franchisee's Restaurant using the forms and formats that
Elephant & Castle prescribes in writing. The weekly reports will be e-mailed
or faxed to Elephant & Castle by Wednesday of each week for the preceding
week. The weekly reports will be signed by the Franchisee and will include
the Franchisee's weekly Gross Sales, the weekly Continuing Fee payment as
calculated by the Franchisee, and such other information as may be required
by Elephant & Castle.
FRANCHISEE'S OBLIGATION TO PAY.
The Continuing Fee payable to Elephant & Castle under this Article will be
calculated and paid to Elephant & Castle by the Franchisee each week during
the entire term of this Agreement, and the
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Franchisee's failure to pay the weekly Continuing Fee to Elephant & Castle
will be deemed to be a material breach of this Agreement. The Franchisee's
obligation to pay Elephant & Castle the Continuing Fee pursuant to the terms
of this Agreement will be absolute and unconditional, and will remain in full
force and effect until the term of this Agreement has expired or until this
Agreement has been terminated in accordance with the terms and conditions set
forth in this Agreement and applicable law. The Franchisee will not have the
"right of offset" and, as a consequence, the Franchisee will timely pay all
Continuing Fees due to Elephant & Castle under this Agreement regardless of
any claims or allegations the Franchisee may allege against Elephant & Castle.
PRE-AUTHORIZED BANK DEBITS.
The Franchisee will, from time to time during the term of this Agreement,
execute such documents as Elephant & Castle may request to provide the
Franchisee's unconditional and irrevocable authority and direction to its
bank authorizing and directing the Franchisee's bank to pay and deposit
directly to the account of Elephant & Castle, and to charge to the account of
the Franchisee, the amount of the weekly Continuing Fee payable by the
Franchisee pursuant to this Agreement on Wednesday of each week for the
Continuing Fee due for the preceding week. The authorizations will be in the
form prescribed by a bank specified by Elephant & Castle and will permit
Elephant & Castle to designate the amount to be debited or drafted from the
Franchisee's account and to adjust such amount from time to time to the
amount of the weekly Continuing Fee payable to Elephant & Castle by the
Franchisee, as calculated by the Franchisee in the report of weekly Gross
Sales submitted by the Franchisee pursuant to Article 5.3 of this Agreement.
If the Franchisee fails at any time to provide the weekly reports required
under Article 5.3, then Elephant & Castle will have the absolute right to
debit the Franchisee's bank account for the same amount as the most recent
debit to the Franchisee's bank account that was based on actual Gross Sales
provided by the Franchisee. The Franchisee will, at all times during the term
of this Agreement, maintain a balance in its account at its bank sufficient
to allow the appropriate amount to be debited from the Franchisee's account
for payment of the Continuing Fee payable by the Franchisee for deposit in
the account of Elephant & Castle.
LOCAL ADVERTISING
LOCAL ADVERTISING EXPENDITURE.
Each quarter for the entire term of this Agreement, the Franchisee will spend
at a minimum for approved local advertising for its Elephant &
Castle-Registered Trademark- Restaurant an amount equal to two percent (2%)
of the quarterly Gross Sales of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant (the "Local Advertising Expenditure"). For the purposes
of this Article, local advertising will include television, radio, newspaper,
billboards, magazine, direct mail and other print advertising, which has been
approved by Elephant & Castle prior to broadcast, publication or distribution.
REPORTS OF LOCAL ADVERTISING EXPENDITURES.
Within 10 (ten) days after the end of each quarter, the Franchisee will, in a
form prescribed by Elephant & Castle, furnish Elephant & Castle with an
accurate accounting of the Franchisee's Local Advertising Expenditure during
the quarter just ended. If the Franchisee has failed to spend the required
amount for the Local Advertising Expenditure, then the Franchisee will
deposit with Elephant & Castle the difference between the amount that should
have been spent by the Franchisee for the Local Advertising Expenditure and
the amount actually spent, and this amount will be spent by Elephant & Castle
for advertising and promotion in the Franchisee's Designated Market Area in a
manner deemed appropriate by Elephant & Castle in its sole discretion.
TELEPHONE DIRECTORY LISTINGS.
The Franchisee will continually list and advertise in the "Yellow Pages" in the
Franchisee's market area under the heading "Restaurant" and/or other listings
designated by Elephant & Castle in writing. The
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FRANCHISE AGREEMENT F-80 426304 9
format, size and content of the listings and advertising will conform in all
respects to the standards established by Elephant & Castle and specified in
the Standard Operations Manual. The Franchisee will also take all steps
necessary to be listed in the "White Pages" for the Franchisee's market area.
Expenditures made by the Franchisee for Yellow Pages or White Pages
advertising may be applied to the Local Advertising Expenditure set forth in
Article 6.1 of this Agreement.
GRAND OPENING ADVERTISING.
The Franchisee will spend, within the period of time from ninety (90) days
prior to the day of the grand opening to 11:00 p.m. on the day of the grand
opening, a minimum of fifteen thousand dollars ($15,000) for grand opening
advertising of the Franchisee's Elephant & Castle-Registered Trademark-
Restaurant. Payments, rebates, or allowances received by the Franchisee from
vendors and used by the Franchisee in connection with advertising and
promoting the grand opening of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant may be applied to the minimum grand opening expenditure
requirement set forth in this Article. The Franchisee's expenditures for
grand opening advertising will not be applied to the Local Advertising
Expenditure requirement set forth in Article 6.1 of this Agreement.
FINANCIAL STATEMENTS
MONTHLY REPORTS AND FINANCIAL STATEMENTS.
The Franchisee will, at its expense, prepare a monthly and year-to-date
balance sheet and profit and loss statement for the Franchisee's Restaurant
("the Monthly Report"). The Franchisee will also prepare, at its expense,
annual financial statements, consisting of a balance sheet, profit and loss
statement, statement of cash flows and explanatory footnotes, for the
Franchisee's Restaurant (the "Financial Statements"). All Monthly Reports and
Financial Statements provided to Elephant & Castle pursuant to this Article
will be in substantially the form prescribed by Elephant & Castle in writing,
will conform to the standard chart of accounts prescribed by Elephant &
Castle and will be prepared in accordance with generally accepted accounting
principles applied on a consistent basis.
DUE DATE; VERIFICATION OF MONTHLY REPORTS AND FINANCIAL STATEMENTS.
The Monthly Report for the Franchisee's Restaurant will be delivered to Elephant
& Castle within twenty (20) days after the end of the month. The Franchisee's
Financial Statements will be delivered to Elephant & Castle within ninety (90)
days after the Franchisee's fiscal year end. The Franchisee's Monthly Reports
and Financial Statements must be verified by the Franchisee's Chief Financial
Officer.
SUBSTANTIATION OF MONTHLY REPORTS AND FINANCIAL STATEMENTS.
Within three (3) business days after receiving a written request from Elephant &
Castle, the Franchisee will provide Elephant & Castle with originals or exact
copies of all documents, records and other materials including, but not limited
to, cash register tapes, customer checks, point-of-sale system records, payroll
records and purchasing and expense records, requested by Elephant & Castle to
substantiate the Monthly Reports and Financial Statements submitted by the
Franchisee pursuant to this Article. Elephant & Castle will maintain the
confidentiality of all information, documents, records and other materials
submitted by the Franchisee to Elephant & Castle pursuant to this Article.
However, if the information, documents, records or other materials are relevant
to any issue in any mediation, arbitration or court proceeding between Elephant
& Castle and the Franchisee, then Elephant & Castle may disclose the
information, documents, records or other materials in such proceeding.
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SALES AND INCOME TAX RETURNS.
Within fifteen (15) days after receipt of a written request from Elephant &
Castle, the Franchisee will furnish Elephant & Castle with exact copies of all
state sales tax returns and all state and federal income tax returns filed by
the Franchisee relating to the operation of the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant.
AUDIT RIGHTS.
Within three (3) business days after receiving written notice from Elephant &
Castle, the Franchisee and the Franchisee's accountants will make all of their
computer and hand prepared records and ledgers, the sales ledger, work papers,
books, bank statements, federal and state income tax returns, federal and state
sales tax returns, daily cash register tapes, accounts, and other financial
information relating to Gross Sales, food and liquor costs, and labor costs (the
"Financial Records") available to Elephant & Castle during business hours for
review and audit by Elephant & Castle or its designee. If the Financial Records
are computerized, then the Franchisee will grant Elephant & Castle or its
designees the absolute right to access the Franchisee's computer and software
programs containing the Financial Records and the absolute right to copy the
Financial Records to a computer disk or to any portable or other computer owned
or controlled by Elephant & Castle. The Financial Records for each fiscal year
will be kept in a secure place by the Franchisee and will be available for audit
by Elephant & Castle for at least five (5) years. The Franchisee will provide
Elephant & Castle with adequate facilities to conduct the audit. Elephant &
Castle will maintain the confidentiality of all information, documents, records
and other materials reviewed or copied by Elephant & Castle during an audit
conducted by Elephant & Castle pursuant to this Article. However, if the
information, documents, records or other materials are relevant to any issue in
any mediation, arbitration or court proceeding between Elephant & Castle and the
Franchisee, then Elephant & Castle may disclose the information, documents,
records or other materials in such proceeding.
PAYMENT OF AUDIT COSTS.
If an audit of the Franchisee's Financial Records reveals any deficiencies in
the Continuing Fees payable to Elephant & Castle, then the Franchisee will,
within five (5) days after receipt of an invoice from Elephant & Castle
indicating the amounts owed, pay to Elephant & Castle any deficiency owed to
Elephant & Castle, together with interest as provided for herein. If an audit by
Elephant & Castle results in a determination that the Franchisee's Gross Sales
were understated by more than one percent (1%) in any year or in any month, then
the Franchisee will, within fifteen (15) days after receipt of an invoice from
Elephant & Castle, pay Elephant & Castle all costs and expenses (including
employee salaries, travel costs, room and board, and audit fees) that Elephant &
Castle incurred for the audit of the Franchisee's Financial Records.
REFUSAL TO SUBMIT RECORDS OR PERMIT AUDIT.
The Franchisee's failure or refusal to provide the documents, records or other
materials requested by Elephant & Castle to substantiate the Monthly Reports or
Financial Statements in accordance with Article 7.3 or to produce the Financial
Records in accordance with Article 7.5 will be grounds for the immediate
termination of this Agreement by Elephant & Castle.
QUALITY CONTROL, UNIFORMITY AND STANDARDS
QUALITY AND SERVICE STANDARDS.
Elephant & Castle will develop, from time to time, uniform standards of
quality, cleanliness and service regarding the business operations of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant to protect
and maintain (for the benefit of Elephant & Castle and all of its
franchisees) the distinction, valuable goodwill and uniformity represented
and symbolized by the Marks and the Restaurant System. Accordingly, to ensure
that all Elephant & Castle franchisees will maintain and adhere to the
uniformity
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FRANCHISE AGREEMENT F-82 426304 9
requirements and quality standards for the foods, products and services
associated with the Marks and the Restaurant System, the Franchisee agrees to
maintain the uniformity and quality standards required by Elephant & Castle
for all foods, products and services associated with the Marks and the
Restaurant System and agrees to the terms and conditions contained in this
Article to assure the public that all Elephant & Castle-Registered
Trademark- Restaurants will be uniform in nature and will sell and dispense
quality foods, products and services.
IDENTIFICATION OF RESTAURANT.
The Franchisee will operate the Restaurant so that it is clearly identified
and advertised as an Elephant & Castle-Registered Trademark- Restaurant. The
style and form of the words "Elephant & Castle-Registered Trademark-" and the
other Marks used in any advertising, marketing, public relations or
promotional program must have the prior written approval of Elephant &
Castle. The Franchisee will use the name "Elephant & Castle-Registered
Trademark-," the approved logos and all graphics commonly associated with the
Restaurant System and the Marks which now or hereafter may form a part of the
Restaurant System, on all paper supplies, furnishings, advertising, public
relations and promotional materials, signs, stationery, business cards,
linens, towels, napkins, aprons, menus, food and beverage containers,
placemats, uniforms, clothing and other materials in the identical
combination and manner as may be prescribed by Elephant & Castle in writing.
The Franchisee will, at its expense, comply with all legal notices of
registration required by Elephant & Castle or its attorneys and will, at its
expense, comply with all trademark, trade name, service xxxx, copyright,
patent or other notice markings that are required by Elephant & Castle or by
applicable law.
COMPLIANCE WITH STANDARDS.
The Franchisee will use the Marks and the Restaurant System in strict compliance
with the moral and ethical standards, quality standards, health standards,
operating procedures, specifications, requirements and instructions required by
Elephant & Castle, which may be amended and supplemented by Elephant & Castle
from time to time.
ALTERATIONS TO RESTAURANT.
The Franchisee will not install or permit to be installed in, on or above the
Restaurant, without the prior written consent of Elephant & Castle, any
fixtures, furnishings, equipment, decor, signs or other items not previously
approved by Elephant & Castle.
PROHIBITED SALES.
The Franchisee will offer for sale at the Franchised Location only those menu
items, food products and other products approved in writing by Elephant &
Castle. Elephant & Castle will provide the Franchisee with a sample of the
standard Elephant & Castle menu and all subsequent modifications to the menu.
OTHER BUSINESS.
The Franchisee will use the Franchised Location solely for the operation of
an Elephant & Castle-Registered Trademark- Restaurant and will not directly
or indirectly operate or engage in any other business or activity from the
Franchised Location without the prior written consent of Elephant & Castle.
The Franchisee will not participate in any dual branding program, or in any
other program, promotion or business pursuant to which a trademark, service
xxxx, trade name, logo, slogan, or commercial symbol owned by any person or
entity other than Elephant & Castle is displayed, featured or used in
connection with the Franchisee's Elephant & Castle-Registered Trademark-
Restaurant without the prior written consent of Elephant & Castle.
FRANCHISEE'S NAME.
The Franchisee will not use the name "Elephant & Castle-Registered
Trademark-" or any derivative thereof in its corporate, partnership or sole
proprietorship name. The Franchisee will hold itself out to the public as an
independent contractor operating its Elephant & Castle-Registered Trademark-
Restaurant pursuant to a Franchise from Elephant & Castle. The Franchisee
will file for a certificate of assumed name in the manner required
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FRANCHISE AGREEMENT F-83 426304 9
by applicable state law to notify the public that the Franchisee is operating
its Elephant & Castle-Registered Trademark- Restaurant as an independent
contractor pursuant to this Agreement.
OPERATION OF ELEPHANT & CASTLE-Registered Trademark- RESTAURANT.
The Franchisee will be totally and solely responsible for the operation of
its Elephant & Castle-Registered Trademark- Restaurant, and will control,
supervise and manage all the employees, agents and independent contractors
who work for or with the Franchisee. The Franchisee will be responsible for
the acts of its employees, agents, and independent contractors and will take
all reasonable business actions necessary to ensure that its employees,
agents and independent contractors comply with all applicable federal, state,
city, local and municipal laws, statutes, ordinances, rules and regulations.
Elephant & Castle will not have any right, obligation or responsibility to
control, supervise or manage the Franchisee's employees, agents or
independent contractors.
BUSINESS HOURS.
The Franchisee's Elephant & Castle-Registered Trademark- Restaurant will be
open from 11:00 a.m. to 11:00 p.m. every day of the week, or during such
other normal business hours as otherwise may be specified by Elephant &
Castle in the Standard Operations Manual.
PERSONNEL.
The Franchisee will at all times during business hours have management personnel
on duty who are responsible for supervising the employees and the business
operations of the Franchisee's Restaurant. The Franchisee will maintain a
competent, conscientious and adequately trained staff with enough personnel to
operate the Restaurant in a professional and competent manner and to guarantee
efficient service to the Franchisee's customers. The Franchisee will take such
steps as are necessary to ensure that its employees develop and preserve good
customer relations, render competent, prompt, courteous and knowledgeable
service and meet the quality and service standards established by Elephant &
Castle.
STANDARDS OF SERVICE.
The Franchisee will at all times give prompt, courteous and efficient service to
its customers. The Franchisee will, in all dealings with its customers,
suppliers and the public, adhere to the highest standards of honesty, integrity,
fair dealing and ethical conduct.
ALCOHOLIC BEVERAGES.
The Franchisee will serve beer, wine and alcoholic beverages at its Elephant
& Castle-Registered Trademark- Restaurant. The Franchisee will comply with
all federal, state, city, local and municipal licensing, insurance and other
laws, regulations and requirements applicable to the sale of alcoholic
beverages by the Franchisee. The Franchisee will comply with the liquor
liability insurance requirements set forth in Article 14 of this Agreement.
VENDING MACHINES AND ENTERTAINMENT DEVICES.
Other than those items which the Franchisee must procure and place in the
premises of the Franchised Location as specified in the Standard Operations
Manual, the Franchisee will not permit any jukebox, video and electronic games,
vending machines (including cigarette, gum and candy machines), newspaper racks,
rides or other mechanical or electronic entertainment devices or coin or token
operated machines (including pinball) to be used on the premises of the
Franchised Location without the prior written approval of Elephant & Castle.
GAMBLING MACHINES; TICKETS.
The Franchisee will not permit any gambling machines or other gambling devices
to be used on the premises of the Franchised Location, except with the prior
written approval of Elephant & Castle. The Franchisee will not keep or offer for
sale or allow employees to offer for sale at or near the Franchised
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FRANCHISE AGREEMENT F-84 426304 9
Location any tickets, subscriptions, pools, chances, raffles, lottery tickets
or pull tabs, except with the prior written approval of Elephant & Castle.
STANDARD ATTIRE OR UNIFORMS.
The Franchisee will require its employees to wear the standard attire or
uniforms described in the Standard Operations Manual. All employees of the
Franchisee will wear clean and neat attire or uniforms and will practice good
personal hygiene.
CREDIT CARDS.
The Franchisee will honor all credit, charge, courtesy or cash cards or other
credit devices required or approved by Elephant & Castle in writing. The
Franchisee must obtain the written approval of Elephant & Castle prior to
honoring any unapproved credit, charge, courtesy or cash cards or other credit
devices.
GIFT CERTIFICATES AND COUPONS.
The Franchisee will offer the gift certificates issued by Elephant & Castle
for use by its franchisees. The Franchisee will not have the right to sell or
issue gift certificates except those that have been obtained from Elephant &
Castle. The Franchisee will not issue coupons or discounts of any type,
except as may be approved in advance in writing by Elephant & Castle. Such
coupons will clearly state that they are redeemable only at the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant, and not at any other
Elephant & Castle-Registered Trademark- Restaurant.
MUSIC AND MUSIC SELECTION.
In order to maintain the image and ambiance associated with the Restaurant
System, the Franchisee will only play the music and music selections that have
been approved by Elephant & Castle as set forth in the Standard Operations
Manual.
APPROVED ADVERTISING.
The Franchisee will not conduct any advertising and/or promotion for its
Elephant & Castle-Registered Trademark- Restaurant business unless and until
Elephant & Castle has given the Franchisee prior written approval for all
concepts, materials and media proposed for any such advertising and/or
promotion. The Franchisee will not permit any third party to advertise its
business, services or products on the premises of the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant without the prior written approval of
Elephant & Castle.
COMPLIANCE WITH APPLICABLE LAW.
The Franchisee will, at its expense, comply with all applicable federal,
state, city, local and municipal laws, statutes, ordinances, rules and
regulations pertaining to the construction or remodeling of the Franchised
Location and the operation of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant including, but not limited to, all health, food service
and liquor licensing laws, all health and safety regulations, all
environmental laws, all laws relating to employees, including all wage and
hour laws, employment laws, workers' compensation laws, discrimination laws,
sexual harassment laws, and disability discrimination laws. The Franchisee
will, at its expense, be solely and exclusively responsible for determining
the licenses and permits required by law for the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant, for obtaining and qualifying for all
such licenses and permits, and for complying with all applicable laws.
PAYMENT OF TAXES.
The Franchisee will be absolutely and exclusively responsible and liable for
filing all required tax returns and for the prompt payment of all federal,
state, city and local taxes including, but not limited to, individual and
corporate income taxes, sales and use taxes, franchise taxes, gross receipts
taxes, employee withholding taxes, F.I.C.A. taxes, inventory taxes, liquor
taxes, personal property taxes and
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FRANCHISE AGREEMENT F-85 426304 9
real estate taxes (hereinafter referred to as "taxes") payable in connection
with the Franchisee's Elephant & Castle-Registered Trademark- Restaurant
business. Elephant & Castle will have no liability for these or any other
taxes which arise or result from the Franchisee's Restaurant business and the
Franchisee will indemnify Elephant & Castle for any such taxes that may be
assessed or levied against Elephant & Castle which arise out of or result
from the Franchisee's Restaurant.
"FRANCHISE" AND OTHER TAXES.
If any "franchise" or other tax which is based upon the Gross Sales,
receipts, sales, business activities or operation of the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant is imposed upon Elephant &
Castle by any taxing authority, then the Franchisee will reimburse Elephant &
Castle in an amount equal to the amount of such taxes and related costs
imposed upon and paid by Elephant & Castle. The Franchisee will be notified
in writing when Elephant & Castle is entitled to reimbursement for the
payment of such taxes and, in that event, the Franchisee will pay Elephant &
Castle the amount specified in the written notice within ten (10) days after
receipt of the written notice.
PAYMENTS TO CREDITORS.
The Franchisee will timely pay all of its obligations and liabilities due and
payable to Elephant & Castle, suppliers, lessors and its creditors.
SECURITY INTEREST IN FRANCHISE AGREEMENT.
This Agreement and the Franchise granted to the Franchisee hereunder may not be
used as collateral or be the subject of a security interest, lien, levy,
attachment or execution by the Franchisee's creditors or any financial
institution, except with the prior written approval of Elephant & Castle.
INSPECTION RIGHTS.
The Franchisee will permit Elephant & Castle or its representatives to enter,
remain on, and inspect the Franchised Location, whenever Elephant & Castle
reasonably deems it appropriate and without prior notice, to interview the
Franchisee's employees and customers, to take photographs and videotapes of
and to examine the interior and exterior of the Franchised Location, to
examine representative samples of the foods, beverages and other products
sold or used at the Franchisee's Restaurant and to evaluate the quality of
the foods, beverages, products and services provided by the Franchisee to its
customers. Elephant & Castle will also have the right to send a
representative of Elephant & Castle to dine at the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant to evaluate the operations of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant and the
quality of the foods and services provided by the Franchisee to its
customers. Elephant & Castle will have the right to use all interviews,
photographs and videotapes of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant for such purposes as Elephant & Castle deems
appropriate including, but not limited to, use in advertising, marketing and
promotional materials. The Franchisee will not be entitled to, and hereby
expressly waives, any right that it may have to be compensated by Elephant &
Castle, its advertising agencies, and other Elephant & Castle franchisees for
the use of such photographs or videotapes for advertising, marketing and
promotional purposes.
DEFAULT NOTICES AND SIGNIFICANT CORRESPONDENCE.
The Franchisee will deliver to Elephant & Castle, immediately upon receipt by
the Franchisee or delivery at the Franchised Location, an exact copy of all:
(a) notices of default received from the landlord of the Franchised Location
or any mortgagee, trustee under any deed of trust, contract for deed holder,
lessor, or any other party with respect to the Franchised Location; (b)
notifications or other correspondence relating to any legal proceeding or
lawsuit relating in any way to the Franchisee's Restaurant or to the
Franchised Location; (c) consumer lawsuits, complaints or claims filed with
or served upon the Franchisee or a better business bureau; (d) employee
lawsuits, complaints or claims; and (e) inspection reports or any other
notices, claims, reports, warnings or citations from or by any governmental
authority, including any health or safety authority. Upon a
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FRANCHISE AGREEMENT F-86 426304 9
written request from Elephant & Castle, the Franchisee will provide such
additional information as may be required by Elephant & Castle regarding the
subject matter of the correspondence or other documents received by the
Franchisee.
PRODUCTS AND SERVICES
LIMITATIONS ON PRODUCTS AND SERVICES.
The Franchisee will sell only those foods, beverages, food products, clothing,
and services and other items approved by Elephant & Castle in writing and will
offer for sale all foods, beverages, food products, clothing, services and other
items prescribed by Elephant & Castle or approved by Elephant & Castle in
writing. Prior to the opening of the Restaurant, Elephant & Castle will provide
the Franchisee with a written schedule of all foods, food products, beverages,
clothing, and other items for sale, and the fixtures, supplies and equipment
necessary and required to commence operation of the Franchisee's Restaurant. The
Franchisee will maintain sufficient inventories of foods, beverages, food
products, clothing, and other items to realize the full potential of the
Restaurant. The Franchisee will conform to all customer service standards
prescribed by Elephant & Castle in writing. The Franchisee will have the
absolute right to sell all foods, beverages, food products, clothing, services
and other items at whatever prices and on whatever terms it deems appropriate.
LIMITATION ON SALES.
The Franchisee will offer for sale and sell those foods, beverages, food
products, clothing, services and other items offered for sale in connection
with the Franchisee's Elephant & Castle-Registered Trademark- Restaurant or
which are sold under any of the Marks only on a retail basis at the
Franchisee's Franchised Location. The Franchisee will not offer for sale or
sell on a wholesale or retail basis at any other location or in any other
premises, or by means of the Internet, catalogue or mail order sales,
telemarketing, or by any other method of sales or distribution, any of the
foods, beverages, food products, clothing, services or other items offered
for sale or sold in connection with the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant or which are sold under any of the
Marks.
APPROVED SUPPLIERS AND DISTRIBUTORS.
The Franchisee will purchase from suppliers and distributors approved in
writing by Elephant & Castle those foods, food items, beverages, recipe
ingredients, goods, products, clothing, merchandise, supplies, sundries,
uniforms, machinery, signs, furniture, fixtures, equipment and services
(sometimes referred to in this Agreement as "products and services")
designated in writing by Elephant & Castle which are to be used or sold by
the Franchisee and which Elephant & Castle determines must meet the standards
of quality and uniformity required to protect the valuable goodwill and
uniformity symbolized by and associated with the Marks and the Restaurant
System and/or to protect the health and safety of the Franchisee's employees,
customers and guests. Elephant & Castle will provide the Franchisee with a
list of the approved suppliers and distributors for these products and
services. The Franchisee will have the right and option to purchase these
products and services from other or outside suppliers and distributors
provided that such products and services conform in quality to the standards
and specifications of Elephant & Castle and provided that Elephant & Castle
determines that the supplier's or distributor's business reputation, quality
standards, delivery performance, credit rating, and other factors determined
by Elephant & Castle are satisfactory. If the Franchisee desires to purchase
any products or services from such other suppliers and distributors, then the
Franchisee must, at its expense, submit samples and specifications, and other
business and product information as requested, to Elephant & Castle for
review and/or product testing to determine whether the supplier or
distributor and its products and services are satisfactory to Elephant &
Castle and comply with Elephant & Castle's standards and specifications.
Elephant & Castle will also have the right to inspect the facilities of the
proposed supplier or distributor. The Franchisee will reimburse Elephant &
Castle for the costs and expenses incurred by Elephant & Castle to conduct an
inspection of the facilities of
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FRANCHISE AGREEMENT F-87 426304 9
the unapproved supplier or distributor within thirty (30) days after the
Franchisee's receipt of an invoice for such costs and expenses from Elephant
& Castle. Elephant & Castle will complete all product testing within thirty
(30) days after Elephant & Castle receives the samples and other requested
information from the Franchisee, and will notify the Franchisee of its
determination within fifteen (15) days after completion of the testing
process. The written approval of Elephant & Castle must be obtained by the
Franchisee before any previously unapproved products and services are sold by
or used by the Franchisee or any previously unapproved supplier or
distributor is used by the Franchisee.
DESIGNATED SUPPLIERS.
The Franchisee will purchase from designated suppliers those proprietary
seasonings and other foods, food items and recipe ingredients, and clothing
items designated in writing by Elephant & Castle which are to be used or sold by
the Franchisee and which Elephant & Castle determines must meet the standards of
quality and uniformity required to protect the valuable goodwill and uniformity
symbolized by and associated with the Marks and the Restaurant System. In
addition, the Franchisee will purchase and use in its Restaurant operations all
the brand name products required by Elephant & Castle. Such required brand name
products may be purchased from any commercial supplier of such products.
USE OF REBATES FROM SUPPLIERS.
Any rebates or other payments paid to Elephant & Castle by a supplier as a
result of the Franchisee's purchases from the supplier will be used by
Elephant & Castle for the creation, development and production of advertising
and promotional materials, marketing or related research and development,
advertising and marketing expenses, product and food research and
development, advertising materials, production costs, brochures, ad slicks,
radio, film and television commercials, videotapes, newspaper, magazine and
other print advertising, direct mail pieces, photographer costs, photographs,
pictures, designs, services provided by advertising agencies, public
relations firms or other marketing, research or consulting firms or agencies,
market research and marketing surveys, menu design and graphics, customer
incentive programs, sponsorships, marketing meetings, sales incentives,
development of Home Pages on the Internet, Internet access provider costs,
Internet/World Wide Web programming and advertising, subscriptions to
industry newsletters or magazines, marketing or industry studies, books and
research materials, administrative costs or salaries for marketing support
personnel.
LIMITATION ON BRANDING, DEVELOPMENT AND SALE OF PRODUCTS.
Nothing in this Agreement gives the Franchisee the right to, and the
Franchisee will not: (a) use or display the Marks on or in connection with
any product or service other than those products and services prescribed or
approved by Elephant & Castle; (b) acquire, develop or manufacture any
product using the name "Elephant & Castle-Registered Trademark-" or any of
the Marks, or direct any other person or entity to do so; (c) acquire,
develop or manufacture any product that has been developed or manufactured by
or for Elephant & Castle for use in the Restaurant System and which is sold
under any of the Marks, or direct any other person or entity to do so; and
(d) use, have access to, or have any rights to any proprietary formulas,
ingredients, or recipes for any product created by or at the direction of
Elephant & Castle and sold under the name "Elephant & Castle-Registered
Trademark-" or any of the Marks.
INDEPENDENT SHOPPING SERVICES.
Elephant & Castle will have the right to hire an independent shopping service
to visit, dine at and evaluate the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant and the quality of the foods, beverages and services
provided to customers by the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant. Elephant & Castle will determine the number and
frequency of the visits the shopping service will make to the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant and the form of the
reports the shopping service will provide to Elephant & Castle. The fees
charged by the shopping service for visiting and evaluating the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant will be paid by Elephant &
Castle. Elephant & Castle
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FRANCHISE AGREEMENT F-88 426304 9
will provide the Franchisee with copies of all reports prepared by the
shopping service evaluating the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant.
STANDARD OPERATIONS MANUAL
COMPLIANCE WITH MANUAL.
In order to protect the reputation and goodwill of Elephant & Castle, and to
maintain the uniform operating standards under the Marks and the Restaurant
System, the Franchisee will at all times conduct its business and operate its
Elephant & Castle-Registered Trademark- Restaurant in compliance with
Elephant & Castle's confidential and copyrighted Standard Operations Manual
(sometimes referred to as the "Manual") which is incorporated herein and made
part of this Agreement. The Franchisee will conform to the common image and
identity created by the foods, beverages, products, music, food portions,
recipes, ingredients, cooking techniques and processes, cleanliness,
sanitation and services associated with the Elephant & Castle-Registered
Trademark- Restaurant which are portrayed and described by the Manual. The
Franchisee acknowledges having received on loan from Elephant & Castle one
copy of the Manual.
REVISIONS TO MANUAL.
Elephant & Castle reserves the right to and may from time to time revise the
Standard Operations Manual. The Franchisee will, as promptly as reasonably
possible, modify the operations of the Restaurant to implement all changes,
additions and supplements made by Elephant & Castle to the Restaurant System
which are reflected by the Manual. The Franchisee will implement all operational
changes to the Restaurant System deemed necessary by Elephant & Castle to: (a)
improve the standards of service or the food, food items, beverages, and
products offered for sale under the Restaurant System; (b) protect the goodwill
associated with the Marks; (c) improve the operation of the Franchisee's
Restaurant; or (d) protect the health and safety of the Franchisee's employees,
customers or guests. The Franchisee will at all times keep its copy of the
Manual current and up-to-date, and in the event of any dispute regarding the
Manual, the terms of the master copy of the Manual maintained by Elephant &
Castle will be controlling in all respects.
CONFIDENTIALITY OF MANUAL.
The Standard Operations Manual, and all revisions thereto, will at all times
during the term of this Agreement and thereafter remain the sole and
exclusive property of Elephant & Castle, which will own all copyright and
other interests related to the Manual. The Franchisee will at all times
during the term of this Agreement and thereafter treat the Manual and any
other manuals created for or approved for use in the operation of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant as secret and
confidential, and the Franchisee will use all reasonable means to keep such
information secret and confidential. Neither the Franchisee nor any employees
of the Franchisee will make any copy, duplication, record or reproduction of
the Manual, or any portion thereof, available to any unauthorized person. The
Franchisee will not use the Manual or any information contained therein in
connection with the operation of any other business or for any purpose other
than in conjunction with the operation of the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant.
CONFIDENTIALITY OF OTHER INFORMATION.
Elephant & Castle and the Franchisee expressly understand and agree that
Elephant & Castle will be disclosing and providing to the Franchisee certain
confidential and proprietary information concerning the Restaurant System and
the procedures, operations, technology and data used in connection with the
Restaurant System. The Franchisee will not, during the term of this Agreement
or thereafter, communicate, divulge or use for the benefit of any other
person or entity any such confidential and proprietary information, knowledge
or know-how concerning the methods of operation of the Elephant &
Castle-Registered Trademark- Restaurant which may be communicated to the
Franchisee, or of which the Franchisee may
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be apprised by virtue of this Agreement. The Franchisee will divulge such
confidential and proprietary information only to its employees who must have
access to it in order to operate the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant. Any and all information, knowledge
and know-how including, without limitation, drawings, client lists,
materials, equipment, technology, methods, procedures, techniques, recipes,
specifications, computer programs, systems and other data which Elephant &
Castle copyrights or designates as confidential or proprietary will be deemed
confidential and proprietary for the purposes of this Agreement.
BUSINESS PREMISES
SITE LOCATION.
The Franchisee will be solely responsible for selecting the site of the
Franchised Location for the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant, regardless of whether the Franchised Location is owned
or leased by the Franchisee. The Franchisee will retain an experienced
commercial real estate broker or salesperson who has at least five (5) years
experience in locating restaurant sites to advise the Franchisee and to
locate, acquire, purchase or lease the site for the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant. Accordingly, no provision in this
Agreement will be construed or interpreted to impose any obligation upon
Elephant & Castle to locate a site for the Franchised Location, to assist the
Franchisee in the selection of a suitable site for the Franchised Location,
or to provide any assistance to the Franchisee in the purchase or lease of
the Franchised Location.
SITE LOCATION CRITERIA.
Elephant & Castle may require that the Franchisee provide to Elephant &
Castle for its review site information relating to, among other things,
accessibility, visibility, potential traffic flows, population trends,
household income and financial statistics, lease terms and other demographic
information. The review of the site conducted by Elephant & Castle will not
be deemed to be a warranty, representation or guaranty by Elephant & Castle
that if the Franchisee's Elephant & Castle-Registered Trademark- Restaurant
is opened and operated at that site, it will be a financial success. Elephant
& Castle will have the right to require the Franchisee to obtain, at the
Franchisee's expense, an economic feasibility and demographics study for the
proposed site of the Franchised Location. Any feasibility and demographics
study required by Elephant & Castle will be completed by a real estate or
marketing expert mutually agreed upon in writing by Elephant & Castle and the
Franchisee.
CONSTRUCTION AND REMODELING COSTS.
The Franchisee will, at its cost, retain a licensed architect and will be
responsible for the preparation of the floor plans, layouts, working drawings
and construction plans and architectural plans and specifications for the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant. The
Franchisee will be responsible for the accuracy of such floor plans, layouts,
drawings, plans and specifications. The Franchisee will, at its expense, be
solely responsible for all costs and expenses incurred for the construction,
renovation or remodeling of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant at the Franchised Location including, but not limited
to, all costs for architectural plans and specifications, all modifications
to the floor plans and layouts necessitated by the structure, construction or
layout of the Franchised Location, building permits, site preparation,
demolition, construction of the parking lot, landscaping, heating,
ventilation and air conditioning, interior decorations, furniture, fixtures,
equipment, leasehold improvements, labor, architectural and engineering fees,
electricians, plumbers, general contractors and subcontractors.
COMPLIANCE WITH SPECIFICATIONS.
The Franchised Location and the Franchisee's Restaurant will conform to all
specifications for decor, furniture, fixtures, equipment, exterior and
interior decorating designs and color schemes established by Elephant &
Castle. The Franchisee will obtain and pay for the furniture, fixtures,
supplies and
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FRANCHISE AGREEMENT F-90 426304 9
equipment required by Elephant & Castle and used by the Franchisee for the
operation of its Elephant & Castle-Registered Trademark- Restaurant. The
furniture, fixtures and equipment used in the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant must be installed and located in
accordance with the floor plans approved by Elephant & Castle, and must
conform to the quality standards and uniformity requirements established by
Elephant & Castle.
INSPECTION DURING CONSTRUCTION OR RENOVATION.
The Franchisee will be solely responsible for inspecting the Franchised Location
during construction or renovation to confirm that the Franchised Location is
being constructed or renovated in a workmanlike manner and according to the
specifications established by Elephant & Castle. The Franchisee will be solely
responsible for complying with all applicable local, state and federal laws,
ordinances, statutes and building codes, and for acquiring all licenses and
building and other permits required by all federal, state, city, municipal and
local laws in connection with the construction or renovation of the Franchisee's
business premises at the Franchised Location. Elephant & Castle will have no
responsibility to the Franchisee or any other party if the Franchised Location
is not constructed or renovated by the Franchisee or its architect or
contractor: (a) according to the standard specifications established by Elephant
& Castle; (b) in compliance with all applicable federal, state or local laws or
ordinances; or (c) in a workmanlike manner. The Franchisee will not open the
Restaurant for business without the prior written approval of Elephant & Castle.
MAINTENANCE.
The Franchisee will, at its expense, repair, paint and keep in a clean and
sanitary condition the interior, the exterior, the parking lot, signage,
exterior lighting, and the grounds of the Franchised Location and the
Franchisee's Restaurant, and will replace all floor covering, wall coverings,
light fixtures, curtains, blinds, shades, furniture, room furnishings, wall
hangings, signs, fixtures and other decor items as they become worn-out, soiled
or in disrepair. All mechanical equipment, including ventilation, heating and
air conditioning, must be kept in good working order by the Franchisee at all
times. All replacement equipment, decor items, furniture, fixtures, signs,
supplies and other items used in the Restaurant by the Franchisee must comply
with the then-current standards and specifications of Elephant & Castle.
REMODELING OF BUSINESS PREMISES.
The Franchisee will make the reasonable capital expenditures necessary to
extensively remodel, modernize, redecorate and renovate ("remodel" or
"remodeling") the Franchisee's Restaurant and to replace and modernize the
furniture, fixtures, supplies and equipment ("FF&E") so that the Franchisee's
Restaurant will reflect the then-current image of an Elephant &
Castle-Registered Trademark- Restaurant. All remodeling and all replacements
for the FF&E must conform to the then-current specifications of Elephant &
Castle. The Franchisee will commence remodeling the Franchised Location
within four (4) months after the date the Franchisee receives written notice
from Elephant & Castle specifying the required remodeling, and will
diligently complete such remodeling within a reasonable time after its
commencement. Except as provided for in Article 11.6 of this Agreement, the
Franchisee will not be required to remodel the Restaurant, or to replace and
modernize its FF&E more than once every five (5) years during the term of
this Agreement.
SIGNS
APPROVED SIGNS.
The signs used at the Franchised Location (the "Signs") must comply with the
standard sign plans and specifications established by Elephant & Castle.
Elephant & Castle will provide the Franchisee with a copy of the standard
sign plans and specifications and the Franchisee will, at its expense,
prepare or cause the preparation of complete and detailed plans and
specifications for the Signs and will submit such plans and specifications to
Elephant & Castle for its written approval. Elephant & Castle
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FRANCHISE AGREEMENT F-91 426304 9
will have the absolute right to inspect, examine, videotape and photograph
the Signs for any reason at any time during the term of this Agreement.
PAYMENT OF COSTS AND EXPENSES.
The Franchisee will, at its expense, be responsible for any and all installation
costs, sign costs, architectural fees, engineering costs, construction costs,
permits, licenses, repairs, maintenance, utilities, insurance, taxes,
assessments and levies in connection with the construction, erection,
maintenance or use of the Signs including, if applicable, all electrical work,
construction of the base and foundation, relocation of power lines and all
required soil preparation work. The Franchisee will comply with all federal,
state and local laws, regulations, building codes and ordinances relating to the
construction, erection, maintenance and use of the Signs.
MODIFICATIONS; INSPECTION.
The Franchisee may not alter, remove, change, modify, or redesign the Signs
unless approved by Elephant & Castle in writing. Elephant & Castle will have
the unequivocal and unilateral right to redesign the plans and specifications
for the Signs during the term of this Agreement without the approval or
consent of the Franchisee. Within thirty (30) days after receipt of written
notice from Elephant & Castle, the Franchisee must, at its expense, either
modify or replace the Signs so that the Signs displayed at the Franchised
Location will comply with the redesigned plans and specifications as issued
by Elephant & Castle. The Franchisee will not be required to modify or
replace the Signs more than once every five (5) years.
TELECOMMUNICATION AND COMPUTER EQUIPMENT
TELECOMMUNICATION EQUIPMENT.
The Franchisee will, at its sole expense, obtain and maintain at all times
during the term of this Agreement, the telephone answering equipment,
electronic telephone facsimile ("fax") equipment, and such other
telecommunications equipment as may from time to time be required by Elephant
& Castle for use in the operation of the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant business. At all times during the
term of this Agreement, all telecommunication and fax equipment must be in
compliance with the then-current standards and specifications established by
Elephant & Castle, and must be in operation to send and receive information
at such times as may be required by Elephant & Castle.
SATELLITE AND CABLE TELEVISION.
The Franchisee will, at its sole expense, obtain, maintain and provide for
viewing by the customers in the Franchisee's Restaurant, those cable and
satellite television stations, networks and/or systems as may be specified in
writing from time to time by Elephant & Castle. The Franchisee will, at its
sole expense, obtain and maintain all services and equipment necessary to
receive and display such cable and satellite television stations in
accordance with the Standard Operations Manual.
COMPUTER HARDWARE.
The Franchisee will, at its sole expense, purchase the computer hardware and
peripherals, including printers, monitors, modems and networking equipment
(the "Computer Equipment") that will serve as, or integrate with, the
Franchisee's point-of-sale cash register. All Computer Equipment must meet
the standards and specifications established by Elephant & Castle and must be
compatible with the software described in Article 13.4. The Franchisee will
update the Computer Equipment as may from time to time be required by
Elephant & Castle. The Franchisee will purchase a maintenance agreement for
on-site maintenance of the Franchisee's point-of-sale cash register.
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SOFTWARE.
The Franchisee will purchase the computer software and operating system
specified by Elephant & Castle, including software for accounting and cost
control, which meets the specifications described in the Standard Operations
Manual. The Franchisee will, from time to time, update the computer software to
meet the then-current standards and specifications issued by Elephant & Castle.
ACCESS TO COMPUTER DATA.
Elephant & Castle will, at all times during the term of this Agreement, have
the right to directly access all sales, financial, marketing, management and
other business information and all other data maintained and stored by the
Franchisee in its computer databases ("Data and Information"). The Franchisee
will, at its expense, configure its computer and maintain the communications
software and hardware necessary to permit Elephant & Castle to access the
Data and Information by modem and telephone lines and to upload and download
the Data and Information and other business information from and to the
Franchisee's computers, computer data bases and software programs.
INTERNET PROVIDER.
The Franchisee will, at all times during the term of this Agreement, at the
Franchisee's expense, have access to the Internet through the Microsoft
Network, America Online, Prodigy, CompuServe or other Internet access
provider designated or approved by Elephant & Castle.
E-MAIL ADDRESS.
The Franchisee will, at all times during the term of this Agreement, maintain
an e-mail address on the Internet. The Franchisee's e-mail address will be
provided to Elephant & Castle and will be used as a method for the Franchisee
and Elephant & Castle to communicate with each other and to transmit
documents and other information. The Franchisee will not use the words
"Elephant & Castle-Registered Trademark-" as any part of its e-mail address
or its domain name if a Home Page is maintained by the Franchisee on the
Internet. The Franchisee will review its e-mail at least once a day and will
respond to all e-mails within twenty-four (24) hours, except for weekend
e-mails, which will be answered every Monday.
INSURANCE
GENERAL LIABILITY INSURANCE.
The Franchisee will procure and maintain in full force and effect, at its
sole cost and expense, a general liability insurance policy with coverage of
at least one million dollars ($1,000,000) per occurrence insuring the
Franchisee, Elephant & Castle and their respective officers, directors,
agents and employees from and against any and all loss, liability, claim or
expense of any kind whatsoever, including bodily injury, personal injury,
food poisoning or other sickness, death, property damage, products liability
and all other occurrences resulting from the condition, operation, use,
business or occupancy of the Franchisee's Restaurant and the Franchised
Location, including the surrounding premises or area, the parking area and
the sidewalks of the Franchised Location.
LIQUOR LIABILITY INSURANCE.
The Franchisee will procure and maintain in full force and effect, at its
sole cost and expense, liquor liability insurance with coverage of at least
two million dollars ($2,000,000) per occurrence insuring the Franchisee,
Elephant & Castle and their respective officers, directors, agents and
employees from any and all loss, liability, claim or expense of any kind
whatsoever, including bodily injury, personal injury, death, property damage
and all other occurrences resulting from the sale of liquor by the Franchisee
or any of the Franchisee's employees in connection with the Franchisee's
Restaurant.
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AUTOMOBILE LIABILITY INSURANCE.
The Franchisee will procure and maintain in full force and effect, at its sole
cost and expense, automobile liability insurance with coverage of at least one
million dollars ($1,000,000) per occurrence insuring the Franchisee, Elephant &
Castle and their respective officers, directors, agents and employees from any
and all loss, liability, claim or expense of any kind whatsoever resulting from
the use, operation or maintenance of all automobiles or vehicles owned by the
Franchisee or used by the Franchisee or any of the Franchisee's employees
(including automobiles owned or leased by any employee of the Franchisee) in
connection with the Franchisee's Restaurant.
PROPERTY INSURANCE.
The Franchisee will procure and maintain in full force and effect, at its sole
cost and expense, "all risks" property insurance coverage, which will include
fire and extended coverage, for the inventory, machinery, equipment, fixtures
and furnishings owned or leased by the Franchisee and used by the Franchisee at
the Franchised Location. The Franchisee's property insurance policy (including
fire and extended coverage) must have coverage limits equal to at least
"replacement" cost.
BUILDING INSURANCE.
If the Franchisee, or any of the Franchisee's Owners, owns, either directly or
indirectly, the building or the business premises at the Franchised Location,
then the Franchisee will insure the building or the business premises for and
against all risk, loss and damages in an amount equal to at least "replacement"
cost. If the Franchised Location is either partially or completely destroyed by
fire or any other catastrophe, then the Franchisee will use the insurance
proceeds to repair or reconstruct the Franchised Location and recommence
business as soon as reasonably possible.
UMBRELLA LIABILITY.
The Franchisee will, at its sole cost and expense, purchase and maintain
umbrella liability insurance in the amount of one million dollars ($1,000,000)
that will provide liability insurance coverage for any liability incurred by the
Franchisee in excess of the primary general liability, liquor liability,
automobile liability and other liability insurance coverage carried by the
Franchisee.
INSURANCE REQUIRED BY LAW.
The Franchisee will, at its sole cost and expense, procure and maintain all
other insurance required by state or federal law, including workers'
compensation insurance for its employees.
INSURANCE COMPANIES; EVIDENCE OF COVERAGE.
All insurance companies providing coverage to the Franchisee must be acceptable
to and approved by Elephant & Castle, and must be licensed in the state where
coverage is provided. The Franchisee will provide Elephant & Castle with
certificates of insurance evidencing the insurance coverage required of the
Franchisee pursuant to this Article no later than the date the Franchisee opens
for business, and the Franchisee will immediately provide, upon expiration,
change or cancellation, a new certificate of insurance to Elephant & Castle.
DEFENSE OF CLAIMS.
All liability insurance policies procured and maintained by the Franchisee in
connection with the Franchisee's Restaurant will require the insurance company
to provide and pay for attorneys to defend any legal actions, lawsuits or claims
brought against the Franchisee, Elephant & Castle, and their respective
officers, directors, agents and employees.
RIGHTS OF ELEPHANT & CASTLE.
All insurance policies procured and maintained by the Franchisee pursuant to
this Article will name Elephant & Castle as an additional insured, will contain
endorsements by the insurance companies
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waiving all rights of subrogation against Elephant & Castle, and will
stipulate that Elephant & Castle will receive copies of all notices of
cancellation, nonrenewal, or coverage reduction or elimination at least
thirty (30) days prior to the effective date of such cancellation, nonrenewal
or coverage change.
LICENSING OF MARKS AND RESTAURANT SYSTEM
RIGHT TO LICENSE MARKS.
Elephant & Castle warrants that, except as otherwise provided for herein, it has
the right to grant the Franchise and to license the Marks and the Restaurant
System to the Franchisee. Any and all improvements made by the Franchisee to the
Marks or the Restaurant System will be the sole and absolute property of
Elephant & Castle, which will have the exclusive right to register and protect
all such improvements in its name in accordance with applicable law. The
Franchisee's right to use and identify with the Marks and the Restaurant System
will exist concurrently with the term of this Agreement and such use by the
Franchisee will inure exclusively to the benefit of Elephant & Castle.
CONDITIONS TO LICENSE OF MARKS.
Elephant & Castle hereby grants to the Franchisee the nonexclusive personal
right to use the Marks and the Restaurant System in accordance with the
provisions of this Agreement. The Franchisee's nonexclusive personal right to
use "Elephant & Castle-Registered Trademark-" as the name of the Franchisee's
Restaurant and its right to use the Marks and the Restaurant System applies
only to the Franchisee's Restaurant at the Franchised Location and such
rights will exist only so long as the Franchisee fully performs and complies
with all of the conditions, terms and covenants of this Agreement.
"Nonexclusive," for the purposes of this Article, will mean that Elephant &
Castle has or will grant franchises to other franchisees authorizing such
franchisees to operate Elephant & Castle-Registered Trademark- Restaurants in
conformity with the Restaurant System using the name "Elephant &
Castle-Registered Trademark-" and the other Marks, and that Elephant &
Castle, its affiliates and/or subsidiaries have operated and will operate
Elephant & Castle-Registered Trademark- Restaurants.
FRANCHISEE'S USE OF MARKS.
The Franchisee will only use the Marks designated by Elephant & Castle and
only in the manner authorized and permitted by Elephant & Castle. The
Franchisee's right to use the Marks is limited to the uses set forth in this
Agreement and any unauthorized use will constitute an infringement of the
rights of Elephant & Castle under this Agreement and under the Xxxxxx Act (15
U.S.C. Sections 1051, ET SEQ.). The Franchisee will not have or acquire any
rights in any of the Marks or the Restaurant System other than the right of
use as provided herein. The Franchisee will have the right to use the Marks
and the Restaurant System only in the manner prescribed, directed and
approved by Elephant & Castle in writing and will not have the right to use
the Marks in connection with the sale of any products or services other than
those prescribed or approved by Elephant & Castle for sale by the Franchisee.
If, in the judgment of Elephant & Castle, the acts of the Franchisee infringe
upon or demean the goodwill, uniformity, quality or business standing
associated with the Marks or the Restaurant System, then the Franchisee will,
upon written notice from Elephant & Castle, immediately modify its use of the
Marks or the Restaurant System in the manner prescribed by Elephant & Castle
in writing.
ADVERSE CLAIMS TO MARKS.
If there are any claims by any third party that its rights to any or all of the
Marks are superior to those of Elephant & Castle and if the attorneys for
Elephant & Castle are of the opinion that such claim by a third party is legally
meritorious, or if there is an adjudication by a court of competent jurisdiction
that any party's rights to the Marks are superior to those of Elephant & Castle,
then upon receiving written notice from Elephant & Castle, the Franchisee will,
at its sole expense, immediately adopt and use the changes and amendments to the
Marks that are specified by Elephant & Castle. If so specified, the
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Franchisee will immediately cease using the Marks specified by Elephant &
Castle, and will, as soon as reasonably possible, commence using the new
trademarks, trade names, service marks, logos, designs and commercial symbols
designated by Elephant & Castle in writing at the Franchised Location, and in
connection with all advertising, marketing and promotion of the Franchisee's
Restaurant. The Franchisee will not make any changes or amendments whatsoever
to the Marks or the Restaurant System unless specified or approved in advance
by Elephant & Castle in writing.
DEFENSE OR ENFORCEMENT OF RIGHTS TO MARKS.
The Franchisee will have no right to and will not defend or enforce any rights
associated with the Marks or the Restaurant System in any court or other
proceedings for or against imitation, infringement, prior use or for any other
claim or allegation. The Franchisee will give Elephant & Castle immediate
written notice of any and all claims or complaints made against or associated
with the Marks and the Restaurant System and will, without compensation for its
time and at its expense, cooperate in all respects with Elephant & Castle in any
lawsuits or other proceedings involving the Marks and the Restaurant System.
Elephant & Castle will have the sole and absolute right to determine whether it
will commence or defend any litigation involving the Marks and/or the Restaurant
System, and the cost and expense of all litigation incurred by Elephant &
Castle, including attorneys' fees, specifically relating to the Marks or the
Restaurant System will be paid by Elephant & Castle.
TENDER OF DEFENSE.
If the Franchisee is named as a defendant or party in any action involving the
Marks or the Restaurant System and if the Franchisee is named as a defendant or
party solely because the plaintiff or claimant is alleging that the Franchisee
does not have the right to use the Marks or the Restaurant System licensed by
Elephant & Castle to the Franchisee at the Franchised Location pursuant to this
Agreement, then the Franchisee will have the right to tender the defense of the
action to Elephant & Castle and Elephant & Castle will, at its expense, defend
the Franchisee in the action provided that the Franchisee has tendered defense
of the action to Elephant & Castle within seven (7) days after receiving service
of the pleadings or the Summons and Complaint relating to the action. Elephant &
Castle will indemnify and hold the Franchisee harmless from any damages assessed
against the Franchisee in any actions resulting solely from the Franchisee's
proper and authorized use of the Marks and the Restaurant System at the
Franchised Location if the Franchisee has timely tendered defense of the action
to Elephant & Castle.
FRANCHISEE'S RIGHT TO PARTICIPATE IN LITIGATION.
The Franchisee may, at its expense, retain an attorney to represent it
individually in all litigation and court proceedings involving the Marks or the
Restaurant System, and may do so with respect to matters involving only the
Franchisee (I.E., not involving Elephant & Castle or its interests); however,
Elephant & Castle and its attorneys will control and conduct all litigation
involving the Marks or the Restaurant System and the rights of Elephant &
Castle. Except as expressly provided for herein, Elephant & Castle will have no
liability to the Franchisee for any costs that the Franchisee may incur in any
litigation involving the Marks or the Restaurant System, and the Franchisee will
pay for all costs, including attorneys' fees, that it may incur in any
litigation or proceeding arising as a result of matters referred to under this
Article, unless it tenders the defense to Elephant & Castle in a timely manner
pursuant to and in accordance with Article 15.6.
TRAINING PROGRAM; OPENING ASSISTANCE
TRAINING.
Elephant & Castle will provide a training program for the Franchisee (or the
Franchisee's Operating Partner), the Franchisee's General Manager and the
Franchisee's Chef at an approved training site designated by Elephant &
Castle, to educate, familiarize and acquaint them with the Restaurant
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System and the operations of the Elephant & Castle-Registered Trademark-
Restaurant. The Elephant & Castle training program will include on-the-job
instruction on basic business procedures, equipment operation and
maintenance, hiring and training of employees, scheduling, advertising and
promotion, purchasing procedures, food preparation, food safety, food
presentation, food quality, food portions, liquor service, food and beverage
inventory and cost control, customer service, janitorial service, general
maintenance and other topics selected by Elephant & Castle. The Franchisee
(or the Franchisee's Operating Partner), the Franchisee's General Manager and
the Franchisee's Chef must successfully complete the Elephant & Castle
training program and be certified in writing by Elephant & Castle prior to
commencing the business operations of the Franchisee's Restaurant. The
training program will be scheduled by Elephant & Castle in its sole
discretion and will be for a minimum of five (5) consecutive days for the
Franchisee (or the Franchisee's Operating Partner), and for a minimum of
thirty (30) consecutive days for the Franchisee's General Manager and for the
Franchisee's Chef. The Franchisee (or the Franchisee's Operating Partner),
the Franchisee's General Manager and the Franchisee's Chef must begin
training within ninety (90) days after the date of this Agreement, unless the
parties agree in writing to a different date due to conflicts with the
construction or opening schedule for the Restaurant. If the Franchisee (or
the Franchisee's Operating Partner), the Franchisee's General Manager or the
Franchisee's Chef do not successfully complete the required training program
within one hundred twenty (120) days after the date of this Agreement, then
such person(s) will not be permitted or authorized to participate in the
operations of the Franchisee's Restaurant, and Elephant & Castle will have
the right to terminate this Agreement pursuant to Article 4.2.
CHANGES IN PERSONNEL.
The Franchisee must at all times employ General Managers and Chefs who have
successfully completed the prescribed training program and, consequently,
have been certified in writing by Elephant & Castle to participate in the
operation of the Franchisee's Elephant & Castle-Registered Trademark-
Restaurant. The Franchisee will immediately notify Elephant & Castle in
writing of any personnel changes in the positions of General Manager or Chef
of the Franchisee's Restaurant. If the Franchisee hires a new General Manager
or a new Chef who has not successfully completed the required Elephant &
Castle training program, then that person must begin the training program
within thirty (30) days after the date of hire by the Franchisee, and must
attend and successfully complete the training program. If, in the judgment of
Elephant & Castle, the new General Manager or the new Chef does not
successfully complete the required Elephant & Castle training program, then
the Franchisee will not permit that person to continue to participate in the
operation of the Franchisee's Restaurant.
INITIAL TRAINING OF NEW PERSONNEL.
The initial training program for new General Managers and new Chefs, as required
by Article 16.2 of this Agreement, will be conducted by Elephant & Castle either
at the Franchised Location or at another location designated by Elephant &
Castle at the sole discretion of Elephant & Castle. If Elephant & Castle
provides the initial training program for a new General Manager or a new Chef at
the Franchised Location, then the Franchisee will pay Elephant & Castle the
then-current per day on-site training fee and reimburse Elephant & Castle for
all expenses it incurs in connection with providing the training at the
Franchised Location, including travel, lodging, food, and automobile rental
costs. If the initial training program of new personnel is provided by Elephant
& Castle at another site designated by Elephant & Castle other than the
Franchised Location, then there will be no per day training fee and the
Franchisee will not be required to reimburse Elephant & Castle for its expenses.
PAYMENT OF SALARIES AND EXPENSES.
The Franchisee will pay the salaries, fringe benefits, payroll taxes,
unemployment compensation, workers' compensation insurance, lodging, food,
automobile rental, travel costs and all other expenses for all persons who
attend any type of Elephant & Castle training program on behalf of the
Franchisee.
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OPENING ASSISTANCE.
After the Franchisee (or the Franchisee's Operating Partner), the
Franchisee's General Manager and the Franchisee's Chef have successfully
completed the Elephant & Castle training program and have been certified,
Elephant & Castle will arrange for a training coordinator, a host/hostess
trainer, a barkeeping trainer, four (4) kitchen staff trainers, and five (5)
service staff trainers to be at the Franchised Location for a period of not
less than fourteen (14) consecutive days to provide opening assistance to the
Franchisee. The opening assistance will include implementing internal
controls, assistance with training employees, and implementing the
Franchisee's initial business operations. The Franchisee will pay Elephant &
Castle an opening assistance fee of twenty thousand dollars ($20,000) within
five (5) days after the date the Franchisee opens its Restaurant for
business. The Franchisee will accept and fully cooperate with the opening
assistance provided by Elephant & Castle, and will not open and commence
initial business operations until Elephant & Castle has given the Franchisee
written approval to open the Franchisee's Restaurant.
ADVISORY ASSISTANCE.
If, after the opening of the Franchisee's Restaurant, Elephant & Castle provides
any advisory management, operations or other assistance to the Franchisee at the
Franchised Location, then within five (5) days after receipt of an invoice from
Elephant & Castle specifying the amount owed, the Franchisee will pay Elephant &
Castle the then-current per diem fees charged by Elephant & Castle and reimburse
Elephant & Castle for the expenses Elephant & Castle incurred in connection with
providing the advisory assistance to the Franchisee at the Franchised Location,
including travel costs, lodging, food and automobile rental costs.
HIRING AND TRAINING OF EMPLOYEES BY FRANCHISEE.
The Franchisee will hire all employees of the Restaurant, will be exclusively
responsible for the terms of their employment and compensation, and will
implement a training program for employees of the Restaurant in compliance with
the Standard Operations Manual. The Franchisee will at all times maintain a
staff of trained employees sufficient to efficiently operate the Restaurant in
compliance with Elephant & Castle's standards.
ASSIGNMENT
ASSIGNMENT BY ELEPHANT & CASTLE.
This Agreement may be unilaterally assigned by Elephant & Castle to a person or
entity without the approval of the Franchisee and will inure to the benefit of
the successors and assigns of Elephant & Castle. Elephant & Castle will provide
the Franchisee with written notice of any such assignment, and the assignee will
be required to fully perform all obligations of Elephant & Castle under this
Agreement.
ASSIGNMENT BY FRANCHISEE TO OWNED OR CONTROLLED ENTITY.
If the Franchisee is an individual or a partnership, this Agreement may be
transferred by the Franchisee to a corporation or limited liability company
that is owned or controlled by the Franchisee without paying any transfer
fee, provided that: (a) the Franchisee and the shareholders who own the
voting capital stock of the assignee corporation or the members who own the
membership interests of the assignee limited liability company sign or have
signed a personal guaranty in the form attached to this Agreement; (b) the
Franchisee furnishes prior written proof to Elephant & Castle substantiating
that the assignee corporation or limited liability company will be
financially able to perform all of the terms and conditions of this
Agreement; and (c) none of the shareholders or members operate, franchise,
develop, manage or control any Anglo/British style pub or related restaurant
concept that is in any way similar to or competitive with the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant. The Franchisee will give
Elephant & Castle fifteen (15) days prior written notice of the assignment of
this Agreement to a corporation or limited liability company owned or
controlled by the Franchisee;
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FRANCHISE AGREEMENT F-98 426304 9
however, the assignment of this Agreement will not be valid or effective
until Elephant & Castle has received the documents which its attorneys deem
reasonably necessary to properly and legally document the assignment of this
Agreement to the corporation or limited liability company as provided herein.
ASSIGNMENT BY INDIVIDUAL FRANCHISEE IN EVENT OF DEATH OR PERMANENT
DISABILITY.
If the Franchisee is an individual, then in the event of the death or
permanent disability of the Franchisee, this Agreement may be assigned,
transferred or bequeathed by the Franchisee to any designated person or
beneficiary without the payment of any transfer fee. However, the assignment
of this Agreement to the transferee, assignee or beneficiary of the
Franchisee will be subject to the applicable provisions of Article 17.6, and
will not be valid or effective until Elephant & Castle has received the
properly executed legal documents which its attorneys deem necessary to
properly and legally document the transfer, assignment or bequest of this
Agreement. The transferee, assignee or beneficiary must agree to be
unconditionally bound by the terms and conditions of this Agreement and to
personally guarantee the performance of the Franchisee's obligations under
this Agreement. Furthermore, the transferee, assignee or beneficiary must
complete the initial training program as set forth in Article 16.1 of this
Agreement. The training will be conducted by Elephant & Castle at a location
designated by Elephant & Castle. There will be no charge to the transferee,
assignee or beneficiary for the initial training program, but that person's
salary and expenses will be paid in accordance with Article 16.4 of this
Agreement.
SALE OF OWNERSHIP INTERESTS TO PUBLIC.
If the Franchisee is a corporation or limited liability company and intends
to sell any Ownership Interests to the public under any foreign, federal or
state securities laws, then the Franchisee will provide Elephant & Castle
with written notice of the proposed public offering and with a copy of the
proposed placement memorandum, offering circular or prospectus for its review
at least twenty (20) days prior to the time that any such document is filed
with any foreign or state securities commission or the Securities and
Exchange Commission. The Franchisee's Owner(s), prior to the public offering
will, at all times, retain ownership of at least a fifty-one percent (51%) of
the Ownership Interests of the Franchisee. Elephant & Castle will have the
absolute right to attend all "due diligence" meetings held in preparation for
the offer to sell Ownership Interests to the public, and the Franchisee will
give Elephant & Castle at least five (5) business days prior written notice
of such meetings. The Franchisee will pay Elephant & Castle twenty thousand
dollars ($20,000) for the legal, accounting and related due diligence costs
incurred by Elephant & Castle in connection with any public offering. This
amount will be payable in full within thirty (30) days after the date on
which the Franchisee provides written notice of the proposed public offering
to Elephant & Castle and will be payable even if the Franchisee is unable to
complete the public offering. The Franchisee will not offer any Ownership
Interests using or under the name "Elephant & Castle-Registered Trademark-,"
or any similar name. The Franchisee will not have the right to sell any
Ownership Interests to the public or to any other person or entity until the
Franchisee has complied in all respects with the applicable provisions of
this Agreement.
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FRANCHISE AGREEMENT F-99 426304 9
ELEPHANT & CASTLE'S WARRANT.
The Franchisee hereby agrees to grant to Elephant & Castle, effective upon
the sale of any Ownership Interests to the public, a warrant or an option (a
"Warrant") to purchase for a period of five (5) years up to five percent (5%)
of the Ownership Interests purchased in such offering at an exercise price
equal to the purchase price of the Ownership Interests in such offering. The
Warrant will contain customary anti-dilution provisions, incidental or
"piggyback" registration rights and a cashless conversion right whereby
Elephant & Castle will have the right to require the Franchisee to convert
the Warrant into Ownership Interests using the current market value of the
Ownership Interests without payment by Elephant & Castle of any cash exercise
price at any time prior to its expiration as provided for in this provision.
ASSIGNMENT BY FRANCHISEE.
This Agreement and the rights granted to the Franchisee pursuant to this
Agreement may be sold, assigned or transferred by the Franchisee only with
the prior written approval of Elephant & Castle. Elephant & Castle will not
unreasonably withhold its written consent to any sale, assignment or transfer
of this Agreement, if the sale, assignment or transfer does not violate
Article 17.9 of this Agreement and if the Franchisee and/or the transferee
franchisee comply with the following conditions: (a) the Franchisee has
provided written notice to Elephant & Castle of the proposed sale, assignment
or transfer of this Agreement at least ninety (90) days prior to the
transaction; (b) all of the Franchisee's monetary obligations due to Elephant
& Castle have been paid in full, and the Franchisee is not otherwise in
default under this Agreement; (c) the Franchisee has executed a written
agreement, in a form satisfactory to Elephant & Castle, in which the
Franchisee agrees to observe all applicable provisions of this Agreement,
including the provisions with obligations and covenants that continue beyond
the expiration or termination of this Agreement, which includes the covenants
not to compete contained in Article 21 of this Agreement; (d) Elephant &
Castle and the Franchisee have executed a joint and mutual release, in a form
satisfactory to Elephant & Castle, of any and all claims against Elephant &
Castle or the Franchisee and of any and all claims against their officers,
directors, shareholders, Owners, agents and employees, in their corporate and
individual capacities arising from, in connection with, or as a result of
this Agreement or the Franchisee's purchase of the Franchise including,
without limitation, all claims arising under any federal or state franchising
laws or any other federal, state or local law, rule or ordinance; provided,
however, that Elephant & Castle and the Franchisee may exclude from the
coverage of the release any prior or concurrent written agreements between
them; (e) the transferee franchisee has demonstrated to the satisfaction of
Elephant & Castle that he, she or it meets the managerial, financial and
business standards required by Elephant & Castle for new franchisees,
possesses a good business reputation and credit rating, and possesses the
aptitude and ability to operate the Elephant & Castle-Registered Trademark-
Restaurant in an economic and businesslike manner (as may be evidenced by
prior related business experience or otherwise); (f) the transferee
franchisee and all parties having a legal or beneficial interest in the
transferee franchisee including, if applicable, the transferee franchisee's
Owners and the Personal Guarantors, execute the transfer and assignment
agreement between Elephant & Castle, the Franchisee and the transferee
franchisee and such other ancillary agreements as Elephant & Castle or its
legal counsel may require for the transfer of this Agreement for the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant to the
transferee franchisee; (g) the transferee franchisee has purchased the
Franchised Location, acquired the lease for the Franchised Location or
otherwise acquired possession of and access to the Franchised Location for a
term consistent with the remaining term of this Agreement; (h) the transferee
franchisee has purchased or otherwise acquired a valid liquor license and a
valid food service license for the Elephant & Castle-Registered Trademark-
Restaurant at the Franchised Location; and (i) the transferee franchisee has
successfully completed the initial training program as set forth in Article
16.1 of this Agreement.
ACKNOWLEDGMENT OF RESTRICTIONS.
The Franchisee acknowledges and agrees that the restrictions on transfer
imposed herein are reasonable and necessary to protect the Restaurant System
and the Marks, as well as the reputation
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FRANCHISE AGREEMENT F-100 426304 9
and image of Elephant & Castle, and are for the protection of Elephant &
Castle, the Franchisee and all other franchisees who own and operate Elephant
& Castle-Registered Trademark- Restaurants. Any assignment or transfer
permitted by this Article will not be effective until Elephant & Castle
receives a completely executed copy of all transfer documents and Elephant &
Castle consents to the transfer in writing. Any attempted assignment or
transfer made without complying with the requirements of this Article will be
void.
TRANSFER FEE.
If this Agreement is assigned, transferred or bequeathed to another person or
entity, or if the Franchisee's Owner(s) transfers in the aggregate controlling
interest in the Franchisee to a third party, then except as provided for in
Article 17.2 or Article 17.3, the Franchisee will pay Elephant & Castle on or
before the date of transfer a transfer fee of five thousand dollars ($5,000) to
cover the costs incurred by Elephant & Castle in connection with the transfer,
including attorneys' fees, accountants' fees, out-of-pocket expenses, long
distance telephone calls, administrative costs and the time of its employees and
officers. The transfer fee also covers the cost to Elephant & Castle to provide
the initial training program to the transferee franchisee at the location
designated by Elephant & Castle. However, the transfer fee does not cover the
salary of or expenses incurred by the transferee franchisee in connection with
attending the initial training program, and salary and expenses of that person
will be paid in accordance with Article 16.5 of this Agreement.
TRANSFER TO COMPETITOR PROHIBITED.
The Franchisee and the Franchisee's Owners will not sell, assign or transfer
this Agreement or their Ownership Interests in the Franchisee or in the
Franchise to any person, partnership, corporation or entity that owns,
operates, franchises, develops, consults with, manages, is involved in, or
controls any Anglo/British style pub restaurant business that is in any way
competitive with an Elephant & Castle-Registered Trademark- Restaurant. If
Elephant & Castle refuses to permit a transfer of this Agreement under this
Article, then the Franchisee's and the Franchisee's Owners only remedy will
be to have an arbitrator determine whether the proposed transferee is a
competitor of Elephant & Castle.
TERMINATION RIGHTS OF ELEPHANT & CASTLE
CONDITIONS OF BREACH.
In addition to its other rights of termination contained in this Agreement,
Elephant & Castle will have the right to terminate this Agreement if: (a) the
Franchisee fails to open and commence operations of its Elephant &
Castle-Registered Trademark-Restaurant within twelve (12) months after the
date of this Agreement or when the Franchised Location is ready for the
Franchisee's occupancy, whichever is earlier; (b) the Franchisee violates any
material provision, term or condition of this Agreement including, but not
limited to, the failure to timely pay the Initial Fee, any Continuing Fees,
or any other monetary obligations or fees due pursuant to this Agreement; (c)
the Franchisee or any of its directors, officers or majority Owners are
convicted of, or plead guilty to or no contest to, a charge of violating any
law relating to the Franchisee's Elephant & Castle-Registered
Trademark-Restaurant, or any felony; (d) the Franchisee fails to timely pay
any of its obligations or liabilities due and owing to Elephant & Castle,
suppliers, banks, purveyors, other creditors or to any federal, state or
municipal government (including, if applicable, federal and state income,
sales, property, withholding and unemployment taxes); (e) the Franchisee is
determined to be insolvent within the meaning of applicable state or federal
law, any involuntary petition for bankruptcy is filed against the Franchisee,
or the Franchisee files for bankruptcy or is
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FRANCHISE AGREEMENT F-101 426304 9
adjudicated a bankrupt under applicable state or federal law; (f) the
Franchisee makes an assignment for the benefit of creditors or enters into
any similar arrangement for the disposition of its assets for the benefit of
creditors; (g) any check issued by the Franchisee is dishonored because of
insufficient funds (except where the check is dishonored because of an error
in bookkeeping or accounting) or closed accounts; (h) the Franchisee
voluntarily or otherwise abandons the franchised Restaurant; (i) the
Franchisee is involved in any act or conduct which materially impairs the
goodwill associated with the name "Elephant & Castle-Registered Trademark-"
or any other Marks or the Restaurant System; (j) the lease for the Franchised
Location is terminated or canceled for non-payment of rent or other legal
reasons, or the Franchisee otherwise loses possession of all or a significant
portion of the Franchised Location; (k) the Franchisee's food service license
or liquor license for the Franchised Location is terminated or canceled for
any reason, or the Franchisee otherwise loses the food service license or
liquor license for its Elephant & Castle-Registered Trademark- Restaurant;
(l) the Franchisee fails to timely file any federal or state income or sales
tax return or fails to timely pay any federal or state income or sales taxes,
or (m) the Franchisee fails or refuses to provide the documents, records and
other materials requested by Elephant & Castle to substantiate the Monthly
Reports and Financial Statements pursuant to Article 7.3 or to produce and
permit Elephant & Castle to audit the Franchisee's Financial Records in
accordance with Article 7.5 of this Agreement.
NOTICE OF BREACH.
Except as provided in Article 4.2, Article 18.5 and Article 18.6 of this
Agreement, Elephant & Castle will not have the right to terminate this
Agreement until: (a) written notice setting forth the alleged breach in
detail has been delivered to the Franchisee by Elephant & Castle; and (b)
after receiving the written notice, the Franchisee fails to correct the
alleged breach within the period of time specified by applicable law. If
applicable law does not specify a time period to correct an alleged breach,
then the Franchisee will have thirty (30) days after receipt of the written
notice to correct the alleged breach, except where the written notice states
that the Franchisee is delinquent in the payment of any Initial Fees,
Continuing Fees or other fees payable to Elephant & Castle pursuant to this
Agreement, in which case the Franchisee will have ten (10) days after receipt
of written notice to correct the breach by making full payment (including
administrative fees and interest as provided for herein) to Elephant &
Castle. If the Franchisee fails to correct the alleged breach set forth in
the written notice within the applicable period of time, then this Agreement
may be terminated by Elephant & Castle as provided for in this Agreement. For
the purposes of this Agreement, an alleged breach of this Agreement by the
Franchisee will be deemed to be "corrected" if both Elephant & Castle and the
Franchisee agree in writing that the alleged breach has been corrected.
ARBITRATION.
If the Franchisee notices arbitration in accordance with Article 23 of this
Agreement within the time period established in Article 18.2 for correcting
the alleged breach, then Elephant & Castle will not have the right to
terminate this Agreement until the facts of the alleged breach have been
submitted to arbitration, the arbitrator determines that the Franchisee has
breached this Agreement and the Franchisee fails to correct the breach within
the applicable time period. If the arbitrator determines that the Franchisee
has violated or breached this Agreement as alleged by Elephant & Castle in
the written notice given to the Franchisee, then unless applicable law
specifies otherwise, the Franchisee will have thirty (30) days from the date
the arbitrator issues a written determination on the matter to correct the
specified breach or violation of this Agreement, except where the
Franchisee's breach is for failure to pay any fees or other payments to
Elephant & Castle, in which case the Franchisee will have ten (10) days to
make full payment, including all interest and administrative fees, to
Elephant & Castle. If the Franchisee does timely correct the specified breach
or violation of this Agreement, then this Agreement will remain in full force
and effect. For the purpose of this Agreement, any controversy or dispute on
the issue of whether the Franchisee has timely corrected the specified breach
or violation of this Agreement will also be subject to arbitration as
provided for herein. The time limitations set forth in this Article within
which the Franchisee may demand arbitration of a dispute or controversy
relating
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FRANCHISE AGREEMENT F-102 426304 9
to the right of Elephant & Castle to terminate this Agreement for an alleged
breach are mandatory. If the Franchisee fails to comply with the time
limitations set forth in this Article, then Elephant & Castle may terminate
this Agreement as provided for herein.
NOTICE OF TERMINATION.
Except as provided in Article 18.5 and Article 18.6, if Elephant & Castle has
complied with the provisions of Article 18.2 and the Franchisee has not
corrected the alleged breach set forth in the written notice within the time
period specified in this Agreement, then Elephant & Castle will have the
absolute right to terminate this Agreement by giving the Franchisee written
notice stating to the Franchisee that this Agreement is terminated and in
that event the effective date of termination of this Agreement will be the
day the written notice of termination is received by the Franchisee.
IMMEDIATE TERMINATION RIGHTS OF ELEPHANT & CASTLE.
Elephant & Castle will have the absolute right, unless precluded by
applicable law, to immediately terminate this Agreement if: (a) the
Franchisee or any of its directors, officers or majority Owners are convicted
of, or plead guilty to or no contest to a charge of violating any law
relating to the Franchisee's Elephant & Castle-Registered Trademark-
Restaurant, or any felony; (b) the Franchisee is deemed insolvent within the
meaning of applicable state or federal law, any involuntary petition for
bankruptcy is filed against the Franchisee, or the Franchisee files for
bankruptcy or is adjudicated a bankrupt under applicable state or federal
law; (c) the Franchisee makes an assignment for the benefit of creditors or
enters into any similar arrangement for the disposition of its assets for the
benefit of creditors; (d) the Franchisee voluntarily or otherwise abandons
the Restaurant; (e) the Franchisee fails or refuses to provide the documents,
records and other materials requested by Elephant & Castle to substantiate
the Monthly Reports and Financial Statements pursuant to Article 7.3 or to
produce and permit Elephant & Castle to audit the Franchisee's Financial
Records in accordance with Article 7.5 of this Agreement; (f) the Franchisee
is involved in any act or conduct which materially impairs the goodwill
associated with the Marks of Elephant & Castle or with the Restaurant System
and the Franchisee fails to correct the breach within twenty-four (24) hours
after receipt of written notice from Elephant & Castle of the breach; or (g)
the Franchisee violates any provision, term or condition of this Agreement
three (3) or more times during a twelve (12) month period, without regard to
whether the violations were of a similar or different nature or whether the
violations were corrected within the prescribed cure period after receipt of
written notice of the violations.
NOTICE OF IMMEDIATE TERMINATION.
Except as set forth in Article 18.5(f), if this Agreement is terminated by
Elephant & Castle pursuant to Article 18.5 above, then Elephant & Castle will
give the Franchisee written notice by personal service or prepaid registered
or certified mail that this Agreement is terminated and in that event the
effective date of termination of this Agreement will be the day the written
notice of termination is received by the Franchisee. If this Agreement is
terminated by Elephant & Castle pursuant to Article 18.5(f), then this
Agreement will terminate on the first minute of the twenty-fifth hour after
receipt of the written notice of termination if the Franchisee fails to
correct the alleged breach within twenty-four (24) hours after receiving the
written notice of termination.
OTHER REMEDIES.
Nothing in this Article will preclude Elephant & Castle from seeking other
remedies or damages under state or federal laws, common law, or under this
Agreement against the Franchisee including, but not limited to, attorneys' fees,
punitive damages and injunctive relief. If this Agreement is terminated by
Elephant & Castle pursuant to this Article, or if the Franchisee breaches this
Agreement by a wrongful termination or a termination that is not in strict
compliance with the terms and conditions of Article 19 of this Agreement, then
Elephant & Castle will be entitled to all damages from the Franchisee that
Elephant & Castle has sustained and will sustain in the future as a result of
the Franchisee's breach of this Agreement.
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FRANCHISEE'S TERMINATION RIGHTS
CONDITIONS OF BREACH.
The Franchisee will have the right to terminate this Agreement, as provided
herein, if Elephant & Castle violates any material provision, term or condition
of this Agreement, or fails to timely pay any material uncontested obligations
due and owing to the Franchisee.
NOTICE OF BREACH.
The Franchisee will not have the right to terminate this Agreement or to
commence any action, lawsuit or proceeding against Elephant & Castle for
breach of this Agreement, injunctive relief, violation of any state, federal
or local law (including alleged violations of franchise laws), violation of
common law (including allegations of fraud and misrepresentation),
rescission, general or punitive damages, or termination, unless and until:
(a) written notice setting forth the alleged breach or violation in detail
has been delivered to Elephant & Castle by the Franchisee; and (b) Elephant &
Castle fails to correct the alleged breach or violation within thirty (30)
days after receipt of the written notice. If Elephant & Castle fails to
correct the alleged breach or violation within thirty (30) days after
receiving written notice, then this Agreement may be terminated by the
Franchisee as provided for in this Agreement. For the purposes of this
Agreement, an alleged breach or violation of this Agreement by Elephant &
Castle will be deemed to be "corrected" if both Elephant & Castle and the
Franchisee agree in writing that the alleged breach or violation has been
corrected.
ARBITRATION.
If Elephant & Castle notices arbitration in accordance with Article 23 of this
Agreement within thirty (30) days after the date Elephant & Castle receives
written notice of any alleged breach of this Agreement from the Franchisee, then
the Franchisee will not have the right to terminate this Agreement until the
facts of the alleged breach have been submitted to arbitration, the arbitrator
determines that Elephant & Castle has breached this Agreement and Franchisee
fails to timely correct the breach as set forth in this Agreement. If the
arbitrator determines that Elephant & Castle has violated or breached this
Agreement as alleged by the Franchisee in the written notice given to Elephant &
Castle, then Elephant & Castle will have thirty (30) days after the date the
arbitrator issues a written determination on the matter to correct the specified
breach or violation of this Agreement, then this Agreement will remain in full
force and effect. If Elephant & Castle does timely correct the specified breach
or violation of this Agreement, then this Agreement will remain in full force
and effect. If Elephant & Castle does not correct the specified breach or
violation of this Agreement, then the Franchisee will have the right to
terminate this Agreement by giving Elephant & Castle written notice by personal
service or prepaid registered or certified mail that this Agreement is
terminated and in that event the effective date of termination of this Agreement
will be the day the written notice of termination is received by Elephant &
Castle. For the purpose of this Agreement, any controversy or dispute on the
issue of whether Elephant & Castle has timely corrected the specified breach or
violation of this Agreement will also be subject to arbitration as provided for
herein. The time limitation set forth in this Article within which Elephant &
Castle may demand arbitration of a dispute or controversy relating to the right
of the Franchisee to terminate this Agreement for an alleged breach is
mandatory. If Elephant & Castle fails to comply with the time limitation set
forth in this Article, then the Franchisee may terminate this Agreement as
provided for herein.
WAIVER.
The Franchisee must give Elephant & Castle immediate written notice of any
alleged breach or violation of this Agreement after the Franchisee has
knowledge of, believes, determines, is of the opinion, or becomes aware of
facts and circumstances reasonably indicating that there has been an alleged
breach or violation of this Agreement by Elephant & Castle. If the Franchisee
fails to give
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FRANCHISE AGREEMENT F-104 426304 9
written notice to Elephant & Castle as provided for herein of
any alleged breach or violation of this Agreement within one (1) year after
the date that the Franchisee has knowledge of, believes, determines, is of
the opinion that, or becomes aware of facts and circumstances reasonably
indicating that the Franchisee may have a claim under any state law, federal
law or common law because there has been an alleged breach or violation by
Elephant & Castle, then the alleged breach or violation by Elephant & Castle
will be deemed to be condoned, approved and waived by the Franchisee, the
alleged breach or violation by Elephant & Castle will not be deemed to be a
breach or violation of this Agreement by Elephant & Castle, and the
Franchisee will be barred from commencing any action against Elephant &
Castle for that specific alleged breach or violation.
INJUNCTIVE RELIEF.
Notwithstanding any of the foregoing provisions, if the Franchisee gives
Elephant & Castle written notice of an alleged breach or violation of this
Agreement or of any federal or state laws that give rise to a claim that the
Franchisee has the right to terminate this Agreement, then Elephant & Castle
will have the absolute right to immediately commence legal action against the
Franchisee to enjoin and prevent the termination of this Agreement by the
Franchisee without giving the Franchisee any notice and without regard to any
waiting period that may be contained in this Agreement. If Elephant & Castle
commences such legal action against the Franchisee, then the Franchisee will not
have the right to terminate this Agreement, unless and until a court of
competent jurisdiction has ruled on the merits that Elephant & Castle has
breached this Agreement in the manner alleged by the Franchisee, and then only
if Elephant & Castle fails to begin the actions necessary to correct the breach
or violation within sixty (60) days after a final judgment has been entered
against Elephant & Castle and all time for appeals by Elephant & Castle has
expired.
FRANCHISEE'S OBLIGATIONS UPON TERMINATION
TERMINATION OF USE OF MARKS; OTHER OBLIGATIONS.
If this Agreement is canceled or terminated for any reason or this Agreement
expires, then the Franchisee will: (a) within five (5) days after
termination, pay all Continuing Fees, other fees and other amounts due and
owing under this Agreement or under any other contract, promissory note or
other obligation due and owing by the Franchisee to Elephant & Castle; (b)
immediately return to Elephant & Castle by first class prepaid United States
mail the Manual, menus, advertising materials and all other printed materials
pertaining to the Restaurant; and (c) comply with all other applicable
provisions of this Agreement. Upon termination or expiration of this
Agreement for any reason, the Franchisee's right to use "Elephant &
Castle-Registered Trademark-," the other Marks and the Restaurant System will
terminate immediately.
ALTERATION OF FRANCHISED LOCATION.
If this Agreement expires or is terminated for any reason or if the
Franchised Location ever ceases to be used for the Franchisee's Elephant &
Castle-Registered Trademark-Restaurant, then within thirty (30) days after
the date of the expiration or termination of this Agreement, the Franchisee
will, at its expense, alter, modify and change both the exterior and interior
appearance of the building and the Franchised Location so that it will be
clearly distinguished from the standard appearance of an Elephant &
Castle-Registered Trademark- Restaurant. At a minimum, such changes and
modifications to the Franchised Location will include: (a) repainting and,
where applicable, recovering both the exterior and interior walls of the
Franchised Location with totally different colors, including removing any
distinctive colors, designs and paneling from the walls; (b) removing all
furniture, fixtures and decor items associated with an Elephant &
Castle-Registered Trademark- Restaurant and replacing them with other decor
items not of the general type and appearance customarily used in Elephant &
Castle-Registered Trademark-Restaurants; (c) removing all exterior and
interior Elephant & Castle-Registered Trademark- signs; and (d) immediately
discontinuing use of the approved wall decor items and window decals, and
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FRANCHISE AGREEMENT F-105 426304 9
refraining from using any items which may be confusingly similar to those
used in an Elephant & Castle-Registered Trademark- Restaurant.
CANCELLATION OF TELEPHONE DIRECTORY LISTINGS.
Upon termination or expiration of this Agreement, or if Elephant & Castle
acquires the Franchisee's Elephant & Castle-Registered Trademark- Restaurant
pursuant to this Agreement, Elephant & Castle will have the absolute right to
notify the telephone company and all listing agencies of the termination or
expiration of the Franchisee's right to use all telephone numbers and all
classified and other directory listings for the Restaurant and to authorize
the telephone company and all listing agencies to transfer to Elephant &
Castle or its assignee all telephone numbers and directory listings of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant. The
Franchisee acknowledges and agrees that Elephant & Castle has the absolute
right and interest in and to all telephone numbers and directory listings
associated with the Marks, and the Franchisee hereby authorizes Elephant &
Castle to direct the telephone company and all listing agencies to transfer
the Franchisee's telephone numbers and directory listings to Elephant &
Castle or to an assignee of Elephant & Castle, if this Agreement expires or
is terminated or if Elephant & Castle acquires the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant. The telephone company and all
listing agencies may accept this Agreement as evidence of the exclusive
rights of Elephant & Castle to such telephone numbers and directory listings
and this Agreement will constitute the authority from the Franchisee for the
telephone company and listing agency to transfer all such telephone numbers
and directory listings to Elephant & Castle. This Agreement will constitute a
release of the telephone company and listing agencies by the Franchisee from
any and all claims, actions and damages that the Franchisee may at any time
have the right to allege against them in connection with this Article.
CONTINUATION OF OBLIGATIONS.
The indemnities and covenants contained in this Agreement will continue in
full force and effect subsequent to and notwithstanding the expiration or
termination of this Agreement.
FRANCHISEE'S COVENANTS NOT TO COMPETE
CONSIDERATION.
The Franchisee, the Owners and the Personal Guarantors acknowledge that the
Franchisee, its officers, executives and employees will receive specialized
training, marketing and advertising plans, business strategies, confidential
recipe, cooking, and food preparation information, and trade secrets from
Elephant & Castle pertaining to the Restaurant System and the operation of
the Elephant & Castle-Registered Trademark- Restaurant. In consideration for
this information, the Franchisee, the Owners and the Personal Guarantors will
comply in all respects with the provisions of this Article. Elephant & Castle
has advised the Franchisee that this provision is a material provision of
this Agreement, and that Elephant & Castle will not sell an Elephant &
Castle-Registered Trademark- Restaurant Franchise to any person or entity
that owns or intends to own, operate or be involved in any business that
competes directly or indirectly with an Elephant & Castle-Registered
Trademark- Restaurant; provided however, that Elephant & Castle may, under
certain circumstances, exclude from the coverage of Article 21.2 and Article
21.3 existing operational restaurant(s) owned and operated by the Franchisee
as of the date of this Agreement, and the Franchisee may, with the written
consent of Elephant & Castle, continue to own and operate such restaurants
during the term of this Agreement and thereafter.
IN-TERM COVENANT NOT TO COMPETE.
The Franchisee, the Owners and the Personal Guarantors will not, during the
term of this Agreement, on their own account or as an employee, agent,
consultant, affiliate, licensee, partner, officer, director, or shareholder
of any other person, firm, entity, partnership or corporation, own, operate,
lease, franchise, conduct, engage in, be connected with, have any interest
in, or assist any person or entity
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FRANCHISE AGREEMENT F-106 426304 9
engaged in any Anglo/British style pub restaurant concept that is in any way
similar to or competitive with an Elephant & Castle-Registered Trademark-
Restaurant, except with the prior written consent of Elephant & Castle.
POST-TERM COVENANT NOT TO COMPETE.
The Franchisee, the Owners and the Personal Guarantors will not, for a period
of twelve (12) months after the termination or expiration of this Agreement
on their own account or as an employee, principal, agent, independent
contractor, consultant, affiliate, licensee, partner, officer, director or
shareholder of any other person, firm, entity, partnership or corporation,
own, operate, lease, franchise, conduct, engage in, be connected with, have
any interest in or assist any person or entity engaged in any Anglo/British
style pub restaurant concept that is in any way similar to or competitive
with an Elephant & Castle-Registered Trademark-Restaurant and which is
located within ten (10) miles of the Franchised Location or any other
Elephant & Castle-Registered Trademark- Restaurant, or within any exclusive
area granted by Elephant & Castle or any affiliate of Elephant & Castle
pursuant to a Development Agreement or other territorial agreement. The
Franchisee, the Owners and the Personal Guarantors expressly agree that the
time and geographical limitations set forth in this provision are reasonable
and necessary to protect Elephant & Castle and its franchisees if this
Agreement expires or is terminated by either party for any reason, and that
this covenant not to compete is necessary to permit Elephant & Castle the
opportunity to resell and/or develop a new Elephant & Castle-Registered
Trademark- Restaurant at or in the area near the Franchised Location.
INJUNCTIVE RELIEF.
The Franchisee, the Owners and the Personal Guarantors agree that the
provisions of this Article are necessary to protect the legitimate business
interest of Elephant & Castle and its franchisees including, without
limitation, preventing the unauthorized dissemination of marketing,
promotional and other confidential information to competitors of Elephant &
Castle and its franchisees, protecting recipes, cooking and food preparation
techniques and other trade secrets, protecting the integrity of the franchise
system of Elephant & Castle, preventing duplication of the Restaurant System
by unauthorized third parties, and preventing damage to and/or loss of
goodwill associated with the Marks. The Franchisee, the Owners and the
Personal Guarantors also agree that damages alone cannot adequately
compensate Elephant & Castle if there is a violation of this Article by the
Franchisee, the Owners or the Personal Guarantors, and that injunctive relief
against the Franchisee is essential for the protection of Elephant & Castle
and its franchisees. The Franchisee, the Owners and the Personal Guarantors
agree, therefore, that if Elephant & Castle alleges that the Franchisee, the
Owners or the Personal Guarantors have breached or violated this Article,
then Elephant & Castle will have the right to petition a court of competent
jurisdiction for injunctive relief against the Franchisee, the Owners and the
Personal Guarantors, in addition to all other remedies that may be available
to Elephant & Castle. Elephant & Castle will not be required to post a bond
or other security for any injunctive proceeding. If Elephant & Castle is
granted ex parte injunctive relief against the Franchisee, the Owners or the
Personal Guarantors, then the Franchisee, the Owners or the Personal
Guarantors will have the right to petition the court for a hearing on the
merits at the earliest time convenient to the court.
SEVERABILITY.
It is the desire and intent of the parties to this Agreement, including the
Owners and the Personal Guarantors, that the provisions of this Article be
enforced to the fullest extent permissible under the laws and public policy
applied in each jurisdiction in which enforcement is sought. Accordingly, if any
part of this Article is adjudicated to be invalid or unenforceable, then this
Article will be deemed to modify or delete that portion thus adjudicated to be
invalid or unenforceable, such modification or deletion to apply only with
respect to the operation of this Article in the particular jurisdiction in which
the adjudication is made. Further, to the extent any provision of this Article
is deemed unenforceable by virtue of its scope or limitation, the parties to
this Agreement, including the Owners and the Personal Guarantors, agree that the
scope and limitation provisions will nevertheless, be enforceable
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FRANCHISE AGREEMENT F-107 426304 9
to the fullest extent permissible under the laws and public policies applied
in such jurisdiction where enforcement is sought.
INDEPENDENT CONTRACTORS; INDEMNIFICATION
INDEPENDENT CONTRACTORS.
Elephant & Castle and the Franchisee are each independent contractors and, as a
consequence, there is no employer-employee or principal-agent relationship
between Elephant & Castle and the Franchisee. The Franchisee will not have the
right to and will not make any agreements, representations or warranties in the
name of or on behalf of Elephant & Castle or represent that their relationship
is other than that of franchisor and franchisee. Neither Elephant & Castle nor
the Franchisee will be obligated by or have any liability to the other under any
agreements or representations made by the other to any third parties.
INDEMNIFICATION.
Elephant & Castle will not be obligated to any person or entity for any
damages arising out of, from, in connection with, or as a result of the
Franchisee's negligence, the Franchisee's wrongdoing or the operation of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant. Therefore,
the Franchisee will indemnify and hold Elephant & Castle harmless against,
and will reimburse Elephant & Castle for, all damages for which Elephant &
Castle is held liable and for all costs incurred by Elephant & Castle in the
defense of any claim or action brought against Elephant & Castle arising
from, in connection with, arising out of, or as a result of the Franchisee's
negligence, the Franchisee's wrongdoing or the operation of the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant including, without
limitation, attorneys' fees, investigation expenses, court costs, deposition
expenses, and travel and living expenses. The Franchisee will indemnify
Elephant & Castle, without limitation, for all claims and damages arising
from, out of, in connection with, or as a result of: (a) any personal injury,
property damage, commercial loss or environmental contamination resulting
from any act or omission of the Franchisee or its employees, agents or
representatives; (b) any failure on the part of the Franchisee to comply with
any requirement of any laws or any governmental authority; (c) any failure of
the Franchisee to pay any of its obligations to any person or entity; (d) any
failure of the Franchisee to comply with any requirement or condition of this
Agreement or any other agreement with Elephant & Castle; (e) any misfeasance
or malfeasance by the Franchisee; and (f) any tort. Elephant & Castle will
have the right to defend any claim made against it arising from, as a result
of, in connection with or out of the Franchisee's negligence or the operation
of the Franchisee's Elephant & Castle-Registered Trademark- Restaurant.
PAYMENT OF COSTS AND EXPENSES.
The Franchisee will indemnify Elephant & Castle for all costs and expenses
incurred by Elephant & Castle in enforcing any term, condition or provision of
this Agreement or in enjoining any violation of this Agreement by the Franchisee
including, without limitation, attorneys' fees, expert witness fees, costs of
investigation, court costs, litigation expenses, arbitration fees, costs and
expenses, and travel and living expenses.
CONTINUATION OF OBLIGATIONS.
The indemnification and other obligations contained herein will continue in full
force and effect subsequent to and notwithstanding the expiration or termination
of this Agreement.
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FRANCHISE AGREEMENT F-108 426304 9
ARBITRATION
MEDIATION.
Elephant & Castle and the Franchisee acknowledge that resolving disputes
prior to commencing arbitration hearings or court proceedings is in the best
interests of both parties. Therefore, the Franchisee and Elephant & Castle
will, when practical, attempt to resolve disputes by non-binding mediation.
The parties agree that they will act in good faith to settle any dispute
between them; however, either party will have the right to decline to mediate
the dispute.
DISPUTES SUBJECT TO ARBITRATION.
Except as expressly provided to the contrary in Article 23.7 of this
Agreement, all disputes and controversies, including allegations of fraud,
misrepresentation and violation of any state or federal laws or regulations,
arising under, as a result of, or in connection with this Agreement, the
Franchised Location, the Franchisee's Restaurant business or the Personal
Guaranty attached to this Agreement are subject to and will be resolved
exclusively by arbitration conducted in accordance with the Commercial Rules
and Regulations of the American Arbitration Association.
NOTICE OF DISPUTE.
The party alleging the dispute must provide the other party with written
notice setting forth the alleged dispute in detail. The party who receives
written notice alleging the dispute will have thirty (30) days after receipt
of the written notice to resolve the dispute specified in the written notice.
If the written notice alleges that the Franchisee is delinquent in the
payment of any fees or other payments payable to Elephant & Castle, the
Franchisee will have ten (10) days to make full payment (including interest
and administrative fees as provided for herein) to Elephant & Castle.
DEMAND FOR ARBITRATION.
If the dispute alleged by either party has not been corrected, settled or
compromised within the time period provided for in this Agreement, then either
party may demand arbitration by giving the other party written notice. Within
ten (10) days after a written demand for arbitration has been delivered by the
party demanding arbitration, either party will have the right to request the
office of the American Arbitration Association in Minneapolis, Minnesota to
initiate the procedures necessary to appoint an arbitrator. Either party will
have the right to demand that the arbitration hearings be conducted by three (3)
arbitrators. The arbitrator(s) will be appointed as provided herein within sixty
(60) days after a written demand for arbitration has been made in accordance
with the Rules and Regulation of the American Arbitration Association.
VENUE AND JURISDICTION.
All arbitration hearings will take place exclusively in Hennepin County,
Minnesota or at the general offices of Elephant & Castle, and will be held no
earlier than ninety (90) days after the arbitrator(s) has (have) been selected.
Elephant & Castle and the Franchisee, its officers and directors, and the Owners
and Personal Guarantors do hereby agree and submit to personal jurisdiction in
the State of Minnesota in connection with any arbitration hearings hereunder and
any suits brought to enforce the decision of the arbitrator(s), and do hereby
waive any rights to contest venue and jurisdiction in the State of Minnesota and
any claims that venue and jurisdiction are invalid.
POWERS OF ARBITRATOR(S).
The authority of the arbitrator(s) will be limited to making a finding,
judgment, decision and award relating to the interpretation of or adherence to
the written provisions of this Agreement. The Federal Rules of Evidence (the
"Rules") will apply to all arbitration hearings and the introduction of all
evidence, testimony, records, affidavits, documents and memoranda in any
arbitration hearing must comply in
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FRANCHISE AGREEMENT F-109 426304 9
all respects with the Rules and legal precedents interpreting the Rules. Both
parties will have the absolute right to cross-examine any person who has
testified against them or in favor of the other party. The arbitrator(s) will
have no authority to add to, delete or modify in any manner the terms and
provisions of this Agreement. All findings, judgments, decisions and awards
of the arbitrator(s) will be limited to the dispute set forth in the written
demand for arbitration, and the arbitrator(s) will have no authority to
decide any other issues. The arbitrator(s) will not have the right or
authority to award punitive damages to either Elephant & Castle or the
Franchisee or their officers, directors, shareholders, Owners and Personal
Guarantors, and Elephant & Castle and the Franchisee and their officers,
directors, shareholders or Owners, and the Personal Guarantors expressly
waive their rights to plead or seek punitive damages. All findings,
judgments, decisions and awards by the arbitrator(s) will be in writing, will
be made within sixty (60) days after the arbitration hearings have been
completed, and will be final and binding on Elephant & Castle and the
Franchisee, except as provided for in Article 23.9. The written decision of
the arbitrator(s) will be deemed to be an order, judgment and decree and may
be entered as such in any court of competent jurisdiction by either party
thirty (30) days thereafter, unless any party elects to pursue its rights
under Article 23.9.
DISPUTES NOT SUBJECT TO ARBITRATION.
The following disputes between Elephant & Castle and the Franchisee will not be
subject to arbitration: (a) any disputes arising between Elephant & Castle and
the Franchisee which are set forth in Article 24.1; (b) any dispute involving
the Marks or which arise under or as a result of Article 15 of this Agreement;
(c) any dispute involving immediate termination of this Agreement by Elephant &
Castle pursuant to Article 18.5 and Article 18.6 of this Agreement; and (d) any
dispute involving enforcement of the covenants not to compete contained in
Article 21 of this Agreement.
NO COLLATERAL ESTOPPEL OR CLASS ACTIONS.
Except as provided by Article 23.9, all arbitration findings, conclusions,
orders and awards made by the arbitrator(s) will be final and binding on
Elephant & Castle and the Franchisee; however, such arbitration findings,
conclusions, orders and awards may not be used: (a) to collaterally estop either
the Franchisee or Elephant & Castle from raising any like or similar issue or
defense in any subsequent arbitration, litigation, court hearing or other
proceeding involving third parties, including other franchisees; or (b) by any
third party or other franchisee to establish any fact, action, finding,
violation or otherwise used by any third party or other franchisee as evidence,
in any arbitration, litigation, court hearing or other proceeding involving
Elephant & Castle or the Franchisee. In any arbitration between them, neither
Elephant & Castle nor the Franchisee may introduce as evidence, or otherwise use
to establish any fact, action, finding or violation, any findings, conclusions,
orders or awards resulting from any prior arbitration, litigation, court hearing
or other proceeding involving the Franchisee and a third party, or Elephant &
Castle and a third party or other franchisees. No party except Elephant &
Castle, the Franchisee, and their officers, directors, shareholders or Owners
and the Personal Guarantors will have the right to join in any arbitration
proceeding arising under this Agreement, and therefore, the arbitrator(s) will
not be authorized to permit class actions or to permit any other party to be
involved in any arbitration proceeding brought by either party under this
Agreement.
DE NOVO HEARING ON MERITS.
If the arbitrator(s) awards either Elephant & Castle or the Franchisee damages
(including actual damages, costs and attorneys' fees) in excess of one hundred
thousand dollars ($100,000) in any arbitration proceeding commenced pursuant to
this Agreement, then the party who has been held liable by the arbitrator(s)
will have the right to a de novo hearing on the merits by commencing an action
in a court of competent jurisdiction in accordance with the provisions of this
Agreement. If the party held liable by the arbitrator(s) commences a court
action as provided for herein, then neither party will have the right to
introduce the arbitrator's(s') decision or findings in any such court action and
the arbitrator's(s') decision and findings will be of no force and effect and
will not be final or binding on
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FRANCHISE AGREEMENT F-110 426304 9
either Elephant & Castle or the Franchisee. If the party who has been held
liable by the arbitrator(s) for over one hundred thousand dollars ($100,000)
in damages fails to commence a court action within thirty (30) days after
receiving the arbitrator's(s') written award, then the arbitrator's(s')
findings, judgments, decisions and awards will be final and binding on
Elephant & Castle, the Franchisee and all other parties and may be entered as
an order decree and judgment in any court of competent jurisdiction by any
party.
CONFIDENTIALITY.
All evidence, testimony, records, documents, findings, decisions, judgments and
awards pertaining to any arbitration hearing between Elephant & Castle and the
Franchisee will be secret and confidential in all respects. Elephant & Castle
and the Franchisee will not disclose the decision or award of the arbitrator(s)
and will not disclose any evidence, testimony, records, documents, findings,
orders, or other matters from the arbitration hearing to any person or entity
except as required by law. Nothing herein will prevent either party from
disclosing or using any information presented in any arbitration proceeding in
any subsequent court hearing brought pursuant to Article 23.9.
PERFORMANCE DURING ARBITRATION OF DISPUTES.
Elephant & Castle and the Franchisee will fully comply with all of the terms and
conditions of this Agreement and will fully perform their respective obligations
under this Agreement during the entire time of the arbitration process.
ENFORCEMENT
INJUNCTIVE RELIEF.
Elephant & Castle will have the right to petition a court of competent
jurisdiction for the entry of temporary and permanent injunctions and orders
of specific performance enforcing the provisions of this Agreement for any
action relating to: (a) the Franchisee's improper use of the Marks or the
Restaurant System; (b) the obligations of the Franchisee upon termination or
expiration of this Agreement; (c) the sale, transfer or assignment of this
Agreement, the Franchisee's Restaurant or the Ownership Interests of the
Franchisee; (d) the Franchisee's violation of the provisions of this
Agreement relating to confidentiality and the covenants not to compete; and
(e) any act or omission by the Franchisee or the Franchisee's employees that
(1) constitutes a violation of any applicable law, ordinance or regulation,
(2) is dishonest or misleading to the guests or customers of the Franchisee's
Restaurant or other Elephant & Castle-Registered Trademark- Restaurants, (3)
constitutes a danger to the employees, public, guests, or customers of the
Franchisee's Restaurant, or (4) may impair the goodwill associated with the
Marks or the Restaurant System.
SEVERABILITY.
All provisions of this Agreement are severable and this Agreement will be
interpreted and enforced as if all completely invalid or unenforceable
provisions were not contained herein and partially valid and enforceable
provisions will be enforced to the extent valid and enforceable. If any
applicable law or rule of any jurisdiction requires a greater prior notice of
the termination of this Agreement than is required hereunder or the taking of
some other action not required hereunder, or if under any applicable law or
rule of any jurisdiction, any provision of this Agreement or any
specification, standard or operating procedure prescribed by Elephant &
Castle is invalid or unenforceable under applicable law, then the prior
notice or other action required by such law or rule will be substituted for
the notice requirements hereof, or such invalid or unenforceable provision,
specification, standard or operating procedure will be modified to the extent
required to be valid and enforceable. Such modifications to this Agreement
will be effective only in such jurisdiction.
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FRANCHISE AGREEMENT F-111 426304 9
WAIVER.
Elephant & Castle and the Franchisee may, by written instrument signed by
Elephant & Castle and the Franchisee, waive any obligation of or restriction
upon the other under this Agreement. Acceptance by Elephant & Castle of any
payment by the Franchisee and the failure, refusal or neglect of Elephant &
Castle to exercise any right under this Agreement or to insist upon full
compliance by the Franchisee of its obligations hereunder including, without
limitation, any mandatory specification, standard or operating procedure,
will not constitute a waiver by Elephant & Castle of any provision of this
Agreement. Elephant & Castle will have the right to waive obligations or
restrictions for other franchisees under their franchise agreements without
waiving those obligations or restrictions for the Franchisee and, except to
the extent provided by law, Elephant & Castle will have the right to
negotiate terms and conditions, grant concessions and waive obligations for
other franchisees of Elephant & Castle without granting those same rights to
the Franchisee and without incurring any liability to the Franchisee
whatsoever.
PAYMENTS TO ELEPHANT & CASTLE.
The Franchisee will not, on grounds of the alleged nonperformance by Elephant &
Castle of any of its obligations under this Agreement, any other contract
between Elephant & Castle and the Franchisee, or for any other reason, withhold
payment of any Continuing Fees or any other fees or payments due Elephant &
Castle pursuant to this Agreement or pursuant to any other contract, agreement
or obligation to Elephant & Castle. The Franchisee will not have the right to
"offset" or withhold any liquidated or unliquidated amounts, damages or other
funds allegedly due to the Franchisee by Elephant & Castle against any
Continuing Fees or any other fees or payments due to Elephant & Castle under
this Agreement.
EFFECT OF WRONGFUL TERMINATION.
If either Elephant & Castle or the Franchisee takes any action to terminate
this Agreement or the Franchisee takes any action to convert its Elephant &
Castle-Registered Trademark-Restaurant to another business, and such actions
were taken without first complying with the terms and conditions of Article
18 or Article 19 of this Agreement, as applicable, then such actions will not
relieve either party of, or release either party from, any of its obligations
under this Agreement, and the terms and conditions of this Agreement will
remain in full force and effect and the parties will be obligated to fully
perform all terms and conditions until such time as this Agreement expires or
is terminated in accordance with the provisions of this Agreement and
applicable law, as determined by arbitration or a court of competent
jurisdiction.
CUMULATIVE RIGHTS.
The rights of Elephant & Castle hereunder are cumulative and no exercise or
enforcement by Elephant & Castle of any right or remedy hereunder will preclude
the exercise or enforcement by Elephant & Castle of any other right or remedy
hereunder or which Elephant & Castle is entitled by law to enforce.
BINDING AGREEMENT.
This Agreement is binding upon the parties hereto and their respective
executors, administrators, heirs, assigns and successors in interest.
JOINT AND SEVERAL LIABILITY.
If the Franchisee consists of more than one person, their liability under this
Agreement will be deemed to be joint and several.
NO ORAL MODIFICATION.
No modification, change, addition, rescission, release, amendment or waiver of
this Agreement and no approval, consent or authorization required by any
provision of this Agreement may be made by any person except by a written
agreement signed by a duly authorized officer or partner of the Franchisee and
the President or a Vice President of Elephant & Castle.
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FRANCHISE AGREEMENT F-112 426304 9
ENTIRE AGREEMENT.
This Agreement supersedes and terminates all prior agreements, either oral or
in writing, between the parties involving the franchise relationship and
therefore, representations, inducements, promises or agreements alleged by
either Elephant & Castle or the Franchisee that are not contained in this
Agreement will not be enforceable. The Recitals are part of this Agreement,
which constitutes the entire agreement of the parties, and there are no other
oral or written understandings or agreements between Elephant & Castle and
the Franchisee relating to the subject matter of this Agreement. This
Agreement will not supersede any written agreements or contracts that are
signed concurrently with this Agreement.
HEADINGS; TERMS.
The headings of the Articles are for convenience only and do not in any way
define, limit or construe the contents of such Articles. The term "Franchisee"
as used herein is applicable to one or more individuals, a corporation, a
limited liability company, a partnership or a limited partnership, as the case
may be, and the singular usage includes the plural, the masculine usage includes
the neuter and the feminine, and the neuter usage includes the masculine and the
feminine. References to "Franchisee," "assignee" and "transferee" which are
applicable to an individual or individuals will mean the Owner or Owners of the
equity or operating control of the Franchisee or any such assignee or transferee
if the Franchisee or such assignee or transferee is a corporation, a limited
liability company, a partnership, or a limited partnership.
VENUE AND JURISDICTION.
All litigation, court proceedings, arbitration proceedings, mediation
proceedings, lawsuits, court hearings and other hearings initiated by the
Franchisee or Elephant & Castle must and will be venued exclusively in
Hennepin County, Minnesota. The Franchisee, each of its officers and
directors, and the Owners and Personal Guarantors do hereby agree and submit
to personal jurisdiction in the State of Minnesota for the purposes of any
suit, proceeding or hearing brought to enforce or construe the terms of this
Agreement or to resolve any dispute or controversy arising under, as a result
of, or in connection with this Agreement, the Franchised Location or the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant, and do
hereby agree and stipulate that any such suits, proceedings and hearings will
be exclusively venued and held in Hennepin County, Minnesota. The Franchisee,
each of its officers and directors, and the Owners and Personal Guarantors
waive any rights to contest such venue and jurisdiction and any claims that
such venue and jurisdiction are invalid.
FEDERAL ARBITRATION ACT.
Any issue regarding arbitration will be governed by the Federal Arbitration Act
and the federal common law of arbitration.
CONTRACTUAL STATUTE OF LIMITATIONS.
Any and all claims and actions arising out of or relating to this Agreement, the
relationship of the Franchisee and Elephant & Castle, or the Franchisee's
operation of the Restaurant brought by either party against the other, whether
in arbitration or any other proceeding, will be commenced within one (1) year
from the occurrence of the facts giving rise to such claim or action, or such
claim or action will be barred.
NOTICES
All notices to Elephant & Castle will be in writing and will be made by personal
service upon an officer or director of Elephant & Castle or sent by prepaid
registered or certified mail addressed to Xx. Xxxxxx X'Xxxx, President and Chief
Executive Officer of Elephant & Castle International, Inc., 7657 Anagram
ELEPHANT & CASTLE INTERNATIONAL, INC. 15 GTM/RCA 032999
FRANCHISE AGREEMENT F-113 426304 9
Drive, Xxxx Xxxxxxx, Xxxxxxxxx 00000 or such other address as Elephant &
Castle may subsequently designate in writing, with a copy to G. Xxxxxx
XxxXxxxxx, XX, Attorney at Law, Xxxxxxx, Xxxxxxx & Xxxxx, XXX, 0000 AT&T
Tower, 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000-0000. All notices
to the Franchisee will be made by personal service upon the Franchisee (or,
if applicable, upon an officer or director of the Franchisee) or sent by
prepaid registered or certified mail addressed to the Franchisee at the
Franchised Location, or such other address as the Franchisee may subsequently
designate in writing. For the purposes of this Agreement, personal service
will include service by a recognized overnight delivery service (such as
Federal Express, Airborne Express or UPS) which requires a written receipt of
delivery from the addressee.
DISCLAIMER; ACKNOWLEDGMENTS
DISCLAIMER.
Elephant & Castle does not warrant or guarantee to the Franchisee that the
Franchisee will derive income or profit from the Elephant & Castle-Registered
Trademark-Restaurant, or that Elephant & Castle will refund all or part of
the Initial Fee or the price paid for the Franchisee's Restaurant or
repurchase any of the supplies, products, technology or equipment supplied or
sold by Elephant & Castle or by an approved or designated supplier if the
Franchisee is in any way unsatisfied with its Restaurant. Elephant & Castle
expressly disclaims the making of any express or implied representations or
warranties regarding the sales, earnings, income, profits, Gross Sales,
business or financial success, or value of the Franchisee's Restaurant except
as contained in the Elephant & Castle Uniform Franchise Offering Circular
received by the Franchisee.
ACKNOWLEDGMENTS BY FRANCHISEE.
The Franchisee acknowledges that it has conducted an independent
investigation of the Elephant & Castle-Registered Trademark- Restaurant and
recognizes that the business venture contemplated by this Agreement involves
business and economic risks. The Franchisee acknowledges that the financial,
business and economic success of the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant will be primarily dependent upon the
personal efforts of the Franchisee, its management and its employees, and on
economic conditions in the area where the Franchised Location is located and
economic conditions in general. The Franchisee acknowledges that it has not
received any estimates, projections, representations, warranties or
guaranties, expressed or implied, regarding potential sales, Gross Sales,
income, profits, earnings, expenses, financial or business success, value of
the Restaurant, or other economic matters pertaining to the Franchisee's
Restaurant from Elephant & Castle or any of its agents that were not
expressly set forth in the Elephant & Castle Uniform Franchise Offering
Circular received by the Franchisee from Elephant & Castle (hereinafter
referred to in this provision as "Representations"). The Franchisee further
acknowledges that if it had received any such Representations, it would not
have executed this Agreement, and that it would have promptly notified the
President of Elephant & Castle in writing of the person or persons making
such Representations, and provided to Elephant & Castle a specific written
statement detailing the Representations made.
OTHER FRANCHISEES.
The Franchisee acknowledges that other franchisees of Elephant & Castle have
or will be granted franchises at different times, different locations, under
different economic conditions and in different situations, and further
acknowledges that the economics and terms and conditions of such other
franchises may vary substantially in form and in substance from those
contained in this Agreement.
RECEIPT OF AGREEMENT AND UNIFORM FRANCHISE OFFERING CIRCULAR.
The Franchisee acknowledges that it received a copy of this Agreement with
all material blanks fully completed at least five (5) business days prior to
the date that this Agreement was executed by the Franchisee. The Franchisee
further acknowledges that it received a copy of the Elephant & Castle
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FRANCHISE AGREEMENT F-114 426304 9
Uniform Franchise Offering Circular at least ten (10) business days prior to
the date on which this Agreement was executed.
ALAMO GRILL-TM- RESTAURANTS.
The Franchisee agrees and acknowledges that the Alamo Grill-TM- restaurants
which are or will be operated or franchised by Elephant & Castle ("Alamo
Grill-TM- Restaurants") are restaurants that address different markets and
thus are not competitive with Elephant & Castle-Registered Trademark-
Restaurants. Further, the Franchisee acknowledges and agrees that, except as
restricted by the terms of the Franchise Agreements with its Alamo Grill
franchisees, Elephant & Castle will have the absolute right to develop, own,
manage, license and franchise Alamo Grill-TM- Restaurants at any location in
the world, and the Franchisee hereby waives any and all rights that it may
have or allege against Elephant & Castle or any affiliate of Elephant &
Castle resulting from the operation of any Alamo Grill-TM- Restaurant,
including those Alamo Grill-TM- Restaurants that may be in, near or adjacent
to the Franchisee's Exclusive Area or the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant.
FRANCHISEE'S LEGAL COUNSEL
The Franchisee acknowledges that this Agreement constitutes a legal document
which grants certain rights to and imposes certain obligations upon the
Franchisee. The Franchisee has been advised by Elephant & Castle to retain an
attorney or advisor prior to the execution of this Agreement to review the
Elephant & Castle Uniform Franchise Offering Circular, to review this
Agreement in detail, to review all legal documents, to review the economics,
operations and other business aspects of the Elephant & Castle-Registered
Trademark- Restaurant, to determine compliance with franchising and other
applicable laws, and to advise the Franchisee on economic risks, liabilities,
obligations and rights under this Agreement and to advise the Franchisee on
tax issues, financing matters, applicable state and federal laws, liquor
laws, health and safety laws, environmental laws, employee issues, insurance,
structure of the Restaurant business, and other business matters. The name of
the Franchisee's attorney or other advisor is:
Attorney's Name:____________________________________________________
Name of Firm:_______________________________________________________
Address:____________________________________________________________
City, State, Zip Code:_______________________
Telephone Number: ( )_____________________
Fax Number: ( )___________________________
GOVERNING LAW; STATE MODIFICATIONS
GOVERNING LAW; SEVERABILITY.
Except to the extent governed by the United States Trademark Act of 1946 (Xxxxxx
Act, 15 U.S.C. Sections 1051, et seq.), this Agreement and the relationship
between Elephant & Castle and the Franchisee will be governed by the laws of the
state in which the Franchised Location is located. The provisions of this
Agreement which conflict with or are inconsistent with applicable governing law
will be superseded and/or modified by such applicable law only to the extent
such provisions are inconsistent. All other provisions of this Agreement will be
enforceable as originally made and entered into upon the execution of this
Agreement by the Franchisee and Elephant & Castle.
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FRANCHISE AGREEMENT F-115 426304 9
APPLICABLE STATE LAWS.
If applicable, the following states have statutes which may supersede the
provisions of this Agreement in the Franchisee's relationship with Elephant &
Castle in the areas of termination and renewal of the Franchise: ARKANSAS
[Stat. Section 70-807], CALIFORNIA [Bus. & Prof. Code Sections 20000-20043],
CONNECTICUT [Gen. Stat. Section 42-133e, ET SEQ.], DELAWARE
[Code Section 2552], HAWAII [Rev. Stat. Section 482E-1], ILLINOIS
[815 ILCS 705/19-20], INDIANA [Stat. Section 23-2-2.7], MICHIGAN
[Stat. Section 19.854(27)], MINNESOTA [Stat. Section 80C.14], MISSISSIPPI
[Code Section 75-24-51], MISSOURI [Stat. Section 407.400], NEBRASKA
[Rev. Stat. Section 87-401], NEW JERSEY [Stat. Section 56:10-1], SOUTH DAKOTA
[Codified Laws Section 37-5A-51], VIRGINIA [Code 13.1-557-574-13.1-564],
WASHINGTON [Code Section 19.100.180], and WISCONSIN [Stat. Section 135.03].
These and other states may have court decisions which may supersede the
provisions of this Agreement in the Franchisee's relationship with Elephant &
Castle in the areas of termination and renewal of the Franchise.
STATE LAW MODIFICATIONS.
If the Franchisee's Elephant & Castle-Registered Trademark- Restaurant is
located in any one of the states indicated below in this Article, or if the
laws of any such state are otherwise applicable, then the designated
provisions of this Agreement will be amended and revised as follows:
(a) CALIFORNIA. If this Agreement is governed by the laws of the State
of California, then: (1) the covenant not to compete upon termination
or expiration of this Agreement contained in Article 21.3 may be
unenforceable, except in certain circumstances provided by law; and (2)
provisions of this Agreement giving Elephant & Castle the right to
terminate in the event of the Franchisee's bankruptcy may not be
enforceable under federal bankruptcy laws (11 U.S.C. Sec. 101, ET
SEQ.).
(b) ILLINOIS. If this Agreement is governed by the laws of the State of
Illinois, then: (1) the designation of jurisdiction and venue in
Hennepin County, Minnesota contained in Article 23.5 and Article 24.12
of this Agreement will be inapplicable; provided, however, that such
inapplicability will not be construed to mean that such venue is
improper, or that the Franchisee, its officers, directors, Owners and
the Personal Guarantors are not subject to jurisdiction in the State of
Minnesota, or in any other state; (2) Article 24.14 of this Agreement
is hereby amended to provide that Section 27 of the Illinois Franchise
Disclosure Act will be applicable to any action maintained by the
Franchisee to enforce any liability created by the Act; and (3) any
condition, stipulation or provision of this Agreement requiring the
Franchisee to waive compliance with any provision of the Illinois
Franchise Disclosure Act is void; therefore, any acknowledgments
contained in Article 26.2 and Article 26.4 of this Agreement which
waive compliance with the Illinois Franchise Disclosure Act will be
deleted from this Agreement.
(c) INDIANA. If this Agreement is governed by the laws of the State of
Indiana, then: (1) Article 17.6(d) of this Agreement will be
inapplicable; (2) the post-term covenant not to compete contained in
Article 21.3 of this Agreement will be enforceable only within the
Exclusive Area; (3) Article 21.4 and Article 24.1 of this Agreement
will be amended to provide that a court of competent jurisdiction will
determine whether Elephant & Castle will be entitled to injunctive
relief in any injunctive proceeding commenced by Elephant & Castle
against the Franchisee; (4) the designation of jurisdiction and venue
in Hennepin County, Minnesota contained in Article 24.12 of this
Agreement is inapplicable; provided, however, that such inapplicability
will not be construed to mean that such venue is improper, or that the
Franchisee, its officers, directors, Owners and the Personal Guarantors
are not subject to jurisdiction in the State of Minnesota, or in any
other state; (5) arbitration hearings will be conducted in
Indianapolis, Indiana or at a mutually agreed upon location; (6) the
Franchisee
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FRANCHISE AGREEMENT F-116 426304 9
does not, by signing this Agreement, waive its rights under
Indiana law with respect to any representations made by Elephant &
Castle prior to the date of this Agreement; (7) notwithstanding any
provision of this Agreement to the contrary, the Franchisee will have
up to two years to bring an action against Elephant & Castle for a
violation of the Indiana Deceptive Franchise Practices Act, and up to
three years from the date of discovery to bring an action against
Elephant & Castle for a violation of the Indiana Franchise Disclosure
Law; and (8) notwithstanding any provisions of this Agreement to the
contrary, a court of competent jurisdiction will determine whether
Elephant & Castle will be required to post a bond or other security,
and the amount of such bond or other security, in any injunctive
proceeding commenced by Elephant & Castle against the Franchisee.
(d) MARYLAND. If this Agreement is governed by the laws of the State of
Maryland, then: (1) Article 17.6(d) of this Agreement is hereby amended
to provide that such release will not relieve Elephant & Castle from
any liability imposed by the Maryland Franchise Registration and
Disclosure Law; (2) with the exception of mediation or arbitration
proceedings, the designation of jurisdiction and venue in Hennepin
County, Minnesota contained in Article 23.5 and Article 24.12 will be
inapplicable; provided, however, that such inapplicability in the State
of Maryland will not be construed to mean that venue in Hennepin
County, Minnesota is improper, or that the Franchisee, its officers,
directors, Owners and Personal Guarantors are not subject to
jurisdiction in Hennepin County, Minnesota, or in any other state; and
(3) the acknowledgments made by the Franchisee contained in Article 26
of this Agreement will not be construed to act as a waiver of the
Franchisee's rights under the Maryland Franchise Registration and
Disclosure Law.
(e) MINNESOTA. If this Agreement is governed by the laws of the State
of Minnesota, then: (1) Article 3 of this Agreement will be amended to
provide that, except in certain circumstances specified by law,
Elephant & Castle must give the Franchisee at least one hundred eighty
(180) days prior written notice of nonrenewal of the Franchise; (2)
Article 18.2 will be amended to require that, except as set forth in
Article 18.5 and 18.6, in the event Elephant & Castle gives the
Franchisee written notice that the Franchisee has breached this
Agreement, such written notice will be given to the Franchisee at least
ninety (90) days prior to the date this Agreement is terminated by
Elephant & Castle, and the Franchisee will have sixty (60) days after
such written notice within which to correct the breach specified in the
written notice; (3) notwithstanding any provisions of this Agreement to
the contrary, a court of competent jurisdiction will determine whether
Elephant & Castle will be required to post a bond or other security,
and the amount of such bond or other security, in any injunctive
proceeding commenced by Elephant & Castle against the Franchisee, the
Owners or the Personal Guarantors; (4) Article 17.6(d) of this
Agreement will be inapplicable; and (5) in accordance with Minn. Stat.
Sec. 80C.17, Subd. 5, the Franchisee will have no more than three years
after the cause of action accrues to commence an action pursuant to
Minn. Stat. Sec. 80C.17.
(f) NEW YORK. If this Agreement is governed by the laws of the State of
New York, then: (1) Article 17.1 of this Agreement will be amended to
provide that Elephant & Castle may not assign this Agreement unless, in
its reasonable judgment, the assignee will be able to perform Elephant
& Castle's obligations under this Agreement; (2) Article 22.1 of this
Agreement will be amended to provide that the Franchisee will not be
required to indemnify Elephant & Castle against claims arising out of
Elephant & Castle's breach of contract, negligence or other civil
wrong; however, such amendment of Article 22.1 will not affect in any
way the Franchisee's obligation to obtain and maintain insurance
coverage in accordance with Article 14; (3) any modifications to the
Manual made by Elephant & Castle will not unreasonably increase the
Franchisee's obligations under this Agreement and will not place an
excessive economic
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FRANCHISE AGREEMENT F-117 426304 9
burden on the Franchisee's operations; and (4)
Article 17.6(d) of this Agreement is hereby amended to provide that all
rights arising in the Franchisee's favor from the provisions of Article
33 of the GBL of the State of New York and the regulations issued
thereunder shall remain in force, it being the intent of this provision
that the non-waiver provisions of Sections 687.4 and 687.5 of the GBL
be satisfied.
(g) NORTH DAKOTA. If this Agreement is governed by the laws of the
State of North Dakota, then: (1) the covenant not to compete upon
termination or expiration of this Agreement contained in Article 21.3
of this Agreement may be unenforceable, except in certain circumstances
provided by law; (2) arbitration hearings will be conducted in Fargo,
North Dakota or at a mutually agreed upon location; (3) Article 24.2 is
amended to provide that the prevailing party will pay all attorneys'
fees, costs and expenses incurred by the other party in enforcing any
term, condition or provision of this Agreement or in enjoining any
violation of this Agreement by the other party; and (4) the consent by
the Franchisee to jurisdiction and venue in Hennepin County, Minnesota
contained in Article 24.12 is inapplicable; provided, however, that
such inapplicability in the State of North Dakota will not be construed
to mean that venue in Hennepin County, Minnesota is improper, or that
the Franchisee, its officers, directors, Owners and the Personal
Guarantors are not subject to jurisdiction in the State of Minnesota,
or in any other state.
(h) RHODE ISLAND. If this Agreement is governed by the laws of the
State of Rhode Island, then any provision of this Agreement which
restricts jurisdiction or venue to a forum outside the State of Rhode
Island is void with respect to a claim otherwise enforceable under the
Rhode Island Franchise Investment Act.
(i) SOUTH DAKOTA. If this Agreement is governed by the laws of the
State of South Dakota, then: (1) Article 18 of this Agreement will be
amended to provide that if the Franchisee breaches the provisions of
this Agreement, including the failure to meet performance or quality
standards or to pay any fees or other payments payable to Elephant &
Castle pursuant to this Agreement, Elephant & Castle will provide the
Franchisee with at least thirty (30) days written notice and an
opportunity to cure prior to the termination of this Agreement by
Elephant & Castle; (2) the covenant not to compete upon termination or
expiration of this Agreement contained in Article 21.3 of this
Agreement may be unenforceable, except in certain circumstances
provided by law; (3) any provision of this Agreement which designates
jurisdiction or venue outside of the State of South Dakota or requires
the Franchisee to agree to jurisdiction or venue in a forum outside of
the State of South Dakota is void with respect to any cause of action
which is otherwise enforceable in the State of South Dakota; (4)
pursuant to SDCL Sections 37-5A-86, any acknowledgment provision,
disclaimer, integration clause or provision having a similar effect in
this Agreement will not negate or act to remove from judicial review
any statement, misrepresentation or action that violates Chapter 37-5A
or a rule or order under Chapter 37-5A; (5) arbitration hearings will
be conducted in Sioux Falls, South Dakota or at a mutually agreed upon
location; and (6) provisions of this Agreement which require that
actions be commenced within one year and that limit the parties' rights
to recover punitive, exemplary, incidental, indirect, special or
consequential damages may not be enforceable under South Dakota law.
(j) WASHINGTON. If this Agreement is governed by the laws of the State
of Washington, then: (1) in the event of a conflict of laws, the
provisions of the Washington Franchise Investment Protection Act,
Chapter 19.100 RCW, will prevail; (2) a release or waiver of rights
executed by the Franchisee will not include rights under the Washington
Franchise Investment Protection Act, except when executed pursuant to a
negotiated settlement after this Agreement is in effect and where the
parties are represented by independent counsel; (3) any
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FRANCHISE AGREEMENT F-118 426304 9
provision of this Agreement which unreasonably restricts or limits the
statute of limitations period for claims under the Washington Franchise
Investment Protection Act, rights or remedies under the Washington
Franchise Investment Protection Act, such as a right to a jury trial,
may not be enforceable; and (4) transfer fees are collectible by
Elephant & Castle to the extent that they reflect Elephant & Castle
reasonable estimated or actual costs in effecting a transfer.
SEVERABILITY.
The severability provisions of this Agreement will pertain to all of the
applicable laws which conflict with or modify the provisions of this Agreement
including, but not limited to, the provisions of this Agreement specifically
addressed in Article 28.3 above.
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FRANCHISE AGREEMENT F-119 426304 9
IN WITNESS WHEREOF, Elephant & Castle, the Franchisee and the Franchisee's
Owners have respectively signed this Agreement effective as of the day and year
set forth on Page F-1 of this Agreement.
In the Presence of: ELEPHANT & CASTLE INTERNATIONAL, INC.
By
----------------------------------- --------------------------------
Its
----------------------------------- --------------------------------
In the Presence of: "FRANCHISEE"
----------------------------------- ------------------------------------
----------------------------------- ------------------------------------
----------------------------------- ------------------------------------
----------------------------------- ------------------------------------
The undersigned Owners of the Franchisee hereby agree to be bound by the
terms and conditions of this Agreement.
In the Presence of: OWNERS Percentage of
Ownership
------------------------ ---------------------------- ----------------- %
------------------------ ---------------------------- ----------------- %
------------------------ ---------------------------- ----------------- %
------------------------ ---------------------------- ----------------- %
ELEPHANT & CASTLE INTERNATIONAL, INC. 15 GTM/RCA 032999
FRANCHISE AGREEMENT F-120 426304 9
PERSONAL GUARANTY AND AGREEMENT TO BE BOUND
PERSONALLY BY THE TERMS AND CONDITIONS
OF THE FRANCHISE AGREEMENT
In consideration of the execution of this Agreement by Elephant & Castle, and
for other good and valuable consideration, the undersigned, for themselves,
their heirs, successors, and assigns, do individually, jointly and severally
hereby become surety and guaranty for the payment of all amounts and the
performance of the covenants, terms and conditions of this Agreement,
including the covenants not to compete, to be paid, kept and performed by the
Franchisee.
Further, the undersigned, individually and jointly, hereby agree to be
personally bound by each and every condition and term contained in this
Agreement, including the covenants not to compete, and agree that this
Personal Guaranty should be construed as though the undersigned and each of
them executed an agreement containing the identical terms and conditions of
this Agreement.
If any default should at any time be made therein by the Franchisee, then the
undersigned, their heirs, successors and assigns, do hereby, individually,
jointly and severally, promise and agree to pay to Elephant & Castle all
Initial Fees, Continuing Fees and other fees due and payable to Elephant &
Castle under the terms and conditions of this Agreement.
In addition, if the Franchisee fails to comply with any other terms and
conditions of this Agreement, then the undersigned, their heirs, successors
and assigns, do hereby, individually, jointly and severally, promise and
agree to comply with the terms and conditions of this Agreement for and on
behalf of the Franchisee.
If the Franchisee is at any time in default on any obligation to pay monies
to Elephant & Castle or any subsidiary or affiliate of Elephant & Castle,
whether for Initial Fees, Continuing Fees, merchandise, products, supplies,
furniture, fixtures, equipment or other products purchased by the Franchisee
from Elephant & Castle or any subsidiary or affiliate of Elephant & Castle,
or for any other indebtedness of the Franchisee to Elephant & Castle or any
subsidiary or affiliate of Elephant & Castle, then the undersigned, their
heirs, successors and assigns, do hereby, individually, jointly and
severally, promise and agree to pay all such monies due and payable from the
Franchisee to Elephant & Castle or any subsidiary or affiliate of Elephant &
Castle upon default by the Franchisee.
The maximum individual liability that each Personal Guarantor will incur
under this Personal Guaranty is two hundred fifty thousand dollars ($250,000).
It is further understood and agreed by the undersigned that the provisions,
covenants and conditions of this Personal Guaranty will inure to the benefit
of the successors and assigns of Elephant & Castle.
Except as provided by applicable law, all litigation, actions or proceedings
pertaining to this Personal Guaranty will be brought and venued in accordance
with Article 24.12 of the Franchise Agreement.
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PERSONAL GUARANTORS
------------------------------------- -------------------------------------
Individually Individually
Percentage of Ownership Interest ___% Percentage of Ownership Interest ___%
------------------------------------- -------------------------------------
Address Address
------------------------------------- -------------------------------------
City State Zip Code City State Zip Code
------------------------------------- -------------------------------------
Telephone Telephone
------------------------------------- -------------------------------------
Individually Individually
Percentage of Ownership Interest ___% Percentage of Ownership Interest ___%
------------------------------------- -------------------------------------
Address Address
------------------------------------- -------------------------------------
City State Zip Code City State Zip Code
------------------------------------- -------------------------------------
Telephone Telephone
------------------------------------- -------------------------------------
Individually Individually
Percentage of Ownership Interest ___% Percentage of Ownership Interest ___%
------------------------------------- -------------------------------------
Address Address
------------------------------------- -------------------------------------
City State Zip Code City State Zip Code
------------------------------------- -------------------------------------
Telephone Telephone
ELEPHANT & CASTLE INTERNATIONAL, INC. 15 GTM/RCA 032999
FRANCHISE AGREEMENT F-122 426304 9
ELEPHANT & CASTLE INTERNATIONAL, INC.
0000 Xxxxxxx Xxxxx
Xxxx Xxxxxxx, Xxxxxxxxx 00000
(000) 000-0000
Fax: (000) 000-0000
ELEPHANT & CASTLE-R- RESTAURANT
FRANCHISE AGREEMENT
FRANCHISEE FRANCHISED LOCATION
------------------------------------- -------------------------------------
Name Street
------------------------------------- -------------------------------------
Street City State Zip Code
------------------------------------- -------------------------------------
( )
------------------------------------- -------------------------------------
City State Zip Code Area Code Telephone
( ) ( )
------------------------------------- -------------------------------------
Area Code Telephone Area Code Fax
( )
------------------------------------- -------------------------------------
Area Code Fax E-Mail Address
Franchised Restaurant No.
------------------------------------- -----------
E-Mail Address
-------------------------------------
Date of Franchise Agreement
ELEPHANT & CASTLE INTERNATIONAL, INC. 15 GTM/RCA 032999
FRANCHISE AGREEMENT 426304 9
ELEPHANT & CASTLE INTERNATIONAL, INC.
FRANCHISE AGREEMENT INDEX
Page
ARTICLE 1 DEFINITIONS....................................................74
1.1 Designated Market Area......................................74
1.2 Dollars.....................................................74
1.3 Franchise...................................................74
1.4 General Manager.............................................74
1.5 Gross Sales.................................................74
1.6 Marks.......................................................75
1.7 Ownership Interest..........................................75
1.8 Owner.......................................................75
1.9 Restaurant System...........................................75
1.10 Week.......................................................75
ARTICLE 2 GRANT OF FRANCHISE.............................................76
2.1 Franchised Location.........................................76
2.2 Exclusive Area..............................................76
2.3 Undetermined Franchised Location............................76
2.4 Lease or Purchase of Franchised Location....................76
2.5 Relocation..................................................76
2.6 Conditions..................................................77
2.7 Personal License............................................77
ARTICLE 3 TERM OF AGREEMENT..............................................77
3.1 Term........................................................77
3.2 Term of Lease...............................................77
3.3 Reacquisition Option........................................77
3.4 Terms of Option.............................................78
ARTICLE 4 INITIAL FEE; APPROVAL OF FRANCHISEE............................78
4.1 Initial Fee.................................................78
4.2 Termination of Franchise....................................78
4.3 Refund of Initial Fee.......................................79
ARTICLE 5 CONTINUING FEE.................................................79
5.1 Amount of Continuing Fee; Date Payable......................79
5.2 Interest on Unpaid Continuing Fees..........................79
5.3 Reports.....................................................79
5.4 Franchisee's Obligation to Pay..............................79
5.5 Pre-Authorized Bank Debits..................................80
ARTICLE 6 LOCAL ADVERTISING..............................................80
6.1 Local Advertising Expenditure...............................80
6.2 Reports of Local Advertising Expenditures...................80
6.3 Telephone Directory Listings................................80
6.4 Grand Opening Advertising...................................81
ELEPHANT & CASTLE INTERNATIONAL, INC. 15 GTM/RCA 032999
FRANCHISE XXXXXXXXX -x- 000000 9
ARTICLE 7 FINANCIAL STATEMENTS...........................................81
7.1 Monthly Reports and Financial Statements....................81
7.2 Due Date; Verification of Monthly Reports and Financial
Statements..................................................81
7.3 Substantiation of Monthly Reports and Financial Statements..81
7.4 Sales and Income Tax Returns................................82
7.5 Audit Rights................................................82
7.6 Payment of Audit Costs......................................82
7.7 Refusal to Submit Records or Permit Audit...................82
ARTICLE 8 QUALITY CONTROL, UNIFORMITY AND STANDARDS......................82
8.1 Quality and Service Standards...............................82
8.2 Identification of Restaurant................................83
8.3 Compliance with Standards...................................83
8.4 Alterations to Restaurant...................................83
8.5 Prohibited Sales............................................83
8.6 Other Business..............................................83
8.7 Franchisee's Name...........................................83
8.8 Operation of Elephant & Castle-R-Restaurant.................84
8.9 Business Hours..............................................84
8.10 Personnel..................................................84
8.11 Standards of Service.......................................84
8.12 Alcoholic Beverages........................................84
8.13 Vending Machines and Entertainment Devices.................84
8.14 Gambling Machines; Tickets.................................84
8.15 Standard Attire or Uniforms................................85
8.16 Credit Cards...............................................85
8.17 Gift Certificates and Coupons..............................85
8.18 Music and Music Selection..................................85
8.19 Approved Advertising.......................................85
8.20 Compliance with Applicable Law.............................85
8.21 Payment of Taxes...........................................85
8.22 "Franchise" and Other Taxes................................86
8.23 Payments to Creditors......................................86
8.24 Security Interest in Franchise Agreement...................86
8.25 Inspection Rights..........................................86
8.26 Default Notices and Significant Correspondence.............86
ARTICLE 9 PRODUCTS AND SERVICES..........................................87
9.1 Limitations on Products and Services........................87
9.2 Limitation on Sales.........................................87
9.3 Approved Suppliers and Distributors.........................87
9.4 Designated Suppliers........................................88
9.5 Use of Rebates from Suppliers...............................88
9.6 Limitation on Branding, Development and Sale of Products....88
9.7 Independent Shopping Services...............................88
ARTICLE 10 STANDARD OPERATIONS MANUAL....................................89
10.1 Compliance with Manual.....................................89
10.2 Revisions to Manual........................................89
10.3 Confidentiality of Manual..................................89
ELEPHANT & CASTLE INTERNATIONAL, INC. 15 GTM/RCA 032999
FRANCHISE AGREEMENT -ii- 426304 9
10.4 Confidentiality of Other Information.......................89
ARTICLE 11 BUSINESS PREMISES.............................................90
11.1 Site Location..............................................90
11.2 Site Location Criteria.....................................90
11.3 Construction and Remodeling Costs..........................90
11.4 Compliance with Specifications.............................90
11.5 Inspection During Construction or Renovation...............91
11.6 Maintenance................................................91
11.7 Remodeling of Business Premises............................91
ARTICLE 12 SIGNS.........................................................91
12.1 Approved Signs.............................................91
12.2 Payment of Costs and Expenses..............................92
12.3 Modifications; Inspection..................................92
ARTICLE 13 TELECOMMUNICATION AND COMPUTER EQUIPMENT......................92
13.1 Telecommunication Equipment................................92
13.2 Satellite and Cable Television.............................92
13.3 Computer Hardware..........................................92
13.4 Software...................................................93
13.5 Access to Computer Data....................................93
13.6 Internet Provider..........................................93
13.7 E-Mail Address.............................................93
ARTICLE 14 INSURANCE.....................................................93
14.1 General Liability Insurance................................93
14.2 Liquor Liability Insurance.................................93
14.3 Automobile Liability Insurance.............................94
14.4 Property Insurance.........................................94
14.5 Building Insurance.........................................94
14.6 Umbrella Liability.........................................94
14.7 Insurance Required by Law..................................94
14.8 Insurance Companies; Evidence of Coverage..................94
14.9 Defense of Claims..........................................94
14.10 Rights of Elephant & Castle...............................94
ARTICLE 15 LICENSING OF MARKS AND RESTAURANT SYSTEM......................95
15.1 Right to License Marks.....................................95
15.2 Conditions to License of Marks.............................95
15.3 Franchisee's Use of Marks..................................95
15.4 Adverse Claims to Marks....................................95
15.5 Defense or Enforcement of Rights to Marks..................96
15.6 Tender of Defense..........................................96
15.7 Franchisee's Right to Participate in Litigation............96
ARTICLE 16 TRAINING PROGRAM; OPENING ASSISTANCE..........................96
16.1 Training...................................................96
16.2 Changes in Personnel.......................................97
16.3 Initial Training of New Personnel..........................97
ELEPHANT & CASTLE INTERNATIONAL, INC. 15 GTM/RCA 032999
FRANCHISE AGREEMENT -iii- 426304 9
16.4 Payment of Salaries and Expenses............................97
16.5 Opening Assistance..........................................98
16.6 Advisory Assistance.........................................98
16.7 Hiring and Training of Employees by Franchisee..............98
ARTICLE 17 ASSIGNMENT.....................................................98
17.1 Assignment by Elephant & Castle.............................98
17.2 Assignment by Franchisee to Owned or Controlled Entity......98
17.3 Assignment by Individual Franchisee in Event of Death or
Permanent Disability........................................99
17.4 Sale of Ownership Interests to Public.......................99
17.5 Elephant & Castle's Warrant................................100
17.6 Assignment by Franchisee...................................100
17.7 Acknowledgment of Restrictions.............................100
17.8 Transfer Fee...............................................101
17.9 Transfer to Competitor Prohibited..........................101
ARTICLE 18 TERMINATION RIGHTS OF ELEPHANT & CASTLE.......................101
18.1 Conditions of Breach.......................................101
18.2 Notice of Breach...........................................102
18.3 Arbitration................................................102
18.4 Notice of Termination......................................103
18.5 Immediate Termination Rights of Elephant & Castle..........103
18.6 Notice of Immediate Termination............................103
18.7 Other Remedies.............................................103
ARTICLE 19 FRANCHISEE'S TERMINATION RIGHTS...............................104
19.1 Conditions of Breach.......................................104
19.2 Notice of Breach...........................................104
19.3 Arbitration................................................104
19.4 Waiver.....................................................104
19.5 Injunctive Relief..........................................105
ARTICLE 20 FRANCHISEE'S OBLIGATIONS UPON TERMINATION.....................105
20.1 Termination of Use of Marks; Other Obligations.............105
20.2 Alteration of Franchised Location..........................105
20.3 Cancellation of Telephone Directory Listings...............106
20.4 Continuation of Obligations................................106
ARTICLE 21 FRANCHISEE'S COVENANTS NOT TO COMPETE.........................106
21.1 Consideration..............................................106
21.2 In-Term Covenant Not to Compete............................106
21.3 Post-Term Covenant Not to Compete..........................107
21.4 Injunctive Relief..........................................107
21.5 Severability...............................................107
ARTICLE 22 INDEPENDENT CONTRACTORS; INDEMNIFICATION......................108
22.1 Independent Contractors....................................108
22.2 Indemnification............................................108
22.3 Payment of Costs and Expenses..............................108
22.4 Continuation of Obligations................................108
ELEPHANT & CASTLE INTERNATIONAL, INC. 15 GTM/RCA 032999
FRANCHISE AGREEMENT -iv- 426304 9
ARTICLE 23 ARBITRATION...................................................109
23.1 Mediation..................................................109
23.2 Disputes Subject to Arbitration............................109
23.3 Notice of Dispute..........................................109
23.4 Demand for Arbitration.....................................109
23.5 Venue and Jurisdiction.....................................109
23.6 Powers of Arbitrator(s)....................................109
23.7 Disputes Not Subject to Arbitration........................110
23.8 No Collateral Estoppel or Class Actions....................110
23.9 De Novo Hearing on Merits..................................110
23.10 Confidentiality...........................................110
23.11 Performance During Arbitration of Disputes................110
ARTICLE 24 ENFORCEMENT...................................................111
24.1 Injunctive Relief..........................................111
24.2 Severability...............................................111
24.3 Waiver.....................................................112
24.4 Payments to Elephant & Castle..............................112
24.5 Effect of Wrongful Termination.............................112
24.6 Cumulative Rights..........................................112
24.7 Binding Agreement..........................................112
24.8 Joint and Several Liability................................112
24.9 No Oral Modification.......................................112
24.10 Entire Agreement..........................................113
24.11 Headings; Terms...........................................113
24.12 Venue and Jurisdiction....................................113
24.13 Federal Arbitration Act...................................113
24.14 Contractual Statute of Limitations........................113
ARTICLE 25 NOTICES.......................................................113
ARTICLE 26 DISCLAIMER; ACKNOWLEDGMENTS...................................114
26.1 Disclaimer.................................................114
26.2 Acknowledgments by Franchisee..............................114
26.3 Other Franchisees..........................................114
26.4 Receipt of Agreement and Uniform Franchise
Offering Circular..........................................114
26.5 Alamo Grill-TM-Restaurants.................................115
ARTICLE 27 FRANCHISEE'S LEGAL COUNSEL....................................115
ARTICLE 28 GOVERNING LAW; STATE MODIFICATIONS............................115
28.1 Governing Law; Severability................................115
28.2 Applicable State Laws......................................116
28.3 State Law Modifications....................................116
28.4 Severability...............................................119
ELEPHANT & CASTLE INTERNATIONAL, INC. 15 GTM/RCA 032999
FRANCHISE AGREEMENT -v- 426304 9
The following information will have to be completed by Elephant & Castle and the
Franchisee prior to the time that this Agreement is signed by the parties:
Article Page Information Required Completed Person Completing
Information
N/A F-1 Date of Agreement
------------ ------------------
N/A F-1 Name of Franchisee
------------ ------------------
N/A F-1 Business Structure of Franchisee
------------ ------------------
2.1 F-4 Franchised Location
------------ ------------------
27 F-44 Name, address and telephone number
of Franchisee's attorney or advisor
------------ ------------------
N/A F-49 Signature of Elephant & Castle
------------ ------------------
N/A F-49 Signature(s) of Franchisee
------------ ------------------
N/A F-49 Signature(s) of Owners and
percentage of Ownership Interest
(if applicable)
------------ ------------------
N/A F-51 Signature(s) of Personal Guarantors
and percentage of Ownership
Interest (if applicable)
------------ ------------------
ELEPHANT & CASTLE INTERNATIONAL, INC. 15 GTM/RCA 032999
FRANCHISE AGREEMENT -vi- 426304 9
ARTICLE 4
INITIAL FEE; APPROVAL OF FRANCHISEE
4.1 INITIAL FEE.
The Franchisee will pay Elephant & Castle a nonrefundable Initial Fee of
thirty-five thousand dollars ($35,000), which will be payable in full on the
date the Franchisee commences business. The Initial Fee payable by the
Franchisee is payment, in part, to Elephant & Castle for the costs incurred
by Elephant & Castle to operate its business, including costs for general
sales and administrative expenses, travel, long distance telephone calls,
training, opening costs, marketing costs, legal and accounting fees,
compliance with franchising and other laws, and the initial services rendered
to the Franchisee as described in this Agreement.
4.2 TERMINATION OF FRANCHISE.
Elephant & Castle will have the right to terminate this Agreement at any time
within one hundred twenty (120) days after the date of this Agreement if: (a)
any required or other financial, personal or other information provided by
the Franchisee to Elephant & Castle is materially false, misleading,
incomplete or inaccurate; (b) the Franchisee has not purchased or leased a
site for the Franchised Location or has done so in a manner not in compliance
with Article 2.4 and Article 11 of this Agreement; (c) the Franchisee fails
to apply for and obtain a valid license for the service of food for its
Elephant & Castle-R-Restaurant from the appropriate governmental agencies;
(d) the Franchisee fails to apply for and obtain a valid liquor license for
its Elephant & Castle-R-Restaurant from the appropriate governmental
authorities; or (e) the Franchisee (or its Operating Partner), the
Franchisee's General Manager and the Franchisee's Chef fail to complete the
Elephant & Castle training program described in Article 16.1 of this
Agreement.
4.3 PAYMENT OF COSTS.
If this Agreement is terminated by Elephant & Castle pursuant to Article 4.2,
then, within ten (10) days after termination, the Franchisee will pay
Elephant & Castle fifty percent (50%) of the Initial Fee as payment for the
administrative and out-of-pocket expenses incurred by Elephant & Castle
including, but not limited to, executives' and employees' salaries,
salespersons' commissions, attorneys' fees, accountants' fees, travel
expenses, training costs, legal compliance, marketing costs and long distance
telephone calls.
ARTICLE 5
CONTINUING FEE
5.1 AMOUNT OF CONTINUING FEE; DATE PAYABLE.
In addition to the Initial Fee payable by the Franchisee, the Franchisee will
pay Elephant & Castle a weekly Continuing Fee equal to the greater of: (a)
five percent (5%) of the Franchisee's weekly Gross Sales for the preceding
week; or (b) one thousand two hundred and fifty dollars ($1,250). The weekly
Continuing Fee will be paid to Elephant & Castle by the Franchisee by
Wednesday of each week for the preceding week. The minimum weekly Continuing
Fee of one thousand two hundred and fifty dollars ($1,250) will not be
applicable until the first full week of the seventh month after the date of
this Agreement, and beginning on Wednesday of that week, the Franchisee will
pay the greater of the amounts set forth above.
5.2 INTEREST ON UNPAID CONTINUING FEES.
If the Franchisee fails to remit the Continuing Fee due to Elephant & Castle
as provided for in Article 5.1, then the amount of the unpaid and past due
Continuing Fee will bear simple interest at the lesser of the maximum legal
rate allowable by applicable law or eighteen percent (18%) simple interest
per annum. The Franchisee will pay Elephant & Castle an administrative fee of
seventy-five dollars ($75)
for each delinquent Continuing Fee payment within ten (10) days after the
delinquent
