STEAK N SHAKE OPERATIONS, INC. UNIT FRANCHISE AGREEMENT Recitals Terms of Agreement Property, Equipment and Furnishings AND UNIFORMS Methods of Payment AND TRADE SECRETS Expiration of this Agreement SIGNATURE PAGE SCHEDULE 1
Exhibit 10.1
000
Xxxxxxxx Xx.
Xxxxxxxxxx,
X.X.
STEAK
N SHAKE OPERATIONS, INC.
UNIT
FRANCHISE AGREEMENT
TABLE
OF
CONTENTS
Recitals
Terms
of
Agreement
SECTION
1. GRANT OF FRANCHISE
1.01. Exclusive
Grant
1.02. Additional
Restaurants
1.03. Franchisee
Obligations
1.04. Operating
Manager's Duties
1.05. Company
Services
SECTION
2. TERM AND RENEWAL
2.01. Term
2.02. Renewal
SECTION
3. RESTAURANT PROPERTY AND EQUIPMENT
3.01. Transfer
of Real and Personal Property Interest
3.02. Construction
of Restaurant
3.03. Installation
of Equipment and Furnishings
3.04. Maintenance
and Renovation of the Restaurant
Property,
Equipment and Furnishings
3.05. Purchase
of Non Approved Equipment and Furnishings
3.06. Eminent
Domain
SECTION
4. SUPPLIES,
FOOD PRODUCTS, RECIPE ITEMS
AND
UNIFORMS
4.01. Use
of
Food Supplies and Other Items
4.02. Samples
4.03. Suppliers
of Food Supplies and Other Items
4.04. Uniforms
SECTION
5. OPERATING STANDARDS
5.01. Operational
Standards
5.02. Operating
Hours
5.03. Training
5.04. Continuing
Services
SECTION
6. FEES AND ADVERTISING EXPENDITURES
6.01. Initial
Franchise and Royalty Fee
6.02. Advertising
and Marketing Expenditures
6.03. Definition
of Gross Receipts
6.04. Interest
on Late Payments
6.05. Credit
Cards and Other
Methods
of Payment
6.06. Vending
Machines
6.07. Fees
Non-Refundable
6.08. Payment
By Electronic Transfer
SECTION
7. ADVERTISING
7.01. Origination
and Approval of Advertising
7.02. Advertising
Agency
SECTION
8. BOOKS, RECORDS AND CONTROL PROCEDURES
8.01. Bookkeeping
System
8.02. Reports
8.03. Marketing
Information
8.04. Records
of Franchisee
8.05. Inspection
of Franchisee's Records
8.06. Company
Provided Accounting Services
SECTION
9. INSURANCE AND INDEMNITY
9.01. Indemnity
9.02. Franchisee's
Insurance
9.03. Evidence
of Insurance
9.04. Notice
9.05. Additional
Insured
SECTION
10. LIMITATION
AND USE OF PROPRIETARY MARKS
AND
TRADE
SECRETS
10.01.
Proprietary Marks And Trade Secrets
10.02.
Limitation on Franchisee's Use of Marks
10.03.
Notification of Infringements and Claims
10.04.
Indemnification of Franchisee/Discontinuance of Use of Marks
10.05.
Non-Disclosure of Trade Secrets and Confidential Information
10.06.
Survival
SECTION
11. TERMINATION
11.01.
Termination of the Franchise Agreement
11.02. Effect
of
Any Termination, Cancellation or
Expiration
of this Agreement
11.03.
[INTENTIONALLY DELETED]
SECTION
12. COVENANT NOT TO COMPETE
SECTION
13. ASSIGNMENTS
13.01.
Assignment by the Company
13.02.
Assignment by Franchisee
13.03.
The Company’s Right of First Refusal
SECTION
14. GENERAL PROVISIONS
14.01.
Improvements to System
14.02.
Severability
14.03.
Franchisee Independent Contractor /Disclosure Thereof
14.04.
Section and Subsection Titles
14.05.
Entire Agreement
14.06.
Number and Gender
14.07.
Obligations of Interested Parties
14.08.
Written Approval, Waiver and Non-Waiver
14.09.
Notices
14.10.
Designated Agent of Franchisee
14.11.
Specific Performance
14.12.
Venue/Dispute Resolution
14.13.
Costs and Attorneys' Fees
14.14.
Interference with Employment Relations
14.15.
Acknowledgment of Differing Terms
14.16.
Acknowledgment of No Promises
14.17.
Governing Law
14.18.
Agreement Location
SIGNATURE
PAGE
SCHEDULE
1
ATTACHMENT
A - PERSONAL GUARANTY (omitted from filing)
STEAK
N SHAKE
UNIT
FRANCHISE AGREEMENT
THIS
AGREEMENT is made and entered into this 16th day of December, 2005,
("Effective Date") by and between STEAK N SHAKE OPERATIONS, INC., an Indiana
corporation, with its principal office at 500 Century Building, 00 Xxxxx
Xxxxxxxxxxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxx 00000 (the "Company") and Xxxxxx
Operations, Inc. a North Carolina Corporation with its principal offices
at 0000
Xxxxxxxxx Xxxxx, Xxxxxxxxx, Xxxxx Xxxxxxxx 00000. ("Franchisee").
Recitals
The
Company has created and developed a unique restaurant concept, including
buildings with a distinctive architectural design, decorative color scheme
and
trade dress, and has standardized methods of preparing and serving certain
food
products and beverages for on-premises and off-premises consumption in
manuals
and other materials of the Company (the "Operating Standards Manual") as
issued
and revised from time to time (hereinafter collectively referred to as
the
"System"). Such restaurants are operated with uniform formats, systems,
methods,
procedures and designs and are known as "STEAK N SHAKE" Restaurants. The
Company
believes that the reputation and goodwill of STEAK N SHAKE Restaurants
are based
upon, and can be maintained only by, the sale of distinctive, high quality
products and services.
The
Company is duly licensed to use and promote certain proprietary trademarks,
service marks, trade dress and other commercial symbols, including "STEAK
N
SHAKE", the "WINGED LOGO", "TAKHOMASAK", "IN SIGHT IT MUST BE RIGHT", "FAMOUS
FOR STEAKBURGERS", and related logos (the "Marks"). The Company has experience
and Know-How (as defined herein) in the operation of STEAK N SHAKE Restaurants
and can provide assistance and guidance in connection therewith.
The
Company grants franchises to own and operate STEAK N SHAKE Restaurants
to
persons who meet the Company's qualifications and are willing to undertake
the
investment and effort to establish and develop a STEAK N SHAKE Restaurant
in
accordance with the System.
Franchisee
acknowledges that he has conducted an independent investigation of the
business
contemplated by this Agreement and recognizes that it involves business
risks
which make the success of the venture largely dependent upon the business
abilities of Franchisee.
Franchisee
has applied for a franchise to own and assume operations at an existing
STEAK N
SHAKE Restaurant at the location identified or to be identified in Section
1.01
hereof and such application has been approved by the Company in reliance
upon
all of the representations made by the Franchisee.
Terms
of Agreement
Company
and Franchisee hereby agree as follows:
SECTION
1. GRANT
OF FRANCHISE
1.01.
Exclusive
Grant.
This
franchise (hereinafter sometimes referred to as the "Franchise") is being
granted based on the application, financial statements and other documents
submitted by Franchisee to the Company prior to the execution hereof, and
Franchisee represents and warrants:
| (a) |
the
accuracy and completeness of such submissions as of the respective
dates
of the documents and the date hereof;
and
|
| (b) |
that
such submissions do not omit the statement of any material fact
necessary
to make them not misleading.
|
Subject
to the conditions of this Agreement and the continuing faithful performance
by
Franchisee hereunder, the Company grants to Franchisee, for and during
the term
hereof, the right, license and privilege: (1) to operate the following
STEAK N
SHAKE Restaurant: 000 Xxxxxxxx Xxxx, Xxxxxxxxxx, X.X. (the "Restaurant");
(2) to
use the Marks licensed to the Company as are now or may hereafter be
specifically designated by the Company in writing for use only with the
System;
(3) to offer for sale all of the (and only the) food and beverage products
designated by the Company and sold therein (as they may be changed, improved,
and further developed from time to time); and (4) to indicate to the public
that
Franchisee's Restaurant is operated as a part of the System. During the
term of
this Agreement, the Company shall not own or operate a STEAK N SHAKE Restaurant,
and shall not grant to any third party a franchise to operate a Steak n
Shake
restaurant at any location within the geographical area described or to
be
determined and described in Schedule
1
(the
"Exclusive Territory"). Nothing contained herein shall limit the right
of the
Company to sell directly or through third parties any products, provided
that
the items sold by the Company are either packaged or bottled and sold for
preparation and/or consumption off the selling premises.
1.02.
Additional
Restaurants.
Franchisee understands that the Company and its affiliated corporations
currently operate and/or franchise, and may in the future operate and/or
franchise, restaurants and food establishments other than STEAK N SHAKE
Restaurants, and Franchisee agrees that the Company and/or any related
entity
may do so within the Exclusive Territory, provided that such restaurants
and
food establishments do not feature ground beef sandwiches as a primary
product
and do not utilize the following or similar names or trade names: "STEAK
N
SHAKE", "TAKHOMASAK, "IN SIGHT IT MUST BE RIGHT", and "FAMOUS FOR STEAKBURGERS".
Franchisee further agrees that this franchise relates solely to and is
limited
to the single Restaurant location described herein, and affords Franchisee
no
right, title or interest in additional franchises to be operated at any
other
location (subject to relocation of the Restaurant as permitted under
Section
3.01).
Neither
this Agreement nor the franchise issued hereunder obligates the Company
in any
way to seek, issue, or allow the purchase of any additional franchises
by
Franchisee or others.
1.03.
Franchisee
Obligations.
Franchisee agrees to diligently use its best efforts to develop and operate
the
business franchised herein and to promote the interest of the System for
the
term of this Agreement and any renewal thereof. Franchisee accepts the
grant of
this franchise and agrees to maintain and operate the Restaurant only at
the
location in Schedule
1
hereof
in accordance with the Company's plans, specifications and procedures as
set
forth in the Operating Standards Manual and other applicable publications
of the
Company, as revised from time to time, and the terms of this Agreement.
Franchisee agrees to use the franchised facility only for the purpose designated
in this Franchise Agreement.
Franchisee
acknowledges that maintaining uniformity in every component of the operation
of
the System is essential to the success of the entire chain of STEAK N SHAKE
Restaurants, including a designated menu; uniformity of food and beverage
specifications, preparation methods, quality and appearance; and uniformity
of
facilities and service. Franchisee agrees to comply with the entire System,
as
revised from time to time by the Company.
1.04.
Operating
Manager's Duties.
At all
times during this Agreement, Franchisee's manager in charge of operations
for
the Restaurant will have attended and successfully completed the prescribed
manager training program of Company and all subsequent manager training,
refresher and retraining programs offered from time to time by Company
pursuant
to Section
5.03
of this
Agreement. The manager will be a full-time manager on the premises or with
reasonable availability to the premises at all times to carry out the manager's
day-to-day responsibilities. The manager will refrain from operational
or
management commitments in other businesses (except other STEAK N SHAKE
Restaurants operated under franchises granted by the Company) which would
in any
way affect the management duties required hereunder.
1.05.
Company
Services.
The
Company agrees to provide to Franchisee the following materials, benefits
and
services, all as hereinafter more fully set forth:
| (a) |
Written
guidelines for site selection (if applicable) upon
request;
|
| (b) |
As-Built
Survey site plans, construction plans, drawings and specifications
for the
Restaurant and related facilities;
|
| (c) |
Layouts
and specifications for fixtures, furnishings, interior design
and decor,
signs and equipment required as elements of the
System;
|
| (d) |
Such
training at such locations and for such periods as may be designated
by
the Company from time to time in the Operating Standards Manual
or
otherwise in writing, subject to Section
5.03
of
this Agreement;
|
| (e) |
Such
assistance as the Company may determine is required in connection
with the
Restaurant operation by Franchisee;
|
| (f) |
One
(1) copy each of the Company's Operating Standards Manual and
other
applicable manuals, publications or materials issued by the Company,
copies of which are, concurrently with the execution hereof,
delivered and
loaned to Franchisee for the term hereof. Any additions and modifications
thereto as the Company may issue from time to time, in its discretion,
to
incorporate new developments or other changes in System standards,
specifications, procedures, and techniques will be provided to
the
Franchisee. Franchisee must pay then-current replacement fee
as
established by the Company for replacing copies of the Operating
Standards
Manual or other materials;
|
| (g) |
A
sample of the Company's standardized chart of accounts, statement
of
earnings, balance sheet and other report formats to be used by
Franchisee
for purposes of reporting to the
Company;
|
| (h) |
The
Company's regular and continuing consulting services and periodic
inspections and evaluations of Franchisee's operations pursuant
to
Section
5.04;
and
|
| (i) |
The
STEAK N SHAKE advertising/marketing program(s) as developed and
issued
from time to time by the Company under Sections
6.02 and 7.01.
|
SECTION
2. TERM
AND RENEWAL
2.01.
Term.
Unless
sooner terminated as hereinafter provided, this Franchise Agreement shall
extend
for a term commencing one hundred (100) days from the date of this Agreement,
("Franchise Date") and ending on the twentieth (20th) anniversary of such
date.
If the premises of the Restaurant are leased by Franchisee, the term of
the
agreement shall be co-extensive with the shorter of (i) the initial term
of the
lease or (ii) the term as hereinabove set forth.
2.02.
Renewal.
If all
of the following criteria are satisfied, Franchisee may renew this Franchise
to
use the System and Marks at the Restaurant for one additional term equal
to the
term in the Company's standard form of Unit Franchise Agreement as it exists
on
the renewal date:
| (a) |
Franchisee
gives the Company written notice of its intention to renew this
Franchise
not less than six (6) months, nor more than twelve (12) months,
prior to
the end of the then-current term.
|
| (b) |
Franchisee
is not, when notice is given and when the franchise is renewed,
in
material default of any provision of this Agreement, any amendment
hereof
or successor hereto, or any other Unit Franchise Agreement, and
has
complied with all such agreements during the term of this
Agreement.
|
| (c) |
All
monetary obligations owed by Franchisee to the Company are current
and
have been paid throughout the initial and all prior renewal terms
of this
Agreement in a timely manner.
|
| (d) |
Franchisee
executes the Company's then-current form of standard Unit Franchise
Agreement, which agreement shall supercede this Agreement in
all respects,
and the terms of which may differ from the terms of this Agreement,
including without limitation a higher percentage royalty fee,
a different
term or higher national and local advertising and marketing expenditure
requirements (or new methods of computing same), if
any.
|
| (e) |
Franchisee,
its managers and any other employee of the Franchisee attend
and
satisfactorily complete such retraining or refresher training
program as
the Company may require, in its sole discretion, at such time
and place as
the Company may reasonably
designate.
|
| (f) |
Franchisee
performs such remodeling, repairs, replacements and redecoration
as the
Company may require to cause the Restaurant, equipment, electronic
point
of sale systems, computer systems, fixtures, furnishings and
furniture to
conform to the plans and specifications being used for new or
remodeled
STEAK N SHAKE Restaurants on the renewal
date.
|
| (g) |
Franchisee
pays to Company a renewal fee equal to fifty percent (50%) of
the Initial
Franchise Fee payable by franchisees prevailing at the renewal
date,
payable at least thirty (30) days prior to the renewal
date.
|
| (h) |
Franchisee
executes an agreement with the Company agreeing to release any
claims,
known or unknown, Franchisee may have against the Company at
the time of
the renewal.
|
SECTION
3. RESTAURANT
PROPERTY AND EQUIPMENT
3.01.
Transfer
of Personal and Real Property Interests.
Franchisee desires to assume operation of the Restaurant and the Company
agrees
to transfer its interest in the Restaurants on the Franchise Date as
follows:
|
(a).
|
All
of the Company’s right, title and interest in and to the Restaurant shall
be conveyed pursuant to that Contract for Purchase and Sale of
Real Estate
of even date herewith, attached hereto as Exhibit A, and incorporated
herein by this reference (the "Contract"). It being acknowledged
and
agreed by the parties that if the Contract is terminated for
any reason,
this Agreement shall terminate immediately and the parties shall
have no
further obligations to each other hereunder;
and
|
(b). All
of
the Company’s right, title and interest in and to the good will, inventory,
equipment, furniture and fixture located at the Restaurants as of the date
hereof shall be conveyed pursuant to that Personal Property Sales Agreement
of
even date herewith and attached hereto as Exhibit B. It being acknowledged
and
agreed that if the Personal Property Sales Agreement is terminated for
any
reason, this Agreement shall terminate immediately and the parties shall
have no
further obligation to each other hereunder.
3.02.
Casualty.
In
the
event the Restaurant is damaged or rendered totally or partially untenantable
by
fire or other casualty, Franchisee shall, within thirty (30) days, initiate
repairs to the Restaurant property and diligently pursue the completion
of such
repairs in order to restore the Restaurant property to its former condition
prior to the casualty within a reasonable time, not to exceed six (6) months
after the date of the fire or casualty, which time period may be extended
for
delays resulting from acts of God, force majeure and other causes beyond
the
reasonable control of Franchisee, provided Franchisee continues to diligently
pursue the completion of such repairs. If, in the Company's reasonable
judgment,
the damage or destruction is so extensive that substantial cost and effort
will
be expended in restoring the Restaurant property, the Company may require
Franchisee, by giving written notice thereof, to restore the Restaurant
property
in conformance with the then standard STEAK N SHAKE Restaurant decor
specifications. Notwithstanding anything herein to the contrary, Franchisee
shall not be required to repair or restore the Restaurant property if such
damage occurs during the final year of the Franchise unless the Company
agrees
to extend the Franchise pursuant to Section
2.02.
Franchisee shall be solely responsible for the cost associated with restoring
the Restaurant property.
3.03.
Use
of
Equipment and Furnishings.
Franchisee shall:
| (a) |
install
and use in and about the Restaurant only such equipment (including,
but
not limited to, food and beverage preparation equipment, fixtures,
furnishings, point of sale equipment, computer hardware and software,
interior and/or exterior signage and air handling equipment)
and other
personal property which strictly conforms to the appearance,
uniform
standards, specifications and procedures of the Company and the
System.
Such equipment is sometimes referred to herein collectively as
"Equipment
and Furnishings." Franchisee shall purchase and install all Equipment
and
Furnishings listed on the equipment and furnishings list, and
not
currently installed in the Restaurants, in the New Store Construction
Manual from approved suppliers. The Company shall have the right
to
inspect and approve all Equipment and Furnishings and their installation
to ensure Franchisee's compliance with the Company's standards
and
specifications; and
|
| (b) |
install
no vending machine on or about the Restaurant property, in addition
to any
vending machine currently installed, other than pay telephones
and
newspaper vending machines, without the Company's prior written
consent.
|
3.04.
Maintenance
and Renovation of the Restaurant Property, Equipment and
Furnishings.
| (a) |
Franchisee
agrees to maintain the condition and appearance of the Restaurant
in
compliance with the Company's prescribed standards of quality,
service and
cleanliness. If at any time, in the Company's reasonable judgment,
the
general state of repair, appearance or cleanliness of the Restaurant
property or its Equipment and Furnishings do not meet the Company's
standards, the Company will so notify the Franchisee in writing,
specifying the action to be taken by the Franchisee to correct
such
deficiency, and the Franchisee will promptly comply with the
Company's
requirements.
|
| (b) |
If
the Company changes the design, decor, layout or other elements
of the
System, the Franchisee agrees to remodel its Restaurant, at Franchisee's
expense, to conform with the Company's new standards. Such changes
will be
made by Franchisee by the time the Company completes such changes
to
substantially all of the Company
Restaurants.
|
| (c) |
If
the Company changes or modifies its electronic point of sale
system or
computer system used in the Company Restaurants, the Franchisee
agrees to
change or modify its electronic point of sale system or computer
system to
conform with the Company's new standards. Such changes and modifications
will be made by the Franchisee, at the Franchisee's expense,
by the time
the Company completes such changes and modifications to substantially
all
of the Company Restaurants.
|
| (d) |
If
the Company changes or modifies any item or items of equipment
used in the
Company Restaurants, the Franchisee agrees to change or modify
such item
or items of equipment in the franchised Restaurant to conform
with the
Company's new standards. Such changes and modifications will
be made by
the Franchisee, at the Franchisee's expense, by the time the
Company
completes such changes and modifications to substantially all
of the
Company Restaurants.
|
3.05.
Purchase
of Non Approved Equipment and Furnishings.
If
Franchisee desires to purchase or install any item that has not been
specifically approved by the Company, or to purchase an item of equipment
manufactured to the Company’s specifications from a supplier that has not been
pre-approved by the Company, Franchisee shall submit to the Company a written
request for approval of such item or supplier. The Company shall have the
right
to require, among other things, that a sample of the item to be delivered
or
manufactured be made available in a manner acceptable to the Company or
to an
independent certified laboratory designated by the Company for testing
prior to
acting on the request for approval. All costs and expenses related to such
testing and evaluation shall be paid to the Company by Franchisee. The
Company
shall not be liable for any damage to sample items which may result from
the
testing process. The Company reserves the right to retest any items previously
approved by it and may revoke any prior approval if the item fails to continue
to meet the Company's standards and specifications. If the Company revokes
the
approval of any item or any supplier in writing or in the New Store Construction
Manual, Franchisee shall not thereafter purchase such item from the supplier
or
use such item in connection with the operation of the Restaurant.
3.06.
Eminent
Domain.
If
during the term of this Agreement, the Restaurant property shall be taken
for
any public use by an exercise of eminent domain, condemnation or by purchase
under the threat of such power (hereinafter referred to the "Proceeding"),
either party to this Agreement may elect to continue the Franchise under
the
terms of this Agreement at a new Restaurant location. However, such new
Restaurant location must be approved by the Company within six (6) months
of the
"completion of" the Proceeding, and the location set out in a new Schedule
1,
to be
attached hereto and made a part hereof. Approval of the location for the
new
Restaurant is within the sole discretion of the Company, which shall not
be
unreasonably withheld.
The
right
to elect to continue the Franchise at a new Restaurant location may be
exercised
by either party only if there is a total taking of the Restaurant property
or a
Material Partial Taking of the Restaurant property. For purposes of this
Agreement, "Material Partial Taking" is the taking of any portion of the
restaurant building, the loss of twenty percent (20%) or more of the parking
area or number of parking spaces on the Restaurant property or the loss
of
drive-thru facilities on the Restaurant property. Regardless of the provisions
set forth above, if any Proceeding occurs after the tenth (10th) anniversary
of
this Agreement, then both parties must agree in writing to continue the
Franchise and the terms of this Agreement. In the event the Proceeding
results
in less than a total or Material Partial Taking, Franchisee agrees to repair
or
restore any damage to the Restaurant property in the manner set forth for
fire
and casualty losses in Section
3.02
herein.
SECTION
4. SUPPLIES,
FOOD PRODUCTS, RECIPE ITEMS AND UNIFORMS
4.01.
Use
of
Food Supplies and Other Items.
Franchisee agrees:
| (a) |
to
serve, sell or offer for sale all of the (and only the) food
and beverage
products that: (i) are listed in the then-current standard menu
or menus
specified by the Company, (ii) meet the Company's uniform standards
of
quality and portions, and (iii) have been prepared in accordance
with the
recipes and food handling and preparation methods and procedures
designated from time to time in the Operating Standards Manual
or
otherwise in writing;
|
| (b) |
to
maintain in sufficient supply all of the food, beverage and other
items
served;
|
| (c) |
not
to deviate from the Company's standards, specifications and procedures
for
serving or selling the same without the Company's prior written
consent;
and
|
| (d) |
to
discontinue serving, selling or offering for sale any such items
as the
Company may, in its discretion, disapprove in writing at any
time.
|
4.02.
Samples.
Franchisee further agrees to permit the Company or its agents, at any reasonable
time, to remove from the Restaurant certain samples of any inventory items,
without payment therefor, in amounts reasonably necessary for testing by
the
Company or an independent certified laboratory to determine whether the
samples
meet the Company's then-current standards and specifications.
4.03.
Suppliers
of Food Supplies and Other Items.
Franchisee will purchase approved food products and other items only from
sources approved by the Company (which may include the Company and/or its
affiliates). The Company may from time to time modify the list of approved
items, brands and suppliers, and Franchisee shall not, after receipt in
writing
of such modification, reorder any item or brand or reorder from any supplier
which is no longer approved. If Franchisee proposes to use or serve any
food or
beverage item or other ingredient or proposes to use any item, brand or
supplier
which is not approved at that time, it shall first notify the Company and
submit
sufficient information, specifications and samples concerning such item,
brand
or supplier for a determination by the Company whether such item or brand
complies with the Company's specifications and standards and whether such
supplier meets the Company's approved supplier criteria. The Company shall,
within a reasonable time, notify Franchisee whether or not such proposed
item,
brand or supplier is approved. The Company shall approve such proposed
item,
brand or supplier, if in the Company's sole judgment and discretion, it
is
satisfied that the proposed item, brand or supplier meets the Company's
specifications, standards and requirements. The Franchisee will reimburse
the
Company for the costs and expenses relating to the testing, research and
investigation of proposed items, brands or suppliers. Notwithstanding the
above,
the Company shall not be obligated to approve more than a reasonable number
of
suppliers or products used or served by the Restaurant.
4.04.
Uniforms.
Franchisee shall purchase and use uniforms and costumes for its employees
which
conform strictly to the specifications, design and style of the Company
existing
from time to time, as required in the Operating Standards Manual or other-wise
in writing.
SECTION
5. OPERATING
STANDARDS.
5.01.
Operational
Standards.
| (a) |
The
Company will loan to Franchisee during the term of the Franchise
one copy
each of the Operating Standards Manual, and other applicable
manuals and
publications of the Company for STEAK N SHAKE Restaurants, containing
mandatory and suggested specifications, standards and operating
procedures
prescribed from time to time by the Company for STEAK N SHAKE
Restaurants
and information relative to other obligations of Franchisee hereunder
for
the operation of a STEAK N SHAKE Restaurant. The Company shall
have the
right to modify the Operating Standards Manual and other manuals
and
publications from time to time to reflect changes in authorized
products
and services, standards of product quality and services for the
operation
of a STEAK N SHAKE Restaurant.
|
| (b) |
Franchisee
shall keep current all copies of the Operating Standards Manual
and other
manuals. The master copies maintained by the Company at its principal
office shall control in the event of a dispute relative to the
contents
thereof.
|
| (c) |
Franchisee
shall comply with all federal, state and local laws, rules and
regulations
and shall timely obtain any and all permits, certificates or
licenses
necessary for the full and proper conduct of the business franchised
under
this Agreement, including, without limitation, building and other
required
construction and occupancy permits, licenses to do business,
fictitious
name registration, sales tax permits, health and sanitation permits
and
ratings and fire code clearances. Copies of all inspection reports,
warnings, certificates and ratings issued by any governmental
entity
during the term of this Agreement in connection with the conduct
of the
franchised business which cites or indicates Franchisee's failure
to meet
or maintain the highest governmental standards or failure to
fully comply
with any applicable law, rule or regulation, shall be forwarded
to the
Company within five (5) days of Franchisee's receipt thereof.
Franchisee
shall remedy such failure within the required time period as
specified in
the respective citation, report or other notices, or within ten
(10) days
if no time period is so specified.
|
5.02.
Operating
Hours.
During
the term of this Agreement, Franchisee shall be open and in normal operation
for
twenty-four hours per day, seven days per week, or such other minimum hours
and
days as the Company may from time to time reasonably prescribe in
writing.
5.03.
Training.
| (a) |
All
of the Franchisee's managerial employees are required to successfully
complete the management training program (Phase I) prescribed
by the
Company at such place and time as the Company may designate,
but prior to
performing duties in or related to the Restaurant. Additionally,
any general managers or multi-unit managers must complete Phase
II
training provided by the Company. At
the Company's option, such training may take place at a STEAK
N SHAKE
Restaurant(s) operated by Franchisee and may be conducted by
properly
trained Franchisee personnel. Franchisee shall be solely responsible
for
the compensation of trainees and their travel, lodging and living
expenses
incurred in connection with the attendance at such
programs.
|
| (b) |
In
addition to the required management training, all other employees
of
Franchisee must undergo such on-the-job and instructional training
as the
Company may from time to time
require.
|
| (c) |
Franchisee,
and/or such executive, managerial, supervisory and other employees
of
Franchisee shall attend and successfully complete all subsequent
training,
refresher and retraining programs which the Company may conduct
and
require Franchisee and/or designated employees to attend, in
its
reasonable discretion.
|
| (d) |
Upon
failure of Franchisee or any manager or employee of Franchisee
to complete
successfully, for any reason, any training, retraining or refresher
program required by the Company, Franchisee shall require some
other
trainee to attend and successfully complete the program, and
to operate
the franchised business thereafter as its manager or otherwise
perform the
functions of the category of employee for which the training
program was
offered, if the Company, at its option, so
directs.
|
| (e) |
There
shall be no tuition charge for the training required by subsections
(a),
(b), (c) and (d) of this Section
5.03,
but Franchisee shall pay all expenses of travel, room, board,
training
supplies and materials and salaries or wages of its employees
while in
training.
|
| (f) |
Franchisee
shall replace any manager who the Company determines is not qualified
to
manage a Restaurant in accordance with the System and its
standards.
|
| (g) |
The
Company will provide the initial training materials and supplies,
which
are part of the System. Franchisee will purchase any additional
or
replacement training materials and supplies, as may be specified
by the
Company, to properly conduct such training as is established
and published
from time to time in the Operating Standards Manual.
|
5.04.
Continuing
Services.
The
Company will:
| (a) |
furnish
to Franchisee, from time to time, such merchandising and operating
aids
and services, bulletins, newsletters, reports and other printed
material
in connection therewith, as are generally furnished to its other
STEAK N
SHAKE Franchisees.
|
| (b) |
from
time to time, at its discretion, provide written or verbal consultation
and advice or send representatives to Franchisee's premises to
consult
with Franchisee or its management representative relative to
the operation
of the Restaurant; and shall periodically inspect the premises
of the
Restaurant (with or without prior notice) and the Equipment and
Furnishings thereon and the products served by Franchisee therein
to
determine the efficiency and quality of the operation and the
faithfulness
of compliance with the System.
|
| (c) |
on
reasonable written request by Franchisee as determined by the
Company,
furnish services to Franchisee to aid in the solution of specific
problems
encountered by Franchisee which are beyond the scope of the Company's
obligations in subsection
(b)
above. Franchisee shall reimburse the Company promptly for its
actual time
and actual expenses incurred in aiding Franchisee with such
problems.
|
SECTION
6. FEES
AND ADVERTISING EXPENDITURES.
6.01.
Franchise
and Royalty Fees.
| (a) |
On
or before the Franchise Date, Franchisee shall pay to the Company
an
initial nonrecurring franchise fee payable on the execution of
this
Agreement in the amount of Twenty Thousand Dollars and 00/100
($20,000.00)
(the "Initial Fee"). Nothing herein is intended to represent
or guarantee
the amount of the Initial Fee for any Restaurant other than the
one
franchised by the terms of this Agreement. The Initial Fee is
nonrefundable..
|
| (b) |
Franchisee
shall pay to the Company as a royalty fee, a sum equal to four
percent
(4%) of Franchisee's "Gross Receipts" (as defined in Section
6.03
hereof) ("Royalty Fee") from the operation of the Restaurant,
provided
however that for the first two years following the Franchise
Date, half of
this royalty fee shall be deferred ("Deferred Royalty Fee").
Commencing on
the second anniversary of the Franchise Date the Franchisee shall
begin
paying the full amount of the Royalty Fee, plus an additional
one percent
(1%) of Gross Receipts, until the Deferred Royalty Fee is paid
in full.
The Royalty Fee, and Royalty Fee with Deferred Royalty Fee reimbursement
amounts, shall be paid on or before the seventh (7th) day after
the end of
each four week accounting period, or, at the Company's option,
by the
seventh (7th) day after the end of each week for the preceding
week's
receipts.
|
6.02.
Advertising
and Marketing Expenditures.
Franchisee understands and hereby acknowledges that advertising, marketing
and
promotional activities are essential to the furtherance of the goodwill
and
public image of the Company and the success of the business franchised
hereunder, and agrees as follows:
| (a) |
Franchisee
will expend a reasonable amount annually, but in no event less
than five
percent (5%) of its Gross Receipts for advertising and marketing.
Price
discounts on products will not be included in calculating compliance
with
this requirement. Included in the required advertising and marketing
expenditures will be a payment to the Company of one percent
(1%) of Gross
Receipts which will be used by the Company, at its sole discretion,
for
expenditures reasonably related to the creation, development,
administration and supervision of marketing and advertising programs
and
menu development for all STEAK N SHAKE
restaurants.
|
| (b) |
At
the Company's option, Franchisee will pay to the Company or its
designee
five percent (5%) of Franchisee's Gross Receipts from the operation
of the
franchised business to be credited to an advertising account
for
Franchisee payable by the seventh (7th) day after the end of
each four
week accounting period, or, at the Company's option, by the seventh
(7th)
day after the end of each week for the preceding week's receipts.
The
monies in the advertising account will be used by the Company,
at its sole
discretion, for the implementation of local and/or regional and/or
national marketing and advertising programs intended to increase
general
public recognition and acceptance of STEAK N SHAKE Restaurants
in the
Franchisee’s Market area, with one percent (1%) of the account being used
by the Company for creation and development of marketing as set
forth in
subsection (a) above. These marketing and advertising expenditures
will be
credited toward the advertising and marketing expenditure requirements
described in subparagraph (a) of this Section. The Company will
administer
the advertising account, which will not be subject to audit by
the
Franchisee. The Company will create a periodic statement of monies
collected and costs incurred for the implementation portion of
the
advertising account, and will provide such periodic statement
to
Franchisee not less frequently than semi-annually. No monies
in such
advertising account are refundable upon the termination or expiration
of
this Agreement, as such monies are to be used by the Company
to further
the goodwill and public image of the Marks and the STEAK N SHAKE
brand.
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6.03.
Definition
of Gross Receipts.
"Gross
Receipts" for purposes herein shall mean and include the total actual gross
charges for all food, beverages, services (including service charges in
lieu of
gratuities) and other products and services sold to customers of the Restaurant,
for cash or credit, regardless of whether or not such sales are made from
the
premises of the Restaurant or any other location. Excluded from Gross Receipts
are sales, use, service or excise taxes collected from customers and paid
to the
appropriate taxing authority, customer refunds, discounts and adjustments,
employee discounts and proceeds from vending machine sales for newspapers
and
pay telephones.
6.04.
Interest
on Late Payments.
All
royalty fees, service fees, advertising contributions, amounts due for
purchases
from the Company or its affiliates and other amounts which Franchisee owes
to
the Company or its affiliates shall bear interest after the due date at
the
lesser of the highest legal rate permissible or 18 percent (18%) per annum.
Franchisee acknowledges that this Section
6.04
shall
not constitute the Company's agreement to accept such payments after same
are
due or a commitment by the Company to extend credit to, or otherwise finance,
Franchisee's operation of the Restaurant. Further, Franchisee acknowledges
that
its failure to pay all amounts when due shall constitute grounds for termination
of this Agreement as provided in Section
11,
notwithstanding the provisions of this Section
6.04.
6.05.
Credit
Cards and Other Methods of Payment.
Franchisee shall make arrangements with the suppliers or sponsors of such
credit
cards, check verification services or electronic funds transfer systems
for such
services as the Company may designate from time to time in order that the
Restaurant may accept customers’ credit cards, checks, gift cards or other
methods of payment.
6.06.
Vending
Machines.
No
vending machines, video games, jukeboxes, gum or candy machines, pinball
machines, rides or other mechanical devices (other than pay telephones
and
newspaper vending machines), in addition to those (if any) already installed
in
the Restaurant, shall be installed or operated on the Restaurant property
without the Company's prior written consent.
6.07.
Fees
Non-Refundable.
All
fees and other amounts payable to the Company under this Agreement are
non-refundable.
6.08.
Payment
By Electronic Transfer.
The
Company reserves the right to require Franchisee to pay amounts due to
the
Company under this Section
6
via
electronic transfer.
SECTION
7. ADVERTISING.
7.01.
Origination
and Approval of Advertising.
| (a) |
Recognizing
the value of advertising and the importance of the standardization
of
advertising to the furtherance of the goodwill and public image
of the
STEAK N SHAKE System, Franchisee agrees that the Company or its
designee
shall have the right to conduct, determine, maintain and administer
all
national, regional, local and other advertising and marketing
as may be
instituted by the Company from time to time, and to direct all
such
advertising and marketing with sole discretion over the concepts,
materials, form, copy, layout and content used
therein.
|
| (b) |
Franchisee
understands and acknowledges that advertising expenditures are
intended to
maximize general public recognition and acceptance of all STEAK
N SHAKE
Restaurants, and the Company and its designee(s) make no representation
or
warranty that any particular STEAK N SHAKE Restaurant, including
the
Restaurant operated under this Agreement, will benefit directly
or pro
rata from such advertising.
|
| (c) |
Franchisee
shall be free to conduct, at its separate expense, supplemental
advertising in addition to the advertising received for the expenditures
specified in Section
6.02
herein, to promote and increase the demand for the products and
services
of its own STEAK N SHAKE Restaurant. All such supplemental advertising
shall either have been prepared or previously approved in writing
by the
Company.
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7.02.
Advertising
Agency.
The
Company shall have the right to delegate its responsibilities and duties
hereunder to an advertising agency or any designee(s) of its choosing,
provided
that the right of final approval of all advertising programs shall be retained
at all times by the Company.
SECTION
8. BOOKS,
RECORDS AND CONTROL PROCEDURES.
8.01.
Reports.
On an
annual basis within sixty (60) days of the end of Franchisee’s fiscal year,
Franchisee shall submit to the Company a statement of earnings and a balance
sheet, current as of the end of the last fiscal year, with respect to the
operation of all the Restaurant operated by Franchisee, including the Restaurant
franchised hereunder. In addition, Franchisee shall submit to the Company,
for
review or auditing, such information, forms, reports and records, with
respect
to operation of the Restaurant franchised hereunder, as the Company may
reasonably designate, in the form and at the times and places reasonably
required by the Company. The Company may, at its option, gather financial
and
operating information from the electronic point of sale system and computer
system at the Restaurant by electronic transfer.
8.02.
Marketing
Information.
The
Company shall have the right from time to time to require Franchisee to
furnish
requested marketing information based on Franchisee's records, which information
will be used by the Company in making surveys and analysis designed to
benefit
and improve the System, business and operating results of all STEAK N SHAKE
Restaurants. Franchisee, upon reasonable request, shall promptly furnish
such
information to the Company or its designee(s).
8.03.
Records
of Franchisee.
Franchisee agrees to maintain and preserve, during the term of this Agreement,
full, complete and accurate books, records and accounts relative to the
operation of the Restaurant in accordance with generally accepted accounting
principles. Such records shall be retained for at least three (3) years
from the
dates thereof and in the form and manner prescribed by the Company from
time to
time.
8.04.
Inspection
of Franchisee's Records.
| (a) |
The
Company shall have the right to examine and audit Franchisee's
records,
accounts and books, federal and state income tax returns and
state sales
tax returns at reasonable times and places (including, without
limitation,
Franchisee's principal place of business). Franchisee shall pay
the
Company's audit fees, charges and expenses (including, without
limitation,
travel expenses and reasonable accounting and legal fees) with
respect to
any periodic or annual audit which reveals an understatement
of Gross
Receipts by Franchisee to the Company, if such understatement
is in excess
of two percent (2%) of Gross Receipts during such periodic or
annual audit
period.
|
| (b) |
If
required payments are delinquent or if an inspection should reveal
that
the Gross Receipts reported by Franchisee to the Company have
been
understated, Franchisee shall immediately pay to the Company
the amount
overdue, unreported or understated, in addition to interest thereon
from
the date due at the rate required under Section
6.04
hereof. The foregoing shall be in addition to any other rights
the Company
may have.
|
8.05.
Company
Provided Accounting Services.
If
Franchisee requests the Company in writing to perform the accounting services
discussed in this Section 8 and more particularly described in 8.05(b)
herein,
the Company will provide the same procedure for a fee ("Accounting Services
Fee"); according to the following:
|
(a)
|
All
receipts from the operation of the Restaurants, net of refunds,
all of
which shall be documented as agreed between the parties hereto
(the
"Deposits"), shall be deposited with a banking institution acceptable
to
the Company, in the Company’s sole discretion, in accounts upon which the
Company may draw (the "Accounts).
|
|
(b)
|
The
Company shall provide the following accounting
services:
|
|
i.
|
Preparation
of financial statements for each 4-week accounting cycle and
fiscal year
periods, including a statement of earnings for the Restaurants,
general
and administrative expenses and distribution center. In addition,
the
Company shall provide a statement of financial position, statement
of cash
flows, and a consolidated or combined statement of earnings.
Financial
statements shall be prepared on an accrual basis of accounting
in
accordance with generally accepted accounting principles from
the date
provided by Franchisee;
|
|
ii.
|
Processing
and payment of approved invoices for operating costs, merchandize
and
services and copies of check registers shall be provided to Franchisee
while supporting documents shall be kept on file in the Company’s
accounting office and available for
inspection;
|
|
iii.
|
Processing
and payment of Franchisee’s bi-weekly payroll. Payroll services shall
include all normal payroll deductions, garnishments, vacation,
and
end-of-year W-2 processing.
|
|
iv.
|
Preparation
and filing of payroll related tax returns (federal, state, local,
SUTA and
FUTA), sales and use tax returns and personal property tax
returns.
|
|
v.
|
Provide
copies of reconciliations on the Accounts for each accounting
period.
|
|
vi.
|
The
accounting and administrative services provided by the Company
shall not
include the administration of any group employee benefit plans
or
formulation of budgeted financial data. The Company shall not
be
responsible for computation or payment of federal, state or local
income
tax liabilities nor filing of related returns for Franchisee.
(Collectively, #i-vi, the
"Services")
|
| (c) |
As
payment for the Services provided by the Company as set forth
above,
Franchisee shall pay an Accounting Services Fee of Twelve Thousand
Dollars
($12,000) for each of the Restaurants per annum, payable in thirteen
(13)
equal installments, which sum shall be deducted by the Company
from the
Accounts within twenty (20) days from the end of the first four-week
accounting period following the Franchise Date and within twenty
(20) days
from the end of each four-week accounting period thereafter.
The
Accounting Service Fee hereunder may be adjusted, as appropriate,
to
equitably reflect any increase or decrease in the actual costs
incurred by
the Company in performing the Services. Franchisee shall not
be charged a
greater amount for such services than any other
Franchisee.
|
| (d) |
Franchisee
shall establish the Accounts for the
Deposits.
|
| (e) |
All
expenses related to the operation of the Restaurants, including
by way of
illustration and not limitation, rent payments, insurance premiums,
real
estate taxes, ADP fees, and other impositions required under
the Leases
will be paid by the Company from the
Accounts.
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(f) Either
party may cancel the provision of the Services provided by this Section
8.05
upon thirty (30) days notice to the other party. Upon such discontinuation
of
the Services, the Franchisee shall pay a prorated Accounting Services Fee
for
services provided and not billed, provided however that all other reports
to be
provided to Franchisee pursuant to this Section 8.05 will be provided within
twenty (20) days from the end of the then-current accounting
period.
SECTION
9. INSURANCE
AND INDEMNITY.
9.01.
Indemnity.
Franchisee agrees to indemnify and save the Company, its parent company,
subsidiaries, affiliates, stockholders, directors, officers, employees,
agents
and assignees, harmless from liability for any and all debts, obligations,
damages, claims, demands, actions, suits, proceedings or judgments of any
kind
or nature, arising directly or indirectly from, as a result of, or otherwise
in
connection with, or alleged to be in connection with, Franchisee's operation
of
the Restaurant. Franchisee will pay any costs arising therefrom, including
without limitation, reasonable accountant's and attorney's fees, expert
witness
fees, court costs and other expenses of defending against them. At the
election
of Company, Franchisee shall defend the Company at Franchisee's sole cost
and
expense in any such suits, actions or proceedings in which Company is joined
as
a party thereto, including any such suit, action or proceeding alleging
liability by the Company. The Company shall also have the right to defend
any
such claim itself and to be reimbursed by the Franchisee for the cost of
such
defense.
9.02.
Franchisee's
Insurance.
| (a) |
Franchisee
shall maintain in full force and effect at all times during the
term of
this Agreement at its sole expense:
|
| (i) |
Commercial
General Liability insurance, with an endorsement deleting the
contractual
liability exclusion with respect to personal injury insurance,
and motor
vehicle liability insurance, if a motor vehicle, as opposed to
mobile
equipment, is employed in the operation of the
Restaurant.
|
| (ii) |
Such
insurance coverage shall be maintained under one or more policies
of
insurance containing minimum liability protection of One Million
Dollars
($l,000,000) per person for bodily and personal injury or death,
Five
Million Dollars ($5,000,000) per occurrence for bodily and personal
injury
or death and One Million Dollars ($1,000,000) per occurrence
for property
damage, or such greater amounts or such additional coverages
as may be
required by the Company or any lease for the Restaurant property.
Such
insurance coverage shall name the Company as an additional
insured.
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| (iii) |
Further,
Franchisee shall carry "Special Form" property insurance to keep
the
premises of the Restaurant and its contents insured against loss
or damage
by fire and such other risks covered in the Standard Extended
Coverage
Endorsement, in an amount not less than 100% of the full replacement
cost
of such assets.
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| (b) |
Franchisee
acknowledges that the minimum coverages and policy limits required
by this
Section may be reasonably increased from time to time by the
Company for
its own and Franchisee's protection, and agrees to comply with
such new
requirements promptly upon receipt of written notice from the
Company. The
insurance policy or policies required by this Section shall be
written by
an insurance company or companies possessing an A.M. Best rating
of A-, XI
or such other rating as the Company may approve in
writing.
|
| (c) |
Worker's
Compensation, Unemployment Compensation, Social Security and
other
insurance coverages shall be maintained in such statutory amounts
as may
now or hereafter be required by any applicable
law.
|
| (d) |
Franchisee's
obligation to obtain and maintain the foregoing policies in the
amounts
specified shall not be limited by reason of any insurance which
may be
maintained by the Company, nor shall Franchisee's performance
of such
obligation relieve it of liability under the indemnity provisions
set
forth in Section
9.01.
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9.03.
Evidence
of Insurance.
Franchisee shall deliver or cause to be delivered an XXXXX 25 form to evidence
the insurance required by Section 9.02 (a)(i) and an XXXXX 27 form to evidence
the insurance required by Section 9.02 (a)(iii) to the Company prior to
commencement of the term of this Agreement upon renewal of such policies.
Franchisee shall also deliver to the Company evidence of payment of all
insurance premiums at any time upon written request of the Company.
9.04.
Notice.
All
insurance policies shall provide for (a) written notice to the Company
of any
cancellation, termination, nonrenewal or material alteration thereunder
thirty
(30) days prior to such termination, nonrenewal or alteration of coverage
and
(b) the Company's right to cure any default in the payment of premiums
within
ten (10) days after written notice of such default. The Company shall not
have
any duty to cure such default; provided, however, that if the Company does
cure
such default, the Company shall have the right to charge Franchisee all
costs
and expenses of curing such default, which charges shall be payable by
Franchisee immediately upon notice, subject to the provisions of Section
6.04
herein.
9.05.
[INTENTIONALLY DELETED].
SECTION
10. LIMITATION
AND USE OF PROPRIETARY MARKS AND TRADE SECRETS.
10.01.
Proprietary
Marks and Trade Secrets.
Franchisee acknowledges that the Company owns or controls the rights in
the
Marks, trade secrets, trade dress, Operating Standards Manual, instruction
manuals and goodwill associated therewith, all of which are licensed or
sublicensed on a non-exclusive basis to Franchisee pursuant to this Agreement.
Franchisee's right to use the Marks, trade secrets, trade dress, Operating
Standards Manual and instruction manuals is derived solely from this Agreement
and is limited to the conduct of its Restaurant business pursuant to and
in
compliance with this Agreement and all applicable standards, specifications
and
operating procedures prescribed by the Company from time to time during
the term
of the Franchise. Any unauthorized use of the Marks or any colorable imitations
thereof or confusingly similar marks or names, or trade secrets or trade
dress
by Franchisee shall constitute an infringement of the rights of the Company
in
the Marks, trade secrets and trade dress. Franchisee agrees that all usage
by
Franchisee of the Marks, trade dress and System, and any goodwill established
thereby, shall inure to the exclusive benefit of the Company. Franchisee
acknowledges that this Agreement does not confer any goodwill or other
interests
in the Marks and System upon Franchisee other than stated in this Section
10.
10.02.
Limitation
on Franchisee's Use of Marks.
Franchisee agrees to use the Marks as the sole identification of the Restaurant,
provided that Franchisee may identify itself as the independent owner thereof
in
the manner reasonably prescribed by the Company. Franchisee shall not use
any
Xxxx or colorable imitations thereof or confusingly similar name as part
of any
corporate or trade name or in the name of any bank account. Franchisee
may not
use any Xxxx in connection with the sale of any unauthorized product or
service
or in any other manner not expressly authorized in writing by the Company.
Franchisee agrees to display the Marks prominently and in the manner prescribed
by the Company on, or in connection with, exterior and interior signs,
menus,
in-store posters and displays and other forms and packaging materials designated
by the Company. Further, Franchisee agrees to obtain such fictitious or
assumed
name registrations as may be required under applicable law. Franchisee
shall
not, in any manner, authorize or purport to authorize another to use the
Marks.
Franchisee shall not establish any internet, world wide web ("WWW"), or
uniform
resource locator ("URL") addresses, sites, or pages for the STEAK N SHAKE
Restaurant or that use the Marks without the prior written consent of the
Company, which consent may be withheld in the Company’s sole
judgment.
10.03.
Notification
of Infringements and Claims.
Franchisee shall notify the Company immediately of any apparent infringement
of
or challenge to Franchisee's use of any Xxxx, or claim by any person of
any
right in any Xxxx or the copyrighted Operating Standards Manual, and Franchisee
shall not communicate with any person other than the Company and its counsel
in
connection with any such infringement, challenge or claim. The Company
shall
have sole discretion to take such action as it deems appropriate and the
right
to exclusively control any litigation, U.S. Patent and Trademark Office
or
Copyright Office proceeding or other administrative proceeding arising
out of
any such infringement, challenge or claim or otherwise relating to any
Xxxx or
the copyrighted Operating Standards Manual. Franchisee agrees to execute
and
deliver any and all instruments and documents which, in the opinion of
the
Company's counsel, are necessary or advisable to protect and maintain the
interests of the Company in any such litigation or administrative proceeding
or
to otherwise protect and maintain the interests of the Company in the Marks
or
the copyrighted Operating Standards Manual.
10.04.
Indemnification
of Franchisee/Discontinuance of Use of Marks.
The
Company agrees to indemnify Franchisee against, and to reimburse Franchisee
for,
any damages for which Franchisee is held liable in any proceeding arising
out of
its use of any Xxxx or the copyrighted Operating Standards Manual pursuant
to
and in compliance with this Agreement. All costs reasonably incurred by
Franchisee in the defense of any such claim brought against it in any such
proceeding in which Franchisee is named as a party, including court costs,
attorney's fees and other reasonable litigation expenses shall be reimbursed
by
the Company, provided that Franchisee has timely notified the Company of
such
claim or proceeding and has otherwise complied with this Agreement. If
it
becomes advisable at any time, in the Company's sole discretion, for the
Company
and/or Franchisee to modify or discontinue use of any Xxxx or the copyrighted
Operating Standards Manual, and/or use one or more additional, substitute
trademarks or service marks or materials, Franchisee agrees to comply therewith
within a reasonable time after notice thereof by the Company, at the
Franchisee's expense.
10.05.
Non-Disclosure
of Trade Secrets and Confidential Information.
| (a) |
The
Company possesses certain proprietary know-how, consisting of
the unique
restaurant concept of a STEAK N SHAKE Restaurant and the methods,
techniques, formats, drawings, specifications, procedures, information,
systems and knowledge and experience in the design and operation
thereof
and the purchase, preparation and sale of authorized and approved
products
and services (the "Know-How"). The Company will disclose the
Know-How to
Franchisee by furnishing layouts, specifications and guidance
in the
development and operation of the Restaurant, the training program,
the
Operating Standards Manual and other instructional manuals, sale
promotion
aids, accounting procedures, marketing reports, informational
and product
bulletins, vendors price sheets and inventory systems and in
guidance
furnished to Franchisee during the term of the
Franchise.
|
| (b) |
Franchisee
agrees that it will not acquire any legal or equitable interest
in the
Know-How, other than the right to utilize it in the development
and
operation of the Restaurant during the term of the Franchise,
and that the
use or duplication of the Know-How in any other restaurant business
would
constitute an unfair method of competition. Franchisee acknowledges
and
agrees that the Know-How is proprietary to the Company and, except
to the
extent known in the relevant market or trade, is a trade secret
of the
Company and is disclosed to Franchisee solely for use by Franchisee
in the
development and operation of the Restaurant during the term of
the
Franchise and on the condition that Franchisee does hereby agree,
that
it:
|
| (i) |
will
not use the Know-How in any other business or
capacity;
|
| (ii) |
will
maintain the confidentiality of the Know-How at all times during
and after
the term of the Franchise;
|
| (iii) |
will
not make unauthorized copies of any portion of the Know-How disclosed;
and
|
| (iv) |
will
adopt and implement all reasonable procedures prescribed from
time to time
by the Company to prevent unauthorized use or disclosure of the
Know-How,
including without limitation restrictions on disclosure thereof
to
employees of the Restaurant and the use of nondisclosure clauses
in
employment agreements with such
employees.
|
| (c) |
Franchisee
agrees that the Company would be unable to protect its trade
secrets and
Know-How against unauthorized use or disclosure if Franchisee
were
permitted to hold interests in businesses similar to STEAK N
SHAKE
Restaurants. Therefore, during the term of the Franchise, Franchisee
may
not have any interest as an owner, investor, partner, director,
officer,
employee, consultant, representative or agent, or in any other
capacity,
in any other restaurant business offering fast service or full
service
meals which feature ground beef sandwiches as a principal product;
provided, however, that this restriction shall not apply to (i)
other
STEAK N SHAKE Restaurants operated under Franchise Agreements
previously
or hereafter entered into with the Company or (ii) ownership
of
securities, that are publicly traded, representing five percent
(5%) or
less of the equity or voting power of any
corporation.
|
| (d) |
The
Company has not authorized or empowered Franchisee to use the
Marks except
as provided by this Agreement, and Franchisee shall not employ
any of the
Marks in signing any contract, lease, mortgage, check, purchase
agreement,
negotiable instrument or other legal obligation without the prior
written
consent of the Company.
|
| (e) |
Neither
the Company nor Franchisee shall make any express or implied
agreements,
warranties or representations or incur any debt, in the name
of or on
behalf of the other or represent that their relationship is other
than
franchisor and franchisee and neither the Company nor Franchisee
shall be
obligated by or have any liability under any agreements or representations
made by the other that are not expressly authorized
hereunder.
|
| (f) |
The
Company shall have no liability for any sales, use, excise, gross
receipts, income, property or other taxes, whether levied upon
Franchisee,
the Restaurant or its assets, in connection with the sales made,
services
performed or business conducted by
Franchisee.
|
10.06.
Survival.
The
covenants set forth in this Section
10
shall
survive the termination or expiration of this Agreement.
SECTION
11. TERMINATION.
11.01.
Termination
of the Franchise Agreement.
The
Company may terminate this Agreement only for good cause.
| (a) |
Franchisee
agrees that the Company shall have good cause to immediately
terminate
this Franchise Agreement, without notice to Franchisee, if Franchisee
|
| (i) |
files
a voluntary petition in bankruptcy or any pleading seeking any
reorganization, liquidation, dissolution or composition or other
settlement with creditors under any law; admits or fails to contest
the
material allegations of any such pleading filed against it; is
adjudicated
a bankrupt or insolvent; a receiver is appointed for a substantial
part of
the assets of Franchisee or the Restaurant; a final judgment
remains
unsatisfied or of record for thirty (30) days or longer (unless
a
supersedeas bond or other appeal bond is filed); execution is
levied
against the Franchise or any substantial part of the assets of
the
Restaurant; tax levy is made; suit to foreclose any lien or mortgage
on
the premises or assets of the Restaurant is instituted against
Franchisee
and Franchisee fails to diligently contest such action; a substantial
part
of the real or personal property of the Restaurant is sold after
levy of
judgment thereupon by any sheriff, marshal or constable; or the
claims of
creditors of Franchisee or the Restaurant are abated or subject
to a
moratorium under any law;
|
| (ii) |
is
convicted of or pleads no contest to a felony, a crime involving
moral
turpitude or any other crime or offense that is likely to adversely
affect
the reputation of the Restaurant and the goodwill associated
with the
Marks;
|
| (iii) |
makes
any unauthorized use or disclosure to any third party of the
Company's
System or utilizes, duplicates or discloses any portion of the
Operating
Standards Manual in violation of this
Agreement;
|
| (iv) |
denies
the Company the right to inspect the Restaurant or to examine
its books
and records and other business documents in accordance with the
Agreement;
|
| (v) |
submits,
or the Company learns that Franchisee has previously submitted
to the
Company, a franchise application, a management commitment form
and/or
capitalization plan which contains any false or misleading statements
or
omits any material fact necessary in order to make the statements
made not
misleading;
|
| (vi) |
submits
to the Company at any time during the term of this Agreement,
reports,
financial statements, tax returns or schedules or other information
or
supporting records which intentionally understate gross receipts
for any
period covered by such report by more than two percent
(2%);
|
| (vii) |
fails
to timely pay the Company all amounts due pursuant to this Agreement,
including but not limited to payment of the Royalty Fee and Advertising
Fee when due; provided, however, that the Company will not terminate
this
Agreement for non-payment without giving Franchisee the opportunity
to
make such payment within 10 days after receipt of written notice
demanding
such payment; provided further, however, that Franchisee will
be entitled
to only 2 such notices in any 12 month period under this Agreement.
Upon a
third violation of this subsection in any 12 month period, this
Agreement
may be immediately terminated by the
Company.
|
| (viii) |
fails
on two or more separate occasions within any 12 consecutive month
period
to submit when due financial statements, reports or other data,
information or supporting records required by this Agreement,
unless such
failures are corrected within 10 days after notice is delivered
to
Franchisee; provided, however, that Franchisee will be entitled
to only 2
such notices in any 12 month period under this
Agreement.
|
| (ix) |
if
Franchisee is a corporation, limited liability company, partnership,
limited partnership or other entity, the transfer of any share
or
ownership interest in Franchisee without Franchisor’s prior written
consent, which may be withheld in Franchisor’s sole
discretion.
|
| (b) |
Franchisee
agrees that the Company shall have good cause to terminate this
Franchise
Agreement if Franchisee commits any of the following material
defaults,
unless Franchisee promptly takes action to cure such default,
and, within
thirty (30) days after receipt of a notice from the Company,
succeeds in
curing such default:
|
| (i) |
abandons
or surrenders or transfers control of the operation of the Restaurant
(including entering into a management arrangement with any person
not a
party to this Agreement), fails to maintain its right of possession
of the
premises of the Restaurant, fails to actively operate the Restaurant
during required business hours, or, if applicable, commits a
material
default under any lease or sublease for the
Restaurant;
|
| (ii) |
makes
an unauthorized assignment of the Franchise or an ownership interest
in
Franchisee or the Restaurant, or fails to assign the Franchise
or an
interest in Franchisee owned by a deceased or disabled person
as herein
required;
|
| (iii) |
misuses
or makes any unauthorized use of the Marks or commits any act
which can
reasonably be expected to materially impair the goodwill associated
with
the Marks;
|
| (iv) |
operates
the Restaurant in a manner that presents a health or safety hazard
to its
customers, employees or the public or which is deleterious to
or reflects
unfavorably on STEAK N SHAKE
Restaurants;
|
| (v) |
fails
to maintain a responsible credit rating by failing to make prompt
payment
of undisputed bills, invoices and statements from suppliers of
goods and
services to the Restaurant;
|
| (vi) |
fails
to maintain and operate the Restaurant in accordance with the
standards
and specifications established by the Company from time to time;
knowingly
sells any product on the premises which does not conform to the
Company's
specifications; fails to sell products designated by the Company;
or sells
products not approved by the
Company;
|
| (vii) |
fails
to repair, restore or relocate the Restaurant building and premises
after
damage, destruction or public taking as provided in Sections
3.02 and 3.06
hereof;
|
| (viii) |
fails
to complete all phases of any required training program to the
Company's
satisfaction;
|
| (ix) |
defaults
in the performance of any other term, condition or covenant contained
herein which is not corrected within the time and under the conditions
provided with respect thereto.
|
| (c) |
If
Franchisee is in substantial compliance with this Agreement and
the
Company materially breaches this Agreement and fails to cure
such breach
within thirty (30) days after delivery to the Company of written
notice
thereof, Franchisee may, at its option, terminate this Franchise
Agreement.
|
11.02.
Effect
of Any Termination, Cancellation or Expiration of this Agreement.
| (a) |
Franchisee,
upon any termination, cancellation or expiration of this Agreement,
shall
promptly pay to the Company, its affiliates and subsidiaries,
any and all
sums owed to them. In the event of termination for any default
by
Franchisee, such sums shall include all damages, costs and expenses,
including reasonable attorneys' fees, incurred by the Company
as a result
of the default, which obligation shall give rise to and remain,
until paid
in full, a lien in favor of the Company against any and all of
the assets
of the Restaurant owned by Franchisee at the time of
default.
|
| (b) |
Upon
termination, cancellation or expiration hereof for any reason,
all
Franchisee's rights hereunder shall terminate. Franchisee shall
not
thereafter use or adopt any secret recipes, formulas, trade secrets,
Know-How or other proprietary information disclosed to it hereunder
or any
china or glassware, emblems, signs, displays or other property
on which
the Company's name or Marks are imprinted, or any simulation
thereof.
Franchisee shall not otherwise use or duplicate the System or
any portion
thereof or assist others to do so. Franchisee shall remove from
the
premises all signs, emblems and displays identifying it as associated
with
the Company or its System and shall surrender or destroy all
written
materials bearing the Marks. It shall cease to use and shall
return to the
Company all copies of the Operating Standards Manual and all
other
manuals, instructions or materials delivered to it hereunder
and shall
relinquish its STEAK N SHAKE Restaurant telephone number and
assign such
telephone number to the Company or the Company’s designee. At the
Company’s discretion, Franchisee shall also provide written notice to
telephone directory and yellow page providers to remove Franchisee’s STEAK
N SHAKE Restaurant listing.
|
| (c) |
Upon
termination, cancellation or expiration of this Agreement, unless
otherwise directed in writing by the Company, Franchisee shall
at
Franchisee's sole expense change the exterior and interior design,
color
scheme, decor and trade dress of the Restaurant premises from
that unique
to STEAK N SHAKE Restaurants, and shall make or cause to be made
such
changes in signs, building and structure as the Company shall
reasonably
direct, so as to effectively distinguish the same from its former
appearance and from other STEAK N SHAKE Restaurant units. If
Franchisee
fails or refuses to comply herewith, then the Company shall have
a license
to enter upon the Restaurant property for the purpose of making
or causing
to be made such changes at the expense of Franchisee, payable
on demand to
the Company. Franchisee shall complete all such modifications
within sixty
(60) days after the STEAK N SHAKE Restaurant ceases to operate.
No
business shall be conducted in the former STEAK N SHAKE Restaurant
building until such modifications have been
completed.
|
| (d) |
Upon
termination, cancellation or expiration of this Agreement, Franchisee
shall cease to hold itself out as a franchisee or affiliate of
the Company
or do anything which would indicate any relationship between
it and the
Company, and Franchisee shall take all appropriate steps to immediately
cancel all fictitious or assumed name filings or equivalent registrations
with state and local governmental
agencies.
|
| (e) |
In
the event this Agreement is terminated by Franchisee pursuant
to Section
11.01(c) hereof, the Company shall reimburse Franchisee for the
reasonable
expenses incurred by Franchisee in connection with the removal
from the
premises of all signs, emblems and displays identifying it as
associated
with the Company or the System, and any other reasonable expenses
incurred
to comply with any and all other requirements of Franchisee under
Sections
11.02(b) and 11.02(c).
|
| (f) |
The
covenants set forth in subsections (a), (b), (c), (d) and (e)
of this
Section
11.02
shall survive the termination, cancellation or expiration of
this
Agreement.
|
| (g) |
All
rights, claims and indebtedness which may accrue to the Company
or
Franchisee prior to termination, cancellation or expiration of
this
Agreement shall survive termination, cancellation or expiration
and be
enforceable by the Company.
|
11.03.
[INTENTIONALLY
DELETED].
SECTION
12. COVENANT
NOT TO COMPETE.
If,
prior
to its expiration, the Franchise is terminated by the Company in accordance
with
the provisions of this Agreement or by Franchisee without cause, Franchisee
agrees that for a period of one (1) year, commencing on the effective date
of
termination, or the date on which Franchisee ceases to conduct business
pursuant
to this Agreement, whichever is later, Franchisee will not have any interest
as
an owner, investor, partner, director, officer, employee, consultant,
representative or agent, or in any other capacity, in any restaurant located
within the Exclusive Territory described in Schedule
1
which
offers fast service or full service meals which feature ground beef sandwiches
as a principal product; provided, however, that this restriction shall
not apply
to other STEAK N SHAKE Restaurants operated under franchise agreements
heretofore or hereafter entered into with the Company, or to ownership
of
securities that are publicly traded representing five percent (5%) or less
of
the equity or voting power thereof. Nothing in the foregoing shall be construed
as terminating Xxxxx Xxxxxx’x employment by the Company, or in the event that
Xxxxx Xxxxxx retires from the Company during the term of this Agreement,
prohibiting Xxxxx Xxxxxx’x future employment with the Company, in the event this
Agreement is terminated.
SECTION
13. ASSIGNMENTS.
13.01.
Assignment
by the Company.
The
Company may make a good faith assignment of its interests under this Agreement
upon written notice to Franchisee, and, upon the acceptance by the assignee
of
all the obligations of the Company hereunder, the Company will have no
further
obligations thereafter.
| 13.02. |
Assignment
by Franchisee.
|
| (a) |
Franchisee
understands and acknowledges that the rights and duties created
by this
Agreement are personal to Franchisee and that the Company has
granted the
Franchise in reliance upon the individual or collective character,
skill,
aptitude, attitude, business ability and financial capacity of
Franchisee.
Therefore, except as provided with respect to assignment to a
corporation
or partnership, neither the Franchise, the Restaurant (or any
interest
therein), nor any part or all of the ownership of the Franchise
may be
voluntarily, involuntarily, directly or indirectly assigned,
sold,
subdivided, subfranchised, issued or otherwise transferred by
Franchisee
(including without limitation by consolidation or merger) without
the
prior written approval of the Company, which approval shall not
be
unreasonably withheld. Such assignment or transfer without approval
shall
constitute a breach hereof and will convey no rights or interests
in the
Franchise or the Restaurant to such assignee(s). Transferees
shall be
subject to the Company’s then current franchisee selection and
qualification criteria. Grounds for withholding consent to an
assignment
or transfer include, but are not limited to: (i) the transfer
is proposed
to be made to any competitor of the Company or a transferee involved
with
a competitor of the Company; (ii) the transfer is proposed to
be made to a
transferee who fails to demonstrate to the Company’s satisfaction that it
or its owners and management meet the Company’s educational, managerial
and business standards, possess good moral character, business
reputations, and credit ratings, and have the aptitude and ability
to
conduct the business contemplated by this Agreement; or (iii)
in the
Company’s sole judgment, the price, payment terms, or other material
terms
of the transaction or any financing incurred in connection with
the
transaction are so burdensome, individually or in the aggregate,
as to
threaten the continued operation of the Steak n Shake Restaurant
after the
transfer.
|
| (b) |
In
the event Franchisee, including any successors, is a partnership,
limited
liability company, corporation, or other entity that is not a
natural
person:
|
| (i) |
The
organizational documents shall recite that the issuance and transfer
of
any interest in the Franchise is restricted by the terms of this
Franchise
Agreement, and copies thereof shall be furnished to the Company
upon
request (together with copies of the Resolutions of the Board
of Directors
authorizing its entry into this
Agreement).
|
| (ii) |
A
transfer of any fractional ownership interest in Franchisee from
one
partner, member or shareholder to another or by a partnership,
limited
liability company or corporation must be approved in advance,
in writing,
by the Company. One condition of any such transfer shall be the
requirement that all general partners and all direct and indirect
holders
of an interest in Franchisee in excess of ten percent (10%) shall
execute
a written agreement with the Company, personally guaranteeing
the full
payment and performance of Franchisee's obligations to the Company
and
individually undertaking to be bound, jointly and severally,
by all terms
of this Agreement, including, without limitation, the restrictions
on
assignment in this Section
13.
|
| (iii) |
Franchisee
shall not use the name "STEAK N SHAKE", any other Xxxx or any
name
deceptively similar thereto, in any offering of its securities,
except to
reflect its franchise relationship with the Company. Any prospectus,
private placement or Registration Statement proposed to be used
in such an
offering shall be submitted to the Company within a reasonable
time prior
to the filing and effective date thereof for the limited purpose
of
permitting the Company to verify Franchisee's compliance with
this
requirement.
|
| (iv) |
Franchisee
shall furnish the Company, at the time of execution of this Agreement
and
upon all transfers subject to the provisions of this Section
13
thereafter, a list of all stockholders and/or persons having
an interest
in Franchisee which reflects the percentage interest of each
stockholder
or person, and the ownership interest directly and indirectly
held or
controlled by each stockholder or
person.
|
| (c) |
Death
and Disability.
In the event of the death or disability of an individual Franchisee
or a
majority owner of any Franchisee that is a corporation or LLC
(collectively for the purposes of this section the "Franchisee"),
this
Agreement shall terminate and be of no force and effect unless
the
administrator of the Franchisee’s estate or a legal representative of the
Franchisee ("Administrator") shall notify the Company in writing
of such
death or disability within sixty (60) days of the Franchisee’s death or
disability (the "Death/Disability Notice").
|
1. Upon
the
death or disability of Franchisee, Company shall have an option to purchase
Franchisee’s Restaurants operated pursuant to this Agreement. To exercise this
option, Company shall provide written notice to Administrator indicating
its
intention to purchase Franchisee’s Restaurants within one hundred twenty days
(120) of receipt of the Death/Disability Notice ("Option Notice"). The
Option
Notice shall include Company’s proposed purchase price for all of Franchisee’s
Restaurants operated pursuant to this Agreement, including the land and
buildings, furnishings and equipment located therein ("Assets") and the
exact
date upon which Company intends to take title to Franchisee’s Restaurants.
2. Franchisee’s
Administrator shall have thirty (30) days from the date it receives the
Option
Notice to either accept or reject Company’s offer to purchase in writing. The
Administrator’s failure to respond within the time set forth herein shall be
deemed an acceptance of all terms contained in the Offering Notice.
3. If
the
Administrator rejects the terms and conditions contained in the Option
Notice
("Franchisee’s Rejection") the parties shall thereafter confer in good faith for
thirty (30) days following Company’s receipt of Franchisee’s Rejection in an
attempt to agree on terms and conditions under which Company would purchase
the
Assets. In the event the parties are not able to agree on a purchase price
and
terms for the Assets within the time set forth above the fair market value
of
the Assets shall be determined by three appraisers, with each party selecting
one appraiser and the two appraisers, so chosen, selecting the third appraiser.
In the event of such an appraisal, each party shall bear its own legal
and other
costs and shall split equally the appraisal fees. The purchase price of
the
Assets shall be the average of the three appraisals.
4. If
Company desires to exercise the option to purchase herein granted based
upon the
purchase price established by the appraisals, Company shall give written
notice
of such fact to the Administrator not more than thirty (30) days after
the final
determination of the purchase price by the appraisers and shall designate
the
closing date ("Closing Date") for transfer of the Assets, which date shall
not
be more than sixty (60) days after the date of such notice. If the parties
agree
upon the purchase price, the closing shall take place no later than sixty
(60)
days following such agreement.
5. If
Company shall have exercised the option to purchase pursuant to the terms
of
this Section 13.02, Company on the Closing Date shall pay the purchase
price to
Franchisee’s Administrator. At closing, the Administrator will deliver
instruments transferring to Company: (1) good and merchantable title to
the
Assets, free and clear of all liens and encumbrances; and (2) all licenses
or
permits which may have been assigned or transferred. Company shall pay
any
required transfer taxes and closing costs.
6. In
the
event that the Company does not exercise its option to purchase granted
hereunder, any transfer of the Franchisee’s interest must comply with all other
conditions set forth in this Section 13.
7. In
the
event of the death of an interest holder of Franchisee, any transfer of
such
interest to decedent's surviving spouse, heirs or estate must
comply with all other conditions set forth in this Section 13.
| (d) |
Franchisee
agrees that the restrictions on transfer imposed herein are reasonable
and
necessary to protect the Company's Marks, trade secrets, trade
dress,
Know-How, System and operating procedures and quality, as well
as the
Company's high reputation and image and are for the protection
of the
Company, Franchisee and other STEAK N SHAKE Franchisees. Any
assignment or
transfer permitted by this Section shall not take effect until
the Company
issues its written consent thereto, following its receipt and
review of a
completely executed copy of all transfer
documents.
|
| (e) |
In
addition to the restrictions on assignment of the Franchisee
or all or a
portion of the interest in Franchisee set forth above, the Company
shall
have the right to condition its consent on the satisfaction of
the
following requirements:
|
| (i) |
All
obligations of Franchisee and its owners incurred in connection
with this
Agreement have been assumed by the
assignee(s);
|
| (ii) |
Franchisee
shall have paid all amounts owed to the Company or its affiliates
which
are then due and unpaid;
|
| (iii) |
The
assignee(s) shall have completed the training program required
of new
STEAK N SHAKE franchisees pursuant to Section
5.03;
|
| (iv) |
The
assignee(s) and its owner(s) shall have executed and agreed to
be bound by
the then existing form of Franchise Agreement and such ancillary
agreements as are then customarily used by the Company in the
grant of
franchises for STEAK N SHAKE
Restaurants;
|
| (v) |
Franchisee
or the assignee(s) shall have paid a transfer fee to the Company
equal to
Five Thousand Dollars ($5,000.00) to defray expenses incurred
by the
Company in connection with the assignment, including without
limitation
legal and accounting fees, credit and other investigation charges
and
evaluation of assignee(s) and the terms of the
assignment;
|
| (vi) |
The
Company shall have approved the material terms and conditions
of such
assignment, including without limitation, approval that the price
and
terms of payment are not so burdensome so as to adversely affect
the
future operations of the Restaurant by such assignee(s) in compliance
with
the Company's then standard Franchise Agreement and ancillary
agreements;
|
| (vii) |
Franchisee
and all of its shareholders, partners, members and the owners
shall have
executed a noncompetition covenant in favor of the Company and
the
assignee(s), agreeing that for a period of not less than one
(1) year,
commencing on the effective date of the assignment, Franchisee
and its
owners will not have any interest as an owner, investor, partner,
director, officer, employee, consultant, representative or agent,
or in
any other capacity, in any restaurant featuring fast service
or full
service meals featuring ground beef sandwiches as a primary product
and
located within the Exclusive Territory defined in Schedule
1
to
this Agreement (except ownership of publicly traded securities
representing five percent (5%) or less of the equity or voting
power
thereof and interests in other STEAK N SHAKE Restaurants pursuant
to other
franchise agreements heretofore or hereafter entered into with
the
Company);
|
|
(viii)
|
Franchisee
and its owner(s) shall have entered into an agreement with the
Company
agreeing to subordinate any rights they may have to receive installment
payments of the purchase price from the assignee(s), to the Company's
and
its affiliates' rights to receive monies from the assignee(s),
including
without limitation, payment of royalty fees, and service fees
and
advertising contributions; and
|
|
(ix)
|
Franchisee
shall have entered into an agreement with the Company agreeing
to release
any claims, known or unknown, Franchisee may have against the
Company at
the time of the transfer.
|
| (f) |
If
an individual Franchisee desires to assign all of its rights
to a
corporation or other entity formed for convenience of ownership,
then the
Company's consent to such assignment shall be conditioned on
the following
requirements, at the Company’s sole discretion, in addition to those in
subsections (b), (c) and (d) of this
Section:
|
| (i) |
The
Franchise and the assets and liabilities of the Restaurant may
be assigned
to a newly organized corporation or other entity that conducts
no business
other than the Restaurant (and other STEAK N SHAKE Restaurants
under
Franchise Agreements with the Company), which is actively managed
by
Franchisee and in which Franchisee owns and controls at least
fifty-one
percent (51%) of the equity and voting power of all issued and
outstanding
capital stock or ownership interest therein;
and
|
| (ii) |
All
shareholders or owners of the assignee shall comply with the
requirement
set forth in subsection
(b)(ii)
of
this Section, if applicable; and
|
| (iii) |
The
Assignee shall execute the Company’s then current Unit Franchise
Agreement.
|
The
Company's consent to a transfer of any interest subject to the restrictions
of
this Section shall not constitute a waiver of any claims it may have against
the
assignor, nor shall it be deemed a waiver of the Company's right to demand
exact
compliance with any of the terms of this Agreement by the assignee.
13.03 The
Company’s Right of First Refusal.
If
Franchisee or its owner(s) shall at any time determine to sell the Franchise
to
any third party, Franchisee or its owner(s) shall obtain a bona fide, executed
written offer from a responsible and fully disclosed purchaser and shall
submit
an exact copy of such offer to the Company. The Company shall have the
option,
exercisable by written notice delivered to Franchisee or its owner(s) thirty
(30) days from the date of delivery of such offer to the Company, to purchase
such interest in the Restaurant or such ownership interest in Franchisee
for the
price and on the terms and conditions contained in such offer, provided
that the
Company may substitute cash for any other form of payment proposed in such
offer
and shall have not less than thirty (30) days from the date of the exercise
its
option to prepare for closing. Any change in the terms of an offer prior
to
closing shall constitute a new offer that is subject to the same right
of first
refusal by the Company as in the case of an initial offer. The failure
of the
Company to exercise the option afforded by this Section
13.03
shall
not constitute a waiver of any other provision of this Agreement, including
any
of the requirements of this Section with respect to the proposed transfer,
or of
its right of first refusal with respect to any subsequent offer.
SECTION
14. GENERAL
PROVISIONS.
14.01
Improvements
to System.
Any and
all improvements in the System developed by Franchisee, the Company or
other
Franchisees, shall be and become the sole and absolute property of the
Company,
and the Company may incorporate the same in the System and shall have the
sole
and exclusive right to copyright, patent, register and protect such improvements
in the Company's own name to the exclusion of Franchisee, whose right to
use
such improvements are limited to its right as a Franchisee
hereunder.
14.02 Severability.
Except
as expressly provided, each section, part, term or provision of this Agreement
shall be considered severable. If, for any reason, any section, part, term
or
provision herein is determined to be invalid or unenforceable, such
determination shall not impair the operation or affect such other portions,
sections, parts, terms or provisions of this Agreement as may remain otherwise
intelligible, and the latter will continue to be given full force and effect
and
bind the parties hereto.
14.03
Franchisee
Independent Contractor /Disclosure Thereof.
| (a) |
It
is understood and agreed by the parties hereto that Franchisee
shall be an
independent contractor and that nothing herein contained shall
constitute
Franchisee as the agent, legal representative, partner, joint
venturer or
employee of the Company. Franchisee shall not have any right
or power to
and shall not bind or obligate the Company in any way or manner
whatsoever, nor represent that it has the right to do
so.
|
| (b) |
Franchisee
shall have sole responsibility for, and shall promptly pay when
due, all
taxes levied or assessed by reason of its operation and performance
under
this Agreement, including, but not limited to, local, state and
federal,
property, license, sales, use, leasehold, excise and income taxes.
Franchisee shall have the right to contest in good faith the
amount or
validity of such payment by appropriate legal proceedings. Franchisee
shall be responsible for all loss or damage and contractual liabilities
to
third persons originating from or in connection with the operation
of the
Restaurant and for all claims or demands for damages to property
or for
injury, illness or death of persons directly or indirectly resulting
therefrom. Franchisee further agrees to indemnify and save the
Company
harmless from or with respect to any such claims for taxes and
other
liabilities, loss, expense or
damage.
|
| (c) |
In
all building directories, public records (except in telephone
directories)
and in its relationship with other persons, Franchisee shall
indicate its
independent ownership of its business and that it is only a Franchisee
of
the Company. Franchisee shall file and maintain in the proper
public
office for the locality involved, a statement showing the actual
name of
Franchisee as the owner of the
Restaurant.
|
| (d) |
The
Company may require Franchisee to identify itself as an independent
operator and franchisee of the Company in a manner prescribed
by the
Company.
|
14.04.
Section
and Subsection Titles.
Section
and Subsection titles are used for convenience only and shall not affect
the
meaning or construction of any provision hereof.
14.05
Entire
Agreement.
The
recitals to this Agreement are hereby incorporated into and made a part
of this
Agreement, which, together with Schedule
1
and
Exhibits A and B and any addendum hereto, constitute the entire agreement
of the
parties (and which supersedes all prior negotiations, commitments,
representations and undertakings of the parties with respect to the subject
matter hereof, all of which are deemed to have been merged into this Agreement).
The Company has made no representations inducing the execution of this
Agreement
that are not incorporated herein.
14.06
Number
and Gender.
All the
terms and words used in this Agreement, regardless of the number and gender
in
which they are used shall be deemed and construed to
14.07.
Obligations
of Interested Parties.
| (a) |
Except
as otherwise provided herein, all acknowledgments, promises,
covenants,
agreements and obligations herein made or undertaken by Franchisee
shall
be jointly and severally undertaken by Franchisee and all persons
signing
this Agreement in their individual capacities and by all
guarantors.
|
| (b) |
At
the Company's request, Franchisee shall from time to time obtain
an
executed confidentiality and other business interests agreement,
as it may
be revised by the Company, from every interest holder and such
employees
of Franchisee as the Company may designate, and shall forward
same to the
Company.
|
14.08.
Written
Approval, Waiver and Non-Waiver.
| (a) |
Whenever
this Agreement requires the prior approval or consent of the
Company,
Franchisee shall make a timely written request therefor, and
such approval
shall be obtained in writing from the Vice President of Franchising,
President or other officer that the Company may designate from
time to
time. By providing any waiver, approval, consent or suggestion
to
Franchisee in connection with this Franchise, the Company makes
no
warranties or guarantees and assumes no liability or obligation
to
Franchisee.
|
| (b) |
No
failure of either party to exercise any power reserved to it
by this
Agreement or to insist upon strict compliance by the other party
with any
obligation or condition hereunder, and no custom or practice
of the
parties at variance with the terms hereof, shall constitute a
waiver of
either party’s right to demand exact compliance with any of the terms
herein. Waiver by either party of any particular default by the
other
party shall not affect or impair the non-defaulting party’s rights with
respect to any subsequent default of the same, similar or different
nature. Any delay, forbearance or omission of either party to
exercise any
power or right arising out of any breach or default by the other
party of
any of the terms, provisions or covenants hereof, shall not affect
or
impair the non-breaching or non-defaulting party’s right to exercise such
power or right, nor shall such delay, forbearance or omission
constitute a
waiver by the non-breaching or non-defaulting party of any right
hereunder, or the right to declare any subsequent breach a default
and to
terminate this Agreement prior to the expiration of its term.
Subsequent
acceptance by the Company of any payments due to it hereunder
shall not be
deemed to be a waiver by the Company of any preceding breach
by Franchisee
of this Agreement and subsequent acceptance by Franchisee of
any services
or benefits provided under this Agreement shall not be deemed
to be a
waiver by Franchisee of any preceding breach by the Company of
this
Agreement.
|
| (c) |
Each
right or remedy conferred upon or reserved to the Company or
Franchisee by
this Agreement shall be cumulative of every other right or remedy
herein
or by law or equity and is not exclusive of any other right or
remedy.
|
| (d) |
No
amendment, change or variance from this Agreement shall be binding
on
either party unless mutually agreed by the parties and executed
in
writing.
|
14.09.
Notices.
| (a) |
All
notices required to be given to the Company shall be in writing
and shall
be sent by reputable overnight delivery service or by registered
or
certified mail, postage fully prepaid, addressed to the attention
of:
|
Vice
President, Franchising,
STEAK
N
SHAKE OPERATIONS, INC.
500
Century Building
00
Xxxxx
Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx,
Xxxxxxx 00000
With
a
copy to the attention of the General Counsel
or
to
such other address as the Company shall from time to time designate in
writing.
Unless otherwise instructed by the Company, all payments required to be
made
hereunder to the Company shall be sent by First Class mail, postage fully
prepaid, addressed to the attention of the Controller at the above address,
or
to such address as the Company shall from time to time designate in
writing.
| (b) |
All
notices to Franchisee shall be in writing and shall be sent by
reputable
overnight delivery service or by registered or certified mail,
postage
fully prepaid, addressed to Franchisee, care of its designated
agent, at:
|
Xxxxxx
Operations, Inc.
0000
Xxxxxxxxx Xxxxx
Xxxxxxxxx,
XX 00000
ATT:
Xxxxxxx X. Xxxxxx
or
to
such other address as Franchisee shall from time to time designate in
writing.
| (c) |
Notice
by mail shall be deemed delivered when received, but in no event
later
than the fifth (5th) business day following the date it was deposited
in
the mail duly addressed and posted. Notice by overnight delivery
service
shall be deemed delivered when actually delivered as confirmed
by such
delivery service.
|
| (d) |
Any
payment not actually received by the Company on or before the
date
specified herein shall be deemed overdue if not postmarked at
least two
(2) days prior to the date due.
|
14.10.
Designated
Agent of Franchisee.
Franchisee hereby designates Xxxxxxx
X. Xxxxxx
to act
on its behalf and to execute all documents on its behalf in all transactions
with the Company (the "Designated Agent"). The Designated Agent must be
an
individual, not a business entity. All actions by the Designated Agent
shall be
binding upon Franchisee. The Company shall have no duty to deal with anyone
other than the Designated Agent; however, any documents submitted to the
Company
executed by any other officer or partner shall be valid and binding upon
Franchisee. Franchisee shall promptly notify the Company in writing of
any
change in its Designated Agent.
14.11.
Specific
Performance.
Nothing
herein contained shall bar the Company's or Franchisee's right to seek
specific
performance of this Agreement and injunctive relief against threatened
conduct
that will cause it loss or damages, under customary equity rules, including
applicable rules for obtaining restraining orders and preliminary injunctions.
14.12.
Venue/Dispute
Resolution.
ANY AND
ALL ACTIONS AND OTHER LEGAL PROCEEDINGS ARISING UNDER THIS AGREEMENT SHALL
BE
FILED AND MAINTAINED ONLY IN A STATE OR FEDERAL COURT OF COMPETENT JURISDICTION
LOCATED IN THE STATE OF INDIANA, AND THE PARTIES HEREBY CONSENT TO THE
JURISDICTION AND VENUE OF SUCH COURTS SOLELY FOR THE PURPOSE OF RESOLUTION
OF
ANY SUCH DISPUTES. Franchisee and Company acknowledge that the parties’
agreement regarding applicable state law and forum set forth in sections
above
provide each of the parties with the mutual benefit of uniform interpretation
of
this Agreement and any dispute arising out of this Agreement or the parties’
relationship created by this Agreement. Each of Franchisee and Company
further
acknowledge the receipt and sufficiency of mutual consideration for such
benefit. The Company reserves the right to institute at any time a system
of
nonbinding arbitration or mediation. Any arbitration under this Agreement
shall
be held in a forum in the City of Indianapolis, State of Indiana. The Franchisee
will be obligated to participate in such system, at the Company's request,
in
the event of a dispute. The Federal Arbitration Act applies to the arbitration
forum clauses contained in this Agreement.
14.13.
Costs
and Attorneys' Fees.
If the
Company or its affiliates assert a claim for amounts owed by Franchisee
in any
legal proceeding before a court of competent jurisdiction, or in arbitration,
or
if the Company or Franchisee is required to enforce this Agreement in a
judicial
or arbitration proceeding, the party prevailing in such proceeding shall
be
entitled to reimbursement of its costs and expenses, including reasonable
legal
fees.
14.14.
Interference
with Employment Relations.
During
the term of this Agreement, neither Franchisee nor the Company shall employ
or
seek to employ any person who is at the time employed by the other party,
including related entities, or by any other franchisee of the Company,
or
otherwise induce, directly or indirectly, such person to leave such employment;
provided, however, that the prohibitions herein shall not apply to any
such
person who has left the employ of any of the foregoing parties for a period
in
excess of six (6) months.
14.15.
Acknowledgment
of Differing Terms.
Franchisee acknowledges that some present STEAK N SHAKE franchisees of
the
Company may operate under prior or different forms of unit franchise agreements
and, consequently, that Company's obligations and rights in respect to
its
various STEAK N SHAKE franchisees may differ materially in certain
circumstances.
14.16.
Acknowledgment
of No Promises.
Franchisee acknowledges that the Company is not a guarantor, directly or
indirectly, of the success or profitability of any franchised restaurant
or the
Franchise granted hereunder.
14.17.
Governing
Law.
This
Agreement and the Franchise granted hereunder shall be governed by the
laws of
Indiana except to the extent that Franchisee's state franchise disclosure
law or
unfair franchise practices act, or comparable law, may afford Franchisee
additional protection. Franchisee and Company acknowledge that the parties’
agreement regarding applicable state law and forum set forth in the sections
above provide each of the parties with the mutual benefit of uniform
interpretation of this Agreement and any dispute arising out of this Agreement
or the parties’ relationship created by this Agreement. Each of Franchisee and
Company further acknowledge the receipt and sufficiency of mutual consideration
for such benefit.
14.18.
Agreement
Location.
Franchisee and Company acknowledge that the execution of this Agreement
by
Company occurred in Indianapolis, Indiana and further acknowledge that
the
performance of certain obligations of Franchisee arising under this Agreement,
including but not limited to the payment of monies due hereunder, shall
occur in
Indianapolis, Indiana.
IN
WITNESS WHEREOF the parties hereto have executed and delivered this Agreement
on
the day and year first above written.
THE
COMPANY
STEAK
N
SHAKE OPERATIONS, INC.
an
Indiana corporation
ATTEST:
_/s/
Xxxxxxx X. Crowley____________ BY:_/s/
Xxxxx X. Milne_______
Printed:__Michael
T. Crowley___________ Printed:__David
C. Milne______________
Title:__Associate
Counsel___________ Title:
__General Counsel, Secretary, The Steak n Shake Company
FRANCHISEE
Xxxxxx
Operations, Inc.
a(n)
North Carolina Corporation
ATTEST/WITNESS
By:__/s/
Xxxxx X. Kelley____________
Printed:
Xxxxx X. Xxxxxx
Title:
President, Xxxxxx Operations, Inc.________
__/s/
Xxxxxx X. Brown_________________________ Individually__/s/
Xxxxx X. Kelley________________________
Printed:__Andrea
W. Brown_____________________ Xxxxx
X. Xxxxxx
Title:____Associate___________________________
SCHEDULE
1
The
franchised STEAK N SHAKE restaurant will be located:
000
Xxxxxxxx Xxxx, Xxxxxxxxxx, Xxxxx Xxxxxxxx
Franchisee's
Exclusive Territory shall comprise the following area:
An
area within a two (2) mile radius of the location described
above.
