EXHIBIT 10.88
SEATTLE'S BEST COFFEE
FRANCHISE AGREEMENT
BETWEEN
CINNABON, INC., SUCCESSOR IN INTEREST TO
SEATTLE'S BEST COFFEE, LLC
AND
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Unit No.: ______
Dev. Agr. No.: ______
Dated: _____________
[ ] Cafe [ ] Kiosk
[ ]Trad. Ven. [ ]Captive Ven.
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SEATTLE'S BEST COFFEE
FRANCHISE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this _______ day of
_________________, 200___, by and between CINNABON, INC., SUCCESSOR IN INTEREST
TO SEATTLE'S BEST COFFEE, LLC, a Washington corporation, with offices at Xxx
Xxxxxxxxx Xxxxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxx, 00000-0000 X.X.X. ("Franchisor"
or "SEATTLE'S BEST COFFEE") and _______ , [jointly and severally where more than
one], ("Franchisee").
WITNESSETH:
WHEREAS, Seattle's Best Coffee, LLC has developed and owns a unique and
distinctive system for the development, establishment and operation of retail
Cafes ("SBC Cafes") and Kiosks ("SBC Kiosks") (collectively, "SBC RETAIL UNITS")
specializing in the preparation and sale of specialty coffee beverages,
proprietary coffee products and other menu items developed and owned by
Franchisor (the "Seattle's Best Coffee System", "SBC System" or "System");
WHEREAS, the distinguishing characteristics of the SBC SYSTEM include,
without limitation, the name "SEATTLE'S BEST COFFEE"; distinctive interior and
exterior design and layouts, decor, color schemes, and furnishings; confidential
food formulae and recipes used in the preparation of food products, formulas and
specifications for preparing specialty coffee drinks and other coffee and
non-coffee-based products; specialized menus; standards and specifications for
equipment, equipment layouts, products, operating procedures, and management
programs, all of which may be changed, improved, and further developed by
Franchisor from time to time;
WHEREAS, Franchisor identifies the SBC SYSTEM by means of certain trade
names, service marks, trademarks, logos, emblems, and other indicia of origin,
including, but not limited to, the marks "SEATTLE'S BEST COFFEE", "SBC" and such
other trade names, service marks, trademarks and trade dress as are now, or may
hereafter, be designated by Franchisor for use in connection with the SBC SYSTEM
(collectively referred to as the "Proprietary Marks");
WHEREAS, pursuant to a Master License Agreement and First Amendment
thereto, both dated July 13, 2003, by and between Cinnabon Inc., SBC and Seattle
Coffee Company, SBC granted a license to CBI for the use of the SBC System and
proprietary marks in performing its obligations under this Agreement;
WHEREAS, Franchisor continues to develop, use, and control the use of
such Proprietary Marks in order to identify for the public the source of
services and products marketed thereunder in the SBC SYSTEM and to represent the
System's high standards of quality, appearance, and service;
WHEREAS, Franchisee wishes to be assisted, trained, and licensed by
Franchisor as an SBC franchisee and licensed to use, in connection therewith,
the SBC SYSTEM and to continuously operate one SBC Retail Unit at the location
specified in Section 1.01 herein (the "Franchised Location");
WHEREAS, Franchisee understands the importance of the SBC SYSTEM and
SEATTLE'S BEST COFFEE'S high and uniform standards of quality, cleanliness,
appearance, and service, and the necessity of opening and operating SBC RETAIL
UNITS in conformity with the SBC SYSTEM;
NOW, THEREFORE, the parties hereto agree as follows:
I. APPOINTMENT
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1.01. Franchisor grants to Franchisee a franchise to open and
operate an SBC Unit (the "Franchised Unit", or "Franchised Business") at one
location only, such location to be described as:
STORE NUMBER:
FRANCHISED
LOCATION:
UNIT FORMAT: [ ] SBC Cafe [ ] SBC Kiosk
[ ] Traditional Venue [ ] Captive Venue
upon the terms and conditions herein contained and subject to the terms and
conditions contained in the development agreement between Franchisor and
Franchisee, dated _________, (the "Development Agreement"), which is
incorporated herein by reference; and a license to use in connection therewith
Franchisor's Proprietary Marks and the SBC SYSTEM. Franchisee may not operate
the Franchised Unit at any site other than the Franchised Location.
1.02. Except as otherwise set forth herein, (a) the franchise
granted to Franchisee under this Agreement is non-exclusive, and grants to
Franchisee the rights to establish and operate the Franchised Unit at only the
specific location set forth hereinabove, (b) no exclusive, protected or other
territorial rights in the contiguous area or market of such Franchised Unit or
otherwise is hereby granted or to be inferred and (c) Franchisor and/or its
affiliates have the right to operate and grant as many other franchises for the
operation of SBC Retail Units, anywhere in the world, as they shall, in their
sole discretion, elect. In addition to the foregoing, Franchisor may sell SBC
brand coffee and related coffee products anywhere, including, but not limited
to, sales on the Internet, by mail order, or through wholesale distribution
channels, including, but not limited to independent coffee retailers, department
stores, food marts, restaurants, cafes and grocery stores, during and after the
term of this Agreement ("Wholesale Accounts"). Wholesale Accounts of Franchisor
may, in return, sell SBC coffee and related products under the same or different
trademarks.
1.03. Nothing herein shall be deemed to be a grant to Franchisee of
any rights as a commercial agent or distributor of SBC Coffee and/or coffee
products in any jurisdiction. Franchisor reserves the right, in its sole
discretion, to grant such rights to any third party, during or after the term of
this Agreement. Franchisee may not sell any SBC Coffee Products (as defined
herein) and/or any other materials, supplies, or inventory bearing the
Proprietary Marks anywhere except at the SBC Retail Unit, without SBC's prior
written consent. Franchisee shall specifically be prohibited from selling any
such items at wholesale, except as specifically agreed to, in writing, by
Franchisor. The foregoing restriction shall not apply to catering events and/or
the offer of samples of SBC coffee products at or directly in front of the
Franchised Unit.
1.04. Franchisee acknowledges that, over time, Franchisor has
entered, and will continue to enter, into franchise agreements with other
franchisees that may contain provisions, conditions and obligations that differ
from those contained in this Agreement, including, without limitation, franchise
agreements for the operation of SBC Retail Units. The existence of different
forms of agreement and the fact that Franchisor and other franchisees may have
different rights and obligations does not affect the parties' duty to comply
with the terms of this Agreement.
II. TERM
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2.01. Except as otherwise provided in this Agreement, the initial
term of this Franchise Agreement (the "Term") shall expire on the tenth (10th)
anniversary of the date of commencement of operation of the Franchised Unit. For
all purposes under this Agreement, the date of commencement of operation of the
Franchised Unit shall be the date verified in writing by Franchisor and
delivered to Franchisee in a form substantially similar to the "Notice" attached
hereto as Exhibit "A". Franchisee agrees and shall be obligated to operate the
Franchised Unit and perform hereunder for the full Term of this Agreement.
2.02. Franchisee may, at its option, renew this franchise for one
(1) additional period of five (5) years, provided that, at the time of such
renewal:
A. Franchisee gives Franchisor written notice of such
election to renew not less than six (6) months nor
more than twelve (12) months prior to the end of the
then-current term. Failure by Franchisee to timely
provide Franchisor the required notice constitutes a
waiver by Franchisee of its option to remain a
franchisee beyond the expiration of the Initial Term
or the first Renewal Term;
B. Franchisee executes Franchisor's then-current
standard form of franchise agreement, which may
include, without limitation, a higher royalty fee and
a higher advertising contribution, if any, than that
contained in this Agreement; and the term of which
shall be the renewal term as specified in Section
2.02. hereof, but shall contain no further renewal
rights;
C. Franchisee shall execute a general release and a
covenant not to xxx, in a form satisfactory to
Franchisor, of any and all claims against Franchisor
and its subsidiaries and affiliates, and their
respective past and present officers, directors,
shareholders, agents and employees, in their
corporate and individual capacities, including,
without limitation, claims arising under federal,
state and local laws, rules and ordinances, and
claims arising out of, or relating to, this
Agreement, any other agreements between Franchisee
and Franchisor and Franchisee's operation of the
Franchised Unit and/or other SBC Retail Units
operated by Franchisee;
D. Franchisee is not in default under this Agreement or
any other agreements between Franchisee and
Franchisor (or any parent, subsidiary or affiliate of
Franchisor), and Franchisee has fully and faithfully
performed all of Franchisee's obligations throughout
the term of this Agreement; Franchisee is not in
default beyond the applicable cure period under any
real estate lease, equipment lease or financing
instrument relating to the Franchised Unit;
Franchisee is not in default beyond the applicable
cure period with any vendor or supplier to the
Franchised Unit; and, Franchisee shall not have been
in default beyond the applicable cure period under
this Agreement or any other agreements between
Franchisor and Franchisee more than 3 times during
the period 12 months before the date of Franchisee's
notice and 12 months before the expiration of the
Initial Term;
E. Franchisee has paid or otherwise satisfied all
monetary obligations owed by Franchisee to Franchisor
and its subsidiaries and affiliates and any
indebtedness of Franchisee which is guaranteed by
Franchisor, and Franchisee has timely paid or
otherwise satisfied these obligations throughout the
term of this Agreement;
F. Franchisee agrees, at its sole cost and expense, to
reimage, renovate, refurbish and modernize the
Franchised Unit, within the time frame required by
Franchisor, including the building design, parking
lot, landscaping, equipment, signs, interior and
exterior decor items, fixtures, furnishings, trade
dress, color scheme, presentation of trademarks
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and service marks, supplies and other products and
materials to meet Franchisor's then-current
standards, specifications and design criteria for SBC
RETAIL UNITS , as contained in the then-current
franchise agreement, Confidential Operating Standards
Manual (as defined herein), or otherwise in writing,
including, without limitation, such structural
changes, remodeling and redecoration and such
modifications to existing improvement as may be
necessary to do so;
G. Franchisee shall pay to Franchisor a renewal fee
equal to fifty percent (50%) of Franchisor's standard
initial franchise fee in effect at the date of
renewal.
H. Franchisee and its employees at the Franchised Unit
shall be in compliance with the then-current SBC
System training requirements.
I. Franchisee has the right to remain in possession of
the premises of the Franchised Unit, or other
premises acceptable to Franchisor, for the Renewal
Term and all monetary obligations owed to
Franchisee's landlord must be current.
J. As determined by Franchisor in its sole discretion,
Franchisee has operated the Franchised Unit in
accordance with this Agreement and the SBC System (as
set forth in the Manual or otherwise in writing and
as revised from time to time) and has operated all of
its other SBC Retail Units that are franchised by
Franchisor in accordance with the applicable
franchise agreements.
III. FEES
3.01. In consideration of the franchise granted to Franchisee
herein, Franchisee shall pay to the Franchisor the following:
A. A franchise fee of ___________THOUSAND DOLLARS
($_________) payable upon execution of this Agreement
by Franchisee, less __________ Dollars ($________),
representing the portion of the Development Fee (as
defined in the Development Agreement), applicable to
the Franchise Fee payable hereunder. Such franchise
fee shall be fully earned by Franchisor upon
execution of this Agreement by Franchisee and is in
addition to any development fees paid to Franchisor
by Franchisee.
B. A recurring, non-refundable royalty fee of FOUR
PERCENT (4%) of Gross Sales (as defined herein)
during the term of this Agreement, payable weekly, on
the Gross Sales of the preceding week (or on such
other basis as may be set forth in the Confidential
Operating Standards Manual (as defined herein) or
otherwise agreed to in writing by Franchisor). Upon
thirty (30) days prior written notice, Franchisor may
require Franchisee to authorize Franchisor to make
electronic debits from Franchisee's operating account
as a means of paying the royalty fee.
3.02. In addition to the payments provided for in Section 3.01.
hereof, Franchisee, recognizing the value of advertising and the importance of
the standardization of advertising and promotion to the goodwill and public
image of the System, agrees to pay to the SEATTLE'S BEST COFFEE national
marketing fund (the "NMF", f/k/a "NCP Fund") a recurring, non-refundable
contribution ("NMF Contribution", f/k/a "NCP Fund Contribution") in an amount to
be determined by Franchisor, in its sole discretion, up to [ ] THREE PERCENT
(3%) [ ] ONE PERCENT (1%) of the Gross Sales of the Franchised Unit, payable
weekly, for the preceding week (or on such other basis as may be set forth in
the Confidential Operating Standards Manual or otherwise agreed to in writing by
Franchisor). Upon thirty (30) days prior written notice, Franchisor may require
Franchisee to authorize Franchisor to make electronic
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debits from Franchisee's operating account as a means of paying the NMF
Contribution. The NMF Contribution shall be expended by the NMF for national,
regional, and/or local advertising and promotional materials and market research
for the SBC SYSTEM, under the following conditions and limitations:
A. The NMF, all contributions thereto, and any earnings
thereon, shall be used exclusively to pay any and all
costs of maintaining, administering, directing,
producing and preparing market research, advertising,
marketing materials and/or promotional activities for
the SBC SYSTEM. Franchisee shall pay the NMF
Contribution by separate check made payable to the
NMF. All sums paid by the Franchisee to the NMF shall
be maintained in an account separate from other funds
of Franchisor and shall not be used to defray any of
Franchisor's expenses except as provided herein, and
as Franchisor may incur in activities reasonably
related to the administration or direction of the NMF
and advertising and marketing programs for
franchisees and the SBC SYSTEM. The NMF and its
earnings shall not otherwise inure to the benefit of
Franchisor. Franchisor shall maintain a separate
bookkeeping account for the NMF.
B. The selection of media and locale for media placement
shall be at the sole discretion of the Franchisor.
C. All reasonable costs incurred by Franchisor or
charged to Franchisor by third parties for market
research and the production and dissemination of
advertising, marketing and promotional materials may
be charged to the NMF.
D. Franchisor, upon request, shall provide Franchisee
with an annual accounting of receipts and
disbursements of the NMF.
E. It is anticipated that all contributions to and
earnings of the NMF will be expended for market
research, costs of creating and producing advertising
materials, marketing and/or promotional purposes and
reimbursement to Franchisor of costs directly related
to the management of the NMF (including personnel
costs) during the taxable year in which contributions
and earnings are received. If, however, excess
amounts remain in the NMF at the end of a taxable
year, all expenditures in the following taxable
year(s) shall be made first out of accumulated
earnings from previous years, next out of earnings in
the current year, and finally from contributions.
F. The NMF is not, and shall not be, an asset of
Franchisor. Although the NMF is intended to be of
perpetual duration, Franchisor maintains the right to
terminate the NMF; provided, however, that the NMF
shall not be terminated until all monies in the NMF
have been expended for the purposes stated herein.
G. Franchisee understands that such advertising and
marketing is intended to maximize the public's
awareness of SBC Retail Units and the SBC System, and
that Franchisor accordingly undertakes no obligation
to insure that any individual Franchisee benefits
directly or on a pro rata basis from the placement,
if any, of such advertising or marketing in its local
market. Franchisee further acknowledges that its
failure to derive any such benefit, whether directly
or indirectly, shall not be cause for Franchisee's
nonpayment or reduction of the required contributions
to the NMF.
3.03. If any monetary obligations owed by Franchisee to Franchisor
and its subsidiaries and affiliates are more than seven (7) days overdue,
Franchisee shall, in addition to such obligations, pay to Franchisor a sum equal
to one and one-half percent (1-1/2%) of the overdue balance per month, or the
highest rate permitted by law, whichever is less, from the date said payment is
due.
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3.04. For the purposes of this Agreement, the term "Gross Sales"
shall mean all revenues generated by Franchisee's business conducted upon, from
or with respect to the Franchised Unit, whether such sales are evidenced by
cash, check, credit, charge, account, barter or exchange. Gross Sales shall
include, without limitation, monies or credit received from the sale of food and
merchandise, from tangible property of every kind and nature, promotional or
otherwise, and for services performed from or at the Franchised Unit, including
without limitation such off-premises services as catering and delivery. Gross
Sales shall not include the sale of food or merchandise for which refunds have
been made in good faith to customers, the sale of equipment used in the
operation of the Franchised Unit, nor shall it include sales, meals, use or
excise tax imposed by a governmental authority directly on sales and collected
from customers; provided that the amount for such tax is added to the selling
price or absorbed therein, and is actually paid by Franchisee to such
governmental authority.
3.05. In addition to the payments otherwise provided for in Section
3.02, above, Franchisee shall expend each month during the term of this
Franchise Agreement an amount to be determined by Franchisor, in its sole
discretion, up to [ ] TWO PERCENT (2%) [ ] ONE PERCENT (1%) of the Gross Sales
of the Franchised Unit for the preceding week, which sum shall be expended by
Franchisee for local advertising, which shall be conducted in a dignified manner
and shall conform to such standards and requirements as Franchisor may specify
(hereinafter the "Local Area Marketing Expenditure", f/k/a ""Local Advertising
Expenditure"). Franchisee shall not use any advertising or promotional plans or
materials unless and until Franchisee has received written approval from
Franchisor, pursuant to the procedures and terms set forth in Section 10.09.
hereof. Franchisee's Local Area Marketing Expenditure shall be reduced by an
amount equal to Franchisee's actual contribution, for the corresponding period,
to a Local Area Marketing Cooperative established pursuant to Section 10.06. of
this Agreement, if any.
3.06. In addition to the payments provided for in Sections 3.01,
3.02 and 3.05 hereof, Franchisee shall expend at least [ ] TEN THOUSAND AND
NO/100 DOLLARS ($10,000.00) [ ] FIVE THOUSAND AND NO/100 DOLLARS ($5,000.00) for
grand opening advertising of the Franchised Unit during the first two (2) months
following the opening of the SBC Retail Unit, which advertising must be
approved, in advance, by Franchisor.
IV. ACCOUNTING AND RECORDS
4.01. ACCURATE BOOKS AND RECORDS. During the Term of this Agreement,
Franchisee shall maintain and preserve, for at least three (3) years from the
dates of their preparation, full, complete and accurate books, records and
accounts in accordance with generally accepted accounting principles and in the
form and the manner prescribed by Franchisor from time-to-time in the
Confidential Operating Standards Manual or otherwise in writing. These records
shall include, without limitation, cash register sales tape (including
non-resettable readings), meals, sales and other tax returns, duplicate deposit
slips and other evidence of Gross Sales and all other business transactions.
4.02. ROYALTY REPORTS. Franchisee shall submit to Franchisor, weekly
reports on forms prescribed by Franchisor, accurately reflecting all Gross Sales
during the preceding week and such other forms, reports, records, financial
statements or information as Franchisor may reasonably require in the
Confidential Operating Standards Manual, or otherwise in writing. Even if
Franchisor requires Franchisee to implement an electronic cash register system
that transmits Franchisee's Gross Sales to Franchisor on a periodic basis,
Franchisor may still require Franchisee to submit written reports.
4.03. QUARTERLY STATEMENT. Franchisee shall, at its expense, submit
to Franchisor quarterly, within thirty (30) days following the end of each
quarter during the Term hereof, an unaudited financial statement with such
detail as Franchisor may reasonably require (hereinafter, "Quarterly Statement")
together with a certificate executed by Franchisee stating that such financial
statement is true and accurate. Upon Franchisor's request, Franchisee shall
submit to Franchisor, with each Quarterly Statement, copies of any state or
local sales tax returns
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("Sales Tax Returns") filed by Franchisee for the period included in the
Quarterly Statement. In the event Franchisee prepares financial statements on
the basis of thirteen (13), four (4) week periods ("Periods"), the Quarterly
Statements shall be submitted within thirty (30) days following the end of the
third (3rd), sixth (6th), ninth (9th) and thirteenth (13th) Periods.
4.04. ANNUAL FINANCIAL STATEMENTS. Franchisee shall, at its expense,
submit to Franchisor within ninety (90) days following the end of each calendar
or fiscal year during the Term of this Agreement, an unaudited financial
statement for the preceding calendar or fiscal year with such detail and in a
format as Franchisor may reasonably require, together with a certificate
executed by Franchisee certifying that such financial statement is true and
accurate (hereinafter, "Annual Financial Statements") and such other information
in such form as Franchisor may reasonably require. Upon written request from
Franchisor, the foregoing Annual Financial Statement shall include both a profit
and loss statement and a balance sheet, and shall be prepared in accordance with
generally accepted accounting principles. In the event Franchisee defaults under
this Agreement, Franchisor may require, upon written notice to Franchisee, that
all Annual Financial Statements submitted thereafter include a "Review Report"
prepared by an independent Certified Public Accountant.
4.05. OTHER REPORTS. Franchisee shall also submit to Franchisor, for
review or auditing, such other forms, financial statements, reports, records,
information and data as Franchisor may reasonably designate, in the form and at
the times and places reasonably required by Franchisor, upon request and as
specified from time-to-time in the Confidential Operating Standards Manual or
otherwise in writing. If Franchisee has combined or consolidated financial
information relating to the Franchised Unit with that of any other business or
businesses, including a business licensed by Franchisor, Franchisee shall
simultaneously submit to Franchisor, for review or auditing, the forms, reports,
records and financial statements (including, but not limited to the Quarterly
Statements and Annual Financial Statements) which contain the detailed financial
information relating to the Franchised Unit, separate and apart from the
financial information of such other businesses. Franchisee hereby authorizes all
of its suppliers and distributors to release to Franchisor, upon Franchisor's
request, any and all of its books, records, accounts or other information
relating to goods, products and supplies sold to Franchisee and/or the
Franchised Unit.
4.06. EQUIPMENT. Franchisee shall record all sales on cash registers
or other point-of-sale equipment approved, in writing, by Franchisor
(hereinafter "POS Equipment"). Franchisee agrees that Franchisor shall have the
free and unfettered right to retrieve any data and information from Franchisee's
P.O.S. Equipment and computers as Franchisor, in its sole discretion, deems
appropriate, with the telephonic cost of the retrieval to be borne by
Franchisor, including electronically polling the daily sales, menu mix and other
data of the Franchised Unit.
4.07. FRANCHISOR'S RIGHT OF AUDIT. Franchisor or its designated
agents or auditors shall have the right at all reasonable times to audit, review
and examine by any means, including electronically through the use of
telecommunications devices or otherwise, at its expense, the books, records,
accounts, and tax returns of Franchisee related to the Franchised Unit. If any
such audit, review or examination reveals that Gross Sales have been understated
in any report to Franchisor, Franchisee shall immediately pay to Franchisor the
royalty fee and NCP Fund Contribution due with respect to the amount understated
upon demand, in addition to interest from the date such amount was due until
paid, at the rate of one and one-half percent (1.5%) per month. If any such
understatement exceeds two percent (2%) of Gross Sales as set forth in the
report, Franchisee shall, in addition, upon demand, reimburse Franchisor for any
and all costs and expenses connected with such audit, review or examination
(including, without limitation, reasonable accounting and attorneys' fees). The
foregoing remedies shall be in addition to any other rights and remedies
Franchisor may have.
V. PROPRIETARY MARKS
5.01. It is understood and agreed that the franchise granted herein
to use Franchisor's Proprietary Marks applies only to use in connection with the
operation of the Franchised Unit franchised in this Agreement at the
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location designated in Section I hereof, and includes only such Proprietary
Marks as are now designated or which may hereafter be designated, in the
Confidential Operating Standards Manual or otherwise in writing as a part of the
SBC System (which might or might not be all of the Proprietary Marks pertaining
to the System owned by the Franchisor), and does not include any other xxxx,
name, or indicia of origin of Franchisor now existing or which may hereafter be
adopted or acquired by Franchisor.
5.02. With respect to Franchisee's use of the Proprietary Marks
pursuant to this Agreement, Franchisee acknowledges and agrees that:
A. Franchisee shall not use the Proprietary Marks as
part of Franchisee's corporate or other business
name;
B. Franchisee shall not hold out or otherwise use the
Proprietary Marks to perform any activity or incur
any obligation or indebtedness in such manner as
might, in any way, make Franchisor liable therefor,
without Franchisor's prior written consent;
C. Franchisee shall execute any documents and provide
such other assistance deemed necessary by Franchisor
or its counsel to obtain protection for the
Proprietary Marks or to maintain the continued
validity of such Proprietary Marks; and
D. Franchisor reserves the right to substitute different
Proprietary Marks for use in identifying the System
and the franchised businesses operating thereunder,
and Franchisee agrees to immediately substitute
Proprietary Marks upon receipt of written notice from
Franchisor.
5.03. Franchisee expressly acknowledges Franchisor's exclusive right
to use the marks "SEATTLE'S BEST COFFEE" and "SBC" for restaurant services,
coffee products, and other related food and beverage products; the building
configuration; and the other Proprietary Marks of the System. Franchisee agrees
not to represent in any manner that it has any ownership in the Proprietary
Marks or the right to use the Proprietary Marks except as provided in this
Agreement. Franchisee further agrees that its use of the Proprietary Marks shall
not create in its favor any right, title, or interest in or to the Proprietary
Marks, and that all of such use shall inure to the benefit of Franchisor.
5.04. Franchisee acknowledges that the use of the Proprietary Marks
outside the scope of this license, without Franchisor's prior written consent,
is an infringement of Franchisor's exclusive right to use the Proprietary Marks,
and during the term of this Agreement and after the expiration or termination
hereof, Franchisee covenants not to, directly or indirectly, commit an act of
infringement or contest or aid in contesting the validity or ownership of
Franchisor's Proprietary Marks, or take any other action in derogation thereof.
5.05. Franchisee shall promptly notify Franchisor of any suspected
infringement of, or challenge to, the validity of the ownership of, or
Franchisor's right to use, the Proprietary Marks licensed hereunder. Franchisee
acknowledges that Franchisor has the right to control any administrative
proceeding or litigation involving the Proprietary Marks. In the event
Franchisor undertakes the defense or prosecution of any litigation relating to
the Proprietary Marks, Franchisee agrees to execute any and all documents and to
do such acts and things as may, in the opinion of counsel for Franchisor, be
necessary to carry out such defense or prosecution. Except to the extent that
such litigation is the result of Franchisee's use of the Proprietary Marks in a
manner inconsistent with the terms of this Agreement, Franchisor agrees to
reimburse Franchisee for its out of pocket costs in doing such acts and things,
except that Franchisee shall bear the salary costs of its employees.
5.06. Franchisee understands and agrees that its license with
respect to the Proprietary Marks is non-exclusive to the extent that Franchisor
has and retains the right under this Agreement:
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A. To grant other licenses for the Proprietary Marks, in
addition to those licenses already granted to
existing franchisees;
B. To develop and establish other franchise systems for
the same, similar, or different products or services
utilizing proprietary marks not now or hereafter
designated as part of the System licensed by this
Agreement, and to grant licenses thereto, without
providing Franchisee any right therein; and
C. To develop and establish other systems for the sale,
at wholesale or retail, of similar or different
products utilizing the same or similar Proprietary
Marks, without providing Franchisee any right
therein.
5.07. Franchisee acknowledges and expressly agrees that any and all
goodwill associated with the System and identified by the Proprietary Marks used
in connection therewith shall inure directly and exclusively to the benefit of
Franchisor and is the property of Franchisor, and that upon the expiration or
termination of this Agreement or any other agreement, no monetary amount shall
be assigned as attributable to any goodwill associated with any of Franchisee's
activities in the operation of the Franchised Unit granted herein, or
Franchisee's use of the Proprietary Marks.
5.08. Franchisee understands and acknowledges that each and every
detail of the SBC SYSTEM is important to Franchisee, Franchisor, and other
franchisees in order to develop and maintain high and uniform standards of
quality and services, and hence to protect the reputation and goodwill of SBC
RETAIL UNITS. Accordingly, Franchisee covenants:
A. To operate and advertise the Franchised Unit, at
Franchisee's own expense, under the name "SEATTLE'S
BEST COFFEE," without prefix or suffix;
B. To adopt and use the Proprietary Marks licensed
hereunder solely in the manner prescribed by
Franchisor;
C. To observe such reasonable requirements with respect
to trademark registration notices as Franchisor may
from time to time direct in the Confidential
Operating Standards Manual or otherwise in writing.
5.09. In order to preserve the validity and integrity of the
Proprietary Marks licensed herein and to assure that Franchisee is properly
employing the same in the operation of the Franchised Unit, Franchisor or its
agents shall at all reasonable times have the right to inspect Franchisee's
operations, premises, and Franchised Unit and make periodic evaluations of the
services provided and the products sold and used therein. Franchisee shall
cooperate with Franchisor's representatives in such inspections and render such
assistance to the representatives as may reasonably be requested.
5.10. Franchisee shall not hold out or otherwise employ the
Proprietary Marks to perform any activity, or to incur any obligation or
indebtedness in such a manner as might, in any way, make Franchisor liable
therefor, without Franchisor's prior written consent.
VI. OBLIGATIONS OF CORPORATE OR PARTNERSHIP FRANCHISEE
6.01. If Franchisee, or any successor to or assignee of Franchisee,
is a corporation, or limited liability company:
10
A. Franchisee shall furnish to Franchisor, upon
execution or any subsequent transfer of this
Agreement, a copy of the Franchisee's Articles of
Incorporation, Certificate of Incorporation, Bylaws
and a list of shareholders showing the percentage
interest of each, and shall thereafter promptly
furnish Franchisor with a copy of any and all
amendments or modifications thereto;
B. Franchisee shall promptly furnish Franchisor, on a
regular basis, with certified copies of such
corporate records (or limited liability company
records) material to the Franchised Business as
Franchisor may require from time to time in the
Confidential Operating Standards Manual or otherwise
in writing; and
C. Franchisee shall maintain stop-transfer instructions
against the transfer, on its records, of any
securities with voting rights, subject to the
restrictions of this Agreement, and each stock
certificate of the corporate Franchisee representing
each share of stock, shall have conspicuously
endorsed upon it the following legend:
"THE TRANSFER OF THIS STOCK IS SUBJECT
TO THE TERMS AND CONDITIONS OF A
SEATTLE'S BEST COFFEE FRANCHISE
AGREEMENT WITH SEATTLE'S BEST COFFEE,
LLC. DATED ___________. REFERENCE IS
MADE TO THE PROVISIONS OF SAID
FRANCHISE AGREEMENT AND TO THE ARTICLES
AND BY-LAWS OF THIS CORPORATION."
6.02. If the Franchisee, or any successor to or assignee of
Franchisee, is a partnership, limited partnership or limited
liability partnership, Franchisee shall furnish to Franchisor,
upon execution or any subsequent transfer of this Agreement, a
copy of Franchisee's Articles of Partnership, if any, and
Partnership Agreement, and shall thereafter promptly furnish
Franchisor with a copy of any and all amendments or
modifications thereto.
6.03. Franchisee shall, upon execution of this Agreement, furnish to
Franchisor a completed Statement of Legal Composition attached as Exhibit C
hereto as to all the parties with an ownership interest in Franchisee, the
amount of such ownership interests, the jurisdiction in which Franchisee is
legally incorporated or organized, and other information specified. Franchisee
shall thereafter furnish to Franchisor an updated Statement of Legal Composition
promptly when requested by Franchisor. Franchisee shall promptly advise
Franchisor of any change in such information. Franchisee warrants, represents,
and covenants to Franchisor that all of the information furnished in the
completed Statement of Legal Composition is true and correct as of the date of
this Agreement, and when subsequently furnished to Franchisor.
VII. CONFIDENTIAL OPERATING STANDARDS MANUAL.
7.01. In order to protect the reputation and goodwill of Franchisor
and the SBC SYSTEM and to maintain uniform standards of operation under
Franchisor's Proprietary Marks, Franchisee shall conduct the Franchised Business
in accordance with Franchisor's Confidential Operating Standards Manual
(hereinafter, together with any other manuals created or approved for use in the
operation of the Franchised Business granted herein, and all amendments and
updates thereto, the "Manual").
7.02. Franchisee shall at all times treat the Manual, and the
information contained therein, as confidential, and shall use all reasonable
efforts to keep such information secret and confidential. Franchisee shall not,
at any time, without Franchisor's prior written consent, copy, duplicate,
record, or otherwise make the Manual available to any unauthorized person or
entity.
7.03. The Manual shall at all times remain the sole property of
Franchisor.
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7.04. In order for Franchisee to benefit from new knowledge
information, methods and technology adopted and used by Franchisor in the
operation of the System, Franchisor may from time-to-time revise the Manual and
Franchisee agrees to adhere to and abide by all such revisions.
7.05. Franchisee agrees at all times to keep its copy of the Manual
current and up-to-date, and in the event of any dispute as to the contents of
Franchisee's Manual, the terms of the master copy of the Manual maintained by
Franchisor at Franchisor's home office, shall be controlling.
7.06. The Manual is intended to further the purposes of this
Agreement, and is specifically incorporated, by reference, into this Agreement.
Except as otherwise set forth in this Agreement, in the event of a conflict
between the terms of this Agreement and the terms of the Manual, the terms of
this Agreement shall control.
VIII. TRAINING
8.01. Franchisee, a partner of Franchisee if Franchisee is a
partnership, or a principal shareholder of Franchisee if Franchisee is a
corporation (or a principal member of Franchisee if Franchisee is a limited
liability company), must complete, to Franchisor's satisfaction, the SEATTLE'S
BEST COFFEE New Franchisee Orientation Program ("NFOP") prior to opening the
first franchised SBC RETAIL UNIT operated by Franchisee. NFOP shall consist of
up to three (3) days of workshops and seminars conducted at a training facility
and designated by Franchisor.
8.02. In addition to completing the NFOP, Franchisee (or a partner,
principal shareholder, principal member of Franchisee, or an Operations
Director/District Manager designated by Franchisee, and at least one designated
management employees of Franchisee (and, in all instances, a senior management
employee of Franchisee responsible for daily operations of the Franchised Unit),
must attend and complete, to Franchisor's satisfaction, the SBC FRANCHISE
ACADEMY PROGRAM ("FAP"), prior to opening the Franchised Unit. FAP l consists of
up to four (4) weeks of classroom and and operations training at an SBC Cafe
designated by Franchisor (an "SBC Certified Training Cafe"). A management
employee of Franchisee that successfully completes FAP, shall be certified by
Franchisor as an "SBC Certified Manager".
8.03. Franchisee shall maintain the number of FAP Certified Managers
designated by the Franchisor in the employ of the Franchised Unit throughout the
term of this Agreement, which in no event shall be less than one (1). In the
event that Franchisee or any SBC Certified Manager ceases active employment at
the Franchised Unit, Franchisee must enroll a qualified replacement in FAP
within thirty (30) days of cessation of such individual's employment. The
replacement employee shall attend and complete the next regularly scheduled FAP
to Franchisor's satisfaction.
8.04. The cost of conducting the initial NFOP and FAP (instruction
and required materials) shall be borne by Franchisor. All other expenses during
NFOP and FAP, including meals and lodging, wages and travel, shall be borne by
Franchisee.
8.05. Franchisor reserves the right to test any and all SBC
Certified Managers at any time, and may require such individuals to attend and
complete additional training at a training facility designated by Franchisor,
and at Franchisee's sole cost and expense, in the event they fail to achieve a
satisfactory score on such test. Additionally, Franchisor may make available to
Franchisee or Franchisee's employees, from time to time, such additional
training programs as Franchisor, in its sole discretion, may choose to conduct.
Attendance at said training programs may be mandatory. The cost of conducting
such additional training programs (instruction and required materials) shall be
borne by Franchisor. All other expenses during the training period, including
meals and lodging, wages and travel, shall be borne by the Franchisee.
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IX. DUTIES OF THE FRANCHISOR
9.01. Franchisor will make available to Franchisee standard plans
and specifications to be utilized only in the construction of the Franchised
Unit. No modification to or deviations from the standard plans and
specifications may be made without the written consent of Franchisor. Franchisee
shall obtain, at its expense, further qualified architectural and engineering
services to prepare surveys, site and foundation plans, and to adapt the
standard plans and specifications to applicable local or state laws, regulations
or ordinances. Franchisee shall bear the cost of preparing plans containing
deviations or modifications from the standard plans.
9.02. Franchisor shall provide consultation and advice to Franchisee
as Franchisor deems appropriate with regard to construction or renovation and
operation of the Franchised Unit, building layout, furnishings, fixtures and
equipment plans and specifications, employee selection and training, purchasing
and inventory control and those other matters as Franchisor deems appropriate.
9.03. Franchisor will make available to Franchisee such continuing
advisory assistance in the operation of the Franchised Business, in person or by
electronic or written bulletins made available from time to time, as Franchisor
may deem appropriate.
9.04. Franchisor, in its sole discretion, may provide opening
assistance to Franchisee at the Franchised Unit.
9.05. Franchisor will loan one (1) copy of the Manual to Franchisee
for the duration of this Agreement, which the Manual contains the standards,
specifications, procedures and techniques of the SBC System.
9.06. Franchisor will continue its efforts to maintain high and
uniform standards of quality, cleanliness, appearance and service at all SBC
Retail Units, to protect and enhance the reputation of the SBC System and the
demand for the products and services of the System. Franchisor will establish
uniform criteria for approving suppliers; make every reasonable effort to
disseminate its standards and specifications to prospective suppliers of the
Franchisee upon the written request of the Franchisee, provided that Franchisor
may elect not to make available to prospective suppliers the standards and
specifications for such food formulae or equipment designs deemed by Franchisor
in its sole discretion to be confidential; and may conduct periodic inspections
of the premises and evaluations of the products used and sold at the Franchised
Unit and in all other SBC Retail Units.
9.07. Franchisor will provide training to Franchisee as set forth in
Article VIII hereof.
X. DUTIES OF THE FRANCHISEE
Franchisee understands and acknowledges that every detail of the System
is important to Franchisor, Franchisee and other franchisees in order to develop
and maintain high and uniform operating standards, to increase the demand for
SEATTLE'S BEST COFFEE products and services, and to protect the reputation and
goodwill of Franchisor. Accordingly, Franchisee agrees that:
10.01. Franchisee shall maintain, at all times during the term of
this Agreement, at Franchisee's expense, the premises of the Franchised Unit and
all fixtures, furnishings, signs, systems and equipment (hereinafter
"improvements") thereon or therein, in conformity with Franchisor's high
standards and public image and to make such additions, alterations, repairs, and
replacements thereto (but no others, without Franchisor's prior written consent)
as may be required by Franchisor, including but not limited to the following:
A. To keep the Franchised Unit in the highest degree of
sanitation and repair, including, without limitation,
such periodic repainting, repairs or replacement of
impaired equipment, and replacement of obsolete
signs, as Franchisor may reasonably direct;
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B. To meet and maintain the highest governmental
standards and ratings applicable to the operation of
the Franchised Business;
C. At its sole cost and expense, to complete a full
reimaging, renovation, refurbishment and
modernization of the Franchised Unit, within the time
frame required by Franchisor, including the building
design, parking lot, landscaping, equipment, signs,
interior and exterior decor items, fixtures,
furnishings, trade dress, color scheme, presentation
of trademarks and service marks, supplies and other
products and materials, to meet Franchisor's
then-current standards, specifications and design
criteria for SBC Retail Units, including without
limitation, such structural changes, remodeling and
redecoration and such modifications to existing
improvements as may be necessary to do so
(hereinafter, a "Franchised Unit Renovation").
Franchisee shall not be required to perform a
Franchised Unit Renovation if there are less than
three (3) years remaining on the term of this
Agreement, and/or the lease for the premises occupied
by the Franchised Unit. Nothing herein shall be
deemed to limit Franchisee's other obligations,
during the term of this Agreement, to operate the
Franchised Unit in accordance with Franchisor's
standards and specifications for the SBC System,
including, but not limited to, the obligations set
forth in this Section X.
10.02. Franchisee shall operate the Franchised Unit in conformity
with such uniform recipes, methods, standards, and specifications as Franchisor
may from time to time prescribe in the Manual or otherwise in writing, to insure
that the highest degree of quality, service and cleanliness is uniformly
maintained and to refrain from any deviation therefrom and from otherwise
operating in any manner which reflects adversely on Franchisor's name and
goodwill or on the Proprietary Marks, and in connection therewith:
A. To maintain in sufficient supply, and use at all
times, only such ingredients, products, materials,
supplies, and paper goods as conform to Franchisor's
standards and specifications, and to refrain from
deviating therefrom by using non-conforming items,
without Franchisor's prior written consent;
B. To sell or offer for sale only proprietary "Seattle's
Best Coffee" brand coffee products and such other
products and menu items that have been expressly
approved for sale in writing by Franchisor, meet
Franchisor's uniform standards of quality and
quantity and as have been prepared in accordance with
Franchisor's methods and techniques for product
preparation; to sell or offer for sale the minimum
menu items specified in the Manual or otherwise in
writing; to refrain from any deviation from
Franchisor's standards and specifications for serving
or selling the menu items, without Franchisor's prior
written consent; and to discontinue selling or
offering for sale such items as Franchisor may, in
its discretion, disapprove in writing at any time;
C. To use the premises of the Franchised Unit solely for
the purpose of conducting the business franchised
hereunder, and to conduct no other business or
activity thereon, whether for profit or otherwise,
without Franchisor's prior written consent;
D. To keep the Franchised Unit open and in normal
operation during such business hours as Franchisor
may prescribe in the Manual or otherwise in writing;
E. To permit Franchisor or its agents, at any time
during ordinary business hours, to remove from the
Franchised Unit samples of any ingredients, products,
materials, supplies, and paper goods used in the
operation of the Franchised Unit, without payment
therefor, in amounts reasonably necessary for testing
by Franchisor or an independent laboratory, to
14
determine whether such samples meet Franchisor's
then-current standards and specifications. In
addition to any other remedies it may have under this
Agreement, Franchisor may require Franchisee to bear
the cost of such testing if any such ingredient,
products, materials, supplier or paper goods have
been obtained from a supplier not approved by
Franchisor, or if the sample fails to conform to
Franchisor's specifications;
F. To purchase, install and construct, at Franchisee's
expense, all improvements furnishings, signs and
equipment specified in the approved standard plans
and specifications, and such other furnishings, signs
or equipment as Franchisor may reasonably direct from
time to time in the Manual or otherwise in writing;
and to refrain from installing or permitting to be
installed on or about the premises of the Franchised
Unit, without Franchisor's written consent, any
improvements, furnishings, signs or equipment not
first approved in writing as meeting Franchisor's
standards and specifications;
G. To comply with all applicable federal, state and
local laws, regulations and ordinances pertaining to
the operation of the Franchised Business; and
H. Franchisee shall grant Franchisor and its agents the
right to enter upon the premises of the Franchised
Unit at any time during ordinary business hours for
the purpose of conducting inspections; cooperate with
Franchisor's representatives in such inspections by
rendering such assistance as they may reasonably
request; and, upon notice from Franchisor or its
agents, and without limiting Franchisor's other
rights under this Agreement, take such steps as may
be necessary immediately to correct the deficiencies
detected during any such inspection, including,
without limitation, immediately desisting from the
further use of any equipment, promotional materials,
products, or supplies that do not conform with
Franchisor's then-current specifications, standards,
or requirements.
10.03. To maintain the quality and distinct characteristics of fine
specialty coffee flavors that customers associate with the SBC System and the
Proprietary Marks, Franchisee shall offer and sell only SEATTLE'S BEST COFFEE
brand coffee and coffee products at or from the Franchised Unit and must
purchase all of its coffee and coffee products from Franchisor or its designee
("SBC Coffee Products"), and prepare all coffee products at the Franchised Unit
using Franchisor's proprietary recipes and methods of operation. Franchisor will
sell SBC Coffee Products to Franchisee on standard purchase terms that may vary
from time to time, F.O.B. Franchisor's designated distribution center, with all
freight, duties and shipping charges at Franchisee's sole cost and expense.
Franchisor will give prior notice of any material changes in purchase terms.
10.04. Franchisee shall (i) purchase all other ingredients, products,
materials, supplies, and other items required in the operation of the Franchised
Unit which are or incorporate trade-secrets of Franchisor, as designated by
Franchisor ("Trade-Secret Products") only from Franchisor or suppliers
designated by Franchisor.
10.05. Franchisee shall purchase all other ingredients, products,
materials, supplies, paper goods, and other items required for the operation of
the Franchised Business, except SBC Coffee Products and Trade-Secret Products,
solely from suppliers who demonstrate, to the continuing reasonable satisfaction
of Franchisor, the ability to meet Franchisor's reasonable standards and
specifications for such items; who possess adequate quality controls and
capacity to supply Franchisee's needs promptly and reliably; and who have been
approved in writing by Franchisor and such approval has not thereafter been
revoked. If Franchisee desires to purchase any such items from an unapproved
supplier, Franchisee shall submit to Franchisor a written request for approval,
or shall request the supplier itself to seek approval. Franchisor shall have the
right to require, as a condition of its approval, that its representatives be
permitted to inspect the supplier's facilities, and that samples from the
supplier be delivered, at Franchisor's option, either to Franchisor or to an
independent laboratory designated by Franchisor for testing prior to granting
approval. A charge not to exceed Franchisor's reasonable cost of inspection and
the actual cost of testing shall be paid by the supplier or Franchisee.
Franchisor reserves the right, at its option, to reinspect the facilities and
15
products of any such approved supplier from time to time and to revoke its
approval upon failure of such supplier to continue to meet any of the foregoing
criteria.
10.06. Advertising Cooperative. Franchisor shall have the right, in
its sole discretion, to designate any geographic area (which may consist of any
portion of a country or jurisdiction and/or more than one country or
jurisdiction) for the purposes of establishing an advertising cooperative
("Cooperative").
A. If a Cooperative has been established in the
geographic area in which the Franchised Unit is
located, Franchisee shall become a member of such
Cooperative upon commencement of operation of the
Franchised Unit, if the Cooperative is in existence
at that time or no later than thirty (30) days after
the date on which the Cooperative commences
operation. In no event shall Franchisee be required
to be a member of more than one Cooperative with
respect to the Franchised Unit.
B. If a Cooperative has been established, Franchisee
shall contribute an amount, to be determined by the
Cooperative, which shall be not more than [ ] TWO
PERCENT (2%) [ ] ONE PERCENT (1%) of the Gross Sales
of the Franchised Unit, payable each week, for the
preceding week (or such other period as may be set
forth, in writing, by the Cooperative).
C. Each Cooperative shall be organized and governed in a
form and manner, and shall commence operations on a
date, approved in advance by Franchisor in writing.
(1) Each Cooperative shall be organized for the
exclusive purpose of administering regional
advertising programs and developing, subject
to Franchisor's approval, standardized
promotional materials for use by its members
in local advertising.
(2) No advertising or promotional plans or
materials may be used by a Cooperative or
furnished to its members without the prior
approval of the Franchisor, pursuant to the
procedures and terms set forth in Section
10.09. hereof.
(3) Franchisee shall pay its required
contribution to the Cooperative each week on
Gross Sales for the preceding week, together
with such other statements or reports as may
be required by Franchisor, or by the
Cooperative with the Franchisor's prior
written approval.
D. Franchisor, in its sole discretion, may grant an
exemption to any franchisee for any length of time
from the requirement of membership in a Cooperative,
and/or from the obligation to contribute thereto
(including a reduction, deferral or waiver of such
contribution), upon written request of such
franchisee stating reasons supporting such exemption.
Franchisor's decision concerning such request for
exemption shall be final. If an exemption is granted
to a franchisee, such franchisee shall be required to
expend on local advertising, during each Period, the
same amount as would otherwise be assessed by the
Cooperative, as set forth in Section 10.06.B hereof.
16
10.07. Franchisor disclaims all express or implied warranties
concerning any approved products or services, including, without limitation, any
warranties as to merchantability, fitness for a particular purpose,
availability, quality, pricing or profitability. Franchisee acknowledges that
Franchisor may, under appropriate circumstances, receive fees, commissions,
field-of-use license royalties, or other consideration from approved suppliers
based on sales to franchisees, and that Franchisor may charge non-approved
suppliers reasonable testing or inspection fees.
10.08. All local advertising by Franchisee shall be in such media,
and of such type and format as Franchisor may approve; shall be conducted in a
dignified manner; and shall conform to such standards and requirements as
Franchisor may specify. Franchisee shall not use any advertising or promotional
plans or materials unless and until Franchisee has received written approval
from Franchisor, pursuant to the procedures and terms set forth in Section 10.09
hereof.
10.09. All advertising and promotional plans proposed to be used by
Franchisee or the Cooperative, where applicable, except such plans and materials
that have been previously approved by Franchisor shall be submitted to
Franchisor for Franchisor's written approval (except with respect to prices to
be charged) prior to any use thereof. Franchisor shall use its best efforts to
complete its review of Franchisee's proposed advertising and promotional plans
within fifteen (15) days after Franchisor receives such plans. If written
approval is not received by Franchisee or the Cooperative from Franchisor within
fifteen (15) days after receipt by Franchisor of such plans, Franchisor shall be
deemed to have disapproved such plans.
10.10. Franchisee shall, at Franchisor's request, require all of its
supervisory employees, as a condition of their employment, to execute an
agreement prohibiting them, during the term of their employment or thereafter,
from communicating, divulging, or using for the benefit of any person, persons,
partnership, association, corporation or other entity any confidential
information, trade secrets, knowledge, or know-how concerning the SBC System or
methods of operation of the Franchised Unit which may be acquired as a result of
their employment with Franchisee or other franchisees. A duplicate original of
each such agreement shall be provided by Franchisee to Franchisor immediately
upon execution.
10.11. If Franchisee operates more than five (5) Franchised Units,
Franchisee shall have a supervisor, which may be Franchisee, to supervise and
coordinate the operation of the Franchised Units (hereinafter, a "Supervisor").
In addition to the foregoing, Franchisee shall employ an additional Supervisor
upon the opening of Franchisee's sixth (6th) Franchised Unit and upon the
opening of each successive fifth (5th) Franchised Unit thereafter. Each
Supervisor shall attend and successfully complete the CMT program set forth in
Section 8.02 hereof prior to assuming any supervisory responsibilities and shall
meet such other standards as Franchisor may reasonably impose. No Supervisor may
have supervisory responsibility for more than five (5) Franchised Units.
10.12. If at any time the Franchised Unit is proposed to be operated
by an entity or individual other than the Franchisee, Franchisor reserves the
right to review and approve the operating entity or individual and to require
and approve an operating agreement prior to such party's assumption of
operations. Franchisor may, in its sole discretion, reject either the operating
entity, the individual operator or the operating agreement. If approved by
Franchisor, the operating entity and/or individual shall agree in writing to
comply with all of Franchisee's obligations under the Franchise Agreement as
though such party were the franchisee designated therein, on such form as may be
designated by Franchisor. The operation of the Franchised Unit by any party
other than Franchisee, without Franchisor's prior written consent, shall be
deemed a material default of this Agreement for which Franchisee may terminate
this Agreement pursuant to the provisions of Section 15.02 hereof.
10.13. Franchisee shall become a member of any purchasing cooperative
established by Franchisor for the SEATTLE'S BEST COFFEE System and shall remain
a member in good standing thereof throughout the term of this Agreement and
shall pay all reasonable membership fees assessed by such purchasing
association.
17
10.14. Franchisee shall, within thirty (30) days from receipt of
written notice from Franchisor, at its sole cost and expense, purchase and
install at the Franchised Unit and/or at Franchisee's principal business office
such computer hardware and software equipment, required dedicated telephone and
power lines, modems, printers and other computer related accessory and
peripheral equipment as Franchisor specifies in the Manual or otherwise in
writing (the "Required Computer Equipment"). The Required Computer Equipment
shall include telecommunications devices and may include a single software
program or set of programs, all of which must be obtained in accordance with the
Franchisor's standards and specifications. The Required Computer Equipment shall
permit 24 hour per day electronic communications between Franchisor and
Franchisee including access to the internet and Franchisor's current intranet,
or any successor thereto. Franchisee shall only be required to purchase and
install the Required Computer Equipment at one, central location, which shall
satisfy the conditions of this Section 10.02 (or its equivalent) for all
Franchised Units operated by Franchisee, provided information for all Franchise
Units is maintained at such location.
10.15 Franchisee shall comply with all other requirements set forth
in this Agreement.
XI. INSURANCE
11.01. Insurance Program. Franchisee shall procure, prior to
commencement of construction of the Franchised Unit, and shall maintain in full
force and effect during the Term of this Agreement at Franchisee's expense, an
insurance policy or policies protecting Franchisee and Franchisor, and their
officers, directors, agents and employees, against any loss, liability, or
expense whatsoever from personal injury, death or property damage or casualty,
including, fire, lightning, theft, vandalism, malicious mischief, and other
perils normally included in an extended coverage endorsement arising from,
occurring upon or in connection with the construction, operation or occupancy of
the Franchised Unit, as Franchisor may reasonably require for its own and
Franchisee's protection.
11.02. Insurance Requirements. Such policy or policies shall be
written by an insurance company satisfactory to Franchisor, and shall include,
at a minimum the following coverage:
A. Workers' Compensation Insurance, with statutory
limits as required by the laws and regulations
applicable to the employees of Franchisee who are
engaged in the performance of their duties relating
to the Franchised Unit, including any pre-opening
training programs, as well as such other insurance as
may be required by statute or regulation of the state
in which the Franchised Unit is located.
B. Employer's Liability Insurance, for employee bodily
injuries and deaths, with a limit of $500,000 each
accident.
C. Comprehensive or Commercial General Liability
Insurance, covering claims for bodily injury, death
and property damage, including Premises and
Operations, Independent Contractors, Products and
Completed Operations, Personal Injury, Contractual,
and Broadform Property Damage liability coverages,
with limits as follows:
Occurrence/Aggregate Limit of $1,000,000 for bodily
injury, death and property damage each occurrence and
$2,000,000 for general aggregate or Split liability
limits of:
$1,000,000 for bodily injury per person
$1,000,000 for bodily injury per occurrence
$ 500,000 for property damage
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D. Comprehensive Automobile Liability Insurance, if
applicable, covering owned, non-owned and hired
vehicles, with limits as follows:
Combined Single Limit of $500,000 for bodily injury,
death and property damage per occurrence or Split
liability limits of:
$500,000 for bodily injury per person
$500,000 for bodily injury per occurrence
$250,000 for property damage
E. All Risk Property Insurance, on a replacement cost
basis, with limits as appropriate, covering the real
property of Franchisee and any real property which
the Franchisee may be obligated to insure by
contract. Such real property may including building,
machinery, equipment, furniture, fixtures and
inventory.
11.03. All such policies of insurance shall provide that the same
shall not be canceled, modified or changed without first giving thirty (30) days
prior written notice thereof to Franchisor. No such cancellation, modification
or change shall affect Franchisee's obligation to maintain the insurance
coverages required by this Agreement. Except for Workers' Compensation
Insurance, Franchisor shall be named as an Additional Insured on all such
required policies. All liability insurance policies shall be written on an
"occurrence" policy form. Franchisee shall be responsible for payment of any and
all deductibles from insured claims under its policies of insurance. Franchisee
shall not satisfy the requirements of this Article XI unless and until
certificates of such insurance, including renewals thereof, have been delivered
to and approved by Franchisor. Franchisee shall not self-insure any of the
insurance coverages required by this Agreement, or non-subscribe to any State's
applicable workmen's compensation laws without the prior written consent of
Franchisor. Franchisor shall have the right, at any time during the term of this
Agreement to increase the minimum limits of insurance coverage or otherwise
modify the insurance requirements of this Agreement upon written notice in the
Manual or as otherwise prescribed by Franchisor in writing. If Franchisee shall
fail to comply with any of the insurance requirements herein, upon written
notice to Franchisee by Franchisor, Franchisor may, without any obligation to do
so, procure such insurance and Franchisee shall pay Franchisor, upon demand, the
cost thereof plus interest at the maximum rate permitted by law, and a
reasonable administrative fee designated by Franchisor.
11.04. Insurance Obtained by Franchisee Shall Be Primary to
Franchisor's Own Insurance. Franchisee agrees that all insurance policies
obtained by Franchisee pursuant to Sections 11.01 and 11.02 shall be primary
coverage, the applicable limits of which shall be exhausted before any benefits
(defense or indemnity) may be obtained under any other insurance (including
self-insurance) providing coverage to Franchisor. In the event payments are
required to be made under Franchisor's own insurance policies or self-insurance
(whether for defense or indemnity) before the applicable coverage limits for the
insurance policies obtained by Franchisee are exhausted, then Franchisee hereby
agrees to reimburse, hold harmless and indemnify the Franchisor and its insurers
for such payments. Franchisee shall notify its insurers of this Agreement and
shall use best efforts to obtain an endorsement on each policy it obtains
pursuant to Sections 11.01 and 11.02 stating as follows:
The applicable limits of this policy shall be
applied and exhausted before any benefits may be
obtained (whether for defense or indemnity) under
any other insurance (including self-insurance) that
may provide coverage to Franchisor. All insurance
coverage obtained by Franchisor shall be considered
excess insurance with respect to this policy, the
benefits of which excess insurance shall not be
available until the applicable limits of this policy
are exhausted.
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11.05 No Limitation on Coverage. Franchisee's obligation to obtain
and maintain the foregoing policy or policies of insurance in the amounts
specified shall not be limited in any way by reason of any insurance which may
be maintained by Franchisor, nor shall Franchisee's performance of that
obligation relieve it of liability under the indemnity provisions set forth in
Section XVIII of this Agreement.
11.06. Issuance of Insurance. Franchisee must obtain the insurance
required by this Agreement no later than fifteen (15) days before the date on
which any construction is commenced. The Franchised Unit shall not be opened for
business prior to Franchisor's receipt of satisfactory evidence that all
insurance required by this Agreement is in effect. Upon obtaining such
insurance, and on each policy renewal date thereafter, Franchisee shall promptly
submit evidence of satisfactory insurance and proof of payment therefor to
Franchisor, together with, upon request, copies of all policies and policy
amendments. The evidence of insurance shall include a statement by the insurer
that the policy or policies will not be canceled or materially altered without
at least thirty (30) days prior written notice to Franchisor.
XII. CONFIDENTIAL INFORMATION
12.01. Franchisee shall not, during the term of this Agreement or
thereafter, communicate, divulge, or use for the benefit of any other person,
persons, partnership, association, corporation or other entity, any confidential
information, knowledge or know-how concerning the construction and methods of
operation of the Franchised Business which may be communicated to Franchisee, or
of which Franchisee may be apprised, by virtue of Franchisee's operation under
the terms of this Agreement. Franchisee shall divulge such confidential
information only to such employees of Franchisee as must have access to it in
order to exercise the franchise rights granted hereunder and to establish and
operate the Franchised Unit pursuant hereto and as Franchisee may be required by
law, provided Franchisee shall give Franchisor prior written notice of any such
required disclosure immediately upon receipt of notice by Franchisee in order
for Franchisor to have the opportunity to seek a protective order or take such
other actions as it deems appropriate under the circumstances.
12.02. Any and all information, knowledge, and know-how, including,
without limitation, drawings, materials, equipment, recipes, prepared mixtures
or blends of spices or other food products, and other data, which Franchisor
designates as confidential, and any information, knowledge, or know-how which
may be derived by analysis thereof, shall be deemed confidential for purposes of
this Agreement, except information which Franchisee can demonstrate came to
Franchisee's attention prior to disclosure thereof by Franchisor; or which, at
the time of disclosure thereof by Franchisor to Franchisee, had become a part of
the public domain, through publication or communication by others; or which,
after disclosure to Franchisee by Franchisor, becomes a part of the public
domain, through publication or communication by others.
XIII. COVENANTS
13.01. Franchisee covenants that, during the term of the Agreement,
except as otherwise approved in writing by Franchisor, Franchisee or,
alternatively, one designated management employee if that employee assumes
primary responsibility for the operation of the Franchised Unit, shall devote
full time, energy and best efforts to the management and operation of the
Franchised Business.
13.02. Franchisee acknowledges that, pursuant to this Agreement,
Franchisee will receive valuable specialized training and confidential
information, including without limitation, information regarding the
operational, sales, promotional, and marketing methods, procedures and
techniques of Franchisor and the System. Franchisee covenants that, during the
term of this Agreement, Franchisee
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(who, unless otherwise specified, shall include, for purposes of this Section
XIII, collectively and individually, (i) all officers, directors and holders of
a beneficial interest of five percent (5%) or more of the securities with voting
rights of Franchisee and of any corporation, directly or indirectly controlling
Franchisee, if Franchisee is a corporation,; (ii) the general partner and any
limited partners, including any corporation, and the officers, directors and
holders of a beneficial interest of five percent (5%) or more of securities with
voting rights of a corporation which controls, directly or indirectly, any
general or limited partner, if Franchisee is a partnership; and (iii) any
members and managers and holders of a beneficial interest of five percent (5%)
or more of securities with voting rights of any corporation which controls
directly or indirectly, any limited liability company) shall not, either
directly or indirectly, for itself or on behalf of, or in conjunction with, any
person, persons, partnership, limited liability company, association or
corporation or other entity:
A. Divert or attempt to divert any business or customer
of the business franchised hereunder to any
competitor by direct or indirect inducements or
otherwise, or to do or perform, directly or
indirectly, any other act injurious or prejudicial to
the goodwill associated with Franchisor's Proprietary
Marks and the SBC System;
B. Employ or seek to employ any person who is, at that
time, employed by Franchisor or by any other
SEATTLE'S BEST COFFEE franchisee, or otherwise,
directly or indirectly, induce such person to leave
his or her employment therewith; or
C. Own, maintain, operate, engage in, or have any
interest in any business that prepares, offers,
sells, roasts and/or distributes specialty coffee
products and/or any product or service substantially
similar to those sold within the SEATTLE'S BEST
COFFEE System (a "Specialty Coffee Shop"); provided,
however, that the term "Specialty Coffee Shop" shall
not apply to any business operated by Franchisee
under a franchise agreement with Franchisor or an
affiliate of Franchisor. During the term of this
Agreement, there is no geographical limitation on
this restriction.
13.03. Franchisee covenants that Franchisee shall not, regardless of
the cause for termination, either directly or indirectly, for itself, or
through, on behalf of, or in conjunction with any person, persons, partnership,
limited liability company, association, corporation or other entity:
A. For a period of two (2) years following the
termination or expiration of this Agreement, own,
maintain, engage in, or have any interest in any
Specialty Coffee Shop which is located within a
radius of ten (10) miles of the location specified in
Section I hereof, or the location of any other SBC
Retail Unit under the SBC System, whether owned by
Franchisor or any other SBC franchisee, which is in
existence as of the date of expiration or termination
of this Agreement; or
B. For a period of one (1) year following the
termination or expiration of this Agreement, employ
or seek to employ any person who is, at the time,
employed by Franchisor or by any other SEATTLE'S BEST
COFFEE franchisee, or otherwise, directly or
indirectly, induce such person to leave his or her
employment therewith.
13.04. At Franchisor's request, Franchisee shall require and obtain
execution of covenants similar to those set forth in this Section XIII
(including covenants applicable upon the termination of a
21
person's relationship with Franchisee) in a form satisfactory to Franchisor,
including, without limitation, specific identification of Franchisor as a third
party beneficiary of such covenants with the independent right to enforce them,
from any or all of the following persons:
A. All managers and assistant managers of the Franchised
Unit, and any other personnel employed by Franchisee
who have received or will receive training from
Franchisor;
B. All officers, directors, and holders of a direct or
indirect beneficial ownership interest of five
percent (5%) or more in Franchisee.
The failure of Franchisee to obtain execution of a covenant required by
this Section 13.04 shall constitute a material breach of this Agreement. A
duplicate original of each such covenant shall be provided by Franchisee to
Franchisor immediately upon execution.
13.05. The parties agree that each of the foregoing covenants shall
be construed as independent of any other covenant or provision of this
Agreement. If all or any portion of a covenant in this Section XIII, is held
unreasonable or unenforceable by a court or agency having jurisdiction in a
final decision, Franchisee expressly agrees to be bound by any lesser covenant
subsumed within the terms of such covenant that imposes the maximum duty
permitted by law, as if the resulting covenant was separately stated in and made
a part of this Section XIII.
A. Right to Reduce Covenants. Franchisee understands and
acknowledges that Franchisor shall have the right, in
its sole discretion, to reduce the scope of any
covenant set forth in Sections 13.02. and 13.03. of
this Agreement, or any portion thereof, without
Franchisee's consent, effective immediately upon
receipt by Franchisee of written notice thereof, and
Franchisee agrees that it shall comply with any
covenant as so modified, which shall be fully
enforceable notwithstanding the provisions of Section
XXII hereof.
B. Injunctive Relief. The parties acknowledge that it
will be difficult to ascertain with any degree of
certainty the amount of damages resulting from a
breach by Franchisee of any of the covenants
contained in this Section XIII. It is further agreed
and acknowledged that any violation by Franchisee of
any of said covenants will cause irreparable harm to
Franchisor. Accordingly, Franchisee agrees that upon
proof of the existence of a violation of any of said
covenants, Franchisor will be entitled to injunctive
relief against Franchisee in any court of competent
jurisdiction having authority to grant such relief,
together with all costs and reasonable attorney's
fees incurred by Franchisor in bringing such action.
XIV. TRANSFERABILITY OF INTEREST
14.01. Transfer by Franchisor. This Agreement shall inure to the
benefit of the successors and assigns of Franchisor. Franchisor shall have the
right, without Franchisee's consent, to transfer or assign its interest in this
Agreement to any person, persons, partnership, association, corporation, or
other entity and Franchisee agrees promptly to execute any documents in
connection therewith. If Franchisor's assignee assumes all the obligations of
Franchisor hereunder and sends Franchisee written notice of the assignment so
attesting, Franchisee agrees promptly to execute a general release of
Franchisor, and any affiliates of Franchisor, from claims or liabilities of
Franchisor under this Agreement.
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14.02. Transfer by Franchisee. Franchisee understands and
acknowledges that the rights and duties set forth in this Agreement are personal
to Franchisee, and that Franchisor has granted this Agreement in reliance on
Franchisee's business skill and financial capacity. Accordingly, neither (i)
Franchisee, nor (ii) any immediate or remote successor to Franchisee, nor (iii)
any individual, partnership, corporation or other legal entity which directly or
indirectly owns any interest in the Franchisee or in this Franchise Agreement,
shall sell, assign, transfer, convey, donate, pledge, mortgage, or otherwise
encumber any direct or indirect interest in this Agreement or in any legal
entity which owns the Franchised Business without the prior written consent of
Franchisor. Acceptance by Franchisor of any royalty fee, advertising fee or any
other amount accruing hereunder from any third party, including, but not limited
to any proposed transferee, shall not constitute Franchisor's approval of such
party as a transferee or the transfer of this Franchise Agreement to such party.
Any purported assignment or transfer, by operation of law or otherwise, not
having the written consent of Franchisor, shall be null and void, and shall
constitute a material breach of this Agreement, for which Franchisor may then
terminate without opportunity to cure pursuant to Section 15.02.E. of this
Agreement.
14.03. Conditions for Consent. Franchisor shall not unreasonably
withhold its consent to any transfer referred to in Section 14.02. hereof, when
requested; provided, however, that prior to the time of transfer;
A. All of Franchisee's accrued monetary obligations to
Franchisor and its subsidiaries and affiliates shall
have been satisfied;
B. Franchisee shall have agreed to remain obligated
under the covenants contained in Section XIII hereof
as if this Agreement had been terminated on the date
of the transfer;
C. The transferee must be of good moral character and
reputation, in the reasonable judgment of the
Franchisor;
D. The Franchisor shall have determined, to its
satisfaction, that the transferee's qualifications
meet the Franchisor's then current criteria for new
franchisees;
E. Franchisee and transferee shall execute a written
assignment, in a form satisfactory to Franchisor,
pursuant to which the transferee shall assume all of
the obligations of Franchisee under this Agreement
and Franchisee shall unconditionally release any and
all claims Franchisee might have against Franchisor
as of the date of the assignment;
F. The transferee shall execute the then-current form of
SEATTLE'S BEST COFFEE Franchise Agreement and such
other then-current ancillary agreements as Franchisor
may reasonably require. The then-current form of
Franchise Agreement may have significantly different
provisions including, without limitation, a higher
royalty fee and advertising contribution than that
contained in this Agreement. The then-current form of
Franchise Agreement will expire on the expiration
date of this Agreement and will contain the same
renewal rights, if any, as are available to
Franchisee herein;
G. The transferee shall agree at its sole cost and
expense, to (i) complete a Franchised Unit Renovation
(as defined in Section 10.01.C herein), within the
time frame required by Franchisor, unless a
Franchised Unit Renovation was
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completed within three (3) years prior to the date of
the transfer and (ii) perform such other scope of
work as may be determined by Franchisor.
H. The transferee and such other individuals as may be
designated by Franchisor in the Manual or otherwise
in writing, must have successfully completed the SBC
training course then in effect for new SBC
franchisees. If the Franchised Unit is the
transferee's first SBC Retail Unit, the transferee
shall pay to Franchisor the then-standard Training
Fee;
I. If the transferee is a partnership or limited
liability company, the partnership agreement or
limited liability company organizational documents
shall provide that further assignments or transfers
of any interest in the partnership or limited
liability company, respectively, are subject to all
restrictions imposed upon assignments and transfers
in this Agreement;
J. Franchisee shall, at Franchisor's option and request,
execute a written guarantee of the transferee's
obligations under the Agreement, which guarantee
shall not exceed a period of three (3) years from the
date of transfer; and all principals of the
transferee shall also guarantee Franchisee's
obligations hereunder, and
K. The Franchisee or transferee shall pay to Franchisor
a transfer processing fee of Two Thousand Five
Hundred Dollars ($2,500), to cover Franchisor's
administrative expenses in connection with the
transfer and a training fee in the amount of Five
Thousand Dollars ($5,000); however no additional
franchise fee shall be charged by Franchisor for a
transfer. If the transferee is (i) a corporation or
limited liability company formed by Franchisee for
the convenience of ownership and in which the
Franchisee is the sole shareholder or limited
liability company member, or (ii) an existing
Franchisee under this Agreement, no transfer
processing fee and/or training fee shall be required.
14.04. Grant of Security Interest. Franchisee shall grant no security
interest in this Agreement, the Franchised Business, or in any of its assets
unless the secured party agrees that, in the event of any default by Franchisee
under any documents related to the security interest (i) Franchisor shall be
provided with notice of default and given a reasonable time within which to cure
said default, (ii) Franchisor shall have the right and option to be substituted
as obligor to the secured party and to cure any default of Franchisee or to
purchase the rights of the secured party upon payment of all sums then due to
such secured party, except such amounts which may have become due as a result of
any acceleration of the payment dates based upon the Franchisee's default, and
(iii) the secured party shall agree to such other requirements as Franchisor, in
its sole discretion, deems reasonable and necessary to protect the integrity of
the Proprietary Marks and the SEATTLE'S BEST COFFEE System.
14.05. Transfer on Death or Mental Incapacity. Upon the death or
mental incapacity of any person with an interest in this Agreement, the
Franchised Business or Franchisee, the executor, administrator, or personal
representative of such person shall transfer his interest to a third party
approved by Franchisor within twelve (12) months after such death or mental
incapacity. Such transfer, including, without limitation, transfer by devise or
inheritance, shall be subject to the same conditions as any inter vivos
transfer. However, in the case of transfer by devise or inheritance, if the
heirs or beneficiaries of any such person are unable to meet the conditions in
this Section XIV, the personal representative of the deceased Franchisee shall
have a reasonable time, but in no event more than eighteen (18) months from
Franchisee's death, to dispose of the deceased's interest in this Agreement and
the business conducted pursuant hereto, which disposition shall be subject to
all the terms and conditions for assignments and
24
transfers contained in this Agreement. If the interest is not disposed of within
twelve (12) or eighteen (18) months, whichever is applicable, Franchisor may
terminate this Agreement.
14.06. Right of First Refusal. Any party holding an interest in this
Agreement, the Franchised Business or in Franchisee, and who desires to accept a
bona fide offer from a third party to purchase such interest, shall notify
Franchisor in writing of such offer within ten (10) days of receipt of such
offer, and shall provide such information and documentation relating to the
offer as Franchisor may require. Franchisor shall have the right and option,
exercisable within thirty (30) days after receipt of such written notification,
to send written notice to the seller that Franchisor intends to purchase the
seller's interest on the same terms and conditions offered by the third party.
In the event that Franchisor elects to purchase the seller's interest, closing
on such purchase must occur within sixty (60) days from the date of notice to
the seller of the election to purchase by Franchisor. Any material change in the
terms of any offer prior to closing shall constitute a new offer subject to the
same rights of first refusal by Franchisor as in the case of an initial offer.
Failure of Franchisor to exercise the option afforded by this Section 14.06.
shall not constitute a waiver of any other provisions of this Agreement,
including all of the requirements of this Section XIV, with respect to a
proposed transfer.
In the event the consideration, terms, and/or conditions offered by a
third party are such that Franchisor may not reasonably be required to furnish
the same consideration, terms, and/or conditions, then Franchisor may purchase
the interest in this Agreement, Franchisee, or the Franchised Business proposed
to be sold for the reasonable equivalent in cash. If the parties cannot agree
within a reasonable time as to the reasonable equivalent in cash of the
consideration, terms, and/or conditions offered by the third party, an
independent appraiser shall be designated by Franchisor, and his determination
shall be binding upon the parties.
14.07. Offerings by Franchisee. Securities or partnership interests
in Franchisee may be offered to the public, by private offering or otherwise,
only with the prior written consent of Franchisor, which consent shall not be
unreasonably withheld. All materials required for such offering by applicable
federal or state law shall be submitted to Franchisor for review prior to their
being filed with any governmental agency; and any materials to be used in any
exempt offering shall be submitted to Franchisor for review prior to their use.
No offering of such securities shall imply (by use of the Proprietary Marks or
otherwise) that Franchisor is participating in the underwriting, issuance, or
offering of securities by Franchisee; and Franchisor's review of any offering
shall be limited solely to the subject of the relationship between Franchisee
and Franchisor. Franchisee and the other participants in the offering shall
fully indemnify Franchisor in connection with the offering. For each proposed
offering, Franchisee shall pay to Franchisor a non-refundable fee of Five
Thousand Dollars ($5,000), or such greater amount as is necessary to reimburse
Franchisor for its reasonable costs and expenses associated with reviewing the
proposed offering, including, without limitation, legal and accounting fees.
Franchisee shall give Franchisor written notice at least sixty (60) days prior
to the date of commencement any offering or other transaction covered by this
Section 14.07.
XV. TERMINATION
15.01. Franchisee shall be deemed to be in default under this
Agreement, and all rights granted herein shall automatically terminate without
notice to Franchisee, if Franchisee shall become insolvent or make a general
assignment for the benefit of creditors; if a petition in bankruptcy is filed by
Franchisee or such a petition is filed against Franchisee and not opposed by
Franchisee; or if Franchisee is adjudicated bankrupt or insolvent; or if a
receiver or other custodian (permanent or temporary) of Franchisee's assets or
property, or any part thereof, is appointed by any court of competent
jurisdiction; or if proceedings for a composition with creditors under the
applicable law of any jurisdiction should be instituted by Franchisee or against
Franchisee and not opposed by Franchisee; or if a final judgment remains
unsatisfied or of record
25
for thirty (30) days or longer (unless a supersedeas bond is filed or other
steps are taken to stay effectively the enforcement of such judgment in the
relevant jurisdiction); or if Franchisee is dissolved; or if execution is levied
against Franchisee's property or business; or if suit to foreclose any lien or
mortgage against the premises or equipment of the Franchised Unit is instituted
against the Franchisee and not dismissed within thirty (30) days; or if the real
or personal property of any other SBC Retail Unit operated by Franchisee shall
be sold after levy thereon by any sheriff, marshal, or constable.
15.02. Franchisee shall be deemed to be in default and Franchisor
may, at its option, terminate this Agreement and all rights granted hereunder
without affording Franchisee any opportunity to cure the default (effective
immediately upon receipt of notice by Franchisee as described in Section XX
hereof) upon the occurrence of any of the following events:
A. If Franchisee fails to complete construction of the
Franchised Unit and opens for business within one
hundred eighty (180) days of execution of this
Agreement. Franchisor may, in its sole discretion,
extend this period to address unforeseen construction
delays, not within the control of Franchisee.
B. If Franchisee at any time ceases to operate the
Franchised Unit or otherwise abandons the Franchised
Unit, or loses the right to possession of the
premises of the Franchised Unit, or otherwise
forfeits the right to do or transact business in the
jurisdiction where the Franchised Unit is located;
provided, however, that if, through no fault of
Franchisee, the premises are damaged or destroyed by
an event not within the control of Franchisee such
that repairs or reconstruction cannot be completed
within one hundred eighty (180) days thereafter, then
Franchisee shall have thirty (30) days after such
event in which to apply for Franchisor's approval to
relocate and/or reconstruct the premises, which
approval shall not be unreasonably withheld, but may
be conditioned upon the payment of an agreed minimum
royalty to Franchisor during the period in which the
Franchised Unit is not in operation;
C. If Franchisee is convicted of or pleads guilty to a
felony, a crime involving moral turpitude, or any
other crime or offense that Franchisor believes is
reasonably likely to have an adverse effect on the
System, the Proprietary Marks, the goodwill
associated therewith, or Franchisor's interest
therein;
D. If a threat or danger to public health or safety
results from the construction, maintenance, or
operation of the Franchised Unit;
E. If Franchisee, or any partner, shareholder or member
of Franchisee purports to transfer any rights or
obligations under this Agreement or any interest in
Franchisee to any third party without Franchisor's
prior written consent, contrary to the terms of
Section XIV hereof;
F. If Franchisee fails to comply with the in-term
covenants in Section 13.02. hereof or fails to obtain
execution of the covenants required under Sections
10.10. or 13.04. hereof;
G. If, contrary to the terms of Section VII hereof,
Franchisee discloses or divulges the contents of the
Manual or any other confidential information provided
to Franchisee by Franchisor;
26
H. If an approved transfer is not effected as required
by Section 14.05 hereof, following the death or
mental incapacity of a person described therein;
I. If Franchisee knowingly maintains false books or
records, or submits any false reports to Franchisor;
J. If Franchisee or any individual, group, association,
limited or general partnership, corporation or other
business entity which directly or indirectly
controls, is controlled by, or is under common
control with Franchisee; or which directly or
indirectly owns, controls, or holds power to vote ten
percent (10%) or more of the outstanding voting
securities of Franchisee; or which has in common with
Franchisee one or more partners, officers, directors,
trustees, branch managers, or other persons occupying
similar status or performing similar functions
("Affiliate") commits any act of default under any
other Franchise Agreement, Development Agreement
(except for failure to meet the development schedule
thereunder), asset purchase agreement, promissory
note or any other agreement entered into by
Franchisee or an Affiliate of Franchisee, and
Franchisor, or any parent, subsidiary, affiliate,
predecessor or successor to Franchisor;
K. If Franchisee, after or during a default pursuant to
Section 15.03. hereof, commits the same default
again, whether or not such default is cured after
notice; or
L. If Franchisee defaults more than once in any twelve
(12) month period under Section 15.03. hereof for
failure to substantially comply with any of the
requirements imposed by this Agreement, whether or
not cured after notice.
M. If Franchisee refuses to permit Franchisor or its
agents to enter upon the premises of the Franchised
Unit to conduct any periodic inspection as set forth
in Sections 5.09. and 10.02.H hereof.
N. If Franchisee uses any of Franchisor's Proprietary
Marks in any unauthorized manner or is otherwise in
default of the provisions of Section V hereof.
O. Franchisor discovers that Franchisee made a material
misrepresentation or omitted a material fact in the
information that was furnished to Franchisor in
connection with its decision to enter into this
Agreement.
P. Franchisee knowingly falsifies any report required to
be furnished Franchisor or makes any material
misrepresentation in its dealings with Franchisor or
fails to disclose any material facts to Franchisor.
Q. There is a material breach of any representation or
warranty set forth in this Agreement.
R. If Franchisee, at any time, offers for sale from the
franchised Unit any coffee products and/or beverages
other than SBC Coffee Products.
27
15.03. Except as provided in Sections 15.01 and 15.02 of this
Agreement, upon any default by Franchisee which is susceptible of being cured,
Franchisor may terminate this Agreement only by giving written Notice of
Termination stating the nature of such default to Franchisee at least ten (10)
days prior to the effective date of termination if the default is for failure to
pay royalties, NCP Fund Contributions (including Cooperative Contributions, if
any are due, and/or any other financial obligations owed to Franchisor by
Franchisee), and thirty (30) days, prior to the effective date of termination
for any other default, provided, however, that Franchisee may avoid termination
by curing such default to Franchisor's satisfaction within the ten (10) day or
thirty (30) day period, as applicable. If any such default is not cured within
the specified time, this Agreement shall terminate without further notice to
Franchisee effective immediately upon the expiration of the ten (10) day or
thirty (30) day period, as applicable, or such longer period as applicable law
may require. Notwithstanding anything to the contrary set forth in this
Agreement, Franchisee hereby acknowledges that any agreement between Franchisee
and Franchisor relating to past due amounts accruing hereunder, (an "Arrearage
Agreement"), including, but not limited to any promissory note, payment plan or
amendment to this agreement shall be deemed to be a material part of this
agreement and shall be incorporated herein by reference. A default under any
Arrearage Agreement shall be deemed a material default of this Franchise
Agreement, regardless of the reason Franchisee fails to pay the amount which is
the subject of such Arrearage Agreement.
15.04. Franchisee shall indemnify and hold Franchisor harmless for
all costs, expenses and any losses incurred by Franchisor in enforcing the
provisions hereof, or in upholding the propriety of any action or determination
by Franchisor pursuant to this Agreement, or in defending any claims made by
Franchisee against Franchisor, or arising in any manner from Franchisee's breach
of or failure to perform any covenant or obligation hereunder, including,
without limitation, reasonable litigation expenses and attorney's fees incurred
by Franchisor in connection with any threatened or pending litigation relating
to any part of this Agreement, unless Franchisee shall be found, after due legal
proceedings, to have complied with all of the terms, provisions, conditions and
covenants hereof.
15.05 In addition to the other provisions of this Section XVI, if
Franchisor reasonably determines that Franchisee becomes or will become unable
to meet its obligations to Franchisor under this Agreement, Franchisor may
provide Franchisee written notice to that effect and demand that Franchisee
provide those assurances reasonably designated by Franchisor, which may include
security or letters of credit for the payment of Franchisee's obligations to
Franchisor. If Franchisee fails to provide the assurances demanded by Franchisor
within 30 days after its receipt of written notice from Franchisor, this
Agreement shall terminate without further notice to Franchisee effective
immediately upon expiration of that time, unless Franchisor notifies Franchisee
otherwise in writing.
XVI. EFFECT OF TERMINATION OR EXPIRATION
16.01. Upon termination or expiration of this Agreement, all rights
granted herein shall forthwith terminate, and:
A. Franchisee shall immediately cease to operate the
Franchised Unit as an SBC Retail Unit, and shall not
thereafter, directly or indirectly, represent to the
public that the business is an SBC Retail Unit;
B. Franchisee shall immediately and permanently cease to
use, by advertising or in any manner whatsoever, any
menus, recipes, confidential food for formulae,
equipment, methods, procedures, and the techniques
associated with the System, Franchisor's Proprietary
Marks, and Franchisor's other trade names, trademarks
and service marks associated with the SBC System. In
particular, and without
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limitation, Franchisee shall cease to use all signs,
furniture, fixtures, equipment, advertising
materials, stationery, forms, packaging, containers
and any other articles which display the Proprietary
Marks;
C. Franchisee agrees, in the event Franchisee continues
to operate or subsequently begins to operate a
restaurant, coffee shop or other businesses, not to
use any reproduction, counterfeit, copy, or colorable
imitation of the Proprietary Marks in conjunction
with such other business which is likely to cause
confusion or mistake or to deceive, and further
agrees not to utilize any trade dress, designation of
origin, description, or representation which falsely
suggests or represents an association or connection
with Franchisor;
D. Franchisee agrees, upon termination or expiration of
this Agreement or upon cessation of the Franchised
Business at the location specified in Section I
hereof for any reason, whether or not Franchisee
continues to operate any business at such location,
and whether or not Franchisee owns or leases the
location, to make such modifications or alterations
to the Franchised Unit premises immediately upon
termination or expiration of this Agreement or
cessation of operation of the Franchised Business as
may be necessary to prevent the operation of any
businesses thereon by Franchisee or others in
derogation of this Section XVI, and shall make such
specified additional changes thereto as Franchisor
may reasonably request for that purpose. The
modifications and alterations required by this
Section XVI shall include, but are not limited to,
removal of all trade dress, proprietary marks and
other indicia of the SBC System;
E. Franchisee shall immediately pay all sums owing to
Franchisor and its subsidiaries and affiliates. In
the event of termination for any default by
Franchisee, such sums shall include all damages,
costs and expenses, including reasonable attorneys'
fees, incurred by Franchisor as a result of the
default; and
F. Franchisee shall immediately turn over to Franchisor
the Manual, all other manuals, records, files,
instructions, correspondence and any and all other
materials relating to the operation of the Franchised
Business in Franchisee's possession and all copies
thereof (all of which are acknowledged to be
Franchisor's property) and shall retain no copy or
record of any of the foregoing, with the exception of
Franchisee's copy of this Agreement, any
correspondence between the parties, and any other
documents which Franchisee reasonably needs for
compliance with any provision of law.
16.02. Franchisor shall have the right (but not the duty) to be
exercised by notice of intent to do so within thirty (30) days after termination
or expiration of this Agreement, to purchase any and all improvements,
equipment, advertising and promotional materials, ingredients, products,
materials, supplies, paper goods and any items bearing Franchisor's Proprietary
Marks at current fair market value. If the parties cannot agree on a fair market
value within a reasonable time, an independent appraiser shall be designated by
Franchisor, and his determination of fair market value shall be binding. If
Franchisor elects to exercise any option to purchase herein provided, it shall
have the right to set-off all amounts due from Franchisee under this Agreement
and the cost of the appraisal, if any, against any payment therefor.
16.03. In the event the premises of the Franchised Unit are leased to
Franchisee, Franchisee shall, upon termination or expiration of this Agreement
and upon request by Franchisor, immediately
29
assign, set over and transfer unto Franchisor, at Franchisor's sole option and
discretion, said lease and the premises, including improvements. Any such lease
entered into by Franchisee shall contain a clause specifying the landlord's
consent to assign such lease to Franchisor or its assignee in the event this
Agreement is terminated.
16.04. Franchisee shall pay to Franchisor all damages, costs, and
expenses, including reasonable attorneys' fees, incurred by Franchisor in
seeking recovery of damages caused by any action of Franchisee in violation of,
or in obtaining injunctive relief for the enforcement of, any portion of this
Section XVI. Further, Franchisee acknowledges and agrees that any failure to
comply with the provisions of this Section XVI, shall result in irreparable
injury to Franchisor.
16.05. All provisions of this Agreement which, by their terms or
intent, are designed to survive the expiration or termination of this Agreement,
shall so survive the expiration and/or termination of this Agreement.
16.06. Franchisee shall comply with the covenants contained in
Section XIII of this Agreement.
16.07. Franchisee shall execute such documents as Franchisor may
reasonably require to effectuate termination of the franchise and Franchisee's
rights to use the trademarks and systems of Franchisor.
XVII. TAXES, PERMITS, AND INDEBTEDNESS
17.01. Franchisee shall promptly pay when due all taxes, accounts and
other indebtedness of every kind incurred by Franchisee in the conduct of the
Franchised Business under this Agreement.
17.02. Franchisee, in the conduct of the Franchised Business, shall
comply with all applicable laws and regulations, and shall timely obtain any and
all permits, certificates, or licenses necessary for the full and proper conduct
of the businesses operated under this Agreement, including, without limitation,
licenses to do business, trade name registrations, sales tax permits and fire
clearances.
XIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
18.01. This Agreement does not constitute Franchisee an agent, legal
representative, joint venturer, partner, employee or servant of Franchisor for
any purpose whatsoever. It is understood and agreed that Franchisee shall be an
independent contractor and is in no way authorized to make any contract,
agreement, warranty, or representation on behalf of Franchisor. The parties
further agree that this Agreement does not create any fiduciary relationship
between them.
18.02. During the term of this Agreement and any extensions hereof,
Franchisee agrees to take such action as Franchisor deems reasonably necessary
for Franchisee to inform and hold itself out to the public as an independent
contractor operating the Franchised Business pursuant to a franchise from
Franchisor, including, without limitation, exhibiting a notice of that fact at
the Franchised Business in form and substance satisfactory to Franchisor.
18.03 Franchisee agrees to defend, indemnify and hold harmless
Franchisor, its parent, subsidiaries and affiliates, and their respective
officers, directors, employees, agents, successors and assigns from all claims,
demands, losses, damages, liabilities, cost and expenses (including attorney's
fees and expense of litigation) resulting from, or alleged to have resulted
from, or in connection with Franchisee's
30
operation of the Franchised Business, including, but not limited to, any claim
or actions based on or arising out of any injuries, including death to persons
or damages to or destruction of property, sustained or alleged to have been
sustained in connection with or to have arisen out of or incidental to the
Franchised Business and/or the performance of this contract by Franchisee, its
agents, employees, and/or its subcontractors, their agents and employees, or
anyone for whose acts they may be liable, regardless of whether or not such
claim, demand, damage, loss, liability, cost or expense is caused in whole or in
part by the negligence of Franchisor, Franchisor's representative, or the
employees, agents, invitees, or licensees thereof.
18.04 Franchisor shall advise Franchisee in the event Franchisor
receives notice that a claim has been or may be filed with respect to a matter
covered by this Agreement, and Franchisee shall immediately assume the defense
thereof at Franchisee's sole cost and expense. In any event, Franchisor will
have the right, through counsel of its choice, to control any matter to the
extent it could directly or indirectly affect Franchisor and/or its parent,
subsidiaries or affiliates or their officers, directors, employees, agents,
successors or assigns. If Franchisee fails to assume such defense, Franchisor
may defend, settle, and litigate such action in the manner it deems appropriate
and Franchisee shall, immediately upon demand, pay to Franchisor all costs
(including attorney's fees and cost of litigation) incurred by Franchisor in
affecting such defense, in addition to any sum which Franchisor may pay by
reason of any settlement or judgment against Franchisor.
18.05 Franchisor's right to indemnity hereunder shall exist
notwithstanding that joint or several liability may be imposed upon Franchisor
by statute, ordinance, regulation or judicial decision.
18.06 Franchisee agrees to pay Franchisor all expenses including
attorney's fees and court costs, incurred by Franchisor, its parent,
subsidiaries, affiliates, and their successors and assigns to remedy any
defaults of or enforce any rights under this Agreement, effect termination of
this Agreement or collect any amounts due under this Agreement.
XIX. APPROVALS AND WAIVERS
19.01. Whenever this Agreement requires the prior approval of
Franchisor, Franchisee shall make a timely written request to Franchisor
therefor, and such approval or consent shall be in writing.
19.02. Franchisor makes no warranties or guarantees upon which
Franchisee may rely, and assumes no liability or obligation to Franchisee or any
third party to which Franchisor would not otherwise be subject, by providing any
waiver, approval, advice, consent, or suggestions to Franchisee in connection
with this Agreement, or by reason of any neglect, delay, or denial of any
request therefor.
19.03. No failure of Franchisor to exercise any power reserved to it
in this Agreement, or to insist upon compliance by Franchisee with any
obligation or condition in this Agreement, and no custom or practice of the
parties at variance with the terms hereof, shall constitute a waiver of
Franchisor's right to demand exact compliance with the terms of this Agreement.
Waiver by Franchisor of any particular default shall not affect or impair
Franchisor's right in respect to any subsequent default of the same or of a
different nature, nor shall any delay, forbearance, or omission of Franchisor to
exercise any power or rights arising out of any breach or default by Franchisee
of any of the terms, provisions, or covenants of this Agreement, affect or
impair Franchisor's rights, nor shall such constitute a waiver by Franchisor of
any rights, hereunder or right to declare any subsequent breach or default.
Subsequent acceptance by Franchisor of any payments due to it shall not be
deemed to be a waiver by Franchisor of any preceding breach by Franchisee of any
terms, covenants, or conditions of this Agreement.
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XX. NOTICES
Any and all notices required or permitted under this Agreement shall be
in writing and shall be personally delivered , sent by registered mail, or by
other means which will provide evidence of the date received to the respective
parties at the following addresses unless and until a different address has been
designated by written notice to the other party:
Notices to Franchisor: SBC Legal Department
c/o AFC Enterprises, Inc.
Six Concourse Parkway
Suite 1700
Xxxxxxx, Xxxxxxx 00000-0000
X.X.X.
Telefax Number: (000) 000-0000
with copies to: President, International Division
AFC Enterprises, Inc.
Xxx Xxxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000-0000
X.X.X.
Telefax Number: (000) 000-0000
Notices to Franchisee: _____________________________
_____________________________
_____________________________
All written notices and reports permitted or required to be delivered
by the provisions of this Agreement shall be addressed to the party to be
notified at its most current principal business address (or telefax number) of
which the notifying party has been notified (under the provisions of this
Section XX) and shall be deemed so delivered (i) at the time delivered by hand;
(ii) one (1) business day after sending by telegraph, facsimile, electronic mail
or comparable electronic system with electronic confirmation of receipt; or
(iii) if sent by registered or certified mail or by other means which affords
the sender evidence of delivery, on the date and time of receipt or attempted
delivery if delivery has been refused or rendered impossible by the party being
notified.
XXI. SEVERABILITY AND CONSTRUCTION
21.01. Except as expressly provided to the contrary herein, each
section, paragraph, part, term, and/or provision of this Agreement shall be
considered severable; and if, for any reason, any section, part, term, and/or
provision herein is determined to be invalid and contrary to, or in conflict
with, any existing or future law or regulation by a court or agency having valid
jurisdiction, such shall not impair the operation, or have any other effect
upon, such other portions, sections, parts, terms, and/or provisions of this
Agreement as may remain otherwise intelligible, and the latter shall continue to
be given full force and effect to bind the parties hereto; and said invalid
portions, sections, parts, terms, and/or provisions shall be deemed not to be
part of this Agreement.
21.02. Except as has been expressly provided to the contrary herein,
nothing in this Agreement is intended, nor shall be deemed, to confer upon any
person or legal entity other than Franchisee,
32
Franchisor, Franchisor's officer, directors, and employees, and Franchisee's
permitted and Franchisor's respective successors and assigns, any rights or
remedies under or by reason of this Agreement.
21.03. All captions in the Agreement are intended solely for the
convenience of the parties, and none shall be deemed to affect the meaning or
construction of any provision hereof.
21.04. All references herein to the masculine, neuter or singular
shall be construed to include the masculine, feminine, neuter or plural, where
applicable, and all acknowledgments, promises, covenants, agreements and
obligations herein made or undertaken by Franchisee shall be deemed jointly and
severally undertaken by all the parties hereto on behalf of Franchisee.
21.05. This Agreement may be executed in counterparts, and each copy
so executed shall be deemed an original.
XXII. ENTIRE AGREEMENT: SURVIVAL
22.01. This Agreement, the documents referred to herein, the
Development Agreement, if any, and the exhibits hereto, constitute the entire,
full and complete agreement between Franchisor and Franchisee concerning the
subject matter hereof and supersede any and all prior agreements. Except for
those permitted to be made unilaterally by Franchisor hereunder, no amendment,
change, modification or variance of this Agreement shall be binding on either
party unless in writing and executed by Franchisor and Franchisee.
Representations by either party, whether oral, in writing, electronic or
otherwise, that are not set forth in this Agreement shall not be binding upon
the party alleged to have made such representations and shall be of no force or
effect.
I have read this Section 22.01 and agree
that I have not been induced by and am not
relying upon any representation not
contained in this Agreement.
_____________________________, Franchisee
22.02. Notwithstanding anything herein to the contrary, upon the
termination of this Agreement for any reason whatsoever (including the execution
of a subsequent Franchise Agreement pursuant to the provisions of Sections
2.02.B and 14.03.F), or upon the expiration of the Term hereof, any provisions
of this Agreement which, by their nature, extend beyond the expiration or
termination of this Agreement, shall survive termination or expiration and be
fully binding and enforceable as though such termination or expiration had not
occurred.
XXIII. ACKNOWLEDGMENTS
23.01. Franchisee acknowledges that Franchisee has conducted an
independent investigation of the SEATTLE'S BEST COFFEE franchise and recognized
that the business venture contemplated by this Agreement involves business risks
and Franchisee's success will be largely dependent upon the ability of the
Franchisee as an independent business entity.
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_______________________
Franchisee must initial
FRANCHISOR EXPRESSLY DISCLAIMS THE MAKING OF, AND FRANCHISEE ACKNOWLEDGES THAT
FRANCHISEE HAS NOT RECEIVED, ANY WARRANTY OR GUARANTY, EXPRESSED OR IMPLIED, AS
TO THE POTENTIAL VOLUME, PROFITS OR SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED
BY THIS AGREEMENT.
_______________________
Franchisee must initial
23.02. FRANCHISEE ACKNOWLEDGES THAT FRANCHISEE HAS RECEIVED A COMPLETED COPY OF
THIS AGREEMENT, THE EXHIBITS HERETO, IF ANY, AND THE AGREEMENTS RELATING
THERETO, IF ANY, AT LEAST FIVE (5) BUSINESS DAYS PRIOR TO THE DATE ON WHICH THIS
AGREEMENT WAS EXECUTED. FRANCHISEE FURTHER ACKNOWLEDGES THAT FRANCHISEE HAS
RECEIVED THE DISCLOSURE DOCUMENT REQUIRED BY THE TRADE REGULATION RULE OF THE
FEDERAL TRADE COMMISSION ENTITLED "DISCLOSURE REQUIREMENTS AND PROHIBITIONS
CONCERNING FRANCHISING AND BUSINESS OPPORTUNITY VENTURES" AT LEAST TEN (10)
BUSINESS DAYS PRIOR TO THE DATE ON WHICH THIS AGREEMENT WAS EXECUTED.
_______________________
Franchisee must initial
23.03. FRANCHISEE ACKNOWLEDGES THAT FRANCHISEE HAS READ AND UNDERSTOOD THIS
AGREEMENT, THE EXHIBITS HERETO, IF ANY, AND AGREEMENTS RELATING THERETO, IF ANY,
AND THAT FRANCHISOR HAS ACCORDED FRANCHISEE AMPLE TIME AND OPPORTUNITY AND HAS
ENCOURAGED FRANCHISEE TO CONSULT WITH ADVISORS OF FRANCHISEE'S OWN CHOOSING
ABOUT THE POTENTIAL BENEFITS AND RISKS OF ENTERING INTO THIS AGREEMENT.
_______________________
Franchisee must initial
23.04. FRANCHISEE RECOGNIZES AND UNDERSTANDS THAT IT MAY INCUR OTHER EXPENSES
AND/OR OBLIGATIONS AS PART OF THE INITIAL INVESTMENT IN THE FRANCHISED BUSINESS
WHICH THE TERMS OF THIS AGREEMENT MAY NOT ADDRESS, AND WHICH INCLUDE WITHOUT
LIMITATION: OPENING ADVERTISING, EQUIPMENT, FIXTURES, OTHER FIXED ASSETS,
CONSTRUCTION, LEASEHOLD IMPROVEMENTS AND DECORATING COSTS AS WELL AS WORKING
CAPITAL NECESSARY TO COMMENCE OPERATIONS.
XXIV. APPLICABLE LAW: VENUE
24.01. Applicable Law. This Agreement takes effect upon its
acceptance and execution by Franchisor and shall be interpreted and construed
under the laws of the State of GEORGIA which laws shall prevail in the event of
any conflict of law (without regard to, and without giving effect to, the
application of GEORGIA choice of law or conflict of law rules) except to the
extent governed by the U. S. Trademark Act of 1946, 15 U.S.C. Section 1051,
et seq. (the " Xxxxxx Act") as amended; provided, however, that if the covenants
in Article XIII of this Agreement would not be enforceable under the laws of
GEORGIA, and the Franchised Unit is located outside of GEORGIA, then such
covenants shall be interpreted and construed under the laws of the state in
which the Franchised Unit is located. Nothing in this Section XXIV is intended
by the parties to subject this Agreement to any franchise or similar law, rule,
or regulation of the State of Georgia to which this Agreement would not
otherwise be subject.
24.02. The parties agree that any action brought by Franchisee
against Franchisor in any court, whether federal or state, shall be brought
within a court of competent jurisdiction in Atlanta, Georgia. Any action brought
by Franchisor against Franchisee in any court, whether federal or state, may be
brought within any court in the State of Georgia, or in the jurisdiction where
Franchisee resides or does business or where the Franchised Unit is or was
located or where the claim arose. Franchisee hereby consents to personal
jurisdiction and venue in the state and judicial district in which Franchisor
has its principal place of business.
34
24.03. No right or remedy herein conferred upon or reserved to
Franchisor is exclusive of any other right or remedy herein, or by law or equity
provided or permitted; but each shall be cumulative of any other right or remedy
provided in this Agreement
24.04. Nothing herein contained shall bar Franchisor's right to
obtain injunctive relief against threatened conduct that will cause it loss or
damages, under the usual equity rules, including the applicable rules for
obtaining restraining orders and preliminary injunctions.
24.05. Any and all claims and actions arising out of or relating to
this Agreement (including, but not limited to, the offer and sale of this
franchise), the relationship of Franchisee and Franchisor, or Franchisee's
operation of the Franchised Unit, brought by Franchisee shall be commenced
within eighteen (18) months from the occurrence of the facts giving rise to such
claim or action, or such claim or action shall be barred.
24.06. Franchisor and Franchisee hereby waive to the fullest extent
permitted by law any right to or claim of any consequential, punitive, or
exemplary damages against the other, and agree that in the event of a dispute
between them each shall be limited to the recovery of any actual damages
sustained by it.
XXV. CORPORATE FRANCHISEE
In the event the Franchisee named herein is a corporation at the time
of execution of this Agreement, it is warranted, covenanted and represented to
Franchisor that:
25.01. All of the issued and outstanding stock of Franchisee is
owned, legally and beneficially, by the person or persons listed on Exhibit "B"
attached hereto.
25.02. The above-named person or persons has (have) individually, and
jointly and severally, executed this Agreement, and such person, or one of such
persons, is and shall be the chief executive officer of the Franchisee
corporation, holding such corporate office or offices as may be necessary to
maintain and exercise the actual power and authority actively to direct the
affairs of the Franchisee.
25.03. Franchisee is validly incorporated and duly existing under the
laws of the State of, is duly qualified to conduct business therein, and has
its principal place of business at. Franchisee shall promptly notify Franchisor
in writing of any change thereto during the term of this Agreement.
(SIGNATURES ON FOLLOWING PAGE)
35
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed, sealed, and delivered this Agreement in triplicate
on the day and year first above-written.
WITNESSES: CINNABON, INC., SUCCESSOR IN INTEREST TO
SEATTLE'S BEST COFFEE, LLC
___________________________ By:_____________________________________
___________________________ Title:__________________________________
DEVELOPER:
___________________________ By:_____________________________________
___________________________ Title:__________________________________
{SIGNATURE PAGE TO FRANCHISE AGREEMENT}
36
EXHIBIT "A"
SEATTLE'S BEST COFFEE
FRANCHISE AGREEMENT
NOTICE OF COMMENCEMENT DATE
Name of Franchisee: ___________________________________________________
Franchise Agreement Dated: ____________________________________________
Franchise Premises Address: ___________________________________________
_______________________________________________________________________
_______________________________________________________________________
Store Number: _________________________________________________________
NOTICE is hereby given to the abovementioned Franchisee pursuant to
Section 2.01 of the Franchise Agreement that the Term of the abovementioned
Franchise Agreement commenced on ________________, 200___, and that the Term
shall expire on ________________, _____, unless the Franchise Agreement is
terminated earlier, pursuant to its terms and conditions.
SEATTLE'S BEST COFFEE, LLC.
By: __________________________________
Title: _______________________________
Date of Notice: ______________________
37
EXHIBIT "B"
SHAREHOLDERS OF FRANCHISEE
(For Corporate Franchisees)
Name of Number of % Ownership
Shareholders Shares of Franchisee Title
------------ --------- ------------- -----
38
