[LOGO OF KENTUCKY FRIED CHICKEN APPEARS HERE]
DEVELOPMENT AGREEMENT
BETWEEN:
KENTUCKY FRIED CHICKEN PTY. LIMITED
AND
▇▇▇▇▇▇▇ FOODS INTERNATIONAL
PTY. LIMITED
EXHIBIT 10.18
DEVELOPMENT AGREEMENT dated 4th day of October 1996
BETWEEN: KENTUCKY FRIED CHICKEN PTY LIMITED A.C.N. 000 587 780 having its
registered office at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇,
▇▇▇▇ ("PRI")
AND: ▇▇▇▇▇▇▇ FOODS INTERNATIONAL PTY. LIMITED ARBN ▇▇▇ ▇▇▇ ▇▇▇, a
Nevada corporation having its principal executive office at
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
and its registered Australian office at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇. ▇▇▇, ▇▇▇▇ ("Franchisee")
BACKGROUND FACTS
PRI and/or its Affilliated Companies have developed a unique and valuable system
for the preparation, marketing and sale of certain quality food products under
various trade marks, service marks and trade names owned by them.
PRI is entitled to franchise to third parties the right to operate the Concept
using the Marks and the System.
PRI has agreed to grant Franchisee the right, and Franchisee has agreed to
accept the obligation, to develop Outlets in the Development Area under the
terms and conditions of this Agreement.
THE PARTIES AGREE:
1. DEFINITIONS
In this Agreement unless the context requires otherwise:
"Accounting Year" means PRI's financial year, as notified to Franchisee
by PRI.
"Affiliated Companies" means any companies which are part of one or more
ownership structures ultimately controlled by a common parent
corporation or common shareholders, including any related bodies
corporate within the meaning of the Corporations Law.
"Approvals" means all approvals, authorizations, consents, permits,
exemptions, licenses and any other actions required by law or by any
person, company or governmental authority in order for Franchisee to be
able to develop and operate Outlets within the Development Area.
"Concept" means the concept specified in Schedule 1.
"Deemed Franchise Agreement" means a document in the form set out in
Schedule 4.
"Development Area" means the area specified in Schedule 1.
"Development Fee" means the fee specified in Schedule 1.
"Development Schedule" means the development obligations specified in
Schedule 2.
"Expansion/Renewal Criteria" means PRI's expansion/renewal criteria for
multi-site franchisees, as specified in Schedule 3.
-2-
"Franchise Agreement" means a franchise agreement in the form set out in
Schedule 6.
"Franchise Documents" means the Franchise Agreement together with any
other documents required by PRI to be executed in connection with the
development of Outlets by Franchisee pursuant to this Agreement.
"Manuals" means the manuals, notices and correspondence published or
issued from time to time by PRI in any form, containing the Standards
and other requirements, rules, procedures and guidelines relating to the
System.
"Marks" means the trademarks, service marks and trade names owned by PRI
or its Affiliated Companies and designated by PRI from time to time for
use in the System.
"Outlet" means an outlet conforming to the Concept.
"Plans" means the final plans, drawings and specifications for the site
and building in respect of a proposed Outlet.
"System" means the system for the preparation, marketing and sale of
food products under the Marks used in operating the Concept.
"Term" means the period specified in Schedule 1, unless earlier
terminated pursuant to Clause 9.
2. DEVELOPMENT FEE AND DEVELOPMENT SCHEDULE
2.1 On or prior to the date of this Agreement, Franchisee will pay the
Development Fee to PRI.
2.2 PRI grants to Franchisee the right to develop, and Franchisee accepts
the obligation to develop, Outlets in the Development Area during
the Term in compliance with the Development Schedule.
2.3 Franchisee must at all times comply strictly with the Development
Schedule by having, as a minimum, the number of Outlets referred to in
the Development Schedule open and operating in the Development Area by
the dates referred to in the Development Schedule. The parties agree
that time is of the essence in relation to the time periods specified in
the Development Schedule.
3. BUSINESS PLAN/APPROVALS/HUMAN RESOURCES
3.1 Prior to execution of this Agreement, Franchisee must have provided PRI
with a business plan including projected profit and loss statements,
balance sheets and cash flow statements for the Term. Franchisee will
update the business plan each year and provide a copy of each update to
PRI not later than each anniversary date of this Agreement. Each
business plan will be in the format of PRI's Annual Operating Plan as
notified to Franchisee by PRI from time to time.
3.2 Franchisee will obtain and maintain all Approvals required in the
Development Area to enable Franchisee to comply with this Agreement, in
addition to all Approvals required in respect of individual Outlets.
-3-
3.3 Franchisee will at all times ensure that its business is adequately
staffed with properly qualified and trained employees, including by
employing people in the key positions and in accordance with the job
descriptions, competencies and profiles referred to in the Manuals or
otherwise notified to Franchisee by PRI from time to time.
4. EXPANSION/RENEWAL CRITERIA - -
4.1 Franchisee must comply with the Expansion/Renewal Criteria each year
during the Term. PRI will review Franchisee's compliance with the
Expansion/Renewal Criteria on an annual basis.
4.2 If PRI determines after its annual review that Franchisee is not in
compliance with the Expansion/Renewal Criteria, PRI will notify
Franchisee of its non-compliance and Franchisee will have 45 days in
which to remedy such non-compliance.
4.3 At the end of the 45 day period, PRI will undertake a further review, at
Franchisee's cost, to determine whether Franchisee has remedied its
non-compliance to PRI's satisfaction.
4.4 Franchisee's ongoing development rights under this Agreement will be
suspended and Franchisee will not be entitled to enter into any new
commitments in respect of any proposed sites until PRI has undertaken
the further review pursuant to Clause 4.3 and has notified Franchisee in
writing that PRI is satisfied that Franchisee is in compliance with the
Expansion/Renewal Criteria.
4.5 Franchisee acknowledges that the 45 day cure period provided for under
this Clause applies only for the purposes of determining Franchisee's
compliance with the Expansion/Renewal Criteria and will not limit PRI's
rights or ability to act in respect of any breach of any other provision
of this Agreement or of any provision of any franchise agreement between
the parties.
5. OUTLET DEVELOPMENT PROCEDURE
5.1 Franchisee will not take any step towards developing an Outlet without
first obtaining PRI's written approval of the site for the proposed
Outlet, which approval shall be in PRI's sole discretion to grant or
withhold. The following approval procedure will apply:
(a) Franchisee will submit a written site evaluation to PRI,
including preliminary plans showing site location, dimensions,
building type and placement, proposed layout and other relevant
documents and information relating to the site as may be
required by PRI.
(b) PRI will complete its evaluation of the proposed site and notify
Franchisee of its approval or rejection of the proposed site
and, if approved, any conditions applying to the approval.
(c) Within 30 days of receipt of PRI's notice of approval of any
proposed site, Franchisee will:
(i) establish to PRI that it has the necessary freehold or
leasehold interest in the site to enable it to develop
and operate the Outlet, and in the case of a leasehold
interest, on terms and conditions approved by PRI:
(ii) submit to PRI for PRI's approval 2 copies of the
proposed Plans; and
-4-
(iii) execute and deliver to PRI the Franchise Document in respect
of the proposed Outlet and pay any initial fee specified in
the Franchise Agreement.
(d) Franchisee will be responsible for ensuring, at Franchisee's cost,
that all necessary Approvals have been obtained in Franchisee's name
in respect of the Plans (including any modifications required by PRI
under paragraph (e)).
(e) PRI will notify Franchisee of any modifications to the Plans
required by PRI and Franchisee must bear all costs associated with
such modifications. Franchisee must resubmit the modified Plans to
PRI within 10 days of receipt of PRI's notice of the modifications.
5.2 As soon as practicable after receipt of PRI's final approval of the Plans,
Franchisee will commence the construction and fitting out of the Outlet at
the approved site in accordance with the Plans and with the procedures set
out in the Manuals.
5.3 Within 6 months of receipt of PRI's notice of approval of the site,
Franchisee will complete the construction and fitting out the Outlet so
that it is ready for opening and will notify PRI of its intention to open
the Outlet for business. Franchisee will not open any Outlet for business
without first allowing PRI to inspect the Outlet and obtaining PRI's
written approval to open.
5.4 The time periods set out in this Clause 5 are designed to assist
Franchisee in meeting its development obligations under this Agreement.
Franchisee acknowledges that PRI will not deviate from or undermine the
integrity of its site approval process due to time constraints caused by
Franchisee and accordingly Franchisee's failure to comply with these time
periods may result in Franchisee failing to comply with the Development
Schedule.
5.5 All costs associated with the development by Franchisee of any Outlet
pursuant to this Agreement will be borne by Franchisee.
6. FIRST RIGHT OF REFUSAL
6.1 Subject to compliance by Franchisee with its development obligations
pursuant to Clause 2.3 and with the Expansion/Renewal Criteria pursuant to
Clause 4, Franchisee will have a first right of refusal during the Term in
respect of any new Outlet within the Development Area which PRI considers
appropriate for development in addition to the Outlets in the Development
Schedule, as follows:
(a) PRI will not itself commence developing, or franchise to a third
party the right to develop, a new Outlet at any site within the
Development Area without first offering to Franchisee in writing the
right to develop the relevant Outlet under the terms of the
Franchise Documents.
(b) Franchisee will have 30 days from its receipt of the written offer
to execute and deliver to PRI the Franchise Documents in respect of
the relevant Outlet, and establish to PRI's satisfaction that
Franchisee has the necessary freehold or leasehold interest in the
site to enable it to develop and operate the Outlet, and in the case
of the leasehold interest, on terms and conditions approved by PRI.
(c) Franchisee will submit for PRI's approval 2 copies of the proposed
Plans and will follow the procedures set out in Clauses 5.1(d),
5.1(e) and 5.2.
-5-
(d) Franchisee must complete the development and open the relevant
Outlet within 6 months of receipt of the written offer from PRI.
6.2 If Franchisee falls on any occasion to comply with either Clause 6.1(b) or
Clause 6.1(d) then PRI will be entitled itself or by franchise to a third
party to develop the relevant Outlet.
7. EXECUTION OF FRANCHISE AGREEMENT
7.1 Notwithstanding Clause 5.1(c)(iii) and Clause 6.1(b), PRI may elect in
respect of one or more approved sites that Franchisee execute, in lieu of
a full-form Franchise Agreement, a Deemed Franchise Agreement. If PRI
chooses to adopt this approach, it will submit to Franchisee for execution
a Deemed Franchise Agreement duly completed with the Outlet Address and
Date of Grant for the relevant site or sites.
7.2 Upon PRI executing the Deemed Franchise Agreement, a separate Franchise
Agreement will be deemed to be effected in respect of each of the sites
referred to in the Deemed Franchise Agreement, with the appropriate Outlet
Address and Date of Grant duly completed in Schedule S of the Franchise
Agreement.
8. LIMITATIONS ON DEVELOPMENT RIGHTS
8.1 Franchisee acknowledges and agrees that Franchisee's development right and
first right of refusal under Clauses 2 and 6 apply only in respect of the
Concept and only within the Development Area. Other than as set out in
Clauses 2 and 6, no exclusive territory, protection or other right in
respect of the Development Area is expressly or impliedly granted to
Franchisee. Other than as set out in Clause 2 and 6, Franchisee
acknowledges that PRI reserves the right to use, and to grant to other
parties the right to use within the Development Area:
(a) the Marks and the System in any manner and at any location through
all concepts and distribution channels (other than the Concept)
currently existing or which may be developed in the future;
(b) the Marks and the System through the Concept at Outlets already
under construction or operating at the date of this Agreement, or
Outlets developed by PRI or a third party pursuant to Clause 6.2;
and
(c) all other marks, names or systems in connection with any product or
service in any manner and at any location.
8.2 Franchisee specifically acknowledges that PRI and its Affiliated Companies
and their franchisees operate other systems and concepts for the sale of
food products and services which may be competitive with the System and
may compete directly with the System within the Development Area.
9. TERMINATION
9.1 PRI may terminate this Agreement at any time during the Term by notice to
Franchisee effective immediately upon receipt by Franchisee of the notice
if any of the following events occur:
-6-
(a) Franchisee is unable to pay its debts as and when they become
due or becomes insolvent or a liquidator, receiver, manager,
administrator or trustee in bankruptcy (or local equivalent) of
Franchisee or its business is appointed, whether provisionally
or finally, or an application or order for the winding up of
Franchisee is made or Franchisee enters into any composition or
scheme of arrangement:
(b) Franchisee fails to comply with its development obligations
referred to in Clause 2.3;
(c) PRI determines that Franchisee is not in compliance with the
Expansion/Renewal Criteria following PRI's review pursuant to
Clause 4.3;
(d) PRI notifies Franchisee that Franchisee has breached any term
or condition of this Agreement (other than Clause 2.3 or Clause
4) and Franchisee does not fully cure the breach to PRI's
satisfaction within the cure period provided for in the notice;
(e) an event occurs which gives rise to a right in PRI (or its
Affiliated Company) to terminate any franchise agreement
between PRI and Franchisee (or their respective Affiliated
Companies); or
(f) any party of this Agreement is held to be void, invalid or
otherwise unenforceable.
9.2 Notwithstanding any provision to the contrary in the Franchise
Agreement, the termination by PRI of this Agreement will not of itself
give PRI the right to terminate individual Franchise Agreements in
respect of either existing Outlets which are already being operated by
Franchisee, or PRI approved sites for which Franchisee is already
unconditionally committed to acquiring a freehold or leasehold interest
at the time of termination of this Agreement.
9.3 PRI's exercise of any of its rights under this Clause 9 will be in
addition to and not in limitation of any other rights and remedies it
may have in the event of any breach or default by Franchisee.
10. GUARANTEE/ NOTICES
10.1 Upon PRI's request, Franchisee will procure the execution by guarantors
approved by PRI of a guarantee of Franchisee's obligations and
liabilities under this Agreement and all Franchise Agreements entered
into pursuant to this Agreement, in the form required by PRI.
10.2 Any notice or other communication required or permitted to be given
under this Agreement will be in writing and properly addressed to the
addressee at the address specified in this Agreement (or any other
address notified by the addressee) and will be deemed received by the
addressee on the earlier of the date of delivery, the date of
transmission if sent by facsimile with receipt confirming completion of
transmission, or, if sent by pre-paid security or registered post, the
deemed postal receipt date specified in Schedule 1.
11. MISCELLANEOUS
11.1 This Agreement (and any Confidentiality Agreement that may have been
signed by the parties) constitutes the entire agreement between the
parties with respect to its subject matter and supersedes all prior
negotiations, agreements or understandings.
-7-
11.2 Franchisee is an independent contractor and is not the agent,
representative, joint venturer, partner or employee of PRI. No fiduciary
relationship exists between PRI and Franchisee.
11.3 Franchisee will not sell, transfer or gift any of its rights under this
Agreement to any other party without PRI's prior written approval, which
may be witheld in PRI's sole discretion.
11.4 This Agreement will inure to the benefit of PRI, its successors and
assigns and may be transferred by PRI to any party without the prior
approval of Franchisee,
11.5 The delay or failure of any party to exercise any right or remedy
pursuant to this Agreement will not operate as a waiver of the right or
remedy and a waiver of any particular breach will not be a waiver of
any other breach. All rights and remedies under this Agreement are
cumulative and the exercise of one right or remedy will not limit the
exercise of any other right or remedy.
11.6 If any part of this Agreement is held to be void, invalid or otherwise
unenforceable, PRI may elect either to terminate this Agreement pursuant
to Clause 8.1 or to sever the void, invalid or unenforceable part in
which event the remainder of this Agreement will continue in full force
and effect.
11.7 The terms and conditions of this Agreement may be changed only in
writing signed by both parties, provided that the Manuals may be updated
by PRI from time to time in accordance with the Franchise Agreement.
11.8 This Agreement will be governed by and construed in accordance with the
law of the territory specified in Schedule 1 and the parties agree to
submit to the non-exclusive jurisdiction of the courts of that
territory.
11.9 Franchisee will pay to PRI all reasonable legal expenses incurred by PRI
in connection with this Agreement, including, without limitation, any
stamp duty and any expenses incurred in connection with the enforcement
of this Agreement, provided that PRI is not itself in breach of any term
or condition of this Agreement at the time of enforcement.
11.10 Each party will take all such steps, execute all such documents and do
all such acts and things as may be reasonably required by the other
party to give effect to any of the transactions contemplated by this
Agreement.
11.11 This Agreement is executed in English. A local language translation may
be attached, which the parties intend to be identical to the English
text. However, if any dispute arises as to the interpretation of the
language of this Agreement, the English text shall govern unless
otherwise prohibited under the law of the territory specified in
Schedule 1.
11.12 In the interpretation of this Agreement, unless the context indicates a
contrary intention:
(a) the obligations of more than one party will be joint and
several;
(b) words denoting the singular include the plural and vice versa
and words denoting any gender include all genders;
(c) headings are for convenience only and do not affect
interpretation;
(d) references to Clauses and Schedules are to clauses and schedules
of this Agreement, and the Schedules form part of this
Agreement; and
-8-
(a) this Agreement may be executed in any number of counterparts, each of
which will be deemed an original but which together will constitute
one instrument.
EXECUTED as an agreement
THE COMMON SEAL of KENTUCKY )
FRIED CHICKEN PTY LIMITED was )
affixed in the presence of: )
/s/ SIGNATURE APPEARS HERE /s/ SIGNATURE APPEARS HERE
---------------------------- -----------------------------
Secretary Director
THE COMMON SEAL of )
▇▇▇▇▇▇▇ FOODS INTERNATIONAL )
PTY, LIMITED was affixed in the )
presence of: )
/s/ SIGNATURE APPEARS HERE /s/ SIGNATURE APPEARS HERE
----------------------------- -----------------------------
Secretary President
In Los Angeles, California
October 4, 1996
-9-
SCHEDULE 1
INFORMATION SCHEDULE
CONCEPT: KFC Restaurant Outlets, excluding delivery and
"two-in-one" outlets.
DEEMED POSTAL RECEIPT DATE: 3 days after the date of posting
DEVELOPMENT AREA: Queensland
DEVELOPMENT FEE: NIL
GOVERNING LAW: New South Wales
TERM: 10 years commencing on the date of execution
of this Agreement
-10-
SCHEDULE 2
DEVELOPMENT SCHEDULE
DATE MINIMUM NO. OF OUTLETS
---- ----------------------
TO BE DEVELOPED AND OPENED
--------------------------
On or before:
Last day of Period 13 in PRI's 1997 Accounting Year 4
Last day of Period 13 in PRI's 1998 Accounting Year 4
Last day of Period 13 in PRI's 1999 Accounting Year 4
Last day of Period 13 in PRI's 2000 Accounting Year 4
Last day of Period 13 in PRI's 2001 Accounting Year 4
Last day of Period 13 in PRI's 2002 Accounting Year 3
Last day of Period 13 in PRI's 2003 Accounting Year 3
Last day of Period 13 in PRI's 2004 Accounting Year 3
Last day of Period 13 in PRI's 2005 Accounting Year 3
Tenth anniversary of date of execution of this
Agreement 3
-11-
SCHEDULE 3
EXPANSION/RENEWAL CRITERIA
(A) Outlets fitted with current signage and equipment standards
(B) STAR 2000, or PRI's then current training programs, or alternative training
programs used by ▇▇▇▇▇▇▇ Foods with PRI's approval, in use in all Outlets
(C) All Outlet Managers and Area Managers trained and certified under current
management training programs
(D) Approved field management structure in place
(E) Franchisee in compliance with all Franchise Agreements, including all fees
and payments up to date
(F) Same store PRA sales growth year-on-year equal to or better than average
PRA sales growth year-on-year across the KFC system in Austria
(G) Rolling 6 month average CHAMPS (or score under PRI's then current
equivalent system) across all Outlets equal to or better than rolling 6
month average score across KFC system in Australia
(H) Franchisee has management and financial capacity to expand its network of
Outlets
(I) Ongoing participation in PRI's consumer P & L tracking programs, including
(without limitation) brand tracking research, customer experience
monitoring and CHAMPS checks.
-12-
SCHEDULE 4
DEEMED FRANCHISE AGREEMENT
As referenced in the Development Agreement dated _____________ between the
parties ("Development Agreement")
Upon PRI executing this document, a separate Franchise Agreement (as defined in
the Development Agreement) will be deemed to be effected in respect of each of
the following outlets. The relevant Outlet Address and Date of Grant set out
below will be deemed to be included in Schedule B of such Franchise Agreement.
Outlet Address Date of Grant
-------------- -------------
THE COMMON SEAL of )
KENTUCKY FRIED CHICKEN )
PTY LIMITED was affixed in )
the presence of: )
--------------------------- ---------------------------
Director Director/Secretary
THE COMMON SEAL of )
▇▇▇▇▇▇▇ FOODS )
INTERNATIONAL PTY, LTD )
was affixed in the presence of: )
--------------------------- ---------------------------
Director Director/Secretary
Date:
-13-
SCHEDULE 5
ADDITIONAL PROVISIONS OF DEVELOPMENT AGREEMENT
(A) The definition of "Franchise Agreement" is amended to read as follows:
"Franchise Agreement" means:
(a) during the first 6 years of the Term: a franchise agreement in
the form set out in Schedule 6; and
(b) during the last 5 years of the Term: a franchise agreement in
the then current form used by PRI as at the fifth anniversary
of the date of execution of this Agreement, including (without
limitation) PRI's then current fees."
(B) Clause 2.3 is amended to read as follows:
"Franchisee must at all times comply strictly with the Development
Schedule by developing, opening and operating, as a minimum, the number
of new Outlets referred to in the Development Schedule in the
Development Area by the dates referred to in the Development Schedule.
The parties agree that time is of the essence in relation to the time
periods specified in the Development Schedule, except in the event of
war, civil commotion, fire, flood, earthquake, act of God or any other
cause beyond Franchisee's reasonable control.
(C) A new Clause 2.4 is added as follows:
"2.4 Franchisee's closure from time to time of any operating Outlet
in the Development Area, if such closure is approved by PRI,
will not entitle PRI to correspondingly increase the number of
Outlets referred to in the Development Schedule in the relevant
year."
(D) Clause 4.1 will be effective as from 1 December, 1997.
(E) Clause 5.1(b) is amended by the addition of the words "Within 30 days of
receipt of the written site evaluation" at the beginning of the Clause.
(F) In Clause 5.1(c), the period of 30 days is varied to 45 days.
(G) In Clause 5.1(e) the period of 10 days is varied to 30 days.
(H) Clause 5.3 is amended by changing the period of 6 months to 9 months and
including a further sentence at the end of the clause as follows:
"PRI will be deemed to have approved the opening of the Outlet if PRI
has not inspected the Outlet and disapproved its opening within 21 days
of PRI's CFO actually receiving Franchisee's notice of its intention to
open the Outlet. The deemed receipt provisions of Clause 10 will not
apply in respect of such notice to PRI's CFO."
(I) In Clause 6.1(b), the period of 30 days is varied to 45 days.
(J) In clause 6.1(d) the period of 6 months is varied to 9 months.
(K) Clause 9.1(c) will be effective as from 1 December, 1997.
-14-
(L) A new Clause 9.4 is added as follows:
"9.4 Franchisee may terminate this Agreement at any time and for any
reason during the Term effective upon 3 months notice to PRI."
(M) Clause 10.1 is deleted.
(N) Clause 11.1 is amended to read as follows:
"This Agreement and the Master Franchise Agreement executed by the
parties contemporaneously with this Agreement constitute the entire
agreement between the parties with respect to their subject matter and
supersede all prior negotiations, agreements or understandings."
(O) Clause 11.3 is amended to read as follows:
"(a) Franchisee will not sell, transfer or gift any of its rights
under this Agreement to any other party without PRI's prior
written approval, which may be withheld in PRI's sole
discretion.
(b) In the event of an approved transfer by Franchisee of all KFC
outlets then operated by Franchisee to a single transferee in a
single transaction, Franchisee may transfer this Agreement,
subject to compliance by Franchisee with, and PRI granting
approval pursuant to, the transfer provisions of the Franchise
Agreement".
(P) Clause 11.9 will be amended by deletion of the words "and any expenses
incurred in connection with the enforcement of this Agreement, provided
that PRI is not itself in breach of any term or condition of this
Agreement at the time of enforcement."
-15-
SCHEDULE 6
FRANCHISE AGREEMENT
See attached
[LOGO OF KENTUCKY FRIED CHICKEN APPEARS HERE]
FRANCHISE AGREEMENT
BETWEEN:
KENTUCKY FRIED CHICKEN PTY. LIMITED
AND
▇▇▇▇▇▇▇ FOODS INTERNATIONAL
PTY. LIMITED
AGREEMENT dated day of 1996
BETWEEN: KENTUCKY FRIED CHICKEN PTY LIMITED, A.C.N. 000 587 780 having
its registered office at ▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇, ▇▇▇▇ ("PRI")
AND: ▇▇▇▇▇▇▇ FOODS INTERNATIONAL PTY. LIMITED, ARBN ▇▇▇ ▇▇▇ ▇▇▇, a
Nevada corporation having its principal executive office at
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
and its registered Australian office at ▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ("Franchisee")
BACKGROUND FACTS
PRI and/or its Affiliated Companies have developed a unique and valuable system
for the preparation, marketing and sale of certain quality food products under
various trade marks, service marks and trade names owned by them.
The System is a comprehensive restaurant system for the retailing of a limited
menu of uniform and quality food products, emphasising prompt and courteous
service in a clean and wholesome atmosphere which is intended to be particularly
attractive to families. The foundation and essence of the System is the
adherence by franchisees to standards and policies providing for the uniform
operation of all restaurants within the System including, but not limited to,
serving designated food and beverage products: the use of only prescribed
equipment and building layout and designs; and strict adherence to designated
food and beverage specifications and to prescribed standards of quality, service
and cleanliness in restaurant operations. Compliance by franchisees with the
foregoing standards and policies in conjunction with the trademarks, service
marks and trade names provides the basis for the valuable goodwill and wide
acceptance of the System. Moreover the establishment and maintenance of a close
personal working relationship with Franchisee in the conduct of the Business,
Franchisee's accountability for performance of the obligations contained in this
agreement, and Franchisee's adherence to the tenets of the System constitute the
essence of the license provided for herein.
PRI is entitled to grant to third parties, and has agreed to grant to
Franchisee, the right to use the System, the System Property and the Marks on
the terms and conditions of this Agreement.
In this Agreement, capitalized terms have the meanings specified in Schedule A.
THE PARTIES AGREE:
1. GRANT OF FRANCHISE
1.1 PRI grants to Franchisee the right to use the System, the System
Property and the Marks for the Term solely in connection with the
conduct of the Business at the Outlet and subject to the terms and
conditions of this Agreement.
1.2 At all times during the Term, Franchisee will use its best endeavours to
develop the Business and to increase the Revenues.
1.3 Franchisee will not, without PRI's prior written approval:
(a) conduct all or any part of the Business at any location other
than the Outlet; or
-2-
(b) sub-license to any other party the right to use the System, the
System Property or the Marks.
1.4 No exclusive territory, protection or other right in the contiguous space,
area or market of the Outlet is expressly or impliedly granted to
Franchisee. PRI reserves the right to use, and to grant to other parties
the right to use, the Marks, the System and the System Property or any
other marks, names or systems in connection with any product or service
(including, without limitation, the Approved Products) at any location
other than the Outlet through any outlet, food service concept or
distribution channel. Franchisee acknowledges that as at the Date of
Grant, PRI and its Affiliated Companies and franchisees operate outlets
conforming to the Concept and also operate other systems for the sale of
food products and services which are competitive with the System and may
compete directly with the Business.
2. INITIAL FEE AND CONTINUING FEE
2.1 On or before the Date of Grant, Franchisee will pay the initial fee
specified in Schedule B to PRI.
2.2 On or before each Due Date, Franchisee will pay the Continuing Fee to PRI.
Each payment of the Continuing Fee will be accompanied by a statement of
the Revenue for the relevant Accounting Period, in the form required by
PRI from time to time.
2.3 Franchise's payments pursuant to this Agreement are in consideration
solely for the grant of rights in Clause 1.1 and not for PRI's performance
of any specific obligations or services.
3. MANUALS AND STANDARDS
3.1 At all times during the Term, Franchisee must comply with all of the
Standards and the Manuals and all applicable laws, regulations, rules, by-
laws, orders and ordinances in its conduct of the Business. The Manuals
are incorporated by reference into this Agreement.
3.2 PRI may, by notice to Franchisee, at any time change any of the Standards
or Manuals or introduce new Standards or Manuals. Franchisee acknowledges
and agrees that such changes or introductions will bind Franchisee upon
receipt as provided in Clause 20 and Franchisee will implement such
changes or introductions within the period specified in the notice.
3.3 In order to determine Franchisee's compliance with the Manuals and the
terms and conditions of this Agreement. PRI and its agents or
representative will have the right at all times during opening hours to
enter and inspect the Outlet without prior notice to Franchisee.
4. UPGRADES
PRI may, by notice to Franchisee, at any time require Franchisee to
upgrade or renovate all or part of the Outlet or its equipment, systems or
inventory to ensure compliance with the Standards, and Franchisee
acknowledges and agrees that such upgrades or renovations may require
significant capital expenditures and/or ongoing financial commitments.
Franchisee will implement any upgrade or renovation required by PRI within
the period specified in the notice.
-3-
5. APPROVED PRODUCTS AND SUPPLIES
5.1 Franchisee will not prepare, market or sell at the Outlet any product or
service other than the Approved Products without PRI's prior written
approval. PRI will from time to time notify Franchisee of the Approved
Products and will specify those of the Approved Products which must be
offered for sale at the Outlet at all times.
5.2 PRI may, by notice to Franchisee, at any time change or withdraw any
Approved Product or add new Approved Products. Franchisee will
implement such changes, withdrawals and additions within the period
specified in the notice.
5.3 Franchisee will purchase the supplies, materials, equipment and services
used in the Business from suppliers who have been approved in writing by
PRI prior to the time of supply in accordance with the approval
procedures in the Manuals. Franchisee will not have any claim or action
against PRI in connection with any approved supplier's non-delivery,
delayed or non-conforming delivery.
6. ADVERTISING
6.1 Franchisee will spend, in the manner directed by PRI in writing from
time to time, an amount not less than the Advertising Contribution on
advertising and promoting the products and services of the Business and
the System. Without limitation, PRI may at any time during the Term
direct Franchisee:
(a) to pay all or part of the Advertising Contribution to PRI, in
which event PRI will apply the Advertising Contribution to the
costs of national and regional advertising and promotions
conducted by PRI in its discretion, provided that PRI will not
have any obligation to apply the Advertising Contribution for
the specific benefit of Franchisee or the Business and no
express or implied trust will be created in respect of the
Advertising Contribution;
(b) to pay all or part of the Advertising Contribution to a national
or regional co-operative advertising fund specified by PRI; or
(c) to spend all or part of the Advertising Contribution on local or
regional advertising and promotions, provided that if Franchisee
fails to spend the full amount directed by PRI, Franchisee will
pay the unspent amount to PRI within the period specified in a
written demand from PRI.
6.2 Franchisee will participate in such national and regional advertising
and promotions as PRI from time to time requires and Franchisee will not
have any claim or action against PRI in connection with the level of
success of any such advertising or promotion.
6.3 Franchisee will not execute or conduct any local or regional advertising
or promotion without PRI's prior written approval.
7. TRAINING
PRI will provide and Franchisee and Franchisee's employees will
undertake such initial and ongoing training and assistance as PRI in its
discretion considers appropriate. Franchisee will bear the full cost of
attendance at training programs. Franchisee will ensure that all store
-4-
managers operating the Outlet have been certified by PRI as having
successfully completed PRI's current training programs from time to
time.
8. MARKS AND SYSTEM PROPERTY
8.1 The Marks, the System Property and the goodwill associated with them are
the exclusive property of PRI and/or its Affiliated Companies.
Franchisee will acquire no right, interest or benefit in or to them
other than the rights of use granted under this Agreement. All
accretions in the goodwill associated with the Marks and the System
Property resulting from Franchisee's use thereof are solely for the
benefit of PRI and its Affiliated Companies.
8.2 Franchisee will use the Marks only in such form and manner as is
specifically approved by PRI and Franchisee will follow PRI's
instructions regarding proper usage of the Marks in all respects. PRI
may, by notice to Franchisee, at any time change or withdraw any of the
Marks or designate new Marks and Franchisee will implement such changes,
withdrawals and additions within the period specified in the notice.
8.3 Franchisee will not use in the operation of the Business any trademarks,
service marks, trade names or indicia other than the Marks without PRI's
prior written approval. Franchisee will not use, register or apply to
register any trademarks, trade names or indicia similar to the Marks or
that in any way suggest an association or affiliation with the System.
8.4 Franchisee will do nothing to prejudice, damage or contest the validity
of the Marks, the System Property, the goodwill associated with them or
the ownership of them by PRI or its Affiliated Companies. Franchisee
will cooperate fully with PRI in the protection and defence of the Marks
and the System Property, which will be undertaken solely by PRI.
Franchisee will promptly notify PRI of any actual or potential
infringements of, or claims or actions brought by third parties in
respect of, the Marks or the System Property.
8.5 Any improvements to, and inventions and products derived from the Marks
the System Property or the Business during the Term, including those
attributable to Franchisee, will be the exclusive property of PRI or its
Affiliated Companies and will be promptly disclosed by Franchisee to
PRI. Franchisee hereby assigns to PRI all present and future right,
title and interest throughout the world in and to any such improvements,
inventions and products. Franchisee will take all actions and execute
all documents required by PRI for this purpose.
8.6 Franchisee agrees to join with PRI in any application to enter
Franchisee as a registered or permitted user of the Marks with any
governmental entity and Franchisee acknowledges that upon termination or
expiration of this Agreement, PRI may automatically cancel such entry.
9. CONFIDENTIALITY
9.1 Franchisee will at all times during and after the Term keep confidential
and not disclose to any person, other than with PRI's prior written
approval or to Franchisee's employees for the purposes of the Business,
the Manuals, all other materials containing or referring to the System
Property and all other information concerning PRI's business and affairs
which may come to Franchisee during the Term. Franchisee will ensure
that Franchisee's employees retain the Manuals and other materials and
information in confidence. This obligation of confidentiality does not
apply in respect of information in the public domain or previously known
to Franchisee otherwise than by breach of any obligation of
confidentiality, or disclosure required by law or an order of any court
or tribunal.
- 5 -
9.2 Franchisee will not reproduce or part with possession of the Manuals or
other materials containing or referring to the System Property without
PRI's prior written approval and will return all copies of the Manuals and
other materials to PRI immediately upon the expiration or termination of
this Agreement or upon PRI's request.
10. ACCOUNTING RECORDS - -
10.1 Franchisee will establish and maintain an accounting system incorporating
methods, procedures, records and equipment satisfactory to PRI and in
compliance with the Manuals.
10.2 Franchisee will retain all records relating to the Business for the period
required by the tax authorities and PRI and its agents or representatives
will have the right at any reasonable time to inspect and audit the records
wherever they are located. Franchisee will fully cooperate and will
instruct its employees, agents or representatives to fully cooperate with
PRI and its agents or representatives during such inspections and audits.
If any inspection or audit discloses a deficiency in Franchisee's payment
of any amount payable or required to be spent by Franchisee pursuant to
this Agreement, Franchisee will immediately pay to PRI the deficiency plus
late payment interest pursuant to Clause 11.2. If the deficiency is equal
to or greater than 2% of the correct amount, Franchisee will also
immediately pay to PRI all of the costs incurred by PRI in the inspection
or audit.
11. PAYMENTS BY FRANCHISEE
11.1 Franchisee will pay all amounts due to PRI pursuant to this Agreement:
(a) in the currency specified in Schedule B or such other currency as
PRI notifies Franchisee from time to time, using, where applicable,
the exchange rate for conversion to the specified currency which is
posted on the day before the due date for payment by such bank as
is specified by PRI from time to time;
(b) into the bank account specified in Schedule B or in such other
manner as PRI notifies Franchisee from time to time; and
(c) without any deduction or set-off and free of any taxes, deductions
or withholdings other than as required by law. To the extent that a
deduction or withholding is required to be made by law, Franchise
will pay such increased amount as will, after deduction or
withholding, result in the receipt by PRI of the same amounts as
would have been received had no such deduction or withholding been
made.
11.2 Any amount not paid by Franchisee to PRI when due will bear late payment
interest calculated on a daily basis from the due date at the rate
specified in Schedule B. This interest will continue to apply after any
judgment.
11.3 Franchisee will pay promptly when due all taxes, duties, charges and levies
payable in respect of the Business and all debts and other financial
obligations incurred in the operation of the Business, including, without
limitation, all obligations to suppliers. If applicable, Franchisee will
observe, perform and comply with all obligations and covenants to the
lessor of the Outlet's premises.
-6-
12. INSURANCE, INDEMNITY AND GUARANTEE
12.1 At all times during the Term, Franchisee will at its cost maintain the
Insurances prescribed in the Manuals. PRI must be named as an additional
insured party on the policies of Insurance. Franchisee will on demand
deliver to PRI certificates of insurance and will not commit any act or
omission which may render the insurances void or voidable.
12.2 Franchisee indemnifies and will keep indemnified PRI, its Affiliated
Companies and their agents, employees, directors, successors and assigns
from and against any and all claims, liabilities, losses, costs and
damages (including legal costs and expenses) arising directly or
indirectly in connection with or related to Franchisee's conduct of the
Business. PRI's exercise of any right pursuant to this Agreement,
including, without limitation, any exercise of the power of attorney
granted pursuant to Clause 15.4, or any act or omission by any agent,
representative, contractor, licensee or invitee of Franchisee.
12.3 As a precondition to the grant of rights pursuant to Clause 1.1,
Franchisee will procure the execution by the guarantors specified in
Schedule B (and such other guarantors as PRI requires in connection with
any approved transfer of any interest or share in Franchisee) of a
guarantee of Franchisee's obligations and liabilities under this
Agreement. In the form required by PRI and including such covenants by
the guarantors regarding the terms and conditions of this Agreement as
PRI may require.
13. PROTECTION OF SYSTEM PROPERTY AND GOODWILL OF SYSTEM
Franchisee covenants that neither Franchisee nor any affiliated Company
of Franchisee will directly or indirectly in any capacity, whether on its
own account or as a member, shareholder, director, employee, agent,
partner, joint venturer, advisor, consultant, lender or lessor, have any
interest in, be engaged in or perform any services for:
(a) during the Term, any business within the In-Term area specified in
Schedule B involving the wholesale or retail preparation, marketing
or sale of any food products without PRI's prior written approval,
provided that such approval will not be unreasonably withheld by PRI
if the business does not predominantly involve the preparation,
marketing or sale of pizza and pasta (collectively), chicken,
Mexican or burger products; and
(b) for 12 months following the expiration, termination or transfer of
this Agreement, any business within the post-Term area specified in
Schedule B involving the preparation, marketing or sale of products
similar to the Approved Products.
14. TRANSFERS AND CHARGES
14.1 Franchisee will not charge, pledge or otherwise encumber any interest in
or right under this Agreement. Franchisee will not charge, pledge or
otherwise encumber any interest in or asset of the Business without
giving PRI prior notice.
14.2 Franchisee will not sell, transfer or gift this Agreement or any interest
in this Agreement without first obtaining PRI's prior written approval of
the proposed transferees and then complying with all of PRI's transfer
procedures specified in the Manuals, including, without limitation,
paying to PRI the transfer fee specified in Schedule B and the costs and
expenses incurred by PRI in connection with the transfer.
-7-
14.3 Franchisee will not, without PRI's prior written approval, permit any
sale, transfer or gift of any interest or share in Franchisee, issue any
new share in Franchisee to any party who is not a shareholder at the Date
of Grant or permit any reconstruction, amalgamation or other material
change in the structure or financial condition of Franchise.
14.4 If Franchisee proposes any sale or transfer of this agreement or any
interest in this Agreement, Franchisee will notify PRI of the agreed terms
and conditions and PRI will have the right itself to elect to proceed with
the sale or transfer on substantially the same terms and conditions within
60 days of receipt of Franchisee's notice. If PRI does not so proceed,
Franchisee will submit the proposed transferee for PRI's approval pursuant
to Clause 14.2.
15. DEFAULT AND TERMINATION
15.1 PRI may terminate this Agreement by notice to Franchisee effective upon
receipt by Franchisee of the notice, and/or adopt any of the remedies
specified in Clause 15.2, if any of the following events occur:
(a) Franchisee is unable to pay any of its debts when they become due or
becomes insolvent or a liquidator, receiver, manager, administrator
or trustee in bankruptcy (or local equivalent) of the Franchisee or
the Business is appointed, whether provisionally or finally, or an
application or order for the winding up of Franchisee is made or
Franchisee enters into any composition or scheme of arrangement;
(b) Franchisee breaches any of the terms and conditions of Clause 1.3,
5.1, 8, 9, 13 and 14;
(c) Franchisee commits any crime, offence or act which in PRI's
reasonable judgment is likely to adversely affect the goodwill of
the Business, the Marks, the System or the System Property;
(d) Franchisee knowingly or negligently maintains false records in
respect of the Business or submits any false report to PRI;
(e) Franchisee abandons or ceases to operate the Business for more than 3
consecutive days without PRI's prior written approval provided that
such approval will not be unreasonably withheld by PRI where the
abandonment or cessation is caused by war, civil commotion, fire,
flood, earthquake, act of God or any other cause beyond Franchisee's
reasonable control;
(f) any other agreement between PRI and Franchisee (or their respective
Affiliated Companies) is terminated;
(g) any part of this Agreement, or the guarantee referred to in Clause
12.3, is held to be void, invalid or otherwise unenforcable pursuant
to Clause 21.5;
(h) PRI notifies Franchisee that Franchisee has breached any term or
condition of this Agreement (other than Clause 1.3, 5.1, 8, 9, 13 and
14) or any other agreement between PRI and Franchisee (or their
respective Affiliated Companies) relating to the Business and
Franchisee does not fully cure the Breach to PRI's satisfaction
within the cure period provided for in the notice; or
-8-
(l) Franchisee breaches any term or condition of this Agreement (other
than Clauses 1.3, 5.1, 8, 9, 13 and 14) or any other agreement
between PRI and Franchisee (or their respective Affiliated Companies)
relating to the Business in circumstances where, in the preceding 24-
month period, Franchisee has been sent 2 notices pursuant to Clause
15.1 (h), whether or not Franchisee cured the prior breaches to PRI's
satisfaction.
15.2 If any of the events specified in Clause 15.1 occur, PRI may, in addition
and without prejudice to its rights under Clause 15.1:
(a) terminate, by notice to Franchisee, Franchisee's right under Clause
18 to renew the franchise hereby granted;
(b) terminate any development or option rights in respect of any system
or concept granted to Franchisee pursuant to any other agreement
between Franchisee and PRI (or their respective Affiliated
Companies);
(c) itself take whatever actions it considers necessary to cure the
breach at Franchisee's cost (including, without limitation,
administrative costs), such cost to be payable by Franchisee within
the period specified in a written demand from PRI;
(d) limit or withhold the supply of any products, supplies, materials,
equipment or services supplied to Franchisee by PRI or its
Affiliated Companies; or
(e) In the event that PRI has issued a notice pursuant to Clause 15.1(h)
in respect of a breach of Clause 3.1 and Franchisee has not fully
cured the breach to PRI's satisfaction within the cure period
provided for in the notice, PRI may take control of the Business for
a period of up to 30 days, for the purpose of rectifying the breach
and retraining Franchisee and Franchisee's employees at Franchisee's
cost, such cost to be payable by Franchisee within the period
specified in a written demand from PRI. During this period,
Franchisee and its employees must continue to attend the Outlet to
perform their responsibilities in the conduct of the Business, but
subject to the directions of PRI. Any obligations, liabilities or
costs incurred in respect of the Business during this period will be
Franchisee's responsibility and the indemnity in Clause 12.2 will
apply.
15.3 PRI's exercise of any of its rights under this Clause 15 will be in
addition to and not in limitation of any other rights and remedies it may
have in the event of any breach or default by Franchisee.
15.4 In the event of the expiration or termination of this Agreement, Franchisee
appoints PRI to be Franchisee's attorney with power to do in the name of
Franchisee and on Franchisee's behalf all acts and things necessary to
effect Franchisee's compliance with its obligations under this Agreement,
including, without limitation, executing documents. Franchisee agrees that
Franchisee will be bound by and will ratify all acts and things done by PRI
pursuant to this power of attorney.
16. CONSEQUENCES OF TERMINATION
16.1 Immediately upon the expiration or termination of this Agreement,
Franchisee will:
(a) pay all amounts owing to PRI;
-9-
(b) discontinue all use of the Marks and the System Property and
otherwise cease holding out any affiliation or association with PRI
or the System unless authorized pursuant to any other written
agreement with PRI;
(c) dispose of all materials bearing the Marks and all supplies in
accordance with PRI's instructions; and
(d) if PRI so requires, restore or de-identify the Outlet in accordance
with PRI's instructions.
16.2 If Franchisee fails to fulfill any of its obligations under Clause 16.1,
PRI may itself take whatever actions it considers necessary to fulfill
those obligations and invoice Franchisee for the full cost of such
actions, such invoice to be payable within 7 days.
16.3 For 60 days from the termination of this Agreement, PRI will have the
option to purchase, or to nominate a third party purchaser of, any of the
supplies held by Franchisee at cost price and any of the equipment or
signage at the Outlet at a price equal to book value less depreciation or
as otherwise agreed, and free of any charges or other security interests.
16.4 The rights and obligations under Clauses 8, 9, 10, 11, 12.2, 13(b),
15.2(c), 15.2(e), 16 will survive the expiration or termination of this
Agreement.
17. RIGHTS OF ENTRY
17.1 Notwithstanding Clause 3.3, Franchisee expressly authorizes PRI and its
agents or representatives to enter the Outlet, without prior notice to
Franchisees, for the purposes of Clauses 15.2(c), 15.2(e) and 16.2.
Franchisee hereby waives, and releases PRI from, any rights, actions or
claims which Franchisee may at any time have against PRI in connection
with PRI's entry into the Outlet.
17.2 Franchisee will execute any documents required by PRI in connection with
PRI's entry into the Outlet and use its best endeavours to procure any
consent required from any third party in connection with PRI's entry into
the Outlet.
18. RENEWAL
Upon the expiration of the Term, PRI will renew the franchise for the
renewal term specified in Schedule B if the following conditions are
satisfied:
(a) Franchisee requests the renewal in writing no more than 18 months
and no less than 12 months prior to the expiration of the Term;
(b) Franchisee's right to renew the franchise has not been terminated
under Clause 15.2(a) prior to the expiration of the Term;
(c) Franchisee is not at the expiration of the Term in breach of any
term or condition of this Agreement or any other agreement between
PRI and Franchisee (or their respective Affiliated Companies);
(d) Franchisee upgrades the Outlet to PRI's then current Standards for
new outlets prior to the expiration of the Term;
-10-
(e) Franchisee executes PRI's then current Franchise Agreement for new
franchisees, incorporating the then current continuing fees,
advertising contributions and other financial obligations but
excluding any further renewal, together with any other documents
required by PRI to be executed by Franchisee or such guarantors as
PRI requires; and
(f) Franchisee pays the renewal fee specified in Schedule B to PRI at
least 90 days prior to the expiration of the Term.
19. DISPUTE RESOLUTION
19.1 PRI and Franchisee will endeavour to resolve by mutual negotiation any
dispute arising between them in connection with this Agreement.
19.2 If PRI and Franchisee fail to resolve any dispute by mutual negotiation,
the parties may refer the dispute to a mutually agreed mediator for non-
binding mediation. The parties will bear the costs of any mediation
equally.
19.3 Such dispute resolution procedures will not in any way prejudice or limit
PRI's ability to exercise its rights under Clause 15 at any time.
20. NOTICES
Any notice or other communication required under this Agreement will be
in writing and properly addressed to the addressee at the address
specified in this Agreement (or any other address notified by the
addressee) and will be deemed received by the addressee on the earlier of
the date of delivery, the date of transmission if sent by facsimile with
receipt confirming completion of transmission or, if sent by pre-paid
security or registered post, the deemed postal receipt date specified in
Schedule B.
21. MISCELLANEOUS
21.1 This Agreement constitutes the entire agreement between the parties with
respect to its subject matter and supersedes all prior negotiations,
agreements or understandings.
21.2 Franchisee is an independent contractor and is not an agent,
representative, joint venturer, partner or employee of PRI. No fiduciary
relationship exists between PRI and Franchisee.
21.3 This Agreement will inure to the benefit of PRI, its successors and
assigns and may be transferred by PRI to any party without Franchisee's
prior approval.
21.4 The delay or failure of any party to exercise any right or remedy
pursuant to this Agreement will not operate as a waiver of the right or
remedy and a waiver of any particular breach will not be a waiver of any
other breach. All rights and remedies under this Agreement are cumulative
and the exercise of one right or remedy will not limit the exercise of
any other right or remedy.
21.5 If any part of this Agreement is held to be void, invalid or otherwise
unenforceable, PRI may elect either to terminate this Agreement pursuant
to Clause 15.1 or to sever the void, invalid or unenforceable part. In
which event the remainder of this Agreement will continue in full force
and effect.
-11-
21.6 The terms and conditions of this Agreement may be changed only in writing
signed by both parties, provided that the Standards and the Manuals may be
changed by the PRI from time to time pursuant to Clause 3.2.
21.7 This Agreement will be governed by and construed in accordance with the
law of the territory specified in Schedule B and the parties agree to
submit to the non-exclusive jurisdiction of the courts of that territory.
21.8 Franchisee will pay to PRI all reasonable legal expenses incurred by PRI
in connection with this Agreement, including, without limitation, any
stamp duty and any expenses incurred in connection with the enforcement of
this Agreement.
21.9 This Agreement is executed in English. A local language translation may be
attached, which the parties intend to be identical to the English text.
However, if any dispute arises as to the interpretation of the language of
this Agreement, the English text shall govern.
21.10 In the interpretation of this Agreement, unless the context indicates a
contrary intention:
(a) the obligations of more than one party will be joint and several;
(b) words denoting the singular include the plural and vice versa and
words denoting any gender include all genders;
(c) headings are for convenience only and do not affect interpretation;
(d) references to Clauses and Schedules are to clauses and schedules of
this Agreement; and the Schedule form part of this Agreement; and
(e) this Agreement may be executed in any number of counterparts, each
of which will be deemed an original but which together will
constitute one instrument.
-------------------------------------------------------------------
FRANCHISEE'S REPRESENTATION
Franchisee represents to PRI that:
(a) Franchisee has reviewed the Agreement with the assistance of
independent legal counsel and understands and accepts the
terms and conditions of this Agreement;
(b) Franchisee has relied upon its own investigations and
judgement in entering this Agreement and no inducements,
representations or warranties have been given in respect
of the Business or this Agreement; and
(c) Franchisee acknowledges that establishment and operation of
the Business will involve significant financial risks that
the success of the Business will depend upon the skills and
financial capacity of Franchisee and also upon changing
economic and market conditions.
-------------------------------------------------------------------
-18-
EXECUTED as an agreement
THE COMMON SEAL of )
KENTUCKY FRIED CHICKEN )
PTY LIMITED was affixed in the )
a presence of: )
--------------------------------- ----------------------------------
Director/Secretary Director
THE COMMON SEAL of )
▇▇▇▇▇▇▇ FOODS INTERNATIONAL )
PTY LIMITED was affixed in the )
presence of: )
--------------------------------- ----------------------------------
Director/Secretary Director
SCHEDULE A -- DEFINITIONS
Accounting Period means any one of the periods making up PRI's financial year.
Advertising Contribution means the percentage of Revenues specified in
Schedule B.
Affiliated Companies means any companies which are part of one or more ownership
structures ultimately controlled by a common parent corporation or common
shareholder, including any related bodies corporate within the meaning of the
Corporations Law.
Approved Products means the products from time to time approved by PRI for sale
in the Business.
Business means the business of preparing, marketing and selling the Approved
Products under the Marks at the Outlet pursuant to this Agreement.
Concept means the concept franchised to Franchisee pursuant to this Agreement
and specified in Schedule B.
Continuing Fee means the percentage of Revenues specified in Schedule B.
Date of Grant means the date specified in Schedule B.
Due Date means the date specified in Schedule B or any other date notified by
PRI to Franchisee from time to time.
Manuals means the manuals, notices and correspondence published or issued from
time to time by PRI in any form, containing the Standards and other
requirements, rules, procedures and guidelines relating to the System.
Marks means the trademarks, service marks and trade names and other similar
rights owned by PRI or its Affiliated Companies and designated by PRI from time
to time for use in the Business.
Outlet means the outlet conforming to the Concept at the address specified in
Schedule B.
Revenues means all gross receipts received by Franchisee as payment for the
Approved Products and for all other goods and services sold at or from the
Outlet or the Business and all service fees but excludes sales or other tax
receipts required by law to be remitted, and in fact remitted by Franchisee, to
any government authority and no adjustment for cash shortages from cash
registers will be made.
Standards means the standards, specifications and other requirements of the
System from time to time determined, changed, or added to by PRI, including,
without limitation, with respect to the preparation, marketing and sale of the
Approved Products, customer service procedures, the design, decor and fit-out
of the Outlet, the equipment at the Outlet, and the content, quality and use of
advertising and promotional materials.
System means the system for the preparation, marketing and sale of food products
used in operating the Concept.
System Property means the contents of the Manuals and all other know how,
information, specifications, systems and data used by PRI in or in respect of
the System, including, without limitation, trade secrets, copyrights, designs,
patents and other intellectual property.
Term means the period specified in Schedule B.
SCHEDULE B
INFORMATION SCHEDULE
Advertising Contribution: 6% of Revenues:
(Clause 6)
. 5% of Revenues to be paid by Franchisee to
PRI on or before each Due Date for
administration by PRI, through a National
Advertising Cooperative; and
. 1% of Revenues to be spent by Franchisee
on local advertising and promotions in
each Accounting Period
Bank: Westpac Banking Corporation
(Clause 11.1)
Bank Account: Account No. 119481
(Clause 11.1) BSB No. 34002
Concept: KFC Restaurant Outlet
Continuing Fee: 5% of Revenues
Currency: Australian Dollars
(Clause 11.1)
Date of Grant:
Due Date: 5 days after each Accounting Period
Governing Law: New South Wales
(Clause 21.7)
Guarantors: Not Applicable - no guarantee required by PRI.
(Clause 12.3)
In-Term Restraint Area: Australia and New Zealand
(Clause 13(a))
Initial Fee: $35,000
(Clause 2.1)
Interest Rate: Indicator lending rate quoted by Westpac Banking
(Clause 11.2) Corporation on the due date plus 2% per annum,
calculated on a daily basis.
Outlet Address:
Post-Term Restraint Area: As specified in Schedule C.
(Clause 13(b))
Postal Receipt Date: 3 days after the date of posting
(Clause 20)
Renewal Fee: (if applicable) $35,000 adjusted in line with the
(Clause 18(g)) percentage increase in the Consumer Price Index
(all groups - Sydney) from the Date of Grant.
SCHEDULE B - INFORMATION SCHEDULE
Page 2
Renewal Term:
(Clause 18)
Term:
Transfer Fee: $35,000 adjusted in line with the percentage
(Clause 14.2) increase in the Consumer Price Index (all groups-Sydney)
from the Date of Grant.
SCHEDULE C
ADDITIONAL PROVISIONS OF FRANCHISE AGREEMENT
C1. MAXIMUM RETAIL PRICE
--------------------
Franchisee will not permit any Approved Products to be sold at the Outlet
at any price exceeding the maximum retail prices advised by PRI to
Franchisee from time to time.
C2. FRANCHISING CODE PROVISION
--------------------------
Franchisee acknowledges that PRI is registered under the Franchising Code
of Practice, and accordingly Franchisee agrees to comply with all
provisions of the Franchising Code of Practice (as modified from time to
time).
C3. POST-TERM RESTRAINT AREA
------------------------
The non-competition restraint in Clause 13(b) of this Agreement will apply:
(i) within a radius of 5km of any KFC retail outlet located in
Australia:
(ii) within a radius of 1km of any KFC retail outlet located in
Australia:
(iii) within a radius of 1km of any KFC retail outlet located in
Queensland;
(iv) within a radius of 5 km of the Outlet;
(v) within a radius of 1 km of the Outlet.
This Clause C3 will have effect as if it were 5 separate covenants and if
any one or more of such separate covenants is or becomes invalid or
unenforceable for any reason then such invalidity or unenforceability will
not affect the validity or enforceability of any of the other separate
covenants.
C4. DELIVERY OPERATION
------------------
If PRI, in its discretion, determines to introduce delivery operations to
the System, PRI will have the right to require Franchise to deliver the
Approved Products from the Outlet, within a specified delivery area
determined by PRI in accordance with the Manuals and notified by PRI to
Franchisee. Franchisee acknowledges and agrees that such delivery
operations may require capital expenditures by Franchisee at the Outlet.
The terms and conditions under which Franchisee will conduct such delivery
operations will otherwise be as specified in the Manuals.
C5. AMENDMENT OF CLAUSE 15.1(l)
---------------------------
Clause 15.1(l) will only apply in respect of a terminated agreement between
an Affiliated Company of PRI and an Affiliated Company of Franchisee to the
extent that such termination results from a breach of the agreement by the
Affiliated Company of Franchisee. For the avoidance of doubt, Clause
15.1(f) will not apply in the event of the expiration of the term of any
other agreement between PRI and Franchisee (or their respective Affiliated
Companies).
