EXHIBIT 10.27
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT ("AGREEMENT"), entered into on this 7th day of January,
2005 by and between BACK YARD BURGERS, INC., a Delaware corporation
("Franchisor"), with its principal place of business at 0000 Xxxxxx Xxxx Xxxxx,
Xxxxx #000, Xxxxxxx, Xxxxxxxxx 00000 and XXXXXXX X. XXXXXXXX ("Franchisee[s]"),
whose principal place of business is 0000 Xxxxxxx Xxxx, #000, Xxxxxxx, XX 00000.
W I T N E S S E T H
WHEREAS, Franchisor has created a method for establishing and operating
quick-service restaurants which are known as Back Yard Burgers(R) restaurants
and has also created a system for the establishment and operation of such
restaurants selling standardized menu items (the "System"), all of which is set
out in the Franchise Administration Manual and the Restaurant Operations Manual
(hereinafter collectively the "Manuals"), which are loaned to the Franchisee for
the duration of this Agreement; and
WHEREAS, Franchisor has, by considerable expenditure, created
substantial goodwill associated with its marks described hereinafter; and
WHEREAS, Franchisee desires to operate a Back Yard Burgers(R)
restaurant (the "Restaurant") in a certain territory hereinafter defined (the
"Territory"); and
WHEREAS, Franchisee desires to use the System and trademarks and/or
trade names "Back Yard Burgers(R)", the logo associated with the name "Back Yard
Burgers(R)" (an outdoor grill with flames emanating therefrom) and other
trademarks now or hereafter owned and used by Franchisor in the operation of
restaurants (hereinafter collectively the "Marks");
NOW, THEREFORE, in consideration of the mutual promises, and covenants
herein contained, the parties hereto agree as follows:
1. GRANT OF RIGHT.
(a) Franchisor grants to Franchisee the right to open and operate
a Restaurant in the Territory using the System and the Marks.
(b) Franchisee agrees to use the System and the Marks in the
manner prescribed by Franchisor.
(c) Franchisee agrees to use the Marks only in accordance with the
provisions of this Agreement and the Manuals, and to notify
Franchisor of any improper use of the Marks by others of which
Franchisee becomes aware. Franchisee shall not use any of the
Marks as part of its corporate name, other business name or
internet domain name, whether alone or in prefix, suffix, or
in combination with other
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modifying words, without the prior written permission of
Franchisor. Any and all goodwill associated with the Marks,
including any goodwill which might be deemed to have arisen
through Franchisee's activities, shall inure directly and
exclusively to the benefit of Franchisor, and Franchisee shall
not at any time acquire any rights in the Marks. Franchisee
further agrees that it will not challenge Franchisor's
ownership of the Marks, and that it will not register or
attempt to register the Marks in its own name or that of any
other firm, person or corporation. If requested by Franchisor,
Franchisee will assign to Franchisor any domain name
registrations which contain one or more of the Marks.
(d) The license granted by this Agreement does not include the
right to operate mobile units, trailers, concessions, and/or
catering off the premises of the Restaurant; however, if you
obtain our specific prior written permission, you will be
allowed to prepare product for off-premise sales. All such
off-premise operations by Franchisee shall be subject to and
in accordance with the terms and provisions of this Agreement
and the Manuals.
2. TERRITORY. Franchisor agrees that, during the term of this Agreement,
it will not sell or establish any other franchised or company-owned
Restaurant or any other restaurant which sells hamburgers and/or
chicken sandwiches in the following territory: A site to be determined
with a one (1) mile exclusive radius (the "Territory"), except in or in
conjunction with any military installation, zoo, amusement park, or
stadium/arena/coliseum. Franchisee expressly acknowledges and agrees
that Franchisor shall retain the exclusive right to sell within the
Territory in grocery stores, specialty shops, or other non-restaurant
retail outlets both food and non-food products (now existing or
hereafter developed) bearing one or more of the Marks. This Agreement
applies only to the Territory.
3. COVENANTS OF FRANCHISOR
(a) Franchisor will provide, without charge and at a training
facility designated by Franchisor, Franchisee and/or employees
designated by Franchisee with an approximate eight-week
training session which will include classroom as well as
"on-the-job" training. Franchisee shall be responsible for its
travel and room and board expenses incurred in connection with
training and the cost of uniforms. Franchisee or Franchisee's
representative must successfully complete training, and three
of its restaurant managers must be certified by Franchisor
prior to commencement of operations by Franchisee.
(b) Franchisor shall furnish Franchisee with copies of the Manuals
which set forth the standard operating policies and procedures
of Franchisor.
(c) Franchisor will provide site guidance to Franchisee by
delivering suggested dimensions and design plans for the
Restaurant. Franchisors acceptance of the site does not
guarantee the success of the location.
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Franchisor will provide Franchisee with prototypical
construction documents indicating the site and construction
work required. Determination that these documents are in
compliance with any local statutes, ordinances, codes, or
regulations is the responsibility of Franchisee. Franchisor
shall provide consultation regarding preparation of actual
construction documents at no additional charge. Franchisor
will assist Franchisee and Franchisee's consultants in the
selection of a general contractor by providing guidelines and
suggested stipulations to be included in agreements between
Franchisee and its general contractor. Franchisor will
periodically review the progress of the Restaurant
development. The actual day-to-day supervision of the
Restaurant development shall be the responsibility of
Franchisee.
(d) Franchisor will perform lease or purchase agreement review and
will provide guidance in negotiations of such agreements.
However, it is strongly recommended that Franchisee have such
documents examined by legal counsel or other competent advisor
prior to their execution. Franchisor disavows any
responsibility for the legality or contents of such agreement
or any of those documents referenced in paragraph 3(c) hereof.
(e) Franchisor will furnish Franchisee with lists of equipment,
supplies, and other items which are to be utilized in the
operation of the Restaurant. Franchisor will also assist in
locating sources of supply for all such items. Currently,
Franchisee is required to purchase three items from
Franchisor, namely, Miz Grazi's Hot Sauce(TM), Back Yard
Burgers(R) Lemon Butter Spice Packs, and Back Yard Burgers(R)
Blackened Seasoning. Formulas for these items are "trade
secrets" of Franchisor (or its suppliers) and any substitution
therefore would substantially alter the recognized taste and
presentation of products in which these items are used.
Additional proprietary items may be introduced in the future
which Franchisee will be required to purchase from Franchisor
or its designated suppliers. Franchisee is further required to
use certain brands of products in the preparation of products
for sale. Franchisor believes that, because of national
contract pricing, those required brands will be competitively
and reasonably priced. Franchisee is not required to purchase
any other items from Franchisor or its designated suppliers.
In any event, all items utilized in the Restaurant must meet
the quality standards of Franchisor. Franchisor will permit
Franchisee to obtain equipment, fixtures, supplies, and other
services from sources of Franchisee's choice provided that the
chosen suppliers meet the Franchisor's quality, service,
safety and health standards, and have the capacity to supply
Franchisee's requirements. Additionally, any such supplier
must demonstrate sound financial condition and business
reputation, and must supply to a sufficient number of
franchisees of Franchisor to enable Franchisor economically to
monitor compliance with Franchisor's standards,
specifications, and requirements.
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(f) Prior to commencement of operations of the Restaurant,
Franchisor will send a representative to the Restaurant
premises to perform a final inspection, including equipment
check-out, proper stocking of goods and materials, staffing,
sign installation, landscaping, fixtures and the actual
building structure, and to conduct an overall review of the
plans to begin operations. In the event that all conditions
necessary to commence operations have been met, the Franchise
Representative will issue a written opening authorization
("Opening Authorization") to the Franchisee which shall
certify Franchisor's approval for the Franchisee to open for
business. Should any items be noted as deficient or improperly
prepared, the Franchisee will be required to correct
satisfactorily such items prior to commencing actual
operations. In addition, Franchisor will have its New Store
Opening Team at the Restaurant to assist Franchisee in hiring,
training, opening, and operating the restaurant for at least
the first five (5) days of operations.
(g) Following commencement of operations, a Franchisor
representative will make periodic visits to the Restaurant.
Periodically, the Franchisor representative will make a
written inspection report of the physical condition, and
Franchisee's performance of all primary aspects of the
Restaurant business. Copies of these reports will be furnished
to the Franchisee, or manager designated by the Franchisee.
Any deficiencies or any violations of the Agreement or the
Manuals noted in the report must be corrected. Failure to make
such corrections can result in termination of this Agreement
pursuant to Paragraph 7 hereof.
4. COVENANTS OF FRANCHISEE.
(a) Simultaneously with the execution of this Agreement Franchisee
shall pay Franchisor a franchise fee of Twenty Five Thousand
Dollars ($25,000.00). This fee is non-refundable.
(b) Franchisee agrees to submit to Franchisor a site selected for
the Restaurant as soon as practicable, but in no event more
than 120 days following the execution of this Agreement.
Franchisee further agrees that commencement of retail
operations of the Restaurant shall begin not more than 270
days following the execution of this Agreement.
Franchisee shall provide Franchisor with complete engineering
surveys of the selected site prepared by an engineer or
surveyor currently licensed in the state in which the site is
located. Franchisee may use the above prototypical
construction documents to convey the intent of Franchisor to
its architects and engineers who shall be currently licensed
in the state in which the Restaurant is to be constructed.
Franchisee shall have actual construction documents prepared
by such duly licensed professionals for use in obtaining
competitive bids, securing required permits, constructing the
project, ascertaining in consultation with professional
consultants the suitability of the soil and subsurface
conditions of the site for placement of the construction shown
on the prototype construction documents,
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and modifying the prototype design as necessary to comply with
local statute, ordinances, regulations and codes.
(c) Franchisee agrees to pay Franchisor a royalty of four percent
(4%) of the gross receipts (less sales tax) derived from all
sales of goods (whether food or non-food) and services made
by, at or from the Restaurant, including, but not limited to,
catering and off-premises sales ("Gross Receipts"). Such
royalty payments shall be made on a weekly basis (accounting
period Sunday through Saturday) and forwarded by mail so as to
arrive at Franchisor's headquarters within seven (7) days of
each Saturday. Failure to pay royalties as herein called for
can result in cancellation of this Agreement as provided
below.
(d) Franchisee agrees to maintain books and records of all
operations of the Restaurant and to make such books and
records available to Franchisor for inspection. Franchisor
reserves the right to have such books and records of the
Restaurant audited. Should such audit result in the
determination that reports to Franchisor have been understated
by an amount exceeding 1%, then the Franchisee shall pay for
all audit costs incurred and royalties owing plus interest at
the maximum rate allowable by applicable law.
(e) Franchisee agrees to spend a sum equal to not less than two
percent (2%) of gross receipts (less any sales tax) on local
promotion and advertising such as radio, television,
Duratrans, banners, other point-of-purchase materials,
printing of coupons, direct mail, and other collateral
materials. Franchisor will furnish suggested promotional
programs and advertisements, and Franchisee may prepare its
own. All advertisements and promotions must have prior written
approval from Franchisor.
In addition, Franchisor shall have the right at any time, and
from time to time, to create Co-op Advertising Regions. If and
when Franchisor creates a Co-op Advertising Region for the
region in which the Franchisee's Restaurant is located,
Franchisee shall become a member thereof and participate
therein. The size and content of such regions, when and if
established by the Franchisor, shall be binding upon
Franchisee and all other Back Yard Burgers franchisees
similarly situated who are required by the terms of their
franchise agreements to so participate. At all meetings of
such Co-op Advertising Region each participating Franchisee,
and Franchisor, shall be entitled to one (1) vote for each of
its Restaurants located within such Co-op Advertising Region.
Twenty percent (20%) of the eligible member votes, or
Franchisor by itself, may call a meeting of all members of a
Co-op Advertising Region. All matters concerning operation of
a Co-op Advertising Region shall be decided by majority vote,
provided that a quorum is present, and such vote shall bind
all members of said region, including Franchisor. For purposes
hereof, a quorum shall consist of members entitled to cast at
least 50% of the total number of votes in such Co-operative
Advertising Region. Upon the approval of at least a majority
of the votes represented by all of
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the members of the Co-op Advertising Region, the Co-op
Advertising Region members may vote to require each member to
contribute up to, but not greater than, six percent (6%) and
not less than one percent (1%) of the Gross Receipts (less
sales tax) of all such member's Restaurants in said Co-op
Advertising Region for a regional co-op advertising program or
programs. In the event of approval of such additional regional
advertising contributions as aforesaid, each franchisee,
including Franchisee, and Franchisor, shall contribute to the
Co-op Advertising Region in accordance with said vote.
Expenditures made by Franchisee pursuant to any Co-op
Advertising Region program shall be credited against
Franchisee's local advertising requirement described in
Paragraph 4(e) above. Notwithstanding any contrary provision
hereinabove, Franchisor shall have the right to approve the
content of all advertising and promotional materials of the
Co-op Advertising Region.
Franchisor may require all of its Franchisees to participate
periodically in certain national marketing promotions.
(f) Franchisee agrees to contribute to a National Advertising Fund
(the "Fund") which shall be administered by Franchisor.
Contributions shall be in an amount equal to one percent (1%)
of the Gross Receipts. Payments to the Fund shall be made on a
weekly basis and submitted along with royalty payments.
Franchisor shall apply at least fifty percent (50%) of
contributions to the creation of marketing tools, such as
advertising copy for use on local radio and television, ad
slicks, four-color art, design, and other collateral pieces.
As a general rule, Franchisor will not use the Fund for the
purchase and placement of media advertising. Franchisee agrees
that Franchisor shall be authorized to spend the remaining
funds on such items as new product testing and development,
market research, improvements in operating methods and
techniques, or for other such purposes that Franchisor shall
deem to be in the interest of improving operations and
earnings of Restaurants. Franchisor shall furnish Franchisee
with a yearly report of the status of the Fund which shall
disclose contributions made and uses thereof. Franchisor shall
make contributions on behalf of its company-owned Restaurants
at the same rate as required of Franchisee herein.
(g) Franchisee shall submit for review a weekly Form 45 and a
monthly profit and loss statement to Franchisor together with
all other reports as required by the Manuals.
(h) Franchisee agrees to operate the Restaurant and the off
premises operations in accordance with all standards,
specifications, methods, techniques, and procedures set forth
in the Manuals which may be amended, replaced, and
supplemented from time to time by Franchisor.
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(i) Franchisee agrees to obtain and maintain in full force during
the term of this Agreement or any renewal hereof an insurance
policy or policies affording at least the following coverage:
(1) (A) Commercial General Liability with a general aggregate
limit (other than products-completed operations) of
$1,000,000.00.
(B) Products-Completed Operations aggregate limit of
$1,000,000.00.
(C) Personal and Advertising Injury limit of
$1,000,000.00.
(D) Each occurrence limit of $1,000,000.00.
(E) Fire damage limit (any one fire) of $50,000.00.
(F) Umbrella Liability over the above with a $1,000,000
limit, thereby providing total coverage of
$2,000,000.
(2) (A) Liability coverage shall include the above, and
i) blanket contractual liability, and
ii) broad form property damage
(B) Non-owned automobiles limit of $1,000,000.00.
(C) Hired automobiles limit of $1,000,000.00.
(3) Workmen's Compensation in the amount required by applicable
law.
It is suggested the building, contents, and equipment be
insured at replacement cost. All such required policies shall
name Franchisor an additional insured against any loss,
liability, or expense arising or occurring in connection with
the Franchisee's operation of the Restaurant. Franchisee must
provide Franchisor with a certificate of insurance evidencing
satisfaction of the above requirements. All such policies
shall include a provision that the issuer shall give
Franchisor not less than 30 days prior written notice of
cancellation of said policies.
(j) Should the Restaurant close for any reason relating to natural
disaster, accident or other unforeseeable events, Franchisee
will vigorously pursue reopening at the same or a new
location. If Franchisee has not resumed operations within a
period of one hundred eighty (180) days from the time of
closing, this Agreement shall be canceled by Franchisor unless
Franchisor in its sole discretion has granted a written
extension because of unusual circumstances beyond the control
of the Franchisee that have resulted in undue delay.
(k) Franchisee agrees to operate the Restaurant in compliance with
all federal, state, and local laws and regulations and shall
obtain all permits, certificates, and licenses necessary for
proper operation of the business.
(l) Franchisee agrees, to the extent permitted by applicable law,
to indemnify and hold harmless Franchisor and its officers,
employees, agents, successors and assigns (collectively,
"Indemnitees") from any liability or damage Indemnitees may
incur, including reasonable attorneys', experts' and
accountants' fees, as a
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result of claims, demands, costs of judgments, of any kind or
nature, by anyone whomsoever, arising out of, or otherwise
connected with, the ownership, maintenance or operation of the
Restaurant by Franchisee; any Agreement breaches by the
Franchisee; and/or any act or omission of the Franchisee or
any of its employees, agents or suppliers.
(m) Royalty or National Advertising Fund fees provided for in this
agreement respectively in Paragraphs 4(c) and 4(f) which are
not received within thirty (30) days of the payment due date
shall be charged interest on all past due balances at the rate
of 1% monthly or the highest amount permitted under applicable
law, whichever is less.
(n) Franchisor shall have the right, but not the obligation, at
any time during the Term hereof (as hereinafter defined) to
require Franchisee to instruct its bank to pay the amounts
identified in Paragraphs 4(c) and 4(f) hereof directly to
Franchisor from Franchisee's account, by such automatic
payment mechanism as Franchisor may reasonably designate and
upon the terms and conditions set forth herein. Upon
Franchisor's written notice of such election, Franchisee shall
so instruct its bank.
5. TERM. The term of this Agreement is for ten (10) years from the date
of execution (the "Term"). Franchisee may renew this Agreement for
successive five (5) year periods by providing written notice of intent
to renew to Franchisor and executing the then-current franchise
agreement not less than one hundred twenty (120) days prior to
expiration of the existing term and submitting with such written notice
a renewal fee of One Thousand Dollars ($1,000.00), provided that (a)
there is no material non-compliance or default by Franchisee at the
time such notice is given or upon the expiration of the existing term,
and (b) prior to giving written notice of intent to renew, Franchisee
shall have modernized, or contracted to modernize within a reasonable
time, the Restaurant and its premises including, but not limited to,
the building, signs, equipment, decor, and furnishings, if applicable,
so as to reflect the then-current image required by Franchisor.
6. TRANSFERABILITY OF INTERESTS.
(a) Neither any interest in the Restaurant nor any rights under
this Agreement may be sold, assigned, transferred, conveyed,
given away, or disposed of in any manner without the prior
written consent of Franchisor, provided, however, that
Franchisee is granted the right to assign this Agreement to a
corporation solely owned by Franchisee. If Franchisee is a
corporation, partnership, unincorporated association or
similar entity, the terms of this paragraph 6 shall apply to
any sale, resale, pledge, assignment, transfer or encumbrance
of the voting stock of, or other ownership interest in,
Franchisee, which alone or together with other related,
previous, simultaneous or proposed transfers, would result in
a change of control of Franchisee.
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Any proposed transfer other than to a corporation solely owned
by Franchisee is subject to the following conditions:
1. Franchisee must be in substantial compliance with the
terms and conditions of this Agreement.
2. The proposed transferee must meet all qualifications
imposed upon new franchisees by Franchisor at the
time the proposed transfer is to take place.
3. Franchisor has determined not to exercise its right
of first refusal as specified in paragraph 6(b) of
this Agreement.
4. Transferee must execute the then-current franchise
agreement.
5. A transfer fee of $1,000.00 shall be paid to
Franchisor. The transfer fee shall be paid at the
time the transferee executes the franchise agreement.
(b) With respect to a proposed transfer by Franchisee of any right
or interest which requires the prior written consent of
Franchisor, Franchisor shall have the right within 30 days to
match any bona fide offer of purchase, for the price and on
the terms and conditions contained in such bona fide offer.
The thirty-day period shall commence upon receipt by
Franchisor of a copy of such written offer of purchase. Should
Franchisor elect not to express its right of first refusal,
Franchisee may proceed with the transfer provided Franchisor
approves the prospective buyer. Such approval shall not be
unreasonably withheld.
(c) In the event of the death or disability of the Franchisee,
Franchisor shall consent to the transfer of the interest to
Franchisee's spouse, heirs, or relative, by blood or by
marriage, whether such a transfer is made by Will or by
operation of law if, at the sole discretion and judgment of
Franchisor, such person or persons obtaining said interest
shall be capable of conducting said business in a manner
satisfactory to Franchisor. In the event Franchisor does not
consent to such transfer, Franchisee's rights hereunder shall,
at Franchisor's option, terminate. This paragraph shall only
apply to the extent Franchisee owns the rights hereunder
personally and has not assigned such rights to a corporation,
limited liability company, partnership, or any other entity.
(d) In the event of new ownership or change of personnel, the new
franchisee and/or its designated employees must complete the
training program prescribed by Paragraph 3(a) hereof.
(e) This agreement is fully transferable by Franchisor.
7. TERMINATION. The following shall constitute events of default under
this Agreement and are good and sufficient cause for Franchisor to
cancel this Agreement.
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(a) AUTOMATIC TERMINATION BY FRANCHISOR. Franchisor shall
automatically terminate this Agreement without any notice or
action required by Franchisor under the following
circumstances:
(i) Insolvency of Franchisee or, unless otherwise
prohibited by law, upon the filing by Franchisee of
any proceeding under the Bankruptcy Act or any
similar state insolvency act or upon the filing of
any involuntary petition against Franchisee under any
such laws which is not dismissed within thirty (30)
days after filing; or
(ii) Franchisee has made a general assignment for the
benefit of creditors; or
(iii) A receiver shall be appointed by any court for
Franchisee; or
(iv) The assignment or transfer or attempt to assign or
transfer any interest in the Restaurant or this
Agreement by Franchisee without the prior written
approval of Franchisor whenever such approval is
required.
(b) TERMINATION BY FRANCHISOR ON IMMEDIATE NOTICE. Franchisor may
terminate this Agreement on immediate notice to Franchisee and
without giving Franchisee any opportunity to cure the event of
default under the following circumstances:
(i) Franchisee duplicates any portion of the System in
any food service outlet not franchised by Franchisor;
or
(ii) Franchisee has knowingly maintained false books and
records, has knowingly submitted false reports to
Franchisor, or has submitted false information in
connection with the original application to
Franchisor.
(iii) If in the judgment of Franchisor reasonably
exercised, the continued operation of the Restaurant
would result in imminent danger to public health or
safety; or
(iv) Franchisee violates or is convicted of violating any
federal, state, or local law or any administrative
regulation materially applicable to the operation of
the Restaurant.
(c) TERMINATION BY FRANCHISOR ON TEN (10) DAYS NOTICE. Franchisor
may terminate this Agreement by giving Franchisee ten (10)
days written notice under the following circumstances:
(i) Franchisee has failed to remain open for business or
has abandoned the Restaurant for more than three (3)
business days other than for reasons of casualty or
circumstances beyond the control of Franchisee; or
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(ii) Franchisee has failed to cure to Franchisor's
satisfaction within ten business days following
written notice by Franchisor to submit required
reports including, but not limited to, Form 45's as
required by Paragraph 4(g) hereof and monthly profit
and loss statements as required by Paragraph 4(g)
hereof.
(iii) Franchisor may terminate this Agreement upon
Franchisee's failure to cure to Franchisor's
satisfaction, within ten (10) days following written
notice by Franchisor, any default in payment of the
royalties or other sums owed to Franchisor pursuant
to this Agreement.
(d) TERMINATION BY FRANCHISOR ON THIRTY (30) DAYS NOTICE.
Franchisor may terminate this Agreement upon Franchisee's
failure to cure to Franchisor's satisfaction, within thirty
(30) days following written notice by Franchisor, any of the
following:
(i) Any other violations of this Agreement or one or more
of the Manuals.
(ii) Franchisee's denial, obstruction, or restriction of
Franchisor's right to inspect the Restaurant, receive
samples for testing, or examine any of Franchisee's
business records applicable to the Restaurant.
(iii) Franchisee's refusal to participate in certain
national marketing programs as required by Paragraph
4(e) hereof.
(iv) Franchisee's failure on three or more occasions
within any twelve-month period to comply with the
provisions of this Agreement or the Manuals whether
or not such failures have been corrected after notice
[the provisions of this paragraph 7(d)(4) are
inapplicable unless Franchisor shall have given
Franchisee notice of each such failure].
8. OBLIGATIONS OF THE FRANCHISEE AFTER TERMINATION. Upon expiration or
termination of this Agreement, including voluntary termination by
Franchisee, Franchisee shall have the immediate obligation to:
(a) Relinquish all interest of every kind and description in the
franchise granted hereunder;
(b) Pay within fifteen (15) days to Franchisor any royalties,
fees, and/or other monies owed by Franchisee to Franchisor;
(c) Not own, maintain, operate, engage in, or have any interest in
a restaurant with a fast food format, with or without a drive
through, that offers charbroiled hamburgers, charbroiled
chicken breast, hand-dipped milk shakes, and seasoned
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french fries within ten miles of the former franchisee's
former franchise location or locations or locations of any
other franchise or company-owned restaurants for a period of
one year after the date of termination of the franchise
agreement;
(d) Surrender all copies of any of the Manuals, and any other
materials bearing the Marks; and, at Franchisor's request,
cancel or assign to Franchisor any domain name registration
which contains, or would likely be confused with, one or more
of the Marks.
(e) Comply with the provisions of Paragraphs 9 and 14 of this
Agreement;
(f) Remove all signs, canopy, and other items from the Restaurant
premises necessary to insure that it does not continue to
resemble a Back Yard Burgers restaurant;
(g) Allow a final inspection of the Restaurant premises and
business records of the Restaurant; and
(h) Release to Franchisor all telephone numbers used in listing or
advertising under the Marks.
9. NONCOMPETITION. The Franchisee acknowledges that, pursuant to this
Agreement, Franchisee will receive valuable specialized training,
confidential information, and trade secrets, including, without
limitation, the contents of the Manuals, and information regarding the
operational, sales, promotional, and marketing methods and techniques
all of which are owned by Franchisor as part of the System and are
collectively hereinafter referred to as "Confidential Information." In
consideration for the use and license of the Confidential Information,
Franchisee agrees that it shall not, during the term of this Agreement
and for a period of one (1) year from termination, transfer, or
expiration of this Agreement, either directly, or indirectly, for
itself, or through, on behalf of, or in conjunction with, any person,
persons, partnership, or corporation:
(a) divert or attempt to divert any business or customer of the
Restaurant to any competitor, by direct or indirect inducement
or otherwise, or do or perform, directly or indirectly, any
other act injurious or prejudicial to the goodwill associated
with the names and marks and other proprietary rights of
Franchisor;
(b) employ or seek to employ any person who is at the time
employed by Franchisor or by another franchisee of Franchisor,
or otherwise directly or indirectly induce any such person to
leave his or her employment;
(c) own, maintain, operate, engage in, or have any interest in any
business which sells goods or services of a like competitive
nature, more specifically, hamburger or chicken sandwich
restaurants, and which is located within ten (10) miles of the
protected territory of any company-owned or franchised
Restaurant. This subsection shall not apply to ownership by
Franchisee as a passive investor of less
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than five percent (5%) interest in a publicly-held corporation
listed on a national stock exchange or traded on the
over-the-counter market.
Franchisee expressly acknowledges that it possesses skills and
abilities of a general nature and has other opportunities for
exploiting such skills. Therefore, enforcement of the covenants made by
Franchisee herein will not deprive it of its personal goodwill or
ability to earn a living. In the event that a court of competent
jurisdiction determines that the provisions of this paragraph 9 are
unreasonably broad or of unreasonable duration, the restrictions
contained in this paragraph shall be reduced to the longest period and
the largest geographical area which such court deems reasonable under
the circumstances.
Franchisee will cause its general partners, officers, directors and
management employees to execute non-competition agreements containing
the same provisions as those contained in this paragraph 9.
10. INDEPENDENT CONTRACTOR. Franchisee and Franchisor recognize that each
is an independent contractor and in no way an agent, servant,
fiduciary, or employee of the other.
11. INTERPRETATION. This agreement shall be interpreted according to the
internal laws of the State of Tennessee without regard to its conflict
of law provisions.
12. BINDING EFFECT. This Agreement shall be binding upon the parties
hereto, their respective heirs, successors, assigns, or legal
representatives.
13. SEVERABILITY; WAIVER. Any provision of this Agreement deemed to be
invalid shall be severable and will be automatically modified to the
extent necessary to make it valid. No waiver of any provisions herein
contained shall be construed as a waiver of any subsequent breach of
the same or any other covenant or provision.
14. CONFIDENTIALITY. Franchisee agrees that, during the term of this
Agreement and thereafter for the longest time permitted by applicable
law, it will preserve the confidentiality of the Confidential
Information. Franchisee shall comply with all instructions in the
Manuals for preserving the confidentiality of Confidential Information.
Franchisee shall use Confidential Information only in furtherance of
this Agreement, shall divulge Confidential Information only to its own
employees or representatives who need to know the same to discharge
their responsibilities in connection with the Restaurant, and shall,
upon termination of this Agreement, return to Franchisor all
Confidential Information fixed in any tangible medium of expression
(within the meaning of the U.S. Copyright Act), now known or later
developed. Franchisee will require its general partners, officers,
directors and management employees, as well as any other persons to
whom any Confidential Information is disclosed, to execute
Confidentiality Agreements containing the same provisions as are
contained in this Section 14. Franchisee agrees that Franchisor shall
be entitled to injunctive relief to enforce these confidentiality
provisions.
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15. FORUM SELECTION CLAUSE, WAIVER OF RIGHT TO JURY TRIAL, AND WAIVER OF
CLAIMS FOR PUNITIVE DAMAGES. The Franchisee and Franchisor hereby
mutually agree that this franchise agreement was negotiated, in its
entirety or in part, at Franchisor's headquarters in Memphis,
Tennessee, was accepted in Memphis, Tennessee, and that any and all
disputes either arising out of the franchise agreement or out of the
transactions and relationships between the parties, shall be brought in
the Chancery or Circuit Court of Tennessee for the Thirtieth Judicial
District at Memphis, which shall have exclusive jurisdiction to hear
the claims of the parties. Franchisee and Franchisor further agree to
waive their rights, if any, to trial by jury. Franchisee and Franchisor
further agree to waive their claims, if any, for punitive damages.
16. ATTORNEYS' FEES. Owner agrees that in the event that Back Yard Burgers
is forced to incur costs, including attorneys' fees, to enforce
compliance with this agreement or is forced to defend lawsuits or other
claims brought by owner, owner will pay Back Yard Burgers its costs,
including reasonable attorneys' fees incurred.
17. EARNINGS CLAIMS. Franchisee confirms that no officer, director, sales
person, or other representative of Franchisor has made any claims,
promises or forecasts regarding sales, earnings, break-even points, or
potential profits relative to the ownership of a Back Yard Burgers
franchise.
18. ENTIRE AGREEMENT. This instrument constitutes the entire agreement
between the parties. There are no other covenants, promises or
agreements, written or oral, not set forth herein except for such other
Agreements that may be executed concurrently herewith. No covenant or
provision of this Agreement may be changed or modified, unless it is in
writing and with the mutual consent of both parties hereto. Franchisee
has reviewed this Agreement in its entirety and understands its
contents.
19. NOTICE. All notices, offers, acceptances, waivers and other
communications made with respect to this Agreement shall be in writing,
and shall be deemed to have been both given and received when delivered
to the party in person or, if mailed, when deposited (i) in the U.S.
Mails, by certified mail, postage prepaid, with return receipt
requested, or (ii) with any nationally known commercial delivery
service (such as Federal Express), third party at the address set forth
in the first paragraph of this Agreement or to such other address as
any party, by notice to all others, may designate from time to time.
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IN WITNESS WHEREOF the parties hereto have executed this Agreement in duplicate.
XXXXXXX X. XXXXXXXX, FRANCHISEE
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------
Witness: /s/ Xxxxxxx X. Xxxx
---------------------------
Date: January 7, 2005
------------------------------
ACCEPTED AT MEMPHIS, TENNESSEE THIS 7TH DAY OF JANUARY, 2005.
BACK YARD BURGERS, INC., FRANCHISOR
By: /s/ Xxxxxxxxx M. Michael
--------------------------------
Xxxxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
-----------------------------
Witness: /s/ Xxxxxxx X. Xxxx
---------------------------
Date: January 7, 2005
------------------------------
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ADDENDUM 1
TERRITORY
The first sentence of Section 2 of this Agreement is hereby deleted and
replaced with the following:
Franchisor agrees that, during the term of this Agreement, it will not
sell or establish any other franchised or company-owned Restaurant or any other
restaurant which sells hamburgers and/or chicken sandwiches in the following
territory: Sites to be determined within Xxxxxxxxxx County and Xxxxxx County,
Texas with a one (1) mile exclusive radius (the "Territory"), except in or in
conjunction with any military installation, zoo, amusement park, or
stadium/arena/coliseum.
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ADDENDUM 2
COVENANTS OF FRANCHISOR
Section 3, part (d) of this Agreement is hereby deleted and replaced
with the following:
"(d) Prior to commencement of operations of the Restaurant, Franchisor may, at
its sole discretion, send a representative to the Restaurant premises to perform
a final inspection, including equipment check-out, proper stocking of goods and
materials, staffing, sign installation, landscaping, fixtures and the actual
building structure, and to conduct an overall review of the plans to begin
operations. In the event that all conditions necessary to commence operations
have been met, the Franchise Representative will issue a written opening
authorization ("Opening Authorization") to the Franchisee which shall certify
Franchisor's approval for the Franchisee to open for business. Should any items
be noted as deficient or improperly prepared, the Franchisee will be required to
correct satisfactorily such items prior to commencing actual operations.
Franchisor will have its New Store Opening Team at the first Franchisee
Restaurant to assist Franchisee in hiring, training, opening, and operating the
restaurant for at least the first five (5) days of operations. No such support
will be provided for any additional Franchisee Restaurants."
Immediately after Section 3, part (g) of this Agreement, the following
is inserted:
"(h) For a period of two years beginning with the commencement of operations of
the Franchisee's first Restaurant, Franchisor agrees to spend one percent (1%)
of taxable sales to market the Franchisee's first Restaurant."
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ADDENDUM 3
COVENANTS OF FRANCHISEE
Section 4, parts (a) and (b) of this Agreement are hereby deleted and
replaced with the following:
20. COVENANTS OF FRANCHISEE.
(a) Simultaneously with the execution of this Agreement Franchisee
shall pay Franchisor a franchise fee of Five Thousand Dollars
($5,000.00). This fee is non-refundable.
(b) Franchisee agrees to submit to Franchisor a site selected for
the Restaurant as soon as practicable, but in no event more
than 120 days following the termination of the Consulting
Services Agreement. Franchisee further agrees that
commencement of retail operations of the Restaurant shall
begin not more than 270 days following the termination of the
Consulting Services Agreement.
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