Exhibit 10.12
(TO FRANCHISE OFFERING CIRCULAR)
FRANCHISE AGREEMENT
THE QUIZNO'S CORPORATION
FRANCHISE AGREEMENT
Franchisee:
Date:
Franchised Location:
THE QUIZNO'S CORPORATION
FRANCHISE AGREEMENT
TABLE OF CONTENTS
Page
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1. PURPOSE 1
2. GRANT OF FRANCHISE 1
2.1. GRANT OF FRANCHISE 1
2.2. SCOPE OF FRANCHISE OPERATIONS 1
3. FRANCHISED LOCATION AND DESIGNATED AREA 1
3.1. FRANCHISED LOCATION 1
3.2. LIMITATION ON FRANCHISE RIGHTS 2
3.3. EXPRESS RESTAURANTS. 2
3.4. TERRITORIAL DEVELOPMENT PROGRAM. 2
3.5. SPECIAL PRODUCTS. 2
3.6. FRANCHISOR'S RESERVATION OF RIGHTS 2
4. INITIAL FRANCHISE FEE 2
4.1. INITIAL FRANCHISE FEE 2
5. ROYALTIES 2
5.1. ROYALTY 2
5.2. GROSS SALES 2
5.3. ROYALTY PAYMENTS 2
5.4. APPLICATION OF PAYMENTS 3
6. DEVELOPMENT OF FRANCHISED LOCATION 3
6.1. APPROVAL OF FRANCHISED LOCATION. 3
6.2. LEASE APPROVAL 3
6.3. LEASE ASSISTANCE PROGRAM 3
6.4. SCHEDULE 3
6.5. CONVERSION AND DESIGN 3
6.6. SIGNS 3
6.7. EQUIPMENT 3
6.8. PERMITS AND LICENSES 4
6.9. COMMENCEMENT OF OPERATIONS 4
7. TRAINING 4
7.1. INITIAL TRAINING PROGRAM 4
7.2. ADDITIONAL TRAINING PROGRAMS 4
8. OPERATIONS MANUAL 4
8.1. OPERATIONS MANUAL 4
8.2. CHANGES TO OPERATIONS MANUAL 5
9. DEVELOPMENT ASSISTANCE 5
9.1. FRANCHISOR'S DEVELOPMENT ASSISTANCE 5
9.2. RESPONSIBILITIES OF AREA DIRECTOR 5
10. OPERATING ASSISTANCE 5
10.1. FRANCHISOR'S ASSISTANCE 5
11 FRANCHISEE'S OPERATIONAL COVENANTS 6
11.1. BUSINESS OPERATIONS 6
12. ADVERTISING 7
12.1. APPROVAL OF ADVERTISING 7
12.2. GRAND OPENING. 7
12.3. MARKETING AND PROMOTION FEE 7
12.4. LOCAL ADVERTISING. 8
12.5. REGIONAL ADVERTISING PROGRAMS 8
13. QUALITY CONTROL 8
13.1. STANDARDS AND SPECIFICATIONS 8
13.2. INSPECTIONS 8
13.3. RESTRICTIONS ON SERVICES AND PRODUCTS 8
13.4. APPROVED SUPPLIERS 8
13.5. REQUEST FOR CHANGE OF SUPPLIER 8
14. MARKS, TRADE NAMES AND PROPRIETARY INTERESTS 9
14.1. MARKS 9
14.2. LICENSED METHODS 9
14.3. TRADEMARK INFRINGEMENT 9
14.4. FRANCHISEE'S BUSINESS NAME 9
14.5. CHANGE OF MARKS 9
15. REPORTS, RECORDS AND FINANCIAL STATEMENTS 9
15.1. FRANCHISEE REPORTS 9
15.2. FINANCIAL RECORDS USE AND ACCESS. 10
15.3. BOOKS AND RECORDS 10
15.4. AUDIT OF BOOKS AND RECORDS 10
16. TRANSFER 10
16.1. TRANSFER BY FRANCHISEE 10
16.2. PRE-CONDITIONS TO FRANCHISEE'S TRANSFER 10
16.3. FRANCHISOR'S APPROVAL OF TRANSFER 10
16.4. RIGHT OF FIRST REFUSAL 11
16.5. TYPES OF TRANSFERS 11
16.6. TRANSFER BY FRANCHISOR 11
16.7. FRANCHISEE'S DEATH OR DISABILITY 11
17. TERM AND RENEWAL 11
17.1. TERM 11
17.2. RENEWAL 11
17.3. EXERCISE OF RENEWAL 12
18. DEFAULT AND TERMINATION 12
18.1. TERMINATION BY FRANCHISEE 12
18.2. TERMINATION BY FRANCHISOR - EFFECTIVE
UPON NOTICE 12
18.3. TERMINATION BY FRANCHISOR - THIRTY DAYS NOTICE 13
18.4. LATE FEE 13
18.5. FAILURE TO COMPLY WITH REPORTING REQUIREMENTS 13
18.6. RIGHT TO REPURCHASE. 13
18.7. OBLIGATIONS OF FRANCHISEE UPON TERMINATION OR
EXPIRATION 14
18.8. STATE AND FEDERAL LAW 14
19. BUSINESS RELATIONSHIP 14
19.1. INDEPENDENT BUSINESSPERSONS 14
19.2. PAYMENT OF THIRD PARTY OBLIGATIONS 15
19.3. INDEMNIFICATION 15
20. RESTRICTIVE COVENANTS 15
20.1. NON-COMPETITION DURING TERM 15
20.2. "BRANDED BUSINESS" 15
20.3. POST-TERMINATION COVENANT NOT TO COMPETE 16
20.4. ADDITIONAL REMEDIES FOR BREACH 16
20.5. CONFIDENTIALITY OF PROPRIETARY INFORMATION 16
20.6. CONFIDENTIALITY AGREEMENT 16
21. DISPUTES 16
21.1. GOVERNING LAW/CONSENT TO VENUE AND
JURISDICTION. 16
21.2. WAIVER OF JURY TRIAL. 16
21.3. REMEDIES. 16
22. SECURITY INTEREST 17
22.1. COLLATERAL. 17
22.2. INDEBTEDNESS SECURED. 17
22.3. ADDITIONAL DOCUMENTS. 17
22.4. POSSESSION OF COLLATERAL. 17
22.5. REMEDIES OF FRANCHISOR IN EVENT OF DEFAULT. 17
22.6. SPECIAL FILING AS FINANCING STATEMENT. 18
23. MISCELLANEOUS PROVISIONS 18
23.1. MODIFICATION 18
23.2. ENTIRE AGREEMENT 18
23.3. DELEGATION BY FRANCHISOR 18
23.4. AGREEMENT EFFECTIVE 18
23.5. REVIEW OF AGREEMENT 18
23.6. ATTORNEYS' FEES 18
23.7. INJUNCTIVE RELIEF 18
23.8. NO WAIVER 18
23.9. NO RIGHT TO SET OFF 18
23.10. INVALIDITY 18
23.11. NOTICES 19
23.12. ACKNOWLEDGMENT 19
EXHIBITS
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B-1 Addendum -- Location and Initial Franchise Fee
B-2 Addendum -- QUIZNO'S Classic Subs Express Facility
B-3 Addendum -- Special Products Program
B-4 Authorization Agreement for Prearranged Payments
B-5 Statement of Ownership
B-6 Guaranty and Assumption of Franchisee's Obligations
B-7 Addendum -- Bookkeeping Services
X-0 Xxxxxxxx -- Xxxxxxxxxxx Development Program
FRANCHISEE:
ADDRESS:
EFFECTIVE
DATE: , 19
THIS AGREEMENT (the "AGREEMENT") is between THE QUIZNO'S CORPORATION, a
Colorado corporation, located at Denver Place, Plaza Tower, 0000 00xx Xxxxxx,
Xxxxx 0000, Xxxxxx, Xxxxxxxx 00000 ("FRANCHI-SOR") and the franchisee listed
above ("FRANCHISEE"), who agree as follows:
1. PURPOSE
1.1. Franchisor has developed methods for establishing, operating and
promoting restaurants offering submarine sandwiches, salads, other food
products and beverages and related restaurant and carry out services
("QUIZNO'S RESTAURANTS" or "RESTAU-RANTS") which include the use and license
of proprietary rights in certain valuable trade names, service marks and
trade-marks owned by Franchisor (the "MARKS"), including the service xxxx
"QUIZNO'S," and Franchisor's distinctive techniques, expertise and knowledge
in the establishment, operation and promotion of restaurants and related
licensed methods of doing business (the "LICENSED METHODS").
1.2. Franchisor grants the right to others to establish and operate
Restaurants, under the Marks and pursuant to the Licensed Methods.
1.3. Franchisee recognizes and acknowledges the benefits to be
derived from being identified and associated with Franchisor and being able to
utilize the Restaurant system and concepts, and therefore desires to establish
a Restaurant at a location identified herein or to be later identified.
Franchisor is willing to grant Franchisee the right to operate a Restaurant
under the terms and condi-tions which are contained in this Agreement.
2. GRANT OF FRANCHISE
2.1. GRANT OF FRANCHISE. Franchisor
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grants to Franchisee, and Franchisee accepts from Franchisor, the right to use
the Marks and Licensed Methods in connection with the establishment and
operation of a Restaurant, at the location described in Section 3. Franchisee
agrees to use the Marks and Licensed Methods, as they may be changed,
improved, and further developed by Franchisor from time to time, only in
accordance with the terms and conditions of this Agreement.
2.2. SCOPE OF FRANCHISE OPERATION.
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OPERATIONS. Franchisee agrees at all times to faithfully, honestly and
diligently perform Franchisee's obligations hereunder, to use best efforts to
promote its Restaurant and to not engage in any other business or activity
that conflicts with the operation of the Restaurant in compliance with this
Agreement. Franchisee agrees to utilize the Marks and Licensed Methods to
operate all aspects of Franchisee's Restaurant in accordance with the methods
and systems developed and prescribed from time to time by Franchisor, all of
which are a part of the Licensed Methods. Franchisee's Restaurant shall offer
all products and services designated by Franchisor, which may include, without
limitation, restaurant services offered in conjunction with a distinctive
theme and decor and a uniform menu offering specialty submarine and other
sandwiches, salads and other food and beverages. Franchisee shall implement
any additions and changes to the products and services offered by its
Restaurant required by Franchisor.
3. FRANCHISED LOCATION AND DESIGNATED AREA
3.1. FRANCHISED LOCATION. Franchisee is
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granted the right to own and operate a Restaurant at the address and location
("FRANCHISED LOCATION") set forth in the Addendum attached as Exhibit B-1.
If, at the time of execution of this Agreement, the Franchised Location has
not been selected by Franchisee and approved by Franchisor, then Franchisee
shall choose and acquire a location for its Restaurant within the nonexclusive
Designated Area set forth in Exhibit B-1. In such circumstances, Franchisee
shall select and propose to Franchisor for approval a specific site for the
Franchised Location in the Designated Area which, which Franchisor shall have
the right to approve in accordance with the terms set forth herein. During
the term of this Agreement, the Franchised Location shall be used exclusively
for the purpose of operating a Restaurant.
3.2. LIMITATION ON FRANCHISE RIGHTS.
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RIGHTS. The rights granted to Franchisee are for the specific Franchised
Location and cannot be transferred to any other location, except with the
prior written approval of Franchisor. The Marks and Licensed Methods are
licensed from the Franchised Location only in the manner and within the
geographic boundaries prescribed by Franchisor.
3.3. EXPRESS RESTAURANTS.Franchisee may
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not operate a Restaurant located within a host facility such as a gas station
and convenience store facility or a hotel (all referred to as "EXPRESS
RESTAURANTS") using the Marks and Licensed Methods, except with the prior
written consent of Franchisor, in which case Franchisor and Franchisee shall
execute Exhibit B-2 (if this Agreement governs the operation of a traditional
Restaurant, the Express Restaurant(s) shall be governed by separate Franchise
Agreements).
3.4. TERRITORIAL DEVELOPMENT PROGRAM.
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PROGRAM. Franchisor may offer the "TERRITORIAL DEVELOPMENT PROGRAM ," in
which Franchisee is granted the right to develop a certain number of
Restaurants within a defined territory. Franchisee may not participate in the
Territorial Development Program except with the prior written permission of
Franchisor, in which case Franchisor and Franchisee shall execute Exhibit B-8.
3.5. SPECIAL PRODUCTS. From time to time,
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Franchisor may offer supplemental programs to be incorporated in certain
Restaurants ("SPECIAL PRODUCTS"). Franchisee may not offer a Special Product
except with the prior written permission of Franchisor, in which case
Franchisor and Franchisee shall execute Exhibit B-3.
3.6. FRANCHISOR'S RESERVATION OF RIGHTS.
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RESERVATION OF RIGHTS. Franchisee acknowledges that the franchise granted
hereunder is nonexclusive and that Franchisor retains the right, among others:
(1) to use, and to license others to use, the Marks and Licensed Methods for
the operation of Restaurants at any location other than the Franchised
Location; (2) to use the Marks and Licensed Methods in connection with other
services and products, promotional and marketing efforts or related items, or
in alternative channels of distribution, without regard to location; and (3)
to use and license the use of alternative proprietary marks or methods in
connection with the operation of restaurant businesses under names which are
not the same as or confusingly similar to the Marks, which businesses may be
the same as, or similar to, or different from Restaurants.
4. INITIAL FRANCHISE FEE
4.1. INITIAL FRANCHISE FEE. Franchisee
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agrees to pay to Franchisor, concurrently with the execution of this
Agreement, an initial franchise fee ("INITIAL FRANCHISE FEE") in the amount
set forth in Exhibit B-1. Franchisee acknowledges and agrees that the Initial
Franchise Fee represents payment for the initial grant of the rights to use
the Marks and Licensed Methods, that Franchisor has earned the Initial
Franchise Fee upon receipt, and that the Initial Franchise Fee is not
refundable to Franchisee after it is paid.
5. ROYALTIES ROYALTIES
5.1. ROYALTY. Franchisee agrees to pay to Franchisor
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a weekly royalty ("ROYALTY") equal to 7% of the total amount of its Gross
Sales, defined in Section 5.2 , generated from or through its Restaurant.
5.2. GROSS SALES "GROSS SALES" shall be defined as
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sales of any kind for all services or products from or through the Restaurant,
including any such sale of services or products made for cash or upon credit,
or partly for cash and partly for credit, regardless of collection of charges
for which credit is given, regardless of whether such sale is conducted in
compliance with or in violation of the terms of this Agreement and regardless
of whether such sale is at the Franchised Location or off-site, but exclusive
of discounts, sales taxes or other similar taxes and credits. Gross Sales
shall also include the fair market value of any services or products received
by Franchisee in barter or exchange for its services and products.
5.3. ROYALTY PAYMENTS. Franchisee agrees that
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Royalty payments shall be paid weekly and sent to Franchisor by electronic
funds transfer, due on Thursday (for the preceding Monday through Sunday
period), or such other specific day of the week which Franchisor will
designate from time to time ("DUE DATE"). Upon the request of Franchisor and
in no event later than 30 days prior to the opening of the Restaurant,
Franchisee shall execute an Authorization Agreement for preauthorized payment
of Royalty payments by electronic transfer of funds from Franchisee's bank
account to Franchisor's bank account, in the form attached to this Agreement
as Exhibit B-4. On the Due Date of each week, Franchisee shall report to
Franchisor by telephone, electronic means or in written form, as may be
reasonably directed by Franchisor, in a manner more fully described in Section
15, with such information and pursuant to such standard transmittal procedures
regarding Franchisee's Gross Sales and such additional information as may be
requested by Franchisor. Franchisor shall have the right to verify such
Royalty payments from time to time as it deems necessary, in any reasonable
manner. In the event that Franchisee fails to have sufficient funds in its
account or otherwise fails to pay any Royalties due as of the Due Date,
Franchisee shall owe, in addition to such Royalties, a late charge equivalent
to 2% per month, of any late Royalty payment; provided, however, in no event
shall Franchisee be required to pay a late payment at a rate greater than the
maximum interest rate permitted by applicable law.
5.4. APPLICATION OF PAYMENTS.
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Notwithstanding any designation Franchisee might make, Franchisor has the
discretion to apply any payments made by Franchisee to any of Franchisee's
past due indebtedness to Franchisor. Franchisee acknow-ledges that Franchisor
has the right to set-off any amounts Franchisee may owe to Franchisor against
any amounts Franchisor might owe to Franchisee.
6. DEVELOPMENT OF FRANCHISED LOCATION
6.1. APPROVAL OF FRANCHISED LOCATION.
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LOCATION. Franchisee may only operate a QUIZNO'S Restaurant at a site
approved by Franchisor, which approval will not be unreasonably withheld so
long as the site meets Franchisor's site selection criteria. Franchisee shall
follow Franchisor's site selection procedures in locating a Franchised
Location for the Restaurant. Franchisee shall submit a completed site
submittal package, including demographics and other materials requested by
Franchisor, containing all information reasonably required by Franchisor to
assess a proposed Franchised Location.
6.2. LEASE APPROVAL. Franchisee shall obtain
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Franchisor's prior written approval before executing any lease or purchase
agreement for the Franchised Location. Prior to its execution, Franchisee's
proposed Franchised Location lease shall be reviewed and certified acceptable
by Franchisor. Such review is for the benefit of Franchisor, and Franchisee
acknowledges that review and approval of a lease for the Franchised Location
by Franchisor does not constitute a recommendation, endorsement or guarantee
by Franchisor of the suitability of the Franchised Location or the lease and
Franchisee should take all steps necessary to ascertain whether such
Franchised Location and lease are acceptable to Franchisee. Upon submission
of a proposed Franchised Location for the Restaurant, Franchisee shall pay
Franchisor or its designated supplier a lease review fee of $1,450 ("LEASE
REVIEW FEE"). The Lease Review Fee pays the expenses incurred to negotiate
the lease. Franchisee is not a third-party beneficiary of the lease
negotiation or review. Franchisee agrees that while Franchisor will attempt
to negotiate the most favorable terms possible under the Master Lease,
Franchisor does not guaranty that the terms, including rent, will represent
the most favorable terms available in that market.
6.3. LEASE ASSISTANCE PROGRAM. If
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Franchisee participates in the "LEASE ASSISTANCE PROGRAM," once Franchisor has
approved the Franchised Location, Franchisor will enter into negotiations with
the Franchised Location's landlord ("MASTER LANDLORD") and, assuming such
negotiations are successful, enter into a lease for the Franchised Location
("MASTER LEASE"). The Lease Review Fee will be $2,200. Franchisee agrees to
then enter into a sublease with Franchisor or its designated subsidiary
("SUBLEASE") in substantially the same form as attached to Franchisor's
Uniform Franchise Offering Circular ("UFOC") as Exhibit H. The Sublease shall
incorporate the terms and conditions of the Master Lease, including rent and
other charges payable thereunder. Default of the Sublease will constitute
default of this Agreement, and default of this Agreement will constitute
default of the Sublease. Franchisee acknowledges that approval of a lease for
the Franchised Location by Franchisor and execution of the Sublease does not
constitute a recommendation, endorsement or guarantee by Franchisor of the
suitability of the Franchised Location or the terms of the Master Lease and
Franchisee should take all steps necessary to ascertain whether such
Franchised Location and lease terms are acceptable to Franchisee.
6.4. SCHEDULE. Franchisee shall execute a lease no
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later than one year from the date of execution of this Agreement. Franchisor
will extend the time in which Franchisee has to obtain an executed lease for
the Franchised Location for one three-month period, in the event factors
beyond Franchisee's reasonable control prevent Franchisee from meeting this
deadline, so long as Franchisee has made reasonable and continuing efforts to
obtain and submit for approval an acceptable site and Franchisee requests, in
writing, an extension of time in which to have an executed lease for the
Franchised Location before the end of the one-year period. Any lease for the
Franchised Location shall, at Franchisor's option, be collaterally assigned to
Franchisor as security for performance of Franchisee's obligations hereunder.
Franchisee shall deliver a copy of the signed lease for the Franchised
Location to Franchisor within five days of execution thereof.
6.5. CONVERSION AND DESIGN. Franchisee
---------------------
acknowledges that the layout, design, decoration and color scheme of the
Restaurants are an integral part of Franchisor's proprietary Licensed Methods
and accordingly, Franchisee shall convert and decorate the Franchised Location
in accordance with Franchisor's plans, designs and specifications. Franchisee
shall also obtain Franchisor's written consent to any conversion, design or
decoration of the Franchised Location before remodeling or decorating begins,
recognizing that such remodeling, decoration and any related costs are
Franchisee's sole respon-sibility.
6.6. SIGNS. Franchisee shall purchase or otherwise obtain
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for use at the Franchised Location and in connection with the Restaurant the
maximum number and size signs allowed by applicable building codes, which
signs shall comply with the standards and specifications of Franchisor. It is
Franchisee's sole responsibility to ensure that all signs comply with
applicable local ordinances, building codes and zoning regulations. Any
modifications to Franchisor's standards and specifications for signs which
must be made due to local ordinances, codes or regulations shall be submitted
to Franchisor for prior written approval. Franchisee acknowledges the Marks,
or any other name, symbol or identifying marks on any signs shall only be used
in accordance with Franchisor's standards and specifications and only with the
prior written approval of Franchisor.
6.7. EQUIPMENT. Franchisee shall purchase or otherwise
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obtain for use in connection with the Restaurant such equipment, including
delivery vehicles (if utilized) and computer hardware and software, of a type
and in an amount which complies with the standards and specifica-tions of
Franchisor, and only from suppliers or other sources approved by Franchisor.
Franchisee acknowledges that the type, quality, configuration, capability and
performance of the Restaurant equipment are all standards and specifications
which are a part of the Licensed Methods. Franchisee shall purchase or lease
for use in the operation of the Restaurant an electronic cash register or
computer system ("SYSTEM") approved by Franchisor that accurately records
every sale or other transaction. Franchisee shall purchase, or Franchisor
may, in its sole discretion, license to Franchisee for such license fee as it
may determine, software which shall be used by Franchisee in conjunction with
the System. Franchisee shall submit any required reports hereunder in a
format designated from time to time by Franchisor. Franchisee hereby grants
Franchisor the right to access the System and authorizes Franchisor to obtain
sales, sales mix and revenue information directly by modem or otherwise.
Franchisee acknowledges that Franchisor will use information from required
reports primarily to make business and marketing decisions. Franchisee shall
be obligated to upgrade or update the System and the software, at Franchisee's
sole cost, to meet Franchisor's then-current standards and specifications.
6.8. PERMITS AND LICENSES. Franchisee
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agrees to obtain all permits and licenses required for the lawful construction
and operation of its Restaurant together with all certifications from
government authorities having jurisdiction over the site that all requirements
for construction and operation have been met, including without limitation,
zoning, access, sign, health, fire and safety requirements, building and other
required construction permits, licenses to do business and fictitious name
registrations, sales tax permits, health and sanitation permits and ratings
and fire clearances. Franchisee agrees to obtain all customary contractors'
sworn statements and partial and final lien waivers for construction,
remodeling, decorating and installation of equipment at the Franchised
Location. Franchisee shall keep copies of all health department, fire
department, building department and other similar reports of inspections on
file and available for inspection by Franchisor. Franchisee shall immediately
forward to Franchisor any such reports or inspections in which Franchisee has
been found not in compliance with the underlying regulation.
6.9. COMMENCEMENT OF OPERATIONS.
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Unless otherwise agreed in writing by Franchisor and Franchisee, Franchisee
has 12 months from the date of this Agreement (which may extended 3 months as
provided by Section 6.4) within which to complete the initial training
program, described in Section 7.1, and commence operation of the Restaurant.
Franchisee shall obtain the written consent of Franchisor prior to commencing
operation of the Restaurant, which consent shall not be unreasonably withheld
but cannot be granted until Franchisor has approved the Franchised Location,
and Franchisee has: (1) successfully completed the initial training program;
(2) paid all fees and other amounts due to Franchisor; (3) furnished copies of
all insurance policies required by this Agreement; (4) built out and equipped
the Franchised Location in accordance with Franchisor's standards and
specifications, and received a QUIZNO'S certificate of occupancy from
Franchisor; (5) purchased an inventory of approved products and supplies; and
(6) otherwise completed all other aspects of development of the Restaurant as
Franchisor shall have reasonably required.
7. TRAINING
7.1. INITIAL TRAINING PROGRAM.
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Franchisee or, if Franchisee is not an individual, the person designated by
Franchisee to assume primary responsibility for the management of the
Restaurant ("DESIGNATED MANAGER"), is required to attend and successfully
complete the initial training program which is offered by Franchisor at one of
Franchisor's designated training facilities. Up to three individuals are
eligible to participate in Franchisor's initial training program without
charge of a tuition or fee. Franchisee shall be responsible for any and all
traveling and living expenses incurred in connec-tion with attendance at the
training program, as well as wages or salaries, if any, of the person(s)
receiving such training. At least one individual must successfully complete
the initial training program prior to Franchisee's commencement of operation
of its Restaurant. Franchisor reserves the right to waive all or a portion of
the training program or alter the training schedule, if in Franchisor's sole
discretion, Franchisee or its Designated Manager has sufficient prior
experience in operating Restaurants.
7.2. ADDITIONAL TRAINING PROGRAMS.
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Franchisor reserves the right to conduct, at its sole discretion, one training
program or seminar annually at a location to be determined by Franchisor to
discuss relevant business trends and share new information relating to the
Restaurant business. Attendance at the seminar is optional unless Franchisor
gives Franchisee at least 60 days prior written notice that the seminar shall
be mandatory, in which case Franchisee or its Designated Manager shall be
required to attend. Franchisor shall not require that Franchisee attend any
on-going training program or seminar more than once a year. Mandatory
training programs and seminars shall not last more than three days. All such
mandatory training will be offered without charge of a tuition or fee;
provided, however, Franchisee will be responsible for any and all
transportation and living expenses, which are incurred in connection with
attendance at such additional training programs or seminars.
8. OPERATIONS MANUAL
8.1. OPERATIONS MANUAL. Franchisor agrees
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to loan to Franchisee one or more manuals, technical bulletins or other
written or videotaped materials (collectively referred to as "OPERATIONS
MANUAL") covering the proper operating and marketing techniques of the
Restaurant and for any Special Product(s) applicable to the Restaurant.
Franchisee agrees that it shall comply with the Operations Manual as an
essential part of its obligations under this Agreement. Franchisee shall at
all times be responsible for assuring that its employees and all other persons
under its control comply with the Operations Manual in all respects.
Franchisee shall not duplicate the Operations Manual nor disclose its contents
to persons other than its employees or officers who need the information to
perform their jobs.
8.2. CHANGES TO OPERATIONS MANUAL.
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MANUAL. Franchisor reserves the right to revise the Operations Manual from
time to time as it deems necessary to update operating and marketing
techniques or standards and specifications in any manner, including updates
contained in monthly newsletters. Franchisee, within 30 days of receiving any
updated information, shall in turn update its copy of the Operations Manual as
instructed by Franchisor and shall conform its operations with the updated
provisions. Franchisee acknowledges that a master copy of the Operations
Manual maintained by Franchisor at its principal office shall be controlling
in the event of a dispute relative to the content of any Operations Manual.
9. DEVELOPMENT ASSISTANCE
9.1. FRANCHISOR'S DEVELOPMENT ASSISTANCE.
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DEVELOPMENT ASSISTANCE. To assist Franchisee in the initial establishment of
the Restaurant, Franchisor shall provide the following:
(A) Assistance related to the acceptance of a site for the
Restaurant, although Franchisee acknowl-edges that Franchisor shall have no
obligation to select or acquire a site on behalf of Franchisee. Franchisor's
assistance will consist of, at a minimum, the provision of general criteria
for a satisfactory site and a determination of whether a proposed site
fulfills the requisite criteria prior to formal acceptance of a site selected
by Franchisee. Site selection, acquisition and development shall be the sole
obligation of Franchisee, except as may be set forth in this Agreement or any
other written agree-ment executed by Franchisor. Franchisee acknowledg-es
that Franchisor is under no obligation to provide additional site selection
services other than as may be set forth in a written, executed agreement and
that Franchisor's acceptance of the site does not imply or guarantee the
success or profitability of the site in any manner whatsoever.
(B) Standards and specifications for the build out, interior design,
layout, floor plan, signs, designs, color and decor of the Restaurant.
(C) Advice regarding the standards and specifications for the
equipment, supplies and materials used in, and the menu items offered for sale
by, the Restaurant and advice regarding the selection of suppliers for and the
purchasing of such items.
(D) Guidance in implementing advertising and marketing programs,
operating and sales procedures and bookkeeping and accounting programs.
(E) The initial training in accordance with Section 7.1.
(F) Opening assistance consisting of one or more representatives of
Franchisor on site at the Franchised Location for not less than five days to
assist Franchisee in opening the Restaurant; provided, however, that
Franchisee shall hire and be exclusively responsible for the training,
compensation and control of its employees.
(G) One copy of the Operations Manual, as defined and described in
Section 8 , which shall be loaned to Franchisee during the term of this
Agreement.
9.2. RESPONSIBILITIES OF AREA DIRECTOR.
---------------------------------
Franchisor reserves the right to retain the services of an
area director ("AREA DIRECTOR") in the geographic area in which Franchisee's
Restaurant will be located. In such event, the Area Director, on behalf of
Franchisor, will perform certain sales, site assistance and supervisory
services, as may be directed by Franchisor. Franchisee agrees in advance to
any such delegation and assignment by Franchisor of any portion or all of
Franchisor's obligations and rights under this Agreement.
10. OPERATING ASSISTANCE
10.1. FRANCHISOR'S ASSISTANCE.
------------------------
Franchisor agrees that, during Franchisee's operation of the Restaurant,
Franchisor, or its designated representatives, shall make available to
Franchisee the following assistance:
(A) Upon the reasonable request of Franchisee, consultation by
telephone regarding the continued operation and management of a Restaurant and
advice regarding Restaurant services, product quality control, menu items and
customer relations issues.
(B) Access to advertising and promotional materials as may be
developed by Franchisor through the Marketing and Promotion Fund (as defined
below).
(C) On-going updates of information and programs regarding menu items
and their preparation, the Restaurant business and related Licensed Methods,
including information about special or new services or products that may be
developed and made available to franchisees of Franchisor.
(D) The initial training program to replacement or additional
Designated Managers during the term of this Agreement. Although Franchisor
does not currently charge a tuition or fee, Franchisor reserves the right to
charge a tuition or fee in an amount payable in advance, commensurate with the
then-current published prices of Franchisor for such training. Franchisee
shall be responsible for all travel and living expenses incurred by its
personnel during the training program.
11. FRANCHISEE'S OPERATIONAL COVENANTS
11.1. BUSINESS OPERATIONS. Franchisee
-------------------
acknowledges that it is solely respon-sible for the successful operation of
its Restaurant and that the continued successful operation thereof is
partially dependent upon Franchisee's compliance with this Agreement and the
Operations Manual. In addition to all other obligations contained herein and
in the Operations Manual, Franchisee covenants that:
(A) Franchisee shall maintain a clean, safe, and high quality
Restaurant operation and shall promote and operate the business in accordance
with the Operations Manual and in such a manner as not to detract from or
adversely reflect upon the name and reputation of Franchisor and the goodwill
associated with the QUIZNO'S name and Marks-.
(B) Franchisee will conduct itself and operate its Restaurant in
compliance with all applicable laws, regulations and other ordinances and in
such a manner so as to promote a good public image in the business community.
In connection therewith, Franchisee will be solely and fully responsible for
obtaining any and all licenses to operate the Restaurant. Franchisee shall
keep copies of all health department, fire department, building department and
other similar reports of inspections on file and available for inspection by
Franchisor. Franchisee shall immediately forward to Franchisor any such
reports or inspections in which Franchisee has been found not in compliance
with the underlying regulation.
(C) Franchisee acknowledges that proper management of the Restaurant
is important and shall ensure that Franchisee or a Designated Manager who has
completed the initial training program will be responsible for management of
the Restaurant after commencement of operations and will be present at the
Franchised Location during operation of the Restaurant.
(D) Franchisee acknowledges that the franchise granted hereunder
requires and authorizes Franchisee to offer only authorized products and
services as are more fully described in the Operations Manual, which may
include, without limitation, submarine and other sandwiches, salads and other
authorized food and beverage products and related restaurant and carry out or
delivery services. Franchisee shall maintain at all times a sufficient supply
of all menu items and related food and paper products to ensure, insofar as
possible, that such items are at all times available to its customers.
Franchisee shall offer all types of services and products as from time to time
may be prescribed by Franchisor and shall not offer any other types of
services or products, or operate or engage in any other type of business or
profession, from or through the Restaurant, unless Franchisor's written
consent is first obtained.
(E) Franchisee shall promptly pay when due all taxes and other
obligations owed to third parties, including without limitation, all federal,
state and local taxes, and any and all accounts payable or other indebtedness
of every kind, incurred by Franchisee in the conduct of the Restaurant.
(F) Franchisee shall comply with all agreements with third parties
related to the Restaurant including, in particular, all provisions of any
premises lease or Sublease.
(G) Franchisee agrees to renovate, refurbish, remodel or replace, at
its own expense, the real and personal property and equipment used in the
operation of the Restaurant, when reasonably required by Franchisor in order
to comply with the image, standards of operation and performance capability
established by Franchisor from time to time. If Franchisor changes its image
or standards of operation, it shall give Franchisee a reasonable period of
time within which to comply with such changes.
(H) Franchisee shall at all times during the term of this Agreement
own and control the Restaurant authorized hereunder. Upon request of
Franchisor, Franchisee shall promptly provide satisfactory proof of such
ownership to Franchisor. Franchisee represents that the Statement of
Ownership, attached hereto as Exhibit B-5, is true, complete, accurate and not
misleading. Franchisee shall promptly provide Franchisor with a written
notification if the information contained in the Statement of Ownership
changes at any time during the term of this Agreement and shall comply with
the applicable transfer provisions contained in Section 16. Franchisee
acknowledges that, if Franchisee is other than an individual(s), -Franchisor
may require that the individual members of Franchisee guarantee the
performance of Franchisee hereunder and sign the Guaranty and Assumption of
Franchisee's Obligations which is attached to this Agreement as Exhibit B-6.
(I) Franchisee shall at all times during the term of this Agreement
keep its Restaurant open during the business hours as may be designated by
Franchisor from time to time in the Operations Manual. Any deviations from
the required hours must be approved in writing by Franchisor.
(J) Franchisee shall procure, maintain and provide evidence of
insurance for the Restaurant and its operations, of the types, in the amounts,
and with such terms and conditions as Franchisor may from time to time
reasonably prescribe, in the Operations Manual or otherwise. All of the
required policies of insurance shall name Franchisor as an additional named
insured and shall provide for a 30-day advance written notice to Franchisor of
cancellation. If Franchisee participates in the Lease Assistance Program, it
shall use an insurance carrier approved by Franchisor.
(K) Franchisee will provide proof of insurance to Franchisor prior to
commencement of operations at its Restaurant. This proof will show that the
insurer has been authorized to inform Franchisor in the event any policies
lapse or are cancelled. Franchisor has the right to change the minimum amount
of insurance Franchisee is required to maintain by giving Franchisee prior
reasonable notice, giving due consideration to what is reasonable and
customary in the similar business. Noncompli-ance with the insurance
provi-sions set forth herein shall be deemed a material breach of this
Agreement; in the event of any lapse in insurance coverage, in addition to all
other remedies, Franchisor shall have the right to demand that Franchisee
cease operations of the Restaurant until coverage is reinstated or,
alterna-tively, pay any delinquencies in premium payments and charge the same
to Franchisee.
12. ADVERTISING
12.1. APPROVAL OF ADVERTISING.
------------------------
Franchisee shall obtain Franchisor's prior written ap-proval of all written
advertising or other marketing or promotional programs not previously approved
by Franchisor regarding the Restaurant, including, without limitation, "Yellow
Pages" advertising, newspaper ads, flyers, brochures, coupons, direct mail
pieces, specialty and novelty items, radio and television advertising, and
Internet "web" pages. Any proposed written advertising or a description of a
marketing or promotional program not previously approved by Franchisor shall
be submitted to Franchisor at least ten days prior to publication, broad-cast
or use. Franchisee ack-nowledges that advertising and promoting the
Restaurant in accordance with Franchisor's standards and specifications is an
essential aspect of the Licensed Methods, and Franchisee agrees to comply with
all advertising standards and specifica-tions.
12.2. GRAND OPENING. Franchisee agrees to
-------------
conduct a grand opening advertising and promotional program for the Restaurant
not earlier than 30 days before opening and within 75 days after the
Restaurant opens (or as may be otherwise specified by Franchisor) and agrees
to spend a minimum of $5,000 for the grand opening program. Franchisee agrees
to provide Franchisor with a summary of grand opening program expenditures
within 120 days after the Restaurant opens. Franchisee's grand opening
program will utilize the marketing and public relations programs and media and
advertising materials that Franchisor has either developed or approved.
12.3. MARKETING AND PROMOTION FEE
---------------------------
Franchisee agrees to pay to Franchisor, in addition to Royalties, a Marketing
and Promotion fee ("MARKETING AND PROMOTION FEE") of 1% of the total amount of
Franchisee's Gross Sales. The Marketing and Promotion Fee shall be in
addition to and not in lieu of Franchisee's Local Advertising Fee. The
following terms and conditions will apply to the Marketing and Promotion Fee
payment:
(A) The Marketing and Promotion Fee shall be payable weekly,
concurrently with the payment of the Royalties, based on Gross Sales (as
defined in Section 5.2) for the immediately preceding reporting period.
Franchisee shall execute an Authorization Agreement for preauthorized payment
of Marketing and Promotion Fees by electronic transfer of funds from
Franchisee's bank account to the bank account designated by Franchisor. Any
Marketing and Promotion Fee collected by Franchisor will be deposited by
Franchisor in one or more separate accounts (referred collectively as the
"FUND"), all designated as "QUIZNO'S MARKETING AND PROMOTION FUND." The
Marketing and Promotion Fees will be subject to the same late charges as the
Royalties. Upon written request by Franchisee, Franchisor will make available
to Franchisee, no later than 120 days after the end of each calendar year, an
annual financial statement for the Fund which indicates how deposits to the
Fund have been spent.
(B) The Fund will be adminis-tered by Franchisor, in its sole
discretion, and may be used for production and placement of media advertising,
direct response literature, direct mailings, brochures, collateral material
advertising, surveys of advertising effectiveness, or other advertising or
public relations expenditures relating to advertising Franchisee's services
and products and providing professional services, materials and personnel to
support the marketing function. Franchisor may reimburse itself for
administrative costs, independent audits, reasonable accounting, bookkeeping,
reporting and legal expenses, taxes and other reasonable direct and indirect
expenses as may be incurred by Franchisor or its authorized representa-tives
in connection with the programs funded by the Fund. Franchisor will not be
liable for any act or omission with respect to such Fund that is consistent
with this Agreement and is done in good faith. Franchisor may spend in any
fiscal year an amount greater or less than the aggregate contribution of all
Restaurants to the Fund in that year, and the Fund may borrow from Franchisor
or others to cover deficits or to invest in any surplus for future use. All
interest earned on monies contributed to the Fund will be used to pay
advertising costs before other assets of the Fund are expended. Franchisor
may cause the Fund to be incorporated or operated through a separate entity,
at such time as Franchisor deems appropriate, and such successor entity, if
established, will have all rights and duties of Franchisor with respect to the
Fund as specified in this Section. Franchisor undertakes no obligation to
ensure that the Fund benefits each Restaurant in proportion to its respective
contributions. The Fund's primary purpose is to support sales by the entire
QUIZNO'S System and to build brand identity.
12.4. LOCAL ADVERTISING. Franchisee
-----------------
agrees to spend not less than 3% of the total amount of its Gross Sales each
calendar quarter for local advertising ("LOCAL ADVERTISING FEE"). Franchisor
may request that Franchisee prepare and submit a quarterly report to
Franchisor which accounts for the use of the Local Advertising Fee no later
than 10 days following the end of each calendar quarter during the term of
this Agreement. Franchisor may collect and designate all or a portion of the
Local Advertising Fee to the Marketing and Promotion Fund.
12.5. REGIONAL ADVERTISING PROGRAMS.
-----------------------------
Although not obligated to do so, Franchisor may create a regional
advertising program ("REGIONAL ADVERTISING") for the benefit of the
Restaurants located within a particular region. Franchisor has the right to
(i) allocate any portion of the Marketing and Promotion Fund to the Regional
Advertising program; and (ii) collect and designate all or a portion of the
Local Advertising Fee to a Regional Advertising program. If a Regional
Advertising program is established, Franchisor may increase the Local
Advertising Fee by 1%; provided that in no event shall Franchisee be required
to spend more than a total of 5% of its Gross Sales, in the aggregate, for
Local Advertising Fee, Regional Advertising and Marketing and Promotion Fee
contributions, inclusive of Yellow Pages advertising. Franchisor has the
right, in its sole discretion, to determine the composition of all geographic
territories and market areas for the implementation of Regional Advertising
and promotion campaigns and to require that Franchisee participate in such
Regional Advertising programs as and when they may be established by
Franchisor. If a Regional Advertising program is implemented on behalf of a
particular region. Franchisor reserves the right to establish an advertising
cooperative for a particular region to enable the cooperative to
self-administer the Regional Advertising program, and Franchisee agrees to
participate in such cooperative.
13. QUALITY CONTROL
13.1. STANDARDS AND SPECIFICATIONS
----------------------------
Franchisor will make available to Franchisee standards and specifications for
services and products offered at or through the Restaurant and the uniforms,
recipes, materials, forms, menus, items and supplies used in connection with
the franchised business. Franchisor reserves the right to change standards
and specifica-tions for services and products offered at or through the
Restaurant or for the uniforms, recipes, materials, forms, items and supplies
used in connection with the franchised business upon 30 days prior written
notice to Franchisee.
13.2. INSPECTIONS. Franchisor shall have the right
-----------
to interview customers or examine the Franchised Location and to examine and
copy its books, records, and documents, including without limitation the
inventory, products, equipment, materials or supplies, to ensure compliance
with all standards and specifications set by Franchisor. Franchisor shall
conduct such inspections during regular business hours without prior notice to
Franchisee.
13.3. RESTRICTIONS ON SERVICES AND PRODUCTS
--------------------------------------
Franchisee is prohibited from offering or selling any
services or products from or through the Restaurant that have not been
previously authorized by Franchisor. However, if Franchisee proposes to
offer, conduct or utilize any services, products, materials, forms, items or
supplies for use in connection with or sale through the Restaurant that are
not approved by Franchisor, Franchisee shall first notify Franchisor in
writing requesting approval. Franchisor may, at its sole discretion, elect to
withhold such approval; however, in order to make such determination,
Franchisor may require submission of specifica-tions, informa-tion, or samples
of such services, products, materials, forms, items or supplies. Franchisor
will advise Franchisee within a reasonable time whether such products,
supplies or services meet its specifications.
13.4. APPROVED SUPPLIERS Franchisee shall
------------------
purchase all equipment, products, services, supplies and materials required
for the operation of the Restaurant licensed herein, from manufacturers,
suppliers or distributors designated by Franchisor or, if there is no
designated supplier for a particular product, service, supply or material,
from such other suppliers who meet all of Franchisor's specifications and
standards as to quality, composi-tion, finish, appearance and service, and who
shall adequately demonstrate their capacity and facilities to supply
Franchisee's needs in the quantities, at the times, and with the reliabil-ity
requisite to an efficient operation. Franchisor reserves the right to
designate, from time to time, a single supplier for any services, products,
equipment, supplies or materials and to require Franchisee to use such a
designated supplier exclusively.
13.5. REQUEST FOR CHANGE OF SUPPLIER
--------------------------------
In the event Franchisee desires to purchase products, services,
supplies or materials from manufacturers, suppliers or distributors other than
those previously approved by Franchisor, Franchisee shall, prior to purchasing
any such products, services, supplies or materials, give Franchisor a written
request to change supplier. Franchisor shall notify Franchisee in writing of
its approval or rejection of the proposed supplier within a reasonable time
after Franchisor's completion of its investigation of the proposed supplier.
Franchisor may from time to time inspect any manufacturer's, suppliers, or
distributor's facilities and products to assure proper production, processing,
storing and transportation of products, services, supplies or materials to be
purchased from the manufacturer, supplier or distributor by Franchisee.
Permission for such inspection shall be a condition of the continued approval
of such manufacturer, supplier or distributor. Franchisor may at its sole
discretion, for any reason whatsoever, elect to withhold approval of the
manufacturer, supplier or distributor; however, in order to make such
determination, Franchisor may require that samples from a proposed new
supplier be delivered to Franchisor for testing prior to approval and use. A
charge not to exceed the actual cost of the test may be made by Franchisor and
shall be paid by Franchisee.
14. MARKS, TRADE NAMES AND PROPRIETARY INTERESTS
14.1. MARKS. Franchisee hereby acknowledges that
-----
Franchisor has the sole right to license and control Franchisee's use of the
QUIZNO'S service xxxx, design and other of the Marks, and that such Marks
shall remain under the sole and exclusive ownership and control of Franchisor.
Franchisee acknowledges that it has not acquired any right, title or interest
in the Marks except for the right to use the Marks in the operation of its
Restaurant as it is governed by this Agreement. Franchisee shall display the
Marks prominently at the Restaurant and on packaging and serving materials and
in connection with forms, advertising and marketing, all in a manner as
Franchisor shall reasonably prescribe. Franchisee further agrees that no
Marks other than "QUIZNO'S," "QUIZNO'S CLASSIC SUBS" or such other trademarks
as may be specified by Franchisor shall be used in the marketing, promotion,
identification or operation of the Restaurant, except with Franchisor's prior
written consent.
14.2. LICENSED METHODS. Franchisee hereby
-----------------
acknowledges that Franchisor owns and controls the distinctive plan for the
es-tablishment, operation and promotion of Restaurants and all related
licensed methods of doing business, previously defined as the Licensed
Methods, which include, but are not limited to, recipes, menu items and
cooking methods, technical restaurant equipment standards, order and take-out
fulfillment methods and customer relations, marketing techniques, written
promotional materials and Operations Manual contents, advertising, and
accounting systems, all of which constitute trade secrets of Franchisor, and
Franchisee acknowledges that Franchisor has valuable rights in and to such
trade secrets. Franchisee further ack-nowledges that it has not acquired any
right, title or interest in the Licensed Methods, except for the right to use
the Licensed Methods in the operation of the Restaurant, and that any and all
innovations, additions or improvements made to the Licensed Methods, even if
by Franchisee, shall be owned by and inure to the benefit of Franchisor.
14.3. TRADEMARK INFRINGEMENT. Franchisee
----------------------
agrees to notify Franchisor in writing of any possible infringement or illegal
use by others of a trademark the same as or confusingly similar to the Marks
which may come to its attention. Franchisee acknowledges that Franchisor
shall have the right, in its sole discretion, to determine whether any action
will be taken in response to any possible infringement or illegal use and
agrees to fully cooperate with Franchisor in any such litiga-tion.
14.4. FRANCHISEE'S BUSINESS NAME.
--------------------------
Franchisee acknowledg-es that Franchisor has a prior and superior claim to the
QUIZNO'S trade name. Franchisee shall not use the word "QUIZNO'S" in the legal
name of its corporation, partnership or any other business entity used in
conducting the business provided for in this Agree-ment. Franchisee also
agrees not to register or attempt to register a trade name using the word
"QUIZNO'S" or any portions thereof in Franchisee's name or that of any other
person or business entity, without prior written consent of Franchisor.
14.5. CHANGE OF MARKS. In the event Franchisor,
----------------
in its sole discretion, decides to modify or discontinue use of any
proprietary Marks, or to develop additional or substitute marks, Franchisee
shall, within a reasonable time after receipt of written notice thereof, -take
such action, at Franchisee's sole expense, as may be necessary to comply with
such modification, discontinuation, addition or substitution.
15. REPORTS, RECORDS AND FINANCIAL STATEMENTS
15.1. FRANCHISEE REPORTS. Franchisee shall
------------------
use the bookkeeping services described in and shall execute Exhibit B-7 for
the first 12 months Franchisee's first Restaurant is operating. After that,
Franchisee may discontinue the bookkeeping service 90 days following
completion of the following : Franchisee retains a full time professional
accountant (approved in writing by Franchisor) to provide bookkeeping services
(at Franchisee's expenses) and that accountant agrees in writing (on a form
acceptable to Franchisor) to provide timely financial statements required by
this Section 15. If Franchisee fails to provide such financial statements
more than 2 times in any 12-month period, in addition to any other remedies,
Franchisor may require Franchisee to use Franchisor's bookkeeping services at
the then-current fee. Franchisee shall also provide to Franchisor financial
and accounting reports in a manner and form as Franchisor may reasonably
require, including:
(A) Weekly summary reports, submitted by no later than the Due Date
each week (defined in Section 5.3) and containing information relative to the
previous weekly reporting period operations;
(B) Any other data, information and supporting records reasonably
requested by Franchisor from time to time (including without limitation daily
and weekly reports of product sales by category);
(C) Within 15 days after the end of each month, an income statement
of Franchisee's Restaurant for such month and for the fiscal year to date,
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied, in Franchisor's recommended format; and
(D) Within 90 days after the end of Franchisee's fiscal year, which
shall be the calendar year, an income statement and balance sheet of
Franchisee's Restaurant for such fiscal year (reflecting all year-end
adjustments), and a statement of changes in cashflow of the Restaurant,
prepared in accordance with GAAP, consistently applied, and in Franchisor's
recommended format. Franchisor reserves the right to require that Franchisee
have reviewed financial statements prepared on an annual basis.
15.2. FINANCIAL RECORDS USE AND ACCESS.
--------------------------------
Franchisor reserves the right to disclose data derived from all
financial and accounting reports received from Franchisee, without identifying
Franchisee by name or by Restaurant. Franchisee reserves the right to require
that Franchisee install and maintain, as a part of the System, (defined in
Section 6.6), a telephone modem and dedicated line at the Restaurant which
Franchisor may access to obtain sales information and data of the System and
Franchisee agrees to cooperate with Franchisor's procedures regarding such
System. With respect to the operation and financial condition of the
Restaurant, Franchisee agrees to furnish Franchisor the financial and
accounting reports required hereunder in a form reasonably prescribed by
Franchisor which may include, without limitation, computer diskette,
electronic mail and facsimile transmission.
15.3. BOOKS AND RECORDS. Franchisee shall
-----------------
maintain all books and records for its Restaurant in accordance with generally
accepted accounting principles, consistently applied, and preserve such
records, including cash register tapes, shift reports, weekly operating
summaries and sales tax returns, for at least three years after the fiscal
year to which they relate.
15.4. AUDIT OF BOOKS AND RECORDS.
--------------------------
Franchisee shall permit Franchisor or its representatives to inspect and audit
the books and records of the Restaurant at any reasonable time, at
Franchisor's expense. If any audit discloses a deficiency in amounts owed to
Franchisor, then such amounts shall become immediately payable to Franchisor
by Franchisee, with interest from the date such payments were due at the
lesser of 2% per month or the maximum rate allowed by law. In addition, if
such audit discloses that the Gross Sales of the Restaurant have been
understated by 2% or more during the audit period, Franchisee shall pay all
reasonable costs and expenses Franchisor incurred in connection with such
audit.
16. TRANSFER
16.1. TRANSFER BY FRANCHISEE. The
------------------------
franchise granted herein is personal to Franchisee and, except as stated
below, Franchisor shall not allow or permit any transfer, assignment,
subfranchise or conveyance of this Agreement or any interest hereunder. As
used in this Agreement, the term "TRANSFER" includes Franchisee's voluntary,
involuntary, direct or indirect assignment, sale, gift or other disposition of
any interest in: (1) this Agreement; (2) the Franchisee entity; (3) the
Restaurant governed by this Agreement; or (4) all or a substantial portion of
the assets of the Restaurant.
16.2. PRE-CONDITIONS TO FRANCHISEE'S TRANSFER
---------------------------------------
Franchisee shall not engage in a transfer unless
Franchisee obtains Franchisor's written consent, and Franchisee and the
proposed transferee comply with the following requirements: (a) All amounts
due and owing pursuant to this Agreement by Franchisee to Franchisor or its
affiliates or to third parties whose debts or obligations Franchisor has
guaranteed on behalf of Franchisee, if any, are paid in full; (b) the proposed
transferee agrees to operate the Restaurant as a QUIZNO'S Restaurant and
agrees to sign the then-current form of franchise agreement and
satisfac-torily complete the initial training program, which training may be
completed by the transferee either prior to or immediately after the transfer
is effective; (c) Franchisee provides written notice to Franchisor at least 30
days prior to the proposed effective date of the transfer, and includes
information reasonably detailed to enable Franchisor to evaluate the terms and
conditions of the proposed transfer, and which at a minimum includes a written
offer from the proposed transferee; (d) the proposed transferee provides
informa-tion to Franchisor sufficient for Franchisor to assess the proposed
transferee's business experience, aptitude and financial qualification, and
Franchisor approves -the proposed transferee as a franchisee; (e) Franchisee
executes a general release, in a form satisfactory to Franchisor, of any and
all claims against Franchisor, its affiliates and their respective officers,
directors, employees and agents; (f) Franchisee or the proposed transferee
pays a transfer fee in an amount equal to 25% of the then-current Initial
Franchise Fee for the type of Restaurant being transferred, which fee is
required to cover Franchisor's reasonable expenses related to the transfer,
including training; provided, however, that no transfer fee will be charged
for a transfer by Franchisee to a corporation wholly-owned by Franchisee,
between partners of a partnership Franchisee or to a spouse of a Franchisee
upon the death or disability of Franchisee; and (g) Franchisee agrees to abide
by all post-termination covenants set forth herein, including without
limitation the covenant not to compete set forth in Section 20.3.
16.3. FRANCHISOR'S APPROVAL OF TRANSFER
---------------------------------
Franchisor has 30 days from the date of the written notice to
approve or disapprove, in writing, Franchisee's proposed transfer. Franchisee
acknowledges that the proposed transferee shall be evaluated for approval by
Franchisor based on the same criteria as is currently being used to assess new
franchisees of Franchisor and that the proposed transferee shall be provided
with such disclosures as may be required by state or federal law.
16.4. RIGHT OF FIRST REFUSAL. In the event
----------------------
Franchisee wishes to engage in a transfer, Franchisee agrees to grant to
Franchisor a 30-day right of first refusal to purchase such rights, interest
or assets on the same terms and conditions as are contained in the written
notice set forth in Section 16.2(c); provided, however, the following
additional terms and conditions shall apply: (a) the right of first refusal
will be effective for each proposed transfer and any material change in the
terms or conditions of the proposed transfer shall be deemed a separate offer
on which Franchisor shall have a new 30-day right of first refusal; (b) the
30-day right of first refusal period will run concurrently with the period in
which the Franchisor has to approve or disapprove the proposed transferee; (c)
if the consideration or manner of payment offered by a proposed
transferee is such that Franchisor may not reasonably be required to furnish
the same, then Franchisor may purchase the interest which is proposed to be
sold for the reasonable cash equivalent. If the parties cannot agree within a
reasonable time on the cash consideration, an independent appraiser shall be
designated by Franchisor, whose determi-nation will be binding upon the
parties; all expenses of the appraiser shall be paid for equally by Franchisor
and Franchisee; and (d) if Franchisor chooses not to exercise its right of
first refusal, Franchisee shall be free to complete the transfer subject to
compliance with Sections 16.2 and 16.3.
16.5. TYPES OF TRANSFERS. Franchisee
--------------------
acknowledges that Franchisor's right to approve or disapprove a proposed
transfer as provided for above shall apply (1) if Franchisee is a partnership,
corporation or other business association, (i) to the addition or deletion of
a partner, shareholder or members of the association or the transfer of any
ownership interest among existing partners, shareholders or members; (ii) to
any proposed transfer of 25% or more of the interest (whether stock,
partnership interest, or membership interest) to a third party, whether such
transfer occurs in a single transaction or several transactions; and (2) if
Franchisee is an individual, to the transfer from such individual or
individuals to a corporation or entity controlled by them, in which case
Franchisor's approval will be conditioned upon: (i) the continuing personal
guarantee of the individual (or individuals) for the performance of
obligations under this Agreement; and (ii) a limitation on the corporation's
or other entity's business activity to that of operating the Restaurant and
related activities; provided that with respect to such transfer, Franchisor's
right of first refusal to purchase shall not apply and Franchisor shall not
charge a transfer fee
16.6. TRANSFER BY FRANCHISOR. This
------------------------
Agreement is fully assignable by Franchisor and shall inure to the benefit of
any assignee or other legal successor in interest.
16.7. FRANCHISEE'S DEATH OR DISABILITY
--------------------------------
Upon the death or permanent disability of Franchisee (or an
individual owning 25% or more of, or controlling, a Franchisee entity), the
personal representa-tive of such person shall transfer Franchisee's interest
in this Agreement or such interest in the Franchisee entity to an approved
third party. Such disposition of this Agreement or such interest (including,
without limitation, transfer by bequest or inheritance) shall be completed
within a reasonable time, not to exceed 120 days from the date of death or
permanent disability (unless extended by probate proceedings), and shall be
subject to all terms and conditions applicable to transfers contained in this
Section 16; provided, however, that for purposes of this Section, there shall
be no transfer fee charged by Franchisor. Failure to transfer the interest
within said period of time shall constitute a breach of this Agreement. For
the purposes hereof, the term "PERMANENT DISABILITY" shall mean a mental or
physical disability, impairment or condition that is reasonably expected to
prevent or actually does prevent Franchisee (or the owner of 25% or more of,
or controlling, a Franchisee entity) from supervising the management and
operation of the Restaurant for a period of 120 days from the onset of such
disability, impairment or condition.
17. TERM AND RENEWAL
17.1. TERM. The primary term of this Agreement is for a
----
period of 15 years from the Effective Date, unless sooner terminated as
provided herein.
17.2. RENEWAL At the end of the primary term,
-------
Franchisee shall have the option to renew its franchise rights for an
additional 15-year term, so long as Franchisee:
(A) Has -complied with all provisions of this Agreement during the
primary term, including the payment on a timely basis of all Royalties and
other fees. "COMPLI-ANCE" shall mean, at a minimum, that Franchisee has not
received any written notification from Franchisor of breach hereunder more
than four times during the primary term;
(B) Is not in default or under notification of breach of this
Agreement at the time it gives notice under Section 17.3;
(C) Agrees to upgrade and remodel the Restaurant at Franchisee's sole
expense (the necessity of which shall be at the sole discretion of Franchisor)
to conform with the then-current Operations Manual;
(D) Executes a general release, in a form satisfactory to
Franchisor, of any and all claims against Franchisor and its affiliates, and
their respective officers, directors, employees and agents arising out of or
relating to this Agreement; and
(E) Executes the then-current form of Franchise Agreement, which
agreement may contain terms materially different than those in this Agreement
including terms changing the Royalty and other fee amounts; provided that
Franchisee shall not be required to pay a new Initial Franchise Fee. For
purposes of this Section, the renewed franchised rights shall constitute
successor franchise rights.
17.3. EXERCISE OF RENEWAL. Franchisee may
-------------------
exercise its option to renew by giving written notice of such exercise to
Franchisor not more than one year nor less than 180 days prior to the
expiration of the primary term. Franchisee must also pay a $1,000 renewal fee
to Franchisor concurrently with the execution of the then-current Franchise
Agreement, to cover Franchisor's expenses related to reviewing Franchisee's
operations and approving the renewal. If Franchisee fails to comply with any
of the conditions listed above (other than execution of the new Franchise
Agreement or payment of the renewal fee), Franchisor shall give notice to that
effect to Franchisee no later than 90 days before expiration of the primary
term.
18. DEFAULT AND TERMINATION
18.1. TERMINATION BY FRANCHISEE.
---------------------------
Franchisee shall have the right to terminate this Agreement, if Franchisor
materially fails to comply with this Agreement and fails to cure its default
within 30 days after written notice of the default from Franchisee.
Notwithstanding the foregoing, if the breach is curable, but is of a nature
which cannot be reasonably cured within such 30-day period and Franchisor has
commenced and is continuing to make good faith efforts to cure the breach
during such 30-day period, Franchisor shall be given an additional reasonable
period of time to cure the same, and this Agreement shall not terminate.
18.2. TERMINATION BY FRANCHISOR - EFFECTIVE UPON NOTICE
-------------------------------------------------------
Franchisor shall have the
right, at its option, to terminate this Agreement and all rights granted
Franchisee hereunder, without affording Franchisee any opportunity to cure any
default (subject to any state laws to the contrary, where state law shall
prevail), effective upon receipt of notice by Franchisee, upon the occurrence
of any of the following events:
(A) UNAUTHORIZED DISCLOSURE. If Franchisee or any person under
------------------------
Franchisee's control intention-ally or negligently discloses to any
unauthorized person, or copies or reproduces, the contents of or any part of
the Operations Manual or any other trade secrets or confidential information
of Franchisor;
(B) FRAUD OR CONDUCT EFFECTING THE MARKS. If Franchisee commits
------------------------------------
fraud in connection with the purchase or operation of the Restaurant or
otherwise engages in conduct that, in the sole judgment of Franchisor,
materially impairs the goodwill associated with the Marks.
(C) ABANDONMENT. If Franchisee ceases to operate the Restaurant or
-----------
otherwise abandons the Restaurant for a period of 5 consecutive days, or any
shorter period that indicates an intent by Franchisee to discontinue operation
of the Restaurant, unless and only to the extent that full operation of the
Restaurant is suspended or terminated due to fire, flood, earthquake or other
similar causes beyond Franchisee's control and not related to the availability
of funds to Franchisee;
(D) INSOLVENCY; ASSIGNMENTS. If Franchisee becomes insolvent or is
-----------------------
adjudicated a bankrupt; or any action is taken by Franchisee, or by others
against Franchisee under any insolvency, bankruptcy or reorganization act,
(this provision may not be enforceable under federal bankruptcy law, 11 U.S.C.
101 et seq.), or if Franchisee makes an assignment for the benefit of
creditors, or a receiver is appointed by Franchisee;
(E) UNSATISFIED JUDGMENTS; LEVY; FORECLOSURE. If any material
------------------------------------------
judgment (or several judgments which in the aggregate are material) is
obtained against Franchisee and remains unsatisfied or of record for 30 days
or longer (unless a supersedeas or other appeal bond has been filed); or if
execution is levied against Franchisee's business or any of the property used
in the operation of the Restaurant and is not discharged within 5 days; or if
the real or personal property of Franchisee's business shall be sold after
levy thereupon by any sheriff, xxxxxxxx or constable;
(F) CRIMINAL CONVICTION. If Franchisee (or any of its shareholders,
-------------------
partners, or members) is convicted of a felony, a crime involving moral
turpitude, or any crime or offense reasonably likely, in the sole opinion of
Franchisor, to materially and unfavorably affect the Licensed Methods, Marks,
and the associated goodwill and reputation thereof;
(G) FAILURE TO MAKE PAYMENTS. If Franchisee fails to pay any amounts
------------------------
due Franchisor or affiliates within 10 days after receiving notice that such
fees or amounts are overdue;
(H) FINANCIAL REPORTING. If Franchisee intentionally under reports
-------------------
Gross Sales in any amount, or negligently under reports Gross Sales by 5% or
more during any reporting period;
(I) FAILURE TO COMPLETE TRAINING OR OPEN. If Franchisee fails to
------------------------------------
complete the initial training program to Franchisor's satisfaction or to
commence operations of the Restaurant within the time specified herein;
(J) MISUSE OF MARKS. If Franchisee misuses or fails to follow
-----------------
Franchisor's directions and guidelines concerning use of the Marks and fails
to correct the misuse or failure within 10 days after notification from
Franchisor;
(K) REPEATED NONCOMPLIANCE. If Franchisee has received three notices
----------------------
of default from Franchisor within a 12-month period, regardless of whether the
defaults were cured by Franchisee;
(L) RIGHT TO POSSESSION OF PROPERTY. If Franchisee loses the right
-------------------------------
to occupy the Restaurant's premises because of a default under the
Franchisee's lease or Sublease, or defaults under any other agreement related
to use or operation of the Restaurant; or
(M) UNAUTHORIZED TRANSFER. If Franchisee sells, transfers or
----------------------
otherwise assigns the franchise, an interest in the franchise or Franchisee
entity, this Agreement, the Restaurant or a substantial portion of the assets
of the Restaurant owned by Franchisee without complying with the provisions of
Section 16.
18.3. TERMINATION BY FRANCHISOR - THIRTY DAYS NOTICE
----------------------------------------------
Franchisor shall have the right to
terminate this Agreement (subject to any state laws to the contrary, where
state law shall prevail), effective upon 30 days written notice to Franchisee,
if Franchisee breaches any other provision of this Agreement, including but
not limited to, if Franchisee fails to substantially comply with the
Operations Manual, and fails to cure the default during such 30 day period.
In that event, this Agreement will terminate without further notice to
Franchisee, effective upon expiration of the 30 day period. Notwithstanding
the foregoing, if the breach is curable, but is of a nature which cannot be
reasonably cured within such 30 day period and Franchisee has commenced and is
continuing to make good faith efforts to cure the breach during such 30 day
period, Franchisee shall be given an additional reasonable period of time to
cure the same, and this Agreement shall not terminate.
18.4. LATE FEE. In addition to its other rights and
--------
remedies hereunder, Franchisor may charge Franchisee a late fee of $100 per
violation by Franchisee of any term or condition of this Agreement, including
without limitation failure to pay (or to have adequate amounts available for
electronic transfer for) amounts owed Franchisor, or failure to timely provide
required reports. This fee may be changed or eliminated by Franchisor, in its
sole discretion, in the future.
18.5. FAILURE TO COMPLY WITH REPORTING REQUIREMENTS.
---------------------------------------------
If Franchisee fails to prepare and submit
any statement or report as required under Section 15, then Franchisor shall
have the right to treat Franchisee's failure as good cause for termina-tion of
this Agreement. In addition to all other remedies available to Franchisor, in
the event that Franchisee fails to prepare and submit any statement or report
required under Section 15 for two consecutive reporting periods, Franchisor
shall be entitled to make an audit, at the expense of Franchisee, of
Franchisee's books, records and accounts, including Franchisee's bank
accounts, which in any way pertain to the Gross Sales of the Restaurant. The
statements or reports not previously submitted shall be prepared by or under
the direction and supervi-sion of an independent certified public accountant
selected by Franchisor. In addition to its other rights and remedies, if
Franchisee fails to comply with the reporting requirements under Section 15,
Franchisor shall have the right to collect, in addition to the late fee, $500
per week for royalty payments and $100 per week for advertising payment (or a
greater amount if Franchisor reasonably estimates that the Restaurant is
generating higher Gross Sales), provided that any amounts will be reconciled
and adjusted as needed when Franchisor receives actual Gross Sales amounts.
18.6. RIGHT TO REPURCHASE. Except in
-------------------
the case of a renewal under Section 17, upon termination or expiration of this
Agreement for any reason, Franchisor shall have the option to purchase the
Restaurant, or a portion of the assets of the Restaurant, which may include,
at Franchisor's option, all of Franchisee's interest, leasehold or otherwise,
in and to the real estate upon which the Restaurant is located, and all
buildings and other improvements related thereto. The purchase price for the
assets to be transferred will be 30% of the Gross Sales of the Restaurant
during the 12 calendar months immediately proceeding the date of termination
or expiration, and will be adjusted by setting off any amount then owing by
Franchisee to Franchisor, including any amounts paid by Franchisor to cure
Franchisee's defaults with third parties such as landlords (the decision to
pay such cure amounts to be in the sole and absolute discretion of
Franchisor). The following additional terms shall apply to Franchisor's
exercise of this option:
(A) Franchisor's option hereunder shall be exercisable by providing
Franchisee with written notice of its inten-tion to exercise the option no
later than the effective date of termination, in the case of termina-tion
(unless Franchisee terminates without notice or Franchisor terminates for
cause, in which case Franchisor shall have 30 days after receipt of actual
notice of the termination or such additional time as is reasonably necessary
given the circumstances), or at least 30 days prior to the expiration of the
term of the franchise, in circumstances where no successor franchise is
granted.
(B) Franchisor and Franchisee agree that the terms and conditions of
this right and option to purchase may be recorded, if deemed appropriate by
Franchisor, in the real property records and Franchisor and Franchisee further
agree to execute such additional documentation as may be necessary and
appropriate to effectuate such recording; and
(C) The closing for the purchase of the Restaurant will take place no
later than 60 days after written notice of Franchisor's exercise of its option
is given to Franchisee. Franchisor has the unrestricted right to assign this
option to purchase at any time prior to such closing. Franchisor will pay the
purchase price in full at the closing, or, at its option, in 24 equal
consecutive monthly installments with interest at a rate equal to the prime
lending rate as of the closing at Franchisor's primary bank. Franchisee must
sign all documents of transfer as are reasonably necessary for purchase of the
Restaurant by Franchisor, which documents shall include all customary
representations and warranties from Franchisee as to ownership, condition of
and title to the assets of the Restaurant being transferred.
In the event that Franchisor does not exercise Franchisor's right to
repurchase Franchisee's Restaurant as set forth above, Franchisee will be free
to keep or to sell, after such termination or expiration, to any third party,
all of the physical assets of its Restaurant; provided, however, that all
appearances of the Marks are first removed in a manner approved in writing by
Franchisor.
18.7. OBLIGATIONS OF FRANCHISEE UPON TERMINATION OR EXPIRATION
----------------------------------------------------------
Franchisee is obligated upon termination or expiration of this Agreement
to immediately:
(A) Pay Franchisor all Royalties, other fees, and any and all amounts
or accounts payable then owed Franchisor or its affiliates pursuant to this
Agreement, or pursuant to any other agreement between the parties;
(B) Cease to identify itself as a QUIZNO'S franchi-see or use any
Marks, trade secrets, signs, symbols, devices, trade names, or other materials
of Franchisor;
(C) Immediately cease to identify the Franchised Location as being,
or having been, associated with Franchisor, and immediately cease using any
proprietary xxxx of Franchisor or any xxxx in any way associated with the
Marks- and Licensed Methods;
(D) Deliver to Franchisor all signs, sign-faces, advertising
materials, forms and other materials bearing any of the Marks or otherwise
identified with Franchisor and obtained by and in connection with this
Agreement;
(E) Immediately deliver to Franchisor the Operations Manual and all
other information, documents and copies thereof which are proprietary to
Franchisor;
(F) Promptly take such action as may be required to cancel all
fictitious or assumed names or equivalent registrations relating to its use of
any Marks which are under the exclusive control of Franchisor or, at the
option of Franchisor, assign the same to Franchisor;
(G) Notify the telephone company and all telephone directory
publishers of the termination or expiration of Franchisee's right to use any
telephone number and any regular, classified or other telephone directory
listings associated with any Xxxx and to authorize transfer thereof to
Franchisor or its designee. Franchisee acknowledg-es that, as between
Franchisee and Franchisor, Franchisor has the sole rights to and interest in
all telephone, telecopy or facsimile machine numbers and directory listings
associated with any Xxxx. Franchisee authorizes Franchisor, and hereby
appoints Franchisor and any of its officers as Franchisee's attorney-in-fact,
to direct the telephone company and all telephone directory publishers to
transfer any telephone, telecopy or facsimile machine numbers and directory
listings relating to the Restaurant to Franchisor or its designee, should
Franchisee fail or refuse to do so, and the telephone company and all
telephone directory publishers may accept such direction or this Agree-ment as
conclusive of Franchisor's exclusive rights in such telephone numbers and
directory listings and Franchisor's authority to direct their transfer; and
(H) Abide by all restrictive covenants set forth in Section 20 of
this Agreement.
18.8. STATE AND FEDERAL LAW. THE PARTIES
---------------------
ACKNOWLEDGE THAT IN THE EVENT THAT THE TERMS OF THIS AGREEMENT REGARDING
TERMINATION OR EXPIRATION ARE INCONSISTENT WITH APPLICABLE STATE OR FEDERAL
LAW, SUCH LAW SHALL GOVERN FRANCHISEE'S RIGHTS REGARDING TERMINA-TION OR
EXPIRATION OF THIS AGREEMENT.
19. BUSINESS RELATIONSHIP
19.1. INDEPENDENT BUSINESS PERSONS.
---------------------------
The parties agree that each of them are independent businesspersons, their
only relation-ship is by virtue of this Agreement and that no fiduciary
relation-ship is created hereunder. Neither party is liable or responsible
for the other's debts or obligations, nor shall either party be obligated for
any damages to any person or property directly or indirectly arising out of
the operation of the other party's business authorized by or conducted
pursuant to this Agreement. Franchisor and Franchisee agree that neither of
them will hold themselves out to be the agent, employer or partner of the
other and that neither of them has the authority to bind or incur liability on
behalf of the other.
19.2. PAYMENT OF THIRD PARTY OBLIGATIONS
----------------------------------
Franchisor shall have no liability for Franchisee's obligations
to pay any third parties, including without limitation, any product vendors,
or any sales, use, service, occupation, excise, gross receipts, income,
property or other tax levied upon Franchisee, Franchisee's property, the
Restaurant or upon Franchisor in connection with the sales made or business
conducted by Franchisee (except any taxes Franchisor is required by law to
collect from Franchisee with respect to purchases from Franchisor).
19.3. INDEMNIFICATION. Franchisee agrees to
---------------
indemnify, defend and hold harmless Franchisor, its subsidiaries and
affiliates, and their respective shareholders, directors, officers, employees,
agents, successors and assignees, (the "INDEMNIFIED PARTIES") against, and to
reimburse them for all claims, obligations and damages described in this
Section 19.3, any and all third party obligations described in Section 19.2
and any and all claims and liabilities directly or indirectly arising out of
the operation of the Restaurant or arising out of the use of the Marks and
Licensed Methods in any manner not in accordance with this Agreement. For
purposes of this indemnifica-tion, claims shall mean and include all
obligations, actual and consequential damages and costs reasonably incurred in
the defense of any claim against the Indemnified Parties, including, without
limitation, reasonable accountants', attorneys' and expert witness fees, costs
of investigation and proof of facts, court costs, other litigation expenses
and travel and living expenses. Franchisor shall have the right to defend any
such claim against it. This indemnity shall continue in full force and effect
subsequent to and notwithstanding the expiration or termination of this
Agreement.
20. RESTRICTIVE COVENANTS
20.1. NON-COMPETITION DURING TERM.
---------------------------
Franchisee acknowl-edges that, in addition to the license of the Marks
hereunder, Franchisor has also licensed commercially valuable information
which comprises and is a part of the Licensed Methods, including without
limitation operations, marketing, advertising and related information and
materials, and that the value of this information derives not only from the
time, effort and money which went into its compilation, but from the usage by
all franchisees of Franchisor using the Marks and Licensed Methods.
Franchisee therefore agrees that other than the Restaurant licensed herein,
neither Franchisee nor any of Franchisee's officers, directors, shareholders
or partners, nor any spouse of Franchisee or any of these individuals ("BOUND
PARTIES"), shall during the term of this Agreement:
(A) have any direct or indirect controlling interest as a disclosed
or beneficial owner in a "Competitive Business" as defined below;
(B) perform services as a director, officer, manager, employee,
consultant, representative, agent or otherwise for a Competitive Business;
(C) divert or attempt to divert any business related to, or any
customer or account of the Restaurant, Franchisor's business or any other
QUIZNO'S franchi-see's business, by direct inducement or otherwise, or
diverting or attempting to divert the employment of any employee of Franchisor
or another franchisee licensed by Franchisor to use the Marks and Licensed
Methods, to any Competitive Business by any direct inducement or otherwise; or
(D) directly or indirectly solicit or employ any person who is
employed by Franchisor or any other franchisee licensed by Franchisor to use
the Marks and Licensed Methods.
The term "COMPETITIVE BUSINESS" as used in this Agreement shall mean any
business operating, or granting franchises or licenses to others to operate, a
restaurant or other food service business deriving more than 10% of its gross
receipts, excluding gross receipts relating to the sale of alcoholic
beverages, from the sale of submarine, hoagie, hero-type and/or deli-style
sandwiches (other than another QUIZNO'S Restaurant operated by you); provided,
however, neither Franchisee nor the Bound Parties shall be prohibited from
owning securities in a Competitive Business if such securities are listed on a
stock exchange or traded on the over-the-counter market and represent 5% or
less of that class of securities issued and outstanding. Franchisee agrees
that nothing in this Section 20 shall be construed to grant Franchisee any
protected territory.
20.2. "BRANDED BUSINESS". During the term of
------------------
this Agreement, neither Franchisee nor any other Bound Party will operate,
directly or indirectly, any Branded Business within a mile radius of the
Restaurant without the written consent of Franchisor, which consent shall not
be unreasonably withheld. The term "BRANDED BUSINESS" is defined as any
business marketed by a franchisor or chain under a locally, regionally, or
nationally known or registered trademark or service xxxx.
20.3. POST-TERMINATION COVENANT NOT TO COMPETE
------------------------------------------
For a period of two years from termination or
expiration of this Agreement for any reason, or the date on which Franchisee
ceases to conduct business, whichever is later, neither Franchisee nor any
Bound Party shall have any direct or indirect interest as a disclosed or
beneficial owner, investor, partner, director, officer, employee, consultant,
representative or agent or in any other capacity in any Competitive Business
located or operating within a five-mile radius of the former Franchised
Location or within a five-mile radius of any other QUIZNO'S franchised or
company-owned restaurant. The restrictions of this Section shall not be
applicable to the ownership of shares of a class of securities listed on a
stock exchange or traded on the over-the-counter market that represent 5% or
less of the number of shares of that class of securities issued and
outstanding. Franchisee and the Bound Parties expressly acknowledge that they
possess skills and abilities of a general nature and have other
opportunities for exploiting such skills. Consequently, enforcement of the
covenants made in this Section will not deprive them of their personal
goodwill or ability to earn a living.
20.4. ADDITIONAL REMEDIES FOR BREACH
------------------------------
In addition to any other remedies or damages allowed hereunder, if
Franchisee breaches the covenants set forth in Sections 20.1, 20.2, or 20.3,
Franchisee shall pay Franchisor a fee equal to Franchisor's then-current
Initial Franchise Fee for each Competitive Business or Branded Business opened
in violation of the covenants, and eight percent of such Business' gross sales
until expiration of the noncompetition period set forth in Section 20.3.
20.5. CONFIDENTIALITY OF PROPRIETARY INFORMATION
------------------------------------------
Franchisee shall treat all information it
receives which comprises or is a part of the Licensed Methods licensed
hereunder (including without limitation the Operations Manual) as propri-etary
and confidential and will not use such information in an unautho-rized manner
or disclose the same to any unauthorized person without first obtaining
Franchisor's written consent. Franchisee agrees that all such material is the
sole property of Franchisor. Franchisee acknowledges that the Marks and the
Licensed Methods have valuable goodwill attached to them, that the protection
and maintenance thereof is essential to Franchisor and that any unauthorized
use or disclosure of the Marks and Licensed Methods will result in irreparable
harm to Franchisor. All ideas, concepts, techniques or materials concerning a
Quizno's Restaurant, whether or not protectable intellectual property and
whether created by or for Franchisee or its owners or employees, must be
promptly disclosed to Franchisor and will be deemed Franchisor's sole and
exclusive property, part of the Quizno's system, and works made-for-hire for
Franchisor. To the extent any item does not qualify as a "work made-for-hire"
for Franchisor, Franchisee assigns ownership of that item, and all related
rights to that item, to Franchisor and must sign whatever assignment or other
documents Franchisor requests to show ownership or to help Franchisor obtain
intellectual property rights in the item.
20.6. CONFIDENTIALITY AGREEMENT.
--------------------------
Franchisor reserves the right to require that Franchisee cause each of its
officers, directors, partners, shareholders, and Designated Manager, and, if
applicable, the spouse of Franchisee and any of these named individuals, to
execute a Nondisclosure and Noncompetition Agreement containing the above
restrictions, in a form approved by Franchisor.
21. DISPUTES
21.1. GOVERNING LAW/CONSENT TO VENUE AND JURISDICTION.
--------------------------------------------------
Except to the extent
governed by the United States Trademark Act of 1946 (Xxxxxx Act, 15 U.S.C.
1051 et seq.) or other federal law, this Agreement shall be interpreted under
-- ---
the laws of the State of Colorado and any dispute between the parties shall be
governed by and determined in accordance with the substantive laws of the
State of Colorado, which laws shall prevail in the event of any conflict of
law. The Franchisee and the Franchisor have negotiated regarding a forum in
which to resolve any disputes which may arise between them and have agreed to
select a forum in order to promote stability in their relationship.
Therefore, if a claim is asserted in any legal proceeding involving the
Franchisee or any Bound Party and the Franchisor, the parties agree that the
exclusive venue for disputes between them shall be in the District Court for
the City & County of Denver, Colorado, or the United States District Court for
the District of Colorado, and the parties each waive any objection they may
have to the personal jurisdiction of or venue in such courts.
21.2. WAIVER OF JURY TRIAL. 21.2. WAIVER OF JURY TRIAL.
----------------------- --------------------
Franchisor, Franchisee and the Bound Parties each waive their right to a trial
by jury. Franchisee and Franchisor acknowledge that the parties' waiver of
jury trail rights provides the parties with the mutual benefit of uniform
interpretation of this Agreement and any dispute arising out of this Agreement
or the parties' relationship created by this Agreement. Franchisee and
Franchisor further acknowledge the receipt and sufficiency of mutual
consideration for such benefit.
21.3. REMEDIES. REMEDIES. Except as set forth in Section 21.4,
-------- --------
the court will have the right to award any relief which it deems proper in the
circumstances, including without limitation money damages (with interest on
unpaid amounts from the date due), lost profits, specific performance,
injunctive relief and attorneys' fees and costs. The parties agree that any
claim for lost earnings or profits by Franchisee shall be limited to a maximum
amount equal to the net profits of the Restaurant for the prior year as shown
on Franchisee's federal income tax return. The parties further agree that, in
addition to such other damages as may be awarded by the court, if this
Agreement is terminated because of a Franchisee default, Franchisee shall be
liable to Franchisor for a lump sum amount equal to the Royalties and
Marketing and Promotion Fees that would have become due following termination
of this Agreement for the period this Agreement would have remained in effect
but for the Franchisee's default. Royalties and Marketing and Promotion Fees
for purposes of this Section shall be calculated based on the Restaurant's
average monthly Gross Sales for the prior year.
- 21.4. LIMITATION OF CLAIMS. Franchisee and the Bound Parties agree
--------------------
not to bring any claim asserting that any of the Marks are generic or
otherwise invalid. Any claims between the parties must be commenced within
one year from the occurrence of the facts giving rise to such claim, or such
claim shall be barred. The parties understand that such time limit may be
shorter than otherwise allowed by law. Franchisee agrees that its sole
recourse for claims arising between the parties shall be against Franchisor or
its successors and assigns. Franchisee agrees that the shareholders,
directors, officers, and employees and agents of the Franchisor and its
affiliates shall not be personally liable nor named as a party in any action
between the Franchisor and Franchisee; provided that this shall not preclude
claims Franchisee may have directly against an Area Director. Franchisor and
Franchisee further agree that, in connec-tion with any such proceeding, each
must submit or file any claim which would constitute a compulsory counterclaim
(as defined by rule 13 of the Federal Rules of Civil Procedure) within the
same proceeding as the claim to which it relates. Any such claim which is not
submitted or filed as described above will be forever barred. Franchisor and
Franchisee agree that any proceeding will be conducted on an individual, not a
class-wide, basis, and that a proceeding between Franchisor -and Franchisee or
the Bound Parties -may not be consolidated with any other proceeding between
Franchisor and any other person or entity. No party will be entitled to an
award of punitive or exemplary damages (provided that this limitation shall
not apply to statutory penalties such as those set forth in 15 U.S.C.
1117(a)). No previous course of dealing shall be admissible to explain,
modify, or contradict the terms of this Agreement. No implied covenant of
good faith and fair dealing shall be used to alter the express terms of this
Agreement.
22. SECURITY INTEREST 22. SECURITY INTEREST
22.1. COLLATERAL. 22.1. COLLATERAL. Franchisee hereby grants
---------- ----------
Franchisor a security interest ("SECURITY INTEREST") in all of the furniture,
fixtures, equipment, signage, and realty (including Franchisee's interests
under all real property and personal property leases) and together with all
similar property now owned or hereafter acquired, additions, substitutions,
replacements, proceeds and products thereof, wherever located and used in
connection with the Restaurant. All items in which a security interest is
granted hereby are referred to as the "COLLATERAL."
22.2. INDEBTEDNESS SECURED. The
--------------------
Security Interest is to secure payment of the following (the "INDEBTEDNESS"):
(A) All amounts due under this Agreement including without limitation
Royalty Fees and Marketing and Promotion Fees, together with interest, fees
and other charges provided for herein;
(B) All sums which Franchisor may, at its option, expend or advance
for the maintenance, preservation and protection of the Collateral, including
without limitation, payment of rent, taxes, levies, assessments, insurance
premiums and discharge of liens, together with interest thereon, or in any
other property given as security for payment of the Indebted-ness;
(C) All expenses, including reasonable attor-neys' fees, which
Franchisor incurs in connection with collection of any or all Indebtedness
secured hereby or in enforcement or protection of its rights hereunder; and
(D) All other present or future, direct or indirect, absolute or
contingent, liabilities, obligations and indebted-ness of Franchisee to
Franchisor or third-parties under this Agreement, however created, and
specifically including all or part of any renewal or extension of this
Agreement whether or not Franchisee executes any extension agreement or
renewal instruments.
22.3. ADDITIONAL DOCUMENTS.
---------------------
Franchisee will from time to time as re-quired by Franchisor join with
Franchisor in executing any additional documents and one or more financing
statements pursuant to the Uniform Commercial Code (and any assignments,
exten-sions or modifica-tions thereof) in form satisfactory to Franchisor.
22.4. POSSESSION OF COLLATERAL.
------------------------
Upon default and termination of Franchisee's rights hereunder, Franchisor
shall have the immediate right to possession and use of the Collateral.
22.5. REMEDIES OF FRANCHISOR IN EVENT OF DEFAULT.
------------------------------------------
Franchisee agrees that upon the occurrence
of any default set forth above, the full amount remaining unpaid on the
Indebtedness secured hereby shall, at the option of Franchisor and without
notice, be and become due and payable forthwith, and Franchisor shall then
have the rights, options, duties and remedies of a secured party under, and
Franchisee shall have the rights and duties of a debtor under, the Uniform
Commercial Code of Colorado, including without limitation Franchisor's right
to take possession of the Collateral and of anything found therein, and the
right without legal process to enter any premises where the Collateral may be
found. Any sale of the Collateral may be conducted in the Franchisor's sole
discretion, and the conduct of such sale is agreed to be commercially
reasonable. Reasonable notification of the time and place of any sale shall
be satisfied by mailing to Franchisee pursuant to the notice provisions set
forth below.
22.6. SPECIAL FILING AS FINANCING STATEMENT.
--------------------------------------
This Agreement shall be a deemed a Security
Agreement and a Financing Statement. This Agreement may be filed for record
in the real estate records of each county in which the Collateral, or any part
thereof, is situated, and may also be filed as a Financing Statement in the
counties or in the office of the Secretary of State, as appropriate, in
respect of those items of Collateral of a kind or character defined in or
subject to the applicable provisions of the Uniform Commercial Code, as in
effect in the appropriate jurisdiction.
23. MISCELLANEOUS PROVISIONS
23.1. MODIFICATION. No amendment, waiver or
------------
modifi-cation of this Agreement shall be effective unless it is in writing and
signed by the Franchisor and Franchisee. Franchisee acknowledges that
Franchisor may modify its standards and specifications and operating and
marketing techniques set forth in the Operations Manual unilaterally under any
conditions and to the extent in which Franchisor, in its sole discretion,
deems necessary to protect, promote, or improve the Marks and the quality of
the Licensed Methods, but under no circumstances will such modifications be
made arbitrarily without such determina-tion.
23.2. ENTIRE AGREEMENT. This Agreement contains
----------------
the entire agreement between the parties and supersedes any and all prior
agreements concern-ing the subject matter hereof. Franchisee agrees and
understands that Franchisor shall not be liable or obligated for any oral
representations or commitments made prior to the execution hereof or for
claims of negligent or fraudulent misrepresentation and that no modifica-tions
of this Agreement shall be effective except those in writing and signed by
both parties. Franchisor does not authorize and will not be bound by any
representation of any nature other than those expressed in this Agreement.
Franchisee further acknowledges and agrees that no representations have been
made to it by Franchisor regarding projected sales volumes, market potential,
revenues, profits of Franchisee's Restaurant, or operational assistance other
than as stated in this Agreement or in any disclosure document provided by
Franchisor or its representatives.
23.3. DELEGATION BY FRANCHISOR. From
------------------------
time to time, Franchisor shall have the right to delegate the performance of
any portion or all of its obligations and duties hereunder to third parties,
whether the same are agents of Franchisor or Area Directors or indepen-dent
contractors which Franchisor has contracted with to provide such services.
Franchisee agrees in advance to any such delegation by Franchisor of any
portion or all of its obliga-tions hereunder. Franchisee acknowledges and
agrees that Franchisor may not be bound and this Agreement may not be modified
by any Area Director without Franchisor's prior written consent. Franchisee
acknowledges and agrees that any such delegation of Franchisor's duties and
obligations to Area Directors does not assign or confer any rights under this
Agreement upon Area Directors and that Area Directors are not third party
beneficiaries of this Agreement.
23.4. AGREEMENT EFFECTIVE. This Agreement
-------------------
shall not be effective until accepted by Franchisor as evidenced by dating and
signing by an officer of Franchisor.
23.5. REVIEW OF AGREEMENT. Franchisee
---------------------
acknowledges it had a copy of Franchisor's Uniform Franchise Offering Circular
in its possession for not less than 10 full business days, and this Agreement
in its possession for not less than 5 full business days, during which time
Franchisee has had the opportunity to submit same for professional review and
advice of Franchisee's choosing prior to freely executing this Agreement.
23.6. ATTORNEYS' FEES. In the event of any
----------------
default on the part of either party to this Agreement, in addition to all
other remedies, the party in default will pay the prevailing party all amounts
due and all damages, costs and expenses, including reason-able attorneys'
fees, incurred by the aggrieved party in any legal action or other proceeding
as a result of such default, plus interest at the lesser of 2% per month or
the highest rate allowable by law, accruing from the date of such default.
Additionally, if Franchisee withholds any amounts due Franchisor, Franchisee
shall reimburse Franchisor's costs of collecting such amounts including
reasonable attorney fees and expenses.
23.7. INJUNCTIVE RELIEF. Nothing herein shall
------------------
prevent Franchisor or Franchisee from seeking injunctive relief to prevent
irreparable harm, in addition to all other remedies.
23.8. NO WAIVER. No waiver of any condition or
----------
covenant contained in this Agreement or failure to exercise a right or remedy
by Franchisor or Franchisee shall be considered to imply or constitute a
further waiver by Franchisor or Franchisee of the same or any other condition,
covenant, right, or remedy.
23.9. NO RIGHT TO SET OFF. Franchisee shall
-------------------
not be allowed to set off amounts owed to Franchisor for Royalties, fees or
other amounts due hereunder, against any monies owed to Franchi-see, which
right of set off is hereby expressly waived by Franchisee.
23.10. INVALIDITY. If any provision of this Agreement
----------
is held invalid by any tribunal in a final decision from which no appeal is or
can be taken, such provision shall be deemed modified to eliminate the invalid
element and, as so modified, such provision shall be deemed a part of this
Agreement as though originally included. The remaining provisions of this
Agreement shall not be affected by such modification.
23.11. NOTICES. All notices required to be given under
-------
this Agreement shall be given in writing, by certified mail, return receipt
requested, or by an overnight delivery service providing documentation of
receipt, at the address set forth in the first paragraph of this Agreement or
at such other addresses as Franchisor or Franchisee may designate from time to
time, and shall be effectively given when deposited in the United States
mails, postage prepaid, or when received via overnight delivery, as may be
applicable.
23.12. ACKNOWLEDGMENT. BEFORE SIGNING THIS
--------------
AGREEMENT, FRANCHISEE SHOULD READ IT CAREFULLY WITH THE ASSISTANCE OF LEGAL
COUNSEL. FRANCHISEE ACKNOWLEDGES THAT:
(A) THE SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED HEREIN INVOLVES
SUBSTANTIAL RISKS AND DEPENDS UPON FRANCHISEE'S ABILITY AS AN INDEPENDENT
BUSINESS PERSON AND ITS ACTIVE PARTICI-PATION IN THE DAILY AFFAIRS OF THE
BUSINESS, AND
(B) NO ASSURANCE OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN GIVEN AS
TO THE POTENTIAL SUCCESS OF SUCH BUSINESS VENTURE OR THE EARNINGS LIKELY TO BE
ACHIEVED, AND
(C) NO STATEMENT, REPRESENTATION OR OTHER ACT, EVENT OR
COMMUNICATION, EXCEPT AS SET FORTH IN THIS DOCUMENT, AND IN ANY OFFERING
CIRCULAR SUPPLIED TO FRANCHISEE IS BINDING ON FRANCHISOR IN CONNECTION WITH
THE SUBJECT MATTER OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above set forth.
THE QUIZNO'S CORPORATION
By:
Its:
Date:
FRANCHISEE:
Individually
Date:
OR:
(if a corporation, limited liability company, or partnership)
Company Name
By:
Its:
Date:
EXHIBIT B-1 TO
FRANCHISE AGREEMENT
ADDENDUM TO QUIZNO'S
FRANCHISE AGREEMENT
1. FRANCHISED LOCATION. The Franchised Location set forth in Section
-------------------
3.1 of the Agreement shall be:
OR if the Franchised Location is not determined as of this date, then the
DESIGNATED AREA, referred to in Section 3.1 of the Agreement, shall be:
If the Franchised Location is not determined as of this date, the
Franchised Location shall be deemed approved upon approval by Franchisor of
the site and Sublease pursuant to Section 6 of the Agreement.
By execution hereof, Franchisor approves the above-stated Franchised
Location, or the Designated Area for the Franchised Location, and Franchisee
acknowledges and warrants that (1) Franchisor's approval does not constitute a
guarantee, recommenda-tion or endorsement of the Franchised Location or
Designated Area and that the success of the Restaurant to be operated at a
Franchised Location is dependent upon Franchisee's abilities as an independent
businessperson; and, if a Franchised Location is designated, (2) that
Franchisor has complied with its obligations under the Agreement to assist
Franchisee by provision of criteria for the Franchised Location and
determination of fulfillment of the requisite criteria for the Franchised
Location, such determination based on information provided by Franchisee.
2. INITIAL FRANCHISE FEE. Franchisee shall pay to Franchisor an
---------------------
Initial Franchise Fee, referenced in Section 4.1 of the Agreement, of: $.
3. LEASE ASSISTANCE PROGRAM. (Referenced in Section 6.3 of the
-------------------------
Agreement). Check One:
Not Participating
Participating (Lease Review Fee: $2,200; Franchisee required to
execute Sublease)
4. TRAINING. The following individuals shall attend Franchisor's
--------
initial training program, as described in Section 7.1 of the Agreement:, and,
of these individuals, the DESIGNATED MANAGER shall be:.
5. ACKNOWLEDGMENT. Franchisee acknowledges receiving an execution
--------------
copy of the Franchise Agreement, including this Addendum, all other addenda
and all other documents related to the purchase of the franchise, at least
five business days prior to signing the Franchise Agreement or paying any
funds to Franchisor.
THE QUIZNO'S CORPORATION
By:
Its:
FRANCHISEE
By:
Its:
EXHIBIT B-2 TO
FRANCHISE AGREEMENT
ADDENDUM TO
FRANCHISE AGREEMENT --
QUIZNO'S CLASSIC SUBS
EXPRESS FACILITY
THIS ADDENDUM to the Franchise Agreement dated of even date herewith
("AGREEMENT") is made on ________________________, between The Quizno's
Corporation ("FRANCHISOR") and the undersigned "FRANCHISEE." The following
amends and shall be incorporated into the Agreement. In the event of any
conflict between the terms of the Agreement and the terms of this Addendum,
the terms of this Addendum shall control. All capitalized terms not defined
in this Addendum have the respective meanings set forth in the Agreement.
Franchisor and Franchisee agree as follows:
1. EXPRESS RESTAURANT. All references in the Agreement to the
-------------------
"RESTAURANT," as defined in Section 1.1 of the Agreement, are deleted and the
reference "EXPRESS RESTAURANT" is inserted in place thereof. Except as may be
otherwise noted herein or in the Agreement, all applicable terms, conditions
and requirements set forth in the Agreement applicable to the Restaurants
apply to the Express Restaurants. Franchisor's approval of the development
and operation of an Express Restaurant, as required pursuant to Section 3.3 of
the Agreement, is hereby granted. The terms of the Agreement and of this
Addendum apply only to the Express Restaurant operations and products offered
or sold from or through the Express Restaurant and not to the other business
of Franchisee located in the Host Facility (defined below) except as
specifically set forth herein.
2. FRANCHISED LOCATION. The Franchised Location shall be within or
-------------------
adjacent to the following facility (also referred to as the "HOST FACILITY"):
If the placement and operation of the Express Restaurant in or in connection
with the Host Facility requires the consent of the owner, franchisor or
licensor of the Host Facility, Franchisee hereby represents and warrants that
such consent has been obtained in writing, and such representation is a
condition precedent to the grant of Franchisee's right to establish and
operate the Express Restaurant.
3. ROYALTY. Section 5.1 is deleted and replaced with the following:
-------
Franchisee agrees to pay to Franchisor a weekly royalty ("ROYALTY") equal to
8% of the total amount of its Gross Sales, defined hereinafter, generated from
or through the Express Restaurant.
4. BEVERAGES. Check either (a), (b), (c), or (d):
---------
_____ (a) All fountain drink sales that occur within the Express
Restaurant or in a QUIZNO'S logoed cup will be included in the Gross Sales.
Franchisee may either have a separate fountain for the Express Restaurant or
the Express Restaurant may share a common self-service fountain with the rest
of the Host Facility.
_____ (b) 25% of all fountain drink sales made at the Host Facility will
be included in the Gross Sales.
_____ (c) 25% of all QUIZNO'S units sold will be considered to have been
made with the sale of the averaged size beverage for Host Facility. The price
of the beverage will be the average price of all beverages sold at the Host
Facility for that month. (For example: if 100 units are sold and the average
beverage price is $1.00, then 25 units will be considered to have been sold
with a soda and $25.00 will be included in Gross Sales as sales from fountain
drinks and subject to royalty and advertising charges.)
_____ (d) Gross Sales shall be increased by 13% of recorded Gross Sales
for the purposes of the Agreement.
5. APPROVAL OF FRANCHISED LOCATION. Franchisor hereby approves the
-------------------------------
above-stated location as the Franchised Location. Franchisee acknowledges and
warrants that (1) Franchisor's approval does not constitute a guarantee,
recommenda-tion or endorsement of the Franchised Location and that the success
of the Express Restaurant is dependent upon Franchisee's abilities as an
independent businessperson; and (2) Franchisor has complied with its
obligations under the Agreement to assist Franchisee with respect to criteria
for the Franchised Location and determination of fulfillment of the requisite
criteria for the Franchised Location, such determination based on information
provided by Franchisee.
6. SIGNS. Section 6.5 of the Agreement is supplemented by adding the
-----
following:
Franchisee agrees to use best efforts to maximize the use of Franchisor's
Marks on pre-existing and new signs as may be placed at the Franchised
Location and on the premises of the Host Facility. All signs and the
placement configuration thereof shall be approved by both Franchisee and
Franchisor, which approval shall not be unreasonably withheld and shall be
based on parameters which shall best maximize sign usage to the extent
allowable under any landlord restrictions and any applicable local laws,
zoning ordinances and other similar requirements. Franchisor hereby approves
all uses by Franchisee of the marks, symbols, names and identifying marks of
at the Franchised Location.
7. EQUIPMENT. Section 6.6 is deleted and replaced by the following:
---------
Franchisee shall purchase, lease or otherwise obtain for use in connection
with the Express Restaurant such equipment of a type and in an amount which
complies with the standards and specifications of Franchisor. Franchisee
acknowledges that the type, quality, configuration, capability, and/or
performance of the Restaurant equipment are all standard and specifications
which are a part of the Licensed Methods and therefore such equipment must be
purchased, leased, or otherwise obtained in accordance with Franchisor's
standards and specifications and only from suppliers or other sources approved
by Franchisor. Franchisee shall configure its computer cash register system
in use in the Host Facility ("SYSTEM") to accurately record every sale or
other transaction. Franchisee shall submit any required reports hereunder in
a format designated from time to time by Franchisor. Franchisee hereby grants
Franchisor reasonable access to its records only on the System and authorizes
Franchisor to obtain its sales, sales mix and revenue information therefrom.
Franchisee acknowledges that Franchisor will use information from required
reports primarily to make business and marketing decisions.
8. EXPRESS RESTAURANT OPERATIONS. Section 11.1(d) of the Agreement
-----------------------------
is supplemented by adding the following:
Franchisor and Franchisee acknowledge and agree that the products and services
offered for sale from the Express Restaurant, and the standards and
specifications of Franchisor related thereto, may differ from that of a
traditional QUIZNO'S Restaurant and will be subject to alternative standards
and specifications as may be developed and made available by Franchisor.
9. GRAND OPENING. Section 12.2 is amended to require Franchisee to
-------------
spend a minimum of $3,000 for the grand opening program. All other terms of
Section 12.2 remain the same.
10. LOCAL ADVERTISING. Section 12.4 of the Agreement is deleted.
-----------------
11. REGIONAL ADVERTISING PROGRAMS. The following is added at the end
-----------------------------
of Section 12.5:
Notwithstanding the provisions of Section 12.5, Franchisee will not be
required to contribute any funds to a Regional Advertising program or to
participate in either a Regional Advertising program or a Regional Advertising
cooperative.
12. RESTRICTIONS ON SERVICES AND PRODUCTS. The following is added at
-------------------------------------
the end of Section 13.3:
Franchisee agrees that, during the term of the Agreement, it will not offer
or sell any Sub-Sandwiches or any type of Branded Sandwich from or through the
Host Facility other than from or through the Express Restaurant.
"SUB-SANDWICH" is defined as a submarine, hoagie, hero-type or deli-style
sandwich. "BRANDED SANDWICH" is defined as any sandwich marketed by a fast
food franchisor or chain, whose primary menu items consist of sandwiches,
under a locally, regionally, or nationally known or registered trade name,
trademark, or service xxxx. Except for Sub-Sandwich or Branded Sandwich
products, Franchisee may sell other food products from or through the portion
of the Host Facility that does not comprise the Express Restaurant.
13. MARKS. Section 14.1. of the Agreement is supplemented by adding
-----
the following:
Franchisor and Franchisee acknowledge and agree that the primary Xxxx to be
used to identify market and promote the Express Restaurant will be "QUIZNO'S
EXPRESS CLASSIC SUBS." All other references to the Marks as set forth in the
Agreement are inclusive of this primary Xxxx.
14. FINANCIAL REPORTS. The second sentence of Section 15.1 is
------------------
deleted. The following new Section 15.1(e) is added:
The point-of-sale system used at the Host Facility shall differentiate sales
of the Express Restaurant from sales of the rest of the Host Facility by the
use of "price look up" ("PLU") or other keys that track and tally sales of the
Express Restaurant separately and shall report Express Restaurant Gross Sales
by item type.
15. FINANCIAL RECORDS USE AND ACCESS. The second sentence of Section
--------------------------------
15.2 is deleted.
16. TERM. Section 17.1 is deleted and replaced with the following:
----
The primary term of this Agreement is for a period of 5 years from the
Effective Date, unless sooner terminated as provided herein.
17. RENEWAL. Section 17.2 is amended to provide that the term of
-------
Franchisee's option to renew is 5 years. All other terms of Section 17.2
remain the same.
18. DEFAULT AND TERMINATION. The following new Section 18.2(n) is
-----------------------
added:
(M) LOSS OF RIGHT TO OPERATE HOST FACILITY. If Franchisee loses the right
--------------------------------------
for whatever reason to operate the Host Facility.
19. RIGHT TO REPURCHASE. The first sentence of 18.6 is deleted and
-------------------
replaced with the following:
Upon termination or expiration of this Agreement for any reason, the
Franchisor shall have the option to purchase the assets used in the operation
of the QUIZNO'S Express Restaurant, or a portion thereof, which option shall
not include the right to purchase any fixtures or real property interest,
however.
Section 18.5(b) is deleted.
20. NON-COMPETITION DURING TERM. Section 20.1 is amended to provide
---------------------------
that the term "COMPETITIVE BUSINESS" shall mean any business operating, or
granting franchises or licenses to others to operate, a restaurant or other
food service business deriving more than 10% of its gross receipts, excluding
gross receipts relating to the sale of alcoholic beverages, from the sale of
Sub-Sandwiches (as defined above). The offer or sale of food products other
than Sub-Sandwiches or Branded Sandwiches through or from the portion of the
Host Facility that does not comprise the Express Restaurant shall not be
considered a Competitive Business.
21. "BRANDED BUSINESS". Section 20.2 is deleted.
-------------------
22. POST TERMINATION COVENANT NOT TO COMPETE. Section 20.3 is
------------------------------------------
deleted and replaced with the following:
For a period of two years from termination or expiration of this Agreement for
any reason, or the date on which Franchisee ceases to conduct business of the
Express Restaurant, whichever is later, neither Franchisee or its officers,
directors, shareholders, nor partners (through a spouse or otherwise) shall
have any direct or indirect interest as a disclosed or beneficial owner,
investor, partner, director, officer, employee, consultant, representative or
agent or in any other capacity in any Branded Sandwich franchise or chain
located at the Host Facility or located within a five-mile radius of the Host
Facility or within a five-mile radius of any other QUIZNO'S franchised or
company-owned restaurant. The restrictions of this Section shall not be
applicable to the ownership of shares of a class of securities listed on a
stock exchange or traded on the over-the-counter market that represent 5% or
less of the number of shares of that class of securities issued and
outstanding. Franchisee and its officers, directors, shareholders, and
partners expressly acknowledge that they possess skills and abilities of a
general nature and have other opportunities for exploiting such skills.
Consequently, enforcement of the covenants made in this Section will not
deprive them of their personal goodwill or ability to earn a living.
23. ADDITIONAL REMEDIES FOR BREACH. Section 20.4's reference to
------------------------------
Section 20.2 is deleted.
24. CONFIDENTIALITY OF PROPRIETARY INFORMATION. The following is
------------------------------------------
added to the end of Section 20.5:
Franchisee shall not use Franchisor's Licensed Methods, including without
limitation Franchisor's recipes, materials, forms, menus, items, supplies,
business forms or business policies, as stated in the Operations Manual or
otherwise, except for the benefit of Franchisor and in operation of the
Franchisee's Express Restaurant.
25. SECURITY INTEREST. Section 22 is deleted.
------------------
THE QUIZNO'S CORPORATION FRANCHISEE
By: By:
Its: Its:
EXHIBIT B-3 TO
FRANCHISE AGREEMENT
ADDENDUM TO FRANCHISE AGREEMENT
SPECIAL PRODUCTS PROGRAM FOR
_______________________________
("SPECIAL PRODUCT")
THIS ADDENDUM to the Franchise Agreement ("AGREEMENT") dated, 19, is made
effective as of, 19 by and between The Quizno's Corporation ("FRANCHISOR") and
("FRANCHISEE"), to amend and supplement the terms and conditions contained in
the Agreement to allow Franchisee to offer and sell the Special Product listed
above at its QUIZNO'S restaurant ("RESTAURANT"), which is operated pursuant to
the Agreement (the "SPECIAL PRODUCT PROGRAM"). Capitalized terms not defined
herein shall be as defined in the Agreement.
The parties therefore agree as follows:
1. LICENSED METHODS. The "Licensed Methods" shall be deemed to
-----------------
include the Special Product and all products and services offered pursuant to
the Special Product Program. The "Marks" shall be deemed to include all
trademark and service xxxx designating the Special Program Products ("SPECIAL
PRODUCT TRADEMARKS"). Except as otherwise noted herein, the terms of the
Agreement, including any and all exhibits and addendums to the Agreement,
shall apply to the Special Product Program.
2. MARKS. Franchisee acknowledges that Article 14 of the Agreement
-----
also governs the Special Product Trademarks, which during the term of this
Addendum shall be considered "Marks" under the Agreement. Franchisee also
acknowledges and agrees that no Marks other than Special Product Trademark or
such other trademarks as may be specified by Franchisor shall be used in the
marketing, promotions, identification of the Special Products and the
operation of the Special Product Program, except with Franchisor's prior
written consent.
3. TRAINING FEE. Franchisee agrees to pay to Franchisor,
-------------
concurrently with the execution of this Addendum, a training fee of $600 to
compensate Franchisor for its costs and expenses in providing initial training
to Franchisee in connection with Franchisee's participation in the Special
Product Program. Franchisee acknowledges and agrees the training fee
represents payment for the initial grant of the rights to use the Special
Product Trademarks and Licensed Methods relating to the Special Product
Program, Franchisor has earned the training fee upon receipt and the training
fee is not refundable to Franchisee after it is paid.
4. TERM. Unless terminated early pursuant to Section 5, this
----
Addendum shall be effective on the date listed above and shall remain in
effect until termination (for any reason) or expiration of the Agreement.
Upon the termination or the expiration of the term of this Addendum, or any
extension hereof, Franchisee must cease offering the Special Product Products
at or through the Franchised Location in accordance with the post-termination
obligations of Franchisee under the Agreement.
5. EARLY TERMINATION. This Addendum may be terminated by Franchisor,
-----------------
with or without a termination of the Agreement: (a) if Franchisee breaches
any provision of this Addendum, provided, however, state laws may apply which
will supersede this provision; or (b) if Franchisee is in default of the
Agreement and fails to cure such default pursuant to the terms of the
Agreement; or (c) if Franchisor determines it to be in the best interests of
Franchisor and its franchise system to discontinue the sale of the Special
Products through the Restaurant, in which case termination shall be effective
90 days after notice from Franchisor. Franchisee may only terminate this
Addendum if Franchisor has committed a material breach of any of Franchisor's
obligations under this Addendum and has failed to cure such breach pursuant to
the terms of the Agreement.
6. CONDITIONAL BASIS OF PROGRAM. Franchisee acknowledges and
-------------------------------
understands (a) that the Special Product Program may be an initial development
program to determine whether the Special Products can and will be licensed for
use and sale by other QUIZNO'S Restaurants and that Franchisor may still be in
the development stage of creating and implementing manuals, programs, and
related policies and procedures, if any, with regard to the sale of the
Special Products at QUIZNO'S Restaurants; and (b) if the Special Product
Program is in the nature of a test program, it is being established and
implemented to, among other things, research and evaluate the feasibility of
offering the Special Products in other Restaurants, so that Franchisee shall
freely share with Franchisor operational results, information, technology and
ideas regarding the sale of the Special Products during the term of this
Addendum.
7. INITIAL TRAINING PROGRAM. Franchisee, or if Franchisee is not an
------------------------
individual, the Designated Manager, shall attend and successfully complete the
Special Product Program initial training offered by Franchisor at one of
Franchisor's designated training facilities. Franchisee shall be responsible
for all travel and living expenses incurred in connection with attendance at
the initial training program as well as wages or salaries, if any, of the
persons receiving the training. One individual must successfully complete the
Special Product Program initial training program prior to Franchisee's
commencement of operation of the Special Product Program at its QUIZNO'S
Restaurant, but Franchisee may designate up to 2 people to attend such
training.
8. AUTHORIZED SPECIAL PRODUCTS. For the term of this Addendum,
----------------------------
Franchisee shall use best efforts to offer, promote, market and sell Special
Product as specified by the Special Product Program. The Special Products
shall be offered for retail sale at the Restaurant in accordance with the
written standards and specifications of Franchisor, many of which will be
contained in the Operations Manual or in technical bulletins or other written
materials specific to the Special Product Program, all of which may be changed
or supplemented by Franchisor in accordance with the terms of the Agreement.
By execution of this Addendum, Franchisor approves the Special Products as
products and services authorized to be sold at and through the Restaurant, in
accordance with the Agreement.
9. IMPLEMENTATION OF THE SPECIAL PRODUCT PROGRAM. Franchisee shall
---------------------------------------------
commence implementation of the Special Product Program and begin offering and
selling Special Products on the same day that Franchisee commences operation
of its Restaurant, or the date of this Addendum, whichever is later.
10. ROYALTY. Any revenues derived by Franchisee from the sale of the
-------
Special Product Products shall be included in the Gross Sales of the
Restaurant for purposes of determining the Royalty, Local Advertising Fee,
and the Marketing and Promotion Fee, which are paid to Franchisor by
Franchisee pursuant to the Agreement. The Gross Sales of the Restaurant
attributable to the Special Product Program shall be accounted for and
reported to Franchisor separate and apart from Gross Sales attributable to the
remainder of the products and services offered by and through the Restaurant.
11. MARKETING AND ADVERTISING FOR SPECIAL PRODUCT PRODUCTS.
-----------------------------------------------------------
(a) Franchisee shall only use designated marketing materials as
provided to Franchisee by Franchisor and will not produce any of its own
marketing materials unless given written approval to do so by Franchisor with
respect to marketing the Special Products or the Special Product Program.
(b) At no time will Franchisee display or use in any manner any of
the Special Product Trademarks which have been designated for use in selling
Special Products in the offer or sale of any other products or services,
including sandwiches, offered at or through the QUIZNO'S Restaurant, without
written permission of Franchisor.
(c) Franchisee shall implement and maintain during the term of this
Addendum any promotional campaign for the sale of the Special Product Products
and/or the Special Product Program in an amount and manner as set forth in the
Operations Manual or otherwise by written notice.
12. COMPETITIVE BUSINESS. Franchisee acknowledges that the Special
--------------------
Product Program is a "Competitive Business" for purposes for the restrictive
covenants set forth in the Agreement.
13. REPORTS, BOOKS AND RECORDS. Franchisee agrees to prepare and
--------------------------
submit certain weekly reports regarding the sale of the Special Products in a
form which will be designated by Franchisor. Franchisee agrees to provide
Franchisor with full access to the results of its operations in connection
with the sale of the Special Products and shall allow Franchisor's designated
representa-tives to inspect its Franchised Location and operations to observe
and assess the sale of the Special Products at any time during regular
business hours. Franchisor or its representative shall be permitted to copy
and retain copies of all relevant invoices, records, customer lists and other
documents related to the sale of the Special Products. Franchisee shall
maintain and submit to Franchisor separate accounting records with regard to
the income, expenses and costs which are incurred in connection with the sale
of the Special Products.
14. COMPLIANCE WITH LAWS. Franchisee shall comply with any
----------------------
applicable federal, state and local laws, rules and regulations and shall
obtain any and all permits, certificates and licenses which may be required in
order to offer and sell the Special Products at and through the Franchised
Location.
15. LANDLORD APPROVAL. If Franchisee leases the premises of its
-----------------
Franchised Location, Franchisee represents and warrants that operation of the
Special Product Program at the Franchised Location does not violate the terms
and conditions of Franchisee's lease.
16. OWNERSHIP OF PROGRAM. Franchisor and Franchisee agree that
---------------------
Franchisor shall have the right to offer participation in the Special Product
Program to other Restaurants throughout the QUIZNO'S Restaurant system without
compensation to Franchisee. Franchisee shall have no right, title or interest
in or to any proprietary methods, service marks, trademarks, confidential
systems or information arising out of or developed through the implementation
of the Special Product Program, and Franchisee's implementation and use of the
same shall inure to the benefit of Franchisor.
17. TRADEMARKS; COMPANY AUTHORIZATION. In the event and to the
----------------------------------
extent that any of the Special Products Trademarks are owned and licensed by a
company other than Franchisor, Franchisee shall comply with all specifications
and standards required by such third-party and that are disclosed to
Franchisee by Franchisor. The terms of all agreements between Franchisor and
the owners or licensors of Special Products Trademarks shall be deemed to be
incorporated herein by this reference.
18. POST-TERMINATION COVENANT NOT TO COMPETE. In addition to the
----------------------------------------
post-termination covenants not to compete provided in the Agreement, for a
period of two years from termination or expiration of the Agreement for any
reason, or the date on which Franchisee ceases to conduct business, whichever
is later, neither Franchisee nor any Bound Party shall have any direct or
indirect interest as a disclosed or beneficial owner, investor, partner,
director, officer, employee, consultant, representative or agent or in any
other capacity in any business operating, or granting franchises or licenses
to others to operate, a restaurant or other food service business deriving
more than 10% of its gross receipts from the sale of products substantially
similar to the Special Product designated herein and related food products and
services (which shall be considered a Competitive Business both for purposes
of the post-termination covenant not to compete and Section 20.1 of the
Agreement) located or operating within a five-mile radius of the former
Franchised Location or within a five-mile radius of any other QUIZNO'S
franchised or company-owned restaurant. The restrictions of this Section
shall not be applicable to the ownership of shares of a class of securities
listed on a stock exchange or traded on the over-the-counter market that
represent 5% or less of the number of shares of that class of securities
issued and outstanding. Franchisee and the Bound Parties expressly
acknowledge that they possess skills and abilities of a general nature and
have other opportunities for exploiting such skills. Consequently,
enforcement of the covenants made in this Section will not deprive them of
their personal goodwill or ability to earn a living.
19. INCONSISTENT TERMS. To the extent that the terms of this
-------------------
Addendum are inconsistent with the Agreement, the terms of this Addendum shall
prevail in connection with the implementation of the Special Product Program
and the sale of the Special Products and shall supersede any inconsistent
terms in the Agreement. Except as modified herein, the other terms and
conditions of the Agreement shall govern and remain in full force and effect
between Franchisor and Franchisee.
IN WITNESS WHEREOF, the parties have executed this Addendum to Franchise
Agreement to be effective as of the date first set forth above.
THE QUIZNO'S CORPORATION
By:
Its:
FRANCHISEE:
By:
Its:
EXHIBIT B-4
TO FRANCHISE AGREEMENT
AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS
(DIRECT DEBITS)
The undersigned depositor ("DEPOSITOR") hereby (1) authorizes The Quizno's
Corporation ("COMPANY") to initiate debit entries and/or credit correction
entries to the undersigned's checking and/or savings account indicated below
and (2) authorizes the depository designated below ("DEPOSITORY") to debit
such account pursuant to Company's instructions.
Depository Branch
City State Zip Code
Bank Transit/ABA Number Account Number
This authority is to remain in full force and effect until Depository has
received joint written notification from Company and Depositor of the
Depositor's termination of such authority in such time and in such manner as
to afford Depository a reasonable opportunity to act on it. Notwithstanding
the foregoing, Depository shall provide Company and Depositor with 30 days'
prior written notice of the termination of this authority. If an erroneous
debit entry is initiated to Depositor's account, Depositor shall have the
right to have the amount of such entry credited to such account by Depository,
if (a) within 15 calendar days following the date on which Depository sent to
Depositor a statement of account or a written notice pertaining to such entry
or (b) 45 days after posting, whichever occurs first, Depositor shall have
sent to Depository a written notice identifying such entry, stating that such
entry was in error and requesting Depository to credit the amount thereof to
such account. These rights are in addition to any rights Depositor may have
under federal and state banking laws.
DEPOSITOR (Print Name) DEPOSITORY (Print Name)
By: By:
Its: Its:
Date: Date:
EXHIBIT B-5
TO FRANCHISE AGREEMENT
STATEMENT OF OWNERSHIP
FRANCHISEE:
TRADE NAME (if different from above):
Form of Ownership
(Check One)
__________ Individual __________ Partnership __________
Corporation __________ Limited Liability Company
If a Partnership, provide name and address of each partner showing
percentage owned, whether active in management, and indicate the state in
which the partnership was formed.
If a Corporation or Limited Liability Company, give the state and date of
incorporation or organization, the names and addresses of each officer and
director or manager, and list the names and addresses of every shareholder or
member showing what percentage of stock or interest is owned by each.
Provide the address where Franchisee's financial records, and
partnership, corporate or company records, as applicable, are maintained
(Restaurant location will be deemed to be the address unless otherwise stated
below):
Franchise acknowledges that this Statement of Ownership applies to the
Restaurant authorized under the Franchise Agreement.
Use additional sheets if necessary. Any and all changes to the above
information must be reported to Franchisor in writing.
Date Name
EXHIBIT B-6
TO FRANCHISE AGREEMENT
GUARANTY AND ASSUMPTION OF FRANCHISEE'S OBLIGATIONS
--------------------------------------------------------
In consideration of, and as an inducement to, the execution of the above
Franchise Agreement (the "AGREEMENT") by The Quizno's Corporation
("FRANCHISOR"), each of the undersigned hereby personally and unconditionally:
(a) Guarantees to Franchisor and its successors and assigns, for the term
of this Agreement, including renew-als thereof, that Franchisee as that term
is defined in the Agreement ("FRANCHI-SEE") shall punctually pay and perform
each and every undertaking, agreement and covenant set forth in the
Agree-ment; and
(b) Agrees to be personally bound by, and personally liable for the breach
of, each and every provision in the Agree-ment.
Each of the undersigned waives the following:
1. Acceptance and notice of acceptance by Franchisor of the foregoing
undertaking;
2. Notice of demand for payment of any indebtedness or nonperformance of
any obligations hereby guaranteed;
3. Protest and notice of default to any party with respect to the
indebtedness or nonperformance of any obligations hereby guaranteed; and
4. Any right he or she may have to require that any action be brought
against Franchisee or any other person as a condition of liability.
Each of the undersigned consents and agrees that:
5. His or her direct and immediate liability under this guaranty shall be
joint and several;
6. He or she shall render any payment or performance required under the
Agreement upon demand if Franchisee fails or refuses punctually to do so;
7. Such liability shall not be contingent or conditioned upon pursuit by
Franchisor of any remedies against Xxxx-chisee or any other person; and
8. Such liability shall not be diminished, relieved or otherwise affected
by any extension of time, credit or other indulgence which Franchisor may from
time to time grant to Franchisee or to any other person, including without
limitation the acceptance of any partial payment or performance, or the
compromise or release of any claims, none of which shall in any way modify or
amend this guaranty, which shall be continuing and irrevocable during the term
of the Agreement, including renewals thereof.
IN WITNESS WHEREOF, each of the undersigned has affixed his or her
signature effective on the same day and year as the Agreement was executed.
GUARANTOR(S)
SIGNATURE SIGNATURE
NAME - TYPED OR PRINTED NAME - TYPED OR PRINTED
SIGNATURE
NAME - TYPED OR PRINTED
EXHIBIT B-7 TO
FRANCHISE AGREEMENT
ADDENDUM TO
TO FRANCHISE AGREEMENT --
BOOKKEEPING SERVICES
AND DIRECT DEBIT AUTHORIZATION
THIS ADDENDUM to the Franchise Agreement dated as of even date herewith
-by and between The Quizno's Corporation ("FRANCHISOR") and
________________________________ ("FRANCHISEE") is made as of the same date to
supplement certain terms and conditions of the Agreement. In the event of any
conflict between the terms of the Agreement and the terms of this Addendum,
the terms of this Addendum shall control. All capitalized terms not otherwise
defined in this Addendum shall have their respective meanings set forth in the
Agreement. Franchisor and Franchisee agree as follows:
1. BOOKKEEPING SERVICES. The following shall be added to supplement
--------------------
Section 15 of the Agreement:
A. SERVICES. Franchisee shall use Franchisor or Franchisor's
--------
designated vendor to provide payroll and bookkeeping services to Franchisee
and Franchisee agrees to comply with all requirements Franchisor prescribes
with regard to said services. Franchisor's bookkeeping service does not
include cash management.
Franchisor or Franchisor's designated vendor will provide the following
accounting services on a period basis for franchised Restaurants:
Period End Financial Statements: . Balance Sheet
. Profit and Loss Statement
Detailed General Ledger: . Unpaid Invoice Register
. Bank Reconciliation
. Check Register
. Printed Period Accounts Payable Checks
. Prepare necessary sales tax reports
. Prepare necessary personal property tax
reports
. Prepare necessary use tax reports
. Payroll Register, Payroll tax reports and
all necessary filings
A department manager will personally review all period end financial
information before issuance. A complete Franchise Bookkeeping Department
Procedures Manual will be provided to Franchisee. This manual will outline in
detail all procedures and checklists followed by Franchise Bookkeeping
Department personnel.
A complete Franchise Restaurant Accounting Procedures Manual will be
provided to Franchisee. This manual will outline in detail all accounting
procedures that are the Restaurants' managers' responsibility.
B. SUBMISSION OF RESTAURANT RELATED ITEMS. In order for the
------------------------------------------
Franchise Bookkeeping Department to provide the most timely and useful
information to individual Restaurants or companies, it is essential that the
accounting department receive information as soon as possible after the period
closes.
The Franchise Bookkeeping Department will provide the above services to
Franchisee within 10 working days upon receiving the last information for the
period.
Each week, in accordance with our procedures, Franchisee agrees to submit
to Franchisor: (a) completed Profit Planners worksheets; (b) Payroll changes
and current hours worked; (c) Bank statements; (d) Manual check stubs with
invoice copies; (e) Invoices to be paid; and (f) Any other documents as may be
required to properly record all transactions affecting the Restaurant's
financial activity.
C. FEES FOR BOOKKEEPING SERVICES. In consideration for the services
-----------------------------
Franchisor provides to Franchisee pursuant to this Addendum, Franchisee shall
pay to Franchisor the sum of $85 per Restaurant per week. Franchisor may, in
its sole discretion, increase the fee after 12 months following the date
Franchisee's Restaurant commences operation, and thereafter annually to an
amount equal to the market rate for similar services as determined by
Franchisor.
D. TERMINATION.
-----------
(a) By Franchisor. If Franchisee fails to (i) submit restaurant
-------------
related items when required pursuant to this Section, or (ii) pay fees due to
Franchisor for these services, Franchisor shall have the right to terminate
the Agreement as provided in Section 18.2 of the Agreement.
(b) By Franchisee. At any time after 12 months following the date
-------------
Franchisee's Restaurant commences operation, Franchisee may terminate the
bookkeeping services service 90 days following completion of the following :
Franchisee retains a full time professional accountant (approved in writing by
Franchisor) to provide bookkeeping services (at Franchisee's expenses) and
that accountant agrees in writing (on a form acceptable to Franchisor) to
provide timely financial statements required by Section 15 of the Agreement.
If Franchisee fails to provide such financial statements more than 2 times in
any 12-month period, in addition to any other remedies, Franchisor may require
Franchisee to use Franchisor's bookkeeping services at the then-current fee.
2. DIRECT DEBITS. If required by Franchisor, Franchisee shall
--------------
complete Exhibit B-4 to authorize Franchisor to initiate debit entries and/or
credit correction entries to Franchisee's checking or savings account for the
payment of Royalties, Marketing and Promotion Fees or any other payment owed
by Franchisee to Franchisor under the terms of the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed on the date first set forth above.
THE QUIZNO'S CORPORATION FRANCHISEE:
By: By:
Its: Its:
EXHIBIT B-8 TO
FRANCHISE AGREEMENT
ADDENDUM TO
TO FRANCHISE AGREEMENT --
DEVELOPMENT RIGHTS ADDENDUM
TO
THE QUIZNO'S CORPORATION
FRANCHISE AGREEMENT
1. BACKGROUND. This Development Rights Rider (the "Rider") is
----------
between The Quizno's Corporation ("we," "us" or "our") and ("you" or "your").
This Rider is attached to, and intended to be part of, the Franchise Agreement
signed simultaneously with this Rider for the operation of a specific Quizno's
Restaurant (the "Franchise Agreement"). We and you are signing this Rider
because you want the right to develop a multiple number of Restaurants within
a certain geographic area over a certain period of time, and we are willing to
grant you these development rights if you comply with this Rider.
2. GRANT OF DEVELOPMENT RIGHTS. Subject to your compliance with this
---------------------------
Rider, we grant you the right to develop Restaurants, according to the
mandatory schedule (the "Schedule") on Exhibit A to this Rider, within the
following geographic area (the "Territory"):
If you are fully complying with all of your obligations under this Rider,
the Franchise Agreement, and all other franchise agreements then in effect
between us and you (or your affiliated entities) for the operation of
Restaurants, then during this Rider's term only, we (and our affiliates) will
not establish, or allow another franchise owner to establish, Restaurants to
be located within the Territory (except franchises we grant you pursuant to
this Rider).
3. DEVELOPMENT OBLIGATIONS. To maintain your rights under this
------------------------
Rider, you must have Restaurants open and operating within the Territory by
the dates set forth on the Schedule. You will operate each Restaurant under a
separate franchise agreement with us. The franchise agreement that you sign
for each additional Restaurant will be our then-current form of franchise
agreement, any or all of the terms of which may be materially different than
the terms of the Franchise Agreement. Despite any contrary provision
contained in any such franchise agreement, you must have your additional
Restaurants open and operating by the dates contained on the Schedule. To
retain your rights under this Rider, each Restaurant opened pursuant to this
Rider must operate continuously throughout this Rider's term.
4. SUBFRANCHISING RIGHTS. This Rider does not give you any right to
---------------------
license others to operate Restaurants. Only you (or affiliated entities you
establish and we approve) any open Restaurants pursuant to this Rider.
5. DEVELOPMENT FEES. As consideration for the rights we grant you in
----------------
this Rider, you must pay us, at the same time you sign this Rider, a total of
________________________ ($________) (the "Development Fee"), which equals one
hundred percent (100%) of the first two (2) initial franchise fees and fifty
percent (50%) of the aggregate initial franchise fees due for all of the
Restaurants that you must develop under the Schedule. Each time you sign a
franchise agreement for a Restaurant to be developed within the Territory, we
will apply the Development Fee in increments equal to fifty percent (50%) of
the initial franchise fee due for that Restaurant to reduce the additional
amount you must pay. We fully earn the Development Fee when you sign this
Rider. The Development Fee is not refundable if you do not satisfy the
Schedule.
6. GRANT OF FRANCHISES. You must submit a separate application for
-------------------
each Restaurant location you wish to develop in the Territory. You agree to
give us all information and materials we request to assess the proposed site.
We will not unreasonably withhold approval of any site you propose if that
site meets our then-current site criteria. We agree to use our best
reasonable efforts to review and approve sites you propose within thirty (30)
days after we receive all requested information and materials. If we approve
the proposed site, you agree, within the time period we specify, to sign a
separate franchise agreement for that site and to pay the initial franchise
fee due. If you do not do so, or are unable to obtain lawful possession of
the proposed site, we may withdraw our approval of the proposed site. After
you sign the franchise agreement, its terms and conditions will control your
development and operation of the Restaurant (except for the required opening
date, as provided in Section 3 above).
7. TERM. This Rider's term begins on the date we and you sign it and
----
ends on the date when (a) the final Restaurant is to open under the Schedule,
or (b) this Rider is otherwise terminated.
8. TERMINATION. We may terminate this Rider and your right to
-----------
develop additional Restaurants at any time, effective upon delivery of written
notice of termination if (a) you fail to satisfy your obligations under the
Schedule, which defaults you have no right to cure; or (b) the Franchise
Agreement, or any other franchise agreement between us and you (or your
affiliated entity) for a Restaurant, is terminated by us or you for any or no
reason.
9. ASSIGNMENT. This Rider and all related rights are not assignable
----------
except in connection with the assignment of the Franchise Agreement and all
other franchise agreements to which you (and your affiliated entities) then
are a party, provided that the Franchise Agreement and all such other
franchise agreements are assigned to the same entity and the conditions for
assignment in all such documents are satisfied.
10. RIDER TO CONTROL. Except as provided in this Rider, the
------------------
Franchise Agreement remains in full force and effect as originally written.
If there is any inconsistency between the Franchise Agreement and this Rider,
the terms of this Rider will control.
Dated this day of, 19.
THE QUIZNO'S CORPORATION FRANCHISEE:
By: By:
Its: Its:
