EXHIBIT 10.6
PLATO'S CLOSET(R)
FRANCHISE AGREEMENT
BETWEEN
GROW BIZ INTERNATIONAL, INC.
0000 Xxxxxxxx Xxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
(000) 000-0000
AND
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Name(s) of Franchisee
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Xxxxxx
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Xxxx Xxxxx Zip Code
( )
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Area Code Telephone
FRANCHISED LOCATION:
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Xxxxxx
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Xxxx Xxxxx Zip Code
( )
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Area Code Telephone
PLATO'S CLOSET(R)
FRANCHISE AGREEMENT
INDEX
SECTION DESCRIPTION PAGE
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1. GRANT OF FRANCHISE; FRANCHISED LOCATION..................................1
2. TERM OF FRANCHISE; RENEWAL RIGHTS........................................2
3. OWNERSHIP AND USE OF MARKS...............................................2
4. INITIAL FRANCHISE FEE....................................................3
5. CONTINUING FEE...........................................................4
6. ADVERTISING AND PROMOTION................................................4
7. FRANCHISOR'S OBLIGATIONS.................................................6
8. OPERATION OF THE FRANCHISEE'S BUSINESS...................................7
9. CONFIDENTIAL INFORMATION................................................10
10. INSURANCE; BONDING......................................................10
11. INDEPENDENT CONTRACTORS; INDEMNIFICATION................................11
12. SALES REPORTS, FINANCIAL STATEMENTS AND AUDIT RIGHTS....................11
13. FRANCHISOR'S RIGHT OF FIRST REFUSAL TO PURCHASE.........................12
14. ASSIGNMENT OF FRANCHISE AGREEMENT.......................................13
15. FRANCHISOR'S TERMINATION RIGHTS.........................................14
16. FRANCHISEE'S TERMINATION RIGHTS; NOTICE REQUIRED........................15
17. FRANCHISEE'S OBLIGATIONS UPON TERMINATION...............................15
18. FRANCHISEE'S COVENANTS NOT TO COMPETE...................................16
19. ARBITRATION; ENFORCEMENT................................................16
20. SEVERABILITY AND CONSTRUCTION...........................................17
21. NOTICES.................................................................18
22. ACKNOWLEDGMENTS.........................................................18
EXHIBITS A - FRANCHISEE'S DEVELOPMENT AREA AND EXCLUSIVE TERRITORY
B - COMPUTER SOFTWARE LICENSE AGREEMENT
C - PERSONAL GUARANTY
D - ADDITIONAL STORE ADDENDUM
01GK052199
02GK101599
PLATO'S CLOSET(R)
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT is made and entered into this ___________ day of
___________________, 19____, by and between GROW BIZ INTERNATIONAL, INC., a
Minnesota corporation ("Franchisor"), and ____________________________________
("Franchisee").
BACKGROUND:
A. Franchisor franchises teen clothing resale stores known as "Plato's
Closet" stores ("Plato's Closet(R) Stores") which feature quality used and new
teen clothing. Franchisor uses and licenses certain trademarks, including
"Plato's Closet," and may hereafter adopt, use and license additional or
substitute trademarks, service marks, logos and commercial symbols in connection
with the operation of Plato's Closet(R) Stores (collectively, the "Marks").
Plato's Closet(R) Stores use Franchisor's methods, procedures, standards,
specifications and the Marks (all of which are collectively referred to as the
"Business System"), which Franchisor may periodically improve, further develop
or otherwise modify.
B. Franchisee has had an adequate opportunity to be thoroughly advised
of the provisions of this Agreement and Franchisor's Offering Circular and has
had sufficient time and opportunity to evaluate and investigate the Business
System and the procedures and financial requirements associated with the
Business System as well as the competitive market in which it operates.
C. Franchisee desires to operate a "Plato's Closet" Store which will
conform to the uniform requirements and quality standards of the Business
System.
AGREEMENTS:
The Franchisor and Franchisee agree as follows:
1. GRANT OF FRANCHISE; FRANCHISED LOCATION
X. Xxxxx of Franchise. Subject to the provisions stated below,
Franchisor grants to Franchisee a personal license and franchise to operate a
Plato's Closet(R) Store (the "Store") in conformity with Franchisor's Business
System at a location within the development area specified in Exhibit A attached
hereto. The specified area identified in Exhibit A is referred to as the
"Development Area." Franchisee will operate the Store under the Business System
in strict compliance with the provisions of this Agreement and only at a
location within the Development Area approved by Franchisor (the "Franchised
Location").
B. Franchisee's Protected Area; Rights Reserved By Franchisor. During
the term of this Agreement, Franchisor will not establish for its own account or
franchise others to operate a Plato's Closet(R) Store or any other business
generally classified as a teen clothing retail business within the exclusive
area specified in Exhibit A. The exclusive area identified in Exhibit A, which
includes the Development Area, is referred to as the "Exclusive Territory."
Franchisee understands, however, that Franchisor may sell any products or
services under trademarks other than the Marks (subject to those restrictions
described above). Franchisor also may sell products or services under the Marks
through other channels of distribution, provided any such products or services
Franchisor intends to sell directly within the Exclusive Territory will first be
offered to Franchisee on the same terms and conditions as would otherwise be
offered within the
Exclusive Territory. The rights and privileges granted to Franchisee under this
Agreement are personal in nature, and may not be used at any location other than
the Franchised Location. Franchisee will not relocate the Store without
Franchisor's prior written consent and will not open any other Plato's Closet(R)
Store in the Exclusive Territory. Franchisee will not have the right to
subfranchise or sublicense any of its rights under this Agreement. Franchisee
will not use the Franchised Location for any purposes other than the operation
of a Plato's Closet(R) Store.
2. TERM OF FRANCHISE; RENEWAL RIGHTS
A. Term. The term of this Agreement will be for ten (10) years
commencing on the date of this Agreement.
B. Renewal. Franchisee will have the right to renew its Plato's
Closet(R)franchise for the Franchised Location for continuing ten (10) year
terms, provided Franchisee meets the following conditions:
1. Franchisee has given Franchisor written notice at least one
hundred eighty (180) days before the end of the term of this Agreement
of its intention to renew;
2. Franchisee has complied with all of the material provisions
of this Agreement, including the payment of all monetary obligations
owed by Franchisee to Franchisor, and has complied with Franchisor's
material operating and quality standards and procedures;
3. Franchisee has at its expense made such reasonable capital
expenditures necessary to remodel, modernize and redecorate the Store
premises and to replace and modernize the supplies, fixtures, and
equipment used in Franchisee's business so that Franchisee's business
reflects the then-current physical appearance of new Plato's Closet(R)
Stores;
4. Franchisee has paid a Renewal Fee of Five Thousand Dollars
($5,000) to Franchisor at least thirty (30) days before the expiration
of the initial (and any renewal) term of this Agreement expires;
5. Franchisee executes the standard Franchise Agreement then
being used by Franchisor; provided that Franchisee will be required to
pay the Renewal Fee in lieu of the Initial Franchise Fee stated in the
then-current Franchise Agreement; and
6. Franchisee is able to secure a renewal or extension of the
lease for the Franchised Location or is able to secure a new location
within the Development Area which has been accepted by Franchisor, such
acceptance not to be unreasonably withheld.
3. OWNERSHIP AND USE OF MARKS
A. Ownership. Franchisor is the owner of the Marks. Any and all
improvements by Franchisee relating to the Marks and Business System will become
the sole property of Franchisor who has the exclusive right to register and
protect all such improvements in its name.
B. Use. Franchisee's right to use and identify with the Marks and
Business System applies only to the operation of the Store at the Franchised
Location, and exists concurrently with the term of this Agreement and only so
long as Franchisee is in complete compliance with Franchisor's quality
standards.
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Franchisee will have the right to use the Marks and Business System only in the
manner Franchisor directs and approves in writing. Franchisee will not have or
acquire any rights in any of the Marks or Business System other than the right
of use as governed by this Agreement. If, in the judgment of Franchisor,
Franchisee's acts infringe upon or harm the goodwill, standards of uniformity or
quality, or business standing associated with the Marks and Business System,
Franchisee will immediately, upon written notice from Franchisor, modify its use
of the Marks and Business System in the manner Franchisor directs in writing.
Franchisee will not during or after the term of this Agreement do anything
directly or indirectly which would infringe upon, harm, mislead or contest
Franchisor's rights in the Marks or Business System. Franchisee cannot advertise
any liquidation sale or similar type of activity.
C. Promotion. Franchisee will operate the Store so that it is clearly
identified and advertised as a Plato's Closet(R) Store. The style, form and use
of the words "Plato's Closet" in any advertising, written materials or supplies
must, however, have Franchisor's prior written approval, which approval will not
be unreasonably withheld. Franchisee will use the name "Plato's Closet" and the
other Marks which now or hereafter may form a part of the Business System, on
all paper supplies, business cards, letterhead, envelopes, uniforms, advertising
materials, signs or other articles in the identical combination and manner as
Franchisor may require in writing. Franchisee will comply with all trademark,
trade name, service xxxx and copyright notice marking requirements.
D. Identity. Franchisee will not use the words "Plato's Closet" in its
corporate or partnership name. Franchisee will clearly indicate on its business
checks, purchase orders, business cards, receipts, promotional materials and
other written materials that Franchisee is the owner of the Store and that
Franchisee is a Plato's Closet(R) franchisee. Franchisee will display a sign
which is clearly visible to the general public indicating that the Store is
independently owned and operated.
E. Substitutions. If any third party claims that its rights to use any
of the Marks are superior and if Franchisor determines that such claim is
legally meritorious, Franchisee will, upon receiving written notice from the
Franchisor, immediately use such changes and amendments to the Marks as
Franchisor may require. Franchisee will not make any changes or amendments in or
to the use of the Marks and Business System unless directed by Franchisor in
writing.
F. Litigation. Franchisee will have no obligation to and will not,
without Franchisor's prior written consent, defend or enforce any of the Marks
in any court or other proceedings for or against imitation, infringement, any
claim of prior use, or for any other allegation. Franchisee will, however,
immediately notify Franchisor of any claims or complaints made against
Franchisee respecting the Marks and will, at its expense, cooperate in all
respects with Franchisor in any court or other proceedings involving the Marks.
Franchisor will pay the cost and expense of all litigation Franchisor incurs,
including attorneys' fees, specifically relating to the Marks. Franchisor and
its legal counsel will have the right to control and conduct any litigation
relating to the Marks.
4. INITIAL FRANCHISE FEE
A. Initial Franchise Fee. Franchisee will pay Franchisor an Initial
Franchise Fee of __________________________ Dollars ($_______), which will be
due and payable on the date of this Agreement. The Initial Fee payable by
Franchisee is payment to Franchisor for the costs that it will incur to get
Franchisee into business including costs Franchisor incurs for training, site
evaluation, business overhead costs, travel costs, and for the other initial
services Franchisor provides hereunder.
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B. Refund of Fee. If Franchisor subsequently determines that Franchisee
is not qualified to properly operate the Store, Franchisor will refund to
Franchisee the Initial Franchise Fee. Franchisor will notify Franchisee in
writing within one hundred eighty (180) days of the date of this Agreement if
Franchisor will terminate this Agreement under this Section 4(B).
5. CONTINUING FEE
A. Continuing Fee. Franchisee will, for the term of this Agreement, pay
to Franchisor a Continuing Fee equal to four percent (4%) of Franchisee's Gross
Sales (as defined below). Franchisee's obligation to pay Franchisor the
Continuing Fee under the terms of this Agreement will remain in full force and
effect until this Agreement has expired or is terminated under the provisions
herein.
B. Payment. At Franchisor's request, Franchisee will promptly execute
and deliver to Franchisor appropriate pre-authorized check forms or such other
instruments or drafts Franchisor's bank requires payable against Franchisee's
bank account, so that Franchisor may electronically collect (draft on
Franchisee's account by electronic withdrawal) the Continuing Fee due pursuant
to Section 5(A) above. Franchisee will report to Franchisor on or before
Wednesday of each week its Gross Sales for the previous week. If Franchisee
fails to report its Gross Sales on a timely basis, Franchisor may estimate
Franchisee's Gross Sales to prepare a provisional estimate for billing purposes
for that week. On Thursday of each week, Franchisor will xxxx Franchisee for all
amounts due for the previous week and deposit into its account Franchisee's
pre-authorized check or other instrument for the amounts due either pursuant to
Franchisee's report or Franchisor's estimate. Any unpaid Continuing Fee or other
amounts past due and owing to Franchisor will bear interest at the rate of
eighteen percent (18%) per annum or the maximum rate permitted by law, whichever
is less. Franchisee will pay Franchisor for any and all costs Franchisor incurs
in collecting any unpaid and past due Continuing Fees, including reasonable
attorneys' fees.
X. Xxxxx Sales. The term "Gross Sales" means the total amount of all
revenues Franchisee receives from the sale of goods and services, whether for
cash or by check, credit card or trade, in connection with the Store, less
customer refunds and returns. Gross Sales will include any sales permitted
through the Internet and wholesale transactions involving any party other than a
Plato's Closet(R) franchisee who is in good standing with Franchisor. Gross
Sales will not include sales tax collected from customers and paid to
appropriate tax authorities.
6. ADVERTISING AND PROMOTION
A. Cooperative Advertising. Franchisee will participate in, support and
contribute a proportionate share, but no more than an amount equal to four
percent (4%) of the Gross Sales for the Store, of the cost of regional
cooperative advertising programs either designated by Franchisor or approved by
a regional advertising council established by Franchisor or other Plato's
Closet(R) franchisees in Franchisee's area. Franchisor reserves the right to
designate regional advertising markets, to establish regional advertising
councils and to establish the rules under which such councils will operate.
B. Local Advertising Expenditures. To the extent Franchisee's annual
contributions to cooperative advertising programs described in Section 6(A)
above are less than four percent (4%) of the Gross Sales for the Store, or if
the Franchisee cannot participate in any regional cooperative advertising
program because such a program has not been established in Franchisee's
geographic area, Franchisee will then be obligated to conduct advertising and
promotional activities in Franchisee's local geographic area; provided that
Franchisee's local advertising activities will not reduce, eliminate or
otherwise impact Franchisee's obligations under Section 6(A) above. Franchisee's
local advertising expenditures will include
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advertising, merchandising, sales promotion and other forms of advertising at
the local level. Within thirty (30) days following the end of each calendar
quarter, Franchisee will provide Franchisor with an accounting of the monies
that it has spent for approved regional cooperative advertising and local
advertising for the preceding calendar quarter. If Franchisee has failed to
spend at least four percent (4%) of its Gross Sales for the calendar quarter for
approved regional cooperative advertising or local advertising, Franchisee will
deposit with Franchisor the difference between what it should have spent for
advertising during the calendar quarter and what it actually spent for
advertising during the calendar quarter. Franchisor will spend such amount for
any type of advertising or promotion that Franchisor deems appropriate for
Franchisee's business, although Franchisor will use reasonable efforts to spend
such amounts in Franchisee's local geographic area.
C. Marketing Fee. In addition to Franchisee's local advertising
obligations described in Section 6(B) above, Franchisee will pay to Franchisor
an annual Marketing Fee of Five Hundred Dollars ($500) which will be payable in
two (2) installments of Two Hundred Fifty Dollars ($250) each on the first day
of January and July of each year. Franchisor will use the Marketing Fee to
develop marketing programs, produce advertising and/or promotional materials,
conduct advertising research, and implement advertising and promotional
campaigns.
D. Yellow Page Advertising. Franchisee will, at its expense, obtain an
annual yellow page listing in the primary yellow page directory serving the
geographic area in which the Store is located. At a minimum, this listing will
consist of a bold heading in such directory. Amounts spent for yellow page
advertising will be credited towards Franchisee's local advertising obligations
described in Section 6(B) above.
E. Future Advertising Programs. Franchisee acknowledges and agrees that
as the Plato's Closet(R) franchise system continues to expand and mature, it
will be necessary to revise Franchisee's advertising obligations. Franchisee
therefore agrees that Franchisor may, upon sixty (60) days' written notice,
increase Franchisee's minimum advertising expenditures (as described in Section
6(B) above) up to a total of five percent (5%) of Franchisee's Gross Sales and
require Franchisee to pay Franchisor for deposit in an "Advertising Fund" an
"Advertising Fee" of up to two percent (2%) of Franchisee's Gross Sales. In such
event, Franchisee's advertising obligations under Section 6(A) (and, if
appropriate, Section 6(B)) above will be reduced to three percent (3%) of the
Gross Sales for the Store. Franchisor will provide Franchisee with at least
sixty (60) days' written notice before the commencement of an Advertising Fee.
All Advertising Fees will be placed in an Advertising Fund managed by
Franchisor. Reasonable disbursements from the Advertising Fund will be made
solely for the payment of expenses incurred in connection with the general
promotion of the Marks and the Business System, including the cost of
formulating, developing and implementing advertising and promotional campaigns;
and the reasonable costs of administering the Advertising Fund, including
accounting expenses and the actual costs of salaries and fringe benefits paid to
Franchisor's employees engaged in administration of the Advertising Fund.
Although Franchisor will strive to manage the Advertising Fund in such a manner
that benefits franchisees uniformly, taking into account regional and/or local
advertising costs and forms of media available, Franchisor cannot insure that
any individual franchisee will benefit directly or on a pro rata basis from the
future placement of any such advertising in its local market. The methods of
advertising, media employed and contents, terms and conditions of advertising
campaigns and promotional programs will be within Franchisor's sole discretion.
Franchisor will provide Franchisee an annual unaudited statement of the receipts
and disbursements of the Advertising Fund.
F. Approved Advertising Materials. Franchisee will use only approved
advertising and promotional materials. If Franchisee desires to use any
unapproved advertising or promotional materials
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bearing the name "Plato's Closet" or other Marks, Franchisee must obtain written
approval from Franchisor before using any such materials, which approval will
not be unreasonably withheld.
G. Promotion. Franchisee will use its best efforts to promote and
advertise its Plato's Closet(R) business and will participate in all advertising
and promotional programs Franchisor establishes. Franchisee will have the right
to advertise and sell its products at whatever prices Franchisee determines.
7. FRANCHISOR'S OBLIGATIONS
A. Location. Unless Franchisor and Franchisee previously executed a
Site Selection Agreement relating to the site of the Store, Franchisor will
provide Franchisee with assistance respecting site location and evaluation for
the Store. Franchisee acknowledges that Franchisor's assistance in site location
and acceptance of the premises does not constitute a representation or guaranty
by Franchisor that the location will be a successful location for Franchisee's
Plato's Closet(R) Store.
X. Xxx-Out and Design. Franchisor will designate the standard design,
lay-out and motif for Franchisee's premises and will furnish prototype
specifications for the premises.
C. Equipment, Supplies and Inventory. Franchisor will designate the
standard fixtures, equipment, supplies, signs and initial inventory for use in
the Store. Franchisee will purchase only such types, models or brands of
fixtures, furniture, equipment, signs and supplies that Franchisor approves for
Plato's Closet(R) Stores as meeting its specifications and standards, including
specifications and standards for quality, design, warranties, appearance,
function and performance.
D. Training. Franchisor will, at its expense, provide a two-part
training program in Minneapolis, Minnesota or other location Franchisor
designates to educate, familiarize and acquaint Franchisee with the business of
operating a Plato's Closet(R) Store. The first session of the training program
will include instruction on general business issues related to the ownership of
a privately-owned retail business, including real estate matters, business plan
development, inventory management, point-of-sales systems, used product
purchasing, Franchisor's preferred vendor program, and other topics Franchisor
may select. The period of this session will be at Franchisor's discretion but
generally will be for not less than five (5) days and will be scheduled by
Franchisor at its discretion. The second session of the training program will
include instruction on sales and marketing, inventory purchasing, computer
operation, store management, personnel issues and other topics Franchisor may
select. The period of this session will be at Franchisor's discretion but
generally will be for at least five (5) days and will be scheduled by Franchisor
in its sole discretion. Franchisee must successfully complete both sessions of
the training program. If Franchisee fails to successfully complete both
sessions, he/she will not be permitted or authorized to manage Franchisee's
business and Franchisor may terminate this Agreement pursuant to Section
15(A)(2) below. Franchisee will be responsible for travel costs, room and board,
the salaries, fringe benefits and other expenses Franchisee and its employees
incur in attending both sessions of the training program.
E. Opening Assistance. Franchisor will assist in scheduling the opening
of the Store. Franchisee will not open or commence business operations until
Franchisor has approved the opening. Franchisor will, at no charge, provide at
least one (1) person to assist Franchisee with the opening of the Store for at
least two (2) days around the time of opening. If Franchisee is opening its
second or subsequent Store, Franchisee will provide this assistance only at
Franchisee's request.
F. Operations Manual. Franchisor will loan Franchisee one copy of the
Operations Manual wherein Franchisor will describe its operational policies,
standards, requirements and practices. Franchisee
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will comply with all provisions of the Operations Manual. Franchisor reserves
the right to revise the Operations Manual at any time.
G. Additional Initial Assistance. Franchisor will assist Franchisee in
the development of a business plan. Franchisor and Franchisee may also agree
that Franchisor provide management assistance and other services, in addition to
the usual initial assistance and supervision Franchisor provides to all
franchisees, for additional agreed upon compensation.
H. Ongoing Assistance. During the operation of Franchisee's business,
Franchisor will: (1) inspect the Store as often as Franchisor deems necessary
and provide written reports to Franchisee on operations; (2) provide, upon the
written request of Franchisee, advisory services pertaining to operation of
Franchisee's business; (3) periodically make available to Franchisee all
changes, improvements and additions to the Business System to the same extent as
made available to other franchisees; (4) provide Franchisee with all supplements
and modifications to the Operations Manual; and (5) develop advertising and
marketing materials.
8. OPERATION OF THE FRANCHISEE'S BUSINESS
The Marks and Business System licensed to Franchisee represent valuable
goodwill distinctive of Franchisor's business and reputation. Franchisor will
periodically develop uniform standards of quality and service regarding the
business operations of the Store so as to protect (for the benefit of all
franchisees and Franchisor) the distinction, valuable goodwill and uniformity
represented and symbolized by the Marks and Business System. To insure that all
franchisees will maintain the uniform requirements and quality standards for
goods and services associated with the Plato's Closet(R) Stores and with the
Marks and Business System, Franchisee will maintain the uniformity and quality
standards Franchisor reasonably requires for all products and services and
agrees to the following provisions:
A. Managerial Responsibility. During the term of this Agreement, the
parties who have signed this Agreement on behalf of Franchisee will personally
manage and operate Franchisee's business and will not, without Franchisor's
prior written consent, delegate its authority and responsibility with respect to
management and operation. If Franchisee is a corporate entity or a partnership,
one individual will retain at least fifty percent (50%) of the equity and voting
interest in such corporation or partnership and will be obligated to personally
manage and operate the Franchisee's business.
B. Design and Appearance of Premises. The design and appearance of the
exterior and interior of the Store, including signage, are part of the Business
System. It is essential to the integrity of Franchisor's Business System that as
great a degree of uniformity as possible be maintained among the various
premises of Plato's Closet(R) franchisees. Franchisee agrees that: (1) no
material alteration or addition will be made to the premises without
Franchisor's prior written consent; (2) the painting and decor will be
maintained in such manner and form as Franchisor may reasonably require; (3)
Franchisee will follow Franchisor's reasonable instructions with respect to
layout and character of interior fixtures and furnishings; and (4) only such
signs, emblems, logos, lettering, and artwork as Franchisor may reasonably
require or periodically provide will be displayed on the Store premises.
C. General Operation. Franchisee will use the Marks and Business System
in strict compliance with the standards, operating procedures, specifications,
requirements and instructions required of all Plato's Closet(R)franchisees,
which Franchisor may periodically amend and supplement.
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D. Products and Services. Franchisee will sell only those categories of
products and services Franchisor approves in writing and will offer for sale all
categories of products and services required by Franchisor. Franchisee will
conform to all quality and customer service standards Franchisor requires in
writing. FRANCHISOR DISCLAIMS ALL WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE
IN CONNECTION WITH FRANCHISOR'S (AND/OR AN AFFILIATE'S) SALE OF ANY GOODS,
EQUIPMENT, FURNITURE, SIGNS OR SUPPLIES TO FRANCHISEE. Franchisee agrees to
execute any and all documents Franchisor reasonably requests, including letters
of credit, security agreements, and financing statements, to provide collateral
for amounts due to Franchisor for purchases of inventory and other items used in
Franchisee's business. Franchisor's approval is not required with respect to new
and used teen clothing and related accessories Franchisee purchases from its
customers or places in the Store on a consignment basis, provided, however, that
Franchisee may not sell or offer for sale any goods which would be determined
unsafe upon reasonable inspection.
E. Maintenance of Premises; Modernization. Franchisee will, at its
expense, repair, paint and keep in an attractive, clean and sanitary condition
the interior and exterior of the Store premises. Franchisee will insure that all
equipment will be kept in good working order and will meet Franchisor's quality
standards. Franchisee will periodically make reasonable capital expenditures to
remodel, modernize and redecorate the Store and to replace and modernize the
furniture, fixtures, signs, supplies and equipment used in the Store so that the
Store will reflect the then-current physical appearance of new Plato's Closet(R)
Stores. All remodeling, modernization or redecoration of the Store must be done
pursuant to Franchisor's then-current standards and specifications and only with
Franchisor's prior written approval. Franchisee agrees to commence remodeling
activities within ninety (90) days after written notice from Franchisor,
although Franchisee will not be required to remodel, modernize and redecorate
the Store more than once every five (5) years during the term of this Agreement.
F. Compliance with Laws. Franchisee will, at its expense, comply with
all applicable local, state, federal and municipal laws, ordinances, rules and
regulations pertaining to the operation of the Store, including any and all
licensing and bonding requirements.
G. Payment of Liabilities. Franchisee will timely pay all of its
obligations and liabilities due and payable to Franchisor, suppliers, lessors
and creditors.
H. Taxes. Franchisee will promptly pay all federal, state and local
taxes arising out of the operation of Franchisee's business. Franchisor will not
be liable for these or any other taxes and Franchisee will indemnify Franchisor
for any such taxes that may be assessed or levied against Franchisor which arise
or result from Franchisee's business.
I. Standardization. Franchisee will require its employees to wear such
uniforms as Franchisor may designate and will comply with such programs of
standardization as Franchisor may periodically develop to promote the common
business image and to protect the goodwill associated with the Marks and
Business System.
J. Personnel. Franchisee will, at all times when open for business,
have a person designated as a management person on duty who will be responsible
for the business operations of Franchisee's business. Franchisee will employ and
maintain a sufficient number of adequately trained and competent employees to
provide efficient service to Franchisee's customers.
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K. Hours of Operation. Franchisee's business will be open for business
for such days and hours as Franchisor may reasonably designate.
L. Additional Training Seminars. Franchisor may periodically conduct
refresher courses, seminars and other programs for all Plato's Closet(R)
franchisees. Franchisee and/or its employees will be required to attend any such
programs and will be responsible for any expenses incurred by them in attending
such programs including the cost of transportation, lodging, meals and any
wages.
M. Photographs. Franchisor will have the right to photograph the Store
premises and, with prior written consent, Store employees at all reasonable
times.
N. Operations Manual. To protect Franchisor's reputation and goodwill
and to maintain uniform operating standards under the Marks and Business System,
Franchisee will conduct its business according to Franchisor's Operations
Manual, one copy of which Franchisee will have on loan from Franchisor.
Franchisee will treat the Operations Manual as confidential, and will use all
reasonable efforts to maintain the Operations Manual as secret and confidential.
The Operations Manual will remain Franchisor's sole property. Franchisor may
periodically revise the contents of the Operations Manual. Franchisee agrees to
comply with each new or changed standard. Franchisee will insure that its copy
of the Operations Manual is kept current. In the event of any dispute as to the
contents of the Operations Manual, the terms of the master copy of the
Operations Manual Franchisor maintains will control.
O. Lease. Franchisee's lease or sublease for the Store premises must be
approved by Franchisor before its execution, but such approval will not be
unreasonably withheld. Franchisee must provide Franchisor with an executed copy
of any lease for the Store. Franchisor makes no guarantees concerning the
success of the Store located on any site consented to by Franchisor. Franchisor
recommends that Franchisee employ an independent real estate broker to assist
Franchisee in locating a suitable site and negotiating a lease for such site.
Franchisee's lease must contain provisions requiring that: (i) so long as this
Agreement remains in effect, the premises will be used only for a Plato's
Closet(R) business; (ii) Franchisor will be granted the right (but not the duty)
to take possession of the premises and assume the lease in the event of a
termination of this Agreement or a threatened termination of the lease as a
result of a breach by Franchisee; (iii) the landlord will provide Franchisor
written notice of any Franchisee default and/or right to cure; and (iv) upon
termination of this Agreement or the Lease, Franchisee must remove all signs and
materials bearing the name "Plato's Closet" and other Marks.
P. Point-of-Sale System. Franchisee will utilize in the Store the
point-of-sale system (the "POS System") which Franchisor has developed and/or
selected for the Business System, including all future updates, supplements and
modifications. The computer software package developed for use in Franchisee's
business will include a proprietary software program owned by Franchisor or
developed for Franchisor by a third party (the "Third Party Developer").
Franchisee must lease the proprietary software from Franchisor or the Third
Party Developer. Franchisee and Franchisor will enter into Franchisor's standard
form of Computer Software License Agreement attached hereto as Exhibit B ("the
Software License Agreement") in connection with Franchisee's use of such
software. Franchisor reserves the right to assign its rights, title and interest
in the Proprietary Software or the Software License Agreement to the Third Party
Developer. In such event, Franchisee may be required to enter into a separate
computer software license agreement specified by the Third Party Developer.
Franchisor also reserves the right, upon prior written notice to Franchisee, to
access information and data produced by Franchisee's POS System. The computer
hardware component of the POS System must conform with specifications Franchisor
or the Third Party Developer develops and must be configured as a package unit
as Franchisor or the Third Party Developer designates. If Franchisor or a third
party designee is requested to configure Franchisee's
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computer hardware component to conform with the designated computer software
component of the POS System, Franchisor or the third party designee may provide
such assistance for additional agreed upon compensation. Franchisee will be
required to utilize and, at Franchisor's discretion, pay for all future updates,
supplements and modifications to the POS System.
Q. Participation in Internet Web Site. Franchisee acknowledges that the
Internet is a powerful, expanding medium through which business is conducted.
Franchisee must have Internet access and an e-mail address. In addition,
Franchisor may, upon ninety (90) days' prior written notice, require Franchisee,
at Franchisee's expense, to participate in a Plato's Closet(R) World Wide Web
Site listed on the Internet. Franchisor will, at its discretion, determine the
content and use of a Plato's Closet(R) Web Site and will establish the rules
under which franchisees may or will participate in such Web Site or separately
use the Internet. Franchisor will retain all rights relating to the Plato's
Closet(R) Web Site and may alter or terminate the Web Site upon thirty (30)
days' notice to Franchisee. Franchisee's general conduct on the Internet and
specifically its use of the Marks on the Internet (including the domain name and
any other Marks Franchisor may develop as a result of participation in the
Internet) will be subject to the provisions of this Agreement. Franchisee
acknowledges that certain information obtained through its participation in the
Plato's Closet(R) Web Site may be considered Confidential Information (as
defined in Section 9 below), including access codes and identification codes.
Franchisee's right to participate in the Plato's Closet(R) Web Site or otherwise
use the Marks or Business System on the Internet will terminate when this
Agreement expires or terminates.
9. CONFIDENTIAL INFORMATION
A. Non-Disclosure of Confidential Information. Franchisee and those
individuals who have signed the Personal Guaranty attached hereto as Exhibit C
will not, during or after the term of this Agreement, communicate, disclose or
use for the benefit of any other person or entity any confidential information,
knowledge or know-how concerning the Business System which may be communicated
to Franchisee. Franchisee will disclose such confidential information only to
such of its employees as must have access to it in order to operate Franchisee's
business. Any and all information, knowledge and know-how, including the
Operations Manual, any other manuals created for use in the operation of the
Store, methods, supplier lists, procedures, specifications, techniques, computer
programs and other data which Franchisor copyrights or designates as
confidential will be deemed confidential for purposes of this Agreement.
B. Confidentiality Agreements. All of Franchisee's employees who have
managerial duties respecting the Store and who have access to confidential
information of Franchisor, as well as all corporate officers, directors and
shareholders if Franchisee is a corporation (all partners if Franchisee is a
partnership), must sign agreements in a form satisfactory to Franchisor,
agreeing to maintain the confidentiality, during the course of their agreement
and thereafter, of all information Franchisor copyrights or designates as
confidential and proprietary. Copies of the executed agreements will be provided
to Franchisor upon request.
10. INSURANCE; BONDING
A. Insurance. Franchisee will obtain and maintain in force (under
policies of insurance issued by solvent and reputable carriers) and pay the
premiums for public liability insurance with complete operations coverage with
minimum limits of $1,000,000 per person and $1,000,000 per occurrence, bailee
insurance protecting Franchisee's consignment goods and other insurance in such
types and amounts as Franchisor may reasonably require. Such insurance policies
will expressly protect both Franchisee and
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Franchisor and will require the insurer to defend both Franchisee and Franchisor
in any action. Franchisee will furnish to Franchisor a certificate of insurance
as stated above, naming Franchisor as an additional insured, and providing that
such policy will not be canceled, amended or modified except upon thirty (30)
days' prior written notice to Franchisor. Maintenance of the insurance
requirement will not relieve Franchisee of the obligations of indemnification
stated in Section 11 below. If Franchisee fails to obtain or maintain in force
any insurance as required by this Section or to furnish any certificate of
insurance required hereunder, Franchisor may, in addition to all other available
remedies, obtain such insurance or certificates, and Franchisee will promptly
reimburse Franchisor for all insurance premiums and other costs incurred in
obtaining such insurance.
B. Bonding. Franchisee will comply with any and all bonding
requirements which may be applicable to its Plato's Closet(R)business, including
bonding requirements resulting from the consignment portion of Franchisee's
business.
11. INDEPENDENT CONTRACTORS; INDEMNIFICATION
A. Relationship. Franchisor and Franchisee are independent contractors.
Neither Franchisor nor Franchisee will make any agreements, representations or
warranties in the name of or for the other or that their relationship is other
than franchisor and franchisee. Neither Franchisor nor Franchisee will be
obligated by or have any liability under any agreements, representations or
warranties made by the other. Franchisee alone will be responsible for all loss
or damage arising out of or relating to the operation of Franchisee's business
or arising out of the acts or omissions of Franchisee or any of its agents,
employees or contractors in connection with the preparation and sale of products
by Franchisee, and for all claims for damage to property or for injury or death
of any persons directly or indirectly resulting therefrom. Franchisee will
indemnify Franchisor against and will reimburse Franchisor for all obligations
and damages arising out of the operation of Franchisee's business, including all
costs Franchisor reasonably incurs in the defense of any such claim brought
against it or in any action in which it is named as a party (including
reasonable attorneys' fees). Franchisor will have the right to defend any such
claim against it. Franchisor will indemnify Franchisee against and reimburse
Franchisee for any obligations or liability for damages attributable to
agreements, representations or warranties of Franchisor, or caused by
Franchisor's negligence or willful action, and for costs Franchisee reasonably
incurs in the defense of any such claim brought against it or in any action in
which it is named as a party, provided that Franchisor will have the right to
participate in and, to the extent Franchisor deems necessary, to control any
litigation or proceeding which might result in liability of or expense to
Franchisee subject to such indemnification. The indemnities and assumptions of
liabilities and obligations stated in this Agreement will continue in full force
and effect following the expiration or termination of this Agreement.
B. Enforcement. The non-prevailing party will pay all costs and
expenses, including reasonable attorneys' fees, the prevailing party incurs in
any action or proceeding brought to enforce any provision of this Agreement or
to enjoin any violation of this Agreement.
12. SALES REPORTS, FINANCIAL STATEMENTS AND AUDIT RIGHTS
A. Sales Reports. Franchisee will maintain an accurate written record
of daily Gross Sales and will deliver to Franchisor a signed and verified
statement of the weekly Gross Sales of Franchisee's business using such forms as
Franchisor may require in writing. The weekly statement of Gross Sales must be
provided to Franchisor on or before Wednesday of each week for the preceding
week. Franchisor reserves the right to modify or substitute the required forms
and impose additional recordkeeping procedures.
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B. Financial Statements. Franchisee will, at its expense, provide
Franchisor with quarterly and annual financial statements and such other
financial reports as Franchisor specifies using the forms and chart of accounts
Franchisor requires. All financial information provided to Franchisor under this
Section must be presented in the form Franchisor periodically requires in
writing. Franchisee will deliver the quarterly financial information to
Franchisor by the thirtieth (30th) day of the month following the end of the
preceding quarter. The annual financial statement must be provided on or before
March 1 of each year for the preceding calendar year.
C. Audit Rights. Franchisee will make all of its financial books and
records available to Franchisor or its designated representative at all
reasonable times for review and audit by Franchisor or its designee. Franchisee
will keep its financial books and records for each fiscal and calendar year in a
secure place and will make them available for audit by Franchisor for at least
five (5) years. If an audit conducted by Franchisor results in a determination
that the Continuing Fees paid to Franchisor are deficient (underpaid) by more
than two percent (2%), Franchisee will pay Franchisor for the reasonable costs
and expenses that it has incurred as a result of the audit. If pursuant to
audits, the Continuing Fees have been deficient by more than two percent (2%)
twice or more within any five (5) year period, this will be considered a
material breach of this Agreement.
13. FRANCHISOR'S RIGHT OF FIRST REFUSAL TO PURCHASE
A. Restrictions. Franchisee will not sell, assign, trade, transfer,
lease, sublease, or otherwise dispose of: (1) any interest in or any part of the
Franchised Location or this Agreement, or (2) any controlling interest (whether
through one or more related transactions) in Franchisee's business or the assets
of Franchisee's business to any third party, without first offering the same to
Franchisor in writing, at the same price and on the same terms as stated in the
proposed third-party offer. Franchisee's written offer to Franchisor must
contain all material provisions of the proposed sale or transfer. Upon
Franchisor's receipt of written notice specifying the proposed price and terms
of a proposed sale or transfer of Franchisee's business or interest therein,
Franchisor will give Franchisee written notice within ten (10) business days
thereafter if Franchisor has an interest in negotiating to purchase the business
or interest being offered according to the proposed terms. If Franchisor
commences negotiations to purchase Franchisee's business or interest therein as
described herein, Franchisee may not sell the business or interest being offered
to a third party for at least thirty (30) days or until Franchisor and
Franchisee agree in writing that the negotiations have terminated, whichever
comes first. If Franchisor waives its right to purchase, Franchisee may complete
the sale or transfer of the business or interest therein according to the terms
described in the written notice to Franchisor but not upon more favorable terms.
Any such sale, transfer or assignment to a third party is subject to the
provisions stated in Section 14 of this Agreement. Franchisor's nonacceptance of
Franchisee's written offer will not affect or change Franchisee's obligations
under this Agreement.
B. Corporate Franchisee. If Franchisee is a corporation, the
shareholders cannot sell, assign, pledge or otherwise dispose of a controlling
interest in the capital stock of Franchisee ("Capital Stock") (except to
immediate family members of the controlling shareholder(s) or to a trust
established for their benefit) until the Capital Stock has been first offered to
Franchisor in writing under the same terms and conditions offered to any third
party. A shareholder of Franchisee may, however, bequeath, sell, assign, trade
or transfer his/her Capital Stock to the other shareholders of Franchisee
corporation because of death or permanent disability without first offering it
to Franchisor, provided Franchisee provides Franchisor with written notice of
all such transactions. All shares of Capital Stock issued by Franchisee's
corporation to its shareholders must bear the following legend on the reverse
side of each issued and outstanding stock certificate:
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The shares of capital stock represented by this
certificate are subject to a written Franchise
Agreement which grants Grow Biz International, Inc.
a right of first refusal to purchase these shares of
capital stock from the shareholder.
Nothing in this Section will be construed as prohibiting the shares of Capital
Stock of a corporate Franchisee from being pledged as security to an
institutional lender who has provided financing to or for the Store; provided
the institutional lender accepts such security interest subject to Franchisor's
reasonable conditions.
14. ASSIGNMENT OF FRANCHISE AGREEMENT
A. By Franchisor. This Agreement may be assigned and transferred by
Franchisor and will benefit Franchisor's successors and assigns. Any such
assignment or transfer will require the assignee to fulfill Franchisor's
obligations under this Agreement.
B. Corporate Franchisee. This Agreement may be transferred or assigned
by Franchisee to a corporation which is owned or controlled by Franchisee,
provided Franchisee and all other shareholders of the assignee corporation
owning at least ten percent (10%) of the Capital Stock thereof sign the Personal
Guaranty attached hereto as Exhibit C and agree to be bound by the provisions of
this Agreement. Franchisee will give Franchisor fifteen (15) days written notice
before the proposed date of assignment or transfer of this Agreement to a
corporation owned or controlled by Franchisee; however, the transfer or
assignment of this Agreement will not be valid or effective until Franchisor has
received the legal documents which its legal counsel deems necessary to properly
document such transfer or assignment.
C. Conditions to Other Transfer or Assignment. Franchisee (and its
partners and shareholders, if any) will not transfer (whether voluntary or
involuntary), assign or otherwise dispose of, in one or more transactions,
Franchisee's business, the Franchised Location, substantially all or all of the
assets of Franchisee's business, this Agreement or any controlling interest in
Franchisee (a "controlling" interest will include a proposed transfer of fifty
percent (50%) or more of the Capital Stock of a corporate Franchisee) without
Franchisor's prior written consent, except to trusts established for
Franchisee's benefit. Franchisor will not unreasonably withhold its consent to a
transfer, subject to any or all of the following conditions described below
which Franchisor may, in its sole discretion, deem necessary:
1. All of Franchisee's accrued monetary obligations to
Franchisor will have been satisfied, and Franchisee is not in default
under this Agreement;
2. Franchisee executes a written agreement in a form
satisfactory to Franchisor, in which Franchisee covenants to observe
all applicable post-term obligations and covenants contained in this
Agreement;
3. The transferee-franchisee enters into a written agreement
in a form satisfactory to Franchisor assuming and agreeing to discharge
all of Franchisee's obligations and covenants under this Agreement for
the remainder of its term or, at Franchisor's option, execute
Franchisor's then-current standard form of franchise agreement (which
may provide for different royalties, advertising contributions,
duration, and other rights and obligations from those provided in this
Agreement);
4. The transferee-franchisee is approved by Franchisor and
demonstrates to Franchisor's satisfaction that he/she meets
Franchisor's managerial, financial, and business
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standards for new franchisees, possesses a good business reputation and
credit rating, and has the aptitude and ability to conduct the
franchised business. Franchisee understands that Franchisor may
communicate directly with the transferee-franchisee during the transfer
process to respond to inquiries, as well as to ensure that the
transferee-franchisee meets Franchisor's qualifications;
5. The transferee-franchisee successfully completes
Franchisor's training program; and
6. Franchisee pays Franchisor a transfer fee of Five Thousand
Dollars ($5,000) for the costs Franchisor incurs, including the costs
of any required training. There will be no transfer fee payable for
transfers to immediate family members.
15. FRANCHISOR'S TERMINATION RIGHTS
A. Grounds. Franchisee will be in default, and Franchisor may, at its
option, terminate this Agreement, as provided herein, if: (1) Franchisee fails
to open and commence operations of the Store at such time as the premises are
ready for occupancy or within nine (9) months of the execution of this
Agreement, whichever occurs first; (2) Franchisee violates any material
provision or obligation of this Agreement; (3) Franchisee or any of its
managers, directors, officers or majority shareholders are convicted of, or
plead guilty to or no contest to (a) a charge of violating any law which
adversely impacts upon the reputation of the franchised business or (b) any
felony; (4) Franchisee fails to conform to the material requirements of the
Business System or the material standards of uniformity and quality for the
products and services Franchisor has established in connection with the Business
System; (5) Franchisee fails to timely pay Continuing Fees, Marketing or
Advertising Fees, buying group (inventory) obligations or any other obligations
or liabilities due and owing to Franchisor or fails to timely pay any
advertising cooperative obligations; (6) Franchisee is insolvent within the
meaning of any applicable state or federal law; (7) Franchisee makes an
assignment for the benefit of creditors or enters into any similar arrangement
for the disposition of its assets for the benefit of creditors; (8) Franchisee
voluntarily or otherwise "abandons" (as defined below) the franchised business;
(9) Franchisee is involved in any act or conduct which materially impairs the
goodwill associated with the name "Plato's Closet" or any of the Marks or the
Business System; or (10) Franchisee's lease for the Store premises expires or is
terminated for any reason (unless, through no fault of Franchisee, the lessor of
the premises in which the Store is located refuses to renew Franchisee's lease
and Franchisee relocates within the Development Area to a site approved by
Franchisor within sixty (60) days thereafter). The term "abandon" means
Franchisee's failure to operate the Store during regular business hours for a
period of ten (10) consecutive days without Franchisor's prior written consent
unless such failure is due to an act of God, war, strikes or riots.
B. Procedure. Except as described below, Franchisee will have thirty
(30) days, or such longer period as applicable law may require, after its
receipt from Franchisor of a written Notice of Termination within which to
remedy any default hereunder, and to provide evidence thereof to Franchisor. If
Franchisee fails to correct the alleged default within that time (or such longer
period of time as applicable law may require), this Agreement will terminate
without further notice to Franchisee effective immediately when the thirty (30)
day period (or such longer period as applicable law may require) expires.
Franchisor may terminate this Agreement immediately upon delivery of written
notice to Franchisee, with no opportunity to cure, if the termination results
from any of the following: (1) Franchisee repeatedly fails to comply with one or
more material requirements of this Agreement; (2) the nature of Franchisee's
breach makes it not curable; (3) Franchisee willfully and repeatedly deceives
customers relative to the source, nature or quality of goods sold; (4) any
default under items (3), (6), (8) or (9) in Section 15(A) above; or (5)
Franchisee willfully and
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materially falsifies any report, statement, or other written data furnished to
Franchisor either during the franchise application process or after Franchisee
is awarded a franchise. Any report submitted pursuant to Section 12 will be
conclusively deemed to be materially false if it understates Gross Sales by more
than four percent (4%).
C. Applicable Law. If the provisions of this Section 15 are
inconsistent with applicable law, the applicable law will apply. Franchisor's
ability to terminate or fail to renew a Wisconsin franchise will be governed by
the Wisconsin Fair Dealership Law, Chap. 135, Wisc. Stats. Minnesota law
provides franchisees with certain termination and non-renewal rights. As of the
date of this Agreement, Minn. Stat. Section 80C.14, Subd. 3, 4 and 5 require
that, except in certain specified cases, a franchisee be given 90 days notice of
termination (with 60 days to cure) and 180 days notice for non-renewal of the
Agreement.
16. FRANCHISEE'S TERMINATION RIGHTS; NOTICE REQUIRED
A. Termination. Franchisee may terminate this Agreement if Franchisor
violates any material obligation of Franchisor to Franchisee and fails to cure
such violation within thirty (30) days after Franchisor's receipt of written
notice from Franchisee; provided, however, that Franchisee is in substantial
compliance with the Agreement at the time of giving such notice of termination.
Franchisee's written notice will identify the violation and demand that it be
cured.
B. Required Notice. A party must give the other party written notice of
an alleged default under or violation of this Agreement after it has knowledge
of, determines, or is of the opinion that there has been an alleged default
under or violation of this Agreement. If there is failure to give written notice
of an alleged default under this Agreement within one (1) year from the date
that the nonbreaching party has knowledge of, determines or is of the opinion
that there has been an alleged default, the alleged default will be deemed to be
approved and waived, and the alleged default or violation will not be deemed to
be a default under or violation of this Agreement.
17. FRANCHISEE'S OBLIGATIONS UPON TERMINATION
A. Post-Term Duties. If this Agreement is terminated for any reason
other than a termination as a result of a breach by Franchisor, Franchisee will:
(1) within five (5) days after termination, pay all amounts due and owing to
Franchisor under this Agreement; (2) return to Franchisor by first class prepaid
United States mail the Operations Manual and any other manuals, advertising
materials, and all other printed materials relating to the operation of the
franchised business; (3) assign to Franchisor the telephone number for the
Store; and (4) remove all signs and other materials bearing the name "Plato's
Closet" and other Marks; (5) comply with all post-termination obligations under
the Software License Agreement, including the return of all copies of
Franchisor's proprietary software; (6) disconnect any Internet web site
Franchisee has established in connection with Franchisee's operation of the
Store; and (7) comply with all other applicable provisions of this Agreement,
including the non-compete provisions. Upon termination of this Franchise
Agreement for any reason, Franchisee's right to use the name "Plato's Closet"
and the other Marks and the Business System will immediately terminate. If
Franchisee fails to remove all signs and other materials bearing the Marks,
Franchisor may do so at Franchisee's expense.
B. Redecoration. If this Agreement is terminated for any reason, and
Franchisee either remains in possession of the Franchised Location to operate a
separate business not in violation of Section 18 below or enters into an
agreement with a third party to allow such third party to directly operate
business at the Franchised location, Franchisee will, at its expense, modify
both the exterior and interior appearance of the business premises so that they
will be easily distinguished from the standard appearance of Plato's
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Closet(R) Stores. At a minimum, such changes and modifications to the premises
will include: (1) repainting the premises with totally different colors; (2)
removing all signs and other materials bearing the name "Plato's Closet" and
other Marks; (3) removing from the premises all fixtures which are indicative of
Plato's Closet(R) Stores; (4) discontinuing use of the approved employee
uniforms and refraining from using any uniforms which are confusingly similar;
and (5) discontinuing use of all packaging and confidential information
regarding the operation of the Store.
18. FRANCHISEE'S COVENANTS NOT TO COMPETE
A. During Term. Franchisee (and the Personal Guarantors) will not,
during the term of this Agreement, on their own account or as an employee,
agent, consultant, partner, officer, director, or shareholder of any other
person, firm, entity, partnership or corporation, own, operate, lease,
franchise, conduct, engage in, be connected with, have any interest in, or
assist any person or entity engaged in any business involving wholesale or
retail teen or children's clothing or related accessories, or any other related
business that is competitive with or similar to a Plato's Closet(R)Store, except
with Franchisor's prior written consent.
B. After Termination. Franchisee (and the Personal Guarantors) will
not, for a period of one (1) year after this Agreement expires or is terminated
(except for a termination as a result of a Franchisor's breach), on their own
account or as an employee, agent, consultant, partner, officer, director, or
shareholder of any other person, firm, entity, partnership or corporation, own,
operate, lease, franchise, conduct, engage in, be connected with, have any
interest in or assist any person or entity engaged in any business involving
wholesale or retail teen clothing or related accessories or any other related
business that is competitive with or similar to a Plato's Closet(R) Store which
is located at the Franchised Location or within a six (6) mile radius of the
Franchised Location or any Plato's Closet(R) Store. Franchisee expressly agrees
that the one (1) year period and the six (6) mile radius are the reasonable and
necessary time and distance needed to protect Franchisor if this Agreement
expires or is terminated for any reason.
C. Injunctive Relief. Franchisee agrees that damages alone cannot
adequately compensate Franchisor if there is a violation of these noncompetitive
covenants and that injunctive relief is essential for the protection of
Franchisor. Franchisee therefore agrees that in case of any alleged breach or
violation of this Section by it, Franchisor may seek injunctive relief without
posting any bond or security, in addition to all other remedies that may be
available to Franchisor at equity or law.
19. ARBITRATION; ENFORCEMENT
A. Arbitration Process. Except to the extent Franchisor elects to
enforce the provisions of this Agreement by judicial process and injunction as
provided herein, all disputes, claims and controversies between the parties
arising under or in connection with this Agreement or the making, performance or
interpretation thereof (including claims of fraud in the inducement and other
claims of fraud and the arbitrability of any matter) will be settled by
arbitration under the authority of the Federal Arbitration Act in Minneapolis,
Minnesota. The arbitrator will have a minimum of five (5) years experience in
franchising or distribution law and will have the right to award specific
performance of this Agreement. The proceedings will be conducted under the
commercial arbitration rules of the American Arbitration Association, to the
extent such Rules are not inconsistent with the provisions of this arbitration
provision. The decision of the arbitrator will be final and binding on all
parties. This Section will survive termination or non-renewal of this Agreement
under any circumstances. Judgment upon the award of the arbitrator may be
entered in any
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court having jurisdiction thereof. During the pendency of any arbitration
proceeding, Franchisee and Franchisor will fully perform their respective
obligations under this Agreement.
B. Additional Proceedings. If, after Franchisor or Franchisee
institutes an arbitration proceeding, one or the other asserts a claim,
counterclaim or defense, the subject matter of which, under statute or current
judicial decision is nonarbitrable for public policy reasons, the party against
whom the claim, counterclaim or defense is asserted may elect to proceed with
the arbitration of all arbitrable claims, counterclaims or defenses or to
proceed to litigate all claims, counterclaims or defenses in a court having
competent jurisdiction.
C. Punitive Damages. Franchisor and Franchisee acknowledge that
judgment upon an arbitration award may be entered in any court of competent
jurisdiction and will be binding, final and nonappealable. Franchisor and
Franchisee (and their respective owners and guarantors, if applicable) agree to
waive, to the fullest extent permitted by law, the right to or claim for any
punitive or exemplary damages against the other and agree that in the event of a
dispute between them, each will be limited to the recovery of actual damages
sustained by it.
D. Enforcement of Franchise Agreement. Notwithstanding the other
provisions of this Section 19, Franchisee recognizes that the failure of a
single franchisee to comply with the terms of its Plato's Closet(R) franchise
agreement could cause irreparable damage to Franchisor or to some or all other
Plato's Closet(R) franchisees. Franchisor and Franchisee, therefore agree that,
in the event of a breach or threatened breach of Sections 3, 8, 9, 12, 13, 14,
17 and/or 18 of this Agreement by Franchisee or in the event of any conduct by
Franchisee which is illegal or is dishonest or misleading to Franchisee's
customers or prospective customers or may impair the goodwill associated with
the Marks, Franchisor may seek an injunction restraining such breach or obtain a
decree of specific performance, without showing or proving any actual damage,
until such time as a final and binding determination is made by the arbitrator.
The foregoing equitable remedy will be in addition to, and not in lieu of, all
other remedies or rights which Franchisor might otherwise have by virtue of any
breach of this Agreement by Franchisee.
20. SEVERABILITY AND CONSTRUCTION
A. Severability. All provisions of this Agreement are severable and
this Agreement will be interpreted and enforced as if all completely invalid or
unenforceable provisions were not contained herein and partially valid and
enforceable provisions will be enforced to the extent valid and enforceable. If
any applicable law or rule of any jurisdiction requires a greater prior notice
period than is required hereunder, or if under any applicable law or rule of any
jurisdiction, any provision of this Agreement is invalid or unenforceable, the
prior notice required by such law or rule will be substituted for the notice
requirements hereof, or such invalid or unenforceable provision will be modified
to the extent required to be valid and enforceable. Such modifications to this
Agreement will be effective only in such jurisdiction and will be enforced as
originally made and entered into in all other jurisdictions.
B. Waiver. Franchisor and Franchisee may by written instrument
unilaterally waive any obligation of or restriction upon the other under this
Agreement. No acceptance by Franchisor of any payment by Franchisee and no
failure, refusal or neglect of Franchisor or Franchisee to exercise any right
under this Agreement or to insist upon full compliance by the other with its
obligations hereunder, including any mandatory specification, standard or
operating procedure, will constitute a waiver of any provision of this
Agreement.
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C. Cumulative Rights. The rights of Franchisor and Franchisee hereunder
are cumulative and no exercise or enforcement by Franchisor or Franchisee of any
right or remedy hereunder will preclude the exercise or enforcement by
Franchisor or Franchisee of any other right or remedy hereunder or which
Franchisor or Franchisee is entitled by law to enforce.
D. Governing Law. Except to the extent governed by the United States
Trademark Act of 1946 (Xxxxxx Act, 15 U.S.C. Section 1051 et seq.), this
Agreement and the franchise relationship will be governed by the laws of the
state in which the Franchised Location is located.
E. Binding Effect. This Agreement is binding upon the parties hereto
and their respective executors, administrators, heirs, assigns and successors in
interest.
F. Consents. Whenever a party's consent or approval is required under
this Agreement, such consent or approval will not be unreasonably withheld or
delayed.
G. Entire Agreement. The "Background" section is a part of this
Agreement which, together with exhibits, represents the entire agreement of the
parties. This Agreement supersedes and terminates any prior oral or written
understandings or agreements between Franchisor and Franchisee relating to the
subject matter of this Agreement. No modification of this Agreement will be
effective unless it is in writing and signed by Franchisor and Franchisee. The
term "Franchisee" as used herein is applicable (where relevant) to one or more
persons, a corporation or a partnership. References to "Franchisee," "assignees"
and "transferees" which are applicable to an individual or individuals mean the
principal owner or owners of the equity or operating control of Franchisee or
any such assignee or transferee if Franchisee or such assignee or transferee is
a corporation or partnership. If Franchisee consists of more than one
individual, all individuals will be bound jointly and severally by the
provisions of this Agreement.
21. NOTICES
All notices to Franchisor will be in writing and will be made by
personal service or sent by prepaid certified or registered United States mail,
return receipt requested, addressed to Franchisor at its principal place of
business, or at such other address as Franchisor may designate in writing. All
notices to Franchisee will be made by prepaid certified or registered United
States mail, return receipt requested, addressed to Franchisee at the Franchised
Location, or such other address as Franchisee may designate in writing. Any
notice under this Agreement may also be made by a recognized delivery service
that requires a written receipt.
22. ACKNOWLEDGMENTS
A. Independent Investigation. Franchisee acknowledges that it has
conducted an independent investigation of the business franchised hereunder, and
recognizes that the business venture contemplated by this Agreement involves
business risks and that its success will largely depend on Franchisee's ability
as an independent business person. Franchisor expressly disclaims the making of,
and Franchisee acknowledges that it has not received, any warranty or guarantee,
express or implied, as to the potential volume, profits or success of the
business venture contemplated by this Agreement.
B. Franchise Agreement. Franchisee acknowledges that it has received,
read, and understood this Agreement and that Franchisor has fully and adequately
explained the provisions of it to Franchisee's satisfaction and that Franchisee
has had sufficient time and opportunity to consult with advisors of its own
choosing about the potential benefits and risks of entering into this Agreement.
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C. Other Franchises. Franchisee acknowledges that other franchisees of
Franchisor have or will be granted franchises at different times and in
different situations, and further acknowledges that the provisions of such
franchises may vary substantially from those contained in this Agreement.
D. Receipt of Documents. Franchisee acknowledges that it received a
copy of this Agreement at least five (5) business days before the date on which
this Agreement was executed. Franchisee further acknowledges that he/she has
received a Franchise Offering Circular at least ten (10) business days before
the date on which this Agreement was executed.
IN WITNESS WHEREOF, Franchisor and Franchisee have signed this
Agreement as of the day and year first above written.
FRANCHISOR DISCLAIMS ANY WARRANTY OR REPRESENTATION AS TO THE POTENTIAL SUCCESS
OF FRANCHISEE'S BUSINESS OPERATIONS UNDER THIS AGREEMENT.
This is a legal document which grants specific rights to and imposes certain
obligations upon Franchisor and Franchisee. Consult legal counsel to be sure
that you understand your rights and duties. Please insert the name and address
of your attorney: ____________________________________________________________.
"FRANCHISOR" "FRANCHISEE"
GROW BIZ INTERNATIONAL, INC. If "Franchisee" is a corporation,
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(Print Corporate Name)
By By
--------------------------------- -----------------------------------------
Its Its
----------------------------- -------------------------------------
If "Franchisee" is one or more individuals,
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(Print Individual Name)
By
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(Print Individual Name)
By
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(Print Individual Name)
By
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-19-
EXHIBIT A
TO FRANCHISE AGREEMENT
FRANCHISEE'S DEVELOPMENT AREA AND EXCLUSIVE TERRITORY
1. Description of Development Area:
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2. Description of Exclusive Territory:
----------------------------------
------------------------- -------------------------
Franchisor Franchisee
EXHIBIT B
TO FRANCHISE AGREEMENT
COMPUTER SOFTWARE LICENSE AGREEMENT
EXHIBIT C
TO FRANCHISE AGREEMENT
PERSONAL GUARANTY AND AGREEMENT TO BE BOUND
PERSONALLY BY THE PROVISIONS OF THE FRANCHISE AGREEMENT
In consideration of Franchisor's execution of this Franchise Agreement,
and for other good and valuable consideration, the undersigned jointly and
severally: (1) guarantee Franchisee's payment of all amounts due Franchisor and
Franchisee's performance of the covenants and obligations in this Franchise
Agreement; and (2) agree to be personally bound by every provision contained in
this Franchise Agreement including the non-compete provisions and agree that
this Personal Guaranty will be construed as though the undersigned executed a
Franchise Agreement containing the identical provisions of this Franchise
Agreement.
A. Each of the undersigned waives:
(1) notice of demand for payment of any indebtedness or
nonperformance of any obligations hereby guaranteed;
(2) protest and notice of default to any party respecting the
indebtedness or nonperformance of any obligations hereby guaranteed;
and
(3) any right he/she may have to require that an action be
brought against Franchisee or any other person as a condition of
liability.
B. Each of the undersigned consents and agrees that:
(1) he/she will provide any payment or performance required
under the Agreement upon demand if Franchisee fails or refuses to do
so;
(2) such liability will not be contingent or conditioned upon
Franchisor's pursuit of any remedies against Franchisee or any other
person; and
(3) such liability will not be diminished, relieved or
otherwise affected by Franchisee's insolvency, bankruptcy or
reorganization, the invalidity, illegality or unenforceability of all
or any part of the Agreement, or the amendment or extension of the
Agreement with or without notice to the undersigned.
IN WITNESS WHEREOF, each of the undersigned has signed this Guaranty on
the same day and year as the Franchise Agreement was signed.
In the Presence of: PERSONAL GUARANTORS
------------------------------------- -------------------------------------
Individually
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Address
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Individually
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Address
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Individually
------------------------------------- -------------------------------------
Address
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Individually
------------------------------------- -------------------------------------
Address
EXHIBIT D
TO FRANCHISE AGREEMENT
ADDITIONAL STORE ADDENDUM TO
PLATO'S CLOSET(R) FRANCHISE AGREEMENT
ADDITIONAL STORE ADDENDUM TO
PLATO'S CLOSET(R) FRANCHISE AGREEMENT
This Addendum is entered into as of the _____ day of _______________,
199__, by and among Grow Biz International, Inc. ("Franchisor"), and
______________________________ ("Franchisee").
BACKGROUND:
Franchisor and Franchisee are, on this day, entering into a Plato's
Closet(R) Franchise Agreement (the "Franchise Agreement"), whereby Franchisee
will be granted the right to develop and operate a Plato's Closet(R) store at
the location stated in the Franchise Agreement (the "Store"). Franchisee
currently owns one or more existing stores franchised under one of Franchisor's
concepts. Franchisor and Franchisee agree to the following modifications to the
Franchise Agreement.
AGREEMENTS:
In consideration of the foregoing, the parties agree as follows:
1. Initial Franchise Fee. Subject to the provisions stated herein,
Section 4 of the Franchise Agreement is amended to provide that Franchisee will
not pay an Initial Franchise Fee. If Franchisee transfers the Franchise
Agreement (as described in Section 14(c) therein) before the Store commences
operation, Franchisee will pay a supplemental transfer fee of Fifteen Thousand
Dollars ($15,000).
2. Franchisor's Obligations. Franchisor and Franchisee agree that
Franchisor may, but will not be required to, provide location, training or
opening assistance as described in Sections 7(A), (D) and (E) of the Franchise
Agreement.
3. Store Opening Period. Section 15(A)(1) of the Franchise Agreement is
amended by replacing the phrase "nine (9) months" in such Section with the
phrase "three (3) months."
4. Construction. In all other respects, the Franchise Agreement will be
construed and enforced with its terms.
IN WITNESS WHEREOF, the parties have executed this Addendum as of the
day and year first above written.
FRANCHISOR: FRANCHISEE:
GROW BIZ INTERNATIONAL, INC.
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(Name of Corporation)
By By
--------------------------------- ---------------------------------------
Its Its
----------------------------- -----------------------------------
or
(Individuals)
By
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By
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