International Fast Food Corporation
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Attn: ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇,
Chief Executive Officer
Letter Agreement
Gentlemen:
This letter will confirm the mutual understanding between International
Fast Food Corporation, on behalf of itself and its direct and indirect
subsidiaries (hereinafter collectively referred to as "IFFC"), and Host Marriott
Services Corporation, on behalf of itself and its direct and indirect
subsidiaries (hereinafter collectively referred to as "Host Marriott"), with
respect to the development and operation of Burger King restaurants within
shopping center food courts in the Republic of Poland.
Specifically, we have agreed as follows:
1. IFFC will, subject to any necessary approvals of Burger King
Corporation ("BKC"), grant Host Marriott the rights to develop and operate
Burger King restaurants within enclosed shopping centers located in Poland where
Host Marriott has leased substantially all of the food and beverage facilities.
2. Host Marriott will pay:
(a) an initial start-up fee of US $25,000 per location to
IFFC in exchange for IFFC's pre-opening support and assistance, including
furnishing design and construction advice, hiring and training management staff,
advising on the selection of information and accounting systems, etc. for each
Burger King restaurant developed by Host Marriott pursuant to this agreement.
The start-up fee will be paid simultaneously with the payment of any initial
franchise fees payable to BKC for such location.
(b) an on-going annual fee to IFFC equal to the greater of
U.S. $7,000 per location, or 1.5% of Host Marriott's gross receipts from the
operation of each Burger King restaurant developed by Host Marriott pursuant to
this agreement, in exchange for IFFC's on-going technical assistance and
services, including maintaining quality standards, procurement and supply
services, on-going staff training, etc. The fee will be payable monthly, with an
annual reconciliation and will continue for the duration of Host Marriott's
operation of the location as a Burger King restaurant.
(c) all amounts payable to BKC (e.g., franchise fees,
advertising contributions, royalty fees) for the franchise rights for each
location developed by Host Marriott pursuant to this agreement.
3. Host Marriott will, subject to any necessary approvals of BKC,
offer IFFC the option to acquire an interest in the pre-tax profits of any
Burger King restaurants developed by Host Marriott pursuant to this agreement.
IFFC may exercise such option by giving Host Marriott written notice, at any
time prior to the opening of each Burger King restaurant, specifying the
percentage interest (the "Percentage Interest") that IFFC intends to acquire, up
to a maximum of 50% per location. Within 60 days after the opening of any Burger
King restaurant for which IFFC has exercised its option, Host Marriott will
provide IFFC with (i) a statement, certified by its Chief Financial Officer,
setting forth in reasonable detail the total costs incurred by Host Marriott in
building, equipping and opening such restaurant, together with a pro rata
portion of the cost of any common facilities (e.g., seating areas, tray wash
areas, office and storage space, point of sale and telecommunications systems,
etc.) used in connection therewith; and (ii) an invoice equal to the amount of
the statement multiplied by the Percentage Interest. IFFC will pay the amount of
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the invoice within thirty (30) days after its receipt thereof, or its option
will have been deemed to lapse. IFFC's share of the pre-tax profits for each
Burger King restaurant will be calculated as set forth in Exhibit A attached
hereto.
4. This agreement will be coterminous with IFFC's March 1997
Development Agreement with BKC; provided, however, no such termination or
expiration of the Development Agreement shall be deemed to terminate IFFC's
right to receive the payments and IFFC's obligation to perform the services set
forth above for any Burger King restaurants previously developed by Host
Marriott pursuant to this agreement.
If the foregoing accurately reflects our mutual understanding, please
sign this letter agreement in the space provided below and return one fully
signed original to use for our files.
Sincerely,
Host Marriott Services Corporation
By: signature illegible
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Vice President
Agreed:
International Fast Food Corporation
By: /s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
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Title: Chairman
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Date: 3-18-99
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EXHIBIT A
Gross Receipts from Burger King (excluding sales taxes and VAT) __________________
Less Cost of Products Sold (__________________)
Gross Profit __________________
Less Expenses as follows:
(a) All local, direct operating expenses such as salaries, wages
and related costs; rental payments and charges; advertising;
franchise fees payable to BKC; fees payable to IFFC;
insurance, utilities; taxes (exclusive of income taxes and
those taxes excluded in the definition of gross receipts);
business license fees; and like items of direct operating
expense (__________________)
(b) Amortization of leasehold acquisition costs and leasehold
improvements, furnishings, fixtures and equipment (based on
amortizing the cost on a straight-line basis for the full
lease term or the useful life, whichever is less) (__________________)
(__________________)
(c) General and administrative overhead at 4.5% of gross receipts
(d) Less any accumulated losses from prior fiscal years (__________________)
Balance of Profit for Distribution __________________
Multiplied by IFFC's Percentage Interest X __________________
Balance Payable to IFFC __________________
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