EXHIBIT 10.12
Buffalo Wild Wings®
Area Development Agreement
Developer
Effective Date:
(To be completed by Us)
TABLE OF CONTENTS
|
|
|
|
|
|
|
SECTION
|
|
PAGE
|
|
RECITALS
|
|
1
|
|
|
|
|
|
1.
|
|
DEFINITIONS
|
|
1
|
|
|
|
|
|
2.
|
|
GRANT OF
DEVELOPMENT RIGHTS
|
|
2
|
|
|
|
|
|
3.
|
|
DEVELOPMENT
FEE
|
|
4
|
|
|
|
|
|
4.
|
|
DEVELOPMENT
SCHEDULE
|
|
4
|
|
|
|
|
|
5.
|
|
TERM
|
|
7
|
|
|
|
|
|
6.
|
|
YOUR
DUTIES
|
|
7
|
|
|
|
|
|
7.
|
|
DEFAULT AND
TERMINATION
|
|
8
|
|
|
|
|
|
8.
|
|
RIGHTS AND
DUTIES OF PARTIES UPON TERMINATION OR EXPIRATION
|
|
8
|
|
|
|
|
|
9.
|
|
TRANSFER
|
|
10
|
|
|
|
|
|
10.
|
|
MISCELLANEOUS
|
|
10
|
APPENDICES
BUFFALO WILD WINGS®
AREA DEVELOPMENT AGREEMENT
This Area Development Agreement is
made this
day of
, 20 between BUFFALO WILD WINGS
INTERNATIONAL, INC., an Ohio corporation with its principal
business located at 1600 Utica Avenue South, Suite 700,
Minneapolis, Minnesota 55426 (“we” or “us”)
and
, a(n)
whose principal business address is
(“developer” or “you”). If the developer is
a corporation, partnership or limited liability company, certain
provisions of the Agreement also apply to your owners and will be
noted.
RECITALS
A. Our parent company has developed
a unique system for operating video entertainment oriented, fast
casual restaurants that feature chicken wings, sandwiches, unique
food service and other products, beverages and services using
certain standards and specifications;
B. Many of the food and beverage
products are prepared according to specified recipes and
procedures, some of which include proprietary sauces and
mixes;
C. Our parent company owns the
B UFFALO W ILD W INGS® Trademark and other trademarks used in
connection with the Operation of a B UFFALO W ILD W INGS restaurant;
D. Our parent company has granted to
us the right to sublicense the right to develop and operate
B UFFALO W ILD W INGS restaurants;
E. You desire to develop and operate
several B UFFALO
W ILD W INGS restaurants and we, in reliance on your
representations, have approved your franchise application to do so
in accordance with this Agreement.
In consideration of the foregoing
and the mutual covenants and consideration below, you and we agree
as follows:
DEFINITIONS
1. For purposes of this Agreement,
the terms below have the following definitions:
A. “Menu Items” means
the chicken wings, sandwiches and other products and beverages
prepared according to our specified recipes and procedures, as we
may modify and change them from time to time.
B. “Principal Owner”
means any person who directly or indirectly owns a 10% or greater
interest in the developer when the developer is a corporation,
limited liability company, a partnership, or a similar entity.
However, if we are entering into this Agreement totally or
partially based on the financial qualifications, experience, skills
or managerial qualifications of any person or entity who directly
or indirectly owns less than a 10% interest in the developer, that
person or entity may, in our sole discretion, be considered a
Principal Owner for all purposes under this Agreement, including,
but not limited to, the execution of the personal guaranty
referenced in Section 10.J below. In addition, if the developer is
a partnership entity, then each general partner is a Principal
Owner, regardless of the percentage ownership interest. If the
developer is one or more individuals, each individual is a
Principal Owner of the developer. You must have at least one
Principal Owner.
1
C. “Restaurants” means
the B UFFALO
W ILD W INGS Restaurants you develop and operate pursuant to
this Agreement.
D. “System” means the
B UFFALO W ILD W INGS System, which consists of distinctive food and
beverage products prepared according to special and confidential
recipes and formulas with unique storage, preparation, service and
delivery procedures and techniques, offered in a setting of
distinctive exterior and interior layout, design and color scheme,
signage, furnishings and materials and using certain distinctive
types of facilities, equipment, supplies, ingredients, business
techniques, methods and procedures together with sales promotion
programs, all of which we may modify and change from time to
time.
E. “Trademarks” means
the B UFFALO
W ILD W INGS Trademark and Service Mark that have been
registered in the United States and elsewhere and the trademarks,
service marks and trade names set forth in each Franchise
Agreement, as we may modify and change from time to time, and the
trade dress and other commercial symbols used in the Restaurants.
Trade dress includes the designs, color schemes and image we
authorize you to use in the operation of the Restaurants from time
to time.
GRANT OF DEVELOPMENT
RIGHTS
2. The following provisions control
with respect to the rights granted hereunder:
A. We grant to you, under the terms
and conditions of this Agreement, the right to develop and operate
( )
B UFFALO W ILD W INGS Restaurants (the “Restaurants”)
within the territory described on Appendix A (“Development
Territory”).
B. You are bound by the development
schedule (“Development Schedule”) set forth in Appendix
B. Time is of the essence for the development of each Restaurant in
accordance with the Development Schedule. Each Restaurant must be
developed and operated pursuant to a separate Franchise Agreement
that you enter into with us pursuant to Section 4.B
below.
C. If you are in compliance with the
Development Schedule set forth on Appendix B, we will not develop
or operate or grant anyone else a franchise to develop and operate
a B UFFALO W ILD W INGS Restaurant business in the Development Territory
prior to the earlier of (i) the expiration or termination of this
Agreement; (ii) the date on which you must execute the Franchise
Agreement for your last restaurant pursuant to the terms of the
Development Schedule or (iii) the date on which the Designated Area
for your final Restaurant under this Agreement is determined,
except (a) for the Special Sites defined in Section 2.D below; (b)
in the event that the Development Territory covers more than one
city, county or designated market area, the protection for each
particular city, county or designated market area shall expire upon
the earliest of (1) any of the foregoing events or (2) the date
when the Designated Area for your final Restaurant to be developed
in such city, county or designated market area under this Agreement
is determined; or (c) as otherwise provided in this Agreement.
Notwithstanding anything in this Agreement, upon the earliest
occurrence of any of the foregoing events (i) the Development
Territory shall expire and (ii) we will be entitled to develop and
operate, or to franchise others to develop and operate, B
UFFALO W ILD W INGS restaurants in the Development Territory, except
as may be otherwise provided under any Franchise Agreement that has
been executed between us and you and that has not been terminated.
At the time you execute your final Franchise Agreement under the
Development Schedule, you must have an Authorized Location for your
final Restaurant.
2
D. The rights granted under this
Agreement are limited to the right to develop and operate
Restaurants located in the Development Territory, and do not
include (i) any right to sell products and Menu Items identified by
the Trademarks at any location or through any other channels or
methods of distribution, including the internet (or any other
existing or future form of electronic commerce), other than at
Restaurants within the Development Territory, (ii) any right to
sell products and Menu Items identified by the Trademarks to any
person or entity for resale or further distribution, or (iii) any
right to exclude, control or impose conditions on our development
or operation of franchised, company or affiliate owned restaurants
at any time or at any location outside of the Development
Territory. You may not use any the words B UFFALO ,
W ILD or W INGS or any
of the other Trademarks as part of the name of your corporation,
partnership, limited liability company or other similar
entity.
You acknowledge and agree that (i)
we and our affiliates have the right to operate or franchise within
the Designated Area one or more facilities selling, for dine in or
take out, all or some of the Menu Items, using the Trademarks or
any other trademarks, service marks or trade names, without
compensation to any franchisee, provided, however, that such
facilities shall not have an interior area larger than 2,400 square
feet and shall not have seating capacity for more than 48 people;
(ii) we and our affiliates have the right outside of the
Development Territory to grant other franchises or operate company
or affiliate owned B UFFALO W ILD W INGS restaurants and offer, sell or distribute any
products or services associated with the System (now or in the
future) under the Trademarks or any other trademarks, service marks
or trade names or through any distribution channel or method, all
without compensation to any developer; and (iii) we and our
affiliates have the right to operate and franchise others to
operate restaurants or any other business within and outside the
Development Territory under trademarks other than the B
UFFALO W ILD W INGS Trademarks, without compensation to any
developer, except that our operation of, or association or
affiliation with, restaurants (through franchising or otherwise) in
the Development Territory that compete with B UFFALO W ILD W INGS restaurants in the video entertainment oriented,
fast casual restaurant segment will only occur through some form of
merger or acquisition with an existing restaurant chain.
In addition, we and our affiliates
have the right to offer, sell or distribute, within the Development
Territory, any frozen, pre-packaged items or other products or
services associated with the System (now or in the future) or
identified by the Trademarks, or any other trademarks, service
marks or trade names, except for Prohibited Items (as defined
below), through any distribution channels or methods, without
compensation to any developer. The distribution channels or methods
include, without limitation, grocery stores, club stores,
convenience stores, wholesale, hospitals, clinics, health care
facilities, business or industry locations (e.g. manufacturing
site, office building), military installations, military
commissaries or the internet (or any other existing or future form
of electronic commerce). The Prohibited Items are the following
items that we will not sell in the Development Territory through
other distribution channels or methods: any retail food service
Menu Items that are cooked or prepared to be served to the end user
or customer for consumption at the retail location (unless sold at
the limited seating facilities referenced in subparagraph (i) of
the paragraph above). For example, chicken wings cooked and served
to customers at a grocery store or convenience store would be a
Prohibited Item, but the sale of frozen or pre-packaged chicken
wings at a grocery store or convenience store would be a permitted
form of distribution in the Development Territory.
3
Further, you acknowledge that
certain locations within the Development Territory are by their
nature unique and separate in character from sites generally
developed as B UFFALO
W ILD W INGS restaurants. As a result, you agree that the
following locations (“Special Sites”) are excluded from
the Development Territory and we have the right, subject to our
then-current Special Sites Impact Policy, to develop or franchise
such locations: (1) military bases; (2) public transportation
facilities; (3) sports facilities, including race tracks; (4)
student unions or other similar buildings on college or university
campuses; (5) amusement and theme parks; and (6) community and
special events.
E. This Agreement is not a Franchise
Agreement and you have no right to use in any manner the Trademarks
by virtue of this Agreement. You have no right under this Agreement
to sublicense or subfranchise others to operate a business or
restaurant or use the System or the Trademarks.
DEVELOPMENT FEE
3. You must pay a Development Fee as
described below:
A. As consideration for the rights
granted in this Agreement, you must pay us a “Development
Fee” of $
, representing one-half of the Initial Franchise Fee for each
Restaurant to be developed under this Agreement. The Initial
Franchise Fee for the first Restaurant is $
. The Initial Franchise Fee for the second Restaurant is $
. The Initial Franchise Fee for each subsequent Restaurant is $
.
The Development Fee is consideration
for this Agreement and not consideration for any Franchise
Agreement, is fully earned by us upon execution of this Agreement
and is non-refundable. The part of the Initial Franchise Fee that
is included in the Development Fee is credited against the Initial
Franchise Fee payable upon the signing of each individual Franchise
Agreement. The balance of the Initial Franchise Fee for the first
Restaurant must be paid at the time of execution of this Agreement,
together with the execution by you of the Franchise Agreement for
the first Restaurant. The total amount to be paid by you at the
time of execution of this Agreement pursuant to this Section,
including both the Development Fee and the balance of the Initial
Franchise Fee for your first Restaurant is $
. The balance of the Initial Franchise Fee for each subsequent
Restaurant is due as specified in Section 3.B.
B. You must submit a separate
application for each Restaurant to be established by you within the
Development Territory as further described in Section 4. Upon our
consent to the site of your Restaurant, a separate Franchise
Agreement must be executed for each such Restaurant, at which time
the balance of the Initial Franchise Fee for that Restaurant is due
and owing. Such payment represents the balance of the appropriate
Initial Franchise Fee, as described above in Section 3.A. Upon the
execution of each Franchise Agreement, the terms and conditions of
the Franchise Agreement control the establishment and operation of
such Restaurant.
DEVELOPMENT
SCHEDULE
4. The following provisions control
with respect to your development rights and obligations:
A. You are bound by and strictly
must follow the Development Schedule. By the dates set forth under
the Development Schedule, you must enter into Franchise Agreements
with us pursuant to this Agreement for the number of Restaurants
described under the Development
4
Schedule. You also must comply with
the Development Schedule requirements regarding (i) the restaurant
type to be developed and the opening date for each Restaurant and
(ii) the cumulative number of Restaurants to be open and
continuously operating for business in the Development Territory.
If you fail to either execute a Franchise Agreement or to open a
Restaurant according to the dates set forth in the Franchise
Agreement, we, in our sole discretion, may (i) require that you
hire a franchise development expert with recognized experience in
developing franchises in a similar line of business to ours or (ii)
immediately terminate this Agreement pursuant to Section
7.B.
B. You may not develop a Restaurant
unless (i) at least 45 days, but no more than 60 days, prior to the
date set forth in the Development Schedule for the execution of
each Franchise Agreement, you send us a notice (a) requiring that
we send you our then current disclosure documents, (b) confirming
your intention to develop the particular Restaurant and (c) sending
us all information necessary to complete the Franchise Agreement
for the particular Restaurant and (ii) all of the following
conditions have been met (these conditions apply to each Restaurant
to be developed in the Development Territory):
1. Your Submission of Proposed
Site . You must find a proposed site for the Restaurant which
you reasonably believe to conform to our site selection criteria,
as modified by us from time to time, and submit to us a complete
site report (containing such demographic, commercial, and other
information and photographs as we may reasonably require) for such
site.
2. Our Consent to Proposed
Site . You must receive our written consent to your proposed
site. We agree not to unreasonably withhold consent to a proposed
site. Prior to granting our consent to a site, you must have the
site evaluated by the proprietary site evaluator software that has
been developed by GeoVue, Inc. You will pay GeoVue, Inc. an
evaluation fee of $400 per site evaluated, provided, that you must
purchase the rights to have at least 3 sites evaluated. In
approving or disapproving any proposed site, we will consider such
matters as we deem material, including demographic characteristics
of the proposed site, traffic patterns, competition, the proximity
to other businesses, the nature of other businesses in proximity to
the site, and other commercial characteristics (including the
purchase or lease obligations for the proposed site) and the size
of premises, appearance and other physical characteristics. Our
consent to a proposed site, however, does not in any way constitute
a guaranty by us as to the success of the Restaurant.
3. Your Submission of
Information . You must furnish to us, at least 30 days prior to
the earliest of (i) the date set forth in the Development Schedule
by which you must execute a Franchise Agreement or (ii) the actual
date in which the Franchise Agreement would be executed, a
franchise application for the proposed Restaurant, financial
statements and other information regarding you, the operation of
any of your other Restaurants within the Development Territory and
the development and operation of the proposed Restaurant
(including, without limitation, investment and financing plans for
the proposed Restaurant) as we may reasonably require.
4. Your Compliance with Our
Then-Current Standards for Franchisees . You must receive
written confirmation from us that you meet our then-current
standards for franchisees, including financial capability criteria
for the development of a new Restaurant. You acknowledge and agree
that this requirement is necessary to ensure the proper development
and operation of your Restaurants, and preserve and enhance the
reputation and goodwill of all B UFFALO W ILD W INGS restaurants and the goodwill of the Trademarks.
Our confirmation that you meet our then-current standards for the
development of a new Restaurant, however, does not in any way
constitute a guaranty by us as to your success.
5
5. Good Standing . You must
not be in default of this Agreement, any Franchise Agreement
entered into pursuant to this Agreement or any other agreement
between you or any of your affiliates and us or any of our
affiliates. You also must have satisfied on a timely basis all
monetary and material obligations under the Franchise Agreements
for all existing Restaurants.
6. Execution of Franchise
Agreement . You and we must enter into our then-current form of
Franchise Agreement for the proposed Restaurant. You understand
that we may modify the then-current form of Franchise Agreement
from time to time and that it may be different than the current
form of Franchise Agreement, including different fees and
obligations. You understand and agree that any and all Franchise
Agreements will be construed and exist independently of this
Agreement. The continued existence of each Franchise Agreement will
be determined by the terms and conditions of such Franchise
Agreement. Except as specifically set forth in this Agreement, the
establishment and operation of each Restaurant must be in
accordance with the terms of the applicable Franchise
Agreement.
C. You must begin substantial
construction of each of the Restaurants at least 150 days before
the deadline to open each of the Restaurants if the Restaurant will
be in a free standing location or at least 120 days before the
deadline to open the Restaurant if the Restaurant will be in a
non-free standing location. In addition, on or before the deadlines
to start construction you must submit to us executed copies of any
loan documents and/or any other document that proves that you have
secured adequate financing to complete the construction of the
Restaurant by the date you are obligated to have that Restaurant
open and in operation. In the event that you fail to comply with
any of these obligations, we will have the right to terminate this
Agreement without opportunity to cure pursuant to subparagraph
7.B.
D. You acknowledge that you have
conducted an independent investigation of the prospects