EXHIBIT 10
Buffalo Wild Wings ® Franchise
Agreement
Between
Buffalo Wild Wings International, Inc.
5500 Wayzata Blvd., Suite 1600
Minneapolis, MN 55416
And
AMC Flint, Inc.
21751 West Eleven Mile Road, Suite 208
Southfield, MI 48076
248-223-9160
Authorized Location:
Street
City
State
Zip Code
Effective Date:
(To be completed by us)
--TABLE OF CONTENTS--
BUFFALO WILD WINGS ® FRANCHISE
AGREEMENT
SECTION
PAGE
DEFINITIONS
1
GRANT OF LICENSE
2
TRADEMARK STANDARDS AND REQUIREMENTS
4
TERM AND RENEWAL
5
FACILITY STANDARDS AND MAINTENANCE
6
PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
10
PERSONNEL AND SUPERVISION STANDARDS
14
ADVERTISING
16
FEES, REPORTING AND AUDIT RIGHTS
18
YOUR OTHER OBLIGATIONS; NONCOMPETE COVENANTS
20
TRANSFER OF FRANCHISE
22
DISPUTE RESOLUTION
26
DEFAULT AND TERMINATION
27
POST-TERM OBLIGATIONS
28
GENERAL PROVISIONS
30
APPENDICES
A.
Trademarks
B.
Designated Area
C.
Addendum to Lease
D.
Electronic Transfer of Funds Authorization
E.
Gift Cards Participation Agreement
F.
Enrollment Form and Portal Terms and Conditions
BUFFALO WILD WINGS ® FRANCHISE
AGREEMENT
This Franchise Agreement is made this ____ day
of May, 2008 between BUFFALO WILD WINGS INTERNATIONAL, INC., an
Ohio corporation with its principal business located at 5500
Wayzata Blvd., Suite 1600, Minneapolis, Minnesota 55416
(“we” or “us”), and AMC FLINT, INC., a
Michigan corporation whose principal business address is 21751
West Eleven Mile Road, Suite 208, Southfield, Michigan 48076
(“franchisee” or “you”). If the
franchisee is a corporation, partnership, limited liability
company or other legal entity, certain provisions to this
Agreement also apply to its owners.
RECITALS
A.
Our parent company has developed a unique system
for video entertainment oriented, casual/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 BUFFALO WILD
WINGS ® Trademark and other trademarks used
in connection with the operation of a BUFFALO WILD WINGS
®
restaurant;
D.
Our parent company has granted to us the right
to sublicense the right to develop and operate BUFFALO
WILD WINGS ® restaurants;
and
E.
You desire to develop and operate a
BUFFALO WILD WINGS ® restaurant and
we, in reliance on your representations, have approved your
franchise application.
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.
“Control Person” means the
individual who has the authority to, and does in fact, actively
direct your business affairs in regard to the Restaurant, is
responsible for overseeing the general management of the
day-to-day operations of the Restaurant and has authority to
sign on your behalf on all contracts and commercial documents.
The Control Person is identified on the Ownership and
Management Addendum attached to this Agreement.
B.
“Gross Sales” includes the total
revenues and receipts from the sale of all products, services
and merchandise sold in your Restaurant whether under any of the
Trademarks or otherwise, including any cover charges or fees,
vending or similar activities in your Restaurant or on its
premises as well as all license and use fees. Gross Sales
excludes sales taxes.
C.
“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.
D.
“Principal Owner” means any person
or entity who, now or hereafter, directly or indirectly owns a
10% or greater interest in the franchisee when the franchisee is
a corporation, limited liability company, partnership, or a
similar entity. However, if we are entering into this
Agreement
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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 franchisee, we have the right to
designate that person or entity as a Principal Owner for all
purposes under this Agreement. In addition, if the
franchisee is a partnership entity, then each person or entity
who, now or hereafter is or becomes a general partner is a
Principal Owner, regardless of the percentage ownership
interest. If the franchisee is one or more individuals,
each individual is a Principal Owner of the franchisee.
Each franchisee must have at least one Principal Owner.
Your Principal Owner(s) are identified on the Ownership
and Management Addendum attached to this Agreement. Every
time there is a change in the persons who are your Principal
Owners, you must, within 10 days from the date of each such
change, update the Ownership and Management Addendum. As
used in this Agreement, any reference to Principal Owner
includes all Principal Owners.
E.
“Restaurant” means the
BUFFALO WILD WINGS ® Restaurant you
develop and operate pursuant to this
Agreement.
F.
“System” means the BUFFALO
WILD WINGS ® 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.
G.
“Trademarks” means the
BUFFALO WILD WINGS ®
Trademark and Service Mark that have been registered
in the United States and elsewhere and the trademarks, service
marks and trade names set forth on Appendix A, as we may modify
and change from time to time, and the trade dress and other
commercial symbols used in the Restaurant. Trade dress
includes the designs, color schemes and image we authorize you
to use in the operation of the Restaurant from time to
time.
H.
“Unit General Manager” means the
individual who (i) personally invests his or her full time and
attention and devotes his or her best efforts to the on-premises
general management of the day-to-day operations of the
Restaurant and (ii) meets our training requirements. The
Unit General Manager must be appointed at least 60 days prior to
the Restaurant opening and fully trained 20 days prior to the
Restaurant opening.
GRANT OF LICENSE
2.
The following provisions control with respect to
the license granted hereunder:
A.
Authorized Location . We grant to
you the right and license to establish and operate a retail
Restaurant identified by the BUFFALO WILD WINGS
® Trademarks or such other marks as we may
direct, to be located at a location to be determined, in
accordance with this subparagraph or a location to be
designated within 90 days from the date of this Agreement (the
“Authorized Location”). When a location has
been designated by you and approved by us, it will become part
of this subparagraph 2.A as if originally stated. If an
Authorized Location is not designated by you and approved by us
within 90 days from the date of this Agreement, we have the
right to declare this Agreement null and void without the return
of any Initial Franchise Fee or other amounts paid to us.
You accept the license and undertake the obligation to
operate the Restaurant at the Authorized Location using the
Trademarks and the System in compliance with the terms and
conditions of this Agreement.
B.
Designated Area . You must locate
and operate the Restaurant at an Authorized Location within the
area described in Appendix B (the “Designated
Area”). We and our affiliates
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will not locate and operate or grant to anyone
else a franchise to locate and operate a BUFFALO WILD
WINGS ® restaurant within the Designated
Area so long as this Agreement is in effect, except as provided
in subparagraph 2.D. You do not have any right to
sublicense or subfranchise within or outside of the Designated
Area and do not have the right to operate more than one
Restaurant within the Designated Area.
C.
Opening . You agree that the
Restaurant will be open and operating in accordance with the
requirements of subparagraph 5.A within (i) 270 days from the
date of this Agreement if the Restaurant is located within an
end cap, shopping mall, Special Site or other similar location,
or (ii) 365 days from the date of this Agreement if the
Restaurant is a free standing building, unless in either case we
authorize in writing an extension of time. Notwithstanding
the foregoing, if you are entering this Agreement pursuant to an
Area Development Agreement executed between you and us, you
agree to open the Restaurant by the date stated in the Area
Development Agreement. If you fail to have your Restaurant
open and in operation according to the provisions of this
subparagraph 2.C, we will have the right to terminate this
Agreement without opportunity to cure pursuant to subparagraph
13.B.2.
D.
Nonexclusivity; Our Reservation of Rights
. The license is limited to the right to develop and
operate one Restaurant at the Authorized Location located in the
Designated Area, and does not include (i) any right to sell
products and Menu Items identified by the Trademarks at any
location other than the Authorized Location, except for
authorized catering and delivery services as noted in
subparagraph 2.E, or through any other channels or methods of
distribution, including the internet (or any other existing or
future form of electronic commerce), (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 of future franchised, company or affiliate owned
restaurants at any time or at any location. You
acknowledge that the consumer service area or trade area of
another BUFFALO WILD WINGS ®
restaurant may overlap with your Designated
Area.
You also acknowledge and agree that we and our
affiliates have the right to operate and franchise others the
right to operate restaurants or any other business within and
outside the Designated Area under trademarks other than the
BUFFALO WILD WINGS ® Trademarks,
without compensation to any franchisee, except that our
operation of, or association or affiliation with, restaurants
(through franchising or otherwise) in the Designated Area that
compete with BUFFALO WILD WINGS ®
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 (except as
otherwise provided for in this subparagraph). Outside of
the Designated Area, we and our affiliates have the right to
grant other franchises or develop and operate company or
affiliate owned BUFFALO WILD WINGS ®
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
franchisee.
We and our affiliates have the right to offer,
sell or distribute, within and outside the Designated Area, 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 franchisee. 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 Designated
Area 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
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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 Designated Area.
You acknowledge and agree that certain locations
within and outside the Designated Area are by their nature
unique and separate in character from sites generally developed
as BUFFALO WILD WINGS ® restaurants.
As a result, you agree that the following locations
(“Special Sites”) are excluded from the Designated
Area and we have the right 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.
In addition, you acknowledge and agree that,
subject to your right of first refusal as set forth below, we
and our affiliates have the right to operate or franchise within
and outside 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 (“Limited Seating
Facilities”). If we develop a model for a Limited
Seating Facility and determine that your Designated Territory is
an appropriate market for such a facility, we will provide to
you a written offer (“Offer”) specifying the terms
and conditions for your development of the Limited Seating
Facility. You will have 90 days following your receipt of
the Offer to accept the Offer by delivering written notice to us
of your acceptance, provided that you are not in default under
this Agreement or any other Agreement with us or our affiliates.
If you do not provide written notice to us within the time
period or if you are in default under this Agreement or any
other agreement with us or our affiliates, you will lose the
right to develop the Limited Seating Facility and we may develop
or franchise others to develop the Limited Seating Facility
within your Designated Area. You acknowledge and agree
that if you accept the Offer, we may require you to submit a
full application, pay an initial fee and sign a new form of
franchise agreement.
E.
Catering and Delivery . You may not
engage in catering and delivery services and activities within
or outside of the Designated Area, unless we authorize you in
writing, as further described in subparagraph 6.L. We and
our affiliate companies will not engage in catering and delivery
services and activities in the Designated Area; however, we have
no obligation to enforce similar covenants against any other
franchisee.
TRADEMARK STANDARDS AND REQUIREMENTS
3.
You acknowledge and agree that the Trademarks
are our parent company’s property and it has licensed the
use of the Trademarks to us with the right to sublicense to
others. You further acknowledge that your right to use the
Trademarks is specifically conditioned upon the following:
A.
Trademark Ownership . The
Trademarks are our parent company’s valuable property, and
it is the owner of all right, title and interest in and to the
Trademarks and all past, present or future goodwill of the
Restaurant and of the business conducted at the Authorized
Location that is associated with or attributable to the
Trademarks. Your use of the Trademarks will inure to our
parent company’s benefit. You may not, during or
after the term of this Agreement, engage in any conduct directly
or indirectly that would infringe upon, harm or contest our
parent company’s rights in any of the Trademarks or the
goodwill associated with the Trademarks, including any use of
the Trademarks in a derogatory, negative, or other inappropriate
manner in any media, including but not limited to print or
electronic media.
4
B.
Trademark Use . You may not use, or
permit the use of, any trademarks, trade names or service marks
in connection with the Restaurant except those set forth in
Appendix A or except as we otherwise direct in writing.
You may use the Trademarks only in connection with such
products and services as we specify and only in the form and
manner we prescribe in writing. You must comply with all
trademark, trade name and service mark notice marking
requirements. You may use the Trademarks only in
association with products and services approved by us and that
meet our standards or requirements with respect to quality, mode
and condition of storage, production, preparation and sale, and
portion and packaging.
C.
Restaurant Identification . You
must use the name BUFFALO WILD WINGS GRILL & BAR
® as the trade name of the Restaurant and
you may not use any other mark or words to identify the
Restaurant without our prior written consent. You may not
use the phrase “Buffalo Wild Wings” or
any of the other Trademarks as part of the name of your
corporation, partnership, limited liability company or other
similar entity. You may use the Trademarks on various
materials, such as business cards, stationery and checks,
provided you (i) accurately depict the Trademarks on the
materials as we prescribe, (ii) include a statement on the
materials indicating that the business is independently owned
and operated by you, (iii) do not use the Trademarks in
connection with any other trademarks, trade names or service
marks unless we specifically approve in writing prior to such
use, and (iv) make available to us, upon our request, a copy of
any materials depicting the Trademarks. You must post a
prominent sign in the Restaurant identifying you as a
BUFFALO WILD WINGS ® franchisee in a
format we deem reasonably acceptable, including an
acknowledgment that you independently own and operate the
Restaurant and that the BUFFALO WILD WINGS
® Trademark is owned by our parent company
and your use is under a license we have issued to you. All
your internal and external signs must comply at all times with
our outdoor/indoor guidelines and practices, as they are
modified from time to
time.
D.
Litigation . In the event any
person or entity improperly uses or infringes the Trademarks or
challenges your use or our use or ownership of the Trademarks,
we will control all litigation and we have the right to
determine whether suit will be instituted, prosecuted or
settled, the terms of settlement and whether any other action
will be taken. You must promptly notify us of any such use
or infringement of which you are aware or any challenge or claim
arising out of your use of any Trademark. You must take
reasonable steps, without compensation, to assist us with any
action we undertake. We will be responsible for our fees
and expenses with any such action, unless the challenge or claim
results from your misuse of the Trademarks in violation of this
Agreement, in which case you must reimburse us for our fees and
expenses.
E.
Changes . You may not make any
changes or substitutions to the Trademarks unless we direct in
writing. We reserve the right to change the Trademarks at
any time. Upon receipt of our notice to change the
Trademarks, you must cease using the former Trademarks and
commence using the changed Trademarks, at your expense. If
the changes to the Trademarks result in a required change to
outdoor signage, such changes will be subject to the provisions
in 5.F.
TERM AND RENEWAL
4.
The following provisions control with respect to
the term and renewal of this Agreement:
A.
Term . The initial term of this
Agreement is 20 years, unless this Agreement is sooner
terminated in accordance with Paragraph 13. The initial
term commences upon the Effective Date (as defined in
subparagraph 15.S) of this Agreement. We may extend this
initial term in writing for a limited period of time not to
exceed 6 months to take into account the term of any applicable
lease for the Authorized Location.
5
B.
Renewal Term and Conditions of Renewal .
You may renew your license for two renewal terms, (the
first renewal term is 10 years; the second renewal term is 5
years), provided that with respect to each renewal: (i)
you have given us written notice of your decision to renew at
least 6 months but not more than 12 months prior to the end of
the expiring term; (ii) you sign our then-current form of
franchise agreement (modified to reflect no additional renewal
term upon expiration and other modifications to reflect that the
agreement relates to the grant of a renewal), the terms of which
may differ from this Agreement, including higher fees and a
modification to the Designated Area (although in no event will
the revised Designated Area have a residential population of the
lesser of approximately 30,000 to 40,000 or the residential
population that existed as of the Effective Date); (iii) you
have complied with the provisions of subparagraph 5.E regarding
modernization and you perform any further items of modernization
and/or replacement of the building, premises, trade dress,
equipment and grounds as may be necessary for your Restaurant to
conform to the standards then applicable to new BUFFALO
WILD WINGS restaurants, regardless of the cost of such
modernizations and/or replacements, unless we determine that you
should relocate your Restaurant because your Authorized Location
no longer meets our then-current site criteria, in which case
you must comply with the 90 and 270 day relocation requirements
of subparagraph 5.D; (iv) you are not in default of this
Agreement or any other agreement pertaining to the franchise
granted, have satisfied all monetary and material obligations on
a timely basis during the term and are in good standing; (v) if
leasing the Restaurant premises (and not subject to relocation
under (iii) above), you have renewed the lease and have provided
written proof of your ability to remain in possession of the
premises throughout the renewal period; (vi) you comply with our
then-current training requirements; (vii) you pay us, at least
30 days prior to the end of the expiring term, a renewal fee in
the amount of $20,000; and (viii) you and your Principal Owners
and guarantors execute a general release of claims in a form we
prescribe.
C.
Relocation Upon Renewal . If, as a
condition of renewal, we require you to relocate your Restaurant
pursuant to subparagraph 4.B(iii) above, you receive a new term
of 20 years plus two renewal terms of 10 years and five years,
respectively, provided that with respect to the renewal, you
meet all conditions stated in subparagraph 4.B.
FACILITY STANDARDS AND MAINTENANCE
5.
You acknowledge and agree that we have the right
to establish, from time to time, quality standards regarding the
business operations of BUFFALO WILD WINGS
® restaurants and stores to protect the
distinction, goodwill and uniformity symbolized by the
Trademarks and the System. Accordingly, you agree to
maintain and comply with our quality standards and agree to the
following terms and conditions:
A.
Restaurant Facility; Site Under Control .
You are responsible for purchasing or leasing a site that
meets our site selection criteria. You must obtain our
written consent to the 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 must execute the Enrollment Form and Portal Terms and
Conditions attached as Appendix F and pay GeoVue, Inc. an
evaluation fee of $400 per site evaluated, but you must pay for
the rights to have at least 3 sites evaluated and these fees are
nonrefundable. If your authorized location is located in an area
with a lower population or smaller trade area, we may reduce the
number of required site evaluations. You may not use the
Restaurant premises or Authorized Location for any purpose other
than the operation of a BUFFALO WILD WINGS
® Restaurant during the term of this
Agreement. We make no guarantees concerning the success of
the Restaurant located on any site to which we
consent.
You may not open your Restaurant for business
until we have notified you in writing that you have satisfied
your pre-opening obligations as set forth in subparagraphs 5.A
and 5.B and we have approved your opening date. We are not
responsible or liable for any of your pre-opening obligations,
losses or expenses you might incur for your failure to comply
with these obligations or your failure to
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open by a particular date. We also are
entitled to injunctive relief or specific performance under
subparagraph 12.C for your failure to comply with your
obligations.
In the event that you plan to enter into any
type of lease for the Restaurant premises, you and your landlord
must sign the Lease Addendum attached as Appendix C. We
recommend you submit the Lease Addendum to the landlord at the
beginning of your lease review and negotiation, although the
terms of the Lease Addendum may not be negotiated without our
prior approval. If the landlord requires us to negotiate
the Lease Addendum, we reserve the right to charge you a fee,
which will not exceed our actual costs associated with the
negotiation. You must provide us a copy of the executed
lease and Lease Addendum within 5 days of its execution.
We have no responsibility for the lease; it is your sole
responsibility to evaluate, negotiate and enter into the lease
for the Restaurant premises.
You must execute, and provide us an executed
copy of your lease (including an executed copy of the Lease
Addendum) or the purchase agreement for the selected and
approved site for your Restaurant within 120 days from the date
of execution of this Agreement if the Restaurant will be in a
free standing location or within 90 days from the execution of
this Agreement if the selected and consented to site for the
Restaurant is in a non-free standing location. If you fail
to have your “site under control” (execute the lease
or the purchase agreement within the periods set forth in this
subparagraph), we will have the right to terminate this
Agreement without opportunity to cure pursuant to subparagraph
13.B.2.
B.
Construction; Future Alteration .
You must construct and equip the Restaurant in strict
accordance with our current approved specifications and
standards pertaining to equipment, inventory, signage, fixtures,
furnishings, accessory features (including sports memorabilia)
and design and layout of the building. You may not
commence construction of the Restaurant until you have received
our written consent to your building plans. If your
Restaurant is not constructed strictly according to the
previously consented building plans, we will not approve your
Restaurant for opening. You will have 30 days from the
date we deny our approval for opening your Restaurant to correct
all the construction problems so that your Restaurant is
strictly constructed according to the consented building plans.
If you fail to correct the problems within the 30 day
period we may immediately terminate this Agreement pursuant to
subparagraph 13.B.2. If the Restaurant opening is delayed
for the foregoing reasons, you will be responsible for any
losses and costs related to such delay.
Without limiting the generality of the prior
paragraph, you must promptly after obtaining possession of the
site for the Restaurant: (i) retain the services of one of our
designated architects; and (ii) retain the services of a general
contractor and audio/visual equipment providers and installers,
each of whom must have successfully gone through our application
process or otherwise been approved by us in writing (although if
this Agreement is for your first BUFFALO WILD WINGS
® restaurant or if you or any of your
affiliates have failed to timely open any other BUFFALO
WILD WINGS ® restaurant in accordance with
the terms of any franchise agreement with us, you must use one
of our designated general contractors); (iii) have prepared and
submitted for our approval a site survey and basic architectural
plans and specifications (not for construction) consistent with
our general atmosphere, image, color scheme and ambience
requirements as set forth from time to time in the manuals for a
BUFFALO WILD WINGS ® restaurant
(including requirements for dimensions, exterior design,
materials, interior design and layout, equipment, fixtures,
furniture, signs and decorating); (iv) purchase or lease and
then, in the construction of the Restaurant, use only the
approved building materials, equipment, fixtures, audio visual
equipment, furniture and signs; (v) complete the construction
and/or remodeling, equipment, fixtures, furniture and sign
installation and decorating of the Restaurant in full and strict
compliance with plans and specifications we approve and all
applicable ordinances, building codes and permit requirements
without any unauthorized alterations; (vi) obtain all customary
contractors’ sworn statements and partial and final
waiver; (vii) obtain all necessary permits, licenses and
architectural seals and comply with applicable
legal
7
requirements relating to the building, signs,
equipment and premises, including, but not limited to, the
Americans With Disabilities Act; and (viii) obtain and maintain
all required zoning changes, building, utility, health,
sanitation, liquor and sign permits and licenses and any other
required permits and licenses (if this Agreement is for your
first BUFFALO WILD WINGS ® restaurant
or if in any previous franchise agreement executed between you
or any of your affiliates and us, you or any of your affiliates
have not met your obligations regarding the build out of any
previous BUFFALO WILD WINGS ®
restaurant, you must retain the services of a company
specialized in assisting restaurant operators during the
construction process to assist you in submitting, processing,
monitoring and obtaining in a timely manner all necessary
construction documents, licenses and permits and to advise you
throughout the construction of your Restaurant). It is
your responsibility to comply with the foregoing conditions.
If this is not your first BUFFALO WILD
WINGS ® restaurant and you have opened all
others on a timely basis, you may request that we approve a
general contractor that is not on our current list of approved
suppliers. You, your affiliates or your Principal Owners, or any
person related to, or any entity controlled by your Principal
Owners may not be your general contractor unless you have
requested our approval and we have approved your request.
If you have signed an Area Development Agreement for 8 or
more restaurants, you also may request approval of an architect
that is not on our list of approved suppliers.
Your general contractor may not be your
audio/visual equipment provider and installer, unless your
general contractor shows expertise in this field to our
satisfaction and is approved by us prior to performing any work.
Any change to the building plans or any
replacement, reconstruction, addition or modification in the
building, interior or exterior decor or image, equipment or
signage of the Restaurant to be made after our consent is
granted for initial plans, whether at the request of you or of
us, must be made in accordance with specifications that have
received our prior written consent. You may not commence
such replacement, reconstruction, addition or modification until
you have received our written consent to your revised plans.
You must begin substantial construction (site
work, utility infrastructure and building erection) of the
Restaurant at least 150 days before the deadline to open the
Restaurant 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.
We may require you to provide us weekly development and
construction progress reports in the form we designate from the
date you begin development until the date you open the
Restaurant. For instance, you may be required to contact
the designated project manager and provide construction manual
checklists and digital photos during construction on a weekly
basis. In addition, on or before the deadlines to start
construction you must submit to us executed copies of any loan
documents and 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 the Restaurant
open and in operation. In the event that you fail to begin
construction or to secure financing pursuant to this paragraph,
we will have the right to terminate this Agreement without
opportunity to cure pursuant to subparagraph 13.B.2.
C.
Maintenance . The building,
equipment, fixtures, furnishings, signage and trade dress
(including the interior and exterior appearance) employed in the
operation of your Restaurant must be maintained and refreshed in
accordance with our requirements established periodically and
any of our reasonable schedules prepared based upon periodic
evaluations of the premises by our representatives. Within
a period of 30-45 days (as we determine depending on the work
needed) after the receipt of any particular report prepared
following such an evaluation, you must effect the items of
maintenance we designate, including the repair of defective
items and/or the replacement of irreparable or obsolete
items
8
of equipment and interior signage. If,
however, any condition presents a threat to customers or public
health or safety, you must effect the items of maintenance
immediately, as further described in subparagraph 6.G. The
items of maintenance generally result from common wear and tear
over a period of time, accidents or lack of care. Examples
include, but are not limited to, repairing or replacing HVAC
equipment, plumbing and electrical systems that are not
functioning properly; repairing a leaking roof; repairing or
replacing broken operational and audio-visual equipment;
refreshing general appearance items such as paint (interior and
exterior) and landscaping; replacing worn carpet, furniture and
other furnishings; and conducting routine maintenance of areas
that affect the appearance of the Restaurant and goodwill of the
Trademarks such as the appearance of the outdoor signage, the
parking lot and dumpster area.
D.
Relocation . If you need to
relocate because of condemnation, destruction, or expiration or
cancellation of your lease for reasons other than your breach,
we will grant you authority to do so at a site acceptable to us
that is within your Designated Area; provided that (i) the new
site has been evaluated by the proprietary site evaluator
software that has been developed by GeoVue, Inc. (or by the
proprietary site evaluation system then being used by us) and
you have paid the $400 evaluation fee, provided, that you must
purchase the rights to have at least 3 sites evaluated unless we
determine your trade area does not require 3 evaluations; (ii)
we have consented in writing to the new site; (iii) the new
Restaurant is under construction within 90 days after you
discontinue operation of the Restaurant at the Authorized
Location; and (iv) the new Restaurant is open and operating
within 270 days after construction commences, all in accordance
with our then-current standards. If you voluntarily decide
to relocate the Restaurant, your right to relocate the
Restaurant will be void and your interest in this Agreement will
be voluntarily abandoned, unless you have given us notice of
your intent to relocate not less than 60 days prior to closing
the Restaurant, have procured a site that has been evaluated by
the proprietary site evaluator software that has been developed
by GeoVue, Inc. (or by the proprietary site evaluation system
then being used by us) and accepted by us within 60 days after
closing the prior Restaurant, have opened the new Restaurant for
business within 180 days of such closure and complied with any
other conditions that we reasonably require. You must pay
the costs of any relocation, and we reserve the right to charge
you for any reasonable costs that we incur.
In the event your Restaurant is destroyed or
damaged and you repair the Restaurant at the Authorized Location
(rather than relocate the Restaurant), you must repair and
reopen the Restaurant at the Authorized Location in accordance
with our then-current standards for the destroyed or damaged
area within 270 days of the date of occurrence of the
destruction or damage.
You do not have the right to relocate in the
event you lose the right to occupy the Restaurant premises
because of the cancellation of your lease due to your breach.
The termination or cancellation of your lease due to your
breach is grounds for immediate termination under subparagraph
13.B.2.
E.
Modernization or Remodel . You
agree that you will make such capital improvement or
modifications necessary to modernize, redecorate and upgrade
your Restaurant to reflect the current image of new
BUFFALO WILD WINGS ® restaurants as
reasonably requested by Franchisor during the term of this
Agreement (taking into consideration the cost of the
modernization, the life expectancy of the equipment and the
then-remaining term of this Agreement). We will not impose
any new standards or specifications requiring structural changes
or remodeling of your Restaurant more frequently than once every
seven (7) years.
You must complete to our satisfaction any
changes we require within a reasonable time, not to exceed 12
months from the date you are notified of any required changes,
except for outdoor signage as set forth in subparagraph 5.F.
9
You acknowledge and agree that the requirements
of this subparagraph 5.E are both reasonable and necessary to
ensure continued public acceptance and patronage of
BUFFALO WILD WINGS ® restaurants and
to avoid deterioration or obsolescence in connection with the
operation of the Restaurant. If you fail to make any
improvement as required by this subparagraph or perform the
maintenance described in subparagraph 5.C, we may, in addition
to our other rights in this Agreement, effect such improvement
or maintenance and you must reimburse us for the costs we
incur.
Except for transfers under Subparagraph 11.G,
every other transfer of any interest in this Agreement or your
business governed by Paragraph 11 or any renewal covered by
Paragraph 4 is expressly conditioned upon your compliance with
these requirements at the time of transfer or renewal.
F.
Signage . The outdoor signage at
your Restaurant must comply with our then-current
specifications, which we may modify and change from time to time
due to modifications to the System, including changes to the
Trademarks. You must make such changes to the outdoor
signage as we require. We will pay for 1/3 of the cost to
replace your outdoor signage if: (i) your Restaurant’s
sign is less than 2 years old and (ii) we require that you
replace the sign within one year from the date of notification.
In any case, your failure to replace the signage within 15
months from the date of notification will constitute a default
of this Agreement under Paragraph 13. Any upgrades to the
type or size of your outdoor signage will be at your expense.
PRODUCTS AND OPERATIONS STANDARDS AND
REQUIREMENTS
6.
You must implement and abide by our requirements
and recommendations directed to enhancing substantial System
uniformity. The following provisions control with respect to
products and operations:
A.
Authorized Menu . Your business
must be confined to the preparation and sale of only such Menu
Items and other food and beverage products as we designate and
approve in writing from time to time for sale by your
Restaurant. You must offer for sale from the Restaurant
all items and only those items listed as Menu Items and other
approved food and beverage products. You must offer the
full Authorized Menu during all hours of operation, although you
may offer a limited selection of food Menu Items during the last
hour if your Restaurant is open past midnight and in excess of
12 hours during a day. We have the right to make
modifications to these items from time to time, and you agree to
comply with any modifications. You may not offer or sell
any other product or service at the Authorized Location without
our prior written consent.
B.
Authorized Products and Ingredients .
You must use in the operation of the Restaurant and in the
preparation of Menu Items and other food and beverage products
only the proprietary sauces and mixes and other proprietary and
non-proprietary ingredients, recipes, formulas, cooking
techniques and processes and supplies, and must prepare and
serve Menu Items and products in such portions, sizes,
appearance, taste and packaging, all as we specify in our most
current product preparation materials or otherwise in writing.
We will supply to you a copy of the current product
preparation materials prior to opening the Restaurant. You
acknowledge and agree that we may change these periodically and
that you are obligated to conform to the requirements. All
supplies, including containers, cups, plates, wrapping, eating
utensils, and napkins, and all other customer service materials
of all descriptions and types must meet our standards of
uniformity and quality. You acknowledge that the
Restaurant must at all times maintain an inventory of
ingredients, food and beverage products and other products,
material and supplies that will permit operation of the
Restaurant at maximum capacity.
C.
Approved Supplies and Suppliers .
We will furnish to you from time to time lists of approved
supplies or approved suppliers. You must only use approved
products, services, inventory, equipment, fixtures, furnishings,
signs, advertising materials, trademarked items and novelties,
and other
10
items or services (collectively, “approved
supplies”) in connection with the design, construction and
operation of the Restaurant as set forth in the approved
supplies and approved suppliers lists, as we may amend from time
to time. Although we do not do so for every item, we have
the right to approve the manufacturer, distributor and/or
supplier of approved supplies and in some instances, require
that you use designated sources or suppliers. Along with a
number of other approval criteria, to be an approved supplier,
the supplier must have the ability to provide the product and/or
service, on a national basis, to at least 80% of the then
existing Restaurants. You acknowledge and agree that
certain approved supplies may only be available from one source,
and we or our affiliates may be that source. All
inventory, products, materials and other items and supplies used
in the operation of the Restaurant that are not included in the
approved supplies or approved suppliers lists must conform to
the specifications and standards we establish from time to time.
ALTHOUGH APPROVED OR DESIGNATED BY US, WE AND OUR
AFFILIATES MAKE NO WARRANTY AND EXPRESSLY DISCLAIM ALL
WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY AND FITNESS
FOR ANY PARTICULAR PURPOSE, WITH RESPECT TO SERVICES, PRODUCTS,
EQUIPMENT (INCLUDING, WITHOUT LIMITATION, ANY REQUIRED COMPUTER
SYSTEMS), SUPPLIES, FIXTURES, FURNISHINGS OR OTHER APPROVED
ITEMS. IN ADDITION, WE DISCLAIM ANY LIABILITY ARISING OUT
OF OR IN CONNECTION WITH THE SERVICES RENDERED OR PRODUCTS
FURNISHED BY ANY SUPPLIER APPROVED OR DESIGNATED BY US.
OUR APPROVAL OR CONSENT TO ANY SERVICES, GOODS, SUPPLIERS,
OR ANY OTHER INDIVIDUAL, ENTITY OR ANY ITEM SHALL NOT CREATE ANY
LIABILITY TO US.
D.
Computer System . You must purchase
and use any computer system that we develop or select for the
Restaurant, including all future updates, supplements and
modifications (the “Computer System”). The
Computer System may include all hardware and software used in
the operation of the Restaurant, including electronic
point-of-sale cash registers and back office programs used to
record, analyze and report sales, labor, inventory and tax
information. The computer software package developed for
use in the Restaurant may include proprietary software.
You may be required to license the proprietary software
from us, an affiliate or a third party and you also may be
required to pay a software licensing or user fee in connection
with your use of the proprietary software. All right,
title and interest in the software will remain with the licensor
of the software. The computer hardware component of the
Computer System must conform to specifications we develop.
We reserve the right to designate a single source from
whom you must purchase the Computer System. You
acknowledge and agree that we will have full and complete access
to information and data entered and produced by the Computer
System. You must, at all times, have at the Authorized
Location internet access with a form of high speed connection as
we require and you must maintain: (i) an email account for our
direct correspondence with the Control Person; and (ii) a
separate email account for the Restaurant.
E.
Serving and Promotional Items . All
sales promotion material, customer goodwill items, cartons,
containers, wrappers and paper goods, eating and serving
utensils and other items, and customer convenience items used in
the sales promotion, sale and distribution of products covered
by this Agreement are subject to our approval and must, where
practicable, contain one or more of the Trademarks. We may
require you to carry and offer for sale in the Restaurant a
representative supply of approved trademarked clothing and other
novelty items, including special promotional items that we
develop and market from time to time.
F.
Health and Sanitation . Your
Restaurant must be operated and maintained at all times in
compliance with any and all applicable health and sanitary
standards prescribed by governmental authority. You also
must comply with any standards that we prescribe. In
addition to complying with such standards, if the Restaurant is
subject to any sanitary or health inspection by any governmental
authorities under which it may be rated in one or more than one
classification, it must be maintained and operated so as to be
rated in the highest available health and sanitary
classification with respect to each governmental agency
inspecting the same. In the event you fail to be rated in
the highest classification
11
or receive any notice that you are not in
compliance with all applicable health and sanitary standards,
you must immediately notify us of such failure or
noncompliance.
G.
Evaluations . We or our authorized
representative have the right to enter your Restaurant at all
reasonable times during the business day for the purpose of
making periodic evaluations and to ascertain if the provisions
of this Agreement are being observed by you, to inspect and
evaluate your building, land and equipment, and to test, sample,
inspect and evaluate your supplies, ingredients and products, as
well as the storage, preparation and formulation and the
conditions of sanitation and cleanliness in the storage,
production, handling and serving. If we determine that any
condition in the Restaurant presents a threat to customers or
public health or safety, we may take whatever measures we deem
necessary, including requiring you to immediately close the
Restaurant until the situation is remedied to our satisfaction.
Our inspections and evaluations may include a
“mystery shopper” program from time to time
throughout the term of this Agreement. We hire various
vendors who send the “mystery shoppers” into the
BUFFALO WILD WINGS ® restaurants.
If you fail an evaluation by us or by a mystery shopper or
if we receive a specific customer complaint, you must pay for
the mystery shopper(s) we send to your Restaurant (until the
issue is resolved to our satisfaction). The current fee
charged by the vendors is approximately $100 fee per visit,
which you must pay directly to the vendor. The fee per
visit includes the reimbursement of the tab paid by the mystery
shopper for the items consumed at your Restaurant and,
therefore, the actual fee for each visit will
vary.
H.
Period of Operation . Subject to
any contrary requirements of local law, your Restaurant must be
opened to the public and operated with the full Authorized Menu
at least 12 hours each day of the year, although you have the
option to close your Restaurant, with prior notification to us,
5 days per year, although never 2 consecutive days (with the
exception of Christmas Eve and Christmas Day). Any
variance from this provision must be authorized by us in
writing. You acknowledge and agree that if your Restaurant
is closed for a period of 2 consecutive days or 5 or more days
in any 12-month period without our prior written consent, such
closure constitutes your voluntary abandonment of the franchise
and business and we have the right, in addition to other
remedies provided for herein, to terminate this Agreement.
Acts of force majeure, as defined in subparagraph 16.M,
preventing you temporarily from complying with the foregoing,
will suspend compliance for the duration of such
interference.
I.
Operating Procedures . You must
adopt and use as your continuing operational routine the
required standards, service style, procedures, techniques and
management systems described in our manuals or other written
materials relating to product preparation, menu, storage,
uniforms, financial management, equipment, facility and
sanitation. We will revise the manuals and these
standards, procedures, techniques and management systems
periodically to meet changing conditions of retail operation in
the best interest of restaurants operating under the Trademarks.
Any required standards exist to protect our interests in
the System and the Trademarks and not for the purpose of
establishing any control or duty to take control over those
matters that are reserved to you. You must use your best
efforts to promote and increase the sales and service of Menu
Items and to effect the widest and best possible distribution
throughout the Designated Area.
You acknowledge having received one copy of the
manuals on loan from us for the term of this Agreement.
You acknowledge and agree that the manuals and other
system communications may only be available on the internet or
other online or computer communications. The manuals at all
times are our sole property. You must at all times treat
the manuals, and the information they contain, as secret and
confidential, and must use all reasonable efforts to maintain
such information as secret and confidential. We may from
time to time revise the contents of the manuals and you
expressly agree to comply with each new or changed requirement.
You must at all times ensure that your copy of the manuals
are kept current and up to date, and in the event of any dispute
as to the contents of said manuals, the terms of the master copy
of the manuals that we maintain are controlling.
12
J.
Confidential Information . You, the
Principal Owners, the Unit General Manager, your guarantors,
officers, directors, members, managers, partners, employees or
agents, or any other individual or entity related to, or
controlled by, you may not, during the term of this Agreement or
thereafter, disclose, copy, reproduce, sell or use any such
information in any other business or in any manner not
specifically authorized or approved in advance in writing by us
any Confidential Information. For purposes of this
Agreement, “Confidential Information” means the
whole or any portion of know-how, knowledge, methods,
specifications, processes, procedures and/or improvements
regarding the business that is valuable and secret in the sense
that it is not generally known to our competitors and any
proprietary information contained in the manuals or otherwise
communicated to you in writing, verbally or through the internet
or other online or computer communications, and any other
knowledge or know-how concerning the methods of operation of the
Restaurant, as well as the content of this Agreement and any
other document executed in connection with this Agreement.
Any and all Confidential Information, including, without
limitation, proprietary ingredients, sauces and mixes, secret
formulas and recipes, methods, procedures, suggested pricing,
specifications, processes, materials, techniques and other data,
may not be used for any purpose other than operating the
Restaurant. We may require that you obtain nondisclosure
and confidentiality agreements in a form satisfactory to us from
any persons owning a minority interest in the franchisee, the
Principal Owners, the Unit General Manager and other key
employees. You must provide executed copies of these
agreements to us upon our request. Notwithstanding the
foregoing, you are authorized to disclose the terms of this
Agreement to any lender providing you financing for the
Restaurant as well as to your landlord.
K.
Vending Services . If you install
or maintain on the premises any newspaper racks, video games,
jukeboxes, gum machines, games, rides, vending machines, or
other similar devices that do not meet with our approval, you
must remove them within three days from receiving written notice
from us. Pool tables, cigarette vending machines, gambling
and gaming machines or games of chance are not allowed.
Any income from vending services in the Restaurant or on
its premises, regardless of which person or entity collects the
money, and regardless of whether we authorized you to install
them, must be included in Gross Sales for purposes of your
Royalty Fee and Advertising Fee. Upon our written
approval, the money derived from services provided by charitable
organizations or services that are for customer convenience,
such as pay phones or cash machines, will not be included in
Gross Sales.
L.
Catering and Delivery Services . If
you want to offer catering or delivery service to customers, you
must obtain our prior written approval, which we will not
withhold unreasonably, although we reserve the right to require
you to offer catering service to customers located within the
Designated Area. Any catering or delivery services must
meet our written standards. You also must charge the same
price for products offered by the Restaurant whether delivered
or catered by or sold in the Restaurant. Any income from
catering or delivery services must be included in Gross Sales
for purposes of your Royalty Fee and Advertising Fee.
M.
Compliance with Law; Licenses and Permits
. You must at all times maintain your premises and conduct
your Restaurant operations in compliance with all applicable
laws, regulations, codes and ordinances. You must secure
and maintain in force all required licenses, including a liquor
license that permits alcohol sales 7 days a week (full liquor
Monday through Saturday and either full liquor or at least beer
only on Sundays), permits and certificates relating to your
Restaurant. If your Restaurant is open and operating and a
change occurs in applicable state or local law that does not
permit liquor sales on Sundays, it will not be deemed a breach
of this Agreement. In the event your liquor license is
suspended or revoked, in addition to our right to terminate this
Agreement pursuant to subparagraph 13.B, we reserve the right to
charge you the Royalty Fee on the Gross Sales you would have
received on the lost liquor sales during the license suspension.
We will estimate the Gross Sales based on the prior
year’s Gross Sales for the suspension period.
13
You acknowledge that you are an independent
business and responsible for control and management of your
Restaurant, including, but not limited to, the hiring and
discharging of your employees and setting and paying wages and
benefits of your employees. You acknowledge that we have
no power, responsibility or liability in respect to the hiring,
discharging, setting and paying of wages or related matters.
You must immediately notify us in writing of any
claim, litigation or proceeding that arises from or affects the
operation or financial condition of your BUFFALO WILD
WINGS ® business or Restaurant, including
any notices of health code violations or liquor license
violations.
N.
Participation in Internet Web Sites or Other
Online Communications . You must, at your expense,
participate in our BUFFALO WILD WINGS
® web site on the internet, our intranet
system or other online communications as we may require.
For instance, you must submit to us daily reports via our
intranet system, as further described in subparagraph 9.H.
We have the right to determine the content and use of our
web site and intranet system and will establish the rules under
which franchisees may or must participate. You may not
separately register any domain name containing any of the
Trademarks nor participate in any web site that markets goods
and services similar to a BUFFALO WILD WINGS
® restaurant. We retain all rights
relating to our web site and intranet system and may alter or
terminate our web site or intranet system. Your general
conduct on our web site and intranet system or other online
communications and specifically your use of the Trademarks or
any advertising is subject to the provisions of this Agreement.
You acknowledge that certain information related to your
participation in our web site or intranet system may be
considered Confidential Information, including access codes and
identification codes. Your right to participate in our web
site and intranet system, or otherwise use the Trademarks or
System on the internet or other online communications, will
terminate when this Agreement expires or terminates.
O.
System Modifications . You
acknowledge and agree that we have the right to modify, add to
or rescind any requirement, standard or specification that we
prescribe under this Agreement to adapt the System to changing
conditions competitive circumstances, business strategies,
business practices and technological innovations and other
changes as we deem appropriate. You must comply with these
modifications, additions or rescissions at your expense, subject
to the requirements of subparagraph 5.E and any other express
limitations set forth in this Agreement.
P.
Suggested Pricing Policies . We
may, from time to time, make suggestions to you with regard to
your pricing policies. Notwithstanding any suggestions,
you have the sole and exclusive right as to the minimum prices
you charge for the services offered at the Restaurant. We
retain the right to establish maximum prices to be charged by
you for sales promotions, subject to subparagraph 8.F, or
otherwise. Any list or schedule of prices we furnish to
you may, unless otherwise specifically stated as to the maximum
price, be treated as a recommendation only and failure to accept
or implement any such suggestion will not in any way affect the
relationship between you and us.
PERSONNEL AND SUPERVISION STANDARDS
7.
The following provisions and conditions control
with respect to personnel, training and supervision:
A.
Supervision . You must have a
Control Person and a Unit General Manager that meet our
standards and qualifications at all times during the term of
this Agreement. Your Control Person and Unit General
Manager must attend and successfully complete all required
training, as set forth in subparagraphs 7.B – E.
Should any actions (or inactions) of your Control Person
or Unit General Manager cause the individual to fail to meet our
standards and qualifications or should the action (or
14
inaction) bring or tend to bring any of the
Trademarks into disrepute or impair or tend to impair your or
your Restaurant’s reputation or the goodwill of the
Trademarks, your Restaurant or the BUFFALO WILD WINGS
® system, we have the right to require that
you replace the Control Person or Unit General Manager with an
individual who meets our standards and qualifications within 30
days. Any new Control Person or Unit General Manager must
attend and successfully complete our training requirements
immediately after being appointed by you. The Control
Person and Unit General Manager must ensure that the Restaurant
is operated in accordance with the terms and conditions of this
Agreement, although this in no way relieves you of your
responsibilities to do so. Your Control Person also must
be readily and continuously available to us. In addition
to the Control Person and your Unit General Manager, you must
have at least two assistant managers at all times during the
term of this Agreement.
B.
Training . You must, at your expense,
comply with all of the training requirements we prescribe for
the Restaurant to be developed under this Agreement. The
Control Person, the Unit General Manager and at least two of
your assistant managers must attend training and complete
training to our satisfaction (such that at all times you have 3
trained managers for your Restaurant). All replacement
managers must complete training to our satisfaction, and must
begin training within 6 weeks of the time of hire. The
training requirements may vary depending on our assessment of
the experience of the Control Person, the Unit General Manager
and the assistant managers or other factors specific to the
Restaurant. In the event you are given notice of default
as set forth in subparagraphs 13.A and B and the default
relates, in whole or in part, to your failure to meet any
operational standards, we have the right to require as a
condition of curing the default that you, the Control Person,
the Unit General Manager and the assistant managers, at your
expense, comply with the additional training requirements we
prescribe. Any new Control Person or Unit General Manager
must comply with our training requirements. Under no
circumstances may you permit management of the
Restaurant’s operations by a person who has not
successfully completed to our reasonable satisfaction all
applicable training we require.
C.
Ongoing Training . We may require
the Control Person, the Unit General Manager, the assistant
managers and other key employees of the Restaurant to attend, at
your expense, ongoing training at our training facility, the
Authorized Location or other location we designate. In
addition, we may develop and require you to purchase an
in-restaurant training program.
D.
Staffing . You will employ a
sufficient number of competent and trained employees to ensure
efficient service to your customers. You must require all
your employees to work in clean uniforms approved by us, but
furnished at your cost or the employees’ cost as you may
determine. No employee of yours will be deemed to be an
employee of ours for any purpose whatsoever.
E.
Attendance at Meetings . You and
the Control Person must attend, at your expense, all annual
franchise conventions we may hold or sponsor and all meetings
relating to new products or product preparation procedures, new
operational procedures or programs, training, restaurant
management, sales or sales promotion, or similar topics.
If you or the Control Person are not able to attend a
meeting or convention, you must notify us prior to the meeting
and must have a substitute person acceptable to us attend the
meeting. In addition, your Unit General Manager(s) must
attend the annual training meeting for Unit General Managers
that we may hold or sponsor, at your own expense. We
reserve the right to require that you and/or your Control Person
attend any additional meetings that we deem appropriate under
special circumstances, provided however, that we will not
require more than one additional meeting every year and we will
give you written notice of any such meeting at least 10 days
prior to the meeting.
15
ADVERTISING
8.
You agree to actively promote your Restaurant,
to abide by all of our advertising requirements and to comply
with the following provisions:
A.
Advertising Fund . You must pay to
us an Advertising Fee as set forth in subparagraph 9.C.
All Advertising Fees will be placed in an Advertising Fund
that we own and manage. On behalf of our company and
affiliate owned restaurants (except for “Special
Sites”), we will pay the same Advertising Fee as similarly
situated franchised restaurants (based on age and type of
location) in the same local marketing area. The
Advertising Fund is not a trust or escrow account, and we have
no fiduciary obligation to franchisees with respect to the
Advertising Fund; provided, however, we will make a good faith
effort to expend such fees in a manner that we determine is in
the general best interests of the S ystem. We
have the right to determine the expenditures of the amounts
collected and the methods of marketing, advertising, media
employed and contents, terms and conditions of marketing
campaigns and promotional programs. Because of the methods
used, we are not required to spend a prorated amount on each
restaurant or in each advertising market. We have the
right to make disbursements from the Advertising Fund for
expenses incurred in connection with the cost of formulating,
developing and implementing marketing, advertising and
promotional campaigns. The disbursements may include
payments to us for the expense of administering the Advertising
Fund, including accounting expenses and salaries and benefits
paid to our employees engaged in the advertising functions.
If requested, we will provide you an annual unaudited
statement of the financial condition of the Advertising
Fund.
B.
Required Local Expenditures . You
must use your best efforts to promote and advertise the
Restaurant and participate in any local marketing and
promotional programs we establish from time to time. In
addition to the Advertising Fee, you are required to spend
½% of your Gross Sales on approved local marketing and
promotion. Upon our request, you must provide us with
itemization and proof of marketing and an accounting of the
monies that you have spent for approved local marketing.
If you fail to make the required expenditure, we have the
right to collect and contribute the deficiency to the
Advertising Fund.
C.
Approved Materials . You must use only
such advertising materials (including any print, radio,
television, electronic, or other media forms that may become
available in the future) as we furnish, approve or make
available, and the materials must be used only in a manner that
we prescribe. Furthermore, any promotional activities you
conduct in the Restaurant or on its premises are subject to our
approval. We will not unreasonably withhold approval of
any sales promotion materials or media and activities; provided
that they are current, in good condition, in good taste and
accurately depict the Trademarks. Any point-of-sale
posters or other promotional materials used by you must be
current and in good condition. We may make available at a
reasonable cost to you annually or at other reasonable
intervals, a sales promotion kit containing new (or replacement)
point-of-sale and other promotional materials.
D.
Advertising Cooperatives . We have
the right to designate local advertising markets and if
designated, you must participate in and contribute to the
cooperative advertising and marketing programs in your
designated local advertising market. If established, you
must contribute a minimum of ½% of Gross Sales to the
local cooperative. This is in addition to the ½% of
Gross Sales you are required to spend on local marketing.
If, however, the cooperative votes to spend a percentage
greater than ½% per location, you must contribute such
amount. Each BUFFALO WILD WINGS
® restaurant, including those
operated by us, our parent company or our affiliates (except
Special Sites) within a designated local advertising area is a
member of the local advertising cooperative and each restaurant
has one vote on all matters requiring a vote. Each
advertising cooperative will be required to adopt governing
bylaws that meet our approval. We will
provide
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each advertising cooperative with a sample form of
bylaws, containing certain terms and conditions that we require,
although the bylaws can not modify the voting structure set forth
in this paragraph. You will be required to contribute to the
cooperative the percentage as designated by a majority vote of the
cooperative members. We reserve the right to administer the
advertising cooperatives’ funds and require payment from its
members via electronic funds transfer. The contribution
amount designated by the cooperative must be on a percentage of
Gross Sales basis and per Restaurant, and must be at least
½%. The members of each cooperative and their elected
officers will be responsible for the administration of the
advertising cooperative. Each advertising cooperative must
engage the services of a professional advertising agency or media
buyer that meets with our approval and has expertise in the
industry and in the particular market. Further, you must
obtain our written approval of all promotional and advertising
materials, creative execution and media schedules prior to their
implementation. Each advertising cooperative will be required
to prepare annual financial statements, which must be made
available to all members of the cooperative and to us upon request.
Also, each advertising cooperative must submit to us its
meeting minutes upon our request. We have the right to
require advertising cooperatives to be formed, changed, dissolved
or merged.
E.
Telephone Directory Listing . You
must place a separate listing, or participate in a joint
listing, in the primary yellow page directory serving the
geographic area in which your Restaurant is located. The
listing must contain such copy and proper use of the Trademarks
as we specify. The cost of the listing must be paid by you
or, in the case of a joint listing, by you and other
participating BUFFALO WILD WINGS ®
restaurants. Your cost to advertise in the
yellow pages as we direct will be included as part of your local
advertising requirements under subparagraph 8.B. We will
not specify an unreasonably expensive listing; we may, however,
require you to advertise in more than one local telephone
directory.
F.
Participation in Certain Programs and
Promotions . You must participate in all required
advertising and promotional programs we establish. If the
promotional program involves alcohol, or any Menu Item that is
listed on the then-current BUFFALO WILD WINGS
® printed menu (including any limited time
offers), we may suggest, but will not require, that you offer
the item at a price lower than the every day menu price.
You must use and honor only system-wide gift cards,
certificates and checks that we designate and you must obtain
all certificates, cards or checks from an approved supplier.
We have developed a gift card program and require that you
sign the Participation Agreement attached as Appendix E.
At the time of termination or expiration, or the transfer
of your rights under this Agreement, you must pay all amounts
owed by you under the Participation Agreement, including those
amounts from purchased, but unredeemed, gift
cards.
G.
New Restaurant Opening Promotion .
You must conduct certain advertising and public relations
activities in connection with the opening of your Restaurant.
We require you to spend, in addition to the required local
advertising contribution described above, $12,500 for such
opening activities, which must be spent some time within 45 days
prior and 45 days following the opening of your Restaurant,
unless otherwise approved by us. In addition, you must
perform opening advertising and promotions as required by this
paragraph every time that you (i) relocate the Restaurant or
(ii) reopen the Restaurant after having it closed for 30 days or
more. Upon our request, you must provide to us proof of
these expenditures. We have the right, but not the
obligation, to collect and administer these funds on your
behalf.
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FEES, REPORTING AND AUDIT RIGHTS
9.
You must pay the fees described below and comply
with the following provisions:
A.
Initial Franchise Fee . You must
pay to us a nonrefundable Initial Franchise Fee of $10,000.
The Initial Franchise Fee, payable in full on the date you
sign this Agreement, is earned upon receipt and is in
consideration for our expenses incurred and services rendered in
granting you the franchise rights.
B.
Royalty Fee . In addition to the
Initial Franchise Fee, during the full term of this Agreement
and in consideration of the rights granted to you, you must pay
to us as a weekly Royalty Fee. The Royalty Fee for the
first half of the initial term of this Agreement shall be an
amount equal to 5% of Gross Sales. The Royalty Fee for the
second half of the initial term of this Agreement shall be an
amount equal to the greater of (i) 5% of Gross Sales or (ii) the
Royalty Fee being charged by us under our form of franchise
agreement being used by us at any time during the second half of
the initial term of the Agreement (or, if no form of franchise
agreement is being used by us on such date, the Royalty Fee
being charged by us under our latest form of franchise
agreement), provided that the Royalty Fee may not be increased
by more than ½% at any time during the initial term of
the Agreement. The amount of the Royalty Fee for any
renewal term shall be that provided in the franchise agreement
executed for such renewal term.
C.
Advertising Fee . You must pay to
us a weekly Advertising Fee in an amount equal to 3% of Gross
Sales. We reserve the right to increase this percentage
upon 60 days written notice to you, provided, however, that we
may not increase the Advertising Fee by more than ½% per
year and that the Advertising Fee will not exceed 4% for the
initial term of this Agreement. These fees are not held by
us in trust and become our property to be spent in accordance
with Paragraph 8 of this Agreement.
D.
Computations and Remittances .
Except for the Initial Franchise Fee, you must compute all
amounts due and owing at the end of each week’s operation
and remittance for the amounts must be made to us on or before
Friday of the following week, accompanied by any reports we may
require under subparagraph 9.H of this Agreement. We
reserve the right to change the reporting day of the week for
any or all amounts. You must certify the computation of
the amounts in the manner and form we specify, and you must
supply to us any supporting or supplementary materials as we
reasonably require to verify the accuracy of remittances.
You waive any and all existing and future claims and
offsets against any amounts due under this Agreement, which
amounts you must pay when due. We have the right to apply
or cause to be applied against amounts due to us or any of our
affiliates any amounts that we or our affiliates may hold from
time to time on your behalf or that we or our affiliates owe to
you. Further, if you are delinquent in the payment of any
amounts owed to us, we have the right to require you to prepay
estimated Royalty Fees and Advertising Fees.
E.
Electronic Transfer of Funds . You
must sign an electronic transfer of funds authorization,
attached as Appendix D, to authorize and direct your bank or
financial institution to transfer electronically, on a weekly
basis, directly to
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