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EXHIBIT 10.88
SEATTLE'S BEST COFFEE
FRANCHISE AGREEMENT
BETWEEN
CINNABON,
INC., SUCCESSOR IN INTEREST TO
SEATTLE'S BEST COFFEE, LLC
AND
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Unit No.: ______
Dev. Agr. No.: ______
Dated: _____________
[ ] Cafe [ ] Kiosk
[ ]Trad. Ven. [ ]Captive Ven.
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SEATTLE'S BEST COFFEE
FRANCHISE AGREEMENT
THIS AGREEMENT (the "Agreement") is made this _______ day of
_________________, 200___, by and between
CINNABON, INC., SUCCESSOR IN INTEREST
TO SEATTLE'S BEST COFFEE, LLC, a Washington
corporation, with offices at Six
Concourse Parkway, Suite 1700, Atlanta,
Georgia, 30328-5352 U.S.A. ("Franchisor"
or "SEATTLE'S BEST COFFEE") and _______ ,
[jointly and severally where more than
one], ("Franchisee").
WITNESSETH:
WHEREAS, Seattle's Best Coffee, LLC has developed and owns a unique
and
distinctive system for the development,
establishment and operation of retail
Cafes ("SBC Cafes") and Kiosks ("SBC
Kiosks") (collectively, "SBC RETAIL UNITS")
specializing in the preparation and sale of
specialty coffee beverages,
proprietary coffee products and other menu
items developed and owned by
Franchisor (the "Seattle's Best Coffee
System", "SBC System" or "System");
WHEREAS, the distinguishing characteristics of the SBC SYSTEM
include,
without limitation, the name "SEATTLE'S
BEST COFFEE"; distinctive interior and
exterior design and layouts, decor, color
schemes, and furnishings; confidential
food formulae and recipes used in the
preparation of food products, formulas and
specifications for preparing specialty
coffee drinks and other coffee and
non-coffee-based products; specialized
menus; standards and specifications for
equipment, equipment layouts, products,
operating procedures, and management
programs, all of which may be changed,
improved, and further developed by
Franchisor from time to time;
WHEREAS, Franchisor identifies the SBC SYSTEM by means of certain
trade
names, service marks, trademarks, logos,
emblems, and other indicia of origin,
including, but not limited to, the marks
"SEATTLE'S BEST COFFEE", "SBC" and such
other trade names, service marks,
trademarks and trade dress as are now, or may
hereafter, be designated by Franchisor for
use in connection with the SBC SYSTEM
(collectively referred to as the
"Proprietary Marks");
WHEREAS, pursuant to a Master License Agreement and First
Amendment
thereto, both dated July 13, 2003, by and
between Cinnabon Inc., SBC and Seattle
Coffee Company, SBC granted a license to
CBI for the use of the SBC System and
proprietary marks in performing its
obligations under this Agreement;
WHEREAS, Franchisor continues to develop, use, and control the use
of
such Proprietary Marks in order to identify
for the public the source of
services and products marketed thereunder
in the SBC SYSTEM and to represent the
System's high standards of quality,
appearance, and service;
WHEREAS, Franchisee wishes to be assisted, trained, and licensed
by
Franchisor as an SBC franchisee and
licensed to use, in connection therewith,
the SBC SYSTEM and to continuously operate
one SBC Retail Unit at the location
specified in Section 1.01 herein (the
"Franchised Location");
WHEREAS, Franchisee understands the importance of the SBC SYSTEM
and
SEATTLE'S BEST COFFEE'S high and uniform
standards of quality, cleanliness,
appearance, and service, and the necessity
of opening and operating SBC RETAIL
UNITS in conformity with the SBC
SYSTEM;
NOW, THEREFORE, the parties hereto agree as follows:
I.
APPOINTMENT
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1.01.
Franchisor grants to Franchisee a franchise to open and
operate an SBC Unit (the "Franchised Unit",
or "Franchised Business") at one
location only, such location to be
described as:
STORE NUMBER:
FRANCHISED
LOCATION:
UNIT FORMAT: [ ] SBC
Cafe
[ ] SBC Kiosk
[ ] Traditional Venue [ ] Captive Venue
upon the terms and conditions herein
contained and subject to the terms and
conditions contained in the development
agreement between Franchisor and
Franchisee, dated _________, (the
"Development Agreement"), which is
incorporated herein by reference; and a
license to use in connection therewith
Franchisor's Proprietary Marks and the SBC
SYSTEM. Franchisee may not operate
the Franchised Unit at any site other than
the Franchised Location.
1.02.
Except as otherwise set forth herein, (a) the franchise
granted to Franchisee under this Agreement
is non-exclusive, and grants to
Franchisee the rights to establish and
operate the Franchised Unit at only the
specific location set forth hereinabove,
(b) no exclusive, protected or other
territorial rights in the contiguous area
or market of such Franchised Unit or
otherwise is hereby granted or to be
inferred and (c) Franchisor and/or its
affiliates have the right to operate and
grant as many other franchises for the
operation of SBC Retail Units, anywhere in
the world, as they shall, in their
sole discretion, elect. In addition to the
foregoing, Franchisor may sell SBC
brand coffee and related coffee products
anywhere, including, but not limited
to, sales on the Internet, by mail order,
or through wholesale distribution
channels, including, but not limited to
independent coffee retailers, department
stores, food marts, restaurants, cafes and
grocery stores, during and after the
term of this Agreement ("Wholesale
Accounts"). Wholesale Accounts of Franchisor
may, in return, sell SBC coffee and related
products under the same or different
trademarks.
1.03.
Nothing herein shall be deemed to be a grant to Franchisee of
any rights as a commercial agent or
distributor of SBC Coffee and/or coffee
products in any jurisdiction. Franchisor
reserves the right, in its sole
discretion, to grant such rights to any
third party, during or after the term of
this Agreement. Franchisee may not sell any
SBC Coffee Products (as defined
herein) and/or any other materials,
supplies, or inventory bearing the
Proprietary Marks anywhere except at the
SBC Retail Unit, without SBC's prior
written consent. Franchisee shall
specifically be prohibited from selling any
such items at wholesale, except as
specifically agreed to, in writing, by
Franchisor. The foregoing restriction shall
not apply to catering events and/or
the offer of samples of SBC coffee products
at or directly in front of the
Franchised Unit.
1.04.
Franchisee acknowledges that, over time, Franchisor has
entered, and will continue to enter, into
franchise agreements with other
franchisees that may contain provisions,
conditions and obligations that differ
from those contained in this Agreement,
including, without limitation, franchise
agreements for the operation of SBC Retail
Units. The existence of different
forms of agreement and the fact that
Franchisor and other franchisees may have
different rights and obligations does not
affect the parties' duty to comply
with the terms of this Agreement.
II.
TERM
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2.01.
Except as otherwise provided in this Agreement, the initial
term of this Franchise Agreement (the
"Term") shall expire on the tenth (10th)
anniversary of the date of commencement of
operation of the Franchised Unit. For
all purposes under this Agreement, the date
of commencement of operation of the
Franchised Unit shall be the date verified
in writing by Franchisor and
delivered to Franchisee in a form
substantially similar to the "Notice" attached
hereto as Exhibit "A". Franchisee agrees
and shall be obligated to operate the
Franchised Unit and perform hereunder for
the full Term of this Agreement.
2.02.
Franchisee may, at its option, renew this franchise for one
(1) additional period of five (5) years,
provided that, at the time of such
renewal:
A.
Franchisee gives Franchisor written notice of such
election to renew not less than six (6) months nor
more than
twelve (12) months prior to the end of the
then-current term. Failure by Franchisee to timely
provide Franchisor the required notice constitutes a
waiver by Franchisee of its option to remain a
franchisee beyond the expiration of the Initial Term
or the first Renewal Term;
B.
Franchisee executes Franchisor's then-current
standard form of franchise agreement, which may
include, without limitation, a higher royalty fee and
a higher advertising contribution, if any, than that
contained in this Agreement; and the term of which
shall be the renewal term as specified in Section
2.02. hereof, but shall contain no further renewal
rights;
C. Franchisee shall
execute a general release and a
covenant not to sue, in a form satisfactory to
Franchisor, of any and all claims against Franchisor
and its subsidiaries and affiliates, and their
respective past and present officers, directors,
shareholders, agents and employees, in their
corporate and individual capacities, including,
without limitation, claims arising under federal,
state and local laws, rules and ordinances, and
claims arising out of, or relating to, this
Agreement, any other agreements between Franchisee
and Franchisor and Franchisee's operation of the
Franchised Unit and/or other SBC Retail Units
operated by Franchisee;
D.
Franchisee is not in default under this Agreement or
any other agreements between Franchisee and
Franchisor (or any parent, subsidiary or affiliate of
Franchisor), and Franchisee has fully and faithfully
performed all of Franchisee's obligations throughout
the term of this Agreement; Franchisee is not in
default beyond the applicable cure period under any
real estate lease, equipment lease or financing
instrument relating to the Franchised Unit;
Franchisee is not in default beyond the applicable
cure period with any vendor or supplier to the
Franchised Unit; and, Franchisee shall not have been
in default beyond the applicable cure period under
this Agreement or any other agreements between
Franchisor and Franchisee more than 3 times during
the period 12 months before the date of Franchisee's
notice and 12 months before the expiration of the
Initial Term;
E.
Franchisee has paid or otherwise satisfied all
monetary obligations owed by Franchisee to Franchisor
and its subsidiaries and affiliates and any
indebtedness of Franchisee which is guaranteed by
Franchisor, and Franchisee has timely paid or
otherwise satisfied these obligations throughout the
term of this Agreement;
F.
Franchisee agrees, at its sole cost and expense, to
reimage, renovate, refurbish and modernize the
Franchised Unit, within the time frame required by
Franchisor, including the building design, parking
lot, landscaping, equipment, signs, interior and
exterior decor items, fixtures, furnishings, trade
dress, color scheme, presentation of trademarks
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and service marks, supplies and other products and
materials to meet Franchisor's then-current
standards, specifications and design criteria for SBC
RETAIL UNITS , as contained in the then-current
franchise agreement, Confidential Operating Standards
Manual (as defined herein), or otherwise in writing,
including, without limitation, such structural
changes, remodeling and redecoration and such
modifications to existing improvement as may be
necessary to do so;
G.
Franchisee shall pay to Franchisor a renewal fee
equal to fifty percent (50%) of Franchisor's standard
initial franchise fee in effect at the date of
renewal.
H.
Franchisee and its employees at the Franchised Unit
shall be in compliance with the then-current SBC
System training requirements.
I.
Franchisee has the right to remain in possession of
the premises of the Franchised Unit, or other
premises acceptable to Franchisor, for the Renewal
Term and all monetary obligations owed to
Franchisee's landlord must be current.
J. As
determined by Franchisor in its sole discretion,
Franchisee has operated the Franchised Unit in
accordance with this Agreement and the SBC System (as
set forth in the Manual or otherwise in writing and
as revised from time to time) and has operated all of
its other SBC Retail Units that are franchised by
Franchisor in accordance with the applicable
franchise agreements.
III.
FEES
3.01. In
consideration of the franchise granted to Franchisee
herein, Franchisee shall pay to the
Franchisor the following:
A. A
franchise fee of ___________THOUSAND DOLLARS
($_________) payable upon execution of this Agreement
by Franchisee, less __________ Dollars ($________),
representing the portion of the Development Fee (as
defined in the Development Agreement), applicable to
the Franchise Fee payable hereunder. Such franchise
fee shall be fully earned by Franchisor upon
execution of this Agreement by Franchisee and is in
addition to any development fees paid to Franchisor
by Franchisee.
B. A
recurring, non-refundable royalty fee of FOUR
PERCENT (4%) of Gross Sales (as defined herein)
during the term of this Agreement, payable weekly, on
the Gross Sales of the preceding week (or on such
other basis as may be
set forth in the Confidential
Operating Standards Manual (as defined herein) or
otherwise agreed to in writing by Franchisor). Upon
thirty (30) days prior written notice, Franchisor may
require Franchisee to authorize Franchisor to make
electronic debits from Franchisee's operating account
as a means of paying the royalty fee.
3.02. In
addition to the payments provided for in Section 3.01.
hereof, Franchisee, recognizing the value
of advertising and the importance of
the standardization of advertising and
promotion to the goodwill and public
image of the System, agrees to pay to the
SEATTLE'S BEST COFFEE national
marketing fund (the "NMF", f/k/a "NCP
Fund") a recurring, non-refundable
contribution ("NMF Contribution", f/k/a
"NCP Fund Contribution") in an amount to
be determined by Franchisor, in its sole
discretion, up to [ ] THREE PERCENT
(3%) [ ] ONE PERCENT (1%) of the Gross
Sales of the Franchised Unit, payable
weekly, for the preceding week (or on such
other basis as may be set forth in
the Confidential Operating Standards Manual
or otherwise agreed to in writing by
Franchisor). Upon thirty (30) days prior
written notice, Franchisor may require
Franchisee to authorize Franchisor to make
electronic
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debits from Franchisee's operating account
as a means of paying the NMF
Contribution. The NMF Contribution shall be
expended by the NMF for national,
regional, and/or local advertising and
promotional materials and market research
for the SBC SYSTEM, under the following
conditions and limitations:
A. The
NMF, all contributions thereto, and any earnings
thereon, shall be used exclusively to pay any and all
costs of maintaining, administering, directing,
producing and preparing market research, advertising,
marketing materials and/or promotional activities for
the SBC SYSTEM. Franchisee shall pay the NMF
Contribution by separate check made payable to the
NMF. All sums paid by the Franchisee to the NMF shall
be maintained in an account separate from other funds
of Franchisor and shall not be used to defray any of
Franchisor's expenses except as provided herein, and
as Franchisor may incur in activities reasonably
related to the administration or direction of the NMF
and advertising and marketing programs for
franchisees and the SBC SYSTEM. The NMF and its
earnings shall not otherwise inure to the benefit of
Franchisor. Franchisor shall maintain a separate
bookkeeping account for the NMF.
B. The
selection of media and locale for media placement
shall be at the sole discretion of the Franchisor.
C. All
reasonable costs incurred by Franchisor or
charged to Franchisor by third parties for market
research and the production and dissemination of
advertising, marketing and promotional materials may
be charged to the NMF.
D.
Franchisor, upon request, shall provide Franchisee
with an annual accounting of receipts and
disbursements of the NMF.
E. It
is anticipated that all contributions to and
earnings of the NMF will be expended for market
research, costs of creating and producing advertising
materials, marketing and/or promotional purposes and
reimbursement to Franchisor of costs directly related
to the management of the NMF (including personnel
costs) during the taxable year in which contributions
and earnings are received. If, however, excess
amounts remain in the NMF at the end of a taxable
year, all expenditures in the following taxable
year(s) shall be made first out of accumulated
earnings from previous years, next out of earnings in
the current year, and finally from contributions.
F. The
NMF is not, and shall not be, an asset of
Franchisor. Although the NMF is intended to be of
perpetual duration, Franchisor maintains the right to
terminate the NMF; provided, however, that the NMF
shall not be terminated until all monies in the NMF
have been expended for the purposes stated herein.
G.
Franchisee understands that such advertising and
marketing is intended to maximize the public's
awareness of SBC Retail Units and the SBC System, and
that Franchisor accordingly undertakes no obligation
to insure that any individual Franchisee benefits
directly or on a pro rata basis from the placement,
if any, of such advertising or marketing in its local
market. Franchisee further acknowledges that its
failure to derive any such benefit, whether directly
or indirectly, shall not be cause for Franchisee's
nonpayment or reduction of the required contributions
to the NMF.
3.03. If
any monetary obligations owed by Franchisee to Franchisor
and its subsidiaries and affiliates are
more than seven (7) days overdue,
Franchisee shall, in addition to such
obligations, pay to Franchisor a sum equal
to one and one-half percent (1-1/2%) of the
overdue balance per month, or the
highest rate permitted by law, whichever is
less, from the date said payment is
due.
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3.04. For
the purposes of this Agreement, the term "Gross Sales"
shall mean all revenues generated by
Franchisee's business conducted upon, from
or with respect to the Franchised Unit,
whether such sales are evidenced by
cash, check, credit, charge, account,
barter or exchange. Gross Sales shall
include, without limitation, monies or
credit received from the sale of food and
merchandise, from tangible property of
every kind and nature, promotional or
otherwise, and for services performed from
or at the Franchised Unit, including
without limitation such off-premises
services as catering and delivery. Gross
Sales shall not include the sale of food or
merchandise for which refunds have
been made in good faith to customers, the
sale of equipment used in the
operation of the Franchised Unit, nor shall
it include sales, meals, use or
excise tax imposed by a governmental
authority directly on sales and collected
from customers; provided that the amount
for such tax is added to the selling
price or absorbed therein, and is actually
paid by Franchisee to such
governmental authority.
3.05. In
addition to the payments otherwise provided for in Section
3.02, above, Franchisee shall expend each
month during the term of this
Franchise Agreement an amount to be
determined by Franchisor, in its sole
discretion, up to [ ] TWO PERCENT (2%) [ ]
ONE PERCENT (1%) of the Gross Sales
of the Franchised Unit for the preceding
week, which sum shall be expended by
Franchisee for local advertising, which
shall be conducted in a dignified manner
and shall conform to such standards and
requirements as Franchisor may specify
(hereinafter the "Local Area Marketing
Expenditure", f/k/a ""Local Advertising
Expenditure"). Franchisee shall not use any
advertising or promotional plans or
materials unless and until Franchisee has
received written approval from
Franchisor, pursuant to the procedures and
terms set forth in Section 10.09.
hereof. Franchisee's Local Area Marketing
Expenditure shall be reduced by an
amount equal to Franchisee's actual
contribution, for the corresponding period,
to a Local Area Marketing Cooperative
established pursuant to Section 10.06. of
this Agreement, if any.
3.06. In
addition to the payments provided for in Sections 3.01,
3.02 and 3.05 hereof, Franchisee shall
expend at least [ ] TEN THOUSAND AND
NO/100 DOLLARS ($10,000.00) [ ] FIVE
THOUSAND AND NO/100 DOLLARS ($5,000.00) for
grand opening advertising of the Franchised
Unit during the first two (2) months
following the opening of the SBC Retail
Unit, which advertising must be
approved, in advance, by Franchisor.
IV.
ACCOUNTING AND RECORDS
4.01.
ACCURATE BOOKS AND RECORDS. During the Term of this Agreement,
Franchisee shall maintain and preserve, for
at least three (3) years from the
dates of their preparation, full, complete
and accurate books, records and
accounts in accordance with generally
accepted accounting principles and in the
form and the manner prescribed by
Franchisor from time-to-time in the
Confidential Operating Standards Manual or
otherwise in writing. These records
shall include, without limitation, cash
register sales tape (including
non-resettable readings), meals, sales and
other tax returns, duplicate deposit
slips and other evidence of Gross Sales and
all other business transactions.
4.02.
ROYALTY REPORTS. Franchisee shall submit to Franchisor, weekly
reports on forms prescribed by Franchisor,
accurately reflecting all Gross Sales
during the preceding week and such other
forms, reports, records, financial
statements or information as Franchisor may
reasonably require in the
Confidential Operating Standards Manual, or
otherwise in writing. Even if
Franchisor requires Franchisee to implement
an electronic cash register system
that transmits Franchisee's Gross Sales to
Franchisor on a periodic basis,
Franchisor may still require Franchisee to
submit written reports.
4.03.
QUARTERLY STATEMENT. Franchisee shall, at its expense, submit
to Franchisor quarterly, within thirty (30)
days following the end of each
quarter during the Term hereof, an
unaudited financial statement with such
detail as Franchisor may reasonably require
(hereinafter, "Quarterly Statement")
together with a certificate executed by
Franchisee stating that such financial
statement is true and accurate. Upon
Franchisor's request, Franchisee shall
submit to Franchisor, with each Quarterly
Statement, copies of any state or
local sales tax returns
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("Sales Tax Returns") filed by Franchisee
for the period included in the
Quarterly Statement. In the event
Franchisee prepares financial statements on
the basis of thirteen (13), four (4) week
periods ("Periods"), the Quarterly
Statements shall be submitted within thirty
(30) days following the end of the
third (3rd), sixth (6th), ninth (9th) and
thirteenth (13th) Periods.
4.04.
ANNUAL FINANCIAL STATEMENTS. Franchisee shall, at its expense,
submit to Franchisor within ninety (90)
days following the end of each calendar
or fiscal year during the Term of this
Agreement, an unaudited financial
statement for the preceding calendar or
fiscal year with such detail and in a
format as Franchisor may reasonably
require, together with a certificate
executed by Franchisee certifying that such
financial statement is true and
accurate (hereinafter, "Annual Financial
Statements") and such other information
in such form as Franchisor may reasonably
require. Upon written request from
Franchisor, the foregoing Annual Financial
Statement shall include both a profit
and loss statement and a balance sheet, and
shall be prepared in accordance with
generally accepted accounting principles.
In the event Franchisee defaults under
this Agreement, Franchisor may require,
upon written notice to Franchisee, that
all Annual Financial Statements submitted
thereafter include a "Review Report"
prepared by an independent Certified Public
Accountant.
4.05.
OTHER REPORTS. Franchisee shall also submit to Franchisor, for
review or auditing, such other forms,
financial statements, reports, records,
information and data as Franchisor may
reasonably designate, in the form and at
the times and places reasonably required by
Franchisor, upon request and as
specified from time-to-time in the
Confidential Operating Standards Manual or
otherwise in writing. If Franchisee has
combined or consolidated financial
information relating to the Franchised Unit
with that of any other business or
businesses, including a business licensed
by Franchisor, Franchisee shall
simultaneously submit to Franchisor, for
review or auditing, the forms, reports,
records and financial statements
(including, but not limited to the Quarterly
Statements and Annual Financial Statements)
which contain the detailed financial
information relating to the Franchised
Unit, separate and apart from the
financial information of such other
businesses. Franchisee hereby authorizes all
of its suppliers and distributors to
release to Franchisor, upon Franchisor's
request, any and all of its books, records,
accounts or other information
relating to goods, products and supplies
sold to Franchisee and/or the
Franchised Unit.
4.06.
EQUIPMENT. Franchisee shall record all sales on cash registers
or other point-of-sale equipment approved,
in writing, by Franchisor
(hereinafter "POS Equipment"). Franchisee
agrees that Franchisor shall have the
free and unfettered right to retrieve any
data and information from Franchisee's
P.O.S. Equipment and computers as
Franchisor, in its sole discretion, deems
appropriate, with the telephonic cost of
the retrieval to be borne by
Franchisor, including electronically
polling the daily sales, menu mix and other
data of the Franchised Unit.
4.07.
FRANCHISOR'S RIGHT OF AUDIT. Franchisor or its designated
agents or auditors shall have the right at
all reasonable times to audit, review
and examine by any means, including
electronically through the use of
telecommunications devices or otherwise, at
its expense, the books, records,
accounts, and tax returns of Franchisee
related to the Franchised Unit. If any
such audit, review or examination reveals
that Gross Sales have been understated
in any report to Franchisor, Franchisee
shall immediately pay to Franchisor the
royalty fee and NCP Fund Contribution due
with respect to the amount understated
upon demand, in addition to interest from
the date such amount was due until
paid, at the rate of one and one-half
percent (1.5%) per month. If any such
understatement exceeds two percent (2%) of
Gross Sales as set forth in the
report, Franchisee shall, in addition, upon
demand, reimburse Franchisor for any
and all costs and expenses connected with
such audit, review or examination
(including, without limitation, reasonable
accounting and attorneys' fees). The
foregoing remedies shall be in addition to
any other rights and remedies
Franchisor may have.
V.
PROPRIETARY MARKS
5.01. It
is understood and agreed that the franchise granted herein
to use Franchisor's Proprietary Marks
applies only to use in connection with the
operation of the Franchised Unit franchised
in this Agreement at the
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location designated in Section I hereof,
and includes only such Proprietary
Marks as are now designated or which may
hereafter be designated, in the
Confidential Operating Standards Manual or
otherwise in writing as a part of the
SBC System (which might or might not be all
of the Proprietary Marks pertaining
to the System owned by the Franchisor), and
does not include any other mark,
name, or indicia of origin of Franchisor
now existing or which may hereafter be
adopted or acquired by Franchisor.
5.02. With
respect to Franchisee's use of the Proprietary Marks
pursuant to this Agreement, Franchisee
acknowledges and agrees that:
A.
Franchisee shall not use the Proprietary Marks as
part of Franchisee's corporate or other business
name;
B.
Franchisee shall not hold out or otherwise use the
Proprietary Marks to perform any activity or incur
any obligation or indebtedness in such manner as
might, in any way, make Franchisor liable therefor,
without Franchisor's prior written consent;
C.
Franchisee shall execute any documents and provide
such other assistance deemed necessary by Franchisor
or its counsel to obtain protection for the
Proprietary Marks or to maintain the continued
validity of such Proprietary Marks; and
D.
Franchisor reserves the right to substitute different
Proprietary Marks for use in identifying the System
and the franchised businesses operating thereunder,
and Franchisee agrees to immediately substitute
Proprietary Marks upon receipt of written notice from
Franchisor.
5.03.
Franchisee expressly acknowledges Franchisor's exclusive right
to use the marks "SEATTLE'S BEST COFFEE"
and "SBC" for restaurant services,
coffee products, and other related food and
beverage products; the building
configuration; and the other Proprietary
Marks of the System. Franchisee agrees
not to represent in any manner that it has
any ownership in the Proprietary
Marks or the right to use the Proprietary
Marks except as provided in this
Agreement. Franchisee further agrees that
its use of the Proprietary Marks shall
not create in its favor any right, title,
or interest in or to the Proprietary
Marks, and that all of such use shall inure
to the benefit of Franchisor.
5.04.
Franchisee acknowledges that the use of the Proprietary Marks
outside the scope of this license, without
Franchisor's prior written consent,
is an infringement of Franchisor's
exclusive right to use the Proprietary Marks,
and during the term of this Agreement and
after the expiration or termination
hereof, Franchisee covenants not to,
directly or indirectly, commit an act of
infringement or contest or aid in
contesting the validity or ownership of
Franchisor's Proprietary Marks, or take any
other action in derogation thereof.
5.05.
Franchisee shall promptly notify Franchisor of any suspected
infringement of, or challenge to, the
validity of the ownership of, or
Franchisor's right to use, the Proprietary
Marks licensed hereunder. Franchisee
acknowledges that Franchisor has the right
to control any administrative
proceeding or litigation involving the
Proprietary Marks. In the event
Franchisor undertakes the defense or
prosecution of any litigation relating to
the Proprietary Marks, Franchisee agrees to
execute any and all documents and to
do such acts and things as may, in the
opinion of counsel for Franchisor, be
necessary to carry out such defense or
prosecution. Except to the extent that
such litigation is the result of
Franchisee's use of the Proprietary Marks in a
manner inconsistent with the terms of this
Agreement, Franchisor agrees to
reimburse Franchisee for its out of pocket
costs in doing such acts and things,
except that Franchisee shall bear the
salary costs of its employees.
5.06.
Franchisee understands and agrees that its license with
respect to the Proprietary Marks is
non-exclusive to the extent that Franchisor
has and retains the right under this
Agreement:
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A. To
grant other licenses for the Proprietary Marks, in
addition to those licenses already granted to
existing franchisees;
B. To
develop and establish other franchise systems for
the same, similar, or different products or services
utilizing proprietary marks not now or hereafter
designated as part of the System licensed by this
Agreement, and to grant licenses thereto, without
providing Franchisee any right therein; and
C. To
develop and establish other systems for the sale,
at wholesale or retail, of similar or different
products utilizing the same or similar Proprietary
Marks, without providing Franchisee any right
therein.
5.07.
Franchisee acknowledges and expressly agrees that any and all
goodwill associated with the System and
identified by the Proprietary Marks used
in connection therewith shall inure
directly and exclusively to the benefit of
Franchisor and is the property of
Franchisor, and that upon the expiration or
termination of this Agreement or any other
agreement, no monetary amount shall
be assigned as attributable to any goodwill
associated with any of Franchisee's
activities in the operation of the
Franchised Unit granted herein, or
Franchisee's use of the Proprietary
Marks.
5.08.
Franchisee understands and acknowledges that each and every
detail of the SBC SYSTEM is important to
Franchisee, Franchisor, and other
franchisees in order to develop and
maintain high and uniform standards of
quality and services, and hence to protect
the reputation and goodwill of SBC
RETAIL UNITS. Accordingly, Franchisee
covenants:
A.
To operate and
advertise the Franchised Unit, at
Franchisee's own expense, under the name "SEATTLE'S
BEST COFFEE," without prefix or suffix;
B. To
adopt and use the Proprietary Marks licensed
hereunder solely in the manner prescribed by
Franchisor;
C. To
observe such reasonable requirements with respect
to trademark registration notices as Franchisor may
from time to time direct in the Confidential
Operating Standards Manual or otherwise in writing.
5.09. In
order to preserve the validity and integrity of the
Proprietary Marks licensed herein and to
assure that Franchisee is properly
employing the same in the operation of the
Franchised Unit, Franchisor or its
agents shall at all reasonable times have
the right to inspect Franchisee's
operations, premises, and Franchised Unit
and make periodic evaluations of the
services provided and the products sold and
used therein. Franchisee shall
cooperate with Franchisor's representatives
in such inspections and render such
assistance to the representatives as may
reasonably be requested.
5.10.
Franchisee shall not hold out or otherwise employ the
Proprietary Marks to perform any activity,
or to incur any obligation or
indebtedness in such a manner as might, in
any way, make Franchisor liable
therefor, without Franchisor's prior
written consent.
VI.
OBLIGATIONS OF CORPORATE OR PARTNERSHIP FRANCHISEE
6.01. If
Franchisee, or any successor to or assignee of Franchisee,
is a corporation, or limited liability
company:
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A.
Franchisee shall furnish to Franchisor, upon
execution or any subsequent transfer of this
Agreement, a copy of the Franchisee's Articles of
Incorporation, Certificate of Incorporation, Bylaws
and a list of shareholders showing the percentage
interest of each, and shall thereafter promptly
furnish Franchisor with a copy of any and all
amendments or modifications thereto;
B.
Franchisee shall promptly furnish Franchisor, on a
regular basis, with certified copies of such
corporate records (or limited liability company
records) material to the Franchised Business as
Franchisor may require from time to time in the
Confidential Operating Standards Manual or otherwise
in writing; and
C.
Franchisee shall maintain stop-transfer instructions
against the transfer, on its records, of any
securities with voting rights, subject to the
restrictions of this Agreement, and each stock
certificate of the corporate Franchisee representing
each share of stock, shall have conspicuously
endorsed upon it the following legend:
"THE TRANSFER OF THIS STOCK IS SUBJECT
TO THE TERMS AND CONDITIONS OF A
SEATTLE'S BEST COFFEE FRANCHISE
AGREEMENT WITH SEATTLE'S BEST COFFEE,
LLC. DATED ___________. REFERENCE IS
MADE TO THE PROVISIONS OF SAID
FRANCHISE AGREEMENT AND TO THE ARTICLES
AND BY-LAWS OF THIS CORPORATION."
6.02. If
the Franchisee, or any successor to or assignee of
Franchisee, is a partnership, limited partnership or limited
liability partnership, Franchisee shall furnish to Franchisor,
upon execution or any subsequent transfer of this Agreement, a
copy of Franchisee's Articles of Partnership, if any, and
Partnership Agreement, and shall thereafter promptly furnish
Franchisor with a copy of any and all amendments or
modifications thereto.
6.03.
Franchisee shall, upon execution of this Agreement, furnish to
Franchisor a completed Statement of Legal
Composition attached as Exhibit C
hereto as to all the parties with an
ownership interest in Franchisee, the
amount of such ownership interests, the
jurisdiction in which Franchisee is
legally incorporated or organized, and
other information specified. Franchisee
shall thereafter furnish to Franchisor an
updated Statement of Legal Composition
promptly when requested by Franchisor.
Franchisee shall promptly advise
Franchisor of any change in such
information. Franchisee warrants, represents,
and covenants to Franchisor that all of the
information furnished in the
completed Statement of Legal Composition is
true and correct as of the date of
this Agreement, and when subsequently
furnished to Franchisor.
VII.
CONFIDENTIAL OPERATING STANDARDS MANUAL.
7.01. In
order to protect the reputation and goodwill of Franchisor
and the SBC SYSTEM and to maintain uniform
standards of operation under
Franchisor's Proprietary Marks, Franchisee
shall conduct the Franchised Business
in accordance with Franchisor's
Confidential Operating Standards Manual
(hereinafter, together with any other
manuals created or approved for use in the
operation of the Franchised Business
granted herein, and all amendments and
updates thereto, the "Manual").
7.02.
Franchisee shall at all times treat the Manual, and the
information contained therein, as
confidential, and shall use all reasonable
efforts to keep such information secret and
confidential. Franchisee shall not,
at any time, without Franchisor's prior
written consent, copy, duplicate,
record, or otherwise make the Manual
available to any unauthorized person or
entity.
7.03. The
Manual shall at all times remain the sole property of
Franchisor.
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7.04. In
order for Franchisee to benefit from new knowledge
information, methods and technology adopted
and used by Franchisor in the
operation of the System, Franchisor may
from time-to-time revise the Manual and
Franchisee agrees to adhere to and abide by
all such revisions.
7.05.
Franchisee agrees at all times to keep its copy of the Manual
current and up-to-date, and in the event of
any dispute as to the contents of
Franchisee's Manual, the terms of the
master copy of the Manual maintained by
Franchisor at Franchisor's home office,
shall be controlling.
7.06. The
Manual is intended to further the purposes of this
Agreement, and is specifically
incorporated, by reference, into this Agreement.
Except as otherwise set forth in this
Agreement, in the event of a conflict
between the terms of this Agreement and the
terms of the Manual, the terms of
this Agreement shall control.
VIII.
TRAINING
8.01.
Franchisee, a partner of Franchisee if Franchisee is a
partnership, or a principal shareholder of
Franchisee if Franchisee is a
corporation (or a principal member of
Franchisee if Franchisee is a limited
liability company), must complete, to
Franchisor's satisfaction, the SEATTLE'S
BEST COFFEE New Franchisee Orientation
Program ("NFOP") prior to opening the
first franchised SBC RETAIL UNIT operated
by Franchisee. NFOP shall consist of
up to three (3) days of workshops and
seminars conducted at a training facility
and designated by Franchisor.
8.02. In
addition to completing the NFOP, Franchisee (or a partner,
principal shareholder, principal member of
Franchisee, or an Operations
Director/District Manager designated by
Franchisee, and at least one designated
management employees of Franchisee (and, in
all instances, a senior management
employee of Franchisee responsible for
daily operations of the Franchised Unit),
must attend and complete, to Franchisor's
satisfaction, the SBC FRANCHISE
ACADEMY PROGRAM ("FAP"), prior to opening
the Franchised Unit. FAP l consists of
up to four (4) weeks of classroom and and
operations training at an SBC Cafe
designated by Franchisor (an "SBC Certified
Training Cafe"). A management
employee of Franchisee that successfully
completes FAP, shall be certified by
Franchisor as an "SBC Certified
Manager".
8.03.
Franchisee shall maintain the number of FAP Certified Managers
designated by the Franchisor in the employ
of the Franchised Unit throughout the
term of this Agreement, which in no event
shall be less than one (1). In the
event that Franchisee or any SBC Certified
Manager ceases active employment at
the Franchised Unit, Franchisee must enroll
a qualified replacement in FAP
within thirty (30) days of cessation of
such individual's employment. The
replacement employee shall attend and
complete the next regularly scheduled FAP
to Franchisor's satisfaction.
8.04. The
cost of conducting the initial NFOP and FAP (instruction
and required materials) shall be borne by
Franchisor. All other expenses during
NFOP and FAP, including meals and lodging,
wages and travel, shall be borne by
Franchisee.
8.05.
Franchisor reserves the right to test any and all SBC
Certified Managers at any time, and may
require such individuals to attend and
complete additional training at a training
facility designated by Franchisor,
and at Franchisee's sole cost and expense,
in the event they fail to achieve a
satisfactory score on such test.
Additionally, Franchisor may make available to
Franchisee or Franchisee's employees, from
time to time, such additional
training programs as Franchisor, in its
sole discretion, may choose to conduct.
Attendance at said training programs may be
mandatory. The cost of conducting
such additional training programs
(instruction and required materials) shall be
borne by Franchisor. All other expenses
during the training period, including
meals and lodging, wages and travel, shall
be borne by the Franchisee.
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IX.
DUTIES OF THE FRANCHISOR
9.01.
Franchisor will make available to Franchisee standard plans
and specifications to be utilized only in
the construction of the Franchised
Unit. No modification to or deviations from
the standard plans and
specifications may be made without the
written consent of Franchisor. Franchisee
shall obtain, at its expense, further
qualified architectural and engineering
services to prepare surveys, site and
foundation plans, and to adapt the
standard plans and specifications to
applicable local or state laws, regulations
or ordinances. Franchisee shall bear the
cost of preparing plans containing
deviations or modifications from the
standard plans.
9.02.
Franchisor shall provide consultation and advice to Franchisee
as Franchisor deems appropriate with regard
to construction or renovation and
operation of the Franchised Unit, building
layout, furnishings, fixtures and
equipment plans and specifications,
employee selection and training, purchasing
and inventory control and those other
matters as Franchisor deems appropriate.
9.03.
Franchisor will make available to Franchisee such continuing
advisory assistance in the operation of the
Franchised Business, in person or by
electronic or written bulletins made
available from time to time, as Franchisor
may deem appropriate.
9.04.
Franchisor, in its sole discretion, may provide opening
assistance to Franchisee at the Franchised
Unit.
9.05.
Franchisor will loan one (1) copy of the Manual to Franchisee
for the duration of this Agreement, which
the Manual contains the standards,
specifications, procedures and techniques
of the SBC System.
9.06.
Franchisor will continue its efforts to maintain high and
uniform standards of quality, cleanliness,
appearance and service at all SBC
Retail Units, to protect and enhance the
reputation of the SBC System and the
demand for the products and services of the
System. Franchisor will establish
uniform criteria for approving suppliers;
make every reasonable effort to
disseminate its standards and
specifications to prospective suppliers of the
Franchisee upon the written request of the
Franchisee, provided that Franchisor
may elect not to make available to
prospective suppliers the standards and
specifications for such food formulae or
equipment designs deemed by Franchisor
in its sole discretion to be confidential;
and may conduct periodic inspections
of the premises and evaluations of the
products used and sold at the Franchised
Unit and in all other SBC Retail Units.
9.07.
Franchisor will provide training to Franchisee as set forth in
Article VIII hereof.
X.
DUTIES OF THE FRANCHISEE
Franchisee understands and acknowledges that every detail of the
System
is important to Franchisor, Franchisee and
other franchisees in order to develop
and maintain high and uniform operating
standards, to increase the demand for
SEATTLE'S BEST COFFEE products and
services, and to protect the reputation and
goodwill of Franchisor. Accordingly,
Franchisee agrees that:
10.01.
Franchisee shall maintain, at all times during the term of
this Agreement, at Franchisee's expense,
the premises of the Franchised Unit and
all fixtures, furnishings, signs, systems
and equipment (hereinafter
"improvements") thereon or therein, in
conformity with Franchisor's high
standards and public image and to make such
additions, alterations, repairs, and
replacements thereto (but no others,
without Franchisor's prior written consent)
as may be required by Franchisor, including
but not limited to the following:
A. To
keep the Franchised Unit in the highest degree of
sanitation and repair, including, without limitation,
such periodic repainting, repairs or replacement of
impaired equipment, and replacement of obsolete
signs, as Franchisor may reasonably direct;
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B. To
meet and maintain the highest governmental
standards and ratings applicable to the operation of
the Franchised Business;
C. At
its sole cost and expense, to complete a full
reimaging, renovation, refurbishment and
modernization of the Franchised Unit, within the time
frame required by Franchisor, including the building
design, parking lot, landscaping, equipment, signs,
interior and exterior decor items, fixtures,
furnishings, trade dress, color scheme, presentation
of trademarks and service marks, supplies and other
products and materials, to meet Franchisor's
then-current standards, specifications and design
criteria for SBC Retail Units, including without
limitation, such structural changes, remodeling and
redecoration and such modifications to existing
improvements as may be necessary to do so
(hereinafter, a "Franchised Unit Renovation").
Franchisee shall not be required to perform a
Franchised Unit Renovation if there are less than
three (3) years remaining on the term of this
Agreement, and/or the lease for the premises occupied
by the Franchised Unit. Nothing herein shall be
deemed to limit Franchisee's other obligations,
during the term of this Agreement, to operate the
Franchised Unit in accordance with Franchisor's
standards and specifications for the SBC System,
including, but not
limited to, the obligations set
forth in this Section X.
10.02.
Franchisee shall operate the Franchised Unit in conformity
with such uniform recipes, methods,
standards, and specifications as Franchisor
may from time to time prescribe in the
Manual or otherwise in writing, to insure
that the highest degree of quality, service
and cleanliness is uniformly
maintained and to refrain from any
deviation therefrom and from otherwise
operating in any manner which reflects
adversely on Franchisor's name and
goodwill or on the Proprietary Marks, and
in connection therewith:
A. To
maintain in sufficient supply, and use at all
times, only such ingredients, products, materials,
supplies, and paper goods as conform to Franchisor's
standards and specifications, and to refrain from
deviating therefrom by using non-conforming items,
without Franchisor's prior written consent;
B. To
sell or offer for sale only proprietary "Seattle's
Best Coffee" brand coffee products and such other
products and menu items that have been expressly
approved for sale in writing by Franchisor, meet
Franchisor's uniform standards of quality and
quantity and as have been prepared in accordance with
Franchisor's methods and techniques for product
preparation; to sell or offer for sale the minimum
menu items specified in the Manual or otherwise in
writing; to refrain from any deviation from
Franchisor's standards and specifications for serving
or selling the menu items, without Franchisor's prior
written consent; and to discontinue selling or
offering for sale such items as Franchisor may, in
its discretion, disapprove in writing at any time;
C. To
use the premises of the Franchised Unit solely for
the purpose of conducting the business franchised
hereunder, and to conduct no other business or
activity thereon, whether for profit or otherwise,
without Franchisor's prior written consent;
D. To
keep the Franchised Unit open and in normal
operation during such business hours as Franchisor
may prescribe in the Manual or otherwise in writing;
E. To
permit Franchisor or its agents, at any time
during ordinary business hours, to remove from the
Franchised Unit samples of any ingredients, products,
materials, supplies, and paper goods used in the
operation of the Franchised Unit, without payment
therefor, in amounts reasonably necessary for testing
by Franchisor or an independent laboratory, to
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determine whether such samples meet Franchisor's
then-current standards and specifications. In
addition to any other remedies it may have under this
Agreement, Franchisor may require Franchisee to bear
the cost of such testing if any such ingredient,
products, materials, supplier or paper goods have
been obtained from a supplier not approved by
Franchisor, or if the sample fails to conform to
Franchisor's specifications;
F. To
purchase, install and construct, at Franchisee's
expense, all improvements furnishings, signs and
equipment specified in the approved standard plans
and specifications, and such other furnishings, signs
or equipment as Franchisor may reasonably direct from
time to time in the Manual or otherwise in writing;
and to refrain from installing or permitting to be
installed on or about the premises of the Franchised
Unit, without Franchisor's written consent, any
improvements, furnishings, signs or equipment not
first approved in writing as meeting Franchisor's
standards and specifications;
G. To
comply with all applicable federal, state and
local laws, regulations and ordinances pertaining to
the operation of the Franchised Business; and
H.
Franchisee shall gran
