EXHIBIT 10.11
BUFFALO WILD WINGS(R) FRANCHISE AGREEMENT
BETWEEN
BUFFALO WILD WINGS INTERNATIONAL, INC.
1600 UTICA AVENUE, SUITE 700
MINNEAPOLIS, MN 55416
AND
AUTHORIZED LOCATION:
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Street
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City
State
Zip Code
EFFECTIVE DATE:
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(To be completed by us)
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BUFFALO WILD WINGS(R) FRANCHISE AGREEMENT
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SECTION
PAGE
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1.
DEFINITIONS..............................................................................................1
2.
GRANT OF
LICENSE.........................................................................................2
3.
TRADEMARK STANDARDS AND
REQUIREMENTS.....................................................................4
4. TERM
AND
RENEWAL.........................................................................................5
5.
FACILITY STANDARDS AND
MAINTENANCE.......................................................................6
6.
PRODUCTS AND OPERATIONS STANDARDS AND
REQUIREMENTS......................................................11
7.
PERSONNEL AND SUPERVISION
STANDARDS.....................................................................15
8.
ADVERTISING.............................................................................................16
9.
FEES, REPORTING AND AUDIT
RIGHTS........................................................................18
10. YOUR OTHER
OBLIGATIONS; NONCOMPETE
COVENANTS............................................................20
11. TRANSFER
OF
FRANCHISE...................................................................................23
12. DISPUTE
RESOLUTION......................................................................................26
13. DEFAULT
AND
TERMINATION.................................................................................27
14. POST-TERM
OBLIGATIONS...................................................................................29
15. GENERAL
PROVISIONS......................................................................................30
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APPENDICES
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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
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BUFFALO WILD WINGS(R) FRANCHISE AGREEMENT
This Franchise
Agreement is made this
____ day of , 2006 between BUFFALO WILD
WINGS INTERNATIONAL,
INC., an Ohio
corporation
with its principal business
located at 1600 Utica Avenue South, Suite 700, Minneapolis, Minnesota 55416
("we" or "us"), and , a whose principal business address is
("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, 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(R) 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
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are entering into this Agreement totally or partially based on
the
financial qualifications, experience, skills or managerial
qualifications of any person or entity who directly or
indirectly
owns less than a 10% interest in the 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, (ii) meets our prior restaurant
or
retail management experience requirements, and (iii) does not
participate in the active operation or management of any
business
other than the Restaurant. The Unit General Manager must be
appointed at least 60 days prior to the Restaurant opening,
fully
trained 20 days prior to the Restaurant opening and is or will
be
identified on the Ownership and Management Addendum attached to
this
Agreement.
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.
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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 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
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cooked or prepared to be served to the end user or customer for
consumption at
the retail location (unless sold at the limited seating facilities
referenced in
subparagraph (i) of the paragraph above). For example, chicken
wings cooked and
served to customers at a grocery store or convenience store would
be a
Prohibited Item, but the sale of frozen or pre-packaged chicken
wings at a
grocery store or convenience store would be a permitted form of
distribution in
the 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, subject to our then-current
Special Sites
Impact Policy, to develop or franchise such locations: (1) military
bases; (2)
public transportation facilities; (3) sports facilities, including
race tracks;
(4) student unions or other similar buildings on college or
university campuses;
(5) amusement and theme parks; and (6) community and special
events.
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.
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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 any of the words
BUFFALO,
WILD or 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 require substantial remodeling due to
a
modernization in trade dress, the expenditure will be
considered
toward the Maximum Modernization Amount described in
subparagraph
5.E. 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:
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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.
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, in
addition, 6 months prior to the end of the initial term, 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 240 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 may renew your license for two renewal
terms
(the first renewal term for 15 years and the second renewal term
for
5 years), provided that with respect to each 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
non
refundable. 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.
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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 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 must provide us a copy of the lease at
least 10 business days prior to the date you would execute the
lease; we reserve the right to, in such 10 days period, review
and
approve or reject the lease. 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 and your
landlord are required to sign the Lease Addendum attached as
Appendix C. We require 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. You must provide us a copy of the executed lease and
Lease
Addendum within 5 days of their execution.
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 a general contractors 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
and
audio/visual equipment provider and/or installers); (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
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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 obtain all necessary permits,
licenses
and architectural seals and comply with applicable legal
requirements relating to the building, signs, equipment and
premises, including, but not limited to, the Americans With
Disabilities Act; and (vii) 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 must pay us a $5,000 processing fee to process
your
request to qualify the general contractor. If you want to use
an
audio/visual equipment provider/installer who is not on our list
of
approved suppliers (whether it is for your first or any
subsequent
restaurant), you must pay us $250 for any audio/visual
equipment
provider/installer that you submit for our qualification. You
also
must pay a bid review fee of $150 and a final inspection fee of
$500
for audio/visual related services (in addition to travel expenses
of
the inspector), regardless of whether you use a newly approved
or
previously approved audio/visual provider and installer. Your
general contractor may not be your audio/visual equipment
provider
and installer. 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, you have paid the $5,000 qualification processing fee,
and
we have approved your request. If you have signed an Area
Development Agreement for 8 or more restaurants, you also may
request approval an architect that is not on our list of
approved
suppliers. The architect will be required to attend a two day
training session at our Minneapolis headquarters, at a cost of
$7,500.
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. You must provide us weekly
development
and construction reports in the form we designate from the date
you
begin development until the date you open the Restaurant. For
instance, you must
contact us weekly and provide checklists and
digital photos during construction. 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
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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
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. Items of maintenance will not be considered items of
modernization or replacement under subparagraph 5.E and,
therefore,
any expenses for maintenance will not be counted towards the
Maximum
Modernization Amount that you are required to spend pursuant to
subparagraph 5.E.
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 240 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 240 days of the date
of
occurrence of the destruction or damage.
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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 Replacement. From time to time as we
require,
you must effect 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 for
similarly situated new BUFFALO WILD WINGS restaurants. The
maximum
cumulative amount (the "Maximum Modernization Amount") that you
will
be required to spend during the initial term of this Agreement
depends on whether your Restaurant is a free standing location
and
is established as follows:
(i) Free Standing Locations (a single use, single
tenant, unattached building or pad site). You will be
required to spend no more than $185,000 during the
initial 10 years of this Agreement and $50,000 during
years 11-15. If we do not require you to spend $185,000
during the first 10 years of the Agreement, we may
require you to spend the remaining amount, in addition
to the $50,000, during years 11-15. If we do not require
you to spend $235,000 during the first 15 years of this
Agreement, we may require you to spend the remaining
amount up to $235,000 during years 16-20.
(ii) Non-Free Standing Locations. You will be required
to spend no more than $155,000 during the initial 10
years of this Agreement and $25,000 during years 11-15.
If we do not require you to spend $155,000 during the
first 10 years of the Agreement, we may require you to
spend the remaining amount, in addition to the $25,000,
during years 11-15. If we do not require you to spend
$180,000 during the first 15 years of this Agreement, we
may require you to spend the remaining amount up to
$180,000 during years 16-20.
Notwithstanding the prior paragraphs, we will not require you
to
make any modernization expenditures during the first three years
of
this Agreement. Thereafter, however, you must complete to our
satisfaction any changes we require within 24 months from the
date
you are notified of any required changes, except for outdoor
signage
as set forth in subparagraph 5.F.
Each and every transfer of any interest in this Agreement or
your
business governed by Paragraph 11 or renewal covered by Paragraph
4
is expressly conditioned upon your compliance with these
requirements at the time of transfer or renewal without regard
to
the Maximum Modernization Amount.
The Maximum Modernization Amount will be adjusted every 5-year
period in accordance with any change in the National Consumer
Price
Index - All Urban Consumers for the recently completed 5-year
period, as described in subparagraph 16.Q. The Maximum
Modernization
Amount does not include any required expenditures for equipment
or
leasehold improvements necessary to prepare new product
offerings.
Furthermore, you must perform general, continued maintenance
and
refreshing of the Restaurant premises whenever necessary as set
forth in subparagraph 5.C and at a cost not included in the
Maximum
Modernization Amount.
You acknowledge and agree that the requirements of this
subparagraph
5.E are both reasonable and necessary to insure 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.
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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. Your costs for the signage will be included in the
Maximum
Modernization Amount under subparagraph 5.E.
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. 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 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
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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").
Any
updates, supplements or modifications are not subject to or part
of
the Maximum Modernization Amount defined in subparagraph 5.E.
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 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
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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. You will be obligated to pay for 3 "mystery
shopper"
visits during the first 3 months after you open your Restaurant.
In
addition, any time you fail an evaluation, by us or by a
mystery
shopper, you must pay the next three mystery shoppers we send
to
your Restaurant. 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
at least 12 hours each day of the year, although you have the
option
to close your Restaurant on Thanksgiving, Christmas Eve,
Christmas
Day and Easter. 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 God, war, strikes,
riots or other force majeure cause 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
insure
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.
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
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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. You may not install or maintain on the
premises
of the Restaurant any newspaper racks, video games, jukeboxes,
gum
machines, games, rides, vending machines, or other similar
devices
without our prior written approval. If you install any such
devices
without our prior written approval, you must remove them within
3
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, permits and certificates
relating to your Restaurant. 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.
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.
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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 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 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 insure 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.
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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 one of your assistant managers must attend
training and complete training to our satisfaction. 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 immediately after being appointed by you.
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 insure 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.
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 System. 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
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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, Approved Materials. 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 1/2% 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. You must use
only
such advertising materials 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 and activities; provided that they are current, in
good
condition, in good taste and accurately depict the Trademarks.
You
must use point-of-sale posters or other promotional materials
that
depict any of the Trademarks only in connection with your sale
of
approved Menu Items at the Restaurant. Any point-of-sale posters
or
other promotional materials used by you must be current and in
good
condition. To that end, we may make available at a reasonable
cost
to you
annually or at other reasonable intervals, and when made
available you must purchase, a sales promotion kit containing
new
point-of-sale and other promotional materials; however, the cost
of
the sales promotion kit may be included from time to time as
determined by us in the Advertising Fee described in
subparagraph
9.C.
C. 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 the 1/2% of Gross Sales you are required to spend on
local marketing and promotion to the local cooperative. If,
however,
the cooperative votes to spend a percentage greater than 1/2%
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 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 1/2%. 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 franchisee
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.
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D. Yellow Pages. You must place a separate listing, or
participate
in a joint listing, in the Yellow Pages of your local telephone
directory. 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.
E. Gift Cards, Certificates and Checks. 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.
F. Grand Opening Promotion. You must conduct certain advertising
and
public relations activities in connection with the opening of
your
Restaurant, as we specify in writing. We require you to spend,
in
addition to the required local advertising contribution
described
above, $12,500 for such grand opening activities. In addition,
you
must perform a grand opening as mandated 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.
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 $___________. 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 1/2% 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 1/2% 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.
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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 the
reports required by 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 our account or
our
affiliates' and to charge to your account all amounts due to us
or
our affiliates. You must maintain a balance in your account
sufficient to allow us and our affiliates to collect the
amounts
owed when due. You are responsible for any penalties, fines or
other
similar expenses associated with the transfer of funds described
in
this subparagraph.
F. Interest Charges; Late Fees. Any and all amounts that you owe
to
us or to our affiliates will bear interest at the rate of 18%
per
annum or the maximum contract rate of interest permitted by
governing law, whichever is less, from and after the date of
accrual. In addition to interest charges on late Royalty Fee
and
Advertising Fee payments, you must pay to us a service charge
of
$150
for each delinquent report or payment that you owe to us under
this Agreement. A payment is delinquent for any of the
following
reasons: (i) we do not receive the payment on or before the
date
due; or (ii) there are insufficient funds in your bank account
to
collect the total payment by a transfer of funds on or after
the
date due. The service charge is not interest or a penalty, it
is
only to compensate us for increased administrative and
management
costs due to late payment.
G. Financial Planning and Management. You must record daily all
sales on a cash register tape or similar device. You must keep
books
and records and submit reports as we periodically require,
including
but not limited to a monthly profit plan, monthly balance sheet
and
monthly statement of profit and loss, records of prices and
special
sales, check registers, purchase records, invoices, sales
summaries
and inventories, sales tax records and returns, payroll
records,
cash disbursement journals and general ledger, all of which
accurately reflect the operations and condition of your
Restaurant
operations. You must compile, keep and submit to us the books,
records and reports on the forms and using the methods of
bookkeeping and accounting as we periodically may prescribe.
The
records that you are required to keep for your Restaurant must
include detailed daily sales, cost of sales, and other relevant
records or information maintained in an electronic media format
and
methodology we approve. You must provide this information to us
according to reporting formats, methodologies and time
schedules
that we establish from time to time. You also must preserve and
retain the books, records and reports for not less than 36
months.
You must allow us electronic and manual access to any and all
records relating to your Restaurant.
H. Reports and Audit. You must submit your Gross Sales daily via
our
intranet system. You must verify the accuracy of the Gross
Sales
figure on Friday of each week for the preceding week. Within 10
days
after the end of each month, you must submit to us a report
with
respect to the preceding calendar month in the form and content
as
we periodically prescribe. The report must include, but not be
limited to, the following information for the preceding month:
(i)
amount of Gross Sales and gross receipts of the Restaurant,
amount
of sales tax and the computation of the Royalty Fee and the
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Advertising Fee; (ii) quantities of products purchased and the
sources from which each were obtained; (iii) if we request,
copies
of your most recent sales tax return, monthly sales summary and
monthly balance sheet and statement of profit and loss, including
a
summary of your costs for utilities, labor, rent and other
material
cost items (iv) if requested by us to verify your Gross Sales,
all
such books and records as we may require under our audit
policies
published from time to time. You also must, at your expense,
submit
to us within 90 days after the end of each fiscal year a
detailed
balance sheet, profit and loss statement and statement of cash
flows
for such fiscal year, prepared on an accrual basis including
all
adjustments necessary for fair presentation of the financial
statements. We may require that the annual financial statements
be
reviewed by a certified public accountant. You must certify all
reports to be true and correct. You acknowledge and agree that
we
have the
right to impose these requirements on you regardless of
whether we impose the same requirement on our other
franchisees.
We or our authorized representative have the right at all times
during the business day to enter the premises where your books
and
records relative to the Restaurant are kept and to evaluate,
copy
and audit such books and records. We also have the right to
request
information from your suppliers and vendors. In the event that
any
such evaluation or audit reveals any understatement of your
Gross
Sales, Royalty Fees or Advertising Fees or a variance of 1.25%
or
more from data reported to us in respect to any other item that
is
material to the computation of fees or to the analysis of the
operation, you must pay for the audit, and in addition to any
other
rights we may have, we have the right to conduct further
periodic
audits and evaluations of your books and records as we
reasonably
deem necessary for up to 3 years thereafter and any further
audits
and evaluations will be at your sole expense, including,
without
limitation, professional fees, travel, and room and board
expenses
directly related thereto. Furthermore, if you intentionally
understate or underreport Gross Sales, Royalty Fees or
Advertising
Fees at any time, or if a subsequent audit or evaluation
conducted
within the 3-year period reveals any understatement of your
Gross
Sales, Royalty Fees or Advertising Fees or a variance of 1.25%
or
more from data reported to us in respect to any other item that
is
material
to the computation of fees or to the analysis of the
operation, in addition to any other remedies provided for in
this
Agreement, at law or in equity, we have the right to terminate
this
Agreement immediately. In order to verify the information that
you
supply, we have the right to reconstruct your sales through the
inventory extension method or any other reasonable method of
analyzing and reconstructing sales. You agree to accept any
such
reconstruction of sales unless you provide evidence in a form
satisfactory to us of your sales within a period of 14 days from
the
date of notice of understatement or variance. You must fully
cooperate with us or our representative in performing these
activities and any expenses incurred by us from your lack of
cooperation shall be reimbursed by you.
We will keep your financial books, records and reports
confidential,
unless the information is requested by tax authorities or used
as
part of a legal proceeding or in a manner as set forth in
subparagraph 11.D.8 or where your information is grouped with
similar information from other restaurants to produce shared
results
like high-low ranges or average gross sales or expenses on a
system-wide or regional basis.
YOUR OTHER OBLIGATIONS; NONCOMPETE COVENANTS
10. You
agree to comply with the following terms and conditions:
A. Payment of Debts. You agree to pay promptly when due: (i)
all
payments, obligations, assessments and taxes due and payable to
us
and our affiliates, vendors, suppliers, lessors, federal, state
or
local governments, or creditors in connection with your
business;
(ii) all liens and encumbrances of every kind and character
created
or placed upon or against any of the property used in
connection
with the Restaurant or business; and (iii) all accounts and
other
indebtedness of every kind incurred by you in the conduct of
the
Restaurant or business. In the event you default in making any
such
payment, we are authorized, but not required, to pay the same
on
your behalf and you agree promptly to reimburse us on demand for
any
such payment.
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B. Indemnification. You hereby waive all claims against us for
damages to property or injuries to persons arising out of the
operation of your Restaurant. You must fully protect, indemnify
and
hold us and our owners, directors, officers, insurers,
successors
and assigns and our affiliates harmless from and against any and
all
claims, demands, damages and liabilities of any nature
whatsoever
arising in any manner, directly or indirectly, out of or in
connection with or incidental to the operation of your
Restaurant
(regardless of cause or any concurrent or contributing fault or
negligence of us or our affiliates) or any breach by you or
your
failure to comply with the terms and conditions of this
Agreement.
We also reserve the right to select our own legal counsel to
represent our interests, and you must reimburse us for all our
costs
and all attorneys' fees immediately upon our request as they
are
incurred.
We hereby waive all claims against you for damages to property
or
injuries to persons arising out of the operation of our company
or
affiliate owned restaurants. We must fully protect, indemnify
and
defend you and your affiliates and hold you and them harmless
from
and against any and all claims, demands, damages and liabilities
of
any nature whatsoever arising in any manner, directly or
indirectly,
out of or in connection with or incidental to the operation of
our
company or affiliate owned restaurants (regardless of cause or
any
concurrent or contributing fault or negligence of you) or any
breach
by us or our failure to comply with the terms and conditions of
this
Agreement.
C. Insurance. You must purchase and maintain in full force and
effect, at your expense and from a company we accept, insurance
that
insures both you and us, our affiliates and any other persons
we
designate by name. The insurance policies must include, at a
minimum: (i) special/causes of loss coverage forms (sometimes
called
"All Risk coverage") on the Restaurant and all fixtures,
equipment,
supplies and other property used in the operation of the
Restaurant,
for full repair and replacement value of the machinery,
equipment
and improvements, including full coverage for loss of income
resulting from damage to the Restaurant without any
co-insurance
clause, except that an appropriate deductible clause is
permitted;
(ii) business interruption insurance covering a minimum 12
months
loss of income, including coverage for our Royalty Fees; (iii)
comprehensive general liability insurance, including product
liability insurance and contractual liability insurance, with
minimum limits of $1,000,000 per occurrence and $2,000,000
aggregate; (iv) liquor liability coverage with minimum limits
of
$1,000,000 per occurrence; (v) "Per Location" aggregate limits
when
multiple restaurant locations are insured under one
comprehensive
general
