FORM OF FRANCHISE AGREEMENT

 

                      

 

 

 

 

 

 

 

 

 

 

 

                                  STANDARD FORM

 

                       APPLEBEE'S NEIGHBORHOOD GRILL & BAR

 

                               FRANCHISE AGREEMENT

 

 

 

 

                       -----------------------------------

                               (Location Address)

 

 

                       -----------------------------------

                                (Franchisee Name)

 

 

                       -----------------------------------

                                     (Date)

 

 

                                      -1-

<PAGE>

 

 

                                TABLE OF CONTENTS

 

RECITALS.................................................................      3

 

    1.   FRANCHISE GRANT AND TERM........................................      4

    2.   UNIFORM STANDARDS...............................................      5

    3.   COMPLIANCE WITH THE SYSTEM......................................      6

    4.   GENERAL SERVICES OF FRANCHISOR..................................      6

    5.   RESTAURANT SYSTEM AND PROCEDURES................................      7

    6.   TRAINING........................................................     10

    7.   RESTAURANT MAINTENANCE..........................................     10

    8.   ADVERTISING.....................................................     11

    9.   FEES............................................................     13

    10.  RECORD KEEPING..................................................     15

    11.  FRANCHISEE ORGANIZATION, AUTHORITY,

         FINANCIAL CONDITION AND SHAREHOLDERS............................     15

    12.  TRANSFER........................................................     18

    13.  CONFIDENTIALITY; RESTRICTIONS...................................     21

    14.  INSPECTIONS.....................................................     23

    15.  RELATIONSHIP OF PARTIES AND INDEMNIFICATION.....................     24

    16.  INSURANCE.......................................................     26

    17.  DEBTS AND TAXES.................................................     28

    18.  TRADE NAMES, SERVICE MARKS AND TRADEMARKS.......................     28

    19.  EXPIRATION AND TERMINATION; OPTION TO

         PURCHASE RESTAURANT; ATTORNEYS' FEES............................     30

    20.  NO WAIVER OF DEFAULT............................................     35

    21.  CONSTRUCTION, SEVERABILITY,

         GOVERNING LAW AND JURISDICTION..................................     35

    22.  INTERFERENCE WITH EMPLOYMENT RELATIONS..........................     36

    23.  LIQUOR LICENSE..................................................     37

    24.  FORCE MAJEURE...................................................     37

    25.  MISCELLANEOUS...................................................     38

    26.  ACKNOWLEDGMENTS.................................................     39

 

 

EXHIBIT 1:    ROYALTY FEE................................................     41

 

APPENDIX A:   STATEMENT OF OWNERSHIP INTERESTS...........................     42

 

APPENDIX B:   REVIEW AND CONSENT WITH

              RESPECT TO TRANSFERS.......................................     43

 

APPENDIX C:   CONFIDENTIALITY AGREEMENT..................................     44

 

                                      -2-

<PAGE>

 

                       APPLEBEE'S NEIGHBORHOOD GRILL & BAR

                               FRANCHISE AGREEMENT

 

This Agreement is made this ________ day of _____________________,  20______, by

and   between   APPLEBEE'S   INTERNATIONAL,   INC.,   a   Delaware   corporation

("FRANCHISOR"),         _____________________________________________,         a

(_______________ corporation, sole proprietorship,  _______________ partnership,

_______________    limited   partnership   [strike   inappropriate    language])

("FRANCHISEE")            and             --------------------------------------

______________________________  (collectively, the "PRINCIPAL SHAREHOLDERS" and,

individually,  a "PRINCIPAL  SHAREHOLDER"  of  Franchisee  if a  corporation  or

general  partner if  Franchisee is a limited  partnership  having as its general

partner                   a                   corporation)                   and

------------------------------------------------------------------------------

("GENERAL PARTNER" of Franchisee if Franchisee is a limited partnership).*

 

    *    (If  Franchisee is not a corporation  or a sole  proprietorship,  or if

Franchisee is a limited liability company,  the parties hereto hereby agree that

an Addendum  shall be attached to this  Agreement  so as properly to reflect the

responsibilities of the partners of any general partnership, the general partner

of any limited partnership and the shareholders of any corporate general partner

of any partnership, or the members of any limited liability company.)

 

 

WITNESSETH:

 

                                    RECITALS

 

    A.   Franchisor  owns the rights to develop  and  operate a unique system of

restaurants which specialize in the sale of high quality, moderately priced food

and  alcoholic  beverages  in an  attractive,  casual  setting,  which  includes

proprietary   rights  in  certain  valuable  trade  names,   service  marks  and

trademarks,  including the service mark Applebee's  Neighborhood Grill & Bar and

variations  of such  mark,  designs,  decor and  color  schemes  for  restaurant

premises,  signs,  equipment,  procedures  and formulae for  preparing  food and

beverage  products,  specifications  for  certain  food and  beverage  products,

inventory  methods,  operating  methods,  financial control  concepts,  training

facilities and teaching techniques ("the System").

 

    B.   Franchisor  established, through its own development and operation, and

through the granting of franchises,  a chain of Applebee's  Neighborhood Grill &

Bar restaurants which are distinctive;  which are similar in appearance,  design

and decor; and which are uniform in operation and product consistency.

 

    C.   The value of Franchisor's trade names,  service marks and trademarks is

based upon: (1) the maintenance of uniform high quality  standards in connection

with the preparation and sale of Franchisor-approved food and beverage products,

(2) the uniform high standards of appearance of the individual  restaurant units

in the System, (3) the use of distinctive  trademarks,  service marks,  building

designs and advertising  signs  representing a uniformly high quality of product

and services,  and (4) the assumption by Franchisor  and its  franchisees of the

obligation  to maintain and enhance the goodwill  and public  acceptance  of the

System (and of Franchisor's trade names, service marks and trademarks) by strict

adherence to the high standards required by Franchisor.

 

                                      -3-

<PAGE>

 

 

    D.   Franchisor, Franchisee and the Principal Shareholders have entered into

a Development  Agreement  dated    __________________,    20____   ("Development

Agreement"),   relating  to  the   development   by   Franchisee  of  Applebee's

Neighborhood Grill & Bar restaurants.

 

    E.   Franchisee desires to use the System in  connection with the  operation

of an  Applebee's  Neighborhood Grill & Bar restaurant  at the location which is

specified in Subsection 1.1 of this Agreement, pursuant to the terms, conditions

and provisions hereinafter set forth.

 

NOW, THEREFORE,  in consideration of the mutual obligations contained herein, it

is hereby agreed as follows:

 

 

1.  FRANCHISE GRANT AND TERM

 

    1.1  Franchisor  grants  Franchisee,  for the term stated below,  the right,

license and privilege:

 

         (a)  to use  the  System incident  to the  operation  of an  Applebee's

    Neighborhood Grill & Bar restaurant at  ____________________________________

    (the "Restaurant");

 

         (b)  to use  the  trade  names,  service  marks  and  trademarks  which

    Franchisor shall from time to time designate as part of the System, but only

    in  connection  with the sale at the  Restaurant  of  those  products  which

    Franchisor has designated and approved; and

 

         (c)  to hold itself out to the public as a Franchisee of Franchisor.

 

    1.2  The term of the  franchise shall commence  as of the Commencement Date,

as hereinafter  defined, and shall end twenty (20) years thereafter, unless this

Agreement is terminated  prior to that date in accordance  with its  provisions.

"Commencement  Date,"  as used  herein,  shall  mean the  date  upon  which  the

Restaurant  opens for business.  The parties agree to affix to this Agreement an

addendum  expressly setting forth the Commencement Date, which, when so affixed,

shall become a part of this Agreement.

 

    1.3  At the  expiration of the term  hereof, Franchisee shall have an option

to  operate  the Restaurant for  four (4)  successive  terms  of  five (5) years

(unless the franchise agreement with respect to that additional term  is  sooner

terminated in accordance with its provisions),  provided that immediately  prior

to each such five (5) year term (a) Franchisee  satisfies the requirements which

Franchisor  then-imposes on its new franchisees,  (b) all other restaurant units

within the System which Franchisee  then-operates  substantially  comply, in the

opinion of Franchisor, with Franchisor's then-current standards, specifications,

requirements and instructions, and (c) Franchisee executes the form of franchise

agreement which Franchisor is then using with respect to new restaurants  within

the System, with the amount of royalty and advertising fees payable at the rates

then-prevailing  under the franchise  agreements  which Franchisor is then using

 

                                      -4-

<PAGE>

 

 

for new  restaurants  within the System,  and Franchisee  pays to Franchisor for

each of said five (5) year periods a franchise fee equal to ten percent (10%) of

the prevailing franchise fee paid by new franchisees at that time. Any franchise

agreement which  Franchisee  executes for such additional term will also contain

options to obtain an assignment of Franchisee's  lease with a third party and/or

to purchase  certain  property or to purchase or lease the  Restaurant  premises

exercisable by Franchisor upon termination  thereof and an option to purchase or

lease the Restaurant  premises  exercisable by Franchisor upon expiration of the

renewal term (subject to any then-existing  renewal rights of Franchisee).  Such

options will  contain  provisions  substantially  similar to the  provisions  of

Franchisor's options described in Subsection 19.4 hereof.  Franchisee shall give

Franchisor  written  notice of its desire to exercise  its option to operate the

Restaurant  for an  additional  term no earlier than twelve (12) months,  and no

later than  seven (7)  months,  prior to  expiration  of the  initial  term.  If

Franchisee gives that notice,  Franchisor,  in its sole  discretion,  reasonably

exercised,  shall  determine  whether  Franchisee  has  satisfied  the foregoing

requirements.  Within  forty-five  (45) days of receiving  the notice  described

above,  Franchisor shall notify  Franchisee in writing whether or not Franchisee

is eligible to exercise the option described in this Subsection.

 

    1.4  During the period from the date of this  Agreement to the expiration or

earlier  termination  of  this  Agreement,  Franchisor  shall  not  establish  a

restaurant unit utilizing the System, or license another franchisee to establish

a restaurant  unit utilizing the System,  at any location within the lesser of a

three (3) mile radius of the  Restaurant or a radius from the  Restaurant  which

includes either a daytime or residential  population of forty thousand  (40,000)

or more  people.  Notwithstanding  the  foregoing,  Franchisor  may  establish a

restaurant  unit or may license a  restaurant  unit to a third party  within the

geographic  area set forth in the  preceding  sentence,  provided  that (i) such

restaurant  is located  within an  airport  (serviced  by one or more  public or

charter carrier), arena, stadium, state or national park, or military fort, post

or base,  (ii) is  located  across an  international  border,  or (iii) does not

utilize the System or utilize the  Applebee's  Neighborhood  Grill & Bar service

mark.

 

    1.5  Franchisee, in consideration of the benefits and privileges provided to

it by this  Agreement,  agrees to operate the Restaurant and perform as required

hereunder for the full term of this Agreement.

 

    1.6  This Agreement is entered into pursuant to and subject to the terms and

conditions which are set forth in the Development Agreement.

 

 

2.  UNIFORM STANDARDS

 

    2.1  The System is a comprehensive  restaurant  system for the  retailing of

certain  uniform and quality food and  beverage  products  (including  alcoholic

beverages),  emphasizing a varied menu of high quality,  moderately  priced food

products  (including  appetizers,   creative  sandwiches,   dinner  entrees  and

desserts),  a  selection  of  alcoholic  and other  beverages,  and  prompt  and

courteous service in a clean,  wholesome,  casual atmosphere.  The foundation of

the System is the establishment and maintenance of a reputation among the public

for the operation of high quality restaurant units. A fundamental requirement of

the System,  this Franchise Agreement and franchises which Franchisor will grant

to others is adherence by all franchisees to Franchisor's standards and policies

providing for the uniform  operation of all restaurant  units within the System,

including,  but not limited to, (a) selling only those products which Franchisor

has designated and approved,  (b) using only  Franchisor's  prescribed  building

layout and  designs,  equipment,  signs,  interior  and  exterior  decor  items,

fixtures and furnishings,  (c) adhering  strictly to Franchisor's  standards and

specifications  relating  to  the  selection,  purchase,  storage,  preparation,

packaging,  service and sale of all food and beverage products being sold at the

Restaurant,  and (d)  satisfying  all of  Franchisor's  prescribed  standards of

quality,  service  and  cleanliness.  Compliance  by all  franchisees  with  the

foregoing  standards and policies in  conjunction  with the use of  Franchisor's

trade names, service marks and trademarks provides the basis for the wide public

acceptance  of  the  System  and  its  valuable  goodwill.  Accordingly,  strict

adherence  by all  franchisees  to all  aspects of the System is required at all

times.

 

                                      -5-

<PAGE>

 

 

    2.2  The  provisions of the Agreement shall be interpreted to give effect to

the intent of the parties  stated in this  Section 2 to assure  that  Franchisee

shall  operate the  Restaurant  in conformity  with the System,  through  strict

adherence to  Franchisor's  standards and policies as they now exist and as they

may be modified from time to time.

 

 

3.  COMPLIANCE WITH THE SYSTEM

 

    Franchisee  acknowledges  that every component of the System is important to

Franchisor, to all franchisees and to the operation of the Restaurant, including

the  requirements  (a) that only those  products  designated and approved by the

Franchisor are sold at the Restaurant,  and (b) that there is uniformity of food

and beverage specifications,  preparation methods, quality, appearance, building

and interior design, color and decor, landscaping,  facilities and service among

all restaurant units in the System. Accordingly,  Franchisee agrees to and shall

comply  with  all  aspects  of the  System  (as it now  exists  and as it may be

modified from time to time).  Franchisee  recognizes and agrees that  Franchisor

may  prohibit  the use of the System and its trade  names,  notwithstanding  the

granting of this Agreement, if Franchisee fails to design,  construct,  equip or

furnish its  Restaurant  in  compliance  with the  specifications  designated by

Franchisor, unless prior written approval has been received from Franchisor.

 

 

4.  GENERAL SERVICES OF FRANCHISOR

 

    4.1  Franchisor  shall advise and consult with  Franchisee  periodically  in

connection with the operation of the Restaurant,  and at other  reasonable times

upon  Franchisee's  request.  Franchisor  will provide to Franchisee such of its

know-how,  new developments,  techniques and improvements in areas of restaurant

design, management,  food and beverage preparation,  sales promotion and service

concepts as may be pertinent to the construction and operation of the Restaurant

under the  System.  Franchisor  may  provide the  foregoing  information  (a) by

sending  representatives  to visit the Restaurant,  (b) by providing  written or

other  material,  (c) at meetings or seminars,  and (d) at training  sessions at

Franchisor's training facility and/or such other locations as may be selected by

Franchisor from time to time. Franchisor also shall make available to Franchisee

all additional  services,  facilities,  rights and privileges  which  Franchisor

makes available from time to time to its franchisees of the System generally.

 

                                      -6-

<PAGE>

 

 

    4.2  For approximately eight (8) days prior to the opening of the Restaurant

and the first six (6) days that the Restaurant is open for business,  Franchisor

shall provide Franchisee,  at Franchisor's expense, with the services of up to a

maximum of six (6) of  Franchisor's  training  personnel  to  facilitate  proper

operation  of the  kitchen,  bar and dining room areas during that period and to

assist in correcting any operational problems which may arise.

 

    4.3  From time to time during the term of this  Agreement,  Franchisor  will

develop and test new menu items. The menu consists of approved national food and

beverage  selections.  Franchisee  shall  comply  with  all menu  changes  which

generally  occur every six (6) months.  The menu may be modified to reflect food

and beverage items peculiar to Franchisee's  local area, subject to Franchisor's

testing and approval.

 

 

5.  RESTAURANT SYSTEM AND PROCEDURES

 

    5.1  Franchisor  shall  furnish  Franchisee  with advice and  assistance  in

managing and operating the Restaurant,  and  Franchisor's  representatives  will

visit  the  Restaurant  periodically.   Franchisor  will  assist  Franchisee  in

coordinating  the  Restaurant's  pre-opening  activities,   and  as  noted  more

particularly  in  Subsection  4.2  hereof,  shall  provide  Franchisee  with the

services of certain of Franchisor's  personnel to facilitate proper operation of

the Restaurant when it opens for business.

 

    5.2  Franchisee   shall   designate  an  employee  who  will  supervise  the

Restaurant,  and devote his or her full time, best efforts and constant personal

attention to the day-to-day operation of the Restaurant (the "General Manager").

Franchisee  also shall  designate an employee who will  supervise the Restaurant

kitchen,  and devote his or her full time,  best efforts and  constant  personal

attention to the day-to-day  operation of the  Restaurant  kitchen (the "Kitchen

Manager").

 

    5.3  Franchisee shall require that the General  Manager, the Kitchen Manager

and each of Franchisee's  employees who serve as Restaurant managers to maintain

his or her principal  personal residence within a usual driving time of not more

than  approximately  one (1) hour from the Restaurant.  Franchisor  reserves the

right to require  that,  as a condition  of his or her  employment,  the General

Manager  must  successfully  complete  Franchisor's   interview  process  and  a

psychological  profile  test in a manner  which  satisfies  a  uniform  standard

established by Franchisor. The test shall be administered by Franchisor, or by a

testing agency designated by Franchisor, at Franchisee's expense.

 

    5.4  Unless   Franchisor  shall  have  given  its  prior  written  approval,

Franchisee  shall keep the  Restaurant  open for business  only during the hours

which are specified by Franchisor in the Franchise  Operations Manual or in such

other  materials  or  manuals  provided  or  made  available  by  Franchisor  to

Franchisee  (collectively  the  "Manuals"),  provided  that  such  hours  do not

conflict with state laws or local  ordinances  relating to the sale of alcoholic

beverages or governing the hours during which restaurant  establishments  may be

open for business. In addition, Franchisee expressly agrees to:

 

         (a)  operate  the  Restaurant  in a  clean,  safe and  orderly  manner,

    providing courteous, first-class service to the public;

 

                                      -7-

<PAGE>

 

 

         (b)  diligently  promote and  make every  reasonable effort to increase

    the business of the Restaurant;

 

         (c)  advertise  the  business  of  the  Restaurant  by  the  use of the

    Franchisor's  trade  names,  service  marks and  trademarks  and such  other

    insignia,   slogans,   emblems,   symbols,  designs  and  other  identifying

    characteristics  as may be  developed  or  established  from time to time by

    Franchisor  and  included  in the  Manuals,  subject to the  limitations  of

    Subsections 8.4 and 8.5 hereof;

 

         (d)  prohibit and, to the best of Franchisee's ability, prevent the use

    of the  Restaurant  for any  immoral  or illegal  purpose,  or for any other

    purpose,   business  activity,  use  of  function  which  is  not  expressly

    authorized hereunder or in the Manuals; and

 

         (e)  comply fully with all applicable laws and  regulations, including,

    but not limited to, those relating to building construction, maintenance and

    safety,  environmental,  fire prevention, food safety, public access and the

    sale of alcoholic beverages.

 

    5.5  Franchisee  hereby acknowledges  receipt  and  loan  of  a  copy of the

Manuals  heretofore or  hereinafter  furnished  to  Franchisee,  and  agrees  to

faithfully,  completely   and continuously perform,  fulfill, observe and follow

all   instructions,  requirements,   standards,   specifications,   systems  and

procedures contained therein, including (a) those relating to the  construction,

design,  decor, building and  equipping of the Restaurant, (b) those relating to

the  selection, purchase, storage,  preparation, packaging,  service and sale of

all products being sold at the Restaurant, (c) those relating to the maintenance

and  repair of Restaurant  building,  grounds,  equipment,  signs,  interior and

exterior  decor  items,  fixtures  and  furnishings,  and  (d) those relating to

employee  uniforms  and dress,  accounting,  bookkeeping,  record retention, and

other  business systems, procedures and operations. The Manuals are incorporated

herein  by  reference  and  hereby  made  part  of  this  Agreement.  Franchisee

acknowledges  and  agrees  that  the  materials  contained  in  the  Manuals are

integral, necessary and material elements of the System.

 

    5.6  Franchisee  understands, acknowledges and agrees that strict conformity

with the System, including the standards,  specifications,  systems, procedures,

requirements and instructions contained in this Agreement and in the Manuals, is

vitally important, not only to the success of Franchisor,  but to the collective

success of all of  Franchisor's  other  franchisees,  by reason of the  benefits

which  Franchisor  and all of its  franchisees  will derive from  uniformity  in

products sold, identity, quality,  appearance,  facilities and service among all

restaurant  units which are part of the System.  Without limiting the generality

of the  foregoing  provisions,  Franchisee  agrees  to  adhere  strictly  to the

requirements in the Manuals  relating (a) to the  construction,  design,  decor,

building and equipping of the Restaurant,  (b) to the maximum  permissible ratio

of sales of alcoholic  beverages to sales of food at the Restaurant,  and (c) to

the  limitations  on the number of video games or similar  devices  which may be

placed on the  Restaurant  premises.  Any  failure  to adhere to the  standards,

specifications,   systems,   requirements  or  instructions  contained  in  this

Agreement  or in  the  Manuals  shall  constitute  a  material  breach  of  this

Agreement.

 

                                      -8-

<PAGE>

 

 

    5.7  Franchisor  shall have the right, at any time and from time to time, in

the good faith exercise of its reasonable business judgment, consistent with the

overall  best  interests  of the  System  generally,  having  due regard for the

financial  burden which may be placed upon its  franchisees,  to revise,  amend,

delete from and add to the System and the  material  contained  in the  Manuals.

Franchisee  expressly  agrees to  comply  with all such  revisions,  amendments,

deletions and additions.

 

    5.8  Franchisee shall offer for sale from the Restaurant,  at all times when

the  Restaurant  is open for  business,  only the products  which are  expressly

designated in the Manuals, except, as noted more particularly in Subsection 4.3,

to the extent that Franchisee has obtained Franchisor's prior written consent to

a modification  of that  requirement.  No product shall be offered or sold at or

from the Restaurant  under, or in connection with, any trademark or service mark

other  than  Franchisor's   designated  trademarks  and  service  marks  without

Franchisor's prior written consent.

 

    5.9  Franchisee  shall  obtain all food and beverage  products,  equipments,

signs, interior and exterior decor items, fixtures,  furnishings,  supplies, and

other  products  and  materials  required  for the  operation  of or sold at the

Restaurant  solely from suppliers  (including  manufacturers,  distributors  and

other  sources)  who   demonstrate,   to  Franchisor's   continuing   reasonable

satisfaction,  the  ability  to meet  Franchisor's  then-current  standards  and

specifications  for such  items;  who  possess  adequate  quality  controls  and

capacity to supply  Franchisee's needs promptly and reliably;  and who have been

approved in writing by Franchisor  and not thereafter  disapproved.  The Manuals

contain a list of approved  suppliers.  If  Franchisee  desires to purchase  any

items from an  unapproved  supplier,  Franchisee  shall  submit to  Franchisor a

written  request for such approval,  which  approval  shall not be  unreasonably

withheld,  or shall request the supplier itself to do so.  Franchisor shall have

the right to inspect the supplier's facilities, and to require that samples from

the supplier be delivered, at Franchisor's option, either to Franchisor or to an

independent,   certified  laboratory   designated  by  Franchisor  for  testing.

Franchisee  or the  supplier  shall pay the costs of any such  test.  Franchisor

shall notify  Franchisee in writing within forty-five (45) days of receiving any

such request  whether it disapproves  the supplier.  Failure by Franchisor to so

notify Franchisee within that period shall be deemed to constitute  Franchisor's

approval of such  supplier.  Franchisor  reserves the right,  at its option,  to

reinspect the  facilities and retest  products of any such approved  supplier at

any time and to revoke its approval upon the  supplier's  failure to continue to

meet any of Franchisor's criteria.  Notwithstanding the foregoing,  any supplier

of goods having any trademark, trade name, service mark, logo or symbol owned by

Franchisor  shall not be  approved  to supply  Franchisee  such goods until such

supplier  has  entered  a  written  agreement  with  Franchisor   regarding  the

production, use and sale of such goods.

 

    5.10 No food or beverage  product,  interior or exterior  decor item,  sign,

item of  equipment,  fixtures,  furnishings  or  supplies,  or other  product or

material  required  for the  operation  of the  Restaurant,  which  bears any of

Franchisor's trade names, service marks or trademarks,  shall be used or sold in

or upon the Restaurant  premises unless the same shall have been first submitted

to and approved in writing by Franchisor.

 

    5.11 The Manuals and all related material furnished to Franchisee  hereunder

are and shall  remain  the  property  of  Franchisor,  and must be  returned  to

Franchisor, along with any copies made thereof, immediately upon request or upon

the expiration or earlier termination of this Agreement.

 

                                      -9-

<PAGE>

 

6.  TRAINING

 

    6.1  Franchisor shall make its operations  training course  available to the

General Manager,  the Kitchen Manager,  and Franchisee's  Assistant Managers and

other Restaurant managers.

 

    6.2  Before the Restaurant opens for business, and thereafter as replacement

personnel are employed by Franchisee,  the General Manager,  the Kitchen Manager

and  each  Assistant  Manager  shall  attend  Franchisor's  operations  training

facility for such period of time as Franchisor shall deem reasonably  necessary,

and  shall  successfully   complete  that  course  to  Franchisor's   reasonable

satisfaction.  If the General Manager,  Kitchen Manager or an Assistant  Manager

fails  to  successfully  complete   Franchisor's   operations  training  course,

Franchisor may require designation of a new General Manager,  Kitchen Manager or

Assistant  Manager,  as the case may be, and  Franchisee  shall  designate a new

General Manager,  Kitchen Manager or Assistant Manager, who shall be required to

successfully complete such training course.

 

    6.3  The General  Manager, the Kitchen  Manager and each  Assistant  Manager

shall,  from time to time as  reasonably  required  by  Franchisor,  attend  and

successfully    complete   to    Franchisor's    reasonable    satisfaction    a

Franchisor-provided refresher course in restaurant operations.

 

    6.4  Franchisee shall  be responsible for  the Restaurant's  compliance with

the operating standards, methods, techniques and material taught at Franchisor's

operations  training course,  and shall cause the employees of the Restaurant to

be trained in such  standards,  methods and  techniques  as are  relevant to the

performance of their respective duties.

 

    6.5  Attendance  of the  General  Manager,  the  Kitchen  Manager  and  each

Assistant Manager at any of Franchisor's training courses shall be tuition-free.

Franchisee shall pay all other costs and expenses  relating to the attendance of

Franchisee's  personnel  at any of  Franchisor's  training  courses,  including,

without limitation,  the cost of travel,  lodging,  meals, and other related and

incidental expenses.

 

 

7.  RESTAURANT MAINTENANCE

 

    7.1  Franchisee shall, at Franchisee's  sole cost and expense,  maintain the

Restaurant in conformity with the standards,  specifications and requirements of

the  System,  as the same may be  designated  by  Franchisor  from time to time.

Franchisee  specifically  agrees to repair or replace,  at Franchisee's cost and

expense,   equipment,  signs,  interior  and  exterior  decor  items,  fixtures,

furnishings,  supplies,  and  other  products  and  materials  required  for the

operation  of the  Restaurant  as  necessary  or  desirable,  and to obtain,  at

Franchisee's cost and expense, any new or additional equipment,  signs, interior

and exterior decor items,  fixtures,  furnishings,  supplies, and other products

and materials which may be reasonably required by Franchisor for new products or

procedures.  Except as may be expressly provided in the Manuals,  no alterations

or improvements, or changes of any kind in design, equipment, signs, interior or

exterior  decor  items,  fixtures or  furnishings  shall be made in or about the

Restaurant  or  Restaurant  premises  without  the  prior  written  approval  of

Franchisor in each instance.

 

                                      -10-

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    7.2  In order to assure the continued  success of the Restaurant, Franchisee

shall, at any time from time to time after ________________,  _________,  (i.e.,

six [6] years  after  the date of this  Agreement)  as  reasonably  required  by

Franchisor (taking into  consideration the cost and then-remaining  term of this

Agreement),  modernize the Restaurant premises,  equipment,  signs, interior and

exterior decor items,  fixtures,  furnishings,  supplies, and other products and

materials  required  for  the  operation  of  the  Restaurant,  to  Franchisor's

then-current standards and specifications,  provided that at the time Franchisor

requires Franchisee to so modernize the Restaurant premises at least twenty-five

percent (25%) of Franchisor-owned  and operated  Restaurants meet such standards

and  specifications.  Franchisee's  obligations  under  this  Subsection  are in

addition to, and shall not relieve Franchisee from, any of its other obligations

under this Agreement, including those contained in the Manuals.

 

    7.3  If Franchisee  is or  becomes  a  lessee  of the  Restaurant  premises,

Franchisee shall have included in the lease provisions expressly permitting both

Franchisee and Franchisor to take all actions and make all alterations  referred

to under Subsections 7.1 and 7.2 hereof, requiring the lessor thereunder to give

Franchisor reasonable notice of any contemplated termination, and providing that

Franchisee has the unrestricted  right to assign the lease to Franchisor without

the lessor having any right to impose conditions on such assignment or to obtain

any payment in connection  therewith.  Franchisee  shall not,  without the prior

written  consent  of  Franchisor,  execute  any lease or other  agreement  which

imposes,  or purports to impose,  any  limitations  on the ability of Franchisee

and/or  of  Franchisor  to  operate  additional  restaurants  at any  particular

location  beyond the geographic  limitation set forth in Section 1.4 hereof,  or

any lease the term of which is shorter than the term of this Agreement.

 

8.  ADVERTISING

 

    8.1  Franchisor shall develop and administer  advertising,  public relations

and sales  promotion  programs  designed to promote  and enhance the  collective

success of all  restaurant  units in the  System.  It is  expressly  understood,

acknowledged  and agreed that in all phases of such  advertising  and promotion,

including,  without limitation,  type, quantity, timing, placement and choice of

media and medium, market areas, advertising agencies an