FRANCHISE DISCLOSURE DOCUMENT TCBY Systems, LLC A Delaware Limited Liability Company 8001 Arista Place, Suite 600 Broomfield, CO 80021 (720) 599-3350 www.tcby.com www.tcbyfranchise.com [email protected]
If you qualify to purchase or renew a franchise, complete our application process and enter into a franchise agreement with us, you will offer for sale TCBY brand premium soft-serve frozen yogurt, hand-dipped frozen yogurt, fresh yogurt, yogurt-based smoothies, sorbet and other approved food and drinks from a retail location.
The total investment necessary to begin operation of a TCBY store franchise ranges from $126,500 to $193,000 for Other Concepts Stores and $209,280 to $492,152 for Traditional Stores. This includes $15,000 for Other Concepts Stores and $20,000 to $35,000 for Traditional Stores that must be paid to us or our affiliates. These ranges do not include real property acquisition or leasing costs, a salary or management fee for the owner, or any franchise fees that would be payable to our Affiliates if you are simultaneously developing an affiliated co-brand in conjunction with your Other Concepts Store.
We also offer area director franchises within certain limited territories. If you qualify for an area director franchise and enter into an area director agreement with us, you will provide certain sales services to us and certain site and support services to TCBY franchisees, within a specific territory, in exchange for a share of various franchise fees. The total investment necessary to begin operation of an area director franchise is $101,000 to $1,037,000. This includes approximately $100,000 to $1,000,000 that must be paid to us or our Affiliates. This range reflects that the initial area director fee varies widely depending on variables such as the size and population of the territory that you are granted. These ranges do not include any franchise fees that would be payable to our Affiliates if you are simultaneously purchasing an area director franchise from our affiliate, Mrs. Fields Franchising, LLC.
This disclosure document summarizes certain provisions of your franchise agreement and other information in plain English. Read this disclosure document and all accompanying agreements carefully. You must receive this disclosure document at least 14 calendar days before you sign a binding agreement with, or make any payment to, the franchisor or an affiliate in connection with the proposed franchise sale. Note, however, that no governmental agency has verified the information contained in this document.
You may wish to receive your disclosure document in another format that is more convenient for you. To discuss the availability of disclosures in different formats, contact our Development Department, at 8001 Arista Place, Suite 600, Broomfield, CO 80021, (888) 728-6999 or [email protected].
The terms of your contract will govern your franchise relationship. Don’t rely on the disclosure document alone to understand your contract. Read all of your contract carefully. Show your contract and this disclosure document to an advisor, like a lawyer or an accountant.
Buying a franchise is a complex investment. The information in this disclosure document can help you make up your mind. More information on franchising, such as “A Consumer’s Guide to Buying a Franchise,” which can help you understand how to use this disclosure document, is available from the Federal Trade Commission. You can contact the FTC at 1-877-FTC-HELP or by writing to the FTC at 600 Pennsylvania Avenue, NW, Washington, D.C. 20580. You can also visit the FTC’s home page at www.ftc.gov for additional information. Call your state agency or visit your public library for other sources of information on franchising.
There may also be laws on franchising in your state. Ask your state agencies about them.
Issuance Date: March 26, 2014, as amended July 16, 2014
TCBY FDD 03/2014 i STATE COVER PAGE
Your state may have a franchise law that requires a franchisor to register or file with a state franchise administrator before offering or selling in your state. REGISTRATION OF A FRANCHISE BY A STATE DOES NOT MEAN THAT THE STATE RECOMMENDS THE FRANCHISE OR HAS VERIFIED THE INFORMATION IN THIS DISCLOSURE DOCUMENT.
Call the state franchise administrator listed in Exhibit A for information about the franchisor, or about franchising in your state.
MANY FRANCHISE AGREEMENTS DO NOT ALLOW YOU TO RENEW UNCONDITIONALLY AFTER THE INITIAL TERM EXPIRES. YOU MAY HAVE TO SIGN A NEW AGREEMENT WITH DIFFERENT TERMS AND CONDITIONS IN ORDER TO CONTINUE TO OPERATE YOUR BUSINESS. BEFORE YOU BUY, CONSIDER WHAT RIGHTS YOU HAVE TO RENEW YOUR FRANCHISE, IF ANY, AND WHAT TERMS YOU MIGHT HAVE TO ACCEPT IN ORDER TO RENEW.
Please consider the following RISK FACTORS before you buy this franchise:
1. THE FRANCHISE AGREEMENT REQUIRES YOU TO RESOLVE DISPUTES WITH US BY LITIGATION ONLY IN BROOMFIELD, COLORADO. OUT-OF-STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST YOU MORE TO LITIGATE WITH US IN COLORADO THAN IN YOUR OWN STATE. 2. THE FRANCHISE AGREEMENT AND AREA DIRECTOR AGREEMENT EACH STATE THAT COLORADO LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS. 3. THE AREA DIRECTOR AGREEMENT REQUIRES YOU TO RESOLVE DISPUTES WITH US FIRST BY NON-BINDING MEDIATION, AND THEN BY LITIGATION, ONLY IN BROOMFIELD, COLORADO. OUT-OF-STATE MEDIATION AND LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE FOR YOU TO MEDIATE OR LITIGATE WITH US IN COLORADO THAN IN YOUR OWN STATE. 4. THE AUDITED AND UNAUDITED FINANCIAL STATEMENTS PROVIDED AT EXHIBIT LTO THIS DISCLOSURE DOCUMENT ARE THOSE OF OUR AFFILIATE AND ULTIMATE PARENT, MRS. FIELDS’ ORIGINAL COOKIES, INC. (“MFOC”). ALTHOUGH OUR FINANCIAL STATEMENTS ARE NOT INCLUDED IN THIS DISCLOSURE DOCUMENT, MFOC HAS AGREED TO GUARANTY OUR OBLIGATIONS (SEE GUARANTEE OF PERFORMANCE INCLUDED AS EXHIBIT M TO THIS DISCLOSURE DOCUMENT). 5. PER THE AUDITED BALANCE SHEET DATED DECEMBER 28, 2013, SINCE ITS INCEPTION, MFOC HAS LOST $73,662,000 CAUSING IT TO HAVE A DEFICIT NET WORTH OF $27,936,000. 6. AREA DIRECTORS ARE NOT A PARTY TO YOUR CONTRACT. FRANCHISOR IS RESPONSIBLE FOR ALL OBLIGATIONS UNDER YOUR CONTRACT AND IN CERTAIN CIRCUMSTANCES MAY BE LIABLE FOR MISREPRESENTATIONS OR ACTIONS OF THE AREA DIRECTOR. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE. We use the services of one or more FRANCHISE BROKERS or referral sources to assist us in selling our franchise. A franchise broker or referral source represents us, not you. We pay this person a fee for selling our franchise or referring you to us. You should be sure to do your own investigation of this franchise.
Effective Date: See the next page for state effective dates
iiTCBY FDD 03/2014 ii STATE EFFECTIVE DATES
The following states require that the disclosure document be registered or filed with the state, or be exempt from registration: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin.
This disclosure document is registered, on file or exempt from registration in the following states having franchise registration and disclosure laws, with the following effective dates:
State Effective Date State Effective Date California July 28, 2014 New York PENDING Hawaii Effective North Dakota July 25, 2014 Illinois July 17, 2014 Rhode Island July 17, 2014 Indiana April 15, 2014 South Dakota March 27, 2014 Maryland July 30, 2014 Virginia July 25, 2014 Michigan April 14, 2014 Washington July 17, 2014 Minnesota July 23, 2014 Wisconsin July 17, 2014
In all other states, the effective date of this disclosure document is the issuance date of March 26, 2014, as amended July 16, 2014.
TCBY FDD 03/2014 iii NOTICE REQUIRED
BY
STATE OF MICHIGAN
THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
Each of the following provisions is void and unenforceable if contained in any documents relating to a franchise:
(a) A prohibition on the right of a franchisee to join an association of franchisees.
(b) A requirement that a franchisee assent to a release, assignment, novation, waiver, or estoppel which deprives a franchisee of rights and protections provided in this act. This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims.
(c) A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.
(d) A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee’s inventory, supplies, equipment, fixtures, and furnishings. Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the franchise business are not subject to compensation. This subsection applies only if: (i) the term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months’ advance notice of franchisor’s intent not to renew the franchise.
(e) A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.
THIS MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.
ivTCBY FDD 03/2014 iv (f) A provision requiring that arbitration or litigation be conducted outside this state. This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.
(g) A provision which permits a franchisor to refuse to permit a transfer of ownership of a franchise, except for good cause. This subdivision does not prevent a franchisor from exercising a right of first refusal to purchase the franchise. Good cause shall include, but is not limited to:
(i) The failure of the proposed transferee to meet the franchisor’s then current reasonable qualifications or standards.
(ii) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.
(iii) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(iv) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
(h) A provision that requires the franchisee to resell to the franchisor items that are not uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).
(i) A provision which permits the franchisor to directly or indirectly convey, assign, or otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless provision has been made for providing the required contractual services.
The fact that there is a notice of this offering on file with the attorney general does not constitute approval, recommendation, or endorsement by the attorney general.
Any questions regarding this notice should be directed to the Department of Attorney General, State of Michigan, 670 Law Building, Lansing, Michigan 48913, telephone (517) 373-7117.
THIS MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.
vTCBY FDD 03/2014 v TABLE OF CONTENTS Item Page ITEM 1. THE FRANCHISOR AND ANY PARENTS, PREDECESSORS, AND AFFILIATES .. 1 ITEM 2. BUSINESS EXPERIENCE ...... 7 ITEM 3. LITIGATION ...... 7 ITEM 4. BANKRUPTCY ...... 9 ITEM 5. INITIAL FEES ...... 10 ITEM 6. OTHER FEES ...... 12 ITEM 7. ESTIMATED INITIAL INVESTMENT ...... 18 ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES ...... 24 ITEM 9. FRANCHISEE’S OBLIGATIONS ...... 28 ITEM 10. FINANCING ...... 31 ITEM 11. FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING ...... 32 ITEM 12. TERRITORY ...... 42 ITEM 13. TRADEMARKS ...... 45 ITEM 14. PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION ...... 46 ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS ...... 47 ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL ...... 47 ITEM 17. RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION ...... 48 ITEM 18. PUBLIC FIGURES ...... 55 ITEM 19. FINANCIAL PERFORMANCE REPRESENTATIONS ...... 55 ITEM 20. OUTLETS AND FRANCHISEE INFORMATION ...... 57 ITEM 21. FINANCIAL STATEMENTS ...... 67 ITEM 22. CONTRACTS ...... 67 ITEM 23. RECEIPTS ...... 67
EXHIBITS
EXHIBIT A STATE ADMINISTRATORS AND AGENTS FOR SERVICE OF PROCESS EXHIBIT B FRANCHISE AGREEMENT (WITH SCHEDULES AND EXHIBITS) EXHIBIT C OTHER CONCEPTS STORE ADDENDUM TO FRANCHISE AGREEMENT EXHIBIT D AREA DIRECTOR DISCLOSURE ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT EXHIBIT E AREA DIRECTOR AGREEMENT (WITH EXHIBITS) EXHIBIT F TERM PURCHASE ADDENDUM EXHIBIT G SUBLEASE AGREEMENT; ASSIGNMENT AND ASSUMPTION OF SUBLEASE EXHIBIT H LEASE ADDENDUM EXHIBIT I OPERATING PROCEDURES MANUAL TABLE OF CONTENTS
viTCBY FDD 03/2014 vi EXHIBIT J CONFIDENTIALITY AGREEMENT EXHIBIT K FRANCHISEE INFORMATION EXHIBIT L FINANCIAL STATEMENTS EXHIBIT M GUARANTEE OF PERFORMANCE EXHIBIT N ASSIGNMENT, ASSUMPTION AND CONSENT EXHIBIT O RENEWAL ADDENDUM TO FRANCHISE AGREEMENT; OTHER CONCEPTS RENEWAL ADDENDUM TO FRANCHISE AGREEMENT EXHIBIT P STATE SPECIFIC ADDENDA TO DISCLOSURE DOCUMENT, FRANCHISE AGREEMENTS AND AREA DIRECTOR AGREEMENT
viiTCBY FDD 03/2014 vii ITEM 1. THE FRANCHISOR AND ANY PARENTS, PREDECESSORS, AND AFFILIATES
Us; Our Parents and affiliates; Certain Definitions.
To simplify the language in this disclosure document, the following terms and definitions will apply throughout this disclosure document:
Term Definition
“we,” and similar words TCBY Systems, LLC, the franchisor “MFFB” Our parent, Mrs. Fields Famous Brands, LLC “MFOC” MFFB’s parent and our affiliate, Mrs. Fields’ Original Cookies, Inc. “Holdco” MFOC’s parent, MFOC Holdco, Inc. “Z Capital” Holdco’s parent and our ultimate parent, Z Capital Partners, L.L.C. “MFF” Our affiliate, Mrs. Fields Franchising, LLC “You,” and similar words The person or persons, including a corporate or other legal entity, individually and collectively, buying a franchise from us “affiliate” An entity controlled by, controlling, or under common control with, another entity “parent” An entity that controls another entity directly, or indirectly through one or more subsidiaries “Effective Period” The period of time that this disclosure document is effective and can be delivered by us to prospective franchisees “TCBY Products” Products approved or required by us periodically for sale at or from TCBY retail outlets, including fresh yogurt, soft-serve frozen yogurt, hand-dipped frozen yogurt, sorbets, and other products approved by us or our affiliates “TCBY Store” TCBY Store, whether a Traditional or Other Concepts Store, you develop under the Franchise Agreement “Premises” Premises you have secured and we have approved for your Store “Franchise Agreement” The Franchise Agreement you sign for your TCBY Store “Traditional Store” Typical TCBY Store, either self-service or full-service “Other Concepts Store” TCBY Store established within a premises operated primarily under another trade name that we have approved for co-branding “Other Concepts Addendum” The addendum that, in conjunction with the Franchise Agreement, gives you the right to operate an Other Concepts Store using the Marks “Area Director” The person authorized to offer sales services, site services and support services to TCBY Stores within a defined territory “Area Director Territory” The defined territory in which you provide sales services, site services and support services to TCBY Stores if you become an Area Director “Area Director Agreement” The Area Director Agreement you sign for your Area Director Territory
TCBY FDD 03/2014 1 We, MFFB and each of our affiliates specifically listed above, with the exception of Z Capital, have a principal address of 8001 Arista Place, Suite 600, Broomfield, CO 80021. Z Capital has a principal address of Two Conway Park, 150 Field Drive, Suite 300, Lake Forest, Illinois 60045.
We are a Delaware limited liability company organized on May 30, 2000. We are a wholly-owned subsidiary of MFFB. MFFB is a wholly owned subsidiary of MFOC, which is a wholly owned subsidiary of Holdco. We do business under the name TCBY (or variations of that name). In December 2011, as part of its refinance, MFOC became a wholly-owned subsidiary of Holdco. Z Capital is the sole owner of Holdco. Though they are our parent companies, neither Holdco nor Z Capital are involved in franchising activities.
Agents for Service of Process.
Our agent for service of process at our principal address is Joyce Hrinya. Please see Exhibit A to this disclosure document for a list of the names and addresses of our agents for service of process in various other states.
Our Predecessors.
TCBY Systems, Inc. and TCBM Co. are our predecessors. We were formed as part of a transaction where an affiliate of MFOC purchased TCBY Systems, Inc., then the franchisor of the TCBY® franchise system, along with certain of its parents and affiliates. TCBY Systems, Inc. offered franchises for TCBY stores from June 1982 until June 1, 2000, when it was merged into TCBM Co., which then immediately merged into us. TCBM Co. never offered franchises or engaged in any business other than merging into us.
Description of the Franchises Offered.
We currently offer TCBY franchises for two different types or categories of new TCBY Stores: (i) TCBY Traditional Stores; and (ii) TCBY Other Concepts Stores. These are described in more detail as follows:
TCBY Traditional Stores
TCBY Traditional Stores offer and sell TCBY brand products that we periodically approve, which may include premium soft-serve frozen yogurt, hand-dipped frozen yogurt and other frozen dessert and treat items, such as cakes and pies, sorbet, smoothies, fresh yogurt, mix-ins, toppings and drinks to retail customers. TCBY Stores may be established in a variety of locations that we approve, including a strip shopping center, a free- standing building (with or without drive-up window) and a regional shopping mall, and usually will be located in urban and suburban areas. TCBY Stores are open year-round, except under certain limited circumstances where we have given our prior written permission.
A TCBY store typically has 1,000 to 1,500 square feet, seats 10 to 20 customers, and caters to both carry- out and eat-in business. Sometimes a TCBY Store will have drive-thru facilities. A TCBY Store will generally be developed in either a self-service format or a full-service format, as you and we agree as part of the store approval process. A self-service format allows customers to serve themselves and choose among various types and flavors of yogurt, toppings and beverages. A self-serve TCBY Store generally includes 5 or more self serve yogurt machines, a self-serve beverage dispenser and a products and topping bar. Some self-serve and full– service stores also sell the Yovana® fresh yogurt products described below. Yogurt products and toppings are priced by weight. A full-service TCBY Store typically offers a more extensive menu of items made to order by Store employees and may include yogurt cakes, pies, prepacked quarts and other products that consumers can purchase and take home.
2TCBY FDD 03/2014 2 If you qualify and desire to develop and operate a Traditional Store, you will sign our Franchise Agreement, which is attached to this disclosure document as Exhibit B. The Franchise Agreement gives you the right to operate a Traditional Store using the Marks.
Other Concepts Store Franchises
The second type of TCBY store is an Other Concepts Store, which is a smaller TCBY Store established within a premises operated primarily under trade names or trademarks belonging to another concept that we have approved for co-branding with a TCBY Store, which may include one of the MFFB Franchised Concepts. Other Concepts Stores usually offer a limited menu of TCBY products.
If you qualify and desire to develop and operate an Other Concepts Store, you will sign our Franchise Agreement, attached as Exhibit B, together with our Other Concepts Addendum, attached as Exhibit C. The Franchise Agreement and Other Concepts Addendum give you the right to operate an Other Concepts Store using the Marks. Your Other Concepts Store may operate in conjunction with another MFFB Franchised Concept.
Area Director Franchises.
We have developed an area director program (“Area Director Program”) for the TCBY franchise system. We currently offer area director franchises within certain territories.
We grant each Area Director the right within an Area Director Territory to: (i) solicit prospective TCBY franchisees and, as we request, assist in the franchise sales process (“sales services”); (ii) perform certain site acquisition and development services (“site services”); and (iii) render compliance and enforcement services for and on behalf of us, and provide additional marketing, operational, training and field support services to TCBY franchisees (“support services”). In some circumstances, an Area Director also may have a right of first refusal to develop or find another franchisee to develop new TCBY Stores at approved locations within its Area Director Territory. Area Directors are not authorized, and Area Director sales services do not include the right, to approve prospects as TCBY franchisees, offer or sell franchises, or negotiate or sign franchise agreements on our behalf. Area Directors are not party to contracts between us and franchisees.
If you qualify and desire to act as an Area Director in a territory where we are offering the Area Director Program, you will sign an Area Director Agreement with us. A copy of the Area Director Agreement, which will control the relationship between you and us, if you and we sign it, is attached to this disclosure document as Exhibit D. The Area Director Agreement grants you the right to operate an “AD Business” (as defined in the Area Director Agreement) and offer the sales services, site services and support services described above. The Area Director Agreement, however, does not grant you the right to operate an individual TCBY Store, and you must sign the applicable TCBY Franchise Agreement with us if you desire to own and operate a TCBY Store within or outside of your Area Director Territory.
In exchange for Area Director services described above, we will pay you several different fees. These fees include percentages of initial franchise fees, royalty and service fees, and may include percentages of transfer fees and other fees that franchisees pay in connection with the purchase or operation of a TCBY Store within your Area Director Territory, provided certain conditions are met regarding the sale of the franchises and provided that you meet your obligations, all as further described in your Area Director Agreement.
As a condition of maintaining your Area Director franchise, you must satisfy certain Development Quota, which we and you will mutually agree upon, for each Development Period (as these terms are defined in Item 12) during the term of the Area Director Agreement. Renewal of the Area Director Agreement is contingent upon we and you agreeing on a new Development Quota for the renewal term. Further, at all times from and after the second Development Period, you must continuously own and operate at least the number of TCBY Stores to be
3TCBY FDD 03/2014 3 designated in your Area Director Agreement located within your Area Director Territory. See Item 12 for further information regarding these development obligations.
The Market.
The market for a Store’s business is the general public. Sales are generally seasonal, tending to increase in warmer months and decrease in cooler months. We offer several fat-free and/or no sugar added products targeted toward customers who are looking for a low fat satisfying treat. We also offer gluten-free and vegan products.
Laws and Regulations.
In addition to laws and regulations that apply to business generally, the Store’s business is subject to federal, state, and local laws and regulations pertaining to food labeling, sanitation, and weights and measurement. You should also be aware of federal, state, and local employment laws and regulations, specifically including minimum age and wage requirements. Local law requirements vary by location.
Some states may require franchisees to obtain restaurant, business, occupational, food products, and miscellaneous licenses. Some states also have laws regarding who may secure these licenses. You may also have to obtain health licenses and to comply with health laws and regulations that apply to restaurant and food product sales establishments. You should inquire about these laws and regulations.
Area Directors should be aware of Federal Trade Commission regulations and various state laws that impact the sale of franchises and the relationship between franchisors and franchisees that may apply when acting as our agent in soliciting prospective franchisees and in providing initial and ongoing sales services, site services and support services. You may not solicit prospective TCBY franchisees in any state that requires the registration of disclosure documents, unless we have a currently effective registration in that state. You must comply with all local, state and federal laws that affect your AD Business, including employment, workers’ compensation, corporate, tax, licensing and similar laws and regulations.
Several state franchise disclosure and registration laws regard you to be our franchise broker in the Area Director Territory to which you are appointed. Therefore, in accordance with applicable law, you must, at your expense, and if required, register as our franchise broker and provide us with proof of that registration. You are responsible for notifying us immediately of any material changes in the information that you give to us for purposes of complying with franchise disclosure laws.
If your activities as our Area Director require you separately to register in your Area Director Territory, you must prepare the necessary documents and submit the relevant filings at your expense. We will provide you with information relating to us, which is necessary for your registration. As an alternative, we may, at our option, agree to prepare and register in certain states joint disclosure documents that include information not only about us, but also about you as our Area Director. In that case, you agree to cooperate in providing us with information relating to you and your AD Business and, upon demand, to pay to us or our designee the costs of preparing and registering those portions of disclosure documents and ancillary documents which are applicable only to you and your AD Business.
Competition.
If you open a Store, your competition may include other yogurt stores, soft-serve frozen dessert stores, ice cream parlors or stores, and smoothie and other specialty beverage shops; fast-service and full-service restaurants offering yogurt products, soft-serve frozen desserts, smoothies and other products that may be similar to products offered by Stores; and stores offering other dessert and snack items such as cookies, baked goods, coffee and coffee-based drinks. Some of these competitive stores are or may be owned or licensed by us or one of our
4TCBY FDD 03/2014 4 affiliates. Your competition includes other, existing TCBY franchisees who may operate TCBY Stores under different formats or who have entered into franchise agreements with us that contain terms significantly different than those in the Franchise Agreement.
Prior Business Experience: Us and Our Affiliates.
Since July 2000, we have granted licenses and franchises for the operation of TCBY Stores using the name and service mark “TCBY” and other marks we designate for use by TCBY Stores (all referred to as the “Marks”). In addition, since January 2010, we have been in the business of granting area director franchises in certain limited territories to certain franchisees.
In addition to offering TCBY franchises since July 2000, we have been engaged in other businesses as described in this Item 1. Although we are the franchisor of the TCBY franchise system, MFFB employees perform the day-to-day operations of our franchise systems, and provide services to our franchisees at our direction. MFFB does not offer and has never offered franchises of any kind.
From January 2006 to December 2008, we offered multiple unit franchises for the operation of TCBY Stores under a Development Agreement and Franchise Agreement. We no longer offer this program, although we may agree to sell more than one TCBY franchise to the same franchisee.
From December 2005 to December 2007, we offered single and multiple unit franchises for the operation of Yovana® stores (“Yovana® Stores”), in certain limited markets. During that period we sold three such stores. These stores operated under the Yovana® trademarks and other TCBY Marks. As of the issuance date of this disclosure document, there were no franchised or company-owned Yovana® Stores, and we do not anticipate franchising, owning or operating additional Yovana® Stores during the Effective Period, but are testing the Yovana® product in some TCBY Stores and the concept in a few captive, licensed locations operated in airports by HMS Host.
We or one of our affiliates or predecessors, have entered into transactions for development of TCBY locations. The terms of these transactions are substantially different than those on which you would operate a Store. These different locations include, but are not limited to (a) locations in countries other than the United States of America, (b) certain airport, toll road plaza, and other unique locations which in certain cases are operated under a joint venture agreement between us and either Sodexho Marriott, Inc., or HMS Host (or their affiliates or successors), (c) certain sports arena or stadium locations controlled by the operator of the facilities, (d) certain theme park locations controlled by the operator or owner of the facilities, and (e) certain private sector food service locations (such as large plants and offices) controlled by an operator or owner. We or one of our affiliates may enter into co-branding arrangements with other snack food companies, establish a new business or franchise system, or acquire an existing business or franchise system. We may also sell refrigerated, frozen novelty, and hard pack TCBY brand yogurt to various distributors throughout the United States for resale primarily to grocery stores and similar venues.
Our affiliate MFF also offers franchises. MFF is a wholly-owned subsidiary of MFFB. MFF or its predecessors, including MFOC, have granted licenses and franchises for the operation of Mrs. Fields Cookie Stores in the United States and abroad, to franchisees or licensees since 1977 and MFF continues to offer them. From 2010 to 2012, MFF, sometimes in conjunction with us, also granted area director franchises in certain limited territories. In certain cases, MFF may offer franchises to our franchisees to operate locations that are co- branded with TCBY Stores. Other of our affiliates have offered co-branding in the past, and may do so in the future, but currently MFF is our only affiliate that does so.
On March 16, 2004, MFOC contributed all of its franchise-related assets, including its Mrs. Fields trademarks and all other existing Mrs. Fields franchise agreements, to MFFB. Immediately after, MFFB contributed these franchise-related assets to MFF or other of its subsidiaries. At the same time, both we and MFF
5TCBY FDD 03/2014 5 entered into franchise agreements with MFOC to license it to continue to operate Mrs. Fields Cookie Stores and TCBY Stores, although as of the issuance date of this disclosure document, MFOC operates no TCBY or Mrs. Fields Cookie Stores. Before the March 2004 contributions, MFOC and its predecessors operated the Mrs. Fields franchise system in the United States and abroad.
Our former affiliates, PTF LLC and PMF LLC, formerly operated the Pretzel Time and Pretzelmaker franchise systems and our former affiliates, GACCF LLC and GAMAN LLC formerly operated the Great American Cookie Company franchise system. These former affiliates and various predecessors of each were the franchisors or suppliers of their respective franchises for more than 10 years. These franchise systems were purchased by NexCen Asset Acquisition, LLC (“NexCen”) on August 7, 2007 (Pretzel Time and Pretzelmaker) and on January 29, 2008 (Great American Cookie Company). We are not affiliated with the current franchisors of these brands. PTF LLC, PMF LLC, GACCF LLC and GAMAN LLC were dissolved on June 19, 2012. However, some of these brands formerly franchised by our affiliates are operated by the franchisees of us or MFF, sometimes as co-branded locations.
For more than 20 years, we or our predecessors and our affiliates have offered international master franchise agreements, franchise agreements and other licensing agreements for TCBY Stores and the other MFFB franchised concepts in foreign countries. As of December 28, 2013, we and our affiliates have developed 143 Mrs. Fields locations in 18 foreign countries, and 126 TCBY locations in 17 foreign countries. Going forward, we and our affiliates may offer international master franchise agreements, franchise agreements and other licensing agreements in foreign countries. Licenses and franchises for TCBY Stores in other countries may be under different terms and conditions than are described in this disclosure document.
Although some of our affiliates have periodically operated company-owned stores and engaged in similar businesses as described elsewhere in this Item 1, and reserve the right to do so in the future, we are engaged in the business of franchising and licensing systems and trademarks for the delivery of goods and services. Although we currently own, and may own in the future, a few TCBY Stores, our primary business activities are franchising and licensing. Our franchisees are not our employees.
Except as qualified in Note 1, the table below indicates the number of franchises sold by us and our respective affiliates or their predecessors which were in operation as of December 28, 2013. All of these locations may compete with you.
Except as described in the table below and elsewhere in this Item 1, as of December 28, 2013, neither we nor our affiliates have offered franchises in any other lines of business or operated any company-owned stores for the concepts listed in the table below.
Number of Number of Company-Owned Franchisor Concept Franchises(1) Stores (Operated by us or MFOC)
Us TCBY Stores 345 1
MFF Mrs. Fields Cookies Stores (including Mrs. Fields Bakery Cafés) 195 5
(1) This column lists the number of franchises open and operating as of December 28, 2013. These numbers include co-branded and Other Concept units so that the same location may be included in the total for more than one concept.
Except as described above, no other parents, predecessors or affiliates are required to be disclosed in this Item 1.
6TCBY FDD 03/2014 6 ITEM 2. BUSINESS EXPERIENCE
Interim Chief Executive Officer: Joyce Hrinya
Ms. Hrinya has been the Interim Chief Executive Officer for MFFB since July 2014. Ms. Hrinya has also served on the board of directors of MFFB since March 2014. Ms. Hrinya has also served as the Managing Director and Operating Partner of Z Capital, located in Chicago, Illinois, since May 2014. Ms. Hrinya has also served on the board of directors of Great Plains Communications, located in Blair, Nebraska, since September 2009. Prior to that, Ms. Hrinya served as the Managing Partner of A&R Strategy Partners, LLC, located in Kansas City, Missouri, from March 2010 to April 2014. Prior to that, Ms. Hrinya served as the Senior Vice President, Marketing and Customer Satisfaction for Helzberg Diamonds, located in North Kansas City, Missouri, from December 2004 to March 2010.
Chief Financial Officer: Michael Chao
Mr. Chao has been the Chief Financial Officer for MFFB since August of 2013. Mr. Chao served as Vice President of Finance, Investor Relations and Treasury for Vail Resorts from October of 2009 to August of 2013. From August 2006 to October 2009, Mr. Chao was Director of Finance, Investor Relations and Treasury for Vail Resorts.
Chief Operating Officer: David Bloom
Mr. Bloom has been the Chief Operating Officer for MFFB since March of 2014. Prior to that, he was MFFB’s Senior Vice President of Strategic Development from October 2013 to March 2014. He served as Senior Vice President of Brand Expansion for Hurricane Grill & Wings from May 2012 until October of 2013. From October 2011 to May 2012 Mr. Bloom was Chief Operating Officer of Bridge International Academies in Nairobi, Kenya. From June 2009 to September 2011, Mr. Bloom served as Senior Vice President of Brand Expansion for Quiznos Subs in Denver, Colorado. From June 2008 to June 2009 Mr. Bloom was President of Capital Idea Group in Sarasota, Florida. From January 2006 to May 2008 Mr. Bloom was Vice President Franchise Sales for Clockwork Home Services in Sarasota, Florida. From 1992 until 2006, Mr. Bloom served in various capacities for Quiznos Subs, including roles as Senior Vice President of Brand Expansion in both the US and Canada. He was also a partner in Falcon Ventures Ltd., a multi-unit owner and area developer of Quiznos Subs, as well as the owner of Rice Boxx Restaurants.
Please see Exhibit D for disclosures related to our Area Director(s), including their names, addresses and their Area Director Territories.
ITEM 3. LITIGATION
Advanced Food Concepts, Ltd., et al. v. William P. Creasman, et al., (U.S. District Court for the Eastern District of Arkansas, Case No. 401-CV-00-117JMM, filed June 21, 2001). Two of the plaintiffs that filed this Complaint were former franchisees of us, and the other purported to be a former franchisee (collectively referred to as “Advanced Food”). The lawsuit originally included numerous corporate and individual defendants related to us, but all defendants were dismissed except TCBY of Ireland, Inc., an indirect subsidiary of us and the franchisor party under a Transnational Master License Agreement entered into with certain of the Advanced Food and others. This case stems from TCBY of Ireland’s performance under and termination of the Transnational Master License Agreement. Advanced Food sought damages in excess of $70 million in connection with TCBY of Ireland’s performance under and termination of the Transnational Master License Agreement. On August 4, 2004, the court granted TCBY of Ireland’s Motion for Summary Judgment on all remaining counts of the complaint. Advanced Food filed various motions, including a motion for reconsideration, which the court denied. On February 7, 2005, the parties entered into a settlement agreement in which Advanced Food agreed to pay TCBY of Ireland a negotiated sum for its attorneys’ fees, and the parties agreed not to appeal the Court’s rulings.
7TCBY FDD 03/2014 7 On February 14, 2005, the court entered its order dismissing the case with prejudice in accordance with the settlement agreement.
Anthony H. Coombs, Scott Haslam and Judith Haslam, and Hasco, LLC, v. Juice Works Development, Inc., TCBY Systems, Inc., Mrs. Fields Original Cookies, Inc., Mrs. Fields, Inc., Mrs. Fields Brand, Inc., Mrs. Fields Holding Company, Inc., and Mrs. Fields Famous Brands (Third Judicial District Court of Salt Lake County, State of Utah, Case No. 010902619, filed March 27, 2001). Plaintiffs (collectively referred to as “Coombs”) were former franchisees of Juice Works Development, Inc. Their Complaint, filed March 27, 2001, alleged that Juice Works breached the provisions of their Franchise Agreement by failing to provide meaningful support, sales promotions, marketing support or assistance in operating Coombs’ Juice Works location. Coombs further alleged that Juice Works made representations during the sale of the franchise to Coombs with the intent to defraud and deceive Coombs and failed to disclose certain material facts related to the sale. The Complaint also alleged breach of fiduciary duty, and negligence on the part of the defendants (collectively referred to as “Mrs. Fields”), and asked for general and punitive damages of $3,000,000. Mrs. Fields denied the allegations and filed a Motion to Dismiss the Complaint on jurisdictional grounds. In October 2002, the court granted our Motion to Dismiss, and Coombs appealed. In November 2003, the Utah Court of Appeals held that the trial court properly granted our Motion to Dismiss on jurisdictional grounds. As of the issuance date of this disclosure document, Coombs has not refiled the action in the venue required by the choice of venue clause of the Franchise Agreement.
TCBY Systems, LLC vs. S.E.L. Yogurt, L.C. and Esther Malca (Circuit Court of the Fifteenth Judicial Circuit, Palm Beach County, Florida, Case No. 2004-008624 AG, filed September 14, 2004). We filed an action against Malca, a former franchisee, to collect on an outstanding promissory note in the amount of $90,295.75. After attempts to settle the case were unsuccessful, Malca filed an answer and counterclaim against us toward the end of 2005. The counterclaim alleges breach of contract, breach of an implied covenant of good faith and fair dealing, and tortious interference with a business relationship. Malca’s allegations arise from some of our actions related to her attempt to sell her business to a third party. We filed an answer with affirmative defenses to Malca’s counterclaim, together with a motion to dismiss or abate Malca’s entity, S.E.L. Yogurt, L.C., on the grounds that the Florida Secretary of State had administratively dissolved it for failure to file its 2003 annual report. The case was dismissed without prejudice on December 8, 2006.
Mayfare Enterprises, Inc. v. Mrs. Fields Famous Brands, LLC, TCBY Systems, LLC, et al. (American Arbitration Association Case No. 77-1140046404-VSS, filed December 29, 2004). On December 29, 2004, Mayfare Enterprises, Inc. (“Mayfare”), one of our former franchisees, brought this claim for damages in excess of $50,000, alleging incomplete disclosures and breach of the covenant of good faith and fair dealing with its purchase of franchises from us and from our affiliates, PMF and MFF, for the development of a triple concept location in Geneva, Illinois. On July 16, 2007, the parties reached a settlement of the arbitration where the claims against MFFB and its affiliates were dismissed with prejudice, and MFFB and its affiliates paid a $150,000 settlement to Mayfare. Mayfare also agreed to pay any outstanding fees associated with the arbitration to the American Arbitration Association, and the parties agreed to pay their own costs, expenses and attorneys’ fees incurred in or as a result of the arbitration.
Osman Kashlan v. TCBY Systems, LLC, TCBY of Jordan, Inc. (United States District Court Case No. 4- 06 CV 000497 GTE, filed April 29, 2006). This lawsuit stems from a termination of a TCBY Transnational Master Franchise Agreement entered into for the exclusive territories of the Kingdom of Jordan and the Republic of Syria. Kashlan, the Master Franchisee, sought a declaratory judgment from the court regarding the separate entities of TCBY Systems, LLC and TCBY of Jordan, Inc., and alleged breach of contract and breach of the implied covenant of good faith and fair dealing. We filed an answer and counterclaim for breach of contract and trademark infringement. Kashlan filed a motion to dismiss the counterclaim and we filed an opposition. On October 8, 2009, the parties reached a settlement where Kashlan dismissed their claim with prejudice and TCBY of Jordan, Inc. paid a $1,000,000 settlement to Kashlan.
8TCBY FDD 03/2014 8 SAI Food Sensations v. TCBY Systems, LLC (American Arbitration Association Case No. 13 459 01726 06, filed July 26, 2006). A demand for Arbitration was filed with the American Arbitration Association by SAI Food Sensations, a TCBY Master Franchisee for the exclusive territory of India. The demand for arbitration alleged breach of contract and breach of the implied covenant of good faith and fair dealing, requesting damages of no less than $1.1 million. The contract provided for arbitration with the International Chamber of Commerce as the administering agency. The AAA requested, and the parties provided, their written consent to arbitrate before the AAA in New York. On September 16, 2009, the parties reached a settlement where SAI dismissed their claim with prejudice and TCBY Systems, LLC paid a $500,000 settlement to SAI.
TCBY Systems, LLC v. Herd, Case No. 252519, Superior Court of Sonoma County, State of California. We filed suit against former franchisee, Robert Herd, seeking a preliminary injunction order directing him to cease and desist from using TCBY’s trademarks and to comply with other post-termination obligations in the Franchise Agreement. We also sent form interrogatories and requests for admission to Mr. Herd. Mr. Herd filed his answer to the complaint and served responses to some of our written discovery. In a telephone call with him on February 8, 2013, he stated that he had ceased using all trademark and other insignia of TCBY and was on the verge of bankruptcy, with tax liens assessed against him for failure to pay payroll taxes and others. We asked him to send us photographs of the inside and outside of his store and evidence of his impecuniosity, including any tax liens.
Other than the actions described above, no litigation is required to be disclosed in this Item.
ITEM 4. BANKRUPTCY
As summarized in the chart below, we, MFFB, MFOC and 11 of our other affiliates each filed a voluntary Chapter 11 bankruptcy case in the United States Bankruptcy Court for the District of Delaware on August 24, 2008. All of the active entities below have a principal address of 8001 Arista Place, Suite 600, Broomfield, CO 80021, except for Mrs. Fields Gifts, Inc., which has a principal address of 1717 South 4800 West, Salt lake City, Utah 84104.
Relationship to Filing Entity Bankruptcy Case Name and Number Franchisor Us Franchisor In re TCBY Systems, LLC Case Number 08-11962 (PJW) MFOC Predecessor and In re Mrs. Fields Original Cookies, Inc. affiliate Case Number 08-11953 (PJW) (Jointly Administered Under this Case) MFFB Parent In re Mrs. Fields Famous Brands, LLC Case Number 08-11954 (PJW) Mrs. Fields Financing Company, affiliate In re Mrs. Fields Financing Company, Inc. Inc. Case Number 08-11955 (PJW) PTF, LLC (Note 1) affiliate In re PTF, LLC Case Number 08-11957 (PJW) PMF, LLC (Note 1) affiliate In re PMF, LLC Case Number 08-11958 (PJW) GACCF, LLC (Note 1) affiliate In re GACCF, LLC Case Number 08-11959 (PJW) GAMAN, LLC (Note 1) affiliate In re GAMAN, LLC Case Number 08-11960 (PJW) The Mrs. Fields’ Brand, Inc. affiliate In re Mrs. Fields’ Brand, Inc. Case Number 08-11961 (PJW) MFF affiliate In re Mrs. Fields Franchising, LLC Case Number 08-11956 (PJW)
9TCBY FDD 03/2014 9 Mrs. Fields Gifts, Inc. affiliate In re Mrs. Fields Gifts, Inc. Case Number 08-11963 (PJW) Mrs. Fields Cookies Australia affiliate In re Mrs. Fields Cookies Australia Case Number 08-11964 (PJW) TCBY International, Inc. affiliate In re TCBY International, Inc. Case Number 08-11965 (PJW) TCBY of Texas, Inc. (Note 1) affiliate In re TCBY of Texas, Inc. Case Number 08-11966 (PJW) Note 1: PTF, LLC, PMF, LLC, GACCF, LLC, and GAMAN, LLC were dissolved as of June 19, 2012. TCBY of Texas was dissolved as of June 20, 2012.
We, MFFB, MFOC and our other affiliates listed in the chart above filed a Joint Prepackaged Plan of Reorganization with the United States Bankruptcy Court for the District of Delaware on the day we each filed our Chapter 11 bankruptcy cases. The Joint Prepackaged Plan of Reorganization, as modified, was confirmed by the United States Bankruptcy Court for the District of Delaware on October 2, 2008, and we, MFFB, MFOC and our other affiliates all received discharges. Under the Joint Prepackaged Plan of Reorganization, the holders of approximately $200 million in senior secured notes exchanged those notes for a pro-rata share of the following: (i) $52,149,000 in new senior secured notes, (ii) 87,851,000 in cash, and (iii) 87.5% of the new common stock of MFOC, issued after the cancellation its old common stock. The new senior secured notes contain payment terms more favorable to MFFB, including the option for the first 2 years of issuing additional notes as payment in kind of interest due under the notes. The Joint Prepackaged Plan of Reorganization also established a new $10 million dollar senior secured, 3-year term loan for MFFB.
Other than as described above, no bankruptcy is required to be disclosed in this Item.
ITEM 5. INITIAL FEES
Store Franchise.
Initial Franchise Fee:
The initial franchise fee for a Traditional TCBY Store is $35,000. We will reduce the initial franchise fee during the Effective Period to $20,000 for an additional TCBY Store franchise. The initial franchise fee for Other Concepts Stores is $15,000. If you purchase an Other Concepts Store in conjunction with a Mrs. Fields Cookie Store, we may choose to waive the initial franchise fee for the TCBY Other Concepts Store.
We have the right to reduce or waive the initial franchisee fee in certain cases.
If you have obtained our approval of and secured the Premises for your Store at the time of signing the Franchise Agreement, the entire initial franchise fee is payable to us when you sign the Franchise Agreement. If you have not obtained our approval of and secured the Premises for your Store at the time of signing the Franchise Agreement, you will pay us an initial franchise fee deposit of $5,000 when you sign the Franchise Agreement and the remaining balance when you obtain our written approval of and secure the Premises for your Store. The $5,000 deposit is refundable until your lease is signed. Once you sign your lease, the deposit and the remainder of the initial franchise fee are fully earned by us and are due and fully payable. If you are unable locate and lease a space for your Store within 6 months from the date of the Franchise Agreement, you or we have the right to terminate the Franchise Agreement and refund your fee deposit. (See Item 11 for further information regarding our approval of the Premises of your Store.)
If you or your initial store manager do not satisfactorily complete the initial training program, we will refund the initial franchise fee less all reasonable expenses incurred by us for any services performed by us in establishing and developing your Store, up to 50% of the initial franchise fee. If you have paid less than 50% of
10TCBY FDD 03/2014 10 the full initial franchise fee at the time of the refund, no portion of that payment will be refundable under any circumstances. If we terminate for failure to satisfactorily complete training after you have secured your premises, we will keep the $5,000 deposit, although you will not be required to pay to us the remaining balance of the initial franchise fee. You must sign all releases, waivers and other agreements necessary to terminate the relationship between you and us before receiving your refund.
If you acquire an existing Store from another franchisee of ours, you will not pay an initial franchise fee to us, but will pay us a transfer fee (currently $5,000).
Except as described in this Item 5, we do not offer refunds of the initial franchise fee under any circumstances.
Other Initial Fees:
If you are developing a new TCBY Traditional Store, you must conduct a grand opening advertising and promotion program and must spend for the grand opening program for your Store an amount we determine that is at least $5,000 but does not exceed $10,000. You agree to spend at least $1,000 for the grand opening of your new Other Concepts Store. We have the right to require you to purchase grand opening advertising and promotional materials from us, our affiliates or our designees. Neither we nor an affiliate refund any payments for these materials. You may also incur expenses from other vendors and suppliers in your grand opening promotion.
From December 30, 2012 to December 28, 2013, our franchisees paid us or an affiliate initial fees ranging from $0 to approximately $35,000.
Area Director Franchise.
Initial Area Director Fee.
If you and we sign an Area Director Agreement, you will pay us an initial Area Director fee negotiated between you and us. We estimate the initial Area Director fee will range from $100,000 to $1 million or more, but will vary widely and will be calculated based on a number of factors. These factors will primarily consider the size and population of the Area Director Territory, but may also include the number of TCBY Stores to be developed, the number of existing TCBY Stores (if any) in the Territory, and the market for the products. The initial Area Director fee is fully earned when you sign the Area Director Agreement and is non-refundable once paid. Typically the initial Area Director fee is paid in full when you sign the Area Director Agreement. In some instances that we approve in advance, however, you will pay us the initial Area Director fee on an installment basis. In that case, we will retain the sales commissions you earn (as described in Item 11 and Section 6.1 of the Area Director Agreement) and apply the sales commissions towards the initial Area Director fee until the fee is paid in full; provided that if, at any time before you have completed paying us the initial Area Director fee, you fail to satisfy your Development Quota or the Area Director Agreement is terminated, the unpaid balance of the initial Area Director fee is immediately due and payable in cash or immediately available funds.
11TCBY FDD 03/2014 11 ITEM 6. OTHER FEES
STORE FRANCHISES
OTHER FEES
Type of Fee Amount Due Date Remarks
Royalty 6% of monthly Gross Weekly on or before the See the General Comments below for Revenues close of business on a definition of Gross Revenues. See Wednesday for the Note 1. immediately preceding week
Marketing fees 3% of Gross Revenues Same as continuing fee See Note 2
Local Advertising; Will vary Will vary See Note 3 Cooperative advertising
Training fee None currently, but When incurred We may charge a fee for certain may be charged in the training programs, as described in future Item 11.
Refresher training Then-current fees – When incurred We have the right to require you currently estimated at and/or previously trained and $500 per day per experienced managers and employees person plus travel to attend periodic refresher courses at expenses the times and locations we designate.
Special assistance Daily fees and charges When incurred We do not charge for the operating we establish – currently assistance and guidance we provide estimated at $500 per to all of our franchisees. However, day per person plus we have the right to make special travel costs assistance programs available to you for which you must pay fees and charges that we establish.
Late payment fee $100 for each When the delinquent delinquent payment. payment is due
Late reporting fee $100 for each When the delinquent report delinquent report is due and continuing to be due for each period that the report remains delinquent
Interest expenses Will vary under When due You must pay all business debts, circumstances liens and taxes when due. If you fail to do so, we have the right, to pay the same and then be entitled to immediate reimbursement from you. Unpaid debts owed to us bear interest from the due date until paid at the lesser of 1.5% per month or the maximum contract rate permitted by
12TCBY FDD 03/2014 12 OTHER FEES
Type of Fee Amount Due Date Remarks state law.
Audit Cost of financial audit 15 days after receipt of You must pay the costs of the audit or plus interest at 1.5% audit or inspection report inspection only if you fail to furnish per month or the us with reports, financial statements, highest legal rate on tax returns or schedules, or if the any underpayment - audit results show an understatement currently the cost of the of Gross Revenues of more than 2% audit is estimated to be or if the need for an audit was a result $5,000 of your default under the Franchise Agreement in failing to provide records and reports in a timely manner.
Transfer Fee $5,000 or the current Before or upon final See Note 4 and Item 17 transfer fee, whichever closing of transfer is greater; $7,500 or the current transfer fee, whichever is greater, to transfer a Store co- branded with an Affiliate’s concept
Additional Term 1/20th of then-current Payable before transfer or See Note 5 initial franchise fee, or relocation the current fee charged, whichever is greater, for each year of additional term ($1,750 per year during Effective Period for Traditional Store) 1/10th of then-current initial franchise fee, or the current fee charged, whichever is greater, for each year of additional term ($1,500 per year during Effective Period for Other Concepts Store)
Advertising, Marketing Will vary under When the materials are See Note 6 and Promotional circumstances ordered and/or delivered Materials
13TCBY FDD 03/2014 13 OTHER FEES
Type of Fee Amount Due Date Remarks
Maintenance, Repair, Actual costs incurred When incurred by us, on If your Store, or any part of your Replacement and demand Store, does not meet our then-current Refurbishment System Standards, we will notify Expenses you. You must update your Store as directed. We will not require a full refresh or remodel if: (a) your Store met prior System Standards at construction or the last update; and (b) the refresh or remodel is requested during the first two years or last three years of your Initial Term. If you fail or refuse to initiate promptly and timely complete the necessary actions as set forth in the notice, after notice of default and 30- day opportunity to cure, we have the option to perform the necessary repairs, replacements, maintenance or refurbishment and charge you for our costs.
Interim management 10% of Gross As incurred Incurred if we elect to manage your fees Revenues during the Store pending our purchase of that period of management Store, or we assume management of your Store in the case of your voluntary abandonment.
UCC filing fees As set by state law; Upon signing of the We have a security interest in the varies from state to Franchise Agreement and collateral required by the Franchise state at the times UCC Agreement. You must sign the continuation statements are necessary UCC financing statements filed and continuation statement, and reimburse us for the costs of filing those statements with the appropriate governmental agencies.
Costs and attorneys Will vary under Upon occurrence If we or an affiliate prevail in any fees, and circumstances proceeding or litigation against you, indemnification you must pay the costs and attorneys’ fees incurred. You and each of your Entity Owners also have indemnification obligations to us and our affiliates. Depending on the circumstances, you may pay these costs and fees to attorneys and other third parties, or reimburse us or our affiliates.
Sublease See Note 7 Monthly See Note 7
14TCBY FDD 03/2014 14 General Comments:
Except as noted above or in Note 3, all fees are payable to us or an affiliate. These fees are non- refundable except as explained in Note 5 below. Unless noted, all fees payable to us or an affiliate are uniformly imposed. If we or an affiliate do not actually receive your payments on the due date, they will be deemed delinquent. These fees do not include any initial fees that may be payable to an affiliate if you are developing your TCBY Store as a co-brand with an MFFB Franchised Concept.
You must pay all continuing fees, marketing fees and other amounts owed to us or an affiliate by pre- authorized electronic bank transfer from your general account. You must sign and complete the form Authorization Agreement attached to the Franchise Agreement as Appendix B or any other documentation we require periodically to permit the electronic transfer. The pre-authorized electronic bank transfer requirements are described in Section 6.5 of the Franchise Agreement and Appendix B to the Franchise Agreement.
“Gross Revenues” means the aggregate amount of all sales of TCBY Products, other items, and services made and rendered with the operation of the TCBY Store, including sales made at or away from the Premises of your Store, whether for cash or credit, but excluding all federal, state or municipal sales, use, or service taxe1 collected from customers and paid to the appropriate taxing authority.
Specific Notes:
1. During the Effective Period, we may require certain franchisees of Other Concepts Stores to pay royalties and marketing fees by way of a surcharge on purchases of frozen yogurt mix, hard pack yogurt, and other products. This surcharge is calculated so that it will not exceed the royalty and marketing fees rate set forth in the Franchise Agreement; however, if you are required to pay a surcharge for your Other Concepts Store, and the surcharge does result in an overpayment for your Store, you may request a credit due to any overpayment in accordance with our policies, and we will grant your request upon your presentation of proof, satisfactory to us, that a credit is due. The designated distributor from whom you purchase frozen yogurt mix, hard pack yogurt or other dessert products will report your purchases to us, and we will bill you directly for the surcharge. We have the right to reasonably direct payment method and time in alternative manners, including payment to a distributor or supplier, or by automatic debit (ACH) with weekly reports of Gross Revenues.
2. Not all TCBY Stores pay the same weekly continuing fee and marketing fee percentage. See Item 11 of this disclosure document for more information on marketing.
3. Although we do not currently establish a required minimum amount, we encourage you to spend at least 3% of your Gross Revenues each year on local store advertising.
4. We will not charge a transfer fee if the transfer is of ownership interests among your existing owners and the names and identity of all owners remains the same following the transfer. Also during the Effective Period, we may allow certain existing franchisees to transfer their franchise agreements for a lower transfer fee with or without the payment of a corresponding documentation or other administrative fee.
5. We have the right to require, as a condition of our approval of a proposed transfer, that your transferee purchase additional term under the Franchise Agreement. Similarly, we have the right to require, as a condition of our approval of a proposed relocation of your Store, that you purchase additional term under the Franchise Agreement. Currently, we will not require your transferee or you to purchase additional term if there are 4 or more years of term remaining under the Franchise Agreement at the time of a proposed transfer or relocation. We will not require your transferee or you to purchase more additional term than necessary to make the term remaining under the Franchise Agreement equal 10 years for Traditional Stores or 5 years for Other Concepts Stores. For the purposes of this disclosure document, “term remaining under the Franchise Agreement” means the remainder of any initial term plus the remainder of any renewal term under the Franchise Agreement.
15TCBY FDD 03/2014 15 Upon the purchase of additional term, your transferee or you will enter into our then current form of Term Purchase Addendum to the Franchise Agreement (“Term Purchase Addendum”). A copy of our current Term Purchase Addendum is attached as Exhibit F to this disclosure document.
We have the right to change the fees we charge for additional term and our requirements for when and how much additional term must be purchased upon a proposed transfer or relocation. In addition, although the current requirements for when additional term must be purchased are the same for transfers and relocations, we have the right to have different requirements in the future for these situations. We also have the right to require you or your transferee to sign a new form of franchise agreement for a term equal to the term remaining under the Franchise Agreement, plus any prepurchased term, in lieu of having you or your transferee sign the Term Purchase Addendum.
6. We may provide you with copies of advertising, marketing and promotional formats and materials for use in your Store, which we have prepared using the marketing fees we collect. You only must pay shipping and handling costs for these items or, if you want additional or replacement copies, our direct cost of producing those items together with any related shipping, handling and storage charges. In addition to these items, we may offer you the option of purchasing other advertising, marketing and promotional formats and materials that we have prepared and that are suitable for use at local TCBY Stores. We may provide samples, copies or information explaining these items to you periodically. If you elect to purchase any of those items from us, we will provide them to you at our direct cost of producing them plus any related shipping, handling and storage charges. In addition, we have the right to develop and market special mandatory promotional items for TCBY Stores and require you to maintain a representative inventory of these promotional items to meet public demand. In that case, we will make these items available to you at our cost plus a reasonable mark-up and any shipping, handling and storage charges.
7. Currently, neither we nor any affiliate generally enters into any leases for new franchised store locations; however, our affiliates, MFOC and MFFB, are currently on the lease for a number of existing franchised store locations, including some for TCBY Stores. If you acquire a franchise for one of these locations, you will sublease the Premises to be used as your Store from MFOC or MFFB (sometimes referred to in this disclosure document as the “Sublessor”). In those situations, you must sign a standard Sublease Agreement in the form included in Exhibit G of this disclosure document. If you are an Entity, the Sublessor has the right to require that each of your Active Entity Owners (as defined in the Franchise Agreement) sign a Guaranty in the form attached to the Sublease Agreement. The rent and other amounts due under the Sublease Agreement will be the same as the rent and other amounts due from the tenant under the Sublessor’s lease (the “Master Lease”) of the Premises from the landlord. The rent due will vary with the location of the Premises. Typically, monthly rental payments will be based on factors such as the current market value of similar properties and the perceived market value of your Store based on its location and traffic patterns, sales volumes, and so forth. You must pay the monthly rent under the Sublease Agreement directly to us or the Sublessor, as designated by the Sublessor, and we or the Sublessor will then pay the rent to the landlord under the Master Lease. However, we may require you to make the payments to us or the Sublessor at least 30 days in advance of the date the payments are due under the Master Lease (10 days in advance, for percentage rental payments). As described in the General Comments above, rental payments must be paid to us or the Sublessor by electronic bank transfer from your general account. Rental payments are typically non-refundable. Depending on our and the Sublessor’s evaluation of your credit-worthiness, the Sublessor has the right to require you to pay a security deposit (typically, the equivalent of one month’s rent) under the Sublease Agreement. Upon termination of the Sublease Agreement, the Sublessor will refund the security deposit to you if you have fulfilled all of your obligations under the Sublease Agreement.
16TCBY FDD 03/2014 16 OTHER FEES
AREA DIRECTOR FRANCHISES
Type of Fee Amount Due Date Remarks Advertising and $0 to $5,000 each calendar Each calendar quarter See Note 1 for more Recruiting Costs quarter during the term of your information Area Director Agreement Transfer Fee An amount to cover our Upon application for administrative costs (not consent to transfer to exceed then-current Assignment Fee for an individual Store) plus reasonable training fee Renewal Fee Our then-current initial At renewal Area Director fee, not to exceed the initial Area Director fee paid for the initial term Insurance $5,000-$30,000 for annual When premiums are due See Items 7 and 9 for premiums more information on insurance. See Note 2 Seminars and Conferences Will vary under When offered See Note 3 circumstances – currently estimated at $1,500 per person
General Comments:
Except as noted above, all fees are payable to us and all fees are non-refundable and uniformly imposed.
Specific Notes:
1. Advertising and Recruiting Costs. As an Area Director, you must spend an amount to advertise for prospective TCBY franchisees within your Area Director Territory that will allow you, in your reasonable opinion, to meet your Development Quota. We estimate that this amount will typically range between $0 to $5,000 per calendar quarter, although you may determine that you need to spend more than this estimated amount to meet your Development Quota. See Item 11.
2. Insurance. The estimate includes comprehensive general liability insurance with minimum limits of 1,000,000 per occurrence and $2,000,000 in the aggregate. You pay insurance premiums directly to third party insurers.
3. Seminars and Conferences. You or your Managing Owner and your Operations Manager must attend any seminars, industry conventions or programs that we designate as mandatory. We will designate the locations for these meetings and you must pay the cost of attendance, including all travel and living expenses, for each of your attendees. If you fail to attend, we have the right to charge you a reasonable fee, not to exceed $1,000 for each mandatory program missed.
17TCBY FDD 03/2014 17 ITEM 7. ESTIMATED INITIAL INVESTMENT
YOUR ESTIMATED INITIAL INVESTMENT FOR A TCBY STORE
To Whom Payment Type of Expenditure Amount Method of Payment When Due Is to Be Made
Initial franchise fee— $20,000 - $35,000 Lump Sum; Deposit Upon signing Us Traditional Store Paid If Premises Not Franchise Agreement; Approved Upon if Deposit Paid,
Signing of Franchise Remainder Due Upon Initial franchise fee— $15,000 Agreement Approval of Premises. Other Concepts Store (Note 1)
Travel and living $2,000 - $3,000 Lump sum, as As incurred during Airlines, hotels, and expenses while incurred training restaurants training (Note 2)
Real estate lease Note 3 Note 3 Note 3 Note 3
Improvements and $152,380 - $399,152 As agreed with the As incurred Various independent Equipment, if contractors and contractors and constructing a new suppliers providing suppliers (Note 4) Traditional Store labor, materials, or (Note 4) equipment
$80,000 - $135,000 Improvements and Equipment, if constructing an Other Concepts Store (Note 4)
Opening Product and $2,900 - $10,000 As agreed with As incurred Suppliers Soft Goods Inventory suppliers – Traditional Store (Note 5)
Opening Product and $1,500 - $3,000 Soft Goods Inventory – Other Concepts Store (Note 5)
Grand opening $5,000 - $10,000 Lump sum As incurred Us, and various promotion, if opening vendors and suppliers a new Traditional Store (Note 6)
Grand opening $1,000 - $2,000 promotion, if opening a new Other Concepts Store (Note 6)
18TCBY FDD 03/2014 18 To Whom Payment Type of Expenditure Amount Method of Payment When Due Is to Be Made
Security deposits, $4,000 - $5,000 Lump sum Before opening Landlord, utility utility deposits, companies, suppliers, business licenses, and and government other deposits and agencies prepaid expenses (Note 7)
Professional fees $9,000 - $10,000 Lump sum or as As incurred Attorneys, (Note 8) arranged by providers accountants, and other consultants
Insurance (3 months) $2,500 - $3,500 Lump sum or Before or upon Insurance carriers (Note 9) installments, as signing of Franchise determined by Agreement insurance carriers
Computer hardware $3,500 - $4,500 Lump sum As incurred Various vendors or and software suppliers (Note 10)
Additional funds $8,000 - $12,000 Lump sum, as As incurred Employees, suppliers, (3 months) incurred utilities and other (Note 11) vendors $209,280 - $492,152, Totals if constructing a new Traditional Store (not including real estate lease costs); $126,500 - $193,000 if constructing a new Other Concepts Store (not including real estate costs)
General Comments:
We have based the estimates provided in the tables above upon our experience and the experience of our predecessors in establishing and operating numerous TCBY Stores; however, we do not guarantee that your costs will not be higher than described above. You should review these figures carefully with a business adviser before making any decision to enter into a Franchise Agreement.
This table estimates the initial investment required to develop a Traditional or an Other Concepts Store. Where the estimated range of an item for an Other Concepts Store is different than the estimated range of the same item for a Traditional Store, we have included on the table a separate estimated range of the item for the Other Concepts Store. The estimates in the table above assume you are developing a single TCBY Store that will operate independently of any co-branded concept. Therefore, the estimates do not include any initial franchise fees, royalties, build outs, labor, equipment, or any other costs or expenses associated with any co-branded concept that you might seek to develop at your TCBY Store.
19TCBY FDD 03/2014 19 All payments you make to us or an affiliate are non-refundable unless otherwise stated. Payments you make to parties other than us or an affiliate may be refundable at the option of the other party.
Except where otherwise noted on this table, the table below, or as described in Item 10, neither we nor an affiliate offer any financing, directly or indirectly, to franchisees.
The estimates in the tables above do not include continuing fees or marketing fees payable to us during the operation of your Franchise since these fees are payable out of the Gross Revenues of your Store.
Specific Notes:
1. $35,000 is the standard initial franchise fee for a new TCBY Traditional Store franchise while $15,000 is the standard initial franchise fee for a new Other Concepts Store. See Item 5 of this disclosure document for a more detailed explanation of the initial franchise fee, the transfer fee, and the conditions when it may be reduced or when a portion of the initial franchise fee may be refundable.
2. You must pay any incidental expenses that you and your manager and any other trainees incur while attending our initial training program, including car rental, gas, airline tickets, meals, hotel room, entertainment, and salaries.
3. If you do not own a retail location we approve, you will have to lease or purchase one that meets our site approval standards. Real estate costs vary from place to place, and you will have a wide range of choices in selecting premises for your Store. Most Store premises are leased. On average, franchisees pay their area’s going rate for first class retail space, but we are unable to give you an estimate for your area. Generally, Traditional Stores require 1,000 to 1,500 square feet of space. Typical locations are strip malls or freestanding buildings, but they may also be located in malls and lifestyle centers. The size of Other Concepts Stores vary widely. We recommend that you consult with your real estate broker to develop an estimate of your costs in buying or leasing a location; be sure to add all closing costs in your estimate, such as prepaid security deposit; first month’s rent; common area maintenance (CAM) fees; heating, ventilation, and cooling (HVAC) fees; or other costs. Your lease may also require you to spend a certain amount on advertising and promotion for your particular store. Again, because these payments vary widely from lease to lease, we cannot estimate the amount you may be required to pay for these or other similar items. You will make rental payments to the landlord.
4. These estimates include construction costs (labor and material) for typical tenant improvements and remodeling to prepare a site for operation of a TCBY Store, as the estimated costs for necessary trade fixtures, such as display cases, topping bars, signage, counters and work tables, and equipment, such as freezers and Stoelting brand soft-serve dispensing machines. The low end of the range reflects the cost of purchasing 2 Stoelting brand machines, and the high end of the range reflects the cost of purchasing 5 Stoelting machines and additional fixtures and furniture for a larger Traditional Store. Sometimes, landlords may provide you a build out allowance that will defray some of the direct costs of building out your Premises. The estimates also include construction management costs, general conditions, builders risk/liability insurance and financing costs. If you develop a new store, we will provide you with prototypical plans and specifications at no additional cost to you, but you must also employ and pay an architect or engineer to prepare a site plan and other construction documents to adapt these plans and specifications to city, state and local building codes and to the specific site chosen for your Store. You must use a commercial contractor and architect that we designate or approve. These estimates do not include lease costs. Your actual construction costs will depend on numerous factors, such as the condition of the Premises, duration of the building process (delays), union labor requirements, contractors’ fees, signage, availability of materials and equipment, interest rates, and the insurance coverage you choose.
5. This estimate includes supplies, opening inventory, accounting forms and systems, soft goods, such as napkins, cups, and other paper goods, utensils, packaging materials and other items required to operate under the TCBY Franchise System. The costs will vary depending upon your inventory levels and storage space.
20TCBY FDD 03/2014 20 6. This item covers the grand opening promotional expenses which we require that you incur for the opening of the Store. Advertising and promotional materials must be approved by us, and we have the right to require you to purchase some of these materials from us, our affiliates or our designees (see Item 5 of this disclosure document). These expenses are typically not refundable and generally are paid contemporaneously with the opening of the Store. We will require that you spend at least $5,000, but not more than $10,000, for the grand opening of your Traditional Store. We will require that you spend at least $1,000 for the grand opening of a new Other Concepts Store. We may require you to submit a grand opening plan containing details about your planned grand opening promotion, and obtain our approval of the plan before the event.
7. You may be required to pay a security deposit under your real estate lease and other deposits for utilities and insurance premiums. Lease security deposits are typically due upon signing and can potentially be refundable if you do not default on your lease. Your lease may also require you to pay the last month’s rent in advance. Deposits for utility services are typically required at the time the service is applied for, and may or may not be refundable. You must confirm all of the specific deposits required. The amount for licenses and permits can vary significantly, and you should verify specific amounts with local authorities.
8. You may find it necessary to retain an attorney to review the real estate lease or sublease, the franchise documents, or to assist in forming a corporation, partnership, or limited liability company. You may also retain an accountant for advice in establishing and operating your franchise business and filing necessary tax forms and returns.
9. We require you to obtain and keep in force the following insurance coverages on a primary non- contributory basis, with us and our affiliates named as an additional insured on each policy:
(a) Property Insurance. Property insurance for all of your goods, fixtures, furniture, equipment, and other personal property located on your Store Premises insuring 100% of the full replacement cost against loss or damage from fire and other risks normally insured against in special cause of loss coverage. You will also maintain business income and extra expense coverage to cover loss of income and extra expenses for at least one year.
(b) Liability Insurance. Liability insurance on an occurrence basis, insuring against all liability resulting from damage, injury, or death occurring to persons or property in or about your Store Premises (including products liability insurance and broad form contractual liability coverage), the liability under this insurance to be at least $1,000,000 for one person injured, $1,000,000 for any one accident, and $1,000,000 for property damage.
(c) Workers’ Compensation and Employers’ Liability Insurance. You must maintain and keep in force all workers’ compensation insurance on your employees that is required under applicable laws of the state where your Store is located. You must also maintain and keep in force employers’ liability insurance on your employees, with liability limits of no less than $100,000 per accident for bodily injury by accident, and $100,000 per employee for bodily injury by disease, with no less than a $500,000 policy limit for bodily injury by disease.
(d) Other Insurance Policies. You must maintain any additional insurance policies that a prudent franchisee in your position would maintain or as we reasonably require.
Your real estate lease may also impose additional requirements for insurance coverage. The first table above contains the estimated cost of required insurance coverage for a 3 month start-up period; however, the cost of insurance varies, depending upon the insurance company you select, lease requirements, variances in the cost of insurance by location, and other factors. Whether insurance premiums are refundable depends on individual insurance carriers and the terms of the insurance policies.
21TCBY FDD 03/2014 21 10. In addition to this initial cost, you must pay to our designated supplier a monthly maintenance and subscriber fee ranging from $100 to $125. We also currently require that you have Internet access in your Store Premises, which will cost approximately $150 for installation and $600 per year or more for a subscription. These fees are not included in the $3,500 to $4,500 initial costs described above in this Note 10, though they are included in the ranges in the table.
11. This amount represents the range of your initial start-up expenses over the first 3 months. These figures include estimated payroll costs. However, they do not include the salary for the store manager, on the assumption that you will manage the store. The initial start-up expenses also do not include costs of inventory to replace the initial inventory provided in the table. These figures are estimates and we cannot guarantee that you will not have additional expenses starting your business. Your costs will depend upon factors such as how well you follow our methods and procedures; your management skill, experience, and business acumen; local economic conditions; the time of the year your Store is opened; the demand for specialty food and snack goods and services in your area; the prevailing wage rates; competition; and the sales level reached during the initial period.
YOUR ESTIMATED INITIAL INVESTMENT FOR AN AREA DIRECTOR FRANCHISE
Type of Method of To Whom Payment is Amount When Due Expenditure Payment to be Made Initial Fee (1) $100,000 to $1 million or Credited towards As we owe sales Us more, calculated based on amounts we owe commissions to several factors, primarily you for sales you, unless you the size and population of commission (5) fail to meet your the Area Director Development Territory you are granted Quota or your Area Director Agreement terminates, then the balance is due immediately Vehicle $0 to $3,000 As Arranged As Arranged Third Party Supplier Lease/Purchase (2) Computer Hardware $0 to $3,000 As Arranged As Arranged Third Party Supplier and Software (3) Advertising (4) $0 to $5,000 As Arranged As Arranged Third Party Supplier Area Director $0 to $21,000 As Arranged As Arranged Your Attorneys, Registration Costs (5) Accountants and Franchise Registration States Additional Funds $1,000 to $5,000 As Arranged As Arranged Miscellaneous Third (covers first 3 Parties. months) (6) TOTAL (7) $101,000 to $1,037,000
22TCBY FDD 03/2014 22 Specific Notes:
1. The initial Area Director fee will vary widely because it will be calculated based on a number of factors unique to each Area Director Territory granted, primarily its size and population. See Item 5 for more information.
2. You will need the use of a vehicle in the operation of your AD Business, which you may own or lease. We do not require that the vehicle you use meet any specific criteria, except that it must run reliably enough to enable you to perform your obligations under the Area Director Agreement, such as visiting TCBY Stores, and performing site services and support services. The lower end of the estimate assumes you will use a vehicle that you already own and the higher end of the estimate assumes you will lease a vehicle. The cost of your investment in a vehicle will vary depending on your current assets, the cost of leasing and purchasing vehicles in your area, and the vehicle you choose.
3. You will need a laptop computer for the operation of your AD Business, as further described in Item 11. If you already own a laptop computer, you may use it in the operation of your AD Business. The cost of your investment in computer hardware will vary depending on your current assets, the cost of computer hardware in your area, and the specific equipment you choose.
4. See Items 6 and 11 for further information regarding your obligations to advertise for prospective TCBY franchisees within your Area Director Territory.
5. You must, at your expense, register as our franchise broker and provide us with proof of that registration if the laws in your Area Director Territory require broker registration, even though the sales services you perform do not give you the right or authority to offer or sell franchises, or negotiate or execute franchise agreements on our behalf. We estimate the cost of this registration to be up to $1,000. In addition, if your activities as our Area Director require you separately to register in your Area Director Territory, you must prepare the necessary documents and submit the relevant filings at your expense. As an alternative, we may, at our option, agree to prepare and register in certain states joint disclosure documents that include information not only about us, but also about you as our Area Director. Regardless of whether you rely on your own FDD or a joint FDD, we estimate that the disclosure and registration costs you will incur as an Area Director will be up to $20,000. These costs may include your preparation of audited financial statements.
6. We do not require that you rent commercial office space, nor do we impose specifications for office decoration, fixtures, business equipment, insurance, minimum number of employees or otherwise. You may locate the administrative office for your AD Business in your home. However, we expect you will incur miscellaneous expenses to establish your AD Business. The table assumes you do not incur any real estate leasing costs, but allows for the lease or purchase of home office furniture; required expenditures such as a facsimile machine, telephone line, business cards and stationery; insurance; travel costs for initial training and site development work in your Area Director Territory; and legal and professional expenses to acquire the franchise and form a business entity to own the Area Director franchise.
7. This total is an estimate of your initial investment for the development of an AD Business under the Area Director Agreement, not including the initial Area Director fee payable to us or our Affiliates as more fully explained in Item 5 and Note 2 above. The estimated initial investment is based on our prior experience in the development and support of TCBY Stores. You should review these figures carefully with a business advisor before making any decision to enter into the Area Director Agreement. Please note that the estimates do not include the estimated initial investment to develop individual TCBY Stores. The estimated initial investment to develop a TCBY Store is described in the first table of this Item 7.
23TCBY FDD 03/2014 23 ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
Purchases of TCBY Products and Other Items
TCBY brand fresh yogurt, soft-serve frozen yogurt, hand-dipped frozen yogurt, sorbets, and other TCBY branded products are distinctive as a result of being specially produced using secret formulas and processes. These products are, in the mind of the public, inextricably interrelated with the Marks, and the reputation and goodwill of TCBY Stores is based upon, and can be maintained only by, the sale of these products. Therefore, your Store will only prepare and offer for sale menu items using TCBY brand frozen desserts or other products, test products under the Marks, or frozen desserts or other products which, in our opinion, meet our high standards and specifications. These TCBY brand products are currently only produced by Scott Brothers Dairy and Hudsonville Creamery & Ice Cream Company, LLC and Rich’s is our designated manufacturer of our frozen yogurt cake and pie products (“Manufacturers”). We have the right to appoint substitute or additional manufacturers, but are not required to do so. Manufacturers then sell TCBY brand products to our authorized distributors (“Distributors”).
We have established a regional system of Distributors to supply TCBY brand products to TCBY franchisees. You must purchase TCBY brand products from the Distributor we designate for your region. Distribution costs and terms, including minimum drop sizes, minimum case charges and delivery schedules, vary by Distributor. We have the right to appoint substitute or additional Distributors, but are not required to do so. Although we and our affiliates pay the same prices as franchisees do to purchase TCBY brand products from a particular distributor, we or our affiliates may receive rebates or payments on our and franchisees’ purchases of those products as described below.
We have currently designated Venture Projects, Inc. dba Concept Services (“Concept Services”), Tundra Services (“Tundra”), Regency Lighting, Inc. (“Regency”) and Wisconsin Built (“WB”) as approved suppliers of Store build out services, certain soft goods, furnishings, equipment and supplies.
Except for certain items that Concept Services and Tundra make available to you for purchase, such as small wares, small equipment and promotional materials (as described below in this Item 8), Master Brands (“Master Brands”) and Halo (“Halo”) are the only suppliers licensed to distribute soft goods supplies displaying the TCBY Marks and you must purchase these items from them. We have the right to appoint substitute or add additional suppliers, but are not required to do so.
You must use only the soft goods, small wares, utensils, cleaning supplies, novelty items and other miscellaneous items that we require and have been approved for TCBY Stores, as meeting our specifications and standards for quality, appearance, function and performance. Except as stated in this Item 8 and in our Management Operations Manual and Daily Operations Manual (collectively, “Operating Procedures Manual”), you may purchase these items from any supplier who satisfies our standards and specifications, as contained in the Operating Procedures Manual and other written or electronically transmitted materials that we or an affiliate furnish to you.
We and our affiliates participate in a nationwide marketing program sponsored by Coca-Cola Fountain and its affiliates. To sell certain of our products, you must participate in the program and purchase Coca-Cola soft drink mixes, beverages, and other products required under the program from any authorized Coca-Cola distributor. Coca-Cola currently pays us or our affiliates amounts based upon purchases by our franchisees. The amounts that Coca-Cola pays to us or our affiliates under this program is included in the total revenue amount received from suppliers and vendors disclosed below. Amounts paid by Coca-Cola to us or our affiliates may be used to develop and implement marketing and promotional activities designed to benefit the TCBY system, the other MFFB Franchised Concept systems, and to increase the sale of Coca-Cola products at all stores within those systems. These funds will not reduce any payments you must make to us or others as advertising fees under the Franchise Agreement.
24TCBY FDD 03/2014 24 If we grant you the right to develop and operate a TCBY Store within an Area Director Territory, or if we appoint an Area Director for an Area Director Territory that encompasses your TCBY Store after you open it, we have the right to require you to obtain or receive certain site services and support services from your Area Director and its agents and employees. These services may include assisting you in finding a site for your TCBY Store, advising you during the process of opening your TCBY Store for business, attending your grand opening promotion, and making quality control and operations and enforcement visits to your TCBY Store, all as we direct. Your Area Director may receive a portion of the initial franchise fee, royalty and service fees and other fees you pay to us or our designee in consideration for providing services to you, although you will not be required to pay any additional or greater initial franchise fee, royalty and service fees to your Area Director in order to receive the services it provides.
We or one of our affiliates may enter into co-branding arrangements with other snack-food companies. In those cases, we or our affiliates may or may not allow you to offer the co-branded products from your Store, depending on factors like the terms of the co-branding arrangement, the terms of your Franchise Agreement, applicable geographic restrictions and our and our affiliates’ other rights and obligations.
We estimate that the required purchases contained in this Item 8 will be approximately 75-85% of the cost of establishing your business and approximately 75-85% of the cost of operating your business.
We do not currently require you to purchase or lease goods, services, or supplies from any specific suppliers in the establishment or operation of your TCBY AD Business.
Development of your Store
You must construct and develop your Store in accordance with prototypical plans and specifications that we will provide to you, including requirements for exterior and interior materials and finishes, dimensions, design, image, interior layout, decor, fixtures, furnishings, equipment, color schemes and signs. You must prepare all required construction plans and specifications based on the prototypical plans and specifications, to suit the shape and dimensions of your site and to ensure that they comply with applicable ordinances, building codes and permit requirements and with lease requirements and restrictions. You must submit construction plans and specifications to us for our approval before you begin construction of your Store, and you must submit all revised and “as built” plans and specifications to us during the course of construction. You must purchase certain furniture, fixtures, and equipment (“FF&E”), as well as services related to the build out of the first two stores you build from Concept Services. The items and services you are required to purchase are listed below. You must use a professional contractor and architect in developing your Store. You must use a contractor and architect that we designate or approve.
Required Purchases from Suppliers for Build Out of Next Two Stores Required purchases may include the following: FF&E • Exterior sign package • Casework • Interior signs and graphics • Equipment • Lighting package • Indoor furniture • POS system • Yogurt machines • Walk-in cooler and/or freezer • Small wares Services • Order, ship, deliver, receive on-site and • Project management, supply chain arrange for installation of FF&E management, administration, architect consultation, general contractor consultation
25TCBY FDD 03/2014 25 and coordination, vendor and supplier • Job site visit during final installation management, and service agent coordination • Start-up and training coordination of yogurt • Installation work—walk-in cooler/freezer, machines casework, yogurt machines, equipment, • indoor furniture, outdoor furniture and One year service program through in-house exterior sign package service center • • Coordinate multiple deliveries and Continual sourcing on all elements of store installations to meet construction and build-out (FF&E, small wares, millwork, operational milestones general contractors, etc.) Fixtures, Furnishings, Equipment and Signs
You must use only the fixtures, furnishings, equipment (including computer hardware and software and signs) that we require and have approved. You may only display at your Store the signs, emblems, lettering, logos and display materials that we approve in writing. We have the right to install all required signs at the Store Premises at your expense, although our current practice is to allow you to install the signs. You may purchase these items from any supplier who can satisfy our standards and specifications. All standards and specifications will be contained in the Operating Procedures Manual and other materials we furnish or make available to you. Except for the first two Stores you develop, you are not obligated to purchase equipment or smallwares from or through Concept Services. Smallwares, however, may only be purchased from Tundra and may be purchased directly from Tundra after the initial order placed for your first two Stores through Concept Services. In some instances, our approved suppliers may be the only source of supply for certain items of equipment that satisfy our standards and specifications.
We have designated a Computer System (as described in Item 11) for use in your Store. While you may obtain hardware from any dealer authorized to sell the equipment we approve, we may negotiate with one or more vendors to provide discounts or incentives that may reduce your cost of purchasing the equipment. We will provide you with details on any discount or preferred provider program as part of our process for approving plans for constructing or remodeling your Store. You must purchase the software, and pay service and access fees, to our designated supplier, currently Innovative Computer Systems (“ICS”). We have the right to designate a different provider or providers in the future or to require you in the future to purchase additional or different computer hardware and software from a supplier or suppliers we designate, which may be us or an affiliate.
Standards and Specifications; Suppliers
In developing and operating your Store, you will use many supplies (“General Supplies”) other than the food items to be incorporated into TCBY Products and the trademark-bearing soft goods. The Operating Procedures Manual contains standards and specifications for many of the supplies that you will use. We have the right to modify our standards and specifications in the future. Standards and specifications for TCBY Products and the food items to be incorporated into these products are not available to franchisees since these constitute our trade secrets.
If you wish to use General Supplies in your Store that are different from those specified in the Operating Procedures Manual, you may request from us a detailed breakdown of our required specifications. You may then submit to us the details and specifications of any substitute item or supply you propose to use. We will advise you within 90 days of your submission if the substitute item is acceptable to us. We do not charge any fee for evaluating substitute suppliers proposed by franchisees.
We have the right to periodically review and revoke our approval of suppliers. If we revoke our approval of certain products or services a supplier provides, or of a supplier generally, within 30 days after receiving notice from us, you must stop purchasing and must discontinue using those products and services we designate, or all products and services, purchased from that supplier.
TCBY FDD 03/2014 26 As described above in this Item 8, we have approved Manufacturers, Distributors, Concept Services, Tundra, Coca-Cola and ICS as the only approved suppliers of certain items. We have no procedures for franchisees to propose alternative suppliers of these items, and we will not approve any other suppliers of these items unless we terminate our relationship with one of the approved suppliers identified above. We will then establish other supplier relationships and will advise you of the new suppliers. Except as disclosed in this Item 8, neither we nor an affiliate receive payments from any approved supplier because of transactions between the supplier and the franchisee.
We estimate that the cost of required purchases of products, supplies, fixtures, furnishings, equipment, signs and leases from approved suppliers or otherwise will represent 90% or more of your overall purchases of those items in operating your Store.
We and our affiliates have the right to receive rebates or other payments from Manufacturers, Distributors, Concept Services, Tundra, Coca-Cola and other suppliers and service providers (directly or indirectly) on sales to franchisees and to us or our affiliates. These payments have ranged or may range from less than 1% up to 40% or more of the amount of those purchases by franchisees.
During our 2013 fiscal year, we and our affiliates received approximately $3,499,576 from suppliers and vendors, based on purchases by us, our affiliates, our and their respective domestic franchisees and licensees, and/or referrals from us or our affiliates. This amount represents approximately 2.3% of MFFB’s combined total revenues from all sources for fiscal year 2013. Of that amount, we paid a total of $2,484,796, or 5.7% of MFFB’s combined total revenues, to TCBY franchisees as YFC Reimbursements (described below).
One of the rebates that we receive from Manufacturers or Distributors is a yogurt formulation charge (“YFC”). The total amount of YFC we receive is based on the purchases of TCBY yogurt products by franchisees and licensees from Distributors. As an incentive to all franchisees who enter into a Franchise Agreement and develop a new Traditional Store during the Effective Period, we have agreed to reimburse all of the YFC that the Manufacturer or Distributor pays us for the qualifying products purchased by each of these franchisees (the “YFC Reimbursement”) during the term of the Franchise Agreement. If you are one of these franchisees, your YFC Reimbursement will be set forth on Schedule 1 to the Franchise Agreement included in Exhibit B of this disclosure document). You will receive any YFC Reimbursement to which you are entitled subject to your compliance with your Franchise Agreement and payment of the YFC amount by Manufacturers. YFC Reimbursement will be paid in a manner and frequency reasonably determined periodically by us. For details about qualification, products and the method(s) of payment of this YFC Reimbursement, see Schedule 1 to the Franchise Agreement. The YFC Reimbursement is intended to help reduce costs for Traditional Stores in certain circumstances. This incentive does not apply to Other Concept Stores and will not affect or limit our ability, or our Manufacturers’ or Distributors’ ability, to adjust product prices or affect or limit our ability to collect YFC or other rebates from Manufacturers except as described in the Franchise Agreement or Schedule 1.
Without limiting these rights, we expressly reserve the ability for us and our Manufacturers or Distributors to (a) change the cost of products as a result of documented commodity or other raw ingredients pricing, packaging, manufacturing and distribution fees and similar fees and costs; (b) receive the full amount of formulation charges, contributions, rebates or other payments, including YFC, for products other than those that qualify for a YFC Reimbursement; and (c) to the extent permitted by the Franchise Agreement and Schedule 1, charge different YFC, eliminate the YFC Reimbursement or terminate or discontinue the YFC Reimbursement.
We do not negotiate purchase arrangements from suppliers or service providers for the benefit of franchisees or participate in any purchasing or distribution cooperatives. We do not provide material benefits to franchisees based on their purchase of particular products or services. There are no suppliers in which one of our officers owns a material interest.
TCBY FDD 03/2014 27 ITEM 9. FRANCHISEE’S OBLIGATIONS
This table lists your principal obligations under the franchise and other agreements. It will help you find more detailed information about your obligations in these agreements and in other items of this disclosure document.
Obligation Section in Agreement(1) Disclosure Document Item
a. Site selection and Sections 4.1 and 4.2; also see Sublease Items 6, 7, 8, 11 and 12 acquisition/lease Agreement and Assignment and Assumption of Sublease
b. Pre-opening Sections 4.2, 4.3, 4.4, 4.6 and 7.1 Items 5, 6, 7, and 8 purchases/leases
c. Site development and Sections 4.3, 4.4, 4.5, 7.1 and 7.8; Items 6, 7 and 11 other pre-opening requirements
d. Initial and ongoing Article 5 Items 6, 7 and 11 training
e. Opening Sections 4.5 and 4.6 Items 5, 6, 7 and 11
f. Fees Sections 3.2, 4.6, 4.7, 5.1, 5.2, 5.3, 6.1, Items 5, 6, 7, 11, and 17 6.2, 6.3, 6.4, 6.5, 6.6, 8.3, 9.1, 9.3, 12.3(f), 13.5, 14.2, and 16.2; Schedule 1 to Franchise Agreement; Sections 1.4, 2.5, 3.4, Article 4, Article 5, and Sections 12.3, 12.4, and 12.5 of Sublease Agreement; also see Term Purchase Addendum
g. Compliance with Article 4 and Sections 5.1, 5.2, 5.3, 7.1, Items 6, 7, 8, 11, 13, 14, 15, and 16 System Standards and 7.2, 7.3, 7.4, 7.5, 8.1, 8.2, 9.2 and policies/Operating Article 10 Procedures Manual
h. Marks and proprietary Section 4.7, Article 10 and Sections Items 8, 13, 14, and 17 information 12.3(l), 13.1(d), 14.3 and 14.4; also see Confidentiality Agreement
i. Restrictions on Sections 2.1, 7.1, 7.3, 9.2 and 10.7 Items 1, 8, 14, and 16 products/services offered
j. Warranty and customer Sections 4.1, 4.2(d), 5.3, 7.1, 7.5, 15.2 Item 11 service requirements and 15.6; Acknowledgment Addendum to Franchise Agreement
k. Territorial development Not Applicable Item 12 and sales quotas
TCBY FDD 03/2014 28 Obligation Section in Agreement(1) Disclosure Document Item
l. Ongoing Sections 4.4 and 7.1 Items 8 and 11 product/service purchases
m. Maintenance, Sections 3.2, 4.4, 4.6, 7.1, and 9.2; Items 11, 13, and 17 appearance, and Article 2 and Article 8 of Sublease remodeling Agreement requirements
n. Insurance Sections 4.5(e), 7.9 and 13.5; Article 8 Items 6, 7 and 11 of Sublease Agreement
o. Advertising Sections 4.6, 7.1, Article 9 and Article Items 5, 6, 7, 11, and 13 10
p. Indemnification Sections 7.8, 10.5 and 15.6; Sections Item 6 2.5(a), 3.4, 6.7, 6.9 and 8.1 of Sublease Agreement; Section 7 of Assignment, Assumption and Consent
q. Owner’s participation/ Sections 5.1, 7.1, 7.2, 7.7, 7.8 and 13.5 Items 11 and 15 management/staffing
r. Records and reports Sections 7.1, 7.4, 7.6, 7.7, 8.1, 8.2 and None 10.4
s. Inspections and audits Sections 7.5 and 8.3; Section 2.6 of Item 6 Sublease Agreement
t. Transfer Section 4.7, Article 12 and Section Item 17 13.1(b); Article 11 of Sublease Agreement; also see Assignment, Assumption and Consent and Term Purchase Addendum
u. Renewal Section 3.2; Renewal Addendum Item 17
v. Post-termination Sections 6.5, 7.8, 8.2, 8.3, 10.5, 10.8, Item 17 obligations 11.2, 12.3(j) and 12.3(1), Article 14, Section 15.6, Article 16 and Article 18; Sections 2.5(a), 3.2, 3.3, 3.4, 6.7, 6.9, 8.1 and 13.12 of Sublease Agreement
w. Non-competition Article 11 and Sections 12.3(j) and Item 17 covenants 12.5(c)
x. Dispute resolution Articles 16 and 17 Item 17
y. Other Not Applicable Not Applicable
(1) Unless otherwise noted, Section references are to the Franchise Agreement.
TCBY FDD 03/2014 29 This table lists your principal obligations under the Area Director Agreement and other agreements. It will help you find more detailed information about your obligations in these agreements and in other items of this disclosure document.
Obligation Section in Agreement(1) Disclosure Document Item
a. Site selection and Not Applicable Items 7 and 11 acquisition/lease b. Pre-opening purchases/leases Section 9.2 Items 5, 6, 7 and 8 c. Site development and other pre- Section 9.2 Items 7, 8 and 11 opening requirements d. Initial and ongoing training Sections 7.1-7.4 Items 5, 6 and 11 e. Opening Section 9.2 Items 5 and 11 f. Fees Sections 5.1, 6.1-6.5 Items 5, 6 and 7 g. Compliance with system Sections 8.1, 13 Items 6, 7, 8, 11, 14 and 16 standards and policies/Operating Procedures Manual h. Trademarks and proprietary Sections 10, 11; also see Items 13 and 14 information Confidentiality Agreement i. Restrictions on Sections 3, 4, 9.7 Items 6, 7, 8, 11, and 16 products/services offered j. Warranty and customer service Sections 3.1, 9.7, 13.1 Items 6 and 11 requirements k. Territorial development and Section 4.1, Appendix A Item 12 sales quotas l. Ongoing product/service Not Applicable Items 6, 7 and 8 purchases m. Maintenance, appearance, and Not Applicable Items 8 and 11 remodeling requirements n. Insurance Section 13.7, 13.8 Items 6, 7 and 8 o. Advertising Sections 13.9, 13.10 Items 6, 7 and 11 p. Indemnification Section 18.4; also see Guaranty None q. Owner’s participation/ Sections 9.1, 13.5; also see Items 11 and 15 management/staffing Guaranty r. Records and reports Section 13.11, 13.12 None s. Inspections and audits Section 14 Items 6 and 11 t. Transfer Section 15 Items 6 and 17 u. Renewal Sections 16.2-16.5 Items 6 and 17 v. Post-termination obligations Sections 17.3-17.8 Item 17 w. Non-competition covenants Sections 12.1, 17.5 Item 17 x. Dispute resolution Section 19 Item 17 y. Other Not Applicable Not Applicable
TCBY FDD 03/2014 30 (1) Unless noted otherwise, references are to Sections of the Area Director Agreement.
ITEM 10. FINANCING
TCBY Stores
Except as described below or in Item 5 of this disclosure document, neither we nor an affiliate offer direct or indirect financing. Neither we nor an affiliate guarantee your note, lease or obligation.
Our affiliate MFOC (sometimes referred to in this disclosure document as the “Sublessor”), may sublease the Premises of your Store to you. In that case, you must sign a standard form of Sublease Agreement included in Exhibit G to this disclosure document. If you are an Entity, the Sublessor has the right to require that each of your Active Entity Owners guarantee payment and performance of your obligations under the Sublease Agreement by signing a Guaranty in the form attached to the Sublease Agreement.
The amount due under the Sublease Agreement will be the same amounts as the rent and other amounts due from the tenant under the Master Lease of the Premises from the landlord (Article 1 and Article 4 of the Sublease Agreement). You must always pay us or Sublessor, as directed by the Sublessor, the full amount of all rental payments due. The rent due will vary with the location of the Premises, and neither we nor our affiliates can estimate that amount.
Sublessor has the right to require you to pay a security deposit under the Sublease Agreement (Section 1.4(c) and Section 5.1 of the Sublease Agreement). Typically, a security deposit will be the equivalent of one month’s rent. Other than this possible security deposit, there is no other security interest required.
The Sublease Agreement does not contain any prepayment penalties.
If you do not make your rental payments within 10 days of the due date or if you commit another breach of the Sublease Agreement or the Master Lease and do not remedy the breach within the time periods specified in the Sublease Agreement, Sublessor has the right to re-enter the Premises and relet the Premises and/or to sue you to collect any unpaid rent or other amounts due. The Sublessor can collect our costs of enforcement and collection, including court costs and attorneys’ fees. The Sublessor also has the right to charge a $100 late fee for each delinquent payment. In addition, late payments will bear interest from the due date until paid at a rate equal to the lesser of the highest applicable legal rate for open account business credit, or 1.5% per month (Section 12 of the Sublease Agreement).
Your breach of the Sublease Agreement and loss of possession of the Premises is also a default under the Franchise Agreement and would permit us to terminate the Franchise Agreement (Section 13.1(f) of the Franchise Agreement).
It is not our practice or intent to sell, assign or discount to a third party all or part of the sublease.
Area Directors
In some instances that we approve in advance you will pay us the initial Area Director fee on an installment basis. In that case, we will retain the sales commissions you earn (as described in Item 11 and Section 6.1 of the Area Director Agreement) and apply the sales commissions towards the initial Area Director fee until the fee is paid in full.
TCBY FDD 03/2014 31 ITEM 11. FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING
Except as listed below, TCBY is not required to provide you with any assistance.
If your store is located within an Area Director Territory, either at the time of opening or after you open it, our Area Director will discharge some or all of the obligations that we describe in this Item 11 for us, as allowed by the Franchise Agreement. The term “we” in this Item 11 refers interchangeably to us and to the Area Director whom we may appoint to service an Area Director Territory that includes your Store. Ultimately, however, we are responsible for ensuring that we comply with our obligations to you under your Franchise Agreement with us.
STORE FRANCHISES
Assistance before Opening:
Before you open your Store, we or an affiliate will:
1. Approve or disapprove a site that you propose for your Store within 30 days of the time you submit your proposed site for our consideration. We may refer you to a recommended broker to assist you in finding a site, although you are not required to use the broker. In evaluating a proposed site, we may inspect the site and may consider a variety of factors, including demographic characteristics, traffic patterns, parking, character of the neighborhood, competition from other dessert, snack food and bakery outlets in the area, the proximity to other businesses (including other TCBY Stores), the nature of other businesses in proximity to the site and other commercial characteristics (including the purchase price, rental obligations and other lease terms for the proposed site), and the size, appearance and other physical characteristics of the proposed site (Franchise Agreement, Section 4.1). Our approval of a site is no guarantee or assurance that you will be successful there.
2. If you are developing a new TCBY Store, provide you with prototypical plans and specifications on which to model the plans to build out your Store (Franchise Agreement, Section 4.3(a)).
3. Provide you, through the Operating Procedures Manual and other materials, the standards and specifications for the fixtures, furnishings, equipment (including computer hardware and software) and signs that you must use (Franchise Agreement, Sections 4.4 and 5.2 and also Item 8 of this disclosure document).
4. If you are developing a new store, provide you our standard marketing and public relations programs and media and advertising materials for your grand opening at least 10 days before store opening (Franchise Agreement, Section 4.6).
5. Provide an initial training program for you and for your initial store manager once you have signed your Franchise Agreement. However, as described in Item 7, you will be responsible for all compensation and expenses (including travel, meals and lodging) incurred due to any training programs (Franchise Agreement, Section 5.1). This training is described in detail later in this Item 11.
Assistance During Operation:
During the operation of your Store, we or an affiliate will:
1. Loan you one copy of our Operating Procedures Manual, as described in Section 5.2 of the Franchise Agreement. We have the right, at our option, to furnish or make available to you the Operating Procedures Manual in the form of a paper copy, or an electronic copy (on CD Rom or accessed through the Internet or other communication systems). Exhibit I to this disclosure document contains the Tables of Contents
TCBY FDD 03/2014 32 of the Operating Procedures Manual and the number of pages devoted to each subject as of December 28, 2013, as well as the total number of pages in the Operating Procedures Manual. As of December 28, 2013, the Operating Procedures Manual contained a total of 255 pages.
2. Provide training for any existing or replacement store managers, as explained above (Franchise Agreement, Section 5.1).
3. Furnish you guidance and operating assistance, at your request, about (a) methods, standards, specifications and operating procedures; (b) purchasing required fixtures, furnishings, equipment, signs, materials, supplies, TCBY Products; and (c) advertising and promotional programs. Occasionally, we may make special assistance programs available to you, however, for which you must pay the daily fees and charges that we establish (Franchise Agreement, Section 5.3).
4. Provide you with the System Standards (as defined in Section 1.2(j) of the Franchise Agreement and discussed in Section 7.1 of the Franchise Agreement). We may modify the System Standards periodically and the modifications may obligate you to invest additional capital in your Store and to incur higher operating costs (Franchise Agreement, Section 7.1).
5. Provide advertising and marketing services to you as explained below.
Time to Open:
If you are developing a new TCBY Store, we estimate that it will take between 60 to 120 days between the date you obtain our approval of and secured the Premises, and the date you open your Store. The interval may vary depending upon factors such as the weather, the location and condition of the site, your ability to obtain any necessary financing and building, zoning or other permits and approvals, construction delays, completion of required training and so forth. Also, you may not open your Store for business until: (a) we approve the store for opening; (b) pre-opening training of you and the store personnel has been completed to our satisfaction; (c) the initial franchise fee and all other amounts then due to us have been paid in full; (d) the lease documentation has been signed and all other documentation for development of your Store has been completed; and (e) we have been furnished with copies of all required insurance policies or other evidence of insurance coverage and payment of premiums we require.
Training:
You (or one of your Active Entity Owners) and any manager of your Store must successfully complete all phases of our training program to our satisfaction. After signing your Franchise Agreement but before you can register for training, you will be required to take and pass (to our satisfaction) an online basic skills test that includes verbal and quantitative questions. Training is provided only in English, so all of your training attendees must be sufficiently proficient in the English language to successfully complete our training program, to adequately communicate and correspond with us and your employees, customers, manufacturers, suppliers, vendors and distributors, and to effectively fulfill their responsibilities to manage and/or oversee the management of your Store. All training occurs at our classroom facility located in Broomfield, Colorado, or any other location designated by us. Classes are held periodically, and will last approximately 6 days. However, we may require you to continue training for a longer period of time as we may deem reasonably necessary, but not to exceed 12 days. In addition to the training described below, a typical trainee will spend between 6 and 10 hours during the course on recommended homework.
During the Effective Period, we require all franchisees to complete an annual training re-certification. This consists of passing an online certification knowledge assessment managed by our training department with a score of 90% or higher, achieving a compliant score on an in-store audit and attending all mandatory regional meetings and conventions. As long as franchisees certify annually under this program, we will not require them
TCBY FDD 03/2014 33 to attend additional training classes in Broomfield when they purchase additional Stores of the same brand, although the additional Store must still be managed by someone who has successfully completed our training in Broomfield or any other location designated by us. We have the right to periodically change this certification program and additional training requirements (Franchise Agreement, Section 5.1).
We distribute training materials, including our Operating Procedures Manual, at various times during the training course. The training program is overseen by Renee Roozen, who has over 16 years of food service and training experience. Other of our employees may also participate in providing and conducting aspects of the training program. All instructors will have a minimum of one year of training experience in the subject that they teach and have been employed by us for a minimum of 3 months. In the case of a proposed transfer, we will provide training to the proposed transferee and its attendees at our training facility in Broomfield or any other location we designate. The transferee and its attendees must attend training before a proposed transfer is completed, and before they can assume operations of the transferring TCBY Store. Currently, neither we nor an affiliate charge you or your transferee a separate fee for any training we provide or for the in-store work experience, but we have the right to do so in the future.
TRAINING PROGRAM
Hours of Hours of “On Subject Classroom the Job Location Training Training” Welcome, training overview, company history, 4 0 Broomfield, Colorado or other mission, vision and values, brand blue print, designated locations understanding your resources, approved suppliers, advisory board, vendor applications, core lineup and suggested retail prices, introduction to yogurt and sorbet, review shelf life chart and equipment temperatures Review dry, hot and cold toppings. If applicable 1 2 Broomfield, Colorado or other review dipping cabinet, review sizes and sampling of designated locations hand scooped yogurt Review opening store, review soft serve machine 1 11 Broomfield, Colorado or other assembly and, yogurt handling designated locations Review sampling soft serve. If applicable review 1 Broomfield, Colorado or other preparing cups and cones designated locations Review soft serve machines, re-priming (if applicable) 1 4 Broomfield, Colorado or other and opening and closing process, mixing juices, designated locations changing flavors without dissemble product temperatures, and breaking the cycle If applicable review Shiver machine and all menu 0 1 Broomfield, Colorado or other items and review waffle cone bowls and smoothies. designated locations Review take out freezer display, review quarts, pints 0 1 Broomfield, Colorado or other and pre-made cakes and pies (if needed). designated locations Disassemble soft serve machines 0 4 Broomfield, Colorado or other designated locations How to place and receive product and small ware 4 2 Broomfield, Colorado or other orders, waste control, beverages and POS register designated locations Customer service and handling complaints 4 4 Broomfield, Colorado or other designated locations
TCBY FDD 03/2014 34 Hours of Hours of “On Subject Classroom the Job Location Training Training” Selecting and building a strong retail team: Training, 4 0 Broomfield, Colorado or other motivating, coaching, and leading your team designated locations Financial Management: Planning sales and payroll 4 0 Broomfield, Colorado or other budgets, inventory, creating a P&L, and reporting designated locations sales and P&L Marketing presentation, food safety, health department 4 0 Broomfield, Colorado or other inspections, and critical control points designated locations Meet with personnel from the Franchisee Support 1 0 Broomfield, Colorado or other Center designated locations Final knowledge assessment 2 0 Broomfield, Colorado or other designated locations
We provide training for you (or one of your Active Entity Owners, if you are an entity) and the initial store manager (if different from you) free of charge; however, you must pay all travel and living expenses incurred during the training program. Store manager training is mandatory and must be completed before store opening. We reserve the right to charge you for any additional person you send for training. All training must be completed to our satisfaction and must be completed no more than 60 days before the opening of your Store. Replacement store managers must also complete the initial training. We currently do not charge a fee for replacement store managers to attend training; however, you may be required to pay a tuition fee for that training in the future (Franchise Agreement, Section 5.1). Under no circumstances should you permit your Store to be managed by a person who has not been certified by us as having completed all phases of our training program to our satisfaction (Franchise Agreement, Section 5.1). We have the right to require previously trained and experienced managers to attend periodic refresher courses at the times and locations that we designate. We have the right to charge fees for refresher training courses.
We require you (or one of your Entity Owners, if you are an entity) and the initial store manager (if different from you) to complete an annual recertification program online. You are required to complete this program to our satisfaction. It is an assessment that you should be able to complete within 2 hours and covers the following topics: operations, management, and customer service.
In the case of a proposed Transfer, we will provide training to the proposed transferee and its attendees, as described above. We also may require the proposed transferee and its attendees to attend, an in-store work experience at an existing TCBY Store. Currently, neither we or our affiliates, nor the host franchisee plan to charge you or your transferee a fee for any training we provide or for the in-store work experience, but we have the right to do so in the future. You must pay travel and living expenses for your trainees.
Marketing and Advertising:
Materials
We and our affiliates currently utilize point of purchase printed advertising for the sale of TCBY Products, goods and services at TCBY Stores. We do not currently utilize electronic media such as radio or television. We may also conduct coupon promotions. In that case, we may require you to accept coupons that are issued by us or our affiliates and presented at your Store by your customers. You will receive certain compensation for these coupons when you tender them to us in accordance with our System Standards. We typically conduct coupon promotions on a regional basis. We currently use national advertising firms for the production of advertising materials.
TCBY FDD 03/2014 35 We may provide you with copies of advertising, marketing and promotional formats and materials for use in your Store, which we have prepared using marketing fees we have collected from TCBY Stores. In addition, we may also offer you the option of purchasing other advertising, marketing and promotional formats and materials that we have prepared and that are suitable for use at local TCBY Stores. For required advertising, you must pay only shipping and handling costs. For optional materials or for additional or replacement copies of required items, you must pay our direct cost of producing these items together with any related shipping, handling and storage charges. You must participate in all mandatory promotions and product roll-outs. If you do not place minimum orders of products and other items necessary for a mandatory promotion or product roll-out by a certain date, we have the right to send, or direct suppliers to send, an automatic shipment of a specified minimum quantity of these products and items to you, and you must accept and pay for them upon receipt. All payments for the items described in this paragraph are nonrefundable and cannot be applied against the weekly marketing fees that you must pay to us, as described in Item 6 of this disclosure document and below (Franchise Agreement, Section 9.3). We are not required to spend any particular amount on advertising in the area in which your Store is located.
You may use advertising materials prepared by you if the materials (a) comply with the requirements of Articles 9 and 10 of the Franchise Agreement, (b) are completely clear and factual and not misleading, and (c) conform to the highest standards of ethical marketing and promotion policies which we have the right to prescribe. Before use, you must submit to us for approval all press releases and policy statements and samples of all local advertising, marketing and related materials, including materials offering free TCBY Products, not prepared or previously approved by us. We will not unreasonably withhold our approval. You may not advertise your Store or the TCBY Products over the Internet (or any other form of electronic commerce) or establish a related World Wide Web Site without our prior written consent. If we do not give you written approval of any advertising or other promotional materials within 15 days from the date of receipt by us of the materials, we will be deemed to have disapproved the submission. You may not use any advertising, marketing or related materials that we have disapproved. You must list your Store in the principal telephone directories distributed in your metropolitan area (Franchise Agreement, Section 9.2).
Marketing Fee
You must pay to us a weekly marketing fee of 3% of your Store’s Gross Revenues. TCBY Stores owned by us or an affiliate contribute marketing fees on the same basis as similarly situated Stores operated by franchisees, but that basis and the amount of marketing fees paid may differ from yours (Franchise Agreement, Section 9.1(a)). You must pay marketing fees weekly by pre-authorized electronic bank transfer, at the same time that you pay continuing fees (Franchise Agreement, Sections 6.4, 6.5 and 9.1(a)).
As of the issuance date of this disclosure document, we do not establish a required minimum amount for local store advertising, but we encourage you to spend at least 3% of your Gross Revenues each year on local store advertising.
We will administer the marketing fees we collect and direct all marketing programs financed by the marketing fees, and have the right to determine the creative concepts, materials and endorsements used and the geographic, market and media placement and allocation.
We will account for the marketing fees we collect separately from our other funds, although we are not required to establish a separate marketing fund or bank account for those fees. We have the right to use the marketing fees we collect to defray the salaries, administrative costs and overhead we and an affiliate may incur in activities related to our marketing programs, including conducting market research, preparing advertising, promotion and marketing materials and collecting and accounting for the marketing fees we collect. On your prior written request made within the first quarter of any calendar year, we will make available to you no later than 120 days after the end of each calendar year, an annual statement of moneys collected and costs incurred for our marketing programs. No independent audit is required with this statement or the marketing fees we collect.
TCBY FDD 03/2014 36 We have the right in the future to create a marketing fund to be operated by us or through another form of entity separate from us (Franchise Agreement, Section 9.1(c)).
Generally, we feel we will expend all marketing fees we collect during the taxable year within which the contributions and earnings are received. However, any marketing fees we collect but do not spend in the fiscal year in which they were accrued will be carried forward to the following fiscal year. We may spend in any fiscal year an amount greater or less than the aggregate marketing fees collected from TCBY franchisees in that year and we may make loans on behalf of the marketing fund bearing reasonable interest, not to exceed 10%, to cover any deficits in the amount of marketing fees collected, and cause future collections to be applied first, at our discretion, to any outstanding loans we have made on behalf of TCBY Store marketing programs.
Although we will endeavor to utilize the marketing fees to develop advertising and marketing materials and programs and to place advertising that will benefit all TCBY Stores, we cannot ensure you that our expenditure of marketing fees in or affecting any geographic area will be proportionate or equivalent to the marketing fees paid to us by TCBY Stores operating in that geographic area or that any TCBY Store will benefit directly or in proportion to the marketing fees it pays to us from the development of advertising and marketing materials or the placement of advertising (Franchise Agreement, Section 9.1(d)). Except as described in this Item 11, we are not obligated to conduct any advertising programs for the franchised system.
In 2013, marketing fee contributions were used as follows: (i) production, printing, and merchandising: 75%; (ii) administrative expenses (including salaries of advertising/marketing executives and employees of ours): 16%; and (iii) other expenses, consisting primarily of product development, marketing research and store design: 9%. In 2013, we did not spend any of the marketing fee contributions that we received for advertising that was used principally to solicit new franchise sales, nor do we intend to do so in 2014. You may receive an accounting of the marketing fee, including how the funds were raised and spent, as outlined in your Franchise Agreement.
In addition to the marketing fees you pay to us, you must also spend on advertising any amount required under your lease or sublease. Those amounts typically vary from lease to lease, and therefore, franchisees are not obligated to spend the same amount on local advertising and marketing (Franchise Agreement, Section 9.2). If you are developing a new TCBY Store, you must also conduct a grand opening advertising and promotion program as explained above in this Item 11 and in Item 5 of this disclosure document.
Advertising Cooperatives
As of the issuance date of this disclosure document, we do not form, organize, maintain or otherwise make use of advertising cooperatives, nor do we require you to join one. We have the right, however, in the future, to form, organize, maintain and otherwise make use of local or regional advertising cooperatives. As described in Item 6 of this disclosure document, if a local or regional advertising cooperative is formed or organized for the market that includes your Store, we have the right to require you to participate in and contribute to the advertising cooperative an amount of up to 3% of your Gross Revenues, which is in addition to your marketing fees and any lease-required advertising fees. All franchisees will contribute at the same rate. Each TCBY Store located within an advertising cooperative, including any TCBY Stores owned by us or an affiliate, will be a member of the advertising cooperative and have one vote per Store. The members of each advertising cooperative and their elected officers will be responsible for all administration of the advertising cooperative. Each advertising cooperative will engage the services of a professional advertising agency, public relations firm or similar service that meets with our approval and has expertise in their market. Each advertising cooperative must have an independent CPA prepare quarterly and annual financial statements, which will be made available to us and all TCBY franchisees in the advertising cooperative. We have the right to require local and regional advertising cooperatives to be formed, changed, dissolved or merged.
TCBY FDD 03/2014 37 Advertising Committee
We have the power to form, create or dissolve any advertising committee, and to determine how members of any committee we form or create are selected. In addition, any advertising committee we form will serve in an advisory capacity only.
Point of Sale System/Computer System Requirements
As of the date of this disclosure document, we require you to purchase and use the Treatware point-of- sale system by ICS (and applicable hardware as specified by ICS or us) in the operation of your Store. We also require you to participate in the prepaid/stored value tracking system from a service managed by Opticard Payment Services, Inc. (“Opticard”). The point-of-sale system and prepaid/stored value tracking system as upgraded or modified by current releases or similar hardware and software constitute the current computer system requirements (“Computer System”). The hardware operating with the ICS Treatware software also acts as your cash register for recording sales transactions and printing customer receipts. As of the date of this disclosure document, ICS is our only designated point-of-sale system provider and Opticard is our only designated prepaid/stored value tracking system provider, but we reserve the right to designate a different provider or providers in the future. You must obtain service contracts and pay monthly service and access fees of $65-$95 to our designated point-of-sale system service provider, and $30-$50 to our designated prepaid/stored value tracking system provider. The initial costs associated with the Computer System will range from $3,500 to $4,500.
We also currently require that you have high-speed Internet access in your Store premises in order to electronically submit Gross Revenues and financial statement reports for your Store to us, and to allow us to access information directly from your Computer System. You will spend approximately $150 for the initial Internet installation and approximately $50 per month for Internet access.
In addition, we require you to establish and maintain a valid email address and authorize us to communicate with you via e-mail at the address. Currently, you may use any Internet service provider that allows you to access the Internet.
We have the right to require you in the future to purchase, install and use a different Computer System and to designate in the future the supplier or suppliers (which may be or include us or an affiliate) from whom you must purchase these items. You must purchase, install and begin using any required computer hardware and software in your Store within 60 days of our notice to you. We have the right to require you, at your sole expense to upgrade any required computer hardware and software to meet our then-current standards and specifications. There is no limitation on the frequency and cost of this requirement. We estimate that the annual cost for any upgrades, maintenance, or updating will be up to $500. We also have the right to independently access the information and data you collect and gather using any required computer hardware and software, and there is no limitation on our right to access this information.
AREA DIRECTOR FRANCHISE
Assistance Before Opening: Before you begin your AD Business, we will:
1. Provide an initial training program to you or your Managing Owner and your Operations Manager, if any (Area Director Agreement, Section 7.1). See Note 11 below in the “Area Director Franchise” section of “Assistance During Operation” for information regarding training.
2. Upon your request at the end of the initial training program, provide you or your Managing Owner with additional training if you or your Managing Owner do not feel completely trained in the operation of an AD Business after the initial training program (Area Director Agreement, Section 7.2).
TCBY FDD 03/2014 38 Assistance During Operation: During the operation of your AD Business, we will:
1. Loan you a copy of our Area Director Operating Procedures Manuals (“Area Director Manuals”) when available (Area Director Agreement, Section 8.1). We are currently in the process of developing our Area Director Manuals, which will consist of our operations, training and other manuals, and related materials, as well as materials specific to the operation of an AD Business. The Area Director Manuals will contain mandatory and suggested standards and operating procedures. The Area Director Manuals may be provided in paper or electronic form. The Area Director Manuals are confidential and remain our property. We will occasionally modify or supplement the Area Director Manuals, and you must comply with current, mandatory standards and procedures in the Area Director Manuals. Until the Area Director Manuals are complete, we will loan you a copy (in paper or electronic form) of our current Operating Procedures Manual (as described in Note 1 above in the “Store Franchise” section of “Assistance During Operation”) and other materials we, in our sole judgment, deem appropriate.
2. Register, as applicable, and furnish to you a current copy of our disclosure document for you to use as we may request periodically in identifying prospective TCBY franchisees in your Area Director Territory (Area Director Agreement, Section 4.2).
3. Provide an initial training program to replacement or additional Managing Owners, Operations Managers and other management personnel. We reserve the right to charge a tuition fee in advance of such training (Area Director Agreement, Section 7.3).
4. Provide you with advice relating to franchise sales, franchisee support and assistance via telephone consultation, upon your reasonable request (Area Director Agreement, Section 8.2).
5. Provide you with access to any franchise sales advertising and promotional materials that we may (but are not required to) develop, the actual cost of which we may pass on to you (Area Director Agreement, Section 8.2).
6. Provide you with access to our point-of-sale, product promotions, coupons and other marketing materials generally made available to TCBY Stores (Area Director Agreement, Section 8.2).
7. Collect certain fees from TCBY franchisees within your Area Director Territory, and remit commissions owed to you, as appropriate. Area Director commissions are summarized in the table below:
Section(s) of Commission Amount When Paid Area Director Agreement Sales Commissions A percentage of Initial Franchise Fees Within 30 days after all 6.1, 6.2 that will vary widely, negotiated between conditions of payment the parties based on several factors, have been met including the Development Quota and size of the Area Director Territory Transfer Commissions If any, a percentage of transfer fees paid Within 30 days after 6.3 by transferring franchisees as negotiated completion of transfer (if between the parties based on several we ask you to perform factors, including the Development services in connection with Quota, size of the Area Director Territory the transfer) and after all and number of existing TCBY Stores in conditions have been met such Territory
TCBY FDD 03/2014 39 Section(s) of Commission Amount When Paid Area Director Agreement Commissions on A percentage of royalty and service fees Within 10 business days 6.4 Royalty and Service that will vary widely, negotiated between after the end of each 4 or 5 Fees the parties based on several factors, week fiscal month including the Development Quota, size of (excludes advertising fees, the Area Director Territory and number company-owned TCBY of existing TCBY Stores in such Stores, and certain other Territory excluded locations)
General Note:
Conditions apply to payment of Area Director commissions. Refer to the Area Director Agreement, attached to this disclosure document as Exhibit D, for more information. No commissions are paid to you unless the underlying fees have been actually paid to us by TCBY franchisees within your Area Director Territory and you have met all applicable conditions (Area Director Agreement, Section 6).
Time to Open:
The typical length of time between the effective date of the Area Director Agreement and the commencement of your AD Business is approximately 1 to 2 months, depending on our scheduling of Area Director training programs, your training attendees’ ability to complete the training program and our ability register, as applicable, and furnish to you a current copy of our disclosure document for you to use in your Area Director Territory. Under the Area Director Agreement, you have 60 days from the effective date to complete our initial training program and commence operation of your AD Business. We will extend the time within which you must commence operations for a reasonable period of time, if factors beyond your reasonable control prevent you from meeting this schedule, if have made reasonable and continuing efforts to comply and you request an extension in writing. If you fail to commence operation of your AD Business within 60 days from the effective date or before the end of any agreed upon extension, we may terminate the Area Director Agreement (Area Director Agreement, Section 9.2).
Training.
Before you commence operation of your AD Business, we will furnish an initial training program to up to 2 people from your management staff. Currently, you must attend the initial management and operational training program we offer to TCBY franchisees (as described in Note 5 above in the “Store Franchise” section of “Assistance Before Opening”). We will work with you to provide further training on topics we deem advisable, depending on your training needs and past experience. We will furnish all training programs at the places and times we designate. In addition to the instructional materials used in the TCBY Store initial training programs, training materials for Area Directors will include our current disclosure document, advertising and marketing materials, and other Area Director instructional materials. The initial training program for Area Directors will be supervised and taught by the same individuals involved in the TCBY initial training program.
Training must be completed by you or your Managing Owner (if you are an entity) to our satisfaction and may, at your option, be attended by your Operations Manager. “Managing Owner” and “Operations Manager” are defined in Item 15. All training must be completed prior to your provision of services to any TCBY franchisee or prospective franchisee (Area Director Agreement, Section 7.1).
You must pay for the salaries, wages, overtime, benefits, travel costs and expenses, and related costs for persons associated with you who attend any of the training or other programs described in this Note 11, but we do not collect a separate fee for you, your Managing Owner, or your Operations Manager to attend initial training.
TCBY FDD 03/2014 40 After the initial training program, you or your Managing Owner may request that we provide additional training, at no additional cost to you, provided that you request the training in writing at the end of the initial training program (Area Director Agreement, Section 7.2).
At all times during the term of the Area Director Agreement, you must have at least one person who has completed our initial training program to our satisfaction. We reserve the right to charge a tuition fee for replacement or additional Operations Managers and other management personnel (Area Director Agreement, Section 7.3).
We may require you or your Managing Owner to attend ongoing training, seminars, conventions, and development programs. We have the right to charge you a reasonable fee for your attendance at such programs. If you fail to attend any mandatory program we offer without our prior written approval, you must make up the missed program at a time and place we designate, and may be charged a reasonable fee not to exceed $1,000 for each program missed (Area Director Agreement, Section 7.4).
With our prior written consent and subject to our then-current certification and training procedures, we may require or authorize you to implement a training program for your agents and employees that provide services to TCBY franchisees within your Area Director Territory. We have the right to designate and approve all of the content for any such training program we may require (Area Director Agreement, Section 9.1).
Marketing and Advertising.
As further described in Item 6, you must spend an amount to advertise for prospective TCBY franchisees within your Area Director Territory that will allow you, in your reasonable opinion, to meet your Development Quota. Although we may provide you with promotional and recruiting materials to solicit prospective franchisees, you are responsible for arranging media placement and for all media expenses. All advertising which you conduct, even using the recruiting materials that we create, is subject to our prior approval, which you must obtain in the same manner as applies to local advertising by TCBY franchisees. As a condition of our approval, you must permit us and other Area Directors that we authorize to use the materials that we approve for your use, without compensation to you. You may use materials that we approve only in the exact form that you submit them to us. You agree, at your expense, to comply with all state filing requirements relating to the advertising you use, unless we have previously filed the advertising with the particular state (Area Director Agreement, Sections 13.9 and 13.10).
Point of Sale System/Computer System Requirements.
You must purchase a laptop computer and computer software for the operation of your AD Business. Although we do not require you to purchase computer hardware and software that meets any particular specifications, we recommend that you purchase for use in the operation of your AD Business a computer with sufficient processor speed and memory to efficiently operate, along with an up-to-date operating system and Microsoft Office software package (Area Director Agreement, Section 9.2). Currently, we estimate that the cost of the computer hardware and software ranges from $0 to $3,000 and we estimate that you will spend up to $500 per year on optional maintenance, upgrades, updates or support contracts.
TCBY FDD 03/2014 41 ITEM 12. TERRITORY
Store Franchise.
Territory
We will grant you a franchise for a specific location that we must approve. You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.
You may not operate your Store at any other site without our prior written consent and you may not build or relocate your Store until we have approved your location. In addition, you may only offer and sell finished, approved TCBY Products over the counter to retail customers from your Store, and may not sell approved TCBY Products or any materials, supplies, or inventory bearing the TCBY Marks at any other location or through any alternative channel of distribution, including through the Internet (or any other form of electronic commerce), mail order and catalog sales, telemarketing, and direct marketing, without our prior written consent. You may, however, (1) offer and sell approved TCBY Products as part of off-site catering events and company account programs, provided you deliver (and do not engage a major carrier to deliver) TCBY Products that meet System Standards for quality and freshness and the sales are not part of a mail order program; (2) offer samples of approved TCBY Products at or near your Store as approved by your landlord, where necessary, or at other locations as approved by us or in accordance with any sampling or promotional program we approve or designate; or (3) upon our prior written approval, offer and sell approved TCBY Products from a table, kiosk or cart at satellite locations that we approve. You may not sell to anyone any materials, supplies, or inventory used in the preparation of any TCBY Products. Further, you may not sell any TCBY Products to any person or entity purchasing the TCBY Products for resale without our express written permission.
Your Franchise Agreement does not grant you any options, rights of first refusal or similar rights to acquire additional franchises.
Relocation
You may not relocate your Store unless you relocate your Store as a result of condemnation, the exercise of a relocation right by your landlord or for some other reason approved by us in writing. Upon the occurrence of one of the relocations described in the preceding sentence, we will consent to such relocation at a site acceptable to us provided that: (1) you are in full compliance with the Franchise Agreement; (2) you give us written notice of your desire to relocate at least 30 days prior to the date your Store will close for relocation; (3) you find relocated Premises that meet all of our then current site criteria for the development of new TCBY Stores and obtain our written approval of the relocated Premises within 60 days after the date your Store will be closed for relocation and before you sign a lease or sublease or begin construction of the relocated Premises, and you open the relocated Store at the relocated Premises within 180 days after the date your Store closes for relocation; (4) you construct and develop the relocated Store in accordance with all of our then current System Standards for TCBY Stores, including designs and service systems, and trade dress; (5) you have sufficient term remaining under the Franchise Agreement, or purchase from us sufficient additional term under the Franchise Agreement, to satisfy our then current policy on remaining term requirements for relocations; (6) you pay to us our then current relocation fee (if any); and (7) at our request, you execute a general release, in a form satisfactory to us, of any and all claims against us or our affiliates and our and their respective officers, directors, attorneys, shareholders and employees, and any other ancillary agreements we are then using for relocations, or, in the event you are required to purchase additional term, you sign our then current form of Franchise Agreement.
TCBY FDD 03/2014 42 Our Reservation of Rights
We and our affiliates have the right, without compensation to you or any other franchisee, to do the following: (1) franchise, license and/or own and operate TCBY Stores and Yovana® stores at any locations and on any terms and conditions as we or an affiliate deem appropriate; (2) sell and license and franchise others to sell TCBY Products and any other products or services under the TCBY Marks, or any trade names, trademarks, service marks, trade dress or other commercial symbols of an affiliate, through alternative channels of distribution (as described above) and to a variety of customers; and (3) franchise, license and/or own and operate businesses (including dessert and snack food businesses) at any locations and on any terms and conditions as we or an affiliate deem appropriate, or distribute products or services through alternative channels of distribution which are similar to the TCBY Products under trade names, trademarks, service marks, trade dress or other commercial symbols other than the TCBY Marks or those owned by us or an affiliate. These activities may compete with you. We will not pay you any compensation for soliciting or accepting orders inside your Territory through alternative channels of distribution.
Further, we or an affiliate may acquire or actively seek to acquire businesses or franchise systems that are your competitors and those competitors may have locations near your Store, including locations within the same shopping mall. In addition, we or an affiliate may enter into co-branding arrangements. These activities may compete with you.
We enter into licensing and franchising arrangements with other individuals and entities, granting those individuals and entities exclusive territorial rights which may restrict your rights to locate your Store in certain locations. Any restrictions in effect will be explained to you as part of the site selection process for your Store.
Area Director Franchise.
Territory
We will grant you the right to perform sales services for us, and provide site services and support services to TCBY franchisees within your Area Director Territory. You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control.
As a condition of maintaining your Area Director franchise, you must satisfy certain development obligations (“Development Quota”) for each “Development Period” during the term of the Area Director Agreement. The Development Quota consists of the number of new Stores, as well as the cumulative number of Stores that must be open and operating within your territory. We and you will mutually agree upon the applicable Development Quota to be included in Appendix A to the Area Director Agreement before you sign the Area Director Agreement. Area Director Development Quotas vary considerably. We estimate, however, that the typical Development Quota will be a cumulative total of approximately 10 to 30 TCBY Stores open and operating at the end of the initial term of the Area Director Agreement.
In addition, at all times from and after the second Development Period, you must continuously own and operate at least the minimum number of TCBY Stores that we designate within your Area Director Territory. Further, renewal of the Area Director Agreement is contingent upon we and you agreeing on a new Development Quota for the renewal term at least 90 days prior to the expiration of the previous term.
You may only solicit prospective TCBY franchisees that reside, or maintain their principal place of business, within your Area Director Territory. You may not solicit prospective TCBY franchisees that reside, or maintain their principal place of business, outside of your Area Director Territory.
TCBY FDD 03/2014 43 If you provide site services and support services to a TCBY franchisee located within your Area Director Territory, even to a TCBY Store whom we recruit, we will pay you a percentage of the royalty and services fees that we collect from that Store, except we do not share royalty and service fees from any TCBY Store that we or any affiliate owns or any Excluded Locations.
Relocation
When we offer to sell you the Area Director franchise, we will identify the boundaries of your Area Director Territory in Appendix A to the Area Director Agreement. The size may vary from one Area Director to the next. Once established, you may not relocate your Area Director Territory.
Our Reservation of Rights
We and our employees, affiliates and designees reserve the right, without compensation to you (unless otherwise specifically described below), to:
(a) use, and license others to use, the Marks for the operation of TCBY Stores, sale of proprietary products or any other business or endeavor at any location outside the Area Director Territory or in any channel of distribution, including the Internet and other e-commerce;
(b) solicit prospective TCBY franchisees and grant others the right to operate TCBY Stores outside the Area Director Territory;
(c) solicit prospective TCBY franchisees, with or without your involvement, and grant other TCBY Store franchises in the Area Director Territory provided that (i) any new prospective site will first be offered to you; (ii) new TCBY Stores open in the Area Director Territory will count towards your Development Quota and (iii) you will receive your sales commission and related fees for those Stores;
(d) own and operate TCBY Stores within the Area Director Territory without payment of sales commissions or other fees in connection with those Stores;
(e) solicit prospective TCBY franchisees and grant franchises or licenses to others to open TCBY Stores or offer proprietary products at locations within the Area Director Territory that are to be co-branded with stores that are part of a multi-unit chain or retailer, such as Starbucks®, Subway®, Quiznos®, Schlotzsky’s®, Wal-Mart®, Blockbuster® or Build-a-Bear®, who have the right or ability to add food service to one or more of their company-owned, franchised or licensed locations, provided that (i) you will provide the services and support for those Stores within the Area Director Territory as set forth in the Area Director Agreement; and (ii) you will receive your royalty fees (but no sales commissions) for those Stores;
(f) offer franchises or licenses to others to operate TCBY Stores or offer proprietary products from any location with premium, priority, or exclusive access, including a grant to a disadvantaged business entity (DBE), masterconcessionnaire, or master franchisee or operator who is awarded a bid to operate stores or food outlets at an airport, commercial or corporate park, school, hospital, food service court, stadium, toll stop or rest area, outlet or factory stores, or masterconcessionnaire mall (“Excluded Locations”);
(g) have the option, but not the obligation, to provide sales services, site services or support services for franchised TCBY Stores within the Area Director Territory with no change in the percentage of royalty and service fees commissions paid to you, unless you are in default under the Area Director Agreement;
(h) use and license others the use of trademarks other than the Marks in connection with the operation of retail outlets or businesses featuring similar products as the TCBY Stores from any location, including within the Area Director Territory; and
TCBY FDD 03/2014 44 (i) use any alternative channels of distribution, including the Internet and other e-commerce, catalog or wholesale distribution, or branded and non-branded retail channels such as grocery, drug, club or convenience stores, from any location, including within the Area Director Territory.
ITEM 13. TRADEMARKS
Under the Franchise Agreement, we grant you the right to operate a TCBY Store under the TCBY name and Mark. You may also use our other Marks, as approved by us, in or with your TCBY Store. The following is the principal TCBY Mark registered on the Principal Register of the United States Patent and Trademark Office (“USPTO”):
Principal/Supplemental Register Principal U.S. Serial No. of the United States Patent Date of Registration Trademark and Trademark Office TCBY 1,463,784 Principal November 3, 1987
We renewed this registration on June 23, 2007. We have filed all required affidavits with the USPTO. There are no currently effective material determinations of the USPTO, Trademark Trial and Appeal Board, the Trademark Administrator of any state, or any court, nor are there any pending infringements, opposition or cancellation proceedings or any pending material litigation, involving the TCBY Mark described above. There are no agreements currently in effect which significantly limit our rights to use or franchise the use of this Mark.
Your right to use the TCBY Marks is derived solely from the Franchise Agreement and is limited to your conduct of business in compliance with the Franchise Agreement and all applicable standards, specifications, operating procedures and rules that we require.
You must use the applicable TCBY Marks as the sole identification of your Store, and you must identify yourself as the independent owner in the manner we require. You may not use any TCBY Mark as part of any corporate or trade name or with any prefix, suffix or other modifying words, terms, designs or symbols (other than logos franchised to you under the Franchise Agreement), or in any modified form, including on any sites on the Internet or World Wide Web, as an Internet domain name, or as part of an electronic mail address without prior written approval from us. You must follow all other policies and procedures relating to the Marks, as contained in the Operating Procedures Manual. You must display all applicable TCBY Marks in the manner we require, and you must use the registration symbol “®” in using any of the registered Marks. You must refrain from any business or marketing practice which may be injurious to our business and the good will associated with the TCBY Marks or TCBY Stores. We have the right to require you to modify or discontinue use of any TCBY Mark or use one or more additional or substitute trade or service marks if we determine that it becomes advisable at any time.
You must immediately notify us of any apparent infringement of or challenge to your use of any TCBY Mark or claim by any person of any rights in any Mark, and you must not communicate with any person other than us or our counsel about the infringement, challenge or claim. We and our affiliates have the right to take the action we deem appropriate and control exclusively any litigation, USPTO proceeding or any other administrative or court proceeding concerning any TCBY Mark. You must sign any instruments and documents, render assistance and do those things as, in the opinion of our legal counsel, may be necessary or advisable to protect and maintain our interests in any litigation or USPTO or other proceeding or otherwise to protect and maintain our interests in the TCBY Marks.
We will take the action we think appropriate. We will indemnify you against and reimburse you for all damages for which you are held liable in any proceeding arising out of your authorized use of any TCBY Mark and for all costs you reasonably incur in defending any claim brought against you or any proceeding in which you
TCBY FDD 03/2014 45 are named as a party, if you have timely notified us of the claim or proceeding and have otherwise complied with the requirements of the Franchise Agreement. At our option, we and our affiliates are entitled to defend and control the defense of any proceeding arising out of your authorized use of any TCBY Mark.
We do not know of any infringing uses that could materially affect your use of the Marks.
ITEM 14. PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION
Except as noted below, we and our affiliates do not own any patents or copyrights which are material to the Franchise. As of the date of this disclosure document, there are no patents or copyrights registered or pending, and no patent applications, that are material to the Franchise.
We claim copyrights in the Operating Procedures Manual and Area Director Manuals, construction plans, specifications and materials, printed advertising, promotional, sales, training and management materials and in related items you will use in operating your Franchise. We have not registered these copyrights with the U.S. Registrar of Copyrights. You may use the Operating Procedures Manual (or Area Director Manuals if you are an Area Director) and other materials during the term of the Franchise Agreement (or the Area Director Agreement if you are an Area Director).
There are currently no effective determinations of the U.S. Copyright Office or any court regarding any of the copyrights. There are no agreements currently in effect which significantly limit our rights to use or franchise the copyrighted materials. Also, there are no superior prior rights or infringing uses actually known to us which could materially affect your use of the copyrighted materials in any state.
Your right to use the copyrights is derived solely from the Franchise Agreement and is limited to your conduct of business in compliance with the Franchise Agreement and all applicable standards, specifications, operating procedures and rules that we require. We have the right to require you to modify or discontinue use of any of the materials in which we claim copyrights if we determine that it becomes advisable at any time. In that case, you must comply with our directions to modify or discontinue the use of those materials within a reasonable time after notice from us.
You must immediately notify us if you learn that any person may be using our copyrighted materials without our consent or authorization. You must also immediately notify us of any challenge to your use of any copyright or claim by any person of any rights in any copyright. You must not communicate with any person other than us or our counsel about any challenge or claim to any copyright. We and our affiliates have the right to take the action we deem appropriate and the right to control exclusively any litigation, U.S. Copyright Office proceeding or any other administrative proceeding concerning any copyright. You must sign any instruments and documents, render assistance and do those things as, in the opinion of our legal counsel, may be necessary or advisable to protect and maintain our interests in any litigation or Copyright Office or other proceeding or otherwise to protect and maintain our interests in the copyrights.
We will compensate and reimburse you for all damages for which you are held liable in any proceeding arising out of your authorized use of any copyright and for all costs you reasonably incur in defending any claim brought against you or any proceeding in which you are named as a party, if you have timely notified us of the claim or proceeding and have complied with your obligations under the Franchise Agreement. At our option, we or our affiliates are entitled to defend and control the defense of any proceeding arising out of your use of any copyright.
We also own the Confidential Information (as defined in Section 10) of the Franchise Agreement) and claim copyrights in the Confidential Information. The Confidential Information includes trade secrets and is our proprietary information. Portions of the Confidential Information required in the operation of your business will be communicated to you. However, you will not acquire any interest in any Confidential Information, other than
TCBY FDD 03/2014 46 the right to utilize Confidential Information disclosed to you in operating your Store during the term of the Franchise Agreement. You may only use the Confidential Information as outlined in the Franchise Agreement.
We and our affiliates will own and have the perpetual right to use and authorize other TCBY Stores to use, and you must fully and promptly disclose to us, all ideas, concepts, formulas, recipes, methods and techniques relating to the development and/or operation of a yogurt, frozen yogurt, ice cream, dessert or retail snack food business conceived or developed by you and/ or your employees during the term of the Franchise Agreement. You agree that we shall have the perpetual right to use and authorize other TCBY Stores to use such ideas, concepts, methods and techniques and, if incorporated in the System for the development and/or operation of TCBY Stores, such ideas, concepts, methods and techniques shall become our sole and exclusive property without any consideration to you. You must not, however, test, offer or sell any new products without our prior written consent.
ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS
We recommend that you participate personally in the direct operation of your Store, although the Franchise Agreement does not specifically obligate you to do so. However, you must either manage your Store yourself, or use a full time “on Premises” manager. The manager need not have an ownership interest in a franchisee that is an entity. Both you (or one of your Active Entity Owners, if you are an entity) and the manager of your Store must be certified by us as having completed all phases of our training program to our satisfaction and must participate in all other activities required to open your Store. Replacement managers must also satisfactorily complete all phases of our training program.
If you are an entity, each Entity Owner must guarantee your obligations under the Franchise Agreement by signing the Guaranty attached to the Franchise Agreement, a copy of which is included in Exhibit B.
We have the right to require your training attendees (including you and any Entity Owner or manager) to sign a Confidentiality Agreement in the form of Exhibit J. In addition, we have the right to require each manager of a TCBY Store to agree to the non-competition covenants described in Item 17 of this disclosure document.
During the term of the Franchise Agreement, you (or if you are an entity, an Entity Owner who manages or oversees the management of your Store) and your on Premises manager must: (a) be sufficiently proficient in the English language to adequately communicate and correspond with us and your employees, customers, manufacturers, suppliers, vendors and distributors, and to effectively manage and/or oversee the management of your Store; (b) be authorized to work in the U.S. without sponsorship by us or one of our affiliates and provide proof satisfactory to us of your authority to work in the U.S.; and (c) successfully pass a workplace appraisal test in the English language.
ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
In operating your Store, you may offer for sale only those TCBY Products that we approve for you to sell at the Premises. The Operating Procedures Manual explains the TCBY Products that you are authorized to offer at your Store. Your lease may also impose other obligations or restrictions on the types of products that you may offer from your Premises, and you must comply with those restrictions and obligations even if they would prevent you from offering certain TCBY Products that we have approved for you to offer.
We have the right to change the types of authorized products and services you may offer and sell at your particular Store and there are no limits on our right to make changes.
TCBY FDD 03/2014 47 You may not use your Store for any purpose other than the operation of a TCBY Store in compliance with the Franchise Agreement. You may not: (a) offer TCBY Products or materials, supplies, or inventory bearing the TCBY Marks at any site other than your Store Premises; (b) offer for sale any materials, supplies or inventory used in the preparation of any of the TCBY Products; or (c) sell any TCBY Products to any person or entity purchasing the TCBY Products for resale. You may only sell TCBY Products to retail customers.
ITEM 17. RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION
THE FRANCHISE RELATIONSHIP
This table lists certain important provisions of the franchise and related agreements. You should read these provisions in the agreements attached to this disclosure document.
Section in Provision Franchise or Other Summary(1) Agreement(1)
a. Length of the franchise term Section 3.1; Section 3 of 10 years (for Traditional Stores) or 5 years (for Other Other Concepts Addendum Concepts Stores) from the date you have obtained our approval of and secured the Premises for your Store.
b. Renewal or extension of the Section 3.2; Renewal You have the right to renew for 1 additional 10-year term Addendum to Franchise term (for Traditional Stores) or 5-year term (for Other Agreement; Term Purchase Concepts Stores) if you are not in default. In certain Addendum; Section 3 of circumstances, you may also be required or allowed to Other Concepts Addendum purchase additional term under the Franchise Agreement.
c. Requirements for you to Section 3.2 Give 180 days prior notice; sign then current Franchise renew or extend Agreement (which may contain materially different terms and conditions than your original Franchise Agreement) and our then current Renewal Addendum; refurbish and remodel the Premises at our request; remain in good standing with us during the initial term; satisfy all monetary obligations; retain the Premises for the renewal term; follow our then current renewal process, including any requirements for additional training and delivery of certain financial statements and records.
d. Termination by you Section 13.4 You have the right to terminate if we breach the Agreement and fail to cure the breach.
e. Termination by us without Not applicable. Not applicable. cause
f. Termination by us with Sections 13.1 and 13.2 We can terminate if you are in default of any cause agreement with us or an affiliate; see also “17.o.” below.
TCBY FDD 03/2014 48 Section in Provision Franchise or Other Summary(1) Agreement(1)
g. “Cause” defined - curable Sections 13.1 and 13.2 Curable defaults: (1) you have 48 hours to cure failure defaults to comply with certain System Standards and health requirements; (2) you have 10 days to cure failure to make payments; and (3) you have 30 days to cure any other default of Franchise Agreement or any other agreement with us or an affiliate not listed above or in “17.h.” below. Bankruptcy or other insolvency events are defaults if not discharged within 60 days.
h. “Cause” defined – non- Sections 13.1 and 13.2 Non-curable defaults: curable defaults (1) bankruptcy or other insolvency events; (2) unauthorized transfers; (3) material misstatements or omissions; (4) you are convicted or plead no contest to a felony; (5) you engage in detrimental conduct; (6) unauthorized use of the TCBY Marks or Confidential Information; (7) abandonment of or failure to actively operate your Store; (8) you are in breach of your obligations under your lease or sublease of the Store Premises or you lose the right of possession of your Store Premises; (9) failure to pay uncontested taxes; (10) repeated defaults, even if cured; (11) you default on any financing obligations; (12) failure to obtain our approval of and secure Premises for your Store within 6 months after date of Franchise Agreement; (13) possession or use of unauthorized products; or (14) failure to satisfactorily complete training.
i. Your obligations on Sections 6.5, 7.8, 8.2, 8.3, Pay all amounts due, including any late charges and termination/non-renewal 10.5, 10.8, 12.3(1), 13.6, interest; continue to honor all guarantees, releases and 14.2, 14.3, 14.4, 15.6 and waivers; retain records and permit audits; not disclose Article 18 Confidential Information; discontinue use of TCBY Marks; deliver to us all signs, equipment, supplies and materials displaying the TCBY Marks; cancel any fictitious or assumed name certificates; make required changes to Premises; assign telephone listings; dispose of non-returnable supplies and materials; honor indemnification requirements; and continue to honor and be bound by general provisions; see also “17.o.” and “17.r.” below.
j. Assignment of contract by Section 12.1 No restriction on our right to transfer or assign. us
k. “Transfer” by you - defined Section 1.2(o) Includes transfer of Franchise Agreement or ownership change.
TCBY FDD 03/2014 49 Section in Provision Franchise or Other Summary(1) Agreement(1)
l. Our approval of transfer by Sections 4.7, 12.2, 12.3 and We have the right to approve all transfers but will not you 12.4; Assignment, unreasonably withhold approval if specified Assumption and Consent; requirements are met. Transfers to a wholly-owned Section 12 of Other corporation or limited liability company do not require Concepts Addendum our consent. Other Concepts Addendum: you must submit a copy of written approval of the Host Concept prior to transfer.
m. Conditions for our approval Section 12.3; Assignment, Your Store is not closed for relocation; 60 day prior of transfer Assumption and Consent; written notice to us in a form satisfactory to us; Term Purchase Addendum; transferee qualifies; your obligations are paid and you are not in default; transferee completes training; you, transferee and us sign the Assignment, Assumption and Consent, which contains a release of claims against us; at our option, transferee signs our then current Franchise Agreement and guaranty (if applicable) for remaining term of Franchise Agreement being transferred; you or your transferee pays transfer fee; we approve terms of transfer; you subordinate any obligations of the transferee to you to the transferee’s obligations to us; you obtain any required landlord consents; you agree not to use the Marks; you or your transferee agrees to any refurbishment or remodel that we require; you have sufficient term under the Franchise Agreement, or the transferee has agree to purchase from us sufficient additional term under the Franchise Agreement, to meet our standard for transfers; you and transferee use a licensed escrow professional to conduct the closing of the transfer; and you comply with any other conditions we reasonably require; See also “17.r.” below.
n. Our right of first refusal to Section 12.5 We can match any offer for your business or for a acquire your business controlling interest in you; see also “17.r.” below.
o. Our option to purchase your Section 14.5 and Article 16 We have the right, at our option, to purchase your business Store upon termination of Franchise Agreement unless we are in default. Under the security agreement contained in Article 16 of the Franchise Agreement, we can foreclose and acquire the assets of your Store if you default.
p. Your death or disability Section 12.6 Your successor must transfer your interest in the Franchise Agreement or your controlling interest in an entity developer within 12 months, to a transferee approved by us.
TCBY FDD 03/2014 50 Section in Provision Franchise or Other Summary(1) Agreement(1)
q. Non-competition covenants Sections 11.1, 11.3, Traditional Stores: No interest in or services for a during the term of the 11.4 and 18.1; competitive business; no solicitation of employees. franchise Section 10 of Other Other Concepts Stores: No interest or services for a Concepts Addendum competitive business operated at your Other Concepts Store premises.
r. Non-competition covenants Sections 11.2, 11.3, 11.4, Traditional Stores: No interest in or services for a after the franchise is 12.3(j), 12.5(c) and 18.1; competitive business within 10 miles of your Store or terminated or expires Section 11 of Other 10 miles of any TCBY Store, for 2 years, if we don’t Concepts Addendum purchase your Store (see “17.o.” above) or for 3 years, if we do purchase your Store (including after a transfer or exercise of your right of first refusal, for a 3 year period). Other Concepts Stores: No interest in or services for a competitive business operated at the premises where your Other Concepts Store was operated.
s. Modification of the Sections 11.4, 18.1, 18.2 and Subject to automatic modification to conform to agreement 18.8 mandatory provisions of applicable law. Other modifications require mutual consent.
t. Integration/merger clause Section 18.15; Section 10 of Only the terms of Franchise Agreement, Assignment, Assignment, Assumption Assumption and Consent, and Confidentiality and Consent; Section 12 of Agreement, are binding (subject to federal and state Confidentiality Agreement law). Any other promises may not be enforceable. Nothing in the Franchise Agreement or any related agreement is intended to disclaim the representations we made in this disclosure document.
u. Dispute resolution by Not applicable arbitration or mediation
v. Choice of forum Section 17.5 Disputes must be conducted in the State of Colorado (subject to state law)
w. Choice of law Section 17.4 Colorado law applies to Franchise Agreement and Confidentiality Agreement, unless governed by applicable federal or state law.
(1) Unless otherwise noted, Section references and summaries are to the Franchise Agreement.
TCBY FDD 03/2014 51 THE FRANCHISE RELATIONSHIP
AREA DIRECTORS This table lists certain important provisions of the franchise and related agreements. You should read these provisions in the agreements attached to this disclosure document.
Section in Provision Area Director or Other Summary(2) Agreement(2)
a. Length of the franchise term Section 16.1 5 years
b. Renewal or extension of the Section 16.2 You have the right to renew for 1 additional 5-year term term if you are not in default.
c. Requirements for you to Section 16.2 Give 60 days prior notice; sign then current Area renew or extend Director Agreement (which may contain materially different terms and conditions than your original Area Director Agreement); be in compliance with all provisions of your original Area Director Agreement; execute a general release, if permitted under state law; agree to new Development Quota.
d. Termination by you Section 17.1 Upon 90 days written notice if we are unable to provide registered and effective FDDs that allow you to sell within your Territory for more than 90 consecutive days; you have the right to terminate if we breach the Agreement and fail to cure the breach within 90 days.
e. Termination by us without Not applicable. Not applicable. cause
f. Termination by us with Section 17.2 We can terminate if you: fail to complete training; cause intentionally make any material misrepresentation or omission in your application; fail to comply with federal and state franchise laws; fail to meet your Development Quota; fail to comply with any provision of your Area Director Agreement; surrender control or fail to actively operate your business; convicted of a felony or other crime as we determine; declare or are adjudicated bankrupt or insolvent; abandon or cease to operate your business for 30 consecutive days; receive 3 notices of default within a 12 month period; fail to pay any amounts due to us within 30 days’ notice.
g. “Cause” defined - curable Sections 17.2 Curable defaults: (1) you have 90 days to cure failure defaults to meet your Development Quota (or 180 days if the default is for the cumulative number of Stores to be open and in operation in your Territory); (2) you have 30 days to cure failure to make payments; and (3) you have 30 days to cure any other default of Area Director Agreement or any other agreement with us or an affiliate not listed above or in “17.h.” below.
TCBY FDD 03/2014 52 Section in Provision Area Director or Other Summary(2) Agreement(2)
h. “Cause” defined – non- Sections 17.2 Non-curable defaults: curable defaults (1) bankruptcy or other insolvency events; (2) unauthorized transfers; (3) material misstatements or omissions; (4) you are convicted or plead no contest to a felony; (5) you engage in detrimental conduct; (6) abandonment of or failure to actively operate your business; (7) repeated defaults, even if cured; (8) failure to satisfactorily complete training; (9) failure to comply with requirements under federal and state franchise laws.
i. Your obligations on Section 17.3 Pay all amounts due, including any late charges and termination/non-renewal interest; refrain from identifying yourself as our current area director; immediately deliver to us all past and present franchise sales leads, records, contracts, acknowledgments of receipt and other information and records related to franchisees; immediately deliver all advertising materials, manuals, forms, FDDs, sales brochures and other materials displaying the TCBY Marks; refrain from communicating with franchisees; cancel all fictitious or assumed name or equivalent registrations; furnish within 30 days proof of compliance with the foregoing obligations; and continue to honor and be bound by general provisions; see also “17.r.” below.
j. Assignment of contract by Section 15.1 No restriction on our right to transfer or assign. us
k. “Transfer” by you - defined Section 15.2 Includes the voluntary, involuntary, direct, or indirect assignment, sale, subfranchise, gift or other disposition of any interest in the Area Director Agreement, the ownership of the Area Director, Stores operated by the Area Director, or assets of the Area Director business.
l. Our approval of transfer by Sections 15.3, 15.4 and 15.5 We have the right to approve all transfers but will not you unreasonably withhold approval if specified requirements are met.
TCBY FDD 03/2014 53 Section in Provision Area Director or Other Summary(2) Agreement(2)
m. Conditions for our approval Section 15.3 You are in full compliance with your Area Director of transfer Agreement; transferee has sufficient business experience, aptitude and financial resources and agrees to be bound by the Area Director Agreement; transferee has completed our training program to our satisfaction and paid a reasonable training fee; you have paid all amounts owed to us, our affiliates and third party creditors and submitted all required reports and statements; you or your transferee has paid a transfer fee to us; you execute a general release, where permitted under state law; transferee signs an assumption of your obligations or a current Area Director Agreement; we approve the material terms and conditions of the transfer; you agree that all obligations of the transferee under any promissory note, agreement or security interest will be subordinate to transferee’s obligation to pay amounts due to us (where applicable); you execute a noncompetition covenant; and you comply with any other conditions we reasonably require; See also “17.r.” below.
n. Our right of first refusal to Section 15.7 We can match any offer for your business or for a acquire your business controlling interest in you; see also “17.r.” below.
o. Our option to purchase your Section 15.7 We have the right of first refusal to acquire your business business. See “17.n” above.
p. Your death or disability Section 12.6 Your personal representative must transfer your interest in the Area Director Agreement or your entity within 6 months, to a transferee approved by us.
q. Non-competition covenants Section 12 You may not: have an interest in a competitive during the term of the business, perform services for a competitive business, franchise divert or attempt to divert business to a competitive business, solicit or employ an employee of us or our affiliates.
r. Non-competition covenants Section17.5 No interest in a competitive business in your territory after the franchise is within 2 years. terminated or expires
s. Modification of the Sections 20.1 and 20.2 Subject to automatic modification to conform to agreement mandatory provisions of applicable law. Other modifications require mutual consent.
t. Integration/merger clause Section 20.11 Only the terms of the Area Director Agreement and its attachments are binding (subject to federal and state law). Any other promises may not be enforceable. Any representations or promises outside of the disclosure document and Area Director Agreement may not be enforceable.
TCBY FDD 03/2014 54 Section in Provision Area Director or Other Summary(2) Agreement(2)
u. Dispute resolution by Section 19.1 You agree to mediate any dispute that does not include arbitration or mediation injunctive relief or specific performance actions; mediator will be agreed to by all parties; you must participate in good faith; if dispute is not resolved within 30 days, the parties can pursues legal action.
v. Choice of forum Section 19.2 Disputes must be conducted in the State of Colorado (subject to state law)
w. Choice of law Section 19.2 Colorado law applies to Franchise Agreement and Confidentiality Agreement, unless governed by applicable federal or state law.
(2) Unless otherwise noted, Section references and summaries are to the Area Director Agreement.
ITEM 18. PUBLIC FIGURES
We do not use any public figure to promote our Franchise.
ITEM 19. FINANCIAL PERFORMANCE REPRESENTATIONS
The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and if the information is included in the disclosure document. Financial performance information that differs from that included in Item 19 may be given only if: (1) a franchisor provides the actual records of an existing outlet you are considering buying; or (2) a franchisor supplements the information provided in this Item 19, for example, by providing information about possible performance at a particular location or under particular circumstances.
The financial representations in this Item 19 apply only to Self-Serve Stores.
The following represents the actual average sales, and these numbers are based on the actual historical performance of TCBY Self-Serve Stores that were open for all 52 weeks of 2013, that operate under the standard Self-Serve model presented in this FDD, and reported a full 52 weeks of sales. 59 locations that were either non- standard locations or did not report a full 52 weeks of sales were excluded because they would not be indicative of the standard Self-Serve Store operations. The remaining 89 stores are represented in table 1 below:
Table 1 shows the highest average unit sales volume (“AUV”) for calendar year 2013, as well as the average AUV for the top 5 Self-Serve Stores and the bottom 5 Self-Serve Stores. Table 2 shows the number of Stores above and below the average AUV, broken out by geographic area. All numbers in Tables 1 and 2 are based on the 89 stores represented in Table 1 that operate under the standard Self-Serve model presented in this FDD and that reported a full 52 weeks of sales. Some Self-Serve Stores have sold this amount. Your individual results may differ. There is no assurance you’ll sell as much. The characteristics of the Self-Serve Stores included below do not differ materially from the Self-Serve Stores that may be offered to prospective franchisees.
TCBY FDD 03/2014 55 Table 1
AUV Top/bottom 5 Average High Sales $601,144 $563,715 (top 5) Average Sales $287,608 Low Sales $93,922 $136,260 (bottom 5)
Table 2
Total Store Count East Stores West Stores (Note 1) (Note 1) Stores above average 37 27 10 Stores below average 52 32 20 Total Stores 89 59 30
Note 1: Self-Serve Stores are divided into two geographic areas—East and West. The “East” area includes stores in the following states: Connecticut, Florida, Georgia, Illinois, Maryland, Michigan, Mississippi, New Jersey, New York, North Carolina, Pennsylvania, South Carolina, Tennessee, and Virginia. The “West” area includes stores in the following states: Arkansas, California, Colorado, Louisiana, Oregon, Texas, Utah, and Washington.
The earnings figures in Tables 1and 2 may be different than the figures you will realize in operating your Self-Serve Store. You should conduct an independent investigation of the costs and expenses you will incur in operating your Self-Serve Store. Franchisees or former franchisees listed in the offering circular may be one source of this information.
Bases and Assumptions
As of December 2013, there are a total of 148 Self-Serve Stores and 345 total Self-Serve and Full-Service Stores combined. We compiled the quartile AUV numbers provided in Tables 1 and 2 from the unaudited sales reports submitted to us by our Self-Serve store franchisees, as complied for the 2013 year.
There are 89 Self-Serve Stores represented in Tables 1 and 2 above. This represents 60% of the 148 Self- Serve Stores and 26% of the total 345 locations open as of year-end 2013.
The market where your Self-Serve store is located may be in a different type of market. Accordingly, the results achieved by these franchisees may not be typical for those in your area. Written substantiation for the financial performance representation will be made available to the prospective franchisee upon reasonable request.
Some Self-Serve Stores have sold this amount. Your individual results may differ.
The financial representations in this Item 19 apply only to Self-Serve Stores. Other than for Self-Serve Stores, TCBY does not make any financial performance representations. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of the outlet. If you receive any other financial performance information or projections of your future income, you should report it to the franchisor’s
TCBY FDD 03/2014 56 management by contacting Michael Chao, CFO, 8001 Arista Place, Suite 600, Broomfield, CO 80021, (720) 599- 3384, the Federal Trade Commission, and the appropriate state regulatory agencies.
ITEM 20. OUTLETS AND FRANCHISEE INFORMATION
STORE FRANCHISES
TABLE NUMBER 1 Systemwide Store Summary (1) For Years 2011 to 2013
Stores at the Start Stores at the End Store Type Year Net Change of the Year of the Year Franchised 2011 347 341 -6 2012 341 343 +2 (2) 2013 343 345 +2 Company-Owned 2011 2 2 0 2012 2 2 0 2013 2 1 -1 Total 2011 349 343 -6 2012 343 345 +2 2013 345 346 +1
(1) More than 30 TCBY stores co brand with Mrs. Fields. More than 25 TCBY locations within Subway stores. More than 50 TCBY locations within various gas station/convenience marts. (2) Includes TCBYP Smoothie location store #9384201 which is still Temporarily closed from 2012.
TABLE NUMBER 2 Transfers of Stores From Franchisee to New Owners (Other than the Franchisor) For Years 2011 to 2013
State Year Number of Transfers Arizona 2011 1 2012 0 2013 1 California 2011 1 2012 2 2013 1 Delaware 2011 0 2012 2 2013 0 Florida 2011 2 2012 3 2013 1
TCBY FDD 03/2014 57 State Year Number of Transfers Georgia 2011 0 2012 0 2013 1 Idaho 2011 0 2012 0 2013 1 Illinois 2011 0 2012 0 2013 1 Indiana 2011 0 2012 0 2013 1 Maryland 2011 0 2012 0 2013 1 Michigan 2011 0 2012 0 2013 1 Minnesota 2011 1 2012 0 2013 0 Nebraska 2011 1 2012 0 2013 0 North Carolina 2011 0 2012 2 2013 1 Oregon 2011 0 2012 1 2013 0 Texas 2011 1 2012 1 2013 4 TOTAL 2011 7 2012 11 2013 14
TCBY FDD 03/2014 58 TABLE NUMBER 3 Status of Franchised Stores 1 For Years 2011 to 2013
Ceased Stores at the Reacquired Stores at the Stores Termina- Non- Operations / State Year Start of the by End of the Opened tions Renewals Other Year(1) Franchisor Year (1) Reasons Alabama 2011 13 0 0 0 0 0 13 2012 13 0 0 0 0 4 9 2013 9 1 0 0 0 0 10 Arizona 2011 7 0 0 0 0 2 5 2012 5 0 0 0 0 3 2 2013 2 2 0 0 0 0 4 Arkansas 2011 5 2 0 0 0 0 7 2012 7 1 0 0 0 0 8 2013 8 0 0 0 0 2 6 California 2011 32 0 0 3 0 7 22 2012 22 1 0 0 0 3 20 2013 20 2 0 0 0 3 19 Colorado 2011 7 5 0 0 0 1 11 2012 11 4 0 0 0 2 13 2013 13 3 0 0 0 2 14 Connecticut 2011 0 2 0 0 0 0 2 2012 2 0 0 0 0 0 2 2013 2 1 0 0 0 1 2 Delaware 2011 4 0 0 0 0 0 4 2012 4 0 0 0 0 0 4 2013 4 0 0 0 0 0 4 Florida 2011 20 10 0 0 0 3 27 2012 27 5 0 0 0 6 26 2013 26 2 0 0 0 4 24 Georgia 2011 10 1 0 1 0 1 9 2012 9 1 0 0 0 2 8 2013 8 0 0 0 0 2 6 Hawaii 2011 2 0 0 0 0 1 1 2012 1 0 0 0 0 0 1 2013 1 0 0 0 0 0 1 Idaho 2011 7 0 0 1 0 0 6 2012 6 0 0 0 0 1 5 2013 5 0 0 0 0 0 5 Illinois 2011 7 2 0 0 0 0 9 2012 9 5 0 0 0 0 14 2013 14 6 0 0 0 1 19
TCBY FDD 03/2014 59 Ceased Stores at the Reacquired Stores at the Stores Termina- Non- Operations / State Year Start of the by End of the Opened tions Renewals Other Year(1) Franchisor Year (1) Reasons Indiana 2011 4 0 0 0 0 0 4 2012 4 1 0 0 0 1 4 2013 4 1 0 0 0 0 5 Iowa 2011 2 1 0 0 0 0 3 2012 3 0 0 0 0 2 1 2013 1 0 0 0 0 0 1 Kansas 2011 4 0 0 1 0 0 3 2012 3 1 0 0 0 1 3 2013 3 0 0 0 0 0 3 Louisiana 2011 13 2 1 0 0 2 12 2012 12 1 0 0 0 1 12 2013 12 0 0 0 0 2 10 Maine 2011 1 0 0 0 0 0 1 2012 1 0 0 0 0 0 1 2013 1 0 0 0 0 1 0 Maryland 2011 6 3 0 0 0 0 9 2012 9 0 0 0 0 1 8 2013 8 1 0 0 0 1 8 Massachusetts 2011 2 0 0 0 0 1 1 2012 1 0 0 0 0 0 1 2013 1 0 0 0 0 0 1 Michigan 2011 9 0 0 0 0 0 9 2012 9 0 0 0 0 0 9 2013 9 0 0 0 0 1 8 Minnesota 2011 4 0 0 0 0 0 4 2012 4 0 0 0 0 1 3 2013 3 1 0 0 0 0 4 Mississippi 2011 4 1 0 0 0 0 5 2012 5 0 0 0 0 0 5 2013 5 1 0 0 0 0 6 Missouri 2011 2 0 0 0 0 0 2 2012 2 0 0 0 0 1 1 2013 1 0 0 0 0 0 1 Montana 2011 1 0 0 0 0 0 1 2012 1 0 0 0 0 0 1 2013 1 0 0 0 0 0 1 Nebraska 2011 6 0 0 0 0 0 6 2012 6 1 0 0 0 1 6 2013 6 1 0 0 0 1 6
TCBY FDD 03/2014 60 Ceased Stores at the Reacquired Stores at the Stores Termina- Non- Operations / State Year Start of the by End of the Opened tions Renewals Other Year(1) Franchisor Year (1) Reasons Nevada 2011 4 0 0 0 0 1 3 2012 3 0 0 0 0 0 3 2013 3 0 0 0 0 1 2 New 2011 2 0 0 0 0 0 2 Hampshire 2012 2 0 0 0 0 0 2 2013 2 1 0 0 0 1 2 New Jersey 2011 9 1 0 0 0 1 9 2012 9 1 0 0 0 2 8 2013 8 2 0 0 0 3 7 New Mexico 2011 2 0 0 0 0 0 2 2012 2 0 0 0 0 0 2 2013 2 0 0 0 0 0 2 New York 2011 23 1 0 2 0 1 21 2012 21 4 0 0 0 3 22 2013 22 4 0 0 0 3 23 North 2011 22 6 0 0 0 3 25 Carolina 2012 25 7 0 0 0 3 29 2013 29 5 0 0 0 1 33 North 2011 5 0 0 1 0 0 4 Dakota 2012 4 1 0 0 0 1 4 2013 4 0 0 0 0 0 4 Ohio 2011 2 0 0 0 0 1 1 2012 1 0 0 0 0 1 0 2013 0 0 0 0 0 0 0 Oklahoma 2011 3 0 0 1 0 1 1 2012 1 0 0 0 0 0 1 2013 1 0 0 0 0 1 0 Oregon 2011 6 2 0 0 0 1 7 2012 7 0 0 0 0 0 7 2013 7 0 0 0 0 0 7 Pennsylvania 2011 11 1 0 0 0 6 6 2012 6 1 0 0 0 0 7 2013 7 3 0 0 0 0 10 South 2011 12 2 0 0 0 0 14 Carolina 2012 14 2 0 0 0 1 15 2013 15 2 0 0 0 3 14
TCBY FDD 03/2014 61 Ceased Stores at the Reacquired Stores at the Stores Termina- Non- Operations / State Year Start of the by End of the Opened tions Renewals Other Year(1) Franchisor Year (1) Reasons South Dakota 2011 2 0 0 1 0 0 1 2012 1 0 0 0 0 0 1 2013 1 0 0 0 0 0 1 Tennessee 2011 20 2 0 0 0 3 19 2012 19 0 0 0 0 1 18 2013 18 0 0 0 0 1 17 Texas 2011 23 5 0 4 0 0 24 2012 24 13 0 0 0 3 34 2013 34 0 0 0 0 3 31 Utah 2011 6 0 0 0 0 2 4 2012 4 0 0 0 0 2 2 2013 2 1 0 0 0 1 2 Virginia 2011 8 0 0 1 0 0 7 2012 7 1 0 0 0 2 6 2013 6 0 0 0 0 1 5 Washington 2011 5 1 0 0 0 1 5 2012 5 2 0 0 0 1 6 2013 6 4 0 0 0 0 10 West 2011 3 0 0 0 0 0 3 Virginia 2012 3 0 0 0 0 1 2 2013 2 0 0 0 0 1 1 Wisconsin 2011 2 0 0 0 0 0 2 2012 2 1 0 0 0 0 3 2013 3 0 0 0 0 0 3 Wyoming 2011 5 0 0 0 0 0 5 2012 5 0 0 0 0 1 4 2013 4 0 0 0 0 1 3 TOTAL 2011 347 50 1 16 0 39 341 2012 341 54 0 0 0 52 343 2013 343 44 0 0 0 42 345 (1) Notes stores that are closed temporarily as open. There are 7 TCBY Stores that are temporarily closed for 2013, all of which are TCBY Traditional locations except 1 TCBY Public location.
TCBY FDD 03/2014 62 TABLE NUMBER 4 Status of Company-Owned Stores (1) For Years 2011 to 2013
Stores Stores at the Stores Sold Stores at the Stores Reacquired Stores State Year Start of the to End of the Opened From Closed Year Franchisees Year Franchisees Colorado 2011 0 0 0 0 0 0 2012 0 0 0 0 0 0 2013 0 1 0 0 0 1 Utah 2011 2 0 0 0 0 2 2012 2 0 0 0 0 2 2013 2 0 0 0 2 0 TOTAL 2011 2 0 0 0 0 2 2012 2 0 0 0 0 2 2013 2 1 0 0 2 1 (1) This table includes Self-Serve Stores owned and operated by us or MFFB, our affiliate. It does not include any locations owned by any other entity.
TABLE NUMBER 5 Projected Openings As of December 28, 2013
Franchise Agreements Projected New Franchised Projected New Company- State Signed But Store Not Stores in the Next Fiscal Owned Stores in the Opened Year Current Fiscal Year California 3 5 0 Colorado 2 2 0 Connecticut 0 3 0 Florida 2 4 0 Illinois 3 4 0 Indiana 0 2 0 Kansas 0 2 0 Maryland 1 4 0 Nebraska 1 2 0 Nevada 0 4 0 New Hampshire 0 1 0 New Jersey 2 2 0 New York 2 4 0 North Carolina 3 4 0 Pennsylvania 0 2 0 South Carolina 2 4 0
TCBY FDD 03/2014 63 Franchise Agreements Projected New Franchised Projected New Company- State Signed But Store Not Stores in the Next Fiscal Owned Stores in the Opened Year Current Fiscal Year Texas 9 6 0 Washington 7 5 0 TOTAL 37 60 0
AREA DIRECTOR BUSINESSES
TABLE NUMBER 1 System Wide Business Summary(1) For Years 2011 to 2013
Businesses at the Businesses at the Business Type Year Net Change Start of the Year End of the Year 2011 3 6 +3 Franchised 2012 6 7 +1 2013 7 7 0 2011 0 0 0 Company-Owned 2012 0 0 0 2013 0 0 0 2011 3(2) 6(2) +3(2) (2) (2) (2) Total Businesses 2012 6 7 +1 2013 7 2 7 2 0 (1) The numbers throughout these Item 20 tables are as of December 28, 2013, December 29, 2012, and December 31, 2011. (2) The table reflects 5 Area Director Businesses, operated under 5 Area Director Agreements, 3 of which operate in 2 separate Area Director Territories. We list 6 Businesses in 2011 and 7 Businesses in 2012 in the table to be consistent with Table 3 below, which breaks out the Businesses into separate states.
TABLE NUMBER 2 Transfers of Businesses from Area Directors to New Owners (Other than the Franchisor) For years 2011 to 2013
Number of State Year Transfers 2011 0 TOTAL 2012 0 2013 0
TCBY FDD 03/2014 64 TABLE NUMBER 3 Status of Area Director Businesses For Years 2011 to 2013
Ceased Businesses Reacqui- Businesses Businesses Termi- Non- Operations State Year at Start of red by at End of Opened nated Renewals Other Year Franchisor Year Reasons Hawaii(1) 2011 1(1) 0 0 0 0 0 1(1) 2012 1(1) 0 0 0 0 0 1(1) 2013 1(1) 0 0 0 0 0 1(1) Washington(1) 2011 1(1) 0 0 0 0 0 1(1) 2012 1(1) 0 0 0 0 0 1(1) 2013 1(1) 0 0 0 0 0 1(1) Texas 2011 1 0 0 0 0 0 1 2012 1 0 0 0 0 0 1 2013 1 0 0 0 0 0 1 Colorado(1) 2011 0 1 0 0 0 0 1 2012 1 1(1) 0 0 0 0 2(1) 2013 2(1) 0 0 0 0 0 2(1) Wyoming(1) 2011 0 0 0 0 0 0 0 2012 0 1(1) 0 0 0 0 1(1) 2013 1(1) 0 0 0 0 0 1(1) North 2011 0 1(1) 0 0 0 0 1(1) Carolina(1) 2012 1(1) 0 0 0 0 0 1(1) 2013 1(1) 0 0 0 0 0 1(1) South 2011 0 1(1) 0 0 0 0 1(1) Carolina(1) 2012 1(1) 0 0 0 0 0 1(1) 2013 1(1) 0 0 0 0 0 1(1) Total 2011 3 3(1) 0 0 0 0 61) 2012 6 1(1) 0 0 0 0 7(1) 2013 7(1) 0 0 0 0 0 7(1) (1) This table includes 3 Area Director Businesses operated in 6 Area Director Territories (Hawaii and Washington, North Carolina and South Carolina, Colorado and Wyoming) each under a single Area Director Agreement. There are a total of 7 separate Area Director Businesses operated under 5 Area Director Agreements in 7 states.
TABLE NUMBER 4 Status of Company-Owned Businesses For Years 2011 to 2013
Businesses Businesses Businesses Businesses at Businesses Reacquired Businesses State Year at Start of Sold to End of the Opened from Closed Year Franchisee Year Franchisee TOTALS 2011 0 0 0 0 0 0 2012 0 0 0 0 0 0 2013 0 0 0 0 0 0
TCBY FDD 03/2014 65 TABLE NUMBER 5 Projected Openings As of December 28, 2013
Projected New Area Director Projected New Area Company-Owned State Agreements Signed But Director Businesses In Businesses In The Next Business Not Opened The Next Fiscal Year Fiscal Year Virginia 0 1 0 Pennsylvania 0 1 0 Florida 0 1 0 Ohio 0 1 0 TOTAL 0 4 0
Attached as Exhibit K, Part 1 are the names, address and telephone numbers of all TCBY franchisees as of December 28, 2013; Exhibit K, Part 2 are the city, state, business telephone number (and if unknown, last known home telephone number) of every franchisee who had an agreement terminated, not renewed, reacquired or who otherwise voluntarily or involuntarily ceased to do business under the franchise agreement during our 2013 Fiscal Year; and Exhibit K, Part 3 are all franchised locations that were transferred during our 2013 Fiscal Year. No franchisee has failed to communicate with the Company within 10 weeks of the issuance date of this disclosure document. Names of and contact information for our Area Directors, as of December 28, 2013, are set forth in Exhibit K, Part 4.
If you buy a TCBY Store franchise, your contact information may be disclosed to other buyers when you leave the TCBY franchise system.
During the last 3 fiscal years, franchisees have signed confidentiality clauses. In some instances, current and former franchisees sign provisions restricting their ability to speak openly about their experience with the TCBY franchise system. You may wish to speak with current and former franchisees, but be aware that not all such franchisees will be able to communicate with you.
THE COUNTRY’S BEST YOGURT FRANCHISEE ASSOCIATION (the “Association”) is an independent association of franchisees of the TCBY system. We recognize the Association and regularly consult with its leadership on a wide range of matters that affect the TCBY system.
The contact information for the Association is as follows: Mailing Address: 620 W. Franklin, Boise, ID 83702 Telephone: 208-384-5010
President Mike Murtaugh [email protected] Vice President Brian Coury [email protected] Secretary Hannah Smith [email protected] Treasurer – Advisor Jim Mowbray [email protected] Marketing Committee Chair Tommy Douglas [email protected] Operations Committee Chair Brandon Hopkins [email protected] Advisor Greg Forst [email protected] Advisor Ron Rye [email protected]
TCBY FDD 03/2014 66 ITEM 21. FINANCIAL STATEMENTS
Attached as Exhibit L to this disclosure document are: (i) the interim unaudited financial statements for our affiliate and ultimate parent, MFOC, as of May 24, 2014; and (ii) the consolidated balance sheets of our affiliate and ultimate parent, MFOC, as of December 28, 2013, December 29, 2012, and December 31, 2011 and the related consolidated statements of operations and comprehensive loss, stockholders’ deficit and cash flows for the year ended December 28, 2013, December 29, 2012, and December 31, 2011, together with the Independent Auditors’ Report.
Separate stand-alone financial statements of us (TCBY Systems, LLC) are not included in this disclosure document. Should we fail to fulfill our obligations to our franchisees, however, MFOC absolutely and unconditionally guarantees to fulfill those obligations. A copy of the written guarantee is attached as Exhibit M.
ITEM 22. CONTRACTS
The following agreements proposed for use regarding the offering of a TCBY Franchise are attached to this disclosure document:
Exhibit B - Franchise Agreement (with Schedules and Exhibits) Exhibit C - Other Concepts Addendum Exhibit E - Area Director Agreement (with Exhibits) Exhibit F - Term Purchase Addendum Exhibit G - Sublease Agreement; Assignment and Assumption of Sublease Exhibit H - Lease Addendum Exhibit J - Confidentiality Agreement Exhibit N - Assignment, Assumption and Consent Exhibit O - Renewal Addendum to Franchise Agreement; Other Concepts Renewal Addendum to Franchise Agreement
ITEM 23. RECEIPTS
The last two pages of this disclosure document are copies of a detachable acknowledgment of receipt. Please sign and return to us our copy of the receipt (Copy for TCBY Systems, LLC), and sign and retain for your records your copy of the receipt (Copy for Prospective Franchisee).
TCBY FDD 03/2014 67 EXHIBIT A
LIST OF STATE ADMINISTRATORS AND
AGENTS FOR SERVICE OF PROCESS
TCBY FDD 03/2014 EXHIBIT A: List of State Administrators STATE STATE ADMINISTRATOR/AGENT ADDRESS California CA Commissioner, Department of Business 320 West 4th Street, Suite 750 Oversight Los Angeles, CA 90013-2344 Hawaii Commissioner of Securities 335 Merchant Street (State Dept. of Commerce and Consumer Affairs Room 203 Administrator) Business Registration Division Honolulu, HI 96813 Securities Compliance Branch Illinois Illinois Attorney General 500 South Second Street Springfield, IL 62706 Indiana Indiana Securities Commissioner 302 West Washington Street, Room E111 (State Securities Division Indianapolis, IN 46204 Administrator) Indiana Indiana Secretary of State 302 West Washington Street, Room E018 (Agent) Indianapolis, IN 46204 Maryland Office of the Attorney General 200 St. Paul Place (State Division of Securities Baltimore, MD 21202-2020 Administrator) Maryland Maryland Securities Commissioner 200 St. Paul Place (Agent) Baltimore, MD 21202-2020 Michigan Michigan Department of Attorney General Williams Building, 7th Floor Consumer Protection Division 525 West Ottawa Street Lansing, MI 48909 Minnesota Commissioner of Commerce 85 7th Place East, Suite 500 Minnesota Department of Commerce St. Paul, MN 55101-2198 New York New York State Department of Law 120 Broadway, 23rd Floor (State Bureau of Investor Protection and Securities New York, NY 10271 Administrator) New York Secretary of State of the State of New York 41 State Street, Second Floor (Agent) Albany, NY 12231 North Dakota Securities Commissioner 600 East Boulevard Avenue, Fifth Floor Bismarck, ND 58505-0510 Rhode Island Director, Department of Business Regulation, 1511 Pontiac Avenue Securities Division John O. Pastore Complex – Building 69-1 Cranston, RI 02920 South Dakota Director Division of Securities 445 East Capitol Avenue Division of Securities Pierre, SD 57501 Virginia Virginia State Corporation Commission 1300 East Main Street, 9th Floor (State Division of Securities and Retail Richmond, VA 23219-3630 Administrator) Virginia Clerk of the State Corporation Commission 1300 East Main Street, 1st Floor (Agent) Richmond, VA 23219-3630 Washington Department of Financial Institutions 150 Israel Road SW Securities Division Tumwater, WA 98501 Wisconsin Commissioner of Securities Department of Financial Institutions Division of Securities 345 W. Washington Ave., 4th Floor Madison, WI 53703
TCBY FDD 03/2014 EXHIBIT A: List of State Administrators 1 EXHIBIT B
FRANCHISE AGREEMENT
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement [# ]
TCBY® FRANCHISE AGREEMENT
BETWEEN
TCBY SYSTEMS, LLC 8001 Arista Place Suite 600 Broomfield, Colorado 80021 (720) 599-3350
AND
______
______
______Name(s) of Franchisee
______Street
______City State Zip Code
(___)______Area Code Telephone
Franchised Store:
______Street
______City State Zip Code
(___)______Area Code Telephone
Date of Franchise Agreement
______, 20____
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement ii TCBY® FRANCHISE AGREEMENT
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS; PREAMBLES; AND ACKNOWLEDGMENTS ...... 1 1.1 Date of Agreement ...... 1 1.2 Definitions ...... 1 1.3 Preambles ...... 3 ARTICLE 2 - GRANT OF FRANCHISE ...... 3 2.1 Franchise ...... 3 2.2 Reservation of Certain Rights ...... 4 ARTICLE 3 - INITIAL TERM AND RENEWAL ...... 4 3.1 Initial Term of the Franchise Agreement ...... 4 3.2 Renewal ...... 4 ARTICLE 4 - SITE SELECTION, LEASE OF PREMISES AND DEVELOPMENT OF YOUR STORE ...... 5 4.1 Site Selection ...... 5 4.2 Acquisition of the Premises ...... 6 4.3 Franchised Store Development ...... 7 4.4 Fixtures, Furnishings, Equipment, Signs and Computer Systems ...... 8 4.5 Franchised Store Opening ...... 8 4.6 Grand Opening Promotion ...... 9 4.7 Relocation ...... 9 ARTICLE 5 - TRAINING AND GUIDANCE ...... 10 5.1 Training...... 10 5.2 Operations Manual ...... 10 5.3 Guidance and Operating Assistance ...... 11 5.4 National Conventions and Regional Meetings ...... 11 ARTICLE 6 - FEES...... 11 6.1 Initial Franchise Fee ...... 11 6.2 Continuing Fees ...... 12 6.3 Yogurt Formulation Charge and YFC Reimbursement ...... 12 6.4 Date and Term of Payment ...... 12 6.5 Payment by Pre-Authorized Bank Transfer ...... 12 6.6 Late Fees; Interest on Late Payments ...... 12 6.7 Application of Payments ...... 13 6.8 No Right of Offset ...... 13 ARTICLE 7 - OBLIGATIONS RELATING TO OPERATIONS ...... 13 7.1 System Standards ...... 13 7.2 Performance of Duties and Obligations ...... 13 7.3 Restrictions on Operations ...... 14 7.4 Internet Use ...... 14 7.5 Our Right to Inspect Your Store ...... 14 7.6 Surveys ...... 14 7.7 Entity Owners ...... 15 7.8 Guaranties by Entity Owners ...... 15 7.9 Insurance ...... 15
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement iii ARTICLE 8 - REPORTS AND RECORD KEEPING ...... 16 8.1 Accounting, Reports and Financial Statements ...... 16 8.2 Retention of Records ...... 17 8.3 Our Right to Audit ...... 17 ARTICLE 9 - MARKETING AND PROMOTION ...... 17 9.1 Marketing Fees ...... 17 9.2 Advertising and Promotional Activities by You ...... 18 9.3 Our Advertising Materials ...... 18 9.4 Advertising Cooperatives...... 19 ARTICLE 10 - USE OF THE MARKS AND CONFIDENTIAL INFORMATION ...... 19 10.1 Ownership and Goodwill of Marks ...... 19 10.2 Limitations on Your Use of Marks ...... 19 10.3 Discontinuance of Use of Marks ...... 20 10.4 Notification of Infringements and Claims...... 20 10.5 Our Indemnification of You ...... 20 10.6 Copyrights ...... 20 10.7 Concepts Developed by You ...... 20 10.8 Confidential Information ...... 20 ARTICLE 11 - COVENANTS NOT TO COMPETE ...... 21 11.1 In Term Non-Compete ...... 21 11.2 Post Term Non-Compete ...... 21 11.3 Shareholder Exception ...... 21 11.4 Enforcement of Non-Competes ...... 21 ARTICLE 12 - TRANSFERS ...... 22 12.1 Transfers by Us ...... 22 12.2 Restrictions on Transfers by You...... 22 12.3 Conditions for Approval of Transfers by You ...... 22 12.4 Transfer to a Wholly-Owned Corporation or Limited Liability Company ...... 24 12.5 Our Right of First Refusal ...... 24 12.6 Death or Permanent Disability ...... 25 12.7 Effect of Consent to Transfer ...... 25 12.8 Preparation of a Financial Report by You...... 25 ARTICLE 13 - DEFAULT AND TERMINATION ...... 25 13.1 Your Defaults ...... 25 13.2 Our Right to Terminate if You Default ...... 27 13.3 Our Right to Terminate if You Fail to Complete Training ...... 28 13.4 Your Right to Terminate if We Default ...... 28 13.5 Assumption of Management ...... 28 13.6 Early Termination Damages ...... 28 ARTICLE 14 - POST TERM OBLIGATIONS ...... 29 14.1 Reversion of Rights ...... 29 14.2 Payment of Amounts Owed to Us and Others following Termination or Expiration ...... 29 14.3 Discontinuance of the Use of the Marks following Termination or Expiration ...... 29 14.4 Discontinuance of Use of Confidential Information following Termination or Expiration ...... 30 14.5 Our Option to Purchase Franchised Stores ...... 30 14.6 Continuing Obligations ...... 31 ARTICLE 15 - RELATIONSHIP OF THE PARTIES/INDEMNIFICATION...... 31 15.1 Independent Contractors ...... 31 15.2 No Liability for the Act of Other Party ...... 31 15.3 Your Control ...... 32 15.4 Our Approval and Enforcement ...... 32 15.5 Taxes ...... 32
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement iv 15.6 Indemnification ...... 32 15.7 Waiver of Claims ...... 32 ARTICLE 16 - SECURITY AGREEMENT ...... 32 16.1 Security Interest ...... 32 16.2 Requirements ...... 33 ARTICLE 17 - DISPUTE RESOLUTION ...... 33 17.1 Injunctive Relief ...... 33 17.2 Rights of Parties Are Cumulative ...... 33 17.3 Costs and Attorneys’ Fees ...... 33 17.4 Governing Law ...... 33 17.5 Consent to Jurisdiction ...... 34 17.6 Waiver of Punitive Damages and Jury Trial ...... 34 17.7 Limitation of Claims ...... 34 ARTICLE 18 - GENERAL PROVISIONS ...... 34 18.1 Severability ...... 34 18.2 Rights Provided by Law...... 34 18.3 Waivers by Either of Us ...... 35 18.4 Certain Acts Not to Constitute Waivers ...... 35 18.5 Excusable Non-Performance ...... 35 18.6 Interpretation of Rights and Obligations ...... 35 18.7 Notice of Potential Profit to Us ...... 36 18.8 Binding Effect ...... 36 18.9 No Third Party Beneficiaries ...... 36 18.10 Approvals ...... 36 18.11 Headings ...... 36 18.12 Joint and Several Liability ...... 36 18.13 Counterparts ...... 36 18.14 Notices and Payments ...... 36 18.15 Entire Agreement ...... 37
SCHEDULE 1 – YOGURT FORMULATION CHARGE REIMBURSEMENT ...... 38 ACKNOWLEDGEMENT ADDENDUM TO TCBY® FRANCHISE AGREEMENT ...... 40 OWNERSHIP ADDENDUM TO TCBY® FRANCHISE AGREEMENT ...... 42 GUARANTY ...... 43 APPENDIX A – STORE PREMISES; START DATE ...... 45 ALTERNATIVE APPENDIX A – STORE PREMISES; START DATE ...... 46 APPENDIX B – AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS (DIRECT DEPOSIT) ...... 47
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement v TCBY® FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (the “Agreement”) is between TCBY SYSTEMS, LLC, a Delaware limited liability company, with its principal business address at 8001 Arista Place, Suite 600, Broomfield, Colorado 80021 (referred to in this Agreement as “we” and like terms), and ______, a ______, whose principal business address is ______(referred to in this Agreement as “you” and like terms).
OUR AGREEMENT WITH YOU: By signing this Agreement, you and we agree to all of the terms and provisions in this Agreement and in any exhibits, addenda and appendices to this Agreement. By signing this Agreement, you are also affirming that you understand and accept the Preambles in Article 1 of this Agreement. Finally, by signing the Acknowledgment Addendum attached hereto, you are affirming that you understand and accept all of the acknowledgments and representations contained therein.
ARTICLE 1
DEFINITIONS; PREAMBLES; AND ACKNOWLEDGMENTS
1.1 Date of Agreement. The date of this Agreement is ______, 20__.
1.2 Definitions.
(a) “Active Entity Owner” means, with respect to an Entity, either: (i) any Entity Owner involved in the ongoing decision making of the entity and operations of the Store (i.e., manager or operator, regardless of the actual percentage of ownership) rather than a passive interest investor in the Entity; or (ii) any shareholder owning directly or beneficially twenty percent (20%) or more of any class of securities of the Entity, any partner in a limited liability partnership or member in a limited liability company owning directly or beneficially twenty percent (20%) or more ownership interests in the limited liability partnership or limited liability company, or any beneficiary of a trust or estate owning, directly or beneficially, a twenty percent (20%) or more interest in the trust or estate. If any Active Entity Owner within the scope of this definition is itself an Entity, the term “Active Entity Owner” also includes Active Entity Owners (as defined in the preceding sentence) in the Entity. It is the intent of this definition to “trace back” and include within the definition of Active Entity Owner all natural persons owning the requisite interests to qualify as Active Entity Owners.
(b) “Affiliate,” as used in relation to us, means any person or entity that directly or indirectly owns or controls us, is directly or indirectly owned or controlled by us or is under common control with us, now or in the future; and as used in relation to you, means any person or entity that directly or indirectly owns or controls you, is directly or indirectly owned or controlled by you or is under common control with you, now or in the future.
(c) “Competitive Business” means any business operating or granting franchises or licenses to others to operate, a restaurant or retail outlet or any similar food service business selling or offering fresh or frozen yogurt, smoothies or similar items, except for an existing restaurant or retail outlet or similar food service business selling or offering such products owned and operated by you, which has been disclosed to us in writing prior to execution of this Agreement or a restaurant or retail outlet or similar food service business selling or offering such products as an incidental part of its operations. For purposes of this definition, “incidental” shall be defined as less than ten percent (10%) of gross sales.
(d) “Confidential Information” means any information relating to the TCBY Products or the development or operation of TCBY Stores, including site selection criteria; recipes and methods for
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement the preparation of TCBY Products; methods, techniques, formats, standards, specifications, systems, procedures, sales and marketing techniques and knowledge of and experience in the development and operation of TCBY Stores; marketing programs for TCBY Stores; knowledge of specifications for and suppliers of certain TCBY Products, materials, supplies, equipment, furnishings and fixtures; and knowledge of the operating results and financial performance of TCBY Stores other than the Franchised Store.
(e) “Controlling Interest” means an interest, the ownership of which empowers the holder to exercise a material influence over the management, policies or personnel of an Entity. Ownership of 10% or more of the equity or voting securities of a corporation, limited liability company or limited liability partnership or ownership of any general partnership interest in a general or limited partnership will be deemed conclusively to constitute a Controlling Interest in the corporation, limited liability company, or partnership, as the case may be.
(f) “Entity” means a corporation, general partnership, joint venture, limited partnership, limited liability partnership, limited liability company, trust, estate or other business entity.
(g) “Entity Owner” means, with respect to an Entity, any shareholder owning directly or beneficially any class of securities of the Entity; any general partner or co-venturer in the Entity; any partner in a limited liability partnership or member in a limited liability company owning directly or beneficially an ownership interests in the limited liability partnership or limited liability company; the trustees or administrators of any trust or estate; and any beneficiary of a trust or estate owning, directly or beneficially, an interest in the trust or estate.
(h) “Gross Revenues” means the aggregate amount of all sales of TCBY Products, other items, and services made and rendered in connection with the operation of the Franchised Store (as defined in Section 2.1(a)), including sales made at or away from the Premises of your Store, whether for cash or credit, but excluding all federal, state or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority.
(i) “Marks” means the trademarks, trade names, service marks, logos and other commercial symbols which we authorize franchisees to use to identify the TCBY Products and/or services offered by TCBY Stores, including the trademarks and service marks TCBY® and THE COUNTRY’S BEST YOGURT® and the Trade Dress (as defined in Section 1.2(o)) and the goodwill associated therewith; provided that we have the right to modify and/or discontinue the use of such trademarks, trade names, service marks, logos and other commercial symbols and the Trade Dress, and establish, in the future, additional or substitute trademarks, trade names, service marks, logos, commercial symbols or Trade Dress.
(j) “Restricted Person” means you; each of your Entity Owners, if you are an Entity; and the spouses, natural and adopted children, and siblings of any of you and your Active Entity Owners.
(k) “System Standards” means the operating procedures, standards, requirements and specifications, whether contained in the Operations Manual or elsewhere, which we have the right to improve, further develop or modify from time to time and which are mandatory in nature so as to comprise the requirements to be followed with respect to TCBY Stores and the use of the Marks in connection therewith.
(l) “TCBY Products” means products approved or required by us or our Affiliates from time to time for sale at or from TCBY Stores, including fresh and frozen yogurt, hand-dipped frozen yogurt, other frozen desserts, other food and beverage items and other products approved by us or our
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 2 Affiliates; provided that we have the right to modify and/or discontinue the use of the foregoing products from time to time and include additional or substitute products.
(m) “TCBY Store” means a retail outlet selling or offering for sale any TCBY Products for on- or off-premises consumption and other products and services specified by us. The term “TCBY Store” includes carts, kiosks, and other satellite units selling the TCBY Products. We have the right to approve all carts, kiosks and satellite units.
(n) “TCBY System” means our business formats, signs, equipment, methods, procedures, designs, layouts, standards and specifications, including the use of the Marks and the Trade Dress, which we have the right to modify in the future.
(o) “Trade Dress” means the designs, color schemes, decor and images which we authorize and require our franchisees to use in connection with the operation of TCBY Stores, which we or our Affiliates have the right to revise and further develop from time to time.
(p) “Transfer” means the voluntary or involuntary, direct or indirect transfer, assignment, sale, gift, pledge, mortgage, hypothecation or other disposition (including those occurring by operation of law and a series of transfers that in the aggregate constitute a Transfer) of any of your interest in this Agreement, your TCBY Store or a substantial portion of its assets, the lease for your TCBY Store or a Controlling Interest in you.
1.3 Preambles. TCBY Stores operate under distinctive business formats, systems, methods, procedures, designs, layouts, standards and specifications, all of which we have the right to improve, further develop or modify in the future. We and our Affiliates have expended a considerable amount of time and effort in developing and refining the recipes and formulations for and the methods of preparation of TCBY Products to obtain high product quality. We have the right to modify these recipes and methods of preparation as we deem is in the best interest of the TCBY System. One of our Affiliates currently owns and operates TCBY Stores, and we and our Affiliates may own and operate TCBY Stores in the future. We or our Affiliates own the Marks. We and our Affiliates have franchised and licensed and, in the future, have the right to continue to franchise and license others to operate TCBY Stores.
ARTICLE 2
GRANT OF FRANCHISE
2.1 Franchise.
(a) Grant of Franchise. Subject to the terms and conditions of this Agreement, we grant you a NON-EXCLUSIVE franchise (the “Franchise”) to own and operate a TCBY Store (the “Franchised Store” or “Store”) at and only at the “Premises,” as described below in this Section. If at the time of signing this Agreement you have obtained our approval of and secured the Premises for your Store, the Premises will be identified in Appendix A attached to this Agreement. However, if at the time of signing this Agreement you have not obtained our approval of and secured the Premises for your Store, you will pay us an initial franchise fee deposit of $5,000, as further described in Section 6.1. You will then have a period of 6 months from the date of this Agreement to obtain our approval of and secure the Premises for your Store. If you subsequently obtain our approval of and secure the Premises for your Store within the 6-month period, we and you will sign Alternative Appendix A identifying the Premises for your Store. If you fail to obtain our approval of and secure the Premises for your Store within the 6-month period, however, we have the right to terminate this Agreement. You hereby accept the Franchise and undertake the obligation to operate your Store using the TCBY System in accordance with the System Standards.
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 3 The Franchise granted herein is limited to the right to operate the one Franchised Store at the Premises, and does not include an exclusive area or protected territory within which we or our Affiliates agree not to issue franchises or operate competing businesses. We and our Affiliates have the right to issue franchises or operate competing businesses for or at locations, as determined by us or our Affiliates, near the Premises. You have no right to construct or operate any additional, expanded or modified facilities on the Premises, nor any right to construct or operate a TCBY Store at any location other than the Premises. In addition, you have no right to sublicense pursuant to this Agreement. For purposes of this Agreement, “secured the Premises for your Store” means that you have either (i) signed a lease or sublease we have approved (including any required addenda thereto) for the Premises, as further described in Section 4.2(a) of this Agreement, if you are leasing or subleasing the Premises, or (ii) taken possession of the Premises, if you own the Premises.
(b) TCBY Products. In operating your Store, you may offer for sale only those TCBY Products that we approve from time to time for you to sell at the Premises. The TCBY Products that you initially are authorized to offer at your Store are explained in the Operations Manual referred to in Section 5.2. In the future, we have the right to change or add to the TCBY Products that you are authorized to offer at the Premises and notify you of such changes or additions, as we determine, through references to the Operations Manual, bulletins and other written materials, electronic computer messages, telephonic conversations, and/or consultations at our offices or at your Store. Although the TCBY Products sold at TCBY Stores may vary from Store to Store, you may only sell those TCBY Products that we authorize you to sell from your Store.
2.2 Reservation of Certain Rights. We and our Affiliates reserve all rights not expressly granted to you in this Agreement, including but not limited to the rights to: (1) establish TCBY Stores, including TCBY Store franchises, licenses or businesses owned by us or our Affiliates, at any locations we deem appropriate; (2) distribute TCBY Products and any other products or services through alternative channels of distribution using the Marks; and (3) establish businesses which are franchised, licensed or owned by us or our Affiliates at any locations we deem appropriate or distribute products or services through alternative channels of distribution which are similar to the TCBY Products under trade names, trademarks, service marks, trade dress or other commercial symbols other than the Marks.
ARTICLE 3
INITIAL TERM AND RENEWAL
3.1 Initial Term of the Franchise Agreement. The initial term of this Agreement will be 10 years, commencing on the date of this Agreement. Notwithstanding the preceding sentence, if at the time of signing this Agreement we have not identified the Premises on Appendix A attached to this Agreement, the initial term will commence as of the date of this Agreement, and continue for a period of 10 years from the date you and we sign Alternative Appendix A identifying the Premises for your Store, unless otherwise terminated in accordance with the terms of this Agreement. This Agreement may be renewed as provided in Section 3.2. This Agreement may be terminated prior to expiration of its term if: (i) the lease or sublease of the Premises is terminated as provided in Section 4.2(c) and 13.1(f); (ii) the lease or sublease of the Premises expires and you are unable to obtain a replacement lease or sublease, as provided in Sections 4.2(c) and 13.1(f); or (iii) this Agreement is otherwise terminated in accordance with Article 13. References in this Agreement to the term of this Agreement mean the initial term and any properly exercised renewal term.
3.2 Renewal. If you are not in default at the time of exercise of a renewal option and at the time the prior term expires, you shall have the right to renew this Agreement for one additional 10-year term, provided that:
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 4 (a) You give us written notice of your intention to renew at least 180 days prior to expiration of the then current term;
(b) You sign our then current form of Franchise Agreement, which will include the same financial terms (continuing fees, advertising fees and other fees) as this Franchise Agreement or the terms of our then current form of Franchise Agreement, whichever you deem is more advantageous to you, and sign our then current Renewal Addendum to such Franchise Agreement, which shall, among other things, establish that the Franchise Agreement is for a renewal term with no additional renewal rights, and contain a general release of claims against us;
(c) At our request, you refurbish, remodel, redecorate, and renovate your Store at the commencement of the renewal term to meet our then current System Standards for TCBY Stores, including designs and service systems, computer and point-of-sale equipment, and Trade Dress;
(d) You have complied with all of the terms and conditions of this Agreement or any other agreement between you and us during the initial term;
(e) All monetary obligations owed by you to us, our Affiliates or your suppliers or creditors, whether pursuant to this Agreement or otherwise, have been satisfied prior to renewal, and have been paid in a timely manner throughout the initial term;
(f) You have the right to maintain the Premises for at least the duration of the renewal term and provide a copy of the lease to us; and
(g) You follow our then current renewal process, which may require you to deliver certain financial statements and other records and reports to us, attend additional training and cooperate in any audits and/or inspections we may conduct or require.
We will not charge any renewal fee in connection with any renewal under this Section 3.2. If we determine that you have met all of the conditions described above prior to the expiration date, we will provide you with an execution copy of the form of Franchise Agreement to be entered into for the renewal term. If you do not execute and return the renewal Franchise Agreement to us within 30 days of receipt, then you will be deemed to have withdrawn your notice of renewal, and this Agreement will terminate at the end of the current term.
ARTICLE 4
SITE SELECTION, LEASE OF PREMISES AND DEVELOPMENT OF YOUR STORE
4.1 Site Selection. You must obtain our written approval of the Premises before you sign a lease or sublease for or begin construction of the Premises. Our approval of the Premises is based and made in reliance upon information you furnish and representations you make to us (all of which we assume you have carefully and fully considered in selecting the Premises and proposing the Premises to us) with respect to the size, appearance and other physical characteristics of the Premises, photographs of the Premises, and demographic characteristics, traffic patterns, competition from other businesses in the area (including other TCBY Stores) and other commercial characteristics (including the purchase price, rental obligations, and other lease terms). Our approval of the Premises and any information communicated to you regarding the Premises do not constitute an express or implied representation or warranty of any kind as to the suitability of the Premises for a TCBY Store or for any other purpose. Our approval of the Premises indicates only that we believe that the Premises falls within our criteria as of the time period encompassing the evaluation. Both you and we acknowledge that application of criteria that have been effective with respect to other sites and premises may not predict the potential results for a specific site and that, subsequent to our approval of a site and Premises, demographic and/or economic factors,
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 5 including competition from other restaurants and retail outlets and similar food service businesses, included in or excluded from our criteria, could change, thereby altering the potential of a site. The uncertainty and instability of the factors included in the criteria are beyond our control and we will not be responsible to you for the failure of the Premises to meet expectations as to potential revenue or operational criteria. We may have rendered certain assistance in connection with you obtaining the Premises, including identifying one or more sites that we believe are available for development, recommending a real estate or business broker, or utilizing any information, contacts, databases and referral networks to which we may have access. Notwithstanding any such assistance, you acknowledge that you have conducted your own diligent review of the site, and your acceptance of a Franchise for the operation of a TCBY Store at the Premises is based on your own independent investigation of the suitability of the Premises.
4.2 Acquisition of the Premises.
(a) Your Obligation to Obtain Lease Unless you own the Premises, you agree to obtain any necessary lease or sublease for the Premises. We may (but are not obligated to) assist you in the process of obtaining and/or negotiating a lease or sublease for the Premises. In any event, you agree to obtain our approval of the terms of the lease or sublease for the Premises prior to your execution of the lease or sublease. You agree not to execute a lease or sublease which we have disapproved, and you must deliver a copy of the signed, approved lease to us within 15 days after its execution. Any lease or sublease must be in a form satisfactory to us. Prior to execution of the lease or sublease, you must also sign, and obtain agreement from the landlord of the Premises to sign, an addendum to the lease or sublease in a form that we provide or approve (the “Lease Addendum”). The lease, sublease or Lease Addendum must:
(i) Provide for notice to us of any default by you under the lease or sublease and provide us with a right (but no obligation) to cure the default. If we cure any default, the total amount of all costs and payments incurred by us in curing the default will be immediately due and owing to us by you;
(ii) Provide that you have the right to assign your interest under the lease or sublease to us without the lessor’s or sublessor’s consent;
(iii) Authorize and require the lessor or sublessor to disclose to us, upon our request, sales and other information that you furnish to the lessor or sublessor; and
(iv) Provide that we, one of our Affiliates or, in the case that clause (4) below is applicable, our assignee has the right to assume the lease or sublease:
(1) Upon expiration or termination of this Agreement, or
(2) If you fail to exercise any options to renew or extend the lease or sublease, or
(3) If you commit a default that gives the lessor or sublessor the right to terminate the lease or sublease, or
(4) If we or one of our Affiliates or our assignee purchases your Store as permitted by Section 14.5.
(b) Use of Premises Currently Under Lease to Us. If we or one of our Affiliates is currently leasing the Premises and has the right under that lease to sublease the Premises to you, and you desire to sublease the Premises from us or our Affiliate, and we or our Affiliate offer the Premises to you, then you agree to execute our then current form of sublease and, if you are an Entity, have each of your Active
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 6 Entity Owners execute our then current form of guaranty. If we or one of our Affiliates elects to assign an existing lease to you and you desire to obtain an assignment of the existing lease, unless we otherwise agree, you agree to arrange for the release of us or our Affiliate from all obligations under the assigned lease, as of the date of the assignment, and you agree to obtain from the landlord any consents, agreements, and lease amendments as are required so that the assigned lease satisfies the requirements of Section 4.2(a), as if the assigned lease were a third-party lease.
(c) Expiration or Termination of Lease. If a current lease or sublease will expire prior to expiration of this Agreement, you may attempt to obtain a replacement lease or sublease. We will have the right to approve any proposed replacement lease or sublease as otherwise provided in this Article 4. If you are unable to obtain a replacement lease or sublease that meets our approval prior to the expiration of the current lease or sublease, (i) you have the right to terminate this Agreement, subject to your observation of all notice provisions and post-term obligations set forth in this Agreement, including the continuing obligations described in Section 14.6, or (ii) we have the right to terminate this Agreement in accordance with Section 13.1(f). In addition, if the current lease or sublease is terminated for any reason prior to its expiration, we have the right to terminate this Agreement in accordance with Section 13.1(f).
(d) Effect of our Approval of Lease. Our approval of a lease or sublease for the Premises or the granting by us or one of our Affiliates of a sublease or lease assignment for the Premises does not constitute an express or implied warranty by us of the successful operation or profitability of a TCBY Store operated at the Premises. The approval indicates only that we believe the Premises and the terms of the lease fall within the acceptable criteria established by us as of the time period encompassing the evaluation.
4.3 Franchised Store Development.
(a) Plans and Specifications. You are responsible for constructing and developing your Store. We will furnish you with prototypical plans and specifications for a TCBY Store, including requirements for exterior and interior materials and finishes, dimensions, design, image, interior layout, decor, fixtures, equipment, signs, furnishings and color scheme. You must comply with these plans and specifications. You agree to have prepared all required construction plans and specifications to suit the shape and dimensions of the Premises and to ensure that the plans and specifications comply with applicable ordinances, building codes and permit requirements and with lease requirements and restrictions. You acknowledge that construction plans must be based on the prototypical plans and specifications. You agree to submit construction plans and specifications to us for our approval before construction of your Store is commenced, and you agree to submit all revised plans and specifications to us for our approval during the course of construction. Unless specifically informed otherwise by us, you are required to purchase certain furniture, fixtures and equipment, as well as services related to the build out of your store from Venture Projects, Inc. dba Concept Services, or other providers we may designate from time to time in our discretion, for the construction and development of your Stores. You agree that you must use an architect and contractor that we designate or approve. We do not receive any financial compensation from the approved architect and contractor. Upon completion of construction, you also agree to provide us with a set of “as built” plans and specifications. Further, you acknowledge and agree that you assume all risk relating to the construction and development of your Store, and our designation or approval of your architect, contractor, construction plans and specifications does not constitute an express or implied representation or warranty of any kind as to the quality of such construction or development or the success of your Store.
(b) Development Obligations. You agree to do each of the following:
(i) Secure all financing required to develop and operate your Store;
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 7 (ii) Obtain all required building, utility, sign, health, sanitation, business, environmental and other permits and licenses required for construction and operation of your Store;
(iii) Construct all required improvements to the Premises and decorate your Store in compliance with plans and specifications that we approve;
(iv) Purchase and install all fixtures, furnishings, equipment and signs required for your Store in accordance with Section 4.4; and
(v) Purchase an opening inventory of TCBY Products, materials and supplies.
4.4 Fixtures, Furnishings, Equipment, Signs and Computer Systems. In developing and operating your Store, you agree to do each of the following:
(a) Use only the fixtures, furnishings, equipment and signs that we require and have approved for TCBY Stores as meeting our System Standards;
(b) Place or display at the Premises (interior and exterior) only the signs, emblems, lettering, logos and display materials that we approve in writing. However, we have the right to install all required signs at the Premises at your sole expense; and
(c) Use the computer equipment and operating software and point of sale or electronic cash register (“Computer System”) that we determine is necessary. We have the right to require you to obtain specified computer hardware and/or software and modify specifications for and components of the Computer System from time to time. Our modification of specifications for the Computer System’s components may require you to incur costs to purchase, lease and/or license new or modified computer hardware and/or software, obtain service and support for the Computer System during the term of this Agreement and pay any related connection fees. We have the right to require you in the future to purchase additional or different components of the Computer System, including computer hardware and software and connection and other related services, from a supplier or suppliers we designate, which may include us or our Affiliates. You agree to incur the costs of obtaining the computer hardware and software comprising the Computer System (or additions or modifications). Within 60 days after you receive notice from us, you agree to obtain the components of the Computer System that we designate. We have the right to independently access the information and data you collect and gather using any Computer System or other data collection equipment (such as an electronic cash register) we require for your Store.
You agree that all fixtures, furnishings, equipment, signs and computer systems used in connection with the operation of your Store will be free and clear of all liens, claims and encumbrances, except for liens, claims or encumbrances asserted by us and except for third party purchase money security interests.
4.5 Franchised Store Opening. You will not open your Store for business until:
(a) We approve your Store for opening;
(b) Pre-opening training of you and Franchised Store personnel has been completed to our satisfaction;
(c) The initial franchise fee and all other amounts then due to us have been paid in full;
(d) The lease documentation, including the Lease Addendum, has been executed and all other documentation has been completed in connection with the development of your Store; and
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 8 (e) We have been furnished with copies of all insurance policies required by this Agreement and evidence of payment of premiums.
Subject to your compliance with the conditions set forth in this Section 4.5, you agree to open your Store for business by the “Start Date,” which is the date that is 120 days after either (i) the date of this Agreement, if at the time of signing this Agreement we have identified the Premises on Appendix A attached to this Agreement, or (ii) the date you and we sign Alternative Appendix A identifying the Premises for your Store, if at the time of signing this Agreement we have not identified the Premises on Appendix A attached to this Agreement. Your Start Date is listed on Appendix A or Alternative Appendix A, as applicable.
4.6 Grand Opening Promotion. You agree to conduct a grand opening advertising and promotion program for a newly developed Franchised Store for a period of at least 7 to 14 days, commencing within 30 days after the opening of your Store. The grand opening program shall conform to our requirements and shall utilize the media and advertising formats designated by us. We have the right to require you to submit a grand opening plan that meets our approval containing details about the grand opening promotion. You shall expend for the grand opening program an amount determined by us, but not to exceed $10,000. We have the right to require you to purchase grand opening advertising and promotional materials from us, our affiliates or our designees in advance of or during the grand opening program. You may also make payments to other vendors and suppliers for grand opening advertising or promotional materials. Payments to us or our affiliates for any grand opening advertising or promotional materials are non-refundable.
4.7 Relocation. Should it become necessary, on account of the condemnation of the Premises or the exercise of a relocation right by your landlord or for some other reason approved by us in writing to relocate the Store, we will consent to such relocation at a site acceptable to us provided that:
(a) You are in full compliance with this Agreement;
(b) You give us written notice of your desire to relocate at least 30 days prior to the date your Store will close for relocation;
(c) You find relocated Premises that meet all of our then current site criteria for the development of new TCBY Stores and obtain our written approval of the relocated Premises within 60 days after the date your Store will be closed for relocation and before you sign a lease or sublease or begin construction of the relocated Premises, and you open the relocated Store at the relocated Premises within 180 days after the date your Store closes for relocation;
(d) You construct and develop the relocated Store in accordance with all of our then current System Standards for TCBY Stores, including designs and service systems, and Trade Dress;
(e) You have sufficient term remaining under this Agreement, or purchase from us sufficient additional term under this Agreement, to satisfy our then current policy on remaining term requirements for relocations; and
(f) At our request, you execute a general release, in a form satisfactory to us, of any and all claims against us or our Affiliates and our and their respective officers, directors, attorneys, shareholders and employees, and any other ancillary agreements we are then using for relocations, or, in the event you are required to purchase additional term as set forth in Section 4.7(e), you sign either an extension of the existing Franchise Agreement or our then current form of Franchise Agreement (which will have the same financial terms as this Franchise Agreement or the financial terms of our then current form of Franchise Agreement as you deem is in your best interest), which will be effective for a period
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 9 commencing on the date you sign such agreement or extension and ending upon the expiration of the additional term.
In the event we consent to a relocation of your Store, you must, upon the closure of your former Store and at your expense: (i) promptly remove from the former Store Premises any and all signs, fixtures, furniture, posters, furnishings, equipment, menus, advertising materials, stationery supplies, forms and other articles which display any of the Marks or any distinctive features or designs associated with the System and either use them in your relocated Store or dispose of them as directed by us, and (ii) immediately make such modifications or alterations as we deem necessary to distinguish the former Store Premises from other TCBY Stores so as to prevent any possibility of confusion by the public. If after consenting to a relocation of your Store you fail to comply with any of the conditions set forth in this Section 4.7, we have the right to revoke our consent to such relocation and hold you in default of this Agreement for abandonment. In addition, while your former Store is closed for relocation, you may not Transfer your interest in this Agreement, and any such transfer will constitute a breach of this Agreement and will be void and of no effect.
ARTICLE 5
TRAINING AND GUIDANCE
5.1 Training.
(a) Training for You and your Store Manager. Prior to your Store’s opening, we will furnish an initial training program on the operation of TCBY Stores to you (or one of your Active Entity Owners, if you are an Entity) and the initial store manager (if the store manager is different from you). The training program will be furnished at our designated training facility, a TCBY Store owned and operated by one of our Affiliates, or any other location designated by us. You (or one of your Active Entity Owners) and the manager of your Store (if different from you) agree to complete all phases of the training program to our satisfaction and to participate in all other activities required to open your Store. Subsequent managers will also be required to satisfactorily complete all phases of our training program. Under no circumstances shall you permit management of the Store by a person who has not been certified by us as qualified to manage the Store by completing all phases of our training program to our satisfaction. We will furnish the initial training program to you (or one of your Active Entity Owners, if you are an Entity) and to the initial store manager (if different from you) free of charge if it is conducted at our training facility or a TCBY Store owned and operated by one of our Affiliates; however, if we agree to provide the training at any other location, we may charge a reasonable fee to cover our costs, including living expenses during the training for our employees or agents who provide the training. We have the right to charge a fee for the training for subsequent managers, which you will be required to pay at least 10 days prior to beginning of training.
(b) Refresher Training. We have the right to require you and/or previously trained and experienced managers to attend periodic refresher courses at the times and locations that we designate. We have the right to charge fees for refresher training courses.
5.2 Operations Manual. We will loan to you during the term of this Agreement one copy of our operating procedures manual (the “Operations Manual”). We have the right, at our option, to furnish or make available to you the Operations Manual in the form of a paper copy, an electronic copy on computer diskette or CD Rom, or an electronic copy accessed through the Internet or other communication systems. The Operations Manual contains mandatory and suggested specifications, standards and operating procedures, including System Standards that we prescribe for TCBY Stores and contain information relating to your other obligations under this Agreement. We have the right to modify the Operations Manual in the future to reflect changes in the image, specifications, standards, procedures, TCBY Products, TCBY System, and System Standards. However, no
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 10 provision of the Operations Manual, and no modification of the same, may (a) amend or override any of the express provisions of this Agreement, or (b) impose new fees or increase the fees payable by you to us and our affiliates. You may not at any time copy any part of the Operations Manual, either physically or electronically. If your copy of the Operations Manual is lost, destroyed or significantly damaged, you will be obligated to obtain from us, at our then applicable charge, a replacement copy of the Operations Manual.
5.3 Guidance and Operating Assistance. Although we do not have an obligation to do so, we may advise you from time to time of operating problems of your Store which come to our attention. At your request, we will furnish to you guidance and operating assistance in connection with:
(a) Methods, standards, specifications and operating procedures utilized by TCBY Stores;
(b) Purchasing required fixtures, furnishings, equipment, signs, TCBY Products, materials and supplies; and
(c) Advertising and promotional programs.
Any guidance and assistance we furnish or make available to you will be, at our option, in the form of references to the Operations Manual, bulletins and other written materials, electronic computer messages, telephonic conversations and/or consultations at our offices or at your Store. You agree that we will not be liable to you or any other person, and you waive all claims for liability or damages of any type (whether direct, indirect, incidental, consequential, or exemplary), on account of any guidance or operating assistance offered by us in accordance with this Section 5.3, except to the extent caused by our gross negligence or intentional misconduct. We will make no separate charge to you for such operating assistance and guidance as we customarily provide to our franchisees generally. Occasionally, we may make special assistance programs available to you, however, for which you will be required to pay the daily fees and charges that we establish.
5.4 National Conventions and Regional Meetings. We encourage you (or one of your Active Entity Owners, if you are an Entity) and a store manager (if the store manager is different from you) and/or an approved trainer (if you are a multi-unit TCBY Store franchisee) to attend all national conventions and regional meetings that we may hold periodically. These conventions and regional meetings will take place at the locations we designate. If you or your representatives attend these conventions and regional meetings, you will be responsible for all travel and living expenses and all other costs associated with such attendance.
ARTICLE 6
FEES
6.1 Initial Franchise Fee. You agree to pay us a nonrecurring initial franchise fee in the amount of $______. If at the time of signing this Agreement we have identified the Premises on Appendix A attached to this Agreement, the entire initial franchise fee is payable upon your execution of this Agreement. If at the time of signing this Agreement we have not identified the Premises on Appendix A attached to this Agreement, you will pay us an initial franchise fee deposit of $5,000 when you sign this Agreement. This $5,000 deposit is refundable until you secure our approval of and secure the Premises for your Store. You will pay us the remaining balance of the initial franchise fee at the time you obtain our approval of and secure the Premises for your Store, and you and we sign Alternative Appendix A identifying the Premises for your Store. If you fail to obtain our approval of and secure the Premises for your Store within the 6-month period described in Section 2.1(a) of this Agreement, however, we have the right to terminate this Agreement, in accordance with Sections 13.1 and 13.2. If we terminate this Agreement after you secure your Premises, we will keep the $5,000 deposit, although you will not be required to pay to us the remaining balance of the initial franchise fee. The
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 11 initial franchise fee will be fully earned by us when paid and is not refundable, except as provided in Section 13.3(a).
6.2 Continuing Fees. In addition to the initial franchise fee, you agree, for the entire term of this Agreement, to pay us a weekly continuing fee of 6% of your Store’s Gross Revenues.
6.3 Yogurt Formulation Charge and YFC Reimbursement. The parties acknowledge that we typically receive a formulation charge from our designated manufacturers (“Manufacturers”) or distributors (“Distributors”) of certain TCBY Products. The amount of the formulation charge that we receive is based on the purchases of such products by franchisees and licensees from our designated Distributors. As incentive for you to develop the Store and enter into this Agreement, we agree to provide you with a reimbursement (the “YFC Reimbursement”) of all of the yogurt formulation charge that we actually collect for certain yogurt products purchased by you for your Store. The amount of your YFC Reimbursement is set forth on Schedule 1 attached hereto. Any YFC Reimbursement to which you are entitled will be paid in a manner and with a frequency reasonably determined periodically by us, including without limitation, by rebate or by reducing the cost that you pay for TCBY Products. Payment of any YFC Reimbursement to you shall be subject to your material compliance with this Agreement at the time of payment and other conditions described on Schedule 1.
6.4 Date and Term of Payment. You agree to pay the weekly continuing fees pursuant to Section 6.2, and the marketing fees pursuant to Section 9.1, to us on or before the close of business on Wednesday of each week for the preceding week by pre-authorized electronic bank transfer from your account to our account or as otherwise directed by us. We expressly reserve the right to modify the timing and method of payment of the fees from time to time during the term of this Agreement, provided that the fees shall be payable no more frequently than weekly.
6.5 Payment by Pre-Authorized Bank Transfer. You agree to execute and complete the form Authorization Agreement attached as Appendix A to this Agreement, and/or such other documents as we may require from time to time, to authorize and direct your bank or financial institution to pay and deposit directly to our account, and to charge to your account, the amount of the continuing fees, marketing fees, and other amounts due and payable by you pursuant to this Agreement. Your authorizations will permit us to initiate debit entries and/or credit correction entries to your account for the amount of the continuing fees, marketing fees and other amounts then payable to us from you. You agree to maintain, at all times during the term of this Agreement, a balance in your account at your bank or financial institution sufficient to allow the appropriate amount to be debited from your account for payment of the continuing fees, marketing fees and other amounts payable by you for deposit in our account. The continuing fee and marketing fee amount actually transferred from your account each week shall be based on the Gross Revenue Report you provide to us for such week, as required in Section 8.1(a). If you do not provide us with a Gross Revenue Report for any given week, we have the right to estimate in good faith your Store’s Gross Revenues for the missing period and debit your account in an amount equal to the continuing fees and marketing fees that would be due based on such estimation. In making our good faith estimate, we may consider the last Gross Revenue Report that we received from you, any seasonal sales trends, and any system-wide averages and other pertinent information available to us. You are responsible for any penalties, fines or other similar expenses associated with the pre-authorized bank transfers described in this Section 6.5.
6.6 Late Fees; Interest on Late Payments. To compensate us for the increased administrative expense of handling late payments and late reports, we have the right to charge a $100 late fee for each delinquent payment, due when the delinquent payment is due, and a $100 late fee for each delinquent report, due when the delinquent report is due. We will continue to charge a late fee for each period that the report remains delinquent. These late fees are not interest or a penalty. They are only to compensate us for increased administrative and management costs due to your late payment or late report. The late fees are non-refundable. All continuing fees, amounts due for purchases by you from us or our Affiliates and other amounts which you owe to us or our
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 12 Affiliates will bear interest from their due date until paid at a rate equal to the lesser of the highest applicable legal rate for open account business credit, or 1.5% per month, payable when the corresponding delinquent payment is made. You agree that this Section 6.6 does not constitute our or our Affiliates’ agreement to accept payments after they are due or a commitment by us or our Affiliates to extend credit to you or otherwise to finance the operation of your Store.
6.7 Application of Payments. Regardless of any designation by you, we have the right to apply any payments by you to any of your past due indebtedness for continuing fees, marketing fees, purchases from us or our Affiliates, interest or any other indebtedness or amounts owed to us or our Affiliates.
6.8 No Right of Offset. You have no right of “offset” and will not withhold payment, for any reason, of any continuing fees, marketing fees or any other payment due to us under this Agreement or any other agreement.
ARTICLE 7
OBLIGATIONS RELATING TO OPERATIONS
7.1 System Standards; Refresh and Remodel.
(a) You acknowledge and agree that the operation of your Store in accordance with the System Standards is the essence of this Agreement and is essential to preserve the goodwill of the Marks and all TCBY Stores. Therefore, you agree that, at all times during the term of this Agreement, you will maintain and operate your Store in accordance with each of the System Standards. You agree that we have the right to modify the System Standards from time to time and acknowledge that the modifications may obligate you to invest additional capital in your Store and to incur higher operating costs. We agree not to modify the System Standards in such a way as to obligate you to complete a material remodel during the initial term of your Agreement, except as expressly set forth in this Agreement, or obligate you to invest additional capital at a time when the investment cannot in our reasonable judgment be amortized during the remaining term of this Agreement, unless required by the lease or sublease for the Premises or applicable law. Specifically, we will not require you to perform a refresh or remodel of your Store (assuming it met the prior System Standard) during the first two (2) years or last three (3) years of your initial Term.
(b) If, at any time in our reasonable judgment, your Store or any part thereof, including without limitation its design, finishes, fixtures, equipment, furniture, signs or utensils, do not meet our then-current System Standards (if not excepted above), we will notify you, specifying in reasonable detail the actions to be taken by you to comply with System Standards. If you fail or refuse to initiate promptly and timely complete the necessary actions as set forth in the notice, you will be in default under this Agreement. In addition to any of our other rights to enforce this Agreement, we will have the right (but not the obligation), pursuant to Section 13.2(e), to enter upon your Store premises and complete the necessary actions described in the notice, such as refurbishment, repairs, replacements and maintenance, and you will reimburse us for the entire cost thereof upon demand. You agree to cooperate fully with us in connection with any of our actions under this Section.
7.2 Performance of Duties and Obligations. You will at all times faithfully, honestly and diligently perform your obligations under this Agreement and you will continuously exert your best efforts to promote and enhance the business of your Store. You will not engage in any other business or activity that may conflict with your obligations under this Agreement.
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 13 7.3 Restrictions on Operations. You may not operate your Store at any site other than the Premises without our prior written consent. In addition, you may only offer and sell finished TCBY Products that have been approved for sale, as provided in Section 2.1(b), over the counter to retail customers from your Store, and may not sell approved TCBY Products or any materials, supplies, or inventory bearing the Marks at any other location or through any alternative channel of distribution without our prior written consent. “Alternative channels of distribution” includes, but is not limited to, the operation of a food cart or kiosk, sales through the Internet (or any other form of electronic commerce), mail order and telephone sales. Notwithstanding the above restrictions, you may: (i) offer and sell approved TCBY Products as part of off-site catering events and company account programs, provided you deliver (and do not engage a major carrier to deliver) TCBY Products that meet System Standards for quality and freshness and the sales are not part of a mail order program; (ii) offer samples of approved TCBY Products at or directly in front of your Store or other locations near your Store as approved by your landlord, where necessary, or at other locations in your community as approved by us or in accordance with any sampling or promotional program we approve or designate; or (iii) upon our prior written approval, offer and sell approved TCBY Products from a table, kiosk or cart at satellite locations that we approve. You may not sell to anyone any mix, materials, supplies, or inventory used in the preparation of any TCBY Products. Further, you may not sell any TCBY Products to any person or entity purchasing the TCBY Products for resale.
7.4 Internet Use. You acknowledge that the Internet is a powerful and expanding medium through which business is conducted. You may not, however, advertise your Store or the TCBY Products over the Internet (or any other form of electronic commerce) or establish a related World Wide Web Site without our prior written consent. In addition, your general conduct on the Internet (or any other form of electronic commerce) and specifically your use of the Marks is subject to the provisions of this Agreement. Without limiting the foregoing, you agree to follow our policies and procedures as they may be communicated to you periodically in the Operations Manual or otherwise regarding the use of social media and similar methods of communication. Further, you acknowledge that we have the right to require you to have access to the Internet from your Store Premises and submit reports, including Gross Revenue Reports, to us over the Internet in accordance with System Standards. We also have the right to require you to establish and maintain a valid email address and authorize us to communicate with you by this method at such address.
7.5 Our Right to Inspect Your Store. To determine whether you are complying with this Agreement and with all System Standards and whether your Store is in compliance with the terms of this Agreement, we and our designated agents have the right to, at any reasonable time and without prior notice to you:
(a) Inspect the Premises;
(b) Observe, photograph and video tape your Store’s operations for such consecutive or intermittent periods as we deem necessary;
(c) Remove samples of any TCBY Products, materials or supplies for testing and analysis;
(d) Interview personnel of your Store;
(e) Interview customers of your Store; and
(f) Access, inspect and copy any books, records and documents relating to the operation of your Store.
You agree to cooperate fully with us in connection with any of our inspections, observations, photographing, videotaping, product removal and interviews.
7.6 Surveys. You will present to your customers such evaluation forms as we periodically require and will participate in and request your customers to participate in any surveys performed by or on our behalf.
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 14 7.7 Entity Owners; Name Change. You agree, for the entire term of this Agreement, to identify your Entity Owners, if any, on the Ownership Addendum attached to this Agreement and send us prior notification of any change. Additionally, if you change your name, or your Entity changes its name or entity type, but no Transfer occurs as a result, you must notify us promptly following the change, provide us with any documentation we reasonably request to verify the name change, and pay us our then-current documentation fee (if any) to defray our costs associated with documenting the change, provided no fee will be charged for the first name change during the Term of the Agreement.
7.8 Guaranties by Entity Owners. If you are an Entity, you represent and warrant to us that you are duly organized or formed and validly existing in good standing under the laws of the state of your incorporation or formation, are qualified to do business in all states in which you are required to qualify and have the authority to execute, deliver and carry out all of the terms of this Agreement. If you are an Entity, each of your Active Entity Owners must execute our current form of Guaranty attached to this Agreement prior to or upon the date of this Agreement. Any person or Entity that at any time after the date of this Agreement becomes an Active Entity Owner pursuant to Article 12 or otherwise must, as a condition of becoming an Active Entity Owner, execute our then current form of Guaranty.
7.9 Insurance.
(a) Property Insurance. You agree, at your sole cost and expense, at all times during the term of this Agreement, to keep all of your goods, fixtures, furniture, equipment, and other personal property located on your Store Premises insured to the extent of 100% of the full replacement cost against loss or damage from fire and other risks normally insured against in special cause of loss coverage. You will also maintain business income and extra expense coverage to cover loss of income and extra expense for at least one year.
(b) Liability Insurance. You agree, at your sole cost and expense, at all times during the term of this Agreement, to maintain in force an insurance policy or policies, on an occurrence basis, which will name both us and our Affiliates as additional insureds on a primary non-contributory basis, insuring against all liability resulting from damage, injury, or death occurring to persons or property in or about your Store Premises (including products liability insurance and broad form contractual liability insurance), the liability under such insurance to be not less than $1,000,000 for one person injured, $1,000,000 for any one accident, and $1,000,000 for property damage. The original of such policy or policies shall remain in your possession. However you agree to give us a copy of the policy upon our request.
(c) Workers’ Compensation and Employers Liability Insurance. You also agree to maintain and keep in force all workers’ compensation and employers liability insurance on your employees, if any, in the following amounts:
(i) Workers Compensation: The amount required under the applicable workers’ compensation laws of the state in which your Store is located.
(ii) Employers Liability: No less than $100,000 per accident for bodily injury by accident, no less than $100,000 per employee for bodily injury by disease and no less than a $500,000 policy limit for bodily injury by disease.
(d) Other Insurance Policies. At your sole cost, you agree, at all times during the term of this Agreement, to maintain in force such other and additional insurance policies as a prudent franchisee in your position would maintain or as we reasonably require.
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 15 (e) Policy Requirements. The deductibles on all insurance policies required under this Section 7.9 shall not exceed $5,000, and all insurance policies will contain provisions to the effect that the insurance will not be canceled or modified without at least 30 days prior written notice to us and that no modification will be effective unless approved in writing by us. All such policies will be issued by a company or companies, rated “A-XII” or better by Best’s Insurance Guide, responsible and authorized to do business in the state in which your Store is located, as you may determine, and will be approved by us, which approval will not be unreasonably withheld. You shall provide us with certificates of insurance for all insurance policies required under this Section 7.9 at the time you procure the insurance. You agree to send the certificates of insurance to Risk Management, TCBY Systems, LLC, at the address set forth above or as we designate periodically.
(f) Release of Insured Claims. You release and relieve us and our Affiliates, and all of our and their officers, directors, shareholders, employees, agents, successors, assigns, contractors, and invitees and waive your entire right of recovery against us and our Affiliates and all of our officers, directors, shareholders, employees, agents, successors, assigns, contractors, and invitees for loss or damage arising out of or incident to the perils required to be insured against under this Section 7.9, which perils occur in, on or about your Store Premises or relate to your business on the Premises, whether due to the negligence of us or our Affiliates or you or any of our or your related parties.
ARTICLE 8
REPORTS AND RECORD KEEPING
8.1 Accounting, Reports and Financial Statements. You agree to establish and maintain a bookkeeping, accounting, record keeping and data processing system conforming to the requirements and formats that we prescribe. You agree to furnish to us reports relating to your Store by the delivery method (including without limitation via the Internet) and in such form and content as we have the right to prescribe from time to time. These reports include, but are not limited to, the following:
(a) Gross Revenue Reports. On or before noon on Wednesday of each week, a report of your Store’s Gross Revenues for the previous week;
(b) Monthly Financial Reports. Within 25 days after the end of each fiscal calendar month, a profit and loss statement for your Store for the previous fiscal calendar month and a year-to-date statement of financial condition as of the end of the previous fiscal calendar month;
(c) Semi-Annual Reports. Within 25 days after the end of each 6-fiscal calendar month period, a balance sheet for your Store as of the end of that semi-annual period;
(d) Annual P&L Reports. Within 25 days after the end of each fiscal year, a profit and loss statement setting out cost of goods, labor and other items to allow us to include needed details in our franchise disclosure document for the next fiscal year; and
(e) Tax Returns. Within 10 days after the returns are filed, exact copies of federal and state income, sales and any other tax returns and the other forms, records, books and other information as we have the right to periodically require.
Each report and financial statement will be signed and verified by you in the manner we specify. We have the right to disclose data derived from the sales reports to other franchisees and licensees. We have the right to charge you a late fee for each delinquent report due to us, for each period that such report remains delinquent, as further described in Section 6.5.
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 16 8.2 Retention of Records. You agree to keep full, complete and proper books, records and accounts of Gross Revenues and of your operations at your Store or at your business office. All the books, records and accounts will be kept in the English language and will be retained for a period of at least 3 years following the end of each fiscal year. The books and records will include: tax returns (sales and income); semi-annual balance sheets and monthly profit and loss statements; monthly inventories; records of promotions and coupon redemptions; and such other records as we request.
8.3 Our Right to Audit. At any time during business hours and without prior notice to you, we and our representatives have the right to inspect and audit the business records, bookkeeping and accounting records, sales and income tax records and returns and other records of your Store as well as your books and records. You agree to fully cooperate with representatives and independent accountants hired by us to conduct any inspection or audit. If an inspection or audit discloses an understatement of your Store’s Gross Revenues, you will pay to us, within 15 days after receipt of the inspection or audit report, the continuing fees due on the amount of the understatement, plus interest (at the rate and on the terms provided in Section 6.5) from the date originally due until the date of payment. Further, if inspection or audit is made necessary by your failure to furnish reports, supporting records or other information as required by this Agreement, or to furnish the reports, records or information on a timely basis, or if an understatement of Gross Revenues for the period of any audit is determined by the audit or inspection to be greater than three percent (3%), then within 15 days after receipt of the inspection or audit report, you will reimburse us for the cost of the audit or inspection, including the charges of attorneys and any independent accountants and the travel expenses, room and board and compensation of our employees. If you fail to cooperate with our audit, or are unwilling or unable to provide us with sufficient records, including the records and reports that you are required to maintain under this Agreement, to complete the audit to our reasonable satisfaction, we may establish a reasonable estimation of your Gross Revenues based on the data available to us (which may include records regarding product purchases, percentage rent reports or other information obtained from third parties) and collect from you any estimated amount that we deem was underreported or underpaid pursuant to this Agreement. These remedies are in addition to our other remedies and rights under this Agreement or applicable law, and our right to audit will continue for 2 years following termination of this Agreement.
ARTICLE 9
MARKETING AND PROMOTION
9.1 Marketing Fees.
(a) Collection of Marketing Fees. You agree, for the entire term of this Agreement, to pay to us a weekly marketing fee of 3% of your Store’s Gross Revenues. Marketing fees will be payable weekly by pre-authorized bank transfers, together with the continuing fees, in accordance with Sections 6.3 and 6.4. TCBY Stores owned by us and our Affiliates in the same market area as you will contribute marketing fees on the same basis as similarly situated franchisees in the area.
(b) Right to Direct Operation of the Marketing Fees Collected. Marketing fees pay for marketing programs. We will direct all marketing programs financed by the marketing fees we collect, and have the right to determine the creative concepts, materials and endorsements used and the geographic, market and media placement and allocation. You agree that we have the right to use the marketing fees we collect to meet any and all costs of maintaining, administering, directing and preparing advertising materials and marketing programs, including: preparing and producing video, audio and advertising materials; administering and funding local, regional and multi-regional marketing programs; purchasing direct mail and other media marketing; employing advertising, promotion and marketing agencies; supporting public relations; conducting market research; implementing and testing Trade Dress and design prototypes; and other advertising, promotion and marketing activities. We have the right, at
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 17 our option, to use marketing fees to prepare, furnish and/or offer for sale to you advertising, marketing and promotional formats and materials as described in Section 9.3.
(c) Accounting for the Marketing Fees Collected. The marketing fees we collect will be accounted for separately from our other funds, although we are not required to establish a separate marketing fund or bank account for such fees. We have the right to use the marketing fees we collect to defray the salaries, employee benefits, administrative costs and overhead we and our Affiliates may incur in activities related to our marketing programs, including conducting market research, preparing advertising, promotion and marketing materials and collecting and accounting for the marketing fees we collect. Upon your prior written request made within the first quarter of any calendar year, we will make available to you no later than 120 days after the end of the calendar year, an annual statement of moneys collected and costs incurred for our marketing programs. No independent audit is required in connection with this statement or the marketing fees we collect. We and our Affiliates have no fiduciary obligation above and beyond the contractual obligations listed herein to franchisees with respect to the collection and expenditure of marketing fees. We have the right to create a marketing fund in the future to be operated by us or through an entity separate from us.
(d) Benefits to Individual Stores. You understand and agree that our collection expenditure of marketing fees is intended to maximize recognition of the Marks and patronage of TCBY Stores. Although we will endeavor to utilize the marketing fees we collect to develop advertising and marketing materials and programs and to place advertising that will benefit all TCBY Stores, we cannot ensure you that our expenditure of marketing fees in or affecting any geographic area will be proportionate or equivalent to the marketing fee contributions by TCBY Stores operating in that geographic area or that any TCBY Store will benefit directly or in proportion to the marketing fees it pays to us from the development of advertising and marketing materials or the placement of advertising.
9.2 Advertising and Promotional Activities by You. In addition to marketing fees, you agree that you will spend on marketing and related programs any amount that is required under your lease or sublease. Those amounts cannot be applied against the weekly marketing fees you are required to pay us. In addition, those amounts typically vary from lease to lease, and therefore, all TCBY Store franchisees will not be obligated to spend the same amount on local advertising and marketing. You agree that all advertising, promotion and marketing by you will comply with the requirements of Article 10, will be completely clear and factual and not misleading, and will conform to the highest standards of ethical marketing and promotion policies which we have the right to prescribe. Prior to use, all press releases and policy statements and samples of all local advertising, marketing and related materials not prepared or previously approved by us will be submitted to us for approval. Our approval will not be unreasonably withheld. Pamphlets, brochures, cards or other promotional materials offering free Products may only be used if prepared by us, unless otherwise approved in advance by us. However, we will give favorable consideration to your use of free product cards developed by you, if the cards clearly state that they may only be redeemed at TCBY Stores owned by you. If we do not give you written approval of any advertising or other promotional materials within 15 days from the date of receipt by us of the materials, we will be deemed to have disapproved the submission. You agree not to use any advertising, marketing or related materials that we have disapproved. You also agree to list your Store in the principal telephone directories distributed in your metropolitan area.
9.3 Our Advertising Materials. From time to time, we will provide you with copies of advertising, marketing and promotional formats and materials for use in your Store, which we have prepared using marketing fees we have collected from TCBY Stores. You are only required to pay shipping and handling costs for these items or, if you want additional or replacement copies, our direct cost of producing such items together with any related shipping, handling and storage charges. In addition to these items, we may offer you the option of purchasing other advertising, marketing and promotional formats and materials that we have prepared and that are suitable for use at local TCBY Stores. We may provide samples, copies or information explaining these items to
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 18 you from time to time. If you elect to purchase any such items from us, we will provide them to you at our direct cost of producing them plus any related shipping, handling and storage charges. In addition, we have the right to develop and market special mandatory promotional items for TCBY Stores and require you to maintain a representative inventory of these promotional items to meet public demand. In such case, we will make these items available to you at our direct cost plus a reasonable mark-up and any shipping, handling and storage charges. You will have the right to purchase alternative promotional items if the alternative items conform to the specifications and quality standards we establish and you obtain our prior written approval. We also have the right to conduct coupon promotions. In such case, we have the right to require you to accept coupons that are issued by us or our Affiliates and presented at your Store by your customers. You will receive certain compensation for these coupons when you tender them to us in accordance with our System Standards. You acknowledge and agree that all payments to us for the items described in this Section 9.3 are nonrefundable and cannot be applied against the weekly marketing fee you are required to pay to us. You must participate in all mandatory promotions and product roll-outs that are agreed upon by the franchisee marketing committee (if the franchisee association has established that committee or one performing a similar function) and us. If you do not place minimum orders of products and other items necessary for a mandatory promotion or product roll-out by a certain date, we have the right to send, or direct suppliers to send, an automatic shipment of a specified minimum quantity of such products and items to you, and you must accept and pay for them upon receipt.
9.4 Advertising Cooperatives. We have the right, at any time, to form, organize, maintain and otherwise make use of, local advertising cooperatives in areas that include your Store but we will not require you to participate in or contribute to the advertising cooperative unless you agree to do so in writing.
ARTICLE 10
USE OF THE MARKS AND CONFIDENTIAL INFORMATION
10.1 Ownership and Goodwill of Marks. You acknowledge that we or our Affiliates are the exclusive owners of the Marks and that your right to use the Marks is derived solely from this Agreement and is limited to the conduct of business in compliance with this Agreement and all applicable System Standards, specifications and operating procedures that we require. Any unauthorized use of the Marks by you will constitute a breach of this Agreement and an infringement of our rights in the Marks. You agree that your usage of the Marks and any goodwill established by that use will be for our and our Affiliates’ exclusive benefit. This Agreement does not confer any past, present or future goodwill or other interests in the Marks upon you, other than the right to operate a TCBY Store in compliance with this Agreement. All provisions of this Agreement applicable to the Marks will apply to any additional proprietary trade and service marks and commercial symbols we or our Affiliates authorize for your use in the future.
10.2 Limitations on Your Use of Marks. You agree to use the Marks as the sole identification of your Store. You will not use any Mark as part of any corporate or trade name or with any prefix, suffix or other modifying words, terms, designs or symbols (other than logos licensed to you under this Agreement), or in any modified form, nor may you use any Mark in connection with the performance or sale of any unauthorized services or products or in any other manner not expressly authorized in writing by us. You agree to display the Marks prominently at your Store, on supplies or materials designated by us and in connection with packaging materials, forms, labels and advertising and marketing materials. All Marks will be displayed in the manner we require. You agree to use the registration symbol “®” in connection with your use of the Marks that are registered. You agree to refrain from any business or marketing practice which may be injurious to our business and the goodwill associated with the Marks and other TCBY Stores. You agree to give such notices of trade and service mark registrations as we specify and to obtain such fictitious or assumed name registrations as may be required under applicable law. You may not use any Mark as part of an electronic mail address or on any sites on the Internet or World Wide Web. Without limiting the foregoing, you may not use or register the Marks as an Internet domain name.
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 19 10.3 Discontinuance of Use of Marks. We have the right to require you to modify or discontinue use of any Marks or use one or more additional or substitute trade or service marks if we determine it becomes advisable to do so at any time. In such case, you agree to comply with our directions to modify or discontinue the use of the Mark or use one or more additional or substitute trade or service marks within a reasonable time after notice from us. We will reimburse you for your reasonable direct expenses in modifying or discontinuing the use of a Mark and substituting a different trademark or service mark. However, we will not be obligated to reimburse you for any loss of goodwill associated with any modified or discontinued Mark or for any expenditures made by you to promote a modified or substitute trademark or service mark.
10.4 Notification of Infringements and Claims. You agree to immediately notify us of any apparent infringement of or challenge to your use of any Mark or claim by any person of any rights in any Mark, and you will not communicate with any person other than us or our counsel in connection with the infringement, challenge or claim. We and our Affiliates will have the right to take the action we deem appropriate and control exclusively any litigation, U.S. Patent and Trademark Office proceeding or any other administrative or court proceeding arising out of any such infringement, challenge or claim or otherwise relating to any Mark. You agree to execute any instruments and documents, render such assistance and do those things as, in the opinion of our legal counsel, may be necessary or advisable to protect and maintain our interests in any litigation or U.S. Patent and Trademark Office or other proceeding or otherwise to protect and maintain our interests in the Marks.
10.5 Our Indemnification of You. We agree to indemnify you against and to reimburse you for all damages for which you are held liable in any proceeding arising out of your authorized use of any Mark in compliance with this Agreement, provided that you have timely notified us of the claim or proceeding and have otherwise complied with this Agreement. We and our Affiliates shall control the defense of any proceeding arising out of your authorized use of any Mark.
10.6 Copyrights. We or our Affiliates claim copyrights in the Confidential Information, the Operations Manual, our construction plans, specifications and materials, printed advertising and promotional materials and in related items used in operating the Franchise. You may use the Operations Manual and other materials during the term of the Franchise Agreement. The provisions of Sections 10.1, 10.3, 10.4 and 10.5 relating to Marks also apply to copyrights owned by us, as if copyrights were included within the definition of Marks.
10.7 Concepts Developed by You. We and our Affiliates will have the perpetual right to own and use and authorize other TCBY Stores to use, and you will fully and promptly disclose to us, all ideas, concepts, formulas, recipes, methods, techniques and other materials relating to the development or operation of a restaurant or retail outlet serving products similar to TCBY Products or any similar food service business conceived or developed by you or your employees during the term of this Agreement. You may not test, offer, or sell any new products without our prior written consent.
10.8 Confidential Information. We may disclose certain Confidential Information to you in training, the Operations Manual and in guidance furnished to you during the term of the Franchise. You are not acquiring any interest in Confidential Information, other than the right to utilize Confidential Information disclosed to you in the operation of your Store during the term of this Agreement. Your use or duplication of any Confidential Information in any other business will constitute an unfair method of competition and a violation of this Agreement. The Confidential Information is proprietary, includes our trade secrets and is disclosed to you solely on the condition that you agree:
(a) Not to use Confidential Information in any other business or capacity;
(b) To maintain the absolute confidentiality of Confidential Information during and after the term of this Agreement;
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 20 (c) Not to make unauthorized copies of any portion of Confidential Information disclosed in written or other tangible form; and
(d) To adopt and implement all reasonable procedures that we prescribe to prevent unauthorized use or disclosure of Confidential Information, including restrictions on disclosure of Confidential Information to your employees and compliance with the requirement that certain key employees execute confidentiality agreements as a condition of employment.
ARTICLE 11
COVENANTS NOT TO COMPETE
11.1 In Term Non-Compete. You agree and acknowledge that we would be unable to protect the Confidential Information against unauthorized use or disclosure and would be unable to encourage a free exchange of ideas and information among TCBY Stores if franchised owners of TCBY Stores or the manager of your Store were permitted to hold interests in or perform services for a Competitive Business. You also acknowledge and agree that we have granted the Franchise to you in consideration of and reliance upon your agreement to deal exclusively with us. Therefore, during the term of this Agreement, no Restricted Person and no manager of your Store will:
(a) Have any direct or indirect interest in a Competitive Business, except other TCBY Stores or other stores operated by you under franchise agreements with us or any of our Affiliates;
(b) Perform services as a director, officer, manager, employee, consultant, representative, agent or otherwise for a Competitive Business, except other TCBY Stores or other stores operated by you under franchise agreements with us or any of our Affiliates; or
(c) Recruit or hire any employee who, within the immediately preceding 6-month period, was employed by us or any TCBY Stores operated by us, our Affiliates or another franchisee or licensee of us, without obtaining the prior written permission of us or the franchisee or licensee.
11.2 Post Term Non-Compete. Upon termination of this Agreement for any reason other than as a result of our default, you agree that, for a period of 2 years (or 3 years if we purchase your Store as provided in Section 14.5) commencing on the effective date of termination, no Restricted Person will have any direct or indirect interest as an owner, investor, partner, director, officer, employee, consultant, representative or agent or in any other capacity in any Competitive Business located or operating within (a) 10 miles of your Store, or (b) 10 miles of any TCBY Stores, except TCBY Stores that you operate under agreements with us or our Affiliates. You expressly acknowledge that you and the other Restricted Persons possess skills and abilities of a general nature and have other opportunities for exploiting those skills. Consequently, enforcement of the covenants made in this Section 11.2 will not deprive you or any of the other Restricted Persons of their personal goodwill or ability to earn a living.
11.3 Shareholder Exception. The restrictions of Sections 11.1 and 11.2 do not apply to the ownership of shares of a class of securities listed on a stock exchange or traded on the over-the-counter market that represent 2% or less of the number of shares of that class of securities issued and outstanding.
11.4 Enforcement of Non-Competes. If any covenant in this Agreement which restricts competitive activity is deemed unenforceable by virtue of its scope in terms of area, business activity prohibited and/or length of time, but would be enforceable by reducing any part or all of the covenant, you and we agree that the covenant will be enforced to the fullest extent permissible under the laws and public policies applied in the jurisdiction in which enforcement is sought.
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 21 ARTICLE 12
TRANSFERS
12.1 Transfers by Us. This Agreement is fully transferable by us and will inure to the benefit of any transferee or other legal successor to our interest in this Agreement.
12.2 Restrictions on Transfers by You. Your rights and duties created by this Agreement are personal to you, and we have granted this Agreement to you in reliance upon our perceptions of the individual or collective character, skill, aptitude, attitude, business ability and financial capacity of you and, if you are not an individual, your Entity Owners. Accordingly, you must give us written notice in a form satisfactory to us of your intention to accomplish any Transfer hereunder no less than 60 days prior to the proposed Transfer, and no Transfer will be made without our prior written approval. Any Transfer without our approval will constitute a breach of this Agreement and will be void and of no effect.
12.3 Conditions for Approval of Transfers by You. If you are in full compliance with this Agreement and provide prior written notice to us in accordance with Section 12.2, we will not unreasonably withhold our approval of a Transfer that meets all of the following requirements:
(a) Character. The proposed transferee and the individuals ultimately owning the transferee, if the transferee is an Entity, must be individuals of good moral character and otherwise meet our then applicable standards for owners of TCBY Stores;
(b) Business Experience. The transferee and, if the transferee is an Entity, its Entity Owners must have sufficient business experience, aptitude and financial resources to purchase under the terms and conditions proposed, own and operate the Store and its business and comply with this Agreement;
(c) Training. The proposed transferee and/or its senior management personnel have completed to our satisfaction our then current training program for transferees after signing the franchise documents set forth herein, but prior to assuming operations of the Store;
(d) Satisfaction of Obligations. You have paid all amounts owed for purchases by you from us and our Affiliates and all other amounts owed to us or our Affiliates and third-party creditors;
(e) Execution of Assignment and Assumption Agreement. You and your transferring Entity Owners, if you are an Entity, the transferee and its Entity Owners, if the transferee is an Entity, and us have entered into our then current form of assignment and assumption agreement, pursuant to which (i) the transferee has agreed to be bound by and has expressly assumed all of the terms and conditions of this Agreement for the remainder of its term, (ii) the transferee’s Entity Owners, if any, have executed our then current form of guaranty, and (iii) you and your Entity Owners, if any, have agreed to release us and our Affiliates and our and their respective officers, directors, employees and agents from any and all claims;
(f) Execution of New Agreement at Our Option. In addition to entering into our then current assignment and assumption agreement, at our option, the transferee has executed our then current form of Franchise Agreement for a term equal to the remainder of current term of this Agreement and any additional term purchased in accordance with Section 12.3(n), and if the transferee is an Entity, each Entity Owner of the transferee has executed our then current form of guaranty;
(g) Payment of Transfer Fees. You or the transferee has paid our then current transfer fee for a Franchise Agreement. However, we will not charge a transfer fee if the Transfer is among existing Entity Owners of you and the names and identity of all Entity Owners remain the same following the
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 22 Transfer. We reserve the right to charge a reduced fee in certain circumstances, including a Transfer to a wholly-owned corporation under Section 12.4 and may refund the transfer deposit if we do not approve the transfer or in other circumstances that we agree to in writing;
(h) Approval of Terms of Transfer. We have approved the material terms and conditions of the Transfer, including, without limitation, the price and terms of payment. However, our approval of a Transfer does not ensure the transferee’s success as a TCBY Store franchisee nor should the transferee rely upon our approval of the Transfer in determining whether to acquire your Store;
(i) Subordination. If you (or your Entity Owners) finance any part of the sale price of the transferred interest, you and the Entity Owners have agreed that all obligations of the transferee under any promissory notes, agreements or security interests reserved by you (or your Entity Owners) will be subordinate to the transferee’s obligations to us and our Affiliates;
(j) Non-Competition Agreement. Each Restricted Person has executed a non-competition agreement in our favor and in favor of the transferee agreeing that, for a period of 3 years commencing on the effective date of the transfer, no Restricted Person will acquire or hold any direct or indirect interest as an owner, investor, partner, director, officer, manager, employee, consultant, representative or agent, or in any other capacity, in a Competitive Business located within (i) 10 miles of your Store, or (ii) 10 miles of any TCBY Store, except TCBY Stores that you operate under agreements with us or our Affiliates. The restrictions of this Section 12.3(j) will not apply to the ownership of shares of a class of securities listed on a stock exchange or traded on the over-the-counter market that represent 2% or less of the number of shares of that class of securities issued and outstanding;
(k) Landlord Consent. If consent is required, the lessor of the Premises consents to the assignment or sublease of the Premises to the transferee;
(l) Non-Use of Marks. You and your Entity Owners have agreed that you and they will not directly or indirectly at any time or in any manner (except with respect to TCBY Stores owned and operated by you or them) identify yourself or themselves or any of their businesses as a current or former TCBY Store, or as a franchisee, licensee or dealer of us or our Affiliates, use any Mark, any colorable imitation of any of the Marks or other indicia of a TCBY Store in any manner or for any purpose or utilize for any purpose any trade name, trade or service mark or other commercial symbol that suggests or indicates a connection or association with us or our Affiliates;
(m) Refurbishment. You or the transferee has agreed to any refurbishment or remodel of the Store required by us to bring the Store in compliance with the then current System Standards and Trade Dress, including without limitation, any Mid-Term Refresh that you would otherwise have been required to complete under this Agreement during a period of 12 months before or 12 months after the transfer date;
(n) Sufficient Term. You have sufficient term remaining under this Agreement, or the transferee has agreed to purchase from us, pursuant to our then-current term pre-purchase agreement, sufficient additional term under this Agreement to satisfy our then current policy on remaining term requirements for transfers;
(o) Licensed Escrow Professional. You and the transferee, at your cost, use a licensed escrow professional or other qualified third party acceptable to us to conduct the closing of the Transfer. We have the right to require that all documents and fees payable to us shall be deposited into escrow prior to the time that your transferee attends our training program, together with escrow instructions in form
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 23 and content satisfactory to us providing for a final closing of the Proposed Transfer after the transferee successfully completes all required training; and
(p) Other Conditions. You and your transferring Entity Owners, if you are an Entity, have complied with any other conditions that we reasonably require from time to time as part of our transfer policies.
In connection with any assignment permitted under this Section 12.3, you will provide us with all documents to be executed by you and the proposed transferee at least 30 days prior to execution.
12.4 Transfer to a Wholly-Owned Corporation or Limited Liability Company. If you are in full compliance with this Agreement, you will have the right to transfer your rights in this Agreement to a corporation or limited liability company which will conduct no business other than the business contemplated by this Agreement, which you actually manage and in which you maintain management control and own and control 100% of the equity and voting power of all issued and outstanding capital stock or other ownership interests. Transfers of shares or other ownership interests of you will be subject to the provisions of Sections 12.2 and 12.3. Even though a transfer is made under this Section 12.4, you will remain personally liable under this Agreement as if the transfer to such corporation or limited liability company had not occurred. The articles of incorporation, by- laws and other organizational documents of the corporation or limited liability company will recite that the issuance and assignment of any interest in the corporation or limited liability company is restricted by the terms of this Article 12, and all issued and outstanding stock certificates and other documents representing ownership interests in you will bear a legend reciting or referring to these restrictions.
12.5 Our Right of First Refusal.
(a) Submission of Offers to Us. If you or one or more of your Entity Owners desires to make a Transfer, you or the Entity Owner will obtain a bona fide, executed written offer and an earnest money deposit (in the amount of 5% or more of the offering price) from a responsible and fully disclosed purchaser and will immediately submit to us a true and complete copy of such offer, which will include details of the payment terms of the proposed sale and the sources and terms of any financing for the proposed purchase price and a list of the owners of record and beneficially of any offeror that is an Entity and the individuals ultimately owning or controlling the offeror. If the offeror or an owner of the offeror is a publicly-held Entity, you will also submit to us copies of the most current annual and quarterly reports of the publicly-held Entity. To be a valid, bona fide offer, the proposed purchase price will be denominated in a dollar amount. The offer must apply only to an interest in this Agreement or a Controlling Interest in you and may not include an offer to purchase any other property or rights of you or your Entity Owners. However, if the offeror proposes to buy any other property or rights from you or your Entity Owners under a separate, contemporaneous offer, the price and terms of purchase offered to you or your Entity owners for the interest in this Agreement or the Controlling Interest in you will reflect the bona fide price offered for that interest and will not reflect any value for any other property or rights.
(b) Our Right to Purchase. We will have the right, exercisable by written notice delivered to you or your Entity Owners within 30 days from the date of delivery of an exact copy of the offer to us, to purchase the interest in this Agreement or such Controlling Interest in you for the price and on the terms and conditions contained in the offer. However we have the right to substitute cash for any form of payment proposed in the offer, our credit will be deemed equal to the credit of any proposed purchaser, and we will have not less than 60 days to close the purchase. Without regard to the representations and warranties demanded by the proposed purchaser, if any, we will have the right to purchase the interest, receiving from you all customary representations and warranties given by the seller of the assets of a business or equity interest in an Entity, as applicable, including representations and warranties as to ownership, condition of and title to assets, absence of liens and encumbrances relating to the ownership
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 24 interest and assets, and validity of contracts and liabilities affecting the assets being purchased, contingent or otherwise.
(c) Non-Competition Restriction. If we exercise our right of first refusal, you and each other Restricted Person must execute a non-competition agreement in our favor agreeing to the same restrictions described in Section 12.3(j). If we exercise our right of first refusal, you and your Entity Owners further agree that you will abide by the restrictions of Section 12.3(l).
(d) Non-Exercise by Us of Our Right of First Refusal. If we do not exercise our right of first refusal, you (or your Entity Owners) may complete the sale to such purchaser pursuant to and on the terms of such offer, subject to our approval as provided in Sections 12.2 and 12.3. However, if the sale to the purchaser is not completed within 120 days after delivery of the offer to us, or if there is a material change in the terms of the sale, our right of first refusal will be extended for 30 days after the expiration of the 120-day period or after the material change in the terms of the sale.
12.6 Death or Permanent Disability. If you are an individual, upon your death or permanent disability or, if you are an Entity, upon the death or permanent disability of an individual owner of a Controlling Interest in you, the executor, administrator, conservator or other personal representative of that person will transfer his interest in this Agreement or his Controlling Interest in you within a reasonable time, not to exceed 12 months from the date of death or permanent disability, to a third party approved by us. A transfer under this Section 12.6, including, without limitation, transfer by devise or inheritance, will be subject to all of the terms and conditions for Transfers contained in Sections 12.2 and 12.3, and unless transferred by gift, devise or inheritance, subject to the terms of Section 12.5. Failure to dispose of such interest within the specified period of time will constitute a breach of this Agreement. For purposes of this Agreement, the term “permanent disability” will mean a mental or physical disability, impairment or condition that is reasonably expected to prevent or actually does prevent you or an owner of a Controlling Interest in you from supervising the operation of your Store for a period of 6 months from the onset of such disability, impairment or condition.
12.7 Effect of Consent to Transfer. Our consent to a Transfer will not constitute a waiver of any claims we may have against the transferor nor be deemed a waiver of our right to demand full compliance by the transferee with the terms or conditions of this Agreement.
12.8 Preparation of a Financial Report by You. We have the right to require you to prepare and furnish to a prospective transferee and/or us such financial reports and other data relating to your Store and its operations as we deem necessary or appropriate for the prospective transferee and/or us to evaluate the Store and the proposed transfer. You agree that we have the right to confer with prospective transferees and furnish them with information concerning your Store and proposed transfer without being held liable to you, except for intentional misstatements made to any such transferee. Any such information furnished by us to prospective transferees is for the sole purpose of permitting the transferees to evaluate your Store and the proposed transfer and shall not be construed in any manner or form whatsoever as financial performance representations, or representations or claims of success or failure.
ARTICLE 13
DEFAULT AND TERMINATION
13.1 Your Defaults. You will be in default under the terms of this Agreement if any of the following occur:
(a) Insolvency. You become insolvent or admit in writing your inability to pay your debts as they mature, or make an assignment for the benefit of creditors, file a petition under any bankruptcy act, receivership statute, or the like or if a petition is filed by a third party, or if an application for a receiver is
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 25 made by anyone and the petition or application is not resolved favorably to you within 60 days (any such event described in this Section 13.1(a) being referred to as an “Insolvency Event”);
(b) Unauthorized Transfer. A Transfer occurs in violation of the provisions of Article 12;
(c) Misstatements and other Adverse Developments. You (or, if you are an Entity, any Entity Owner of you) have made any material misrepresentation or omission in your application for the rights conferred by this Agreement, are convicted by a trial court of or plead no contest to a felony or to any other crime or offense that may adversely affect the goodwill associated with the Marks, or if you engage in any conduct which may adversely affect the reputation of any TCBY Store or the goodwill associated with the Marks;
(d) Unauthorized Use of Marks or Confidential Information. You or an Entity Owner of you makes any unauthorized use of the Marks or any unauthorized use or disclosure of Confidential Information;
(e) Abandonment. You abandon or fail actively to operate your Store for 3 consecutive days unless your Store has been closed for a purpose approved in advance by us in writing or because of fire, flood or other casualty, government order or other reasons beyond your reasonable control;
(f) Breach of Lease; Loss of Right of Possession. You are in breach of any of your obligations under your lease or sublease of the Premises or you lose the right to possession of the Premises;
(g) Failure to Comply with Certain System Standards and Health Requirements. You fail or refuse to comply with System Standards relating to the cleanliness or sanitation of your Store or violate any health, safety or sanitation law, ordinance or regulation;
(h) Understatements of Gross Revenues. You understate your Store’s Gross Revenues in any report or financial statement by an amount greater than 5%;
(i) Failure to Make Payments. You or any of your Affiliates fail to make payments, when due, of any amounts due to us or our Affiliates under this Agreement or any other agreement with us or our Affiliates, or fail to make payments, when due, of any amounts due to vendors, distributors, suppliers or landlords of the Store that relate to the Store’s operation;
(j) Failure to Pay Taxes. You fail to pay any federal or state income, sales or other taxes due with respect to your Store’s operations unless you are in good faith contesting your liability for the taxes;
(k) Failure of Inspection. You fail to achieve a passing score reasonably established by us on two consecutive announced or unannounced store inspections conducted by us or our agents;
(l) Other Breaches. You fail to comply with any other provision of this Agreement or any System Standard;
(m) Repeated Breaches. You fail on 2 or more separate occasions within any period of 12 consecutive months or on 3 occasions during the term of this Agreement to submit when due reports or other data, information or supporting records or to pay when due the continuing fees or other payments due to us or our Affiliates or otherwise fails to comply with this Agreement, whether or not the failures to comply are corrected after notice thereof is delivered to you;
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 26 (n) Financing Defaults. You default with respect to any of your obligations to us or any other lender under any financing provided to you in connection with this Franchise Agreement or a purchase of Franchised Store assets; or
(o) Default of any Other Agreement. You default in the performance or observance of any of your obligations under any other agreement with us or our Affiliates.
(p) Failure to Secure Store Premises. You fail to obtain our approval of and secure the Premises for your Store within the 6-month period described in Section 2.1(a) of this Agreement, if at the time of signing this Agreement we have not identified the Premises on Appendix A attached to this Agreement.
(q) Possession or Use of Unauthorized Products. You possess or use on the Premises of your Store unauthorized products, as specified periodically by us in the Operations Manual or otherwise.
13.2 Our Right to Terminate if You Default. We have the right to terminate this Agreement in accordance with the following provisions:
(a) Immediate Termination With No Opportunity to Cure. You will have no right or opportunity to cure any of the defaults described in Sections 13.1(a), 13.1(b), 13.1(c), 13.1(d), 13.1(e), 13.1(f), 13.1(j), 13.1(m), 13.1(n), 13.1(p) and 13.1(r) and, upon the occurrence of one of these defaults, this Agreement will terminate effective immediately on our issuance of written notice of termination.
(b) Immediate Termination After 48 Hours to Cure. You will have 48 hours after written notice of default to cure a default relating to your failure to comply with certain System Standards and health requirements, as described in Section 13.1(g). If you fail to cure or only partially cure such a default within the 48-hour cure period, we will have good cause to terminate this Agreement and such termination will be effective immediately upon on our issuance of written notice of termination.
(c) Immediate Termination After 10 Days to Cure. You will have 10 days from the date of written notice of default to cure a default relating to your failure to make payments, as described in Section 13.1(i). If you fail to cure or only partially cure such a default within the 10-day cure period, we will have good cause to terminate this Agreement and such termination will be effective immediately upon on our issuance of written notice of termination.
(d) Termination After Opportunity to Cure. Except as otherwise provided in Sections 13.2(a), 13.2(b) and 13.2(c): (i) you will have 30 days from the date of written notice of default to cure any default under this Agreement or, if the default cannot reasonably be cured within 30 days from the date of written notice of default, provide proof acceptable to us of efforts which are reasonably calculated to correct the default within a reasonable time, which will in no event be more than 30 days from the date of written notice of default; (ii) your failure to fully cure a default within the applicable cure period will provide us with good cause to terminate this Agreement; (iii) the termination will be accomplished by mailing or delivering to you written notice of termination that will identify the grounds for the termination; and (iv) the termination will be effective 30 days after the date of written notice of termination.
(e) Other Rights and Remedies. If you cure any default after the applicable cure period has expired, we still have the right to terminate this Agreement. In any event, our right to terminate this Agreement is in addition to whatever other rights and remedies are available to us. Without limiting the foregoing, we reserve the right to interrupt your product shipments or ordering privileges instead of or in addition to exercising our right to terminate this Agreement, or require you to sign our then-current form
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 27 of Franchise Agreement if we choose to rescind our termination of this Agreement. We also reserve the right (but not the obligation), at your sole expense, to take actions necessary to cure any default that you do not timely cure within any applicable period provided in this Agreement, and to establish reasonable conditions that you must satisfy to cure any default, such as requiring you to pay for a year of monthly Store inspections if you commit a default relating to Section 13.1(k).
(f) Effect of Other Laws. The provisions of any valid, applicable law or regulation prescribing permissible grounds, cure rights or minimum periods of notice for termination of this Franchise will supersede any provision of this Agreement that is less favorable to you than such law or regulation.
13.3 Our Right to Terminate if You Fail to Complete Training. If you or your initial store manager fails to complete all phases of the initial training program to our satisfaction, we will have the right to terminate this Agreement effective upon delivery of notice of termination to you. If we terminate the Agreement as permitted by this provision, we will refund to you the initial franchise fee less all reasonable expenses incurred by us in connection with (i) the preparation of this Agreement and all related agreements, (ii) the grant of the Franchise, (iii) approval of the Premises, (iv) selection of the Premises, and (v) any other services performed by us in connection with the establishment and development of your Store. However, in no event will the refund exceed 50% of the initial franchise fee. In addition, we will not refund any portion of the $5,000 deposit you pay to us if at the time of signing this Agreement we have not identified the Premises on Appendix A attached to this Agreement, as described in Section 6.1. The refund will be delivered to you upon execution of all releases, waivers and other agreements necessary to terminate the relationship between you and us.
13.4 Your Right to Terminate if We Default. We will be in default under this Agreement if we materially breach a provision contained herein. Our failure to either cure such a default within 30 days from the date of a written notice of default delivered to us or, if such default cannot reasonably cured within 30 days, to provide proof to you of efforts which are reasonably calculated to cure such default within a reasonable time (which will in no event be more than 60 days after notice), will give you good cause to terminate this Agreement; provided you are in compliance with this Agreement. Termination will be accomplished by delivering to us written notice of termination, which notice will state the grounds for the termination and will be effective 10 days after delivery to us. Your right to terminate this Agreement is in addition to whatever other rights and remedies are available to you.
13.5 Assumption of Management. If you are in default of this Agreement for abandonment (as described in Section 13.1(e)), we have the right, at our option, to enter the Premises and assume the management of your Store for any period of time we deem appropriate. If we assume management of your Store, we will appoint a manager who will maintain Store operations. All funds from the operation of your Store during the period of management by our appointed manager will be kept in a separate fund, and all expenses of your Store, including compensation, other costs, and travel and living expenses of our appointed manager, will be charged to such fund. As compensation for such management services, we will charge such fund 10% of the Gross Revenues of your Store during the period of our management. Operation of your Store during any such period will be on your behalf, provided that we will have a duty only to utilize our good faith effort and will not be liable to you for any debts or obligations incurred by your Store or to any of your creditors for any merchandise, materials, supplies or services purchased by your Store during any period in which your Store is managed by our appointed manager. You will maintain in force for your Store all insurance policies required by this Agreement. Our right to assume management of your Store pursuant to this Section 13.5 is in addition to and does not affect our right to terminate this Agreement under Section 13.2.
13.6 Early Termination Damages. Upon (i) our termination of this Agreement according to its terms and conditions, except as a result of the circumstances set forth in Section 4.2(c), or (ii) your termination of this Agreement prior to expiration of its current term, except for termination as a result of the circumstances set forth
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 28 in Section 4.2(c) or in accordance with Section 13.1(f), you understand that we may seek damages, and you acknowledge and agree we will be entitled to damages, for anticipated and reasonably estimated lost profits.
ARTICLE 14
POST TERM OBLIGATIONS
14.1 Reversion of Rights. You agree that upon termination or expiration of this Agreement, all of your rights to use the Marks and all other rights and licenses granted herein and the right and license to conduct business under the Marks at your Store and on the Premises shall revert to us without further act or deed of any party. All right, title and interest of you in, to and under this Agreement shall become our property.
14.2 Payment of Amounts Owed to Us and Others following Termination or Expiration. You agree to pay us within 15 days after the date of termination or expiration of this Agreement, or such later date as the amounts due to us are determined, the continuing fees, marketing fees, amounts owed for purchases by you from us or our Affiliates, interest due on any of the foregoing and all other amounts owed to us or our Affiliates which are then unpaid.
14.3 Discontinuance of the Use of the Marks following Termination or Expiration. You agree that, upon termination or expiration of this Agreement, you will:
(a) Not directly or indirectly at any time or in any manner (except with respect to other TCBY Stores owned and operated by you) identify yourself or any business as a current or former TCBY Store, or as a franchisee, licensee or dealer of us or our Affiliates, use any Mark, any colorable imitation of a Mark or other indicia of a TCBY Store in any manner or for any purpose or utilize for any purpose any trade name, trade or service mark or other commercial symbol that suggests or indicates a connection or association with us or our Affiliates;
(b) Deliver to us all signs, sign-faces, sign-cabinets, marketing materials, forms, invoices and other materials containing any Mark or otherwise identifying or relating to a TCBY Store and allow us, without liability, to remove all such items from your Store;
(c) Take such action as may be required to cancel all fictitious or assumed name or equivalent registrations relating to your use of any Mark;
(d) If we do not purchase your Store as provided in Section 14.5, make the changes to the exterior and interior appearance of your Store to distinguish the Trade Dress as are reasonably required by us;
(e) Deliver all materials and supplies identified by the Marks in full cases or packages to us for credit and dispose of all other materials and supplies identified by the Marks within 30 days after the effective date of termination of this Agreement;
(f) Notify the telephone company and all telephone directory publishers of the termination of your right to use any telephone and telecopy numbers and any regular, classified or other telephone directory listings associated with any Mark and to authorize transfer of those rights to us, or at our direction, our designee. You agree that, as between you and us, we have the right to and interest in all telephone and telecopy numbers and directory listings associated with any Mark. You authorize us and appoint us and any of our officers as your attorney in fact, to direct the telephone company and all telephone directory publishers to transfer any telephone and telecopy numbers and directory listings relating to your Store to us, or our designee, should you fail or refuse to do so, and the telephone company and all telephone directory publishers may accept such direction or this Agreement as conclusive of our
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 29 exclusive rights in the telephone and telecopy numbers and directory listings and our authority to direct their transfer; and
(g) Furnish us, within 30 days after the effective date of termination, with evidence satisfactory to us of your compliance with the obligations in this Section 14.3.
You agree that if you fail to fulfill any of the obligations contained in this Section 14.3 upon termination or expiration of this Agreement, we have the right, at our option, to perform such obligations at your expense.
14.4 Discontinuance of Use of Confidential Information following Termination or Expiration. You agree that, upon termination or expiration of this Agreement, you will immediately cease to use any Confidential Information disclosed to you pursuant to this Agreement in any business or otherwise and you will return to us all copies of the Operations Manual and any other confidential materials which we have loaned to you.
14.5 Our Option to Purchase Franchised Stores.
(a) Option to Purchase. Upon termination or expiration of this Agreement other than as a result of our default, we or our assignee will have the right, at our option, exercisable by giving written notice thereof within 60 days from the date of such termination or expiration, to acquire from you the inventory of TCBY Products, materials, and supplies that are in good and saleable condition and not obsolete or discontinued (the “Inventory”) and the equipment, furnishings, signs, and the other tangible assets of your Stores (collectively, with the Inventory, the “Assets”). We will have the right to assign this option to purchase and our rights under this Section 14.5. We will be entitled to all customary warranties and representations in connection with our purchase, including, without limitation, representations and warranties as to ownership, condition of and title to the Assets, no liens and encumbrances on the Assets, and validity of contracts and agreements and liabilities benefiting us or affecting the Assets, contingent or otherwise.
(b) Purchase Price. The purchase price for the Assets will be equal to the greater of:
(i) The sum of the book value of your Store’s Assets, other than Inventory, amortized on a straight-line basis over a 10-year period, plus the lesser of cost and the then- current wholesale market value of the Inventory, or
(ii) The product of your Store’s average cash flow for the 2 most recently completed fiscal years, multiplied by 2. “Cash flow” means your Store’s Gross Revenues less all Franchised Store-related costs (i.e., cost of goods sold, labor, occupancy and other Franchised Store expenses) as well as annual administrative costs of $15,000, continuing fees and marketing fees, but not including interest and depreciation.
We will have the right to set off against and reduce the purchase price by any and all amounts owed by you to us or our Affiliates. We have the right to exclude from the Assets purchased any equipment, furnishings, signs, and usable inventory of TCBY Products, materials, or supplies of your Stores that we have not approved as meeting our standards for TCBY Stores, and the purchase price will be reduced by the replacement cost of such excluded items which are required in the operation of your Stores being purchased.
(c) Payment of Purchase Price. The purchase price will be paid in cash at the closing of the purchase, which will take place no later than 90 days after your receipt of our notice of exercise of this option to purchase your Stores, at which time you will deliver instruments transferring to us good and merchantable title to the Assets purchased, free and clear of all liens and encumbrances and with all sales and other transfer taxes paid by you, and with all licenses or permits of your Stores which may be
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 30 assigned or transferred. If the closing of the purchase does not occur within the 90-day period because you fail to act diligently in connection with the purchase, the purchase price will be reduced by 10%. The purchase price will be further reduced by 10% per month for each subsequent month you fail to act diligently to consummate the purchase. Prior to closing, you and we will comply with the applicable Bulk Sales provisions of the Uniform Commercial Code as enacted in the state where your Store is located.
(d) Lease of Premises. In connection with the purchase of the Assets of a Franchised Store, you will also deliver to us an assignment of the lease for your Store Premises (or, if assignment is prohibited, subleases for the full remaining term and on the same terms and conditions as your lease). If you own the Premises of your Store, you agree to lease the Premises to us pursuant to the terms of our standard lease, for a term of 5 years with two successive 5-year renewal options at fair market rental during the initial and renewal terms.
(e) Interim Management. If we exercise the option to purchase your Store, pending the closing of such purchase, we have the right to appoint a manager to maintain the operation of your Store or, at our option, require you to close your Store during such time period without removing any assets. If we appoint a manager to maintain the operation of your Store pending closing of such purchase, we will have the right to manage your Store under the same terms and conditions as described in Section 13.5.
(f) Termination of Franchise Agreement. Upon the closing of the purchase of the Assets and satisfaction by you of all of your obligations under this Agreement accruing through the closing, this Agreement will terminate.
14.6 Continuing Obligations. All obligations of us and you which expressly or by their nature survive the termination or expiration of this Agreement will continue in full force and effect subsequent to and notwithstanding termination or expiration and until they are satisfied in full or by their nature expire. Included in the obligations that will continue following termination or expiration of this Agreement are the provisions of Sections 6.3, 7.9, 8.2, 8.3, 10.5, 10.8, 11.2, 12.3(m), 14.1, 14.2, 14.3, 14.4, 14.5, 14.6, 15.6, 15.7, 16.1, and the provisions of Articles 17 and 18.
ARTICLE 15
RELATIONSHIP OF THE PARTIES/INDEMNIFICATION
15.1 Independent Contractors. This Agreement does not create a fiduciary relationship between the parties. We and you are independent contractors and nothing in this Agreement is intended to make either party a general or special agent, joint venturer, partner or employee of the other for any purpose. You will conspicuously identify yourself in all dealings as the owner of your Store under a franchise granted by us and will place such other notices of independent ownership on the forms, business cards, stationery, marketing and other materials as we have the right to require from time to time.
15.2 No Liability for the Act of Other Party. You will not employ any of the Marks in signing any contract or applying for any license or permit or in a manner that may result in our liability for any indebtedness or obligations of you, nor may you use the Marks in any way not expressly authorized by us. Neither we nor you will make any express or implied agreements, warranties, guarantees or representations or incur any debt in the name or on behalf of the other or be obligated by or have any liability under any agreements or representations made by the other. We will not be obligated for any damages to any person or property directly or indirectly arising out of the operation of your business authorized by or conducted pursuant to this Agreement.
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 31 15.3 Your Control. You have the sole right and responsibility for the manner and means by which the day-to-day operation of your Store is determined and conducted and for achieving your business objectives. Subject to any approval, inspection and enforcement rights reserved to us, this right and responsibility includes the employment, supervision, setting the conditions of employment and discharge for your employees at your Store, daily maintenance, safety concerns, and the achievement of conformity with the System Standards.
15.4 Our Approval and Enforcement. Our retention and exercise of the right to approve certain matters, to inspect your Store and its operation and to enforce our rights, exists only to the extent necessary to protect our interest in the TCBY System and the Marks for the benefit of us and the TCBY System. Neither the retention nor the exercise is for the purpose of establishing any control, or the duty to take control, over those matters which are clearly reserved to you, nor shall they be construed to do so.
15.5 Taxes. We will have no liability for any sales, use, service, occupation, excise, gross receipts, income, property or other taxes, whether levied upon you or your assets or upon us, arising in connection with your sales or the business conducted by you pursuant to this Agreement, except for taxes that we are required by law to collect from you with respect to purchases from us and except for our own income taxes. Payment of all such taxes will be your responsibility.
15.6 Indemnification. You agree to indemnify, defend and hold harmless us, our parent company, subsidiaries and Affiliates and each of our and their respective shareholders, directors, officers, employees, agents, successors and assigns (the “Indemnified Parties”) against and to reimburse the Indemnified Parties for any claims, liabilities, lawsuits, demands, actions, damages and expenses arising from or out of (a) any breach of your agreements, covenants, representations, or warranties contained in this Agreement, (b) any damages or injury to any person, including, but not limited to, your employees, our employees and agents, your customers, and members of the public, suffered or incurred on or about any Franchised Store owned or operated by you, (c) product liabilities claims or defective manufacturing of TCBY Products by you, or (d) the activities under this Agreement of you or any of your officers, owners, directors, employees, agents or contractors. We agree to indemnify you against and reimburse you for any obligations or liability for damages attributable to agreements, representations or warranties of Franchisor, or caused by negligence or willful action of Franchisor, and for costs reasonably incurred by you in the defense of any such claim brought against you or in any action in which you are named as a party, provided that Franchisor will have the right to participate in and, to the extent Franchisor deems necessary, to control any litigation or proceeding which might result in liability of or expense to Franchisee subject to such indemnification. For purposes of this indemnification, claims will mean and include all obligations, actual, consequential, and incidental damages and costs reasonably incurred in the defense of any claim against the Indemnified Parties or you, including reasonable accountants’, arbitrators’, attorneys’ and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses and travel and living expenses. We will have the right to defend any such claim against us, using counsel of our choice, at your expense. This indemnity will continue in full force and effect subsequent to and notwithstanding the termination of this Agreement.
15.7 Waiver of Claims. You agree to waive all claims against us for damages to property or injuries to persons arising out of the operation of your Store.
ARTICLE 16
SECURITY AGREEMENT
16.1 Security Interest. In order to secure full and prompt payment of the fees and other charges to be paid by you to us, and to secure performance of your other obligations and covenants under this Agreement, you hereby grant us a security interest in, lien upon, and right of set off against all of your interest in the improvements, fixtures, inventory, goods, appliances and equipment now or hereafter owned and located at your
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 32 Store (whether annexed to the Premises or not) or used in connection with the business conducted at the Premises, including all raw materials, work in process and finished goods, and all replacements thereof, attachments, additions, and accessions thereto, and products and proceeds thereof in any form, including but not limited to insurance proceeds and any claims against third parties for loss or damage to or destruction of any or all of the foregoing (collectively, the “Collateral”).
16.2 Requirements. Without our prior written consent, you agree that no lien upon or security interest in the Collateral or any item thereof will be created or suffered to be created and that no lease will be entered into with respect to any item of Collateral. Without our prior written consent, you will not sell or otherwise dispose of any item of Collateral, or remove any Collateral from the Premises, unless the same is replaced by a similar item of equal or greater value, and except for the sales of inventory in the ordinary course of business. You agree to give to us advance notice in writing of any proposed change in your name, identity, or structure and not to make any change without our prior written consent and compliance with the provisions of this Agreement, including Article 12. You agree to execute for filing the financing statements and continuation statements as we have the right to require from time to time. You agree to pay all filing fees, including fees for filing continuation statements in connection with the financing statements, and to reimburse us for all costs and expenses of any kind incurred in connection therewith. If you default under this Agreement, we will have all the remedies and rights available as a “secured party” with respect to the Collateral under the Uniform Commercial Code as in effect from time to time in the state where the Premises are located. The grant of the security interest by you pursuant to Section 16.1 will not be construed to derogate from or impair any other rights which we may have under this Agreement or otherwise at law or equity. The provisions of this Section 16.2 shall survive the termination of this Agreement.
ARTICLE 17
DISPUTE RESOLUTION
17.1 Injunctive Relief. Nothing in this Agreement will prohibit us or you from exercising the right in a proper case to obtain specific performance, eviction from the Premises, temporary restraining orders and temporary or preliminary injunctive relief from a court of competent jurisdiction. You agree that we may have temporary or preliminary injunctive relief without bond, but upon due notice, and your sole remedy in the event of the entry of such injunctive relief will be the dissolution of the injunctive relief, if warranted, upon hearing duly had (all claims for damages by reason of the wrongful issuance of any the injunction being expressly waived.
17.2 Rights of Parties Are Cumulative. Our and your rights under this Agreement are cumulative and the exercise or enforcement of any right or remedy under this Agreement will not preclude the exercise or enforcement by a party of any other right or remedy under this Agreement which it is entitled by law or this Agreement to exercise or enforce.
17.3 Costs and Attorneys’ Fees. If we or you are required to enforce this Agreement in any proceeding, the party prevailing in such proceeding will be entitled to reimbursement of its costs and expenses, including reasonable court costs, accounting and legal fees, whether incurred prior to, in preparation for or in contemplation of the filing of any written demand, claim, action, hearing or proceeding to enforce the obligations of this Agreement. If we incur expenses in connection with your failure to pay when due amounts owing to us, to submit when due any reports, information or supporting records or otherwise to comply with this Agreement, including, but not limited to court costs, legal and accounting fees, you will reimburse us for any such costs and expenses which we incur.
17.4 Governing Law. EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER FEDERAL LAW, THIS AGREEMENT AND THE RELATIONSHIP BETWEEN YOU AND US WILL BE GOVERNED
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 33 BY THE LAWS OF THE STATE OF COLORADO, EXCEPT THAT ANY OTHER STATE LAW RELATING TO (1) THE OFFER AND SALE OF FRANCHISES (2) FRANCHISE RELATIONSHIPS, OR (3) BUSINESS OPPORTUNITIES, WILL NOT APPLY UNLESS THE APPLICABLE JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
17.5 Consent to Jurisdiction. WE MAY INSTITUTE ANY ACTION AGAINST YOU IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF COLORADO, AND YOU IRREVOCABLY SUBMIT TO THE JURISDICTION OF SUCH COURTS AND WAIVE ANY OBJECTION YOU MAY HAVE TO EITHER THE JURISDICTION OF OR VENUE IN SUCH COURTS.
17.6 Waiver of Punitive Damages and Jury Trial. BOTH PARTIES AGREE THAT NEITHER SHALL BE ENTITLED TO NOR SHALL EITHER DEMAND A JURY TRIAL IN THE EVENT OF LITIGATION, AND EACH WAIVE THEIR RIGHT TO A TRIAL BY JURY. The parties acknowledge that their waiver of jury trial rights provides the parties with the mutual benefit of uniform interpretation of this Agreement and resolution of any dispute arising out of this Agreement or any aspect of the parties’ relationship. You and we further acknowledge the receipt and sufficiency of mutual consideration for such benefit. Except as specifically provided in this Agreement, neither you nor we are entitled to any compensation or reimbursement for loss of prospective profits, anticipated sales, or other losses occasioned by cancellation or termination of this Agreement. You and we each EXPRESSLY WAIVE ANY CLAIM FOR PUNITIVE, MULTIPLE, AND/OR EXEMPLARY DAMAGES, except that we shall be free at any time hereunder to bring an action for willful trademark infringement and, if successful, to receive an award of multiple damages as provided by law. You and we each EXPRESSLY AGREE THAT NO PARTY BOUND HEREBY MAY RECOVER DAMAGES FOR ECONOMIC LOSS ATTRIBUTABLE TO NEGLIGENT ACTS OR OMISSIONS EXCEPT FOR CONDUCT WHICH IS DETERMINED TO CONSTITUTE GROSS NEGLIGENCE OR AN INTENTIONAL WRONG. BY INITIALING HERE:
______[FRANCHISEE TO INITIAL HERE]
YOU ACKNOWLEDGE AND AGREE THAT YOU HAVE READ THIS SECTION, UNDERSTAND ITS PROVISIONS, and that we have accorded you ample time and opportunity to consult with financial and legal advisors of your own choosing about the effect of these provisions on your rights under this Agreement.
17.7 Limitation of Claims. Any and all claims arising out of or relating to this Agreement or the relationship among the parties to this Agreement will be barred unless an action or proceeding is commenced within one year from the date you or we knew or should have known of the facts giving rise to such claim.
ARTICLE 18
GENERAL PROVISIONS
18.1 Severability. Each article, section, paragraph, term and provision of this Agreement will be considered severable and if, for any reason, any provision of this Agreement is held to be invalid, contrary to or in conflict with any applicable present or future law or regulation in a final, unappealable ruling issued by any court, agency or tribunal with competent jurisdiction in a proceeding to which we are a party, that ruling will not impair the operation of, or have any other effect upon, such other portions of this Agreement as may remain otherwise intelligible, and such other portions will continue to be given full force and effect and bind the parties, although any portion held to be invalid will be deemed not to be a part of this Agreement from the date the time for appeal expires, if you are a party thereto, otherwise upon your receipt of a notice of non-enforcement thereof from us.
18.2 Rights Provided by Law. If any applicable and binding law or rule of any jurisdiction requires a greater prior notice of the termination or non-renewal of this Agreement than is required under this Agreement, or
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 34 the taking of some other action not required under this Agreement, or if, under any applicable and binding law or rule of any jurisdiction, any provision of this Agreement is invalid or unenforceable, the prior notice and/or other action required by such law or rule will be substituted for the comparable provisions of this Agreement, and we will have the right to modify the invalid or unenforceable provision to the extent required to be valid and enforceable. You agree to be bound by any promise or covenant imposing the maximum duty permitted by law which is subsumed within the terms of any provision of this Agreement, as though it were separately articulated in and made a part of this Agreement, that may result from striking from any of the provisions of this Agreement any portion or portions which a court may hold to be unenforceable in a final decision to which we are a party, or from reducing the scope of any promise or covenant to the extent required to comply with such a court order. Such modifications to this Agreement will be effective only in such jurisdiction, unless we elect to give them greater applicability, and will be enforced as originally made and entered into in all other jurisdictions.
18.3 Waivers by Either of Us. Either we or you may by written instrument unilaterally waive or reduce any obligation of or restriction upon the other under this Agreement, effective upon delivery of written notice of waiver to the other or such other effective date stated in the notice of waiver. Any waiver granted by us will be without prejudice to any other rights we may have, will be subject to our continuing review and may be revoked by us at any time and for any reason, effective upon delivery to you of 10 days’ prior written notice.
18.4 Certain Acts Not to Constitute Waivers. Neither we nor you will be deemed to have waived or impaired any right, power or option reserved by this Agreement (including, without limitation, the right to demand exact compliance with every term, condition and covenant in this Agreement or to declare any breach to be a default and to terminate this Agreement prior to the expiration of its term) by virtue of (i) any custom or practice of the parties at variance with the terms of this Agreement; (ii) any failure, refusal or neglect of us or you to exercise any right under this Agreement or to insist upon exact compliance by the other with its obligations under this Agreement, including any waiver, forbearance, delay, failure or omission by us to exercise any right, power or option, whether of the same, similar or different nature, with respect to other TCBY Stores or franchise agreements; or (iii) our acceptance of any payments due from you after any breach of this Agreement.
18.5 Excusable Non-Performance. Neither we nor you will be liable for loss or damage or deemed to be in breach of this Agreement if the failure to perform obligations results from transportation shortages; inadequate supplies of equipment, merchandise, supplies, labor, material or energy or the voluntary suspension of the right to acquire or use any of those items in order to accommodate or comply with the orders, requests, regulations, recommendations or instructions of any federal, state or municipal government or any governmental department or agency; compliance with any law, ruling, order, regulation, requirement or instruction of any federal, state or municipal government or any governmental department or agency; acts of God; fires, strikes, embargoes, war or riot; or any other similar event or cause beyond the reasonable control of the party. Any delay resulting from any of those causes will extend performance accordingly or excuse performance, in whole or in part, as may be reasonable.
18.6 Interpretation of Rights and Obligations. The following provisions will apply to and govern the interpretation of this Agreement, the parties’ rights under this Agreement, and the relationship between the parties:
(a) Our Rights. Whenever this Agreement provides that we have a certain right, that right is absolute and the parties intend that our exercise of that right will not be subject to any limitation or review. We have the right to operate, administrate, develop, and change the TCBY System in any manner that is not specifically precluded by the provisions of this Agreement.
(b) Our Reasonable Business Judgment. Whenever we reserve or are deemed to have reserved discretion in a particular area or where we agree or are deemed to be required to exercise our rights reasonably or in good faith, we will satisfy our obligations whenever we exercise Reasonable
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 35 Business Judgment in making our decision or exercising our rights. A decision or action by us will be deemed to be the result of Reasonable Business Judgment, even if other reasonable or even arguably preferable alternatives are available, if our decision or action is intended, in whole or significant part, to promote or benefit the TCBY franchise system generally even if the decision or action also promotes a financial or other individual interest of us. Examples of items that will promote or benefit the TCBY franchise system include, without limitation, enhancing the value of the Marks, improving customer service and satisfaction, improving product quality, improving uniformity, enhancing or encouraging modernization, and improving the competitive position of the TCBY franchise system. Neither you nor any third party (including, without limitation, a trier of fact), shall substitute its judgment for our Reasonable Business Judgment.
18.7 Notice of Potential Profit to Us. We hereby advise you that we and/or our Affiliates have the right from time to time to make available to you goods, products and/or services for use in your Store on the sale of which we and/or our Affiliates may make a profit. We further advise you that we and/or our Affiliates have the right from time to time to receive consideration from suppliers, distributors and/or manufacturers related (directly or indirectly) to sales of goods, products or services to you, the promotion of goods, products or services by the TCBY System or in consideration of services rendered or rights licensed to such persons, including yogurt formulation charges. You agree that we and/or our Affiliates shall be entitled to said profits and/or consideration.
18.8 Binding Effect. Subject to the restrictions on Transfers contained in this Agreement, this Agreement is binding upon the parties hereto and their respective executors, administrators, heirs, assigns and successors in interest and will not be modified except by written agreement signed by both you and us.
18.9 No Third Party Beneficiaries. Nothing in this Agreement is intended, nor will be deemed, to confer any rights or remedies upon any person or legal entity not a party to this Agreement.
18.10 Approvals. Except where this Agreement expressly obligates us reasonably to approve or not unreasonably to withhold our approval of any action or request by you, we have the right to refuse any request by you or to withhold our approval of any action by you that requires our approval.
18.11 Headings. The headings of the several sections and paragraphs of this Agreement are for convenience only and do not define, limit or construe the contents of such sections or paragraphs.
18.12 Joint and Several Liability. If you consist of 2 or more persons or Entities, whether or not as partners, joint venturers, or co-owners, the obligations and liabilities of each person and Entity to us are joint and several.
18.13 Counterparts. This Agreement may be executed in multiple copies, each of which will be deemed an original.
18.14 Notices and Payments. All written notices and reports permitted or required to be delivered by the provisions of this Agreement will be deemed so delivered at the time delivered by hand; 1 business day after transmission by telegraph, facsimile, or other electronic system; 1 business day after being placed in the hands of a commercial courier service for next business day delivery; or 3 business days after placement in the United States Mail by registered or certified mail, return receipt requested, postage prepaid, and will be addressed to the parties at the addresses set forth on the first page of this Agreement or to such other address as a party may specify in a written notice to the other party. Any required payment or report not actually received by us during regular business hours on the date due (or postmarked by postal authorities at least 2 days prior thereto) will be deemed delinquent.
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 36 18.15 Entire Agreement. The Preambles and any exhibits, addenda and appendices attached hereto are a part of this Agreement. This Agreement constitutes the entire agreement of the parties except as provided below in this Section 18.15, and there are no other oral or written understandings or agreements between us and you relating to the subject matter of this Agreement, except that you acknowledge that we justifiably have relied on your representations made prior to the execution of this Agreement. Nothing in this or in any related agreement, however, is intended to disclaim the representations we made in the franchise disclosure document that we furnished to you.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the day and year first above written. This Agreement is not valid until signed by our authorized officer.
TCBY SYSTEMS, LLC, , a Delaware limited liability company a
By: By:
Title: Title:
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 37 SCHEDULE 1
YOGURT FORMULATION CHARGE REIMBURSEMENT
This schedule sets forth the YFC Reimbursement, if any, to which you are entitled in accordance with Section 6.3 of this Agreement. It will only be valid if signed by an authorized agent of you and TCBY SYSTEMS, LLC in the space provided below. This schedule is hereby incorporated into the Agreement in its entirety and is subject to the terms thereof.
1. YFC Reimbursement Amount: $12.03 per 36 lb case of TCBY soft serve product; $ 4.92 per 3-gallon tub of TCBY hardpack product; $ 3.90 per 8-unit case of TCBY prepacked quarts; $ 2.34 per 4-unit case of TCBY 8” yogurt pies; and $1.59/$1.92/$3.93 per 6/4/4-unit case of TCBY 7” cakes/ 9” cakes/sheet cakes, respectively (the listed products, collectively, the “Subject Products”)
In order to qualify for the YFC Reimbursement, the Subject Products must be purchased from us or our authorized manufacturers (“Manufacturers”) or distributors (“Distributors”), and be fully and timely paid for by you. You shall submit, and agree that Manufacturers and Distributors may submit, any documentation required by us to verify your purchase of and payment for Subject Products. The YFC Reimbursement amount is calculated based on existing case sizes described above and remains subject to change to provide for the same YFC Reimbursement level if the case size changes. You must use the Subject Products for your business at the Store only. Without limiting the generality of the foregoing, you may not transfer or sell such products to another store operated by you or another TCBY franchisee or licensee.
We may review and audit any and all documentation submitted in connection with the YFC Reimbursement and, if such audit shows that you received an incorrect amount of YFC Reimbursement for any period, we may reconcile and adjust future YFC Reimbursements accordingly. You shall have access to any and all documentation that we use to reconcile your YFC Reimbursement upon reasonable notice and written request to the COMPANY.
2. YFC Reimbursement Method/Frequency: As of the date of this Agreement, the YFC Reimbursement shall be paid to you monthly, for purchases of Subject Products made by you during our immediately prior fiscal month, within thirty (30) days of the later to occur of the date that we receive payment of our YFC for your purchases of Subject Products for such month from Manufacturers and Distributors and the date we receive proper verification documentation from you (including weekly reports of your Store’s Gross Revenues) and/or Manufacturers and Distributors. This method, including the timing of payment, may be changed periodically by us upon thirty (30) days written notice to you. Without limiting the foregoing, if at any time the YFC Reimbursement for any monthly period is less than One Hundred Dollars ($100), we may remit the YFC Reimbursement on a quarterly basis.
3. Term of YFC Reimbursement: We will remit any YFC Reimbursement that is due to you, subject to the terms and provisions of this Agreement, for a period commencing with the date that the STORE opens for business, up to and including the expiration or termination of the initial term of this Agreement, and throughout any properly exercised and granted extension or renewal of this Agreement (the “YFC Reimbursement Term”).
While the YFC Reimbursement is intended to help reduce your costs, we expressly reserve the ability of us and our Manufacturers or Distributors to (a) change the cost of products as a result of commodity or other raw ingredients pricing, packaging, manufacturing and distribution fees and costs; (b) change any surcharge that is added to product pricing for remittance of the royalty and advertising fund contributions if that method of
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 38 payment is required under this Agreement; (c) receive contributions, rebates or other payments, including YFC, for products other than the Subject Products, paper products and toppings that you purchase for the Store; (d) retain the amount of YFC in excess of the YFC Reimbursement, if any, that we receive from Manufacturers based on your purchases as of the date you sign this Agreement (such as for other Stores you own that are not subject to YFC Reimbursement); or (e) terminate or discontinue the YFC Reimbursement in accordance with the provisions of this Agreement.
4. Assignability of YFC Reimbursement; Default: The YFC Reimbursement may not be assigned separately from your interests in the Store and this Agreement and may only be assigned as part of an approved transfer in accordance with Section 12 of this Agreement. Any payments due hereunder shall cease and the YFC Reimbursement shall be subject to automatic termination upon any unauthorized transfer or assignment of any of your interest in the Store or this Agreement, or upon your default of this Agreement, without cure within any applicable cure period.
5. Acknowledgment: In consideration of the YFC Reimbursement and other covenants and benefits received by you hereunder, you acknowledge our right (but not the obligation) to (a) collect YFC in any manner not inconsistent with this Agreement, and to accept rebates or other payments from Manufacturers, Distributors and other suppliers and vendors, and (b) make payments from our funds or the TCBY marketing fund to franchisees or others related to any business plan improvement and store revitalization programs we prescribe.
DATED ______, 20__
FRANCHISEE TCBY SYSTEMS, LLC
By: By:
Its: Its:
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 39 ACKNOWLEDGEMENT ADDENDUM TO TCBY® FRANCHISE AGREEMENT
Acknowledgments and Representations.
1. You acknowledge and represent that you have read this Agreement and our disclosure document and understand and accept the provisions of this Agreement as being reasonably necessary to maintain our high standards of quality and service and the uniformity of those standards at all TCBY Stores franchised by us and to protect and preserve the goodwill of the Marks.
2. You acknowledge that you have conducted an independent investigation of the business venture contemplated by this Agreement and you recognize that, like any other business, the nature of the business contemplated by this Agreement may change over time, that an investment in a TCBY Store involves business risks, and that the success of the venture is largely dependent upon your business abilities and efforts.
3. You acknowledge and understand that any information relating to the sales, profits or cash flows of TCBY Stores operated by us or our Affiliates, or our franchisees that may be contained in our disclosure document and other materials is intended only to be an indication of historical performance of certain TCBY Stores and NOT of potential future financial performance.
4. Except for any financial performance representation that may be included in our disclosure document, we expressly disclaim the making of, and you acknowledge that you have not received or relied on, any express or implied warranty or guarantee as to the revenues, profits or success of the business venture contemplated by this Agreement.
5. You acknowledge and understand that our officers, directors, employees and agents are acting only in a representative and not a personal capacity in their dealings with you. You also acknowledge and represent that you have not received or relied on any representations about us or our franchise program or policies from us or our officers, directors, employees or agents that are contrary to the statements made in our disclosure document or to the terms of this Agreement.
6. You acknowledge and understand that the franchise granted under this Agreement is limited to the right to operate one TCBY Store at the Premises, and does not include an exclusive area or protected territory within which we or our Affiliates agree not to issue franchises or operate competing businesses. Further, you acknowledge and understand that we and our Affiliates have the right to establish competing franchises, licenses or businesses owned by us or our Affiliates, including TCBY Stores, at any locations we deem appropriate, including locations near the Premises, and distribute TCBY Products and other competitive products and services through alternative channels of distribution, all consistent with the terms of Section 2.2 of this Agreement.
7. You represent to us, as an inducement to your entry into this Agreement, that you satisfy all requirements to qualify as a franchisee that may be set forth in our disclosure document, and that all statements in your application for the rights granted in this Agreement are accurate and complete and that you have made no misrepresentations or material omissions in obtaining these rights.
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 40 8. You acknowledge that you received a copy of our disclosure document, as required under federal and applicable state franchise disclosure law, at least fourteen (14) calendar days before signing this Agreement or any other binding agreement, or paying any fees to us or our Affiliates. In addition, if we materially altered the provisions of this Agreement, including any attachments relating thereto, or any related agreements attached to our disclosure document (except as a result of negotiations you initiated), you acknowledge that you received a copy of this Agreement or the related agreement at least seven (7) calendar days before signing it.
, a
By:
Title:
Date Signed:
*All representations requiring prospective franchisee to assent to a release, estoppel or waiver of liability are not intended to nor shall they act as a release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 41 OWNERSHIP ADDENDUM TO TCBY® FRANCHISE AGREEMENT
1. Entity Owners. You represent and warrant to us that your Entity Owners are as follows:
NAME PERCENTAGE ADDRESS OF INTEREST
______
______
______
______
______
______
______
______
______
2. Change. You agree to immediately notify us in writing of any change in the information contained in this Addendum and, at our request, prepare and sign a new Addendum containing the correct information.
3. Date of Addendum. The date of this Addendum is ______, 20__.
Your Initials Our Initials
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 42 GUARANTY
In consideration of, and as an inducement to, the execution by TCBY SYSTEMS, LLC (“Franchisor”) of the foregoing TCBY® Franchise Agreement (the “Franchise Agreement”) with ______(“Franchisee”) dated ______, 20___, and for other good and valuable consideration, each of the undersigned for themselves, their heirs, legal representatives, successors and assigns (collectively the “Guarantors”) do hereby unconditionally, individually, jointly and severally guarantee to Franchisor, and to its successors and assigns, the full, complete and timely payment and performance of each and all of the terms, covenants and conditions of the Franchise Agreement (and any modification or amendment to the Franchise Agreement) to be kept and performed by Franchisee during the term of the Franchise Agreement, including without limitation the payment of all continuing license fees, marketing fees and all other fees and charges accruing pursuant to the Franchise Agreement.
Each of the Guarantors further agrees as follows:
1. The Guarantors, individually, jointly and severally, shall be personally bound by each and every condition and term contained in the Franchise Agreement as though each of the Guarantors had executed a franchise agreement containing the identical terms and conditions of the Franchise Agreement, including without limitation the provisions of Section 10.8 and Article 11 relating to Confidential Information and covenants not to compete. This Guaranty shall continue in favor of Franchisor notwithstanding any extension, modification, or alteration of the Franchise Agreement, and notwithstanding any assignment of the Franchise Agreement, with or without the Franchisor’s consent. No extension, modification, alteration or assignment of the Franchise Agreement shall in any manner release or discharge the Guarantors, and each of the Guarantors consents to any such extension, modification, alteration or assignment.
2. This Guaranty will continue unchanged by the occurrence of any Insolvency Event, as defined in the Franchise Agreement, with respect to Franchisee or any assignee or successor of Franchisee or by any disaffirmance or abandonment of the Franchise Agreement by a trustee in bankruptcy of Franchisee. Each Guarantor’s obligation to make payment or render performance in accordance with the terms of this Guaranty and any remedy for the enforcement of this Guaranty will not be impaired, modified, changed, released or limited in any manner whatsoever by any impairment, modification, change, release or limitation of the liability of Franchisee or its estate in bankruptcy or of any remedy for the enforcement thereof, resulting from the operation of any present or future provision of the U.S. Bankruptcy Act or other statute, or from the decision of any court or agency.
3. Each Guarantor’s liability under this Guaranty is primary and independent of the liability of Franchisee and any other Guarantors. Each Guarantor waives any right to require Franchisor to proceed against any other person or to proceed against or exhaust any security held by Franchisor at any time or to pursue any right of action accruing to Franchisor under the Franchise Agreement. Franchisor may proceed against each Guarantor and Franchisee, jointly and severally or may, at its option, proceed against each Guarantor without having commenced any action, or having obtained any judgment, against Franchisee or any other Guarantor. Each Guarantor waives the defense of the statute of limitations in any action under this Guaranty or for the collection of any indebtedness or the performance of any obligation guaranteed pursuant to this Guaranty.
4. The Guarantors unconditionally, individually, jointly and severally agree to pay all attorneys’ fees and all costs and other expenses incurred in any collection or attempted collection of this Guaranty or in any negotiations relative to the obligations guaranteed or in enforcing this Guaranty against Franchisee.
5. Each Guarantor waives notice of any demand by Franchisor, any notice of default in the payment of any amounts contained or reserved in the Franchise Agreement, or any other notice of default under the Franchise Agreement. Each Guarantor expressly agrees that the validity of this Guaranty and its obligations shall
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 43 in no way be terminated, affected or impaired by reason of any waiver by Franchisor, or its successors or assigns, or the failure of Franchisor to enforce any of the terms, covenants or conditions of the Franchise Agreement or this Guaranty, or the granting of any indulgence or extension of time to Franchisee, all of which may be given or done without notice to the Guarantors.
6. This Guaranty shall extend, in full force and effect, to any assignee or successor of Franchisor and shall be binding upon the Guarantors and each of their respective successors and assigns.
7. Until all obligations of Franchisee to Franchisor have been paid or satisfied in full, the Guarantors have no remedy or right of subrogation and each Guarantor waives any right to enforce any remedy which Franchisor has or may in the future have against Franchisee and any benefit of, and any right to participate in, and security now or in the future held by Franchisor.
8. All existing and future indebtedness of Franchisee to each Guarantor is hereby subordinated to all indebtedness and other obligations guaranteed in this Guaranty and, without the prior written consent of Franchisor, shall not be paid in whole or in part, nor will any Guarantor accept any payment of or on account of any such indebtedness while this Guaranty is in effect.
9. This Guaranty shall be construed in accordance with the laws of the State of Colorado, without giving effect to its conflict of laws principles.
GUARANTOR(S)
STATE OF ) ) ss. COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day of ______, 20___ by ______.
My Commission Expires: NOTARY PUBLIC ______Residing at
[Notary Seal]
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 44 APPENDIX A
TO TCBY® FRANCHISE AGREEMENT
STORE PREMISES; START DATE
If at the time of signing this Agreement you have obtained our approval of and secured the Premises for your Store, the Premises for your Store and your applicable Start Date are identified below. However, if at the time of signing this Agreement you have not obtained our approval of and secured the Premises for your Store, we and you will sign an Alternative Appendix A identifying the Premises of your Store and your applicable Start Date, assuming you obtain our approval of and secure the Premises for your Store within the applicable 6-month period described in Section 2.1(a) of this Agreement.
1. Premises. You and we agree that your Store will be located at and only at the following Premises:
2. Start Date. You and we agree that the following is the Start Date described in Section 4.5 of the Franchise Agreement:
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 45 ALTERNATIVE APPENDIX A
TO TCBY® FRANCHISE AGREEMENT
STORE PREMISES; START DATE
This Exhibit, with a date of ______, 20__, is attached to and is an integral part of the TCBY® Franchise Agreement between you and us with a date of ______, 20__ (the “Franchise Agreement”).
1. Premises. You and we agree that your Store will be located at and only at the following Premises:
2. Start Date. You and we agree that the following is the Start Date described in Section 4.5 of the Franchise Agreement:
3. Defined Terms. All capitalized terms contained in this Exhibit and not defined in this Exhibit will have the same meaning as provided in the Franchise Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Exhibit on the day and year first written above.
TCBY SYSTEMS, LLC ______
By: ______By: ______Title: ______Title: ______
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 46 APPENDIX B TO TCBY® FRANCHISE AGREEMENT
AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS (DIRECT DEBITS)
[Important Instructions for Completing this Form: Before we can process your Franchise Agreement, you must sign and return this authorization. If, at the time you sign your Franchise Agreement, you do not have your account set up, or if you do not yet know your account information, please show that you agree to the terms of this authorization by signing this form, leaving the account information blank, and returning the signed form with your Franchise Agreement. You can give us your account information when you receive it, but we must have the information before you open your store. If you have any questions about what this form means, you should get advice from your lawyer, your accountant or your bank.]
Your Name (or name of legal entity on Franchise Agreement):
Your Social Security Number (or legal entity Federal Tax ID Number):
Name on Bank Account (if different than above):
The undersigned (“ACCOUNT HOLDER”) hereby authorizes TCBY Systems, LLC (“COMPANY”) to initiate debit entries and/or credit correction entries to ACCOUNT HOLDER’s checking and/or savings account(s) listed below at the bank, credit union or other depository listed below (“BANK”) and to debit such account per COMPANY’s instructions for any and all amounts due to COMPANY. The ACCOUNT HOLDER understands that all amounts debited from the account below will be credited to COMPANY’s account. INSTEAD OF COMPLETING THE INFORMATION REQUIRED ON THE FOLLOWING FOUR LINES, YOU MAY ATTACH A CANCELLED OR VOIDED CHECK TO THIS AUTHORIZATION, BECAUSE A VOIDED CHECK INCLUDES ALL OF THIS INFORMATION.
NAME OF BANK Branch
City State Zip Code
Telephone Number of Bank Contact Person at Bank
Bank Transit/ABA Number Account Number
This authority is to remain in effect until BANK has received joint written notice from COMPANY and ACCOUNT HOLDER of the ACCOUNT HOLDER’s termination. Any termination notice must be given in a way as to give BANK a reasonable opportunity to act on it. If a debit entry is initiated to ACCOUNT HOLDER’s account in error, ACCOUNT HOLDER shall have the right to have the amount of the error credited to the account by BANK, if (a) within fifteen (15) calendar days following the date on which BANK sent to ACCOUNT HOLDER a statement of account or a written notice regarding such entry or (b) forty-five (45) days after posting, whichever occurs first, ACCOUNT HOLDER shall have sent to BANK a written notice identifying such entry, stating that such entry was in error and requesting BANK to credit the amount thereof to such account. These rights are in addition to any rights ACCOUNT HOLDER may have under federal and state banking laws.
ACCOUNT HOLDER
By:
Title:
Date:
TCBY FDD 03/2014 EXHIBIT B: Franchise Agreement 47 EXHIBIT C
OTHER CONCEPTS STORE ADDENDUM TO FRANCHISE AGREEMENT
TCBY FDD 03/2014 EXHIBIT C: Other Concepts Store Addendum OTHER CONCEPTS STORE ADDENDUM TO TCBY®
FRANCHISE AGREEMENT
This is an addendum (the “OC Store Addendum”) to the TCBY® FRANCHISE AGREEMENT between______(“you” or the “Franchisee”) and TCBY SYSTEMS, LLC (“us”, “we” or “TCBY”), dated ______, 20__ (the “Agreement”) and upon execution shall modify and be incorporated into that Agreement by reference. All capitalized terms used in this OC Store Addendum but not defined herein shall have the same meanings ascribed to them in the Agreement. “Agreement” as used therein shall refer to the Agreement as modified by this OC Store Addendum.
1. Preambles. You have entered into the Agreement for the purpose of developing a TCBY Store to be located at and operated in conjunction with the trademarks and service marks of another brand or concept, known as ______(the “Host Concept”). This OC Store Addendum is required to modify certain provisions of the Franchise Agreement to allow for such co-branded development and operation.
2. Store; Grant of Franchise. The Agreement, including Sections 1.2(l) and 2.1 thereof, is amended as necessary to accomplish the following: references to the “Store” or “TCBY Store” throughout this Agreement shall refer only to that part of the Premises in and from which you shall operate the “TCBY” portion of your store. Specifically excluded from the definition of the Store and TCBY Store are any and all areas of the Premises which are not trade dressed as a “TCBY” store, and your activities at or in that portion of the Premises not containing the Store shall not be subject to or controlled by this Agreement except as expressly set forth in this OC Addendum. Operating the Host Concept at the Premises in accordance with the Lease and all other agreements applicable thereto shall not violate the Agreement.
3. Term of Franchise Agreement; Renewal. Sections 3.1 and 3.2 of the Agreement are hereby amended to provide that the initial term of the Agreement will be 5 years, and you shall have the right to renew the Agreement for one additional 5-year term, subject to the conditions set forth in 3.2.
4. Addition of TCBY to Host Concept. Sections 4.1, 4.2 and 4.3 are deleted in their entirety and the following is substituted in their place: “You must obtain our prior approval of the Premises and of the Host Concept. By signing this OC Store Addendum, you represent and warrant that you have obtained all necessary consents and approvals for the operation of the TCBY Store, including the written consent of the Host Concept. We have the right to require you to provide us with copies of such consents before approving the Premises for your Store. You must follow our plans and specifications for adding or incorporating the TCBY Store into and with the Host Concept at the Premises, including our requirements for signage, fixtures, equipment, and design. You agree to spend no less than $1,000 (which replaces the requirement to spend $10,000 set forth in Section 4.6 of the Agreement) on your grand opening of the TCBY Store.” Sections 4.3 through 4.7 are renumbered to account for the deletion of Sections 4.1 through 4.3.
5. Section 5 is intentionally omitted.
6. Yogurt Formulation Charge (YFC) Reimbursement. Section 6.3 is deleted in its entirety and the following is substituted in its place: “The parties acknowledge that we typically receive a formulation charge from our designated manufacturers (“Manufacturers”) or distributors (“Distributors”) of certain TCBY Products. The amount of the formulation charge that we receive is based on the purchases of such products by franchisees and licensees from our designated Distributors. Some TCBY franchisees may receive a reimbursement of a portion or all of the YFC collected for their stores. This program is not available for franchisees of most TCBY Other Concepts Stores and will not be available or paid to you for your TCBY Store.”
TCBY FDD 03/2014 EXHIBIT C: Other Concepts Store Addendum 1 7. Mid-Term Refresh. Section 7.1(c) is modified as necessary to provide that we may require you to complete the Mid-Term Refresh during the period from 30 to 36 months from the date you open your TCBY Store, and will establish a reasonable limit on the amount you are required to spend, not to exceed $7,500, based on the nature of your Premises and the scope of your TCBY Store operations.
8. System Standards. Notwithstanding our System Standards, the hours and days during which your Store will be open for business will be consistent with those required by the Host Concept. Similarly, the general appearance and demeanor of Store employees will be consistent with the standards of the Host Concept. Upon request, we will consider granting you a waiver from following any System Standard that materially conflicts with those of the Host Concept, except those that affect only the TCBY Store portion of the Premises. Our consent to such waiver shall not be unreasonably withheld.
9. Section 9 is intentionally omitted.
10. In-Term Non-Compete. Section 11.1 of the Agreement is hereby deleted in its entirety and the following is substituted in its place: “You will not operate, or to the best of your ability allow to be operated, any Competing Business at or within the Premises where the Store is operated. For purposes of this Section, the Host Concept shall not be considered a Competing Business. Further, you agree not to hire any employee who, within the immediately preceding 6-month period, was employed by us or any TCBY Stores operated by us, our Affiliates or another franchisee or licensee of us, without obtaining the prior written permission of us or the franchisee or licensee.”
11. Post-Term Non-Compete. Section 11.2 of the Agreement is hereby deleted in its entirety and the following is substituted in its place: “Upon termination of this Agreement for any reason other than as a result of our default, you agree that, for a period of 2 years commencing on the effective date of termination, no Restricted Person will have any direct or indirect interest as an owner, investor, partner, director, officer, employee, consultant, representative or agent or in any other capacity in any Competitive Business located or operating within the Premises where the Store is operated.” Section 12.3(j) of the Agreement shall be deemed modified to the extent necessary to provide for the same noncompete parameters as set forth in this paragraph 11.
12. Transfers. In addition to the other conditions of transfer set forth in Article 12, you will be required to submit to us a copy of the written approval of the Host Concept prior to completing any transfer of your Store. Further, Sections 12.5 and 12.6 are hereby deleted in their entirety, and Section 12.7 is renumbered accordingly.
13. Termination. We have the additional right to terminate this Agreement upon 30 days prior written notice if you lose the right to operate the Host concept at the Premises. Section 13.5 is hereby deleted in its entirety. Our rights under Section 14.5 of the Agreement are subject to us obtaining the consent of the Host Concept.
IN WITNESS WHEREOF, the parties have executed and delivered this OC Store Addendum to be effective as of the date of the Agreement set forth above.
TCBY SYSTEMS, LLC ______
By: By:
Title: Title:
TCBY FDD 03/2014 EXHIBIT C: Other Concepts Store Addendum 2 EXHIBIT D
AREA DIRECTOR DISCLOSURE
TCBY FDD 03/2014 EXHIBIT D: Area Director Disclosures As of December 28, 2013
Area Director – State of Washington and the Island of Oahu in the State of Hawaii – Green Bowl Time, Inc.
Owner, Director, CEO and President: Hyoungsoo Kim
Green Bowl Time, Inc., owned by Mr. Hyoungsoo Kim, is the Area Director for us and our Affiliate, TCBY, for the entire State of Washington and the Island of Oahu in the State of Hawaii. Green Bowl Time, Inc. is a Washington corporation organized in May 2009. Mr. Kim has been the owner, Director, CEO and President of Green Bowl Time, Inc. since May 2009. He has been the President of Cell Towns Business Group, a Washington corporation, since at least January 2006. An affiliate of Green Bowl Time, Inc., is a franchisee of the Mrs. Fields and TCBY franchise systems and is currently developing Mrs. Fields and TCBY Stores in Washington State.
Contact Information: Green Bowl Time, Inc., Attn: Hyoungsoo Kim, 1000 2nd Avenue, Suite 1320, Seattle, Washington 98104, Telephone (206) 774-3800.
Based on the information provided to us by this Area Director, which we have not independently verified, there are no disclosures that need to be made about this Area Director consistent with the requirements of Items 3 and 4 of this disclosure document.
This Area Director is not our Affiliate.
Area Director – Part of the state of Texas consisting of Dallas, Plano, Overland, Wichita Falls, Texarcana, Waco, Fort Worth, Tyler, Austin, TCBY self-serve – Lone Star Yogurt, Inc.
President and Owner: David Weaver; Vice President and Owner: Jeff Worthen; Secretary/Treasurer and Owner: Bryan Selden
Lone Star Yogurt, Inc., owned by Mr. Weaver, Mr. Worthen and Mr. Selden, is our Area Director for certain parts of the state of Texas, TCBY self-serve. Lone Star Yogurt, Inc. is a Texas corporation organized in October 2010. Since its incorporation, Mr. Weaver has served as its President, Mr. Worthen has served as its Vice President and Mr. Selden has served as its Secretary/Treasurer. An affiliate of Lone Star Yogurt, Inc. is a franchisee of the TCBY franchise system and is currently developing TCBY Stores in the State of Texas.
Contact Information: Lone Star Yogurt, Inc., Attn: David Weaver, 15488 FM 2493 Tyler, Texas 75703, Telephone (903) 561-0860.
Based on the information provided to us by this Area Director, which we have not independently verified, there are no disclosures that need to be made about this Area Director consistent with the requirements of Items 3 and 4 of this disclosure document.
This Area Director is not our Affiliate.
Area Director – Larimer, Weld and Boulder Counties in the State of Colorado, Laramie and Albany Counties in the State of Wyoming, TCBY self-serve – Froyo Development Co., LLC
Manager and Owner: Steven L. Lauer
Froyo Development Co., LLC, owned by Mr. Lauer, is our Area Director for the Larimer and Weld Counties of Colorado, TCBY self-serve. Froyo Development Co., LLC is a Colorado limited liability company organized in
TCBY FDD 03/2014 EXHIBIT D: Area Director Disclosures 1 May 2011. Since its organization, Mr. Lauer has served as its Managing Member. An affiliate of Froyo Development Co., LLC, is a franchisee of the TCBY franchise system and is currently developing TCBY Stores in the State of Colorado.
Contact Information: Froyo Development Co., LLC, Attn: Steven L. Lauer, 1218 W. Ash St., Suite G, Windsor, CO 80550, Telephone (970) 690-7070.
Based on the information provided to us by this Area Director, which we have not independently verified, there are no disclosures that need to be made about this Area Director consistent with the requirements of Items 3 and 4 of this disclosure document.
This Area Director is not our Affiliate.
Area Director – Mecklenberg, Union and New Hanover Counties in the State of North Carolina and Charleston and York Counties in the State of South Carolina, TCBY self-serve – Batt Enterprises VIII, LLC
Manager and Owner: Samuel Batt
Batt Enterprises VIII, LLC, owned by Mr. Batt, is our Area Director for the Mecklenberg, Union and Hanover Counties of North Carolina and the Charleston and York Counties of South Carolina, TCBY self-serve. Batt Enterprises VIII, LLC is a North Carolina limited liability company organized in September 2011. Since its organization, Mr. Batt has served as its Manager. An affiliate of Batt Enterprises VIII, LLC is a franchisee of the TCBY franchise system and is currently developing TCBY Stores in the States of North Carolina and South Carolina.
Contact Information: Batt Enterprises VIII, LLC, Attn: Samuel Batt, 1037 Westbury Drive, Matthews, NC 28104, Telephone (610) 937-1792.
Based on the information provided to us by this Area Director, which we have not independently verified, there are no disclosures that need to be made about this Area Director consistent with the requirements of Items 3 and 4 of this disclosure document.
This Area Director is not our Affiliate.
TCBY FDD 03/2014 EXHIBIT D: Area Director Disclosures 2 EXHIBIT E
AREA DIRECTOR AGREEMENT
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement
TCBY SYSTEMS, LLC,
as “FRANCHISOR”
AREA DIRECTOR AGREEMENT
AREA DIRECTOR
TERRITORY (as further defined in Appendix A)
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement i
TABLE OF CONTENTS
Section Page 1. BACKGROUND AND PURPOSE ...... 1 2. DEFINITIONS ...... 1 2.1 Affiliate ...... 1 2.2 Applicable Laws ...... 2 2.3 Bound Parties ...... 2 2.4 Business Entity ...... 2 2.5 Company-Owned Stores...... 2 2.6 Controlling Interest ...... 2 2.7 Development Period ...... 2 2.8 Excluded Location ...... 2 2.9 Existing Stores...... 2 2.10 Franchise Agreement ...... 2 2.11 Franchisee ...... 2 2.12 Manuals ...... 2 2.13 Other Concepts Store ...... 2 2.14 Primary Owner ...... 3 2.15 Proprietary Products ...... 3 2.16 Territory ...... 3 2.17 Territory Franchisee ...... 3 3. SCOPE OF APPOINTMENT ...... 3 3.1 Appointment of Area Director/Scope of Operations ...... 3 3.2 Duty to Operate Stores ...... 3 3.3 Rights and Limitations to Territory ...... 3 3.4 Reservation of Rights to Franchisor ...... 3 4. FRANCHISE SALES PROCEDURES ...... 5 4.1 Development Quota ...... 5 4.2 Franchise Registration and Disclosure ...... 5 4.3 Advertising, Recruiting, and Screening ...... 5 4.4 Franchisor’s Approval of Prospective Franchisees ...... 6 5. PAYMENTS TO FRANCHISOR...... 6 5.1 Initial Territory Fee ...... 6 6. PAYMENTS TO AREA DIRECTOR ...... 6 6.1 Sales Commissions and Conditions of Payment ...... 6 6.2 Sales Commission Payments ...... 6 6.3 Commissions on Transfers of Franchises ...... 7 6.4 Royalty Fees ...... 7 6.5 Internet/Catalog Sales Program ...... 7 6.6 Commissions After Termination ...... 7 6.7 Application of Payments ...... 7 6.8 Setoffs ...... 7 6.9 Payment Verification ...... 8 7. TRAINING ASSISTANCE ...... 8 7.1 Area Director Training ...... 8 7.2 Length of Training ...... 8 7.3 Additional Training ...... 8 7.4 Seminars and Ongoing Training ...... 8
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement ii 8. FRANCHISOR’S OPERATING ASSISTANCE ...... 9 8.1 Manuals ...... 9 8.2 Operating Assistance ...... 9 9. AREA DIRECTOR’S OBLIGATIONS ...... 9 9.1 Hiring and Training of Employees of Area Director ...... 9 9.2 Commencement of AD Business...... 9 9.3 Sales Services ...... 9 9.4 Site Services ...... 10 9.5 Pre-Opening and Opening Support Services ...... 10 9.6 Ongoing Support Services ...... 10 9.7 Dealings with Franchisees ...... 11 9.8 Area Director’s Inspections ...... 11 10. MARKS ...... 11 10.1 Ownership and Goodwill of Marks ...... 11 10.2 Limitations on Use ...... 11 10.3 Discontinuance of Use of Marks ...... 12 10.4 Notification of Infringements and Claims ...... 12 11. CONFIDENTIAL INFORMATION ...... 12 11.1 Confidential Information ...... 12 11.2 Nondisclosure and Noncompetition Agreement ...... 12 12. EXCLUSIVE RELATIONSHIP ...... 13 12.1 Exclusive Relationship ...... 13 13. OPERATING STANDARDS ...... 13 13.1 Standards of Service ...... 13 13.2 Compliance with Laws and Good Business Practices ...... 13 13.3 Accuracy of Information ...... 13 13.4 Notification of Litigation ...... 14 13.5 Ownership and Management of AD Business ...... 14 13.6 Conflicting Interests ...... 14 13.7 Insurance ...... 14 13.8 Proof of Insurance Coverage ...... 14 13.9 Advertising in Territory...... 14 13.10 Approval of Advertising ...... 14 13.11 Accounting, Bookkeeping and Records ...... 15 13.12 Reports ...... 15 14. INSPECTIONS AND AUDITS ...... 15 14.1 Inspections and Audits ...... 15 15. TRANSFERS ...... 15 15.1 Transfers by Franchisor ...... 15 15.2 Transfers by Area Director ...... 15 15.3 Conditions for Approval of Transfer ...... 16 15.4 Transfer to an Entity ...... 17 15.5 Franchisor’s Approval of Transfer ...... 17 15.6 Death or Disability of Area Director ...... 17 15.7 Right of First Refusal ...... 17 16. TERM AND EXPIRATION ...... 18 16.1 Term ...... 18 16.2 Renewal ...... 18 16.3 New Development Quota ...... 18 16.4 Exercise of Renewal Option ...... 18 16.5 Conditions of Renewal ...... 18
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement iii 16.5 Transfer at End of Term ...... 18 17. TERMINATION ...... 19 17.1 By Area Director ...... 19 17.2 By Franchisor Upon AD’s Default ...... 19 17.3 Rights and Obligations of Area Director ...... 20 17.4 Confidential Information ...... 20 17.5 Covenant Not to Compete ...... 20 17.6 No Further Right to Payment ...... 21 17.7 Continuing Obligations ...... 21 17.8 Applicable Laws ...... 21 18. RELATIONSHIP OF THE PARTIES ...... 21 18.1 Relationship of the Parties ...... 21 18.2 Payment of Third Party Obligations ...... 21 18.3 Independent Contractors...... 22 18.4 Indemnification ...... 22 19. DISPUTES ...... 22 19.1 Non-binding Mediation ...... 22 19.2 Governing Law/Consent to Venue and Jurisdiction ...... 22 19.3 Waiver of Jury Trial ...... 23 19.4 Limitation of Claims ...... 23 20. MISCELLANEOUS PROVISIONS ...... 23 20.1 Invalidity ...... 23 20.2 Modification ...... 23 20.3 Force Majeure ...... 23 20.4 Attorneys’ Fees...... 24 20.5 Interpretation of Rights and Obligations ...... 24 20.6 Injunctive Relief ...... 24 20.7 No Waiver ...... 24 20.8 No Right to Set Off ...... 24 20.9 Effective Date ...... 24 20.10 Review of Agreement ...... 24 20.11 Entire Agreement ...... 24 20.12 Notices...... 25 20.13 Acknowledgment ...... 25
APPENDICES Appendix A - Rider to ADA (Territory, Quota, Existing Stores) Appendix B - Guaranty and Assumption of Area Director’s Obligations Appendix C - Statement of Ownership Appendix D - Acknowledgment Addendum
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement iv TCBY SYSTEMS, LLC AREA DIRECTOR AGREEMENT
AREA DIRECTOR:
ADDRESS:
EFFECTIVE DATE:
THIS AREA DIRECTOR AGREEMENT (the “Agreement”) is made and entered into between TCBY Systems, LLC, a Delaware limited liability company (“TCBY”), sometimes referred to herein as the “Franchisor,” and the Area Director listed above (“Area Director” or “AD”), who agree as follows:
1. BACKGROUND AND PURPOSE
1.1 TCBY is the franchisor of the TCBY franchise system (the “System”). TCBY and its Affiliates have developed methods for establishing, operating, and promoting retail outlets (“Stores”) featuring a variety of fresh and frozen yogurt, sorbets, shakes, sundaes, toppings, and other frozen desserts, products and beverages. These methods feature the use and license of the trademark and service mark “TCBY®” and related trademarks and service marks (collectively, the “Marks”) owned by TCBY, as well as TCBY’s distinctive plans for franchising, establishing, operating, and promoting TCBY Stores and related licensed methods of doing business (the “Licensed Methods”).
1.2 Franchisor is in the business of granting to qualified individuals, or to entities with which such individuals are affiliated, the right and license to develop and operate Stores using the Marks and Licensed Methods.
1.3 AD desires to own and operate its own business acting as a special agent for Franchisor within certain geographic areas, enabling AD to assist Franchisor in identifying prospective franchisees to purchase franchises for Stores from Franchisor, and to develop, support, and provide certain services to, Stores within such geographic areas under the terms and conditions contained in this Agreement (“AD Business”).
1.4 Franchisor is willing to grant AD the right to operate the AD Business and serve as an area director, enabling AD to assist Franchisor in identifying prospective franchisees to purchase franchises for Stores from Franchisor, and to develop, support, and provide certain services to, Stores within certain geographic areas under the terms and conditions contained in this Agreement.
2. DEFINITIONS
In addition to capitalized terms in this Agreement which are defined elsewhere, the following terms are assigned these definitions:
2.1 “Affiliate” includes each and every entity that controls, is controlled by, or is under common control with, the applicable party.
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 1 2.2 “Applicable Laws” means and includes applicable common law and all applicable statutes, laws, rules, regulations, ordinances, policies and procedures established by any governmental authority, governing the development or operation of a Store, including all franchise, immigration, labor, disability, food and drug laws, health and safety regulations, as in effect on the Effective Date hereof, and as may be amended, supplemented or enacted from time to time.
2.3 “Bound Parties” mean each of the following persons: (i) the Business Entity executing this Agreement as Area Director; (ii) each officer, director, shareholder, member, manager, trustee or general partner of Area Director and each one of Area Director’s Affiliates; and (iii) each member of Area Director’s or any of the foregoing individuals’ immediate family.
2.4 “Business Entity” means any limited liability company or partnership, and any association, corporation or other entity which is not an individual.
2.5 “Company-Owned Stores” shall mean Stores within the Territory owned and operated by a Franchisor or its Affiliates.
2.6 “Controlling Interest” means the possession, directly or indirectly, of power to direct, or cause a change in the direction of, the management and policies of a Business Entity. Franchisor shall consider whether a transfer, either alone or together with all other previous, simultaneous or proposed transfers, would have the effect of transferring, in the aggregate, a sufficient number of the equity or voting interests of a Business Entity to enable the purchaser or transferee to direct, or cause a change in the direction of, the management and policies of the Business Entity. For purposes of this Agreement, any person who qualifies as Primary Owner shall be deemed to own a Controlling Interest.
2.7 “Development Period” means each 12-fiscal-month period during the term of this Agreement, commencing with the Effective Date hereof.
2.8 “Excluded Location” has the meaning set forth in Section 3.4(f) below.
2.9 “Existing Stores” are Stores open and operating within the Territory as of the Effective Date, which are listed on Appendix A.
2.10 “Franchise Agreement” means the forms of agreements (including franchise agreement and any appendices, exhibits, riders, collateral assignments of lease or sublease, and personal guarantees) used by Franchisor from time to time in granting franchises for the ownership and operation of Stores. Area Director acknowledges that Area Director will use Franchisor’s then-current forms of Franchise Agreement and Franchise Disclosure Document (“FDD”) in conducting any franchise selling activities authorized or requested by Franchisor hereunder, and that Franchisor may from time to time modify or amend in any respect the forms of FDD, Franchise Agreement and related agreements, including modifying or waiving fees paid by Franchisees.
2.11 “Franchisee” means any person or Business Entity who has entered into a Franchise Agreement with Franchisor, including Area Director.
2.12 “Manuals” means Franchisor’s operations and training manuals, training software, online programs and related manuals and materials now or hereafter created by Franchisor for use in connection with the operation of a Store, as the same may be amended and revised from time to time, including all bulletins, supplements and ancillary manuals. The Manuals also may include materials that will be specific to an AD Business.
2.13 “Other Concepts Store” means a TCBY retail outlet that serves Proprietary Products or other products and services bearing the Marks, which are co-branded and operated at or within locations of any brands
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 2 or concepts other than those offered by Franchisor, such as (without limitation) Starbucks®, Subway®, Quiznos®, Schlotzsky’s®, Wal-Mart®, Blockbuster® or Build-a-Bear®. Except as expressly excluded or modified in this Agreement, Other Concepts Stores shall be considered Stores for purposes of this Agreement.
2.14 “Primary Owner” refers to any person who owns at least 10% of the ownership interests of an Area Director that is a Business Entity.
2.15 “Proprietary Products” refers to all products and merchandise (i) manufactured by, or for, Franchisor or Franchisor’s Affiliates in accordance with proprietary recipes, specifications or formulas, or (ii) bearing packaging or labels displaying any of the Proprietary Marks and promoted as a Store brand item.
2.16 “Territory” is the geographical area described in the attached Appendix A.
2.17 “Territory Franchisee” means any approved Franchisee of Franchisor, other than Area Director, that enters into a Franchise Agreement for the development and operation of a Store in the Territory, including Franchisees of TCBY who have entered into Franchise Agreements for Existing Stores.
3. SCOPE OF APPOINTMENT
3.1 Appointment of Area Director/Scope of Operations. Franchisor hereby appoints Area Director, and Area Director hereby accepts appointment, as a special agent of Franchisor in accordance with the terms and conditions of this Agreement, and only within the Territory, to: (1) solicit prospective franchisees for Stores to be located in the Territory and assist Franchisor in completing franchise sales as requested by Franchisor (“Sales Services”); (2) perform certain site acquisition and development services (“Site Services”); and (3) render compliance and enforcement services for and on behalf of Franchisor and support to Territory Franchisees, including marketing and operational services (“Support Services”) to Stores located within the Territory all on the further terms and conditions of this Agreement. Area Director agrees that, during the term of this Agreement, it will at all times faithfully, honestly and diligently perform its obligations hereunder in accordance with all Applicable Laws, and will continuously exert its best efforts to promote and enhance the development and operation of Stores within the Territory.
3.2 Duty to Operate Stores. At all times from and after the second Development Period, Area Director is required to own and operate a minimum of __ Stores in the Territory as a condition of Area Director’s appointment. Such stores shall be located within the Territory as set forth on Appendix A. Area Director must sign Franchisor’s then-current Franchise Agreement for each Store it owns and operates.
3.3 Rights and Limitations to Territory. During this Agreement’s term, Franchisor and its Affiliates will not establish and license any other individual or Business Entity to act as area directors, master franchisees or special agents to perform Sales Services or to render Site Services or Support Services to Franchisees within the Territory; provided, however, that Franchisor and its Affiliates shall retain such rights in the Territory as described in Section 3.4.
3.4 Reservation of Rights to Franchisor. AD acknowledges that the rights granted by this Agreement are, except as set forth in Section 3.3 above, nonexclusive, and Franchisor (and its employees, Affiliates and designees) retains the right (without compensation or obligation whatsoever to AD unless specifically set forth herein):
(a) to use, and to license others to use, the Marks and Licensed Methods for the operation of Stores, AD Businesses, the sale of Proprietary Products, or any other business or endeavor at any location outside the Territory;
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 3 (b) to solicit prospective Franchisees, and to grant others franchises to operate Stores, at such locations outside of the Territory and on such terms and conditions as Franchisor deems appropriate;
(c) to solicit prospective Franchisees, with or without the involvement of the AD, and to grant others franchises to operate Stores at locations within the Territory (excluding, for all purposes of this subsection (c) any Company-Owned Stores, Other Concepts Stores and, for clarity, Excluded Locations, which will be subject to subsections (d), (e) and (f) below); provided that (i) any site for such new Store to be located within the Territory will be offered first to AD for development by AD or its qualified applicant that is approved by Franchisor; (ii) such new Stores opened within the Territory during the term shall be counted toward determining whether AD has met its Development Quota, and (iii) AD shall provide the services and support for such Stores as set forth in this Agreement and shall receive its Sales Commission and Royalty Fees for any such new Stores;
(d) to itself own and operate for its own benefit Company-Owned Stores within the Territory without applying such Company-Owned Stores toward AD’s Development Quota or paying AD any Sales Commissions or Royalty Fees in connection with such Stores;
(e) to grant franchises or licenses to others to open and operate Other Concepts Stores within the Territory; provided that at Franchisor’s written request only, AD shall perform the services and support for Other Concepts Stores within the Territory and shall receive its Royalty Fees therefor, but shall not receive credit toward its Development Quota or Sales Commissions on Other Concepts Stores opened by Franchisees and licensees other than AD or AD’s qualified applicant that is approved by Franchisor;
(f) to grant franchises or licenses to others to open TCBY retail outlets or serve Proprietary Products or other products and services bearing the Marks, at locations within or outside the Territory to which such Franchisee or licensee has premium, priority or exclusive access, such as (without limitation) a grant to a disadvantaged business entity (DBE), master concessionaire, or master franchisee or operator who is awarded a bid to operate stores or food outlets at an airport, commercial or corporate park, school, hospital, food service court, stadium, toll stop or rest area, outlet or factory stores, or master concessionaire mall (each an “Excluded Location” which, for purposes of this Agreement, shall NOT be considered a Store and shall fall outside the entire scope of this Agreement);
(g) to have the option, but not the obligation, to provide Sales Services, Site Services and Support Services for franchised Stores within the Territory (but with no adjustment or reduction in Royalty Fees payable to AD as a result of rendering such services, unless AD is in default under this Agreement);
(h) to use and license the use of proprietary marks or methods (other than the Marks and Licensed Methods) in connection with the operation of retail outlets or business featuring products the same as, similar to or different from the Proprietary Products but that do not bear the Marks, other food products, and related services, in any channel of distribution or at any location and within any territory (including the Territory), which businesses may be the same as, similar to, or different from that of the Stores; and
(i) other than as set forth in Section 3.3 of this Agreement, to use the Marks and Licensed Methods in connection with any or all of the same products and services offered by Stores, or other or different services and products, promotional and marketing efforts or related items, in any channel of distribution other than Stores, including without limitation, the Internet and other e-commerce, catalog or wholesale distribution, or branded and non-branded retail channels such as grocery, drug, club or convenience stores, at any location and within any territory (including the Territory).
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 4 4. FRANCHISE SALES PROCEDURES
4.1 Development Quota. AD agrees to comply with the development quota set forth in Appendix A to this Agreement (“Development Quota”) with respect to each Development Period. The determination as to whether AD has met its development obligations under this Agreement shall be made based on the number of Stores sold, and the number of Stores open and operating, at the end of a Development Period as described on Appendix A. For purposes of the Development Quota, a Store, to be “sold,” must have a fully signed and effective Franchise Agreement and a fully paid initial franchise fee; and to be considered “open and operating,” must be operating in compliance with the applicable Franchise Agreement.
4.2 Franchise Registration and Disclosure. Neither AD nor any employee or representative of AD shall solicit prospective Franchisees for Stores until Franchisor has registered its current FDD in applicable jurisdictions and has provided AD with the requisite documents, or at any time when Franchisor notifies AD that its registration is not then in effect or its documents are not then in compliance with Applicable Laws. Franchisor shall bear its costs of preparing and registering its FDD. AD’s costs associated with the following obligations shall be borne by AD. In particular, AD shall:
(a) prepare and forward to Franchisor verified financial statements of AD in such form and for such periods as shall be designated by Franchisor, including audited financial statements, if necessary and appropriate to comply with applicable legal disclosure, filing, or other legal requirements;
(b) promptly provide all information required by Franchisor to prepare all requisite disclosure documents and ancillary documents for the offering of franchises throughout the Territory;
(c) execute all documents required by Franchisor for the purpose of registering AD as a representative of Franchisor to offer franchises throughout the Territory; and
(d) pay to Franchisor, or its designee, upon demand, the costs of preparing and registering those portions of disclosure documents and ancillary documents which are applicable only to AD.
AD agrees to review all information pertaining to AD prepared to comply with Applicable Laws for selling franchises in the Territory and verify its accuracy if so requested by Franchisor. AD acknowledges that Franchisor and its Affiliates and designees shall not be liable to AD for any form of damages, errors, omissions, or delays which occur in the preparation of such materials.
4.3 Advertising, Recruiting, and Screening. AD shall be responsible for advertising for, recruiting, screening, pre-qualifying and, at Franchisor’s request, interviewing prospective Franchisees within the Territory. AD shall provide prospective Franchisees with any written information designated and approved by Franchisor or communicate information regarding Store franchises via the telephone, face-to-face meetings, or visits at other Stores within the Territory. Unless otherwise agreed to in writing by Franchisor, AD shall submit each pre- screened applicant (“Applicant”) for a Store franchise to Franchisor for proper and timely disclosure with Franchisor’s then-current FDD, and all Applicants shall be subject to final approval by Franchisor. AD further agrees that all Applicants submitted to Franchisor by AD, if an individual, or the Entity Owners (as defined in the Franchise Agreement) of the Applicant, if the Applicant is not an individual, shall to AD’s knowledge be individuals who are of good character, have adequate financial resources, and meet Franchisor’s criteria for Franchisees or Entity Owners of Franchisees. Each application for a franchise received by AD shall be submitted to Franchisor with all information respecting the Applicant, the Principal Owner of the Applicant, if applicable, the Applicant’s proposed franchise location, if known, and all other information then customarily required by Franchisor concerning Applicants, including such financial statements and other information as Franchisor may require. AD shall assist the Applicant in preparing such financial reports and other information.
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 5 4.4 Franchisor’s Approval of Prospective Franchisees. By delivery of written notice to AD, Franchisor, in its sole discretion, shall approve or disapprove Applicants to become Store Franchisees. AD shall have NO AUTHORITY OR ABILITY TO OFFER OR SELL A FRANCHISE, OR GRANT, SELL, NEGOTIATE OR EXECUTE any Franchise Agreement on behalf of Franchisor. Franchisor agrees to exert its best efforts to deliver such notification to AD within 14 days after the later of: (a) receipt by Franchisor of a signed FDD receipt, complete application, financial statement, and other materials regarding the Applicant requested by Franchisor; or (b) the interview of Applicant by Franchisor, if any. Franchisor, in its sole discretion, shall determine whether the Applicant possesses sufficient financial and managerial capability and meets the other criteria then utilized by Franchisor in the grant of franchises. Franchisor may refuse to grant a franchise to an Applicant if it so chooses. The grant of the franchise shall be effected only upon the full execution of the then- current Franchise Agreement by Franchisor and the Applicant and Applicant’s successful completion of Franchisor’s training program. AD understands and agrees that Franchisor’s trainers have the right in their sole discretion to reject any Applicant trainee.
5. PAYMENTS TO FRANCHISOR
5.1 Initial Territory Fee. The initial territory fee (“Initial Fee”) payable to Franchisor by AD in consideration for AD’s appointment as AD within the Territory shall be ______($____). The Initial Fee is fully earned by Franchisor upon execution of this Agreement and is nonrefundable once paid. The Initial Fee shall be paid to Franchisor in immediately available funds upon execution of this Agreement.
6. PAYMENTS TO AREA DIRECTOR
6.1 Sales Commissions and Conditions of Payment. In consideration of the Sales Services and Site Services rendered during the term of this Agreement, AD shall be paid a commission equal to ____% of the initial franchise fees paid by each Franchisee (including AD) for the purchase of franchises for Stores to be located within the Territory (“Sales Commissions”), subject to and upon fulfillment of the following conditions (“Franchise Sales Conditions”):
(a) Franchisee executes a Franchise Agreement with Franchisor and the Store opens for business;
(b) AD or its authorized representative attends the Store opening, collects the initial franchise fee from Franchisee, promptly remits 100% of the initial franchise fee (without set off or deduction) to Franchisor, and Franchisor has actually received the initial franchise fee (Franchisor shall not be deemed to have received any fees paid into escrow, if applicable, until such fees actually have been remitted to Franchisor);
(c) The sale for which the initial franchise fee has been paid is not a resale of any existing Store or any interest in such Store, or paid in connection with the relocation of any Store; and
(d) AD has complied with all of its other obligations under this Agreement with respect to such sale and has verified the same to Franchisor in writing in a form prescribed by Franchisor, which shall acknowledge the completion of the items in sections 6.1(a), (b) and (c) hereof.
6.2 Sales Commission Payments. Sales Commissions shall be payable to AD within 30 days after the Franchise Sales Conditions have been fulfilled. AD shall not receive any Sales Commissions for or with respect to (a) Existing Stores; (b) Company-Owned Stores; (c) Other Concepts Stores operated by Franchisees other than AD or AD’s qualified applicant approved by Franchisor, as described in Section 3.4(e); or (d) Excluded Locations.
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 6 6.3 Commissions on Transfers of Franchises. If, during the term of this Agreement, (a) a Store located within the Territory or an interest in the Store is resold to a different Franchisee and the sale results in the execution of a Franchise Agreement or Assignment and Assumption Agreement and the payment of a transfer fee to Franchisor, and (b) Franchisor asks AD to perform services in connection with the Transfer, including without limitation, pre-approval or interview of transferee, site inspection or advice related to any required remodel; then AD will be paid a commission in the amount of ____% of the transfer fee paid and actually received by Franchisor, payable within 30 days after the completion of the transfer, provided that AD has timely performed all services requested by Franchisor. Franchisor shall not be deemed to have received any fees paid into escrow, if applicable, until such fees actually have been remitted to Franchisor. Franchisor may opt to conduct the transfer without assistance from AD, or may waive the transfer fee, in which case no commission shall be due to AD in connection therewith.
6.4 Royalty Fees. In consideration of the Support Services, Franchisor shall pay to AD, within 10 business days after the end of each 4- or 5-week fiscal month determined by Franchisor’s fiscal calendar, _____% of the royalty fees (which excludes advertising fees) actually received by Franchisor from each Store located in the Territory (including Existing Stores, approved Other Concepts Stores and other Stores owned and operated by AD and Territory Franchisees, but excluding Company-Owned Stores and, for clarity, excluding Excluded Locations,) during the applicable period pursuant to their Franchise Agreement (“Royalty Fees”). Notwithstanding the foregoing, if AD has failed to conduct the periodic inspections described in Section 9.6 and to file a written report, or failed to perform in any material respect, with respect to one or more Franchisees located in the Territory, the other services described in Section 9 to be provided to Franchisees located in the Territory during any applicable fiscal month, AD shall not be entitled to receive Royalty Fees with respect to such Franchisees for the period during which reports or services were not provided. For clarity, all advertising fund contributions received from Stores within the Territory shall be paid to Franchisor’s applicable advertising funds and used and applied as provided in the Franchise Agreement, and AD shall receive no fees, commissions, credits or payments in respect thereto.
6.5 Internet/Catalog Sales Program. AD shall have the right to participate on the same basis and upon the same terms as any other of Franchisor’s franchisees, in any internet/catalog sales program it makes generally available its franchisees.
6.6 Commissions After Termination. All payments under this Section 6 shall immediately and permanently cease after the expiration or termination of this Agreement, except as set forth in Section 17.6. Further, AD shall receive all amounts which have accrued to AD as of the effective date of expiration or termination.
6.7 Application of Payments. Franchisor’s payments to AD shall be based on amounts actually collected from Franchisees, not on payments accrued, due, or owing. Further, in the event of termination of a Franchise Agreement for a Store within the Territory under circumstances entitling Franchisee to the return of all or part of the initial franchise fee or Royalty Fees (or in the event that Franchisor becomes legally obligated or decides to return part or all of the initial franchise fee or Royalty Fees), Franchisor may deduct the portion of the amount to be returned to Franchisee in the same proportion as AD shared in the initial franchise fee or Royalty Fees from any future amounts owed AD. Franchisor shall apply any payments received from a Franchisee to any past due indebtedness of that Franchisee for Royalty Fees, advertising contributions, purchases from Franchisor or its Affiliates, interest, or any other indebtedness of that Franchisee to Franchisor or its Affiliates. To the extent that such payments are applied to a Franchisee’s overdue Royalty Fee payments, AD shall be entitled to its pro rata share of such payments, less its pro rata share of the costs of collection paid to third parties.
6.8 Setoffs. AD shall not be allowed to set off amounts owed to Franchisor for fees or other amounts due under this Agreement against any monies owed to AD by Franchisor, which right of set off is hereby
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 7 expressly waived by AD. Franchisor shall be allowed to set off against amounts owed to AD for Sales Commissions, Royalty Fees, or other amounts due under this Agreement any monies owed to Franchisor by AD.
6.9 Payment Verification. AD shall, upon 10 days prior written notice to Franchisor, have access to Franchisor’s books and records relating to the calculation and payment of any amounts due to AD hereunder. If AD’s inspection of such records shall reveal any material discrepancy or failure to pay AD the proper amounts due under this Agreement, AD shall promptly notify Franchisor of the same. Franchisor shall then have 30 days to review AD’s findings in good faith and, if it concurs that an adjustment is due, shall make any necessary adjustment to the next payment paid to AD.
7. TRAINING ASSISTANCE
7.1 Area Director Training. Franchisor shall furnish, and AD (or, if AD is a Business Entity, a Primary Owner of AD and who has been approved and designated by Franchisor as AD’s “Managing Owner”) shall attend, and complete to Franchisor’s satisfaction, an initial training program consisting of the training program applicable to Franchisor’s Store franchisees and such further training as Franchisor deems advisable, which may include topics such as marketing, franchise sales, franchise law compliance, site selection, and Store operations, furnished at such place and time as Franchisor designates, prior to the opening of the first franchised Store in the Territory after the Effective Date. The AD may also designate one additional member of the AD’s management staff (the “Operations Manager”), who may attend initial training at no additional charge to the AD. Training must be completed prior to AD’s provision of services to franchisees or prospective franchisees.
7.2 Length of Training. Franchisor shall determine the appropriate length of the AD training program. Other than any portion of the Initial Fee that Franchisor may consider to be earned for training AD, no tuition or fee shall be charged for the initial training. However, AD shall be responsible for all travel and living expenses incurred in connection with attendance at all training sessions offered or required by Franchisor.
AD or its Managing Owner may request additional training during the initial training program, to be provided at no additional charge, if AD or its Managing Owner does not feel completely trained in the operation of an AD Business: However, if AD or its Managing Owner satisfactorily completes Franchisor’s initial training program, and does not inform Franchisor in writing at the end of the initial training program that AD or its Managing Owner does not feel completely trained, then AD will be deemed to have been trained sufficiently to operate the AD Business.
7.3 Additional Training. The initial training program will be made available to replacement or additional Operations Managers and other management personnel of AD during the term of this Agreement. AD agrees that it shall have at least one person who has satisfactorily completed the AD training program on staff at all times during the term of this Agreement. Franchisor reserves the right to charge a tuition fee in advance of such training. AD will be responsible for all travel and living expenses incurred by its personnel in connection with attendance at the training program. Further, the availability of the training programs will be subject to space considerations and prior commitments to new Franchisees and ADs.
7.4 Seminars and Ongoing Training. From time to time, Franchisor may present seminars, conventions, or continuing development programs for the benefit of AD. AD or its Managing Owner and its Operations Manager shall, at AD’s expense, be required to attend any ongoing mandatory seminars, industry conventions, or programs offered by Franchisor. If AD fails to attend a mandatory seminar, convention, or program without obtaining Franchisor’s prior written approval and fails to arrange for attendance at an alternate time, AD shall be required to make up the missed program at a time and place designated by Franchisor and may be charged a reasonable fee of not to exceed $1,000 for each program missed. Franchisor shall give AD at least 30 days prior written notice of any seminar, convention, or program that is deemed mandatory. Franchisor will
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 8 not require that AD attend any ongoing training more often than 2 times per calendar year. AD will be responsible for all travel and living expenses associated with attendance at any ongoing training programs.
8. FRANCHISOR’S OPERATING ASSISTANCE
8.1 Manuals. Franchisor shall, in addition to the AD training program, loan to AD during the term of this Agreement 1 copy of its Manuals to assist AD and its employees in conducting the AD Business. Franchisor may prescribe mandatory and suggested standards and operating procedures for AD in the Manuals, which may be modified from time to time by Franchisor. AD shall keep its copy of the Manuals current. In the event of a dispute relating to the Manuals, Franchisor’s master copy controls. AD may not at any time copy any part of the Manuals unless approved in writing by Franchisor. In the event AD’s copy of the Manuals is lost, destroyed, or damaged, AD shall be obligated to obtain from Franchisor, at no charge to AD, a replacement copy of the Manuals. The Manuals and other writings physically or electronically communicated to AD shall constitute material provisions of this Agreement as if fully set forth within its text.
8.2 Operating Assistance. Franchisor will make available the following services during the term of this Agreement:
(a) Upon the reasonable request of AD, telephone consultation regarding advice related to franchise sales, Franchisee support, and assistance;
(b) Access to any franchise sales advertising and promotional materials that Franchisor may (but is not required to) develop, the actual cost of which may be passed on to AD at Franchisor’s option; and
(c) Access to Franchisor’s point-of-sale, product promotions, coupons, and other marketing materials generally made available to Stores within Franchisor’s franchised system, at the same cost (if any) that is charged to other franchisees.
9. AREA DIRECTOR’S OBLIGATIONS
9.1 Hiring and Training of Employees of Area Director. AD shall be solely responsible for hiring all of AD’s employees and shall be exclusively responsible for supervising such employees and for the terms and conditions of their employment and compensation. AD shall be responsible for training its employees to enable AD to operate its AD Business.
9.2 Commencement of AD Business. Unless otherwise agreed to in writing by Franchisor and AD, AD has 60 days from the Effective Date of this Agreement within which to complete the first part of its initial training and commence operation of its AD Business. Franchisor will extend the time within which AD must commence operations for a reasonable period of time, in the event that factors beyond AD’s reasonable control prevent AD from meeting this schedule, so long as AD has made reasonable and continuing efforts to comply and AD requests in writing an extension of time in which to have its AD Business established before the period lapses. The obligations of AD shall commence at the earlier to occur of the date AD or its Managing Owner has satisfactorily completed Franchisor’s initial training program, or 60 days from the Effective Date of this Agreement; provided, however, that AD shall not commence its Sales Services until Franchisor has registered its FDD in accordance with Applicable Laws within the Territory. AD will also, at AD’s expense, purchase or otherwise obtain for use in connection with the AD Business (a) computer hardware and computer software that comply with the standards and specifications of Franchisor; (b) an office space serviced by a minimum of one dedicated telephone line with 24-hour professional answering service or voice mail; (c) a facsimile machine with its own dedicated telephone line; and (d) business cards and stationery.
9.3 Sales Services. AD shall conduct the Sales Services as described in Section 3.1 and 4.3 above, including advertising for, identifying and pre-qualifying prospective Territory Franchisees, providing sales
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 9 assistance to Franchisor’s sales agents, and seeking to obtain prospects by networking and conducting franchise sales promotional activities within the Territory. AD is not authorized, and Sales Services do not include the right, to approve prospects as TCBY franchisees, offer or sell franchises, or negotiate or sign Franchise Agreements on behalf of Franchisor.
9.4 Site Services. AD shall perform the following Site Services on behalf of Franchisor with respect to Territory Franchisees:
(a) Assist with Store location selection, which shall consist of providing each Franchisee with Franchisor’s criteria for a Store site (which shall be approved by Franchisor in its sole discretion) and assisting each Franchisee in completing a site submittal package (containing such demographic, commercial, and other information as Franchisor may require in its Franchise Agreement) for each location at which Franchisee proposes to establish and operate a Store, assist in negotiating lease terms, and coordinate the work of contractors and architects with respect to the development of each Store in the Territory;
(b) Deliver to franchisees the standards and specifications for the build out, interior design, layout, floor plan, signs, designs, color, and decor of the Store that Franchisor prescribes and provides to AD from time to time; and
(c) Submit completed forms and reports to Franchisor as prescribed by Franchisor from time to time.
9.5 Pre-Opening and Opening Support Services. With respect to Territory Franchisees, AD shall perform the following pre-opening and opening Support Services on behalf of Franchisor: AD shall assume and perform any and all of Franchisor’s obligations, as set forth in the Franchise Agreement, to provide assistance to Territory Franchisees pertaining to the timely opening of their Stores, including, without limitation, consultation, as the AD deems appropriate, with the Territory Franchisee about hiring employees, preparing for and conducting the grand opening promotion, pre-opening advertisement and promotion, purchasing required products, including Proprietary Products as set forth in the Franchise Agreement, and adopting and complying with Franchisor’s system standards for opening the new Store. Additionally, one of AD’s agents or employees shall attend the grand opening of each new Store in the Territory.
9.6 Ongoing Support Services. With respect to Franchisees of Stores located in the Territory, AD shall perform the following ongoing Support Services on behalf of Franchisor:
(a) Upon the reasonable request of Franchisee, provide telephone consultation regarding the continuing operation and management of the Store and advice regarding Store services, product quality control, menu items, and customer relations issues;
(b) Provide on-going updates of information and programs regarding menu items and their preparation, the Store business, and related Licensed Methods, including, without limitation, information about special or new services of Franchisor,
(c) Provide advice and assistance to Territory Franchisees in connection with developing and improving Franchisee’s Store;
(d) Conduct the following site inspections in the manner required by Franchisor periodically, said inspections to be verified by written reports in a form acceptable to Franchisor: (i) for the first three months following a new Store’s opening in the Territory, at least 1 quality assurance inspection (or reinspection in the case of a failed first inspection) of such Store every month; and (ii) for all other Stores in the Territory, at least 1 quality assurance inspection or reinspection each calendar quarter;
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 10 (e) At Franchisor’s written request, establish an advertising cooperative for all Stores located in the Territory using forms and procedures supplied by Franchisor; and
(f) Submit periodic reports to Franchisor on activities in the Territory using procedures and forms prescribed by Franchisor.
9.7 Dealings with Franchisees. AD acknowledges that it is being delegated certain responsibilities of Franchisor under the Franchise Agreement to Franchisees in the Territory. The responsibilities to Franchisees are to be performed by AD as described in this Agreement or as set forth in the Manuals or other reasonable standards and specifications provided by Franchisor from time to time, and the responsibilities to Franchisees will not materially change during the term of this Agreement. In providing services to Territory Franchisees, AD shall in all respects comply with the terms and conditions of any Franchise Agreement or other agreement in effect between Franchisee and Franchisor. AD understands, however, that its rights as an Area Director are only derived and exist by virtue of this Agreement and that it is not in any manner a party, third party beneficiary, or holder of any other right or title to or interest in any Franchise Agreement. Similarly, no Franchisee is a third party beneficiary of this Agreement or any other agreement between Franchisor and AD. AD agrees that other than as set forth herein, it may not under any circumstances sell any products or other items to, or collect any money for any reason from, Franchisees without Franchisor’s prior written consent.
9.8 Area Director’s Inspections. AD shall ascertain through field audits, reviews, and inspections that each Franchisee in the Territory has complied satisfactorily with all of the terms and conditions of the Franchise Agreement, specifications, standards, operating procedures, and the Franchisee’s Operations Manual and shall promptly notify Franchisee in writing, with a copy and evaluation report to Franchisor, of any deficiencies; provided, however, AD understands and acknowledges that its inspections and reports are advisory only and that Franchisor shall have: (a) all of the rights to inspect and ascertain compliance of all Franchisees as if this Agreement were not in effect; (b) the sole right to send notices of default to Franchisee; (c) the sole right to terminate a Franchise Agreement for failure to cure such defaults (if an opportunity to cure is granted); and (d) the sole right to take any legal action with respect to any violation of a Franchise Agreement. If AD believes that any Franchisee in the Territory has breached a Franchise Agreement with Franchisor, AD shall document in writing all facts related to the alleged breach and request in writing that Franchisor investigate such alleged breach. If, as a result of Franchisor’s investigation, Franchisor determines that there is a breach by Franchisee of its Franchise Agreement with Franchisor, Franchisor may take such action as it deems appropriate.
10. MARKS
10.1 Ownership and Goodwill of Marks. AD acknowledges that its right to use the Marks is derived solely from this Agreement (unless and to the extent such rights are granted under a separate Franchise Agreement or other written agreement with Franchisor) and is limited to use in operating as an AD pursuant to and in compliance with this Agreement. Any unauthorized use of the Marks by AD shall constitute a breach of this Agreement and an infringement of Franchisor’s and its Affiliates’ rights in and to the Marks. AD acknowledges and agrees that its usage of the Marks and any goodwill established by that use shall inure to Franchisor’s and its Affiliates’ exclusive benefit and that this Agreement does not confer any goodwill or other interests in the Marks upon AD.
10.2 Limitations on Use. AD shall not use any Mark (a) with any prefix, suffix, or other modifying words, terms, designs, or symbols (other than logos licensed to AD under this Agreement), (b) in connection with unauthorized services or products, (c) as part of any domain name or electronic address maintained on the Internet, the World Wide Web, or any other similar proprietary or common carrier electronic delivery system, (d) in any legal name of a Business Entity used to conduct the AD Business; or (e) in any other manner not expressly authorized in writing by Franchisor. AD agrees to give such notices of trademark and service mark registration as
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 11 Franchisor specifies and to use and obtain such fictitious or assumed name registrations required by Franchisor or under applicable law.
10.3 Discontinuance of Use of Marks. If it becomes advisable at any time for Franchisor to modify or discontinue use of any Mark by AD or to require AD to use one or more additional or substitute trade or service marks, AD agrees to comply, at its own expense, with Franchisor’s directions to do so within a reasonable time after receiving notice. Franchisor need not reimburse AD for its direct expenses of doing so, for any loss of revenue due to any modified or discontinued Mark, or for AD’s expenses of promoting a modified or substitute trademark or service mark.
10.4 Notification of Infringements and Claims. AD shall immediately notify Franchisor of any apparent infringement of or challenge to AD’s use of any Mark, or claim by any person of any rights in any Mark, and AD shall not communicate with any person other than Franchisor or its counsel in connection with any such matter. AD may not settle any claim without Franchisor’s and its Affiliates’ prior written consent. Franchisor and its Affiliates may take such action as they deem appropriate and control exclusively any litigation, U.S. Patent and Trademark Office proceeding, or other administrative proceeding arising out of any such infringement, challenge, or claim or otherwise relating to any Mark. AD agrees to execute any and all instruments and documents, render such assistance, and perform such acts as, in the opinion of Franchisor’s and its Affiliates’ counsel, are necessary or advisable to protect and maintain Franchisor’s and its Affiliates’ interests in the Marks.
11. CONFIDENTIAL INFORMATION
11.1 Confidential Information. Franchisor and its Affiliates possess certain proprietary confidential information consisting of the methods, techniques, formats, specifications, procedures, information, systems, methods of business management, sales and promotion techniques, and knowledge of and experience in operating and franchising Stores (the “Confidential Information”). Franchisor may disclose the Confidential Information to AD in the training program, the Manuals, and in guidance furnished to AD during this Agreement’s term. AD will not acquire any interest in the Confidential Information, other than the right to utilize it in the Territory in performing its duties during the term of this Agreement, and AD acknowledges that the use or duplication of the Confidential Information in any other business venture would constitute an unfair method of competition. AD acknowledges and agrees that the Confidential Information is proprietary, includes trade secrets of Franchisor and its Affiliates, and is disclosed to AD solely on the condition that AD agrees, and AD (and its shareholders, partners, members, and managers, if AD is a Business Entity) does hereby agree that AD: (a) shall not use the Confidential Information in any other business or capacity; (b) shall maintain the absolute confidentiality of the Confidential Information during and after the term of this Agreement; (c) shall not make unauthorized copies of any portion of the Confidential Information disclosed in written or other tangible form; and (d) shall adopt and implement all procedures prescribed from time to time by Franchisor to prevent unauthorized use or disclosure of the Confidential Information. All ideas, concepts, techniques, or materials concerning a Store or AD Business, whether or not protectable intellectual property and whether created by or for AD or its owners or employees, must be promptly disclosed to Franchisor and will be deemed Franchisor’s and its Affiliates’ sole and exclusive property, part of the Licensed Methods and Franchisor’s franchise system, and works made-for-hire for Franchisor and its Affiliates. To the extent any item does not qualify as a “work made-for-hire” for Franchisor and its Affiliates, AD assigns ownership of that item, and all related rights to that item, to Franchisor and its Affiliates and must sign whatever assignment or other documents Franchisor and its Affiliates request to show ownership or to help Franchisor and its Affiliates obtain intellectual property rights in the item.
11.2 Nondisclosure and Noncompetition Agreement. Franchisor reserves the right to require AD to have each of its owners, officers, directors, partners, employees, members, and managers, and, if AD is an individual, AD’s spouse, execute a Nondisclosure and Noncompetition Agreement in a form approved by Franchisor.
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 12 12. EXCLUSIVE RELATIONSHIP
12.1 Exclusive Relationship. Franchisor has entered into this Agreement with AD on the condition that AD will deal exclusively with Franchisor. AD acknowledges and agrees that Franchisor would be unable to protect its and its Affiliates’ Confidential Information or to encourage a free exchange of ideas and information among area directors and Franchisor if area directors were permitted to hold interests in any Competitive Business, as defined below. AD therefore agrees that, during this Agreement’s term, neither AD, AD’s shareholders, members, owners, or partners who participate in the management of AD, nor, if applicable, the Managing Owner, nor any spouse of any of the foregoing, shall:
(a) have any direct or indirect interest as a disclosed or beneficial owner in a “Competitive Business,” wherever located or operating, defined as a business operating, or granting franchises or licenses to others to operate, a store, retail outlet or other food service business deriving more than 10% of its gross receipts from the sale of products the same as or similar to Proprietary Products or other principal goods and services sold at the Stores (excluding Stores operated under franchise agreements with Franchisor and its Affiliates, and any existing businesses of AD as disclosed in writing to Franchisor prior to the Effective Date);
(b) perform services as a director, officer, manager, employee, consultant, representative, agent, or otherwise for a Competitive Business, wherever located or operating;
(c) divert or attempt to divert any business related to, or any customer or account of, the AD Business, Franchisor’s business, or any other of its area director’s or Franchisee’s business, by direct inducement or otherwise, or divert or attempt to divert the employment of any employee of Franchisor, its Affiliates, or another area director or Franchisee to any Competitive Business; or
(d) directly or indirectly solicit or employ any person who is employed by Franchisor or its Affiliates.
Notwithstanding the foregoing, (i) AD shall not be prohibited from owning securities in a Competitive Business if such securities are listed on a stock exchange or traded on the over-the- counter market and represent 5% or less of that class of securities issued and outstanding.
13. OPERATING STANDARDS
13.1 Standards of Service. AD shall at all times give prompt, courteous, and efficient service to Territory Franchisees. AD shall, in all dealings conducted hereunder or on behalf of Franchisor, adhere to the highest standards of honesty, integrity, fair dealing, and ethical conduct.
13.2 Compliance with Laws and Good Business Practices. AD shall secure and maintain in force all required licenses, permits, and certificates relating to AD’s activities under this Agreement and operate in full compliance with all Applicable Laws.
13.3 Accuracy of Information. Before it conducts any Sales Services, AD shall take reasonable steps to confirm that the information contained in any written materials, agreements, and other documents related thereto is true, correct, and not misleading, and will not be contrary to Applicable Laws. Franchisor shall provide AD with information regarding the status of its FDD, any changes to its FDD and other agreements on a timely basis and, upon request, provide AD with confirmation that the information contained in any written materials, agreements, or documents being used by AD is true, correct, and not misleading, except for information specifically relating to disclosures regarding AD. If AD notifies Franchisor of an error in any information in Franchisor’s documents, Franchisor shall have a reasonable period of time to attempt to correct any deficiencies, misrepresentations, or omissions in such information.
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 13 13.4 Notification of Litigation. AD shall notify Franchisor in writing within 5 days after the commencement of any action, suit, arbitration, proceeding, or investigation, or the issuance of any order, writ, injunction, award, or decree, by any court, agency, or other governmental instrumentality, which names AD or its Managing Owner or otherwise, concerns the operation or financial condition of AD, AD’s Business, or any Territory Franchisee.
13.5 Ownership and Management of AD Business. The AD Business shall at all times be under the direct, day-to-day, full-time supervision of AD or the Managing Owner. AD shall at all times during the term of this Agreement own and control the AD Business. Upon the request of Franchisor, AD shall promptly provide satisfactory proof of such ownership. AD represents that the Statement of Ownership, attached to this Agreement as Appendix C is true, complete, and not misleading. AD shall promptly provide Franchisor with written notification if the information contained in the Statement of Ownership changes at any time during the term of this Agreement and comply with the applicable transfer provision contained in Section 15. If AD is a Business Entity, an individual or individuals designated by Franchisor shall execute the Guaranty and Assumption of AD’s Obligations attached hereto as Appendix B and incorporated in this Agreement by this reference.
13.6 Conflicting Interests. AD shall at all times faithfully, honestly, and diligently perform its obligations under this Agreement and continuously exert its best efforts to promote, enhance, and service Stores in the Territory. AD shall not engage in any other business or activity, directly or indirectly, that requires any significant management responsibility or time commitments, or otherwise may conflict with AD’s obligations under this Agreement, without the prior written approval of Franchisor.
13.7 Insurance. AD shall at all times during the term of this Agreement maintain in force, at AD’s sole expense, comprehensive general liability insurance with minimum limits of $1,000,000 per occurrence and $2,000,000 aggregate, or other amounts, and with such terms and conditions as Franchisor may from time to time prescribe in the Manuals or otherwise. All of the required insurance policies shall name Franchisor and Affiliates designated by Franchisor as additional insureds, contain a waiver of the insurance company’s right of subrogation against Franchisor and the designated Affiliates, and provide that Franchisor will receive thirty (30) days’ prior written notice, of termination, expiration, cancellation, or modification of any such policy.
13.8 Proof of Insurance Coverage. AD will provide proof of insurance to Franchisor before beginning operations of its AD Business. This proof will show that the insurer has been authorized to inform Franchisor in the event any policies lapse or are canceled or modified. Franchisor has the right to change the types, amounts, and terms of insurance that AD is required to maintain by giving AD prior notice. Noncompliance with these insurance provisions shall be deemed a material breach of this Agreement; and, in the event of any lapse in insurance coverage, Franchisor shall have the right, in addition to all other remedies, to demand that AD cease operations of its AD Business until coverage is reinstated or, in the alternative, to pay any delinquencies in premium payments and charge the same back to AD.
13.9 Advertising in Territory. In order to advertise for prospective Franchisees in the Territory, AD is required to spend an amount equal to $______during each calendar quarter, commencing with the first full calendar quarter hereunder, during the term of this Agreement. AD shall submit to Franchisor an accounting of the amounts spent on advertising for its AD Business within 60 days following the end of each quarter during the term of this Agreement.
13.10 Approval of Advertising. Prior to their use by AD, samples of all advertising and promotional materials not prepared or previously approved by Franchisor shall be submitted to Franchisor for approval, which may be withheld for any reason or no reason. AD shall not use any advertising or promotional materials that Franchisor has not approved or has disapproved. AD acknowledges and understands that certain states require the filing of franchise sales advertising materials with the appropriate state agency prior to dissemination. AD agrees fully and timely to comply with such filing requirements at AD’s own expense unless such advertising has been
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 14 previously filed with the state by Franchisor. Franchisor may charge AD for the actual, out-of-pocket costs incurred by Franchisor in printing large quantities of advertising and marketing materials supplied by Franchisor to AD at AD’s request.
13.11 Accounting, Bookkeeping and Records. AD shall maintain at its business premises in the Territory all original invoices, receipts, checks, contracts, licenses, acknowledgment of receipt forms, and bookkeeping and business records related to the AD Business that Franchisor requires from time to time. AD shall furnish to Franchisor, within 120 days after the end of AD’s fiscal year, a balance sheet and profit and loss statement for such year for its AD Business (or monthly or quarterly statement if required by Franchisor, in which case such statements also shall reflect year-to-date information). In addition, upon request of Franchisor, within 30 days after such returns are filed, exact copies of federal and state income, sales, and any other tax returns and such other forms, records, books, and other information as Franchisor periodically requires regarding the AD Business shall be furnished to Franchisor. AD shall maintain all records and reports of the business conducted pursuant to this Agreement for at least 1 year after the date of termination or expiration of this Agreement. The recordkeeping provisions of this Agreement, including this Section 13.11, shall apply only to the AD Business conducted by AD hereunder, and shall not be deemed to give Franchisor access to any tax returns, records, or other financial or business information of AD that is not related to the AD Business.
13.12 Reports. AD shall, as often as required by Franchisor, deliver to Franchisor a written report of its AD Business activities during such period required in Sections 9.4, 9.6 and 9.8, in such form and detail as Franchisor may from time to time specify, including information about efforts to solicit prospective Franchisees, the status of pending real estate transactions related to the AD Business, and the status of the Stores in the Territory. AD shall, as often as required by Franchisor during the term of this Agreement, deliver to Franchisor the other quality assurance inspection reports required in Section 9 for each Franchisee in the Territory in such form and detail as Franchisor may from time to time specify, and timely deliver any other reports or information that Franchisor may request.
14. INSPECTIONS AND AUDITS
14.1 Inspections and Audits. To determine whether AD is complying with this Agreement, Franchisor or its designee shall have the right at any time during normal business hours, upon 72 hours prior notice to AD, to enter the premises in which AD is then keeping its records pertaining to the AD Business, and inspect, and conduct an audit of, the business records, bookkeeping and accounting records, invoices, payroll records, time cards, check stubs, bank deposits, receipts, sales tax records and returns, and other business records and documents pertaining to the AD Business. AD and its employees shall fully cooperate with representatives of Franchisor making, conducting, supervising, or observing any such inspection or audit.
15. TRANSFERS
15.1 Transfers by Franchisor. AD acknowledges that Franchisor maintains a staff to manage and operate its franchise system and that staff members can change from time to time. AD represents that it has not signed this Agreement in reliance on any shareholder, director, officer, or employee remaining with Franchisor in that capacity. Franchisor may change its ownership or form and/or assign this Agreement or any of its rights, interests and obligations herein and hereunder without restriction.
15.2 Transfers by Area Director. AD agrees that the rights and duties created by this Agreement are personal to AD (or its Primary Owners, if AD is a Business Entity) and that Franchisor has entered into this Agreement in reliance upon AD’s representations about and Franchisor’s perceptions of the individual or collective character, skill, aptitude, attitude, business ability, and financial capacity of AD (or its Primary Owners). Accordingly, without the prior written consent of Franchisor, which consent may be withheld for any reason or no reason, neither this Agreement or any interest herein nor any part or all of any of the Primary
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 15 Ownership of AD may be transferred. Any unauthorized transfer shall constitute a breach of this Agreement and be void and of no effect. As used in this Agreement, the term “transfer” shall mean and include the voluntary, involuntary, direct, or indirect assignment, sale, subfranchise, gift, or other disposition by AD (or any of its owners) of any interest in: (1) this Agreement; (2) the ownership of AD; (3) the Stores operated by AD; or (4) the assets of the AD Business. It also includes an assignment of day-to-day operational responsibilities for the AD Business pursuant to an operating agreement or otherwise.
15.3 Conditions for Approval of Transfer. Franchisor shall not be obligated to approve a proposed transfer unless AD (and its Primary Owners) are in full compliance with this Agreement. Franchisor shall not unreasonably withhold its approval of a proposed transfer that meets all the applicable requirements of this Section. The proposed transferee and its owners must be individuals of good moral character and otherwise meet Franchisor’s then applicable standards for area directors. If the transfer is of this Agreement and the AD Business, or a Controlling Interest in AD, or is one of a series of transfers (regardless of the time period over which such transfers occur) which in the aggregate transfer this Agreement and the AD Business or a Controlling Interest in AD, all of the following conditions must be met before or concurrently with the effective date of the transfer:
(a) The transferee has sufficient business experience, aptitude, and financial resources to act as an area director, agrees to be bound by all of the terms and conditions of this Agreement (unless Franchisor exercises its option under subparagraph (e) below to require the transferee to sign its then current form of agreement), and, with its Managing Owner, must have completed Franchisor’s training program to Franchisor’s satisfaction and paid to Franchisor a reasonable training fee (plus cover its own expenses for attending the training program);
(b) AD has paid all amounts owed to Franchisor or its Affiliates and third party creditors and submitted to Franchisor all required reports and statements;
(c) AD or the transferee has paid Franchisor a transfer fee in the amount needed to defray expenses Franchisor incurs in connection with the transfer (not to exceed Franchisor’s transfer fee for a Store as disclosed in its then-current FDD;
(d) AD (and its transferring owners) executes a general release, in form satisfactory to Franchisor, of any and all claims against Franchisor and its Affiliates and their respective shareholders, officers, directors, employees, and agents;
(e) The transferee signs an express written assumption of AD’s obligations pursuant to this Agreement or, at the option of Franchisor, executes an Area Director Agreement in the form then-currently offered by Franchisor, the duration of which will end on the expiration date of this Agreement and the terms of which may differ materially from any and all of the terms contained in this Agreement, and which shall supersede this Agreement in all respects;
(f) Franchisor approves the material terms and conditions of such transfer, including, without limitation, that the price and terms of payment are not so burdensome as to affect adversely the transferee’s business as an area director of Franchisor;
(g) If AD (and the transferring owners) finances any part of the sale price of the transferred interest, AD and its owners agree that all obligations of the transferee under any promissory notes, agreements, or security interests shall be subordinate to the transferee’s obligation to pay fees and other amounts due to Franchisor and its Affiliates and otherwise to comply with this Agreement; and
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 16 (h) AD (and its transferring owners) executes a noncompetition covenant in favor of Franchisor and the transferee with terms the same as those set forth in Section 17.6.
15.4 Transfer to an Entity. If AD is in full compliance with this Agreement, AD may transfer this Agreement with Franchisor’s prior written approval, which approval may be withheld for any reason or no reason, to a Business Entity of which AD owns not less than two-thirds of the ownership interest. The transfer fee described in Section 15.3(c) will be waived by Franchisor, and all owners of such Business Entity must sign a Guaranty and Assumption of AD’s Obligations attached as Appendix B.
15.5 Franchisor’s Approval of Transfer. Franchisor has 30 days from the date of the written notice to approve or disapprove in writing AD’s proposed transfer. Written notice shall mean and include all documentation necessary to evaluate the transferee. AD acknowledges that the proposed transferee shall be evaluated for approval by Franchisor based on the same criteria as are currently being used to assess new area directors of Franchisor and that such proposed transferee shall be provided, if appropriate, with such disclosures required by state or federal law. Franchisor may review all information regarding the AD Business that AD gives the transferee and give the transferee copies of any reports that AD has given Franchisor or Franchisor has made regarding the AD Business.
15.6 Death or Disability of Area Director. Upon the death or permanent disability of AD (or a Managing Owner of AD), the personal representative of such person shall transfer his or her interest in this Agreement or such interest in AD to an approved third party. Such disposition of this Agreement or such interest (including, without limitation, transfer by bequest or inheritance) shall be completed within a reasonable time, not to exceed 6 months from the date of death or permanent disability (unless extended by probate proceedings), and be subject to all the terms and conditions applicable to transfers contained in this Section. Failure to transfer the interest in this Agreement or such interest in AD within said period of time shall constitute a breach of this Agreement. The term “permanent disability” means a mental or physical disability, impairment, or condition that prevents AD or the Managing Owner from performing the essential functions of AD.
15.7 Right of First Refusal. In the event AD (or, if applicable, an owner) wishes to sell, transfer, gift, assign, or otherwise dispose of any interest in this Agreement or in AD, or all or a substantial portion of the assets of the AD Business, AD agrees to grant to Franchisor a 30 day right of first refusal to purchase such rights, interest, or assets on the same terms and conditions as are contained in the written offer to purchase submitted to AD by a bona fide proposed purchaser; provided, however, the following additional terms and conditions shall apply:
(a) AD shall notify Franchisor of such offer by sending a written notice to Franchisor enclosing a copy of the written offer signed by the bona fide proposed purchaser;
(b) The 30 day right of first refusal period will run concurrently with the period in which Franchisor has to approve or disapprove the proposed transferee;
(c) Such right of first refusal arises for each proposed transfer, and any material change in the terms or conditions of the proposed transfer, even if to the same bona fide proposed purchaser, shall be deemed a separate offer for which a new 30 day right of first refusal shall be given to Franchisor;
(d) If Franchisor chooses not to exercise its right of first refusal, Franchisee shall be free to complete the sale, transfer, or assignment, subject to compliance with the applicable provisions of Section 15. Absence of a reply to AD’s notice of a proposed sale within the 30 day period is deemed a waiver of such right of first refusal but not a waiver of the required compliance with Section 15; and
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 17 (e) Franchisor has the unrestricted right to assign this right of first refusal to a third party, who then will have the rights described in this Section.
16. TERM AND EXPIRATION
16.1 Term. The initial term of this Agreement is for a period of 5 years from the Effective Date, unless sooner terminated as provided herein.
16.2 Renewal. At the end of the initial term, AD shall have the option to renew its area director rights for one additional 5-year renewal term, so long as AD complies with the following requirements during the initial term of this Agreement:
(a) At least 60 days prior to expiration of the initial term, AD executes the form of Area Director Agreement then in use by Franchisor, which agreement may contain terms materially different from those in this Agreement or in the form of Area Director Agreement under which AD then is operating, including without limitation a new Initial Fee; provided that any such Initial Fee cannot exceed the fee paid for the initial term hereunder, and commission percentages and definition of the Territory will not be altered;
(b) AD has complied with all provisions of this Agreement during its term, including the payment on a timely basis of all fees due. “Compliance” shall mean, at a minimum, that AD has not received any written notification from Franchisor of a breach of the Agreement more than 3 times during the initial term;
(c) AD is not in default or under notification of breach of this Agreement at the time it gives notice under Section 16.4;
(d) AD executes a general release, in a form satisfactory to Franchisor, of any and all claims against Franchisor and its Affiliates, and their respective shareholders, officers, directors, employees, and agents, arising out of or relating to this Agreement; and
(e) AD has agreed on a new Development Quota (if any) for the renewal term in accordance with Section 16.3.
16.3 New Development Quota. AD’s area director rights may be renewed only if AD and Franchisor have agreed on a new Development Quota (if any) for the renewal term at least 90 days prior to expiration of the initial term of this Agreement. If AD and Franchisor do not agree on a new Development Quota for the renewal term within this timeframe, AD may only renew its area director rights upon agreeing to the same Development Quota applicable during the initial term.
16.4 Exercise of Renewal Option. AD may exercise its option to renew by giving written notice of such exercise to Franchisor not more than 180 days nor less than 90 days prior to the expiration of the initial term of this Agreement.
16.5 Conditions of Renewal. Franchisor shall not be obligated to offer AD renewal upon the expiration of this Agreement if AD fails to comply with any of the above conditions of renewal. In such event, except for failure to execute the then-current Area Director Agreement, Franchisor shall give AD notice of expiration at least 60 days prior to the expiration of the initial term, and such notice shall set forth the reasons for such refusal to offer renewal. Upon the expiration of this Agreement, AD shall comply with the provisions of Section 17.
16.6 Transfer at End of Term. If AD is not in breach or under notification of default of this Agreement, AD may transfer its rights and obligations under this Agreement to another, at the conclusion of the initial or any renewal term, provided that: (1) AD and the proposed transferee meet all requirements of Section 15
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 18 and (2) AD provides not more than 180 days nor less than 90 days’ notice of its intent to transfer. Franchisor may, at its sole option, extend the term of this Agreement or the Area Director Agreement under which AD then is operating for a reasonable period (not to exceed 90 days) to facilitate an end-of-term transfer, if Franchisor believes that AD is close to completing a transfer and is acting in good faith.
17. TERMINATION
17.1 By Area Director. AD may terminate this Agreement upon 90 days advance written notice if Franchisor is unable to provide registered and effective FDDs or offer or sell franchises within the Territory for a period of more than 90 consecutive days within any Development Period. Further, AD may terminate this Agreement if Franchisor fails to comply with any other provision of this Agreement and does not correct such failure within 90 days after written notice of such failure to comply is delivered to Franchisor. AD must comply with all post-term obligations in the event it elects to terminate the Agreement.
17.2 By Franchisor Upon AD’s Default. Franchisor shall have the right to terminate this Agreement, effective upon delivery of written notice of termination to AD, unless otherwise noted below (subject to any state laws to the contrary, in which case state law shall prevail), if AD (or any of its shareholders, members, owners, managers, or partners or the Managing Owner):
(a) Fails to satisfactorily complete the training program as provided in Section 7.1;
(b) Has intentionally made any material misrepresentation or omission in its application to be an area director or in operating as an area director;
(c) Fails to comply with any requirements under the federal and state franchise laws, including, but not limited to, communicating in written, verbal, or other form to any prospective Franchisee any information or presentation which states or suggests a specific level or range of potential or actual sales, income, gross or net profits, unless that information or presentation is identical to that contained in Franchisor’s FDDs and other disclosure documents;
(d) Fails to meet the Development Quota set forth in Appendix A and does not correct such failure within 90 days after written notice of such failure to comply is delivered to AD if the default is for Stores sold or 180 days if the default is for the cumulative number of Stores to be open and in operation in the Territory;
(e) Fails to comply with any other provision of this Agreement or any mandatory specification, standard, or operating procedure prescribed by Franchisor and does not correct such failure within 30 days after written notice of such failure to comply is delivered to AD;
(f) Surrenders, transfers control of, or makes an unauthorized transfer of this Agreement or an Ownership interest in AD or abandons or fails actively to operate the AD Business;
(g) Is convicted by a trial court of or pleads no contest to a felony or any other crime or offense that is, in the opinion of Franchisor, likely to affect adversely the goodwill associated with the Marks or engages in any conduct which might adversely affect the reputation of the Stores or the goodwill associated with the Marks;
(h) To the extent enforceable under federal bankruptcy law, 11 U.S.C. § 101, is declared bankrupt or insolvent, voluntarily institutes a bankruptcy proceeding under the Bankruptcy Code, or is adjudicated bankrupt as a result of an involuntary petition in bankruptcy being filed against it;
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 19 (i) Abandons or ceases to operate the AD Business for a period of 30 consecutive days, unless precluded from doing so by an event beyond AD’s reasonable control (other than for financial reasons), or abandons any Store owned by AD;
(j) Has received 3 notices of default from Franchisor within a 12 month period under any agreement between Franchisor and AD, regardless of whether the defaults were cured by AD; or
(k) Fails to pay any amounts due Franchisor or its Affiliates within 30 days after receiving notice that such fees or amounts are overdue.
17.3 Rights and Obligations of Area Director. Upon termination of this Agreement, whether pursuant to Section 17.1 or 17.2 or upon expiration without renewal of this Agreement pursuant to Section 16, AD agrees:
(a) To pay Franchisor within 15 days after the effective date of termination or expiration of this Agreement, or such later date that the amounts due to Franchisor are determined, such fees, amounts owed for purchases by AD from Franchisor or its Affiliates, interest due on any of the foregoing, and all other amounts owed to Franchisor or its Affiliates which are then unpaid;
(b) To refrain from, directly or indirectly, at any time or in any manner (except with respect to Store franchises owned and operated by AD), identifying itself or any business as a current area director or authorized agent of Franchisor or its Affiliates, using any Mark, any colorable imitation thereof, or other indicia of a Store in any manner or for any purpose, or utilizing for any purpose any trade name, trademark or service mark, or other commercial symbol that suggests or indicates a connection or association with Franchisor or its Affiliates;
(c) To immediately deliver to Franchisor all past and present franchise sales leads and records and all contracts, acknowledgments of receipt, and other information and records related to Franchisees of Franchisor in the Territory;
(d) To immediately deliver to Franchisor all advertising materials, the Manuals, and all other manuals, forms, FDDs, franchise sales brochures, and other materials containing any Mark or otherwise identifying or relating to the sale or service of Stores;
(e) To refrain from communicating in any manner with Franchisees concerning Franchisor or obligations arising from this Agreement or the Franchise Agreement, except as expressly authorized by Franchisor;
(f) To take such action required to cancel all fictitious or assumed name or equivalent registrations relating to AD’s use of any Mark; and
(g) Furnish Franchisor, within 30 days after the effective date of termination or expiration, with evidence satisfactory to Franchisor of AD’s compliance with the foregoing obligations.
17.4 Confidential Information. AD agrees that, upon termination or expiration of this Agreement, AD shall immediately cease to use any Confidential Information disclosed pursuant to this Agreement or as a result of its relationship with Franchisor in any business or otherwise (except in connection with the operation of a Store pursuant to a Franchise Agreement with Franchisor) and return to Franchisor all copies of the Manuals and any other confidential materials loaned to AD by Franchisor.
17.5 Covenant Not to Compete. Upon termination or expiration of this Agreement, AD (and its shareholders, officers, directors, owners, members, managers, or partners, and the spouses of these individuals and AD (collectively, “Bound Parties”)) agrees that, for 2 years commencing on the later of the effective date of termination or expiration or the date on which AD and all Bound Parties begin to comply with this Section,
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 20 neither AD nor any Bound Party shall have any direct or indirect interest (through an immediate family member of AD or any Bound Party or otherwise) as a disclosed or beneficial owner, investor, partner, director, officer, employee, consultant, representative, agent, or in any other capacity in any Competitive Business located in any territory in which Franchisor or its Affiliates or area directors conduct business at the later of the time of termination or expiration or the date on which AD and all Bound Parties begin to comply with this Section. The restrictions of this Section shall not apply to the ownership of shares of a class of securities listed on a stock exchange or traded on the over-the-counter market that represent 5% or less of the number of shares of that class of securities issued and outstanding. AD and each Bound Party expressly acknowledge that they possess skills and abilities of a general nature and have other opportunities for exploiting such skills. Consequently, enforcement of the covenants made in this Section will not deprive them of their personal goodwill or ability to earn a living.
17.6 No Further Right to Payment. Upon expiration or termination of this Agreement, AD forfeits all fees paid to Franchisor and remains liable to Franchisor for all amounts then due to Franchisor. AD shall have no further right to receive payment of Sales Commissions, Royalty Fees or other amounts from Franchisor, except for those commissions or Royalty Fees which have been fully earned by AD up through the date of expiration or termination. For purposes of this Agreement, “fully earned” commissions shall mean commissions due on franchise sales for which all conditions described in Section 6.1 have been fulfilled by AD for the purchase of a franchise for a Store to be located within the Territory. “Fully earned” Royalty Fees shall mean those Royalty Fees which accrue up through the date of expiration or termination which are otherwise owed to AD. Franchisor shall have the right immediately to assume control of and manage all franchise sales in the Territory and to receive all Royalty Fees from Franchisees in the Territory. Any fully earned commissions or Royalty Fees which are due to AD will be paid in accordance with the provisions of Section 6.
17.7 Continuing Obligations. All obligations of Franchisor and AD and the Bound Parties that expressly or by their nature survive the expiration or termination of this Agreement shall continue in full force and effect subsequent to and notwithstanding its expiration or termination and until they are satisfied or by their nature expire.
17.8 Applicable Laws. The parties acknowledge that, in the event the terms of this Agreement regarding termination or expiration are inconsistent with Applicable Laws, such law shall govern AD’s rights regarding termination or expiration of this Agreement.
18. RELATIONSHIP OF THE PARTIES
18.1 Relationship of the Parties. It is understood and agreed by the parties that this Agreement does not create a fiduciary relationship between them, that the parties are independent contractors, that Franchisor appoints AD as its special agent for a particular purpose, and that nothing in this Agreement is intended to make either party a general agent, subsidiary, joint venturer, partner, employee, or servant of the other for any purpose. AD acknowledges that Franchisor is in the business of granting franchises and licenses to Franchisees and Area Directors for the operation of Stores and AD Businesses, and notwithstanding the fact that Franchisor may engage in activities similar to the Sales Services, Site Services and Support Services, Franchisor does not operate an AD Business and is not in the same business as AD. AD shall conspicuously identify itself in all dealings with Franchisees, prospective Franchisees, lessors, contractors, suppliers, public officials, and others as the owner of its own AD Business under an Area Director Agreement with Franchisor and shall place the notices of independent ownership required by Franchisor on signs, forms, stationery, advertising, and other materials.
18.2 Payment of Third Party Obligations. Neither Franchisor nor AD shall make any express or implied agreements, guaranties, or representations, or incur any debt, in the name or on behalf of the other or represent that their relationship is other than franchisor and special agent; neither Franchisor nor AD shall be obligated by or have any liability under any agreements or representations made by the other that are not
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 21 expressly authorized under this Agreement; nor shall Franchisor be obligated for any damages to any person or property directly or indirectly arising out of the operation of the AD Business.
18.3 Independent Contractors. AD may delegate its duties under this Agreement to independent contractors provided that AD first receives written approval from Franchisor and complies with all state laws which require broker or other registrations for such persons. Franchisor reserves the right at any time to withdraw the approval of any independent contractor engaged by AD to fulfill its duties and obligations under this Agreement.
18.4 Indemnification. AD agrees to indemnify and reimburse Franchisor and its Affiliates, and their respective stockholders, directors, officers, employees, agents, and assignees (the “Indemnified Parties”), for, and hold the Indemnified Parties harmless against, any loss, liability, taxes, or damages (actual or consequential) and all reasonable costs and expenses of defending any claim brought against any of them or any action in which any of them is named as a party (including, without limitation, reasonable accountants’, attorneys’, and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses), which any of them may suffer, sustain, or incur by reason of, arising from, or in connection with any acts, omissions, or activities of AD or any of its employees or independent contractors, unless (and then only to the extent that) the loss, liability, taxes, damages, and reasonable costs and expenses are determined to be caused solely by the Indemnified Party’s negligence or willful misconduct in a final, unappealable ruling issued by a court or arbitrator with competent jurisdiction. Each Indemnified Party shall have the right to defend any such claim against it at AD’s expense and agree to settlements or take any other remedial, corrective, or other actions. This indemnity shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement.
19. DISPUTES
The following provisions apply with respect to dispute resolution:
19.1 Non-binding Mediation. Before the filing of any legal proceeding or claim, the parties agree to mediate any dispute that does not include injunctive relief or specific performance actions, provided that the party seeking mediation notify the other party of its intent to mediate prior to the termination of this Agreement. Mediation will be conducted by a mediator or mediation program agreed to by all parties. Persons authorized to settle the dispute must attend any mediation session. The parties agree to participate in the mediation proceedings in good faith with the intention of resolving the dispute if at all possible within 30 days of the notice from the party seeking to initiate the mediation procedures. If not resolved within 30 days, the parties are free to pursue legal action. Mediation is a compromise negotiation for purposes of the federal and state rules of evidence, and the entire process is confidential and shall be non-binding.
19.2 Governing Law/Consent to Venue and Jurisdiction. Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. § 1051) or other federal law, this Agreement shall be interpreted under the laws of the state of Colorado, and any dispute between the parties, whether arising under this Agreement or from any other aspect of the parties’ relationship, shall be governed by and determined in accordance with the substantive laws of that state, which laws shall prevail in the event of any conflict of law. AD and Franchisor have negotiated regarding a forum in which to resolve any disputes arising between them and have agreed to select a forum in order to promote stability in their relationship. Therefore, if a claim is asserted in any legal proceeding involving the AD or any Bound Party and Franchisor, the parties agree that the exclusive venue for disputes between them shall be in the County of Broomfield, State of Colorado, or the Federal District Court for the Tenth District, and each party waives any objection it might have to the personal jurisdiction of or venue in such courts.
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 22 19.3 Waiver of Jury Trial. Franchisor, AD, and the Bound Parties each waive their right to a trial by jury. AD, the Bound Parties, and Franchisor acknowledge that the parties’ waiver of jury trial rights provides the parties with the mutual benefit of uniform interpretation of this Agreement and resolution of any dispute arising out of this Agreement or any aspect of the parties’ relationship. AD, the Bound Parties, and Franchisor further acknowledge the receipt and sufficiency of mutual consideration for such benefit. BY INITIALING HERE:
______[AD TO INITIAL HERE]
AD ACKNOWLEDGES AND AGREES THAT AD HAS READ THIS SECTION, UNDERSTANDS ITS PROVISIONS, and that Franchisor has accorded AD ample time and opportunity to consult with financial and legal advisors of AD’s own choosing about the effect of these provisions on AD’s rights under this Agreement.
19.4 Limitation of Claims. AD and the Bound Parties agree not to bring any claim asserting that any of the Marks are generic or otherwise invalid. Except with regard to AD’s obligation to pay Franchisor and its Affiliates amounts due pursuant to this Agreement or otherwise, any claims between the parties must be commenced within 1 year from the date on which the party asserting the claim knew or should have known of the facts giving rise to the claim, or such claim shall be barred. The parties understand that such time limit might be shorter than otherwise allowed by law. AD and the Bound Parties agree that their sole recourse for claims arising between the parties shall be against Franchisor or its successors and assigns. AD and the Bound Parties agree that the shareholders, directors, officers, employees, and agents of Franchisor and its Affiliates (other than AD) shall not be personally liable nor named as a party in any action between Franchisor and AD or any Bound Party. The parties further agree that, in connection with any such proceeding, each must submit or file any claim which would constitute a compulsory counterclaim (as defined by Rule 13 of the Federal Rules of Civil Procedure) within the same proceeding as the claim to which it relates. Any such claim which is not submitted or filed as described above will be forever barred. The parties agree that any proceeding will be conducted on an individual, not a class-wide, basis, and that a proceeding between Franchisor and AD or the Bound Parties may not be consolidated with any other proceeding between Franchisor and any other person or entity. No party will be entitled to an award of punitive or exemplary damages (provided that this limitation shall not apply to statutory penalties such as those set forth in 15 U.S.C. § 1117(a)). No previous course of dealing shall be admissible to explain, modify, or contradict the terms of this Agreement. No implied covenant of good faith and fair dealing shall be used to alter the express terms of this Agreement.
20. MISCELLANEOUS PROVISIONS
20.1 Invalidity. If any provision of this Agreement is held invalid by any tribunal in a final decision from which no appeal is or can be taken, such provision shall be deemed modified to eliminate the invalid element, and, as so modified, such provision shall be deemed a part of this Agreement as though originally included. The remaining provisions of this Agreement shall not be affected by such modification.
20.2 Modification. No amendment, waiver, or modification of this Agreement shall be effective unless it is in writing and signed by the party or parties against whom such amendment or waiver is to be enforced. AD acknowledges that Franchisor may modify its standards and specifications and operating and marketing techniques set forth in the Manuals unilaterally under any conditions and to the extent to which Franchisor deems necessary to protect, promote, or improve the Marks and the quality of the Licensed Methods.
20.3 Force Majeure. In the event any party fails of perform any obligation under this Agreement, the same shall not be deemed a breach of this Agreement if it arose from a cause beyond the control of and without the negligence of said party. Such causes include, but are not limited to, acts of God, actions of the elements, lockouts, strikes, wars, riots, civil commotion, and acts of government except as may be specifically provided for elsewhere in this Agreement.
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 23 20.4 Attorneys’ Fees. In the event of any default on the part of either party to this Agreement, in addition to all other remedies, the party in default will pay the prevailing party (as determined by the decision- maker in the proceeding) all amounts due and all damages, costs, and expenses, including reasonable attorneys’ fees, incurred by the prevailing party in any legal action or other proceeding as a result of such default, plus interest at the lesser of 2% per month or the highest commercial contract interest rate allowable by law accruing from the date of such default.
20.5 Interpretation of Rights and Obligations. The following provisions apply to and govern the interpretation of this Agreement, the parties’ rights under this Agreement, and the relationship between the parties:
(a) Franchisor’s Rights. Whenever this Agreement provides that Franchisor has a certain right, that right is absolute and the parties intend that Franchisor’s exercise of that right will not be subject to any limitation or review. Franchisor has the right to operate, administrate, develop, and change its Licensed Method and franchise system in any manner that is not specifically precluded by the provisions of this Agreement.
(b) Franchisor’s Reasonable Business Judgment. Whenever Franchisor reserves discretion in a particular area or where Franchisor agrees to exercise its rights reasonably or in good faith, Franchisor will satisfy its obligations whenever Franchisor exercises Reasonable Business Judgment in making its decision or exercising our rights. Franchisor’s decisions or actions will be deemed to be the result of Reasonable Business Judgment, even if other reasonable or even arguably preferable alternatives are available, if its decision or action is intended, in whole or significant part, to promote or benefit its franchise System generally even if the decision or action also promotes Franchisor’s financial or other individual interest. Examples of items that will promote or benefit the system include enhancing the value of the Proprietary Marks, improving customer service and satisfaction, improving product quality, improving uniformity, enhancing or encouraging modernization and improving the competitive position of the System.
20.6 Injunctive Relief. Nothing herein shall prevent Franchisor or AD from seeking injunctive relief in appropriate cases to prevent irreparable harm.
20.7 No Waiver. No waiver of any condition or covenant contained in this Agreement, or failure to exercise a right or remedy, by AD or Franchisor shall be considered to imply or constitute a further waiver by Franchisor or AD of the same or any other condition, covenant, right, or remedy.
20.8 No Right to Set Off. AD shall not be allowed to set off amounts owed to Franchisor for fees or other amounts due against any monies owed to AD, which right of set off is hereby expressly waived by AD.
20.9 Effective Date. Regardless of the date first written above, this Agreement shall not be effective until executed by Franchisor, as evidenced by dating and signing by an officer of Franchisor.
20.10 Review of Agreement. AD acknowledges that, where required by Applicable Laws, it has had a copy of Franchisor’s FDD in its possession for not less than 14 full calendar days, and this Agreement in its possession for not less than 7 full calendar days, during which time AD has had the opportunity to submit the same for review and advice by a professional of AD’s choosing before freely executing this Agreement. Where such disclosure is not required by Applicable Laws, any FDD or other disclosure AD has received pertaining to such jurisdiction shall be deemed a courtesy disclosure by Franchisor.
20.11 Entire Agreement. This Agreement (which includes the attachments and Appendices expressly incorporated) contains the entire agreement between the parties and supersedes any and all prior agreements concerning the subject matter covered by this Agreement. AD agrees and understands that Franchisor shall not be liable or obligated for any oral representations or commitments made prior to this Agreement’s execution or for
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 24 claims of negligent or fraudulent misrepresentation and that no modifications of this Agreement shall be effective except those in writing signed by both parties. Franchisor does not authorize and will not be bound by any representation of any nature other than those expressed in this Agreement. However, nothing in this Agreement or any related agreement is intended to disclaim the representations made in the disclosure document that was provided to AD. AD further acknowledges and agrees that no representations have been made to it by Franchisor regarding projected sales volumes, market potential, revenues, profits of the AD Business, or operational assistance other than as stated in this Agreement or in the FDD provided in connection with this Agreement. AD acknowledges and agrees that any delegation of Franchisor’s duties and obligations to area directors does not assign or confer any rights under any Franchise Agreement (unless entered into between AD and Franchisor) upon AD and that AD is not a third party beneficiary of any Franchise Agreement between Franchisor and a Franchisee who is not also AD. This Agreement shall not modify, affect or amend any Franchise Agreement entered into between AD and Franchisor. Any policies that Franchisor adopts and implements from time to time to guide it in its decision-making are subject to change, are not a part of this Agreement, and are not binding on Franchisor.
20.12 Notices. All notices required to be given under this Agreement shall be given in writing, by certified mail, return receipt requested, or by any delivery service providing documentation of receipt, to addresses set forth in the first paragraph of this Agreement or, with respect to notices to AD, to the address of the AD Business, or at such other addresses as Franchisor or AD may designate from time to time, and shall be deemed delivered (a) on the date shown on the return receipt or in the courier’s records as the date of delivery or (b) on the date of first attempted delivery, if actual delivery cannot for any reason be made.
20.13 Acknowledgment. BEFORE SIGNING THIS AGREEMENT, AD SHOULD READ IT CAREFULLY WITH THE ASSISTANCE OF LEGAL COUNSEL. AD ACKNOWLEDGES THAT:
(A) THE SUCCESS OF THE AD BUSINESS VENTURE INVOLVES SUBSTANTIAL RISKS AND DEPENDS UPON AD’S ABILITY AS AN INDEPENDENT BUSINESS PERSON AND ITS ACTIVE PARTICIPATION IN THE DAILY AFFAIRS OF THE AD BUSINESS, AND
(B) NO ASSURANCE OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN GIVEN AS TO THE POTENTIAL SUCCESS OF SUCH AD BUSINESS VENTURE OR THE EARNINGS LIKELY TO BE ACHIEVED, AND
(C) NO STATEMENT, REPRESENTATION, OR OTHER ACT, EVENT, OR COMMUNICATION, EXCEPT AS SET FORTH IN THIS DOCUMENT AND IN ANY DISCLOSURE DOCUMENT SUPPLIED TO AD, IS BINDING ON FRANCHISOR IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed, sealed, and delivered this Agreement in counterparts on the date first mentioned above.
TCBY SYSTEMS, LLC AREA DIRECTOR
By: By: Its: Its: Date: Date:
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 25 APPENDIX A
RIDER TO AREA DIRECTOR AGREEMENT DATED ______
1. Territory. The Territory referred to in Section 2.14 of the Agreement shall be the following geographic area:
______.
2. Existing Stores. The following Stores are Existing Stores by virtue of being opened and operated by Franchisees within the Territory as of the Effective Date:
[list Existing TCBY Stores]
3. Development Quota.
(a) AD shall meet the following Development Quota by the last day of each Development Period during the term of this Agreement (to be completed before the execution of this Agreement):
Cumulative Number of Stores (Excluding Company- Owned Stores, Existing Stores, Excluded Locations and any other Stores or outlets excluded or retained by Number of New Stores Franchisor pursuant to this to be Opened by AD in Agreement*) Development Territory or Sold to Territory to be Open and in Period Franchisees Operation in the Territory** 1 2 3 4 5
*Of the new Stores opened and operating within the Territory, AD must, at the end of each Development Period from and after the second Development Period, own at least __ Stores in the Territory. See Section 3.2 for further information.
**Provided that Franchisor has given its prior written approval for the development of such location, each “Limited Services Location” or Other Concepts Store operated within the Territory by AD or AD’s qualified applicant approved by Franchisor will count as 1/3 of 1 Store for purposes of determining whether AD has met its Development Quota. In other words, AD must open 3 approved Limited Services Locations or Other Concepts Stores to receive credit for 1 Store under the Development Quota. For purposes of this paragraph, a “Limited Services Location” is a limited menu TCBY-branded presence (such as a single yogurt machine) located outside a
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 26 traditional or Other Concepts Store presence, such as within a gas station retail area. AD ACKNOWLEDGES AND AGREES THAT IT MAY NOT PURSUE A LIMITED SERVICES LOCATION OR OTHER CONCEPTS STORE OPPORTUNITY WITHOUT THE PRIOR WRITTEN CONSENT OF FRANCHISOR, WHICH MAY BE GRANTED OR WITHHELD FOR ANY REASON OR NO REASON, and that Other Concepts Stores and Limited Services Locations may, at Franchisor’s sole discretion, be considered Excluded Locations hereunder.
(b) The Development Quota that AD must satisfy during any renewal term of this Agreement shall be determined in the manner and within the timeframe specified in Section 16.3 of this Agreement. AD and Franchisor shall revise this Appendix or its counterpart in the form of Area Director Agreement that is executed by the parties, to reflect the new Development Quota for any renewal term.
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 27 APPENDIX B
GUARANTY AND ASSUMPTION OF AREA DIRECTOR’S OBLIGATIONS
In consideration of, and as an inducement to, the execution of the above Area Director Agreement (the “Agreement”) by ______(“Franchisor”), each of the undersigned (“Guarantors”) personally and unconditionally (I) guarantees to Franchisor and its Affiliates and their successors and assigns, for the term of the Agreement and thereafter as provided in the Agreement, that Area Director defined in the Agreement (“AD”) shall punctually pay and perform each and every undertaking, agreement, and covenant set forth in the Agreement and (2) agrees personally to be bound by, and personally liable for the breach of, each and every provision in the Agreement, including, but not limited to, those specifically identified below.
1. Waiver. Each of the undersigned waives:
(a) acceptance and notice of acceptance by Franchisor and its Affiliates of the foregoing undertakings;
(b) notice of demand for payment of any indebtedness or nonperformance of any obligations hereby guaranteed;
(c) protest and notice of default to any party with respect to the indebtedness or nonperformance of any obligations hereby guaranteed; and
(d) any right he or she may have to require that an action be brought against AD or any other person as a condition of liability.
2. Consents. Each of the undersigned consents and agrees that:
(a) his or her direct and immediate liability under this guaranty shall be joint and several;
(b) he or she shall render any payment or performance required under the Agreement upon demand if AD fails or refuses punctually to do so;
(c) such liability shall not be contingent or conditioned upon pursuit by Franchisor or its Affiliates of any remedies against AD or any other person;
(d) such liability shall not be diminished, relieved, or otherwise affected by any extension of time, credit, or other indulgence which Franchisor or its Affiliates may from time to time grant to AD or to any other person, including, without limitation, the acceptance of any partial payment or performance or the compromise or release of any claims, none of which shall in any way modify or amend this guaranty, which shall be continuing and irrevocable during the term of the Agreement; and
(e) he or she shall be bound by the restrictive covenants, confidentiality provisions, and indemnification provisions contained in Sections 11, 12, 17.4, 17.5, and 18.4 of the Agreement; and
(f) the provisions contained in Section 19, and the costs and attorneys’ fees provision contained in Section 20.4, of the Agreement shall govern this Guaranty, and such provisions are incorporated into this Guaranty by this reference.
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 28 IN WITNESS WHEREOF, each of the undersigned has affixed his or her signature, effective as of the ____ day of ______.
PERCENTAGE OF OWNERSHIP GUARANTOR(S) INTERESTS IN AREA DIRECTOR
(Print Name)
(Signature)
Address
(Telephone)
(Print Name)
(Signature)
Address
(Telephone)
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 29 APPENDIX C
STATEMENT OF OWNERSHIP
Area Director: ______
Trade name (if different from above): ______
Form of Ownership (Check One)
_____ Individual _____ Partnership _____ Corporation _____ Limited Liability Company
_____ Other (List):
If a Partnership, provide name and address of each partner showing percentage owned, whether active in management, and indicate the state in which the partnership was formed.
If a Corporation, give the state and date of incorporation, the names and addresses of each officer and director and list the names and addresses of every shareholder showing what percentage of stock is owned by each.
If a Limited Liability Company, give the state and date of formation, the name and address of the manager, and list the names and addresses of every member and the percentage of membership interest held by each member.
AD acknowledges that this Statement of Ownership applies to the ______AD Business authorized under the Area Director Agreement. Use additional sheets if necessary. Any and all changes to the above information must be reported to (and in some cases first approved by) Franchisor in writing.
Date: Name
AREA DIRECTOR
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 30 APPENDIX D
ACKNOWLEDGMENT ADDENDUM TO TCBY® AREA DIRECTOR AGREEMENT
As you know, you and we are entering into an Area Director Agreement for the operation of a TCBY® area director franchise. The purpose of this Acknowledgment Addendum is to determine whether any statements or promises were made to you that we have not authorized or that may be untrue, inaccurate or misleading, and to be certain that you understand the limitations on claims that may be made by you by reason of the offer and sale of the franchise and operation of your area director business. Please review each of the following questions carefully and provide honest responses to each question.
Acknowledgments and Representations*
1. Except as exempted under Applicable Laws, did you receive a copy of our Disclosure Document (and all exhibits and attachments) at least 14 calendar days prior to signing the Area Director Agreement? Check one: ( ) Yes ( ) No. If no, please comment:
2. Have you studied and reviewed carefully our Disclosure Document and Area Director Agreement? Check one: ( ) Yes ( ) No. If no, please comment:
3. Except as exempted under Applicable Laws, did you receive a copy of the Area Director Agreement at least 7 calendar days prior to the date on which the Area Director Agreement was executed? Check one: ( ) Yes ( ) No. If no, please comment:
4. If you answered no to question 3, but answered yes to question 1, were all of the changes to the Area Director Agreement made as a result of negotiations that you initiated with us? Check one: ( ) Yes ( ) No. If no, please comment:
5. Did you understand all the information contained in both the Disclosure Document and Area Director Agreement? Check one: ( ) Yes ( ) No. If no, please comment:
6. Was any oral, written or visual claim or representation made to you which contradicted the disclosures in the Disclosure Document? Check one: ( ) Yes ( ) No. If yes, please comment:
7. Did any employee or other person speaking on behalf of Franchisor make any oral, written or visual representation, claim, statement or promise to you that stated, suggested, predicted or projected financial performance, sales, revenues, earnings, income or profit levels for any AD Business or Store location, or the likelihood of success of your franchised business? Check one: ( ) Yes ( ) No. If yes, please state in detail the oral, written or visual representation:
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 31
8. Do you understand that that the franchise granted is for the right to operate in the Territory, as stated in Subparagraph 3.3 of the Area Director Agreement, but that we and our Affiliates have the right to issue area director franchises outside of your Territory and the right to issue Store franchises, operate company-owned Stores, and provide services to Store franchisees both inside and outside of your Territory, as described in Subparagraph 3.4?
Check one: ( ) Yes ( ) No. If no, please comment:
9. Do you understand that the Area Director Agreement contains the entire agreement between you and us concerning your franchise, meaning that any prior oral or written statements not set out in the Area Director Agreement will not be binding? Check one: ( ) Yes ( ) No. If no, please comment:
10. Do you understand that the success or failure of your business will depend in large part upon your skills and experience, your business acumen, your location, the market for Stores and products in your Territory, interest rates, the economy, inflation, the number of employees you hire and their compensation, competition and other economic and business factors? Further, do you understand that the economic and business factors that exist at the time you begin operations may change? Check one: ( ) Yes ( ) No. If no, please comment:
YOU UNDERSTAND THAT YOUR ANSWERS ARE IMPORTANT TO US AND THAT WE WILL RELY ON THEM. BY SIGNING THIS ADDENDUM, YOU ARE REPRESENTING THAT YOU HAVE CONSIDERED EACH QUESTION CAREFULLY AND RESPONDED TRUTHFULLY TO THE ABOVE QUESTIONS. IF MORE SPACE IS NEEDED FOR ANY ANSWER, CONTINUE ON A SEPARATE SHEET AND ATTACH.
NOTE: IF THE RECIPIENT IS A CORPORATION, PARTNERSHIP, LIMITED LIABILITY COMPANY OR OTHER ENTITY, EACH OF ITS PRINCIPAL OWNERS MUST EXECUTE THIS ACKNOWLEDGMENT.
*Such representations are not intended to nor shall they act as a release, estoppel or waiver of any liability incurred under the Territory’s Franchise Disclosure Act, Franchise Registration and Disclosure Law and other Applicable Laws.
[Signatures on following page.]
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 32 AREA DIRECTOR AREA DIRECTOR
By: By:
(signature) (signature)
(Print Name) (Print Name)
(Date) (Date)
APPROVED ON BEHALF OF ______
By:
(signature)
(Print Name)
(Date)
TCBY FDD 03/2014 EXHIBIT E: Area Director Agreement 33 EXHIBIT F
TERM PURCHASE ADDENDUM
TCBY FDD 03/2014 EXHIBIT F: Term Purchase Addendum TERM PURCHASE ADDENDUM TO
FRANCHISE AGREEMENT
This is a Term Purchase Addendum (the “Addendum”) to the Franchise Agreement between the parties described as follows:
Franchise Renewal Agreement dated ______, 20__ between ______(“you” or the “Franchisee”) and TCBY SYSTEMS, LLC (“us”, “we” or “Franchisor”), dated ______, 20__ (the “Franchise Agreement”)
This Addendum is considered to be part of the Franchise Agreement. All capitalized terms used in this Addendum but not defined herein shall have the same the meaning as ascribed to them in the Franchise Agreement. The Preambles set forth below are an integral part of this Addendum.
1. Preambles. You own and operate a franchised location (the “Store”) under and by virtue of the Franchise Agreement. The current (renewal) term (the “Term”) of the Franchise Agreement will expire on ______(the “Expiration Date”). Prior to the Expiration Date, you wish to transfer or relocate your Store, or extend the Term of the Franchise Agreement (the “Transaction”). You are required by the Franchise Agreement to obtain our consent to the Transaction. We have evaluated the Transaction and have determined that as a condition to providing our consent, you or your transferee (as the case may be, the “Term Purchaser”) must purchase additional term for the operation of the Store beyond the Expiration Date. You acknowledge that there may be other conditions to our consent, and that this Addendum is not itself evidence of our consent to the Transaction. Its purpose is to allow you or your transferee, as the Term Purchaser, to purchase at our standard term purchase rates as of the date of this Addendum, additional term for operation of the Store beyond the Expiration Date, subject to completion and final closing of the Transaction and pursuant to the other provisions of this Addendum.
2. Term Purchase. No later than the date that we sign this Addendum, the Term Purchaser will pay to us the amount of $______(the “Purchase Price”). In consideration of full payment of the Purchase Price, we hereby grant the Term Purchaser the right to extend the Franchise Agreement for a period of [_____] months (the “Extended Term”) following the Expiration Date without payment of any additional term purchase fee. Notwithstanding the foregoing, however, Term Purchaser’s right to operate the Store for the Extended Term is subject to the Term Purchaser, no later than the Expiration Date: (a) complying with all of our conditions of renewal as set forth in our then-current Franchise Disclosure Document and then-current Franchise Agreement as of the Expiration Date (except payment of any renewal fee); and (b) signing our then-current form of Franchise Agreement, modified as necessary to reflect that it is an extension agreement only, and does not grant additional term or renewal rights upon expiration of the Extended Term.
3. Other Provisions. Our execution of this Addendum and/or our consent to the Transaction does not constitute an express or implied representation or warranty by us of the successful operation or profitability of the Store at its current or any relocated premises during the Term, the Extended Term or any other period of operation, or the success or viability of the Transaction. This Addendum may be signed in counterparts and/or by facsimile signature. The Franchise Agreement shall remain in full force and effect according to its terms, as modified by this Addendum.
TCBY FDD 03/2014 EXHIBIT F: Term Purchase Addendum 1 IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the day and year set forth below their signatures, to be effective as of the date the Franchisor signs below.
FRANCHISOR: TERM PURCHASER:
a Delaware limited liability company
By: By:
Its: Its:
Date: ______Date: ______
======To be completed by Franchisor:
Term Purchase in connection with:
______Transfer;
______Relocation; or
______Approved Extension of Franchise Agreement
Term Purchaser is:
______Current Franchisee; or
______Transferee
Extended Term Expiration Date has been recorded in Franchise Development Database by ______(initial)
TCBY FDD 03/2014 EXHIBIT F: Term Purchase Addendum 2 EXHIBIT G
SUBLEASE AGREEMENT;
ASSIGNMENT AND ASSUMPTION OF SUBLEASE
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement SUBLEASE AGREEMENT
THIS SUBLEASE (the “Sublease”) is between ______[INSERT APPROPRIATE AFFILIATE OF TCBY SYSTEMS, LLC], a ______corporation, with its principal business address at 8001 Arista Place, Suite 600, Broomfield, Colorado 80021 (referred to in this Sublease as “Sublessor” and like terms) and , a with its principal business address at (referred to in this Sublease as “you” and like terms).
SUBLESSOR’S AGREEMENT WITH YOU: By signing this Sublease, you and Sublessor agree to all of the terms and provisions in this Sublease and in the Exhibits to this Sublease. By signing this Agreement, you are also affirming that you understand and accept the Statement of Facts, Fundamental Terms, and Acknowledgements in Article 1 of this Agreement.
ARTICLE 1 STATEMENT OF FACTS; FUNDAMENTAL TERMS; AND ACKNOWLEDGMENTS
1.1 Date of Sublease. The date of this Sublease is ______, 20___.
1.2 Franchise Agreement. Sublessor’s Affiliate, TCBY Systems, LLC (“TCBY”), a Delaware limited liability company, is the franchisor of the TCBY franchise system. TCBY, as franchisor, and you, as franchisee, entered into a Franchise Agreement, dated ______, 20___ (the “Franchise Agreement”), for a TCBY Store located at (the “Premises”);
1.3 The Master Lease. Sublessor, as tenant, and ______, a ______, as landlord (the “Master Landlord”), entered into a lease for the Premises, dated ______, _____ (the “Master Lease”). A copy of the Master Lease is attached to this Sublease as Exhibit A.
1.4 Certain Fundamental Provisions.
(a) Base Rent. “Base Rent” means the minimum monthly rental amount payable by the tenant pursuant to Section ____ of the Master Lease, as that amount may be adjusted from time to time.
(b) Percentage Rent. “Percentage Rent” means the percentage rent payable by the tenant pursuant to Section ___ of the Master Lease.
(c) Security Deposit. “Security Deposit” means the sum of $______, to be deposited with Sublessor as required by Section 5.1 of this Sublease.
1.5 Acknowledgment. You acknowledge that you have read the Master Lease and understand that the Master Lease contains duties and obligations in addition to the duties and obligations of this Sublease and that you are liable to perform the duties and obligations of the tenant in the Master Lease.
ARTICLE 2 SUBLEASE OF PREMISES
2.1 Sublease of Premises to you. Sublessor is subleasing the Premises to you and you are subleasing the Premises from Sublessor on the terms and conditions set forth in this Sublease.
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 1 2.2 Acceptance of Premises; Possession. (a) Inspection and Acceptance. Prior to entering into this Sublease, you acknowledge that you made a full and complete inspection of the Premises. You agree that you are subleasing the Premises and that you accept the Premises, “AS IS, WHERE IS”, with all defects (patent, latent or otherwise) and with no representations or warranties by Sublessor as to the fitness, suitability, habitability, or usability of the Premises, as to compliance of the Premises with any laws, regulations, or ordinances, or as to the presence or absence of any Hazardous Materials (as defined in Section 6.8) on, about or adjacent to the Premises. In addition, the Premises are subleased subject to current taxes and assessments, reservations in patents and all rights-of-way, easements, covenants, conditions, restrictions, obligations, liens, encumbrances, and liabilities of record as of the date of this Sublease, and to all zoning and building code requirements and other governmental laws, rules, and regulations.
(b) Possession. Possession of the Premises will be delivered to you on the date of this Sublease.
2.3 Sublease Subject to Master Lease. Your rights and interests under this Sublease are subject and subordinate to the Master Lease and to all renewals, replacements and extensions of the Master Lease.
2.4 Duties of the Master Landlord under the Master Lease. It is expressly understood and agreed that Sublessor does not assume and will not have any of the obligations or liabilities of the Master Landlord under the Master Lease and that Sublessor is not making any of the representations or warranties made by the Master Landlord in the Master Lease. With respect to work, services, repairs and restoration or the performance of other obligations required of the Master Landlord under the Master Lease, Sublessor’s sole obligation with respect to such obligations is to request the same from the Master Landlord upon written request from you and to use reasonable efforts to obtain the same from the Master Landlord. Sublessor is not liable in damages, nor will rent abate under this Sublease, on account of any failure by the Master Landlord to perform the obligations and duties imposed on the Master Landlord under the Master Lease. Nothing contained in this Sublease will be construed to create privity of estate or contract between you and the Master Landlord.
2.5 Assumption of Duties under Master Lease.
(a) Your Duties. As between you and Sublessor, you hereby assume and agree to be bound by all of the covenants, obligations, and agreements of the tenant set forth in the Master Lease and by any terms and limitations imposed upon the tenant under the Master Lease, except as otherwise provided in Section 2.5(b) below. You agree to indemnify, defend (with counsel acceptable to Sublessor), and hold Sublessor and its Affiliates (as this term is defined in the Franchise Agreement), and Sublessor’s and its Affiliates’ Related Parties (as defined below) harmless for, from and against any and all claims, demands, liabilities, obligations, damages, penalties, causes of action, costs and expenses, including attorneys’ fees and expenses, imposed upon, incurred by or asserted against Sublessor or its Affiliates, or any of Sublessor’s or its Affiliates’ Related Parties which arise out of any violations under the Master Lease occurring as a result of your acts or omissions or the acts or omissions of any of your Related Parties or any violations by you or any of your Related Parties of this Sublease or which may arise out of or are in any manner connected with your or any of your Related Parties’ use and occupancy of the Premises pursuant to this Sublease, a breach by you of this Sublease or a breach by you of the provisions of the Master Lease. You agree that (a) the terms of this Sublease do not grant you any rights of first refusal, any options to purchase, or any extensions or renewal rights with respect to the Master Lease; and (b) you will not use or occupy the Premises in a manner contrary to or inconsistent with any of the provisions of the Master Lease. You agree that Sublessor may deliver to the Master Landlord any and all submissions, notices, or other information received by Sublessor from you under this Sublease or the Franchise Agreement. As used in this Sublease, “Related Parties” means the officers, directors, shareholders, employees, agents, successors, assigns, contractors, and invitees of the particular person or entity.
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 2 (b) Sublessor’s Duties. Sublessor is to timely make all Rent payments due to the Master Landlord under the Master Lease, but only to the extent that you first make those payments to Sublessor, as required under Article 4 of this Sublease.
2.6 Sublessor’s Access to Premises. Sublessor and its agents will have free and full access to the Premises at all reasonable times for the purpose of examining or inspecting the condition of the Premises, for the purpose of determining if you are complying with this Sublease, for the purpose of performing Sublessor’s obligations under this Sublease, and for the purpose of posting such reasonable notices as Sublessor may desire to protect its rights.
2.7 Quiet Enjoyment. Conditioned upon your payment of the Rent as provided for in this Sublease and performing and fulfilling all the covenants, agreements, conditions, and provisions in this Sublease to be kept, observed or performed by you, you may at all times during the Term, peaceably, quietly, and exclusively have, hold, and enjoy the Premises, subject to the terms and conditions of this Sublease and the Master Lease.
ARTICLE 3 TERM
3.1 Term of Sublease.
(a) Term of Sublease. The term of this Sublease (the “Term”) will commence on the date of this Sublease and will end on the earlier of (i) the date of expiration (without renewal) of the Franchise Agreement or (ii) that day which is one day prior to the expiration of the Master Lease. However, the Sublease Term may be ended earlier as provided in Sections 8.8, 8.9 and 12.2 of this Sublease.
(b) Extension of Master Lease. If the Master Lease term would expire before expiration of the term of the Franchise Agreement and the Master Lease contains renewal options, at your written request and if no Event of Default has occurred and is continuing under this Sublease, Sublessor will cooperate with you to extend or replace the Master Lease; provided, however, that any such extension or replacement lease must be in your name and release Sublessor from all liability therefrom from the original date of expiration of the Master Lease. Sublessor gives you no assurance that you will be able to obtain such an extension or replacement lease.
3.2 Surrender of Premises. Upon termination of this Sublease, you must immediately surrender to Sublessor peaceable possession of the Premises, and all buildings, improvements and fixtures then located on the Premises (ordinary depreciation, reasonable wear and tear, and casualty loss insured under the casualty insurance required by Article 8 excepted), subject, however, to your rights of removal as provided in Section 3.3. All keys will be returned to Sublessor upon surrender. If you do not return all keys, you must pay all necessary costs in changing the locks to the Premises.
3.3 Removal of Personal Property and Fixtures. You may, if not in default under any of the terms of this Sublease or the Master Lease and on or before the date of termination, remove from the Premises any and all of your personal property, including furniture, equipment, and fixtures belonging to you. However, you must repair any damage to any improvements on the Premises caused by such removal.
3.4 Holding Over. If the Premises are not surrendered at the end of the Term, you will indemnify Sublessor and its Affiliates, and Sublessor’s and its Affiliates’ Related Parties for, from and against any loss or liability resulting from delay by you in surrendering the Premises, including any claims made by the Master Landlord or any succeeding tenant based on your delay. If you or any of your Related Parties should remain in possession of the Premises after the expiration of the Term without executing a new lease, then such holding over will be construed as a tenancy at will, subject to all the covenants, terms, provisions and obligations of this
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 3 Sublease except that the Base Rent (as defined below) during any holdover tenancy will be equal to 200% of the original Base Rent. Nothing contained in this Sublease will be construed as Sublessor’s permission for you to hold over or as limiting Sublessor’s remedies against you as a holdover tenant.
ARTICLE 4 RENT
4.1 Base Rent. You agree to pay the Base Rent to Sublessor. Base Rent will be prorated for any calendar month of the Term which consists of only a portion of the month. Base Rent will adjust and be payable in accordance with the terms of Section 4.4 below and otherwise in accordance with the terms of Section 4.4 below and otherwise in accordance with the terms and conditions set forth in the Master Lease.
4.2 Percentage Rent. You agree to pay the Percentage Rent to Sublessor. Any Percentage Rent due and owing under this Sublease shall be determined, computed, and shall be payable in accordance with the terms of Section 4.4 below and otherwise in accordance with the terms and conditions set forth in the Master Lease.
4.3 Additional Rent and Charges. You also agree to pay to Sublessor all additional rent and other charges which may be payable by the tenant under the Master Lease, including taxes, insurance, deposits, common area maintenance charges, association dues, marketing fees, and utility charges (all of which are collectively referred to in this Sublease as “Additional Rent”). As used in this Sublease, the term “Rent” means Base Rent, Percentage Rent, Additional Rent and all other amounts otherwise due and payable by you to Sublessor under this Sublease.
4.4 Payment Date. You agree to pay the Base Rent and all Additional Rent at least 30 days in advance of the date on which any of those payments are due to the Master Landlord under the Master Lease. You agree to pay Percentage Rent at least 10 days in advance of the date on which any payment of Percentage Rent is due to the Master Landlord under the Master Lease. All other Rent payments shall be made at the times specified in this Sublease.
4.5 No Offsets. All Rent will be paid without further notice or demand and without any deduction, abatement, counterclaim or set-off.
ARTICLE 5 SECURITY DEPOSIT
5.1 Security Deposit. Upon the execution of this Sublease, you will deposit the Security Deposit with Sublessor, as security for the full performance by you of your obligations under this Sublease. If an Event of Default occurs, Sublessor will be entitled, at Sublessor’s option, to apply or retain all or any part of the Security Deposit for the payment of any rent or other sum in default, any other amount which Sublessor may spend or become obligated to spend because of your default, or to compensate Sublessor for any other loss or damage which Sublessor may suffer because of your default. If any portion of the Security Deposit is so used or applied, you will, within five days after written demand from Sublessor, deposit cash with Sublessor in an amount sufficient to restore the Security Deposit to its original amount. The Security Deposit is not a prepayment of any Rent or other amounts payable by you under this Sublease. Sublessor is not required to keep the Security Deposit separate from Sublessor’s and its Affiliates’ general funds, and you will not be entitled to interest on the Security Deposit. If you fully and faithfully perform every provision of this Sublease, then within 30 days after your surrender of the Premises, Sublessor will return the Security Deposit, or any remaining balance, together with a written explanation of the application of the funds, to you. If Sublessor terminates its interest in this Sublease, Sublessor will transfer the Security Deposit to its successor in interest, giving notice to you. You agree that, upon a transfer of the Security Deposit, Sublessor will have no further liability to return or account for it. Sublessor’s
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 4 rights with respect to the Security Deposit are in addition to and will not preclude concurrent, alternative or successive exercise of any other rights or remedies available to Sublessor.
ARTICLE 6 USE; CONSTRUCTION; MAINTENANCE AND REPAIR
6.1 Permitted Use. You agree that the Premises will be used exclusively for the purpose of operating a franchised TCBY Store in accordance with the Franchise Agreement (the “Permitted Use”) and for no other purpose. In addition, at all times, you will use the Premises in accordance with the terms of the Master Lease and all applicable laws, rules, codes, regulations and ordinances.
6.2 Continuous Occupancy and Operation. You acknowledge that your continued occupancy of the Premises and the regular conduct of your business in the Premises are of utmost importance to the other tenants at the property of which the Premises are a part and to the Master Landlord for the efficient and economic supply of services and utilities at such property and for the maintenance of Percentage Rent. Accordingly, you agree that throughout the Term you will continuously and uninterruptedly occupy, use and operate the entire Premises as a TCBY Store. You acknowledge that Sublessor is executing the Sublease in reliance on this agreement, and that your agreement of continuous occupancy and operation is a material element inducing Sublessor to execute this Sublease. You also agree to use your best efforts to maximize sales at the Premises.
6.3 No Waste; Compliance with Law. You agree not to commit or permit any waste of the Premises. You agree to comply with all laws, ordinances, regulations, building permits, governmental stipulations and conditions, covenants, conditions and restrictions, public or private, affecting the Premises and not to suffer or permit any act to be done in or about the Premises in violation thereof.
6.4 Alterations and Improvements. Any alterations or improvements to the Premises will be at your expense and in full compliance with all of the terms and conditions of the Master Lease and the Franchise Agreement. All such work will conform to all applicable building codes, zoning and other governmental regulations and restrictions and will be undertaken and completed diligently, in a good and workmanlike manner.
6.5 Maintenance, Repair, Construction and Restoration Obligations. During the Term, you, at your sole cost and expense, will observe and perform all maintenance, repair, construction, and restoration obligations imposed on the tenant by the Master Lease. All such work will conform to all applicable building codes, zoning and other governmental regulations and restrictions, to the requirements of the Franchise Agreement, and will be undertaken and completed diligently, in a good and workmanlike manner.
6.6 Mechanics’ Liens. The parties agree, and notice is hereby given, that you are not Sublessor’s agent for the construction, alteration, maintenance, or repair of any improvements on the Premises, the same being done at your sole direction and expense. All contractors, materialmen, mechanics, and laborers are advised that they must look only to you for the payment of any charge for work done or material furnished on the Premises during the Term. You have no right, authority, or power to bind Sublessor or its interest in the Premises for the payment of any claim for labor or material, or for any charge or expense, incurred by you as to improvements, alterations, maintenance, or repairs on or to the Premises, and you will post notices on the Premises during all such work that Sublessor is not responsible for any material and labor used on the Premises.
6.7 Indemnification Provisions. You will hold harmless and indemnify Sublessor and its Affiliates, and Sublessor’s and its Affiliates’ Related Parties for, from and against any costs, expenses and liabilities for any mechanics’, laborers’ or materialmen’s liens which may be filed against the Premises during the Term. You also agree to indemnify and hold Sublessor and its Affiliates, and Sublessor’s and its Affiliates’ Related Parties harmless for, from and against any and all claims for damages on the part of the owners, tenants, or occupants of adjacent lands, buildings, or space arising from the uses of the Premises by or activities of you or any of your
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 5 Related Parties pursuant to this Article 6, and you agree to take all necessary, prudent and proper measures to protect the land, improvements, and space of such adjacent owners, tenants and occupants from injury of any nature arising from any such use or activity.
6.8 Environmental Compliance. You agree to comply with all environmental and industrial hygiene laws, rules, and regulations relating to or affecting the Premises or any operations or improvement on the Premises. You agree that you will not use, generate, manufacture, store or dispose of, in, under or about the Premises or transport to or from the Premises any Hazardous Materials, other than in compliance with all applicable law and after any and all necessary permits and licenses have been obtained and are in force. For purposes of this Sublease, “Hazardous Materials” include (i) flammable, explosive, or radioactive materials, hazardous wastes, toxic substances, or related materials and (ii) all substances defined as “hazardous substances,” “hazardous materials,” or “toxic substances” in the Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. §1901, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. §6901, et seq; the regulations promulgated thereunder and in corresponding provisions of state law.
6.9 Environmental Indemnity. You will be solely responsible for, and will indemnify and hold harmless Sublessor and its Affiliates, and Sublessor’s and its Affiliates’ Related Parties for, from and against any loss, damage, cost, expense or liability directly or indirectly arising out of or attributable to the use, generation, storage, release, threatened release, discharge, or disposal by you or any of your Related Parties of Hazardous Materials on, under or about the Premises arising subsequent to the date on which this Sublease was executed, including without limitation: (a) all consequential and incidental damages; (b) the costs of any required or necessary repairs, cleanup or detoxification of the Premises, and the preparation and implementation of any closure, remedial or other required plans; and (c) all reasonable costs and expenses in connection with clauses (a) and (b), including but not limited to attorneys’ fees.
ARTICLE 7 LIENS AND ENCUMBRANCES
7.1 Encumbering the Premises. During the Term, you will not cause or permit any lien, claim, charge or encumbrance of any nature or description whatsoever to attach to or encumber your interest in this Sublease, the Premises or any part thereof.
7.2 Subordination.
(a) Subordination. This Sublease, at Sublessor’s option, will be subordinate to any mortgage, deed of trust, or any other hypothecation or security now or in the future placed by Sublessor upon its interest in the Premises and to any and all advances made on the security thereof and to all renewals, modifications, consolidations, replacements and extensions thereof. If any mortgagee or trustee elects to have this Sublease prior to the lien of its mortgage or deed of trust, and gives written notice of that election to you, this Sublease will be deemed prior to such mortgage or deed of trust, whether this Sublease is dated prior or subsequent to the date of said mortgage or deed of trust or the date of recording of that mortgage or deed of trust.
(b) Execution of Certain Documents. You agree to execute any documents required to effectuate an attornment or a subordination or to make this Sublease prior to the lien of any mortgage or deed of trust, as the case may be. If you fail to execute such documents within ten days after written demand, Sublessor may execute such documents on your behalf as your attorney-in-fact. You hereby make, constitute and irrevocably appoint Sublessor as your attorney-in-fact and in your name, place and stead, to execute such documents in accordance with this Section 7.2(b).
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 6 ARTICLE 8 GENERAL INDEMNITY; INSURANCE; CASUALTY; CONDEMNATION
8.1 Non-Liability and General Indemnity Provisions. You agree that Sublessor and its Affiliates, and Sublessor’s and its Affiliates’ Related Parties are not liable for, are released from, and you agree to indemnify and hold Sublessor and its Affiliates, and Sublessor’s and its Affiliates’ Related Parties entirely harmless for, from and against each and every claim, demand, liability, loss, cost, damage and expense, including attorneys’ fees and court costs, arising out of any accident or other occurrence causing injury to or death of persons or damage to property by reason of construction or maintenance of any improvements on the Premises, of any additions, alterations or renovations thereto, or due to the condition of the Premises, or the use or neglect thereof by you or any of your Related Parties, or any other person, or otherwise occurring upon the Premises. You further agree to indemnify and hold Sublessor and its Affiliates, and Sublessor’s and its Affiliates’ Related Parties and Sublessor’s respective interests in the Premises entirely harmless for, from and against all claims, demands, liabilities, damages and penalties arising out of any failure of you to comply with any of your obligations under this Sublease, including attorneys’ fees and court costs. These provisions, as well as all other indemnity provisions in this Sublease, will survive the expiration of this Sublease or the earlier termination thereof.
8.2 Casualty Insurance. You will, at all times during the Term and at your sole cost and expense, keep all of your goods, fixtures, furniture, equipment, and other personal property on the Premises insured to the extent of 100% of the full replacement cost against loss or damage from fire and other risks normally insured against in extended risk coverage.
8.3 Liability Insurance. You will, at all times during the Term and at your sole cost and expense, maintain in force an insurance policy or policies which will name Sublessor and its Affiliates, and you as insureds, and the Master Landlord as an additional insured, insuring against all liability resulting from injury or death occurring to persons in or about the Premises, the liability under such insurance to be not less than $______for one person injured, $______for any one accident, and $______for property damage. The original of such policy or policies will remain in your possession. However, Sublessor will have the right to receive from you, upon written demand, a duplicate policy or policies of any such insurance.
8.4 Workmens’ Compensation Insurance. You will also maintain and keep in force all employees’ and workmens’ compensation insurance on your employees as required under the applicable workmen’s compensation laws of the state in which the Premises are located.
8.5 Other Insurance. You agree, at your sole cost and expense and at all times during the Term, to maintain in force such other and additional insurance policies as are required under the Master Lease, the Franchise Agreement, or as a prudent tenant in your position would maintain, or as Sublessor may reasonably require from time to time.
8.6 Insurance Policy Requirements. All insurance policies required under this Article will contain provisions to the effect that the insurance will not be canceled or modified without at least thirty days prior written notice to Sublessor and that no modification will be effective unless approved in writing by Sublessor. All such policies will be issued by a company or companies rated “A-XII” or better by Best’s Insurance Guide and authorized to do business in the state in which the Premises are located.
8.7 Mutual Waiver of Subrogation Rights. You and Sublessor each hereby release and relieve the other and the Related Parties of the other, and waive their entire right of recovery against the other and the Related Parties of the other, for loss or damage arising out of or incident to the perils insured against under this Article 8, which perils occur in, on or about the Premises, whether due to the negligence of Sublessor, its Affiliates or you or the respective Related Parties of Sublessor, its Affiliates or you but only to the extent of insurance proceeds actually paid. You will, upon obtaining the policies of insurance required hereunder, give
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 7 notice to and obtain waiver of subrogation agreements or endorsements from the insurance carrier or carriers concerning the foregoing mutual waiver of subrogation.
8.8 Fire and Other Casualty. If the improvements constituting part of the Premises are damaged or destroyed, in whole or in part, by fire or other casualty at any time during the Term, Rent shall be abated and this Sublease terminated only to the extent that Rent is abated under the Master Lease or the Master Lease is terminated in such circumstances. Sublessor does not have any repair or restoration obligations in such circumstances and you will be required to rely exclusively on the obligations of the Master Landlord under the Master Lease.
8.9 Condemnation. If the whole or any part of the Premises are taken or condemned under the right of eminent domain (or agreement in lieu thereof), Rent shall be abated and this Sublease terminated only to the extent that Rent is abated under the Master Lease or the Master Lease is terminated in such circumstances. Sublessor does not have any repair or restoration obligations in such circumstances and you will be required to rely exclusively on the obligations of the Master Landlord under the Master Lease.
8.10 Compensation Awards. All compensation or damages awarded for any taking will belong to and be the property of Sublessor and the Master Landlord, except for any specific award to you for fixtures and improvements installed by you at your sole cost and expense.
ARTICLE 9 UTILITIES
9.1 Adequacy of Utility Services. You acknowledge that you have inspected the Premises and the available utility services and have determined that the available utility services are adequate for your purposes.
9.2 Utility Charges. You agree to pay when due and prior to delinquency any and all charges for water, gas, electricity, telephone service, sewage service, garbage service and any other utilities used in or upon the Premises during the Term and agree not to permit any charges of any kind to accumulate or become a lien against the Premises.
ARTICLE 10 TAXES AND ASSESSMENTS
10.1 Sales Taxes. You will pay to Sublessor, at the same time as any other Rent payment is made to Sublessor, an amount equal to the amount of all gross proceeds taxes, transaction privilege taxes, sales taxes, or like taxes now or hereafter levied or assessed by the United States, the state in which the Premises are located, or any municipal corporation or political subdivision upon such Rent, or the payment or receipt thereof, or which Sublessor will be caused to pay as a result of the receipt thereof, except that you will not be obligated to pay to Sublessor any amount on account of its income taxes.
10.2 Ad Valorem Taxes. In addition to all other sums payable pursuant to this Sublease, you will pay during the entire Term all ad valorem taxes, assessments, and charges and other governmental levies and charges, general and special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind, which are assessed or imposed upon your trade fixtures, equipment, and other property located on the Premises (the “Personal Property Taxes”). You agree to pay the Personal Property Taxes when due and prior to any delinquency.
10.3 Other Taxes. You agree to pay any and all other governmental taxes, license fees, assessments, or charges imposed on the business conducted by you on or from the Premises.
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 8 ARTICLE 11 ASSIGNMENT AND SUBLETTING; SALE OF LEASEHOLD BY SUBLESSOR
11.1 Assignments. You may not assign all or part of this Sublease without Sublessor’s prior written consent, which consent will be at Sublessor’s sole and absolute discretion. Any attempted assignment will be null and void, will constitute an immediate default under this Sublease (without any cure period), and will, at Sublessor’s election, result in the immediate termination of this Sublease. Your interest in this Sublease is not assignable by operation of law. Any transfer of a “Controlling Interest” in you, as that term is defined in the Franchise Agreement, will be deemed to be an assignment of this Sublease within the meaning of this Section 11.1. Any assignment permitted by this 11.1 will not release you from your obligation to continue to perform all covenants contained in this Sublease after such assignment, and you and the assignee will be required to sign an Assignment of Sublease in a form acceptable to Sublessor and Master Landlord.
11.2 Subleases. You may not further sublet all or any portion or portions of the Premises without first having obtained Sublessor’s written consent, which consent will be at Sublessor’s sole and absolute discretion. Any attempted sublease will be null and void, will constitute an immediate default under this Sublease (without any cure period), and will, at Sublessor’s election, result in the immediate termination of this Sublease. Any such permitted sublease will not release you from your obligation to perform all covenants contained in this Sublease, and you and your subtenant will be required to sign a sublease in a form acceptable to Sublessor and Master Landlord.
11.3 Sale of Leasehold by Sublessor. Sublessor may sell, transfer, assign or otherwise dispose of all or any portion of Sublessor’s interest in the Premises or this Sublease without your consent. Upon any such sale, transfer, assignment or disposal and assumption by the transferee of Sublessor’s obligations under this Sublease, Sublessor will be automatically relieved of all obligations under this Sublease after the date of transfer. This Sublease will not be affected by any such sale, transfer, assignment or disposal of Sublessor’s interest, and you agree to attorn to Sublessor’s purchaser or assignee.
ARTICLE 12 DEFAULTS AND REMEDIES
12.1 Events of Default. You will be in default under this Sublease if any of the following occur (an “Event of Default”):
(a) Failure to Pay Monetary Amounts. You fail to fully and timely pay any Rental or other monetary amount due under this Sublease and such failure continues for a period of 10 days beyond the due date for such payment;
(b) Non-Monetary Breaches. You fail to fully and timely comply with any other provision of this Sublease and, except as otherwise provided in Sections 11.1 and 11.2 or in this Section 12.1, such failure continues for a period of 15 days after written notice of the failure is delivered to you;
(c) Breach of Master Lease. An act or event occurs which would constitute a default by the tenant under the Master Lease (unless the default occurs as a result of Sublessor’s breach of the provisions of Section 2.5(b) of this Sublease), regardless of any notice or cure period or of whether or not the Master Landlord seeks to enforce the applicable default provision of the Master Lease;
(d) Breach of Franchise and Other Agreements. You are in default under any of the provisions of the Franchise Agreement or any other notes or agreements between you and Sublessor, TCBY or any of Sublessor’s other Affiliates;
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 9 (e) Repeated Breaches. If on two or more occasions during any twelve month period or on five occasions during the term of this Sublease, you fail to fully and timely pay any required amounts when due, without regard to any cure period provided in this Sublease;
(f) Bankruptcy. You file a petition in bankruptcy or for reorganization or for an arrangement pursuant to any federal or state bankruptcy law or any similar federal or state law, or are adjudicated a bankrupt or make an assignment for the benefit of creditors or admit in writing your inability to pay your debts generally as they become due, or if a petition or answer proposing the adjudication of you as a bankrupt or your reorganization pursuant to any federal or state bankruptcy law or any similar federal or state law is filed in any court and you consent to or acquiesce in the filing thereof or such petition or answer is not discharged or denied within 60 days after the occurrence of any of the foregoing;
(g) Other Insolvency Events. If a receiver, trustee or liquidator of you or of all or substantially all of your assets or your leasehold interest in the Premises is appointed in any proceeding brought by you, or if any such receiver, trustee or liquidator is appointed in any proceeding brought against you and is not discharged within 60 days after the occurrence thereof, or if you consent to or acquiesce in such appointment (with any event described in this Section 12.1(g) and 12.1(f) above being referred to as an “Insolvency Event”);
(h) Abandonment or Failure to Continuously Operate. You abandon the Premises or otherwise fail to continuously operate your business at the Premises, with your absence from the Premises for a period for three consecutive days to be conclusive evidence that the Premises have been abandoned and that you have breached the covenant of continuous operation and occupancy, unless the Premises have been closed for a purpose approved by Sublessor in advance, in writing, or because of fire, flood, or other casualty or government order.
12.2 Remedies. Upon the occurrence of an Event of Default, Sublessor may, at its option, re-enter the Premises and repossess and enjoy the same and all the improvements thereon free of any claims or interest of you whatsoever, with or without terminating this Sublease. In addition, Sublessor will be entitled to avail itself of whatever remedies it may have at law or in equity for the collection of any unpaid Rent, past and future, or for any damages that Sublessor may have sustained by reason of the breach by you of the terms and conditions of this Sublease. No termination of this Sublease by forfeiture nor taking or recovering possession of the Premises will deprive Sublessor of any other action, right, or remedy against you.
12.3 Interest on Late Payments. All Rent not paid when due will bear interest from the due date until paid at a rate equal to the lesser of the highest applicable legal rate for open account business credit, or 1.5% per month. Interest is due and payable when the late payment is made.
12.4 Late Fees. To compensate Sublessor for the increased administrative expense of handling late payments, you agree to pay a $100 late charge for each delinquent payment, such late charge to be paid when the delinquent payment is made. This late charge is in addition to interest and other collection costs and expenses.
12.5 Sublessor’s Right to Take Certain Actions. If you fail to comply with any of the terms of this Sublease, Sublessor, in its sole judgment, but without any obligation to do so, may do any or all things required of you by any of the provisions of this Sublease or the Master Lease and incur and pay expenses in connection with its actions. Any amounts expended by Sublessor pursuant to this Section will be immediately due and payable by you to Sublessor and will bear interest at a rate equal to the lesser of the highest applicable legal rate for open account business credit, or 1.5% per month. Interest is due and payable when the payment is made. Any action by Sublessor under this Section will not constitute a waiver of any default by you and will be in addition to any other right or remedy available to Sublessor pursuant to this Sublease or at law or in equity.
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 10 12.6 Waiver of Breach. No waiver by Sublessor or you of the breach of any provision of this Sublease will be construed as a waiver of any preceding or succeeding breach of the same or any other provision of this Sublease, nor will the acceptance of a Rent payment by Sublessor during any period of time in which you are in default in any respect other than payment of that Rent be deemed to be a waiver of such default. Only full payment of any amount, together with any applicable interest and late charges, will satisfy your payment obligations with respect to the amount due. No endorsement or statement on any check or any letter accompanying any check or payment made hereunder shall be deemed or construed as an accord and satisfaction of the full amount due, and Sublessor may accept such check or payment without prejudice to its right to recover the balance of such amount or pursue any remedy which would otherwise be available.
ARTICLE 13 GENERAL PROVISIONS
13.1 Notices. Notices will be in writing and will be given by personal delivery, by deposit in the United States mail, certified mail, return receipt requested, postage prepaid, or by express delivery service, freight prepaid. Notices will be delivered or addressed to Sublessor and you at the addresses set forth on the first page of this Sublease or at such other address as a party may designate in writing. The date notice is deemed to have been given, received and become effective will be the date on which the notice is delivered, if notice is given by personal delivery, or the date of actual receipt, if the notice is sent through the United States mail or by express delivery service or by facsimile transmission.
13.2 Attorneys’ Fees. If any action is brought by any party to this Sublease in respect of its rights under this Sublease, the prevailing party will be entitled to reasonable attorneys’ fees and court costs as determined by the court. In the event that any person who is not be a party to this Sublease institutes an action against you in which Sublessor are involuntarily and without cause joined as a party, you will reimburse Sublessor for all attorneys’ fees incurred by it in connection therewith.
13.3 Estoppel Certificates.
(a) Agreement to Provide Estoppel Certificate. You will at any time upon 10 days’ prior written notice from Sublessor execute, acknowledge and deliver to Sublessor a statement in writing (i) certifying that this Sublease is unmodified and in full force and effect (or, if modified, stating the nature of such modifications and certifying that this Sublease, as so modified, is in full force and effect) and the date to which the rent and other charges are paid in advance, if any; (ii) acknowledging that there are not, to your knowledge, any uncured defaults on Sublessor’s part under this Sublease, or specifying such defaults if any are claimed; and (iii) acknowledging that you have unconditionally accepted the Premises, are in possession thereof, and no defense to enforcement of the Sublease exists. Any such statement may be conclusively relied upon by any prospective purchaser or encumbrancer of the Premises.
(b) Your Failure to Provide Certificate. At Sublessor’s option, Sublessor may treat your failure to deliver such statement as conclusive evidence (i) that this Sublease is in full force and effect, without modification, except as may be represented by Sublessor; (ii) that there are no uncured defaults in Sublessor’s performance; (iii) that not more than one month’s rent has been paid in advance; (iv) that you are in possession of the Premises; and (v) that no defenses exist to the enforcement of the Sublease.
13.4 Severability. The invalidity of any provision of this Sublease, as determined by a court of competent jurisdiction, will in no way affect the validity of any other provision of this Sublease.
13.5 Recording. Neither this Sublease nor any memorandum of this Sublease will be recorded or filed without Sublessor’s prior written consent, which may be given or withheld by Sublessor in its sole and absolute discretion.
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 11 13.6 Cumulative Remedies. No remedy or election hereunder will be deemed exclusive but will, wherever possible, be cumulative with all other remedies under this Sublease or at law or in equity.
13.7 Construction. The titles which are used following the number of each Section are so used only for convenience in locating various provisions of this Sublease and will not be deemed to affect the interpretation or construction of such provisions. This Sublease will not be construed for or against Sublessor or you. References in this Sublease to “Articles” and “Sections” refers to the Articles and Sections of this Sublease, unless otherwise noted.
13.8 Successors. Subject to the restrictions contained in Article 11, this Sublease and all of provisions hereof will be binding upon and inure to the benefit of the successors and assigns of Sublessor and you.
13.9 Governing Law. The terms, conditions, covenants, and agreements herein contained will be governed, construed, and controlled according to the laws of the state in which the Premises are located.
13.10 Broker’s Commission. You and Sublessor represent and warrant to each other that there are no claims for brokerage commissions or finder’s fees in connection with this Sublease and each agrees to indemnify the other for, from and against all liabilities arising from any claims, including any attorneys’ fees connected therewith, relating to claims arising out of the other’s actions.
13.11 Time is of the Essence. Time is of the essence of this Sublease and in the performance of all of the covenants and conditions hereof.
13.12 Survival. All obligations of Sublessor and you which expressly or by their nature survive the termination of this Sublease will continue in full force and effect subsequent to the termination until they are satisfied in full or by their nature expire. Included in the obligations that will survive the termination of this Lease are the indemnity provisions of Sections 2.5(a), 3.4, 6.7, 6.9 and 8.1.
13.13 Entire Agreement. This Sublease sets forth all the promises, inducements, agreements, conditions, and understandings between Sublessor and you relative to the Premises, and there are no promises, agreements, conditions, or understandings, either oral or written, express or implied, between Sublessor and you other than as set forth in this Sublease. No subsequent alteration, amendment, change, or addition to this Sublease will be binding upon Sublessor or you unless in writing and signed by both Sublessor and you. Parol evidence will never be admissible in any court, tribunal, arbitration or governmental agency to modify, amend or vary the terms of this Sublease.
IN WITNESS WHEREOF, you and Sublessor have executed this Sublease as of the day and year written above.
SUBLESSOR: SUBLESSEE:
______, ______. a ______a ______
By: By: Its: Its:
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 12 STATE OF ______) : ss. COUNTY OF ______)
The foregoing instrument was acknowledged before me this _____ day of ______, 20___, by ______, the ______of ______, a ______, on behalf of the ______.
______My Commission Expires: NOTARY PUBLIC ______Residing at______
STATE OF ______) : ss. COUNTY OF ______)
The foregoing instrument was acknowledged before me this _____ day of ______, 20___, by ______, the ______of ______, a ______, on behalf of the ______.
______My Commission Expires: NOTARY PUBLIC ______Residing at______
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 13 EXHIBIT A TO SUBLEASE AGREEMENT
PRIME LEASE
[To be attached]
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 14 EXHIBIT B TO SUBLEASE AGREEMENT
GUARANTY
In consideration of, and as an inducement to, the execution by ______[INSERT APPROPRIATE AFFILIATE OF TCBY SYSTEMS, LLC] (“Sublessor”) of the foregoing Sublease Agreement (the “Sublease Agreement”) with ______(“Sublessee”) dated ______, 20___, and for other good and valuable consideration, each of the undersigned for themselves, their heirs, legal representatives, successors and assigns (collectively the “Guarantors”) do hereby unconditionally, individually, jointly and severally guarantee to Sublessor, and to its successors and assigns, the full, complete and timely payment and performance of each and all of the terms, covenants and conditions of the Sublease Agreement (and any modification or amendment to the Sublease Agreement) to be kept and performed by Sublessee during the term of the Sublease Agreement, including without limitation the payment of all rents and other fees and charges accruing pursuant to the Sublease Agreement.
Each of the Guarantors further agrees as follows:
1. The Guarantors, individually, jointly and severally, shall be personally bound by each and every condition and term contained in the Sublease Agreement as though each of the Guarantors had executed a sublease agreement containing the identical terms and conditions of the Sublease Agreement. This Guaranty shall continue in favor of Sublessor notwithstanding any extension, modification, or alteration of the Sublease Agreement, and notwithstanding any assignment of the Sublease Agreement, with or without the Sublessor’s consent. No extension, modification, alteration or assignment of the Sublease Agreement shall in any manner release or discharge the Guarantors, and each of the Guarantors consents to any such extension, modification, alteration or assignment.
2. This Guaranty will continue unchanged by the occurrence of any Insolvency Event, as defined in the Sublease Agreement, with respect to Sublessee or any assignee or successor of Sublessee or by any disaffirmance or abandonment of the Sublease Agreement by a trustee in bankruptcy of Sublessee. Each Guarantor’s obligation to make payment or render performance in accordance with the terms of this Guaranty and any remedy for the enforcement of this Guaranty will not be impaired, modified, changed, released or limited in any manner whatsoever by any impairment, modification, change, release or limitation of the liability of Sublessee or its estate in bankruptcy or of any remedy for the enforcement thereof, resulting from the operation of any present or future provision of the U.S. Bankruptcy Act or other statute, or from the decision of any court or agency.
3. Each Guarantor’s liability under this Guaranty is primary and independent of the liability of Sublessee and any other Guarantors. Each Guarantor waives any right to require Sublessor to proceed against any other person or to proceed against or exhaust any security held by Sublessor at any time or to pursue any right of action accruing to Sublessor under the Sublease Agreement. Sublessor may proceed against each Guarantor and Sublessee, jointly and severally or may, at its option, proceed against each Guarantor without having commenced any action, or having obtained any judgment, against Sublessee or any other Guarantor. Each Guarantor waives the defense of the statute of limitations in any action under this Guaranty or for the collection of any indebtedness or the performance of any obligation guaranteed pursuant to this Guaranty.
4. The Guarantors unconditionally, individually, jointly and severally agree to pay all attorneys’ fees and all costs and other expenses incurred in any collection or attempted collection of this Guaranty or in any negotiations relative to the obligations guaranteed or in enforcing this Guaranty against Sublessee.
5. Each Guarantor waives notice of any demand by Sublessor, any notice of default in the payment of rents or any other any amounts contained or reserved in the Sublease Agreement, or any other notice of default
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 15 under the Sublease Agreement. Each Guarantor expressly agrees that the validity of this Guaranty and its obligations shall in no way be terminated, affected or impaired by reason of any waiver by Sublessor, or its successors or assigns, or the failure of Sublessor to enforce any of the terms, covenants or conditions of the Sublease Agreement or this Guaranty, or the granting of any indulgence or extension of time to Sublessee, all of which may be given or done without notice to the Guarantors.
6. This Guaranty shall extend, in full force and effect, to any assignee or successor of Sublessor and shall be binding upon the Guarantors and each of their respective successors and assigns.
7. Until all obligations of Sublessee to Sublessor have been paid or satisfied in full, the Guarantors have no remedy or right of subrogation and each Guarantor waives any right to enforce any remedy which Sublessor has or may in the future have against Sublessee and any benefit of, and any right to participate in, and security now or in the future held by Sublessor.
8. All existing and future indebtedness of Sublessee to each Guarantor is hereby subordinated to all indebtedness and other obligations guaranteed in this Guaranty and, without the prior written consent of Sublessor, shall not be paid in whole or in part, nor will any Guarantor accept any payment of or on account of any such indebtedness while this Guaranty is in effect.
9. This Guaranty shall be construed in accordance with the laws of the State of Colorado, without giving effect to its conflict of laws principles.
GUARANTOR(S)
STATE OF ) ) ss. COUNTY OF )
The foregoing instrument was acknowledged before me this _____ day of ______, 20___ by ______.
My Commission Expires: NOTARY PUBLIC
______Residing at
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 16 ASSIGNMENT AND ASSUMPTION OF SUBLEASE AGREEMENT
THIS ASSIGNMENT AGREEMENT is made and entered into as of ______, 20__, by and among Mrs. Fields’ Original Cookies, Inc., a Delaware corporation (“Lessor”), having a principal place of business at 8001 Arista Place, Suite 600, Broomfield, Colorado 80021, ______, a ______(“Assignor”), having a principal place of business at ______, and ______, a______, (“Assignee”), having a principal place of business at ______. Lessor, Assignor and Assignee are sometimes referred to herein as the “parties.”
In exchange for the mutual covenants, consideration, warranties, and representations herein set forth, the parties agree as follows:
1. Assignment and Assumption. Assignor shall assign and Assignee shall assume all right, title, interest, duties, covenants, and obligations under that certain Sublease Agreement between Lessor and Assignor dated ______(“Sublease”) and pertaining to the premises located at , referred to as Space # ______, containing approximately ______square feet, along with Storage Area Space # ______, containing approximately ______square feet (collectively, the “Premises”).
2. Effective Date. The effective date of this Assignment Agreement shall be the closing of the purchase of the franchised concepts at the Premises by Assignee from Assignor and the approval of the purchase by Lessor.
3. Acceptance of Premises. Upon assignment hereunder, Assignee shall accept the Premises on an “AS IS, WHERE IS” basis provided the condition of the Premises is consistent with the terms of the Sublease.
4. Representations and Warranties. Both Lessor and Assignor, each for itself, hereby represent and warranty to Assignee that (a) there are no defaults under the Master Lease (as defined in the Sublease) that are known to them or that have been declared by either of them under the Lease, (b) except for the current rent due to Lessor under the Sublease, which will be paid on or before execution of this Assignment Agreement, there are no defaults, performance, or payments past due under the Sublease, (c) the document attached hereto is the actual and complete Sublease Agreement evidencing the agreement between the parties, (d) the monthly minimum rent paid by Assignor to Lessor each month is currently $______, and, (e) the Master Lease commenced on ______and will expire ______. Further, Assignee acknowledges that Lessor’s current policy is to require payment of the base rent on or before the 25th day of each month, in advance for the following month.
5. Successors and Assigns. The terms and conditions of this Assignment Agreement shall be binding upon and inure to the benefit of any and all of the parties’ successors, assigns, heirs, executors, administrators, affiliates, controlled corporations, subsidiaries, parent corporations, directors, officers, shareholders, or employees, as the case may be, but may not be assigned by Assignor or Assignee without Lessor’s prior written consent.
6. Lessor’s Consent to Assignment; Assignor’s Guarantee in Event of Default. Lessor hereby consents to this assignment and assumption; provided, however: (a) effective as of the date of this Assignment Agreement, Assignee will fully perform under, observe and remain in compliance with each of the terms of the Sublease and the Master Lease as tenant thereunder; and (b) for a period of ____ months from the date hereof (the “Guarantee Period”), Assignor will fully and unconditionally guarantee Assignee’s full performance under the
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 17 Sublease, including, without limitation, prompt payment of all amounts due to Lessor thereunder and the obligation to operate the franchised concepts at the Premises in accordance with the franchise agreements applicable thereto. Lessor agrees to give Assignor the same notice of default that Lessor provides to Assignee under the Sublease during the Guarantee Period, and provide Assignor with an additional 10 days beyond any cure period provided to Assignee in such notice to cure or cause Assignee to cure any such default. At the end of the Guarantee Period, provided that Assignee is then in material compliance under the Sublease, that certain Guaranty dated ______, signed by Assignor’s principals in favor of Lessor pertaining to the Sublease, shall automatically terminate.
7. Security Deposit. Assignor releases all claims to any security deposit paid by Lessor or Assignor on the Premises, and any such deposit shall be accounted for pursuant to the Sublease.
8. Survival of Obligations. All obligations of the parties herein set forth, which by their nature survive the closing of the transactions herein contemplated, shall continue in full force with full effect until they are satisfied or by the nature expire.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have executed this Assignment Agreement in three (3) counterparts as of the date first above written.
ASSIGNEE: LESSOR:
______, MRS. FIELDS’ ORIGINAL COOKIES, INC., a ______a Delaware corporation
By: By: Title: Title:
ASSIGNOR:
______, a ______
By: Title:
By: Title:
TCBY FDD 03/2014 EXHIBIT G: Sublease Agreement 18 EXHIBIT H
LEASE ADDENDUM
TCBY FDD 03/2014 EXHIBIT H: Lease Addendum LEASE ADDENDUM – FRANCHISEE LEASE
FOR VALUE RECEIVED, the undersigned (“Assignor”) assigns, transfers and sets over to TCBY SYSTEMS, LLC, a wholly-owned subsidiary of MRS. FIELDS FAMOUS BRANDS, LLC, a Delaware limited liability company (“Assignee”), all of Assignor’s right and title to and interest in that certain lease, a copy of which is attached as Appendix A (the “Lease”), respecting premises commonly known as ______. This assignment is for collateral purposes only, and, except as specified in this document, Assignee will have no liability or obligation of any kind whatsoever arising from or in connection with this assignment or the Lease unless and until Assignee takes possession of the premises the Lease demises according to the terms of this document and assumes Assignor’s obligations under the Lease. Assignor represents and warrants to Assignee that it has full power and authority to assign the Lease and that Assignor has not previously assigned or transferred, and is not otherwise obligated to assign or transfer, any of its interest in the Lease or the premises it demises. Upon Assignor’s default under the Lease or under the franchise agreement for a retail outlet between Assignee and Assignor (the “Franchise Agreement”), or in the event Assignor defaults under any document or instrument securing the Franchise Agreement, Assignee has the right to take possession of the premises the Lease demises and expel Assignor from the premises. In that event, Assignor will have no further right and title to or interest in the Lease but will remain liable to Assignee for all past due rents Assignee is required to pay Lessor to effectuate the assignment this document contemplates. Assignor agrees that it will not suffer or permit any surrender, termination, amendment or modification of the Lease without Assignee’s prior written consent. Throughout the term of the Franchise Agreement, Assignor agrees that it will elect and exercise all options to extend the term of or renew the Lease not less than thirty (30) days before the last day upon which the option must be exercised, unless Assignee agrees otherwise in writing. Upon Assignee’s failure to agree otherwise in writing, and upon Assignor’s failure to elect to extend or renew the Lease as required, Assignor appoints Assignee as its true and lawful attorney-in-fact with the authority to exercise the extension or renewal options in the name, place and stead of Assignor for the sole purpose of effecting the extension or renewal.
ASSIGNOR: Dated: ENTITY SIGNATURE:
a ______corporation By: Its:
INDIVIDUAL SIGNATURE(S):
TCBY FDD 03/2014 EXHIBIT H: Lease Addendum 1 CONSENT TO LEASE ADDENDUM AND AGREEMENT OF LESSOR
The undersigned Lessor under the Lease:
Agrees to notify Assignee in writing of, and upon Assignee’s failure to cure, any default by Assignor under the Lease;
Agrees that Assignee will have the right, but not the obligation, to cure any default by Assignor under the Lease within 30 days after Lessor’s delivery of notice of the default under section (a) above;
Consents to the collateral assignment in the Lease Addendum and agrees that, if Assignee takes possession of the premises the Lease demises and confirms to Lessor that it has assumed the Lease as tenant, Lessor will recognize Assignee as tenant under the Lease, provided that Assignee cures within the 30-day period noted in section (b) above Assignor’s defaults under the Lease; and
Agrees that Assignee may further assign the Lease to or enter into a sublease with a person, firm or corporation who agrees to assume the tenant’s obligations under the Lease and is reasonably acceptable to Lessor and that, upon that assignment, Assignee will have no further liability or obligation under the Lease as assignee, tenant or otherwise, other than to certify that the additional assignee or sublessee operates the premises the Lease demises as a franchised retail outlet of Assignee.
DATED:
, Lessor
TCBY FDD 03/2014 EXHIBIT H: Lease Addendum 2 EXHIBIT I
OPERATING PROCEDURES MANUAL
TABLE OF CONTENTS
TCBY FDD 03/2014 EXHIBIT I: Operating Procedures Manual - TOC MANAGEMENT OPERATIONS MANUAL – TABLE OF CONTENTS
TCBY FDD 03/2014 EXHIBIT I: Operating Procedures Manual - TOC 1
TCBY FDD 03/2014 EXHIBIT I: Operating Procedures Manual - TOC 2
TCBY FDD 03/2014 EXHIBIT I: Operating Procedures Manual - TOC 3 DAILY OPERATIONS MANUAL - -TABLE OF CONTENTS
TCBY FDD 03/2014 EXHIBIT I: Operating Procedures Manual - TOC 4
TCBY FDD 03/2014 EXHIBIT I: Operating Procedures Manual - TOC 5
TCBY FDD 03/2014 EXHIBIT I: Operating Procedures Manual - TOC 6 EXHIBIT J
CONFIDENTIALITY AGREEMENT
TCBY FDD 03/2014 EXHIBIT J: Confidentiality Agreement CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement (the “Agreement”) is made as of this ___ day of ______, 20___ (the “Effective Date”), by and between TCBY Systems, LLC, and/or the subsidiary of Mrs. Fields Famous Brands, LLC listed on the signature page below (collectively, “Company”), and ______(hereinafter referred to as “You,” “you,” “your,” “yourself,” etc.).
Recitals
A. You are an individual who is a franchisee or prospective franchisee of Company, or are an individual who is an owner, officer, director, member, employee, agent and/or independent contractor of an entity that is a franchisee or a prospective franchisee of Company (any such entity referred to herein as “Guarantor”).
B. As a result of being a franchisee or prospective franchisee of Company, or an owner, officer, director, member, employee, agent and/or independent contractor of Guarantor, Company or its affiliates may disclose certain Information (as defined below) to you, which is either non-public, confidential or proprietary in nature.
C. Disclosure of the Information may require that you travel to and/or enter onto the property of Company and/or its affiliates, or their respective agent(s) or designee(s).
D. It is in the interest Company, you and any Guarantor that the Information be disclosed on a confidential basis and otherwise pursuant to the terms set forth below.
Agreement
In light of the above recitals and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, you, Company and any Guarantor agree as follows:
1. Information which is either non-public, confidential or proprietary in nature delivered, in whole or in part, before or after the date hereof in any form, including, without limitation, training materials, product information, operations manuals, supplier and vendor lists, customer lists, videotapes, films, drawings, diagrams and computer programs, together with analyses, compilations, studies, or other documents prepared by Company, you or any Guarantor, or any of their respective owners, officers, directors, members, employees, agents and/or advisers, which contain or otherwise reflect such information, is hereinafter referred to as “Information.”
2. If Company and you, or Company and any Guarantor, have entered into or shall hereafter determine to enter into discussions or negotiations concerning a possible transaction involving Company and you, or Company and any Guarantor, or an affiliate of Company or any Guarantor (a “Transaction”), the existence and nature of such discussions and negotiations will also constitute Information for purposes of this Agreement. In the case of a possible Transaction, each party hereto agrees to transmit Information only to the owners, officers, directors, members, employees, agents and/or advisers of Company and any Guarantor, who need to know the Information for the purpose of evaluating the Transaction and who are informed of the confidential nature of the Information.
3. All Information will be kept secret and confidential and will not be communicated, divulged or disclosed to any other person or entity by the party receiving the Information (the “Receiving Party”) in any manner whatsoever, in whole or in part, without the prior written consent of the party providing the Information, (the “Disclosing Party”), and will not be used by the Receiving Party other than in connection with evaluating or implementing a possible Transaction, or in the operation of a retail store or outlet franchised by Company and operated by you or any Guarantor pursuant to a franchise agreement with Company (a “Franchised Store”). The Receiving Party will be responsible for any breach of any provision of this Agreement.
TCBY FDD 03/2014 EXHIBIT J: Confidentiality Agreement 1 4. All Information, and all copies thereof, including, without limitation, training materials, product information, operations manuals, analyses, compilations, studies or other documents prepared by the Receiving Party, and any of its owners, officers, directors, members, employees, agents or advisers, will be returned to the Disclosing Party without retaining any copies thereof immediately upon written request of the Disclosing Party.
5. You will at all times treat the Information you receive from Company and its affiliates as the sole and absolute property of Company and its affiliates.
6. If, during the course of research and due diligence for assessing any possible Transaction, or in connection with any training conducted by Company, you shall have occasion to visit Company or any of its corporate offices or designated training facilities (each a “Visit”), then any information and documentation obtained during such Visits shall be included in the definition of Information. You shall bear any and all costs of Visits, including, without limitation, your airfare, lodging, living expenses, wages and benefits, and costs of copying or obtaining Information. Company shall have no obligation to reimburse you for any costs arising from Visits, whether or not Company and you, or Company and Guarantor, eventually complete a Transaction. You assume all risks associated with your Visit and/or your participation in any training conducted by Company, and you agree to defend and indemnify Company and hold Company harmless from and against any and all claims, actions, damages, liability and expenses arising from, out of or relating to your Visit and/or your participation in training. In addition, except to the extent limited or prohibited by applicable law, you agree to release and forever discharge Company and its affiliates, and all of their respective owners, officers, directors, members, employees, agents, representatives, attorneys, insurers, successors, assigns, heirs and personal representatives, from any and all claims, debts, covenants, liabilities, suits, judgments, damages, actions and causes of action, whether known or unknown, direct or indirect, which you ever had, have or ever may have or claim to have, arising out of or relating to any of your Visits or your participation in training.
7. Nothing stated herein shall preclude the Receiving Party, and any of its owners, officers, directors, members, employees, agents or advisers, from disclosing Information that it is legally compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose, provided that the procedures referred to in this paragraph 7 are satisfied. In the event of a premature disclosure or any persons to whom Information pursuant to this Agreement is made available becomes legally compelled to disclose Information, such party will provide the Disclosing Party with prompt notice thereof so that the Disclosing Party may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. In the event that such protective order or other remedy is not obtained, or that the Disclosing Party waives compliance with the provisions of this Agreement, any person legally compelled to disclose any Information will furnish only that portion of such Information that such person is legally required to disclose and such party shall use its reasonable best efforts to ensure that the information so disclosed is accorded confidential treatment. In all events the parties agree to cooperate in determining what steps shall be taken.
8. The term “Information” does not include Information that (a) becomes generally available to the public other than as a result of disclosure by the Receiving Party or anyone to whom the Receiving Party transmits Information, (b) was available to the Receiving Party on a non-confidential basis prior to its disclosure to the Receiving Party by the Disclosing Party, or (c) becomes available to the Receiving Party on a non- confidential basis from a source other than the Disclosing Party who is not bound by a confidentiality agreement or other obligation of secrecy with respect to such Information.
9. For a period of two (2) years following the date of this Agreement, the parties hereto will not, as a result of knowledge obtained from the Information, and will likewise direct any of their owners, officers, directors, members, employees, agents, and advisors not to, use the Information to solicit or recruit employees of the other parties hereto for employment or induce agents or employees of the other parties hereto to terminate their employment. Nothing in this paragraph 9 shall prevent any of the parties hereto from employing any employee of the other parties hereto if such employee contacts the one of the other parties on his or her own
TCBY FDD 03/2014 EXHIBIT J: Confidentiality Agreement 2 initiative without any direct or indirect solicitation by or encouragement from the other party (other than general solicitations in industry journals, national newspaper or similar solicitations or publications).
10. Neither the parties hereto nor their respective advisers makes any representation or warranty as to the accuracy or completeness of Information or of any other written or oral communication transmitted or made available pursuant to this Agreement, and each such party expressly disclaims any and all liability based on such Information or communications or on omissions therefrom. Only those representations or warranties that are made to a party in a Franchise Agreement executed between Company and you, or Company or any Guarantor, or in a definitive Transaction Agreement (as hereinafter defined) when, as and if it is executed, shall have any legal effect.
11. This paragraph 11 applies if no Franchise Agreement nor definitive Transaction Agreement has been executed between Company and you, or Company and any Guarantor. The parties understand and agree that no contract or agreement shall be deemed to exist between the parties unless and until a definitive Transaction Agreement has been executed. Until execution of such a definitive Transaction Agreement, other than the obligations set forth in this Agreement, the parties have no legal obligation of any kind with respect to any possible Transaction. Each party may conduct negotiations in any manner as it reasonably determines, including entering into a Transaction Agreement with another party or terminating negotiations with the other parties hereto. For purposes of this Agreement, a definitive Transaction Agreement is not a letter of interest, term sheet or any other preliminary agreement or understanding but only a final definitive agreement. Except as expressly set forth in this Agreement, none of the parties hereto are committed in any way with respect to the matters discussed by them, unless and until a definitive Transaction Agreement with respect thereto is executed, nor shall this Agreement be construed as an obligation on the part of the parties hereto to negotiate such a definitive Transaction Agreement, or be liable for any expenses of the other parties.
12. The obligations in this Agreement shall be binding upon the parties as well as any successor assigns.
13. It is further understood and agreed that no failure or delay by any party to this Agreement in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise of any right, power or privilege hereunder. The provisions of this Agreement may be modified or waived only by a separate writing, expressly modifying or waiving such provision, and executed by all parties to this Agreement.
14. Each party recognizes that irreparable injury may result to a Disclosing Party and its business and property if a Receiving Party breaches any provision of this Agreement and that money damages would not be a sufficient remedy for any such breach. Each party therefore agrees that if any act in violation of any provision hereof occurs, the Disclosing Party shall be entitled, in addition to such other remedies, damages and relief as may be available under applicable law, to an injunction prohibiting the Receiving Party from engaging in any such act or specifically enforcing this Agreement, as the case may be.
15. This Agreement is the complete and exclusive statement of the agreement between the parties and supersedes all prior written and oral communications and agreements, if any relating to the subject matter hereof.
16. This Agreement shall be governed by and construed in accordance with the laws of the State of Colorado, without giving effect to the principles of conflict of laws thereof. This Agreement may be executed in counterparts, each of which when so executed and delivered shall be an original, but such counterparts shall constitute one and the same instrument.
17. If you are an owner, officer, director, member, employee, agent and/or independent contractor of a Guarantor, Guarantor must sign the Undertaking and Guarantee; Release attached to this Agreement.
TCBY FDD 03/2014 EXHIBIT J: Confidentiality Agreement 3
The undersigned, by executing this Agreement, agree to be bound by the provisions of this Agreement as of the date first above written.
[MFFB SUBSIDIARY] YOU
By: By: Its: Its:
Your Contact information: (Please Print)
Name: Phone:
Relationship to Guarantor:
Address:
City: State: Zip:
Fax: email:
Best time to contact:
TCBY FDD 03/2014 EXHIBIT J: Confidentiality Agreement 4
UNDERTAKING AND GUARANTEE; RELEASE
Guarantor acknowledges and agrees that you are an owner, officer, director, member, employee, agent and/or independent contractor of Guarantor, and are signing the foregoing Confidentiality Agreement (the “Agreement”) as a benefit to and at the request of Guarantor. Accordingly, in consideration of the execution of the Agreement by you, and for other good and valuable consideration, Guarantor for itself, its heirs, legal representatives, successors and assigns hereby agrees to sign this Undertaking and Guarantee; Release (the “Guarantee”) and guarantee the full and timely performance by you of each of your obligations arising under the Agreement, including, without limitation, your obligations to defend, indemnify and hold harmless Company and its affiliates in accordance with paragraph 6.
In addition, the Guarantor hereby agrees to be personally bound by each and every condition and term contained in the Agreement as though the Guarantor had executed an agreement containing the identical terms and conditions of the Agreement. The Guarantor agrees to pay all attorneys’ fees and costs and other expenses incurred in connection with the enforcement of the Guarantee or with any negotiations related to such enforcement.
Further, except to the extent limited or prohibited by applicable law, Guarantor agrees to release and forever discharge Company and its affiliates, and all of their respective owners, officers, directors, members, employees, agents, representatives, attorneys, insurers, successors, assigns, heirs and personal representatives, from any and all claims, debts, covenants, liabilities, suits, judgments, damages, actions and causes of action, whether known or unknown, direct or indirect, which Guarantor ever had, has or ever may have or claim to have, arising out of or relating to any of your Visits or your participation in training.
The Guarantor agrees that each and every provision, covenant, and condition of the Guarantee shall inure to the benefit of Company’s successors and assigns.
GUARANTOR(S):
By:
Its:
TCBY FDD 03/2014 EXHIBIT J: Confidentiality Agreement 5 EXHIBIT K
FRANCHISEE INFORMATION
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information LIST OF CURRENT FRANCHISEES AS OF DECEMBER 28, 2013
9040302 Anniston #2 James Kemp TCBYT 1903 Quintard Ave Anniston P.O. AL 36201- (256)-238-8229 Box 3217 2309 9291601 Corner Village Ryan TCBYT 300 N Dean Rd Ste 3 Auburn AL 36830- (334)-826-8828 Schoonover 5045 9396703 280 Station Ronald TCBYT 400 Cahaba Park Circle Birmingham AL 35242- (205)-637-0500 Howard 5008 9432401 1352-1 Mark Joy TCBYT 1352-1 Eufaula Ave. Eufaula AL 36027 (334)-546-3966 Eufaula Ave. 9104201 Gulf Shores Dan Farmer TCBYT 1301 Gulf Shores Pkwy Gulf Shores PO Box AL 36542- (251)-968-8229 274 5933 9396701 Merchants Ronald TCBYT 1919 28th Ave S Ste Homewood AL 35209- (205)-870-8229 Walk Howard 153 2600 9403301 Picadilly Brenda TCBYT 6345 Airport Blvd Ste Mobile AL 36608- (251)-342-5866 Square Thomas B 3127 Shopping 9017905 Essex Square C E Jr Tiller TCBYT 2 McFarland Blvd Northport AL 35476- (205)-758-6855 Market Place 3348 9017906 Meadowbrook C E Jr Tiller TCBYT 2304 McFarland Blvd E Tuscaloosa AL 35404- (205)-349-4661 5802 9017907 University C E Jr Tiller TCBYT 1130 University Blvd Tuscaloosa AL 35401- (205)-345-0804 Town Center Ste A-5 0326 9315001 Dave Ward Milinda TCBYT 3900 Dave Ward Dr Conway AR 72034- (501)-327-0909 Drive Holman Ste 2300 5581 9109311 Harrison Don Weir TCBYT 1313 Highway 62 65 N Harrison AR 72601- (870)-741-9554 # G 2013 9427801 Cornerstone Roy Tim TCBYT 227 Cornerstone Blvd Hot Springs AR 71913 (501)-520-0700 Marketplace Webb 9109314 Markham Don Weir TCBYT 11418 W Markham St Little Rock AR 72211- (501)-221-9020 Plaza 2806 9411601 Lakewood Elly Rumbach TCBYT 2600 Lakewood North Little AR 72116- (501)-753-5572 Village Village Pl Ste E Rock 8049 9423701 Promenade Jared Greer TCBYT 2005 Promenade Blvd Rogers AR 72758- (479)-636-8229 Pointe Ste 140 9073 9434001 Arrowhead Edward Daly TCBYT 7700 W Arrowhead Glendale #1259 AZ 85308 (0)--0 Towne Center Towne Ctr 9431402 Carefree Hwy Michael & TCBYT 3134 W. Carefree Hwy Phoenix Suite 8 AZ 85086 (630)-596-3990 Ursula Conroy 9431401 Village at Michael & TCBYT 8120 N Hayden Road Scottsdale AZ 85258- (630)-596-3990 Hayden Ursula 2465 Conroy 9376101 Foothills Mall - Atul Jain TCBYP 7401 N La Cholla Blvd Tucson AZ 85741- (520)-531-8404 Bakery Cafe Ste 155 2329 9400801 Grewal Ravinder TCBYP 72363 Baker Blvd Baker PO Box CA 92309 (760)-733-4505 Business Grewal 729 Center 9430902 Camp Anil Kumar TCBYT Building 15-100 Camp CA 92055 (714)-612-3751 Pendleton - Pendleton Mainside 9431801 Exeter Carol Nickel TCBYT 112 South E Street Exeter CA 93221 (559)-592-4455 9293505 Solano Mall David Smith TCBYP 1350 Travis Blvd Fairfield CA 94533- (707)-429-5205 #1427B 4646
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 1
9147232 Folsom David Smith TCBYP 13000 Folsom Blvd Folsom CA 95630- (916)-351-1448 Premium #210 8002 Outlets 9293506 Folsom David Smith TCBYT 13000 Folsom Blvd Ste Folsom CA 95630- (916)-351-1438 Premium 808 8008 Outlets 9345903 San Vicente Michael Zreik TCBYP 11740 San Vicente Los Angeles CA 90049- (310)-207-1604 Plaza Blvd 6610 9139502 Great Mall of Dung Nguyen TCBYT 173 Great Mall Dr Milpitas CA 95035- (408)-942-0331 the Bay Area 8039 9430501 Northridge Kamyar TCBYP 9301 Tampa Ave Northridge CA 91324- (818)-407-0404 Mall Lashgari 2503 9427101 Westfield Cherie TCBYP 72840 Highway 111 Palm Desert CA 92260- (760)-346-4598 Shopping Coulter- Ste S339 3337 Town Weith 9431501 Victoria Braden & TCBYT 7834 Kew Ave Rancho #1765 CA 91739- (213)-448-8920 Gardens Luisa Onishi Cucamonga 2465 9293502 Galleria at David Smith TCBYP 1151 Galleria Blvd Spc Roseville CA 95678- (916)-878-5418 Roseville #276 1945 9147233 Country Club David Smith TCBYP 2380 Watt Ave Spc Sacramento CA 95825- (916)-971-4803 Plaza 338 0610 9293503 Smoothies- David Smith TCBYP 1689 Arden Way Ste Sacramento CA 95815- (916)-927-5483 Arden Fair 1116 4043 Mall 9385202 Weberstown Sohn, Jong TCBYP 4950 Pacific Ave Stockton CA 95207- (209)-474-3466 Mall 6307 9405601 Stockton Kahlon, TCBYS 3201 W Benjamin Holt Stockton CA 95219- (209)-952-8873 Subway Jagwinder K. Dr # 18 3741 9407301 Stockton Kaur, Rajvir TCBYS 5308 Pacific Ave Ste Stockton CA 95207- (209)-951-2524 Subway 92 5636 9293504 Factory Stores David Smith TCBYP 321 Nut Tree Rd Ste 2 Vacaville CA 95687- (707)-448-4718 at Vacaville 3242 9412801 West Covina Yui Man Mak TCBYP 603 Plaza Dr West CA 91790- (626)-960-7011 Fashion Plaza Covina 2837 9421701 Market Place Enkler Jean TCBYT 3670 Austin Bluffs Colorado CO 80918 (719)-265-8229 Austin Bluffs Parkway Springs 9261901 Craig Subway George TCBYS 1420 W Victory Way Craig CO 81625- (970)-824-2900 Barlow 3412 9028808 Denver Int'l Greg Forst TCBYT P.O. Box 492025 Denver 8400 CO 80249 (303)-342-6970 Airport/Main Pena Term Bv/Mai n Termin al 9028809 Denver Int'l Greg Forst TCBYT P.O. Box 492025 Denver 8900 CO 80249 (303)-342-6971 Airport/Conc Pena B Bv/Con course B 9028810 Denver Int'l Greg Forst TCBYT P.O. Box 492025 Denver 9100 CO 80249 (303)-342-6972 Airport/Conc Pena C Bv/Con course C 9425907 Black Steve Lauer TCBYT 11169 E I25 Frontage Firestone CO 80504- (303)-990-8557 Diamond Rd Ste B 5276 Marketplace 9425901 Troutman Steve Lauer TCBYT 100 W Troutman Pkwy Fort Collins CO 80525- (970)-223-4851 Parkway 3037
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 2
9425902 Rain Tree Steve Lauer TCBYT 2519 S Shields Fort Collins CO 80526 (970)-484-8195 Village 9425906 Timberline Steve Lauer TCBYT 2638 S. Timberline Rd Fort Collins Suite CO 80525 (970)-682-1954 Shops 120 9426001 Center Place Tim TCBYT 4548 Center Place Greeley CO 80634- (970)-673-8193 Brynteson 3747 9424501 Arapahoe Rick Green TCBYT 8547 East Arapahoe Greenwood CO 80112- (303)-220-8229 Marketplace Road Village 1430 9425908 Clover Basin in Steve Lauer TCBYT 2345 Clover Basin Longmont CO 805037 (720)-378-7877 Longmont Drive 603 9425903 Garfield Steve Lauer TCBYT 3033 N Garfield Ave Loveland CO 80538 (970)-619-8557 Avenue 9431701 HighPointe Jeffrey TCBYT 9645 Washington St Thornton CO 80229- (720)-872-6459 Park Roberts Ste 140 2173 9424003 Wintonbury Lisa Gross TCBYT 836 Park Ave Bloomfield CT 06002- (860)-263-7360 Mall Arnold 2033 9424001 Avon Lisa Gross TCBYT 530R Bushy Hill Road Simsbury CT 06070 (860)-658-4520 Marketplace Arnold 9089001 Secrest Shops J. Robert TCBYT Garfield and Atlantic Bethany DE 19930 (302)-537-2266 Unit 4 McCabe Ave Beach 9412001 Dover Mall Kenneth TCBYP 1365 N Dupont Hwy Dover DE 19901- (302)-678-9797 Rebbro 8710 9383002 Christiana Abdul TCBYP 1531 Christiana Mall Newark DE 19702 (302)-678-9797 Mall Mannan 9427902 Tanger Outlet Rhoda Salem TCBYT 1600 Ocean Outlets Rehoboth Suite DE 19971 (302)-226-7801 Center Beach 1580 9424201 University Lisa Wolfe TCBYT 1230 S Dixie Highway Coral FL 33146- (786)-433-8229 Centre Gables 2902 9428602 Shops at Shawn Tolley TCBYT 8076 Mediterranean Estero Suite FL 33928 (239)-992-8229 Coconut Point Drive 113 9430601 Thornbrook Chris TCBYT 2441 NW 43rd Gainesville 24-C FL 32606 (352)-378-1051 Village Hartwell 9425103 Shoppes at Tommy TCBYT 13820 Old Saint Jacksonville FL 32258- (904)-260-9833 Bartram Park Douglas Augustine Road 5427 9425104 St. Vincents Tommy TCBYT 7936 Pine Lake Road Jacksonville FL 32256 (904)-273-4135 Hospital Douglas 9239701 Miami Subway Burr Camp TCBYS 2720 S Dixie Hwy Ste B Miami FL 33133- (305)-441-2613 3786 9233503 Plaza Del Maria Linares TCBYT 12070 SW 127th Miami FL 33186- (305)-252-7906 Paraiso Avenue 4663 9424202 Mary Brickell Lisa Wolfe TCBYT 900 S Miami Ave Ste Miami FL 33130 (786)-517-5555 Village 147 9428601 Falls Mall Shawn Tolley TCBYT 8888 SW 136th Street Miami FL 33176 (305)-232-4280 9420601 Beach Walk Meena Shah TCBYT 130 Scenic Gulf Dr Miramar FL 32550- (850)-654-2076 Center Beach 4960 9425101 Seminole Tommy TCBYT 628-5 Atlantic Blvd Neptune FL 32266 (904)-246-2800 Shoppes Douglas Beach 9210806 Tioga Town Ken Rembert TCBYT 12921 SW 1st Rd Ste Newberry FL 32669- (352)-332-8896 Center 103 5709 9425102 Pine Tree Tommy TCBYT 410 Blanding Blvd Orange Park Space 7 FL 32073 (904)-276-0955 Plaza Douglas 9304601 Orlando Michael TCBYP 8200 Vineland Ave Ste Orlando FL 32821- (407)-238-9775 Premium D'Argenio 1238 6828 Outlet Mall 9345603 Universal Bruce Eakin TCBYT 1000 Universal Studio Orlando City FL 32819- (407)-226-2689 Studios Florida Plz #340 Walk 7601 9424101 Shops at Jerry Calvo TCBYT 14543 SW 5th St Pembroke FL 33027- (954)-432-5900 Pembroke Pines 1453
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 3
Gardens 9330101 Bayou Frank TCBYT 4771 Bayou Blvd Pensacola FL 32503- (850)-475-8048 Boulevard Messina 1930 9330102 University Frank TCBYT 1765 East 9 Mile Road Pensacola Suite 7 FL 32514- (850)-607-8099 Town Center Messina 5531 9424801 Waco Travel Donald TCBYT 2715 South Byron Perry FL 32348- (850)-838-1852 Center Everett Butler Pkwy 6309 9413601 Plantation Danielle TCBYT 2750 Race Track Road Saint Johns FL 32259- (904)-287-8229 Plaza Trubey Ste 306 3230 Shopping Ctr 9109309 Paradise Plaza Don Weir TCBYT 3800 S Tamiami Trail Sarasota FL 34239- (941)-953-3241 #100 6907 9433701 Mahan Square Maya Sutaria TCBYT 1350 E Tennessee St Tallahassee FL 32308 (0)--0 9424401 Mitchell Jay Silar TCBYT 3140 Little Road Trinity FL 34655- (727)-375-1177 Ranch Plaza 1864 9429301 Courtyard Joe Iacidfoli TCBYT 13860 Wellington Trce Wellington FL 33414 (561)-366-7725 Shops at Ste 43 Wellington 9413301 Dawson Road Sandra S. TCBYT 2416 Dawson Rd Albany GA 31707- (229)-883-7143 Jones 2344 9354901 Fountain Oaks Nasim Jina TCBYT 4920 Roswell Rd NE Atlanta GA 30342- (404)-252-7437 Shopping 2686 Center 9432101 Westside Mohammad TCBYT 807 West Ave. Cartersville Suite B GA 30120 (678)-557-3692 Plaza Malik 9423501 Braelinn Michael TCBYT 532 Crosstown Dr Peachtree GA 30269- (770)-631-9803 Village Murtaugh City 2916 Shopping Ctr 9017908 Brookwood Charles and TCBYT 2615 Peachtree Pkwy Suwanee GA 30024- (678)-947-0540 Marketplace Will Tiller Ste 140 1061 9357701 Valdosta Mall Bipin Patel TCBYP 1700 Norman Dr Spc Valdosta GA 31601- (229)-293-0093 1054 7407 9412701 Honolulu Seung Eun TCBYS 1249 Wilder Ave Honolulu HI 96822- (808)-531-6355 Subway Park 3100 9299901 Council Bluffs Kent Tyler TCBYS 208 E Broadway Council IA 51503- (712)-322-4114 Subway Bluffs 4407 9024405 Albertson's Jim Mowbray TCBYT 1790 W State St Boise ID 83702- (208)-384-0994 Marketplace 3923 9228604 Silverstone Diana TCBYT 1630 S Eagle Rd Ste Meridian ID 83642- (208)-898-1482 Plaza Mallard 100 2445 9343701 Fred Meyer Dave Niblett TCBYT 1800 N Locust Grove Meridian ID 83646- (208)-884-8366 Plaza Rd Ste A 7842 9228601 Mountain Jesse Mallard TCBYP 390 American Legion Mountain ID 83647- (208)-587-9048 Home Moxie Blvd Home 2703 Java 9431001 Nampa Talel Aref TCBYT 624 12th Ave S Nampa Suite 6 ID 83651 (208)-461-4846 9394201 Chicago Ghanshyam I TCBYP 1650 Premium Outlets Aurora Ste IL 60502- (630)-898-9909 Premium Vyas Blvd 1245 2911 Outlets 9428201 Old Farm Todd TCBYT 1731 W Kirby Avenue Champaign Space IL 61821 (217)-607-5090 Thorstenson B-12 9101501 Grove Mall Ashokkuma TCBYT 1340 W 75th St Downers IL 60516- (630)-963-9559 Savsani Grove 4205 9381307 York Street Yousef TCBYT 158 N York St Elmhurst IL 60126- (708)-422-2810 Kashkeesh 2806 9421201 Evanston Minesh Patel TCBYS 1551 Sherman Ave Evanston IL 60201- (847)-328-2917 Subway 4421
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 4
9407001 Hawthorne Kenneth T. TCBYT 1807 S Washington St Naperville IL 60565- (630)-416-8229 Square Hahn Ste 105 2049 9423802 Naperville Victor TCBYT 2860 Showplace Drive Naperville 12-20 IL 60564 (630)-961-8229 Crossings Howard 9433301 New Lenox Marge & Scot TCBYT 2356 E Lincoln Hwy New Lenox IL 60451 (0)--0 Boulanger 9428102 North Lomesh Amin TCBYT 7501 W Cermak Rd North Suite F1 IL 60546- (708)-447-5938 Riverside Park Riverside 1436 Mall 9428101 Oakbrook Lomesh Amin TCBYT 100 Oakbrook Center Oak Brook IL 60523- (630)-368-1002 Center Ste 30 1838 9381308 Oak Lawn- Yousef TCBYT 6770 West 95th St Oak Lawn IL 60453 (708)-422-2810 South Chicago Kashkeesh 9432302 Coopers Mubarak TCBYT 14658 S. LaGrange Orland Park IL 60462 (708)-951-1905 Square Amine Road 9433401 Oswego Vyomesh TCBYT 2840 Route 34 Oswego IL 60543 (0)--0 Desai 9421401 Northwoods Khalid TCBYP 4501 War Memorial Peoria IL 61613- (309)-682-4901 Mall Mohammed Drive 0100 9025804 Quincy Marvin TCBYT 1735 State St Quincy IL 62301- (217)-228-2292 Hufford 5053 9423801 Shorewood Victor TCBYT 930 Brook Forest Ave Shorewood IL 60404 (815)-577-8229 Crossings Howard 9381303 Westfield Old Yousef TCBYP 4999 Old Orchard Ctr Skokie IL 60077- (847)-677-0123 Orchard Kashkeesh 1450 9434101 East Gate Bhasker Patel TCBYT 3835 East Main Street St. Charles IL 60174 (203)-214-8746 Shopping Center 9427201 Hinsdale Lake Colleen TCBYT 6300 Kingery Highway Willowbroo IL 60527 (630)-920-8229 Commons Pushic Spc 4 k 9432001 Rangeline Roy TCBYT 1350 S. Rangeline Rd Carmel IN 46032 (317)-938-2472 Crossing Patel/Nate Patel 9382801 Galleria Retail Victor 'Bud' TCBYP 425 U.S. Hwy 30 Ste Dyer IN 46311 (219)-865-2240 DiMaggio 221 9261701 Georgetown Gabe Keri TCBYT 6422 E State Blvd Fort Wayne IN 46815- (260)-493-2795 Square 7025 9200402 Glendale Shirley Ho TCBYT 2132 E 62nd St Indianapolis IN 46220- (317)-251-2766 Shoppes 2312 Blimpie 9434201 Southlake James Sheets TCBYT 2109 Southlake Mall Merrillville IN 46410 (219)-718-8108 Mall 9428901 Massachusetts Ed Forman TCBYT 845 Massachusetts Lawrence KS 66044 (785)-249-0999 Street Street 9365401 Plaza Pointe Mary TCBYP 4841 W 135th St Leawood KS 66224- (913)-897-6544 McMinn 8901 9202001 Prairie Village Nancy Bream TCBYT 6966 Mission Rd Prairie KS 66208- (913)-671-8180 Shoppes Village 2609 9388402 Jefferson Richard T TCBYT 7631 Jefferson Hwy Baton LA 70809- (225)-923-2400 Highway Daspit, Sr Rouge 1102 9388403 George O'Neal Richard T TCBYT 15226 George ONeal Baton LA 70817- (225)-755-2590 Road Daspit, Sr Rd Rouge 1507 9421302 Flowers Holly TCBYT 70488 Highway 21 Ste Covington LA 70433- (985)-626-4770 Center Schwartz 206 8134 9388406 Broadway Richard T TCBYT 7755 Magnolia Beach Denham LA 70726- (225)-243-5741 Place Daspit Sr Rd Ste E Springs 8970 9195201 Geismar Exxon Elvin Simpson TCBYP 13475 Highway 73 Geismar LA 70734- (225)-673-8406 Jr 3061
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 5
9421301 Highway 59 Holly TCBYT 1680 Highway 59 Mandeville Suite LA 70448 (985)-626-4770 Schwartz 100 9237202 Old Metairie John Ploen TCBYT 701 Metairie Rd Metairie LA 70005- (504)-835-2983 Village #23101 4050 9374701 Shreveport Scott Ferris TCBYT 1704 East Bert Kouns Shreveport Industri LA 71105 (318)-797-8229 Loop al Dr 9237206 Camellia John Ploen TCBYT 1736 Gause Blvd East Slidell LA 70461 (985)-288-0340 Square 9407601 Zachary Frances TCBYT 4461 Main Street Zachary LA 70791- (225)-654-5620 Nezianya 3756 9087103 Queen Anne Mike Grubor TCBYT 10 Washington St Norwell MA 02061- (781)-982-8220 Plaza 1749 9420903 Belvedere Dennis TCBYT 540 East Belvedere Baltimore M 21212- (410)-323-4351 Square McGrath Ave Spc 11 D 3750 9103702 Harford Mall Mary B. TCBYT 696 Bel Air Road J08 Belair M 21014- (410)-420-9552 Taylor D 4201 9420901 Snowden Dennis TCBYT 9400 Snowden River Columbia M 21045- (410)-995-6140 River McGrath Pkwy D 5297 9398602 127th Street Nayfeh Salem TCBYT 12701 Coastal Hwy Ste Ocean City M 21842- (410)-250-5909 Ocean City 10 D 6055 9398605 33rd Street Munther TCBYT 3310 Coastal Hwy Ocean City M 21842 (410)-430-9270 Ocean City Salem D 9398604 56th Street Nayfeh Salem TCBYT 5601 Coastal Highway Ocean City M 21842 (410)-524-0253 Ocean City D 9431101 Salisbury Khurshid TCBYT 306 Dogwood Dr Salisbury M 21801- (0)--0 Ahmed D 7122 9103701 Timonium Mary B. TCBYT 2080 York Rd Ste 125 Timonium Attn: M 21093- (410)-252-9554 TCBY Taylor Mary D 4258 Taylor 9332501 Dearborn Ramzi TCBYS 5929 Schaefer Rd Dearborn MI 48126- (313)-581-1977 Subway Hourani 2254 9305502 East Paris Miller, TCBYT 2675 E Paris Ave SE Grand MI 49546- (616)-949-4418 Plaza Edward & Rapids 6138 Paula 9133802 Grosse Pointe Brian Coury TCBYT 17045 Kercheval Ave Grosse MI 48230- (313)-885-0384 Pointe 1562 9133801 Grosse Pointe Brian Coury TCBYT 20385 Mack Ave Grosse MI 48236- (313)-881-5608 Pointe 1610 Wood 9270201 Marysville Gerald TCBYS 1030 Gratiot Blvd Marysville MI 48040- (810)-364-7737 Subway Mccarthy 1130 9029801 K-Mart Rosalyn Karp TCBYT 3468 Henry St Muskegon MI 49441- (231)-733-2110 Shopping 4356 Center 9393801 North Hill Won Sook TCBYT 1421 N Rochester Rd Rochester MI 48307- (248)-650-2161 Kim Hills 1121 9433101 Somerset Thomas TCBYT 2848 W Maple Rd Troy MI 48084 (0)--0 Plaza Runyan 9425801 Outlets of Paul Yenish TCBYP 6415 Labeaux Ave NE Albertville M 55301- (763)-497-7077 Albertville Ste C800 N 9813 9432601 Burnsville Thu Nguyen TCBYT 1042 Burnsville Center Burnsville M 55306 (952)-956-2642 Center TCBY N 93842011 Smoothies- Joe Huang TCBYP 600 Hennepin Ave. Minneapoli M 55403- 612-388-3725 Block E Ste 260 s N 1821 9143201 Rosedale Mall Justina TCBYT 120 Rosedale Ctr Roseville M 55113- (651)-635-9868 Huang N 3005 9347802 Kirksville Ed TCBYP 516 N Baltimore St Ste Kirksville M 63501- (660)-665-7665 Bellacino's Featherstone C O 3285 Pizza
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 6
9221501 Laurel William TCBYP 1037 Highway 15 N Laurel Mac's MS 39440- (601)-425-5900 Chevron Carmichael Mini 2647 Mart 9432402 421 Pinola Mark Joy TCBYT 421 Pinola Drive Magee MS 39111 (334)-546-3966 Drive 9247801 McComb Clifton Cleave TCBYP 1812 Delaware Ave McComb Buffalo MS 39648- (601)-250-0360 Chevron Service 3614 s, Inc. 9323706 Wedgewood Ron Rye TCBYT 5070 Goodman Rd Ste Olive MS 38654 (662)-420-7823 Commons 111 Branch 9143701 Chaney's Brent Smith TCBYP 501 Bramlett Blvd Oxford MS 38655- (662)-234-7221 Pharmacy 4129 9256501 Philadelphia Jeff George TCBYS 1006 Central Dr Philadelphia MS 39350- (601)-389-0020 Subway 8971 9227401 Missoula Taco Doug & Linda TCBYP 4780 N Reserve St Missoula MT 59808- (406)-542-1414 Time Barr 1408 9242101 Dingle Creek Laneal TCBYT 1800 Hendersonville Asheville NC 28803- (828)-274-1100 Crossing Vaughn Rd 3213 9424701 Westgate Alex Hawkins TCBYT 5 Westgate Parkway Asheville NC 28806- (828)-225-5111 3835 9253301 Bryson City Alan TCBYS 15 Highway 19 S Bryson City NC 28713- (828)-488-1227 Subway Nosworthy 9501 9431601 Shoppes of Christian TCBYT 1369 Kildaire Farm Cary NC 27511 (919)-234-0059 Kildaire Poole Road 9409602 Eastgate Mark A. TCBYT 1800 E Franklin St Ste Chapel Hill NC 27514- (919)-967-0629 Shopping Sperry 22 5816 Center 9422201 Colony Place Samuel Batt TCBYT 7731 Colony Rd Ste 1 Charlotte NC 28226- (704)-341-2000 7679 9422202 Blakeney Samuel Batt TCBYT 9864 Rea Road Charlotte NC 28277 (704)-341-2002 Town Center 9422205 Montford Samuel Batt TCBYT 1730 Abbey Place Charlotte NC 28209- (704)-522-7223 Abbey 3722 Shopping Center 9422208 Quail Corners Samuel Batt TCBYT 8502 Park Road Charlotte NC 28210- (704)-556-5955 5803 9422209 Town Center Samuel Batt TCBYT 8550 University City Charlotte NC 28213 (704)-547-1234 Plaza Blvd 9422211 TCBY Truck Samuel Batt TCBYT Charlotte NC 28226 (610)-937-1792 9422213 Ballantyne Samuel Batt TCBYT 14835 Ballantyne Charlotte Suite NC 28277- (704)-541-0230 Village Way 130 4309 9422218 Piedmond Samuel Batt TCBYT 4620 Piedmont Row Charlotte NC 28210 (610)-937-1792 Town Center South 9106056 Charlotte Intl Host Marriott YOV-F 5501 Josh Birmingham Charlotte Food NC 28208 (704)-359-4610 Arpt dbe Sandy Pkwy Court Dunn CD/Pret zel Mania 9422219 Gateway Samuel Batt TCBYT 1390 Tiger Blvd Clemson Suite NC 29631 (864)-654-3030 Village 302 9432201 Carolina Mall Dhruv TCBYP 1480 Concord Pkwy Concord NC 28025 (240)-625-4695 Nakrani 9422216 Davidson Samuel Batt TCBYT 610 Jetton Street Davidson NC 28036- (610)-937-1792 Commons 9318 9409601 Homestead Mark A. TCBYT 105 W Nc Highway 54 Durham NC 27713- (919)-544-5229 Market Sperry Spc 299 6646 Shopping Ctr
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 7
9427701 Westwood Rakesh Sethi TCBYT 112 Westwood Fayetteville NC 28314- (910)-229-2446 Shopping Shopping Center 1521 Center 9270801 Forest Brook Charles Hunt TCBYS 3284 S Union Rd Gastonia NC 28056- (704)-853-2493 Subway 7050 9428401 Westridge Biren Patel TCBYT 3343 Battleground Greensboro NC 27410 (336)-286-5020 Square 9422203 Birkdale Samuel Batt TCBYT 16916-A Birkdale Huntersville NC 28078- (704)-987-2262 Village Commons Pkwy 1819 9422221 Rosedale Samuel Batt TCBYT 9334 Rose Commons Huntersville NC 28078 (610)-937-1792 Commons Drive 9422215 Thrift Samuel Batt TCBYT 208 Morganton Blvd Lenoir NC 28645 (610)-937-1792 Shopping SW Center 9422207 Plantation Samuel Batt TCBYT 3116 Weddington Matthews Suite NC 28105 (704)-847-0444 Market Road 700 9425201 Shoppes at Ross Shattuck TCBYT 111D Marketplace Ave Mooresville NC 28117 (704)-660-9995 Morrison Plantation 9279301 Edgewood William Juno TCBYS 1408 Edgewood Dr Mount Airy NC 27030- (336)-789-0800 Drive Subway 5216 9279302 Pine Street William Juno TCBYS 701 W Pine St Ste 100 Mount Airy NC 27030- (336)-789-0900 Subway 4575 9428501 Carolina Place Bina Kalaria TCBYT 11025 Carolina Place Pineville Space NC 28134 (704)-547-1234 Mall Parkway C-27 9242102 Weaverville Laneal TCBYP 105 Weaver Blvd Weaverville Unit 16 NC 28787 (828)-645-0234 Subway Vaughn 9422204 Village Samuel Batt TCBYT 6312 Weddington- Wesley NC 28104 (704)-843-0260 Commons at Monroe Road Chapel Wesley Chap 9422212 Oleander Samuel Batt TCBYT 3804 Oleander Drive Wilmington NC 28403 (910)-794-5663 Place 9429201 Oliver's Steven TCBYT 5038 Peters Creek Winston NC 27127 (336)-784-6101 Crossing Rudzinski Parkway Salem 9250301 Bismarck Red Tim TCBYP 2921 N 11th St Bismarck ND 58503- (701)-223-0609 Carpet Car Wonnenburg 0514 Wash 9250303 Fargo Red Tim TCBYP 1020 19th Ave N Fargo ND 58102- (701)-239-4500 Carpet Car Wonnenburg 2298 Wash 9284901 Jamestown - I- Douglas TCBYP 808 20th St SW Jamestown ND 58401- (701)-252-3363 94 Clark Wonnenberg 6131 9282501 Minot Amoco Lori Zavalney TCBYP 1340 S Broadway Minot L & B ND 58701- (701)-852-8988 Zavalne 5931 y, Inc. 9262801 Lincoln Joanne Haase TCBYT 6450 O St Lincoln NE 68510- (402)-464-7766 2369 9263801 McCook Michael TCBYS 216 Westview Plaza McCook NE 69001- (308)-345-2322 Subway Jonasen 4414 9299902 Omaha Kent Tyler TCBYS 7616 Dodge St Omaha NE 68114- (402)-392-1567 Subway 3635 9421801 Harvey Oaks Stephen TCBYT 14506 W Center Rd Omaha NE 68144- (402)-697-1419 Plaza McColley 3218 9426601 Omaha - West Angela TCBYT 14615 W Maple Rd Ste Omaha NE 68116- (402)-496-3981 Maple Greisen 113 4392 9429901 Lakeview Tom and TCBYT 5170 S. 72nd Street Ralston Suite NE 68127 (402)-934-8844 Plaza Kara Negley 102 9430101 Bedford Mark and TCBYT 5 Kilton Rd Unit #1 Bedford NH 33110 (603)-782-8733 Ann Lagasse
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 8
9147224 Fox Run Mall Patty Krukoff TCBYP 50 Fox Run Rd Ste #65 Newington NH 03801- (603)-431-7531 2858 9304501 Denville Jagat Patel TCBYS 559 East Main St # 53 Denville NJ 07834- (973)-586-6767 Subway 2482 9408001 Crispin Square P. Andrew TCBYT 230 N Maple Ave #A-4 Marlton NJ 08053- (856)-983-8229 Williams 9411 9124402 Nutley Jose Young TCBYT 226 Franklin Ave Nutley NJ 07110- (973)-235-9229 4701 9423901 Paramus Park Nate Patel TCBYT 700 Paramus Park Ste Paramus NJ 07652- (201)-203-9278 Mall 1540 3557 9426101 Shoppes at Cynthia Rust TCBYT 243 Sparta Ave Sparta NJ 07871- (973)-726-4140 Lake Mohawk 1102 9391701 Poppy's Bagels Jacob Geffner TCBYP 204 W Englewood Ave Teaneck NJ 07666- (201)-862-0800 3512 9423903 Woodbridge Nate Patel TCBYT 250 Woodbridge Woodbridg #1075 NJ 07095 (732)-634-5800 Mall Center Drive e 9026303 NMSU Food Irma May TCBYP Williams & Frenger St Las Cruces N 88001 (575)-646-4001 Court M 9170301 Pinetree Jimmy TCBYP 2812 Sudderth Dr Ruidoso N 88345- (575)-257-7822 Square Goodwin M 6308 9322801 Meadows Mall Ted Yang TCBYP 4300 Meadows Ln Ste Las Vegas NV 89107- (702)-877-9165 133A 3017 9421001 Lakeside Marlene TCBYT 900 W Moana Ln Ste Reno NV 89509- (775)-829-7447 Crossing Frallicciardi 101 4880 9426701 Guilderland Tejraj Hada TCBYT 1512 Western Ave Albany NY 12203- (518)-456-8229 0511 9209102 Finger Lake Joseph Liseno TCBYS 2000 Clark Street Rd Auburn NY 13021- (315)-258-8830 Mall Subway Jr 9698 9430301 Mckinley Steven TCBYT 3860 Mckinley Blasdell Suite NY 14219 (716)-822-1100 Parkway Christensen Parkway 180 9383201 Atlantic Luther TCBYP 139 Flatbush Ave Brooklyn NY 11217- (718)-230-7067 Terminal Robinson 1450 9398901 Bonwit Village Joseph C TCBYT 9 Vanderbilt Motor Commack NY 11725- (631)-499-6555 DePalma Pkwy 5409 9426704 East Tejraj Hada TCBYT 307 Toy Road East NY 12144 (518)-283-8229 Greenbush Greenbush 9132101 Jericho Dennis TCBYT 1955 Jericho Tpke East NY 11731- (631)-499-1007 Turnpike Kaplan Northport 6216 9392601 Queens Marc Schein TCBYP 90-15 Queens Blvd Ste Elmhurst NY 11373- (718)-271-7893 Center Mall 1036 4914 9326601 Garden City Patrick & TCBYT 158 7th St Garden City NY 11530- (516)-741-5132 Felicia Bruno 5725 9050405 Morton Plaza John Bassett TCBYT 1090 Morton Blvd Kingston NY 12401- (845)-336-8146 1504 9426702 Newton Plaza Tejraj Hada TCBYT 594 New Loudon Rd Latham NY 12110 (518)-783-8229 9395201 Phillips Plaza Patricia Diaz TCBYT 653 Sunrise Hwy Lynbrook NY 11563- (516)-596-1994 3246 9427401 Route 6 Plaza Mahendar TCBYT 1775 East Main Street Mohegan NY 10547 (914)-245-9796 Patel Lake 9183201 Mount Sinai Asghar Jafri TCBYT 5507 Nesconsett Hwy Mount Sinai NY 11766- (631)-474-3345 Shopping Ste 16 2019 Center 9426703 Shop Rite Tejraj Hada TCBYT 2321 Nott St E Niskayuna NY 12309 (518)-393-8229 Square 9059015 Washington Louis Brienza TCBYT 10 Washington Ave Plainview NY 11803- (516)-942-8229 Avenue Plaza 4045 9391401 Ronkonkoma Arlene TCBYT 630 Portion Rd Ronkonkom NY 11779- (631)-467-6520 Musselwhite a 1872
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 9
9431301 Stewart Helene & TCBYT 100 Covert Ave Stewart NY 11530 (0)--0 Manor Carlos Jorge Manor 9423003 Destiny Mall Jui Trivedi TCBYT 9090 Destiny Mall Syracuse NY 13290 (315)-423-5566 9430302 Victor Steven TCBYT 405 Commerce Drive Victor Suite NY 14564 (973)-901-8899 Crossing Christensen 200 9423002 Waterloo Jui Trivedi TCBYP 665 Route 318 Space Waterloo NY 13165 (315)-539-2700 Premium A025B Outlets 9351301 Palisades Ramesh TCBYP 2380 Palisades Center West Nyack NY 10994- (845)-348-9150 Center Mall Bhalodia Dr 6403 9032802 Mall at Cross Nick D'Intino TCBYT 728 Central Park Ave Yonkers NY 10704- (914)-375-1588 County 2061 9411801 Sunnyside Duke & Yumi TCBYT 10117 SE Sunnyside Clackamas OR 97015- (503)-654-0399 Road Hong Rd Ste D 7708 9220301 Eugene Kenneth TCBYT 3001 W 11th Ave #V-3 Eugene OR 97402- (541)-345-5955 Mellor 6642 9392101 Burnside Road George TCBYT 1101 NE Burnside Rd Gresham OR 97030- (503)-669-8383 Prindle 5710 9426201 Sandy Shops Hannah TCBYT 16605 SE 362nd Dr #F Sandy OR 97055- (503)-482-0822 Smith 9289 9422002 Washington Dean Nguyen TCBYP 9487 SW Washington Tigard OR 97223- (503)-620-8300 Square Mall Square Road 4448 9428701 Bridgeport David Young TCBYP 7403 SW Bridgeport Tigard OR 97224- (503)-968-1000 Village - Kiosk Kim Rd # K6 7773 9397001 Tigard Sung Bae Yu TCBYT 11681 SW Pacific Hwy Tigard OR 97223- (503)-684-0551 8672 9423904 Neshaminy Nate Patel TCBYT 4200 Neshaminy Blvd Bensalem 00311 PA 19020 (215)-469-2904 Mall #707 9244801 Charleroi Ron Barbe TCBYS 407 McKean Avee Charleroi Attn: PA 15022- (724)-483-9495 Subway Ron 1527 Barbe 9425301 Cranberry Gary TCBYT 1667 Route 228 Ste Cranberry PA 16066- (724)-591-8985 Township Vanasdale 300 Twp 5326 9427301 Whiteland Zeng Wang TCBYT 153 West Lincoln Hwy Exton PA 19341 (484)-879-6577 Towne Center Ste 1230 9412901 King Of Cindy Tang TCBYT 160 N Gulph Rd Ste King of PA 19406- (610)-337-7530 Prussia Plaza 2020 Prussia 2937 9429801 Rosa Court Sunil Anand TCBYT 4430 William Penn Murrysville PA 15668 (631)-889-3077 Hwy 9394001 Cheltenham Abu Taher or TCBYP 2385 W Cheltenham Philadelphia PA 19150- (215)-887-1250 Square Abul Karim Ave Rm 327 1506 9390402 Brentwood Ritesh Patel TCBYT 4090 Brownsville Rd Pittsburgh PA 15227- (412)-856-9044 Towne Square 3449 9111302 Fashion Mall Darrel Fantini TCBYT 217 Scranton Scranton PA 18508- (570)-961-3033 Carbondale Hwy 1111 9422801 Stroud Jessica TCBYT 1619 N 9th St Ste 7 Stroudsburg PA 18360- (570)-730-4886 Commons Kramer 8384 9422210 South Samuel Batt TCBYT 2 Windermere Blvd Charleston SC 29407- (843)-769-8222 Windermere 7412 Shopping Ctr 9425601 916 Gervais St Anup Patel TCBYT 916 Gervais Street Columbia SC 29201- (803)-832-7586 3128 9400101 Magnolia Mall Paul Branco TCBYP 2701 David H McLeod Florence Spc SC 29501- (843)-664-0744 Blvd 1034A 4043 9422217 Baxter Village Samuel Batt TCBYT 940 Market Street Fort Mill SC 29708 (610)-937-1792 9428801 Doby's Bridge Williams Ross TCBYT 8433 Charlotte Fort Mill SC 29707- (803)-547-8229 Highway 7587
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 10
9047104 Sutton Place Betty Crow TCBYT 7 Brendan Way Ste A Greenville SC 29615- (864)-297-5683 3514 9411401 Lexington George TCBYT 205-A Columbia Ave Lexington SC 29072- (803)-957-7444 Village Renwick 2662 9422206 Mount Samuel Batt TCBYT 1332 Theater Drive Mount SC 29464- (843)-884-8224 Pleasant Pleasant 2304 Towne Centre 9392401 Sayebrook Eugene TCBYT 106 Sayebrook Pkwy Myrtle SC 29588- (843)-294-8229 Village Spivey Ste 5 Beach 6854 9400601 Kings Highway Jean Phillipe TCBYT 1802 N Kings Hwy Myrtle SC 29577- (843)-448-8229 Saad Beach 3152 9422214 Rock Hill Samuel Batt TCBYT 1965 Canterbury Glen Rock Hill SC 29730 (803)-366-8229 Lane 9297002 Sumter Charles TCBYP 2000 W Liberty St Sumter SC 29153- (803)-934-0708 Texaco Hodge 9226 9187301 Yemassee Gregorie TCBYP 5 Lane St Yemassee Exit 38 SC 29945- (843)-589-4010 Subway - Lane and I95 2251 Loneco Exprs Hwy 68 9187302 Laneco Gregorie TCBYP 698 Kings Hwy Yemassee SC 29945- (843)-726-4954 Express #111 Lane 8330 9194302 Crossroads Kathleen TCBYS 411 N Highway 77 Dell Rapids SD 57022- (605)-428-6075 Mall - Subway Lindsay 1543 9323703 Wolf Chase Ron Rye TCBYT 7994 US Highway 64 # Bartlett TN 38133- (901)-383-7994 108 4008 9323705 Stage Centre Ron Rye TCBYT 2955 Kirby Whitten Rd Bartlett TN 38134 (901)-343-0114 9010602 Almadale Eric Tushek TCBYT 2059 South Houston Collierville TN 38139- (901)-861-1710 Crossing Levee Rd 6970 9382002 Saddle Creek Jitendra TCBYT 7584 Farmington Blvd Germantow TN 38138- (901)-755-6069 North Parekh n 2809 9016016 Greeneville Scotty Long TCBYT 1370 Tusculum Blvd Greeneville TN 37745- (423)-638-7674 4108 9284401 Kingsport Demetrice TCBYP 4121 Fort Henry Dr Kingsport TN 37663- (423)-239-5871 Amoco Garst 2224 9324504 Crown Point Leisa Self TCBYT 1229 North Eastman Kingsport TN 37664- (423)-246-2266 Shopping Rd #205 3145 Center 9178902 Knoxville BP Charles TCBYP 7406 Strawberry Knoxville TN 37924- (865)-933-2251 Carruthers Plains Pike 4309 9401601 Lakeside Massengil, TCBYT 9420 Northshore Dr Knoxville TN 37922- (865)-769-0767 Village III James #105 6549 9178001 Tiger Mart James TCBYP 3548 Canada Rd Lakeland Tugwell TN 38002- (901)-386-9920 Exxon Tugwell Oil 9722 Compa ny Inc. 9178907 Lenoir City BP Charles TCBYP 1104 Highway 321 N Lenoir City TN 37771- (865)-986-2307 Carruthers 6665 9010603 Poplar Court Tushek Eric TCBYT 6515 Poplar Ave #104 Memphis TN 38119- (901)-680-9123 4878 9010604 Union Ave Tushek Eric TCBYT 1708 Union Ave Memphis TN 38104 (901)-552-4727 9010605 University Tushek Eric TCBYT 3445 Poplar Ave Memphis TN 38111 (901)-552-5419 Center 9323701 Brookhaven Ron Rye TCBYT 5134 Poplar Ave # 102 Memphis TN 38117- (901)-761-4126 7607 9016001 Plaza Terrace Scotty Long TCBYT 400 E Economy Rd Morristown TN 37814- (423)-587-6212 Shopping 3388 Center 9178906 Powell BP Charles TCBYP 404 E Emory Rd Powell TN 37849- (865)-947-0338 Carruthers 3517
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 11
9307601 Martin Luther Michael Trub TCBYT 303 W Martin Luther Austin TX 78701- (512)-320-8229 King King Jr Bl 1218 Boulevard 9427501 Parkside Herbert TCBYT 5701 Slaughter Lane Austin Building TX 78749 (830)-693-0313 Village Grebe B, Suite B100 9426302 Parkdale Mall Chuck Schrick TCBYT 6155 Eastex Freeway Beaumont TX 77706 (409)-898-2222 9248001 Brownwood Steve TCBYS 211 E Commerce St Brownwood TX 76801- (915)-643-4688 Subway Weckwerth 1802 9174404 Lakewood Doug Sanders TCBYT 6402 E Mockingbird Dallas TX 75214- (214)-821-5757 Dallas Lane 7011 9372203 Heritage Town John Jerman TCBYT 1301 W Glade Rd Euless TX 76039 (817)-545-7535 Crossing III 9372204 Parkwood John Jerman TCBYT 5800 N Tarrant Pkwy Fort Worth Suite TX 76248 (817)-581-8229 Shopping III 106 Center 9424603 Lincoln Village David TCBYT 6328 Camp Bowie Blvd Fort Worth TX 76116 (817)-570-0367 Weaver 9099101 Friendswood Richard Soler TCBYT 104-B S Friendswood Friendswoo TX 77546- (281)-992-3323 Corner Dr d 3951 9339901 Millers Scott Gilmore TCBYT 302 Millers Xing Harker TX 76548- (254)-680-7108 Crossing Heights 5659 9372205 Marketplace John Jerman TCBYT 3090 Justin Road Highland Suite TX 75077 (972)-966-8229 @ Highland III Village 305 Village 9281302 San Felipe Mustaque TCBYT 5884 San Felipe St Houston TX 77057- (713)-278-1252 Dharmajwala 3066 9426901 Green Tee Adam Saadi TCBYT 9639 Scarsdale Blvd Houston TX 77089 (281)-741-9024 Center 9428301 Royal Oaks Nizar TCBYT 11700 Westheimer Ste Houston TX 77077 (832)-331-5191 Centre Khimani F 9428302 Champion Nizar TCBYT 5508 FM 1960 Rd W Houston TX 77069- (832)-331-5191 Forest Khimani 4304 9433202 Memorial City Brij Agrawal TCBYT 303 Memorial City Houston #675A TX 77024 (0)--0 Mall 1 Mall 9429101 Cinco Ranch David Tran TCBYT 27110 Cinco Ranch Katy TX 77494 (713)-828-3399 Blvd 9236802 Kingsville Ali Samadi TCBYS 620 N Armstrong Ste B Kingsville TX 78363- (361)-592-6200 Subway 4268 9429501 South Main Gary Camp TCBYT 318 S. Main Lindale TX 75771 (903)-882-9261 9425001 Magnolia Joylanne TCBYT 6311 FM 1488 Magnolia TX 77354 (281)-259-3344 Glover 9426501 Stone Oak Gerardo TCBYT 3701 Expressway 83 McAllen Suite TX 78503 (956)-630-3109 Carrillo 200 9405901 Town East Suresh Chand TCBYP 2063 Town East Mall Mesquite TX 75150- (972)-270-2550 Mall 4118 9303201 Midland Thomas TCBYT 5115 W Wadley Ave Midland TX 79707- (432)-520-8597 McComic Ste A 5190 9424607 Spring Creek David TCBYT 1201 E Spring Creek Plano C-120 TX 75074 (972)-881-4384 Plaza Weaver Pkwy 9433001 Alamo Heights James & TCBYT 5920 Broadway San Antonio TX 78209 (0)--0 Patrica Reid 9429401 Panther Creek Lance TCBYT 4775 W Panther Creek Spring TX 77381- (281)-419-8053 Shopping Langenhoven Dr A-150 3592 Center 9424609 Marketplace David TCBYT 3010 S 31st Street Temple TX 76502 (254)-773-2750 Commons Weaver
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 12
9424605 Richmond David TCBYT 2511 Richmond Road Texarkana TX 75503 (903)-838-0771 Ranch Weaver Shopping Center 9433201 The Brij Agrawal TCBYP 1201 Lake Woodlands The TX 77380 (0)--0 Woodlands Dr Woodlands Mall 9424601 South David TCBYT 7488 S Broadway Tyler TX 75703 (903)-747-3434 Broadway Weaver Shopping Center 9424604 5th and David TCBYT 1690 S Beckham Ave Tyler TX 75701 (903)-747-3924 Beckham Weaver 9339605 University Blane Smith TCBYP 575 University Pkwy Orem UT 84097- (801)-802-7788 Mall I Ste M214 7601 9432501 Sugar House Lisa Liu TCBYT 2274 South 1300 East Salt Lake Building UT 84106 (505)-507-8934 City #8571, Space# G17 9257301 Tightsqueeze Robert TCBYS 13701 US Highway 29 Chatham VA 24531- (434)-432-1544 Plaza Subway Adams 3611 9206901 Cockerham Dickie Mayes TCBYP 1115 E Stuart Dr #9 Galax Attn: VA 24333- (276)-236-3036 Food Mart BP Tina 2513 Lawson 9429701 West Broad Leslie & TCBYT 9466 West Broad St Henrico VA 23293 (804)-513-7423 Claudia Davis 9206902 Hillsville Pizza Joe White TCBYP 49 Farmers Market Dr Hillsville Attn: VA 24343- (276)-728-2799 Inn George 3649 Black 9357803 Sterling Xiaopeng TCBYP 45415 Dulles Crossing Sterling VA 20166- (703)-444-1203 Walmart Guo Plz 8921 9430801 Barkley Village Jack Padia TCBYT 3011 Cinema Place Ste Bellingham W 98226 (917)-257-4833 101 A 9430802 Bellis Fair Jignesh Padia TCBYT 1 Bellis Fair Parkway Bellingham 516 W 98226 (917)-257-4833 A 9400702 Commons at Avinder Singh TCBYT 2008 Seatac Mall Federal W 98003- (253)-839-3470 Federal Way Way A 6040 9430001 Issaquah Tom and TCBYT 2520 NE Park Drive Issaquah C-105 W 98029 (425)-394-4168 Kara Negley A 9378401 Alderwood Brian Lim TCBYT 2615 184 St SW Lynnwood W 98037- (425)-774-6698 Park Place A 4737 9431901 Frontier Dan Peterson TCBYT 4717 68th Dr. NE Marysville W 98270 (206)-423-2427 Village A 9424301 City Centre - Young Kim TCBYT 1420 5th Ave Seattle W 98101 (206)-420-7787 Seattle A 9428001 Southcenter Pengpeng TCBYT 2800 Southcenter Mall Seattle W 98188- (206)-708-1096 Mall Wang A 2875 9217601 North City Thomas TCBYS 18002 15th Ave NE Ste Shoreline W 98155- (206)-306-0933 Plaza Subway Sandstedt A A 3838 9424302 Woodinville Young Kim TCBYT 13804 NE 175th Street Woodinville W 98072 (425)-806-8088 A 9227101 Cliton Citgo & Sean TCBYS 503 Peck Ave Clinton WI 53525- (608)-676-4606 Subway Harrison 9017 9033604 Market Saad & Ellen TCBYT 6654 Odana Rd Madison WI 53719- (608)-833-8474 Square Khalifa 1012 9429001 Concord 22 Bruce TCBYT 11523 N Port Mequon WI 53092 (262)-241-8833 Greenwald Washington Rd 9206301 Scott Junction Adam TCBYT 4144 State Route 34 Hurricane WV 25526- (304)-757-8220 Sponaugle 8821
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 13
9404502 Frontier Mall Gary & Cindy TCBYP 1400 Dell Range Blvd Cheyenne WY 82009- (307)-637-5547 Oliver Spc 40 4849 9300101 Lander Exxon Ron Hansen TCBYP 8116 State Highway Lander WY 82520- (307)-332-4402 Jr 789 2953 9250604 Mills Subway Richard TCBYS 516 SW Wyoming Blvd Mills WY 82644- (307)-473-1113 Bertagnole 9990 Includes TCBYP Smoothie location store #9384201 which is still Temporarily closed from 2012
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 14 EXHIBIT K – PART 2
LIST OF FRANCHISEES THAT WERE TERMINATED, NOT RENEWED OR REACQUIRED, OR OTHERWISE VOLUNTARILY OR INVOLUNTARILY CEASED DOING BUSINESS DURING 2013
The Garland 9426401 TCBYT Closed Fayetteville AR David Bass (479)-301-2719 Shops
9010402 Jonesboro TCBYT Closed Jonesboro AR Lynn Denton (870)-935-5825
Grewal Ravinder 9400802 TCBYT Closed Baker CA (310)-748-1348 Travel Plaza Grewal
9413001 Fresno TCBYT Closed Fresno CA Chae Lee (559)-323-8229
Paseo Mary and 9430401 TCBYP Closed Pasadena CA (818)-523-1829 Colorado Betty Horton Laurel 9425905 TCBYT Closed Fort Collins CO Steve Lauer (970)-682-1223 Street Marketplace 9425904 TCBYT Closed Loveland CO Steve Lauer (970)-685-4058 in Loveland Eric Town Lisa Gross 9424002 TCBYT Closed Glastonbury CT (860)-659-8550 Square Arnold Marketplace Richard 9425501 @ Seminole TCBYT Closed Sanford FL (407)-617-8232 Santos Town Ct Michael 9034903 Monroe TCBYT Closed Tallahassee FL (850)-385-6991 Stumpf Mahan Michael 9034904 TCBYT Closed Tallahassee FL (850)-878-0013 Square Stumpf Red Bug Winter 9345102 TCBYT Closed FL David Bishop (407)-699-5446 Lake Springs Executive 9362101 TCBYT Closed Atlanta GA Tim McGhee (404)-325-8736 Park Myong 9407201 Columbus TCBYT Closed Columbus GA (706)-569-1251 Jamieson Chicago 9422401 Union TCBYP Closed Chicago IL Nishit Shah (312)-234-9070 Station Centre Park James 9268401 TCBYT Closed Lafayette LA (337)-233-7740 Mall Plumley South James 9268402 College TCBYT Closed Lafayette LA (337)-504-4701 Plumley Center
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 15
Brandywine Dennis 9420902 TCBYT Closed Brandywine MD (301)-782-1950 Crossing McGrath South 9413901 Maine Mall TCBYP Closed ME Paul Delisle (207)-879-7779 Portland Smoothies- 9394901 Twelve Oaks TCBYP Closed Novi MI Navi Singh (248)-380-8303 Mall Tannery 9227601 TCBYT Closed Morganton NC Laura Hurt (828)-430-8444 Square Linden Angela 9426602 TCBYT Closed Omaha NE (402)-496-3981 Market Greisen Pheasant Sree Kumar 9409701 TCBYP Closed Nashua NH (603)-891-1413 Lane Mall Menon Taj Mahal 9360602 TCBYT Closed Atlantic City NJ Praveen Vig (609)-348-9000 Casino New Road Wayne 9422101 TCBYT Closed Parsippany NJ (973)-227-8229 Plaza Gargiulo Franklin 9423902 TCBYT Closed Ramsey NJ Nate Patel (201)-962-3330 Turnpike Guru 9407401 Express TCBYP Closed Las Vegas NV Nikolaas Bos (702)-433-9322 Market
9370401 New York TCBYT Closed New York NY Dennis Ratis (212)-327-3869
Greater 9423001 Rochester TCBYP Closed Rochester NY Jui Trivedi (585)-235-5588 Intl Airport Yonkers 9203701 TCBYP Closed Yonkers NY Carl Paley (914)-779-1881 Nathans Woodland Michael 9413801 TCBYP Closed Tulsa OK (918)-252-2901 Hills Mall Schultz High Pointe 9106703 TCBYT Closed Irmo SC Dipak Patel (803)-781-7560 Center Myrtle Myrtle 9365102 TCBYP Closed SC James Rugg (843)-272-7146 Beach Mall Beach North Fork 9301202 TCBYT Closed Orangeburg SC Dayle Bolen (803)-531-3663 Crossing Charles 9178901 Maryville BP TCBYP Closed Maryville TN (865)-982-1197 Carruthers Copperfield Corpus Alyeh Azali 9399001 Shopping TCBYT Closed TX (361)-993-5727 Christi Hatami Fardy Center
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 16
Fountains at Ahmad 9376502 TCBYT Closed Katy TX (281)-578-1077 Fry Road Ghalamdanchi
9424606 Faith Village TCBYT Closed Wichita Falls TX David Weaver (903)-372-7073
Factory 9375801 Stores at TCBYP Closed Park City UT Jason Reeder (435)-940-1200 Park City Richland 9199701 TCBYP Closed Richlands VA Bill Lester (276)-963-0256 Exxon Glenmark Marshall 9336801 TCBYP Closed Morgantown WV (304)-292-5375 Center Bishop Casper Richard 9250601 TCBYS Closed Casper WY (307)-266-1841 Subway Bertagnole
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 17 EXHIBIT K – PART 3
LIST OF FRANCHISEES WHO TRANSFERRED A FRANCHISE DURING 2013
TCBYT 9426801 Diane Pothast Scottsdale AZ
Rancho TCBYT 9413401 Tracy Avooski CA Cucamonga
TCBYT 9210801 Ken Rembert Gainesville FL
TCBYT 9427601 Andy Womack Cartersville GA
TCBYT 9228602 Jesse Mallard Nampa ID
TCBYT 9381306 Yousef Kashkeesh Orland Park IL
TCBYT 9381305 Yousef Kashkeesh Merrillville IN
TCBYT 9398601 Nayfeh Salem Salisbury MD
TCBYT 9095601 Brian Coury Troy MI
Chimanlal TCBYP 9395301 Concord NC Bhingrodia
TCBYT 9426301 Chuck Schrick Houston TX
TCBYT 9325002 Lawrence Cohen Houston TX
TCBYT 9409501 Cheryl Watson San Antonio TX
TCBYP 9325003 Doc Cohen Spring TX
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 18 EXHIBIT K – PART 4
NAMES AND CONTACT INFORMATION FOR AREA DIRECTORS
AS OF DECEMBER 28, 2013
Franchisee Territory Contact Person Address City State Zip Phone Number Name Froyo Larimer and Weld 1218 W. Ash Development Counties in the State of Steven L. Lauer Windsor Colorado 80550 (970) 690-7070 St., Suite G Co., LLC Colorado Laramie and Albany Froyo Counties in the State of 1219 W. Ash Development Wyoming and Boulder Steven L. Lauer Windsor Colorado 80551 (970) 690-7071 St., Suite G Co., LLC County in the State of Colorado
Mecklenberg, Union and Hanover Counties Batt in the State of North 1037 Westbury Matthew North Enterprises Carolina and Charleston Samuel Batt 28104 (610) 937-1792 Drive s Carolina VIII, LLC and York Counties in the State of South Carolina Lone Star Texas David Weaver 15488 FM 2493 Tyler Texas 75703 (903) 561-0860 Yogurt, Inc. Washington and the Green Bowl 1000 2nd Avenue Island of Oahu in Hyoungsoo Kim Seattle Washington 98104 (206) 774-3800 Time, Inc. Suite 1320 Hawaii
TCBY FDD 03/2014 EXHIBIT K: Franchisee Information 19 EXHIBIT L
FINANCIAL STATEMENTS
TCBY FDD 03/2014 EXHIBIT L: Financial Statements
THESE FINANCIAL STATEMENTS ARE PREPARED WITHOUT AN AUDIT. PROSPECTIVE FRANCHISEES OR SELLERS OF FRANCHISES SHOULD BE ADVISED THAT NO CERTIFIED PUBLIC ACCOUNTANT HAS AUDITED THESE FIGURES OR EXPRESSED HIS/HER OPINION WITH REGARD TO THE CONTENT OR FORM.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 1 May 25,
Mrs. Fields' Original Cookies, Inc. Monthly Financial Statements May 2014 Mrs. Fields' Original Cookies, Inc. Consolidated Balance Sheets (in thousands) (unaudited)
May 24, December 28, 2014 2013 ASSETS: Cash and cash equivalents ...... $ 2,707 $ 5,337 Restricted cash ...... 450 400 Receivables, net ...... 4,206 6,691 Inventories ...... 2,178 2,322 Prepaid expenses and other ...... 383 467 Deferred tax asset ...... 179 179 Total current assets ...... 10,103 15,396
Property and equipment, net ...... 3,417 3,471 Goodwill ...... 7,651 7,651 Trade names and other intangible assets, net ...... 18,135 18,827 Other assets ...... 440 442
Total assets ...... $ 39,746 $ 45,787
LIABILITIES AND STOCKHOLDERS' DEFICIT: Accounts payable ...... $ 2,638 $ 4,572 Accrued liabilities ...... 4,248 5,450 Accrued restructure liabilities ...... 317 141 Senior secured notes, current portion ...... 6,297 6,297 Current portion of other liabilities ...... 488 688 Total current liabilities ...... 13,988 17,148
Revolver ...... 25,362 25,000 Term loan ...... 27,304 26,977 Senior secured notes ...... - - Deferred tax liabilities ...... 4,155 4,155 Other liabilities ...... 377 443
Total liabilities ...... 71,186 73,723
Common stock ...... - - Additional paid-in-capital ...... 47,961 45,711 Accumulated deficit ...... (79,427) (73,662) Accumulated other comprehensive income ...... 26 15
Total stockholders' deficit ...... (31,440) (27,936)
Total liabilities and stockholders' deficit ...... $ 39,746 $ 45,787 Mrs. Fields' Original Cookies, Inc. Consolidated Statements of Operations (in thousands) (unaudited)
4 Weeks 4 Weeks 21 Weeks 21 Weeks Ended Ended Ended Ended May 24, May 25, May 24, May 25, 2014 2013 2014 2013 REVENUES: Mrs. Fields Gifts ...... $ 1,162 $ 1,319 $ 6,502 $ 6,762 Mrs. Fields Branded Retail ...... (38) (15) (75) 189 Mrs. Fields Franchising ...... 324 349 1,780 1,888 Mrs. Fields Licensing ...... 308 352 1,589 1,528 Total Mrs. Fields ...... 1,756 2,005 9,796 10,367 TCBY ...... 440 483 1,800 2,080 International Franchising ...... 269 104 795 521 Total revenues ...... 2,465 2,592 12,391 12,968
OPERATING COSTS AND EXPENSES: Mrs. Fields Gifts ...... 1,245 1,436 7,173 7,528 Mrs. Fields Branded Retail ...... - 8 - 370 Mrs. Fields Franchising ...... 201 269 1,283 1,490 Mrs. Fields Licensing ...... 17 33 104 181 Total Mrs. Fields ...... 1,463 1,746 8,560 9,569 TCBY ...... 351 348 1,853 2,178 International Franchising ...... 85 75 320 322
General and administrative ...... 774 582 3,694 3,259 Depreciation and amortization ...... 260 272 1,290 1,313 Total operating costs and expenses ...... 2,933 3,023 15,717 16,641
Income (loss) from operations ...... (468) (431) (3,326) (3,673)
OTHER (EXPENSE) INCOME, NET: Interest expense, net ...... (489) (447) (2,422) (2,242)
Income (loss) before and provision for income taxes ...... (957) (878) (5,748) (5,915)
Provision for income taxes ...... 2 1 17 12
Net income (loss) ...... $ (959) $ (879) $ (5,765) $ (5,927)
EBITDA from continuing operations ...... $ (208) $ (159) $ (2,036) $ (2,360) Mrs. Fields' Original Cookies, Inc. Consolidating Statements of Cash Flows (in thousands) (unaudited)
21 Weeks 21 Weeks Ended Ended May 24, May 25, 2014 2013 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ...... $ (5,765) $ (5,927) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization ...... 1,290 1,313 Lease termination expense ...... (47) (33) Interest paid in kind ...... 689 - Changes in assets and liabilities: Restricted cash ...... (50) - Receivables ...... 2,485 2,524 Inventories ...... 144 939 Prepaid expenses and other assets ...... 86 193 Accounts payable ...... (1,934) (2,897) Accrued liabilities ...... (1,202) (1,306) Accrued restructuring liabilities ...... 223 (613) Other liabilities ...... (266) (64) Net cash used in operating activities ...... (4,347) (5,871)
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment ...... (544) (1,094) Net cash used in investing activities ...... (544) (1,094)
CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments on capital lease obligations ...... - (14) Capital contribution ...... 2,250 - Net cash provided by financing activities ...... 2,250 (14)
Effect of foreign exchange rate changes on cash ...... 11 (7) Net decrease in cash and cash equivalents ...... (2,630) (6,986) Cash and cash equivalents at beginning of period ...... 5,337 7,985 Cash and cash equivalents at end of period ...... $ 2,707 $ 999
Supplemental Disclosures of Cash Flow Information: Cash paid for interest ...... $ 2,258 $ 2,688
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 2
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 3
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 4
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 5
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 6
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 7
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 8
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 9
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 10
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 11
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 12
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 13
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 14
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 15
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 16
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 17
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 18
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 19
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 20
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 21
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 22
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 23
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 24
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 25
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 26
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 27
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 28
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 29
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 30
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 31
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 32
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 33
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 34
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 35
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 36
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 37
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 38
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 39
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 40
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 41
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 42
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 43
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 44
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 45
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 46
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 47
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 48
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 49
KPMG LLP Suite 1500 15 W. South Temple Salt Lake City, UT 84101
Independent Auditors' Report
The Board of Directors and Shareholders Mrs. Fields' Original Cookies, Inc.:
We have audited the accompanying consolidated balance sheets of Mrs. Fields Original Cookies, Inc. and subsidiaries as of December 31, 2011 and January 1, 2011, and the related consolidated statements of operations and comprehensive loss, stockholders' deficit, and cash flows for the years ended December 31, 2011, January 1, 2011, and January 2, 2010. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Mrs. Fields' Original Cookies, Inc. and subsidiaries as of December 31, 2011 and January 1, 2011, and the results of their operations and their cash flows for the years ended December 31, 2011, January 1, 2011, and January 2, 2010, in conformity with U.S. generally accepted accounting principles.
KPMG LLP
Salt Lake City, Utah March 29, 2012
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 50
Mrs. Fields' Original Cookies, Inc.
Consolidated Financial Statements December 31, 2011 and January 1, 2011
Confidential Proprietary Information
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 51
Mrs. Fields' Original Cookies, Inc. Table of Contents
Independent Auditors Report ...... 1
Consolidated Balance Sheets ...... 2
Consolidated Statements of Operations and Comprehensive Loss ...... 3
Consolidated Statements of Stockholders' Deficit...... 4
Consolidated Statements of Cash Flows ...... 5
Notes to Consolidated Financial Statements ...... 7
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 52
Audit Opinion
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 53
[This Page Intentionally Left Blank]
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 54
December 31, January 1, 2011 2011 ASSETS Cash and cash equivalents ...... $ 6,548 $ 9,930 Restricted cash ...... 1,075 1,019 Receivables, net of allowance for doubtful accounts of $1,422 and $1,201, respectively ...... 8,094 6,347 Inventories ...... 2,842 3,179 Prepaid expenses and other ...... 898 1,331 Deferred tax asset ...... 853 343 Total current assets ...... 20,310 22,149 Property and equipment, net ...... 3,830 4,100 Goodwill ...... 7,789 7,789 Trademarks and other intangible assets, net ...... 22,377 24,038 Other assets ...... 394 554 Total assets ...... $ 54,700 $ 58,630
LIABILITIES AND STOCKHOLDERS' DEFICIT Accounts payable ...... $ 5,984 $ 5,954 Accrued liabilities ...... 3,702 5,411 Current portion of store closure reserve, capital lease obligations and deferred revenues ...... 730 1,141 Current portion of term loan ...... - 1,000 Total current liabilities ...... 10,416 13,506 Revolving loan facility ...... 14,000 - Term loan facility ...... 26,977 6,800 Senior secured notes ...... 6,297 65,837 Store closure reserve, capital lease obligations and deferred revenues, net of current portion ...... 54 112 Deferred tax liabilities ...... 7,190 4,567 Other liabilities ...... 843 1,020 Total liabilities ...... 65,777 91,842 Commitments and contingencies Common stock - $0.01 par value; 100 shares authorized and outstanding in 2011 and $0.001 par value; 29,900,000 shares authorized; 22,371,056 shares issued and outstanding in 2010 ...... - 22 Additional paid-in-capital ...... 43,714 17,829 Accumulated deficit ...... (54,799) (51,065) Accumulated other comprehensive income ...... 8 2 Total stockholders' deficit ...... (11,077) (33,212) Total liabilities and stockholders' deficit ...... $ 54,700 $ 58,630
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 55
For the For the For the Fiscal Year Fiscal Year Fiscal Year Ende d Ende d Ende d December 31, January 1, January 2, 2011 2011 2010 REVENUES: Mrs. Fields ...... $ 58,189 $ 54,849 $ 52,376 TCBY ...... 5,951 5,604 5,871 International Franchising ...... 1,741 1,902 1,499 Total revenues ...... 65,881 62,355 59,746
OPERATING COSTS AND EXPENSES: Mrs. Fields ...... 49,065 45,570 42,960 TCBY ...... 4,546 3,255 2,438 International Franchising ...... 644 604 494 General and administrative ...... 5,852 8,023 8,077 Executive severance, recruiting and compensation costs ...... - 1,065 445 Depreciation ...... 1,158 1,093 1,169 Amortization ...... 1,660 1,660 1,660 Impairment of goodwill and intangible assets ...... - 4,976 14,191 Other expense (income), net ...... 51 (113) (32) Total operating costs and expenses ...... 62,976 66,133 71,402 Income (loss) from operations ...... 2,905 (3,778) (11,656)
OTHER EXPENSES, NET: Interest expense, net ...... (8,183) (8,513) (8,087) Gain on extinguishment of debt, net ...... 1,712 - - Reversal of severance accrual ...... - 992 - Income (loss) before provision (benefit) for income taxes ...... (3,566) (11,299) (19,743) Provision (benefit) for income taxes ...... 168 34 (3,017) Net loss ...... $ (3,734) $ (11,333) $ (16,726)
COMPREHENSIVE INCOME (LOSS): Net loss ...... $ (3,734) $ (11,333) $ (16,726) Foreign currency translation adjustment ...... 6 (9) 5 Comprehensive loss ...... $ (3,728) $ (11,342) $ (16,721)
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 56
Accumulated Additional Other Paid-in Accumulated Comprehensive Shares Amount Capital Deficit Income (Loss) Total
Balance at January 3, 2009 ...... 22,371,056 $ 22 $ 17,829 $ (23,006) $ 6 $ (5,149) Foreign currency translation adjustment ...... - - - - 5 5 Net loss ...... - - - (16,726) - (16,726) Balance at January 2, 2010 ...... 22,371,056 22 17,829 (39,732) 11 (21,870) Foreign currency translation adjustment ...... - - - - (9) (9) Net loss ...... - - - (11,333) - (11,333)
Balance at January 1, 2011 ...... 22,371,056 22 17,829 (51,065) 2 (33,212) Foreign currency translation adjustment ...... - - - - 6 6 Net loss ...... - - - (3,734) - (3,734) Repurchase and cancellation of common stock ...... (22,371,056) (22) (202) - - (224) Issuance of common stock ...... 100 - - - - - Capital contribution on debt exchange, net of income taxes of $2.0 million and expenses of $6.5 million ...... - - 26,087 - - 26,087 Balance at December 31, 2011 ...... 100 $ - $ 43,714 $ (54,799) $ 8 $ (11,077)
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 57
For the For the For the Fiscal Year Fiscal Year Fiscal Year Ende d Ende d Ende d December 31, January 1, January 2, 2011 2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss ...... $ (3,734) $ (11,333) $ (16,726) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization ...... 2,818 2,753 2,829 Amortization of deferred loan costs ...... 292 35 - Impairment of goodwill and intangible assets ...... - 4,976 14,191 Reversal of excess severance accrual ...... - (992) - Gain on extinguishment of debt ...... (1,712) - - Loss (gain) on sales of assets ...... 8 2 (40) Non-cash interest expense on Senior Secured Notes ...... 3,854 7,242 6,446 Deferred income taxes ...... 122 (8) (2,353) Changes in assets and liabilities: Receivables ...... (1,751) (323) (1,047) Inventories ...... 337 (646) 1,384 Prepaid expenses and other assets ...... 561 (788) 307 Accounts payable ...... 34 297 947 Accrued liabilities ...... (1,709) 77 (1,947) Store closure reserve, deferred revenues and other liabilities ...... (577) 377 (149) Total operating cash flows (used in) provided by continuing operations ...... (1,457) 1,669 3,842 Total operating cash flows used in discontinued operations ...... - - (42) Net cash (used in) provided by operating activities ...... (1,457) 1,669 3,800 CASH FLOWS FROM INVESTING ACTIVITIES: Change in restricted cash ...... (56) 469 (1,488) Proceeds from sales of assets ...... - - 6 Purchases of property and equipment ...... (895) (1,291) (516) Net cash used in investing activities ...... (951) (822) (1,998) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from revolving loan facility ...... 14,000 - - Proceeds from term loan ...... 3,200 - - Proceeds from term loan facility ...... 1,089 - - Principal payments on term loan ...... (11,000) (2,200) - Principal payments on senior secured notes ...... (1,089) - - Payment of debt financing costs ...... (4,387) (67) - Debt exchange fees paid to shareholders ...... (2,500) - - Principal payments on capital lease obligations ...... (69) (63) (63) Purchase and cancellation of common stock ...... (224) - -
Net cash used in financing activities ...... (980) (2,330) (63) Effect of foreign exchange rate changes on cash ...... 6 (9) 5 Net (decrease) increase in cash and cash equivalents ...... (3,382) (1,492) 1,744 Cash and cash equivalents at beginning of period ...... 9,930 11,422 9,678 Cash and cash equivalents at end of period ...... $ 6,548 $ 9,930 $ 11,422
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 58
For the For the For the Fiscal Year Fiscal Year Fiscal Year Ende d Ende d Ende d December 31, January 1, January 2, 2011 2011 2010 Supplemental Disclosures of Cash Flow Information: Cash paid for interest ...... $ 5,135 $ 1,311 $ 1,578 Refunds received for income taxes ...... - (350) (374)
Supplemental Disclosures of Noncash Investing and Financing Activities: Capital contribution on debt exchange, net of income taxes of $2.0 million and expenses of $4.0 million ...... $ 28,587 $ - $ - Increase in long-term debt related to non-cash interest expense ...... - 7,242 6,446
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 59
1. Business
Description of the Business
Mrs. Fields' Original Cookies, Inc. ("MFOC") and its wholly-owned subsidiary Mrs. Fields Famous Brands, LLC ("MFFB", together with MFOC, the "Company") develops and franchises retail stores which sell core products including cookies, brownies and frozen yogurt through two specialty branded concepts, Mrs. Fields and TCBY. The Company operates two company-owned TCBY stores.
The Company markets and distributes products through catalogs and its website as well as affiliations with other websites and sales to large corporate customers for gifting purposes and various retail channels.
The Company authorizes franchisees and third-party licensees to use certain business formats, systems, methods, procedures, designs, layouts, specifications, trade names and trademarks in the United States of America (the "United States") and other countries.
The Company licenses the use of its trademarks, logos and recipes to third parties for distribution of Mrs. Fields and TCBY branded products through non-bakery stores and cafés.
Refinancing Transaction
On December 13, 2011, MFOC and its subsidiaries consummated an exchange offer/tender offer (the "Exchange") pursuant to which (a) the holders of its 10 percent senior secured notes ( the "Senior Secured Notes") either (i) exchanged their respective Senior Secured Notes for a portion of a new 10 percent term loan (the "Term Loan Facility") in an aggregate principle amount of $27.0 million or (ii) tendered all of their Senior Secured Notes to MFFB and Mrs. Fields Financing Company, Inc., for a certain cash purchase price (the "Note Purchase") and (b) certain eligible holders of the Senior Secured Notes subscribed for interests in a new revolving loan facility (the "Revolving Loan Facility", together with the Term Loan Facility, the "Credit Facilities") in an aggregate principle amount of $20.0 million and additional interests in the Term Loan and common stock of MFOC Holdco Inc. ("Holdco"), the Company's ultimate parent, an entity organized under Delaware law. In addition, the Company purchased all of the outstanding common shares of MFOC for $224,000 in cash and issued 100 shares of new common stock to Holdco (the "Transactions").
In exchange for their total claims of $59.5 million, the holders of the Senior Secured Notes received at closing $1.1 in cash, $27.0 million of the new Term Loan Facility and 100 percent of the common stock of Holdco. Certain holders of the Senior Secured Notes, aggregating $6.3 million, elected not to participate in the Exchange. The initial lenders also provided the Company with the Credit Facilities. The retirement of the Senior Secured Notes was accounted for as an extinguishment of debt with a portion deemed to be a troubled debt restructuring under Accounting Standards Codification ("ASC") 470-60 (see Note 10).
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP"). All intercompany accounts and transactions have been eliminated in consolidation.
Accounting Periods
The Company operates using a 52/53 week fiscal year ending on the Saturday closest to December 31.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 60
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of contingent liabilities in the financial statements and accompanying notes. From time to time management evaluates these estimates, including those that relate to allowances for bad debt, inventory valuation, fair value of goodwill and intangible assets, long-lived asset impairments, deferred tax valuation allowances and contingencies. The Company bases its estimates on historical experience and on various assumptions that it believes reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates.
Foreign Currency Translation
The balance sheet accounts of foreign subsidiaries are recorded in their local currency (the functional currency) and translated into U.S. dollars using the applicable balance sheet date exchange rates, while revenues and expenses are translated using the average exchange rates for the period presented.
Cash Equivalents
The Company considers all highly liquid investments purchased with initial maturities of three months or less to be cash equivalents. The Company places its temporary cash investments with high credit quality financial institutions. At times such investments may be in excess of the Federal Deposit Insurance Corporation insurance limit. As of December 31, 2011 and January 1, 2011, the Company had cash equivalents of $14,000 and $13,000, respectively.
Restricted Cash
Restricted cash of $1.1 million and $1.0 million at December 31, 2011 and January 1, 2011, respectively, represents cash held in reserve accounts under agreements with the Company’s financial institutions to cover their risk associated with the Company’s Automated Clearing House ("ACH") transactions, company credit card and 3rd party credit card transactions.
Receivables
Most of the Company's receivables are due from domestic and international franchisees, distributors, licensees, as well as corporate customers of Mrs. Fields Gifts and Mrs. Fields Branded Retail (see Note 14). These receivables are comprised of normal trade accounts receivable and longer-term notes receivable. Service charges may be assessed on past due invoices but any revenue associated with the service charges is only recognized when collected. The Company maintains an allowance for doubtful accounts to cover potential losses. This allowance is the Company's best estimate of the amount of probable collection losses in the Company's existing trade accounts receivable. The Company determines the allowance based upon historical write-off experience and individual facts and circumstances associated with individual debtors. If the assumptions that are used to determine the allowance for doubtful accounts change, the Company may have to provide for a greater level of expense in future periods or reverse amounts provided for in prior periods.
Inventories
Inventories, consisting of finished goods, novelties, packaging and raw materials, are stated at the lower of cost (first-in, first-out method) or market value. In assessing the realizability of inventories, the Company makes judgments as to future demand requirements and product expiration dates. The inventory requirements change based on projected customer demand, which changes due to fluctuations in market conditions and product life cycles.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 61
Property and Equipment
Additions of property and equipment are recorded at cost and depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are capitalized and amortized over the lesser of the life of the lease or the estimated useful life of the asset.
Expenditures that materially extend useful lives of property and equipment are capitalized. Routine maintenance, repairs and renewal costs are expensed as incurred. Gains or losses from the sale or retirement of property and equipment are recorded in current operations.
Goodwill, Trademarks and Other Intangible Assets
Goodwill and intangible assets with indefinite lives are not amortized, but are tested for impairment at least annually and more frequently in the event of an impairment indicator. Intangible assets with definite useful lives are amortized over their respective estimated useful lives and reviewed whenever events or circumstances indicate an impairment may exist.
A two-step test must be performed to assess goodwill for impairment. First, the fair value of each reporting unit is compared to its carrying value. Fair value is computed by the Company utilizing a discounted cash flow model. If the estimated fair value of the reporting unit exceeds the carrying value, the reporting unit's goodwill is not impaired and no further testing is performed. The second step is performed if the reporting unit's carrying value exceeds its estimated fair value. The implied fair value of the reporting unit’s goodwill must be determined and compared to the carrying value of the goodwill. If the carrying value of reporting unit’s goodwill exceeds its implied fair value, an impairment loss equal to the difference is recorded.
Deferred Loan Costs
Deferred loan costs are amortized to interest expense over the period of the underlying indebtedness using the effective interest rate method. As a result of its extinguishment of debt, the Company wrote-off unamortized deferred loan costs associated with its old Term Loan of $457,000 which were deemed to be a reduction of the capital contribution and were recorded to paid-in-capital in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2011.
As of December 31, 2011 and January 1, 2011, the Company had unamortized deferred loan costs of $0 and $32,000, respectively, which are included in other assets in the accompanying consolidated balance sheets. During the years ended December 31, 2011, January 1, 2011 and January 2, 2010, the Company amortized deferred loan costs of $292,000, $35,000 and $0, respectively.
Long-Lived Assets
Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the book value of an asset may not be fully recovered. The Company uses an estimate of future undiscounted net cash flows of the related asset or group of assets over the remaining life in measuring whether the assets are recoverable. Impairment of long- lived assets is assessed at the lowest level for which there are identifiable cash flows that are independent of other groups of assets. Impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. The impairment of long-lived assets requires judgments and estimates. If circumstances change, such estimates could also change.
Revenue Recognition
The Company recognizes revenues, net of state and local sales taxes, from gift sales at the time of shipment. Revenues, net of sales discounts and allowances, from the sale of shelf stable cookies directly through various retail channels are recognized upon delivery and are included in branded retail revenues.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 62
Revenues from initial franchising and licensing fees under domestic franchise agreements are recognized when all material services or conditions relating to the franchising or licensing agreement have been substantially performed or satisfied and collectability of the initial franchise fee is reasonably assured, which is generally upon the opening of a location by a franchisee or licensee. The Company recognizes revenues from initial franchise fees under domestic area director agreements and international master franchise agreements when substantially all of the initial services required by the agreement have been met and collectability of the initial franchise fee is reasonably assured.
Franchise and license royalties, which are based on a percentage of gross store sales, are recognized as earned net of any amounts due under area director agreements. Royalties are generally earned upon sale of product by franchisees or licensees. Minimum royalty payments under certain licensing agreements are deferred and recognized on a straight-line basis over the term of the agreement. Revenues from the two company-owned TCBY stores are recognized when payment is tendered at the time of sale.
The Company receives cash payments for product formulation fees and allowances from suppliers based on the amount of product purchased directly by its distributors and franchisees. These product formulation fees include cash payments to the Company for the right to use the Company's proprietary formulations and recipes to manufacture the frozen dough and TCBY products these suppliers sell to the Company's franchisees. Formulation fees and allowances are recorded as revenues within the Mrs. Fields Franchising, TCBY and International Franchising operating segments upon shipment of product to the Company's distributors or franchisees.
Formulation fees and allowances for each of the operating segments are as follows (in thousands):
For the For the For the Fiscal Year Fiscal Year Fiscal Year Ende d Ende d Ende d December 31, January 1, January 2, 2011 2011 2010 Mrs. Fields ...... $ 1,248 $ 1,328 $ 1,343 TCBY ...... 3,643 3,566 4,024 International Franchising ...... 260 284 179 $ 5,151 $ 5,178 $ 5,546
Operating Expenses
Mrs. Fields Gifts operating expenses are comprised of costs incurred to generate gifting revenues which include cost of sales for products sold, selling and promotional expenses, compensation and related costs and other direct operating expenses of the gifts segment. Cost of sales includes inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, formulation fees and other costs of the Company's distribution network. Mrs. Fields Branded Retail operating expenses are comprised of cost of sales for products sold, selling and promotional expenses, compensation and related costs and other direct operating expenses of the branded retail segment. Operating expenses of the Company's franchising segments, including Mrs. Fields, TCBY and International Franchising, are comprised of costs incurred to generate franchising revenues, which include operation and supervision expenses wherein the Company provides support, direction and supervision to the franchisees; development and support expenses including product development costs, expenses relating to new franchise development, marketing and advertising, bad debt expense and other direct franchising expenses. TCBY operating expenses also include the expenses related to its two company-owned stores.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 63
Mrs. Fields Licensing operating expenses are comprised of costs incurred to generate licensing revenues, which primarily are selling and promotional expenses, bad debt and other direct operating expenses of the licensing segment. Selling expenses include compensation and related costs, outside commissions and professional fees.
General and administrative expenses are comprised of compensation and related costs of corporate employees such as executive, accounting, legal, human resources and information systems personnel; travel and travel- related expenses of corporate employees; professional and legal fees, bank charges, insurance costs and facility costs not related to the generation of revenues. These costs are associated with providing management support for all of the Company's business segments. Executive severance, recruiting and compensation costs are comprised of costs incurred during 2010 for compensation and severance related to one of the Company's former Co-CEOs and President of Mrs. Fields Division ("Co-CEO") and recruiting and relocation costs related to its Chief Executive Officer ("CEO"), hired in May 2010. Shipping and Handling Costs
The Company charges customers in its gifting segment for shipping and handling costs and records the amounts in Mrs. Fields revenues. The costs for shipping and handling are included in Mrs. Fields operating costs and expenses.
Sales Tax
The Company records revenues net of state and local sales taxes.
Income Taxes
Income taxes are accounted for under the asset and liability method. The Company recognizes deferred income tax assets or liabilities for expected future income tax consequences of events that have been recognized in the financial statements or income tax returns. Under this method, deferred income tax assets or liabilities are determined based upon the difference between the financial statement and income tax bases of assets and liabilities using enacted tax rates expected to apply when differences are expected to be settled or realized.
Advertising
The Company administers advertising funds (the "Ad Funds") collected from its domestic franchisees. The Company directs the expenditures of the Ad Funds in connection with advertising and marketing campaigns for the overall benefit of the respective concepts. The Ad Funds and their related activities are not included in the accompanying consolidated financial statements.
General corporate advertising costs are expensed as incurred. During the years ended December 31, 2011, January 1, 2011 and January 2, 2010, the Company incurred advertising expenses, excluding the expenditures of the advertising funds, totaling approximately $5.5 million, $5.3 million and $4.7 million, respectively, which are included in the operating costs of Mrs. Fields and TCBY.
Legal and Regulatory
The Company records liabilities for legal and regulatory matters when the contingency is both probable and estimable. The Company is involved in several legal and regulatory matters. After consultation with legal counsel, the Company believes that the ultimate dispositions of these matters will not have a material adverse impact on its financial position, liquidity or results of operations. However, there can be no assurance that the
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 64
Company will be successful in its efforts to satisfactorily resolve these matters and the ultimate outcome could result in a material adverse impact on its financial position, liquidity or results of operations.
New Accounting Pronouncements Not Yet Adopted
In September 2011, the FASB issued ASU No. 2011-08, "Intangibles—Goodwill and Other (ASC 350): Testing Goodwill for Impairment," which specifies that an entity has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test. An entity is not required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that its fair value is less than its carrying amount. ASU No. 2011-08 is effective prospectively for fiscal years and interim periods beginning after December 15, 2011. The Company's adoption of ASU No. 2011-08 is not expected to have a significant impact on the Company's consolidated financial condition or results of operations.
In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income". Under ASU 2011-05, an entity will have the option to present the components of net income and comprehensive income in either one or two consecutive financial statements. The ASU eliminates the option in U.S. GAAP to present other comprehensive income in the statement of changes in equity. An entity should apply the ASU retrospectively. The ASU is effective for fiscal years ending after December 15, 2012 and interim and annual periods thereafter. Early adoption is permitted. In December 2011, the FASB decided to defer the effective date of those changes in ASU 2011-05 that relate only to the presentation of reclassification adjustments in the statement of income by issuing ASU 2011-12, "Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive income in Accounting Standards Update 2011-05". The Company's adoption of ASU No. 2011-05 is not expected to have a significant impact on the Company's consolidated financial condition or results of operations.
3. Fair Value Measurement
FASB authoritative guidance defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. It also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
• Level 1 – quoted prices for identical instruments in active markets;
• Level 2 – quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which all significant inputs and significant value drivers are observable in active markets; and
• Level 3 – valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
The Company applies fair value techniques on a non-recurring basis associated with valuing potential impairment losses related to goodwill and other long-lived assets. Non-financial assets and liabilities measured at fair value on a non-recurring basis are summarized below (in thousands):
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 65
January 1, 2011 Total Level 1 Level 2 Level 3 Goodwill ...... $ 2,837 $ - $ - $ 2,837 Other intangible assets ...... 1,377 - - 1,377
4. Inventories Inventories are comprised of the following (in thousands):
December 31, January 1, 2011 2011 Finished goods ...... $ 1,386 $ 1,625 Novelties ...... 704 664 Packaging ...... 529 488 Raw materials ...... 223 402 $ 2,842 $ 3,179
5. Property and Equipment Property and equipment are comprised of the following (in thousands):
Estimated December 31, January 1, Useful Life's 2011 2011 Equipment and fixtures ...... up to 7 years $ 3,678 $ 3,193 Leasehold improvements ...... up to 10 years 3,583 3,414 7,261 6,607 Accumulated depreciation ...... (3,431) (2,507) $ 3,830 $ 4,100
Property and equipment at December 31, 2011 and January 1, 2011 includes gross assets acquired under capital leases of $315,000 and $318,000, respectively, and related accumulated depreciation of $217,000 and $151,000, respectively. Included in leasehold improvements at December 31, 2011 and January 1, 2011 is $1.1 million for tenant improvements provided as a lease incentive by the lessors related to the leases for the Company's gifting operations facility and the two company-owned TCBY stores, less accumulated depreciation of $461,000 and $309,000, respectively. Deferred rent at December 31, 2011 and January 1, 2011 of $134,000 is included in accrued liabilities and $467,000 and $601,000, respectively, in other liabilities relating to these lease incentives. The total amount of these leasehold improvements and deferred rents are amortized over the life of the lease. 6. Goodwill and Other Intangible Assets The Company performed its annual impairment analysis for goodwill as of December 31, 2011 and January 1, 2011 by comparing the fair value of each of the reporting units to the carrying amount of each reporting unit as of December 31, 2011 and January 1, 2011. As of December 31, 2011, management concluded that the fair value of its reporting units exceeded the carrying amount of the reporting units, thus indicating no impairment. Accordingly, the Company recorded no impairment charge for the fiscal year ended December 31, 2011. As of January 1, 2011, management concluded that the carrying amount of its Mrs. Fields Franchising, Mrs. Fields Licensing and TCBY reporting units exceeded the fair value of the reporting units, thus indicating an
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 66
impairment. Accordingly, the Company recorded an impairment charge of $5.0 million for the fiscal year ended January 1, 2011 As of January 2, 2010, management concluded that the carrying amount of its Mrs. Fields Branded Retail, Mrs. Fields Franchising and Mrs. Fields Licensing reporting units exceeded the fair value of the reporting units, thus indicating an impairment. Accordingly, the Company recorded an impairment charge of $6.2 million for the fiscal year ended January 2, 2010. The Company performed its annual impairment analysis for indefinite-lived intangible assets, consisting of the Mrs. Fields and TCBY trade names, for fiscal year 2011 and fiscal year 2010 by comparing the fair value of the trade names to their carrying amount as of December 31, 2011 and January 1, 2011. As of December 31, 2011, management concluded that the estimated fair value of its trade names exceeded the carrying value and recorded no impairment charge for the fiscal year ended December 31, 2011. As of January 1, 2011, management concluded that the carrying value of the TCBY trade names exceeded the estimated fair value and recorded an impairment charge of $22,000 for the fiscal year ended January 1, 2011. As of January 2, 2010, management concluded that the carrying value of the Mrs. Fields trade names exceeded the estimated fair value and recorded an impairment charge of $8.0 million for the fiscal year ended January 2, 2010. As a result of the impairment of goodwill and indefinite-lived intangible assets as of January 1, 2011 and January 2, 2010, the Company concluded that a triggering event had occurred. The Company performed an impairment test of its definite-lived intangible assets and concluded that as of January 1, 2011 and January 2, 2010 its definite-lived intangible assets were not impaired. The following summarizes the Company's goodwill by operating segment (in thousands):
December 31, January 1, 2011 2011 Mrs. Fields Gifts ...... $ 3,496 $ 3,496 Mrs. Fields Licensing ...... 1,818 1,818 TCBY ...... 1,019 1,019 International ...... 1,456 1,456 $ 7,789 $ 7,789
The following table summarizes the changes in goodwill (in thousands):
Accumulated Impairment Goodwill Loss Total Balance at January 3, 2009 ...... $ 32,077 $ (12,454) $ 19,623 Other intangible assets Reduction in goodwill resulting from changes in income tax receivable ...... (724) - (724) are comprised of Impairment loss ...... - (4,954) (4,954) Balance at January 2, 2010 ...... 31,353 (18,610) 12,743 indefinite-lived and Impairment loss ...... - (4,954) (4,954) Balance at January 1, 2011 ...... 31,353 (23,564) 7,789 definite-lived assets
Impairment loss ...... - - - (amortized over 10 Balance at December 31, 2011 ...... $ 31,353 $ (23,564) $ 7,789 years). The following
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 67
details the Company's other intangibles (in thousands):
December 31, 2011 January 1, 2011 Gross Accumulated Gross Accumulated Amount Amortization Amount Amortization Indefinite-lived intangibles Trade names ...... $ 11,032 $ - $ 11,032 $ - Definite-lived intangibles Recipes ...... 5,063 1,629 5,063 1,126 Franchise relationships ...... 11,594 3,683 11,594 2,525 16,657 5,312 16,657 3,651 $ 27,689 $ 5,312 $ 27,689 $ 3,651
The range of remaining useful lives and weighted average amortization period for the definite-lived intangible assets at December 31, 2011 are as follows:
Range of Weighted Remaining Average Estimated Amortization Useful Lives Period Recipes ...... 6.8 years 6.8 years Franchise relationships ...... 6.8 years 6.8 years
Future amortization expense of the definite-lived intangible assets as of December 31, 2011 is estimated to be as follows (in thousands):
Fiscal Year 2012 ...... $ 1,660 2013 ...... 1,660 2014 ...... 1,660 2015 ...... 1,660 2016 ...... 1,660 Thereafter ...... 3,045 $ 11,345
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 68
7. Accrued Liabilities Accrued liabilities are comprised of the following (in thousands):
December 31, January 1, 2011 2011
Compensation and benefits ...... $ 1,117 $ 979 Gift cards and gift certificates ...... 934 700 Branded Retail trade spend ...... 454 435 Interest ...... 342 1,418 Professional fees ...... 190 227 Deferred rent credits ...... 134 134 Occupancy ...... 116 121 Severance ...... - 311 Legal ...... - 292 Other ...... 415 794 $ 3,702 $ 5,411
Included in accrued compensation and benefits at December 31, 2011 and January 1, 2011 is $216,000 and
$220,000, respectively, for accrued commissions.
The activity in accrued severance is as follows (in thousands):
December 31, January 1, 2011 2011 Beginning balance ...... $ 311 $ 1,272 Additions ...... - 800 Reversal of accrual ...... - (992) Payments ...... (311) (769) $ - $ 311
During June 2010, the Company agreed to a severance payment to its former CEO at an amount less than originally provided. As a result, the Company reversed approximately $992,000 of severance accrual and included it in a separate line item in the accompanying consolidated statements of operations and comprehensive loss.
8. Store Closure Reserve
At the date the Company ceases use of a property under an operating lease, the Company records a liability for any remaining lease obligations, net of estimated sublease income. Lease termination costs include both settlement payments and continued contractual payments over time under the original lease agreements where no settlement can be reached with the landlord.
Management periodically assesses the remaining store closure reserve based on all available relevant data. Reserves for closed stores that are settled on terms more favorable than were originally estimated and expensed through the store closure provision are reversed through the store closure provision in the accompanying consolidated statements of operations and comprehensive loss.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 69
The activity in the store closure reserve is as follows (in thousands):
December 31, January 1, 2011 2011 Beginning balance ...... $ 509 $ 456 Additional reserves ...... 37 336 Utilization of reserves ...... (406) (283) 140 509 Less current portion ...... (126) (502) $ 14 $ 7
During fiscal year 2010, the Company recorded a specific reserve of $405,000 for certain locations where it holds the primary obligation under the lease.
9. Deferred Revenues
Deferred revenues represent initial franchising and licensing fees received from customers under domestic and international franchise agreements and amounts received from customers for merchandise to be shipped in subsequent periods and are included in current liabilities in the accompanying consolidated balance sheets. Such fees and revenues will be earned in subsequent periods in accordance with the Company's revenue recognition policy.
Deferred revenues are comprised of the following (in thousands):
December 31, January 1, 2011 2011 Initial franchise and licensing fees ...... $ 384 $ 353 Customer deposits ...... 148 196 Royalties ...... 6 21 538 570 Less current portion ...... (526) (570) $ 12 $ -
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 70
10. Long-Term Debt and Capital Lease Obligations
Long-term debt is comprised of the following (in thousands):
December 31, January 1, 2011 2011 Revolving Loan Facility, interest at 10 percent, payable quarterly in arrears on March 31, June 30, September 30 and December 31; due December 13, 2014 with option to extend to December 13, 2015 upon payment of an extension fee ...... $ 14,000 $ - Term Loan Facility, interest at 10 percent, payable quarterly in arrears on March 31, June 30, September 30 and December 31; due December 13, 2016 ...... 26,977 - Senior Secured Notes and Additional Notes, interest at 10 percent, payable semi-annually in arrears on April 24 and October 24; due October 24, 2014 ...... 6,297 65,837 Term Loan, interest at adjusted LIBOR, plus applicable margin of 12 percent, payable quarterly in arrears on January 29, April 29, July 29 and October 29; due October 23, 2011 ...... $ - $ 7,800 47,274 73,637 Less current portion ...... - (1,000) $ 47,274 $ 72,637
In connection with the Transactions on December 31, 2011, the initial Lenders provided a Term Loan Facility to the Company in an aggregate principal amount of $26,977,000 and a Revolving Loan Facility in an aggregate principal amount of $20,000,000 under Credit Facilities, with an outstanding balance of $14,000,000 at December 31, 2011. The Credit Facilities carry interest on unpaid principal at 10 percent paid quarterly in arrears on the last day of each fiscal quarter. The Revolving Loan Facility also requires interest on the unused portion at 0.5 percent paid quarterly in arrears on the last day of each fiscal quarter. The Term Loan Facilities ranks senior in right of payment to all subordinated indebtedness of the Company and is secured by a first priority lien on substantially all of the tangible and intangible assets of the Company and its subsidiaries.
The Credit Facilities contain certain covenants that limit among other things, the ability of the Company and its subsidiaries to:
• incur additional indebtedness; • make certain investments or enter into sale and leaseback transactions; • pay dividends, redeem subordinated debt, repurchase the Company’s or its subsidiaries' stock or make any other restricted payments as defined in the Indenture; • enter into certain transactions with affiliates; • create or incur liens; • transfer or sell assets; • make dividends, distributions or other payments from the Company’s subsidiaries;
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 71
• consummate a merger, consolidation or sale of all or substantially all of its assets; and • engage in unrelated business.
The Credit Facilities limits the Company’s use of the proceeds from an asset sale to:
• consideration at the time of the sale is at least equal to the fair market value of the assets sold or otherwise disposed of; • at least 75 percent of the consideration received be in the form of cash or cash equivalents and is received at the time of disposition; • apply the net cash proceeds related to the sale pursuant to Section 2.10(a) of the Credit Facilities agreement; • make an investment within 365 days in long term productive assets of the general type used in the Company's business; or • use the net proceeds to make an offer to pay down long-term debt.
The Credit Facilities also contain certain covenants whereby the Company must maintain a quarterly maximum leverage ratio and limits capital expenditures to $3,000,000 for each fiscal year plus any unused amounts carried forward from the preceding year.
Term Loan
The $10 million term loan (the "Term Loan"), as amended, carried interest on unpaid principal at a fluctuating rate, at 90 day LIBOR or three percent, whichever is greater ("Adjusted LIBOR") plus an applicable margin of 12 percent, increased by two percent per annum every six months. The proceeds of the amended Term Loan were used for general corporate purposes of the Company and its subsidiaries and to repay the $6,800,000 balance under the previous Term Loan (including a prepayment premium required by the previous term loan agreement) and to pay all fees, costs and expenses related to the Term Loan. Effective May 17, 2011, the Company entered into a Second Amendment to the Credit and Guaranty Agreement (the "Second Amendment"). The Second Amendment increased the Term Loan to $10 million and required loan costs of $707,000. The outstanding balance on the Term Loan was repaid in full on December 13, 2011 from the proceeds of the Revolving Loan Facility in conjunction with the Transactions. As a result, the unamortized balance of these loan costs were written off against interest expense.
Effective February 4, 2010, the Company, Bank of New York Mellon and the Requisite Lenders (as defined in the credit agreement governing the Term Loan) entered into a First Amendment to the Credit and Guaranty Agreement (the "First Amendment"). The First Amendment, among other items, revised the minimum consolidated EBITDA targets and maximum capital expenditures set forth in section 6.12 of the Credit and Guaranty Agreement and required a one-time payment of principal of $2.2 million, loan costs of $67,000 and an additional one-time payment of principal of $1.0 million and additional loan costs of $10,000 that was paid in January 2011.
Senior Secured Notes
The 10 percent senior secured notes and the additional notes (the "Additional Notes", together with the 10 percent senior secured notes, the "Senior Secured Notes") are due October 24, 2014 and interest payments are payable semiannually in arrears on October 24 and April 24, commencing April 24, 2009, until the principal thereof is paid or made available for payment (see Note 10). The Company elected to pay interest from October 2008 to October 2010 by the issuance of Additional Notes at the rate of 12 percent per annum, in accordance to the provisions of the Indenture and authorized by a board resolution. Interest is payable in cash after October 2010 at the rate of 10 percent until the principal is paid or made available for payment. The Additional Notes totaled $13.7 million at January 1, 2011 and are included in Senior Secured Notes in the accompanying consolidated balance sheets.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 72
Pursuant to the indenture governing its Senior Secured Notes (the "Indenture"), the Company was required to make a semiannual interest payment on April 24, 2011. The Company notified the Trustee and Note Holders that it would not pay the required interest on that date. The Company paid the required interest payment on May 19, 2011, before the 30 day cure period expired in accordance to the Indenture.
The retirement of $59,540,000 of the Senior Secured Notes was accounted for as an extinguishment of debt with a portion deemed to be a troubled debt restructuring under ASC 470-60 as outlined below. Certain holders of the Senior Secured Notes, aggregating $6.3 million, elected not to participate in the Exchange.
Extinguishment of Debt
As a result of the Transactions on December 13, 2011, the Company exchanged $56,693,000 of its Senior Secured Notes for interests in the Term Loan Facility of $25,833,000 and 100 percent of the common stock of Holdco, the Company's ultimate parent, resulting in a capital contribution of $26,087,000, net of income taxes of $1,991,000 and including $3,669,000 of accrued interest and $6,451,000 of expenses. Because these note holders are the controlling shareholders after the Transactions, the extinguishment embodies a capital transaction.
Transactions costs totaling $3,494,000 paid to third parties that were directly associated with the Transactions and $457,000 of unamortized loan costs associated with its Term Loan were deemed to be reductions of the capital contribution and were recorded to paid-in-capital in the accompanying consolidated balance sheets.
Troubled Debt Restructuring
As a result of the Transactions on December 13, 2011, the Company exchanged $2,726,000 of its Senior Secured Notes for a cash payment of $1,089,000 and exchanged $121,000 for interests in the Term Loan Facility of $55,000 and recorded a $1,712,000 gain on extinguishment of debt, including $184,000 of accrued interest that was forgiven, net of expenses of $175,000.
Subscription Rights
In connection with the Exchange, eligible holders were offered the right to subscribe for a pro rata share of additional interests in the Term Loan Facility in aggregate principal amount equal to the funds necessary to pay the consideration to those note holders that elected the cash option. Accordingly, the Company made a cash payment of $1,089,000 which was funded by the eligible holders and increased their interests in the Term Loan Facility by the same amount.
In conjunction with the Transactions, the Company entered into Supplemental Indenture No. 1 (the "Supplemental Indenture"). The Supplemental Indenture amends the Indenture dated October 24, 2008 to eliminate certain restrictions, covenants and reporting requirements.
Capital Lease Obligations
The Company has acquired equipment under various capital leases. Capital lease obligations are comprised of the following (in thousands):
December 31, January 1, 2011 2011 Capital lease obligations ...... $ 105 $ 175 Less current portion of capital lease obligations ...... (78) (70) $ 27 $ 105
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 73
As of December 31, 2011, the future minimum lease payments, including interest, for capital lease obligations are as follows (in thousands):
Fiscal Year 2012 ...... $ 85 2013 ...... 28 113 Less amount representing interest (8) Present value of net minimum lease payments $ 105
11. Income Taxes
The components of the provision (benefit) for income taxes are as follows (in thousands):
For the For the For the Fiscal Year Fiscal Year Fiscal Year Ended Ended Ended December 31, January 1, January 2, 2011 2011 2010 Current Federal ...... $ - $ - $ - Foreign ...... 46 42 60 46 42 60
Deferred Federal ...... 5,518 (1,878) (4,514) State ...... 1,129 (384) (923) Allowance ...... (6,525) 2,254 2,360 122 (8) (3,077) Total provision (benefit) for income taxes ...... $ 168 $ 34 $ (3,017)
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 74
The differences between income taxes at the U.S. federal statutory income tax rate and income taxes reported in the consolidated statements of operations and comprehensive loss are as follows (in thousands):
For the For the For the Fiscal Year Fiscal Year Fiscal Year Ended Ended Ended December 31, January 1, January 2, 2011 2011 2010 Income taxes computed at federal statutory rate ...... $ (1,212) $ (3,842) $ (6,712) State income taxes ...... 14 (253) (345) Foreign taxes ...... 46 42 40 Goodwill ...... - 1,685 2,093 Tax attribute reduction ...... 10,328 - - Cancellation of indebtedness ...... (582) - - Equity contribution ...... (2,414) - - Valuation allowance ...... (5,794) 2,254 1,959 Other ...... (218) 148 (52) $ 168 $ 34 $ (3,017)
The components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 75
December 31, January 1, 2011 2011 Deferred tax asset - current: Allowance for doubtful accounts ...... $ 545 $ 452 Accrued expenses ...... 219 267 Other ...... 89 112 Deferred tax assets - current ...... 853 831 Valuation allowance ...... - (488) Net deferred tax asset - current ...... $ 853 $ 343
Deferred tax asset - long-term: Depreciation ...... $ 463 $ 133 Net operating loss and carryforwards ... - 5,084 Capital loss carry over ...... - 4,588 Loan costs ...... 727 - Other ...... 188 473 Deferred tax assets - long-term ...... 1,378 10,278 Valuation allowance ...... - (6,037) Net deferred tax asset - long-term 1,378 4,241
Deferred tax liabilities -long-term: Intangibles ...... (8,568) (8,808) Deferred tax liabilities - long-term ...... (8,568) (8,808) Net deferred tax liabilities - long-term ...... $ (7,190) $ (4,567)
A valuation allowance is provided when it is more-likely-than-not that all or some of the deferred income tax assets will not be realized. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the temporary differences are deductible, the Company has determined a valuation allowance is necessary of $0 and $6.5 million at December 31, 2011 and January 1, 2011, respectively. The net change in valuation allowance for the years ended December 31, 2011 and January 1, 2011, was a decrease of $6.5 million and an increase of $2.3 million.
The Company recognizes the impact of a tax position in the financial statements if that position is more likely than not of being sustained on audit, based on the technical merits of the position. For fiscal year 2011 and fiscal year 2010, the Company had no unrecognized tax benefits.
The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense. There have been no interest or penalties recognized in the financial statements of the Company.
The Company was subject to an audit by the federal tax authority for fiscal years 2007 and 2008, which was closed with no adjustments. The Company remains subject to income tax examinations for each of its open tax years, which extend back to 2008 for federal income tax purposes and 2007 for state income tax purposes.
The Company realized income from the cancellation of indebtedness as a result of the Transactions to restructure the Company's debt and capital structure. Because the Company was insolvent, the cancellation of indebtedness is excluded from taxable income on the Company's federal income tax return for the year ended December 31, 2011. However, the Company is required to reduce its tax attributes on the first day of the following tax period. As such, during the tax period ending December 29, 2012, the Company will reduce its estimated Net Operating Loss carry forwards of $19.1 million and its estimated AMT Loss Carry Forwards of $20.5 million to zero.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 76
Capital Loss Carry Forwards of $12.0 million will also be reduced to zero. The tax effect of the attribute reduction related to the capital transaction of $2.0 million was recorded as an adjustment to equity.
12. Related Party Transactions
Services Agreement
In conjunction with the Transactions, The Company entered into a services agreement (the "Services Agreement") with Carlyle Strategic Partners II, L.P and CSP II Co-Investment L.P. (together, "Carlyle") and Z Capital Special Situations Fund Holdings I, L.P. ("Z Capital" and together with Carlyle, the "Advisors"). The Services Agreement retains each of the Advisors to provide services, including but not limited to, accounting and financial planning, market research, product development, risk assessments, information systems analysis and transactional due diligence services to the Company on an ongoing basis in connection with the operation and growth of the Company in the ordinary course of business.
The term of the Services Agreement, unless terminated earlier pursuant to the terms of the Services Agreement, continues until the fourth anniversary of the date of the Services Agreement and thereafter will extend automatically each year for one additional year, unless at least three months written notice is provided. In consideration for the services provided as described above, the Company is required to pay a non-refundable annual payment equal to five percent of consolidated EBITDA (as defined in the Credit Facilities agreement). This fee will be allocated to the Advisors on a pro rata basis based on the number of shares of the Company's common stock they each hold as of the last day of the fiscal year.
Fees Related to the Transactions
Carlyle and Z Capital entered into a backstop agreement (the "Backstop Agreement") in conjunction with the Transactions (see Note 10). Pursuant to the Backstop Agreement, in exchange for an aggregate cash payment of $1,350,000 (the "Backstop Fee") on December 13, 2011, Carlyle and Z Capital, severally and not jointly, agreed to backstop the subscriptions rights by funding in the aggregate any portion of the Credit Facilities not otherwise funded in accordance with the Subscription Rights. The Backstop Fee is in addition to any corresponding subscription consideration they will receive in respect of the subscription rights covered thereby.
On December 13, 2011, The Company made an aggregate cash payment of $400,000 to Carlyle and Z Capital for upfront fees on the aggregate revolving loan commitment (the "Loan Commitment Fee") on that date. The Company is required to pay an additional commitment fee of 0.5 percent per annum times the daily average undrawn portion of the Revolving Loan Facility, payable quarterly in arrears.
As the Backstop Fee and the Loan Commitment Fee were fees paid by the Company to Carlyle and Z Capital, the note holders, these fees have been included with the extinguishment of the Senior Secured Notes. The $2,500,000 reduced the capital contribution of $28,587,000, net of income taxes of $1,991,000, recorded as an increase to paid-in-capital in the accompanying consolidated balance sheets and consolidated statements of stockholders' deficit.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 77
13. Employee Benefit Plans
The Company sponsors the Mrs. Fields' Original Cookies, Inc. 401(k) Retirement Savings Plan (the "401k Plan") for all eligible employees of the Company. Under the terms of the 401k Plan, employees make voluntary contributions to the 401k Plan. A portion of the employee contributions to the 401k Plan were matched by contributions from the Company at the rate of 100 percent of the first three percent of employee contributions plus 50 percent of the next two percent of employee contributions. The total matching contributions made by the Company to the 401k Plan for the years ended December 31, 2011, January 1, 2011 and January 2, 2010 $0, $0 and $41,000, respectively.
During the first quarter of 2009, the 401k Plan was amended to eliminate all employer matching fund provisions.
14. Reportable Segments
Operating segments are components of the Company for which separate financial information is available that is evaluated regularly by management in deciding how to allocate resources and assess performance. The segment information is reported on the basis that it is used internally for evaluating segment performance.
The Company has the following six operating segments:
Mrs. Fields Gifts
Mrs. Fields Branded Retail
Mrs. Fields Franchising
Mrs. Fields Licensing
TCBY (collectively "Mrs. Fields") International Franchising
The accounting policies for the segments are the same as those discussed in the summary of significant accounting policies (see Note 2). Sales and transfers between segments are eliminated in consolidation.
The Mrs. Fields Gifts operating segment includes sales generated from the Company's gift catalog and website as well as affiliations with other websites and sales to large corporate customers for gifting purposes.
The Mrs. Fields Branded Retail operating segment includes sales generated from the sale of Mrs. Fields branded products directly to various retail channels.
The Mrs. Fields Licensing operating segment includes licensing activity with third parties for the sale of products bearing the Company's brand names.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 78
The Mrs. Fields Franchising and TCBY operating segments include revenues received either directly or indirectly from cookie and yogurt stores in the United States, which are owned and operated by third parties. These domestic revenues include initial franchise or license fees, monthly royalties based on a percentage of a franchisee's gross sales and certain product formulation fees and supplier allowances which are based upon sales to franchisees. In addition, the operations of the two company-owned TCBY stores are included in the TCBY operating segment.
The International Franchising operating segment includes revenues received either directly or indirectly from cookie and yogurt stores outside of the United States, which are owned and operated by third parties. These international revenues include initial franchise or license fees, monthly royalties based on a percentage of a franchisee's gross sales and certain product formulation fees and supplier allowances which are based upon sales to franchisees.
The Company evaluates performance of each operating segment based on contribution. Contribution is computed as the difference between the revenues generated by a reportable segment and the selling, cost of sales and direct operating expenses related to that reportable operating segment. Contribution is used as a measure of the operating performance of an operating segment. The Company does not allocate any general and administrative expenses, interest expense, or depreciation and amortization to its reportable operating segments
Segment revenues and contribution are presented in the following table (in thousands):
For the For the For the Fiscal Year Fiscal Year Fiscal Year Ende d Ende d Ende d December 31, January 1, January 2, 2011 2011 2010 Revenues: Mrs. Fields Gifts ...... $ 28,597 $ 26,034 $ 23,963 Mrs. Fields Branded Retail ...... 21,889 22,165 21,591 Mrs. Fields Franchising ...... 5,396 5,691 5,861 Mrs. Fields Licensing ...... 2,307 959 961 58,189 54,849 52,376 TCBY ...... 5,951 5,604 5,871 International Franchising ...... 1,741 1,902 1,499 $ 65,881 $ 62,355 $ 59,746
Contribution: Mrs. Fields Gifts ...... $ 2,374 $ 2,735 $ 2,724 Mrs. Fields Branded Retail ...... 1,955 3,066 2,462 Mrs. Fields Franchising ...... 2,656 2,789 3,407 Mrs. Fields Licensing ...... 2,139 689 823 9,124 9,279 9,416 TCBY ...... 1,405 2,349 3,433 International Franchising ...... 1,097 1,298 1,005 $ 11,626 $ 12,926 $ 13,854
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 79
The reconciliation of contribution to loss before reorganization items and provision (benefit) for income taxes is as follows (in thousands):
For the For the For the Fiscal Year Fiscal Year Fiscal Year Ende d Ende d Ende d December 31, January 1, January 2, 2011 2011 2010 Contribution ...... $ 11,626 $ 12,926 $ 13,854 General and administrative ...... (5,852) (8,023) (8,077) Executive severance, recruiting and compensation costs ...... - (1,065) (445) Depreciation and amortization ...... (2,818) (2,753) (2,829) Impairment of goodwill and intangible assets - (4,976) (14,191) Store closure provision ...... - - - Other income, net ...... (51) 113 32 Interest expense, net ...... (8,183) (8,513) (8,087) Reversal of severance accrual ...... - 992 - Gain on extinguishment of debt ...... 1,712 - - Loss before provision (benefit) for income taxes ...... $ (3,566) $ (11,299) $ (19,743)
Segment assets are presented in the following table (in thousands):
December 31, January 1, 2011 2011
Mrs. Fields Gifts ...... $ 10,235 $ 9,877 Mrs. Fields Branded Retail ...... 3,564 3,587 Mrs. Fields Franchising ...... 18,662 18,464 Mrs. Fields Licensing ...... 2,448 2,220 Total Mrs. Fields ...... 34,909 34,148 TCBY ...... 8,087 8,706 International Franchising ...... 1,729 1,859 Total segment identified assets ...... 44,725 44,713 Non-segment identified assets ...... 9,975 13,917 Total assets ...... $ 54,700 $ 58,630
The assets of Mrs. Fields Gifts operating segment consists of fixed assets, receivables, inventories and goodwill. The assets of the Mrs. Fields Franchising and TCBY operating segments consist of fixed assets, receivables, inventories and other intangible assets. The TCBY operating segment also includes goodwill. The assets of the Mrs. Fields Branded Retail operating segment consists of fixed assets, receivables and inventories. The assets of the Mrs. Fields Licensing and International Franchising operating segments consist of receivables and goodwill.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 80
Segment Revenues
Revenues from franchisees, customers and licensees within the United States were $56.2 million, $52.7 million and $52.6 million or 85.3 percent, 84.5 percent and 88.0 percent of total revenues for the years ended December 31, 2011, January 1, 2011 and January 2, 2010, respectively.
Revenues from international franchisees, customers and licensees were $9.7 million, $9.7 million and $7.1 million or 14.7 percent, 15.5 percent and 12.0 percent of total revenues for the years ended December 31, 2011, January 1, 2011 and January 2, 2010, respectively. Revenues from any single foreign country were not material. Providing geographical information regarding long-lived assets is impracticable.
The Mrs. Fields Gifts, Mrs. Fields Branded Retail and Mrs. Fields Licensing operating segments do not have any single customers that account for more than ten percent of Company's total revenues.
The Mrs. Fields, TCBY and International Franchising business units are not dependent upon any single franchisee.
15. Commitments and Contingencies
Legal Matters
The Company and its products are subject to regulation by numerous governmental authorities, including, without limitation, federal, state and local laws and regulations governing franchising, health, sanitation, environmental protection, safety and hiring and employment practices.
In the ordinary course of business, the Company is involved in routine litigation, including franchise disputes and trademark disputes. The Company is not a party to any legal proceedings, except as noted below, that, in the opinion of management, after consultation with legal counsel, is material to its business, financial condition or consolidated results of operations.
Litigation Settlements
During the years ended December 31, 2011, January 1, 2011 and January 2, 2010, the Company recorded expenses, net of insurance coverage, of $143,000, $99,000 and $475,000, respectively, related to the items discussed below. These settlement amounts are included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.
On November 1, 2011, the Company settled a complaint with a former employee by entering into a settlement agreement and general release. Pursuant to this agreement, the Company was required to pay the settlement on January 6, 2012.
In December 2010, the Company entered into a separation agreement and general release with a former employee to settle a claim. Under this agreement, the Company agreed to pay a lump sum severance payment and reimbursement of six month's Cobra payments.
In December 2009, the Company entered into a settlement agreement representing a complete settlement and release of a lawsuit filed against the Company for breach of contract. The settlement agreement also provides for certain amendments to the original Master Franchise Agreement.
In October 2009, the Company entered into a settlement agreement representing a complete settlement and release of a lawsuit filed against the Company for breach of contract. The settlement agreement also provides for the termination of the TCBY Transnational Master Franchise Agreement.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 81
In September 2009, the Company entered into a settlement agreement representing a complete settlement and release of a lawsuit filed against the Company. The settlement agreement also grants the plaintiff the exclusive right to solicit leads and advertise the availability of a Master Franchise within India in the Company's behalf for a period of 12 months from the date of the settlement agreement and on a non-exclusive basis for an additional 12 months and entitles them to a finder's fee. The dispute resulted from the termination of the Master Franchise Agreement for failure to comply with the development obligations under the agreement.
Operating Leases
The Company leases office space, facilities and equipment under long-term non-cancelable operating lease agreements with remaining terms of one to ten years. Rent expense, net of sublease payments, was $1.7 million, $2.3 million and $2.3 million for the years ended December 31, 2011, January 1, 2011 and January 2, 2010, respectively.
Effective October 1, 2010, the Company entered into an Industrial Real Estate Lease (the "Lease") with an unrelated third party for the lease of approximately 19,000 square feet of space in Salt Lake City, Utah. The Lease carries a 66 month term and provides for monthly base rent payments of $4,651 for February and March of 2011 and $9,303 per month commencing April 1, 2011. The Lease also requires additional monthly payments for common area expenses, maintenance, utilities, insurance and taxes, as well as a $9,303 security deposit. This newly leased space replaces approximately 41,000 square feet of space the Company was leasing in the Salt Lake City area for its Franchise Support Center and Corporate Headquarters.
On September 8, 2010, the Company entered into a lease termination agreement (the "Lease Termination Agreement") with NOP Cottonwood 2855, LLC, which provided for the early termination of the assignment and assumption of lease dated March 16, 2004. In accordance with the terms of the Lease Termination Agreement, the Company paid an early termination fee of $95,000, which is included in general and administrative expenses in the accompanying consolidated statements of operations and comprehensive loss.
As of December 31, 2011, the future minimum lease payments due under operating leases are as follows (in thousands):
Fiscal Year 2012 ...... $ 3,953 2013 ...... 2,612 2014 ...... 2,228 2015 ...... 1,851 2016 ...... 646 Thereafter ...... 440 $ 11,730
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 82
As of December 31, 2011, the future minimum sublease payments due to the Company under these operating leases are as follows (in thousands):
Fiscal Year 2012 ...... $ (2,151) 2013 ...... (915) 2014 ...... (588) 2015 ...... (203) 2016 ...... (63) $ (3,920)
Contractual Arrangements
Frozen Dough
The Company has a product supply agreement (the "Frozen Dough Supply Agreement") to purchase frozen dough products, which stipulates, among other things, minimum annual purchase commitments. These annual purchase commitments are satisfied primarily through the direct purchase of frozen dough products by franchisees.
The Company entered into a first amendment to the Frozen Dough Supply Agreement effective October 18, 2010. This amendment, among other items, revised the product price list, extended the term for a period of five years and eliminated any annual product purchase commitments (see Note 16).
The supplier of the frozen dough product manufactures its products in one location. A production disruption or the supplier’s inability to secure the raw materials used in the production of its products could adversely affect the operating results of the Company and its franchisees. Although management believes that other suppliers could provide similar products on comparable terms, a change in suppliers could cause a delay in manufacturing and a possible loss of sales, which could adversely affect the financial position, results of operations or liquidity of the Company and its franchisees.
Soft-Serve Frozen Yogurt
The Company has a supply agreement which provides for manufacturing of TCBY's soft-serve frozen yogurt products (the "Soft-Serve Supply Agreement”). Under the Soft-Serve Supply Agreement, frozen yogurt products are made available to TCBY's designated distributors, who purchase the products for resale to TCBY franchisees. The Soft-Serve Supply Agreement has an initial term of three years with an automatic renewal for one year unless notification of intent to terminate is not given within 180 days of the expiration of the Soft-Serve Supply Agreement. The Soft-Serve Supply Agreement has been renewed for a one year term.
The Soft-Serve Supply Agreement was amended effective March 25, 2010 to reset the tolling fee and establish a date 12 months from the date of execution to review the tolling fee. The tolling fee was not reset during fiscal year 2011. The Soft-Serve Supply Agreement includes provisions related to licensing of TCBY's trademarks for purposes of:
• production; pricing, payment, invoicing and collection; • inventory controls; • quality standards and assurance; • indemnification; and • confidentiality.
Credit Card Processing
Effective October 21, 2011, the Company entered into a Payment Processing Agreement (the " C/C Agreement") with Cardservice International, Inc., ("Cardservice, Inc."). Under the C/C Agreement, Cardservice, Inc. will
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 83
provide credit card processing services for the Company's gifting segment as well as extend preferred pricing to its franchised and company operated stores.
Hand-Scooped Frozen Yogurt
Effective July 22, 2011, TCBY Systems, LLC ("TCBY"), a wholly-owned subsidiary of the Company, entered into a product supply agreement (the "Hand-Scooped Supply Agreement") with Hudsonville Creamery & Ice Cream Company, LLC ("Hudsonville"). Under the Hand-Scooped Supply Agreement, Hudsonville will produce the Company's proprietary hard-pack yogurt product that will then be made available to distributors designated by the Company for resale to its franchise system. The Hand-Scooped Supply Agreement replaces a supply agreement between TCBY and Yarnell Ice Cream Company, Inc., which was terminated for cause by the Company based on the vendor’s material breach of its obligations thereunder.
The Hand-Scooped Supply Agreement outlines services to be performed and products to be provided by Hudsonville, and describes production schedules, tolling fees, raw materials and manufacturing costs, product pricing, quality standards and controls, use of trademarks, confidentiality and other provisions customarily included in agreements of this nature. The Hand-Scooped Supply Agreement has an initial term of three years, unless terminated earlier in accordance with provisions set forth in the Hand-Scooped Supply Agreement, and will automatically renew for additional one-year periods unless either party gives at least 180 days' notice prior to the end of the current term of its intent not to renew.
16. Subsequent Events
The Company has evaluated subsequent events through March 28, 2012, which is the date these financial statements were available to be issued and determined the following subsequent events required disclosure:
On March 1, 2012, the Company entered into the second amendment (the "Second Amendment") to the Soft- Serve Supply Agreement. Under the Soft-Serve Supply Agreement, frozen yogurt products are made available to TCBY's designated distributors, who purchase the products for resale to the Company's TCBY franchisees. The Second Amendment reset the tolling fee to be charged on all TCBY products and establishes a date 24 months from the execution of the Second Amendment to review the tolling fee.
On February 17, 2012, the Company announced a reorganization of certain departments that provide support functions for the operations of the Company. In order to focus on the its core competencies and its operations, the Company has outsourced its legal, information technology and certain research and development functions to various third party providers and eliminated certain positions within its organization.
On January 13, 2012, the Company signed a consent letter allowing Dawn Food Products, Inc., the successor-in- interests to Countryside Baking, Inc. ("Dawn") to assign the Frozen Dough Supply Agreement they had to provide the Company's frozen dough products to South Coast Bakery, LLC ("South Coast"), as a result of Dawn entering into an asset purchase agreement with South Coast.
TCBY FDD 03/2014 EXHIBIT L: Financial Statements 84 EXHIBIT M
GUARANTEE OF PERFORMANCE
TCBY FDD 03/2014 EXHIBIT M: Guarantee of Performance
TCBY FDD 03/2014 EXHIBIT M: Guarantee of Performance 1 EXHIBIT N
ASSIGNMENT, ASSUMPTION AND CONSENT
TCBY FDD 03/2014 EXHIBIT N: Assignment, Assumption and Consent
[#/# ]
ASSIGNMENT, ASSUMPTION AND CONSENT
THIS ASSIGNMENT, ASSUMPTION AND CONSENT (the “Assignment”) is made and entered into as of this _____ day of , 20__, by and among ______(together with its predecessors-in-interest, the “Franchisor”), whose principal address is 8001 Arista Place, Suite 600, Broomfield, Colorado 80021, ______(individually or collectively “Assignor”), whose principal address is ______, and ______(individually or collectively “Assignee”), whose principal address is ______.
A. Assignor wishes to sell, assign or convey to Assignee that certain franchised location described as: the ______store located at or in ______(the “Store”), currently identified by Franchisor as Store No. ______, and to transfer and convey to Assignee all of Assignor’s rights, title, interest and obligations in and to that certain Franchise Agreement (the “Franchise Agreement”) for the operation of the Store, dated as of ______(the “Transfer”).
B. Under the terms of the Franchise Agreement, Franchisor has the right to consent to the Transfer before it occurs, and further has a right of first refusal pertaining to the Store and the Franchise Agreement.
For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
1. Agreement Assigned. Subject to Franchisor’s consent as provided herein, Assignor hereby sells, assigns, transfers and conveys to Assignee all of its rights, title, interest and obligations in and to the Franchise Agreement, to have and to hold said rights, title, interest and obligations for the term of the Franchise Agreement and any renewal thereof consistent with its terms and conditions. Subject to Franchisor’s consent as provided herein, Assignee hereby unconditionally assumes and accepts such assignment and agrees to perform when and as due each and every obligation of Assignee thereunder. Any capitalized terms not otherwise defined herein shall have the same meanings as set forth in the Franchise Agreement.
2. Representations.
(a) Assignor and Assignee represent and warrant to Franchisor that they have disclosed to Franchisor all of the material terms of the Transfer and that they have the authority to execute this Assignment.
(b) Assignee represents and warrants to Franchisor that it has independently conducted all necessary due diligence to make an informed decision respecting the purchase of assets and business related to the Store.
(c) Assignor represents and warrants to Franchisor that Assignor owns all rights, title and interest, free and clear of any mortgage, lien or claim, in and to the Franchise Agreement and the business related to the Store, and has not assigned any or all of its interest in the Franchise Agreement or the business related to the Store to any third party. Assignor represents and warrants to Franchisor that Assignor will not retain any interest in the Store after the Closing.
(d) Assignor further represents and warrants to Franchisor that Assignor is not in default of any of the terms of the Franchise Agreement as of the Closing.
TCBY FDD 03/2014 EXHIBIT N: Assignment, Assumption and Consent 1
(e) Assignor further represents and warrants to Franchisor that the owner of the principal business premises for the Store has consented to the assignment, including Assignor’s assignment to Assignee of the Lease, if any, for the Store premises.
3. Franchisor’s Consent. Based on the information provided by Assignor and Assignee, Franchisor hereby (a) waives its right of first refusal to acquire the Store and the Assignor’s interests in the Franchise Agreement, and (b) gives its consent for the Transfer upon the terms and conditions set forth herein; provided, however, that its consent does not constitute an express or implied warranty by Franchisor of the successful operation or profitability of the Store by Assignee following the Transfer.
4. Purchase and Sale Agreement; Conditions to Closing; Escrow. In consideration of the Franchisor’s consent to the Transfer, Assignor and Assignee agree that the closing of the Transfer and Assignee’s purchase of the Store from Assignor (the “Closing”) shall not occur, and Assignee shall not take legal possession of the Store or accept assignment of the Franchise Agreement or the lease or sublease pertaining to the Store premises (the “Lease”) until each of the following conditions have been satisfied by them, or waived by the Franchisor:
(a) The following items have been delivered to a licensed escrow agent or other third party selected by Assignor and Assignee and acceptable to Franchisor no later than five (5) days prior to the date that Assignee is scheduled to commence Franchisor’s training program (the “Escrow Date”):
(1) A check or certified funds in the amount equal to the total of:
(i) All past-due royalty and service fees, continuing fees, advertising fund contributions and any other amounts owed by Assignor to Franchisor or any of its affiliates, pursuant to the Franchise Agreement, Lease, or any other agreement between them;
(ii) All past-due amounts owed to vendors or suppliers pertaining to the Store if payment is necessary to accomplish the Closing in accordance with any applicable bulk sales or similar laws, or where the consent of such vendors or suppliers is required by Franchisor; and
(iii) The Franchisor’s then-current Transfer Fee (or any balance thereof not already paid to Franchisor).
(2) The following documents, fully and properly signed by Assignor and/or Assignee, to be effective as of the date of the Closing (the “Closing Date”) without condition except as set forth herein:
(i) This Assignment;
(ii) The following Franchise Documents required by Franchisor pertaining to the Closing:
[list]
(iii) Instructions acceptable to the parties pertaining to disbursement of all funds and documents upon the Closing Date, and removing all conditions to the Closing except satisfaction of the conditions set forth in Sections 4(b), (c) and (d) hereof; and
TCBY FDD 03/2014 EXHIBIT N: Assignment, Assumption and Consent 2
(iv) Any other documents between Assignor and Assignee necessary to complete the Closing as set forth herein.
(b) Assignee has successfully completed Franchisor’s training program and has been approved by Franchisor to complete the Transfer upon the proposed terms;
(c) Assignor and/or Assignee have satisfied any other conditions to obtaining Franchisor’s consent to the Transfer as set forth in or contemplated by the Franchise Agreement; and
(d) Assignor and/or Assignee has deposited into escrow any and all other documents and funds necessary to complete the Closing as set forth herein, including without limitation, any purchase price to be paid to Assignor at the Closing.
Unless otherwise agreed in writing by the Franchisor, the Closing Date shall occur no later than 15 days following satisfaction of the conditions to Closing set forth in sections 4(b) and 4(c). Franchisor shall not be required to sign any documentation until the later to occur of the Closing Date, or a date within 30 days after the Closing Date, provided in such case that Franchisor delivers into escrow no later than the Closing Date a notice that Assignor and Assignee have met each of Franchisor’s conditions to obtaining its consent to the Transfer. For the period of time from the Escrow Date to the Closing Date, Assignor shall continue to operate the Store, or cause it to be operated, in compliance with Franchisor’s system standards and the Franchise Agreement, and Franchisor may continue to enforce the terms of the Franchise Agreement against Assignor. Without limiting the foregoing, during such period, Franchisor shall have the right to draft Assignor’s account for any current royalties, continuing fees, advertising fund contributions and other fees that become due under the Franchise Agreement.
5. Agreement to Execute New Franchise Documents. Assignee acknowledges that Franchisor may condition its consent to the Transfer upon Assignee’s agreement to execute Franchisor’s current form of franchise agreement and related documents which, if fully executed, shall replace the Franchise Agreement in its entirety. The new franchise agreement may contain terms that are materially different from those set forth in the Franchise Agreement, including without limitation, different royalty, service fees, continuing fees, advertising fund contributions, and other fees. Assignee acknowledges that it has received Franchisor’s current form of disclosure document at least 14 calendar days prior to the earlier to occur of the Escrow Date and the date on which this Assignment was executed. Assignee further acknowledges that if Franchisor materially altered the provisions of the Franchise Agreement and this Assignment (except as a result of negotiations you initiated) Assignee has received the agreements at least 7 calendar days prior to the earlier to occur of the Escrow Date and the date on which this Assignment was executed.
6. Mutual Release. Subject to the full and complete occurrence of the Closing, and effective as of the Closing Date, Assignor on Assignor’s behalf and for any of Assignor’s wholly-owned or controlled corporation, subsidiary, and any shareholders, partners, officer, directors, employees agents, successors, assigns, heirs, executors and administrators of any of them (the “Assignor Parties”), hereby remise, release, and forever discharge generally the Franchisor and any affiliate, wholly-owned or controlled corporation, subsidiary, successor or assign thereof and any shareholder, officer, director, employee, or agent of any of them (the “Franchisor Parties”), and the Franchisor does hereby remise, release, and forever discharge generally the Assignor Parties, from any and all claims, demands, damages, and injuries, whether presently known or unknown, suspected or unsuspected, disclosed or undisclosed, actual or potential, which any of the Assignor Parties or the Franchisor Parties may have, or may hereafter claim to have had or to have acquired against the other of whatever kind or character arising out of or related to the Transfer, the Store, the Franchise Agreement, any Lease or other agreements between the Assignor and any of the Franchisor Parties related to the Store or the Franchise Agreement, and arising from or related to any period prior to and including the date hereof (the “Released Claims”), including generally any and all claims at law or in equity, those arising under the common law or state or federal statutes, rules or regulations such as, by way of example only, franchising, securities and antitrust
TCBY FDD 03/2014 EXHIBIT N: Assignment, Assumption and Consent 3
statutes, rules or regulations, in any way arising out of or connected with the Released Claims, and further promise never from this day forward, directly or indirectly, to institute, prosecute, commence, join in, or generally attempt to assert or maintain any action arising from or related to the Released Claims against any of the other parties, in any court or tribunal of the United States of America, any state thereof, or any other jurisdiction. Not released by the Franchisor Parties are (1) current or past due debts on account, owed either to the Franchisor or any affiliate of the Franchisor, and (2) unpaid principal and accrued interest under any promissory note made by Assignor or Assignee and held by any of the Franchisor Parties, or any holder to which any note may be negotiated or assigned. Not released by the Franchisor Parties or the Assignor Parties against the other are (1) claims arising from their obligations or performance under this Assignment, and (2) any claims arising from or related to any relationship or agreement between them not included in the Released Claims.
7. Indemnification.
(a) Assignor, for itself, its heirs, successors and assigns, agrees to indemnify and hold harmless each of the Franchisor Parties against any and all liabilities, damages, actions, claims, costs (including reasonable attorneys’ fees) or expenses of any nature resulting, directly or indirectly, from any of the following: (i) any misrepresentations or breach of warranty by Assignor under this Assignment; (ii) the transfer of the Franchise Agreement; or (iii) any claim, suit or proceeding initiated by or for a third party or third parties, now or in the future, that arises out of or relates to Assignor’s operation of the Store prior to the Closing.
(b) Assignee, for itself, its heirs, successors and assigns, agrees to indemnify and hold harmless each of the Franchisor Parties against any and all liabilities, damages, actions, claims, costs (including reasonable attorneys’ fees) or expenses of any nature resulting, directly or indirectly, from any of the following: (i) any misrepresentations or breach of warranty by Assignee under this Assignment; or (ii) the transfer of the Franchise Agreement.
8. Assignor Post-Assignment and Post-Termination Obligations. Assignor acknowledges and agrees that those obligations and duties which have effect on a post-assignment or a post-termination basis and which are expressly set forth in the Franchise Agreement or implied by their nature therein shall be performed and observed hereafter to the extent and for a term as expressed or implied in the Franchise Agreement.
9. Subordination. Assignor agrees to subordinate any right to receive any payment from Assignee to any rights or claims of the Franchisor to receive or for payments from Assignee. Any payments received by Assignor as a result of any sale of assets connected with or by virtue of this Assignment shall be subject to settlement of all accounts Assignor has with the Franchisor, and Assignee shall not pay any material portion of such purchase price to Assignor without first obtaining the Franchisor's written consent.
10. Miscellaneous. This Assignment, and the documents referred to herein, constitute the entire agreement among the parties with respect to the subject matter hereof. No amendment will be binding unless in writing and signed by the party against whom enforcement is sought. All representations, warranties, agreements and all other provisions of this Assignment which by their terms or by reasonable implication are intended to survive the closing of this Transfer will survive it.
11. Counterparts. This Assignment may be executed in more than one counterpart, each of which shall constitute an original copy.
TCBY FDD 03/2014 EXHIBIT N: Assignment, Assumption and Consent 4
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have executed this Assignment to be effective as of the date first set forth above.
Assignor:
By:
Title:
Assignee, as the purchaser of an existing franchised location in Franchisor’s franchise system, by signing where indicated below, understands and acknowledges the absolute right of the Franchisor, and companies affiliated with the Franchisor to sell Franchisor branded products and similar products wherever the Franchisor, or any affiliated company, may from time to time deem appropriate. Such products may include, but shall not be limited to, the products that franchisees, including Assignee, are authorized to sell under their franchise agreements, and other products of whatever type that the Franchisor or any affiliated company may from time to time deem appropriate for sale through franchised, traditional, non-traditional or other distribution methods. Such methods of distribution may include, but shall not necessarily be limited to, sales by franchisees of the Franchisor or its affiliates, sales at sports arenas and stadiums, department stores, airports, toll road travel plazas, hospitals, office buildings, schools and colleges, and other non-store venues, as well as sales to wholesalers and/or distributors for resale.
Assignee:
By:
Title:
Not binding without execution by an authorized officer of the Franchisor.
Franchisor:
By:
Title:
TCBY FDD 03/2014 EXHIBIT N: Assignment, Assumption and Consent 5 EXHIBIT O
RENEWAL ADDENDUM TO FRANCHISE AGREEMENT
TCBY FDD 03/2014 EXHIBIT O: Renewal Addendum
RENEWAL ADDENDUM TO TCBY®
FRANCHISE AGREEMENT
This is an addendum (the “Renewal Addendum”) to the TCBY® FRANCHISE AGREEMENT between______(“you” or the “Franchisee”) and TCBY SYSTEMS, LLC (“us”, “we” or “TCBY”), dated ______, 20__ (the “Agreement”) and is considered to be part of that Agreement. All capitalized terms used in this addendum but not defined herein shall have the same meanings ascribed to them in the Agreement.
1. Preambles. You have owned and operated a TCBY store under and by virtue of a franchise agreement dated ______made and entered into between you and TCBY (the “Original Franchise Agreement”). The initial term of the Original Franchise Agreement has expired or will soon expire, and the parties wish to renew the franchise relationship by entering into the Agreement, as modified by this Renewal Addendum. The Renewal Addendum is necessary to modify the terms of the standard form of Franchise Agreement to remove the right to renew for an additional term thereunder, and to provide for a general mutual release of claims, a condition to renewal set forth in the Original Franchise Agreement.
2. Term. Article 3 of the Franchise Agreement is hereby deleted in its entirety and the following is substituted in its place:
ARTICLE 3
TERM
3.1 Term of the Franchise Agreement. The term of this Agreement will be 10 years, commencing on the date of this Agreement. This Agreement is granted in connection with the renewal of a predecessor franchise agreement entered into between you and us. See the Renewal Addendum attached to this Agreement. References to the term of this Agreement mean the 10- year renewal term granted hereunder, and notwithstanding anything to the contrary contained in this Agreement or any related exhibit or addenda, no additional right to renew is granted by virtue of this Agreement.
3. Mutual Release. The following provision is hereby added to the Agreement as a new Section 15.8:
15.8 Mutual Release of Claims. You (and your Entity Owners, if you are an Entity), on behalf of you, your Entity Owners, your affiliates, wholly-owned or controlled corporations, subsidiaries, parents, employees, agents, representatives consultants, predecessors, successors, assigns, heirs, executors, and administrators (collectively the “Franchisee Parties”), hereby remise, release, and forever discharge generally TCBY and any affiliate, wholly-owned or controlled corporation, subsidiary, predecessor, successor, or assign thereof and any shareholder, officer, director, employee, or agent of any of them (collectively the “TCBY Parties”), and TCBY does hereby remise, release, and forever discharge generally the Franchisee Parties from any and all claims, demands, damages, and injuries, whether presently known or unknown, suspected or unsuspected, disclosed or undisclosed, actual or potential, which any of the Franchisee Parties or the TCBY Parties may now have, or may hereafter claim to have had or to have acquired against the other, of whatever source of origin, which in any way arise out of or are connected with the Store, or any franchise agreements or rights under which you currently operate the Store, arising from any periods prior to and including the date hereof, including
TCBY FDD 03/2014 EXHIBIT O: Renewal Addendum 1
generally any and all claims at law or in equity, those arising under the common law or state or federal statutes, rules or regulations such as, by way of example only, franchising, securities and antitrust statutes, rules or regulations (the “Released Claims”). Further, each of the Franchisee Parties and the TCBY Parties agree never from this day forward, directly or indirectly, to institute, prosecute, commence, join in, or generally attempt to assert or maintain any action against the other, in any court or tribunal of the United States of America, any state thereof, or any other jurisdiction in connection with or related to the Released Claims.
NOT RELEASED BY THE TCBY PARTIES ARE (1) CURRENT OR PAST DUE DEBTS ON ACCOUNT OR UNDER ANY AGREEMENT, PAYABLE EITHER TO TCBY OR ANY OF OUR AFFILIATES, (2) THE COLLECTION OF ANY CURRENT OR DELINQUENT REPORTS OR RECORDS REQUIRED TO BE FILED BY YOU UNDER ANY AGREEMENT BETWEEN YOU AND TCBY OR ANY OF OUR AFFILIATES, AND (3) ANY CLAIMS ARISING FROM OR RELATED TO TCBY’S AUDIT RIGHTS UNDER THE FRANCHISE AGREEMENT.
THIS IS A RELEASE. A RELEASE HAS LEGAL CONSEQUENCES. ANY PARTY HERETO SHOULD CONSULT WITH AN ATTORNEY IF SUCH PARTY DOES NOT FULLY UNDERSTAND WHAT A RELEASE IS OR THE EFFECT OF THIS RELEASE.
THIS RELEASE MAY BE SUBJECT TO OR LIMITED BY LOCAL LAW IN YOUR STATE. PLEASE REFER TO ANY STATE-SPECIFIC ADDENDA OR RIDERS ATTACHED TO THE AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the day and year first written above.
TCBY SYSTEMS, LLC
By: By:
Title: Title:
TCBY FDD 03/2014 EXHIBIT O: Renewal Addendum 2
EXHIBIT P
STATE SPECIFIC ADDENDA TO DISCLOSURE DOCUMENT, FRANCHISE
AGREEMENT AND AREA DIRECTOR AGREEMENT
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda
CALIFORNIA ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT TCBY SYSTEMS, LLC
NOTE: THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE FRANCHISE DISCLOSURE DOCUMENT.
As a supplement to the information disclosed in this disclosure document, the following additional paragraphs are added:
1. State Cover Page, Risk Factor 4: IN ADDITION, WE WILL DEFER COLLECTION OF ALL INITIAL FEES DESCRIBED IN ITEM 5 UNTIL WE HAVE COMPLETED OUR INITIAL OBLIGATIONS UNDER THE FRANCHISE OR AREA DIRECTOR AGREEMENT UNTIL THE FRANCHISEE OR AREA DIRECTOR IS OPEN FOR BUSINESS.
2. State Cover Page, additional Risk Factor: AS SUMMARIZED IN ITEM 4, WE, OUR PARENT, AND SEVERAL AFFILIATES EACH FILED A VOLUNTARY CHAPTER 11 BANKRUPTCY IN 2008. YOU SHOULD CAREFULLY REVIEW ITEM 4 BEFORE INVESTING IN THIS FRANCHISE.
3. No person identified in Item 2 of the disclosure document is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Act of 1934, 15 U.S.C.A 78a et seq., suspending or expelling such person from membership in such association or exchange.
4. California Business and Professions Code Sections 20000 through 20043 provide rights to you concerning termination or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.
5. The Franchise Agreement and Area Director Agreement provide for termination upon bankruptcy. These provisions may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
6. The Franchise Agreement and Area Director Agreement contain a covenant not to compete which extends beyond the termination of the franchise. These provisions may not be enforceable under California Law.
7. The Franchise Agreement and Area Director Agreement require litigation to occur at Broomfield, Colorado, with the costs being borne by the non-prevailing party in the litigation. You are encouraged to consult private legal counsel to determine the applicability of California and federal laws (such as Business and Professions Code Section 20040.5, Code of Civil Procedure Section 1281) to any provisions of an agreement restricting venue to a forum outside the State of California.
8. The Franchise Agreement and Area Director Agreement require application of the laws of the State of Colorado. These provisions may not be enforceable under California law.
9. The Franchise Agreement and Area Director Agreement require the parties to waive any and all rights to a trial by jury in the event of litigation. These provisions may not be enforceable under California law.
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 1
10. With respect to franchises governed by California law, we agree to comply with the requirements of Section 31109.1 of the Franchise Investment Law if we waive some fees for some franchisees, as described in Item 5.
11. You must sign a general release if you transfer your franchise. California Corporations Code 31512 voids a waiver of your rights under the Franchise Investment Law (California Corporations Code 31000 through 31516). Business and Professions Code 20010 voids a waiver of your rights under the Franchise Relations Act (Business and Professions Code 20000 through 20043).
12. The Franchise Agreement contains a liquidated damages clause. Under California Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
13. THE CALIFORNIA INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE FRANCHISE DISCLOSURE DOCUMENT. SECTION 31125 OF THE FRANCHISE INVESTMENT LAW REQUIRES US TO GIVE TO YOU A DISCLOSURE DOCUMENT APPROVED BY THE COMMISSIONER OF CORPORATIONS BEFORE WE ASK YOU TO CONSIDER A MATERIAL MODIFICATION OF YOUR FRANCHISE AGREEMENT.
14. OUR WEBSITE HAS NOT BEEN REVIEWED OR APPROVED BY THE CALIFORNIA DEPARTMENT OF CORPORATIONS. ANY COMPLAINTS CONCERNING THE CONTENT OF THIS WEBSITE MAY BE DIRECTED TO THE CALIFORNIA DEPARTMENT OF CORPORATIONS AT www.dbo.ca.gov.
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 2
CALIFORNIA ADDENDUM TO FRANCHISE AGREEMENT TCBY SYSTEMS, LLC
In recognition of the Franchise Investment Law and the rules and regulations promulgated thereunder, the Franchise Agreement is modified as follows:
1. Collection of the initial franchise fee identified in Subparagraph 6.1 of the Franchise Agreement and any other fees described in Item 5 of the Franchise Disclosure Document is deferred until we have completed our initial obligations under the Franchise Agreement and until the franchisee is open for business.
3. Subparagraph 17.6 of the Franchise Agreement requires the parties to waive any and all rights to a trial by jury in the event of litigation. This provision may not be enforceable under California law.
4. Except as expressly provided herein, the Franchise Agreement shall remain in full force and effect.
Dated: ______TCBY SYSTEMS, LLC
By Its
Dated: ______FRANCHISEE(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 3
CALIFORNIA ADDENDUM TO AREA DIRECTOR AGREEMENT TCBY SYSTEMS, LLC
In recognition of the Franchise Investment Law and the rules and regulations promulgated thereunder, the Area Director Agreement is modified as follows:
1. Collection of the initial territory fee identified in Section 5.1 of the Area Director Agreement is deferred until we have completed our initial obligations under the Area Director Agreement and until the Area Director is open for business.
2. Section 19.3 of the Area Director Agreement requires the parties to waive any and all rights to a trial by jury in the event of litigation. This provision may not be enforceable under California law.
3. Except as expressly provided herein, the Area Director Agreement shall remain in full force and effect.
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______AREA DIRECTOR(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 4
HAWAII ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
TCBY SYSTEMS, LLC
As a supplement to the information disclosed in this disclosure document, the following additional paragraph is added to Item 5:
“For those franchises governed by Hawaiian law, we will defer payment of the initial fees described in Item 5 until we have completed our initial obligations under the Franchise Agreement or Area Director Agreement.”
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 5
HAWAII ADDENDUM TO THE FRANCHISE AGREEMENT TCBY SYSTEMS, LLC
In recognition of the Hawaiian Franchise Investment Law and the rules and regulations promulgated thereunder, the Franchise Agreement executed as of ______, 20___, of TCBY Systems, LLC shall be modified as follows:
1. Payment of the initial franchise fee identified in Section 6.1 of the Franchise Agreement and any other fees described in Item 5 of the Franchise Disclosure Document are deferred until we have completed our initial pre-opening obligations under the Franchise Agreement.
TCBY SYSTEMS, LLC FRANCHISEE(S)
By (Signature) Its
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 6
HAWAII ADDENDUM TO THE AREA DIRECTOR AGREEMENT TCBY SYSTEMS, LLC
In recognition of the Hawaiian Franchise Investment Law and the rules and regulations promulgated thereunder, the Area Director Agreement executed as of ______, 20___, of TCBY Systems, LLC shall be modified as follows:
1. Payment of the initial territory fee identified in Section 5.1 of the Area Director Agreement is deferred until we have completed our initial pre-opening obligations under the Area Director Agreement.
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______AREA DIRECTOR(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 7
ILLINOIS ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
TCBY SYSTEMS, LLC
1. The following is inserted after the third paragraph under the sub-heading “Risk Factors” at the cover page of this disclosure document:
“The Risk Factors set forth above may be affected by Illinois law, 815 ILCS §§ 705/4 and 705/41.”
2. The following is added to Item 5:
“Based on our financial condition, the Illinois Attorney General has imposed a fee deferral requirement with respect to the franchises governed by Illinois law. We therefore will defer payment of the initial fees described in Item 5 until all initial obligations owed the franchisee have been completed and the franchisee has commenced business pursuant to the Franchise Agreement or Area Director Agreement.”
3. The following paragraphs are inserted at the end of Item 17:
“The conditions under which your franchise can be terminated and your rights upon non-renewal may be affected by Illinois law, 815 ILCS 705/19 and 705/20.”
“Provisions regarding jurisdiction and venue and choice of law may be affected by Illinois law, 815 ILCS §§ 705/4 and 705/41, respectively.
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 8
ILLINOIS ADDENDUM TO FRANCHISE AGREEMENT TCBY SYSTEMS, LLC
In recognition of the Illinois Disclosure Franchise Act and the rules and regulations promulgated thereunder, the Franchise Agreement executed as of ______, 20___, of TCBY Systems, LLC shall be modified as follows:
1. Payment of the initial franchise fee identified in Section 6.1 of the Franchise Agreement and any other fees described in Item 5 of the Franchise Disclosure Document are deferred until we have completed all of our pre-opening obligations and you commence business pursuant to the Franchise Agreement.
2. The following statement is added to the end of Section 13.2 and inserted as Section 13.3: The conditions under which your license rights can be terminated and your rights upon non-renewal may be affected by Illinois law, 815 ILCS 705/19 and 705/20.
3. Section 17.4 is hereby deleted in its entirety, to the extent required under Illinois law, and the following is substituted in its place: EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER FEDERAL LAW OR MATTERS ARISING UNDER THE ILLINOIS FRANCHISE DISCLOSURE ACT WHICH SHALL BE GOVERNED BY ILLINOIS LAW, THIS AGREEMENT, THE FRANCHISE AND THE RELATIONSHIP BETWEEN COMPANY AND FRANCHISEE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO, EXCEPT THAT ANY STATE LAW RELATING TO (1) THE OFFER AND SALE OF FRANCHISES, (2) FRANCHISE RELATIONSHIPS OR (3) BUSINESS OPPORTUNITIES, SHALL NOT APPLY UNLESS THE APPLICABLE JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
4. Section 17.5 is hereby deleted in its entirety, to the extent required under Illinois law.
5. Section 17 is amended, to the extent required under Illinois law, to include the following:
Section 41 of the Illinois Franchise Disclosure Act states that “any condition, stipulation, or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of this Act is void.”
6. Section 17.7 is deleted in its entirety, to the extent required under Illinois law.
7. The following Section 18.16 is added to the Agreement: 18.16 Certain Waivers Void. This Agreement is subject to Section 41 of the Illinois Franchise Disclosure Act which states that “any condition, stipulation, or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of this Act is void.”
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 9
8. Paragraphs 4 and 5 of the Acknowledgement Addendum are deleted, to the extent required under Illinois law.
TCBY SYSTEMS, LLC FRANCHISEE(S) By: Its: (Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 10
ILLINOIS ADDENDUM TO AREA DIRECTOR AGREEMENT TCBY SYSTEMS, LLC
In recognition of the Illinois Disclosure Franchise Act and the rules and regulations promulgated thereunder, the Area Director Agreement executed as of ______, 20___, of TCBY Systems, LLC shall be modified as follows:
1. Payment of the initial territory fee identified in Section 5.1 of the Area Director Agreement is deferred until we have completed all of our pre-opening obligations and you have commenced operation of your AD Business.
2. The following statement is added to the end of Section 17.2: The conditions under which your license rights can be terminated and your rights upon non-renewal may be affected by Illinois law, 815 ILCS 705/19 and 705/20.
3. Section 19.2 is hereby deleted in its entirety, to the extent required under Illinois law, and the following is substituted in its place: Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Sections 1051 Et Seq.) or other federal law or matters arising under the Illinois Franchise Disclosure Act which shall be governed by Illinois law, this Agreement, the franchise and the relationship between company and area director shall be governed by the laws of the state of Colorado, except that any state law relating to (1) the offer and sale of franchises, (2) franchise relationships or (3) business opportunities, shall not apply unless the applicable jurisdictional requirements are met independently without reference to this paragraph.
4. Section 19 is amended, to the extent required under Illinois law, to include the following:
Section 41 of the Illinois Franchise Disclosure Act states that “any condition, stipulation, or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of this Act is void.”
5. The following Section 20.14 is added to the Agreement: 20.14 Certain Waivers Void. This Agreement is subject to Section 41 of the Illinois Franchise Disclosure Act which states that “any condition, stipulation, or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of this Act is void.”
6. Paragraphs 6 and 7 of the Acknowledgement Addendum are deleted, to the extent required under Illinois law.
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______AREA DIRECTOR(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 11
MARYLAND ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT TCBY SYSTEMS, LLC
As a supplement to the information disclosed in this disclosure document, the following additional paragraphs are added to Item 5 of the disclosure document:
1. With respect to franchises governed by the Maryland Franchise Registration and Disclosure Law, all initial fees and payments shall be deferred until such time as the franchisor completes its initial obligations under the Franchise Agreement and the first outlet opens.
2. With respect to franchises governed by the Maryland Franchise Registration and Disclosure Law, the initial territory fee shall be deferred until such time as the franchisor completes its initial obligations under the Area Director Agreement and the Area Director commences operation of its AD Business.
3. With respect to the offer and sale of franchises governed by the Maryland Franchise Registration and Disclosure Law, we will not require the signing of a release or waiver as a condition of any refund of the initial franchise fee or initial territory fee.
As a supplement to the information disclosed in this disclosure document, the following additional paragraphs are added to Item 17 of the disclosure document:
1. The Franchise Agreement and Area Director Agreement provide for termination upon bankruptcy. These provisions may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.)
2. Any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of your franchise or AD Business.
3. You may sue in Maryland for claims arising under the Maryland Franchise Registration and Disclosure law.
4. Under the Maryland Franchise Registration and Disclosure Law, the general release required as a condition of renewal, sale and/or assignment/transfer will not apply to any liability under the Maryland Franchise Registration and Disclosure Law. Further, in the event of a transfer, you will sign the Assignment, Assumption and Consent included as an exhibit to our disclosure document, which contains a release.
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 12
MARYLAND ADDENDUM TO FRANCHISE AGREEMENT TCBY SYSTEMS, LLC
In recognition of the requirements of the Maryland Franchise Registration and Disclosure Law and the rules and regulations promulgated thereunder, the Franchise Agreement is modified as follows:
1. The following is added at the end of Section 12.3(e):
Nothing in this Section 12.3(e) will act as a release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.
2. The following is added at the end of both Section 17.4 and 17.5:
NOTWITHSTANDING THE PRECEDING, YOU MAY BRING A LAWSUIT IN MARYLAND FOR CLAIMS ARISING UNDER THE MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE LAW.
3. The following is added to the end of Section 17.7:
This 1 year limitation of claims shall not apply to any claims arising under the Maryland Franchise Registration and Disclosure Law. Any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of your franchise.
4. Any provision in the Franchise Agreement that requires you to disclaim the occurrence and/or acknowledge the non-occurrence of acts that would constitute a violation of the Maryland Franchise Registration and Disclosure Law is not intended to nor will it act as a release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.
5. All initial fees and payments shall be deferred until such time as we (the franchisor) have completed our initial obligations and the first outlet opens.
6. Except as expressly provided herein, the Franchise Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Addendum in ______counterparts on the day and year first above written.
Dated:______TCBY SYSTEMS, LLC
By: Its:
Dated:______FRANCHISEE(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 13
MARYLAND ADDENDUM TO AREA DIRECTOR AGREEMENT TCBY SYSTEMS, LLC
In recognition of the requirements of the Maryland Franchise Registration and Disclosure Law and the rules and regulations promulgated thereunder, the Area Director Agreement is modified as follows:
1. The following is added at the end of Section 15.3(d):
Nothing in this Section 15.3(d) will act as a release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.
2. The following is added at the end of Section 19.2:
NOTWITHSTANDING THE PRECEDING PARAGRAPH, YOU MAY BRING A LAWSUIT IN MARYLAND FOR CLAIMS ARISING UNDER THE MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE LAW.
3. The following is added to the end of Section 19.4:
This 1 year limitation of claims shall not apply to any claims arising under the Maryland Franchise Registration and Disclosure Law. Any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of your AD Business.
4. Any provision in the Area Director Agreement that requires you to disclaim the occurrence and/or acknowledge the non-occurrence of acts that would constitute a violation of the Maryland Franchise Registration and Disclosure Law is not intended to nor will it act as a release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.
5. The initial territory fee shall be deferred until such time as we (the franchisor) have completed our initial obligations.
6. Except as expressly provided herein, the Area Director Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Addendum in ______counterparts on the day and year first above written.
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______AREA DIRECTOR(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 14
MINNESOTA ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
TCBY SYSTEMS, LLC
As a supplement to the information disclosed in this disclosure document, the following additional paragraphs are added:
1. Any release executed in connection with the Franchise Agreement or Area Director Agreement shall not apply to any claims arising under Minnesota Statutes 1973 Supplement, Sections 80C.01 to 80C.22, providing that a franchisee cannot be required to assent to a release, assignment, or waiver that would relieve any person from liability imposed by such statutes; provided, however that this shall not bar the voluntary settlement of disputes.
2. With respect to the franchises governed by Minnesota law, we will comply with Minnesota Statute Sec. 80C.14, subdivisions 3, 4 and 5 which require, except in certain specific cases, that we give you 90 days notice of termination (with 60 days to cure) and 180 days notice for non-renewal of the franchise agreement.
3. Minnesota Statute Sec. 80C.21 and Minnesota Rule 2860.4400J prohibit us from requiring litigation to be conducted outside Minnesota. In addition, nothing in the disclosure document, Franchise Agreement or Area Director Agreement can abrogate or reduce any of your rights as provided for in Minnesota Statutes, Chapter 80C, or your rights to a jury trial or any procedure, forum, or remedies provided for by the laws of the jurisdiction.
4. With respect to the franchises governed by Minnesota law, we will defer payment of the initial fees described in Item 5 until we have completed our initial obligations under the Franchise Agreement or Area Director Agreement.
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 15
MINNESOTA ADDENDUM TO FRANCHISE AGREEMENT TCBY SYSTEMS, LLC
In recognition of the Minnesota Franchise Act and the rules and regulations promulgated thereunder, the Franchise Agreement is modified as follows:
1. The following is added at the end of Section 12.3(e):
“except that any release shall not apply to any claims arising under the Minnesota Statutes 1973 Supplement, Sections 80C.01 to 80.C.22, providing that a franchisee cannot be required to assent to a release, assignment, or waiver that would relieve any person from liability imposed by such statutes; provided, however that this shall not bar the voluntary settlement of disputes;”
2. The following sentence is added to the end of Section 13.2:
With respect to the franchises governed by Minnesota law, notwithstanding the foregoing, Company will comply with Minnesota Statute Sec. 80C.14, subdivisions 3, 4 and 5 which require, except in certain specific cases, that we give you 90 days notice of termination (with 60 days to cure) and 180 days notice for non-renewal of the franchise agreement.
3. Section 17.5 is amended, to the extent required under Minnesota law, to provide that any litigation or other court proceeding will take place in the state in which your Store is located.
4. Section 17.4 is deleted in its entirety, to the extent required under Minnesota law, and the following language is substituted in its place:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER FEDERAL LAW, OR MATTERS ARISING UNDER THE MINNESOTA FRANCHISE ACT WHICH SHALL BE GOVERNED THEREBY, THIS AGREEMENT AND THE RELATIONSHIP BETWEEN YOU AND US WILL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO, EXCEPT THAT ANY STATE LAW RELATING TO (1) THE OFFER AND SALE OF FRANCHISES, (2) FRANCHISE RELATIONSHIPS, OR (3) BUSINESS OPPORTUNITIES, WILL NOT APPLY UNLESS THE APPLICABLE JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
5. The following sentence is added to the end of Section 17.1:
Pursuant to Minn. Stat. Sec. 80C.21 and Minn. Rule Part 2860.4400J, this Section shall not in any way abrogate or reduce any of your rights as provided for in Minnesota Statutes, Chapter 80C or your rights to a jury trial or any procedure, forum, or remedies provided for by the laws of the jurisdiction.
8. Section 17.6 is deleted in its entirety, to the extent required under Minnesota law.
9. Payment of the initial franchise fee identified in Section 6.1 of the Franchise Agreement and any other fees described in Item 5 of the Franchise Disclosure Document are deferred until we have completed our initial obligations under the Franchise Agreement.
10. Except as expressly provided herein, the Agreement shall remain in full force and effect.
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 16
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______FRANCHISEE(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 17
MINNESOTA ADDENDUM TO AREA DIRECTOR AGREEMENT TCBY SYSTEMS, LLC
In recognition of the Minnesota Franchise Act and the rules and regulations promulgated thereunder, the Area Director Agreement is modified as follows:
1. The following is added at the end of Section 15.3(d):
“except that any release shall not apply to any claims arising under the Minnesota Statutes 1973 Supplement, Sections 80C.01 to 80.C.22, providing that a franchisee cannot be required to assent to a release, assignment, or waiver that would relieve any person from liability imposed by such statutes; provided, however that this shall not bar the voluntary settlement of disputes;”
2. The following sentence is added to the end of Section 17.2:
With respect to the franchises governed by Minnesota law, notwithstanding the foregoing, Company will comply with Minnesota Statute Sec. 80C.14, subdivisions 3, 4 and 5 which require, except in certain specific cases, that we give you 90 days notice of termination (with 60 days to cure) and 180 days notice for non-renewal of the franchise agreement.
3. Section 19.2 is deleted in its entirety, to the extent required under Minnesota law, and the following language is substituted in its place:
Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Sections 1051 et seq.) Or other federal law, or matters arising under the Minnesota Franchise Act which shall be governed thereby, this agreement and the relationship between you and us will be governed by the laws of the state of Colorado, except that any state law relating to (1) the offer and sale of franchises, (2) franchise relationships, or (3) business opportunities, will not apply unless the applicable jurisdictional requirements are met independently without reference to this paragraph.
4. Section 19.3 is deleted in its entirety, to the extent required under Minnesota law.
5. Payment of the initial territory fee identified in Section 5.1 of the Area Director Agreement is deferred until we have completed our initial obligations under the Area Director Agreement.
6. Except as expressly provided herein, the Agreement shall remain in full force and effect.
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______AREA DIRECTOR(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 18
NEW YORK ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT TCBY SYSTEMS, LLC
As a supplement to the information disclosed in this disclosure document, the following additional paragraphs are added:
1. Except as disclosed in Item 3 of the disclosure document, neither we, our predecessors, affiliates nor any person identified in Item 2 of this disclosure document:
A. Has any administrative, criminal or material civil action (or a significant number of civil actions irrespective of materiality) pending against it or him alleging a violation of any franchise law, securities law, fraud, embezzlement, fraudulent conversion, restraint of trade, unfair or deceptive practices, misappropriation of property or comparable allegations.
B. Has been convicted of a felony or pleaded nolo contendere to a felony charge or within the ten (10) year period immediately preceding the application for registration, been convicted of a misdemeanor or pleaded nolo contendere to a misdemeanor charge or been held liable in a civil action by final judgment or been the subject of a material complaint or other legal proceeding if such misdemeanor conviction or charge or civil action, complaint or other legal proceeding involved violation of any franchise law, securities law, fraud, embezzlement, fraudulent conversion, restraint of trade, unfair or deceptive practices, misappropriation of property or comparable allegations.
C. Is subject to any currently effective injunctive or restrictive order or decree relating to franchises or under any federal, state, or Canadian franchise, securities, antitrust, trade regulation, trade practice law, or any national securities association or national securities exchange (as defined in the Securities and Exchange Act of 1934) suspending or expelling such person from membership in such association or exchange as a result of a concluded or pending action or proceeding brought by a public agency.
2. Except as disclosed in Item 4 of the disclosure document, during the fifteen (15) year period immediately preceding the date of this disclosure document, neither we, our predecessors, affiliates or any person identified in Item 2 of this disclosure document has been adjudged bankrupt or reorganized due to insolvency or been a principal officer of any company or a general partner in any partnership at or within 1 year of the time that such company or partnership was adjudged bankrupt or reorganized due to insolvency or is otherwise subject to any pending bankruptcy or reorganization proceeding.
3. You will not be required to indemnify us for any claims arising out of a breach of the Franchise Agreement or Area Director Agreement by us or other civil wrongs committed by us.
4. We will not make any changes to the Operations Manual or Area Director Manuals which would impose an unreasonable economic burden on you or unreasonably increase your obligations under the Franchise Agreement or Area Director Agreement.
5. We will not assign any of our rights under the Franchise Agreement or Area Director Agreement except to an assignee who, in our good faith judgment, is willing and able to assume our obligations under the Agreement.
6. Any release executed in connection with the Franchise Agreement or Area Director Agreement is subject to the proviso that all rights enjoyed by you and any causes of action arising in your favor
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 19
from the provisions of Article 33 of the General Business Law of the State of New York and the regulations issued thereunder shall remain in force; it being the intent of this proviso that the non- waiver provisions of Sections 687.4 and 687.5 of the General Business Law of New York State be satisfied.
7. You may terminate the Franchise Agreement, Area Director Agreement and any ancillary agreements upon any other grounds available by law.
8. The summary in Item 17.w., Choice of Law, is amended to state the following:
Colorado law applies unless governed by applicable federal law. The foregoing choice of law should not be considered a waiver of any right conferred upon the franchisor or upon Franchisee or Area Director by the General Business Law of the State of New York.
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 20
NEW YORK ADDENDUM TO FRANCHISE AGREEMENT TCBY SYSTEMS, LLC
1. The following is added after the third sentence in Section 5.2:
However, we will make no changes to the Operations Manual which would impose an unreasonable economic burden on you or unreasonably increase your obligations.
2. Section 12.1 is amended by adding the following to the end of that Section:
However, we will make no assignment except to an assignee who, in our good faith judgment, is willing and able to assume our obligations under this Agreement.
3. The following language is added at the end of Section 12.3(e):
provided, however, that any release shall not apply to any claims arising under the provisions of Article 33 of the General Business Law of the State of New York.
4. The following sentence, to the extent required under New York law, is added to the end of Section 15.6:
However, you will not be required to indemnify us for any claims arising out of a breach of the Agreement by us or other civil wrongs of us.
5. Section 17.4 is deleted in its entirety, to the extent required under New York law, and the following is substituted in its place:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER FEDERAL LAW OR MATTERS ARISING UNDER ARTICLE 33 OF THE GENERAL BUSINESS LAW OF THE STATE OF NEW YORK WHICH SHALL BE GOVERNED THEREBY, THIS AGREEMENT AND THE RELATIONSHIP BETWEEN YOU AND US WILL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO, EXCEPT THAT ANY STATE LAW RELATING TO (1) THE OFFER AND SALE OF FRANCHISES, (2) FRANCHISE RELATIONSHIPS, OR (3) BUSINESS OPPORTUNITIES, WILL NOT APPLY UNLESS THE APPLICABLE JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 21
6. Except as expressly provided herein, the Agreement shall remain in full force and effect.
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______FRANCHISEE(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 22
NEW YORK ADDENDUM TO AREA DIRECTOR AGREEMENT TCBY SYSTEMS, LLC
1. Section 15.1 is amended by adding the following to the end of that Section:
However, we will make no assignment except to an assignee who, in our good faith judgment, is willing and able to assume our obligations under this Agreement.
2. The following language is added at the end of Section 15.3(d):
provided, however, that any release shall not apply to any claims arising under the provisions of Article 33 of the General Business Law of the State of New York.
3. The following sentence, to the extent required under New York law, is added to the end of Section 18.4:
However, you will not be required to indemnify us for any claims arising out of a breach of the Agreement by us or other civil wrongs of us.
4. Section 19.2 is deleted in its entirety, to the extent required under New York law, and the following is substituted in its place:
Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Sections 1051 et seq.) Or other federal law or matters arising under Article 33 of the General Business Law of the state of New York which shall be governed thereby, this Agreement and the relationship between you and us will be governed by the laws of the state of Colorado, except that any state law relating to (1) the offer and sale of franchises, (2) franchise relationships, or (3) business opportunities, will not apply unless the applicable jurisdictional requirements are met independently without reference to this paragraph.
5. Except as expressly provided herein, the Agreement shall remain in full force and effect.
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______AREA DIRECTOR(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 23
NORTH DAKOTA ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT TCBY SYSTEMS, LLC
As a supplement to the information disclosed in this disclosure document, the following additional paragraphs are added:
1. Covenants not to compete upon termination or expiration of the Franchise Agreement or Area Director Agreement are generally unenforceable in North Dakota, except as provided by law.
2. Any release executed in connection with the Franchise Agreement or Area Director Agreement will not apply to any claims that may arise under the North Dakota Franchise Investment Law.
3. Any litigation required by the Franchise Agreement or Area Director Agreement will be conducted in the state where your Store or the territory for your AD Business is or will be located.
4. With respect to the franchises governed by North Dakota law, we will defer payment of the initial fees described in Item 5 until we have fulfilled all of our initial obligations under the Franchise Agreement or Area Director Agreement and you have commenced doing business pursuant to the Agreement.
5. With respect to the franchises governed by North Dakota law, any provisions requiring the franchisee to consent to liquidated damages upon termination shall be void, in keeping with the provisions of the North Dakota Franchise Investment Law.
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 24
NORTH DAKOTA ADDENDUM TO FRANCHISE AGREEMENT TCBY SYSTEMS, LLC
In recognition of the North Dakota Franchise Act and the rules and regulations promulgated thereunder, the Franchise Agreement is modified as follows:
1. The following statement is added at the end of Sections 11.2, 12.3(j) and 12.5(c):
Covenants not to compete upon termination or expiration of a franchise agreement are generally unenforceable in North Dakota, except as provided by law.
2. The following statement is added at the end of Sections 12.3(e):
(To the extent required under North Dakota law, any release executed in connection herewith will not apply to any claims that may arise under the North Dakota Franchise Investment Law.)
3. The following statement is added at the end of Section 13.6:
Notwithstanding the foregoing, nothing in this Section shall be construed to require the franchisee to consent to liquidated damages in the event of termination.
4. Section 17.5 is amended, to the extent required under North Dakota law, to provide:
a. Litigation will occur in the state in which your Store is located.
b. The judge will have the authority to award exemplary or punitive damages in a proper case.
5. Section 17.4 is deleted in its entirety, to the extent required under North Dakota law, and the following is substituted in its place:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER FEDERAL LAW OR MATTERS ARISING UNDER THE NORTH DAKOTA FRANCHISE INVESTMENT LAW WHICH SHALL BE GOVERNED THEREBY, THIS AGREEMENT AND THE RELATIONSHIP BETWEEN YOU AND US WILL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO, EXCEPT THAT ANY STATE LAW RELATING TO (1) THE OFFER AND SALE OF FRANCHISES, (2) FRANCHISE RELATIONSHIPS, OR (3) BUSINESS OPPORTUNITIES, WILL NOT APPLY UNLESS THE APPLICABLE JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
7. Section 17.6 is deleted in its entirety, to the extent required under North Dakota law.
8. Payment of the initial franchise fee identified in Section 6.1 of the Franchise Agreement and any other fees described in Item 5 of the Franchise Disclosure Document are deferred until we have fulfilled all of our initial obligations under the Franchise Agreement or other documents and you have commenced doing business pursuant to the Franchise Agreement.
9. Except as expressly provided herein, the Agreement shall remain in full force and effect.
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 25
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment in ______counterparts on the day and year first above written.
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______FRANCHISEE(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 26
NORTH DAKOTA ADDENDUM TO AREA DIRECTOR AGREEMENT TCBY SYSTEMS, LLC
In recognition of the North Dakota Franchise Act and the rules and regulations promulgated thereunder, the Area Director Agreement is modified as follows:
1. The following statement is added at the end of Section 17.5:
Covenants not to compete upon termination or expiration of a franchise agreement are generally unenforceable in North Dakota, except as provided by law.
2. The following statement is added at the end of Sections 15.3(d):
(To the extent required under North Dakota law, any release executed in connection herewith will not apply to any claims that may arise under the North Dakota Franchise Investment Law.)
3. Section 19.2 is deleted in its entirety, to the extent required under North Dakota law, and the following is substituted in its place:
Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Sections 1051 et seq.) or other federal law or matters arising under the North Dakota Franchise Investment Law which shall be governed thereby, this Agreement and the relationship between you and us will be governed by the laws of the state of Colorado, except that any state law relating to (1) the offer and sale of franchises, (2) franchise relationships, or (3) business opportunities, will not apply unless the applicable jurisdictional requirements are met independently without reference to this paragraph.
4. Section 19.3 is deleted in its entirety, to the extent required under North Dakota law.
5. Payment of the initial territory fee identified in Section 5.1 of the Area Director Agreement is deferred until we have fulfilled all of our initial obligations under the Area Director Agreement or other documents and you have commenced operating your AD Business.
6. Except as expressly provided herein, the Agreement shall remain in full force and effect.
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______AREA DIRECTOR(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 27
RHODE ISLAND ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT TCBY SYSTEMS, LLC
The following paragraph is added to the end of Item 17 of the disclosure document:
19-28.1-14 of the Rhode Island Franchise Investment Act provides that “A provision in a franchise agreement restricting jurisdiction or venue to a forum outside this state or requiring the application of the laws of another state is void with respect to a claim otherwise enforceable under this act.”
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 28
RHODE ISLAND ADDENDUM TO FRANCHISE AGREEMENT TCBY SYSTEMS, LLC
In recognition of the requirements of the Rhode Island Franchise Investment Act and the rules and regulations promulgated thereunder, the Franchise Agreement of TCBY Systems, LLC is modified as follows:
1. Section 17.4 is hereby deleted in its entirety, to the extent required under Rhode Island law, and the following is substituted in its place:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER FEDERAL LAW AND EXCEPT WITH RESPECT TO MATTERS ARISING UNDER THE RHODE ISLAND FRANCHISE INVESTMENT ACT, WHICH MATTERS SHALL BE GOVERNED THEREBY, THIS AGREEMENT, THE FRANCHISE AND THE RELATIONSHIP BETWEEN COMPANY AND FRANCHISEE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO, EXCEPT THAT ANY STATE LAW RELATING TO (1) THE OFFER AND SALE OF FRANCHISES, (2) FRANCHISE RELATIONSHIPS, OR (3) BUSINESS OPPORTUNITIES, SHALL NOT APPLY UNLESS THE APPLICABLE JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
2. Section 17.5 is hereby deleted in its entirety, to the extent required under Rhode Island law.
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______FRANCHISEE(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 29
RHODE ISLAND ADDENDUM TO AREA DIRECTOR AGREEMENT TCBY SYSTEMS, LLC
In recognition of the requirements of the Rhode Island Franchise Investment Act and the rules and regulations promulgated thereunder, the Area Director Agreement of TCBY Systems, LLC is modified as follows:
1. Section 17.4 is hereby deleted in its entirety, to the extent required under Rhode Island law, and the following is substituted in its place:
Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C. Sections 1051 et seq.) or other federal law and except with respect to matters arising under the Rhode Island Franchise Investment Act, which shall be governed thereby, this Agreement and the relationship between you and us will be governed by the laws of the state of Colorado, except that any state law relating to (1) the offer and sale of franchises, (2) franchise relationships, or (3) business opportunities, will not apply unless the applicable jurisdictional requirements are met independently without reference to this paragraph.
Dated:______TCBY SYSTEMS, LLC
By Its
Dated:______AREA DIRECTOR(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 30
VIRGINIA ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
TCBY SYSTEMS, LLC
As a supplement to the information described in this disclosure document, the following additional paragraph is added to Item 5:
“The Virginia State Corporation Commission’s Division of Securities and Retail Franchising requires us to defer payment of the initial franchise fee or initial territory fee and other initial payments owed by franchisees or area directors to the franchisor until the franchisor has completed its pre-opening obligations under the Franchise Agreement or Area Director Agreement.”
The following paragraph is added to Item 17:
“Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful for a franchisor to cancel a franchise without reasonable cause. If any grounds for default or termination stated in the Franchise Agreement or Area Director Agreement do not contain “reasonable cause,” as the term may be defined in the Virginia Retail franchising Act or the laws of Virginia, that provision may not be enforceable.”
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 31
VIRGINIA ADDENDUM TO FRANCHISE AGREEMENT TCBY SYSTEMS, LLC
In recognition of the Virginia Retail Franchising Act and the rules and regulations promulgated thereunder, the Franchise Agreement executed as of ______, 20___, of TCBY Systems, LLC shall be modified as follows:
1. Section 6.1 of the Franchise Agreement is amended to provide:
“The Virginia State Corporation Commission’s Division of Securities and Retail Franchising requires us to defer payment of the initial franchise fee and other initial payments owed by franchisees to the franchisor until the franchisor has completed its pre-opening obligations under this Agreement.”
TCBY SYSTEMS, LLC FRANCHISEE(S) By: Its: (Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 32
VIRGINIA ADDENDUM TO AREA DIRECTOR AGREEMENT TCBY SYSTEMS, LLC
In recognition of the Virginia Retail Franchising Act and the rules and regulations promulgated thereunder, the Area Director Agreement executed as of ______, 20___, of TCBY Systems, LLC shall be modified as follows:
1. Section 5.1 of the Area Director Agreement is amended to provide:
“The Virginia State Corporation Commission’s Division of Securities and Retail Franchising requires us to defer payment of the initial territory fee and other initial payments owed by area directors to the franchisor until the franchisor has completed its pre-opening obligations under this Agreement.”
Dated:______TCBY SYSTEMS, LLC
By: Its:
Dated:______AREA DIRECTOR(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 33
WASHINGTON ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT TCBY SYSTEMS, LLC
1. In any litigation involving a franchise purchased in Washington, the litigation site shall be either in the state of Washington, or in a place mutually agreed upon at the time of the litigation.
2. In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW, shall prevail.
3. A release or waiver of rights executed by you shall not include rights under the Washington Franchise Investment Protection Act except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, or rights or remedies under the Act may not be enforceable.
4. Transfer fees are collectable to the extent that they reflect our reasonable estimated or actual costs in effecting a transfer.
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 34
WASHINGTON ADDENDUM TO FRANCHISE AGREEMENT TCBY SYSTEMS, LLC
1. In any litigation involving a franchise purchased in Washington, the litigation shall take place either in the state of Washington, or in a place mutually agreed upon by the parties, to the extent required under Washington law.
2. In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW, shall prevail.
3. A release or waiver of rights executed by you shall not include rights under the Washington Franchise Investment Protection Act except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, or rights or remedies under the Act may not be enforceable.
4. Transfer fees are collectable to the extent that they reflect our reasonable estimated or actual costs in effecting a transfer.
5. Payment of the initial franchise fee identified in Section 6.1 of the Franchise Agreement and any other fees described in Item 5 of the Franchise Disclosure Document are deferred until you have received our initial training and open your Store for business.
6. It shall be an unfair or deceptive act or practice or an unfair method of competition and therefore unlawful and a violation of this chapter for any person to:
(i) Refuse to renew a franchise without fairly compensating the franchisee for the fair market value, at the time of expiration of the franchise, of the franchisee’s inventory, supplies, equipment, and furnishings purchased from the franchisor, and good will, exclusive of personalized materials which have no value to the franchisor, and inventory, supplies, equipment and furnishings not reasonably required in the conduct of the franchise business: Provided, That compensation need not be made to a franchisee for good will if (i) the franchisee has been given one year’s notice of nonrenewal and (ii) the franchisor agrees in writing not to enforce any covenant which restrains the franchisee from competing with the franchisor: Provided further, That a franchisor may offset against amounts owed to a franchisee under this subsection any amounts owed by such franchisee to the franchisor.
(ii) Terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include, without limitation, the failure of the franchisee to comply with lawful material provisions of the franchise or other agreement between the franchisor and the franchisee and to cure such default after being given written notice thereof and a reasonable opportunity, which in no event need be more than thirty days, to cure such default, or if such default cannot reasonably be cured within thirty days, the failure of the franchisee to initiate within thirty days substantial and continuing action to cure such default: Provided, That after three willful and material breaches of the same term of the franchise agreement occurring within a twelve-month period, for which the franchisee has been given notice and an opportunity to cure as provided in this subsection, the franchisor may terminate the agreement upon any subsequent willful and material breach of the same term within the twelve-month period without providing notice or opportunity to cure: Provided Further, That a franchisor may terminate a franchise without giving prior notice or opportunity to cure a default of the franchisee: (i) Is adjudicated a bankrupt or insolvent; (ii) makes an assignment for the benefit of creditors or similar disposition of the assets of the
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 35
franchise business; (iii) voluntarily abandons the franchise business; or (iv) is convicted of or pleads guilty or no contest to a charge of violating any law relating to the franchise business. Upon termination for good cause, the franchisor shall purchase from the franchisee at a fair market value at the time of termination, the franchisee’s inventory and supplies, exclusive of (i) personalized materials which have no value to the franchisor; (ii) inventory and supplies not reasonably required in the conduct of the franchise business; and (iii) if the franchisee is to retain control of the premises of the franchise business, any inventory and supplies not purchased from the franchisor or on his express requirement: Provided, That a franchisor may offset against amounts owed to a franchisee under this subsection any amounts owed by such franchisee to the franchisor.
Dated:______TCBY SYSTEMS, LLC
By: Its:
Dated:______FRANCHISEE(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 36
WASHINGTON ADDENDUM TO AREA DIRECTOR AGREEMENT TCBY SYSTEMS, LLC
1. In any litigation involving a franchise purchased in Washington, the litigation shall take place either in the state of Washington, or in a place mutually agreed upon by the parties, to the extent required under Washington law.
2. In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chapter 19.100 RCW, shall prevail.
3. A release or waiver of rights executed by you shall not include rights under the Washington Franchise Investment Protection Act except when executed pursuant to a negotiated settlement after the agreement is in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, or rights or remedies under the Act may not be enforceable.
4. Transfer fees are collectable to the extent that they reflect our reasonable estimated or actual costs in effecting a transfer.
5. Payment of the initial territory fee identified in Section 5.1 of the Area Director Agreement is deferred until you have received our initial training and commenced operation of your AD Business.
6. It shall be an unfair or deceptive act or practice or an unfair method of competition and therefore unlawful and a violation of this chapter for any person to:
(i) Refuse to renew a franchise without fairly compensating the franchisee for the fair market value, at the time of expiration of the franchise, of the franchisee’s inventory, supplies, equipment, and furnishings purchased from the franchisor, and good will, exclusive of personalized materials which have no value to the franchisor, and inventory, supplies, equipment and furnishings not reasonably required in the conduct of the franchise business: Provided, That compensation need not be made to a franchisee for good will if (i) the franchisee has been given one year’s notice of nonrenewal and (ii) the franchisor agrees in writing not to enforce any covenant which restrains the franchisee from competing with the franchisor: Provided further, That a franchisor may offset against amounts owed to a franchisee under this subsection any amounts owed by such franchisee to the franchisor.
(ii) Terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include, without limitation, the failure of the franchisee to comply with lawful material provisions of the franchise or other agreement between the franchisor and the franchisee and to cure such default after being given written notice thereof and a reasonable opportunity, which in no event need be more than thirty days, to cure such default, or if such default cannot reasonably be cured within thirty days, the failure of the franchisee to initiate within thirty days substantial and continuing action to cure such default: Provided, That after three willful and material breaches of the same term of the franchise agreement occurring within a twelve-month period, for which the franchisee has been given notice and an opportunity to cure as provided in this subsection, the franchisor may terminate the agreement upon any subsequent willful and material breach of the same term within the twelve-month period without providing notice or opportunity to cure: Provided Further, That a franchisor may terminate a franchise without giving prior notice or opportunity to cure a default of the franchisee: (i) Is adjudicated a bankrupt or insolvent; (ii) makes an assignment for the benefit of creditors or similar disposition of the assets of the franchise business; (iii) voluntarily abandons the franchise business; or (iv) is convicted of or
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 37
pleads guilty or no contest to a charge of violating any law relating to the franchise business. Upon termination for good cause, the franchisor shall purchase from the franchisee at a fair market value at the time of termination, the franchisee’s inventory and supplies, exclusive of (i) personalized materials which have no value to the franchisor; (ii) inventory and supplies not reasonably required in the conduct of the franchise business; and (iii) if the franchisee is to retain control of the premises of the franchise business, any inventory and supplies not purchased from the franchisor or on his express requirement: Provided, That a franchisor may offset against amounts owed to a franchisee under this subsection any amounts owed by such franchisee to the franchisor.
Dated:______TCBY SYSTEMS, LLC
By: Its:
Dated:______AREA DIRECTOR(S)
(Signature)
(Signature)
TCBY FDD 03/2014 EXHIBIT P: State Specific Addenda 38
RECEIPT
This disclosure document summarizes certain provisions of the franchise agreement and other information in plain language. Read this disclosure document and all agreements carefully.
If TCBY Systems, LLC (“TCBY”) offers you a franchise, TCBY must provide this disclosure document to you 14 calendar days before you sign a binding agreement with, or make a payment to, TCBY or its affiliate in connection with the proposed franchise sale. Iowa, New York, Oklahoma and Rhode Island require that TCBY gives you this disclosure document at the earlier of the first personal meeting or 10 business days (or 14 calendar days in Iowa) before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. Michigan and Washington require that TCBY gives you this disclosure document at least 10 business days before the execution of any binding franchise or other agreement or payment of any consideration, whichever occurs first.
If TCBY does not deliver this disclosure document on time or if it contains a false or misleading statement, or a material omission, a violation of federal law and state law may have occurred and should be reported to the Federal Trade Commission, Washington, D.C. 20580 and those state administrators listed on Exhibit A.
The franchisor is TCBY Systems, LLC located at 8001 Arista Place, Suite 600, Broomfield, CO 80021. Its telephone number is (720) 599-3300.
Issuance Date: March 26, 2014, as amended July 16, 2014. See state effective dates page for state effective dates.
TCBY’s franchise sellers involved in offering and selling the franchise to you are listed below (with address and telephone number), or will be provided to you separately before you sign a franchise agreement:
TCBY authorizes the respective state agencies identified on Exhibit A to receive service of process for TCBY in the particular state.
I have received a disclosure document with an issuance date of March 26, 2014, as amended July 16, 2014, that included the following Exhibits: H. Lease Addendum A. State Administrators/Agents for Service of Process I. Operating Procedures Manual Table of Contents B. Franchise Agreement (with Schedules and Exhibits) J. Confidentiality Agreement C. Other Concepts Store Addendum to Franchise K. Franchisee Information Agreement L. Financial Statements D. Area Director Disclosure Addendum to Franchise M. Guarantee of Performance Agreement N. Assignment, Assumption and Consent E. Area Director Agreement (with Exhibits) O. Renewal Addendum to Franchise Agreement F. Term Purchase Addendum P. State Specific Addenda to Disclosure Document, G. Sublease Agreement; Assignment and Franchise Agreements, and Area Director Agreement Assumption of Sublease Addendum
Date: (Do not leave blank) (Print Name of Prospective Franchisee (For Entity))
By: Its:
Signature
(Print Name of Prospective Franchisee (For Individuals))
Signature
RECEIPT
This disclosure document summarizes certain provisions of the franchise agreement and other information in plain language. Read this disclosure document and all agreements carefully.
If TCBY Systems, LLC (“TCBY”) offers you a franchise, TCBY must provide this disclosure document to you 14 calendar days before you sign a binding agreement with, or make a payment to, TCBY or its affiliate in connection with the proposed franchise sale. Iowa, New York, Oklahoma and Rhode Island require that TCBY gives you this disclosure document at the earlier of the first personal meeting or 10 business days (or 14 calendar days in Iowa) before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship. Michigan and Washington require that TCBY gives you this disclosure document at least 10 business days before the execution of any binding franchise or other agreement or payment of any consideration, whichever occurs first.
If TCBY does not deliver this disclosure document on time or if it contains a false or misleading statement, or a material omission, a violation of federal law and state law may have occurred and should be reported to the Federal Trade Commission, Washington, D.C. 20580 and those state administrators listed on Exhibit A.
The franchisor is TCBY Systems, LLC located at 8001 Arista Place, Suite 600, Broomfield, CO 80021. Its telephone number is (720) 599-3300.
Issuance Date: March 26, 2014, as amended July 16, 2014. See state effective dates page for state effective dates.
TCBY’s franchise sellers involved in offering and selling the franchise to you are listed below (with address and telephone number), or will be provided to you separately before you sign a franchise agreement:
TCBY authorizes the respective state agencies identified on Exhibit A to receive service of process for TCBY in the particular state.
I have received a disclosure document with an issuance date of March 26, 2014, as amended July 16, 2014, that included the following Exhibits:
A. State Administrators/Agents for Service of Process H. Lease Addendum B. Franchise Agreement (with Schedules and Exhibits) I. Operating Procedures Manual Table of Contents C. Other Concepts Store Addendum to Franchise J. Confidentiality Agreement Agreement K. Franchisee Information D. Area Director Disclosure Addendum to Franchise L. Financial Statements Agreement M. Guarantee of Performance E. Area Director Agreement (with Exhibits) N. Assignment, Assumption and Consent F. Term Purchase Addendum O. Renewal Addendum to Franchise Agreement G. Sublease Agreement; Assignment and P. State Specific Addenda to Disclosure Document, Assumption of Sublease Addendum Franchise Agreements, and Area Director Agreement
Date: (Do not leave blank) (Print Name of Prospective Franchisee (For Entity))
By: Its:
Signature
(Print Name of Prospective Franchisee (For Individuals))
Signature