FRANCHISE DISCLOSURE DOCUMENT Yoshinoya America, Inc. 991 West Knox Street Torrance, California 90502 (310) 353-7110 (tel) (310) 217-2149 (fax) http://www.yoshinoyafranchise.com http://www.yoshinoyaamerica.com http://www.yoshinoyausa.com
Franchise Business: You will own and operate a restaurant featuring freshly-prepared, quality Japanese style foods.
Total Initial Investment: The total investment necessary to open a single YOSHINOYA restaurant (not yet in operation) will range from $507,600 - $841,300. This includes $195,600 - $274,300 you pay the franchisor or its affiliates as Initial Fees. The total investment necessary to purchase an existing YOSHINOYA restaurant will range from $272,316 - $1,887,867. This includes $165,600 - $1,674,300 you pay the franchisor or its affiliates as Initial Fees.
For area development rights, which let you open an agreed number of YOSHINOYA restaurants in a protected area, provided you meet development deadlines, you pay us a Territorial Rights Fee. It is the product of $13,750 (50% of the $27,500 Initial Franchise Fee) times the number of YOSHINOYA restaurants in your development commitment. We credit $13,750 to the Initial Franchise Fee for each Franchise Agreement you sign. We discount the Initial Franchise Fee up to 50% depending on the number of YOSHINOYA restaurants in your commitment.
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 (or earlier date required by your state law - see State Addenda) before you sign a binding agreement with, or make any payment to, the franchisor or affiliate. No government agency verified the information in this document.
You can receive your disclosure document in another format that is more convenient for you. To discuss availability of the disclosure document in another format, contact Scot Hobert, Yoshinoya America, Inc., 991 West Knox Street, Torrance, California 90502 (phone: 310/353- 7110; fax: 310/217-2149; e-mail: [email protected]).
The terms of your contract govern your franchise relationship. Don’t rely on the disclosure document alone to understand your contract. Read your entire 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, N.W., 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 30, 2012.
FDD - CA rev. 8/11 G:\lhsmh\LW\12912-2\541120.doc
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 OR VERIFIED THE INFORMATION IN THIS DISCLOSURE DOCUMENT.
Call the state franchise administrator listed in Exhibit A for information about the franchisor, about other franchisors, 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:
THE FRANCHISE AGREEMENT AND AREA DEVELOPMENT AGREEMENT EACH REQUIRE ALL DISAGREEMENTS TO BE RESOLVED FIRST BY TRYING NON- BINDING MEDIATION, AND IF THAT PROCESS DOES NOT RESULT IN RESOLUTION, THEN BY ARBITRATION. MEDIATION IS AT OUR OFFICES IN TORRANCE, CALIFORNIA, AND ARBITRATION IS IN LOS ANGELES, CALIFORNIA. IF YOU LIVE OUTSIDE CALIFORNIA, OUT OF STATE MEDIATION OR ARBITRATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT OF DISPUTES. IT MAY ALSO COST YOU MORE TO MEDIATE OR ARBITRATE WITH US IN CALIFORNIA THAN IN YOUR OWN STATE.
THE FRANCHISE AGREEMENT AND AREA DEVELOPMENT AGREEMENT EACH SAY CALIFORNIA LAW GOVERNS THEIR INTERPRETATION AND ENFORCEMENT FOR ALL MATTERS, EXCEPT LOCAL LAW IN YOUR STATE MAY GOVERN ENFORCEMENT OF THE COVENANT NOT TO COMPETE THAT APPLIES AFTER TERMINATION OR EXPIRATION OF THE FRANCHISE, IN STATED CIRCUMSTANCES. CALIFORNIA LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAWS IN YOUR STATE. YOU MAY WANT TO COMPARE THESE LAWS.
IF YOU ARE A BUSINESS ENTITY AND ANY INDIVIDUAL OWNING 10% OR MORE OF YOUR OWNERSHIP INTERESTS IS MARRIED, WE MAY REQUIRE THAT THE OWNER’S SPOUSE SIGN OUR PERSONAL GUARANTY AND THE SEPARATE PERSONAL GUARANTY OF SUBLEASE AS A CO-GUARANTOR. BY SIGNING A PERSONAL GUARANTY, THE SPOUSE WILL BE JOINTLY AND SEVERALLY LIABLE FOR ALL OBLIGATIONS OF THE FRANCHISEE WHETHER OR NOT THE SPOUSE IS INVOLVED IN OPERATION OF THE FRANCHISE BUSINESS. A PERSONAL GUARANTY PLACES THE PERSONAL ASSETS OF EACH OWNER AND HIS OR HER SPOUSE AT RISK. ALTERNATIVELY, AT OUR DISCRETION, IF AN INDIVIDUAL OWNING 10% OR MORE OF YOUR OWNERSHIP INTERESTS IS MARRIED, WE MAY REQUIRE THE OWNER’S SPOUSE TO SIGN OUR SPOUSAL CONSENT FORM. THE PERSONAL GUARANTY AND CONSENT OF SPOUSE FORMS ARE EXHIBITS TO THIS FRANCHISE DISCLOSURE DOCUMENT.
FDD - CA ii THERE ARE FINANCIAL AND LEGAL RISKS TO MOST BUSINESS EFFORTS, INCLUDING THIS FRANCHISE. TAKE YOUR TIME TO DECIDE. YOU MAY FIND IT USEFUL TO REVIEW THIS DISCLOSURE DOCUMENT, THE FRANCHISE AGREEMENT AND OTHER EXHIBITS WITH YOUR OWN ACCOUNTING, FINANCIAL AND LEGAL ADVISORS.
IF YOU BUY AN EXISTING STORE FROM US OR OUR AFFILIATE, YOU SHOULD INVESTIGATE THE STORE’S HISTORY AND OPERATIONS CAREFULLY TO ASSESS VIABILITY. THE STORE MAY HAVE A HISTORY OF LOSING MONEY. TO CONTINUE OPERATIONS, IT MAY BE ESSENTIAL FOR YOU TO RE-NEGOTIATE THE LEASE OR RELOCATE.
IF YOU BUY A FRANCHISE IN A NON-TRADITIONAL LOCATION (LOCATIONS WITHIN A MALL, SCHOOL, AIRPORT, RAIL OR BUS TERMINAL, STADIUM, SPORTS ARENA, AMUSEMENT PARK, PUBLIC PARK, THEATER, MILITARY BASE, RACE TRACK, HOSPITAL OR HEALTH CARE FACILITY, EDUCATIONAL FACILITY OR OTHER HIGH DENSITY OFFICE LOCATION OR OTHER MASS GATHERING PLACE), 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.
WE ARE IN THE PROCESS OF LAUNCHING A NEW FAST CASUAL RESTAURANT CONCEPT CALLED ASIANA GRILL AND/OR ASIANA GRILL YOSHINOYA THAT MAY COMPETE WITH YOUR RESTAURANT. THE NEW CONCEPT IS SCHEDULED TO LAUNCH IN 2012.
THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
We may use the services of one or more FRANCHISE BROKERS or referral sources to assist us in selling our franchises. 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 make sure to do your own investigation of the franchise.
Effective Date: See next page for state effective dates.
FDD - CA iii STATE EFFECTIVE DATES
The Franchise Disclosure Document is registered or on file in the following states having franchise registration or disclosure laws, with the following effective dates:
State Effective Date California May 9, 2012 Hawaii Illinois New York Virginia Washington
Also see Exhibit M - State Addendum.
FDD - CA iv TABLE OF CONTENTS
ITEM Page
ITEM 1 THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES ... 1
ITEM 2 BUSINESS EXPERIENCE ...... 5
ITEM 3 LITIGATION ...... 6
ITEM 4 BANKRUPTCY ...... 7
ITEM 5 INITIAL FEES ...... 7
ITEM 6 OTHER FEES ...... 11
ITEM 7 ESTIMATED INITIAL INVESTMENT ...... 17
ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES ...... 30
ITEM 9 FRANCHISEE’S OBLIGATIONS ...... 36
ITEM 10 FINANCING ...... 37
ITEM 11 FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING ...... 37
ITEM 12 TERRITORY ...... 49
ITEM 13 TRADEMARKS ...... 52
ITEM 14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION ...... 56
ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS ...... 56
ITEM 16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL ...... 57
ITEM 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION ...... 58
ITEM 18 PUBLIC FIGURES ...... 64
ITEM 19 FINANCIAL PERFORMANCE REPRESENTATIONS ...... 64
ITEM 20 OUTLETS AND FRANCHISEE INFORMATION ...... 65
ITEM 21 FINANCIAL STATEMENTS ...... 68
ITEM 22 CONTRACTS ...... 68
ITEM 23 RECEIPTS ...... 69
FDD - CA i LIST OF EXHIBITS
EXHIBIT A - FTC and State Administrators List EXHIBIT B - Agents for Service of Process EXHIBIT C - Franchise Agreement EXHIBIT D - Area Development Agreement EXHIBIT E - General Release EXHIBIT F - Sublease EXHIBIT G - Guaranty of Sublease EXHIBIT H - Addendum to Lease EXHIBIT I - Confidentiality, Non-Disclosure and Non-Competition Agreement EXHIBIT J - Personal Guaranty EXHIBIT K - YOSHINOYA Restaurants EXHIBIT L - Financial Statements EXHIBIT M - State Addendum EXHIBIT N - Addendum to Franchise Agreement re: Employee Franchise Program (Offered Only in California) EXHIBIT O - Advertising Addendum to Franchise Agreement EXHIBIT P - Asset Sale and Purchase Agreement EXHIBIT Q - Spousal Consent EXHIBIT R - Closing Acknowledgement EXHIBIT S - Table of Contents of Systems Manual EXHIBIT T - Receipts
FDD - CA ii ITEM 1 THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES
A. Terminology.
In this Franchise Disclosure Document, “we” or “us” means Yoshinoya America, Inc. (“Yoshinoya America”), the franchisor. “You” means the person who buys the franchise. If a corporation, partnership or other entity buys the franchise, “you” refers collectively to all persons who own an interest in the entity. “Yoshinoya restaurant” means the restaurant we license you to operate. “Single unit franchise” means the right to own and operate one Yoshinoya restaurant.
B. We, Our Parents, Predecessors and Affiliates.
We are a Delaware corporation incorporated in 1977. Our principal business address is 991 West Knox Street, Torrance, California 90502. We do business under our corporate name, and also the names YOSHINOYA and YOSHINOYA RESTAURANTS.
On October 1, 2008, we became the successor entity after the merger of three affiliates: (1) Yoshinoya Franchise of North America, Inc. (“YFNA”), a California corporation, organized January 23, 1996, which administered the YOSHINOYA franchise program since it started in 1996; (2) Yoshinoya West, Inc. (“Yoshinoya West”), a Delaware corporation, organized in 1977; which developed, owned and operated YOSHINOYA restaurants in California since 1979; and (3) Yoshinoya America, Inc. (“YAI”), a Delaware corporation organized January 1, 2003, which was the parent company of YFNA and Yoshinoya West. All three affiliates had the same principal address as we have now.
Yoshinoya West is the surviving corporation of the merger. We changed our name to Yoshinoya America, Inc. on October 1, 2008. As a result of the merger, YFNA is our predecessor. We administered the YOSHINOYA franchise program since the merger. We have operated YOSHINOYA restaurants of the type being franchised since 1979. Neither we nor our predecessor or affiliates offered or sold franchises in any other line of business.
Our agent for service of process is disclosed in Exhibit B.
1. Our Parents and Affiliates.
We are a wholly-owned subsidiary of Yoshinoya Holdings Co., Ltd. (“Yoshinoya Holdings”), a Japanese corporation, which formerly conducted business under the name, Yoshinoya D&C Co., Ltd. Yoshinoya Holdings’ principal address is 1-20-1 Akabane-minami, Kita-ku Tokyo 115-0044, Japan.
We are not affiliated with any company that presently offers franchises in the United States in any other business.
Yoshinoya Holdings has other wholly-owned foreign subsidiaries that operate and franchise restaurants in Japan and/or other Asian markets. We list the foreign affiliates that offer franchises below. Except for Yoshinoya Co., Ltd. and Yoshinoya International Co. Ltd., which we discuss below, the foreign affiliates do not operate or offer franchises under the YOSHINOYA name. We are not aware of any of the foreign affiliates having a present plan to
FDD - CA 1 open or franchise restaurants in the United States. The activities of the foreign affiliates are not material to our franchisees in the United States. Neither Yoshinoya Holdings nor our foreign affiliates provides goods or services to our franchisees or engages in franchise activities in the United States.
Affiliates that offer franchises under the “Yoshinoya” trademark
Yoshinoya Co., Ltd. Yoshinoya International Co., Ltd. 1-20-1 Akabane-minami, Kita-ku, Tokyo 1-20-1 Akabane-minami, Kita-ku, 115-8529, Japan Tokyo 115-0044, Japan Phone: 81-3-4332-9711 Phone: 81-3-4332-9770
Note: Has 225 Yoshinoya franchises in Japan Note: Offering franchises internationally in locations not covered by YAI; located mostly in other Asian countries
Affiliates that offer franchises in another line of business:
Hanamaru, Inc. Peterpan Comoco Co., Ltd. 7F Ryoshin Ginza East Mirror Bldg., 3-15-10 1-20-1 Akabane-minami, Kita-ku, Ginza, Chuo-ku, Tokyo 104-0061, Japan Tokyo 115-0044, Japan Phone: 81-3-3549-8701 Phone: 81-3-4332-9785
Line of business: Noodle shops Line of business: Snack shops, Lorean-style Brand: Hanamaru Udon food Note: 129 franchise shops in Japan Brands: Hitokuchi-chaya; Peter Pan; Ishiyaki Bibimba Note: Total of 10 franchise shops in Japan of the various brands
Don Co., Ltd. 1-20-1 Akabane-minami, Kita-ku, Tokyo 115-0044, Japan Phone: 81-3-4332-9950
Line of business: Steakhouses Brands: Don; Volks Note: Has 1 franchise in China; now offering franchises in Japan for the Volks brand
2. Our Prior Business Experience.
In view of the merger, we sold YOSHINOYA franchises since 1996 and owned and operated YOSHINOYA restaurants in California since 1979. Our subsidiary, Yoshinoya New York, Inc. (“YNI”), was formed to develop, own and operate YOSHINOYA restaurants in New York and opened its first restaurant in 2002. YNI, a New York corporation, was formed on January 8, 2001. YNI is not in any other business and shares our business address. The YOSHINOYA restaurants we and our subsidiary own are similar to the YOSHINOYA franchises described in this Franchise Disclosure Document. Addresses of our operating YOSHINOYA restaurants are in Exhibit K.
There may be situations when, at your request, we or an affiliate we choose will lease the franchise location from the real estate owner and sublease the location to you. At this time, we have not identified an affiliate we will use to do this. The affiliate may be a new company
FDD - CA 2 (not now in existence) formed to hold real estate master leases and subleases for properties that YOSHINOYA franchisees operate. The affiliate will derive revenue from the sublease if rent under the sublease exceeds rent under the master lease. See more on this in Items 5 and 6 of this Franchise Disclosure Document.
We have no affiliate (U.S. or foreign) that provides products or services to YOSHINOYA franchisees in the U.S. (But we may provide products or services to franchisees directly).
3. Prior Business Experience of Our Foreign Affiliates.
Yoshinoya Holdings was organized in 1958 and formerly did business under the name, Yoshinoya D&C Co., Ltd. Through its wholly-owned subsidiary, Yoshinoya Co., Ltd., Yoshinoya Holdings owns, operates and franchises YOSHINOYA restaurants in Japan that use the same principal trademarks we use in the United States. Its principal business address is 1-20-1 Akabane-minami, Kita-ku, Tokyo 115-0044, Japan.
The first YOSHINOYA restaurant opened in 1899 in Japan. It was a family business of the founders of Yoshinoya Co. Ltd. At 12/31/11, there were 1173 YOSHINOYA restaurants in Japan with 948 owned by Yoshinoya Co., Ltd and 225 owned by franchisees.
Since 1973, Yoshinoya Co., Ltd., directly and through its predecessor and affiliates, has sold YOSHINOYA restaurant franchises in Japan and other Asian markets. YOSHINOYA restaurants in Japan differ from YOSHINOYA restaurants described in this Franchise Disclosure Document. The differences are mostly restaurant design and menu items. The restaurants in Japan serve gyudon (a traditional Japanese style beef and rice bowl), and a traditional Japanese breakfast, and other items that YOSHINOYA restaurants in the United States do not feature. The Japan restaurants also have sit-down counter service. Yoshinoya franchised restaurants in Asian markets outside Japan are more similar to YOSHINOYA restaurants described in this Franchise Disclosure Document than to the YOSHINOYA restaurants in Japan.
C. The YOSHINOYA Franchise.
We grant franchises to own and operate a quick-service restaurant featuring freshly prepared Japanese style foods using the YOSHINOYA System and YOSHINOYA Marks.
YOSHINOYA restaurants offer a distinctive fusion of Japanese style dishes in an American-style quick service format. Menu items feature a variety of rice bowl selections, including the signature Beef Bowl® and Teriyaki Chicken Bowl, together with a Shrimp Bowl, Vegetable Bowl, Combo Bowl, sesame wings, freshly prepared side dishes, desserts and beverages. YOSHINOYA restaurants are designed for customers to place orders at a central counter. Freestanding units may have a drive-through depending on real estate, zoning and local customer base. YOSHINOYA restaurants do not serve alcoholic beverages at this time.
The YOSHINOYA System includes specifications for design and appearance of YOSHINOYA restaurants; specially designated equipment, interior fixtures, furnishings, and signs; required menu selections, uniform menu designations, special recipes, ingredients and food preparation processes; management and operational training programs; uniform operating methods and procedures; advertising, marketing and publicity programs; customer and community relations programs; and identification, including use of the YOSHINOYA name and commercial symbols (the “YOSHINOYA Marks”). We may modify these specifications (referred to collectively as the “YOSHINOYA System”). We tell you changes in writing. You must use and conform to the YOSHINOYA System in operating your YOSHINOYA restaurant.
FDD - CA 3 D. General Market for Your Products and Services; Your Competition.
The restaurant industry is developed and competitive. YOSHINOYA restaurants provide a distinctive menu offering Japanese food in an American restaurant format. Ethnic oriented restaurants are increasingly popular in the United States. Customers of YOSHINOYA restaurants come from all ethnic and economic backgrounds. Business at our restaurants is about even between lunch and dinner “day parts.” (A “day part” refers to the type of meal: breakfast, lunch or dinner.) Presently, YOSHINOYA restaurants open for lunch and there is no breakfast menu. We could introduce breakfast in the future and require you to offer breakfast following our specifications.
You will compete against quick service and fast food restaurants -- chains and independents. You will also compete with all alternative eating choices, including meals prepared at home, full-service restaurants, convenience stores and grocery stores. But these alternatives do not necessarily cater to customers who demand quickly served, prepared foods.
E. Laws and Regulations.
You must comply with laws and regulations that apply to businesses generally, and to restaurants and businesses serving food. Generally applicable laws and regulations include tax rules, labor laws, business license requirements, laws on construction of business premises, zoning rules, requirements for parking and access, the Americans with Disabilities Act, export control laws pertaining to technology, and laws on storage, preparation, packaging, labeling and sale of food to the public.
Federal and state laws affecting businesses generally include smoking restrictions, public posting of notices re health hazards (e.g., tobacco smoke or other carcinogens), fire safety and emergency preparedness laws, rules on use, storage and disposal of waste, insecticides and other hazardous materials, environmental laws that may impact the operation of restaurants (like laws on recycling and regulating the use of certain types of containers and materials potentially harmful to the environment), and standards regarding sanitation, employee health and safety. Some areas have or are considering proposals to regulate indoor air quality. Many places have laws against smoking inside restaurants.
A new trend is state and local laws requiring posting and disclosure of nutritional information at restaurants. The Health Care Reform Bills that became law in March 2010 contain provisions that require disclosure of nutrition and calorie information in chains of more than 20 restaurants.
You should investigate all general laws in evaluating the franchise.
F. Your Owner’s Obligations.
If you are a business entity, each person who owns or later acquires 10% or more of your equity or voting interests must sign our Personal Guaranty (Exhibit J) agreeing to jointly and severally personally guaranty the entity’s obligations to us under all contracts with us. If you are a business entity that enters into a sublease with us, we may require each 10% or more owner to sign a separate Personal Guaranty of Sublease (Exhibit G).
If any 10% or more owner is married, we may require the spouse to sign the Personal Guaranty and, if applicable, the separate Personal Guaranty of Sublease as a co-guarantor.
FDD - CA 4 Alternatively, at our discretion, if any 10% or more owner is married, we may require the spouse to sign our form of Spousal Consent (Exhibit Q).
If you acquire the franchise or area development rights as an individual and you are married and if your spouse is not a party to the Franchise Agreement (Exhibit C), Area Development Agreement (Exhibit D), General Release (Exhibit E), Sublease (Exhibit F), Confidentiality, Non-Disclosure and Non-Competition Agreement (Exhibit I), and/or Asset Sale and Purchase Agreement (Exhibit P), we may require your spouse to sign our form of Spousal Consent (Exhibit Q).
ITEM 2 BUSINESS EXPERIENCE
HISASHI IKEGAMI, President and Chief Executive Officer; Director
Mr. Ikegami joined Yoshinoya in 1985 and served in various positions over the years. In 2000 he became Managing Director and General Manager of Yoshinoya D&C’s Planning Department. During this assignment, Mr. Ikegami served on Yoshinoya D&C’s Board of Directors and served as auditor or director for several Yoshinoya D&C subsidiaries and affiliates, including YAI. Before the merger on October 1, 2008, Mr. Ikegami was a member of the Board of Directors of YAI from April, 2007, a member of the YFNA Board of Directors from September 1, 2007, interim President and Chief Executive Officer of YFNA from September, 2007 - October, 2007, as well as a Director of YNI from September 2007 – December 31, 2011. With the merger on October 1, 2008, Mr. Ikegami became our President and Chief Executive Officer and remains a member of our Board of Directors.
OLIVER CORTES, Exec. Vice President and Chief Operating Officer, Franchise Division
Mr. Cortes became Executive Vice President and the Chief Operating Officer of our Franchise Division on October 1, 2008, when we merged with our predecessor, YFNA. From November 1, 2007 until the merger, Mr. Cortes served as President and Chief Executive Officer of YFNA. From June, 2003 until August, 2006, he was Yoshinoya West’s Vice President of Planning. In August, 2006, he was promoted to Senior Vice President of YAI and his responsibilities expanded to include the YAI construction, merchandising and marketing departments. From July, 2006 to November, 2007, Mr. Cortes served as Corporate Secretary of YAI, Yoshinoya West, YNI, and YFNA. In April, 2010 the marketing and merchandising duties were moved to another department. At the same time, Mr. Cortes assumed additional duties being responsible for the training department.
SOOMI JO WEN, Vice-President of Site Development and Construction
Ms. Wen has served as our Vice-President of Site Development and Construction since August, 2009. From 2006-2009 Ms. Wen was the Senior Project Manager of Starbucks Coffee Company in Burbank, California.
ATSUSHI SAMURA, Executive Vice President and Chief Operating Officer, Yoshinoya America, Inc.
Mr. Samura became YAI’s Executive Vice President in November 2007 and Chief Operating Officer in October 2008. His duties also include operations, marketing and training. From January 2001 to July 2006 Mr. Samura was the Director, President and Chief Operating Officer of YNI, and later President and Chief Operating Officer of YNI from July 2006 to
FDD - CA 5 December 31, 2011. From January 2003 to July 2006 Mr. Samsura served as a Director of Yoshinoya Franchise of North America, Inc. He served as Yoshinoya West’s President and CEO from June 2005 until October 2008.
MANUEL VILLARREAL, Executive Vice President, Operations Division 1
Mr. Villarreal became YAI’s Executive Vice President, Operations Division 1 on April 3, 2010. Prior to that he was Vice President from June 11, 2005 to June 30, 2007 and Senior Vice President from July 1, 2007 to April 2, 2010. Mr. Villarreal has been with the company for more than 20 years in the Operations department. His current responsibilities include operations, training, marketing and research and development.
SCOT HOBERT, Vice President, Franchise Development, Sales, Operations & Relations
Mr. Hobert joined our predecessor YFNA in February, 2008 as Vice President of Franchise Development and Sales and has continued in this position since the October 1, 2008 merger. In April, 2010 Mr. Hobert also became Vice President of Franchise Operations and Relations. From 1994 until joining YAI, Mr. Hobert served in various capacities at OhCal Foods of Woodland Hills, California, one of the largest area developers in the Subway franchise system. From 1998 to 2008 he served as OhCal Foods’ Director of Franchise Sales.
SHIRLEY EDMONSON, Vice-President Finance and Accounting, Corporate Secretary
Ms. Edmonson has been our Vice-President of Finance and Accounting since 2008 and our Corporate Secretary since 2011.
YUKIHISA NISHIMURA, Executive Vice-President
Mr. Nishimura has been our Executive Vice-President since March, 2012. From January 2011 to February, 2012, Mr. Nishimura was the President of Yoshinoya Kyushu Co., Ltd. in Japan. He was also the General Manager of Business Planning for Yoshinoya Holdings Co., Ltd. in Japan from May, 2010 to December, 2011. From July, 2007 to April, 2010, Mr. Nishimura was Vice-President of the Planning Department of Yoshinoya Co., Ltd. in Japan.
ITEM 3 LITIGATION
Yoshinoya America, Inc. vs. DB Group, LLC, Brian De Borja and Francis De Borja, (Los Angeles Superior Court, Case No. BC434282, filed March 19, 2010). We sought relief for breaches by our Nevada franchisee, among them, failure to meet the schedule in an area development agreement and violation of system standards and requirements in two franchise agreements. We sought an injunction ordering compliance with the franchise agreement, monetary and other relief. Later we terminated the area development agreement and one franchise agreement by mutual agreement. On March 9, 2011 we submitted a settlement agreement and proposed judgment to the court, in which our franchisee agreed to an injunction ordering them to comply with the remaining Franchise Agreement and pay our legal fees according to an agreed schedule. On March 22, 2011 the court signed the agreed judgment.
Other than disclosed above, no litigation is required to be disclosed in this Item.
FDD - CA 6 ITEM 4 BANKRUPTCY
On June 18, 2008, YNI, our affiliate, filed a petition to reorganize under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the Southern District of New York, Case No. 08-12281-jmp. On December 18, 2008 YNI’s motion to dismiss the case was granted and the case was dismissed.
Except as disclosed above, no bankruptcies are required to be disclosed in this Item.
ITEM 5 INITIAL FEES
A. Initial Fees. These are all fees, payments, and commitments to pay for services or goods you receive from us or our affiliates before your YOSHINOYA restaurant opens. We apply Initial Fees uniformly. Initial Fees are lower if you buy multiple franchises or qualify under our Employee Franchise Program, which we describe in this Item 5. Except as we describe in this Item 5, Initial Fees are not refundable.
1. Initial Franchise Fee.
The initial franchise fee for a single YOSHINOYA franchise is $27,500 for the first unit opened. For an existing franchisee at an additional location (after receiving approval from us), the initial franchise fee is $24,750 for the second and each additional unit. You must sign a separate Franchise Agreement for each additional franchise on the terms we are then offering to new YOSHINOYA franchisees.
If you qualify under the Employee Franchise Program you pay an Initial Franchise Fee of $5,000 for the first YOSHINOYA franchise only.
You must complete a comprehensive franchise application. We ask you for preliminary financial and biographic information. We can require you to participate in a standardized assessment or test to assist us in evaluating you as a potential franchisee. Whether or not a franchise is entered into, we are not required to share the assessment or test results with you. We evaluate your application and decide if more discussion with you may be productive. We charge a non-refundable fee of $500 to conduct a background check. If you purchase the franchise, we credit the $500 background check fee toward the initial franchise fee.
If we accept your franchise application, within 14 days after we send you the notice of acceptance you must sign the Franchise Agreement (Exhibit C) and pay the Initial Franchise Fee. If you fail to do so, we have no obligation to sell you a YOSHINOYA franchise, and may withdraw approval any time after the 14 days.
You have 6 months to locate a proposed site for your franchise, obtain our approval and sign a lease. If you don’t have a signed lease for your store within 6 months of the date of your franchise agreement, we can terminate the franchise, and keep all fees paid. In extenuating circumstances (if beyond our and your control), we may grant a limited extension at our sole discretion. Unless you obtain an extension from us, you have 12 months from the date of the Franchise Agreement to open for business. If you fail to open for business within this time frame, we can terminate the Franchise Agreement and keep all fees paid.
FDD - CA 7 2. Territorial Rights Fee.
We offer area development franchises to qualified prospects. This is the Area Development Agreement (see Exhibit D). This grants a protected area for multiple YOSHINOYA restaurants. You and we decide the development territory and number of restaurants by negotiation before you sign. The Area Development Agreement does not let you sell YOSHINOYA franchises to others. See also Item 12. For each YOSHINOYA restaurant you wish to establish under the Area Development Agreement, you and we will enter into a separate Franchise Agreement. Outside of California, we can require you to enter into an Area Development Agreement as a condition to purchasing franchises.
You pay a territorial rights fee (“Territorial Rights Fee”) when you sign the Area Development Agreement. The Territorial Rights Fee compensates us for foregoing other opportunities to develop the territory during the Area Development Agreement term. We calculate the Territorial Rights Fee as the product of (i) $13,750 (being 50% of the $27,500 Initial Franchise Fee we currently charge for one “single unit” franchise), and (ii) the number of YOSHINOYA restaurants you commit to open during the Area Development Agreement’s term. As an example, if you commit to open 10 restaurants, the Territorial Rights Fee is $137,500. We fully earn the Territorial Rights Fee when you pay it at the time you sign the Area Development Agreement. We do not refund the Territorial Rights Fee under any circumstance even if you fail to satisfy your development commitment. If we terminate the Area Development Agreement based on your material default, you lose any unexpired development rights.
We credit you $13,750 toward the applicable Initial Franchise Fee due for each franchise under your development commitment. We discount the Initial Franchise Fee that an area developer pays according to the number of YOSHINOYA restaurants in the development commitment, as shown in the chart below. You pay the balance of the Initial Franchise Fee due for the particular restaurant when you sign the Franchise Agreement for the Restaurant, which you must do within 15 days after you receive site approval.
A. B. C. D. Franchise # - Balance Due of Initial Less Territorial YOSHINOYA Initial Franchise Fee Franchise Fee Rights Fee Restaurant (Column B - Column C) 1 $27,500 (100%) <$13,750> $13,750 2 and 3 each $22,000 (80%) <$13,750> $8,250 4 and 5 each $19,250 (70%) <$13,750> $5,500 6 & higher, each $13,750 (50%) <$13,750> $0
3. Purchases of Designated Goods/Services Before Opening.
Before you open your YOSHINOYA restaurant for business, you must purchase from us or our designated supplier all the Designated Goods/Services we identify in Item 8. We source these items from different suppliers. We may require you to enter into agreements with our suppliers. We estimate that payments for Designated Goods/Services before opening will range between $33,203 - $36,004. These payments are non-refundable.
FDD - CA 8 4. Grand Opening Fee.
No later than the date you sign a lease or sublease for the Franchise Location, you pay us a Grand Opening Fee of $10,000. We spend this on pre-opening and opening marketing and promotion materials, menu boards, and activities regarding the opening of your restaurant. We consult with you on implementation of the grand opening program so that publicity of your restaurant’s opening is consistent with our marketing approach. We account to you for our use of the Grand Opening Fee. This may include reimbursing ourselves up to $1,500, or 15% of the Grand Opening Fee, to cover our general overhead costs and staff time for development and implementation of the grand opening program. Within 180 days after your restaurant opens, we refund any portion of the Grand Opening Fee that we do not spend for these purposes.
5. Additional Advertising Contribution.
For certain locations we identify in advance and discuss with you, we may require you to spend additional sums on advertising and promotion, beyond the standard requirements in the franchise agreement. Typically these are locations that were previously owned by our affiliate or that we otherwise consider to require additional promotion.
The exact amount of the additional advertising will be determined in consultation with you and is payable to us when you sign the Advertising Addendum. (See Exhibit O). You must tell us the advertising and marketing you propose to conduct and obtain our written consent before using such advertising. To be reimbursed, you submit to us invoices showing that the advertising and marketing was completed and that it was previously consented to by us. After we confirm such advertising and marketing was completed, we pay the invoices, up to an aggregate total not to exceed the deposit paid to us on signing the addendum. Our Advertising Addendum is Exhibit O.
6. Payment Security Deposit.
1. We and our designated supplier(s), require you deposit $5,000 with us/them prior to opening, as partial security for timely and full payment of all amounts due to us and/or our supplier(s). We and/or the supplier (as applicable) can apply all or portions of the deposit to pay amounts not paid as and when due from you. You must replenish the deposit back to $5,000 if any portion is used.
B. Discounts.
1. Additional Franchises. The YOSHINOYA franchise grants you the right to open 1 YOSHINOYA restaurant at a designated, approved location. If you do not acquire area development rights, we have no obligation to grant you an additional franchise. As discussed above, you can apply to purchase one or more additional franchises. If we approve your application, we discount the Initial Franchise Fee for the second and each additional YOSHINOYA franchise to $24,750. You and we must sign a separate Franchise Agreement for each additional franchise on the terms we are then offering to new YOSHINOYA franchisees.
We may modify or stop this program any time. While it is in effect, if you own your first YOSHINOYA franchise as an individual, you receive the discount for each additional franchise you acquire personally. The discount also applies for additional franchises you acquire through a legal entity in which you own a controlling interest of the equity or voting interests or through a partnership in which you are a general partner. “Controlling interest” means you own enough shares or voting interests to direct the management and policies of the entity or partnership.
FDD - CA 9 However, if an entity is the original franchisee, the discount opportunity does not extend to its shareholders, owners, members or partners individually.
The terms of the additional franchise you purchase may differ from the Franchise Agreement attached to this Franchise Disclosure Document. The discount opportunity is uniform to all YOSHINOYA franchisees to which we contemporaneously grant an additional YOSHINOYA single unit franchise.
2. Related Parties; Employee Franchise Program. We may waive or discount the Initial Franchise Fee if we sell a franchise to a former or current: (i) employee or manager of our company or affiliate, (ii) approved supplier or affiliate, or (iii) employee of an approved supplier. The Employee Franchise Program is available only for the first franchise an employee purchases. YAI may limit how many employee franchise opportunities are available each year and will pre-screen employees interested in qualifying for the program to help us identify potential candidates.
We currently offer special terms to qualified former or current employees and managers of our company. We describe special terms that comprise the Employee Franchise Program elsewhere in various Items of this Franchise Disclosure Document and in the Addendum to the Franchise Agreement re: Employee Franchise Program, which is Exhibit N. We may further negotiate terms of our current Addendum in individual situations in our discretion depending on special circumstances of the location, market or employee.
If there is mutual interest, the employee candidate completes a comprehensive application, including bank and personal references and additional information we request. The candidate must pay a non-refundable fee of $500 for a background check. If the candidate purchases the franchise, we credit the $500 fee toward the initial franchise fee when the Franchise Agreement and Employee Franchise Program Addendum are signed (Exhibit N).
The Initial Franchise Fee under the Employee Franchise Program is $5,000, unless waived, and is payable at the time of signing the franchise agreement.
If, as an employee, you served as a YOSHINOYA restaurant manager in the 12 months before signing the Franchise Agreement, you must successfully complete a one month condensed version of our manager training. Other employees who we accept into the Employee Franchise Program must successfully complete the 12-week manager training class we offer to non-employee franchisees. If you do not pass after attending the 12-week training class, we may require you to successfully complete additional manager training up to a total of 12 months (including the 12-week manager training class). During manager training, you will be our at-will employee and receive compensation and standard benefits we then offer manager trainees. We may terminate the Franchise Agreement if you do not pass in the extended manager training class, in which case, we refund the $5,000 Initial Franchise Fee, less the $500 background check fee. You must sign our form of general release (Exhibit E), releasing all claims against us, as a condition to obtaining any refund.
C. Sale of Operating YOSHINOYA Restaurant by Us or our Affiliate.
We, or an affiliate, may agree to sell all the assets of an operating YOSHINOYA restaurant which we, or it, owns to a buyer who will continue to operate the restaurant under the YOSHINOYA Marks and YOSHINOYA System. Typically, the assets will not include the POS system, therefore you must buy and install a POS system meeting our requirements, before operating the restaurant. Existing locations offered for sale may have lost money. You should
FDD - CA 10 independently evaluate and consult advisors like a CPA to assess viability and prospects of the location. Locations are sold “As-Is”, without any warranties or representations. To purchase an existing location, the buyer must meet our qualifications for new YOSHINOYA franchisees and must purchase franchise rights from us. The sale of franchise rights by us, and sale of assets must occur simultaneously, so that on the same date the buyer acquires the assets of the operating restaurant and franchise rights for the restaurant. Depending on the physical condition of the restaurant assets, we may require the buyer to upgrade the facility to our then- current standards for design and appearance. Any upgrading we require would be in the nature of Renovation Changes, as defined in the Franchise Agreement. We will identify any required Renovation Changes before you sign the Franchise Agreement or purchase the assets.
If you purchase an existing location, we may also require you to do additional opening advertising. The exact amount of the additional advertising will be determined in consultation with you and is payable to us when you sign the Advertising Addendum. (Exhibit O).
If we lease the location, we may require you to accept an assignment of the lease, or we may elect to sublease the location to you.
We, or the affiliate owning the YOSHINOYA restaurant, and you will negotiate the price and terms of purchase of the assets and other conditions for the purchase and sale agreement before you sign the Franchise Agreement. The terms of purchase will vary in individual cases because of factors like operating performance and market potential of the restaurant being sold. Depending on payment terms negotiated, all or part of the purchase price may be payable before your business opens. The franchisee/buyer will pay us the Initial Franchise Fee disclosed in this Item 5. You must reimburse the professional fees we incur for this. Our form of Asset Purchase Agreement is attached as Exhibit P.
7. Other and Future Fees. Fees you pay may be higher or lower than other franchisees pay. In the future, we can lower or raise fees we charge to new franchisees at that time. We do not promise that fees you pay are the same or lower, compared to fees we charge others, now or in the future.
ITEM 6 OTHER FEES
Type of Fee Amount Due Date Remarks Service Fee 4% of Net Sales Payable on or before See Note 1 for the Tuesday each week based definition of Gross Sales (all franchisees except on Net Sales during the and Net Sales. Employee Franchisee prior Monday - Sunday. Program) We may debit your EFT We require payment by account 120% of your last electronic funds transfer payment if you fail to (“EFT”). report Net Sales to us on time. Service Fee 3% of Net Sales Same terms as above Same terms as above
(Employee Franchisee Program Only)
FDD - CA 11 Type of Fee Amount Due Date Remarks Promotional Fee Under the Franchise Same as Service Fee See Note 1. Agreement, 4% of Net Sales, which we may At any time, we may increase to up to a change the amount of the maximum of 5% of Net Promotional Fee on 30 Sales. days written notice to a maximum of 5% of Net Currently, until further Sales. notice, the Promotional Fee is 1.5% of Net Sales. We may debit your EFT account 120% of your last payment if you fail to report Net Sales to us on time. Regional Cooperative Maximum 2% of Net Sales Established by If a regional cooperative is Promotional Fee franchisees; franchisees established for your may increase or impose region, any contribution supplemental contribution you must make is in by 65% vote, which is addition to your obligation binding on all members of for Promotional Fees. See cooperative. Note 2. Additional Advertising Up to $10,000 At time of signing the If we determine your Contribution (limited to Advertising Addendum location would benefit from locations we identify in additional advertising, we advance) will inform you of this requirement before you sign the franchise agreement and require you to sign the form of agreement in Exhibit O-- Advertising Addendum to Franchise Agreement. See also Item 5. Training of Additional Presently $300 per week, Before start of training. Conducted in Torrance, Personnel (More than 4) or $60 per day (per See Note 3. California or other location and Each Replacement person); amount is based we designate. See Note 3 Manager; Refresher and on current rate. and Item 11. Advanced Training Courses Renewal Fee 25% of then-current Initial When you give notice of The Renewal Fee is the Franchise Fee for non- your exercise or renewal same whether you qualify employee franchisees option, at least 12 months to buy a franchise under purchasing their first before expiration of the the Employee Franchise YOSHINOYA franchise current term. Program or not. Transfer Fee (Area Transfer fee for transfer of Before transfer Area Development Development) area development rights is Agreement defines what 10% of the Territorial events are a “transfer” Rights Fee. requiring payment of a fee. If consent is denied, we may keep 5% of the Territorial Rights Fee for our expenses in reviewing the proposed transfer.
FDD - CA 12 Type of Fee Amount Due Date Remarks Transfer Fee (Single Unit) 25% of then-current Initial Before transfer Franchise Agreement Franchise Fee for non- defines what events are a employee franchisees “transfer” requiring purchasing their first payment of a fee. The YOSHINOYA franchise Transfer Fee is the same whether you qualify to buy a franchise under the Employee Franchise Program or not. Securities Review Fee Reimbursement of our Before transfer Applies if you are an entity actual cost to review the and the issuance, offer or securities registration or sale of your securities is offering documents, not to subject to registration with exceed $25,000 (subject to the federal Securities & cost-of-living adjustment). Exchange Commission or is offered as a private offering. On-Site Review Fee See Note 4 See Note 4 No charge for first on-site evaluation by us for your first YOSHINOYA franchise. In all other cases, see Note 4. Alternate Supplier Testing Based on our actual cost When approval of an Fee alternate supplier is requested (see Item 8) Sublease Each month the rental You pay sublease rent to You will pay us the same payable under the us or to our designated deposit that we pay under sublease will exceed the affiliate which serves as the master lease. rental payable under the sublandlord. Payments master lease by an are due at least 10 days amount not to exceed 20% before date payment is of the master lease base required under the Master rent. We refer to this in Lease; however, if the the sublease (Exhibit F) charge is not imposed as an “administrative fee.” monthly under the master This fee may be increased lease, payment is due to with CPI increases. us within 10 days after written notice from the affiliate/sublandlord. Sublease – Late Payment If rent is late 3 days or On demand if payment is We can request you to pay more, you pay a 10% late late a late fee if your rent fee on the delinquent amount is late. amount. This does not excuse the breach Security Deposit – You pay us a security On signing Sublease We can apply deposit to Sublease deposit generally equal to remedy any default by you. amount charged to us by You must restore security the Master Landlord. amount within 10 days after demand. Site Location Finder’s Fee $6,000 If YAI offers site selection See Exhibit N, which sets (Employee Franchise assistance, a $6,000 forth the terms of our Program only) finder’s fee is payable Employee Franchise when you sign the lease or Program) sublease for the approved location. Proprietary Software None, because presently December 1, in advance For use of Proprietary
FDD - CA 13 Type of Fee Amount Due Date Remarks Annual License Fee not available. If for the next year; no Software when developed introduced, we expect the prorations for partial annual license fee to be period. approximately $500/year, subject to annual CPI increase. Maintenance or Repair 15% service charge On receipt of invoice Payable if you fail to Work (based on cost of remedial complete required work) payable to us if we maintenance or repair elect to perform needed work. We have no maintenance or repair obligation to perform the work after you fail to do so. work for you, however, and Additionally, you must may terminate the reimburse us for all of our Franchise Agreement actual direct costs in because of your breach. performing the work. Insurance 15% service charge On receipt of invoice Payable if you fail to carry (based on cost of obtaining required insurance. We required insurance) have no obligation to payable to us if you fail to obtain coverage for you, maintain required however, and may insurance. terminate the Franchise Agreement because of your breach. See Item 8. Replacement of all or any $500 per volume, plus 10 days after billing Cost of replacement copy portion of our Systems shipment Manual Fee For Guaranty .05% (APR) of principal Monthly, by 10th of month, See Item 10. If we don’t (Employee Franchise amount of loan which YAI based on then-current provide a guaranty, then Program only) guarantees principal balance of any we don’t charge you this conventional loan, up to fee. $600,000 maximum principal Reimbursement of Our Amount incurred When incurred and If we incur professional Professional Fees requested. fees in negotiating a lease or sublease, or selling you assets of an existing, operating restaurant, or assisting in finding financing, assisting with the sale or purchase of a Yoshinoya restaurant or any other matter you or a third party (such as Landlord or Lender) requests, you reimburse the professional fees we incur. Reimbursement for taxes, As incurred When incurred You reimburse us or our excises, and other charges affiliates for taxes, excises we incur as a result of and other charges we may shipping products to you. be required to pay to any government authority due to sale, production or transportation of goods you buy from us or an affiliate
FDD - CA 14 Type of Fee Amount Due Date Remarks Management Fee $250 per day, plus As billed If we take over operations reimbursement for our of your restaurant due to personnel’s travel and breach or other reason, living expenses and you pay us this daily compensation while restaurant management managing your restaurant. fee. You also pay our personnel’s compensation and reimburse their travel and living expenses. Audit Cost of inspection or audit 10 days after billing Payable if audit discloses underpayment of Net Sales by 2% or more Late Payment Late charge equal to 10% When billed Interest is payable on of payment due, together entire overdue amount with interest at one-and- beginning with the date one-half percent (1 1/2%) payment is due until per month (not to exceed payment, late charge and highest legal rate) interest is paid in full Dishonored Item Fee $75 plus reimbursement of On notice following a You reimburse the amount charge a financial or other dishonor or other we are charged by our institution imposes on us, incompletion of a payment financial institution, and for each dishonored or instrument or debit or other you pay us $75 to unsuccessful check, ACH payment procedure. compensate our time and debit, electronic funds administrative attention to transfer, credit or wire the dishonored item. transfer or other form of payment that in any way is not honored or completed. Security Deposit $5,000 (deposit) On Request. We require you to deposit (Franchise Agreement) this with us or our designated supplier, as partial security for payment of amounts due. If we or they apply all or portions you must replenish the deposit back to $5,000. The deposit is non- refundable until (1) if held by us, the Franchise Agreement terminates or expires, or (2) if held by the supplier, your agreement with the supplier ends. We and/or the supplier have the right to increase the amount of the security deposit on notice to you. Product and Supply Varies based on order As incurred You pay for products, Purchases supplies and other items purchased from us, according to our then current pricing schedules. Collection Costs Will vary under As incurred You pay all collection circumstances costs, attorneys fees and court costs we or our affiliate incurs for collecting
FDD - CA 15 Type of Fee Amount Due Date Remarks amounts owed to us or our affiliate. Indemnification Will vary under As Incurred You reimburse losses we circumstances suffer from the operation of your business Costs and Attorneys Fees Will vary under As incurred Awarded to prevailing circumstances party
All fees are payable to us and are non-refundable. At this time, we impose fees uniformly. However, we retain discretion to reduce fees in individual cases in our discretion.
NOTE 1: “Gross Sales” means all sales you make from the operation of your YOSHINOYA restaurant including sales from delivery services and the retail value of all food and other merchandise of any kind sold through coupon redemption or otherwise given away for which reduced or no cash is received. “Net Sales” means Gross Sales less the sum of: (i) sales taxes or similar taxes imposed on the transaction which you pay to any federal, state or local taxing authority; (ii) retail value of any coupon sales; (iii) proceeds you receive on the sale of fixtures or personal property not in the ordinary course of business; and (iv) Qualified Charitable Sales in an amount not to exceed 10% of Gross Sales for the applicable period. The term “Qualified Charitable Sales” means proceeds of sales made to qualified charities meeting the criteria we identify, or will identify, in the Systems Manual if you obtain our prior written approval before you complete the sale following the procedures in the Systems Manual. See additional disclosures about the Systems Manual in Item 11.
The Franchise Agreements requires payment by electronic funds transfer (“EFT”). If you fail to report Net Sales to us on time for any accounting period, we may, without waiving our right to terminate the Franchise Agreement, debit your EFT account for 120% of your last payment. Once we do so, that payment is non-refundable even if you later report your Net Sales and demonstrate to us that the amount we debited exceeds 4% of your actual Net Sales for the accounting period.
When we resume collecting the regular rate of Promotional Fee that we disclose in this Item 6 in our discretion, we may rebate all or a portion of the Promotional Fee to you for local marketing use. Additionally, we may increase the Promotional Fee by up to a maximum of 5% of your Net Sales. Increases become effective on at least 30 days written notice.
You pay us the amount of any State or local sales, use, gross receipts, or similar tax that the State or local government imposes on fees which you pay to us under the Franchise Agreement, without offset or deduction. Your obligation to reimburse us for these taxes do not extend to income-type taxes which a State or local government imposes on our income.
NOTE 2: We may establish regional advertising cooperatives and determine each region’s boundaries. Your participation in the co-op is mandatory. We approve advertising that the co- op produces. Item 11 discloses additional information regarding cooperatives, including voting power of our affiliates for the YOSHINOYA Restaurants they own in the regional marketing territory to which we assign you.
NOTE 3: As noted in Item 11, at least 1 full-time manager, 1 full-time lead kitchen personnel, and the franchisee (if not the full-time manager) must complete the initial training program. We do not impose a training fee to send up to 4 individuals to the same initial training session. We
FDD - CA 16 conduct initial training at the training center in Torrance, California where our headquarters is located or at an alternate location in the United States that we specify. The length varies, as follows: franchisee training (6 days); lead kitchen (6 weeks); manager training (12 weeks). As disclosed in Item 11, your designated full-time manager must successfully complete the initial training program based on minimum performance requirements. If you send more than 4 people to the initial training program, or if we must train a replacement manager/lead kitchen personnel, we charge a training fee of $300/week (or, if training is less than a week, $60/day) per person. Therefore, under the present curriculum, the fee payable to us for training an additional or replacement manager is $3,600 and an additional or replacement lead kitchen employee is $1,800. You must pay for travel, lodging, personal expenses, and salary expenses of your employees receiving training. We may also require that you and designated personnel complete refresher and advanced training courses. See Item 11.
NOTE 4: If you submit a completed site proposal, including materials identified in the site proposal package guidelines we provide (for example, site surveys, photographs, demographic report, master landlord letter of intent), we do not impose a fee or other charge to make one on- site visit for your first site, or to make a separate on-site visit during build-out to inspect construction of the first restaurant. But if we make a trip and determine your site proposal is incomplete, you must reimburse our actual travel expenses (transportation, hotel, meals) for the visit. If more than one on-site visit is necessary to select the location for your first restaurant or to inspect your first restaurant during build-out, or if we make an on-site visit for a later restaurant (either for that restaurant’s location or construction), you must pay a site review fee of $350 per day and reimburse our reasonable travel (transportation, hotel, meals) and related expenses. See additional disclosures in Items 8 and 11.
ITEM 7 ESTIMATED INITIAL INVESTMENT
YOUR ESTIMATED INITIAL INVESTMENT*
Amount Method of To Whom Type of Expenditure (Notes 1, When Due Payment Payment Made 22) Initial Franchise Fee (Note 1) $5,000 - Cash On signing. $5,000 if you Us $27,500 qualify under the Employee Franchise Program; otherwise $27,500. Store Development (Notes 2, $15,000 - Cash Before opening Site location service 3) $50,000 provider, architect, consultant, government agencies, and miscellaneous third parties Real Estate Deposit and $19,600 - Cash Typically on signing lease Third party landlord Rent for Initial Period (Note 5) $30,800 or sublease or us or our designated affiliate as sublandlord under conditions explained in Item 5 Construction and Leasehold $170,000 - Cash Before opening Third Parties Improvements (Notes 4, 6) $300,000 Furniture, Fixtures and decor $40,000 - Cash Before opening Third Parties
FDD - CA 17 Amount Method of To Whom Type of Expenditure (Notes 1, When Due Payment Payment Made 22) (Note 7) $60,000 Equipment (Note 8) (includes $65,000 - As Arranged Before opening Us and Third smallwares) $90,000 Parties Inventory Food - Initial Period $69,000 As Arranged Before opening Us and Third (Note 9) Parties Other Initial Inventory – Initial $22,000 As Arranged Before opening Us and Third Period (Note 10) Parties Signs (Note 11) $10,000 - As Arranged Before opening Third Parties $40,000 Your Professional Fees (Note $5,000 - As Arranged Before opening Your accountants, 12) $10,000 attorneys, etc. Utility Deposits (Note 13) $3,000 - Cash Before opening Utility companies, $20,000 including telephone company Payment of Security Deposit $5,000 Cash Before opening or on Us or our (Note 14) request designated supplier. Insurance (Note 15) $3,000 - As Arranged Before opening Insurance $6,000 Companies Employee Expenses During $16,000 - Cash; you pay Before and at time of Third Parties Training (Salary, $31,000 travel expens- opening transportation, hotel, meals es by credit and related expenses) (Note card and take 16) longer to repay Grand Opening Fee (Note 17) $10,000 Cash On or before signing lease Us Additional Advertising $0 - $10,000 Cash, at time On signing the Advertising Us Contribution (limited to of signing the Addendum. locations we identify in Advertising advance) (Note 18) Addendum Reimbursement of Our $0 - $10,000 Cash At time incurred by us Us. Professional Fees (Note 19) Additional Funds (Note 20) (3 $50,000 As Arranged Pre and Post Opening Third Parties; months) employees Total (Notes 21, 22) $507,600 - $841,300
Explanatory Notes to Initial Investment Chart
* This table discloses your estimated initial investment for purchasing a Yoshinoya restaurant. If you are converting your existing restaurant to a Yoshinoya restaurant, your initial investment in various categories, including construction and leasehold improvements may be significantly less.
NOTE 1: If you do not qualify under the Employee Franchise Program, the Initial Franchise Fee of $27,500 is payable when you sign the Franchise Agreement. If you qualify under the Employee Franchise Program, the Initial Franchise Fee is $5,000 for the first franchise. You pay this with the Franchise Agreement. We do not finance the Initial Franchise Fee. The $500
FDD - CA 18 background fee paid when submitting your application is applied to the initial franchise fee at time of signing the franchise agreement.
Refund: See Item 5 regarding conditions for refunding portions of the Initial Franchise Fee.
NOTE 2: The low estimate assumes 1,400 square foot interior space for tenant improvement building (in-line) location where the shell building already exists, one restroom and no drive through. The high estimate assumes 2,200 square foot interior space for a free standing building, two restrooms and a drive through. The cost to use a site location service provider, architect, consultant, government agencies, and miscellaneous third parties range from $15,000 - $50,000 depending on the local and city requirements for plan check and permits.
NOTE 3: We have 2 basic site development plans. One is an in-line construction. The other is a freestanding building with or without drive through facilities. These range from 1,400 to 2,200 square feet interior space. Freestanding locations require a lot size of approximately 12,000 to 25,000 square feet. While we may consider alternate configurations, the initial investment for an alternate site may be outside the above estimates. The low estimates reflect an in-line location and high estimates reflect a free standing location with a drive through development.
These estimates assume you lease a previously constructed building which is suitable for conversion to our exterior and interior design specifications. These figures assume you do not build a new location on vacant land, nor purchase the building or real estate.
We assume the condition of an existing building conforms to the following or that the landlord will provide all the following:
Space: Warm, dark shell Floor: Smooth and level unsealed concrete floor provided by landlord. Walls: Demising walls studded, dry walled, taped and finished by landlord. Ceiling: In place Lighting: In place Electric: 110/208 400 AMP 3 Phase power inside space provided as 2 – 200 amp live panels with main disconnect provided. Water: 2” water line to the premises Gas: 2” gas line to the premises, with a #4 meter large enough to produce 1.6 million BTU’s per hour Sewer: 6” waste line inside space, maximum depth 5’ at proper depth for gravity feed system, grease interceptor (if required) Grease Line: 6” grease waste line inside space, maximum depth 5’ at proper depth to allow gravity feed system Telephone: 1.5” conduit with pull string to the premises H.V.A.C. Rooftop unit provided, installed and fully functioning, no distribution provided at 1 ton per 150 square feet for dining room and 1 Ton per 250 square feet for kitchen areas. Roof: At least 6’ parapet wall to screen equipment if required by local government Kitchen: Hood and ansul system installed by equipment supplier, duct connections provided and installed by general contractor Refrigeration: Walk-in cooler installed by equipment supplier, remote compressor installed by HVAC contractor. Fire Sprinkler: Installed, if required and code compliant with heads up.
FDD - CA 19 Alarm: Code compliant fire alarm system as required with building system information provided by landlord. Fire Hydrant: Installed, if required. Other: ADA compliant store front and access to space provided by landlord.
The estimate includes expenses for preparing floor plans, architectural and design fees for adapting our design standards and construction guidelines to dimensions of your location, building and zoning licenses and permits, and site survey expenses. But these costs can vary considerably depending on location. You must investigate these costs in the area where you will locate your YOSHINOYA restaurant.
The estimated costs do not anticipate financial assistance from the landlord. The estimates assume non-union labor and contractors and no franchisee expense for fire flow testing, utility meters, utility fees for tie-ins or for utility service installations, no winter conditions, no hazardous materials removal or remediation, no removal or replacement of unsuitable subsurface materials, no ledge removal, no security work, and no terminations of phone or data runs. If any of these expenses apply, your investment will increase. Allowances will depend on lease negotiations.
The estimates include fees you will pay for a site analysis and demographic report, which we may require as part of the site package you present to us for site approval. See additional disclosures in Items 8 and 11.
NOTE 4: The leasehold improvement costs (not including equipment, furniture, fixtures or decorating) are estimated to be in the range $170,000 - $300,000. These figures assume you do not build a new location on vacant land, nor purchase the building or real estate. If you construct from ground up, your costs will be much higher.
NOTE 5: These figures cover the initial security deposit and 3 months rent. The initial security deposit is typically refundable; rent payments are not. Both the low and high estimates assume we let you lease the approved location directly from the landlord and you do not sublease from us. We have discretion to require you to sublease from us in all cases. But generally we require a sublease only if you buy a franchise under the Employee Franchise Program. Then, either we or our affiliate will enter into a master lease for the approved location directly with the landlord and sublease the location to you and we may impose an additional administrative charge up to 20% above the master lease rent as additional compensation to us for taking on the role of master tenant. See Item 6 and Exhibit F. We base the real estate figures on our experience operating YOSHINOYA restaurants in California. Outside California, real estate costs and lease terms may differ. We (through Yoshinoya West before the merger) have sometimes negotiated with landlords for a rent commencement date that begins on the date the restaurant opens for business. Accordingly, we believe 3 month’s rent is sufficient to cover the initial phase (pre-opening through the end of the first 3 months after opening). You should investigate prevailing lease rates and terms in the area where you will locate your restaurant. See Item 6. The low estimate assumes a location in a lower density area. The high estimate assumes a higher density area. Actual figures may be higher in very high density and historically expensive areas, such as downtown Manhattan, New York.
NOTE 6: The total is based on building size within the parameters in Note 3. This category includes decorating costs and certain leasehold improvements.
FDD - CA 20 NOTE 7: Your costs depend on the size of your YOSHINOYA Restaurant and seating space. Our assumptions are based on 1,400 square feet (low estimate) and 2,200 square feet (high estimate) with seating for 38 – 44.
NOTE 8: Costs include (i) kitchen, refrigeration, cooking and food preparation equipment and small wares (including a proprietary gas beef cooker you buy from us for approximately $7,000 and a griddle you can buy from us for approximately $4,000), (ii) the purchase and installation of the Radiant Aloha point-of-sale (“POS”) and enterprise software and hardware system (see Items 8 and 11); and (iii) miscellaneous office furniture and office equipment (computer hardware, designated accounting software, facsimile machine, high-speed Internet access, digital surveillance camera system and computer printer). We require you to maintain an active e-mail address so we can communicate with you electronically.
The Equipment category includes an allowance for costs during the initial phase of business associated with the purchase of computer hardware to run the Radiant/Aloha system (including terminals, printer and kitchen display equipment); the cost to install all the Aloha software we require for front-of-the-house and back-of-the-house functions; maintenance and support costs during the initial phase; and costs to establish on-line communication for uploading information and downloading upgrades and a monthly hosting fee payable to Radiant. The high estimate includes an allowance for travel expenses for one Radiant representative to travel to your YOSHINOYA restaurant to provide on-site training in use of the POS system to your opening staff and Radiant’s fee for providing opening support at your election. For preparing operating and financial reports, communicating through e-mail, receiving, sending and storing documents and performing other back-office business functions, you need to purchase and maintain a personal commuter with high-speed Internet access.
These estimates assume you do not own equipment before purchasing the franchise.
NOTE 9: Covers estimated cost of inventory of food supplies, beverages, condiments, spices and ingredients needed for opening and through the end of the first three months. This also includes some items you will buy from us before opening at an estimated cost to you of $7,295. Costs vary according to local suppliers’ terms, calendar season, product availability and quantity requirements as well as your own sales level during the initial period.
NOTE 10: Covers estimated cost of inventory of non-food supplies, including paper goods, office supplies, cleaning materials and other disposables needed for opening and through the end of the first three months. This also includes some items you will buy from us before opening at an estimated cost to you of $408. Costs vary according to local supplier terms, product availability, quantity requirements and your own sales level during the initial period.
NOTE 11: Covers cost of interior and exterior signs. High estimate includes cost of monument sign or freestanding sign on high rise pole and exterior menu sign for YOSHINOYA Restaurants with drive-through facilities.
NOTE 12: We encourage you to consult an attorney, accountant or other professional. These estimates are an approximate estimated range of professional fees you might incur.
NOTE 13: Includes initial deposits required by utility companies (phone, water, gas, electricity, trash removal, and related utility and service expenses) to establish service.
NOTE 14: We and/or our designated supplier require you to deposit $5,000 with us or them prior to opening, as partial security for timely and full payment of all amounts due to them/us.
FDD - CA 21 We and/or the supplier can apply all or portions of the deposit to pay amounts not paid as and when due from you. You must then replenish the deposit back to $5,000 if any portion is used. This deposit is refundable only after the franchise agreement or supplier contract terminates.
NOTE 15: Covers first year insurance expense which usually is prepaid. See Item 8 for coverage requirements.
NOTE 16: You must send at least 3 individuals (1 lead kitchen personnel, 1 full-time manager, and you) to the initial training program. For an area developer, we also require your principal owner or principal executive or other principal officer acceptable to us, to attend and complete training under your first Franchise Agreement. These estimates cover anticipated travel, lodging, food and miscellaneous costs for all 3 persons, and an allowance for salaries during training. Your actual costs for initial training may be lower if the persons who attend our initial training program live within driving distance to our training location and do not need a hotel stay or air travel. Initial training expenses do not include an allowance for expenses you may incur before opening during the on-site training which we provide to your opening crew, like a salary to your opening crew. These expenses are included under the “Additional Funds” category.
Item 11 explains that you may send a total of 4 individuals to initial training before opening for no additional fee. To send more than 4 individuals, or if a replacement employee must complete initial training after your YOSHINOYA Restaurant opens, you must pay the per person fee disclosed in Item 6. You pay all travel, lodging, food and other out-of-pocket expenses and salary for every person who you send to training.
Item 11 describes the length and location of pre-opening initial training.
NOTE 17: When you sign the lease or sublease for the Franchise Location, you pay us a Grand Opening Fee of $10,000. We spend this on pre-opening and opening marketing and promotion materials, menu boards, and activities connected with opening your YOSHINOYA restaurant. We account to you for our expenditures, which may include up to a 15% administrative fee to cover our general overhead costs and dedication of staff time to your grand opening program. Within 180 days after opening your YOSHINOYA restaurant, we refund to you any of the Grand Opening Fee we did not spend.
NOTE 18: If we determine your location would benefit from additional advertising, we will inform you of this requirement before you sign the franchise agreement and require you to sign Exhibit O-- Advertising Addendum to Franchise Agreement. See also Item 5.
NOTE 19: If we incur legal or other professional fees for negotiating a lease or sublease on your behalf, or in connection with the sale or purchase of a Yoshinoya Restaurant or arranging financing assistance or any other matter you or a third party (such as a Landlord or Lender) requests, then we may require you to reimburse the legal and other professional fees we incur.
NOTE 20: The low/high estimates cover additional funds for the first 3 months after you open your YOSHINOYA restaurant. The category of “Additional Funds” does not represent the only source of cash, but is in addition to cash flow from operations. We cannot estimate what your cash flow from operations will be. You might not have positive cash flow. We recommend you have available to you, at opening, the amounts shown above to defray miscellaneous operating costs through the end of the first 3 months of operations, including: incidental expenses to train opening employees on-site, local business licenses, payroll expenses, bank charges, miscellaneous out-of-pocket, postage, office supplies, and other initial expenses.
FDD - CA 22 Depending on your state, you may be required to pay a deposit with a state agency to obtain a seller’s permit to do business to cover sales taxes you owe the state when your business closes. State law may determine the amount of the deposit according to a formula that considers your likely aggregate gross sales in your first year of operation. While the deposit may be refundable in certain conditions after a certain time, any refund would not occur until after the first 3 months of operations. So, the high estimate for Additional Funds includes an allowance for a sales tax deposit. For example, YOSHINOYA restaurants in California may be required to pay a sales tax deposit to the State Board of Equalization to obtain a seller’s permit which is determined as a percentage of the aggregate gross sales you estimate in the first year of operation of your YOSHINOYA restaurant. You are responsible to research laws in the state where you open your YOSHINOYA restaurant to determine if comparable requirements exist.
These estimates also include opening cash in the register of $500. You should have funds available in reserve, in cash or through a bank line of credit, for unanticipated expenses, losses or events during the start-up and development stages and beyond. You should evaluate your working capital needs to be certain you have adequate funds available in the initial phase and later to cover normal operating expenses and unexpected contingencies.
These figures exclude payments of Service Fees and Promotional Fees since these amounts depend on your actual Gross Sales and Net Sales. We do not project what your Gross Sales or Net Sales will be; however, your calculations should consider these expenses.
Payroll expenses cover opening employees but do not include any draw or salary to you.
In certain locations, the additional funds required to operate will be much higher. An example is a location in New York City where you may need up to $1 million in additional capital during the initial period.
NOTE 21: Item 7 explains the estimated initial investment to open and begin operating a YOSHINOYA restaurant as of the effective date of this Franchise Disclosure Document. The estimated initial investment covers the period starting when you sign the Franchise Agreement and continuing through the first 3 months after your restaurant opens for business. The Item 7 chart is accompanied by notes that explain each expense category and variables that influence the low and high initial investment estimates. The notes are an integral part of Item 7. Unless otherwise indicated, the initial investment payments are not refundable. You may be able to negotiate refund terms with a third party supplier. We make no representation as to your ability to obtain refund terms with third parties you deal with in establishing your franchise business.
The Item 7 figures do not include an allowance for payments made to a bank or financing company on any loan obtained to finance the cost of purchasing the franchise or other development-related costs.
We rely on our experience in operating YOSHINOYA restaurants in California to compile these estimates. As we note above, certain categories of expenses may not be relevant to a prospective franchisee who intends to open a YOSHINOYA restaurant in a major metropolitan area with comparably expensive real estate.
All Item 7 figures are estimates only. We cannot and do not guarantee that you will not have additional expenses in opening and initially operating your YOSHINOYA restaurant. Your costs will depend on factors like: actual size of your restaurant and number of employees required per shift; whether you hire additional personnel to assist you with administrative and accounting functions; your management skill, prior experience in restaurant management and
FDD - CA 23 business acumen; local economic conditions; prevailing wage rate; competition; and the sales level reached during the initial period.
You should review the Item 7 figures carefully with a business advisor before making any decision to purchase the franchise. Except for the Employee Franchise Program, we do not offer direct or indirect financing to franchisees for any items.
NOTE 22: All amounts are only estimates. Because these are only estimates your actual expenditures, both specific, and total in any category, and total overall, may not conform to these specific amounts. Do not rely on this table alone. Use this table as a reference point for your own further independent investigation. You should independently investigate the actual expenditures you will incur.
YOUR ESTIMATED INITIAL INVESTMENT PURCHASE OF ASSETS OF AN EXISTING LOCATION
Amount Method of To Whom Type of Expenditure (Notes 1, When Due Payment Payment Made 22) Initial Franchise Fee (Note 1) $5,000 - Cash On signing. $5,000 if you Us $27,500 qualify under the Employee Franchise Program, unless waived. For other franchisees the Initial Franchise Fee is $27,500. Purchase of Existing $45,000- Cash Before opening Us or our affiliate. Restaurant Assets, including $1,500,000 broker fees (Note 2) Remodel Expenses (Note 3) $14,950 - Cash Before opening Site location service $79,000 provider, architect, consultant, gov’t. agencies, and misc. third parties Real Estate Deposit and $19,600 - Cash Typically on signing lease Third party landlord Rent for Initial Period (Note 4) $30,800 or sublease or us or our designated affiliate as sublandlord under conditions explained in Item 5 Purchase and Installation of $14,766 - As Arranged Before opening Third Parties Radiant Aloha Point of Sale $17,567 system (POS) (Note 5) Inventory Food - Initial Period $69,000 As Arranged Before opening Us and Third (Note 6) Parties Other Initial Inventory – Initial $22,000 As Arranged Before opening Us and Third Period (Note 7) Parties Your Professional Fees (Note $5,000 - As Arranged Before opening Your accountants, 8) $10,000 attorneys, etc. Utility Deposits (Note 9) $3,000 - Cash Before opening Utility companies, $20,000 including phone co. Payment Security Deposit $5,000 Cash Before Opening or on Us or our (Note 10) request designated supplier.
FDD - CA 24 Amount Method of To Whom Type of Expenditure (Notes 1, When Due Payment Payment Made 22) Insurance (Note 11) $3,000 - As Arranged Before opening Insurance $6,000 Companies Employee Expenses During $16,000 - Cash; you pay Before and at time of Third Parties Training (Salary, $31,000 travel opening transportation, hotel, meals expenses by and related expenses) (Note credit card and 12) take longer to repay Additional Advertising (if we $0 - $10,000 Cash, at time On signing the Advertising Us require)(Note 13) of signing the Addendum. Advertising Addendum Reimbursement of Our $0 - $10,000 Cash At time incurred by us Us. Professional Fees (Note 14) Additional Funds (Note 15) (3 $50,000 As Arranged Pre and Post Opening Third Parties; months) employees Total (Notes 16, 17) $272,316 - $1,887,867
NOTE 1: If you do not qualify under the Employee Franchise Program, the Initial Franchise Fee of $27,500 is payable when you sign the Franchise Agreement. If you qualify under the Employee Franchise Program, the Initial Franchise Fee is $5,000 for the first YOSHINOYA franchise, unless waived. Waiver, while possible, is rare, so you should not expect it and we do not reflect it in the low estimate. You pay this with the Franchise Agreement. We do not finance the Initial Franchise Fee. The $500 background fee paid when submitting your application is applied to the initial franchise fee at time of signing the franchise agreement.
Refund: See Item 5 regarding conditions for refunding portions of the Initial Franchise Fee.
NOTE 2: If you purchase an existing restaurant owned by us or our affiliate, we, or the affiliate owning the YOSHINOYA restaurant, and you will negotiate the price and terms of purchase for the assets and the other conditions for the purchase and sale agreement before you sign the Franchise Agreement. Typically, the assets will not include the POS system. You must purchase and install a POS System meeting our requirements before operating the restaurant. The low estimate assumes you purchase an older store with lower sales volume. The high estimate assumes you purchase a more recently built store with higher sales volume. The terms of purchase and price will vary in individual cases because of the operating performance and market potential of the YOSHINOYA restaurant. Depending on payment terms negotiated, all or part of the purchase price may be payable before your business opens. See Exhibit P for the form of Asset Purchase Agreement you will be required to sign. You are also responsible to pay the broker fee if a broker is involved.
NOTE 3: Estimated costs to upgrade and remodel the location to our then current standards. Any upgrading we require would be in the nature of Renovation Changes, as defined in the Franchise Agreement. We will identify required Renovation Changes before you sign the Franchise Agreement or purchase the assets. The low estimate assumes only minor upgrades are needed. The high estimate assumes more significant upgrades are required.
FDD - CA 25 NOTE 4: These figures cover the initial security deposit and 3 months rent. The initial security deposit is typically refundable; rent payments are not. Both the low and high estimate assume we allow, or require, you to lease the location directly from the landlord and do not sublease the location from us. We have discretion to require you to sublease the location from us. Generally we require a sublease if you buy a franchise under the Employee Franchise Program. But we may require you to lease direct from the landlord. Then, either we or our affiliate will enter into a master lease for the approved location directly with the landlord and sublease the location to you and we may impose an additional administrative charge up to 20% above the master lease rent as additional compensation to us for taking on the role of master tenant. See Item 6 and Exhibit F. We base the real estate figures in the chart on our experience operating YOSHINOYA restaurants in California. Outside California, real estate costs and lease terms may differ. We have sometimes negotiated with landlords for a rent commencement date that begins on the date the restaurant opens for business. Accordingly, we believe 3 month’s rent is sufficient to cover the initial phase (pre-opening through the end of the first 3 months after opening). You should investigate prevailing lease rates and terms in the area where you will locate your YOSHINOYA restaurant. See Item 6. The low estimate assumes a location in a lower density area. The high estimate assumes a location in a higher density area. Actual figures may be higher in very high density and historically expensive areas, such as downtown Manhattan, New York.
NOTE 5: Estimated cost for the purchase and installation of the Radiant Aloha point-of-sale (“POS”) and enterprise software and hardware system (see Items 8 and 11). The low estimate assumes a traditional restaurant model. The high estimate assumes restaurant has a drive through.
NOTE 6: Covers estimated cost of inventory of food supplies, beverages, condiments, spices and ingredients needed through the end of the first three months of operation. This also includes some items you will buy from us before opening at an estimated cost to you of $7,295. Costs vary according to local suppliers’ terms, calendar season, product availability and quantity requirements as well as your own sales level during the initial period.
NOTE 7: Covers estimated cost of inventory of non-food supplies, including paper goods, office supplies, cleaning materials and other disposables needed through the end of the first three months of operation. This also includes some items you will buy from us at an estimated cost to you of $408. Costs will vary according to local suppliers’ terms, product availability and quantity requirements as well as your own sales level during the initial period.
NOTE 8: We encourage you to consult an attorney, accountant or other professional. These estimates are approximate estimated range of professional fees you might incur.
NOTE 9: Includes initial deposits required by utility companies (phone, water, gas, electricity, trash removal, and related utility and service expenses) to establish service.
NOTE 10: We and/or our designated supplier require you to deposit $5,000 with them/us as partial security for timely and full payment of all amounts due. We and/or the supplier can apply all or portions of the deposit to pay amounts not paid as and when due from you. You must then replenish the deposit back to $5,000 if any portion is used. This deposit is refundable only after the franchise agreement or supplier contract terminates.
NOTE 11: Covers first year insurance expense which usually is prepaid. See Item 8 for coverage requirements.
FDD - CA 26 NOTE 12: You must send at least 3 individuals (1 lead kitchen personnel, 1 full-time manager, and you) to the initial training program. For an area developer, we also require your principal owner or principal executive or other principal officer acceptable to us, to attend and complete training under your first Franchise Agreement. These estimates cover anticipated travel, lodging, food and other costs for all 3 persons, and an allowance for salaries during training. Your actual costs for initial training may be lower if the persons who attend our initial training program live within driving distance to our training location and do not need a hotel stay or air travel. Initial training expenses do not include expenses you may incur before opening during the on-site training which we provide to your opening crew, like salary to your opening crew. These expenses are included under the “Additional Funds” category.
Item 11 explains that you may send a total of 4 individuals to initial training before opening for no additional fee. To send more than 4 individuals to pre-opening initial training, or if a replacement employee must complete initial training after your YOSHINOYA Restaurant opens, you must pay the per person fee disclosed in Item 6. You must pay all travel, lodging, food and other out-of-pocket expenses and salary for every person who you send to training.
Item 11 describes the length and location of pre-opening initial training.
NOTE 13: If you purchase an existing location, we may also require you to conduct additional opening advertising. The exact amount of the additional advertising will be determined in consultation with you and is payable to us when you sign the Advertising Addendum. (Exhibit O). In some circumstances, we may elect to use for advertising, some of the sales proceeds we receive. This is up to us.
NOTE 14: If we incur legal or other professional fees for negotiating a lease or sublease on your behalf, or in connection with the sale or purchase of an operating Yoshinoya Restaurant, or arranging financing assistance or any other matter you or a third party (such as a Landlord or Lender) requests, then we may require you to reimburse the legal and other professional fees we incur.
NOTE 15: The low/high estimates cover additional funds for the first 3 months of operations. The category of “Additional Funds” does not represent the only source of cash, but is in addition to cash flow from operations. We cannot estimate what your cash flow from operations will be. You might not have positive cash flow. We recommend you have available to you, the amounts shown above for miscellaneous operating costs through the end of the first 3 months of operations, including: incidental expenses to train opening employees on-site, local business licenses, payroll expenses, bank charges, miscellaneous out-of-pocket, postage, office supplies, and other initial expenses.
Depending on your state, you may be required to pay a deposit with a state agency to obtain a seller’s permit to do business to cover sales taxes you owe to the state when your business closes. State law may determine the amount of the deposit according to a formula that considers your likely aggregate gross sales in your first year of operation. While the deposit may be refundable in certain conditions after a certain time, any refund would not occur until after the first 3 months of operations. So, the high estimate for Additional Funds includes an allowance for a sales tax deposit. For example, YOSHINOYA restaurants in California may be required to pay a sales tax deposit to the State Board of Equalization to obtain a seller’s permit which is determined as a percentage of aggregate gross sales you estimate in the first year of operation of your YOSHINOYA restaurant. You are responsible to research laws in the state where you open your YOSHINOYA restaurant to determine if comparable requirements exist.
FDD - CA 27 These estimates also include opening cash in the register of $500. You should have funds available in reserve, in cash or through a bank line of credit, for unanticipated expenses, losses or events during the start-up and development stages and beyond. You should evaluate your working capital needs to be certain you have adequate funds available in the initial phase and later to cover normal operating expenses and unexpected contingencies.
These figures exclude payments of Service Fees and Promotional Fees since these amounts depend on your actual Gross Sales and Net Sales. We do not project what your Gross Sales or Net Sales will be. In your own calculations an allowance should be made for these expenses.
Payroll expenses cover all opening employees but do not include any allowance for a draw or salary to you.
In certain locations, the additional funds required to operate will be substantially higher. An example is a location in New York City where you may need up to $1 million in additional capital during the initial period.
NOTE 16: This Item 7 table explains the estimated initial investment to purchase assets of and continuing to operate an existing Yoshinoya Restaurant as of the effective date of this Franchise Disclosure Document. The estimated initial investment covers the period starting when you sign the Franchise Agreement and continuing through the first 3 months after your operations begin. The Item 7 chart is accompanied by notes that explain each expense category and variables that influence the low and high initial investment estimates. The notes are an integral part of Item 7. Unless otherwise indicated, initial investment payments are not refundable. You may be able to negotiate refund terms with a third party supplier. We make no representation as to your ability to obtain refund terms with third parties.
The Item 7 figures do not include an allowance for payments to a bank or financing company on any loan obtained to finance the cost of purchasing the franchise or other development-related costs.
We rely on our experience in operating YOSHINOYA restaurants in California to compile these estimates. As we note above, certain categories of expenses may not be relevant to a prospective franchisee who intends to open a YOSHINOYA restaurant in a major metropolitan area with comparably expensive real estate.
All Item 7 figures are estimates only. We cannot and do not guarantee that you will not have additional expenses in opening and initially operating your YOSHINOYA restaurant. Your costs will depend on factors like: actual size of your restaurant and number of employees required per shift; whether you hire additional personnel to assist you with administrative and accounting functions; your management skill, prior experience in restaurant management and business acumen; local economic conditions; prevailing wage rate; competition; and the sales level reached during the initial period.
You should review the Item 7 figures carefully with a business advisor before making any decision to purchase the franchise. Except for the Employee Franchise Program, we do not offer direct or indirect financing to franchisees for any items.
NOTE 17: All amounts are only estimates. Because these are only estimates your actual expenditures, both specific, and total in any category, and total overall, may not conform to these specific amounts. Do not rely on this table alone. Use this table as a reference point for
FDD - CA 28 your own further independent investigation. You should independently investigate the actual expenditures you will incur.
YOUR ESTIMATED INITIAL INVESTMENT (Area Development)
Method To Whom Type of Expenditure Amount of When Due Payment Made Payment Territorial Rights Fee (Note 2) $68,750 to Cash On signing. The Territorial Us $137,500 Rights Fee is the product of $13,750 and the number of locations you commit to open during the agreement term (Exhibit D). Estimated initial Investment to $507,600 - Cash Before opening. This is the Us and Third open first location (Note 3) $1,887,867 total of the preceding tables for Parties opening a single YOSHINOYA restaurant. Your Professional Fees (Note $5,000 - As Before opening Your accountants, 4) $10,000 Arranged attorneys, etc. Additional Funds (Note 5) (3 $50,000 As Pre and Post Opening Third Parties; months) Arranged employees Total (Notes 1, 6) $631,350 – $2,085,367
NOTE 1: Item 7 explains the estimated initial investment to purchase an area development franchise, granting you the right to operate multiple YOSHINOYA restaurants in your territory, as of the effective date of this Franchise Disclosure Document. We have the right to require an Area Development Agreement outside of California. The estimated initial investment covers the period starting when you sign the Area Development Agreement and continuing through the first 3 months after you sign the Area Development Agreement. See Exhibit D for our form agreement. The Item 7 chart is accompanied by notes that explain each expense category and variables that influence the low and high initial investment estimates. The notes are an integral part of Item 7.
NOTE 2: You and we decide the development territory and number of restaurants by negotiation before you sign. For each YOSHINOYA restaurant you wish to establish under the Area Development Agreement, you and we will enter into a separate Franchise Agreement.
You pay the Territorial Rights Fee when you sign the Area Development Agreement. We calculate the Territorial Rights Fee as the product of (i) $13,750 (being 50% of the $27,500 Initial Franchise Fee we currently charge for one “single unit” franchise), and (ii) the number of YOSHINOYA restaurants you commit to open during the Area Development Agreement’s term. We fully earn the Territorial Rights Fee when you pay it. We do not refund the Territorial Rights Fee under any circumstance even if you fail to satisfy your development commitment. If we terminate the Area Development Agreement based on your material default, you also lose any unexpired development rights. The low estimate assumes you agree to develop 5 restaurants in your territory. The high estimate assumes you agree to develop 10 YOSHINOYA restaurants in your territory.
FDD - CA 29 We credit you $13,750 toward the applicable Initial Franchise Fee due for each franchise under your development commitment. We discount the Initial Franchise Fee that an area developer pays according to the number of YOSHINOYA restaurants in the development commitment, as shown in the chart below. You pay the balance of the Initial Franchise Fee due for the particular YOSHINOYA restaurant when you sign the Franchise Agreement for the YOSHINOYA Restaurant, which you must do within 15 days after you receive site approval.
A. B. C. D. Franchise # - Balance Due of Initial Less Territorial YOSHINOYA Initial Franchise Fee Franchise Fee Rights Fee Restaurant (Column B - Column C) 1 $27,500 (100%) <$13,750> $13,750 2 and 3 each $22,000 (80%) <$13,750> $8,250 4 and 5 each $19,250 (70%) <$13,750> $5,500 6 & higher, each $13,750 (50%) <$13,750> $0
NOTE 3: Estimated amount to open your first location. These estimates are from the prior tables for opening a single YOSHINOYA restaurant.
NOTE 4: We encourage you to consult an attorney, accountant or other professional. These estimates are approximate estimated range of professional fees you might incur.
NOTE 5: We recommend you have available to you at least the amounts shown above for miscellaneous costs through the end of the first 3 months of operations, including: incidental expenses to train employees, obtain local business licenses (if needed), payroll expenses, bank charges, miscellaneous out-of-pocket, postage, office supplies, and other initial expenses.
NOTE 6: The Item 7 figures do not include an allowance for payments made to a bank or financing company on any loan obtained to finance the cost of purchasing the franchise or other development-related costs.
We rely on our experience (through Yoshinoya West before the merger) in operating YOSHINOYA restaurants in California to compile these estimates.
All Item 7 figures are estimates only. We cannot and do not guarantee that you will not have additional expenses through the first 3 months of operations. You should review the Item 7 figures carefully with a business advisor before making any decision to purchase the franchise. We do not offer direct or indirect financing to franchisees for any items of the Area Development Agreement.
ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
A. Uniformity of Operations.
The goal of uniformity of operations is part of the YOSHINOYA System. To achieve this, our multi-volume Systems Manual contains mandatory specifications pertaining to all aspects of
FDD - CA 30 restaurant operations. As Item 11 discloses, you may review a copy of our current Systems Manual before signing the Franchise Agreement. Our goal of uniformity is not a promise to you. Accordingly, we are not obligated to achieve uniformity; we are not obligated to take steps as to franchisees other than you, and we can determine when and in what respects uniformity is not essential. We can require you to take steps to help us achieve uniformity.
Specifications exist for all food and beverage products sold at YOSHINOYA restaurants, cooking equipment, food preparation methods, recipes and ingredients. Some specifications identify equipment, supplies, serving bowls, products or ingredients by brand name, which you may purchase or lease from any recommended or approved supplier who sells that brand. It is possible that for some items, or at some time(s) in the future, we could be the only approved supplier for one or more items. For some specifications we identify, we are or may become the only authorized supplier for a particular item, unless we designate a third-party supplier. We use the term “Designated Goods/Services” to identify collectively all items for which we designate a mandatory supplier. Designated Goods/Services include, but are not limited to, proprietary items and items that are not necessarily proprietary to us, but for which we restrict the source to a particular company for purposes of quality control, consistency of operations and volume purchasing advantages.
We state all specifications and in the future intend to identify designated suppliers in the Systems Manual. We may revise the specifications and designated suppliers through written bulletins or supplements to the Systems Manual at any time.
After you sign the Franchise Agreement, we will furnish you a list of designated and recommended suppliers. Except for items we identify by designated supplier, you may purchase all goods, services, equipment, supplies, fixtures, furnishings and inventory that we require you to have to operate your YOSHINOYA restaurant from any supplier we recommend or from any alternative supplier whom you propose and which we approve in writing following the procedures we specify below.
We estimate the proportion of your required purchases and leases to all purchases and leases by you of products and services in establishing and operating your YOSHINOYA restaurant will be approximately 5% to 25%.
B. Obligations to Purchase Items from Designated Suppliers.
At this time, the “goods” portion of Designated Goods/Services include certain kitchen equipment (beef cooker and chicken griddle); foods and ingredients (for example, sliced beef; beef soup; miso soup; teriyaki sauces; and seafood sauce); fountain beverages; and serving bowls. We regard the sliced beef, beef soup, miso soup and teriyaki sauces to be proprietary in that these items are produced exclusively for YOSHINOYA restaurants according to a proprietary recipe, formula or specifications.
You must purchase your chicken griddle and other items directly from the supplier we designate, and purchase all other Designated Goods/Services from us or our designated or approved suppliers. We source these items from different designated suppliers we identify. This enables you to coordinate purchase orders for these items from a single supply source. We have the right to charge a markup on proprietary and non-proprietary goods purchased from us and to revise our pricing from time to time on written notice.
As of the date of this disclosure document, our designated supplier of our proprietary and Designated Goods for foods and ingredients is ICREST International. Under our current
FDD - CA 31 agreement with ICREST, ICREST is permitted to charge a 4% markup on our price list as well as a fee in connection with the logistics, warehousing and delivery of products. ICREST is based in Los Angeles, California. We may designate alternative or additional suppliers on written notice to you.
The “services” portion of Designated Goods/Services includes the obligation to purchase and install a POS system, which as of the date of this disclosure document, is manufactured by Radiant Systems, Inc. (“Radiant”), of Alpharetta, Georgia, an independent business technology development company. This includes hardware and software with features we specify. Radiant’s Aloha system performs a variety of front-of-house cash control and recordkeeping functions and back office functions. We also require you to enter into an annual maintenance and support contract with Radiant for basic equipment maintenance and software system upgrades, at a cost Radiant sets. Since the maintenance and support contract is only available by purchasing the Aloha system from Radiant, they are the only vendor we approve for the POS hardware and software.
While Radiant is our current approved supplier of POS systems, we may modify our criteria in the future and require you to upgrade and change the POS system at your expense.
Radiant also offers on-site opening services, which include sending their representative to your YOSHINOYA restaurant to train your opening crew on use of the POS software and to customize the POS system with your opening prices, which we recommend, but do not require, you to use. You are responsible to update your POS system programs to reflect changes in menu items, pricing changes you want to make, and equivalent kinds of updates. We do not provide technology support for your POS system. We have no plan to receive revenue or other material benefits from Radiant on account of its transactions with franchisees. Item 7 includes an allowance within the Equipment category for costs during the initial phase of business associated with installing and using the Radiant/Aloha POS system.
We require you to install and maintain at your own expense a network camera monitoring system which we approve before installation giving us remote monitoring access at any time to observe activities from different vantage points in your YOSHINOYA restaurant. Our requirements include specific components, features and software, and we may modify our requirements any time on 30 days written notice.
At any time, we may modify these arrangements by (i) changing or adding to the list of Designated Goods/Services you must use and/or sell in operating your YOSHINOYA restaurant; (ii) changing or adding new designated suppliers, or (iii) changing whether you may buy an item directly from the designated supplier or must purchase it from us or another affiliate of ours. We notify you of all changes in writing through written bulletins or supplements to the Systems Manual. For example, in the future, we may designate additional Radiant hardware or software features for the POS system you must use, or designate a different POS system and service provider, which may include custom or proprietary software.
C. Purchasing Arrangement with Pepsi Brand Fountain Beverages.
You must sell Pepsi brand fountain beverages. We have an agreement with Pepsi-Cola Fountain Company, Inc. (“PCFC”), which makes PCFC the exclusive supplier of fountain beverages for us and our franchisees through at least December 31, 2013. PCFC agreed to sell the particular Pepsi fountain beverages we designate for YOSHINOYA restaurants at PCFC’s national account prices in effect at the time of sale. Until notice from us, we will serve as a commissary for Pepsi fountain beverages and equipment and you will purchase all your
FDD - CA 32 Pepsi fountain beverage requirements from us at PCFC’s national account prices in effect at the time of sale. We include Pepsi fountain beverages as Designated Goods/Services.
PCFC provides franchisees without charge one Pepsi brand fountain beverage dispensing machine for each new YOSHINOYA restaurant (two for drive-through restaurants) and up to two service calls per year (Pepsi equipment parts excluded). These benefits require the YOSHINOYA chain as a whole to meet specific performance obligations including minimum purchase requirements.
PCFC will make payments to us for designating Pepsi as the exclusive beverage brand at YOSHINOYA restaurants. Certain payments are a flat amount. Others are based on formulas that depend partly on quantity of Pepsi fountain beverages purchased during the year by franchisees and affiliates. We earned $744,415.50 from PCFC in our most recent fiscal year ended December 31, 2011 on account of franchisees’ and Company owned units purchases of Pepsi fountain beverages. This amount includes equipment fund, service fund, Systems Fund and purchase volume payments.
During our last fiscal year ending December 31, 2011, PCFC paid us approximately $110,385 as an allowance for truck volume rebate, warehousing and distributing Pepsi beverage products to franchisees. We currently handle Pepsi brand warehousing and distributing functions.
D. Site Analysis.
If we believe the site you propose is within or close to the market area and may hurt the sales of an existing operating YOSHINOYA restaurant we may require you to submit a market impact study to evaluate the impact on the existing Restaurant’s sales, traffic flow and business prospects. You must use the service provider we designate or approve in writing. We estimate the expenses for the additional market impact study will be about $300 per site. We do not receive revenue or other benefits from any service provider we designate or approve to prepare a separate market impact study on account of fees or compensation you pay for their services.
E. Procedure for Approving Alternate Suppliers.
If you want to purchase a required item (other than Designated Goods/Services) from an alternate supplier and not from the supplier we recommend (“Non-Designated Goods/Services”), you must request our approval in writing and submit samples for examination and/or testing, together with information supporting the proposed supplier’s financial capability, business reputation, delivery performance and credit rating. We may impose a charge to cover our cost of testing the item, including expenses to visit the supplier’s manufacturing facility, lab testing, and other direct costs, which must be paid before testing starts. Approval of a proposed supplier will consider quality and conformity of product and the supplier’s distribution capabilities and reputation.
We will notify you in writing within 15 business days after we receive all requested information and complete testing to tell you if we approve your proposed supplier. Our failure to timely respond constitutes disapproval. We may re-inspect facilities of an approved supplier and revoke a supplier’s approval for good cause, effective on written notice to you.
FDD - CA 33 F. Payments and Other Consideration from Approved or Designated Suppliers.
We are currently an optional supplier of a variety of foods and supplies we include in the Franchise Agreement’s definition of Non-Designated Goods/Services.
During our last fiscal year ending December 31, 2011, we received $2,264,284 from our franchisees who elected to purchase Non-Designated Goods/Services from us, representing 3% of our total revenues in 2011.
During our last fiscal year ending December 31, 2011, we received a total of $477,225 from third party suppliers on account of the suppliers’ transactions with our franchisees, representing less than 1% of our total revenues in 2011. In the year ending December 31, 2011, we also received additional rebates on account of supplier sales of bowls and salad dressings to both franchised and company owned stores, in the amount of $75,297.
During our last fiscal year ending December 31, 2011, we received $2,606,920 from our franchisees purchasing Designated Goods/Services from us, representing approximately 3% of our total revenues in 2011.
We are not affiliated with any currently designated or recommended suppliers.
We may receive revenue from certain third party suppliers we designate or from those we approve as optional suppliers on account of the supplier’s transactions with our franchisees or affiliates that own YOSHINOYA restaurants. We also receive revenue on account of our direct sales transactions with franchisees.
We may receive rebates from suppliers from whom we or you make purchases for our or your operating YOSHINOYA restaurants. We retain these benefits. Likewise, if you receive a rebate directly from a designated, recommended or approved supplier, you may retain it.
In the future, we may receive a promotional allowance, rebate, incentive payment or material non-cash benefits from designated, recommended or approved suppliers on account of transactions with YOSHINOYA franchisees (in addition to amounts PCFC will pay us). If a supplier pays consideration on condition that we apply it for a specific purpose, like advertising, then the sums we receive will go into the Promotional Fund (see Item 11). Rebates and other cash consideration that are earmarked for advertising purposes or as a promotional allowance that suppliers pay us or our affiliates for our operating YOSHINOYA restaurants will also go into the Promotional Fund. If funds a supplier pays us or our affiliates are not earmarked for advertising purposes, then we may use the funds for any purpose.
We do not provide material benefits to you based on your purchase of particular products or services or use of particular suppliers.
G. Sublease; Addendum to Lease; UCC-1.
In certain circumstances we may sublease the approved location to you for which we may charge you compensation up to 20% above the monthly rent that we owe under the master lease. See Item 6.
To secure your performance, in the Franchise Agreement you grant us a security interest in your tangible property you use to operate your YOSHINOYA restaurant. We will record a UCC-1 to perfect our rights as a secured party. Except with our prior written consent,
FDD - CA 34 you may not grant another person a security interest in the assets of your YOSHINOYA restaurant even if their security interest is subordinate to ours.
H. Additional Disclosures re: Purchasing Arrangements.
As we note in this Item 8, we source products to our approved supplier(s) for Designated Goods and Services and provide warehousing and distributing functions for PCFC. In addition to negotiating a purchasing arrangement with PCFC, we negotiated a purchasing arrangement with the supplier of the chicken griddle and other items that includes price terms for our franchisees.
We use a Southern California-based food service distribution and logistics provider specializing in quality Japanese and Asian produce to deliver certain food items and ingredients to all our YOSHINOYA restaurants. You will be required to purchase all proprietary Designated Goods from ICREST, or other suppliers we approve or designate. At this time, we do not offer logistics support to franchisees for distribution or delivery of goods or services. We could do so in the future on an optional or mandatory basis on 30 days written notice.
No other purchasing arrangements exist at this time. We will notify you of changes we make to our purchasing programs and any new purchasing arrangements that we offer franchisees by written bulletins or supplements to the Systems Manual.
I. Insurance.
Before opening your YOSHINOYA restaurant you must purchase and throughout the term maintain insurance policies meeting our specifications which we provide to you after you sign the Franchise Agreement. At this time, we require at a minimum (i) comprehensive general liability insurance with a limit of Two Million Dollars ($2,000,000) combined single limit (including broad form contractual liability); (ii) workers compensation insurance as required by law; (iii) general casualty insurance for the full replacement value of the YOSHINOYA restaurant and its contents; (iv) Builder’s All Risk insurance during construction and renovation work; and (v) any additional insurance required by law. We may modify our minimum insurance requirements, establish and change deductible limits, and require you to carry additional forms of insurance on reasonable written notice. See Franchise Agreement, Section 7.10 for additional requirements.
J. Additional Disclosure re: Suppliers.
At this time, no officer of ours owns an interest in any required, recommended or approved supplier. One or more of our officers may own nominal interests in certain of our suppliers that are public companies.
K. Stopping Sales and/or Deliveries.
We or our supplier(s) may stop selling and/or delivering any and all good and/or services to you if you are in default and fail to cure within 10 days. This may impact your operation because our decision to stop selling and/or delivering goods does not excuse you from the obligation to comply with the Franchise Agreement and all aspects of our system, and does not modify our other remedies for your breach and/or failure to comply.
FDD - CA 35 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 franchise disclosure document.
Disclosure Obligation Section in Agreement Document Item a. Site selection and Fran Agmt. 2.1, 2.2, 5.1, 6.1, 6.2; 5, 7, 11A, acquisition/lease Area Dev. Agmt., 4.1; Sublease; 11E. Asset Sale & Purchase Agmt., 4.1; Employee Addendum 5, 6 b. Pre-opening purchases/leases Fran Agmt., 6.4 8, 11A c. Site development and other pre- Fran Agmt., 5.2, 6.2; Employee 11A opening requirements Addendum 5; 6. d. Initial and ongoing training Fran Agmt., 6.5, 7.3; Employee 6, 11A, 11B, Addendum 8 11F. e. Opening Fran Agmt., 5.3; Area Dev. Agmt., 3 11G. (Dev. Obligations) f. Fees Fran Agmt, 5.1.5, 6.14, 8, 10.5, 15.7; 5, 6, 7, 8 and Area Dev. Agmt., 1.2, 4.2; Sublease 11 4; Employee Addendum 3, 4. g. Compliance with standards and Fran Agmt., 6.3, 7.2, 7.4.1, 7.6 11A policies/Operating Manual h. Trademarks and proprietary Fran Agmt., 3, 7.11; Area Dev. Agmt. 13, 14 information 5; NDA, 3(b); i. Restrictions on products/ services Fran Agmt., 7.2 8, 16 offered j. Warranty and customer service Fran Agmt., 6.14, 7.7, 7.8 N/A requirements k. Territorial development and sales Fran Agmt., 2.3, 2.4; Area Dev. 12 quotas Agmt., 1.3, 1.4 l. Ongoing product/service Fran Agmt., 6.4, 6.14, 7.2 8 purchases m. Maintenance, appearance and Fran Agmt., 7.4; Sublease, 17 6, 7 remodeling requirements n. Insurance Fran Agmt., 7.10 7 o. Advertising Fran Agmt, 6.8, 6.9, 7.5; Advertising 6, 11C Addendum, 18 p. Indemnification Fran Agmt., 13.3; Area Dev. Agmt., 6 9.3; Asset Sale and Purchase Agmt., 3.4; Sublease, 13 q. Owner’s participation/ Fran Agmt., 7.1, 7.3; Area Dev. 15 management/staffing Agmt., 6; Employee Addendum 9 r. Records/reports Fran Agmt., 7.2.9, 9 6 s. Inspections/audits Fran Agmt., 6.12, 6.13, 9.4 6, 17 t. Transfer Fran Agmt., 12; Area De. Agmt., 8; 6, 17
FDD - CA 36 Disclosure Obligation Section in Agreement Document Item Sublease - 11 u. Renewal Fran Agmt., 4.2; Employee 6, 17 Addendum Sec. 6 v. Post-termination obligations Fran Agmt., 7.13, 7.14, 11; NDA, 3 17 e.; Sublease, 15. w. Non-competition covenants 7.11, 7.12, 7.13, 7.14; NDA, 3 d. and 17 e. x. Dispute Resolution Fran Agmt., 15; Area Dev. Agmt., 11; 17 NDA, 3 i; Guaranty, 5; Asset Sale & Purchase Agmt. 7.2 y. Audit Fran Agmt., 9.4 6 z. Spousal Consent Fran Agmt., 17.12’ Area Dev. Agmt., N/A 12.13
ITEM 10 FINANCING
Except for the Employee Franchise Program, we do not offer direct or indirect financing, nor do we guaranty any note you make or your obligations to third parties. However, we may provide assistance to you in obtaining third party financing if you request. If we incur professional expenses (such as legal fees) we can charge you. We do not receive any payment or other consideration for placing financing with a lender.
If you qualify under our Employee Franchise Program and request financial assistance, we may offer to guaranty up to $600,000 of conventional bank or third party financing you obtain. We are not required to do so. If we provide a guaranty, we take a security interest in the assets of the YOSHINOYA Restaurant, which can be subordinate only to the primary lender’s security interest. Our guaranty will not extend longer than 10 years from the loan date. You pay us a monthly fee for serving as guarantor equal to .05% APR of the then-principal amount of the loan, as long as the guaranty is in effect. Failure to pay the monthly fee or any loan payment on a timely basis, or breach of any term of the loan we guaranty is grounds for us to terminate your franchise rights. If you purchase the franchise through a business entity, you must personally guaranty repayment of the bank or third party financing to us and sign our Personal Guaranty (Exhibit J).
ITEM 11 FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING
Except as disclosed, we need not provide you with any assistance.
A. Before Opening:
1. (See generally, Franchise Agreement - Paragraph 2.2.1). We provide site proposal package guidelines and approval procedures in writing, including demographic and other site selection requirements. You receive this information after signing the Franchise Agreement. You must evaluate the demographic and related conditions in the area you target for your YOSHINOYA restaurant and present us a written site proposal in the format we require
FDD - CA 37 which shows your proposed site meets our demographic and other site guidelines. Our guidelines consider population size, ethnic make-up, persons per household, income level, residential/commercial mix, and population age; traffic patterns, parking, and access issues; neighboring business mix; rent and leasing terms; and size, appearance and other physical characteristics of the proposed premises. We may require your site proposal to include a market impact analysis prepared by a third party service provider we designate if we are concerned that the proposed site is in or close to the market area of an existing operating YOSHINOYA restaurant and will or may hurt its sales. You and we must agree on the location and boundaries of your exclusive territory (if applicable) within the time periods described in Item 5. Though we identify site guidelines, you are solely responsible to select the site, subject to our approval. We may terminate the Franchise Agreement if we do not receive a completed site proposal, with a separate market impact analysis report if we require. We have 21 days after receipt of the completed site proposal to approve it. Our failure to respond in this time constitutes disapproval. Disapproval permits us to terminate the Franchise Agreement.
When we approve a proposed site, our notice also describes the proposed geographic boundaries of your exclusive territory (if applicable). You may disapprove the proposed territory by giving written notice of disapproval to us within 5 days; otherwise, you are conclusively deemed to accept the territory, and the Franchise Agreement is automatically deemed amended to incorporate the territory description. If you disapprove the proposed territory, we will try to negotiate boundaries for your territory. If you and we cannot agree on the boundaries within 30 days after our approval of the franchise site, the proposed site will be deemed disapproved and either party may terminate the Franchise Agreement by giving written notice to the other. In the event of termination, there are no refunds of monies paid.
2. After we receive your written site proposal, we will, if we believe appropriate, make a site visit to evaluate the proposed location. Except as disclosed in Item 6, we do not impose a fee or other charge to make one site visit for your first restaurant. If more than one visit is needed to select the location for your first restaurant, or if you request or we require an on-site evaluation for a later restaurant, you pay a site review fee and reimburse our travel expenses (transportation, hotel, food) as disclosed in Item 6. (Franchise Agreement - Paragraph 6.1.1).
3. Lease/Sublease. (See generally Franchise Agreement –Paragraph 5).
You must negotiate a lease with the owner of the real estate. After we approve the site and territory (if applicable), you must deliver to us a copy of the lease and an Addendum to Lease that you and the landlord sign. The Addendum to Lease must be in the form of Exhibit H. If you fail to satisfy this condition, we may terminate the Franchise Agreement. There is no refund. You may already own real estate suitable for use as a YOSHINOYA restaurant. Then you may apply for our approval of the location as your franchise location. As a condition to granting approval, you must sign a lease and an Addendum to Lease. You must hold title to the real estate, and ownership of the franchise rights, through separate entities (or own one individually and the other through an entity) so that 2 legal persons exist capable of entering into the lease contract.
There may be situations when the real estate owner prefers leasing the property directly to us or our designated affiliate. Then you may apply to us to have us or our designated affiliate lease the location directly from the master landlord and sublease the location to you. If we agree, you sign our form of sublease (Exhibit G) within 5 days after we deliver it to you. You must reimburse the legal and any other professional fees we incur for this.
FDD - CA 38 We do not obligate you to sublease the approved site from us or our designee. A sublease arrangement will not happen unless you ask and we agree. If you cannot lease the approved site directly from the owner, you must investigate alternative sites for our approval. We are not obligated to extend the deadline for site approval.
If you apply to us or our designee for a sublease, neither one must enter into a master lease for you. If you are unable to lease the approved site directly and we and our affiliate chose not to enter into a master lease, you must obtain approval of an alternate site.
If you buy an existing location we can require you to assume our existing lease, have our security deposit returned and have us released from all liability under the existing lease, or to sublease from us. The term of the existing lease may end sooner or later than the term of the Franchise Agreement. If the lease ends before the Franchise Agreement, you will not have possession of a location to operate your franchise. If your Franchise Agreement term ends before the term of the lease, you will not have the right to continue to operate the franchise at the premises, but will still be obligated to pay the rent. If the existing lease is assigned to you, you must negotiate a new lease or lease extension with the landlord. The existing lease may include an option or options giving the tenant the right to extend the term of the lease. If the lease is assigned to you, you are responsible to keep track of, and if you wish to exercise any option, to take all actions needed to do so.
4. (See generally, Franchise Agreement - Paragraph 5.2). We provide you design standards and construction guidelines for build-out of the franchise location. You must prepare detailed construction drawings tailored to the specific dimensions of your approved location which conform to our design standards and construction guidelines. You must also ensure that construction and build-out conform to local ordinances and building codes, and obtain all required permits (i.e., health, sanitation, building, driveway, utility and sign permits). You hire and supervise construction personnel, paying all construction, remodeling and build-out costs, and readying the premises for opening as a YOSHINOYA restaurant in conformity with the construction, design and decoration specifications we issue. You receive design standards and construction guidelines after execution of the Franchise Agreement. You may not open for business until we issue a completion certificate; the certificate signifies that we find that the restaurant, as built, substantially conforms to our design standards and construction guidelines.
During construction of your first franchise location, we make one on-site inspection at no charge to you. (Franchise Agreement - Paragraph 6.2). If we or you require additional inspections for the first restaurant, or for later restaurants, you must pay the site review fee and reimburse our actual travel expenses (transportation, hotel, food), as disclosed in Item 6.
5. We will loan you a copy of our multi-volume Systems Manual, which contains mandatory and suggested specifications, standards and operating procedures. (Franchise Agreement - Paragraph 6.3). See Exhibit S for the Table of Contents of our Systems Manual. You will receive your copy after signing the Franchise Agreement. We may also supply guidance and instructions in the requirements of the YOSHINOYA System in other formats, including orally (for example, during training programs or while providing on-site assistance) and through other types of written or electronic materials. The Systems Manual provides information on all aspects of the YOSHINOYA System.
The Systems Manual is confidential and remains our property. We may modify the Systems Manual in our discretion through written supplements, which you will receive. (Franchise Agreement - Paragraph 6.3). You must pay the fee disclosed in Item 6 if you lose your copy of the Systems Manual. A copy of the Systems Manual will be available for your
FDD - CA 39 review before you buy the franchise if you sign our Confidentiality & Non-Disclosure Agreement in (Exhibit I).
6. We will identify at least one recommended supplier for each required item of equipment, supplies and materials. (Franchise Agreement - Paragraph 6.4.4). You must purchase all items from approved suppliers and for installation and maintenance. We provide purchasing assistance, as disclosed in Item 8 and in section B. below.
7. We provide an initial training program, as described in section 11. F. below, for no additional fee, to up to 4 individuals who attend their appropriate session before your restaurant opens. (Franchise Agreement - Paragraph 6.5). At a minimum, you must send 1 lead kitchen personnel, 1 full-time manager and yourself (if you do not designate yourself as the full-time manager) to initial training. Each person must participate in the appropriate segment of the initial training program designed for them -- that is, the lead kitchen person must complete the 6 week lead kitchen training; the full-time manager must complete the 12 week managers training; and you must complete a 6 day course which focuses on administrative matters. An area developer shall cause area developer’s principal owner or principal executive officer, or other principal officer acceptable to Company, to personally undergo and satisfactorily complete training in accordance with the training obligations in the first Franchise Agreement that Developer enters into with Company.
B. After Opening:
1. We run a variety of training programs. We repeat our initial training program. We offer advanced and refresher training for managers. You must have at least 1 fully-trained full- time manager on your staff at all times. So you need to enroll any managers you later hire, who do not attend initial training before your restaurant opens, in our next scheduled initial training, subject to space availability, before he or she may assume management functions.
If this cannot be planned ahead of time, on request, and at our discretion, we may agree to send a member of our staff, on a temporary basis, to your YOSHINOYA restaurant to fill in as your full-time manager for a mutually agreed time, not to exceed 12 weeks. You must pay all travel expenses (transportation, hotel, meals, etc.) and the salary of our staff member while he or she assists in your YOSHINOYA restaurant. (Franchise Agreement - Paragraph 6.5).
You must pay the training fee disclosed in Item 6, and the travel expenses (transportation, hotel, meals, etc.) and salary for any additional trainees and replacement managers you send for training. (Franchise Agreement - Paragraph 6.5).
As the need develops, we offer specialized training with the launch of new products or programs or to address particular aspects of the YOSHINOYA System, like inventory management or financial recordkeeping. These programs are given at the training facility in Torrance, California or at an alternate location we specify. (Franchise Agreement - Paragraph 6.5.2). Attendance at designated training programs may be mandatory for managers or other designated personnel. (Franchise Agreement - Paragraph 6.5.2).
The training fee for advanced, refresher and supplemental training courses (unless conducted with an “annual meeting” -- see below) is $300 per week (or $60 per day if training is for less than a week) per person. You must pay the travel expenses (transportation, hotel, meals, etc.) and salary of your staff during training. At this time, all training courses are provided at the training center in Torrance, California, though we may designate other locations in the United States for training. (Franchise Agreement - Paragraph 6.5.4).
FDD - CA 40 2. We may conduct annual meetings to address subjects relevant to the franchise system. If held, we may use these for continuing or advanced training or discussion of topics of interest (sales, customer relations, personnel administration, new food concepts, advertising programs, restaurant promotions as examples). We determine length and whether to include all franchisees or limit the meeting to particular groups we specify. We determine if your full-time manager or other designated personnel (in addition to you) must attend. We expect that if an annual meeting is held, it will be at or near our headquarters in Torrance, California, though we may designate any location in the United States. We will not charge a fee to attend, but you must pay the travel expenses (transportation, hotel, meals, etc.) and salary of your staff during attendance. (Franchise Agreement - Paragraph 6.6).
3. We investigate, research and monitor developments in food preparation and delivery systems and evaluate their suitability for inclusion in the YOSHINOYA System; try to monitor activities of competitors; and test new menu items, ingredients, recipes, and food handling and preparation methods. (Franchise Agreement - Paragraph 6.11).
4. We provide regular and continuing advice regarding operating, production and administrative matters affecting your YOSHINOYA restaurant, including local marketing and promotion and employee matters. (Franchise Agreement - Paragraph 6.10). We may, in the future, establish a franchisee advisory board comprised of franchisee representatives who will consult with us regarding a variety of operating issues and other subjects affecting quality and reputation of YOSHINOYA restaurants, but whose decisions will not bind us. We have not devised any plans for how franchisee representatives to an advisory board will be elected or appointed if a board is established.
5. We inspect your operations, at times we determine, and provide you periodic written and/or verbal evaluations. We may observe and interview your employees and review your books and records (including data stored on your computers) to verify your compliance with the Franchise Agreement and Systems Manual. We may record and photograph these inspections. We require you to install and maintain at your own expense a network camera monitoring system that we approve before installation giving us remote monitoring access at any time to observe activities in your YOSHINOYA restaurant. (Franchise Agreement - Paragraphs 6.12 and 6.13).
6. We offer advertising assistance described in section C. below. (Franchise Agreement - Paragraph 6.8). We will help you implement a grand opening program for your YOSHINOYA restaurant. See additional disclosures in Item 5 regarding the Grand Opening Fee. (Franchise Agreement - Paragraph 6.9, 7.5.3).
7. We review requests for approval of alternate suppliers. (Franchise Agreement - Paragraph 6.4.5).
8. We plan to periodically revise the Systems Manual, as needed, to incorporate new developments and changes in the YOSHINOYA System, and will provide you a copy of all updates. (Franchise Agreement - Paragraph 6.3).
9. In our discretion, at any time, without prior notice, we may delegate performance of our duties to our affiliate operating in your market. These duties may include conducting inspections and providing consultation and advice.
FDD - CA 41 C. Promotional, Advertising and Marketing Services:
1. Promotional Fund.
We develop advertising, marketing and other types of promotional materials and conduct advertising, marketing and public relations activities for the YOSHINOYA restaurant chain through application of the Promotional Fund. The Promotional Fund consists of the Promotional Fees YOSHINOYA franchisees and we and our affiliates owning YOSHINOYA restaurants in the United States, Canada or Mexico pay. (Franchise Agreement - Paragraph 6.8).
As disclosed in Item 6, we base your mandatory contribution to the Promotional Fund on a percentage of total Net Sales from your YOSHINOYA restaurant. YOSHINOYA franchisees other than you may not pay at the same percentage contribution rate. Our company owned locations are not required to contribute specific amounts to the Promotional Fund. However, we will remit to the Promotional Fund any promotional allowances or other money consideration we receive from recommended or approved suppliers on account of franchisee purchases which are specifically designated for marketing and forbids use for any purpose except marketing or advertising, and we will make up shortfalls in the Promotional fund, if necessary. We retain discretion over the particular marketing application for funds that are specifically earmarked for promotional or marketing purposes.
We use the Promotional Fund for costs of maintaining, administering, directing and preparing marketing programs which advertise and promote the YOSHINOYA name and YOSHINOYA System. We may use the Promotional Fund for public relations, branding programs and market research. Within the scope of these purposes, we are not restricted as to what, where and how we apply the Promotional Fund. We retain complete discretion over the form, content, time, location, market and choice of media for all advertising and promotion paid from Promotional Fund proceeds. We make no representation as to the amount the Promotional Fund will spend in any geographic region, or that it will spend monies on advertising that is national in scope, or that it will spend monies in your market area in proportion to your contribution.
Promotional Fund materials provided to franchisees include point of sale materials, direct mail advertising materials, and proposed copy for local print advertising. You will receive one sample of materials the Promotional Fund produces free of charge; you must pay duplication costs if you want additional copies.
We intend to use the services of an outside advertising agency to create, develop and place advertising and public relations articles. At this time, however, we expect that franchisees will handle placing most advertising (and paying media costs) on a local basis, using local advertising agencies. Our staff will likely conduct market research and involve all, or designated, YOSHINOYA restaurants in the collection of sales data and customer feedback.
We may, in the future, establish an advertising advisory board comprised of franchisee representatives who will consult with us regarding application of the Promotional Fund, but whose decisions will not bind on us. We have not devised plans for how to elect or appoint franchisee representatives to an advisory board if it is established.
Our accounting and marketing personnel administer the Promotional Fund. We may reimburse ourselves for actual administrative costs to manage the Promotional Fund, in an amount per year up to 15% of aggregate contributions to the Promotional Fund for that year. We have no present plan to sell goods or services to the Promotional Fund.
FDD - CA 42 During our last fiscal year ending December 31, 2011, the percentage breakdown of Promotional Fund expenditures was as follows:
Production costs to produce advertising materials and coupons 80.4% Media placement costs 17% Administrative expenses 2.6% TOTAL 100%
We are in the process of refunding $58,262.37 to franchisees based on unused Promotional Fund contributions made in prior years. Accordingly, there is no carryover to 2012.
We did not use any of the Promotion Fund for advertising to solicit new franchisees.
We prepare an annual accounting of the Promotional Fund, and will give you a copy on request. This accounting is not independently audited. We attempt to expend Promotional Fund collections on a current basis. We may recover over-expenditures from later financial periods and may carry forward under-expenditures. The Promotional Fund may borrow money from us or any affiliate of ours. Any funds loaned to the Promotional Fund will be repayable on demand when funds are available, and bear interest at no more than 2 points over the prime lending rate of Bank of America. We are not obligated to loan money to the Promotional Fund.
2. Local Advertising.
We encourage you to develop, at your own cost, promotional materials and advertising for local use. But, before distributing or publishing any advertising or promotional materials you create, you must obtain our written approval of the copy and proposed media or method of distribution. As a condition of approval, you must assign your copyright and any trademark or service mark rights in any materials you create to us, without compensation. You must permit us, the Promotional Fund, and other YOSHINOYA franchisees we authorize, to use these materials without compensation.
To apply for approval, you must submit a copy or transcript of the proposed materials in the exact form you intend to use them. We have 15 business days to review your request. If you do not receive our written disapproval in 15 business days, the materials are deemed to be approved, unless we request a reasonable extension of time. If you use materials we approve, you must use them in the exact form in which you submitted them to us. You retain discretion over all decisions which concern or affect the prices of goods or services you sell. (Franchise Agreement - Paragraph 7.5).
Before your YOSHINOYA restaurant is ready to open for business, we will consult with you regarding the grand opening program we will design to publicize the opening of your YOSHINOYA restaurant. As we note in Item 5, you must pay us a Grand Opening Fee of $10,000 which we will spend on pre-opening and opening marketing and promotional materials and related activities we believe are appropriate and consistent with our marketing image. Our right to design your grand opening program will not interfere with your right to set prices at your YOSHINOYA restaurant.
FDD - CA 43 3. Advertising Cooperatives.
As noted in Item 6, we may establish advertising cooperatives comprised of groups of franchisees within regions or areas we designate, and may modify boundaries of these groups in our discretion, effective on written notice. You must participate in any advertising cooperative which encompasses an area we designate. The members of each cooperative will adopt governing rules and voting procedures and determine procedures for assessing members; however, we may approve these rules and procedures and any amendments. If any of our affiliates owns a YOSHINOYA restaurant within the boundaries of a cooperative, it will contribute to the cooperative at the lowest percentage contribution rate that any YOSHINOYA franchisee in the same cooperative then pays and will have the same voting rights as franchisee members.
Each cooperative’s members and elected officers are responsible for the cooperative’s administration. The cooperative must obtain our written approval of the copy and proposed media or method of distribution for advertising and promotion it creates, following the same procedures you must follow for materials you create, as described above. The cooperative must assign to us any copyright, trademark or service mark rights in any materials it creates, without compensation, and permit us and other YOSHINOYA franchisees which it authorizes to use these materials without compensation.
We may require a cooperative to merge with another cooperative servicing an adjacent or proximate area, or to subdivide a cooperative into smaller groupings. We may dissolve a cooperative when we simultaneously dissolve all advertising cooperatives. For example, we may determine it is preferable to centralize all group advertising activities under the Promotional Fund. Advertising cooperatives must prepare quarterly and annual financial statements, which need not be audited, and make them available to all cooperative members and us. We have no present plan to sell goods or services to any advertising cooperative.
4. Advertising Council; Advertising Cooperatives.
At this time, there is no advertising council of franchisees that advises us regarding advertising and promotional programs or policies for YOSHINOYA restaurants generally.
At this time, we do not require franchisees to participate in a local or regional advertising cooperative. No local or regional advertising cooperative exists in our system at this time.
5. Additional Advertising Requirements.
For certain locations we identify in advance and discuss with you, we may require you to spend additional sums for advertising and promotion, beyond the standard requirements in the franchise agreement. These are typically locations that were previously owned by an affiliate of ours or that we otherwise consider to require additional promotion. The amount will be determined in consultation with you and is payable to us when you sign the Advertising Addendum. (Exhibit O). You must inform us of the advertising and marketing you propose to do and get our written consent before using such advertising. To be reimbursed for this advertising from amounts you provide us, you submit to us invoices showing the advertising and marketing was completed and was previously consented to by us. After we confirm this, we will pay the invoices, up to an aggregate total not to exceed the deposit paid to us on signing the addendum. Our Advertising Addendum is Exhibit O.
FDD - CA 44 D. Software and Hardware Systems (Franchise Agreement - Paragraph 6.7):
As we disclose in Item 8, we require you to install a POS System meeting our specifications. As of the effective date of this franchise disclosure document, our current approved POS provider is Radiant. You must install the Radiant/Aloha POS hardware and software system meeting our specifications, and enter into an annual maintenance and support contract with Radiant covering basic equipment maintenance and software system upgrades, at a cost which Radiant determines. The maintenance and support contract is available only by purchasing the Aloha System from Radiant. Thus, we currently designate Radiant as the only approved vendor. The Radiant/Aloha system includes their Enterprise Reporting software to provide us tools to prepare network-level statistics and gain remote access to your POS information. As of January, 2012, the cost of purchasing the Radiant/Aloha POS hardware and software system was $14,766 for non-drive thru and $17,567 for a drive thru unit.
In purchasing the Radiant/Aloha system, you will purchase or license hardware and software we designate, directly from Radiant. The annual maintenance contract will cover both diagnostic repairs and support and upgrades to the Radiant/Aloha software. You pay Radiant directly for the initial hardware and software package and for annual maintenance. As of January, 2012, the cost of the annual maintenance contract for the required maintenance, updating, upgrading, menu maintenance or support was approximately $5,195. While Radiant is our current POS System supplier, we can modify our criteria in the future and require you to upgrade and change the POS System at your expense.
Radiant provides roll-out installation and training services as part of the initial cost package, but may charge a separate fee for on-site opening services to your opening staff. As we disclose in Item 8, you are responsible for updating your POS programs to change menu items, pricing changes you desire to make, and other updates. We do not provide technology support for your POS system except if you request support, in which case it will be on mutually acceptable terms.
You must also use basic non-proprietary accounting software, which we specify by brand name and functional features, which we require you to use to prepare accounting reports following our reporting system. You may purchase the software as well as compatible computer hardware from any recommended or approved supplier.
In the future, we may develop and require you to use a proprietary POS system and require you to license proprietary POS software programs from us or a third party supplier we designate in exchange for a software license fee, which is yet undetermined but we expect to be uniform for all franchisees.
In addition to the Radiant/Aloha POS system, you must purchase and maintain a personal computer with high-speed internet and an active e-mail address, but you may purchase any brand of hardware capable of running the software applications you will need to prepare operating and financial reports, communicate through e-mail, receive, send and store documents and perform other back-office business functions. On request, you must maintain on-line communication between your computer systems and our computer systems, and permit us independent access to, and retrieval of, data from your computer systems at all times. Nothing limits our right to access or use the data we retrieve. (Franchise Agreement - Paragraph 7.2.7.)
We may modify our specifications for computer systems at any time and will notify you of these developments by written bulletin or supplements to the Systems Manual. Depending on
FDD - CA 45 changes in software specifications, you may have to upgrade your computer hardware. There are no contract limitations on the frequency or cost of upgrades or changes in the computer systems we may impose. See Item 6 regarding estimated annual software licensing fees for any proprietary software that we may introduce.
E. Site Selection:
As explained in section A., we developed demographic and site selection guidelines for YOSHINOYA restaurants. (Franchise Agreement - Paragraph 2.2). We identify various sources of information you may use to research a particular area’s demographic characteristics.
Item 12 explains procedures and time limits for obtaining our approval of the site for your YOSHINOYA restaurant, identifying your assigned exclusive territory (if applicable), and signing the lease and Addendum to Lease or sublease. Item 12 also explains the consequences of not meeting these conditions within the required time periods.
F. Time to Opening:
You are required to open your YOSHINOYA restaurant for business within 1 year after the date of your Franchise Agreement. Factors that might affect this time are the ability to obtain financing or building permits, zoning and local ordinances, weather conditions, shortages of building materials, delays in obtaining and installing equipment, fixtures and signs not due to your neglect or failure to act diligently.
G. Training:
Our initial training program consists of separate courses for lead kitchen personnel, managers and franchisees, which vary in length. At this time, we conduct all courses at the training facility at our headquarters in Torrance, California, and nearby YOSHINOYA restaurants we own in Southern California, but we may designate other locations at any time at suitable locations in the United States.
Each training course emphasizes a different aspect of the YOSHINOYA System. They encompass administrative, management, customer service and operational issues, and hands- on training in food preparation, food service and employee training and staffing. The initial training includes 5 days of on-site training in your YOSHINOYA restaurant with its grand opening, to assist you in training your opening staff, implementing operational procedures and conducting opening publicity and related matters.
FDD - CA 46 TRAINING PROGRAM
Hours of Classroom Hours of On-the-Job Subject Location Training (Note 1) Training (Note 1) Lead Kitchen Up to 112 hours Up to 128 hours Torrance, California Personnel Training (Up to 14 days) (Up to 16 days) headquarters and Course Southern California (total 6 weeks) operating restaurant; in our discretion, we (Note 2) may designate an alternate location in the United States. Franchisee Initial Up to 32 hours Up to 8 hours Torrance, California Training Course (up to 4 days) (Up to 1 day) headquarters and (total 5 days) Southern California operating restaurant; (Note 2) in our discretion, we may designate an alternate location in the United States. Managers Initial Up to 184 hours Up to 296 hours Torrance, California Training Course (total (Up to 23 days) (Up to 37 days) headquarters and 12 weeks) Southern California operating restaurant; (Note 2) in our discretion, we may designate an alternate location in the United States. On-Site Opening 40 hours Your YOSHINOYA Training restaurant (total 5 days) (5 days)
Explanatory Notes
NOTE 1: The number of hours assumes 8 hours of training per day. When the Lead Kitchen Personnel Training course and Managers Initial Training course each begin, we expect them to continue for 6 consecutive weeks and 12 consecutive weeks, respectively, based on a 5 day work week.
NOTE 2: Training is led by Amalia Romero, our Training Manager. Ms. Romero has been with YAI for 16 years. Ms. Romero has been in our training department for the past 6 years. Ms. Romero has also served as a District Manager, Manager and Crew Leader for YAI.
We offer training at regular intervals on a scheduled basis and will arrange with you and your staff to schedule initial training at a mutually convenient time. We expect training to begin within the first month after you sign the Franchise Agreement. Our training staff prepares all instructional materials and uses the Systems Manual as part of our training curriculum. We reserve the right to modify the training curriculum
We do not charge a training fee. You pay all travel (transportation, hotel, meals, etc.) and salary for each person who attends the training program. See Items 6 and 7 regarding training costs, including training costs for replacement managers and advanced refresher and supplemental training courses.
FDD - CA 47 See Item 11 A. regarding who must attend initial training. A total of 4 people may attend the initial training program without charge, provided all attend before your restaurant’s opening. Additional persons must pay the per person fee that we charges for replacement managers (see Item 6). See Item 11 B. regarding mandatory additional training programs.
The designated full-time manager attending initial training must attain at least a minimum performance grade based on written tests, skill tests, and conduct and appearance standards. If the original designated full-time manager does not pass, a replacement full-time manager must successfully complete initial training before your YOSHINOYA restaurant may open.
After opening, if your designated full-time manager resigns, a replacement full-time manager must successfully complete the initial training program and achieve a passing grade on the minimum performance requirements. See Item 11 B.
If you qualify under our Employee Franchise Program you must successfully complete different training requirements depending on prior management-level experience in operating a YOSHINOYA restaurant. As we explain in Item 5, an employee we accept into the Employee Franchise Program who served as a YOSHINOYA restaurant manager in the 12 months before signing the Franchise Agreement must successfully complete a one month condensed version of our manager training. All other employees we accept into the Employee Franchise Program must successfully complete the 12-week manager training class we offer to non-employee franchisees. We may require an employee who receives a failing grade after attending the 12- week training class to personally successfully complete additional manager training for up to a total of 12 months (including the initial 12-week manager training class). We may terminate the Franchise Agreement if you do not pass at the end of the extended manager training class. See additional disclosures in Item 5. Unlike the general franchise program, we do not offer employees who buy a franchise under the Employee Franchise Program the opportunity to qualify another person as the Approved Manager.
An employee who qualifies for a franchise under the Employee Franchise Program must resign his or her current employment with us or our affiliate. However, during manager training, we treat you as an at-will employee and pay you compensation and standard benefits according to our then-current manager trainee rates. If your YOSHINOYA restaurant is not ready for opening after you complete manager training, we may offer you employment as a manager of one of our YOSHINOYA restaurants depending on our operational needs at that time.
If you qualify for a franchise under the Employee Franchise Program, you may send your lead kitchen personnel to that segment of our initial training course without additional charge.
If you are an employee who we accept into the Employee Franchise Program you must successfully complete a 5-day general franchise training course after successfully completing manager training (whether manager training is the one-month condensed class or up to 12 weeks in length). We may extend the general franchise training class to up to 10 days depending on your level of performance during general franchise training. We offer this course only to employees who qualify for a franchise under the Employee Franchise Program.
Employees we accept into the Employee Franchise Program must successfully complete both manager-level and general franchise training at least 30 days before opening of the YOSHINOYA restaurant. We offer franchisees who qualify under our Employee Franchise Program the same 5- day on-site training in connection with opening their YOSHINOYA restaurant that we offer to non-employee franchisees.
FDD - CA 48 We periodically offer advanced, refresher and supplemental training to franchisees and may require attendance of designated personnel at specified training programs. As the need develops, we offer specialized training for launches of new products or programs or to address particular aspects of the YOSHINOYA System. Continuing training courses shall be at our training facility at our headquarters, at one or more operating YOSHINOYA Restaurants in Southern California, and at other locations in the United States we designate. During any calendar year, we will not ask you and your representatives to complete more than two different additional training sessions not to exceed 2 days per session.
ITEM 12 TERRITORY
We grant you a franchise for a specific location, which we must approve according to site selection procedures described in Items 5 and 11 of this Franchise Disclosure Document. You may not relocate your franchise except under conditions specified in the Franchise Agreement. (See Franchise Agreement Sec. 2.6).
For traditional locations, (locations other than Non-Traditional Locations, as described below),the franchise agreement grants a specific territory in which we agree, subject to exceptions and reservations noted in this Item 12, not to operate or permit others to operate a restaurant in the territory whose principal name is Yoshinoya Beef Bowl (“Yoshinoya Beef Bowl Branded Restaurant”). A restaurant whose name may include or reference Yoshinoya does not constitute a Yoshinoya Beef Bowl Branded Restaurant. For example, we may operate or grant others the right to operate restaurants by the name “Asiana Grill Yoshinoya” even in your territory. The area we grant to you is described in this Franchise Disclosure Document as your “territory”.
If we add a delivery program (discussed below) to the YOSHINOYA System, we agree not to engage or permit others to engage in delivery of branded menu items sold at YOSHINOYA restaurants, to consumers in your territory.
In non-traditional locations, defined in the Franchise Agreement and Area Development Agreement as locations in a mall, school, airport, rail or bus terminal, stadium, sports arena, amusement park, public park, theater, military base, race track, hospital or health care facility, educational facility or other high density office location or other mass gathering place, 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.
A. Description of Your Territory for Traditional Locations.
For traditional locations, if you locate your YOSHINOYA restaurant in a Central Business District, your territory will be an area of about .2 (two-tenths) of one mile from your YOSHINOYA restaurant. The term “Central Business District” refers to an area concentrated with commercial businesses. We alone decide whether to designate an area as a Central Business District, considering demographic factors which we identify in the Systems Manual or otherwise in writing to you.
For other traditional locations, your territory will be an area measuring approximately 1 mile from your YOSHINOYA restaurant.
FDD - CA 49 We determine the boundaries of your territory after we approve your franchise location. We determine what category the approved location qualifies as, and then present you the proposed boundaries of your territory.
If you don’t have a signed lease for your restaurant within 6 months of the date of your franchise agreement, we can terminate your franchise, and keep all fees paid. See Item 5.
As noted in Item 5, if you purchase area development rights, you receive the exclusive right to open YOSHINOYA restaurants in an agreed geographic area, provided you satisfy agreed development obligations in a required time period. However, you and we together establish the boundaries of your development territory and the development commitment through negotiation, before you sign the Area Development Agreement. You and we enter into a separate Franchise Agreement for each YOSHINOYA restaurant you open in your development territory. The Franchise Agreement assigns each YOSHINOYA restaurant its own exclusive territory based on factors disclosed in this Item 12. Once you fulfill the agreed development obligations or when the term of the Area Development Agreement ends, you have no more right to develop new YOSHINOYA restaurants in the development territory. But each YOSHINOYA restaurant you open retains the exclusive territory assigned to it, subject to exceptions noted in this Item 12.
B. Exceptions and Reservations.
The territorial rights we grant you for your YOSHINOYA restaurant under the Franchise Agreement (if applicable) and/or Area Development Agreement are subject to all these exceptions and reservations. We may operate or permit others to operate restaurants whose principal name is not Yoshinoya Beef Bowl, even in your territory. In addition, we may sell, and grant others the right to sell:
Menu items and ingredients under the YOSHINOYA Marks or other names to independent restaurants, convenience stores, grocery stores, specialty food stores, and department stores which sell foods or ingredients in your territory. This means, for example, we may prepare and sell on the third-party’s premises freshly-prepared, ready-to-serve and ready-to-eat foods under the YOSHINOYA name or other names; we may also sell from these locations specialized ingredients and sauces, like teriyaki sauce, bottled under the YOSHINOYA label or other labels;
Menu items sold at YOSHINOYA restaurants, or operate (or permit others to operate) YOSHINOYA restaurants or restaurants under other names at, or in, any mall, school, airport, rail or bus terminal, stadium, sports arena, amusement park, public park, theater, military base, race track, hospital or health care facility, educational facility, high density office location or other mass gathering place even if located entirely or partially in your territory;
Menu items under the YOSHINOYA Marks or under other names from mobile units or carts, kiosks, vending machines, or other mobile or stationery devices which occupy less than 100 square feet and are in your territory; and
Advertise and promote the sale of, and sell, menu items sold at YOSHINOYA restaurants through the Internet or by using any other public computer network, electronic communication method or by mail order, catalog sales or comparable methods that solicit orders and business from customers without requiring the
FDD - CA 50 customer’s physical presence in a YOSHINOYA restaurant to complete the transaction.
We may engage or let others engage in the above activities in your territory and development territory without paying you compensation. We will use reasonable efforts trying to resolve conflicts between franchisees regarding territorial rights. At this time we have no formal grievance procedure.
We reserve all other distribution rights that we do not expressly grant to you. By distribution rights, we mean all forms and channels of distribution, regardless of whether we use the method now or adopt it in the future. Channels of distribution include the Internet, catalog sales, telemarketing or other direct marketing sales. Technology may yield new channels of distribution. The kinds of reserved activities which we or our affiliates may engage in within your territory or development territory might include, directly or through one of our affiliates, selling products and services of any kind, including, without limitation, freshly-prepared, ready-to-serve and ready-to-eat foods under the YOSHINOYA Marks or other names, through retail and wholesale channels of distribution, including by means of the Internet and mail order catalogs, in addition to sales through independent restaurants, convenience stores, grocery stores, specialty food stores and department stores.
We do not restrict advertising and publicity you conduct for your franchised business in your territory. Likewise, we and other franchisees may conduct advertising and publicity of ours and their YOSHINOYA restaurants in your territory. We do forbid franchisees from maintaining a World Wide Web site and from advertising and promoting their YOSHINOYA restaurant on the Internet or using any other public computer network.
C. Additional Disclosures re: Territory.
The Franchise Agreement lets you engage only in retail transactions of authorized goods and services to customers for their own use and for their own consumption at your YOSHINOYA restaurant. You may not engage in wholesale sales without our prior written consent. “Wholesale sales” includes the sale or distribution of merchandise or products to a third party for resale, retail sale or other method of distribution.
You may not engage in transactions with customers that do not take place on the premises of your YOSHINOYA restaurant unless we decide to implement a delivery program. We have no present plan to implement a delivery program.
We do not impose restrictions on customers you may serve. However, if we implement a delivery program, we would confine your delivery zone to the dimensions of your territory in which you would have the exclusive right to engage in delivery sales. In our discretion, if we do not assign an area for delivery that is outside of, but contiguous to, your territory to another YOSHINOYA restaurant, we may enlarge your delivery zone to include all or part of the contiguous area if you can demonstrate to our reasonable satisfaction your ability to provide efficient delivery services within the larger zone without compromising quality. We anticipate that we would establish the boundaries of any larger delivery zone using road routes, and you would have the exclusive right to make deliveries in the larger area. We will resolve any competing bids to provide delivery services to an unassigned area which lies contiguous to (but outside of) 2 or more franchisees’ separate exclusive territories. We may reduce your delivery zone if we later assign any part of the outside contiguous area to another YOSHINOYA restaurant, or if we determine that you cannot adequately service the contiguous area, in which
FDD - CA 51 case we will delineate new street boundaries for your delivery zone (which will not be smaller than your territory), effective on written notice.
Unless you acquire area development rights, you do not receive the right to acquire additional franchises within the territory we assign to your YOSHINOYA restaurant. See Item 5 for a discussion regarding the purchase of additional franchises and area development rights.
Your franchise rights are not contingent on achieving any minimum sales level or other sales or market penetration contingency.
We and our affiliates have the right to operate or franchise other businesses selling or leasing similar products or services under different trademarks. We are in the process of developing a fast casual restaurant by the name “Asiana Grill” and/or “Asiana Grill Yoshinoya”. The new concept is scheduled to launch in 2012. Like Yoshinoya restaurants, Asiana Grill will feature our Beef Bowl and other Bowl products. These locations will initially be company owned, but we may franchise them in the future. There is no restriction on Asiana Grill locations from soliciting or accepting orders within your territory. Because each concept will cater to different types of customers (quick serve versus fast casual customers) and offer primarily different foods (although as discussed above, there will be some overlap), we do not expect a conflict between us, the franchisees of that system (if applicable) and you. If there is, we will use reasonable efforts trying to resolve conflicts regarding territory, customers and support we provide to each system. At this time, we anticipate Asiana Grill corporate operations will share offices with us. We do not anticipate maintaining physically separate offices and training facilities for Asiana Grill, but may elect to do so in the future.
As we note in Item 1, our foreign affiliates engage in various restaurant franchising activities outside the U.S. Other than the YOSHINOYA System, there is no current plan to operate or franchise in the United States any of the other restaurants concepts that our affiliates operate or franchise outside of the United States. But we could do so in the future
ITEM 13 TRADEMARKS
We grant you the right to operate a business using the YOSHINOYA System under the name YOSHINOYA and the YOSHINOYA Marks. You may also use other current or future trademarks we designate. By “trademark” or the phrase “YOSHINOYA Marks,” we mean all designated trade names, trademarks, service marks and logos and commercial slogans.
You must follow our rules when you use the YOSHINOYA Marks. You may not use any mark as part of a corporate or partnership name. You may not use any mark or design with any modifying words, designs, colors, or symbols, or with the sale of any unauthorized goods or services, or in a manner we do not authorize in writing. When you use the YOSHINOYA Marks, you must apply the notices of registration that we designate.
You must modify or stop using any mark if we, in our discretion, modify or stop using it. You will receive written notice of any change, and will be given a reasonable time to conform to our directives (including, for example, changing signs, promotional displays and advertising), at your expense. As long as you conform to our directives in making the changes, your rights under the Franchise Agreement will continue in effect. You must not directly or indirectly contest our ownership of our trademarks, trade secrets or business techniques.
FDD - CA 52 Yoshinoya Holdings, our parent, (see Item 1), owns and registered the following marks on the Principal Register of the U.S. Patent & Trademark Office:
Trademark (and goods/services for which registered)* Registration No. Date Registered “BEEF BOWL” (registered for restaurant services). 1,037,068 March 30, 1976 “YOSHINOYA” (registered for restaurant services). 1,038,988 May 4, 1976 Bowl Design (registered for restaurant services). 1,288,353 July 31, 1984
“YOSHINOYA” in the color orange (registered for 1,891,501 April 25, 1995 restaurant services). Bowl design in the color orange (registered for restaurant 1,908,980 August 1, 1995 services).
“BEEF BOWL” in the color orange (registered for 2,088,487 August 19, 1997 restaurant services). “YOSHINOYA RESTAURANTS” with design (registered 2,537,741 February 12, 2002 for prepared meats mainly of beef or pork or chicken; and other food items; snack bar and restaurant services, catering, take-out, providing restaurant information via the internet).
“YOSHINOYA “(registered for prepared meals mainly of 3,023,255 January 17, 2006 beef or of pork or of chicken; specified meats, and other specified food items). Bowl Design (registered for prepared meals mainly of beef, 3,044,961 January 17, 2006 or of pork or of chicken; specified meats and other food items; coffee, tea, cocoa, and other specified confectionary, spices and ingredients).
Design of bull horns in circle (registered for prepared 3,290,669 June 26, 2007 meals mainly of beef; or pork; or chicken; specified meats, other specified food items; snack bar and restaurant services, takeout restaurants; hotel services; providing restaurant information via Internet).
FDD - CA 53 Trademark (and goods/services for which registered)* Registration No. Date Registered
Design of bull horns in circle (registered for prepared 3,425,756 May 13, 2008 meals mainly of rice and beef, chicken or port, sushi, boxed lunches and other specified food, confectionary, spice and ingredient items).
Design of Chinese Characters for “Yoshinoya” (registered 3,437,935 May 27, 2008 for prepared meals mainly of beef; and mainly of chicken; snack bar and restaurant services, catering, take-out).
Design of Chinese Characters for “Yoshinoya” (registered 3,712,509 November 17, 2009 for prepared meals mainly of rice and beef, chicken or pork, specified meats, sushi, boxed lunches and other specified food, confectionary, spice and ingredient items).
“BEEF BOWL” (registered for prepared meals primarily of 3,847,904 September 14, 2010 beef; and primarily beef with rice and vegetables). * The goods/services descriptions are only shorthand descriptions. The actual registrations or applications may contain more detailed descriptions or definitions of the goods and services.
Yoshinoya Holdings filed in a timely manner all affidavits and renewals to maintain these registrations, all of which are currently effective.
YAI (we) registered the following on the Principal Register of the U.S. Patent & Trademark Office:
Trademark (and goods/services for which registered) * Registration No. Date Registered “GET INTO THE BOWL” (registered for restaurant 3,733,663 January 5, 2010 services, catering and restaurant take out food services). “GET IN THE BOWL” (registered for restaurant services, 3,791,285 May 18, 2010 catering and restaurant take out food services). “COOKED FRESH TASTES BETTER” (registered for 4,044,760 October 25, 2011
FDD - CA 54 Trademark (and goods/services for which registered) * Registration No. Date Registered restaurant services, including sit-down service of food and take-out restaurant services). “TASTES BETTER BECAUSE IT’S COOKED FRESH” 4,044,761 October 25, 2011 (registered for restaurant services, including sit-down service of food and take-out restaurant services). “SABE MAJOR PORQUE ESTA COCINADA FRESCA” 4,055,813 November 15, 2011 (registered for restaurant services, including sit-down service of food and take-out restaurant services).
As of the date of this disclosure document, there were no affidavits or renewals needed to maintain these registrations.
We applied in the U.S. Patent & Trademarks Office to register the following on the Principal Register, and the applications are pending:
Trademark (and goods/services for which Application No. Filing Date registration is sought) ** “ASIANA GRILL YOSHINOYA” (application to S/N 85/447,808 October 14, 2011 register restaurant services, including sit-down service of food and take out restaurant services) “ASIANA GRILL” (application to register S/N 85/550,894 February 23, 2012 restaurant services, including sit-down service of food and take out restaurant services).
** We anticipate these marks will be used by our new fast casual concept. Unless otherwise agreed in writing with you, you will not obtain the right to use these marks. We plan to convert some of our company owned locations to the new concept.
We are not aware of any (i) currently effective material determinations of the U.S. Patent and Trademark Office, the Trademark Trial and Appeal Board, the trademark administrator of any state or court; (ii) pending infringement, opposition or cancellation proceedings; or (iii) pending material litigation, involving any of the YOSHINOYA Marks.
In a Master License Agreement Yoshinoya Holdings granted us the exclusive right to use and sublicense the YOSHINOYA Marks in the United States, Mexico and Canada for restaurants and the manufacture and sale of YOSHINOYA brand foods. That Agreement does not significantly limit our right to use or license the use of the YOSHINOYA Marks in any manner material to the franchise.
You must notify us immediately if you learn about (i) improper use of the YOSHINOYA Marks, (ii) a third party’s use of a mark or design that is confusingly similar to any of the YOSHINOYA Marks, or (iii) a challenge to your use of any of the YOSHINOYA Marks. We will take action we think is appropriate. We control the prosecution, defense or settlement of any legal action. You must cooperate and assist in defending our and our affiliates’ rights in the YOSHINOYA Marks. You may not take action in your own name. Unless a third party challenge is based on your misuse of the YOSHINOYA Marks, we will defend you in the matter and reimburse your liability and reasonable costs. To be reimbursed you must notify us immediately when you learn about the claim and fully cooperate in the defense. Because we
FDD - CA 55 defend the claim, we will not reimburse legal fees or related costs you pay to your separate legal counsel or others.
We don’t know of either superior prior rights or infringing uses that could materially affect your use of the trademarks described in this Item 13.
ITEM 14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION
We own no patents that are material to the franchise.
We have not applied for copyright registrations. But we and our affiliates claim copyrights in the Franchise Agreement, Systems Manual and all advertising and promotional materials (the “Copyrighted Materials”). You may use the Copyrighted Materials only to promote your franchised business and only in the manner we authorize.
We consider all information in the Systems Manual to be proprietary, and some portions we designate to be our trade secrets. For example, we claim beef soup base and teriyaki sauce recipes (see Item 8) and sections on marketing strategies as trade secrets, and other information we specify in writing. If developed, proprietary software may be copyrighted and considered a trade secret.
We may modify the Systems Manual and any advertising and promotional materials, or add to, or stop using, all or part of the Systems Manual or Copyrighted Materials. We notify you of all changes and you must conform to them at your expense. You must not contest our or our affiliates’ interest in the Copyrighted Materials, proprietary information or trade secrets.
There are no current determinations of the Copyright Office or any court, any pending interference, opposition or cancellation proceedings, or any pending material litigation involving the Copyrighted Materials or information we regard as proprietary or our trade secrets, which are relevant to their use in this state.
You must promptly notify us when you learn about any unauthorized use, or third party challenge to your use, of any Copyrighted Materials, proprietary information in the Systems Manual, or our or our affiliates’ trade secrets. We are not obligated to take action, but we will respond as we think appropriate. Unless it is established that the third party challenge is based on your misuse, we will defend you in the matter, and reimburse your liability and reasonable costs. To be reimbursed, you must notify us immediately when you learn about the claim and fully cooperate in the defense. Because we defend the claim, we will not reimburse any legal fees or costs you pay to your separate legal counsel or others.
We know of no infringing uses which would materially affect your use of the Copyrighted Materials in this state.
ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS
If you are an individual, you must devote full time and attention to supervising all administrative and operational activities of your franchised business at the franchise location.
FDD - CA 56 If a legal entity owns the franchise rights, like a corporation, partnership or limited liability company, the person who owns a controlling interest in the entity’s equity or voting rights, or a general partner, must devote full time and attention to franchise activities.
You must respond to our communications and requests for information within time frames we request.
You must staff your YOSHINOYA restaurant with at least one “Approved Manager.” That is, a full-time employee with management responsibilities who successfully completes the manager training segment of the initial training program and any mandatory supplemental management classes. You (or the person who owns a controlling interest in equity or voting interests of an entity, or the general partner of a partnership, which owns the franchise) may be an Approved Manager provided you devote full time and attention to your franchise business. You must hire and train all your employees. You may send your employees to our training programs (see Items 6 and 11).
Each of your owners, employees and agents who have access to our proprietary information must enter into a written agreement with you using forms we designate (Exhibit I). They must agree to maintain the confidentiality of all proprietary information and conform to the covenants not to compete described in Item 17.
If you are a corporation, limited liability company or other business entity, each person who owns 10% or more of the equity or voting interests of the entity must sign (a) the Personal Guaranty (Exhibit J), agreeing to be personally, jointly and severally, liable for all obligations under the Franchise Agreement; and (b) if you sublease the franchise location from us or our affiliate, the Guaranty of Sublease (Exhibit G) agreeing to be personally, jointly and severally, liable for all obligations under the Sublease.
ITEM 16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
The franchise lets you operate one YOSHINOYA restaurant at the franchise location only, and nowhere else, except with our prior approval. You may relocate your YOSHINOYA restaurant only with our prior written consent, subject to conditions in the Franchise Agreement.
You must offer and sell only menu items and other goods and services we approve. You must offer all menu items, goods and services we designate as required for YOSHINOYA franchisees, and no others. You may not sell to customers for resale, nor sell for off-site consumption, except take-out or ready-to-go orders packaged in authorized containers. You may not make sales to wholesale accounts without our prior written consent. You must label and identify all food items using the name or designation we give them.
You must operate your YOSHINOYA restaurant all days and during the minimum hours we prescribe in the Systems Manual, unless local conditions, like terms of your lease, require different days/hours or you obtain our prior written consent. At this time, we require your YOSHINOYA restaurant to open every day except New Year’s Day, Thanksgiving and Christmas. Minimum operating hours are 10AM to 10PM. We may change operating days and minimum operating hours any time.
Your operations must comply with all laws. This includes, as examples, laws on packaging, labeling, health and sanitation, environmental waste, and the like. (See Item 1) You must investigate these laws and ensure compliance.
FDD - CA 57 You are otherwise not restricted regarding customers to whom you may sell authorized goods and services.
Any variation from our mandatory requirements requires our prior written approval. We grant approval only in exceptional cases in our discretion. Granting an exception to another franchisee does not require us to grant you that or any exception.
We may add to, modify or discontinue the approved list of menu items, ingredients, preparation processes, or other goods and services you must offer. We communicate changes by written bulletin or revisions to the Systems Manual. There is no limit on our right to impose these modifications. You will be given reasonable time (at least 30 days) after notice from us to implement changes and stop selling particular items which we delete from the approved list.
ITEM 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION
THE FRANCHISE RELATIONSHIP
This table lists important provisions of the franchise and related agreements pertaining to renewal, termination, transfer and dispute resolution. You should read these provisions in the agreements attached to this Franchise Disclosure Document.
Section in Franchise or Provision Summary other Agreement A. Length of the Franchise - 4.1 The term starts on the date we sign franchise term the Franchise Agreement. The Franchise Agreement expires 10 years after the date your YOSHINOYA restaurant opens for business (Opening Date).
Area Development – 2 Based on development schedule and your performance
Sublease – 2 The term starts on the date we sign the sublease and terminates on the same date on which the Master lease terminates unless sublease is sooner terminated. B. Renewal or Franchise - 4.2 You have 2 renewal options, each for extension of the term 5 years. You may exercise each renewal option if you are in good standing at the end of the preceding term and meet the other conditions to renewal. You must give timely notice of intent to renew.
Sublease - 3 Renewal options based on options granted in Master Lease. C. Requirements for Franchise - 4.2 Sign new Franchise Agreement; pay franchisee to renew renewal fee (Item 6); sign release; or extend good standing under expiring Franchise Agreement, satisfy us of funds and financing to perform renewal obligations. Our then-current Franchise Agreement may contain
FDD - CA 58 Section in Franchise or Provision Summary other Agreement materially different terms than the expiring Franchise Agreement. Our then-current design, appearance, trade dress elements for YOSHINOYA restaurants may require you to make additional capital improvements to your existing premises.
Sublease – 3 Deliver an Option Request in writing at least 15 (but no more than 45) days before the Option Exercise Deadline in Master Lease. You must also inquire, no sooner than 7 days after delivering the Option Request, but no later than 3 days before the Option Exercise Deadine, whether Landlord exercised the applicable option. D. Termination by Franchise - 10.1 You may terminate if you and we franchisee cannot agree on the site for your YOSHINOYA restaurant or your exclusive territory, or otherwise for good cause, as defined in the Franchise Agreement (Exhibit C). You may also terminate for any reason available under applicable law.
Area Development - N/A You may terminate for any reason available under applicable law.
E. Termination by N/A franchisor without cause F. Termination by Franchise - 10.2, 10.3; We may terminate the Agreements for franchisor with cause Area Development - 7.1 good cause.
Sublease – 14 Sublease may be terminated for good cause and non-compliance with terms of agreement. G. “Cause” defined - Franchise - 10.3 You have 10 days after notice to cure curable defaults non-payment of fees, failure to provide reports or financial statements and non-responsiveness to our requests for information; you have 30 days after notice to cure non- submission of reports and any other default not listed in Paragraph 10.2. See Note 4.
Area Development - 7.1.5, You have 10 days after notice to cure 7.1.9, 7.1.10 non-payment of fees; you have 30 days after notice to cure any default not listed in Paragraphs 7.1.1 - 7.1.8.
Sublease – 14 A-B You have 3 days after notice to cure for non-payment of rent and other charges; you have the time specified in the Master lease for other items
FDD - CA 59 Section in Franchise or Provision Summary other Agreement that may be cured under Master Lease. H. “Cause” defined - Franchise - 10.2 Under the Franchise Agreement, non- non-curable defaults curable defaults include: conviction of felony; abandonment of franchised business; sale of unauthorized menu items or other goods or services; unapproved transfer; receipt of 3 or more notices of default within 24 month period; misuse of proprietary information; failure to agree on franchise location or your territory’s boundaries within time periods identified in the Franchise Agreement; failure to satisfy conditions for opening; loss of possession of franchise location, violation of other agreement with us; bankruptcy or assignment for benefit of creditors; misrepresentation or omission in becoming a Franchisee; Franchisee dissolves or liquidates; abandonment; understatement of revenues by 5% or more.
Under specified conditions, both before and after termination, we have the right to step in and operate your restaurant. See Franchise Agreement Section 10.5.
Area Development – 7.1.1 Under the Area Development - 7.1.4, 7.1.6 - 7.1.8, 7.1.9 Agreement, non-curable defaults include your failure to satisfy Development Quota, as well as some of the same defaults that are non- curable under the Franchise Agreement, including bankruptcy and assignment for benefit of creditors, unapproved transfer, winding up, liquidation or dissolution, misrepresentation or omission in becoming a developer, conviction of crime, violation or termination of other agreement with us, receipt of three or more notices of default within twenty- four month period.
Sublease – 14 C-D Expiration or termination of Master Lease or Franchise Agreement. I. Franchisee’s Franchise - 11 Obligations include complete de- obligations on identification; sign release; pay all termination/ accounts due (see also r. below). nonrenewal
FDD - CA 60 Section in Franchise or Provision Summary other Agreement Area Development - 7.2 No further right to develop in territory. All rights end. Does not automatically terminate any Franchise Agreement(s) entered into with us, unless grounds for terminating other agreement(s) exist.
Sublease - 15 You no longer have a right to occupy premises and must vacate the premises upon notice to quit given by Landlord. You must return premises in same condition as existing on start date of sublease. J. Assignment of Franchise - 12.1; No restriction on our right to assign. contract by Area Development - 8.1 franchisor Sublease – 11 Sublessee has no right or power to assign Sublease without Landlord’s prior written consent K. “Transfer” by Franchise - 12.2; Includes transfer of Franchise franchisee - defined Area Development - 8.2 Agreement, or assets, or change in ownership of controlling interest of corporate, limited liability company or partnership franchisee. L. Franchisor approval Franchise - 12.2, 12.7; We have the right to approve all of transfer by Area Development - 8.4, transfers, but will not unreasonably franchisee 8.5 withhold approval. M. Conditions for Franchise - 12.4, 12.5 New franchisee qualifies; pay transfer franchisor approval fee; no out-standing default; purchase of transfer agreement approved; training completed; you sign general release; at our option, either existing agreement is transferred and assumed or current agreement is signed by new franchisee (see also r. below); required Renovation Changes are made, you remain bound by non- competition and non-disclosure obligations.
Area Development - 8.4, Transferee qualifies; transfer fee is 8.5 paid; no outstanding defaults; purchase agreement approved; you sign general release; transferee assumes Area Development Agreement and principals sign personal guaranty; obligations to you must be subordinated to our rights. (See also r. below) N. Franchisor’s right of Franchise - 12.3; We can match any third party offer to first refusal to Area Development - 8.3 buy the franchise, assets or acquire franchisee’s controlling interest, which is the business subject of a proposed transfer. O. Franchisor’s option Franchise - 11.3 Right to purchase assets upon to purchase termination or expiration of the franchisee’s Franchise Agreement.
FDD - CA 61 Section in Franchise or Provision Summary other Agreement business P. Death or disability of Franchise - 12.8 Franchise must be assigned to franchisee approved buyer within 6 months.
Area Development - 8.8 Development rights must be assigned to approved buyer within 6 months. Q. Non-competition Franchise - 7.12, 7.14, Extends to each “Covered Person” as covenants during the 7.15 defined in Franchise Agreement; term of the franchise prohibits direct or indirect involvement with any business which serves menu items denominated as a “Bowl” or produces Japanese rice bowls or similar foods; applies worldwide. You may not employ any person who is currently employed by or was employed within the last 6 months by us or another Yoshinoya franchisee, without obtaining our or the affected franchisee’s express prior written consent.
Confidentiality & Non- Prohibits direct or indirect involvement Disclosure – 3(d). with any business which serves menu items denominated as a “Bowl” or produces Japanese rice bowls or similar foods; applies worldwide.
R. Non-competition Franchise - 7.13, 7.14, Extends to each “Covered Person” covenants after the 7.15 (see Q. above); same activities franchise is prohibited as Q. above; applies terminated or expires anywhere within 25 miles of your Restaurant or any other YOSHINOYA restaurant. For 12 months after expiration or termination of your agreement, you may not employ any person who is currently employed by or was employed within the last 6 months by us, or another Yoshinoya franchisee, without obtaining our or the affected franchisee’s express prior written consent.
Confidentiality & Non- Extends to each person signing Disclosure – 3(e). agreement for a period of 2 years after expiration or termination of Franchise Agreement or transfer of franchise to another. Same activities prohibited as Q above; may not conduct activities within 25 mile radius of your Restaurant, or any other Yoshinoya restaurant. S. Modification of the Franchise - 17.8 Franchise Agreement may not be agreement modified except by written agreement you and we both sign. We can change Systems Manual.
FDD - CA 62 Section in Franchise or Provision Summary other Agreement Area Development - 12.9; No modification unless by written NDA – K(2) agreement you and we both sign. T. Integration/merger Franchise - 17.9; Only terms of Franchise Agreement clause are binding (subject to state law). Any other promises may not be enforceable. Nothing in the Franchise Agreement is intended to disclaim the representations in the Franchise Disclosure Document or its exhibits.
Area Development - 12.10 Only terms of the Area Development are binding. Nothing in Area Development Agreement requires you to waive or disclaim representations in the Franchise Disclosure Document.
Confidentiality & Non- Only terms of Agreement are binding. Disclosure – K(2); Guaranty – 6(c); Guaranty of Sublease – 10.2; Sublease – 18(e) U. Dispute resolution by Franchise - 15; Area Disputes are submitted to mediation arbitration or Development – 11; according to procedure in Franchise mediation Guaranty – 5; Agreement and Area Development Confidentiality & Non- Agreement, except as provided in Disclosure – 3(i) Franchise Agreement and Area Development Agreement re interim relief. Disputes not solved through mediation or negotiation are resolved by arbitration in Los Angeles, California.
Franchise - 15; Area The Franchise Agreement, Area Development – 11; Development Agreement, Guaranty Guaranty – 5; and Confidentiality and Non- Confidentiality & Non- Disclosure Agreement each provides Disclosure – 3(i) for arbitration of disputes. The Franchise Agreement and Area Development Agreement each provide (i) a time limit for bringing claims arising out of the agreement, which may be shorter than the time limit under applicable law, and (ii) that the parties each waive punitive damages and limit recovery to actual damages according to proof.
Under specified conditions, both before and after termination, we have the right to step in and operate your restaurant. See Franchise Agreement Section 10.5.
Asset Sale & Purchase – Disputes are resolved by arbitration in 7.2 Los Angeles, California. V. Choice of forum Franchise - 15.3; Area Subject to state law, disputes are Development - 11.3 resolved by arbitration in Los Angeles, California. See State Addendum
FDD - CA 63 Section in Franchise or Provision Summary other Agreement (Exhibit M)
Asset Sale & Purchase - Subject to state law, disputes are 7.2; Confidentiality & Non- resolved by arbitration in Los Angeles Disclosure – 3(i). County.
Guaranty of Lease - 5 Subject to state law, disputes resolved by litigation in Los Angeles County Superior Court W. Choice of law Franchise - 15.4; Area California law applies, subject to state Development - 11.4 law. See State Addendum (Exhibit M). Asset Sale & Purchase - 7.3; Guaranty of Sublease California law applies, subject to state - 5; Confidentiality & Non- law. Disclosure – 3 i; Guaranty - 5.
ITEM 18 PUBLIC FIGURES
At this time, we do not use any public figure to promote the YOSHINOYA franchise.
ITEM 19 FINANCIAL PERFORMANCE REPRESENTATIONS
The FTC’s Franchise Rule permits a franchisor to provide information about actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and 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.
We do not make any representations about a franchisee’s future financial performance or the past financial performance of company-owned, affiliate-owned or franchised YOSHINOYA restaurants. We do not authorize our employees or representatives to make any such representations either orally or in writing. But if you are purchasing an existing YOSHINOYA restaurant from us or an affiliate of ours, we may provide you the actual records of that YOSHINOYA restaurant. If you receive any other financial performance information or projections of your future income, you should report it to our management by contacting Scot Hobert, Yoshinoya America, Inc., 991 West Knox Street, Torrance, California 90502 (phone: 310/353-7110; fax: 310/217-2149; e-mail: [email protected]), the Federal Trade Commission and any appropriate state regulatory agencies.
FDD - CA 64
ITEM 20 OUTLETS AND FRANCHISEE INFORMATION
TABLE 1
Systemwide Outlet Summary For Years 2009 to 2011
Column 1 Column 2 Column 3 Column 4 Column 5 Outlets at the Start Outlets at the End Outlet Type Year Net Change of the Year of the Year Franchised 2009 13 18 +5 2010 18 18 0 2011 18 21 +3 Company-Owned 2009 76 80 +4 2010 80 79 -1 2011 79 74 -5 Total Outlets 2009 89 98 +9 2010 98 97 -1 2011 97 95 -2
TABLE 2
Transfers of Outlets from Franchisees to New Owners (other than the Franchisor) For Years 2009 to 2011
Column 1 Column 2 Column 3 State Year Number of Transfers ALL 2009 0 2010 0 2011 0 Total 2009 0 2010 0 2011 0
FDD - CA 65 TABLE 3
Status of Franchise Outlets for Years 2009 to 2011
Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Column 9 Ceased Outlets at Outlets at Outlets Non- Reacquired by State Year Terminations Operations - End of the Start of Year Opened Renewals Franchisor Other Reasons Year Arizona 2009 1 0 0 0 0 0 1 2010 1 0 0 0 0 0 1 2011 1 0 0 0 0 1 0 California 2009 10 5 0 0 0 0 15 2010 15 1 0 0 0 0 16 2011 16 5 0 0 0 1 20 Nevada 2009 2 0 0 0 0 0 2 2010 2 0 0 0 0 1 1 2011 1 0 0 0 0 0 1 Texas 2011 0 1 1 0 0 0 0 Totals 2009 13 5 0 0 0 0 18 2010 18 1 0 0 0 1 18 2011 18 6 1 0 0 2 21
[THE REMAINDER OF THIS PAGE IS LEFT BLANK INTENTIONALLY]
FDD - CA 66 TABLE 4
Status of Company-Owned Outlets for Years 2009 to 2011
Column 1 Column 2 Column 3 Column 4 Column 5 Column 6 Column 7 Column 8 Outlets at Start Outlets Reacquired Outlets Sold to Outlets at End State Year Outlets Opened Outlets Closed of Year From Franchisees Franchisees of the Year California 2009 75 7 0 3 0 79 2010 79 2 0 3 0 78 2011 78 1 0 4* 2 73 New York 2009 1 0 0 0 0 1 2010 1 0 0 0 0 1 2011 1 0 0 0 0 1 Totals 2009 76 7 0 3 0 80 2010 80 2 0 3 0 79 2011 79 1 0 4* 2 74 * One location opened and closed in the year 2011.
TABLE 5
Projected New Franchised Outlets as of December 31, 2011
Column 1 Column 2 Column 3 Column 4 Franchise Agreements Signed But Projected New Franchised Outlets Projected New Company – Owned State Outlet Not Opened in the Next Fiscal Year Outlets In the Next Fiscal Year California 4 13 1 Nevada 0 0 0 Arizona 0 0 0 Texas 0 0 0 Total 3 13 1
FDD - Multistate 67
Attached as Exhibit K is a list of the names of all YOSHINOYA restaurant franchisees and their addresses and telephone numbers at December 31, 2011.
Attached as part of Exhibit K is a list of names, city and state and current business telephone number or last known home telephone numbers of every YOSHINOYA franchisee who had a franchise terminated, cancelled, not renewed or who otherwise voluntarily or involuntarily ceased to do business under a Franchise Agreement during our most recently completed fiscal year ending December 31, 2011, or who have not communicated with us during the 10 weeks before the filing of this Franchise Disclosure Document. If you buy a franchise, your contact information may be disclosed to other buyers when you are a franchisee and when you leave the franchise system.
Attached as part of Exhibit K are the addresses and telephone numbers of all affiliate- owned Yoshinoya restaurants.
During our last 3 fiscal years, we have not signed any confidentiality clauses with current or former franchisees which restrict them from speaking openly with you about their experience with us.
There are no trademark-specific franchisee organizations associated with the franchise system which we have created, sponsored or endorsed as of December 31, 2011.
ITEM 21 FINANCIAL STATEMENTS
Attached as Exhibit L are our interim unaudited financials for the two months ended February 29, 2012 and audited Financial Statements for the fiscal years ended December 31, 2011, 2010 and 2009.
ITEM 22 CONTRACTS
All agreements proposed for use in this State are attached to this Franchise Disclosure Document as follows:
EXHIBIT C - Franchise Agreement EXHIBIT D - Area Development Agreement EXHIBIT E - General Release EXHIBIT F - Sublease EXHIBIT G - Guaranty of Sublease EXHIBIT H - Addendum to Lease EXHIBIT I - Confidentiality, Non-Disclosure and Non Competition Agreement EXHIBIT J - Personal Guaranty EXHIBIT N - Addendum to Franchise Agreement - Employee Franchise Program EXHIBIT O - Advertising Addendum to Franchise Agreement EXHIBIT P - Asset Sale and Purchase Agreement EXHIBIT Q - Spousal Consent EXHIBIT R - Closing Acknowledgement
FDD – Multistate 68
ITEM 23 RECEIPTS
The last 4 pages of this franchise disclosure document are detachable receipt pages (Exhibit T). Please insert the name, address and telephone number of the franchise seller, and date and sign both copies. Detach the last 2 pages and return to us promptly on execution. Retain the other copy of the receipt pages for your records. If these pages or any other pages or exhibits are missing from your copy, please contact us at this address or phone number:
Yoshinoya America, Inc. 991 West Knox Street Torrance, California 90502 (310) 353-7110 (tel) (310) 217-2149 (fax)
FDD – Multistate 69
EXHIBIT A FTC AND STATE ADMINISTRATORS FEDERAL TRADE COMMISSION AND STATE ADMINISTRATORS ADDRESSES
Federal Trade Commission
Division of Marketing Practices Bureau of Consumer Protection 600 Pennsylvania Avenue, N.W. Washington, D.C. 20580. (202) 326-3128 1-877-FTC-HELP
Listed below are the names, addresses and telephone numbers of the state agencies having responsibility for franchising disclosure/registration laws:
California Indiana
Department of Corporations Franchise Section State of California Indiana Securities Division 320 W. 4th Street, Suite 750 Room E-111 Los Angeles, California 90013-2344 302 West Washington Street (213) 576-7500 Indianapolis, Indiana 46204 (866) 275-2677 (317) 232-6681
Hawaii Maryland
Hawaii Commissioner of Securities Office of the Attorney General Department of Commerce and Securities Division Consumer Affairs 200 St. Paul Place Business Registration Division Baltimore, Maryland 21202 State of Hawaii (410) 576-6360 335 Merchant Street, Room 203 Honolulu, Hawaii 96813 (808) 586-2722
Illinois Michigan
Franchise Bureau Consumer Protection Division Illinois Attorney General Franchise Section 500 South Second Street Michigan Department of Attorney Springfield, Illinois 62706 General (217) 782-4465 525 W. Ottawa Street G. Mennen Williams Building, 6th Floor Lansing, Michigan 48933 (517) 373-7117
1 Minnesota South Dakota
Minnesota Department of Commerce Franchise Administration Franchise Section Division of Securities 85 7th Place East , Suite 500 445 E. Capitol Avenue St. Paul, Minnesota 55101-2198 Pierre, South Dakota 57501-3185 (651) 296-6328 (605) 773-4823
New York Virginia
Bureau of Investor Protection State Corporation Commission and Securities Division of Securities and New York State Department of Law Retail Franchising 23rd Floor 1300 East Main Street, 9th floor 120 Broadway Richmond, Virginia 23219 New York, New York 10271 (804) 371-9051 (212) 416-8211
North Dakota Washington
North Dakota Securities Department Department of Financial Institutions State of North Dakota Securities Division Fifth Floor State of Washington 600 East Boulevard P.O. Box 9033 Bismarck, North Dakota 58505-0510 Olympia, Washington 98507-9033 (701) 328-4712 (360) 902-8738
Oregon Wisconsin
Department of Consumer and Business Division of Securities Services Department of Financial Institutions Division of Finance and Corporate Wisconsin Commissioner of Securities Securities P.O. Box 1768 State of Oregon Madison, Wisconsin 53701-1768 Labor and Industries Building (608) 266-8559 Salem, Oregon 97310 (503) 378-4140
Rhode Island
Department of Business Regulation Securities Division John O. Pastore Complex 1511 Pontiac Avenue, Bldg. 69-1 Cranston, RI 02910 (401) 462-9587
2
EXHIBIT B AGENTS FOR SERVICE OF PROCESS
COMPANY’S AGENTS FOR SERVICE OF PROCESS
California Maryland
Commissioner of Corporations Maryland Securities State of California Commissioner Department of Corporations Office of the Attorney General Suite 750 Securities Division 320 W. 4th Street 200 Saint Paul Place Los Angeles, California 90013-2344 Baltimore, Maryland 21202-2020
Joji Kagei, Esq. Michigan 19191 S. Vermont Torrance, California 90502 Michigan Department of Commerce Corporation & Securities Bureau 6546 Mercantile Way Lansing, MI 48909
Hawaii Minnesota
Commissioner of Securities Commissioner of Commerce Department of Commerce and Minnesota Department of Commerce Consumer Affairs Franchise Section Business Registration Division 85 7th Place East, Suite 500 335 Merchant Street, Room 203 St. Paul, Minnesota 55101-2198 Honolulu, Hawaii 96813
Illinois New York
Office of Attorney General Secretary of State State of Illinois State of New York 500 South Second Street 41 State Street Springfield, Illinois 62706 Albany, New York 12231
Indiana
Secretary of State State of Indiana 201 State House 200 West Washington Street Indianapolis, Indiana 46204
- 1 - North Dakota Virginia
North Dakota Securities Commissioner Clerk of the State Corporation North Dakota Securities Department Commission Fifth Floor 1300 East Main Street, 1st Floor 600 East Boulevard Avenue Richmond, Virginia 23219 Bismarck, North Dakota 58505-0510
Oregon Washington
Department of Consumer and Business Director of Financial Institutions Services Securities Division Division of Finance and Corporate State of Washington Securities 150 Israel Rd. SW State of Oregon Tumwater, Washington 98501 350 Winter Street, N.E. Room 21 Salem, Oregon 97310
Rhode Island Wisconsin
Director of Business Regulation Commissioner of Securities Department of Business Regulation Wisconsin Securities Commission Division of Securities 345 W. Washington, 4th Floor State of Rhode Island Madison, Wisconsin 53703 1511 Pontiac Avenue Cranston, RI 02920
South Dakota
Franchise Administration Division of Securities Department of Revenue and Regulation State of South Dakota 445 E. Capitol Avenue Pierre, South Dakota 57501-3185
- 2 -
EXHIBIT C FRANCHISE AGREEMENT
TABLE OF CONTENTS
Page
1. APPOINTMENT ...... 1
2. FRANCHISE LOCATION; TERRITORY; RESERVED RIGHTS; RELOCATION ...... 2
3. SPECIFIC RIGHTS AND DUTIES REGARDING USE OF THE YOSHINOYA MARKS AND YOSHINOYA SYSTEM ...... 6
4. TERM AND RENEWAL ...... 8
5. LEASE AND DEVELOPMENT OF FRANCHISE LOCATION; OPENING ...... 9
6. SERVICES FURNISHED BY COMPANY...... 11
7. ADDITIONAL OBLIGATIONS OF FRANCHISEE ...... 19
8. FEES PAYABLE TO COMPANY ...... 28
9. ACCOUNTING AND RECORDS ...... 32
10. DEFAULT AND TERMINATION...... 33
11. RIGHTS AND DUTIES OF PARTIES UPON EXPIRATION OR TERMINATION...... 37
12. ASSIGNMENT AND TRANSFER ...... 39
13. RELATIONSHIP OF PARTIES; INDEMNIFICATION ...... 45
14. PERSONAL GUARANTY ...... 46
15. DISPUTE RESOLUTION ...... 46
16. ACKNOWLEDGEMENTS ...... 49
17. MISCELLANEOUS ...... 49
i G:\lhsmh\LW\12912-2\529991.DOC
YOSHINOYA AMERICA, INC.
THIS FRANCHISE AGREEMENT (the “Agreement”) is made by and between YOSHINOYA AMERICA, INC., a Delaware corporation (“Company”) and ______(“Franchisee”) as of ______, 20___ (the “Effective Date”) with reference to the following facts:
R E C I T A L S
A. Company owns the right to use a distinctive system (the “YOSHINOYA System”) for the establishment, operation and promotion of quick-service restaurants which feature freshly prepared, high quality Japanese style foods and use uniform operating methods and proprietary information and trade secrets developed by or for Company and entities affiliated with Company (collectively, “YOSHINOYA Restaurants” and individually a “YOSHINOYA Restaurant”). In this Agreement, references to “Affiliate” mean an entity that controls, is controlled by, or is under common control with, a party to this Agreement.
B. Company has rights to the names YOSHINOYA and YOSHINOYA BEEF BOWL and to other distinctive marks, logos and commercial symbols which identify YOSHINOYA Restaurants (collectively referred to as the “YOSHINOYA Marks”).
C. Company maintains high standards of quality, cleanliness, appearance and service, which the public identifies with YOSHINOYA Restaurants and the YOSHINOYA Marks.
D. Franchisee wants to obtain a franchise and license to use the YOSHINOYA System and the YOSHINOYA Marks in the operation of a YOSHINOYA Restaurant, and Company is willing to grant a license to Franchisee on the terms in this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. APPOINTMENT
1.1. Grant of Rights
1.1.1. Company grants to Franchisee, and Franchisee accepts, on the terms and conditions in this Agreement, a franchise and license to use the YOSHINOYA Marks and YOSHINOYA System in the operation of one YOSHINOYA Restaurant at the Franchise Location. The franchise and license granted apply to the Franchise Location, and to no other location. Company grants Franchisee no rights other than the rights expressly stated in this Agreement. Franchisee’s business activities pursuant to this Agreement are sometimes collectively referred to as the “Franchised Business.”
1.1.2. The YOSHINOYA System is composed of elements, designated from time to time by Company, designed to identify YOSHINOYA Restaurants to the consuming public and to contribute to such identification and its association with quality standards. The YOSHINOYA System includes (without limitation) use of uniform identification to distinguish YOSHINOYA Restaurants, including use of the YOSHINOYA Marks; uniform specifications for exterior and
1 interior design and appearance of YOSHINOYA Restaurants; specially designated equipment, fixtures, furnishings and signage; prescribed menu selections, uniform menu designations, special recipes, ingredients and food preparation processes; management and operational training programs; uniform operating methods and procedures; access to, and use of, Confidential Information (defined below); advertising, marketing and publicity programs; and customer and community relations programs; and other specifications which now, or in the future, are stated in Company’s multi-volume Systems Manual (defined below) or are communicated to Franchisee in writing. Company, in its sole discretion, reserves the absolute right to modify the YOSHINOYA System from time to time. Franchisee shall receive written notice of all changes instituted by Company in the YOSHINOYA System. Franchisee shall implement all changes made in the YOSHINOYA System, at Franchisee’s sole cost and expense, within a reasonable time after receiving notice of a change.
1.1.3. Franchisee’s use of the YOSHINOYA System for any purpose, or in any manner, not permitted by this Agreement constitutes a breach of this Agreement.
1.2. Additional Franchises. This Agreement does not grant Franchisee any preferential right, or right of any kind, to acquire any additional franchise. Franchisee acknowledges that granting of an additional franchise is a matter solely at Company’s discretion. If Company approves Franchisee’s application to purchase an additional franchise, the parties shall execute the then-current form of Franchise Agreement which Company is then offering new YOSHINOYA franchisees in the state where the additional franchise will be located, which Franchisee acknowledges may be materially different than the terms of this Agreement; provided, however, the initial franchise fee payable by Franchisee for each additional franchise shall be discounted as provided in this Agreement. Company’s approval of Franchisee’s application to purchase an additional franchise for a YOSHINOYA Restaurant shall not constitute, or be regarded as precedent for, approval of any other application by Franchisee.
2. FRANCHISE LOCATION; TERRITORY; RESERVED RIGHTS; RELOCATION
2.1. Procedures for Designating Franchise Location and Territory (if applicable).
2.1.1. If mutually agreed before executing this Agreement, the parties shall complete the following: Franchisee’s YOSHINOYA Restaurant shall be operated at the following street address: ______, in the city and state of ______(the “Franchise Location”). If the Franchise Location is a Traditional Location (as defined below), Franchisee’s territory is the geographic area located within and including the following boundaries: ______(the “Territory”). Otherwise, the parties shall identify the Franchise Location and Territory (if applicable) according to the procedures in this Section 2.
2.2. Procedure for Selecting Franchise Location. Following execution of this Agreement, Company will loan Franchisee a copy of its Systems Manual, which contains, among other things, Company’s then current site proposal package guidelines, including demographic, design and construction guidelines for selection and build-out of the franchise location and other site development requirements applied by Company to site review and approval. Franchisee shall identify potential sites which meet Company’s demographic and other guidelines and submit a written site proposal to Company, for approval. Franchisee shall bear all expenses in connection with preparation of the site proposal.
2.2.1. Franchisee’s site proposal must include a written site analysis report, which shall cover the subjects and be in the form directed by Company.
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2.2.2. If Company believes Franchisee’s proposed site is within, or near to, the market area of an existing YOSHINOYA Restaurant, Company may require Franchisee’s written site analysis report to include a separate market impact study prepared by a third party service provider designated by Company. The market impact study shall cover the subjects and be in the form directed by Company and assess if opening a YOSHINOYA Restaurant at the proposed site will or may materially and negatively affect the existing YOSHINOYA Restaurant’s sales levels, traffic flow and business prospects. Company may change the designated third party service provider any time. However, if Company decides to change its designated service provider after Franchisee engaged the services of a previously approved provider, Company shall not require Franchisee to end the existing engagement nor shall the change in Company’s designated service provider rescind Company’s prior approval of a site proposed by Franchisee.
2.2.3. Company shall have 21 days following receipt of the completed site proposal to approve the proposed site by giving written notice to Franchisee; Company’s failure to give timely notice shall constitute disapproval of the proposed site. Company may terminate this Agreement if it disapproves the proposed site, and termination shall be effective on written notice to Franchisee. The site which Company approves shall be the Franchise Location, and the parties shall then either execute, or be deemed to have completed, Exhibit “A” to state the street address of the approved site, which shall then be deemed to be incorporated here by reference. If Franchisee proposes alternative sites and Company approves more than one proposed site, the parties must designate one which shall be the Franchise Location; Franchisee acknowledges that Company’s approval of alternative sites does not confer any right on Franchisee to open more than one YOSHINOYA Restaurant.
2.2.4. If Franchisee’s site proposal seeks approval of real estate owned by Franchisee as the Franchise Location, then Company shall require, as an additional condition to approval, that Franchisee execute and deliver a Lease and an Addendum to Lease (as such terms are defined in Section 5.1.1 according to the requirements of Section 5.1.1. This will require Franchisee to hold title to the real estate, and ownership of the franchise rights, through separate entities (or that Franchisee own one individually and the other through an entity) so that 2 legal persons exist capable of entering into such Lease and Addendum to Lease.
2.2.5. Franchisee acknowledges that (i) it is solely responsible for site selection, (ii) Company’s approval of a site that Franchisee proposes does not constitute a guaranty or warranty that a YOSHINOYA Restaurant at that site will be successful or profitable; such approval signifies only that the Company determined for its own benefit, that the site meets Company’s then-current minimum site proposal guidelines; and (iii) Company’s site approval does not certify that development of the site according to Company’s design standards and construction guidelines will comply with local zoning and building codes, and (iv) Franchisee is solely responsible to investigate and comply with all applicable ordinances, codes and permit requirements for development of the approved site as a YOSHINOYA Restaurant.
2.3. Procedure for Selecting Territory. In Company’s notice approving the Franchise Location, Company shall identify the proposed geographic boundaries for Franchisee’s Territory (if applicable).
2.3.1. If the Franchise Location is located within a mall, school, airport, rail or bus terminal, stadium, sports arena, amusement park, public park, theater, military base, race track, hospital or health care facility, educational facility, high density office location or other mass gathering place (“Non-Traditional Location”), Franchisee is not granted any exclusivity. Franchisee may face competition from other franchisees, from outlets that Company owns, or
3 from other channels of distribution or competitive brands that Company controls. By initialing here, Franchisee acknowledges that the Franchise Location is a Non-Traditional Location, and Franchisee will not receive an exclusive territory.
______Franchisee initials
2.3.2. For all locations, other than Non-Traditional Locations (“Traditional Location”), if the Franchise Location is within a Central Business District, the Territory shall be an area measuring approximately .2 (two-tenths) of one mile from the Franchise Location. If the Franchise Location is not within a Central Business District, the Territory shall be an area measuring approximately one mile from the Franchise Location. The term “Central Business District” means an area concentrated with commercial businesses. Company shall determine if a proposed Franchise Location is within a Central Business District. Franchisee understands and agrees that it shall have no right to challenge Company’s decision that a proposed Franchise Location is within a Central Business District, its sole option is to disapprove of the proposed Territory according to procedures in this Agreement.
2.3.3. Franchisee may disapprove the proposed Territory by giving written notice of disapproval to Company within five (5) days after receipt of Company’s notice. If Franchisee fails to do so, Franchisee is conclusively deemed to have accepted the Territory on the 5th day after receipt of Company’s notice approving the Franchise Location (the “Territory Approval Date”). The parties shall execute, or be deemed to have completed, as of the Territorial Approval Date, Exhibit “B” to conform with such description, which shall then be deemed to be incorporated here by reference.
2.3.4. If Franchisee gives timely notice that it disapproves the Territory identified by Company, the parties shall negotiate in good faith to identify mutually acceptable boundaries for the Territory consistent with Company’s policies regarding size and demographic qualities of franchisee territories, as stated in the Systems Manual; provided, however, if the parties cannot agree on such boundaries within 30 days after Franchisee receives Company’s notice of site approval, the proposed site shall be deemed disapproved and either party may terminate this Agreement effective on written notice to the other party. In the event of such termination, there shall be no refunds of any amounts paid.
2.4. Grant of Territorial Rights. If the Franchise Location is a Traditional Location, as long as Franchisee is not in default under this Agreement, Company shall not engage in the following activities in the Territory:
A. operate, or grant others the right to operate, a restaurant in the Territory whose principal name is Yoshinoya Beef Bowl (“Yoshinoya Beef Bowl Branded Restaurant”). A restaurant whose name may include or reference Yoshinoya does not constitute a Yoshinoya Beef Bowl Branded Restaurant;
B. if Company, in the future, adds a delivery program to the YOSHINOYA System, Company agrees not to engage, or permit others to engage, in delivery services of menu items sold at YOSHINOYA Restaurants, to consumers located within the Territory.
2.4.1. Nothing in or elsewhere in this Agreement prohibits Company from engaging in the following activities in the Territory:
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2.4.1.1. Operating or permitting others to operate restaurants that are not Yoshinoya Beef Bowl Branded Restaurants, even in Franchisee’s Territory;
2.4.1.2. selling (or permitting others to sell) any menu items sold at YOSHINOYA Restaurants, or ingredients used to prepare foods sold at YOSHINOYA Restaurants, under the YOSHINOYA Marks or under other names, to restaurants, convenience stores, grocery stores, specialty food stores, and department stores selling foods or ingredients located within the Territory. For illustration only, the foregoing permits Company to prepare on third-party premises and sell, or authorize others to prepare and sell, ready-to-eat, ready-to-serve or ready- to-cook foods and ingredients from such locations under the YOSHINOYA Marks or under other names;
2.4.1.3. selling (or permitting others to sell) any menu items sold at YOSHINOYA Restaurants, or operating (or granting others the right to operate) a YOSHINOYA Restaurant, or a restaurant under another name which is located at, or within, any mall, school, airport, rail or bus terminal, stadium, sports arena, race track, amusement park, public park, theater, military base, hospital or health care facility, educational facility, high density office location or other mass gathering place entirely or partially in the Territory;
2.4.1.4. selling (or permitting others to sell) menu items sold at YOSHINOYA Restaurants, or ingredients used to prepare foods sold at YOSHINOYA Restaurants, under the YOSHINOYA Marks or other names from mobile units or carts, kiosks, vending machines, or other mobile or stationery devices which occupy less than 100 feet and are in the Territory; or
2.4.1.5. advertising and promoting the sale of, and selling, menu items sold at YOSHINOYA Restaurants through the Internet or by using any other public computer network, electronic communication method, or by mail order, catalog sales or comparable methods that solicit orders and business from customers without requiring the customer’s physical presence in a YOSHINOYA Restaurant to complete the transaction.
2.4.2. Franchisee acknowledges that Company, entities related to Company through common ownership, and each of their officers, directors, employees and agents, may engage in any, and every, activity, within or outside of the Territory, which is not expressly prohibited by this Agreement. Except for the restrictions stated in this Section 2.4, this Agreement does not limit Company’s right to use or license the YOSHINOYA Marks or the YOSHINOYA System, or to engage in, or license, any other type of business activity, whether similar to or different from the YOSHINOYA System.
2.5. Further Agreements Regarding Company’s Reserved Rights. Franchisee understands, acknowledges and agrees it has no right to participate, directly or indirectly, in any activity reserved by Company, and no right to object to issuance of franchise rights to others.
2.5.1. Company, in its sole discretion, reserves the right to approve exceptions or deviations from the YOSHINOYA System. Franchisee acknowledges it has no right to object to variances granted to others and no claim against Company for failing to enforce standards of the YOSHINOYA System against other YOSHINOYA franchisees. Franchisee acknowledges that Company does not intend to grant Franchisee any exception or deviation from the standards of the YOSHINOYA System unless, in Company’s sole discretion, Company finds exceptional or special circumstances exist justifying such allowance. Company is not required to apply this same standard in determining whether to grant exceptions or variances to others.
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Any exception or deviation granted by Company must be in writing and executed by Company in order to be enforceable.
2.6. Relocation. Franchisee shall relocate the Franchise Location only according to the following requirements:
2.6.1. If (a) the master lease for the Franchise Location expires or terminates for reasons other than Franchisee’s breach; (b) the site is destroyed, condemned or otherwise rendered unusable; or (c) the parties’ mutually believe relocation will increase the business potential of the franchise, Franchisee shall relocate its YOSHINOYA Restaurant to a new location selected by Franchisee, and approved by Company, according to Company’s then- current site selection procedures specified in the Systems Manual. If the relocated premises are not in Franchisee’s Territory, a new Territory shall be determined according to the procedures applicable to designation of the original Territory. Exhibits “A” and “B” shall be amended, or deemed to be amended, to designate the new Franchise Location and Territory (if applicable).
2.6.2. The relocated premises shall be constructed, developed, improved and equipped according to the then-current appearance and design standards and equipment specifications which apply to new YOSHINOYA Restaurants. Company shall supply Franchisee with one set of the then-current design standards and construction guidelines for build-out of a new YOSHINOYA Restaurant and loan Franchisee a copy of the then-current YOSHINOYA Construction Manual. All costs and expenses relating to relocation, construction and build-out of substitute premises shall be borne by Franchisee. Complete de-identification of the original Franchise Location must be completed before Franchisee may commence business to the public at the new premises.
2.6.3. Franchisee shall complete relocation according to the requirements of this Agreement without interruption in the continuous operation of Franchisee’s YOSHINOYA Restaurant, unless Company’s prior written consent is obtained. If Company consents to a disruption in operations and such operations cease, then until operations resume at the substitute location: (a) the term of this Agreement shall not be abated, and (b) Franchisee shall remain liable to pay Promotional Fees and any Cooperative Promotional Fees based on Franchisee’s average Gross Sales and Net Sales for the YOSHINOYA Restaurant during the 16 week period immediately preceding the date operations cease or the shorter period that Franchisee has been in business.
3. SPECIFIC RIGHTS AND DUTIES REGARDING USE OF THE YOSHINOYA MARKS AND YOSHINOYA SYSTEM
3.1. Ownership of YOSHINOYA Marks and YOSHINOYA System
3.1.1. Franchisee shall not contest validity, or Company’s ownership, of any of the YOSHINOYA Marks or the YOSHINOYA System, or assist any other person to contest the validity, or Company’s ownership, of such property rights, during the Term of this Agreement or anytime after the Effective Date of Termination or Expiration (as defined below) or after an assignment or transfer as described in Section 12.
3.1.2. As and to the extent required in Company’s judgment, Company will research enhancements to the YOSHINOYA System that Company believes may benefit the YOSHINOYA System and YOSHINOYA Marks. Enhancements may include, without limitation,
6 developments in food preparation and delivery systems and new menu items, ingredients, recipes, and food handling and preparation methods. Company does not guaranty that any particular improvements or enhancements will be added to the YOSHINOYA System. Any improvements or additions which Company makes to, or which become associated with the YOSHINOYA System, including, without limitation, ideas suggested or initiated by Franchisee or other YOSHINOYA franchisees, shall benefit, and become, the exclusive property of Company. Any goodwill resulting from Franchisee’s use of the YOSHINOYA Marks or the YOSHINOYA System shall inure to the exclusive benefit of Company. This Agreement confers no goodwill or other interest in the YOSHINOYA Marks or the YOSHINOYA System on Franchisee other than a license to use same in Franchisee’s operation of its YOSHINOYA Restaurant.
3.2. Use of YOSHINOYA Marks
3.2.1. Franchisee shall use the designated YOSHINOYA Marks as the sole identification of its YOSHINOYA Restaurant, but shall clearly and conspicuously identify Franchisee as the independent owner of its YOSHINOYA Restaurant in the manner prescribed by Company. Franchisee shall not use any of the YOSHINOYA Marks, or any part thereof: (i) if an entity, in Franchisee’s corporate or entity name, or with any prefix, suffix or other modifying words, terms, designs, colors or symbols, (ii) in any modified form, (iii) in connection with the sale of any unauthorized services or products, or (iv) in any other manner not expressly authorized in writing by Company. Franchisee shall not use any of the YOSHINOYA Marks in any manner that may result in Company’s liability for any debt or obligation of Franchisee. Franchisee shall prominently display the YOSHINOYA Marks on signs, menu boards, sales receipts, packaging, uniforms, and other items specified by Company and only according to Company’s instructions. Franchisee shall give notices of trademark and service mark registrations as Company specifies. Franchisee shall obtain fictitious or assumed name registrations as may be required under applicable law.
3.2.2. Company reserves the right to modify or discontinue the use of any of the YOSHINOYA Marks, including, without limitation, the names YOSHINOYA or YOSHINOYA BEEF BOWL, and to add new names, marks, designs or other commercial symbols to the YOSHINOYA Marks, from time to time. Franchisee shall comply, at its sole expense, with Company’s directions to modify or discontinue using, or to use new, YOSHINOYA Marks within a reasonable time after written notice from Company, and Company shall have no liability to Franchisee for any cost, expense, loss or damage arising by reason of such change, except under the conditions identified in Section 3.3.3.
3.2.3. Franchisee shall not use the Proprietary Marks in any electronic mail address or in any domain name, nor shall Franchisee maintain a World Wide Web site or a presence or advertise on the Internet, or on any other public computer network, using the Proprietary Marks.
3.3. Disputes Concerning YOSHINOYA Marks or YOSHINOYA System. Company shall have the sole right to handle disputes with third parties concerning the YOSHINOYA Marks or the YOSHINOYA System.
3.3.1. Franchisee shall immediately notify Company in writing if Franchisee receives notice, or is informed, of any: (i) improper use of any of the YOSHINOYA Marks, (ii) use by a third party of a mark or design which, in Franchisee’s judgment, may be confusingly similar to any of the YOSHINOYA Marks, or (iii) any claim, suit or demand asserted against it on account of its use of the YOSHINOYA Marks or the YOSHINOYA System.
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3.3.2. Company shall have sole discretion to take such action as it deems appropriate, including, without limitation, to take no action, and the sole right to exclusively control any litigation, Patent and Trademark Office or other proceeding relating to the YOSHINOYA Marks or the YOSHINOYA System. Franchisee has no right to settle or compromise any claim, suit or demand asserted against it. Franchisee shall cooperate fully with Company and execute documents and perform such actions as may, in Company’s judgment, be necessary, appropriate or advisable in the defense of such claims, suits or demands and to protect and maintain Company’s rights in the YOSHINOYA Marks and the YOSHINOYA System.
3.3.3. Unless it is established that a third party challenge is based on Franchisee’s misuse of the YOSHINOYA Marks or the YOSHINOYA System, Company will indemnify and defend Franchisee in such matter, and reimburse Franchisee for the amount of any liability imposed against Franchisee by reason of its use of the YOSHINOYA Marks or the YOSHINOYA System according to this Agreement and Franchisee’s reasonable costs, provided Franchisee notified Company immediately after learning of the claim and fully cooperated in the defense of the action. Because Company will defend such claim, Franchisee is not entitled to reimbursement of any legal fees or related costs paid to independent legal counsel or others.
4. TERM AND RENEWAL
4.1. Term. The term of this Agreement starts on the Effective Date and expires ten years from the Opening Date, unless this Agreement is sooner terminated as provided herein (such ten year period is referred to as the “Term”).
4.2. Renewal Rights. Franchisee may renew the franchise as many as two times, each for a term of 5 years (each five year period is called the “Renewal Term” and each option to renew is referred to as a “Renewal Option”). Franchisee’s right to exercise each Renewal Option is subject to the following conditions:
4.2.1. Franchisee must not be in default under this Agreement at the time Franchisee gives written notice of election to renew or on commencement of the Renewal Term. Franchisee must not have received more than 4 notices of default during the Term or Renewal Term which is expiring, nor more than 3 notices of default during any 24 month period;
4.2.2. Franchisee must give written notice of desire to renew at least 12 months, but not more than 18 months, before expiration of the Term or Renewal Term. The notice must be accompanied by payment of a nonrefundable renewal fee (“Renewal Fee”) equal to 25% of the then-current initial franchise fee payable by new non-employee franchisees purchasing their first YOSHINOYA franchise in the state where the Franchise Location is located.
4.2.3. Franchisee must provide evidence sufficient to satisfy Company that Franchisee possesses sufficient funds and has sufficient financial arrangements in place to pay for remodeling, upgrading and any and all other expenses that may be incurred in connection with and as a result of renewal. Company may require Franchisee to provide, at a minimum, financial statements reviewed by a certified public accountant, and bank and financial institution account statements for a period of 6 months or more preceding the date of exercise of the Renewal Option and the start date of the Renewal Term. Franchisee shall also consent to and cooperate in any inquiry or investigation Company elects to make regarding Franchisee’s credit.
4.2.4. Franchisee must execute the form of standard Franchise Agreement and any ancillary agreements then customarily used by Company in granting or renewing franchises in
8 the state where the Franchise Location is located, except that: (i) the term of the Franchise Agreement shall be five years; (ii) Franchisee shall not be required to pay the initial franchise fee stated therein, but shall instead pay the Renewal Fee; and (iii) at least one Approved Manager (defined below), one lead kitchen personnel and Franchisee shall complete additional training, if any, as Company then customarily requires other YOSHINOYA franchisees to complete in connection with renewal of franchise rights; provided, however, if Franchisee is not an individual, the additional training must be completed by the owner of a Controlling Interest of the equity or voting interests of Franchisee if Franchisee is a corporation, limited liability company (“LLC”) or other entity, or by a general partner of Franchisee if Franchisee is a partnership.
4.2.5. Before the Renewal Term starts, Franchisee shall complete, at its sole expense, all Renovation Changes (defined in Section 7.4) to its YOSHINOYA Restaurant required to conform its physical condition and operating methods to the then-current standards, specifications and requirements of the YOSHINOYA System.
4.2.6. Franchisee shall execute and deliver a general release, in form satisfactory to Company, of any and all claims against Company and its officers, directors, shareholders, employees and agents.
4.3. Additional Conditions. Franchisee’s failure to deliver the agreements and releases and complete all other steps required by this Section 4 within 30 days after delivery to Franchisee (or such earlier time as Company may establish) shall be deemed an election by Franchisee not to exercise the Renewal Option. Franchisee’s purported exercise of the Renewal Option shall be ineffective if Franchisee is in default under this Agreement when Franchisee gives written notice or on the date the Term, or first Renewal Term, expires. Franchisee’s failure to effectively exercise the first Renewal Option shall cancel the second Renewal Option. Franchisee acknowledges and agrees that the agreements Franchisee may be required to execute to exercise each Renewal Option may contain different terms than this Agreement, including, without limitation, increased or additional Service Fees and other continuing fees. If Franchisee satisfies the conditions for renewal, the first Renewal Term shall start on the day after the Term expires, and the second Renewal Term shall start on the day after the first Renewal Term expires.
5. LEASE AND DEVELOPMENT OF FRANCHISE LOCATION; OPENING
5.1. Delivery of Lease, Addendum to Lease; Sublease.
5.1.1. After Company approves the Franchise Location and designates the Territory (if applicable), Franchisee shall deliver to Company a copy of its lease (the “Lease”) with the owner or master landlord of the real estate and an Addendum to Lease, each duly executed by Franchisee and such owner or master landlord. The Addendum to Lease form shall be in the forms attached to Company’s “Franchise Disclosure Document (“FDD”) delivered to Franchisee.
5.1.2. Franchisee may apply to Company to have Company or Company’s Affiliate lease the approved Franchise Location direct from the owner or master landlord of the real estate and sublease the Franchise Location to Franchisee. Any such application by Franchisee shall be made promptly to give Company or its nominee adequate time to negotiate terms of a master lease. Neither Company nor its Affiliates are obligated to lease the Franchise Location for Franchisee; however, if Company or its designee elects to do so, Company or its designee shall sublease the Franchise Location to Franchisee on the terms of the Sublease (“Sublease”)
9 attached to Company’s FDD. Franchisee shall reimburse legal and any other professional fees Company incurs in connection with such lease negotiation. Franchisee shall execute and deliver the Sublease to Company within 5 days after it is delivered to Franchisee. If Franchisee fails or refuses to do so, Franchisee shall be deemed to have terminated this Agreement effective at the close of business on the 5th day following delivery of the Sublease. In the event of termination, there shall be no refund of fees paid.
5.1.3. Company may terminate this Agreement if Franchisee fails to deliver to Company, within 6 months of signing this Agreement either (i) a fully executed lease or Addendum to Lease pursuant to Section 5.1.1, or (ii) an executed Sublease under the conditions stated in Section 5.1.2. In the event of termination, there shall be no refund of fees paid.
5.1.4. Franchisee acknowledges that (i) it is solely responsible for negotiating the terms of the Lease, (ii) if a Sublease is offered to Franchisee it is only because Franchisee requested such arrangement and Company approved such request, and (iii) neither Company nor its Affiliates are obligated to lease the Franchise Location for Franchisee.
5.2. Construction of Franchise Location
5.2.1. Following execution of this Agreement, Company will loan Franchisee a copy of Company’s Systems Manual, which includes Company’s then-current design standards and construction guidelines. For this Agreement, the term “Construction Manual” refers to that portion of the Systems Manual that relates to development and construction of the Franchise Location.
5.2.2. Franchisee is solely responsible, at its expense, for development and construction of the YOSHINOYA Restaurant according to the Construction Manual, including, without limitation: (i) preparing detailed construction drawings tailored to the specific dimensions of the Franchise Location which conform to Company’s prototype plans and obtaining Company’s approval of such plans; (ii) ensuring that construction and build out conform to local ordinances and building codes and obtaining all required government and regulatory clearances and permits, including (without limitation) zoning, parking sanitation, building, driveway, utility and sign permits; (iii) ensuring structural integrity of the YOSHINOYA Restaurant and its fitness as a facility serving the public; (iv) hiring and supervising competent and licensed construction personnel and obtaining all customary contractors’ lien waivers for the work performed; (v) procuring and installing all required equipment, furnishings and signs; (vi) maintaining during the construction period the insurance specified in this Agreement; and (vii) using best efforts to do everything necessary to complete development of the Franchise Location diligently, expeditiously and according to the requirements in the Construction Manual to cause the YOSHINOYA Restaurant to open for business to the public on or before the Opening Date.
5.2.3. Franchisee acknowledges that (i) it will select all contractors, employees and agents to perform construction work and is solely responsible for their acts and omissions, (ii) Company is not responsible for supervising or controlling Franchisee’s contractors, employees or agents performing construction services or otherwise, and (iii) Company shall have no liability to Franchisee or to any third party for the acts or omissions of the persons hired or retained by Franchisee to provide construction services.
5.2.4. Franchisee acknowledges that (i) Company shall have no liability to Franchisee or to any third party for any loss or damage arising directly or indirectly from the design or
10 specifications of the YOSHINOYA Restaurant, by reason of Company’s approval of Franchisee’s plans and specifications, or as a consequence of actual construction or otherwise, and (ii) Company’s physical inspection of construction shall not, and is not intended to, certify that construction complies with applicable codes or building requirements or attest to the quality of workmanship.
5.3. Opening Date. The “Opening Date” shall be the date that the YOSHINOYA Restaurant commences to do business with the public, which date shall not be later than the 1 year anniversary of the Effective Date. Franchisee may not commence to do business with the public until Company issues a completion certificate which shall signify, for Company’s own benefit, that Company finds that Franchisee’s YOSHINOYA Restaurant, as built, substantially conforms to Company’s construction and design specifications. Company may, in Company’s sole discretion, extend the Opening Date if Company determines that opening has been, or will be, delayed due to events beyond Franchisee’s control, such as, for example and without limitation, due to fire or other casualty or other similar causes not attributable to Franchisee’s fault or neglect, with the length of any such extension to be determined by Company, in its reasonable judgment, based on the event causing the delay If grounds for extending the Opening Date do not exist in Company’s reasonable judgment, Company may terminate this Agreement effective on written notice to Franchisee given anytime after the Opening Date if Franchisee has not been issued a completion certificate by Company and opened its YOSHINOYA Restaurant by the Opening Date. In the event of termination, there shall be no refund of fees paid.
5.4. Extension(s). In extenuating circumstances (if beyond Franchisee and Company’s control), Company may, in Company’s sole and absolute discretion, grant a limited extension to Franchisee to identify the Franchise Location, sign a lease and/or open for business. Company shall have no obligation to provide an extension and may elect not to provide any additional extensions if any were previously given.
6. SERVICES FURNISHED BY COMPANY.
In addition to obligations stated elsewhere in this Agreement, Company shall provide the following services:
6.1. Site Visit in Connection with Site Selection
6.1.1. Following receipt of Franchisee’s written site proposal for the Franchise Location, Company will make one on-site visit to the area where the proposed site for Franchisee’s first YOSHINOYA restaurant is located if Company reasonably believes physical inspection of the demographic conditions of such area or of a particular location is necessary to evaluate Franchisee’s proposal.
6.1.2. As long as Franchisee submits a properly completed written site proposal which includes the materials identified in the Systems Manual, Company will not impose any fee or other charge to make such on-site visit; however, if Company makes the trip and determines that the written site proposal is incomplete, Franchisee must reimburse Company for its actual travel expenses in connection with the visit.
6.1.3. If Franchisee requests that Company make more than one on-site visit, or if Company determines that more than one on-site visit is necessary, to select the Franchise Location for Franchisee’s first YOSHINOYA Restaurant, or if an on-site visit is requested or
11 required in connection with relocation of Franchisee’s YOSHINOYA Restaurant or the selection of any additional YOSHINOYA Restaurant owned by Franchisee, Franchisee shall pay Company’s then-current per diem site review fee and reimburse Company’s travel expenses.
6.1.4. Franchisee acknowledges Company’s site review is not for the purpose of reviewing or certifying that development and use of the proposed site as a YOSHINOYA Restaurant will conform to applicable local laws, codes or permit requirements, but to evaluate, for Company’s own benefit, whether a proposed site meets Company’s minimum site proposal guidelines. Franchisee acknowledges it is solely responsible for investigating and complying with all applicable local laws, codes and permit requirements.
6.2. Site Visit in Connection with Site Development
6.2.1. During construction of the YOSHINOYA Restaurant, at such time as Company selects, Company shall make one on-site inspection at no charge to Franchisee. If Franchisee requests that Company make more than one on-site visit during construction, or if Company determines that more than one on-site visit is necessary, Franchisee shall pay Company’s then- current per diem site review fee and reimburse Company for its actual travel expenses.
6.2.2. Franchisee acknowledges that Company’s inspection of construction is not for the purpose of reviewing or certifying that construction conforms to applicable local laws, codes or permit requirements, but to evaluate, for Company’s own benefit, that development conforms to the detailed construction plans approved by Company. Franchisee acknowledges it is solely responsible for investigating and complying with all applicable local laws, codes and permit requirements.
6.3. Systems Manual
6.3.1. Company will loan Franchisee one copy of its multi-volume Systems Manual and all updates and revisions to the Systems Manual for as long as this Agreement is in effect.
6.3.2. The Systems Manual is, and at all times shall remain Company’s sole property and shall promptly be returned to Company on expiration, termination or an assignment of this Agreement. Franchisee shall treat all information in the Systems Manual as confidential, and use all reasonable efforts to keep the information secret. Franchisee shall not, without Company’s prior written consent, copy, duplicate, record or otherwise reproduce the Systems Manual, in whole or in part, or otherwise make it available to any person not required to have access to its contents in order to carry out the functions of his or her employment.
6.3.3. The Systems Manual contains both mandatory and recommended specifications, standards and operating procedures for all YOSHINOYA franchisees and information pertinent to the YOSHINOYA System and Franchisee’s obligations. Among the subjects the Systems Manual will cover are operating guidelines, including, without limitation, use of designated point- of-sale system; Construction Manual; Franchise Location site guidelines and proposal package; and information regarding Company’s standard grand opening program for YOSHINOYA Restaurants. Franchisee shall comply with all mandatory specifications, standards, operating procedures and rules prescribed from time to time by Company in the Systems Manual or otherwise communicated to Franchisee in writing. The mandatory requirements now or hereafter contained in the Systems Manual or otherwise communicated to Franchisee in writing are incorporated in this Agreement by this reference, and a breach of any such mandatory requirement shall constitute a breach of this Agreement and grounds for termination.
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6.3.4. Company reserves the right to modify the Systems Manual, from time to time, to reflect changes implemented in the mandatory and recommended specifications, standards and operating procedures of the YOSHINOYA System. Such revisions shall be reflected in written supplements to the Systems Manual or in other written communications delivered to Franchisee, and each supplement or communication shall become effective on receipt. Franchisee shall insert any updated pages in its copy of the Systems Manual on receipt and remove superseded pages and return them to Company within 5 days following receipt. Franchisee shall immediately conform its operations to such revisions.
6.3.5. Franchisee shall promptly notify Company if any volume or part of its copy of the Systems Manual is lost or destroyed for any reason. Provided such loss is not the result of Franchisee’s breach of its duty to keep the contents of the Systems Manual confidential, and provided further, Franchisee is not otherwise in default under this Agreement, Company shall furnish Franchisee with the needed replacement copy or portion of the current Systems Manual. Franchisee shall pay Company a replacement Systems Manual fee of $500 for each volume of the Systems Manual or part thereof requiring replacement, plus all shipping expenses, in full within 10 days following receipt of invoice.
6.4. Required Equipment and Supplies; Procedures for Selecting Suppliers; Purchasing Assistance
6.4.2. The Systems Manual contains specifications for all equipment, supplies, furnishings, inventory and materials required to operate the YOSHINOYA Restaurant, including, without limitation, identifying particular items by brand name; minimum quantities; minimum performance capability; appearance and design; taste, weight, color, and nutritional components; and other mandatory features. Company may modify specifications, in its discretion, at any time. Specification changes will be communicated to Franchisee by written supplements to the Systems Manual or otherwise in writing. Franchisee will have a reasonable time to adopt each change, and may be required to cease using discontinued items and replace them with items meeting newly published specifications. Franchisee is solely responsible for installing and maintaining all equipment, supplies, furnishings and materials required to operate the YOSHINOYA Restaurant.
6.4.3. Company reserves the right to require that all YOSHINOYA franchisees purchase designated ingredients, food products, cooking equipment, software, or other goods or services (collectively referred to as “Designated Goods/Services”) from specific suppliers whom Company designates. Designated Goods/Services may in some cases include items that are Company’s proprietary trade secrets or are otherwise specially fabricated according to Company’s specifications. Company shall identify the Designated Goods/Services and designated suppliers in the Systems Manual or otherwise by written notice. Company shall have the right to charge a markup on proprietary and non-proprietary goods purchased by Franchisee from Company and to revise the pricing from time to time on written notice.
6.4.4. Except for Designated Goods/Services, Franchisee may purchase all other items (collectively referred to as “Non-Designated Goods/Services”) required to operate the YOSHINOYA Restaurant from any recommended or approved supplier.
6.4.5. Company shall publish a list of recommended suppliers in the Systems Manual. Company reserves the right to modify the list of Designated Goods/Services, designated suppliers, or recommended suppliers from time to time in its discretion, including, without limitation, expanding the list of Designated Goods/Services and withdrawing or revoking its
13 approval of any supplier, at any time. All modifications shall be communicated to Franchisee by written supplements to the Systems Manual or otherwise in writing. Franchisee shall not place any new order for any item or with any supplier after receiving written notice of changes in the item’s specifications or that Company’s approval of the supplier has been withdrawn or revoked.
6.4.6. To obtain approval to purchase any brand or item of equipment, supplies, furnishings, inventory or materials not then approved by Company as meeting its minimum specifications and quality standards, or from a supplier not then included on Company’s recommended list, Franchisee shall submit a written request identifying the proposed supplier, together with samples of the item for examination and/or testing and information supporting the proposed supplier’s financial capability, business reputation, delivery performance and credit rating.
6.4.6.1. Company may impose a charge to cover its costs of inspecting or testing any item, including expenses to visit the proposed manufacturer’s or supplier’s production facility, for lab testing, or other direct costs, which must be paid before inspection or testing commences. Company will evaluate not only the quality and conformity of the item sought to be purchased from the proposed supplier, but the proposed supplier’s distribution capabilities and reputation.
6.4.6.2. Company will notify Franchisee in writing within 15 business days after all requested information is received and inspection or testing is completed if Company approves the proposed item and/or supplier. Failure to timely respond shall constitute disapproval. Company reserves the right to reinspect facilities of an approved supplier and to revoke a supplier’s or item’s approval for good cause, effective on written notice to Franchisee. Following receipt of written notice, Franchisee shall not place any new order for such item or with such supplier. For this Agreement, a “business day” is any day except Saturday, Sunday or a state or federal holiday recognized in the state where the Franchised Business is located.
6.4.7. Company will negotiate with suppliers that sell goods to entities which are related to Company and own YOSHINOYA Restaurants to extend identical pricing benefits to YOSHINOYA franchisees, subject to volume discounts and differences in shipping costs, but Company makes no representation about its ability to secure such benefits.
6.5. Initial and Continuing Training Programs
6.5.1. Company will provide an initial training program prior to the Opening Date, with separate courses for lead kitchen personnel, managers and franchisees. Except as provided, Company shall not charge a training fee for providing the initial training program:
6.5.1.1. At a minimum, one lead kitchen personnel, one full-time manager, and Franchisee must successfully complete the appropriate segment of the pre-Opening Date initial training program designed for their category. If Franchisee is not an individual, the franchisee segment of initial training must be attended by the owner of a Controlling Interest of the equity or voting interests of Franchisee if Franchisee is a corporation, LLC or other entity, or by a general partner of Franchisee if Franchisee is a partnership. Franchisee may designate itself (or the owner of a Controlling Interest of the equity or voting interests of Franchisee if Franchisee is a corporation, LLC or other entity, or a general partner of Franchisee if Franchisee is a partnership) as the full-time manager of the YOSHINOYA Restaurant, in which case the individual must attend both the managers and franchisee segments of initial training.
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6.5.1.2. Up to four individuals may attend pre-Opening Date initial training without payment of a training fee. For each additional person who attends pre-Opening Date initial training on behalf of Franchisee, and for each subsequently hired manager, Franchisee must pay a training fee of $300/week. Additionally, Franchisee must pay for travel, lodging, personal expenses, and salary for those who attend initial training.
6.5.1.3. Franchisee shall enroll any subsequently hired manager, who does not attend pre-Opening Date initial training, in Company’s next scheduled initial training managers’ session, subject to space availability, before he or she may assume management functions.
6.5.1.4. If training of a replacement manager cannot be completed ahead of time (so that there is at all times at least one Approved Manager supervising operations at the YOSHINOYA Restaurant as required by Section 7.1 of this Agreement), on Franchisee’s request, and at Company’s sole discretion, Company will send a designated manager, on a temporary basis, to the YOSHINOYA restaurant to fill in as the full-time manager for a mutually agreed upon time period, not to exceed 12 weeks. Franchisee must pay for travel, lodging, personal expenses, and the salary expenses of the replacement manager for the entire period that he or she provides management support.
6.5.1.5. Company shall provide Franchisee with 5 days of on-site training in Franchisee’s YOSHINOYA Restaurant in connection with the opening of the YOSHINOYA Restaurant on dates to be scheduled by mutual agreement.
6.5.2. In addition to the initial training program, Company will periodically offer advanced, refresher and supplemental training and reserves the right to require the attendance of designated personnel at specified training programs. As Company believes the need develops, the Company will offer specialized training in connection with the launch of new products or programs or to address particular aspects of the YOSHINOYA System. During any calendar year, Company will not require that Franchisee or Franchisee’s representatives attend more than two additional training sessions lasting longer than 2 days per session.
6.5.3. All training courses shall be conducted at Company’s training facility on the premises of Company’s headquarters, at one or more operating YOSHINOYA Restaurants in Southern California, or such other locations in the United States designated by Company.
6.5.4. The training fee for all advanced, refresher and supplemental training courses (unless conducted in conjunction with any Annual Meeting (defined below) is $300 per week, or $60 per day, per person. Franchisee must pay for travel, lodging, personal expenses, and salary for its staff who attend training.
6.5.5. Company may change its training programs at any time without prior notice.
6.6. Annual Meeting. Company may conduct an annual meeting at its headquarters or other location it designates in the United States (the “Annual Meeting”) and require Franchisee’s attendance. If Company chooses to conduct an Annual Meeting, it will establish the agenda and length and determine whether attendance by the Approved Manager or other designated personnel is also mandatory. No fee will be imposed to attend the Annual Meeting. Franchisee must pay all expenses for transportation, hotel, meals and salary for those attending.
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6.7. Computer Hardware, POS and Software Purchases, including Proprietary Software. Company reserves the right to require that all YOSHINOYA franchisees use designated computer hardware, Point of Sale systems (POS) and software, including proprietary software for administrative, sales and financial recordkeeping and reporting functions, in which case Franchisee’s use of such hardware and software, and any designated enhancements and modifications, is mandatory. On request, Franchisee shall execute Company’s form of software license agreement, which will require payment of an annual license fee. Franchisee is responsible for installing, maintaining and upgrading designated hardware and software at Franchisee’s expense. Company may modify its hardware and software requirements on written notice. Franchisee shall implement all changes requested by Company including purchase any additional or new hardware and/or software on written notice.
6.8. Promotional Fund.
6.8.1. Company will develop advertising and promotional materials seeking to enhance consumer awareness and identity of the YOSHINOYA Marks and YOSHINOYA Restaurants generally, through the application of the Promotional Fund (the “Promotional Fund”). The Promotional Fund consists of (i) Promotional Fees (defined herein) contributed by YOSHINOYA franchisees, and (ii) monetary promotional allowances paid to Company from third party suppliers on account of purchases by any YOSHINOYA Restaurant owner, provided such allowances are specifically designated as a marketing or advertising contribution. Company owned locations (and Affiliate owned locations) are not required to contribute specific amounts to the Promotional Fund, however Company will make up shortfalls in the Promotional Fund, if Company deems necessary in its sole discretion.
6.8.2. Company has the right to use the Promotional Fund to meet all costs of maintaining, administering, directing and preparing advertising and promotional programs for the purposes identified in this Section 6.8, and for public relations and market research. No restrictions are imposed on Company on what, where and how the Promotional Fund will be applied for these purposes. Company retains complete discretion over the form, content, time, location, market and choice of media for all advertising and promotion paid for from the Promotional Fund proceeds. Company makes no representation that any amount of the Promotional Fund will be spent in any given geographic region or in the Territory, that monies will be spent on advertising, marketing or promotional activities which are national in scope, or that monies will be spent in Franchisee’s market area in proportion to Franchisee’s contributions to the Promotional Fund.
6.8.3. Company will prepare an annual accounting of the Promotional Fund, and will furnish a copy of it to Franchisee on request. While Company will attempt to expend Promotional Fund collections on a current basis, it may recover over-expenditures from subsequent years and may carry forward under-expenditures. Company may reimburse itself for actual administrative costs to manage the Promotional Fund, in an amount per annum which will not exceed 15% of aggregate contributions to the Promotional Fund for that year. If requested by the Promotional Fund, Company may, but is not obligated to, loan money to the Promotional Fund; any funds loaned to the Promotional Fund will be repayable on demand when funds are available, and bear interest at no more than 2 points over the prime lending rate of Bank of America.
6.8.4. Company may receive rebates or other considerations from suppliers which are not designated as marketing or advertising contributions. Such amounts may be retained and/or used by Company for any purposes.
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6.9. Grand Opening Assistance. In consultation with Franchisee, Company shall prepare and implement a grand opening program for Franchisee’s YOSHINOYA Restaurant, which Company shall administer for Franchisee out of the Grand Opening Fee described in this Agreement.
6.10. Consultation and Advice. As and to the extent required in Company’s judgment, Company shall provide regular consultation and advice to Franchisee in response to specific administrative and operating issues and problems affecting Franchisee’s YOSHINOYA Restaurant which Franchisee brings to Company’s attention. Company shall determine the method(s) for communicating consultation or advice to Franchisee, which may differ from methods used for other YOSHINOYA franchisees. For example and without limitation, consultation may be provided by phone, in writing (in which case Company shall determine the method for delivering such writing, whether by facsimile, mail or by other means) or in person.
6.11. Research and Development. As and to the extent required in Company’s judgment, Company will investigate and conduct market research, try to monitor activities of competitors and developments in restaurant management and food preparation and delivery systems, and evaluate ingredients, recipes, menu items and food handling and preparation methods used by the YOSHINOYA System, seeking to maintain and enhance the reputation and demand for YOSHINOYA Restaurants and the products sold therefrom.
6.12. Inspections. Franchisee authorizes Company and its representatives, at any reasonable times, and without prior notice to Franchisee, to enter Franchisee’s YOSHINOYA Restaurant and conduct inspections of Franchisee’s YOSHINOYA Restaurant and its methods of operation, including, without limitation, observing and conducting discussions with Franchisee’s employees and reviewing Franchisee’s books and records (including, without limitation, data stored on Franchisee’s computer and disks) to verify compliance with this Agreement and the Systems Manual. Franchisee shall cooperate with Company’s inspections and promptly cure all deviations from Company’s standards, specifications and operating procedures of which Franchisee is notified orally or in writing.
6.13. Monitoring Camera. Franchisee shall install and maintain, at its own expense, the specific network camera monitoring system that Company approves giving Company remote monitoring access at any time to observe activities from different vantage points at the Franchise Location.
6.14. Terms of Purchase and Sale
6.14.1. This Section 6.14 states terms on which Company or Affiliates sell goods to Franchisee. The terms in this Section 6.14 may be varied only if Company or the Affiliate, as applicable, and Franchisee, agree in writing to change them.
6.14.2. Company or an Affiliate may state additional terms in an invoice or purchase order or other sales document. Those terms supplement the terms in this Section 6.14. If terms stated by Company or an Affiliate in an invoice or purchase order or other sales document conflict with terms in this Section 6.14, and state that they vary the terms in this Agreement, then the terms in such invoice, purchase order or other sales document control.
6.14.3. Franchisee’s order for goods must refer to items by product number and description in Company’s or the Affiliate’s most recent product price list.
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6.14.4. Company shall have the right to require Franchisee to pay for goods on a time schedule that Company determines from time to time, which may be as frequently as weekly. If Franchisee fails to make any payment(s) on time, Company shall have the right to require payment in advance or on a C.O.D. basis, or other payment basis providing satisfactory assurance to Company.
6.14.5. Among Company’s or an Affiliate’s other remedies, Company or Affiliate may elect to stop selling and/or delivering any or all goods and/or services to Franchisee if any payment due to Company or an Affiliate is past due more than ten (10) days. Franchisee acknowledges that this action may impact Franchisee’s operation because, among other things, Company’s or an Affiliate’s decision to stop selling and/or delivering goods does not excuse Franchisee from the obligation to comply with this Agreement and all aspects of the YOSHINOYA System, and does not waive or modify other remedies for Franchisee’s failure to pay on time.
6.14.6. Company or an Affiliate warrants only that goods sold to Franchisee will generally meet Company’s or the Affiliate’s specifications and be free from material defects. This is the sole warranty regarding the goods. This warranty does not cover and Company or an Affiliate shall not be responsible for any damage caused by or resulting from (a) something other than a processing or manufacturing defect; (b) accident, negligence, misuse, abuse, improper storage, outside force that damages the product, or failure to follow care or handling or storage instructions for the product;; or (c) any reason during shipment of the product.
6.14.7. EXCEPT AS STATED IN SECTION 6.14.6, COMPANY AND ANY AFFILIATE MAKES NO WARRANTY OF ANY KIND WHATSOEVER, EXPRESS OR IMPLIED, AND ALL IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE ARE HEREBY DISCLAIMED AND EXCLUDED FROM THIS AGREEMENT, EVEN IF COMPANY OR THE AFFILIATE HAD NOTICE OF A PARTICULAR PURPOSE FOR WHICH THE GOODS ARE INTENDED TO BE USED. THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THE DESCRIPTION ON THE FACE HEREOF.
6.14.8. Franchisee’s receipt of goods is an unqualified acceptance of the goods, including quantity, quality and all other attributes, and a waiver by Franchisee of any and all claims regarding those goods unless Franchisee delivers written notice to Company or the Affiliate, as applicable, detailing the specifics of Franchisee’s claim, within 24 hours after receipt of the goods for quantity or other visible defect; and within 72 hours after receipt of goods for latent defects.
6.14.9. If Company or an Affiliate breaches the warranty in Section 6.14.6 then Company or the Affiliate will have the option to (a) accept return of the goods and issue Franchisee a credit for the applicable portion of the price paid (b) replace the goods, or (c) where applicable, repair the goods, or (d) refund the purchase price paid for that portion of the goods which are defective, or (e) refund a reasonable portion of the purchase price based on the nature of the defect and the portion of the goods affected. The option selected by Company or the Affiliate is Franchisee’s sole and exclusive remedy for breach of warranty.
6.14.10. COMPANY OR AFFILIATE SHALL NOT BE LIABLE FOR ANY INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, UNDER ANY CIRCUMSTANCES, WHETHER BASED ON CONTRACT OR TORT, OTHER PERSONAL INJURY, OR ANY OTHER INJURY OR DAMAGE.
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6.14.11. IN ANY EVENT, COMPANY’S OR AFFILIATE’S MAXIMUM LIABILITY WHETHER RESULTING FROM BREACH OF CONTRACT, OR NEGLIGENCE OR OTHERWISE SHALL NOT EXCEED THE CONTRACT PRICE OF THE GOODS SOLD AND PAID FOR.
6.14.12. Franchisee shall pay or reimburse Company or the Affiliate (Franchisor’s or the Affiliate’s option) all taxes, excises and other charges that Company or the Affiliate may be required to pay to any government authority on the sale, production or transportation of goods Franchisee buys from Company or an Affiliate. Franchisee shall pay all collection costs, attorneys fees and court costs (including appeals) that Company or an Affiliate incurs for collection of amounts Franchisee owes Company or the Affiliate.
7. ADDITIONAL OBLIGATIONS OF FRANCHISEE
In addition to obligations stated elsewhere in this Agreement, Franchisee agrees as follows:
7.1. Management
7.1.1. If Franchisee is an individual, Franchisee shall devote full time and attention to supervising all administrative and operational activities of the YOSHINOYA Restaurant. If Franchisee is not an individual, the owner of a Controlling Interest of the equity or voting interests of Franchisee if Franchisee is a corporation, LLC or other entity, or a general partner of Franchisee if Franchisee is a partnership, must devote full time and attention to such activities.
7.1.2. The YOSHINOYA Restaurant shall be managed by one or more Approved Managers. “Approved Manager” means an individual who devotes full-time, attention and best efforts to the direct, day-to-day supervision of the YOSHINOYA Restaurant, successfully completes the initial training program and any supplemental or advanced training programs at which attendance by management-level employees is mandatory, and is responsible for performing the management duties identified in the Systems Manual. Each Approved Manager must have literacy and fluency in the English language, sufficient, in Company’s good faith judgment, to satisfactorily complete training programs and to communicate with Franchisee’s other employees, customers, suppliers and Company’s representatives. Each Approved Manager shall conduct in-store training procedures for Franchisee’s other employees, from time to time, in accordance with Company’s instructions. In Franchisee’s discretion (i) if Franchisee is an individual, Franchisee may be an Approved Manager, and (ii) if Franchisee is not an individual, the owner of a Controlling Interest of the equity or voting interests of Franchisee if Franchisee is a corporation, LLC or other entity, or a general partner of Franchisee if Franchisee is a partnership, may be an Approved Manager, provided, in either case, he or she otherwise satisfies the criteria of an Approved Manager stated in this Section.
7.2. Restrictions on Operations
7.2.1. Franchisee shall (i) use all materials, ingredients, food products, supplies, paper goods, uniforms, furnishings, signs, equipment, and methods of product preparation, delivery and services prescribed by Company or which conform to its specifications and standards, and (ii) conduct its YOSHINOYA Restaurant in accordance with the operational standards and specifications established by Company and set forth in the Systems Manual or otherwise communicated to Franchisee, as such standards and specifications may be revised in the future by Company in its discretion, from time to time. Franchisee shall not use any materials,
19 ingredients, food products, supplies, paper goods, uniforms, furnishings, signs, equipment, or methods of product preparation, delivery or services which have not been approved by Company in writing as meeting its specifications and standards.
7.2.2. Franchisee shall offer for sale all of the products and services expressly approved for sale by Company in writing from time to time, and only those items, and not offer for sale, or sell, directly or indirectly in conjunction with the YOSHINOYA Marks, any other products or services. Franchisee shall label and identify all products offered for sale by the same name or designation given to them by Company.
7.2.3. Franchisee shall maintain at all times a sufficient supply of materials, ingredients, food products, supplies, and paper goods and other disposables, in order to operate its YOSHINOYA Restaurant efficiently and to meet customer demand.
7.2.4. Franchisee shall not sell any products for consumption off the premises of its YOSHINOYA Restaurant, except for take-out or ready-to-go orders packaged in authorized containers, unless Company’s written consent is first obtained. Franchisee shall not engage in sales to wholesale accounts of any kind without Company’s prior written consent.
7.2.5. Franchisee shall, at its own expense, correct any unhealthy, unsanitary or unclean condition at Franchisee’s YOSHINOYA Restaurant within 24 hours after being notified either orally or in writing of its existence by Company or any Health Department. The term “Health Department” includes all governmental units, however designated, which address the health, safety, sanitation, physical access, environment, or activities conducted at the YOSHINOYA Restaurant which concern or affect the welfare of employees or customers of the YOSHINOYA Restaurant. Without waiving its right to terminate this Agreement based upon such default, Company may correct the cited condition. To the extent Company does so, Franchisee shall be invoiced for the cost of all remedial work, which shall be payable upon receipt of invoice, together with a 15% service charge.
7.2.6. Franchisee shall not, directly or indirectly, maintain a World Wide Web site or other presence on the World Wide Web using the Proprietary Marks, or advertise on the World Wide Web or on any other type of public computer network, with respect to Franchisee’s Restaurant or any other Restaurant in the Territory or the System. “World Wide Web” means that portion of the Internet used primarily as a commercial computer network by the general public, and any successor technology, which enables the general public to obtain information about goods or services from merchant-controlled World Wide Web sites.
7.2.7. At Franchisee’s expense, Franchisee shall maintain an electronic communications system meeting Company’s minimum requirements for purposes of transmitting to Company electronically financial reports, sales data and other operating information which Company requires, enables the parties to engage in electronic communication, and allows Company to have continuous on-line remote access to Franchisee’s point-of-sales system, including sales data.
7.2.8. Franchisee shall respond promptly and diligently to customer inquiries and complaints and shall continue such response until the matter is resolved to the reasonable satisfaction of the Customer.
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7.2.9. Franchisee shall respond to each and all communications and inquiries from Company that request a response, within the response time stated or requested by Company. Failure to do so by the stated response time shall be cause for termination of this Agreement.
7.3. Staffing and Training. Franchisee shall employ a sufficient number of competent employees and cause them to receive such in-store training in the YOSHINOYA System as Company may require. All employees whose duties include customer service shall have sufficient literacy and fluency in the English language, in Company’s good faith judgment, to adequately meet the public. Franchisee is solely responsible for hiring, firing and establishing employment policies applicable to its employees, and acknowledges that this Agreement does not impose any controls, or otherwise impinge, on Franchisee’s discretion to make all employment-related decisions.
7.4. Repair and Maintenance; Renovation Changes
7.4.1. Franchisee shall, at its own expense, repair and maintain the interior and exterior of its YOSHINOYA Restaurant, including all adjacent parking facilities, and all equipment, signs, fixtures, furnishings, supplies, materials and other tangible property used in operating its YOSHINOYA Restaurant, in the highest degree of cleanliness, sanitation, orderliness and repair in conformity with the standards, specifications and requirements of the YOSHINOYA System, and as Company may from time to time direct.
7.4.1.1. Franchisee shall promptly replace any item which becomes worn, damaged and non-repairable, or mechanically impaired to the extent that it no longer adequately performs the function for which it was originally intended.
7.4.1.2. All replacement items shall be of the same type, model and quality then specified in the Systems Manual at the time replacement is required.
7.4.1.3. While Franchisee’s failure to repair or maintain its property or correct any unauthorized variance from the requirements of the YOSHINOYA System constitutes a default, Company may, without waiving its right to terminate this Agreement for such reason, repair or correct the cited non-conformance. Company shall have no liability to Franchisee for the work performed. To the extent Company elects to perform required repair or maintenance work, Franchisee shall be invoiced for labor and materials and all associated costs to complete the work, and shall pay forthwith all expenses billed upon receipt of invoice, together with a 15% service charge and reimbursement of Company’s actual direct costs to perform and inspect such work, including (without limitation) transportation, hotel, meals, contractors and other personnel expenses.
7.4.1.4. In addition to the duties stated in Section 7.4.2, Franchisee shall, at its own expense, within 6 months following written notice from Company, renovate, remodel and otherwise conform its YOSHINOYA Restaurant to changes and modifications implemented and prescribed by Company, from time to time, in the physical appearance and design standards of YOSHINOYA Restaurants (collectively referred to as “Renovation Changes”). Renovation Changes may include, without limitation: structural modification of the YOSHINOYA Restaurant and adjacent parking facilities and changes in interior and exterior design, decoration and appearance of the YOSHINOYA Restaurant and adjacent parking facilities. Franchisee shall be required to make Renovation Changes once during the Term, and as a condition of the exercise of each Renewal Option. Company reserves absolute discretion to determine whether a particular modification to the YOSHINOYA System is a Renovation Change or falls under
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Franchisee’s duty to repair and maintain the Franchise Location or to conform to operating changes and enhancements imposed by Company in the YOSHINOYA System, and Company’s decision shall be final.
7.4.2. Nothing in this Section 7.4 limits Franchisee’s obligation, pursuant to Section 7.2, to conform its operations to the standards and specifications established and modified by Company from time to time. For example, and without limitation, if changes imposed by Company in the goods or services which Franchisee must offer for sale requires that Franchisee purchase new, or modify existing, equipment, signs, fixtures, furnishings, supplies, materials or other tangible property, Franchisee shall do so at its sole expense and nothing in this Section 7.4 limits such duty.
7.5. Advertising
7.5.1. Franchisee shall not use, disseminate, broadcast or publish any advertisement using the YOSHINOYA Marks or promoting Franchisee’s YOSHINOYA Restaurant without first obtaining Company’s written approval of the copy and proposed media or method of distribution of such advertisement in accordance with this Section.
7.5.1.1. The term “advertisement” is used in its broadest sense to include, without limitation: (i) any written or printed communication or any communication by means of a recorded telephone message or spoken on radio, television or similar communication media, (ii) any promotional items or promotional or publicity event, or (iii) the use of any of the YOSHINOYA Marks on merchandise, displays, signs, or other tangible personal property.
7.5.1.2. To apply for Company’s approval, Franchisee shall submit a true and correct copy, sample or transcript of the proposed advertisement, a business plan which explains the proposed promotional event, and such additional information, in writing, disclosing Franchisee’s proposed use of the proposed advertisement. Company shall have 15 business days from the date of receipt in which to approve or disapprove the submitted material or business plan. If written disapproval is not received by the end of the 15 business day period, Company shall be deemed to have given the required approval, whereupon Franchisee shall be permitted to use the advertisement or conduct the promotional event, but only in the exact form submitted to Company and in the manner disclosed to Company.
7.5.2. Franchisee shall be bound by the rules of, and agrees to participate in, any advertising cooperative which exists, or may be formed, comprised of the owners of YOSHINOYA Restaurants located within an area delineated by Company.
7.6. Compliance with Laws. Franchisee shall operate its YOSHINOYA Restaurant in strict compliance with all applicable laws, ordinances and regulations, including (without limitation) those relating to health and sanitation, packaging and labeling of food products; worker’s compensation; unemployment insurance; withholding and payment of Federal and State income taxes and social security taxes; collection and reporting of sales taxes; and the American With Disabilities Act. Franchisee shall secure and maintain in good standing all necessary licenses, permits, deposits and certificates required to operate its YOSHINOYA Restaurant, and shall provide Company with proof of compliance promptly following Company’s request.
7.7. Credit Cards. Franchisee shall honor all credit cards designated by Company and enter into all necessary credit card agreements with the issuers of such cards.
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7.8. Customer and Government Records. Franchisee shall submit to Company promptly upon receipt thereof copies of all customer complaints and notices and communications received from any Health Department and hereby authorizes such Health Department to provide such information directly to Company upon Company’s request.
7.9. Operating Hours. Franchisee shall operate its YOSHINOYA Restaurant on all of the days and during the hours prescribed in the Systems Manual, unless Company’s prior written approval of different days or hours has been obtained.
7.10. Insurance. Franchisee shall procure before the opening of its YOSHINOYA Restaurant, at its expense, and maintain in full force and effect during the term of this Agreement, policies of insurance in accordance with the following terms and conditions:
7.10.1. Comprehensive general liability insurance with a limit of Two Million Dollars ($2,000,000.00) combined single limit (including broad form contractual liability), or such higher amount as may be required by the master lease of the Franchise Location, insuring Company and Franchisee against all claims, suits, obligations, liabilities and damages, including attorneys’ fees, based upon or arising out of actual or alleged personal injuries or property damage resulting from, or occurring in the course of, or otherwise relating to Franchisee’s YOSHINOYA Restaurant or the activities of Franchisee’s employees. The required liability coverage shall not be limited in any way by reason of any insurance which Company may maintain. Company shall be named an additional insured on each such policy.
7.10.2. Workers compensation insurance as required by applicable law.
7.10.3. General casualty insurance, including fire and extended coverage, vandalism and malicious mischief insurance for the full replacement value of the YOSHINOYA Restaurant and its contents, based on the cost of replacing the damaged or destroyed property with property meeting Company’s current specifications at the time replacement is required.
7.10.4. In connection with any construction, renovation or remodeling work performed by Franchisee, Franchisee shall maintain Builder’s All Risk insurance covering the completed value of the construction, and performance and completion bonds in form and amounts acceptable to Company.
7.10.5. Company may from time to time increase the minimum insurance requirements, establish and change deductible limits, require Franchisee to procure and maintain additional forms of insurance, and otherwise modify the requirements set forth in this Section 7.10 based upon inflation, Company’s experience with claims, or other commercially reasonable reasons. Franchisee shall comply with any change imposed by Company upon written notice from Company setting forth the required change, and shall submit written proof of compliance to Company upon request.
7.10.6. Each insurance policy required by this Agreement shall be written by insurance companies of recognized responsibility meeting the standards stated in the Systems Manual. Prior to the date equipment is installed in the Franchise Location, or by the date specified in the master lease, if earlier, Franchisee shall submit to Company certificates of insurance showing compliance with Company’s insurance requirements. Such certificates shall state that the policy or policies will not be canceled or altered without at least 30 days prior written notice to Company. Maintenance of required insurance shall not relieve Franchisee of liability under the indemnity provisions set forth in this Agreement.
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7.10.7. Franchisee shall cause each policy of insurance required by this Agreement to include a waiver of subrogation, which shall provide that Franchisee and Company each releases and relieves the other, and each waives its entire right to recover damages, in contract, tort and otherwise, against the other for any loss or damage occurring to Franchisee’s property arising out of or resulting from any of the perils required to be insured against under this Section 7.10. The effect of such releases and waivers by Company and Franchisee shall not be limited by the amount of insurance carried by Franchisee or required by this Agreement or by any deductible applicable thereto.
7.10.8. Should Franchisee not procure or maintain the insurance coverages required by this Agreement, Company may, without waiving its right to declare a breach of this Agreement based on Franchisee’s default, procure such insurance coverage at Franchisee’s expense, although Company has no obligation to do so. The cost of obtaining such insurance shall be payable in full upon receipt of invoice, together with a 15% service charge and reimbursement of the Company’s actual direct costs in obtaining such insurance.
7.11. Confidential Information
7.11.1. “Confidential Information” includes, without limitation, the following: any information or knowledge concerning the methods for constructing, equipping or operating a YOSHINOYA Restaurant; knowledge of pricing, sales and profit performance at YOSHINOYA Restaurants; knowledge of sources and suppliers of goods, services, equipment, fixtures, furnishings and other items used in operating YOSHINOYA Restaurants; knowledge regarding ingredients, recipes and food preparation processes; demographic data for determining restaurant sites and exclusive territories; the results of customer surveys and promotional programs; and, in general, methods, specifications, customer data, pricing and cost data, procedures, information systems and knowledge in the operation of YOSHINOYA Restaurants, whether it is now known or exists or hereinafter is acquired or created, and whether or not it is included in Company’s Systems Manual. Confidential Information does not include (i) information which Franchisee can demonstrate came to its attention independent of the YOSHINOYA franchise, and prior to Company’s disclosure of the information in the Systems Manual or otherwise, and (ii) information that Company agrees is, or has become, generally known in the public domain, except where public knowledge is the result of wrongful disclosure (whether or not deliberate or inadvertent).
7.11.2. Company will disclose Confidential Information to Franchisee in furnishing Franchisee with the Systems Manual, any proprietary software, and otherwise through the performance of Company’s obligations and the exercise of its rights under this Agreement. Franchisee shall acquire no interest in the Confidential Information, other than a license to utilize it in the operation of its YOSHINOYA Restaurant.
7.11.3. Franchisee’s use, publication or duplication of the Confidential Information for any purpose not authorized by this Agreement constitutes an unfair method of competition by Franchisee and grounds for termination of this Agreement. Franchisee agrees to (i) keep the Confidential Information secret, (ii) confine disclosure of the Confidential Information to those of its employees and agents who require access in order to perform the functions for which they have been hired or retained, and (iii) observe and implement reasonable procedures prescribed from time to time by Company to prevent the unauthorized use, publication or disclosure of the Confidential Information including, without limitation, requiring that employees who have access to Company’s Confidential Information or are otherwise designated by Company enter into Company’s form of Confidentiality and Non-Disclosure Agreement. In this connection,
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Franchisee agrees, upon request from Company, to obtain and deliver to Company an executed Confidentiality and Non-Disclosure Agreement, using Company’s current form, from each officer, director, shareholder, member, manager, trustee, owner, general partner, employee of Franchisee, or other person associated with Franchisee, who Company designates if necessary, in Company’s judgment, to protect Company’s Confidential Information.
7.11.4. All agreements contained in this Agreement pertaining to the Confidential Information shall survive the expiration, termination or Franchisee’s assignment of this Agreement.
7.11.5. The provisions of this Section 7.11 shall not apply when Franchisee’s disclosure of Confidential Information is legally compelled in a judicial or administrative proceeding, provided Franchisee shall have used its best efforts, and shall have afforded Company the opportunity, to obtain an appropriate protective order or other assurance satisfactory to Company of confidential treatment for the information required to be so disclosed.
7.12. Agreements Regarding Competition: In-Term
7.12.1. This Section 7.12 applies to the activities of each Covered Person (defined herein) anywhere in the world throughout the Term and any Renewal Term of this Agreement; provided, however, in no event shall the restrictions stated in this Section 7.12 apply to any Covered Person after two years from the date the Covered Person ceases to be an officer, director, shareholder, member, manager, trustee, owner, general partner, employee or otherwise associated in any capacity with Franchisee.
7.12.2. ”Covered Person” means (i) the individual executing this Agreement as Franchisee, if Franchisee is a natural person; (ii) each officer, director and shareholder of a Franchisee that is a corporation; (iii) each officer, member and manager of a Franchisee that is a LLC; (iv) each trustee and person who owns any interest in the equity or voting interests of a Franchisee that is another form of entity; (v) each general partner of a Franchisee that is a partnership; (vi) each Approved Manager; and (v) each member of Franchisee’s or any of the foregoing individual’s immediate family.
7.12.3. During the time period and within the geographic area described in Section 7.12.1, it shall be a breach of this Agreement for any Covered Person, directly or indirectly, to own, engage in or render services to, whether as an investor, partner, lender, director, officer, manager, employee, consultant, representative or agent, any restaurant which predominantly serves menu items denominated as a “Bowl” or any business which produces, manufactures or sells Japanese foods which include rice bowls of any kind.
7.12.4. Within the geographic area described in Section 7.12.1, it shall be a breach of this Agreement for any Covered Person to use, in any manner whatsoever, the YOSHINOYA Marks, Confidential Information, or any other materials, methods, procedures or techniques associated with the YOSHINOYA System; engage in any conduct or activity not related to the franchise and license granted to Franchisee or suggest or imply that Company is associated with, or authorizes, such other activity; induce any other person to engage in conduct proscribed in this Section 7.12; or divert customers away from any YOSHINOYA Restaurant.
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7.13. Agreements Regarding Competition: Post-Term
7.13.1. This Section 7.13 applies to each Covered Person throughout the 2 years following the expiration or termination of this Agreement for any reason, or an assignment of the franchise by Franchisee under the conditions set forth in Section 12 of this Agreement, whichever occurs first; provided, however in no event shall the restrictions stated in this Section 7.13 continue to apply to any Covered Person after 2 years from the date the Covered Person ceases to be an officer, director, shareholder, member, manager, trustee, owner, general partner, employee or otherwise associated in any capacity with Franchisee.
7.13.2. This Section 7.13 applies to each Covered Person’s activities conducted anywhere within a radius of 25 miles from: (i) the Franchise Location, and (ii) any other YOSHINOYA Restaurant (regardless of whether the YOSHINOYA Restaurant opens before or after the Effective Date, or is opened by another franchisee, Company or Company’s Affiliates).
7.13.3. During the time period and within the geographic area described in this Section 7.13.1, it shall be a breach of this Agreement for any Covered Person, directly or indirectly, to own, engage in or render any services to, whether as an investor, partner, lender, director, officer, manager, employee, consultant, representative or agent, any restaurant which predominantly serves menu items denominated as a “Bowl” or any business which produces, manufactures or sells Japanese foods which include rice bowls of any kind.
7.13.4. Within the geographic area described in this Section 7, it shall be a breach of this Agreement for any Covered Person to use, in any manner whatsoever, the YOSHINOYA Marks, Confidential Information, or any other materials, methods, procedures or techniques associated with the YOSHINOYA System; engage in any conduct or activity which suggests or implies that Company is associated with, or authorizes, such activities; induce any other person to engage in conduct proscribed in this Section 7.13; or divert customers away from any YOSHINOYA Restaurant.
7.14. Additional Agreements Regarding Competition.
7.14.1. The agreements stated in Sections 7.12 and 7.13 shall survive termination or expiration of this Agreement.
7.14.2. If directed by Company, Franchisee agrees to cause each Covered Person to execute Company’s form of Confidentiality and Non-Disclosure Agreement containing restrictions regarding competition substantively identical to the provisions of this Agreement.
7.14.3. This Agreement does not prohibit a Covered Person from owning 5% or less of the voting stock of a Publicly Held Entity (defined below) that operates restaurants which predominantly serve menu items denominated as a “Bowl” or produces, manufactures or sells Japanese foods which include rice bowls of any kind.
7.14.4. If any of the provisions of Section 7.12 or 7.13 are void or unenforceable under California law (the governing law selected by the parties pursuant to this Agreement), but such provisions are enforceable as written or as modified under the laws of the state in which the Franchise Location is located (the “Local Laws”), then the parties agree that the Local Laws shall govern any dispute concerning or involving the construction, interpretation, validity or enforcement of this Section 7.12 and 7.13 (but only such provisions).
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7.14.5. Franchisee understands and agrees that Company will suffer irreparable injury not capable of precise measurement in monetary damages if its Confidential Information and/or other proprietary information of the YOSHINOYA System is obtained by any person, firm or corporation and is used in competition with Company or a YOSHINOYA franchisee, or if Franchisee or any Covered Person breaches the covenants set forth in this Agreement. Accordingly, in the event of a breach of this Agreement by Franchisee or any Covered Person, Franchisee consents to entry of a temporary restraining order or other injunctive relief as well as to any other equitable relief which may be granted by a court having proper jurisdiction, without the requirement that Company post bond. Franchisee further agrees that the award of equitable remedies to Company in the event of such breach is reasonable and necessary for the protection of the business and goodwill of Company.
7.15. Agreement Regarding Non-Solicitation
7.15.1. Franchisee acknowledges that:
7.15.1.1. recruiting/soliciting the personnel of Company or another franchisee increases costs to the employer whose employee is recruited/solicited away;
7.15.1.2. recruiting/soliciting away of personnel shifts hiring and selection risks, and shifts training and replacement costs unfairly within the system, to the party whose employee is recruited/solicited away. This is because the party doing the recruiting, avoids the uncertainty inherent in recruiting and selecting personnel, by recruiting an individual who was already selected and trained;
7.15.1.3. recruiting/soliciting of personnel takes unfair advantage of being part of the Yoshinoya system by enabling the party who conducts the recruiting/soliciting to benefit unfairly from another member of the system's investment in recruiting, selection, hiring and training;
7.15.1.4. recruiting/soliciting of personnel interferes with the ability of franchisees to engage in sharing of information with Company and each other about such matters as personnel and thus deprives the system of a useful source of information that could help with continuous improvement of the System.
7.15.1.5. restricting against recruiting/soliciting away personnel of Company or another franchisee does not limit anyone from practicing a trade or profession and does not exclude any person or entity from employing anyone. Nor does it preclude any employee from working for any employer.
7.15.2. For the reasons described in Section 7.15.1, during the term of this Agreement and for 12 months after this Agreement expires or is terminated, Franchisee shall not employ or seek to employ any person who is then employed by Company, Company’s affiliates or another franchisee of Company or otherwise directly or indirectly induce or seek to induce any such person to leave his or her employ, and shall not employ any person who was, within the prior six months, employed by Company or another franchisee of Company, without obtaining Company’s or the affected franchisee’s express prior written consent.
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8. FEES PAYABLE TO COMPANY
8.1. Initial Franchise Fee. In consideration of the franchise and license granted herein, Franchisee shall pay Company in full on execution of this Agreement, as an initial franchise fee (the “Initial Franchise Fee”), the sum of $27,500, less any background check fee previously paid by Franchisee to Company. The Initial Franchise Fee is fully earned when paid, and no portion is refundable.
8.2. Initial Franchise Fee - Additional Franchises. Should Company approve Franchisee’s application to purchase an additional franchise for a YOSHINOYA Restaurant, the parties shall, for each franchise so purchased, enter into the then current form of Franchise Agreement as provided in Section 1.2, except that the amount of the initial franchise fee shall be $24,750 for each such franchise. The Initial Franchise Fee is fully earned when paid, and no portion is refundable.
8.3. Grand Opening Fee. By no later than the date that Franchisee signs the Lease or Sublease for the Franchise Location, Franchisee shall pay to Company, without offset, credit or deduction of any nature, a Grand Opening Fee of $10,000, which Company will spend on preparing pre-opening and opening marketing and promotional materials, menu boards and related activities in connection with creating publicity regarding the opening of Franchisee’s YOSHINOYA Restaurant. Before the Opening Date, Company will consult with Franchisee regarding the specific plans and implementation of the grand opening program that Company has designed for Franchisee’s YOSHINOYA Restaurant, with the understanding that Company shall have the right to require that the grand opening publicity is both appropriate and consistent with Company’s uniform marketing methods in Company’s judgment. In no event shall Company be required to obtain Franchisee’s prior approval before spending, or committing to spend, any portion of the Grand Opening Fee. Within 180 days after the Opening Date, Company will present Franchisee with a written accounting of its specific expenditures. Franchisee agrees that Company may reimburse itself and retain up to $1,500, or 15% of the Grand Opening Fee, to cover Company’s general overhead costs and dedication of staff time to the development and implementation of Franchisee’s grand opening program. Upon presentation of the written accounting, Company shall refund to Franchisee any portion of the Grand Opening Fee that has not been spent. Franchisee shall not be responsible for any expenses that Company may incur above $10,000 that which Company incurs on the grand opening advertising program for Franchisee’s YOSHINOYA Restaurant, unless Company has obtained Franchisee’s prior written consent to the additional expenses above $10,000. Company’s right to prepare the grand opening program for Franchisee’s YOSHINOYA Restaurant shall not interfere with Franchisee’s right to determine the prices at which Franchisee sells all authorized products and services from its YOSHINOYA Restaurant.
8.4. Service Fee. Franchisee shall pay to Company, without offset, credit or deduction of any nature, a Service Fee equal to 4% of the total Net Sales of Franchisee’s YOSHINOYA Restaurant (the “Service Fee”). The Service Fee is due and payable weekly, on or before Tuesday of each week based upon the Net Sales of Franchisee’s YOSHINOYA Restaurant for the 7 day period ending at the close of business on the preceding Sunday. Franchisee shall pay the Service Fee by check or by such other method, including automatic bank debit, as Company may from time to time direct.
8.5. Gross Sales, Net Sales Defined. “Gross Sales” means the total of all sales made by Franchisee at or from the Franchise Location or otherwise pursuant to this Agreement, including, without limitation, sales made by delivery when permitted by this Agreement and the
28 retail value of all food and other merchandise of any kind sold through coupon redemption or otherwise given away for which reduced or no cash is received (“Coupon Sales”). “Net Sales” means Gross Sales less the sum of: (i) all sales taxes or similar taxes imposed on the transaction which Franchisee pays to any federal, state or local taxing authority, if properly documented; (ii) the retail value of all Coupon Sales; (iii) the proceeds received on the sale of fixtures or personal property not in the ordinary course of business; and (iv) Qualified Charitable Sales in an amount not to exceed 10% of Gross Sales for the applicable period. The term “Qualified Charitable Sales” means the proceeds of sales made on behalf of, or to, qualified charitable organizations meeting the criteria identified in the Systems Manual, provided Franchisee has obtained Company’s prior written approval of the proposed sale before the transaction is made in accordance with the procedures stated in the Systems Manual.
8.6. Promotional Fee; Cooperative Promotional Fee
8.6.1. Franchisee shall pay to Company, without offset, credit or deduction of any nature, a monthly Promotional Fee equal to 4% of the total Net Sales of the YOSHINOYA Restaurant (the “Promotional Fee”), which Company shall deposit into the Promotional Fund. The Promotional Fee shall be due and payable weekly, together with the Service Fee, by check or by such other method, including automatic bank debit, as Company may from time to time direct.
8.6.1.1. Company may, but is not obligated to, from time to time, rebate to Franchisee a portion of the Promotional Fee which it pays provided the amount rebated is used for local marketing purposes approved by Company, in accordance with this Agreement.
8.6.1.2. During the Term, Company reserves the right to increase the Promotional Fee by up to 1% of Net Sales, to an amount not to exceed 5% of the total Net Sales of the YOSHINOYA Restaurant, and to decrease the Promotional Fee, provided, in no event shall the Promotional Fee be less than 4% of the total Net Sales of the YOSHINOYA Restaurant. Any increase or decrease shall become effective upon at least 30 days written notice.
8.6.2. Company reserves the right to establish advertising cooperatives (each is referred to as an “Advertising Cooperative”) comprised of groups of franchisees located within regions or areas which Company designates.
8.6.2.1. Company reserves the right, in its discretion from time to time, to modify the region or area serviced by each Advertising Cooperative, to require that one or more Advertising Cooperatives servicing an adjacent or proximate area merge together, to subdivide an Advertising Cooperative into smaller groupings, or to dissolve an Advertising Cooperative in connection with the dissolution of all Advertising Cooperatives then in existence, all effective within 30 days following written notice from Company. Franchisee must participate in the Advertising Cooperative established to service all or part of the Territory, and is bound by any subsequent changes made to the boundaries of the Advertising Cooperative to which it is initially assigned. Each Advertising Cooperative will adopt its own written governing documents and voting procedures, and determine the procedures for assessing its members, and the time and method of payment; however, Company reserves the right to approve such rules and procedures and any amendments thereto.
8.6.2.2. Franchisee’s obligation to the Advertising Cooperative shall not exceed 2% of its Net Sales (the “Cooperative Promotional Fee”), unless and until an increase or special
29 assessment is approved by a vote of 65% of the members of the Advertising Cooperative to which Franchisee is assigned, in which event Franchisee shall be bound by such decision.
8.6.2.3. Franchisee’s payment of Cooperative Promotional Fees, if any, shall be in addition to Franchisee’s obligation to pay Promotional Fees to the Promotional Fund.
8.7. Late Payment. If Franchisee fails to pay any amount to Company by the date payment is due, Franchisee shall pay (i) a late charge equal to 10% of the amount of the payment due, and (ii) interest on the amount unpaid at the rate of 1½% per month (not to exceed the maximum legal rate of interest) from the date payment was due until the entire sum, late charge and accrued interest is paid in full. Franchisee acknowledges that the provisions of this Section are not consent to late payment, agreement by Company to accept payment after the due date or a commitment by Company to extend credit to, or otherwise finance, Franchisee’s YOSHINOYA Restaurant, and that Franchisee’s failure to pay all amounts when due breaches and is grounds for termination of this Agreement.
8.8. Gross Receipts or Equivalent Taxes. Franchisee shall pay to Company the amount of any State or local sales, use, gross receipts, or similar tax that Company may be required to pay on payments which Franchisee makes to Company under this Agreement, regardless of whether the State or local tax is imposed directly on Company, is required to be withheld by Franchisee from amounts due to Company under this Agreement, or is otherwise required to be collected by Franchisee from Company. Franchisee’s obligation under this Section shall not be reduced or offset by any type of claim, credit or deduction of any kind. This provision shall not apply to income taxes or comparable taxes measured by income to which Company may be subject.
8.9. Electronic Payment Systems
8.9.1. Franchisee shall make payments to Company following Company’s electronic payment system. Under the electronic payment system, all required payments to Company and any of Company’s Affiliates shall be made through a designated payment system using pre-authorized transfers from Franchisee’s designated operating account through the use of electronic fund transfers, or, if Company requests, by special checks or other equivalent payment system that Company designates in the Confidential Manual or otherwise in writing. Franchisee shall give its financial institution instructions in a form provided or approved by Company and obtain the financial institution’s agreement to follow the instructions to effectuate the electronic payment system meeting Company’s requirements. Without Company’s prior written consent, the financial institution’s agreement may not be withdrawn, modified or cancelled. Franchisee shall execute any other documents or agreements relating to establishing or maintaining an electronic payment system as Company or the financial institution may reasonably request from time to time. Franchisee understands that Company may modify the electronic payment system at any time upon written notice and agrees to promptly conform to the changes at its sole expense, which may require changes to the financial institution’s agreement.
8.9.2. Franchisee shall deposit all revenue and income from the Franchised Business into the operating account accessed by the electronic payment system by no later than the close of business on the day after receipt. Franchisee shall maintain sufficient funds in the designated operating account to ensure full payment of payment of continuing Service Fees, Promotional Fees, Cooperative Promotional Fees, late charges, interest and all other obligations payable to Company, Company’s Affiliates and third parties when due. In the event
30 a payment cannot be made due to insufficient funds in Franchisee’s operating account, Company may, in its sole discretion or election, declare a breach of this Agreement or require that Franchisee direct its financial institution to send Company a monthly or periodic statement showing all account activity at the same time that it sends such statements to Franchisee or give Company electronic access to Franchisee’s account activity if the financial institution makes electronic access available to its account holders.
8.9.3. Franchisee understands and agrees that its failure to report Net Sales for any accounting period will prevent Company from debiting Franchisee’s operating account with the appropriate amount due to Company. In that event, Franchisee authorizes Company to debit its operating account on the date that payment is due for 120% of the last payment of Service Fees and Promotional Fees paid to Company (whether by debit or otherwise) together with the late charges permitted by this Agreement. Franchisee understands and agrees that the amount debited shall represent a final non-refundable payment and Franchisee shall be barred from challenging the amount so debited at a later date. However, if Company discovers that the amounts which Company debits from Franchisee’s operating account are less than the amounts actually due to Company based on the Franchised Business’ actual Net Sales for the relevant accounting period, Company may immediately debit Franchisee’s operating account for the balance.
8.9.4. Franchisee shall bear all costs to establish and maintain the required electronic payment system meeting Company’s requirements and all fees and charges resulting from insufficient funds being in Franchisee’s bank accounts at the time funds are withdrawn to pay obligations owed to Company or Company’s Affiliates. The duty to maintain an electronic payment system shall not change the date on which payments are due under this Agreement.
8.10. Dishonored Item Fee. If any check, ACH debit, electronic funds transfer, credit or wire transfer or other form of payment from Franchisee to Company is dishonored, rejected or for any reason not completed, whether due to insufficient funds, discrepancy in the instrument or instructions, or other reason, then Franchisee shall immediately reimburse any charge that Company’s financial institution imposes on Company and in addition pay Company a dishonored item fee in the amount of seventy five dollars ($75).
8.11. Payment Security Deposit. Franchisee shall deposit with Company or its designated supplier, five thousand dollars ($5,000). Company or the designated supplier shall hold this as partial security for timely and full payment of all amounts due at any time to the supplier, Company and/or affiliates of Company. Company and/or the supplier may elect to commingle this deposit with other funds and shall have no obligation to segregate this deposit. Company and/or the designated supplier shall have the right to apply all or portions of the deposit to pay any amounts not paid as and when due from Franchisee. Company and/or the supplier (as applicable) shall notify Franchisee in writing of applications of the deposit from time to time. Franchisee shall replenish the deposit back to $5,000, if any portion is used immediately, on written notice. This Section 8.11, and/or possession of the deposit, are not consent to Franchisee’s failure to pay and do not excuse breach by Franchisee of the obligation to pay all amounts as and when due. Company and/or the supplier shall have the right from time to time, to increase the amount of the required deposit. On and after expiration or termination of this Agreement, Company may continue to apply any or all of the deposit (if held by Company) to amounts due from Franchisee to Company or affiliates, and shall thereafter refund any unused portion of the deposit to Franchisee. If held by the supplier, the supplier shall refund the deposit to Franchisee less all amounts owed by Franchisee to the supplier, on
31 termination of the supplier agreement between Franchisee and the supplier. No interest shall accrue in favor of Franchisee on the deposit.
8.12. Professional Fees Reimbursement. Franchisee shall reimburse legal and any other professional fees Company incurs on Franchisee’s behalf in connection with lease or sublease negotiations, Franchisee’s sale or purchase of a Yoshinoya Restaurant, financing negotiation assistance or any other matter Franchisee or a third party (such as a Landlord or Lender) requests.
9. ACCOUNTING AND RECORDS
9.1. Maintenance of Business Records. Franchisee shall maintain during the term of this Agreement, full, complete and accurate business records in accordance with the standards stated in Systems Manual or otherwise prescribed by Company in writing. Such business records shall be retained by Franchisee for a period of 5 years during, and following, the expiration, termination or Franchisee’s assignment of this Agreement.
9.2. Reports
9.2.1. Franchisee shall submit weekly reports of Gross Sales, Net Sales and such additional information required by Company, on forms prescribed by Company, and in the manner and at the times stated, in the Systems Manual or otherwise prescribed by Company in writing.
9.2.2. Franchisee shall furnish to Company, on or before the 15th day of each calendar month, in the form approved by Company, a monthly profit and loss statement and balance sheet, providing information for the preceding calendar month and cumulative information for the calendar quarter and year-to-date. Additionally, Franchisee shall submit to Company within 90 days after the end of Franchisee’s fiscal year, or if none, the end of each calendar year, during the Term and any Renewal Term, a profit and loss statement for each YOSHINOYA Restaurant owned by Franchisee and a balance sheet as of the last day of such year, prepared on an accrual basis including all adjustments necessary for fair presentation of financial statements.
9.2.3. All reports submitted to Company pursuant to this Agreement shall be executed by Franchisee or a duly authorized representative of Franchisee, certifying that the information is true and correct and that no material fact has been omitted which is necessary in order to make the information disclosed not misleading.
9.2.4. Company may change the accounting period for reporting Gross Sales, Net Sales and other information as Company may require, submitting financial statements or paying the fees described in this Agreement at any time effective upon no less than 30 days written notice to Franchisee.
9.3. Recording of Transactions. Franchisee shall track and record all sales utilizing the equipment and recording systems prescribed by Company. Franchisee shall utilize a computer terminal, dedicated modem and such other business equipment required by Company, and purchase, install and use specified non-proprietary and proprietary software programs, at Franchisee’s sole expense, to record business activities, sales, and inventories, and to prepare operating reports in accordance with Company’s uniform standards. All equipment and software shall conform to Company’s specifications, which Company may
32 modify in its discretion, from time to time. Use of proprietary software shall be governed by the parties’ separate software license agreement.
9.4. Audit Rights
9.4.1. Company and its representatives shall have full access to inspect Franchisee’s business records relating to the franchise and activities of Franchisee’s YOSHINOYA Restaurant. Such business records shall include, without limitation, Franchisee’s federal and state income tax returns and sales tax returns, bank statements (including deposit slips and canceled checks), data stored on Franchisee’s computer terminal or on disk, and such other documents and information as Company may in its sole discretion request in order to verify Gross Sales and Net Sales reported to Company.
9.4.2. Company or its representatives may access Franchisee’s business records kept on disk or stored on Franchisee’s computer terminal at any time, without notice, by remote electronic means. Additionally, Company or its representatives may, at any reasonable time, physically inspect, examine and copy Franchisee’s business records. Company may, at its expense, have an independent audit made of Franchisee’s business records, at any reasonable time.
9.4.3. If any inspection or audit conducted by Company reveals an understatement in the amount of Gross Sales or Net Sales reported by Franchisee to Company, then Franchisee shall within 10 days after notice from Company pay to Company any additional Service Fees and Promotional Fees which are owed, together with late charges and interest as provided in this Agreement, and pay to any Advertising Cooperative any additional Cooperative Promotional Fees, together with late charges and interest imposed by the Advertising Cooperative. Additionally, Company may require that all future reports and financial statements submitted by Franchisee pursuant to this Agreement be prepared by an independent certified public accountant or such other independent accountant acceptable to Company, until further notice from Company.
9.4.4. On discovery of an understatement of Gross Sales or Net Sales of 2% or more for the reported period, Franchisee shall also pay and reimburse Company for all expenses connected with said inspection and audit, including, but not limited to, Company’s reasonable accounting and legal fees and travel expenses.
9.4.5. In addition to the other consequences identified in this Section 9.4, Company shall have the right to terminate this Agreement if any audit discloses an understatement of actual Gross Sales or Net Sales of 5% or more for any period. Additionally, if two or more separate audits or examinations of Franchisee’s business records conducted within any 36 month period disclose an understatement of either actual Gross Sales or Net Sales in any amount, then the second understatement shall be conclusively presumed to have been intentional for purposes of this Agreement and, in addition to the consequences identified in this Section 9.4 because of such understatement, Company may terminate this Agreement upon discovery of such second understatement based upon Franchisee’s intentional underreporting of Gross Sales or Net Sales.
10. DEFAULT AND TERMINATION
10.1. Termination by Franchisee. Franchisee may terminate this Agreement (i) any time prior to the date Company approves the Franchise Location; (ii) by giving written notice
33 disapproving the proposed Territory (if applicable) within five days after receiving notice of the proposed boundaries; or (iii) otherwise for reasons constituting good cause. Good cause requires: (X) that Franchisee must not be in default of any obligation under this Agreement, and (Y) that Company have committed a material and substantial breach of this Agreement. In order to terminate this Agreement based upon Company’s material and substantial breach, Franchisee must serve Company with written notice of default specifying with particularity the matters cited to be in default, and provide Company with a minimum of 30 days in which to cure the default. Additional time to cure must be provided as is reasonable under the circumstances if a default cannot reasonably be cured within the minimum 30 day period. Any attempt by Franchisee to terminate this agreement except on the grounds, or according to the procedures, stated in this Agreement shall be void. In the event of termination by Franchisee for good cause or as otherwise permitted by this Agreement, Franchisee is not entitled to a refund of any portion of the Initial Franchise Fee or of any other fees or monies paid to Company.
10.2. Termination by Company without Opportunity to Cure. Company may terminate this Agreement, in its discretion and election, effective immediately upon Company’s delivery of written notice of termination to Franchisee which specifies the grounds of default, should any one or more of the following events occur, and Franchisee shall have no opportunity to cure a default based on any of the following events:
10.2.1. Should the parties not agree on the Franchise Location or boundaries of the Territory (if applicable) within the time period set forth in this Agreement;
10.2.2. Should Franchisee fail to satisfy the conditions for opening its YOSHINOYA Restaurant within the time period set forth in this Agreement;
10.2.3. Should Franchisee fail or refuse to pay, on or before the date payment is due, any fees or other amounts payable to Company, Company’s Affiliates or any third party supplier and should such default continue for a period of ten (10) days after written notice of default is given by Company to Franchisee;
10.2.4. Should Franchisee fail to respond to Company’s communications or fail to satisfactorily respond to Company’s communications within time frames Company requests, and such default continues for a period of ten (10) days after written notice of default is given by Company to Franchisee;
10.2.5. Should Franchisee fail or refuse to submit any report or financial statement on or before the date due, and should such default continue for a period of ten (10) days after written notice of default is given by Company to Franchisee;
10.2.6. Should Franchisee lose the right to possession of the Franchise Location due to Franchisee’s breach of the Lease or Sublease, which either cannot be cured or which Franchisee has failed to cure;
10.2.7. Should Franchisee fail to perform under any other agreement by and between Franchisee and Company pertaining to the franchise resulting in Franchisee’s default, which, by its terms, cannot be cured or which Franchisee has failed to cure;
10.2.8. Should Franchisee make any general arrangement or assignment for the benefit of creditors or become a “debtor” as defined in 11 U.S.C. 101 or any successor statute, unless, in the case where a petition is filed against Franchisee, Franchisee obtains an order
34 dismissing the proceeding within 60 days after such petition is filed; or should a trustee or receiver be appointed to take possession of all, or substantially all, of the assets of the YOSHINOYA Restaurant, unless possession of such assets is restored to Franchisee within 30 days following such appointment; or should all, or substantially all, of the assets of the YOSHINOYA Restaurant or contract rights permitting operation of the franchise be subject to an order of attachment, execution or other judicial seizure, unless such order or seizure is discharged within 30 days following issuance;
10.2.9. Should Franchisee, or any duly authorized representative of Franchisee, make a material misrepresentation or omission in obtaining the franchise rights granted hereunder, or should Franchisee or any officer, director, shareholder, member, manager, or general partner of Franchisee be convicted of or plead no contest to a felony charge or engage in any conduct or practice that, in the reasonable opinion of Company, reflects unfavorably upon or is detrimental or harmful to the good name, goodwill or reputation of Company or to the business, reputation or goodwill of the YOSHINOYA System or the YOSHINOYA Marks;
10.2.10. Should Franchisee fail to comply with the conditions governing the transfer of rights under this Agreement;
10.2.11. Should an order be made or resolution passed for the winding-up or the liquidation of Franchisee (if a corporation, LLC, partnership or other entity) or should Franchisee adopt or take any action for its dissolution or liquidation;
10.2.12. Should Franchisee have received from Company, during any consecutive 24 month period, 3 or more notices of default (whether or not such notices relate to the same or to different defaults and whether or not such defaults were timely cured by Franchisee);
10.2.13. Should Franchisee make any unauthorized use, publication, duplication or disclosure of any Confidential Information or any portion of the Systems Manual;
10.2.14. Should Franchisee abandon or fail or refuse to actively operate its YOSHINOYA Restaurant for any period such that Company may reasonably conclude that Franchisee does not intend to continue operating its YOSHINOYA Restaurant, unless Franchisee obtains Company’s written consent to a closure before Franchisee ceases regular activities;
10.2.15. Should Franchisee materially misuse or make an unauthorized use of any of the YOSHINOYA Marks or commit any other act which does, or can reasonably be expected to, materially impair the goodwill or reputation associated with any of the YOSHINOYA Marks or the YOSHINOYA System;
10.2.16. Should an audit of Franchisee’s business records disclose an understatement of actual Gross Sales or Net Sales for any period of 5% or more, or should Franchisee be conclusively presumed to have intentionally underreported actual Gross Sales or Net Sales as provided in this Agreement; or
10.2.17. Should Franchisee fail to correct any unhealthy, unsanitary or unclean condition at Franchisee’s YOSHINOYA Restaurant within 24 hours after being notified either orally or in writing of its existence by Company or any Health Department, or fail to comply with any other violation of federal, state or local law within 10 days after notification of non- compliance.
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10.3. Termination by Company with Right to Cure. Should Franchisee breach, or refuse to fulfill or perform, any obligation arising under this Agreement not articulated in Section 10.2 above, or fail or refuse to adhere to any mandatory operating procedure, specification or standard prescribed by Company in the Systems Manual or otherwise communicated to Franchisee, Company may terminate this Agreement, in its discretion and election, effective at the close of business 30 days after giving written notice of default to Franchisee which specifies the grounds of default, if Franchisee fails to cure the default cited in the notice. If a default cannot reasonably be cured within 30 days, Franchisee may apply to Company for additional time to complete the cure. The length of the additional cure period, if any, allowed by Company shall be stated in a writing signed by Company. If Franchisee does not complete the required cure within the cure period allowed, termination of this Agreement shall be effective at the close of business on the last day of the cure period without further notice from Company.
10.4. Effect of Termination. Termination of this Agreement, at Company’s option shall result in the concurrent, termination of all other agreements between the parties, including any Sublease, software license, or other agreement. In any proceeding in which the validity of termination of this Agreement is at issue, Company shall not be limited to the reasons set forth in any notice of default delivered to Franchisee.
10.5. Right to Step In and Operate Restaurant.
10.5.1. Prior to Termination. If Company determines that operation of the YOSHINOYA Restaurant may be in jeopardy or if a default or breach occurs, then in addition to all Company’s other rights and remedies, Company shall have the right, but no obligation, to enter into and operate the YOSHINOYA Restaurant for as long as Company believes necessary or practical. Any decision by Company to do so shall be deemed to be an accommodation to assist Franchisee. Company makes no representation or warranty regarding its ability to operate the YOSHINOYA Restaurant profitably, and Company shall not be responsible for results of operation. Franchisee shall reimburse all Company’s expenses incurred to operate the YOSHINOYA Restaurant pursuant to this Section 10.5, including but not limited to travel, lodging, meals, and personnel compensation; and shall pay Company, in addition to all other amounts provided for in this Agreement, a management fee equal to $250 per day for the period of operation by Company. Company shall have the right to increase this daily rate effective on delivery of written notice to Franchisee. Company shall have the right to cause itself to be paid and reimbursed any or all these amounts from revenues of the YOSHINOYA Restaurant, as well as all other amounts required to be paid under this Agreement.
10.5.2. Post Termination. Company shall have the right, but no obligation, at any time after termination of this Agreement, to enter into and operate the YOSHINOYA Restaurant. Company shall also have the right to communicate directly with Franchisee’s landlord and obtain the assignment of the Lease pursuant to the terms of the Addendum to Lease. Franchisee shall not be entitled to any compensation from the YOSHINOYA Restaurant’s operation after termination of this Agreement. Alternatively, and in lieu of continued operation of the YOSHINOYA Restaurant, Company shall have the right to step in and de-identify the YOSHINOYA Restaurant if Franchisee fails to do so. Franchisee shall reimburse COMPANY for all expenses incurred in de-identifying the YOSHINOYA Restaurant pursuant to the requirements in Section 11.1.3.
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11. RIGHTS AND DUTIES OF PARTIES UPON EXPIRATION OR TERMINATION.
11.1. Franchisee’s Obligations. On and after the Effective Date of Termination or Expiration of this Agreement, Franchisee must comply with the following duties:
11.1.1. Within ten days following the Effective Date of Termination or Expiration of this Agreement, Franchisee shall pay all fees and other amounts owed to Company, to the Advertising Cooperative to which it is assigned (if any), and to any third party, including, without limitation, late charges and interest on any late payments. Service Fees, Promotional Fees, Cooperative Promotional Fees shall continue to be due and payable (and late charges and interest thereon assessed) after the Effective Date of Termination or Expiration of this Agreement until the date that Franchisee completes all post-termination obligations required by this Agreement. When termination is based upon Franchisee’s default, Franchisee shall also pay to Company all damages, costs and expenses, and reasonable attorneys’ fees, incurred by Company in enforcing such default and termination. Franchisee’s payments shall be accompanied by all reports required by Company regarding Gross Sales, Net Sales and business transactions through the date of payment;
11.1.2. Franchisee shall cease using and, within 48 hours after the Effective Date of Termination or Expiration of this Agreement, return to Company the Systems Manual and all documents, proprietary software and supporting documentation, and all other confidential or proprietary materials provided to Franchisee pursuant to this Agreement, and shall retain no copy or record of any of the foregoing. Continued use by Franchisee of any copyrighted material shall constitute willful copyright infringement by Franchisee;
11.1.3. With respect to the Franchise Location:
11.1.3.1. If Franchisee subleases the Franchise Location from Company, then in accordance with the terms of the Sublease, termination of the Sublease shall occur concurrently on the Effective Date of Termination or Expiration of this Agreement. Franchisee shall vacate the Franchise Location and surrender possession to Company in accordance with the terms of the Sublease on or as soon after the Effective Date of Termination or Expiration of this Agreement as Company is able to send its employees or representatives to assume day-to-day operations of the YOSHINOYA Restaurant.
11.1.3.2. If Franchisee leases the Franchise Location directly from the master lessor (owner), Company shall have the right to accept an assignment of the Lease in accordance with the provisions of the Addendum to Lease, in which case, upon notice from Company, Franchisee shall forthwith vacate the Franchise Location, leaving it in good condition and repair with all equipment in good working order. If Company elects not to accept the assignment of the Lease, Franchisee shall modify the physical design and appearance of the Franchise Location, including removing signs and other distinctive physical and structural features identifying restaurants which belong to the YOSHINOYA System in a manner acceptable to Company so that the former Franchise Location no longer suggests or indicates a connection with the YOSHINOYA System. Such modifications must be completed within 10 days after Franchisee receives Company’s notice given pursuant to this Section;
11.1.4. Franchisee shall execute and deliver a general release, in form satisfactory to Company, of any and all claims against Company and its officers, directors, shareholders, employees and agents;
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11.1.5. Franchisee shall permanently cease using, in any manner whatsoever, the YOSHINOYA Marks, all Confidential Information, all Designated Goods/Services, and any other materials, signs, or distinctive features or designs associated with the YOSHINOYA System or which suggest or indicate that Franchisee is or was an authorized YOSHINOYA franchisee or continues to remain associated with the YOSHINOYA System. Franchisee shall cancel all advertising and promotional activities which associate Franchisee with the YOSHINOYA System. Continued use by Franchisee of any of the YOSHINOYA Marks shall constitute willful trademark infringement by Franchisee;
11.1.6. Franchisee shall take such action as may be required to cancel all fictitious or assumed name or equivalent registrations relating to its use of the YOSHINOYA Marks;
11.1.7. Franchisee shall cease using all telephone numbers and listings used in operating its YOSHINOYA Restaurant, take all steps necessary to delete Franchisee’s Yellow Page’s listings using the YOSHINOYA Marks, and, if Company directs, either assign such numbers or listings to Company or disconnect such numbers. Franchisee shall furnish Company with evidence satisfactory to Company of compliance with this obligation within ten days after the Effective Date of Termination or Expiration of this Agreement;
11.1.8. Franchisee shall comply with the provisions of this Agreement regarding noncompetition and maintaining the confidentiality of Confidential Information; and
11.1.9. Franchisee shall keep and maintain all business records pertaining to its YOSHINOYA Restaurant for five years after the Effective Date of Termination or Expiration of this Agreement. During this period, Franchisee shall permit Company to inspect such business records as frequently as Company deems necessary.
11.2. Effective Date of Termination or Expiration of this Agreement. For purposes of this Agreement, the Effective Date of Termination or Expiration of this Agreement is defined as follows:
11.2.1. The Effective Date of Termination is: (i) the date Franchisee receives notice of a default described in Section 10.2, or (ii) the last day of the permitted cure period for a default described in Section 10.3; and
11.2.2. The Effective Date of Expiration of this Agreement is the last day of the Term.
11.3. Company’s Right to Purchase Assets
11.3.1. On termination or expiration of this Agreement, Company shall have the right, but not the obligation, to purchase all, or any, of the physical assets of Franchisee’s YOSHINOYA Restaurant at Franchisee’s original cost less depreciation, based upon the depreciation schedule which Company or Company’s Affiliates that own a YOSHINOYA Restaurant, use for like or comparable property.
11.3.2. Company may exercise this option by giving Franchisee written notice within 10 days after the Effective Date of Termination or Expiration of this Agreement, specifying in such notice the assets it may purchase. Within ten days following receipt of Company’s notice, Franchisee shall furnish Company with documentation substantiating its original cost of each item identified by Company.
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11.3.3. Within ten days following receipt of documentation, Company shall notify Franchisee of the particular assets it will purchase, and within five days after giving such notice, Company shall pay Franchisee the purchase price, less permitted set offs, and Franchisee shall deliver such assets to Company. Company shall have the absolute right to set off from the purchase price of assets all amounts then due and owing from Franchisee to it under this Agreement or otherwise, and to the Promotional Fund and any Advertising Cooperative to which Franchisee was assigned.
11.4. Survival of Obligations. All obligations of the parties that expressly, or by their nature, survive the Effective Date of Termination or Expiration of this Agreement shall continue in full force and effect subsequent to such Effective Date of Termination or Expiration of this Agreement until they are satisfied in full. Franchisee remains fully liable for any and all obligations of its YOSHINOYA Restaurant, whether incurred before, or following, the Effective Date of Termination or Expiration of this Agreement, including, without limitation, obligations arising under this Agreement, any Sublease, any software license agreement, or under any other agreement between Franchisee and Company relating to the YOSHINOYA Restaurant, and all obligations owed to third parties including, without limitation, obligations for goods and supplies, salaries to employees, and taxes.
11.5. Third Party Rights; Available Remedies. No person acting for the benefit of Franchisee’s creditors or any receiver, trustee in bankruptcy, sheriff or any other officer of a court or other person in possession of Franchisee’s assets or business shall have the right to assume Franchisee’s obligations under this Agreement without Company’s prior consent. Company’s right to terminate this Agreement shall not be its exclusive remedy in the event of Franchisee’s default, and Company shall be entitled, in its sole discretion and election, alternatively or cumulatively, to affirm this Agreement in the event of Franchisee’s default and obtain damages arising out of such breach, injunctive relief to compel Franchisee to perform its obligations under this Agreement and/or to prevent Franchisee from breaching this Agreement, and any other remedy available under applicable law.
12. ASSIGNMENT AND TRANSFER
12.1. Assignment by Company. This Agreement shall inure to the benefit of Company’s successors and assigns. Company is free to assign all of its rights under this Agreement to any person or entity, provided the assignee agrees in writing to assume Company’s obligations. Upon such assignment and assumption, Company shall have no further obligation to Franchisee.
12.2. Assignment by Franchisee: In General. Franchisee acknowledges that the franchise rights granted to it are personal, and are granted in reliance upon, among other considerations, the individual or collective character, skill, aptitude, attitude, business ability and financial condition and capacity of Franchisee and, if Franchisee is a corporation, LLC or other entity, that of its officers, directors, shareholders, managers, members, trustees or owners. Accordingly, Franchisee agrees that:
12.2.1. Franchisee has no right, by operation of law or otherwise, to sell, assign, transfer, pledge, donate, encumber or otherwise deal with, directly or indirectly: (i) any interest in this Agreement, (ii) the right to use the YOSHINOYA System or the YOSHINOYA Marks granted pursuant to this Agreement, or (iii) all or a significant portion of the other assets of its YOSHINOYA Restaurant or its leasehold rights, unless Franchisee obtains Company’s prior written consent, which shall not unreasonably be withheld and shall be subject to the further
39 conditions stated in this Section 12. The foregoing restrictions include, without limitation, transfers due to consolidation or merger, issuance of additional securities representing an interest in the equity or voting interests of Franchisee, an order of dissolution of marriage, death of Franchisee or of the person owning a Controlling Interest (defined below) in the equity or voting interests of Franchisee, creation of a trust, or otherwise, all of which are considered interchangeable events of transfer for purposes of this Agreement;
12.2.2. If Franchisee is a corporation, LLC, partnership or other entity, then the sale, assignment, transfer, pledge, donation, encumbrance or other alienation of (i) more than a 1% interest in the outstanding securities of a Publicly Held Entity, (ii) securities of Franchisee offered pursuant to a transaction which is subject to registration under federal or state securities laws or is offered as a private offering pursuant to a written private placement memorandum of any kind, or (iii) a Controlling Interest in the equity or voting interests of Franchisee which is not a Publicly Held Entity, shall also constitute an assignment, shall not be attempted or consummated unless Franchisee obtains Company’s prior written consent, which shall not unreasonably be withheld and shall be subject to the further conditions stated in this Section 12. For purposes of this Agreement, Franchisee is a “Publicly Held Entity” if Franchisee is registered to sell its securities under the Securities Exchange Act of 1934.
12.2.3. “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 Franchisee. A “Controlling Interest” shall be presumed to be transferred if a transfer, either alone or together with other previous, simultaneous or proposed transfers, would have the effect of transferring, in the aggregate, more than 25% of the equity or voting interests in a Franchisee which is a corporation, LLC, partnership or other entity; and
12.2.4. Any attempted or purported assignment or transfer which fails to comply with the requirements of this Agreement shall be null and void and shall constitute a default under this Agreement.
12.3. Company’s Right of First Refusal
12.3.1. Except as otherwise provided in this Section 12, if a written offer (“Third Party Offer”) is made to purchase or otherwise acquire: (i) Franchisee’s rights under this Agreement, (ii) all or a significant portion of the assets or leasehold rights used in operating Franchisee’s YOSHINOYA Restaurant, (iii) more than a 1% interest in the outstanding securities of a Publicly Held Entity, (iv) any securities of Franchisee offered pursuant to a transaction which is subject to registration under federal or state securities laws or is offered as a private offering pursuant to a written private placement memorandum of any kind, or (v) a Controlling Interest in the equity or voting interests of Franchisee which is not a Publicly Held Entity, Franchisee, or the person receiving such offer (the “Individual Transferor”), shall, within 5 days after receiving the Third Party Offer and before accepting it, apply to Company in writing for Company’s consent to the proposed assignment. Franchisee, or the Individual Transferor, shall attach to such application a copy of the Third Party Offer together with (x) information relating to the proposed transferee’s experience and qualifications, (y) a copy of the proposed transferee’s current financial statement, and (z) such other information as Company may require which is relevant or material to the Third Party Offer, proposed transferee and proposed assignment.
12.3.2. Company or its nominee shall have the right, exercisable by written notice (“Notice of Exercise”) delivered to Franchisee, or the Individual Transferor, within 30 days following receipt of the Third Party Offer, all supporting information, and the application for
40 consent, to notify Franchisee or the Individual Transferor that it will purchase or acquire the rights, assets, equity and/or interests proposed to be assigned on the same terms and conditions set forth in the Third Party Offer, except that Company may (i) substitute cash for any form of payment proposed in the offer discounted to present value based upon the rate of interest stated in the Third Party Offer, and (ii) deduct from the purchase price the amount of any commission or fee that would otherwise be payable to any broker or agent in connection with the Third Party Offer and all amounts then due and owing from Franchisee to Company, the Promotional Fund, and any Advertising Cooperative under this Agreement or otherwise.
12.3.3. The closing for any purchase by Company shall be consummated and closed in Company’s principal office at a mutually agreed upon date and time, provided that such closing shall be held no later than 60 days following receipt of the Third Party Offer, all supporting information, and the application for consent. At the closing, Franchisee or the Individual Transferor shall deliver to Company such documents, affidavits, warranties, indemnities and instruments as would have been delivered by Franchisee or the Individual Transferor to the proposed transferee pursuant to the Third Party Offer. All costs, fees, document taxes and other expenses incurred in connection with the transfer shall be allocated between Franchisee and Company in accordance with the terms of the Third Party Offer, and any costs not allocated shall be paid by Franchisee or the Individual Transferor.
12.3.4. In the event Company gives timely Notice of Exercise but, through no fault of Franchisee or the Individual Transferor, fails to close the purchase of the interest which is the subject of the Third Party Offer, the transfer may not be completed unless Company’s consent is obtained and all other conditions stated in this Section 12 are satisfied.
12.3.5. Company’s right of first refusal shall not apply to any of the following transfers (“Qualified Transfers”): (i) the transfer or assignment of equity or voting interests constituting less than a Controlling Interest of the equity or voting interests of a Franchisee which is not a Publicly Held Entity, (ii) if Franchisee is an individual, the transfer by Franchisee all of his or her rights under this Agreement to a newly-formed corporation, LLC or other entity provided all of the equity or voting interests of such entity are owned by the individual, or (iii) a transfer following the death or permanent incapacity of Franchisee, or of the person owning a Controlling Interest in the equity or voting interests of Franchisee, to the spouse, adult children, heirs or legal representative of the deceased or incapacitated person.
12.4. Conditions of Assignment to Third Party. In the event Company does not exercise its right of first refusal or complete the purchase of the interest which is the subject of a Third Party Offer, or in the event of a Qualified Transfer or other transfer requiring Company’s consent, Company shall determine whether or not to consent to the proposed transfer, and shall notify Franchisee of its decision by no later than the following dates: (x) if Company gives timely Notice of Exercise but does not consummate the transfer through no fault of Franchisee or the Individual Transferor, notice shall be given by either ten days after the scheduled closing date for Company’s purchase of the interest, or 30 days after Notice of Exercise is given, which ever occurs last, or (y) in all other cases, notice shall be given 30 days following Company’s receipt of the Third Party Offer (if any), all supporting information and the application for consent. As a condition to consenting to the transfer, Company may, in its sole discretion, require that any or all of the following conditions be satisfied:
12.4.1. The proposed transferee must meet Company’s then-current qualifications for new YOSHINOYA franchisees in the state where the YOSHINOYA Restaurant is operated,
41 including qualifications pertaining to financial condition, credit rating, experience, moral character and reputation.
12.4.2. As of the date consent is requested and through the date of closing of the proposed transfer and assignment, Franchisee must not be in default under this Agreement, the Sublease or Lease, any software license agreement or any other agreements with Company, and must be current with all monetary obligations owed to third parties.
12.4.3. Franchisee will remain subject to all obligations stated herein that expressly, or by their nature, survive the Effective Date of Expiration or Termination of this Agreement, including, without limitation, the provisions prohibiting competition and disclosure of Confidential Information.
12.4.4. Franchisee must execute and deliver a general release, in form satisfactory to Company, of any and all claims against Company and its officers, directors, shareholders, employees and agents.
12.4.5. All required third party consents to the transfer must be obtained.
12.4.6. The proposed transferee must execute all other documents and agreements required by Company to consummate the assignment. If the proposed transferee is a corporation, LLC or other entity, each person who at the time of such assignment, or later, owns or acquires, either legally or beneficially, 10% or more of the equity or voting interests of the proposed transferee must execute the form of personal guaranty attached to this Agreement as Exhibit “C” and incorporated herein by reference.
12.4.7. Franchisee’s right to receive the sales proceeds from the proposed transferee in consideration of the transfer, or otherwise, shall be subordinate to the proposed transferee’s and Franchisee’s duties owed to Company, or to any assignee or Affiliate of Company, under, or pursuant to, this Agreement or any other agreement, including under any Lease or Sublease. All contracts by and between Franchisee and the proposed transferee shall provide for such subordination and may further provide that so long as the proposed transferee is not in default to Company in the performance of any of its obligations, the proposed transferee may pay such sales proceeds to Franchisee.
12.4.8. The proposed transferee, its designated Approved Manager (if not the proposed transferee), at least one lead kitchen personnel and such additional personnel as Company designates, must successfully complete Company’s next available initial training program. Company shall not charge a fee for providing the initial training program to the proposed transferee and such persons, but all transportation, hotel, food, personal and salary expenses incurred by any person to attend the initial training program are the proposed transferee’s sole obligation.
12.4.9. Franchisee shall pay a transfer fee equal to 25% of the then-current Initial Franchise Fee for non-employee franchisees purchasing their first YOSHINOYA franchise in the state where the Franchise Location is located.
12.4.10. Either:
12.4.10.1. Franchisee must simultaneously transfer its rights under this Agreement, the Lease or Sublease for the Franchise Location, under any software license agreement, and
42 under any other contracts whose continuation is necessary for operation of the YOSHINOYA Restaurant, to the same proposed transferee and satisfy any separate conditions stated in such other contracts to obtain any required consent to the transfer of such rights; and the proposed transferee must enter into a written assignment and assumption agreement acceptable to Company, assuming and agreeing to be bound by all of the terms and conditions of the contracts being assigned; or
12.4.10.2. At Company’s option, Company may require the transferee to execute its then-current form of Franchise Agreement, and its then-current form of any other contract to which it is a party which is being assigned, including (without limitation) any Sublease for the Franchise Location and any software license agreement. The term of the new Franchise Agreement shall be equal to the unexpired portion of the selling Franchisee’s franchise term. The transferee shall be excused from paying the Initial Franchise Fee stated in the new Franchise Agreement.
12.4.11. If the transfer occurs within 12 months before the date that the selling Franchisee would be required to commence work on Renovation Changes to the Franchise Location, Company shall have the right to require that all, or specified, Renovation Changes be completed by the transferee within a reasonable period of time following the closing date.
12.5. Additional Conditions Re Publicly Traded Entity and Sale of Certain Securities. Whenever the issuance, offer or sale of securities of Franchisee (whether or not a Publicly Held Entity) is subject to registration under federal or state securities laws or is offered as a private offering pursuant to a written private placement memorandum of any kind, Franchisee shall, at least 45 days before the proposed effective date of the registration or the delivery of any private placement memorandum, submit all offering or registration materials to Company for prior review; (ii) reimburse Company for its actual expenses incurred in connection with reviewing the offering or registration materials, including (without limitation) attorneys’ fees, accountants’ fees and travel expenses, in an amount not to exceed $25,000 (the “Securities Review Fee”); (iii) provide Company with a written opinion of counsel, in the form and covering the matters prescribed by Company, that the offering or registration complies with all federal and state laws; and (iv) agree in writing to fully indemnify and hold Company harmless from and against any claims, demands, liability, costs or expenses of any kind arising out of the private or public offering and avoid any implication that Company participates in, or endorses, the offering.
12.5.1. Franchisee shall promptly delete or correct any statements concerning the YOSHINOYA System, YOSHINOYA Marks or experience of YOSHINOYA Restaurants that Company may reasonably objects to following notice from Company.
12.5.2. The Securities Review Fee shall be increased effective as of January 1 of each year during the Term by an amount equal to the percentage increase, if any, in the Consumer Price published by the United States Department of Labor, Bureau of Labor Statistics for the Los Angeles-Anaheim-Riverside, All Urban Consumers (All Items 1982 = 100), or if that index is no longer published then by a comparable index selected by Company (the “Index”), comparing the Index level existing on January 1 of each subsequent year during the Term with the Index level existing on January 1 of the year in which the Term commenced.
12.6. Closing of Sale to Third Party. Should Company consent to an assignment to a third party, Franchisee, or the Individual Transferor, may only complete the transfer to the proposed transferee on the terms identified in the Third Party Offer or as otherwise stated in Franchisee’s application for consent. If there is any material change in the terms of the Third
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Party Offer, Company has a right of first refusal to accept the new terms subject to the conditions stated in this Section 12. If Company consents to the assignment, the transfer to the proposed transferee must close within 60 days from the date the Third Party Offer is first submitted to Company unless Company grants an extension of time in writing; otherwise, it must again be offered to Company.
12.7. Corporate/Entity Franchisee
12.7.1. If Franchisee is a corporation, LLC, partnership, or other entity, it shall furnish to Company, on execution of this Agreement or at such other time as transfer to the entity is permitted, a copy of its articles of incorporation, by-laws, operating agreement, partnership agreement or other governing agreement, as appropriate, and a list of all persons owning an interest in the equity or voting interests of the entity. Additionally, Franchisee shall provide Company, at least 14 days prior to the adoption thereof, a copy of any proposed amendment to, or change in, such information during the term of this Agreement. Franchisee shall not adopt any such amendment or change that Company objects to. Franchisee shall, immediately on adoption, provide Company a copy of the final version of any amendment or change, and of the instrument by which such amendment or change was adopted.
12.7.2. During the Term, each person who now or later owns or acquires, either legally or beneficially, 10% or more of the equity or voting interests of Franchisee must execute Company’s form of personal guaranty attached hereto as Exhibit “C.”
12.7.3. Franchisee shall maintain stop transfer instructions against the transfer on its records of any equity or ownership interests. Each certificate representing an ownership interest in Franchisee shall bear a legend, in the form stated in the Systems Manual, that it is held, and further assignment or transfer thereof is, subject to all restrictions imposed on transfer set forth in this Agreement. The chief financial officer of Franchisee shall deliver a certificate to Company annually, when Franchisee’s annual financial statements are delivered, which lists all owners of record and all beneficial owners of any interest in the equity or voting interests of Franchisee and identifies all transfers of equity or voting interests in Franchisee which have occurred during the period covered by such annual financial statement.
12.8. Death or Incapacity
12.8.1. In the event of the death or incapacity of Franchisee, or any person owning a Controlling Interest in the equity or voting interests of Franchisee, the spouse, heirs or personal representative of the deceased or incapacitated person, or the remaining shareholders, members, partners or owners (collectively referred to as the “Successor”) shall have 180 days from the date of death or incapacity in which to (i) purchase the interest of the deceased or incapacitated person in the franchise or Franchisee, or (ii) complete the sale or assignment of such interest to a qualified, approved third party, provided, in either case, the purchase or assignment complies with all of the terms and conditions for assignment stated in this Section 12.
12.8.2. During the period that the Successor operates Franchisee’s YOSHINOYA Restaurant, the Successor shall perform all of the obligations of Franchisee under this Agreement. At the end of the 180 day period, if the Successor has not purchased the franchise or obtained Company’s consent to an assignment to a third party, Company may, at its election, terminate this Agreement.
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12.8.3. For purposes of this Agreement, the term “incapacity” means an inability due to medical reasons to devote full time and attention to the YOSHINOYA Restaurant as required by this Agreement for at least 4 months in the aggregate during any consecutive 12 month period during the Term, based on the examination and findings of a physician selected by Company. A period of incapacity shall continue without interruption unless and until the person suffering the incapacity resumes his or her duties under this Agreement on a full time basis for thirty (30) consecutive business days.
13. RELATIONSHIP OF PARTIES; INDEMNIFICATION
13.1. Independent Contractor. This Agreement does not create a fiduciary relationship between the parties. With respect to all matters pertaining to Franchisee’s YOSHINOYA Restaurant, Franchisee is an independent contractor. 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. Franchisee acknowledges that it is the independent owner of its YOSHINOYA Restaurant and is in full control thereof, and shall conduct such business in accordance with Franchisee’s own judgment and discretion, subject only to the provisions of this Agreement. Franchisee shall conspicuously identify itself in all advertising and in all dealings with customers, suppliers and other third parties as the owner of the YOSHINOYA Restaurant under a franchise from Company.
13.2. No Liability of Company. Neither Company nor Franchisee shall be obligated by, or have any liability under, any agreements or representations made by the other that are not expressly authorized under this Agreement. Company shall not be obligated for any damages to any person or party directly or indirectly arising out of the operation of Franchisee’s YOSHINOYA Restaurant.
13.3. Indemnification by Franchisee. Franchisee shall indemnify and hold Company and each of its officers, directors, shareholders, employees, agents, successors and assigns, harmless from and against any and all costs, expenses, losses, liabilities, damages, causes of action, claims and demands whatsoever, arising from or relating to the operation of Franchisee’s YOSHINOYA Restaurant, whether or not arising from bodily injury, personal injury or property damage, or any other violation of the rights of others, or in any other way. The foregoing indemnification shall extend, without limitation, to all claims and obligations arising from construction and development of the YOSHINOYA Restaurant and from the business conducted by Franchisee pursuant to this Agreement, actual and consequential damages, and Company’s costs and expenses incurred in defending any third party claim covered by this indemnification, including, without limitation, attorneys fees, court costs, and travel and living expenses. Company shall have the right to retain its own counsel to defend any third party claim asserted against it which is covered by this indemnification agreement. The provisions of this Section 13.3 shall survive the expiration or termination of this Agreement for any reason.
13.4. Security Interest. To secure Franchisee’s performance under this Agreement Franchisee hereby grants to Company a security interest in and to all the following property of Franchisee located at the Yoshinoya Restaurant, and used in any way to operate the Franchised Business: refrigerators, storage equipment, cooking equipment, dispensing equipment, utensils, small wares, computers, printers, telephones, cash registers, cameras, other office equipment, furniture, furnishings, signs, décor, inventory and supplies, all tangible materials, and also any and all other miscellaneous tangible property of Franchisee located at the Franchised Restaurant and used in any way to operate the Franchised Business. Company shall record appropriate financing statements to protect and perfect Company's rights as a
45 secured party under Applicable Law. Except with Company's prior written consent, it shall be a breach of this Agreement for Franchisee to grant another person a security interest in Franchisee's tangible or intangible assets of the Franchised Business even if subordinate to Company's security interest.
14. PERSONAL GUARANTY
14.1. Personal Guaranty Form. If Franchisee is a corporation, LLC or other entity, each person who owns or at anytime during the Term acquires, either legally or beneficially, 10% or more of the equity or voting interests of Franchisee shall furnish any financial information reasonably required by Company and execute Company’s form of personal guaranty attached to this Agreement as Exhibit “C.” An event of default under this Agreement shall occur if any guarantor fails or refuses to deliver to Company, within ten days after Company’s written request: (i) evidence of the due execution of the personal guaranty, and (ii) current financial statements of guarantor as, may from time to time be requested by Company.
14.2. Spouse. If the person signing the Personal Guaranty is a married individual, Company may require the individual’s spouse to also sign the Personal Guaranty as a co- guarantor.
15. DISPUTE RESOLUTION
15.1. Agreement to Mediate Disputes. Except as provided in Section 15.2, no party shall bring any form of action or arbitration seeking enforcement or any other legal remedy founded on this Agreement until the dispute has been submitted to a mediation proceeding conducted according to the procedures in this Section 15.1.
15.1.1. Either party may initiate a mediation proceeding (the “Initiating Party”) by notifying American Arbitration Association, with offices in Los Angeles, California (“the Mediation Service”) in writing, with a copy to the other party (the “Responding Party”). The notice shall describe with specificity the nature of the dispute and Initiating Party’s claim for relief. Thereon, both parties shall engage in the mediation, which shall be conducted according to the Mediation Service’s then current rules, but in a conflict between those rules and this Agreement, this Agreement controls.
15.1.2. The mediation will be conducted by a single mediator, who must be a retired judge with no past or present affiliation or conflict with any party to the mediation. The parties agree that the mediator and Mediation Service’s employees shall be disqualified as a witness, expert, consultant or attorney in any pending or subsequent proceeding relating to the dispute which is the subject of the mediation.
15.1.3. On receipt of the written mediation demand, Mediation Service shall provide the parties with a list of mediators willing to serve. If the parties do not agree on a mediator, and so advise Mediation Service in writing, within ten days of receipt of such list, Mediation Service shall appoint the mediator. The fees and expenses of Mediation Service, including (without limitation) mediator’s fee, shall be shared equally by the parties. Each party shall bear its own attorneys fees and other costs incurred in the mediation irrespective of the outcome of the mediation or the mediator’s evaluation of each party’s case.
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15.1.4. The mediation proceeding shall commence within 30 days after selection of the mediator. Regardless of whether Company or Franchisee is the Initiating Party, the mediation shall be conducted at Company’s offices, unless Company and Franchisee agree on a mutually acceptable alternative location.
15.1.5. At least seven days before the first scheduled session of mediation, each party shall deliver to the mediator and to the other party a concise written summary of its position regarding the matters in dispute and Initiating Party’s claims for relief, and such other matters required by the mediator.
15.1.6. The parties shall participate in good faith in the mediation with the intention of resolving the dispute, if possible. The parties recognize and agree, however, that the mediator’s recommendations and decision shall not be binding on the parties.
15.1.7. During the mediation, the mediator may have joint and separate meetings with the parties and their counsel, at the mediator’s discretion. The mediation shall continue until conclusion, which is deemed to occur when: (i) a written settlement is reached, (ii) the mediator concludes and informs the parties in writing that further efforts would not be useful, or (iii) the parties agree in writing that an impasse has been reached. Neither party may withdraw before the conclusion of the mediation proceeding.
15.1.8. At the mediator’s discretion, or on either party’s request, the mediator will provide a written evaluation of each party’s claims and defenses and of the likely resolution of the dispute if not settled. The parties agree that the mediator is not acting as an attorney or providing legal advice on behalf of any party.
15.1.9. The mediation proceeding will be treated as a compromise settlement negotiation. All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation proceeding by any party or their agents, experts, counsel, employees or representatives, and by the mediator and Mediation Service’s employees, are confidential. Such offers, promises, conduct and statements may not be disclosed to any third party and are privileged and inadmissible for any purpose, including impeachment, under applicable federal and state laws or rules of evidence; provided however, that evidence otherwise discoverable or admissible shall not be rendered not discoverable or inadmissible as a result of its use in the mediation. If a party informs the mediator that information is conveyed in confidence by the party to the mediator, the mediator will not disclose the information.
15.2. Exceptions to Duty to Mediate Disputes. The obligation to mediate shall not apply to:
15.2.1. Any claim by either party seeking interim relief, including, without limitation, requests for temporary restraining orders, preliminary injunctions, writs of attachment, appointment of a receiver, claim and delivery, or any other orders which a court may issue when deemed necessary in its discretion to preserve the status quo or prevent irreparable injury, including the claim of either party for injunctive relief to preserve the status quo pending completion of a mediation and/or arbitration proceeding. The party awarded interim or injunctive relief shall not be required to post bond; or
15.2.2. Any claim by Company or the holder of rights under any Lease or Sublease for unlawful detainer or similar remedies available to a landlord or for the enforcement of Company’s other rights under the Addendum to Lease.
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15.3. Dispute Resolution: Any dispute arising from or relating to this Agreement not resolved by mediation, also including any claim that this Agreement (including this Section 15.3) was induced by misrepresentation or fraud, shall be resolved by arbitration according to the Commercial Rules of Arbitration of American Arbitration Association. Arbitration shall be conducted by a single arbitrator. The arbitration shall be conducted in Los Angeles, California. The arbitrator shall have authority to award or include in the award any relief which the arbitrator deems proper in the circumstances, including without limitation, money damages (with interest on unpaid amounts from the due date), specific performance and injunctive relief. Discovery shall be permitted in the arbitration in accordance with California Code of Civil Procedure Section 1283.05 and 1283.1(b). Judgment on the award of the arbitrator may be entered in and enforced by any court of competent jurisdiction. This arbitration provision is self-executing and a properly noticed arbitration may proceed despite a party’s failure to appear or participate. This agreement to arbitrate shall continue in effect subsequent to and regardless of expiration or termination of this Agreement.
15.4. Choice of Law. Except as otherwise provided in Section 7.14.4, and subject to state law requirements to the contrary, the parties agree that California law shall govern the construction, interpretation, validity and enforcement of this Agreement and shall be applied in any mediation or judicial proceeding to resolve all disputes between them, except to the extent the subject matter of the dispute arises exclusively under federal law, in which event such federal law shall govern.
15.5. Limitations Period. To the extent permitted by applicable law, any legal action of any kind arising out of or relating to this Agreement or its breach, including without limitation, any claim that this Agreement or any of its parts is invalid, illegal or otherwise voidable or void, must be commenced by no later than the last to occur of the following: (i) 90 days after obtaining knowledge of the facts which constituted or gave rise to the alleged violation or liability, or (ii) one year after the act, event, occurrence or transaction which constituted or gave rise to the alleged violation or liability; provided, however, the applicable limitations period shall be tolled during the course of any mediation proceeding which is initiated before the last day of the limitations period, and such toll shall commence on the date the Responding Party receives the Initiating Party’s demand for mediation and continue until the date the mediation is concluded.
15.6. Punitive or Exemplary Damages. Company and Franchisee, and their respective directors, officers, shareholders and guarantors, as applicable, each hereby waive to the fullest extent permitted by law, any right to, or claim for, punitive or exemplary damages against the other and agree that, in the event of a dispute between them, each is limited to recovering only the actual damages proven to have been sustained by it.
15.7. Attorneys’ Fees
15.7.1. Except as expressly provided in this Agreement, in any action or proceeding brought to enforce any provision of this Agreement or arising out of or in connection with the relationship of the parties hereunder, the prevailing party shall be entitled to recover against the other its reasonable attorneys’ fees and costs in addition to any other relief awarded by the court. As used in this Agreement, the “prevailing party” is the party who recovers greater relief in the action.
15.7.2. Company shall be entitled to reimbursement of all fees, costs and expenses which it incurs, including fees to retain attorneys, accountants or other experts, to enforce its
48 rights under this Agreement under circumstances when no mediation or judicial action is commenced.
16. ACKNOWLEDGEMENTS
Franchisee acknowledges and represents to Company, to induce Company to enter into this Agreement, that:
16.1. Acceptance of Conditions. Franchisee has read this Agreement and Company’s UFDD and understands and accepts the terms, conditions and covenants contained in this Agreement as being reasonably necessary to maintain Company’s standards of service and quality and the uniformity of those standards at all YOSHINOYA Restaurants in order to protect and preserve the YOSHINOYA System and the goodwill of the YOSHINOYA Marks;
16.2. Independent Investigation. Franchisee has conducted an independent investigation of the business contemplated by this Agreement. Franchisee recognizes that the YOSHINOYA System may evolve and change over time; that an investment in this franchise involves business risks; and that the success of the investment depends on Franchisee’s business ability and efforts;
16.3. Reliance. Franchisee has not received or relied on any promise or guaranty, express or implied, about the revenues, profits or success of the business venture contemplated by this Agreement;
16.4. No Representations; Status of Franchisee
16.4.1. No representations have been made by Company, or by its officers, directors, shareholders, employees or agents, that are contrary to statements made in the UFDD previously received by Franchisee or to the terms contained in this Agreement; and
16.4.2. Franchisee (if a natural person) or each person executing a guaranty of Franchisee’s obligations, is a United States citizen or a lawful resident alien of the United States; if Franchisee is a corporation, LLC, partnership or other entity, it shall remain duly organized and in good standing for as long as this Agreement is in effect and it owns the franchise rights; and all financial and other information provided to Company in connection with Franchisee’s application is true and correct and no material information or fact has been omitted which is necessary in order to make the information disclosed not misleading.
17. MISCELLANEOUS
17.1. Notices. All communications required or permitted to be given to either party hereunder shall be in writing and shall be deemed duly given on the earlier of: (i) the date when delivered by hand; (ii) the date when delivered by fax if confirmation of transmission is received or can be established by the sender; (iii) one business day after delivery to a reputable national overnight delivery service; or (iv) four business days after being placed in the United States Mail and sent by certified or registered mail, postage prepaid, return receipt requested. All notices shall be addressed to Franchisee at the following address: ______; and to Company at its headquarters at 991 West Knox Street, Torrance, California 90502; (310) 217-2149 (FAX). Either party may change its address for receiving notices by appropriate written notice to the other. All payments and reports required to be delivered to Company shall be directed to Company at the above address. Notwithstanding the parties’ agreement
49 regarding when notices shall be deemed to be given, any required payment or report not actually received by Company during regular business hours on the date it is due shall be deemed delinquent.
17.2. Time of the Essence. Time is of the essence of this Agreement with respect to each and every provision of this Agreement in which time is a factor.
17.3. Withholding of Consent. Except where this Agreement expressly obligates Company to reasonably approve or not unreasonably withhold its approval of any action or request by Franchisee, Company has the absolute right to refuse any request by Franchisee or to withhold its approval of any action by Franchisee. Further, whenever the consent or approval of Company is required under this Agreement such consent or approval must be in writing unless this Agreement specifies otherwise.
17.4. Waiver. Any waiver granted by Company to Franchisee excusing or reducing any obligation or restriction imposed under this Agreement shall be in writing and shall be effective on delivery of such writing by Company to Franchisee or on such other effective date as specified in the writing, and only to the extent specifically allowed in such writing. No waiver granted by Company, and no action taken by Company, with respect to any third party shall limit Company’s discretion to take action of any kind, or not to take action, with respect to Franchisee. Any waiver granted by Company to Franchisee shall be without prejudice to any other rights Company may have. The rights and remedies granted to Company are cumulative. No delay on the part of Company in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by Company of any right or remedy shall preclude Company from fully exercising such right or remedy or any other right or remedy. Company’s acceptance of any payments made by Franchisee after a breach of this Agreement shall not be, nor be construed as, a waiver by Company of any breach by Franchisee of any term, covenant or condition of this Agreement.
17.5. Section Headings; Language. The section headings used in this Agreement are inserted for convenience only and shall not be deemed to affect the meaning or construction of any of the terms, provisions, covenants or conditions of this Agreement. The language used in this Agreement shall in all cases be construed simply according to its fair meaning and not strictly for or against Company or Franchisee. The term “Franchisee” as used herein is applicable to one or more persons, corporations, partnerships or entities, as the case may be, and the singular usage includes the plural and the masculine and neuter usages include the other and the feminine. If two or more persons are at any time Franchisee hereunder, whether or not as partners or joint venturers, their obligations and liabilities to Company shall be joint and several. Nothing in this Agreement is intended, nor shall it be deemed, to confer any rights or remedies on any person or entity not a party hereto. Whenever this Agreement refers to “business days,” it shall mean weekdays only, excluding Saturdays, Sundays and holidays.
17.6. Binding on Successors. Subject to the restrictions contained herein on assignment by Franchisee, the covenants, agreements, terms and conditions contained in this Agreement shall be binding on, and shall inure to the benefit of, the successors, assigns, heirs and personal representatives of the parties hereto.
17.7. Validity; Conformity with Applicable Law. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be valid under applicable law, but if any provision of this Agreement shall be invalid or prohibited under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without
50 invalidating the remainder of such provision or the remaining provisions of this Agreement. To the extent that the provisions of this Agreement provide for periods of notice less than those required by applicable law, or provide for termination, cancellation, non renewal or the like other than in accordance with applicable law, such provisions shall be deemed to be automatically amended to conform them to the provisions of such applicable law. To the extent any provision of this Agreement is deemed unenforceable by virtue of its scope in terms of geographic area, business activity prohibited and/or length of time, but could be enforceable by reducing any or all thereof, the parties agree that the provision shall be enforced to the fullest extent permissible under the laws of the jurisdiction in which enforcement is sought.
17.8. Amendments. No amendment, change, modification or variance to or from the terms and conditions set forth in this Agreement shall be binding on any party unless it is set forth in writing and executed: (i) on behalf of Franchisee by Franchisee or, if Franchisee is not a natural person, by an authorized agent or officer of Franchisee; and (ii) on behalf of Company, by any duly authorized officer of Company.
17.9. Complete Agreement. This Agreement, including all exhibits and addendums attached hereto, and all agreements or documents which by the provisions of this Agreement are expressly incorporated herein or made a part hereof, sets forth the entire agreement between the parties, fully superseding any and all prior agreements or understandings between them pertaining to the subject matter hereof. There are no representations, warranties, promises or inducements, either oral or written, except those contained in this Agreement. However, nothing in this Agreement, the exhibits or any related agreement or document is intended to disclaim representations which Company has made in Company’s Franchise Disclosure Document which Franchisee acknowledges has been furnished to Franchisee. Franchisee acknowledges that Franchisee is entering into this Agreement as a result of its independent investigation of the franchise opportunity and not as a result of any representations about Company made by any of Company’s officers, directors, shareholders, employees, agents, representatives or independent contractors that are contrary to the terms set forth in this Agreement or in any disclosure document, prospectus, or other similar document required or permitted to be given to Franchisee under applicable law.
17.10. Covenant and Condition. Each provision of this Agreement performable by Franchisee shall be construed to be both a covenant and a condition.
17.11. Submission of Agreement. The submission of this Agreement to Franchisee does not constitute an offer to Franchisee, and this Agreement shall become effective only on execution by Company and Franchisee.
17.12. Spousal Consent. If the party entering into this Agreement as Franchisee is a married individual and the party’s spouse is not a party to this Agreement, Franchisee’s spouse shall execute the Spousal Consent attached as Exhibit “D.”
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IN WITNESS WHEREOF, the parties have executed this Agreement on the date stated on the Effective Date.
[Company]
YOSHINOYA AMERICA, INC.
By:
Its:
[Franchisee]
[Signature]
[Print Name]
[Name of Corporation or Partnership]
By: Its:
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EXHIBIT “A”
FRANCHISE LOCATION
The street address of the Franchise Location is as follows: ______
Dated: ______, ______
[COMPANY] [FRANCHISEE]
YOSHINOYA AMERICA, INC. [NAME]
By: [Signature]
Its: [Print Name]
[NAME OF CORPORATION OR PARTNERSHIP]
By:
Its:
53
EXHIBIT “B”
DESCRIPTION OF TERRITORY
Franchisee’s Territory is the following geographic area: or, alternatively, as shown on the map attached hereto as Exhibit ”1” and incorporated herein by this reference. [FOR NON-TRADITIONAL LOCATIONS, INSERT “NONE”]
(Complete if applicable) The Territory includes all or a portion of the following zip codes as of the Effective Date:
Dated: ______, ______
[COMPANY] [FRANCHISEE]
YOSHINOYA AMERICA, INC. [NAME]
By: [Signature]
Its: [Print Name]
[NAME OF CORPORATION OR PARTNERSHIP]
By:
Its:
54
EXHIBIT “C”
PERSONAL GUARANTY
55
EXHIBIT “D”
CONSENT OF SPOUSE
56
EXHIBIT D AREA DEVELOPMENT AGREEMENT
TABLE OF CONTENTS
Page
1. DEVELOPMENT RIGHTS AND OBLIGATIONS...... 1
1.1 Grant of Rights ...... 1
1.2 Territorial Rights Fee ...... 1
1.3 Developer’s Territory ...... 2
1.4 Company’s Reserved Rights in Developer’s Territory ...... 2
1.5 Further Agreements Re Company’s Reserved Rights ...... 3
1.6 Licensing Others Prohibited ...... 3
2. DEVELOPMENT TERM ...... 3
3. DEVELOPMENT OBLIGATIONS ...... 3
3.1 Development Quota; Development Deadline ...... 3
3.2 Failure to Meet Development Conditions ...... 3
3.3 Closures ...... 3
4. GRANT OF FRANCHISES TO DEVELOPER...... 3
4.1 Site Selection and Designation of Territory ...... 3
4.2 Franchise Agreement ...... 4
5. YOSHINOYA MARKS AND YOSHINOYA SYSTEM ...... 5
6. FULL TIME AND ATTENTION ...... 5
7. TERMINATION OF DEVELOPMENT AGREEMENT BY COMPANY ...... 5
7.1 Procedure for Terminating Agreement ...... 5
7.2 Effect of Termination on Franchise Agreements ...... 6
8. TRANSFER ...... 7
8.1 Assignment by Company ...... 7
8.2 Assignment by Developer ...... 7
8.3 Company’s Right of First Refusal ...... 8
i G:\lhsmh\TG\12912-2\530901.DOC 8.4 Conditions of Assignment to Third Party ...... 9
8.5 Additional Conditions Re Sale of Securities ...... 10
8.6 Closing of Sale to Third Party ...... 11
8.7 Corporate/Entity Developer ...... 11
8.8 Death or Incapacity ...... 11
8.9 Transfer of Individual Franchise Agreements ...... 12
9. RELATIONSHIP OF PARTIES ...... 12
9.1 Independent Contractor ...... 12
9.2 No Liability ...... 12
9.3 Indemnification ...... 12
10. PERSONAL GUARANTY ...... 12
10.1 Personal Guaranty Form ...... 12
10.2 Spouse ...... 12
11. DISPUTE RESOLUTION ...... 13
11.1 Agreement to Mediate Disputes ...... 13
11.2 Interim Relief ...... 14
11.3 Arbitration ...... 14
11.4 Choice of Law ...... 14
11.5 Limitations Period ...... 14
11.6 Punitive or Exemplary Damages ...... 15
11.7 Attorneys’ Fees ...... 15
12. MISCELLANEOUS ...... 15
12.1 Notices ...... 15
12.2 Time of the Essence ...... 15
12.3 Withholding of Consent ...... 15
12.4 Waiver ...... 15
ii 12.5 Capitalized Terms ...... 16
12.6 Section Headings; Language ...... 16
12.7 Binding on Successors ...... 16
12.8 Validity; Conformity with Applicable Law ...... 16
12.9 Amendments ...... 16
12.10 Complete Agreement ...... 16
12.11 Covenant and Condition ...... 17
12.12 Submission of Agreement ...... 17
12.13 Spousal Consent ...... 17
iii LIST OF EXHIBITS
EXHIBIT 1 - Description of Developer’s Territory EXHIBIT 2 - Development Quota EXHIBIT 3 - Franchise Agreement EXHIBIT 4 - Personal Guaranty EXHIBIT 5 - Spousal Consent
iv YOSHINOYA AMERICA, INC.
AREA DEVELOPMENT AGREEMENT
This AREA DEVELOPMENT AGREEMENT (“Agreement”) is made and entered into on ______, 20___ by and between YOSHINOYA AMERICA, INC., a Delaware corporation (“Company”) and ______(“Developer”), with reference to the following facts:
RECITALS
A. Company owns a distinctive system (the “YOSHINOYA System”) for the establishment, operation and promotion of quick-service restaurants which feature freshly prepared, high quality Japanese style foods and use uniform operating methods and proprietary information and trade secrets developed by or for Company (collectively, “YOSHINOYA Restaurants” and individually, a “YOSHINOYA Restaurant”).
B. Company has rights to the names YOSHINOYA and YOSHINOYA BEEF BOWL and to other distinctive marks, logos and commercial symbols which identify YOSHINOYA Restaurants (collectively referred to as the “YOSHINOYA Marks”).
C. Company grants to persons who are able to meet Company’s qualifications and will undertake the necessary investment and effort, and Developer has applied for, the right to develop and operate a mutually agreed-upon number of YOSHINOYA Restaurants within a designated geographic area, pursuant to the YOSHINOYA System and the further requirements and obligations in this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. DEVELOPMENT RIGHTS AND OBLIGATIONS.
1.1 Grant of Rights. Company grants Developer, and Developer accepts, the exclusive right to develop YOSHINOYA Restaurants in the geographic area described on attached Exhibit “1” (“Developer’s Territory”), on the terms and subject to the conditions of this Agreement.
1.2 Territorial Rights Fee. On execution of this Agreement, Developer shall pay to Company a territorial rights fee of ______Dollars ($______) (the “Territorial Rights Fee”) equal to the sum of: (i) $13,750, (ii) multiplied by the number of YOSHINOYA Restaurants in the Development Quota (defined below) less one. (Example: If the Development Quota is 10 YOSHINOYA Restaurants, the Territorial Rights Fee is $137,500.)
1.2.1 Developer acknowledges that $13,750 represents 50% of the current Initial Franchise Fee of $27,500 that Company charges for a single unit franchise pursuant to Company’s form of Franchise Agreement attached as Exhibit “3.”
1.2.2 The Territorial Rights Fee is fully earned by Company when paid. It represents consideration for Company’s administrative and other expenses incurred, and for development opportunities lost or deferred, in granting development rights to Developer. The Territorial Rights Fee is not refundable in any circumstance or for any reason.
1 1.3 Developer’s Territory. During the Development Term (defined below), provided Developer is not in default under this Agreement, Company shall not engage in the following activities in Developer’s Territory:
1.3.1 Operate, or grant others the right to operate, a restaurant in Developer’s Territory whose principal name is Yoshinoya Beef Bowl (“Yoshinoya Beef Bowl Branded Restaurant”). A restaurant whose name may include or reference Yoshinoya does not constitute a Yoshinoya Beef Bowl Branded Restaurant;
1.3.2 If Company, in the future, adds a delivery program to the YOSHINOYA System, not to engage, or permit others to engage, in delivery services of branded menu items sold at YOSHINOYA Restaurants to consumers located in Developer’s Territory.
1.4 Company’s Reserved Rights in Developer’s Territory. Nothing in this Agreement prohibits Company from engaging in the following activities in Developer’s Territory, and Developer understands, acknowledges and agrees it has no right to engage in such activities on its own or participate, directly or indirectly, in such activities to the extent Company engages in any of them:
1.4.1 Operating or permitting others to operate restaurants that are not Yoshinoya Beef Bowl Branded Restaurants, even in Developer’s Territory;
1.4.2 Selling (or permitting others to sell) any menu items sold at YOSHINOYA Restaurants, or ingredients used to prepare foods sold at YOSHINOYA Restaurants, under the YOSHINOYA Marks or under other names, to restaurants, convenience stores, grocery stores, specialty food stores, or department stores selling foods or ingredients located in Developer’s Territory. For illustration only, the foregoing permits Company to prepare on third-party premises and sell, or authorize others to prepare and sell, ready-to-eat, ready-to-serve or ready- to-cook foods and ingredients under the YOSHINOYA Marks or under other names from such locations in Developer’s Territory;
1.4.3 Selling (or permitting others to sell) any menu items sold at YOSHINOYA Restaurants, or operating (or granting others the right to operate) YOSHINOYA Restaurants, or restaurants under other names located at, or within, any mall, school, airport, rail or bus terminal, stadium, sports arena, race track, amusement park, public park, theater, military base, hospital or health care facility, educational facility, high density office location or other mass gathering place entirely or partially in Developer’s Territory;
1.4.4 Selling (or permitting others to sell) menu items sold at YOSHINOYA Restaurants, or ingredients used to prepare foods sold at YOSHINOYA Restaurants, under the YOSHINOYA Marks or other names from mobile units or carts, kiosks, vending machines, or other mobile or stationery devices which occupy less than 100 feet and are in Developer’s Territory; or
1.4.5 Advertising and promoting the sale of, and selling, menu items sold at YOSHINOYA Restaurants through the Internet or by using any other public computer network, electronic communication method, or by mail order, catalog sales or comparable methods that solicit orders and business from customers without requiring the customer’s physical presence in a YOSHINOYA Restaurant to complete the transaction.
2 1.5 Further Agreements Re Company’s Reserved Rights. Developer acknowledges that Company, entities related to Company through common ownership (collectively, “Company’s Affiliates”), and their respective officers, directors, employees and agents, may engage in any, and every, activity, within or outside of Developer’s Territory, which is not expressly prohibited by this Agreement. Except for the restrictions in Section 1.3, this Agreement does not limit Company’s right to use or license the YOSHINOYA Marks or the YOSHINOYA System, or to engage in, or license, any other type of business activity, whether similar to or different from the YOSHINOYA System. Additionally:
1.5.1 Developer understands, acknowledges and agrees it has no right to participate, directly or indirectly, in any activity reserved by Company, and no right to object to the issuance of franchise rights to others.
1.5.2 Company, in its sole discretion, reserves the absolute right to approve exceptions or deviations from the YOSHINOYA System. Developer acknowledges it has no right to object to any variances granted to others and no claim against Company for failing to enforce standards of the YOSHINOYA System against others permitted to use it.
1.6 Licensing Others Prohibited. Developer shall have no right under this Agreement to license others to use the YOSHINOYA Marks or the YOSHINOYA System.
2. DEVELOPMENT TERM.
The term of this Agreement (“Development Term”) starts on the date written on page 1. Unless this Agreement is earlier terminated as provided below, the Development Term expires on the earlier of the following 2 dates: (i) the date specified for opening the last YOSHINOYA Restaurant as set forth on Exhibit “2”, or (ii) the date the last YOSHINOYA Restaurant permitted to be open pursuant to this Agreement actually opens for business to the public.
3. DEVELOPMENT OBLIGATIONS.
3.1 Development Quota; Development Deadline. Developer agrees to open and operate, within Developer’s Territory, the number of YOSHINOYA Restaurants set forth on Exhibit “2” (the Development Quota”) from and after each point in time set forth on Exhibit “2” (each deadline identified on Exhibit “2” for fulfilling a Development Quota is referred to as a “Development Deadline”).
3.2 Failure to Meet Development Conditions. If Developer does not satisfy a Development Quota by the applicable Development Deadline, Company may terminate this Agreement and the consequences of termination, stated in this Agreement shall apply.
3.3 Closures. If a YOSHINOYA Restaurant permanently closes for any reason after opening, and as a result of closure Developer falls below the Development Quota applicable at the time of closure, Developer shall have 6 months from the closing date to open a substitute YOSHINOYA Restaurant within Developer’s Territory in its place.
4. GRANT OF FRANCHISES TO DEVELOPER.
4.1 Site Selection and Designation of Territory. Following execution of this Agreement, Company shall provide Developer with a copy of Company’s current site proposal package guidelines, including the demographic, design and construction guidelines for selection
3 and build-out of the franchise location and other requirements applied by Company in connection with site review and approval. Thereafter, during the Development Term, Company shall provide Developer with all updates to such information which may be made from time to time. Unless specific locations are identified on Exhibit “2”, Developer shall propose to Company, for its approval, specific locations in Developer’s Territory for each YOSHINOYA Restaurant which Developer believes meets Company’s site proposal package guidelines. Each location proposed by Developer shall be subject to Company’s approval, which Company shall not unreasonably withhold. Before Company shall be obligated to offer Developer a Franchise Agreement for any proposed location, Developer shall comply with all of the following conditions:
4.1.1 Developer shall submit a written site proposal to Company, which shall contain all the information required by Company’s then-current site proposal package guidelines.
4.1.2 Company shall have 21 days following receipt of the completed site proposal to approve the proposed site by giving written notice to Developer; Company’s failure to give timely notice shall constitute its disapproval of the proposed site. Developer acknowledges that Company’s approval of a proposed site does not constitute a guaranty or warranty that a YOSHINOYA Restaurant located at that site will be successful or profitable; such approval signifies that the site meets Company’s then-current site proposal package guidelines.
4.1.3 If Company approves the proposed site, it will identify in its notice of approval the proposed exclusive territory assigned to that YOSHINOYA Restaurant. Developer may disapprove the proposed exclusive territory by giving written notice of disapproval to Company within 5 days after receipt of Company’s notice; otherwise, Developer is conclusively deemed to accept such boundaries. If Developer gives timely notice that it disapproves the proposed boundaries, the parties shall negotiate in good faith to identify mutually acceptable boundaries for the proposed exclusive territory to be assigned to the subject YOSHINOYA Restaurant consistent with Company’s policies concerning the size and demographic qualities of franchisee territories; provided, however, if the parties cannot agree upon such boundaries within 30 days after Developer receives Company’s notice of site approval, the proposed site shall be deemed disapproved.
4.2 Franchise Agreement. If the parties agree on the proposed location and exclusive territory for a YOSHINOYA Restaurant, Company shall offer Developer a franchise to operate a YOSHINOYA Restaurant at that location by delivering to Developer a Franchise Agreement for such site.
4.2.1 The form of Franchise Agreement for each franchise offered, and granted, by Company pursuant to this Agreement shall be the form attached hereto as Exhibit “3” (the “Franchise Agreement”), except that the following provisions of the Franchise Agreement shall not apply, and instead the parties agree as follows:
4.2.2 The Initial Franchise Fee for each YOSHINOYA franchise shall be determined based on the total number of YOSHINOYA Restaurants which Developer develops in the Territory in accordance with the following chart. Company shall credit Franchisee with $13,750 toward the applicable Initial Franchise Fee, being a portion of the Territorial Rights Fee previously paid.
4 A. B. C. D. YOSHINOYA Initial Franchise Fee Less Territorial Rights Balance Due Restaurant Fee (Column B – Column C) 1 $27,500 (100%) <$13,750> $13,750 2 and 3 each $22,000 (80%) <$13,750> $8,250 4 and 5 each $19,250 (70%) <$13,750> $5,500 6 & higher, each $13,750 (50%) <$13,750> $0
4.2.2.1 Within fifteen (15) days after receipt of the Franchise Agreement for an approved site, Developer shall execute the Franchise Agreement and return it to Company together with payment of the applicable Initial Franchise Fee determined in accordance with this Section 4.2. If Developer fails to comply with this obligation, Company shall have no obligation to sell a franchise for the approved site to Developer, and Developer has the risk of failing to satisfy the Development Quota on Exhibit “2.”
4.2.3 Once the parties execute a Franchise Agreement for an approved site, their relationship, and the parties’ rights and obligations, as to development, ownership and operation of that site, shall be exclusively governed by the Franchise Agreement and any other agreements entered into by them pursuant to the Franchise Agreement.
5. YOSHINOYA MARKS AND YOSHINOYA SYSTEM.
Developer acknowledges that this Agreement does not grant a franchise and does not grant Developer any right to use the YOSHINOYA Marks or the YOSHINOYA System, and that Developer’s right to use the YOSHINOYA Marks and YOSHINOYA System is derived solely from each Franchise Agreement which may be entered into pursuant to this Agreement.
6. FULL TIME AND ATTENTION.
6.1.1 Developer shall devote full time and best efforts to the development obligations under this Agreement.
6.1.2 Developer shall cause Developer’s principal owner or principal executive officer, or other principal officer acceptable to Company, to personally undergo and satisfactorily complete training in accordance with the training obligations in the first Franchise Agreement that Developer enters into with Company.
7. TERMINATION OF DEVELOPMENT AGREEMENT BY COMPANY.
7.1 Procedure for Terminating Agreement. Company may terminate this Agreement, in its discretion and election, effective on Company’s delivery of written notice of termination to Developer (unless a different effective date is specified in this Agreement or in the notice of termination). Company’s notice must specify the grounds of default and be based on any one or more of the following events, and Developer shall have no opportunity to cure a default based on any of the following events:
7.1.1 If Developer makes a general arrangement or assignment for the benefit of creditors or become a “debtor” as defined in 11 U.S.C. §101 or any successor statute, unless, in the case where a petition is filed against Developer, Developer obtains an order dismissing the proceeding within 60 days after the petition is filed; or if a trustee or receiver is appointed to take possession of all, or substantially all, the assets of the YOSHINOYA Restaurant, unless possession of the assets is restored to Developer within 30 days following such appointment; or
5 if all, or substantially all, of the assets of Developer become subject to an order of attachment, execution or other judicial seizure, unless the order or seizure is discharged within 30 days;
7.1.2 Developer breaches or fails to comply with any of the conditions governing transfer of rights under this Agreement;
7.1.3 If an order is made or resolution passed for winding-up or liquidation of Developer (if a corporation, LLC, partnership or other entity) or if Developer adopts or takes any action for its dissolution or liquidation;
7.1.4 If Developer, or any authorized representative of Developer, makes a material misrepresentation or omission in obtaining rights granted hereunder, or if Developer or any officer, director, shareholder, member, manager, or general partner of Developer is convicted of or pleads no contest to a felony charge or engages in any conduct or practice that, in Company’s reasonable opinion, reflects unfavorably on or is detrimental or harmful to the good name, goodwill or reputation of Company or to the business, reputation or goodwill of the YOSHINOYA System or any of the YOSHINOYA Marks;
7.1.5 If Developer fails or refuses to pay, on or before the due date, any fee or other amount payable to Company under this Agreement, and if the default continues for a period of 10 days after written notice of default is given by Company to Developer;
7.1.6 If Developer fails to satisfy the Development Quota;
7.1.7 If any other agreement by and between Developer and Company or any of Company’s Affiliates, including, without limitation, any Franchise Agreement for a YOSHINOYA Restaurant, is terminated for any reason;
7.1.8 After curing any default, if Developer engages in the same noncompliance, whether or not the later default is timely corrected after notice is delivered to Developer, or, alternatively, if on 3 or more occasions within any 24 consecutive months during the Development Term, if Developer fails to comply with one or more requirements of this Agreement whether or not each separate default (which need not be the same act of noncompliance) is timely corrected after notice is delivered to Developer;
7.1.9 If Developer fails to perform as required by Company under this Agreement or any other agreement between Developer and Company, or fails to meet operational standards of Company, or is not in good standing with Company, and Developer fails to correct the failure within 30 days after Company gives Developer written notice of the default and the action the Developer must take to cure the default; or
7.1.10 If Developer fails to comply with any other provision of this Agreement and does not correct the default within 30 days after Company gives Developer written notice of the default, which notice must describe the action that Developer must take to cure the default.
7.2 Effect of Termination on Franchise Agreements.
7.2.1 If this Agreement is terminated by Company pursuant to Section 7.1, or if this Agreement expires, the parties agree that each Franchise Agreement, and every other agreement, then in effect by and between Developer and Company pertaining to a YOSHINOYA Restaurant owned by Developer shall remain in full force and effect, unless the
6 grounds on which termination is predicated also are grounds for terminating the other agreement(s) and Company has satisfied all requirements to effect a termination of the other agreement(s).
7.2.2 If this Agreement is terminated or expires, Developer shall have no further right to develop YOSHINOYA Restaurants in Developer’s Territory, nor shall Developer have any right to prevent Company, or others, from owning and operating, or granting franchises to others to own and operate, YOSHINOYA Restaurants in Developer’s Territory, subject, however, to the territorial rights, if any, granted to Developer under each Franchise Agreement then in effect between the parties pertaining to a YOSHINOYA Restaurant owned by Developer.
8. TRANSFER.
8.1 Assignment by Company. This Agreement is fully assignable by Company and shall benefit Company’s successors and assigns.
8.2 Assignment by Developer. The provisions of this Agreement are personal to Developer. Company enters into this Agreement in reliance on the individual or collective character, skill, aptitude, attitude, business ability and financial capacity of Developer, and, if Developer is a corporation, LLC or other entity, that of its officers, directors, shareholders, managers, members, trustees or owners. Accordingly, Developer agrees that:
8.2.1 Developer has no right, by operation of law or otherwise, to sell, assign, transfer, pledge, donate, encumber or otherwise deal with, directly or indirectly, the rights granted pursuant to this Agreement or any interest in this Agreement, unless Developer obtains Company’s prior written consent, which shall not unreasonably be withheld and shall be subject to the further conditions stated in this Section 8. The foregoing restrictions on assignment include, without limitation, transfers due to consolidation or merger, issuance of additional securities representing an interest in the equity or voting interests of Developer, an order of dissolution of marriage, death of Developer or of the person owning a Controlling Interest (defined below) in the equity or voting interests of Developer, creation of a trust, or otherwise, all of which are considered interchangeable events of assignment or transfer for purposes of this Agreement;
8.2.2 If Developer is a corporation, LLC, partnership or other entity, then the sale, assignment, transfer, pledge, donation, encumbrance or other alienation of (i) more than a 1% interest in the outstanding securities of a Publicly Held Corporation, (ii) securities of Developer offered pursuant to a transaction which is subject to registration under federal or state securities laws or is offered as a private offering pursuant to a written private placement memorandum of any kind, or (iii) a Controlling Interest in the equity or voting interests of Developer which is not a Publicly Held Corporation, shall also constitute an assignment, shall not be attempted or consummated unless Developer obtains Company’s prior written consent, which shall not unreasonably be withheld and shall be subject to the further conditions stated in this Section 8. Developer is a “Publicly Held Corporation” if Developer is registered to sell its securities under the Securities Exchange Act of 1934.
8.2.3 “Controlling Interest” means possession, directly or indirectly, of power to direct, or cause a change in the direction of, the management and policies of Franchisee. A “Controlling Interest” shall be presumed to be transferred if a transfer, alone or together with other prior, simultaneous or proposed transfers, would have the effect of transferring, in the
7 aggregate, more than 25% of the equity or voting interests in a Franchisee which is a corporation, LLC, partnership or other entity; and
8.2.4 Any attempted or purported assignment or transfer which fails to comply with the requirements of this Agreement shall be null and void and shall constitute a default under this Agreement.
8.3 Company’s Right of First Refusal. Except as otherwise provided in this Section 8.3.4, if a written offer (“Third Party Offer”) is made to purchase or otherwise acquire: (i) Developer’s rights under this Agreement, (ii) more than a 1% interest in the outstanding securities of a Publicly Held Corporation, (iii) any securities of Developer offered pursuant to a transaction which is subject to registration under federal or state securities laws or is offered as a private offering pursuant to a written private placement memorandum of any kind, or (iv) a Controlling Interest in the equity or voting interests of Developer which is not a Publicly Held Corporation, Developer, or the person receiving the offer (the “Individual Transferor”), shall, within 5 days after receiving the Third Party Offer and before accepting it, apply to Company in writing for Company’s consent to the proposed assignment. Developer, or the Individual Transferor, shall attach to the application a copy of the Third Party Offer together with (x) information relating to the proposed transferee’s experience and qualifications, (y) a copy of the proposed transferee’s current financial statement, and (z) other information that Company may require which Company deems to be relevant or material to the Third Party Offer, proposed transferee and proposed assignment.
8.3.1 Company or its nominee shall have the right, exercisable by written notice (“Notice of Exercise”) delivered to Developer, or the Individual Transferor, within 30 days following receipt of the Third Party Offer, all supporting information, and the application for consent, to notify Developer or the Individual Transferor that it will purchase or acquire the rights, equity and/or interests proposed to be assigned on the terms in the Third Party Offer, except that Company may (i) substitute cash for any form of payment proposed in the offer discounted to present value based on the rate of interest stated in the Third Party Offer, and (ii) deduct from the purchase price the amount of any commission or fee that would otherwise be payable to any broker or agent in connection with the Third Party Offer and all amounts then due and owing or to become due from Developer to Company.
8.3.2 The closing for any purchase by Company shall be consummated and closed in Company’s principal office at a mutually agreed date and time, provided that the closing shall be held no later than 60 days after receipt of the Third Party Offer, all supporting information, and the application for consent. At the closing, Developer or the Individual Transferor shall deliver to Company such documents, affidavits, warranties, indemnities and instruments as would have been delivered by Developer or the Individual Transferor to the proposed transferee pursuant to the Third Party Offer. All costs, fees and other expenses incurred in connection with the transfer shall be allocated between Developer and Company in accordance with the terms of the Third Party Offer, and any costs not allocated shall be paid by Developer or the Individual Transferor.
8.3.3 If Company gives timely Notice of Exercise but, through no fault of Developer or the Individual Transferor, fails to close the purchase of the interest which is the subject of the Third Party Offer, the transfer may not be completed unless Company’s consent is obtained and all other conditions stated in this Section 8 are satisfied.
8 8.3.4 Company’s right of first refusal shall not apply to any of the following transfers (“Qualified Transfers”): (i) the transfer or assignment of equity or voting interests constituting less than a Controlling Interest of the equity or voting interests of a Developer which is not a Publicly Held Corporation, (ii) if Developer is an individual, the transfer by Developer all of his or her rights under this Agreement to a newly-formed corporation, LLC or other entity provided all the equity or voting interests of such entity are owned by the individual, or (iii) a transfer following death or permanent incapacity of Developer, or of the person owning a Controlling Interest in the equity or voting interests of Developer, to the spouse, adult children, heirs or legal representative of the deceased or incapacitated person.
8.4 Conditions of Assignment to Third Party. If Company does not exercise its right of first refusal or complete the purchase of the interest which is the subject of a Third Party Offer, or in the event of a Qualified Transfer or other transfer requiring Company’s consent, Company shall determine whether or not to consent to the proposed transfer, and shall notify Developer of its decision by no later than the following dates: (x) if Company gives timely Notice of Exercise but does not consummate the transfer through no fault of Developer or the Individual Transferor, notice shall be given by either 10 days after the scheduled closing date for Company’s purchase of the interest, or 30 days after Notice of Exercise is given, whichever occurs last, or (y) in all other cases, notice shall be given 30 days following Company’s receipt of the Third Party Offer (if any), all supporting information and the application for consent. As a condition to consenting to the transfer, Company may, in its sole discretion, require that any or all of the following conditions be satisfied:
8.4.1 Developer shall pay to Company a transfer fee equal to 10% of the Territorial Rights Fee when Developer applies to Company for its consent to transfer. This shall be additional to the payment of any transfer fee(s) due under any Franchise Agreement(s). If consent is denied, Company may retain an amount equal to 5% of the Territorial Rights Fee as compensation for expenses in reviewing the proposed transfer;
8.4.2 The proposed transferee must meet Company’s then-current qualifications for an area developer of a territory similar in size and demographic characteristics to Developer’s Territory, including qualifications pertaining to financial condition, credit rating, business experience, moral character and reputation.
8.4.3 Developer must execute and deliver a general release, in form satisfactory to Company, of any and all claims against Company and its officers, directors, shareholders, employees and agents;
8.4.4 The proposed transferee must execute all other documents and agreements required by Company to evidence the assumption of Developer’s obligations hereunder and under any other agreements which are contemporaneously being assigned; provided, however, that nothing in this Agreement requires that, in connection with the transfer and assignment of this Agreement, Developer also assign and transfer to the same proposed transferee any or all other agreements then in effect by and between Developer and Company or Company’s Affiliates. In no event may other agreements be contemporaneously assigned either to the same or to other transferees unless Developer satisfies all conditions for transfer imposed under such other agreements;
8.4.5 If the proposed transferee is a corporation, LLC or other entity, each person who at the time of such assignment, or later, owns or acquires, either legally or
9 beneficially, 10% or more of the equity or voting interests of the proposed transferee must execute Company’s form of personal guaranty attached as Exhibit “4.”
8.4.6 Developer’s right to receive the sales proceeds from the proposed transferee in consideration of the transfer, or otherwise, shall be subordinate to the proposed transferee’s and Developer’s duties owed to Company, or to any assignee or affiliate of Company, under, or pursuant to, this Agreement or any other agreement, including under any Franchise Agreement, Lease or Sublease. All contracts by and between Developer and the proposed transferee shall provide for such subordination and may further provide that so long as the proposed transferee is not in default to Company in the performance of any of its obligations, the proposed transferee may pay such sales proceeds to Developer;
8.4.7 Developer and its owner(s) shall enter into an agreement with Company which provides that all obligations of the proposed assignee to make installment payments of the purchase price to Developer or its owner(s) shall be subordinate to the proposed assignee(s) obligations to pay to Company or Company’s Affiliates service fees, advertising contributions and any other payment obligations imposed by any Franchise Agreement or any other agreement which is contemporaneously being assigned and assumed; and
8.4.8 As of the date consent is requested and through the date of closing of the proposed transfer and assignment, Developer must not be in default under this Agreement or under any other agreements with Company, including Franchise Agreements for YOSHINOYA Restaurants owned by Developer, and must be current with all monetary obligations owed to third parties.
8.5 Additional Conditions Re Sale of Securities. Whenever the issuance, offer or sale of securities of Developer (whether or not a Publicly Traded Corporation) is subject to registration under federal or state securities laws or is offered as a private offering pursuant to a written private placement memorandum of any kind, Developer shall, at least 45 days before the proposed effective date of the registration or the delivery of any private placement memorandum, submit all offering or registration materials to Company for its prior review; (ii) reimburse Company for its actual expenses incurred in connection with reviewing the offering or registration materials, including (without limitation) attorneys’ fees, accountants’ fees and travel expenses, in an amount not to exceed $25,000 (the “Securities Review Fee”); (iii) provide Company with a written opinion of counsel, in the form and covering the matters prescribed by Company, that the offering or registration complies with all federal and state laws; and (iv) agree in writing to fully indemnify and hold Company harmless from and against any claims, demands, liability, costs or expenses of any kind arising out of the private or public offering and avoid any implication that Company participates in, or endorses, the offering.
8.5.1 Developer shall promptly delete or correct any statements concerning the YOSHINOYA System, YOSHINOYA Marks or experience of YOSHINOYA Restaurants that Company may reasonably objects to following notice from Company.
8.5.2 The Securities Review Fee shall be increased effective as of January 1 of each year during the Term by an amount equal to the percentage increase, if any, in the Consumer Price published by the United States Department of Labor, Bureau of Labor Statistics for the Los Angeles-Anaheim-Riverside, All Urban Consumers (All Items 1982 = 100), or if that index is no longer published then by a comparable index selected by Company (the “Index”), comparing the Index level existing on January 1 of each subsequent year during the Term with the Index level existing on January 1 of the year in which the Term commenced.
10 8.6 Closing of Sale to Third Party. If Company consents to an assignment to a third party, Developer, or the Individual Transferor, may only complete the transfer to the proposed transferee on the terms in the Third Party Offer or as otherwise stated in Developer’s application for consent. If there is any material change in the terms of the Third Party Offer, Company has a right of first refusal to accept the new terms subject to the conditions in this Section 8. If Company consents to the assignment, the transfer to the proposed transferee must close within 60 days from the date the Third Party Offer is first submitted to Company unless Company grants an extension of time in writing; otherwise, it must again be offered to Company.
8.7 Corporate/Entity Developer. If Developer is a corporation, LLC, partnership, or other entity, it shall furnish to Company, on execution of this Agreement or at such other time as transfer to the entity is permitted, a copy of its articles of incorporation, by-laws, operating agreement, partnership agreement or other governing agreement, as appropriate, and a list of all persons owning an interest in the equity or voting interests of the entity. Developer shall promptly provide Company with a copy of any amendments to, or changes in, such information during the Development Term.
8.7.1 During the Development Term, each person who now or later owns or acquires, either legally or beneficially, 10% or more of the equity or voting interests of Developer must execute Company’s form of personal guaranty attached hereto as Exhibit “4.”
8.7.2 Developer shall maintain stop transfer instructions against the transfer on its records of any equity or ownership interests. Each certificate representing an ownership interest in Developer shall bear a legend stating that such interest is held, and further assignment or transfer is subject to all restrictions imposed on transfer set forth in this Agreement. The chief financial officer of Developer shall deliver a certificate to Company annually, on or before January 15 each year, which lists all owners of record and all beneficial owners of any interest in the equity or voting interests of Developer as of the end of the most recent calendar year and identifies all transfers of equity or voting interests in Developer which occurred during such calendar year.
8.8 Death or Incapacity. In the event of the death or incapacity of Developer, or any person owning a Controlling Interest in the equity or voting interests of Developer, the spouse, heirs or personal representative of the deceased or incapacitated person, or the remaining shareholders, members, partners or owners (collectively, the “Successor”) shall have 180 days from the date of death or incapacity to (i) purchase the interest of the deceased or incapacitated person in this Agreement or in Developer, or (ii) complete the sale or assignment of such interest to a qualified, approved third party, provided, in either case, the purchase or assignment complies with all of the terms and conditions for assignment stated in this Section 8.
8.8.1 The development obligations imposed by this Agreement shall be tolled until the events described in (i) or (ii) of the preceding Section occur, or, if neither occurs, for 180 days. At the end of the 180 day period, if the Successor has not purchased the interest of the deceased or incapacitated person in this Agreement or in Developer or obtained Company’s consent to an assignment to a third party, Company may, at its election, terminate this Agreement.
8.8.2 For this Agreement, “incapacity” means inability due to medical reasons to devote full time and attention to the development obligations under this Agreement for at least 4 months in the aggregate during any consecutive 12 month period during the Development Term, based on the examination and findings of a physician selected by Company. A period of
11 incapacity shall continue without interruption unless and until the person suffering the incapacity resumes his or her duties under this Agreement on a full time basis for thirty (30) consecutive business days.
8.9 Transfer of Individual Franchise Agreements. Developer’s right to transfer its interest in any Franchise Agreement shall be governed by the terms of that Franchise Agreement.
9. RELATIONSHIP OF PARTIES.
9.1 Independent Contractor. This Agreement does not create a fiduciary relationship between the parties. Company and Developer are independent contractors. 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. Company shall neither regulate nor be responsible for the hiring or firing of Developer’s agents or employees or for Developer’s contracts with third parties, except to the extent necessary to protect Company’s name, reputation and goodwill, the YOSHINOYA Marks, or the confidentiality of information which may be imparted to Developer.
9.2 No Liability. Neither Company nor Developer shall be obligated by, or have any liability under, any agreements or representations made by the other that are not expressly authorized under this Agreement. Company shall not be obligated for any damages to any person or party directly or indirectly arising out of the operation of any YOSHINOYA Restaurant in which Developer owns an interest, whether caused by Developer’s negligence, willful action or failure to act.
9.3 Indemnification. Developer shall indemnify and hold Company and each of Company’s officers, directors, shareholders, employees, agents, successors and assigns, harmless from and against any and all costs, expenses, losses, liabilities, damages, causes of action, claims and demands whatsoever, arising, directly or indirectly, out of Developer’s exercise of the rights granted hereunder. Company shall have the right to retain its own counsel to defend any third party claim asserted against it which is covered by this indemnification agreement. This indemnity shall continue in full force and effect subsequent to, and notwithstanding, expiration or termination of this Agreement.
10. PERSONAL GUARANTY.
10.1 Personal Guaranty Form. If Developer is a corporation, LLC or other entity, each person who owns or at anytime during the Development Term acquires, either legally or beneficially, 10% or more of the equity or voting interests of Developer shall furnish any financial information reasonably required by Company and execute the form of personal guaranty attached to this Agreement as Exhibit “4.” An event of default under this Agreement shall occur if any guarantor fails or refuses to deliver to Company, within 10 days after Company’s written request: (i) evidence of the due execution of the personal guaranty, and (ii) current financial statements of guarantor as may from time to time be requested by Company.
10.2 Spouse. If the person signing the Personal Guaranty is married, Company may require the individual’s spouse to also sign the Personal Guaranty as a co-guarantor.
12 11. DISPUTE RESOLUTION.
11.1 Agreement to Mediate Disputes. Except as provided in Section 11.2, no party shall bring a civil action seeking enforcement or any other legal remedy founded on this Agreement until the dispute has been submitted to a mediation proceeding conducted according to the procedures in this Section 11.1.
11.1.1 Either party may initiate mediation (the “Initiating Party”) by notifying American Arbitration Association (“AAA”), with offices in Los Angeles, California (“the Mediation Service”) in writing, with a copy to the other party (the “Responding Party”). The notice shall describe with specificity the nature of the dispute and Initiating Party’s claim for relief. Thereupon, both parties shall engage in the mediation, which shall be conducted in according to the Mediation Service’s then current rules, but in a conflict between those rules and this Agreement, this Agreement controls.
11.1.2 The mediation will be conducted by a single mediator, who must be a retired judge with no past or present affiliation or conflict with any party to the mediation. The parties agree that the mediator and Mediation Service’s employees shall be disqualified as a witness, expert, consultant or attorney in any pending or subsequent proceeding relating to the dispute which is the subject of the mediation.
11.1.3 On receipt of the written mediation demand, Mediation Service shall provide the parties with a list of mediators willing to serve. If the parties do not agree on a mediator, and so advise Mediation Service in writing, within 10 days of receipt of the list, Mediation Service shall appoint the mediator. The fees and expenses of Mediation Service, including (without limitation) mediator’s fee, shall be shared equally by the parties. Each party shall bear its own attorneys fees and other costs incurred in the mediation irrespective of the outcome of the mediation or the mediator’s evaluation of each party’s case.
11.1.4 The mediation proceeding shall commence within 30 days after selection of the mediator. The mediation will be conducted at Company’s offices, unless Company and Developer agree on a mutually acceptable alternative location.
11.1.5 At least 7 days before the first scheduled session of mediation, each party shall deliver to the mediator and to the other party a concise written summary of its position regarding the matters in dispute and Initiating Party’s claims for relief, and such other matters required by the mediator.
11.1.6 The parties shall participate in good faith in the mediation with the intention of resolving the dispute, if possible. The parties recognize and agree, however, that the mediator’s recommendations and decision shall not bind the parties.
11.1.7 During the mediation, the mediator may have joint and separate meetings with the parties and their counsel, at the mediator’s discretion. The mediation shall continue until conclusion, which is deemed to occur when: (i) a written settlement is reached, (ii) the mediator concludes and informs the parties in writing that further efforts would not be useful, or (iii) the parties agree in writing that an impasse has been reached. Neither party may withdraw before the conclusion of the mediation proceeding.
11.1.8 At the mediator’s discretion, or on either party’s request, the mediator will provide a written evaluation of each party’s claims and defenses and of the likely resolution of
13 the dispute if not settled. The parties agree that the mediator is not acting as an attorney or providing legal advice on behalf of any party.
11.1.9 The mediation proceeding will be treated as a compromise settlement negotiation. All offers, promises, conduct and statements, whether oral or written, made in the course of the mediation proceeding by any party or their agents, experts, counsel, employees or representatives, and by the mediator and Mediation Service’s employees, are confidential. Such offers, promises, conduct and statements may not be disclosed to any third party and are privileged and inadmissible for any purpose, including impeachment, under applicable federal and state laws or rules of evidence; provided however, that evidence otherwise discoverable or admissible shall not be rendered not discoverable or inadmissible as a result of its use in the mediation. If a party informs the mediator that information is conveyed in confidence by the party to the mediator, the mediator will not disclose the information.
11.2 Interim Relief. The obligation to mediate shall not apply to any claim by either party seeking interim relief, including, without limitation, requests for temporary restraining orders, preliminary injunctions, writs of attachment, appointment of a receiver, claim and delivery, or any other orders which a court may issue when deemed necessary in its discretion to preserve the status quo or prevent irreparable injury, including the claim of either party for injunctive relief to preserve the status quo pending completion of a mediation and/or arbitration proceeding. The party awarded interim or injunctive relief shall not be required to post bond.
11.3 Arbitration. Any dispute arising from or relating to this Agreement, also including any claim that this Agreement (including this Section 11.3) was induced by misrepresentation or fraud, shall be resolved by arbitration according to the Commercial Rules of Arbitration of American Arbitration Association. Arbitration shall be conducted by a single arbitrator. The arbitration shall be conducted in Los Angeles, California. The arbitrator shall have authority to award or include in the award any relief which the arbitrator deems proper in the circumstances, including without limitation, money damages (with interest on unpaid amounts from the due date), specific performance and injunctive relief. Discovery shall be permitted in the arbitration in accordance with California Code of Civil Procedure Section 1283.05 and 1283.1(b). Judgment on the award of the arbitrator may be entered in and enforced by any court of competent jurisdiction. This arbitration provision is self-executing and a properly noticed arbitration may proceed despite a party’s failure to appear or participate. This agreement to arbitrate shall continue in effect subsequent to and regardless of expiration or termination of this Agreement.
11.4 Choice of Law. Subject to state law requirements to the contrary, California law shall govern the construction, interpretation, validity and enforcement of this Agreement and shall be applied in any mediation or arbitration or judicial proceeding to resolve all disputes between them, except that when the subject of the dispute arises exclusively under federal law, federal law shall govern.
11.5 Limitations Period. To the extent permitted by applicable law, any legal action of any kind arising out of or relating to this Agreement or its breach, including without limitation, any claim that this Agreement or any of its parts is invalid, illegal or otherwise voidable or void, must be commenced by no later than (i) 90 days after obtaining knowledge of the facts which constituted or gave rise to the alleged violation or liability, or (ii) one year after the act, event, occurrence or transaction which constituted or gave rise to the alleged violation or liability; provided, however, the applicable limitations period shall be tolled during the course of any mediation proceeding which is initiated before the last day of the limitations period, and such toll
14 shall commence on the date the Responding Party receives the Initiating Party’s demand for mediation and continue until the date the mediation is concluded.
11.6 Punitive or Exemplary Damages. Company and Developer, and their respective directors, officers, shareholders and guarantors, as applicable, each waives to the fullest extent permitted by law, any right to, or claim for, punitive or exemplary damages against the other and agrees that, in a dispute between them, each is limited to recovering only the actual damages proven to have been sustained by it.
11.7 Attorneys’ Fees. In any arbitration or other proceeding brought to enforce any provision of this Agreement or arising out of or in connection with the relationship of the parties, the prevailing party shall be entitled to recover against the other its reasonable attorneys’ fees and costs in addition to any other relief awarded by the tribunal. As used in this Agreement, the “prevailing party” is the party who recovers greater relief in the action. Additionally, Company shall be entitled to reimbursement of all fees, costs and expenses which it incurs, including fees to retain attorneys, accountants or other experts, to enforce its rights under this Agreement under circumstances when no mediation or judicial action is commenced.
12. MISCELLANEOUS.
12.1 Notices. All communications required or permitted to be given to either party shall be in writing and shall be deemed duly given on the earlier of: (i) the date when delivered by hand; (ii) the date when delivered by fax if confirmation of transmission is received or can be established by the sender; (iii) one business day after delivery to a reputable national overnight delivery service; or (iv) 4 business days after being placed in the United States Mail and sent by certified or registered mail, postage prepaid, return receipt requested. All notices shall be addressed to Franchisee at the following address: ______; and to Company at its headquarters at 991 West Knox Street, Torrance, California 90502; 310/217-2149 (FAX). Either party may change its address for receiving notices by appropriate written notice to the other. Notwithstanding the parties’ agreement regarding when notices shall be deemed to be given, any required payment not actually received by Company during regular business hours on the date it is due shall be deemed delinquent.
12.2 Time of the Essence. Time is of the essence of this Agreement with respect to each and every provision of this Agreement in which time is a factor.
12.3 Withholding of Consent. Except where this Agreement expressly obligates Company to reasonably approve or not unreasonably withhold approval of any action or request by Developer, Company has the absolute right to refuse any request by Developer or to withhold approval of any action by Developer. Further, whenever the consent or approval of Company is required under this Agreement such consent or approval must be in writing unless this Agreement specifies otherwise.
12.4 Waiver. Any waiver granted by Company to Developer excusing or reducing any obligation or restriction imposed under this Agreement shall be in writing and shall be effective on delivery of the writing by Company to Developer or on such other effective date as specified in the writing, and only to the extent specifically allowed in the writing. No waiver granted by Company, and no action taken by Company, with respect to any third party shall limit Company’s discretion to take action of any kind, or not to take action, with respect to Developer. Any waiver granted by Company to Developer shall be without prejudice to any other rights
15 Company may have. No delay by Company in exercising any right or remedy shall operate as a waiver, and no single or partial exercise by Company of any right or remedy shall preclude Company from fully exercising that right or remedy or any other right or remedy. Company’s acceptance of any payments made by Developer after a breach of this Agreement shall not be, nor be construed as, a waiver by Company of any breach by Developer of any term, covenant or condition of this Agreement. The rights of Company are cumulative and no exercise or enforcement by Company of any right or remedy shall preclude the exercise or enforcement by Company of any other right or remedy to which Company is entitled by law to enforce.
12.5 Capitalized Terms. Except as expressly provided herein, to the extent any capitalized term is also defined in the Franchise Agreement, the term shall have the same meaning given to it in the Franchise Agreement and such definitions are incorporated herein by this reference. All other capitalized terms shall have the meaning given to them herein.
12.6 Section Headings; Language. Section headings in this Agreement are for convenience only and shall be deemed not to affect the meaning or construction of any of the terms, provisions, covenants or conditions of this Agreement. The language used in this Agreement shall be construed according to its fair meaning and not strictly for or against Company or Developer. The term “Developer” as used herein is applicable to one or more persons, corporations, entities or partnerships, as the case may be, and the singular usage includes the plural and the masculine and neuter usages include the other and the feminine. If two or more persons are at any time Developer, whether or not as partners or joint venturers, their obligations and liabilities shall be joint and several. Nothing in this Agreement is intended, nor shall it be deemed, to confer any rights or remedies on any person or entity not a party hereto. No agreement between Company and anyone else is for the benefit of Developer. Whenever this Agreement refers to “business days,” it shall mean weekdays only, excluding Saturdays, Sundays and holidays.
12.7 Binding on Successors. Subject to the restrictions on assignment by Developer herein, the covenants, agreements, terms and conditions in this Agreement shall be binding on, and shall benefit, the successors, assigns, heirs and personal representatives of the parties.
12.8 Validity; Conformity with Applicable Law. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be valid under applicable law, but if any provision of this Agreement shall be invalid or prohibited under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the rest of the provision or the remaining provisions of this Agreement. To the extent the provisions of this Agreement provide for periods of notice less than those required by applicable law, or provide for termination other than according to applicable law, such provisions shall be deemed to be automatically amended to conform to the provisions of applicable law.
12.9 Amendments. No amendment, change, modification or variance to or from the terms and conditions in this Agreement shall be binding on any party unless it is set forth in writing and executed: (i) on behalf of Developer by Developer or, if Developer is not a natural person, by an authorized agent or officer of Developer; and (ii) on behalf of Company, by a duly authorized officer of Company.
12.10 Complete Agreement. This Agreement, including the exhibits, is the entire agreement between the parties, superseding any and all prior agreements or understandings between them pertaining to the subject matter. The recitals in this Agreement, and the exhibits, are incorporated herein by reference and made a part hereof. There are no representations,
16 warranties, promises or inducements, either oral or written, except those contained in this Agreement. However, nothing in this Agreement, the exhibits or any related agreement or document is intended to disclaim representations made in Company’s Franchise Disclosure Document which Franchisee acknowledges was furnished to Franchisee. Franchisee acknowledges that Franchisee is entering into this Agreement as a result of its independent investigation of the franchise opportunity and not as a result of any representations about Company made by any of Company’s officers, directors, shareholders, employees, agents, representatives or independent contractors that are contrary to the terms in this Agreement or in any disclosure document, prospectus, or other similar document required or permitted to be given to Franchisee under applicable law.
12.11 Covenant and Condition. Each provision of this Agreement performable by Developer shall be construed to be both a covenant and a condition.
12.12 Submission of Agreement. The submission of this Agreement to Developer is not an offer to Developer and this Agreement shall become effective only on execution by Company and Developer.
12.13 Spousal Consent. If the party entering into this Agreement as Franchisee is married and the party’s spouse is not a party to this Agreement, Franchisee’s spouse shall execute the Spousal Consent attached as Exhibit “5.”
IN WITNESS WHEREOF, the parties have executed this Agreement on the day and year first above written.
“COMPANY” “DEVELOPER”
YOSHINOYA AMERICA, INC.
By:
Its:
17
Exhibit “1”
Description of Developer’s Territory
- 1
Exhibit “2”
Development Quota
YOSHINOYA Restaurant Date by Which YOSHINOYA Restaurant Shall Open For Business
Unit #1 Unit #2 Unit #3 Unit #4
- 1
Exhibit “3”
Franchise Agreement
- 1
Exhibit “4”
Personal Guaranty
- 1
Exhibit “5”
Spousal Consent
- 1
EXHIBIT E GENERAL RELEASE
GENERAL RELEASE
This GENERAL RELEASE (“Release”) is made this ______day of ______, 20______, by ______("Releasor”) with reference to the following facts:
A. The undersigned, Releasor:
[CHECK APPROPRIATE BOX]
1. ____ is the Franchisee under, and signatory to, that certain Franchise Agreement dated ______entered into by and between YOSHINOYA AMERICA, INC., as Franchisor (the “Company”) and Releasor, as Franchisee, permitting Releasor to use the YOSHINOYA System and YOSHINOYA Marks in operating a YOSHINOYA Restaurant, as the capitalized terms are defined in the Franchise Agreement, on the terms and conditions of the Franchise Agreement; or
2. ____ applied to Company to purchase a YOSHINOYA franchise; or
3. ____ is an officer, director, member, manager or partner of ______, the entity which executed the Franchise Agreement as Franchisee; or
4. ____ is a shareholder, trustee, or owner of an interest in the equity or voting interests of ______, the entity which executed the Franchise Agreement as Franchisee.
B. This Release is being executed either pursuant to the requirements of the Franchise Agreement or the Franchise Deposit Agreement, and for other good and valuable consideration, the receipt of which is acknowledged by the parties.
NOW, THEREFORE, RELEASOR AGREES AS FOLLOWS:
1. General Release.
Releasor, for itself, himself or herself, and, if applicable, additionally, for its, his or her respective officers, directors, shareholders, members, managers, trustees, partners, employees, attorneys, heirs and successors (Releasor and such other persons are collectively referred to as the “Releasing Parties”), hereby release and forever discharge Company, its officers, directors, shareholders, agents, employees, representatives, attorneys, successors and assigns, and each of them, from any and all claims, demands, obligations, liabilities, actions, causes of action, suits, proceedings, controversies, disputes, agreements, promises, allegations, costs and expenses, at law or in equity, of every nature, character or description whatsoever, whether known or unknown, suspected or unsuspected or anticipated or unanticipated, which any of the Releasing Parties ever had, now has, or may, shall or can hereafter have or acquire (collectively referred to as “Claims”). This Release includes, but is not limited to, all Claims arising out of, concerning, pertaining to or connected with any agreement, tort, statutory violation, representation, nondisclosure, act, omission to act, fact, matter or thing whatsoever, occurring as of or prior to the date of this Release, so that after the date of this Release, none of the Releasing Parties shall have any claim of any kind or nature whatsoever against Company or its officers, directors, shareholders, agents, employees, representatives, attorneys, successors and
- 1 - assigns, directly or indirectly, or by reason of any matter, cause, action, transaction or thing whatsoever done, said or omitted to have been done or said at any time prior to the date of this Release.
2. Waiver of Civil Code Section 1542.
This Release is intended by Releasor to be a full and unconditional general release, as that phrase is used and commonly interpreted, and to constitute a full, unconditional and final accord and satisfaction, extending to all claims of any nature, whether or not known, expected or anticipated to exist in favor of Releasor or any of the other Releasing Parties against Company regardless of whether any unknown, unsuspected or unanticipated claim would materially affect settlement and compromise of any matter mentioned herein. Releasor, for itself, himself or herself, for each of the other Releasing Parties expressly, voluntarily and knowingly waives, relinquishes and abandons each and every right, protection and benefit to which Releasor or any of the Releasing Parties would be entitled, now or at any time hereafter under Section 1542 of the Civil Code of the State of California, as well as under any other statutes or common law principles of similar effect to said Section 1542, whether now or hereafter existing under the laws of California or any other applicable federal and state law with jurisdiction over the parties relationship. Releasor, for itself, himself or herself, for each of the other Releasing Parties, acknowledges that Section 1542 of the Civil Code of the State of California provides as follows:
“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially effected his settlement with the debtor.”
In making this voluntary express waiver, Releasor acknowledges that claims or facts additional to or different from those which are now known or believed to exist regarding the matters mentioned herein may later be discovered and that it is Releasor’s intention to hereby fully and forever settle and release any and all matters, regardless of the possibility of later discovered claims or facts. This Release is and shall be and remain a full, complete and unconditional general release. Releasor acknowledges and agrees that the foregoing waiver of Section 1542 is an essential, integral and material term of this Release.
3. Dispute Resolution. California law shall govern the construction, interpretation, validity and enforcement of this Release. Any dispute arising from or relating to this Release, also including any claim that this Release (including this Section 3) was induced by misrepresentation or fraud, shall be resolved by arbitration according to the Commercial Rules of Arbitration of American Arbitration Association. Arbitration shall be conducted by a single arbitrator. The arbitration shall be conducted in Los Angeles, California. The arbitrator shall have authority to award or include in the award any relief which the arbitrator deems proper in the circumstances, including without limitation, money damages (with interest on unpaid amounts from the due date), specific performance and injunctive relief. Discovery shall be permitted in the arbitration in accordance with California Code of Civil Procedure Section 1283.05 and 1283.1(b). Judgment on the award of the arbitrator may be entered in and enforced by any court of competent jurisdiction. This arbitration provision is self-executing and a properly noticed arbitration may proceed despite a party’s failure to appear or participate. The party prevailing in any action arising out of or relating to this Release shall be entitled to receive from the other party, in addition to any other relief that may be granted, its attorneys fees and
- 2 - costs incurred in the action. As used in this Release, the “prevailing party” is the party who recovers greater relief in the action.
4. Release Not Admission. Releasor understands and agrees that the giving or acceptance of this Release and the agreements contained herein shall not constitute or be construed as an admission of any liability by Company or an admission of the validity of any claims made by or against Company.
5. Authority of Parties. Each person executing this Release on behalf of a party warrants and represents that he or she is duly authorized to execute this Release on behalf of such party.
6. No Prior Assignments. Releasor represents and warrants that Releasor has not previously assigned or transferred, or attempted to assign or transfer, to any third party any of the Claims which are the subject of this Release, all of such Claims being released.
IN WITNESS WHEREOF, Releasor has executed this Release on the date first shown above.
Releasor: ______[IF APPLICABLE]
Signature: ______
Printed Name:______
Title or Capacity:______
- 3 -
EXHIBIT F SUBLEASE
SUBLEASE
This SUBLEASE is made as of ______, 201___ by and between ______, a ______[corporation (“Landlord”) and ______(“Sublessee”), with reference to the following facts:
R E C I T A L S
A. Sublessee is the “Franchisee” under a Franchise Agreement dated ______, 201___ (“Franchise Agreement”) in which Yoshinoya America, Inc. (“Company”) granted Sublessee rights to use the Yoshinoya System and Yoshinoya Marks in operating a Yoshinoya Restaurant at an approved Franchise Location (as these capitalized terms are defined in the Franchise Agreement) on the terms in the Franchise Agreement; B. Sublessee applied for approval to locate its Yoshinoya Restaurant at ______(“Franchise Location”); C. Under the Franchise Agreement, when Company approves a franchise location, Company may lease the location from the owner or master landlord and sublease the location to Sublessee, on terms in the master lease, and other terms provided in the Franchise Agreement. D. Company notified Sublessee that Company approves the Franchise Location for Sublessee’s Yoshinoya Restaurant and that Company, or a company affiliated with Company, will exercise the right to lease the location from the owner or master landlord; E. Landlord is either Company or is an entity affiliated with Company through common ownership. Landlord entered into a written lease dated ______, ____ (“Master Lease”) with ______(“Master Landlord”) for the premises where the Franchise Location is situated, as described in the Master Lease (the “Premises”). A copy of the Master Lease is attached to this Sublease as Exhibit “A.” F. In accordance with the Franchise Agreement, Landlord is willing to lease the Premises to Sublessee, and Sublessee wants to rent the Premises, all on the terms in this Sublease. Accordingly, it is agreed as follows: 1. Premises. Landlord leases to Sublessee, and Sublessee leases from Landlord, on the terms in this Sublease, the Premises, together with all easements, parking areas, rights, privileges and appurtenances under the Master Lease. 2. Term. This Sublease starts on ______, 201__ and ends on the same date on which the Master Lease terminates, unless this Sublease is sooner terminated. 3. Option to Extend. (a) The Master Lessor granted Landlord the option to extend the term of the Master Lease for ____ additional ____ year periods (each an “Option Period”), as stated in the Master Lease. Subject to Sections 3(c) – 3(e) below, following timely receipt from Sublessee of a written “Option Request” in each instance, Landlord agrees to exercise the applicable option seeking to extend the term of the Master Lease. (b) The first Option Period shall start on the day after the original Expiration Date, and any subsequent Option Period shall start on the day after the end of the preceding Option Period. The expiration of the term of the Master Lease as the same may be so extended is
- 1 - referred to as the “Expiration Date”. The period of time when the option may be exercised under the Master Lease is referred to as the “Option Exercise Period.” The deadline for exercise of the option under the Master Lease is referred to as the “Option Exercise Deadline.” (c) Sublessee shall have no right to request that Landlord exercise an option under the Master Lease (an “Option Request”) during any of the following periods: (i) After expiration or termination of the Franchise Agreement; (ii) During the period starting with giving of any notice of breach or default under this Sublease or the Franchise Agreement, and continuing until the breach or default is cured. (iii) After Sublessee's breach of any obligation imposed on the Landlord under the Master Lease and Sublessee’s failure to cure the breach within the time period, if any, provided by the Master Lease. (iv) If in the twelve (12) months preceding the Expiration Date, either (a) Sublessee shall not have paid basic rent or charges more than ten (l0) days after such payment is due, on three (3) or more occasions, regardless of whether Landlord served a three day notice on Sublessee under California Code of Civil Procedure §1161, or equivalent notice under the law of any state, or otherwise, on any such occasion, or (b) Landlord has on two or more occasions instituted legal proceedings to recover possession of the Premises from Sublessee on account of default. (d) Sublessee may deliver an Option Request only in writing, to be received by Landlord not later than fifteen (15) days before and not more than forty-five (45) days before the Option Exercise Deadline. The delivery of any Option Request shall be irrevocable and Sublessee shall have no right to withdraw same. (e) Sublessee shall, no sooner than seven (7) days after delivering the Option Request, but no later than three (3) days before the Option Exercise Deadline, inquire again in writing to Landlord whether Landlord exercised the applicable option. Landlord shall not be liable for any inadvertent failure to exercise the applicable option in the absence of this additional inquiry delivered to Landlord by Sublessee in writing within the above time. (f) In the event Sublessee timely delivers an Option Request and additional inquiry, and if the option is exercised by Landlord, then rent and other charges for the Option Period shall be the same as provided in Section 4, below. 4. Rent and Other Charges. A. Sublessee shall pay to Landlord as rent for the Premises, without offset or deduction for any reason, all rent and other charges of any kind which are the obligation of the tenant under the Master Lease, together with the Administrative Fee (defined below) and any security deposit which Landlord may be required to deliver to Master Lessor. B. Sublessee shall make all such payments to Landlord at least ten (10) days before the date such payments are required to be paid by Landlord under the Master Lease. If not received by Landlord at least ten (10) days before such payments are required to be paid by Landlord under the Master Lease, then the payment from Sublessee shall be deemed delinquent. For example, if minimum and percentage rent is due and payable under the Master Lease monthly, on or before the fifth (5th) day of each month, Sublessee’s payment of minimum and percentage rent is due and payable to Landlord at least five (5) days before the end of the prior month.
- 2 - C. The Administrative Fee is $______(the “Administrative Fee”). Sublessee shall pay the Administrative Fee to Landlord on or before the first day of each month during the term of this Sublease. D. Landlord reserves the right to increase the Administrative Fee effective January 1 each year in amounts commensurate with increases in the Consumer Price Index published by the U.S. Department of Labor, Bureau of Labor Statistics for Los Angeles-Anaheim-Riverside, All Urban Consumers (All Items 1982-84 = 100) (the “Index”), comparing the Index level existing on January 1 of each subsequent year during the term of this Sublease (the “Comparison Index”) with the Index level existing on January 1 of the year in which the term of this Sublease commences (the “Base Index”). The Administrative Fee shall not be reduced in any circumstance. (1) Each year, after January 1, Landlord shall notify Sublessee in writing of the increase in the Administrative Fee, stating the Comparison Index, the Base Index, the percentage increase between those two indices, and the new Administrative Fee. (2) Lessee shall pay the new Administrative Fee for 12 months, starting as of January 1 of each new year during the term of this Sublease until the next adjustment, if any, based on increases in the Index. (3) If the format or components of the Index are materially changed, or it is no longer published, Lessor shall substitute an index which Lessor considers to be reasonably equivalent to the Index. E. Sublessee’s obligation to pay all rent and other charges imposed on the tenant under the Master Lease includes, without limitation, minimum rent, percentage rent, common area charges, merchant association fees, assessments, insurance, taxes, late charges, penalties, interest, and any other obligations of any other kind or description imposed on the tenant under the Master Lease. F. If Sublessee fails to make any payment required by this Sublease within three (3) days after it is due, Sublessee recognizes that Landlord will incur extra expenses because of the delinquency in an amount which is impossible to ascertain. Sublessee acknowledges that a charge of ten percent (10%) of the amount of the delinquent payment is a fair approximation of Landlord’s extra expenses based on the facts and circumstances existing as of the date of this Sublease. Therefore, on written demand from Landlord given anytime after Sublessee fails to make a payment to Landlord within three (3) days after the payment is due, Sublessee shall immediately pay to Landlord a late charge equal to ten percent (10%) of the delinquent payment. This shall be in addition to and not in lieu of any late charges or other assessments due under the Master Lease. Sublessee shall also be responsible for such late charges and other assessments. Acceptance of the late charge does not waive Sublessee’s default nor prevent Landlord from exercising any other right or remedy available to Landlord under this Sublease or applicable law. G. Sublessee shall send or deliver all payments required by this Sublease to Landlord at the address shown for giving notices to Landlord, or at any other place designated in writing by Landlord. 5. Reimbursement of Lease Negotiation Costs. Sublessee shall pay and reimburse to Company and/or Landlord all costs incurred by Company and/or Landlord in negotiating, and/or otherwise associated with leasing the premises from Master Landlord and subleasing the premises to Sublessee. 6. Security Deposit. On signing this Sublease, Sublessee shall pay Landlord a
- 3 - security deposit of $______as security for full performance by Sublessee of the terms, covenants and conditions of this Sublease. Landlord may apply any portion of the deposit to remedy any default by Sublessee under this Sublease. Sublessee shall then restore the amount of the security so applied by Landlord within ten (10) days after written demand. Sublessee’s failure to do so shall be a material breach of this Sublease. Within forty-five (45) days after termination or expiration of this Sublease, Landlord shall return to Sublessee the balance of the security deposit remaining after taking any deductions authorized by this provision or law. Sublessee shall not be entitled to interest on any of the security deposit. 7. Use of Premises. Sublessee shall use the Premises only as a Yoshinoya Restaurant according to the terms of the Franchise Agreement, and for no other purpose. Sublessee shall comply with the terms of this Sublease and the Franchise Agreement. 8. Entry. Company or its agents or employees may enter the Premises for any purpose permitted by the Franchise Agreement. 9. Condition of Premises. Sublessee shall maintain the Premises, at its expense, in good repair and good, safe and sanitary condition and otherwise according to the requirements of the Franchise Agreement and Master Lease. 10. Obligations of Tenant Under Master Lease. A. This Sublease is subject and subordinate to the terms and conditions of the Master Lease, all of which are incorporated herein by reference. B. Sublessee assumes and agrees to perform and comply with all obligations required to be kept or performed by the tenant under the Master Lease, except to the extent modified by this Sublease. C, To the extent the Master Lease requires the tenant to submit written reports or other information to Master Lessor or any other person, Sublessee shall do so, and at the same time provide Landlord with a copy of each and all writings so submitted. D. Sublessee shall promptly furnish Landlord and Company with a copy of any notice, report or citation, immediately on receipt (i) concerning an unhealthy, unsanitary or unclean condition at the Premises, or (ii) asserting, suggesting, or alleging that activity at, or the physical condition of, the Premises may, or do, violate any law or regulation. 11. Assignment and Subletting. Sublessee shall have no right or power to assign or purport to assign this Sublease or any interest herein or to sublet the Premises or any part thereof, without Landlord’s prior written consent. Any purported assignment in breach of this provision shall have no effect and shall be deemed to be void. 12. No Assumption of Obligations. Landlord does not assume the obligations required to be kept or performed by the Master Lessor under the Master Lease. 13. Indemnification. Sublessee shall indemnify, defend and hold Landlord and Company and each of their respective officers, directors, shareholders, employees, agents, successors and assigns (collectively, the “Indemnified Parties”), harmless from and against any and all costs, expenses, losses, liabilities, damages, causes of action, claims and demands, arising from or relating to Sublessee’s occupancy of the Premises or breach of this Sublease, whether or not arising from bodily injury, personal injury or property damage, or any other violation of the rights of others, or in any other way. These indemnity, defense and hold harmless obligations shall also extend, without limitation, to costs and expenses incurred by the Indemnified Parties, or any of them, in defending any third party claim within the above scope,
- 4 - including, without limitation, attorneys fees and court costs. Each of the Indemnified Parties may retain its own counsel to defend any third party claim asserted against it which is covered by this indemnification agreement. The provisions of this paragraph shall survive the expiration or termination of this Sublease for any reason. 14. Termination of Sublease. This Sublease will terminate effectively immediately on written notice to Sublessee based on any of the following events: A. Sublessee’s failure to pay rent or any other charge due to Landlord pursuant to this Sublease within three (3) days after written notice of default is given to Sublessee; B. Sublessee’s breach of any obligation imposed on the tenant under the Master Lease and failure to cure such default within the time period, if any, provided by the Master Lease, resulting in termination of the Master Lease; C. Expiration or termination of the Master Lease for any reason; or D. Expiration or termination of the Franchise Agreement for any reason. 15. Effects of Termination. On termination of this Sublease, Sublessee shall have no further right to occupy the Premises, and, on written notice from Landlord to quit, which notice to quit may be included in the same notice given by Landlord in terminating this Sublease, Sublessee shall vacate the Premises. Sublessee shall be liable to Landlord for all costs incurred by Landlord to restore the Premises to the condition existing on the start date of this Sublease, ordinary wear and tear excepted. 16. Personal Guaranty. If Sublessee is a corporation, LLC or other entity, each person who owns or at anytime during the term of this Sublease, either legally or beneficially, ten percent (10%) or more of the equity or voting interests of Sublessee shall furnish any financial information reasonably required by Landlord and execute Landlord’s standard form of personal guarantee, agreeing to be, and remain, jointly and severally personally liable for Sublessee’s payments and performance under the terms of this Sublease. [______] If the franchise is a Yoshinoya Employee Franchise, the following Section 17 may possibly apply. Please check the box if the following Section 17 applies: 17. Improvements Package. Sublessee acknowledges and confirms that, in accordance with the Franchise Agreement: (a) on or about the date of this Sublease, Sublessee is entering into a financing agreement (the “Finance Agreement”) with ______or its affiliate (“Improvements Package Lender”) pursuant to which Sublessee must make scheduled payments to Improvements Package Lender through the original Expiration Date; (b) payments under the Finance Agreement are additional to, and are not included in, rent and other payments required to be made to Landlord under Section 4 above; (c) subject to the terms of the Finance Agreement and the Franchise Agreement, title to the Improvements Package (to the extent severable from the Premises) will vest in Sublessee on the original Expiration Date; and (d) Company has guaranteed the Financing Agreement and, because such guarantee is a contingent obligation of Company, Company’s auditors may from time to time require information concerning or pertaining to the financial condition of Sublessee. Sublessee agrees to fully cooperate with any inquiries the auditors may make and that as additional rent under this Sublease Sublessee will promptly reimburse Company for all costs and expenses which Company may thereby incur.
- 5 - 18. Miscellaneous. A. All communications required or permitted to be given to a party shall be in writing and shall be deemed duly given on the earlier of: (i) the date delivered by hand; (ii) one business day after delivery to a reputable national overnight delivery service for overnight delivery; or (iii) four (4) business days after being placed in the U.S. Mail and sent by certified or registered mail, postage prepaid, return receipt requested. All notices shall be addressed as follows: If to Sublessee: If to Landlord: If to Company: 991 West Knox Street 991 West Knox Street Torrance, California 90502 Torrance, California 90502 Fax: Fax (310) 527-6050 Fax (310) 527-6050
Any notice from Sublessee to Landlord shall be copied to Company. A party may change its address for receiving notices by appropriate written notice to the other. B, Time is of the essence of this Sublease with respect to each and every provision in which time is a factor. C. Any waiver granted by Landlord to Sublessee excusing or reducing any obligation or restriction under this Sublease shall be effective only if in writing and only on delivery of the writing by Landlord to Sublessee or on such other effective date specified in the writing, and only to the extent stated in the writing. Any waiver granted by Landlord to Sublessee shall be without prejudice to other rights Landlord may have. No delay by Landlord in exercising any right or remedy shall operate as a waiver, and no waiver shall be regarded as a continuing waiver of the same or other provision of this Sublease. Landlord’s acceptance of any payments made by Sublessee after breach of this Sublease shall not be, nor be construed as, waiver by Landlord of any breach by Sublessee. All remedies, either under this Sublease, at law, in equity, or otherwise afforded to Landlord, shall be cumulative and not exclusive. D. Subject to the restrictions contained herein on assignment by Sublessee, the covenants, agreements, terms and conditions in this Sublease shall bind, and shall benefit, the successors, assigns, heirs and personal representatives of the parties. If Company is not a signatory to this Sublease, then Company is intended to be a third party beneficiary of this Sublease, even though Company has not signed. E. This Sublease, including the attachment, sets forth the entire agreement between the parties, and supersedes any and all prior agreements or understandings between them pertaining to the subject matter. No amendment, change, modification or variance to or from the terms and conditions in this Sublease shall bind any party unless it is set forth in a writing and duly executed by the parties. However, nothing in this Agreement is intended to disclaim representations which Company has made in Company’s Franchise Disclosure Document which Franchisee acknowledges has been furnished to Franchisee. F. If any action or other proceeding is brought for unlawful detainer of the Premises, for breach of this Sublease, or concerning the Premises, the prevailing party shall be entitled to receive from the other party, in addition to any other relief that may be granted, its attorneys fees and costs incurred in the action or other proceeding. As used in this Sublease, the “prevailing party” is the party who recovers greater relief in the action.
- 6 - The parties have executed this Sublease on the date first stated on page 1.
“Landlord” ”Sublessee”
By: [Signature]
Its: [Print Name]
[NAME OF CORPORATION OR PARTNERSHIP]
By:
Its:
CONSENT OF MASTER LESSOR
The undersigned is the Master Lessor under the Master Lease and hereby consents to the above Sublease:
Dated: Landlord”
By:
Its:
- 7 - EXHIBIT “A”
[COPY OF MASTER LEASE]
- 8 -
EXHIBIT G GUARANTY OF SUBLEASE
GUARANTY OF SUBLEASE
FOR VALUABLE CONSIDERATION, the undersigned ("Guarantor"), to induce YOSHINOYA AMERICA, INC., a Delaware corporation ("Landlord") to enter into that certain Sublease Agreement (“Sublease”) dated as of ______, 201___ with ______, a ______("Sublessee"), and as a material inducement to Landlord to execute the Sublease, and as otherwise required as a condition of the Franchise Agreement entered into by and between Landlord in its capacity as franchiser (in such capacity, hereinafter referred to as "Company") and Sublessee, does hereby unconditionally, absolutely, unlimitedly, continuously, and irrevocably guarantee to Landlord, its successors and assigns, the full, prompt, and unconditional payment and due performance by Sublessee of each and every one of the terms, conditions, and covenants of the Sublease ("Obligations").
1. Waiver and Consents.
1.1. Guarantor waives:
a. Notice that Landlord accepted this Guaranty, and all notices and demands of any kind to which Guarantor may be entitled, including, but not limited to, demands of payment or performance, notice of non-payment, notice of amount of indebtedness outstanding at any time, notice of non-performance, notice of all renewals and extensions of Obligations covered by this Guaranty, presentments and protest and dishonor to the Guarantor or to Sublessee.
b. All rights to determine how, when and what application of payments and credits will be made on the Obligations.
c. Any and all benefits and any and all claims or defenses it may otherwise be entitled to as a guarantor or surety under applicable law, including but not limited to Sections 2787 through 2855 of the California Civil Code and/or any similar laws of California, or any state, or of the United States.
1.2. Guarantor waives notice of and consents to any amendment, modification, extension, or renewal of the Sublease, or any other agreement, between Landlord and Sublessee, the creation or incurring of new or additional Obligations, the taking of security for payment, the granting of additional time for payment, filing by or against Sublessee of bankruptcy, insolvency, reorganization, or other debtor's relief afforded under any present or future law or by the decision of any court, or any other matter, whether similar or dissimilar to any of the foregoing; and this Guaranty shall cover the terms and obligations of any such modifications, notes, security agreements, extensions, or renewals.
1.3. This Guaranty shall not be affected by any defect in the genuineness, validity, regularity, or enforceability of the Obligations or liability to Landlord, or any other circumstances whether or not referred to herein which might otherwise constitute a legal or equitable discharge of a surety or guarantor.
1.4. Guarantor waives all rights it may otherwise be entitled to, and hereby consents to any agreement or arrangement with Sublessee, or anyone else, including, without limitation, agreements and arrangements for payment extensions, subordination, composition arrangements, discharge, or release of the whole, or any part, of the Obligations of Sublessee, or of other guarantors, or for the change or surrender of any and all security if any is ever taken.
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1.5. Guarantors agree that Guarantors have no right of offset, subrogation, reimbursement, or indemnity whatsoever as against Landlord. If the Sublessee has a defense against Landlord, Guarantor shall have the same defense.
2. Subordination. Guarantor covenants and agrees that any indebtedness by Sublessee to Guarantor for any reason, currently existing or which might arise after the date hereof, shall at all times be inferior and subordinate to any indebtedness owed by the Sublessee to Landlord.
3. Joint and Several Obligations.
3.1. The Obligations, as created by this Guaranty, are independent of the obligations of Sublessee, and a separate action or actions may be brought and prosecuted against Guarantor whether brought against Sublessee, or whether Sublessee be joined in any such action or actions. The liability of the undersigned and of Sublessee shall be joint and several. Notwithstanding the above, the Guarantor shall have all defenses available to the Sublessee.
3.2. If more than one person executes a personal guaranty in favor of Landlord (whether or not in identical form), guarantying the Sublessee's payment or performance of the Obligations, each individual shall be jointly and severally liable for the Obligations. Landlord shall have recourse against any one guarantor, or all of them, or any combination of them, and Landlord’s election to pursue recourse against fewer than all guarantors shall not discharge the others. Landlord may partially or fully release Sublessee or any other guarantor without obtaining Guarantor's consent and without affecting or impairing the Obligations under this Guaranty.
4. Rights Cumulative. All rights and remedies of Landlord under this Guaranty are cumulative and not alternative, and such rights and remedies are in addition to those given to Landlord by applicable law.
5. Law; Venue; Attorneys' Fees. California law shall govern the construction, interpretation, validity and enforcement of this Guaranty. All disputes arising out of or relating to this Guaranty shall be brought in the Superior Court of California for the County of Los Angeles. The parties submit to the jurisdiction of that court. The party prevailing in any action arising out of or relating to this Guaranty shall be entitled to receive from the other party, in addition to any other relief that may be granted, its attorneys' fees and costs incurred in the action.
6. Partial Invalidity. No invalidity, irregularity, or unenforceability of all or any part of the Obligations shall affect, impair, or be a defense to this Guaranty, and this Guaranty is a primary obligation of the undersigned.
7. Obligation to be Informed. Guarantor acknowledges, represents, and warrants to Landlord, that, in executing this Guaranty, and at all times hereinafter, Guarantor relies and will continue to rely on Guarantor's own investigations, and on sources other than Landlord, for all information and facts relating to the ability of Sublessee to pay and to perform Obligations, and Guarantor does not and will not hereafter rely on Landlord for any such information or facts, and Guarantor will furnish to Landlord all facts known to and/or hereafter discovered by Guarantor relating to Sublessee's ability to pay and perform Obligations, and Guarantor does not and will not hereafter rely on Landlord for any such information or facts, and Guarantor independently reviewed the Franchise Agreement and/or any other agreements between Sublessee and Landlord.
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8. Notices. All notices required or permitted to be given to either party hereunder shall be in writing and shall be deemed duly given on the earlier of: (i) the date when delivered by hand; (ii) one business day after delivery to a reputable national overnight delivery service for overnight delivery; or (iii) four (4) business days after being placed in the U.S. Mail and sent by certified or registered mail, postage prepaid, return receipt requested. All notices shall be addressed as follows:
If to Guarantor: ______
If to Landlord: Yoshinoya America, Inc. 991 West Knox Street Torrance, California 90502 Attn: Property Management Fax: (310) 527-6050
Either party may change it address for receiving notices by written notice to the other.
9. Claim for Repayment. If claim is ever made on Landlord for repayment or recovery of any amount or amounts received by Landlord in payment of or on account of any of the debts guaranteed this agreement and Landlord repays all or part of that amount by reason of (i) any judgment, decree, or order of any court or administrative body having jurisdiction over Landlord or any of Landlord's property, or (ii) any settlement or compromise of any such claim effected by Landlord with any such claimant (including the obligor), then and in any such event, the undersigned agrees that any such judgment, decree, order, settlement, or compromise shall be binding on the undersigned, notwithstanding revocation or release of this Guaranty, or cancellation of any note or other instrument evidencing any of the Obligations, or any release of any such Obligations, and the undersigned shall be and remain liable to Landlord for the amount repaid or recovered to the same extent as if such amount was never originally received by Landlord. The provisions of this paragraph shall survive and continue in effect, notwithstanding any revocation or release hereof.
10. Miscellaneous.
10.1. This Guaranty shall bind and benefit the parties, their successors-in-interest, heirs and personal representatives.
10.2. This Guaranty states the entire agreement between the parties, superseding any and all prior agreements or understandings between them pertaining to its subject. No amendment, change, modification or variance to or from the terms and conditions in this Guaranty shall be binding unless set forth in writing and duly executed by Guarantor.
10.3. No waiver of any default under this Guaranty shall be effective unless the waiver is stated in a writing duly executed by Landlord. No such waiver shall constitute a continuing waiver of the same or any other default or provision of this Guaranty or render unnecessary Landlord's consent to or approval of any other act or subsequent act.
11. Waiver of Jury Trial. GUARANTOR HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, COUNTERCLAIM, OR CROSS¬COMPLAINT IN ANY ACTION, PROCEEDING AND/OR HEARING BROUGHT BY EITHER LANDLORD,
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SUBLESSEE, AND/OR GUARANTOR ON ANY MATTER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THE SUBLEASE, THIS GUARANTY, THE RELATIONSHIP OF LANDLORD AND SUBLESSEE, THE RELATIONSHIP OF LANDLORD, SUBLESSEE AND GUARANTOR, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY LAW, STATUTE, REGULATION, EMERGENCY, OR OTHERWISE NOW OR HEREAFTER IN EFFECT.
IN WITNESS WHEREOF, Guarantor has executed this Agreement on the date set forth below.
Dated ______
“Guarantor”
______, Individually
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EXHIBIT H ADDENDUM TO LEASE
ADDENDUM TO LEASE DATED ______, ______
BY AND BETWEEN ______, LANDLORD
AND ______TENANT
RE: RIGHTS OF YOSHINOYA AMERICA, INC., A Delaware Corporation (“Company”)
RECITALS
A. Company and Tenant (hereinafter referred to as “Tenant” and/or “Franchisee”) are parties to a Franchise Agreement dated ______, 20___ (the “Franchise Agreement”), pursuant to which Company granted Franchisee a franchise and license to use the Yoshinoya system and Yoshinoya Marks in the operation of a Yoshinoya Restaurant at a designated Franchise Location, as such capitalized terms are defined in the Franchise Agreement, on the terms and conditions stated in the Franchise Agreement.
B. Company approved Franchisee’s request to locate its Yoshinoya Restaurant on the property which is the subject of this Lease, provided that the conditions and agreements stated in this Addendum are part of the Lease.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows:
1. Assignment of Lease.
1.1. Franchisee irrevocably assigns and transfers to Company all of Franchisee’s right, title, and interest in and to this Lease and all options contained therein. This assignment may not be revoked without Company’s prior written consent, and may be accepted by Company and/or any assignee of, transferee or, or a successor-in-interest to Company (any such person or entity being referred to herein as “Assignee”), and take effect at any time under the terms and provisions of this Addendum.
1.2. Until Assignee accepts the assignment herein, Assignee shall have no obligations, liabilities, or responsibilities under this Lease or otherwise, including but not limited to obligations of the Landlord and/or Tenant hereunder, or any obligations as a guarantor or indemnitor.
2. Use of Property.
2.1. Notwithstanding anything to the contrary in this Lease, until Company delivers to Landlord notice in writing that grounds exist for termination of the Franchisee Agreement:
(a) The Premises shall be used only for the operation of a Yoshinoya Restaurant and only during the operating hours established by Company, subject to local zoning restrictions, if any.
(b) Franchisee shall have the right to display all the Yoshinoya Marks, as they may be modified by Company from time to time. All exterior signs of Franchisee and all
- 1 - monument signs shall comply with the specifications in Exhibit “A” attached hereto or such additional specifications as may be reasonably adopted by Company.
(c) Company shall have the right to enter the Premises to inspect Franchisee’s operation of the Yoshinoya Restaurant and engage in all activities expressly permitted by the Franchise Agreement.
2.2. If Company notifies Landlord in writing that grounds exist for termination of the Franchisee Agreement, Franchisee thereafter will not engage in, and Landlord shall not thereafter permit, the sale of prepared oriental food on a quick service basis at the Premises.
2.3. Landlord agrees that during the term hereof, and for a period of two years thereafter, not to allow:
(a) Any quick service restaurant serving oriental food, or sale of prepared oriental food, on the Premises or on the Shopping Center or on contiguous lands leased, or controlled by Landlord;
(b) Any tenant in the Shopping Center to sell any food item described or designated as a “Beef Bowl”, “Chicken Bowl”, “Vegetable Bowl” or similar variation incorporating the name “Bowl” in the menu item description.
3. Default in Franchise Agreement.
3.1. Franchisee’s default under the Franchise Agreement, for any reason, shall constitute an event of default under this Lease, which can be cured only if the Franchise Agreement default is timely cured by the Franchisee.
4. Notice to Company.
4.1. On request from Company, Landlord shall furnish Company with copies of all information pertaining to sales and activities of the Yoshinoya Restaurant in Landlord’s possession, including copies of correspondence and reports received from Franchisee or reports prepared by others about the Yoshinoya Restaurant.
4.2. Landlord shall promptly furnish Company and Franchisee with a copy of any notice, report or citation which Landlord receives:
(a) Concerning an unhealthy, unsanitary, or unclean condition at Franchisee’s Yoshinoya Restaurant; or
(b) Asserting, suggesting, or alleging that activities at, or the physical condition of, the Premises may, or do, violate any law or regulation.
5. Default by Franchisee.
5.1. Landlord agrees it shall not terminate or purport to terminate this Lease because of any actual or claimed default or breach hereunder by Franchisee if Assignee, within sixty (60) days after service of written notice on Company from Landlord of Landlord’s intention to terminate this Lease for such breach or default, shall:
- 2 - (a) Cure the breach or default if it can be cured by payment or expenditure of money provided to be paid under the terms of this Lease, specifically including, but limited to, payment of Rent, or if the default or breach is not so curable, commence and thereafter pursue to completion the steps and proceedings to obtain possession of the property, and thereafter cure the default.
(b) Keep and perform all the covenants and conditions of this Lease, requiring the payment or expenditure of money by Tenant until such time as Assignee shall have had the opportunity to terminate the leasehold interest of Franchisee, provided, however, that if Assignee fails or refuses to comply with the conditions of this section 5.1(b), then, and thereon, Landlord shall be released from the covenants of forbearance in Section 5.1 with respect to that breach or default.
(c) Assignee shall have no obligation to comply with the conditions of this section. If Assignee shall fail or refuse to comply with the conditions of this section, then and thereon Landlord shall be released from the conditions of forbearance in Section 5.1 with respect to that breach or default, and such release shall be the only remedy available to Landlord.
6. Acceptance of Assignment by Assignee.
6.1. Assignee shall have the right to accept the assignment herein if (1) either the Franchise Agreement expires or is terminated for any reason, or (2) Franchisee loses the right to occupy the Premises for any reason prior to expiration of the Lease. If Assignee accepts the assignment, Franchisee shall be deemed to be, from and after acceptance, a sublessee of Assignee on the terms and conditions in this Lease. All obligations of Franchisee to Landlord shall be deemed to be obligations of Franchisee to Assignee, and Assignee shall have all rights of a sublessor to terminate Franchisee’s rights under this Lease as a sublessee, and to exercise all rights which the Landlord would have had and does have to obtain immediate possession of the Premises, to terminate the sublease, or any other remedy provided by law.
7. Rights of Assignee Upon Acceptance of Assignment.
7.1 If Assignee accepts the assignment herein contained, then:
(a) Assignee shall have all rights of Franchisee under and to said Lease;
(b) Assignee shall have the right to assign, transfer, mortgage, or otherwise transfer, encumber, or sublet (collectively “Transferring”) all or any part of its interest in this Lease or in the Premises, without Landlord’s prior consent.
(c) Assignee shall be liable to perform the obligations of Franchisee under this Lease arising from and after the acceptance of the assignment by Assignee and continuing so long as Assignee holds title to the leasehold. Assignee shall have no obligation to perform any obligations of Franchisee which Franchisee did not perform prior to default unless said obligations were specifically set forth in the notice to Company provided in Section 5 above.
8. No Voluntary Surrender or Amendment.
8.1. For the benefit of Company, Landlord agrees not to accept a voluntary surrender of this Lease at any time before Landlord receives written notice that the Franchise Agreement
- 3 - between Company and Franchisee has been terminated. Landlord or Franchisee shall not subordinate or subject this Lease to any mortgage or encumbrance which may hereafter be placed on the fee or amend or alter any term or provision of this Lease without securing Company’s prior written consent. Landlord and Franchisee shall not enter into any amendment or modification of this Lease without Company’s prior written consent. Any purported amendment or modification made without Company’s prior written consent shall not bind any Assignee.
9. Communications.
9.1. All notices and other communications required or permitted to be given by the parties under this Addendum shall be in writing and shall be deemed duly given on the earlier of.
(a) The date when delivered by hand;
(b) The date when delivered by a reputable national overnight delivery service; or
(c) Four (4) business days after being placed in the United States Mail and sent by certified or registered mail, postage prepaid, return receipt requested. All notices shall be addressed as follows:
Company: YOSHINOYA AMERICA, INC. 991 West Knox Street Torrance, California 90502
Phone: (310) 527-6060 Fax: (310) 527-6050
With Copy to Company’s Counsel (which shall not constitute notice): David J. Lewis, Esq. Donfeld, Kelley & Rollman 11845 W. Olympic Boulevard, Suite 1245 Los Angeles, California 90064
Phone: (310) 312-8077 Fax: (310) 312-8014
Landlord:
Tenant:
Any party may change its address for receiving notices by appropriate written notice to the other parties.
- 4 - (d) Any waiver excusing or reducing any obligation imposed by this Addendum shall be in writing and executed by the party charged with making the waiver and effective only to the extent specifically allowed in such writing. No waiver shall constitute a continuing waiver of the same or a waiver of any other provision.
(e) The provisions in this Addendum shall be construed simply according to their fair meanings and not strictly for or against any party. Nothing in this Addendum is intended, nor shall it be deemed, to confer any rights or remedies on any person or entity not a party hereto.
(f) This Addendum shall bind, and shall benefit, the successors, assigns, heirs, and personal representatives of the parties. The rights of Company hereunder may be assigned on one or more occasions in Company’s sole discretion.
(g) This Addendum states the entire agreement with regard to the rights of Company, fully superseding any and all prior agreements or understandings between the parties pertaining to the subject matter of this Addendum. No amendment, change, modification, or variance to or from the terms and conditions in this Addendum shall be binding on any party unless set forth in a writing duly executed by each party.
10. Miscellaneous.
10.1. The signature of Company to this Addendum shall not be deemed to be, nor shall it impose any obligations on Company not specifically stated in this Addendum.
11. Waiver of Jury Trial.
11.1. LANDLORD, TENANT AND COMPANY HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, COUNTERCLAIM, OR CROSS-COMPLAINT IN ANY ACTION, PROCEEDING AND/OR HEARING BROUGHT BY EITHER LANDLORD, TENANT OR COMPANY ON ANY MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS ADDENDUM, THE RELATIONSHIP OF LANDLORD, TENANT AND ASSIGNEE, THE USE OR OCCUPANCY OF THE PREMISES, OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY LAW, STATUTE, REGULATION, EMERGENCY, OR OTHERWISE NOW OR HEREAFTER IN EFFECT.
COMPANY: YOSHINOYA AMERICA, INC.
BY:
LANDLORD:
BY:
FRANCHISEE:
BY:
- 5 -
EXHIBIT I CONFIDENTIALITY, NON-DISCLOSURE AND NON-COMPETITION AGREEMENT
YOSHINOYA AMERICA, INC.
CONFIDENTIALITY AND NONDISCLOSURE AGREEMENT
The undersigned ______:
1. CHECK AND COMPLETE APPROPRIATE BOX:
a. ______is the Franchisee under, and signatory to, that certain Franchise Agreement dated ______, 20___(the “Franchise Agreement”) entered into with YOSHINOYA AMERICA, INC. (“Company”) pursuant to which Franchisee has the right to own and operate a YOSHINOYA Restaurant under the conditions stated therein;
b. ______is an officer, director, member, manager or partner of ______, the entity which executed the Franchise Agreement as Franchisee;
c. ______is a shareholder, trustee, or owner of an interest in the equity or voting interests of ______, the entity which executed the Franchise Agreement as Franchisee; or
d. ______is an employee of ______, the entity which executed the Franchise Agreement as Franchisee.
e. ______is associated with ______, the entity which executed the Franchise Agreement as Franchisee in the following capacity: ______.
2. The undersigned acknowledges that to induce Company to grant Franchisee a license and franchise to operate a YOSHINOYA Restaurant, Franchisee agreed to execute, and to cause certain persons owning an interest in, or who are employed by, or associated with, Franchisee to execute, Company’s form of Confidentiality and Non-Disclosure Agreement (“Agreement”) for the benefit of Company. The undersigned acknowledges that for such reason, the undersigned is required to execute this Agreement. The undersigned read this Agreement and understands its terms and is willing to execute this Agreement for the benefit of Company.
3. The undersigned agrees as follows:
a. Nondisclosure of Confidential Information. The undersigned agrees not to disclose, duplicate, sell, reveal, divulge, publish, furnish or communicate, directly or indirectly, any Confidential Information (as defined below) of Company to any other person, firm or entity, unless authorized in writing by Company. The undersigned agrees not to use any Confidential Information for his or her own personal gain or to further the purposes of others, whether or not the Confidential Information has been conceived, originated, discovered or developed, in whole or in part, by the undersigned or represents the undersigned’s work product. To the extent the undersigned assisted in preparation of any information which Company considers to be Confidential Information or prepared or created such information by himself or herself, the undersigned assigns any rights he or she may have in such information as creator to Company, including all ideas made or conceived by the undersigned.
- 1 - G:\lhsmh\TG\12912-2\533587.DOC b. Definition of Confidential Information. “Confidential Information” includes, without limitation, the following: any information or knowledge concerning methods for constructing, equipping or operating a YOSHINOYA Restaurant; knowledge of pricing, sales and profit performance at YOSHINOYA Restaurants; knowledge of sources and suppliers of goods, services, equipment, fixtures, furnishings and other items used in operating YOSHINOYA Restaurants; knowledge regarding ingredients, recipes and food preparation processes; demographic data for determining restaurant sites and exclusive territories; results of customer surveys and promotional programs; and, in general, methods, specifications, customer data, pricing and cost data, procedures, information systems and knowledge in the operation of YOSHINOYA Restaurants, whether now known or in existance or hereafter acquired or created, and whether or not included in Company’s Systems Manual. Confidential Information does not include (i) information which Franchisee or the undersigned demonstrates came to its, his or her attention independent of the YOSHINOYA franchise, and prior to Company’s disclosure of the information in the Systems Manual or otherwise, and (ii) information that Company agrees is, or has become, generally known in the public domain, except where public knowledge is the result of wrongful disclosure (whether or not deliberate or inadvertent).
c. Return of Proprietary Materials. On expiration or termination of the Franchise Agreement, the undersigned shall surrender to Franchisee, or, if directed by Company, directly to Company, all materials in the possession of the undersigned relating or concerning any Confidential Information. The undersigned acknowledges that such materials shall be and remain the sole property of Company.
d. Restriction of Competition During Term of Franchise Agreement.
(1) This Paragraph d. shall apply to the activities of the undersigned conducted anywhere in the world for a period equal in duration to the term of the Franchise Agreement, including any renewal terms; provided, however, if the undersigned ceases to be an officer, director, shareholder, member, manager, trustee, owner, general partner, employee or otherwise associated in any capacity with Franchisee prior to the expiration or termination of the Franchise Agreement, then the restrictions in this Paragraph d. shall no longer apply to the undersigned after 2 years from the date the undersigned ceases to be an officer, director, shareholder, member, manager, trustee, owner, general partner, employee or otherwise associated in any capacity with Franchisee.
(2) During the time period and within the geographic area described in subparagraph (1), the undersigned shall not, directly or indirectly, own, engage in or render services, whether as an investor, partner, lender, officer, director, manager, employee, consultant, representative or agent, to any restaurant which predominantly serves menu items denominated as a “Bowl” or any business which produces, manufactures or sells Japanese foods which include rice bowls of any kind.
(3) During the time period and within the geographic area described in subparagraph (1), the undersigned may engage in any activity not expressly prohibited by this Paragraph d. However, in connection with such permitted activities, the undersigned agrees not to (i) use, in any manner whatsoever, the YOSHINOYA Marks or the Confidential Information, (ii) engage in any conduct or activity which suggests or implies that Company is associated with, or authorizes, the activities engaged in by the undersigned; (iii) induce any other person to engage in conduct proscribed in this Paragraph d.; or divert customers away from any YOSHINOYA Restaurant.
- 2 - e. Additional Post-Term Agreements Regarding Competition.
(1) The agreements in this Paragraph e. shall apply to the undersigned throughout the 2 years following the expiration or termination of the Franchise Agreement for any reason, or an assignment of the franchise by Franchisee under the conditions stated in the Franchise Agreement, whichever occurs first; provided, however, if the undersigned ceases to be an officer, director, shareholder, member, manager, trustee, owner, general partner, employee or otherwise associated in any capacity with Franchisee prior to the expiration or termination of the Franchise Agreement, then the restrictions in this Paragraph d. shall no longer apply to the undersigned after 2 years from the date the undersigned ceases to be an officer, director, shareholder, member, manager, trustee, owner, general partner, employee or otherwise associated in any capacity with Franchisee.
(2) The restrictions in this Paragraph e. shall apply to the undersigned’s activities conducted anywhere within a radius of 25 miles from : (i) the Franchise Location (as defined in the Franchise Agreement), and (ii) any other YOSHINOYA Restaurant (regardless of whether the YOSHINOYA Restaurant opens before or after the date of this Agreement, or is opened by another franchisee, Company or a person or entity related or affiliated with Company).
(3) During the time period and within the geographic area described in subparagraphs (1) and (2) of this Paragraph e., the undersigned shall not, directly or indirectly, own, engage in or provide any services to, whether as an investor, partner, lender, director, officer, manager, employee, consultant, representative or agent, any restaurant which predominantly serves menu items denominated as a “Bowl” or any business which produces, manufactures or sells Japanese foods which include rice bowls of any kind.
(4) The parties acknowledge that the undersigned may engage in any activities not expressly prohibited by this Paragraph e. However, in connection with such permitted activities, the undersigned agrees not to (i) use, in any manner whatsoever, the YOSHINOYA Marks or the Confidential Information; (ii) engage in any conduct or activity which suggests or implies that Company is associated with, or authorizes, the activities engaged in by the undersigned; (iii) induce any other person to engage in conduct proscribed in this Paragraph e.; or (iv) divert customers away from any YOSHINOYA Restaurant.
f. Ownership of Stock in Public Corporation. Notwithstanding anything to the contrary, this agreement does not prohibit the undersigned from owning 5% or less of the voting stock of a Publicly Held Corporation (as defined in the Franchise Agreement) that operates restaurants which predominantly serve menu items denominated as a “Bowl” or produces, manufactures or sells Japanese foods which include rice bowls of any kind.
g. Irreparable Harm to Company. The undersigned understands and agrees that Company will suffer irreparable injury not capable of precise measurement in monetary damages if the Confidential Information is obtained by any person, firm or corporation and is used in competition with Company or another YOSHINOYA Franchisee, or if the undersigned breaches the covenants set forth in this Agreement. Accordingly, in the event of a breach of this Agreement by the undersigned, the undersigned consents to entry of interim relief, including, without limitation, the entry of a temporary restraining order, preliminary injunction, permanent injunction, writ of attachment, appointment of a receiver, and any other equitable relief which the court deems necessary in order to prevent irreparable injury, all without the requirement that bond be posted. The undersigned agrees that the award of equitable remedies to Company in
- 3 - the event of such breach is reasonable and necessary for the protection of the business and goodwill of Company.
h. Validity; Conformity With Applicable Law. Each provision of this Agreement shall be interpreted in such manner as to be valid under applicable law, but if any provision of this Agreement shall be invalid or prohibited thereunder, such provision shall be ineffective to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Agreement.
i. Dispute Resolution. Any dispute arising from or relating to this Agreement, also including any claim that this Agreement (including this Section 3(e)(i) was induced by misrepresentation or fraud, shall be resolved by arbitration according to the Commercial Rules of Arbitration of American Arbitration Association. Arbitration shall be conducted by a single arbitrator. The arbitration shall be conducted in Los Angeles, California. The arbitrator shall have authority to award or include in the award any relief which the arbitrator deems proper in the circumstances, including without limitation, money damages (with interest on unpaid amounts from the due date), specific performance and injunctive relief. Discovery shall be permitted in the arbitration in accordance with California Code of Civil Procedure Section 1283.05 and 1283.1(b). Judgment on the award of the arbitrator may be entered in and enforced by any court of competent jurisdiction. This arbitration provision is self-executing and a properly noticed arbitration may proceed despite a party’s failure to appear or participate. This agreement to arbitrate shall continue in effect subsequent to and regardless of expiration or termination of this Agreement. Except as otherwise provided in Paragraph g., the parties agree that California law shall govern the construction, interpretation, validity and enforcement of this Agreement. The party prevailing in any action arising out of or relating to this Agreement shall be entitled to receive from the other party, in addition to any other relief that may be granted, its attorneys fees and costs incurred in the action. As used in this Agreement, the “prevailing party” is the party who recovers greater relief in the action.
j. Savings Clause. To the extent any provision of this Agreement is deemed unenforceable by virtue of its scope in terms of geographic area, business activity prohibited and/or length of time, but could be enforceable if modified, the undersigned agrees that the provision shall be reduced in scope in order that this Agreement, as modified, may be enforced to the fullest extent permissible under the laws of the jurisdiction in which enforcement is sought. If any provision of this Agreement is determined to be void or unenforceable under California law (the governing law selected by the parties pursuant to Paragraph 3.i.), but would be enforceable as written or as modified under the laws of the state in which Franchisee’s YOSHINOYA Restaurant is located (the “Local Laws”), then the parties agree that the Local Laws shall govern any dispute concerning or involving the construction, interpretation, validity or enforcement of this Agreement.
k. Miscellaneous.
(1) Any waiver granted to the undersigned by Company excusing or reducing any obligation or restriction imposed under this Agreement shall be evidenced by a writing executed by Company in order to be effective and shall only be effective to the extent specifically allowed in such writing. No such waiver shall constitute a continuing waiver of the same or any other default or provision of this Agreement or render unnecessary Company’s consent to or approval of any other act or subsequent act. Any waiver granted by Company shall be without prejudice to any other rights Company may have. The rights and remedies granted to Company are
- 4 - cumulative and non-exclusive. No delay on the part of Company in exercising any right or remedy shall operate as a waiver thereof
(2) This Agreement sets forth the entire agreement pertaining to the subject matter hereof, fully superseding any and all prior agreements or understandings that may exist between the undersigned and the Company pertaining to such subject matter. No amendment, change, modification or variance to or from the terms and conditions set forth in this Agreement shall be binding on the undersigned unless it is set forth in a writing and duly executed by the undersigned and Company.
(3) This Agreement shall be binding on the undersigned’s heirs, executors, successors and assigns as though originally executed by such persons.
(4) The parties agree that all capitalized terms in this Agreement shall have the same meaning assigned to them in the Franchise Agreement and incorporate such definitions herein.
IN WITNESS WHEREOF, the undersigned has entered into this Agreement as of the date shown above the undersigned’s signature.
DATED:
Signature
Print Name
- 5 -
EXHIBIT J PERSONAL GUARANTY
PERSONAL GUARANTY AND SUBORDINATION AGREEMENT
The undersigned (“Guarantor”), to induce YOSHINOYA AMERICA, INC. (“Company”):
(i) to enter into that certain Franchise Agreement dated ______, 20___ (the “Franchise Agreement”) with ______as Franchisee (the “Corporation”);
(ii) to permit assignment of the Franchise Agreement to the Corporation by the individual or individuals who are the original signatories of the Franchise Agreement as franchisee, or
(iii) as otherwise required as a condition of the Franchise Agreement, enters into this Guaranty and Subordination Agreement (“Guaranty”) for the benefit of Company and unconditionally, absolutely, jointly and severally, personally guarantees to Company, its successors and assigns, the full, timely and complete payment and performance of all obligations of the Corporation which are or may become due and owing to Company or to any entity affiliated with Company, including, but not limited to, all obligations arising out of the Franchise Agreement, any Sublease by and between the Corporation and Company or any entity now or hereafter affiliated with Company, and any other agreement now or hereafter existing between Company and the Corporation (collectively, the “Guaranteed Obligations”) in the same manner as if the Franchise Agreement, Sublease or other agreement was entered into by Company and Guarantor directly. The obligations of Guarantor under this Guaranty are independent of the obligations of the Corporation or any other guarantor, and shall be continuing and irrevocable until all of the Guaranteed Obligations have been fully satisfied.
1. Waivers; Amendments.
a. Guarantor waives (i) notice that Company accepted, or will accept, money or other consideration from the Corporation or for the Corporation’s benefit, (ii) notice that the Corporation incurred, or will incur, any new or additional obligations or liability to Company or to any entity affiliated with Company, and (iii) any and all other notices and demands to which it may be entitled under applicable law.
b. Guarantor waives all rights to determine how, when and what application of payments and credits will be made on the Guaranteed Obligations.
c. This Guaranty shall not be affected by the amendment, modification, extension or renewal of any agreement between Company and the Corporation, by the creation or incurring of new or additional Guaranteed Obligations, the taking of security for payment, the granting of additional time for payment, the filing by or against the Corporation of bankruptcy, insolvency, reorganization or other debtor’s relief afforded under any present or future law or by the decision of any court, or any other matter, whether similar or dissimilar to any of the foregoing; and this Guaranty shall cover the terms and obligations of any such modifications, notes, security agreements, extensions, or renewals.
- 1 - G:\lhsmh\LW\12912-2\460762.DOC d. This Guaranty shall not be affected by any defect in the genuineness, validity, regularity, or enforceability of the Corporation’s obligations or liability to Company, or any other circumstances whether or not referred to herein which might otherwise constitute a legal or equitable discharge of a surety or guarantor.
e. Guarantor waives all rights it may otherwise be entitled to by reason of Company’s failure to enforce, or delay in enforcing, any of Company’s rights with respect to the Guaranteed Obligations.
f. Guarantor waives any and all benefits it may otherwise be entitled to as a guarantor or surety under applicable law, including the provisions of California Civil Code Sections 2787 through 2855.
g. Guarantor’s liability under this Guaranty shall not be contingent on Company’s exercise or enforcement of any remedy it may have against the Corporation or others, or the enforcement of any lien or realization upon any security Company may at any time possess.
2. Subordination. Guarantor covenants and agrees that any indebtedness by the Corporation to Guarantor for any reason, currently existing or which might arise after the date hereof, shall at all times be inferior and subordinate to any indebtedness owed by the Corporation to Company. As long as the Corporation owes any monies to Company (other than fees or payments that are not past due), the Corporation will not pay, and Guarantor will not accept payment of, any part of any indebtedness which may be owed by the Corporation to Guarantor, either directly or indirectly, without Company’s prior written consent.
3. Joint and Several Obligations. If more than one person executes a personal guaranty in favor of Company (whether or not in identical form), guarantying the Corporation’s payment or performance of the Guaranteed Obligations, each individual shall be jointly and severally liable for the Guaranteed Obligations. Company shall have recourse against any one guarantor, or all of them, and its election to pursue recourse against fewer than all guarantors shall not discharge the others. Company may partially or fully release the Corporation or any other guarantor without obtaining Guarantor’s consent and without affecting or impairing Guarantor’s obligations under this Guaranty.
4. Rights Cumulative. All rights and remedies of Company under this Guaranty are cumulative and not alternative, and such rights and remedies are in addition to those given to Company by applicable law.
5. Dispute Resolution. California law shall govern the construction, interpretation, validity and enforcement of this Guaranty. Any dispute arising from or relating to this Guaranty, also including any claim that this Guaranty (including this Section 5) was induced by misrepresentation or fraud, shall be resolved by arbitration according to the Commercial Rules of Arbitration of American Arbitration Association. Arbitration shall be conducted by a single arbitrator. The arbitration shall be conducted in Los Angeles, California. The arbitrator shall have authority to award or include in the award any relief which the arbitrator deems proper in the circumstances, including without limitation, money damages (with interest on unpaid amounts from the due date), specific performance and injunctive relief. Discovery shall be permitted in the arbitration in accordance with California Code of Civil Procedure Section 1283.05 and 1283.1(b). Judgment on the award of the arbitrator may be entered in and enforced by any court of competent jurisdiction. This arbitration provision is self-executing and a properly noticed arbitration may proceed despite a party’s failure to appear or participate. This
- 2 - agreement to arbitrate shall continue in effect subsequent to and regardless of expiration or termination of this Agreement.
6. Miscellaneous.
a. All notices required or permitted to be given to either party shall be in writing and shall be deemed duly given on the earlier of: (i) the date when delivered by hand; (ii) one business day after delivery to a reputable national overnight delivery service; or (iii) 4 business days after being placed in the United States Mail and sent by certified or registered mail, postage prepaid, return receipt requested. All notices shall be addressed as follows:
If to Guarantor: ______Fax:______
If to Company: 991 West Knox Street Torrance, California 90502 Fax: (310) 217-2149
Either party may change its address for receiving notices by appropriate written notice to the other.
b. This Guaranty shall be binding on, and shall benefit, Guarantor’s successors-in- interest, heirs and personal representatives.
c. This Guaranty sets forth the entire agreement between the parties, fully superseding any and all prior agreements or understandings between them pertaining to the subject matter hereof. No amendment, change, modification or variance to or from the terms and conditions set forth in this Guaranty shall be binding unless it is set forth in a writing and duly executed by Guarantor.
d. No waiver of any default under this Guaranty shall be effective unless the waiver is evidenced by a writing duly executed by Company. No such waiver shall constitute a continuing waiver of the same or any other default or provision of this Guaranty or render unnecessary Company’s consent to or approval of any other act or subsequent act.
e. If Guarantor is a married individual and his or her spouse is not also required by Company to execute this Guaranty as a guarantor, Guarantor’s spouse shall execute the Spousal Consent attached as Exhibit “A.”
IN WITNESS WHEREOF, Guarantor has executed this Guaranty on the date set forth below.
“Guarantor” ______Print Name (Please sign without title)
Dated: ______
- 3 - EXHIBIT “A”
CONSENT OF SPOUSE
- 4 -
EXHIBIT K YOSHINOYA RESTAURANTS
YOSHINOYA RESTAURANTS
FRANCHISED LOCATIONS OPERATING AS OF DECEMBER 31, 2011
CALIFORNIA
Corona 401 S. Lincoln Ave. Corona, CA 92882 951-549-9294 Tam Lieu Unit-C
Culver City 5495 Sepulveda Culver City, CA 310-370-4357 Kae Samsen Blvd. 90230
Cupertino 19825 Stevens Cupertino, CA 95014 408-253-8049 Caroline Delizo Creek Blvd. El Monte 11030 Lower Azusa El Monte, CA 91731 626-422-2333 Steve Lee; Suk Ahn Rd. Lawndale 17070 Hawthorne Lawndale, CA 90260 310-370-7055 Philip Wen Blvd. Los Angeles 3081 N. San Los Angeles, CA 323-258-4142 Virode Fernando Road 90065 Pukasamsombut Los Angeles 2850 S. Crenshaw Los Angeles, CA 323-766-9220 Yasuhiko Sugimoto Blvd. 90016 Los Angeles 2215 Vermont Ave. Los Angeles, CA 323-732-1516 Francisco Sandoval 90007 Los Angeles 3476 Whittier Blvd. Los Angeles, CA 323-269-3868 Whittier & Spence; 90022 Jean Song Los Angeles 1570 S. Western Los Angeles, CA 323-733-4623 Western & Venice; Ave. 90006 Susie Shim Monterey Park - 2121 S. Atlantic Monterey Park, CA 323-780-8288 Ara Tien South Blvd. 91754 North Hollywood 6050 Lankershim North Hollywood, CA 818-762-3888 Lankershim; Sue Blvd. 91606 Suzuki Northridge 18441 Nordhoff St. Northridge, CA 818-885-5133 Roger Moussa; Chris 91325 Muradyan Riverside 1201 University Ave. Riverside, CA 92507 951-784-2333 Suk Han and Steve Lee (S&S Investment Group) Santa Clara 1790 El Camino Santa Clara, CA 408-260-0210 Caroline Delizo Real 95050 Santa Fe Springs 11400 Washington Whittier, CA 90606 562-695-3848 Indra Rustandi Blvd. South Gate 3506 Tweedy Blvd. South Gate, CA 323-564-9934 Darunee 90280 Chutiyasantayanon Sun Valley 8400 Sunland Blvd. Sun Valley, CA 818-252-0896 Damrong Sangern 91352 Sylmar 12902 Foothill Blvd. Sylmar, CA 91342 818-365-7444 Roger Moussa Walnut 1269 N. Grand Ave. Walnut, CA 91789 909-598-8111 Alan Yu; Marvin Cheng
1 G:\lhsmh\LW\12912-2\531152.DOC
NEVADA Las Vegas 4808 S. Maryland Las Vegas, NV 702-798-5568 DB Group, LLC, Parkway 89119 Brian DeBorja and Francis DeBorja
FRANCHISE AGREEMENTS SIGNED BUT OUTLET NOT OPENED AS OF DECEMBER 31, 2011
CALIFORNIA Lancaster Ariel and Marlene Hutalla Westwood – UCLA Campus Roger Moussa and Chris Muradyan Los Angeles James Yu and John Kim Barstow John C. Wang
2 FRANCHISEES WHO HAVE HAD AN OUTLET TERMINATED, CANCELLED, NOT RENEWED OR OTHERWISE VOLUNTARILY OR INVOLUNTARILY CEASED TO DO BUSINESS UNDER THE FRANCHISE AGREEMENT DURING THE FISCAL YEAR ENDED DECEMBER 31, 2011:
JIMMY KWAK 330 N. DYSART RD. GOODYEAR, AZ 85338
PETER KIM 6598 CHERRY AVENUE LONG BEACH, CA 90805
JP&B COMPANY * ALEXANDER KIM 2944 MURFIELD DRIVE LEWISVILLE, TEXAS 75067
* This location opened and closed in the year 2011
FRANCHISEES WHO HAVE NOT COMMUNICATED WITH US WITHIN 10 WEEKS OF AN APPLICATION DATE
NONE
3
COMPANY-OWNED LOCATIONS OPERATING AS OF DECEMBER 31, 2011
CALIFORNIA
Alhambra 1701 W. Valley Blvd. Alhambra, CA 91803 626-570-9133
Bell Gardens 6801 S. Eastern Ave. Bell Gardens, CA 90201 323-771-8568
Burbank 1215 N. San Fernando Blvd. Burbank, CA 91504 818-556-5623
Canoga Park 7300 Topanga Canyon Blvd. Canoga Park, CA 91303 818-340-2103
Carson 101 E. Carson Street Carson, CA 90745 310-835-9043
Chula Vista 1299 Broadway Chula Vista, CA 91910 619-422-2199
City of Industry 15685 Valley Blvd. City of Industry, CA 91744 626-330-9820
Costa Mesa 2800 Harbor Blvd. # A Costa Mesa, CA 92628 714-437-5379
Covina 420 N. Azusa Ave. Covina, CA 91722 626-858-0801
Downey 7910 Florence Ave. Downey, CA 90240 562-928-1603
El Monte 3532 N. Peck Road El Monte, CA 91731 626-442-4277
El Monte 10534 Garvey Ave., #101 El Monte, CA 91733 626-401-0132
Fontana 16833 Valley Blvd. Fontana, CA 92336 909-428-6732
Fullerton 450 N. State College Blvd. Fullerton, CA 92631 714-871-8442
Garden Grove 13512 Harbor Blvd. Garden Grove, CA 92843 714-534-4355
Gardena 1825 Redondo Beach Blvd. Gardena, CA 90249 310-532-3063
Gardena 14225 S. Vermont Ave. Gardena, CA 90247 310-516-7863
Glendale 100 W. Colorado Blvd. Glendale, CA 91203 818-240-5561
Glendale (South) 4000 San Fernando Blvd. Glendale, CA 91204 818-545-0112
Hawthorne 14308 Prairie Ave. Hawthorne, CA 90250 310-978-3074
Hollywood 6300 Santa Monica Blvd. Los Angeles, CA 90038 323-467-8875
Huntington Park 2667 E. Florence Ave., #G Huntington Park, CA 90255 323-583-8025
Inglewood 10025 Hawthorne Blvd. Inglewood, CA 90304 310-677-9543
Kearny Mesa 4344 Convoy St., #A San Diego, CA 92111 858-560-5163
Lakewood 5605 Woodruff Ave. Lakewood, CA 90713 562-867-4272
Lincoln Heights 2500 Pasadena Avenue Los Angeles, CA 90031 323-222-9705
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Long Beach 590 East Willow Street Long Beach, CA 90806 562-427-5818
Los Angeles 1900 S. San Pedro St., #1 Los Angeles, CA 90011 213-748-1908
Los Angeles 1004 W. Slauson Los Angeles, CA 90044 213-565-3506
Los Angeles 1201 S. Soto St. Los Angeles, CA 90023 323-269-3575
Los Angeles 1461 S. La Cienega Blvd. Los Angeles, CA 90035 310-659-4662
Los Angeles 3959 Wilshire Blvd., #A3 & A5 Los Angeles, CA 90010 213-385-9031
Los Angeles 642 S. Alvarado St. Los Angeles, CA 90057 213-483-2455
Los Angeles 2897 Olympic Blvd. Los Angeles, CA 90006 213-382-0184
Los Angeles 700 N. Vermont Ave. Los Angeles, CA 90029 323-668-1935
Los Angeles 4202-4204 Beverly Blvd. Los Angeles, CA 90004 213-384-1557
Los Angeles 4000 S. Vermont Avenue Los Angeles, CA 90007 323-231-4378
Los Angeles 539 East Florence Ave., #C Los Angeles, CA 90003- 323-971-4560 2235
Los Angeles 4846 W. Pico Blvd. Los Angeles, CA 90019 323-931-9972
Los Angeles - East 701 S. Atlantic Blvd. Los Angeles, CA 90022 323-268-3636
Los Angeles - USC 3021 S. Figueroa St. Los Angeles, CA 90007 213-749-3911
Los Angeles - USC 977 W. Jefferson Blvd. Los Angeles, CA 90007 213-748-2490
Los Angeles - West 11090 Santa Monica Blvd. Los Angeles, CA 90025 310-268-1586
Los Angeles 1075 N. Western Ave. # 109 Los Angeles, CA 90038 323-871-0877 (Hollywood)
Maywood 4407 E. Slauson Ave. Maywood, CA 90270 323-560-8567
Monrovia 707 E. Huntington Dr. Monrovia, CA 91016 626-303-0408
Montebello 1479 N. Montebello Blvd. Montebello, CA 90640 323-726-6250
Moreno Valley 24318 Hemlock Ave. #H Moreno Valley, CA 92553 909-243-1231
North Hollywood 12850 Sherman Way North Hollywood, CA 91605 818-503-9626
Norwalk 12555 Alondra Blvd. Norwalk, CA 90650 562-404-9311
Ontario 405 N. Vineyard Ave., #C Ontario, CA 91764 909-937-6832
Orange 1273 Tustin Ave. Orange, CA 92667 714-639-0554
Panorama City 13750 Roscoe Blvd. Panorama City, CA 91402 818-891-3494
Panorama City 8267 Sepulveda Blvd. Panorama City, CA 91402 818-894-9108
- 5 -
Paramount 14551 Lakewood Blvd. #A-2 Paramount, CA 90723 562-272-4531
Pasadena 1441 E. Colorado Blvd. Pasadena, CA 91106 626-449-7065
Pomona 2102 S. Garey Ave. Pomona, CA 91766 909-591-3183
Reseda 6800 Reseda Blvd., #H Reseda, CA 91335 818-996-8365
Riverside 3501 Madison St. Riverside, CA 92504 909-353-2274
Rowland Heights 18389 Coloma Road Rowland Heights, CA 626-810-3764 91748
San Fernando 317 San Fernando Mission Rd. San Fernando, CA 91340 818-361-0122
Santa Ana 1701 N. Broadway St., #A Santa Ana, CA 92706 714-953-8481
Santa Fe Springs 11536 Telegraph Road Santa Fe Springs, CA 562-929-3772 90670
Santa Monica 2360 Pico Blvd. Santa Monica, CA 90405 310-450-2004
Stanton 12505 Beach Blvd., #B1 Stanton, CA 90680 714-895-9890
Temple City 5721 Rosemead Blvd. Temple City, CA 91780 626-292-1120
Torrance 1603 W. Sepulveda Blvd. Torrance, CA 90501 310-539-8319
Torrance 23215 Hawthorne Blvd. Torrance, CA 90505 310-791-0321
Tustin 14510 Newport Ave. Tustin, CA 92680 714-544-9733
Upland 1261 Foothill Blvd., #C Upland, CA 91786 909-946-0024
Van Nuys 6562-6564 Van Nuys Blvd. Van Nuys, CA 91401 818-787-0533
West Covina 1130 S. Glendora Ave. West Covina, CA 91790 626-918-1482
Westchester 5539 Manchester Ave. Westchester, CA 90045 310-338-1148
NEW YORK
Times Square 42nd 253 West 42nd Street New York, NY 10036 212-703-9940 Street
- 6 -
COMPANY-OWNED LOCATIONS CLOSED AS OF DECEMBER 31, 2011
CALIFORNIA
Bellflower 15794 Belflower Blvd. Beflower, CA 90706 562-867-3733
Culver City 5945 Sepulevda Blvd. Culver City, CA 90230 310-397-4357
Escondido 601 N. Broadway Escondido, CA 92025 760-745-3570
Lawndale 17070 Hawthorne Blvd. Lawndale, CA 90260 310-370-7055
Long Beach* 2958 Anaheim St. Long Beach, CA 90804 562-856-3407
Oxnard 2801 Saviers Blvd. Oxnard, CA 93033 805-486-4520
* This location opened and closed in the year 2011
- 7 -
EXHIBIT L FINANCIAL STATEMENTS
UNAUDITED INTERIM FINANCIAL STATEMENTS AS OF FEBRUARY 29, 2012
THE FOLLOWING FINANCIAL STATEMENTS ARE PREPARED WITHOUT AN AUDIT. PROSPECTIVE FRANCHISEES OR SELLERS OF FRANCHISES SHOULD BE ADVISED THAT NO CERTIFIED PUBLIC ACCOUNTANT HAD AUDITED THESE FIGURES OR EXPRESSED HIS/HER OPINION WITH REGARD TO THE CONTENT OR FORM
03/27/12 YOSHINOYA AMERICA GROUP 11:20 INCOME STATEMENT YAGTOTAL2007 GRAND TOTAL AS OF February 29, 2012
CURRENT PERIOD REVENUE PREVIOUS PERIOD PREV CURRENT PERIOD BUDGET BUDGET LAST YEAR CURRENT Y-T-D CURRENT Y-T-D % CUR. LAST DESCRIPTION AMOUNT % AMOUNT % BUDGET REVENUE% % % AMOUNT BUDGET BUDGET Y-T-D %
REVENUE SALES 5010 CASH SALES $5701100 89.36% $5781517 98.61% $6046835 92.30% 94.28% 98.91% $11482617 $12343372 93.03% 95.76% 5010-1 EBT SALES NON-TAXABLE 70555 1.11 74377 94.86 0 0.00 0.00 122.15 144932 0 0.00 129.84 5011 WHOLESALES-FRANCHISE 251315 3.94 225469 111.46 234626 3.58 107.11 133.60 476784 475514 100.27 123.87 5012 WHOLESALES-OTHERS 4578 0.07 14285 32.05 0 0.00 0.00 11.38 18864 36061 52.31 33.76 5013 WHOLESALES-GEN. FRANCHISE 258036 4.04 219543 117.53 166885 2.55 154.62 201.27 477579 332799 143.50 184.57 5014 WHOLESALES-YOSHINOYA WEST 25059 0.39 19526 128.33 33870 0.52 73.99 149.03 44585 59796 74.56 134.10 5015 NON-FOOD ITEMS SALES 676 0.01 573 117.95 0 0.00 0.00 135.14 1249 0 0.00 110.48 TOTAL SALES $6311319 98.92% $6335290 99.62% $6482216 98.95% 97.36% 101.87% $12646610 $13247542 95.46% 98.52% NON-SALES 8310 ROYALTY INCOME $40972 0.64% $38216 107.21% $41406 0.63% 98.95% 146.32% $79187 $83676 94.64% 137.36% 8311 ROYALTY INC - FINISH PROD 189 0.00 178 106.37 71 0.00 266.20 39.31 367 142 258.45 76.27 8360 MANAGEMENT FEE INCOME 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 8365 FRANCHISE FEE INCOME 24750 0.39 0 0.00 24750 0.38 100.00 0.00 24750 24750 100.00 0.00 8370 MARKETING ADMIN. FEE INC. 2879 0.05 2959 97.31 2894 0.04 99.48 177.55 5838 6172 94.59 175.47 TOTAL NON-SALES $68790 1.08% $41353 166.35% $69121 1.06% 99.52% 228.51% $110142 $114740 95.99% 179.22% TOTAL REVENUE $6380109 100.00% $6376643 100.05% $6551337 100.00% 97.39% 102.48% $12756752 $13362282 95.47% 98.90% DISCOUNTS 7320 SALES PROMOTIONS $160696 2.52% $176300 91.15% $207732 3.17% 77.36% 67.33% $336996 $437308 77.06% 58.61% 6315 EMPLOYEE MEALS 17060 0.27 18959 89.98 20796 0.32 82.04 84.76 36019 43585 82.64 87.58 TOTAL DISCOUNTS 177756 2.79 195259 91.04 228528 3.49 77.78 68.68 373015 480893 77.57 60.55 COST OF GOODS SOLD 5100 FOOD $2361930 37.02% $2370890 99.62% $2431354 37.11% 97.15% 118.06% $4732820 $4934893 95.91% 115.93% 5102 FOOD PURCHASE DISCOUNT 5368- 0.08 4752- 112.96 3612- 0.06 148.62 148.60 10119- 6420- 157.62 157.62 5400 NON-FOOD ITEM 300 0.01 674 44.48 0 0.00 0.00 30.88 974 0 0.00 239.61 5500 SUB-SUPPLIES 244511 3.83 256293 95.40 254613 3.89 96.03 90.70 500804 517321 96.81 89.99 5512 SUB-SUP PURCHASE DISCOUNT 9064- 0.14 8213- 110.36 11166- 0.17 81.18 80.14 17277- 24176- 71.46 70.41 5800 REBATE 75251- 1.18 58629- 128.35 76840- 1.17 97.93 110.82 133880- 153395- 87.28 108.50 TOTAL COST OF GOODS SOLD $2517058 39.45% $2556263 98.47% $2594349 39.60% 97.02% 115.02% $5073322 $5268223 96.30% 113.11% GROSS PROFIT $3863051 60.55% $3820380 101.12% $3956988 60.40% 97.63% 95.68% $7683430 $8094059 94.93% 91.32% SALARIES AND WAGES 6200 SALARIES $183173 2.87% $249816 73.32% $212713 3.25% 86.11% 77.90% $432990 $440717 98.25% 88.86% 6200-1 STORE MANAGER WAGES 262236 4.11 274844 95.41 256882 3.92 102.08 95.99 537080 533861 100.60 94.93 6220 TRAINING WAGES 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 6250 HOURLY WAGES 980554 15.37 1243700 78.84 1000400 15.27 98.02 99.14 2224254 2189348 101.59 97.05 6260 FUTA, FICA, AND SUI 157126 2.46 224707 69.93 168900 2.58 93.03 93.44 381832 369695 103.28 93.49 6270 BONUS EXPENSE 0 0.00 2204 0.00 1650 0.03 0.00 0.00 2204 3400 64.82 64.12 TOTAL SALARIES & WAGES $1583089 24.81% $1995271 79.34% $1640545 25.04% 96.50% 94.84% $3578360 $3537021 101.17% 95.17% EMPLOYEE BENEFITS 6310 EMPLOYEE BENEFITS $3717 0.06% $15522 23.95% $4343 0.07% 85.59% 22.55% $19239 $22321 86.19% 82.67% 6312 VACATION EXPENSE 37726 0.59 38534 97.90 38437 0.59 98.15 97.40 76260 76874 99.20 98.42 6315-1 EMPLOYEE MEALS - COGS 6643 0.10 7285 91.18 7869 0.12 84.42 98.80 13928 16469 84.57 101.44 6320 HEALTH INSURANCE 149183 2.34 148484 100.47 147850 2.26 100.90 119.45 297667 296500 100.39 119.61 6340 WORKMAN'S COMP. INSURANCE 14350- 0.23 70512 20.35 70049 1.07 20.49 20.68 56162 140415 40.00 43.36 TOTAL EMPLOYEE BENEFITS $182919 2.87% $280337 65.25% $268548 4.10% 68.11% 71.39% $463256 $552579 83.84% 93.99% OPERATING EXPENSE 03/27/12 YOSHINOYA AMERICA GROUP 11:20 INCOME STATEMENT YAGTOTAL2007 GRAND TOTAL AS OF February 29, 2012
CURRENT PERIOD REVENUE PREVIOUS PERIOD PREV CURRENT PERIOD BUDGET BUDGET LAST YEAR CURRENT Y-T-D CURRENT Y-T-D % CUR. LAST DESCRIPTION AMOUNT % AMOUNT % BUDGET REVENUE% % % AMOUNT BUDGET BUDGET Y-T-D %
6500 SUPPLIES $94473 1.48% $95492 98.93% $96021 1.47% 98.39% 94.57% $189965 $191707 99.09% 104.40% 6520 AUTOMOBILE EXPENSE 36627 0.57 31415 116.59 40990 0.63 89.36 102.41 68042 81661 83.32 91.61 6530 CASHIER BALANCE 1571 0.03 2 757.08 0 0.00 0.00 292.28 1574 0 0.00 116.31 6535 DISCOUNT 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 6540 MANAGER BALANCE 1536- 0.02 371- 414.31 0 0.00 0.00 917.29 1907- 0 0.00 273.78 6550 DELIVER EXPENSE 131530 2.06 140096 93.89 136974 2.09 96.03 98.04 271627 277965 97.72 100.70 6560 DELIVERY CHARGE 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 6565 STORAGE EXPENSE 87 0.00 170 50.96 87 0.00 100.00 37.30 257 174 147.70 82.90 6570 SECURITY EXPENSE 33761 0.53 34751 97.15 35309 0.54 95.62 89.83 68512 70618 97.02 90.70 6580 TRAINING 127 0.00 5353 2.37 5145 0.08 2.47 3.10 5480 20420 26.84 36.30 6590 MUSIC EXPENSE 2234 0.04 2234 100.00 2265 0.04 98.63 72.30 4469 4530 98.65 72.34 6599 YOSHINOYA ERROR SUSPENSE 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 TOTAL OPERATING EXPENSE $298874 4.68% $309142 96.68% $316791 4.84% 94.34% 94.83% $608019 $647075 93.96% 97.48% ENERGY & UTILITY SERVICES 6800 ELECTRIC EXPENSE $101368 1.59% $109237 92.80% $102052 1.56% 99.33% 102.41% $210604 $206224 102.12% 99.39% 6820 WATER EXPENSE 20996 0.33 46530 45.12 20932 0.32 100.31 100.89 67527 48251 139.95 137.96 6850 GAS EXPENSE 44532 0.70 41840 106.44 45807 0.70 97.22 100.63 86372 90738 95.19 95.58 TOTAL ENEGRY & UTILITY $166896 2.62% $197607 84.46% $168791 2.58% 98.88% 101.74% $364503 $345213 105.59% 103.79% REPAIR AND MAINTENANCE 6900 REPAIR EXPENSE $32432 0.51% $41220 78.68% $37450 0.57% 86.60% 51.98% $73652 $73450 100.28% 75.60% 6920 MAINTENANCE EXPENSE 80660 1.26 83268 96.87 94924 1.45 84.97 86.86 163928 207338 79.06 84.80 6950 MAINTENANCE CHARGE 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 TOTAL REPAIR AND MAINT. $113092 1.77% $124488 90.85% $132374 2.02% 85.43% 72.84% $237580 $280788 84.61% 81.72% RENT & OTHER OCCUPATION 7100 RENT $513796 8.05% $545365 94.21% $489505 7.47% 104.96% 89.59% $1059161 $1039830 101.86% 92.53% 7100-1 RENT TAX 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 7100-2 RENT DEFERRED LEASE 8494- 0.13 4521- 187.89 4039- 0.06 210.30 121.78 13014- 12051- 107.99 122.60 7100-3 RENT DEFERRED CONST. 371 0.01 371 100.00 898 0.01 41.31 27.33 743 1796 41.37 27.33 7120 EXCESS RENT 3010 0.05 506 595.31 1181 0.02 254.87 87.42 3515 2299 152.89 71.11 7130 HEALTH PERMITS 4315 0.07 4572 94.39 4644 0.07 92.92 82.53 8887 9311 95.45 86.06 7140 BUSINESS LICENSE & PERMIT 6969 0.11 6752 103.22 20378 0.31 34.20 32.82 13720 28334 48.42 45.32 7150 PERSONAL PROPERTY TAX 12895 0.20 12895 100.00 13122 0.20 98.27 100.33 25790 26244 98.27 100.33 7160 REAL PEOPERTY TAX 24872 0.39 25031 99.37 20965 0.32 118.64 95.47 49903 41930 119.02 95.63 7180 COMMON AREA MAINTENANCE 93733 1.47 101024 92.78 92085 1.41 101.79 88.71 194757 188602 103.26 92.44 TOTAL RENT & OTHER OCCP. $651467 10.21% $691995 94.14% $638739 9.75% 101.99% 87.75% $1343462 $1326295 101.29% 91.33% MARKETING 7300 ADVERTISEMENT $52077 0.82% $47718 109.14% $69943 1.07% 74.46% 66.34% $99795 $134286 74.32% 69.58% 7300-1 ADVERTISEMENT NEW CONCE 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 7310 ADVERTISING CHARGE 0 0.00 1864 0.00 0 0.00 0.00 0.00 1864 2004 93.01 69.86 7320-1 SALES PROMOTION - COGS 62700 0.98 67580 92.78 78869 1.20 79.50 78.33 130280 165976 78.49 67.68 7350 RESEARCH & DEVELOPMENT 380 0.01 0 0.00 1675 0.03 22.69 56.42 380 2925 12.99 50.65 7350-1 RESEARCH&DEVELP NEW CON 4287 0.07 1050 408.38 0 0.00 0.00 0.00 5337 0 0.00 0.00 TOTAL MARKETING $119444 1.87% $118212 101.04% $150487 2.30% 79.37% 74.40% $237656 $305191 77.87% 70.04% ADMINISTRATIVE & GENERAL 7500 TRAVEL EXPENSE $3509 0.06% $0 0.00% $3550 0.05% 98.85% 132.22% $3509 $6933 50.61% 91.17% 7502 CONVENTION EXPENSE 2004 0.03 0 0.00 400 0.01 501.00 0.00 2004 2650 75.62 89.57 7505 CLASSIFIED AD AND HIRING 1920 0.03 81 385.09 0 0.00 0.00 0.00 2001 0 0.00 0.00 03/27/12 YOSHINOYA AMERICA GROUP 11:20 INCOME STATEMENT YAGTOTAL2007 GRAND TOTAL AS OF February 29, 2012
CURRENT PERIOD REVENUE PREVIOUS PERIOD PREV CURRENT PERIOD BUDGET BUDGET LAST YEAR CURRENT Y-T-D CURRENT Y-T-D % CUR. LAST DESCRIPTION AMOUNT % AMOUNT % BUDGET REVENUE% % % AMOUNT BUDGET BUDGET Y-T-D %
7510 COMMUNICATION EXPENSE $22299 0.35% $23820 93.62% $22824 0.35% 97.70% 96.07% $46118 $47453 97.19% 94.46% 7515 INSURANCE 30451 0.48 30451 100.00 38687 0.59 78.71 87.57 60902 77351 78.74 92.89 7520 ENTERTAINMENT 893 0.01 348 256.35 500 0.01 178.60 78.94 1242 1050 118.29 72.21 7525 SUBSCRIPTION EXPENSE 949 0.02 154 615.77 1215 0.02 78.11 104.27 1103 2260 48.81 61.52 7530 MEMBERSHIP DUES 2197 0.03 3219 68.24 2925 0.05 75.11 60.43 5415 3760 144.02 76.14 7534 MANAGEMENT FEE 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 7535 PROFESSIONAL SERVICE 137954 2.16 85573 161.21 226262 3.45 60.97 126.40 223527 326824 68.39 85.58 7536 FRANCHISE SERVICE FEE 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 7537 RETALIL FOODS PROCESS FEE 0 0.00 0 0.00 15205 0.23 0.00 0.00 0 26810 0.00 0.00 7540 PAYROLL FEES 4539 0.07 8698 52.19 4724 0.07 96.08 88.98 13237 13924 95.07 97.02 7545 BANK CHARGES 31834 0.50 25388 125.39 27168 0.42 117.18 121.80 57223 55424 103.25 112.22 7550 DONATION 36636 0.57 0 0.00 0 0.00 0.00 0.00 36636 200 318.00 0.00 7555 ROYALTY FEE 53107 0.83 63488 83.65 65995 1.01 80.47 87.17 116596 134573 86.64 93.84 7556 FRANCHISE ROYALTY COST 5531 0.09 5531 100.00 0 0.00 0.00 73.44 11061 0 0.00 73.44 7560 MISCELLANEOUS 457 0.01 9800 4.66 100 0.00 457.00 14.57 10257 200 128.50 121.48 7560-1 ATM SURCHARGE 40855 0.64 40961 99.74 43010 0.66 94.99 114.10 81816 87963 93.01 110.50 TOTAL ADMIN. AND GENERAL $375135 5.88% $297512 126.09% $452565 6.91% 82.89% 116.32% $672647 $787375 85.43% 96.70% DEPR. AND AMORTIZATION 7800 DEPRECIATION $279680 4.38% $290938 96.13% $277427 4.24% 100.81% 81.79% $570618 $573387 99.52% 85.66% 7850 FRAN. DEBT GUARANTEE AMOR 5531 0.09 5531 100.00 0 0.00 0.00 276.53 11061 0 0.00 116.06 TOTAL DEPRECIATION $274149 4.30% $285407 96.06% $277427 4.24% 98.82% 80.64% $559557 $573387 97.59% 85.22% TOTAL EXPENSES $3765065 59.01% $4299971 87.56% $4046267 61.76% 93.05% 91.27% $8065040 $8354924 96.53% 92.91% TOTAL OPERATING INCOME $97986 1.54% $479591- 20.43% $89279- 1.36% 109.75% 111.27% $381610- $260865- 146.29% 142.73% OTHER INCOME 8300 INTEREST INCOME $762 0.01% $743 102.51% $395 0.01% 192.91% 190.23% $1505 $790 190.51% 181.90% 8320 DIVIDEND INCOME 0 0.00 10 0.00 5 0.00 0.00 0.00 10 10 100.00 107.29 8330 GAIN ON DISPOSAL OF F/A 4266 0.07 3166 134.75 4205 0.06 101.45 0.00 7432 8410 88.37 0.00 8340 MISCELLANOUS INCOME 69 0.00 18361 0.38 0 0.00 0.00 2.05 18430 0 0.00 524.92 8340-1 ATM REBATE 0 0.00 72 0.00 0 0.00 0.00 0.00 72 48 150.00 150.26 8340-2 RENTAL INCOME 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 8345 BAD DEBT RECOVERY 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 8350 SERVICE FEE INCOME 17376 0.27 8514 204.09 0 0.00 0.00 0.00 25891 0 0.00 0.00 TOTAL OTHER INCOME $22473 0.35% $30866 72.81% $4605 0.07% 488.01% 594.63% $53340 $9258 576.15% 213.46% OTHER EXPENSE 7400 INTEREST EXPESE $3683 0.06% $3937 93.55% $2902 0.04% 126.91% 132.12% $7620 $5804 131.29% 129.73% 7420 OTHER NON OPERATING EXPES 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 7425 IMPAIRMENT LOSS 0 0.00 0 0.00 4195 0.06 0.00 0.00 0 8390 0.00 0.00 7430 BAD DEBT EXPENSE 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 7440 LOSS ON DISPOSAL OF F/A 25284 0.40 0 0.00 33737 0.52 74.94 0.00 25284 33737 74.94 0.00 7490 LITIGATION EXPENSE 0 0.00 0 0.00 0 0.00 0.00 0.00 0 0 0.00 0.00 TOTAL OTHER EXPENSE $28967 0.45% $3937 735.78% $40834 0.62% 70.94% 426.77% $32904 $47931 68.65% 331.35% NET INCOME(LOSS) BEFORE TAX $91492 1.43% $452662- 20.21% $125508- 1.92% 72.90% 100.46% $361174- $299538- 120.58% 132.34% 7480 INCOME TAX $36598 0.57% $181065- 20.21% $50181- 0.77% 72.93% 76.20% $144468- $119756- 120.64% 135.01% NET INCOME (LOSS) $54894 0.86% $271597- 20.21% $75327- 1.15% 72.87% 127.53% $216706- $179782- 120.54% 130.62% ======03/27/12 YOSHINOYA AMERICA GROUP 11:20 BALANCE SHEET YAGBALSHEET AS OF February 29, 2012 GRAND TOTAL
CURRENT MONTH PREVIOUS MONTH PREVIOUS YEAR DESCRIPTION AMOUNT % AMOUNT AMOUNT % ASSETS
CURRENT ASSETS
CASH: CASH ACCOUNT 2165650.84 10.39 % 2725092.45 1636083.56 6.38 % ______TOTAL CASH 2165650.84 10.39 % 2725092.45 1636083.56 6.38 %
INVENTORY 1050 MERCHANDISE INVENTORY 1117613.63 5.36 % 1140891.43 1099511.90 4.29 % 1053 NON-FOOD ITEM INVENTORY 21556.54 0.10 21856.36 19785.07 0.08 1055 SUB-SUPPLIES INVENTORY 371367.59 1.78 361720.65 334968.96 1.31 1060 SUPPLIES INVENTORY 261682.21 1.26 274972.63 281623.98 1.10 ______TOTAL INVENTORY 1772219.97 8.51 % 1799441.07 1735889.91 6.76 %
ACCOUNT RECEIVABLES 799099.13 3.84 % 753795.92 941311.96 3.67 % ------TOTAL ACCOUNTS RECEIVABLE 799099.13 3.84 % 753795.92 941311.96 3.67 %
PREPAID & OTHER CURRENT ASSETS 1040 TIME CERTIFICATE DEPOSIT 801.51 0.00 % 801.51 801.51 0.00 % 1070 INVOICED NOT RECEIVED 0.03 0.00 0.03 0.03 0.00 1080 PREPAID EXPENSE 598844.51 2.87 635393.17 535018.82 2.09 1085 PREPAID RENT 0.00 0.00 0.00 0.00 0.00 1086 PREPAID CAM 0.00 0.00 0.00 0.00 0.00 1090 SHORTTERM LOAN RECEIVABLE 7200.00 0.04 7200.00 0.00 0.00 1091 SHORT TERM INVESTMENTS 0.00 0.00 0.00 0.00 0.00 1100 LOAN RECEIVABLE 0.00 0.00 0.00 0.00 0.00 1101 LOAN REC. SUBSIDIARY-CURR 0.00 0.00 0.00 0.00 0.00 1110 PREPAID INSURANCE 93807.60 0.45 103747.65 168724.53 0.66 1115 PREPAID WORKERS' COMP. 296288.20 1.42 348654.20 266218.50 1.04 1125 ACCRUED INTEREST REC. 0.00 0.00 0.00 0.00 0.00 1130 NOTES RECEIVABLE 0.00 0.00 0.00 0.00 0.00 1135 DERERRED INC TAX-CURRENT 119011.00 0.57 119011.00 119011.00 0.46 1140 OTHER CURRENT ASSEST 0.00 0.00 0.00 0.00 0.00 1160 PREPAID TAXES 352559.15 1.69 352559.15 354182.02 1.38 ______TOTAL PREPAID & OTHER ASSETS 1468512.00 7.05 % 1567366.71 1443956.41 5.63 %
TOTAL CURRENT ASSETS 6205481.94 29.78 % 6845696.15 5757241.84 22.44 %
FIXED ASSETS 1600 COMPUTER SOFTWARE 1269199.33 6.09 % 1277031.79 1268469.29 4.94 % 1610 BUILDING 1070160.00 5.14 1070160.00 1070160.00 4.17 1620 LEASEHOLD IMPROVEMENT 35284983.68 169.34 37038513.89 38743939.38 150.98 1625-1 LEASEHOLD IMP. LOSS 891331.67- 4.28- 1683271.91- 1669369.36- 6.51- 03/27/12 YOSHINOYA AMERICA GROUP 11:20 BALANCE SHEET YAGBALSHEET AS OF February 29, 2012 GRAND TOTAL
CURRENT MONTH PREVIOUS MONTH PREVIOUS YEAR DESCRIPTION AMOUNT % AMOUNT AMOUNT % 1630 MACHINERY & EQUIPMENT 11863232.66 56.94 % 12052000.73 12512968.12 48.76 % 1635-1 MACH. & EQUIP IMP. LOSS 190.66- 0.00 190.66- 190.66- 0.00 1640 TRUCK & AUTOS 234855.17 1.13 234855.17 227519.19 0.89 1650 FURNITURE & FIXTURE 2788873.58 13.39 2898242.44 2901287.77 11.31 1655-1 FURN.& FIXT. IMP. LOSS 0.00 0.00 0.00 0.00 0.00 1660 LAND 1529840.00 7.34 1529840.00 1529840.00 5.96 1670 CONSTRUCTION IN PROGRESS 522083.37 2.51 156547.24 555177.77 2.16 1672 FRANCHISE PROJ. IN PROG. 0.00 0.00 0.00 0.00 0.00 1677 PROJECTS IN PROGRESS 232039.99 1.11 232039.99 677403.77 2.64 1680 ACCUMLATED DEPRECIATION 40444715.27- 194.11- 41493232.83- 40418572.34- 157.50- ______TOTAL FIXED ASSETS 13459030.18 64.59 % 13312535.85 17398632.93 67.80 %
INTAGIBLE ASSETS 1690 FRANCHISE DEBT GUARANTEE 463391.42 2.22 % 468921.92 504618.48 1.97 % ______TOTAL INTANGIBLE ASSETS 463391.42 2.22 % 468921.92 504618.48 1.97 %
OTHER ASSETS 1705 INVESTMENT IN SUBSIDIARY 0.00 0.00 % 0.00 0.00 0.00 % 1706 LOAN REC. SUBSIDIARY NCUR 27691.74 0.13 28246.62 0.00 0.00 1710 SECURITY DEPOSIT 194647.89 0.93 194647.89 193881.62 0.76 1740 DEFERRED INC TAX NON-CURR 119010.44- 0.57- 119010.44- 1660911.29 6.47 1750 OTHER ASSETS 605178.85 2.90 605178.85 146943.25 0.57 ______TOTAL OTHER ASSETS 708508.04 3.40 % 709062.92 2001736.16 7.80 %
======TOTAL ASSETS 20836411.58 100.00 % 21336216.84 25662229.41 100.00 % ====== 03/27/12 YOSHINOYA AMERICA GROUP 11:20 BALANCE SHEET YAGBALSHEET AS OF February 29, 2012 GRAND TOTAL
CURRENT MONTH PREVIOUS MONTH PREVIOUS YEAR DESCRIPTION AMOUNT % AMOUNT AMOUNT % LIABILITIES&STOCKHOLDER EQUITY
CURRENT LIABILITIES ACCOUNTS PAYABLE 2110 ACCOUTNTS PAYABLE OTHER 1028127.44 4.93 % 1620688.93 1346212.10 5.25 % 2111 ACCOUNTS PAYABLE - YWI 0.00 0.00 0.00 0.00 0.00 2112 ACCOUNTS PAYABLE NONSTOCK 0.00 0.00 0.00 0.00 0.00 2115 ACCOUNTS PAYABLE - YDC 0.00 0.00 0.00 0.00 0.00 2116 ACCOUNTS PAYABLE - YFNA 0.00 0.00 0.00 0.00 0.00 2117 ACCOUNTS PAYABLE - YNI 0.00 0.00 0.00 0.00 0.00 2118 ACCOUNTS PAYABLE - YAI 0.00 0.00 0.00 0.00 0.00 2120 USE TAXES PAYABLE 0.00 0.00 0.00 0.00 0.00 2125 SALES TAXES PAYABLE 487895.13 2.34 498899.25 569724.32 2.22 2150 RECEIVED NOT INVOICED 188984.89 0.91 171666.03 204134.58 0.80 ______TOTAL ACCOUNTS PAYABLE 1705007.46 8.18 % 2291254.21 2120071.00 8.26 % ACCRUED EXPENSE 2130 ACCRUED ELECTRIC EXPENSE 0.00 0.00 % 0.00 0.00 0.00 % 2160 ACCRUED CAM 148695.10 0.71 138000.34 135718.12 0.53 2166 DEFERRED CONST ALLOW CURR 10779.00 0.05 10779.00 16307.28 0.06 2165 DEFERRED RENT CURRENT 155551.18 0.75 159524.31 249170.02 0.97 2187 ACCRUED EXPENSE- OTHER 1095749.48 5.26 1141965.89 892700.75 3.48 2187 - 1 ASC 740 LIABILITY 10271.00 0.05 10271.00 12048.00 0.05 2188 ACCRUED ROYALTY-PARENT 116595.51 0.56 63488.20 124248.88 0.48 EMPLOYEE BENEFINTS ACCRUED 1153218.95 5.54 1101164.71 1051486.00 4.10 ______TOTAL ACCRUED EXPENSES 2690860.22 12.91 % 2625193.45 2481679.05 9.67 %
OTHER CURRENT LIABILITIES 2190 LINE OF CREDIT SHORT TERM 2400000.00 11.52 % 2400000.00 3200000.00 12.47 % 2195 DEBT GUARANTEE - CURRENT 63354.67 0.30 64860.20 90369.60 0.35 2200 INCOME TAX PAYABLE 144467.60- 0.69- 181065.20- 107003.13- 0.42- 2250 DEPOSITS RECEIVED 355492.38 1.71 383408.15 319831.84 1.25 2250-1 ADVERTISING FEE DEPOSIT 2972.34 0.01 4321.88 6572.83- 0.03- 2250-2 SYSTEM FUND DEPOSIT REC 33365.18- 0.16- 6869.18- 36056.92- 0.14- 2250-3 UNKNOWN DEPOSITS REC 400000.00 1.92 400000.00 0.00 0.00 2300 ACCRUED TAX WITHHOLDING 0.00 0.00 0.00 0.00 0.00 2400 DEFERRED INC.TAX LIAB.CUR 0.00 0.00 0.00 0.00 0.00 ______TOTAL OTHER CURRENT LIAB. 3043986.61- 14.61-% 3064655.85- 3460568.56- 13.49-%
TOTAL CURRENT LIABILITIES 7439854.29 35.71 % 7981103.51 8062318.61 31.42 %
LONG TERM LIABILITIES 2610 LONG TERM LIABILITIES 910445.51 4.37 % 915719.00 217664.00 0.85 % 2615 GUARANTEE DEPOSIT 19593.75 0.09 19593.75 19593.75 0.08 2616 DEBT GUARANTEE NON CUR 400036.75 1.92 404061.72 419779.91 1.64 2620 DEFERRED INC TAX NON CUR 0.00 0.00 0.00 0.00 0.00 2630 DEFERRED RENT LONG TERM 808456.57 3.88 812977.18 953567.93 3.72 03/27/12 YOSHINOYA AMERICA GROUP 11:20 BALANCE SHEET YAGBALSHEET AS OF February 29, 2012 GRAND TOTAL
CURRENT MONTH PREVIOUS MONTH PREVIOUS YEAR DESCRIPTION AMOUNT % AMOUNT AMOUNT % 2631 DEFERRED CONST ALLOW NCUR 22339.36 0.11 % 21967.93 78933.51 0.31 % ______TOTAL LONG TERM LIABILITIES 2160871.94 10.37 % 2174319.58 1689539.10 6.58 %
STOCKHOLDER'S EQUITY 3010 COMMON STOCK 8000000.00 38.39 % 8000000.00 8000000.00 31.17 % 3015 ADD'T PAID IN CAPITAL 10008768.00 48.04 10008768.00 10008768.00 39.00 3020 RETAINED EARNING 6556376.43- 31.47- 6556376.43- 1825160.96- 7.11- 3030 HEADQUARTERS-INTERCO 0.00 0.00 0.00 107330.00- 0.42- 3400 ERROR SUSPENSE 0.00 0.00 0.00 0.00 0.00 3500 CURRENT EARNING 216706.22- 1.04- 271597.82- 165905.34- 0.65- ______TOTAL STOCKHOLDER'S EQUITY 11235685.35 53.92 % 11180793.75 15910371.70 62.00 %
______TOTAL LIAB.& STOCKHOLDERS EQUI 20836411.58 100.00 % 21336216.84 25662229.41 100.00 % ======
AUDITED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2011, 2010 AND 2009
EXHIBIT M STATE ADDENDUM
STATE ADDENDUM
STATE SPECIFIC DISCLOSURE REQUIREMENTS
The laws of several states require that we provide this Franchise Disclosure Document to you at the following earlier dates:
1. Iowa requires that we give you this disclosure document at the earlier of the first personal meeting or 14 calendar-days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship.
2. New York requires that we give you a copy of this Franchise Disclosure Document at the earlier of the first personal meeting or 10 business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship.
3. Michigan and Washington require that we give you this Franchise Disclosure Document at least 10 business days before the execution of any binding franchise or other agreement or the payment of any consideration, whichever occurs first.
[continued on next page]
1 G:\lhsmh\TG\12912-2\532638.DOC STATE EFFECTIVE DATES
For franchises that we sell for locations in CALIFORNIA, HAWAII, ILLINOIS, MICHIGAN NEW YORK, VIRGINIA and WASHINGTON, state laws require us to disclose additional information. Please refer to the separate state addendum pages in this Exhibit for additional disclosures that may apply to you.
We are registered to sell franchises, or qualified under an exemption from registration, in each of the following states effective as of the date indicated below:
The Franchise Disclosure Document is registered or on file in the following states having franchise registration or disclosure laws, with the following effective dates:
State Effective Date California May 9, 2012 Hawaii ______Illinois ______New York ______Virginia ______Washington ______
CALIFORNIA
THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED WITH THE FRANCHISE DISCLOSURE DOCUMENT.
1. In addition to the information disclosed in Item 3:
a. Neither the Company nor any person identified in Item 2 of this Franchise 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 persons from membership in such association or exchange.
2. In addition to the information disclosed in Item 17:
a. California Business and Professions Code Sections 20000 through 20043 provide rights to the franchisee concerning termination or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with state law, state law will control.
b. The Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
c. The Franchise Agreement contains a covenant not to compete which extends beyond the termination of the franchise. This provision may not be enforceable under California law.
3. California law requires us to make the following disclosures:
a. You must sign a general release if you renew or transfer your franchise. California Corporations Code Section 31512 voids a prospective waiver of your rights under the Franchise Investment Law (California Corporations Code Section 31000 through 31516). Business and Professions Code Section 20010 voids a prospective waiver of your rights under the Franchise Relations Act (Business and Professions Code Sections 2000 through 20043).
b. Section 31125 of the California Corporations Code requires us to give you a disclosure document, in a form containing the information that the commissioner may by rule or order require, before a solicitation of a proposed material modification of an existing franchise.
4. OUR WEBSITES ARE WWW.YOSHINOYAFRANCHISE.COM, WWW.YOSHINOYAAMERICA.COM, and WWW.YOSHINOYAUSA.COM. OUR WEBSITES HAVE NOT BEEN REVIEWED OR APPROVED BY THE CALIFORNIA DEPARTMENT OF CORPORATIONS, ANY COMPLAINTS CONCERNING THE CONTENT OF THESE WEBSITES MAY BE DIRECTED TO THE CALIFORNIA DEPARTMENT OF CORPORATIONS AT WWW.CORP.CA.GOV.
5. YAI CERTIFIES THAT IT HAS COMPLIED WITH THE REQUIREMENTS OF CORP. CODE SECTION 31109.1 PERTAINING TO NEGOTIATED SALES. HAWAII
HAWAII ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT
1. THESE FRANCHISES WILL BE/HAVE BEEN FILED UNDER THE FRANCHISE INVESTMENT LAW OF THE STATE OF HAWAII. FILING DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION OR ENDORSEMENT BY THE DIRECTOR OF COMMERCE AND CONSUMER AFFAIRS OR A FINDING BY THE DIRECTOR OF COMMERCE AND CONSUMER AFFAIRS THAT THE INFORMATION PROVIDED HEREIN IS TRUE, COMPLETE AND NOT MISLEADING.
THE FRANCHISE INVESTMENT LAW MAKES IT UNLAWFUL TO OFFER OR SELL ANY FRANCHISE IN THIS STATE WITHOUT FIRST PROVIDING TO THE PROSPECTIVE FRANCHISEE, OR SUBFRANCHISOR, AT LEAST SEVEN DAYS PRIOR TO THE EXECUTION BY THE PROSPECTIVE FRANCHISEE, OF ANY BINDING FRANCHISE OR OTHER AGREEMENT, OR AT LEAST SEVEN DAYS PRIOR TO THE PAYMENT OF ANY CONSIDERATION BY THE FRANCHISEE, OR SUBFRANCHISOR, WHICHEVER OCCURS FIRST, A COPY OF THE FRANCHISE DISCLOSURE DOCUMENT, TOGETHER WITH A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE.
THIS FRANCHISE DISCLOSURE DOCUMENT CONTAINS A SUMMARY ONLY OF CERTAIN MATERIAL PROVISIONS OF THE FRANCHISE AGREEMENT. THE CONTRACT OR AGREEMENT SHOULD BE REFERRED TO FOR A STATEMENT OF ALL RIGHTS, CONDITIONS, RESTRICTIONS AND OBLIGATIONS OF BOTH THE FRANCHISOR AND THE FRANCHISEE.
2. SECTION 482E-(3), HAWAII REVISED STATUTES, PROVIDES THAT FRANCHISEE MAY BE ENTITLED TO CERTAIN COMPENSATION UPON TERMINATION OR REFUSAL TO RENEW THE FRANCHISE. TO THE EXTENT SUCH SECTION IS APPLICABLE, THE FRANCHISEE SHALL HAVE AN INTEREST IN THE FRANCHISE UPON TERMINATION OR REFUSAL TO RENEW AS SPECIFIED THEREIN.
3. NO RELEASE LANGUAGE SET FORTH IN THE FRANCHISE AGREEMENT SHALL RELIEVE FRANCHISOR OR ANY OTHER PERSON, DIRECTLY OR INDIRECTLY, FROM LIABILITY IMPOSED BY THE LAWS CONCERNING FRANCHISING IN THE STATE OF HAWAII. ILLINOIS ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT
1. The Franchise Agreement will not in any way prevent you from submitting matters to the jurisdiction of the courts of Illinois in accordance with Illinois Franchise Disclosure Act of 1987.
2. The conditions under which your franchise can be terminated and your rights on non-renewal may be affected by Illinois Law 815 ILCS 705/19 and 705/20.
3. The Illinois Franchise Disclosure Act (815 ILCS Section 705/4) provides that “any provision in a Franchise Agreement that designates jurisdiction or venue in a forum outside of this State [Illinois] is void provided that a Franchise Agreement may provide for arbitration in a forum outside of this State [Illinois].”
4. For any franchise located in Illinois, Illinois law shall govern the Agreements.
5. Illinois residents and non-residents who own a franchise located in the State of Illinois will enter into the Illinois Addendum to Franchise Agreement in the form attached to this Exhibit.
6. Illinois law requires us to give you a copy of the Franchise Disclosure Document at least 14 calendar days before you sign the Franchise Agreement or other binding agreement or before we receive any consideration from you, whichever first occurs. ADDENDUM TO CONTRACTS FOR THE STATE OF ILLINOIS
This FIRST ADDENDUM TO CONTRACTS (“Addendum”) is made and entered into on, ______, ____ by and between YOSHINOYA AMERICA, INC., a Delaware corporation (“Company”) and ______(“Franchisee”), subject to the following recitals:
RECITALS
A. Franchisee is a resident of the state of Illinois or a non-resident who is acquiring franchise rights permitting the location of one or more YOSHINOYA® Restaurants in the State of Illinois.
B. The “Contracts” covered by this Addendum include all of the following contracts, copies of which are attached as exhibits to the Franchise Disclosure Document that Company has delivered to Franchisee, i.e.: Franchise Agreement; Area Development Agreement, General Release; Sublease, Guaranty of Sublease, Addendum to Lease; Confidentiality, Non- Disclosure and Non-Competition Agreement; Advertising Addendum; Asset Sale and Purchase Agreement; Addendum to Franchise Agreement - Employee Franchise Program, and Personal Guaranty (collectively referred to as the “Contracts”).
C. To the extent that the parties enter into any of the Contracts now or in the future, they desire to amend the Contracts in order to conform them to the requirements of Illinois law.
D. All capitalized terms in this Addendum shall have the same meaning assigned to them in the Contracts.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged by the parties, the parties agree as follows:
1. The above recitals are incorporated by the parties as part of their covenants and undertakings.
2. The provisions of the Illinois Franchise Disclosure Act of 1987 (the “Act”) shall supersede any provision of the Contracts or California law which are in conflict with the Act.
3. Illinois law shall be applied to, and govern, any claim between the parties that alleges violation of the Act.
4. The parties hereby amend Section 17.A of the Franchise Agreement by adding the following at the end of the paragraph:
“Nothing in this provision waives any rights you may have under Section 41 of the Illinois Franchise Disclosure Act of 1987.”
5. To the extent that the Contracts designate jurisdiction or venue in a forum outside of the State of Illinois, the provision shall not be effective for Franchise Agreements entered into with an Illinois resident for a YOSHINOYA Restaurant in the State of Illinois. 6. The parties agree that the Contracts, whether now existing or hereinafter entered into by the parties, shall be enforced in accordance with their terms, subject, however, to the terms of this Addendum.
IN WITNESS WHEREOF the parties have executed this Addendum on the date first above written.
COMPANY: FRANCHISEE:
YOSHINOYA AMERICA, INC., a Delaware NAME corporation
By: By:
Its: Its:
DISCLOSURES REQUIRED BY MICHIGAN LAW
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.
1. A prohibition on the right of a franchisee to join an association of franchisees.
2. 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.
3. 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.
4. 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 the franchisor’s intent not to renew the franchise.
5. 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.
6. 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.
7. 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:
a. The failure of the proposed transferee to meet the franchisor’s then current reasonable qualifications or standards.
b. The fact that the proposed transferee is a competitor of the franchisor or subfranchisor. c. The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
d. 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.
8. 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).
9. 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 FRANCHISE DISCLOSURE DOCUMENT ON FILE WITH THE ATTORNEY GENERAL DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENDORSEMENT BY THE ATTORNEY GENERAL.
Michigan law provides that a franchisor whose most recent statements are unaudited and which show a net worth of less than $100,000 shall, at the request of a franchisee, arrange for the escrow of initial investment and other funds paid by the franchisee or subfranchisor until the obligations to provide real estate, improvements, equipment, inventory, training, or other items included in the franchise offering are fulfilled. At the option of the franchisor, a surety bond may be provided in place of escrow. In the event that an escrow is so established, the escrow agent shall be a financial institution authorized to do business in the State of Michigan. The escrow agent may release to the franchisor those amounts of the escrowed funds applicable to a specific franchisee or subfranchisor upon presentation of an affidavit executed by the franchisee and an affidavit executed by the franchisor stating that the franchisor has fulfilled its obligation to provide real estate, improvements, equipment, inventory, training, or other items. This portion of the Michigan law does not prohibit a partial release of escrowed funds upon receipt of affidavits of partial fulfillment of the franchisor’s obligation.
SHOULD THE PROSPECTIVE FRANCHISEE HAVE ANY QUESTIONS REGARDING THE NOTICE OF THIS FILING WITH THE ATTORNEY GENERAL, SUCH QUESTIONS SHOULD BE ADDRESSED TO:
Department of the Attorney General Consumer Protection Division Antitrust and Franchise Section PO Box 30213 Lansing, Ml 48909 (517) 373-7117 NEW YORK
1. The Company adds the following to the Franchise Disclosure Document cover page:
THE FRANCHISOR MAY, IF IT CHOOSES, NEGOTIATE WITH YOU ABOUT ITEMS COVERED IN THE PROSPECTUS. HOWEVER, THE FRANCHISOR CANNOT USE THE NEGOTIATING PROCESS TO PREVAIL UPON A PROSPECTIVE FRANCHISEE TO ACCEPT TERMS WHICH ARE LESS FAVORABLE THAN THOSE SET FORTH IN THIS PROSPECTUS.
2. The New York State Department of Law, by administrative rule, requires the Company to advise you of the disclosure question answered by the Company’s Item 3 response:
Disclose whether the franchisor, its predecessor, a person identified in item 2, or an affiliate offering franchises under the franchisor’s principal trademark:
a. Has an administrative, criminal or civil action pending against that person alleging: a felony; a violation of a franchise; antitrust or securities law; fraud, embezzlement, fraudulent conversion, misappropriation of property; unfair or deceptive practices or comparable civil or misdemeanor allegations. In addition, include pending actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature or financial condition of the franchise system or its business operations. If so, disclose the names of the parties, the forum, nature, and current status of the pending action. Franchisor may include a summary opinion of counsel concerning the action if the attorney’s consent to the use of the summary opinion of counsel concerning the action if the attorney’s consent to the use of the summary opinion is included as part of this Franchise Disclosure Document.
b. Has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the ten-year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or has been the subject of a civil action alleging: violation of a franchise, antifraud or securities law; fraud, embezzlement, fraudulent conversion or misappropriation of property, or unfair deceptive practices or comparable allegations. If so, disclose the names of the parties, the forum and date of conviction or date judgment was entered; penalty or damages assessed, and/or terms of settlement.
c. Is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under a federal, State or Canadian franchise, securities, antitrust, trade regulation or trade practice law, resulting from a concluded or pending action or proceeding brought by a public agency; or is subject to any currently effective order of 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; or is subject to a currently effective injunctive or restrictive order relating to any other business activity as a result of an action brought by a public agency or department, including, without limitation, actions affecting a license as a real estate broker or sales agent. If so, disclose the name of the person; the public agency, association, or exchange; the court, or other forum; a summary of the allegations or facts found by the agency, association, exchange or court; and the date, nature, terms and conditions of the order or decree.
3. The New York State Department of Law, by administrative rule, requires the Company to advise you of the disclosure question answered by the Company’s Item 4 response:
State whether the franchisor, its affiliate, its predecessor, officers, or general partner during the 10-year period immediately before the date of the franchise disclosure document: (a) filed as debtor (or had filed against it) a petition to start an action under the U.S. Bankruptcy Code; (b) obtain a discharge of its debts under the bankruptcy code; or (c) was a principal officer of a company or a genera! partner in a partnership that either filed as a debtor (or had filed against it) a petition to start an action under the U.S. Bankruptcy Code or that obtained a discharge of its debts under the U.S. Bankruptcy Code during or within 1 year after the officer or general partner of the franchisor held this portion in the company or partnership. If so, disclose the name of the person and/or company that was the debtor under the Bankruptcy Code, the Date of the action and the materials facts.
4. In addition to the information disclosed in Item 5:
The initial franchise fee becomes part of our general funds and may be used for any company purpose.
5. In addition to the information disclosed in Item 17:
a. The Franchise Agreement contains a covenant not to compete which extends beyond the termination of the franchise. There may be court decisions in the State of New York limiting the Company’s ability to restrict your activities after the franchise agreement has ended.
b. The Franchise Agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
c. The following additional comments are made to Item 17 W. (Choice of Law) applicable in the State of New York only:
Provided however, that all rights enjoyed by the franchisee and any causes of action arising in its favor from the provisions of the General Business Law of the State of New York and the regulations thereunder shall remain in force; it being the extent of the proviso that the non-waiver provisions of General Business Law Sections 687.4 and 687.5 be satisfied.
The fact that the franchise contracts you will sign select California law as the governing law should not be considered a waiver of any right conferred upon the franchisor or franchisee by Article 33 of the General Business Law of the State of New York. DISCLOSURES REQUIRED BY VIRGINIA WASHINGTON PROVISIONS
1. The State of Washington has a statute, RCW 19.100.180, which may supersede the provisions of the contracts that you enter into with the Company pertaining to, among other subjects, the areas of termination and renewal of your franchise. There may also be decisions rendered by the state courts of Washington which may supersede the provisions of the contracts that you enter into with the Company.
2. To the extent that the applicable governing law stipulated in any of the contracts that you enter into with the Company conflicts with the Washington Franchise Investment Protection Act, Chapter 19.100 RCW (the “Act”), the Act shall prevail.
3. A release or waiver of rights executed by a franchisee who is a resident of Washington or who is a nonresident of Washington but operates a franchise in Washington shall not include rights that arise under the Act, except when the release or waiver is executed pursuant to a negotiated settlement agreement provided each party is represented by independent counsel in the settlement negotiations. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims arising under the Act or which reduce or limit your rights or remedies under the Act, such as the right to a jury trial, may not be enforceable under the Act.
4. Under Washington law, transfer fees are collectible to the extent that they reflect the franchisor’s reasonable estimated or actual costs in effecting a transfer.
5. Washington residents and non-residents who own a franchise located in the State of Washington will enter into the Washington Addendum to Contracts in the form which is included as part of this Exhibit “O” for purposes of amending the contracts entered into by the parties to comply with the provisions of the Act. ADDENDUM TO CONTRACTS FOR THE STATE OF WASHINGTON
This FIRST ADDENDUM TO CONTRACTS (“Addendum”) is made and entered into on _____, by and between YOSHINOYA AMERICA, INC., a Delaware corporation (“Company”), and _____ (“Franchisee”), subject to the following recitals:
R E C I T A L S
A. Franchisee is a resident of the state of Washington or a non-resident who is acquiring franchise rights permitting the location of one or more YOSHINOYA® Restaurants in the State of Washington.
B. The “Contracts” covered by this Addendum include all of the following contracts, copies of which are attached as exhibits to the Franchise Disclosure Document that Company has delivered to Franchisee, i.e.: Franchise Agreement; Area Development Agreement, General Release; Sublease, Guaranty of Sublease, Addendum to Lease; Confidentiality, Non- Disclosure and Non-Competition Agreement; Advertising Addendum; Asset Sale and Purchase Agreement; Addendum to Franchise Agreement - Employee Franchise Program, and Personal Guaranty (collectively referred to as the “Contracts”).
C. To the extent that the parties enter into any of the Contracts now or in the future, they desire to amend the Contracts in order to conform them to the requirements of Washington law.
D. All capitalized terms in this Addendum shall have the same meaning assigned to them in the Contracts.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged by the parties, the parties agree as follows:
1. The above recitals are incorporated by the parties as part of their covenants and undertakings.
2. The parties mutually acknowledge and agree that:
a. To the extent that any provision in any of the Contracts is inconsistent with the Washington Franchise Investment Protection Act (the “Act”), the provisions of the Act shall control.
b. To the extent that the governing law provided for in each of the Contracts is inconsistent with the Act, the provisions of the Act shall prevail.
c. A release or waiver of rights executed by Franchisee shall not include a release or waiver of rights arising under the Act except when the release or waiver of rights is executed pursuant to a negotiated settlement agreement and provided that each party is represented by independent counsel.
d. To the extent that any provision in any of the Contracts unreasonably restricts or limits the statute of limitations period for claims arising under the Act, right or remedies under the Act or reduces or limits Franchisee’s rights or remedies under the Act, such as the right to a jury trial, the specific provision in the Contract may not be enforceable under the Act. e. Transfer fees payable in connection with an assignment of any of the Contracts shall be limited to Company’s reasonable estimated or actual costs in approving and processing a transfer application.
3. The parties agree that the Contracts, whether now existing or hereinafter entered into by the parties, shall be enforced in accordance with their terms, subject, however, to the terms of this Addendum.
IN WITNESS WHEREOF the parties have executed this Addendum on the date first above written.
COMPANY: FRANCHISEE:
YOSHINOYA AMERICA, INC., a Delaware [NAME] corporation
By: By:
Its: Its:
EXHIBIT N ADDENDUM TO FRANCHISE AGREEMENT RE: EMPLOYEE FRANCHISE PROGRAM (OFFERED ONLY IN CALIFORNIA)
YOSHINOYA AMERICA, INC.
ADDENDUM TO FRANCHISE AGREEMENT FOR EMPLOYEE FRANCHISE PROGRAM
This ADDENDUM TO FRANCHISE AGREEMENT (the “Addendum”) is made this ______day of ______, 20___ by and between YOSHINOYA AMERICA, INC., a Delaware corporation (“Company”) and ______(“Franchisee”) with reference to the following facts:
R E C I T A L S
A. Franchisee applied to purchase a franchise under the Employee Franchise Program that Company offers to certain qualified employees and managers of the Company or other Company Affiliates (collectively, “Yoshinoya Entities”). Franchisee does not currently own a franchise to operate a YOSHINOYA Restaurant. Franchisee’s application is to acquire Franchisee’s first franchise.
B. Before submitting the application, Franchisee reviewed a copy of the Yoshinoya Entities’ current policy discussing qualifications and conditions for acquiring a franchise under the Employee Franchise Program. Franchisee represents that it understands the Employee Franchise Program policies, including, without limitation, the duty to resign from Franchisee’s current position with the Yoshinoya Entities before starting manager training and the prohibition against borrowing money from any employee of the Yoshinoya Entities to finance acquisition of the franchise or development of the YOSHINOYA Restaurant. Franchisee understands that the Yoshinoya Entities may administer the Employee Franchise Program policies in their discretion and may revoke or modify the policies any time and in any manner without prior notice.
C. Franchisee understands that acquiring a franchise under the Employee Franchise Program is voluntarily and not a condition of Franchisee’s employment. Franchisee understands that buying a franchise is a complex and risky investment and Franchisee has been encouraged to consult professional advisors, like a lawyer or accountant, for professional advice regarding the franchise investment.
D. This Addendum memorializes changes to the Franchise Agreement offered to a potential franchisee who qualifies to purchase a franchise under the Employee Franchise Program and is being entered into simultaneously with the Franchise Agreement.
E. Company accepted Franchisee’s application to acquire a franchise pursuant to the Employee Franchise Program, and each party represents to the other that it is prepared to execute Company’s current form of Franchise Agreement (“Franchise Agreement”), as amended by this Addendum.
F. Franchisee understands and agrees that the terms and conditions of this Addendum apply only to Franchisee’s first franchise restaurant. If Franchisee applies to acquire an additional franchise and Company, in its discretion, accepts Franchisee’s application to acquire an additional franchise, Franchisee shall not be entitled to the terms and conditions of the Employee Franchise Program that Company may then be offering to qualified candidates and any additional franchise shall be on the terms and conditions of Company’s then-current Franchise Agreement.
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NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is acknowledged, the parties enter into this Addendum simultaneous with their execution of the Franchise Agreement of even date herewith:
1. Definitions
Unless specifically defined in this Addendum, all capitalized terms in this Addendum shall have the same meaning given to them in the Franchise Agreement.
2. Recitals
The parties incorporate the recitals into this Addendum to make the recitals part of the substantive terms of their agreement.
3. Initial Franchise Fee
The Initial Franchise Fee for Franchisee’s first YOSHINOYA franchise is $5,000. Company acknowledges that, before entering into this Addendum and in connection with submitting its application to acquire a franchise under the Employee Franchise Program, Franchisee paid Company a background check fee of $500. Company hereby credits the $500 background check fee to the Initial Franchise Fee and acknowledges that the Initial Franchise Fee has been paid in full. Franchisee understands and agrees that no portion of the Initial Franchise Fee is refundable, except under the specific terms in the Franchise Agreement or this Addendum. The $5,000 Initial Franchise Fee can be waived only in a writing expressly granting such waiver.
4. Service Fee
The Service Fee for Franchisee’s first YOSHINOYA franchise shall be 3% of the YOSHINOYA Restaurant’s Net Sales for a period commensurate with the Initial Term of the Franchise Agreement. If Franchisee exercises the Renewal Options, the Service Fee during the Renewal Term will be the amount specified in the then-current Franchise Agreement that the parties enter into in connection with Franchisee’s exercise of the Renewal Option.
5. Site Selection Assistance
a. Franchisee understands and agrees that, whether or not Franchisee requests or receives site selection assistance described in this Section, Franchisee is solely responsible for fulfilling the site selection and leasing duties on the terms and within the time period set forth in the Franchise Agreement.
b. At Franchisee’s request, and at Company’s election, and only in connection with Franchisee’s first YOSHINOYA franchise, Company shall arrange to identify and offer Franchisee up to 3 available potential sites from those that Company previously identified as suitable for the operation of a YOSHINOYA Restaurant and which Company includes in its then- current site pipeline. Franchisee shall have 7 days after Company presents a site proposal in which to notify Company in writing if Franchisee accepts or rejects the proposed site. Company’s offer to Franchisee of more than one site does not signify that Franchisee has the right to open more than one franchise. Company’s or Company’s recommendation or identification of a potential site shall not constitute an admission by any Yoshinoya Entities that the Yoshinoya Entities are responsible for site selection nor extend Franchisee’s time under the
2 Franchise Agreement to complete site selection. Franchisee understands that, despite any site selection assistance to Franchisee, site selection remains Franchisee’s sole responsibility, subject to Company’s right to approve the site as provided in the Franchise Agreement.
c. Franchisee understands and agrees that Company may offer a proposed site to more than one franchisee. If Franchisee and one or more other franchisees desire to accept the same site, Company shall decide among the candidates to whom it will offer the site and may, but is not required to, use a lottery drawing or other selection method based on chance or other system for determining priority in its sole discretion, or may decide based on some other basis.
d. If Franchisee accepts a site proposed by Company, Franchisee shall pay Company a $6,000 finder’s fee on or before the date Franchisee signs the Lease or Sublease for the approved location.
e. Company’s approval of a site does not certify that Franchisee’s development, use or occupancy of the site for the operation of a YOSHINOYA Restaurant will conform to applicable laws or that a YOSHINOYA Restaurant operated at that location will be profitable. Franchisee understands and agrees that Franchisee is solely responsible for investigating and complying with applicable laws regarding development and occupancy of the Franchise Location.
f. Company’s site selection assistance described in this Section shall apply only to the first Franchise Agreement the parties enter into and not to any additional franchise, if any.
6. Lease and Sublease
a. Regardless of whether Franchisee receives site selection assistance from Company or another of the Yoshinoya Entities, Company may elect, in consideration of the grant of franchise rights, whether Franchisee shall: (a) sublease the approved location from Company; or (b) sublease the approved location from another of the Yoshinoya Entities; or (c) for an existing location, accept an assignment of the existing lease for the location and secure the return to Company and/or Yoshinoya entities of any security deposit, and release of Company and Yoshinoya Entities from existing agreements with and obligations to the landlord; or (d) negotiate Franchisee’s own new lease for the location and secure the release of Company and Yoshinoya Entities from existing agreements with and obligations to the landlord. If Company requires a Sublease, Franchisee shall execute the form of Sublease attached as Exhibit 1 within 5 business days after being presented with the Sublease.
b. Franchisee understands that, among other things, the Sublease identifies terms and conditions permitting Franchisee to acquire the Personal Property (as the term “Personal Property” is defined in the Sublease). The parties hereby amend the Franchise Agreement wherever the context requires to reflect the existence of the Sublease and the terms of this Addendum with respect to the rights and duties regarding the Personal Property. In any conflict between the Franchise Agreement and Sublease, the Sublease shall control. Unless Franchisee meets the conditions precedent to acquire the Personal Property and exercises its right to do so according to the Sublease (i) title in and to the Personal Property shall remain in Company or its assignee or successor, and (ii) Franchisee’s right to use the Personal Property shall be subject to the terms of the Sublease and Franchise Agreement (as the latter is amended by this Addendum).
3 c. Franchisee understands and agrees that Company may rescind its offer to enter into a Sublease for a particular site and may offer the site to another franchisee or employee candidate or develop the site as a YOSHINOYA Restaurant for itself if Company or Company concludes, in its/their discretion, that Franchisee may not be able to complete all required training described in the Franchise Agreement or this Addendum to Company’s satisfaction sufficiently in advance of the expected Opening Date.
d. Franchisee shall be responsible to deliver a copy of any Lease and/or Addendum to Lease for the approved location to Company together with other ancillary documents, and within the time period, indicated in the Franchise Agreement.
e. Franchisee acknowledges that the term of any existing lease for the approved location may end sooner or later than the term of the Franchise Agreement. If the lease ends before the Franchise Agreement, Franchisee will lose possession of the approved location. If the Franchise Agreement term ends before the lease term, then Franchisee will not have the right to operate the franchise at the location, but will remain obligated to pay the rent under the lease. If the existing lease is assigned to Franchisee, then Franchisee shall be responsible to negotiate any new lease or lease extension with the landlord.
f. Franchisee acknowledges that the term of any existing lease for the approved location may include an option or options permitting the tenant to elect to extend the term of the lease. If the existing lease is assigned to Franchisee, then Franchisee shall be responsible to monitor, and if Franchisee wishes to exercise any option, to take all actions needed to do so.
7. Financial Support
a. Franchisee is solely responsible, at its expense, for development and construction of the YOSHINOYA Restaurant in accordance with the Construction Manual.
b. At Franchisee’s request, and at Company’s election, and only in connection with Franchisee’s first YOSHINOYA franchise, Company may be willing to guaranty repayment of potentially up to $600,000 of conventional bank or third party construction financing on the terms and conditions of this Section. In no event shall the principal amount guaranteed by Company exceed 100% of the construction bid accepted by Franchisee from the contractor whom Franchisee selects to handle development and construction of the YOSHINOYA Restaurant. Company will notify Franchisee of Franchisor’s willingness, and if willing, the principal amount it will guaranty following Franchisee’s presentation of the final construction bid.
c. The maximum length of Company’s guaranty shall not exceed 10 years from the date of the construction loan. If Company provides a guaranty, then Franchisee shall pay Company a monthly fee for serving as guarantor equal to .05% APR of the then-principal amount of the loan for as long as the guaranty is in effect.
d. As security for Franchisee’s repayment to Company of any funds that Company is required to advance to the construction lender pursuant to the guaranty, Franchisee grants Company a security interest in and to all the following property of Franchisee located at the Yoshinoya Restaurant, and used in any way to operate the Franchised Business: refrigerators, storage equipment, cooking equipment, dispensing equipment, utensils, small wares, computers, printers, telephones, cash registers, cameras, other office equipment, furniture, furnishings, signs, décor, inventory and supplies, all tangible materials, and also any and all other miscellaneous tangible property of Franchisee located at the Franchised Restaurant and
4 used in any way to operate the Franchised Business for as long as the guaranty is in effect. Company’s security interest shall be subordinate only to the primary construction lender’s security interest.
e. It shall be a breach of the Franchise Agreement if Franchisee fails to pay the monthly fee to Company or any payment to the construction lender on a timely basis, or if Franchisee defaults under any other obligation imposed by the construction loan which Company guarantees and, if the default is curable, fails to cure the default within a timely manner.
8. Initial Training
a. Franchisee understands that its successful completion of the training requirements in this subsection is a material condition of the award of the franchise under the Employee Franchise Program. Franchisee must personally successfully complete the following training requirements at least 30 days before the opening the YOSHINOYA Restaurant. The training requirements in this subsection must be completed by the employee who is the Franchisee and buys the franchise as an individual, the owner of a Controlling Interest of the equity or voting interests of Franchisee if Franchisee is a corporation, LLC or other entity, or by a general partner of Franchisee if Franchisee is a partnership, and references to Franchisee in this subsection shall mean the individual who is the owner or general partner:
(i) If Franchisee has been employed as a YOSHINOYA restaurant manager during the 12 months before the date of the Franchise Agreement, Franchisee shall personally successfully complete a one month condensed version of Company’s manager training class.
(ii) If Franchisee has not been employed as a YOSHINOYA restaurant manager during the 12 months before the date of the Franchise Agreement, Franchisee shall personally successfully complete the same manager training class that Company offers to non-employee franchisees, which as of the date of this Addendum is a 12-week course. If Franchisee receives a failing grade at the end of the manager training course, Company may require Franchisee to personally successfully complete additional manager training for up to a total of 12 months (including the initial 12-week manager training course). Franchisee understands and agrees that Company may terminate the Franchise Agreement if Franchisee receives a failing grade at the end of the extended manager training class, in which case Company shall refund the $5,000 Initial Franchise Fee, less $500, on Franchisee’s execution of Company’s form of general release. Franchisee understands and agrees that it must personally complete manager training to Company’s satisfaction and qualify as an Approved Manager and may not fulfill this obligation by sending another person to manager training or qualifying another person as an Approved Manager in its place.
(iii) Franchisee understands and agrees that, as a condition to beginning the manager training described in subsections (i) and (ii), Franchisee must resign his or her current employment position with the Yoshinoya Entities. During manager training described in subsections (i) and (ii), Franchisee shall be deemed to be an at-will employee of Company and entitled to receive the same compensation and benefits that Company then pays to its entry- level manager trainees. Franchisee further understands and agrees that:
(1) If Franchisee’s YOSHINOYA Restaurant is not in a condition where its opening is relatively imminent following Franchisee’s completion of manager training, Company may, in its discretion and depending on its operational needs, offer employment to Franchisee
5 as a manager of one of its YOSHINOYA restaurants on an at-will basis. However, Franchisee is not guaranteed employment in any capacity by any of the Yoshinoya Entities following completion of the manager training described in subsections (i) and (ii); and
(2) If the Franchise Agreement terminates for any reason or if Franchisee completes a transfer in accordance with the Franchise Agreement, whether before or after the Opening Date, Franchisee shall not be entitled to be reinstated to the employment position or seniority status that Franchisee held with the Yoshinoya Entities before beginning manager training, nor shall Franchisee be entitled to be hired by any of the Yoshinoya Entities in any capacity.
(iv) Following successful completion of the manager training described in subsections (i) and (ii), Franchisee shall schedule and successfully complete a 5-day general franchise training course, which Company may extend to up to 10 days in its discretion depending on Franchisee’s level of performance.
(v) Franchisee understands and agrees that it must successfully complete both manager-level and general franchise training by no later than 30 days before the scheduled opening of the YOSHINOYA Restaurant. Manager and general franchise training shall be conducted at the Yoshinoya Training Center or at an operating YOSHINOYA restaurant that Company designates.
b. Company shall provide Franchisee with the 5-day on-site training in connection with the opening of the YOSHINOYA Restaurant that is described in the Franchise Agreement.
c. The other provisions of the Franchise Agreement pertaining to initial and continuing training shall be in full force and effect.
9. Full Time and Attention
a. If Franchisee is an individual, Franchisee shall devote full time and attention to the franchise business and pre-opening activities starting at the earlier of (i) 2 months before the scheduled opening of the YOSHINOYA Restaurant, or (ii) when Franchisee commences manager training described in this Addendum.
b. If Franchisee is a corporation, LLC, partnership or other form of business entity, the person who is an employee or manager of Company or Company and who qualifies under Company’s Employee Franchise Program to buy the franchise must own a Controlling Interest of the equity or voting interests of the business entity and devote full time and attention to the franchise business and pre-opening activities starting at the earlier of (i) 2 months before the scheduled opening of the YOSHINOYA Restaurant, or (ii) when Franchisee commences manager training described in this Addendum.
10. Exceptions; Policies
Franchisee understands that the Yoshinoya Entities may rescind and modify the eligibility requirements and terms, conditions and policies of the Employee Franchise Program from time to time in their discretion and apply and offer different requirements, terms and conditions in individual cases to others. Franchisee acknowledges that it has no right to object to any variances granted to others.
6 11. Scope of Addendum
Except as expressly amended by this Addendum, the Franchise Agreement shall continue in full force and effect.
The parties have executed this Addendum on the date first stated on page 1.
[COMPANY] [FRANCHISEE]
YOSHINOYA AMERICA, INC. ______[entity name of Franchisee, if applicable]
Signature:______Signature: ______
Printed name: ______Printed name: ______
Title: ______Title: ______
7 EXHIBIT 1
[ATTACH SUBLEASE]
8
EXHIBIT O ADVERTISING ADDENDUM TO FRANCHISE AGREEMENT
ADVERTISING ADDENDUM TO FRANCHISE AGREEMENT
This Advertising Addendum to Franchise Agreement (this "Addendum") is made this ____ day of ______, 200___ between Yoshinoya America, Inc. ("Company") and ______("Franchisee") with reference to the following facts:
R E C I T A L S
Company and Franchisee entered into a Franchise Agreement dated ______, 200__ (the "Franchise Agreement"). The parties want to add additional provisions concerning initial advertising. Accordingly, the parties have agreed as follows:
A G R E E M E N T
A. New Section 18 is added to and made part of the Franchise Agreement, as follows:
18. Additional Advertising.
18.1. Expenditure. In addition to advertising contributions provided for in Sections 8.3 and 8.6 and any other payments provided for in the Franchise Agreement, during the period starting on signing the Franchise Agreement, and lasting _____ days (the “Initial Advertising Period”) Franchisee shall spend at least $_____ for advertising and marketing the Restaurant.
18.2. Deposit. On signing this Addendum, Franchisee shall pay to Company an advertising deposit equal to the total required expenditure under Section 18.1 (“Advertising Deposit”).
18.3. Consent. Franchisee shall inform Company of advertising and marketing Franchisee proposes to conduct for the Restaurant during the Initial Advertising Period and shall not use that advertising or marketing before obtaining Company’s written consent.
18.4. Payment. During the Initial Advertising Period, Franchisee may submit to Company invoices for advertising and marketing of the Restaurant that Company previously consented to in writing. After Company confirms such advertising and marketing was completed and consented to in writing by Company, Company shall pay such invoices, up to an aggregate total not to exceed the Advertising Deposit.
B. Other.
Defined terms not defined in this Addendum shall have the meaning provided in the Franchise Agreement. This Addendum shall be deemed to be part of, and shall be subject to all other terms and conditions in, the Franchise Agreement. In any conflict between the Franchise Agreement and this Addendum, the provisions in this Addendum shall control.
FRANCHISEE COMPANY
YOSHINOYA AMERICA, INC.
Signature: Signature: _____ Print Name: Print Name: Title: ______Title: ______
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EXHIBIT P ASSET SALE AND PURCHASE AGREEMENT
ASSET SALE AND PURCHASE AGREEMENT
This ASSET SALE AND PURCHASE AGREEMENT is entered into this ____ day of ______, 200__, by and between ______("Buyer"), whose address is ______, and ______(“Seller"), whose address is ______, with reference to the following facts:
RECITALS
Seller owns assets of a Yoshinoya® restaurant located at ______("Location"). These include the assets listed on Exhibit A. Seller wants to sell, assign and transfer to Buyer, and Buyer wants to purchase and acquire from Seller, the assets listed on Exhibit A. Accordingly, the parties have agreed as follows:
AGREEMENT
1. Purchase and Sale
1.1 Purchase and Sale of Assets. Seller agrees to sell, transfer, assign and convey to Buyer, and Buyer agrees to purchase and acquire from Seller, on the Closing Date (as hereinafter defined), all the assets listed in Exhibit A attached to this Agreement and incorporated here by this reference (the "Assets").
1.2 Price. The total purchase price for the Assets is the sum of $______. The purchase price shall be payable in full on the Closing Date.
1.3 Allocation of Purchase Price. The allocation of the purchase price among the Assets for federal and state income and franchise tax shall be as stated in Exhibit B entitled "Allocation of Purchase Price."
1.4 Further Assurances. From time to time at a party's request, at or after the Closing Date, the other party shall sign and deliver instruments and documents and take other action as the requesting party reasonably requests to more effectively convey and transfer the Assets.
2. Closing
2.1 Closing. The closing will take place at ______, on ______, 200___ at ______.m. or such other time and place as may be agreed by Seller and Buyer. But, at ______’s discretion, this Agreement shall terminate and be of no further force and effect if the closing shall not have occurred by close of business on ______, 200____ (the “Deadline”). Such termination shall not affect the rights or remedies of either party regarding a breach of, or default under, this Agreement by the other party. On consummation, the closing shall be deemed to take place as of the close of business on the closing Date. The time and date of the closing are referred to as the "Closing Date."
- 1 - G:\lhsmh\LW\12912-2\482283.DOC 2.2 Deliveries. At the closing, Seller shall deliver to Buyer, against receipt of the purchase price referred to in Section 1.2, a bill of sale and other instruments of transfer and conveyance as reasonably requested by Buyer. At the closing, Buyer shall deliver to Seller the purchase price and such instruments of assumption as reasonably requested by Seller.
3. Covenants.
3.1 Sales Tax. ______shall be responsible to pay any sales tax which may become due by virtue of the sale of the Assets contemplated by this Agreement.
3.2 Bulk Transfer Laws. [_____] [_____] Both parties initial if applicable or delete this Section 3.2 if not applicable. The parties mutually agree to waive compliance with the bulk sales provisions of the Uniform Commercial Code of the State of ______, or any other applicable "bulk transfer" law in connection with the sale of the Assets. Seller agrees to indemnify Buyer against all claims, expenses, obligations, damages or liabilities occurring or arising from such waiver of compliance.
3.3 Obligations to Personnel. Seller shall be responsible for payment of and shall pay all compensation and benefits due to personnel of the Yoshinoya restaurant operated at the Location for services performed through the Closing Date.
3.4 Indemnification. Seller shall indemnify, defend and hold Buyer harmless from and against damages, losses, liabilities, claims or expenses (including court costs and reasonable attorneys' fees) arising from the use of the Assets or operation of the Yoshinoya restaurant prior to the Closing. Buyer shall indemnify, defend and hold Seller harmless from and against damages, losses, liabilities, claims or expenses (including court costs and reasonable attorneys' fees) arising from use of the Assets or operation of the Yoshinoya restaurant after the Closing Date.
4. Conditions to Buyer's Obligations. Buyer's obligations to complete the transactions contemplated by this Agreement are subject to the performance or satisfaction of the following conditions on or before the Closing Date:
4.1 Lease. The lease for the premises and all deposits held by the lessor of the Location will be, at ______'s option, (i) assigned to Buyer by Seller for the remaining term, with the lessor’s consent (if necessary) and an assumption by Buyer (if necessary), or (ii) re-negotiated by Buyer to its satisfaction with the assistance of Seller, or (iii) subleased by Seller to Buyer on mutually satisfactory terms. If Seller under this Agreement is Yoshinoya America, Inc. or its affiliated entity, then Seller shall have the right (but not the obligation) to require Buyer to: (x) assume Seller’s existing lease for the premises; (y) secure the release of Seller from all liability under the existing lease and return of Seller’s security deposit; or (z) to sublease from Seller. Buyer acknowledges that the term of the existing lease may end at a different time than the term of the Franchise Agreement (earlier, or later). If the lease ends before the Franchise Agreement, Buyer will not have possession of a location to operate the franchise. If the Franchise Agreement ends before the term of the lease, Buyer will not have the right to continue to operate the franchise at the premises (but will still be obligated to pay the rent). If the existing lease is assigned to Buyer, Buyer must negotiate a new lease or lease extension with the landlord. The existing lease may include an option or options giving the tenant the right to extend the term of the lease. If the lease is assigned to
- 2 - Buyer, Buyer shall be responsible to keep track of, and if Buyer wishes to exercise any option, to take all the actions needed to do so.
4.2 Bulk Transfer Law. If Section 3.2 has been deleted Buyer and Seller shall have taken all action required to comply with the provisions of the Uniform Commercial Code - Bulk Transfer Law applicable to the transactions contemplated by this Agreement.
5. Conditions to Seller's Obligations. Seller's obligation to consummate the transac- tions contemplated by this Agreement are subject to the performance or satisfaction of the following conditions on or before the Closing Date:
5.1 Representations and Warranties. Buyer's representations and warranties in this Agreement or in any certificate, document or instrument delivered to Seller pursuant to this Agreement or in connection with the transactions contemplated by this Agreement shall be true and correct as of the Closing Date as if made on and as of the Closing Date.
5.2 Covenants. Buyer shall have performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied by Buyer, on or before the Closing Date.
5.3 No Actions or Proceedings. There will not be pending or threatened any action or proceeding before any court or government body or agency which seeks to restrain, prohibit or invalidate any transaction contemplated by this Agreement.
6. Termination.
6.1 Events of Termination. This Agreement and the transactions contemplated by this Agreement may be terminated at any time prior to the Closing Date: (a) by Buyer, if any of the conditions in Section 4 shall have become incapable of satisfaction or performance or shall not have been satisfied or performed in the manner and within the time required on or before the Closing Date; and shall not have been waived by Buyer; or (b) by Seller, if any of the conditions in Section 5 shall have become incapable of satisfaction or performance or shall not have been satisfied or performed in the manner and within the time required on or before the Closing Date; and shall not have been waived by Seller.
6.2 Effects of Termination. Termination of this Agreement pursuant to Section 6.1 is deemed not to be a remedy, and shall not waive or release a party from liability for breach of this Agreement.
7. Other.
7.1 Headings. Section numbers and headings in this Agreement are for convenience only and shall not affect in any way the meaning or interpretation of this Agreement. The provisions of this Agreement shall be interpreted according to their fair meaning, and shall not be strictly construed for or against either party.
- 3 - 7.2 Arbitration: Any controversy or claim that arises out of or relates to this Agreement, or any claimed breach of this Agreement, including without limitation any claim that any of this Agreement (including this Section 7.2) is invalid, illegal, voidable or void, shall be resolved by arbitration according to the Commercial Rules of Arbitration of the American Arbitration Association. Judgment on the award may be entered in any court with jurisdiction. Arbitration shall occur in Los Angeles, California. This arbitration provision shall be self- executing, and shall remain in effect after and regardless of expiration or termination of this Agreement. An arbitration may proceed and an award may be entered regardless of a party’s failure to appear at the arbitration.
7.3 Governing Law. This Agreement is deemed to be entered into in the State of California. The interpretation, validity, construction and performance of this Agreement shall be governed by the laws, without regard to the laws as to choice or conflict of laws, of the State of California.
7.4 Binding Effect. This Agreement shall bind and benefit the parties and their successors and permitted assigns.
7.5 Parties in Interest. Nothing in this Agreement, expressed or implied, is intended to confer on any person or entity other than the parties any right or remedy under or by reason of this Agreement.
7.6 Notices. Any notice or communication required or permitted by this Agreement shall be transmitted in writing and be deemed sufficiently given when delivered personally or three (3) days after mailing with the U.S. Postal Service by registered or certified mail, postage prepaid or one day after being sent by Federal Express or other receipted overnight courier service, and addressed to the recipient at its address stated in the introductory paragraph of this Agreement, or such other address as a party has furnished to the other party in the manner provided above.
7.7 Disputes. In any arbitration or other proceeding the prevailing party shall be entitled to recover all costs and expenses of suit, including reasonable attorneys' fees.
7.8 Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect the other provisions, and this Agreement shall be construed in all respects as if any invalid or unenforceable provision were omitted.
7.9 Entire Agreement. This Agreement, including its Exhibits is the entire agreement between the parties on its subject, and supersedes all prior agreements, understandings, negotiations, representations and discussions, whether verbal or written pertaining to its subject. There is no promise, term, condition or obligation of the parties pertaining to that subject other than as stated in this Agreement. If Seller is Yoshinoya America, Inc. (“YAI”) or its affiliate, nothing in this Agreement is intended to disclaim representations which YAI has made in its Franchise
- 4 - Disclosure Document which Buyer acknowledges has been furnished to Franchisee. This Agreement may be amended, modified or supplemented only by a writing executed by each of the parties.
Signed as of the date first written above.
BUYER SELLER
______
By______By______
Print Name______Print Name______
Title______Title______
- 5 -
EXHIBIT A
ASSETS
EXHIBIT B
ALLOCATION OF PURCHASE PRICE
EXHIBIT Q SPOUSAL CONSENT
CONSENT OF SPOUSE
The undersigned, as spouse of the person whose name appears beneath my signature below, signs this Consent with regard to that or those of the following that are checked:
Please check all that apply:
□ Franchise Agreement dated ______by and between Yoshinoya America, Inc., a Delaware corporation (“Company”) and ______. □ Guaranty Agreement dated ______by the undersigned’s spouse. □ Area Development Agreement dated ______by and between the Company and ______. □ Sublease dated ______by and between the Company and ______, a ______. □ Guaranty of Sublease dated ______by and between the Company and ______. □ General Release dated ______by and between the Company and ______. □ Confidentiality, Non-Disclosure and Non-Competition Agreement dated ______by and between the Company and ______. □ Asset Sale and Purchase Agreement dated ______by and between the Company and ______.
For this Consent, the items indicated above shall individually and collectively be referred to as, the “Agreement(s)”.
I acknowledge and confirm that I have read and understand the Agreement(s) and obtained explanation of any provisions I did not understand so that I now understand such provisions. I acknowledge that I have the right and had the opportunity to seek independent legal counsel and was fully advised by counsel as to all my rights, interests and obligations relating to the Agreement(s) and the contemplated transactions, or I voluntarily chose not to retain independent legal counsel. I consent to, approve of and agree with the execution and delivery of the Agreement(s) and the consummation of the transactions by my spouse with the understanding that I may have a beneficial interest, community property interest, quasi-community property interest or other interest in the property rights of my spouse which are the subject of the Agreement(s) and which, by this consent and the Agreement(s) are made subject to the Agreement(s).
I understand the terms and conditions in the Agreement(s) and consent to and agree to be bound by all terms and provisions of the Agreement(s). I acknowledge that I signed this consent voluntarily and of my own free will without relying on any promise, commitment or other inducement by the Company, my spouse or any other person. I promise not to take any action at any time to hinder the transactions contemplated in the Agreement(s).
Dated and effective as of ______, 201___
Signature: ______
Print Name: ______
Spouse of: ______(please print)
EXHIBIT R CLOSING ACKNOWLEDGMENT
DECLARATION OF FRANCHISE APPLICANT
As part of the process we follow in reviewing an application to purchase a YOSHINOYA franchise, you must execute this Declaration to inform us if any statement or promise was made to you by our representatives that we do not authorize or that you believe is untrue, inaccurate or misleading. We also want to confirm that you understand the terms of the agreements you will sign. Please review each of the following questions carefully and provide honest and complete answers to each question.
Did you receive and personally review the Franchise Disclosure Yes No Document (“the FDD”) and each exhibit that the FDD identifies as being attached to it presented by Yoshinoya Franchise North America, Inc. (the “Company”)? Do you understand all the information in the Franchise Agreement Yes No and exhibits?
If not, what parts do you not understand? (Attach additional pages, if necessary.) ______
Did you receive the FDD together with a copy of all proposed Yes No agreements relating to the sale of the franchise at least the longer of (i) 14 calendar days, or (ii) ten (10) business days before your execution of this document and before you paid any consideration in connection with the this franchise? Did you sign a receipt for the FDD indicating the date that you Yes No received the FDD? Do you understand all of the information contained in the FDD? Yes No
If not, what parts do you not understand? (Attach additional pages, if necessary.) ______
- 1 - G:\lhsmh\LW\12912-2\351908.DOC Did you have the opportunity to discuss the benefits and risks of Yes No investing in and operating a YOSHINOYA franchise business with an attorney, accountant or other professional advisor hired by you to advise you? If you discussed the benefits and risks of investing in and operating Yes No a YOSHINOYA franchise business with an attorney, accountant or other professional advisor, hired by you to advise you, do you understand those benefits and risks?
If you did not discuss the benefits and risks of investing in and operating a YOSHINOYA franchise business with an attorney, accountant or other professional advisor hired by you to advise you, why did you decide not to seek professional advice? (Attach additional pages, if necessary.) ______
Do you understand each of the following: Yes No (i) we retain the right to modify the YOSHINOYA System; (ii) the YOSHINOYA System may evolve and change over time; Yes No (iii) investing in a YOSHINOYA franchise involves business risks; Yes No (iv) results of your YOSHINOYA franchise depend primarily on your business ability and personal efforts as well as competition from other businesses, location you chose for your YOSHINOYA Yes No restaurant and other economic and business factors?
If not, what do you not understand? (Attach additional pages, if necessary.) ______
Did you have the opportunity to visit an operating YOSHINOYA Yes No restaurant and/or speak with an existing YOSHINOYA franchisee?
If not, why not? (Attach additional pages, if necessary.) ______
- 2 - G:\lhsmh\LW\12912-2\351908.DOC Did any employee or other person speaking on behalf of the Com- Yes No pany make any statement or promise concerning revenues, profits or operating costs you will or are likely to earn from a YOSHINOYA restaurant or that your YOSHINOYA restaurant may generate? Did any employee or other person speaking on behalf of the Yes No Company make any statement or promise regarding the amount of money you may earn in operating a YOSHINOYA restaurant? Did any employee or other person speaking on behalf of the Com- Yes No pany make any statement or promise regarding costs you may incur in operating a YOSHINOYA restaurant other than disclosures in the FDD? Did any employee or other person speaking on behalf of the Yes No Company make any statement or promise concerning the likelihood of success you should or might expect to achieve from operating a YOSHINOYA restaurant? Did any employee or other person speaking on behalf of the Yes No Company make any statement, promise or agreement concerning advertising, marketing, training, support service or assistance that we will or may furnish to you that is contrary to, or different from, the information contained in the FDD? Did any employee or other person speaking on behalf of the Yes No Company make any statement, promise or agreement concerning the anticipated income, earnings and growth of the Company or of YOSHINOYA franchise network?
If you answered “Yes” to any of the questions, please provide a full explanation of your answer in the following blank lines. (Attach additional pages, if necessary, and refer to them below). If you answered “No” to each of the foregoing questions, you may leave the following lines blank, though you are welcome to write in any comments you have. ______
Do you understand that your answers are important to us and that Yes No we will rely on them in deciding whether or not to enter into an Area Development Agreement or Franchise Agreement with you or grant you a franchise?
By signing this Declaration, you represent that you answered truthfully based on your personal knowledge and belief and provided complete answers containing all material facts that are responsive to the above questions.
Dated: ______, 20______APPLICANT
- 3 - G:\lhsmh\LW\12912-2\351908.DOC
EXHIBIT S TABLE OF CONTENTS OF SYSTEMS MANUAL
Introduction Startup Yoshinoya Restaurant Systems Manual ...... int_2 General Guidelines ...... start_1 Confidentiality ...... int_3 Form the Business ...... start_1 History of Yoshinoya ...... int_3 Obtaining Business Licenses and Forms ...... start_2 Yoshinoya Corporate Philosophy ...... int_4 Business Licenses, Use and Other Permits ...... start_2 Franchise Agreement ...... int_4 Independently Owned and Operated ...... int_4 Business Accounting Records ...... start_3 Brand Identity, Trademarks ...... int_5 Site Selection ...... start_4 Franchisee Feedback ...... int_5 Site Analysis ...... start_4 Chapter Conclusion ...... int_6 General Site Model Guidelines ...... start_4 Suburban Site Model Guidelines ...... start_5 Exclusive Territory ...... start_6 Lease Terms ...... start_6 Utilities...... start_7 Signage ...... start_7 Design Standards and Construction Guide .....start_8 Construction Manual ...... start_8 Recommended Suppliers ...... start_9 Designated Goods ...... start_9 Designated Services ...... start_9 Computer Equipment and Software Req...... start_10 Back Office Computer and Software ...... start_10 Insurance Requirements ...... start_10 Employees ...... start_11 Franchisee Training Requirements ...... start_11 Code of Business Conduct ...... start_12 Arriving at the Training Facility ...... start_12 Expectations While in Training ...... start_13 Cell Phone Usage ...... start_14
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Inappropriate Language ...... start_14 Franchise Standards and Sexual Harassment...... start_14 Site Visitation Personal Grooming and Attire ...... start_15 Illegal Drug and/or Alcohol Use ...... start_15 System Compliance ...... fssv_1 Vandalism or Defacement of Property ...... start_15 What Yoshinoya Expects from You...... fssv_1 Theft ...... start_15 Days and Hours of Operation ...... fssv_3 Trespass ...... start_15 Restaurant Environment ...... fssv_4 Fireworks ...... start_15 Fighting/Criminal Assault ...... start_16 Store Design and Furnishing ...... fssv_4 Physical Assault ...... start_16 Point of Purchase (POP) and Menu Boards .....fssv_4 Firearms/Weapons ...... start_16 Illuminated Signage and Awning ...... fssv_4 Lewd, Indecent, or Disorderly Conduct ...... start_16 Business Licenses and Permits ...... fssv_4 Gambling ...... start_16 No Smoking Policy ...... fssv_4 Littering ...... start_16 Music...... fssv_4 Other Acts of Misconduct ...... start_16 Temperature Control ...... fssv_5 Termination of Franchise ...... start_17 Tip Jars ...... fssv_5 Americans with Disabilities Act (ADA) Grand Opening ...... start_18 Accommodations ...... fssv_5 Grand Opening Fee Reconciliation ...... start_18 Uniform Program and Policy ...... fssv_6 Pre-Opening Marketing ...... start_19 Uniform Standards ...... fssv_6 Banners...... start_19 Restaurant Evaluation and Audit ...... fssv_7 Friends and Family Event ...... start_20 Now Open Marketing ...... start_20 Frequency ...... fssv_7 Local Store Marketing ...... start_22 Evaulation and Audit Report ...... fssv_7 Consultation and Advice ...... fssv_8 Chapter Conclusion ...... start_24 Effects of Inspections ...... fssv_8 Inspections: City, State and Federal ...... fssv_9 Chapter Conclusion ...... fssv_10
Yoshinoya Systems Manual ©2010 TOC_3TOCTTOOC_3_3
Customer Experience Management Procedures Customer Experience Standards ...... c-svc_1 Planning Steps ...... mgt_1 Customer Area ...... c-svc_2 Restaurant Operation Schedule ...... mgt_2 Employee Attitude ...... c-svc_3 Opening and Preparation Duties ...... mgt_3 English Language Fluency ...... c-svc_3 Tasks to Complete First ...... mgt_3 Personal Appearance and Demeanor ...... c-svc_4 Employee Management ...... mgt_3 Telephone ...... c-svc_5 Monetary Tasks ...... mgt_3 Employee Telephone Policy ...... c-svc_5 Paperwork and Reports ...... mgt_3 Basic Telephone Etiquette ...... c-svc_5 Local Store Marketing (LSM) ...... mgt_3 Handling Customer Complaints ...... c-svc_6 Check Restaurant for Cleanliness ...... mgt_3 General Guidelines ...... c-svc_6 Rush Management Procedures ...... mgt_4 Handling Level I Complaints ...... c-svc_7 Preparation ...... mgt_4 L.A.A.S.T. Strategy ...... c-svc_7 During the Rush ...... mgt_4 Handling Level II Complaints ...... c-svc_9 Re-adjustment ...... mgt_4 Closing/Shift Change Duties ...... mgt_5 Level III Complaints ...... c-svc_9 Employee Management ...... mgt_5 Refusal of Service ...... c-svc_10 Check the Restaurant for Cleanliness ...... mgt_5 Lost and Found: Property and Money ...... c-svc_11 Paperwork and Reports ...... mgt_5 Chapter Conclusion ...... c-svc_12 Monetary Tasks ...... mgt_5 Food Safety ...... mgt_5 Security ...... mgt_5 Daily Accounting Procedures ...... mgt_6 POS Systems ...... mgt_6 Making the Daily Bank Deposit ...... mgt_6 Weekly Management Procedures ...... mgt_7 Employee Management ...... mgt_7 Operational Paperwork ...... mgt_7 Invoices ...... mgt_7 Inventory ...... mgt_7 End of Week Paperwork/Reporting ...... mgt_7 Monthly, Quarterly and Annual Management Procedures ...... mgt_7 Employee Management ...... mgt_7 Operational Paperwork...... mgt_7 Food Waste Log Sheet ...... mgt_8 Inventory ...... mgt_8 Inventory Counting Categories ...... mgt_8 Taking Inventory ...... mgt_9 Ordering and Receiving Product ...... mgt_9 General Requirements...... mgt_9 Approved Manufacturer ...... mgt_9 Receiving Product ...... mgt_10 Purchase Orders ...... mgt_11 Developing Usage Values ...... mgt_11 Purchase Order Methods ...... mgt_12
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Ordering for Quantitative Purchase Orders ..mgt_12 Accounting & Bookkeeping Scheduling Guidelines ...... mgt_13 General Accounting Expectations ...... acct_1 Part-Time Employees ...... mgt_13 Overtime ...... mgt_13 Retaining and Storing Records ...... acct_1 Employee Availability Schedule ...... mgt_14 Hiring an Accountant ...... acct_2 Teamwork ...... mgt_14 Hiring a Bookkeeper ...... acct_2 Rest and Lunch Breaks ...... mgt_14 Accounting and Bookkeeping Methods ...... acct_3 Labor Budget ...... mgt_14 Cash Method Accounting ...... acct_3 Working Hour Analysis ...... mgt_14 Which Method Should You Use? ...... acct_3 Weekly Work Schedule ...... mgt_15 Chart of Accounts...... acct_3 Consult Professional Advisors ...... mgt_15 General Accounting Procedures ...... acct_4 Chapter Conclusion ...... mgt_16 Daily Accounting ...... acct_4 Weekly Accounting ...... acct_4 Monthly Accounting ...... acct_4 Quarterly Accounting ...... acct_4 Annual Accounting ...... acct_5 Payment Transactions ...... acct_5 Cash ...... acct_5 Credit Cards ...... acct_5 Credit Card Processing ...... acct_6 Selecting a Processing Service ...... acct_6 Taxes ...... acct_8 Federal Income Tax ...... acct_8 Federal Unemployment Tax: FUTA ...... acct_8 Sales Tax ...... acct_8 Payroll Taxes ...... acct_8 Independent Contractor vs. Employees ...... acct_9 Payroll Reporting and Payment ...... acct_9 Using a Payroll Service ...... acct_10 Operations Budget and Analysis ...... acct_11 Profit and Loss Statement (P&L) ...... acct_11 Description ...... acct_12 Restaurant Operation Budget and Analysis .. acct_13 Payments to Corporate ...... acct_15 Service Fee ...... acct_15 Promotional Fee ...... acct_15 Cooperative Promotional Fee ...... acct_15 Late Payment ...... acct_16 Chapter Conclusion ...... acct_16
Yoshinoya Systems Manual ©2010 TOC_5TOCTTOOC_5_5
Kitchen Operations Beef Dishing: Beef Only ...... kitch_32 Vegetables ...... kitch_33 Yoshinoya Menu ...... kitch_1 Cabbage: Cooking ...... kitch_33 Bowls ...... kitch_1 Cabbage: Storage ...... kitch_34 Sides ...... kitch_1 Vegetables: Cooking ...... kitch_35 Sesame Chicken Wings ...... kitch_1 Vegetable Bowl Dishing: Regular ...... kitch_37 Soups ...... kitch_2 Vegetable Bowl Dishing: Large ...... kitch_38 Salads ...... kitch_2 Vegetable Dishing: Vegetables Only ...... kitch_39 Desserts ...... kitch_2 Beef Bowl® w/ Vegetables Dishing: Reg ...... kitch_40 Drinks ...... kitch_2 Beef Bowl® w/ Vegetables Dishing: Large .....kitch_41 Kid’s Meal ...... kitch_2 Beef Bowl® w/ Vegetables Dishing: Kids ...... kitch_42 Portion Control Chart...... kitch_3 Chicken ...... kitch_43 Product Storage ...... kitch_4 Chicken Specifications ...... kitch_43 Basic Guidelines ...... kitch_4 Chicken Cooking Dos and Don’ts ...... kitch_43 Unprepared Product ...... kitch_4 Chicken Cooking ...... kitch_44 Prepared Product ...... kitch_5 Warming Teriyaki Sauce ...... kitch_45 Dry Storage ...... kitch_5 Dishing Teriyaki Sauce ...... kitch_46 Frozen Storage ...... kitch_6 Chicken Bowl Dishing: Regular ...... kitch_47 Refrigerated Storage ...... kitch_6 Chicken Bowl Dishing: Large ...... kitch_49 Product Descriptions and Handling ...... kitch_7 Chicken Bowl Dishing: Kids’ Meal ...... kitch_50 Produce ...... kitch_7 Chicken Bowl Dishing: Chicken-Veg ...... kitch_51 Meats ...... kitch_7 Chicken Bowl Dishing: Combo Bowl ...... kitch_52 Soups ...... kitch_8 Yoshinoya Feast ...... kitch_53 Sauces, Condiments, Canned, Dry Goods ....kitch_8 Yoshinoya Feast Dishing: Beef & Chicken ...kitch_53 Beverages, Salads and Desserts ...... kitch_9 Yoshinoya Feast Dishing: Beef ...... kitch_55 Frozen Food Defrosting Procedure ...... kitch_10 Yoshinoya Feast Dishing: Chicken ...... kitch_57 Approximate Refrigerated Defrosting Times kitch_10 Salads ...... kitch_59 Beef and Chicken Defrosting Procedure ...... kitch_10 Chicken Salad Preparation ...... kitch_59 Rice ...... kitch_11 Chicken Salad Dishing ...... kitch_60 Rice Measurement ...... kitch_11 Garden Salad Preparation ...... kitch_61 Rice Washing ...... kitch_12 Garden Salad Dishing ...... kitch_62 Rice Cooking ...... kitch_13 Macaroni Salad Preparation ...... kitch_63 Rice Transfer ...... kitch_15 Macaroni Salad Dishing ...... kitch_64 Rice Dishing: Regular ...... kitch_16 Grilled Shrimp ...... kitch_65 Rice Dishing: Large ...... kitch_17 Grilled Shrimp Defrosting ...... kitch_65 Rice Dishing: Rice Only ...... kitch_18 Griddle Layout ...... kitch_65 Beef ...... kitch_19 Grilled Shrimp: Cooking ...... kitch_65 Beef Soup Dissolving ...... kitch_19 Seafood Sauce Warming ...... kitch_66 Seven Steps of Beef Cooking ...... kitch_20 Grilled Shrimp Bowl Dishing ...... kitch_67 Beef Cooking (detail) ...... kitch_21 Grilled Shrimp Dishing: Grilled Shrimp .....kitch_68 Beef Degreasing ...... kitch_23 Soup: Clam Chowder ...... kitch_69 Grease Transfer ...... kitch_24 Clam Chowder Guidelines ...... kitch_69 Beef Soup Adding ...... kitch_25 Clam Chowder: Non-Dairy Creamer ...... kitch_70 Beef Soup Filtering ...... kitch_26 Clam Chowder: Cooking ...... kitch_71 Beef Dishing: General ...... kitch_29 Clam Chowder: Dishing ...... kitch_72 Beef Bowl® Dishing: Regular ...... kitch_30 Beef Bowl® Dishing: Large ...... kitch_31
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Soup: Chicken Vegetable ...... kitch_73 Idle Time Pre-Cooked Minimum ...... kitch_106 Chicken Vegetable Soup Guidelines ...... kitch_73 Rush Hour Pre-Cooked...... kitch_106 Chicken Vegetable Soup: Cooking ...... kitch_74 Bag-in-Box (BIB) Replacement ...... kitch_107 Chicken Vegetable Soup: Dishing ...... kitch_75 CO2 Tank Replacement ...... kitch_108 Soup: Miso ...... kitch_76 Miso Soup Guidelines ...... kitch_76 Miso Soup: Serving ...... kitch_76 Sesame Wings ...... kitch_77 Sesame Wings Guidelines ...... kitch_77 Sesame Wings: Cooking (FryMaster) ...... kitch_77 Sesame Wings: Cooking (Wells)...... kitch_78 Sesame Wings: Dishing ...... kitch_79 Fryer Cleaning (Wells) ...... kitch_80 Oil Filtering: Filter Pan Preparation ...... kitch_82 Oil Filtering ...... kitch_83 Oil Replacing ...... kitch_84 Fryer Cleaning ...... kitch_85 BBQ Menu ...... kitch_86 Storage and Specifications: BBQ Items ...... kitch_86 Wok Range Start-up ...... kitch_87 Heat Treating a Cooking Wok ...... kitch_87 Storing BBQ Items at the Steam Table ...... kitch_87 Steam Table Layout ...... kitch_87 Yakisoba Noodle, Cabbage and Sauce ...... kitch_88 Yakisoba Noodle Preparation ...... kitch_88 Cabbage and Carrot Preparation ...... kitch_88 Yakisoba Noodle Sauce Preparation ...... kitch_89 Cooking Yakisoba Noodles ...... kitch_90 Dishing Yakisoba Noodles Only ...... kitch_90 Fried Rice ...... kitch_92 Fried Rice Preparation ...... kitch_92 Heating Fried Rice ...... kitch_93 Dishing Fried Rice Only ...... kitch_94 Salad Preparation for BBQ Menu ...... kitch_95 Marinating Sliced Beef ...... kitch_96 Cooking BBQ Beef ...... kitch_97 Griddle Layout ...... kitch_97 Dishing BBQ Beef ...... kitch_98 Dishing BBQ Beef ONLY ...... kitch_99 Cooking BBQ Chicken ...... kitch_100 Griddle Layout ...... kitch_100 Dishing BBQ Chicken ...... kitch_101 Dishing BBQ Chicken ONLY ...... kitch_103 Dishing BBQ Beef and Chicken ...... kitch_104 Cooking Amount at Slow Time ...... kitch_106
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Counter Operations Discounts: Police Officer ...... count_40 Discounts: Senior Citizens ...... count_42 Serving ...... count_1 Starting Break ...... count_44 Menu Items ...... count_1 Ending Break ...... count_45 Bowls ...... count_1 Closing the Cashier Shift (Check Out) ...... count_46 Sides ...... count_1 Clocking Out ...... count_48 Sesame Chicken Wings ...... count_1 POS Terminal Operations: Manager ...... count_49 Soups ...... count_2 Authorizing “Need Approval…” ...... count_49 Salads ...... count_2 Deleting Clockout ...... count_50 Desserts ...... count_2 Deleting Checkout ...... count_51 Drinks ...... count_2 Enroll Thumbprints ...... count_52 Kid’s Meal ...... count_2 Editing Clock-in and Clock-out Time ...... count_54 Unusual Menu Items ...... count_3 Editing Break In/Out Time ...... count_55 Good Customer Relations ...... count_5 Opening the Cash Drawer ...... count_56 Customer Relations Basics ...... count_5 Cash Drop ...... count_57 Handling Complaints at the Cashier Station count_5 Reprinting a Guest Check Receipt ...... count_59 Terminal: Serving ...... count_7 Voiding/Deleting an Item on a Closed Check: Cash ...... count_60 Cashier Serving Steps ...... count_7 Voiding/Deleting an Item on a Cashier Serving Steps: Summary ...... count_10 Closed Check: Credit/Debit ...... count_61 Packer Serving Steps ...... count_11 Adjusting Payments ...... count_62 Packer Serving Steps: Summary ...... count_12 Refund Guest Check: Cash ...... count_63 Drive-thru Serving Steps ...... count_13 Refund Guest Check: Credit/Debit ...... count_65 Drive-thru Serving Steps: Summary ...... count_14 Front Office Assistant (FOA) Report ...... count_67 HS 6000 Communicator ...... count_16 POS Terminal Operations: Cash Handling ..count_70 Operating ...... count_16 Cashier Cash Handling Overview ...... count_70 Charging Batteries ...... count_17 Travelers Checks Policy ...... count_72 POS Terminal Operations: Serving ...... count_19 Large Bills Policy ...... count_73 Terminal Overview ...... count_19 Cash Drawer Fund and Change ...... count_73 Receipt Thermal Paper Replacement ...... count_20 Vindicator Safe ...... count_74 Bump Bar Overview ...... count_21 Key Handling...... count_75 Bumping Orders: Drive-Thru ...... count_22 Shift Deposits ...... count_76 Recalling Orders: Drive-Thru ...... count_22 Multiple Cash Drops ...... count_76 Bumping Orders: Non-Drive-Thru ...... count_23 Daily Sales Deposit ...... count_78 Recalling Orders: Non-Drive-Thru ...... count_23 Preparing Cash for Daily Sales Deposit ...... count_78 Terminal Operations ...... count_24 Fixed Change Fund ...... count_79 Clocking In ...... count_24 Shift Change Fund ...... count_80 Assigning Cash Drawer ...... count_25 Coupon Handling...... count_81 Ringing Items ...... count_26 Coupon Varieties ...... count_81 Closing the Guest Check: Cash ...... count_27 Discount Policies & Procedure ...... count_82 Closing the Guest Check: Credit/Debit ...... count_29 Police Discount ...... count_82 Deleting Items from an Order ...... count_30 Senior Citizen Discount ...... count_82 Using the QUANTITY Button ...... count_31 Drink Serving: Cold Drinks ...... count_83 Using the REPEAT Button ...... count_32 Using the MEAL CHANGE Button ...... count_33 Cold Drinks: ...... count_83 Using the MODIFY Button ...... count_34 Soda Dispensers ...... count_83 Discounts: Employee Meal Discount ...... count_36 Cold Drink: Milk and Juices ...... count_84 Discounts: Complimentary Coupon...... count_37 Drink Serving: Hot Drinks...... count_85 Discounts: Direct Mail Coupons ...... count_39 Green Tea ...... count_85
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Hot Drinks Refills ...... count_85 Food Safety and Sanitation Serving ...... count_86 Food-borne Illness ...... food_1 Tray Serving: Eat In ...... count_86 Bag Serving: Take Out ...... count_87 Food Allergies ...... food_2 Kid’s Meal Serving ...... count_88 Anaphylaxis ...... food_2 Refilling and Replacing ...... count_89 Contamination ...... food_3 Biological Contaminants ...... food_3 Red Pepper Refilling ...... count_89 Chemical Contaminants...... food_3 Soy Sauce Refilling ...... count_90 Physical Contaminants...... food_3 Ginger Refilling...... count_91 Cross Contamination ...... food_4 Temperature Zones ...... food_5 Temperature Chart ...... food_5 Thermometers ...... food_6 Checking Calibration ...... food_6 Taking Food Temperatures ...... food_6 Preventing Contamination: Food Safety ...... food_7 All Products ...... food_7 Product Labeling...... food_7 Heated Products ...... food_7 Refrigerated Products ...... food_7 Frozen Products ...... food_8 Thawing Procedure ...... food_8 Employee Hygiene and Health ...... food_9 Hand Hygiene Maintenance ...... food_10 Clothing and General Hygiene ...... food_10 Illness ...... food_10 Wounds and Sores ...... food_10 Restaurant Cleanliness ...... food_11 Cleaning and Sanitizing Products ...... food_11 Cleaning and Sanitizing Equipment ...... food_14 Three-Compartment Sink ...... food_14 Red Sanitation Buckets ...... food_14 Towels ...... food_15 Dry Mops ...... food_15 Mop Buckets ...... food_15 Brooms ...... food_15 Dustpans ...... food_15 Squeegee...... food_15 Deck Brush ...... food_15 Griddle Screen Grill Cleaner ...... food_15 Cleaning & Sanitizing Procedures ...... food_16 Outside Area ...... food_16 Dining Area ...... food_17 Serving Area ...... food_20 Restrooms ...... food_22 Kitchen Area ...... food_23 Storage Area ...... food_29 Utility Room ...... food_30 Chapter Conclusion ...... food_32
Yoshinoya Systems Manual ©2010 TOC_9TOCTTOOC_9_9
Marketing Employee Relations Marketing Plan ...... mkt_1 Legal Consultation...... emp_1 Promotional Fund ...... mkt_1 Employee Relations/Human Resources ...... emp_2 Advertising Cooperative ...... mkt_2 General Federal Laws ...... emp_3 Marketing Plans and Strategies ...... mkt_3 Labor Laws ...... emp_3 How to Create a Marketing Budget ...... mkt_3 Americans with Disabilities Act ...... emp_4 Demographic Information ...... mkt_3 Age Discrimination in Employment Act ...... emp_4 Local Store Marketing (LSM) ...... mkt_3 Occupational Safety and Health Act ...... emp_4 Marketing Calendar ...... mkt_4 Fair Labor Standards Act ...... emp_5 Local Store Marketing (LSM) Programs and Eventsmkt_5 Workers Compensation ...... emp_5 Brand Identity ...... mkt_7 EEOC ...... emp_6 Family Medical Leave Act ...... emp_7 Graphic Standards ...... mkt_7 Immigration Reform and Control Act ...... emp_7 Market to Your Community ...... mkt_7 Required Postings ...... emp_7 Market to the Media ...... mkt_8 Legal Issues Regarding Employees ...... emp_8 News Releases ...... mkt_8 Employee Handbooks ...... emp_8 Press Kit ...... mkt_8 Employee Meetings ...... emp_8 Newspaper Advertising ...... mkt_8 Employee Files ...... emp_9 Market to Customers ...... mkt_8 Employee Safety and Security ...... emp_9 Marketing Tools ...... mkt_9 Sample Violence Policy ...... emp_10 Lead Generation Material ...... mkt_9 Harassment ...... emp_11 Chapter Conclusion ...... mkt_10 Sample Anti-Harassment Policy ...... emp_13 Recruiting: How and Where ...... emp_17 Manager Training Requirements ...... emp_17 Recruiting Criteria ...... emp_17 Job Descriptions ...... emp_19 Sourcing ...... emp_20 Collecting Applications and Resumes ...... emp_21 Sorting Applications and Resumes ...... emp_21 Selecting Interview Candidates ...... emp_22 Interview Process ...... emp_23 Introduction phone conversation ...... emp_23 Face-to-Face Interview...... emp_23 Interviewing Skills ...... emp_24 Basics of Interviewing ...... emp_24 Interview Guidelines ...... emp_25 Sample Interview Questions ...... emp_25 Illegal Interview Topics ...... emp_26 After the Interview Process ...... emp_26 References ...... emp_27 Background Information ...... emp_27 Offering the Position ...... emp_27 Paperwork ...... emp_28 New Employee Orientation ...... emp_28 Uniforms ...... emp_30
Version 0410 TOC_10
Training New Employees ...... emp_31 Safety and Security Hours of Work and Paydays ...... emp_32 Employee Safety and Security Training ...... s&s_2 Overtime ...... emp_32 Emergency Preparedness ...... s&s_3 Employee Benefits ...... emp_33 Restaurant Preparedness ...... s&s_4 Statutory Benefits ...... emp_33 Other Benefits ...... emp_33 Evacuation Plans ...... s&s_5 Contractors / 1099 Workers ...... emp_34 Crisis Situations...... s&s_6 Smoking Policy ...... emp_35 Crisis Definitions ...... s&s_6 Substance Abuse Policy ...... emp_35 Handling a Crisis ...... s&s_6 Gathering Crisis Information ...... s&s_7 Workplace Search Policy ...... emp_35 Dealing with Victims...... s&s_7 Attendance and Schedule Adherence Policy .emp_36 Notifying the Authorities ...... s&s_7 Lateness/Leaving Early ...... emp_36 Working with Authorities/Outside Agencies .. s&s_7 No Call/No Show ...... emp_36 Dealing with the Media ...... s&s_8 Job Abandonment ...... emp_36 Food-Borne Illness/Infectious Disease ...... s&s_10 Legally Permitted Absences ...... emp_36 Food-Borne Illness ...... s&s_10 Positive Performance Management ...... emp_37 Infectious Disease ...... s&s_11 Performance Reviews ...... emp_37 Medical Emergencies ...... s&s_12 Discipline and Termination ...... emp_38 Power Outage/Blackouts ...... s&s_13 What to do ...... emp_38 Fire ...... s&s_13 What not to do ...... emp_38 Natural Disasters ...... s&s_13 Employee Standards of Conduct ...... emp_39 Sample Progressive and Corrective Disciplinary Action Safety Tips ...... s&s_13 Policy ...... emp_40 Utilities ...... s&s_13 Involuntary Terminations ...... emp_43 Storage ...... s&s_13 Floors and Traffic Areas ...... s&s_14 Resignation ...... emp_44 Chemicals ...... s&s_14 Separation Dates ...... emp_44 Employee Behavior ...... s&s_14 Rehire ...... emp_44 Emergency Procedures ...... s&s_14 Referrals, Reference Checks, Employment Safe Equipment Operations ...... s&s_14 Verifications ...... emp_45 Avoiding Burns ...... s&s_15 Ex-employees ...... emp_45 Using Knives Safely...... s&s_15 Prospective Employers ...... emp_45 Proper Lifting Techniques ...... s&s_16 Financial Institutions ...... emp_45 OSHA Safety Training Requirements ...... s&s_16 Chapter Conclusion ...... emp_46 Loss Prevention ...... s&s_17 General Loss Prevention Measures ...... s&s_17 Internal Theft ...... s&s_17 External Theft ...... s&s_19 Robbery ...... s&s_21 Burglary ...... s&s_22 Vandalism ...... s&s_23 Chapter Conclusion ...... s&s_24
Yoshinoya Systems Manual ©2010
EXHIBIT T RECEIPTS
ITEM 23 RECEIPT (YOUR COPY)
This Franchise Disclosure Document (“FDD”) summarizes certain provisions of the Franchise Agreement and Area Development Agreement and other information in plain language. Read this FDD and all agreements carefully.
If YOSHINOYA AMERICA, INC. offers you a franchise or area development rights, YOSHINOYA AMERICA, INC. must provide this FDD to you 14 calendar-days (or earlier date as required by applicable state law - see State Addenda) before you sign a binding agreement with, or make a payment to, the franchisor or an affiliate in connection with the proposed franchise or area development sale.
New York requires that we give you this disclosure document at the earlier of the first personal meeting or 10 business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship.
Michigan, Oregon and Washington require that we give you this disclosure document at least 10 business days before the execution of any binding franchise or other agreement or the payment of any consideration, whichever occurs first.
If YOSHINOYA AMERICA, INC. does not deliver this FDD on time or if it contains a false or misleading statement, or a material omission, a violation of federal and state law may have occurred and should be reported to the Federal Trade Commission, Washington D.C., 20580 and to the applicable state agency at any of their offices. See Exhibit A.
The name, principal business address and phone number of each franchise seller offering the franchise is:
Franchisor: Franchise Seller:
YOSHINOYA AMERICA, INC. Name of Individual negotiating on behalf of 991 West Knox Street Franchisor: Oliver Cortes, Scot Hobert Torrance, California 90502 YOSHINOYA AMERICA, INC. (310) 353-7110 (tel) 991 West Knox Street (310) 217-2149 (fax) Torrance, California 90502 http://www.yoshinoyafranchise.com Phone: (310) 353-7110 http://www.yoshinoyaamerica.com Fax: (310) 217-2149 http://www.yoshinoyausa.com
If an additional broker or other franchise seller is involved in a particular transaction, their name, principal business address and phone number shall be inserted above. If the information is left blank, there is no additional franchise seller involved in the transaction with the prospective franchisee who signs the receipt. Issuance Date: March 30, 2012. See Exhibit M - State Addendum for state effective dates.
We authorize the persons or entities listed on Exhibit B to receive service of process for us.
1 5/14/2012 11:26 AM I received a FDD dated March 30, 2012 that included the following Exhibits:
EXHIBIT A FTC and State Administrators List EXHIBIT B Agents for Service of Process EXHIBIT C Franchise Agreement EXHIBIT D Area Development Agreement EXHIBIT E General Release EXHIBIT F Sublease EXHIBIT G Guaranty of Sublease EXHIBIT H Addendum to Lease EXHIBIT I Confidentiality, Non-Disclosure and Non Competition Agreement EXHIBIT J Personal Guaranty EXHIBIT K YOSHINOYA Restaurants EXHIBIT L Financial Statements EXHIBIT M State Addendum EXHIBIT N Addendum to Franchise Agreement re: Employee Franchise Program EXHIBIT O Advertising Addendum to Franchise Agreement EXHIBIT P Asset Sale and Purchase Agreement EXHIBIT Q Spousal Consent EXHIBIT R Closing Acknowledgement EXHIBIT S Table of Contents of Systems Manual EXHIBIT T Receipts
DATED:
YOUR SIGNATURE:
PRINT NAME:
ONLY COMPLETE THE FOLLOWING IF THE FRANCHISEE IS A CORPORATION OR PARTNERSHIP: STATE YOUR OFFICE OR AUTHORITY TO SIGN FOR THE CORPORATION OR PARTNERSHIP (E.G., AS PRESIDENT; GENERAL PARTNER):
PRINT NAME:
RETAIN THIS COPY FOR YOUR RECORDS ITEM 23 RECEIPT (OUR COPY)
This Franchise Disclosure Document (“FDD”) summarizes certain provisions of the Franchise Agreement and Area Development Agreement and other information in plain language. Read this FDD and all agreements carefully.
If YOSHINOYA AMERICA, INC. offers you a franchise or area development rights, YOSHINOYA AMERICA, INC. must provide this FDD to you 14 calendar-days (or earlier date as required by applicable state law - see State Addenda) before you sign a binding agreement with, or make a payment to, the franchisor or an affiliate in connection with the proposed franchise or area development sale.
New York requires that we give you this disclosure document at the earlier of the first personal meeting or 10 business days before the execution of the franchise or other agreement or the payment of any consideration that relates to the franchise relationship.
Michigan, Oregon and Washington require that we give you this disclosure document at least 10 business days before the execution of any binding franchise or other agreement or the payment of any consideration, whichever occurs first.
If YOSHINOYA AMERICA, INC. does not deliver this FDD on time or if it contains a false or misleading statement, or a material omission, a violation of federal and state law may have occurred and should be reported to the Federal Trade Commission, Washington D.C., 20580 and to the applicable state agency at any of their offices. See Exhibit A.
The name, principal business address and phone number of each franchise seller offering the franchise is:
Franchisor: Franchise Seller:
YOSHINOYA AMERICA, INC. Name of Individual negotiating on behalf of 991 West Knox Street Franchisor: Oliver Cortes, Scot Hobert Torrance, California 90502 YOSHINOYA AMERICA, INC. (310) 353-7110 (tel) 991 West Knox Street (310) 217-2149 (fax) Torrance, California 90502 http://www.yoshinoyafranchise.com Phone: (310) 353-7110 http://www.yoshinoyaamerica.com Fax: (310) 217-2149 http://www.yoshinoyausa.com
If an additional broker or other franchise seller is involved in a particular transaction, their name, principal business address and phone number shall be inserted above. If the information is left blank, then there is no additional franchise seller involved in the transaction with the prospective franchisee who signs the receipt.
Issuance Date: March 30, 2012. See Exhibit M - State Addendum for state effective dates.
We authorize the persons or entities listed on Exhibit B to receive service of process for us. I received a FDD dated March 30, 2012 that included the following Exhibits:
EXHIBIT A FTC and State Administrators List EXHIBIT B Agents for Service of Process EXHIBIT C Franchise Agreement EXHIBIT D Area Development Agreement EXHIBIT E General Release EXHIBIT F Sublease EXHIBIT G Guaranty of Sublease EXHIBIT H Addendum to Lease EXHIBIT I Confidentiality, Non-Disclosure and Non Competition Agreement EXHIBIT J Personal Guaranty EXHIBIT K YOSHINOYA Restaurants EXHIBIT L Financial Statements EXHIBIT M State Addendum EXHIBIT N Addendum to Franchise Agreement re: Employee Franchise Program EXHIBIT O Advertising Addendum to Franchise Agreement EXHIBIT P Asset Sale and Purchase Agreement EXHIBIT Q Spousal Consent EXHIBIT R Closing Acknowledgement EXHIBIT S Table of Contents of Systems Manual EXHIBIT T Receipts
DATED:
YOUR SIGNATURE:
PRINT NAME:
ONLY COMPLETE THE FOLLOWING IF THE FRANCHISEE IS A CORPORATION OR PARTNERSHIP: STATE YOUR OFFICE OR AUTHORITY TO SIGN FOR THE CORPORATION OR PARTNERSHIP (E.G., AS PRESIDENT; GENERAL PARTNER):
PRINT NAME:
RETURN THIS COPY TO US -- YOU MAIL THE EXECUTED ORIGINAL TO US AT THE ABOVE ADDRESS; FAX US A SIGNED COPY OF THIS RECEIPT TO THE FAX NUMBER SHOWN ABOVE; OR PDF THE SIGNED COPY AS AN ATTACHMENT TO AN E-MAIL DIRECTED TO [email protected]