Franchise Disclosure Document Pizza Hut, Inc. A
Total Page:16
File Type:pdf, Size:1020Kb
FRANCHISE DISCLOSURE DOCUMENT PIZZA HUT, INC. A California Corporation 7100 Corporate Drive Piano, TX 75024-4100 972-338-7700 www.pizzahutfranchise.com P!M? O--^ The franchisee will operate a dine-in, delivery or delivery and carryout restaurant, offering primarily pizza, pasta and other Italian-style food items, under the name Pizza Hut (each, a "Restaurant"). The franchisee may acquire one or more existing Restaurants from Pizza Hut, Inc. ("PHI") or one or more of its subsidiaries, or may construct a new Restaurant. The total investment necessary to begin operation of an existing Pizza Hut restaurant ranges from $225,000 to $1,025,000 or more, of a new Pizza Hut "Red Roof dine-in restaurant (with or without delivery) ranges from $852,000 to $2,109,000, of a new Pizza Hut Freestanding "Delco" Delivery/Carryout restaurant ranges from $545,000 to $882,000, of a new Pizza Hut Inline/Endcap "Delco" Delivery/Carryout restaurant ranges from $379,000 to $528,000 and of a new Pizza Hut Inline/Endcap "Delco Lite" Delivery/Carryout restaurant ranges from $297,000 to $434,000, in each case excluding real property and including $25,000 that must be paid to the franchisor. If you sign one or more Development Agreements to develop new Restaurants, you must pay $25,000 to $50,000 for each additional Restaurant you agree to develop, which will, if you timely open the Restaurant, be applied to the $25,000 initial franchise fee that you must pay to the franchisor for the operation of a Restaurant (see above). If you do not do this, the franchisor keeps the fee. This disclosure document summarizes certain provisions of your franchise agreement and other information in plain English. Read this disclosure document and all accompanying agreements carefully. You must receive this disclosure document at least 14 calendar days before you sign a binding agreement with, or make any payment to, the franchisor or an affiliate in connection with the proposed franchise sale. Note, however, that no government agency has verified the information contained in this document. You may wish to receive your disclosure document in another format that is more convenient for you. To discuss the availability of disclosures in different formats, contact the PHI Law Department at 7100 Corporate Drive, Piano, Texas 75024-4100 at 972-338-7700. The terms of your contract will govern your franchise relationship. Don't rely on the disclosure document alone to understand your contract. Read all of your contract carefully. Show your contract and this disclosure document to an advisor, like a lawyer or accountant. Buying a franchise is a complex investment. The information in this disclosure document can help you make up your mind. More information on franchising, such as "A Consumer's Guide to Buying a Franchise," which can help you understand how to use this disclosure document is available from the Federal Trade Commission. You can contact the FTC at 1-877-FTC-HELP or by writing to the FTC at 600 Pennsylvania Avenue, NW, Washington, DC 20580. You can also visit the PHI FDD 2a^20.1_4 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 22. 201325. 2014 PHI FDD 2O4520_1_4 STATE OOVERPAGE Yours^emayhavea^anchise^wtha^ ^anohise adm^is^or before offering or selling in your sfate. REGISTRATION OF A FRANCHISE SYASTATEOOES NOT MEAN THATTHE STATE RECOMMENDS THE FRANCHISE OR HAS VERIFIED THE INFORMATION IN THIS OISCLOSORE OOCUMENT Call fbe sfafe franohise adminisf^ otber franchisors, or abouf franohising In your sfafe. MANY FRANCHISE AGREEMENTS DO NOTALLOWYOU TO RENEW UNCONDITIONALLY AFTERTHE INITIALTERM EXPIRES YOU MAYHAVETOSIGNANEW AGREEMENTWITH DIFFERENT TERMS ANO CONDITIONS IN ORDER TO CONTINUE TO OPERATE YOUR BUSINESS EEFOREYOUEUY,CONSIDERWHATRIGHTS YOU HAVE TO RENEW YOUR FRANCHISE, IFANY,ANDWHATTERMSYOU MIGHT HAVE TO ACCEPT IN ORDERTO RENEW PleaseoonsiderfhefollowingRISKFACTORS before you buy fhis franohise. T THE FRANCHISE AGREEMENT REOUIRES YOU TO RESOLVE DISPUTES WITH US SYLITIGATIONONLYIN COLLINCOUNTY,TEXAS ANDTHEDEVELOPMENT AGREEMENT REOUIRES YOU TO RESOLVE DISPUTES WITH US BY LITIGATION ONLY IN COLLIN COUNTY,TEXAS OR ANY OTHER COUNTY OR DISTRICT IN WHICH WE THEN HAVE OUR PRINCIPAL PLACE OF BUSINESS OUTOFSTATE LITIGATION MAYFORCEYOUTOACCEPTALESSFAVORABLE SETTLEMENT FOR DISPUTES IT MAYALSO COST YOU MORE TO LITIGATE WITH US IN COLLIN COUNTY,TEXAS(ORINANOTHERCOUNTYORDISTRICTWHEREWETHENHAVE OUR PRINCIPAL PLACE OF BUSINESS) THAN IN YOUR OWN STATE THE FRANCHISE AGREEMENT STATES THAT TEXAS LAW GOVERNS THE AGREEMENTAND THIS LAW MAYNOT PROVIDE THE SAME PROTECTIONS AND BENEFITSASLOCALLAW YOU MAYWANTTOCOMPARETHESELAWS 2 AS NOTED IN THE FINANCIAL STATEMENTS IN RESPONSE TO ITEMSOF THIS DISCLOSURE DOCUMENT, AS OF DECEMBERS 28 2013 THE FRANCHISOR'SCORPORATE PARENT (YUM! BRANDS, INC)HADAWORKING CAPITAL DEFICIENCY OF ^279 000 000 5B4 000 000PLEASEBEARTHISINMIND WHEN FORMING YOUR INVESTMENTDECISION 3 YOU WILL NOT BE GRANTED ANY EXCLUSIVE TERRITORY ^ THERE MAYBE OTHER RISKS CONCERNING THIS FRANCHISE Effective Dafe: See fhe next page for state effective dates. P^FOO^O^O^ STATE EFFECTIVE DATES The following states require that the Franchise Disclosure Document be registered or filed with the state, or be exempt from registration: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin. This Franchise Disclosure Document is registered, on file or exempt from registration in the following states having franchise registration and disclosure laws, with the following effective dates: California March 22, 2013 Illinois March 22, 2013 Indiana March 22,2013 Maryland March 27,2013 Michigan March 22,2013 Minnesota March 26,2013 New York March 25, 2013 North Dakota March 26, 2013 Rhode Island March 31, 2013 South Dakota March 25, 2013 Virginia March 25, 2013 Washington March 26, 2013 Wisconsin March 25, 2013 In all the other states, the effective date of this Franchise Disclosure Document is the issuance date of March 22. 2013.25. 2014. PHI FDD 304320.14 TABLE OF CONTENTS ITEM PAGE 1 THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES 1 2 BUSINESS EXPERIENCE 5 3 LITIGATION 7 4 BANKRUPTCY 89 5 INITIAL FEES 89 6 OTHER FEES 1412 7 ESTIMATED INITIAL INVESTMENT 4314. 8 RESTRICTIONS ON SOURCES 4920 9 FRANCHISEE'S OBLIGATIONS 2425 10 FINANCING 2526 11 FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS AND TRAINING 2931 12 TERRITORY 4042 13 TRADEMARKS 4244 14 PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION 4647 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS 464Z 16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL 4648 17 RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION 4749 18 PUBLIC FIGURES 5452 19 FINANCIAL PERFORMANCE REPRESENTATION 5452 20 RESTAURANTS AND FRANCHISEE INFORMATION 5951 21 FINANCIAL STATEMENTS 7022 22 CONTRACTS 7GZ2 23 RECEIPTS Z4Z3 PHI FDD 20432014 E^h^ A List of State Agencies B List et Agents tor Service ot Process C Pizza Hut, inc. Location Franchise Agreement, State Amendments and State Addenda to Oisciosure Oocument O Release and Assignment P Asset Saie Agreement (With Fee interest), with Exhibits F Pizza Hut Oevelopment Services Agreement 0- 1 Confidentiality Agreement (new stores) C 2 Confidentiality Agreement (existing stores) H Pizza Hut Hiring Management System and Learning Management System Services and SupportAgreement 1- 1 List ot Franchisees 12 List of Franchisees Who Voluntarily/lnvoluntarily Closed Pizza Hut Cutlets Ouring 20^2013 J1 YLIMFundin^Ca^ital Financing Program Credit Agreement (Leasehold) YUM FundingCa^ital Financing Program Credit Agreement (Fee Simple) K OevelopmentAgreement L Financialstatements M WingStreet Oevelopment Authorization Agreement N C H A M P.S. Program Participation Notice Agreement C Test Market Agreement P Receipts PHIFOO 2^2014 Item 1 THE FRANCHISOR AND ANY PARENTS. PREDECESSORS AND AFFILIATES The Franchisor and its Parent Pizza Hut, Inc., a California corporation, is the franchisor, and will be referred to as "PHI". "You" means the individual, corporation, limited liability company, partnership or other entity that buys the franchise. If the franchisee will operate through a corporation, limited liability company, partnership or other business entity, "you" also includes the franchisee's owners or partners. If you are not an individual, many provisions of the franchise agreement will also apply to your owners. Disclosure laws require all disclosure documents to be written in "plain English". The use of different words in this disclosure document from the words used in the agreements themselves to describe the parties' rights and obligations is not intended to diminish or modify in any way the rights and obligations in the agreements themselves. PHI was originally incorporated as "Pizza Hut of San Diego, Inc." in 1967, and changed its name on September 25, 1997, in anticipation of acquiring the assets of Pizza Hut, Inc., a Delaware corporation ("old PHI"). PHI does not currently do business under any trade name other than "Pizza Hut." PHI's principal business address is 7100 Corporate Drive, Piano, Texas 75024-4100. PHI's corporate parent is YUM! Brands, Inc. ("YUM") f/k/a TRICON Global Restaurants, Inc. ("TRICON"). PHI is a wholly-owned subsidiary of YUM. On May 7, 2002, YUM acquired Yorkshire Global Restaurants, Inc., the owner of the Long John Silver's and A&W Restaurants brands. YUM adopted its new name on May 17, 2002. Yum sold the Long John Silver's and A&W Restaurants brands to two separate buyers in December 2011. PHI is the successor to old PHI, having acquired substantially all of its assets on September 30, 1997. Before that acquisition, old PHI was the corporate parent of PHI. PHI's agents for service of process are listed in Exhibit B to this disclosure document. PHI's Affiliates The following are PHI's affiliates, which either offer franchises within the United States or provide products or services to PHI's franchisees and licensees located in the United States.