FRANCHISE DISCLOSURE DOCUMENT
Tropical Smoothie Café, LLC (a Georgia limited liability company) 7000 Peachtree Dunwoody Road Building #2, Floor #3 Atlanta, Georgia 30328 (770) 821-1900 phone (770) 821-1895 fax E-mail: [email protected] www.tropicalsmoothiecafe.com www.facebook.com/tropicalsmoothiecafe
The franchise is for the establishment and operation of a café offering customers a variety of premium quality real fruit smoothies blended fresh in the store using proprietary recipes, as well as specialty sandwiches, gourmet wraps, salads, soups and coffee drinks (a “Tropical Smoothie Café® franchise” or “Franchised Business”).
The total investment necessary to begin operation of a single-unit Tropical Smoothie Café® franchise ranges from $164,500 to $398,000. This includes a $25,000 initial franchise fee that must be paid to us. If a franchisee chooses to develop multiple units, a $15,000 initial franchise fee must be paid for the second and each additional unit.
This disclosure document summarizes certain provisions of your Franchise Agreement and other information in plain English. Read this disclosure document and all accompanying agreements carefully. You must receive this disclosure document at least 14 calendar days before you sign a binding agreement with, or make any payment to, the franchisor or an affiliate in connection with the proposed franchise sale. Note, however, that no governmental agency has verified the information contained in this document.
You may wish to receive your Disclosure Document in another format that is more convenient for you. To discuss the availability of disclosures in different formats, contact Charles Watson at 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328 and (770) 821-1900.
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 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.
Date of Issuance: September 28, 2012
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STATE COVER PAGE
Your state may have a franchise law that requires a franchisor to register or file with a state franchise administrator before offering or selling in your state. REGISTRATION OF A FRANCHISE BY A STATE DOES NOT MEAN THAT THE STATE RECOMMENDS THE FRANCHISE OR HAS VERIFIED THE INFORMATION IN THIS DISCLOSURE DOCUMENT.
Call the state franchise administrator listed in Exhibit A for information about the franchisor or about franchising in your state.
MANY FRANCHISE AGREEMENTS DO NOT ALLOW YOU TO RENEW UNCONDITIONALLY AFTER THE INITIAL TERM EXPIRES. YOU MAY HAVE TO SIGN A NEW AGREEMENT WITH DIFFERENT TERMS AND CONDITIONS IN ORDER TO CONTINUE TO OPERATE YOUR BUSINESS. BEFORE YOU BUY, CONSIDER WHAT RIGHTS YOU HAVE TO RENEW YOUR FRANCHISE, IF ANY, AND WHAT TERMS YOU MIGHT HAVE TO ACCEPT IN ORDER TO RENEW.
Please consider the following RISK FACTORS before you buy this franchise:
1. THE FRANCHISE AGREEMENT REQUIRES YOU TO RESOLVE DISPUTES WITH US BY MEDIATION OR LITIGATION ONLY IN GEORGIA. OUT OF STATE MEDIATION OR LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST YOU MORE TO MEDIATE OR LITIGATE WITH US IN GEORGIA THAN IN YOUR OWN STATE.
2. THE FRANCHISE AGREEMENT STATES THAT GEORGIA LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
3. OUR AFFILIATE AND PREDECESSOR, TROPICAL SMOOTHIE FRANCHISE DEVELOPMENT CORPORATION. ("TSFDC") HAS AGREED TO GUARANTEE OUR OBLIGATIONS. TSFDC'S DECEMBER 31, 2011 AUDITED FINANCIAL STATEMENTS SHOW THAT THEY HAD A RETAINED EARNINGS DEFICIT OF $4,702,096, AND A DEFICIT IN SHAREHOLDERS’ EQUITY OF $4,518,661.
4. YOU WILL NOT RECEIVE EXCLUSIVE TERRITORY. WE AND OUR AFFILIATES MAY ESTABLISH OTHER FRANCHISED OR COMPANY OWNED LOCATIONS AND OTHER CHANNELS OF DISTRIBUTION, AND MAY SELL OR DISTRIBUTE ANY PRODUCT OR SERVICE UNDER THE SAME AND/OR DIFFERENT TRADEMARKS TO THE GENERAL PUBLIC IN COMPETITION WITH YOUR FRANCHISE.
5. UPON EARLY TERMINATION OF THE FRANCHISE, YOU MUST PAY US LIQUIDATED DAMAGES IN AN AMOUNT EQUAL TO THE AVERAGE MONTHLY ROYALTY FEES DURING THE TWELVE MONTHS PRIOR TO TERMINATION MULTIPLIED BY 18 OR THE NUMBER OF MONTHS REMAINING IN THE FRANCHISE AGREEMENT, WHICHEVER IS LESS.
6. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
We use the services of one or more FRANCHISE BROKERS or referral sources to assist us in selling our franchise. A franchise broker or referral source represents us, not you. We pay this person a fee for selling our franchise or referring you to us. You should be sure to do your own investigation of the franchise.
The effective dates of this Disclosure Document in the states with franchise registration laws in which we have sought registration appear on the following page.
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TROPICAL SMOOTHIE CAFE, LLC STATE REGISTRATIONS
This Franchise Disclosure Document is registered, on file, exempt from registration, or otherwise effective in the following states with franchise registration and/or disclosure laws:
California Effective date: April 10, 2012; amended ______, 2012 Hawaii Effective date: April 15, 2012; amended ______, 2012 Illinois Effective date: April 10, 2012; amended ______, 2012 Indiana Effective date: August 16, 2012; amended ______, 2012 Maryland Effective Date: June 15, 2012; amended ______, 2012 Michigan Effective date: September 15, 2012 Minnesota Effective date: April 12, 2012, amended May 31, 2012; amended ______, 2012 New York Effective date: April 25, 2012; amended ______, 2012 North Dakota Effective Date: April 17, 2012; amended ______, 2012 Rhode Island Effective date: May 10, 2012; amended ______, 2012 South Dakota Virginia Effective date: May 3, 2012; amended ______, 2012 Washington Effective Date: ______, 2012 Wisconsin Effective date: April 9, 2012; amended ______, 2012
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THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
Each of the following provisions is void and unenforceable if contained in any documents relating to a franchise:
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 before 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 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.
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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).
10. 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.
If the franchisor’s most recent financial statements are unaudited and show a net worth of less than $100,000.00, the franchisee may request the franchisor to arrange for the escrow of initial investment and other funds paid by the franchisee until the obligations, if any, of the franchisor 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.
THE FACT THAT THERE IS A NOTICE OF THIS OFFERING ON FILE WITH THE ATTORNEY GENERAL DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENDORSEMENT BY THE ATTORNEY GENERAL.
Any questions regarding this notice should be directed to:
Michigan Department of Attorney General G. Mennen Williams Building, 7th Floor 525 W. Ottawa St. P.O. Box 30212 Lansing, MI 48909 (517) 373-7117
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TABLE OF CONTENTS
Item Page
ITEM 1. THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES ...... 1
ITEM 2. BUSINESS EXPERIENCE ...... 3
ITEM 3. LITIGATION ...... 6
ITEM 4. BANKRUPTCY ...... 9
ITEM 5. INITIAL FEES ...... 9
ITEM 6. OTHER FEES ...... 9
ITEM 7. ESTIMATED INITIAL INVESTMENT ...... 12
ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES ...... 14
ITEM 9. FRANCHISEE’S OBLIGATIONS ...... 18
ITEM 10. FINANCING ...... 19
ITEM 11. FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING... 19
ITEM 12. TERRITORY ...... 28
ITEM 13. TRADEMARKS ...... 29
ITEM 14. PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION ...... 30
ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS ...... 31
ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL ...... 32
ITEM 17. RENEWAL, TERMINATION, TRANSFER & DISPUTE RESOLUTION ...... 32
ITEM 18. PUBLIC FIGURES ...... 36
ITEM 19. FINANCIAL PERFORMANCE REPRESENTATIONS ...... 37
ITEM 20. OUTLETS AND FRANCHISEE INFORMATION ...... 39
ITEM 21. FINANCIAL STATEMENTS ...... 48
ITEM 22. CONTRACTS ...... 48
ITEM 23. RECEIPTS ...... 49
EXHIBITS:
EXHIBIT A State Agencies and Administrators/Agents for Service of Process EXHIBIT B Form of Franchise Agreement
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EXHIBIT C Information About Our Area Developers EXHIBIT D Pre-Authorized Bank Form EXHIBIT E Exclusive Real Estate Services Representation Agreement EXHIBIT F Addendum to Lease Agreement/Conditional Assignment of Lease EXHIBIT G Conditional Assignment of Telephone Numbers and Listings EXHIBIT H Franchisee Training Acknowledgement Form EXHIBIT I Operating Manual Table of Contents EXHIBIT J Nondisclosure and Noncompetition Agreement EXHIBIT K Owners’ Guaranty EXHIBIT L State Specific Addenda and Riders EXHIBIT M Roster of Current and Former Franchisees EXHIBIT N Financial Statements EXHIBIT O Guaranty of Performance of TSFDC EXHIBIT P Assignment and Assumption of Franchise Agreement EXHIBIT Q Franchisee Disclosure Questionnaire EXHIBIT R Receipts
APPLICABLE STATE LAW MAY REQUIRE ADDITIONAL DISCLOSURES RELATED TO THE INFORMATION CONTAINED IN THIS DISCLOSURE DOCUMENT. THESE ADDITIONAL DISCLOSURES, IF ANY, APPEAR IN EXHIBIT L.
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ITEM 1. THE FRANCHISOR AND ANY PARENTS, PREDECESSORS AND AFFILIATES
To simplify the language in this Disclosure Document, “Tropical Smoothie Café” or "we" or "us" or "our" mean Tropical Smoothie Café, LLC, the franchisor. “You” or “your” means the person who is awarded the franchise rights. If you are a corporation, partnership, limited liability company or other legal entity, certain provisions of the Franchise Agreement and related agreements will apply to your shareholders, partners, members, and owners, as applicable. Those provisions will be noted where applicable. (See Item 15)
The Franchisor
We are a Georgia limited liability company, organized on June 25, 2012. Our principal place of business is 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328, and our telephone number is (770) 821-1900. We do business under our corporate name and under the trade names “TROPICAL SMOOTHIE® and TROPICAL SMOOTHIE CAFÉ®. If we have agents in your state for service of process, they are disclosed in Exhibit “A” to this Disclosure Document. We have offered Tropical Smoothie Café® franchises since September 4, 2012. We have never offered franchises in any other line of business. We do not engage in any business other than the offer and sale of Tropical Smoothie Café® franchises.
Our principals are partners of BIP Opportunities Fund, LP ("BIP"), an Atlanta, Georgia-based investment firm focused on providing capital and operational support to emerging, high-growth companies. BIP is our parent. BIP's principal business address is 3575 Piedmont Road, Building 15, Suite 730, Atlanta, Georgia 30305.
On August 16, 2012, we acquired substantially all of the assets, and all of the franchise and related agreements, from our affiliate and predecessor, Tropical Smoothie Franchise Development Corporation ("TSFDC") in exchange for issuing membership interests in us to it, and other consideration. TSFDC is a Florida corporation incorporated on July 2, 1997. It's principal place of business is 12598 U.S. Highway 98 West, Suite 200, Destin, Florida 32550. TSFDC offered Tropical Smoothie Café® franchises from 1997 through August 15, 2012, when it had 310 franchises in operation and 30 sold and under development. TSFDC never offered franchises in any other line of business and did not engage in any business other than the offer and sale of Tropical Smoothie Café® franchises. TSFDC remains our affiliate because it is also one of our members, although it no longer will offer Tropical Smoothie Cafe® franchises for sale.
Through common ownership, our affiliate is Tin Drum Asiacafé, LLC, a Georgia limited liability company, with its principal place of business at 88 5th Street, Atlanta, Georgia 30308 (“Tin Drum”). Tin Drum operates and franchises restaurants featuring fast-casual, Pan-Asian cuisine. It has offered franchises since April 1, 2011, and has sold 11 franchises. We have no other affiliates that offer franchises in any line of business, or provide products or services to Tropical Smoothie Cafe® franchisees.
The Franchise
We grant Tropical Smoothie Cafe® franchises to qualified candidates for the right to develop and operate a Tropical Smoothie Café® store, which is a customer-driven business that sells a variety of premium quality proprietary real fruit smoothies, specialty sandwiches, gourmet wraps, salads, soups and coffee drinks, all which are made on the premises of each store. We refer to this business as the “Franchised Business” in this Disclosure Document. You must sign our standard Franchise Agreement (the “Franchise Agreement”) in the form attached as Exhibit “B” to this Disclosure Document. The
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Franchise Agreement grants you the right to develop and operate a single Tropical Smoothie Café® store at an approved location.
The Franchised Business will operate under the trade names and service marks TROPICAL SMOOTHIE® and TROPICAL SMOOTHIE CAFÉ®, and will use other trade names, service marks, trademarks, logos, emblems and indicia of origin that we designate for use by Tropical Smoothie Café® businesses (the “Proprietary Marks”). We use and license others to use the Proprietary Marks and our proprietary operating system, which includes trade secret recipes (the “System”), developed for the operation of a Franchised Business.
Area Developers
We also grant area representative rights to individuals called “Area Developers” by a separate Disclosure Document. An Area Developer acts as our sales representative within a defined geographic area to solicit prospective single-unit and multi-unit franchisees and to provide support before, during and after a franchisee begins operations. An Area Developer identifies and qualifies potential franchisees. The Franchise Agreement is signed by the franchisee and us after we have approved the franchisee and timely provided the Franchise Disclosure Document. We have offered area representative rights since August 16, 2012, and TSFDC did so from 1997 until August 15, 2012. (See Exhibit “C” for information regarding our Area Developers and the Illinois Addendum in Exhibit “L.”)
The Tropical Smoothie Café® Business
A Tropical Smoothie Café® is a quick casual restaurant business offering fresh, made to order food and real fruit smoothies served in our unique tropical environment. Customers can taste the freshness and quality in our toasted wraps, bistro sandwiches, grilled flatbreads and gourmet salads. We offer breakfast, lunch and dinner and our food and smoothies are the perfect take along items. We use artisan breads, premium meats and cheeses and flavorful sauces, along with fresh produce, to create a tasteful experience with every bite. Our smoothies have always been made with real fruit and our unique combinations are packed with flavor and nutrition.
Each Tropical Smoothie Café® focuses on generating sales inside and outside of the Café’s four walls. We strive to reach more consumers by offering breakfast, lunch and dinner. Our catering program delivers the “tropical experience” direct to the consumer whether they are at work or home. Consumers can enjoy our wrap and sandwich trays for breakfast, lunch and/or dinner.
We have also developed supplemental programs to introduce our brand to new consumers through catering and our “FUNraising” program, which allows us to give back to our local communities. Organizations can eat well, make some friends and enjoy giving during our FUNraisers. They bring their friends and family in to enjoy an evening of fun and food at their local Tropical Smoothie Café® and earn a percentage of the event’s sales.
Our primary customers are health conscious consumers in most every age group - anyone desiring a quick and healthy meal or snack.
We support our franchise community with innovative leadership and tools focusing on sales building and profitability through our tried and true proprietary systems.
The Franchised Business will occupy approximately 1,200 to 2,400 square feet and will seat approximately 10 to 50 customers. We have developed a design package with tropical themes, which conforms to our mandatory interior décor specifications. These specifications incorporate a “tropical”
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theme and are designed to ensure uniformity in the presentation of the Tropical Smoothie Café® System to customers.
Incentive Referral Program
We and our area developers may utilize incentive referral programs with franchisees, suppliers, vendors and their employees. Under these programs, we or our area developers may pay cash compensation or provide other prizes or benefits for the referral of qualified franchise prospects. In many cases, the compensation or benefit will not be paid unless the franchise prospect enters into a franchise agreement with us. However, in some cases, compensation or benefits will be paid for the referral of qualified prospects, even if those prospects do not enter into a franchise agreement with us. None of the participants in any of these referral programs are authorized to sell franchises. They are only authorized to refer the prospective franchisee to us for franchise sales. We take it from there.
The Market and Competition
The smoothie business has become very competitive in recent years, however, not all smoothies offered by competitors offer the nutritional and other natural supplements, in addition to the fruit ingredients, and not all competitors offer the array of specialty sandwiches, gourmet wraps, salads, soups and coffee drinks, that we offer. Each Franchised Business will have to compete with other businesses offering smoothie beverages, as well as juice bars and national and local restaurants that offer smoothie beverages as additional menu items, and businesses offering sandwiches, wraps, salads, soups and coffee drinks as menu items. Other competitors include health food and general nutrition businesses. You may also encounter competition from other Tropical Smoothie Café® stores operated by us or other franchisees.
Regulations Specific to the Industry
The Franchised Business will be subject to various federal, state and local laws and regulations that typically affect the operations of food service establishments. You will also have to comply with laws and regulations of the U.S. Food and Drug Administration and Federal Trade Commission that relate to the presentation of nutritional information. Your Franchised Business will be subject to federal and state laws establishing minimum wages, unemployment taxes and sales taxes, and other working conditions and similar matters over which we have no control. It will be your responsibility to investigate any applicable laws as they relate to operating a Tropical Smoothie Café® franchise. You should consider these laws and regulations when evaluating your purchase of a franchise.
ITEM 2. BUSINESS EXPERIENCE
CHAIRMAN OF THE BOARD: H. Scott Pressly
Scott Pressly has been our Chairman since August 16, 2012. From November 2008 to the present, he has been a partner in BIP Opportunities Fund, LP, an Atlanta, Georgia-based investment firm. From July 2007 to the present, he has been managing partner of Van Ness Capital Advisors in Atlanta, Georgia. Prior to Van Ness Capital Advisors he was a partner at Roark Capital Group in Atlanta, Georgia from April 2001 to June 2007.
CHIEF EXECUTIVE OFFICER: Mike Rotondo
Mike Rotondo is our Chief Executive Officer since August 16, 2012. Prior to joining us, he was TSFDC's Chief Operating Officer from January 2011. He had been TSFDC's Vice President of
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Operations from February 2008 through December 2010. From October 2006 to January 2008, he served as Vice President of Operations for Great Wraps in Atlanta, Georgia. From July 2005 to October 2006, Mr. Rotondo was the Regional Director of Franchise Management for Arby’s Restaurant Group in Dunwoody, Georgia. Prior to that, he owned and operated a causal dining restaurant, Cozzi Café, in Kennesaw, Georgia from April 2004 to July 2005. From June 1996 to April 2004, Mr. Rotondo was Director of Sales Development for Honey Baked Ham in Atlanta, Georgia.
VICE PRESIDENT OF FRANCHISE DEVELOPMENT: Charles L. Watson
Charles Watson has been our Vice President of Franchise Development since August 16, 2012. Prior to joining us, he was TSFDC's Vice President of Franchise Development since January 2010. From February 2009 until August 2009, he was an independent contractor for Hotel Real Estate Counselors in Atlanta, Georgia as a Senior Broker. From August 2008 until October 2008, he was Vice President Corporate Strategy and Development for Wyndham Hotel Group in Atlanta, Georgia. From June 2004 until August 2008, he was Vice President Corporate Strategy and Development for US Franchise Systems, Atlanta, Georgia.
VICE PRESIDENT OF MARKETING: Cynthia Richardson
Cynthia Richardson has been our Vice President of Marketing since August 16, 2012. Prior to joining us, she was TSFDC's Vice President of Marketing since January 2012. Before that, for approximately 11 years, Cyndi was employed by Arby’s Restaurant Group, Inc. located in Atlanta, Georgia. Her two most recent positions at Arby’s were as Vice President/Field Marketing (from July 2005 until September 2010) and as Vice President/National Marketing (from September 2010 until October 2011).
GENERAL COUNSEL: Joseph C. Wasch
Mr. Wasch has been our General Counsel since August 16, 2012. Prior to joining us, he was TSFDC's General Counsel since February 2008. He is also the founder and managing attorney of Florida General Counsel Services, a law firm in Boca Raton, Florida, since November 2007. He was Corporate Secretary and General Counsel of Learn.com, Inc., a software development company located in Sunrise, Florida, from February 2006 through November 2007. Prior to that, from March 2001 to January 2006, he was Vice President and General Counsel of HCX Salons International, LLC (and its predecessor, haircolorxpress International, LLC), a hair salon franchise company located in Fort Lauderdale, Florida.
DIRECTOR OF FRANCHISE DEVELOPMENT: Philip Watson
Mr. Watson has been our Director of Franchise Development since August 16, 2012. Prior to joining us, he was TSFDC's Director of Franchise Development since October 2011. From August 2009 until June 2011, he was in various restaurant management positions for the Cox Restaurant Group in Valdosta, Georgia. Previous to that, he attended Valdosta State University in Valdosta, Georgia from September 2007 until September 2009.
REGIONAL DIRECTOR OF FRANCHISE OPERATIONS: Troy Godbee
Troy Godbee has been our Regional Director of Franchise Operations since August 16, 2012. Prior to joining us, Troy was TSFDC's Director of Operations since February 2011. Before that, he had been one of TSFDC's Regional Directors of Franchise Operations since January 2006.
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REGIONAL DIRECTOR OF FRANCHISE OPERATIONS: Robert Fischer
Mr. Fischer has been one of our Regional Directors of Franchise Operations since August 16, 2012. In this capacity, he consults with both our area developers and our franchisees. Prior to joining us, he was one of TSFDC's Regional Directors of Franchise Operations since November 2009. Prior to joining TSFDCs, he was, from March 2006 to November 2009, Vice President of Operations for Promus Restaurants LLC, owner and operator of Cold Stone Creamery and BD’s Mongolian Grill franchises located in the Cincinnati, Ohio and Lexington, Kentucky areas. From March 2002 through February 2006, he was a Regional Director of Operations for Cold Stone Creamery in Scottsdale, Arizona.
REGIONAL DIRECTOR OF FRANCHISE OPERATIONS: Dana Lockyear
Ms. Lockyear has been one of our Regional Directors of Franchise Operations since August 16, 2012. Prior to joining us, she had been one of TSFDC's Regional Directors of Franchise Operations since July 2011. Prior to that, she was an Area Manager for TSFDC since May 2010, consulting with TSFDC franchisees in the territory comprising the southern part of Virginia. Prior to joining TSFDC, she was staffing coordinator for Randstad North America in Virginia Beach, Virginia from September 2009 through May 2010, and in Portsmouth, Virginia from September 2007 through June 2008. From June 2007 through September 2007, Ms. Lockyear was a casting director intern for Studio Center Total Production in Virginia Beach, Virginia, and before that, starting in November 1999 through August 2006, she was a corporate trainer/manager for Outback Steakhouse in Virginia Beach, Virginia.
REGIONAL DIRECTOR OF FRANCHISE OPERATIONS: Gregg Kocenko
Mr. Kocenko has been one of our Regional Directors of Franchise Operation since August 16, 2012. Prior to joining us, he was one of TSFDC's Regional Directors of Franchise Operation since August 2011. Prior to that, from January 2005 through December 2010, he was a regional director for Jamba Juice in Wellington, Florida.
DIRECTOR OF TRAINING: Robin Willis
Robin Willis has been our Director of Training since August 16, 2012. Prior to joining us, she was TSFDC's Director of Training since August 2011. From October 2007 until August 2011, she was President of Creating Simplicity, LLC ("Creating Simplicity"), an Atlanta, Georgia-based consulting company that she founded. Creating Simplicity consulted in a variety of areas, including training, project management and event planning. Previous to that, from June 2000 until October 2007, Mrs. Willis was Director of National Field Training for Church’s Chicken, located in Atlanta, Georgia.
DIRECTOR: Eric Jenrich
Eric Jenrich has been one of our Directors since August 16, 2012. Prior to joining us, he was, and continues to be, TSFDC's Chief Executive Officer and one of its Directors since its inception on July 2, 1997 in Destin, Florida. In January 2011, he was named President of TSFDC. He had also been TSFDC's President from its inception through August 19, 2008. Mr. Jenrich has also been Chief Executive Officer and a Director of 2 of TSFDC’s now dormant subsidiaries, Café Management, Inc. and Tropical Smoothie Café, LLC ("TSC") in Destin, Florida, for more than the past 5 years; both previously owned and operated Tropical Smoothie Café® restaurants. Eric Jenrich is an owner and CEO of Island Wing Franchise Company LLC (“Island Wing”), in Destin, Florida since November 2011.
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DIRECTOR: David W. Walker
David Walker has been one of our Directors since August 16, 2012. Prior to joining us, he was, and continues to be, TSFDC's Executive Vice President and one of its Directors since its inception on July 2, 1997 in Destin, Florida.
DIRECTOR: Shawn B. Welch
Shawn Welch has been one of our Directors since August 16, 2012. From November 2008 to the present, he has been a partner in BIP Opportunities Fund, LP, an Atlanta, Georgia-based investment firm. From November 2006 to the present, he has been managing partner of Midtown Capital Advisors, LLC in Atlanta, Georgia. Prior to forming Midtown Capital Advisors, LLC, he was a partner at Roark Capital Group in Atlanta, Georgia from March 2002 to November 2006.
DIRECTOR: Mark Buffington
Mark Buffington has been one of our Directors since August 16, 2012. From November 2008 to the present, he has been a partner in BIP Opportunities Fund, LP, an Atlanta, Georgia-based investment firm. From April 2007 to the present, he has been the founder and managing partner of Buckhead Investment Partners, LLC, which focuses on investing and managing assets for high net worth individuals.
ITEM 3. LITIGATION
The following matters relate to our predecessor and affiliate, TSFDC (see Item 2). Prior Actions:
McMurrain v. Tropical Smoothie Franchise Development Corporation, (American Arbitration Association, Case Number 33M1140013602). Scott McMurrain, a former area sales developer for us in Texas, filed a demand for arbitration against our predecessor, TSFDC, before the American Arbitration Association in Atlanta, Georgia on or about April 12, 2002, seeking rescission, restitution of monies paid, damages in the amount of $150,000 and attorney’s fees. The arbitration demand claimed: violation of Texas and Florida Franchise Laws and “baby FTC” acts; common law fraud; negligent misrepresentation; breach of contract, and breach of good faith and fair dealing. The arbitration demand did not specify the nature of the alleged violations of the Texas and Florida laws; it simply alleged they were violated. Similarly, the alleged damages were not specified in the demand. TSFDC counterclaimed for breach of contract for failure to fulfill development responsibilities, among other claims. The parties settled the matter in Atlanta, Georgia in March 2003 before a hearing was held with TSFDC agreeing to repurchase the territory for the sum of $80,000, and the parties joint agreement to dismiss the arbitration and enter into mutual releases.
Commonwealth Of Virginia Vs. Tropical Smoothie Franchise Development Corporation (State Corporation Commission At Richmond, Virginia; Case No. Sec-2002-00039). In February 2003, TSFDC agreed to a consent order, without admitting or denying allegations by the Virginia State Corporation Commission, Division of Securities and Retail Franchising (the “Commission”), with respect to allegations of sales of unregistered area sales developer master franchise and single unit franchises in the Commonwealth of Virginia. In September 2002, the Commission alleged that TSFDC offered for sale and sold two (2) area sales developer/master franchises in the Commonwealth of Virginia, and that it offered for sale and sold five (5) single unit franchises in the Commonwealth of Virginia. On February 12, 2003, the Commission entered a Settlement Order, whereby TSFDC agreed to offer rescission to all Virginia franchises, pay the Commission’s investigation costs of $750, pay a $2,500 6 QB\138221.00002\10107206.43 9/28/12
penalty, complete the Alternative Franchise Sales Law Enforcement Program offered by the National Franchise Council, and to not violate the Virginia Retail Franchising Act in the future. One franchisee opted to rescind.
Commonwealth Of Virginia Vs. Tropical Smoothie Franchise Development Corporation And Eric Jenrich (State Corporation Commission At Richmond, Virginia, Case No. Sec-2007- 00084). In 2007, the Commission initiated a second investigation (Case No. SEC-2007-00084) relating to the lack of disclosure of the prior investigation in the offering circulars that had been registered in Virginia between 2002 and 2007. On January 14, 2008, the Commission entered a Settlement Order, whereby TSFDC and Eric Jenrich admitted to the allegations and agreed to pay $25,000 to the Treasurer of Virginia, to pay the Commission the amount of $1,000 for the cost of investigation, offered rescission to identified Virginia franchisees, and agreed not to violate the Virginia Retail Franchising Act in the future. Four franchisees who had not yet opened their stores opted to rescind. The Commission dismissed the case on March 4, 2008, finding that TSFDC had fulfilled the requirements of the Order.
In the Matter of Tropical Smoothie Franchise Development Corporation, Administrative Proceeding Before the Securities Commissioner of Maryland, Case No. 2008-0329. As a result of an investigation into the franchise related activities of Tropical Smoothie Franchise Development Corporation (“TSFDC”), the Maryland Securities Commissioner (“Commissioner”) concluded that grounds existed to allege that TSFDC violated the registration and disclosure provisions of the Maryland Franchise Law and a previous agreement with the Commissioner, in relation to the offer and sale of Tropical Smoothie unit and area franchises. In responding to inquiries from the Maryland Securities Division, TSFDC disclosed that it sold an area franchise to a Maryland resident, during the time it was not registered to offer and sell area franchises in Maryland. In addition, TSFDC failed to include required disclosure regarding litigation in its Uniform Franchise Offering Circular that it provided to prospective unit franchises and to the area franchisee with the offer to rescind the area franchise pursuant to the previous agreement with the Commissioner. This failure to disclose violated the Maryland Franchise Law and the terms of a previous agreement with the Commissioner. On September 23, 2008, the Commissioner and TSFDC agreed to enter into a consent order whereby TSFDC, without admitting or denying any violations of the law, agreed to: immediately and permanently cease from the offer and sale of unit and area franchises in violation of the Maryland Franchise Law; complete its pending renewal applications to register its unit and area franchise offerings in Maryland; implement new compliance procedures; engage a franchise law compliance program to monitor its sales activities in Maryland and to Maryland residents for a period of two years; and, offer rescission to the unit and area franchisees who were sold franchises in Maryland in violation of the Maryland Franchise Law. Four franchisees holding two franchise agreements opted to rescind.
In the Matter of Tropical Smoothie Franchise Development Corporation, Administrative Proceeding Before the Securities Commissioner of Maryland, Case No. 2008-0329. In 2010, the Maryland Securities Division initiated a second investigation into the franchise related activities of Tropical Smoothie Franchise Development Corporation ("TSFDC") following its review of the compliance Monitor's 2010 Report that was prepared in connection with the requirements of the September 23, 2008 Consent Order disclosed above. Based upon its investigation, the Maryland Securities Commissioner ("Commissioner") concluded that grounds existed to allege that TSFDC violated the registration and disclosure provisions of the Maryland Franchise Law, the 2008 Consent Order, and an Agreement with the Commissioner, in relation to a 2009 offer and sale of a Tropical Smoothie franchise in Maryland. The Monitor's 2010 Report disclosed that TSFDC sold a franchise in Maryland without providing the franchisee with the required Maryland Addendum. The Monitor also noted that TSFDC provided the Maryland franchisee with advertising in the form of a business plan template and break even analysis that had not been filed with the Division, as required. In responding to inquiries from the Maryland Securities Division in connection with TSFDC's amendment application of 7 QB\138221.00002\10107206.43 9/28/12
its franchise registration, TSFDC acknowledged that it failed to comply with the Commissioner's requirement to defer the collection of all initial fees received from the franchisee to whom it sold the franchise. On March 10, 2011, the Commissioner and TSFDC agreed to enter into a consent order whereby TSFDC, without admitting or denying any violations of the law, agreed to: immediately and permanently cease from the offer and sale of franchises in violation of the Maryland Franchise Law; diligently pursue the completion of its pending application to amend the franchise offering in Maryland; implement new compliance procedures; pay the Office of the Attorney General a civil monetary penalty of $10,000 and, offer rescission to the franchisee who was sold a franchise in Maryland in violation of the Maryland Franchise Law.
Pacheco v. Tropical Smoothie Franchise Development Corporation, Case No. 10-33167-18), (Circuit Court of the 17th Judicial Circuit, Broward County, Fla., filed July 27, 2010). Plaintiff, Victor Pacheco, was formerly the area developer for the Counties of Bronx, New York, Queens and Richmond territory in the State of New York. On June 26, 2007, TSFDC terminated Pacheco's area sales development agreement based on his (a) failure to conduct himself in a manner consistent with TSFDC's missions, principles and values; and (b) engaging in behavior that presented a health or safety hazard to customers, employees or the general public. Over 3 years later, Pacheco sued TSFDC alleging breach of contract and breach of the implied covenant of good faith and fair dealing arising out of the wrongful termination of the area sales development agreement with TSFDC. Pacheco claims that TSFDC did not have sufficient grounds to terminate the contract and that TSFDC's decision to do so violated the implied covenant of good faith and fair dealing. He seeks an unspecified amount of compensatory damages, lost profits and attorneys' fees. TSFDC denies the claims and has moved to stay the lawsuit pending arbitration in compliance with the contract. TSFDC's motion to compel arbitration and stay the lawsuit was granted by Order dated February 8, 2011. A demand for arbitration in this matter alleging essentially the same facts and claims was filed against TSFDC on June 15, 2012. While denying any liability, to avoid further defense costs, we settled the claim on September 27, 2012 by agreeing to pay Pacheco $75,000 in exchange for his release of all claims and dismissal of the arbitration with prejudice.
Pending Actions:
Michael J. Hunter, Suzanne J. Hunter and Frederick & Friends, Atlanta, LLC v. Tropical Smoothie Franchise Development Corporation, Tropical Smoothie Café, LLC, Tropical Smoothie, Inc., Eric Jenrich and James Valentino (Case No. 2008CA3779), filed in the Circuit Court of the 2nd Judicial Circuit Court, Leon County, Florida. This lawsuit was filed on November 18, 2008, and amended in April 2010, alleging breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, promissory estoppel, conversion and unjust enrichment and constructive trust. The lawsuit resulted from action TSFDC took in January 2008 to terminate the area development agreement with the Plaintiff, Fredrick & Friends, Atlanta, LLC, the area developer for the Atlanta, Georgia territory (the “LLC”). The LLC had assumed the area sales development agreement, dated July 9, 2004 (the “ASDA”) in September 2007 from Robert Frederick, the original signatory of the ASDA (“Frederick”). Frederick owned 50% of the LLC and the individual Plaintiffs, Michael Hunter and Suzanne Hunter (the “Hunters”), owned the other 50%. In December 2007, the Hunters had entered into an agreement to purchase Frederick’s 50% interest in the LLC and TSFDC's consent to that transfer was requested. TSFDC informed Frederick that its consent to the proposed transfer was conditioned on Frederick maintaining one of TSFDC's franchised stores in the Atlanta market that Frederick owned personally (the “Frederick Café”), and that if he closed the Frederick Café TSFDC would not consent to the transfer and, in addition, TSFDC would exercise its right, pursuant to the ASDA, to terminate the ASDA. When Frederick closed the Frederick Café in early January 2008, TSFDC terminated the ASDA. The Hunters claim TSFDC breached our agreement to approve their purchase of Frederick’s interest in the LLC and that TSFDC fraudulently induced them to enter into the purchase agreement with Frederick. They are seeking an unspecified amount of compensatory damages, recovery of their investment and unspecified 8 QB\138221.00002\10107206.43 9/28/12
amounts that would be due them if they acquired the ASDA, prejudgment interest and any other relief allowed by the court. TSFDC denies all of Plaintiffs’ claims and denies that it made any fraudulent statements or misrepresentations of any kind, whether in violation of a statute or common law. TSFDC has counterclaimed against the Plaintiffs for Plaintiffs' actions which resulted in a diminution in the value of the Atlanta, Georgia market for TSFDC's business. Discovery is currently in progress and it is anticipated that a trial date will be set to commence in the third quarter of 2012.
Other than these actions, no litigation is required to be disclosed in this Item.
See Exhibit "C" for any required disclosure relating to Area Developers.
ITEM 4. BANKRUPTCY
Our Chief Executive Officer, Mike Rotondo, filed a voluntary petition under Chapter 7 of the U.S. Bankruptcy Code on October 20, 2003 (Case No. 03-74494, U.S. Bankruptcy Court, Northern District of Georgia, Atlanta Division). On January 28, 2004, he obtained a discharge of his debts.
Other than this one proceeding, no bankruptcy information is required to be disclosed in this Item. See Exhibit “C” for any required disclosure relating to Area Developers.
ITEM 5. INITIAL FEES
Initial Franchise Fee
The initial franchise fee for a single Franchised Business is $25,000, payable in full upon execution of the Franchise Agreement. A franchisee that desires to open more than one Franchised Business, if approved by us, will be given a discount on the initial franchise fees paid for the additional Franchised Businesses. The initial franchise fee for the second and each subsequent Franchised Business developed will be $15,000, due at the time you sign the Franchise Agreement for each location.
From time to time, we may discount or reduce the initial franchise fees for certain prospects due to special circumstances (e.g., re-opening a closed store, a franchisee with multiple units who does not need initial training or support, etc.). During 2011, the initial franchise fees paid to us ranged from $1 to $25,000. In all cases, the initial franchise fee is deemed fully earned by us upon receipt and is non- refundable. We use the initial franchise fee to provide training and other services to our franchisees.
We are a member of the International Franchise Association (“IFA”) and participate in the IFA’s VetFran program, which provides financial incentives to qualified veterans to help them acquire franchised businesses. In support of this program, we currently reduce the initial franchise fee 50% for qualified veterans, to $12,500 for the first franchise and $7,500 for the second and each additional franchise.
Except as described above, we charge the initial franchise fee uniformly to all franchisees.
ITEM 6. OTHER FEES
Type of Fee (1) Amount Due Date Remarks Royalty Fee 6% of Gross Sales Payable on Wednesday See definition of “Gross Sales.” (2) You must pay of each week for the the Royalty Fee by electronic funds transfer. prior week’s Gross (Franchise Agreement, Section 5.B.) Sales
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Type of Fee (1) Amount Due Date Remarks National Marketing Maximum – 2% of Payable on Wednesday We may use these funds to create marketing, Fee Gross Sales of each week for the advertising and promotional materials for your use, (currently 1% of prior week’s Gross or we may use these funds for marketing, advertising Gross Sales) (3) Sales and public relations programs and materials on a system-wide basis. You must pay the National Marketing Fee by electronic funds transfer. (Franchise Agreement, Section 5.D.) (See Item 11) Local Advertising 2% of Gross Sales Payable on Wednesday We (or our designee) administer these funds in Cooperative of each week for the accordance with the direction of the cooperative Contribution prior week’s Gross members. You must pay the Local Advertising Sales Cooperative Contribution by electronic funds transfer. (Franchise Agreement, Section 5.E.) (See Item 11) Grand Opening $2,000 During first 60 days of You must spend a minimum of $2,000 on grand Marketing operations opening marketing for your Franchised Business to promote the opening of the Franchised Business in your local market area. You must use the marketing, advertising and public relations programs, media and materials that we have developed or approved. (Franchise Agreement, Section 5.F.) (See Item 11). MIS Fees Currently $50 to Payable on the 20th You must pay us the amount we designate for the $100 per month per day of each Month use of our mandated management information store system, which includes auto-polling services of the POS System that you review via the Internet. We deduct the MIS Fee from your account by electronic funds transfer. (Franchise Agreement, Section 5.C.) (See Item 11) Additional Training $1,000 per person Before training Payable in the event that more than 2 people attend initial training at your request. (Franchise Agreement, Section 4.A.5.) (See Item 11) No Show Fee $1,000 per As invoiced Only required, at our option, for unexcused non- occurrence attendance at any scheduled phase of training. (Franchise Agreement, Section 4.A.5.) (See Item 11) Interest Charge on 2 times the prime rate On demand Only required if payment is late. (Franchise Late Payments being charged by Agreement, Section 5.G.) Chase Manhattan Bank, NA or the highest rate permitted by applicable state law, whichever is less (the “Default Rate”) Late Fee $25 per week (or On demand Only required if any payment or report is late. portion thereof) (Franchise Agreement, Section 5.G.) Default Fee $100 each time you As stated in our notice Only required, at our option, if we reasonably default and for each believe you have committed an event of default week (or portion under the Franchise Agreement. (Franchise thereof) that the Agreement, Section 5.H.) default continues. Audit Fee Cost of audit plus Immediately upon Payable only if we find, based on an audit, that you interest on under- determination by audit have understated amounts owed to us by 2% or payment at Default more. (Franchise Agreement, Section 10.E.) Rate Insurance Amount of unpaid As invoiced Payable only if you fail to maintain required premiums insurance coverage and we elect to obtain coverage for you. (Franchise Agreement, Section 12.F.) Transfer Fee 5% of the total sales Before transferring Payable when Franchised Business is transferred to price or $10,000, an unrelated 3rd party. (Franchise Agreement, whichever is greater Section 13.B.)
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Type of Fee (1) Amount Due Date Remarks Management Fee Reasonable As agreed Payable during the period that our appointed compensation and manager manages the Franchised Business to avoid expenses estimated to interruption of business operations if transferred. range between $600 (Franchise Agreement, Section 13.G.) to $800 per week Supplier Approval Reasonable costs and As invoiced We may require you to pay us for our reasonable expenses of costs and expenses if we evaluate a proposed inspection and testing product, service or supplier at your request. estimated to range (Franchise Agreement, Section 6.P.) from $500 to $2,000 Indemnification Will vary under On demand You must indemnify us when certain of your actions circumstances result in loss or damages to us. (Franchise Agreement, Section 19.B.) Liquidated Damages Amount equal to the On demand We may require you to pay us this amount in the average Royalty Fees event you terminate the Franchise Agreement for the last 12 months without cause or we terminate the Franchise (or shorter period, if Agreement for cause (Franchise Agreement, Section Franchised Business 15.G.) has been in operation less than 12 months), multiplied by: (i)18 or (ii) the number of months remaining in the term, whichever is less. Costs and Attorneys’ Will vary under On demand You will reimburse us for all costs in enforcing your Fees circumstances obligations if we prevail. (Franchise Agreement, Section 27.)
NOTES:
(1) All fees and expenses described in this Item 6 are non-refundable. All fees are uniformly imposed. Except as otherwise indicated in the chart above, we impose all of the fees and expenses listed, and they are payable to us. We may require you to pay any or all periodic or recurring fees to us by electronic funds transfer. We require you to sign the Pre-Authorized Bank Form attached as Exhibit “D” to this Disclosure Document.
(2) “Gross Sales” means all sales generated through the Franchised Business including fees for any products or goods sold by you, whether for cash or credit (and regardless of collectability), proceeds received by you in connection with any business interruption insurance, and income of every kind or nature related to the Franchised Business including barter and trade. Gross Sales does not include the sales price of goods returned by customers and any sales tax or other taxes collected from customers and paid to the appropriate taxing authority, or any sales attributable to coupon purchases.
(3) As of the date of this Disclosure Document, the National Marketing Fee is 1% of Gross Sales. We may, in our sole discretion, increase the National Marketing Fee to 2% of Gross Sales. (See Item 11)
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ITEM 7. ESTIMATED INITIAL INVESTMENT
YOUR ESTIMATED INITIAL INVESTMENT
To whom Method of payment is to Type of expenditure Amount payment When due be made INITIAL FRANCHISE $25,000 Lump sum When the Franchise Us FEE (1) Agreement is signed REAL ESTATE $0 to $5,000 As arranged As arranged Designated BROKER (2) Real Estate Broker ARCHITECT (3) $2,500 to $10,000 As arranged Before opening Architect STORE FIXTURES $50,000 to $125,000 Lump sum As arranged Designated AND EQUIPMENT Source (including point of sale/cash register system) (4) LEASEHOLD $50,000 to $135,000 Lump sum Before opening Contractor or IMPROVEMENTS (5) Designated Source SIGNAGE $6,000 to $15,000 Lump sum Before opening Suppliers UNIFORMS $500 to $1,000 Lump sum Before opening Suppliers INITIAL INVENTORY $8,000 to $13,000 Lump sum Before opening Suppliers INITIAL TRAINING $3,000 to $5,000 Lump sum As incurred Airlines, EXPENSES (6) Hotels, etc. INSURANCE $1,000 to $3,000 As arranged As incurred Insurance DEPOSITS Companies INITIAL DEPOSITS $5,000 to $15,000 As arranged As incurred Landlord & Utility Providers LICENSES, BONDING $1,000 to $2,000 As incurred Before opening Government & PERMITS (7) Agencies LEGAL/ACCOUNTING $500 to $2,000 As arranged As incurred Attorney Accountant GRAND OPENING $2,000 As arranged Before opening Suppliers, MARKETING (8) Media ADDITIONAL FUNDS $10,000 to $40,000 As needed As needed Third parties (WORKING CAPITAL) (9) (3 to 6 months) TOTAL (10) $164,500 to $398,000
NOTES:
1. Franchisees wishing to open more than one Franchised Business must sign a Franchise Agreement and pay an initial franchise fee for each additional location. The initial franchise fee for the second and each subsequent Franchised Business is $15,000.
2. You must use our designated national site selection and real estate services provider in connection with site selection and lease negotiations for your Franchised Business. You must sign the form of exclusive representation agreement attached as Exhibit “E” to this Disclosure Document. Commissions are typically paid to the real estate broker by the landlord of the premises; however, you are
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responsible for any commissions due and not otherwise paid by the landlord. You may not use the services of any other real estate broker without our prior written consent.
3. You will be provided a set of plans for recommended construction in conformity with mandatory design specifications. You may be required by local codes and regulations to retain an architect or equivalent professional to review or certify the plans and/or to oversee construction. The lower ranges assume that the site was formerly used as a restaurant so that the plans can utilize existing plumbing, electrical, etc.
4. Equipment needed to operate the Franchised Business includes (without limitation) tables and chairs, ice machine, blenders, refrigerators, mixing bar, ice wells, freezers, menu boards, artwork and point of sale/cash register system. Grand Restaurant Equipment and Design, Inc. ("Grand Equipment") is our designated suppliers for these items. You must purchase the equipment, furnishings and other items from Grand Equipment before your Franchised Business opens. The cost of these items, purchased new, ranges from $90,000 to $110,000. Your cost will be lower if you purchase used equipment. The low end of this estimate assumes the purchase of some pre-owned equipment. The types of costs are uniform among franchisees, but may vary depending on factors like the size and layout of the Franchised Business and whether new or used fixtures and equipment are utilized. For instance, in certain areas of the country, to the extent available and subject to our approval, we may allow you to purchase pre-owned equipment that meets our specifications and standards, and thus, reduce the cost of these items. Also, as stated in note 5, landlord improvement incentives are sometimes available for fixtures and equipment. Likewise, for sites recovered from closed restaurants, leftover fixtures and equipment held by the landlord that meets our specifications and standards can be utilized. This may include kitchen equipment, seating, bathroom fixtures, air conditioning and other items. Payment is due upon receipt of invoice and is nonrefundable.
5. These amounts are our best estimate of finish-out costs only. Labor and material costs may vary significantly in accordance with local variations in wage rates, labor efficiency, union restrictions and availability, and price of materials. Finish-out costs are based on leasing unfinished space that consists of walls, plumbing, concrete slab, lighting, HVAC, and electricity. We are unable to calculate the exact real estate investment required of each franchisee for a Franchised Business due to the many factors which influence the total project costs, such as location, amount of space leased (1,400 to 2,400 sq. ft.), amount of remodeling needed and so forth. In addition, due to the softness in the retail store leasing market in some areas of the country, you may be able to negotiate certain incentives from your landlord in the form of tenant improvement dollars and initial free rent, which, if available, will reduce the effective cost of your build-out. The lower range of the estimates anticipates that landlord improvement incentives will be available to construct much of the improvements. The amount of landlord incentives can vary widely depending on many factors including, without limitation: financial capacity of the landlord; competitive retail leasing locations; market conditions for rental rates; occupancy of the site and status of other leases and others. The use of landlord improvement money may also result in higher rent or occupancy costs. Also, some sites may have shells left vacant from prior tenants so that it costs less to convert the Stores to conform to our specifications. This includes the possibility that existing walls, plumbing, concrete slab, lighting, HVAC and electricity can be utilized. The availability of such sites may be limited or absent in your market. There is no assurance that you will be able to find sites that have these options available to you. The amount does not reflect an investment in real estate, since it is assumed that you will lease your premises.
6. You are responsible for all transportation, meal and other expenses associated with the initial training program for you and/or your managers, designees and employees. The cost will depend on the distance you must travel and the type of accommodations you choose. (See Item 11)
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7. This may include building inspection fees, occupational license fees, food service licenses, and the like, and will vary from one jurisdiction to the other.
8. You must spend at least $2,000 (exclusive of the cost of food and smoothies) on a grand opening marketing program for the Franchised Business during the first 60 days of operations. The grand opening program will use the marketing, advertising and public relations programs, media and materials we have developed or approved, and is separate from your other marketing and advertising requirements. We may require you to submit expenditure report(s) to us, accurately reflecting your grand opening marketing expenditures.
9. This estimates your start-up expenses. The estimate is intended to cover items such as possible initial operating losses, additional insurance, rent and security deposits, miscellaneous additional pre-opening costs, payroll, utilities, additional legal and accounting fees, and payments to any governmental agency that are necessary to open the Franchised Business. In addition, you should be prepared to have cash available to pay your personal living expenses during the first 3 to 6 months of operation. This is only an estimate however, and the necessary amount of working capital will vary considerably with each franchisee. We cannot guarantee that this amount is sufficient. You may require additional working capital over and above this estimated amount if your sales are low or if your fixed costs are high.
10. Your initial investment will vary depending upon the method and amount of financing that you use. The initial franchise fee, equipment, and other items are shown in full, although they may be financed or leased through third parties, and except where the low ranges are based in part on either landlord incentives, conversions of prior tenant's locations, and used fixtures and equipment. We have relied on historical experience provided by our franchisees and data from our predecessor, TSFDC, to compile these estimates. The total actual cost to construct and operate each Tropical Smoothie Café® store has varied from the estimates shown above, and no particular outlet has experienced the high or low estimate for every category. The amounts shown are estimates only and may vary for many reasons, including, without limitation, your management skill and experience, your business acumen, local economic conditions, and sales reached during the initial operating period. Estimated initial investment costs may be substantially higher in certain states and locations, including New York, California, Nevada and Hawaii. You should review these figures carefully with a business advisor before making any decision to purchase the Franchised Business.
We do not offer any financing for your initial franchise fee or any portion of your initial investment. (See Item 10) The amounts described above are not refundable unless otherwise stated.
ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
In order to maintain the reputation, goodwill, high standards, quality and uniformity of the System, the Franchise Agreement restricts the sources of products and services you utilize in establishing and operating your Franchised Business. Some items can be purchased only from us or our affiliates, some only from suppliers we have designated or approved, and others only in accordance with our standards and specifications. The following table summarizes the approximate percentages of your purchase of goods and services through sourcing restrictions, based on the nature of the restriction. The source for virtually all of your purchases is restricted in some way.
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Required Purchases In Accordance Required Purchases from Required Purchases from with Our Specifications Us or Our Affiliates Approved Suppliers and Standards Establishment − 0% Establishment − 15% Establishment − 25% Operation − 0% Operation − 90% Operation − 5%
Purchases from Us
You may be required to purchase certain products, equipment or services directly from us or our affiliates. Currently, we do not require you to purchase any items from us or our affiliates. During 2010, we did not derive any revenue from direct sales of equipment, products or services to franchisees.
There are no suppliers in which any of our officers own an interest.
Purchases from Approved Suppliers
To maintain the superior quality of the goods and services sold by Tropical Smoothie Café® businesses and the reputation of the Tropical Smoothie Café® franchise network, you must purchase or lease fixtures, equipment and supplies, furnishings, products and services, and related items from suppliers that we designate or approve. Examples of designated or approved suppliers are Micros (data polling services), The Windsor Realty Group (real estate brokerage services), Sysco (food and beverage products and supplies) and Grand Equipment (equipment, furnishings, point-of-sale/cash register system, interior signage, artwork and smallwares).
We may change approved suppliers periodically upon written notice to you. We will identify all designated and approved suppliers in our Manuals or other written or electronic communications. We do not make any express or implied warranties for any products or goods that we recommend for your use.
Purchases According to Standards and Specifications
In order to maintain the uniformly high standards and reputation of the System, you are required to purchase or lease certain items in accordance with the specifications and guidelines issued by us. This requirement applies to design and build-out standards, computerized point-of-sale and cash register system, signage, menu boards, uniforms, beverage and food products, branded paper goods, and supplies to be used in developing and operating the Franchised Business. Specifications may include minimum standards for quality, quantity, delivery, performance, design, appearance, durability, style, warranties, price range, and other related restrictions. We consider these specifications to be of critical importance to the success of the System. (All of these specifications and guidelines are more fully described in our Manuals).
Site Selection − The location for your Franchised Business must satisfy our site selection criteria, which we may modify. You must utilize the services of our designated national site selection and real estate services provider to assist with site selection and lease negotiations. Before you acquire the premises for the Franchised Business, you must submit to us all information that we request. We will have 30 days after we receive the information from you to determine whether the proposed site meets our site selection criteria. We will not unreasonably withhold our approval, but no site will be deemed to conform to our criteria unless we have expressly indicated that in writing. We have the right to ensure that the proposed lease or sublease for the premises satisfied the leasing standards we prescribe before you sign it. We require you and your landlord to sign our standard Addendum to Lease Agreement/Conditional Assignment of Lease. (See Item 11)
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Construction and Opening − You are responsible for developing the Franchised Business in compliance with our standards and specifications. We will furnish you with mandatory and suggested specifications and layouts for a Tropical Smoothie Café® store, including requirements for dimensions, design, color scheme, image, interior layout, décor, fixtures, equipment, signs and furnishings. You are obligated, at your expense, to have an architect prepare all required construction plans and specifications to suit the shape and dimensions of the accepted site and to ensure that the plans and specifications comply with applicable ordinances, building codes, permit requirements, lease requirements and restrictions, and the mandatory specifications and layout provided by us. Design quality is important to us, and we have the right to review and accept all plans and specifications and to confirm that construction is completed in conformance with our architectural and design standards and specifications for a Tropical Smoothie Café® store. You must complete construction and begin operations of the Franchised Business within 12 months of the date that you sign the Franchise Agreement. You may not open the Franchised Business to the public until you have received our approval.
Computer Hardware and Software − You are required to purchase the point-of-sale system and computer hardware and software described in Item 11 of this Disclosure Document.
Advertising and Promotional Materials − All of your advertising and promotions must conform to our standards and requirements. We must approve all advertising and promotional materials before you use them. You must submit to us samples of all promotional and marketing materials in whatever form you propose to use them at least 15 days before their intended use, and we will make reasonable efforts to approve or disapprove them within 10 days after we receive them. You must not use the advertising or marketing materials until we have approved them, and must promptly discontinue using any advertising or promotional materials if we notify you to do so.
Insurance − You must obtain and maintain, at your own expense, insurance coverage that we require periodically. We may regulate the types, amounts, terms and conditions of insurance coverage required for your Franchised Business, and standards for underwriters of policies providing required insurance coverage, including (a) our protection and rights under these policies as an additional insured; (b) required or permissible insurance contract provisions; (c) assignment of policy rights to us; (d) periodic verification of insurance coverage that must be furnished to us; (e) our right to obtain insurance coverage at your expense if you fail to obtain required coverage; and (f) similar matters relating to insured and uninsured claims.
All policies must be written by an insurance company satisfactory to us in accordance with the standards and specifications we prescribe in the Manuals or otherwise in writing. You are currently required to purchase and maintain throughout the term of the Franchise Agreement:
1. Comprehensive general liability insurance, including contractual liability, broad form property damage, personal injury, advertising injury, product liability, employee liability, completed operations and independent contractors coverage, and fire damage coverage in the amount of $1,000,000 per occurrence, with $2,000,000 aggregate coverage (or such higher amount as required by the lease for the premises);
2. Worker’s compensation and employer’s liability insurance, as well as such other insurance as may be required by applicable law;
3. Fire, vandalism and extended coverage insurance with primary and excess limits of at least the full replacement value of the Franchised Business and its furniture, fixtures and equipment;
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4. Business interruption and extra expense insurance for a minimum of 6 months to cover net profits and continuing expenses, including royalty fees; and
5. Employment practices liability insurance.
The cost of these coverages will vary depending on the insurance carrier’s charges, terms of payments, and your history. All insurance policies, except workers’ compensation policies, must name us and your Area Developer (if any) as an additional insured party. You must provide us with a copy of each certificate of insurance at least 15 days before the opening of the Franchised Business and on each policy renewal date. No policy may be cancelled or materially altered without 30 days advance written notice to us. We do not derive revenue as a result of your purchase of insurance.
In connection with any construction, leasehold improvements, renovation, refurbishment or remodeling of the premises of the Franchised Business, your general contractor must maintain comprehensive general liability insurance (with comprehensive automobile liability coverage for both owned and non-owned vehicles, builder’s risk, product liability and independent contractors coverage) in at least the amount of $1,000,000, with us named as an additional insured, as well as worker’s compensation and employer’s liability insurance as required by state law.
Supplier Approval Procedure
If you propose to purchase or lease any services or products not previously approved by us in writing (for services and products that require supplier approval), you must first notify us. We may require (among other things) submission of sufficient information, specifications and/or samples for us to determine whether the product or service complies with our standards and specifications, or whether the supplier meets our approved supplier criteria. We generally apply the following criteria (among others) in considering whether the supplier will be designated as an approved supplier:
1. Ability to produce the products, services, supplies, or equipment and meet our standards and specifications for quality and uniformity;
2. Production and delivery capabilities and ability to meet supply commitments;
3. Integrity of ownership (to assure that its association with us would not be inconsistent with our image or damage our goodwill); and
4. Financial stability.
You are responsible for all reasonable expenses incurred by us in connection with evaluating the product, service or supplier. Although we are not required to approve or disapprove supplier requests within any particular time period, we generally respond within 30 days after we receive your written request. Suppliers must maintain our standards in accordance with written specifications and any modifications. Failure to correct a deviation from the System’s specifications will result in the termination of status as an approved supplier.
Purchasing Arrangements
We may (but are under no responsibility to) negotiate with suppliers and manufacturers to receive discounts or rebates on certain items you must purchase. For the fiscal year ended December 31, 2011, TSFDC received rebates of $1,172,249in connection with purchases by franchisees of certain items from approved or designated suppliers; these items included potato chips, chicken, frozen fruit, tortillas, yogurt
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and Sysco purchases. This amounted to approximately 8.8% of its total revenues of $13,261,675. During that time frame, we did not receive any discounts or rebates on account of franchisee purchases. We used some of these rebates for the benefit of our franchisees (although we are under no obligation to do so), including (but not limited to) annual convention costs and a portion of administrative salaries for those individuals responsible for distribution and production that benefit the entire System. Our rebate programs may vary depending on the supplier and the nature of the product or service.
PRODUCT BASIS FOR REBATE Chips $0.25 to $2.56 per case Fruit $0.05 per pound Tortillas $2.00 per case Chicken $0.15 per pound Yogurt $3.00 per case Sysco 0.25% of Total System Purchases Chocolate and caramel sauce $1.50 per case Logo Cups $4.00 per case for 24 oz. cups Food $0.01 to $2.59 per package Beverages $0.10 to $0.45 per package Paper Products $0.02 to $3.12 per package
Miscellaneous
There currently are no purchasing or distribution cooperatives. We currently negotiate purchase arrangements with suppliers (including price terms) for most of the products and services you will purchase for use in operating the Franchised Business. In doing so, we seek to promote the overall interests of the Tropical Smoothie Café® franchise system and company-owned operations. We do not provide material benefits to you (for example, renewal or granting additional franchises) for purchasing particular products or services or using a particular supplier.
Except as described above, neither we nor our affiliates currently derive revenue or other material consideration as a result of your required purchases or leases.
ITEM 9. FRANCHISEE’S OBLIGATIONS
This table lists your principal obligations under the franchise and other agreements. It will help you find more detailed information about your obligations in these agreements and in other items of this Disclosure Document.
DISCLOSURE SECTION IN DOCUMENT OBLIGATION AGREEMENT ITEM a. Site selection and acquisition/lease Sections 4.A. and 6.B. Items 7, 8 and 11 b. Pre-opening purchases/leases Sections 6.C., 6.M., 6.P., Items 5, 7, 8 and 11 6.S. and 6.V. c. Site development Sections 6.B., 6.C. and 6.M. Items 5, 7, 8 and 11 d. Initial and ongoing training Sections 6.E. and 6.G. Item 11 e. Opening Section 6.D. Item 11 f. Fees Sections 5, 10.E., 11.B., Items 5 and 6 11.C., 11.D., 13.B., 13.G. and 27
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DISCLOSURE SECTION IN DOCUMENT OBLIGATION AGREEMENT ITEM g. Compliance with standards and Sections 6, 7 and 8 Item 11 policies/operating manuals h. Trademarks & proprietary information Sections 7, 8 and 9 Items 13 and 14 i. Restrictions on Products and Services Section 6 Items 8 and 16 Offered j. Warranty and customer service Not applicable Not applicable requirements k. Territorial development and sales quota Not applicable Not applicable l. Ongoing product/service purchases Section 6 Item 8 m. Maintenance, appearance and remodeling Sections 6.I. and 13.B.2. Item 11 requirements n. Insurance Section 12 Items 7 and 8 o. Advertising Section 11 Items 6, 8 and 11 p. Indemnification Section 19.B. Item 6 q. Owners participation/management/staffing Sections 3.B., 6.F. and 6.M. Items 11 and 15 r. Records and reports Sections 6.F. and 10 Item 17 s. Inspections and audits Sections 6.R., 10.D. and Items 6 and 11 10.E. t. Transfer Section 13 Items 6 and 17 u. Renewal Section 2.B. Items 6 and 17 v. Post-termination obligations Section 15 and 16.C. Item 17 w. Non-competition covenants Section 16 Item 17 x. Dispute resolution Section 26 Item 17 y. Owner’s Guaranty Section 3.B. and 13.B. and Item 15 Exhibit “C”
ITEM 10. FINANCING
We do not offer direct or indirect financing. We do not guarantee your note, lease or obligations.
We participate in the IFA’s VetFran program, which provides financial incentives to qualified veterans to help them acquire franchised businesses. See Item 5.
ITEM 11. FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING
Except as listed below, we are not required to provide you with any assistance.
Pre-Opening Obligations: Before you open your Franchised Business, we will:
1. If the location for your Franchised Business has not been approved at the time you sign the Franchise Agreement, designate a geographic area (“Designated Area”) within which the Franchised Business is to be located. The Designated Area for your Franchised Business will be inserted into the Franchise Agreement before you sign the Franchise Agreement. The Designated Area is delineated for the sole purpose of site selection and does not confer any territorial exclusivity or protection. (Section 1.C. of the Franchise Agreement)
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2. Review and approve or disapprove your site for the Franchised Business in the Designated Area. (Section 4.A.2. of the Franchise Agreement) We will approve or disapprove a site that you propose within 30 days after we receive from you a complete site report and any other materials that we may require for assessing potential. If you have not heard from us within such 30 day period, the proposed site is deemed disapproved. The factors that will affect our approval are demographic characteristics of the proposed site, traffic patterns, parking, the predominant character of the neighborhood, competition from other businesses providing similar services within the area, the proximity to other businesses (including other TROPICAL SMOOTHIE CAFÉ® stores), the nature of other businesses in proximity to the proposed site, and other commercial characteristics (including the purchase price or rental obligations and other lease terms for the proposed site) and the size of the premises, appearance and other physical characteristics of the premises, financing, building permits, zoning, local ordinances, and anticipated timetable for the installation of equipment, furniture and signs. If we have not approved a site for your Franchised Business within 90 days of the date of your agreement, the agreement may be terminated.
3. Review and approve or disapprove the lease for your site. (Section 4.A.2 of the Franchise Agreement)
You must obtain our approval of the lease or sublease (or any modification or amendment) for the location before you sign it, or any renewal of it. A condition to our approval of the lease (or sublease) is the execution by you, the landlord and us of the Addendum to Lease Agreement/Conditional Assignment of Lease (a copy of which is attached as Exhibit “F” to this Disclosure Document). We also require you to sign and deliver to us a Conditional Assignment of Telephone Numbers and Listings in the form attached as Exhibit “G” to this Disclosure Document. (Section 15.J. of the Franchise Agreement)
4. Furnish you with mandatory and suggested specifications and layouts for a TROPICAL SMOOTHIE CAFÉ® store, including requirements for dimensions, design, color scheme, image, interior layout, décor, fixtures, equipment, signs and furnishings. You are solely responsible for developing and constructing the Site for your Franchised Business, for all expenses associated with it, and for compliance with the requirements of any applicable federal, state or local law. (Section 4.A.3. of the Franchise Agreement)
5. Provide you with written specifications for the operation and management of the Franchised Business. (Section 4.A.4. of the Franchise Agreement).
6. Provide you with our initial training program, which is described below. (Section 4.A.5. of the Franchise Agreement).
7. Provide one training team member or field staff member (which may be your Area Developer, if applicable) for one week of on-site pre-opening and opening supervision and assistance (as described above). (Section 4.A.6. of the Franchise Agreement)
8. Loan to you a single set of our Operating Manuals (the “Manuals”), which will include specifications for equipment, supplies, inventory, management, and operation. The Manuals are confidential and remain our property. (Section 4.A.7. of the Franchise Agreement). A copy of the Table of Contents of our Manuals is attached as Exhibit “I” to this Disclosure Document.
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Continuing Obligations: During the operation of the Franchised Business, we will:
1. Provide the general advisory assistance and field support deemed by us to be helpful to you in the ongoing operation, advertising and promotion of the Franchised Business. (Section 4.B.1. of the Franchise Agreement)
2. Continue our efforts to establish and maintain high standards of quality, cleanliness, safety, customer satisfaction and service. (Section 4.B.2. of the Franchise Agreement)
3. Provide you with updates, revisions and amendments to our Manuals. We may periodically modify the Manuals, but these modifications will not alter your fundamental status and rights under the Franchise Agreement. (Section 4.B.3. of the Franchise Agreement)
4. On a periodic basis, conduct (as we deem advisable) inspections of the Franchised Business and its operations and evaluations of the methods and the staff. You must sign an operations report in connection with each visit by our field support staff. (Section 4.B.4. of the Franchise Agreement).
We may delegate certain of our duties and responsibilities to an Area Developer (see Item 2 and Exhibit “C” of this Disclosure Document for Area Developers in your State). Although we may voluntarily provide additional services, no additional duties may be implied because we provide those additional services (if any). We have no implied duties or other duties not expressly stated in the Franchise Agreement.
Advertising and Promotion
Approval of Advertising. All promotional and marketing materials that you propose to use must conform to our standards and requirements as specified in our Manuals. You must provide us with all samples of promotional and marketing materials in whatever form you desire to use for our approval at least 15 days before your proposed use of the materials. We will notify you of our approval or disapproval of the materials within 10 days of receiving them. If you do not receive our written approval within this time period, we will be deemed to have disapproved the materials. You cannot use any advertising or promotional plans or materials that we have not approved. (Section 11.A. of the Franchise Agreement.)
Grand Opening Advertising. You must spend at least $2,000 (exclusive of the cost of food and smoothies) on a grand opening marketing program for your Franchised Business during the first 60 days of operations. The grand opening program must use marketing, advertising and public relations programs, media and materials that we develop or approve, and is in addition to your other marketing and advertising requirements under the Franchise Agreement. We may, at our option, require you to submit expenditure reports to us detailing your grand opening marketing expenditures.
National Advertising Program. You will be charged a non-refundable national marketing and advertising fee (“National Marketing Fee”) equal to 1% of Gross Sales each week. We reserve the right to raise the National Marketing Fee to 2% of Gross Sales at any time. The National Marketing Fee is placed in the National Marketing Fee account ("NMF Account") and we use it in part to cover the costs incurred by us and/or our affiliates in designing and creating promotional, marketing and advertising resources, including, but not limited to, in-store point of purchase materials, flyers, radio and television commercials and other materials that we, in our sole discretion, deem appropriate. The NMF Account may be used by us to duplicate or distribute these materials; otherwise it is your cost to do so. We may
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also use funds in the NMF Account for media placement. However, you are responsible for some of these costs if you elect to use the materials created in your own market and the NMF Account does not do so. We may elect in the future to use the NMF Account in connection with advertising with different media outlets, including print, radio, television and/or online on a national and/or regional level intended to benefit the patronage of all Tropical Smoothie Café® stores. We (or our designee) administer and maintain the NMF Account in the following manner:
1. We (or our designee) oversee all advertising, promotion and marketing programs, with sole discretion over the creative concepts, materials and media used in the programs, and the geographic, market and media placement and allocation thereof. We do not warrant that any particular franchisee will benefit directly or pro rata from expenditures of the NMF Account. The NMF Account may be used to satisfy all costs of maintaining, administering, directing, preparing and producing marketing, promotion and advertising resources, including, but not limited to, the cost of preparing and producing television, radio, magazine and newspaper advertising campaigns; the cost of direct mail and outdoor billboard advertising; the cost of marketing and promotion activities, including advertising and marketing agencies; the cost of public relations activities, including advertising and public relations agencies; the cost of developing and maintaining an Internet website; the cost of providing promotional and/or other marketing materials to franchisees; and personnel and other departmental costs for advertising, promotion and marketing that we internally administer or prepare.
2. The NMF Account is accounted for separately from our other funds and is not used to defray any of our general operating expenses, except for the reasonable salaries, administrative costs and overhead that we may incur in activities reasonably related to the administration or direction of our marketing programs.
3. It is anticipated that NMF Account contributions will be expended for programs during the fiscal year in which the contributions to it are made. If excess amounts remain at the end of the fiscal year, all expenditures in the following fiscal year(s) will be made first out of the excess amounts, including any interest or other earnings on the NMF Account, and next out of current contributions. We may, in our sole discretion, spend in any fiscal year an amount greater or less than NMF Account contributions in that year, and we may lend money to cover any deficits.
4. Each company-owned Tropical Smoothie Café® store will contribute to the NMF Account at the same rate as franchised locations.
5. An accounting of the NMF Account will be prepared annually and will be made available to you upon request. We retain the right to have the collections and expenditures of the NMF Account audited, at the expense of the NMF Account, by an independent certified public accountant we select.
We assume no fiduciary duty in administering the NMF Account. We are under no obligation to ensure that expenditures of the NMF Account are or will be proportionate or equivalent to contributions of National Marketing Fees by Tropical Smoothie Café® stores operating in any geographic area or that any Tropical Smoothie Café® store will benefit directly or in proportion to the amount of National Marketing Fees it has paid. (Section 11.C. of the Franchise Agreement)
The National Marketing Fees are deposited in our operating account, but are accounted for separately in our financial statements. During its fiscal year ended December 31, 2011, TSFDC used all of the National Marketing Fees as follows: 22 QB\138221.00002\10107206.43 9/28/12
Item % Spent Production 66.47 Media Placement 1.85 Administrative Expenses 22.62 Other 9.06 Total 100.00 %
We do not currently have a franchisee advertising council.
Local Advertising Cooperative. You will be required to participate in a local advertising cooperative with other franchisees in your area and to pay 2% of Gross Sales each week into a fund to be used by the cooperative in accordance with mandatory administrative oversight by us in our sole discretion. We have contracted with an outside independent accounting firm to administer the funds in accordance with the direction of the cooperative members. Cooperatives will usually be based on practical geographic divisions like cities, counties and states, and we reserve the right to designate the geographic area for establishing each cooperative. Each cooperative will allow franchisee members to coordinate advertising and marketing efforts and programs, and to maximize the efficient use of local advertising media. No money may be spent, nor will any promotional or advertising plans or materials be used by a cooperative or its members without our prior written approval. (Section 11.D. of the Franchise Agreement)
We reserve the right to require cooperative members to adhere to governing documents that we develop. You may also be required to submit monthly financial statements for the cooperative. We will have the power to require a cooperative to be changed, dissolved or merged. Activities of the cooperative will generally be determined by its members, except that we reserve the right to exercise sole decision- making power over the cooperative funds if we determine, in our sole discretion, that the cooperative is not functioning properly either due to a lack of participation or an impasse among the members. Company-owned locations may participate in the cooperatives and, if they do so, they will be subject to the same fees and voting powers as franchisee members. (Section 11.D. of the Franchise Agreement.)
Internet Advertising. You must not establish, use, nor otherwise create, an internet website, web posting, or host location for your business, except as approved and authorized by us and appropriately linked or included within our own exclusive internet website, and you must not use nor permit the use of any internet website, web posting or host location except as specifically authorized by us in writing. (Section 11.B. of the Franchise Agreement.)
Training Program
TRAINING
Hours of Classroom Hours of On-the-Job Subject Training Training Location PHASE 1 – Approximately 90 Days Before Opening Marketing; Tropical Existing Tropical Smoothie Smoothie Café Culture; Café® store closest to the Safety & Sanitation; Menu location of your Franchised Review; Proper Uniform 8 Business Standards & Personal Hygiene; Smoothie Station; Soda Machine; Dining Area
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Hours of Classroom Hours of On-the-Job Subject Training Training Location Existing Tropical Smoothie Training Video; Equipment Café® store closest to the Review; Prep List; Food 8 location of your Franchised Vendors Business Prep List, Sandwich Line Existing Tropical Smoothie Café® store closest to the 8 location of your Franchised Business Prep List, Sysco Orders; Existing Tropical Smoothie Marketing Café® store closest to the 8 location of your Franchised Business Work Sandwich Station; Existing Tropical Smoothie Cleaning & Maintenance Café® store closest to the 8 location of your Franchised Business PHASE II – Approximately 60 Days Before Opening Our Corporate Headquarters Forecasting our Future 1 located in Atlanta, Georgia TSC Introduction; Face of the Our Corporate Headquarters Brand; Unparalleled located in Atlanta, Georgia Hospitality; Tropical Report; 8 Theft Prevention; Crew Training Program Our Corporate Headquarters Franconnect 1 located in Atlanta, Georgia Our Corporate Headquarters Construction 1 located in Atlanta, Georgia Tropical Report; One Perfect Our Corporate Headquarters Smoothie; Profitability; 6 located in Atlanta, Georgia Operational Excellence. Our Corporate Headquarters Distribution 1 located in Atlanta, Georgia Sysco Vendor Representative Our Corporate Headquarters to Discuss contract, pricing, located in Atlanta, Georgia o-line ordering, how to read 2 an invoice and answer questions. Payroll Vendor Our Corporate Headquarters Representative to share the located in Atlanta, Georgia benefits they have to offer to 1 franchisees, contract, payroll, HR, etc. Our Corporate Headquarters Accounting 2 located in Atlanta, Georgia Our Corporate Headquarters Micros 6 located in Atlanta, Georgia Our Corporate Headquarters Inventory (My Inventory) 5 located in Atlanta, Georgia Our Corporate Headquarters Marketing 5 located in Atlanta, Georgia Our Corporate Headquarters Human Resource 1 located in Atlanta, Georgia
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Hours of Classroom Hours of On-the-Job Subject Training Training Location PHASE III – Approximately 30 Days Before Opening Existing Tropical Smoothie Café® store closest the Scheduling and Stat Book 8 location of your Franchised Business Existing Tropical Smoothie Café® store closest the Inventory and Food Ordering 8 location of your Franchised Business Prep, POS System & Order Existing Tropical Smoothie Taking, BOH Cash Café® store closest the 8 Management location of your Franchised Business AM Prep, POS System & Existing Tropical Smoothie Order Taking, BOH Cash Café® store closest the 8 Management location of your Franchised Business Complete Break Even Existing Tropical Smoothie Analysis, comparing actual to Café® store closest the targeted numbers; Discuss location of your Franchised principal of contribution 8 Business margin ratio; Work Sandwich Station; BOH Cash Management NEW STORE OPENING When the store is ready to Your Franchised Business open a member of our corporate office and/or the 50 Area Developer will assist with opening the store. TOTALS 40 130
The time periods allocated to the subjects listed above are approximations, and the time actually spent by you and your personnel may vary based on the experience and performance of those persons being trained. The instructional materials used in the initial training program will consist primarily of our Manuals, marketing and promotional materials, videos and other handouts. Our training is conducted by the following employees. Their experience relating to the subjects taught and our operations are as follows:
Mike Rotondo has been our Chief Executive Officer since August 16, 2012, and was TSFDC's Chief Operating Officer since January 2011 and prior to that was our Vice President of Operations since February 2008. He has trained Tropical Smoothie Café® franchisees for at least 2 years. See Item 2 for additional information regarding his experience.
Troy Godbee has been a Regional Director of Franchise Operations since August 16, 2012 and prior to that was one of TSFDC’s Regional Directors of Franchise Operations since January 2006. He has trained TSFDC’s franchisees for at least 2 years. See Item 2 for additional information regarding his experience.
Cyndi Richardson has been our Vice President of Marketing since August 16, 2012, and prior to that was TSFDC’s Vice President of Marketing since January 2012. See Item 2 for additional information regarding her experience.
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Robin Willis has been our Director of Training since August 2012, and prior to that was TSFDC’s Director of Training since August 2011. See Item 2 for additional information regarding her experience.
Joseph C. Wasch has been our General Counsel since August 2012, and prior to that was TSFDC’s General Counsel since February 2008. See Item 2 for additional information regarding his experience.
Jose Rodriguez has been our Operation IT Director since August 2012. He worked for TSFDC since April 2003, and recently served as TSFDC’s Operation IT Director. Jose has trained TSFDC’s franchisees for at least 2 years. Previously he worked for the State of Florida Department of Health from April 1999 in Tallahassee, FL.
Winston Fletcher has been our Distribution Director since August 2012. He worked for TSFDC since January 2003 and recently served as TSFDC’s Distribution Director. He has trained TSFDC’s franchisees for at least 2 years. Previously he was a subfranchisor for Blimpie International, Inc.
Steve Taylor has been our Manager of IT Special Projects since August 2012, and prior to that was TSFDC’s Manager of IT Special Projects since April 2010. Previous to that, from July 2007 through June 2009, he was a graduate intern working for Harris Corporation in Melbourne, Florida.
The initial training is mandatory for you (or your Operating Principal) and your approved manager, and must be successfully completed within 15 days before opening the Franchised Business. Initial training is conducted in three separate phases, and typically involves 40 hours of in-store training (Phase I), followed by 40 hours of classroom training (Phase II), and then an additional 40 hours of in- store training (Phase III) completed before opening the Franchised Business. In-store training is conducted by our Area Developer (if any) who is responsible for the area where your Franchised Business is located or by an existing franchisee, at an existing store. There is no fee for initial training for you (or your Operating Principal) and your approved manager. Additional persons may attend initial training, with our consent, for a fee of $1,000 per person. In all cases, you are responsible for the travel and living expenses of any persons who attend initial or other training. You must sign and deliver to us the Training Acknowledgement Form (a copy of which is attached as Exhibit “H” to this Disclosure Document). (Section 4.A. of the Franchise Agreement)
We will (in our sole discretion) make available other ongoing continuing education and training programs, meetings or seminars (on an optional or mandatory basis), that we deem advisable. We may also host one or more conventions per calendar year, as well as conference telephone calls, which may include education and training. You and your designated employees must attend and successfully complete all ongoing continuing education and training programs, and must attend all meetings, seminars, conventions and conference telephone calls, as we may require. We provide and pay for instruction and training materials, but you are responsible for all other expenses, including travel, lodging and meals, incurred by you and your employees. (Section 4.A. of the Franchise Agreement).
Computer and Point-of-Sale Systems
You must, at your sole cost, purchase, use, maintain and update the point-of-sale system (“POS System”) and other computer systems that we specify for use in the operation of the Franchised Business,
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and must follow all policies and procedures that we specify in the Manuals or otherwise in writing. (Section 6.V. of the Franchise Agreement)
You must maintain the POS System and other computer systems in good working order at all times, and upgrade or update the computer hardware and software during the term of the Franchise Agreement, as we may require. You must enter into contracts for the maintenance, support, upgrades and updates to the POS System and other computer systems with approved suppliers described in the Manuals, and you must purchase any updated software upgrades for the POS System or other computer systems. (Section 6.V. of the Franchise Agreement)
The POS System and all other computer systems must be capable of connecting with our computer systems. To this end, you must maintain a high-speed Internet connection (including e-mail capabilities) and participate in our mandated management information system (the “MIS System”), which allows us to communicate with you, and poll and review the results of your Franchised Business’ operations, including (without limitation) sales data, consumer trends, food and labor costs, and other financial and marketing information. You must purchase the MIS System from Micros. We may distribute this data on a confidential basis to our network of franchisees. (Section 6.V. of the Franchise Agreement).
We estimate that the cost of the POS System will be approximately $14,000 to $22,000, depending on the size of your Tropical Smoothie Café® store and the number of terminals that you require. Micros (our designated software provider) provides one year of hardware and software technical support with the purchase of the POS System. Optional maintenance and support contracts can be obtained from Micros for an annual cost that ranges from approximately $1,500 to $3,600, depending on the system configuration. In addition, there is a $50 per month charge for My Micros, a web service that allows us to poll and review store level information online. During the term of the Franchise Agreement, we (or our designee) will provide you with limited programming support, including menu updates and promotions.
Except as described above (a) neither we, our affiliates, nor any third parties are required to provide ongoing maintenance, repairs, upgrades, or updates to your computer system; and (b) there are no optional or required maintenance/upgrade contracts for the point-of-sale or computer system.
You must install any other hardware or software for the operation of the Franchised Business that we may require in the future, including any enhancements, additions, substitutions, modifications, and upgrades. Specifically, we may require that you install and maintain systems that permit us to access and retrieve electronically any information stored in your computer systems, including information regarding your store’s Gross Sales, at the times and in the manner we specify. There is no contractual limitation on the frequency or cost of these obligations. We may also require you to license from us, or others we designate, any computer software we develop or acquire for use by Tropical Smoothie Café® stores.
Typical Length of Time Before You Open Your Franchised Business
The typical length of time between the signing of the Franchise Agreement and the opening of the Franchised Business is 6 to 12 months. Factors affecting this range include site acquisition, lease negotiation and construction timetable. You are responsible and the Franchised Business must be open for business within 12 months from the date of execution of the Franchise Agreement.
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ITEM 12. TERRITORY
You will not receive an exclusive territory. You may face competition from other franchisees, from outlets that we own, or from other channels of distribution or competitive brands that we control. You will operate the Franchised Business at a specific location that we approve. You may operate the Franchised Business only at the approved premises and may not relocate without our prior approval.
We do not grant you any exclusive or protected territory. We have the right to grant additional franchised businesses or establish company-owned units at any time and at any location, in our sole discretion, even at a location in close proximity to your Franchised Business. We may establish policies regarding your off-site marketing and promotion, and catering and delivery services, which will be set forth in the Manuals or otherwise in writing.
The location of your Franchised Business may be changed only with our prior written consent and upon the following conditions: (a) you are in good standing under your franchise agreement and current in your financial obligations to us and our affiliates; (b) you are good standing under the lease for the current location; (c) you provide us with a financial statement covering the previous 12 months; (d) you provide us with a copy of the proposed lease for the new location; (e) you comply with required site selection and construction procedures; (f) the new location is constructed, furnished and equipped in accordance with our then-current design specifications and standards; (g) you give us 90-days written notice of the proposed relocation; and (h) at our option, you enter into our then-current form of franchise agreement, including our then-current royalty rate, except that the term of the new franchise agreement will expire on the date of the prior franchise agreement and no new initial franchise fee will be required. The Franchised Business must be open at the new location within 30 days of the closing of the prior location, unless we consent to a 30-day extension.
If, through no fault of your own, you lose possession of the premises due to an event of force majeure, we will allow you to relocate the Franchised Business to another location, which we must approve within 60 days of the event of force majeure. You must reopen for business at the new location within 5 months after we approve the location, and we may charge you an agreed minimum royalty fee during the period in which the Franchised Business in not in operation.
We reserve the right to establish company-owned or franchisee-operated businesses that sell similar products and/or services under different trade names or trademarks other than the Proprietary Marks. We may also sell products or services under the Proprietary Marks, or any other marks, through any other retail outlets, and we may establish other channels of distribution providing the same or similar services under the same or a different trade name or trademark.
Our affiliate, Tin Drum, franchises a full-service restaurant concept specializing in fast-casual, Pan-Asian cuisine (see Item 1). Tin Drum restaurants will not feature smoothies and so are not "competitive restaurants." It will have a separate management team and will have separate training facilities. Tin Drum restaurants may be located within, and solicit and accept orders from, the same market area as Tropical Smoothie Café® stores. However, we do not believe these restaurants offer goods and services substantially similar to those offered by Tropical Smoothie Café® stores, since each restaurant concept has its own unique menu and business format, and because only Tropical Smoothie Café® stores feature smoothies. Therefore, we do not expect any conflicts to arise regarding territories or customers.
You have no right of first refusal or similar rights to acquire additional franchises or establish additional Tropical Smoothie Café® stores. If we grant you an additional franchise, you must enter into a separate Franchise Agreement with us.
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You may use the Internet to advertise only in compliance with the Franchise Agreement.
We do not generally grant options, rights of first refusal or similar rights to acquire additional franchises, as each franchise is awarded on a franchise-by-franchise basis. Accordingly, you may only acquire additional franchised Tropical Smoothie Café® stores from us if you meet our qualifications at the time you apply. And we may limit the number of Tropical Smoothie Café® stores owned by any franchise owner or its affiliates. You may only relocate your Tropical Smoothie Café® stores with our approval, both for the relocation and for the new site. We apply the same considerations for evaluating relocation of a Tropical Smoothie Café® stores and the leasing of the additional site as we do for Tropical Smoothie Café® stores and sites generally.
ITEM 13. TRADEMARKS
Pursuant to the terms of the Franchise Agreement, we grant you the right and license to operate a Franchised Business pursuant to the System and using the Proprietary Marks and related names and marks that may be developed in the future and used as part of the System. TSI assigned to TSFDC the trade name and trademark/service mark TROPICAL SMOOTHIE® on March 3, 2000, and in turn, TSFDC assigned all of its trademarks to us on August 16, 2012. We are the exclusive owner of the System and the Proprietary Marks, including the following principal marks, which are registered on the Principal Register of the United States Patent and Trademark Office (“USPTO”). We intend to renew the registrations and file all appropriate affidavits for the marks at the times required by law.
REGISTRATION TRADEMARK NUMBER REGISTRATION DATE TROPICAL SMOOTHIE 2,103,370 October 7, 1997 (renewed October 23, 2007)
TROPICAL SMOOTHIE CAFÉ AND DESIGN 2,763,722 September 16, 2003
TROPICAL SMOOTHIE CAFÉ 2,892,598 October 12, 2004
TROPICAL SMOOTHIE CAFÉ AND COLOR DESIGN 2,918,995 January 18, 2005
All required affidavits have been filed for the registered trademarks.
You must use all names and marks in full compliance with provisions of the Franchise Agreement and in accordance with the rules we periodically prescribe. You may not use any name or mark as a part of any corporate name or with any prefix, suffix or other modifying words, terms, designs or symbols (other than logos licensed by us to you). In addition, you may not use any name or mark for the sale of any unauthorized product or services, or in any other manner not explicitly authorized in writing by us.
There is no currently effective material determination of the USPTO, the Trademark Trial and Appeal Board, the trademark administrator of any state, or any court, and no pending infringement, opposition or cancellation proceeding or any pending material litigation involving the principal trademarks.
There are no agreements currently in effect which significantly limit our rights to use or license the use of the trademarks, service marks, trade names, logotypes or other commercial symbols in any manner material to the Franchised Business.
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If there is any infringement of, or challenge to, your use of any name, mark or symbol, you must immediately notify us, and we will have the sole discretion to take any action as we deem appropriate, in order to fulfill our obligation to preserve and protect the ownership, identity and validity of the Proprietary Marks. We are not obligated to protect your rights in the Proprietary Marks, nor are we obligated to indemnify you for losses associated with any infringement of, or challenge to, our rights in the Proprietary Marks. If it becomes advisable at any time, in our sole discretion, to modify or discontinue the use of any name or mark and/or use one or more additional or substitute names or marks, you must pay for the tangible costs (such as replacing signs and materials) associated with a change.
We are not obligated to participate in your defense and/or indemnify you for expenses or damages if you are party to an administrative or judicial proceeding involving the Proprietary Marks if the proceeding is resolved unfavorable to you.
You may not contest, directly or indirectly, our ownership, title, right or interest in any of our names or marks, trade secrets, methods, procedures, and advertising techniques which are part of the System, or contest our sole right to register, use or license others to use such names, marks, trade secrets, methods, procedures, or techniques.
We do not actually know of either superior or infringing uses that could materially affect your use of such trademarks, service marks, trade names, logotypes or other commercial symbols in this state or any state in which a Franchised Business is to be located.
ITEM 14. PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION
We do not own any patents that are material to the franchise. We do claim copyright protection and proprietary rights to the confidential information contained in our Manuals. The Manuals are described in Item 11. We claim common law copyrights on our operational materials and on other proprietary materials specifically created by us in connection with the System, including the proprietary advertisements, all of our materials presented to your prospective customers, printed materials, and forms used in connection with the operation of a Franchised Business. The Manuals and other proprietary materials have not been registered with any copyright office, but we reserve the right to register these copyrights in the future.
There currently are no effective determinations of the Copyright Office (Library of Congress) or any court regarding any of the copyrighted materials. Nor are there any agreements currently in effect that significantly limit our right to use or authorize franchisees to use the copyrighted materials. Furthermore, there are no infringing uses actually known to us that could materially affect a franchisee's use of the copyrighted materials in any state.
Item 11 describes limitations on the use of the Manuals by you and your employees. You must also promptly tell us when you learn about unauthorized use of this proprietary information. We are not obligated to take any action but will respond to this information as we deem appropriate. We will not indemnify you for losses brought by a third party concerning your use of this information. If you develop any new concept, process or improvement in the operation or promotion of your Franchised Business, you must promptly notify us and give us all necessary information about the new process or improvement, without compensation. You agree that any of these concepts, processes or improvements will become our property, and we may use or disclose them to other franchisees, as we deem appropriate.
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ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS
During the term of the Franchise Agreement, you (if you are a natural person) or your Operating Principal (if you are a corporation, limited liability company, partnership or other business entity (a “Business Entity”)) must devote full time and best efforts to the development and operation of the Franchised Business. Your Operating Principal must have and maintain at least 5% ownership of the Franchised Business and have full authority to bind you regarding all operational decisions about the Franchised Business. We must approve your Operating Principal, and you must designate a qualified replacement from among your owners if your Operating Principal can no longer fulfill its responsibilities under the Franchise Agreement.
The Franchised Business must be under the direct, on-site supervision of you (or your Operating Principal) or a manager who has been selected by you and approved by us. You (or your Operating Principal) and your approved manager must successfully complete our initial training program. You (or your Operating Principal) are not required to be directly involved in the day-to-day operations of the Franchised Business, although you (or your Operating Principal) must participate in the Franchised Business as follows:
a. You must submit an initial business plan for the Franchised Business before beginning operations and an annual business plan each year; you also must submit annual financial statements, including an income statement and balance sheet, prepared in accordance with generally accepted accounting principles, within 90 days of your fiscal year end, and a profit and loss statement within 10 days following the end of each month;
b. You must be directly responsible for all accounting, reporting and bookkeeping;
c. You (and your approved manager, if you will not be the on-site supervisor) must complete initial training and any ongoing or other training that we require;
d. You must attend any meeting of franchisees that is called by us or your Area Developer;
e. You must be directly involved with the site selection, construction, remodeling and all financial components of the Franchised Business; and
f. You and/or your approved manager (who is your employee) must be directly involved in all personnel decisions; and
g. You must comply with all of our requirements relating to the supervision of your Franchised Business by your Area Developer (if any), including inspections, reports and guidance. Area Developers are independent business persons and are not authorized to make promises or agreements on our behalf, or to agree to modifications to the Franchise Agreement, operating policies and procedures, or Corporate Policy Directives.
You must obtain covenants against the use and disclosure of any confidential information and covenants not to compete from your managers and any other employees or agents who have received or will have access to our training or Confidential Information. All of the required covenants must be in substantially the form of Nondisclosure and Noncompetition Agreement attached as Exhibit “J” to this Disclosure Document.
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If you are a Business Entity, each of your owners must individually, jointly and severally, guaranty your obligations under the Franchise Agreement and be personally bound by each term of the Franchise Agreement. Our current form of Owners’ Guaranty is attached as Exhibit “K” to this Disclosure Document.
Unless your spouse is an owner of the Franchised Business or an owner of the Business Entity that owns the Franchised Business, he or she will not be required to sign the Franchise Agreement or a personal guaranty.
ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
The Franchise Agreement provides that you must offer only the products and services that conform to our standards and specifications. (See Item 8) These are described in our Manuals and other writings, as they may be updated periodically. Unless you obtain our prior written approval, you are prohibited from (a) offering or selling products or services not authorized by us; (b) using the premises of the Franchised Business for any purpose not related to the Franchised Business; and (c) soliciting other franchisees either directly or indirectly for any other business or investment activity. You must prepare all menu items using the procedures for preparation contained in our Manuals or other written instructions, and the smoothies, specialty sandwiches, and gourmet wraps must be sold immediately after their preparation. You may not advertise, offer for sale, or sell any products that are damaged, deteriorated, or “out-of-date,” as provided in the Manuals or as specified on the product itself. All such inferior or nonconforming items must be withdrawn from sale and removed from the premises of the Franchised Business. We have the right to add or delete items, products, merchandise or services and you must do the same on notice from us. There are no limits in our right to do so.
There are no limitations imposed by us on the persons to whom you may provide products and services, except such as are imposed by the nature of the System itself, as described in the Franchise Agreement or the Manuals.
ITEM 17. RENEWAL, TERMINATION, TRANSFER & DISPUTE RESOLUTION
THE FRANCHISE RELATIONSHIP
This table lists certain important provisions of the franchise and related agreements. You should read these provisions in the agreements attached to this disclosure document.
Section In Franchise Provision Agreement Summary a. Length of the franchise term Section 2.A. Term is equal to 15 years. If the lease for the premises terminates sooner, we may, at our option, terminate the Franchise Agreement. We may require renovation of premises once every 5 years, beginning with date of opening (see Franchise Agreement, Section 5.L.). b. Renewal or extension of the term Section 2.B. If you are in good standing and satisfy certain conditions, you may renew for one additional 10 year term (or such lesser period as remains on the lease for the premises).
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Section In Franchise Provision Agreement Summary c. Requirements for franchisee to renew or Section 2.B. Your renewal right permits you to remain as a extend franchisee after the initial term of your Franchise Agreement expires. However, to remain a franchisee, you must meet all required conditions to renewal, including signing our then-current form of Franchise Agreement, which may be materially different than the form attached to this Disclosure Document. Other conditions are: Give us advance written notice, not be in default, satisfy all monetary obligations to us and suppliers, pass inspection, complete training, remodel and sign general release – there are no renewal fees. You must have the right to remain in possession of the premises for the duration of the renewal term. d. Termination by franchisee Section 15.G. If we terminate the Franchise Agreement for cause, or you terminate the Franchise Agreement without cause, we can recover an amount equal to the average of the prior twelve (12) months Royalty Fees (or shorter period if the Franchised Business has been in operation for less than twelve (12) months) multiplied by: (i) 18 or (ii) the number of months remaining in the term of the Franchise Agreement, whichever is less. e. Termination by franchisor without cause Not Applicable Not Applicable f. Termination by franchisor with cause Sections 14.A. and 14.B. We can terminate only if you default. g. “Cause” defined – curable defaults Section 14.B. You have 30 days to cure certain defaults listed within the section, such as failure to file reports or financial reports, failure to comply with standards and specifications, or failure to obtain required consents or approvals.
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Section In Franchise Provision Agreement Summary h. “Cause” defined – non-curable defaults Section 14.A. Non-curable defaults include: failure to pay amounts due within 10 days after notice; insolvency, bankruptcy, general assignment for the benefit of creditors, appointment of a receiver or custodian, or final judgment remains unsatisfied for 30 days or more; failure to locate an approved location or to open for business within the required time periods; abandonment of the franchise; loss of right to occupy the premises; failure to operate or maintain, or unapproved modification of the POS System or other required systems; understatement of Gross Sales by 2% or more; material misrepresentation or omissions; repeated excessive use of alcohol or drugs; failure to comply with applicable laws and license requirements; unauthorized use of any marks or disclosure of confidential information; operation of the Franchise Business as a health, safety or welfare hazard; conviction or plea of no contest or guilty to a felony or other serious crime or offense likely to adversely affect the Proprietary Marks or the System; judgment or consent decree entered against you or your owners involving fraud or unfair/deceptive trade practices; unauthorized transfers; failure to comply with restrictive covenants, including non-solicitation and non-competition; knowingly maintain false books or records; unlawful or deceptive trade practices; failure to comply with standards and specifications not cured within 10 days after notice; termination of another franchise agreement between you and us; repeated defaults, even if cured; engaging in illegal, immoral or unethical acts in violation of our mission and values; default under the lease or any other agreement and failure to cure such default within the applicable cure period, regardless of whether such agreement is terminated; unapproved relocation of the Franchised Business; violation of existing confidentiality or non-competition agreements with third parties upon entering into franchise agreement; failure to maintain a qualified Operating Principal; or blocking of your or your owners’ property or interests under Anti-Terrorism laws. i. Franchisee’s obligations on termination/ Section 15 Obligations include, among others: You must non-renewal cease operating the Franchised Business, cease using the Proprietary Marks and System, completely de-identify the business, pay all amounts due to us or our affiliates, return all Manuals and other proprietary materials, assign telephone numbers and listings to us, and comply with confidentiality requirements and post-term restrictive covenants.
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Section In Franchise Provision Agreement Summary j. Assignment of contract by franchisor Section 13.A. No restriction on our right to assign as long as the transferee or assignee assumes our obligations under the Franchise Agreement. k. “Transfer” by franchisee – defined Section 13.B.1. Includes transfer of any interest in the Franchise Agreement, Franchised Business (including the assets) or Franchisee. l. Franchisor approval of transfer by Section 13.B. We have the right to approve all transfers (even franchisee to a business entity controlled by you), but will not unreasonably withhold approval. m. Conditions for franchisor approval of Sections 13.B. and 13.C. You may transfer a non-controlling interest in transfer you to a qualified transferee, with our prior written consent. For transfer of the Franchise Agreement or a controlling interest in you, we may require, among other things, that you (a) pay all amounts due us or our affiliates; (b) not otherwise be in default, (c) sign a general release; and (d) pay a transfer fee. The proposed transferee must meet our criteria, assume all of your obligations, attend training, renovate or modernize the store and sign our then-current form of Franchise Agreement. n. Franchisor’s right of first refusal to Section 13.D. We can match any offer for sale of your acquire franchisee’s business business or any ownership interest in you. o. Franchisor’s option to purchase Section 15.K. We have the right to purchase any or all of the franchisee’s business tangible assets of the Franchised Business at your cost or fair market value, whichever is less, by written notice to you within 30 days after termination or expiration of the Franchise Agreement. p. Death or disability of franchisee Section 13.E. The interest must be assigned to an approved transferee within 6 months and is subject to the same conditions as an inter vivos transfer. q. Non-competition covenants during the Section 16.B. You and your owners may not: (a) divert any term of the franchise business or customer to a competitor, or do or perform any act injurious or prejudicial to the goodwill of the Proprietary Marks and System; (b) recruit or hire any person employed by us or our franchisees or area developers; or (c) have any involvement or interest in a competitive business.
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Section In Franchise Provision Agreement Summary r. Non-competition covenants after the Section 16.C. You and your owners may not, for 2 years after franchise is terminated or expires expiration or termination of the Franchise Agreement: (a) divert any business or customer to a competitor, or do or perform any act injurious or prejudicial to the goodwill of the Proprietary Marks and System; (b) recruit or hire any person employed by us or our franchisees or area developers; or (c) have any involvement or interest in a competitive business located within a 5-mile radius of the premises of the Franchised Business or the location of any company-owned or franchised location in existence on the date of termination or expiration of the Franchise Agreement. s. Modification of the Agreement Sections 24, 25.B. and 25.C. You must comply with the Manuals as amended. Franchise Agreement may not be modified unless mutually agreed to in writing, except we may reduce the scope of the covenants. t. Integration/merger clause Section 24 Only the terms of the Franchise Agreement and other related written agreements are binding (subject to applicable state law). No other representations or promises will be enforceable. Nothing in the Franchise Agreement or any related agreement is intended to disclaim our representations made in this Disclosure Document. u. Dispute resolution by arbitration or Section 26.A. Except for certain claims, all disputes must be mediation mediated at a mutually agreeable location, or at our headquarters. Before you take any legal or other action against us, whether for damages, injunctive, equitable or other relief (including rescission), upon any alleged act or omission of ours, you must first give us 90 days prior written notice and an opportunity to cure such alleged act or omission or otherwise resolve such matter (see Franchise Agreement, Section 26.B.) v. Choice of forum Section 26.D. Litigation in the state and federal courts with jurisdiction over the City of Atlanta, Georgia (subject to applicable state law). w. Choice of law Section 26.C. Georgia law applies (subject to applicable state law).
Please refer to the disclosure addenda and contractual amendments appended to this Disclosure Document for additional terms that may be required under applicable state law. These additional disclosures, if any, appear in an addendum or rider in Exhibit “L”. Please note, though, that if you would not otherwise be covered under those state laws by their own terms, then you will not be covered merely because we have given you an addendum that describes the provisions of those state laws.
ITEM 18. PUBLIC FIGURES
We currently do not use any public figures to promote our franchise. 36 QB\138221.00002\10107206.43 9/28/12
ITEM 19. FINANCIAL PERFORMANCE REPRESENTATIONS
The FTC’s Franchise Rule permits a franchisor to provide information about the actual or potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable basis for the information, and 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.
FINANCIAL PERFORMANCE REPRESENTATIONS: INDIVIDUAL UNIT TROPICAL SMOOTHIE CAFÉ FRANCHISES
The following tables provide historical sales information for Tropical Smoothie Café® franchised stores (“Stores”) that were open at least one full year as of: (a) the calendar year 2011 for 245 Stores; (b) the calendar year 2010 for 262 Stores; and (c) the calendar year 2009 for 233 Stores. The tables do not include any financial performance information for any other types of franchises, such as non-traditional locations (i.e. college campus or other captive locations) or seasonal locations, and do not include any franchises of any type that had not been open for at least one year on December 31, 2011, December 31, 2010 and December 31, 2009, respectively. The information presented is not a forecast of future potential performance. The gross revenue figures are based on the same computation for computing royalties as required under the Franchise Agreement.
The tables provide the average gross revenues for the following categories of Stores in 2011, 2010 and 2009 on a category and cumulative basis: (a) our top 10% revenue producing Stores (meaning the average gross revenue for the number of Stores that were in the top 10% of gross revenues for that year); (b) our top 25% revenue producing Stores (which includes the Stores that are in the top 10%); (c) our top 50% revenue producing Stores (which includes the Stores that are in the top 10% and the top 25%); and (d) our top 75% revenue producing Stores. We present the average gross sales for the year in that category as well as the number and percentage achieving or surpassing the average gross sales in that category alone and cumulative for all Stores. For example, 24 of the 62 Stores in the top 25% for 2010 (or 39%), and 113 of the 250 total Stores for 2010 (or 45%) achieved or surpassed that average.
Average Gross Revenues in 2011
Top 10% Top 25% Top 50% Top 75% Total No. of Stores 25 61 122 184 245 Avg. Gross Revenues $829,297 $710,319 $608,796 $540,516 $477,463 No. that Attained or Surpassed Stated Result 10/25 22/61 47/122 75/184 106/245 in Category(Cumulative) Percent that Attained or Surpassed Stated Result 40% 37% 39% 41% 43% in Category(Cumulative)
As of December 31, 2011, there were 301 franchised Stores and 4 company-owned Stores. Of the 301 franchised Stores, 261 were franchised Stores that had been open for at least 12 months as of December 31, 2011. Of the 261 Stores, 16 Stores were excluded since they were non-traditional locations. Of the 245 Stores referenced in the above table, all reported sufficient financial performance information to be included in this financial performance representation.
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Average Gross Revenues in 2010
Top 10% Top 25% Top 50% Top 75% Total No. of Stores 25 62 125 188 250 Avg. Gross Revenues $837,313 $712,346 $604,736 $529,639 $462,670 No. that Attained or Surpassed Stated Result 7/25 24/62 50/125 74/188 113/250 in Category(Cumulative) Percent that Attained or Surpassed Stated Result 28% 39% 40% 39% 45% in Category(Cumulative)
As of December 31, 2010, there were 289 franchised Stores and 2 company-owned Stores. Of the 289 franchised Stores, 262 were franchised Stores that had been open for at least 12 months as of December 31, 2010. Of the 262 Stores, 12 Stores were excluded since they were non-traditional locations. Of the 250 Stores referenced in the above table, all reported sufficient financial performance information to be included in this financial performance representation.
Average Gross Revenues in 2009
Top 10% Top 25% Top 50% Top 75% Total No. of Stores 23 59 117 175 233 Avg. Gross Revenues $752,752 $643,565 $545,822 $476,026 $415,026 No. that Attained or Surpassed Stated Result 7/23 26/59 45/117 74/175 105/233 in Category(Cumulative) Percent that Attained or Surpassed Stated Result 30% 44% 39% 42% 45% in Category(Cumulative)
As of December 31, 2009, there were 275 franchised Stores and 3 company-owned Stores. Of the 275 franchised Stores, 233 were franchised Stores that had been open for at least 12 months as of December 31, 2009. Of these 233 Stores, all reported sufficient financial performance information to be included in this financial performance representation.
As stated, the sales for each of the Stores presented are limited to the sales results for Stores that had been open for a full 12 months of operations as of December 31, 2011, December 31, 2010 and December 31, 2009, respectively. Sales during the first year of operations are likely to be significantly less than for those that have been open for a year or more.
All Tropical Smoothie Café® Stores offer substantially the same products and services to the public. None of the franchised Tropical Smoothie Café® Stores received any services not generally available to other franchisees and substantially the same services will be offered to new franchisees.
We obtained these historical financial results from the information submitted by our franchisees. Neither we nor an independent certified public accountant has independently audited or verified the information. Some Stores have sold the amounts shown in the tables. Your individual results may differ. There is no assurance you will sell as much.
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YOUR INDIVIDUAL FINANCIAL RESULTS MAY DIFFER SUBSTANTIALLY FROM THE RESULTS DISCLOSED IN THIS ITEM 19.
The foregoing data relates to revenues only; we are not presenting any information on the costs and expenses of operating a Store. Operating a Store incurs a wide variety of expenses that will reduce the Store’s income from the revenue levels shown. Examples of the types of these expenses include, without limitation, rent and occupancy expenses; food and beverage product and supply costs; salaries, wages and other personnel-related expenses; federal, state and local taxes and fees; utilities; financing costs (including on loans and leases); royalties and other amounts due us. See also Items 5, 6 and 7.
CHARACTERISTICS OF THE INCLUDED FRANCHISED STORES MAY DIFFER SUBSTANTIALLY FROM YOUR STORE DEPENDING ON YOUR PREVIOUS BUSINESS AND MANAGEMENT EXPERIENCE, COMPETITION IN YOUR AREA, LENGTH OF TIME THAT THE INCLUDED STORES HAVE OPERATED COMPARED TO YOUR STORE, AND THE SERVICES OR GOODS SOLD AT YOUR STORE COMPARED TO THE INCLUDED STORES. THE SALES, PROFITS AND EARNINGS OF AN INDIVIDUAL FRANCHISEE MAY VARY GREATLY DEPENDING ON THESE AND A WIDE VARIETY OF OTHER FACTORS, INCLUDING THE LOCATION OF THE STORE, POPULATION AND DEMOGRAPHICS IN YOUR MARKET AREA, ECONOMIC AND MARKET CONDITIONS, LABOR AND PRODUCT COSTS, ETC.
WE HAVE WRITTEN SUBSTANTIATION IN OUR POSSESSION TO SUPPORT THE INFORMATION APPEARING IN THIS FINANCIAL PERFORMANCE REPRESENTATION. WRITTEN SUBSTANTIATION WILL BE MADE AVAILABLE TO YOU ON REASONABLE REQUEST.
We recommend that you make your own independent investigation to determine whether or not the franchise may be profitable, and consult with an attorney and other advisors prior to executing the franchise agreement.
Other than the preceding financial performance representation, we do not make any financial performance representations about a franchisee's future financial performance or the past financial performance of company-owned or franchised outlets. We also do not authorize our employees or representatives to make any such representations either orally or in writing. If you are purchasing an existing outlet, however, we may provide you with the actual records of that outlet. If you receive any other financial performance information or projections of your future income, you should report it to our management by contacting Mike Rotondo, our CEO at 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328 and 770-821-1900, the Federal Trade Commission, and the appropriate state regulatory agencies.
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ITEM 20. OUTLETS AND FRANCHISEE INFORMATION
Table No. 1 Systemwide Outlet Summary For Years Ending December 31, 2009, 2010 and 2011
Outlets at the Start of Outlets at the End of Outlet Type Year Net Change the Year the Year
Franchised 2009 262 275 +13 2010 275 289 +14 2011 289 301 +12 Company- Owned (1) 2009 4 3 -1 2010 3 2 -1 2011 2 4 +2 Total Outlets 2009 266 278 +12 2010 278 291 +13 2011 291 305 +14 NOTES:
(1) The "company-owned" stores were owned and operated by TSFDC's wholly-owned subsidiaries and were sold on March 30, 2012 and July 10, 2012, respectively. See Item 1. We do not own or operate any Tropical Smoothie Café® stores.
Table No. 2 Transfers of Outlets from Franchisees to New Owners (other than the Franchisor) For Years Ending December 31, 2009, 2010 and 2011
State Year Number of Transfers 2009 0 Alabama 2010 0 2011 1 2009 0 Alaska 2010 0 2011 0 2009 2 Arizona 2010 3 2011 0 2009 3 Arkansas 2010 0 2011 0 2009 0 California 2010 1 2011 0 2009 0 Colorado 2010 0 2011 0 2009 0 Connecticut 2010 0 2011 0 2009 0 Delaware 2010 0 2011 0 2009 0 District of Columbia 2010 0 2011 0
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State Year Number of Transfers 2009 7 Florida 2010 7 2011 6 2009 0 Georgia 2010 0 2011 0 2009 0 Hawaii 2010 0 2011 0 2009 0 Idaho 2010 0 2011 0 2009 0 Illinois 2010 0 2011 0 2009 0 Indiana 2010 0 2011 0 2009 1 Iowa 2010 0 2011 0 2009 0 Kansas 2010 0 2011 0 2009 0 Kentucky 2010 0 2011 0 2009 0 Louisiana 2010 0 2011 0 2009 0 Maine 2010 0 2011 0 2009 0 Maryland 2010 0 2011 0 2009 0 Massachusetts 2010 0 2011 0 2009 2 Michigan 2010 2 2011 2 2009 0 Minnesota 2010 0 2011 0 2009 0 Mississippi 2010 0 2011 0 2009 1 Missouri 2010 0 2011 0 2009 0 Montana 2010 0 2011 0 2009 0 Nebraska 2010 0 2011 0
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State Year Number of Transfers 2009 4 Nevada 2010 2 2011 5 2009 0 New Hampshire 2010 0 2011 0 2009 0 New Jersey 2010 0 2011 0 2009 0 New Mexico 2010 0 2011 0 2009 0 New York 2010 0 2011 1 2009 0 North Carolina 2010 2 2011 0 2009 0 North Dakota 2010 0 2011 0 2009 0 Ohio 2010 1 2011 0 2009 0 Oklahoma 2010 0 2011 0 2009 0 Oregon 2010 0 2011 0 2009 0 Pennsylvania 2010 0 2011 0 2009 0 Rhode Island 2010 0 2011 0 2009 0 South Carolina 2010 0 2011 0 2009 0 South Dakota 2010 0 2011 0 2009 0 Tennessee 2010 0 2011 0 2009 0 Texas 2010 0 2011 0 2009 0 Utah 2010 0 2011 0 2009 0 Vermont 2010 0 2011 0 2009 8 Virginia 2010 10 2011 6
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State Year Number of Transfers 2009 0 Washington 2010 0 2011 0 2009 0 West Virginia 2010 0 2011 0 2009 0 Wisconsin 2010 2 2011 0 2009 0 Wyoming 2010 0 2011 0 2009 28 Total 2010 30 2011 21
Table No. 3 Status of Franchised Outlets For Years Ending December 31, 2009, 2010 and 2011
Ceased Outlets Outlets at Reacquired Outlets Non- Operations at End State Year the Start Terminations by Opened Renewals - Other of the of Year Franchisor Reasons Year 2009 4 2 1 0 0 0 5 Alabama 2010 5 1 0 0 0 0 6 2011 6 2 0 0 0 0 8 2009 0 0 0 0 0 0 0 Alaska 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 6 1 2 0 1 0 4 Arizona 2010 4 2 2 0 0 0 4 2011 4 0 0 0 1 0 3 2009 8 1 1 0 0 0 8 Arkansas 2010 8 2 1 0 0 0 9 2011 9 3 0 0 0 0 12 2009 4 0 1 0 0 0 3 California 2010 3 0 0 0 0 0 3 2011 3 0 2 0 0 0 1 2009 0 0 0 0 0 0 0 Colorado 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 0 0 0 0 0 0 0 Connecticut 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 0 0 0 0 0 0 0 Delaware 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 0 0 0 0 0 0 0 District of 2010 0 0 0 0 0 0 0 Columbia 2011 0 0 0 0 0 0 0 2009 93 9 3 0 0 0 99 Florida 2010 99 7 3 0 0 0 103 2011 103 4 1 0 1 0 105 2009 5 0 2 0 0 0 3 Georgia 2010 3 0 0 0 0 0 3 2011 3 0 0 0 0 0 3
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Ceased Outlets Outlets at Reacquired Outlets Non- Operations at End State Year the Start Terminations by Opened Renewals - Other of the of Year Franchisor Reasons Year 2009 1 0 0 0 0 0 1 Hawaii 2010 1 0 0 0 0 0 1 2011 1 0 0 0 0 0 1 2009 0 0 0 0 0 0 0 Idaho 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 1 0 0 0 0 0 1 Illinois 2010 1 1 0 0 0 0 2 2011 2 3 0 0 0 0 5 2009 1 0 0 0 0 0 1 Indiana 2010 1 0 0 0 0 0 1 2011 1 0 0 0 0 0 1 2009 1 0 0 0 0 0 1 Iowa 2010 1 1 0 0 0 0 2 2011 2 0 0 0 0 0 2 2009 0 0 0 0 0 0 0 Kansas 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 1 0 0 0 0 0 1 Kentucky 2010 1 0 0 0 0 0 1 2011 1 0 0 0 0 0 1 2009 4 0 0 0 0 0 4 Louisiana 2010 4 1 1 0 0 0 4 2011 4 0 2 0 0 0 2 2009 0 0 0 0 0 0 0 Maine 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 0 0 0 0 0 0 0 Maryland 2010 0 1 0 0 0 0 1 2011 1 1 0 0 0 0 2 2009 0 1 0 0 0 0 1 Massachusetts 2010 1 0 0 0 0 0 1 2011 1 0 0 0 0 0 1 2009 10 0 0 0 0 0 10 Michigan 2010 10 2 0 0 0 0 12 2011 12 0 0 0 0 0 12 2009 1 0 0 0 0 0 1 Minnesota 2010 1 0 0 0 0 0 1 2011 1 0 0 0 0 0 1 2009 1 0 0 0 0 0 1 Mississippi 2010 1 0 0 0 0 0 1 2011 1 1 0 0 0 0 2 2009 1 1 1 0 0 0 1 Missouri 2010 1 0 0 0 0 0 1 2011 1 0 0 0 0 0 1 2009 1 0 0 0 0 0 1 Montana 2010 1 0 0 0 0 0 1 2011 1 0 0 0 0 0 1 2009 1 0 0 0 0 0 1 Nebraska 2010 1 0 0 0 0 0 1 2011 1 0 0 0 0 0 1 2009 19 2 0 0 0 0 21 Nevada 2010 21 0 1 0 0 0 20 2011 20 0 2 0 0 0 18
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Ceased Outlets Outlets at Reacquired Outlets Non- Operations at End State Year the Start Terminations by Opened Renewals - Other of the of Year Franchisor Reasons Year 2009 0 0 0 0 0 0 0 New 2010 0 0 0 0 0 0 0 Hampshire 2011 0 1 0 0 0 0 1 2009 1 0 1 0 0 0 0 New Jersey 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 0 0 0 0 0 0 0 New Mexico 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 3 1 0 0 0 0 4 New York 2010 4 0 0 0 0 0 4 2011 4 4 0 0 0 0 8 2009 8 0 2 0 0 0 6 North Carolina 2010 6 1 2 0 0 0 5 2011 5 0 0 0 0 0 5 2009 0 0 0 0 0 0 0 North Dakota 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 7 0 0 0 0 0 7 Ohio 2010 7 0 0 0 0 0 7 2011 7 3 1 0 0 0 9 2009 0 0 0 0 0 0 0 Oklahoma 2010 0 0 0 0 0 0 0 2011 0 1 0 0 0 0 1 2009 1 0 0 0 0 0 1 Oregon 2010 1 0 0 0 0 0 1 2011 1 0 0 0 0 0 1 2009 2 1 0 0 0 0 3 Pennsylvania 2010 3 0 0 0 0 0 3 2011 3 0 0 0 0 0 3 2009 0 0 0 0 0 0 0 Rhode Island 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 2 0 0 0 0 0 2 South Carolina 2010 2 0 0 0 0 0 2 2011 2 0 1 0 0 0 1 2009 0 0 0 0 0 0 0 South Dakota 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 9 0 0 0 0 0 9 Tennessee 2010 9 0 1 0 0 0 8 2011 8 0 2 0 0 0 6 2009 2 1 0 0 0 0 3 Texas 2010 3 0 0 0 0 0 3 2011 3 0 0 0 0 0 3 2009 0 0 0 0 0 0 0 Utah 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 0 0 0 0 0 0 0 Vermont 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 61 8 0 0 0 0 69 Virginia 2010 69 5 0 0 0 0 74 2011 74 2 0 0 0 0 76
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Ceased Outlets Outlets at Reacquired Outlets Non- Operations at End State Year the Start Terminations by Opened Renewals - Other of the of Year Franchisor Reasons Year 2009 1 0 0 0 0 0 1 Washington 2010 1 0 0 0 0 0 1 2011 1 0 0 0 0 0 1 2009 0 0 0 0 0 0 0 West Virginia 2010 0 1 0 0 0 0 1 2011 1 0 0 0 0 0 1 2009 2 0 0 0 0 0 2 Wisconsin 2010 2 0 0 0 0 0 2 2011 2 0 0 0 0 0 2 2009 0 0 0 0 0 0 0 Wyoming 2010 0 0 0 0 0 0 0 2011 0 0 0 0 0 0 0 2009 262 27 13 0 1 0 275 Totals US 2010 275 25 11 0 0 0 289 2011 289 25 11 0 2 0 301
Table No. 4 Status of Company-Owned Outlets For Years Ending December 31, 2009, 2010 and 2011
Outlets Outlets Outlets at Outlets Reacquired Outlets Outlets Sold State Year at Start End of Opened From Closed to Franchisee of Year Year Franchisee 2009 2 0 1 1 0 2 Arizona (1) 2010 2 1 0 0 2 1 2011 1 0 1 0 0 2 2009 1 0 0 0 0 1 Florida (2) 2010 1 0 0 0 0 1 2011 1 0 1 0 0 2 2009 1 1 0 0 1 0 Missouri (3) 2010 0 0 0 0 0 0 2011 0 0 0 0 0 0 2009 4 0 1 1 1 3 Totals 2010 3 1 0 0 2 2 2011 2 0 2 0 0 4
(1) The two "company-owned” stores operating in Arizona at December 31, 2011 were owned and operated by Café Management, LLC, TSFDC's wholly-owned subsidiary. It closed one of these stores in January 2012, and sold the store in Goodyear, Arizona on July 10, 2012. We do not own or operate any Tropical Smoothie Café® stores.
(2) The "company-owned” store located in Destin, Florida was owned and operated by Tropical Smoothie Café, LLC, a Florida limited liability company wholly-owned by TSFDC. This location was sold to an existing franchisee in April 2012. The other "company-owned" store, located in Jupiter, Florida, is owned and operated by Café Mangement, Inc., TSFDC's wholly- owned subsidiary. In January 2012, Café Management acquired a second location in Palm Beach Gardens, Florida. Both the Jupiter and Palm Beach Gardens stores were sold to a franchisee in March 2012. We do not own or operate any Tropical Smoothie Café® stores.
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(3) The single “company-owned” store in Missouri in 2009 was owned and operated by Café Management, Inc., TSFDC's wholly-owned subsidiary. That store was sold to a franchisee in 2009. We do not own or operate any Tropical Smoothie Cafe Stores.
Table No. 5 Projected Openings as of December 31, 2011
Franchise Agreements Projected New Franchised Projected New Company- State Signed But Outlet Not Outlet In the Next Fiscal Owned Outlet In the Next Opened Year (2012) Fiscal Year (2012)
Alabama 2 1 0 Alaska 0 0 0 Arizona 6 0 0 Arkansas 3 3 0 California 2 0 0 Colorado 0 0 0 Connecticut 0 0 0 Delaware 0 0 0 District of Columbia 0 0 0 Florida 27 6 0 Georgia 1 0 0 Hawaii 0 0 0 Idaho 0 0 0 Illinois 0 0 0 Indiana 0 0 0 Iowa 0 0 0 Kansas 0 0 0 Kentucky 2 0 0 Louisiana 1 1 0 Maine 0 0 0 Maryland 3 0 0 Massachusetts 0 0 0 Michigan 7 6 0 Minnesota 0 0 0 Mississippi 0 0 0 Missouri 0 0 0 Montana 0 0 0 Nebraska 0 0 0 Nevada 7 2 0 New Hampshire 0 0 0 New Jersey 0 1 0 New Mexico 0 0 0 New York 5 4 0 North Carolina 4 4 0 North Dakota 0 1 0 Ohio 3 1 0 Oklahoma 1 3 0 Oregon 0 0 0 Pennsylvania 0 0 0 Rhode Island 0 0 0 South Carolina 2 1 0 South Dakota 0 0 0 Tennessee 11 0 0 Texas 0 1 0 Utah 0 0 0 Vermont 0 0 0 Virginia 13 4 0 47 QB\138221.00002\10107206.43 9/28/12
Franchise Agreements Projected New Franchised Projected New Company- State Signed But Outlet Not Outlet In the Next Fiscal Owned Outlet In the Next Opened Year (2012) Fiscal Year (2012)
Washington 0 0 0 West Virginia 0 0 0 Wisconsin 1 1 0 Wyoming 0 0 0 Totals 101 40 0
Exhibit “M” attached to this Disclosure Document lists the names of all current franchisees with their business address and business telephone number as of December 31, 2011.
The name, city, state, and current business telephone number (or, if unknown, the last known home telephone number) of 44 franchisees who had an outlet terminated, cancelled, not renewed, or otherwise voluntarily or involuntarily ceased to do business under the Franchise Agreement during the most recently completed fiscal year, or has not communicated with us within 10 weeks of the issuance date of this Disclosure Document, are listed on Exhibit “M.”
If you buy this franchise, your contact information may be disclosed to other buyers when you leave the franchise system.
As of the date of this Disclosure Document, we are not offering any existing franchised outlets to prospective franchisees, including those that either have been reacquired by us or are still being operated by current franchisees pending a transfer. If we begin to offer any such outlet, specific information about the outlet will be provided to you in a separate supplement to this Disclosure Document.
We have no current or former franchisees who have signed provisions during the last 3 fiscal years restricting their ability to speak openly to you about their experience with the Tropical Smoothie Café® franchise system.
As of the date of this Disclosure Document, there are no franchisee organizations sponsored or endorsed by us and no independent franchisee organizations have asked to be included in this Disclosure Document.
ITEM 21. FINANCIAL STATEMENTS
Audited financial statements of our affiliate, TSFDC, for the years ended December 31, 2011, December 31, 2010 and December 31, 2009, and its unaudited financial statements for the period ending July 31, 2012, are attached as Exhibit “N” to this Disclosure Document. See Item 1.
TSFDC has guaranteed our performance with you. A copy of the Guaranty of Performance is included as Exhibit "O."
ITEM 22. CONTRACTS
Copies of the following forms, contracts and/or agreements are attached as exhibits to this Disclosure Document:
Exhibit B Franchise Agreement (with attachments) Exhibit D Pre-Authorized Bank Form Exhibit E Exclusive Real Estate Services Representation Agreement 48 QB\138221.00002\10107206.43 9/28/12
Exhibit F Addendum to Lease Agreement/Conditional Assignment of Lease Exhibit G Conditional Assignment of Telephone Numbers and Listings Exhibit H Franchisee Training Acknowledgement Form Exhibit J Nondisclosure and Noncompetition Agreement Exhibit K Owners’ Guaranty Exhibit P Assignment and Assumption of Franchise Agreement Exhibit Q Franchisee Disclosure Questionnaire
ITEM 23. RECEIPTS
You will find 2 copies of a detachable Receipt in Exhibit “R” at the end of the Disclosure Document. One Receipt must be signed, dated and delivered to us. The other Receipt should be retained for your records.
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EXHIBIT A TO THE DISCLOSURE DOCUMENT
STATE AGENCIES AND ADMINISTRATORS/AGENTS FOR SERVICE OF PROCESS
If a state is not listed, we have not appointed an agent for service of process in that state in connection with the requirements of the franchise laws. There may be states in addition to those listed below in which we have appointed an agent for service of process. There also may be additional agents appointed in some of the states listed below.
Our registered agent in the State of Georgia is:
Christy Johnson 3575 Piedmont Road Building 15, Suite 730 Atlanta, Georgia 30305
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AGENT TO RECEIVE PROCESS IN STATE STATE REGULATORY AGENCY STATE, IF DIFFERENT THAN THE STATE REGULATORY AGENCY Department of Corporations Los Angeles 320 West 4th Street Suite 750 Los Angeles, CA 90013-2344 (213) 576-7500 Sacramento 1515 K Street Suite 200 California Sacramento, CA 95814-4052
(916) 445-7205 San Diego 1350 Front Street, Room 2034 San Diego, CA 92101-3697 (619) 525-4233 San Francisco 71 Stevenson Street Suite 2100 San Francisco, CA 94105-2180 (415) 972-8559 Department of Commerce and Commissioner of Securities Consumer Affairs Department of Commerce and Business Registration Division Consumer Affairs Hawaii Commissioner of Securities Business Registration Division
P.O. Box 40 Securities Compliance Branch Honolulu, Hawaii 96810 335 Merchant Street, Room 203 (808) 586-2744 Honolulu, Hawaii 96813 Franchise Bureau Office of Attorney General Illinois 500 South Second Street
Springfield, IL 62706 (217) 782-4465 Franchise Section Indiana Securities Division Secretary of State Indiana Room E-111
302 W. Washington Street Indianapolis, Indiana 46204 (317) 232-6681 Maryland Division of Securities Maryland Commissioner of Maryland 200 St. Paul Place Securities Baltimore, MD 21202-2020 200 St. Paul Place (410) 576-7042 Baltimore, Maryland 21202-2020
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AGENT TO RECEIVE PROCESS IN STATE STATE REGULATORY AGENCY STATE, IF DIFFERENT THAN THE STATE REGULATORY AGENCY Michigan Attorney General's Office Consumer Protection Division Michigan Attn: Franchise Section
525 W. Ottawa Street Williams Building, 1st Floor Lansing, MI 48933 (517) 373-7117 Minnesota Department of Commerce Minnesota Market Assurance Division
85 7th Place East, Suite 500 St. Paul, Minnesota 55101-2198 (651) 296-6328 New York State Department of Law Secretary of State Bureau of Investor Protection The Division of Corporations New York and Securities One Commerce Plaza
120 Broadway, 23rd Floor 99 Washington Avenue New York, NY 10271 Albany, NY 12231-0001 (212) 416-8211 Office of Securities Commissioner North Dakota Fifth Floor
600 East Boulevard Bismarck, ND 58505-0510 (701) 328-4712 Department of Consumer & Business Services Division of Finance and Oregon Corporate Securities
Labor and Industries Building Salem, Oregon 97310 (503) 378-4140 Department of Business Regulation Securities Division Rhode Island 1511 Pontiac Avenue
John O. Pastore Complex–69-1 Cranston, RI 02920-4407 (401) 462-9527 Division of Securities South Dakota 445 East Capitol Avenue
Pierre, SD 57501-3185 (605) 773-4823
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AGENT TO RECEIVE PROCESS IN STATE STATE REGULATORY AGENCY STATE, IF DIFFERENT THAN THE STATE REGULATORY AGENCY State Corporation Commission Clerk 1300 East Main Street Virginia State Corporation Commission 9th Floor 1300 East Main Street, 1st Floor Richmond, VA 23219 Richmond, VA 23219 (804) 371-9051 Department of Financial Institutions Washington Securities Division
P.O. Box 9033 Olympia, WA 98507-9033 (360) 902-8760 Division of Securities Department of Financial Wisconsin Institutions
Post Office Box 1768 Madison, Wisconsin 53701 (608) 266-2801
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EXHIBIT B TO THE DISCLOSURE DOCUMENT
FORM OF FRANCHISE AGREEMENT
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TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
QB\138221.00002\10107296.13 9/4/12 TABLE OF CONTENTS
Section Page
1. GRANT OF FRANCHISE ...... 2 A. Grant ...... 2 B. Relocation ...... 2 C. Designated Site; No Exclusive Territory ...... 3 D. Approved Location Not Determined ...... 3 E. Reservation of Certain Rights ...... 3 2. TERM AND RENEWAL ...... 4 A. Initial Term ...... 4 B. Renewal Term ...... 4 3. YOUR REPRESENTATIONS, WARRANTIES AND COVENANTS ...... 5 A. Your Investigation of this Franchise ...... 5 B. Your Organization...... 6 C. Legal Compliance ...... 7 D. Anti-Terrorism Activities ...... 7 E. Continuing Obligations ...... 8 4. DUTIES OF FRANCHISOR ...... 8 A. Pre-Opening Obligations ...... 8 B. Post-Opening Obligations ...... 9 C. Delegation of Performance ...... 10 5. FEES ...... 10 A. Initial Franchise Fee ...... 10 B. Royalty Fees ...... 10 C. MIS Fees ...... 10 D. National Marketing Fees ...... 10 E. Local Advertising Cooperative Contribution ...... 11 F. Grand Opening Program ...... 11 G. Late Fees ...... 11 H. Default Fees ...... 11 I. Payment Procedures ...... 12 J. Definition of Gross Sales ...... 12 K. Application of Payments ...... 12 L. Payment Offsets ...... 12 6. YOUR DUTIES ...... 12 A. Compliance with System ...... 12 B. Site Approval ...... 12 C. Construction and Finish Out ...... 13 D. Opening Date ...... 13 E. Initial Training ...... 14 F. Supervision Requirements ...... 14 G. Ongoing Training ...... 14 H. Operation of the Franchised Business ...... 15 I. Maintenance ...... 15 J. Health and Safety Standards ...... 15 K. Working Capital ...... 15 L. Design Modifications ...... 15 M. Compliance with Uniform Standards ...... 15 N. Modification of the System ...... 16 O. Variance ...... 16 P. Designated and Approved Products and Suppliers ...... 17 Q. Market Research ...... 17 R. Inspection of Premises ...... 18 S. Proprietary Methods ...... 18 T. Development of the Market ...... 18 U. Display of Proprietary Marks and Logos ...... 18 V. Computerized Point-of-Sale System ...... 19
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Section Page
W. Supplemental Marketing Programs ...... 19 X. Other Requirements ...... 19 7. PROPRIETARY MARKS ...... 20 A. Grant of License ...... 20 B. Conditions for Use ...... 20 C. Acknowledgements ...... 21 8. CONFIDENTIAL MANUALS ...... 22 A. Compliance ...... 22 B. Use ...... 22 C. Confidentiality ...... 22 D. Access ...... 22 E. Duplication ...... 22 F. Our Property ...... 22 G. Updates or Revisions ...... 22 H. Master Set ...... 22 9. CONFIDENTIAL INFORMATION ...... 23 A. Types of Confidential Information ...... 23 B. Confidential Relationship ...... 23 C. Confidentiality Obligations ...... 24 D. Exceptions to Confidentiality ...... 24 E. Remedies ...... 24 F. Communication with Customers ...... 25 10. ACCOUNTING, INSPECTIONS AND RECORDS ...... 25 A. Maintenance of Books and Records ...... 25 B. Weekly Reports ...... 25 C. Financial and Related Reporting ...... 25 D. Other Submissions ...... 25 E. Inspection ...... 26 11. ADVERTISING ...... 26 A. Submission and Approval of Promotional and Marketing Materials ...... 26 B. Internet Advertising/Sales ...... 26 C. Regional/National Advertising Program ...... 27 D. Local Advertising Cooperative Contribution ...... 28 12. INSURANCE ...... 28 A. Procurement ...... 28 B. Minimum Coverage ...... 28 C. Construction Coverage ...... 29 D. Certificates ...... 29 E. Independence of Coverage Requirements ...... 29 F. Failure to Procure ...... 29 G. Third Parties ...... 29 H. Proceeds ...... 30 13. TRANSFER OF INTEREST; OPERATION BY FRANCHISOR ...... 30 A. Transfer by Us ...... 30 B. Transfer by You and Your Owners...... 30 C. Transfer for Convenience of Ownership ...... 32 D. Our Right of First Refusal...... 33 E. Transfer Upon Death or Mental Incapacity ...... 34 F. Effect of Consent to Transfer ...... 34 G. Operation of the Franchised Business by Us ...... 34 14. DEFAULT AND TERMINATION ...... 34 A. Default With No Opportunity To Cure ...... 34 B. Default With Thirty (30) Day Opportunity To Cure ...... 37 C. No Right or Remedy ...... 38 D. Default and Termination ...... 38
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Section Page
E. Right to Purchase ...... 38 15. OBLIGATIONS UPON TERMINATION ...... 38 A. Cessation of Operation ...... 38 B. Cessation of Use of Proprietary Marks ...... 38 C. Cancellation of Name ...... 38 D. Optional Assignment of Lease ...... 39 E. Our Right to Continue Operations ...... 39 F. Non-Usage of Marks ...... 39 G. Prompt Payment Upon Default ...... 39 H. Payment of Costs ...... 40 I. Return of Materials ...... 40 J. Assignment of Telephone Listings ...... 40 K. Option to Purchase ...... 40 L. Covenant of Further Assurances ...... 41 M. Compliance with Covenants ...... 41 N. No Further Interest ...... 41 16. COVENANTS ...... 41 A. Best Efforts ...... 41 B. In-Term Restrictive Covenants ...... 41 C. Post-Term Restrictive Covenants ...... 42 D. No Undue Hardship ...... 42 E. Inapplicability of Restrictions ...... 42 F. Independence of Covenants ...... 43 G. Mission ...... 43 H. Modification of Covenants ...... 43 I. Enforcement of Covenants ...... 43 J. Injunctive Relief ...... 43 K. Execution of Covenants by Management ...... 43 L. Non-solicitation ...... 43 17. CHANGES AND MODIFICATIONS ...... 44 18. TAXES AND INDEBTEDNESS ...... 44 A. Payment ...... 44 B. Dispute ...... 44 C. Compliance with Federal, State and Local Laws ...... 44 D. Duty to Notify ...... 44 19. INDEPENDENT CONTRACTOR AND INDEMNIFICATION ...... 45 A. Independent Contractor...... 45 B. No Liability ...... 45 C. No False Representations ...... 46 20. APPROVALS AND WAIVERS ...... 46 A. Written Consent ...... 46 B. No Waiver ...... 46 21. NOTICES ...... 46 22. RELEASE OF PRIOR CLAIMS ...... 47 23. AMENDMENT OF PRIOR AGREEMENTS ...... 47 24. ENTIRE AGREEMENT ...... 47 25. NATURE AND SCOPE, SEVERABILITY AND CONSTRUCTION ...... 47 A. Nature and Scope ...... 47 B. Severability ...... 48 C. Covenants ...... 48 D. Construction ...... 48 E. Certain Definitions ...... 48 F. Force Majeure ...... 49 G. Timing is of the Essence ...... 49 H. No Third Party Beneficiaries ...... 49
QB\138221.00002\10107296.13 iii 9/4/12 TABLE OF CONTENTS
Section Page
I. Agreement Effective Upon Execution by Franchisor ...... 49 26. ENFORCEMENT ...... 49 A. Mediation ...... 49 B. Notice and Opportunity to Cure ...... 50 C. Governing Law ...... 50 D. Jurisdiction and Venue ...... 50 E. Waiver of Jury Trial ...... 50 F. Waiver of Punitive Damages ...... 50 G. Limitations of Claims ...... 51 H. Specific Performance/Injunctive Relief ...... 51 I. Cumulative Rights and Remedies ...... 51 J. Private Disputes ...... 51 27. ATTORNEYS’ FEES ...... 51 28. JOINT AND SEVERAL LIABILITY ...... 52 29. NO WAIVER ...... 52 30. SURVIVAL ...... 52
EXHIBITS
Exhibit A Designated Area for Selection of Site Exhibit B Statement of Ownership Interests Exhibit C Owners’ Guaranty Exhibit D Addendum to Lease Agreement/Conditional Assignment of Lease Exhibit E Franchisee Training Acknowledgment Form Exhibit F Electronic Funds Authorization Form Exhibit G Nondisclosure and Noncompetition Agreement
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TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (the “Agreement”) is made and entered into this ____ day of ______, 20__ (the “Effective Date”) by and between Tropical Smoothie Cafe, LLC, a Georgia limited liability company, whose principal place of business is 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328 (the “Franchisor,” “we,” “us,” or “our”) and with the current address of (the “Franchisee,” “you,” or “your”).
WITNESSETH:
WHEREAS, we have developed a proprietary system through significant expenditures of time, skill, effort and money (the “System”) relating to the establishment, development and operation of a TROPICAL SMOOTHIE CAFÉ® business which offers premium quality, fruit smoothies made fresh in the store using proprietary recipes, specialty sandwiches, gourmet wraps, salads, soups and coffee drinks (the “Franchised Business”);
WHEREAS, we have developed the uniform standards, specifications, methods, policies and procedures for the shop operations, including, but not limited to proprietary recipes; training and assistance; and advertising and promotional programs, all of which may be changed, improved upon and further developed from time to time;
WHEREAS, we, through our dedicated operations, marketing methods and merchandising policies, have developed the reputation, public image and good will of our System;
WHEREAS, the System is identified by means of certain trade names, service marks, trademarks, logos, emblems and indicia of origin, including, but not limited to, the marks TROPICAL SMOOTHIE® and TROPICAL SMOOTHIE CAFÉ® and such other trade names, service marks and trademarks as are now, and may hereafter be designated for use in connection with the System (all of which are referred to as the “Proprietary Marks”), which Proprietary Marks are owned by us;
WHEREAS, you desire to operate a Franchised Business under the System and the Proprietary Marks and to obtain a license from us for that purpose, as well as to receive the training and other assistance provided by us in connection therewith;
WHEREAS, you acknowledge that you have read this Agreement and our Franchise Disclosure Document, and that you have no knowledge of any representations about the Franchised Business or about us or our franchising program or policies made by us or our officers, directors, shareholders, employees or agents which are contrary to the statements in our Franchise Disclosure Document or to the terms of this Agreement, and that you understand and accept the terms, conditions and covenants contained in this Agreement as being reasonably necessary to maintain our high standards of quality and service and the uniformity of those standards at all facilities which operate pursuant to the System and thereby to protect and preserve the goodwill of the Proprietary Marks; and
WHEREAS, you acknowledge that any assistance, approval or advice given by us under or in connection with this Agreement shall not constitute a warranty or guaranty of the financial success of your Franchised Business. You further acknowledge that we have advised you that prior business management experience is critical for the success of your Franchised Business, and prior business ownership experience is highly desirable. We require that the Franchised Business be owned by an
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individual who is, or a legal entity that includes at least one owner who is, and who will be, actively involved in the day-to-day operations of the Franchised Business.
WHEREAS, you acknowledge and understand that Section 23 of this Agreement amends any and all existing Franchise Agreement(s) you have with us to include the following provisions of this Agreement: Sections 4.B and 11.B. (regarding exclusive website), Section 13 (regarding transfers) and Section 26 (regarding enforcement).
NOW, THEREFORE, the parties, in consideration of the promises, undertakings and commitments of each party to the other set forth in this Agreement, mutually agree as follows:
1. GRANT OF FRANCHISE
A. Grant. You have applied for a TROPICAL SMOOTHIE CAFÉ® franchise to operate a new location at the Site specified in Section 1.C. below, and your application has been approved by us in reliance upon and subject to all representations made in your application. We therefore grant to you, upon the terms and conditions contained in this Agreement, the right and license to operate one (1) TROPICAL SMOOTHIE CAFÉ® store in strict conformity with our quality control standards and specifications, as they may be changed, improved and further developed from time to time, only at the specific location selected by you and agreed to by us. You accept this license and agree to perform all of your obligations in connection therewith as set forth in this Agreement.
B. Relocation. You must not relocate the Franchised Business without our express prior written consent. Except as otherwise set forth in Section 14.A.5., you may relocate the Franchised Business to a new location only upon the following conditions:
1. You must not be in default of any provision of this Agreement or the lease for the former location;
2. You must deliver to us a current financial statement, including a profit and loss statement for the Franchised Business during the last twelve (12) months of operation at the former location, and a copy of the proposed lease for the new location;
3. You must comply with such reasonable site selection and construction procedures as we may require;
4. The new location must be constructed, furnished and equipped in accordance with our then current design specifications and other standards for a TROPICAL SMOOTHIE CAFÉ® store;
5. You must be current on all of your financial obligations to us and our affiliates;
6. You must give us written notice of the proposed relocation at least ninety (90) days before the relocation date; and
7. At our option, you must enter into an amendment of this Agreement to conform it to our then current form of Franchise Agreement, including the then current royalty rate, except that: (i) the term of such amended Franchise Agreement will expire on the same day that this Agreement would have expired; and (ii) there will be no requirement for a new initial franchise fee.
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The Franchised Business must open for business in the new location within thirty (30) days (which may be extended for another thirty (30) days for good cause, with our prior written consent) of the date on which the Franchised Business in the old location closed. Any failure to provide us with ninety (90) days advance written notice of the proposed relocation, or to relocate the Franchised Business within the required time period, will be a material event of default under this Agreement, and we will have the right to terminate this Agreement in accordance with the provisions of Section 14. If you lose the right to possession of the premises because of the exercise of eminent domain or a Force Majeure event (as defined in Section 25.F.), then you must relocate the Franchised Business in accordance with the terms of Section 14.A.5. of this Agreement.
C. Designated Site; No Exclusive Territory. Subject to the terms of this Agreement, we grant you the right and license to operate one (1) TROPICAL SMOOTHIE CAFÉ® store at the following site, which has been approved by us in accordance with Section 4.A.2. (the “Site”):
You acknowledge and understand that there is no protected geographic area or territorial exclusivity associated with your franchise rights acquired under this Agreement. We and our affiliates have the right to locate and consent to the location anywhere of other TROPICAL SMOOTHIE CAFÉ® (or any other brand) businesses, whether or not using the System or Proprietary Marks, and can sell, or authorize others to sell anywhere, any products and services of any kind, whether or not similar to the products and services authorized for sale at TROPICAL SMOOTHIE CAFÉ® stores and/or using the System or Proprietary Marks, including TROPICAL SMOOTHIE CAFÉ® stores. The establishment by you of additional TROPICAL SMOOTHIE CAFÉ® stores requires additional franchises from us and the payment to us of additional franchise fees. We may from time to time establish rules regarding off-site marketing and promotion and catering and delivery services, and you agree to comply with such any policies, as set forth in the Manuals or otherwise in writing.
D. Approved Location Not Determined. If the Site of the Franchised Business has not been determined as of the Effective Date of this Agreement, then the geographical area in which the Franchised Business is to be located will be within a defined area which is described or otherwise mapped out in Exhibit “A” (the “Designated Area”). When the Site is determined, its address will be inserted into Section 1.C. above. You acknowledge and understand that the Designated Area is delineated for the sole purpose of site selection and does not confer any territorial exclusivity or protection.
E. Reservation of Certain Rights. We reserve all rights that we have not expressly granted to you, including the right to establish other TROPICAL SMOOTHIE CAFÉ® stores, whether franchised or company-owned, at any site we deem appropriate, regardless of proximity to your location, on such terms and conditions as we deem appropriate. We also reserve the right to sell smoothie drinks, accessories and related products in other channels of distribution (like grocery stores, kiosks, Internet or other forms of e-commerce). We reserve the right to offer, grant and support franchises in similar and other lines of business, and we make no representation or warranty you will have any right to participate in such franchises. We and/or our affiliates can acquire, be acquired by, merge, affiliate or dual brand with, or engage in any transaction with other businesses (whether competitive or not), with franchises or outlets located anywhere, without any liability to you. We may engage in any activity, action or undertaking that we are not expressly prohibited from taking under this Agreement.
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2. TERM AND RENEWAL
A. Initial Term. Except as otherwise provided in this Agreement, the term of this Agreement will be for fifteen (15) years commencing on the Effective Date of this Agreement; provided, however, that if you lease the business premises, and the lease agreement for your business premises is terminated prior to the expiration of the term of this Agreement, we may, at our option, terminate this Agreement.
B. Renewal Term. You may, subject to our approval in our sole discretion, continue the Franchised Business for one (1) additional ten (10) year term, or such period as remains on the lease underlying the initial term of this Agreement, if such period is shorter than ten (10) years, subject to the following conditions which must be met prior to the renewal period, unless and to the extent expressly waived in writing by us:
1. You must give us written notice of your election to renew this Agreement not less than six (6) months nor more than twelve (12) months prior to the end of the current term of this Agreement;
2. At least four (4) months prior to the expiration of the current term of this Agreement, we will have the right to inspect the Franchised Business and give notice of all required modifications to the nature and quality of the products and services offered at the Franchised Business, your advertising, marketing and promotional programs, your financial and inventory control systems, and the maintenance, refurbishing, equipment upgrade and replacement, renovating and remodeling necessary to comply with our then current standards and specifications and with the requirements of the lease for the Franchised Business. If you elect to renew this Agreement, then you shall complete, to our satisfaction, all such required modifications, as well as adopt and implement any new methods, programs, modifications, techniques or operational systems required by our notice no later than one (1) month prior to expiration of the current term of this Agreement;
3. You must not be in default of any provision of this Agreement, any amendment of or successor to this Agreement, or any other agreement between you and us or our subsidiaries, affiliates and suppliers. You must have substantially complied with all of the terms and conditions of such agreements during the terms thereof;
4. You must have satisfied all monetary obligations owed to us and suppliers and shall have timely met those obligations throughout the term of this Agreement;
5. You must execute upon renewal our then current form of Franchise Agreement. The new Franchise Agreement shall supersede in all respects this Agreement, and may differ from the terms of this Agreement, including, without limitation, the requirement of a higher percentage royalty fee and/or advertising contributions, and the term will expire in accordance with the renewal term as outlined above;
6. You (or your Operating Principal) and your approved manager must attend and successfully complete, to our satisfaction, our then current qualification and training program(s), at your expense;
7. You, your owners, directors and officers must execute a general release, in a form prescribed by us, of any and all claims against us and our affiliates, and our respective officers, directors, agents and employees;
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8. You must present evidence satisfactory to us that you have the right to remain in possession of the premises where the Franchised Business is located for the duration of the renewal term;
9. You must refurbish the Franchised Business (if necessary) to conform to the then-current TROPICAL SMOOTHIE CAFÉ® design and decor, trade dress, color scheme and presentation of trademarks and service marks consistent with the design concepts then in effect for new TROPICAL SMOOTHIE CAFÉ® stores licensed to operate under the System;
10. Your operation and management of the Franchised Business shall be in full compliance with the System; and
11. You must maintain and be in good standing with all necessary and applicable licenses and permits.
In the event that any of the foregoing conditions to renewal have not been met at least one (1) month prior to the expiration of the current term of this Agreement, then we will have no obligation to renew this Agreement and will give you at least thirty (30) days prior written notice of our intent not to renew this Agreement, which notice shall set forth the reasons for such refusal to renew. Your right to renew this Agreement is subject to your continued compliance with all of the terms and conditions of this Agreement through the date of expiration, in addition to your compliance with the obligations described above. We have the right to extend the term of this Agreement for such period of time as we deem necessary in order to provide you with thirty (30) days notice of our refusal to renew this Agreement.
3. YOUR REPRESENTATIONS, WARRANTIES AND COVENANTS
A. Your Investigation of this Franchise.
1. You acknowledge having received our Franchise Disclosure Document within the time period required by applicable law before you executed this Agreement or paid any consideration to us or an affiliate. You further acknowledge that you have read this Agreement (including all Exhibits) and our Franchise Disclosure Document and that you understand the terms of this Agreement (including all Exhibits) and accept them as being reasonably necessary for us to maintain the uniformity of TROPICAL SMOOTHIE CAFÉ® stores and to protect the goodwill of the Proprietary Marks and the integrity of the System.
2. You have conducted an independent investigation of the business contemplated by this Agreement and recognize that an investment in a TROPICAL SMOOTHIE CAFÉ® store involves business risks, that your success is largely dependent on your own abilities, efforts and active participation in the daily affairs of the Franchised Business, and that the nature of TROPICAL SMOOTHIE CAFÉ® stores may change over time. You have not received or relied on any guaranty or assurance, express or implied, as to the revenues, profits or potential success of the business contemplated by this Agreement.
3. You understand and agree that we may operate and change the System and our business in any manner that is not expressly and specifically prohibited by this Agreement.
4. Whenever we have expressly reserved in this Agreement, or are deemed to have, a right and/or discretion to take or withhold an action, or to grant or decline to grant you a right to take or withhold an action, then except as otherwise expressly and specifically provided in this Agreement, we may make our decision or exercise our right and/or discretion on the basis of our judgment of what is in our best interests, including, without limitation, our judgment of what is in the best interests of our
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franchise network, at the time our decision is made or our right or discretion is exercised, without regard to whether: (i) other reasonable alternative decisions or actions could have been made by us; (ii) our decision or the action we take promotes our financial or other individual interest; (iii) our decision or the action we take applies differently to you and one or more other franchisees or our company-owned operations; or (iv) our decision or the exercise of our right or discretion is adverse to your interests. In the absence of an applicable statute, we will have no liability to you for any such decision or action. We and you intend that the exercise of our right or discretion will not be subject to limitation or review. If applicable law implies a covenant of good faith and fair dealing in this Agreement, we and you agree that such covenant shall not imply any rights or obligations that are inconsistent with a fair construction of the terms of this Agreement and that this Agreement grants us the right to make decisions, take actions and/or refrain from taking actions not inconsistent with your rights and obligations hereunder.
5. You expressly understand and acknowledge that you are relying solely on us, and not on any affiliated entities or parent companies related to us, with regard to our financial and other obligations under this Agreement, and no employee or other person speaking on behalf of, or otherwise representing, us has made any statement or promise to the effect that our affiliated entities or parent companies guarantee our performance or financially back us.
B. Your Organization. If you are a corporation, partnership, limited liability company or other legal entity:
1. You are duly organized and validly existing under the law of the state of your formation;
2. You are duly qualified and authorized to do business in each jurisdiction in which your business activities or the nature of the properties you own require such qualification;
3. Your corporate charter or written partnership or limited liability company agreement, as applicable, will at all times provide that your activities are confined exclusively to the operation of TROPICAL SMOOTHIE CAFÉ® stores. You warrant and represent that neither you nor any of your owners own, operate or have any financial or beneficial interest in any business that is the same as or substantially similar to a TROPICAL SMOOTHIE CAFÉ® store;
4. The execution of this Agreement and the performance of the transactions contemplated by this Agreement are within your corporate power, or if you are a partnership or a limited liability company, are permitted under your written partnership or limited liability company agreement, and have been duly authorized;
5. You will provide to us, at our request, copies of your articles of incorporation and bylaws or, as applicable, your written partnership or limited liability company agreement, other governing documents, any amendments to them, resolutions authorizing your entry into and performance of this Agreement, and any certificates, buy-sell agreements or other documents restricting the sale or transfer of your stock or other ownership interests and any other documents that we may reasonably request;
6. Your organizational or governing documents will recite that the issuance and transfer of any ownership interests in you are restricted by the terms of this Agreement, and all certificates and other documents representing ownership interests in you will bear a legend referring to the restrictions of this Agreement;
7. Exhibit “B” accurately and completely describes all of your owners and their ownership interests in you as of the Effective Date. You agree to sign and deliver to us revised Exhibits
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“B” to reflect any permitted changes in the information Exhibit “B ” now contains (no ownership changes may be made without our prior written approval);
8. Each of your owners during the term of this Agreement will sign and deliver to us our standard form of Owners’ Guaranty, undertaking to be bound, jointly and severally, by all provisions of this Agreement. A copy of our current form of Owners’ Guaranty is attached as Exhibit “C” to this Agreement; and
9. You must, subject to our approval, designate at least one (1) of your owners as your “Operating Principal.” The Operating Principal must maintain direct or indirect ownership interest of not less than five percent (5%) of the Franchised Business and must have full authority to bind you with respect to all operational decisions with respect to your Franchised Business. If you are an individual, you will perform all obligations of the Operating Principal. The Operating Principal must devote full time and best efforts to the development and operation of the Franchised Business, and shall not engage in any other business or activity, directly or indirectly, that requires substantial management responsibility or time commitments (except other TROPICAL SMOOTHIE CAFÉ® stores operated under valid agreements with us) or otherwise may conflict with your obligations under this Agreement. If, at any time, your Operating Principal cannot fulfill its responsibilities under this Agreement, you must appoint a qualified replacement from among your owners, subject to our approval, to serve as the replacement Operating Principal. The Operating Principal must at all times be on-site or on-call to oversee the operations of the Franchised Business and meet our initial and ongoing requirements for serving as an Operating Principal.
C. Legal Compliance. In addition to complying with your obligations under this Agreement, you agree to comply with all applicable federal, state and local laws, rules, regulations, ordinances and orders. Such laws, rules, regulations, ordinances and orders vary from jurisdiction to jurisdiction and may be amended or implemented or interpreted in a different manner from time to time. It is your sole responsibility to apprise yourself of the existence and requirements of all such laws, rules, regulations, ordinances and orders, and to adhere to them at all times during the term of this Agreement.
D. Anti-Terrorism Activities. You certify that neither you nor any of your owners, employees or anyone associated with you is listed in connection with any Anti-Terrorism Law (as defined below) and you agree not to hire or have any dealings with a person so listed. You further certify that you have no knowledge or information that, if generally known, would result in you, your owners, employees, or anyone associated with you being so listed. You agree to comply with and/or assist us to the fullest extent possible in our efforts to comply with the Anti-Terrorism Laws and, in connection with such compliance, you represent and warrant that none of your property or interests are subject to being “blocked” under any of the Anti-Terrorism Laws and that you and your owners are not otherwise in violation of any of the Anti-Terrorism Laws. Any misrepresentation by you under this Section or any violation of the Anti-Terrorism Laws by you, your owners or employees will constitute grounds for immediate termination of this Agreement and any other agreement you have entered into with us or one of our affiliates in accordance with the terms of Section 14.A. of this Agreement. For purposes of this Agreement, “Anti-Terrorism Laws” means Executive Order 13224 issued by the President of the United States, the Terrorism Sanctions Regulations (Title 31, Part 595 of the U.S. Code of Federal Regulations), the Foreign Terrorist Organizations Sanctions Regulations (Title 31, Part 597 of the U.S. Code of Federal Regulations), the Cuban Assets Control Regulations (Title 31, Part 515 of the U.S. Code of Federal Regulations), the USA PATRIOT Act, and all other present and future federal, state and local laws, ordinances, regulations, policies, lists and any other requirements of any Governmental Authority (including, without limitation, the United States Department of Treasury Office of Foreign Assets Control) addressing or in any way relating to terrorist acts and acts of war.
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E. Continuing Obligations. You and your owners make the foregoing representations, warranties and covenants understanding that such representations, warranties and covenants are continuing obligations. You agree to cooperate with us to verify you and your owners’ continuing compliance with such representations, warranties and covenants. Any failure to comply with these representations, warranties and covenants will constitute a material event of default under this Agreement.
4. DUTIES OF FRANCHISOR
A. Pre-Opening Obligations. Our duties prior to the opening of the Franchised Business are as follows:
1. We will designate the Designated Area within which you must locate the Site for the Franchised Business;
2. You will have ninety (90) days following the Effective Date of this Agreement to locate and receive our written approval of a site for the Franchised Business in accordance with the provisions of Section 6.B. We will approve or disapprove a site that you propose within thirty (30) days after we receive from you a complete site report and any other materials that we may require from time to time for assessing potential sites for TROPICAL SMOOTHIE CAFÉ® stores. If you have not heard from us within such thirty (30) day period, the proposed site is deemed disapproved. You will conduct a market evaluation of the proposed site to determine its suitability for a Franchised Business. The factors that will affect our approval are demographic characteristics of the proposed site, traffic patterns, parking, the predominant character of the neighborhood, competition from other businesses providing similar services within the area, the proximity to other businesses (including other TROPICAL SMOOTHIE CAFÉ® stores), the nature of other businesses in proximity to the proposed site, and other commercial characteristics (including the purchase price or rental obligations and other lease terms for the proposed site) and the size of the premises, appearance and other physical characteristics of the premises, financing, building permits, zoning, local ordinances, and anticipated timetable for the installation of equipment, furniture and signs. Our approval of the proposed site as being suitable for a Franchised Business is not to be deemed to be a representation or warranty as to the likelihood of your success.
You must obtain our approval of any lease or sublease (or any modification or amendment) for the Site before you sign it, or any renewal of it. A condition to our approval of the lease or sublease is the execution by you, the landlord and us of the Addendum to Lease Agreement/Conditional Assignment of Lease, a copy of which is attached as Exhibit “D” to this Agreement. Our review and approval of the lease or sublease is solely to ensure that the lease or sublease contains terms that we accept or require for our benefit and the franchise system; it is not a substitute for careful review by you and your advisors. Our approval of the lease or sublease does not constitute a warranty or assurance that the lease or sublease contains terms and conditions for your benefit. You must deliver a copy of the signed lease or sublease to us within ten (10) days after it is signed by you and the landlord. You must open the Franchised Business for business within twelve (12) months from the Effective Date of this Agreement, unless otherwise agreed to in writing by us, or we may terminate this Agreement.
3. We will furnish you with mandatory and suggested specifications and layouts for a TROPICAL SMOOTHIE CAFÉ® store, including requirements for dimensions, design, color scheme, image, interior layout, décor, fixtures, equipment, signs and furnishings. You are solely responsible for developing and constructing the Site for your Franchised Business, for all expenses associated with it, and for compliance with the requirements of any applicable federal, state or local law;
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4. We will provide you with written specifications for the operation and management of the Franchised Business;
5. We will provide an initial training program that must be successfully completed, at our discretion, within fifteen (15) days before the opening of the Franchised Business, consisting of three (3) separate phases (approximately one week each) of classroom and on-the-job training at our corporate headquarters and/or an existing TROPICAL SMOOTHIE CAFÉ® store or other location that we may designate. You (or your Operating Principal) and your approved manager shall attend and successfully complete the initial training program. Up to two (2) people (one of whom shall be you or your Operating Principal and the other your full time manager) may attend the initial training program at no charge. Additional persons may attend initial training for a non-refundable fee of One Thousand Dollars ($1,000.00) per person. We will be responsible for training and materials only. You and your employees shall be responsible for all meals, travel, lodging and other expenses incurred in attending the initial training program. We may, in addition to any other rights or remedies that we may have under this Agreement, assess you a non-refundable no-show fee of One Thousand Dollars ($1,000.00) each time a person scheduled for any phase or part of training fails to attend such training, unless the absence has been previously approved by us in writing. Initial training is conducted by us, your Area Developer (if any) and/or our designee.
You must sign and return to us a Franchisee Training Acknowledgement Form (a copy of which is attached as Exhibit “E” to this Agreement) upon your completion of the initial training program. At our sole discretion, we will make available such other ongoing continuing education and training programs, meetings or seminars (on an optional or mandatory basis), as we deem appropriate. We may also host one (1) or more conventions per calendar year, as well as conference telephone calls, which may include education and training. All additional training programs, meetings, seminars, conventions and conference telephone calls provided by us shall be subject to the terms and conditions set forth in Section 6.G. of this Agreement. You and your designated employees must attend and successfully complete all ongoing continuing education and training programs, and must attend all meetings, seminars, conventions and conference telephone calls, as we may require, and you are responsible for all expenses, which may include travel, lodging, and meals.
6. We will provide you with one (1) training team member for one (1) week of onsite pre-opening and opening supervision and assistance; and
7. We will loan you (or provide access to) a single set of our operating manuals (the “Manuals”), which shall include specifications for equipment, supplies, inventory, management and operation of the Franchised Business. The Manuals may consist of one (1) or more separate manuals and other materials as designated by us and may be in written or electronic form. The Manuals are confidential and shall remain our property at all times.
B. Post-Opening Obligations. Our obligations following the opening of the Franchised Business are as follows:
1. We will provide such general advisory assistance and field support deemed by us to be helpful to you in the ongoing operation, advertising and promotion of the Franchised Business;
2. We will continue our efforts to establish and maintain high standards of quality, cleanliness, safety, customer satisfaction and service;
3. We will provide updates, revisions and amendments to our Manuals, including Corporate Policy Directives (as defined in Section 6.S.), which may be provided to you from time to time
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and automatically included in the operations Manuals. We may modify the Manuals from time to time, but these modifications shall not alter your fundamental status and rights under this Agreement; and
4. We will, on a periodic basis, conduct, as we deem advisable, quality control audits of the Franchised Business and its operations, and evaluations of the methods and the staff employed therein. You will be required to sign an operations report in connection with each visit by our field support staff.
All of our obligations under this Agreement are to you, and no other party is entitled to rely on, enforce or obtain relief for breach of such obligations either directly or by subrogation.
We have exclusive right and authority to post and maintain a TROPICAL SMOOTHIE CAFÉ® internet website and your use, or participation in such website, if any, will be exclusively under our supervision and authority. We may provide you with a link on our website to a sub-website to be maintained by you upon our written approval.
C. Delegation of Performance. You agree that we have the right to delegate performance of any portion or all of our obligations under this Agreement to third-party designees, whether these designees are our agents or independent contractors with whom we have contracted to perform these obligations. If we do so, such third-party designees will be obligated to perform the delegated functions for you in compliance with this Agreement.
5. FEES
A. Initial Franchise Fee. The initial franchise fee is Twenty Five Thousand Dollars ($25,000.00), payable by you to us upon execution of this Agreement. The initial franchise fee is non- refundable and deemed fully earned upon receipt by us.
B. Royalty Fees. You will pay to us a continuing nonrefundable weekly royalty fee (the “Royalty Fee”) of six percent (6%) of Gross Sales as that term is defined below. Subject to applicable banking laws and regulation, we will establish a direct debit program with your bank to allow for the electronic transfer of the weekly royalty payment, pursuant to your instructions as contained in a pre- authorized bank form substantially in the form set forth in Exhibit “F” to this Agreement. In the event that the direct debit program is not available, you must pay us directly and the payment must be received by us prior to 1:00 PM Eastern on the Wednesday of the week following the week for which the payment is due.
C. MIS Fees. You will pay to us the fees we designate from time to time (the “MIS Fees”) for the use of our mandated management information system, as described in Section 6.V. This fee does not cover, and we will not perform, bookkeeping, reporting or tax return services.
D. National Marketing and Advertising Fees. You will pay to us a continuing nonrefundable weekly national marketing and advertising fee (the “National Marketing Fee”) of one percent (1%) of Gross Sales. We reserve the right to increase the National Marketing Fee to two percent (2%) of Gross Sales at any time in our discretion. Subject to applicable banking laws and regulation, we will establish a direct debit program with your bank to allow for the electronic transfer of the weekly National Marketing Fee, pursuant to your instructions as contained in a pre-authorized bank form substantially in the form set forth in Exhibit “F” to this Agreement. In the event that the direct debit program is not available, you must pay us directly and the payment must be received by us prior to 1:00 PM Eastern on the Wednesday of the week following the week for which the payment is due. The
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National Marketing Fee may be increased to two percent (2%) of Gross Sales in our sole discretion (see Section 11.C of this Agreement).
E. Local Advertising Cooperative Contribution. You will pay to us a continuing nonrefundable weekly cooperative contribution (the “Local Advertising Cooperative Contribution”) of two percent (2%) of Gross Sales. Subject to applicable banking laws and regulation, we will establish a direct debit program with your bank to allow for the electronic transfer of the weekly royalty payment, pursuant to your instructions as contained in a pre-authorized bank form substantially in the form set forth in Exhibit “F” to this Agreement. In the event that the direct debit program is not available, you must pay us directly and the payment must be received by us prior to 1:00 PM Eastern on the Wednesday of the week following the week for which the payment is due. We have the right, in our sole discretion, to contract with an outside independent accounting firm to administer such funds, and for such administration fee to be paid from such funds. We further have the right to designate the geographic area for establishing a cooperative, as set forth in Section 11.D., below.
F. Grand Opening Program. You will spend at least Two Thousand Dollars ($2,000.00), exclusive of the cost of food and smoothies, on a grand opening marketing program for the Franchised Business during the first sixty (60) days of operations. The grand opening program will use the marketing, advertising and public relations programs, media and materials we have developed or approved, and is separate from your other marketing and advertising requirements. We may require you to submit expenditure report(s) to us, accurately reflecting your grand opening marketing expenditures.
G. Late Fees. If, at any time, we debit your account for payment of the Royalty Fee, National Marketing Fee or Local Advertising Cooperative Contribution (the “Weekly Fees”), or any other amounts you owe us, and there are not sufficient funds in your account to pay such amount, or your bank refuses to clear the withdrawal in our favor, the unpaid amount will be considered late. Any required report not timely received by us will also be considered late. We will assess a late fee of Twenty-Five Dollars ($25.00) for each week (or portion thereof) that any payment is delinquent or report or item is not timely received. In addition, all overdue amounts will bear interest, until paid, at the rate of two (2) times the prime rate then being charged by the Chase Manhattan Bank, N.A. on the date payment was due, or the highest rate permitted by applicable state law, whichever is less (the “Default Rate”). Interest shall be calculated on a daily basis. Late fees and interest charges are nonrefundable. The provision in this Agreement concerning late fees does not mean that we accept or condone late payments, nor does it indicate that we are willing to extend credit to, or otherwise finance, the operation of your Franchised Business. These late fees are intended to reimburse us for our expenses and to compensate us for our inconvenience and do not constitute interest. Your failure to pay all amounts when due constitutes grounds for termination of this Agreement.
H. Default Fees. If we reasonably believe that you have committed an event of default under this Agreement, we may, in addition to any other rights or remedies that we may have under this Agreement, assess you a $100 default fee (the “Default Fee”). We may assess a Default Fee regardless of whether we send you a notice to cure or termination notice, so long as we notify you in writing of our decision to charge you a Default Fee, the amount of the Default Fee, and the reason we believe you have committed a default (the “Default Fee Notice”). If we send you a notice to cure, and you fail to cure the default within the time period specified in our notice, we may assess a Default Fee for each week (or portion thereof) that the violation remains uncured. Assessment and/or payment of a Default Fee does not constitute a waiver of any other rights or remedies we may have in connection with the event of default or otherwise under this Agreement. The Default Fee Notice we send to you will indicate the date the default fee is due.
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I. Payment Procedures. All weekly payments and any late fees and interest charges required by this Agreement shall be paid through our direct debit program each Wednesday, or such other payment method as prescribed by us, following the preceding week for which the applicable fee is being paid (on Gross Sales made during the preceding week which is defined as beginning on Monday and ending on Sunday), throughout the term of this Agreement. At our request, you will execute the pre- authorized bank form attached as Exhibit “F” to this Agreement and all other documents necessary to permit us to withdraw funds from your designated bank account by electronic funds transfer (“EFT”) for payment of the Weekly Fees and other amounts due us under this Agreement, at the time such amounts become due and payable under this Agreement. Should any EFT not be honored by your bank for any reason, you agree that you will be responsible for that payment and any service charge. If any payments are not received when due, interest and late fees may be charged in accordance with Section 5.G. Upon written notice to you, we may designate another method of payment.
J. Definition of Gross Sales. “Gross Sales” is defined as all sales generated through the Franchised Business including, but not limited to, fees for any products or goods sold by you, whether for cash or credit (and regardless of collectability), proceeds received by you in connection with any business interruption insurance, and income of every kind or nature related to the Franchised Business including barter and trade; provided, however, that “Gross Sales” shall not include the sales price of goods returned by customers and any sales tax or other taxes collected from customers by you for transmittal to the appropriate taxing authority, nor shall it include discounts attributable to coupon purchases.
K. Application of Payments. Notwithstanding any designation you might make, we have sole discretion to apply any of your payments to any of your past due indebtedness to us. You acknowledge and agree that we have the right to set off any amounts you owe us against any amounts we might owe you.
L. Payment Offsets. We may setoff from any amounts that we may owe you any amount that you owe to us, or our affiliates, for any reason whatsoever, including without limitation, Weekly Fees, late payment penalties and late payment interest, amounts owed to us or our affiliates for purchases or services, or for any other reason. Thus, payments that we make to you may be reduced, in our discretion, by amounts that you owe to us or our affiliates from time to time. In particular, we may retain (or direct to our affiliates) any amounts that we have received for your account as a credit and payment against any amounts that you may owe to us, or our affiliates, at any time. We may do so without notice to you. You do not have the right to offset payments owed to us for amounts purportedly due to you from us or our affiliates.
6. YOUR DUTIES
A. Compliance with System. You understand and acknowledge that every detail of the appearance and operation of the Franchised Business in compliance with the System is critical to us, and to other franchisees in order to:
1. Develop and maintain high and uniform operating standards;
2. Increase the demand for the products and services sold by franchisees; and
3. Protect the Proprietary Marks and the System, and our trade secrets, reputation and goodwill.
B. Site Approval. You shall have a period of ninety (90) days after the Effective Date of this Agreement to locate the Site, which must be approved by us in writing, and you must open the Franchised Business within twelve (12) months from the Effective Date of this Agreement. You acknowledge that the selection, procurement and development of a site for the Franchised Business is
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your responsibility. You acknowledge that our approval of a prospective site and the rendering of assistance in the selection of a site does not constitute a representation, promise, warranty or guaranty by us that the Franchised Business operated at that site will be profitable or otherwise successful. You shall engage a licensed commercial real estate broker in connection with the selection and acquisition of a site for the Franchised Business (in addition to any other professionals you may choose to consult or engage). You shall use only the commercial real estate brokerage firm(s) that we designate in connection with the selection and acquisition of the premises for the Franchised Business, and you are solely responsible for the amount of any commissions due to said real estate brokerage firm(s) and not otherwise paid by the landlord of the premises.
You must obtain our approval of the lease or sublease (or any modification or amendment) for the Site prior to you executing said lease or sublease. We will not review the form of lease or sublease for the Site unless you deliver to us a copy of the lease or sublease and our standard Addendum to Lease Agreement/Conditional Assignment of Lease (both of which shall have been signed by the landlord, unless we otherwise agree in writing). You agree to obtain all necessary consents, approvals and signatures from the landlord or lessor for the Site. You will not subsequently modify, extend or otherwise alter the terms and conditions of the lease or sublease without our prior written approval. You must deliver a copy of the signed lease or sublease to us within ten (10) days after it is signed by both you and the landlord. You agree to abide by the terms of said lease or sublease.
Your failure to locate a suitable site for the Franchised Business in accordance with the terms of this Section will be deemed a material event of default under this Agreement.
C. Construction and Finish Out. You are solely responsible for developing and constructing the Site for your Franchised Business, for all expenses associated with it, and for compliance with the requirements of any applicable federal, state or local law. We will furnish you with mandatory and suggested specifications and layouts for a TROPICAL SMOOTHIE CAFÉ® store, including requirements for dimensions, design, color scheme, image, interior layout, décor, fixtures, equipment, signs and furnishings. You are obligated, at your expense, to have an architect prepare all required construction plans and specifications to suit the shape and dimensions of the Site and to ensure that such plans and specifications comply with applicable ordinances, building codes, permit requirements, lease requirements and restrictions, and the mandatory specifications and layout provided by us. You acknowledge that design quality is important to us and that we have the right to review and accept all plans and specifications and to confirm that construction is completed in conformance with our architectural and design standards and specifications for a TROPICAL SMOOTHIE CAFÉ® store. You will use in the development and operation of your Franchised Business only those (and each of those) brands, types and/or models of equipment, furniture, fixtures and signs specified by us and using only suppliers designated or approved by us, which may include and/or be limited to us and/or our affiliates.
D. Opening Date. You must open the Franchised Business and commence business within twelve (12) months after the Effective Date of this Agreement, unless you obtain a written extension of such time period from us. You acknowledge that time is of the essence. Before the opening date, you must complete all exterior and interior preparations for the Franchised Business, including installation of equipment, fixtures, furnishings and signs, pursuant to the plans and specifications we have approved, and must comply with all other pre-opening obligations. If you fail to comply with any of these obligations, we have the right to prohibit you from opening the Franchised Business. Your failure to open the Franchised Business in compliance with these provisions will be deemed a material event of default under this Agreement.
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E. Initial Training. In accordance with the terms and conditions set forth in Section 4.A. above, you (or your Operating Principal) and your approved manager must attend and complete to our reasonable satisfaction our initial training program prior to the opening of the Franchised Business.
F. Supervision Requirements. The Franchised Business shall at all times be under the direct, on-premises supervision of you (or your Operating Principal), or the supervision of a manager approved by us who (1) has attended and successfully completed our training program(s); and (ii) will devote his or her full time and energy during business hours to the supervision and management of the Franchised Business. You (or your Operating Principal) must at all times remain active in overseeing the operations of your Franchised Business. Unless we approve otherwise, your Operating Principal must have and retain at least five percent (5%) ownership in the Franchised Business. You (or your Operating Principal) or your approved manager are required to be directly involved in the day-to-day operations of the Franchised Business. Notwithstanding anything to the contrary contained herein, you (or your Operating Principal) must participate in the Franchised Business as follows:
1. You must submit an initial business plan for each Franchised Business prior to commencing operations and an annual business plan for each year thereafter; you also must submit annual financial statements, which shall include an income statement and balance sheet, prepared in accordance with generally accepted accounting principles, within ninety (90) days of fiscal year end, and a profit and loss statement within ten (10) days of the end of each month;
2. You must be directly responsible for all accounting, reporting and bookkeeping;
3. You (and your approved manager if you will not be the on-site supervisor) must attend initial training and ongoing training courses that may be required by us;
4. You must attend any meeting of franchisees that is called by us or your Area Developer;
5. You must be directly involved with the site selection, construction, remodeling and all financial components of the Franchised Business;
6. You and/or your approved manager (who is your employee) must be directly involved in all personnel decisions; and
7. You must comply with and be subject to, all reasonable supervision of your Franchised Business by your Area Developer (if any), in accordance with our operating policies and procedures, including, but not limited to, inspections, reports, and guidance. Area Developers are independent business persons and are not authorized to make promises or agreements on our behalf or to agree to modifications to your Franchise Agreement, operating policies and procedures, nor any Corporate Policy Directives.
G. Ongoing Training. You will cause your employees (including any person subsequently acting as the manager of the Franchised Business) to attend and complete, to our reasonable satisfaction, such special programs or periodic additional training as we may require in writing from time to time. We will only provide and pay for instruction and training materials in connection with such additional training. You and/or your employees shall be responsible for any and all other expenses incurred in training, including, without limitation, the costs of meals, entertainment, lodging, travel, laundry and wages.
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H. Operation of the Franchised Business. You must (i) open the Franchised Business for business within twelve (12) months from the Effective Date of this Agreement (unless we otherwise agree in writing); (ii) use the Franchised Business solely for the operation of the Franchised Business that is licensed by this Agreement in strict accordance with the Manuals; (iii) keep the Franchised Business open and in normal operation for such minimum hours and days as we may from time to time prescribe; and (iv) refrain at all times from using or permitting the use of the premises of the Franchised Business for any other purpose or activity other than as contemplated by this Agreement without first obtaining our written consent. Time is of the essence.
I. Maintenance. You must continuously maintain the Franchised Business in the highest degree of sanitation, repair and condition as we may reasonably require, and in connection therewith shall make such additions, alterations, repairs and replacements thereto (but not without our prior written consent) as may be required for that purpose, including without limitation, such periodic redecorating, replacement of inventory and replacement of obsolete signs, fixtures or materials as we may reasonably direct, or as otherwise required under the lease for the Franchised Business. The expense of such maintenance shall be borne by you and shall be in addition to any expenditures you are required to make under Section 6.L. (design modifications) and Section 6.N. (System modifications).
J. Health and Safety Standards. You must meet and maintain the highest safety standards and ratings applicable to the operation and management of the Franchised Business and its personnel as we may reasonably require.
K. Working Capital. You must meet and maintain sufficient levels of working capital for use in connection with the management and operation of the Franchised Business as we may reasonably require.
L. Design Modifications. At our request, which in no event will be made more than once every five (5) years, except as otherwise provided in this Agreement, you must refurbish the Franchised Business, at your expense, to conform to the then current TROPICAL SMOOTHIE CAFÉ® store design and decor, trade dress, color scheme and presentation of trademarks and service marks consistent with the design concepts then in effect for new TROPICAL SMOOTHIE CAFÉ® stores licensed to operate under the System and in accordance with the Manuals, including, without limitation, such structural changes, remodeling, redecoration and other modifications to existing improvements as we deem necessary.
M. Compliance with Uniform Standards. You must operate the Franchised Business in strict conformity with such uniform methods, standards and specifications as we may from time to time prescribe for TROPICAL SMOOTHIE CAFÉ® stores to ensure that the highest degree of product quality and service is uniformly maintained. You must conduct your business in a manner that reflects favorably at all times on the System and the Proprietary Marks. You shall at no time engage in deceptive, misleading or unethical practices, or conduct any other act which may have a negative impact on our reputation and goodwill or that of any other franchisee operating under the System. Pursuant to this ongoing responsibility, you agree:
1. To sell or offer for sale all menu items, products and services required by us, utilizing the method, manner and style of distribution that we prescribe. Distribution methods may include, but are not limited to, dine-in, carry-out, and catering services, and must be expressly authorized by us in writing, in the Manuals or otherwise. You agree to comply with the terms of any such distribution program and, in connection therewith, to execute such documents or instruments that we may deem necessary.
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2. To maintain in sufficient supply as we may prescribe in the Manuals or otherwise in writing and use at all times only such products and supplies as conform to our standards and specifications as contained in the Manuals, as revised and updated from time to time, and Corporate Policy Directives, and to refrain from deviating therefrom without our prior written consent;
3. To sell or offer for sale only such products and services as meet our uniform standards of quality and quantity which have been expressly approved for sale in writing by us in accordance with our methods and techniques; to sell or offer for sale all approved items; to refrain from any deviation from our standards and specifications for serving or selling such products or services; and to discontinue selling and offering for sale any such products or services as we may, in our sole discretion, disapprove in writing at any time;
4. To lease or purchase and install at your expense all fixtures, furnishings, signs and equipment we may reasonably specify from time to time in the Manuals or otherwise in writing, and to refrain from installing or permitting to be installed on or about the Franchised Business without our prior written consent any fixtures, furnishings, signs, cards, promotional literature, equipment or other items not previously specifically approved as meeting our standards and conforming to our specifications;
5. To purchase and maintain any and all signs for use at the Franchised Business, whether for interior or exterior use, in conformity with our quality control standards and specifications;
6. To employ such minimum number of employees as may be prescribed by us and to comply with all applicable federal, state and local laws, rules and regulations with respect to such employees. You may be required by us to ensure that all employees whose duties include customer service to have sufficient literacy and fluency in the English language (within the United States), or in such other language that is the primary or official language of that franchised location, to adequately serve the public in accordance with our standards and goals;
7. To maintain a competent, conscientious staff; and
8. To maintain all licenses and permits in good standing.
N. Modification of the System. We have the right to change or modify the System from time to time, including, without limitation, the adoption and use of new or modified Proprietary Marks or copyrighted materials, and new or additional menu items, recipes, computer hardware, software, equipment, inventory, supplies or techniques. You will comply with any such changes in, or additions to, the System and will make such expenditures as such changes, additions or modification in the System may reasonably require. Any required expenditure for changes or upgrades to the System will be in addition to expenditures otherwise required pursuant to this Section 6.
O. Variance. We have the right, in our sole discretion and as we may deem in the best interests of all concerned in any specific instance, to vary standards or specifications for any franchisee based upon that particular franchisee’s qualifications, the peculiarities of a particular site or circumstances, the demographics of the trade area, business potential, existing business practices, or any other condition which we deem to be of importance to the successful operation of any particular TROPICAL SMOOTHIE CAFÉ® store. We will not be required to disclose or grant to you a like or similar variance hereunder.
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P. Designated and Approved Products and Suppliers.
1. You acknowledge that the reputation and goodwill of the TROPICAL SMOOTHIE CAFÉ® System is based in large part on offering high quality products and services to our customers. Accordingly, you shall provide or offer for sale, use or consumption at the Franchised Business only those menu items, ingredients, vitamin and nutritional supplements, food, beverages, packaging, supplies, signs, equipment and other items and services that we from time to time approve (and which are not thereafter disapproved) and that comply with our specifications and quality standards. If required by us, any such items or services shall be purchased only from “Approved Suppliers” that we designate or approve (which might include and/or be limited to us and/or our affiliates). You shall not offer for sale, sell or provide through the Franchised Business or from the Site, any products or services that we have not approved.
2. We will provide you, in the Manuals or other written or electronic form, with a list of specifications and, if required, a list of Approved Suppliers for some or all of these items and may from time to time issue revisions thereto. If you desire to utilize any services or products that we have not approved (for services and products that require supplier approval), you must first send us sufficient information, specifications and/or samples for us to determine whether the product or service complies with our standards and specifications, or whether the supplier meets our Approved Supplier criteria.
3. You will bear all reasonable expenses incurred by us in connection with determining whether we will approve an item, service or supplier. We will decide within a reasonable time (usually thirty (30) days) after receiving the required information whether you may purchase or lease such items or services or from such supplier. Approval of a supplier may be conditioned on requirements related to the frequency of delivery, standards of service, consistency, reliability and general reputation. Nothing in this Section will be construed to require us to approve any particular supplier, or to require us to make available to prospective suppliers, standards and specifications that we, in our discretion, deem confidential.
4. Notwithstanding anything contrary in this Agreement, we have the right to review from time to time our approval of any items, services or suppliers. We may revoke our approval of any item, service or supplier at any time, in our sole discretion, by notifying you and/or the supplier. You shall, at your own expense, promptly cease using, selling or providing any items or services disapproved by us and shall promptly cease purchasing from suppliers disapproved by us.
5. We have the right to designate certain products and services, not otherwise authorized for general use as part of the System, to be offered locally or regionally based upon such factors as we determine, including, but not limited to, franchisee qualifications, test marketing and regional or local differences. We have the right, in our sole discretion, from time to time to give our consent to one (1) or more franchisees to provide certain products or services not authorized for general use as part of the System. Such consent will be based upon the factors set forth in Section 6.O. and will not create any rights in you to provide the same products or services.
6. We have the right to retain volume rebates, markups and other benefits from suppliers or in connection with the furnishing of suppliers. You will have no entitlement to or interest in such benefits, unless otherwise agreed to by us in writing.
Q. Market Research. We may conduct market research and testing to determine consumer trends and the salability of new menu items, food products and services. You agree to participate in such market research programs as may be conducted by us, in our sole discretion, by test marketing new menu items and products and services in the Franchised Business. You agree to provide us with timely reports
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and other relevant information regarding market research. You agree to purchase a reasonable quantity of the tested products and effectively promote and make a reasonable effort to sell the products and/or services.
R. Inspection of Premises. You must permit us or our agents or representatives, including, but not limited to, your Area Developer (if any) and his employee(s), to enter upon the premises of the Franchised Business at any time with or without prior notice to you, for purposes of conducting inspections, taking photographs and interviewing employees and customers. You will cooperate fully with us or our agents or representatives in such inspections by rendering such assistance as they or we may reasonably request. Upon notice from us or our agents or representatives, and without limiting our other rights under this Agreement, you shall take such steps as may be necessary to immediately and diligently correct any deficiencies detected during such inspections, including, without limitation, immediately ceasing and preventing the further use of any products, equipment, inventory, advertising materials, supplies or other items that do not conform to our then current specifications, standards or requirements. In the event you fail or refuse to correct such deficiencies, we shall have the right to enter upon the premises of the Franchised Business, without being guilty of trespass or any other tort, for the purpose of making or causing to be made such corrections as may be required, at your sole expense which you agree to pay upon demand.
S. Proprietary Methods. You acknowledge and agree that we have developed certain products, services, operational systems and management techniques and may continue to develop additional products and proprietary methods and techniques for use in the operation of the Franchised Business which are all highly confidential and which are our trade secrets. Because of the importance of quality control, uniformity of product and the significance of such proprietary products in the System, it is to the mutual benefit of the parties that we closely control the dissemination of this proprietary information. Accordingly, you agree that in the event such information and techniques become a part of the System, you will comply with and strictly follow these techniques in the operation of your Franchised Business and shall purchase from us or from an approved or designated source any supplies or materials necessary to protect and implement such techniques.
We are continually creating and developing special procedures, standards and methods for operating and maintaining a TROPICAL SMOOTHIE CAFÉ® store, which standards are made known to you through policy statements from us (“Corporate Policy Directives”) and which are incorporated in our Manuals. You shall ensure that your Franchised Business is developed and operated solely in accordance with our requirements and specifications as set forth in the Corporate Policy Directives and in the Manuals, as may from time to time be made known to you.
T. Development of the Market. You must at all times use your best efforts to promote and increase the sales and consumer recognition of the products and services offered at the Franchised Business pursuant to the System and the Manuals, to effect the widest and best possible distribution of our products and services from the Franchised Business and to devote your best efforts in controlling the Franchised Business, its managers, assistants and employees.
U. Display of Proprietary Marks and Logos. You must display our Proprietary Marks and logos at the Franchised Business, on uniforms and otherwise in the manner prescribed by us. The color, design and location of said displays shall be specified by us and may be changed from time to time in our sole discretion. Specifically, you must conspicuously display to customers the sign or notice designated by us which will serve to notify and inform third parties that we are engaged in the business of franchising and which will provide sufficient information to enable third parties to contact us to inquire about prospective franchises. You must not display any signs or posters at the premises or elsewhere without our prior written consent.
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V. Computerized Point-of-Sale System.
1. You must, at your sole cost, purchase, use, maintain and update the computer systems (collectively, the “Computer System”) we specify from time to time for use in the operation of the Franchised Business, and will follow the procedures related thereto that we specify in the Manuals or otherwise in writing. The Computer System has various components, including (without limitation), designated computer hardware and software, a computerized point-of-sale system (the “POS System”), and related services, such as maintenance, service and support, internet access and data polling. You may be required to obtain some of these components and services directly from us, our affiliates or designated or approved suppliers. You may incur monthly fees for ISP, ASP, data polling services and the like.
2. You must maintain the Computer System in good working order at all times and upgrade, update or otherwise change the Computer System during the term of this Agreement, as we require. Our modifications and specifications for components of the Computer System may require you to incur costs to purchase, lease or license new or modified computer hardware and software or to obtain service and support for the Computer System during the term of this Agreement. You agree to comply with modifications to the Computer System within thirty (30) days after you receive notice of such modifications.
3. We may require you to participate in a mandated management information system, which includes certain internet and/or intranet networks that are capable of connecting with our computer systems (collectively, the “MIS System”). The MIS System may allow us to review the results of your Franchised Business’ operations, provide you information, and otherwise facilitate communications among us and our area developers and franchisees. You must pay our then-current fees to participate in the MIS System, at the times and in the manner we designate in the Manuals or otherwise in writing. We reserve the right to poll (via modem or otherwise) your POS System in order to compile sales data, consumer trends, food and labor costs, and other such financial and marketing information as we deem appropriate, and you acknowledge that we may distribute this data on a confidential basis to our network of franchisees.
4. Your Computer System must be capable of connecting with our computer systems, performing the functions we designate for the Franchised Business, permitting us to review the results of your Franchised Business’ operations, and engaging in any e-commerce activities that we designate. In addition to any access we may have to your Computer System through the MIS System, you must: (a) supply us with any and all codes, passwords and information necessary to have access to your Computer System, and not change them without first notifying us; and (b) not load or utilize any software on the Computer System that we have not specified or approved for use. You will continuously comply with each of our then-current terms of use and privacy policies (and all other requirements) regarding the Computer System, including (but not limited to) internet use.
W. Supplemental Marketing Programs. You acknowledge that (a) supplemental marketing programs (e.g., limited time offers, gift cards, gift certificates, coupons, loyalty programs, customer relationship management and other supplement marketing programs) are an integral part of the System; and (b) you will be required to participate in (and comply with) such supplemental marketing programs established by us from time to time. You acknowledge that you may be responsible for the payment of certain costs associated with these supplemental marketing programs. We reserve the right to establish (and set forth the terms and conditions of) such supplemental marketing programs through (i) a supplement and/or modification to the Manuals, or (ii) other written directive.
X. Other Requirements. You must timely comply with all other requirements set forth in this Agreement, in the Manuals, as revised and updated, including Corporate Policy Directives, or
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otherwise as we may designate from time to time. We may from time to time establish maximum, minimum or other pricing requirements to the fullest extent allowed by law.
7. PROPRIETARY MARKS
A. Grant of License. We grant you the right and license to use the Proprietary Marks in connection with the operation of your Franchised Business and the provision of authorized services and products to your customers. We represent, with respect to the Proprietary Marks, that: (1) we have, to the best of our knowledge, all right, title and interest in and to the Proprietary Marks; (2) we shall take all steps, which we deem reasonably necessary, to preserve and protect the ownership and validity of such Proprietary Marks; and (3) we will use and license you and other franchisees to use the Proprietary Marks only in accordance with the System and the operating standards and quality control specifications attendant thereto which underlie the goodwill associated with and symbolized by the Proprietary Marks.
B. Conditions for Use. With respect to your use of the Proprietary Marks pursuant to the license granted under this Agreement, you agree that:
1. You must use only the Proprietary Marks designated by us and shall use them only in the manner required or authorized and permitted by us.
2. You must use the Proprietary Marks only in connection with the right and license to operate the Franchised Business granted under this Agreement.
3. During the term of this Agreement and any renewal of this Agreement, you must identify yourself as a licensee and not the owner of the Proprietary Marks and shall make any necessary filings under state law to reflect such status. In addition, you must identify yourself as a licensee of the Proprietary Marks on all invoices, order forms, receipts, business stationery and contracts, as well as at the Franchised Business on a sign that is conspicuously displayed to customers.
4. Your right to use the Proprietary Marks is limited to such uses as are authorized under this Agreement or in the Manuals, and any unauthorized use thereof shall constitute an infringement of our rights and grounds for termination of this Agreement.
5. You may not use the Proprietary Marks to incur or secure any obligation or indebtedness.
6. You may not use the Proprietary Marks as part of your corporate or other legal name.
7. You must comply with our instructions in filing and maintaining the requisite trade name or fictitious name registrations, and must execute any documents our counsel or we deem necessary to obtain protection for the Proprietary Marks or to maintain their continued validity and enforceability.
8. In the event that you become aware of any infringement of the Proprietary Marks or if your use of the Proprietary Marks is challenged by a third party, then you are obligated to immediately notify us, and we will have sole discretion to take such action as we deem appropriate. You will cooperate and assist as required by us in any enforcement activities or litigation as we deem necessary to fully protect all our interests in the Proprietary Marks, including any state and federal trademark and service mark registrations for the Proprietary Marks, or to protect the System. If we
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determine that no action to protect the Proprietary Marks is necessary, then you may take any action you deem necessary to protect your own interest, at your own expense.
9. If it becomes advisable at any time in our sole discretion to modify or discontinue the use of any Proprietary Mark and/or use one or more additional or substitute names or marks, you will modify or discontinue the use of any such name or mark, within a reasonable time after receiving notice, and use such additional or substitute name or mark, and shall be responsible for the tangible costs (such as replacing signs and materials) of complying with this obligation. We will not reimburse you for any loss of revenue attributable to any modified or discontinued Proprietary Mark or for any expenditures you make to change names or marks or to promote a modified or substitute name or mark.
C. Acknowledgements. You expressly understand and acknowledge that:
1. We are the owners of all right, title and interest in and to the Proprietary Marks and the goodwill associated with and symbolized by them;
2. The Proprietary Marks are valid and serve to identify the System and those who are licensed to operate a TROPICAL SMOOTHIE CAFÉ® store in accordance with the System;
3. Your use of the Proprietary Marks pursuant to this Agreement does not give you any ownership interest or other interest in or to the Proprietary Marks, except the nonexclusive license granted in this Agreement;
4. Any and all goodwill arising from your use of the Proprietary Marks and/or the System shall inure solely and exclusively to our benefit, and upon expiration or termination of this Agreement no monetary amount shall be assigned as attributable to any goodwill associated with your use of the System or the Proprietary Marks;
5. The license and rights to use the Proprietary Marks granted by this Agreement to you are nonexclusive, and we may: (a) ourselves use, and grant franchises and licenses to others to use, the Proprietary Marks and the System; (b) establish, develop and franchise other systems, different from the System licensed to you in this Agreement, without offering or providing you any rights in, to or under such other systems; and (c) modify or change, in whole or in part, any aspect of the Proprietary Marks or the System, so long as your rights thereto are in no way materially harmed thereby;
6. We reserve the right to substitute different trade names, trademarks and service marks for use in identifying the System, the Franchised Business and other TROPICAL SMOOTHIE CAFÉ® stores operating thereunder, all of which shall become Proprietary Marks;
7. We shall have no liability to you for any senior users that may claim rights to the Proprietary Marks;
8. You shall not register or attempt to register the Proprietary Marks in your name or that of any other person, firm, entity or corporation; and
9. You shall not establish a website on the Internet using any domain name or uniform resource locator containing any of the Proprietary marks or the words “TROPICAL SMOOTHIE” or “TROPICAL SMOOTHIE CAFÉ” or any variation thereof without our prior written consent. We retain the sole right to advertise on the Internet and to create a website using the “TROPICAL SMOOTHIE CAFÉ” domain name. We are the sole owner of all right, title and interest in and to such domain names as we may designate in the Manuals or otherwise in writing.
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8. CONFIDENTIAL MANUALS
A. Compliance. In order to protect our reputation and goodwill and to maintain uniform standards of operation in connection with the Proprietary Marks, you shall conduct your business in strict compliance with the operational systems, procedures, policies, methods and requirements prescribed in the Manuals and any supplemental bulletins, notices, revisions, modifications, Corporate Policy Directives, or amendments thereto, all of which shall be deemed a part thereof. One (1) registered set of the Manuals shall be provided to you on loan from us while this Agreement is in effect, and you shall sign a corresponding receipt therefor.
B. Use. You agree to immediately adopt and use the programs, services, methods, standards, materials, policies and procedures set forth in the Manuals, amendments thereto, and Corporate Policy Directives, as we may modify them from time to time. You acknowledge that we are the owner or licensee of all proprietary rights in and to the System and the Manuals, and any changes or supplements thereto.
C. Confidentiality. You acknowledge and agree that the Manuals are proprietary, include trade secrets belonging to us, and are disclosed to you or authorized for your use in the operation of the Franchised Business, solely on the condition that you agree, and you therefore do agree, to treat the Manuals, including amendments and modifications thereto, and all of the information contained therein, as proprietary and confidential. You shall use all reasonable efforts to maintain such information as confidential. The Manuals must remain in a secure location on the premises of the Franchised Business at all times.
D. Access. The Manuals must be accorded maximum security consistent with your need to make frequent reference thereto. You shall strictly limit access to the Manuals to employees who have a demonstrable and valid need to know the information contained therein in order to perform their duties. You must strictly follow any provisions in the Manuals regarding the care, storage and use of the Manuals and all related proprietary information.
E. Duplication. You shall not at any time, without our prior written consent, copy, duplicate, record or otherwise reproduce in any manner any part of the Manuals, updates, supplements, amendments or related materials, in whole or in part, or otherwise make the same available to any unauthorized person.
F. Our Property. The Manuals shall at all times remain our sole property. Upon the expiration or termination of this Agreement for any reason, you shall return to us the Manuals and all supplements and amendments thereto.
G. Updates or Revisions. We have the right to prescribe additions to, deletions from or revisions to the Manuals, as well as amendments and Corporate Policy Directives, which shall become binding upon you upon being mailed or otherwise delivered to you or posted; provided, however, that no such addition or modification will alter your fundamental status and rights under this Agreement.
H. Master Set. You shall at all times insure that your set of the Manuals is kept current and up-to-date, and in the event of any dispute as to the contents of the Manuals, the terms contained in the master set of the Manuals maintained by us at our headquarters shall be controlling.
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9. CONFIDENTIAL INFORMATION
A. Types of Confidential Information. We possess (and will continue to develop and acquire) certain confidential information, some of which constitutes trade secrets under applicable law (the “Confidential Information”) relating to the development and operation of TROPICAL SMOOTHIE CAFÉ® stores, including (without limitation):
1. site selection criteria and development methods;
2. training and operations materials and manuals, including, without limitation, the Manuals and Corporate Policy Directives;
3. methods, techniques, formats, specifications, procedures, information and systems related to, and knowledge of and experience in, the development, operation and franchising of TROPICAL SMOOTHIE CAFÉ® stores;
4. market research, promotional, marketing and advertising programs for TROPICAL SMOOTHIE CAFÉ® stores;
5. knowledge of specifications for, and suppliers of, certain products, materials, supplies, furniture, furnishings and equipment;
6. any computer software or similar technology which is proprietary to us, our affiliates or the System, including, without limitation, digital passwords and identifications, any source code of, and data, reports and other printed materials generated by, the software or similar technology;
7. recipes, formulas, preparation methods and serving techniques;
8. knowledge of the operating results and financial performance of TROPICAL SMOOTHIE CAFÉ® stores, other than the Franchised Business;
9. e-commerce related data (e.g., customer data, click-stream data, cookies, user data, hits and the like); and
10. customer records of all types.
B. Confidential Relationship. The parties expressly understand and agree that the relationship established between you and us by this Agreement is one of confidence and trust, and that as a result, we will be disclosing and transmitting to you certain trade secrets and other Confidential Information concerning various aspects of your development of the Franchised Business, its methods of operation, techniques and all proprietary systems, procedures and materials relevant thereto, pursuant to the System and this Agreement. In addition, during the course of your development and operation of the Franchised Business, you, your employees, owners or agents may develop ideas, copyrightable works, concepts, methods, techniques or improvements (“Improvements”) relating to your Franchised Business, which you agree to promptly disclose to us. We will be deemed to own the Improvements, whether developed separately or in conjunction with us, and may use them and authorize you and others to use them in the operation of TROPICAL SMOOTHIE CAFÉ® stores. Improvements will then also constitute Confidential Information. In the event that the foregoing provisions are held to be invalid or otherwise unenforceable, you and your owners hereby grant to us an irrevocable, worldwide, perpetual, exclusive, royalty-free license, with the right to sublicense such information, improvement or technique.
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C. Confidentiality Obligations. You agree that your relationship with us does not vest in you any interest in the Confidential Information, other than the right to use it in the development and operation of the Franchised Business, and that the use or duplication of the Confidential Information in any other business would constitute an unfair method of competition. You acknowledge and agree that the Confidential Information is proprietary, includes trade secrets belonging to us, and is disclosed to you for your use solely on the condition that you agree, and you therefore do agree, that:
1. You shall treat and maintain the Confidential Information as confidential both during the term of this Agreement and thereafter;
2. You shall use the Confidential Information only for your operation of the Franchised Business under this Agreement, and not in any other business or capacity;
3. You shall not make unauthorized copies of any portion of the Confidential Information (whether disclosed via electronic medium or in written or other intangible form), including, for example, the Manuals;
4. You shall disclose the Confidential Information only as necessary to your employees or agents who have a demonstrable and valid need-to-know the Confidential Information, and not to anyone else;
5. You shall advise your employees or agents of the confidential nature of such information and the requirements of nondisclosure thereof; and
6. You shall adopt and implement all reasonable procedures that we prescribe from time to time to prevent the unauthorized use or disclosure of the Confidential Information, including, without limitation, restrictions on disclosure of Confidential Information to your employees and the use of nondisclosure and noncompetition agreements we may prescribe for employees or others who have access to the Confidential Information. We shall be designated a third-party beneficiary of such nondisclosure and noncompetition agreements, with the independent right to enforce such agreements.
These covenants shall survive the expiration, termination or transfer of this Agreement or any interest herein, and shall be perpetually binding upon you and each of your owners.
D. Exceptions to Confidentiality. The restrictions on your disclosure and use of Confidential Information will not apply to the following:
1. disclosure or use of information, processes or techniques which you can demonstrate lawfully came to your attention prior to disclosure by us to you;
2. disclosure or use of information, processes or techniques which are generally known and used in the fast-casual dining industry (as long as the availability is not because of a disclosure by you); and
3. disclosure of Confidential Information in judicial or administrative proceedings when and only to the extent you are legally compelled to disclose it, provided that you have first given us the opportunity to obtain an appropriate protective order or other assurance satisfactory to us that the information required to be disclosed will be treated confidentially.
E. Remedies. You acknowledge that in addition to any remedies otherwise available to us under this Agreement, you agree to pay all court costs and reasonable attorneys’ fees incurred by us in
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obtaining specific performance of, or a temporary restraining order and/or an injunction against violation of, the requirements of this Section 9.
F. Communication with Customers. In order to maintain the high standards of quality control throughout the System, we reserve the right to engage in “secret shopper” type programs and use test customers from time to time, without prior notification to you, in order to determine whether the Franchised Business is maintaining high standards of quality, integrity, safety, appearance and customer service.
10. ACCOUNTING, INSPECTIONS AND RECORDS
A. Maintenance of Books and Records. You shall maintain during the term of this Agreement and shall preserve for not less than seven (7) years from the date of preparation full, complete and accurate books, records and accounts in accordance with the System and in the form and manner prescribed by us in the Manuals or otherwise in writing from time to time.
B. Weekly Reports. During the term of this Agreement, you shall submit to us, at the same time that royalty and National Marketing Fees and contributions are payable in accordance with the terms of this Agreement, a weekly statement of Gross Sales in a form prescribed by us in the Manuals, accurately reflecting the Gross Sales during the preceding week, together with such other data or information as we may require. All such reports shall be postmarked by the Monday of each calendar week and received by us not later than three (3) days thereafter. A late fee will be assessed for untimely submission in accordance with Section 5 above.
C. Financial and Related Reporting. During the term of this Agreement, you shall, at your expense, submit to us, on such forms that we prescribe from time to time:
1. within ninety (90) days of the completion of your fiscal year, an annual financial statement, which shall include an income statement and balance sheet prepared in accordance with generally accepted accounting principles;
2. within ten (10) days of the end of each month, a profit and loss statement for the Franchised Business for the immediately preceding month; and
3. within ninety (90) days of the completion of your fiscal year, copies of all federal and state tax returns; and
Each annual financial statement and tax return shall be compiled by an independent certified public accounting firm and signed by your President or Treasurer attesting that the statement is true and correct. We may require the financial statements to be prepared on a consolidated basis for each Franchised Business that you and your affiliates own. We also reserve the right to require you to submit to us certified financial statements for any period or periods of any fiscal year, which shall be certified by your accounting firm and attested to by your Treasurer or Chief Financial Officer. If not timely received by us, a late fee will be assessed pursuant to Section 5 above.
D. Other Submissions. You shall also submit to us, for review and auditing, such other forms, and other reports, including, but not limited to, annual accounting of local advertising expenditures and any and all other information and data as we may reasonably designate, in the form and at the times and places reasonably required by us, upon request and as specified from time to time in the Manuals or otherwise in writing, at any time during the term of this Agreement. If not timely received by us, a late fee will be assessed pursuant to Section 5 above.
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E. Inspection. We or our designated agents shall have the right at all reasonable times to examine and copy, at our expense, your books, records, receipts and tax returns. We shall also have the right, at any time, to have an independent audit made of your books. If an inspection should reveal that any payments to us have been understated in any report to us, then you shall immediately pay to us, upon demand, the amount understated plus interest calculated at the Default Rate on a daily basis. If any inspection discloses an understatement in any report of two percent (2%) or more, you shall, in addition to the payment of interest thereon, reimburse us for any and all costs and expenses connected with the inspection (including, without limitation, reasonable accountants’ and attorneys’ fees). The foregoing remedies shall be in addition to any other remedies available to us, including termination.
11. ADVERTISING
Recognizing the value of advertising, marketing and promotion and the importance of the standardization of those programs to the furtherance and protection of the Proprietary Marks, goodwill and public image of the System, the parties agree as follows:
A. Submission and Approval of Advertising, Promotional and Marketing Materials. All advertising, promotional and marketing materials to be used by you in any medium shall be presented in a dignified manner and shall conform to such standards and requirements as we may specify from time to time in the Manuals or otherwise. You shall submit to us for our prior written approval, samples of all advertising, promotional and marketing materials in whatever form that you desire to use at least fifteen (15) days before their intended use. We shall have ten (10) days from the time of receipt of such materials to approve, disapprove, or revise such materials. If you do not receive our written approval within this time period, we will be deemed to have disapproved the materials. You shall comply with all revisions to such advertising, promotional and marketing materials which we may require prior to approving such materials. You shall not use any advertising, marketing or promotional plans or materials, which have not been approved in writing by us, and you shall cease to use any plans or materials promptly upon notice by us. Your failure to obtain our prior written approval for all proposed advertising, marketing and promotion shall be deemed a material event of default under this Agreement.
B. Internet Advertising/Sales. We have the exclusive right and authority to post and maintain a TROPICAL SMOOTHIE CAFÉ® internet website. You may not establish, use, maintain, nor create an internet website, web posting, web page, or host page or otherwise maintain a presence or advertise on the Internet or any other public computer network in connection with the Franchised Business without our prior written approval, which we may withhold for any reason or no reason. We may provide you with a link on our website to a sub-website to be used by you upon our written approval. If we grant you written approval, you agree to submit to us for approval before use true and correct printouts of all pages you propose to use in connection with the Franchised Business. You understand and agree that our right of approval of all such Web materials is necessitated by the fact that such Web materials will include and be inextricably linked with our Proprietary Marks. You may only use material that we have approved. Your Web site must conform to all of our Web site requirements, whether set forth in the Manuals or otherwise. You agree to provide all hyperlinks or other links that we require. You may not use any of the Proprietary Marks at the web page or link from our site except as we expressly permit. You may not post any of our proprietary, confidential or copyrighted material or information on the Web site without our prior written permission. If you wish to modify your approved link or page, all proposed modifications must also receive our prior written approval. You explicitly understand that you may not post any material which a third-party has any direct or indirect ownership interest in (including, without limitation, video clips, photographs, sound bites, copyrighted text, trademarks or service marks, or any other test or image which any third-party may claim intellectual property rights in). The requirements for our prior approval will apply to all activities on the Internet or other communications network to be conducted by you. You may maintain one or more e-mail addresses
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and may conduct individual e-mail communications only on a computer system that is not connected to our POS System. However, you agree to obtain our prior approval as provided above if you propose to send any such e-mail that contains advertising about the Franchised Business. We may require you to participate in any internet or intranet networks we establish and pay the then-current fees for ISP and ASP services and the like.
C. National Marketing and Advertising Program. You must pay to us the National Marketing Fee. The National Marketing Fee is placed in the National Marketing Fee Account (the "NMF Account"). We use the NMF Account in part to design and create promotional, marketing and advertising resources, including, but not limited to, in-store point of purchase materials, flyers, radio and television commercials and other materials for your use, as we deem appropriate in our sole discretion. All costs associated with your duplication or distribution of these materials, or with media placement, must be borne by you. We will use the NMF Account in connection with advertising with different media outlets, including print, radio, television and/or online on a national and/or regional level for such advertising, marketing and public relations programs and materials as we deem necessary or appropriate, in our sole discretion. We (or our designee) maintain and administer the NMF Account in the following manner:
1. We (or our designee) will oversee all advertising, promotion and marketing programs, with sole discretion over the creative concepts, materials and media used in such programs, and the geographic, market and media placement and allocation thereof. We do not warrant that any particular franchisee will benefit directly or pro rata from expenditures by the NMF Account. The NMF Account may be used to satisfy any and all costs of maintaining, administering, directing, preparing and producing promotional, marketing and advertising resources, including, but not limited to, the cost of preparing and producing television, radio, magazine and newspaper advertising campaigns; the cost of direct mail and outdoor billboard advertising; the cost of marketing and promotion activities, including advertising and marketing agencies; the cost of public relations activities, including advertising and public relations agencies; the cost of developing and maintaining an Internet website; the cost of providing advertising, promotional and/or other marketing materials to franchisees; and personnel and other departmental costs for advertising, promotion and marketing that we internally administer or prepare.
2. The NMF Account will be accounted for separately from our other funds and will not be used to defray any of our general operating expenses, except for such reasonable salaries, administrative costs and overhead that we may incur in activities reasonably related to the administration or direction of the NMF Account and its marketing programs. All interest earned on monies contributed to the NMF Account will be used to pay advertising costs before other assets of the NMF Account are expended.
3. It is anticipated that the NMF Account contributions will be expended for programs during the fiscal year in which such contributions to it are made. If excess amounts remain at the end of such fiscal year, all expenditures in the following fiscal year(s) will be made first out of such excess amounts, including any interest or other earnings on the NMF Account, and next out of current contributions. We may, in our sole discretion, spend in any fiscal year an amount greater or less than the amount in the NMF Account in that year, and we may lend money to cover any deficits.
4. Each TROPICAL SMOOTHIE CAFÉ® store operated by us or our affiliates will contribute National Marketing Fees at the same rate as TROPICAL SMOOTHIE CAFÉ® franchisees.
5. An accounting of the NMF Account will be prepared annually and will be made available to you upon request. We retain the right to have the collections and expenditures of amounts in
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the NMF Account audited, at the expense of the NMF Account, by an independent certified public accountant we select.
6. We assume no fiduciary duty in administering the NMF Account.
7. We have no obligation to ensure that expenditures from the NMF Account are or will be proportionate or equivalent to contributions of National Marketing Fees by TROPICAL SMOOTHIE CAFÉ® stores operating in any geographic area or that any TROPICAL SMOOTHIE CAFÉ® store will benefit directly or in proportion to the amount of National Marketing Fees it has paid.
D. Local Advertising Cooperative Contribution. You must participate with other franchisees in your designated market area (as determined by us) in an advertising cooperative. You shall comply with the policies and procedures established by the advertising cooperative and must contribute two percent (2%) of Gross Sales each week to the advertising cooperative. We (or our designee) will administer these funds in accordance with the direction of the cooperative members, provided that our prior written approval must be obtained for all expenditures of the cooperative and before the use of any advertising and promotional materials developed by the cooperative. We reserve the right, in our sole discretion, to contract with an independent accounting firm to administer such funds. We reserve the right to require cooperative members to adhere to governing documents that we develop. You may also be required to submit monthly financial statements for the cooperative. We will have the power to require a cooperative to be changed, dissolved or merged. Activities of the cooperative will generally be determined by its members, except that we reserve the right to exercise sole decision-making power over the cooperative funds if we determine, in our sole discretion, that the cooperative is not functioning properly either due to a lack of participation or an impasse among the members. Company-owned locations may participate in the cooperatives and, if they do so, they will be subject to the same fees and voting powers as franchisee members.
12. INSURANCE
A. Procurement. You shall procure, prior to the commencement of any operations under this Agreement, and thereafter maintain in full force and effect during the term of this Agreement, at your sole expense, listing us and your Area Developer (if any) each as an additional insured: (i) an insurance policy or policies protecting you, the Area Developer (if any), and us, and each of our officers, directors, partners and employees, against any loss, liability, personal injury, death, property damage or expense whatsoever from fire, lightning, theft, vandalism, malicious mischief and the perils included in the extended coverage endorsement, arising out of or occurring upon or in connection with the Franchised Business or the construction of or leasehold improvements made to the Franchised Business, or by reason of the operation or occupancy of the Franchised Business; (ii) as well as such other insurance applicable to such other special risks, if any, as we may reasonably require for our own and your protection; and (iii) you shall be obligated to procure such insurance and to submit copies of such policies to us fifteen (15) days prior to the opening to the public of the Franchised Business.
B. Minimum Coverage. Such policy or policies shall be written by an insurance company satisfactory to us in accordance with the standards and specifications set forth in the Manuals or otherwise in writing, and shall include, at a minimum (except as additional coverage and higher policy limits may reasonably be specified from time to time by us in the Manuals or otherwise in writing) the following:
1. Comprehensive general liability insurance, including contractual liability, broad form property damage, personal injury, advertising injury, product liability, employee liability, completed operations and independent contractors coverage, and fire damage coverage in the amount of One Million Dollars ($1,000,000.00) per occurrence, with Two Million Dollars ($2,000,000.00) aggregate coverage,
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or such higher amount as required by the lease, and naming us as an additional insured in each such policy or policies;
2. Worker’s compensation and employer’s liability insurance as well as such other insurance as may be required by statute or rule of the state in which the Franchised Business is located and operated;
3. Fire, vandalism and extended coverage insurance with primary and excess limits of not less than the full replacement value of the Franchised Business and its furniture, fixtures and equipment;
4. Business interruption and extra expense insurance for a minimum of six (6) months to cover net profits and continuing expenses, including Royalty Fees; and
5. Employment practices liability insurance.
C. Construction Coverage. In connection with any construction, leasehold improvements, renovation, refurbishment or remodeling of the premises of the Franchised Business, you shall cause the general contractor to maintain with a reputable insurer comprehensive general liability insurance (with comprehensive automobile liability coverage for both owned and non-owned vehicles, builder’s risk, product liability and independent contractors coverage) in at least the amount of One Million Dollars ($1,000,000.00) with us named as an additional insured, and worker’s compensation and employer’s liability insurance as required by state law. A copy of the Certificate of Insurance for worker’s compensation coverage shall be provided to us.
D. Certificates. At least fifteen (15) days prior to the grand opening of the Franchised Business and on each policy renewal date thereafter, you shall submit to us, original or duplicate copies of all policies and policy amendments. The evidence of insurance shall include a statement by the insurer that the policy or policies will not be canceled or materially altered without at least thirty (30) days prior written notice to us.
E. Independence of Coverage Requirements. Your obligation to obtain and maintain the foregoing policy or policies in the amounts specified shall not be limited in any way by reason of any insurance which may be maintained by us, and your performance of that obligation shall not relieve you of liability under the indemnity provision set forth in Section 19 of this Agreement. Any and all policies must provide that your failure as Franchisee to comply with the Franchise Agreement or any other conduct, will not void or otherwise affect the protection afforded to us, as Franchisor, or to the Area Developer (if any).
F. Failure to Procure. Should you for any reason fail to procure or maintain the insurance required by this Agreement, as revised from time to time for all franchisees by the Manuals or otherwise in writing, we shall have the right and authority (without, however, any obligation) to immediately procure such insurance and to charge the same to us, which charges, together with a reasonable fee for our expenses in so acting, including, but not limited to, attorneys’ fees, shall be payable by you immediately upon notice.
G. Third Parties. You shall ensure that all third parties with which you conduct business, are properly insured.
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H. Proceeds. You agree to look solely to the proceeds of such insurance policies as required herein for reimbursement of any loss, and neither you nor any insurance carrier may recover damages against us as Franchisor.
13. TRANSFER OF INTEREST; OPERATION BY FRANCHISOR
A. Transfer by Us. We shall have the right to assign this Agreement, and all of our rights and privileges under this Agreement, to any person, firm, corporation or other entity provided that, with respect to any assignment resulting in the subsequent performance by the assignee of our functions: (1) the assignee shall, at the time of such assignment, be capable of performing our obligations under this Agreement; and (2) the assignee shall expressly assume and agree to perform such obligations.
Specifically, and without limitation to the foregoing, you expressly affirm and agree that we may sell our assets, our rights to the Proprietary Marks and the System outright to a third party; may go public; may engage in a private placement of some or all of our securities; may merge, acquire other corporations, or be acquired by another corporation; may undertake a refinancing, recapitalization, leveraged buy-out or other economic or financial restructuring; and, with regard to any or all of the foregoing sales, assignments and dispositions, you expressly and specifically waive any claims, demands or damages arising from or related to the loss of said Proprietary Marks (or any variation thereof) and/or the loss of association with or identification of “TROPICAL SMOOTHIE CAFE, LLC” as the Franchisor under this Agreement.
Nothing contained in this Agreement shall require us to remain in the smoothie drink or café business or to offer the same products and services, whether or not bearing our Proprietary Marks, in the event that we exercise our rights under this Agreement to assign our rights in this Agreement.
B. Transfer by You and Your Owners.
1. Neither you nor any of your owners, nor any of your or their permitted successors or assigns, shall sell, assign, transfer, convey, give away, pledge, mortgage or otherwise dispose of or encumber any direct or indirect interest in this Agreement, in the Franchised Business, or in you without our prior written consent; provided, however, that our prior written consent shall not be required for a transfer of less than a five percent (5%) interest in a publicly-held corporation. For such purposes, and under this Agreement in general, a publicly-held corporation is a “Reporting Company” as that term is defined by the Securities Exchange Act of 1934. “You” is defined as either you, any immediate or remote successor to any part of your interest in the Franchised Business, any individual, partnership, corporation or other legal entity which directly or indirectly controls you, if you are a business entity, or any, or any general partner or any limited partner (including any corporation which controls, directly or indirectly, any general or limited partner) if you are a partnership. You must notify us in writing at least sixty (60) days prior to the date of the intended assignment. Any purported assignment or transfer, by operation of law or otherwise, not having our prior written consent shall be null and void and shall constitute a material breach of this Agreement, for which we may then terminate without opportunity to cure pursuant to Section 14.A. of this Agreement.
2. If you (and your owners) are in full compliance with this Agreement, then, subject to the other provisions of this Section 13, we will not unreasonably withhold our consent to a transfer that meets all of the requirements of this Section. A non-controlling ownership interest in you or your owners (determined as of the date on which the proposed transfer will occur) may be transferred if the proposed transferee and its direct and indirect owners are of good character and meet our then applicable standards for TROPICAL SMOOTHIE CAFÉ® franchise owners (including no ownership interests in, or performance of services for, a competitive business). If the proposed transfer is of this
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Agreement or a controlling ownership interest in you or one of your owners, or is one of a series of transfers (regardless of the time period over which these transfers take place) which, in the aggregate, transfer this Agreement or a controlling ownership interest in you or one of your owners, then we may, in our sole discretion, require any or all of the following as conditions of our approval:
a. All of your accrued monetary obligations and all other outstanding obligations to us, our subsidiaries, affiliates and suppliers shall be up to date, fully paid and satisfied;
b. You shall not be in default of any provision of this Agreement, any amendment of this Agreement or successor to this Agreement, any other franchise agreement or other agreement between you and us, or our subsidiaries, affiliates or suppliers;
c. You and each of your partners, shareholders, officers and directors shall have executed a general release under seal, in a form satisfactory to us, of any and all claims against us and our officers, directors, shareholders and employees in their corporate and individual capacities, including, without limitation, claims arising under federal, state and local laws, rules and ordinances;
d. The transferee shall demonstrate to our satisfaction that the transferee meets our educational, managerial and business standards; possesses a good moral character, business reputation and credit rating; has the aptitude and ability to operate the Franchised Business (as may be evidenced by prior related experience, our testing criteria or otherwise); has at least the same managerial and financial criteria required of new franchisees; and shall have sufficient equity capital to operate the Franchised Business;
e. The transferee shall enter into a written assignment, under seal and in a form satisfactory to us, assuming and agreeing to discharge all of your obligations under this Agreement. If the transferee is not an individual, then the shareholders, partners or other owners of the transferee shall jointly and severally guarantee your obligations under this Agreement in writing in a form satisfactory to us;
f. At our option, the transferee shall execute (and/or, upon our request, shall cause all interested parties to execute) for a term ending on the expiration date of this Agreement and with such renewal term as may be provided by this Agreement, the standard form of Franchise Agreement then being offered to new franchisees and such other ancillary agreements as we may require for the Franchised Business, which agreements shall supersede this Agreement in all respects and the terms of which agreements may differ materially from the terms of this Agreement, including, without limitation, a higher percentage royalty fee and advertising contributions and the implementation of other fees;
g. The transferee shall upgrade, at the transferee’s expense, the Franchised Business to conform to the then current specifications being used in new TROPICAL SMOOTHIE CAFÉ® stores, and shall complete the upgrading and other requirements within the time specified by us. If the Franchised Business is subject to a mandatory remodel within twelve (12) months of the anticipated transfer, the location must be remodeled at the time of transfer, or upon approval by us, at our option, the transferor must escrow with us an amount we deem sufficient to fully accomplish the remodel, and the transferee must agree to complete the remodel within twelve (12) months of the transfer;
h. You (and your owners) shall remain liable for all direct and indirect obligations to us in connection with the Franchised Business prior to the effective date of the transfer, shall continue to remain responsible for your and their obligations of nondisclosure, noncompetition and
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indemnification as provided elsewhere in this Agreement, and shall execute any and all instruments reasonably requested by us to further evidence such liability;
i. At the transferee’s expense, the transferee and its manager and employees shall complete any training programs then in effect for current franchisees upon such terms and conditions as we may reasonably require unless we have previously trained such employees;
j. The transferee shall have signed an Acknowledgement of Receipt of all required legal documents, such as the Franchise Disclosure Document and the then current Franchise Agreement and ancillary agreements;
k. The transferor shall pay to us a transfer fee of $10,000 or five percent (5%) of the total sales price paid by the transferee to the transferor, whichever is greater, to cover our administrative expenses in connection with the proposed transfer; and
l. The transferor must provide us with a copy of the agreements of purchase and sale between the transferor and the transferee. The terms and price of the proposed transaction between the transferor and a transferee shall be fair and reasonable in our sole discretion and based upon our good faith judgment. You acknowledge that this right of approval shall not create any special liability or duty on our part to the transferor or the proposed transferee.
3. You may not grant a security interest in the Franchised Business or in any of its assets unless the secured party agrees that in the event of any default by you under any documents related to the security interest, we shall have the right and option to be substituted as obligor to the secured party and to cure your default. Notwithstanding the foregoing, we shall not be construed as a guarantor or surety for you.
4. You acknowledge and agree that each of the foregoing conditions of transfer which must be met by you and the transferee are necessary and reasonable to assure such transferee’s full performance of the obligations under this Agreement.
5. You understand and acknowledge that the rights and duties set forth in this Agreement are personal to you and are granted in reliance upon the individual or collective character, skill, aptitude, and business and financial capacity of you and/or your owners. You have represented to us that you are entering into this Agreement with the intention of complying with its terms and conditions and not for the purpose of resale of your rights and obligations under this Agreement.
6. You understand and acknowledge that any sale or assignment of your interest, right or license under this Agreement must be to an approved transferee who will assume the status of a TROPICAL SMOOTHIE CAFÉ® franchisee, and you will notify the proposed transferee of your responsibilities and obligations under this Franchise Agreement, including, but not limited to, protection of the Proprietary Marks and the System.
C. Transfer for Convenience of Ownership. If the proposed transfer is to a corporation or limited liability company formed solely for the convenience of ownership, our consent to such transfer may, in our sole discretion, be conditioned on the following requirements:
1. You and all other owners (if you are more than one individual) will be required to personally, jointly and severally, guarantee your full performance under this Agreement;
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2. The corporation, limited liability company or other business entity shall be newly organized and its charter, bylaws and other organizational documents shall provide that its activities are confined exclusively to operating the business contemplated under this Agreement;
3. You must maintain management control and own a majority or controlling interest in the corporation or limited liability company;
4. The transferee corporation or limited liability company must expressly assume all of your obligations under this Agreement; and
5. Each of your corporate stock certificates or other evidence of ownership shall have conspicuously endorsed upon its face a statement in a form satisfactory to us that it is held subject to, and that further assignment or transfer thereof is subject to, all restrictions imposed upon transfers or assignments by this Agreement; and
6. Copies of the articles of incorporation, bylaws or other governing documents of the corporation or limited liability company, including resolutions of the Board of Directors authorizing entry into this Agreement, shall be furnished to us.
Transfers of ownership interests in the corporation or limited liability company will be subject to Section 13.B. above. You agree to remain personally liable under this Agreement as if the transfer to the corporation or limited liability company did not occur.
D. Our Right of First Refusal.
1. Any party who holds an interest (as we reasonably determine) in you or in the Franchised Business and who desires to accept any bona fide offer from a third party to purchase his interest shall notify us in writing of each such offer and, except as otherwise provided in this Agreement, we shall have the right and option, exercisable within thirty (30) days after receipt of such written notification, to send written notice to the seller that we intend to purchase the seller’s interest on the same terms and conditions offered by the third party less any amount of the purchase price attributable to fees payable to brokers or intermediaries, the Proprietary Marks or the System. Any material change in the terms of any offer prior to closing shall constitute a new offer subject to the same right of first refusal by us as in the case of an initial offer. In the event that we elect to purchase the seller’s interest, closing on such purchase must occur by the later of: (a) the closing date specified in the third party offer; or (b) within thirty (30) days from the date of notice to the seller of our election to purchase. Our right to exercise the option afforded by this Section 13.D. shall not constitute a waiver of any other provision of this Agreement, including all of the requirements of this Section 13 with respect to a proposed transfer.
2. In the event the consideration, terms and/or conditions offered by a third party are such that we may not reasonably be required to furnish the same consideration, terms and/or conditions, then we may purchase the Franchised Business proposed to be sold for the reasonable equivalent in cash. If the parties cannot agree, within a reasonable time, on the reasonable equivalent in cash of the consideration, terms and/or conditions offered by a third party, then the reasonable equivalent will be determined by three independent appraisers who collectively will conduct one appraisal. We will appoint one appraiser, you will appoint one appraiser and the two party-appointed appraisers will appoint the third appraiser. You and we agree to select our respective appraisers within fifteen (15) days after we notify you that we are exercising our right of first refusal, and the two appraisers so chosen are obligated to appoint the third appraiser within fifteen (15) days after the date on which the last of the two party- appointed appraisers was appointed. You and we will bear the cost of our own appraisers and share equally the fees and expenses of the third appraiser chosen by the two party-appointed appraisers. The
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appraisers are obligated to complete their appraisal within thirty (30) days after the third appraiser’s appointment.
E. Transfer Upon Death or Mental Incapacity. Upon the death, mental incapacity or disability of you (if you are a natural person) or that of any owner who is a natural person, we shall consent to the transfer of said interest in you, the Franchised Business or this Agreement to the spouse, heirs or relative by blood or by marriage, of you or said owner, whether such transfer is made by will or by operation of law, if, in our sole discretion and judgment, such person or persons meet our educational, managerial and business standards; possess a good moral character, business reputation and credit rating; have the aptitude and ability to conduct the Franchised Business; have at least the same managerial and financial criteria required by new franchisees and have sufficient equity capital to operate the Franchised Business. If said transfer is not approved by us, the executor, administrator or personal representative of such person shall transfer his interest to a third party approved by us within six (6) months after such death, mental incapacity or disability. Such transfer shall be subject to our right of first refusal and to the same conditions as any inter vivos transfer.
F. Effect of Consent to Transfer. Our consent to a transfer of this Agreement and the Franchised Business or any interest in you (if you are a legal entity) does not constitute a representation as to the fairness of the terms of any contract between you and the transferee, a guarantee of the prospects of success of the Franchised Business or the transferee, or a waiver of any claims we may have against you (or your owners) or of our right to demand exact compliance with any of the terms or conditions of this Agreement or any other agreement by any transferor or transferee.
G. Operation of the Franchised Business by Us. In order to prevent any interruption of the business of the Franchised Business and any injury to the goodwill and reputation thereof which would cause harm to the Franchised Business and thereby depreciate the value thereof, you authorize us, and we shall have the right, but not the obligation, to operate said Franchised Business for so long as we deem necessary and practical, and without waiver of any other rights or remedies we may have under this Agreement, in the event that: (i) any of your owners is absent or incapacitated by reason of illness or death and that you are not, therefore, in our sole judgment, able to do the business licensed under this Agreement; or (ii) any allegation or claim is made against the Franchised Business, you or any of your principals, directors, shareholders, members, partners or employees, involving or relating to misrepresentations or any fraudulent or deceptive practice. In the event that we operate the Franchised Business, we at our option shall not be obligated to operate it for a period of more than ninety (90) days. All revenues from the operation of the Franchised Business during such period of operation by us shall be kept in a separate account and the expenses of the Franchised Business, including royalty fees, National Marketing Fees and contributions, and reasonable compensation and expenses for our representative, shall be charged to said account. If, as provided in this Section 13.G., we elect to temporarily operate the Franchised Business on your behalf, you agree to indemnify and hold us harmless from any and all claims arising from the acts and omissions of our representatives and us.
14. DEFAULT AND TERMINATION
A. Default With No Opportunity To Cure. You shall be deemed to be in default and we may, at our option, terminate this Agreement and all rights granted under this Agreement, without affording you any opportunity to cure the default, effective immediately upon receipt of notice from us to you, upon the occurrence of any of the following events:
1. If you fail, refuse or neglect to pay promptly any monies owing to us or our subsidiaries or affiliates or suppliers within ten (10) days of your receipt of notice that such monies are
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past due, or you fail to submit the financial information or other reports required by us under this Agreement;
2. If you become insolvent or make a general assignment for the benefit of creditors, or if a petition in bankruptcy is filed by you or such a petition is filed against and consented to by you, or if you are adjudicated as bankrupt, or if a bill in equity or other proceeding for the appointment of a receiver of or other custodian (permanent or temporary) of your business or assets is appointed by any court of competent jurisdiction, or if proceedings for a conference with a committee of creditors under any state, federal or foreign law should be instituted by or against you, or if a final judgment remains unsatisfied or of record for thirty (30) days or longer (unless supersedeas bond is filed), or if execution is levied against your operating location or property, or suit to foreclose any lien or mortgage against the premises or equipment is instituted against you and not dismissed within thirty (30) days, or if any substantial real or personal property of the Franchised Business shall be sold after levy thereupon by any sheriff, marshal or constable;
3. If you fail to locate an approved site for the Franchised Business within ninety (90) days from the Effective Date of this Agreement, unless otherwise agreed to in writing by us;
4. If you fail to open the Franchised Business for business within twelve (12) months from the Effective Date of this Agreement, unless otherwise agreed to in writing by us;
5. If you cease to do business at the Franchised Business for two (2) or more consecutive days, excluding holidays, or lose the right to possession of the premises upon which the Franchised Business is located or otherwise forfeit the right to do or transact business in the jurisdiction where the Franchised Business is located; provided, however, that if any such loss of possession results from the governmental exercise of the power of eminent domain, or if, through no fault of yours, the premises are damaged or destroyed by an event of Force Majeure (as defined in Section 25.F.), such that they cannot, in our judgment, reasonably be restored within one hundred twenty (120) days, then, in either such event, you shall have sixty (60) days to identify an alternative location for the operation of the Franchised Business (the “Substituted Site”) and submit all information reasonably requested by us in connection with the Substituted Site for our review and approval. Our approval of the Substituted Site shall not be unreasonably withheld, but may be conditioned upon the payment of an agreed minimum royalty fee to us during the period in which the Franchised Business is not in operation. Notwithstanding the foregoing, we shall have a right to terminate this Agreement if you are not in possession of the Substituted Site and open for business to the general public within five (5) months of your receipt of our approval of the Substituted Site;
6. If you fail to operate and maintain the computerized POS System or other computer systems in accordance with our requirements and guidelines as outlined in the Manuals, or if you attempt to modify the POS System or other computer systems without our prior written approval;
7. If you understate by two percent (2%) or more your Gross Sales in connection with any report required to be submitted to us;
8. If you (or any of your owners) have made any material misrepresentation or omission in this Agreement or any other agreement to which you are a party with us;
9. If you (or any of your owners) in our determination (a) repeatedly engage in the excessive use of alcohol and/or abuse of drugs; or (b) engage in any one or more incidence of violence or abusive behavior within your Franchised Business jeopardizing the health, safety or welfare of employees or the public.
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10. If you, by act or omission, permit a continued violation in connection with the operation of the Franchised Business of any law, ordinance, rule or regulation of a governmental agency, in the absence of a good faith dispute over its application or legality and without promptly resorting to an appropriate administrative or judicial forum for relief therefrom;
11. If you fail to obtain and maintain all required licenses under state and local law for the establishment and operation of a retail food shop;
12. If you misuse or make any unauthorized use of the Proprietary Marks, engage in any business or market any service or products under a name or mark which is confusingly similar to the Proprietary Marks, or otherwise materially impair the goodwill associated therewith or our rights therein;
13. If a threat or danger to public health, safety or welfare results from the construction, maintenance or operation of the Franchised Business;
14. If you (or any of your owners) are or have been convicted by a trial court of, or plead or have pleaded no contest, or guilty, to, a felony or other serious crime or offense that we reasonably believe is likely to have an adverse effect on the System, the Proprietary Marks, the goodwill associated therewith or our interest therein;
15. If a judgment or a consent decree against you, or any of your officers, directors, shareholders or partners is entered in any case or proceeding involving allegations of fraud, racketeering, unfair or improper trade practices or similar claim which is likely to have an adverse effect on the System, the Proprietary Marks, the goodwill associated therewith or our interest therein;
16. If you (or any of your owners) purport to transfer any rights or obligations under this Agreement to any third party without our prior written consent, contrary to any of the terms of this Agreement;
17. If you (or any of your owners) fail to comply with any of the restrictive covenants contained in this Agreement;
18. If you (or any of your owners) disclose or divulge the contents of the Manuals or any other trade secrets or Confidential Information provided to you by us, except as otherwise expressly permitted by this Agreement;
19. If you knowingly maintain false books or records, or submit any false statements, applications or reports to us or any assignee of ours;
20. If you willfully and repeatedly engage in a course of conduct which constitutes a misrepresentation or a deceptive or unlawful act or practice in connection with your sale of the services and products offered at the Franchised Business;
21. If you fail to strictly comply with our product and quality control standards and specifications, fail to have any suppliers approved by us as required by this Agreement, or otherwise fail to meet any other significant specifications or guidelines set forth in the Manuals and do not cure such failure within 10 days after you receive written notice from us;
22. If any other franchise agreement or master franchise agreement (area development agreement) issued to you by us is terminated for any reason;
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23. If you receive three (3) or more notices of default under this Agreement during the term of this Agreement, whether or not such defaults are cured after notice;
24. If you (or any of your owners) engage in any illegal, immoral or unethical acts or any act in violation of our mission and values, as determined by us;
25. If you default under your lease agreement for the premises on which the Franchised Business is located, or under any other agreement to which you are party with us, or any parent or subsidiary corporation or any other affiliated entity of ours, and fail to cure said default within the grace period (if any) provided for in such agreement, regardless of whether we in fact terminate such agreement;
26. If you relocate the Franchised Business without obtaining our prior written approval;
27. If your entering into this Agreement or operating thereunder violates or breaches any confidentiality or non-competition agreement previously existing between you and others prior to your entry of this Agreement;
28. If you fail to maintain at all times a qualified Operating Principal meeting the requirements of Section 3.B. hereof; or
29. If your (or any of your owners’) assets, property or interests are blocked under any Anti-Terrorism Laws, or you (or any of your owners) otherwise violate any such law, ordinance or regulation.
B. Default With Thirty (30) Day Opportunity To Cure. Except as otherwise provided in Section 14.A. of this Agreement, you shall have thirty (30) days after receiving from us a written notice of default within which to remedy any default described in this Section 14.B. and provide evidence thereof to us. If any such default is not cured within that time, or such longer period as applicable law may require, this Agreement, at our option, shall terminate without further notice to you effective immediately upon the expiration of the thirty (30) day period or such longer period as applicable law may require. You shall be in default under this Agreement for any failure to comply substantially with any of the requirements imposed by this Agreement, as it may from time to time reasonably be supplemented by updates to the Manuals, or any part thereof including Corporate Policy Directives, or for any failure to carry out the terms of this Agreement in good faith. Such defaults shall include, without limitation, the occurrence of any of the following events:
1. If you fail to maintain any of the standards or procedures prescribed by us in this Agreement, the Manuals, or any part thereof, any other franchise agreement between you and us, or any other written agreements between you and us or otherwise;
2. If you fail to comply with your duties set forth in Section 6 of this Agreement or to perform any obligation owing to us or to observe any covenant or agreement made by you, whether such obligation, covenant or agreement is set forth in this Agreement or in any other agreement with us including, but not limited to, any other franchise agreement by and between you and us or any entity related to us;
3. If you fail to adequately promote the Franchised Business as provided in the Manuals or otherwise in writing;
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4. If you fail to maintain and timely submit to us any (a) reports required pursuant to Section 10 of this Agreement, including, but not limited to, financial statements, weekly, monthly and other reports of Gross Sales and copies of tax returns; or (b) any reports, compliance items or other documentary items referenced in this Agreement, in the Manuals as updated and revised, Corporate Policy Directives, or otherwise, as we may designate from time to time;
5. If you fail to maintain our quality control standards with respect to your use of signage and other uses of the Proprietary Marks;
6. If you fail to attend and successfully complete any mandatory training program, convention, telephone conference call, or other mandatory event, unless attendance is excused or waived, in writing, by us; or
7. If you fail to obtain our prior written approval of any and all advertising, marketing or promotional plans and materials in whatever form used by you in connection with your promotion of the Franchised Business or otherwise fail to comply with our policies and procedures with respect to advertising, marketing or promotion.
C. No Right or Remedy. No right or remedy conferred upon or reserved to us by this Agreement is exclusive of any other right or remedy provided or permitted by law or equity.
D. Default and Termination. The events of default and grounds for termination described in this Section 14 shall be in addition to any other grounds for termination contained elsewhere in this Agreement or otherwise.
E. Right to Purchase. In the event of termination of this Agreement for any reason, including, but not limited to, a default under this Section 14, we shall have the right and option to purchase your interest in the tangible assets of the Franchised Business as set forth in Section 13.D and Section 15.K, as applicable. In the event that we elect to purchase your interest in said tangible assets, you shall also execute an assignment of the lease for the premises of the Franchised Business.
15. OBLIGATIONS UPON TERMINATION
Upon termination or expiration of this Agreement, all rights granted under this Agreement to you shall forthwith terminate, and you shall observe and perform the following:
A. Cessation of Operation. You shall immediately cease to operate the Franchised Business and shall not thereafter, directly or indirectly, represent to the public or hold yourself out as a franchisee of ours.
B. Cessation of Use of Proprietary Marks. You shall immediately and permanently cease to use, in any manner whatsoever, any equipment, format, confidential methods, customer data base, programs, literature, procedures and techniques associated with the System, the name(s) TROPICAL SMOOTHIE®, TROPICAL SMOOTHIE CAFÉ® and any other Proprietary Marks and distinctive trade dress, forms, slogans, uniforms, signs, symbols or devices associated with the System. In particular, you shall cease to use, without limitation, all signs, fixtures, furniture, equipment, advertising materials or promotional displays, uniforms, stationery, forms and any other articles which display the Proprietary Marks associated with the System.
C. Cancellation of Name. You shall take such action as may be necessary to cancel any assumed name or equivalent registration which contains the Proprietary Marks or any of our other
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trademarks, trade names or service marks, and you shall furnish us with evidence satisfactory to us of compliance with this obligation within thirty (30) days after termination or expiration of this Agreement.
D. Optional Assignment of Lease. You shall, at our option pursuant to Section 14.E. above, assign to us any interest which you have in any lease or sublease for the premises of the Franchised Business. In the event we elect to exercise our option to acquire such lease or sublease, we shall pay for any furniture, equipment, supplies and signs acquired by us as a result of such assignment, at your cost or fair market value (whichever is less), less any sums of money owed by you to us and less any sums of money necessary to upgrade and renovate the premises to meet our then current standards for a TROPICAL SMOOTHIE CAFÉ® store and less any sums necessary to acquire clear title to the lease or sublease interest. In the event that we are unable to agree on the fair market value of said items, an independent appraiser shall be appointed by us to determine the fair market value of said items. The determination of said appraiser shall be final and binding upon the parties. You shall pay the costs and expenses associated with the appointment of an independent appraiser.
In the event that we do not elect to exercise our option to acquire such lease or sublease, you shall make such modifications or alterations to the premises of the Franchised Business immediately upon termination or expiration of this Agreement as may be necessary to distinguish the appearance of said premises from that of other TROPICAL SMOOTHIE CAFÉ® stores under the System, and shall make such specific additional changes thereto as we may reasonably request for that purpose. In the event you fail or refuse to comply with the requirements of this Section 15, we shall have the right to enter upon the premises of the Franchised Business without being guilty of trespass or any other tort for the purpose of making or causing to be made such changes as may be required, at your expense, which expense you agree to pay upon demand.
E. Our Right to Continue Operations. Upon the expiration or termination of this Agreement for any reason, we shall have the right (but not the obligation) to immediately enter the premises of the Franchised Business and continue to provide services to customers of the Franchised Business for such period as we deem necessary and practical to: (a) exercise our option to purchase the Franchised Business and/or assume the lease for the premises pursuant; and/or (b) prevent injury to the goodwill and reputation of the Proprietary Marks. We will be responsible for all operating expenses of the Franchised Business during such period of time. We shall have no other obligations to you in connection with our operation of the Franchised Business following the termination or expiration of this Agreement.
F. Non-Usage of Marks. You agree, in the event you continue to operate or subsequently begin to operate any other business, not to use any reproduction, counterfeit, copy or colorable imitation of the Proprietary Marks or trade dress, either in connection with such other business or the promotion thereof, which is likely to cause confusion, mistake or deception, or which is likely to dilute our exclusive rights in and to the Proprietary Marks or trade dress, and agree not to utilize any designation of origin or description or representation which falsely suggests or represents an association or connection with us so as to constitute unfair competition.
G. Prompt Payment Upon Default. You shall promptly pay all sums owing to us and our subsidiaries, affiliates and suppliers. In the event of termination for your default, such sums shall include all damages, costs and expenses, including reasonable attorneys’ fees, incurred by us as a result of the default, which obligation shall give rise to and remain, until paid in full, a lien in favor of us against any and all of the personal property, machinery, fixtures, equipment and inventory owned by you and on the premises of the Franchised Business at the time of default. In addition, if this Agreement is terminated by us for cause or by you without cause, we shall be entitled, as stipulated damages and not as a penalty and solely to compensate us for lost Royalty Fees for the period after termination of this Agreement, to a sum
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equal to the average Royalty Fees earned (even if not paid) per month over the twelve (12) month period preceding the date of termination (or, if the Franchised Business was not open throughout such twelve (12) period, then the average Royalty Fees earned per month for the period in which the Franchised Business was open), multiplied by: (i) eighteen (18) or (ii) the number of months remaining in the then- current term of this Agreement, whichever is less.
H. Payment of Costs. You shall pay to us all damages, costs and expenses, including reasonable attorneys’ fees, incurred by us subsequent to the termination or expiration of this Agreement in obtaining injunctive or other relief for the enforcement of any provision of this Section 15 or any other obligation under this Agreement.
I. Return of Materials. You shall immediately turn over to us all copies of all materials in your possession including the Manuals, all records, files, instructions, correspondence, customer database, brochures, agreements, disclosure statements and any and all other materials relating to the operation of the Franchised Business in your possession, and all copies thereof (all of which are acknowledged to be our property), and shall retain no copy or record of any of the foregoing, excepting only your copy of this Agreement, any correspondence between you and us, and any other documents which you reasonably need for compliance with any provision of law. In addition to the foregoing, you shall deliver to us a complete list of all persons employed by you during the three (3) years immediately preceding termination, together with all employment files for each employee on such list. All costs of delivering all materials required by this Section 15.I. shall be borne by you.
J. Assignment of Telephone Listings. You shall promptly notify the appropriate telephone company and all telephone directory listing agencies of the termination or expiration of your right to use any telephone number and any regular, classified or other telephone directory listings associated with any Proprietary Marks and authorize the transfer of same to us or, at our direction, instruct the telephone company to forward all calls made to the telephone numbers to numbers we specify. You must sign and deliver to us our standard form of Conditional Assignment of Telephone Numbers and Listings (the current form of which is attached as an exhibit to our Franchise Disclosure Document), simultaneous with your execution of this Agreement. You acknowledge that, as between us and you, we have the sole right to and interest in all telephone numbers and directory listings associated with any Proprietary Marks. You authorize us, and appoint us and any officer of ours as your attorney in fact, to direct the appropriate telephone company and all listing agencies to transfer all such listings to us upon termination or expiration of this Agreement.
K. Option to Purchase. Upon expiration or termination of this Agreement, we shall have the right (but not the obligation) to purchase any or all of the furnishings, equipment, signs, fixtures, supplies, materials and other assets related to the operation of the Franchised Business, at your cost or fair market value, whichever is less. If the parties cannot agree on fair market value within a reasonable time, the fair market value will be determined by three independent appraisers who collectively will conduct one appraisal. We will appoint one appraiser, you will appoint one appraiser and the two party-appointed appraisers will appoint the third appraiser. You and we agree to select our respective appraisers within fifteen (15) days after we notify you that we are exercising our option to purchase the assets of the Franchised Business, and the two appraisers so chosen are obligated to appoint the third appraiser within fifteen (15) days after the date on which the last of the two party-appointed appraisers was appointed. You and we will bear the cost of our own appraisers and share equally the fees and expenses of the third appraiser chosen by the two party-appointed appraisers. The appraisers are obligated to complete their appraisal within thirty (30) days after the third appraiser’s appointment. With respect to our option under this Section, we shall purchase assets only and shall assume no liabilities. Our election to purchase the assets must be exercised by written notice to you within thirty (30) days after termination or expiration of this Agreement. If we elect to exercise any such option, we shall have the right to set off from the
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purchase price: (a) all amounts due from you to us or any of our affiliates; (b) your portion of the cost of any appraisal conducted hereunder; and (c) any costs incurred in connection with any escrow arrangement (including reasonable legal fees and costs). We shall have the unrestricted right to assign this option to any other party, without your consent.
L. Covenant of Further Assurances. You shall execute any legal document that may be necessary to effectuate the termination of this Agreement and shall furnish to us, within thirty (30) days after the effective date of termination, written evidence satisfactory to us of your compliance with the foregoing obligations.
M. Compliance with Covenants. You shall comply with all applicable covenants that, by their nature, survive expiration or termination of this Agreement, including those contained in Section 9 (confidentiality) and Section 16 (non-competition and non-solicitation) of this Agreement.
N. No Further Interest. Other than as specifically set forth above, you shall have no interest in the Franchised Business upon termination or expiration of this Agreement.
16. COVENANTS
A. Best Efforts. You covenant that during the term of this Agreement, and subject to the post-termination provisions contained in this Agreement, and except as otherwise approved in writing by us, you will devote your full time, energy and best efforts to the efficient and effective management and operation of the Franchised Business.
B. In-Term Restrictive Covenants. You and your owners specifically acknowledge that, pursuant to this Agreement, you and they will receive access to valuable specialized training and Confidential Information which are beyond your and their present skills and experience, including, without limitation, information regarding the business, promotional, sales, marketing and operational methods and techniques of the System. You and your owners further acknowledge that such specialized training and Confidential Information provide a competitive advantage, and that gaining access thereto is a primary reason for entering into this Agreement. Accordingly, you and your owners covenant that, with respect to you, during the term of this Agreement (or, with respect to each of the owners, for so long as such person satisfies the definition of “owner” under this Agreement), except as otherwise approved in writing by us, neither you nor any of your owners shall, directly or indirectly, for yourself or themselves or through, on behalf of or in conjunction with any other person or legal entity:
1. Divert or attempt to divert any business or customer of TROPICAL SMOOTHIE CAFÉ® stores to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Proprietary Marks and the System;
2. Employ or seek to employ any person who is at that time employed by us or by any other franchisee or multi-unit operator of ours, or otherwise directly or indirectly induce such person to leave the employ of said party;
3. Except with respect to TROPICAL SMOOTHIE CAFÉ® stores operated under valid agreements with us, own, maintain, operate, engage in, be employed by, advise, assist, invest in, franchise, make loans to or have any financial or beneficial interest in any business or facility which is the same as or substantially similar to a TROPICAL SMOOTHIE CAFÉ® store (including, without limitation, any restaurant or food service facility owning, operating or managing, or granting franchises or licenses to others to do so, any business that features smoothies as a primary menu item and/or where fifty
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percent (50%) or more of the menu items consist of the same or similar items as those typically offered by a TROPICAL SMOOTHIE CAFÉ® store), wherever located;
4. Sell smoothie drinks, specialty sandwiches, wraps, or any other related products in any venue other than through, and on the premises of, the Franchised Business (with the exception of any authorized catering activities carried out through the Franchised Business).
C. Post-Term Restrictive Covenants. You and your owners covenant that, with respect to you, for a continuous uninterrupted period commencing upon the expiration or termination of this Agreement for any reason or, with respect to each of the owners, commencing on the earlier of: (i) the expiration or termination of this Agreement for any reason, or (ii) the time such person ceases to satisfy the definition of “owner” under this Agreement, and continuing for two (2) years thereafter, except as otherwise approved in writing by us, neither you nor any of your owners shall, directly or indirectly, for themselves or through, on behalf of or in conjunction with any other person or legal entity:
1. Divert or attempt to divert any business or customer of TROPICAL SMOOTHIE CAFÉ® stores to any competitor, by direct or indirect inducement or otherwise, or do or perform, directly or indirectly, any other act injurious or prejudicial to the goodwill associated with the Proprietary Marks and the System;
2. Employ or seek to employ any person who is at that time employed by us or by any other franchisee or multi-unit operator of ours, or otherwise directly or indirectly induce such person to leave his or her employment; or
3. Except with respect to TROPICAL SMOOTHIE CAFÉ® stores operated under valid agreements with us, own, maintain, operate, engage in, be employed by, advise, assist, invest in, franchise, make loans to or have any financial or beneficial interest in any business or facility which is the same as or substantially similar to a TROPICAL SMOOTHIE CAFÉ® store (including, without limitation, any restaurant or food service facility owning, operating or managing, or granting franchises or licenses to others to do so, any business that features smoothies as a primary menu item and/or where fifty percent (50%) or more of the menu items consist of the same or similar items as those typically offered by a TROPICAL SMOOTHIE CAFÉ® store), and which is located within a radius of five (5) miles of the approved Site or the location of any company owned or franchised TROPICAL SMOOTHIE CAFÉ® store which is in existence on the date of expiration or termination of this Agreement.
If any person restricted by this Section refuses voluntarily to comply with the foregoing obligations, the two (2) year period shall be extended by the period of non-compliance.
D. No Undue Hardship. You and your owners acknowledge and agree that the covenants not to compete set forth in this Agreement are fair and reasonable and will not impose any undue hardship on you or them, since you and they have other considerable skills, experience and education which afford you and your owners the opportunity to derive income from other endeavors. If the period of time or the geographic area specified for any of the covenants in this Section 16 should be adjudged unreasonable in any proceeding, then the period of time will be reduced by such number of months or the area will be reduced by the elimination of such portion thereof, or both, so that such restrictions may be enforced in such area and for such time as is adjudged to be reasonable.
E. Inapplicability of Restrictions. Sections 16.B. and 16.C. of this Agreement shall not apply to the ownership by you or your owners of less than a five percent (5%) beneficial interest in the outstanding equity securities of any publicly-held corporation.
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F. Independence of Covenants. The parties agree that each of the covenants in this Agreement shall be construed as independent of any other covenant or provision of this Agreement. If any or all portions of the covenants in this Section 16 is held unreasonable or unenforceable by a court or agency having valid jurisdiction in an unappealed final decision to which we are a party, you and your owners expressly agree to be bound by any lesser covenant subsumed within the terms of such covenant that imposes the maximum duty permitted by law, as if the resulting covenant were separately stated in and made a part of this Agreement.
G. Mission. You agree to support our mission and to conduct the Franchised Business in accordance with our operating policies and stated principles.
H. Modification of Covenants. You and your owners understand and acknowledge that we shall have the right, in our sole discretion, to reduce the scope of any restrictive covenant set forth in this Agreement or any portion thereof, without your or their consent, effective immediately upon receipt by you or them of written notice thereof, and you and your owners agree to promptly comply with any covenant as modified, which shall be fully enforceable notwithstanding anything to the contrary in this Agreement.
I. Enforcement of Covenants. You and your owners expressly agree that the existence of any claims you or they may have against us, whether arising under this Agreement or otherwise, shall not constitute a defense to the enforcement by us of the covenants in this Agreement.
J. Injunctive Relief. You and your owners acknowledge that any failure to comply with the requirements of this Section 16 shall constitute a material event of default under this Agreement and further acknowledge that such a violation would result in immediate and irreparable injury to us for which no adequate remedy at law will be available. Accordingly, you and your owners consent to the entry of an injunction prohibiting any conduct by you or them in violation of the covenants not to compete set forth in this Agreement, without the requirement that we post a bond. You and your owners expressly agree that it may be presumed conclusively that any violation of the terms of said covenants not to compete was accomplished by and through your unlawful utilization of our Confidential Information, know-how, methods and procedures. You and your owners agree to pay all court costs and reasonable attorneys’ fees and costs that we incur in connection with the enforcement of this Section 16, including all costs and expenses for obtaining specific performance, or an injunction against the violation, of the requirements of this Section 16, or any part of it.
K. Execution of Covenants by Management. You agree to require and obtain the execution of covenants similar to those set forth in Section 9 (regarding confidentiality) and Section 16 (regarding non-competition and non-solicitation), including covenants applicable upon the termination of a person’s relationship with you, from your officers, directors, managers and, at our request, any other personnel. These covenants must be substantially in the form set forth in Exhibit “G”; provided, however, that we reserve the right, in our sole discretion, to decrease the scope of the restrictive covenants set forth in Exhibit “G” or eliminate such restrictive covenants altogether for any person that is required to execute such agreement. Your failure to obtain execution of any covenants required by this Section shall constitute a material event of default under this Agreement.
L. Non-solicitation. You and your owners may not solicit other franchisees or Area Developers, nor use available lists of franchisees or Area Developers, for any commercial or other purpose other than purposes directly related to the operations of the Franchised Business.
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17. CHANGES AND MODIFICATIONS
This Agreement may be modified only by a written agreement signed by you and us. We reserve and shall have the sole right to make changes in the Manuals, including all parts thereof, the System and the Proprietary Marks at any time and without prior notice to you. You shall promptly alter any signs, products, business materials, business methods, or related items, at your sole cost and expense, upon receipt of written notice of such change or modification in order to conform to our revised specifications. In the event that any improvement or addition to the Manuals, the System or the Proprietary Marks is developed by you, then you agree such improvement or addition is owned by us, or, upon our written agreement, you will grant to us an irrevocable, world-wide, exclusive, royalty-free license, with the right to sublicense such improvement or addition.
You understand and agree that due to changes in competitive circumstances, presently unforeseen changes in the needs of customers, and/or presently unforeseen technological innovations, the System must not remain static, in order that it best serve the interests of us, our franchisees and the System. Accordingly, you expressly understand and agree that we may from time to time change the components of the System, including, but not limited to, altering the programs, services, methods, standards, forms, policies and procedures of that System; adding to, deleting from or modifying those programs, products and services which the Franchised Business is authorized to offer; and changing, improving or modifying the Proprietary Marks. Subject to the other provisions of this Agreement, you expressly agree to abide by any such modifications, changes, additions, deletions and alterations.
18. TAXES AND INDEBTEDNESS
A. Payment. You shall promptly pay when due, all taxes levied or assessed by any federal, state or local tax authority and any and all other indebtedness incurred by you in the operation of the Franchised Business. You shall pay to us an amount equal to any sales tax, gross receipts tax or similar tax imposed on us with respect to any payments to us required under this Agreement, unless the tax is credited against income tax otherwise payable by us.
B. Dispute. In the event of any bona fide dispute as to liability for taxes assessed or other indebtedness, you may contest the validity or the amount of the tax or indebtedness in accordance with procedures of the taxing authority or applicable law; provided, however, in no event shall you permit a tax sale or seizure by levy of execution or similar writ or warrant, or attachment by a creditor, to occur against the premises of the Franchised Business or any improvements thereon.
C. Compliance with Federal, State and Local Laws. You shall comply with all federal, state, and local laws, rules and regulations, and shall timely obtain any and all permits, certificates, licenses and bonds necessary for the full and proper operation and management of the Franchised Business, including, without limitation, a license to do business and provide services, fictitious name registration and sales tax permits. Copies of all subsequent inspection reports, warnings, certificates and ratings, issued by any governmental entity during the term of this Agreement in connection with the conduct of the Franchised Business which indicate your failure to meet or maintain the highest governmental standards or less than full compliance by you with any applicable law, rule or regulation, shall be forwarded to us by you within three (3) days of your receipt thereof.
D. Duty to Notify. You shall notify us in writing within three (3) days of the commencement of any action, suit or proceeding, and of the issuance of any order, writ, injunction, award or decree of any court, agency or other governmental instrumentality, which may adversely affect the operation or financial condition of the Franchised Business. Additionally, any and all consumer related complaints shall be answered by you within fifteen (15) days after receipt thereof or such shorter period
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of time as may be provided in said complaint. A copy of said answer shall be forwarded to us within three (3) days of the date that said answer is forwarded to the complainant.
19. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
A. Independent Contractor.
1. It is understood and agreed by the parties to this Agreement that this Agreement does not create a fiduciary relationship between them, that you shall be an independent contractor, and that nothing in this Agreement is intended to make either party an agent, legal representative, subsidiary, joint venturer, partner, employee or servant of the other for any purpose whatsoever.
2. During the term of this Agreement and any extensions or renewals of this Agreement, you shall hold yourself out to the public as an independent contractor operating the Franchised Business pursuant to a license from us and as an authorized user of the System and the Proprietary Marks which are owned by us. You agree to take such affirmative action as may be necessary to do so, including, without limitation, exhibiting to customers and others such notices of independent ownership as we may require from time to time, in a conspicuous place on the premises of the Franchised Business and on such forms, business cards, stationery and advertising and other materials as we may specify.
3. We shall not have the power to hire or fire your employees, and except as expressly provided in this Agreement, we may not control your funds or expenditures thereof or in any other way exercise dominion or control over the Franchised Business.
B. No Liability. It is understood and agreed that nothing in this Agreement authorizes you to make any contract, agreement, warranty or representation on our behalf, or to incur any debt or other obligation in our name, and that we shall in no event assume liability for or be deemed liable under this Agreement as a result of any such action or by reason of any act or omission of you in your conduct of the Franchised Business or any claim or judgment arising therefrom against us. You agree at all times to defend at your own cost, and to indemnify and hold harmless to the fullest extent permitted by law, us, our corporate parent, the corporate subsidiaries, affiliates, successors, assigns and designees of either entity, and the respective directors, officers, employees, agents, shareholders, designees, and representatives of each (we and all others referred to collectively as “Indemnities”) from all losses and expenses incurred in connection with any action, suit, proceeding, claim, demand, investigation, or formal or informal inquiry (regardless of whether same is reduced to judgment) or any settlement thereof which arises out of or is based upon any of the following: your alleged infringement or any other violation or any other alleged violation of any patent, trademark or copyright or other proprietary right owned or controlled by third parties; your alleged violation or breach of any contract, federal, state or local law, regulation, ruling, standard or directive of any industry standard; libel, slander or any other form of defamation by you; your alleged violation or breach of any warranty, representation, agreement or obligation in this Agreement; any acts, errors or omissions of you or any of your agents, servants, employees, contractors, partners, proprietors, affiliates, or representatives; latent or other defects in the Franchised Business, whether or not discoverable by you or us; the inaccuracy, lack of authenticity or nondisclosure of any information by any customer of the Franchised Business; any services or products provided by you at, from or related to the operation of the Franchised Business; any services or products provided by any affiliated or nonaffiliated participating entity; any action by any customer of the Franchised Business; and, any damage to the property of you or us, our agents or employees, or any third person, firm or corporation, whether or not such losses, claims, costs, expenses, damages, or liabilities were actually or allegedly caused wholly or in part through the active or passive negligence of us or any
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of our agents or employees, or resulted from any strict liability imposed on us or any of our agents or employees.
C. No False Representations. Except as otherwise expressly authorized by this Agreement, neither party to this Agreement will make any express or implied agreements, warranties, guarantees or representations or incur any debt in the name of or on behalf of the other party, or represent that the relationship between you and us is other than that of Franchisor and Franchisee. We do not assume any liability, and will not be deemed liable, for any agreements, representations, or warranties made by you which are not expressly authorized under this Agreement, nor will we be obligated for any damages to any person or property which directly or indirectly arise from or relate to the operation of the Franchised Business franchised by this Agreement.
20. APPROVALS AND WAIVERS
A. Written Consent. Whenever this Agreement requires our prior approval or consent, you shall make a timely written request to us therefor and such approval or consent shall be obtained in writing.
B. No Waiver. No failure by us to exercise any power reserved to us by this Agreement, or to insist upon strict compliance by you with any obligation or condition in this Agreement, and no custom or practice of the parties at variance with the terms of this Agreement, shall constitute a waiver of our right to demand exact compliance with any of the terms in this Agreement. Our waiver of any particular default by you shall not affect or impair our rights with respect to any subsequent default of the same, similar or different nature, nor shall any delay, forbearance or omission of ours to exercise any power or right arising out of any breach or default by you of any of the terms, provisions or covenants of this Agreement affect or impair our right to exercise the same, nor shall such constitute a waiver by us of any right under this Agreement or the right to declare any subsequent breach or default and to terminate this Franchise Agreement prior to the expiration of its term. Subsequent acceptance by us of any payments due to us under this Agreement shall not be deemed to be a waiver by us of any preceding breach by you of any terms, covenants or conditions of this Agreement.
21. NOTICES
Any and all notices required or permitted under this Agreement shall be in writing and shall be personally delivered or mailed by regular U.S. mail, or by certified mail, return receipt requested, or dispatched by overnight delivery service, to the respective parties at the following addresses unless and until a different address has been designated by written notice to the other party:
Notices to Us: Tropical Smoothie Cafe, LLC 7000 Peachtree Dunwoody Road, Building #2, Floor #3 Atlanta, Georgia 30328 Attn: Mike Rotondo, CEO
With a copy to: Tropical Smoothie Cafe, LLC 7000 Peachtree Dunwoody Road, Building #2, Floor #3 Atlanta, Georgia 30328 Attn: Legal Department
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Notices to You: ______
With a copy to: ______
Any notice shall be deemed to have been given at the date and time of mailing.
22. RELEASE OF PRIOR CLAIMS
By executing this Agreement, you, individually and on behalf of your heirs, legal representatives, successors and assigns, and each assignee of this Agreement by accepting assignment of the same, forever releases and discharges us and our officers, directors, employees, agents and servants, including our subsidiary and affiliated corporations, their respective officers, directors, employees, agents and servants, from any and all claims relating to or arising under any franchise agreement or any other agreement between the parties executed prior to the date of this Agreement including, but not limited to, any and all claims, whether presently known or unknown, suspected or unsuspected, arising under the franchise, securities or antitrust laws of the United States or of any state or territory thereof.
23. AMENDMENT OF PRIOR AGREEMENTS
You agree for this Agreement to amend any existing Franchise Agreement(s) you have with us to include the following provisions of this Agreement: Sections 4.B and 11.B. (regarding exclusive website), Section 13 (regarding transfers) and Section 26 (regarding enforcement). By you signing this Agreement as Franchisee, you acknowledge and understand that this Section 23 amends any and all of your existing Franchise Agreement(s) with us, and that such amendment will survive the termination or expiration of this Agreement. These amendments are incorporated into said Franchise Agreement(s) and supersede any conflicting provisions in them.
24. ENTIRE AGREEMENT
This Agreement, all exhibits to this Agreement and all ancillary agreements executed contemporaneously with this Agreement constitute the entire agreement between the parties with reference to the subject matter of this Agreement and supersede any and all prior negotiations, understandings, representations and agreements. Notwithstanding the foregoing, nothing in this Agreement shall disclaim, or require you to waive reliance on, any representation that we made in the most recent franchise disclosure document (including its exhibits and amendments) that we delivered to you or your representative, subject to any changes to the contract terms and conditions described in that franchise disclosure document as reflected in this Agreement (including any riders or addenda signed at the same time as this Agreement). No amendment, change or variance from this Agreement shall be binding on the parties unless mutually agreed to by both parties and executed by themselves or their authorized officers or agents in writing.
25. NATURE AND SCOPE, SEVERABILITY AND CONSTRUCTION
A. Nature and Scope. We and you have entered into this Agreement for the sole purpose of authorizing you to use the intellectual property rights licensed by this Agreement in the operation of a
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single business operation at the designated location during the term of this Agreement in which those specific items designated by us for sale in such locations are offered for sale in individual, face-to-face transactions with patrons visiting this fixed location (and equivalent telephone or mail transactions accepted as a convenience to that customer group). All consideration being furnished by you to us during the course of performance of this Agreement has been determined based on the limited rights and other limitations expressed in this Agreement. No other rights have been bargained for or paid for. This provision is intended to define the nature and extent of the parties’ mutual contractual intent, there being no mutual intent to enter into contract relations, whether by agreement or by implication, other than as set forth above. The parties further acknowledge that these limitations are intended to achieve the highest possible degree of certainty in the definition of the contract being formed, in recognition of the fact that uncertainty creates economic risks for both parties which, if not addressed as provided in this Agreement, would affect the economic terms of this bargain.
B. Severability. Every part of this Agreement is severable. If for any reason any part of this Agreement is held to be invalid, that determination will not impair any other part, or the rest, of this Agreement; provided, however, that if we determine that such finding of invalidity or illegality adversely affects the basic consideration of this Agreement, we, at our option, may terminate this Agreement. If any part of this Agreement that restricts competitive activity is deemed unenforceable by virtue of its scope in terms of geographical area, type of business activity prohibited and/or length of time, but could be rendered enforceable by reducing any part or all of it, you and we agree that it will be enforced to the fullest extent permissible under applicable law and public policy.
If any applicable law requires a greater prior notice of the termination of or refusal to enter into a successor franchise than is required hereunder, a different standard of “good cause”, or the taking of some other action not required hereunder, the prior notice, “good cause” standard and/or other action required by such law shall be substituted for the comparable provisions hereof. If any part of this Agreement or any specification, standard or operating procedure prescribed by us is invalid or unenforceable under applicable law, we may modify such invalid or unenforceable provision, specification, standard or operating procedure to the extent required to make it valid and enforceable.
C. Covenants. You expressly agree to be bound by any promise or covenant imposing the maximum duty permitted by law which is subsumed within the terms of any provision of this Agreement, as though you were separately articulated in and made a part of this Agreement, that may result from striking from any of the provisions of this Agreement any portion or portions which a court may hold to be unreasonable and unenforceable in a final decision to which we are a party, or from reducing the scope of any promise or covenant to the extent required to comply with such a court order.
D. Construction. All captions in this Agreement are intended solely for the convenience of the parties, and none of the captions shall be deemed to affect the meaning or construction of any provision of this Agreement or any part thereof, nor shall such captions otherwise be given any legal effect. “A or B” means “A” or “B” or both. All references in this Agreement to the masculine, neuter or singular shall be construed to include the feminine, neuter or plural, where applicable. Unless otherwise specified, all references to number of days means calendar days and not business days. This Agreement may be executed in multiple counterparts, each of which when so executed shall be deemed an original, and all of which shall constitute one and the same instrument.
E. Certain Definitions. An “affiliate” of a named person means any person or entity that is controlled by, controlling or under common control with the named person. The term “control” or “controlling interest” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of an entity, whether through ownership of voting securities, by contract or otherwise. The term “owners” mean those persons and entities which, collectively and
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individually, hold an ownership interest in you and in any entity directly or indirectly controlling you. The term “person” means any natural person, corporation, partnership (general or limited), limited liability company, or other artificial or legal entity.
F. Force Majeure. If, as a result of hurricane, tornado, typhoon, flooding, lightning, blizzard and other unusually severe weather, earthquake, avalanche, volcanic eruption, fire, riot, insurrection, war, explosion, unavoidable calamity or other act of God (a “Force Majeure”), compliance by any party with the terms of this Agreement is rendered impossible or would otherwise create an undue hardship upon any party, all parties shall be excused from their respective obligations under this Agreement for the duration of the Force Majeure and for a reasonable recovery period thereafter, but otherwise this Agreement shall continue in full force and effect. However, such delays or events do not excuse payments of amounts owed at any time.
G. Timing is of the Essence. Time is of the essence. It will be a material breach of this Agreement to fail to perform any obligation within the time required or permitted by this Agreement. In computing time periods from one date to a later date, the words “from” and “commencing on” (and the like) mean “from and including”; and the words “to,” “until” and “ending on” (and the like) mean “to but excluding.” Indications of time of day mean Atlanta, Georgia time.
H. No Third Party Beneficiaries. Except as otherwise expressly provided herein, nothing in this Agreement is intended, nor shall be deemed, to confer upon any person or legal entity other than you, us, our officers, directors and personnel, and such of your and our respective successors and assigns as may be contemplated (and, as to you, expressly authorized pursuant to Section 13), any rights or remedies under or as a result of this Agreement.
I. Agreement Effective Upon Execution by Franchisor. This Agreement will not become effective until signed by one of our authorized representatives. You and we each agree to promptly execute and deliver such further documents and take such further action as may be necessary in order to carry out the intent and purposes of this Agreement.
26. ENFORCEMENT
A. Mediation. WITH THE EXCEPTION OF ANY CONTROVERSY OR CLAIM RELATING TO THE OWNERSHIP OR IMPROPER USE OF OUR PROPRIETARY MARKS OR CONFIDENTIAL INFORMATION, AND EXCEPT FOR EQUITABLE CLAIMS, THE PARTIES AGREE TO SUBMIT ANY CLAIM, CONTROVERSY OR DISPUTE BETWEEN OR INVOLVING US OR ANY OF OUR AFFILIATES (AND OUR AND THEIR RESPECTIVE SHAREHOLDERS, OFFICERS, DIRECTORS, AGENTS, REPRESENTATIVES AND/OR EMPLOYEES) AND YOU (AND YOUR AGENTS, REPRESENTATIVES AND/OR EMPLOYEES, AS APPLICABLE) ARISING OUT OF OR RELATED TO: (A) THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN US AND YOU OR OUR AND YOUR RESPECTIVE AFFILIATES; (B) OUR RELATIONSHIP WITH YOU; (C) THE VALIDITY OF THIS AGREEMENT OR ANY OTHER AGREEMENT BETWEEN YOU AND US OR OUR AND YOUR RESPECTIVE AFFILIATES; OR (D) ANY SYSTEM STANDARD, TO NON-BINDING MEDIATION AT A MUTUALLY AGREEABLE LOCATION (IF YOU AND WE CANNOT AGREE ON A LOCATION, THE MEDIATION WILL BE CONDUCTED AT OUR HEADQUARTERS) PRIOR TO BRINGING SUCH CLAIM, CONTROVERSY OR DISPUTE IN A COURT OR BEFORE ANY OTHER TRIBUNAL. THE MEDIATION SHALL BE CONDUCTED BY EITHER A MUTUALLY-AGREED-UPON MEDIATOR OR, FAILING SUCH AGREEMENT WITHIN A REASONABLE PERIOD OF TIME (NOT TO EXCEED FIFTEEN (15) DAYS) AFTER EITHER PARTY HAS NOTIFIED THE OTHER OF ITS DESIRE TO SEEK
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MEDIATION, BY THE AMERICAN ARBITRATION ASSOCIATION IN ACCORDANCE WITH ITS COMMERCIAL MEDIATION PROCEDURES. ABSENT AGREEMENT TO THE CONTRARY, THE MEDIATOR SHALL BE EXPERIENCED IN THE MEDIATION OF DISPUTES BETWEEN FRANCHISORS AND FRANCHISEES. YOU AND WE AGREE THAT ANY STATEMENTS MADE BY EITHER YOU OR US IN ANY SUCH MEDIATION PROCEEDING WILL NOT BE ADMISSIBLE IN ANY SUBSEQUENT ARBITRATION OR LEGAL PROCEEDING. EACH PARTY WILL BEAR ITS OWN COSTS AND EXPENSES OF CONDUCTING THE MEDIATION AND SHARE EQUALLY THE COSTS OF ANY THIRD PARTIES WHO ARE REQUIRED TO PARTICIPATE. NEVERTHELESS, BOTH YOU AND WE HAVE THE RIGHT IN A PROPER CASE TO OBTAIN TEMPORARY RESTRAINING ORDERS AND TEMPORARY OR PRELIMINARY INJUNCTIVE RELIEF FROM A COURT OF COMPETENT JURISDICTION. HOWEVER, THE PARTIES MUST IMMEDIATELY AND CONTEMPORANEOUSLY SUBMIT THE DISPUTE FOR NON-BINDING MEDIATION. IF THE PARTIES ARE UNABLE TO RESOLVE THE CLAIM, CONTROVERSY OR DISPUTE WITHIN NINETY (90) DAYS AFTER THE MEDIATOR HAS BEEN CHOSEN, THEN, UNLESS SUCH TIME PERIOD IS EXTENDED BY THE WRITTEN AGREEMENT OF THE PARTIES, EITHER PARTY MAY BRING A LEGAL PROCEEDING UNDER THIS SECTION 26. THE MEDIATION PROVISIONS OF THIS AGREEMENT ARE INTENDED TO BENEFIT AND BIND CERTAIN THIRD PARTY NON-SIGNATORIES, AND ALL OF YOUR AND OUR OWNERS AND AFFILIATES.
B. Notice and Opportunity to Cure. As a mandatory condition precedent prior to your taking any legal or other action against us, whether for damages, injunctive, equitable or other relief (including, but not limited to, rescission), based upon any alleged act or omission of ours, you shall first give us ninety (90) days prior written notice and opportunity to cure such alleged act or omission, or to resolve such matter.
C. Governing Law. Except to the extent this Agreement or any particular dispute is governed by the U.S. Trademark Act of 1946 (Lanham Act, 15 U.S.C. Section 1051 and the sections following it) or other federal law, this Agreement and the relationship created hereby are governed by Georgia law, excluding any law regulating the sale of franchises or governing the relationship between a franchisor and franchisee, unless the jurisdictional requirements of such laws are met independently without reference to this Section. References to any law or regulation also refer to any successor laws or regulations and any implementing regulations for any statute, as in effect at the relevant time. References to a governmental agency also refer to any successor regulatory body that succeeds to the function of such agency.
D. Jurisdiction and Venue. You and we each consent and irrevocably submit to the exclusive jurisdiction and venue of the state and federal courts of competent jurisdiction for the City of Atlanta, Georgia, and waive any objection to the jurisdiction and venue of such courts. This exclusive choice of jurisdiction and venue provision does not restrict the ability of the parties to confirm or enforce judgments or awards in any appropriate jurisdiction.
E. Waiver of Jury Trial. YOU AND WE HEREBY UNCONDITIONALLY AND IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY ACTION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE RELATIONSHIP CREATED BY THIS AGREEMENT, OR ANY OTHER AGREEMENTS BETWEEN YOU AND US AND/OR YOUR AND OUR RESPECTIVE AFFILIATES.
F. Waiver of Punitive Damages EXCEPT FOR YOUR OBLIGATIONS TO US AND CLAIMS FOR UNAUTHORIZED USE OF THE PROPRIETARY MARKS OR CONFIDENTIAL
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INFORMATION, YOU AND WE EACH WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY RIGHT TO, OR CLAIM FOR, ANY PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER. YOU AND WE ALSO AGREE THAT, IN THE EVENT OF A DISPUTE BETWEEN YOU AND US, THE PARTY MAKING THE CLAIM WILL BE LIMITED TO EQUITABLE RELIEF AND RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
G. Limitations of Claims ANY AND ALL CLAIMS ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR THE RELATIONSHIP BETWEEN YOU AND US MUST BE MADE BY WRITTEN NOTICE TO THE OTHER PARTY WITHIN ONE (1) YEAR FROM THE OCCURRENCE OF THE ACT OR EVENT GIVING RISE TO SUCH CLAIM OR ONE (1) YEAR FROM THE DATE ON WHICH YOU OR WE KNEW OR SHOULD HAVE KNOWN, IN THE EXERCISE OF REASONABLE DILIGENCE, OF THE FACTS GIVING RISE TO SUCH CLAIMS, WHICHEVER OCCURS FIRST, EXCEPT FOR CLAIMS FOR: (A) INDEMNIFICATION; OR (B) UNAUTHORIZED USE OF THE CONFIDENTIAL INFORMATION OR PROPRIETARY MARKS. HOWEVER, THIS PROVISION DOES NOT LIMIT OUR RIGHT TO TERMINATE THIS AGREEMENT IN ANY WAY.
H. Specific Performance/Injunctive Relief. Nothing in this Agreement shall bar our right to obtain specific performance of the provisions of this Agreement and injunctive relief against threatened conduct that will cause us loss or damage, under customary equity rules, including applicable rules for obtaining restraining orders and preliminary injunctions. You agree that we may apply for such injunctive relief, without bond, but upon due notice, in addition to such further and other relief as may be available at equity or law, and your sole remedy, in the event of the entry of such injunction, shall be the dissolution of such injunction, if warranted, upon hearing duly held (all claims for damages by reason of the wrongful issuance of any such injunction being expressly waived).
I. Cumulative Rights and Remedies. No right or remedy conferred upon or reserved to us or you by this Agreement is intended to be, nor shall be deemed, to be exclusive of any other right or remedy provided or permitted in this Agreement, by law or at equity, but each right or remedy shall be cumulative of every other right or remedy. Nothing contained herein shall bar our right to obtain injunctive relief against threatened conduct that may cause us loss or damages, including obtaining restraining orders and preliminary and permanent injunctions.
J. Private Disputes. Any dispute and any litigation will be conducted and resolved on an individual basis only and not a class-wide, multiple plaintiff or similar basis. Any such proceeding will not be consolidated with any other proceeding involving any other person, except for disputes involving affiliates of the parties to such litigation.
27. ATTORNEYS’ FEES
If a claim for amounts owed by you to us or any of our affiliates is asserted in any legal or other proceeding or if either you or we are required to enforce this Agreement in a judicial or other proceeding, the party prevailing in such proceeding will be entitled to reimbursement of its costs and expenses, including reasonable accounting and attorneys’ fees. Attorneys’ fees will include, without limitation, reasonable legal fees charged by attorneys, paralegal fees, and costs and disbursements, whether incurred prior to, or in preparation for, or contemplation of, the filing of written demand or claim, action, hearing, or proceeding to enforce the obligations of the parties under this Agreement.
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28. JOINT AND SEVERAL LIABILITY
The term “Franchisee”, “you” or “your” shall include all persons who succeed to the interest of the original Franchisee by transfer or operation of law and shall be deemed to include not only the individual or entity defined as the “Franchisee” in the introductory paragraph of this Agreement, but shall also include all partners of the entity that executes this Agreement, in the event said entity is a partnership; all shareholders of the entity that executes this Agreement, in the event said entity is a corporation; and all members of the entity that executes this Agreement, in the event said entity is a limited liability company. If two or more persons are at any time the “Franchisee” under this Agreement, whether as partners or joint venturers, their obligations and liabilities to us shall be joint and several.
29. NO WAIVER
The failure by any party to give notice of default or to pursue any remedy for a breach of this Agreement shall not affect its right to give notice of any other default or pursue any remedy upon subsequent breaches.
30. SURVIVAL
It is agreed by the parties to this Agreement that whenever performance by a party is contemplated to extend beyond the expiration or termination of this Agreement, such performance obligation shall survive the expiration or termination of this Agreement and continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement, until such performance is satisfied in full or the obligation, by its nature, expires. Examples include indemnification, payment, de-identification, post-term restrictive covenants, and dispute resolution proceedings.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties to this Agreement have duly executed, sealed and delivered this Agreement in triplicate on the day and year first above written (regardless of the actual date of signature).
FRANCHISOR:
TROPICAL SMOOTHIE CAFE, LLC
______Witness By: Mike Rotondo Its: CEO ______Witness
STATE OF ______) ) ss.: COUNTY OF ______)
The foregoing instrument was acknowledged before me this ______day of ______, in the year 200__ by ______, ______of ______. He/she is personally known to me or has produced ______as identification.
Notary: Print Name: NOTARY SEAL Notary Public, State of ______My commission expires: ______
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FRANCHISEE:
______Witness Print Name:______
______Address:______Witness ______
STATE OF ______) ) ss.: COUNTY OF ______)
The foregoing instrument was acknowledged before me this ______day of ______, in the year 200__ by ______, ______of ______. He/she is personally known to me or has produced ______as identification.
Notary: Print Name: NOTARY SEAL Notary Public, State of ______My commission expires: ______
[Signature Page to Tropical Smoothie Cafe, LLC Franchise Agreement]
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EXHIBIT “A” TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
DESIGNATED AREA FOR SELECTION OF SITE
As contemplated by Section 1.D. of the Franchise Agreement, the Designated Area is:
Check if map is attached.
You acknowledge that the Designated Area is delineated solely for the purpose of establishing a geographic area within which you will select the Site for your Franchised Business and for no other purpose. The Designated Area does not confer to you any right of exclusivity or territorial protection within the Designated Area or any other area.
TROPICAL SMOOTHIE CAFE, LLC: FRANCHISEE:
By: Sign:
Title: Print:
Date: Date:
Sign:
Print:
Date:
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EXHIBIT “B” TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
STATEMENT OF OWNERSHIP INTERESTS
Effective Date: This Statement of Ownership Interestes is current and complete as of ______, 20___
1. Form of Owner. My official name is ______. I am a (check one):
General Partnership Corporation Limited Partnership Limited Liability Company Other Specify:
2. Business Entity. I was incorporated or formed on ______, ____, under the laws of the State of ______. I have not conducted business under any name other than my corporate, limited liability company, or partnership name and the name(s) ______. The following is a list of all persons who have management rights and powers (e.g., officers, directors, managers, partners, etc.) and their positions, as of the Effective Date shown above:
Name of Person Position(s) Held ______
3. Owners. The following list includes the full name and mailing address of each person who is one my owners (as defined in the Franchise Agreement), including all shareholders, partners, members, or other investors owning or holding a direct or indirect interest in me, and fully describes the nature of each person’s interest (attach additional sheets if necessary):
Owner’s Name and Address Nature of Interest % of Ownership Interest in Franchisee
4. Operating Principal. My Operating Principal is: ______(must be one of the individuals listed in paragraph 3 above). I understand that I may not change the Operating Principal without Franchisor’s prior written approval.
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5. Governing Documents. Attached are copies of the documents and contracts governing the ownership, management and other significant aspects of the business organization (e.g., articles of incorporation or organization, partnership or shareholder agreements, etc.).
FRANCHISEE:
[Name]
By:
Name:
Title:
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EXHIBIT “C” TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
OWNERS’ GUARANTY
This Owners’ Guaranty (the “Guaranty”) is given this ______day of 20__, by the undersigned in connection with the Franchise Agreement dated ______, 20__ between TROPICAL SMOOTHIE CAFE, LLC (“Franchisor”) and ______(“Franchisee”).
In consideration of, and as an inducement to, the execution of the Franchise Agreement by Franchisor, each of the undersigned and any other parties who sign counterparts of this Guaranty (individually, a “Guarantor” and collectively, the “Guarantors”) hereby personally and unconditionally guarantee to Franchisor and its successors and assigns, that Franchisee will punctually perform its obligations and pay all amounts due under the Franchise Agreement, including (without limitation), amounts due for initial franchise fees, royalties, advertising fund contributions and purchases of equipment, materials, and supplies.
Each Guarantor has read the terms and conditions of the Franchise Agreement and acknowledges that the execution of this Guaranty and the undertakings of the owners in the Franchise Agreement are in partial consideration for, and a condition to, the granting of a franchise in the Franchise Agreement, and that Franchisor would not have granted such rights without the execution of this Guaranty and such undertakings by each Guarantor.
Each Guarantor waives:
(i) acceptance and notice of acceptance by Franchisor of the foregoing undertakings; and
(ii) notice of demand for payment of any indebtedness or nonperformance of any obligations hereby guaranteed; and
(iii) protest and notice of default to any party with respect to the indebtedness or nonperformance of any obligations hereby guaranteed; and
(iv) any right he or she may have to require that an action be brought against Franchisee or any other person as a condition of liability; and
(v) all rights to payments and claims for reimbursement or subrogation which he or she may have against Franchisee arising as a result of his or her execution of and performance under this Guaranty (including by way of counterparts); and
(vi) any and all other notices and legal or equitable defenses to which he or she may be entitled.
Each Guarantor consents and agrees that:
(i) his or her direct and immediate liability under this Guaranty will be joint and several not only with Franchisee, but also among the Guarantors; and
(ii) he or she will render any payment or performance required under the Franchise Agreement upon demand if Franchisee fails or refuses punctually to do so; and
(iii) such liability will not be contingent or conditioned upon pursuit by Franchisor of any remedies against Franchisee or any other person; and
(iv) such liability will not be diminished, relieved or otherwise affected by any subsequent rider or amendment to the Franchise Agreement or by any extension of time, credit or other indulgence
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that Franchisor may from time to time grant to Franchisee or to any other person, including, without limitation, the acceptance of any partial payment or performance, or the compromise or release of any claims, none of which will in any way modify or amend this Guaranty, which will be continuing and irrevocable throughout the term of the Franchise Agreement and for so long thereafter as there are any monies or obligations owing by Franchisee to Franchisor under the Franchise Agreement; and
(v) Franchisee’s written acknowledgment, accepted in writing by Franchisor, or the judgment of any court or arbitration panel of competent jurisdiction establishing the amount due from Franchisee will be conclusive and binding on the undersigned as Guarantors.
Each Guarantor individually, jointly and severally, also makes all of the covenants, representations, warranties and agreements of your owners set forth in the Franchise Agreement and is obligated to perform thereunder, including, without limitation, under Sections 3, 9, 13, 16 and 26 (which include, among other things, the MEDIATION OF DISPUTES and WAIVERS OF JURY TRIAL RIGHTS AND PUNITIVE DAMAGES).
Additionally, with respect to the individual designated as the Operating Principal, the Operating Principal acknowledges that the undertakings by Operating Principal under this Guaranty are made and given in partial consideration of, and as a condition to, Franchisor’s grant of franchise rights as described herein; Operating Principal individually, jointly and severally, makes all of the covenants, representations and agreements of Franchisee and Operating Principal set forth in the Franchise Agreement and is obligated to perform hereunder.
If Franchisor is required to enforce this Guaranty in an administrative, judicial or arbitration proceeding, and prevails in such proceeding, Franchisor will be entitled to reimbursement of its costs and expenses, including, but not limited to, legal and accounting fees and costs, administrative, arbitrators’ and expert witness fees, costs of investigation and proof of facts, court costs, other expenses of an administrative, judicial or arbitration proceeding and travel and living expenses, whether incurred prior to, in preparation for or in contemplation of the filing of any such proceeding. If Franchisor is required to engage legal counsel in connection with any failure by the undersigned to comply with this Guaranty, the Guarantors will reimburse Franchisor for any of the above-listed costs and expenses incurred by it.
IN WITNESS WHEREOF, each Guarantor has hereunto affixed his signature on the same day and year as the Franchise Agreement was executed.
GUARANTORS
*Name:
Name:
Name:
Name:
* Denotes individual who is Franchisee’s Operating Principal.
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EXHIBIT “D” TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
ADDENDUM TO LEASE AGREEMENT/CONDITIONAL ASSIGNMENT OF LEASE
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ADDENDUM TO LEASE AGREEMENT CONDITIONAL ASSIGNMENT OF LEASE
Landlord/Lessor:______Tenant/Lessee:______
Notice Address:______Notice Address:______
______
Franchisor: Tropical Smoothie Cafe, LLC Notice Address: 7000 Peachtree Dunwoody Road, Building #2, Floor #3 Atlanta, Georgia 30328
Date: Effective as of the Date of the Lease Between Landlord and Tenant (the “Lease”)
Leased Premises/Location of Leased Site: (Center Name/Address):______
______
Landlord, Franchisor, and Tenant agree to this addendum (“Addendum”) as follows:
1. Tenant is a TROPICAL SMOOTHIE CAFÉ® Franchisee. The Leased Premises shall be used for the operation of a smoothie beverage/sandwiches/gourmet wraps/salads/soups/coffee drinks restaurant, offering for sale a wide range of smoothie drinks and other products, at retail, and related products or services approved by the Franchisor under the trade name TROPICAL SMOOTHIE®, TROPICAL SMOOTHIE CAFÉ®, or any name authorized by the Franchisor, as further defined in Section/Article ______of the Lease. The Landlord acknowledges that such use shall not violate any existing exclusives granted to any other existing tenant of the Landlord.
2. Landlord shall provide Franchisor, at Franchisor’s then current Notice Address, with copies of any written Notice of Default (“Default”) given to Tenant under the Lease, and Landlord grants to Franchisor, at Franchisor’s option, the right (but not the obligation) to cure any Default under the Lease (should Tenant fail to do so) within 15 days after the expiration of the period in which Tenant may cure the Default.
3. In the event of a Default of the Lease by Tenant, or the default of the Franchise Agreement by Tenant, and upon written notice to Landlord by Franchisor to accept written assignment of the Lease to Franchisor as replacement tenant (“Agreement Notice”), Franchisor shall become Tenant of the Leased Premises and shall become liable for all obligations under the Lease arising after the date of the Assignment Notice.
4. The Lease shall not be modified or canceled with regard to Franchisor’s rights under this Addendum without the prior written approval of Franchisor.
Landlord/Lessor Tenant/Lessee/Franchisee By: ______By:______Name:______Name:______Its:______Its:______
TROPICAL SMOOTHIE CAFE, LLC / FRANCHISOR
By:______Mike Rotondo, CEO
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EXHIBIT “E” TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
FRANCHISEE TRAINING ACKNOWLEDGMENT FORM
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Franchisee Training Acknowledgement Form Store # Opening Date Today’s Date Franchisee Name AD Name or Corporate Store Address City State Zip
Please answer the following questions and, where applicable, circle the correct answer: 1. Did you complete the Phase #1 Training Checklist? YES NO 2. Did you complete the Phase #1 Training Exam? YES NO 3. Did you receive adequate training during Phase #1 Training in each area? YES NO 4. Did you feel that more attention was needed in any one area of Phase #1 Training? YES NO If “YES” please describe:
5. Did you attend Phase #2 Training at Tropical Smoothie Café Corporate offices? YES NO 6. Was the training and the materials provided relevant? YES NO 7. How would you rate the knowledge base and effectiveness of the class trainer? (circle) POOR GOOD EXCELLENT 8. Did you complete the Phase #3 Training Checklist? YES NO 9. From whom did you receive your Phase #1 Training?(circle) Area Developer Agent of Area Developer Corporate Employee Franchisee 10. From whom did your receive your Phase #3 Training? (circle) Area Developer Agent of Area Developer Corporate Employee Franchisee 11. How would you rate the knowledge base and effectiveness of your Phase #1 trainer? POOR GOOD EXCELLENT 12. How would you rate the knowledge base and effectiveness of your Phase # 3 trainer? POOR GOOD EXCELLENT 13. Overall, the Tropical Smoothie Café training was: POOR GOOD EXCELLENT 14. Do you feel that you require additional training in any aspect of the business? YES NO If “YES”, please describe:
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15. Did you receive adequate training in each of the following areas? Food Cost Control YES NO Labor Cost Control YES NO Food Safety YES NO Marketing YES NO Food Preparation YES NO Smoothie Preparation YES NO MICROS, Point of Sale System (POS) YES NO Unparalleled Hospitality YES NO Recruiting/Hiring YES NO 16. If You Answered “NO” to any of the above, please explain:
17. Are there any changes or improvements you would suggest for our training program(s)?
Franchisee Signature Trainer Signature Area Developer Name AD # Regional Director Operations (Corporate) Name
NOTE: After completing this form, please mail to: Tropical Smoothie Café, LLC Attn: Dana Lodridge, 7000 Peachtree Dunwoody Road, Building #2, Floor #3 Atlanta, GA 30328 –or– please email to: [email protected]
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EXHIBIT "F" TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
ELECTRONIC FUNDS AUTHORIZATION FORM
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ELECTRONIC FUNDS TRANSFER (EFT) AUTHORIZATION Franchisee Information:
Franchisee Name Store No.
Franchisee Mailing Address (street) Franchisee Phone No.
Franchise Mailing Address (city, state, zip)
Contact Name, Address and Phone number (if different than above)
Franchisee Fax No. Franchisee E-mail Address
Bank Account Information:
Bank Name Bank Account No.
Bank Mailing Address (street) Bank Routing No. [: [: (9 characters)
Bank Mailing Address (city, state, zip) Bank Phone No.
Payee Information: Tropical Smoothie Cafe, LLC
Authorization:The Franchisee hereby authorizes the Bank to honor and charge the Bank Account for electronic funds transfers or drafts drawn on the Bank Account and payable to the Payees. The amount of such charge shall be set forth in a notice from the Payees presented to the Bank on Wednesday of each week. The Franchisee agrees to execute such additional documents as may be reasonably requested by the Payees or the Bank to evidence the interest of this EFT Authorization. This authority shall remain in full force and effect until the Payees have received written notification from the Franchisee in such time and manner as to afford the Payees and the Bank to act on such notice. The Franchisee understands that the termination of this authorization does not relieve the Franchisee of its obligations to make payments to the Payees.
Signature:______Date:______Federal Tax ID Number: ______
INDEMNIFICATION OF BANK In consideration of the Bank’s compliance with the foregoing request and authorization, the Payees agree with respect to any action by the Bank in compliance with the foregoing request and authorization to indemnify the Bank and hold the Bank harmless for, from and against any loss the Bank may suffer as a consequence of the Bank’s actions from or in connection with the execution and issuance of any electronic fund transfer or draft, whether or not genuine, purporting to be executed by the Payees and received by the Bank in the regular course of business for the purpose of payment, except to the extent such loss caused by the negligence or willful misconduct of the Bank. NOTE: FRANCHISEE MUST ATTACH A VOIDED CHECK RELATING TO THE BANK ACCOUNT.
Return via Fax to Tropical Smoothie Cafe, LLC Fax 770-821-1895 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328
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EXHIBIT “G” TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
NONDISCLOSURE AND NONCOMPETITION AGREEMENT
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NONDISCLOSURE AND NONCOMPETITION AGREEMENT
This NONDISCLOSURE AND NONCOMPETITION AGREEMENT (the “Agreement”) is made and entered into this ____ day of ______, 200___, by and between ______, residing at ______, who presently is a manager, assistant manager or employee of a TROPICAL SMOOTHIE CAFÉ® restaurant, or a director, manager or officer of a TROPICAL SMOOTHIE CAFÉ® franchisee (the “Employee”) and ______, a Georgia ______, and its successors and assigns (the “Employer”).
R E C I T A L S:
A. Employer is a company engaged in the business of owning and operating a TROPICAL SMOOTHIE CAFÉ® franchise under a license granted by Tropical Smoothie Cafe, LLC (the “Franchisor”).
B. Employer is desirous of protecting its rights and interests in and to the TROPICAL SMOOTHIE CAFÉ® franchise that Franchisor has granted to Employer, including operating systems, sales and marketing programs and ideas, and all information and documents relating thereto.
C. Employee is being retained by Employer to provide services as the ______for Employer.
D. Employer will provide substantial opportunities to the Employee in the conduct of Employee’s position including, but not limited to, present and future earnings, access to potential and existing customers and clients, and Employer’s and Franchisor’s confidential and proprietary information. Employee further acknowledges that Employer would not employ or continue to employ Employee without Employee’s agreeing to be bound by the restrictions contained in this Agreement.
A G R E E M E N T S:
NOW, THEREFORE, in consideration of the premises, which Employee agrees is good and valuable consideration, the receipt of which hereby is acknowledged, Employee represents and warrants to Employer and covenants and agrees with Employer as follows:
1. Recitals. The statements made in the Recitals above are true and accurate and are incorporated herein.
2. Specialized Knowledge and Training. Employee acknowledges and agrees that:
(a) the knowledge and experience that Employee will acquire while associated with and/or employed by Employer is of a special, unique, and extraordinary character and that Employee’s position with Employer places Employee in a position of a confidence and trust with the customers, clients, sales agents, contacts, account executives, investors, accounts, associates and employees of Employer and allow Employee access to Confidential Information (as that term is defined in Section 6 below), which access Employee would not have but for Employee’s relationship with Employer; and
(b) Employer will make substantial investments of time and capital in the development of Employee’s goodwill, education and expertise, from which Employee will receive a substantial and direct economic benefit.
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3. Operating System and Trademarks. Employee acknowledges and agrees that:
(a) Franchisor is the creator and owner of the trade secrets, products, concept, style, confidential information, format and operating system (collectively, the “Operating System”) and the logotypes, service marks and trademarks now or hereafter involved in the operation of a TROPICAL SMOOTHIE CAFÉ® store using the style, trademark, service mark, and trade name TROPICAL SMOOTHIE CAFÉ (collectively, the “Trademarks”), and the good will associated therewith, and has granted to Employer the right and license to operate a TROPICAL SMOOTHIE CAFÉ® store using the Operating System and the Trademarks subject to the continuing control by Franchisor of the dissemination and use of the Operating System and the Trademarks;
(b) Employee has obtained or will obtain knowledge of the Operating System in connection with its association with or employment by either Franchisor and/or Employer, which knowledge obtained or to be obtained by Employee was unknown to it prior to said employment and/or the execution of this Agreement, and which knowledge is a prerequisite for Employee’s employment; and
(c) Because the protection of the Operating System and the Trademarks is vital to the continued success of Franchisor and franchisees of Franchisor, Franchisor is unwilling to permit Employer to disclose to Employee the Operating System except upon the terms set forth in this Agreement, including the requirements of confidentiality, nondisclosure and noncompetition as set forth in this Agreement.
4. Ownership of Operating System and Trademarks. Employee acknowledges and agrees that Franchisor is the sole and exclusive owner of all right, title and interest in and to the Operating System and the Trademarks, and that the Operating System and the Trademarks shall be used by Employee only in accordance with the terms hereof. Employee shall acquire no right, title or interest in or to the Operating System and/or the Trademarks. Employee shall not, directly or indirectly, at any time during or after the term of Employee’s employment by or association with Employer’s TROPICAL SMOOTHIE CAFÉ® store, do or cause to be done any act or thing disputing, attacking, or in any way impairing or intending to impair Franchisor’s right, title, or interest in or to the Operating System or the Trademarks. Employee shall immediately notify Employer of all infringements of the Operating System or the Trademarks by others that come to Employee’s attention and of all challenges to or limitations on Franchisor’s use of the Operating System or any of the Trademarks.
5. Nondisclosure of Confidential Information. The parties hereto acknowledge that during the period in which the Employee is employed by or associated with Employer (the “Employment Period”), the Employee shall use, receive, conceive or develop Confidential Information (as that term is defined in Section 6 below). Employee covenants and agrees that during the Employment Period and at all times thereafter, Employee shall not, except with the prior written consent of Employer or Franchisor, which consent shall be granted or denied at the Employer’s or Franchisor’s sole and absolute discretion, or except if acting solely for the benefit of Employer in connection with Employer’s business and in accordance with the Employer’s business practices and policies, at any time disclose, divulge, report, transfer or use, for any purposes whatsoever, any of such Confidential Information which has been used, received, conceived or developed by Employee. Employee also recognizes that such Confidential Information represents a valuable asset of the Employer and Franchisor and is required to ensure the effective and successful conduct of their respective businesses.
6. Confidential Information. For purposes of this Agreement, the term “Confidential Information” shall mean all of the following materials and information that Employee uses, receives,
QB\138221.00002\10107296.13 2 9/4/12 conceives or develops or has used, received, conceived or developed, in whole or in part, in connection with Employee’s employment by or association with Employer:
(a) The Operating System and Trademarks;
(b) The contents of any manuals or other written materials of Franchisor, Employer, or any of Franchisor’s subsidiaries or affiliates;
(c) The names and information relating to customers and prospective customers of Employer, or other persons, firms, corporations or other entities with whom the Employee has contact with on behalf of Employer or to whom any other employee of Employer has provided goods or services at any time;
(d) The terms of various agreements between Employer and any third parties, including without limitation, the terms of customer agreements, vendor or supplier agreements, lease agreements, advertising agreements and the like;
(e) Any data or database, or other information compiled by Employer, including, but not limited to, customer lists, customer information, information concerning Employer, or any business in which Employer is engaged or contemplates becoming engaged, any company that Employer engages in business, any customer, prospective customer or other person, firm or corporation to whom or which Employer has provided goods or services or to whom or which any employee of Employer has provided goods or services on behalf of Employer, or any compilation, analysis, evaluation or report concerning or deriving from any data or database, or any other information;
(f) All policies, procedures, strategies and techniques regarding the services performed by Franchisor, training, marketing and sales of Franchisor, specifically including but not limited to the Operating System and Trademarks, either oral or written, and assorted lists containing information pertaining to customers and prospective customers; and
(g) Any other information, data, know-how or knowledge of a confidential or proprietary nature observed, used, received, conceived or developed by Employee in connection with Employee’s employment by Employer.
7. Use and Return of Confidential Information.
(a) The Employee agrees that under no circumstance and at no time shall any of the Confidential Information be taken from Employer’s premises and that under no circumstances and at no time shall any of the Confidential Information be duplicated, in whole or in part, without the express written permission of Employer, which permission may be granted or denied in its sole and absolute discretion.
(b) The Employee agrees that, upon termination of employment with Employer, Employee shall return to Employer all such Confidential Information, which is in Employee’s possession regardless of the form in which any such materials are kept.
(c) The Employee covenants and agrees that all right, title and interest in any Confidential Information shall be and shall remain the exclusive property of Employer and/or Franchisor. Employee agrees to promptly disclose to Employer all Confidential Information developed in whole or in part by Employee within the scope of this Agreement and to assign to Employer and/or Franchisor any
QB\138221.00002\10107296.13 3 9/4/12 right, title or interest Employee may have in such Confidential Information. Employee agrees to turn over to the Employer all physical manifestations of the Confidential Information in Employee’s possession or under Employee’s control at the request of Employer.
8. In-Term Non-Solicitation and Non-Competition. In order to protect the goodwill of the Operating System and Trademarks, during the term of Employee’s employment by or association with Employer, Employee shall not, directly or indirectly:
(a) Directly or indirectly divert, or attempt to divert, any business opportunity or customer of Employer, Franchisor or any TROPICAL SMOOTHIE CAFÉ® store to any competitor, or do or perform, directly or indirectly, any act injurious or prejudicial to the goodwill associated with the Operating System and the Trademarks;
(b) Employ or seek to employ any person who is at that time employed by Employer, Franchisor, or any TROPICAL SMOOTHIE CAFÉ® franchisee or area developer, or otherwise directly or indirectly induce such person to leave the employ of said party;
(c) Develop, own, manage, operate, be employed by or have any interest in any business or facility (other than a licensed TROPICAL SMOOTHIE CAFÉ® store), which is the same as or substantially similar to a TROPICAL SMOOTHIE CAFÉ® store (including, without limitation, any restaurant or food service facility owning, operating or managing, or granting franchises or licenses to others to do so, any business that features smoothies as a primary menu item and/or where fifty percent (50%) or more of the menu items consist of the same or similar items as those typically offered by a TROPICAL SMOOTHIE CAFÉ® store), wherever located.
9. Post-Term Non-Solicitation and Non-Competition. In order to protect the goodwill of the Operating System and Trademarks, for a period of two (2) years following the termination of Employer’s employment by or association with Employer, for any reason, Employee shall not, directly or indirectly:
(a) Directly or indirectly divert, or attempt to divert, any business opportunity or customer of Employer, Franchisor or any TROPICAL SMOOTHIE CAFÉ® store to any competitor, or do or perform, directly or indirectly, any act injurious or prejudicial to the goodwill associated with the Operating System and the Trademarks;
(b) Employ or seek to employ any person who is at that time employed by Employer, Franchisor, or any TROPICAL SMOOTHIE CAFÉ® franchisee or area developer, or otherwise directly or indirectly induce such person to leave the employ of said party;
(c) Develop, own, manage, operate, be employed by or have any interest in any business or facility (other than a licensed TROPICAL SMOOTHIE CAFÉ® store) which is the same as or substantially similar to a TROPICAL SMOOTHIE CAFÉ® store (including, without limitation, any restaurant or food service facility owning, operating or managing, or granting franchises or licenses to others to do so, any business that features smoothies as a primary menu item and/or where fifty percent (50%) or more of the menu items consist of the same or similar items as those typically offered by a TROPICAL SMOOTHIE CAFÉ® store), and which is located within a radius of five (5) miles of the Employer’s TROPICAL SMOOTHIE CAFÉ® store or any other TROPICAL SMOOTHIE CAFÉ® store (whether company-owned or franchised).
At no time during or after the term of Employee’s employment by or association with Employer shall Employee use or duplicate the Operating System or the Trademarks, except pursuant to a valid
QB\138221.00002\10107296.13 4 9/4/12 license from Franchisor. Employee expressly agrees that the restrictive covenants contained in Sections 8 and 9: (i) are reasonable as to time and geographical area; (ii) do not place an unreasonable burden on Employee; and (iii) are supported by adequate consideration to Employee.
10. At-Will Employment. The mere entering into this Agreement by Employee shall not operate so as to require Employer to continue to employ Employee, and Employee hereby represents and warrants to Employer that Employee has not received any promises or guarantees, implied or express, of such continued employment by or association with Employer. Employee agrees that this Agreement shall be applicable to Employee regardless of whether the termination of its employment by or association with Employer occurs at the instance of Employee or Employer and, if at the instance of Employer, regardless of whether the termination was for cause. Employee further agrees that Employee’s breach of this Agreement shall be grounds for the termination of Employee’s employment.
11. Enforcement and Remedies. Employee agrees that a breach or default of the terms of this Agreement will cause irreparable harm to Employer and/or Franchisor and, therefore, in the event of any such breach or default, Employer and/or Franchisor shall be entitled to injunctive relief, specific performance, or other equitable relief. Employer and/or Franchisor shall be entitled to a restraining order or injunction without bond and without specific proof of irreparable harm and without specific proof of an inadequate remedy at law. Any specific right or remedy set forth in this Agreement shall not be exclusive, but shall be cumulative to other remedies available to Employer and/or Franchisor under this Agreement or at law or in equity, including injunctive relief, specific performance and recovery of money damages. The failure of Employer and/or Franchisor to enforce any of the provisions of this Agreement shall not constitute a waiver thereof or otherwise operate to limit any of Employer’s and/or Franchisor’s rights hereunder. The existence of any claim, defense or cause of action that Employee may have against Employer and/or Franchisor, regardless of cause or origin, shall not constitute a defense against the enforcement of this Agreement by Employer and/or Franchisor against Employee.
12. Toll Period. In the event Employee shall violate any provision of this Agreement as to which there is a specific time period during which Employee is prohibited from taking certain actions or from engaging in certain activities, as set forth in such provision, then, such violation shall toll the running of such time period from the date of such violation until such violation shall cease.
13. Successors and Assigns. This Agreement shall be binding upon Employee and his or her heirs, personal representatives, successors and assigns, and shall inure to the benefit of Employer and Franchisor (Franchisor being an intended third-party beneficiary hereof, with independent rights to enforce this Agreement) and their respective heirs, personal representatives, successors and assigns. Employee expressly agrees that this Agreement shall be assignable by Employer to a successor to the business of Employer and Employee hereby expressly consents to such assignment. Franchisor’s rights under this Agreement are fully assignable and transferable and shall inure to the benefit of Franchisor’s affiliates, successors and assigns.
14. Miscellaneous:
(a) Time is of the essence of this Agreement and of every term, covenant and condition hereof.
(b) The headings in this Agreement are for convenience only and are not to be construed as a part of this Agreement or in any way defining, limiting or amplifying the provisions hereof.
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(c) If Employer or Franchisor retains an attorney or institutes a suit against Employee in any way connected with this Agreement or its enforcement, or to utilize remedies for its breach, they (if prevailing) shall be entitled to recover from Employee reasonable attorneys’ fees (not to exceed actual attorneys’ fees incurred) and all costs in connection with said enforcement or suit, whether or not suit is filed or, if filed, is prosecuted to judgment.
(d) This Agreement shall be governed by, construed and enforced under the laws of the State of ______whose courts shall have jurisdiction over any legal proceedings arising out of this Agreement, and ______County, ______shall be the place of venue for any such action or proceedings. [Insert State and County where Employer’s Franchised Business is located]
(e) The invalidity or unenforceability of any covenant, term or condition of this Agreement, or any portion of any covenant, term or condition of this Agreement, shall not affect any other covenant, term or condition or portion thereof and this Agreement shall remain in effect as if such invalid or unenforceable covenant, term or condition (or portion thereof) were not contained herein; provided that the invalidity of any such provision does not materially and adversely affect the expected benefits accruing to any party hereunder.
(f) This Agreement contains the entire agreement between the parties and supersedes all prior and contemporaneous understandings, representations, warranties, and agreements. This Agreement shall not be amended or modified, except in writing signed by all parties hereto.
15. WAIVER OF JURY TRIAL. EMPLOYEE HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES THE RIGHT EMPLOYEE MAY HAVE TO A TRIAL BY JURY OF, UNDER, OR IN CONNECTION WITH EMPLOYEE’S EMPLOYMENT WITH EMPLOYER, THIS AGREEMENT, OR ANY AGREEMENT OR DOCUMENT EXECUTED IN CONJUNCTION HEREWITH OR ANY COURSE OF CONDUCT, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY RELATING HERETO OR THERETO.
16. Acknowledgment. Employee acknowledges that Employee understands the terms and conditions set forth in this Agreement and has had adequate time to consider whether to agree to them and to consult a lawyer, if Employee wished to do so.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.
EMPLOYER: EMPLOYEE:
______
By: ______[Print Name] ______[Print Name and Title]
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EXHIBIT C TO THE DISCLOSURE DOCUMENT
INFORMATION ABOUT OUR AREA DEVELOPERS
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EXHIBIT C
INFORMATION ABOUT OUR AREA DEVELOPERS
AREA DEVELOPERS AS OF DECEMBER 31, 2011
ARKANSAS Chris Kramolis 14 Racquet Ct. Little Rock, AR 72227 (501) 352-0175 CALIFORNIA Anthony Reed George Geldin George Tateno Ton Lee Scott Weiss Adam Carolla 11551 Westview Pkwy 2077 Orchard Mist St. Joseph Millin Sal Iacono San Diego, CA 92126 Las Vegas, NV 89135 Jacob Lentz James Kimmel (858) 566-5029 (949) 294-9428 16217 Kittridge St. Van Nuys, CA 91406 Alexander Raymundo (818) 997-7712 16938-97 Hutchins Landing San Diego, CA 92127 Dina Mitchell (858) 204-5715 274 Casoria Avenue Las Vega, NV 89123 (702) 914-6654 DISTRICT OF COLUMBIA Ron Holt Stephen J. Seminaro Patrick McKiernan 909 Enfield Chase Virginia Beach, VA 23452 (571) 991-0279 FLORIDA Sam Osborne Jim Thompson 1415 Timberlane Rd, Unit 323 1825 SE Elrose St. Tallahassee, FL 32312 Port St. Lucie, FL 34952 (850) 509-9238 (772) 342-1049 (3 Territories) Richard & Rebecca Torossian 3321 Summerhill Drive Woodridge, IL 60517 (630) 810-1959 (3 Territories) Quint & Christina Noordstar Jack Cleghorn 1109 Pinellas Bayway South, #402 2155 S. Florida Avenue Tierra Verde, FL 33715 Lakeland, FL 33803 (727) 458-1835 (863) 559-3646 David Walker Kimberly Rego 4014 Kilmartin Dr. 2827 NE Cold Springs Drive Tallahassee, FL 32309 Jensen Beach, FL 34957 (850) 269-9850 (407) 470-4273 Andrew & Terri Jessen 1712 Sanctuary Point Ct. Naples, FL 34110 (239) 877-1657 (2 Territories) QB\138221.00002\10107206.43 9/28/12
GEORGIA Tassos Paphites David Walker Christakis Achilleos (See Florida) William Dragas Christakis Paphites Marcus Dragas 2242 Great Neck Road, Suite 201 Virginia Beach, VA 23451 (757) 412-0112 HAWAII John Griffis Timothy Wells 2547 A Lai Road #1 Honolulu, HI 96816 (808) 224-4895 (808) 349-9526 ILLINOIS Brian Guinter Phillip Knippen 1029 Longaker Rd. 7788 Marquette Drive South Northbrook, IL 60062 Tinley Park, IL 60477 (847) 291-4465 (708) 945-7445 IOWA Christine Dayton 2813 1/2 5th Avenue, S. Fort Dodge, IA 50501 (515) 570-3531 KENTUCKY J. Mike Guiler 3508 Castlegate Wynd Lexington, KY 40502 (857) 268-3976 MARYLAND Ron Holt Stephen J. Seminaro Patrick McKiernan (See District of Columbia) MASSACHUSETTS Gilbert & Ana DeSousa 14 Eliza Lane N. Dartmouth, MA 02747 (508) 636-1424 MICHIGAN Larry & Deborah King 8199 Duffield Gaines, MI 48436 (989) 271-8776
Dianne & Craig LeMieux 6081 Byram Lake Drive Linden, MI 48451 (810) 691-9623
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MISSISSIPPI Tassos Paphites Christakis Achilleos William Dragas Christakis Paphites Marcus Dragas (See Georgia) NEVADA Dina Mitchell 274 Casoria Avenue Las Vega, NV 89123 (702) 914-6654 NEW JERSEY Gemini Patel and Urvashi Patel Alfred LaValle and Timothy Fung 13401 Whispering Wood Drive 9 Deerfield Trail Richmond, VA 23233 Monmouth Junction, NJ 08852 (804) 349-8100 (908) 239-0260 NEW YORK Walter & Laura Jankowski 34 Railroad St. Bayport, NY 11705 (631) 807-8358 (2 Territories) NORTH CAROLINA Scott & Linda Menkes 4433 Crow Wing Drive Virginia Beach, VA 23456 (757) 406-3811 OHIO Dianne & Craig LeMieux 6081 Byram Lake Drive Linden, MI 48451 (810) 691-9623 OKLAHOMA Chris Kramolis (See Arkansas) OREGON Tyler & Natalie Dewey 3336 NW Hunsaker Ct. Camas, WA 98607 (360) 608-8547 PENNSYLVANIA Matthew Shaffer 1513 Cobblestone Lane Lancaster, PA 17601 (717) 371-6731
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TENNESSEE Tassos Paphites Christakis Achilleos William Dragas Christakis Paphites Marcus Dragas (See Georgia) TEXAS Michael & Fuailelagi Wynn 1109 White Moss Dr. Hutto, TX 78634 (512) 506-0838 VIRGINIA Ron Holt Gemini & Urvashi Patel Stephen J. Seminaro (See New Jersey) Patrick McKiernan (See District of Columbia) WASHINGTON Tyler & Natalie Dewey (See Oregon)
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LIST OF NAME, CITY, STATE AND TELEPHONE NUMBER OF AREA DEVELOPERS WHO HAD AN OUTLET TERMINATED, CANCELLED, NOT RENEWED OR OTHERWISE CEASED TO DO BUSINESS DURING THE YEAR ENDED DECEMBER 31, 2011 OR WHO HAVE NOT COMMUNICATED WITH US WITHIN 10 WEEKS OF SEPTEMBER 28, 2012.
FLORIDA Greg Marcotte Paul Golden Davie, FL Palm City, FL (321) 543-6606 (772) 263-2158
If you buy this franchise, your contact information may be disclosed to other buyers when you leave the franchise system
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AREA DEVELOPERS INFORMATION
ITEM 2 BUSINESS EXPERIENCE
We have appointed Area Developers in certain geographic areas to refer prospective franchisees to us. We also delegate some of our duties and responsibilities to these Area Developers. The following is information about our Area Developers and certain of their personnel and management.
ARKANSAS
Tropical Development of Arkansas, Inc – State of Arkansas
Tropical Development of Arkansas, Inc., an Arkansas corporation formed on March 23, 2006, with its principal place of business at 14 Racquet Ct., Little Rock, Arkansas 72227, has been our Area Developer for the State of Arkansas since January 2003.
Chris Kramolis: President
Mr. Kramolis has been President of Tropical Development of Arkansas, Inc. since its inception in March 2006. He has also been the franchisee of two Tropical Smoothie Cafés in Little Rock, Arkansas since January 2003. He has also been a member of KG Tropical Development, Inc., our Area Developer in Northeast Oklahoma, since its inception in May 2004. (See Oklahoma) From May 2000 to November 2003, he was in Advertising Sales for FASTLINE in Little Rock, Arkansas.
Jason Alley: Director of Operations
Mr. Alley has been the Director of Operations for the Area Developer Business for the State of Arkansas since June 2011. From March 2009 to May 2011, he was a DSL Customer Assistant/Service Lead for AT&T in Little Rock, Arkansas. From June 2004 to January 2009, he was Manager at Joe's Grocery and Deli in Little Rock, Arkansas.
CALIFORNIA
Dina Mitchell and Anthony Reed – Los Angeles, Valencia and Ventura, California
Dina Mitchell (and State of Nevada)
Ms. Mitchell has been our Area Developer for the Los Angeles, Valencia and Ventura, California areas since December 21, 2005. Ms. Mitchell has also been our Area Developer for the State of Nevada since November 28, 2000. She has owned and operated several Tropical Smoothie Cafés in Las Vegas, Nevada and Valencia, California since 2001. She has been a Member of Smoothie Times, LLC, in Los Angeles, California since its inception on November 14, 2005.
Anthony (Tony) Reed
Mr. Reed has been our Area Developer for the Los Angeles, Valencia and Ventura, California areas since December 21, 2005. Mr. Reed has been the President of
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Millennium Investment Services in Van Nuys, California, since July 1983. He has been a General Partner of Big Fat Gluttons, GP, a California general partnership, since its formation on December 7, 2005. Big Fat Gluttons is a Member of Smoothie Times, LLC, a California limited liability company.
Alexander A. Raymundo, George Tateno and Ton Vinh Lee – San Diego, California
Alexander A. Raymundo
Mr. Raymundo has been our Area Developer for the San Diego, California area since August 8, 2006. He has been a Senior Financial Analyst for Sony Electronic in San Diego, California since April 21, 2007. From May 2005 to August 2006, he was a Financial Analyst with Fresenius Medical Care Extracorporeal Alliance in San Diego, California. Before that, he was a Financial Analyst II with Watkins Manufacturing in San Diego, California from July 2004 to April 2005. Before that, he was an Application Analyst-General Ledger Specialist with Jack Henry & Associates (Symitar Systems) in San Diego, California from September 2002 to July 2004.
George Tateno
Mr. Tateno has been our Area Developer for the San Diego, California area since August 8, 2006. Since November of 2006, he has worked as a Hardware Engineer for Fujitsu in San Diego, California. From August 2003 to September 2004, Mr. Tateno worked as a Hardware Engineer for Vytek in San Diego, California. From March 2003 to May 2003, he worked as a Hardware Engineer for VUIT in San Diego, California.
Ton Vinh Lee
Mr. Lee has been our Area Developer for the San Diego, California area since August 8, 2006. From 2004 to present, he has been the owner of Ton Vinh Lee, DDS Professional Corporation in San Diego, California. From 2005 to present, he has been the owner of Summerlin Smiles in San Diego, California.
DISTRICT OF COLUMBIA
Venture One, LLC – District of Columbia, State of Maryland and Portions of Virginia
Venture One, LLC, a Virginia limited liability company, formed on July 9, 2002, with its principal place of business at 909 Enfield Chase, Virginia Beach, Virginia 23452 and has been one of our Area Developers since August 15, 2002.
Ronald T. Holt: Member
Mr. Holt has been a member of Venture One, LLC since 2002. Since September 1969, he has been the President and COO of Land’or International, Inc. in Glen Allen, Virginia.
James Patrick McKiernan: Development Operations Director
Mr. McKiernan has been employed by Venture One, LLC since 2003.
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Stephen J. Seminaro: Development Sales Director
Mr. Seminaro has been employed by Venture One, LLC since March 19, 2012. Since September 2008, he has been self-employed as Managing Partner of Seminaro Enterprises, LLC in Winchester, Virginia. From August 2007 to August 2008, he was the Service Call Center Manager for BMW of Fairfax in Fairfax, Virginia.
FLORIDA
Andrew and Terri Jessen – Lee, Collier, Charlotte, Manatee and Sarasota Counties, Florida
Andrew Jessen
Mr. Jessen has been our Area Developer for Lee and Collier Counties, Florida since August 4, 2007. Mr. Jessen has been a Tropical Smoothie Café franchisee in Naples, Florida since 2004. Before that, he was a Project Manager for Prudential Insurance Company of America in Newark, New Jersey from July 1995 to January 2004.
Terri Jessen
Ms. Jessen has been our Area Developer for Lee and Collier Counties, Florida since August 4, 2007. Ms. Jessen was the Office Manager for Elizabeth Pediatric Group in Elizabeth, New Jersey from June 1994 to November 2003.
Robert Q. and Christina M. Noordstar – Hillsborough & Pinellas Counties, Florida
Robert Q. Noordstar
Mr. Noordstar has been our Area Developer for Hillsborough & Pinellas Counties since August 15, 2007. Since August 2007, Mr. Noordstar has been the President of Tropical Communities in St. Petersburg, Florida. From February 2004 to present, he has been the Vice President of Noordstar Enterprises I and Manager of a Tropical Smoothie Café in St. Petersburg, Florida. From June 2000 to August 2006, he was a Project Manager for The Whiting Turner Contracting Company in Tampa, Florida.
Christina M. Noordstar
Ms. Noordstar has been our Area Developer for Hillsborough & Pinellas Counties since August 15, 2007. Ms. Noordstar has been the Vice President of Tropical Communities in St. Petersburg, Florida since August 2007. From February 2004 to present she has been the President of Noordstar Enterprises I and the Manager of a Tropical Smoothie Café in St. Petersburg, Florida. From August 2000 to February 2004, she was a computer programmer for Bausch & Lomb.
Kimberly Rachelle Rego – St Lucie and Indian River Counties, Florida
Kimberly Rego
Ms. Rego has been our Area Developer for the St Lucie and Indian River Counties in Florida since 2004. From January 2003 to February 2007, Ms. Rego was a franchisee and owner/operator of a Tropical Smoothie Café, doing business under the name Rego-Gonzalez, Inc. 3 QB\138221.00002\10107206.43 9/28/12
in Port St. Lucie, Florida. From October 1988 to present, she has been the Service Coordinator for the Little People’s College in Bedford, Massachusetts.
Greg Watkins
Mr. Watkins has been operations director for one of our Area Developers, Kimberly Rego, for St. Lucie and Indian River Counties, Florida since January 2005.
Jack Cleghorn – Polk County, Florida
Mr. Cleghorn has been our Area Developer for the Polk County, Florida area since June 28, 2004. From 1988 to present, he has been the President of Florida Pizza Management, Inc.
James K. Thompson – Brevard, Sumter, Martin and Okeechobee Counties, Florida
Mr. Thompson has been our Area Developer for Brevard, Sumter, Martin and Okeechobee Counties in Florida since January 2000. He has been our Area Developer for Manatee and Charlotte Counties since October 2008.
Richard and Rebecca Torossian – Sumter County, Florida
Richard Torossian
Mr. Torossian has been our Area Developer for Sumter County, Florida since January 27, 2007. From 1980 to present, Mr. Torossian has been a Technical Operations Manager for the Federal Aviation Authority in Chicago, Illinois.
Rebecca Torossian
Ms. Torossian has been our Area Developer for Sumter County, Florida since January 27, 2007. From October 2004 until December 2007, she was the United State Sales Manager for Sunstart Bakery Products in Woodridge, Illinois. Before that, from January 2004 until June 2004, she was employed as US Sales Manager for Cossama International Corporation based in Woodridge, Illinois. From January 2003 until December 2003, she was employed as US Sales Manager for LB Direct, Inc. and LB Licensing based in Woodridge, Illinois.
Samuel L. Osborne – Alachua, Lake, Leon, Orange & Seminole Counties in Florida
Mr. Osborne has been one of our Area Developers since 1998. He became our Area Developer for Orange & Seminole Counties on November 5, 1998; Lake & Alachua Counties on November 18, 2003; and Leon County on May 31, 2005. From 1998 to present, he has been the President of Tropical Smoothie Area Development Corporation in Tallahassee, Florida. From 1998 to present, he has been the President of Tropical Smoothie Ventures, Inc. of Tallahassee, Florida.
David Miller: Director of Restaurant Operations
Mr. Miller has been Director of Restaurant Operations for the Area Developer Business for Alachua, Lake, Leon, Orange and Seminole, Florida counties since May 2011. From May 2007 to May 2011, he was the Manager for Tropical Smoothie Ventures, which owns and operates a Tropical Smoothie Café Store in Tallahassee, Florida. 4 QB\138221.00002\10107206.43 9/28/12
GEORGIA
BurgerBusters Properties of Tennessee, LLC – DeSoto County in Mississippi, Dade, Catoosa, Murray, Walker & Whitfield Counties in Georgia & State of Tennessee
BurgerBusters Properties of Tennessee, LLC, a Virginia limited liability company formed on April 1, 2005, with its principal place of business at 2242 W. Greatneck Road #201, Virginia Beach, Virginia 23451 and has been one of our Area Developers since September 29, 2005.
Lee Garvin: Director, Real Estate & Development
Mr. Garvin has been Director, Real Estate & Development of BurgerBusters Properties of Tennessee, LLC since January, 2005. From 1973 to present he has been self-employed as a commercial real estate consultant.
Glenda Shifflett: Director of Operations
Ms. Shifflett has been the Director of Operations for BurgerBusters of Tennessee, LLC since 1992.
Tassos Paphites: Chairman & CEO
Tassos Paphites has been Chairman and CEO for BurgerBusters of Tennessee, LLC since 1987.
HAWAII
TS HOLDINGS, LLC − Hawaii
TS Holdings, LLC is a Hawaii limited liability company, formed on October 11, 2006, with its principal place of business at PMB 698 74-5533 Luthia Street, Suite B-1A, Kailua Kona, Hawaii 96740 and has been our Area Developer since November 13, 2006.
Timothy Teddy Wells: Member
Mr. Wells has been a member of TS Holdings, LLC since its formation in October 2006. From February 2006 to present, Mr. Wells has been the General Manager for Body by Choice LLC in Honolulu, Hawaii. From April 2004 to June 2005, he was the Assistant Club Manager for Marine Corps Community Service at the Kaneohe Marine Base in Hawaii. From July 2003 to April 2004, Mr. Wells was a Line Cook/Assistant Food and Beverage Manager for Morton’s Steak House in Honolulu, Hawaii. From April 2000 to July 2003, he was an Assistant Manager for TGI Friday’s in Honolulu, Hawaii.
John Griffis: Member
Mr. Griffis has been a member of TS Holdings LLC in Hawaii since its formation in October 2006. From August 2003 to present, Mr. Griffis has been a Assistant Specialist with the University of Hawaii-Monoa in Honolulu, Hawaii. From 1988 to August 2003, he was a Professor with the Florida Southern College in Lakeland, Florida. 5 QB\138221.00002\10107206.43 9/28/12
ILLINOIS
Brian Guinter – Barrington, Illinois
Mr. Guinter has been our Area Developer for the Barrington, Illinois area since December 26, 2006. He has been the President of Oceans 4 Shore Inc., which owns a Tropical Smoothie Café franchise in Barrington, Illinois, since 2006. In 2005, he was self employed while in pursuit of business opportunities. From March 2004 to January 2005, he was in Sales and Marketing for Full Package Athletics in Highland Park and Lake Forest, Illinois. From November 2000 to December 2003, he worked with Winward Sports in Chicago, Illinois.
Phil Knippen – Southeast Chicago, Illinois
Mr. Knippen has been our Area Developer for the Southeast Chicago, Illinois area since December 31, 2010. Since 1995, he has also been a multi-unit operator of Brown’s Chicken franchises in the greater Chicago, Illinois metropolitan area.
IOWA
Christine E. Dayton – State of Iowa
Ms. Dayton has been our Area Developer for the State of Iowa since February 1, 2003. She has also been the President of Dayton Enterprises since May 2002 in Fort Dodge, Iowa.
KENTUCKY
J. Mike Guiler – State of Kentucky
J. Mike Guiler
Dr. Guiler has been our Area Developer for the State of Kentucky since April 6, 2007. Since 1980, he has been a physician with the Women’s Care Center in Lexington, Kentucky.
Brad Holler
Mr. Holler has been operations director for one of our Area Developers, J. Michael Guiler, for the State of Kentucky since May 2008. Prior to that, from June 2007 to April 2008, he was a fitness consultant for Gold’s Gym in St. Petersburg, Florida and Lexington, Kentucky. From May 2005 through May 2007, Mr. Holler was a foreman for Bronscum Construction in Lexington, Kentucky.
MARYLAND
Venture One, LLC – District of Columbia, State of Maryland & Portions of Virginia
See “District of Columbia” for information regarding this Area Developer.
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MASSACHUSETTS
Gilbert and Ana DeSousa – Bristol County, Massachusetts
Gilbert DeSousa
Mr. DeSousa has been our Area Developer for Bristol County, Massachusetts since July 27, 2007. Mr. DeSousa has been a Salesman for Lesco Distributing in Dartmouth, Massachusetts since November 1994.
Ana DeSousa
Ms. DeSousa has been our Area Developer for Bristol County, Massachusetts since July 27, 2007. Ms. DeSousa has been the Chief of Internal Fiscal Operations for L.P. College, Inc. in Dartmouth, Massachusetts since August 1985.
MICHIGAN
LeMieux Development Corporation − Genesee, Ingham and Oakland Counties, Michigan
LeMieux Development Corporation, a Michigan corporation, was formed on October 29, 2003, with its principal place of business at 6081 Byram Lake Drive, Linden, Michigan 48451 and has been one of our Area Developers since January 12, 2004.
Craig Lawrence LeMieux: Co-Owner
Mr. LeMieux has been a Co-Owner of LeMieux Development Corporation since its inception. Since November 2005, he has been the President and Co-Owner of Michigan Franchise Development Corporation in Holly, Michigan. From September 2003 to present, Mr. LeMieux has been the President and Co-Owner of LeMieux Ventures, Inc., which operates a Tropical Smoothie Café in Grand Blanc, Michigan. From 1992 to present, Mr. LeMieux has been the President and CEO of Fraternal Enterprises, Inc. and American Bingo Co. in Holly, Michigan. In July 2008, Mr. LeMieux became our Area Developer for multiple counties in Ohio. (See Ohio).
Diane Helen LeMieux: Co-Owner
Ms. LeMieux has been a Co-Owner of LeMieux Development Corporation since its inception. From September 2003 to present, she has been Co-Owner of LeMieux Ventures, Inc., which operates a Tropical Smoothie Café in Grand Blanc, Michigan. From 2002 to 2003, she was Vice President of Finance of Wilshore Development Group LLC in Clarkston, Michigan. In July 2008, Ms. LeMieux became our Area Developer for multiple counties in Ohio. (See Ohio).
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Michigan Franchise Development Corporation – State of Michigan, excluding Genesee, Ingham and Oakland Counties
Michigan Franchise Development Corporation, a Michigan corporation, was formed on November 10, 2005, with its principal place of business at 4100 Baldwin Road, Holly, Michigan 48442 and has been one of our Area Developers since its inception.
Craig Lawrence LeMieux: President and Co-Owner
Since November 2005, he has been the President and Co-Owner of Michigan Franchise Development Corporation in Holly, Michigan. Mr. LeMieux is also Co-Owner of LeMieux Development Corporation. From September 2003 to present, Mr. LeMieux has been the President and Co-Owner of LeMieux Ventures, Inc., which operates a Tropical Smoothie Café in Grand Blanc, Michigan. From 1992 to present, Mr. LeMieux has been the President and CEO of Fraternal Enterprises, Inc. and American Bingo Co. in Holly, Michigan.
Deborah L. LeMieux-King: Vice President and Co-Owner
Since November 2005, Ms. LeMieux-King has been Vice President and Co- Owner of Michigan Franchise Development Corporation in Holly, Michigan. From July 1997 to present, she has been the Vice President of Fraternal Enterprises, Inc. and American Bingo Co. in Holly, Michigan.
Larry Dale King: Co-Owner
Since November 2005, Mr. King has been Co-Owner of Michigan Franchise Development Corporation in Holly, Michigan. From July 1986 to present, he has been a Mail Processing Clerk for the United States Postal Service in Flint, Michigan.
MISSISSIPPI
BurgerBusters Properties of Tennessee, LLC – DeSoto County in Mississippi, Dade, Catoosa, Murray, Walker & Whitfield Counties in Georgia & State of Tennessee
See “Georgia” for information regarding this Area Developer.
NEVADA
Dina Mitchell – State of Nevada & Los Angeles, Valencia and Ventura, California
Dina Mitchell has been our Area Developer for the State of Nevada since November 28, 2000. She is also one of our Area Developers for the Los Angeles, Valencia and Ventura, California areas. (See California).
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NEW JERSEY
Gemini and Urvashi Patel − State of New Jersey (except Monmouth, Mercer and Middlesex Counties) & Richmond, Virginia Area
Gemini Patel
Ms. Patel has been our Area Developer for the State of New Jersey since December 1, 2003. In addition, she has been one of our Area Developers for the Richmond, Virginia area since September 1, 2003. From 1990 to 2003, she was a Manager for Subway in Richmond, Virginia.
Urvashi Patel
Ms. Patel has been our Area Developer for the State of New Jersey since December 1, 2003. In addition, she has been one of our Area Developers for the Richmond, Virginia area since September 1, 2003. From 1992 to 2002, she was a Manager for Subway in Chester, Virginia.
Alfred LaValle and Timothy Fung - Monmouth, Mercer and Middlesex Counties in New Jersey
Alfred LaValle
Mr. LaValle has been our Area Developer for the three noted counties in New Jersey since February 2012. From November 2001 to December 2011, Mr. LaValle owned and operated a franchise of The Goddard School for Early Childhood Development located in Cherry Hill, New Jersey.
Timothy Fung
Mr. Fung has been our Area Developer for the three noted counties in New Jersey since February 2012. From July 1983 to December 2009, Mr. Fung was an area operator and staff manager for Verizon Incorporated, located in New York, New York.
NEW YORK
Walter and Laura Jankowski – Nassau and Suffolk Counties, New York
Walter Jankowski
Mr. Jankowski has been our Area Developer for the Suffolk County, New York area since June 28, 2004. From June 2006 to present, Mr. Jankowski has been the owner/operator of Tropical Smoothie Café doing business under the name W.L. Janko in Bayport, New York. From May 1999 to May 2006, he was a Parts Salesman for Competition BMW of Smithtown in Smithton, New York.
Laura Jankowski
Ms. Jankowski has been our Area Developer for the Suffolk County, New York area since June 28, 2004. Since 2003, she has been a School Social Worker for the Three Village Central School District in East Setauket, New York. From 1999 to 2004, Ms. 9 QB\138221.00002\10107206.43 9/28/12
Jankowski was the Assistant House Manager for Mercy Center Ministries in Patchogue, New York.
NORTH CAROLINA
Scott and Linda Menkes – Raleigh-Durham, North Carolina
Scott Menkes
Mr. Menkes has been our Area Developer for the Raleigh-Durham, North Carolina area since September 29, 2006. From September 2006 to present, he has been the President of SLM Development, Inc. in Virginia Beach, Virginia. From January 2006 to present, he has been the Maintenance Manager for the US Government in Newport News, Virginia. From September 2001 to January 2006, Mr. Menkes was a Maintenance Planner for QED Systems, Inc. in Newport News, Virginia.
Linda Menkes
Ms. Menkes has been our Area Developer for the Raleigh-Durham, North Carolina area since September 29, 2006. From September 2006 to present, Ms. Menkes has been the Vice President of SLM Development, Inc. in Virginia Beach, Virginia. From 2005 to present, she has been the President of Scotlind2 Enterprises, Inc. in Norfolk, Virginia. From 2002 to present, Ms. Menkes has been the Vice President of Scotlind Enterprises, Inc. in Virginia Beach, Virginia.
OHIO
Craig and Diane LeMieux – Allen, Ashland, Ashtabula, Auglaize, Carroll, Columbiana, Coshocton, Crawford, Cuyahoga, Defiance, Erie, Fulton, Geauga, Hancock, Hardin, Harrison, Henry, Holmes, Huron, Jefferson, Know, Lake, Lorain, Lucas, Mahoning, Marion, Medina, Morrow, Ottawa, Paulding, Portage, Putnam, Richland, Sandusky, Seneca, Stark, Summit, Trumbill, Tuscarawas, Union, Wan Wert, Wayne, Williams, Wood, Wyandot Counties, Ohio
Craig Lawrence LeMieux
Mr. LeMieux has been our Area Developer for multiple counties in Ohio since July 2008. He is also one of our Area Developers for Michigan. See “Michigan” for information regarding this Area Developer.
Diane Helen LeMieux
s. LeMieux has been our Area Developer for multiple counties in Ohio since July 2008. She is also one of our Area Developers for Michigan. See “Michigan” for information regarding this Area Developer.
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OKLAHOMA
KG Tropical Development, Inc – Northeast Oklahoma
KG Tropical Development, Inc, an Oklahoma corporation, formed May 17, 2004, with its principal place of business at 6033 S. 66th Avenue, Tulsa, Oklahoma 74145 and has been our Area Developer for counties in the Northeast Region of Oklahoma since June 7, 2004.
Chris Kramolis: President
Mr. Kramolis has been President of KG Tropical Development, Inc. since its inception in May 2004. He has also been our Area Developer for the State of Arkansas since January 2003 (see Arkansas). Since 2003, he has also been the franchisee of two Tropical Smoothie Cafés in Little Rock, Arkansas. From May 2000 to November 2003, he was in Advertising Sales for FASTLINE in Little Rock, Arkansas.
OREGON
Tyler and Natalie Dewey – Clackamas, Colombia, Multnomah, & Washington Counties in the State of Oregon & Clark County, Washington
Tyler Dewey
Mr. Dewey has been our Area Developer for Clark County, Washington & Clackamas, Colombia, Multnomah, & Washington Counties in the State of Oregon since April 9, 2007. From March 2003 to present, Mr. Dewey has been President of TDNAL, Inc. in Vancouver, Washington. From June 1999 to present, Mr. Dewey has been a Production Manager for WaferTech in Camas, Washington.
Natalie Dewey
Ms. Dewey has been our Area Developer for Clark County, Washington & Clackamas, Colombia, Multnomah, & Washington Counties in the State of Oregon since April 9, 2007. From March 2003 to present, Ms. Dewey has been Vice President of TDNAL, Inc. in Vancouver, Washington. From June 2001 to May 2006, Ms. Dewey was a Senior Compensation & Benefits Analyst for CenturyTel in Vancouver, Washington.
PENNSYLVANIA
Matthew Shaffer – Lancaster, Dauphin and Chester Counties in Pennsylvania
Mr. Shaffer has been our Area Developer for Lancaster, Dauphin and Chester Counties in Pennsylvania since April, 2009. In addition, he has been a Tropical Smoothie® franchisee since July 2006. He operates a Tropical Smoothie store in Lititz, Pennsylvania. From January 2007 to present, he has been Vice President of Shaffer Tropics, Inc. in Lancaster, Pennsylvania. Prior to that, he was Superintendent of K&R Contractors in Lancaster, Pennsylvania from January 2005 to November 2006. From March 2004 to December 2004, he was self-employed in construction Lancaster, Pennsylvania.
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TENNESSEE
BurgerBusters Properties of Tennessee, LLC – State of Tennessee, DeSoto County in Mississippi, and Dade, Catoosa, Murray, Walker & Whitfield Counties in Georgia
See “Georgia” for information regarding this Area Developer.
TEXAS
Michael A. and Fuailelagi Wynn – Williamson, Travis & Hays Counties in Texas
Michael A. Wynn
Mr. Wynn has been our Area Developer for Williamson, Travis & Hays Counties in the State of Texas since March 15, 2007. From February 2007 to present, Mr. Wynn has been the President of Wynn Food Group in Austin, Texas. From September 2003 to present, Mr. Wynn has been a Deputy Production Chief for the Department of Defense in Fort Monroe, Virginia. From August 1983 to August 2003, Mr. Wynn was a Major in the US Army in various locations around the world.
Fuailelagi Wynn
Ms. Wynn has been our Area Developer for Williamson, Travis & Hays Counties in the State of Texas since March 15, 2007. She previously managed two Tropical Smoothie Café locations in Virginia from 2004 until 2007.
VIRGINIA
Venture One, LLC – District of Columbia, State of Maryland & Portions of Virginia
See “District of Columbia” for information regarding this Area Developer.
Gemini and Urvashi Patel − State of New Jersey (except Monmouth, Mercer and Middlesex Counties) & Richmond, Virginia Area
See “New Jersey” for information regarding this Area Developer.
WASHINGTON
Tyler and Natalie Dewey – Clark County, Washington & Clackamas, Colombia, Multnomah, & Washington Counties in Oregon
See “Oregon” for information regarding this Area Developer.
ITEM 3 LITIGATION
No litigation is required to be disclosed in this Item for these Area Developers.
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ITEM 4 BANKRUPTCY
No bankruptcy is required to be disclosed in this Item.
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EXHIBIT D TO THE DISCLOSURE DOCUMENT
PRE-AUTHORIZED BANK FORM
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ELECTRONIC FUNDS TRANSFER (EFT) AUTHORIZATION Franchisee Information:
Franchisee Name Store No.
Franchisee Mailing Address (street) Franchisee Phone No.
Franchise Mailing Address (city, state, zip)
Contact Name, Address and Phone number (if different than above)
Franchisee Fax No. Franchisee E-mail Address
Bank Account Information:
Bank Name Bank Account No.
Bank Mailing Address (street) Bank Routing No. [: [: (9 characters)
Bank Mailing Address (city, state, zip) Bank Phone No.
Payee Information: Tropical Smoothie Cafe, LLC
Authorization: The Franchisee hereby authorizes the Bank to honor and charge the Bank Account for electronic funds transfers or drafts drawn on the Bank Account and payable to the Payees. The amount of such charge shall be set forth in a notice from the Payees presented to the Bank on Wednesday of each week. The Franchisee agrees to execute such additional documents as may be reasonably requested by the Payees or the Bank to evidence the interest of this EFT Authorization. This authority shall remain in full force and effect until the Payees have received written notification from the Franchisee in such time and manner as to afford the Payees and the Bank to act on such notice. The Franchisee understands that the termination of this authorization does not relieve the Franchisee of its obligations to make payments to the Payees.
Signature:______Date:______Federal Tax ID Number: ______
INDEMNIFICATION OF BANK In consideration of the Bank’s compliance with the foregoing request and authorization, the Payees agree with respect to any action by the Bank in compliance with the foregoing request and authorization to indemnify the Bank and hold the Bank harmless for, from and against any loss the Bank may suffer as a consequence of the Bank’s actions from or in connection with the execution and issuance of any electronic fund transfer or draft, whether or not genuine, purporting to be executed by the Payees and received by the Bank in the regular course of business for the purpose of payment, except to the extent such loss caused by the negligence or willful misconduct of the Bank. NOTE: FRANCHISEE MUST ATTACH A VOIDED CHECK RELATING TO THE BANK ACCOUNT.
Return via Fax to Tropical Smoothie Cafe, LLC. Fax (770) 821-1895 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328: Phone (770) 821-1900.
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EXHIBIT E TO THE DISCLOSURE DOCUMENT
EXCLUSIVE REAL ESTATE SERVICES REPRESENTATION AGREEMENT
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WINDSOR EXCLUSIVE REPRESENTATION AGREEMENT
This Exclusive Representation Agreement (“Agreement”) is made and entered into as of the ___day of ______, 20__ by and between The Windsor Realty Group, L.L.C. (“Windsor”) and ______(“Tenant”).
WHEREAS, Windsor has been retained by Tenant to represent Tenant in a leasing transaction to take place in Georgia (the “Assignment,” as more clearly defined on Exhibit A).
WHEREAS, Windsor has been retained by Tenant to provide the specific services for a period of up to twelve (12) months as outlined and agreed upon in Exhibit B, unless extended as state below.
NOW THEREFORE, for and in consideration of $1.00 and the mutual promise and covenants contained herein, the parties hereby agree to the following:
1) Responsibilities of Tenant – Tenant shall be an approved Area Developer or Franchisee by Tropical Smoothie Café, LLC before entering into an agreement with Windsor. Tenant shall use its best efforts to supply Windsor with any information Tenant may have ascertained during the Agreement. All such Commission/Fees shall be requested by Windsor to be paid by Lessor/Seller and Tenant agrees to use its best efforts to ensure that Lessor/Seller pays such Commission. Lessors/Sellers shall consider such Commission in all offers or proposals to lease/sell property to Tenant. If such Commission/Fee is not fully paid by Lessor/Seller then Tenant agrees to pay to Windsor the difference between the Commission and what was paid to Windsor by Lessor/Seller within thirty (30) days upon receipt of invoice from Windsor.
2) Responsibilities of Windsor – In addition to those responsibilities described in Exhibit B, Windsor shall diligently keep Tenant, Area Developer, and Tropical Smoothie Café, LLC up to date of the status of the Assignment. Windsor also agrees to use its best efforts work with other brokers engaged in the transaction.
3) Additional Brokers – Any additional Broker introduced into the Assignment by Tenant shall be the sole responsibility of Tenant to compensate, which shall be in addition to the Commission/Fees outlined in Exhibit A.
4) Representations – Windsor represents and warrants that it is solely representing Tenant on this transaction and is not representing any Landlord’s.
5) Hold Harmless – Windsor and Tenant agree to defend and hold harmless each other in the event of any claims which may be made against them or any of their agents in connection with this Assignment.
6) Expiration of Agreement – This Agreement shall expire the earlier of twelve (12) months after the execution of this Agreement or upon the completion of the Assignment. Notwithstanding, the Agreement shall survive the expiration until all such earned Commission/Fee’s for services rendered are paid in full.
7) Duration – If Tenant requests the Assignment to specifically be The Windsor Process as outlined in Exhibit B for the geographic parameters as agreed upon in Exhibit A and a lease is not fully executed within twelve (12) months of execution of this Agreement, Tenant shall pay Windsor $5,000.00 for such Assignment. If a lease is executed within twelve (12) months of this Agreement per the Assignment outlined in Exhibit A, then the compensation shall be as outlined for the Windsor Process in Exhibit A. Furthermore, if a lease is being actively pursued at the expiration of this Agreement by Tenant per this agreement, then this Agreement shall be extended until such time as the lease is fully executed, or Tenant no longer actively pursues such lease.
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8) Non Performance – If Tenant is actively pursuing a leasing transaction and Windsor is not reasonably representing Tenant in such leasing transaction as outlined in this Agreement (“Non Performance”), then Tenant shall have the option to give written notice to Windsor of such specific Non Performance. Upon receipt of written notice of such specific Non Performance, Windsor shall have thirty (30) days to cure such specific Non Performance and this Agreement shall remain in full force and effect. If Windsor does not cure such specific Non Performance within thirty (30) days of written notice, then Tenant may terminate this Agreement upon final written notice to Windsor of Tenant’s intent to terminate this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal this day and year first above written.
TENANT THE WINDSOR REALTY GROUP, LLC
Name: Tropical Smoothie Cafe
By: By:
Its: Its:
Date: Date:
______Witness
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WINDSOR EXCLUSIVE REPRESENTATION AGREEMENT EXHIBIT A
The Assignment
Date: ______THE WINDSOR REALTY GROUP: Contact: Phone: (404) 841.9383 TENANT NAME: Contact Name: Phone: Email: Address: d/b/a Tropical Smoothie Cafe City/State: Geographic Parameters: (RIDS Areas and attached as Exhibit C) Type of Transaction: Size (SF): Size (SF/Acres): Estimated Completion Date: Notes:
Commissions/Fees
Services to be Total Amount Paid Difference to be provided by Commissions / to Windsor by paid by Tenant Windsor: Fees Due Landlord to Windsor Windsor Windsor Process – $5,000.00 $ $ New Locations Relocations: Site Evaluation, $3,000.00 $ $ Negotiation and Documentation: $500.00 $ $ Site Evaluation and Documentation:
Lease Renewal with $3,000.00 $ $ Windsor Process: Lease Renewal $1,000.00 $ $ without Windsor Process:
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WINDSOR EXCLUSIVE REPRESENTATION AGREEMENT EXHIBIT B Windsor Services
Please mark the corresponding which Windsor Service will be utilized.
Windsor TENANT INITIALS THE WINDSOR PROCESS – NEW LOCATIONS / RELOCATIONS Services 1) Review with Tenant prepared market "SIMMS" study (prepared by Forum Analytics) which shall include but not be limited to mutually agreed upon maps and reports (i.e. market overview, demographics, competitors, etc.). 2) Windsor shall travel to proposed geographic market (as warranted) and identify all potential commercial real estate sites within the mutually agreed upon search area. 3) Prepare an up-to-date customized “Initial Site Selection” study to include mutually agreed upon survey and map for the defined market area, including:
a) Location of the defined market area (located on map) b) Size of Building/Center c) Building/Center Type d) Vacant Space Available e) Quoted Rent f) Additional Expenses (CAM, Taxes and Insurance, etc.) g) Current Build-Out and/or proposed Build-Out h) Landlord i) Accessibility j) Parking k) Visibility l) Signage m) Co Tenancy n) Comments regarding the center o) Picture of each building p) Site Plans (if available) q) Aerial of each building (if available) r) Overview Map of all the Available and Unavailable Spaces s) List of all buildings which fit the building criteria, but do not have available space, and the reason why the available space is not available t) Other u) Other 4) Arrange tours for prospective sites. 5) Preparation of Requests for Proposals (RFP) 6) Analysis and summary of proposals. 7) Negotiation of Letter of Intent (LOI). 8) Analysis and summary of finalized Letter of Intent 9) Review with and facilitate Tropical Smoothie Café corporate review and approval 10) Review and assist in negotiation of lease agreement. 11) Provide on-going client contact. 12) At all times to act on behalf of and in the best interests of the Tenant.
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Windsor TENANT INITIALS SITE EVALUATION, NEGOTIATION AND DOCUMENTATION Services 1) Research Comparable Buildings within the Geographic Market 2) Preparation of Requests for Proposals (RFP) 3) Analysis and summary of proposals. 4) Negotiation of Letter of Intent (LOI). 5) Analysis and summary of finalized Letter of Intent 6) Review with and facilitate Tropical Smoothie Café corporate review and approval 7) Review and assist in negotiation of lease agreement. 8) Provide on-going client contact. 9) At all times to act on behalf of and in the best interests of the Tenant.
Windsor TENANT INITIALS SITE EVALUATION AND DOCUMENTATION Services 1) Research Comparable Buildings within the Geographic Market 2) Analysis and summary of finalized Letter of Intent 3) Review with and facilitate Tropical Smoothie Café corporate review and approval 4) Provide on-going client contact. 5) At all times to act on behalf of and in the best interests of the Tenant.
Windsor TENANT INITIALS *LEASE RENEWAL COMPLETED WITH WINDSOR PROCESS Services 1) Review with Tenant prepared market "SIMMS" study (prepared by Forum Analytics) which shall include but not be limited to mutually agreed upon maps and reports (i.e. market overview, demographics, competitors, etc.). 2) Windsor shall travel to proposed geographic market (as warranted) and identify all potential commercial real estate sites within the mutually agreed upon search area. 3) Prepare an up-to-date customized “Initial Site Selection” study to include mutually agreed upon survey and map for the defined market area, including:
a) Location of the defined market area (located on map) b) Size of Building/Center c) Building/Center Type d) Vacant Space Available e) Quoted Rent f) Additional Expenses (CAM, Taxes and Insurance, etc.) g) Current Build-Out and/or proposed Build-Out h) Landlord i) Accessibility j) Parking k) Visibility l) Signage m) Co Tenancy
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n) Comments regarding the center o) Picture of each building p) Site Plans (if available) q) Aerial of each building (if available) r) Overview Map of all the Available and Unavailable Spaces s) List of all buildings which fit the building criteria, but do not have available space, and the reason why the available space is not available t) Other u) Other 4) Arrange tours for prospective sites. 5) Preparation of Requests for Proposals (RFP) 6) Analysis and summary of proposals. 7) Negotiation of Letter of Intent (LOI). 8) Analysis and summary of finalized Letter of Intent 9) Review with and facilitate Tropical Smoothie Café corporate review and approval 10) Review and assist in negotiation of lease agreement. 11) Provide on-going client contact. 12) At all times to act on behalf of and in the best interests of the Tenant.
Windsor TENANT INITIALS LEASE RENEWAL WITHOUT WINDSOR PROCESS Services 1) Research Comparable Buildings within the Geographic Market 2) Preparation of Requests for Proposals (RFP) 3) Analysis and summary of proposals. 4) Negotiation of Letter of Intent (LOI). 5) Analysis and summary of finalized Letter of Intent 6) Review with and facilitate Tropical Smoothie Café corporate review and approval 7) Review and assist in negotiation of lease agreement. 8) Provide on-going client contact. 9) At all times to act on behalf of and in the best interests of the Tenant.
* THE LEASE RENEWAL WITH WINDSOR PROCESS Assignment is completed if Tenant requests a full “Initial Site Search” Study and then elects to renew the existing lease in place. If Tenant has a current location, elects to have an “Initial Site Search” Study completed, and elects to relocate to a new site, then the Assignment completed shall be THE WINDSOR PROCESS – NEW LOCATIONS / RELOCATIONS and not LEASE RENEWAL WITH WINDSOR PROCESS.
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EXHIBIT F TO THE DISCLOSURE DOCUMENT
ADDENDUM TO LEASE AGREEMENT CONDITIONAL ASSIGNMENT OF LEASE
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ADDENDUM TO LEASE AGREEMENT CONDITIONAL ASSIGNMENT OF LEASE
Landlord/Lessor:______Tenant/Lessee:______
Notice Address:______Notice Address:______
______
Franchisor: Tropical Smoothie Cafe, LLC Notice Address: 7000 Peachtree Dunwoody Road, Building. 2, Floor 3 Atlanta, Georgia 30328
Date: Effective as of the Date of the Lease Between Landlord and Tenant (the “Lease”)
Leased Premises/Location of Leased Site: (Center Name/Address):______
______
Landlord, Franchisor, and Tenant agree to this addendum (“Addendum”) as follows:
1. Tenant is a TROPICAL SMOOTHIE CAFÉ® Franchisee. The Leased Premises shall be used for the operation of a smoothie beverage/sandwiches/gourmet wraps/salads/soups/coffee drinks restaurant, offering for sale a wide range of smoothie drinks and other products, at retail, and related products or services approved by the Franchisor under the trade name TROPICAL SMOOTHIE®, TROPICAL SMOOTHIE CAFÉ®, or any name authorized by the Franchisor, as further defined in Section/Article ______of the Lease. The Landlord acknowledges that such use shall not violate any existing exclusives granted to any other existing tenant of the Landlord.
2. Landlord shall provide Franchisor, at Franchisor’s then current Notice Address, with copies of any written Notice of Default (“Default”) given to Tenant under the Lease, and Landlord grants to Franchisor, at Franchisor’s option, the right (but not the obligation) to cure any Default under the Lease (should Tenant fail to do so) within 15 days after the expiration of the period in which Tenant may cure the Default.
3. In the event of a Default of the Lease by Tenant, or the default of the Franchise Agreement by Tenant, and upon written notice to Landlord by Franchisor to accept written assignment of the Lease to Franchisor as replacement tenant (“Agreement Notice”), Franchisor shall become Tenant of the Leased Premises and shall become liable for all obligations under the Lease arising after the date of the Assignment Notice.
4. The Lease shall not be modified or canceled with regard to Franchisor’s rights under this Addendum without the prior written approval of Franchisor.
Landlord/Lessor Tenant/Lessee/Franchisee By: ______By:______Name:______Name:______Its:______Its:______
TROPICAL SMOOTHIE CAFE, LLC / FRANCHISOR
By:______Mike Rotondo, CEO
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EXHIBIT G TO THE DISCLOSURE DOCUMENT
CONDITIONAL ASSIGNMENT OF TELEPHONE NUMBERS AND LISTINGS
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CONDITIONAL ASSIGNMENT OF TELEPHONE NUMBERS AND LISTINGS
THIS CONDITIONAL ASSIGNMENT OF TELEPHONE NUMBERS AND LISTINGS (this “Assignment”) is effective as of ______, 20__, between TROPICAL SMOOTHIE CAFE, LLC, a Georgia limited liability company, with its principal place of business at 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328 (“we,” “us” or “our”) and , whose current place of business is (“you” or “your”). You and we are sometimes referred to collectively as the “parties” or individually as a “party.”
BACKGROUND INFORMATION:
We have simultaneously entered into the certain Franchise Agreement (the “Franchise Agreement”) dated as of ______, 20___ with you, pursuant to which you plan to own and operate a Tropical Smoothie Café® store (the “Franchised Business”). Tropical Smoothie Café® stores use certain proprietary knowledge, procedures, formats, systems, forms, printed materials, applications, methods, specifications, standards and techniques authorized or developed by us (collectively the “System”). We identify Tropical Smoothie Café® stores and various components of the System by certain trademarks, trade names, service marks, trade dress and other commercial symbols (collectively the “Marks”). In order to protect our interest in the System and the Marks, we will have the right to control the telephone numbers and listings of the Franchised Business if the Franchise Agreement is terminated.
OPERATIVE TERMS:
You and we agree as follows:
1. Background Information: The background information is true and correct. This Assignment will be interpreted by reference to the background information. Terms not otherwise defined in this Assignment will have the meanings as defined in the Franchise Agreement.
2. Conditional Assignment: You assign to us, all of your right, title and interest in and to those certain telephone numbers and regular, classified or other telephone directory listings (collectively, the “Numbers and Listings”) associated with the Marks and used from time to time in connection with the operation of the Franchised Business. This Assignment is for collateral purposes only. We will have no liability or obligation of any kind arising from or in connection with this Assignment, unless we notify the telephone company and/or the listing agencies with which you have placed telephone directory listings (collectively, the “Telephone Company”) to effectuate the assignment of the Numbers and Listings to us. Upon termination or expiration of the Franchise Agreement we will have the right and authority to ownership of the Numbers and Listings. In such event, you will have no further right, title or interest in the Numbers and Listings and will remain liable to the Telephone Company for all past due fees owing to the Telephone Company on or before the date on which the assignment is effective. As between us and you, upon termination or expiration of the Franchise Agreement, we will have the sole right to and interest in the Numbers and Listings.
3. Power of Attorney: You irrevocably appoint us as your true and lawful attorney-in-fact to: (a) direct the Telephone Company to effectuate the assignment of the Numbers and Listings to us; and (b) sign on your behalf such documents and take such actions as may be necessary to effectuate the assignment. Notwithstanding anything else in the Assignment, however, you will immediately notify and instruct the Telephone Company to effectuate the assignment described in this Assignment
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to us when, and only when: (i) the Franchise Agreement is terminated or expires; and (ii) we instruct you to so notify the Telephone Company. If you fail to promptly direct the Telephone Company to effectuate the assignment of the Numbers and Listings to us, we will direct the Telephone Company to do so. The Telephone Company may accept our written direction, the Franchise Agreement or this Assignment as conclusive proof of our exclusive rights in and to the Numbers and Listings upon such termination or expiration. The assignment will become immediately and automatically effective upon Telephone Company’s receipt of such notice from you or us. If the Telephone Company requires that you and/or we sign the Telephone Company’s assignment forms or other documentation at the time of termination or expiration of the Franchise Agreement, our signature on such forms or documentation on your behalf will effectuate your consent and agreement to the assignment. At any time, you and we will perform such acts and sign and deliver such documents as may be necessary to assist in or accomplish the assignment described herein upon termination or expiration of the Franchise Agreement. The power of attorney conferred upon us pursuant to the provisions set forth in this Assignment is a power coupled with an interest and cannot be revoked, modified or altered without our consent.
4. Indemnification: You will indemnify and hold us and our affiliates, stockholders, directors, officers and representatives (collectively, the “Indemnified Parties”) harmless from and against any and all losses, liabilities, claims, proceedings, demands, damages, judgments, injuries, attorneys’ fees, costs and expenses that any of the Indemnified Parties incur as a result of any claim brought against any of the Indemnified Parties or any action which any of the Indemnified Parties are named as a party or which any of the Indemnified Parties may suffer, sustain or incur by reason of, or arising out of, your breach of any of the terms of any agreement or contract or the nonpayment of any debt you have with the Telephone Company.
5. Binding Effect: This Assignment is binding upon and inures to the benefit of the parties and their respective successors-in-interest, heirs, and successors and assigns.
6. Assignment to Control: This Assignment will govern and control over any conflicting provision in any agreement or contract which you may have with the Telephone Company.
7. Attorney’s Fees, Etc.: In any action or dispute, at law or in equity, that may arise under or otherwise relate to this Assignment or the enforcement thereof, the prevailing party will be entitled to reimbursement of its attorneys’ fees, costs and expenses from the non-prevailing party. The term “attorneys’ fees” means any and all charges levied by an attorney for his or her services including time charges and other reasonable fees including paralegal fees and legal assistant fees and includes fees earned in settlement, at trial, appeal or in bankruptcy proceedings and/or in arbitration proceedings.
8. Severability: If any of the provisions of this Assignment or any section or subsection of this Assignment are held invalid for any reason, the remainder of this Assignment or any such section or subsection will not be affected, and will remain in full force and effect in accordance with its terms.
9. Governing Law and Forum: This Assignment is governed by Georgia law. The parties will not institute any action against any of the other parties to this Assignment except in the state or federal courts of general jurisdiction in the City of Atlanta, Georgia, and they irrevocably submit to the jurisdiction of such courts and waive any objection they may have to either the jurisdiction or venue of such court.
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ASSIGNOR: ASSIGNEE:
TROPICAL SMOOTHIE CAFE, LLC
By: By: Name: Name: Title: Title: Date: Date:
THIS CONDITIONAL ASSIGNMENT OF TELEPHONE NUMBERS AND LISTINGS is accepted and agreed to by:
(TELEPHONE COMPANY)
By: Name: Its: Date:
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EXHIBIT H TO THE DISCLOSURE DOCUMENT
FRANCHISEE TRAINING ACKNOWLEDGEMENT FORM
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Franchisee Training Acknowledgement Form Store # Opening Date Today’s Date Franchisee Name AD Name or Corporate Store Address City State Zip
Please answer the following questions and, where applicable, circle the correct answer: 1. Did you complete the Phase #1 Training Checklist? YES NO 2. Did you complete the Phase #1 Training Exam? YES NO 3. Did you receive adequate training during Phase #1 Training in each area? YES NO 4. Did you feel that more attention was needed in any one area of Phase #1 Training? YES NO If “YES” please describe:
5. Did you attend Phase #2 Training at Tropical Smoothie Café Corporate offices? YES NO 6. Was the training and the materials provided relevant? YES NO 7. How would you rate the knowledge base and effectiveness of the class trainer? (circle) POOR GOOD EXCELLENT 8. Did you complete the Phase #3 Training Checklist? YES NO 9. From whom did you receive your Phase #1 Training?(circle) Area Developer Agent of Area Developer Corporate Employee Franchisee 10. From whom did your receive your Phase #3 Training? (circle) Area Developer Agent of Area Developer Corporate Employee Franchisee 11. How would you rate the knowledge base and effectiveness of your Phase #1 trainer? POOR GOOD EXCELLENT 12. How would you rate the knowledge base and effectiveness of your Phase # 3 trainer? POOR GOOD EXCELLENT 13. Overall, the Tropical Smoothie Café training was: POOR GOOD EXCELLENT 14. Do you feel that you require additional training in any aspect of the business? YES NO If “YES”, please describe:
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15. Did you receive adequate training in each of the following areas? Food Cost Control YES NO Labor Cost Control YES NO Food Safety YES NO Marketing YES NO Food Preparation YES NO Smoothie Preparation YES NO MICROS, Point of Sale System (POS) YES NO Unparalleled Hospitality YES NO Recruiting/Hiring YES NO 16. If You Answered “NO” to any of the above, please explain:
17. Are there any changes or improvements you would suggest for our training program(s)?
Franchisee Signature Trainer Signature Area Developer Name AD # Regional Director Operations (Corporate) Name
NOTE: After completing this form, please mail to: Tropical Smoothie Café, LLC Attn: Dana Lodridge, 7000 Peachtree Dunwoody Road, Building #2, Floor #3 Atlanta, GA 30328 –or– please email to: [email protected]
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EXHIBIT I TO THE DISCLOSURE DOCUMENT
OPERATING MANUAL TABLE OF CONTENTS
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Operations Manual
Table of Contents
BEGINNING TOTAL TOPIC PAGE PAGES
1. Introduction……………………………………………………1-1 3
2. TSC Culture...………………………………………………….2-1 6
3. Responsibilities……………………………………...…………3-1 8
4. Franchisee Training…………………. ……………………..…4-1 6
5. Crew Management……………………………………………..5-1 22
6. Franchisee (Manager) Functions ……………………………..6-1 23
7. Daily Operations……………………………………………….7-1 19
8. Store Security………... ………………………………………..8-1 3
9. Accounting. ……………………………………………….……9-1 21
10. Technical Support…………………………………………..…10-1 4
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EXHIBIT J TO THE DISCLOSURE DOCUMENT
NONDISCLOSURE AND NONCOMPETITION AGREEMENT
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NONDISCLOSURE AND NONCOMPETITION AGREEMENT
This NONDISCLOSURE AND NONCOMPETITION AGREEMENT (the “Agreement”) is made and entered into this ____ day of ______, 20____, by and between ______, residing at ______, who presently is a manager, assistant manager or employee of a Tropical Smoothie Café® restaurant, or a director, manager or officer of a Tropical Smoothie Café® franchisee (the “Employee”) and ______, a ______, and its successors and assigns (the “Employer”).
R E C I T A L S:
A. Employer is a company engaged in the business of owning and operating a Tropical Smoothie Café® franchise under a license granted by Tropical Smoothie Cafe, LLC (the “Franchisor”).
B. Employer is desirous of protecting its rights and interests in and to the Tropical Smoothie Café® franchise that Franchisor has granted to Employer, including operating systems, sales and marketing programs and ideas, and all information and documents relating thereto.
C. Employee is being retained by Employer to provide services as the ______for Employer.
D. Employer will provide substantial opportunities to the Employee in the conduct of Employee’s position including, but not limited to, present and future earnings, access to potential and existing customers and clients, and Employer’s and Franchisor’s confidential and proprietary information. Employee further acknowledges that Employer would not employ or continue to employ Employee without Employee’s agreeing to be bound by the restrictions contained in this Agreement.
A G R E E M E N T S:
NOW, THEREFORE, in consideration of the premises, which Employee agrees is good and valuable consideration, the receipt of which hereby is acknowledged, Employee represents and warrants to Employer and covenants and agrees with Employer as follows:
1. Recitals. The statements made in the Recitals above are true and accurate and are incorporated herein.
2. Specialized Knowledge and Training. Employee acknowledges and agrees that:
(a) the knowledge and experience that Employee will acquire while associated with and/or employed by Employer is of a special, unique, and extraordinary character and that Employee’s position with Employer places Employee in a position of a confidence and trust with the customers, clients, sales agents, contacts, account executives, investors, accounts, associates and employees of Employer and allow Employee access to Confidential Information (as that term is defined in Section 6 below), which access Employee would not have but for Employee’s relationship with Employer; and
(b) Employer will make substantial investments of time and capital in the development of Employee’s goodwill, education and expertise, from which Employee will receive a substantial and direct economic benefit.
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3. Operating System and Trademarks. Employee acknowledges and agrees that:
(a) Franchisor is the creator and owner of the trade secrets, products, concept, style, confidential information, format and operating system (collectively, the “Operating System”) and the logotypes, service marks and trademarks now or hereafter involved in the operation of a Tropical Smoothie Café® store using the style, trademark, service mark, and trade name TROPICAL SMOOTHIE CAFÉ® (collectively, the “Trademarks”), and the good will associated therewith, and has granted to Employer the right and license to operate a Tropical Smoothie Café® store using the Operating System and the Trademarks subject to the continuing control by Franchisor of the dissemination and use of the Operating System and the Trademarks;
(b) Employee has obtained or will obtain knowledge of the Operating System in connection with its association with or employment by either Franchisor and/or Employer, which knowledge obtained or to be obtained by Employee was unknown to it prior to said employment and/or the execution of this Agreement, and which knowledge is a prerequisite for Employee’s employment; and
(c) Because the protection of the Operating System and the Trademarks is vital to the continued success of Franchisor and franchisees of Franchisor, Franchisor is unwilling to permit Employer to disclose to Employee the Operating System except upon the terms set forth in this Agreement, including the requirements of confidentiality, nondisclosure and noncompetition as set forth in this Agreement.
4. Ownership of Operating System and Trademarks. Employee acknowledges and agrees that Franchisor is the sole and exclusive owner of all right, title and interest in and to the Operating System and the Trademarks, and that the Operating System and the Trademarks shall be used by Employee only in accordance with the terms hereof. Employee shall acquire no right, title or interest in or to the Operating System and/or the Trademarks. Employee shall not, directly or indirectly, at any time during or after the term of Employee’s employment by or association with Employer’s Tropical Smoothie Café® store, do or cause to be done any act or thing disputing, attacking, or in any way impairing or intending to impair Franchisor’s right, title, or interest in or to the Operating System or the Trademarks. Employee shall immediately notify Employer of all infringements of the Operating System or the Trademarks by others that come to Employee’s attention and of all challenges to or limitations on Franchisor’s use of the Operating System or any of the Trademarks.
5. Nondisclosure of Confidential Information. The parties hereto acknowledge that during the period in which the Employee is employed by or associated with Employer (the “Employment Period”), the Employee shall use, receive, conceive or develop Confidential Information (as that term is defined in Section 6 below). Employee covenants and agrees that during the Employment Period and at all times thereafter, Employee shall not, except with the prior written consent of Employer or Franchisor, which consent shall be granted or denied at the Employer’s or Franchisor’s sole and absolute discretion, or except if acting solely for the benefit of Employer in connection with Employer’s business and in accordance with the Employer’s business practices and policies, at any time disclose, divulge, report, transfer or use, for any purposes whatsoever, any of such Confidential Information which has been used, received, conceived or developed by Employee. Employee also recognizes that such Confidential Information represents a valuable asset of the Employer and Franchisor and is required to ensure the effective and successful conduct of their respective businesses.
6. Confidential Information. For purposes of this Agreement, the term “Confidential Information” shall mean all of the following materials and information that Employee uses, receives, conceives or develops or has used, received, conceived or developed, in whole or in part, in connection with Employee’s employment by or association with Employer: 2 QB\138221.00002\10107206.43 9/28/12
(a) The Operating System and Trademarks;
(b) The contents of any manuals or other written materials of Franchisor, Employer, or any of Franchisor’s subsidiaries or affiliates;
(c) The names and information relating to customers and prospective customers of Employer, or other persons, firms, corporations or other entities with whom the Employee has contact with on behalf of Employer or to whom any other employee of Employer has provided goods or services at any time;
(d) The terms of various agreements between Employer and any third parties, including without limitation, the terms of customer agreements, vendor or supplier agreements, lease agreements, advertising agreements and the like;
(e) Any data or database, or other information compiled by Employer, including, but not limited to, customer lists, customer information, information concerning Employer, or any business in which Employer is engaged or contemplates becoming engaged, any company that Employer engages in business, any customer, prospective customer or other person, firm or corporation to whom or which Employer has provided goods or services or to whom or which any employee of Employer has provided goods or services on behalf of Employer, or any compilation, analysis, evaluation or report concerning or deriving from any data or database, or any other information;
(f) All policies, procedures, strategies and techniques regarding the services performed by Franchisor, training, marketing and sales of Franchisor, specifically including but not limited to the Operating System and Trademarks, either oral or written, and assorted lists containing information pertaining to customers and prospective customers; and
(g) Any other information, data, know-how or knowledge of a confidential or proprietary nature observed, used, received, conceived or developed by Employee in connection with Employee’s employment by Employer.
7. Use and Return of Confidential Information.
(a) The Employee agrees that under no circumstance and at no time shall any of the Confidential Information be taken from Employer’s premises and that under no circumstances and at no time shall any of the Confidential Information be duplicated, in whole or in part, without the express written permission of Employer, which permission may be granted or denied in its sole and absolute discretion.
(b) The Employee agrees that, upon termination of employment with Employer, Employee shall return to Employer all such Confidential Information, which is in Employee’s possession regardless of the form in which any such materials are kept.
(c) The Employee covenants and agrees that all right, title and interest in any Confidential Information shall be and shall remain the exclusive property of Employer and/or Franchisor. Employee agrees to promptly disclose to Employer all Confidential Information developed in whole or in part by Employee within the scope of this Agreement and to assign to Employer and/or Franchisor any right, title or interest Employee may have in such Confidential Information. Employee agrees to turn over to the Employer all physical manifestations of the Confidential Information in Employee’s possession or under Employee’s control at the request of Employer.
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8. In-Term Non-Solicitation and Non-Competition. In order to protect the goodwill of the Operating System and Trademarks, during the term of Employee’s employment by or association with Employer, Employee shall not, directly or indirectly:
(a) Directly or indirectly divert, or attempt to divert, any business opportunity or customer of Employer, Franchisor or any Tropical Smoothie Café® store to any competitor, or do or perform, directly or indirectly, any act injurious or prejudicial to the goodwill associated with the Operating System and the Trademarks;
(b) Employ or seek to employ any person who is at that time employed by Employer, Franchisor, or any Tropical Smoothie Café® franchisee or area developer, or otherwise directly or indirectly induce such person to leave the employ of said party;
(c) Develop, own, manage, operate, be employed by or have any interest in any business or facility (other than a licensed Tropical Smoothie Café® store), which is the same as or substantially similar to a Tropical Smoothie Café® store (including, without limitation, any restaurant or food service facility owning, operating or managing, or granting franchises or licenses to others to do so, any business that features smoothies as a primary menu item and/or where fifty percent (50%) or more of the menu items consist of the same or similar items as those typically offered by a Tropical Smoothie Café® store), wherever located.
9. Post-Term Non-Solicitation and Non-Competition. In order to protect the goodwill of the Operating System and Trademarks, for a period of two (2) years following the termination of Employer’s employment by or association with Employer, for any reason, Employee shall not, directly or indirectly:
(a) Directly or indirectly divert, or attempt to divert, any business opportunity or customer of Employer, Franchisor or any Tropical Smoothie Café® store to any competitor, or do or perform, directly or indirectly, any act injurious or prejudicial to the goodwill associated with the Operating System and the Trademarks;
(b) Employ or seek to employ any person who is at that time employed by Employer, Franchisor, or any Tropical Smoothie Café® franchisee or area developer, or otherwise directly or indirectly induce such person to leave the employ of said party;
(c) Develop, own, manage, operate, be employed by or have any interest in any business or facility (other than a licensed Tropical Smoothie Café® store) which is the same as or substantially similar to a Tropical Smoothie Café® store (including, without limitation, any restaurant or food service facility owning, operating or managing, or granting franchises or licenses to others to do so, any business that features smoothies as a primary menu item and/or where fifty percent (50%) or more of the menu items consist of the same or similar items as those typically offered by a Tropical Smoothie Café® store), and which is located within a radius of five (5) miles of the Employer’s Tropical Smoothie Café® store or any other Tropical Smoothie Café® store (whether company-owned or franchised).
At no time during or after the term of Employee’s employment by or association with Employer shall Employee use or duplicate the Operating System or the Trademarks, except pursuant to a valid license from Franchisor. Employee expressly agrees that the restrictive covenants contained in Sections 8 and 9: (i) are reasonable as to time and geographical area; (ii) do not place an unreasonable burden on Employee; and (iii) are supported by adequate consideration to Employee.
10. At-Will Employment. The mere entering into this Agreement by Employee shall not operate so as to require Employer to continue to employ Employee, and Employee hereby represents and
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warrants to Employer that Employee has not received any promises or guarantees, implied or express, of such continued employment by or association with Employer. Employee agrees that this Agreement shall be applicable to Employee regardless of whether the termination of its employment by or association with Employer occurs at the instance of Employee or Employer and, if at the instance of Employer, regardless of whether the termination was for cause. Employee further agrees that Employee’s breach of this Agreement shall be grounds for the termination of Employee’s employment.
11. Enforcement and Remedies. Employee agrees that a breach or default of the terms of this Agreement will cause irreparable harm to Employer and/or Franchisor and, therefore, in the event of any such breach or default, Employer and/or Franchisor shall be entitled to injunctive relief, specific performance, or other equitable relief. Employer and/or Franchisor shall be entitled to a restraining order or injunction without bond and without specific proof of irreparable harm and without specific proof of an inadequate remedy at law. Any specific right or remedy set forth in this Agreement shall not be exclusive, but shall be cumulative to other remedies available to Employer and/or Franchisor under this Agreement or at law or in equity, including injunctive relief, specific performance and recovery of money damages. The failure of Employer and/or Franchisor to enforce any of the provisions of this Agreement shall not constitute a waiver thereof or otherwise operate to limit any of Employer’s and/or Franchisor’s rights hereunder. The existence of any claim, defense or cause of action that Employee may have against Employer and/or Franchisor, regardless of cause or origin, shall not constitute a defense against the enforcement of this Agreement by Employer and/or Franchisor against Employee.
12. Toll Period. In the event Employee shall violate any provision of this Agreement as to which there is a specific time period during which Employee is prohibited from taking certain actions or from engaging in certain activities, as set forth in such provision, then, such violation shall toll the running of such time period from the date of such violation until such violation shall cease.
13. Successors and Assigns. This Agreement shall be binding upon Employee and his or her heirs, personal representatives, successors and assigns, and shall inure to the benefit of Employer and Franchisor (Franchisor being an intended third-party beneficiary hereof, with independent rights to enforce this Agreement) and their respective heirs, personal representatives, successors and assigns. Employee expressly agrees that this Agreement shall be assignable by Employer to a successor to the business of Employer and Employee hereby expressly consents to such assignment. Franchisor’s rights under this Agreement are fully assignable and transferable and shall inure to the benefit of Franchisor’s affiliates, successors and assigns.
14. Miscellaneous:
(a) Time is of the essence of this Agreement and of every term, covenant and condition hereof.
(b) The headings in this Agreement are for convenience only and are not to be construed as a part of this Agreement or in any way defining, limiting or amplifying the provisions hereof.
(c) If Employer or Franchisor retains an attorney or institutes a suit against Employee in any way connected with this Agreement or its enforcement, or to utilize remedies for its breach, they (if prevailing) shall be entitled to recover from Employee reasonable attorneys’ fees (not to exceed actual attorneys’ fees incurred) and all costs in connection with said enforcement or suit, whether or not suit is filed or, if filed, is prosecuted to judgment.
(d) This Agreement shall be governed by, construed and enforced under the laws of the State of ______whose courts shall have jurisdiction over any legal proceedings arising out of 5 QB\138221.00002\10107206.43 9/28/12
this Agreement, and ______County, ______shall be the place of venue for any such action or proceedings. [Insert State and County where Employer’s Franchised Business is located]
(e) The invalidity or unenforceability of any covenant, term or condition of this Agreement, or any portion of any covenant, term or condition of this Agreement, shall not affect any other covenant, term or condition or portion thereof and this Agreement shall remain in effect as if such invalid or unenforceable covenant, term or condition (or portion thereof) were not contained herein; provided that the invalidity of any such provision does not materially and adversely affect the expected benefits accruing to any party hereunder.
(f) This Agreement contains the entire agreement between the parties and supersedes all prior and contemporaneous understandings, representations, warranties, and agreements. This Agreement shall not be amended or modified, except in writing signed by all parties hereto.
15. WAIVER OF JURY TRIAL. EMPLOYEE HEREBY KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES THE RIGHT EMPLOYEE MAY HAVE TO A TRAIL BY JURY OF, UNDER, OR IN CONNECTION WITH EMPLOYEE’S EMPLOYMENT WITH EMPLOYER, THIS AGREEMENT, OR ANY AGREEMENT OR DOCUMENT EXECUTED IN CONJUNCTION HEREWITH OR ANY COURSE OF CONDUCT, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY RELATING HERETO OR THERETO.
16. Acknowledgment. Employee acknowledges that Employee understands the terms and conditions set forth in this Agreement and has had adequate time to consider whether to agree to them and to consult a lawyer, if Employee wished to do so.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first set forth above.
EMPLOYER: EMPLOYEE:
______
By: ______[Print Name] ______[Print Name and Title]
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EXHIBIT K TO THE DISCLOSURE DOCUMENT
OWNERS’ GUARANTY
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OWNERS’ GUARANTY
This Owners’ Guaranty (the “Guaranty”) is given this ____ day of ______, 20__, by the undersigned in connection with the assignment of the Franchise Agreement dated ______, 20____ between TROPICAL SMOOTHIE CAFE, LLC (“Franchisor”) and ______(“Franchisee”) to ______(“Assignee”).
In consideration of, and as an inducement to, the Franchisor’s approval of the assignment of the Franchise Agreement to Assignee and the assumption by Assignee of all of the undertakings of the Franchisee in the Franchise Agreement, as set forth in that certain Assignment and Assumption of Franchise Agreement dated______, 20___, (the “Assignment”), each of the undersigned and any other parties who sign counterparts of this Guaranty (individually, a “Guarantor” and collectively, the “Guarantors”) hereby personally and unconditionally guarantee to Franchisor and its successors and assigns, that Assignee will, as set forth in the Assignment, punctually perform its obligations and pay all amounts due under the Franchise Agreement, including (without limitation), amounts due for initial franchise fees, royalties, advertising fund contributions and purchases of equipment, materials, and supplies.
Each Guarantor has read the terms and conditions of the Franchise Agreement and acknowledges that the execution of this Guaranty, the undertakings of the Franchisee in the Franchise Agreement, and the undertakings of the Assignee in the Assignment are in partial consideration for, and a condition to, the approval of the assignment and assumption as set forth in the Assignment, and that Franchisor would not have granted such approval without the execution of this Guaranty and such undertakings by each Guarantor.
Each Guarantor waives:
(i) acceptance and notice of acceptance by Franchisor of the foregoing undertakings; and
(ii) notice of demand for payment of any indebtedness or nonperformance of any obligations hereby guaranteed; and
(iii) protest and notice of default to any party with respect to the indebtedness or nonperformance of any obligations hereby guaranteed; and
(iv) any right he or she may have to require that an action be brought against the Assignee or Franchisee or any other person as a condition of liability; and
(v) all rights to payments and claims for reimbursement or subrogation which he or she may have against Assignee or Franchisee arising as a result of his or her execution of and performance under this Guaranty (including by way of counterparts); and
(vi) any and all other notices and legal or equitable defenses to which he or she may be entitled.
Each Guarantor consents and agrees that:
(i) his or her direct and immediate liability under this Guaranty will be joint and several not only with Assignee and Franchisee, but also among the Guarantors; and
(ii) he or she will render any payment or performance required under the Franchise Agreement upon demand if the Assignee or Franchisee fails or refuses punctually to do so; and
(iii) such liability will not be contingent or conditioned upon pursuit by Franchisor of any remedies against Assignee or Franchisee or any other person; and
(iv) such liability will not be diminished, relieved or otherwise affected by any subsequent rider or
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amendment to the Assignment or the Franchise Agreement or by any extension of time, credit or other indulgence that Franchisor may from time to time grant to the Assignee or Franchisee or to any other person, including, without limitation, the acceptance of any partial payment or performance, or the compromise or release of any claims, none of which will in any way modify or amend this Guaranty, which will be continuing and irrevocable throughout the term of the Franchise Agreement and for so long thereafter as there are any monies or obligations owing by the Assignee and the Franchisee to Franchisor under the Franchise Agreement; and
(v) Assignee’s or Franchisee’s written acknowledgment, accepted in writing by Franchisor, or the judgment of any court or arbitration panel of competent jurisdiction establishing the amount due from Assignee or Franchisee will be conclusive and binding on the undersigned as Guarantors.
Each Guarantor individually, jointly and severally, also makes all of the covenants, representations, warranties and agreements of Franchisee set forth in the Franchise Agreement and is obligated to perform thereunder, including, without limitation, under Sections 3, 9, 13, 16 and 26 (which include, among other things, the MEDIATION OF DISPUTES and WAIVERS OF JURY TRIAL RIGHTS AND PUNITIVE DAMAGES).
Additionally, with respect to the individual designated as the Operating Principal, the Operating Principal acknowledges that the undertakings by Operating Principal under this Guaranty are made and given in partial consideration of, and as a condition to, Franchisor’s approval of the Assignment as described herein; Operating Principal individually, jointly and severally, makes all of the covenants, representations and agreements of Assignee, Franchisee and Operating Principal set forth in the Franchise Agreement and is obligated to perform hereunder.
If Franchisor is required to enforce this Guaranty in an administrative, judicial or arbitration proceeding, and prevails in such proceeding, Franchisor will be entitled to reimbursement of its costs and expenses, including, but not limited to, legal and accounting fees and costs, administrative, arbitrators’ and expert witness fees, costs of investigation and proof of facts, court costs, other expenses of an administrative, judicial or arbitration proceeding and travel and living expenses, whether incurred prior to, in preparation for or in contemplation of the filing of any such proceeding. If Franchisor is required to engage legal counsel in connection with any failure by the undersigned to comply with this Guaranty, the Guarantors will reimburse Franchisor for any of the above-listed costs and expenses incurred by it.
IN WITNESS WHEREOF, each Guarantor has hereunto affixed his signature on the same day and year as the Assignment was executed.
GUARANTORS
*Name:
Name:
Name:
Name:
* Denotes individual who is Assignee’s Operating Principal.
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EXHIBIT L TO THE DISCLOSURE DOCUMENT
STATE SPECIFIC ADDENDA AND RIDERS
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ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT FOR TROPICAL SMOOTHIE CAFE, LLC STATE OF CALIFORNIA
The following paragraphs are added to the Disclosure Document:
OUR WEBSITE HAS NOT BEEN REVIEWED OR APPROVED BY THE CALIFORNIA DEPARTMENT OF CORPORATIONS. ANY COMPLAINTS CONCERNING THE CONTENT OF THIS WEBSITE MAY BE DIRECTED TO THE CALIFORNIA DEPARTMENT OF CORPORATIONS at www.corp.ca.gov.
THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE DISCLOSURE DOCUMENT.
Item 5 is amended by adding the following:
The State of California has imposed a deferral condition on us; therefore, no fees are payable by you to us until all of our pre-opening obligations are completed and your business has opened.
The following paragraphs are added at the end of Item 17 of the Disclosure Document pursuant to regulations promulgated under the California Franchise Investment Law:
California Law Regarding Termination and Nonrenewal. California Business and Professions Code Sections 20000 through 20043 provide rights to franchisees concerning termination or nonrenewal of a franchise. If the Franchise Agreement contains a provision that is inconsistent with the law, the law will control.
Termination Upon Bankruptcy. 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.).
Post-Termination Noncompetition Covenants. The Franchise Agreement contains a covenant not to compete which extends beyond the termination of the respective agreement. These provisions may not be enforceable under California law.
Applicable Law. The Franchise Agreement requires application of the laws of the State of Georgia with certain exceptions. These provisions may not be enforceable under California law.
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CALIFORNIA RIDER TO THE TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
THIS RIDER (the “Rider”) is effective as of ______, 20____ (the “Agreement Date”), and amends the Franchise Agreement dated ______, 20_____ (the “Agreement”), between TROPICAL SMOOTHIE CAFE, LLC (“we,” “us,” “our” or the “Franchisor”) with its principal office at 7000 Peachtree Dunwood Road, Building #2, Floor #3, Atlanta, Georgia 30328, and (“you,” “your” or the “Franchisee”), whose mailing address is .
1. Precedence and Defined Terms. This Rider is an integral part of, and is incorporated into, the Agreement. Nevertheless, this Rider supersedes any inconsistent or conflicting provisions of the Agreement. Terms not otherwise defined in this Rider have the meanings as defined in the Agreement.
2. Initial Franchise Fee. The payment of the initial franchise fee is deferred until all of our pre- opening obligations to you are completed and your business has opened.
3. Effective Date. This Rider is effective on the Agreement Date regardless of the actual date of signature.
Intending to be bound, the parties sign and deliver this Rider to each other as shown b
Us: You: TROPICAL SMOOTHIE CAFE, LLC
By: By: Name: Name: Title: Title: Date: Date:
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ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT FOR TROPICAL SMOOTHIE CAFE, LLC STATE OF HAWAII
THIS ADDENDUM (the “Addendum”) amends the Franchise Disclosure Document of TROPICAL SMOOTHIE CAFE, LLC for its Tropical Smoothie Cafe® Franchise.
The following is added to Items 5 and 21 of the Franchise Disclosure Document:
The State of Hawaii has imposed a deferral condition on us; therefore, no fees are payable by you to us until all of our pre-opening obligations are completed and your business has opened.
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HAWAII RIDER TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
THIS RIDER (the “Rider”) is effective as of ______, 20____ (the “Agreement Date”), and amends the Franchise Agreement dated ______, 20_____ (the “Agreement”), between TROPICAL SMOOTHIE CAFE, LLC (“we,” “us,” “our” or the “Franchisor”) with its principal office at 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328, and (“you,” “your” or the “Franchisee”), whose mailing address is .
1. Precedence and Defined Terms. This Rider is an integral part of, and is incorporated into, the Agreement. Nevertheless, this Rider supersedes any inconsistent or conflicting provisions of the Agreement. Terms not otherwise defined in this Rider have the meanings as defined in the Agreement.
2. Initial Franchise Fee. The payment of the initial franchise fee is deferred until all of our pre- opening obligations to you are completed and your business has opened.
3. Effective Date. This Rider is effective on the Agreement Date regardless of the actual date of signature.
Intending to be bound, the parties sign and deliver this Rider to each other as shown below:
Us: You: TROPICAL SMOOTHIE CAFE, LLC
By: By: Name: Name: Title: Title: Date: Date:
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ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT FOR TROPICAL SMOOTHIE CAFE, LLC STATE OF ILLINOIS
The following is added to Item 5:
The payment to us of all initial fees is placed in escrow with U.S. Bank until we have provided all of our pre-opening obligations to you and your TROPICAL SMOOTHIE® Store is open for business. The initial franchise fee is made payable to U.S. Bank N.A. as escrowee. The escrow requirement has been imposed by the Illinois Attorney General’s Office based on our financial condition. See a copy of the escrow agreement attached to this Addendum as Exhibit "A."
The following is added to Item 17:
The conditions under which you can be terminated and your rights on non-renewal may be affected by Illinois law, 815 ILCS 705/1-44.
The Illinois Franchise Disclosure Act will govern any franchise agreement if: (a) it applies to a franchise located in Illinois; or (b) a franchisee who resides in Illinois.
Any condition of the franchise agreement that designates litigation, jurisdiction or venue in a forum outside of Illinois is void as to any cause of action that otherwise is enforceable in Illinois provided the franchise agreement may provide for arbitration in a forum outside of Illinois.
Be advised that any condition, stipulation, or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of the Illinois Franchise Disclosure Act or any other law of Illinois is void. No person may be prevented from entering into a settlement agreement or executing a general release regarding a potential or actual lawsuit filed under any of the provisions of the Illinois Franchise Disclosure Act, nor shall arbitration of any claim pursuant to the provisions of Title 9 of the United States Code be prevented.
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RIDER TO TROPICAL SMOOTHIE FRANCHISE DEVELOPMENT CORPORATION FRANCHISE AGREEMENT FOR USE IN ILLINOIS
This Rider is entered into this ______, 200___ (the “Effective Date”), between TROPICAL SMOOTHIE FRANCHISE DEVELOPMENT CORPORATION, a Florida corporation, with its principal business address at 12598 U.S. Highway 98 West, Suite 200, Destin, Florida 32550 ( “we,” “us” or “our”), and , a whose principal business address is (referred to in this Rider as “you” or “your”) and amends the Franchise Agreement between the parties dated as of the Effective Date, (the “Agreement”).
1. Precedence and Defined Terms. This Rider is an integral part of, and is incorporated into, the Agreement. Nevertheless, this Rider supersedes any inconsistent or conflicting provisions of the Agreement. Terms not otherwise defined in this Rider have the meanings as defined in the Agreement.
2. Initial Franchise Fee. Payment of the Initial Franchise Fee is deferred until we have provided you with all of our pre-opening obligations and your TROPICAL SMOOTHIE® Store is open for business. The deferral requirement has been imposed by the Illinois Attorney General’s Office based on our financial condition.
3. Termination. The following is added to Section 14 of the Agreement:
The conditions under which this franchise can be terminated and the parties’ rights on termination may be affected by Illinois law, 815 ILCS 705/1-44.
4. Release of Prior Claims. Section 22 of the Agreement is deleted in its entirety.
5. Entire Agreement. Section 24 of the Agreement is amended by adding the following:
Nothing contained in the Agreement waives any of the Franchisee’s right to rely on the disclosure made by the Franchisor in its Uniform Franchise Disclosure Document or any corresponding rights the Franchisee has under the Illinois Act.
6. Limitation of Claims. The following is added to Section 26(G) of the Agreement:
No action can be maintained to enforce any liability created by the Illinois Franchise Disclosure Law (the “Illinois Act”) unless brought before the earlier of (i) the expiration of 3 years from the act or transaction constituting the violation upon which such action is based; (ii) the expiration of 1 year after you become aware of facts or circumstances reasonably indicating that you may have a claim for relief in respect to conduct governed by the Illinois Act; or (iii) 90 days after delivery to you of a written notice disclosing the violation.
7. Governing Law and Jurisdiction. Sections 26(C) and 26(D) of the Agreement are amended by adding the following:
All matters coming under the Illinois Act will be governed by the Illinois Act. The parties irrevocably submit to the jurisdiction and venue of the federal and state courts in Illinois for all matters coming under the Illinois Act.
8. Waiver of Jury Trial. Section 26(E) of the Agreement is deleted in its entirety.
9. Enforcement. Add Section K to Section 26 of the Agreement to read as follows:
Any condition, stipulation, or provision contained in the Agreement purporting to waive compliance with any provision of the Illinois Act or any other Illinois law is void.
ILLINOIS QB\10200994.7 7/23/10
RIDER TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT FOR USE IN ILLINOIS
This Rider is entered into this ______, 200___ (the “Effective Date”), between TROPICAL SMOOTHIE CAFE, LLC, a Georgia corporation, with its principal business address at 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328 ( “we,” “us” or “our”), and , a whose principal business address is
(referred to in this Rider as “you” or “your”) and amends the Franchise Agreement between the parties dated as of the Effective Date, (the “Agreement”).
1. Precedence and Defined Terms. This Rider is an integral part of, and is incorporated into, the Agreement. Nevertheless, this Rider supersedes any inconsistent or conflicting provisions of the Agreement. Terms not otherwise defined in this Rider have the meanings as defined in the Agreement.
2. Initial Franchise Fee. Payment of the Initial Franchise Fee is placed in escrow with U.S. Bank until we have provided you with all of our pre-opening obligations and your TROPICAL SMOOTHIE® Store is open for business. The escrow requirement has been imposed by the Illinois Attorney General’s Office based on our financial condition.
3. Termination. The following is added to Section 14 of the Agreement:
The conditions under which this franchise can be terminated and the parties’ rights on termination may be affected by Illinois law, 815 ILCS 705/1-44.
4. Release of Prior Claims. Section 22 of the Agreement is deleted in its entirety.
5. Entire Agreement. Section 24 of the Agreement is amended by adding the following:
Nothing contained in the Agreement waives any of the Franchisee’s right to rely on the disclosure made by the Franchisor in its Uniform Franchise Disclosure Document or any corresponding rights the Franchisee has under the Illinois Act.
6. Limitation of Claims. The following is added to Section 26(G) of the Agreement:
No action can be maintained to enforce any liability created by the Illinois Franchise Disclosure Law (the “Illinois Act”) unless brought before the earlier of (i) the expiration of 3 years from the act or transaction constituting the violation upon which such action is based; (ii) the expiration of 1 year after you become aware of facts or circumstances reasonably indicating that you may have a claim for relief in respect to conduct governed by the Illinois Act; or (iii) 90 days after delivery to you of a written notice disclosing the violation.
7. Governing Law and Jurisdiction. Sections 26(C) and 26(D) of the Agreement are amended by adding the following:
All matters coming under the Illinois Act will be governed by the Illinois Act. The parties irrevocably submit to the jurisdiction and venue of the federal and state courts in Illinois for all matters coming under the Illinois Act.
8. Waiver of Jury Trial. Section 26(E) of the Agreement is deleted in its entirety.
9. Enforcement. Add Section K to Section 26 of the Agreement to read as follows:
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Any condition, stipulation, or provision contained in the Agreement purporting to waive compliance with any provision of the Illinois Act or any other Illinois law is void.
10. Be advised that any condition, stipulation, or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of the Illinois Franchise Disclosure Act or any other law of Illinois is void. No person may be prevented from entering into a settlement agreement or executing a general release regarding a potential or actual lawsuit filed under any of the provisions of the Illinois Franchise Disclosure Act, nor shall arbitration of any claim pursuant to the provisions of Title 9 of the United States Code be prevented.
Intending to be bound, the parties sign and deliver this Rider in 2 counterparts effective on the Agreement Date, regardless of the actual date of signature.
Us: You: TROPICAL SMOOTHIE CAFE, LLC
By: Name: Name: Title: Date: Date:
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ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT FOR TROPICAL SMOOTHIE CAFE, LLC STATE OF MARYLAND
THIS ADDENDUM (the “Addendum”) amends the Franchise Disclosure Document of TROPICAL SMOOTHIE CAFE, LLC for its Tropical Smoothie Cafe® Franchise.
The following is added to Item 5 of the Franchise Disclosure Document:
The State of Maryland requires us to hold payment of the initial franchise fee and other initial payments owed by franchisees to the franchisor in escrow until the franchisor has completed its pre-opening obligations under the franchise agreement. The Franchisor has established an Escrow Account with SunTrust Bank. See a copy of the escrow agreement attached to this Addendum as Exhibit "A." The contact information for this Escrow Account is: Matt Ward, Assistant Vice President, SunTrust Bank, CMD 2125, 120 E. Baltimore Street, Baltimore, Maryland 21202 and his telephone number is 410.986.1665.
Sections (c) and (m) of Item 17 are amended by adding the following language:
Pursuant to COMAR 02.02.08.16L, the general release required as a condition of renewal, sale, and/or assignment or transfer will not apply to any liability under the Maryland Franchise Registration and Disclosure Law.
Our Standard form of Release is attached to this Addendum as Exhibit "B."
Item 17 is amended by adding the following language after the table:
You may sue in Maryland for claims arising under the Maryland Franchise Registration and Disclosure Law. Any claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of the franchise.
The provision in the franchise agreement which provides for termination upon bankruptcy of the franchisee may not be enforceable under Federal Bankruptcy Law (11 U.S.C. Section 1010 et seq.)
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EXHIBIT A TO MARYLAND ADDENDUM SUNTRUST BANK ESCROW AGREEMENT WITH TROPICAL SMOOTHIE CAFE, LLC
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EXHIBIT B TO MARYLAND ADDENDUM FORM OF RELEASE
The following is our current general release form that we expect to include in a release that a franchisee, developer, and/or transferor may sign as part of a renewal or an approved transfer. We may, in our sole discretion, periodically modify the release.
THIS RELEASE is given by ______and their predecessors, agents, affiliates, legal representatives, agents, successors, assigns, heirs, beneficiaries, executors and administrators (collectively, the "Franchisee"), to TROPICAL SMOOTHIE CAFE, LLC and all of its predecessors, affiliates, owners, officers, employees, legal representatives and agents, directors, successors and assigns, and their heirs, beneficiaries, executors and administrators (collectively, the "Franchisor").
Effective on the date of this Release, the Franchisee forever releases and discharges the Franchisor from any and all claims, causes of action, suits, debts, agreements, promises, demands, liabilities, contractual rights and/or obligations, of whatever nature or kind, in law or in equity, which the Franchisee now has or ever had against the Franchisor, including without limitation, anything arising out of that certain Franchise Agreement dated ______(the "Franchise Agreement"), the franchise relationship between the Franchisee and the Franchisor, and any other relationships between the Franchisee and the Franchisor; except the Franchisor’s obligations under the ______Agreement dated effective . This Release is effective for: (a) any and all claims and obligations, including those of which the Franchisee is not now aware; and (b) all claims the Franchisee has from anything which has happened up to now.
The Franchisee is bound by this Release. The Franchisee freely and voluntarily gives this Release to the Franchisor for good and valuable consideration and the Franchisee acknowledges its receipt and sufficiency.
The Franchisee represents and warrants to the Franchisor that the Franchisee has not assigned or transferred to any other person any claim or right the Franchisee had or now has relating to or against the Franchisor.
In this Release, each pronoun includes the singular and plural as the context may require.
This Release is governed by Georgia law.
This Release is effective ______, notwithstanding the actual date of signatures.
IN WITNESS WHEREOF, the undersigned execute this Release:
Date:
STATE OF COUNTY OF
The foregoing instrument was acknowledged before me this , 20___. , by , who is personally known to me or has produced ______as identification.
Signature of Notary My Commission Expires:
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MARYLAND RIDER TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
THIS RIDER (the “Rider”) is effective as of ______, 20____ (the “Agreement Date”), and amends the Franchise Agreement dated ______, 20_____ (the “Agreement”), between TROPICAL SMOOTHIE CAFE, LLC (“we,” “us,” “our” or the “Franchisor”) with its principal office at 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328, and (“you,” “your” or the “Franchisee”), whose mailing address is .
1. Precedence and Defined Terms. This Rider is an integral part of, and is incorporated into, the Agreement. Nevertheless, this Rider supersedes any inconsistent or conflicting provisions of the Agreement. Terms not otherwise defined in this Rider have the meanings as defined in the Agreement.
2. Initial Franchise Fee. The State of Maryland requires us to hold payment of the initial franchise fee and other initial payments owed by franchisees to the franchisor in escrow until the franchisor has completed its pre-opening obligations under the franchise agreement. The Franchisor has established an Escrow Account with SunTrust Bank for this purpose.
3. General Release. Pursuant to COMAR 02.02.08.16L, the general release otherwise required by the Agreement as a condition of renewal, sale and/or assignment/transfer does not apply to any liability under the Maryland Franchise Registration and Disclosure Law.
4. Release of Prior Claims. The following sentence is added at the end of Section 22:
Provided, however, that nothing in this Section applies to any liability under the Maryland Franchise Registration and Disclosure Law.
5. Limitation of Claims. Any limitations of claims provisions will not act to reduce the 3 year statute of limitations afforded you for bringing a claim arising under Maryland Franchise Registration and Disclosure Law. All claims arising under the Maryland Franchise Registration and Disclosure Law must be brought within 3 years after the grant of the franchise to you.
6. Jurisdiction and Venue. You may bring a lawsuit against us in Maryland for any claims arising under the Maryland Franchise Registration and Disclosure Law.
7. No Waiver. Nothing in this Agreement is intended to nor will it act as a release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law, including, but not limited to, any acknowledgments or representations made by you which disclaim the occurrence and/or acknowledge the non-occurrence of acts that would constitute a violation of the Maryland Franchise Registration and Disclosure Law.
8. Effective Date. This Rider is effective on the Agreement Date regardless of the actual date of signature.
Intending to be bound, the parties sign and deliver this Rider to each other as shown below:
Us: You: TROPICAL SMOOTHIE CAFE, LLC
By: By: Name: Name: Title: Title: Date: Date:
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ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT FOR TROPICAL SMOOTHIE CAFE, LLC STATE OF MINNESOTA
Additional Disclosures:
1. MINNESOTA LAW PROVIDES YOU WITH CERTAIN TERMINATION AND NON- RENEWAL RIGHTS. MINN. STAT. §80C.14 SUBD. 3, 4 AND 5 REQUIRE, EXCEPT IN CERTAIN CASE, THAT YOU BE GIVEN 90 DAYS' NOTICE OF TERMINATION (WITH 60 DAYS TO CURE) AND 180 DAYS' NOTICE FOR NONRENEWAL OF THE FRANCHISE AGREEMENT.
2. MINN. STAT. §80C.21 AND MINN. RULE 2860.4400J PROHIBIT US FROM REQUIRING LITIGATION TO BE CONDUCTED OUTSIDE MINNESOTA. IN ADDITION, NOTHING IN THE DISCLOSURE DOCUMENT OR AGREEMENT CAN ABROGATE OR REDUCE ANY OF YOUR RIGHTS AS PROVIDED FOR IN MINNESOTA STATUTES, CHAPTER 80C, OR YOUR RIGHTS TO ANY PROCEDURE, FORUM, OR REMEDIES PROVIDED FOR BY THE LAWS OF THE JURISDICTION.
3. Items 5 and 7 are amended by adding the following:
he State of Minnesota requires us to hold payment of the initial franchise fee and other initial payments owed by franchisees to the franchisor in escrow until the franchisor has completed its pre-opening obligations under the franchise agreement. The Franchisor has established an Escrow Account with U.S. Bank, National Association. See a copy of the escrow agreement attached to this Addendum as Exhibit "A."
4. Item 13 is amended to state that we will protect your right to use the trademarks, service marks, trade names, logotypes or other commercial symbols or indemnify you from any loss, costs or expenses arising out of any claim, suit or demand regarding the use of the name.
5. Item 17 is amended by adding the following:
You and your owners must execute general releases, in form and substance satisfactory to us, of any and all claims against us, and our affiliates, officers, directors, employees, agents, successors and assigns, except for matters coming under the Minnesota Franchise law.
6. Item 17, summary column for (f) is amended to add the following:
With respect to franchises governed by Minnesota law, we will comply with Minn. Stat. Sec. 80C.14, subds. 3, 4 and 5 which require, except in certain specified cases, that you be given 90 days’ notice of termination (with 60 days to cure) and 180 days’ notice for nonrenewal of the Franchise Agreement and that consent to transfer of the franchise will not be unreasonably withheld.
7. Item 17, summary column for (m) is amended to add the following:
Any release signed as a condition of transfer will not apply to any claims you may have under the Minnesota Franchise Act.
8. Item 17, summary columns for (v) and (w) are amended to add the following:
Minn. Stat. Sec. 80C.21 and Minn. Rule 2860.4400J prohibit us from requiring litigation to be conducted outside Minnesota. In addition, nothing in this Disclosure Document or agreement can abrogate or reduce any of your rights as provided for in Minnesota Statues, Chapter 80C, or your rights to any procedure, forum, or remedies provided for by the laws of the jurisdiction.
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EXHIBIT A TO MINNESOTA ADDENDUM
IMPOUNDMENT AGREEMENT
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MINNESOTA RIDER TO THE TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
THIS RIDER (the “Rider”) is effective as of ______, 20____ (the “Agreement Date”), and amends the Franchise Agreement dated ______, 20_____ (the “Agreement”), between TROPICAL SMOOTHIE CAFE, LLC (“we,” “us,” “our” or the “Franchisor”) with its principal office at 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328, and (“you,” “your” or the “Franchisee”), whose mailing address is .
1. Background. You and we are parties to that certain Franchise Agreement dated ______, 20___ (the "Franchise Agreement") that has been signed concurrently with the signature of this Rider. This Rider is annexed to and forms part of the Franchise Agreement. This Rider is being signed because the ______Business to be operated by you pursuant to the Franchise Agreement will be located in the State of Minnesota and/or because you are a resident of the State of Minnesota.
2. Initial Franchise Fee. Payment of the Initial Franchise Fee is placed in escrow with U.S. Bank until we have provided you with all of our pre-opening obligations and your TROPICAL SMOOTHIE® Store is open for business.
3. Renewal Term. Paragraph 2.B.7 is amended to read as follows:
You, your owners, directors and officers must execute a general release, in a form prescribed by us, of any and all claims against us and our affiliates, and our respective officers, directors, agents and employees, except for matters coming under the Minnesota Franchise law.
4. Trademarks. We will protect your right to use the trademarks, service marks, trade names, logotypes or other commercial symbols or indemnify you from any loss, costs or expenses arising out of any claim, suit or demand regarding the use of the name.
5. Default and Termination. The following is added at the beginning of Section 14:
Minnesota Law provides you with certain termination and non-renewal rights. Minn. Stat. §80C.14 Subd. 3, 4 and 5 require, except in certain case, that you be given 90 days' notice of termination (with 60 days to cure) and 180 days' notice for nonrenewal of the Franchise Agreement.
6. Governing Law. The following sentence is added at the end of Section 26.C.
MINN. STAT. §80C.21 AND MINN. RULE 2860.4400J PROHIBIT US FROM REQUIRING LITIGATION TO BE CONDUCTED OUTSIDE MINNESOTA. IN ADDITION, NOTHING IN THE DISCLOSURE DOCUMENT OR AGREEMENT CAN ABROGATE OR REDUCE ANY OF YOUR RIGHTS AS PROVIDED FOR IN MINNESOTA STATUTES, CHAPTER 80C, OR YOUR RIGHTS TO ANY PROCEDURE, FORUM, OR REMEDIES PROVIDED FOR BY THE LAWS OF THE JURISDICTION.
7. Injunctive Relief. Nothing in the Franchise Agreement is construed to mean that you are consenting to our obtaining injunctive relief. We may, however, seek injunctive relief. The court will determine if a bond is required.
8. Limitation of Claims. Section 26.G. is deleted in its entirety.
9. Waiver of Jury Trial. Section 26.E. is deleted in its entirety.
Intending to be bound, the parties sign and deliver this Rider to each other as shown below:
Us: You: TROPICAL SMOOTHIE CAFE, LLC
By: By: Name: Name: Title: Title: Date: Date:
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ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT FOR TROPICAL SMOOTHIE CAFE, LLC STATE OF NORTH DAKOTA
1. The following is added to Item 5 of the Franchise Disclosure Document:
The State of North Dakota requires us to hold payment of the initial franchise fee and other initial payments owed by franchisees to the franchisor in escrow until the franchisor has completed its pre-opening obligations under the franchise agreement. The Franchisor has established an Escrow Account with U.S. Bank, National Association. See a copy of the escrow agreement attached to this Addendum as Exhibit "A."
2. The Summary column of Item 17 paragraph (c) of this Disclosure Document is modified to read as follows:
“Give us at least 90 days notice of your intention to renew, sign our current form of Franchise Agreement and ancillary agreements, sign a release (except for matters coming under the North Dakota Franchise Investment Law (the “ND Law”).”
3. The Summary column of Item 17 paragraph (r) of this Disclosure Document is modified by adding the following at the end of the sentence:
“Covenants not to compete such as those mentioned above are generally considered unenforceable in the State of North Dakota.”
4. The Summary column of Item 17 paragraph (u) of this Disclosure Document is amended by adding the following at the end of the paragraph:
“except that matters coming under the ND Law will be submitted to arbitration to be held in a mutually agreeable location.
5. The Summary column of Item 17 paragraph (v) of this Disclosure Document is amended to read as follows:
Except for matters coming under the ND Law, litigation must be in Fulton County, Georgia.
6. The Summary column of Item 17 paragraph (w) of this Disclosure Document is amended to read as follows:
The law of North Dakota governs.*
7. Section 51-19-09 of the North Dakota Franchise Investment Law provides that any requirement that you consent to liquidated damages is unfair, unjust and inequitable.
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Exhibit A
QB\138221.00002\10107206.43 9/28/12 ;;)J,_i_TN E~AGREEMENT Agreement, made this':[_day of 011, by TROPICAL SMOOTHIE FRANCHISE DEVELOPMENT CORPORATION, a mrp ion, organized under the laws of the State of Ronda (hereinafter refenred to as "TROPICAL SMOOTHIE "), and U.S. Bank, National Assodation, Fargo, ND hereinafter refenred to as "BANK", a banking assodation organized under the laws of the State of North Dakota, as Escrowee for the franchisees of TROPICAL SMOOTHIE Franchise Development Corporation. WHEREAS, TROPICAL SMOOTH IE is desirous of establishing franchises in the State of North Dakota; and
WHEREAS, it is in the discretion of the Securities Commissioner, as administrator of the North Dakota Franchise Investment Law, to require an escrow of franchise fees; and WHEREAS, in order to conform to the procedures for arranging an escrow acmunt, TROPICAL SMOOTH IE desires to enter into an escrow agreement with BANK, pursuant to which franchise fees are to be held in escrow for the purpose of mmplying wtth the North Dakota Franchise Investment Law.
NOW, THEREFORE, with the foregoing recitals hereinafter incorporated by reference and made a part thereof, it is agreed as follows: 1. TROPICAL SMOOTHIE shall deposit with BANK payments received from franchisees that are required to be escrowed under the order to the Commissioner, but BANK shall not be respcnsible for insuring that all monies received from each or any one franchisee are deposited with BANK. 2. TROPICAL SMOOTHIE will supply BANK with the name and address of each franchisee, together with the amount of the deposit, which represents· monies paid by each franchisee, and BANK will maintain remrds mntaining the same information. 3. All monies received by BANK from TROPICAL SMOOTHIE shall be held by BANK as escrowee for the exclusive purpose herein described and will be placed in a single segregated account substantially as follows: U.S. BANK, AS ESCROWEE FOR FRANCISEES OF TROPICAL SMOOTHIE FRANCHISE DEVELOPMENT CORPORATION
(hereinafter referred to as "Escrow Account"). 4. BANK shall accept such funds as Tropical Smoothie ; shall deliver to BANK, as escrowee, and BANK shall acknowledge the receipt of funds from Tropical Smoothie; however BA~K shall be responsible only for funds actually depcsited with it and shall not be respcnsible for the accuracy of the information provided to it by Tropical Smoothie.
5. Any funds deposited hereunder in the Escrow Account shall be invested and kept invested by BANK, at the option of Tropical Smoothie, in obligations of the United States; money market mutual funds wtth assets in excess of one billion dollars, or savings accounts or certificates of depcsits of BANK, until they are to be disbursed as provided in paragraph 6 hereof. All interested received and any increment thereon shall be added to the funds so deposited in the Escrow Account and shall be distributed as provided in paragraph 6, 6. BANK shall pay out funds, plus interest, if any, from the Escrow Account upon the occunrence of one of the following conditions: (a) Upon receipt of a letter from an officer of TROPICAL SMOOTHIE directing BANK to pay out such funds to TROPICAL SMOOTHIE, accompanied by a written notice from the Commissioner stating that he takes no exception (hereinafter refenred to as 'No Exception Notice") to the release, BANK shall pay apart of all the monies held in escrow for the benefit of a specified franchise, plus interest, if any, to TROPICAL SMOOTHIE. (b) (Upon written notice from the Commissioner BANK shall return part of all of the deposited franchise fee and other funds, plus interest, if any, to a spedfied franchisee. (c) BANK shall pay funds into court or disperse or deliver them in accordance with any final order of any court of competent jurisdiction. BANK shall not be personally liable for any act taken or omitted hereunder if taken or omitted by it in good faith and in the exerdse of its own best judgment. BANK shall also be fully protected in relying upon any written notice, demand, certificate or document, which it in good faith believes to be genuine. 7. BANK is authorized, in its sole discretion, to disregard any and all notices or instruction given by any of the undersigned or by any other person, firm or corporation, except only such notices or instructions by the Commissioner as are hereinafter provide or and orders or process of any court entered or issued with or without jurisdiction. If any property subject hereto is at any time attached, garnished, or levied upon under any court order or in case the payment, assignment, transfer, conveyance or delivery of any such property shall be stayed or enjoined by any court order, or in case of any court order affecting such property or any part thereof, then and in any of such events BANK is authorized, in its sole discretion, to rely upon and comply with any such order, writ, judgment or decree which it is advised by legal counsel of its own choosing is binding upon it; If it complies with any such order, writ, judgment or decree, it shall not be liable to any of the parties hereto or to any other person, firm or corporation by reason of such compliance even though such order, writ, judgment or decree may be subsequently reversed, modified, annulled, set aside or vacated. 8. Written consent of BANK to act in the capacity of escrowee shall be manifested upon the duly authorized execution of this Agreement. The Commissioner Securities Commissioner, State Capitol 5th Roar, 600 East Boulevard Avenue, Bismarck, North Dakota, 58505. 9. BANK shall be paid by TROPICAL SMOOTHIE and reasonable compensation for its services hereunder. Funds held by BANK pursuant to this Agreement shall not be subject to liens or charges by BANK. 10. If BANK believes it to be reasonably necessary to consult with counsel concerning any of its duties in connection with this escrow, or in the event BANK retains counsel upon becoming involved in litigation on account of any deposit or of this Agreement, TROPICAL SMOOTHIE shall reimburse BANK for and indemnify and hold BANK harmless against any and all costs, attorneys' fees, charges, disbursements and expenses in connection with such consultation or litigation. 11. TROPICAL SMOOTHIE unconditionally guarantees that, in the event BANK misapplies, dissipates, converts or is otherwise responsible for a deficiency in the funds deposited in the Escrow Account, TROPICAL SMOOTHIE franchisee to the extent of such deficiency if such amounts deposited are required to be returned to such franchisee under paragraph 6 hereof. 12. TROPICAL SMOOTHIE shall give each franchisee a copy of this agreement prior to collecting any monies from such franchisee. 13. BANK'S duties as escrowee shall terminate upon final distribution of all monies received under this Agreement. IN WITNESS WHEREOF, this Agreement has been duly executed, the parties intending to be legally bound hereby. ATTEST: NAME AND ADDRESS OF BANK: U.s. f)A~K ~A-T1DJJrtL Assocti\Ttor:> l'S"O FouRrlt AuE. /0. 2 NP PL t-.:)1\SHVJ u..t, 7!\) '3 7 2! 9
NAME AND ADDRESS OF FRANCHISOR: 'DmjCf!l Stmt:hle fgrrhj s= l}wl c:wsnt: Corp. 12598 !JS 1-lo¥ 98 West, Suite 2m ~;~~ Title: Rick O:met:, Chief Firnrcial Officer'
NORTH DAKOTA RIDER TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
THIS RIDER (the “Rider”) is effective as of ______, 20____ (the “Agreement Date”), and amends the Franchise Agreement dated ______, 20_____ (the “Agreement”), between TROPICAL SMOOTHIE CAFE, LLC (“we,” “us,” “our” or the “Franchisor”) with its principal office at 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328, and (“you,” “your” or the “Franchisee”), whose mailing address is .
1. Precedence and Defined Terms. This Rider is an integral part of, and is incorporated into, the Agreement. Nevertheless, this Rider supersedes any inconsistent or conflicting provisions of the Agreement. Terms not otherwise defined in this Rider have the meanings as defined in the Agreement.
2. Initial Franchise Fee. Payment of the Initial Franchise Fee is placed in escrow with U.S. Bank until we have provided you with all of our pre-opening obligations and your TROPICAL SMOOTHIE® Store is open for business. The escrow requirement has been imposed by the North Dakota Securities Department based on our financial condition.
3. Terms and Conditions for Successor Franchise. You are not required to sign a general release as to any matters coming under the North Dakota Franchise Investment Law (the “ND Law”).
4. Competitive Restrictions. Covenants not to compete, such as those mentioned in this section, 4re generally unenforceable in the State of North Dakota.
5. Jurisdiction. All matters coming under the ND Law may be brought in the courts of North Dakota.
6. Waiver of Punitive Damages. Section 26.F. of the Franchise Agreement is deleted in its entirety.
7. Waiver of Jury Trial. Section 26.E. of the Franchise Agreement is deleted in its entirety.
8. Limitation of Claims. The statute of limitations under ND Law applies to all matters coming under ND Law.
9. Governing Law. This Agreement will be governed by North Dakota law.
Us: You: TROPICAL SMOOTHIE CAFE, LLC
By: By: Name: Name: Title: Title: Date: Date:
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ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT FOR TROPICAL SMOOTHIE CAFE, LLC STATE OF RHODE ISLAND
Item 17, summary columns for (v) and (w) are amended to add the following:
Any provision in the Franchise Agreement restricting jurisdiction or venue to a forum outside Rhode Island or requiring the application of the laws of a state other than Rhode Island is void as to a claim otherwise enforceable under the Rhode Island Franchise Investment Act.
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ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT FOR TROPICAL SMOOTHIE CAFE, LLC STATE OF SOUTH DAKOTA
1. The summary statement of provision (q) of Item 17, is deleted in its entirety and the following substituted in its place:
The Franchise Agreement provides that you cannot compete anywhere for 2 years after termination or expiration. However, covenants not to compete upon termination or expiration of a Franchise Agreement are generally unenforceable in the State of South Dakota, except in certain instances as provided by law.
2. Any provision that provides that the parties’ waive their right to claim punitive, exemplary, incidental, indirect, special or consequential damages may not be enforceable under South Dakota Law. If any of the provisions in this Disclosure Document or the Franchise Agreement are inconsistent with this paragraph, the terms of this paragraph will prevail with regard to any franchise sold in South Dakota.
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SOUTH DAKOTA RIDER TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
THIS RIDER (the “Rider”) is effective as of ______, 20____ (the “Agreement Date”), and amends the Franchise Agreement dated ______, 20_____ (the “Agreement”), between TROPICAL SMOOTHIE CAFE, LLC (“we,” “us,” “our” or the “Franchisor”) with its principal office at 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328, and (“you,” “your” or the “Franchisee”), whose mailing address is .
1. Precedence And Defined Terms. This Rider is an integral part of, and is incorporated into, the Agreement. Nevertheless, this Rider supersedes any inconsistent or conflicting provisions of the Agreement. Terms not otherwise defined in this Rider have the meanings as defined in the Agreement.
2. Termination. The following is added to Section 14:
You will have 30 days written notice with an opportunity to cure prior to termination for the following: breach of the Franchise Agreement, failure to meet performance and quality standards and failure to make royalty payments.
3. Covenants Not to Complete. Covenants not to compete on termination or expiration of a Franchise Agreement are generally unenforceable in the state of South Dakota, except in certain instances as provided by law. This statement is given for informational purposes only.
4. Jurisdiction and Venue. Any provision which designates jurisdiction or venue or requires you to agree to jurisdiction or venue in a forum outside South Dakota is void with respect to any cause of action which is otherwise enforceable in South Dakota.
Us: You: TROPICAL SMOOTHIE CAFE, LLC
By: By: Name: Name: Title: Title: Date: Date:
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ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT FOR TROPICAL SMOOTHIE CAFE, LLC STATE OF VIRGINIA
In recognition of the restrictions contained in Section 13.1-564 of the Virginia Retail Franchising Act (the “Act”), the Franchise Disclosure Document for TROPICAL SMOOTHIE CAFE, LLC for use in the Commonwealth of Virginia is amended as follows:
Pursuant to Section 13.1-564 of the Act, it is unlawful for a franchisor to cancel a franchise without reasonable cause. If any ground for default or termination stated in the franchise agreement does not constitute “reasonable cause,” as that term may be defined in the Act or the Laws of Virginia, that provision may not be enforceable.
The following is added to Item 5 of the FDD:
The Virginia State Corporation Commission's Division of Securities and Retail Franchising requires us to hold payment of the initial franchise fee and other initial payments owed by franchisees to the franchisor in escrow until the franchisor has completed its pre-opening obligations under the franchise agreement. The Franchisor has established an Escrow Account with U.S. Bank National Association for this purpose. See a copy of the escrow agreement attached to this Addendum as Exhibit "A."
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EXHIBIT A TO ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT FOR TROPICAL SMOOTHIE CAFE, LLC STATE OF VIRGINIA
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VIRGINIA RIDER TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
THIS RIDER (the “Rider”) is effective as of ______, 20____ (the “Agreement Date”), and amends the Franchise Agreement dated ______, 20_____ (the “Agreement”), between ______. (“we,” “us,” “our” or the “Franchisor”) with its principal office at , and (“you,” “your” or the “Franchisee”), whose mailing address is .
1. Precedence and Defined Terms. This Rider is an integral part of, and is incorporated into, the Agreement. Nevertheless, this Rider supersedes any inconsistent or conflicting provisions of the Agreement. Terms not otherwise defined in this Rider have the meanings as defined in the Agreement.
2. Initial Fees and Payments. The Virginia State Corporation Commission's Division of Securities and Retail Franchising requires us to hold payment of the initial franchise fee and other initial payments owed by franchisees to the franchisor in escrow until the franchisor has completed its pre- opening obligations under the franchise agreement. The Franchisor has established an Escrow Account with U.S. Bank National Association for this purpose.
Intending to be bound, you and we sign and deliver this Rider in 2 counterparts effective on the Agreement Date, regardless of the actual date of signature.
Us: You: TROPICAL SMOOTHIE CAFE, LLC
By: By: Name: Name: Title: Title: Date: Date:
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ADDENDUM TO FRANCHISE DISCLOSURE DOCUMENT FOR TROPICAL SMOOTHIE CAFE, LLC STATE OF WASHINGTON
In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act (the “Act”), Chapter 19.100 RCW, prevails.
Section RCW 19.100.180 of the Act, may supersede the Franchise Agreement in your relationship with us, including the area of termination and renewal of your franchise. There may also be court decisions which may supersede the Franchise Agreement in your relationship with us including the area of termination and renewal of your franchise.
In any arbitration involving a franchise purchased in Washington, the arbitration site will either be in the State of Washington, or in a place mutually agreed upon at the time of the arbitration, or as determined by the arbitrator.
A release or waiver of rights signed by you will not include rights under the Act except when signed pursuant to a negotiated settlement after the agreement(s) are in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, rights or remedies under the Act such as a right to a jury trial may not be enforceable.
Transfer fees may be collected to the extent that they reflect our reasonable estimated or actual costs in effectuating a transfer.
The State of Washington has imposed a deferral condition on us; therefore, no fees are payable by you to us until all of our pre-opening obligations are completed and your business has opened.
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WASHINGTON RIDER TO TROPICAL SMOOTHIE CAFE, LLC FRANCHISE AGREEMENT
THIS RIDER (the “Rider”) is effective as of ______, 20____ (the “Agreement Date”), and amends the Franchise Agreement dated ______, 20_____ (the “Agreement”), between ______. (“we,” “us,” “our” or the “Franchisor”) with its principal office at , and (“you,” “your” or the “Franchisee”), whose mailing address is .
1. Precedence and Defined Terms. This Rider is an integral part of, and is incorporated into, the Agreement. Nevertheless, this Rider supersedes any inconsistent or conflicting provisions of the Agreement. Terms not otherwise defined in this Rider have the meanings as defined in the Agreement.
2. Initial Franchise Fee. The payment of the initial franchise fee is deferred until all of our pre-opening obligations to you are completed and your business has opened.
3. Washington Franchise Investment Protection Act. In the event of a conflict of laws, the provisions of the Washington Franchise Investment Protection Act (the “Act”), Chapter 19.100 RCW, prevail
4. Relationship. Section RCW 19.100.180 of the Act may supersede this Agreement in your relationship with us, including the area of termination and renewal of your franchise. There may also be court decisions which may supersede this Agreement in your relationship with us including the area of termination and renewal of your franchise.
5. Arbitration. In any arbitration involving a franchise purchased in Washington, the arbitration site will either be in the State of Washington, or in a place mutually agreed upon at the time of the arbitration, or as determined by the arbitrator.
6. Waiver of Rights. A release or waiver of rights signed by you will not include rights under the Act except when signed pursuant to a negotiated settlement after the agreement(s) are in effect and where the parties are represented by independent counsel. Provisions such as those which unreasonably restrict or limit the statute of limitations period for claims under the Act, rights or remedies under the Act such as a right to a jury trial may not be enforceable.
7. Transfer Fees. Transfer fees may be collected to the extent that they reflect our reasonable estimated or actual costs in effectuating a transfer.
Intending to be bound, you and we sign and deliver this Rider in 2 counterparts effective on the Agreement Date, regardless of the actual date of signature.
Us: You: TROPICAL SMOOTHIE CAFE, LLC
By: By: Name: Name: Title: Title: Date: Date:
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EXHIBIT M TO THE DISCLOSURE DOCUMENT
ROSTER OF CURRENT AND FORMER FRANCHISEES
AS OF DECEMBER 31, 2011
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ROSTER OF CURRENT FRANCHISEES AS OF DECEMBER 31, 2011
FirstName LastName Store Address City ST PC Phone Nazmi Ozokur Unit Not Open* Auburn AL (251) 643-2323 John Michael Tate 1350 Inverness Corners Birmingham AL 35242 (205) 834-8309 Karen Purvis 3230 Ross Clark Circle Dothan AL 36301 (334) 673-5652 Karen Purvis 1640 Ross Clark Circle Dothan AL 36301 (334) 792-7928 Gordon Saunders Unit Not Open* Hoover AL (205) 365-3177 Gordon Saunders 3049 John Hawkins Parkway, Suite 100 Hoover AL 35226 (205) 444-0612 Nazmi Ozokur 9 Du Rhu Drive Mobile AL 36608 (251) 378-5648 Nazmi Ozokur 570 Schillinger Road South Mobile AL 36695 (251) 634-3454 Linda Morgan 6542 Atlanta Hwy Montgomery AL 36117 (334) 213-2999 Linda Morgan 2790 Legends Parkway Prattville AL 36066 (334) 285-4545 Darrell & Rene Hill 705 Club Lane #109 Conway AR 72034 (501) 764-4800 Wesley & Melody Couch 3878 Crossover Rd. #10 Fayetteville AR 72703 (479) 582-4444 Wesley & Melody Couch 2350 N. College Fayetteville AR 72701 (479) 966-4660 Chad & Tina Moore 140 John Hardin Drive #29 Jacksonville AR 72076 (501) 241-2233 Lindley Smith 2007 E. Nettleton Ave. Jonesboro AR 72401 (870) 932-5421 Lindley Smith 3410 E. Johnson Avenue Jonesboro AR 72401 (870) 932-8767 Josh Inmon & Bradley Newcomb Unit Not Open* Little Rock AR (501) 786-6555 Dennis McDowell 11900 Kanis Rd. Suite D3 Little Rock AR 72211 (501) 221-6773 Larry Bone 12911 Cantrell Rd. #19 Little Rock AR 72223 (501) 224-1113 Chris Kramolis 10221 N. Rodney Parham Rd. Little Rock AR 72227 (501) 224-2233 Josh Inmon & Bradley Newcomb 400 East Markham Little Rock AR 72201 (501) 376-2233 Rita White & Jim Clark 12007 Maumelle Blvd. North Little Rock AR 72113 (501) 851-9555 Lucas Anderson & Mark Todd Howe, Glen Johnson, Watson 5504 JFK Blvd North Little Rock AR 72116 (501) 753-8500 Wesley & Melody Couch Unit Not Open* Rogers AR (479) 466-3034 Lucas Anderson & Mark Todd Howe, Glen Johnson, Watson Unit Not Open* Searcy AR (757) 735-4998 Daniel & Kathleen Hill Unit Not Open* Anthem AZ (602) 463-5454 Stuart & Annette Latta Unit Not Open* Chandler AZ (480) 710-8604 Michael Dill Unit Not Open* Glendale AZ (714) 348-6618 Daniel, Martha, Kevin, & Alison Gillis Unit Not Open* Gold Canyon AZ (480) 474-9818 Robert & Tammy Jones Unit Not Open* Goodyear AZ (623) 935-9575 Robert & Ya-Ju Bradley 2832 North Power Road Suite 102 Mesa AZ 85215 (480) 985-8767 Bradford Kelly 6614 E. Baseline Rd. Suite 110 Mesa AZ 85206 (480) 325-7680 Gregory Bearden 8707 S. Priest Drive Suite # 108 Tempe AZ 85284 (480) 496-4200 David & Allison Hugeback Unit Not Open* Tucson AZ (520) 954-3048 Kasturie & Ayushka Gharib 229 E. Common Wealth Avenue, Suite E Fullerton CA 92832 (714) 680-3008
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FirstName LastName Store Address City ST PC Phone Alex Hwang Unit Not Open* Los Angeles CA (805) 557-6206 Alex Hwang Unit Not Open* Los Angeles CA (805) 557-6206 Arman Marukyan 851 South SR 434 Suite 1000 Altamonte Springs FL 32714 (407) 294-0098 Phong Thai Ho, Melvin Cron & Lieu Thi Nguyen 5072 Annunciation Circle #101 Ave Maria FL 34142 (239) 867-4492 Dale & Josephine Forer 18800 NE 29th Ave., Ste. 9 Aventura FL 33180 (786) 787-9080 Jack Cleghorn 1490 N. Broadway Ave. Bartow FL 33830 (863) 519-9111 Wayne & Mercedes Pedrazas Unit Not Open* Boca Raton FL (772) 287-5417 Brian LaBovick 22191 Powerline Road Suite 27 C Boca Raton FL 33433 (561) 620-0888 Agnes Gregory 100 Plaza Real South, Ste. A Boca Raton FL 33432 (561) 338-7127 Cornel & Delrose Marriott 1025 Gateway Blvd. #305 Boynton Beach FL 33426 (561) 733-0059 Steven & Sheri Grossberg 11011 Causeway Blvd. Brandon FL 33511 (813) 684-1962 Steven & Sheri Grossberg 2330 W. Brandon Blvd. Brandon FL 33511 (813) 689-6200 Dale Forer & Josephine Forer Unit Not Open* Broward County FL (954) 684-8912 Broward/Dade Michael Erber Unit Not Open* Counties FL (352) 246-3277 Jeffrey Smith Unit Not Open* Clearwater FL (727) 647-0351 Keith Sabiel 27001 US 19 Clearwater FL 33761 (727) 216-6984 Keith Sabiel 2695 Roosevelt Blvd. Clearwater FL 33761 (727) 536-1800 Donnise DeSouza & Michael Webb Unit Not Open* Davie FL (305) 253-6288 Sandra Ramirez & Jim Welzer 5780 S. University Dr. #106 Davie FL 33328 (954) 880-0840 Chad Brown & Arnold Rush 66 Harbor Blvd. Destin FL 32541 (850) 424-3617 Michael Burks 10011 Estero Town Commons Pl., Unit 104A Estero FL 33928 (239) 992-2008 Andrew & Terri Jessen 9377 Six Mile Cypress Pkwy, Ste 100 Fort Myers FL 33966 (239) 931-3100 Michelle Lightbourn Unit Not Open* Fort Pierce FL (772) 336-5884 Glen Means 312 NW Racetrack Rd Fort Walton Bch FL 32547 (850) 864-4991 Neil & Carol Hooker & Catherine Catanese 415-C Mary Esther Cutoff Fort Walton Beach FL 32548 (850) 244-3688 Glen Means 21 S. Eglin Parkway Fort Walton Beach FL 32548 (850) 796-2388 Michael Fletcher 1922 Cordova Road Ft. Lauderdale FL 33316 (954) 523-2268 Michael Fletcher 5212 - A Okechobee Road Ft. Pierce FL 34947 (772) 429-1944 Brandy Heinlein Unit Not Open* Gainesville FL (352) 219-6850 Brandy Heinlein 3345 SW 34 Street Ste 5 Gainesville FL 32608 (352) 379-9988 Gary & Patricia Corbitt 10111-12 San Jose Blvd. Jacksonville FL 32257 (904) 880-5161 Ronald Penna 1808 Hendricks Avenue Jacksonville FL 32207 (904) 399-1514 Nicholas Crouch 2245 - 114 County Rd. 210 West Jacksonville FL 32259 (904) 829-9292 Mark Steele 11900 Atlantic Blvd. Suite 228 Jacksonville FL 32225 (904) 996-9991 Jim Mabry 104 Bartram Oaks Walk #6 Jacksonville FL 32259 (904) 230-6360 Alex Juarez, Edgar Zamudio & Antonio Luna 7159 Phillips Hwy, Unit #5 Jacksonville FL 32256 (904) 332-9555 Irwin Witt 8221 Southside Blvd. Jacksonville FL 32256 (904) 646-9727 John Dunlap Sr. & John Dunlap Jr. 9610 Applecross Road, Suite #110 Jacksonville FL 32222 (904) 777-8216
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FirstName LastName Store Address City ST PC Phone Mark Steele 1230 Beach Blvd. Jacksonville Beach FL 32250 (904) 242-4940 Nick Gannascoli 3174 Federal Hwy Jensen Beach FL 34957 (772) 232-9010 Nick Gannascoli 2491 S. Federal Hwy. - Pineapple Plaza Jensen Beach FL 34957 (772) 692-8088 Rick Price & Jeff Leishman 5440 Military Trail, Suite #5 Jupiter FL 33458 (561) 624-8775 Yolanda Montoya 2677 W. Osceola Pkwy. Kissimmee FL 34741 (407) 201-3982 Steven Ira 3785 Lake Emma Road Lake Mary FL 32746 (407) 942-0050 Ming-Ting Chung Unit Not Open* Lakeland FL (863) 529-7961 Ming-Ting Chung 4270 N Hwy 98 Lakeland FL 33809 (863) 859-5116 Jack Cleghorn 116 S. Tennessee Avenue Lakeland FL 33801 (863) 686-9474 Joseph Mormino 1001 West Bay Dr., Ste. 102 Largo FL 33770 (727) 216-3329 Eren Sullivan 504 West Hwy 390 Lynn Haven FL 32444 (850) 271-2120 Ming-Ting Chung 1520 S. Babcock St., Suite A Melbourne FL 32907 (321) 952-5575 Christopher Albers Melbourne Village Plaza 1270 N. Wickham Rd. #1 Melbourne FL 32935 (321) 751-3330 John Feronti 7965 N. Wickham Rd. #103 Melbourne FL 32904 (321) 751-2140 Linda Payne & Michelle Goldstein 700-2 E. Merritt Island Causeway Merritt Island FL 32952 (321) 454-2303 Donnise Desouza 100 S. Biscayne Blvd, Ste 101 Miami FL 33131 (786) 425-2051 Giancarlo & Fernando Capote 9030 SW 72 Place Miami FL 33156 (305) 670-9369 Donnise Desouza 12161 SW 152nd St. Miami FL 33177 (305) 255-3725 Clyde & Maria Shellen 13550 SW 120th St. #452 Miami FL 33186 (305) 251-7570 Giancarlo & Fernando Capote 11290 SW 13 St., RC 101 (FIU) Miami FL 33199 (305) 348-7534 Mary Fawkes Unit Not Open* Miramar FL (954) 964-7615 Michael Burks 5016 Airport - Pulling Rd. N. Naples FL 34105 (239) 262-3600 Thomas & Lana Hudson 570 Ninth Street North Naples FL 34102 (239) 793-5700 Phillip Woodhouse 13585 Tamiami Trail North Unit #19 Naples FL 34110 (239) 591-2241 David & Jennifer Hill David & Tonya Wiley 8646 Navarre Parkway Navarre FL 32566 (850) 936-1320 Alex Juarez, Edgar Zamudio & Antonio Luna 251 Third St. Neptune Beach FL 32266 (904) 247-8323 Bill Wyrough 703 John Sims Pkwy. Niceville FL 32578 (850) 729-8060 Frederick & Albert Soriano Unit Not Open* Odessa FL (813) 892-0120 Frederick & Albert Soriano Unit Not Open* Odessa FL (813) 892-0120 Grant & Staci Leibell Unit Not Open* Orlando FL (407) 619-5182 Sanjay Chaudhari Unit Not Open* Orlando FL (407) 333-0544 Graham Barrett Unit Not Open* Orlando FL (561) 252-6741 Christopher Heidrich Unit Not Open* Orlando FL (407) 647-7476 Ilhan Irmak Unit Not Open* Orlando FL (407) 437-9335 Esteban, Jacqueline & Ann Perez Unit Not Open* Orlando FL (407) 201-2026 Levon & Hovnan Movsisyan 7561 West Sandlake Rd Orlando FL 32819 (407) 248-0707 Barry & Vicki Curran 10501 J. Blanchard Trail Orlando FL 32817 (407) 679-7326 Barry & Vicki Curran 4960 E. Colonial Drive Orlando FL 32803 (407) 897-8585
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FirstName LastName Store Address City ST PC Phone Cindy Pantalone 433 N. Mills Avenue Orlando FL 32803 (407) 896-4999 Steven Ira 12789 Waterford Lakes Pkwy., Ste. 9 Orlando FL 32828 (407) 704-8205 Maureen Riley 63 West Washington Street Orlando FL 32801 (407) 839-0830 Steven Ira 12201 Research Pkwy #199 Orlando FL 32826 (407) 601-4420 Ahmed Eldeeb Unit Not Open* Ormond Beach FL (201) 206-5845 Steven Ira 8155 Red Bug Lake Rd Suite 109 Oviedo FL 32765 (407) 971-9494 David & Vickie Shumate 4700 Babcock St., Unit # 9 Palm Bay FL 32905 (321) 725-6535 Palm Beach Frank & Angela Barba 4276 Northlake Blvd. Gardens FL 33410 (561) 624-4513 Palm Beach Patrick Sedlak** 2508 PGA Blvd. Gardens FL 33410 (561) 626-0412 Stephen & Kristy Reed 3019 SW Martindowns Blvd. Palm City FL 34990 (772) 223-8856 Hung Nguyen Unit Not Open* Palm Coast FL (386) 216-5864 Hung Nguyen 5234 Hwy 100 E., Suite #107 Palm Coast FL 32164 (386) 586-0085 Roy & Jacquelyn Stephens 652 West 23rd Street Panama City FL 32405 (850) 913-9336 Terri Gruber 2239 Martin Luther King Blvd. Panama City FL 32405 (850) 522-0750 Pamela Clark 11260 Panama City Beach Pwky, Unit 101 Panama City Beach FL 32407 (850)588-8470 John Strickler Unit Not Open* Pensacola FL (850) 554-1804 Pamela Clark 5147 Bayou Blvd. Pensacola FL 32503 (850) 332-6601 Enrique Behrens Unit Not Open* Pinelas County FL (727) 385-2606 Brian & Emily Killingsworth & Robert & Steve Szasz Unit Not Open* Pinellas County FL (813) 789-9060 Keith Sabiel Unit Not Open* Pinellas county FL (727) 458-2227 Jim Mabry 840 North A1A, Suite 140 Ponte Vedra Bch FL 32082 (904) 280-4044 Michael Burks 1441 Tamiami Trail, Suite 599 Port Charlotte FL 33948 (941) 764-7926 Daniel & Elizabeth Grund 314 Port St. Lucie Blvd. Port St Lucie FL 34984 (772) 878-0092 Charles Roberts 9182 S. Federal Hwy Port St. Lucie FL 34952 (772) 380-9494 Daniel & Elizabeth Grund 10628 S.W. Village Parkway Port St. Lucie FL 34987 (772) 344-6960 Bryan & Sara Arruda 1707 NW St. Lucie West Blvd., Ste. 122 Port St. Lucie FL 34986 (772) 621-4504 Robbie & Lisa Morrison 602 Barnes Blvd. Rockledge FL 32955 (321) 305-4910 Dai Duc Hoang 1900 Main Street, Suite 102 Sarasota FL 34236 (941) 365-8423 Keith Sabiel 10720 Park Blvd. Seminole FL 33772 (727) 392-5400 Quang Giang 1191 North Eglin Pkwy Suite-F Shalimar FL 32579 (850) 651-1910 Joseph & Dawn Rogers 6134 S. Federal Hwy South Stuart FL 34997 (772) 283-7377 Gary Ryan Wetherhold Unit Not Open* St. Augustine FL (904) 242-4949 Marc & Kathie DaCorta Unit Not Open* St. Augustine FL (718) 423-8167 Amitbhai Patel 112 Seagrove Main St., Suite 114 St. Augustine FL 32080 (904) 461-9090 Quint & Christina Noordstar 2137 66th Street North St. Petersburg FL 33710 (727) 345-8947 Quint & Christina Noordstar 1201 4th St. N. St. Petersburg FL 33701 (727) 821-3100 Andrew Boggini 625 6th Ave. S #150 St. Petersburg FL 33701 (727) 894-0405
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FirstName LastName Store Address City ST PC Phone Brian & Emily Killingsworth & Robert & Steve Szasz 150 Fountain Pkwy N., Suite B St. Petersburg FL 33716 (727) 573-1425 St. Petersburg Francis Morgan Scarritt III Unit Not Open* Beach FL (727) 410-5620 Nick Gannascoli 1989 SE Federal Hwy Stuart FL 34994 (772) 220-2995 Garth Brown 679-B W. Tennessee Street Tallahassee FL 32304 (850) 561-8888 Dennis Carpenter 904 Thomasville Road Tallahassee FL 32303 (850) 224-3600 Sam Osborne 1415 Timberlane Rd. Unit 323 Tallahassee FL 32312 (850) 894-4980 Chris George 3111 Mahan Drive, #23 Tallahassee FL 32308 (850) 878-3777 Adam Pope 3839 N. Monroe Street, Ste. #2 Tallahassee FL 32303 (850) 562-5733 Dennis Carpenter 2415 North Monroe St. Space # 249 Tallahassee FL 32303 (850) 878-8944 3521 Mcclay Blvd.- Inside Premier Health & Sheri-Lyn Crump & Jerry Bennett Fitness Tallahassee FL 32312 (850) 907-1758 Garth Brown 800 Ocala Road, Suite 330 Tallahassee FL 32304 (850) 576-4300 Chris George 1500 Apalachee Pkwy. # 1255 Tallahassee FL 32301 (850) 878-7515 Benny & Christa Chastain 209 N. Magnolia Suite 1 Tallahassee FL 32301 (850) 412-9100 Brian & Emily Killingsworth & Robert & Steve Szasz 200 N. Tampa Street, Suite 120 Tampa FL 33602 (813) 225-1550 Leon Roubekas 3810 Neptune St. Tampa FL 33629 (813) 374-2245 Keith Sabiel 8011 Citrus Park Town Center Tampa FL 33625 (813) 926-9400 Kaushik Joshi 2928 E. Fowler Avenue Tampa FL 33612 (813) 631-0040 Charles Duffy Unit Not Open* Vero Beach FL (772) 485-2499 Kimberly Rego 1555 S. U.S. Highway 1, Suite 102 Vero Beach FL 32960 (772) 226-9988 Ming-Ting Chung 301 W. Central Avenue Winter Haven FL 33681 (863) 295-7988 Grant & Staci Leibell 400 Park Avenue South, Suite 165 Winterpark FL 32789 (407) 628-5521 Anthony Moore 5555 Whittlesey Blvd., Suite 2960 Columbus GA 31909 (706) 257-1751 Padmavati Koganti & Vijayakumar Paturi 909 Eagle's Landing Pkwy, Ste 140 Stockbridge GA 30281 (678) 289-5454 Parag Patel Unit Not Open* Suwanee GA (678) 707-3440 Stephanie Motley 1525 Baytree, Suite C Valdosta GA 31601 (229) 247-5599 John Griffis & Teddy Wells 99-080 Kauhale St. C-4 Aiea HI 96701 (808) 744-4573 Rick & Annette Sandquist 2813.5 Fifth Avenue South Fort Dodge IA 50501 (515) 573-1199 309 S. Madison St. (Inside Live Well Wellness Chandra Wojno Center) Iowa City IA 52242 (319) 384-3427 Tim & Charmaine Lowe 315 East Rand Rd. Arlington Heights IL 60004 (847) 749-3554 Brian Guinter 500 N. Hough St., Ste. 105 Barrington IL 60010 (847) 277-7590 Patrick Bode & Kevin Bartlett 737 S. Halsted Street Chicago IL 60607 (312) 996-8170 Michael Ward 12162 S. IL Rte. 47 Huntley IL 60142 (847) 669-3803 Patrick Bode & Kevin Bartlett 2270 Highland Ave., Ste. 102 Lombard IL 60148 (630) 652-0500 David & Kimberly Knapp 3135 25th St. Columbus IN 47203 (812) 375-1100 Bradley Hollar & J. Mike Guiler Unit Not Open* Lexington KY (859) 338-5452 J. Mike Guiler 1060 Chinoe Rd. suite 112 Lexington KY 40502 (859) 269-2233
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FirstName LastName Store Address City ST PC Phone Charles & Tracy Hepner Unit Not Open* Murray KY (702) 656-2841 Roger & Cathy Carraway 13200 Airline Hwy. (inside Price Leblanc Toyota) Baton Rouge LA 70817 (225) 408-2290 Claire Foret & Robert Crist 458 Heymann Blvd. Lafayette LA 70503 (337) 456-2925 Michael Burks Unit Not Open* Morgan City LA (772) 216-0241 Gilbert & Ana DeSousa 85A Faunce Corner Mall Road N. Dartmouth MA 02747 (508) 858-5456 Carmen Cunningham Unit Not Open* Bowie MD (301) 437-2270 Hely Hiral Patel 6455 Dobbin Road, Suite 35 Columbia MD 21045 (410) 730-6564 Melvin Tucker Unit Not Open* Frederick MD (240) 997-9836 Stephen & Jessica Seminaro 17301 Valley Mall Rd. #576 Hagerstown MD 21740 (301) 579-3898 Kwang-Woo Choi & Joselito Chua Unit Not Open* Oxon Hill MD (703) 753-4832 Hani Halloun Unit Not Open* Ann Arbor MI (810) 606-0456 Hani Halloun Unit Not Open* Ann Arbor MI (810) 606-0456 Hani Halloun Unit Not Open* Ann Arbor MI (810) 606-0456 Hani Halloun Unit Not Open* Brighton MI (810) 606-0456 Brent St. Clair 6459 Dixie Hwy. Clarkston MI 48346 (248) 922-9000 Dianne & Craig LeMieux 7150 Sasahbaw Rd. Clarkston MI 48347 (248) 620-8005 Craig LeMieux 1659 Main Street, Ste. A Clawson MI 48017 (248) 629-7041 Dianne & Craig LeMieux 5105 W. Vienna Rd. Clio MI 48420 (810) 564-9993 David Buko Unit Not Open* East Lansing MI (989) 781-7818 David Buko Unit Not Open* East Lansing MI (989) 781-7818 Harold Bowen 4009 Owen Road Fenton MI 48430 (810) 714-4888 Harold Bowen & Trent Farnsworth 2103 S. Linden Rd. Flint Township MI 48532 (810) 733-2100 Larry & Deborah King 2383 E. Hill Road, Suite 1 Grand Blanc MI 48439 (810) 953-2233 Michelle MacDonald & Ala Fakhouri 30971 5 Mile Rd., Ste. B104 Livonia MI 48150 (734) 427-5500 Ryan & Jeffrey Kaleto Unit Not Open* Midland MI (989) 429-6200 Ryan & Jeffrey Kaleto 2332 S. Mission Rd. Mount Pleasant MI 48858 (989) 317-4800 Mark Yeager 5815 Bay Road, Suite 700 Saginaw MI 48604 (989) 249-0499 Mark Yeager 7194 Gratiot Saginaw MI 48609 (989) 781-2124 Prakash Tamhaney & Avinash Kotian 7354 Haggerty Rd. West Bloomfield MI 48322 (248) 788-3500 Thomas Tran 8330 Egan Dr. Savage MN 55378 (952) 226-1633 Damon Holland 3811 S. Campbell Ave., Suite A Springfield MO 65807 (417) 887-6600 Brent Waters 6129 US Hwy 98 Hattiesburg MS 39402 (601) 336-5356 Lisa Murray & Zac & Mac Garner 7164 Hacks Cross Rd. Olive Branch MS 38654 (662) 890-5060 Rod & Ellen Wirshing 1300 S. Reserve St., Suite A Missoula MT 59801 (406) 543-1141 Devang Desai 1856 West Arlington Blvd. Greenville NC 27858 (252) 215-2204 Christopher & Robin Black Unit Not Open* Manteo NC (703) 272-8985 Joseph Goetschius Jr. Unit Not Open* Nags Head NC (203) 910-1422 Darel & Lisa Crumpler 2236 South Croatan Hwy Unit #2 Nags Head NC 27959 (252) 441-3500
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FirstName LastName Store Address City ST PC Phone Howard & Erica Raphael Unit Not Open* Raleigh NC (919) 217-1724 Howard & Erica Raphael 1028 Oberlin Drive, Suite 232 Raleigh NC 27605 (919) 755-2222 Eric & Gail Farinella 8111 Creedmoor Road, Suite 157 Raleigh NC 27613 (919) 803-5991 Darel & Lisa Crumpler 5385 N. Virginia Dare Trail #1 Southern Shores NC 27948 (252) 441-9996 Steven Scroggin Unit Not Open* Winston-Salem NC (336) 813-2699 Kaye Wentz 7902 Towne Center Parkway #109 Papillion NE 68046 (402) 614-9050 Michael Turpin 160 Washington St. Rochester NH 03839 (603) 509-3000 Eric Persson 10612 S. Eastern Ave, Suite C Henderson NV 89052 (702) 616-1931 Kriss & Michelle Shriver 76 W. Horizon Ridge Parkway Suite # 120 Henderson NV 89015 (702) 992-0570 Eric Persson 2300 Paso Verde Parkway Henderson NV 89052 (702) 822-1931 Dina Mitchell Unit Not Open* Las Vegas NV (702) 914-6654 Hae Kyeong Han Unit Not Open* Las Vegas NV (702) 372-5785 Debra Mele-Blanchard Unit Not Open* Las Vegas NV (702) 293-2603 Richard & Frankie Picone Unit Not Open* Las Vegas NV (702) 435-4552 Mark Lukachko Unit Not Open* Las Vegas NV (212) 228-8726 Eric Persson Unit Not Open* Las Vegas NV (702) 465-9451 Kriss & Michelle Shriver Unit Not Open* Las Vegas NV (702) 617-3703 Eric Persson & Ann Chung 10260 Charleston Blvd. Las Vegas NV 89135 (702) 869-0603 Kevin Zona & Daniel Lasker 4001 Decatur Blvd. Suite 28 Las Vegas NV 89103 (702) 873-7289 Eric Persson & Ann Chung 5035 W. Fort Apache Rd. #105 Las Vegas NV 89148 (702) 459-8000 Kevin Zona & Daniel Lasker 7291 S. Eastern Ave Ste 1K Las Vegas NV 89119 (702) 450-1931 Cindy Horwitz 9440 W. Sahara Blvd Suite 105 Las Vegas NV 89117 (702) 207-1931 Stanley Walls & Robert Price 3390 Novat Street #110 Las Vegas NV 89128 (702) 531-1931 Richard & Frankie Picone 10670 Southern Highlands Pkwy #100 Las Vegas NV 89141 (702) 257-8813 Jason Horwitz 7375 South Durango Dr. #107 Las Vegas NV 89113 (702) 262-5515 Bharti Sharma Ramesh Piplani 6350 W. Charleston Blvd, Suite 130 Las Vegas NV 89146 (702) 304-1931 Hae Kyeong Han 7660 W Cheyenne Ave Suite 121 Las Vegas NV 89129 (702) 365-1931 Debra Mele-Blanchard 7580 S. Las Vegas Blvd. Suite # 100 Las Vegas NV 89123 (702) 257-1931 Brian Cupery 6555 S. Jones Blvd. #110 Las Vegas NV 89118 (702) 247-6208 Mark Lukachko 4165 S. Grand Canyon Parkway # 106 Las Vegas NV 89147 (702) 242-1931 Johnny Sanchez Losada 11011 W. Charleston Blvd (Red Rock Casino) Las Vegas NV 89135 (702) 388-1931 Mark Lukachko 4262 Blue Diamond Rd. #103 Las Vegas NV 89139 (702) 629-3692 John Jankowski 137 Centereach Mall Rd. Centereach NY 11720 (631) 981-8767 Richard & Linda Orofino 532 Larkfield Rd East Northport NY 11731 (631) 486-4455 Jeffrey Hartman 326 Walt Whitman Rd. Huntington Station NY 11746 (631) 427-5100 William Nestor 61 Wall Street Huntington Village NY 11743 (631) 424-8767 David Halloran 3519B Hempsteak Tpke Levittown NY 11756 (516) 731-0399 Jennifer Bazdaric Unit Not Open* New Windsor NY (845) 787-4915
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FirstName LastName Store Address City ST PC Phone Tiffany Wirth & Susanne Wanser 499-83 Sunrise Highway Patchogue NY 11772 (631) 569-4020 Port Jefferson Dana Bush 5120 Nesconset Highway Station NY 11776 (631) 509-5800 Brian Levine & Stephen Brojer 267 Middle Country Rd. Selden NY 11784 (631) 696-4780 Patricia & Tom Diamond Unit Not Open* Seldon NY (631) 696-6217 Christine Filippi & Michael Butler Unit Not Open* Suffolk NY (631) 254-0443 Michael Emanuele Unit Not Open* Suffolk NY (631) 750-3083 Yong Sung Kim & Kwon Oh Hoon Unit Not Open* Suffolk County NY (631) 889-0228 Doug Ruggles 3195 Dayton Xenia Road Beavercreek OH 45434 (937) 426-8767 Chet Hakanson 988 Miamisburg-Centerville Centerville OH 45459 (937) 291-9250 Greg & Ellen Chicoine 6241 Far Hills Avenue Centerville OH 45459 (937) 434-8699 Chet Hakanson Unit Not Open* Cincinnati OH (937) 673-6218 Nitesh Patel 11322 Euclid Avenue Cleveland OH 44106 (216) 421-2233 Christopher Becker 2307 Far Hills Ave. Dayton OH 45419 (937) 395-3525 Doug Ruggles 2642 Colonel Glenn Hwy. Fairborn OH 45324 (937) 429-1519 Richard Yisha 24389 Cedar Rd. Lyndhurst OH 44124 (216) 382-5488 William & Julie Munson 1385 Conant St., Ste. E Maumee OH 43537 (419) 893-2100 Kirk & Carolyn Kennedy Unit Not Open* Salem OH (330) 337-3265 William, Julie, Eric, Kevin & Shaun Munson Unit Not Open* Toledo OH (419) 360-2995 Jeffrey Glassmeyer 7688 Voice of America Dr. Westchester OH 45069 (513) 298-2200 TBJ Food Services LLC Unit Not Open* Tulsa OK (918) 392-1400 Timothy & Nicole Smallwood 7460 S. Olympia Avenue Tulsa OK 74132 (918) 938-7747 Tyler & Natalie Dewey 1902 W. Burnside Street Portland OR 97209 (503) 206-6702 Robert & Margarita Gaul 4635 High Pointe Blvd. Harrisburg PA 17111 (717) 561-1077 Matthew Shaffer & Daryl Herr 15 East King Street Lancaster PA 17601 (717) 397-1827 Matthew & Cynthia Shaffer 235 Bloomfield Dr., Suite 105 Lititz PA 17543 (717) 560-1490 Thomas Willcox III & Thomas Willcox IV Unit Not Open* Charleston SC (757) 348-3070 Rodney Taquino Jr. & Randall Engels 201 Graduate Rd., Unit 103 Conway SC 29526 (843) 234-5670 Leslie & David Duffy Unit Not Open* Irmo SC (803) 600-6300 BurgerBusters LLC 875 W. Poplar #21 Collierville TN 38017 (901) 221-0112 BurgerBusters LLC 1625 N. Germantown Pkwy Cordova TN 38016 (901) 755-5588 Nannette Daley Unit Not Open* Knoxville TN (865) 579-0270 Nannette Daley Unit Not Open* Knoxville TN (865) 579-0270 Nannette Daley Unit Not Open* Knoxville TN (865) 579-0270 Nannette Daley Unit Not Open* Knoxville TN (865) 579-0270 Nannette Daley 8008 Kingston Pike Knoxville TN 37919 (865) 690-5505 BurgerBusters LLC 1779 Kirby Parkway, Ste. 3 Memphis TN 38138 (901) 757-3637 BurgerBusters LLC 7960 Winchester Rd., Suite #101 Memphis TN 38125 (901) 791-9027
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FirstName LastName Store Address City ST PC Phone BurgerBusters LLC 2105 Union Ave., Ste. 101 Memphis TN 38104 (901) 791-9251 David Dunlap Unit Not Open* Murfreesboro TN (586) 260-1779 David Dunlap Unit Not Open* Murfreesboro TN (586) 260-1779 David Dunlap Unit Not Open* Murfreesboro TN (586) 260-1779 Charles & Tracy Hepner Unit Not Open* Nashville TN (702) 656-2841 BurgerBusters LLC Unit Not Open* Nashville TN (757) 692-4623 BurgerBusters LLC Unit Not Open* Nashville TN (757) 692-4623 BurgerBusters LLC Unit Not Open* Nashville TN (757) 692-4623 Michael & Fuailelagi Wynn 14900 Avery Ranch Blvd., Ste. B-400 Austin TX 78717 (512) 388-9925 Michael & Fuailelagi Wynn 12901 North IH 35 Service Rd. Suite # 1850 Austin TX 78727 (512) 251-1800 Alonzo Soliz Sr. & Alonzo Soliz Jr. 1465 E. Whitestone Blvd. Cedar Park TX 78613 (512) 259-5493 Kwan-Woo Choi 1556 Potomac Greens Dr. Alexandria VA 22314 (703) 299-8325 David & Jonathon William & Sean Kelly and Kolodzinski 6552-A Little Rive Turnpike Alexandria VA 22312 (703) 354-0940 Manish Singh Unit Not Open* Arlington VA (240) 320-5530 Peter Pack & Jong S. Choi 43670 Greenway Corporate Drive Suite # 126 Ashburn VA 20147 (571) 291-9089 Marshall & Donna Truddell & Jae Nam Yi 13609 Carrollton Blvd., Ste. 1 Carrollton VA 23314 (757) 745-7700 Kwang-Woo Choi & Joselito Chua 14220-B Centrevillle Square Centreville VA 20121 (703) 815-1455 Christopher Daschbach 1954 Rio Hill Center Charlottesville VA 22901 (434) 975-2233 Daniel Cintron 1412 Greenbrier Pkwy., Suite 135 Chesapeake VA 23320 (757) 413-5400 Sanjay Patel 237 South Battlefield Blvd, Ste 7 Chesapeake VA 23322 (757) 410-5558 Henry Truong 1434 Sam's Drive Suite 101 Chesapeake VA 23320 (757) 410-9543 Jannifer Boyd 1464 Mount Pleasant Road Suite #30 Chesapeake VA 23322 (757) 546-7070 Payal Shah 648 Grassfield Parkway Chesapeake VA 23323 (757) 312-0001 Payal Shah 4105 Chesapeake Sq. Blvd. #103 Chesapeake VA 23321 (757) 488-2060 Vimal (Nick) Patel 1320 Kempsville Road - Ste. 111 Chesapeake VA 23320 (757) 547-3570 Gemini & Urvashi Patel 12802 Jefferson Davis Hwy. Chester VA 23831 (804) 751-0090 Gemini & Urvashi Patel 6925 Commons Plaza Chesterfield VA 23832 (804) 717-9060 Joanne Bennett 190 Southgate Square Colonial Heights VA 23834 (804) 524-9876 Lisa Michanco & Stephen Finch 15315 Creativity Drive Culpeper VA 22701 (540) 825-8417 Mohammed & Katherine Hasan Unit Not Open* Dumfries VA (703) 899-6896 Ron Holt 1460 Central Park Blvd. Fredericksburg VA 22401 (540) 785-7025 Ron Holt 10159 Southpoint Parkway Fredericksburg VA 22407 (540) 710-7025 Mohammed & Katherine Hasan 15 South Gateway Dr., Ste. 113 Fredericksburg VA 22406 (540) 656-2167 Kai Li Brunda 50 Riverton Commons Plaza, Suite 20 Front Royal VA 22630 (540) 635-3965 Sarah Edwards Unit Not Open* Gainesville VA (703) 754-1626 Robert & Susan Hill 8069 Stonewall Shops Sq. Gainesville VA 20155 (703) 754-0404 Ashokkumar & Falguniben Patel 11321-C Nuckols Rd. Glen Allen VA 23059 (804) 346-5101 Sanjay Patel Unit Not Open* Hampton VA (757) 715-5001
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FirstName LastName Store Address City ST PC Phone Alexander Kim 106 Coliseum Crossing Hampton VA 23666 (757) 896-2270 Michael Wynn & George Budd Unit Not Open* Hampton Roads VA (757) 679-2303 Barbara Lee Unit Not Open* Hampton Roads VA (757) 496-2501 Sarah Edwards Unit Not Open* Haymarket VA (703) 754-1626 Alan Batcheller 2465 Centreville Rd., Ste. J-23 Herndon VA 20171 (703) 793-0116 Jigneshbhai Patel 506-A East Market St. Leesburg VA 20176 (703) 777-1100 Lisa Michanco & Stephen Finch Unit Not Open* Manassas VA (540) 439-9752 Nuatu Tseggai & Joseph Carroll 12697 Galveston Ct. Manassas VA 20112 (703) 763-1430 Nuatu Tseggai & Joseph Carroll 9971 Sowder Village Sq. Manassas VA 20109 (703) 330-1399 Fardin Golzar Unit Not Open* McLean VA (703) 404-1456 Shailen Patel 7152 Mechanicsville Tpke. Mechanicsville VA 23111 (804) 569-9707 Gemini & Urvashi Patel 9363 Atlee Road, Suite 2101 Mechanicsville VA 23116 (804) 730-1764 Brant Druhot 4501 Commonwealth Centre Parkway Midlothian VA 23112 (804) 763-2900 Brant Druhot 15521 Westchester Commons Way Midlothian VA 23113 (804) 897-9595 Ernest Jones 4191 William Styron Square Newport News VA 23606 (757) 595-0600 John & Hyang Boyd 12551 Jefferson Ave, Suite 211 Newport News VA 23602 (757) 833-6256 Vimal Patel 12368 Warwick Blvd. A-109 Newport News VA 23606 (757) 240-5458 Vimal (Nick) Patel 12300 Jefferson Ave., Ste. 738 Newport News VA 23602 (757) 369-5533 Warren Thompson 700 Park Ave. - Norfolk State University Norfolk VA 23504 (757) 823-8342 Roy & Debbie Perez 265 Granby Street Norfolk VA 23510 (757) 624-9400 Roy & Debbie Perez 742 West 21st Street, Unit B Norfolk VA 23517 (757) 622-2002 Nayna Modi & Jayshri Patel 1153 N. Military Hwy Norfolk VA 23502 (757) 455-5694 Jatin Trivedi 4316 Monarch Way Norfolk VA 23508 (757) 440-7580 Richard Studebaker 3841 East Little Creek Rd Ste A Norfolk VA 23518 (757) 965-5237 Jatin Trivedi 7862 Tidewater Drive, Suite 111 Norfolk VA 23505 (757) 531-4950 Fardin Golzar 2918 Chain Bridge Rd. Oakton VA 22124 (703) 496-5535 Sanjay & Ruma Patel 477-B Wythe Creek Road Poquoson VA 23662 (757) 659-0297 Bhavin Patel 4032 Unit - B Victory Blvd. Portsmouth VA 23701 (757) 465-8944 Doreen Zentveld & Melissa Lea Dickinson 609 E. Main St., Suite BB Purcellville VA 20132 (540) 338-6703 Nelson Guzman Unit Not Open* Reston VA (703) 779-7447 Jawad & Nida Ahmad and Sohail Afridi 11684 Plaza America Drive Reston VA 20190 (703) 796-2233 Bradford Kelly 11736 W. Broad St., Ste. 101 Richmond VA 23233 (804) 360-3644 Gemini & Urvashi Patel 8207 West Broad Street Richmond VA 23294 (804) 527-2060 Marion & Anna Lynn Cabble 929 W. Broad St. Richmond VA 23220 (804) 353-3533 Brant Druhot 11513 Busy St. Richmond VA 23236 (804) 377-7320 Julius Morrison 4501-150 S. Laburnum Ave. Richmond VA 23231 (804) 236-1100 Brant Druhot 7340-C Forest Hill Avenue Richmond VA 23225 (804) 612-6038 Mohammed & Katherine Hasan 1465 Stafford Marketplace, Ste. 115 Stafford VA 22554 (540) 659-2200
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FirstName LastName Store Address City ST PC Phone Fardin Golzar 20995 Davenport Drive - Suite 131 Sterling VA 20165 (703) 430-1700 Sanjay & Ruma Patel 5860 Harbour View Blvd, Ste A1-A Suffolk VA 23435 (757) 484-7548 Vimal (Nick) Patel 1201 N. Main St., Suite 300 Suffolk VA 23434 (757) 539-7774 Roy & Debbie Perez Unit Not Open* Virginia Beach VA (757) 366-0944 Corbitt Wright Unit Not Open* Virginia Beach VA (757) 747-9467 Leonardo & Mary Agagas 4001 Virginia Beach Blvd Suite 115 Virginia Beach VA 23452 (757) 200-0500 Scott & Linda Menkes 1255 Fordham Dr, Suite 107 Virginia Beach VA 23464 (757) 313-7230 Roy & Debbie Perez & Patrick Finn 401 North Great Neck Rd Suite 101 Virginia Beach VA 23454 (757) 313-7350 Joshua & Jennifer Moore 3813 Princess Anne Road, Suite 125 Virginia Beach VA 23456 (757) 965-2522 Herb Schriefer 2165 General Booth Blvd. Suite 158 Virginia Beach VA 23454 (757) 430-0144 Nicole Rivera & Susan Shorter 211 25th Street Virginia Beach VA 23451 (757) 422-3970 Jatin Trivedi 2728 N. Mall Drive #113 Virginia Beach VA 23452 (757) 333-6700 Robyn Lyon 2865 Lynnhaven Drive, Suite #B-1 Virginia Beach VA 23451 (757) 965-6965 Baldev Gill 4701 Shore Drive Virginia Beach VA 23455 (757) 460-3350 Leonardo & Mary Agagas 4312 Holland Rd, Ste 105 Virginia Beach VA 23452 (757) 747-1941 Leonardo & Mary Agagas 2476 Nimmo Parkway, Ste. 117 Virginia Beach VA 23456 (757) 430-4433 Tony Torres 4515 Haygood Road Virginia Beach VA 23455 (757) 460-7878 Christine Alvir 251 West Lee Hwy Warrenton VA 20186 (540) 428-1818 Bipin Vyas, Jignesh Patel, Tarun & Rupal Shah 4920 / 8-A Monticello Ave Williamsburg VA 23188 (757) 229-0600 Bipin Vyas, Jignesh Patel, Tarun & Rupal Shah 6618/C Mooretown Road Williamsburg VA 23188 (757) 258-0007 Stephen & Jessica Seminaro Unit Not Open* Winchester VA (540) 579-4464 Stephen & Jessica Seminaro 152 Market Street Winchester VA 22603 (540) 667-0002 Nuatu Tseggai & Joseph Carroll 2966 Prince William Pkwy. Woodbridge VA 22192 (703) 910-7188 Heayoung Yi 2643 George Washington Memorial Hwy, Ste. 1 Yorktown VA 23693 (757) 867-9004 Tyler & Natalie Dewey 16020 SE Mill Plain Blvd. #117 Vancouver WA 98684 (360) 891-8418 Shane Ruesch & Andrew Edwards 10 College Avenue Appleton WI 54911 (920) 733-3288 Dalton & Joseph Ruesch Unit Not Open* Green Bay WI (715) 459-3263 Shane Ruesch & Andrew Edwards 555 West Grand Avenue Wisconsin Rapids WI 54495 (715) 424-2229 Stephen & Jessica Seminaro 171 Retail Commons Pkwy, Ste 9 Martinsburg WV 25403 (304) 264-4445
* Unit was not open and operating as of December 31, 2011. ** We re-acquired this location from the franchisee in January 2012.
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COMPANY-OWNED STORES AS OF DECEMBER 31, 2011
Store Address City ST PC Phone 4015 S. Arizona Ave. Suite # 11 Chandler AZ 85248 (480) 883-1234 13375 W. McDowell Rd., Ste. 110 Goodyear AZ 85395 (623) 414-4064 4307 Legendary Drive - Space D-134 Destin FL 32541 (850) 269-0494 6671 W. Indianatown Rd - Suite 2 Jupiter FL 33458 (561) 748-4457
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LIST OF 44 FRANCHISEES WHO HAD AN OUTLET TERMINATED, CANCELLED, NOT RENEWED OR OTHERWISE CEASED TO DO BUSINESS DURING THE YEAR ENDED DECEMBER 31, 2011 OR WHO HAVE NOT COMMUNICATED WITH US WITHIN 10 WEEKS OF THE DATE OF THIS DISCLOSURE DOCUMENT.
STATE NAME(S) CITY AND STATE TELPHONE NO. TRANSFER CLOSED OTHER NOTE Jonathan & AL Lindsay Snyder Deatsville, AL (334) 235-0069 1
AR Larry Bone AR Unknown 1 [email protected] Still in system – AR Area AR Chris Kramolis Little Rock, AR (501) 224-2233 1 Developer still in system - other AZ AZ Bradford Kelly Circle - Mesa, AZ (480) 688-5212 1 location
CA David Nerness & Marita Isidore Chino Hills, CA (909) 606-5558 1 George Tateno, Alexander still in system - CA Area CA Ton Vinh Lee & Raymundo San Diego, CA (858) 566-5029 1 Developer still in system - other FL FL Michael Erber Hallandale Beach, FL (352) 246-3277 1 1 location FL Paul Golden Palm City, FL (772) 263-2158 1 Alex Juarez, still in system - other FL FL Edgar Zamudio & Antonio Luna Jacksonville Beach, FL (904) 247-8323 1 location
FL Alexander & Lori Torza Indian Trail, NC (704) 496-3658 1 lives in NC/location in FL
FL Jose & Carmen Lopez Davie, FL (954) 424-5931 1
FL Timothy Rogers Jacksonville, FL (904) 305-8167 1 still in system - other FL FL Ronald Penna Jacksonville, FL (850) 443-8673 1 location FL Patrick Sedlak Palm Beach Gardens, FL (561) 626-0412 1 FL Dai Duc Hoang Osprey,FL (914) 266-1632 1 M. Austin Speni, Charles Barbara Speni & LA Beaulliew, Robert Daigle Layfayette, LA (337) 303-2169 1 Rene & LA Samantha Arcemont Slidell, LA (202) 250-3825 1
MI Rozalin & Jimmy Fakhoury Dearborn, MI (313) 802-8008 1
MI Brian & Meliss Pieper Grand Blanc, MI (810) 691-4820 1
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STATE NAME(S) CITY AND STATE TELPHONE NO. TRANSFER CLOSED OTHER NOTE
NV Aron & Michelle Eckel Henderson, NV (702) 987-3486 1
NV Jeffrey & Pamela Jones Las Vegas, NV (702) 452-7535 1 NV Kevin Zona & Daniel Lasker Las Vegas, NV (702) 212-7680 4 NV Youn Jong & Ju Hon Jung Las Vegas, NV (702) 233-5256 1 NV Gregory Bearden Las Vegas, NV (702) 256-6652 1 still in system - AZ location NV Steven Kennelley Las Vegas, NV (702) 255-3826 1 Still in system – other NV NV Cindy & Jason Horwitz Las Vegas, NV (941) 266-1632 1 location still in system - NY Area NY Walter & Laura Jankowski Bayport, NY (631) 868-0987 1 Developer
OH Victor Rodriquez Centerville, OH (937) 559-5756 1 SC Rob Greeder Old Tappan, NJ (201) 739-6024 1 lives in NJ/location in SC still in system - other TN location: lives in TN Nannette Daley Knoxville, TN (865) 579-0270 1 GA/location in TN Still in system as TN Area TN BurgerBusters LLC Nashville, TN (757) 692-4623 2 Developer Jason & TN Phanravee Maumenee Rocky Face, GA (706) 313-3156 1 still in system - other VA VA Leonardo & Mary Agagas Virginia Beach, VA (757) 430-3498 1 location
VA Roy & Pam Seitz Chesapeake, VA (757) 673-3173 1
VA Cecilia Thomas Mechanicsville, VA (804) 730-2554 1 still in system - NC Area Developer & other VA VA Scott & Linda Menkes Virginia Beach, VA (757) 406-3811 1 location
VA Derrick & Heather Dozier Virginia Beach, VA (757) 450-2977 1
VA Ned Brown Virginia Beach, VA (757) 479-0764 1
VA Lisa Michanco & Steven Finch Bealeton, VA (703) 675-9227 1
If you buy this franchise, your contact information may be disclosed to other buyers when you leave the franchise system.
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EXHIBIT N TO THE DISCLOSURE DOCUMENT
FINANCIAL STATEMENTS
Audited Financial Statements of Tropical Smoothie Franchise Development Corporation For the years ended December 31, 2011, December 31, 2010 and December 31, 2009 And Unaudited Balance Sheet and Profit and Loss Statement for the Period Ended July 31, 2012
QB\138221.00002\10107206.43 9/28/12 TROPICAL SMOOTHIE FRANCHISE DEVELOPMENT CORPORATION AND SUBSIDIARIES
Financial Statements and Supplemental Information
December 31, 2011 and 2010
TROPICAL SMOOTHIE FRANCHISE DEVELOPMENT CORPORATION AND SUBSIDIARIES
Financial Statements and Supplemental Information
December 31, 2011 and 2010
TABLE OF CONTENTS
Page INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS Consolidated Balance Sheets 2 Consolidated Statements of Income 3 Consolidated Statements of Changes in Shareholders' Equity (Deficit) 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION 17
SUPPLEMENTAL INFORMATION Consolidated Schedules of Operating Expenses 18 45 Eglin Pkwy., N.E. Suite 301 Fort Walton Beach, FL 32548
850.244.5121 Fax: 850.664.2562
www.warrenaverett.com
Board of Directors Tropical Smoothie Franchise Development Corporation and Subsidiaries Destin, Florida
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheets of Tropical Smoothie Franchise Development Corporation and Subsidiaries (an S corporation), as of December 31, 2011, and 2010, and the related consolidated statements of income, changes in shareholders' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of Tropical Smoothie Franchise Development Corporation and Subsidiaries’ management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Tropical Smoothie Franchise Development Corporation and Subsidiaries’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tropical Smoothie Franchise Development Corporation and Subsidiaries as of December 31, 2011, and 2010, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
March 15, 2012
1 Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, 2011 and 2010
2011 2010 ASSETS CURRENT ASSETS Cash and cash equivalents Operating $ 272,845 $ 480,686 Restricted 854,288 838,312 Inventory and other current assets 188,277 50,588 Accounts receivable 294,054 425,570 Note receivable, current portion - 126,559 Total current assets 1,609,464 1,921,715 PROPERTY AND EQUIPMENT, NET 301,778 324,794 OTHER ASSETS Accounts receivable, long-term - 55,000 Note receivable, net of current portion 131,187 - Intangible assets, net 4,234,170 3,065,836 Deposits 15,900 30,042 Shareholder note receivable 1,200,000 - Investment property 948,631 948,631 Total other assets 6,529,888 4,099,509 TOTAL ASSETS $ 8,441,130 $ 6,346,018
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accrued expenses and other liabilities $ 1,024,177 $ 611,708 Gift card program liability 516,870 534,699 Local advertising program liability 854,288 838,312 Notes payable, current portion 1,033,852 546,597 Total current liabilities 3,429,187 2,531,316 LONG-TERM LIABILITIES Notes payable, net of current portion 9,244,852 6,308,742 Unearned franchise fees 285,752 603,502 Total long-term liabilities 9,530,604 6,912,244 TOTAL LIABILITIES 12,959,791 9,443,560 SHAREHOLDERS' EQUITY $0.10 per value, 1,000 shares authorized, 200 shares issued and outstanding 20 20 Additional paid in capital 183,415 183,415 Retained earnings (deficit) (4,702,096) (3,280,977) Total shareholders' equity (deficit) (4,518,661) (3,097,542) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 8,441,130 $ 6,346,018
The accompanying notes are an integral part of these financial statements. 2 Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, 2011 and 2010
2011 2010 REVENUES Initial franchise fees $ 895,254 $ 425,506 Territory sales - 45,000 Franchise royalties 7,888,148 7,419,477 National advertising royalties 1,313,547 1,249,473 Gift card breakage 250,000 207,000 Convention fees 420,104 205,702 Rebates 1,172,249 997,018 Transfer fees 203,368 245,887 Restaurant sales 1,135,734 1,364,090 Other 6,271 3,142 Total revenue 13,284,675 12,162,295
COST OF REVENUES Area developer fees 2,843,704 2,807,467 Restaurant cost of sales 791,615 994,872 Total cost of revenue 3,635,319 3,802,339
GROSS PROFIT 9,649,356 8,359,956
OPERATING EXPENSES 7,417,982 6,294,530
INCOME FROM OPERATIONS 2,231,374 2,065,426
OTHER INCOME (EXPENSES) Interest income 12,579 10,587 Interest expense (1,572,840) (1,014,690) Gain on disposal of equipment - 91,269 Total other income (expenses) (1,560,261) (912,834)
NET INCOME $ 671,113 $ 1,152,592
The accompanying notes are an integral part of these financial statements. 3 Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) Years Ended December 31, 2011 and 2010
Additional Retained Common Paid in Earnings Stock Capital (Deficit) Total Balance, January 1, 2010 $ 20 $ 183,415 $ (976,758) $ (793,323)
Net income - - 1,152,592 1,152,592 Distributions - - (3,456,811) (3,456,811)
Balance, December 31, 2010 20 183,415 (3,280,977) (3,097,542)
Net income - - 671,113 671,113 Distributions - - (2,092,232) (2,092,232)
Balance, December 31, 2011 $ 20 $ 183,415 $ (4,702,096) $ (4,518,661)
The accompanying notes are an integral part of these financial statements. 4 Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2011 and 2010
2011 2010 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 671,113 $ 1,152,592 Adjustments to reconcile net income to net cash flows from operating activities Depreciation and amortization 353,550 302,588 Gain on sale of equipment - (91,269) Provision for unredeemed gift cards (250,000) (207,000) (Increase) decrease in Accounts receivable 186,516 (238,744) Inventory and other current assets (137,689) (5,559) Deposits 14,142 (10,276) Increase (decrease) in Accounts payable and accrued liabilities 412,469 (130,536) Gift card program liability 232,171 244,395 Local advertising program liability 15,976 187,009 Unearned franchise fees (317,750) 41,999 Net cash flows from operating activities 1,180,498 1,245,199
CASH FLOWS FROM INVESTING ACTIVITIES Issuance of note receivable (4,628) - Issuance of loan to stockholder (1,200,000) - Collection of note receivable - 2,076 Proceeds from sale of equipment - 115,000 Acquisition of property and equipment (72,969) (206,599) Repurchase of area developer territories (465,000) (3,222,781) Net cash flows from investing activities (1,742,597) (3,312,304)
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from note payable 8,670,000 5,794,253 Shareholder distributions (2,092,232) (3,456,811) Payments on capital lease obligations - (2,804) Payments on notes payable (5,246,634) (558,047) Loan closing costs (960,900) - Net cash flows from financing activities 370,234 1,776,591
NET CHANGE IN CASH (191,865) (290,514) CASH AT BEGINNING OF YEAR 1,318,998 1,609,512 CASH AT END OF YEAR $ 1,127,133 $ 1,318,998
Cash and cash equivalents Operating $ 272,845 $ 480,686 Restricted 854,288 838,312 Total cash and cash equivalents $ 1,127,133 $ 1,318,998
SUPPLEMENTAL DISCLOSURES Interest paid $ 1,572,840 $ 740,718
The accompanying notes are an integral part of these financial statements. 5 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2011 and 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Business Tropical Smoothie Franchise Development Corporation (the Company) was incorporated on July 2, 1997, and operates as a franchiser in the quick service restaurant industry. Operations include the development and franchising of a system of both traditional and non-traditional quick service restaurant units. Traditional restaurants feature dine-in and carry-out service. Non-traditional units include express units, which have a more limited menu and operate in non-traditional locations such as college campuses where a full-scale traditional outlet would not be practical or efficient. The system features proprietary menu items and emphasizes the preparation of food and drinks (smoothies) with high quality ingredients.
In 2005, Tropical Smoothie Café, LLC (the Café) was formed. The Café is a wholly- owned subsidiary of the Company. The Café operates one franchise store for the purpose of new franchisee training, instruction and to promote a franchise concept showcase store.
In 2008, Café Management, Inc. (Café Management) was formed. Café Management is a wholly-owned subsidiary of the Company. Café Management was created to acquire and operate Tropical Smoothie Cafés previously operated by franchisees that had closed or were on the verge of closing and to open new stores in new markets. The objective of Café Management is to sell each store to an approved franchisee. Café Management sold two Tropical Smoothie Cafés in Arizona and opened a new store in Goodyear, Arizona during 2010. Café Management took over the operation of a Jupiter, Florida store during 2011. The Goodyear, Arizona and Jupiter, Florida stores were the only stores operated by Café Management as of December 31, 2011.
There are 305 stores currently in operation by franchisees throughout the United States, with a concentration in the southeastern region of the United States. The Company also sells certain territories (areas) within the United States to area developers. The area developers are required to meet mandatory development schedules for their specified territory. The Company splits initial franchise fees, transfer fees, and continuing royalty fees with area developers for stores opened in their territories.
B. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Tropical Smoothie Café, LLC and Café Management, Inc. All material intercompany transactions have been eliminated.
6 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2011 and 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Revenue and Cost Recognition The principal sources of revenue for the Company are initial franchise fees, territory sales, and weekly royalty payments. The franchise agreements require the franchisee to pay an initial, non-refundable fee. Initial franchise fees are $25,000 for the first franchisee store and $15,000 for each additional franchisee store. Territory sales are based on the territory purchased, size, population and other factors. Royalty fees are 6% of net sales and are collected on a weekly basis. The franchisee also pays a 1% national advertising fee and a 2% local advertising fee, for a total of 3% of net sales. Net sales are defined as gross sales per the franchise agreement less any customer discounts. Local advertising fees are recorded as a liability to which specific costs are charged since they are required to be used for a specified purpose. Area developer fees paid to area developers in the form of a commission are charged to cost of revenues. Direct costs of servicing the franchise are charged to operating expenses as incurred.
When an individual franchise is sold, the Company agrees to provide certain services to the franchisee. Generally, these services include restaurant design and assistance with site location, confidential operating manuals and initial training. Franchise fee revenue is recognized in the accompanying financial statements, once substantial performance of these services is completed, which is generally upon the opening of a store. At December 31, 2011, and 2010, respectively, there was $285,752 and $603,502 in unearned revenue relating to franchises sold, for which the Company must provide future services. There were 36 and 25 franchises sold in years 2011 and 2010, respectively. The Company recognizes continuing (royalty) fees as earned.
Territory sales are recognized when the territory is sold through contractual agreement. The Company considers substantial performance of their obligation under this agreement satisfied at the designation of a geographical area, which serves as the exclusive designated territory of the area developer. Area developers receive $11,500 of initial franchise fees for the first franchisee store, $6,500 for each additional franchisee store, and 50% of the weekly royalty fees of franchises in their territories. Developer fees are charged to cost of revenues as incurred.
The Company recognizes a transfer fee of 5% or $10,000 (whichever is greater) of the total sales price of a franchised store when the franchised store is sold or otherwise transferred to an unrelated third-party. Area developers receive one-half of the transfer fee for transfers occurring within their territory.
7 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2011 and 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Revenue and Cost Recognition (Continued) The Company sells gift cards with no expiration date. The franchisees recognize income on gift cards when they are redeemed by the customer. The gift card proceeds are pooled and maintained by the Company. Funds are transferred to or withdrawn from franchisee bank accounts on a monthly basis by the third-party gift card processor. During 2007, the Company began recognizing income on unredeemed gift cards when it can be determined that the likelihood of the gift card being redeemed is remote and that there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions (gift card breakage). The Company determines the gift card breakage rate based on historical and industry data and the Company's own redemption experience rate over the gift card program. The Company recognized $250,000 and $207,000 for the years ended December 31, 2011, and 2010, respectively.
The Company negotiates with suppliers and manufacturers to receive discounts or rebates on certain items franchisees must purchase. The rebate programs vary depending on the supplier and the nature of the product. The Company recognizes rebate revenue in the period they are earned.
D. Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, and the reported revenues and expenditures. Actual results could vary from the estimates that were used.
E. Cash and Cash Equivalents For the purpose of the Consolidated Statements of Cash Flows, the Company considers all cash and highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.
F. Restricted Cash Restricted cash consists of cash held on behalf of the franchisees for local advertising cooperative funds. Restricted cash balances were $854,288 and $838,312 for the years ended December 31, 2011, and 2010, respectively.
8 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2011 and 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. Accounts and Note Receivable Accounts receivable consist primarily of amounts due from vendors for rebates and from franchisees for franchise agreements. Terms for repayment vary by franchisee. Note receivable consists of an amount due from an area developer to finance the sale of a territory. The Company asserts that all accounts and notes receivable are fully collectible. This determination is based on prior experience and management's assessment of the collectibility of specific accounts and as such, no allowance for doubtful accounts is deemed necessary.
H. Inventory Inventory is recorded at cost measured by the first-in first-out method and consists of brand promotional items.
I. Property and Equipment Property, equipment and leasehold improvements are recorded at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets. Depreciation on leasehold improvements is calculated over the lives of the leases which are five to ten years. Estimated useful lives of property and equipment for purposes of computing depreciation are three to seven years.
Expenditures for maintenance and repairs are charged against operations when incurred.
J. Intangible Assets Intangible assets consist of trademarks and other marketing related property and reacquired franchise rights. The trademarks and marketing related property are amortized over the legal life of the trademark, which is 15 years. The reacquired franchise rights are amortized over the remaining life of the related franchise agreement. Loan costs are amortized over the 5 year term of the loan. Evaluation of franchise rights for impairment is considered on an annual basis.
K. Income Taxes The Company has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal corporate income taxes on its taxable income. Instead, the shareholders are liable for individual federal income taxes on their respective share of the Company's taxable income. The Company is not aware of any uncertain tax positions that would require disclosure or accrual in accordance with generally accepted accounting principles. With few exceptions, the company is no longer subject to federal, state, or local income tax examination by tax authorities for years before 2008.
9 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2011 and 2010
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
L. Advertising Costs In accordance with the franchise agreement, franchisees must pay a national advertising and production fee of 1% of net sales. The national advertising fee is used to design and create advertising materials and other promotional items as the Company deems appropriate. The Company incurred expenses of $1,304,653 and $951,390 for national advertising during the years ended December 31, 2011, and 2010, respectively.
The Company's total advertising expenses, including national advertising expenses, totaled $1,432,689 and $1,020,970 during the years ended December 31, 2011, and 2010, respectively. The costs are expensed as incurred.
M.Subsequent Event The Company has evaluated events and transactions that occurred between December 31, 2011, and March 15, 2012, which is the date the financial statements were available to be issued, for possible recognition or disclosure in the financial statements.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31, 2011, and 2010: 2011 2010 Trade receivables $ 54,811 $ 218,659 Rebates receivable 238,439 258,105 Other 804 3,806 Accounts receivable $ 294,054 $ 480,570
At December 31, 2010, the Company was owed $55,000 from two franchise sales in Maryland. Due to requirements in that state, the Company cannot collect the amounts until the stores open. The Company is unsure if the stores will ever open therefore it wrote off the $55,000 receivable during 2011, thereby reducing outstanding accounts receivable and unearned franchise fees by that amount.
NOTE 3 - NOTE RECEIVABLE
The Company partially financed the sale of a certain territory for an area developer. The note accrues interest at 8% per annum and had an original maturity date of March 31, 2011. The Company granted the area developer a three year extension through March 31, 2014. All outstanding principal and interest will be due on that date. The outstanding balance on the note receivable at December 31, 2011, and 2010, was $131,187 and $126,559, respectively.
10 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2011 and 2010
NOTE 4 - SHAREHOLDER NOTE RECEIVABLE
The Company issued a note receivable for $1,200,000 to a shareholder on November 29, 2011. The note bears interest at the rate of 2% and requires interest only payments due on the last day of each quarter. The note matures on September 30, 2017, at which time all outstanding principal and interest is due. The note is secured by a portion of the shareholder's stock. The outstanding balance on the shareholder note receivable as of December 31, 2011 was $1,200,000.
NOTE 5 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2011, and 2010, are summarized as follows: 2011 2010 Computers and software $ 164,747 $ 149,055 Furniture, fixtures and equipment 386,242 345,532 Leasehold improvements 319,102 322,203 870,091 816,790 Less accumulated depreciation (568,313) (491,996) Property and equipment, net $ 301,778 $ 324,794
Depreciation expense was $95,984 and $93,520 for the years ended December 31, 2011, and 2010, respectively.
NOTE 6 - INTANGIBLE ASSETS
A summary of identifiable intangible assets at December 31, 2011, and 2010, is as follows: 2011 2010 Trademarks, and other marketing related property $ 164,144 $ 164,144 Reacquired franchise rights 3,687,781 3,222,781 Loan costs 960,900 - Less accumulated amortization (578,655) (321,089) Intangible assets, net $ 4,234,170 $ 3,065,836
Amortization expense related to the trademarks and other marketing property was $10,942 and $10,957 for the years ended December 31, 2011, and 2010, respectively. Amortization expense related to reacquired franchise rights for the years ended December 31, 2011, and 2010, was $214,594 and $198,111, respectively. The weighted average amortization period for the remaining useful life of the reacquired franchise rights is 16 years. Amortization expense related to loan costs was $32,030 for the year ended December 31, 2011.
11 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2011 and 2010
NOTE 6 - INTANGIBLE ASSETS (CONTINUED)
The estimated aggregate amortization expense for the next five years is as follows:
2012 $ 448,153 2013 447,180 2014 447,180 2015 440,430 2015 406,150 Thereafter 2,045,077 $ 4,234,170
The Company occasionally reacquires franchise rights that are expensed as incurred. Normally these situations are in circumstances in which the franchisee or area developer is not performing in accordance with development schedules and the amounts paid for reacquisition are not considered fair market value transactions. Amounts expensed for the years ended December 31, 2011, and 2010, are $39,216 and $163,177, respectively.
NOTE 7 - INVESTMENT PROPERTY
Investment property consists of a condominium unit located in Destin, Florida. The Company intends to hold the property for future resale. The Company does not believe that there is any permanent impairment to the value of the investment property.
NOTE 8 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following at December 31, 2011, and 2010: 2011 2010 Accounts payable $ 671,287 $ 313,767 Area developer fees payable 229,939 235,238 Accrued payroll 50,660 5,712 Other 72,291 56,991 Accounts payable and accrued liabilities $ 1,024,177 $ 611,708
12 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2011 and 2010
NOTE 9 - NOTES PAYABLE
Notes payable consist of the following at December 31, 2011, and 2010: 2011 2010 Note payable to a private lender to refinance existing debts. The note provides for monthly interest only payments through May 1, 2014. Thereafter six monthly principal payments of $83,333 and interest payments through November 1, 2014. Thereafter twelve monthly principal payments of $125,000 and interest payments through November 1, 2015. Thereafter 12 monthly principal payments of $166,667 and interest payments through October 26, 2016. The loan matures on October 26, 2016 with the remaining principal of $4,500,000 due on the loan payable at that time. The note bears a fixed rate of interest at 14%. The note is personally guaranteed by the shareholders of the Company. $ 8,500,000 $ -
Note payable to a private lender. The note provides for monthly interest only payments with all principal due on December 31, 2012. The note bears a fixed rate of interest of 15%, of which 12% is due each month and the remaining 3% is accrued and due at maturity. The note is personally guaranteed by the shareholders of the Company. The note was refinanced during 2011 into the above $8,500,000 note payable. - 2,056,895
Note payable to a private lender. The note provides for monthly interest only payments with all principal due on March 30, 2015. The note bears a fixed rate of interest of 26%, of which 14% is due each month and the remaining 12% is accrued and due at maturity. The note is personally guaranteed by the shareholders of the Company. The note was refinanced during 2011 into the above $8,500,000 note payable. - 2,617,077
Note payable to a commercial bank for the acquisition of real estate held for investment. The note requires monthly principal and interest payments of $3,571 through April 2012, then a $383,111 balloon payment due at the maturity date. The note bears a fixed rate of interest of 6.25%. The note matures on May 31, 2012. The note is secured by a mortgage on the real estate and guaranteed by the shareholders of the Company. 389,537 406,481
Note payable to a former area developer for the repurchase of their territory. The note provides for monthly principal and interest payments of $37,464 and bears a fixed rate of interest of 5%. The note matures on April 15, 2013. The note is unsecured. 578,709 988,163
Note payable to a former area developer for the repurchase of their territory. The note provides for monthly principal and interest payments of $7,918 and bears a fixed rate of interest of 8.5%. The note matures on November 10, 2014. The note is unsecured. 250,835 321,249
13 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2011 and 2010
NOTE 9 - NOTES PAYABLE (CONTINUED)
2011 2010 Note payable to a former area developer for the repurchase of their territory. The note provides for monthly principal and interest payments of $7,068 and bears a fixed rate of interest of 8%. The note matures on March 15, 2018. The note is unsecured. 416,108 465,474
Note payable to a former area developer for the repurchase of their territory. The note provides for monthly principal and interest payments of $7,689 and bears a fixed rate of interest of 8%. The note matures on August 15, 2013. The note is unsecured. 143,515 - Total notes payable 10,278,704 6,855,339 Less current maturities (1,033,852) (546,597) Notes payable, net of current portion $ 9,244,852 $ 6,308,742
Future principal maturities as of December 31, 2011, are as follows: 2012 $ 1,033,852 2013 349,324 2014 903,492 2015 1,651,800 2016 6,239,660 Thereafter 100,576 $ 10,278,704
NOTE 10 - OPERATING LEASES
In 2004, the Company entered into an operating lease for retail space for the Company- owned restaurant. The lease term began in July 2005. The lease term expires on June 30, 2015. The lease requires monthly rent of $5,660 in years one through three, $6,174 in years four through seven, and $6,688 in years eight through ten. The lease also requires a pro rata share of common area maintenance expenses of approximately $3,300 per month. In addition, the lease calls for an additional payment that equals 6% of sales in excess of $1,131,900 in years one to three, $1,234,800 in years four to seven, and $1,337,700 in years eight to ten. No amounts were paid during either of the years ended December 31, 2011, and 2010, under the additional rent provision of this lease.
In November 2006, the Company entered into an operating lease for corporate office space. The lease term expired on November 15, 2011. That lease required monthly rent of $5,518 in year one with rent in years two through five to be increased by the Consumer Price Index.
14 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2011 and 2010
NOTE 10 - OPERATING LEASES (CONTINUED)
Café Management operated two troubled franchises under existing operating leases for retail space during 2010. The operating leases required monthly payments ranging from $2,200 to $2,600, in addition to a pro rata share of common area maintenance costs for each location. These two franchise locations sold on September 23, 2010.
In January of 2010, Café Management entered into an operating lease for a new store with a lease term beginning June 1, 2010, and expiring October 31, 2015. Monthly payments range from $2,916 to $3,500 over the term of the lease. In addition to the minimum rent, common area maintenance costs are approximately $500 per month.
In 2010, the Company entered into an operating lease for corporate office space with a related party. The lease expires on May 1, 2017, and is payable in monthly installments of $15,979 plus a pro rata share of common area maintenance expenses of approximately $3,200 monthly and all applicable sales taxes.
In August of 2011, the Company entered into an operating lease for additional corporate office space in Atlanta, Georgia. The lease expires on August 31, 2014 and is payable in monthly installments of $3,875 that include their estimated prorated share of common area maintenance fees.
Future minimum lease payments for all outstanding operating lease obligations are as follows: 2012 $ 438,032 2013 442,515 2014 428,419 2015 330,076 2016 230,148 Thereafter 76,716 $ 1,945,906
Rent expense charged to operations for the years ended December 31, 2011, and 2010, was $509,498, and $531,407, respectively.
NOTE 11 - RELATED PARTY TRANSACTIONS
The Company leased office space from a related entity that is owned by the two shareholders of the Company. The lease term began in May 2010, and rent is at market rates as disclosed in Note 10. Amounts paid to the related party during the year ended December 31, 2011, and 2010, was $248,035 and $168,249, respectively.
15 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2011 and 2010
NOTE 12 - RECLASSIFICATION
Certain amounts presented in the prior year have been reclassified in order to be consistent with the current year presentation.
16 45 Eglin Pkwy., N.E. Suite 301 Fort Walton Beach, FL 32548
850.244.5121 Fax: 850.664.2562
www.warrenaverett.com Board of Directors Tropical Smoothie Franchise Development Corporation and Subsidiaries Destin, Florida
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION
We have audited the financial statements of Tropical Smoothie Franchise Development Corporation and Subsidiaries as of and for the years ended December 31, 2011, and 2010, and our report thereon dated March 15, 2012, which expressed an unqualified opinion on those financial statements, appears on page 1. Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The independent auditor's report on supplemental information is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole.
March 15, 2012
17 SUPPLEMENTAL INFORMATION Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED SCHEDULES OF OPERATING EXPENSES Years Ended December 31, 2011 and 2010
2011 2010 National advertising Creative production, development and other $ 1,304,653 $ 951,390
Operations Travel 256,791 176,006 Training 61,763 8,427 Franchise assistance 107,835 87,505 Information technology 46,996 5,975 Area developer meetings and webcast - 29,991 Store design and development 19,466 10,199 Salaries, wages, and payroll taxes 1,156,599 863,764 Conventions 575,079 188,404 Other 8,668 - Total operations 2,233,197 1,370,271 Franchise development Advertising 111,225 31,997 Commissions 12,500 25,000 Trade shows 32,477 94,164 Travel 21,739 48,787 Web - 48,157 Consultants - 13,590 Salaries, wages, and payroll taxes 357,364 267,224 Other 43,729 6,104 Total franchise development 579,034 535,023 General and administrative Bad debt 18,384 20,657 Bank charges 20,884 13,802 Investment expenses 47,485 66,534 Donations 5,897 5,438 Dues and subscriptions 9,217 12,296 Insurance 59,745 37,843 Meals and entertainment 46,774 59,786 Office supplies 31,580 37,003 Health insurance 150,699 141,516 Salaries, wages and payroll taxes 890,297 991,285 Recruitment and relocation 10,000 19,939 Other personnel expenses 17,019 - Postage and delivery 20,442 22,154 Professional fees and costs 516,500 455,981 Prospect screening 3,037 3,589 Rent 338,865 323,320 Repairs and maintenance 17,672 12,423 Security 1,055 1,150 Software 47,645 52,462 Storage 4,197 4,397 Supplies 4,821 6,349 Taxes and licenses 15,240 11,502 Travel 134,460 95,164 Utilities 80,782 75,659 Continued... See independent auditor's report on supplemental information. 18 Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED SCHEDULES OF OPERATING EXPENSES Years Ended December 31, 2011 and 2010
2011 2010 General and administrative (Continued) Other 5,658 6,626 Amortization 257,566 209,068 Depreciation 55,417 49,194 Franchise and area developer buy-back and allowances 39,216 163,177 Total general and administrative 2,850,554 2,898,314 Company-owned restaurant operating expenses Advertising 16,811 37,583 Depreciation on equipment and leasehold improvements 40,567 44,326 Store rent 170,633 208,087 Repairs and maintenance 31,430 35,473 Utilities 41,863 42,952 Supplies 51,711 70,653 Taxes and licenses 40,064 51,807 Credit and gift card fees 21,379 25,451 Other 36,086 23,200 Total company-owned restaurant operating expenses 450,544 539,532 Total $ 7,417,982 $ 6,294,530
See independent auditor's report on supplemental information. 19 TROPICAL SMOOTHIE FRANCHISE DEVELOPMENT CORPORATION AND SUBSIDIARIES
Financial Statements and Supplemental Information
December 31, 2010 and 2009
TROPICAL SMOOTHIE FRANCHISE DEVELOPMENT CORPORATION AND SUBSIDIARIES
Financial Statements and Supplemental Information
December 31, 2010 and 2009
TABLE OF CONTENTS
Page INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS Consolidated Balance Sheets 2 Consolidated Statements of Income 3 Consolidated Statements of Changes in Shareholders' Equity (Deficit) 4 Consolidated Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION 16
SUPPLEMENTAL INFORMATION Consolidated Schedules of Operating Expenses 17 45 Eglin Pkwy. NE, Ste. 301, Fort Walton Beach, FL 32548 (850) 244-5121
Board of Directors Tropical Smoothie Franchise Development Corporation and Subsidiaries Destin, Florida
INDEPENDENT AUDITOR'S REPORT
We have audited the accompanying consolidated balance sheets of Tropical Smoothie Franchise Development Corporation and Subsidiaries (an S corporation), as of December 31, 2010, and 2009, and the related consolidated statements of income, changes in shareholders' equity (deficit), and cash flows for the years then ended. These financial statements are the responsibility of Tropical Smoothie Franchise Development Corporation and Subsidiaries’ management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Tropical Smoothie Franchise Development Corporation and Subsidiaries’ internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tropical Smoothie Franchise Development Corporation and Subsidiaries as of December 31, 2010, and 2009, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
March 15, 2011
1 Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS December 31, 2010 and 2009
2010 2009 ASSETS CURRENT ASSETS Cash and cash equivalents Operating $ 480,686 $ 958,209 Restricted 838,312 651,303 Inventory and other current assets 50,588 55,029 Accounts receivable 425,570 186,826 Note receivable, current portion 126,559 4,000 Total current assets 1,921,715 1,855,367 PROPERTY AND EQUIPMENT, NET 324,794 225,446 OTHER ASSETS Accounts receivable, long-term 55,000 55,000 Note receivable, net of current portion - 124,635 Intangible assets, net 3,065,836 52,123 Deposits 30,042 19,766 Investment property 948,631 948,631 Total other assets 4,099,509 1,200,155 TOTAL ASSETS $ 6,346,018 $ 3,280,968
LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accrued expenses and other liabilities $ 611,708 $ 742,244 Gift card program liability 534,699 497,304 Local advertising program liability 838,312 651,303 Capital lease obligation, current portion - 2,804 Notes payable, current portion 546,597 12,781 Total current liabilities 2,531,316 1,906,436 LONG-TERM LIABILITIES Notes payable, net of current portion 6,308,742 1,606,352 Unearned franchise fees 603,502 561,503 Total long-term liabilities 6,912,244 2,167,855 TOTAL LIABILITIES 9,443,560 4,074,291 SHAREHOLDERS' EQUITY $0.10 per value, 1,000 shares authorized, 200 shares issued and outstanding 20 20 Additional paid in capital 183,415 183,415 Retained earnings (deficit) (3,280,977) (976,758) Total shareholders' equity (deficit) (3,097,542) (793,323) TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,346,018 $ 3,280,968
The accompanying notes are an integral part of these financial statements. 2 Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME Years Ended December 31, 2010 and 2009
2010 2009 REVENUES Initial franchise fees $ 425,506 $ 418,005 Territory sales 45,000 100,000 Franchise royalties 7,419,477 6,412,963 National advertising royalties 1,249,473 1,081,381 Gift card breakage 207,000 300,000 Convention fees 205,702 153,150 Rebates 997,018 699,737 Transfer fees 245,887 205,582 Restaurant sales 1,364,090 1,047,647 Other 3,142 5,614 Total revenue 12,162,295 10,424,079
COST OF REVENUES Area developer fees 2,807,467 3,327,664 Restaurant cost of sales 994,872 750,118 Total cost of revenue 3,802,339 4,077,782
GROSS PROFIT 8,359,956 6,346,297
OPERATING EXPENSES 6,294,530 5,392,251
INCOME FROM OPERATIONS 2,065,426 954,046
OTHER INCOME (EXPENSES) Interest income 10,587 10,510 Interest expense (1,014,690) (225,450) Gain on disposal of equipment 91,269 25,371 Settlement income - 2,200,000 Total other income (expenses) (912,834) 2,010,431
NET INCOME $ 1,152,592 $ 2,964,477
The accompanying notes are an integral part of these financial statements. 3 Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) Years Ended December 31, 2010 and 2009
Additional Retained Common Paid in Earnings Stock Capital (Deficit) Total Balance, January 1, 2009 $ 20 $ 183,415 $ (467,265) $ (283,830)
Net income - - 2,964,477 2,964,477 Distributions - - (3,473,970) (3,473,970)
Balance, December 31, 2009 20 183,415 (976,758) (793,323)
Net income - - 1,152,592 1,152,592 Distributions - - (3,456,811) (3,456,811)
Balance, December 31, 2010 $ 20 $ 183,415 $ (3,280,977) $ (3,097,542)
The accompanying notes are an integral part of these financial statements. 4 Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2010 and 2009
2010 2009 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 1,152,592 $ 2,964,477 Adjustments to reconcile net income to net cash flows from operating activities Depreciation and amortization 302,588 107,742 Gain on sale of equipment (91,269) - Provision for unredeemed gift cards (207,000) (300,000) (Increase) decrease in Accounts receivable (238,744) (25,711) Inventory and other current assets (5,559) (33,629) Deposits (10,276) 1,115 Increase (decrease) in Accounts payable and accrued liabilities (130,536) (198,431) Gift card program liability 244,395 238,027 Local advertising program liability 187,009 (89,989) Unearned franchise fees 41,999 (101,003) Net cash flows from operating activities 1,245,199 2,562,598
CASH FLOWS FROM INVESTING ACTIVITIES Collection of note receivable 2,076 82,892 Collection of shareholder note receivable - 195,431 Proceeds from sale of equipment 115,000 - Acquisition of property and equipment (206,599) (15,575) Repurchase of area developer territories (3,222,781) - Net cash flows from investing activities (3,312,304) 262,748
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from note payable 5,794,253 1,125,225 Payments on line of credit - (250,000) Shareholder distributions (3,456,811) (3,473,970) Payments on capital lease obligations (2,804) (6,059) Payments on notes payable (558,047) (580,512) Net cash flows from financing activities 1,776,591 (3,185,316)
NET CHANGE IN CASH (290,514) (359,970) CASH AT BEGINNING OF YEAR 1,609,512 1,969,482 CASH AT END OF YEAR $ 1,318,998 $ 1,609,512
Cash and cash equivalents Operating $ 480,686 $ 958,209 Restricted 838,312 651,303 Total cash and cash equivalents $ 1,318,998 $ 1,609,512
SUPPLEMENTAL DISCLOSURES Interest paid $ 740,718 $ 225,450
The accompanying notes are an integral part of these financial statements. 5 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 and 2009
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Nature of Business Tropical Smoothie Franchise Development Corporation (the Company) was incorporated on July 2, 1997, and operates as a franchiser in the quick service restaurant industry. Operations include the development and franchising of a system of both traditional and non-traditional quick service restaurant units. Traditional restaurants feature dine-in and carry-out service. Non-traditional units include express units, which have a more limited menu and operate in non-traditional locations such as college campuses where a full-scale traditional outlet would not be practical or efficient. The system features proprietary menu items and emphasizes the preparation of food and drinks (smoothies) with high quality ingredients.
In 2005, Tropical Smoothie Café, LLC (the Café) was formed. The Café is a wholly- owned subsidiary of the Company. The Café operates one franchise store for the purpose of new franchisee training, instruction and to promote a franchise concept showcase store.
In 2008, Café Management, Inc. (Café Management) was formed. Café Management is a wholly-owned subsidiary of the Company. Café Management was created to acquire and operate Tropical Smoothie Cafés previously operated by franchisees that had closed or were on the verge of closing and to open new stores in new markets. The objective of Café Management is to sell each store to an approved franchisee. Café Management sold two Tropical Smoothie Cafés in Arizona and opened a new store in Goodyear, Arizona during 2010. This was the only store operated by Café Management as of December 31, 2010.
There are 291 stores currently in operation by franchisees throughout the United States, with a concentration in the southeastern region of the United States. The Company also sells certain territories (areas) within the United States to area developers. The area developers are required to meet mandatory development schedules for their specified territory. The Company splits initial franchise fees, transfer fees, and continuing royalty fees with area developers for stores opened in their territories.
B. Principles of Consolidation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Tropical Smoothie Café, LLC and Café Management, Inc. All material intercompany transactions have been eliminated.
6 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 and 2009
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Revenue and Cost Recognition The principal sources of revenue for the Company are initial franchise fees, territory sales, and weekly royalty payments. The franchise agreements require the franchisee to pay an initial, non-refundable fee. Initial franchise fees are $25,000 for the first franchisee store and $15,000 for each additional franchisee store. Territory sales are based on the territory purchased, size, population and other factors. Royalty fees are 6% of net sales and are remitted on a weekly basis. The franchisee also pays a 1% national advertising fee and a 2% local advertising fee, for a total of 3% of net sales. Net sales are defined as gross sales per the franchise agreement less any customer discounts. Local advertising fees are recorded as a liability to which specific costs are charged since they are required to be used for a specified purpose. Area developer fees paid to area developers in the form of a commission are charged to cost of revenues. Direct costs of servicing the franchise are charged to operating expenses as incurred.
When an individual franchise is sold, the Company agrees to provide certain services to the franchisee. Generally, these services include restaurant design and assistance with site location, confidential operating manuals and initial training. Franchise fee revenue is recognized in the accompanying financial statements, once substantial performance of these services is completed, which is generally upon the opening of a store. At December 31, 2010, and 2009, respectively, there was $603,502 and $561,503 in unearned revenue relating to franchises sold, for which the Company must provide future services. There were 25 and 15 franchises sold in years 2010 and 2009, respectively. The Company recognizes continuing (royalty) fees as earned.
Territory sales are recognized when the territory is sold through contractual agreement. The Company considers substantial performance of their obligation under this agreement satisfied at the designation of a geographical area, which serves as the exclusive designated territory of the area developer. Area developers receive $11,500 of initial franchise fees for the first franchisee store, $6,500 for each additional franchisee store, and 50% of the weekly royalty fees of franchises in their territories. Developer fees are charged to cost of revenues as incurred.
The Company recognizes a transfer fee of 5% or $10,000 (whichever is greater) of the total sales price of a franchised store when the franchised store is sold or otherwise transferred to an unrelated third-party. Area developers receive one-half of the transfer fee for transfers occurring within their territory.
7 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 and 2009
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
C. Revenue and Cost Recognition (Continued) The Company sells gift cards with no expiration date. The franchisees recognize income on gift cards when they are redeemed by the customer. The gift card proceeds are pooled and maintained by the Company. Funds are transferred to or withdrawn from franchisee bank accounts on a monthly basis by the third-party gift card processor. During 2007, the Company began recognizing income on unredeemed gift cards when it can be determined that the likelihood of the gift card being redeemed is remote and that there is no legal obligation to remit the unredeemed gift cards to relevant jurisdictions (gift card breakage). The Company determines the gift card breakage rate based on historical and industry data and the Company's own redemption experience rate over the gift card program. The Company recognized $207,000 and $300,000 for the years ended December 31, 2010, and 2009, respectively.
The Company negotiates with suppliers and manufacturers to receive discounts or rebates on certain items franchisees must purchase. The rebate programs vary depending on the supplier and the nature of the product. The Company recognizes rebate revenue in the period they are earned.
D. Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities, and the reported revenues and expenditures. Actual results could vary from the estimates that were used.
E. Cash and Cash Equivalents For the purpose of the Consolidated Statements of Cash Flows, the Company considers all cash and highly liquid debt instruments with an original maturity of three months or less to be cash equivalents.
F. Restricted Cash Restricted cash consists of cash held on behalf of the franchisees for local advertising cooperative funds. Restricted cash balances were $838,312 and $651,303 for the years ended December 31, 2010, and 2009, respectively.
8 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 and 2009
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
G. Accounts and Note Receivable Accounts receivable consist primarily of amounts due from vendors for rebates and from franchisees for franchise agreements. Terms for repayment vary by franchisee. Note receivable consists of an amount due from an area developer to finance the sale of a territory. The Company asserts that all accounts and notes receivable are fully collectible. This determination is based on prior experience and management's assessment of the collectibility of specific accounts and as such, no allowance for doubtful accounts is deemed necessary.
H. Property and Equipment Property, equipment and leasehold improvements are recorded at cost. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets. Depreciation on leasehold improvements is calculated over the lives of the leases which are five to ten years. Estimated useful lives of property and equipment for purposes of computing depreciation are three to seven years.
Expenditures for maintenance and repairs are charged against operations when incurred.
I. Intangible Assets Intangible assets consist of trademarks and other marketing related property and reacquired franchise rights. The trademarks and marketing related property are amortized over the legal life of the trademark, which is 15 years. The reacquired franchise rights are amortized over the remaining life of the related franchise agreement. Evaluation of franchise rights for impairment is considered on an annual basis.
J. Income Taxes The Company has elected to be taxed under the provisions of Subchapter S of the Internal Revenue Code. Under those provisions, the Company does not pay federal corporate income taxes on its taxable income. Instead, the shareholders are liable for individual federal income taxes on their respective share of the Company's taxable income. The Company is not aware of any uncertain tax positions that would require disclosure or accrual in accordance with generally accepted accounting principles. With few exceptions, the company is no longer subject to federal, state, or local income tax examination by tax authorities for years before 2007.
9 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 and 2009
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
K. Advertising Costs In accordance with the franchise agreement, franchisees must pay a national advertising and production fee of 1% of net sales. The national advertising fee is used to design and create advertising materials and other promotional items as the Company deems appropriate. The Company incurred expenses of $951,390 and $993,360 for national advertising during the years ended December 31, 2010, and 2009, respectively.
The Company's total advertising expenses, including national advertising expenses, totaled $1,020,970 and $1,063,936 during the years ended December 31, 2010, and 2009, respectively. The costs are expensed as incurred.
L. Subsequent Event The Company has evaluated events and transactions that occurred between December 31, 2010, and March 15, 2011, which is the date the financial statements were available to be issued, for possible recognition or disclosure in the financial statements.
NOTE 2 - ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31, 2010, and 2009: 2010 2009 Trade receivables $ 218,659 $ 55,000 Rebates receivable 258,105 152,403 Other 3,806 34,423 Accounts receivable $ 480,570 $ 241,826
At December 31, 2010, and 2009, the Company was owed $55,000 from two franchise sales in Maryland. Due to requirements in that state, the Company cannot collect the amounts until the stores open. The amounts have been presented as long-term in the accompanying financial statements since the Company is unsure if the stores will open in the next year.
NOTE 3 - NOTE RECEIVABLE
The Company is partially financing the sale of a certain territory for an area developer. The note has a provision for interest at 8% per annum in accordance with the note agreement and matures on March 31, 2011. The outstanding balance on the note receivable at December 31, 2010, and 2009, was $126,559 and $128,635, respectively.
10 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 and 2009
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2010, and 2009, are summarized as follows: 2010 2009 Computers and software $ 149,055 $ 136,661 Furniture, fixtures and equipment 345,532 302,453 Leasehold improvements 322,203 255,399 816,790 694,513 Less accumulated depreciation (491,996) (469,067) Property and equipment, net $ 324,794 $ 225,446
Depreciation expense was $93,520 and $96,799 for the years ended December 31, 2010, and 2009, respectively.
NOTE 5 - INTANGIBLE ASSETS
A summary of identifiable intangible assets at December 31, 2010, and 2009, is as follows: 2010 2009 Trademarks, and other marketing related property $ 164,144 $ 164,145 Reacquired franchise rights 3,222,781 - Less accumulated amortization (321,089) (112,022) Intangible assets, net $ 3,065,836 $ 52,123
Amortization expense related to reacquired franchise rights for the years ended December 31, 2010, and 2009, was $198,111 and $0, respectively. The weighted average amortization period for the remaining useful life of the reacquired franchise rights is 16 years. Amortization expense related to the trademarks and other marketing property was $10,957 and $10,943 for the years ended December 31, 2010, and 2009, respectively.
The estimated aggregate amortization expense for the next five years is as follows:
2011 $ 209,054 2012 208,084 2013 207,111 2014 207,111 2015 200,361 Thereafter 2,034,115 $ 3,065,836
11 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 and 2009
NOTE 5 - INTANGIBLE ASSETS (CONTINUED)
The Company occasionally reacquires franchise rights that are expensed as incurred. Normally these situations are in circumstances in which the franchisee or area developer is not performing in accordance with development schedules and the amounts paid for reacquisition are not considered fair market value transactions. Amounts expensed for the years ended December 31, 2010, and 2009, are $163,177 and $171,884, respectively.
NOTE 6 - INVESTMENT PROPERTY
Investment property consists of a condominium unit located in Destin, Florida. The Company intends to hold the property for future resale. The Company does not believe that there is any permanent impairment to the value of the investment property.
NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following at December 31, 2010, and 2009: 2010 2009 Accounts payable $ 313,767 $ 428,588 Area developer fees payable 235,238 259,600 Other 62,703 54,056 Accounts payable and accrued liabilities $ 611,708 $ 742,244
NOTE 8 - NOTES PAYABLE
Notes payable consist of the following at December 31, 2010, and 2009: 2010 2009 Note payable to a commercial bank for the acquisition of real estate held for investment. The note requires monthly principal and interest payments of $3,571 through April 2012, then a $383,111 balloon payment due at the maturity date. The note bears a fixed rate of interest of 6.25%. The note matures on May 31, 2012. The note is secured by a mortgage on the real estate and guaranteed by the shareholders of the Company. $ 406,481 $ 619,133
12 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 and 2009
NOTE 8 - NOTES PAYABLE (CONTINUED)
2010 2009 Note payable to a private lender. The loan agreement provides for a maximum amount to be drawn of $2,000,000 plus accrued payment in- kind interest. $1,000,000 was drawn and outstanding as of December 31, 2009. The remaining $1,000,000 was drawn on the loan during February 2010. The note provides for monthly interest only payments with all principal due on December 31, 2012. The note bears a fixed rate of interest of 15%, of which 12% is due each month and the remaining 3% is accrued and due at maturity. The note is personally guaranteed by the shareholders of the Company. 2,056,895 1,000,000
Note payable to a private lender. The loan agreement provides for a maximum amount to be drawn of $2,400,000 plus accrued payment in- kind interest of which $1,900,000 was drawn March 2010, and $500,000 was drawn April 2010. The $500,000 borrowing was assigned by the private lender to another entity. The note provides for monthly interest only payments with all principal due on March 30, 2015. The note bears a fixed rate of interest of 26%, of which 14% is due each month and the remaining 12% is accrued and due at maturity. The note is personally guaranteed by the shareholders of the Company. 2,617,077 -
Note payable to a former area developer for the repurchase of their territory. The note provides for monthly principal and interest payments of $37,464 and bears a fixed rate of interest of 5%. The note matures on April 15, 2013. The note is unsecured. 988,163 -
Note payable to a former area developer for the repurchase of their territory. The note provides for monthly principal and interest payments of $7,918 and bears a fixed rate of interest of 8.5%. The note matures on November 10, 2014. The note is unsecured. 321,249 -
Note payable to a former area developer for the repurchase of their territory. The note provides for monthly principal and interest payments of $7,068 and bears a fixed rate of interest of 8%. The note matures on March 15, 2018. The note is unsecured. 465,474 - Total notes payable 6,855,339 1,619,133 Less current maturities (546,597) (12,781) Notes payable, net of current portion $ 6,308,742 $ 1,606,352
13 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 and 2009
NOTE 8 - NOTES PAYABLE (CONTINUED)
Future principal maturities as of December 31, 2010, are as follows: 2011 $ 546,597 2012 3,086,081 2013 289,619 2014 153,492 2015 4,443,859 Thereafter 174,126 8,693,774 Less accrued payment in-kind interest included in future maturities (1,838,435) $ 6,855,339
NOTE 9 - CAPITAL LEASE OBLIGATIONS
The Company leases certain equipment under capital lease obligations. The assets and liabilities under capital leases are recorded at the lower of present value of the minimum lease payments or fair value of the assets. The assets are depreciated over their estimated productive lives. Amortization expense is included in depreciation expense. This lease obligation was paid off during the year ended December 31, 2010.
NOTE 10 - OPERATING LEASES
In 2004, the Company entered into an operating lease for retail space for the Company- owned restaurant. The lease term began in July 2005. The lease term expires on June 30, 2015. The lease requires monthly rent of $5,660 in years one through three, $6,174 in years four through seven, and $6,688 in years eight through ten. The lease also requires a pro rata share of common area maintenance expenses of approximately $3,300 per month. In addition, the lease calls for an additional payment that equals 6% of sales in excess of $1,131,900 in years one to three, $1,234,800 in years four to seven, and $1,337,700 in years eight to ten. No amounts were paid during either of the years ended December 31, 2010, and 2009, under the additional rent provision of this lease.
In November 2006, the Company entered into an operating lease for corporate office space. The lease term expires on November 15, 2011. That lease requires monthly rent of $5,518 in year one with rent in years two through five to be increased by the Consumer Price Index.
Café Management operated two troubled franchises under existing operating leases for retail space during 2010 and 2009. The operating leases require monthly payments ranging from $2,200 to $2,600, in addition to a pro rata share of common area maintenance costs for each location. These two franchise locations sold on September 23, 2010.
14 Tropical Smoothie Franchise Development Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2010 and 2009
NOTE 10 - OPERATING LEASES (CONTINUED)
In January of 2010, Café Management entered into an operating lease for a new store with a lease term beginning June 1, 2010, and expiring October 31, 2015. Monthly payments range from $2,916 to $3,500 over the term of the lease. In addition to the minimum rent, common area maintenance cost are approximately $500 per month.
In 2010, the Company entered into an operating lease for corporate office space with a related party. The lease expires on May 1, 2017, and is payable in monthly installments of $15,979 plus a pro rata share of common area maintenance expenses of approximately $3,200 monthly and all applicable sales taxes.
Future minimum lease payments for all outstanding operating lease obligations are as follows: 2011 $ 448,560 2012 391,532 2013 396,015 2014 397,419 2015 330,076 Thereafter 306,864 $ 2,270,466
Rent expense charged to operations for the years ended December 31, 2010, and 2009, was $531,407, and $493,730, respectively.
NOTE 11 - RELATED PARTY TRANSACTIONS
The Company leased office space from a related entity that is owned by the two shareholders of the Company. The lease term began in May 2010, and rent is at market rates as disclosed in Note 10. Amounts paid to the related party during the year ended December 31, 2010, were $168,249.
NOTE 12 - NONRECURRING TRANSACTION
In September 2009, the Company received a settlement of $2,200,000, which is net of legal fees of $300,000, in full satisfaction of a dispute with a third-party. There is no further litigation or obligation by either party in regard to this matter.
NOTE 13 - RECLASSIFICATION
Certain amounts presented in the prior year have been reclassified in order to be consistent with the current year presentation.
15 45 Eglin Pkwy. NE, Ste. 301, Fort Walton Beach, FL 32548 (850) 244-5121
Board of Directors Tropical Smoothie Franchise Development Corporation and Subsidiaries Destin, Florida
INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTAL INFORMATION
Our report on the audits of the financial statements of Tropical Smoothie Franchise Development Corporation and Subsidiaries for December 31, 2010, and 2009, appears on page 1. Those audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole.
March 15, 2011
16 SUPPLEMENTAL INFORMATION Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED SCHEDULES OF OPERATING EXPENSES Years Ended December 31, 2010 and 2009
2010 2009 National advertising Creative production, development and other $ 951,390 $ 993,360
Operations Travel 176,006 190,499 Training 8,427 866 Franchise assistance 87,505 57,993 Information technology 5,975 15,000 Area developer meetings and webcast 29,991 30,169 Store design and development 10,199 4,616 Conventions 188,404 133,449 Total operations 506,507 432,592 Franchise development Advertising 31,997 34,212 Commissions 25,000 - Trade shows 94,164 63,765 Travel 48,787 5,768 Web 48,157 - Consultants 13,590 28,257 Other 6,104 19,694 Total franchise development 267,799 151,696 General and administrative Bad debt 20,657 78,764 Bank charges 13,802 9,839 Investment expenses 66,534 81,263 Donations 5,438 4,142 Dues and subscriptions 12,296 26,178 Insurance 37,843 28,173 Meals and entertainment 59,786 66,893 Office supplies 37,003 30,902 Health insurance 141,516 115,519 Salaries, wages and payroll taxes 2,122,273 1,756,112 Recruitment and relocation 19,939 2,550 Other personnel expenses - 14,128 Postage and delivery 22,154 12,787 Professional fees and costs 455,981 432,025 Prospect screening 3,589 2,163 Rent 323,320 296,265 Repairs and maintenance 12,423 8,238 Security 1,150 627 Software 52,462 33,918 Storage 4,397 5,342 Supplies 6,349 - Taxes and licenses 11,502 10,799 Travel 95,164 - Utilities 75,659 83,925
Continued... See independent auditor's report on supplemental information. 17 Tropical Smoothie Franchise Development Corporation and Subsidiaries CONSOLIDATED SCHEDULES OF OPERATING EXPENSES Years Ended December 31, 2010 and 2009
2010 2009 General and administrative (Continued) Other 6,626 3,585 Amortization 209,068 10,943 Depreciation 49,194 49,034 Franchise and area developer buy-back and allowances 163,177 171,884 Total general and administrative 4,029,302 3,335,998 Company-owned restaurant operating expenses Advertising 37,583 36,364 Depreciation on equipment and leasehold improvements 44,326 47,765 Store rent 208,087 197,465 Repairs and maintenance 35,473 18,566 Utilities 42,952 49,180 Supplies 70,653 46,461 Taxes and licenses 51,807 38,883 Credit and gift card fees 25,451 18,868 Other 23,200 25,053 Total company-owned restaurant operating expenses 539,532 478,605 Total $ 6,294,530 $ 5,392,251
See independent auditor's report on supplemental information. 18
THESE FINANCIAL STATEMENTS ARE PREPARED WITHOUT AN AUDIT. PROSPECTIVE FRANCHISEES OR SELLERS OF FRANCHISES SHOULD BE ADVISED THAT NO CERTIFIED PUBLIC ACCOUNTANT HAS AUDITED THESE FIGURES OR EXPRESSED AN OPINION WITH REGARD TO THEIR CONTENT OR FORM.
QB\138221.00002\10107206.43 9/28/12 3:31 PM Tropical Smoothie Franchise Development Corporation
08/27/12 Balance Sheet Accrual Basis As of July 31, 2012
Jul 31, 12 ASSETS Current Assets Checking/Savings Hancock Bank operating #9579 965,878.94 Hancock Bank Central Proc #9595 203.27 Advertising co-op bank accounts 1,448.60 Wells Fargo oper. acct. #2109 46,638.74 Wells Fargo#4007-Hunter reserve 100,500.97 Wells Fargo Central Proces#2125 48,070.34 Escrow accounts 115,014.60 PayPal gift card sales acct 7,576.18 Total Checking/Savings 1,285,331.64 Accounts Receivable Accounts receivable 273,935.63 Total Accounts Receivable 273,935.63 Other Current Assets Note rec.-Derricksons KY-004 FA 5,000.00 Prepaid expenses 51,024.62 ACH Returns 36,051.19 Inventory 51,633.50 Undeposited Funds -23,489.44 Total Other Current Assets 120,219.87
Total Current Assets 1,679,487.14 Fixed Assets Capital Leases 30,958.33 Computers 136,930.31 Equipment 83,948.85 Leasehold improvements 91,164.83 Office Furniture 95,648.27 Software 35,761.29 Accumulated depreciation -295,229.38 Total Fixed Assets 179,182.50 Other Assets Due from related subsidiary cos 897,060.51 Note rec.-T Dewey (Washington) 127,739.26 Intangible assets 4,234,169.57 Investment-Emerald Grande #E107 948,631.44 Refundable Security Deposits 6,645.08 Stockholder loan-E. Jenrich 1,200,000.00 Total Other Assets 7,414,245.86
TOTAL ASSETS 9,272,915.50 LIABILITIES & EQUITY Liabilities Current Liabilities Accounts Payable *Accounts Payable 212,690.46 Total Accounts Payable 212,690.46 Credit Cards Credit Card at American Express 80,358.29 Total Credit Cards 80,358.29 Other Current Liabilities Accrued Expenses 358,895.36 Camp Sunshine Donation Funds 392,975.41 Co-op funds held by Horne, LLC 775,568.97 Franchisee MyMicros Funds Held 20,522.63 Garnishments payable 463.96 Gift cards liability 279,111.07 Local Advertising Funds Held 320,809.49
Page 1 3:31 PM Tropical Smoothie Franchise Development Corporation
08/27/12 Balance Sheet Accrual Basis As of July 31, 2012
Jul 31, 12 Payroll Liabilities 5,604.29 Total Other Current Liabilities 2,153,951.18
Total Current Liabilities 2,446,999.93 Long Term Liabilities Note pay.-SMS Lender Agent, LLC 8,500,000.00 Note pay.-Golden territory rep 95,439.29 Note pay.-Gonsior territory rep 330,254.15 Note pay.-Kassouf territory rep 206,920.06 Note pay.-Smoothie Adv Jax rep 385,440.38 Note pay-Centenial Bank (condo) 378,864.39 Unearned franchise fee revenues 285,752.00 Total Long Term Liabilities 10,182,670.27
Total Liabilities 12,629,670.20 Equity Additional paid in capital 183,414.88 Common stock 20.00 Dist. to stockholder-David W. -479,858.81 Dist. to stockholder-Eric J. -479,858.83 Retained Earnings -3,802,925.51 Net Income 1,222,453.57 Total Equity -3,356,754.70
TOTAL LIABILITIES & EQUITY 9,272,915.50
Page 2 3:32 PM Tropical Smoothie Franchise Development Corporation
08/27/12 Profit & Loss Accrual Basis January through July 2012
Jan - Jul 12 Ordinary Income/Expense Income Weekly Franchise Royalty 5,438,655.94 National Advertising Fees 921,423.15 Gift Card Breakage 150,000.00 Initial Franchise Fees 485,004.00 Territory Sales 25,000.00 Transfer Fees 134,759.00 Rebates 828,446.28 Road Show 2012 Income 144,100.00 Other Income -2,116.42 Total Income 8,125,271.95 Cost of Goods Sold Area Developer Fees 1,924,083.57 Total COGS 1,924,083.57
Gross Profit 6,201,188.38 Expense National Advertising Expense 1,028,949.04 Operations Expense 1,188,340.39 Franchise Development 314,861.57 Administrative/Finance 1,662,602.52 Total Expense 4,194,753.52
Net Ordinary Income 2,006,434.86 Other Income/Expense Other Income Interest Income Earned 12,116.81 Total Other Income 12,116.81 Other Expense Franchisee/AD Buyback & Allowan 40,000.00 Interest Expense 756,098.10 Total Other Expense 796,098.10
Net Other Income -783,981.29
Net Income 1,222,453.57
Page 1
EXHIBIT O TO THE DISCLOSURE DOCUMENT
GUARANTY OF PERFORMANCE OF TROPICAL SMOOTHIE FRANCHISE DEVELOPMENT CORPORATION
QB\138221.00002\10107206.43 9/28/12
EXHIBIT P TO THE DISCLOSURE DOCUMENT
ASSIGNMENT AND ASSUMPTION OF FRANCHISE AGREEMENT
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ASSIGNMENT AND ASSUMPTION OF FRANCHISE AGREEMENT
This ASSIGNMENT AND ASSUMPTION OF FRANCHISE AGREEMENT (this “Assignment”) is executed and delivered as of ______, 20___, by and between Franchisee, ______individually, and/or ______, Corporation (“Assignor”), and ______, individually, and/or ______, Corporation (“Assignee”).
WHEREAS, Assignor and TROPICAL SMOOTHIE CAFE, LLC (“Franchisor”) entered into that certain Franchise Agreement (the “Franchise Agreement”), dated as of ______, pursuant to which Franchisor granted Assignor the right and license to operate a Tropical Smoothie Café® store in accordance with the terms and conditions stated therein;
WHEREAS, the Franchise Agreement permits Assignor to assign the Franchise Agreement provided that Franchisor consents to such transfer and certain specified conditions are satisfied.
NOW, THEREFORE, in consideration of the promises, undertakings and commitments set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows.
1. Recitals. The Recitals set forth above are true and correct and are incorporated herein as if set forth herein.
2. Assignment of Franchise Agreement. Assignor does hereby sell, assign, transfer, convey, set over and confirm, to Assignee, its successors and assigns, to have and to hold forever, all of Assignor’s right, title and interest of every kind and character whatsoever in, to or with respect to the Franchise Agreement, and Assignee hereby accepts the assignment of the Franchise Agreement.
3. Assumption of Franchise Agreement. Assignee does hereby assume the Franchise Agreement and agrees to perform all of the duties and obligations, and abide by all of the covenants, terms and conditions, applicable to Assignor under the Franchise Agreement. Notwithstanding the foregoing, Assignor shall (i) remain liable for all direct and indirect obligations owed to Franchisor in connection with the Franchise Agreement prior to the effective date of this Assignment; and (ii) continue to comply with the nondisclosure, noncompetition and indemnification provisions set forth in the Franchise Agreement.
4. Consent to the Assignment. Franchisor by its execution below, hereby acknowledges and consents to the assignment of all of Assignor’s rights and interests under the Franchise Agreement to Assignee and the assumption by Assignee of the liabilities of the Assignor under the Franchise Agreement as set forth above; provided, however, that the foregoing consent to the assignment and assumption of the Franchise Agreement by Franchisor shall not release Assignor from any continuing liability under the Franchise Agreement.
5. Further Actions. Assignor and Assignee agree that they shall execute and deliver or cause to be executed and delivered from time to time such instruments, documents, agreements, and assurances and take such other action as any other party may reasonably require to more effectively assign and transfer to and vest in Assignee, its successors and assigns, all right, title and interest of Assignor in and to the Franchise Agreement.
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6. Miscellaneous.
(a) Governing Law. This Assignment is governed by Georgia law. The parties reconfirm and submit to venue and jurisdiction in Fulton County, Georgia.
(b) Counterparts. This Assignment may be executed in any number of counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same document.
(c) Binding Nature. This Assignment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. This Assignment, however, may not be assigned by any party without the prior written consent of the other parties.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, this Assignment is executed as of this __ day of ______, 20___.
“Assignor” ______, ______Individually Corporation
By:______By:______Name: Name:______Title: Title:______
STATE OF ______COUNTY OF ______
The foregoing instrument was acknowledged/sworn before me this _____ day of ______, 20__, by ______, who is either personally known to me (or who has produced ______as identification) and did (did not) take an oath.
NOTARY PUBLIC
______Name: State of ______, At Large My Commission Expires:
(SEAL)
STATE OF ______COUNTY OF ______
The foregoing instrument was acknowledged/sworn before me this _____ day of ______, 20__, by ______, who is an authorized representative of ______, and is either personally known to me (or who has produced ______as identification) and did (did not) take an oath.
NOTARY PUBLIC
______Name: State of ______, At Large My Commission Expires: (SEAL)
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“Assignee”
Individually Corporation
By: By: Name: Name: Title: Title:
STATE OF ______COUNTY OF ______
The foregoing instrument was acknowledged/sworn before me this _____ day of ______, 20___, by ______, who is either personally known to me (or who has produced ______as identification) and did (did not) take an oath.
NOTARY PUBLIC
______Name: State of ______, At Large My Commission Expires:
(SEAL)
STATE OF ______COUNTY OF ______
The foregoing instrument was acknowledged/sworn before me this _____ day of ______, 20___, by ______, who is an authorized representative of ______, and is either personally known to me (or who has produced ______as identification) and did (did not) take an oath.
NOTARY PUBLIC
______Name: State of ______, At Large My Commission Expires:
(SEAL)
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The undersigned hereby consents to the foregoing assignment:
TROPICAL SMOOTHIE CAFE, LLC, a Georgia limited liability company
By: Name: Title:
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EXHIBIT Q TO THE DISCLOSURE DOCUMENT
FRANCHISEE DISCLOSURE QUESTIONNAIRE
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TROPICAL SMOOTHIE CAFE, LLC
FRANCHISEE DISCLOSURE QUESTIONNAIRE
As you know TROPICAL SMOOTHIE CAFE, LLC ("we" or "us'), and you are preparing to enter into a Franchise Agreement for the operation of a Tropical Smoothie Café® franchise. The purpose of this Questionnaire is to determine whether any statements or promises were made to you that we have not authorized or that may be untrue, inaccurate or misleading, to be certain that you have been properly represented in this transaction, and to be certain that you understand the limitations on claims you may make by reason of the purchase and operation of your franchise. You cannot sign or date this Questionnaire the same day as the Receipt for the Franchise Disclosure Document but you must sign and date it the same day you sign the Franchise Agreement and pay your franchise fee. Please review each of the following questions carefully and provide honest responses to each question. If you answer "No" to any of the questions below, please explain your answer on the back of this sheet.
Yes__No__ l. You had your first face to face meeting with us on: ______, 20___.
Yes__No__ 2. Have you received and personally reviewed the Franchise Agreement and each exhibit or schedule attached to it?
Yes__No__ 3. Did you receive the Franchise Agreement and each related agreement, containing all material terms, at least 7 calendar days before signing any binding agreement with us or an affiliate? (Note: This does not include changes to any agreement arising out of negotiations you initiated with us.)
Yes__No__ 4. Have you received and personally reviewed the Franchise Disclosure Document we provided?
Yes__No__ 5. Did you receive the Franchise Disclosure Document at least 14 calendar days before signing the Franchise Agreement or any related agreement, or before paying any funds to us or an affiliate?
Yes__No__ 6. Did you sign a receipt for the Franchise Disclosure Document indicating the date you received it?
Yes__No__ 7. Do you understand all the information contained in the Franchise Disclosure Document and Franchise Agreement?
Yes__No__ 8. Have you reviewed the Franchise Disclosure Document and Franchise Agreement with a lawyer, accountant or other professional advisor?
Yes__No__ 9. Do you acknowledge and understand that no parent or affiliate of ours promises to back us financially or otherwise guarantees our performance or commits to perform post-sale obligations for us?
Yes__No__ 10. Have you discussed the benefits and risks of developing and operating a Tropical Smoothie Cafe® franchise with an existing Tropical Smoothie Café® franchisee?
Yes__No__ 11. Do you understand the risks of developing and operating a Tropical Smoothie Café® franchise?
Yes__No__ 12. Do you understand the success or failure of your franchise will depend in large part upon your skills, abilities and efforts and those of the persons you employ, as well as many factors beyond your control such as weather, competition, interest rates, the economy, inflation, labor and supply costs, lease terms and the marketplace?
Yes__.No__ 13. Do you understand we have not granted you any territorial rights and that another franchised or company Tropical Smoothie Cafe® may open near your unit?
Yes__No__ 14. Do you understand we and our affiliates retain the exclusive unrestricted right to engage, directly or through others, in the production, distribution and sale of products and services under the Tropical Smoothie Café® name or other mark, at any location or by any method of distribution, without regard to the location of other Tropical Smoothie Café® stores and these other Tropical Smoothie Cafe® stores or methods of distribution may compete with your unit and adversely affect its sales?
Yes__No__ 15. Do you understand there are no radius restrictions or minimum population requirements concerning where another franchised or company Tropical Smoothie Cafe® may open?
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Yes__No__ 16. Do you understand that, except where prohibited by the laws of your state, all disputes or claims you may have arising out of or relating to the Franchise Agreement must be litigated in Georgia, if not resolved informally or by mediation?
Yes__No__ 17. Do you understand that you and your manager must satisfactorily complete the initial training course before we will allow the Tropical Smoothie Cafe® to open? (See Sections 3A.4 and 5 and 5.C. of the Franchise Agreement.)
Yes__No__ 18. Is it true no employee or other person speaking on our behalf made any statement or promise or agreement, other than those matters addressed in your Franchise Agreement, concerning advertising, marketing, media support, marketing penetration, training, support service or assistance that is contrary to, or different from, the information contained in the Franchise Disclosure Document?
Yes__ No__ 19. Is it true no employee or other person speaking on our behalf made any statement or promise regarding the actual, average or projected profits or earnings, the likelihood of success, the amount of money you may earn, or the total amount of revenue a Tropical Smoothie Cafe® franchise will generate, that is not contained in the Franchise Disclosure Document or that is contrary to, or different from, the information contained in the Franchise Disclosure Document?
Yes__ No__ 20. Do you understand that the Franchise Agreement contains the entire agreement between us and you concerning the franchise for the Tropical Smoothie Cafe® meaning any prior oral or written statements not set out in the Franchise Agreement will not be binding?∗
Yes__No__ 21. Do you acknowledge and understand that the Franchise Agreement and related agreements are not effective until signed by us?
YOU UNDERSTAND THAT YOUR ANSWERS ARE IMPORTANT TO US AND THAT WE WILL RELY ON THEM. BY SIGNING THIS QUESTIONNAIRE, YOU ARE REPRESENTING THAT YOU HAVE CONSIDERED EACH QUESTION CAREFULLY AND RESPONDED TRUTHFULLY TO THE ABOVE QUESTIONS.
Signature of Franchise Applicant Signature of Franchise Applicant
Name (please print) Name (please print)
Dated Dated
Signature of Franchise Applicant Signature of Franchise Applicant
Name (please print) Name (please print)
Dated Dated
EXPLANATION OF ANY NEGATIVE RESPONSES [REFER TO QUESTION NUMBER]:
∗ Nothing contained in this Questionnaire is intended to disclaim the representations we made in the Franchise Disclosure Document.
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EXHIBIT R TO THE DISCLOSURE DOCUMENT
RECEIPTS
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RECEIPT
This disclosure document summarizes certain provisions of the franchise agreement and other information in plain language. Read this disclosure document and all agreements carefully. If TROPICAL SMOOTHIE CAFE, LLC offers you a franchise, it must provide this disclosure document to you 14 calendar days before you sign a binding agreement with, or make a payment to, the franchisor or an affiliate in connection with the proposed franchise sale. New York and Rhode Island require that we give you this disclosure document at the earlier of the first personal meeting or 10 business days before the execution of any binding franchise or other agreement, or payment of any consideration that relates to the franchise relationship. Michigan requires that we give you this disclosure document at least 10 business days before the execution of any binding franchise or other agreement, or payment of any consideration, whichever occurs first. If TROPICAL SMOOTHIE CAFE, LLC does not deliver this disclosure document on time or if it contains a false or misleading statement, or a material omission, a violation of federal law and state law may have occurred and should be reported to the Federal Trade Commission, Washington, D.C. 20580 and any applicable state agency (as listed in Exhibit “A” to this disclosure document).
The franchisor is Tropical Smoothie Cafe, LLC, located at 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328. Its telephone number is (770) 821-1900.
We authorize the respective state agencies identified on Exhibit “A” to receive service of process for us if we are registered in the particular state. Issuance Date: September 28, 2012. The name, principal business address, and telephone number of the franchise sellers offering the franchise are:
Name Principal Business Address Telephone Number Scott Pressly, Charles Watson, Mike 7000 Peachtree Dunwoody Road, (770) 821-1900 Rotondo, Troy Godbee, Philip Building #2, Floor #3, Atlanta, Watson, Robert Fischer, Dana Georgia 30328 Lockyear, Gregg Kocenko See Exhibit “C” for information on See Exhibit “C” for information on See Exhibit “C” for information on Area Developers (if any) in your area. Area Developers (if any) in your area. Area Developers (if any) in your area.
I received a Disclosure Document dated September 28, 2012. (See the state effective date summary page for state effective dates.) The Disclosure Document included the following Exhibits:
A State Agencies and Administrators/Agents for I Operating Manual Table of Contents Service of Process J Nondisclosure and Noncompetition B Form of Franchise Agreement Agreement C Information About Our Area Developers K Owners’ Guaranty D Pre-Authorized Bank Form L State Specific Addenda and Riders E Exclusive Real Estate Services M Roster of Current and Former Franchisees Representation Agreement N Financial Statements F Addendum to Lease Agreement/Conditional O Guaranty of Performance of TSFDC Assignment of Lease P Assignment and Assumption of Franchise G Conditional Assignment of Telephone Agreement Numbers and Listings Q Franchisee Disclosure Questionnaire H Franchisee Training Acknowledgement Form R Receipts
KEEP THIS COPY FOR YOUR RECORDS.
Signature Date Print Name:
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RECEIPT
This disclosure document summarizes certain provisions of the franchise agreement and other information in plain language. Read this disclosure document and all agreements carefully. If TROPICAL SMOOTHIE CAFE, LLC offers you a franchise, it must provide this disclosure document to you 14 calendar days before you sign a binding agreement with, or make a payment to, the franchisor or an affiliate in connection with the proposed franchise sale. New York and Rhode Island require that we give you this disclosure document at the earlier of the first personal meeting or 10 business days before the execution of any binding franchise or other agreement, or payment of any consideration that relates to the franchise relationship. Michigan requires that we give you this disclosure document at least 10 business days before the execution of any binding franchise or other agreement, or payment of any consideration, whichever occurs first. If TROPICAL SMOOTHIE CAFE, LLC does not deliver this disclosure document on time or if it contains a false or misleading statement, or a material omission, a violation of federal law and state law may have occurred and should be reported to the Federal Trade Commission, Washington, D.C. 20580 and any applicable state agency (as listed in Exhibit “A” to this disclosure document).
The franchisor is Tropical Smoothie Cafe, LLC, located at 7000 Peachtree Dunwoody Road, Building #2, Floor #3, Atlanta, Georgia 30328. Its telephone number is (770) 821-1900.
We authorize the respective state agencies identified on Exhibit “A” to receive service of process for us if we are registered in the particular state. Issuance Date: September 28, 2012. The name, principal business address, and telephone number of the franchise sellers offering the franchise are:
Name Principal Business Address Telephone Number Scott Pressly, Charles Watson, Mike 7000 Peachtree Dunwoody Road, (770) 821-1900 Rotondo, Troy Godbee, Philip Building #2, Floor #3, Atlanta, Watson, Robert Fischer, Dana Georgia 30328 Lockyear, Gregg Kocenko See Exhibit “C” for information on See Exhibit “C” for information on See Exhibit “C” for information on Area Developers (if any) in your area. Area Developers (if any) in your area. Area Developers (if any) in your area.
I received a Disclosure Document dated September 28, 2012. (See the state effective date summary page for state effective dates.) The Disclosure Document included the following Exhibits:
A State Agencies and Administrators/Agents for I Operating Manual Table of Contents Service of Process J Nondisclosure and Noncompetition B Form of Franchise Agreement Agreement C Information About Our Area Developers K Owners’ Guaranty D Pre-Authorized Bank Form L State Specific Addenda and Riders E Exclusive Real Estate Services M Roster of Current and Former Franchisees Representation Agreement N Financial Statements F Addendum to Lease Agreement/Conditional O Guaranty of Performance of TSFDC Assignment of Lease P Assignment and Assumption of Franchise G Conditional Assignment of Telephone Agreement Numbers and Listings Q Franchisee Disclosure Questionnaire H Franchisee Training Acknowledgement Form R Receipts
RETURN THIS RECEIPT TO US AT: TROPICAL SMOOTHIE CAFE, LLC 7000 Peachtree Dunwoody Road, Bldg. 2, Floor 3, Atlanta, Georgia 30328 Tel: 770-821-1900 / Fax: 770-821-1895 E-mail: [email protected]
Signature Date Print Name:
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