FRANCHISE DISCLOSURE DOCUMENT Great American Cookies FDD-04012012-v1 GAC Franchising, LLC A Delaware limited liability company 1346 Oakbrook Drive, Suite 170 Norcross, Georgia 30093 (770) 514-4500 [email protected] www.greatamericancookies.com FRANCHISE DISCLOSURE DOCUMENT GAC Franchising, LLC (“we,” “us,” or “our”) offers franchises for the operation of retail stores selling cookies, brownies and related food items and beverages under the GREAT AMERICAN COOKIES mark (“Stores”). The total investment necessary to begin operation of a GREAT AMERICAN COOKIES franchise is $148,350 to $280,350 for a Traditional Store, $121,000 to $239,600 for a Non-Traditional Store; and $44,550 to $138,394 for a Satellite. This amount does not include rent for the Store. This includes $20,000 to $43,000 that must be paid to us or our affiliates. The total investment necessary to begin operation of a GREAT AMERICAN COOKIES Area Development franchise is $52,500 and up. This includes $52,500 or more that must be paid to us or our affiliates. This Franchise Disclosure Document (“Disclosure Document”) summarizes certain provisions of your Franchise Agreement, Area Development 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 Patricia L. Cobb at 1346 Oakbrook Drive, Suite 170, Norcross, Georgia 30093 (Tel. 770-514-4500). The terms of your contract will govern your franchise relationship. Don’t rely on the Disclosure Document alone to understand your contract. Read all of your contract carefully. Show your contract and this Disclosure Document to an advisor, like a lawyer or an accountant. Buying a franchise is a complex investment. The information in this Disclosure Document can help you make up your mind. More information on franchising, such as “A Consumer’s Guide to Buying a Franchise,” which can help you understand how to use this Disclosure Document, is available from the Federal Trade Commission. You can contact the FTC at 1-877-FTC-HELP or by writing to the FTC at 600 Pennsylvania Avenue, NW, Washington, D.C. 20580. You also can 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 also may be laws on franchising in your state. Ask your state agencies about them. We issued this Disclosure Document on April 1, 2012. Great American Cookies FDD-04012012-v1 STATE COVER PAGE Your state may have a franchise law that requires us 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 G 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 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 TO RENEW. Please consider the following RISK FACTORS before you buy this franchise: 1. THE FRANCHISE AGREEMENT AND THE AREA DEVELOPMENT AGREEMENT REQUIRE YOU TO RESOLVE DISPUTES WITH US BY LITIGATION IN DELAWARE. OUT-OF-STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT ALSO MAY COST MORE TO LITIGATE IN DELAWARE THAN IN YOUR HOME STATE. 2. THE FRANCHISE AGREEMENT AND THE AREA DEVELOPMENT AGREEMENT STATE THAT DELAWARE LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTION AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS. 3. SPOUSES OF FRANCHISE OWNERS MUST SIGN A PERSONAL GUARANTY AND BE BOUND BY THE TERMS OF THE FRANCHISE AGREEMENT, PLACING THEIR PERSONAL ASSETS AT RISK. 4. THE FRANCHISE AGREEMENT PROVIDES FOR YOUR PAYMENT OF LIQUIDATED DAMAGES IF WE TERMINATE THE FRANCHISE AGREEMENT FOR CAUSE. 5. YOU MUST OFFER THE SPECIFIC BRAND AND/OR PRODUCT MIX WE REQUIRE. WE MAY CHANGE THE AUTHORIZED PRODUCTS AND SERVICES AT OUR DISCRETION. WE HAVE THE RIGHT TO AUTOMATICALLY ORDER AND SHIP TO YOU INVENTORY AND PROMOTIONAL ITEMS. 6. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE. We may use the services of one or more franchise brokers or referral sources to assist us in selling our franchise. A franchise broker or referral source represents us, not you. If we use a franchise broker, we will pay this person a fee for selling our franchise or referring you to us. You should make sure to do your own investigation of the franchise. The following chart lists states that require this Disclosure Document to be registered or filed with the state or to be exempt from registration to offer or sell franchises within the state. In these states, the effective date of the Disclosure Document is as follows: Great American Cookies FDD-04012012-v1 STATE EFFECTIVE DATE California Hawaii Illinois Indiana Maryland Michigan Minnesota New York North Dakota Rhode Island South Dakota Virginia Washington Wisconsin In all other states, the effective date of this Disclosure Document is the issuance date of April 1, 2012. Some of the states listed above require that we give you additional disclosures. The additional required disclosures for these states are in Exhibit C to this Disclosure Document. Great American Cookies FDD-04012012-v1 TABLE OF CONTENTS Page ITEM 1 THE FRANCHISOR, AND ANY PARENTS, PREDECESSORS, AND AFFILIATES ............ 1 ITEM 2 BUSINESS EXPERIENCE .................................................................................................... 8 ITEM 3 LITIGATION ........................................................................................................................ 10 ITEM 4 BANKRUPTCY .................................................................................................................... 10 ITEM 5 INITIAL FEES ...................................................................................................................... 11 ITEM 6 OTHER FEES ..................................................................................................................... 14 ITEM 7 ESTIMATED INITIAL INVESTMENT .................................................................................. 19 ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES .................................. 25 ITEM 9 FRANCHISEE'S OBLIGATIONS ......................................................................................... 31 ITEM 10 FINANCING ....................................................................................................................... 33 ITEM 11 FRANCHISOR'S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND TRAINING ......................................................................................................................... 33 ITEM 12 TERRITORY ...................................................................................................................... 47 ITEM 13 TRADEMARKS ................................................................................................................. 51 ITEM 14 PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION .................................. 52 ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE FRANCHISE BUSINESS ........................................................................................................................ 53 ITEM 16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL ........................................... 54 ITEM 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION ....................... 55 ITEM 18 PUBLIC FIGURES ............................................................................................................ 62 ITEM 19 FINANCIAL PERFORMANCE REPRESENTATIONS ...................................................... 62 ITEM 20 OUTLETS AND FRANCHISEE INFORMATION ............................................................... 65 ITEM 21 FINANCIAL STATEMENTS .............................................................................................. 73 ITEM 22 CONTRACTS .................................................................................................................... 73 ITEM 23 RECEIPTS ........................................................................................................................ 74 EXHIBITS A. FRANCHISE AGREEMENT AND STATE-REQUIRED ADDENDA Payment and Performance Guarantee Appendix A - Marks Appendix B – Lease Rider Appendix C – ACH Authorization Form Appendix D – Satellite Addendum Exhibit A – Term Sheet for Satellite Addendum Great American Cookies FDD-04012012-v1 Page i B. AREA DEVELOPMENT AGREEMENT AND STATE-REQUIRED ADDENDA Payment and Performance Guarantee Exhibit A – General, including Schedule 1 Exhibit B – Form of Franchise Agreement Area Representative Addendum C. ADDITIONAL STATE-REQUIRED DISCLOSURES D. GENERAL