800.343.3213
The Franchise Agreement
The Franchise Agreement, which is part of the
Franchise Disclosure Document (FDD), defines the
relationship between you (the franchisor) and each
franchisee. This document protects your image and
reputation. It helps ensure a uniform and consistent
operation from one franchisee to the next. It helps
protect an individual franchisee from adverse actions by
another franchisee. By necessity, this document is very
extensive and the tone of the Franchise Agreement is
one-sided -- in your favor.
If you have any questions, or wish to have a free
franchise consultation, just call us at 800-343-3213 and
a franchise consultant will be glad to speak with you.
The following agreement is from a fictional franchisor
and does not reflect any client of Signature
Franchising.
FRANCHISE
AGREEMENT SAMPLE
Sage Auto Care
PARTIES
THIS AGREEMENT
is made by and between SAGE AUTO CARE FRANCHISE
GROUP, LLC, a UTAH LLC, hereinafter known as
SAC or "Franchisor" and the persons signing as
Franchisee or Guarantors’ and referenced to herein
individually or collectively as "Franchisee," to
evidence the agreement and understanding between the
parties as follows:
RECITALS
WHEREAS,
Franchisor has invested ample efforts, resources, and
experience based skill, have developed unique and
exclusive methods to execute reconditioning services,
operates and has the right to license a system or
business program, including expertise for conducting and
operating a reconditioning services business under the
mark SAGE AUTO CARE GUARANTEE MANAGEMENT® (SAC );
and
WHEREAS,
Franchisor has exclusive ownership of certain trade
names, trademarks, logos, service marks and other
property in connection with the operation of business
and has developed expertise (including confidential
information) and a unique, distinctive and comprehensive
system (the "System") for the establishment and
operation of a franchised business offering:
SAGE AUTO CARE GUARANTEE MANAGMENT® for the promotion
and identification of the mark, SAGE AUTO CARE GUARANTEE
MANAGEMENT® and stylized logo for the sale of products
and services from SAGE AUTO CARE GUARANTEE MANAGEMENT®
businesses and other locations at the discretion of the
licensee (the SAGE AUTO CARE GUARANTEE MANAGEMENT
BUSINESS® and hereinafter referred to as a Franchise
Location or "SAC Business"); and
WHEREAS,
Franchisor has devised a uniform system for the
establishment and operation of an SAC Business,
including a distinctive aesthetic design of trade dress
décor and color scheme; uniform standards,
specifications, and procedures for operations;
procedures for quality control; training and ongoing
operational assistance; advertising and promotional
programs; and other related benefits for use of
Franchisee under the Names and Marks, all of which may
be changed, improved, and further developed by SAC
from time to time; and
WHEREAS,
SAC Businesses identify themselves
System by means of certain trade names, service marks,
trademarks, logos, emblems, trade dress and other
indicia of origin, including but not limited to the mark
“SAGE AUTO CARE GUARANTEE MANGEMENT” and such other
trade names, service marks, trademarks and trade dress
as are now designated (and may hereafter be designated
by SAC in writing) for use in connection with its
System (the "Names and Marks").
WHEREAS,
SAC continues to develop, use, and control the use of
such Names and Marks to identify for the public the
source of services and products marketed there under and
under its System, and to represent the System's high
standards of consistent quality, appearance, and
service.
WHEREAS,
Franchisor has established substantial goodwill and
business value in its Names and Marks, expertise and
System; and
WHEREAS,
Franchisee desires to obtain a franchise from Franchisor
for the right to use the "Names and Marks" and the
expertise for operating an SAC Business and to obtain
the benefits and knowledge of Franchisor's System
including, but without limitation, business design,
operating methods, product preparation, advertising,
sales techniques and materials, signs, personnel
management, control systems, bookkeeping and accounting
methods, and in general a style, method and procedure of
business operation utilizing the Names and Marks as a
Franchisee of Franchisor; and
WHEREAS,
Franchisee recognizes the benefits to be derived from
being identified with and licensed by Franchisor and
Franchisee understands and acknowledges the importance of SAC ’s high
standards of quality, cleanliness, appearance, and
service and the necessity of operating the Business in
conformity with SAC standards and specifications.
NOW, THEREFORE,
in consideration of the foregoing recitals and other
good and valuable consideration, the receipt and
sufficiency of which is hereby mutually acknowledged,
the parties hereto, intending to be legally bound, do
hereby agree as follows:
I. FRANCHISEE'S
ACKNOWLEDGEMENT OF BUSINESS RISK AND
ABSENCE OF
GUARANTEE
Franchisee (and each partner or
shareholder if Franchisee is a partnership or
Corporation or LLC) hereby represents that he or she has
conducted an independent investigation of the
Franchisor's business and System and recognizes that the
business venture contemplated by this Agreement involves
business risks and that its success will depend upon
Franchisee's abilities as an independent
businessperson. Franchisor expressly disclaims the
making of, and Franchisee acknowledges that it has not
received any warranty or guarantee, express or implied,
as to the potential volume, profits or success of the
business contemplated by this Agreement.
II. FRANCHISEE'S
ACKNOWLEDGEMENTS CONCERNING RECEIPT AND THOROUGH
EVALUATION OF AGREEMENT
Franchisee acknowledges having received,
read, and understood this Agreement, including the
Uniform franchise disclosure document and attachments
thereto. Franchisee further acknowledges that Franchisor
has accorded Franchisee ample time and opportunity to
consult with independent legal counsel and other
advisors of its own choosing concerning the potential
benefits and risks of entering into this Agreement.
Franchisee acknowledges that it has received a completed
copy of this Agreement, attachments referred to herein,
and agreements relating hereto, if any, at least seven
(7) days prior to the date on which this Agreement was
executed. Franchisee further acknowledges that it has
received the disclosure document required by the Trade
Regulation Rule of the Federal Trade Commission,
entitled "Information For Prospective Franchisees
Required By The Federal Trade Commission," at least
fourteen (14) days prior to the date on which this
Agreement was executed.
Franchisee acknowledges that it has read and understands
this Agreement, the Attachments hereto, and any
agreements relating thereto, and that Franchisee has
been advised by a representative of SAC to
consult with an attorney or advisor of Franchisee's own
choosing about the potential benefits and risks of
entering into this Agreement prior to its execution.
Franchisee acknowledges that any statements, oral or
written, by SAC or its agents preceding the execution
of this Agreement were for informational purposes only
and do not constitute any representation or warranty by
SAC . The only representations, warranties and
obligations of SAC are those specifically set forth in
the Uniform franchise disclosure document and this
Agreement. Franchisee must not rely on, and the parties
do not intend to be bound by, any statement or
representation not contained therein.
Franchisee acknowledges that SAC will not provide or
designate locations for Franchisee, will not provide
financial assistance to Franchisee, and has made no
representation that it will buy back from Franchisee any
products, supplies or equipment purchased by Franchisee
in connection with the Business.
III. ACTUAL, AVERAGE,
PROJECTED OR FORECASTED FRANCHISE
SALES, PROFITS OR
EARNINGS
The Franchisor does not make or present
and has not prepared “Earning Claims” and has not made
them any as an exhibit to the Uniform franchise
disclosure document. Earnings claims located in the
Uniform franchise disclosure document are the only
statement of sales, profits or earnings that the
Franchisee should rely upon.
Franchisee, and each party executing
this document hereto, acknowledges that SAC , itself or
through any officer, director, employee or agent, has
not made, and Franchisee has not received or relied
upon, any oral or written, visual, express or implied
information, representations, assurances, warranties,
guarantees, inducements, promises or agreements
concerning the actual, average, projected or forecasted
franchise sales, revenues, profits, earnings or
likelihood of success that Franchisee might expect to
achieve from operating the Business, except as set forth
in the Franchise Offering Circular reviewed by
Franchisee or its representatives.
IV. INDEPENDENT
CONTRACTOR
A. Franchisee is an Independent Contractor
During the term of this
Agreement, and any renewals or extensions hereof,
Franchisee shall hold itself out to the public as an
independent contractor operating its business pursuant
to a franchise from the Franchisor. Franchisee agrees
to take such affirmative action as may be necessary,
including, without limitation, exhibiting multiple
public notices of that fact, the content and display of
which Franchisor shall have the right to specify. For
example, such notices shall be provided on letterhead,
business cards, bank account names, bank checks, and
signs at the place of business.
B.
Franchisor Is Not In A Fiduciary Relationship
With
Franchisee
It is understood and
agreed by the parties hereto that this Agreement does
not establish a fiduciary relationship between them, and
that nothing in this Agreement is intended to constitute
either party an agent, legal representative, subsidiary,
joint venture, partner, employee, or servant of the
other for any purpose whatsoever.
It is understood and
agreed that nothing in this Agreement authorizes
Franchisee, and Franchisee shall have no authority, to
make any contract, agreement, warranty, or
representation on behalf of SAC , or to incur any debt
or other obligation in SAC ’s name; and that SAC shall
in no event assume liability for, or be deemed liable
hereunder or there under as a result of any such action;
nor shall SAC be liable by reason of any act or
omission of Franchisee in its conduct of the Business or
for any claim or judgment arising there from against
Franchisee or SAC .
V. FRANCHISE GRANT
Franchisor hereby grants to Franchisee,
upon the terms and conditions herein contained and
subject to the License Agreement, the right, license,
and privilege, and Franchisee hereby accepts a franchise
under the terms and conditions set forth herein for the
right to operate a Business at the Location set forth in
Section VI. (the "Accepted Location"), providing only
our Premium Interior Reconditioning Services or other
reconditioning services that we introduce and/or
explicitly grant permission, with the right to use
solely in connection therewith the Franchisor's Names
and Marks, its advertising and merchandising methods,
and Franchisor's System, as they may be changed,
improved and further developed from time to time only at
the Accepted Location as set forth in Section VI. and
provided the Franchisee shall adhere to the terms and
conditions hereof.
VI. EXCLUSIVE AREA OR
TERRITORY
The
Franchise Location(s) shall be: within the State of
__________________in the county(s) of
__________________________
And in the Territory Boundaries described below (See
Item 12):
______________________________________________________________
The exact accepted office location is:
_________________________________________________________________
If accepted location is not selected prior to the
signing of this agreement, by the parties, then it shall
be entered at a later date, under the terms of this
agreement.)
Franchisee shall not relocate the Business Office
without the express prior written consent of SAC .
During the term of this Agreement, SAC shall not
establish, nor license another party or entity to
establish, an SAC Business within your Territory.
VII. TERM AND RENEWAL OF
AGREEMENT
A. Term
The Franchise herein
granted shall be for a term of TEN (10) years from the
date of execution and acceptance (the "Effective Date")
of this Franchise Agreement (the "Agreement") by SAC
and subject to earlier termination as herein
provided.
B. Renewal
Franchisee may, at its
option, renew this Franchise for two (2) additional
periods of TEN (10) years, if Franchisor
is still offering franchises at that time, and further
subject to the following conditions, all of which must
be met prior to renewal:
1. Franchisee shall give the Franchisor
written notice of its election to renew not less than
six (6) months prior to the end of the then current
term;
2. Franchisee must not be in default under
any provision of the Agreement, any amendment hereof or
successor hereto, or any other agreement between
Franchisor and Franchisee, and Franchisee shall have
complied with all the terms and conditions of all such
agreements during the terms thereof;
3. Franchisee shall complete to Franchisor's
satisfaction such maintenance and renovation of the
Business as Franchisor may reasonably require in
writing;
4. Franchisee shall have satisfied all
monetary obligations owed by Franchisee to Franchisor
and its affiliate, and shall have timely met these
obligations throughout the previous term;
5. Franchisee shall execute, before the
renewal term, the Franchisor's then-current form of
Agreement, which agreement shall supersede this
Agreement in all respects, and the terms of which may
differ from the terms of this Agreement. Franchisor
shall charge Franchisee a renewal fee of Two Thousand
Dollars ($2,000) for each territory granted to you under
this agreement, which is due and payable upon signing
our then current Franchise Agreement and will be
nonrefundable under all circumstances once paid;
6. Franchisee shall comply with Franchisor's
then current qualification and training requirements;
and
7. Franchisee must execute a general
release, in a form prescribed by Franchisor, of any and
all claims against Franchisor and its affiliate, and
their respective officers, directions, agents and
employees, if such release is not in conflict with any
local, state or federal laws.
VIII. FRANCHISEE'S INITIAL
INVESTMENT
The Franchisee's initial investment will
vary depending upon the size of the Business, its
geographical location, leasehold improvements required,
the number of Businesses selected by the Franchisee, and
other factors.
Franchisee hereby certifies that he or
she has reviewed the above-estimated start-up costs as
detailed in the Uniform franchise disclosure document
and has sufficient cash resources available to meet said
expenses. These start-up costs are in addition to the
franchise fee.
IX. FRANCHISEE'S INITIAL
FRANCHISE FEE AND TERRITORY FEES
A. Initial Franchise Fee
By executing this
Agreement, you agree to become a Franchisee and pay an
initial franchise fee in the amount of TWENTY THOUSAND
DOLLARS ($20,000) for a single SAC Business Franchise
the "Initial Franchise Fee," which is due upon execution
of this Agreement and receipt of which is hereby
acknowledged by SAC . The Initial Franchise Fee shall
be paid in a lump sum in U.S. funds and shall be deemed
fully earned and nonrefundable in consideration of
administrative and other expenses incurred by SAC in
granting this franchise and for lost or deferred
opportunity to franchise others.
B.
Territory Fees
You must pay us a
territory fee (“Territory Fee”) of $ 30,000 for each
Territory. The Territory Fee is payable in a lump sum
when you sign the Franchise Agreement. If you purchase
two or more territories when you sign the Franchise
Agreement, the Territory Fee for each additional
territory is reduced to $ 15,000.
See Item 12.
Territory Fees under Franchise
Agreements are uniform and fully earned when paid and
are not refundable under any circumstances, except as
provided below. If we determine that you (or your
managing owner) cannot satisfactorily complete initial
training, we may terminate the Franchise Agreement and
your Territory Fee will be fully refundable minus any
costs incurred in the sale of your franchise. Those
costs may include, but are not limited to, any
commissions to sales agents or brokers, travel expenses,
marketing costs or lost revenue opportunities. We will
return your Territory Fee to you, minus costs, if you
sign our required form of release of claims.
C. Time
Limit for Approving Franchisee
Franchisor, within thirty
(30) days of payment of the Initial Franchise Fee
provided in Section IX.C. Above, will approve or
disapprove the Franchisee's application for a
franchise. If Franchisee is disapproved, the fee
provided in Section IX.A. Above will be refunded in
full.
D. Time Limit for Starting Business
Franchisee shall
commence operations on the first business day
immediately following the day initial training as
described in Section XX of this agreement has been
completed. The Business shall operate uninterrupted
from the day of commencement.
It is understood and
agreed that, except as expressly provided herein, this
franchise is non-exclusive and includes no right of
Franchisee to sub franchise.
E.
Cooperation Required
Franchisee shall
cooperate reasonably with Franchisor to ensure that the
various actions occur which are necessary to obtain
acceptance by Franchisor of the Business Office
location. In particular, Franchisee shall furnish any
pertinent information as may be reasonably requested by
Franchisor regarding Franchisee's business and finances.
X. OTHER FEES
Base Royalty Fees
In addition to the Initial Franchise Fee described in
Item IX above, the following recurring or isolated
payments are required to be made by the Franchisee. The
Franchisee pays to SAC a Base Royalty Fee of EIGHT
Percent (8%) on total Gross Sales of the Franchised
Business.
As used in this Agreement, "Gross Sales" shall include
all revenue accrued from the sale of all products and
performance of services in, at, upon, about, through or
from the Business, whether for cash or credit and
regardless of collection in the case of credit, and
income of every kind and nature related to the Business
including insurance proceeds and/or condemnation awards
for loss of sales, profits or business; provided,
however, that "Gross Sales" shall not include revenues
from any sales taxes or other add on taxes collected
from customers by Franchisee for transmittal to the
appropriate taxing authority, and the amount of cash
refunds to, provided such amounts have been included in
gross sales. The sale and delivery of products and
services away from the Business is by written approval
of SAC only. Should SAC approve such sales
in writing, these sales will be included in computing
Gross Sales.
The Royalty Fee is
uniform as to all persons currently acquiring a
Franchise, nonrefundable, and is not collected on behalf
of nor paid to any third party. The Franchisee shall
participate in our electronic funds transfer program by
which all monthly royalty payments for the immediately
preceding month and other payments and fees owed to us
under this Agreement, including all required product and
supply purchases will be automatically deducted from
your specified bank account by us on the 20th
day of each month or the day designated by us (the “Due
Date”). Before the Commencement Date, you must sign and
return to us and your bank, all documents necessary to
effectuate this program. You must notify us immediately
of any change in your banking relationship, including
changes in account numbers. We reserve the right to
require you to submit all payments due to us under this
Agreement in the form and manner we prescribe. No later
than the due date of each month, you must report to us
by electronic means or in written form, as may be
reasonably directed by us, in a manner more fully
described in Section XIV Part C below, with such
information and pursuant to such standard transmittal
procedures regarding your Gross Sales and such
additional information as we reasonably request. We
reserve the right, with 60 days prior written notice, to
require Royalty payments are to be made on a semimonthly
or weekly basis, at our sole discretion. We have the
right to reasonably verify such Royalty payments from
time to time, as we deem necessary.
Any payment or
report not actually received by SAC on or before the
specified date shall be deemed overdue. If any payment
is overdue, in addition to the right to exercise all
rights and remedies available to SAC under this
Agreement, Franchisee shall pay SAC , in addition to
the overdue amount, a penalty of $50 per month plus
interest on such amount from the date it was due until
paid at the lesser of the rate of eighteen (18%) percent
per annum and the maximum rate allowed by the laws of
the State in which Franchisee’s business is located or
any successor or substitute law (hereinafter the
"Default Rate"), until paid in full. Franchisee
acknowledges we have the right to require timely payment
and any previous forbearance shall not obligate us to
offer any further forbearance. Such late charges shall
be assessed monthly for each Royalty and other amounts
due and SAC will have the right to immediately debit
such amounts from your bank account.
Notwithstanding any
designation by you, we shall have sole discretion to
apply any of your payments to any of your past due
indebtedness to us our affiliates and/or System
Suppliers as are referenced in Section II, A, 4. You
acknowledge that we have the right to set off any
amounts we may owe to you against any amounts you may
owe to us.
XI. FINANCING
ARRANGEMENTS
Franchisee hereby acknowledges that
financing is the responsibility of the Franchisee. The
Franchisor does not finance or guarantee the obligations
of the Franchisee. The Franchise Fee is due and payable
upon execution of this Agreement and as set forth in
Section IX.C. of this Agreement.
There are no waivers of defense by the
Franchisee in either the Franchise Agreement or other
documents evidencing obligations to the Franchisor.
XII. GENERAL OBLIGATIONS
OF FRANCHISEE
A. Follow Operations Manual and Directives
of
Franchisor
Franchisee agrees that
use of Franchisor’s System and adherence to the
Operations Manual (the "Manual"), and to Franchisor's
standardized design and specifications for decor of the
Business and uniformity of equipment, layouts, signs,
and other incidents of the Business, are essential to
the image and goodwill thereof. Franchisee shall
cooperate and assist Franchisor with any customer or
marketing research program which Franchisor may
institute from time to time. Franchisee's cooperation
and assistance shall include, but not be limited to, the
distribution, display and collection of customer comment
cards, questionnaires, and similar items. In order to
further protect the System and the goodwill associated
therewith, Franchisee shall:
1. Operate the Business and use the
Operations Manual solely in the manner prescribed by
Franchisor;
2. Comply with such requirements respecting
any service mark, trade name, trademark, or copyright
protection and fictitious name registrations as
Franchisor may, from time to time, direct;
3.
Follow the methods of preparation, service,
and presentation so as to conform to the specifications
and standards of Franchisor in effect from time to time;
4. Use only such supplies, equipment, and
products so as to conform to Franchisor's specifications
in effect from time to time; which means that SAC may
establish business relationships, from time to time,
with suppliers who may produce, among other things,
certain furnishings, supplies, fixtures, equipment,
products and inventory according to our proprietary
standards and specifications or private label goods that
we have authorized and prescribed for sale by System
franchisees (“System Suppliers”). You recognize that
System Suppliers are essential to the operation of the
SAC Business and to the System generally. You further
recognize that your failure to pay System Suppliers may
interfere with such suppliers’ willingness to supply the
System, which may result in other System franchisees’
inability to obtain product or ability to obtain product
only on less favorable price or credit terms.
Accordingly, you agree to pay system Suppliers when
due. SAC reserves the right to make
payment to the system Supplier for any and all amounts
deemed by us to be in default on your behalf. The
amount paid on your behalf will then be treated as
amounts past due to us and will be treated in accordance
with Section X of this agreement.
5. Sell from the Business all products and
services specified by Franchisor and not sell or offer
for sale any other products of any kind or character
without first obtaining the express approval of
Franchisor, which shall be at the full discretion of the
Franchisor who shall have the sole right of decision in
regards to all products to be sold in the Franchise
Business. Franchisor shall have the right to not approve
any product for any reason whatsoever or for no reason
whatsoever.
6. Discontinue selling or offering for sale
or using any products Franchisor may, in its absolute
discretion, delete from its standards and
specifications for any reason whatsoever or for no
reason whatsoever.
7. Maintain in sufficient supply, and use at
all times, only such products, materials, supplies,
ingredients, methods of preparation and service, weight
and dimensions of products served, standards of
cleanliness, health and sanitation and methods of
service as conform to SAC standards and
specifications; and to refrain from deviating there from
by using non-conforming items or methods without SAC
prior written consent.
9. Purchase such equipment, supplies, or
products as may be required by SAC , for the
appropriate handling and selling of any services and
products that become approved for offering in the
System.
10. Require clean uniforms conforming to such
specifications as to color, design, etc. as Franchisor
may designate, from time to time, to be worn by all of
Franchisee's employees at all times while in attendance
at the Business, and to cause all employees to present a
clean, neat appearance and render competent and
courteous service to customers, as may be further
detailed in the Manual.
11. Permit SAC or its agents, at any
reasonable time, to remove from the Business samples of
item without payment therefore, in amounts reasonably
necessary for testing by SAC or an independent
laboratory to determine whether said samples meet SAC
’s then-current standards and specifications. In
addition to any other remedies it may have under this
Agreement, SAC requires Franchisee to bear the cost of
such testing if the supplier of the item has not
previously been approved by SAC , or if the sample
fails to conform to SAC specifications.
12. Not to install or permit to be installed on
or about the Business premises and/or vehicle, without
our prior written consent, any fixtures, furnishings,
signs, equipment, or other improvements not previously
approved as meeting SAC standards and
specifications.
13. Employ a sufficient number of employees and
maintain sufficient inventories as necessary to operate
the Business at its maximum capacity as prescribed or
approved by SAC and to comply with all applicable Laws
with respect to such employees.
14. Not engage in any trade
practice or other activity or sell any product or
literature which Franchisor determines to be harmful to
the goodwill or to reflect unfavorably on the reputation
of Franchisee or SAC the Business, or the products
sold thereat; or which constitutes deceptive or unfair
competition, or otherwise is in violation of any
applicable laws. The above limitations are closely
related to the business image, purpose and marketing
strategy of the System, and therefore any change there
from would fundamentally change the nature of the
business.
B. Operate
Franchised Business Only
Franchisee shall use the
System and the Names and Marks provided to Franchisee by
Franchisor for the operation of the Business and shall
not use them in connection with any other line of
business or any other activity. Neither Franchisee, nor
any of its employees, may conduct any business at the
Business other than that authorized pursuant to this
Agreement, without the prior written approval of
Franchisor. Neither Franchisee, nor any of its
employees, may engage in the performance or delivery of
any other automotive reconditioning services or
businesses without the expressed written consent or
approval of SAC . Neither Franchisee, nor any of its
employees, may conduct any activity at the Business or
in connection therewith which is illegal or which could
result in damage to the Names and/or Marks or the
reputation and goodwill of Franchisor.
C. Comply
With Laws
Franchisee shall comply
with all federal, state and local laws and regulations,
and shall obtain and at all times maintain any and all
permits, certificates, or licenses necessary for full
and proper operation of the Business franchised under
this Agreement. Franchisor’s standards may exceed any
and all of the requirements of said laws.
D.
Maintain Confidentiality of Proprietary
Information
Neither Franchisee nor
any of its partners, officers, directors, agents, or
employees shall, except as required in the performance
of the duties contemplated by this Agreement, disclose
or use at any time, whether during the terms of this
Agreement or thereafter, any information disclosed to or
known by Franchisee or any such person as a result of
this Agreement. Such information, includes, but shall
not be limited to, information conceived, originated,
discovered, or developed by Franchisee or by any
employee of Franchisee which is not generally known in
the trade or industry about Franchisor's products,
services, or licenses, including information relating to
discoveries, ideas, manufacturing, purchasing,
accounting, engineering, marketing, merchandising or
selling.
E.
Maintain and Renovate Business
Franchisee shall at all
times maintain the Business and/or business vehicle in a
clean, orderly condition and in first class repair and
condition in accordance with all maintenance and
operating standards set forth in the Manual. Franchisee
shall make, at Franchisee's expense, all additions,
repairs, replacements improvements and alterations that
may be determined by Franchisor to be necessary so that
the facilities which are viewed by the public will
conform to the System's image, as may be prescribed by
Franchisor from time to time. Franchisee shall
undertake and complete such additions, repairs,
replacements, improvements and alterations within the
time and under the terms and conditions which may be
reasonably specified by Franchisor.
F.
Maintain Competent Staff
Franchisor will create
and make available to Franchisee training programs and
other selected training materials, as Franchisor deems
appropriate. Franchisee shall maintain a fully trained
competent staff capable of rendering courteous quality
service in a manner in keeping with the standards set by
Franchisor.
G. Open
Business Within Time Limit
You must commence
operations of your SAC Business on the business day
immediately following the completion of the initial
training program as described in Time is of the
essence. Prior to opening, Franchisee shall complete to
Franchisor's satisfaction all preparations and training
concerning the SAC Business, in accordance with
specifications set forth in the Manual, and as required
by local governmental agencies, including the
installation of fixtures, furnishings, and equipment and
the acquisition of supplies and inventory.
H. Operate
Business in Strict Conformity to
Requirements
Franchisee shall operate
the Business in strict conformity with such standards,
techniques, and procedures as Franchisor may from time
to time prescribe in the Manual, or otherwise in
writing, and shall not deviate there from without
Franchisor's prior written consent. Franchisee further
agrees to offer its customers all products and services
which Franchisor may, from time to time, prescribe, to
offer its customers only those products and services
which meet Franchisor's standards of quality and which
Franchisor has approved in writing to be offered in
connection with the Business's operations, and to
discontinue offering any products or services which
Franchisor may, in its sole discretion, disapprove in
writing at any time.
I. Use
Approved Supplies and Products
1. Franchisee shall sell, serve, or
otherwise dispense, only "SAC /SAGE AUTO CARE GUARANTEE
MANGEMENT" items and related products which may, from
time to time, be specified in writing, designated, and
approved for sale by Franchisor. The proprietary
products listed in the operations manual are developed
by Franchisor. The "Proprietary Products" developed by
Franchisor are the only products approved for use by
Franchisee. The "Proprietary Products" must be
purchased by the Franchisee directly from SAC , unless
SAC makes other arrangements which shall be given to
Franchisee in writing such as an approved supplier that
may purchase the products from the Franchisor and resell
them to the Franchisee.
2. To insure the consistent high quality and
uniformity of products and services offered by "SAC
Businesses", Franchisee shall purchase all equipment,
inventory, and other supplies, products, and materials
used in the operation of "SAC Businesses” as
Franchisor may specify from time to time, solely from
suppliers who demonstrate to Franchisor's continuing
satisfaction an ability to meet Franchisor's standards
and specifications. In approving any supplier,
Franchisor may consider factors such as the supplier's
financial strength, quality control, and capacity to
supply Franchisee's needs promptly and reliably. All
suppliers must be approved in writing by Franchisor and
not thereafter disapproved. If Franchisee desires to
purchase the items from an unapproved supplier,
Franchisee shall submit to Franchisor a written request
for such approval. Franchisor shall have the right to
require, as a condition of its approval and review, that
its representatives be permitted to inspect the
facilities of the proposed supplier and that the
proposed item be delivered to Franchisor or its designee
for testing. The cost of such inspection and testing
shall be paid by Franchisee or supplier, and Franchisor
shall not be liable for damage to or for the return of
any sample. Franchisor reserves the right to re-inspect
the facilities and to retest the product of any approved
supplier and to revoke any approval if the supplier
fails to continue to meet Franchisor's high standards.
3. Franchisor reserves the right to require
Franchisee to purchase designated proprietary items and
products, and products bearing the Names and Marks, as
specified in the Manual from time to time, from
Franchisor or its related or affiliated entities or from
sources designated or approved by Franchisor, to the
extent permitted by law.
J. Use
Approved Equipment
In operating the
Business, Franchisee shall install equipment, signs,
furnishings, supplies and fixtures in accordance with
the standards and specifications recommended by
Franchisor or that will continue to be recommended by
Franchisor.
K. Use
Approved Signs
Franchisee shall
purchase or lease such signs that provide maximum
displays of the Names and Marks of Franchisor, primarily
in the form of graphic displays on the vehicle(s) used
in your SAC Business. Upon renewal of this Agreement,
Franchisee shall be totally responsible for obtaining
and equipping the Business with the signage that is
approved for use by Franchisor at the time of the
renewal of this Agreement. The color, size, design and
location of said signs shall be as specified and/or
approved by SAC . Franchisee shall not place
additional signs, posters or other décor items in, on or
about the Accepted Location without the prior written
consent of SAC .
L. Use
Approved Uniforms
Franchisee may require
its employees to wear uniforms while working at the
Business and such uniforms shall be of such design and
color as Franchisor may prescribe from time to time, as
set forth in the Manual.
M. Maintain
Regular Business Hours
Franchisee shall keep
the Business open and in normal operation during normal
business hours for its geographical region, for at least
FIVE (5) days per week, FIFTY-TWO (52) weeks per year.
Being that we are a subscription-based business, it is
essential that a consistent schedule be maintained.
Observance of national holidays is acceptable according
to the schedules of your customer base. Such minimum
hours and days of operation may be changed as SAC may
from time to time specify in the Manual.
N.
Maintain Uniform Operating Standards
Franchisee understands
and acknowledges that every detail of the design and
operation of the Business is important to Franchisee,
Franchisor and other franchisees in order to develop and
maintain uniform operating standards, to increase the
demand for the products and services sold by the
Business under the System, and to protect Franchisor's
reputation and goodwill.
O.
Telephone Number of Business
Franchisee understands
and agrees that the telephone number(s) for the Business
constitute a part of the System and is subject to the
restrictions of this Agreement. Accordingly, Franchisee
shall not change the telephone number(s) for the
Business without prior notice and written approval by
Franchisor. Franchisee shall advertise and publicize
the telephone number(s) for the Business in the manner
prescribed by Franchisor.
P.
Disclose Discoveries and Ideas to Franchisor
Franchisee shall
promptly disclose to Franchisor all discoveries,
inventions or ideas, whether patent able or not,
relating to Franchisor's business, which are conceived
or made by Franchisee or any partner, officer, director,
agent, or employee of Franchisee solely or jointly with
others, during the term of this Agreement, whether or
not Franchisor's facilities, materials, or personnel are
utilized in the conception or making of such discoveries
or ideas. Franchisee hereby acknowledges and agrees
that all such discoveries, inventions or ideas are the
exclusive property of Franchisor, and that Franchisor
shall have no obligation to Franchisee with respect
thereto. The purpose of this clause is to ensure that
ideas for improvements to the System that may be
generated by franchisees within the System will be
distributed to the other franchisees as a benefit of
belonging to the System.
Q. Permit
Franchisor to Enter Business
Franchisee shall permit
Franchisor and its agents or representatives to enter
the Business at any reasonable time for the purpose of
conducting inspections, shall cooperate fully with
Franchisor's representatives in such inspections by
rendering such assistance as they may reasonably
request, and, upon notice from Franchisor or its agents,
and without limiting Franchisor's other rights under
this Agreement, shall take such steps as may be deemed
necessary to immediately correct any deficiencies
detected during such inspections. In the event
Franchisee fails or refuses to correct immediately any
deficiency detected during such inspection, Franchisor
shall have the right to make or cause to be made such
changes as may be required, at the expense of
Franchisee, which expense Franchisee agrees to pay upon
demand. The foregoing shall be in addition to any other
remedies Franchisor may have pursuant to this Agreement.
R.
Additional Requirements for Corporate Franchisee
If Franchisee is or
becomes a corporation, limited or general partnership or
other organization or entity, the following requirements
shall apply:
1. Franchisee shall confine its activities
to the establishment and operation of the Business.
2.
Franchisee's Certificate or Articles of Incorporation
and Bylaws (or comparable governing documents) shall at
all times provide that its activities are confined
exclusively to operation of the Business and that the
issuance, redemption, purchase for cancellation and
transfer of voting stock, or other ownership interest
therein, is restricted by the terms of this Agreement.
Franchisee shall furnish SAC promptly upon request
copies of Franchisee's Articles of Incorporation,
Bylaws, and other governing documents, and any other
documents SAC may reasonably request and any
amendments thereto, from time to time.
3. Franchisee shall maintain a current list
of all owners of record and beneficial owners of any
class of voting stock of Franchisee and shall furnish
such list to Franchisor upon request.
4.
Franchisee shall maintain stop transfer instructions
against the transfer on its record of any equity
securities (voting or otherwise) except in accordance
with the provisions of Article XV. All securities
issued by Franchisee shall bear the following legend,
which shall be printed legibly and conspicuously on each
stock certificate or other evidence of ownership
interest:
THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE TERMS
AND CONDITIONS OF A FRANCHISE AGREEMENT WITH SAC DATED
. REFERENCE IS MADE TO SAID AGREEMENT
AND TO THE RESTRICTIVE PROVISIONS OF THE ARTICLES AND
BYLAWS OF THIS CORPORATION OR LLC.
5. All shareholders of Franchisee shall
jointly and severally guarantee Franchisee's performance
hereunder and shall bind themselves to the terms of this
Agreement, provided, however, that the requirements of
this Section XII.T. shall not apply to any Corporation
or LLC registered under the Securities Exchange Act of
1934 (hereinafter known as a "Publicly-Held Corporation
or LLC").
6. If
Franchisee is or becomes
a partnership, Franchisee shall furnish SAC promptly
upon request a copy of its partnership agreement and any
other documents SAC may reasonably request, and any
amendments thereto, from time to time.
7. Franchisee shall maintain a current list
of all general and limited partners and all owners of
record and all beneficial owners of any class of voting
stock of Franchisee and shall furnish the list to SAC
promptly upon request, from time to time.
8. Each individual who or entity which holds
a ten percent (10%) or greater ownership or beneficial
ownership interest in Franchisee, directly or
indirectly, (including each individual holding a fifty
(50%) or greater interest in any partnership or
corporation which has a ten percent (10%) or greater
interest in Franchisee) shall enter into a continuing
guaranty agreement under seal, in the form attached
hereto as Exhibit A, as such form may be amended or
modified by SAC , from time to time (if such guaranty
agreement is to be executed subsequent to the date
hereof in accordance with the terms of this Franchise
Agreement).
S. Training
Prior to
Franchisee's opening of the Business to the public,
Franchisee and/or up to two (2) personnel of Franchisee
(or, if Franchisee is a Corporation or LLC or
partnership, a principal of Franchisee) shall complete
to SAC ’s satisfaction our management training program
conducted at our location in Billings, Utah and/or at
another location which we may designate. At SAC ’s
option, key personnel subsequently employed by
Franchisee shall also complete to SAC ’s satisfaction,
the management training program. SAC may, at its
discretion, make available additional training programs,
seminars, as well as refresher courses to Franchisee
and/or Franchisee's designated individual(s) from time
to time. SAC may, at any time, discontinue management
training and decline to certify Franchisee and/or
Franchisee's designated individual(s) who fail to
demonstrate an understanding of the management training
acceptable to SAC . If Franchisee or Franchisee's
designated individual's management training is
discontinued by SAC , Franchisee shall have thirty (30)
days to present an alternative acceptable candidate for
management training to Franchisor. If Franchisee's new
candidate does not adequately complete the management
training, then SAC has the option of terminating this
Agreement. SAC shall provide instructors and training
materials for all required training programs; and
Franchisee or its employees shall be responsible for all
other expenses incurred by Franchisee or its employees
in connection with any training programs, including,
without limitation, the cost of transportation, lodging,
meals, and wages.
T.
Miscellaneous
1.
Franchisee shall give SAC advance written notice of
Franchisee's intent to institute legal action against
SAC , specifying the basis for such proposed action,
and shall grant SAC thirty (30) days from receipt of
said notice to cure the alleged act upon which such
legal action is to be based.
XIII. SPECIFIC OBLIGATIONS OF
FRANCHISEE RELATING TO
INSURANCE
A. Overall Coverage Required
Franchisee shall procure, prior to opening the Business,
and shall maintain in full force and effect during the
term of this Agreement at Franchisee's expense, an
insurance policy or policies protecting Franchisor, and
the officers, directors, partners, and employees of both
Franchisor and Franchisee against any loss, liability,
personal injury, death, property damage, or expense
whatsoever arising or occurring upon or in connection
with operating the Business. Franchisor shall be named
as an additional insured on all such policies.
Prior to the opening
of the Business and thereafter at least thirty (30) days
prior to the expiration of any such policy or policies,
Franchisee shall deliver to SAC certificates of
insurance evidencing the proper coverage with limits not
less than those required hereunder. All certificates
shall expressly provide that not less than thirty (30)
days prior written notice shall be given to SAC in the
event of material alteration to termination,
non-renewal, or cancellation of; the coverage’s
evidenced by such certificates.
B.
Insurance Carrier Must be Approved by Franchisor
Such policy or
policies shall be written by an insurance company rated
A-minus or better, in Class 10 or higher, by Best
Insurance Ratings Service and satisfactory to SAC in
accordance with standards and specifications set forth
in the Manuals or otherwise in writing, from time to
time, and shall include, at a minimum (except as
additional coverage’s and higher policy limits may be
specified by SAC from time to time), the following
initial minimum coverage:
1. (i) Commercial General Liability
Insurance, including coverage for products-completed
operations, contractual liability, personal and
advertising injury, fire damage, medical expenses,
having a combined single limit for bodily injury and
property damage of $1,000,000.00 per occurrence and
$3,000,000.00 in the aggregate plus (ii) non-owned
automobile liability insurance and, if Franchisee owns,
rents or identifies any vehicles with any Names and
Marks or vehicles are used in connection with the
operation of the Business, automobile liability coverage
for owned, non-owned, scheduled and hired vehicles
having limits. All such coverage’s shall be on an
occurrence basis and shall provide for waivers of
subrogation.
2. All-risk property insurance, including
theft and flood coverage (when applicable), written at
replacement cost value covering the building,
improvements, furniture, fixtures, equipment and
inventory. Coverage shall be written in a value which
will cover not less than eighty (80%) percent of the
replacement cost of the building and one hundred (100%)
percent of the replacement cost of the contents of the
building.
3. Employer's Liability and Worker's
compensation Insurance, as required by state law.
4. Garage keepers’ liability with a minimum
limit of $150,000
Franchisee's obligation to obtain and maintain, or cause
to be obtained and maintained, 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 SAC , nor shall Franchisee's performance
of that obligation relieve it of liability under the
indemnity provisions set forth in Section XVIII. of this
Agreement.
C. No
Limitations on Coverage
Franchisee's obligations
to obtain and maintain the foregoing insurance policies
in the amounts specified shall not be limited in any way
by reason of any insurance which may be maintained by
Franchisor, nor shall Franchisee's performance of that
obligation relieve it of liability under the indemnity
provisions set forth in this Agreement. Franchisee may
maintain such additional insurance, as it may consider
advisable.
D.
Franchisee Must Provide Evidence of Coverage to
Franchisor
Upon obtaining the
insurance required by this Agreement and on each policy
renewal date thereafter, Franchisee shall promptly
submit evidence of satisfactory insurance and proof of
payment to Franchisor, together with, upon request,
copies of all policies and policy amendments and
endorsements. The evidence of insurance shall include a
statement by the insurer that the policy or policies
will not be cancelled or materially altered without
giving at least thirty (30) days' prior written notice
to Franchisor.
E.
Franchisor May Procure Insurance Coverage
Should Franchisee, for
any reason, fail to procure or maintain the insurance
required by this Agreement, as described from time to
time by the Manual or otherwise in writing, Franchisor
shall have the right and authority (but no obligation)
to procure such insurance and to charge same to
Franchisee, which charges, together with a reasonable
fee for Franchisor's expenses in so acting, shall be
payable by Franchisee immediately upon notice from
Franchisor.
XIV. SPECIFIC OBLIGATIONS OF
FRANCHISEE RELATING TO
ACCOUNTING AND
RECORDS
A. Bookkeeping, Accounting and Records
Franchisee shall
maintain during the term of this Agreement, and shall
preserve for a minimum of three (3) years, full,
complete accurate records of sales, closeout sheets,
payroll, and accounts payable in accordance with the
standard accounting system described by Franchisor in
the Manual or otherwise specified in writing.
B.
Franchisor's Right to Audit
SAC or its designated agents shall have the right, at
all reasonable times, to examine and copy, at SAC ’s
expense, the books, records, and tax returns of
Franchisee and the Business. SAC shall also have the
right, at any time, to have an independent audit made of
the books of the Business. If an inspection should
reveal that any payments to Franchisor have been
understated in any report to SAC , then Franchisee
shall immediately pay to SAC the amount understated
upon demand, in addition to interest on such amount from
the date such amount was due until paid, at the Default
Rate, calculated on a daily basis. If an inspection
discloses an understatement in any payment to Franchisor
of two percent (2%) or more, Franchisee shall, in
addition, reimburse SAC for any and all costs and
expenses relating to the inspection (including, without
limitation, travel, lodging and wage expenses and
reasonable accounting and legal costs), and, at
Franchisor's discretion, submit audited financial
statements prepared, at Franchisee' expense, by an
independent certified public accountant satisfactory to
SAC . If an inspection discloses an understatement in
any payment to Franchisor of four percent (4%) or more,
such act or omission shall constitute grounds for
immediate termination of this Agreement, as set forth in
Section XXIII. hereof. The foregoing remedies shall be
in addition to any other remedies SAC may have
pursuant to this Agreement and as provided at law and in
equity.
C.
Reporting of Gross Sales
Franchisee shall
purchase, install and operate the latest version of
QuickBooks Pro software on your computer and use it to
prepare financial reports sent to us. You will provide
us with electronic access to the data in your computer
at all times. You shall supply us with weekly gross
sales reports signed by you and in the form and manner
we specify, including, without limitation, a summary of
all monies received during the relevant period, as well
as customer counts and average sales, and such other
additional information which we deem necessary to
properly evaluate your progress on or before the close
of business on Friday of each week. This reporting is
to be received by SAC within FIVE (5) days of the last
day in the reporting cycle. In addition, Franchisee is
required to furnish such other data or information as
SAC may require, from time to time.
D.
Submission of Financial Statements
Franchisee shall, at its
expense, submit to Franchisor, within thirty (30) days
of the end of each calendar quarter during the term of
this Agreement, on forms prescribed by Franchisor, a
financial statement, which may be unaudited, for the
preceding quarter, including both an income statement
and balance sheet. Each financial statement shall be
signed by Franchisee or by Franchisee's Treasurer or
Chief Financial Officer, attesting that the statement is
true and correct. Franchisee shall also, at its
expense, submit to Franchisor within sixty (60) days of
the end of each fiscal year of Franchisee during the
terms of this Agreement, a complete financial statement
for said fiscal year, including, without limitation,
both an income statement and balance sheet, which may be
unaudited, together with such other information in such
form as Franchisor may require. Franchisee shall also
submit to Franchisor the current financial statement and
other forms, records, reports, information, and data as
Franchisor may reasonably designate, in the form, and at
the times and the places reasonably required by
Franchisor, upon request, and as specified from time to
time in the Manual or otherwise in
writing
E.
Accounting Equipment
Franchisee shall follow
and adhere to the daily accounting and reporting
procedures as required by SAC , from time to time, and
shall purchase and/or acquire accounting and reporting
equipment including, but not limited to, the latest
version of QuickBooks Pro, a computer with the required
capabilities to efficiently run such programs and allow
SAC to remotely connect and log on via the internet to
inspect the records contained within.
XV. SPECIFIC OBLIGATIONS
OF FRANCHISEE RELATING TO
USES OF NAMES AND
MARKS
A. Names
and Marks are Owned by Franchisor
Franchisor warrants with
respect to the proprietary Names and Marks that:
1.
Pursuant to a license agreement originally dated July 27th,
2009 between SAC and SAGE AUTO CARE, LLC a UTAH
corporation, SAC has been granted the exclusive right
to use the Names and Marks to establish SAGE AUTO CARE
GUARANTEE MANAGEMENT® in the United States.
2. Franchisor is taking and will take such
steps as are reasonably necessary to preserve and
protect the ownership and validity of such Names and
Marks; and
3. Franchisor will use and permit Franchisee
and other franchisees to use the Names and Marks with
the System and standards attendant thereto, which
underlie the goodwill associated with and symbolized by
the Names and Marks.
B.
Franchisee is Licensed to Use Names and Mark
With respect to
Franchisee's franchised use of the Names and Marks
pursuant to this Agreement, Franchisee agrees that:
1. Franchisee shall use only the Names and
Marks as are approved in writing by Franchisor for
Franchisee's use, and shall use them only in the manner
authorized and permitted by Franchisor and that in any
use whatsoever of the Names and Marks of Franchisor that
the Names and Marks are identified as being registered
to or owned by Franchisor;
2. Franchisee shall use the Names and Marks
only in connection with the operation of the Business
and in advertising for the Business conducted at or from
the Accepted Location;
3. Franchisee shall use and display, as
Franchisor may require in the operation of the Business,
a notice in the form approved by Franchisor indicating
that Franchisee is a "Franchised Operator" under the
System and that the Names and Marks are used by
Franchisee under such Franchise;
4. Unless otherwise authorized or required
by Franchisor, Franchisee shall operate and advertise
the Business under the Name and Mark "SAGE AUTO CARE
GUARANTEE MANAGEMENT®";
5. Franchisee's right to use the Names and
Marks is limited to such usages as are authorized under
this Agreement, and any unauthorized use thereof shall
constitute an infringement of Franchisor's rights;
6. Franchisee shall not use the Names and
Marks to incur any obligations or indebtedness on behalf
of Franchisor;
7. Franchisee shall not use the Names and
Marks or any part thereof as part of its corporate or
other legal name;
8. Franchisee shall comply with Franchisor's
instructions in filing and maintaining the requisite
trade name or fictitious name registration, and shall
execute any documents deemed necessary by Franchisor or
its counsel to obtain protection for the Names and Marks
or to maintain their continued validity and
enforceability; and
9. In the event any litigation involving the
Names and Marks is instituted or threatened against
Franchisee, Franchisee shall promptly notify Franchisor
and shall cooperate fully with Franchisor in defending
such litigation.
10. During
the term of this Agreement and any renewal hereof,
Franchisee shall identify itself as the owner of the
Business in conjunction with any use of the Names and
Marks, including, but not limited to, on invoices, order
forms, receipts, and contracts, as well as at such
conspicuous locations on the premises of the Business as
SAC may designate in writing. The form and content of
such identification shall comply with standards set
forth in the Manual.
C.
Franchisee Will Not Challenge Franchisor's Rights
In
Its Names and Marks
Franchisee expressly understands and
acknowledges that:
1. As between the parties hereto, Franchisor
is the owner of all right, title, and interest in and to
the Names and Marks and the goodwill associated with and
symbolized by them;
2. The Names and Marks are valid and serve
to identify the System and those who are franchised
under the System;
3. Franchisee shall not directly or
indirectly contest the validity or the ownership of the
Names and Marks;
4. Franchisee's use of the Names and Marks
pursuant to this Agreement does not give Franchisee any
ownership interest or other interest in or to the Names
and Marks, except the non-exclusive Franchise granted
herein;
5. Any goodwill arising from Franchisee's
use of the Names and Marks in its Business under the
System shall inure solely and exclusively to
Franchisor's benefit, and upon expiration or termination
of this Agreement and the Franchise herein granted, no
monetary amount shall be assigned as attributable to any
goodwill associated with Franchisee's use of the System
or the Names and Marks;
6. Franchisor reserves the right to
substitute different Names and Marks for use in
identifying the System, the Business and other
franchised businesses operating there under; and
7. Franchisee hereby agrees not to register
or attempt to register the Names and Marks in
Franchisee's name or that of any other firm, person or
corporation.
8. The
right and license of the Names and Marks granted
hereunder to Franchisee is nonexclusive, and SAC thus
has and retains the rights, among others:
a. To use the Names and
itself in connection with selling products and services;
b. To grant other licenses for the Names and
Marks, in addition to those licenses already granted to
existing franchisees; and
c. To develop and establish other systems
using similar Names and Marks, or any other proprietary
marks, and to grant licenses or franchises thereto at
any location(s) whatsoever without providing any rights
therein to Franchisee.
9.
Franchisee understands and acknowledges that Franchisor
has the unrestricted right to engage, directly or
indirectly, through its or their employees,
representatives, licensees, assigns, agents and others,
at wholesale, retail and otherwise, in the production,
distribution and sale of products bearing the Names and
Marks licensed hereunder or other names or marks,
including without limitation, products included as part
of the System. Franchisee shall not under any
circumstances engage in any wholesale trade or sale of
System products for resale.
XVI. SPECIFIC OBLIGATIONS OF
THE FRANCHISEE RELATING TO
CONFIDENTIALITY OF
PROPRIETARY INFORMATION
A. Franchisee Will Learn Proprietary
Matters
Franchisee acknowledges
that he or she will obtain knowledge of proprietary
matters, techniques and business procedures or
Franchisor that are necessary and essential to the
operation of the Business, without which information
Franchisee could not effectively and efficiently operate
such business, including, without limitation, knowledge
regarding the System, the layout of the Business and the
Manual. Franchisee further acknowledges that such
proprietary information was not known to Franchisee
prior to execution of this Agreement and that the
methods of Franchisor are unique and novel to the
System. As used herein, "Proprietary Information" shall
mean confidential information concerning:
1. Persons, corporations or other entities
which are have been or become Franchisees of the System
and any investors therein;
2. Persons, corporations or other entities
which are have been or become customers of the Business;
3. The terms of and negotiations relating to
past or current Franchise Agreements with respect to the
System;
4. The operating procedures of the System,
including without limitation: distinctive management,
bookkeeping and accounting systems and procedures,
advertising, promotional and marketing methods,
personnel hiring and training procedures, the
manufacturers, suppliers and uses of equipment, and
lists of vendors and suppliers;
5. The economic and financial
characteristics of the System and Franchisees, including
without limitation: pricing policies and schedules,
profitability, earnings and losses, and capital and debt
structures;
6. The services and products offered to
customers of Businesses, including, without limitation,
the scope of services performed and services refused;
and
7. All documentation of the information
listed in Sections XVI.A.1. through XVI.A.7. hereof,
including, without limitation, the Manual. During the
term of this Agreement and for a period of five (5)
years following the expiration or termination of this
Agreement, Franchisee agrees not to divulge, directly or
indirectly, any Proprietary Information, without the
prior written consent of Franchisor. Nothing contained
herein shall be construed so as to require Franchisor to
divulge any secret processes, formulas, or the like.
B.
Franchisee's Employees Will Not Disclose
Proprietary Information
The Franchisee may
disclose Proprietary Information only to such of its
employees, agents and representatives as must have
access to it in order to operate the Business.
Franchisee shall obtain from each such employee,
representative or agent, an agreement that such person
shall not during the course of his employment,
representation, or agency with Franchisee, or for a
period of five (5) years thereafter, use, divulge,
disclose or communicate, directly or indirectly, in any
form or manner, to any person, firm or corporation, any
of the Proprietary Information of Franchisor.
C.
Injunctive Relief is Available to Franchisor
Franchisee acknowledges
that any failure to comply with the requirements of this
Section XVI will cause Franchisor irreparable injury,
and Franchisor shall be entitled to obtain specific
performance of, or an injunction against any violation
of, such requirements; Franchisee waives any
requirements for the posting of any bond(s) relating
thereto. Franchisee agrees to pay all court costs and
reasonable attorneys' fees incurred by Franchisor in
obtaining specific performance of, or an injunction
against, violation of requirements of this Section XVI.
The foregoing remedies shall be in addition to any other
legal or equitable remedies which Franchisor may have.
D.
Franchisor's Patent Rights and Copyrights
Franchisor does not
currently own rights in or to any patents that are
material to the Franchise but may elect to do so in the
future. However, Franchisor intends to obtain copyright
protection for the Manual and certain marketing, sales,
and operations literature. Furthermore, Franchisor
claims rights to certain trade secrets and confidential
information as discussed above.
XVII. SPECIFIC OBLIGATIONS OF
FRANCHISEE RELATING TO
TAXES, PERMITS AND
LAWSUITS
A. Franchisee Must Notify Franchisor of
Lawsuits
Franchisee shall notify
Franchisor in writing within five (5) days of notice of
the commencement of any action, suit, or proceeding
against Franchisee, and of the issuance of any inquiry,
subpoena, order, writ, injunction, award or decree of
any court, agency, or other governmental
instrumentality, which arises out of, concerns, or may
affect the operation or financial condition of the
Business, including, without limitation, any criminal
action or proceedings brought by Franchisee against its
employees, customers, or other persons.
B.
Franchisee Must Comply With Laws
Franchisee shall, at
Franchisee's expense, comply with all federal, state and
local laws, rules, regulations and ordinances and shall
timely obtain and shall keep in force as required
throughout the term of this Agreement all permits,
certificates and licenses necessary for the full and
proper conduct of the Business, including, without
limitation, any required permits, licenses to do
business, fictitious name registrations, sales tax
permits, and fire clearances.
C.
Franchisee Must Pay Taxes Promptly
Franchisee shall
promptly pay when due all taxes levied or assessed,
including, without limitation, unemployment and sales
taxes, and all accounts and other indebtedness of any
kind incurred by Franchisee in the conduct of the
Business. Franchisee shall pay Franchisor an amount
equal to any sales tax, gross receipts tax or similar
tax imposed on Franchisor with respect to any payments
to Franchisor required under this Agreement, unless tax
is credited against income tax otherwise payable by
Franchisor.
D.
Franchisee May Contest Tax Assessments
In the event of any bona
fide dispute as to any liability for taxes assessed or
other indebtedness, Franchisee may contest the validity
or the amount of the tax or indebtedness in accordance
with procedures of the taxing authority or applicable
law. However, in no event shall Franchisee 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 Business, or any improvements
thereon.
XVIII. SPECIFIC OBLIGATION OF
FRANCHISEE RELATING TO
INDEMNIFICATION
Franchisee understands and agrees that
nothing in this Agreement authorizes Franchisee to make
any contract, agreement, warranty or representation on
Franchisor's behalf, or to incur any debt or other
obligation in Franchisor's name. Franchisee further
understands and agrees that Franchisor shall in no event
assume liability for, or be deemed liable hereunder as a
result of, any such action, or by reason of any act or
omission of Franchisee in its conduct of the Business or
any claim or judgment arising there from against
Franchisee. Franchisee shall indemnify and hold
Franchisor and Franchisor's officers, directors,
shareholders and employees harmless against any and all
claims arising directly or indirectly from, as a result
of, or in connection with, Franchisee's operation of the
Business, as well as the cost, including attorney's
fees, of defending against same.
XIX. MISCELLANEOUS COVENANTS
OF FRANCHISEE
A. Covenants are Independent
The parties agree that
each covenant herein shall be construed to be
independent of any other covenant or provision of this
Agreement. If all or any portion of the covenants in
this Agreement is held to be unenforceable or
unreasonable by a court or agency having competent
jurisdiction in any final decision to which Franchisor
is a party, Franchisee expressly agrees 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 resultant covenant were separately stated in
and made a part of this Agreement.
B.
Franchisee Will Not Compete Against Franchisor
Franchisee
specifically acknowledges that, pursuant to this
Agreement, Franchisee will receive valuable specialized
training and confidential information, including,
without limitation, information regarding the
operational, sales, promotional and marketing methods
and techniques of SAC and the System. Franchisee
covenants that, during the term of this Agreement,
except as otherwise approved in writing by SAC ,
Franchisee shall not, either directly or indirectly, for
itself, or through, on behalf of, or in conjunction
with, any person, persons, or legal entity, employ or
seek to employ any person who is at that time employed
by SAC or by any other franchisee or affiliate of SAC
, or otherwise directly or indirectly induce such person
to leave his or her employment.
Franchisee covenants
that, except as otherwise approved in writing by SAC .
Franchisee shall not, during the term of this Agreement
and for a continuous uninterrupted period commencing
upon the expiration or termination of this Agreement,
regardless of the cause for termination, and continuing
for two (2) years thereafter, either directly or
indirectly for itself, or through, on behalf of, or in
conjunction with, any person, persons, or legal entity,
own, maintain, operate, engage in, be employed by, or
have any interest in any business featuring the overall
SAC concept, with similar decor or similar items to
SAC within a fifty (50) mile radius of the business
territory designated hereunder, or within a fifty (50)
mile radius of any other SAC Business territory in
existence or planned as of the time of termination or
expiration of this Agreement, as identified in the
Franchise Offering Circular of SAC in effect as of the
date of expiration or termination of this Agreement.
C.
Exception to Covenant Not to Compete
Section XIX.B. hereof
shall not apply to ownership by Franchisee of less than
a five percent (5%) beneficial interest in the
outstanding equity securities of any Publicly-Held
Corporation.
D.
Franchisee Will Not Divert Business
During the term of this
Agreement and for a period of two (2) years following
the expiration or termination of this Agreement,
Franchisee covenants that it will not, either directly
or indirectly, for itself, or through, on behalf of, or
in conjunction with any person, persons, or legal
entity:
1. Divert or attempt to divert business or
customers of the Business with which or with whom
Franchisee has had contact during the term of this
Agreement to any competitor by direct or indirect
inducement or otherwise; or
2. Do or perform, directly or indirectly,
any other act injurious or prejudicial to the goodwill
associated with the Names and Marks or the System or
both; or
3. Induce, directly or indirectly, any
person who is at that time employed by Franchisor or by
any other Franchisee of Franchisor, to leave his or her
employment. The provisions of this Section XIX.D. shall
apply only in the geographical area lying within the
exclusive territory of the Business.
E.
Franchisor Is Entitled to Injunctive Relief
Franchisee acknowledges
that any failure to comply with the requirements of this
Section XIX. will cause Franchisor irreparable injury
for which no adequate remedy at law may be available and
Franchisee hereby accordingly consents to the issuance
by a court of competent jurisdiction of an injunction
prohibiting any conduct by Franchisee in violation of
the terms of this Section XIX. and waives any
requirement for the posting of any bond(s) relating
thereto. Franchisor may further avail itself of any
legal or equitable rights and remedies which it may have
under the Agreement or otherwise.
F.
Covenants Are Enforceable Independent of Claims
Franchisee expressly
agrees that the existence of any claim it may have
against Franchisor, whether or not arising from this
Agreement, shall not constitute a defense to the
enforcement by Franchisor of the covenants of this
Section XIX. Franchisee further agrees that Franchisor
shall be entitled to set off any amounts owed by
Franchisor to Franchisee against any loss or damage to
Franchisor resulting from Franchisee's breach of this
Section XIX.
G.
No Right of Set-Off
Franchisee expressly
agrees that the existence of any claims it may have
against SAC whether or not arising from this
Agreement, shall not constitute a defense to the
enforcement by SAC of the covenants in this Section
XIX. Franchisee agrees to pay all damages, costs and
expenses (including reasonable attorney's fees) incurred
by SAC in connection with the enforcement of this
Section XIX.
XX. OBLIGATIONS OF THE
FRANCHISOR: SUPERVISION, ASSISTANCE
OR SERVICES
The Franchisor shall
provide the Franchisee with the following assistance and
services:
A. The
Training Program
1. The Franchisor will provide a training
program concerning the operation of the Business
consisting of up to FIVE (5) days of training at a
location to be designated by Franchisor and up to FIVE
(5) days of on the
job field training either, in your Territory, in the
Territory of an experienced SAC franchisee or at our
designated training facility at our option. The
training session at our location will begin
approximately thirty (30) days or more before the
opening of the Business. The exact days will be mutually
selected by Franchisor and Franchisee. Franchisee
and/or his or her designated representative shall attend
such training program at no charge to the Franchisee.
Franchisee shall be responsible for any travel, lodging,
meal or other costs for the attendee(s) of the training
program at the Franchisor's Home Office.
If we visit your
Territory, we pay our own transportation and lodging
expenses incurred in providing the field training in
your Territory, however you will be responsible for
transporting your personnel and our instructor in the
vehicle(s) that you have purchased for use in your
Business. If you are required to travel to the
Territory of an experienced SAC franchisee or if you
are required to attend our Training Facilities for the
field training, you will pay your own travel and lodging
expenses and those of your employees. Franchisee
must have at least one fully trained, full-time Manager
operating the Business during the entire term of the
Agreement. Either the Franchisee or Franchisee's
Manager must attend the training sessions. Any person
subsequently employed as a full-time manager of the
Business may be required by Franchisor to complete the
initial training program. Satisfactory completion of
all mandatory training sessions is required. Failure to
do so shall result in a breach of this Agreement.
2. SAC shall provide such continuing
advisory assistance to Franchisee in the operation,
advertising and promotion of the Business as SAC deems
advisable. SAC shall also provide refresher training
programs for Franchisee and to Franchisee's employees as
SAC deems appropriate
3. The Franchisor may conduct additional
seminars or other training programs for the benefit of
the Franchisee, and Franchisee (and/or Franchisee's
employees) may attend any such seminar or program.
Franchisor may charge a reasonable fee for such seminar
or program if it is deemed appropriate. Any and all
traveling, living and other expenses incurred by anyone
attending training shall be paid by Franchisee.
4. Franchisee may make reasonable request
for training in addition to that specified above, and
Franchisor shall provide such training, at Franchisee's
expense, including without limitation, any travel,
lodging, meals and other related costs.
5. Franchisee shall complete and/or shall
cause its employees to complete, to Franchisor's
satisfaction, such other additional training as
Franchisor may reasonably require from time to time.
6. SAC may provide Franchisee, from time
to time, as SAC deems appropriate, such merchandising,
marketing and other data and advice as may from time to
time be developed by SAC and deemed by SAC to be
helpful in the managing and operation of the Business.
7. SAC may provide such periodic
individual or group advice, consultation and assistance,
rendered by personal visit or telephone, or by
newsletter or bulletins made available from time to time
to all SAC franchisees, as SAC may deem necessary or
appropriate.
8. SAC may provide such bulletins,
brochures, manuals and reports, if any, as may from time
to time be published by or on behalf of SAC regarding
its plans, policies, developments and activities. In
addition, SAC may provide such communication
concerning new developments, techniques and improvements
management which SAC feels are relevant to the
operation of the Business.
9. SAC shall seek to maintain the high
standards of quality, appearance, and service of the
System, and to that end shall conduct, as it deems
advisable, inspections of the Business franchised
hereunder, and evaluations of the products sold and
services rendered therein.
10. Franchisor is obligated to take any
appropriate action to preserve the Names and Marks
against unauthorized operations which infringe on such
Names and Marks.
11. All obligations of SAC under this
Agreement shall benefit only the Franchisee, and no
other party is entitled to rely on, enforce, benefit
from or obtain relief for breach of such obligations,
either directly or by subrogation.
B. Site
Selection
Given the on-site nature
of an SAC Business, there is no requirement to
maintain a fixed place of business. You are, however,
required to maintain an office to facilitate the
operations of your business in accordance with the
requirements laid out in the Operations Manual. This
may be in a home office, or leased space. There are no
signage requirements for either option. Regardless of
which type of location you select, your Office must be
compliant with the criteria for an SAC Business Office
outlined in our Operations Manual. If you would like to
install signage, the design and placement of such
signage must be submitted to SAC for approval.
C.
Business-Layout and Design
SAC will
assume the layout and design responsibilities of your
mobile workstation (vehicle used to operate your
business). Both interior functionality as well as
exterior aesthetics will be considered to maximize
productivity and the professional appearance of your
SAC Business according to our high standards. We will
provide and install the customized workstation(s) in
your vehicle(s), which include most of the equipment and
supplies needed to operate your Business for your first
two hundred (200) standard serviced units.
D.
Post-Training Assistance
In addition to the
assistance rendered to the Franchisee prior to opening,
the Franchisor will provide continuing consultation and
advise regarding business, financial, operational,
technical, pricing, legal, sales and advertising
matters, products, management of supplies, styles and
type of service, operation of the Business, and
development of personnel policies. The Franchisor will
provide such assistance by telephone or, if the
situation warrants, through on-site assistance of
appropriate Franchisor personnel. If Franchisor is
required to perform on-site assistance, travel, lodging
and other appropriate fees and/or expenses may be the
responsibility of the Franchisee.
E.
Operations Manual
In order to protect the reputation and goodwill of SAC
and to maintain high standards of operation under SAGE
AUTO CARE GUARANTEE MANAGEMENT® Proprietary Marks,
Franchisee shall conduct its business in accordance with
this Agreement and Training Manuals, Audio/Video Media
and/or Online Training Modules described herein as the
"Manuals" (one copy of which Franchisee shall
acknowledge in writing upon receipt has been received on
loan from SAC for the term of this Agreement), other
written directives which SAC may issue to Franchisee
from time to time whether or not such directives are
made part of the Manuals, and any other manuals,
Audio/Video Media and/or Online Training Modules , and
materials created or approved for use in the operation
of the Business by Franchisor, from time to time.
Franchisee shall at all
times treat the Manuals, any written directives of SAC
, any business plans and specifications, and any other
manuals created for or approved for use in the operation
of the Business, and any supplements thereto, and the
information contained therein, in trust and as
confidential information, and shall use all reasonable
efforts to maintain such information as secret and
confidential. Franchisee shall not at any time copy,
duplicate, record, or otherwise reproduce the foregoing
materials, in whole or in part, nor otherwise make the
same available to any unauthorized person.
The Manuals, written
directives, other manuals and materials, and any other
confidential communications provided or approved by SAC
, shall at all times remain the sole property of SAC
shall at all times be kept and maintained in a secure
place on the Business premises.
SAC may from time to
time revise the contents of the Manuals and the contents
of any other manuals and materials created or approved
for use in the operation of the Business, and Franchisee
expressly agrees that each new or changed standard shall
be deemed effective upon receipt by Franchisee or as
specified in such standard.
Franchisee shall at all
times insure that its copy 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 master copy of
the Manuals maintained by SAC at SAC ’s headquarters
shall be controlling.
Any suggestions
Franchisee may have concerning the improvement of
products, equipment, uniforms, business facilities,
service format and advertising are encouraged and shall
be considered by SAC when adopting or
modifying the standards, specifications and procedures
for the System.
F.
Selecting Suppliers
Franchisor shall provide
Franchisee a list of approved suppliers of necessary
supplies.
G.
Recommended Price Schedules
Franchisor shall advise
Franchisee from time to time, concerning such suggested
retail prices. Franchisor and Franchisee agree that any
list or schedule of prices furnished to Franchisee by
Franchisor is a maximum retail price list. Nothing
contained herein shall be deemed a representation by
Franchisor that the use of the Franchisor's suggested
prices will in fact optimize profits.
H.
Advertising and Promotion
On-site sales visits are
core of our advertising function. SAC may develop and
provide creative materials and/or promotional items to
enhance your sales visits and generally promote your
business. If you desire to initiate any type of
advertising or promotional campaign, SAC shall provide
specific guidelines for any such campaign and reserve
the right to disapprove any advertising which is not
found to be, in SAC ’s opinion, in accordance with
these guidelines. However, no approval shall be
unreasonably withheld.
XXI. VARYING STANDARDS
Because complete and detailed uniformity
under many varying conditions may not be possible or
practical, Franchisor specifically reserves the right
and privilege, at its sole and absolute discretion and
as it may deem in the best interests of all concerned in
any specific instance, to vary standards for any
franchisee based upon the peculiarities of a particular
site or circumstance, density of population, business
potential, population or trade area, existing business
practices, or any other condition which Franchisor deems
to be of importance to the successful operation of such
Franchisee's business. Franchisee shall not have any
right to complain about a variation from standard
specifications and practices granted to any other
Franchisee and shall not be entitled to require
Franchisor to grant to Franchisee a like or similar
variation
XXII. SALE OF FRANCHISE
A.
Assignment by Franchisee
This Agreement restricts the Franchisee's right to
assign the Agreement to a third party. Neither this
Agreement, nor any of the Franchisee's rights or
privileges, shall be assigned, transferred, shared,
redeemed or divided by operation of law or otherwise, in
any manner, without the prior written consent of
Franchisor, which consent will not be withheld or
delayed unreasonably. In granting any such consent, the
Franchisor may impose reasonable conditions, including,
without limitation, the following:
1. Franchisee must be in full compliance
with the terms of this Franchise Agreement, including
being paid in full on all fees due and payable to us or
our affiliate;
2. The proposed assignee (or its partners,
managers, directors, officers, or controlling
shareholders, if it is a corporation or partnership)
must meet the then-applicable standards of Franchisor;
3. The proposed assignee must not operate a
franchise, license or other business offering services
similar to those offered by the Business;
4. The assignee must execute and agree to be
bound by the then current form of this Agreement, which
form may contain provisions which materially alter the
rights or obligations of Franchisee under this
Agreement;
5. Franchisor shall not charge such assignee
an Initial Franchise Fee for the Franchise, but will
charge a transfer fee of FIVE THOUSAND DOLLARS ($5,000)
per territory. If Franchisor determines that training
is required, assignee will attend training at
Franchisor's Home Office as required under the then
current Franchise Agreement. Published rates for
training and other related fees may apply. Franchisor
shall have the right to require Franchisee and its
owners to execute a general release of Franchisor in a
form satisfactory to Franchisor's counsel as a condition
to its approval of assignment or other transfer of the
Franchise;
6.
Franchisee shall have substantially complied with all of
the terms and provisions of this Agreement, any
amendment hereof or successor hereto, or any other
agreements between the Franchisee and SAC , its
subsidiaries or affiliates and, at the time of transfer,
shall not be in default thereof;
7. The transferor shall have executed a
general release under seal, in a form satisfactory to
SAC , of any and all claims against SAC and its
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;
8. The transferee (and, if the transferee is
other than an individual, such principals and/or owners
of a beneficial interest in the transferee as SAC may
request) shall enter into a written assumption
agreement, in a form satisfactory to SAC , assuming and
agreeing to discharge all of Franchisee's obligations
under this Agreement and/or any new franchise agreement,
as hereinafter provided;
9. The transferee shall demonstrate to SAC
’s satisfaction that the transferee meets SAC
educational, managerial, and business standards;
possesses a good moral character, business reputation,
and credit rating; has the aptitude and ability to
conduct the Business (as may be evidenced by prior
related business experience or otherwise); and has
adequate financial resources and capital to operate the
Business.
10. The transferee (and, if the transferee is
other than an individual, such principals and/or owners
of a beneficial interest in the transferee as SAC may
request) shall execute, for a term ending on the
expiration date of this Agreement and with such renewal
term, if any, as may be provided by this Agreement, the
standard form franchise agreement then being offered to
new System franchisees and such other ancillary
agreements as SAC may require for the Business, which
agreements shall supersede this Agreement in all
respects and the terms of which agreements may differ
from the terms of this Agreement, including, without
limitation, a higher percentage royalty rate,
advertising contribution, and service charge for goods;
provided; however, that the transferee shall not be
required to pay an initial franchise fee;
11. The transferee, at its expense, shall
upgrade the Business to conform to the then-current
standards and specifications of the new entry System and
shall complete the upgrading and other requirements
within the time specified by SAC ;
12. Franchisee shall remain liable for all of
the obligations to SAC connection with the Business
prior to the effective date of the transfer and shall
execute any and all instruments reasonably requested by
SAC to evidence such liability;
13. Franchisee shall agree to remain obligated
under the covenants against competition of this
Agreement as if this Agreement had been terminated on
the date of the transfer;
14. At the transferee's expense, the transferee
and, if applicable, the transferee's designated
individual manager shall complete any training programs
then in effect for franchisees upon such terms and
conditions as SAC may reasonably require; and
15. The transferee shall agree to a sublease or
to a transfer and assignment, and assumption of the
lease of the Business site (if applicable) and/or
Business Vehicles from the original franchisee and shall
obtain the landlord’s approval if required prior to any
transfer or sublease, if applicable.
B.
Assignment by Franchisor
Franchisor has an
unrestricted right to transfer or assign all or part of
its rights or obligations under this Agreement to any
assignee or other legal successor to the interests of
Franchisor.
C.
Transfer Upon Death or Mental Incapacity
Upon the death or mental incapacity of any person with
an interest in the Business, the executor,
administrator, or personal representative of that person
must transfer his interest to a third party approved by
Franchisor within six (6) months after death or mental
incapacity. These transfers, including, without
limitation, transfers by devise or inheritance, will be
subject to the same restrictions and conditions as any
inter vivos transfer. However, in the case of a
transfer by devise or inheritance, if the heirs or
beneficiaries of any deceased person are unable to meet
the conditions of this Agreement, the personal
representative of the deceased Franchisee shall have a
reasonable time to dispose of the deceased's interest in
the Business, which disposition will be subject to all
the terms and conditions for transfer contained in this
Agreement. If the interest is not disposed of within a
reasonable time, Franchisor may terminate this
Agreement.
Pending assignment,
upon the death of the Principal, or in the event of any
temporary or permanent mental or physical disability of
the Principal, a manager shall be employed for the
operation of the Business who has successfully completed
Franchisor's training courses to operate the Business
for the account of Franchisee. If after the death or
disability of the Principal, the Business is not being
managed by such trained manager, SAC is authorized to
appoint a manager to maintain the operation of the
Business until an approved assignee will be able to
assume the management and operation of the Business, but
in no event for a period exceeding one (1) year without
the approval of the personal representative of the
Principal; such manager shall be deemed an employee of
the Franchisee. All funds from the operation of the
Business during the period of management by such
appointed or approved manager shall be kept in a
separate fund and all expenses of the Business,
including compensation of such manager, other costs and
travel and living expenses of such appointed or approved
manager (the "Management Expenses"), shall be charged to
such fund. As compensation for the management services
provided, in addition to the Fees due hereunder, SAC
shall charge such fund the full amount of the direct
expenses incurred by SAC during such period of
management for and on behalf of Franchisee, provided
that SAC shall only have a duty to utilize reasonable
efforts and shall not be liable to Franchisee, the
Principal or personal representative of the Principal,
the Entity or any person or entity having an interest
therein for any debts, losses or obligations incurred by
the Business, or to any creditor of Franchisee or the
Principal during any period in which it is managed by a
SAC -appointed or approved manager.
D. Sale of
Franchised Business
If the Franchisee (or
its owners) desire to sell the Business, or part or all
of the ownership of the Business, then Franchisor will
reasonably assist Franchisee (or its owners) in
connection therewith. If Franchisee (or its owners)
shall obtain a bona fide written offer to purchase the
Business, or such ownership, such offer shall be
submitted promptly to Franchisor. For a period of
thirty (30) days from the date of Franchisor's receipt
of such offer, Franchisor shall have the right,
exercisable by written notice to Franchisee (or its
owners), to purchase the Business, or such ownership,
for the price and on the same terms and conditions
contained in such offer, provided that Franchisor may
substitute cash for any form of payment proposed in such
offer. If Franchisor does not exercise its right of
first refusal, the bona fide written offer may be
accepted by Franchisee or its owners, subject to the
prior written approval of Franchisor.
To enable SAC to
determine whether it will exercise its option,
Franchisee and the seller shall provide such information
and documentation, including financial statements, as
SAC may require. In the event that SAC elects to
purchase said interest, closing on such purchase must
occur within ninety (90) days from the date of notice to
the seller of the election to purchase said Interest by
SAC . Failure of SAC to exercise the option afforded
by this Section XXII.D. shall not constitute a waiver of
any other provision of this Agreement, including all of
the requirements of this Section XXII., with respect to
a proposed transfer of any Interest. Any subsequent
change in the terms of any offer prior to closing shall
constitute a new offer subject to the same rights of
first refusal by SAC as in the case of an initial
offer.
XXIII. TERMINATION OF FRANCHISE
A. Impact
of Statutes Upon Franchise Agreement
In accordance with the provisions of Florida Statute
559.803(9), if Franchisor fails to deliver the product,
equipment, or supplies necessary to begin substantial
operation of a SAC franchise business within
forty-five (45) days of the delivery date stated in the
Franchise Agreement, Franchisee may notify Franchisor in
writing, cancel the Franchise Agreement, and obtain a
full refund of the Initial Franchise Fee.
The delivery date of this Agreement shall be the first
day of the training session.
The California Franchise
Relations Act (Business and Professions Code, Section
20000 through 20043), became effective October 1, 1982.
This Act provides certain rights to Franchisees,
including: (1) limitations on Franchisor's ability to
terminate a franchise except for good cause; (2)
restrictions on Franchisor's ability to deny renewal of
a franchise; (3) circumstances under which Franchisor
may be required to purchase certain inventory of
Franchisees when a franchise is terminated or not
renewed in violation of the statute; and (4) provisions
relating to arbitration. To the extent that the
provisions of this Franchise Agreement are inconsistent
with the terms of the Act, the terms of the Act may
control in California.
The conditions under
which your franchise can be terminated and your rights
upon non-renewal may be affected by Illinois Law.
Ill.Rev.Stat. 1987, ch. 12111/2, pars. 1719, 1720.
Termination or
modification of a lease or contract upon the bankruptcy
of one of the parties may be unenforceable under the
Bankruptcy Act of 1978, Title II, U.S. Code, as amended.
B. By
Franchisor
Franchisee acknowledges that the strict performance of
all the terms of this Agreement is necessary not only
for protection of Franchisor, but also the protection of
Franchisee and other franchisees of Franchisor. As a
result, Franchisee therefore acknowledges and agrees
that strict and exact performance by Franchisee of each
of the covenants and conditions contained herein is a
condition precedent to the continuation of this
Agreement. If Franchisee shall breach any material
provision of this Agreement, then Franchisor shall
notify Franchisee in writing of such breach, specifying
its nature and giving Franchisee five (5) days, or such
longer period as applicable law may require, in which to
remedy same. If Franchisee shall fail to remedy such
breach, then Franchisor can terminate this Agreement and
the Franchise effective five (5) days, or such longer
period as applicable law may require, after delivery of
notice of termination to Franchisee.
C.
Termination of Franchise Without Cure
Notwithstanding the foregoing, Franchisee shall be
deemed to be in breach and Franchisor, at its option,
may terminate this Agreement and all rights granted
under it, without affording Franchisee any opportunity
to cure the breach, effective immediately upon
Franchisor notifying Franchisee in writing of such
breach, if Franchisee does any of the following:
1. Abandons, surrenders, or transfers
control of the operation of the Business or fails to
continuously and actively operate the Business, unless
precluded from doing so by damage to the premises of the
Business due to war, act of God, civil disturbance,
natural disaster, labor dispute or other events beyond
Franchisee's reasonable control;
2. Consistently fails or refuses to submit
when due any financial statement, tax return or
schedule, or to pay when due the Base Royalty Fees, or
any other payments due Franchisor or its affiliate;
3. Operates the Business in a manner that
violates any federal, state, or local law, rule,
regulation or ordinance;
4. Has made a material misrepresentation or
omission on the application for the Franchise;
5. Transfers, assigns, or sub franchises
this Agreement without having the prior written consent
of Franchisor, as set forth herein;
6. Discloses or divulges the contents of the
Manual or any other Proprietary Information provided to
Franchisee by Franchisor;
7. Repeatedly fails to substantially comply
with any of the requirements imposed by this Agreement,
whether or not cured after notice;
8. Commits a breach of this Agreement or
engages in any other activity which has a material
adverse effect on Franchisor or the Names and Marks;
9. Fails or refuses to comply with any
provision of this Agreement or any other agreement
between Franchisor and Franchisee relating to the
Business or the Franchise, and does not correct such
failure or refusal within thirty (30) days after written
notice of such failure or refusal to comply is delivered
to Franchisee;
10. Is convicted of a felony or has pleaded
nolo contendere to a felony;
11. Engages in dishonest or unethical conduct;
12. Fails to discharge any valid lien placed
against the property of the business;
13. Makes an assignment for the benefit of
creditors or an admission of the Franchisee's inability
to pay its obligations as they become due;
14. Files a voluntary petition in bankruptcy or
any pleading seeking any reorganization, arrangement,
disposition, adjustment, liquidation, dissolution or
similar release under any law, or admitting or failing
to contest the material allegations of any such pleading
filed against him, or is adjudicated bankrupt or
insolvent, or a receiver is appointed for a substantial
part of the assets of the Franchisee or the Business, or
the claims of creditors of Franchisee or the Business
are abated or subject to a moratorium under any laws.
15. Becomes insolvent or makes a general
assignment for the benefit of creditors.
16. If a
bill in equity or other proceeding for the appointment
of a receiver of Franchisee or other custodian for
Franchisee's business or assets is filed and consented
to by Franchisee.
17. If a receiver or other custodian (permanent
or temporary) of the Business, Franchisee, or
Franchisee's assets or property, or any part thereof, is
appointed by any court of competent jurisdiction or by
private instrument or otherwise.
18. If proceedings for a composition with
creditors under any state or federal law should be
instituted by or against Franchisee.
19. If a final judgment remains unsatisfied or
of record for thirty (30) days or longer (unless
supersedeas bond is filed); or if Franchisee is
dissolved or is wound up.
20. If execution is levied against Franchisee's
business or property or against any ownership interest
in Franchisee.
21. If any real or personal property of
Franchisee's Business shall be sold after levy thereupon
by any sheriff, marshal, or constable.
22. If, in
violation of the terms of Sections XII., XVI. and/or XX.
hereof, Franchisee, its principals, representatives,
agents or employees disclose or divulge the contents of
the Manuals or other confidential information provided
to Franchisee by SAC , or if Franchisee maintains false
books or records, or submits any false reports to SAC .
23. If any inspection of
Franchisee's records discloses an understatement of
payments due SAC of four percent (4%) or more.
24. If
Franchisee's alternate candidate for management training
shall not adequately complete such management training
program, after either Franchisee or Franchisee's
designated individual previously failed to complete
adequately the management training.
D.
Termination of Franchise With Cure.
Notwithstanding the foregoing, Franchisee shall cure
violations of health, safety, or sanitation laws with 72
hours notice, and shall pay past due monies owed to us
upon ten (10) days notice. Any default not specifically
listed herein shall be cured within five (10) days of
notice.
E. By
Franchisee
Franchisee is entitled
to termination of the Franchise Agreement and a full
refund of all monies paid as consideration therefore if
Franchisor violates Florida Statute 559.803(9). If
Franchisee is in compliance with this Agreement and
Franchisor breaches this Agreement and fails to cure
such breach within thirty (30) days after written notice
thereof is delivered to Franchisor, then Franchisee may
terminate this Agreement and the franchise effective
thirty (30) days after delivery to Franchisor of notice
thereof. Any termination of this Agreement and the
franchise by Franchisee, without complying with the
foregoing requirements, or for any reason other than
breach of this Agreement by Franchisor and Franchisor's
failure to cure such breach within thirty (30) days
after receipt of written notice thereof, shall be deemed
a termination by Franchisee without cause.
XXIV.FRANCHISEE'S OBLIGATIONS UPON
TERMINATION OR EXPIRATION
A.
Franchisee Shall Cease Using Names and Marks
Franchisee further
agrees that, upon termination or expiration of this
Agreement, Franchisee shall immediately and permanently
cease to use, by advertising, or any manner whatsoever,
any confidential methods, procedures, descriptions of
products, and techniques associated with Franchisor and
the Names and Marks and any proprietary marks and
distinctive forms, slogans, symbols, signs, logos or
devices associated with the System. In particular,
Franchisee shall cease to use, without limitation, all
signs, advertising materials, stationery, forms, and any
other articles which display the Names and Marks.
Franchisee shall comply with the covenant not to compete
and the agreement to maintain the confidentiality of
proprietary information.
B.
Franchisee Shall Cease Operating Business
Franchisee shall
immediately cease to operate the Business under this
Agreement, and shall not thereafter, directly or
indirectly, represent itself to the public or hold
itself out as a present or former Franchisee of
Franchisor.
C.
Franchisee May Not Adopt Confusingly Similar
Names
and Marks
Franchisee agrees, in the event it continues to operate
or subsequently begins to operate any other business,
not to use any reproduction, counterfeit, copy or
colorable imitation of the Names and Marks, either in
connection with such other business or in the promotion
thereof, which is likely to cause confusion, mistake or
deception, or which is likely to dilute Franchisor's
exclusive rights in and to the Names and Marks, and
further agrees not to utilize any designation of origin
or description or representation which falsely suggests
or represents an association or connection with
Franchisor or a former association or connection with
Franchisor.
D. Franchisee Shall Cancel
Assumed Names and Transfer
Phone
Numbers
Franchisee further
agrees that upon termination or expiration of this
Agreement, it will take such action that may be required
to cancel all assumed names or equivalent registrations
relating to its use of any Names or Marks and to notify
the telephone company and listing agencies of the
termination or expiration of Franchisee's right to use
any telephone number in any classified ad and any other
telephone directory listings associated with the Names
and Marks or with the Business and to authorize transfer
of same to Franchisor. Franchisee acknowledges that as
between Franchisor and Franchisee, Franchisor has the
sole rights to an interest in all telephone number and
directory listings associated with any Names or Marks of
the Business. Franchisee further authorizes Franchisor,
and hereby appoints Franchisor as its attorney in fact,
to direct the telephone company and all listing agencies
to transfer same to Franchisor, should Franchisee fail
or refuse to do so, and the telephone company and all
listing agencies may accept such direction in this
Agreement as conclusive evidence of the exclusive rights
of Franchisor in such telephone numbers and directory
listings and its authority to direct their transfer.
E.
Franchisee Must Return Manual and Other Materials
Franchisee further agrees that upon termination or
expiration of this Agreement, it will immediately return
to Franchisor all copies of the Manual, training aids
and any other materials which have been loaned to it by
Franchisor. Franchisee further agrees to turn over to
Franchisor any other manuals, computer programs,
software, customer lists, records, files, instructions,
correspondence and brochures, and any and all other
confidential and proprietary materials relating to the
operation of the Business in Franchisee's possession,
custody, or control, and all copies thereof (all of
which are acknowledged to be Franchisor's property), and
only Franchisee's copy of this Agreement and any
correspondence between the parties, and any other
document copies which Franchisee reasonably needs for
compliance with any provision of law may be retained by
Franchisee.
F.
Franchisor May Purchase Inventory and Equipment
Franchisor shall have the right (but not the duty), to
be exercised by notice of intent to do so within thirty
(30) days after termination or expiration, to purchase
any or all inventory, equipment, supplies, signs,
advertising materials and items bearing Franchisor's
Names and Marks, at fair market value (less the amount
of any outstanding liens or encumbrances). If the
parties cannot agree on a fair market value within a
reasonable time, an independent appraiser shall be
designated by Franchisor, and determination of such
appraiser shall be binding. If Franchisor elects to
exercise any option to purchase as herein provided, it
shall have the right to set off all amounts due from
Franchisee, and the cost for the appraisal, if any,
against any payment therefore.
G.
Franchisee Must Pay Monies Owed to Franchisor
Franchisee shall pay to Franchisor, within fifteen (15)
days after the effective date of termination or
expiration of this Agreement, such Base Royalty Fees,
payments for inventory, equipment or merchandise, or any
other sums owed to Franchisor by Franchisee, which are
then unpaid.
Franchisee shall pay to SAC all damages, costs, and
expenses, including reasonable attorney's fees, incurred
by SAC in obtaining injunctive or other
relief for the enforcement of any provisions of Section
XIX.
XXV. ENFORCEMENT
A.
Franchisee May Not Withhold Payments Due
Franchisor
Franchisee agrees that he or she will not withhold
payments of any Base Royalty Fees or any other amounts
of money owed to Franchisor for any reason, on grounds
of alleged nonperformance by Franchisor of any
obligation hereunder. All such claims by Franchisee
shall, if not otherwise resolved by Franchisor and
Franchisee, be submitted to arbitration as provided in
this Agreement.
B.
Severability and Substitution of Valid Provisions
All provisions of this Agreement are severable, and this
Agreement shall be interpreted and enforced as if all
completely invalid or unenforceable provisions were not
contained herein, and any partially valid and
enforceable provisions shall be enforced to the extent
valid and enforceable. If any applicable law or rule
requires a greater prior notice of the termination of
this Agreement than is required hereunder, or requires
the taking of some other action not required hereunder,
the prior notice or other action required by such law or
rule shall be substituted for the notice or other
requirements hereof.
C.
Arbitration
Except insofar as Franchisor elects to enforce this
Agreement by judicial process, injunction, or specific
performance (as hereinabove provided), all disputes and
claims relating to any provision hereof, any
specification, standard or operating procedure, or any
other obligation of Franchisee prescribed by Franchisor,
or any obligation of Franchisor, or the breach thereof
(including, without limitation, any specification,
standard or operating procedure or any other obligation
of Franchisee or Franchisor, which is illegal or
otherwise unenforceable or voidable under any law,
ordinance, or ruling) shall be settled by mandatory
binding arbitration in Able County, Utah, in accordance
with the U.S. Arbitration Act, if applicable, and the
Rules of the American Arbitration Association (in
accordance with the rules relating to the arbitration of
disputes arising from franchise and license agreements,
if any, or otherwise in accordance with the general
rules of commercial arbitration), provided that at the
option of Franchisor or Franchisee the arbitrator shall
be selected from a list of retired federal or state
judges supplied by the American Arbitration Association
(if obtainable, or otherwise in accordance with the
customary procedures for selecting an arbitrator). The
arbitrator shall allow discovery in accordance with the
Federal Rules of Civil Procedure and may apply the
sanctions relating to noncompliance with discovery
orders therein provided. The arbitrator shall issue a
written opinion explaining the reasons for his or her
decision and award and the arbitrator shall have the
right to award or include in the award the specific
performance of this Agreement. Judgment upon the award
of the arbitrator will be entered in any court having
competent jurisdiction thereof or of the Franchisor of
Franchisee. During the pendency of any arbitration
proceeding hereunder, Franchisee and Franchisor shall
fully perform their respective obligations pursuant to
the terms and conditions of this Agreement.
D. Rights
of Parties Are Cumulative
The rights of Franchisor and Franchisee are cumulative,
and the exercise or enforcement by Franchisor or
Franchisee of any right or remedy shall not preclude the
exercise or enforcement by Franchisor or Franchisee of
any other right or remedy hereunder which Franchisor or
Franchisee is entitled by law to enforce by the
provisions of this Agreement or of the Manual.
E.
Judicial Enforcement, Injunction and Specific
Performance
Franchisor shall have the right to enforce by judicial
process its right to terminate this Agreement for the
causes enumerated in Section XXIII. of this Agreement,
to collect any amounts owed to Franchisor for any unpaid
Base Royalty Fees, or other unpaid charges due
hereunder, arising out of the business conducted by
Franchisee pursuant hereto, and to pursue any rights it
may have under any leases, subleases, sales, purchases,
or security agreements or other agreements with
Franchisee. Franchisor shall be entitled, without bond,
to the entry of temporary or permanent injunctions and
orders of specific performance enforcing any of the
provisions of this Agreement. If Franchisor secures any
such injunction or orders of specific performance,
Franchisee agrees to pay to Franchisor an amount equal
to the aggregate costs of obtaining such relief,
including, without limitation, reasonable attorneys'
fees, costs of investigation, court costs, and other
litigation expenses, travel and living expenses, and any
damages incurred by Franchisor as a result of the breach
of any provision of this Agreement.
F.
Construction
Any other agreements or instruments referred to herein
or which relate to the purchase or lease by Franchisee
from Franchisor of any fixtures, signs, equipment,
merchandise, or the like, constitutes the entire
agreement of the parties, and there are no other oral or
written understandings or agreements between Franchisor
or Franchisee relating to the subject matter of this
Agreement. The headings of the several sections and
paragraphs hereof are for convenience only and do not
define, limit, or construe the contents of those
sections or paragraphs. The term "Franchisee" as used
herein is applicable to one or more persons, a
corporation or partnership, as the case may be, the
singular usage includes the plural, and the masculine
and neuter usages include the other and the feminine.
References to "Franchisee" applicable to an individual
or individuals shall mean the principal owner or owners
of the equity or operating control of Franchisee if
Franchisee is a corporation or partnership.
G. Utah
Law Applies
Except to the extent governed by the U.S. Trademark Act
of 1946 (Lanham Act, 15 U.S.C., Section 1051 et. seq.)
or the U.S. Arbitration Act, this Agreement shall be
governed by the laws of the State of Utah, and venue
shall lie in Able County, Utah.
H.
Attorney Fees
In the event any legal proceedings between the parties
hereto arise under this Agreement, the prevailing party
shall be entitled to recover reasonable attorneys' fees
and court costs from the other party.
I.
Binding Effect
This Agreement is binding upon the parties hereto and
their respective permitted assigns and successors in
interest.
J. There
Are No Unwritten Agreements; Operations Manual is
Subject to Change.
This instrument contains the entire Agreement between
the parties relating to the rights herein granted and
the obligations herein assumed. Any oral
representations or modifications concerning this
Agreement shall be of no force or effect unless a
subsequent modification in writing is signed by the
parties hereto. The manual may be amended at any time
by Franchisor, however, and Franchisee shall adapt its
methods or procedures to comply with the requirements
thereof
K.
Entire Agreement
This Agreement, the
documents referred to herein, and the attachments
hereto, if any, constitute the entire, full, and
complete Agreement between SAC and Franchisee
concerning the subject matter hereof, and supersede all
prior agreements. Except for those acts permitted to be
made unilaterally by SAC hereunder, no amendment,
change, or variance from this Agreement shall be binding
on either party unless mutually agreed to by the parties
and executed by their authorized officers or agents in
writing.
L.
Force Majeure
Except for monetary
obligations hereunder, or as otherwise specifically
provided in this Franchise Agreement, if either party to
this Agreement shall be delayed or hindered in or
prevented from the performance of any act required under
this Agreement by reason of strikes, lock-outs, labor
troubles, inability to procure materials, failure of
power, restrictive governmental laws or regulations,
riots, insurrection, war, or other causes beyond the
reasonable control of the party required to perform such
work or act under the terms of this Agreement not the
fault of such party, then performance of such act shall
be excused for the period of the delay, but in no event
to exceed ninety (90) days from the stated time periods
as set forth in Article I of this Franchise Agreement.
XXVI. APPROVALS AND WAIVERS
Whenever this
Agreement requires the prior approval or consent of SAC
, Franchisee shall make a timely written request to
SAC therefore, and such approval or consent shall be
obtained in writing.
SAC makes no
warranties or guarantees upon which Franchisee may rely,
and assumes no liability or obligation to Franchisee, by
providing any waiver, approval, consent, or suggestion
to Franchisee or in connection with any consent, or by
reason of any neglect, delay, or denial of any request
therefore.
No failure of Franchisor
to exercise any power reserved to it by this Agreement
or to insist upon strict compliance by Franchisee with
any obligation or condition hereunder, and no custom or
practice of the parties at variance with the terms
hereof, shall constitute a waiver of Franchisor's right
to demand exact compliance with any of the terms
herein. Waiver by Franchisor of any particular default
or breach by Franchisee shall not affect or impair
Franchisor's rights with respect to any subsequent
default or breach of the same, similar or different
nature, nor shall any delay, forbearance, or omission,
breach or default by Franchisor to exercise any power or
right arising out of any breach or default by Franchisee
of any of the terms, provisions, or covenants hereof,
affect or impair Franchisor's right to exercise the
same, nor shall such constitute a waiver by Franchisor
of any preceding breach by Franchisee of any terms,
covenants or conditions of this Agreement.
XXVII. AUTHORITY
Franchisee or, if
Franchisee is a corporation or partnership, the
individuals executing this Agreement on behalf of such
corporation or partnership, warrant to Franchisor, both
individually and in their capacities as partners or
officers, that all the partners in the partnership or
all of the shareholders of the corporation, as the case
may be, have read and approved this Agreement, including
the restrictions which this Agreement places upon their
right to transfer their respective interests in the
partnership or corporation, as set forth in Section
XXII. herein.
XXVIII. NOTICES
Any and all notices
required or permitted under this Agreement shall be in
writing and shall be personally delivered or mailed by
certified, registered or express mail, return receipt
requested, or 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:
The above
Franchise Agreement is a partial sample of a fictitious
company and should not be used as a legal document, but
only for informational purposes.
