Franchise Agreement
between
Hooters America, Inc.
4501 Circle 75 Parkway
Suite E-5110
Atlanta, Georgia 30339
(404) 951-2040
and
Butterwings of Wisconsin, Inc.
c/o Harvey L. Temkin
1st Wisconsin Plaza
1 South Pinckney Street
Madison, Wisconsin 53701-1497
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HOOTERS OF AMERICA, INC. FRANCHISE AGREEMENT
TABLE OF CONTENTS
Page
RECITALS..............................................................1
I. GRANT ............................................................... 2
II. TERM AND RENEWAL .....................................................4
III. HOOTERS OF AMERICA/S OBLIGATIONS .....................................4
IV. FEES ................................................................6
V. DUTIES OF FRANCHISEE..................................................8
VI. PROPRIETARY MARKS....................................................19
Vii. HOOTERS OF AMERICA'S MANUALS.........................................22
Viii. CONFIDENTIAL INFORMATION.............................................23
IX. ACCOUNTING AND RECORDS...............................................23
X. ADVERTISING..........................................................26
Xi. INSURANCE............................................................29
Xii. TRANSFER OF INTEREST.................................................31
Xiii. DEFAULT AND TERMINATION..............................................37
XIV. OBLIGATIONS UPON TERMINATION OR EXPIRATION...........................43
XV. COVENANTS............................................................45
XVI. TAXES, PERMITS, AND INDEBTEDNESS.....................................48
XVII. INDEPENDENT CONTRACTOR...............................................48
XVIII. INDEMNIFICATION......................................................49
XIX. APPROVALS AND WAIVERS................................................52
XX. NOTICES..............................................................52
XXI. ENTIRE AGREEMENT.....................................................53
XXII. SEVERABILITY AND CONSTRUCTION........................................53
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XXIII. FORCE MAJEURE........................................................54
XXIV. APPLICABLE LAW.......................................................55
XXV. ACKNOWLEDGMENTS......................................................55
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HOOTERS OF AMERICA, INC.
FRANCHISE AGREEMENT
THIS AGREEMENT is made and entered into October 31, 1993, between
HOOTERS OF AMERICA, INC. , f /k/a Neighborhood Restaurants of America, Inc. , a
Georgia corporation with offices at 4501 Circle 75 Parkway, Suite E-5110,
Atlanta, Georgia 3 03 3 9 (hereinafter "Hooters of America" or "Franchisor") ,
and BUTTERWINGS OF WISCONSIN, INC. hereinafter "Franchisee").
RECITALS
1. Hooters of America has entered into an exclusive license with
Hooters, Inc., a Florida corporation, dated July 21, 1984, as amended, to use
certain trademarks, service marks and other property in connection with the
operation of restaurants (the "License Agreement") and has developed a
distinctive system (the "Hooters System 11) for the establishment and operation
of a franchised restaurant offering a limited menu featuring seafood and chicken
wings along with beer and wine.
2. The Hooters System features a distinctive exterior and interior
restaurant design, trade dress decor and color scheme; uniform standards,
specifications, and procedures for operations; procedures for quality control;
training and ongoing operational assistance; advertising and promotional
programs; all of which may be changed, improved, and further developed by
Hooters of America from time to time.
3. Hooters of America identifies the Hooters 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 "Hooters." and such
other trade names, service marks, trademarks and trade dress as are now
designated (and may hereafter be designated by Hooters of America in writing)
for use in connection with the Hooters System (hereinafter referred to as
"Proprietary Marks"
4. Hooters of America continues to develop, use, and control the use of
such Proprietary Marks to identify for the public the source of services and
products marketed thereunder and under the Hooters System, and to represent the
Hooters System's high standards of consistent quality, appearance, and service.
5. Franchisee desires to enter into the business of operating a Hooters
Restaurant under the Hooters System and wishes to obtain a franchise from
Hooters of America for that purpose, as well as to receive the training and
other assistance provided by Hooters of America in connection therewith.
6. Franchisee understands and acknowledges the importance of Hooters of
America's high standards of. quality, cleanliness, appearance, and service and
the necessity of operating the franchised business. in conformity with Hooters
of America's standards and specifications.
In consideration of these premises and the commitments set forth herein,
the parties hereby agree as follows:
I. GRANT
A. Hooters of America hereby grants to Franchisee, upon the terms and
conditions herein contained and subject to the License Agreement, the
right, license, and privilege, and Franchisee undertakes the
obligation, to operate a Hooters Restaurant (hereinafter referred to
as the "Restaurant" or the "Franchised Business") and to use solely in
connection therewith the Proprietary Marks and the Hooters System, as
they may be changed, improved, and further developed from time to
time, only at the approved location as provided in Section I.B.
B. The address of the location approved hereunder is: Approved location
to be determined at a later date (hereinafter the "Approved
Location"). Franchisee shall not relocate the Franchised Business
without the express prior written consent of Hooters of America.
During the term of this Agreement, Hooters of America shall not
establish, nor license another party or entity to establish, a Hooters
Restaurant under the Hooters System within a radius of five (5) miles
from the Approved Location (hereinafter the "Protected Territory").
C. Franchisee shall complete the construction of the Restaurant in
accordance with the provisions and requirements of Section V(G) hereof
(the "Construction") and shall open the Restaurant for business within
six (6) months of the date of execution of this Franchise Agreement
(the "Opening Date") ; provided ' however, that Franchisee shall have
the right to substitute a different site, if such different site is
acceptable to Franchisor, within sixty (60) days of execution of this
Agreement. Franchisor may grant Franchisee one thirty (30) day
extension past the six months allotted within which to open the
Restaurant; provided, however, that Franchisee shall pay Hooters of
America a non-refundable extension fee of Five Thousand ($5,000)
Dollars for such right contemporaneously with the grant of such
extension by Hooters of America.
Provided that the Franchisee has made full and complete application
for all building permits, beer and wine licenses, and all other
permits required to open a Hooters restaurant, within 60 days of the
execution date of this agreement, Franchisor may agree to grant up to
three (3) thirty (30) day extensions to obtain all necessary permits
if the delay was due to causes beyond the reasonable control of
Franchisee ' which agreement of Hooters of America will not be
unreasonably withheld. Franchisee must submit documentation of the
status of the applications) ten (10) days prior to the date of each
thirty (30) day extension requested. Upon the grant of such
extensions) by Hooters of America, the Opening Date will be
commensurately extended.
Should the Franchisee be unable to obtain all necessary permits and
licenses during the stated period and extension time period or periods
as a result of causes beyond the reasonable control of Franchisee
(unless the requirement for the issuance of such permits and licenses
is waived in writing by Franchisor), this Agreement, and any Option
Addendum, shall be deemed terminated upon written notice from either
Franchisee or Franchisor to the other, without the necessity of
further action by either party or further documentation. Upon such
termination, the Franchisor shall retain one-third (1/3) of the
Franchise Fee as a Termination Fee, two-thirds (2/3) of the Franchise
Fee and one hundred percent (100%) of any pre-paid option fees will be
refunded to the Franchisee within thirty (30) days of the notice by
Franchisor of the termination of this Agreement.
D. During the term of this Agreement, the Approved Location shall be used
exclusively for the purpose of operating a franchised Hooters
Restaurant. In the event the building shall be damaged or destroyed by
fire or other casualty, or be required to be repaired or reconstructed
by any governmental authority, Franchisee shall commence the required
repair or reconstruction of the building within ninety (90) days from
the date of such casualty or notice of such governmental requirement
(or such lesser period as shall be designated by such governmental
requirement) and shall complete all required repair or reconstruction
as soon as possible thereafter, in continuity, but in no event later
than one hundred eighty (180) days from the date of such casualty or
requirement of such governmental notice. The minimum acceptable
appearance for the restored building will be that which existed just
prior to the casualty; however, every effort should be made to have
the restored building include the then-current image, design and
specifications of new entry Hooters Restaurants. If the building is
substantially destroyed
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by fire or other casualty, Franchisee may, with Franchisor's agreement
and upon payment of an amount equal to six percent (6%) of all
insurance proceeds as a consequence of such casualty to the Franchisor
as a royalty, terminate this Agreement in lieu of Franchisee's
reconstructing the building.
E. It is understood and agreed that, ' except as expressly provided
herein, this franchise is non-exclusive and includes no right of
Franchisee to subfranchise others.
TERM
A. Except as otherwise provided herein, the term of this Agreement shall
commence on the date of execution and acceptance of this Franchise
Agreement by Hooters of America and shall expire twenty (20) years
from such date. There are no renewal rights, options or obligations on
the part of either party.
III. HOOTERS OF AMERICA'S OBLIGATIONS
A. Hooters of America shall provide Franchisee with advice in locating
and opening a completed restaurant, including, but not limited to,
providing approved supplier lists, acceptable site criteria, approved
renovation criteria and, at Hooters, of America's option, a set of
architectural plans of an existing Hooters Restaurant.
B. Hooters of America shall provide a management training program for up
to four (4) management personnel of Franchisee, and shall make
available such other training programs as it deems appropriate. All
training provided by Hooters of America shall be subject to the terms
set forth in Section V.H. of this Agreement.
C. Hooters of America shall also offer training resources to assist
franchisees at their restaurant location for hourly employees. All
pre-opening employee training shall be subject to the terms set forth
in Section V.I. of this Agreement.
D. Hooters of America shall provide, as Hooters of America deems
necessary, a minimum of eight (8) weeks of management training at a
designated restaurant prior to the opening of the Franchisee's
restaurant, by a representatives) of Hooters of America, subject (as
to timing) to the availability of personnel, as well as approximately
one (1) week to ten (10) days of preopening employee training at the
Franchisee Is restaurant.
E. Hooters of America shall provide such continuing advisory assistance
to Franchisee in the operation, advertising and promotion of the
Franchised Business as Hooters of America deems advisable.
F. Hooters of America shall also provide refresher training programs for
Franchisee and to Franchisee's employees as Hooters of America deems
appropriate. All refresher training programs provided by Hooters of
America shall be subject to the terms set forth in Section V.H. of
this Agreement.
G. Hooters of America may, from time to time, provide to Franchisee, at
Franchisees expense, such advertising and promotional plans and
materials for local advertising as described in Section X.A. of this
Agreement and may direct the discontinuance of such plans and
materials, from time to time. All other advertising and promotional
materials which Franchisee proposes to use must be reviewed and
approved by Hooters of America, pursuant to Section X.B. hereof.
H. Hooters of America shall provide. Franchisee, on loan, one copy of the
Hooters Training Manual and Videos (hereinafter "Manuals") as more
fully described in Section VII. hereof.
I. Hooters of America may provide Franchisee, from tire to time, as
Hooters of America deems appropriate, such merchandising, marketing
and other data and advice as may from time to time be developed by
Hooters of America and deemed by Hooters of America to be helpful in
the managing and operation of the Franchised Business.
J. Hooters of America 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 Hooters of America franchisees, as Hooters of America may
deem necessary or appropriate.
K. Hooters of America may provide such bulletins, brochures, manuals and
reports, if any, as may from time to time be published by or on behalf
of Hooters regarding its plans, policies, developments and activities.
In addition, Hooters of America may provide such communication
concerning new developments, techniques and improvements in the food
preparation, equipment, food products, packaging and restaurant
management which Hooters of America feels are relevant to the
operation of the Restaurant.
L. Hooters of America shall provide the requirements for a standardized
system for accounting, cost control and inventory control.
M. Hooters of America shall seek to maintain the high standards of
quality, appearance, and service of the Hooters System, and to that
end shall conduct, as it deems advisable, inspections of the
Restaurant franchised hereunder, and evaluations of the products sold
and services rendered therein.
N. All obligations of Hooters of America 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.
IV. FEES
A. Franchisee shall pay to Hooters of America an initial franchise fee in
the amount of Seventy-Five Thousand Dollars ($75,000.00), which is due
upon execution of this Agreement and receipt of which is hereby
acknowledged by Hooters of America. The initial franchise fee shall be
paid in a lump sum in immediately available bank funds and shall be
deemed fully earned and nonrefundable in consideration of
administrative and other expenses incurred by Hooters of America in
granting this franchise and for Hooters of America's lost or deferred
opportunity to franchise others, except as described above in Section
I.C.
B. During the term of this Agreement, Franchisee shall pay to Hooters, of
America a continuing Royalty Fee which shall be equal to six percent
(6%) of the Gross Sales of the Restaurant, without counterclaim or
set-off. The term Gross Sales is defined in Section IV.G. of this
Agreement. Continuing Royalty Fees shall be payable by Franchisee and
actually received by Franchisor within ten (10) days from the end of
each four week accounting period as provided in Section IX hereof.
C. During the term of this Agreement, Franchisee shall spend a minimum of
three percent (3%) of the Gross Sales of the Restaurant on local
advertising and promotion; provided, however, that Franchisor shall
have the right to approve or disapprove any advertising proposed for
use by Franchisee. In the event Hooters of America establishes a Local
Advertising Cooperative within Franchisee's Area of Dominant Influence
(as defined by Arbitron Corporation, or such other entity as shall be
designated by Hooters of America, from time to time) , Franchisee
shall be obligated to contribute a minimum of up to one third of such
three percent (3%) [one percent (1%) of Gross Sales] for local
advertising and promotion expenditure described above to such
Cooperative, to be actually received within ten (10) days from the end
of each four week accounting period. Such percentage contribution to
such Cooperative shall be designated by Hooters of America from time
to time.
D. Franchisee shall pay to Hooters of America, to be actually received
within ten (10) days from the end of each four-week accounting period,
a National Advertising Fee equal to one percent (1%) of Franchisee's
Gross Sales of the Restaurant. The National Advertising Fee shall be
maintained and ad-ministered in a National Advertising Fund by Hooters
as provided in Section X.D. hereof.
E. The obligation of Franchisee to pay the Continuing Royalty Fee and the
National Advertising Fee (collectively the "Fees") shall not be
altered by the occurrence of any casualty or event which would cause a
temporary closing of the Restaurant for a period of more than five (5)
days. In the event that such a casualty or event occurs, the
Continuing Royalty and National Advertising Fees to be paid by
Franchisee for each month in which such temporary closing occurs shall
be the average of all monthly Fees payable by Franchisee during the
immediately preceding period of twelve (12) months, or such lesser
period as the Restaurant has been open, if the Restaurant has been
open less than twelve (12) months. All payments due to Hooters of
America hereunder shall be payable without counterclaim or set-off.
F. Any payment or report not actually received by Hooters of America 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 Hooters of America under Section XIII of this
Agreement, Franchisee shall pay Hooters of America, in. addition to
the overdue amount, 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 of
Georgia, or any successor or substitute law (hereinafter the "Default
Rate"), until paid in full.
G. 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 Franchised 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 Franchised 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, (the retail value of any complimentary
services or trade-outs or credit card discounts from Gross Sales up to
a maximum of 2% of Gross sales in the aggregate) , and the amount of
cash refunds to, and coupons used by customers, provided such amounts
have been included in gross sales. The sale and delivery of products
and services away from the Restaurant is strictly prohibited; however,
should Hooters of America approve such sales in the future, these
sales will be included in computing Gross Sales.
V. DUTIES OF FRANCHISEE
A. Franchisee understands and acknowledges that every detail of the
Franchised Business, including the uniformity of appearance ' service,
products and advertising of the Hooters System, is important to
Franchisee, Hooters of America, the Hooters System, and other Hooters
of America franchisees in order to maintain high and uniform operating
standards, to increase the demand for the products and services sold
by all franchisees- and to pr6tect Hooters of America's reputation and
goodwill.
B. If Franchisee is or becomes a corporation, the Franchisee corporation
must comply with the following requirements:
1. Franchisee shall confine its activities to the establishment and
operation of the Franchised 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
Franchised Business and that the issuance and transfer of voting
stock, or other ownership interest therein, is restricted by the
terms of this Agreement.
3. Franchisee shall furnish Hooters of America promptly upon request
copies of Franchisee's Articles of Incorporation, Bylaws, and
other governing documents, and any other documents Hooters of
America may reasonably request, and any amendments thereto, from
time to time.
4. Franchisee shall maintain stop transfer instructions against the
transfer on its record of any equity securities 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 HOOTERS OF AMERICA, INC.
DATED REFERENCE IS MADE TO SAID AGREEMENT AND TO THE RESTRICTIVE
PROVISIONS OF THE ARTICLES AND BYLAWS OF THIS CORPORATION.
5. Franchisee shall maintain a current list of all owners of record
and all beneficial owners of any class of voting stock of
Franchisee and shall furnish the list to Hooters of America upon
request, from time to time.
C. If Franchisee is or becomes a partnership, Franchisee shall furnish
Hooters of America promptly upon request a copy of its partnership
agreement and any other documents Hooters of America may reasonably
request, and any amendments thereto, from time to time.
D. 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
Hooters of America promptly upon request, from time to time.
E. 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 having a
controlling interest in Franchisee) shall enter into a continuing
guaranty agreement under seal, in the form attached as Exhibit A, as
such form may be amended or modified by Hooters of America, 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).
F. Franchisee assumes all costs, liability, expense, and responsibility
for locating, obtaining, and developing a site for the Restaurant to
be established under the Franchise Agreement and for constructing and
equipping the Restaurant at such site. Franchisee shall not make any
binding commitment to a prospective vendor or lessor of real estate
with respect to the Approved Location for the Restaurant unless such
Approved Location is approved in accordance with the procedure herein
set forth and which provides, without limitation, for (a) thirty (30)
days prior written notice of any default thereunder specifying such
default and the right (but with no obligation) of Franchisor to cure
any such default within said period, and (b) approval of the
Franchisor as an assignee of Franchisee's interest thereunder.
FRANCHISEE ACKNOWLEDGES THAT HOOTERS OF AMERICA'S APPROVAL OF A
PROSPECTIVE SITE AND THE RENDERING OF ASSISTANCE IN THE SELECTION OF A
SITE DOES NOT CONSTITUTE A REPRESENTATION, PROMISE, WARRANTY, OR
GUARANTEE BY HOOTERS OF AMERICA THAT A HOOTERS RESTAURANT OPERATED AT
THAT SITE WILL BE PROFITABLE OR OTHERWISE SUCCESSFUL.
G. Before commencing the Construction of the Restaurant, Franchisee, at
its expense, shall comply, to Hooters of America's satisfaction, with
all of the following requirements:
1. Franchisee shall submit a site plan to Hooters of America,
including a footprint of the proposed building, and
architectural, kitchen and signage drawings for approval by
Hooters of America. Franchisee, at its option, may use any
architect or engineer currently used by Hooters of America to
prepare detailed plans and specifications for the Construction of
the Hooters Restaurant;
2. Franchisee shall use a qualified general contractor or
construction supervisor to oversee the Construction of the
Restaurant and completion of all improvements, and Franchisee
shall submit to Hooters of America a statement identifying the
general contractor or construction supervisor; and
3. Franchisee shall obtain all licenses, permits and certifications
required for lawful construction and operation of the Hooters
Restaurant including, without limitation, building, zoning',
access, parking, driveway access, sign permits and licenses, and
shall certify in writing to Hooters of America that all such
permits, licenses and certifications have been obtained.
Franchisee shall obtain all health, life safety, alcoholic and
other permits and licenses required for operation of the
Restaurant and shall certify that all such permits and licenses
have been obtained prior to the Opening Date.
4. Franchisee shall cause such Construction to be performed only in
accordance with the site plan, and plans and specifications,
approved by Hooters of America, and no changes will be made to
said approved plans and specifications, or the design thereof, or
any of the materials used therein, or to interior and exterior
colors thereof, without the express written consent of Hooters of
America.
H. Prior to Franchisee's opening of the Franchised Business to the
public, Franchisee and/or up to four (4) management personnel of
Franchisee (or, if Franchisee is a corporation or partnership, a
principal of Franchisee) shall complete to Hooters of America's
satisfaction the management training program offered by Hooters of
America. At Hooters of America's option, key personnel subsequently
employed by Franchisee shall also complete to Hooters of Americas
satisfaction, the management training program. Hooters of America 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. Hooters of
America may, at any time, discontinue management training and decline
to certify Franchisee and/or Franchisee's designated individuals) who
fail to demonstrate an understanding of the management training
acceptable to Hooters, of America. If Franchisee or Franchisee's
designated individual's management training is discontinued by Hooters
of America, 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 Hooters of America has the option of
terminating this Agreement. Hooters of America 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. Franchisor offers training
resources if as described below,, to assist franchisees at their
restaurant location for hourly employees. All jump starters shall be
deemed employees of the Franchisee during the period(s) of service to
the Franchisee, as herein provided. Franchisee shall give Franchisor
not less than thirty (30) days notice of when training should begin.
In order for training to begin, Franchisee shall have received a
Certificate of Occupancy and Health Department approval for the
building, and all refrigeration, kitchen and cooking equipment shall
be functioning.
Pre-Opening Training (FIRST UNIT)
Prior to the opening of Franchisee's first Restaurant unit hereunder, Franchisor
shall furnish the following training assistance, upon not less than thirty (30)
days prior written notice received by Franchisor from Franchisee:
opening coordinator (one)
An opening coordinator. for five days of training prior to
opening. Franchisor is responsible for all costs of the opening
coordinator.
Certified front-of-house trainers (up to four, as designated by Hooters of
America)
Front-of-house trainers, whose compensation shall be paid by
Franchisor, shall be furnished for five days of training prior to
opening.
Back-of-house trainers (up to two, as designated by Hooters of America)
Back-of-house trainers, whose compensation shall be paid by
Franchisor, shall be furnished for five days of training prior to
opening.
Jumpstarters (up to six, as requested by Franchisee)
Franchisor, at Franchisee's request, may furnish up to six
jumpstarters to actually work in the restaurant commencing on
opening day. Waitress jumpstarters work for the prevailing local
wage rates and customer's tips. Franchisee shall guarantee such
jumpstarters $45. 00 minimum total compensation (including tips)
for lunch and $65.00 minimum total compensation (including tips)
for dinner, as such minimum total compensation may be increased
by Franchisor, from time to time, with prior written notice to
Franchisee. Franchisee shall pay cook jumpstarters $75.00 per
shift, as such minimum total compensation may be increased by
Franchisor, from time to time, with prior written notice to
Franchisee. It is contemplated that such jumpstarters shall
normally work in the Restaurant during the first seven days after
opening.
Costs shall include: travel costs, per them and lodging costs for
all trainers and jumpstarters, which shall be borne by
Franchisee. Travel within 400 miles of a Franchisor restaurant is
by automobile and drivers are paid $0.20 cents per mile. Travel
further than 400 miles is by commercial airline with tickets
booked to minimize fares, subject to availability. Per them is
currently $20.00 per day. Lodging rates can be negotiated locally
at Franchisee's discretion; however, lodging shall be selected
and designated by Franchisee with consideration for safety,
security, cleanliness and proximity to the Restaurant. The above
stated rates may be changed by Franchisor, from time to time,
upon prior written notice to Franchisee.
Pre-opening Training (SECOND OR ADDITIONAL UNITS FOR A FRANCHISEE, IF PERMITTED
PURSUANT TO THIS FRANCHISE AGREEMENT)
Prior to the opening of Franchisees second or additional units
hereunder, Franchisor shall furnish the following training
assistance, upon not less than thirty (30) days prior written
notice received by Franchisor from Franchisee:
Franchisor shall furnish an opening coordinator for five days for
training prior to opening. Franchisor shall pay for the travel,
lodging, per them and compensation of the opening coordinator.
Prior to the time Franchisee opens its second or any additional
Restaurant units, Franchisee shall cause key employees from the
first unit of the Franchisee to be trained as certified trainers
in accordance with the Manuals. Franchisee's certified trainers
and junpstarters shall then conduct the training of new employees
in the second or additional units.
Franchisee shall be responsible for the compensation, travel,
lodging and per them of their certified trainers and jumpstarters
utilized in opening the second or additional units.
J. Franchisee shall use the Restaurant premises solely for the operation
of the Franchised Business; keep the business open and in normal
operation for a minimum of seven (7) days a week, fifty-two (52) weeks
per year, during hours from 11:30 a.m. to 12:00 midnight Monday
through Thursday, 11:30 a.m. to 1:00 a.m. Friday and Saturday and from
1:00 p.m. to 10:00 p.m. on Sundays, except Thanksgiving and Christmas.
Such minimum hours and days of operation may be changed as Hooters of
America may from time to time specify in the Manual or as Hooters of
America may otherwise approve in writing (subject to local ordinances
or lease restrictions, if any) ; and refrain from using or permitting
the use of the premises for any other purpose or activity at any time
without first obtaining the written consent of Hooters of America.
Franchisee shall not locate or permit to be located on or about the
Hooters Restaurant premises any slot machines or gambling devices, or
coin-operated machine for vending of any merchandise, or entertainment
devices, the playing of electronic or manual games or for any other
similar purpose except as prescribed in the Manual or otherwise
approved by Hooters of America in writing; nor shall Franchisee permit
the sale of products or services not included in the Hooters System
without Franchisor's prior express written consent, provided that
Franchisor, in its sole discretion, may prescribe conditions under
which such products or services may be sold.
K. Franchisee shall maintain the Restaurant in a first class repair and
condition, in accordance with all maintenance and operating standards
set forth in the Manual. In connection therewith, Franchisee shall
make such additions, alterations, repairs, and replacements thereto
(but no others without Hooters of America's prior written consent) as
may be required for that purpose, including, without limitation, such
periodic repainting, repairing, and replacing of obsolete signs,
fixtures, and furnishings as Hooters of America may reasonably direct.
L. Franchisee agrees to display all signs and other promotional materials
provided by Hooters of America, to the extent permitted by applicable
codes, laws, ordinances, rules and regulations of all federal, state
and local governmental authorities having jurisdiction over the
Restaurant (hereinafter collectively the "Laws") . The color, size,
design and location of said signs shall be as specified and/or
approved by Hooters of America. Franchisee shall not place additional
signs, posters or other decor items in, on, or about the Approved
Location without the prior written consent of Hooters of America.
M. Franchisee shall operate and maintain the Restaurant and all exterior
areas at the Approved Location in a clean and neat manner.
N. Franchisee shall, at Franchisee's sole expense, comply (or cause
compliance of the Restaurant and the Approved Location) with all
applicable Laws. Franchisor's standards may exceed the requirements of
the Laws.
0. At Hooters of America's request, which shall not be more often than
once every three (3) years, Franchisee shall refurbish the Restaurant
at its expense, to conform to the building design, trade dress, color
schemes, and presentation of trademarks and service marks consistent
with Hooters of America's designated image, including, without
limitation, remodeling, redecoration, and modifications to existing
improvements.
P. Franchisee shall operate the Restaurant in strict conformity with such
methods, standards, and specifications as Hooters of America may from
time to time prescribe in the Manual or otherwise in writing, to
maintain maximum efficiency and productivity and to insure that the
highest degree of quality and service is uniformly maintained.
Franchisee agrees:
1. To 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 Hooters of America's standards
and specifications; and to refrain from deviating therefrom by
using non-conforming items or methods without Hooters of
America's prior written consent;
2. To purchase such equipment, supplies, or products as may be
required by Hooters of America, for the appropriate handling and
selling of any food or beverage products that become approved for
offering in the Hooters System;
3. To 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 Restaurant, 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;
4. To permit Hooters of America or its agents, at any reasonable
time, to remove from the Restaurant samples of items without
payment therefor, in amounts reasonably necessary for testing by
Hooters of America or an independent laboratory to determine
whether said samples meet Hooters of America's then-current
standards and specifications. In addition to any other remedies
it may have under this Agreement, Hooters of America requires
Franchisee to bear the cost of such testing if the supplier of
the item has not previously been approved by Hooters of America,
or if the sample fails to conform to Hooters of America's
specifications;
5. Not to install or permit to be installed on or about the
Restaurant premises, without Hooters of America's prior written
consent, any fixtures, furnishings, signs, equipment, or other
improvements not previously approved as meeting Hooters of
America's standards and specifications;
6. To employ a sufficient number of employees and maintain
sufficient inventories as necessary to operate the Restaurant at
its maximum capacity as prescribed or approved by Hooters of
America and to comply with all applicable Laws with respect to
such employees.
Franchisee further acknowledges that complete and detailed uniformity
among Hooters Restaurants under varying conditions may be inadvisable,
impractical or impossible and, accordingly, agrees that Hooters of
America, at its sole discretion, may modify or vary aspects of the
Hooters 'System 'with respect to any franchisee or group of franchisees
based on (by way of example and not limitation) local site conditions,
sales potential, demographics, competition, local business practices,
or any other condition or circumstances that Hooters of America deems a
reasonable basis for such variances. Franchisee further agrees that
Hooters of America shall have no obligation to disclose or offer the
same or similar variances to Franchisee.
R. Franchisor reserves the right to require Franchisee to purchase
designated proprietary items and products, and products bearing the
Proprietary Marks, as specified in the Manuals 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.
S. Hooters of America shall have the right to require that certain
equipment, fixtures, furnishings, signs, supplies, and other products
and materials required for the operation of the Restaurant be
purchased solely from suppliers (including manufacturers,
distributors, and other sources), who demonstrate, to the continuing
reasonable satisfaction of Hooters of America, the ability to meet
Hooters of America's then-current standards and specifications for
such items; who possess adequate quality controls and capacity to
supply Franchisee's needs promptly and reliably; and who have first
been approved in writing by Hooters of America and not thereafter
withdrawn from the approved supplier list. Such items shall be listed
in the Manual, as well as in periodic bulletins and newsletters
supplied by Hooters of America. If Franchisee desires to purchase any
items from an unapproved supplier, Franchisee shall submit to Hooters
of America a written request for Franchisor's consent to use such
supplier, and have such supplier acknowledge in writing that
Franchisee is an independent entity from Hooters of America and that
Hooters of America is not liable for debts incurred by Franchisee.
Hooters of America shall have the right to require that its
representatives be permitted to inspect the supplier's facilities, and
that samples from the supplier be delivered ' at Hooters of America's
option, either to Hooters of America or to an independent laboratory
designated by Hooters of America for testing. A charge not to exceed
the reasonable cost of the inspection and the actual cost of the test
shall be paid by Franchisee. Hooters of America may also require that
the supplier comply with such other reasonable requirements as Hooters
of America may deem appropriate, including payment of the cost of
reasonable continuing inspection fees and administrative costs.,
Hooters of -America --reserves the right, following consent to use any
supplier and at its option, to reinspect the facilities and products
of any such supplier and to revoke its consent upon the supplier's
failure to continue to meet any of Hooters of America's then-current
criteria and standards. If, in providing services to Franchisee, any
third party may obtain access to confidential information as defined
in Section VIII. herein, Hooters of America may require, as a
condition of approval of such provider, the execution of covenants of
non-disclosure and non-competition in a form provided by Hooters of
America.
T. Franchisee -shall grant Hooters of America and its agents the right to
enter upon the Restaurant premises at any reasonable time to inspect,
photograph, audiotape or videotape the Restaurant, equipment, and
operations therein to insure compliance with the provisions of this
Agreement and the "Manual"; provided, that Hooters of America, in the
exercise of such rights, shall utilize all reasonable efforts to
prevent disruption or interference with the business of the
Franchisee. Franchisee shall cooperate with Hooters of Americas
representatives in such inspections by rendering such assistance as
they nay reasonably request and shall enforce and comply with all
inspection systems established by Franchisor from time to time; and,
upon reasonable notice from Hooters of America or its agents, and
without limiting Hooters of America's other rights under this
Agreement, take such steps as may be necessary to correct immediately
the deficiencies detected during any such inspection, including,
without limitation, immediately desisting from the further use of any
equipment, advertising materials, products, or supplies that do not
conform with Hooters of America's then-current specifications,
standards, or requirements.
U. Franchisee shall 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 Hooters of America, the Restaurant, 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 restaurant image, purpose and
marketing strategy of the Hooters System, and therefore any change therefrom
would fundamentally change the nature of the business.
V. Franchisee shall give Hooters of America advance written notice of
Franchisee's intent to institute legal action against Hooters of
America, specifying the basis for such proposed action, and shall
grant Hooters of America thirty (30) days from receipt of said notice
to cure the alleged act upon which such legal action is to be based.
W. During the term of this Agreement, except as otherwise approved in
writing by Hooters of America, Franchisee and/or Franchisees
designated manager must devote his or her full time, energy and best
efforts to the management and operation of the Franchised Business.
X. In any. real. property or equipment or trade fixture lease or
financing that Franchisee executes in connection with the Franchised
Restaurant, Franchisee shall include a provision approving Franchisor
as transferee without any right to accelerate or to modify said lease
or financing, and requiring the lessor or lender to send notice of any
default by the Franchisee on said lease or financing to Franchisor at
the address provided herein and to give Franchisor thirty (30) days
from the date notice of default is delivered to Franchisor to cure
said default. Franchisor is under no duty or obligation whatsoever to
cure said default, but should Franchisor elect to cure said default,
Franchisee agrees to re-pay and to indemnify Franchisor for any costs
and expenses incurred by Franchisor in connection with the cure of
said default upon demand by Franchisor.
VI. PROPRIETARY MARKS
A. Hooters of America represents with respect to the Proprietary Marks
that:
1. Pursuant to a license agreement originally dated July 21, 1984
and subsequently amended between Hooters of America and Hooters,
Inc., a Florida corporation, Hooters of America has been granted
the exclusive right to use and to license others to use the
Proprietary Marks to establish Hooters restaurants in the United
States, except in the following areas: Hillsboro, Pasco, Citrus,
Hernando and Pinellas Counties, Florida, Dupage, Kane, Will,
Lake, McHenry and Cook Counties, Illinois.
2. Hooters of America has taken, shall take or cause to be taken all
steps reasonably necessary to preserve and protect the ownership
and validity of the Proprietary Marks.
3. Hooters of America shall permit Franchisee and other franchisees
to use the Proprietary Marks only in accordance with the Hooters
System and the standards and specifications attendant thereto
which underlie the goodwill associated with and symbolized by the
Proprietary Marks.
B. With respect to Franchisee's licensed use of the Proprietary Marks
pursuant to this Agreement, Franchisee agrees that:
1. Franchisee shall use only the Proprietary Marks designated by
Hooters of America, and shall use them only in the manner
authorized and permitted by Hooters of America. Franchisee's
right to use the Proprietary Marks is limited to such uses as are
authorized under this Agreement, and any unauthorized use thereof
shall constitute an infringement of Hooters of America's rights.
2. Franchisee shall use the Proprietary Marks only for the operation
of the Franchised Business and only at the Approved Location
authorized hereunder, or in advertising for the business
conducted at or from the Approved Location.
3. Unless otherwise authorized or required by Hooters of America,
Franchisee shall operate and advertise the ' Franchised Business
only under the name "Hooters" without prefix or suffix, except to
describe the location of their franchise. Franchisee shall not
use the Proprietary Marks as part of its corporate or other legal
name.
4. During the term of this Agreement and any renewal hereof,
Franchisee shall identify itself as the owner of the Franchised
Business in conjunction with any use of the Proprietary 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 Franchised Business as Hooters of America
may designate in writing. The form and content of such
identification shall comply with standards set forth in the
Manual.
5. Franchisee shall not use the Proprietary Marks to incur any
obligation or indebtedness on behalf of Hooters of America.
6. Franchisee shall file and maintain requisite trade name or
fictitious name registrations as shall be required and directed
by Franchisor and/or by law, and shall execute any documents
deemed necessary by Hooters of America or its counsel to obtain
protection for the Proprietary Marks or to maintain their
continued validity and enforceability.
7. In the event that litigation involving the Proprietary Marks is
instituted or threatened against Franchisee, Franchisee shall
promptly notify Hooters of America and shall cooperate fully in
defending or settling such litigation, as determined exclusively
by Franchisor.
C. Franchisee-expressly understands and acknowledges that:
1. As between the parties hereto, Hooters of America has the
exclusive right and interest in and to the Proprietary Marks and
the goodwill associated with and symbolized by them.
2. The Proprietary Marks are valid, distinctive, and serve to
identify Hooters of America as the source of the goods and
services offered pursuant to those marks and by those who are
authorized to operate under the Hooters System.
3. Franchisee shall not directly or indirectly contest the validity,
distinctiveness, the ownership or Hooters of America's right to
license the Proprietary Marks.
4. Franchisee's use of the Proprietary Marks pursuant to this
Agreement does not give Franchisee any ownership interest or
other interest in or to the Proprietary Marks, except the license
granted by this Agreement. In the event Hooters substitutes
different Proprietary Marks, Franchisee shall be responsible for
the costs associated with such a change in connection with the
Franchised Business.
5. Any and all goodwill arising from Franchisee's use of the
Proprietary Marks in its franchised operation under the Hooters
System shall inure solely and exclusively to Hooters of America's
benefit, and upon expiration or termination of this Agreement and
the license herein granted, no monetary amount shall be assigned
as attributable to any goodwill associated with Franchisee's use
of the Hooters System or the Proprietary Marks.
6. The right and license of the Proprietary Marks granted hereunder
to Franchisee is nonexclusive, and Hooters of America thus has
and retains the rights, among others:
a. To use the Proprietary Marks itself in connection with
selling products and services;
b. To grant other licenses for the Proprietary Marks, in
addition to those licenses already granted to existing
franchisees; and
c. To develop and establish other systems using similar
Proprietary Marks, or any other proprietary marks, and to
grant licenses or franchises thereto at any locations)
whatsoever without providing any rights therein to
Franchisee.
7. Franchisee understands and acknowledges that Franchisor and
Hooters, Inc. each 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 Proprietary Marks licensed hereunder or other names
or marks, including without limitation, products included as part
of the Hooters System. Franchisee shall not under any
circumstances engage in any wholesale trade or sale of Hooters
System products for resale.
VII. HOOTERS OF AMERICA MANUALS
A. In order to protect the reputation and goodwill of Hooters of America
and to maintain high standards of operation under Hooters of America's
Proprietary Marks, Franchisee shall conduct its business in accordance
with this Agreement and Training manuals and/or Videotapes, described
herein as the "Manuals" (one copy of which Franchisee shall
acknowledge in writing upon receipt has been received on loan from
Hooters of America for the term of this Agreement), other written
directives which Hooters of America may issue to Franchisee from time
to time whether or not such directives are made part of the Manuals,
and any other manuals, videotapes, and materials created or approved
for use in the operation of the Franchised Business by Franchisor,
from time to time.
B. Franchisee shall at all times treat the Manuals, any written
directives of Hooters of America, any restaurant plans and
specifications, and any other manuals created for or approved for use
in the operation of the Franchised 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.
C. The Manuals, written directives', other manuals and materials, and any
other confidential communications provided or approved by Hooters of
America, shall at all times remain the sole property of Hooters of
America and shall :it all times be kept and maintained in a secure
place on the Restaurant premises.
D. Hooters of America 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 Franchised 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.
E. 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 Hooters of America at Hooters of America's headquarters shall be
controlling..
F. Any suggestions Franchisee may have concerning the improvement of
products, equipment, uniforms, restaurant facilities, service format
and advertising are encouraged and shall be considered by Hooters of
America when adopting or modifying the standards, specifications and
procedures for the Hooters System.
VIII. CONFIDENTIAL INFORMATION
A. Franchisee shall strictly comply with the terms of the Confidentiality
Agreement attached hereto and made a part hereof (hereinafter the
"Confidentiality Agreement").
B. At Hooters of America's request, Franchisee shall require its
principals, managers and any other personnel having access to any
confidential information from Hooters of America to execute and
deliver the Confidentiality Agreement.
C. Franchisee acknowledges that any failure to comply with the
requirements of the Confidentiality Agreement or this Section VIII.
shall cause Hooters of America irreparable injury, and Franchisee
agrees to pay, in addition to other damages, all court costs and
reasonable attorney's fees incurred by Hooters of America in obtaining
specific performance of, or an injunction against violation of, the
requirements of this Section VIII.
IX. ACCOUNTING AND RECORDS
A. Franchisee shall maintain during the term of this Agreement, and shall
preserve for at least two (2) years from the dates of their
preparation, full, complete, and accurate books, records, and accounts
prepared in accordance with generally accepted accounting principles
consistently applied and in the form and manner prescribed by Hooters
of America from time to time in the Manuals or otherwise in writing.
B. Franchisee shall submit to Hooters of America during the term of this
Agreement, after the opening of the Hooters Restaurant, (a) a royalty
report, on a four (4) week accounting period basis in the form
prescribed by Hooters of America from time to time, accurately
reflecting all Gross Sales during each preceding four week accounting
period, and such other data or information as Hooters of America may
require, from time to time, said report to be received by Franchisor
within ten (10) days from the date of expiration of each such four
(4)-week accounting period; and (b) profit and loss statements,
balance sheets and trial balances prepared in accordance with
generally accepted accounting principles, consistently applied, for
each accounting period, to be received by Franchisor within fifteen
(15) days after the date of expiration of each period covered by the
report, (c) copies of all tax returns relating to sales at the Hooters
Restaurant to be received by Franchisor within ten (10) days of the
end of the state sales tax reporting period, and (d) such other data
or information as Hooters of America may require, from time to time.
C. Franchisee shall, at its expense, provide to Hooters of America a
profit and loss statement and balance sheet, accompanied by a review
report certified by the President or Chief Financial Officer of
Franchisee, within ninety (90) days after the end of each fiscal year
of the Franchised Business during the term hereof, showing the results
of operations of the Franchised Business during said fiscal year.
Hooters of America also reserves the right to require Franchisee to
'have such review report prepared by an independent certified public
accountant satisfactory to Hooters of America.
D. Franchisee shall also submit to Hooters of America, for review or
auditing, such other forms, reports, records, sales tax returns
information, and data as Hooters of America may reasonably designate,
in the forms and at the times and places reasonably required by
Hooters of America, upon request and as specified from time to time in
the Manuals or otherwise in writing. Franchisee shall provide to
Hooters of America, or its designee, on forms designated for use by
Hooters of America, reports of daily receipts, vendor purchases,
payroll payments, and such other-forms, reports, records, and
information as Hooter's of America may request from time to time.
Franchisee shall also report all discounts" allowances and premiums
received from vendors.
E. Hooters of America or its designated agents shall have the right, at
all reasonable times, to examine and copy, at Hooters of America's
expense, the books, records, and tax returns of Franchisee and the
Franchised Business. Hooters of America shall also have the right, at
any time, to have an independent audit made of the books of the
Franchised Business. If an inspection should reveal that any payments
to Franchisor have been understated in any report to Hooters of
America, then Franchisee shall immediately pay to Hooters of America
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 Hooters of America 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 Franchisors discretion, submit
audited financial statements prepared, at Franchisee' expense, by an
independent certified public accountant satisfactory to Hooters of
America. 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 XIII. hereof. The foregoing remedies shall be in
addition to any other remedies Hooters of America may have pursuant to
this Agreement and as provided at law and in equity.
F. Franchisee hereby grants permission to Hooters of America to release
to Franchisee's landlord, lenders or prospective landlords or lenders!
any financial and operational information relating to Franchisee
and/or the Hooters Restaurant; however, Hooters of America has no
obligation to do so.
G. Franchisee shall follow and adhere to the daily accounting and
reporting procedures as required by Hooters of America, from time to
time, and shall purchase accounting and reporting equipment including,
but not limited to, point of sale equipment as required by Hooters of
America. The point of sale equipment to be used in the Hooters
Restaurant shall possess several important features in order to
facilitate the operation and internal accounting control of the
Franchised Business. The hardware of the point of sale system shall
contain the following, without limitation:
1. A highly sensitive keyboard for fast input;
2. Controlled access to management functions such as item voids,
sales reports, refunds and adjustments;
3. Remote printer to aid in the service of beer and wine;
4. Internal communication among cash registers;
5. Check printer to document the detail of all sales transactions;
6. Capability to provide telecommunications to a central polling
location; and
7. A hard copy slip printer for guest checks.
Additionally, the software of the point of sale system shall contain the
following, without limitation:
1. Security key and password identification for each employee,
allowing the point of sale system to provide detailed sales
information for each employee;
2. Detailed sales tracking ability including, but not limited to,
hourly sales, department sales, customer counts, sales for the
individual employees and accounting period to date sales
information; and
3. communication or polling ability for all sales information to be
retrieved by Franchisee or Franchisor.
X. ADVERTISING
Recognizing the value of advertising and the importance of the standardization
of advertising programs to the furtherance of the goodwill and public image of
the Hooters System, the parties agree as follows:
A. Hooters of America may, from time to time, provide to Franchisee, at
Franchisee's expense, such advertising and promotional plans and
materials as Hooters of America deems advisable for local advertising.
Franchisee shall spend a minimum of three percent (3%) of Franchisee's
Gross Sales. on local advertising and promotion annually. In the event
that Hooters of America establishes a local/regional advertising
cooperative, Franchisee will be required to spend one percent (1%) of
the three percent (3%) local advertising expenditure on or through
such advertising cooperative. In addition, Hooters of America may
develop advertising programs for the promotion of the Proprietary
Marks or merchandise offered at Hooters restaurants.
B. Franchisee may undertake additional advertisement and promotion of the
Restaurant at Franchisee's election. All advertising and promotion by
Franchisee in any manner or medium shall conform to such standards and
requirements as are specified by Hooters of America. Franchisee shall
submit to Hooters of America for its prior written approval (except
with respect to product prices to be charged) , samples of all
advertising and promotional plans and materials that Franchisee
desires to use and which have not been prepared or previously approved
by Hooters of America. Franchisee shall display the Proprietary Marks
in the manner prescribed by Hooters of America on all signs and all
other advertising and promotional materials used in connection with
the Franchised Business.
C. Franchisee shall obtain listings and place advertisements in the white
and yellow pages of local telephone directories, in the form, size and
type of directories specified by Hooters of America.
D. (a) Franchisee agrees to make continuing monthly contributions to the
National Advertising Fund as required by Hooters of America in an
amount equal to one percent (1%) of Franchisee's Gross Sales.
Franchisee agrees that the National Advertising Fund shall be
maintained and administered by Hooters of America, or its designee, on
terms determined by Hooters of America -and that the Franchisor or its
designee will direct all advertising and/or promotional programs with
sole discretion over the concepts, materials and media used in such
programs and the placement and allocation thereof. Franchisee
acknowledges that the National Advertising Fund shall be used to
maximize general public recognition and acceptance of the Proprietary
Marks and all Hooters restaurants, and that Hooters of America is not
obligated in administering the National Advertising Fund to undertake
expenditures for Franchisee which are equivalent to Franchisee's
contribution, or to ensure that any particular franchise owner
benefits directly or pro rata from expenditures by the National
Advertising Fee. Upon written request of --------- Franchisee, Hooters
of America will furnish or cause to be furnished to Franchisee, not
more than once annually, an accounting of receipts and disbursements
of the National Advertising Fund.
(b) The National Advertising Fund, all contributions thereto, and any
earnings thereon, will be used exclusively to meet any and all
costs of maintaining, administering, researching, directing, and
preparing advertising and/or promotional activities.
(c) All sums paid by the Franchisee to the National Advertising Fund
will be maintained in an account separate from the other monies
of the Franchisor, and will not be used to defray any of the
Franchisor's expenses, except for such reasonable administrative
costs and overhead as the Franchisor may incur in activities
reasonably related to the administration or direction of the
National Advertising Fund and advertising programs for the
franchisees under the Hooters System. The National Advertising
Fund will not otherwise inure to the benefit of the Franchisor.
The Franchisor or its designee will maintain separate bookkeeping
accounts for the National Advertising Fund.
(d) It is anticipated that all contributions to and. earnings of the
National Advertising Fund will be expended for advertising and/or
promotional purposes during the taxable year within which the
contributions and earnings are received. if, however, excess
amounts remain in the National Advertising Fund at the end of
such taxable year, all expenditures in the following taxable
year(s) will be made first out of accumulated earnings from
previous years, next out of earnings-in-the-current year, and
finally from contributions.
(e) The National Advertising Fund is not and will not be an asset of
the Franchisor or its designee.
(f) Although the National Advertising Fund is intended to be of
perpetual duration, the Franchisor retains the right to terminate
the National Advertising Fund. The National Advertising Fund will
not be terminated, however, until all monies in the National
Advertising Fund have been expended for advertising and/or
promotional purposes or returned to contributors on the basis of
their respective contributions.
E. Franchisee is encouraged, although not required, to take part in
promotional programs which may be developed by Hooters of America.
However, Franchisee may be required to participate in cooperative
advertising programs with certain suppliers or approved sources of
goods. Franchisee shall have the right to sell its products and offer
services at any price Franchisee may determine, and shall in no way be
bound by any price which may be recommended or suggested by Hooters of
America.
XI. INSURANCE
A. Franchisee shall procure, or cause to be procured, prior to the
commencement of any operations under this Agreement, and shall
maintain, or cause to be maintained, in full force and effect at all
times during the term of this Agreement, at Franchisee's expense, an
insurance policy or policies insuring Franchisee and Hooters of
America, and their respective officers, directors, shareholders,
partners, and employees, as additional insured, against any demand or
claim with respect to personal injury, death, or property damage, or
any loss, liability, or expense whatsoever arising or occurring upon
or in connection with the Franchised Business.
B. 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 Hooters of America 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 coverages and higher policy limits may be specified by
Hooters of America from time to time), the following initial minimum
coverage:
1. (i) Commercial General Liability Insurance, including coverages
for products-completed operations, contractual liability,
personal and advertising injury, fire damage, medical expenses,
and liquor liability, having a combined single limit for bodily
injury and property damage of $1,000,000 per occurrence and
$2,000,000 in the aggregate (except for fire damage and medical
expense coverages, which may have different limits of not less
than $50,000 for one fire and $5,000 for one person,
respectively); plus (ii) non-owned automobile liability insurance
and., if Franchisee owns f rents or identifies any vehicles with
any Proprietary Mark or vehicles are used in connection with the
operation of the Franchised Business, automobile liability
coverage for owned, non-owned, scheduled and hired vehicles
having limits for bodily injuries of $100,000 per person and
$300,000 per accident, and property damage limits of $50,000 per
occurrence; plus (iii) excess liability umbrella coverage for the
general liability and automobile liability coverages in an amount
of not less than $5,000,000 per occurrence and aggregate. All
such coverages shall be on an occurrence basis and shall provide
for waivers of subrogation.
2. Franchisee shall also maintain comprehensive crime and blanket
employee dishonesty insurance in an amount of not less than
$100,000.
3. All-risk property insurance, including theft and flood coverage
(when applicable), written at replacement cost value covering the
building, improvements, furniture, fixtures, equipment, food and
beverage products. 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.
4. Employer's Liability and Worker's compensation Insurance, as
required by state law.
5. Business interruption insurance of not less than Fifty Thousand
Dollars ($50,000.00) per month for loss of income and other
expenses with a limit of not less than six (6) months of
coverage.
C. 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 Hooters of America, nor shall
Franchisee's performance of that obligation relieve it of liability
under the indemnity provisions set forth in Section XVIII of this
Agreement.
D. Prior to the opening of the Hooters Restaurant and thereafter at least
thirty (30) days prior to the expiration of any such policy or
policies, Franchisee shall deliver to Hooters of America 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 Hooters of America in the event of material alteration to
termination, non-renewal, or cancellation of, the coverages evidenced
by such certificates.
XII. TRANSFER OF INTEREST
A. Transfer by Hooters of America:
Hooters of America shall have the right to transfer or assign all or
any part of its rights or obligations herein to any person or legal
entity.
B. Transfer by Franchisee:
1. Franchisee understands and acknowledges that the rights and
duties set forth in this Agreement are personal to Franchisee,
and that Hooters of America has granted this Agreement in
reliance on information provided by Franchisee relating to
Franchisee's business skill, financial capacity, and personal
character. Accordingly, Franchisee agrees that Hooters of
America's express prior written consent shall be a necessary
condition precedent to the sale, assignment, transfer,
conveyance, gift, pledge, mortgage, encumbrance., or
hypothecation of any of the following:
a. any direct or indirect interest in this Agreement or the
franchise and license granted hereunder;
b. any direct or indirect interest in Franchisee, except that,
if the Franchisee is a corporation, the interest of a
stockholder may be transferred to another existing and
approved shareholder of the corporation and, 'if the
Franchisee is a 'partnership,,, the partnership interest of
a partner may be transferred to another existing and
approved partner of the partnership; and
c. Restaurant, the Approved Location, or all or substantially
all of the assets of the Franchised Business.
2.Hooters of America, in its sole discretion, except as herein
specifically provided, may withhold its consent to a transfer of
any interest in Franchisee, this Agreement, or the franchise;
provided, however, in all events, Hooters of America may, at its
sole discretion, require any or all of the following as
conditions of its approval:
a. All of Franchisee's accrued monetary obligations and all
other outstanding obligations to Hooters of America., its
subsidiaries, and its affiliates shall have been satisfied;
b. 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 Hooters of America, its subsidiaries or
affiliates and, at the time of transfer, shall not be in
default thereof;
c. The transferor shall have executed a general release under
seal, in a form satisfactory to Hooters of America, of any
and all claims against Hooters of America 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;
d. The transferee (and, if the transferee is .other than an
individual, such principals and/or owners of a beneficial
interest in the transferee as Hooters of America may
request) shall enter into a written assumption agreement, in
a form satisfactory to Hooters of America, assuming and
agreeing to discharge all of Franchisee's obligations under
this Agreement and/or any new franchise agreement, as
hereinafter provided;
e. The transferee shall demonstrate to Hooters of America's
satisfaction that the transferee meets Hooters of America's
educational, managerial, and business standards; possesses a
good moral character, business reputation, and credit
rating; has the aptitude and ability to conduct the
Franchised Business (as may be evidenced by prior related
business experience or otherwise) ; and has adequate
financial resources and capital to operate the Franchised
Business.
f. The transferee (and, if the transferee is other than an
individual, such principals and/or owners of a beneficial
interest in the transferee as Hooters of America 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 Hooters System
franchisees and such other ancillary agreements as Hooters
of America may require for the Franchised 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 as provided in Section IV. A.;
g. The transferee, at its expense, shall upgrade the Restaurant
to conform to the then-current standards and specifications
of the new entry Hooters System and shall complete the
upgrading and other requirements within the time specified
by Hooters of America;
h. Franchisee shall remain liable for all of the obligations to
Hooters of America in connection with the Franchised
Business prior to the effective date of the transfer and
shall execute any and all instruments reasonably requested
by Hooters of America to evidence such liability;
i. 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..
j. At the transferees 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 Hooters of
America may reasonably require;
k. Except in the case of a transfer to a corporation
wholly-owned by the Franchisee and formed for the
convenience of ownership, transferee shall pay a transfer
fee in an amount equal to twenty (20%) per cent of the then
current initial franchise fee charged by Franchisor.
l. The transferee shall agree to a sublease or to a transfer
and assignment, and assumption of the lease of the
Restaurant site for the original franchisee and shall obtain
the landlord's approval if required prior to any transfer or
sublease, if applicable.
m. The Franchisee and the transferee shall execute and deliver
a transfer agreement in the form attached hereto or the then
current form of transfer agreement approved by the
Franchisor.
3. Franchisee acknowledges and agrees that each condition which must
be met by the transferee is necessary to assure such transferee's
full performance of the obligations hereunder.
4. If the contract of sale between Franchisee and transferee
provides for installment payments of the purchase price of any
such sale of assets or stock of the Franchisee', the terms of any
such transaction must be expressly preapproved in writing by
Franchisor. Franchisee seller shall remain personally liable to
Franchisor for payment of the Fees owed by the transferee until
the installment payments of the purchase price and any related
compensation or remuneration are paid and satisfied. Such
installment payments, compensation and/or remuneration shall be
subordinate to the Fees to be paid to Franchisor under the
Franchise Agreement then if effect for the Restaurant.
C. Transfer to Franchisee's CorDoration:
Franchisee reserves the right to transfer and assign all of its right, title and
interest under this Franchise Agreement relating to an Approved Location to a
corporation or partnership owned and controlled by Franchisee, or shareholders
of the Franchisee, and formed for the convenience of ownership and operation of
the Restaurant, subject to compliance with the requirements otherwise set forth
in this Agreement and the satisfaction of the following additional requirements
as provided in (1) below to be delivered to Franchisor upon such transfer and
assignment and, thereafter, upon request by Franchisor, from time to time:
1. Franchisee or, if Franchisee is a corporation, the shareholders
of Franchisee shall be and at all times shall remain the owner of
a majority of the stock and a majority of the voting control of
such corporation (or, if a partnership, the sole general partner
and the owner of a majority of the partnership interests of said
partnership);
2. The transferee corporation or partnership shall comply, except as
otherwise approved in writing by Franchisor, with the
requirements set forth in Section V.B. throughout the term of
this Agreement.
3. Franchisee agrees to remain responsible and liable for the
performance by Franchisee and such transferee corporation or
partnership of all of the terms and provisions of this Franchise
Agreement.
D. Right of First Refusal:
1. The Franchisee and any party holding any interest in the
Franchisee who desires to accept any bona fide offer from a third
party to purchase such interest shall notify Hooters of America
in writing of each such offer, and shall provide such information
and documentation relating to the offer as Hooters of America may
require, including a true copy of any such offer. Hooters of
America shall have the right and option, exercisable within
twenty (20) business days after receipt of such written
notification, to send written notice to the seller that Hooters
of America intends to purchase the seller's interest on the same
terms and conditions offered by the third party. To enable
Hooters of America to determine whether it will exercise its
option, Franchisee and the seller shall provide such information
and documentation, including financial statements, as Hooters of
America may require. In the event that Hooters of America elects
to purchase the seller's interest, closing on such purchase must
occur within ninety -(90)---days-,from the-date-of-notice-to-the
seller of the election to purchase by Hooters of America. Failure
of Hooters of America to exercise the option afforded by this
Section XII-D. shall not constitute a waiver of any other
provision of this Agreement, including all of the requirements of
this Section XII., with respect to a proposed transfer. Any
change in the terms of any offer prior to closing shall
constitute a new offer subject to the same rights of first
refusal by Hooters of America as in the case of an initial offer.
2. In the event the consideration, terms, and/or conditions offered
by a third party are such that Hooters of America nay not
reasonably be required to furnish the same consideration, terms,
and/or conditions, then Hooters of America may purchase the
interest in the Franchised Business proposed to be sold for the
reasonable equivalent in cash. If the parties cannot agree within
a reasonable time on the cash consideration, an independent
appraiser experienced in appraising business similar to the
Restaurant shall be designated by Hooters of America, and
determination by such appraiser shall be conclusive and binding
on all parties.
E. Transfer Upon Death or Mental Incompetency:
Upon the death or mental incompetency of the Franchisee or any person with an
interest or beneficial interest in the Franchise, the executor, administrator,
or personal representative of such person shall transfer within one (1) year
after such death or mental incompetency such interest to an existing approved
shareholder of Franchisee, or to a third party approved by Hooters of America,
which approval shall not be unreasonably withheld. Mental incompetency, for
purposes of this Franchise Agreement, shall mean the appointment of a guardian
for the subject party by a court of competent jurisdiction. Such transfers,
including, without limitation, transfers by devise or inheritance, shall be
subject to the same conditions as any inter vivos transfer. However, in the case
of transfer by devise or inheritance, if the heirs or beneficiaries of any such
person are unable to satisfy the conditions in this Section XII. within said one
(1) year period, Hooters of America may terminate this Agreement or may exercise
its option to purchase the Hooters Restaurant at fair market value, as
determined by an independent appraiser designated by Hooters of America which
determination by such appraiser shall be conclusive and binding on all parties.
F. "Interim--operation--of-the-Restaurant:
Pending assignment, upon the death of Franchisee or its operating principal, or
in the event of any temporary or permanent mental or physical disability of
Franchisee or its operating principal, a manager shall be employed for the
operation of the Restaurant who has successfully completed Franchisor's training
courses to operate the Restaurant for the account of Franchisee. If after the
death or disability of Franchisee or the operating principal of Franchisee the
Restaurant is not being managed by such trained manager, Hooters of America is
authorized to appoint a manager to maintain the operation of the Restaurant
until an approved assignee will be able to assume the management and operation
of the Restaurant, but ih no event f or a period exceeding one (1) year without
the approval of Franchisee, the personal representative of Franchisee, or
Franchisee's successor in interest; such manager shall be deemed an employee of
the Franchisee. All funds from the operation of the Restaurant during the period
of management by such appointed or approved manager shall be kept in a separate
fund and all expenses of the Restaurant, 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, Hooters
of America shall charge such fund the full amount of the direct expenses
incurred by Hooters of America during such period of management for and on
behalf of Franchisee ' provided that Hooters of America shall only have a duty
to utilize reasonable efforts and shall not be liable to Franchisee or its
owners for any debts, losses or obligations incurred by the Restaurant, or to
any creditor of Franchisee for any merchandise, materials, supplies or services
purchased by the Restaurant during any period in which it is managed by a
Hooters of America-appointed or approved manager.
G. Non-Waiver of Claims:
Neither Hooters of America's consent to any proposed transfer of any interest in
the franchise granted herein, nor Hooters of America's failure to exercise its
option to purchase any interest of a seller, shall be deemed to constitute a
waiver of any claims it may have-against the transferring party or entity, nor
shall it be deemed a waiver of Hooters of America's right to demand exact
compliance with any of the terms of this Agreement by any transferor or
transferee, any future rights or options of Hooters of America, or any provision
of this Agreement.
XIII. DEFAULT AND TERMINATION
A. Franchisee shall be deemed to be in default under this Agreement, and
all rights granted herein shall automatically terminate without notice
to Franchisee, upon the occurrence of any of the following events:
1. If Franchisee shall become insolvent or makes a general
assignment for the benefit of creditors;
2. If a petition in bankruptcy is filed or a case in bankruptcy is
commenced by Franchisee, or against Franchisee and is not opposed
by Franchisee;
3. If Franchisee is adjudicated as bankrupt or becomes insolvent, in
Franchisor's reasonable determination, which shall mean any one
or more of the following conditions that appertain - to
Franchisee: (i) The fair value of its property is less than the
amount required to pay all of its indebtedness, including
contingent debts; (ii) The present fair saleable value of its
owned property is less than the amount that will be required to
pay all of its existing indebtedness as such becomes absolute and
matured; (iii) Franchisee is unable to pay all of its
indebtedness as such indebtedness matures, or (iv) Franchisee's
capital is insufficient to carry on its business transactions and
all business transactions in which it is about to engage.
4. 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,
5. If a receiver or other custodian (permanent or temporary) of the
Restaurant, Franchisee, or Franchisee's assets or property, or
any part thereof, is appointed by any court of competent
jurisdiction;
6. If proceedings for a composition with creditors under any state
or federal law should be instituted by or against Franchisee;
7. If a final judgment remains unsatisfied or of record for thirty
(30) days or longer (unless supersedes bond is filed) ; or if
Franchisee is dissolved;
8. If execution is levied against Franchisee's business or property;
9. If any real or personal property of Franchisee's Restaurant shall
be sold after levy thereupon by any sheriff., marshal, or
constable;
10. If Franchisee (or, if Franchisee is a corporation or partnership,
any principal of Franchisee) is convicted of or pleads nolo
contenders to a felony, fraud, sale of illegal drugs, a crime
involving moral turpitude or any other crime that is directly
related to Franchisee's conduct of the Franchised Business, or
any other crime that Hooters of America determines to have an
adverse effect on the Restaurant, the Hooters System, the
Proprietary Marks, the goodwill associated therewith, or Hooters
of America's interest therein;
11. If, in violation of the terms of Sections VII. or VIII. hereof,
or the Confidentiality Agreement, Franchisee, its principals,
representatives, agents or employees disclose or divulge the
contents of the Manuals or other confidential information
provided to Franchisee by Hooters of America, or if Franchisee
maintains false books or records, or submits any false reports to
Hooters of America;
12. If any inspection of Franchisee's records discloses an
understatement of payments due Hooters of America of four percent
(4%) or more;
13. If Franchisee or any principal of Franchisee is convicted in a
court of competent jurisdiction of an indictable offense
punishable by a term of imprisonment in excess of one (1) year
that is directly related to the business conducted pursuant to
this Agreement;
14. If Franchisee's alternate candidate for management training shall
not adequately complete such management training program, after
either Franchisee or Franchisees designated individual previously
failed to complete adequately the management training;
15. If an approved transfer is not effected within the time set forth
in Section XII.E. hereof, following Franchisee's or the principal
of Franchisee's death or mental incompetency;
16. Except as otherwise provided in this Franchise Agreement, if
Franchisee at any time ceases to operate or otherwise abandons
the Franchised Business, or otherwise forfeits the right to do or
transact business in the jurisdiction where the Restaurant is
located; or
17. In the event of the gross negligence or willful breach of this
Franchise Agreement by the Franchisee, or any of the principals
of the Franchisee, in the breach of any of the covenants of the
Franchisee contained in this Agreement.
B. Except as provided in Sections XIII.A., XIII.C. and XIII.D. of this
Agreement, Franchisee shall have five (5) days after its receipt from
Hooters of America of a written notice of termination within which to
remedy any default hereunder (or, if the default cannot reasonably be
cured within such five (5) days, to initiate within that time
substantial and continuing action to cure the default), and to provide
evidence thereof to Hooters of America. If any such default is not
cured within that time (or, if appropriate, substantial and continuing
action, in continuity, to cure the default is not initiated within
that time), or such longer period as provided herein or as applicable
law may require, this Agreement shall terminate with reference to such
Approved Location(s) wherein said default shall occur without further
notice to Franchisee effective immediately upon expiration of the five
(5) day period or such longer period as applicable law may require.
Franchisee shall be in default hereunder for any failure to comply
with any of the requirements imposed by this Agreement or the Manuals,
as it may from time to time reasonably be supplemented, or to carry
out the terms of this Agreement. Such defaults shall include, without
limitation, the occurrence of any of the following events:
1. If Franchisee fails, refuses, or neglects promptly to pay when
due any monies owing to Hooters of America or its subsidiaries or
affiliates, the National Advertising Fee or to submit the
financial or other information required by Hooters of America
under this Agreement, or makes any false statements in connection
therewith;
2. If Franchisee sells unauthorized products or products not meeting
Franchisor's specifications;
3. If Franchisee fails to maintain any of the standards or
procedures prescribed by Hooters of -America in this - Agreement,
the Manuals, or otherwise in writing; or
4. If Franchisee fails to maintain the character and nature of the
Restaurant through alteration of the product selection, product
restrictions, image, design or inventory.
C. Except as provided in Sections XIII.A., XIII.B. and XIII.D. of this
Agreement, Franchisee shall have ten (10) days after its receipt from
Hooters of America of a written notice of termination within which to
remedy any default hereunder (or, if the default cannot reasonably be
cured within such ten (10) days, to initiate within that time
substantial and continuing action to cure the default), and to provide
evidence thereof to Hooters of America. If any such default is not
cured within that time (or, if appropriate, substantial and continuing
action in continuity to cure the default is not initiated within that
time) , or such longer period as applicable law may require, this
Agreement shall terminate with reference to such Approved Location(s)
wherein said default shall occur without further notice to Franchisee
effective immediately upon expiration of the ten (10) day period or
such longer period as applicable law may require. Franchisee shall be
in default hereunder for any failure to comply with any of the
requirements imposed by this Agreement or the Manuals, as it may from
time to time reasonably be supplemented, or to carry out the terms of
this Agreement in good faith. Such defaults shall include, without
limitation, the occurrence of any of the following events:
1. If a threat or danger to public health or safety results from the
maintenance or operation of the Restaurant which is not
immediately corrected by Franchisee;
2. If Franchisee or any partner of or shareholder in Franchisee
purports to transfer any rights or obligations under this
Agreement or any interest in Franchisee to any third party
without Hooters of America's prior written consent, contrary to
the terms of Section XII. of this Agreement;
3. If Franchisee fails to comply with the in-term covenants in
Section XV.B. hereof or fails to obtain execution of the
covenants required under Section VIII.B. or Section XV.I. hereof;
or
4. If Franchisee, after curing a default pursuant to 'Section -
XIII. C. hereof , commits the " same - act - of default two
additional times within one (1) year of the initial act of
default.
D. Except as provided in Sections XIII.A., XIII.B. and XIII.C. of this
Agreement, Franchisee shall have thirty (30) days after its receipt
from Hooters of America of a written notice of termination within
which to remedy any default hereunder (or, if the default cannot
reasonably be cured within such thirty (30) days, to initiate within
that time substantial and continuing action to cure the default), and
to provide evidence thereof to Hooters of America. If any such default
is not cured within that time (or, if appropriate, substantial and
continuing action to cure the default is not initiated within that
time) ' or such longer period as applicable law -may require, this
Agreement shall terminate with reference to such Approved Location(s)
wherein said default shall occur without further not-ice to Franchisee
effective immediately upon expiration of the thirty (30) day period or
such longer period as applicable law may require. Franchisee shall be
in default hereunder for any failure to comply with any of the
requirements imposed by this Agreement or the Manuals, as it may from
time to time reasonably be supplemented, or to carry out the terms of
this Agreement in good faith. Such defaults shall include, without
limitation, the occurrence of any of the following events:
1. If Franchisee's alcoholic beverage license is revoked or
suspended for any reason;
2. If Franchisee misuses or makes any unauthorized use of the
Proprietary Marks or otherwise materially impairs the goodwill
associated therewith or Hooters of America's rights therein;
3. If Franchisee engages in any business or markets any service or
product under a name or mark which, in Hooters of America's
opinion, is confusingly similar to the Proprietary Marks or the
Hooters System;
4. If Franchisee, by act or omission, commits or permits a violation
of any terms and provisions of this Franchise Agreement not
specifically addressed in this Section, or of any law, ordinance,
rule or regulation of a governmental agency, in the absence of a
good faith dispute over its application or legality and without
promptly resorting to an appropriate administrative or judicial
forum for relief therefrom;
5. If Franchisee fails to a maintain a responsible credit rating by
failing to make prompt payment of undisputed bills, invoices and
statements from suppliers of goods and services to the Hooters
Restaurant;
6. If Franchisee, without the prior written consent of Hooters of
America, enters into a management agreement or consulting
arrangement relating to the Hooters Restaurant with any person or
with an entity not wholly owned by Franchisee;
7. If Franchisee defaults under a lease for or relating to the
Restaurant, or under any mortgage, chattel mortgage, conditional
bills of sale, title retention contracts or security agreements
of every kind or character, and does not cure such default within
any grace period provided by the lease or security instrument; or
8. If Franchisee fails to pay on a timely basis its taxes or other
governmental charges, rent., lease payments, or payments to
suppliers, contractors, or trade creditors.
9. If the current liabilities of Franchisee exceed the current
assets of Franchisee, as shown on any balance sheet of Franchisee
furnished to the Franchisor; provided that a default of this
nature must be cured within the original thirty (30) day cure
period, and its cure may be effected solely by delivery of (i) an
audited or unaudited balance sheet of Franchisee, dated as of the
end of the month preceding the last day of the cure period,
demonstrating that the current assets of Franchisee exceed the
current liabilities of Franchisee, and (ii) a written
certification, executed by the chief executive officer and the
chief accounting officer of Franchisee, that the balance sheet is
accurate and that as of the date of the certification,
Franchisee's current assets exceed its current liabilities.
E. Any and all claims (except for monies due Franchisor) arising out of
or related to the offer, sale, negotiation, administration and
termination of this Agreement, or the relationship between or among
the parties hereto, shall be barred unless an action at law or in
equity is properly filed in a court of competent jurisdiction within
one (1) year from the date Franchisee or Franchisor knows or should
have known of the fact giving- -rise -to -such- -claim except -to -the
- extent any applicable 'law or statute provides for a shorter period
of time to bring a claim.
XIV. OBLIGATIONS UPON TERMINATION OR EXPIRATION Upon termination or expiration
of this Agreement, all rights granted hereunder to Franchisee shall forthwith
terminate, and:
A. Franchisee shall immediately cease to operate the business franchised
under this Agreement ' and shall not thereafter, directly or
indirectly, represent to the public or hold itself out as a present or
former franchisee of Hooters of America.
B. Franchisee shall immediately and permanently cease to use, in any
manner whatsoever, any confidential methods, procedures and techniques
associated with the Hooters System; the Proprietary Mark "Hooters"; or
all other Proprietary Marks and distinctive forms, slogans, signs,
symbols, and devices associated with the Hooters System. In
particular, Franchisee shall cease to use, without limitation, all
signs, advertising materials, displays, stationery, forms, and any
other articles which display the Proprietary Marks; provided, however,
that this Section XIV.B. shall not apply to the operation by
Franchisee of any other franchise under the Hooters System which may
be separately and independently granted by Hooters of America to
Franchisee.
C. Franchisee shall take such action as may be necessary to cancel any
assumed name or equivalent registration which contains the mark
"Hooters" or any other service mark or trademark of Hooters of
America, and Franchisee shall furnish Hooters of America with
confirmation that this obligation has been fulfilled within thirty
(30) days after termination or expiration of this Agreement.
D. 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
Proprietary Marks, either in connection with such other business or
the promotion thereof, which is likely to cause confusion, mistake, or
deception, or which is likely to dilute Hooters of America's rights in
and to the Proprietary 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 Hooters of
America or the Hooters, System.
E. Franchisee shall promptly pay to Franchisor (a) all sums owing to
Hooters of America and its subsidiaries and affiliates accrued through
the effective date of termination following performance by the
Franchisee of the provisions of Section XIV, and (b) an amount equal
to the Fee payable by Franchisee for the thirteen (13) four (4)-week
periods prior to the date of notice by Franchisor to Franchisee of
termination of this Agreement (or if this Agreement is terminated
prior to the expiration of thirteen (13) four (4)-week periods, then
the amount of such Fees payable by Franchisee projected to said
thirteen (13) four (4)-week periods], and (c) all costs and expenses,
including reasonable attorney's fees, incurred by Hooters of America
as a result of the default, which obligation, until paid in full '
shall be and constitute a lien in favor of Hooters of America against
any and all cf the personal property, furnishings, equipment, signs,
fixtures inventory and assets owned by Franchisee and on the premises
operated hereunder at the time of default. The Franchisor and the
Franchisee specifically acknowledge and agree that the damage to
Franchisor from Franchisee's default hereunder would be difficult or
impossible to accurately determine, and that the sums payable by
Franchisee to Franchisor, as herein provided, are a reasonable
estimate of Franchisor's damages and does not constitute a penalty.
F. Franchisee shall pay to Hooters of America all damages, costs, and
expenses, including reasonable attorney's fees, , incurred by Hooters
of America in obtaining injunctive or other relief for the enforcement
of any provisions of Section XIV.
G. Franchisee shall immediately deliver to Hooters of America all
manuals, including the Manuals, records, files, instructions,
correspondence,. all materials related to operating the Franchised
Business, including, without limitation, brochures, agreements,
invoices, and any and all other materials relating to the operation of
the Franchised Business in Franchisee's possession, and all copies
thereof (all of which are acknowledged to be Hooters of America's
property), and shall retain no copy or record of any of the foregoing,
except Franchisee's copy of this Agreement and of any correspondence
between the parties and any other documents which Franchisee
reasonably needs for compliance with any provision of law.
H. Within ten (10) days from the date of termination of this Agreement,
Franchisee and Hooters of America shall arrange f or an, inventory -
to --be - made, -at -- Hooters- of America's cost if required by
Hooters of America, of all of the assets of the Restaurant, including
without limitation resalable merchandise, decor package, signs, and
any items containing the Proprietary Marks related to the operation of
the Restaurant. Hooters of America shall have the option to purchase
from Franchisee any or all such items at fair market value, as
determined by an independent appraiser designated by Hooters of
America, which determination by such appraiser shall be conclusive and
binding on all parties; such option may be exercised by Hooters of
America within thirty (30) days from the date of receipt of such
appraisal, for closing of purchase and sale within thirty (30) days
from the date of exercise of such option.
XV. COVENANTS
A. Franchisee covenants that during the term of this Agreement, except as
otherwise approved in writing by Hooters of America, Franchisee shall
devote his full time, energy, and best efforts to the management and
operation of the Franchised Business hereunder.
B. 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 Hooters of America and the Hooters System. Franchisee covenants
that, during the term of this Agreement'. except as otherwise approved
in writing by Hooters of America, 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 tin ' e employed by Hooters of
America or by any other franchisee or affiliate of Hooters of America,
or otherwise directly or indirectly induce such person to leave his or
her employment.
C. Franchisee covenants that, except as otherwise approved in writing by
Hooters of America, 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 conti