Prompt pita case
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PPFranchiseAgreement-Final2-15-132.pdf
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Prompt Pita Franchise
Franchise Agreement
OMAHA, NE
Franchise Owner _
Date of Agreement ------ - -------
Restaurant Address -- - - - - ------
Prompt Pita, LLC • 4423 15
th Street • Kansas City, MO 64101 • 816-443-8950 • www.promptpita.com
TABLE OF CONTENTS
• I. PREAMBLES, ACKNOWLEDGMENTS, AND GRANT OF FRANCHISE
A. PREAMBLES...................................................................................................1 B. ACKNOWLEDGMENTS. ..................................................................................2 C. CORPORATION, LIMITED LIABILITY COMPANY, OR
PARTNERSHIP....................................................................................................3 D. GRANT OF FR ANCHISE................................................................................4
E. RIGHTS WE RESERVE...................................................................................5
F. THE EXERCISE OF OUR JUDGMENT........................................................5 G. MODIFICATION OF FRANCHISE SYSTEM................................................5
2. SITE SELECTION, LEASE OF PREMISES, AND DEVELOPMENT AND
OPENING OF RESTAURANT....................................................................................6 A. SITE SELECTION............................................................................................6
B. LEASE OF PREMISES......................................................................................7 C. RESTAURANT DEVELOPMENT...................................................................7 D. OPERATING ASSETS.....................................................................................8
E. COMPUTER SYSTEM.....................................................................................9
F. RESTAURANT OPENING...............................................................................9
3. FE A. A.
ES............................................................................................................................10 INITIAL FRANCHISE FEE............................................................................10 1010101010110 B. CONTINUING SERVICE AND ROYALTY FEE...........................................10
C. DEFINITION OF "GROSS SALES"..............................................................10 D. LATE FEES AND INTEREST......................................................................10 E. APPLICATION OF PAYMENTS...................................................................11
F. METHOD OF PAYMENT..............................................................................11
4. TRAINING AND ASSISTANCE. .................... .........................................................11
A. TRAINING......................................................................................................11 B. GENERAL GUIDANCE................................................................................. 14
C. OPERATIONS MANUAL..............................................................................15 D. DELEGATION OF PERFORMANCE............................................................16
5. MARKS. ......................................................................................................................16
A. OWNERSHIP AND GOODWILL OF MARKS.............................................16
B. LIMITATIONS ON YOUR USE OFMARKS............................................... I6
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS. ...........................16
D. DISCONTINUANCE OF USE OF MARKS.....................................................17 E. INDEMNIPTCATTON FOR USE OF MARKS...............................................18
6. CONFIDENTIAL INFORMATION.........,.............................................................. 19
7. EXCLUSIVE RELATIONSHIP...................................................................................19
8. SYSTEM STANDARDS.............................................................................................20
A. COMPLIANCE WITH SYSTEM STANDARDS..........................................20
B. MODIFICATION OF SYSTEM STANDARDS...........................................23
9. MARKETING..................................................................................................:' ...........24 A GRAND OPENING ADVERTISING. ............................................................24 B. ADVERTISING AND DEVELOPMENT FUND...........................................24 C. BY YOU. ........................................................................................,................26 D COOPERATIVE ADVERTISING PROGRAMS.............................................26
E. REGIONAL ADVISORY COUNCIL..............................................................30
10. RECORDS, REPORTS, AND FINANCIAL STATEMENTS. .......,...................,........30
11. INSPECTIONS AND AUDITS....................................................................................31
A. OUR RIGHT TO INSPECT THE RESTAURANT. ...............................................31 B. OUR RIGHT TO AUDIT.................................................................................31
12. TRANSFER.................................................................................................................32 A. BY US..............................................................................................................32 B. BY YOU..........................................................................................................32 C. CONDITIONS FOR APPROVAL OF TRANSFER.....................................33 D. TRANSFER TO A WHOLLY-OWNED CORPORATION OR
LIMITED LIABILITY COMPANY...............................................................35 E. YOUR DEATH OR DISABILITY..................................................................35 F. EFFECT OF CONSENT TO TRANSFER......................................................36 G. OUR RIGHT OF FIRST REFUSAL...............................................................37
13. EXPIRATION OF THIS AGREEMENT....................................................................38
A. YOUR RIGHT TO ACQUIRE A SUCCESSOR FRANCHISE.....................38 B. GRANT OF A SUCCESSOR FRANCHISE...................................................39 C. AGREEMENTS/RELEASES..............................................................................40
14. TERMINATION OF AGREEMENT..........................................................................40 A. BY YOU.................... .........................................................................................40 B. BY US..............................................................................................................41 C. ASSUMPTION OF MANAGEMENT............................................................43
15. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION OF THIS AGREEMENT...........................................................44 A. PAYMENT OF AMOUNTS OWED TO US..................................................44 B. MARKS...........................................................................................................44 C. CONFIDENTIAL INFORMATION. ..........................,...............................45 D. COVENANT NOT TO COMPETE................................................................45 E. OUR RIGHT TO PURCHASE RESTAURANT............................................46 F. LIQUIDATED DAMAGES............................................................................48 G. CONTINUING OBUGATIONS....................................................................48
16. RELATIONSHIP OF THE PARTIES INDEMNIFICATION...................................48
A. INDEPENDENT CONTRACTORS. ............................................................ 48 B. NO LIABILITY FOR ACTS OF OTHER PARTY........................................49 C. TAXES.............................................................................................................49 D. INDEMNIFICATION......................................................................................49
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17. ENFORCEMENT......................................................................................................50 A. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS..........50 B. WAIVER OF OBLIGATIONS........................................................................50 C. COSTS AND ATTORNEYS' FEES...............................................................51 D. YOU MAY NOT WITHHOLD PAYMENTS DUE TO US..........................51 E. RIGHTS OF PARTIES ARE CUMULATIVE...............................................52 F. ARBITRATION..................................................................................,...........52 G. GOVERNING LAW........................................................................................53 H. CONSENT TO JURISDICTION.....................................................................53 I. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL..........................54 J. BINDING EFFECT..............................................,..........................................54 K. LIMITATIONS OF CLAIMS.........................................,...............................54 L. CONSTRUCTION...........................................................................................54
18. NOTICES AND PAYMENTS.....................................................................................56
19. COMPLIANCE WITH ANTI-TERRORISM LAWS. ...............................................56
EXHIBITS
EXHIBIT A LISTING OF OWNERSH1P INTERESTS EXHIBIT B REFUNDS AND CANCELLATION EXHIBIT C DELIVERY AREA
GUARANTY AND ASSUMPTION OF OBLIGATIONS
PROMPT PITA, INC.
FRANCHISE
AGREEMENT THIS FRANCHISE AGREEMENT (the "Agreement") is made. and entered into as of ___day of , 20__ (the "Effective Date") (regardless of the dates of the parties' signatures) by and between PROMPT PITA FRANCHISE, INC., a Missouri corporation with its principal business address at 4423 15
th Street, Kansas City,
Missouri 64101 ("we," "us," or “our''), a n d _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ whose principal business address is _______________________________________________ ("you" or "your").
l. PREAMBLES, ACKNOWLEDGMENTS, AND GRANT OF FRANCHISE.
A. PREAMBLES.
(I) We and our affiliates have, over a considerable time period and with considerable effort, developed (and continue to develop and modify) a system and franchise opportunity for the operation of restaurants providing carry-out, delivery, and (at certain locations) on-premises dining services and featuring gourmet pita sandwiches, fresh-baked breads, and other food and beverage products (collectively, "Menu Items"). Menu Items are prepared according to our specified recipes, standards, and procedures and use high quality ingredients, including our specially formulated and specially produced proprietary lines of bread dough, meats, and other food products (collectively, 'Trade Secret Food Products") and food products (not constituting Trade Secret Food Products) that are branded, trademarked, and/or packaged exclusively for our system and franchise owners (collectively, "Branded Products"). (Branded Products also are defined
to include non-food products that are branded, trademarked, and/or packaged exclusively for our system and franchise owners.) These restaurants operate under the "PROMPT PITA®" name and other trademarks ("PROMPT PITA® Restaurants") and have distinctive business formats, methods, procedures, designs, layouts, standards, and specifications, all of which we may improve, further develop, or otherwise modify from time to time.
(2) We and our affiliates currently use, promote, and license certain trademarks, service marks, and other commercial symbols in operating P R O M P T P I T A ® Restaurants, w h i c h h a v e gained and will continue to gain public acceptance and goodwill, and may create, use, and license new t r ademarks, service marks, and commercial symbols for PROMPT PITA® Restaurants (collectively, the "Marks"). We use and sublicense the Marks with the permission of our affiliate, Prompt Pita Enterprises, Inc. ("PPE"), the owner of the Marks.
(3) We grant to persons who meet our qualifications, and are willing to undertake the investment and effort, a franchise to own and operate a PROMPT PITA® Restaurant offering the Menu Items and services we authorize and using our and PPE's business formals, methods, procedures, signs, designs, layouts, standards, specifications, and Marks (the "Franchise System'').
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(4) As a PROMPT PITA® Restaurant franchise owner, you must comply with this Agreement and all mandatory specifications, standards, operating procedures, and rules (collectively, "System Standards") that we periodically prescribe for operating a PROMPT PITA® Restaurant in order to maintain the high and consistent quality that is critical to attracting and keeping customers for PROMPT PITA® Restaurants. '
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(5) You have applied for a franchise to own and operate a PROMPT PITA®
Restaurant.
B. ACKNOWLEDGMENTS.
You acknowledge:
(!) That you have independently investigated the PROMPT PITA® Restaurant
franchise opportunity and recognize that, like any other business, the nature of the PROMPT PITA®
Restaurant will evolve and change over time.
(2) That an investment in a PROMPT PITA® Restaurant involves business risks that
could result in the loss of a significant portion or all of your investment.
(3) That your business abilities and efforts are vital to your success.
(4) That attracting customers for your PROMPT PITA® Restaurant will require
you to make consistent marketing efforts in your community through various methods, including
media advertising, direct mail advertising and couponing, and display and use of in-restaurant
promotional materials.
(S) That retaining customers for your PROMPT PITA® Restaurant will require you
to have a high level of customer service and to adhere strictly to the Franchise System and
our System Standards and that you are committed to maintaining System Standards.
(6) That you have not received from us, and are not relying upon, any representations
or guarantees, express or implied, as to the potential volume, sales, income, or profits of a
PROMPT PITA® Restaurant, that any information you have acquired from other PROMPT
PITA® Restaurant franchise owners regarding their sales, profits, or cash flows was not
information obtained from us, and that we make no representation about that information's
accuracy.
(7) That in all of their dealings with you, our officers, directors, employees, and agents act only in a representative, and not in an individual, capacity and that business dealings between you and them as a result of this Agreement are deemed to be only between you and us.
(8) That you have represented to us, to induce our entry into this Agreement, that all statements you have made and all information you have given us are accurate and complete and
that you have made no misrepresentations or material omissions in obtaining the Franchise.
(9) That you have read this Agreement and our Franchise Offering Circular and understand and accept that this Agreement's terms and covenants are reasonably necessary for us to maintain our high standards of quality and -service, as well as the
uniformity of those standards at each PROMPT PITA® Restaurant, and to protect and preserve the goodwill of the Marks. ·
' (I 0) That we will restrict your sources of Trade Secret Food Products and
Branded Products and have the right to restrict your sources of other items as well, as
provided in various sections of this Agreement, including Subsection 8.A.(4) below.
(11) That we have not made any representation, warranty, or other claim regarding this PROMPT PITA® Restaurant franchise opportunity, other than those made in this Agreement and our Franchise Offering Circular, and that you have independently evaluated this opportunity, including by using your own business professionals and advisors, and have relied solely upon those evaluations in deciding to enter into this Agreement.
(12) That you have been afforded an opportunity to ask any questions you have and to review any appropriate materials of interest to you concerning the PROMPT PITA® Restaurant franchise opportunity.
(13) That you have been afforded an opportunity, and have been encouraged by us, to have this Agreement and all other agreements and materials we have given or made available to you reviewed by an attorney and have either done so o r intentionally chosen not to do so.
(14) That you have a net worth that is sufficient to make the investment in the PROMPT PITA® Restaurant franchise opportunity represented by this Agreement, and you will have sufficient funds to meet all of your obligations under this Agreement.
C. CORPORATION, LIMITED LIABILITY COMPANY, OR PARTNERSHIP.
If you are at any time a corporation, limited liability company, or general, limited, or limited liability partnership (collectively, an "Entity"), you agree and represent that:
( I ) You will have the authority to execute, deliver, and perform your obligations under this Agreement and all related agreements and are duly organized or formed and validly existing in good standing under the laws of the state of your incorporation or formation;
(2) Your organizational documents, operating agreement, or partnership agreement, as applicable, will recite that this Agreement restricts the issuance -and transfer of any ownership interests i n you, and a l l c e r t i f i c a t e s and other documents representing ownership interests in you will bear a legend (which we may prescribe) referring to this Agreement's restrictions; ·
(3) Exhibit A to this Agreement completely and accurately describes all of your owners and their interests in you as of the Effective Date;
(4) Each of your owners, except for an "Operations Partner" (defined below) during this Agreement's term will execute a Guaranty and Assumption of Obligations in the form we prescribe undertaking personally to be bound, jointly and severally, by all
provisions of this Agreement and any ancillary agreements between you and us. Subject
to our rights and your obligations under Section 12, you and your owners agree to sign
and deliver to us revised Exhibits A to reflect any permitted changes in the information
that Exhibit A now contains;
(5) You must appoint a shareholder. member, or partner, depending on the
Entity, to be your "Managing Owner," responsible for overseeing and supervising the
operation of the RESTAURANT (defined in Subsection D below). The Managing
Owner as of the Effective Date is identified in Exhibit A. You also may appoint an
"Operations Partner," defined as an individual whom you hire to manage the
RESTAURANT on a day-to-day basis, who reports to the Managing Owner, and who has
the right to receive up to ten percent (10%) of your outstanding ownership interests as a
performance incentive. Any Operations Partner must sign the form we prescribe
undertaking personally to be bound, jointly and severally, by the non-monetary
obligations in this Agreement. You may replace the Operations Partner as you deem
appropriate, although a replaced Operations Partner must relinquish its ownership interest in
you , a replacement Operations Partner must satisfactorily complete our training
requirements, and you must identify for us any new or replacement Operations Partners.
An Operations Partner may not at any time transfer its ownership interest in you except to you or any of your then existing owners. The Operations Partner as of the Effective Date
is identified in Exhibit A; and
(6) The RESTAURANT and other PROMPT PITA® Restaurants, if
applicable, will be the only businesses you operate (although your owners may have other, non-competitive business interests).
D. GRANT OF FRANCHISE.
You have applied for a franchise to own and operate a PROMPT PITA® Restaurant at
(the "Premises"). (If
you have not found a site as of the Effective Date, the Premises will not be identified until you
do so, as provided in Subsection 2.A. below.) Subject to this Agreement's terms, we grant you a
franchise (the "Franchise") to operate a PROMPT PITA® Restaurant (the "RESTAURANT") at
the Premises, and to use the Franchise System in its operation, for a term beginning on the
Effective Date and expiring ten (1.0) years from the first day of the term of the Lease (defined
below), u n l e s s sooner terminated under Section 14. You may use the Premises o n l y f o r
t h e RESTAURANT. You may engage in delivery services only as provided in Exhibit C. If the
blanks in Exhibit C are not filled in, or if Exhibit C is not signed by you and us, that means that
your and our intent is that you may not engage in any delivery services.
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You agree at all times faithfully, honestly, and diligently to perform your obligations under this Agreement and to use your best efforts to promote the RESTAURANT.
E. RIGHTS WE RESERVE. \
You acknowledge that the Franchise is nonexclusive, that you have no territorial protection whatsoever (even if you provide delivery services), and that we (and our affiliates) retain the right at all times during this Agreement's term to engage in any and al l activities that we (and they) deem appropriate, wherever and whenever we (and they) desire, and whether or not such activities compete with your RESTAURANT, including, without limitation, the right to:
(1) establish and operate, and allow others to establish and operate, PROMPT PITA® Restaurants at any locations and in any areas, other than at the Premises;
(2) establish, and allow others to establish, other businesses and distribution channels (including, but not limited to, the Internet), wherever located or operating, that operate under the Marks or any other trademarks or service marks; that are the same as or different from PROMPT PITA® Restaurants; and that sell products and/or services that
are identical or similar to, and/or competitive with, those that PROMPT PITA® Restaurants customarily sell; and
(3) engage in all other activities not expressly prohibited by this Agreement.
F . THE EXERCISE OF OUR JUDGMENT.
We have the right to operate, develop, and change the Franchise System in any manner that is not specifically prohibited b y this Agreement Whenever we have reserved in this Agreement a right to take or to withhold an action, or to grant or decline to grant you a right to take or omit an action, we may, except as otherwise specifically provided in this Agreement, make our decision or exercise our rights based on information readily available to us and our judgment of what is in the best interests of us, PROMPT PITA® Restaurant franchisees generally, or the Franchise System at the time our decision is made, without regard to whether we could have made other reasonable or even arguably preferable alternative decisions or whether our decision promotes our financial or other individual interest.
G. MODIFICATION OF FRANCHISE SYSTEM.
Because complete and detailed uniformity under many varying conditions might not be possible or practical, you acknowledge that we specifically reserve the right and privilege, as we consider to be best, to vary System Standards for any franchise owner based upon the peculiarities of any condition or factors that we consider important to that franchise owner's successful operation. You have no right to require us to grant you a similar variation or accommodation.
2. SITE SELECTION, LEASE OF PREMISES, AND DEVELOPMENT AND OPENING OF RESTAURANT.
A. SITE SELECTION.
If you have not yet located a site for the Premises as of the Effective Date, then, within twelve (12) months after the Effective Date, you agree to purchase, or sign a lease for, a suitable site for the RESTAURANT within the following non-exclusive general area: - - -- - -- OMAHA, NE You agree to obtain our written approval of the RESTAURANT's proposed site before signing any lease, sublease, or other document for the site. We will use reasonable efforts to help analyze your market area, to help determine site feasibility, and to assist in designating the location, although we will not conduct site selection activities for you. It is your responsibility to locate a site for the Premises that satisfies our site selection criteria. We will not unreasonably withhold our approval of a site that meets our criteria for demographic characteristics; traffic patterns; parking; character of neighborhood; competition from, proximity to, and nature of other businesses; other commercial characteristics; and size, appearance, and other physical characteristics.
You agree to send us a description of the proposed site, including a summary of the items listed above, along with a letter of intent or other evidence confirming your favorable prospect for obtaining the proposed site. We will approve or disapprove the proposed site within thirty (30) business days after receiving your written proposal. After you find and secure the site, we will insert its address into Subsection 1 . D. above, and it will be the Premises. You may operate the RESTAURANT only at the Premises, although you may deliver Menu Items prepared at the Premises if Exhibit C has been completed and signed by you and us and you comply with our System Standards for delivery services.
If no acceptable site is found by you and approved by us within twelve (12) months after the Effective Date, then, upon written notice from either you or us, this Agreement will be terminated. In that event, we will return to you all but Five Thousand Dollars ($5,000) of the initial franchise fee if you sign our required form of release of claims. However, if we submitted to you in writing during that twelve (12) month period two (2) or more proposed sites for the RESTAURANT within your market area that were acceptable to us, but you refused to accept one of them and therefore found no acceptable site within the twelve (l2) month period, then upon termination of this Agreement we will keep all of the Initial franchise fee.
You acknowledge and agree that, if we recommend or give you information regarding a site proposed for the Premises, that is not a representation or warranty of any kind, express or implied, of the site's suitability for a PROMPT PITA® R e s t a u r a n t any other purpose. Our recommendation indicates only that we believe the site meets our then acceptable criteria. Applying criteria that have appeared effective with other sites and premises might not accurately reflect the potential for all sites and premises, and demographic and/or other factors included in or excluded from our criteria could change, altering the potential of a site and premises. The uncertainty and instability of these criteria are beyond our control, and we are not responsible if a site and premises we recommend fail to meet your expectations. You acknowledge and agree that your acceptance of the Franchise is based on you r own independent investigation of a site's suitability for the Premises.
B. LEASE OF PREMISES.
We have the right to approve the terms of any lease or sublease for the Premises (the "Lease") before you sign it. The Lease must contain certain required terms and provisions (although we will not directly negotiate your Lease), including, but not limited to: '
(1) A provision reserving to us the right to receive an assignment of the Lease upon termination or expiration of the Franchise;
(2) A provision requiring the lessor to give us all sales and other information we request relating to the RESTAURANT's operation;
(3) A provision requiring the lessor concurrently to send us a copy of any written notice of a Lease default sent to you and granting us the right (but without any obligation) to cu re any Lease default within fifteen (15) business days after the expiration of your cure period (if you fail to do so);
(4) A provision evidencing your right to display the Marks according to the specifications in the Operations Manual (subject only to applicable law);
(5) A provision that the Premises may be used only for the operation of a PROMPT PITA® Restaurant; and
(6) A provision allowing us to enter the Premises upon the expiration or termination of this Agreement in order to remove signage and other items bearing our Marks and otherwise de-identify the Premises.
You acknowledge that our approval of the Lease is not a guarantee or warranty, express or implied, of the success or profitability of a PROMPT PITA® Restaurant operated at the Premises, Our approval indicates only that we believe that the Premises and the Lease's terms meet our then acceptable criteria.
If the Lease expires or is t e r m i n a t e d without your fault, or if the site for the Premises is destroyed, condemned, or otherwise rendered unusable, we will al low you to relocate the RESTAURANT to a new site acceptable to us. Any relocation will be at your sole expense, and we may charge you for the reasonable costs we incur, plus a reasonable fee (as set forth in the Operations Manual) for our services, in connection with any relocation of the RESTAURANT.
C. RESTAURANT DEVELOPMENT.
You are responsible for developing the RESTAURANT. We will give you mandatory and suggested specifications and layouts for a P R O M P T P I T A ® RESTAURANT, including requirements for dimensions, design, image, interior layout, decor, fixtures, equipment, signs, furnishings, and color scheme. These plans might not reflect the requirements of any federal, state, or local law, code, or regulation, including those arising under the Americans with Disabilities Act (the "ADA'') or simi.lar rules governing public accommodations for persons with disabilities. It is your responsibility to prepare a site survey and all required construction plans and specifications to suit the Premises and to make sure that these plans and specifications
comply with our requirements, the ADA and similar rules governing public accommodations for persons with disabilities, other applicable ordinances, building codes, permit requirements, and Lease requirements and restrictions.
You agree to send us construction plans and specifications for review before you begin constructing the RESTAURANT and all “revised” or “as built” plans and specifications during construction. Because our review is limited to ensuring your compliance with our design requirements, our review might not assess compliance with federal, state, or local laws and regulations, including the ADA, as compliance with these laws is your responsibility. We may inspect the Premises while you are developing the RESTAURANT.
You agree to do the following, at your own expense, to develop the RESTAURANT at the Premises:
(I) secure all funding required to develop and operate the RESTAURANT;
(2) obtain al l required building, utility, sign, health, sanitation, business, and other permits and licenses;
(3) construct all required improvements to the Premises and decorate the RESTAURANT according to approved plans and specifications;
(4) o b t a i n all customary contractors' sworn statements and partial and final waivers of lien for construction, remodeling, decorating, and installation services;
(5) purchase or lease, and install, all required fixtures, furniture, equipment (including a required or recommended computer, facsimile, and point-of-sale information system), furnishings, and signs (collectively, "Operating Assets") for the RESTAURANT; and
(6) purchase an opening inventory of authorized and approved Trade Secret Food Products, Branded Products, and other products, materials, and supplies to operate the RESTAURANT.
D. OPERATING ASSETS.
You agree to use in operating the RESTAURANT only those Operating Assets that we designate or approve for PROMPT PITA® Restaurants as meeting our specifications and standards for quality, design, appearance, function, and performance. You may not install or otherwise operate at the Premises any unauthorized vending or lotto machines. You agree to place or display at the Premises (interior and exterior), and on any permitted delivery v e h i c l e s , only the signs, emblems, lettering, logos, and display materials that we approve from time to time. You agree to purchase or lease approved brands, types, or model s of Operating Assets only from suppliers we designate or approve (which may include or be limited to us and/or our affiliates).
B. COMPUTER SYSTEM. •
You agree to obtain and use the integrated computer hardware and/or software we specify, including an integrated computer-based point-of-sale system, back office system, dedicated telephone and power lines, moderns, printers, and other computer-related accessories and peripheral equipment (the "Computer System"). We may modify specifications for and components of the Computer System. You also agree to maintain a functioning e-mail address. Our modification of specifications for t h e Computer System, and/or other technological developments or events, might require you to purchase, lease, and/or license new or modified computer hardware and/or software and to obtain service and support for the Computer System. Although we cannot estimate the future costs of the Computer System or required service or support, and although these costs might not be fully amortizable over this Agreement's remaining term, you agree to incur the costs of obtaining the computer hardware and software comprising the Computer System (or additions and modifications) and required service or support. Within sixty (60) days after you receive notice from us, you agree to obtain the Computer System components that we designate and to ensure that your Computer System, as modified, is functioning properly. We have no obligation to reimburse you for any Computer System costs.
You agree that we or our affiliates may condition any license of proprietary software to you, or your use of technology that we or our affiliates develop or maintain, on y o u r s i g n i n g the software license or similar document that we or our affiliates prescribe to regulate your use of, and our and your respective rights and responsibilities with respect to, the software or technology. We and our affiliates may charge you fees for any proprietary software or technology that we or our affiliates license to you and for other maintenance and support services that we or our affiliates provide during this Agreement's term.
Despite the fact that you agree to buy, use, and maintain the Computer System according to our standards and specifications, you will have sole and complete responsibility for: (1) the acquisition, operation, maintenance, and upgrading of the Computer System; (2) the manner in which your Computer System interfaces with our and any third party's computer system; and (3) any and all consequences if the Computer System is not properly operated, maintained, and upgraded. The Computer System shall permit twenty-four (24) hours per day, seven (7) days per week electronic communications between you and us, including access to the internet and our then current internet or extranet (if applicable).
F. RESTAURANT OPENING.
You agree not to open the RESTAURANT until:
(1 ) we notify you in writing that the RESTAURANT meets our standards and specifications (although our acceptance is not a representation or warranty, express OF implied, that the RESTAURANT complies with any engineering, licensing, environmental, labor, health, building, fire, sanitation, occupational, landlord's, insurance, safety, tax, governmental, or other statutes, rules, regulations, requirements, or recommendations nor a waiver of our right to require continuing compliance with our requirements, standards, or policies);
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(2) you (or your Managing Owner), your Operations Partner (if any), and your
other employees satisfactorily complete training;
(3) you pay the initial franchise fee and other amounts then due to us; and
(4) you give us certificates for all required insurance policies.
You agree to comply with these conditions and to open the RESTAURANT for business within sixteen (1 6) months after the Effective Date or on or before the date the Lease specifies, whichever is earlier. If you open the RESTAURANT for business before we notify you in writing that the RESTAURANT meets our standards and specifications (as required in subparagraph (1) above), you must pay us Two Thousand Five Hundred Dollars ($2,500) for
each day the RESTAURANT is open without our approval. In that event, we also may elect to terminate this Agreement under Section 14.B.
3. FEES.
A. INITIAL FRANCHISE FEE.
You agree to pay us a nonrecurring and, except as specifically provided in this Agreement, nonrefundable initial franchise fee of TWENTY FIVE THOUSAND Dollars ($ 25.000 ). This fee is due, and fully earned by us, when you sign this Agreement.
B. CONTINUING SER VICE AND ROYALTY FEE.
You agree to pay us, in the manner provided below (or as the Operations Manual
otherwise prescribes), a weekly Continuing Service and Royalty Fee (the "Royalty") equal to six percent (6%) of the RESTAURANT's Gross Sales (defined in Subsection C below). On or before Wednesday of each week, you agree to send us on a form we approve (or as we otherwise
direct) a signed statement of the RESTAURANT's Gross Sales and weekly inventory for the week ending on the immediately preceding Tuesday.. Each weekly statement of Gross Sales must be accompanied by the Royalty due for that week.
C. DEFLNITION OF "GROSS SALES".
As used in this Agreement, the term "Gross Sales" means all revenue that you derive from operating the RESTAURANT, including, but not limited to, all amounts that you receive at or away from the Premises and from selling or issuing gift or loyalty cards, and whether from cash, check, credit and debit card, barter exchange, trade credit, or other credit transactions, and also includes all of your proceeds from business interruption insurance, but (1) excludes all
federal, state, or municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing authority, and (2) is reduced by the amount of any documented refunds, credits, discounts, and charge-backs the RESTAURANT in good faith gives to customers.
D. LATE FEES AND INTEREST.
You agree to pay us a late fee for each required payment not made on or before its
original due date. This late fee will equal ten percent (10%) of the original amount due but not
paid on time. The late fee is not interest or a penalty but compensates us for increased
administrative and management costs due to your late payment. I n addition, all amounts that you
owe us for any r e a s o n , i f m o r e than seven (7} days late, will bear interest accruing as of their original due date at one and one-half percent (1.5%) per month or the highest
commercial contract interest rate the law allows, whichever is less. We may debit your bank
account automatically for late fees and interest. You acknowledge that this Subsection is not
our agreement to accept any payments after they are due or our commitment to extend credit to, or otherwise finance you r operation of the RESTAURANT.
E. APPLICATION OF PAYMENTS.
Despite any designation you make, we may apply any of your payments to any of your past due indebtedness to us. We may set off any amounts you or your owners owe us or our affiliates against any amounts we or our affiliates owe you or your owners. You may not withhold payment of any amounts you owe us due to our alleged nonperformance of any of our obligations under this Agreement.
F. METHOD OF PAYMENT.
Before the RESTAURANT opens, you agree to sign and deliver to us the documents we require to authorize us to debit your business checking account automatically for the Royalty, Fund contributions (defined below), and other amounts due under this Agreement and for your purchases of Trade Secret Food Products, Branded Products, and other items from us and/or our affiliates (the "Electronic Depository Transfer Account'' or "EDTA"). We will debit the EDTA for these amounts on their due dates. You agree to ensure that funds are available in the EDTA to cover our withdrawals and to report you r Gross Sales as we require.
If you fail to report the RESTAURANT's Gross Sales, we may debit your EDTA for one hundred twenty percent (120%) of the last Royalty and Fund contribution that we debited (together with the late fee noted in Subsection 3.D. above). If the amounts that we debit from your BDTA are less than the amounts you actually owe us (once we have determined the RESTAURANT's actual Gross Sales), we will debit your EDTA for the balance on the day we specify. If the amounts that we debit from your EDTA are greater than the amounts you actually owe us, we will credit the excess against the amounts due during the following week.
We may require you to pay any amounts due to us or our affiliates under this Agreement (or otherwise) by means other than automatic debit (e.g., by check) whenever we deem appropriate, and you agree to comply with our payment instructions.
4. TRAINING AND ASSISTANCE.
A. TRAINING.
(I) Initial Training. If this is your first PROMPT PITA® Restaurant, then you (or, if you are an Entity, you r Managing Owner) must attend an orientation session at our principal business address within three (3) months after the Effective Date.
Before the RESTAURANT opens for business, we will train you (or you r Managing Owner) and your on-site managers (which may include general managers and assistant managers), one of whom may be an Operations Partner, on the material aspects of operating a PROMPT PITA® Restaurant. We will provide three (3) weeks of training (although the specific number of days depends on our opinion of your or your Managing Owner's, and your managers' (including an Operations Partner's), experience and needs) at a designated training facility of our choice and/or at an operating PROMPT PITA® Restaurant You (or your Managing Owner) and at least one (1) of your on-site managers (which may include an Operations Partner) also must attend our apprenticeship program, which is four (4) weeks long.
We will provide the orientation session for you (or your Managing Owner) at no charge (although you must pay all travel and living expenses) and will provide initial training and the apprenticeship program for no additional fee for two (2) people. There generally are no limits on the number of people whom you may send to initial training and the apprenticeship program. However, you must pay our then current training charge for each additional person after the first two people. You also agree to pay for all travel and living expenses that you (or your Managing Owner) and all of your employees (including an Operations Partner) incur, and for your employees' wages and workers' compensation insurance, while they remain at operating PROMPT PITA® Restaurants.
You (or your Managing Owner) and your on-site managers (including an Operations Partner) must satisfactorily complete initial training and, as applicable, the apprenticeship program in order to become certified. You (or your Managing Owner) and your managers (including an Operations Partner) will not be deemed to be certified unless you and they satisfactorily complete initial training and, as applicable, the apprenticeship program.
Training will include homework assignments that the participants must successfully complete before they may proceed to the next stage. Otherwise, the participants must wait and start over at the next training program. Training also will include double shifts of at least eighteen (18) consecutive hours at an operating PROMPT PITA® Restaurant. After completing the training program, attendees must pass an operations proficiency test. As noted above, you (or your Managing Owner) and your on-site managers (including an Operations Partner) at the RESTAURANT must pass the operations proficiency test and receive management certification. You and they also must have a state health certificate. During the first year that you operate the RESTAURANT, at least two (2) certified managers (which may include your Managing Owner if the Managing Owner also will be an on-site manager) must work (between them) a total of at least ten (10) full-time shifts at the RESTAURANT each week during which time they actually supervise and are involved in the RESTAURANT's operation. The full -time shifts of these two (2) certified managers must be scheduled at different times and should not run concurrently. In other words, there must be at least ten (10) separate full-time shifts at the RESTAURANT during which at least one (1) certified manager is present and actually supervising and involved in the RESTAURANT's operation. After the first year that you operate the RESTAURANT, only one (1) certified manager must be present at the RESTAURANT each week for at least five (5) full-time shifts.
If this is your second or subsequent PROMPT PITA® Restaurant, your Managing Owner need not attend the initial training or apprenticeship programs. However, the RESTAURANT must open with two (2) certified managers and comply with the same minimum managerial requirements specified in the previous paragraph during and after the RESTAURANT's first year of operation. ( I f y o u have acquired the RESTAURANT via a transfer from another franchise owner, you must comply with the same minimum managerial requirements specified in the previous paragraph during and after the first year you operate the RESTAURANT, even if the RESTAURANT already was in operation for more than one (1) year when you acquired it.)
One of the RESTAURANT's two (2) certified managers must have attended and satisfactorily completed our three (3) week initial training and four (4) week apprenticeship programs or must have attended and satisfactorily completed our three (3) week initial training program and worked as a manager of a
PROMPT PITA Restaurant for at least six (6) months.
I f w e determine that you (or your Managing Owner) cannot complete initial training or the apprenticeship program to our satisfaction, we may terminate this Agreement, in which case we will keep one- half (1/2) of the initial franchise fee. We will return the other one-half (1/2) of the initial franchise fee to you if you sign our required form of release of claims. You agree to replace any managers (including an Operations Partner) who we believe are not qualified or suitable to bold that position and to pay our then current fee for training replacement managers (or an Operations Partner).
You (or your Managing Owner) may request additional training at the end of the initial training and apprenticeship programs, to be provided at our then current per diem charges, if you (or your Managing Owner) do not feel sufficiently trained in the operation of a P R O M P T P I T A ® Restaurant. We and you will jointly determine the duration of this additional training. However, if you (or your Managing Owner) satisfactorily complete our initial training and apprenticeship programs, and have not expressly informed us at the end of those programs that you (or your Managing Owner) do not feel sufficiently trained in the operation of a PROMPT PITA® Restaurant, then you (or your Managing Owner) will be deemed to have been trained sufficiently to operate a PROMPT PITA® Restaurant.
When the RESTAURANT is ready to open for business, we will, at our own cost, send one of our representatives to the RESTAURANT to assist during its initial opening period. You will receive twenty-four (24) hours of the representative's time if the RESTAURANT is your first PROMPT PITA® Restaurant, sixteen (16) hours of the representative's time if the RESTAURANT is your second P R O M P T P IT A ® Restaurant, and eight (8) hours of the representative's time if the RESTAURANT is your third or subsequent P R O M P T P IT A ® Restaurant. You also must successfully complete this phase of the initial training program.
If you request, and we agree to provide, additional or special guidance, assistance, or training during
this opening phase, you agree to pay our then applicable charges, including our personnel 's per diem
charges and travel and living expenses.
(2) Ongoing Training. We may require you (or your Managing Owner), any Operations Partner,
and/or other previously trained and experienced employees to attend and complete satisfactorily various
training courses that we periodically choose to provide at the times and locations that we designate.
We may charge reasonable registration or similar fees for these courses. We will not require attendance at
more than two (2) such courses, or for more than a total of ten (10) business days, during a calendar year.
Besides attending these courses, you agree to attend an annual meeting of all PROMPT PITA® Restaurant
franchise owners at a location we designate. Attendance will not be required for more than two (2) days during
any calendar year. You agree to pay all costs to attend.
I f y o u hire new or additional on-site managers for the RESTAURANT during this Agreement's term
(including a new Operations Partner), they must satisfactorily complete our then current initial training and
(depending on the experience of any remaining on-site managers) apprenticeship programs. We may charge
reasonable fees for training new managers (including Operations Partners). You agree to pay all travel and living
expenses that you and your employees incur during all training courses and programs. You agree to assist us in training other PROMPT PITA® Restaurant franchise owners. We will reimburse your out-of-pocket expenses
for providing this assistance.
You understand and agree that any specific ongoing training or advice we provide does not create an
obligation (whether by course of dealing or otherwise) to continue to provide such specific training or advice,
all of which we may discontinue and modify from time to time.
(3) Training Cancellation Fees. If you (or your Managing Owner) or any of your employees
cancel participation in any training class or apprenticeship program for which you or they pre-register
(whether in connection with the initial training program or any subsequent training), you must pay us a
cancellation fee. This cancellation fee is Fifty Dollars ($50) per person if you or they cancel more than two
(2) weeks before the class or program is scheduled to begin; One Hundred Dollars ($100) per person if you or they cancel between one (I ) and two (2) weeks before the class or program is scheduled to begin; Two
Hundred Fifty Dollars ($250) per person if you or they cancel between forty-eight (48) hours and one ( I } week before the class or program is scheduled to begin; and five Hundred Dollars ($500) if you or they cancel less
than forty-eight (48) hours before the class or program is scheduled to begin.
B. GENERAL GUIDANCE.
We may advise you from time to time regarding the RESTAURANT's operation based on your reports or our evaluations and inspections and may guide you with respect to:
( I) standards, specifications, and operating procedures and methods that PROMPT PITA® Restaurants use;
(2) purchasing required and authorized Operating Assets, Trade Secret Food Products, Branded Products, and other items and arranging for their distribution to you;
' (3) advertising and marketing materials and programs;
(4) employee training; and
(5) administrative, bookkeeping, accounting, and inventory control procedures.
We may guide you in our operations manual ("Operations Manual"); in bulletins or other written materials; by electronic media; by telephone consultation; and/or at our office or the RESTAURANT. I f y o u request, and we agree to provide, additional or special guidance, assistance, or training, you agree to pay our then applicable charges, including our personnel's per diem charges and travel and living expenses.
C. OPERATIONS MANUAL.
We will provide you access during the Franchise term to one (1) copy of our Operations Manual, which may include audio tapes, videotapes, compact disks, computer software, other electronic media, and/or written materials. T h e Operations Manual contains System Standards and information on your other obligations under this Agreement. We may modify the Operati.ons Manual periodically to reflect changes in System Standards.
You agree to keep your copy of the Operations Manual current and in a secure location at the RESTAURANT. If there is a dispute over its contents, our master copy of the Operations Manual controls. You agree that the Operations Manual's contents are confidential and that you will not disclose the Operations Manual to any person other than RESTAURANT employees who need to know its contents to perform their duties. You may not at any time copy, duplicate, record, or otherwise reproduce any part of the Operations Manual. If your copy of the Operations Manual is lost, destroyed, or significantly damaged, you agree to obtain a replacement copy at our then applicable charge.
At our option, we may post some or all of the Operations Manual on a restricted Website or extranet to which you will have access. (For purposes of this Agreement, "Website" means an interactive electronic document contained in a network of computers linked by communications software, including, without l imitation, the Internet and World Wide Web home pages). If we do so, you agree to monitor and access the Website or extranet for any updates to the Operations Manual or System Standards. Any passwords or other digital identifications necessary to access the Operations Manual on a Website or extranet will be deemed to b e part of Confidential Information (defined in Section 6 below).
D. DELEGATION OF PERFORMANCE.
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You agree that we have the right to delegate the performance of any portion or all of our obligations under this Agreement to third-party designees, wheth.er these designees are our affiliates, agents, or independent contractors with whom we contract to perform these obligations. If we do so, such third-party designees will be obligated to perform the delegated functions for you in compliance with this Agreement.
5. MARKS.
A. OWNERSHIP AND GOODWILL OF MARKS.
PROMPT PITA® has Licensed the Marks to us to use in connection with the franchising, development, and operation of P R O M P T P I T A ® Restaurants. Your right to use the Marks is derived only from this Agreement and Limited to your operating the RESTAURANT according to this Agreement and all System Standards we prescribe during its term. Your unauthorized use of the Marks is a breach of this Agreement and infringes our and PROMPT PITA’s rights in the Marks. You acknow1edge and agree that your use of the Marks and any goodwill established by that use are exclus ively for our and PROMPT PITA’s benefit and that this Agreement does not confer any goodwill or other interests in the Marks upon you (other than the right to operate the RESTAURANT under this Agreement). All provisions of this Agreement relating to the Marks apply to any additional proprietary trade and service marks we authorize you to use. You may not at any time during or after this Agreement's term contest or a s s i s t any other person in contesting the validity, or our and PROMPT PITA’s ownership, of the Marks.
B LIMITATIONS ON YOUR USE OF MARKS.
You agree to use the Marks as the RESTAURANT's sole identification, except that you agree to identify yourself as its independent owner in the manner we prescribe. You may not use any Mark (1) as part of any corporate or legal business name, (2) with any prefix, suffix, or other modifying words, terms, designs, or symbols (other than logos we have licensed to you), (3) in selling any unauthorized services or products, (4) as part of any domain name, homepage, electronic address, or otherwise in connection with a Website, or (5) in any other manner that we
have not expressly authorized in writing. If we discover your unauthorized use of the Marks, we may require you to destroy all offending items reflecting such unauthorized use.
You may not use any Mark in advertising the transfer, sale, or other disposition of the RESTAURANT or an ownership interest in you without our prior written consent, which we will not unreasonably withhold. You agree to display the Marks prominently as we prescribe at the RESTAURANT and on uniforms, forms, advertising, supplies, and other materials we designate. You agree to give the notices of trade and service mark registrations that we specify and to obtain any fictitious or assumed name registrations required under applicable law.
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
You agree to notify us immediately of any apparent infringement or challenge to your use of any Mark, or of any person's claim of any rights in any Mark, and not to communicate with any person other than us, PROMPT PITA, and our attorneys, and your attorneys, regarding any infringement, challenge, or claim. We and P R O M P T
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P I T A may take the action we deem appropriate (including no action) and control exclusively any litigation, U. S. Patent and Trademark Office ·proceeding, or other administrative proceeding arising from any infringement, challenge, or claim or otherwise concerning any Mark. You agree to sign any documents and take any other reasonable action
that, in the opinion of our and PROMPT PITA's attorneys, are necessary or advisable to protect and maintain our and PROMPT PITA's interests in any litigation o f t h e Patent and Trademark Office or other proceeding or otherwise to protect and maintain our and PROMPT PITA's interests in the Marks. We or PROMPT PITA will reimburse you for your costs of taking any action that we or PROMPT PITA has asked you to take.
D. DISCONTINUANCE OF USE OF MARKS.
If it becomes advisable at any time for us, PROMPT PITA, and/or you to modify, discontinue using,
and/or replace any Mark and/or to use one or more additional, substitute, or replacement trade or service marks together with or in lieu of any previously designated Mark, you agree to comply with our directions within a
reasonable time after receiving notice. We and PROMPT PITA need not reimburse you for your direct expenses of changing the RESTAURANT's signs, for any loss of revenue due to any modified or discontinued Mark, or
for your expenses of promoting a modified or substitute t:rademarkor service mark.
Our rights in this Subsection D apply to any and all of the Marks (and any portion of any Mark) that we authorize you to use in this Agreement. We may exercise these rights at any time and for any reason, business or
otherwise, that we. think best. You acknowledge both our right to take this action and your obligation to comply with
our directions.
E. INDEMNIFICATION FOR U S E O F MARKS.
We agree to reimburse you for all damages and expenses that you incur in any trademark infringement
proceeding disputing your authorized use of any Mark under this Agreement if you have timely notified us of, and comply with our directions in responding to, the proceeding. At our option, we and/or PROMPT PITA may defend
and control the defense of any proceeding arising from your use of any Mark under this Agreement.
6. CONFIDENTIAL INFORMATION.
We and PROMPT PITA possess (and will continue to develop and acquire) certain confidential information,
some of which constitutes trade secrets under applicable law (the "Confidential Information”), relating to developing and operating PROMPT PITA® Restaurants, including (without limitation):
( l) site selection criteria;
(2) recipes for Trade Secret Food Products;
(3) training and operations materials and manuals;
(4) methods, formats, specifications, standards, systems. procedures, food preparation techniques,
sales and marketing techniques, knowledge, and experience used in developing and operating PROMPT
PITA'S® Restaurants;
(5) marketing and advertising programs for PROMPT PITA 'S® Restaurants; ..
(6) knowledge of specifications for and suppliers of Operating Assets, Trade
Secret Food Products, Branded Products, and other products and supplies:
(7) any computer software or similar technology that is proprietary to us, PP, or the Franchise System, including, without limitation, digital passwords and identifications and any source code of, and data, reports, and other printed material s generated by, the software or
similar technology;
(8) knowledge of the operating results and financial performance of P R OMPT P IT A ® Restaurants other than the RESTAURANT; and
(9) graphic designs and related intellectual property.
You acknowledge and agree that you will not acquire interest in Confidential Information, other than the right to use it as we specify in operating the RESTAURANT during this Agreement's term, and that Confidential Information is proprietary, includes our and PP's trade secrets, and is disclosed to you only on the condition that you agree, and you hereby do agree, that you:
(a) will not use Confidential Information in any other business or capacity;
(b) will keep confidential each item deemed to be a part of Confidential Information, both during this Agreement's term and then afterward for as long as the item is not generally known in the food-service industry;
(c) will not make unauthorized copies of any Confidential Information disclosed via electronic medium or in written or other tangible form; and
(d) w i l l adopt and implement reasonable procedures to prevent unauthorized use or disclosure of Confidential Information, including, without lin1itation, restricting its disclosure to RESTAURANT personnel and others and using non-disclosure and non- competition agreements with those having access to Confidential Information. We have the right to regulate the form of agreements that you use and to be a third party beneficiary of those agreements with independent enforcement rights. You must keep copies of those agreements and send them to us upon request.
Confidential Information does not include information, knowledge, or know-bow that you can demonstrate lawfully came to your attention before we provided it to you directly known in the food- service industry through publication or communication by others (without violating any obligation to us or PROMPT PITA); or that, after we disclose it to you, lawfully becomes generally known i n the food-service industry through publication or communication by others (without violating an obligation to us or PP). However, if we include any matter in Confidential Information, anyone who claims that it is not Confidential Information must prove that one of the exclusions provided in this paragraph is satisfied.
All ideas, concepts, techniques, or materials relating to a PROMPT PITA’S® Restaurant property and whether created by or for you or your owners or employees, must be promptly disclosed to us and will be deemed to be our and PROMPT PITA's sole and exclusive property, part of the Franchise System, and works made-for-hire
for us and PROMPT PITA. To the extent that any item does not qualify as a "work made-for-hire" for us and PROMPT PITA by this paragraph you assign ownership of that item, and all related rights to that item, to us and PROMPT PITA and agree to take whatever action (including signing assignment or other documents) we request to evidence our and PROMPT PITA's ownership or to help us and PROMPT PITA obtain intellectual property rights in the item.
7. EXCLUSIVE RELATIONSHIP.
You acknowledge that we have granted you the Franchise in consideration of and reliance upon your
agreement to deal exclusively with us. You therefore agree that, during this Agreement's term, neither you, any of
your owners, nor any of your or your owners' spouses will:
(a) have any direct or indirect controlling interest as an owner - whether of record,
beneficially, or otherwise - in a Competitive Business, wherever located or operating;
(b) have any direct or indirect non-controlling interest as an owner - whether of record, beneficially, or otherwise - in a Competitive Business, wherever located or operating (except that equity ownership of less than two percent (2%) of a Competitive Business whose stock or other forms of
ownership interest are publicly traded on a recognized United States stock exchange will not be deemed to violate this subparagraph);
(c) perform services as a director, officer, manager, employee, consultant, representative, or
agent for a Competitive Business, wherever located or operating;
(d) recruit or hire any person then employed, or who was employed within the immediately
preced.ing twelve (12) months, by us, any of our affiliates, or a franchise owner –or who is still bound
(even if it has been more than 12 months) by a restrictive covenant in an agreement with us, any of our
affiliates, or a franchise owner -without obtaining the existing or former employer's prior written
permission. If you breach this subparagraph (d) by hiring any person whom you are prohibited from
hiring, then in addition to other rights and remedies, you must pay us or the affected employer Fifty
Thousand Dollars ($50,000) as compensation for, among other things, the administrative, hiring, retraining,
and related costs that we or the affected employer will incur. If any of our affiliates or franchise owners is the affected employer under this subparagraph due to your actions, that affiliate or franchise owner will be
a third party beneficiary of .this provision with an independent right to enforce it against you. If you engage in these prohibited activities, we also may elect to terminate this Agreement under Section 14.8.;
(e) divert or attempt to divert any actual or potential business or customer of the
RESTAURANT to a Competitive Business; or
(f) engage in any other activity that might injure the goodwill of the Marks and Franchise System.
The term "Competitive Business" means (i) any restaurant or other food-service business that derives more than ten percent ( 1 0 % ) of its revenue from selling pita-style sandwiches or (ii) any business granting franchises or
licenses to others to operate the type of business specified in subparagraph (i) (other than a PROMPT PITA® Restaurant operated under a franchise agreement with us).
You agree to obtain similar covenants from the personnel we specify, including officers, directors, managers
(including Operations Partners), and other employees attending our training program or having access to Confidential
Information. We have the right to regulate the form of agreement that you use and to be a third party beneficiary of
that agreement with independent enforcement rights. You must keep copies of those agreements and send them
to us upon request.
8. SYSTEM STANDARDS.
A. COM PLIANCEWITH STANDARDS.
You acknowledge and agree that operating and maintaining the RESTAURANT according to System
Standards are essential to preserve the goodwill of the Marks and all PROMPT PITA'S® Restaurants. Therefore, you agree at all times to operate and maintain the RESTAURANT according to all of our System
Standards, as we periodically modify and supplement them, even if you believe that a System Standard, as
originally issued or subsequently modified, is not in the Franchise System's or the RESTAURANT's best interests.
Although we retain the right to establish and periodically modify System Standards that you have. agreed to maintain,
you retain the right to control, and responsibility for, the day-to-day management and operation of the
RESTAURANT and implementing and maintaining System Standards at the RESTAURANT.
System Standards may regulate any one or more of the following:
(1) design, layout, decor, appearance, and lighting of the RESTAURANT; periodic
maintenance, cleaning, and sanitation; periodic remodeling and painting; replacing obsolete or worn-out
leasehold improvements and Operating Assets; and using interior and exterior signs, emblems, lettering, and
logos.
(If at any time the appearance or condition of the Premises, RESTAURANT, or Operating Assets does
not meet our standards, we will notify you and identify the action that you must take to correct the deficiency.
If, within thirty (30) days after our notice, you fail to correct the deficiency, we may enter the Premises and RESTAURANT and take the required action on your behalf, in which case you agree to pay us immediatel y all
related costs. The costs you incur for remodeling, painting, and replacing obsolete or worn-out leasehold
improvements and Operating Assets (other than the Computer System and signage) according to our standards
are included in the amounts that we may require you to spend in Subsection 8.B. below. The other items,
including the Computer System and signage, are not subject to or calculated in the spending limitations identified in
Subsection 8.B below);
(2) types, models, and brands of required Operating Assets, Trade Secret Food
Products, Branded Products, other food products, and supplies and 'minimum standards and
specifications that you must satisfy;
(3) required and/or authorized Menu items, Trade Secret Food Products, and Branded
Products; unauthorized and prohibited food products, beverages, and services; purchase, storage,
cooking, preparation, handling, and packaging procedures and techniques for Menu Items,
Trade Secret Food Products, and Branded Products; and inventory requirements for Trade Secret
Food Products, Branded Products, and other products and supplies so that the RESTAURANT may
operate at full capacity;
(4) designated and approved suppliers of Operating Assets, Trade Secret Food Products, Branded Products, and other items. In the case of Trade Secret Food Products and Branded Products, suppliers will be limited to us, our affiliates, and/or other specified exclusive sources, and you agree to acquire such Trade Secret Food Products and Branded Products during this Agreement's term only from us, our affiliates, and/or the other specified exclusive sources at the prices we or they decide to charge. (We restrict your sources of Trade Secret Food Products and Branded Products in order to protect our trade secrets, assure quality, assure a reliable supply of products that meet our standards, achieve better terms of purchase and delivery service, control usage of the Marks by third parties, and monitor the manufacture, packaging, processing, and sale of such items.)
In the case of Operating Assets and items other than Trade Secret Food Products and Branded Products, suppliers may at our option be limited to us, our affiliates, and/or other specified exclusive
sources, in which case you will (at our direction) have to acquire such Operating Assets and other
items during this Agreement's term only from us, our affiliates, and/or the other specified exclusive
sources at the prices we or they decide to charge. We have the absolute right to limit the suppliers with whom you may deal. We will not approve you or another franchise owner to be a supplier
of any products or services to PROMPT PITA'S® Restaurants;
(5) supply and supplier approval procedures and criteria for items that you need in order to operate your RESTAURANT and that we allow you to obtain from sources other than us, our
affiliates, and/or other specified exclusive sources. If you propose to offer for sale or use at the
RESTAURANT any product brand, ingredient, or supply that we have not then approved as meeting
our minimum specifications and standards, or to purchase any item from a supplier that we have not then
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approved or designated, you agree first to notify us and , at our request, to submit samples and any
other information we require in order to determine whether the item or supplier meets our standards and
specifications. We may charge you or the supplier a reasonable amount for the inspection and
evaluation. We need not approve your request. We will not approve you or another franchise owner to
be a supplier of any products or services to PROMPT PITA® Restaurants. We also have the right to re-
inspect any supplier's products and facilities and to revoke our approval of any item or supplier;
(6) terms and conditions of the sale and delivery of, and terms and methods of payment for, Trade Secret Food Products, Branded Products, other products, and services that you obtain from us and affiliated and unaffiliated suppliers; and our and our affiliates.' right not to sell you any Trade Secret Food Products, Branded Products, or other products or not to provide you with services, or to do so only on a "cash-on-delivery" or other basis, if you are in default under any agreement with us (and have been notified of that default);
(7) our and our affiliates' right (without liability) to consult with your suppliers about the status of your account with them and to advise your suppliers and others with whom you, we, our affiliates, and other franchise owners deal that you are in default under any agreement with us or our affiliates (but only if we have notified you of such default);
(8) our and our affiliates’ right to receive payments from .suppliers on account of their actual or prospective dealings with you and other franchise owners and to use all amounts we and our affiliates receive without restriction for any purposes we and our affiliates deem appropriate (unless we and our affiliates agree otherwise with the supplier);
(9) sales, marketing, advertising, and promotional programs and materials and media used in these programs. You must participate in, and comply with the requirements of, any special promotional programs we implement;
(10) use and display of the Marks at the RESTAURANT and on delivery vehicles, napkins, boxes, bags, wrapping paper, labels, forms, paper and plastic products, and other supplies;
(11) issuing and honoring gift certificates and gift and loyalty cards and administering customer loyalty and similar programs. You must participate in, and comply with the requirements of, our gift card and loyalty programs;
(12) staffing levels for the RESTAURANT, including the presence of a certified manager (which may include an Operations Partner) at the RESTAURANT for a minimum number of full-time shifts each week (as provided in Subsection 4.A. above); identifying the RESTAURANT's personnel; and employee qualifications, maintaining dress, and appearance (although you have sole responsibility and authority concerning, among other things, employee selection and promotion, rates of pay and other benefits, work assigned, and working conditions};
(13) delivery services (as provided in Subsection D . and Exhibit C), delivery driver qualifications, and days and hours of operation, including your obligation to operate the RESTAURANT every day of the week except as we otherwise allow;
(14) participation in market research and testing and product and service development
programs;
(15) accepting credit and debit cards, other payment systems, and check verification services;
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(16) bookkeeping, accounting, data processing, and recordkeeping systems and forms; formats, content, and frequency of reports to us of sales, revenue, financial performance, and condition; and giving us copies of tax returns and other operating and financial information concerning the RESTAURANT;
(17) types, amounts, terms, and conditions of insurance coverage required for the RESTAURANT; our and our affiliates' protection and rights under insurance policies as additional named insureds; required and impermissible insurance contract provisions; assignment of policy rights to us; periodic verification of insurance coverage; our right to obtain insurance coverage for the RESTAURANT at your expense if you fail to do so; our right to defend claims; and similar matters relating to insured and uninsured claims;
(18) the maximum prices on Menu Items and services offered by the RESTAURANT;
(1 9) complying with applicable laws, including those relating to terrorist activities; obtaining required licenses and permits; adhering to good business practices; observing high standards of honesty, integrity, fair dealing, and ethical business conduct in all dealings with customers, suppliers, and us; and notifying us if any action, suit, or proceeding is commenced against you or the RESTAURANT or if you receive any report, citation, or notice regarding the RESTAURANT's failure to comply with any licensing, health, cleanliness, or safety standard; and
(20) any other aspects of operati.ng and maintaining the RESTAURANT that we determine to be useful to preserve or enhance the efficient operation, image, or goodwill of the Marks and PROMPT PITA'S® Restaurants.
You agree that System Standards we prescribe in the Operations Manual, or otherwise communicate to you in writing or another tangible form (for example, via Franchise System extranet or Website), are part of this Agreement as if set forth within its text. All references to this Agreement include all System Standards as periodically modified.
B. MODIFICATION OF SYSTEM STANDARDS.
We periodically may modify System Standards, which may accommodate regional or local variations, and these modifications may obligate you to invest additional capital in the RESTAURANT or incur higher operating costs. You agree to implement any changes in System Standards within the time period we request, whether they involve refurbishing or remodeling the Premises or any other aspect of the RESTAURANT, buying new Operating Assets, adding new Menu Items and services, or otherwise modifying the nature of your operations, as if they were part of this Agreement as of the Effective Date. However, except for changes in the Computer System and signage and logo (the amounts for which are not limited), we will not obligate you, unless the expenditure is required by the Lease or applicable law, to make any capital modifications during the first two (2) years of this Agreement’s term or to make capital modifications the costs of which exceed Twenty Thousand Dollars ($20,000) during any single year during this Agreement's term or One Hundred Twenty-Five Thousand Dollars ($125,000) during this Agreement's entire term, unless the capital modifications are in connection with your acquisition of a successor franchise (as provided in Subsection 1 3.A.( I ) below). ,
9. MARKETING.
A GRAND OPENING ADVERTISING.
We may require you to spend at least Five Thousand Dollars ($5,000) to advet1ise and promote the RESTAURANT during its first ninety (90) to one hundred twenty (120) days of operation. You agree to comply with our guidelines for this grand opening advertising program. (If you have acquired the RESTAURANT via a transfer from another franchise owner, we may require you to spend at least Five Thousand Dollars ($5,000) to advertise and promote the RESTAURANT during the first ninety (90) to one hundred twenty (120) days after either the date the ownership change is completed or the Effective Date, whichever occurs later.)
B. ADVERTISING AND DEVELOPMENT FUND.
Recognizing the value of advertising and marketing to the goodwill and public image of PROMPT PITA'S® Restaurants, we have established an Advertising and Development Fund (the "Fund") for the advertising, marketing, and public relations programs and materials we deem appropriate. You agree to contribute to the Fund the amounts that we prescribe from time to time, not to exceed four and one-half percent (4-1/2%) of the RESTAURANT's Gross Sales, payable in the same manner as the Royalty. PROMPT PITA® Restaurants that we, PROMPT PITA, or our other affiliates own will contribute to the Fund on the same percentage basis as franchise owners.
We have the right to collect for deposit into the Fund any advertising, marketing, or similar allowances paid to us by suppliers who deal with PROMPT PITA'S® Restaurants and with whom we have agreed that we will so deposit these allowances. (These payments are different from those that are not designated by suppliers to be used exclusively for advertising or similar purposes and that we and our affiliates therefore may use for any purposes we and they deem appropriate, as provided in Subsection 8.A.(8) above.)
We will direct all programs that the Fund finances, with sole control over the creative concepts, materials, and endorsements used and their geographic, market, and media placement and allocation. The Fund may pay for preparing and producing video, audio, and written materials and electronic media; developing, imp lementing, and maintaining an electronic commerce Website and/or related strategies; administering regional and multi- regional marketing and advertising programs, including, without l imitation, purchasing trade journal, direct mail, and other media adve1tising and using advertising, promotion, and marketing agencies and other advisors to provide assistance; and supporting public relations, marketing research, and other advertising, promotion, and marketing activities.
The Fund periodically will give you samples of advertising, marketing, and promotional formats and materials at no cost. We will sell you multiple copies of these materials at our direct cost of producing them, plus any related shipping, handling, and storage charges.
We will account for the Fund separately from our other funds and not use the Fund for any of our general operating expenses. However, we may use the Fund to pay the reasonable salaries and benefits of personnel who manage and administer the Fund; the Fund’s other administrative costs, travel expenses of personnel while they are on Fund business; meeting costs; overhead relating to Fund business; and other expenses that we incur in activities reasonably related to administering or directing the Fund and its programs, including, without
limitation, conducting market research, public relations, preparing advertising, promotion, and marketing materials, and collecting and accounting for Fund contributions.
The Fund will not be our asset. Although the Fund is not a trust, we will hold all Fund contributions for the benefit of the contributors and use contributions only for the purposes described in this Subsection. We do not owe any fiduciary obligation to you for administering the Fund or any other reason. The Fund may spend in any fiscal year more or less than the total Fund contributions in that year, borrow from us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use. We will use all interest earned on Fund contributions to pay costs before using the Fund's other assets.
We will prepare an annual, unaudited statement of Fund collections and expenses and give you the statement upon written request. We may have the Fund audited annually, at the Fund's expense, by an independent certified public accountant. We may incorporate the Fund or operate it through a separate entity whenever we deem appropriate. The successor entity will have all of the rights and du ties specified in this Subsection.
We intend the Fund to maximize recognition of the Marks and patronage of PROMPT PITA® Restaurants. Although we will try to use the Fund to develop advertising and marketing materials and programs, and to place advertising and marketing, that will benefit all PROMPT PITA'S® Restaurants, we need not ensure that Fund expenditures in or affecting any geographic area are proportionate or equivalent to Fund contributions by PROMPT PITA'S® Restaurants operating in that geographic area or that any PROMPT PITA'S® Restaurant benefits directly or in proportion to its Fund contribution from the development of advertising and marketing materials or the placement of advertising and marketing.
We have the right, but no obligation, to use collection agents and institute legal proceedings to collect Fund contributions at the Fund's expense. We also may forgive, waive, settle, and compromise all claims by or against the Fund. Except as expressly provided in this Subsection, we assume no direct or indirect liability or obligation to you for collecting amounts due for, maintaining. directing, or administering the Fund.
We may at any time defer or reduce contributions of a PROMPT PITA 'S® Restaurant franchise owner and, upon thirty (30) days· prior written notice to you , reduce or suspend Fund contributions and operations for one or more periods of any length and terminate (and, if terminated, reinstate) the Fund. If we terminate the Fund, we will distribute all unspent monies to our franchise owners, and to us and our affiliates, in proportion to their, and our, respective Fund contributions during the preceding twelve (12) month period.
C. BY YOU. ..
You agree to list and advertise the RESTAURANT in at least one (1) recommended classified telephone directory distributed within the RESTAURANT's market area (in the business classifications we prescribe from time to time) and to use an approved' form of classified telephone directory advertiseme6t. If other PROMPT PITA'S® Restaurants are located within the directory's distribution area, we may require you to participate in a collective telephone directory advertisement with those other PROMPT PITA'S® Restaurants and to pay your share of that collective advertisement.
In addition to both your Fund contribution obligations in Su bsection 9.B. above and your Cooperative Program contribution obligations in Subsection 9.D. below, you agree to spend, beginning one hundred twenty (120) days aft.er you open the RESTAURANT for business, at least one-half percent (0.5%) of the RESTAURANT's weekly Gross Sales to advertise and promote your RESTAURANT locally (including sampling, yellow pages advertising, and special promotions). Within thirty (30) days after the end of each month, you agree. to send us, in the manner we prescribe. an accounting of your expenditures for local advertising and promotion during the preceding month with receipts showing those expenditures.
Your local advertising and promotion must follow our guidelines. All advertising and promotional materials that you develop for your RESTAURANT must contain notices of our Website's domain name in the manner we designate. You may not· develop, maintain, or authorize any Website that mentions or describes you or the RESTAURANT or displays any of the Marks. You agree that your advertising, promotion, and marketing will be completely clear, factual, and not misleading and conform to both the
highest standards of ethical advertising and marketing and the advertising and marketing policies that we prescribe from time to time.
Before you use them , you agree to send us or our designated agency for approval samples of all advertising, promotional, and marketing materials that we have not prepared or previously approved. If you do not receive written disapproval within thirty (30) days after we or our designated agency receives the materials, they are deemed to be approved. You may not use any advertising, promotional, or marketing materials that we have not approved or have disapproved. If you do so, then in addition to our other rights and remedies under this Agreement, you must pay us a One Thousand Dollar ($1,000) administrative fee for each violation upon receiving our invoice. This administrative fee compensates us for, among other things, additional expenses that we will incur due to your breach of this restriction.
D. COOPERATIVE ADVERTISING PROGRAMS.
(I) Formation, Membership, and Regui.red Participation. We may identify a local or regional Television Broadcast Designated Market Area ("DMA"), as defined by the Nielsen ratings system or another recognized market analysis system, in which two (2) or more PROMPT PITA'S® Restaurants are located in order to establish a local or regional cooperative advertising program ("Cooperative Program")
for that DMA. The Cooperative Program's purpose will be to collect funds from its members and to plan,
discuss. organize, develop, utilize, produce, disseminate, and implement advertising and promotional programs and materials on a collective basis (and to cover related expenses) for the sale of Menu Items at
PROMPT PITA'S® located in the DMA. .,
If a Cooperative Program has been established as of the Effective Date for the, DMA in which your
RESTAURANT is located, your RESTAURANT automatically will become a member of that Cooperative Program as of the Effective Date (without further action) upon your signing this Agreement. You and the RESTAURANT must participate in the Cooperative Program as required below. If a Cooperative Program has not been established as of the Effective Date for the DMA in which your RESTAURANT is located, but is established later during this Agreement's term, your RESTAURANT automatically will become a member of that Cooperative Program (without further action) as soon as it is established. You then will be required to participate in the Cooperative Program as provided below. The members of the Cooperative Program in a DMA will be all of the PROMPT PITA'S® Restaurants located in that DMA, including those operated by us and our affiliates.
(2) Manner of Participation. If you are an Entity, you must appoint one person to represent your interests at Cooperative Program meetings. The representative must be an owner, director, or officer of the Entity or an employee with a position no less than General Manager. The Cooperative Program may rely on that representative's decisions, votes, and consents at meetings without further inquiry. One representative may represent you and other franchise owners and multiple PROMPT PITA'S® Restaurants as long as he or she has valid proxies to act in this capacity.
(3) Governance. We have the right to control the formation, organization, governance, administration, and operation of the Cooperative Program, including all advertising, marketing, and promotional activities, regardless of the number of members. We may periodically issue rules and instructions for the Cooperative Program's operation with which you and your RESTAURANT must comply. The Cooperative Program will hold meetings as we deem necessary to conduct .its business. You will receive notices of meetings at least seven (7) days in advance. Your failure to receive notice of a meeting will not invalidate any action validly taken at the meeting.
The Cooperative Program will formulate a budget for the purpose of paying advertising expenses and costs that it incurs. We may establish minimum financial reporting requirements (subject to change from
time to time) with which the Cooperative Program must comply. You have the right during normal business hours, at your own expense, to examine the Cooperative Program's books and records.
(4) Quorum. A majority (i.e., in excess of fifty percent (50%)) of both the PROMPT PITA'S® Restaurants located in the DMA and the franchise owners owning the PROMPT PITA’S® Restaurants located i n the DMA (including, if applicable, us and our affiliates) constitutes a quorum to transact Cooperative Program business and vote at meetings if their representatives are present in person or if their interests are represented by a valid proxy. The voting process described in subparagraphs 5 and 6 below may not occur unless there is a quorum at the meeting.
(5) Minimum Contribution. You must contribute to the Cooperative Program for your RESTAURANT's DMA
the amounts we specify from time to time, although such amounts shall not exceed, except as provided below, one
percent (1%) of your RESTAURANTs Gross Sales. You must pay your minimum contribution at the time, in
the manner, on the terms, and with the report we periodically specify. Contributions are not refundable. All
required contribution is in addition to (and not in place of) your required advertising expenditures under
subsections 9.B and C. above.
The RESTAURANT will not be required to contribute more than one percent ( 1 %) of its Gross Sales to the
Cooperative Program unless at least a majority (i.e., in excess of fifty percent (50%)) of the PROMPT PITA®
Restaurants constituting the quorum present at a Cooperative Program meeting (including, if applicable, PROMPT PITA’S® Restaurants operated by us and our affiliates), and at least sixty-seven percent (67%) of the franchise owners owning the PROMPT PITA'S® Restaurants constituting the quorum present at the meeting (including, if applicable, us and our affiliates), vote to increase the contributions of all PROMPT PITA’S® Restaurants located in the DMA in excess of one percent (1%). Each PROMPT PITA’S® Restaurant constituting the quorum present at the meeting will have one (I) vote for purposes of determining the majority vote of all PROMPT PITA’S® Restaurants constituting the quorum present at the meeting. However. each franchise owner owning the PROMPT PITA’S® Restaurants constituting the quorum present at the meeting (including, if applicable, us and our affilia tes) will have
only one ( 1 ) vote for all of its PROMPT PITA'S® Restaurants constituting the quorum for purposes of determining the sixty-seven percent (67%) vote. I f more than one PROMPT PITA’S® Restaurant constituting the quorum present at the meeting is owned and/or controlled by you or your owners (or, if applicable, us and our affiliates), although a different legal entity might own each separate PROMPT PITA’S® Restaurant, you and your owners (or, if applicable, we and our affiliates) will have only one (I) vote for all such PROMPT PITA’S® Restaurants in
determining whether Cooperative Program contributions should exceed one percent (1%) of Gross Sales.
We may allow Cooperative Program members to participate in the Cooperative Program at varying levels because of the differing levels of Gross Sales of their PROMPT PITA’S® Restaurants. Cooperative Program
contributions need not be uniform as to all members.
We may, but are not obligated to, have Cooperative Program contributions deposited to the Cooperative
Program's credit in banks or other depositories we deem appropriate. You hereby assign to the Cooperative Program
any promotional and/ marketing allowances or similar compensation to be given or paid directly to you (as opposed
to that given or paid directly to us or our affiliates, as provided in Subsections 8.A.(8) and 9.8. above) due to the
RESTAURANT's purchase of products and services under any programs or arrangements that have been negotiated
and established on behalf of PROMPT PITA 'S® Restaurants located in the DMA with the understanding or
expectation that such amounts would be contributed to the Cooperative Program. We and the Cooperative Program
may take any action on your behalf that is necessary to authorize a supplier to pay all such advertising, promotional, or
marketing funds or allowances directly to the Cooperative.
(6) Expenditure of Contributions. Cooperative Program contributions will be spent only for advertising
and marketing-related activities in the DMA. We will develop advertising plans and programs for expenditure of
Cooperative Program funds, which plans and programs are to be approved by the Cooperative Program's members in the following manner.
. We periodically will meet with advertising and similar agencies, determine a nd create particular advertising plans and programs for the DMA, set budgets, and engage in similar planning activities. We then will present our advertising plans and programs at a regular meeting to the PROMPT PITA'S® Restaurants and franchise owners covered by the Cooperative Program. If there is a quorum at the meeting (as defined in subparagraph (4) above), the PROMPT PITA'S® Restaurants and franchise owners covered by the Cooperative Program (including us and our affiliates) will vote to approve or disapprove the advertising plans programs presented. In order for our proposed advertising plans and programs to be approved, at least a majority (i.e., in excess of fifty percent (50%)) of the PROMPT PITA’S ® Restaurants constituting the quorum present at the meeting (including PROMPT PITA’S ® Restaurants operated by us and our affiliates), and at least sixty-seven percent (67%) of the franchise owners owning the PROMPT PITA’S ® Restaurants constituting the quorum present at the meeting (including, if applicable, us and our affiliates), must vote in their favor. Once approved, we will implement the advertising plans and programs using Cooperative Program funds. We may use all advertising and promotional mate1ials developed, prepared, or used by or for the benefit of the Cooperative Program for any other purposes we deem appropriate, including for the activities of other cooperative programs.
(7) Termination of Cooperative Program/Your Participation Rights. We may terminate the Cooperative Program whenever we deem best. You will cease being a member of the Cooperative Program
if you no longer own PROMPT PITA'S® Restaurants located in the DMA or have been expelled. Under such circumstances, your voting and other membership rights in the Cooperative Program with respect to the RESTAURANT will terminate automatically on the day this Agreement terminates or expires or on the day you are expelled. However, yon still will be obligated and responsible for all contributions that accrued before the date of termination, expiration, or expulsion.
(8) Delinquencies. The Cooperative Program may adopt rules and regulations regarding the treatment of delinquencies. You agree to abide by t.bem, including paying interest and late payment fees. We may suspend your voting rights and other privileges if you are delinquent in making contributions or otherwise are in default under this Agreement. However, suspension of your voting rights and other privileges will not excuse you from paying delinquent amounts or other contributions t.bat become due and paya ble by Cooperative Program members after the suspension.
(9) Franchise Transfers and Credit Balauc.es. You will remain responsible to the Cooperative Program for all contributions due through the date of the closing of any transfer of the RESTAURANT to anyone else. A transfer will be deemed to occur only if it complies with Section 12 below.
If you sell or close the RESTAURANT (or are expelled) when you have a credit balance with the Cooperative Program, the balance will not be refunded but will be retained for the benefit of other Cooperative Program members if the transaction involves a closing of the RESTAURANT or the termination or expiration of this Agreement (or your expulsion); credited to the transferee if an approved transfer takes place; or credited to your other PROMPT PITA'S® Restaurants and Cooperative Program memberships if the transaction involves the closing of one PROMPT PITA'S® Restaurant but you then own other PROMPT PITA'S® Restaurants located in the DMA and remain a Cooperative Program member with
respect to one or more of those other PROMPT PITA’S® Restaurants.
E. REGIONAL ADVISORY COUNCIL.
You agree to participate actively in any PROMPT PITA’S ® Regional Advisory Franchisee Council
("Council") that we designate. A Council's purpose includes exchanging ideas and problem-solving methods,
advising us on expenditures for regional advertising, and coordinating franchisee efforts. You agree to pay all
assessments that the Council levies, and we may enforce this obligation on the Council's behalf. Amounts and
expenditures periodically may vary due to variations in Council participation and costs, as determined by a
particular Council and approved by us. We may form a Council when more than one (1) franchise owner operates a
PROMPT PITA'S® Restaurant in any given region, the boundaries of which we may determine.
10. RECORDS, REPORTS, AND FINANCIAL STATEMENTS.
You agree to establish and maintain at your own expense a bookkeeping, accounting, and recordkeeping system
conforming to the requirements and formats we prescribe from time to time. We may require you to use a
Computer System to maintain certain sales data and other information. You agree to give us in the manner and format
that we prescribe from time to time:
(a) on or before Wednesday of each week, a report on the RESTAURANT's
Gross Sales during the week ending on the preceding Tuesday;
(b) within fifteen (15) days after the end of each calendar quarter, the operating statements,
financial statements, statistical reports, purchase records, and other information we request regarding you and
the RESTAURANT covering the previous calendar quarter and the fiscal year to date;
(c) within sixty (60) days after the end of the RESTAURANT's fiscal year, annual profit and
loss and source and use of funds statements and a balance sheet for the RESTAURANT as of the end of that
fiscal year; and
(d) within ten (10) days after our request, exact copies of federal and state income tax returns,
sales tax returns, and any other forms, records, books, and other information we periodically require
relating to the RESTAURANT and the Franchise.
You agree to verify and sign each report and financial statement in the manner we prescribe. We may disclose data derived from these reports, although we will not without your consent (unless required by law) disclose your identity in any materials that we circulate publicly. Moreover, we may, as often as we deem appropriate ( including on a daily basis). access the Computer System and retrieve al l information relating to the RESTAURANT's operation.
You agree to preserve and maintain all records in a secure location at the RESTAURANT during this Agreement's term and for at least three (3) years afterward (including, but not limited • to, sales checks, purchase orders, invoices, payroll records, customer lists, check stubs, sales tax
records and returns, cash receipts and disbursement journals, and general ledgers). , We may require you to have audited financial statements prepared annually during this Agreement's term.
II. INSPECTIONS AND AUDITS.
A. OUR RIGHT TO INSPECT THE RESTAURANT.
To determine whether you and the RESTAURANT are complying with this Agreement and all System Standards, we and our designated agents or representatives may at all times and without prior notice to you:
(I ) inspect the RESTAURANT;
(2) photograph the RESTAURANT and observe and videotape the RESTAURANT's operation for consecut.ive or intermittent periods we deem necessary;
(3) remove samples of any PROMPT PITA’S products and (including Trade Secret Food Products and Branded Products);
(4) interview the RESTAURANT's personnel and customers; and
(5) inspect and copy any books, records, and documents relating to the RESTAURANT's operation.
You agree to cooperate with us and our agents and representatives in any such activities. If we exercise any of these rights, we will not interfere unreasonably with the RESTAURANT's operation. You agree to present to your customers the evaluation forms that we periodically prescribe and to participate and/or request your customers to participate in any surveys performed by or for us.
B. OUR RIGHT TO AUDIT.
We may at any time during your business hours, and without prior notice to you, examine your (if you are an Entity) and the RESTAURANT's business, bookkeeping, and accounting records, sales and income tax records and returns, and other records. You agree to cooperate fully with our representatives and independent accountants in any examination. If any examination discloses an understatement of the RESTAURANT's Gross Sales, you agree to pay us, within fifteen (1 5) days after receiving the examination report, the Royalty and Fund contributions due in the amount of the understatement, plus our late fee and interest on the understated amounts from the date originally due until the date of payment. Furthermore, if an examination is necessary due to your failure to furnish reports, supporting records, or other information as required, or to furnish these items on a timely basis, or if our examination reveals a Royalty or Fund contribution understatement exceeding three percent (3%) of the amount that you actually reported to us for the period examined, you agree to reimburse us for t he costs of the examination, including, without limitation, the charges of attorneys and independent accountants and the travel expenses, room and board, and compensation of our employees. These remedies are in addition to our other remedies and rights under this Agreement and applicable law.
12. TRANS.FER.
A. BY US.
You acknowledge that we maintain a staff to manage and operate the Franchise System and that staff members
can change as employees come and go. You represent that you have not signed this Agreement in reliance on any
particular shareholder, director, officer, or employee remaining with us in that capacity. We may change our
ownership or form and/or assign this Agreement and any other agreement to a third party without restriction. After our
assignment of this Agreement to a third patty who expressly assumes the obligations under this Agreement, we no
longer will have any performance or other obligations under this Agreement.
B. BY YOU.
You understand and acknowledge that the rights and duties this Agreement creates are personal to you (or, if you are an Entity, to your owners) and that we have granted you the Franchise in reliance upon our perceptions of your (or your owners') individual or collective character, skill, aptitude, attitude, business ability, and financial capacity. Accordingly, neither this Agreement (or any interest in this Agreement), the RESTAURANT or substantially all of its assets, any ownership interest in you (regardless of its size). nor any ownership interest in any of your owners (if such owners are legal entities) may be transferred without our prior written approval, which will not be unreasonably withheld if the conditions for transfer contained in this Section 12 are satisfied, A transfer of the RESTAURANT's ownership, possession , or control, or substantially all of its assets, may be made only with a transfer of this Agreement. Any transfer without our approval is a breach of this Agreement and bas no effect, meaning that you will continue to be obligated to us for all of your obligations under this Agreement.
.,
In t hi s Agreement, the term "transfer" includes a voluntary, involuntary, direct, or indirect assignment,
sale, gift, or other disposition of any interest in:
( l) this Agreement; (2) you;
(3) the RESTAURANT or substantially all of its assets; or
(4} your owners (if such owners are legal entities).
An assignment, sale, gift, or other disposition includes the following events:
(a) transfer of ownership of capital stock, a partnership or membership interest, or another form
of ownership interest (although transfer of an ownership interest i n you to (i) an Operations Manager is
expressly allowed if you comply with Subsection I.C.(S) of this Agreement and (ii) an employee
stock ownership plan "ESOP" is expressly allowed if the ESOP meets the criteria, and you satisfy the
conditions, specified in Subsection 17.L. of this Agreement);
(b) merger or consolidation or issuance of additional securities or other forms of ownership interest; 1
(c) any sale of a security conve1tible to an ownership interest;
(d) transfer of an interest in you, this Agreement, the RESTAURANT or substantially all of its assets, or your owners in a divorce, insolvency, or entity dissolution proceeding or otherwise by operation of law;
(e) i f you, one of your owners, or an owner of one of your owners dies, a transfer of an interest in you, this Agreement, the RESTAURANT or substantially all of its assets, or your owner by will, declaration of or transfer in trust, or under the laws of intestate succession; or
(f) pledge of this Agreement (to someone other than us) or of an ownership interest in you or your owners as security, foreclosure upon the RESTAURANT, or your transfer, surrender, or loss of the RESTAURANT's possession, control, or management. You may grant a security interest (including a purchase money security interest) in the RESTAURANT's assets (not including this Agreement} to a lender that finances your acquisition, development, and/or operation of the RESTAURANT without having to obtain our prior written approval as long as you give us ten (10) days' prior written notice.
C. CONDITIONS FOH APPROVAL OF TRANSFER.
If you (and your owners) are fully complying with this Agreement, then, subject to the other provisions of this Section 12, we will approve a transfer that meets all of the requirements in this Subsection. A non-controlling ownership interest in you or your owners (determined as of the date on which the proposed transfer will occur) may be transferred (besides to an Operations Partner) i f t h e proposed transferee and its direct and indirect owners (if the transferee is an Entity) are of good character and otherwise- meet our then applicable standards for PROMPT PITA'S® Restaurant franchise owners (including no ownership interest in or performance of services for a Competitive Business).
If the proposed transfer is of this Agreement or a controlling ownership interest in you or one of your owners, or is one of a series of transfers (regardless of the time period over which these transfers take place) which in the aggregate transfer this Agreement or a controlling ownership interest in you or one of your owners, then all of the following conditions must be met before or concurrently with the effective date of the transfer:
(I) the transferee has the necessary business experience, aptitude, and financial resources to operate the RESTAURANT;
(2) you have paid all Royalties, Fund and Cooperative Program contributions, and other amounts owed to us, our affiliates, and third party vendors; have submitted all required reports and statements; and have not violated any provision of this Agreement, the Lease, or any other agreement with us during both the sixty (60) day period before you requested our consent to the transfer and the period between your request and the effective date of the transfer;
(3) neither the transferee nor its owners (if the transferee is an Entity) or affiliates have
an ownership interest (direct or indirect) in or perform services for a Competitive Business;
(4) the transferee (or its managing owner) and two (2) of its proposed on -site managers
(including an operations partner), if different from your RESTAURANT's on- site managers,
satisfactorily complete our training program and, as applicable, apprenticeship program;
(5) your landlord allows you to transfer the Lease or sublease the Premises to the transferee;
(6) the transferee shall (if the transfer is of this Agreement), or you shall (if the transfer is of
a controlling ownership interest in you or one of your owners), sign our then current form of franchise
agreement and related documents, any and all of the provisions of which may differ materially
from any and all of those contained in this Agreement, including the Royalty and the Fund and
Cooperative Program contributions, provided, however, that the term of the new franchise agreement
signed will equal ten (10) years as long as the transferee may maintain possession of the Premises during
that ten (10) year period;
(7) you or the transferee pays us a transfer fee equal to (a) Twelve Thousand Five Hundred
Dollars ($12,500) if the transfer is of this Agreement and the RESTAURANT, or a controlling
ownership interest in you or your owners, and the transferee is then an existing PROMPT PITA’S
® Restaurant franchise owner, or (b) Five Thousand Dollars ($5,000) if the transfer is of this
Agreement and the RESTAURANT, or a controlling ownership interest in you or your owners,
and the transferee is then an existing PROMPT PITA’S ® Restaurant franchise owner. Under (a) and
(b), one-half (1/2) of the transfer fee is due when you request approval of the transfer and is
nonrefundable, whether or not the transfer actually occurs. No transfer fee is due if, upon a spouse's
death, that spouse's interest in this Agreement and the RESTAURANT, or ownership in you, is
transferred to the surviving spouse;
(8) you (and your transferring owners) sign a general release, in a form satisfactory to
us, of any and all claims against us and our shareholders, officers, directors, employees. and
agents;
(9) we have determined that the purchase price and payment terms will not adversely affect
the transferee’s operation of the RESTAURANT;
(10) if you or your owners finance any part of the purchase price, you and/or your owners
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agree that all of the transferee's obligations under promissory notes, agreements, or security
interests reserved in the RESTAURANT are subordinate to the transferee's obligation to pay Royalties,
Fund contributions, and other amounts due to us, our affiliates, and third patty vendors and otherwise to
comply with this Agreement;
(1I) (a) you have corrected any existing deficiencies of the RESTAURANT of which we have notified you on a punch list or in other communications, and/or (b) the transferee agrees (if the transfer is of this Agreement) to upgrade, remodel, and refurbish the RESTAURANT in accordance with our then current requirements and specifications for PROMPT PITA’S ® Restaurants within the time period we specify following the effective date of the transfer (we will advise the transferee before the effective date of the transfer of the specific actions that it must take and the time period within which such actions must be take n);
(12) you and your transferring owners (and your and your owners' spouses) will not, for two (2) years beginning on the transfer's effective date, engage in any of the activities proscribed in Subsection l5.D. below; and
(13) you and your transferring owners will not directly or indirectly at any time or in any manner (except with respect to other PROMPT PITA'S® Restaurants you own and operate) identify yourself or themselves in any business as a current or former PROMPT PITA'S® Restaurant or as one of our
franchise owners; use any Mark, any colorable imitation of a Mark , or other indicia of a PROMPT PITA'S® Restaurant in any manner or for any purpose; or utilize for any purpose any trade name, trade or service mark, or other commercial symbol that suggests or indicates a connection or association with us.
We may review all information regarding the RESTAURANT that you give the transferee, correct any information that we believe is inaccurate, and give the transferee copies of any reports that you have given us or we have made regarding the RESTAURANT.
D. TRANSFER TO A WHOLLY-OWNED CORPORATION OR LIMITED LIABILITY COMPANY.
Despite Subsection C above, if you are fully complying with this Agreement, you may transfer this Agreement to a corporation or limited liability company that conducts no business other than the RESTAURANT and, if applicable, other PROMPT PITA'S® Restaurants, in which you maintain management control, and of which you own and control one hundred percent (100%) of the equity and voting power of all issued and outstanding ownership interests, provided that all of the RESTAURANT's assets are owned , all the RESTAURANT's business is conducted, only by that single corporation or limited liability company. The corporation or limited liability company must expressly assume all of your obligations under this Agreement. Transfers of ownership interests in the corporation or limited l iability company are subject to Subsection C above. You agree to remain personally liable under this Agreement as if the transfer to the corporation or limited liability company did not occur.
E. YOUR DEATH OR DISABILITY.
(1) Transfer Upon Death or Disability. Upon your or your Managing Owner's death or disability, you r or the Managing Owner's executor, administrator, conservator, guardian, or other personal representative must transfer your interest in this Agreement, or the Managing Owner's ownership interest in you, to a third party (which may be your or the Managing Owner's heirs, beneficiaries, or devisees). That transfer must be completed within a reasonable time, not to exceed nine (9) months from the date of death or disability, and is subject to all of the terms and conditions in
this Section 12. A failure to transfer your interest in this Agreement or the Managing Owner's ownership interest in you within this time period is a breach of this Agreement.
The term "disability" means a mental or physical disability, impairment, or condition that is reasonably expected to prevent or actually does prevent you or the Managing Owner from supervising the RESTAURANT's management and operation.
(2) Operation U pon Death or Disability. 1£, upon your or the Managing Owner's death or disability, a certified manager (including an Operations Partner) is not managing the RESTAURANT, your or the Managing Owner's executor, administrator, conservator, guardian, or other personal representative must within a reasonable time, not to exceed fifteen ( 1 5) days from the date of death or disability, appoint a manager. The manager must complete our standard training and apprenticeship programs at your expense. A new Managing Owner acceptable to us also must be appointed for the RESTAURANT within thirty (30) days. That new Managing Owner must complete our standard training and apprenticeship programs.
lf, in our judgment, the RESTAURANT is not being managed properly any time after your or the Managing Owner's death or disability, we may, but need not, assume the RESTAURANT's management (or appoint a third party to assume its management). All funds from the RESTAURANT's operation while it is under our (or the third party's) management will be kept in a separate account, and all expenses will be charged to this account. We may charge you (in addition to the Royalty, Fund contributions, and other amounts due under this Agreement) Four Hundred Dollars ($400) per day, plus our (or the third party's) direct out-of-pocket costs and expenses. If we (or a third party) assume the RESTAURANT's management under this subparagraph. We (or a third party) have a duty to utilize only reasonable efforts and, provided we are not grossly negligent and do not commit an act of willful misconduct, will not be liable to you or your owners for any debts, losses, or obligations the RESTAURANT incurs, or to any of your creditors for any products, other assets, or services the RESTAURANT purchases while we (or a third party) manage it.
F. EFFECT OF CONSENT TO TRANSFER.
Our consent to a transfer of this Agreement and the RESTAURANT, or any interest in you or your owners, is not a representation of the fairness of the terms of any contract between you and the transferee, a guarantee of the RESTAURANT's or transferee's prospects of success; or a waiver of any claims we have against you (or your owners) or of our right to demand the transferee's full compliance with this Agreement.
G. OUR RIGHT OF FIRST REFUSAL. w
If you (or any of your owners) at any time determine to sell or transfer for consideration an interest in this Agreement and the RESTAURANT, or an ownership interest in you (except to or among your current owners, which i s not subject to this Subsection). in a transaction that otherwise would be allowed under Subsections 12.B. and C above, you (or your owners) agree to obtain from a responsible and fully disclosed buyer, and send us, a true and complete copy of a bona fide, executed written offer (which may include a letter of intent) relating exclusively to an interest in you or in this Agreement and the RESTAURANT. The offer must include details of the payment terms of the proposed sale and the sources and terms of any financing for the proposed purchase price. To be a valid, bona fide offer, the proposed purchase price must be in a dollar amount, and the proposed buyer must submit with its offer and earnest money deposit equal to five percent (5%) or more of the offer1ng price.
The right of first refusal process will not be triggered by a proposed transfer that would not be allowed under Subsections B and C above. We may require you (or your owners) to send us copies of any materials or information sent to the proposed buyer or transferee regarding the possible transaction.
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We may, by written notice delivered to you or your selling owner(s) within thirty (30) days after we receive both an exact copy of the offer and all other information we request, elect to purchase the interest offered for the price and on the terms and conditions contained in the offer, provided that:
(1) we may substitute cash for any form of payment proposed in the offer (such as ownership interests in a privately-held entity);
(2) our credit will be deemed equal to the credit of any proposed buyer (meaning that, if the proposed consideration includes promissory notes, we or our designee may provide promissory notes with the same terms as those offered by the proposed buyer);
(3) we will have an additional thirty (30) days to prepare for closing after notifying you of our election to purchase; and
(4) we must receive, and you and your owners agree to make, all customary representations and warranties given by the seller of the assets of a business or the ownership interests in a legal entity, as applicable, including, without limitation, representations and warranties regarding:
(a) ownership and condition of and title to ownership interests and/or assets; (b) liens
and encumbrances relating to ownership interests and/or assets; and (c) validity of contracts
and the liabilities, contingent or otherwise, of the entity whose assets or ownership interests
are being purchased.
If we exercise our right of first refusal, you and your selling owner(s) agree that, for two (2) years beginning on the closing date, you and they will be bound by the non-competition covenant contained in Subsection 13.D. below. We have the unrestricted right to assign this right of first refusal to a third party, who then will have the rights described in this Subsection.
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If we do not exercise our right of first refusal, you or your owners may complete the sale to the proposed buyer on the original offer's terms, but only if we otherwise approve the transfer in accordance with, and you (and your owners) and the transferee comply with the conditions in, Subsections B and C above. This means that, even if we do not exercise our right of first refusal (whether or not it is properly triggered as provided above), i f t h e p r o p o s e d transfer otherwise would not be allowed under Subsections B and C above, you (or your owners) may not move forward with the transfer at all.
If yo u do not complete the sale to the proposed buyer within sixty (60) days after we notify you
that we do not intend to exercise our right of first refusal, or if there is a material change in the terms of the sale (which you agree to tell us promptly), we or our designee will have an additional right of first refusal during the thirty (30) day period following either the expiration of the sixty (60) day period or our receipt of notice of the material change(s) in the sale's terms, either on the terms originally offered or the modified terms, at our or our designee's option.
13. EXPIRATION OF THIS AGREEMENT.
A YOUR RIGHT TO ACQUIRE A SUCCESSOR FRA NCHISE. When this
Agreement expires:
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(I ) if you (and each of your owners) have substantially complied with this Agreement during its term; and
(2) if you (and each of your owners) are, both on the date you give us written notice of your election to acquire a successor franchise (as provided in Subsection 13.B. below) and on the date on which the term of the successor franchise commences, i n full compliance with this Agreement and all System Standards; and
(3) provided that (a) you maintain possession of and agree (regardless of cost) to remodel and/or expand the RESTAURANT, add or replace improvements and Operating Assets, and otherwise modify the RESTAURANT as we require to comply with System Standards then applicable for new PROMPT PITA'S® Restaurants, or (b) at your option, you secure a substitute premises that we approve and you develop those premises according to System Standards then applicable for PROMPT PITA'S® Restaurants, you may acquire a successor franchise to operate the
RESTAURANT as a PROMPT PITA'S® Restaurant for a term commencing immediately upon the expiration of this Agreement and expiring either ten ( 1O) years from that date or on the date on which the term of your right to occupy the Premises (or substitute premises) (whether under a lease, sublease, or other agreement) expires, whichever occurs first. You agree to sign the franchise agreement we then use to grant franchises for PROMPT PITA'S® Restaurants (modified as necessary to reflect the fact that it is for a successor franchise), which may contain provisions that differ materially from any and all of those contained in this Agreement (and will grant no further successor franchise rights). You must pay us a successor franchise fee equal to Two Thousand Five .Hundred Dollars ($2,500).
' lf you (and each of your owners) are not, both on the date you give us written notice of your
election to acquire a successor franchise and on the date on which the term of the successor franchise commences, in full compliance with this Agreement and all System Standards, you acknowledge that we need not grant you a successor franchise, whether or not we had, or chose to exercise, the right to terminate this Agreement during its term under Subsection 14.B.
B. GRANT OF A SUCCESSOR FRANCHISE.
You agree to give us written notice of your election to acquire a successor franchise no more than two hundred twenty (220) days and no less than one hundred eighty (180) days before this Agreement expires. We agree to give you written notice ("Our Notice"), not more than ninety (90) days after we receive your notice, of our decision:
(l) to grant you a successor franchise;
(2) to grant you a successor franchise on the condition that you correct existing deficiencies of the RESTAURANT or in your operation of the RESTAU RANT; or
(3) not to grant you a successor franchise based on our determination that you and your owners have not substantially complied with this Agreement during its term or were not in full compliance with this Agreement and all System Standards on the date you gave us written notice of your election to acquire a successor franchise.
If applicable, Our Notice will:
(a) describe the remodeling, expansion, improvements, and/or modifications required to bring the RESTA URANT into compliance with then applicable System Standards for new PROMPT PITA'S ® Restaurants; and
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(b) state the actions you must take to correct operating deficiencies and the time period in which you must correct these deficiencies.
If we elect not to grant you a successor franchise, Our Notice will describe the reasons for our decision. If we elect to grant you a successor franchise, your right to acquire a successor franchise is subject to your full compliance with all of the terms and conditions of this Agreement through the date of its expiration, in addition to your compliance with the obligations described in Our Notice.
If our Notice states that you must cure certain deficiencies of the RESTAURANT or its operation as a condition to our granting you a successor franchise, we will give you written notice of our decision not to grant you a successor franchise, based upon your failure to cure those deficiencies, at least ninety (90) days before this Agreement expires. However, we need not give you this ninety (90) days' notice if we decide not to grant you a successor franchise due to your breach of this Agreement
during the ninety (90) day period before it expires. If we fail to give you:
(i) notice of deficiencies in the RESTAURANT, or in your operation of the
RESTAURANT, within ninety (90) days after we receive your timely election to acquire
a successor franchise (if we elect to grant you a successor franchise under subparagraphs
(2) and (b) above); or
(ii) notice of our decision not to grant you a successor franchise at least ninety
(90) days before this Agreement expires, if this notice is required we may unilaterally extend this
Agreement's term for the time period necessary to give you either reasonable time to
correct deficiencies or the ninety (90) days' notice of our refusal to grant a successor
franchise. I f you fail to notify us of your election to acquire a successor franchise within the prescribed time period, we need not grant you a successor franchise.
C. AGREEMENTS/RELEASES.
If you satisfy all of the other conditions for a successor Franchise, you and your owners agree to execute the form of franchise agreement and any ancillary agreement we then customarily use in granting
franchises for .PROMPT PITA'S® Restaurants (modified as necessary to reflect the fact that it is for a successor franchise), which may contain provisions that differ materially from any and all of those contained in this
Agreement (and will grant no further successor franchise rights). You and your owners further agree to
sign general releases, in a form satisfactory to us, of any and all claims against us and our shareholders,
officers, directors, employees, agents, successors, and assigns. We will consider your or your owners' failure
to sign these agreements and releases and to deliver them to us for acceptance and execution (together
with the successor franchise fee) within thirty (30) days after their deliver y to you to be an election not to
acquire a successor franchise.
14. TERMINATION OF AGREEMENT.
A. BYYOU.
If you and your owners are fully complying with this Agreement and we materially fail to comply with
this Agreement and do not co1lect the failure within thirty (30) days after you deliver written notice of the
material failure to us or, if we cannot correct the failure within thirty (30) days, do not give you within thirty
(30) days after your notice reasonable evidence of our effort to correct the failure within a reasonable time,
you may terminate this Agreement effective an additional thirty (30) days after you deliver to us written
notice of termination. (The time period during which we may cure any material failure to comply with
this Agreement after receiving notice from you is called the "Cure Period.") However, if we send you written
notice during the Cure Period indicating either that (1) we do not agree that we have materially failed to comply with this Agreement or (2) we have fully corrected the failure, then you may not terminate this
Agreement. Instead, i f you disagree with our position and still wish to terminate this Agreement, you
agree to submit the dispute to arbitration in accordance with Subsection 17.F. below.
This Agreement will remain in full force and effect during these arbitration proceedings (unless we terminate
it under Subsection B below). If the arbitrator determines that we are materially failing to comply with this Agreement, or that we did not fully correct a material failure to comply, then we will have an additional thirty
(30) days following the arbitrator's decision to correct the· failure. If we fail to do so, then you may terminate this
Agreement immediately.
Your termination of this Agreement other than according to this Subsection l4.A. will be deemed a termination
without cause and a breach of this Agreement.
B. BY US.
We may terminate this Agreement, effective upon delivery of written notice of termination to you, within thirty (30) days after the Effective Date, as provided in Exhibit B. In addition, we may terminate this Agreement,
effective upon delivery of written notice of termination to you, if:
(I ) you (or any of your owners) have made or make any material misrepresentation or omission in acquiring the Franchise or operating the RESTAURANT;
(2) you do not locate, and sign a Lease or purchase document for, an acceptable site for the
Premises within twelve (12) months after the Effective Date;
(3) you do not open the RESTAURANT for business within the time period specified in
Subsection 2.F. above, or you open the RESTAURANT for business before we notify you in writing that the
RESTAURANT meets our standards and specifications;
(4) you (or your Managing Owner) do not satisfactorily complete initial training or our
apprenticeship program;
(5) you abandon or fail actively to operate the RESTAURANT for three (3) or more consecutive business days, unless you close the RESTAURANT for a purpose we approve or because of casualty or government order;
(6) you surrender or transfer control of the RESTAURANT's operation without our prior
written consent;
(7) you (or any of your owners) are or have been convicted by a trial court of, or plead or have
pleaded no contest to, a felony:
(8) you fail to maintain the insurance we require and do not correct the failure w i thin ten (10) days
after we deliver written notice of that failure to you;
(9) you (or any of your owners) engage in any dishonest or unethical conduct that, in our opinion, adversely affects the RESTAURANT's reputation or the goodwill associated with the Marks;
(10) you (or any of your owners or, if one or more of your owners is the owner of a controlling
interest in that Entity) make or attempt to make an unauthorized assignment of this Agreement, an ownership interest in you (or your owner), or the RESTAURANT;
(11) you lose the right to occupy the Premises and fail (a) to begin immediately to look for a substitute
site or (b) to locate a substitute site, and to begin operating the RESTAURANT from that substitute site,
within ninety (90) days;
(12) you (or any of your owners) knowingly make any unauthorized use or disclosure of any part of the Operations Manual or any other Confidential Information;
(13) you violate any health, safety, or sanitation law, ordinance, or regulation, or operate the
RESTAURANT in an unsafe manner, and do not begin to cure the violation immediately, and correct the violation within seventy-two (72) hours, after you receive notice from us or any other party;
(14) you fail to provide delivery services on a continuous basis (If you are authorized to provide
delivery services pursuant to a signed Exhibit C) and do not correct the failure within ten (10) days after we
deliver written notice of that failure to you;
(15) you fail to pay us (or our affiliates) any amounts due and do not correct the failure within ten
(10) days after we deliver written notice of that failure to you;
(16) you fail to pay when due any federal or state income, service, sales, or other taxes due on
the RESTAURANT's operation, unless you are in good faith contesting your liability for those taxes or
have received an extension from the applicable government agency of the time within which to make such
payments;
(17) you understate the RESTAURANT's Gross Sales three (3) times or more during this
Agreement's term or by more than five percent (5%) on any one occasion;
(18) you violate the employee recruiting and hiring restrictions contained in subsection 7(d) above;
(19) you (or any of your owners) (a) fail on three (3) or more separate occasions within any twelve (12) consecutive month period to compl y with this Agreement, whether or not we notify you of the failures, and, if we do notify you of the failures, whether or not you correct the failures after our delivery
of notice to you; o r (b) fail on two (2) or more separate occasions within any six (6) consecutive month period to comply with the same obligation under this Agreement, whether or not we
notify you of the failures, and, if we do notify you of the failures, whether or not you correct the failures
after our delivery of notice to you;
(20) you make an assignment for the benefit of creditors or admit in writing
your insolvency or ina bility to pay your debts generally as they become due; you consent •
to the appointment of a receiver, trustee, or liquidator of all or the substantial part of your property; the
RESTAURANT is attached, seized, subjected to a writ or distress warrant, or levied upon, unless the
attachment, seizure, writ, warrant, or levy is vacated within thirty (30) days; or any order appointing a
receiver, trustee, or liquidator of you or the RESTAURANT is not vacated within thirty (30) days
following the order's entry;
(21) your or any of your owners' assets, property, or interests are blocked under any
law, ordinance, or regulation relating to terrorist activities, or you or any of your owners otherwise
violate any such law, ordinance, or regulation; or
(22) you (or any of your owners) fail to comply with any other provision of this Agreement or any System Standard and do not correct the failure within thirty (30) days after we deliver written
notice of the failure to you.
C. ASSUMPTION OF MANAGEMENT.
We have the right (but not the obligation), under the circumstances described below, to enter the Premises and assume the RESTA URANT's management (or to appoint a third party to assume its management) for any period of time we deem appropriate.. If we (or a third party) assume the RESTAURANT's management under subparagraphs (1) and (2) below, you agree to pay us (in addition to the Royalty, Fund contributions, and other amounts due under this Agreement) Four Hundred Dollars ($400) per day, plus our (or the third party's) direct out-of-pocket costs and expenses, for u p to sixty (60) days after we assume management.
If we (or a third party) assume the RESTAURANT's management, you acknowledge that we (or the third party) will have a duty to utilize only reasonable efforts and, provided we are not grossly negligent and
do not commit an act of willful misconduct, will not be liable to you or your owners for any debts, losses, or obligations the RESTAURANT incurs, or to any of your creditors for any supplies, product or other
assets or services the RESTAURANT purchases, while we (or the third party) manage it.
We (or a third party) may assume the RESTAURANT's management under the following circumstances: (1) if you abandon or fail actively to operate the RESTAURANT; (2) if you fail to comply with any provision of this Agreement or any System Standard and do not cure the failure within the time period we specify in our notice to you, but only for as long as it takes us, using reasonable commercial efforts,
to correct the failure that you failed to cure; or (3) if this Agreement expires or is terminated and we are deciding whether to exercise our option to purchase the RESTAURANT under Subsection 15. E. below.
If we exercise our rights under subparagraphs (1) or (2) above, that will not affect _our right to terminate this Agreement under Subsection 14.B. above.
. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION OF THIS AGREEMENT.
A. PAYMENT OF AMOUNTS OWED TO US.
You agree to pay us within fifteen (15) days after this Agreement expires or is terminated, or on any later date that we determine the amounts due to us, the Royalties, Fund contributions, interest, and all other amounts owed to us (and our affiliates) which then are unpaid.
B. MARKS.
When this Agreement expires or is terminated:
(J) you may not directly or indirectly at any time or in any manner (except with other PROMPT PITA'S® Restaurants you own and operate) identify yourself in any business as a current or former PROMPT PITA'S® Restaurant or as one of our current or former franchise owners; use any Mark, any colorable imitation of a Mark, or other indicia of a PROMPT PITA'S® Restaurant in any manner or for any purpose; or use for any purpose any trade name, trade or service mark, or other commercial symbol that indicates or suggests a connection or association with us;
(2) you agree, within thirty (30) days, to take the action required to cancel all fictitious or assumed name or equivalent registrations relating to your use of any Mark;
(3) you agree to deliver to us or allow us to take from the RESTAURANT, on the day we specify, all signs, sign-faces, sign-cabinets, marketing materials, forms, and other materials containing any Mark or otherwise identifying or relating to a PROMPT PITA'S® Restaurant t hat we request. If you fail to do so voluntarily when we require, then we or our representatives may enter the Premises at our convenience and remove these items from the RESTAURANT without liability to you or third parties for trespass or any other claim. We need not compensate you for any of these items;
(4) if we do not have or do not exercise an option to purchase the RESTAURANT under Subsection E below, you agree within the timeframe we specify, and at your own expense, to take the closing steps and make the alterations specified in our Operations Manual (or otherwise) to distinguish the RESTAURANT clearly from its former appearance and from other PROMPT PITA'S® Restaurants in order to prevent public confusion. If you fail to do so voluntarily when we require, then we or our representatives may enter the Premises at our convenience and take this action without liability to you or third patties for trespass or any other claim. We need not compensate you or the landlord for any such alterations; and
(5) you agree, within thirty (30) days, to notify the telephone company and telephone directory publishers of the termination or expiration of you r right to use any telephone, facsimile, or other numbers and telephone directory listings associated with any Mark; to authorize the transfer of these numbers and directory listings to us or at our direction; and/or to instruct the telephone company to forward all calls made to your numbers to numbers we specify. If you fail to do so, we may take whatever action and sign whatever documents we deem appropriate on your behalf to effect these events.
C. CONFIDENTIA L I NFORMATION.
You agree that, when this Agreement expires or is terminated, you will immediately cease using any of
our Confidential Information (including computer software or similar technology and digital passwords and
identifications that we have licensed to you or that otherwise are proprietary to us or the Franchise System) in any
business or otherwise and return to us all copies of the Operations Manual and any other confidential materials that
we have loaned you.
D. COVENANT NOT TO COMPETE.
Upon
(1) our termination of this Agreement according to its terms and conditions,
(2) your termination of this Agreement without cause, or
(3) expiration of this Agreement (if we offer, but you elect not to acquire, a successor franchise, or
if we do not offer you a successor franchise due to your failure to satisfy the conditions for a successor franchise set forth in Section l3),
you and your owners agree that, for two (2) years beginning on the effective date of termination or expiration or the
date on which al l persons restricted by this Subsection begin to comply with this Subsection, whichever is later, neither
you nor any of your owners will have any direct or indirect interest (e.g., through a spouse) as an owner
(whether of record, beneficially, or otherwise), investor, partner, director, officer, employee, consultant,
representative. or agent in any Competitive Business (as defined in Section 7 above) located or operating:
(a) at the Premises;
(b) within a three (3) mile radius of the Premises:
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(c) within three (3) miles of any other PROMPT PITA'S ® Restaurant in operation or under construction on the Effective Date; or
(d) within one (1) mile of any other PROMPT PITA'S ® Restaurant in operation or under construction on the later of the effective date of the termination or expiration of this Agreement or the
date on which all persons restricted by this Subsection begin to comply with this Subsection.
These restrictions also apply after transfers, as provided in Section 12.C.(12) above. If any person restricted by this Subsection refuses voluntarily to comply with these obligations, the two (2) year period for that person will
commence with the entry of a court order enforcing this provision. You and your owners expressly acknowledge that
you possess skills and abilities of a general nature and have other opportunities for exploiting these skills.
Consequently, our enforcing the covenants made in this Subsection will not deprive you of your personal goodwill or ability to earn a living.
E. OUR RIGHT TO PURCHASE RESTAURANT.
If you decide to transfer the RESTAURANT and this Agreement, the RESTAURANT's assets, or an ownership interest i n you during this Agreement's term, the provisions of Section 12 generally will apply to the proposed transfer. However, under the circumstances listed in subparagraph (1) below, we have certain rights, as described in this Subsection I 5.E., to acquire the RESTAURANT upon the termination or expiration of this Agreement.
(1) Exercise of Option. Upon
(a) our termination of this Agreement according to its terms and conditions,
(b) your termination of this Agreement without cause, or
(c) expiration of this Agreement (if we offer, but you elect not to acquire, a successor franchise, or if we do not offer you a successor franchise due to your failure to satisfy the conditions for a successor franchise set forth in Section 13),
we have the option, exercisable by giving you written notice before or within thirty (30) days after the date of termination or expiration, (i) to purchase the RESTAURANT and the fee simple interest in the Premises (if you or one of your affiliates owns the Premises) or, if you (or one of your affiliates) do not own the Premises or we choose not to purchase your (or your affiliate’s) fee simple interest in the Premises, (ii) to purchase the RESTAURANT and exercise the rights under subparagraph (2) below. We have the unrestricted right to assign this option to purchase.
We are entitled to all customary warranties and representations in our asset purchase, including, without limitation, representations and warranties as to ownership and condition of and title to assets; liens and encumbrances on assets; validity of contracts and agreements; and liabilities affecting the assets, contingent or otherwise.
(2) Right to Premises.
If you lease the Premises from an unaffiliated lessor, or if we choose not to purchase your (or your affiliate's) fee simple interest in the Premises, you agree (as applicable) at our election:
(a) to ass ign your leasehold interest in the Premises to us;
(b) to enter into a sublease for the remainder of the Lease term on the same terms (including renewal options) as the Lease; or
(c) to lease the Premises to us for an initial ten (10) year term, with two five
(5) year renewal terms (at our option), on commercially reasonable terms.
(3) Purchase Price. ..
The purchase price for the RESTAURANT and, if applicable, the fee simple interest in the Premises
will be their fair market value, provided that these items will not include any value for: '·
(a) the Franchise or any rights granted by this Agreement;
(b) goodwill attributable to our Marks, brand image, and other intellectual property; or
(c) participation in the network of PROMPT PITA 'S® Restaurants.
We may exclude from the assets purchased any Operating Assets or other items that are not reasonably
necessary (in function or quality) to the RESTAURANT's operation or that we have not approved as meeting
System Standards for PROMPT PITA'S ® Restaurants, and the purchase price will reflect these exclusions.
(4) Appraisal.
lf we and you cannot agree on fair market value, fair market value will be determined by one (1) independent accredited appraiser upon whom we and you agree who will conduct an appraisal and, in doing so, be bound by the criteria specified in subparagraph (3). You and we agree to select the appraiser within fifteen (15) days after we notify you that we wish to exercise our purchase option (if you and we have not agreed on fair market value before then). You and we will share equally the appraiser's fees and expenses. The appraiser must complete its appraisal within thirty (30) days after its appointment. The purchase price will
be the appraised value. If we and you cannot agree on the appraiser, he or she will be chosen by the American Arbitration Association.
(5) Closing.
We (or our assignee) will pay the purchase price at the closing, which will take place not later than
sixty (60) days after the purchase price is determined, although we (or our assignee) may decide after the
purchase price is determined not to purchase the RESTAURANT and/or the fee simple interest in the
Premises. We may set off against the purchase price, and reduce the purchase price by, any and all amounts you or your owners owe us or our affiliates. At the closing, you agree to deliver instruments transferring to
us (or our assignee):
(a) good and merchantable title to the assets purchased, free and clear of all liens and
encumbrances (other than liens and security interests acceptable to us), with all sales and other transfer
taxes paid by you;
(b) all of the RESTAURANT's licenses and permits that may be assigned or transferred;
and
(c) the fee simple or leasehold interest in the Premises and improvements or a lease
assignment or lease or sublease, as applicable.
..
If you cannot deliver clear title to all of the purchased assets, or if there are other unresolved ' issues, we (or our assignee) and you will close the sale through an escrow. You and your owners further agree to execute general releases, in a form satisfactory to us, of any and all claims against us and our shareholders, officers, directors, employees, agents, successors, and assigns. If we exercise our rights under this Subsection E, you and your owners agree that, for two (2)
I
years beginning on the closing date, you and they will be bound by the non-competition covenant contained in Subsection 15.0. above.
F. LIQUIDATED DAMAGES.
Upon our termination of this Agreement according to its terms and conditions or your termination of this Agreement without cause, you agree to pay us within fifteen (15) days after the effective date of this Agreement's termination, in addition to the amounts owed under Subsection IS.A. above, liquidated damages equal to the product of (l) the total Royalties that you were obligated to pay us on the RESTAURANT's business during the preceding twelve (12) months of operation, (2) multiplied by three (3) (unless there were less than three (3) years remaining in this Agreement's term at the time of termination, in which case the Royalties will be multiplied by the number of years, or po11ion of years, remaining). We, you , and each of your owners acknowledge and agree that it would be impracticable to determine precisely the damages we will incur as a result of this Agreement's termination and the loss of Royalty payments due to, among other things, the complications of determining how much the Royalty payments would have grown over what would have been the remaining term of this Agreement and the expenses we would save from not having to provide services to you. We, you, and each of your owners consider this liquidated damages provision to be a reasonable, good faith pre-estimate of those damages. This liquidated damages provision covers only our damages from the loss of the Royalty. It does not cover any other damages to which we might be entitled as a result of your actions or inaction. You and each of your owners agree that this liquidated damages provision does not give us an adequate remedy at law for any default under, or for the enforcement of, any provision of this Agreement other than the Royalty section.
G. CONTINUING OBLIGATIONS.
All of our and your (and your owners') obligations that expressly or by their nature survive this Agreement's expiration or termination will continue in full force and effect subsequent to and notwithstanding its expiration or termination and until they are satisfied in full or by their nature expire.
I6. RELATIONSHIP OF THE PARTIES/INDEMNIFICATlON.
A. INDEPENDENT CONTRACTORS.
You and we understand and agree that this Agreement does not create a _fiduciary relationship between you and us, that you and we are and will be independent contractors, and that nothing i n this Agreement is intended to make either you or us a general or special agent, joint venturer, partner, or employee of the other for any purpose. You agree to identify yourself conspicuously in all dealings with customers, suppliers, public officials, RESTAURANT personnel, and others as the RESTAURANT's owner under a franchise we have granted.
B. NO LIABILITY FOR ACTS OF OTHER PARTY. ' '
We and you may not make any express or implied agreements, warranties, guarantees, or
representations, or incur any debt, in the name or on behalf of the other or represent that our respective relationship is other than franchisor and franchise owner. We will not be obligated for any damages to any
person or property directly or indirectly arising out of the RESTAURANT's operation or the business you conduct under this Agreement.
We will have no liability for any sales, use, service, occupation, excise, gross receipts, income, property, or other taxes, whether levied upon you or the RESTAURANT, due to the business you conduct (except for our income taxes). You are responsible for paying these taxes and must reimburse us for any taxes that we must pay to any state taxing authority on account of either your operation or payments that you make to us.
D. INDEMNIFICATION.
(l) You agree to indemnify, defend, and bold harmless us, our affiliates, and our and their respective shareholders, directors, officers, employees, agents, successors, and assignees (the "Indemnified Parties") against, and to reimburse any one or more of the Indemnified Parties for, all claims, obligations, and dan1ages directly or indirectly arising out of the RESTAURANT's operation, the business you conduct under this Agreement, or your breach of this Agreement, includ.ing, without limitation, those alleged to be caused by the Indemnified Party's negligence or willful misconduct, unless (and then only to the ex tent that) the claims, obligations, or damages are determined to be caused solely by the Indemnified Party’s gross negligence or willful misconduct in a final, un-appealable ruling issued by a court or arbitrator with competent jurisdiction.
For purposes of this indemnification, "claims" include all obligations, damages (actual, consequential, or otherwise), and costs that any Indemnified Party reasonably incurs in defending any claim against it, including, without limitation, reasonable accountants', arbitrators', attorneys', and expert witness fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses of litigation, arbitration, or alternative dispute resolution, regardless of whether litigation, arbitration, or alternative dispute resolution is commenced. Each Indemnified Party may defend any claim against it at your expense and agree to settlements or take any other remedial, corrective, or other actions.
- This indemnity will continue in full force and effect subsequent to and notwithstanding this Agreement's expiration or termination. An Indemnified Party need not seek recovery from any insurer or other third party, or otherwise mitigate its losses and expenses, in order to maintain and recover fully a claim against you under this subparagraph. You agree that a failure to pursue a recovery or mitigate a loss will not reduce or alter the amounts that an Indemnified Party may recover from you under this subparagraph. "
(2) We agree to indemnify, defend, and hold harmless you and your shareholders,
directors, officers, employees, agents, successors, and assignees (the "Franchise Owner Indemnified
Parties") against, and to reimburse one or more of the Franchise Owner Indemnified Parties for, all claims (as defined in subparagraph (1) above) that you incur in an action or proceeding asserted by a
third party as a result of our contract defaults with or intentional misconduct toward that third party. A Franchise Owner Indemnified Party need not seek recovery from any insurer or other third party, or
otherwise mitigate its losses and expenses, in order to maintain and recover fully a claim against us under this subparagraph. We agree that a failure to pursue a recovery or mitigate a loss will not reduce or alter the amounts that a Franchise Owner Indemnified Party may recover from us under this
subparagraph.
17. ENFORCEMENT.
A. SEVERABlLITY AND SUBSTITUTION OF VALID PROVISIONS.
Except as expressly provided to the contrary in this Agreement, each section, paragraph, term, and
provision of this Agreement is severab le, and if, for any reason, any part is held to be invalid or contrary to
or in conflict with any applicable present or future law or regulation in a final, un-appealable ruling issued
by any court, agency, or tribunal with competent jurisdiction, that ruling will not impair the operation of,
or otherwise affect, any other portions of this Agreemen t, which will continue to have full force and effect
and bind the parties.
If any covenant that restricts competitive activity is deemed unenforceable by virtue of its scope in terms of area, business activity prohibited, and/or length of time, but would be enforceable if modified, you and we agree that t h e covenant will be enforced to the fullest extent pennissi.ble under the laws and public
policies applied in the jurisdiction whose l aw determines the covenant' s validity.
If any applicable and binding law or rule of any jurisdiction requires more notice than this Agreement requires of this Agreement's termination or of our refusal to enter into a successor franchise
agreement, or some other action that this Agreement does not require, or if, under any applicable and binding law or rule of any jurisdiction, any provision of this Agreement or any System Standard is invalid,
unenforceable, or unlawful, the notice and/or other action required by the law or m le will be substituted for
the comparable provisions of this Agreement, and we may modify the invalid or unenforceable provision or
System Standard to the extent required to be valid and enforceable or delete the unlawful provision in its
entirety. You agree to be bound by any promise or covenant imposing the maximum duty the law permits
that is container within any provision of this Agreement, although it were separately articulated in and made
a part of this Agreement.
B. WAIVER OF OBLIGATIONS.
We and you may by written instrument unilaterally waive or reduce any obligation of or restriction
upon the other under this Agreement, effective upon delivery of written notice to the other or another
effective date stated in the notice of waiver. Any waiver granted will be without prejudice to any other
rights we or you have, will be subject to continuing review, and may be revoked at any time and for any reason effective upon delivery of ten (10) days' prior written notice.
We and you will not waive any right, power, or option this Agreement reserves (including, without limitation, our right to demand compliance with every term, condition, and covenant or to declare any breach to be a default and to terminate this Agreement before its term expires) because of any custom or practice at variance with this Agreement's terms; our or your failure, refusal, or neglect to exercise any right under this Agreement or to insist upon the other's compliance with this Agreement, including, without limitation, any System Standard; our waiver of or failure to exercise any right, power, or option, whether of the same, similar, or different nature, with other PROMPT PITA'S® Restaurants; the existence of franchise agreements for other PROMPT PITA'S® Restaurants that contain provisions that are different from those contained in this Agreement; or our acceptance of any payments due from you after any breach of this Agreement. No special or restrictive legend or endorsement on any check or similar item given to us will be a waiver, compromise, settlement, or accord and satisfaction. We are authorized to remove any legend or endorsement, which then will have no effect.
Neither we nor you will be liable for loss or damage or be in breach of this Agreement if our or your failure to perfom1 our or your obligations results from: (1) compliance with the orders, requests, regulations, or recommendations of any federal, state, or municipal government; (2) acts of God; (3) fires, strikes, embargoes, war, acts of terrorism or similar events, or riot; or (4) any other similar event or cause. Any delay resulting from any of these causes will extend performance accordingly or excuse performance, in whole or in part, as may be reasonable, except that these causes will not excuse payments of amounts owed at the time of the occurrence or payment of Royalties or Fund and Cooperative contributions due afterward.
C. COSTS AND AITORNEYS' FEES.
If we incur costs and expenses due to your failure to pay when due amounts owed to us, to submit when due any reports, information, or supporting records, or otherwise to comply with this Agreement, you agree, whether or not we initiate a formal legal proceeding, to reimburse us for all of the costs and expenses that we incur, including, without limitation, reasonable accounting, attorneys', arbitrators', and related fees.
D. YOU MAY NOT WITHHOLD PAYMENTS DUE TO US.
You agree that you will not withhold payment of any amounts owed to us on the grounds of our alleged nonperformance of any of our obligations under this Agreement or for any other reason, and you specifically waive any right you may have at law or in equity to offset any funds you may owe us or to fail or refuse to perform any of your obligations under this Agreement. You agree to submit all claims, unless otherwise resolved by our and your mutual agreement, to arbitration as provided in Subsection F below.
. RIGHTS OF PARTIFS ARE CUMULATIVE. ..
Our and your rights under this Agreement are cumulative, and our or your exercise or enforcement
of any right or remedy under this Agreement will not preclude our or you1· exercise or enforcement of any
other right or remedy that we or you are entitled by law to enforce.
F. ARBITRATION.
We and you agree that, except for controversies, disputes, or claims related to or based on improper use
of the Marks or Confidential Information. All controversies, disputes, or claims between us and our
affiliates, and our and their respective shareholders, officers, directors, agents, and/or employees, and you
(and/or your owners, guarantors, affiliates, and/or employees) arising out of or related to:
(l) this Agreement or any other agreement between you and us;
(2) our relationship with you;
(3) the validity of this Agreement or any other agreement between you and us;
or
(4) any System Standard;
must be submitted for binding arbitration, on demand of either party, to the American Arbitration Association.
The arbitration proceedings will be conducted by one arbitrator and, except as this Subsection otherwise
provides, according to the then current commercial arbitration rules of the American Arbitration Association.
All proceedings w ill be conducted at a suitable location chosen by the arbitrator that is within Kansas City,
Missouri. All matters relating to arbitration will be governed by the Federal Arbitration Act (9 U.S.C. §§ 1
et seq.) Judgment upon the arbitrator's award may be entered in any court of competent jurisdiction.
The arbitrator has the right to award or include in his or her award any relief that he or she deems
proper, including, without limitation, money damages (with interest on unpaid amounts from the date
due), specific performance, injunctive relief, and attorneys' fees and costs, provided that the arbitrator may
not declare any Mark generic or otherwise invalid or, except as expressly provided in Subsection 17.1.
below, award any punitive or exemplary damages against either party (we and you hereby waiving to the
fullest extent permitted by law, except as expressly provided in Subsection 17.1. below, any right to or claim
..
for any punitive or exemplary damages against the other).
We and you agree to be bound by the provisions of any limitation on the period of time in which claims
must be brought under applicable law or this Agreement , whichever expires earlier. We and you further agree
that, in any arbitration proceeding, each must submit or file any claim that would constitute a compulsory
counterclaim (as defined by the Federal Rules of Civil Procedure) within the same proceeding as the claim
to which it relates. Any claim that is not submitted or filed as required is forever barred. The arbitrator may
not consider any settlement discussions or offers that might have been made by either you or us.
We and you agree that arbitration will be conducted on an individual, not a class-wide, basis and that an arbitration proceeding between us and our affiliates, and our and their respective shareholders, officers, directors, agents, and/or employees, and you (and/or your owners, guarantors, affiliates, and/or employees) may not be consolidated with any other arbitration proceeding between us and any other person. ·
Despite our and your agreement to arbitrate, we and you each have the right in a proper case to seek temporary restraining orders and temporary or preliminary injunctive relief from a court of competent jurisdiction; provided, however, that we and you must contemporaneously submit our dispute for arbitration on the merits as provided in this Subsection.
The provisions of this Subsection are intended to benefit and bind certain third party non- signatories and will continue in full force and effect subsequent to and notwithstanding this Agreement's expiration or termination.
G. GOVERNING LAW.
ALL MATTERS RELATING TO ARBITRATION WILL BE GOVERNED BY THE FEDERAL ARBITRATION ACT (9 U.S.C. §§ 1 ET SEQ.). EXCEPT TO THE EXTENT GOVERNED BY THE FEDERAL ARBITRATION ACT, THE UNITED STATES TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.), On OTHER FEDERAL LAW, THIS AGREEMENT, THE FRANCISE, AND ALL CLAIMS ARISING FROM THE RELATIONSHIP BETWEEN US AND YOU WILL BE GOVERNED BY THE LAWS OF THE STATE OF MISSOURI, WITHOUT REGARD TO ITS CONFLICT OF LAWS RULES, EXCEPT THAT ANY MISSOURI LAW REGULATING THE SALE OF FRANCIDSES OR GOVERNING THE RELATIONSHIP OF A FRANCHISOR AND ITS FRANCHISEE WILL NOT APPLY UNLESS ITS JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
H. CONSENT TO JURISDICTION.
SUBJECT TO SUBSECTION 17.F. ABOVE AND THE PROVISIONS BELOW, YOU AND YOUR OWNERS AGREE THAT ALL ACTIONS ARISING UNDER THIS AGREEMENT OR OTHERWISE AS A RESULT OF THE RELATIONSHTP BETWEEN YOU AND US MUST BE COMMENCED IN THE STATE OR FEDERAL COURT OF GENERAL JURISDICTION CLOSEST TO KA NSAS CITY, MISSOURI, AND YOU (AND EACH OWNER) IRREVOCABLY SUBMIT TO THE JURISDICTION OF THOSE COURTS AND WAIVE ANY OBJECTION YOU (OR THE OWNER) MIGHT HAVE TO EITHER THE JURISDICTION OF OR VENUE IN THOSE COURTS. NONETHELESS, YOU AND YOUR OWNERS AGREE THAT WE MAY ENFORCE THIS AGREEMENT AND ANY ARBITRATION ORDERS AND AWARDS IN THE COURTS OF THE STATE OR STATES IN WHICH YOU ARE DOMICILED OR THE RESTAURANT IS LOCATED.
L WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.
EXCEPT FOR OUR AND YOUR OBLIGATIONS TO INDEMNIFY THE OTHER FOR THIRD PARTY CLAIMS UNDER SUBSECTION 16.D., AND EXCEPT FOR PUNITIVE DAMAGES AVAILABLE TO EITHER PARTY UNDER FEDERL LAW, WE AND YOU (AND YOUR OWNERS) WAIVE TO THE FULLEST EXTENT PERMITTED BY LAW ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER AND AGREE THAT, IN THE EVENT OF A DISPUTE BETWEEN US AND YOU, THE PARTY MAKING A CLAIM WILL BE LIMITED TO EQUITABLE RELIEF AND TO RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
WE AND YOU IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT BY EITHER OF US.
J. BINDING EFFECT.
This Agreement is binding upon us and you and our and your respective executors, administrators, heirs,
beneficiaries, permitted assigns, and successors i n interest. Subject to our right to modify the Operations Manual
and System Standards, this Agreement may not be modified except by a written agreement signed by both our and
your duly-authorized officers.
K. LIMITATIONS OF CLAIMS.
Except for claims arising from your non-payment or underpayment of amounts you owe us, any and all claims
arising out of or relating to this Agreement or our relationship with you will be barred unless a judicial or arbitration proceeding is commenced within eighteen (18) months from the date on which the party asserting the claim knew or should have known of the facts giving rise to the claims.
L. CONSTRUCTION.
The preambles and exhibits are a part of this Agreement which , together with the System Standards
contained in the Operations Manual (which may be periodically modified, as provided in this Agreement), constitutes
our and your entire agreement, and there are no other oral or written understandings or agreements between us
and you , or oral or written representations by us, relating to the subject matter of this Agreement, the
franchise relationship, or the RESTAURANT (any understandings or any representations made, before this
Agreement are superseded by this Agreement). You may not rely on any alleged oral or written understandings,
agreements, or representations not contained in this Agreement.
Any policies that we adopt and implement from time to time to guide us in our decision - making are subject to change, are not a part of this Agreement, and are not binding on us. Except as expressl y provided in this
Agreement, nothing in this Agreement is intended or deemed to confer any rights or remedies upon any person
or legal entity not a party to this Agreement.
Except where this Agreement expressly obligates us reasonably to approve or nor unreasonably to withhold our approval of any of your actions or requests, we have the absolute right to refuse any request you make or to withhold our approval of any of your proposed, initiated, or completed actions that require our approval. The headings of the sections and paragraphs are for convenience only and do not define, limit or construe and contents
of these sections or paragraphs. '
References in this Agreement to "we,""us, "and "our," with respect to all of our rights and all of your obligations to us under this Agreement, include any of our affiliates with whom you deal. The term "affiliate" means any person or entity directly or indirectly owned or controlled by, under control of or control with, or owning or controlling you or us. "Control" means the power to direct or cause the direction of management and policies.
If two or more persons are at any time the owners of the Franchise and the RESTAURANT, whether as partners or joint venturers, their obligations and liabilities to us will be joint and several. References to "owner" mean any person holding a direct or indirect ownership interest (whether of record, beneficially, or otherwise) or voting rights in you (or a transferee of this Agreement and the RESTAURANT or an ownership interest in you), including, without limitation, any person who has a direct or indirect interest in you (or a transferee), this Agreement, the Franchise, or the RESTAURANT and any person who has any other legal or equitable interest, or the power to vest in himself or herself any legal or equitable interest, in their revenue, profits, rights, or assets.
References to a "controlling ownership interest" of you or one of your owners (i f an Entity) mean the percent of the voting shares or other voting rights that results from dividing one hundred percent (100%) of the ownership interests by the number of owners. In the case of a proposed transfer of an ownership interest in you or one of your owners, the determination of whether a "controlling ownership interest" is involved must be made as of both immediately before and immediately after the proposed transfer to see if a "controlling ownership interest" will be transferred (because of the number of owners before the proposed transfer or will be deemed to have been transferred (because of the number of owners after the proposed transfer).
An ESOP must satisfy the following criteria for purposes of Section 12 of this Agreement: (1) the ESOP may transfer to employees no more than twenty percent (20%) of your outstanding ownership interests; (2) you must identify for us, in advance, the employees who will receive an ownership interest in you through the ESOP; (3) employees receiving an ownership interest in you through the ESOP must sign the Guaranty or other form we prescribe undertaking personally to be bound, jointly and severally, by the non-monetary obligations in this Agreement; (4) an employee may not at any time transfer his or her ownership interest in you except to you; (5) an employee must relinquish his or her ownership interest in you upon the termination of his or her employment; and (6) transfers of ownership interests in you through an ESOP may not result in the transfer of a controlling ownership interest in you.
"Person" means any natu.ral person, corporation, limited liability company, general or limited partnership, unincorporated association, cooperative, or other legal or functional entity.
Unless otherwise specified, all references to a number of days shall mean calendar days and not business days.
The term "RESTAURANT" includes al l of the assets of the PROMPT PITA'S®
RESTAURANT you operate under this Agreement, including its revenue and the Lease. .
This Agreement may be executed in multiple copies, each of which will be deemed an original.
18. NOTICES AND PAYMENTS.
All written notices, reports, and payments permitted or required to be delivered by this Agreement or the Operations Manual will be deemed to be delivered:
(a) at the time delivered by hand;
(b) at the time delivered via computer transmission and , in the case of the Royalty, Fund contributions, and other amounts due, at the lime we actually receive payment via the EDTA;
(c) one (1) business day after transmission by facsimile or other electronic system if the sender has confirmation of successful transmission;
(d) one ( 1 ) business day after being placed in the hands of a nationally recognized commercial courier service for next business day delivery; or
(e) three (3) business days after placement in the United States Mail by Registered or Certified Mail, Return Receipt Requested, postage prepaid.
Any notice to us must be sent to the address specified on the first page of this Agreement, although we may change this address for notice by giving you thirty (30) days' p1ior notice by any of the means specified in subparagraphs (a) through (e) above. Any notice that we send to you may be sent only to the one (1) person identified on Exhibit A, even if you have multiple owners, at the email or postal address specified on Exhibit A. You may change the person and/or address for notice only by giving us thirty (30) days' prior notice by any of the means specified in subparagraphs (a) through (e) above.
Any required payment or report that we do not actually receive during regular business hours on the date due (or postmarked by postal authorities at least two (2) days before then) will be deemed delinquent.
19. COMPLIANCE WITH ANTI-TERRORISM LAWS.
You and your owners agree to comply and to assist us to the fullest extent possible in our efforts to comply, with Anti-Terrorism Laws (defined below). In connection with that compliance, you and your owners certify, represent and warrant that none of your property or interests is subject to being blocked under, and that you and your owners otherwise are not in violation of, any of the Anti-Terrorism Laws. "Anti-Terrorism Laws" mean Executive Order 13224 issued by the President of the United States, the USA PATRIOT Act, and all other present and future federal, state, and local laws, ordinances, regulations, policies, lists, and other requirements of any governmental authority addressing or in any way relating to terrorist acts or acts of war. Any violation of the Anti-Terrorism Laws by you or your owners, or any blocking of your or your owners' assets under the Anti-Terrorism Laws, shall constitute good · cause for
immediate termination of this Agreement, as provided in Subsection 14.B.(2 l ) above.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the dates noted below, to be effective as of the Effective Date.
PROMPT PITA'S F R A N C H I S E ,
I n c , a M i s s o u r i c o r p o r a t i o n
By: _ __
Name Title: _____________________ ____ _____________________________
FRANCHISE OWNER (IF YOU A RE TAKING THE FRANCHlSE AS A CORPORATION, LIMITED LIABILITY COMPANY, OR PARTNERSHIP):
Dated: [Name]
(IF YOU ARE TAKING THE FRANCHISE INDIVIDUALLY AND NOT AS A LEGAL ENTITY):
'
[Signature]
[Print Name]
[Signature]
[Print Name]
DATED
EXIUBIT A
TO BE FRANCISE AGREEMENT BETWEEN PROMPT PITA'S FRANCIDSE, INC. AND
------------ --
Effective Date: This Exhibit A is current and complete
as of
You and Your Owners
l. Form of Owner.
(a) Individual Proprietorship. Your owner(s) (is) (are) as follows:
(b) Corporation, Limited Liability Company or Partnership.
You were incorporated or formed on under the laws of the State of
. You have not conducted business under any name other than your
corporate, limited liability company, or partnership name and _
------------ · The following is a list of your directors, if applicable, and officers as of the effective date shown above:
Name of each Director/Officer Position(s) Held
2. Owners. The following list includes the full name of each person who is one of your owners (as defined in the Franchise Agreement), or an owner of one of your owners, and fully describes the nature of each owner's interest (attach additional pages if necessary).
Owner’s Name Percentage/Description of Interest
3. Name and Address of Person to Receive Notice for Franchise Owner.
4. Identification of Managing Owner.
Your Managing Owner as of the Effective Date is --------:------(must be one of the individuals
listed in paragraph 2 above). You may not change the Managing Owner without prior written approval.
5. Identification of Operations Partner. Your Operations Partner as of the
Effective Date is ------ - ------- - ------ - ---
PROMPT PITA' S FRANCHISE, INC., a Missouri corporation
FRANCHISE OWNER (IF YOU ARE TAKING THE FRANCHISE AS A CORPORATION,
By: __________________
, LIMITED LIABILITY COMPANY, OR PARTNERSHIP):
Title:
DATED: [Name]
_ By: _
By:
By: _
By: __
By:
DATED:_ _
(IF YOU ARE TAKING THE FRANCHISE INDIVIDUALLY AND NOT AS A LEGAL ENTITY):
[Signature]
[Print Name]
EXHIBIT B TO THE FRANCHISE AGREEMENT
BETWEEN PROMPT PITA’S FRANCHISE, INC. AND ______________________________ DATED ____________________________
REFUNDS AND CANCELLATION
This entire Agreement is conditioned upon our evaluating the personal abilities, aptitudes, and financial qualifications of you (or your owners) and your managers, if applicable. Therefore, you agree to submit all data we request, and we will have thirty (30) days after the Effective Date to prepare our evaluation. We will notify you in writing within the thirty (30) day period if we elect to cancel this Agreement. Our notice will be accompanied by a refund of the monies you paid us under this Agreement, less the amount stated below, and the notice and refund will cause an automatic cancellation of this Agreement without further notice.
In the event we cancel this Agreement as set forth above, we may keep a reasonable fee
for our evaluation and related preparatory work performed and expenses actually incurred, not to exceed Three Thousand Dollars ($3,000). We will return the excess amount to you, and, by doing so, we will be fully and forever released from any claims or causes of action you might have against us arising from the Franchise Agreement or otherwise.
PROMPT PITA'S FRANCHISE, INC., a Missouri corporation
By: __ _ _
Title:
DATED: ...,!
FRANCHISE OWNER
(IF YOU ARE TAKING THE FRANCHISE AS A CORPORATION,
LIMITED LIABILITY COMPANY, OR PARTNERSHIP):
[Name]
By:
By:
By:
By:
DATED: _ _
(IF YOU ARE TAKING THE FRANCHISE INDIVIDUALLY AND NOT AS A LEGAL ENTITY):
[Signature]
[Print Narne]
[Signature]
[Print Name]
;
- -
EXHIBIT
C TO THE FRANCHISE AGREEMENT
BETWEEN PROMPT PITA’S FRANCHISE, INC. AND
DATED
\'
DELIVERY AREA
Subject to your strict compliance with this Agreement, and except as provided below, we
grant you the right to deliver products made at the RESTAURANT within the following area (the "Area") and only within this Area: _
You acknowledge and understand that we may, at any time and from time to time, and for any or no reason, change the definition of the Area and, in particular, reduce the size of the Area. If we ever decide to do so, you agree, without any argument or disagreement, immediately to change the delivery services that you provide and to deliver the RESTAURANT's products only within the newly-defined Area. If you fail to do so, we may immediately terminate your right to provide any delivery services anywhere.
If we reduce the size of the Area, you acknowledge that there might be a reduction in
your sales but that we will not be liable for that reduction because we simply took action that this Exhibit allows us to take. You further acknowledge and agree that the Area is not exclusive and that we may engage, and/or al low other franchise owners and third parties to engage, in any activities we desire within the Area without any restrictions whatsoever (including allowing other franchise owners to provide delivery services in the Area). We will not be liable for any reduction in your sales as a result of these activities because this Exhibit allows us to engage, and/or to allow others to engage, in such activities. The Area is nothing more than the geographic boundaries in which you may deliver the RESTAURANT's products. It confers no other rights on you whatsoever.
[Signature page follows)
PROMPT PITA'S FRANCHISE, INC,. a Missouri corporation
By: _ __ Title:
DATED:
FRANCHISE OWNER
(IF YOU ARE TAKING THE FRANCHISE AS A CORPORATION, LIMITED LIABILITY COMPANY, OR' PARTNERSHIP):
[Name]
By:
By
By:
By:
By:
DATED:
(IF YOU ARE TAKING THE FRANCHISE INDIVIDUALLY AND NOT AS A LEGAL ENTITY):
[Signature]
[Print Name]
[Signature]
[Print Name]
GUARANTY AND ASSUMPTION OF OBLIGATIONS
THIS GUARANTY AND ASSUMPTION OF OBLI GATIONS is given this day of , 200 _,by ALL SHAREHOLDERS
In consideration of, and as an inducement to, the execution of that certain Franchise Agreement (the "Agreement") on this date and unconditionally (a) guarantees to us and our successors and assigns, for the term of the Agreement (including extensions) and afterward as provided in the Agreement, that ("Franchisee") will punctually pay and perform each and every undertaking, agreement, and covenant set forth in the Agreement (including any amendments or modifications of the Agreement) and (b) agrees to be personally bound by, and personally liable for the breach of, each and every provision in the Agreement (including any amendments or modifications of the Agreement), both monetary obligations and obligations to take or refrain from taking specific actions or to engage or refrain from engaging in specific activities, including the non-competition, confidentiality, transfer, and arbitration requirements.
Each of the undersigned consent and agrees that: ( 1 ) h e w i l l n o t in any way modify or amend this Guaranty, which will be continuing and irrevocable during t he term of the Agreement (including extensions), for so long as any performance is or might be owed under the Agreement by Franchisee or owners, and for so long as we have any cause of action against Franchisee or its owners; and (5) this Guaranty will continue in full force and effect for (and as to) any extension or modification of the Agreement and despite the transfer of any interest in the Agreement or Franchisee, and each of the undersigned waives notice of any and all renewals, extensions, modifications, amendments, or transfers.
Each of the undersigned waives: (i) all rights to payments and claims for reimbursement or subrogation which an y of the undersigned may have against Franchisee arising as a result of the undersigned's execution of and performance under this Guaranty; and (ii) acceptance and notice of acceptance by us of his or her undertakings under this Guaranty, notice of demand for payment of any indebtedness or non-performance of any obligations hereby guaranteed, protest and notice of default to any party with respect to the indebtedness or nonperformance of any obligations hereby guaranteed, and any other notices to which he or she may be entitled.
I f w e are required to enforce this Guaranty in a judicial or arbitration proceeding, and prevail in such proceeding, we shall be entitled to reimbursement of our costs and expenses, includ.ing, but not limited to, reasonable accountants', attorneys', attorneys' assistants' , arbitrators', and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses, and travel and living expenses, whether incurred prior to, in preparation for,
or in contemplation of the filing of any such proceeding. If we are required to engage legal counsel in connection with any failure by the undersigned to comply with this Guaranty, the undersigned shall reimburse us for any of the above-listed costs and expenses we incur.
IN WlTNESS WHEREOF, each of the undersigned has affixed his or her signature on the same day contemplation and year as the Agreement was executed.
GUARANTOR(S)
Sign:
Sign:
Sign: PERCENTAGE
OF OWNERSHIP IN
FRANCHISE
Sign:
TO THE PROMPT PITA'S FRANCHISE, lNC.
FRANCHISE EAGREEMENT
FOR USE lN MISSOURI
This Rider is made and entered into as of this day of (the ,
"Effective Dale") (regardless of the dates of the parties' signatures) by and between PROMPT PITA'S '· FRANCHISE, INC., a Missouri corporation ("we," "us," or "our"), and
------- ----------- ------ -<"you)) or "your").
I. BACKGROUND. We and you are parties to that Franchise Agreemen t dated
----.,.---- - -----,.- t h a t has been signed concurrently with the signing of this Rider (the "Franchise Agreement”. This Rider is annexed to and forms part of the Franchise Agreement. This
Rider is being signed because (a) t he offer or sale of the franchise for the PROMPT PITA'S® Restaurant that you will operate under the Franchise Agreement was made in the State of Missouri and the Restaurant will be located in Nebraska, and/or (b) you are a resident of Nebraska.
2. LIMITATIONS OF CLAJMS. The following language is added to the end of
Paragraph 17.K. of the Franchise Agreement:
However. this Section shall not act as a condition, stipulation, or provision purporting to bind any person acquiring any franchise to waive compliance with any provision of the Missouri Franchise Disclosure Act of 1987.
3. CONSTRUCTION. The first sentence of Paragraph 17.L. of the Franchise Agreement is deleted and replaced with the following:
The preambles and exhibits are a part of this Agreement which. together with 1he System
Standards contained in the Operations Manual (which may be periodically modified, as provided in this
Agreement), constitutes our and your entire agreement. and there are no ol.ber oral or written
understandings or agreements between us and you, or oral or wri tten representations by us (except for our
representations made in the Franchise Offering Circular that you received from Us), relating to the subject matter of this Agreement, the franchise relationship, or the RESTAURANT (any understandings or
agreements reached, or any representations made before this Agreement are superseded by this
Agreement).
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, the parties have executed and delivered this Rider effective on the date stated on the first page above.
PROMPT PITA'S FRANCHJS.E, INC., a Missouri corporation
FRANCHISE OWNER
• (IF YOU ARE TAKING THE FRANCHISE AS A CORPORATION, LIMITED LIABILITY COMPANY, OR PARTNERSHIP):
By.: -------------------------- Title: Vice President • Franchise Sales
[Name]
By:
DATED:
By:
By:
DATED:
(IF YOU ARE TAKING TH.E FRANCHISE INDIVIDUALLY AND NOT AS A LEGAL ENTITY):
[Signature] [Print Name]
