Restaurant Franchise Agreement

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Restaurant Franchise Agreement which sets out the terms when a party purchases a franchise. This agreement includes location of the restaurant and information about the goodwill associated with the franchise.

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This Restaurant Franchise Agreement is between a company that owns proprietary know-how and has created certain restaurants, a franchisor who operates restaurants using the company's knowledge and expertise and a franchisee who desires to open a franchise of the restaurant.

This agreement identifies the parties, grants the franchisee the right to own and operate a franchise restaurant in a specific location, how the restaurant will be developed and its opening date. It also includes detailed information about ownership and the goodwill associated with any trademarks owned by the company, and franchisee's limitations on use of these marks. Specific provisions regarding training and hiring of employees, restaurant image and operating and management procedures are also incorporated in this agreement.

This Restaurant Franchise Agreement includes the following:
  • Preamble: Sets out a comprehensive list of preambles regarding the company and the franchisee;
  • Grant of Franchise: Company grants franchisee a nonexclusive franchise to own and operate a restaurant at a certain location;
  • Development/Opening: Provisions include right of occupancy, how the restaurant will be developed, who will pay for costs of development and the furnishings, fixtures, etc. to be used within the developed restaurant;
  • Marks: Franchisee acknowledges that company and licensor are the owners of any trademarks. Limitations on use of these marks are also included in this agreement;
  • Training: Company will furnish a training program to franchisee but franchisee is responsible for all hiring decisions;
  • Insurance: Franchisee shall maintain insurance at all times on the premises and in the coverage amounts specified by company;
  • Franchise Fees: Provisions include initial franchise fee, royalty and service fees and interest on late payments;
  • Inspections and Audits: Company has the right to audit the franchisee at any time upon the giving of reasonable notice;
  • Signatures: The company, franchisor and franchisee must sign this agreement.

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This attorney-prepared packet contains:
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  3. Restaurant Franchise Agreement
State Law Compliance: This form complies with the laws of all states
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
Restaurant Franchise Agreement

 

 
 
Table of Contents
 
Section
 
1. Preambles and acknowledgements.
 
2. Grant of the franchise.
 
3. Development and opening of the restaurant.
 
A. Right of occupancy.
B. Development of the restaurant.
C. Payment of costs of development.
D. Furnishings, fixtures, signs and equipment.
E. Restaurant opening.
 
4. The marks.
 
A. Ownership and goodwill of the marks.
B. Limitations on franchisee's use of the marks.
C. Notification of infringements and claims.
D. Indemnification of franchisee.
E. Discontinuance of use of the marks.
 
5. Training and guidance.
 
A. Training.
B. Hiring and training of employees by franchisee.
C. Guidance.
D. The operating manual.
 
6. Restaurant image and operating procedures.
 
A. Condition and appearance of the restaurant.
B. Alterations to the restaurant.
C. Specifications, standards and procedures.
D. Approved brands and/or suppliers.
E. Compliance with laws and good business practices.
F. Management of the restaurant/conflicting interests.
G. Insurance.
 
7. Trade Secrets.
 
8. Franchise Fees.
 
A. Initial franchise fee.
B. Royalty and service fees.
C. Interest on late payments.
D. Application of payments.
 
9. Advertising and Promotion.
 
A. By company.
B. By franchisee.
 
10. Records, reports, and financial statements.
 
11. Inspections and audits.
 
A. Company's right to inspect the restaurant.
B. Company's right to audit.
 
12. Assignment.
 
A. By company.
B. Franchisee may not assign without approval by company.
C. Conditions for approval of assignment.
D. Assignment to a corporation.
E. Death or disability of franchisee.
F. Company's right of first refusal.
G. Effect of consent to assignment.
 
13. Renewal of the franchise.
 
A. Franchisee's right to renew.
B. Notice of renewal and nonrenewal.
C. Renewal agreements/releases.
 
14. Termination.
 
A. By franchisee.
B. By company.
 
15. Rights and obligations of company and franchisee upon termination or expiration of the franchise.
 
A. Payment of amounts owed to company.
B. The marks.
C. Know-how.
D. Covenant not to compete.
E. Continuing obligations.
 
16. Relationship of parties/indemnification.
 
17. Enforcement.
 
A. Severability and substitution of valid provisions.
B. Waiver of obligation.
C. Costs and attorney's fees.
D. Governing law/consent to jurisdiction.
E. Specific performance/injunctive relief.
F. Binding effect.
G. Construction.
 
18. Notices and Payments.
Time Period
Lessee's Share
Lessor's Share
012 months
50%
50%
1324 months
55%
45%
2536 months
60%
40%
3748 months
65%
35%
4960 months
70%
30%
61120 months
75%
25%
 
 
FRANCHISE AGREEMENT
 
This agreement is made and entered into [date], by and between [company], a corporation duly incorporated [second party], also doing business as [business name of second party] and [third party], with its principal place of business at [business address of company] (“Company”) and [franchisee] whose principal address is [address of franchisee] (“Franchisee”).
 
1. Preambles and Acknowledgements.
 
Company owns proprietary know-how relating to and has created, designed and developed certain fast food restaurants specializing in the sale of [description of product] and utilizing distinctive ingredients and methods of preparing food. Such restaurants are operated with uniform formats, systems, methods, procedures, and designs and are known as [restaurant]. Company and its parent company, [parent company] (“Licensor”), own all rights to, interests in and goodwill of, and use, promote and license the proprietary trade and service mark [mark]” and the logo reproduced on the cover of this Agreement (the “Marks”). Company grants to persons who meet Company's qualifications and are willing to undertake the investment and effort to establish and develop a [restaurant], franchises to operate a [restaurant] offering the products authorized and approved by Company and utilizing its formats, designs, methods, specifications, standards, operating procedures, guidance and the Marks. Franchisee has applied for a franchise to own and operate a [restaurant] and such application has been approved by Company in reliance upon all the representations made in it.
 
Franchisee acknowledges having conducted an independent investigation of the business venture contemplated by this Agreement and recognizes that it involves business risks and that the success of the venture is largely dependent upon the business abilities and efforts of Franchisee. Company expressly disclaims the making of, and Franchisee acknowledges not having received or relied upon, any warranty or guaranty, express or implied, as to the revenues, profits or success of the business venture contemplated by this Agreement. Franchisee acknowledges having read this Agreement and Company's Uniform Franchise Offering Circular and having no knowledge of any representation by Company, or its officers, directors, shareholders, employees or agents that are contrary to the statements made in Company's Uniform Franchise Offering Circular or to the terms in this Agreement.
 
2. Grant of the Franchise.
 
Subject to the provisions of this Agreement, Company grants to Franchisee a nonexclusive franchise (the “Franchise”) to own and operate a [restaurant] (the “Restaurant”) at, and only at, the following location: [location of restaurant] (the “Premises”), and to use the Marks in the operation of it for a term equal to the term of Franchisee's lease or sublease for the Premises. Termination or expiration of this Agreement shall constitute a termination or expiration of the Franchise. If the Restaurant is to be operated in a shopping center or mall, Franchisee shall have exclusive rights to operate a [restaurant] within that shopping center or mall. Subject to Franchisee's exclusive rights, if any, Company retains the right, in its sole discretion, and without granting any rights to Franchisee, to operate and grant other franchises for the operation of [restaurant] at such locations as Company deems appropriate and to sell food products offered by the Restaurant in non-restaurant retail outlets of its choice. Franchisee (and if Franchisee is a corporation or partnership, any shareholder or partner of Franchisee) agrees not, during the term of the Franchise, to have any interest as an owner, director, officer, employee, consultant, representative or agent, or in any other capacity, in any other restaurant, store or fast food establishment which is offering food products similar to the food products offered by [restaurant] (except other [restaurant] locations operated under franchise agreements with Company).
 
3. Development and Opening of the Restaurant.
 
A. Right of occupancy.
Franchisee has made an election to lease from Company and/or the lessor of the Premises (the “Lessor”) has required Company to be the prime lessee under a lease for the Premises (the “Lease”). Company leases to Franchisee, and Franchisee leases from Company, the Premises, on the following terms and conditions (the “Sublease”): (1) the term of the Sublease shall begin on the first day of the term of the Lease and end one day before the last day of the term of the Lease, unless sooner terminated as set forth below; (2) Franchisee shall pay to, or upon the order of, Company, as rent for the Premises, those amounts set forth in the Lease plus additional rent equal to ___% of the monthly rental set forth in the Lease, together with any other amounts required to be paid by Company pursuant to the Lease; (3) Company shall have the right to terminate the Sublease upon the happening of any of the following events: (a) if the Franchise granted by this Agreement expires and is not renewed or is terminated for any reason; (b) if the Lease should be cancelled or terminated for any reason prior to the expiration date of it; or (c) if Franchisee should suffer or permit the occurrence of any act or thing which would constitute an event of default by Company pursuant to the terms of the Lease; (4) concurrently with the execution of this Agreement, Franchisee shall pay to Company as a security deposit the sum paid by Company as stated in the Lease, which security deposit shall be returned to Franchisee, without interest, upon the expiration of the Sublease, providing all of the terms of the Sublease have been complied with; (5) concurrently with the execution of this Agreement, Franchisee shall pay to Company $____ as and for the rent for the first month of the term of the Lease; (6) Franchisee agrees that in the event Franchisee fails or refuses for any reason (other than failure or refusal by Company to perform its obligations under the Sublease or under this Agreement) to take and maintain possession of the Premises in accordance with the terms and conditions of the Lease, Company shall retain all amounts paid by Franchisee pursuant to this Agreement as liquidated damages and not as a penalty, it being agreed that Company's actual damages in any such event would be substantial but difficult to determine; (7) whenever in the Lease the term “Tenant”/“Lessee” or an equivalent term is used, the term “Franchisee” shall be substituted for it, and wherever the term “Landlord”/“Lessor” or an equivalent term is used, the term “Company” shall be substituted therefor. Except as expressly modified by the terms of, and subject to, this Agreement continuing in effect, all the terms and provisions of the Lease, including, without limitation any renewal options, are incorporated by reference and made a part of this Agreement and the parties agree to be bound by it; and (8) Franchisee shall not assign or in any manner transfer the Sublease or any interest in the Sublease, or further sublet the Premises or any part or parts of it, nor permit occupancy by anyone with, through or under it, without the previous written consent of Company.
 
B. Development of the restaurant.
Company will prepare suitable plans and specifications for the Premises of the Restaurant reflecting Company's requirements for interior and exterior design, layout, equipment, leasehold improvements, furnishings and fixtures of [restaurant], modified to the extent necessary to comply with applicable ordinances, building codes, permit requirements, lease requirements and restrictions and market considerations. Unless by rider to this Agreement Company and Franchisee have agreed that Franchisee will develop the Restaurant, Company agrees that it will do or cause to be done the following with respect to development of the Restaurant, as agent for and in the name of Franchisee: (1) obtain all required construction and sign permits and licenses; (2) complete the construction of all required improvements to the Premises and decorate the Premises; (3) purchase and install all fixtures, furnishings, equipment, signs, and the opening food and beverage inventory and operating supplies and other materials (subject to Franchisee's right to direct Company to purchase such items from sources selected by Franchisee as provided in Paragraph D of this Section). Company shall use its best efforts to complete development of and have the Restaurant ready to open within ___ after Company obtains possession of the Premises and all required construction permits and licenses. Company shall furnish to Franchisee: (1) at the time (or times) the construction contract(s) is awarded, a copy of the general contractor's bid(s) and a breakdown of estimated costs; (2) at the times of placement of the orders for signs, fixtures, furnishings, equipment and operating supplies and materials, copies of such orders; (3) at the times of placement of the initial product inventory orders, copies of such orders; and (4) within a reasonable time after the completion of development, a final accounting of all costs of development of the Restaurant, along with all partial and final waivers of lien, other paid receipts and equipment warranties.
 
C. Payment of costs of development.
Concurrently with the execution of this Agreement, Franchisee shall deposit $____, to be applied against the estimated cost of construction, signs, fixtures, furnishings, equipment, inventory and operating supplies and materials. Franchisee will promptly make additional deposits upon request by Company at the times construction contracts are awarded and purchase orders are placed. Franchisee will pay to Company, or Company will refund to Franchisee, as appropriate, the amount by which the actual total costs of development shall differ from the amounts deposited by Franchisee, in accordance with the final accounting as provided above. Franchisee will pay the applicable vendors (including Company and its affiliates) for the initial product and supply inventory ordered for the Restaurant in accordance with the vendors' payment terms.
 
D. Furnishings, fixtures, signs and equipment.
Franchisee agrees to use in the development and operation of the Restaurant only those brands, types or models of fixtures, furnishings, signs and equipment that Company has approved as meeting its specifications and standards for quality, design, appearance and function. Franchisee may purchase approved brands, types or models of signs, fixtures, furnishings and equipment from Company or from any supplier who can provide and install items meeting Company's standards and specifications. Franchisee further agrees to place or display at the Premises of the Restaurant only such signs, emblems, lettering, and logos that are from time to time approved in writing by Company.
 
E. Restaurant opening.
Franchisee shall not open the Restaurant for business until Company determines that it is in suitable condition. Franchisee agrees to open the Restaurant for business within ___ after such determination by Company. Company will prepare and furnish to Franchisee an opening advertising and promotional plan for the Restaurant which will contain Company's advice and guidance with respect to publicity, advertising, promotion, staffing, decoration and operation during the opening period. Franchisee agrees to spend not less than $___ for advertising and promotion of the opening of the Restaurant during the period commencing ___ days prior and ending ___ days after the opening of the Restaurant.
 
4. The Marks.
 
A. Ownership and goodwill of the marks.
Franchisee acknowledges that Company and Licensor are the owners of the Marks, that Franchisee's right to use the Marks is derived solely from this Agreement and is limited to the conduct of business by Franchisee pursuant to and in compliance with this Agreement and all applicable standards, specifications and operating procedures prescribed by Company from time to time during the term of the Franchise. Any unauthorized use of the Marks by Franchisee shall constitute an infringement of the rights of Company and/or Licensor in and to the Marks. Franchisee acknowledges and agrees that all usage of the Marks by Franchisee and any goodwill established by it shall inure to the exclusive benefit of Company and/or Licensor and that this Agreement does not confer any goodwill or other interests in the Marks upon Franchisee (except the right to operate a [restaurant] in compliance with this Agreement). All provisions of this Agreement applicable to the Marks shall apply to any additional proprietary trade and service marks and commercial symbols authorized for use by and licensed to Franchisee by Company.
 
B. Limitations on franchisee's use of the marks.
Franchisee agrees to use the Marks as the sole identification of the Restaurant, provided that Franchisee shall be identified as the independent owner in the manner prescribed by Company. Franchisee shall not use any Mark as part of any corporate or trade name or with any prefix, suffix or other modifying words, terms, designs or symbols (other than logos licensed to Franchisee under this Agreement), or in any modified form, nor may Franchisee use any Mark in connection with the sale of any unauthorized product or service or in any other manner not expressly authorized in writing by Company. Franchisee agrees to prominently display the Marks in the manner prescribed by Company, to give such notices of trade and service mark registrations as Company specifies and to obtain such fictitious or assumed name registrations as may be required under applicable law.
 
C. Notification of infringements and claims.
Franchisee shall immediately notify Company of any apparent infringement of or challenge to Franchisee's use of any Mark, or claim by any person of any rights in any Mark, and Franchisee shall not communicate with any person other than Company and its counsel in connection with any such infringement, challenge or claim. Company and/or Licensor shall have sole discretion to take such action as it or they deem appropriate and the right to exclusively control any litigation or Patent and Trademark Office or other proceeding arising out of any such infringement, challenge or claim or otherwise relating to any Mark and Franchisee agrees to execute any and all instruments and documents, render such assistance and do such acts and things as may, in the opinion of Company's or Licensor's counsel, be necessary or advisable to protect and maintain the interests of Company and Licensor in any such litigation or Patent and Trademark Office or other proceeding or to otherwise protect and maintain the interests of Company and Licensor in the Marks.
 
D. Indemnification of franchisee.
Company agrees to indemnify Franchisee against and to reimburse Franchisee for all damages for which Franchisee is held liable in any proceeding arising out of his use of any Mark, pursuant to and in compliance with this Agreement and for all costs reasonably incurred by Franchisee in the defense of any such claim or in any such proceeding in which Franchisee is named as a party, provided that Franchisee has timely notified Company of such claim or proceeding and has otherwise complied with this Agreement.
 
E. Discontinuance of use of the marks.
If it becomes advisable at any time in Company's sole discretion for Company and/or Franchisee to modify or discontinue use of any Mark due to priority of use by another party of the same or a confusingly similar mark, and/or use one or more additional or substitute trade or service marks, Franchisee agrees to comply within a reasonable time after notice by Company and the sole obligation of Company in any such event shall be to reimburse Franchisee for the out-of-pocket costs of complying with this obligation.
 
5. Training and Guidance.
 
A. Training.
Company shall furnish to Franchisee or Franchisee's designated manager a training program in the operation of a [restaurant] during such period as Company designates prior to and after the opening of the Restaurant. Franchisee or its designated manager shall be required to complete the training program to the satisfaction of Company. Company may require that Franchisee or its designated manager and any successor manager approved by Franchisee attend such further training programs as Company shall from time to time reasonably prescribe. Franchisee shall be responsible for any travel and living expenses which Franchisee and/or its manager incur in connection with training.
 
B. Hiring and training of employees by franchisee.
Franchisee shall hire all employees of the Restaurant, and shall be exclusively responsible for the terms of their employment and compensation and for the proper training of such employees in the operation of the Restaurant. Franchisee agrees to maintain at all times a staff of trained employees sufficient to operate the Restaurant in compliance with Company's standards.
 
C. Guidance.
Company shall maintain a continuing advisory relationship with Franchisee, including consultation in the areas of marketing, restaurant operations and customer service. Company shall advise Franchisee from time to time of operating problems of the Restaurant disclosed by reports submitted to or inspections made by Company and shall furnish to Franchisee guidance in connection with methods and procedures utilized by [restaurant]. Such guidance shall, in the discretion of Company, be furnished in the form of Company's operating manual for [restaurant] (the “Operating Manual”), bulletins, other written materials, telephone consultations and/or consultations at the office of Company or at the Restaurant.
 
D. The operating manual.
Company will loan to Franchisee during the term of the franchise one copy of the Operating Manual. The Operating Manual shall contain mandatory and suggested specifications, standards and operating procedures prescribed from time to time by Company for [restaurant] and information relative to other obligations of Franchisee under this Agreement and the operation of a [restaurant]. Company shall have the right to add to and otherwise modify the Operating Manual from time to time to reflect changes in the image, appearance, and operation of [restaurant], provided that no such addition or modification shall alter Franchisee's fundamental status or rights under this agreement. Franchisee shall keep the copy of the Operating Manual current and in the event of a dispute relative to the contents of the Operating Manual, the master copy maintained by Company at its principal office shall be controlling.
 
6. Restaurant Image and Operating Procedures.
 
A. Condition and appearance of the restaurant.
Franchisee agrees to maintain the condition and appearance of the Restaurant consistent with the image of a [restaurant] as an attractive, clean, and efficiently operated food service business, offering high quality food products and beverages, and efficient and courteous service. Franchisee agrees to effect such maintenance of the Restaurant as is reasonably required from time to time to maintain such condition, appearance and efficient operation, including interior and exterior repair and cleaning of the Restaurant premises, replacement of worn out or obsolete leasehold improvements, fixtures and signs and periodic decorating.
 
B. Alterations to the restaurant.
Franchisee shall not make any material replacements of or alterations to the Premises, leasehold improvements, layout, fixtures, furnishings, signs, equipment, or appearance of the Restaurant as originally developed in accordance with plans and specifications furnished by Company without prior written approval by Company.
 
C. Specifications, standards and procedures.
Franchisee acknowledges and agrees that each and every detail of the appearance and operation of the Restaurant is important to Company and other [restaurant]. Company shall endeavor to maintain high standards of quality and service at all [restaurant]. To this end, Franchisee agrees to cooperate with Company in maintaining such high standards in the Restaurant and, accordingly, agrees to comply with all mandatory specifications, standards and operating procedures (whether contained in the Operating Manual for [restaurant] or any other written or oral communication to Franchisee) relating to the appearance or operation of a [restaurant], including, without limitation: (1) type, quality, weight, dimensions, ingredients, uniformity, manner of preparation and sale of all food products and beverages sold by the Restaurant and of all other products used in the packaging and sale of them; (2) hours and days during which the Restaurant will be open for business; (3) the safety, maintenance, cleanliness, sanitation, function and appearance of the Restaurant premises and its fixtures, equipment, furnishings, decor and signs; and (4) uniforms and appearance of employees. Mandatory specifications, standards and operating procedures prescribed from time to time, or otherwise communicated to Franchisee in writing, shall constitute provisions of this Agreement as if fully set forth in it. All references to this Agreement shall include all such mandatory specifications, standards and operating procedures.
 
D. Approved brands and/or suppliers.
The reputation and goodwill of [restaurant] is based upon, and can be maintained only by, the sale of distinctive, high quality products and services. Franchisee therefore agrees that the Restaurant will: (1) conform to Company's specifications and quality standards, and purchase from suppliers approved by Company all food products and beverages and all ingredients used in the preparation of food products and beverages; (2) prepare and offer for sale only food products and beverages approved in writing by Company; and (3) use only equipment, menus, paper products, packaging materials, and other supplies approved by Company. Company may from time to time modify the list of approved brands and/or suppliers, and Franchisee shall not, after receipt in writing of such modification, reorder any brand or from any supplier which is no longer approved. If Franchisee proposes to use any food or beverage, or utilize any ingredient or supply or serve food products or beverages of any brand and/or supplier which is not then approved, he shall first notify Company and submit sufficient information, specifications and samples concerning such brand and/or supplier for a determination by Company whether such brand complies with Company's specifications and standards and/or such supplier meets Company's approved supplier criteria. Company may impose reasonable inspection and supervision fees on approved suppliers to cover Company's costs incurred in making such determination. Company shall, within a reasonable time, notify Franchisee whether or not such proposed brand and/or supplier is approved by Company.
 
E. Compliance with laws and good business practices.
Franchisee shall secure and maintain in force all required licenses, permits and certificates relating to the operation of the Restaurant and shall operate the Restaurant in full compliance with all applicable laws, ordinances and regulations including, without limitation, all government regulations relating to occupational hazards and health, worker's compensation insurance, unemployment insurance and withholding and payment of federal and state income taxes, social security taxes and sales taxes. Franchisee shall in all dealings with its customers, suppliers, Company and the public adhere to the highest standards of honesty, integrity, fair dealing and ethical conduct. Franchisee agrees to refrain from any business or advertising practice which may be injurious to Company and the goodwill associated with the Marks and other [restaurant]. Franchisee shall notify Company in writing within ___ days of the commencement of any action, suit or proceeding, and of the issuance of any order, writ, injunction, award or decree of any court, agency or other governmental instrumentality, which may adversely affect the operation or financial condition of Franchisee or the Restaurant.
 
F. Management of the restaurant/conflicting interests.
The Restaurant shall at all times be under the direct, on-premises supervision of Franchisee or a full time manager who has successfully completed Company's training program. Franchisee shall keep Company informed at all times of the identity of any employee(s) acting as regular manager(s) of the Restaurant. Franchisee agrees at all times to faithfully, honestly and diligently perform the obligations under this Agreement, to continuously exert Franchisee's best efforts to promote and enhance the business of his Restaurant and not to engage in any similar business or other activity that will conflict with the obligations under this Agreement.
 
G. Insurance.
Franchisee shall at all times during the term of the Franchise maintain in force at Franchisee's sole expense, comprehensive general liability and excess liability insurance against claims for bodily injury, death and property damage caused by or occurring in conjunction with the operation of the Restaurant or otherwise in conjunction with the conduct of business by Franchisee pursuant to the Franchise. Such insurance coverage shall be maintained under one or more policies of insurance containing minimum liability protection of $1,000,000 per occurrence for bodily injury and death, and $100,000 per occurrence for property damage (or such greater amounts as are required under the Lease). All such policies shall be issued by one or more insurance carriers acceptable to Company, shall name Company as an additional insured, and shall provide that Company will receive ___ days' prior written notice of termination, expiration, cancellation, modification or reduction in coverage of any such policy. Upon ___ days' prior notice to Franchisee, Company may increase the minimum protection requirement as of the renewal date of any policy, and require different or additional kinds of insurance at any time, including excess liability (umbrella) insurance, to reflect inflation, identification of new risks, changes in law or standards of liability, higher damage awards or other relevant changes in circumstances. Franchisee shall submit to Company annually a copy of the certificate of or other evidence of the renewal or extension of each such insurance policy. If Franchisee at any time fails or refuses to maintain in effect any insurance coverage required by Company, or to furnish satisfactory evidence of it, Company, at its option and in addition to its other rights and remedies under this Agreement, may, but need not, obtain such insurance coverage on behalf of Franchisee, and Franchisee shall promptly execute any applications or other forms or instruments required to obtain any such insurance and pay to Company, on demand, any costs and premiums incurred by Company.
 
7. Trade Secrets.
 
Franchisee acknowledges that Company possesses proprietary Know-How consisting of the ingredients and methods of preparation of food products sold at and operating procedures of [restaurant] (the “Know-How”). Company will disclose the Know-How to Franchisee in the training program, the Operating Manual and in guidance furnished to Franchisee during the term of the Franchise. Franchisee understands and acknowledges that Franchisee will not acquire any interest in the Know-How other than the right to utilize it in the operation of the Restaurant during the term of the Franchise. Franchisee agrees not to disclose during or after the term of the franchise any Know-How of Company. If any of the Know-How which has been disclosed to Franchisee pursuant to this Agreement becomes generally known in the food service industry other than through default of Franchisee in the obligations under this Agreement, and Franchisee desires to be released from the secrecy obligations under this Section in respect to such information, Company will not unreasonably withhold its consent to such release. In no event shall Franchisee be liable to Company for the unintentional disclosure of any of the Know-How which has become generally known in the food service industry.
 
8. Franchise Fees.
 
A. Initial franchise fee.
Franchisee shall pay to Company a nonrecurring initial franchise fee of $____, payable as follows: (1) $_____ upon execution of this agreement; and (2) $___ within ___ days of the execution of this agreement. The initial franchise fee shall be fully earned by Company and nonrefundable unless, prior to the time that the second payment is required to be paid, Franchisee shall notify Company in writing of its decision to terminate this Agreement, in which event $___ of the initial payment shall be retained by Company in compensation for assistance rendered to Franchisee prior to the date of termination.
 
B. Royalty and service fees.
Franchisee shall pay to Company on or before Thursday of each week, a royalty and service fee of ___% of the net sales of the Restaurant for the seven-day period ending at the close of business on the preceding Saturday. “Net sales” shall mean and include the aggregate amount of all sales of food and beverages made by the Restaurant, but excluding all federal, state or municipal sales or service taxes collected by Franchisee and paid to the appropriate taxing agency.
 
C. Interest on late payments.
All royalty and service fees and advertising contributions which Franchisee owes to Company shall bear interest after due date at the highest applicable legal rate for open account business credit, not to exceed 2% per month. Franchisee acknowledges that this Paragraph shall not constitute Company's agreement to accept such payments after they are due or a commitment by Company to extend credit to, or otherwise finance Franchisee's operation of, the Restaurant. Further, Franchisee acknowledges that failure to pay all amounts when due shall constitute grounds for termination of this Agreement, as provided in Paragraph B of Section 14, notwithstanding the provisions of this paragraph.
 
D. Application of payments.
Notwithstanding any designation by Franchisee, Company shall have the sole discretion to apply any payments by Franchisee to any past due indebtedness of Franchisee for royalty and service fees, advertising contributions, purchases from Company, interest or other indebtedness.
 
9. Advertising and Promotion.
 
A. By company.
Recognizing the value of uniform advertising and promotion to the goodwill and public image of [restaurant], Company agrees to maintain and administer the Advertising and Sales Promotion Fund (the “Fund”) for such advertising programs as Company may deem necessary or appropriate, in its sole discretion. Company shall direct all advertising programs financed by the Fund, with sole discretion over the creative concepts, materials and endorsements used in them, and the geographic, market and media placement and allocation of them. Franchisee agrees that the Fund may be used to pay the costs of preparing approved advertising and marketing materials which, through the Fund, Company shall furnish to Franchisee on the same terms and conditions as such materials are furnished to other [restaurant].
 
Franchisee shall contribute to the Fund in an amount up to ___% of the net revenues of the Restaurant, as defined in this Agreement, payable weekly together with the royalty and service fees due under this Agreement. Franchisee understands and acknowledges that the Fund is intended to maximize general public recognition and patronage of the Marks and [restaurant] for the benefit of all [restaurant] and Company undertakes no obligation in administering the Fund to ensure that expenditures which are proportionate or equivalent to Franchisee's contributions are made for the market area of the Restaurant or that any [restaurant] benefits directly or pro rata from the placement of advertising.
 
The Fund shall be accounted for separately from the other funds of Company and shall not be used to defray any of Company's general operating expenses, except for such reasonable salaries, administrative costs and overhead as Company may incur in activities reasonably related to the administration of the Fund and its advertising programs (including, without limitation, conducting market research, preparing advertising and promotional materials and collecting and accounting for contributions to the Fund). An audit of the operations of the Fund shall be prepared annually by independent certified public accountants and shall be made available to Franchisee upon request. The cost of audits shall be paid by the Fund. Except as expressly provided in this Section, Company assumes no direct or indirect liability or obligation to Franchisee with respect to the maintenance, direction or administration of the Fund.
 
B. By franchisee.
Franchisee agrees to list and advertise the Restaurant in the principal regular (white pages) and classified (yellow pages) telephone directories distributed within Franchisee's market area, in such directory categories as are determined by Company. Franchisee agrees to spend annually for local advertising and promotion of the Restaurant not less than ___% of the Restaurant's net sales for the calendar year. Amounts paid to the Fund pursuant to Paragraph A of this Section and the cost of classified telephone directory advertising shall constitute expenditures for purposes of this obligation. Franchisee shall submit annually, in form satisfactory to Company, verification of his expenditures for advertising and promotion. Prior to their use by Franchisee, samples of all local advertising and promotional materials not prepared or previously approved by Company shall be submitted to Company for approval, which shall not be unreasonably withheld. If written disapproval is not received by Franchisee within ___ days from the date of receipt by Company of such materials, Company shall be deemed to have given the required approval. Franchisee shall not use any advertising or promotional materials that Company has disapproved.
 
10. Records, Reports, and Financial Statements.
 
Franchisee shall establish and maintain at Franchisee's own expense an accounting and recordkeeping system conforming to the requirements prescribed by Company and shall preserve for a period of ___ years from the date of their preparation all accounting records and supporting documents relating to Franchisee's operations under this Agreement. Franchisee shall also furnish to Company in the form from time to time prescribed by Company: (1) by Thursday of each week, a report for the seven-day period ending at the close of business on the preceding Saturday, stating the gross and net sales of the Restaurant; (2) on or before the 20th day of each month, an operating statement for the preceding calendar month; (3) within ___ days after the end of each fiscal year of the Restaurant, an annual statement of profit and loss and a year end balance sheet for the Restaurant verified by Franchisee; and (4) such other periodic forms and reports as may reasonably be required by Company from time to time. Franchisee shall verify in writing to company that all such reports and statement are complete and accurate.
 
11. Inspections and Audits.
 
A. Company's right to inspect the restaurant.
To determine whether Franchisee is complying with this Agreement, Company shall have the right at any time during business hours, and without prior notice to Franchisee, to inspect the Restaurant and to observe the operations of the Restaurant. Franchisee shall fully cooperate with representatives of Company making any such inspection or observing the operations of the Restaurant.
 
B. Company's right to audit.
Franchisee shall maintain readily available for inspection by Company, and shall furnish to Company upon its request, at such locations as Company may reasonably request (including Company's office), exact copies of all books and records of the Restaurant and of any corporation or partnership that holds the Franchise and shall afford Company (and its agents), at any time during business hours, and without prior notice to Franchisee, full and free access to such books and records at the Restaurant. Company (and its agents) shall have the right to make extracts from, and copies of, and to audit, or cause to be audited, such books and records and shall have the right to communicate freely with Restaurant employees. Franchisee shall fully cooperate with representatives of Company and independent accountants hired by Company to conduct any such inspection or audit. In the event any such inspection or audit shall disclose an understatement of the net sales of the Restaurant, Franchisee shall pay to Company, within ___ days after receipt of the inspection or audit report, the royalty and service fee and any advertising contribution due on the amount of such understatement, plus interest (at the rate and on the terms provided in Paragraph C of Section 8) from the date originally due until the date of payment. Further, in the event such inspection or audit is made necessary by the failure of Franchisee to furnish reports, supporting records or other information, as required, or to furnish such reports, records or information on a timely basis, or if an understatement of net sales for the period of any inspection or audit (which shall not be for less than three months) is determined by any such inspection or audit to be greater than 2%, Franchisee shall reimburse Company for the cost of such inspection or audit, including, without limitation, the charges of any independent accountants and the travel expenses, room and board and compensation of employees of Company. The above remedies shall be in addition to all other remedies and rights of Company under this Agreement or under applicable law.
 
12. Assignment.
 
A. By company.
This Agreement and the Franchise are fully assignable by Company and shall inure to the benefit of any assignee or other legal successor to the interest of Company, provided that Company shall, subsequent to any such assignment, remain liable for the performance of its obligations under this Agreement.
 
B. Franchisee may not assign without approval by company.
Franchisee understands and acknowledges that the rights and duties created by this Agreement are personal to Franchisee or its owner and that Company has granted the Franchise in reliance upon the individual or collective character, skill, aptitude, attitude, business ability and financial capacity of Franchisee or its owner. Therefore, except as provided below with respect to assignment to a corporation, neither the Franchise, the Restaurant (or any interest in it) nor any part or all of the ownership of Franchisee may be voluntarily, involuntarily, directly or indirectly assigned, sold, subdivided, subfranchised or otherwise transferred by Franchisee or its owner (including, without limitation, by transfer of capital, stock or partnership interests, by merger or consolidation, by issuance of additional securities representing an ownership interest in Franchisee, or, in the event of the death of Franchisee or an owner of Franchisee, by will, declaration of or transfer in trust or the laws of intestate succession) without the prior written approval of Company, and any such assignment or transfer without such approval shall constitute a breach of this Agreement and convey no rights to or interests in the Franchise.
 
C. Conditions for approval of assignment.
If Franchisee and its owner are in full compliance with this Agreement, Company shall not unreasonably withhold its approval of an assignment, provided that the proposed assignee or its owner is, in the opinion of Company, an individual of good moral character who has sufficient business experience, aptitude and financial resources to own and operate the Restaurant and otherwise meets Company's then applicable standards for franchisees, and further provided that if the transfer is of the franchise or the Restaurant, or of a controlling interest in Franchisee, or is one of a series of transfers which in the aggregate constitute the transfer of a controlling interest in Franchisee, all of the following conditions are met prior to, or concurrently with, the effective date of the assignment: (1) all obligations of Franchisee and its owner incurred in connection with this agreement have been assumed by the assignee; (2) Franchisee shall have paid such royalty and services fees, advertising contributions, amounts owed for purchases by Franchisee from Company and any other amounts owed to Company which are then due and unpaid; (3) the assignee shall have completed the training program required of new franchisees; (4) the assignee and its owner shall have executed and agreed to be bound by the form of franchise agreement and any ancillary agreements as are then customarily used by Company in the grant of franchises for [restaurant], which agreement(s) shall provide for the same royalty and service fees and advertising contributions required under this Agreement and a term equal to the remaining term of the Franchise; (5) Franchisee or the assignee shall have paid a training and assignment fee to Company in an amount equal to ___% of the initial franchise fee payable under the Company's then current standard franchise agreement, to defray expenses incurred by Company in connection with the assignment; (6) Franchisee and its owner shall have executed a general release, in form satisfactory to Company, of any and all claims against Company and its affiliates, officers, directors, employees and agents; (7) Company shall have approved the material terms and conditions of such assignment, including, without limitation, that the price and terms of payment are not so burdensome as to adversely affect the future operations of the Restaurant by the assignee; (8) Franchisee and its owner shall have executed a noncompetition covenant in favor of Company and the assignee, agreeing that for a period of not less than 5 years, commencing on the effective date of the assignment, they will not have any interest as an owner, investor, partner, director, officer, employee, consultant, representative or agent, or in any other capacity, in any fast food restaurant, store or establishment located within a ___ mile radius of the Restaurant which is offering food products substantially similar to the food products offered by [restaurant]; and (9) Franchisee and its owner shall have entered into an agreement with Company agreeing that all obligations of the assignee to make installment payments of the purchase price or interest on it to Franchisee or its owner shall be subordinate to the obligations of the assignee to pay royalty and service fees, advertising contributions and for purchases from Company. If the proposed assignment is to or among owners of Franchisee or to or among the immediate family members of Franchisee or an owner of Franchisee, Subparagraph (5) of the above requirements shall not apply and Subparagraphs (7) and (9) shall not apply to transfers by gift, bequest or inheritance.
 
D. Assignment to a corporation.
The Franchise and the assets and liabilities of the Restaurant may be assigned to a newly organized corporation that conducts no business other than the Restaurant (and other [restaurant]), which is actively managed by Franchisee and in which Franchisee owns and controls all issued and outstanding capital stock. The articles of incorporation, bylaws and other organizational documents of such corporation shall recite that the issuance and assignment of any interest in them is restricted by the terms of Paragraphs B and C of Section 12 of this Agreement and all issued and outstanding stock certificates of such corporation shall bear a legend referring to the restrictions of Paragraphs B and C. Each shareholder of Franchisee at any time during the term of the Franchise shall execute an agreement in form furnished or approved by Company undertaking to be bound jointly and severally by all provisions of this Agreement. Franchisee shall furnish to Company at any time upon request, in such form as Company may require, a list of all shareholders (of record and beneficially) reflecting their respective interests in Franchisee.
 
E. Death or disability of franchisee.
Upon the death or permanent disability of Franchisee or, if Franchisee is a corporation or partnership, the owner of 1/2 or more of the partnership interest, equity or voting control of Franchisee, the executor, administrator, conservator or other personal representative of such person shall assign the Franchise or such interest in Franchisee to a third party approved by the Company. Such disposition of the Franchise or such interest in Franchisee (including, without limitation, transfers by bequest or inheritance) shall be completed within a reasonable time, not to exceed ___ months from the date of death or permanent disability and shall be subject to all the terms and conditions applicable to assignments contained in Paragraph C of this Section and to the Company's right of first refusal contained in Paragraph F of this section (provided that Paragraph F shall not apply to transfers to members of the immediate family of Franchisee or an owner of Franchisee or to transfers by gift, bequest or inheritance). Failure to so dispose of the Franchise or such interest in Franchisee within that period of time shall constitute a breach of this Agreement. Pending disposition, Company shall have the right to approve the management of the Restaurant and no person whom Company has disapproved shall continue to act as a manager of the Restaurant.
 
F. Company's right of first refusal.
If Franchisee or its owner(s) shall at any time determine to sell an interest in the Restaurant or an ownership interest in Franchisee, other than to an existing shareholder or partner of Franchisee, Franchisee or its owner(s) shall obtain a bona fide, executed written offer from a responsible and fully disclosed purchaser and shall submit an exact copy of such offer to Company. Company shall have the right, exercisable by written notice delivered to Franchisee or its owner(s) within ___ days from the date of delivery of an exact copy of such offer to Company, to purchase such interest in the Restaurant or such ownership interest in Franchisee for the price and on the terms and conditions contained in such offer, provided that Company shall be entitled to the customary warranties, closing documents and post-closing indemnifications, the credit of Company shall be deemed the equivalent to the credit of any purchaser, Company may substitute cash for any form of payment proposed in such offer and shall have not less than ___ days to prepare for closing. If Company does not exercise its right of first refusal, Franchisee or its owner may complete the sale to such purchaser pursuant to and on the terms of such offer, subject to Company's approval of the purchaser as provided in Paragraphs B and C of this Section, provided that if the sale to such purchaser is not completed within ___ days after delivery of such offer to Company, or there is a material change in the terms of the sale, Company shall again have the right of first refusal provided in this Agreement.
 
G. Effect of consent to assignment.
Company's consent to an assignment of the Franchise or any interest subject to the restrictions of this Section, shall not constitute a waiver of any claims it may have against the assignor, nor shall it be deemed a waiver of Company's right to demand exact compliance with any of the terms or conditions of the Franchise by the assignee(s).
 
13. Renewal of the Franchise.
 
A. Franchisee's right to renew.
If, upon expiration of the term of this agreement: (1) Company elects to continue the operation of a [restaurant] at Franchisee's location; (2) Franchisee has substantially complied with all provisions of this Agreement; and (3) Franchisee agrees to refurbish and decorate the Premises, replace leasehold improvements, fixtures and signs and otherwise modify the Restaurant in compliance with specifications and standards then applicable under new or renewal franchises for [restaurant]; Franchisee shall have the right to renew the Franchise for an additional term equal to one day less than the remaining term or the renewal term of the Lease or term of any new lease. Such renewal shall be without payment of an initial or renewal franchise fee.
 
B. Notice of renewal and nonrenewal.
Franchisee shall give Company written notice of exercise of his option to renew the Franchise one year prior to the expiration of the initial term. Company agrees to give Franchisee written notice of any deficiencies in Franchisee's operation of the Restaurant which could cause Company to refuse to renew the Franchise ___ years prior to the expiration of the initial term and written notice of an election not to renew the Franchise one year prior to the expiration of the initial term. A notice of nonrenewal by Company shall state the reasons for Company's refusal to renew. If Company elects to continue the operation of a [restaurant] at Franchisee's location, but elects not to renew the Franchise, Franchisee and its owner shall have the right to assign the Franchise or the ownership of Franchisee in accordance with Section 12, provided that Company will grant to the purchaser or Franchisee (under its successor owner) a franchise on the terms and conditions then customarily contained in new franchises. Franchisee's right to assign the Franchise or ownership of Franchisee upon Company's determination not to renew the Franchise shall expire upon expiration of the Franchise.
 
C. Renewal agreements/releases.
To renew the franchise, Company, Franchisee and the owners of Franchisee shall execute the form of franchise agreement and any ancillary agreements then customarily used by Company in the grant or renewal of franchises for the operation of [restaurant] (with appropriate modifications to reflect the fact that the Agreement relates to the grant of a renewal franchise) and Franchisee and its owners shall execute general releases, in form satisfactory to Company, of any and all claims against Company and its affiliates, officers, directors, employees and agents. Failure by Franchisee and its owners to sign such agreement(s) and releases within ___ days after delivery of them to Franchisee shall be deemed an election by Franchisee not to renew the franchise.
 
14. Termination.
 
A. By franchisee.
If Franchisee is in substantial compliance with this Agreement and Company materially breaches this Agreement and fails to cure such breach within ___ days after written notice is delivered to Company, Franchisee may terminate this Agreement effective ___ days after delivery to Company of notice. A termination of this Agreement by Franchisee (whether express or reasonably implied from Franchisee's acts or omissions) for any reason other than a material breach by Company (coupled with substantial compliance by Franchisee) and Company's failure to cure such breach within ___ days after receipt of written notice shall be deemed a termination by Franchisee without cause.
 
B. By company.
Company shall have the right to terminate this Agreement effective upon delivery of notice of termination to Franchisee, if Franchisee: (1) loses, abandons, surrenders or transfers control of the operation of the Restaurant (including entering into a management arrangement with any person not a party to this Agreement); (2) has made any material misrepresentation or omission in applying for the Franchise or is convicted of or pleads no contest to any felony or any crime or offense that is likely to adversely affect the reputation of Franchisee or the Restaurant; (3) makes an unauthorized assignment of the Franchise or an ownership interest in Franchisee or the Restaurant or fails to dispose of the Franchise or the interest in Franchisee of a deceased or disabled owner as required in this Agreement; (4) fails or refuses to comply with any mandatory specification, standard or operating procedure prescribed by Company relating to cleanliness or sanitation of the Restaurant and does not correct such failure or refusal within 48 hours after written notice is delivered to Franchisee; (5) fails to pay when due royalty and service fees or advertising contributions and does not correct such failure within ___ days after notice of such failure is delivered to Franchisee; (6) fails to comply with any other provisions of this agreement and does not correct such failure to comply within ___ days after notice of such failure is delivered to Franchisee; or (7) fails on two or more separate occasions within any period of ___ months consecutive months to submit when due any reports, information or supporting records, to pay when due the royalty and service fees, advertising contributions or other payments due to Company, or otherwise fails to comply with this Agreement, whether or not such failures to comply are corrected after notice is delivered to Franchisee.
 
15. Rights and Obligations of Company and Franchisee Upon Termination or Expiration of the Franchise.
 
A. Payment of amounts owed to company.
Franchisee agrees to pay to Company within ___ days after the effective date of termination or expiration of the Agreement all amounts owed to Company.
 
B. The marks.
Franchisee agrees after the termination or expiration of the Franchise to: (1) not directly or indirectly at any time or in any manner identify personally or any business as a current or former [restaurant], or as a franchisee, or licensee as otherwise associated with Company, or use any Mark, any colorable imitation of it or other indicia of a [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 Company or its affiliate; (2) return to Company all signs, sign faces, advertising materials, forms, invoices, packaging and other materials containing any Mark or otherwise identifying or relating to a [restaurant]; (3) take such action as may be required to cancel all fictitious or assumed name or equivalent registrations relating to the use of any Mark; (4) notify the telephone company and all listing agencies of the termination or expiration of Franchisee's right to use any telephone number and any regular, classified or other telephone directory listings associated with any Mark and direct the telephone company and such listing agencies to cancel such telephone numbers and remove such listings when such directories are next republished. Franchisee acknowledges that as between Company and Franchisee, Company has the sole rights to and interest in all telephone numbers and directory listings associated with any Mark and Franchisee authorizes Company, and appoints Company and any officer of Company as Franchisee's attorney in fact, to direct the telephone company and all listing agencies to cancel such telephone numbers and delete such listings, should Franchisee fail or refuse to do so, and the telephone company and all listing agencies may accept such direction or this Agreement as conclusive of the exclusive rights of Company in such telephone numbers and directory listings and its authority to direct their cancellation and deletion; (5) remove and/or alter any distinctive features of a [restaurant] or allow Company or its agents, without liability, to enter the premises and perform such removal or changes; and (6) furnish to Company, within ___ days after the effective date of termination or expiration, evidence satisfactory to Company of Franchisee's compliance with the above obligations.
 
C. Know-how.
Franchisee agrees upon termination or expiration of the Franchise, to immediately cease to use the Know-How of Company disclosed to Franchisee pursuant to this Agreement in any business or otherwise and return to Company all copies of the Operating Manual for [restaurant] which have been loaned by Company.
 
D. Covenant not to compete.
If prior to its expiration the Franchise is terminated by Company in accordance with its provisions or by Franchisee without cause, Franchisee agrees that for a period of two years, commencing on the effective date of termination, or the date on which Franchisee ceases to conduct the business conducted pursuant to this Agreement, whichever is later, Franchisee (and if franchisee is a corporation or partnership any shareholder or partner of Franchisee) will not have any interest as an owner, partner, director, officer, employee, consultant, representative or agent, or in any other capacity, in any restaurant, store or fast food establishment located within a ___ mile radius of the Restaurant which is offering food products substantially similar to the food products offered by [restaurant].
 
E. Continuing obligations.
All obligations of Company and Franchisee which expressly or by their nature survive the expiration or termination of this Agreement shall 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.
 
16. Relationship of Parties/Indemnification.
 
It is understood and agreed by the parties that this Agreement does not create a fiduciary relationship between them, that Company and Franchisee shall be independent contractors and that nothing in this Agreement is intended to make either party a general or special agent, legal representative, subsidiary, joint venturer, partner, employee or servant of the other for any purpose. In all dealings with customers, contractors, suppliers, public officials and others, Franchisee shall be conspicuously identified as the owner of the Restaurant under a franchise of Company and shall place such other notices of independent ownership on such forms, stationery, advertising and other materials as Company may require from time to time. Company has not authorized or empowered Franchisee to use the Marks except as provided by this Agreement and Franchisee shall not employ any of the Marks in signing any contract, lease, mortgage, purchase agreement, negotiable instrument or other legal obligation, or in a manner that may result in liability of Company for any indebtedness or obligation of Franchisee. Neither Company nor Franchisee shall make any express or implied agreements, warranties or representations, or incur any debt, in the name of or on behalf of the other or represent that their relationship is other than franchisor and franchisee and neither Company nor Franchisee shall be obligated by or have any liability under any agreements or representations made by the other that are not expressly authorized under this Agreement, nor shall Company be obligated for any damages to any person or property directly or indirectly arising out of the operation of the Restaurant or the business authorized by or conducted pursuant to the Franchise, whether caused by Franchisee's negligent or willful action or failure to act. Company shall have no liability for any sales, use, service, excise, gross receipts, property or other taxes, whether levied upon Franchisee, the Restaurant or its assets, or upon Company, in connection with the sales made or business conducted by the Restaurant, or the initial franchise fee, royalty and service fees, advertising contributions or other payments by Franchisee to Company. Franchisee agrees to indemnify and hold Company, its subsidiaries, affiliates, stockholders, directors, officers, employees, agents and assignees harmless against any liability for any claims arising out of the operation of the Restaurant. For purposes of this indemnification, claims shall mean and include all obligations, actual and consequential damages, taxes and costs reasonably incurred in the defense of any claim, including, without limitation, reasonable accountant's, attorney's and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses and travel and living expenses. Company shall have the right to defend any such claim in which it is named as a defendant. This indemnity shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement.
 
17. Enforcement.
 
A. Severability and substitution of valid provisions.
Each section, paragraph, term and provision of this Agreement shall be considered severable and if any such portion of this agreement is held to be invalid, contrary to, or in conflict with any applicable present or future law or regulation, it shall not have any effect upon such other portions of this Agreement as may remain otherwise intelligible. If any applicable and binding law or rule of any jurisdiction requires a greater prior notice of the termination of or refusal to renew this agreement than is required under this Agreement, or the taking of some other action not required under it, or if under any applicable and binding law or rule of any jurisdiction, any provision of this agreement or any specification, standard or operating procedure prescribed by Company is invalid or unenforceable, the prior notice and/or other action required by such law or rule shall be substituted for the comparable provisions of this Agreement, and Company shall have the right to modify such invalid or unenforceable provision, specification, standard or operating procedure to the extent required to be valid and enforceable. Franchisee agrees to be bound by any such modification to this Agreement.
 
B. Waiver of obligation.
Company and Franchisee 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. Company and Franchisee shall not be deemed to have waived or impaired any right, power or option reserved by this Agreement by virtue of any custom or practice of the parties at variance with the terms of this Agreement; any failure, refusal or neglect of Company or Franchisee to exercise any right under this Agreement or to insist upon exact compliance by the other with its obligations under this Agreement; any waiver, forbearance, delay, failure or omission by Company to exercise any right, power or option with respect to any other [restaurant]; or the acceptance by Company of any payments due from Franchisee after any breach of this Agreement. Neither Company nor Franchisee shall be liable for loss or damage or deemed to be in breach of this Agreement if its failure to perform its obligations results from: (1) transportation shortages, inadequate supply of labor, material or energy, or the voluntary above of the right to acquire or use any of the above in order to accommodate or comply with the orders, requests, regulations, recommendations or instructions of any federal, state or municipal government or any department or agency; (2) compliance with any law, ruling, order, regulation, requirement or instruction of any agency of government; (3) acts of God; (4) acts of omissions of the other party; (5) fires, strikes, embargoes, war, or riot; or (6) any other similar event or cause. Any delay resulting from any such cause shall extend performance accordingly or excuse performance, in whole or in part, as may be reasonable.
 
C. Costs and attorney's fees.
If a claim for amounts owed by Franchisee to Company is asserted in any legal proceeding before a court of competent jurisdiction, or if Company or Franchisee is required to enforce this Agreement in a judicial proceeding, the party prevailing in such proceeding shall be entitled to reimbursement of its costs and expenses, including reasonable attorney's fees.
 
D. Governing law/consent to jurisdiction.
This Agreement and the Franchise shall be governed by the laws of the state in which the Restaurant is located. Franchisee agrees that Company may institute any action against Franchisee in any state or federal court of general jurisdiction in the State of ________ and Franchisee irrevocably submits to the jurisdiction of such court and waives any objection to the jurisdiction or venue of such court.
 
E. Specific performance/injunctive relief.
Nothing contained in this Agreement shall bar Company's or Franchisee's right to obtain specific performance of the provisions of this Agreement and injunctive relief against threatened conduct that will cause it loss or damages, under customary equity rules, including applicable rules for obtaining restraining orders and preliminary injunctions. Franchisee agrees that Company may have such injunctive relief, without bond, but upon due notice, in addition to such further and other relief as may be available at equity or law, and the sole remedy of Franchisee, in the event of the entry of such injunction, shall be the dissolution of such injunction, if warranted, upon hearing duly had (all claims for damages by reason of the wrongful issuance of any such injunction being expressly waived).
 
F. Binding effect.
This Agreement is binding upon the parties to it and their respective executors, administrators, heirs, assigns, and successors in interest.
 
G. Construction.
The preambles and the exhibit(s) and riders to this Agreement, if any, are a part of this Agreement, which constitutes the entire agreement of the parties, and there are no other oral or written understandings or agreements between Company and Franchisee relating to the subject matter of this agreement. The term “Franchisee” as used in this Agreement is applicable to one or more persons, a corporation or a partnership and the singular usage includes the plural and the masculine and neuter usages include the other and the feminine. If two or more persons are at any time Franchisee under this Agreement, their obligations and liabilities to Company shall be joint and several. References to “Franchisee,“owner” and “assignee” which are applicable to an individual or individuals shall mean the principal owner or owners of Franchisee or an assignee (any person owning of record or beneficially 10% or more of the equity or control of Franchisee), if Franchisee or the assignee is a corporation or partnership.
 
18. Notices and Payments.
 
All written notices permitted or required to be delivered by this Agreement shall be deemed so delivered at the time delivered by hand, one (1) business day after transmission by telegraph or comparable electronic system or ___ business days after placement in the mail by registered or certified mail, return receipt requested, postage prepaid and addressed to the party to be notified at its current principal business address. All payment and reports required by this Agreement shall be directed to Company at the address notified to Franchisee from time to time.
 
In witness the parties have executed, sealed and delivered this Agreement in ___ counterparts on the day and year first above written.
 
___________________
[company]
By:
___________________
[franchisor]
franchisor
By:
___________________
[franchisee]
franchisee
 
 
 
 
 
 
 
 
 
Number of Pages27
DimensionsDesigned for Letter Size (8.5" x 11")
EditableYes (.doc, .wpd and .rtf)
UsageUnlimited number of prints
Product number#43689
This is the content of the form and is provided for your convenience. It is not necessarily what the actual form looks like and does not include the information, instructions and other materials that come with the form you would purchase. An actual sample can also be viewed by clicking on the "Sample Form" near the top left of this page.
 
 
Restaurant Franchise Agreement

 

 
 
Table of Contents
 
Section
 
1. Preambles and acknowledgements.
 
2. Grant of the franchise.
 
3. Development and opening of the restaurant.
 
A. Right of occupancy.
B. Development of the restaurant.
C. Payment of costs of development.
D. Furnishings, fixtures, signs and equipment.
E. Restaurant opening.
 
4. The marks.
 
A. Ownership and goodwill of the marks.
B. Limitations on franchisee's use of the marks.
C. Notification of infringements and claims.
D. Indemnification of franchisee.
E. Discontinuance of use of the marks.
 
5. Training and guidance.
 
A. Training.
B. Hiring and training of employees by franchisee.
C. Guidance.
D. The operating manual.
 
6. Restaurant image and operating procedures.
 
A. Condition and appearance of the restaurant.
B. Alterations to the restaurant.
C. Specifications, standards and procedures.
D. Approved brands and/or suppliers.
E. Compliance with laws and good business practices.
F. Management of the restaurant/conflicting interests.
G. Insurance.
 
7. Trade Secrets.
 
8. Franchise Fees.
 
A. Initial franchise fee.
B. Royalty and service fees.
C. Interest on late payments.
D. Application of payments.
 
9. Advertising and Promotion.
 
A. By company.
B. By franchisee.
 
10. Records, reports, and financial statements.
 
11. Inspections and audits.
 
A. Company's right to inspect the restaurant.
B. Company's right to audit.
 
12. Assignment.
 
A. By company.
B. Franchisee may not assign without approval by company.
C. Conditions for approval of assignment.
D. Assignment to a corporation.
E. Death or disability of franchisee.
F. Company's right of first refusal.
G. Effect of consent to assignment.
 
13. Renewal of the franchise.
 
A. Franchisee's right to renew.
B. Notice of renewal and nonrenewal.
C. Renewal agreements/releases.
 
14. Termination.
 
A. By franchisee.
B. By company.
 
15. Rights and obligations of company and franchisee upon termination or expiration of the franchise.
 
A. Payment of amounts owed to company.
B. The marks.
C. Know-how.
D. Covenant not to compete.
E. Continuing obligations.
 
16. Relationship of parties/indemnification.
 
17. Enforcement.
 
A. Severability and substitution of valid provisions.
B. Waiver of obligation.
C. Costs and attorney's fees.
D. Governing law/consent to jurisdiction.
E. Specific performance/injunctive relief.
F. Binding effect.
G. Construction.
 
18. Notices and Payments.
Time Period
Lessee's Share
Lessor's Share
012 months
50%
50%
1324 months
55%
45%
2536 months
60%
40%
3748 months
65%
35%
4960 months
70%
30%
61120 months
75%
25%
 
 
FRANCHISE AGREEMENT
 
This agreement is made and entered into [date], by and between [company], a corporation duly incorporated [second party], also doing business as [business name of second party] and [third party], with its principal place of business at [business address of company] (“Company”) and [franchisee] whose principal address is [address of franchisee] (“Franchisee”).
 
1. Preambles and Acknowledgements.
 
Company owns proprietary know-how relating to and has created, designed and developed certain fast food restaurants specializing in the sale of [description of product] and utilizing distinctive ingredients and methods of preparing food. Such restaurants are operated with uniform formats, systems, methods, procedures, and designs and are known as [restaurant]. Company and its parent company, [parent company] (“Licensor”), own all rights to, interests in and goodwill of, and use, promote and license the proprietary trade and service mark [mark]” and the logo reproduced on the cover of this Agreement (the “Marks”). Company grants to persons who meet Company's qualifications and are willing to undertake the investment and effort to establish and develop a [restaurant], franchises to operate a [restaurant] offering the products authorized and approved by Company and utilizing its formats, designs, methods, specifications, standards, operating procedures, guidance and the Marks. Franchisee has applied for a franchise to own and operate a [restaurant] and such application has been approved by Company in reliance upon all the representations made in it.
 
Franchisee acknowledges having conducted an independent investigation of the business venture contemplated by this Agreement and recognizes that it involves business risks and that the success of the venture is largely dependent upon the business abilities and efforts of Franchisee. Company expressly disclaims the making of, and Franchisee acknowledges not having received or relied upon, any warranty or guaranty, express or implied, as to the revenues, profits or success of the business venture contemplated by this Agreement. Franchisee acknowledges having read this Agreement and Company's Uniform Franchise Offering Circular and having no knowledge of any representation by Company, or its officers, directors, shareholders, employees or agents that are contrary to the statements made in Company's Uniform Franchise Offering Circular or to the terms in this Agreement.
 
2. Grant of the Franchise.
 
Subject to the provisions of this Agreement, Company grants to Franchisee a nonexclusive franchise (the “Franchise”) to own and operate a [restaurant] (the “Restaurant”) at, and only at, the following location: [location of restaurant] (the “Premises”), and to use the Marks in the operation of it for a term equal to the term of Franchisee's lease or sublease for the Premises. Termination or expiration of this Agreement shall constitute a termination or expiration of the Franchise. If the Restaurant is to be operated in a shopping center or mall, Franchisee shall have exclusive rights to operate a [restaurant] within that shopping center or mall. Subject to Franchisee's exclusive rights, if any, Company retains the right, in its sole discretion, and without granting any rights to Franchisee, to operate and grant other franchises for the operation of [restaurant] at such locations as Company deems appropriate and to sell food products offered by the Restaurant in non-restaurant retail outlets of its choice. Franchisee (and if Franchisee is a corporation or partnership, any shareholder or partner of Franchisee) agrees not, during the term of the Franchise, to have any interest as an owner, director, officer, employee, consultant, representative or agent, or in any other capacity, in any other restaurant, store or fast food establishment which is offering food products similar to the food products offered by [restaurant] (except other [restaurant] locations operated under franchise agreements with Company).
 
3. Development and Opening of the Restaurant.
 
A. Right of occupancy.
Franchisee has made an election to lease from Company and/or the lessor of the Premises (the “Lessor”) has required Company to be the prime lessee under a lease for the Premises (the “Lease”). Company leases to Franchisee, and Franchisee leases from Company, the Premises, on the following terms and conditions (the “Sublease”): (1) the term of the Sublease shall begin on the first day of the term of the Lease and end one day before the last day of the term of the Lease, unless sooner terminated as set forth below; (2) Franchisee shall pay to, or upon the order of, Company, as rent for the Premises, those amounts set forth in the Lease plus additional rent equal to ___% of the monthly rental set forth in the Lease, together with any other amounts required to be paid by Company pursuant to the Lease; (3) Company shall have the right to terminate the Sublease upon the happening of any of the following events: (a) if the Franchise granted by this Agreement expires and is not renewed or is terminated for any reason; (b) if the Lease should be cancelled or terminated for any reason prior to the expiration date of it; or (c) if Franchisee should suffer or permit the occurrence of any act or thing which would constitute an event of default by Company pursuant to the terms of the Lease; (4) concurrently with the execution of this Agreement, Franchisee shall pay to Company as a security deposit the sum paid by Company as stated in the Lease, which security deposit shall be returned to Franchisee, without interest, upon the expiration of the Sublease, providing all of the terms of the Sublease have been complied with; (5) concurrently with the execution of this Agreement, Franchisee shall pay to Company $____ as and for the rent for the first month of the term of the Lease; (6) Franchisee agrees that in the event Franchisee fails or refuses for any reason (other than failure or refusal by Company to perform its obligations under the Sublease or under this Agreement) to take and maintain possession of the Premises in accordance with the terms and conditions of the Lease, Company shall retain all amounts paid by Franchisee pursuant to this Agreement as liquidated damages and not as a penalty, it being agreed that Company's actual damages in any such event would be substantial but difficult to determine; (7) whenever in the Lease the term “Tenant”/“Lessee” or an equivalent term is used, the term “Franchisee” shall be substituted for it, and wherever the term “Landlord”/“Lessor” or an equivalent term is used, the term “Company” shall be substituted therefor. Except as expressly modified by the terms of, and subject to, this Agreement continuing in effect, all the terms and provisions of the Lease, including, without limitation any renewal options, are incorporated by reference and made a part of this Agreement and the parties agree to be bound by it; and (8) Franchisee shall not assign or in any manner transfer the Sublease or any interest in the Sublease, or further sublet the Premises or any part or parts of it, nor permit occupancy by anyone with, through or under it, without the previous written consent of Company.
 
B. Development of the restaurant.
Company will prepare suitable plans and specifications for the Premises of the Restaurant reflecting Company's requirements for interior and exterior design, layout, equipment, leasehold improvements, furnishings and fixtures of [restaurant], modified to the extent necessary to comply with applicable ordinances, building codes, permit requirements, lease requirements and restrictions and market considerations. Unless by rider to this Agreement Company and Franchisee have agreed that Franchisee will develop the Restaurant, Company agrees that it will do or cause to be done the following with respect to development of the Restaurant, as agent for and in the name of Franchisee: (1) obtain all required construction and sign permits and licenses; (2) complete the construction of all required improvements to the Premises and decorate the Premises; (3) purchase and install all fixtures, furnishings, equipment, signs, and the opening food and beverage inventory and operating supplies and other materials (subject to Franchisee's right to direct Company to purchase such items from sources selected by Franchisee as provided in Paragraph D of this Section). Company shall use its best efforts to complete development of and have the Restaurant ready to open within ___ after Company obtains possession of the Premises and all required construction permits and licenses. Company shall furnish to Franchisee: (1) at the time (or times) the construction contract(s) is awarded, a copy of the general contractor's bid(s) and a breakdown of estimated costs; (2) at the times of placement of the orders for signs, fixtures, furnishings, equipment and operating supplies and materials, copies of such orders; (3) at the times of placement of the initial product inventory orders, copies of such orders; and (4) within a reasonable time after the completion of development, a final accounting of all costs of development of the Restaurant, along with all partial and final waivers of lien, other paid receipts and equipment warranties.
 
C. Payment of costs of development.
Concurrently with the execution of this Agreement, Franchisee shall deposit $____, to be applied against the estimated cost of construction, signs, fixtures, furnishings, equipment, inventory and operating supplies and materials. Franchisee will promptly make additional deposits upon request by Company at the times construction contracts are awarded and purchase orders are placed. Franchisee will pay to Company, or Company will refund to Franchisee, as appropriate, the amount by which the actual total costs of development shall differ from the amounts deposited by Franchisee, in accordance with the final accounting as provided above. Franchisee will pay the applicable vendors (including Company and its affiliates) for the initial product and supply inventory ordered for the Restaurant in accordance with the vendors' payment terms.
 
D. Furnishings, fixtures, signs and equipment.
Franchisee agrees to use in the development and operation of the Restaurant only those brands, types or models of fixtures, furnishings, signs and equipment that Company has approved as meeting its specifications and standards for quality, design, appearance and function. Franchisee may purchase approved brands, types or models of signs, fixtures, furnishings and equipment from Company or from any supplier who can provide and install items meeting Company's standards and specifications. Franchisee further agrees to place or display at the Premises of the Restaurant only such signs, emblems, lettering, and logos that are from time to time approved in writing by Company.
 
E. Restaurant opening.
Franchisee shall not open the Restaurant for business until Company determines that it is in suitable condition. Franchisee agrees to open the Restaurant for business within ___ after such determination by Company. Company will prepare and furnish to Franchisee an opening advertising and promotional plan for the Restaurant which will contain Company's advice and guidance with respect to publicity, advertising, promotion, staffing, decoration and operation during the opening period. Franchisee agrees to spend not less than $___ for advertising and promotion of the opening of the Restaurant during the period commencing ___ days prior and ending ___ days after the opening of the Restaurant.
 
4. The Marks.
 
A. Ownership and goodwill of the marks.
Franchisee acknowledges that Company and Licensor are the owners of the Marks, that Franchisee's right to use the Marks is derived solely from this Agreement and is limited to the conduct of business by Franchisee pursuant to and in compliance with this Agreement and all applicable standards, specifications and operating procedures prescribed by Company from time to time during the term of the Franchise. Any unauthorized use of the Marks by Franchisee shall constitute an infringement of the rights of Company and/or Licensor in and to the Marks. Franchisee acknowledges and agrees that all usage of the Marks by Franchisee and any goodwill established by it shall inure to the exclusive benefit of Company and/or Licensor and that this Agreement does not confer any goodwill or other interests in the Marks upon Franchisee (except the right to operate a [restaurant] in compliance with this Agreement). All provisions of this Agreement applicable to the Marks shall apply to any additional proprietary trade and service marks and commercial symbols authorized for use by and licensed to Franchisee by Company.
 
B. Limitations on franchisee's use of the marks.
Franchisee agrees to use the Marks as the sole identification of the Restaurant, provided that Franchisee shall be identified as the independent owner in the manner prescribed by Company. Franchisee shall not use any Mark as part of any corporate or trade name or with any prefix, suffix or other modifying words, terms, designs or symbols (other than logos licensed to Franchisee under this Agreement), or in any modified form, nor may Franchisee use any Mark in connection with the sale of any unauthorized product or service or in any other manner not expressly authorized in writing by Company. Franchisee agrees to prominently display the Marks in the manner prescribed by Company, to give such notices of trade and service mark registrations as Company specifies and to obtain such fictitious or assumed name registrations as may be required under applicable law.
 
C. Notification of infringements and claims.
Franchisee shall immediately notify Company of any apparent infringement of or challenge to Franchisee's use of any Mark, or claim by any person of any rights in any Mark, and Franchisee shall not communicate with any person other than Company and its counsel in connection with any such infringement, challenge or claim. Company and/or Licensor shall have sole discretion to take such action as it or they deem appropriate and the right to exclusively control any litigation or Patent and Trademark Office or other proceeding arising out of any such infringement, challenge or claim or otherwise relating to any Mark and Franchisee agrees to execute any and all instruments and documents, render such assistance and do such acts and things as may, in the opinion of Company's or Licensor's counsel, be necessary or advisable to protect and maintain the interests of Company and Licensor in any such litigation or Patent and Trademark Office or other proceeding or to otherwise protect and maintain the interests of Company and Licensor in the Marks.
 
D. Indemnification of franchisee.
Company agrees to indemnify Franchisee against and to reimburse Franchisee for all damages for which Franchisee is held liable in any proceeding arising out of his use of any Mark, pursuant to and in compliance with this Agreement and for all costs reasonably incurred by Franchisee in the defense of any such claim or in any such proceeding in which Franchisee is named as a party, provided that Franchisee has timely notified Company of such claim or proceeding and has otherwise complied with this Agreement.
 
E. Discontinuance of use of the marks.
If it becomes advisable at any time in Company's sole discretion for Company and/or Franchisee to modify or discontinue use of any Mark due to priority of use by another party of the same or a confusingly similar mark, and/or use one or more additional or substitute trade or service marks, Franchisee agrees to comply within a reasonable time after notice by Company and the sole obligation of Company in any such event shall be to reimburse Franchisee for the out-of-pocket costs of complying with this obligation.
 
5. Training and Guidance.
 
A. Training.
Company shall furnish to Franchisee or Franchisee's designated manager a training program in the operation of a [restaurant] during such period as Company designates prior to and after the opening of the Restaurant. Franchisee or its designated manager shall be required to complete the training program to the satisfaction of Company. Company may require that Franchisee or its designated manager and any successor manager approved by Franchisee attend such further training programs as Company shall from time to time reasonably prescribe. Franchisee shall be responsible for any travel and living expenses which Franchisee and/or its manager incur in connection with training.
 
B. Hiring and training of employees by franchisee.
Franchisee shall hire all employees of the Restaurant, and shall be exclusively responsible for the terms of their employment and compensation and for the proper training of such employees in the operation of the Restaurant. Franchisee agrees to maintain at all times a staff of trained employees sufficient to operate the Restaurant in compliance with Company's standards.
 
C. Guidance.
Company shall maintain a continuing advisory relationship with Franchisee, including consultation in the areas of marketing, restaurant operations and customer service. Company shall advise Franchisee from time to time of operating problems of the Restaurant disclosed by reports submitted to or inspections made by Company and shall furnish to Franchisee guidance in connection with methods and procedures utilized by [restaurant]. Such guidance shall, in the discretion of Company, be furnished in the form of Company's operating manual for [restaurant] (the “Operating Manual”), bulletins, other written materials, telephone consultations and/or consultations at the office of Company or at the Restaurant.
 
D. The operating manual.
Company will loan to Franchisee during the term of the franchise one copy of the Operating Manual. The Operating Manual shall contain mandatory and suggested specifications, standards and operating procedures prescribed from time to time by Company for [restaurant] and information relative to other obligations of Franchisee under this Agreement and the operation of a [restaurant]. Company shall have the right to add to and otherwise modify the Operating Manual from time to time to reflect changes in the image, appearance, and operation of [restaurant], provided that no such addition or modification shall alter Franchisee's fundamental status or rights under this agreement. Franchisee shall keep the copy of the Operating Manual current and in the event of a dispute relative to the contents of the Operating Manual, the master copy maintained by Company at its principal office shall be controlling.
 
6. Restaurant Image and Operating Procedures.
 
A. Condition and appearance of the restaurant.
Franchisee agrees to maintain the condition and appearance of the Restaurant consistent with the image of a [restaurant] as an attractive, clean, and efficiently operated food service business, offering high quality food products and beverages, and efficient and courteous service. Franchisee agrees to effect such maintenance of the Restaurant as is reasonably required from time to time to maintain such condition, appearance and efficient operation, including interior and exterior repair and cleaning of the Restaurant premises, replacement of worn out or obsolete leasehold improvements, fixtures and signs and periodic decorating.
 
B. Alterations to the restaurant.
Franchisee shall not make any material replacements of or alterations to the Premises, leasehold improvements, layout, fixtures, furnishings, signs, equipment, or appearance of the Restaurant as originally developed in accordance with plans and specifications furnished by Company without prior written approval by Company.
 
C. Specifications, standards and procedures.
Franchisee acknowledges and agrees that each and every detail of the appearance and operation of the Restaurant is important to Company and other [restaurant]. Company shall endeavor to maintain high standards of quality and service at all [restaurant]. To this end, Franchisee agrees to cooperate with Company in maintaining such high standards in the Restaurant and, accordingly, agrees to comply with all mandatory specifications, standards and operating procedures (whether contained in the Operating Manual for [restaurant] or any other written or oral communication to Franchisee) relating to the appearance or operation of a [restaurant], including, without limitation: (1) type, quality, weight, dimensions, ingredients, uniformity, manner of preparation and sale of all food products and beverages sold by the Restaurant and of all other products used in the packaging and sale of them; (2) hours and days during which the Restaurant will be open for business; (3) the safety, maintenance, cleanliness, sanitation, function and appearance of the Restaurant premises and its fixtures, equipment, furnishings, decor and signs; and (4) uniforms and appearance of employees. Mandatory specifications, standards and operating procedures prescribed from time to time, or otherwise communicated to Franchisee in writing, shall constitute provisions of this Agreement as if fully set forth in it. All references to this Agreement shall include all such mandatory specifications, standards and operating procedures.
 
D. Approved brands and/or suppliers.
The reputation and goodwill of [restaurant] is based upon, and can be maintained only by, the sale of distinctive, high quality products and services. Franchisee therefore agrees that the Restaurant will: (1) conform to Company's specifications and quality standards, and purchase from suppliers approved by Company all food products and beverages and all ingredients used in the preparation of food products and beverages; (2) prepare and offer for sale only food products and beverages approved in writing by Company; and (3) use only equipment, menus, paper products, packaging materials, and other supplies approved by Company. Company may from time to time modify the list of approved brands and/or suppliers, and Franchisee shall not, after receipt in writing of such modification, reorder any brand or from any supplier which is no longer approved. If Franchisee proposes to use any food or beverage, or utilize any ingredient or supply or serve food products or beverages of any brand and/or supplier which is not then approved, he shall first notify Company and submit sufficient information, specifications and samples concerning such brand and/or supplier for a determination by Company whether such brand complies with Company's specifications and standards and/or such supplier meets Company's approved supplier criteria. Company may impose reasonable inspection and supervision fees on approved suppliers to cover Company's costs incurred in making such determination. Company shall, within a reasonable time, notify Franchisee whether or not such proposed brand and/or supplier is approved by Company.
 
E. Compliance with laws and good business practices.
Franchisee shall secure and maintain in force all required licenses, permits and certificates relating to the operation of the Restaurant and shall operate the Restaurant in full compliance with all applicable laws, ordinances and regulations including, without limitation, all government regulations relating to occupational hazards and health, worker's compensation insurance, unemployment insurance and withholding and payment of federal and state income taxes, social security taxes and sales taxes. Franchisee shall in all dealings with its customers, suppliers, Company and the public adhere to the highest standards of honesty, integrity, fair dealing and ethical conduct. Franchisee agrees to refrain from any business or advertising practice which may be injurious to Company and the goodwill associated with the Marks and other [restaurant]. Franchisee shall notify Company in writing within ___ days of the commencement of any action, suit or proceeding, and of the issuance of any order, writ, injunction, award or decree of any court, agency or other governmental instrumentality, which may adversely affect the operation or financial condition of Franchisee or the Restaurant.
 
F. Management of the restaurant/conflicting interests.
The Restaurant shall at all times be under the direct, on-premises supervision of Franchisee or a full time manager who has successfully completed Company's training program. Franchisee shall keep Company informed at all times of the identity of any employee(s) acting as regular manager(s) of the Restaurant. Franchisee agrees at all times to faithfully, honestly and diligently perform the obligations under this Agreement, to continuously exert Franchisee's best efforts to promote and enhance the business of his Restaurant and not to engage in any similar business or other activity that will conflict with the obligations under this Agreement.
 
G. Insurance.
Franchisee shall at all times during the term of the Franchise maintain in force at Franchisee's sole expense, comprehensive general liability and excess liability insurance against claims for bodily injury, death and property damage caused by or occurring in conjunction with the operation of the Restaurant or otherwise in conjunction with the conduct of business by Franchisee pursuant to the Franchise. Such insurance coverage shall be maintained under one or more policies of insurance containing minimum liability protection of $1,000,000 per occurrence for bodily injury and death, and $100,000 per occurrence for property damage (or such greater amounts as are required under the Lease). All such policies shall be issued by one or more insurance carriers acceptable to Company, shall name Company as an additional insured, and shall provide that Company will receive ___ days' prior written notice of termination, expiration, cancellation, modification or reduction in coverage of any such policy. Upon ___ days' prior notice to Franchisee, Company may increase the minimum protection requirement as of the renewal date of any policy, and require different or additional kinds of insurance at any time, including excess liability (umbrella) insurance, to reflect inflation, identification of new risks, changes in law or standards of liability, higher damage awards or other relevant changes in circumstances. Franchisee shall submit to Company annually a copy of the certificate of or other evidence of the renewal or extension of each such insurance policy. If Franchisee at any time fails or refuses to maintain in effect any insurance coverage required by Company, or to furnish satisfactory evidence of it, Company, at its option and in addition to its other rights and remedies under this Agreement, may, but need not, obtain such insurance coverage on behalf of Franchisee, and Franchisee shall promptly execute any applications or other forms or instruments required to obtain any such insurance and pay to Company, on demand, any costs and premiums incurred by Company.
 
7. Trade Secrets.
 
Franchisee acknowledges that Company possesses proprietary Know-How consisting of the ingredients and methods of preparation of food products sold at and operating procedures of [restaurant] (the “Know-How”). Company will disclose the Know-How to Franchisee in the training program, the Operating Manual and in guidance furnished to Franchisee during the term of the Franchise. Franchisee understands and acknowledges that Franchisee will not acquire any interest in the Know-How other than the right to utilize it in the operation of the Restaurant during the term of the Franchise. Franchisee agrees not to disclose during or after the term of the franchise any Know-How of Company. If any of the Know-How which has been disclosed to Franchisee pursuant to this Agreement becomes generally known in the food service industry other than through default of Franchisee in the obligations under this Agreement, and Franchisee desires to be released from the secrecy obligations under this Section in respect to such information, Company will not unreasonably withhold its consent to such release. In no event shall Franchisee be liable to Company for the unintentional disclosure of any of the Know-How which has become generally known in the food service industry.
 
8. Franchise Fees.
 
A. Initial franchise fee.
Franchisee shall pay to Company a nonrecurring initial franchise fee of $____, payable as follows: (1) $_____ upon execution of this agreement; and (2) $___ within ___ days of the execution of this agreement. The initial franchise fee shall be fully earned by Company and nonrefundable unless, prior to the time that the second payment is required to be paid, Franchisee shall notify Company in writing of its decision to terminate this Agreement, in which event $___ of the initial payment shall be retained by Company in compensation for assistance rendered to Franchisee prior to the date of termination.
 
B. Royalty and service fees.
Franchisee shall pay to Company on or before Thursday of each week, a royalty and service fee of ___% of the net sales of the Restaurant for the seven-day period ending at the close of business on the preceding Saturday. “Net sales” shall mean and include the aggregate amount of all sales of food and beverages made by the Restaurant, but excluding all federal, state or municipal sales or service taxes collected by Franchisee and paid to the appropriate taxing agency.
 
C. Interest on late payments.
All royalty and service fees and advertising contributions which Franchisee owes to Company shall bear interest after due date at the highest applicable legal rate for open account business credit, not to exceed 2% per month. Franchisee acknowledges that this Paragraph shall not constitute Company's agreement to accept such payments after they are due or a commitment by Company to extend credit to, or otherwise finance Franchisee's operation of, the Restaurant. Further, Franchisee acknowledges that failure to pay all amounts when due shall constitute grounds for termination of this Agreement, as provided in Paragraph B of Section 14, notwithstanding the provisions of this paragraph.
 
D. Application of payments.
Notwithstanding any designation by Franchisee, Company shall have the sole discretion to apply any payments by Franchisee to any past due indebtedness of Franchisee for royalty and service fees, advertising contributions, purchases from Company, interest or other indebtedness.
 
9. Advertising and Promotion.
 
A. By company.
Recognizing the value of uniform advertising and promotion to the goodwill and public image of [restaurant], Company agrees to maintain and administer the Advertising and Sales Promotion Fund (the “Fund”) for such advertising programs as Company may deem necessary or appropriate, in its sole discretion. Company shall direct all advertising programs financed by the Fund, with sole discretion over the creative concepts, materials and endorsements used in them, and the geographic, market and media placement and allocation of them. Franchisee agrees that the Fund may be used to pay the costs of preparing approved advertising and marketing materials which, through the Fund, Company shall furnish to Franchisee on the same terms and conditions as such materials are furnished to other [restaurant].
 
Franchisee shall contribute to the Fund in an amount up to ___% of the net revenues of the Restaurant, as defined in this Agreement, payable weekly together with the royalty and service fees due under this Agreement. Franchisee understands and acknowledges that the Fund is intended to maximize general public recognition and patronage of the Marks and [restaurant] for the benefit of all [restaurant] and Company undertakes no obligation in administering the Fund to ensure that expenditures which are proportionate or equivalent to Franchisee's contributions are made for the market area of the Restaurant or that any [restaurant] benefits directly or pro rata from the placement of advertising.
 
The Fund shall be accounted for separately from the other funds of Company and shall not be used to defray any of Company's general operating expenses, except for such reasonable salaries, administrative costs and overhead as Company may incur in activities reasonably related to the administration of the Fund and its advertising programs (including, without limitation, conducting market research, preparing advertising and promotional materials and collecting and accounting for contributions to the Fund). An audit of the operations of the Fund shall be prepared annually by independent certified public accountants and shall be made available to Franchisee upon request. The cost of audits shall be paid by the Fund. Except as expressly provided in this Section, Company assumes no direct or indirect liability or obligation to Franchisee with respect to the maintenance, direction or administration of the Fund.
 
B. By franchisee.
Franchisee agrees to list and advertise the Restaurant in the principal regular (white pages) and classified (yellow pages) telephone directories distributed within Franchisee's market area, in such directory categories as are determined by Company. Franchisee agrees to spend annually for local advertising and promotion of the Restaurant not less than ___% of the Restaurant's net sales for the calendar year. Amounts paid to the Fund pursuant to Paragraph A of this Section and the cost of classified telephone directory advertising shall constitute expenditures for purposes of this obligation. Franchisee shall submit annually, in form satisfactory to Company, verification of his expenditures for advertising and promotion. Prior to their use by Franchisee, samples of all local advertising and promotional materials not prepared or previously approved by Company shall be submitted to Company for approval, which shall not be unreasonably withheld. If written disapproval is not received by Franchisee within ___ days from the date of receipt by Company of such materials, Company shall be deemed to have given the required approval. Franchisee shall not use any advertising or promotional materials that Company has disapproved.
 
10. Records, Reports, and Financial Statements.
 
Franchisee shall establish and maintain at Franchisee's own expense an accounting and recordkeeping system conforming to the requirements prescribed by Company and shall preserve for a period of ___ years from the date of their preparation all accounting records and supporting documents relating to Franchisee's operations under this Agreement. Franchisee shall also furnish to Company in the form from time to time prescribed by Company: (1) by Thursday of each week, a report for the seven-day period ending at the close of business on the preceding Saturday, stating the gross and net sales of the Restaurant; (2) on or before the 20th day of each month, an operating statement for the preceding calendar month; (3) within ___ days after the end of each fiscal year of the Restaurant, an annual statement of profit and loss and a year end balance sheet for the Restaurant verified by Franchisee; and (4) such other periodic forms and reports as may reasonably be required by Company from time to time. Franchisee shall verify in writing to company that all such reports and statement are complete and accurate.
 
11. Inspections and Audits.
 
A. Company's right to inspect the restaurant.
To determine whether Franchisee is complying with this Agreement, Company shall have the right at any time during business hours, and without prior notice to Franchisee, to inspect the Restaurant and to observe the operations of the Restaurant. Franchisee shall fully cooperate with representatives of Company making any such inspection or observing the operations of the Restaurant.
 
B. Company's right to audit.
Franchisee shall maintain readily available for inspection by Company, and shall furnish to Company upon its request, at such locations as Company may reasonably request (including Company's office), exact copies of all books and records of the Restaurant and of any corporation or partnership that holds the Franchise and shall afford Company (and its agents), at any time during business hours, and without prior notice to Franchisee, full and free access to such books and records at the Restaurant. Company (and its agents) shall have the right to make extracts from, and copies of, and to audit, or cause to be audited, such books and records and shall have the right to communicate freely with Restaurant employees. Franchisee shall fully cooperate with representatives of Company and independent accountants hired by Company to conduct any such inspection or audit. In the event any such inspection or audit shall disclose an understatement of the net sales of the Restaurant, Franchisee shall pay to Company, within ___ days after receipt of the inspection or audit report, the royalty and service fee and any advertising contribution due on the amount of such understatement, plus interest (at the rate and on the terms provided in Paragraph C of Section 8) from the date originally due until the date of payment. Further, in the event such inspection or audit is made necessary by the failure of Franchisee to furnish reports, supporting records or other information, as required, or to furnish such reports, records or information on a timely basis, or if an understatement of net sales for the period of any inspection or audit (which shall not be for less than three months) is determined by any such inspection or audit to be greater than 2%, Franchisee shall reimburse Company for the cost of such inspection or audit, including, without limitation, the charges of any independent accountants and the travel expenses, room and board and compensation of employees of Company. The above remedies shall be in addition to all other remedies and rights of Company under this Agreement or under applicable law.
 
12. Assignment.
 
A. By company.
This Agreement and the Franchise are fully assignable by Company and shall inure to the benefit of any assignee or other legal successor to the interest of Company, provided that Company shall, subsequent to any such assignment, remain liable for the performance of its obligations under this Agreement.
 
B. Franchisee may not assign without approval by company.
Franchisee understands and acknowledges that the rights and duties created by this Agreement are personal to Franchisee or its owner and that Company has granted the Franchise in reliance upon the individual or collective character, skill, aptitude, attitude, business ability and financial capacity of Franchisee or its owner. Therefore, except as provided below with respect to assignment to a corporation, neither the Franchise, the Restaurant (or any interest in it) nor any part or all of the ownership of Franchisee may be voluntarily, involuntarily, directly or indirectly assigned, sold, subdivided, subfranchised or otherwise transferred by Franchisee or its owner (including, without limitation, by transfer of capital, stock or partnership interests, by merger or consolidation, by issuance of additional securities representing an ownership interest in Franchisee, or, in the event of the death of Franchisee or an owner of Franchisee, by will, declaration of or transfer in trust or the laws of intestate succession) without the prior written approval of Company, and any such assignment or transfer without such approval shall constitute a breach of this Agreement and convey no rights to or interests in the Franchise.
 
C. Conditions for approval of assignment.
If Franchisee and its owner are in full compliance with this Agreement, Company shall not unreasonably withhold its approval of an assignment, provided that the proposed assignee or its owner is, in the opinion of Company, an individual of good moral character who has sufficient business experience, aptitude and financial resources to own and operate the Restaurant and otherwise meets Company's then applicable standards for franchisees, and further provided that if the transfer is of the franchise or the Restaurant, or of a controlling interest in Franchisee, or is one of a series of transfers which in the aggregate constitute the transfer of a controlling interest in Franchisee, all of the following conditions are met prior to, or concurrently with, the effective date of the assignment: (1) all obligations of Franchisee and its owner incurred in connection with this agreement have been assumed by the assignee; (2) Franchisee shall have paid such royalty and services fees, advertising contributions, amounts owed for purchases by Franchisee from Company and any other amounts owed to Company which are then due and unpaid; (3) the assignee shall have completed the training program required of new franchisees; (4) the assignee and its owner shall have executed and agreed to be bound by the form of franchise agreement and any ancillary agreements as are then customarily used by Company in the grant of franchises for [restaurant], which agreement(s) shall provide for the same royalty and service fees and advertising contributions required under this Agreement and a term equal to the remaining term of the Franchise; (5) Franchisee or the assignee shall have paid a training and assignment fee to Company in an amount equal to ___% of the initial franchise fee payable under the Company's then current standard franchise agreement, to defray expenses incurred by Company in connection with the assignment; (6) Franchisee and its owner shall have executed a general release, in form satisfactory to Company, of any and all claims against Company and its affiliates, officers, directors, employees and agents; (7) Company shall have approved the material terms and conditions of such assignment, including, without limitation, that the price and terms of payment are not so burdensome as to adversely affect the future operations of the Restaurant by the assignee; (8) Franchisee and its owner shall have executed a noncompetition covenant in favor of Company and the assignee, agreeing that for a period of not less than 5 years, commencing on the effective date of the assignment, they will not have any interest as an owner, investor, partner, director, officer, employee, consultant, representative or agent, or in any other capacity, in any fast food restaurant, store or establishment located within a ___ mile radius of the Restaurant which is offering food products substantially similar to the food products offered by [restaurant]; and (9) Franchisee and its owner shall have entered into an agreement with Company agreeing that all obligations of the assignee to make installment payments of the purchase price or interest on it to Franchisee or its owner shall be subordinate to the obligations of the assignee to pay royalty and service fees, advertising contributions and for purchases from Company. If the proposed assignment is to or among owners of Franchisee or to or among the immediate family members of Franchisee or an owner of Franchisee, Subparagraph (5) of the above requirements shall not apply and Subparagraphs (7) and (9) shall not apply to transfers by gift, bequest or inheritance.
 
D. Assignment to a corporation.
The Franchise and the assets and liabilities of the Restaurant may be assigned to a newly organized corporation that conducts no business other than the Restaurant (and other [restaurant]), which is actively managed by Franchisee and in which Franchisee owns and controls all issued and outstanding capital stock. The articles of incorporation, bylaws and other organizational documents of such corporation shall recite that the issuance and assignment of any interest in them is restricted by the terms of Paragraphs B and C of Section 12 of this Agreement and all issued and outstanding stock certificates of such corporation shall bear a legend referring to the restrictions of Paragraphs B and C. Each shareholder of Franchisee at any time during the term of the Franchise shall execute an agreement in form furnished or approved by Company undertaking to be bound jointly and severally by all provisions of this Agreement. Franchisee shall furnish to Company at any time upon request, in such form as Company may require, a list of all shareholders (of record and beneficially) reflecting their respective interests in Franchisee.
 
E. Death or disability of franchisee.
Upon the death or permanent disability of Franchisee or, if Franchisee is a corporation or partnership, the owner of 1/2 or more of the partnership interest, equity or voting control of Franchisee, the executor, administrator, conservator or other personal representative of such person shall assign the Franchise or such interest in Franchisee to a third party approved by the Company. Such disposition of the Franchise or such interest in Franchisee (including, without limitation, transfers by bequest or inheritance) shall be completed within a reasonable time, not to exceed ___ months from the date of death or permanent disability and shall be subject to all the terms and conditions applicable to assignments contained in Paragraph C of this Section and to the Company's right of first refusal contained in Paragraph F of this section (provided that Paragraph F shall not apply to transfers to members of the immediate family of Franchisee or an owner of Franchisee or to transfers by gift, bequest or inheritance). Failure to so dispose of the Franchise or such interest in Franchisee within that period of time shall constitute a breach of this Agreement. Pending disposition, Company shall have the right to approve the management of the Restaurant and no person whom Company has disapproved shall continue to act as a manager of the Restaurant.
 
F. Company's right of first refusal.
If Franchisee or its owner(s) shall at any time determine to sell an interest in the Restaurant or an ownership interest in Franchisee, other than to an existing shareholder or partner of Franchisee, Franchisee or its owner(s) shall obtain a bona fide, executed written offer from a responsible and fully disclosed purchaser and shall submit an exact copy of such offer to Company. Company shall have the right, exercisable by written notice delivered to Franchisee or its owner(s) within ___ days from the date of delivery of an exact copy of such offer to Company, to purchase such interest in the Restaurant or such ownership interest in Franchisee for the price and on the terms and conditions contained in such offer, provided that Company shall be entitled to the customary warranties, closing documents and post-closing indemnifications, the credit of Company shall be deemed the equivalent to the credit of any purchaser, Company may substitute cash for any form of payment proposed in such offer and shall have not less than ___ days to prepare for closing. If Company does not exercise its right of first refusal, Franchisee or its owner may complete the sale to such purchaser pursuant to and on the terms of such offer, subject to Company's approval of the purchaser as provided in Paragraphs B and C of this Section, provided that if the sale to such purchaser is not completed within ___ days after delivery of such offer to Company, or there is a material change in the terms of the sale, Company shall again have the right of first refusal provided in this Agreement.
 
G. Effect of consent to assignment.
Company's consent to an assignment of the Franchise or any interest subject to the restrictions of this Section, shall not constitute a waiver of any claims it may have against the assignor, nor shall it be deemed a waiver of Company's right to demand exact compliance with any of the terms or conditions of the Franchise by the assignee(s).
 
13. Renewal of the Franchise.
 
A. Franchisee's right to renew.
If, upon expiration of the term of this agreement: (1) Company elects to continue the operation of a [restaurant] at Franchisee's location; (2) Franchisee has substantially complied with all provisions of this Agreement; and (3) Franchisee agrees to refurbish and decorate the Premises, replace leasehold improvements, fixtures and signs and otherwise modify the Restaurant in compliance with specifications and standards then applicable under new or renewal franchises for [restaurant]; Franchisee shall have the right to renew the Franchise for an additional term equal to one day less than the remaining term or the renewal term of the Lease or term of any new lease. Such renewal shall be without payment of an initial or renewal franchise fee.
 
B. Notice of renewal and nonrenewal.
Franchisee shall give Company written notice of exercise of his option to renew the Franchise one year prior to the expiration of the initial term. Company agrees to give Franchisee written notice of any deficiencies in Franchisee's operation of the Restaurant which could cause Company to refuse to renew the Franchise ___ years prior to the expiration of the initial term and written notice of an election not to renew the Franchise one year prior to the expiration of the initial term. A notice of nonrenewal by Company shall state the reasons for Company's refusal to renew. If Company elects to continue the operation of a [restaurant] at Franchisee's location, but elects not to renew the Franchise, Franchisee and its owner shall have the right to assign the Franchise or the ownership of Franchisee in accordance with Section 12, provided that Company will grant to the purchaser or Franchisee (under its successor owner) a franchise on the terms and conditions then customarily contained in new franchises. Franchisee's right to assign the Franchise or ownership of Franchisee upon Company's determination not to renew the Franchise shall expire upon expiration of the Franchise.
 
C. Renewal agreements/releases.
To renew the franchise, Company, Franchisee and the owners of Franchisee shall execute the form of franchise agreement and any ancillary agreements then customarily used by Company in the grant or renewal of franchises for the operation of [restaurant] (with appropriate modifications to reflect the fact that the Agreement relates to the grant of a renewal franchise) and Franchisee and its owners shall execute general releases, in form satisfactory to Company, of any and all claims against Company and its affiliates, officers, directors, employees and agents. Failure by Franchisee and its owners to sign such agreement(s) and releases within ___ days after delivery of them to Franchisee shall be deemed an election by Franchisee not to renew the franchise.
 
14. Termination.
 
A. By franchisee.
If Franchisee is in substantial compliance with this Agreement and Company materially breaches this Agreement and fails to cure such breach within ___ days after written notice is delivered to Company, Franchisee may terminate this Agreement effective ___ days after delivery to Company of notice. A termination of this Agreement by Franchisee (whether express or reasonably implied from Franchisee's acts or omissions) for any reason other than a material breach by Company (coupled with substantial compliance by Franchisee) and Company's failure to cure such breach within ___ days after receipt of written notice shall be deemed a termination by Franchisee without cause.
 
B. By company.
Company shall have the right to terminate this Agreement effective upon delivery of notice of termination to Franchisee, if Franchisee: (1) loses, abandons, surrenders or transfers control of the operation of the Restaurant (including entering into a management arrangement with any person not a party to this Agreement); (2) has made any material misrepresentation or omission in applying for the Franchise or is convicted of or pleads no contest to any felony or any crime or offense that is likely to adversely affect the reputation of Franchisee or the Restaurant; (3) makes an unauthorized assignment of the Franchise or an ownership interest in Franchisee or the Restaurant or fails to dispose of the Franchise or the interest in Franchisee of a deceased or disabled owner as required in this Agreement; (4) fails or refuses to comply with any mandatory specification, standard or operating procedure prescribed by Company relating to cleanliness or sanitation of the Restaurant and does not correct such failure or refusal within 48 hours after written notice is delivered to Franchisee; (5) fails to pay when due royalty and service fees or advertising contributions and does not correct such failure within ___ days after notice of such failure is delivered to Franchisee; (6) fails to comply with any other provisions of this agreement and does not correct such failure to comply within ___ days after notice of such failure is delivered to Franchisee; or (7) fails on two or more separate occasions within any period of ___ months consecutive months to submit when due any reports, information or supporting records, to pay when due the royalty and service fees, advertising contributions or other payments due to Company, or otherwise fails to comply with this Agreement, whether or not such failures to comply are corrected after notice is delivered to Franchisee.
 
15. Rights and Obligations of Company and Franchisee Upon Termination or Expiration of the Franchise.
 
A. Payment of amounts owed to company.
Franchisee agrees to pay to Company within ___ days after the effective date of termination or expiration of the Agreement all amounts owed to Company.
 
B. The marks.
Franchisee agrees after the termination or expiration of the Franchise to: (1) not directly or indirectly at any time or in any manner identify personally or any business as a current or former [restaurant], or as a franchisee, or licensee as otherwise associated with Company, or use any Mark, any colorable imitation of it or other indicia of a [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 Company or its affiliate; (2) return to Company all signs, sign faces, advertising materials, forms, invoices, packaging and other materials containing any Mark or otherwise identifying or relating to a [restaurant]; (3) take such action as may be required to cancel all fictitious or assumed name or equivalent registrations relating to the use of any Mark; (4) notify the telephone company and all listing agencies of the termination or expiration of Franchisee's right to use any telephone number and any regular, classified or other telephone directory listings associated with any Mark and direct the telephone company and such listing agencies to cancel such telephone numbers and remove such listings when such directories are next republished. Franchisee acknowledges that as between Company and Franchisee, Company has the sole rights to and interest in all telephone numbers and directory listings associated with any Mark and Franchisee authorizes Company, and appoints Company and any officer of Company as Franchisee's attorney in fact, to direct the telephone company and all listing agencies to cancel such telephone numbers and delete such listings, should Franchisee fail or refuse to do so, and the telephone company and all listing agencies may accept such direction or this Agreement as conclusive of the exclusive rights of Company in such telephone numbers and directory listings and its authority to direct their cancellation and deletion; (5) remove and/or alter any distinctive features of a [restaurant] or allow Company or its agents, without liability, to enter the premises and perform such removal or changes; and (6) furnish to Company, within ___ days after the effective date of termination or expiration, evidence satisfactory to Company of Franchisee's compliance with the above obligations.
 
C. Know-how.
Franchisee agrees upon termination or expiration of the Franchise, to immediately cease to use the Know-How of Company disclosed to Franchisee pursuant to this Agreement in any business or otherwise and return to Company all copies of the Operating Manual for [restaurant] which have been loaned by Company.
 
D. Covenant not to compete.
If prior to its expiration the Franchise is terminated by Company in accordance with its provisions or by Franchisee without cause, Franchisee agrees that for a period of two years, commencing on the effective date of termination, or the date on which Franchisee ceases to conduct the business conducted pursuant to this Agreement, whichever is later, Franchisee (and if franchisee is a corporation or partnership any shareholder or partner of Franchisee) will not have any interest as an owner, partner, director, officer, employee, consultant, representative or agent, or in any other capacity, in any restaurant, store or fast food establishment located within a ___ mile radius of the Restaurant which is offering food products substantially similar to the food products offered by [restaurant].
 
E. Continuing obligations.
All obligations of Company and Franchisee which expressly or by their nature survive the expiration or termination of this Agreement shall 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.
 
16. Relationship of Parties/Indemnification.
 
It is understood and agreed by the parties that this Agreement does not create a fiduciary relationship between them, that Company and Franchisee shall be independent contractors and that nothing in this Agreement is intended to make either party a general or special agent, legal representative, subsidiary, joint venturer, partner, employee or servant of the other for any purpose. In all dealings with customers, contractors, suppliers, public officials and others, Franchisee shall be conspicuously identified as the owner of the Restaurant under a franchise of Company and shall place such other notices of independent ownership on such forms, stationery, advertising and other materials as Company may require from time to time. Company has not authorized or empowered Franchisee to use the Marks except as provided by this Agreement and Franchisee shall not employ any of the Marks in signing any contract, lease, mortgage, purchase agreement, negotiable instrument or other legal obligation, or in a manner that may result in liability of Company for any indebtedness or obligation of Franchisee. Neither Company nor Franchisee shall make any express or implied agreements, warranties or representations, or incur any debt, in the name of or on behalf of the other or represent that their relationship is other than franchisor and franchisee and neither Company nor Franchisee shall be obligated by or have any liability under any agreements or representations made by the other that are not expressly authorized under this Agreement, nor shall Company be obligated for any damages to any person or property directly or indirectly arising out of the operation of the Restaurant or the business authorized by or conducted pursuant to the Franchise, whether caused by Franchisee's negligent or willful action or failure to act. Company shall have no liability for any sales, use, service, excise, gross receipts, property or other taxes, whether levied upon Franchisee, the Restaurant or its assets, or upon Company, in connection with the sales made or business conducted by the Restaurant, or the initial franchise fee, royalty and service fees, advertising contributions or other payments by Franchisee to Company. Franchisee agrees to indemnify and hold Company, its subsidiaries, affiliates, stockholders, directors, officers, employees, agents and assignees harmless against any liability for any claims arising out of the operation of the Restaurant. For purposes of this indemnification, claims shall mean and include all obligations, actual and consequential damages, taxes and costs reasonably incurred in the defense of any claim, including, without limitation, reasonable accountant's, attorney's and expert witness fees, costs of investigation and proof of facts, court costs, other litigation expenses and travel and living expenses. Company shall have the right to defend any such claim in which it is named as a defendant. This indemnity shall continue in full force and effect subsequent to and notwithstanding the expiration or termination of this Agreement.
 
17. Enforcement.
 
A. Severability and substitution of valid provisions.
Each section, paragraph, term and provision of this Agreement shall be considered severable and if any such portion of this agreement is held to be invalid, contrary to, or in conflict with any applicable present or future law or regulation, it shall not have any effect upon such other portions of this Agreement as may remain otherwise intelligible. If any applicable and binding law or rule of any jurisdiction requires a greater prior notice of the termination of or refusal to renew this agreement than is required under this Agreement, or the taking of some other action not required under it, or if under any applicable and binding law or rule of any jurisdiction, any provision of this agreement or any specification, standard or operating procedure prescribed by Company is invalid or unenforceable, the prior notice and/or other action required by such law or rule shall be substituted for the comparable provisions of this Agreement, and Company shall have the right to modify such invalid or unenforceable provision, specification, standard or operating procedure to the extent required to be valid and enforceable. Franchisee agrees to be bound by any such modification to this Agreement.
 
B. Waiver of obligation.
Company and Franchisee 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. Company and Franchisee shall not be deemed to have waived or impaired any right, power or option reserved by this Agreement by virtue of any custom or practice of the parties at variance with the terms of this Agreement; any failure, refusal or neglect of Company or Franchisee to exercise any right under this Agreement or to insist upon exact compliance by the other with its obligations under this Agreement; any waiver, forbearance, delay, failure or omission by Company to exercise any right, power or option with respect to any other [restaurant]; or the acceptance by Company of any payments due from Franchisee after any breach of this Agreement. Neither Company nor Franchisee shall be liable for loss or damage or deemed to be in breach of this Agreement if its failure to perform its obligations results from: (1) transportation shortages, inadequate supply of labor, material or energy, or the voluntary above of the right to acquire or use any of the above in order to accommodate or comply with the orders, requests, regulations, recommendations or instructions of any federal, state or municipal government or any department or agency; (2) compliance with any law, ruling, order, regulation, requirement or instruction of any agency of government; (3) acts of God; (4) acts of omissions of the other party; (5) fires, strikes, embargoes, war, or riot; or (6) any other similar event or cause. Any delay resulting from any such cause shall extend performance accordingly or excuse performance, in whole or in part, as may be reasonable.
 
C. Costs and attorney's fees.
If a claim for amounts owed by Franchisee to Company is asserted in any legal proceeding before a court of competent jurisdiction, or if Company or Franchisee is required to enforce this Agreement in a judicial proceeding, the party prevailing in such proceeding shall be entitled to reimbursement of its costs and expenses, including reasonable attorney's fees.
 
D. Governing law/consent to jurisdiction.
This Agreement and the Franchise shall be governed by the laws of the state in which the Restaurant is located. Franchisee agrees that Company may institute any action against Franchisee in any state or federal court of general jurisdiction in the State of ________ and Franchisee irrevocably submits to the jurisdiction of such court and waives any objection to the jurisdiction or venue of such court.
 
E. Specific performance/injunctive relief.
Nothing contained in this Agreement shall bar Company's or Franchisee's right to obtain specific performance of the provisions of this Agreement and injunctive relief against threatened conduct that will cause it loss or damages, under customary equity rules, including applicable rules for obtaining restraining orders and preliminary injunctions. Franchisee agrees that Company may have such injunctive relief, without bond, but upon due notice, in addition to such further and other relief as may be available at equity or law, and the sole remedy of Franchisee, in the event of the entry of such injunction, shall be the dissolution of such injunction, if warranted, upon hearing duly had (all claims for damages by reason of the wrongful issuance of any such injunction being expressly waived).
 
F. Binding effect.
This Agreement is binding upon the parties to it and their respective executors, administrators, heirs, assigns, and successors in interest.
 
G. Construction.
The preambles and the exhibit(s) and riders to this Agreement, if any, are a part of this Agreement, which constitutes the entire agreement of the parties, and there are no other oral or written understandings or agreements between Company and Franchisee relating to the subject matter of this agreement. The term “Franchisee” as used in this Agreement is applicable to one or more persons, a corporation or a partnership and the singular usage includes the plural and the masculine and neuter usages include the other and the feminine. If two or more persons are at any time Franchisee under this Agreement, their obligations and liabilities to Company shall be joint and several. References to “Franchisee,“owner” and “assignee” which are applicable to an individual or individuals shall mean the principal owner or owners of Franchisee or an assignee (any person owning of record or beneficially 10% or more of the equity or control of Franchisee), if Franchisee or the assignee is a corporation or partnership.
 
18. Notices and Payments.
 
All written notices permitted or required to be delivered by this Agreement shall be deemed so delivered at the time delivered by hand, one (1) business day after transmission by telegraph or comparable electronic system or ___ business days after placement in the mail by registered or certified mail, return receipt requested, postage prepaid and addressed to the party to be notified at its current principal business address. All payment and reports required by this Agreement shall be directed to Company at the address notified to Franchisee from time to time.
 
In witness the parties have executed, sealed and delivered this Agreement in ___ counterparts on the day and year first above written.
 
___________________
[company]
By:
___________________
[franchisor]
franchisor
By:
___________________
[franchisee]
franchisee
 
 
 
 
 
 
 
 
 

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