Franchise Agreement - BW-3 Franchise Systems Inc.
BW-3 FRANCHISE SYSTEMS, INC.
FRANCHISE AGREEMENT
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TABLE OF CONTENTS
ARTICLE PAGE
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I. APPOINTMENT AND FRANCHISE FEE. . . . . . . . . . . . . . . . . . . . .1
II. TERM AND RENEWAL . . . . . . . . . . . . . . . . . . . . . . . . . . .3
III. RESTAURANT AND LOCATION. . . . . . . . . . . . . . . . . . . . . . . .4
IV. TRAINING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
V. PROPRIETARY MARKS. . . . . . . . . . . . . . . . . . . . . . . . . . .6
VI. CONFIDENTIAL MANUALS . . . . . . . . . . . . . . . . . . . . . . . . .7
VII. CONFIDENTIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . .7
VIII. MODIFICATION OF THE SYSTEM . . . . . . . . . . . . . . . . . . . . . .8
IX. ADVERTISING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
X. CONTINUING FEE . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
XI. ACCOUNTING AND RECORDS . . . . . . . . . . . . . . . . . . . . . . . 12
XII. STANDARDS OF QUALITY AND PERFORMANCE . . . . . . . . . . . . . . . . 13
XIII. OPERATIONS ASSISTANCE. . . . . . . . . . . . . . . . . . . . . . . . 17
XIV. INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
XV. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
XVI. DEFAULT AND TERMINATION. . . . . . . . . . . . . . . . . . . . . . . 20
XVII. RIGHTS AND DUTIES OF PARTIES UPON EXPIRATION OR
TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
XVIII. TRANSFERABILITY OF INTEREST. . . . . . . . . . . . . . . . . . . . . 24
XIX. YOUR DEATH OR INCAPACITY . . . . . . . . . . . . . . . . . . . . . . 26
XX. RIGHT OF FIRST REFUSAL . . . . . . . . . . . . . . . . . . . . . . . 26
XXI. OPERATION IN THE EVENT OF ABSENCE, DISABILITY OR DEATH . . . . . . . 26
XXII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION . . . . . . . . . . . . . 27
XXIII. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
XXIV. APPLICABLE LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
XXV. DISPUTE RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . 29
XXVI. OWNER AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
XXVII. ACKNOWLEDGEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . 31
EXHIBITS:
A. OWNER AGREEMENT
B. DESCRIPTION OF DESIGNATED AREA
C. LEASE ADDENDUM
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bw-3 FRANCHISE SYSTEMS, INC.
FRANCHISE AGREEMENT
This Franchise Agreement ("Agreement") made this _____ day of ________,
19____, by and between bw-3 FRANCHISE SYSTEMS, INC. an Ohio corporation which
has its principal place of business at 1919 Interchange Tower, 600 South Highway
169, Minneapolis, Minnesota 55426 ("we" or "us"), and __________________________
________________________________________________________________________________
________________________________________________________________________________
_______________ ("you"). If you are a corporation, partnership or limited
liability company, certain provisions of the Agreement also apply to your owners
and will be noted.
BACKGROUND:
A. Our parent company has developed a unique system ("System") for
establishing and operating restaurants which use the service mark "BUFFALO WILD
WINGS" and which feature chicken wings, sandwiches, and other products and
beverages, which are all prepared according to specified recipes and procedures
("Menu Items"), some of which use proprietary mixes ("Trade Secret Food
Products"), and has granted to us the right to sublicense the System to others.
B. The distinguishing characteristics of the System include, without
limitation, distinctive exterior and interior layout, design and color scheme,
signage, decorations, furnishings and materials, special recipes, formulae,
menus and food and beverage designations, Confidential Manuals, food and
beverage storage, preparation service and delivery procedures and techniques,
operating procedures for sanitation and maintenance, and methods and techniques
for inventory and cost controls, record keeping and reporting, purchasing, sales
promotion and advertising, Trade Secret Food Products, all of which may be
changed, improved and further developed from time to time.
C. Our parent company is the owner of the trade names, service marks
and trademarks "BUFFALO WILD WINGS", "bw-3" and other logos and commercial
symbols, and such other trade names, service marks, and trademarks as are now
designated (and may later be designated by us in writing) as part of the System
("Marks").
D. We grant franchises to qualified candidates for the operation of
"Buffalo Wild Wings" Restaurants offering the Menu Items and utilizing the
System and Marks. You desire to operate a Buffalo Wild Wings Restaurant using
the System and Marks and have applied for a franchise, which application has
been approved by us in reliance upon all of the representations you have made.
E. You understand and acknowledge the importance of our high and
uniform standards of quality and service and the necessity of operating the
Buffalo Wild Wings business in conformity with our standards and specifications.
AGREEMENTS:
We and you agree as follows:
I. APPOINTMENT AND FRANCHISE FEE
A. Subject to the provisions stated below, we hereby grant you a
license to use the "Buffalo Wild Wings" Marks and System, and you undertake the
obligation to operate a Buffalo Wild Wings restaurant facility featuring the
Menu Items and providing sit-down, carry-out and other restaurant services
("Franchised
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Restaurant"), and to use the Marks solely in connection with the System, as it
is currently established, and as it may be changed, improved and further
developed from time to time, at one (1) location only, such location to be:
1) ____________________________________________________________________________
___________________________________________________________________________, or
2) at a location to be designated, as provided in Paragraph III within the area
described on EXHIBIT B. When a location has been designated and approved by you
and us, it will become part of Paragraph I.A.1., as if originally incorporated
in that Paragraph. You shall not relocate your Franchised Restaurant without
our prior written approval.
B. You receive a Designated Area within which we and our affiliates
shall not operate or grant to anyone else a franchise to operate a Buffalo Wild
Wings or bw-3 Restaurant so long as this Agreement is in force and effect. The
Designated Area is described in writing and on a map attached to the Agreement
as EXHIBIT B and is made a part of the Agreement. You do not have any right to
sublicense or subfranchise others within or outside of the Designated Area and
do not have the right to operate more than one (1) Franchised Restaurant within
the Designated Area.
C. You acknowledge and agree that we have the right, in our sole
discretion, to grant other franchises outside of the Designated Area as we deem
appropriate. Although we will not operate a Buffalo Wild Wings or bw-3 business
within the Designated Area, we reserve the right, both within and outside of the
Designated Area, to offer and sell at special events (at our option, if you
elect not to participate in such events) or at wholesale, through channels of
distribution distinct from those of a Franchised Restaurant, products and
services which comprise, or may in the future comprise a part of the System,
which products may be resold at retail to the general public by such entities.
Further, you acknowledge that certain locations within the Designated Area are
by their nature unique and separate in character from sites generally developed
as Franchised Restaurants. As a result, you agree that the following locations
("Special Sites") are excluded from the Designated Area and we shall have the
right to develop (by direct ownership or franchising) such locations:
1) public transportation facilities, including airports, train stations and bus
stations; 2) military bases; 3) sports facilities, including race tracks; and 4)
amusement and/or theme parks.
D. We and our affiliated companies shall not engage in catering and
delivery services and activities in the Designated Area. You shall not engage
in catering and delivery services and activities outside of the Designated Area.
We shall have no obligation to enforce similar covenants against any other
System franchisee. Other System franchisees shall be deemed third party
beneficiaries of such. You shall not offer for sale any Menu Items or
Proprietary Products by means of Internet/World Wide Web programming or
advertising. We reserve the right to market and sell Menu Items and Trade
Secret Food Products on the Internet/World Wide Web.
E. You pay us a nonrefundable Initial Franchise Fee of ________________
_______________________ Dollars ($________) which is payable in full on the date
of this Agreement. The Initial Franchise Fee has been fully earned upon receipt
and is nonrefundable in consideration of the expenses incurred by us in granting
this franchise and for the lost or deferred opportunity to franchise others.
F. You acknowledge that because complete and detailed uniformity under
many varying conditions may not be possible or practical, we specifically
reserve the right, at our sole discretion, to vary standards for any System
franchisee based upon the peculiarities of the particular site or circumstance,
density of population, business potential, population of trade area, existing
business practices or any other condition which we deem to be of importance to
the successful operation of such franchisee's business. You shall not be
entitled to require us to grant to you a like or similar variation.
G. In consideration of our agreement not to grant another franchise in
the area described in Paragraph I.C., you at all times shall use your best
efforts to promote and increase the sales and service of Menu
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Items and to effect the widest and best possible distribution throughout the
Designated Area, soliciting and servicing all potential customers and accounts
for Buffalo Wild Wings food products and services.
II. TERM AND RENEWAL
A. The term of this Agreement is for ten (10) years commencing on the
date of this Agreement, unless terminated as provided by this Agreement.
B. You have the right to renew the franchise for two (2) successive
terms equal to five (5) years each, providing you meet all of the following
conditions:
1. You have, during the entire term, complied with all the
provisions of the Agreement;
2. The premises of the Franchised Restaurant meet our
then-current standards for Buffalo Wild Wings restaurants and you are able to
maintain possession of the Franchised Restaurant. Before the expiration date of
this Agreement you must bring the Franchised Restaurant into full compliance
with the specifications and standards then applicable for new or renewing
Buffalo Wild Wings businesses and present us with evidence satisfactory that you
have the right to remain in possession of the Franchised Restaurant premises for
the duration of the renewal term. In the event you are unable to maintain
possession of the premises of the Franchised Restaurant or if the premises do
not meet our then-current standards, you may secure substitute premises approved
by us and provided that you have furnished, stocked and equipped such premises
to bring the Franchised Restaurant at its substituted premises into full
compliance with the then-current specifications and standards before the
expiration date of this Agreement;
3. You have given us written notice of your desire to renew at
least six (6) months but not more than twelve (12) months prior to the end of
the term;
4. You have satisfied all of your monetary obligations to us and
our affiliates and have timely met these obligations throughout the term of this
Agreement;
5. You have executed for the renewal term our then-current form
of Franchise Agreement (with appropriate modifications to reflect the fact that
the agreement relates to the grant of a renewal franchise), which shall
supersede in all respects this Agreement, and the terms of which may differ from
the terms of this Agreement, including, without limitation, a different
percentage Continuing Fee and advertising contribution; provided, however, that
the percentage Continuing Fee shall not exceed seven percent (7%) during any
renewal period. You will not be required to pay the then-current initial
franchise fee or its equivalent;
6. You have complied with our then-current qualification and
training requirements; and
7. You have executed a general release, in a form prescribed by
us, of all claims against us and our affiliates, and respective officers,
directors, agents, shareholders and employees.
C. Within ninety (90) days of our receipt of your notice to renew, we
will furnish you with written notice of: (i) reasons which could cause us not
to grant a renewal to you including but not limited to any deficiencies which
require correction and a schedule for correction by you; and (ii) our
then-current requirements relating to the image, appearance, decoration,
furnishing, equipping and stocking of Buffalo Wild Wings businesses, and a
schedule for effecting upgrading or modifications in order to bring the
Franchised Restaurant in compliance, as a condition of renewal. Renewal of the
franchise shall be conditioned upon your compliance with such requirements and
continued compliance with all the terms and conditions of this Agreement up to
the date of termination of the initial term.
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D. We shall give you written notice of our election not to renew the
franchise at least three (3) months prior to the expiration of the initial or
first renewal term of this Agreement.
III. RESTAURANT AND LOCATION
A. You shall operate the Franchised Restaurant only at the location
specified in Paragraph I of this Agreement. If the lease for the site of the
Franchised Restaurant expires or terminates for reasons other than your breach,
or if the site is destroyed, condemned or otherwise rendered unusable, or as
otherwise may be agreed upon in writing by us and you, we will grant permission
for relocation of the Franchised Restaurant within your Designated Area at a
location and site acceptable to us. Any such relocation shall be at your sole
expense and we shall have the right to charge you for any and all reasonable
costs incurred by us, and a reasonable fee for our services, in connection with
any such relocation of the Franchised Restaurant.
B. You shall be responsible for purchasing or leasing a suitable site
for the Franchised Restaurant. Prior to the acquisition by lease or purchase of
any site for the premises of the Franchised Restaurant, you shall submit a
description of the proposed site to us, together with a letter of intent or
other evidence satisfactory to us which confirms your favorable prospects for
obtaining the proposed site. We shall provide you written notice of approval or
disapproval of the proposed site within fifteen (15) business days after
receiving your written proposal. Our approval is not a determination or
warranty that the proposed site will be a profitable location for the Franchised
Restaurant.
C. After receiving our written approval of the location of the
Franchised Restaurant as provided in Paragraph III.B. above, you shall, subject
to our prior approval of terms, execute a lease (if the premises are to be
leased) or a binding agreement to purchase the site. All leases pertaining to
the Franchised Restaurant premises must contain an Addendum in the form of
EXHIBIT C attached hereto, or contain terms and conditions substantially similar
to those contained in EXHIBIT C that we approve. You shall provide us with a
copy of the executed lease for the Franchised Restaurant within five (5) days of
its execution, and prior to its execution, provide us with a copy for our
approval. A copy of the executed Addendum must also be provided to us.
D. You shall promptly after obtaining possession of the site for the
Franchised Restaurant: (i) retain the services of an architect and a contractor
each of whom has been approved by us; (ii) have prepared and submitted for our
approval a site survey and basic architectural plans and specifications (not for
construction) consistent with our general atmosphere, image, color scheme and
ambience requirements as set forth from time to time in the Manuals for a
Buffalo Wild Wings restaurant (including requirements for dimensions, exterior
design, materials, interior design and layout, equipment, fixtures, furniture,
signs and decorating); (iii) obtain all required zoning changes, building,
utility, health, sanitation, liquor and sign permits and licenses and any other
required permits and licenses; (iv) purchase or lease equipment, fixtures,
furniture and signs as provided herein; (v) complete the construction and/or
remodeling, equipment, fixtures, furniture and sign installation and decorating
of the Franchised Restaurant in full and strict compliance with plans and
specifications therefore approved by us and all applicable ordinances, building
codes and permit requirements; (vi) obtain all customary contractors' sworn
statements and partial and final waivers of lien for construction, remodeling,
decorating and installation services; and (vii) otherwise complete development
of and have the Franchised Restaurant ready to open and commence the conduct of
its business in accordance with Paragraph XII of this Agreement. Our approval
of your site survey and architectural plans is not a representation or warranty
of any type.
E. You shall be required to periodically make reasonable capital
expenditures to remodel, modernize and redecorate the premises of the Franchised
Restaurant so that the Franchised Restaurant will reflect the then-image
intended to be portrayed by Buffalo Wild Wings businesses. All remodeling,
modernization, or redecoration of the premises of the Franchised Restaurant must
be done in accordance with the standards and specifications as prescribed by us
from time to time and with our prior written approval. All replacements must
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conform to our then-current quality standards and specifications and must be
approved in writing. Your total expenditures during the term of the Franchise
Agreement for such remodeling, modernizing and redecorating will not exceed ONE
HUNDRED THOUSAND Dollars ($100,000.00) adjusted for inflation from the date of
this Agreement. Maintenance of the premises of the Franchised Restaurant and
modifying or replacing equipment may exceed this amount, and maintenance costs
and equipment costs may not be credited to remodeling, modernization or
redecoration expenditures.
IV. TRAINING
A. Before you commence operations, we shall make initial training
available to you. At least three (3) persons designated by you and approved by
us must attend and successfully complete the training to our satisfaction. The
training will be at least three (3) weeks in duration and will be conducted at
either our Cincinnati, or Columbus, Ohio training facilities or at such other
place as we may designate. The training program covers material aspects of the
operation of a Buffalo Wild Wings business, including financial controls,
general bookkeeping procedures, food preparation, service and operational
techniques, familiarization with recipes and cooking procedures, marketing and
advertising techniques, sanitation and maintenance procedures, deployment of
labor, and maintenance of quality standards. We reserve the right to provide
less training if you have one or more Franchised Restaurants in operation. All
expenses incurred by you and your employees in attending the program, including
without limitation, travel costs, room and board expenses, and the employee
compensation shall be your sole responsibility.
B. We will, from time to time upon your written request, make
available, at your expense, training for additional managers designated by you
and approved by us. Such training shall take place at our Cincinnati, or
Columbus, Ohio training facilities or such other place as we may designate. You
acknowledge that the time period within which we provide additional training
will be subject to available openings in our regular training program with
preference being given to initial training for new franchisees.
C. We will schedule the opening of your Franchised Restaurant. For one
(1) week prior to and one (1) week concurrent with the commencement of
operations of the Franchised Restaurant, we will furnish to you, at your
Restaurant and at our expense, one (1) or more of our representatives for the
purpose of training your employees and management team in the operation of a
Franchised Restaurant. During this period, the representatives will assist in
establishing and standardizing procedures and techniques essential to the
operation of a Buffalo Wild Wings business. If you request additional
assistance from us in order to facilitate the opening of the Franchised
Restaurant, and if, we, in our discretion, deem it necessary, feasible and
appropriate to comply with the request, you will reimburse us for our expenses
in providing such additional assistance, which may include our then-current
service fee. You agree that during the week preceding the opening, you will
have four (4) full days during which the Restaurant is fully operational and
will host two (2) opening parties.
D. If we determine, in our sole discretion, that you or your manager is
unable to satisfactorily complete the required training program, you will have
thirty (30) days to provide an alternate person to complete the training program
at your sole expense. At least three (3) persons actively involved in the
management and operation of the Franchised Restaurant must successfully complete
the training program. If you fail to provide three (3) persons who can complete
the training program, we will have the right to terminate this Agreement and you
will not be entitled to a refund of any portion of the franchise fees paid.
E. From time to time we may provide and if we do, may require that
previously-trained and experienced franchisees, their managers and/or employees
attend and successfully complete refresher training programs or seminars to be
conducted at our training facility or at such other place as we shall designate.
Attendance at such refresher training programs or seminars will be at your sole
expense, provided, however, that attendance will not be required at more than
two (2) such programs in any calendar year.
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V. PROPRIETARY MARKS
A. You acknowledge that our parent company is the owner of all right,
title and interest together with all the goodwill of the Marks and has licensed
the use of such Marks to us with the right to sublicense others. You further
acknowledge that your right to use the Marks is derived solely from this
Agreement and is limited to the conduct of business by you pursuant to and in
compliance with this Agreement and all applicable standards, specifications, and
operating procedures prescribed by us from time to time during the term of the
Agreement. Any unauthorized use of the Marks by you is a breach of this
Agreement and an infringement of the rights of us in and to the Marks. You
acknowledge that your usage of the Marks and any goodwill established by your
use of the Marks shall inure to the exclusive benefit of us and our affiliate,
and that this Agreement does not confer any goodwill or other interests in the
Marks upon you. Any developments and improvements by you relating to the Marks
or the System shall be our sole property. You will not, at any time during the
term of this Agreement or after its termination or expiration, contest the
validity or ownership of any of the Marks or assist any other person in
contesting the validity or ownership of the Marks. All provisions of this
Agreement applicable to the Marks apply to any and all additional trademarks,
service marks, and commercial symbols authorized for use by and licensed to you
by us after the date of this Agreement.
B. You will not use any Mark or portion of any Mark as part of a
corporate or trade name, or with any prefix, suffix, or other modifying words,
terms, designs, or symbols, or in any modified form. You will not 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 us. You shall give such
notices of trademark and service mark registrations as we specify and to obtain
such fictitious or assumed name registrations as may be required under
applicable law. Your use of any of the Marks on the Internet/World Wide Web
(including any Home Page) or any other medium must have our prior written
approval. We reserve the right to prohibit your use of the Marks on the
Internet.
C. You will promptly notify us of any claim, demand or cause of action
based upon or arising from any attempt by any other person, firm or corporation
to use the Marks or any colorable imitation of the Marks. You shall also notify
us of any action, claim or demand against you relating to the Marks within ten
(10) days after you receive notice of said action, claim or demand. Upon
receipt of timely notice of an action, claim or demand against you relating to
the Marks, we and our affiliate shall have the sole right and duty to defend any
such action. We and our affiliate will have the exclusive right to contest or
bring action against any third party regarding the third party's use of any of
the Marks and will exercise such right in our and our affiliate's sole
discretion. In any defense or prosecution of any litigation relating to the
Marks or components of the System undertaken by us, you shall cooperate in all
respects with us and our affiliate and execute any and all documents and take
all actions as may be desirable or necessary in the opinion of our counsel, to
carry out such defense or prosecution. Both parties shall make every effort
consistent with the foregoing to protect, maintain, and promote the Marks as
identifying the System and only the System.
D. If, in our sole discretion, it becomes advisable at any time, for us
to modify or discontinue use of any Mark, and/or use one or more additional or
substitute trade names, trademarks, service marks, or other commercial symbols,
either systemwide or with respect to use by any selected franchisee, you will
comply with our directions within a reasonable time after notice to you. We
will have no liability or obligation whatsoever with respect to your
modification or discontinuance of any Mark.
E. In order to preserve the validity and integrity of the Marks and
copyrighted material licensed to you and to assure that you are properly
employing the same in the operation of your Franchised Restaurant, we and our
agents have the right of entry and inspection of your premises and operating
procedures at all reasonable times. We will have the right to observe the
manner in which you are rendering your services and conducting your operations,
to confer with your employees and customers, and to select Menu Items,
ingredients, food and
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non-food products, beverages, and other items, products, delivery vehicles,
products and supplies for test of content and evaluation purposes to make
certain that the Menu Items, ingredients, food and non-food products, beverages
and other items, products, delivery vehicles, materials and supplies are
satisfactory and meet our quality control provisions and performance standards.
VI. CONFIDENTIAL MANUALS
A. We will loan to you during the term of the franchise one (1) copy of
our Confidential Operations Manual and other confidential manuals and written
materials (all of which are collectively referred to herein as the "Manuals")
containing reasonable, mandatory and suggested specifications, standards,
operating procedures and rules prescribed from time to time by us for Buffalo
Wild Wings businesses and information relative to your other obligations. You
will not at any time, without our prior written consent, copy, duplicate, record
or otherwise reproduce the Manuals in whole or in part or otherwise make the
same available to any person. Any authorized duplication or copying of any of
the Manuals shall be performed by us at your expense. We have the right to add
to and otherwise modify, combine, or replace the Manuals from time to time to
reflect changes in the specifications, standards, operating procedures and rules
prescribed by us for Buffalo Wild Wings businesses, provided that no such
addition or modification shall alter your fundamental status and rights under
this Franchise Agreement.
B. The Manuals shall at all times remain our sole property and shall
promptly be returned upon the expiration or termination of this Agreement.
C. The Manuals contain our proprietary information which you shall keep
confidential both during the term of the franchise and subsequent to the
expiration and/or termination of the franchise. You will at all times insure
that your copy of the Manuals are available at the Franchised Restaurant
premises in a current and up-to-date manner. At all times that the Manuals are
not in use by authorized personnel, you will maintain the Manuals in a locked
receptacle at the premises of the Franchised Restaurant, and will only grant
authorized personnel, as defined in the Manuals, access to the key or lock
combination of such receptacle. In the event of any dispute as to the contents
of the Manuals, the terms of the master copy of the Manuals maintained by us at
our home office will be controlling.
VII. CONFIDENTIAL INFORMATION
A. You acknowledge that your entire knowledge of the operation of a
Buffalo Wild Wings business, including, without limitation, the method of
preparation of Menu Items and other food products, and other specifications,
recipes, standards and operating procedures of a Buffalo Wild Wings business is
derived from information disclosed to you by us and that such information is
proprietary, confidential and our trade secret. You will maintain the absolute
confidentiality of all such information during and after the term of the
franchise and you will not use any such information in any other business or in
any manner not specifically authorized or approved in writing by us.
B. You will divulge such confidential information only to the extent
and only to such of your employees as must have access to it in order to operate
the Franchised Restaurant. Any and all information, knowledge and know-how,
including, without limitation, drawings, materials, equipment, techniques,
restaurant systems, product formulae, recipes and other data which we designate
as confidential will be deemed confidential for purposes of this Agreement,
except information: 1) which you can demonstrate lawfully came to your attention
prior to disclosure thereof by us, or 2) which, at the time of disclosure by us
to you, had lawfully become a part of the public domain, through publication or
communication by others, or 3) which, after disclosure to you by us, lawfully
becomes a part of the public domain, through publication or communication by
others.
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C. Due to the special and unique nature of our confidential
information, Marks and Manuals, you acknowledge that we will be entitled to
immediate equitable remedies, including but not limited to, restraining orders
and injunctive relief in order to safeguard our proprietary, confidential,
unique, and special information and you acknowledge that money damages alone
would be an insufficient remedy with which to compensate us for any breach of
the terms of Paragraph V, VI and VII of this Agreement. All of your employees
having access to our confidential and proprietary information and all of your
shareholders, directors, officers, partners and/or members will be required to
execute non-disclosure agreements in the form acceptable to us.
VIII. MODIFICATION OF THE SYSTEM
You acknowledge that from time to time we may change or modify the System
presently identified by the Marks, including, without limitation, the adoption
and use of new or modified trade names, trademarks, service marks or copyrighted
materials, new Menu Items, new products, new equipment or new techniques. You
will accept, use and display for the purpose of this Agreement any such changes
in the System, as if they were part of this Agreement at the time of execution.
You will make such expenditures as are reasonably required by such changes or
modifications in the System. Except as directed by us, you will not change,
modify or alter the System in any way.
IX. ADVERTISING
Recognizing the value of advertising and the importance of the
standardization of advertising and promotion to the furtherance of the goodwill
and the public image of Buffalo Wild Wings businesses, you agree:
A. Before using any promotional and advertising materials, you will
submit to us or our designated agency, for our prior approval, all information
pertaining to promotional materials and advertising initiated by you, including,
but not limited to, newspapers, radio and television advertising, Internet or
any other medium, specialty and novelty items, signs, boxes, napkins, bags and
wrapping papers. In the event written disapproval of any such advertising and
promotional material has not been given by us to you within twenty (20) days
from the date such information has been received by us, the materials will be
deemed approved. Your failure to conform with these provisions and subsequent
nonaction by us to require you to cure or remedy any such failure and default
will not be deemed a waiver of future or additional failures and defaults by you
under this provision and/or any other provision of this Agreement. The
submission of advertising information to us for our approval will not affect
your right to determine the prices at which you sell your products and/or
services.
B. You will contribute to the Buffalo Wild Wings Advertising and
Development Fund ("Fund") (which may be one of several regional Funds, if we
elect to establish separate Funds to serve various regions in which multiple
franchisees are located) an amount equal to three percent (3%) of your Gross
Sales, as defined in Paragraph X. Your required payments to the Fund will be
made on or before the fifteenth day of the month for the preceding month. These
contributions may be withdrawn from your bank account as provided in Paragraph
X. We will use such funds to conduct local, regional or national advertising.
Such payments shall be made in addition to and exclusive of any sums that you
may be required to spend on system or grand opening advertising and promotion.
The Fund shall be maintained and administered by us or our designee, as follows:
1. We will oversee all advertising programs and have sole
discretion over the creative concepts, materials and media used in such programs
including the placement and allocation. We will use the Fund to conduct
national advertising, and/or, if regional Funds are developed, to conduct
regional or local advertising on your behalf, at our sole discretion. We may
also use such funds to conduct advertising in your local advertising market.
However, we cannot and do not ensure that any particular franchisee will benefit
directly or pro rata from the placement of advertising.
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2. For each of our company-owned and affiliate-owned Restaurants
(except Special Sites identified in Paragraph I.C.) offering products and
services similar to the Franchised Restaurant we will make contributions to the
Fund or to regional Funds equivalent to the contributions required of Franchised
Restaurants within the System or, if applicable, region in which the
company-owned or affiliate-owned store is located.
3. We will administer and control the Fund and we will have the
absolute and unilateral right to determine how, when and where the monies in the
Fund will be spent. This includes the right to use Fund monies for (1) the
creation, development and production of advertising and promotional materials,
(2) any marketing or related research and development, and (3) advertising and
marketing expenses, including without limitation, the absolute right to purchase
and pay for product and food research and development, advertising materials,
production costs, brochures, ad slicks, radio, film and television commercials,
videotapes, newspaper, magazine and other print advertising, direct mail pieces,
photographer costs, photographs, pictures, designs, services provided by
advertising agencies, public relations firms or other marketing, research or
consulting firms or agencies, market research and marketing surveys, menu design
and graphics, customer incentive programs, sponsorships, marketing meetings and
sales incentives, development of Home Pages on the Internet, Internet access
provider costs, Internet/World Wide Web programming and advertising,
subscriptions to industry newsletters or magazines, marketing or industry
studies, books and research materials, administrative costs and salaries for
marketing support personnel. All sums paid by you to the Fund will be
maintained in a separate account from our other funds and shall not be used to
defray any of our general operating expenses, except for such reasonable
administrative costs and overhead, if any, as we may incur in activities
reasonably related to the administration or direction of the Fund and
advertising programs including, without limitation, costs incurred in collecting
and accounting for assessments for the Fund.
4. It is our intent that all contributions to the Fund will be
expended for advertising and promotional purposes during our fiscal year within
which contributions are made. Any monies not expended in the fiscal year in
which they were contributed will be applied and used for Fund expenses in the
following year.
5. Although we intend the Fund to be of perpetual duration, we
have the right to terminate the Fund. We will not terminate the Fund, however,
until all monies in the Fund have been expended for advertising and promotional
purposes.
6. An unaudited accounting of Fund contributions and expenditures
will be prepared annually and will be made available to you upon request. At
our option, any such annual accounting may include an audit of the contributions
and expenditures of the Fund prepared by an independent certified public
accountant selected by us and prepared at the expense of the Fund.
7. Once you make contributions to the Fund, all such monies will
be used as required by this Paragraph IX and will not be returned to you.
C. In addition to your contributions to the Fund, you may be required
to spend up to two percent (2%) of your Gross Sales on approved local
advertising. We may direct that your local advertising expenditures be made
either individually or to a local advertising group as described below.
1. We shall have the right to designate local advertising markets
and you will participate in cooperative advertising and marketing programs in
your designated local advertising market as described in this Paragraph. Each
Buffalo Wild Wings and bw-3 Restaurant (except Special Sites identified in
Paragraph I.C.) within the designated local advertising area shall be a member
of the local advertising group and each member shall have one vote on all
matters requiring a vote. We reserve the right to designate the Bylaws which
will govern the operation of local advertising groups.
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2. If we direct you to spend your advertising funds locally, all
such expenditures will be made directly by you or the local advertising group,
subject to approval and direction by us or our designated advertising agency.
You acknowledge that we may direct local advertising to be spent according to a
seasonally adjusted schedule; however, such expenditures shall not exceed two
percent (2%) of your annual Gross Sales. You shall furnish to us an accurate
accounting of all expenditures on local advertising and promotion.
3. You will submit documentation of your advertising expenditures
at such times and in such form as we designate. If you fail to make any
required advertising expenditures, we have the right to require you to
contribute the amount of any deficiency to the Fund to be used by us for general
advertising and promotion.
D. We may require you to expend up to FIVE THOUSAND Dollars ($5,000) on
newspaper, direct mail or advertising through other media prior to your opening
and during your initial ninety (90) days of operation of the Franchised
Restaurant. We retain the right to collect such funds directly from you and
expend the funds on your behalf. Such advertising and promotion will be
designated as "Grand Opening" advertising and promotion and will be conducted in
accordance with the specifications set forth in the Manuals.
E. You must carry and offer for sale to your customers a representative
supply of trademarked clothing. We may, from time to time, develop and market
special promotional items which will be made available to you at our cost plus a
reasonable mark up and you will maintain a representative inventory of such
promotional items to meet public demand. You will have the right to purchase
alternative promotional items provided that such alternative goods conform to
the specifications and quality standards established by us. You will, on an
annual basis, participate in a minimum of fifty percent (50%) of the promotional
programs introduced by us from time to time. You will participate in the
specific promotional programs designated by us.
F. You will maintain a business phone and advertise continuously in the
classified or Yellow Pages of a local telephone directory approved by us or such
other directories under the listing "Restaurant", or such other listings as
deemed appropriate by us using mats of the type and size approved in advance by
us. We reserve the right to require you to advertise in more than one local
telephone directory. When more than one (1) Buffalo Wild Wings and/or bw-3
restaurant serves a metropolitan area, classified advertisements shall list all
such restaurants operating within the distribution area of the classified
directories, and you shall contribute your equal share in the cost of such
advertisement.
G. You will not use in advertising or any other form of promotion, or
in any manner any of the marks without the appropriate -Registered
Trademark- registration mark or the designations TM or SM where applicable.
X. CONTINUING FEE
A. You will pay us without offset, credit or deduction of any nature,
so long as this Agreement is in effect, a monthly Continuing Fee equal to five
percent (5%) of the Gross Sales derived from the Franchised Restaurant. The
Continuing Fee will be paid monthly in the manner specified below or as
otherwise prescribed in the Manuals.
1. We must receive from you within five (5) days after the end of
each month, a correct statement of your Gross Sales for the preceding fiscal
month as determined by us on a form approved by us and signed by you. Each
monthly statement of Gross Sales shall be accompanied by the Continuing Fee
payment based on the Gross Sales reported in the statement so submitted. You
will make available to us all original books and records that we may deem
necessary to ascertain your Gross Sales for reasonable inspection at reasonable
times.
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2. The term "Gross Sales", as used in this Agreement, means and
includes the total amount of all revenue from the sale of services, products and
merchandise and all income of every kind and nature related to the Franchised
Restaurant whether or not sold or performed at or from the Franchised Restaurant
and the proceeds from all games, cover charges, service, license, use and
similar fees collected by the Franchised Restaurant. Gross sales do not include
any sales tax, use tax, or service taxes collected and paid to the appropriate
taxing authority.
B. Prior to the opening of your Restaurant (and thereafter as requested
by us), you shall execute and deliver to us, our bank(s) and your bank, as
necessary, all forms and documents that we may request to permit us to debit
your account, either by check, via electronic funds transfer or other means or
such alternative methods as we may designate ("Payment Methods"). You must
comply with all procedures specified by us from time to time to take such
actions as we may request to assist in utilizing any of the Payment Methods. We
may use the Payment Methods to collect the amount of each month's Continuing
Fee, Advertising Contributions, and any other amounts due to us or our
affiliates under this Agreement or otherwise. The Continuing Fee shall be
withdrawn from your designated bank account by electronic fund transfer on the
fifth of each month for the previous month, or if the fifth falls on a weekend
or bank holiday, then on the next business day. Advertising Contributions will
be withdrawn on the fifteenth of each month or on the next business day.
Payments for commissary purchases will be debited one business day after
products are delivered to the Restaurant. We will determine your Gross Sales by
means of the approved information system, or if we are unable to do so, you
shall report your Gross Sales in writing on or before the fifth day of the month
for the preceding month. You shall notify us at least twenty (20) days before
closing or changing the account against which such debits are to be made. If
such account is closed or ceases to be used, you shall immediately provide all
documents and information necessary to permit us to debit the amounts due from
an alternative account. You acknowledge that these requirements are only a
method to facilitate prompt and timely payment of amounts due and shall not
affect any obligation or liability for amounts owed. If for any reason your
account cannot be electronically debited, you shall submit payments by check
(certified or cashier's check if requested by us) on or before the dates when
due. You shall indemnify, defend and hold us harmless from and against all
claims, damages, losses, costs and expenses resulting from any dishonored debit
against your account, regardless whether resulting from the act or omission of
you or your bank; provided that you shall not be obligated to indemnify us for
any dishonored debit caused by our negligence or mistake.
C. All Continuing Fees, Advertising Contributions, amounts due for
purchases by you from us and our affiliates, and other amounts which you owe us
or our affiliates shall bear interest after due date at the highest applicable
legal rate for open account business credit, not to exceed one and one-half
percent (1.5%) per month. You acknowledge that this Paragraph does not
constitute agreement by us or our affiliates to accept such payments after same
are due or a commitment by us to extend credit to, or otherwise finance your
operation of, the Franchised Restaurant. Further, you acknowledge that your
failure to pay all amounts when due shall constitute grounds for termination of
this Agreement, as provided in Paragraph XVI hereof, notwithstanding the
provisions of this Paragraph.
D. Notwithstanding any designation by you, we have the sole discretion
to apply any payments by you to any past due indebtedness of yours for
Continuing Fees, Advertising Contributions, purchases from us and our
affiliates, interest or any other indebtedness. Further, if you are delinquent
in the payment of any fees or indebtedness we have the right to require you to
prepay estimated Continuing Fees and Advertising Contributions.
XI. ACCOUNTING AND RECORDS
A. You will maintain during the term of this Agreement, and preserve
for the time period specified by us, full, complete, and accurate books,
records, and accounts in accordance with the standard accounting
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system prescribed by us from time to time in writing. You will retain for a
period of three (3) years all books and records related to the Franchised
Restaurant, including without limitation, sales checks, purchase orders,
invoices, payroll records, customer lists, check stubs, sales tax records and
returns, cash receipts and disbursement journals and general ledgers. If a
computerized accounting system is developed by us for use throughout the
franchise System, you will at your expense implement and utilize such a system
according to the standards and procedures established by us.
B. You will supply to us on or before the twenty-eighth (28th) day
after the end of each fiscal quarter, in the form approved by us, an activity
report and a detailed profit and loss statement, balance sheet and statement of
cash flow for the last preceding fiscal quarter. Additionally, you will, at
your expense, submit to us within ninety (90) days after the end of each fiscal
year during the term of this Agreement, a detailed profit and loss statement and
statement of cash flow for such fiscal year and a balance sheet as of the last
day of such fiscal year, prepared on an accrual basis including all adjustments
necessary for fair presentation of the financial statements. Such financial
statements must be certified to be true and correct by you and be reviewed by an
independent certified public account.
C. You will submit to us such other periodic reports, forms and records
as specified, and in the manner and at the time as specified in the Manuals or
as we otherwise require in writing from time to time.
D. You will record all sales on electronic cash registers approved by
us or on such other types of cash registers as may be designated by us in the
Manuals or otherwise in writing. We reserve the right to designate the
information system used in your Franchised Restaurant including the computer
hardware, software, other equipment and enhancements. At such time as we
designate the approved information system, you will have one hundred eighty
(180) days in which to install and commence using the approved information
system. In connection with the approved information system, you agree to the
following:
1. You understand that you will be required to acquire the right
to use the information system, obtain peripheral equipment and accessories and
arrange for required maintenance and support services, all at your cost.
2. We shall have the right at all times to access the information
system and to retrieve, analyze, download and use all software, data and files
stored or used on the information system. We may access the information system
in the Franchised Restaurant or from other locations. You shall store all data
and information on the information system that we designate from time to time.
3. All modifications and enhancements made to the approved
information system shall be our property (or the appropriate vendor if we so
designate), without regard to the source of the modification or enhancement.
You agree to execute any documents, in the form provided by us, that we
determine are necessary to reflect such ownership.
4. Upon expiration or termination of this Agreement, you shall
allow our employees or agents to remove the required software from the
information system, shall immediately return to us the software, each component
thereof, any data generated by the use thereof, all documentation for the
software and other materials or information that relate to or reveal the
software and its operation. You shall immediately destroy any and all back-up
or other copies of the software or parts thereof, and any data generated by the
use of the software (other than financial information relating solely to you).
5. You acknowledge and agree that there will be fees payable by
you in connection with the installation, use, support, maintenance, and periodic
enhancements of the approved information system. These fees will include but
are not necessarily limited to an on-site installation and support fee,
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software support fees and software maintenance fees. These fees will be payable
to us or a vendor designated by us and may be increased from time to time.
6. You will be required to execute a software license agreement
setting forth in more detail your rights and obligations in connection with your
use of the approved information system.
You agree that we have the right to use your data as part of our earnings claim
in our Franchise Offering Circular.
E. We or our designated agents have the right at all reasonable times
to examine and copy, at our expense, your books, records, and tax returns. We
also have the right, at any time, to have an independent audit made of your
books and records at our expense. If an inspection reveals that any payments
due to us have been understated in any report to us, then you will immediately
pay to us the amount understated upon demand, in addition to interest from the
date such amount was due until paid, at the maximum rate permitted by law not to
exceed one and half percent (1.5%) per month. If an inspection discloses an
understatement in any report of two percent (2%) or more, you will also
reimburse us for any and all costs and expenses connected with the inspection
(including, without limitation, reasonable accounting and attorneys' fees), and
we will thereafter have the right to require you to submit annual financial
statements, prepared in accordance with generally accepted accounting
principles, audited by an independent certified public accountant. The
foregoing remedies shall be in addition to any other remedies we may have.
F. You acknowledge that nothing contained in this Agreement constitutes
our agreement to accept any payments after they are due or a commitment by us to
extend credit to or otherwise finance your operation of the Franchised
Restaurant. Further, you acknowledge that your failure to pay all amounts when
due constitutes a material default of, and grounds for, termination of this
Agreement.
XII. STANDARDS OF QUALITY AND PERFORMANCE
In order to promote and protect the value of the Marks and the System,
and to insure optimum quality control as to products and services provided and
sold in Franchised Restaurants, you acknowledge and agree that substantial
uniformity must be maintained in the quality, type and standard of Franchised
Restaurant, and in their facilities, products, services and operations.
Therefore, you will comply with all requirements described in this Agreement,
the Manuals and other written policies supplied by us. Mandatory
specifications, standards, operating procedures and rules prescribed from time
to time by us in the Manuals or otherwise communicated to you in writing, shall
constitute provisions of this Agreement as if fully set forth herein. All
references herein to this Agreement shall include all such mandatory
specifications, standards and operating procedures and rules.
A. You will commence operation of your Franchised Restaurant within
nine (9) months of the execution of this Agreement or as otherwise required or
approved in writing by us. Before opening, you will have procured all necessary
licenses, permits, and approvals, including, but not limited to, liquor and
construction permits; hired and trained personnel, made all leasehold
improvements, and acquired initial inventory. At the time of opening you must
have a minimum of Fifty Thousand Dollars ($50,000) in immediately accessible
working capital funds to be used solely to defray the costs of operating the
Restaurant for the initial several months. If for any reason you fail to
commence operation within the nine (9) month period, we may terminate this
Agreement immediately upon delivery of written notice of termination to you.
B. You will maintain the condition and appearance of the premises of the
Franchised Restaurant consistent with our quality controls and standards. You
will effect reasonable maintenance of the Franchised Restaurant as is from time
to time required to maintain or improve the appearance and efficient operation
of the Franchised Restaurant, including but not limited to replacement of worn
out or obsolete fixtures and signs, repair of the exterior and interior of the
premises of the Franchised Restaurant, and purchasing and installation of new or
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modified equipment. If at any time in our judgment the general state of repair
or the appearance of the premises of the Franchised Restaurant or its equipment,
fixtures, signs or decor does not meet our quality control and standards
therefor, we will notify you, specifying the action to be taken by you to
correct such deficiency. If you fail or refuse to initiate a bona fide program
to complete any required maintenance, within thirty (30) days after receipt of
such notice, we will have the right, but not the obligation, in addition to all
other remedies, to enter upon the premises of the Franchised Restaurant and
effect such repairs, painting, maintenance or replacements of equipment,
fixtures or signs on your behalf and you shall pay the entire costs thereof on
demand.
C. You will not make any material alterations to the premises of the
Franchised Restaurant make any material replacements of or alterations to the
equipment, fixtures or signs of the Franchised Restaurant without our prior
written approval.
D. The Franchised Restaurant may be used solely for the purpose of
conducting a Buffalo Wild Wings Franchised Restaurant. The operating entity
(corporation, partnership or limited liability company) will be dedicated solely
to the operation of your Franchised Restaurant(s) and will not hold any interest
in, operate or manage any other business of any kind without our prior written
approval.
E. We have developed and own proprietary sauces for use in preparing
chicken wings, the weck kaiser roll and other menu items and specially prepared
pocket pizza mix and "Buffalo Breath Chili" mix ("Trade Secret Food Products").
In order to protect our trade secrets and to monitor the manufacture, packaging,
processing and sale of Trade Secret Food Products, we will (i) manufacture,
supply, and sell Trade Secret Food Products to our franchisees; (ii) disclose
the formulae for and methods for preparation of the Trade Secret Food Products
to a limited number of suppliers who may be authorized by us to manufacture
Trade Secret Food Products to our precise specifications and sell Trade Secret
Food Products to our franchisees; and/or (iii) disclose the formulae for and
methods for preparation of the pocket pizza mix and the Buffalo Breath Chili mix
to you who will be authorized by us to manufacture them to our precise
specifications for sale only at the location of the Franchised Restaurant
specified herein, unless otherwise approved by us. Under no circumstances will
we disclose the formulae for and methods of preparation of any of our
proprietary sauces to you. You acknowledge that you may be required to purchase
Trade Secret Food Products (and other products whose consistency and quality is
key to the success of the System) from us or a limited number of suppliers so
authorized by us and will be required to use Trade Secret Food Products as
designated by us.
F. You will offer for sale and sell at the Franchised Restaurant all
Menu Items, other food and beverage products and other products that we from
time to time require and shall not offer for sale or sell at the Franchised
Restaurant or the premises which you occupy any unapproved products or menu
items or use such premises for any purpose other than the operation of a
Franchised Restaurant in full compliance with this Agreement. You will offer
all Menu Items on a menu specified by us.
G. In order to ensure that all Menu Items produced by you meet our high
standards of taste, texture, appearance and freshness, and in order to protect
our goodwill and Marks, all Menu Items and other food products shall be prepared
only by properly trained personnel strictly in accordance with our recipes,
cooking techniques and processes, and the Manuals, and shall be sold only at
retail to customers in conformity with our marketing plan and concept. You
acknowledge that such recipes, cooking techniques and processes are integral to
the System and failure to adhere to such recipes, cooking techniques and
processes shall be detrimental to the System and Marks.
H. From time to time, we will provide you with a list of approved
manufacturers, suppliers and distributors ("Approved Suppliers List") and
approved inventory products, fixtures, furniture, equipment, signs, stationery,
supplies, and other items or services necessary to operate the Franchised
Restaurant ("Approved Supplies List"). The list will specify the manufacturer,
supplier and distributor and the inventory products,
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fixtures, furniture, equipment, signs, stationery, supplies and services which
we have approved to be carried or used in the System. We may revise the
Approved Suppliers List and Approved Supplies List from time to time in our sole
discretion and such lists shall be submitted to you as we deem advisable. If
you propose to offer for sale at the Franchised Restaurant any brand of product,
or to use in the operation of the Franchised Restaurant any brand of food
ingredient or other material or supply which is not then approved by us as
meeting its minimum specifications and quality standards, or to purchase any
product from a supplier that is not then designated by us as an approved
supplier, you must first notify us and shall upon our request submit samples and
such other information as we require for examination and/or testing or to
otherwise determine whether such product, material or supply, or such proposed
supplier meets its specifications and quality standards. We may charge you a
fee in connection with such examination and/or testing which will not exceed the
reasonable cost of the inspection and evaluation and the actual cost of the
test. In some cases we may refuse to consider an alternate supplier of certain
items. We reserve the right to re-inspect the facilities and products of any
supplier of an approved item and to revoke its approval of any item or supplier
which fails to continue to meet any of our criteria.
I. All inventory, products and materials, and other items and supplies
used in the operation of the Franchised Restaurant which are not specifically
required to be purchased in accordance with our Approved Supplies List and
Approved Suppliers List must conform to the specifications and quality standards
established by us from time to time.
J. You will fully comply with all mandatory specifications, standards,
operating procedures and rules as in effect from time to time relating to:
1. The safety, maintenance, cleanliness, sanitation, function and
appearance of the Franchised Restaurant premises and its equipment, fixtures,
decor and signs and maintenance and service agreements therefor;
2. Training, dress, general appearance and demeanor of Franchised
Restaurant employees;
3. Type, quality, taste, portion control and uniformity, and
manner of preparation, packaging, displays and sale of all Menu Items, beverages
and other food items sold by the Franchised Restaurant and of all food,
beverages and other products used in the preparation and packaging thereof;
4. The promotion and sale of novelty items bearing the Marks,
such as cups, T-shirts and related merchandise and accessories;
5. Hours during which the Franchised Restaurant will be open for
business;
6. Advertising and promotional programs;
7. Use and retention of standard forms;
8. Our recipes;
9. Use and illumination of signs, posters, displays, menu boards
and similar items;
10. Your identification as the owner of the Franchised Restaurant;
11. The handling of customer complaints; and
12. Any other standard, specification or procedure designated by
us.
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K. You will secure and maintain in force all required licenses,
including liquor licenses, permits and certificates relating to the operation of
the Franchised Restaurant and will operate the Franchised Restaurant in full
compliance with all applicable laws, ordinances and regulations, including
without limitation all government regulations relating to occupational hazards
and health, dispensing of food products, consumer protection, trade regulation,
worker's compensation, unemployment insurance and withholding and payment of
Federal and State income taxes and social security taxes and sales, use and
property taxes.
L. You will refrain from any merchandising, advertising or promotional
practice which is unethical or may be injurious to our business and/or the
business of other Franchised Restaurants or to the goodwill associated with the
Marks or System.
M. In the operation of the Franchised Restaurant you will use only
displays, trays, boxes, bags, wrapping paper, labels, forms and other paper and
plastic products imprinted with the Marks and colors as prescribed from time to
time by us.
N. You acknowledge that the Franchised Restaurant shall at all times
maintain an inventory of ingredients, food and beverage products and other
products, materials and supplies that will permit operation of the Franchised
Restaurant at maximum capacity.
O. The Franchised Restaurant shall at all times be under your direct,
on-premises supervision, unless, upon sixty (60) days prior written notice and
approval by us you designate a trained and competent employee to act as
full-time general manager. Your designation of a general manager shall be
subject to our prior written approval, and shall further be subject to the
designated general manager successfully completing our training course. All
costs for the attendance of the designated general manager at our training
course shall be at your cost, except as set forth in Section IV(A). We will
have the right at any time to revoke our approval of a designated manager. The
use of a general manager will in no way relieve you of your obligations to
observe, perform and comply with this Agreement and the Manuals and to insure
that the Franchised Restaurant is properly managed and operated or the
responsibility for the on-site, day to day operation of the Franchised
Restaurant. You will employ a sufficient number of competent and trained
employees to insure efficient service to your customers.
P. You will not install or maintain on the premises of the Franchised
Restaurant any newspaper racks, video games, jukeboxes, gaming machines, gum
machines, games, rides, vending machines, pool tables, automated teller
machines, or other similar devices without our written approval. The income
derived from any approved machines will be included in gross sales for purposes
of your Continuing Fee and advertising contribution.
Q. You will timely pay all of your obligations and liabilities due to
us, our parent, bw-3, Inc., our affiliates and other suppliers, lessors and
creditors.
R. You will notify us in writing within five (5) 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 the Franchised Restaurant.
S. We reserve the right to require you to offer delivery service to
customers located within a reasonable radius of the Franchised Restaurant. As
of the date of this Agreement, such delivery service is at your option. If the
Franchised Restaurant offers delivery service to customers located within its
Designated Area, in order to maintain the quality of all food products, the
Franchised Restaurant will not offer delivery service to any customer whose
order cannot be delivered within a reasonable time from when such order is
placed, in
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accordance with our standards. You will charge the same price for products
offered by the Franchised Restaurant whether delivered or sold over the counter
in the Franchised Restaurant, plus a reasonable delivery charge.
XIII. OPERATIONS ASSISTANCE
A. We may from time to time advise or offer guidance to you relative to
prices for the food and other products offered for sale by the Franchised
Restaurant that in our judgment constitute good business practice. Such
guidance will be based on our experience in operating and franchising
Restaurants and an analysis of the costs of such products and prices charged for
competitive products. You will not be obligated to accept any such advice or
guidance and shall have the sole right to determine the prices to be charged
from time to time by the Franchised Restaurant and no such advice or guidance
shall be deemed or construed to impose upon you any obligation to charge any
fixed, minimum or maximum prices for any product offered for sale by the
Franchised Restaurant. We may from time to time establish promotional practices
which you are required to follow such as "free refill," "buy one and get one
free" or similar practices.
B. Before the opening of the Franchised Restaurant we will provide you
with the following:
1. A comprehensive list of established sources of equipment,
foods, supplies and containers necessary for the operation of the Franchised
Restaurant and provide specifications for such products;
2. Coordination of product distribution for local, regional and
national suppliers; and
3. Regulation of quality standards and products in conformance
throughout the network of Franchised Restaurants.
C. We may furnish you with such assistance in connection with the
operation of the Franchised Restaurant as we reasonably determined to be
necessary from time to time. Operations assistance may consist of advice and
guidance with respect to:
1. Proper utilization of procedures to be utilized by the
Franchised Restaurant regarding the service and sale of all Menu Items and other
food and beverage items, and related items and materials as approved by us;
2. Additional products and services authorized for sale by
Franchised Restaurants;
3. Purchase of ingredients and other food and beverage items,
materials and supplies;
4. The institution of proper administrative, bookkeeping,
accounting, inventory control, supervisory and general operating procedures for
the effective operation of the Franchised Restaurant; and
5. Advertising and promotional programs.
D. We will make periodic visits to the Franchised Restaurant for the
purposes of consultation, assistance, and guidance in all aspects of the
operation and management of the Franchised Restaurant as we reasonably determine
to be necessary from time to time. We or our representatives who visit the
Franchised Restaurant will prepare, for the benefit of both us and you, written
reports with respect to such visits outlining any suggested changes or
improvements in the operations of the Franchised Restaurant and detailing any
defaults in such operations which become evident as a result of any such visit,
and a copy of each such written report shall be provided to both us and you. We
will advise you of problems arising out of the operation of the Franchised
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Restaurant as disclosed by reports submitted to us by you or by inspections
conducted by us of the Franchised Restaurant.
E. We will provide to you the specifications, Approved Suppliers Lists,
Approved Supplies Lists, training and Manuals at various times between the
execution of this Agreement and the opening of the Franchised Restaurant.
F. In the event you request additional operational assistance or
services, we have the right to condition the rendering of such services upon the
payment of a per diem fee and all of our expenses incurred in rendering the
services.
XIV. INSURANCE
A. You will procure at your expense and maintain in full force and
effect during the term of this Agreement, an insurance policy or policies
protecting you, us and our designated affiliates, and their officers, directors,
partners and employees against any loss, liability, personal injury, death, or
property damage or expense whatsoever arising or occurring upon or in connection
with the Franchised Restaurant, as we may reasonably require for our own and
your protection. We will be named an additional insured in such policy or
policies.
B. The policy or policies shall be written by an insurance company
satisfactory to us in accordance with standards and specifications set forth in
the Manuals or otherwise in writing, and shall include, at a minimum (except as
different coverages and policy limits may reasonably be specified for all
franchisees from time to time by us in the Manuals or otherwise in writing) the
following:
1. All risks coverage insurance on the Franchised Restaurant and
all fixtures, equipment, supplies and other property used in the operation of
the Franchised Restaurant, for full repair and replacement value of the
machinery, equipment, improvements and betterments, without any applicable
co-insurance clause, except that an appropriate deductible clause shall be
permitted.
2. Worker's compensation and employer's liability insurance as
well as such other insurance as may be required by statute or rule of the state
in which the Franchised Restaurant is located and operated.
3. Comprehensive general liability insurance and product
liability insurance with minimum limits of ONE MILLION Dollars ($1,000,000)
combined single limit including the following coverages: contractual liability;
personal injury; products/completed operation; and tenant's fire legal
liability; insuring against all claims, suits, obligations, liabilities and
damages, including attorneys' fees, based upon or arising out of actual or
alleged personal injuries or property damage resulting from, or occurring in the
course of, or on or about or otherwise relating to the Franchised Restaurant,
provided that the required amounts herein may be modified from time to time by
us to reflect inflation or future experience with claims.
4. If you offer delivery service or utilize motor vehicles for
any other purpose in the operation of the Franchised Restaurant, automobile
liability insurance, including owned, hired and non-owned vehicle coverage, with
a combined single limit of at least ONE MILLION Dollars ($1,000,000).
5. Such insurance and types of coverage as may be required by the
terms of any lease for the Franchised Restaurant, or as may be required from
time to time by us.
6. Liquor liability coverage in a minimum amount of ONE MILLION
Dollars ($1,000,000) or such other amount as may be specified by us.
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C. The insurance afforded by the policy or policies respecting
liability shall not be limited in any way by reason of any insurance which may
be maintained by us. The insurance coverage must commence as of the date the
location of the Franchised Restaurant has been secured. You agree to deliver to
us prior to opening and periodically at any time upon our request, proper
certificate evidencing the existence of the insurance coverage which names us as
a named insured. Such certificate shall state that said policy or policies will
not be canceled or altered without at least twenty (20) days prior written
notice to us and shall reflect proof of payment of premiums. Maintenance of
such insurance and the performance by you of the obligations under this
Paragraph will not relieve you of liability under the indemnity provision set
forth in this Agreement. Minimum limits as required above may be modified from
time to time, as conditions require, by written notice to you and we may require
you to provide periodic proof of payment of premiums.
D. If you, for any reason, do not procure and maintain such insurance
coverage as required by this Agreement, we have the right and authority
(without, however, any obligation to do so) immediately to procure such
insurance coverage and to charge same to you, which charges, together with a
reasonable fee for expenses incurred by us in connection with such procurement,
shall be payable by you immediately upon notice.
XV. COVENANTS
A. Unless otherwise specified, the term "you" as used in this Paragraph
XV shall include, collectively and individually, all officers, directors,
managers, and holders of a beneficial interest of your securities, and of any
corporation directly or indirectly controlling you, if you are a corporation,
the general and limited partners (including any corporation and the officers,
directors, and holders of a beneficial interest of your securities, of a
corporation which controls, directly or indirectly, any general or limited
partner), if you are a partnership, and all members if you are a limited
liability company.
B. You covenant that during the term of this Agreement, except as
otherwise approved in writing by us, you (if you are an individual), a
shareholder of a beneficial interest of ten percent (10%) or more of your
securities (if you are a corporation), a general partner of yours (if you are a
partnership), a member (if you are a limited liability company) or your
full-time manager approved by us shall devote full time, energy and best efforts
to the management and operation of the Franchised Restaurant. At all times
during the term of this Agreement, the on-site day to day management and
operation of the Franchised Restaurant shall be conducted by someone who has
been approved by us and who has satisfactorily completed our training program.
C. You covenant that during the term of this Agreement, except as
otherwise approved in writing by us, you will not, either directly or
indirectly, for yourself, or through, on behalf of, or in conjunction with any
person, persons, partnership, corporation or company:
1. Divert or attempt to divert any business or customer of the
Franchised Restaurant to any competitor, by direct or indirect inducement or
otherwise, or do or perform, directly or indirectly, any other act injurious or
prejudicial to the goodwill associated with the Marks or the System.
2. Employ or seek to employ any person who is at that time
employed by us, our affiliates, or by any other franchisee of ours, or otherwise
directly or indirectly induce or seek to induce such person to leave his or her
employment thereat.
3. Directly or indirectly, for yourself or through, on behalf of,
or in conjunction with any person or entity, own, manage, operate, maintain,
engage in, consult with or have any interest in: a) any restaurant business, b)
any prepared food business, or c) any other business which sells or offers to
dispense prepared food products the same as or similar to the type sold in the
System.
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D. You specifically acknowledge that, pursuant to this Agreement, you
will receive valuable training and confidential information, including, without
limitation, information regarding our promotional, operational, sales and
marketing methods and techniques and the System. Accordingly, you covenant
that, except as otherwise approved in writing by us, you will not, for a period
of two (2) years after the expiration or termination of this Agreement,
regardless of the cause of termination, or within two (2) years of the sale of
the Franchised Restaurant or any interest in you, either directly or indirectly,
for yourself, or through, on behalf of, or in conjunction with any person or
entity, own, manage, operate, maintain, engage in, consult with or have any
interest in: i) any restaurant business, ii) any prepared food business, or iii)
any other business which sells or offers to dispense prepared food products the
same as or similar to the type sold in the System:
1. At the premises of the former Franchised Restaurant;
2. Within a radius of ten (10) miles of the former Franchised
Restaurant; or
3. Within a radius of ten (10) miles of the location of any other
business using the System, whether franchised or owned by us or our affiliates.
E. You will not, at any time during or after the term of this
Agreement, divulge to any person, partnership, corporation or any other entity
any information, trade secrets, the ingredients, recipes, cooking techniques and
processes, used in the Trade Secret Food Products, and other food and beverage
products and Menu Items used in the System or any information stated in the
Manuals.
F. The parties agree that each of the foregoing covenants shall be
construed as independent of any other covenant or provision of this Agreement.
If all or any portion of a covenant in this Paragraph XV is held unreasonable or
unenforceable by a court or agency having valid jurisdiction in an unappealed
final decision to which we are a party, you will be bound by any lesser covenant
subsumed within the terms of such covenant that imposes the maximum duty
permitted by law, as if the resulting covenant were separately stated in and
made a part of this Paragraph XV.
G. You understand and acknowledge that we have the right, in our sole
discretion, to reduce the scope of any covenant set forth in Paragraphs XV.C.
and XV.D. in this Agreement, or any portion thereof, without your consent,
effective immediately upon receipt by you of written notice thereof, and you
shall comply forthwith with any covenant as so modified, which shall be fully
enforceable notwithstanding the provisions of Paragraph XXVI hereof.
H. We have the right to require all of your current and future
shareholders, directors, officers, partners, members, managers and all personnel
performing managerial or supervisory functions and all personnel receiving
training from us to execute similar covenants in a form satisfactory to us.
XVI. DEFAULT AND TERMINATION
A. If you are in substantial compliance with this Agreement and we
materially breach this Agreement and fail to cure such breach within a
reasonable time after written notice thereof is delivered to us, you may
terminate this Agreement. "Reasonable time," as used herein, shall be construed
as allowing us at least thirty (30) days within which to commence curing any
such material breach. Such termination shall be effective thirty (30) days
after delivery to us of written notice that such breach has not been cured and
you elect to terminate this Agreement. An attempted termination of this
Agreement by you except as provided in this Paragraph shall be deemed a
termination without cause and a breach of this Agreement.
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B. This Agreement shall terminate automatically upon delivery of
written notice of termination to you, if you or any shareholder, officer,
partner, member or manager:
1. Fails to satisfactorily complete the training program,
including the opportunity to provide an alternate manager, as provided in
Paragraph IV of this Agreement;
2. Has made any material misrepresentation or omission in your
application for the franchise;
3. Is convicted of or pleads no contest to a felony or other
crime or offense that is likely to adversely affect your reputation, the
Franchised Restaurant, or the goodwill associated with the Marks or System;
4. Makes any unauthorized use, disclosure or duplication of any
portion of the Manuals or duplicates or discloses or makes any unauthorized use
of any trade secret or confidential information provided to you by us;
5. Abandons or fails or refuses to actively operate the
Franchised Restaurant for more than five (5) days in any twelve (12) month
period or for more than two (2) consecutive business days in any twelve (12)
month period, unless the Franchised Restaurant has been closed for a purpose
approved by us or due to force majeure, or fails to relocate to approved
premises within an approved period of time following expiration or termination
of the lease for the premises of the Franchised Restaurant;
6. Surrenders or transfers control of the operation of the
Franchised Restaurant, makes an unauthorized direct or indirect assignment of
the franchise or an ownership interest in you or fails or refuses to assign the
franchise or the interest in you of a deceased or disabled controlling owner
thereof as herein required;
7. Submits to us on five (5) or more separate occasions at any
time during the term of this Agreement or on two (2) or more separate occasions
during any twelve (12) month period any reports or other data, information or
supporting records which understate by more than two percent (2%) the Continuing
Fees for any period of, or periods aggregating, three (3) or more months, and
you are unable to demonstrate that such understatements resulted from
inadvertent error;
8. Commits any affirmative act of insolvency, or files any
petition or action of insolvency, or for appointment of a receiver or trustee,
or makes any assignment for the benefit of creditors, or fails to vacate or
dismiss within sixty (60) days after filing any such proceedings commenced
against you by a third party;
9. Materially misuses or makes an unauthorized use of any Marks
or commits any act which can reasonably be expected to materially impair the
goodwill associated with any Marks;
10. Materially misuses or makes an unauthorized use of our
Proprietary Software Program;
11. Fails on three (3) or more separate occasions within any
period of twelve (12) consecutive months or eight (8) or more separate occasions
at any time during the term of this Agreement to submit when due reports or
other information or supporting records, to pay when due the Continuing Fees,
advertising contributions, amounts due for purchases from us and our affiliates
or other payments due to us and our affiliates, or otherwise fails to comply
with this Agreement, whether or not such failures to comply are corrected;
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12. Continues after written notice from us and/or any governmental
authority to violate any health, safety or sanitation law, ordinance or
regulation or operates the Franchised Restaurant in a manner that presents a
health or safety hazard to your customers or the public;
13. Fails to commence operations within nine (9) months after
execution of this Agreement, or as otherwise required or approved in writing by
us; or
14. Defaults under the lease, if any, for the Franchised
Restaurant.
C. This Agreement shall terminate at our sole option without further
action by us or notice to you if you or your owner:
1. Fails or refuses to make payments of any amounts due to us or
our affiliates for Continuing Fees, advertising contributions, purchases from us
or our affiliates or any other amounts due to us or our affiliates, and does not
correct such failure or refusal within ten (10) days after written notice of
such failure is delivered to you;
2. Fails or refuses to comply with any other provision of this
Agreement, or any mandatory specification, standard or operating procedure
prescribed in the Manuals or otherwise in writing, and does not correct such
failure within thirty (30) days (or provide proof acceptable to us that you have
made all reasonable efforts to correct such failure and will continue to make
all reasonable efforts to cure until a cure is effected if such failure cannot
reasonably be corrected within thirty (30) days) after written notice of such
failure to comply is delivered to you.
3. Fails to devote your best efforts to adequately represent the
Franchised Restaurant in your Designated Area through your sales and service
efforts and does not correct such failure within thirty (30) days (or provide
proof acceptable to us that you have made all reasonable efforts to correct such
failure and will continue to make all reasonable efforts to cure until a cure is
effected if such failure cannot reasonably be corrected within thirty (30) days)
after written notice of such failure to comply is delivered to you.
D. To the extent that the provisions of this Agreement provide for
periods of notice less than those required by applicable law, or provide for
termination, cancellation, non-renewal or the like other than in accordance with
applicable law, such provisions shall, to the extent such are not in accordance
with applicable law, not be effective, and we will comply with applicable law in
connection with each of these matters.
E. In addition to our right to terminate this Agreement, and not in
lieu of such right or any other rights against you, we, in the event that you
have not cured a default under this Agreement within the twenty (20) days after
receipt of a written notice to cure from us, may, at our option, enter upon the
premises of the Franchised Restaurant and exercise complete authority with
respect to the operation of the Franchised Restaurant until such time as we
determine that your default has been cured and that there is compliance with the
requirements of this Agreement. You specifically acknowledge that our
designated representative may take over, control, and operate the Franchised
Restaurant, and that you will pay us a service fee of not less than TWO HUNDRED
Dollars ($200) per day plus all travel expenses, room and board and other
expenses reasonably incurred by such representative so long as it shall be
required by the representative to enforce compliance herewith. You further
acknowledge that if, as herein provided, we temporarily operate for you the
Franchised Restaurant, you will indemnify, defend and hold us harmless and any
representative of ours who may act hereunder, from any and all claims arising
from the operation of the Franchised Restaurant, including without limitation,
acts and omissions of us or our representatives.
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XVII. RIGHTS AND DUTIES OF PARTIES UPON EXPIRATION OR TERMINATION
Upon termination or expiration, this Agreement and all rights granted hereunder
to you will forthwith terminate, and:
A. You will immediately cease to operate the Franchised Restaurant
under this Agreement, and shall not thereafter, directly or indirectly,
represent to the public or hold yourself out as a present or former franchisee
of ours.
B. Upon our demand, you will assign to us your interest in any lease
then in effect for the Franchised Restaurant premises.
C. You will immediately and permanently cease to use, by advertising or
in any manner whatsoever, any confidential methods, procedures, and techniques
associated with the System; the Marks and distinctive forms, slogans, signs,
symbols, logos, or devices associated with the System. In particular, you will
cease to use, without limitation, all signs, advertising materials, stationery,
forms, and any other articles which display the Marks associated with the
System.
D. You will take such action as may be necessary to cancel or assign to
us or our designee, at our option, any assumed name rights or equivalent
registration filed with state, city, or county authorities which contains the
name "Buffalo Wild Wings," "bw-3" or any Mark, and you will furnish us with
evidence satisfactory to us of compliance with this obligation within thirty
(30) days after termination or expiration of this Agreement.
E. You will, in the event you continue to operate or subsequently begin
to operate any other business, not use any reproduction, counterfeit, copy or
colorable imitation of the Marks either in connection with such other business
or the promotion thereof, which is likely to cause confusion, mistake or
deception, or which is likely to dilute our exclusive rights in and to the Marks
and will not utilize any designation of origin or description or representation
which falsely suggests or represents an association or connection with us so as
to constitute unfair competition. You will make such modifications or
alterations to the premises of the Franchised Restaurant (including, without
limitation, the changing of the telephone number) immediately upon termination
or expiration of this Agreement as may be necessary to prevent any association
between us or the System and any business thereon subsequently operated by you
or others, and will make such specific additional changes thereto as we may
reasonably request for that purpose, including, without limitation, removal of
all distinctive physical and structural features identifying the System. In the
event you fail or refuse to comply with the requirements of this Paragraph XVII,
we have the right to enter upon the premises where your Franchised Restaurant
was conducted, without being guilty of trespass or any other tort, for the
purpose of making or causing to be made such changes as may be required at your
expense, which expense you will pay upon demand.
F. You will promptly pay all sums owing to us and our affiliates. In
the event of termination for any default, such sums will include all damages,
costs, and expenses, including reasonable attorneys' fees, incurred by us as a
result of the default.
G. You will pay to us all damages, costs and expenses, including
reasonable attorneys' fees, incurred by us in obtaining injunctive or other
relief for the enforcement of any provisions of this Agreement.
H. You will immediately return to us at your cost all Manuals, our
Proprietary Software Program, customer lists, records, files, instructions,
brochures, agreements, disclosure statements, and any and all other materials
provided by us to you relating to the operation of the Franchised Restaurant
(all of which are acknowledged to be our property).
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I. We will have the right, title and interest to any sign or sign faces
bearing the Marks. You hereby acknowledge our right to access the premises of
the Franchised Restaurant if we elect to take possession of any sign or sign
faces bearing the Marks.
J. You hereby acknowledge that all telephone numbers used in the
operation of the Franchised Restaurant constitute assets of the Franchised
Restaurant; and upon termination or expiration of this Agreement you will
assign to us or our designee, all right, title, and interest in and to your
telephone numbers and will notify the telephone company and all listing agencies
of the termination or expiration of your right to use any telephone number and
any regular, classified or other telephone directory listing associated with the
Marks and to authorize a transfer of same to or at our direction.
K. We will have the right (but not the duty), to be exercised by notice
of intent to do so within sixty (60) days after termination or expiration, to
purchase for cash any or all assets of the Franchised Restaurant, including
leasehold improvements, equipment, supplies, and other inventory, advertising
materials, and all items bearing the Marks, at your cost or fair market value,
whichever is less. You acknowledge that, pursuant to Paragraph XVII.I. of this
Agreement, all signs and sign faces bearing the Marks are specifically excluded
from this provision as such signs and sign faces are deemed to be our property.
If the parties cannot agree on fair market value within a reasonable time, the
determination of fair market value shall be determined by an appraiser selected
by us and you. If you and we cannot agree on a single appraiser, each party
shall select one appraiser, who together will select a third appraiser and the
fair market value will be the average of the three (3) independent appraisers.
Each party will pay their own appraiser and the cost of the third appraiser will
be shared equally by the parties. If we elect to exercise any option to
purchase as herein provided, we have the right to set off all amounts due from
you under this Agreement, if any, against any payment therefor.
L. You will comply with the covenants contained in Paragraph XV of this
Agreement.
XVIII. TRANSFERABILITY OF INTEREST
A. This Agreement and all rights hereunder can be assigned and
transferred by us and, if so, shall be binding upon and inure to the benefit of
our successors and assigns.
B. This Agreement, and your rights and obligations under it, are and
shall remain personal to you. The term "Transfer" shall mean any sale,
assignment, gift, pledge, mortgage or any other encumbrance, transfer by
bankruptcy, transfer by judicial order, merger, consolidation, share exchange,
transfer by operation of law or otherwise, whether direct or indirect, voluntary
or involuntary, of this Agreement or any interest in it, or any rights or
obligations arising under it, or of any material portion of your assets, or of
any interest in you. You (and your shareholders, partners and members) will not
directly or indirectly make a Transfer without our prior written consent. We
will not withhold our consent to a Transfer, subject to all of the following
conditions being satisfied:
1. You are in full compliance with this Agreement, you have no
uncured defaults, all your fees, debts and financial obligations to us, our
affiliates and the Fund are current, and you are current in your required local
advertising expenditures;
2. You execute a written agreement in a form satisfactory to us
in which you and your owners covenant to observe all applicable post-term
obligations and covenants contained in this Agreement;
3. The proposed transferee enters into a written agreement in a
form satisfactory to us assuming and agreeing to discharge all of your
obligations and covenants under this Agreement for the remainder of its term or,
at our option, execute our then-current standard form of franchise agreement
(which
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may provide for different fees, advertising requirements, duration, and other
rights and obligations from those provided in this Agreement);
4. The proposed transferee agrees in writing to perform such
maintenance, remodeling and re-equipping of the Restaurant that we determine
necessary to bring the Restaurant in compliance with our then-current standards;
5. Prior to the date of the proposed Transfer, the proposed
transferee's management team successfully completes such training and
instruction as we deem necessary;
6. We are satisfied that the proposed transferee (and if the
proposed transferee is an entity, all holders of any interest in such entity)
meets all of the requirements for our new franchisees applicable on the date we
receive notice of the proposed transfer and including, but not limited to, good
reputation and character, business experience, restaurant management experience,
and financial strength and liquidity;
7. You and all holders of an interest in you execute a general
release, in the form prescribed by us, releasing, to the fullest extent
permitted by law, all claims that you or any of your investors may have against
us and our affiliates, including our and their respective shareholders,
officers, directors and employees, in both their individual and corporate
capacities;
8. You pay us a transfer fee equal to one-half (1/2) of the
then-current Initial Franchise Fee; and
9. We waive our right of first refusal under Paragraph XX.
C. Application for our consent to a transfer and tender of the right of
first refusal provided for in Paragraph XX, will be accompanied by the documents
(including a copy of the proposed purchase or other transfer agreement) or other
information required by us. Any agreement used in connection with a transfer
including a lease or management agreement, shall be subject to our prior written
approval.
D. In the event you are a corporation, partnership, limited liability
company or other entity, any transfer of stock (or other form of ownership
interest) constituting a controlling interest in you will be subject to the
consent, right of first refusal, transfer fee and all other applicable
provisions of this Agreement. For purposes of this Paragraph XVIII, any change
in the percentage you owned, directly or indirectly, by any person or entity who
directly or indirectly owns an interest in you (including any addition or
deletion of any such person or entity) which results in a change in forty-nine
percent (49%) or more of your ownership or any series of changes in the
percentage you owned, directly or indirectly, by any such person or entity
(including any addition or deletion of any such person or entity) which results
within a period of three (3) years in any change in forty-nine percent (49%) or
more of your ownership shall be deemed a transfer of a controlling interest in
you. Any individual transfer of an interest less than a controlling interest in
you or the Franchised Restaurant must have our prior written consent, which will
not be unreasonably withheld, but will not be subject to our right of first
refusal or the payment of the transfer fee. You will however, reimburse us for
its out-of-pocket expenses incurred in approving the transfers including our
attorneys' fees. Any person who acquires any interest in you, this Agreement or
the Franchised Restaurant must execute the Owner Agreement attached as EXHIBIT A
to this Agreement.
E. You will not, without our prior written consent, place in, on or
upon the location of the Franchised Restaurant, or in any communication media,
any form of advertising, or list with any business, real estate broker, agent,
or attorney any information relating to the sale of the Franchised Restaurant or
the rights granted hereunder.
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XIX. YOUR DEATH OR INCAPACITY
A. In the event of your death or incapacity, or the death or incapacity
of any partner, any shareholder owning fifty percent (50%) or more of your
capital stock, or any Member who owns a majority interest in a limited liability
company, the heirs, beneficiaries, devisees, or legal representatives of said
individual, partner or shareholders shall, within one hundred eighty (180) days
of such event:
1. Apply to us for the right to continue to operate the franchise
for the duration of the term of this Agreement and any renewals hereof, which
right shall be granted upon the fulfillment of all of the conditions set forth
in Paragraph XVIII. of this Agreement (except that no transfer fee shall be
required); or
2. Sell, assign, transfer, or convey your interest in compliance
with the provisions of Paragraphs XVIII and XX of this Agreement; provided,
however, in the event a proper and timely application for the right to continue
to operate has been made and rejected, the one hundred eighty (180) days to
sell, assign, transfer or convey shall be computed from the date of said
rejection. For purposes of this Paragraph, our silence on an application made
pursuant to Paragraph XIX.A.1. through the one hundred and eighty (180) days
following the event of death or incapacity shall be deemed a rejection made on
the last day of such period.
B. In the event of the death or incapacity of an individual franchisee,
or any partner or shareholder of you which is a partnership or corporation,
where the aforesaid provisions of Paragraph XVIII have not been fulfilled within
the time provided, all rights licensed to you under this Agreement shall, at our
option, terminate forthwith and we will have the option to purchase the assets
of the Franchised Restaurant in accordance with Paragraph XVII.K. herein.
XX. RIGHT OF FIRST REFUSAL
If you or your owners propose to sell the Franchised Restaurant (or its
assets) or a controlling interest in the ownership of you as defined in
Paragraph XVIII, you or your owners will obtain and deliver a bona fide,
executed written offer to purchase same to us, which shall, for a period of
thirty (30) days from the date of delivery of such offer to us, have the right,
exercisable by written notice to you or your owners, to purchase the Franchised
Restaurant, (its assets) or an ownership interest in you for the price and on
the terms and conditions contained in such offer, provided that we may
substitute cash for any form of payment proposed in such offer. If we do not
exercise this right of first refusal, you may accept the offer, subject to our
prior written approval, as provided in Paragraph XVIII hereof, provided that if
such offer is not so accepted within six (6) months of the date thereof, we will
again have the right of first refusal herein described.
XXI. OPERATION IN THE EVENT OF ABSENCE, DISABILITY OR DEATH
In order to prevent any interruption of the Franchised Restaurant which
would cause harm to the Franchised Restaurant and thereby depreciate the value
thereof, you authorize us, in the event that you are absent or incapacitated by
reason of illness or death and are not, therefore, in our sole judgment, able to
operate the Franchised Restaurant, to operate the Franchised Restaurant for so
long as we deem necessary and practical, and without waiver of any other rights
or remedies we may have under this Agreement. Provided, however, that we shall
not be obligated to so operate the Franchised Restaurant. All monies from the
operation of the business during such period of operation by us shall be kept in
a separate account and the expenses of the Franchised Restaurant, including
reasonable compensation and expenses for our representative, shall be charged to
said account. If, as herein provided, we temporarily operate for you the
Franchised Restaurant, you will indemnify and hold us harmless and any
representative of ours who may act hereunder, from any and all claims arising
from
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the operation of the Franchised Restaurant, including, without limitation, our
acts and omissions and acts and omissions of our representatives.
XXII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION
A. This Agreement does not make, appoint or constitute you as our
agent, legal representative, joint venturer, partner, employee, or servant for
any purpose whatsoever. You cannot represent to third parties that you are our
agent and it is understood between the parties that you will be an independent
contractor who is in no way authorized to make any contract, agreement, warranty
or representation on our behalf, or to create any obligation, express or
implied, on our behalf. As an independent entrepreneur, you are solely
responsible for the control, management and day-to-day operation of the
Franchised Restaurant, including but not limited to, such matters as determining
the prices at which you will offer and sell approved products and services,
hiring and discharging your employees and setting and paying wages and benefits
of your employees and that we will have no power, responsibility or liability
with respect to such pricing, hiring, discharging, setting and paying of wages
or related matters. All standards of quality and performance, including those
listed in Paragraph XII, are established to promote and protect the value of the
Marks and the System and to insure optimum quality control as to products and
services. You alone are responsible for the food production and preparation at
the Franchised Restaurant.
B. You will prominently display, by posting of a sign within public
view, on or in the premises of the Franchised Restaurant, a statement that
clearly indicates that the Franchised Restaurant is independently owned and
operated by you as a franchisee and not as an agent.
C. You agree to indemnify, defend and hold us and our affiliates
harmless from and against any and all claims, losses, damages and liabilities,
however caused, arising directly or indirectly from, as a result of, or in
connection with, the use and operation of the Franchised Restaurant, as well as
the costs, including attorneys' fees, of defending against them (hereinafter are
"Franchise Claims"). Franchise Claims include, but are not limited to, those
arising from any death, personal injury or property damage (whether caused
wholly or in part through our active or passive negligence), latent, or other
defects in the Franchised Restaurant, or your employment practices. In the
event a Franchise Claim is made against us, we reserve the right in our sole
discretion to select our own legal counsel to represent our interests and you
will reimburse us for our attorneys' fees immediately upon our request as they
are incurred.
XXIII. MISCELLANEOUS
A. Our failure to exercise any power reserved to us hereunder, or to
insist upon strict compliance by you with any obligation or condition hereunder,
and any custom or practice of the parties in variance with the terms hereof,
shall not constitute a waiver of our right to demand exact compliance with the
terms hereof. Our waiver of any default by you shall not be binding unless in
writing and executed by us and shall not affect or impair our right with respect
to any subsequent default of the same or of a different nature.
B. Any and all notices required or permitted under this Agreement shall
be in writing and shall be personally delivered, mailed by certified mail,
return receipt requested, or sent overnight courier to the respective parties at
the following addresses unless and until a different address has been designated
by written notice to the other party:
Notices to Us: bw-3 FRANCHISE SYSTEMS, INC.
1919 Interchange Tower
600 South Highway 169
Minneapolis, Minnesota 55426
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Copy to Mary Beth Brody, Esq.
Fredrikson & Byron, P.A.
1100 International Centre
900 Second Avenue South
Minneapolis, MN 55402
Notices to You: At the address specified on Page 1 of this Agreement.
Copy to:
-------------------------------
-------------------------------
-------------------------------
Any notice by certified mail shall be deemed to have been given at the date and
time of mailing. If you fail to provide us with written notice of alleged
breach of this Agreement or any other legal claims within one (1) year from the
date that you have knowledge of or becomes aware of such breach or grounds for
claim, then the alleged breach or claim shall be deemed waived.
C. In the event either party brings an action to enforce the terms of
this Agreement or to enjoin the violation of any of its terms and prevails, such
party shall be entitled to recover all litigation costs including attorneys'
fees.
D. This Agreement and the Exhibits attached shall be construed together
and constitute the entire, full and complete agreement between the parties
concerning the subject matter hereof, and supersede all prior agreements. No
other representation has induced you to execute this Agreement, and there are no
representations, inducements, promises, or agreements, oral or otherwise,
between the parties not embodied herein, which are of any force or effect with
reference to this Agreement or otherwise. No amendment, change or variance from
this Agreement shall be binding on either party unless executed in writing,
signed by both parties.
E. Each Paragraph, part, term and/or provision of this Agreement shall
be considered severable, and if, for any reason, any Paragraph, part, term
and/or provision herein is determined to be invalid and contrary to, or in
conflict with any existing or future law or regulation, such shall not impair
the operation of or affect the remaining portions, sections, parts, terms and/or
provisions of this Agreement, and the latter will continue to be given full
force and effect and bind the parties hereto; and said invalid sections, parts,
terms and/or provisions shall be reformed to most nearly implement the
intentions of the parties hereto or, if reformation is not possible, be deemed
not part of this Agreement; provided, however, that if we determine that said
finding of illegality adversely affects the basic consideration of this
Agreement, we may, at our option, terminate this Agreement. Anything to the
contrary herein notwithstanding, nothing in this Agreement is intended, nor
shall be deemed, to confer upon any person or legal entity other than you and us
and such of their respective successors and assigns as may be contemplated by
this Agreement, any rights or remedies under or by reason of this Agreement.
XXIV. APPLICABLE LAW
A. THIS AGREEMENT TAKES EFFECT UPON ITS ACCEPTANCE AND EXECUTION BY US,
AND SHALL BE INTERPRETED AND CONSTRUED UNDER THE LAWS OF THE STATE IN WHICH THE
FRANCHISED RESTAURANT IS LOCATED, EXCEPT TO THE EXTENT GOVERNED BY THE UNITED
STATES TRADEMARK ACT OF 1946 (LANHAM ACT, 15, U.S.C. SECTIONS 1051 ET SEQ). YOU
AGREE THAT ANY DISPUTES BETWEEN YOU AND US, bw-3, INC. OR OUR OTHER AFFILIATES
SHALL ALSO BE CONSTRUED UNDER THE LAWS OF THE STATE IN WHICH THE FRANCHISED
RESTAURANT IS LOCATED.
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B. ANY ACTION SOUGHT TO BE BROUGHT BY EITHER PARTY OR ANY ACTION
BROUGHT BY YOU AGAINST OUR PARENT OR OTHER AFFILIATE, SHALL BE BROUGHT IN THE
UNITED STATES DISTRICT COURT OR THE STATE DISTRICT COURT IN THE STATE IN WHICH
OUR COMPANY HEADQUARTERS ARE LOCATED. AS OF THE DATE OF THIS AGREEMENT, THE
LOCATION IS HENNEPIN COUNTY, MINNESOTA. THE PARTIES DO HEREBY WAIVE ALL
QUESTIONS OF PERSONAL JURISDICTION OR VENUE FOR THE PURPOSES OF CARRYING OUT
THIS PROVISION.
C. NO RIGHT OR REMEDY CONFERRED UPON OR RESERVED TO US OR YOU BY THIS
AGREEMENT IS INTENDED TO BE, NOR SHALL BE DEEMED, EXCLUSIVE OF ANY OTHER RIGHT
OR REMEDY HEREIN OR BY LAW OR EQUITY PROVIDED OR PERMITTED, BUT EACH SHALL BE
CUMULATIVE OF EVERY OTHER RIGHT OR REMEDY.
D. NOTHING HEREIN CONTAINED SHALL BAR OUR RIGHT TO OBTAIN INJUNCTIVE
RELIEF AGAINST THREATENED CONDUCT THAT WILL CAUSE US LOSS OR DAMAGES, UNDER THE
USUAL EQUITY RULES, INCLUDING THE APPLICABLE RULES FOR OBTAINING RESTRAINING
ORDERS AND PRELIMINARY INJUNCTIONS.
XXV. DISPUTE RESOLUTION
A. The parties have entered into this Agreement in good faith and in
the belief that it is mutually advantageous to them. It is with that same
spirit of cooperation that they pledge to attempt to resolve any dispute
amicably without the necessity of litigation. Accordingly, they agree that
except as set forth below, if any dispute arises between them relating to this
Agreement that prior to the commencement of any legal action to interpret or
enforce this Agreement, they will first use the procedures specified in this
Section.
B. The party seeking to initiate the procedure shall give written
notice to the other party, describing in general terms the nature of the
dispute, the claim for relief and identifying one or more individuals with
authority to settle the dispute on such party's behalf. The party receiving
such notice shall have ten (10) business days within which to designate by
written notice one or more individuals with authority to settle the dispute on
such party's behalf.
C. The authorized individuals shall be entitled to make such
investigation of the dispute as they deem appropriate, but agree to meet
promptly, and in no event later than thirty (30) days from the date of the
initial written notice, to discuss resolution of the dispute. The authorized
individuals shall meet at such times and places and with such frequency as they
may agree. If the dispute has not been resolved within thirty (30) days from
the date of their initial meeting, the parties shall cease direct negotiations
and shall submit the dispute to mediation in accordance with the following
procedure.
D. The authorized individuals shall have five (5) business days from
the date they cease direct negotiations to submit to each other a written list
of acceptable qualified mediators not affiliated with any of the parties.
Within five (5) days from the date of receipt of such list, the authorized
individuals shall rank the mediators in numerical order of preference and
exchange such rankings. If one or more names are on both lists, the highest
ranking person shall be designated as the mediator. If no mediator has been
selected under this procedure, the parties agree jointly to request the local
administrative judge of the County in which our corporate headquarters are
situated to supply within ten (10) business days a list of potential qualified
mediators. Within five (5) business days of receipt of the list, the parties
shall again rank the proposed mediators in numerical order of preference and
shall simultaneously exchange such lists and shall select as the mediator the
individual
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receiving the highest combined ranking. If such mediator is not available to
serve, they shall proceed to contact the mediator who was next highest in
ranking until they are able to select a mediator.
E. In consultation with the mediator selected, the parties shall
promptly designate a mutually convenient time and place for the mediation, and
unless circumstances require otherwise, such time is to be not later than
forty-five (45) days after selection of the mediator. In the event any party to
this Agreement has substantial need for information in the possession of another
party to this Agreement in order to prepare for the mediation, all parties shall
attempt in good faith to agree on procedures for the expeditious exchange of
such information, with the help of the mediator if required. At least seven (7)
days prior to the first scheduled session of the mediation, each party shall
deliver to the mediator and to the other party a concise written summary of its
views on the matter in dispute, and such other matters required by the mediator.
The mediator may also request that a confidential issue paper be submitted to
him by each party.
F. In the mediation, each party shall be represented by an authorized
individual and may be represented by counsel. In addition, each party may, with
permission of the mediator, bring such additional persons as are needed to
respond to questions, contribute information and participate in the
negotiations.
G. The mediator shall determine the format for the meetings, designed
to assure that both the mediator and the authorized individuals have an
opportunity to hear an oral presentation of each party's views on the matter in
dispute, and that the authorized parties attempt to negotiate a resolution of
the matter in dispute, with or without the assistance of counsel or others, but
with the assistance of the mediator. To this end, the mediator is authorized to
conduct both joint meetings and separate private caucuses with the parties. The
mediation session shall be private. The mediator will keep confidential all
information learned in private caucus with any party unless specifically
authorized by such party to make disclosure of the information to the other
party. The parties agree to sign a document agreeing that the mediator shall be
governed by the provisions of the local Rules of Civil Procedure and such other
rules as the mediator shall prescribe. The parties commit to participate in the
proceedings in good faith with the intention of resolving the dispute, if at all
possible.
H. The parties agree to participate in the mediation procedure to its
conclusion. The mediation shall be terminated (i) by the execution of a
settlement agreement by the parties, (ii) by a declaration of the mediator that
the mediation is terminated, or (iii) by a written declaration of a party to the
effect that the mediation process is terminated at the conclusion of one full
day's mediation session. Even if the mediation is terminated without a
resolution of the dispute, the parties agree not to terminate negotiations and
not to commence any legal action or seek other remedies prior to the expiration
of five (5) days following the mediation. The fees and expenses of the mediator
shall be shared equally by the parties. The mediator shall be disqualified as a
witness, consultant, expert or counsel for any party with respect to the dispute
and any related matters.
I. Mediation is a compromise negotiation for purposes of the Federal
and State Rules of Evidence and constitutes privileged communication. The
entire mediation process is confidential, and no stenographic, visual or audio
record shall be made. All conduct, statements, promises, offers, views and
opinions, whether oral or written, made in the course of the mediation by any
party, by their agents, employees, representatives or other invitees and by the
mediator are confidential and shall, in addition and where appropriate, be
deemed to be privileged. Such conduct, statements, promises, offers, views and
opinions shall not be discoverable or admissible for any purposes, including
impeachment, in any litigation or other proceeding involving the parties, and
shall not be disclosed to anyone not an agent, employee, expert, witness, or
representative of any of the parties; provided however, that evidence otherwise
discoverable or admissible is not excluded from discovery or admission as a
result of its use in the mediation.
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J. Nothing herein contained shall bar our right to seek and obtain
temporary injunctive relief from a court of competent jurisdiction in accordance
with applicable law against any conduct or threatened conduct by you which could
impair the goodwill associated with the Marks.
K. The parties (and their respective owners) agree to waive, to the
fullest extent permitted by law, the right to or claim for any punitive or
exemplary damages against the other and agree that in the event of a dispute
between them, each will be limited to the recovery of actual damages sustained.
XXVI. OWNER AGREEMENT
The franchisee ("you") includes all persons who succeed to the interest
of the original franchisee by permitted transfer or operation of law and shall
be deemed to include not only the individual or entity described in the
introductory paragraph of this Agreement but shall also include all partners if
you are a partnership, all shareholders if you are a corporation and all members
if you are a limited liability company. By their signatures hereto, all of your
officers, partners, members and managers acknowledge and accept the duties and
obligations imposed upon each of them, individually, by the terms of this
Agreement. All partners, all shareholders, or all members, as the case may be,
and your restaurant manager must execute the Owner Agreement attached as EXHIBIT
A and made a part hereof.
XXVII. ACKNOWLEDGEMENTS
A. You acknowledge that the success of the business venture
contemplated to be undertaken by you by virtue of this Agreement is speculative
and depends, to a large extent, upon your ability as an independent
businessperson, and your participation in the daily affairs of the business as
well as other factors. We do not make any representation or warranty, express
or implied, as to the potential success of the business venture contemplated
hereby.
B. You acknowledge that other of our franchisees have been or will be
granted franchises at different times and in different situations, and further
acknowledges that the provisions of such franchises may vary substantially from
those contained in this Agreement.
C. You represent and acknowledge that you have received, read and
understood this Agreement and our Uniform Franchise Offering Circular, and that
we have fully and adequately explained the provisions of each to your
satisfaction, and that we have accorded you ample time and opportunity to
consult with advisors of your own choosing about the potential benefits and
risks of entering into this Agreement.
D. You and each agent signing on your behalf acknowledge that the
officers, partners, members and/or managers who are signing this Agreement on
your behalf are authorized to execute the Agreement and bind you to its terms.
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E. It is contemplated that the parties may execute this Agreement on
different dates. The date of execution and the commencement of the term of this
Agreement shall take place on the date this Agreement is executed by us.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have duly executed and delivered this Agreement in duplicate the day and
year first above written.
FRANCHISOR:
ATTEST: BW-3 FRANCHISE SYSTEMS, INC.
By
------------------------------ ------------------------------------------
Witness
Its
----------------------------------------
FRANCHISEE:
ATTEST:
--------------------------------------------
By
------------------------------ ------------------------------------------
Witness
Its
----------------------------------------
ATTEST:
By
------------------------------ ------------------------------------------
Witness
Its
----------------------------------------
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EXHIBIT A
BUFFALO WILD WINGS
OWNER AGREEMENT
As a condition to the granting by bw-3 Franchise Systems, Inc. ("we" or
"us") of an Area Development Agreement and/or one or more Franchise Agreements
executed (collectively the "Agreements") providing certain rights relating to
Buffalo Wild Wings Restaurants (the "Restaurants") to ________________________
________________ ("Franchisee"), each of the undersigned individuals ("you"),
who constitute each beneficial holder of an interest in the Franchisee,
covenants and agrees to be bound by the terms and restrictions of this Agreement
("Agreement"):
1. ACKNOWLEDGMENTS. Each of you, jointly and severally, represents and
warrants to us:
A. That you are the holders of all equity, voting and other
interests in Franchisee and/or all options, warrants and rights to acquire an
interest in Franchisee and that the address and telephone number set forth next
to your name below are accurate and complete and you will immediately advise us
of any change in the information and we may use or distribute the same as
required by law, including in our Uniform Franchise Offering Circular;
B. That Franchisee is a corporation, limited liability company or
partnership, duly organized, validly existing and in good standing under the
laws of the State of ____________________, and that Franchisee is qualified to
do business in the state where the Restaurant(s) are to be located;
C. It is a condition to the granting of the franchise to
Franchisee that you enter into this Agreement and we have entered into the
Agreements in reliance upon your agreement to do so, and will continue to do so;
D. That, as Franchisee's owners, you have received adequate
consideration to support your execution of this Agreement.
2. CONFIDENTIALITY AND NON-COMPETITION AGREEMENTS.
A. IN TERM COVENANT NOT-TO-COMPETE. Each of you agrees that
during the period Franchisee operates any Buffalo Wild Wings and/or bw-3
Restaurants, or has any beneficial interest therein, or holds any rights to
develop one or more such Restaurants (including all renewal periods) you shall
not directly or indirectly on your own account or as an employee, consultant,
partner, officer, director, shareholder or member of any person, firm, entity,
partnership, corporation or company, own, operate, lease franchise, engage in,
be connected with, have any interest in, or assist any person or entity engaged
in: 1) any restaurant business, 2) any prepared food business, or 3) any other
business which sells prepared food products the same or similar as the type sold
in our System.
B. POST TERM COVENANT NOT-TO-COMPETE. Each of you agrees that
for a two-year period after Franchisee ceases to have any interest in any
Restaurants or any rights to develop Restaurants, regardless of the reasons such
interest ceases or terminates, you will not directly or indirectly on your own
account or as an employee, consultant, partner, officer, director, shareholder
or member of any person, firm, entity, partnership, corporation or company, own
operate, lease franchise, engage in, be connected with, have any interest in, or
assist any person or entity engaged in: 1) any restaurant business, 2) any
prepared food business, or 3) any other business which sells prepared food
products the same or similar as the type sold in our System; which is located at
or within a ten (10) mile radius of your former Franchised Restaurant or any
Buffalo Wild Wings or bw-3 Restaurant.
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C. APPROPRIATION AND DISCLOSURE OF INFORMATION. Except as
permitted under the Agreements, you will not at any time use, copy or duplicate
the System or any aspect thereof, or any of our trade secrets, recipes, methods
of operation, processes, formulas, advertising, marketing, designs, plans,
software, programs, know-how or other proprietary ideas or information, nor will
you convey, divulge, make available or communicate such information to any third
party or assist others in using, copying or duplicating any of the foregoing.
D. INFRINGEMENT; VALIDITY OF MARKS AND COPYRIGHTS; REGISTRATIONS.
You will not at any time commit any act that would infringe upon or impair the
value of the System or the Marks, nor will you engage in any business or market
any product or service under a name, mark, or design that is confusingly or
deceptively similar to any of the Marks. You agree that you will not, at any
time directly or indirectly challenge or contest the validity of, or take any
action to jeopardize our rights in or ownership of, any of the Marks or any
registration of a Mark or any copyrighted work. If you violate this provision,
we shall be entitled to all equitable, monetary, punitive and any other relief
that may be available under applicable law, as well as the recovery of all
costs, expenses and attorneys' fees incurred by us as a result of such
violation.
E. SOLICITATION OF EMPLOYEES. You agree that from and after the
date hereof, you will not solicit, entice, induce to leave employment or hire
directly or indirectly, any person who has been employed by us or by our
affiliates or franchisees within the previous twelve (12) month period.
F. TRADE SECRETS AND CONFIDENTIAL INFORMATION. You understand
and agree that we have disclosed or may disclose to you certain confidential or
proprietary information and trade secrets. Except as necessary in connection
with the operation of the Restaurant and as approved by us, you shall not, at
any time (during or after term), regardless of the cause of termination,
directly or indirectly, use for your own benefit or communicate or divulge to,
or use for the benefit of any other person or entity, any trade secrets,
confidential information, knowledge or know-how concerning the recipes, food
products, advertising, marketing, designs, plans, software, programs or methods
of operation of the Restaurant or the System. You shall disclose to your
employees only such confidential, proprietary or trade secret information as is
necessary to operate your business hereunder and then only while this Agreement
is in effect. Any and all information, knowledge, or know-how, including
without limitation, drawings, materials, equipment, marketing, recipes and other
data, that we designate under the Agreements as secret or confidential shall be
deemed secret and confidential for purposes of this Agreement.
G. REASONABLENESS OF SCOPE AND DURATION. You agree that the
covenants and agreements contained in Section 2 are, taken as a whole,
reasonable with respect to the activities covered and their geographic scope and
duration, and no party shall raise any issue of the reasonableness of the areas,
activities or duration of any such covenants in any proceeding to enforce any
such covenants. Each of you acknowledge and agree that you have other skills
and resources and that the restrictions contained in this Section will not
hinder your activities or ability to make a living either under the Agreement or
in general.
H. ENFORCEABILITY. Each of you agree that we may not be
adequately compensated by damages for a breach of any of the covenants and
agreements contained herein, and that we shall, in addition to all other
remedies, be entitled to injunctive relief and specific performance. The
covenants and agreements contained in this Section 2 shall be construed as
separate covenants and agreements, and if any court shall finally determine that
the restraints provided for in any such covenants and agreements are too broad
as to the area, activity or time covered, said area, activity or time covered
may be reduced to whatever extent the court deems reasonable, and such covenants
and agreements shall be enforced as to such reduced area, activity or time. To
the extent required by the laws of the state in which the Restaurant is located,
the duration or the geographic areas included within the foregoing covenants, or
both, shall be deemed amended in accordance with Section 2.
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3. GUARANTY.
A. GUARANTY. Each of you personally and unconditionally guaranty
to us and to our parent and other affiliates, as well as any of their successors
or assigns, the punctual payment when due of all sums, indebtedness and
liabilities of every kind and nature that Franchisee may now or in the future
owe to any of us (including interest, and all attorneys' fees, costs and
expenses incurred by any of us in collection).
B. COVENANTS AND ACKNOWLEDGMENTS. Each of you covenant and agree
that: (1) liability under this guaranty shall be joint and several; (2) that
this is a guaranty of payment and not of collection and you shall render any
payment required under the Agreements or this guaranty upon demand; (3) this
guaranty shall extend to all amounts you may now or in the future owe to any of
us, whether pursuant to the Agreements, another agreement with us or otherwise;
(4) your liability under this guaranty shall not be contingent or conditioned
upon pursuit by us of any remedies against Franchisee or any of you; (5) your
liability hereunder shall not be diminished, relieved, or otherwise affected by
any extension of time, credit, or other indulgence or waiver that we may from
time to time grant to Franchisee or to any of you, including, without
limitation, the acceptance of partial payment or performance, the compromise or
release of any claims, the release of any other guarantor, or our consent to any
transfer or assignment of the franchise or any interest therein and expressly
reserve all rights that we may have against you.
C. TERM OF GUARANTY. This guaranty and your obligations under it
shall continue in effect so long as you operate any Buffalo Wild Wing Restaurant
or hold any beneficial interest therein and for a one (1) year period
thereafter. Further, this guaranty shall be extended during any period in which
(1) any of us is involved in any judicial or administrative process with
Franchisee or any of you (i) to collect any amounts owed us by you, or (ii) to
enforce the terms of this guaranty, or (2) any bankruptcy or similar proceeding
involving Franchisee or any of you. Your obligations under this guaranty shall
remain in full force and effect without regard to, and shall not be released,
discharged or in any way modified or affected by, any circumstance or condition
of Franchisee (whether or not you shall have any knowledge or notice thereof),
including, without limitation, bankruptcy, insolvency, reorganization,
composition, liquidation or similar proceeding or any action taken by any
trustee or receiver or by any court in any such proceeding.
D. WAIVERS. Each of you waives notice of demand, notice of
protest, nonpayment or default, and all other notices to which Franchisee or you
may be entitled, and all suretyship and guarantor's defenses generally and any
and all other notices and legal or equitable defenses to which you may be
entitled. You waive all exemptions to which you may now or hereafter be
entitled under the laws of this or any other state or of the United States. You
waive any right that you may have to require that an action be brought against
Franchisee or any other payments and claims for reimbursement or subrogation
that you may have against Franchisee arising as a result of your execution and
performance of this guaranty.
E. ASSIGNMENT. This guaranty is personal to you and the
obligations and duties imposed in it may not be delegated or assigned; provided,
this guaranty shall be binding upon your successors, assigns, estates and
personal representatives. This guaranty shall inure to our benefit, and the
benefit of our affiliates, successors and assigns.
F. ENFORCEMENT. If any one or more provisions in this guaranty
shall for any reason be held to be invalid, illegal, or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision hereof and this guaranty shall be construed to bind you to the
maximum extent permitted by law that is subsumed within the terms of such
provision as though it were separately articulated herein.
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4. COVENANT NOT TO TRANSFER INTERESTS. The Agreements, and your rights
and obligations under them, are and shall remain personal to you. Any proposed
transfer by you (regardless of the form of transfer) shall be subject to the
same terms and conditions contained in the Franchise Agreement. As used herein,
the term "Transfer" shall mean any sale, assignment, gift, pledge, mortgage or
any other encumbrance, transfer by bankruptcy, transfer by judicial order,
merger, consolidation, share exchange, transfer by operation of law or
otherwise, whether direct or indirect, voluntary or involuntary, of the
Agreements or any interest in any of them or any rights or obligations arising
under them, or of any material portion of the business assets, or of any
interest in the Franchisee. Each of you agree and covenant that you will not at
any time during which Franchisee is a Buffalo Wild Wings/bw-3 franchisee and/or
developer, directly or indirectly, voluntarily or involuntarily, make any
Transfer, unless you first obtain our written approval in compliance with the
same provisions applicable to a transfer by you as set forth in the Agreements.
You shall cause all stock certificates (or other documents evidencing an
interest or right to acquire an interest) issued by Franchisee to bear a legend
indicating that such stock (or other documents) is subject to the restrictions
provided for in the applicable Agreement.
5. MISCELLANEOUS.
A. CAPITALIZED TERMS. For purposes of this Agreement, all
capitalized terms shall have the same meaning as those terms are defined in the
Franchise Agreement.
B. DISPUTES. Disputes under this Agreement shall be resolved in
the same manner as provided under the Franchise Agreement. You expressly
acknowledge that the provisions of the Franchise Agreement pertaining to
mediation, venue, applicable law, time periods and limitations govern any
disputes between us and you.
IN WITNESS WHEREOF, each of you have signed this Agreement on the date
set forth opposite your signature.
Signature: Date:
-------------------------- -------------------
Name:
-------------------------------
Address:
----------------------------
------------------------------------
------------------------------------
Percentage Interest:
----------
Signature: Date:
-------------------------- -------------------
Name:
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Address:
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Percentage Interest:
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Signature: Date:
-------------------------- -------------------
Name:
-------------------------------
Address:
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Percentage Interest:
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Signature: Date:
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<PAGE>
Name:
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Address:
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Percentage Interest:
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Signature: Date:
-------------------------- -------------------
Name:
-------------------------------
Address:
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Percentage Interest:
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TO BE COMPLETED IF MANAGER IS NOT AN OWNER.
I represent and acknowledge that I am the Manager of a Restaurant and that I
agree to be bound by the provisions of Section 2 of this Agreement.
MANAGER
Signature: Date:
-------------------------- -------------------
Name:
-------------------------------
Address:
----------------------------
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------------------------------------
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<PAGE>
EXHIBIT B
DESCRIPTION OF DESIGNATED AREA
FRANCHISOR: FRANCHISEE:
BW-3 FRANCHISE SYSTEMS, INC.
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By By
---------------------------------- ----------------------------------
Its Its
----------------------------- ------------------------------
By
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Its
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<PAGE>
EXHIBIT C
ADDENDUM TO LEASE
THIS ADDENDUM TO LEASE, dated ______________, 199__, is entered into by
and between _______________________("Lessor"), and __________________________
("Lessee").
RECITALS:
A. The parties hereto have entered into a certain Lease Agreement,
dated _____________, 199__, and pertaining to the premises located at _________
__________________________________ (the "Lease").
B. Lessor acknowledges that Lessee intends to operate a Restaurant from
the leased premises (the "Premises") pursuant to a Franchise Agreement (the
"Franchise Agreement") with bw-3 Franchise Systems, Inc. ("bw-3") under the name
"Buffalo Wild Wings" or other name designated by bw-3 ("Franchised Restaurant").
C. The parties now desire to amend the Lease in accordance with the
terms and conditions contained herein.
AGREEMENT:
NOW, THEREFORE, it is hereby mutually covenanted and agreed between
Lessor and Lessee as follows:
1. REMODELING AND DECOR. Lessor agrees that Lessee shall have the
right to remodel, equip, paint and decorate the interior of the Premises and to
display such proprietary marks and signs on the interior and exterior of the
Premises as Lessee is reasonably required to do pursuant to the Franchise
Agreement and any successor Franchise Agreement under which Lessee may operate a
Franchised Restaurant on the Premises.
2. ASSIGNMENT. Lessee shall have the right to assign all of its right,
title and interest in the Lease to bw-3 or any affiliate of bw-3 at any time
during the term of the Lease, including any extensions or renewals thereof,
without first obtaining Lessor's consent. However, no assignment shall be
effective until such time as bw-3 or its designated affiliate gives Lessor
written notice of its acceptance of such assignment, and nothing contained
herein or in any other document shall constitute bw-3 or its designated
affiliate a party to the Lease, or guarantor thereof, and shall not create any
liability or obligation of bw-3 or any affiliate of bw-3 unless and until the
Lease is assigned to, and accepted in writing by, bw-3 or its designated
affiliate. In the event of an assignment, Lessee shall remain liable under the
terms of the Lease.
3. DEFAULT AND NOTICE.
(a) In the event there is a default or violation by Lessee under
the terms of the Lease, Lessor shall give Lessee and bw-3 written notice
of such default or violation within a reasonable time after Lessor
receives knowledge of its occurrence. bw-3 will notify Lessor whether it
intends to cure the default and take an automatic assignment of Lessee's
interest as provided in Paragraph 4(a). bw-3 will have an additional
fifteen (15) days in which to cure the default or violation.
(b) All notices to bw-3 shall be sent by registered or certified
mail, postage prepaid, to the following address:
bw-3 Franchise Systems, Inc.
1919 Interchange Tower
600 South Highway 169
Minneapolis, MN 55426
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<PAGE>
Attention: Chief Financial Officer
bw-3 may change its address for receiving notices by giving Lessor written
notice of such new address. Lessor agrees that it will notify both Lessee and
bw-3 of any change in Lessor's mailing address to which notices should be sent.
4. TERMINATION OR EXPIRATION.
(a) Upon the expiration or termination of either the Lease or the
Franchise Agreement, bw-3 will, at its option, have the right (but not
the requirement) to take an automatic assignment of Lessee's interest.
(b) Upon the expiration or termination of either the Lease or the
Franchise Agreement, Landlord will cooperate with and assist us in
gaining possession of premises and if bw-3 does not elect to take an
assignment of the Lessee's interest, Lessor will allow bw-3 to enter the
Premises, without being guilty of trespass and without incurring any
liability to Lessor, to remove all signs, awnings, and all other items
identifying the Premises as a Franchised Restaurant and to make such
other modifications (such as repainting) as are reasonably necessary to
protect the bw-3 marks and system, and to distinguish the Premises from
Franchised Restaurants. In the event bw-3 exercises its option to
purchase assets of Lessee, Lessor shall permit bw-3 to remove all such
assets being purchased by bw-3.
5. CONSIDERATION; NO LIABILITY.
(a) Lessor hereby acknowledges that the provisions of this
Addendum to Lease are required pursuant to the Franchise Agreement under
which Lessee plans to operate its business and the Lessee would not lease
the Premises without this Addendum.
(b) Lessor further acknowledges that Lessee is not an agent or
employee of bw-3 and the Lessee has no authority or power to act for, or
to create any liability on behalf of, or to in any way bind bw-3 or any
affiliate of bw-3, and that Lessor has entered into this Addendum to
Lease with full understanding that it creates no duties, obligations or
liabilities of or against bw-3 or any affiliate of bw-3.
6. SALES REPORTS. If requested by bw-3, Lessor will provide bw-3 with
whatever information Lessor has regarding Lessee's sales from the Restaurant.
7. AMENDMENTS. No amendment or variation of the terms of this Addendum
to the Lease shall be valid unless made in writing and signed by the parties
hereto.
8. REAFFIRMATION OF LEASE. Except as amended or modified herein, all
of the terms, conditions and covenants of the Lease shall remain in full force
and effect and are incorporated herein by reference and made a part hereof as
though copied herein in full.
9. BENEFICIARY. Lessor and Lessee expressly agree that bw-3 is a third
party beneficiary of this Addendum.
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<PAGE>
IN TESTIMONY WHEREOF, witness the signatures of the parties hereto as of
the day, month and year first written above.
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By:
-----------------------------------
Title:
-----------------------------------
("Lessor")
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By:
-----------------------------------
Title:
-----------------------------------
("Lessee")
41