Successor Franchise Agreement [Addendum] - Burger King Corp.
EARLY SUCCESSOR INCENTIVE PROGRAM (FISCAL 2000)
ADDENDUM TO SUCCESSOR FRANCHISE AGREEMENT
This Addendum (the "PROGRAM ADDENDUM") to the BURGER KING(R) Successor
Franchise Agreement (Entity) is made and entered into as of the ___ day of
____________, 2000 by and among Burger King Corporation, a Florida corporation
("BKC"), ______________________________, a ___________________________ [state
and form of organization, e.g., corporation/limited liability company/limited
partnership] ("FRANCHISEE"), and ____________________________________________
(collectively, the "OWNERS").
1. BACKGROUND AND PURPOSE OF PROGRAM ADDENDUM; ACKNOWLEDGMENTS.
1.1 PRIOR AGREEMENT AND SUCCESSOR CONDITIONS.
1.1.1 PARTIES TO PRIOR AGREEMENTS. BKC and Franchisee
were parties to a franchise agreement (the "PRIOR FRANCHISE AGREEMENT") for the
operation by Franchisee of the BURGER KING restaurant commonly known as "BK
#______" (the "RESTAURANT") Owners own all or some of the equity interests in
FRANCHISEE and guaranteed and are jointly and severally responsible for the
obligations of FRANCHISEE under the Prior Franchise Agreement.
1.1.2 EXPIRATION DATE OF PRIOR FRANCHISE AGREEMENT.
The term of the Prior Franchise Agreement was to expire on __________________,
_____ (the "FORMER EXPIRATION DATE"), as provided therein.
1.1.3 REMODELING CONDITION TO SUCCESSOR FRANCHISE.
Franchisee acknowledges that under the Prior Franchise Agreement, to the extent
that Franchisee had any right to a successor franchise upon the expiration of
the term, such right was subject to the satisfaction by Franchisee of various
conditions, including without limitation that, as a precondition to the grant of
any such successor franchise, Franchisee would be required to complete
improvements, alterations, and remodeling or rebuilding of the interior and
exterior of the Restaurant as required by BKC in accordance with BKC's
then-current image requirements.
1.2 THE EARLY SUCCESSOR INCENTIVE PROGRAM. BKC has
adopted a limited-term program to encourage eligible franchisees to remodel
their BURGER KING restaurants before they would otherwise be required to do so.
That program, known as the "EARLY SUCCESSOR INCENTIVE PROGRAM" and referred to
as the "PROGRAM," is described in BKC's current Uniform Franchise Offering
Circular ("UFOC"), a copy of which has been furnished to Franchisee. Franchisees
who meet all of the conditions for participation in the Program have an
opportunity to execute a successor franchise agreement for the franchised
restaurant before the expiration of the term of the existing franchise
agreement, and before the completion of remodeling normally required before the
execution of a successor franchise agreement, with the requirement that the
franchisee complete certain remodeling and restaurant improvement requirements
by a firm deadline. Any potential benefits to be derived from the Program by a
franchisee are strictly conditioned upon the franchisee's completion of the
required remodeling in its entirety by the deadline, and the franchisee's
failure to do so has adverse consequences for the franchisee.
1.3 FRANCHISEE ACKNOWLEDGMENT. Franchisee has reviewed
the description of the Program in BKC's UFOC. Franchisee has had an opportunity
to consider the risks and potential benefits of the Program and to consult with
Franchisee's business and professional advisors about the Program before
executing this Program Addendum. Franchisee is executing the Franchise and this
Program Addendum with full understanding and acceptance of the risks and
potential benefits to Franchisee of participating in the Program pursuant to
this Program Addendum.
1.4 EXECUTION OF FRANCHISE AGREEMENT; BKC'S RELIANCE.
Concurrently with the
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execution of this Addendum, Franchisee and BKC are entering into a Successor
Franchise Agreement (the "FRANCHISE AGREEMENT") for the Restaurant, and the
Owners are executing and delivering to BKC an Owner's Guaranty pursuant to which
they guarantee all of Franchisee's obligations to BKC under the Franchise
Agreement. The Franchise Agreement replaces and supersedes the Prior Franchise
Agreement, which is being terminated concurrently with the execution of the
Franchise Agreement and this Program Addendum. Franchisee and the Owners
acknowledge and agree that BKC is entering into the Franchise Agreement in
reliance on the terms and conditions set forth in this Program Addendum, and
that BKC has no obligation to enter into the Franchise and is doing so only in
consideration of Franchisee's agreements set forth in this Program Addendum.
2. FRANCHISEE'S REMODELING OBLIGATIONS; COMPLETION BY DEADLINE IS
CRITICAL.
2.1 REMODELING REQUIREMENTS. Franchisee shall renovate,
repair, replace, remodel and/or rebuild the Restaurant interior and exterior and
complete all such other work as is specified (a) in the scope of work attached
hereto as EXHIBIT "A" (the "REMODELING REQUIREMENTS") and (b) if the Restaurant
now has a drive-thru window or is to be remodeled to include a drive-thru
window, in the "Drive-Thru Requirements" to be communicated to Franchisee by BKC
as described in Subparagraph 2.2. Before beginning the work on the Remodeling
Requirements, Franchisee shall submit a complete set of construction plans to
BKC for its review, and shall obtain BKC's written approval of such plans. Any
such approval by BKC is for BKC's own internal purposes, and does not constitute
a representation or warranty that the remodeling or rebuilding completed in
accordance with such plans will meet any governmental standards or requirements,
including those described in Paragraph 2.3.
2.2 DRIVE-THRU REQUIREMENTS. BKC is currently testing a
package of equipment and fixtures intended to improve the experience of
drive-thru customers at BURGER KING restaurants and sometimes referred to as the
"Drive-Thru 2000 Package." BKC expects to finalize specifications and standards
for the Drive-Thru 2000 Package later in 2000 and will communicate those
specifications and standards (the "DRIVE-THRU REQUIREMENTS") to Franchisee.
2.3 STANDARDS AND OTHER REQUIREMENTS. The Remodeling
Requirements and the Drive-Thru Requirements (which may be referred to
collectively as the "ESIP Work") shall be performed in a good and workmanlike
manner in accordance with (a) existing BKC standards or, if no such standards
exist, then such building plans and specifications as are approved in advance by
BKC in its sole and reasonable discretion and in writing, and (b) all applicable
laws, regulations, ordinances and permits issued by any applicable governmental
body, including, without limitation, the Americans with Disabilities Act. As
part of the ESIP Work, Franchisee agrees to use only such equipment,
furnishings, signs and other materials that meet the then current criteria,
specifications and performance standards established by BKC for the BURGER KING
System. Franchisee shall be responsible for obtaining all necessary approvals
and consents from BKC, governmental agencies and others to effect the completion
of the ESIP Work in accordance with the requirements of this Program Addendum.
Franchisee shall be solely responsible for the payment of all costs, expenses
and fees associated with the completion of the ESIP Work, as well as any
increase in rent, real estate taxes or assessments levied, certified and/or
pending against the Restaurant or the Premises.
2.4 DEADLINE FOR COMPLETION; TIME OF THE ESSENCE.
Franchisee must complete the ESIP Work in accordance with this Program Addendum
and in its entirety, as determined by BKC, on or before December 31, 2001 (the
"COMPLETION DEADLINE"). TIME IS OF THE ESSENCE. Neither partial (even if
substantial) performance of the ESIP Work by the Completion Deadline nor full
completion of the ESIP Work by a later date shall be deemed to satisfy
Franchisee's obligation under this Program Addendum, subject to the provisions
of Paragraph 7.
2.5 INSPECTION AND NOTICE BY BKC. BKC shall inspect the
Restaurant after the Completion Deadline to determine whether Franchisee has
completed the ESIP Work in its entirety. If BKC determines that Franchisee has
not completed the ESIP Work by the Completion Deadline, BKC shall notify
Franchisee in writing of such determination by March 31, 2002.
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2.6 FAILURE TO COMPLETE ESIP WORK BY DEADLINE. If, in
accordance with Subparagraph 2.5, BKC determines that the Franchisee has not
completed the ESIP Work by the Completion Deadline and notifies Franchisee of
such determination, the provisions of this Subparagraph shall apply. In such
event, the term of the Franchise Agreement shall expire on the Initial
Expiration Date as provided in Subparagraph 3.1, and shall not be extended to
the Projected Expiration Date pursuant to Subparagraph 3.2 Moreover, Franchisee
shall not be eligible for the Royalty Reduction pursuant to Paragraph 6. In
addition, Franchisee shall be subject to the provisions of the Prior Franchise
Agreement relating to Franchisee's obligations to improve, alter and remodel the
Restaurant during the term to reflect the current image for BURGER KING
restaurants as changed from time to time by BKC. If the form of the Prior
Franchise Agreement states that the exterior of the Restaurant is to be
remodeled during a specific year of the term (that is, it is a "Project
Jennifer" form), then Franchisee shall be required to complete such exterior
remodeling during such year (if any) as specified in the Prior Franchise
Agreement. If the form of the Prior Franchise Agreement does not provide for
remodeling of the Restaurant exterior during a particular year (that is, it is a
"non-Jennifer" form), then Franchisee shall be subject to the requirements of
the Prior Franchise Agreement as to required improvement, remodeling and
alteration of the Restaurant. If the Prior Franchise Agreement is a
"non-Jennifer" form, Franchisee acknowledges receipt of BKC's general
communication that it will require remodeling of restaurants under that form of
agreement to be completed during the year ending June 30, 2003.
3. TERM OF FRANCHISE AGREEMENT. The term of the Franchise
Agreement shall begin on the date of this Program Addendum. The ultimate
expiration date of the Franchise Agreement shall depend on whether Franchisee
completes the ESIP Work by the Completion Deadline, as set forth in this
paragraph.
3.1 ASSURED TERM. The initial expiration date of the
Franchise Agreement (the "INITIAL EXPIRATION DATE") shall be the later of (a)
the Former Expiration Date (as set forth in Subparagraph 1.1.2 above), and (b)
June 30, 2002.
3.2 PROJECTED TERM. Provided that Franchisee completes
the ESIP Work in its entirety by the Completion Deadline, as determined by BKC,
the term of the Franchise Agreement shall be extended, automatically and without
further notice or action on the part of BKC or the Franchisee, to expire on , 20
(the "PROJECTED EXPIRATION DATE").
3.3 ACKNOWLEDGMENT OF CONDITION TO SUCCESSOR UPON
EXPIRATION OF TERM. Franchisee acknowledges and agrees that upon the expiration
of the Franchise Agreement, whether upon the Initial Expiration Date or the
Projected Expiration Date, Franchisee shall have no right to a further successor
franchise except upon satisfaction of the conditions set forth in the Franchise
Agreement. Without limiting the foregoing, Franchisee acknowledges and agrees
that Franchisee shall be required (a) to reestablish that it satisfies the
conditions for the grant of a successor franchise, including without limitation
the submission of a successor franchise application and the delivery of a
general release of BKC, and (b) to pay the then-current successor franchise fee
charged by BKC, without any credit against said fee based on the payment of the
Program franchise fee under the Franchise Agreement and this Program Addendum.
4. PROGRAM FRANCHISE FEE. Concurrently with the execution of the
Franchise Agreement and this Program Addendum, and in consideration of the
rights granted to Franchise thereby, and not for any future services to be
provided by BKC, Franchisee has paid to BKC a Program franchise fee in the
amount of $__________. Such fee shall be fully earned by BKC and nonrefundable
upon its acceptance and execution of the Franchise Agreement and this Program
Addendum. FRANCHISEE ACKNOWLEDGES AND AGREES THAT THE AMOUNT OF THE PROGRAM
FRANCHISE FEE HAS BEEN DETERMINED BASED ON THE ASSUMPTION THAT THE FRANCHISE
AGREEMENT WILL EXPIRE ON THE PROJECTED EXPIRATION DATE, AND THAT FRANCHISEE
SHALL NOT BE ENTITLED TO ANY TYPE OF CREDIT, REFUND OR ADJUSTMENT IF THE
FRANCHISE AGREEMENT EXPIRES ON THE INITIAL EXPIRATION DATE AND IS NOT EXTENDED
AS PROVIDED IN THIS PROGRAM ADDENDUM.
5. ROYALTIES PAYABLE DURING THE TERM. During the term of the
Franchise Agreement,
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Franchisee agrees to pay to BKC, for the use of the BURGER KING System and the
BURGER KING Marks during the term of the Franchise Agreement, a royalty
("ROYALTY") equal to a percentage of Gross Sales. Royalties shall be paid
monthly by the tenth (10th) day of each month based upon Gross Sales for the
preceding month. EXCEPT AS SET FORTH IN PARAGRAPH 6 WITH RESPECT TO THE ROYALTY
REDUCTION FOR THE ROYALTY REDUCTION PERIOD, the Royalty payable by Franchisee
shall be as follows:
5.1 Through the Initial Expiration Date, Franchisee shall
pay Royalties equal to 3.5% of Gross Sales.
5.2 After the Initial Expiration Date and for the balance
of the term of the Franchise Agreement (provided that the Franchise Agreement
has been extended for the Projected Term pursuant to Subparagraph 3.2), and
subject to the provisions of Paragraph 6 below, Franchisee shall pay BKC
Royalties equal to 4.5% of Gross Sales.
6. ROYALTY REDUCTION. Provided that BKC determines that
Franchisee has completed the ESIP Work in its entirety by the Completion
Deadline, then notwithstanding the provisions of Paragraph 5, Franchisee shall
be entitled to pay Royalties at the reduced rate of 2.75% of gross sales (the
"ROYALTY REDUCTION") for a period of sixty (60) months beginning April 1, 2002
and ending March 31, 2007 (the "ROYALTY REDUCTION PERIOD").
7. ACTS OF GOD/FORCE MAJEURE. Notwithstanding the other
provisions of this Program Addendum, if Franchisee is prevented from completing
the ESIP Work by the Completion Deadline by any act of God, labor strike, civil
unrest, or similar cause, Franchisee must promptly notify BKC in writing of such
event. Together with such notice, Franchisee must provide BKC with all relevant
information about the effect of such event on Franchisee's ability to complete
the ESIP Work and advise BKC of the expected delay in completion as a result of
such event. After reviewing the facts, BKC will notify the Franchisee in writing
of its decision regarding a reasonable extension of the Completion Deadline, but
in no event shall BKC be required to provide an extension of more than six
months. Delays that may be anticipated to arise in the course of restaurant
remodeling or rebuilding, including without limitation delays in obtaining
permits or zoning variances, shall not be considered cause for extension of the
Completion Deadline.
8. ENTIRE AGREEMENT. Section 21.J. of the Franchise Agreement,
captioned "Entire Agreement," is amended to read in its entirety as follows:
This Agreement, together with the Successor Franchise
Addendum, the Early Successor Incentive Program
Addendum to Successor Franchise Agreement, [THE STATE
ADDENDUM TO THIS AGREEMENT, THE NON-TRADITIONAL
FACILITY ADDENDUM,] the Franchise Application and the
Distribution Plan and Guarantee, Indemnification and
Acknowledgment executed by Owners, submitted by
FRANCHISEE to BKC and upon all of which BKC is
relying in granting this franchise, constitute the
entire agreement of the parties, and supersede all
prior agreements, negotiations, commitments,
representations and undertakings of the parties, with
respect to the subject matter of this Agreement.
9. MISCELLANEOUS.
9.1 EXECUTION IN COUNTERPARTS. This Program Addendum may
be executed in one or more counterparts, each of which shall be deemed to be the
same document.
9.2 CONSTRUCTION. All capitalized terms not specifically
defined in this Program Addendum shall have the meanings defined for such terms
in the Franchise Agreement. The captions in this Program Addendum are for
convenience only and do not construe or modify its provisions. The background
paragraphs are terms of this Program Addendum. In the event of a conflict
between the
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terms of the Franchise Agreement [or the Extended Lease], including any other
addendum thereto, and the terms of this Program Addendum, the terms of this
Program Addendum shall govern.
9.3 NO OTHER MODIFICATIONS. Except as specifically
amended hereby, all of the other terms and conditions of the Franchise Agreement
remain the same.
IN WITNESS WHEREOF, the parties have executed this Program Addendum as
of the day and year first above set forth.
BURGER KING CORPORATION
By:_________________________________________
Franchise Systems Supervisor
Attest:_____________________________________
Franchise Associate
FRANCHISEE
(Entity Name)
a * corporation/limited
partnership/limited liability company
By:_________________________________________
*, Managing Owner/Member
Attest:_____________________________________
Print Name:_________________________
Title:______________________________
WITNESS OWNERS
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
__________________________________ __________________________________
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