"DAIRY QUEEN" OPERATING AGREEMENT
This Agreement entered into this 30th day of October, 1985, by and between
Interstate Dairy Queen Corporation of the city of Atlanta, county of Dekalb, and
state of Georgia, herinafter referred to as "Licensor" and ▇▇▇▇▇▇▇ Investments
of the city of Albuquerque county of Bernalillo, and State of New Mexico herein
after referred to as "Licensee":
WHEREAS, Licensor is the exclusive licensee of American Dairy. Queen
Corporation in certain geographical areas including the territory hereinafter
defined of the right to use, license and permit others to use the "Dairy Queen"
trademark, service ▇▇▇▇ and trade name which has been registered in the United
States Patent Office, in each state of the union and in foreign countries as
well as those trademarks and service marks (hereinafter collectively referred to
as "Trademarks"), a list of which is attached hereto and made a part hereof as
Appendix A; and
WHEREAS, Licensor and its predecessors in interest acting under said
exclusive license instituted, developed, promoted, and established the "Dairy
Queen" franchise business and system in the aforesaid territory which consists
of the sale of dairy products, food products, beverages and other products and
services under said trademarks and utilizing in connection therewith certain
types of facilities, equipment, supplies, ingredients, merchandising and
business techniques and methods together with advertising and promotion programs
developed from time to time; and
WHEREAS, it is the purpose of Licensor to provide to Licensee in a
retail store outlet an organization to control and make uniform the operation of
facilities and equipment together with the quality of products, the use and
protection of the trademarks and-to make available uniform and approved
equipment, supplies, ingredients, merchandising and business techniques and the
advertising and promotional programs of American Dairy Queen Corporation, and
WHEREAS, Licensee desires to engage in the "Dairy Queen" business and
system and to enter into this operating Agreement subject to the conditions and
controls herein prescribed for the purpose
of offering to the public products and services of uniformly high quality and
standards to the end of protecting the interests of Licensee, of Licensor, of
American Dairy Queen Corporation and all other persons engaged in said business.
WHEREAS, it is the intent of both Licensor and Licensee to preserve
within the context of a "Dairy Queen" retail store continuing consumer
confidence in the reliability and quality of all products sold under any of the
Trademarks, and, each party desires that all products sold under any of the
Trademarks, consistently conform to the highest expectations of consumers of
such products, and, whereas, by this Agreement the parties contemplate that
Licensee's store, in addition to the normal "Dairy Queen" food and beverage
products may also sell Permitted Products, as defined hereinafter.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the grant by Licensor of this Operating Agreement and the
payment by Licensee of the participation fees provided in Paragraph 9 hereof, it
is agreed by and between the parties hereto as follows:
GRANT OF LICENSE
Licensor's 1. Licensor hereby grants to Licensee, subject to all the
Grant to terms, conditions and provisions hereof, the right and
License license to:
1.1 Establish and operate a retail store under the name
"Dairy Queen" at I-40and Rio Puerco (exit 140)
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
hereinafter referred to as the "Authorized
Location" (provided, however, in the event an
Authorized Location is not designated on the date
hereof, and such location is not designated herein
by Licensor within ninety (90) days after such
date, this Agreement shall become null and void and
all deposit is including the franchise fee shall be
returned to Licensee).
1.2 Use at the Authorized Location the trademark on and
in association with sale of all uniform and
approved products and services as American may
authorize from time to time, with all approved
sales promotion programs relative thereto.
1.3 Use at the Authorized Location the on and in
association with the uniform equipment, supplies,
and ingredients for the products approved by
American.
1.4 Employ in the business of said store the
merchandising, advertising, promotion and business
methods and techniques developed, adopted and
approved by American.
Acceptance 2. Licensee hereby accepts the above license from
by Licensee Licensor subject to all the terms, by Licensee
provisions
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and conditions hereof and agrees that Licensee shall
cause to have a "Dairy Queen" store established within
180 days of the date hereof (unless an extension of
time is expressly authorized in writing by Licensor),
and thereafter maintained and operated at the
Authorized Location, under Licencee's active and
continuous supervision and management and upon the
standards hereinafter provided. Licensee further
expressly acknowledges and agrees:
2.1 American is the owner of all right, title and
interest in and to the trademark, and the good will
attributable thereto of the business in connection
with which said Trademarks have been, and are and
will be used at the Authorized Location. Licensor
is the licensee of the right to use the Trademarks
in the territory which includes the Authorized
Location. Specifically, but without limiting the
foregoing, Licensee disclaims any and all right,
title and interest in or to the Trademarks and to
the good will associated with the Trademarks of the
"Dairy Queen" retail store at the Authorized
Location and acknowledges and agrees that all such
good will is the exclusive property of American.
2.2 The trademarks are valuable property rights owned
by American.
2.3 The trademarks shall be used only in connection
with such products and services as may be approved
or specified by American and shall at all times be
used only in a manner approved by American.
2.4 Licensee's rights to the use of trademarks is
specifically limited to Licensee's retail store
operation at Authorized Location.
2.5 Licensee shall use no other trademarks, trade names
or service marks in said business except those
authorized by American and as set forth in Appendix
A except by the prior written consent of American.
2.6 Licensee shall not use the words "Dairy Queen" as a
part of its corporate or business name unless first
approved in writing by American, and shall use only
the word "Dairy Queen" (and no other words
whatsoever) as the trade name on the store from
which the said products and services are sold. In
the event American does approve the use of the
words "Dairy Queen", or any of the Trademarks, as a
part of Licensee's corporate or business name
Licensee shall cause such name to be changed so as
to eliminate those works and Trademarks from the
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name within thirty (30) days after termination of
this Agreement.
2.7 Licensee shall adopt and follow in good faith the
systems, programs and methods prescribed by
Licensor for Licensee's retail operation in
accordance with this Operating Agreement.
2.8 Neither Licensee nor any person owning an interest
directly or indirectly in Licensee shall directly
or indirectly operate or permit to be operated or
hold any interest (other then 1% or less of any
outstanding stock or debt of any class of any
public company) in any restaurant or fast-food
business other than a Stuckey's Pecan Shoppe or its
affiliates at the time of signing or one authorized
by this Agreement without the prior written consent
of Licensor.
TERM
Term 3. The License granted herein shall continue until
terminated by Licensee, with or without cause, on
sixty (60) days prior written notice to Licensor, or
until otherwise terminated by either Licensee or
Licensor in accordance with the provisions of this
Agreement.
TRADEMARK STANDARDS AND REQUIREMENTS
General 4. Licensee agrees that nothing in this agreement gives
Declarations him the right to use the Trademarks except the right
to use the same under the terms and conditions of this
Agreement and that Licensee's use there of injures to
the benefit of American. Specifically, but without
limiting the foregoing, Licensee acknowledges and
agrees that American has the right and may distribute
for its own account products identified by the
Trademarks through not only "Dairy Queen" retail
stores but through any other distribution method which
may from time to time be established.
Use of 4.1 Licensee shall confine his use the trademarks to
Trademarks the sales promotion programs, sale of products and
services which shall in quality, mode and
conditions of manufacture and sale, comply with
such standards as are established or approved by
American. In order to promote and protect the
business interests of each of the parties, the
value of the "Dairy Queen" business and the
business interests of other persons engaged
therein, uniformity shall be maintained in the
type, standard and quality of stores, equipment,
supplies and ingredients used therein, and the
conditions of preparation and the procedures
employed in the sale of said products and services.
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Acknowledge 4.2 Licensee agrees that the provisions, restrictions
of and controls provided in this Operating Agreement
Necessity of are all necessary, reasonable and desirable for
Uniformity such purposes and that Licensee's said business
shall be conducted in accordance with American's
uniform requirements with respect to quality,
production, appearance, cleanliness, service,
merchandising and advertising standards. Licensee
acknowledges and agrees that substantial uniformity
in facilities, products, services and operations
are essential to the conduct of a system such as
the "Dairy Queen" system, and therefore further
agrees to honor and implement recommendations of
American and Licensor directed to enhancing and
furthering such uniformity.
Equipment 4.3 Licensee agrees to purchase and use, in the
and Supplies operation of Licensee's "Dairy Queen" retail store,
only equipment, supplies, ingredients and services
which are approved by American or by Licensor.
Nothing herein shall be constructed as an attempt
to limit unreasonably the sources from which
Licensee may procure equipment, supplies,
ingredients or services. Rather, it is the
intention of the parties that such items conform to
American's standards and specifications of
consistent quality and uniformity. Nothing
contained herein shall be deemed to require
Licensor to approve an inordinate number of
suppliers of a given item or service w3hich in the
reasonable judgment of American or licensor would
result in licensees or prevent effective and
economical supervision of suppliers by approval of
additional suppliers shall be in writing and shall
contain such information as American and Licensor
may reasonably request. American and Licensor
reserve the right to charge back to Licensee or the
proposed supplier all reasonable expenses incurred
in considering requests for approval.
Approved 4.4 Complete and detailed uniformity under many varying
Adaptations conditions may not be possible or practical and
Licensor reserves the right and privilege, at
American's sole discretion and as American may deem
in the best interests of all concerned in any
specific instance, to accommodate special needs of
Licensee's Authorized Site or that of any other
like based on the peculiar site or location,
density of population, business potential,
population of trade area, existing business
practices, requirements of local law, or any other
condition which Licensor deems to be of importance
to the successful operation of a like business.
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Litigation 4.5 In the event that any person, firm or company, who
is not a licensee or franchisee of American or
Licensor, uses or infringes upon the Trademarks,
American shall control all litigation and shall be
the sole judge as to whether or not suit shall be
instituted or other action taken.
Notice of 4.6 Licensor and American hereby advise Licensee the
Potential licensor, American and /or affiliates of American
American and/or and/or Licensor may from time to time make
Licensor Profit available to Licensee goods, products and/or
services for use in Licensee's "Dairy Queen" retail
store in respect to the sale or provision of which
Licensor, American and/or affiliates of American
and/or Licensor may make a profit. Licensor further
advises Licensee that Licensor, American and/or
affiliates of American and/or Licensor may from
time to time receive consideration from suppliers
and /or manufactures in consideration of such
services provided or rights licensed to such
persons by American, Licensor or their respective
affiliates.
FACILITY STANDARDS AND MAINTENANCE
5. The following provisions and conditions shall control
with respect to Licensee's Authorized Location and
retail store:
Store Facility 5.1 Licensee agrees that the retail store shall
constructed and equipped in accordance with
American's currently approved specifications and
standards in respect to building, equipment,
inventory, signage, fixtures, location and design
and accessory features.
Future 5.2 Any replacement, reconstruction, addition or
Alteration modification in building, equipment or signage, to
be made hereafter, whether at the request of
Licensee or of Licensor, shall be made in
accordance with written specifications approved by
Licensor or American. Licensor and American shall
not unreasonably withhold such approval.
Maintenance 5.3 The building, equipment and signage employed in the
conduct of Licensee's business shall be maintained
in accordance with an annual maintenance list
prepared by Licensor and based upon periodic
inspections of the premises by Licensor's
representatives. Within a period of ninety (90)
days after the receipt of such annual maintenance
list, Licensee shall effect the items of
maintenance reasonably provided therein including
the repair of defective items and/or the
replacement of unrepairable or obsolete items of
equipment and signage. Routine maintenance shall be
conducted in accordance with general schedules
published by Licensor or American and made
available to Licensee.
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Relocation 5.4 Should it become necessary, on account of
condemnation, sale, or other cause, including
expiration or cancellation of lease or rental
contract, to relocate said store, Licensor shall
grant Licensee authority to do so within a radius
of 1,000 yards of the Authorized Location, provided
the new site is reasonably suited for a "Dairy
Queen" retail store in accordance with Licensor's
standards for store sites, does not infringe on
rights of another licensee, is reasonably distant
from other "Dairy Queen" retail stores, and the new
retail store is constructed, equipped and opened
for business in accordance with the current
standards of American at that time within one year
after discontinuing operation of a "Dairy Queen"
retail store at the previous Authorized Location.
5.5 Each and every transfer as provided in Paragraph
9.10 hereof shall be expressly conditioned upon
Licensee promptly performing and effecting such
items of modernization and/or replacement of
building, equipment, and signage as may be
necessary to permit the same to conform to the
standards then prescribed by American for similarly
situated store operations. Licensee recognizes and
acknowledges that the requirements of this
paragraph 5.5 are both reasonable and necessary to
insure continued public acceptance and patronage
and to avoid deterioration or obsolescence in the
business conducted hereunder.
PRODUCTS AND OPERATIONS STANDARDS AND REQUIREMENTS
6. The following provisions shall control with respect to
products and operations:
6.1 Licensee's business shall be confined to the
preparation and sale of only such products as from
time to time are designated or approved by American
for sale by Licensees which are parties to this
form of Operating Agreement. The premises upon
which said business is operated shall not be used
for any other business and there shall not be sold
or offered for sale therefrom any other product or
service (excepting the preparation, storage and
sale of Permitted Products) without the written
consent of American. Specifically, but without
limiting the foregoing, alcoholic or intoxicating
beverages shall not be sold or offered for sale or
otherwise handled upon said premises.
Approved Menu 6.2 Attached hereto as Appendix B is the currently
approved menu for Licensee's retail store. American
may from time to time make reasonable modifications
to said approved menu provided said modifications
are made in respect to all licensees which have
this form of Operating Agreement and are located in
similar areas of the country. In addition, Licensee
may from time to time request variation from
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the currently approved menu. Such variations shall
only be made with the written consent of the
American.
Authorized 6.1 Licensee shall use in preparing products only such
Ingredients, as are specified by American and in such portions,
Formulas, sizes and appearance and packaging as set forth in
Supplies, American's most current "Store Management
Preparation; Operations Manual" and "products preparation
Subject to Change charts". Copies of the current "Store management
by American Operations Manual" and "products preparation
Preparation; Subject to Change by American charts"
have been supplied to Licensee by Licensor
temporaneously with execution of this Operating
Agreement. Licensee acknowledges and agrees that
these may be changed from time to time by American
and that Licensee is obligated to conform to the
requirements as so changed from time to time. All
other supplies, including cones, cups, containers,
eating utensils, napkins, and all other customer
service materials of all description and types,
shall meet the standards of uniformity and quality
as now or hereafter reasonably set by American.
Licensee shall be furnished with lists of approved
equipment, supplies, ingredients and services.
Serving and 6.4 All sales promotional material, customer "goodwill"
Promotion Items items, cartons, containers, wrappers and paper
goods, eating and serving utensils, customer
convenience items (including napkins, baby bibs,
and disposal containers), used in the sales
promotion, sale and distribution of all products
covered by this Operating Agreement shall, where
practicable, contain one or more Trademarks and
indicate that it is produced and sold under
authority of American and shall be subject to
approval by Licensor or American before being used.
Maintenance 6.5 Licensee's said business shall be operated and
and Sanitation maintained at all times in compliance with any and
all reasonable health and sanitary standards
prescribed by American or by governmental
authority. In addition to complying with such
standards, if such store shall be subject to any
sanitary or health inspection by any governmental
authorities under which it may be rated in one or
more than one classification, it shall be
maintained and operated so as to be rated in the
highest available health and sanitary
classification with respect to each governmental
agency inspecting the same.
Inspection and 6.6 American, Licensor or its authorized representative
Recommendation shall have the right from time to time to enter
Licensee's store at all reasonable times during the
business day for the purpose of making periodic
inspections to ascertain if all the provisions of
this Operating Agreement arc being observed by
Licensee
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and to inspect Licensee's said store, lands,
equipment, and to test, sample and inspect his
supplies, ingredients and products, as well as
storage, preparation and formulation thereof and
the conditions of sanitation and cleanliness in the
storage, production, handling and serving thereof.
Period of 6.7 Whenever it shall appear in Licensor's reasonable
Operation judgment that Licensee's said business is not being
operated in compliance with the requirements
hereof, that the volume of business being done is
not equal to the average volume of other businesses
similarly situated, or that the business is not
being operated profitably or efficiently, Licensor,
at Licensor's option: Period of Operation 6.7
Licensee's store shall be opened to the public and
operated twelve months per year and at least twelve
hours each day of the year. Any variance from this
provision must be authorized in writing by Licensor
Acts of God, war, strikes or riots preventing
Licensee from temporarily complying with the
foregoing shall to that extent suspend compliance
therewith.
Notice of 6.8 Licensee acknowledges that he is aware of the fact
Existence of that present licensees of Licensor and American
Different Forms operate under a number of different forms of
of License agreement and that consequently Licensor's and
Agreements American's obligations and rights in respect to
their respective licenses may differ materially in
certain instances.
PERSONNEL AND SUPERVISION STANDARDS
7. The following provisions and conditions shall control
with respect to personnel, training and supervision:
Management 7.1 Licensee shall adopt and use as his continuing
System operational routine the standard "Dairy Queen"
management system as well as American's standards
with respect to product preparation, merchandising,
employee recruitment and training, equipment and
facility maintenance and sanitation. From time to
time American will revise these programs to meet
changing conditions of retail operation in the best
interest of "Dairy Queen" retail stores, and
Licensee shall adopt and implement any such
changes.
Training 7.2 Licensee shall, at Licensee's expense, attend
American's store management training program, at a
place to be designated by American, prior to the
opening of Licensee's store. In the event Licensee
fails to complete such training to the reasonable
satisfaction of American or Licensor, Licensor may
within thirty (30) days thereafter declare this
Agreement null and void whereupon all deposits
including the franchise fee shall be returned to
Licensee. If during the term hereof Licensee
operates said store with a manager other than
himself, Licensee shall, at Licensee's expense,
cause such person to attend and successfully
complete such training program.
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Staffing 7.3 Licensee shall hire and supervise efficient,
competent, sober and courteous operators and
employees for the operation of the business and set
and pay their wages, commissions and incentives
with no liability therefor on American or Licensor.
Licensee shall require all his employees to work in
clean uniforms approved by Licensor but furnished
at the cost of Licensee or his employees as
Internal 7.4 Licensor shall provide or make available to
Training Licensee an in-store training program for all store
Program employees. Licensee shall train and periodically
re-train all store employees using the training
aids made available by Licensor. From time to time,
American will revise such training materials and
aids and it or Licensor make the same available to
Licensee for purchase.
Attendance at 7.5 Licensee, or manager of Licensee, at Licensee's
Meetings expense, shall attend at least one national,
regional or approved local marketing area meeting
each year which Licensor and/or American originates
for and on behalf of "Dairy Queen" operators to set
forth new methods and programs in store operation,
training, management, sales and sale promotion
programs. Licensor further strongly recommends that
key employees of Licensee also attend such
meetings.
SALES PROMOTION PROGRAMS
Sales Promotion 8.1 Licensor and Licensee, together with other
Programs and licensees of American, shall cooperate in the sales
Payment to promotion programs of approved products. To this
American of end, American has reserved the right to establish
Expenses for and organize sales promotion programs from time to
Administering time and Licensee agrees to pay to Licensor for
Same remittance to American a sales promotion program
fee as set forth in Paragraph 9.1 hereof. Licensee
acknowledges and agrees that American has had in
the past, and shall in the future have, the
discretion to determine expenditures of funds
collected in respect to sales promotion programs
and as to the selection of the promotional
materials and programs for which said expenditures
are made, provided, however, that American shall
make a good faith effort to expend such funds in
the general best interest of participating
licensees. Licensee acknowledges and agrees that
American may compensate itself and/or its
affiliates for the expense of administering such
sales promotion programs. Licensor shall advise
Licensee annually of American's expenses in
administering said sales promotion programs.
Sales Promotion 8.2 Licensee shall only use such sales promotion
Materials program or other advertising materials as are
furnished, approved or made available by or through
American. Said materials shall be used only in a
manner prescribed by American. American shall not
unreasonably withhold approval of any reasonable
sales promotion materials.
Yellow Pages 8.3 Licensee shall, iflrequested by Licensor, list
separately, or participate in a listing, in the
Yellow Pages of his local telephone directory
containing such copy as may reasonably be specified
by Licensor. The cost of such listing shall be paid
by Licensee, or by Licensee and other participating
licensees in the case of a joint listing. Licensor
shall not specify an unreasonably expensive
listing.
FEES, REPORTING AND FINANCIAL MANAGEMENT
Service, Set-up, 9.1 Licensee shall pay to Licensor as a service and
Franchise, set-up fee $3,000 of which $3,000 has been paid
License and upon the execution of this Agreement and a balance
Sales Promotion of $ zero is payable in accordance with the
Program Fees termsrof Appendix C attached hereto. Said service
and set-up fee is intended to compensate Licensor
for its expenses incurred, and services rendered in
establishing and setting up Licensee's initial
operation. In addition to said service and set-up
fee, during the full term of this Operating
Agreement, and in consideration of the rights
granted hereunder, Licensee shall pay to Licensor
as license fee in respect to the rights granted
herein a sums equal to those specified on the
schedule addendum to this paragraph, all of which
sums are based on gross retail sales, exclusive of
retail sales taxes, of all products, goods and
wares of every kind and nature sold from, or in
connection with the operation of, Licensee's "Dairy
Queen" retail store, including, but without
limiting the generality of the foregoing, sales of
all products of any of the Trademarks as well as
sales of other merchandise whether or not
identified by other brand names and which may be
authorized for sale by American or Licensor from
time to time; provided, notwithstanding the
foregoing, that no such continuing license fee
shall be payable with respect to sales of Permitted
Products. In addition, mittance to American a sales
promotion fee to be expended in accordance with the
provisions of Paragraph 8.1. The sales promotion
fee shall be a sum equal to not less than 3% nor
more than 5% of Licensee's gross retail sales net
of sales taxes (excluding sales of Permitted
Products). Licensor shall
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determine and notify Licensee of the exact
percentage prior to the first day of each fiscal
year of Licensor (except no notification will be
given with respect to any year for which the
percentage is to be unchanged from the preceding
year). Such percentage shall be the same as that to
be employed during such succeeding year by the
majority of "Dairy Queen" licensees within the
marketing area as determined by American within
which Licensee's store is located.
Computations 9.2 All amount due and owing hereunder shall be
and Remittances computed at the end of each month's operation and
remittance for the same shall be made to Licensor
on or before the tenth day of the following
month accompanied by the reports provided
for in Paragraph 9.4 hereof. The computation of
said amounts shall be certified and sworn to by
Licensee in the manner specified by Licensor and
Licensee shall supply to Licensor such supporting
or supplementary materials as Licensor may
reasonably require to verify the accuracy of such
remittances.
Surcharge 9.3 At Licensor's option,rLicensor may require Method
Method of of Licensee to pay to suppliers of mix, meat
Precollection Precollection and other products and ingredients
used in the conduct of the business a surcharge on
all units of such commodities purchased by
Licensee. Said surcharge shall be paid to such
supplier by Licensee at the time of purchase of
such commodities. Said surcharge shall be
established by Licensor at a reasonable rate so as
to approximate the amount of license fee and sales
promotion fee which will be payable by Licensee.
Said surcharge shall be paid to said supplier or
suppliers for the account of Licensor, the same to
be regarded by the parties as a method of
precollection of said license and sales promotion
fees. The amounts so collected shall be credited by
Licensor against the license and sales promotion
fees due from Licensee to Licensor at the end of
each month's operations. Licensor shall submit to
Licensee on a monthly or quarterly basis a
reconciliation of said license and sales promotion
fees account setting forth the credits to
Licensee's account by reason of amounts collected
for Licensor by suppliers by way of the aforesaid
surcharge method. In the event Licensee shall fail
to submit reports in accordance with Paragraph 9.4,
Licensor may make said reconciliation of amounts
due in conformance with its best judgment with
regard to said amounts due and same shall be
conclusive as to the amounts due Licensor from
Licensee unless within a period of ten (10) days
after mailing of said reconciliation to Licensee by
Licensor, Licensee provides evidence in a form
satisfactory to Licensor of the correct amounts
due.
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Licensee shall pay such amounts, if any, determined
to be owed pursuant to Licensor's reconciliation
within ten (10) days after a mailing of notice to
Licensee by Licensor. If Licensor determines that
Licensee has overpaid license or sales promotion
fees on the surcharge basis, Licensor shall remit
to Licensee an amount equal to the excess fees
collected at the time the monthly or quarterly
reconciliation is provided Licensee.
Reports and 9.4 Licensee shall keep true records from which all
Record sums payable under this Agreement and the dates of
accrual thereof may be readily determined. Licensee
shall make written reports to Licensor in such form
as Licensor may from time to time prescribe within
fourteen (14) days after the end of each month's
operation setting forth the amount of gross sales
of all products from, or in connection with the
operation of, said store and the business thereof
during said month. In addition to the foregoing,
and in addition to such other information as
Licensor may from time to time require, said
monthly report shall accurately set forth the total
number of gallons of mix, the total number of
pounds of meat, and the quantity of other basic
commodities used during said month and the sources
from which said mix, meat and other commodities
were purchased together with a complete statement
of Licensee's cost of labor, utilities, rent and
each other cost of operation. For the purpose of
said reports the date of use of such mix, meat and
other commodities shall be deemed to be the date of
receipt at the store. Licensor, American or the
authorized representative of either shall have the
right at all times during the business day to enter
Licensee's premises where books and records
relative to said store are kept, and to inspect,
copy and audit such books and records. In the event
that any such inspection or audit reveals a
variance of 3% or more from data reported to
Licensor or American, in addition to any other
rights it may have, Licensor or American may
conduct such further periodic audits and/or
inspections of Licensee's books and records as it
reasonably deems necessary for up to one year
thereafter and such further audits and/or
inspections shall be at Licensee's sole expense
including without limitation reasonable
professional fees, travel and room and board
expenses directly related thereto.
Financial 9.5 Licensee agrees to employ sound financial
Planning and management practices in connection with the
Management operation of said business and to that end Licensee
shall maintain on forms approved or provided by
Licensor or American
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a monthly profit plan, a monthly profit and loss
statement and a monthly balance sheet accurately
reflecting the operations and condition of said
business. In addition to the foregoing, Licensee
shall employ such methods of record keeping,
bookkeeping and reporting as Licensor shall from
time to time reasonably require and copies of all
monthly profit plans, profit and loss statements,
sales summaries and breakdowns for the preceding
month shall be forwarded to Licensor on or before
the fourteenth day of the following month.
Payment 9.6 Licensee agrees to pay promptly, when due, all
of Debts taxes and assessments that may be assessed against
said premises or the equipment or supplies used in
connection with Licensee's business, all liens and
encumbrances of every kind and character created or
placed upon or against any of said property and all
accounts and other indebtedness of every kind
incurred by Licensee in the conduct of said
business. In the event Licensee should default in
making any such payment, Licensor shall be
authorized but not required, to pay the same on
Licensee's behalf and Licensee's covenants promptly
to reimburse Licensor on demand for any such
payment. to Licensor by the same arise this
Paragraph vision of this interest at 12% per Any
and all amounts owing Licensee hereunder, whether
under the provisions of 9.6 or under any other
Agreement, shall bear interannum or the maximum
rate permitted by law, whichever is less, from and
after the date of accrual thereof.
Timely 9.7 The default by Licensee in the timely payment of
Payment any indebtedness owing to Licensor and/or American,
or to any affiliates of Licensor and/or American,
or the default by Licensee in the payment of any
indebtedness of Lice
Insolvency, 9.8 In the event that Licensee be declared insolvent or
Etc. bankrupt, or in the event a receiver is appointed,
this Operation Agreement shall automatically
terminate as of the date of such declaration or
appointment.
Liability and 9.9 Licensee hereby waives all claims against Licensor
Insurance and/or American for damages to property or injuries
to persons arising out of the operation of
Licensee's business, and Licensee shall indemnify
and save Licensor and/or American and/or the
affiliates of either harmless of and from
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any damage or injury to property or persons arising
from or in connection with the operation of said
business or the consumption of the product thereof.
Licensee further agrees to purchase and maintain in
full force and effect during the term of this
Agreement, at Licensee's sole expense, liability
insurance in an aggregate amount not less than
$300,000 insuring Licensee, Licensor and American
from li4 ability for any and all such damage or
injury and Licensee further agrees to deliver to
Licensor a proper certificate evidencing the
existence of such insurance coverage and Licensee's
compliance with the provisions of this paragraph
and which provides that Licensor and American will
be given thirty (30) days prior written notice of
material change, termination or cancellation of the
policy. Said insurance coverage shall commence as
of the date Licensee commences operating a "Dairy
Queen" retail store or as of the date the
Authorized Location is first identified as a site
on which a "Dairy Queen" retail store will be
operated, whichever shall first occur.
Assignment and 9.10 Licensee agrees not to transfer, assign or alienate
Transfer his interest herein or hereunder in whole or in
part without the prior written consent of Licensor,
which consent shall not be withheld unreasonably,
but Licensor may insist that any proposed
assignment be an assignment of all of Licensee's
interest hereunder and that any proposed assignee,
be a person, in Licensor's reasonable judgment,
qualified to provide active supervision over the
operation of said store in compliance with
Licensee's obligations hereunder and who has
sufficient net worth and sources of capital which
meet Licensor's then current requirements for a
store operation of the type contemplated by this
form of agreement. In the event Licensee's said
interest should be so transferred or assigned,
Licensee shall pay to Licensor contemporaneously
therewith the sum of One Thousand Five Hundred
Dollars ($1,500), or an amount equal to one-half of
the license fees paid or payable by Licensee in
respect of operations in the twelve (12) months
ending with the month prior to the month in which
the assignment is approved, whichever is the
greater amount, as a fee for the preparation of a
new Operating Agreement in assignee's name, for
Licensor's assistance in reset-up of the retail
store and for any and all other expenses incurred
and services rendered by Licensor in effecting said
transfer. In the event of any such assignment, the
assignee, as a condition of Licensor approving such
assignment, must attend and to the reasonable
satisfaction of Licensor
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successfully complete, at assignee's expense,
American's training program at American's training
center. In the event Licensee is a corporation,
partnership or other entity, any transfer or
transfers of stock (or other form of ownership
interest) constituting in the aggregate a
controlling interest in Licensee shall be subject
to the consent, transfer fee and all other
applicable provisions of this Agreement. Licensor
may withhold its consent to any proposed transfer
until all amounts owed by Licensee to Licensor,
American, the affiliates or subsidiaries of either
and approved "Dairy Queen" suppliers have been paid
in full.
Offsets 9.11 Licensee waives any and all existing and future
claims and offsets against any amounts due
hereunder, which amounts shall be paid when due.
CONTRACT VIOLATION
Remedies, 10. In the event of any dispute between the parties hereto
Arbitration arising under, out of, in connection with or in
relation to this Agreement, said dispute shall be
submitted by the parties to binding arbitration in
accordance with the Rules and Procedures and under the
auspices of the American Arbitration Association. The
arbitration shall take place at the capital of the
state of the Authorized Location of Licensee or at
such other place as may be mutually agreeable to the
parties. The decision of the arbitrators shall be
finally, and binding on all parties. Notwithstanding
the foregoing, Licensee recognizes that his "Dairy
Queen" store is one of a large number of stores
similarly situated and selling to the public similar
products, and hence the failure on the part of a
single licensee to comply with the terms of his
Operating Agreement could cause irreparable damage to
Licensor, American and/or to some or all other "Dairy
Queen" licensees. Therefore, it is mutually agreed
that in the event of a breach or threatened breach of
any of the terms of this Operating Agreement by
Licensee, Licensor shall forthwith be entitled to an
injunction restraining such breach and/or to a decree
of specific performance without having to show or
prove any actual damage, together with recovery of
reasonable attorney's fees and other costs incurred in
obtaining said equitable relief, until such time as a
final and binding determination is made by the
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arbitrators. The foregoing equitable remedy shall be
in addition to, and not in lieu of, all other remedies
and rights which Licensor might otherwise have by
virtue of any breach of this Agreement by Licensee.
Breach of Contract 10.1 Licensee shall be in default hereunder if Licensor
determines that Licensee has made any false report
to Licensor, or has failed to pay when due any
amounts owed to Licensor, or has in Licensor's
judgment in any other way breached any of the terms
of this Agreement, including but not limited to,
failing to submit required reports, failing to meet
any requirements or specification established with
respect to product quality, physical property,
conditions or equipment or materials used, products
manufactured, menu or use of approved products,
packages or promotional materials. Failure of
Licensee to pay to Licensor any past due amount
owed within fourteen (14) days of Licensor's
written notice of default therein shall be
construed as Licensee's voluntary abandonment of
this Agreement and the franchised business
hereunder operated.
10.2 Except as hereinafter provided, failure of Licensee
to cure a default by Licensee hereunder within
fourteen (14) days from the date of a written
notice of default mailed or delivered to Licensee,
which notice states such default, shall give
Licensor good cause to terminate this Agreement.
Termination shall be accomplished by mailing or
delivering to Licensee written notice of
termination, which notice shall state the grounds
therefore and shall be effective (i) immediately in
any case of voluntary abandonment of this Agreement
by Licensee of conviction of Licensee of an offense
directly related to the business conducted
hereunder; or (ii) sixty (60) days after the date
of such notice of termination in all other cases;
provided, however, that notwithstanding any other
provision of this Paragraph 10, this Agreement may
be terminated immediately upon failure of Licensee
to cure within twenty-four (24) hours of notice
thereof any default under this Agreement which
materially impairs the good will associated with
any of the Trademarks. In addition to the
foregoing, this Agreement may be terminated by
Licensor upon any ground or by any period of notice
as may be permitted from time to time by applicable
law or regulation. Any notice of default of
termination shall be personally delivered or be
mailed by certified or registered mail, return
receipt requested, postage prepaid.
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Land, Building 10.3 Subject to the provisions of Paragraph 5.4 hereof,
Lease, or Failure any failure to rebuild or repair and reopen for
to Reopen operation Licensee's destroyed or damaged store or
store whose lease has been terminated or not
renewed within one year of the date of occurrence
of such termination, destruction or damage, shall
automatically terminate this Operating Agreement.
TERMINATION RIGHTS
11. Upon the termination of this Operating Agreement:
Reverse of Trademark 11.1 All rights to the use of the Trademarks and the
Rights right and license to conduct said business at the
Authorized Location shall revert to Licensor and
Licensee shall immediately cease all use of the
Trademarks and pay all monies due at said date.
Licensee shall promptly and at his own expense
remove or obliterate all store signage and displays
furnished to Licensee by Licensor and shall remove
or obliterate and thereafter discontinue all use of
any signage or displays at the Authorized Location
or in his possession bearing any of the Trademarks
or names or material confusingly similar to any of
the Trademarks.
11.2 All right, title and interest of Licensee in and to
this Operating Agreement shall become the property
of Licensor.
Purchase 11.3 Licensor shall haverthesfirst option to purchase
any or all equipment, fixtures, furnishings or
supplies, of whatever kind, owned by Licensee and
used by him in the production of the "Dairy Queen"
product, or any of the other approved products
under any of the Trademarks hereunder at a price
determined by a qualified appraiser selected with
the consent of both parties. if the parties cannot
agree upon the selection of such an appraiser he
shall be appointed by a Judge of the United States
District Court of Licensee's Authorized Location
upon petition of either party. Said option to
purchase may be exercised by Licensor at any time
within thirty (30) days from the date of such
termination or within thirty (30) days after the
date of the receipt by Licensor of the appraiser's
determination, whichever shall be the later date,
and shall not be impaired or terminated by the
attempted sale or other transfer of any such
equipment or supplies by Licensee to a third party-
Upon the exercise of such option and tender of
payment for any such equipment or supplies,
Licensee agrees to sell and deliver the same to
Licensor free and clear of all encumbrances, and to
execute and deliver to Licensor a ▇▇▇▇ of sale
therefore.
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Non-Compete 11.4 Licensee shall notndirectly or indirectly engage in
any competitive business within 2,000 yards of the
Authorized Location for a period of one year after
said date of termination of this Agreement except
through a Stuckey's Pecan Shoppe or an affiliate in
operation at the time of signing.
PERMITTED PRODUCTS
12. It is mutually understood and agreed that the store
facilities and operations of Licensee hereunder may
include in addition to "Dairy Queen" or "Dairy
Queen/▇▇▇▇▇▇▇" food and beverage service the sale
of various other products not identified or
designated by Company's Trademarks, including, but
not limited to, motor vehicle fuel, oil and related
automotive products, souvenir-type products,
tobacco products, sundries, and packaged food
products not intended for consumption on the
premises where sold and which are not competitive
with food and beverage products identified or
designated by the Trademarks (all of said products
collectively referred to in this Agreement as
"Permitted Products"). In order to prevent public
confusion, preserve and protect the Trademarks and
establish the principles which shall govern
Licensee's sale of Permitted Products and usage of
the Trademarks, the parties agree that
notwithstanding any provision of this or any other
Agreement to the contrary, the following provisions
shall control with regard to Permitted Products:
12.1 Licensee may sell Permitted Products from its
licensed store. Licensee may use in the business
operated hereunder in the manner and to the extent
permitted by this Agreement marks and names
identifying Permitted Products.
12.2 The Trademarks shall not under any circumstances be
used to identify or designate Permitted Products or
any other product(s) for which use of the
Trademarks has not been specifically authorized by
American. Permitted Products shall be sold only
from physical facilities (such as a different area,
room or building) which are clearly distinct and
apart from the "Dairy Queen" retail store.
12.3 No product shall be sold from any part of any
sublicensed store's site which detracts or
threatens to detract from the reputation or
goodwill of the "Dairy Queen" trade name or any of
the Trademarks. Licensor shall have the right to
direct Licensee to remove from the store and
discontinue the sale of any product item or items
which in American's good faith judgment violates
the quality standard of the preceding sentence. No
product shall under any circumstances be sold from
the "Dairy Queen" portion of the licensed store
which has not received
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the specific Prior approval of Licensor.
12.4 A building design and related facility standards,
based upon American's existing design and
specifications for "Dairy Queen"/ "▇▇▇▇▇▇▇" stores,
shall be developed by mutual consultation and
agreement, which shall take into account the
particular requirements for a "Dairy Queen" or
"Dairy Queen"/"▇▇▇▇▇▇▇" facility to be situated
along an Interstate highway. Licensee shall comply
strictly with the design and facility standards
developed hereunder.
12.5 Notwithstanding Paragraph 8.2 hereof, Licensee may
employ off-site advertising media such as
billboards and radio commercials, provided such
advertising is approved by Licensor and American,
and provided further that no such advertising shall
be used which creates or fosters any confusion as
to the identity, source or quality of goods
identified or designated by the Trademarks.
Licensor acknowledges that it may be necessary to
share extant billboard space with an existing
Stuckey's, Wayfara or other store, and Licensor
requires that advertising for the "Dairy Queen"
store be as visually and physically separate from
the other advertising as is feasible.
12.6 Because the "Dairy Queen" store hereunder may also
sell Permitted Products, the parties agree that
notwithstanding any other provision of this
Agreement or any other contract between the
parties, Licensor deems it to be necessary and
desirable, to permit the following:
a. To allow Licensee to sell Permitted Products
in conjunction with a "Dairy Queen" or "Dairy
Queen"/"▇▇▇▇▇▇▇" store;
b. To allow the principal shareholders of
Licensee and members of their immediate
families to own any amount or class of stock
or debt in any Stuckey's Pecan Shoppe
business;
c. To the extent and in the manner permitted
hereunder, to allow Licensee to sell and to
advertise Permitted Products in conjunction
with products identified or designated by the
Trademarks;
d. Subject to Paragraph 6-1 hereof, to relieve
Licensee from the obligation with respect to
Permitted Products, to purchase and use
equipment, supplies, ingredients and services
approved by American;
e. To allow Licensee to construct and equip its
retail store in accordance
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with building design and related facility
standards developed under Paragraph 12.4
hereof;
f. To relieve Licensee: (i) from the obligation
of using, in preparing or selecting Permitted
Products, ingredients, formulas and supplies
specified by American; (ii) from the
obligation to observe, with respect to
Permitted Products, the requirements relative
to portions, sizes, appearance and packaging
set forth in American's "Store Management
Operations Manual" and "product preparation
charts"; and (iii) with respect to Permitted
Products, to allow the use of other supplies
and customer service materials without regard
to standards of uniformity and quality as are
now or hereafter set by American;
g. To allow Licensee its principal shareholders
or members of their immediate families to
engage in a competitive business within 2,000
yards of the Authorized Location of the store
licensed hereunder, as defined in the
Operating Agreement, but only through
a Stuckey's Pecan Shoppe business; and
h. To relieve stockholders of this corporate
Licensee from the obligation of personally
guarantying the obligations of Licensee under
the Operating Agreement. Sale or transfer of
this License to another corporation shall
include the then customary guarantees required
of corporations.
GENERAL PROVISIONS
13.1 In the event any one or more clauses of this
Agreement shall be held to be void or unenforceable
for any reason by any court of competent
jurisdiction such clause or clauses shall be deemed
to be separable and of no force or effect in such
jurisdiction and the remainder of this Agreement
shall be deemed to be valid and in full force and
effect, and the terms of this Operating Agreement
shall be equitably adjusted so as to compensate the
appropriate party for any consideration lost
because of the elimination of such clause or
clauses.
13.2 Any waiver by Licensor of any breach or default by
Licensee shall not be deemed to be a waiver of any
other or subsequent breach or default nor an
estoppel to enforce its rights in the event of any
other or subsequent breach.
13.3 This Agreement, and the application form executed
by Licensee requesting Licensor
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to enter into this Agreement, constitute the sole
agreement between the parties with respect to the
entire subject matter of this Operating Agreement
and embodies all prior agreements and negotiations
with respect to the "Dairy Queen" business. There
are no representations of any kind except as
contained herein and in the aforesaid application.
13.4 Except as otherwise provided in this Agreement, any
notice, demand or communication provided for herein
shall be in writing, signed by the party giving the
same, deposited in the registered or certified
United States mail, return receipt requested,
postage prepaid, and;
a. If intended for American shall be addressed to
American Dairy Queen Corporation at ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇;
b. If intended for Licensor shall be addressed to
Licensor at the address hereinabove set forth;
C. If intended for Licensee, shall be addressed
to Licensee at the Authorized Location
hereinabove designated;
or to such other address as may have been given to
the other party by notification as herein provided.
Notices for purposes of this Agreement shall be
deemed to have been received one business day after
being mailed as provided in this paragraph, or when
personally delivered.
13.5 If Licensee consists of two or more individuals,
such individuals shall be jointly and severally
liable and references to Licensee in this Agreement
shall include all such individuals. Reference to
Licensee as male shall also include a female
licensee, partnership or corporation or any other
business entity. Headings and captions contained
herein are for convenience of reference only and
shall not be taken into account in construing or
interpreting this Agreement.
13.6 Subject to the terms of Paragraph 9.10 hereof, this
Agreement shall be binding upon and inure to the
benefit of the administrators, executors, heirs,
successors and assigns of the parties.
13.7 This Agreement shall be effective only when
approved by an officer of American and shall be
governed by and interpreted in accordance with the
law of the state in which the Authorized Location
is Located.
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13.8 This Agreement shall be deemed to be amended from
time to time as may be necessary to bring any of
its provisions into conformity with valid
applicable laws or regulations.
IN WITNESS IVHEREOF, the parties hereto have executed the foregoing "Dairy
Queen" Operating Agreement the date first above written.
LICENSEE
▇▇▇▇▇▇▇ Investments, Incorporated
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇, President
----------------------------------
----------------------------------
-----------------------------------
ATTEST:
/s/ ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
LICENSOR
ATTEST: INTERSTATE DAIRY QUEEN CORPORATION
----------------------------------
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ /s/ Signature Illegible
------------------------------------ ----------------------------------
Its President
----------------------------------
APPROVED:
AMERICAN DAIRY QUEEN CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------
Its V.P.
-----------------------------
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Date: 10/30/85
Initials:
SCHEDULE ADDENDUM TO PARAGRAPH 9.1 OF
THE "DAIRY QUEEN" OPERATING AGREEMENT
Beginning on the first day of operation as a "Dairy Queen"/"▇▇▇▇▇▇▇" store and
continuing through the following 12 calendar months:
1% of all "Dairy Queen"/"▇▇▇▇▇▇▇" sales not in excess of the
"Stuckey's Pecan Shoppe" restaurant sales for the 12 calendar
months preceding the date of opening as a "Dairy Queen"/ "▇▇▇▇▇▇▇"
store (hereinafter referred to as "existing restaurant sales")
4% of all "Dairy Queen"/"▇▇▇▇▇▇▇" sales in excess of the "existing
restaurant sales."
Second 12 full calendar months of operation as a "Dairy Queen"/"▇▇▇▇▇▇▇" store:
2% of all "Dairy Queen"/"▇▇▇▇▇▇▇" sales not in excess of "existing
restaurant sales"
4% of all "Dairy Queen"/"▇▇▇▇▇▇▇" sales in excess of "existing
restaurant sales."
Third 12 full calendar months of operation as a "Dairy Queen"/"▇▇▇▇▇▇▇" store:
3% of all "Dairy Queen"/"▇▇▇▇▇▇▇" sales not in excess of "existing
restaurant sales"
47. of all "t)airy Queen"/"▇▇▇▇▇▇▇" sales in excess of "existing
restaurant sales."
Fourth 12 full calendar months of operation as a "Dairy Queen"/ "▇▇▇▇▇▇▇" store
and thereafter:
4% of all "Dairy Queen"/"▇▇▇▇▇▇▇" sales.
Compute the above service fees monthly as follows:
1. Determine total "Dairy Queen"/"▇▇▇▇▇▇▇" sales for the month
(Sales A).
2. Determine total "Stuckey's Pecan Shoppe" restaurant sales for
the same month of the base year (Sales B).
3. If (as in a partial first month of operation as a "DQ"/B
restaurant) Sales A are less than Sales B, the service fee due
for the month is *I% of Sales A (* or the applicable 2%, 3% or 4%
rate as specified in the above schedule).
4. If Sales A are more than Sales B, the service fee due for the
month is
*I% of Sales B (.1 or the applicable 2%, 3% or 4% rate as specified
(*or the above schedule).
PLUS 4% of the difference between Sales A and Sales B.