THE QUIZNO'S FRANCHISE COMPANY
AREA DIRECTOR MARKETING AGREEMENT
TABLE OF CONTENTS
Section Number Page Number
1. BACKGROUND AND PURPOSE
2. DEFINITIONS
2.1.Territory
2.2.Sales Year
2.3.Sales Quarter
2.4.Franchise Agreement
2.5.Franchisee
▇.▇.▇▇ Manual
▇.▇.▇▇▇▇▇ Lease and Premises
2.8.Sublease
2.9.Assignment
3. SCOPE OF APPOINTMENT
3.1.Appointment of Area Director/Scope of Operations
3.2.Rights and Limitations to Territory
3.3.Reservation of Rights to Franchisor
4. FRANCHISE SALES PROCEDURES
4.1.Development Quota
4.2.Franchise Registration and Disclosure
4.3.Advertising, Recruiting, and Screening
4.4.Franchisor's Approval of Prospective Franchisees
5. PAYMENTS TO FRANCHISOR
5.1.Initial Area Marketing Fee
5.2.Financing Administration Fee
6. PAYMENTS TO AREA DIRECTOR
6.1.Sales Services Commissions and Conditions of Payment
6.2.Sales Services Commission Payments
▇.▇.▇▇▇▇ Services Commissions
6.4.Commissions on Transfers of Franchises
6.5.Commissions on Royalty Fees
6.6.Commissions After Termination
6.7.Application of Payments
6.8.Setoffs
7. TRAINING ASSISTANCE
7.1.Area Director Training
7.2.Length of Training
7.3.Additional Training
7.4.Seminars and Ongoing Training
8. FRANCHISOR'S OPERATING ASSISTANCE
▇.▇.▇▇ Manual
8.2.Operating Assistance
9. AREA DIRECTOR'S OBLIGATIONS
9.1.Hiring and Training of Employees of Area Director
9.2.Commencement of Business
9.3.Sales Services
▇.▇.▇▇▇▇ Services
9.5.Pre-Opening and Opening Support Services
9.6.Ongoing Support Services
9.7.Dealings with Franchisees
9.8.Area Director's Inspections
9.9.Obligations Under Prime Leases and Subleases
10. MARKS
10.1. Ownership and Goodwill of Marks
10.2. Limitations on Use
10.3. Discontinuance of Use of Marks
10.4. Notification of Infringements and Claims
11. CONFIDENTIAL INFORMATION
11.1. Confidential Information
11.2. Nondisclosure and Noncompetition Agreement
12. EXCLUSIVE RELATIONSHIP
12.1. Exclusive Relationship
13. OPERATING STANDARDS
13.1. Standards of Service
13.2. Compliance with Laws and Good Business Practices
13.3. Accuracy of Information
13.4. Notification of Litigation
13.5. Ownership and Management of Business
13.6. Conflicting Interests
13.7. Insurance
13.8. Proof of Insurance Coverage
13.9. Advertising in Territory
13.10. Approval of Advertising
13.11. Accounting, Bookkeeping and Records
13.12. Reports
14. INSPECTIONS AND AUDITS
14.1. Inspections and Audits
15. TRANSFERS
15.1. Transfers by Franchisor
15.2. Transfers by Area Director
15.3. Conditions for Approval of Transfer
15.4. Transfer to an Entity
15.5. Franchisor's Approval of Transfer
15.6. Death or Disability of Area Director
15.7. Right of First Refusal
15.8. Transfers of Prime Lease or Sublease Interest
16. TERM AND EXPIRATION
16.1. Term
16.2. Renewal
16.3. New Development Quota
16.4. Exercise of Renewal Option
16.5. Conditions of Refusal
17. TERMINATION
17.1. By Area Director
17.2. By Franchisor
17.3. Rights and Obligations of Area Director Upon Termination or
Expiration
17.4. Confidential Information
17.5. Covenant Not to Compete
17.6. No Further Right to Payment
17.7. Continuing Obligations
17.8. State and Federal Law
18. RELATIONSHIP OF THE PARTIES
18.1. Relationship of the Parties
18.2. Payment of Third Party Obligations
18.3. Independent Contractors
18.4. Indemnification
19. DISPUTES
19.1. Governing Law/Consent to Venue and Jurisdiction
19.2. Waiver of Jury Trial
19.3. Limitation of Claims
20. MISCELLANEOUS PROVISIONS
20.1. Invalidity
20.2. Modification
20.3. Attorneys' Fees
20.4. Injunctive Relief
20.5. No Waiver
20.6. No Right to Set Off
20.7. Effective Date
20.8. Review of Agreement
20.9. Entire Agreement
20.10. Notices
20.11. Acknowledgment
EXHIBITS
Exhibit I - Rider to Area Director Marketing Agreement
Exhibit II - Guaranty and Assumption of Area Director's Obligations
Exhibit III - Statement of Ownership
THE QUIZNO'S FRANCHISE COMPANY
AREA DIRECTOR MARKETING AGREEMENT
AREA DIRECTOR:.____________________________
ADDRESS:___________________________________
EFFECTIVE
DATE:
THIS AGREEMENT (the "Agreement") is between THE QUIZNO'S FRANCHISE
COMPANY, a Colorado corporation located at ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ("Franchisor"), and the Area Director listed above ("Area
Director" or "AD"), who agree as follows:
10 BACKGROUND AND PURPOSE
1.1. Franchisor and its affiliates have developed methods for
establishing, operating, and promoting casual dining restaurants featuring
submarine and deli sandwiches, salads, other food products, beverages, and
carry-out and delivery services ("QUIZNO'S Restaurants" or "Restaurants").
These methods feature the use and license of the service ▇▇▇▇ "QUIZNO'S" and
related service marks and trademarks (collectively, the "Marks") owned by The
Quizno's Corporation ("TQC"), Franchisor's parent company and the owner of
the Marks, and Franchisor's and its affiliates' distinctive plans for
establishing, operating, and promoting QUIZNO'S Restaurants and related
licensed methods of doing business (the "Licensed Methods").
1.2. Franchisor grants to qualified individuals, or to entities with
which such individuals are affiliated, the right and license to develop and
operate Restaurants using the Marks and Licensed Methods.
1.3. AD desires to act as a special agent for Franchisor within a
certain geographic area, enabling AD to offer franchises for, and to develop,
support, and provide services to, QUIZNO'S Restaurants within such
geographical area under the terms and conditions contained in this Agreement
("AD Business" or "Business").
1.4. Franchisor is willing to grant AD the right to serve as an area
director, enabling AD to offer franchises for, and to provide site selection
and support services to, QUIZNO'S Restaurants within a certain geographical
area under terms and conditions contained in this Agreement.
2 DEFINITIONS
2.1. Territory. "Territory" is the geographical area described in the
attached Exhibit I.
2.2. Sales Year. "Sales Year" means each calendar year during the
term of this Agreement.
2.3. Sales Quarter. "Sales Quarter" means each calendar quarter
during the term of this Agreement.
2.4. Franchise Agreement. "Franchise Agreement" means the forms of
agreements (including, without limitation, franchise agreement and any
exhibits, riders, collateral assignments of lease or sublease, and personal
guarantees) used by Franchisor from time to time in granting franchises for
the ownership and operation of QUIZNO'S Restaurants. AD acknowledges that AD
will use Franchisor's then-current form of franchise agreement and that
Franchisor may from time to time modify or amend in any respect the form of
franchise agreement and related agreements, including, without limitation,
modifying fees, customarily used in granting QUIZNO's Restaurant franchises.
2.5. Franchisee. "Franchisee" means any person, corporation,
partnership, or other entity who has entered into a Franchise Agreement with
Franchisor.
2.6. AD Manual. "AD Manual" means the manuals, technical bulletins,
or other written materials covering the proper operating and marketing
techniques of an AD Business and standards and specifications for
implementing the Licensed Methods.
2.7. Prime Lease and Premises. "Prime Lease" shall mean a lease of
commercial space ("Premises") entered into by the Area Director, as tenant,
for Premises located within the Territory.
2.8. Sublease. "Sublease" shall mean a lease entered into between the
Area Director, as landlord, and a Franchisee, as tenant, or any other third
party as tenant, for all or any portion of the Premises leased pursuant to a
Prime Lease.
2.9. Assignment. "Assignment" shall mean an assignment or other
transfer to a Franchisee of all of the Area Director's right and title to and
interest in a Prime Lease.
3 SCOPE OF APPOINTMENT
3.1. Appointment of Area Director/Scope of Operations. Franchisor
appoints AD, and AD agrees to perform its obligations, as a special agent of
Franchisor in accordance with the terms and conditions of this Agreement, and
only within the Territory, to: (1) solicit prospective Franchisees for
QUIZNO'S Restaurants to be located in the Territory ("Sales Services") as
described in Section 9.3; (2) perform certain site acquisition and
development services described in Section 9.4 ("Site Services"); and (3)
render support and other services ("Support Services") to Restaurants located
within the Territory as described in Section 9.5. Franchisor may grant AD
the nonexclusive right, but not the obligation, to serve as landlord to
Franchisees in the Territory. In the event that AD requests such right and
Franchisor consents, this Agreement shall govern the terms and conditions of
such grant.
3.2. Rights and Limitations to Territory. During this Agreement's
term, Franchisor and its affiliates will not establish and license any other
area directors to act as special agents to perform Sales Services or to
render Site Services or Support Services to Franchisees within the Territory;
provided, however, that Franchisor and its affiliates shall retain such
rights in the Territory as described in Section 3.3.
3.3. Reservation of Rights to Franchisor. AD acknowledges that the
rights granted by this Agreement are nonexclusive, and Franchisor (and its
affiliates and designees) retains the right (without compensation or
obligation whatsoever to AD unless specifically set forth):
(a) to contract with "Segment Specialists" to allow Segment
Specialists to perform Site Services in the Territory, in which case AD shall
not be required to perform and, to the extent not performed, shall not be
compensated for any Site Services, as set forth in Section 6. A "Segment
Specialist" means a person with whom Franchisor contracts to perform all or a
portion of the Site Services for particular QUIZNO'S Restaurants to be
located at sites within the Territory, such as malls or nontraditional sites
such as airports, universities, medical facilities, and the like. Segment
Specialists, such as mall consultants and others with special experience in
locating and negotiating access to sites, may be used in order to facilitate
the site selection process in specialized segments that are difficult to
obtain by area directors. Franchisor reserves the right to determine when to
use a Segment Specialist;
(b) to use, and to license others to use, the Marks and
Licensed Methods for the operation of other AD Businesses at any location
outside of the Territory and for the operation of Segment Specialist
businesses, wherever located;
(c) to solicit prospective Franchisees, and to grant other
persons franchises to operate QUIZNO'S Restaurants, at such locations within
and outside of the Territory and on such terms and conditions as Franchisor
deems appropriate, to own and operate for its own benefit such QUIZNO'S
Restaurants within the Territory (subject to its obligation to compensate AD
for Royalty Fees, as set forth in Section 6.5), and to provide Site Services
for franchised QUIZNO's Restaurants within the Territory (but with no
obligation to pay AD any Sales Services Commissions or Site Services
Commissions, respectively, in connection with Franchisees whom Franchisor has
solicited or for whom Franchisor, without the assistance of AD, has performed
Sales Services or Site Services);
(d) to use and license the use of alternative proprietary marks
or methods in connection with the operation of restaurants featuring
submarine sandwiches, salads, other food products, and related services, at
any location and within any territory (including the Territory), which
businesses may be the same as, or similar to, or different from QUIZNO'S
Restaurants or may be in alternative channels of distribution; and
(e) to use the Marks and Licensed Methods in connection with
some or all of the same products and services offered by QUIZNO'S
Restaurants, other services and products, promotional and marketing efforts
or related items, or in alternative channels of distribution, including, but
not limited to, the services performed by Segment Specialists as described
above, at any location and within any territory (including the Territory).
4 FRANCHISE SALES PROCEDURES
4.1. Development Quota. AD agrees to comply with the development
quota set forth in Exhibit I to this Agreement ("Development Quota") with
respect to each Sales Quarter. The determination as to whether AD has met
its development obligations under this Agreement shall be made based on the
number of Restaurants open and operating at the end of a Sales Quarter. For
purposes of these development obligations, a Restaurant must be open and
operating in compliance with the applicable Franchise Agreement in order to
be counted toward the satisfaction of the Development Quota. AD agrees that
during the term of this Agreement, it will at all times faithfully, honestly
and diligently perform its obligations hereunder and will continuously exert
its best efforts to promote and enhance the development and operation of
QUIZNO'S Restaurants within the Territory.
4.2. Franchise Registration and Disclosure. Neither AD nor any
employee or representative of AD shall solicit prospective Franchisees of
QUIZNO'S Restaurants until Franchisor has registered its current Uniform
Franchise Offering Circular ("UFOC") in applicable jurisdictions and has
provided AD with the requisite documents or at any time when Franchisor
notifies AD that its registration is not then in effect or its documents are
not then in compliance with applicable law. If AD's activities pursuant to
this Agreement require the preparation, amendment, registration, or filing of
information or any disclosure or other documents, all requisite offering
circulars, ancillary documents, and registration applications shall be
prepared and filed by Franchisor or its designee, and registration secured,
before AD may solicit prospective Franchisees of QUIZNO'S Restaurants. Costs
of such registration applicable to AD shall be borne by AD. In particular,
AD shall:
(a) prepare and forward to Franchisor verified financial
statements of AD in such form and for such periods as shall be designated by
Franchisor, including audited financial statements, if necessary and
appropriate to comply with applicable legal disclosure, filing, or other
legal requirements;
(b) promptly provide all information reasonably required by
Franchisor to prepare all requisite offering circulars and ancillary
documents for the offering of franchises throughout the Territory;
(c) execute all documents required by Franchisor for the
purpose of registering AD and Franchisor to offer franchises throughout the
Territory; and
(d) pay to Franchisor, or its designee, upon demand, the costs
of registering and preparing those portions of offering circulars and
ancillary documents which are applicable to AD.
AD agrees to review all information pertaining to AD prepared to comply with
legal requirements for selling franchises in the Territory and verify its
accuracy if so requested by Franchisor. AD acknowledges that Franchisor and
its affiliates and designees shall not be liable to AD for any errors,
omissions, or delays which occur in the preparation of such materials.
4.3. Advertising, Recruiting, and Screening. AD shall be responsible
for advertising for, recruiting, screening, and interviewing prospects for
QUIZNO'S Restaurant franchises within the Territory. AD shall provide
prospective Franchisees with written information regarding a QUIZNO'S
Restaurant franchise approved by Franchisor or communicate information
regarding QUIZNO'S Restaurant franchises via the telephone, face-to-face
meetings, or visits at other QUIZNO'S Restaurants within the Territory. AD
shall submit each qualified applicant ("Applicant") for a QUIZNO'S Restaurant
franchise to Franchisor for approval. AD further agrees that all Applicants
submitted to Franchisor by AD, if an individual, or the Managing Owner of the
Applicant, if the Applicant is not an individual, shall be individuals who
are of good character, have adequate financial resources, and meet
Franchisor's criteria for Franchisees or Managing Owners of Franchisees (as
Managing Owner is defined in Section 7.1 of the Franchise Agreement). Each
application for a franchise received by AD shall be submitted to Franchisor
with all information respecting the Applicant, the Managing Owner of the
Applicant, if applicable, the Applicant's proposed franchise location, if
known, and all other information then customarily required by Franchisor
concerning Applicants, including such financial statements and other
information as Franchisor may reasonably require. AD shall assist the
Applicant in preparing such financial reports and other information.
4.4. Franchisor's Approval of Prospective Franchisees. By delivery of
written notice to AD, Franchisor shall approve or disapprove Applicants to
become QUIZNO'S Restaurant Franchisees. Franchisor agrees to exert its best
efforts to deliver such notification to AD within ten (10) business days
after the later of: (a) receipt by Franchisor of a complete application,
financial statement, and other materials regarding the Applicant requested by
Franchisor; or (b) the personal interview of Applicant by Franchisor, if
any. Franchisor shall determine whether the Applicant possesses sufficient
financial and managerial capability and meets the other criteria then
utilized by Franchisor in the grant of franchises. Franchisor may refuse to
grant a franchise to an Applicant if it so chooses. The grant of the
franchise shall be effected only upon and after the full execution of the
then-current Franchise Agreement by Franchisor and the Applicant.
5 PAYMENTS TO FRANCHISOR
5.1. Initial Area Marketing Fee. The initial area marketing fee
("Initial Fee") payable to Franchisor by AD in consideration for AD's
appointment as AD within the Territory shall be calculated and set forth in
the attached Exhibit I. Unless otherwise agreed, the Initial Fee is payable
in full upon execution of this Agreement. The Initial Fee is fully earned by
Franchisor upon receipt and is nonrefundable once paid, provided, however,
that if this Agreement is terminated under Section 17.2(a), AD shall be
entitled to a refund of the Initial Fee, less reasonable expenses incurred by
Franchisor in connection with AD's training. AD acknowledges that the
Initial Fee does not include payment of any initial franchise fees for
individual QUIZNO'S Restaurants.
5.2. Financing Administration Fee. If AD finances any portion of the
Initial Fee with Franchisor, AD shall pay an additional administration fee of
one thousand dollars ($1,000) to Franchisor upon execution of this
Agreement.
6 PAYMENTS TO AREA DIRECTOR
6.1. Sales Services Commissions and Conditions of Payment. During the
term of this Agreement, AD shall be paid a commission, as set forth in this
Section, based on a percentage of initial franchise fees paid by Franchisees
for the purchase of QUIZNO'S Restaurant franchises to be located within the
Territory ("Sales Services Commission"), subject to fulfillment of the
following conditions ("Franchise Sales Conditions"):
(a) Franchisee executes a Franchise Agreement with Franchisor,
and an initial franchise fee has been paid to and actually received by
Franchisor (Franchisor shall not be deemed to have received any fees paid
into escrow, if applicable, until such fees actually have been remitted to
Franchisor);
(b) The sale for which the initial franchise fee has been paid
is not a resale of any existing QUIZNO'S Restaurant or any interest in such a
Restaurant; and
(c) AD has complied with all of its other obligations under
this Agreement with respect to such sale and has verified the same to
Franchisor in writing in a form prescribed by Franchisor, provided, however,
that AD shall not be entitled to any Sales Services Commission with respect
to franchised QUIZNO'S Restaurants established in the Territory in connection
with which AD performed no Sales Services.
6.2. Sales Services Commission Payments. Sales Services Commissions
shall be an amount equal to twenty-five percent (25%) of the total initial
franchise fees paid to Franchisor and will be payable to AD within twenty
(20) days after the Franchise Sales Conditions have been fulfilled. AD shall
not receive any Sales Services Commissions for QUIZNO'S Restaurants owned and
operated by Franchisor or its affiliates or designees ("Company Owned
Restaurants") in the Territory, if any, or as provided in Section 6.1.
6.3. Site Services Commissions. During the term of this Agreement,
AD shall be paid a commission in an amount equal to twenty-five percent (25%)
of the total initial franchise fees paid to Franchisor ("Site Services
Commission"), payable within twenty (20) days after a Franchisee's QUIZNO'S
Restaurant opens, upon AD's completion of the Site Services described in
Section 9.4. AD shall not receive Site Services Commissions for Company
Owned Restaurants located in the Territory, or for franchised QUIZNO'S
Restaurants within the Territory for which Franchisor, and not AD, has
performed such Site Services, but all of these Restaurants shall count toward
fulfillment of the Development Quota.
Franchisor shall have the exclusive right to employ a Segment
Specialist to provide Site Services in the Territory, and the fees payable to
the Segment Specialist ("Segment Specialist Fee"), if any, for performing the
Site Services in the Territory shall be paid by Franchisor. If Franchisor
employs a Segment Specialist in the Territory, it will deduct one-half (½) of
the Segment Specialist Fee from the full Site Services Commissions that AD
would have received had AD performed the Site Services performed by the
Segment Specialist and then pay AD the balance, assuming AD performed the
Site Services not performed by the Segment Specialist. However, if the
portion of the Segment Specialist Fee deducted from the Site Services
Commission equals or exceeds the Site Services Commission, AD shall not be
entitled to any payment whatsoever for Site Services.
6.4. Commissions on Transfers of Franchises. If, during the term of
this Agreement, a QUIZNO'S Restaurant located within the Territory or an
interest in the Restaurant is resold to a different Franchisee and the sale
results in the execution of a Franchise Agreement and the payment of a
transfer fee, then AD will be paid a commission in the amount of fifty
percent (50%) of the transfer fee paid and actually received by Franchisor,
payable within twenty (20) days after the completion of the transfer,
provided that Franchisor shall not be deemed to have received any fees paid
into escrow, if applicable, until such fees actually have been remitted to
Franchisor.
6.5. Commissions on Royalty Fees. Franchisor shall pay to AD, within
twenty (20) days after the end of each four (4) or five (5) week period
determined by Franchisor, forty percent (40%) of the royalty fees (which
excludes advertising fees and any fees generated from the activities
described in Section 3.3) actually received by Franchisor from each
Franchisee located in the Territory during the applicable period pursuant to
their Franchise Agreement ("Royalty Fees"). Notwithstanding the foregoing:
(a) If AD has failed to conduct the periodic inspections
described in Section 9.5 and to file a written report or failed to perform in
any material respect, with respect to one (1) or more Franchisees located in
the Territory, the other services described in Section 9 to be provided to
Franchisees located in the Territory during any applicable month, AD shall
not be entitled to receive commissions on Royalty Fees with respect to such
Franchisees for the period during which reports or services were not
provided.
(b) AD shall not be entitled to share in or receive any
commissions on Royalty Fees paid to Franchisor by Franchisees in the
Territory prior to the time AD completes the initial AD training program and
commences full performance of the services set forth in Section 9.
(c) AD shall not be entitled to share in or receive any
commissions on Royalty Fees paid to Franchisor by Franchisees (or that would
otherwise be payable by any Company Owned Restaurant) from any Restaurant in
the Territory that (i) was opened, or operated under a Franchise Agreement
entered into, prior to the Effective Date of this Agreement; (ii) was
constructed by Franchisor and then sold or transferred to a Franchisee under
Franchisor's "Turnkey" program; (iii) was a non-QUIZNO'S operation acquired
by Franchisor or its affiliates and thereafter converted to a QUIZNO'S
Restaurant; or (iv) is operated in an airport (collectively "Exempt
Restaurants"); provided that AD will be paid two hundred dollars ($200) per
month for any Exempt Restaurant located in the Territory in exchange for
performance of the services set forth in Section 9 with respect to such
Exempt Restaurant, and AD shall perform those services at Franchisor's
request.
(d) To compensate AD for providing Support Services, except as
set forth in Section 6.5(c), AD shall receive payments equal to forty percent
(40%) of the Royalty Fees which would otherwise be payable to Franchisor from
any Company Owned Restaurants in the Territory.
6.6. Commissions After Termination. All payments under this Section 6
shall immediately and permanently cease after the expiration or termination
of this Agreement, although AD shall receive all amounts which have accrued
to AD as of the effective date of expiration or termination.
6.7. Application of Payments. Franchisor's payments to AD shall be
based on amounts actually collected from Franchisees, not on payments
accrued, due, or owing. In the event of termination of a Franchise Agreement
for a QUIZNO'S Restaurant within the Territory under circumstances entitling
Franchisee to the return of all or part of the initial franchise fee or
Royalty Fees (or in the event that Franchisor becomes legally obligated or
decides to return part or all of the initial franchise fee or Royalty Fees),
Franchisor may deduct the portion of the amount to be returned to Franchisee
in the same proportion as AD shared in the initial franchise fee or Royalty
Fees from any future amounts owed AD. Franchisor shall apply any payments
received from a Franchisee to any past due indebtedness of that Franchisee
for Royalty Fees, advertising contributions, purchases from Franchisor or its
affiliates, interest, or any other indebtedness of that Franchisee to
Franchisor or its affiliates. To the extent that such payments are applied
to a Franchisee's overdue Royalty Fee payments, AD shall be entitled to its
pro rata share of such payments, less its pro rata share of the costs of
collection paid to third parties.
6.8. Setoffs. AD shall not be allowed to set off amounts owed to
Franchisor for fees or other amounts due under this Agreement against any
monies owed to AD by Franchisor, which right of set off is hereby expressly
waived by AD. Franchisor shall be allowed to set off against amounts owed to
AD for commissions, Royalty Fees, or other amounts due under this Agreement
any monies owed to Franchisor by AD, including setting off amounts owed to AD
against monies owed to Franchisor for commissions on Sales Services which
were paid to AD before Franchisee failed to successfully complete
Franchisor's initial training program.
7 TRAINING ASSISTANCE
7.1. Area Director Training. Within sixty (60) days after the date of
execution of this Agreement, Franchisor shall furnish, and AD (or, if AD is a
partnership, corporation, or other entity, an individual designated by AD who
owns at least twenty-five percent (25%) of the ownership interest in AD and
who has been approved by Franchisor, who shall be designated as the "Managing
Owner") shall attend, at AD's sole cost and expense, an initial training
program consisting of the training program applicable to Franchisor's
Franchisees and such further training as Franchisor deems advisable, which
may include topics such as marketing, franchise sales, franchise law
compliance, site selection, and restaurant operations, furnished at such
place and time as Franchisor designates.
7.2. Length of Training. Franchisor shall determine the appropriate
length of the portion of the initial AD training program applicable only to
Area Directors, which will be in addition to the second part of the initial
AD training program applicable to Area Directors and Franchisees. Other than
the Initial Fee, no tuition or fee shall be charged for the initial
training. However, AD shall be responsible for all travel and living
expenses incurred in connection with attendance at both parts of the initial
training program.
AD (or its Managing Owner) may request additional training during the
initial training program, to be provided at no additional charge, if AD (or
its Managing Owner) does not feel completely trained in the operation of an
area directorship business. However, if AD (or its Managing Owner)
satisfactorily completes Franchisor's initial training program, and does not
inform Franchisor in writing at the end of the initial training program that
AD (or its Managing Owner) does not feel completely trained, then AD will be
deemed to have been trained sufficiently to operate the area directorship
business.
7.3. Additional Training. The initial training program will be made
available to replacement or additional Managing Owners and other management
personnel during the term of this Agreement. Franchisor reserves the right
to charge a tuition or fee in advance of such training. AD will be
responsible for all travel and living expenses incurred by its personnel in
connection with attendance at the training program. Further, the
availability of the training programs will be subject to space considerations
and prior commitments to new QUIZNO'S Franchisees and ADs.
7.4. Seminars and Ongoing Training. From time to time, Franchisor may
present seminars, conventions, or continuing development programs for the
benefit of AD. AD or its Managing Owner shall be required to attend any
ongoing mandatory seminars, industry conventions, or programs offered by
Franchisor. If AD fails to attend a mandatory seminar, convention, or
program without obtaining Franchisor's prior written approval and fails to
arrange for attendance at an alternate time, AD shall be required to make up
the missed program at a time and place designated by Franchisor and will be
charged one thousand five hundred dollars ($1,500) for each program missed.
Franchisor shall give AD at least thirty (30) days' prior written notice of
any seminar, convention, or program that is deemed mandatory. Franchisor
will not require that AD attend any ongoing training more often than five (5)
times per calendar year. AD will be responsible for all travel and living
expenses associated with attendance at any ongoing training programs.
8 FRANCHISOR'S OPERATING ASSISTANCE
8.1. AD Manual. Franchisor shall, in addition to the AD training
program, loan to AD during the term of this Agreement one (1) copy of its AD
Manual to assist AD and its employees in conducting the business contemplated
by this Agreement. Franchisor may prescribe mandatory and suggested
standards and operating procedures for AD in the AD Manual, which may be
modified from time to time by Franchisor. AD shall keep its copy of the AD
Manual current. In the event of a dispute relating to the AD Manual,
Franchisor's master copy controls. AD may not at any time copy any part of
the AD Manual unless approved in writing by Franchisor. In the event AD's
copy of the AD Manual is lost, destroyed, or damaged, AD shall be obligated
to obtain from Franchisor, at Franchisor's then applicable charge, a
replacement copy of the AD Manual. The AD Manual and other writings
communicated to AD shall constitute material provisions of this Agreement as
if fully set forth within its text.
8.2. Operating Assistance. Franchisor will make available the
following services during the term of this Agreement:
(a) Upon the reasonable request of AD, telephone consultation
regarding advice related to franchise sales, Franchisee support, and
assistance; and
(b) Access to franchise sales advertising and promotional
materials developed by Franchisor, the reasonable cost of which may be passed
on to AD at Franchisor's option.
9 AREA DIRECTOR'S OBLIGATIONS
9.1. Hiring and Training of Employees of Area Director. AD shall hire
all of AD's employees, shall be exclusively responsible for the terms of
their employment and compensation, and shall implement a training program for
employees to ensure their compliance with Franchisor's requirements; provided
that AD shall not employ any person who Franchisor has determined is unfit to
represent Franchisor in marketing QUIZNO'S Restaurant franchises or
furnishing services to Franchisees.
9.2. Commencement of Business. Unless otherwise agreed to in writing
by Franchisor and AD, AD has sixty (60) days from the date of this Agreement
within which to complete the first part of its initial training and commence
operation of its QUIZNO'S AD Business. Franchisor will extend the time
within which AD must commence operations for a reasonable period of time, in
the event that factors beyond AD's reasonable control prevent AD from meeting
this schedule, so long as AD has made reasonable and continuing efforts to
comply and AD requests in writing an extension of time in which to have its
Business established before the period lapses. The obligations of AD,
including Sales Services, shall commence at the earlier of the date AD or its
Managing Owner has satisfactorily completed the first part of Franchisor's
initial training program or sixty (60) days from the date of this Agreement.
AD will also, at AD's expense, purchase or otherwise obtain for use in
connection with the Business (a) computer hardware and software that comply
with the standards and specifications of Franchisor; (b) an office serviced
by a minimum of one dedicated telephone line with 24-hour professional
answering service or voice mail; (c) a facsimile machine with its own
dedicated telephone line; (d) business cards and stationery; and (e) any
other items required by the AD Manual. The telephone number of the Business
office must be advertised in the white and yellow pages of the telephone
directories distributed in the Territory.
9.3. Sales Services. AD shall solicit and identify prospective
Franchisees for QUIZNO'S Restaurants to be located within the Territory.
9.4. Site Services. AD shall perform the following Site Services on
behalf of Franchisor with respect to Franchisees of QUIZNO'S Restaurants
located in the Territory (unless Franchisor indicates otherwise with respect
to Franchisees for whom Franchisor will perform such services):
(a) Assist with Restaurant location selection for each
Franchisee, which shall consist of providing each Franchisee with criteria
for a satisfactory site and assisting each Franchisee in completing a site
submittal package (containing such demographic, commercial, and other
information as Franchisor may reasonably require) for each location at which
Franchisee proposes to establish and operate a QUIZNO'S Restaurant, assist in
negotiating lease terms, and coordinate the work of contractors and
architects with respect to the development of each QUIZNO'S Restaurant;
(b) Provide standards and specifications for the build out,
interior design, layout, floor plan, signs, designs, color, and decor of the
Restaurant as prescribed from time to time by Franchisor; and
(c) Submit completed forms and reports to Franchisor as
prescribed by Franchisor from time to time, including site selection and
pre-opening assistance forms and reports related to leases and construction.
9.5. Pre-Opening and Opening Support Services:
(a) Provide advice to Franchisee regarding the standards and
specifications for the equipment, supplies, and materials used in, and the
menu items offered for sale by, the Restaurant and advice regarding selecting
suppliers for purchasing items used in connection with the QUIZNO'S
Restaurant;
(b) Provide initial training and on-site assistance for not
less than eighty (80) hours in the opening of QUIZNO'S Restaurants located in
the Territory; and
(c) Provide guidance in implementing advertising and marketing
programs, operating and sales procedures, and bookkeeping and accounting
programs.
9.6. Ongoing Support Services. With respect to Franchisees of
QUIZNO'S Restaurants located in the Territory, AD shall perform the following
Support Services on behalf of Franchisor:
(a) Upon the reasonable request of Franchisee, provide
telephone consultation regarding the continuing operation and management of
the Restaurant and advice regarding restaurant services, product quality
control, menu items, and customer relations issues;
(b) Provide on-going updates of information and programs
regarding menu items and their preparation, the Restaurant business, and
related Licensed Methods, including, without limitation, information about
special or new services of Franchisor;
(c) Provide advice and assistance to Franchisee in connection
with developing and improving Franchisee's Restaurant;
(d) Conduct at least one (1) quality assurance inspection (or
reinspection in the case of a failed first inspection) of each QUIZNO'S
Restaurant in the Territory every month in the manner required by Franchisor
from time to time, said inspections to be verified by written reports in a
form acceptable to Franchisor and to be conducted by the Managing Owner.
(e) Provide access to advertising and promotional materials
developed by Franchisor from time to time;
(f) At Franchisor's written request, establish an advertising
cooperative for all QUIZNO'S Restaurants located in the Territory using forms
and procedures supplied by Franchisor; and
(g) Submit periodic reports to Franchisor on activities in the
Territory using procedures and forms prescribed by Franchisor.
9.7. Dealings with Franchisees. AD acknowledges that it is being
delegated certain responsibilities of Franchisor under the Franchise
Agreement to Franchisees in the Territory. The responsibilities to
Franchisees are to be performed by AD as described in this Agreement or as
set forth in the AD Manual or other reasonable standards and specifications
provided by Franchisor from time to time, and the responsibilities to
Franchisees will not materially change during the term of this Agreement. In
providing services to Franchisees of QUIZNO'S Restaurants located in the
Territory, AD shall in all respects comply with the terms and conditions of
any Franchise Agreement or other agreement in effect between Franchisee and
Franchisor. AD understands, however, that its rights as an area director are
only by virtue of this Agreement and that it is not in any manner a party,
third party beneficiary, or holder of any other right or title to or interest
in any Franchise Agreement. Similarly, no Franchisee is a third party
beneficiary of this Agreement or any other agreement between Franchisor and
AD. AD agrees that it may not under any circumstances sell any products or
other items to, or collect any money for any reason from, Franchisees without
Franchisor's prior written consent.
9.8. Area Director's Inspections. AD shall ascertain through field
audits, reviews, and inspections that each Franchisee in the Territory has
complied satisfactorily with all of the terms and conditions of the Franchise
Agreement, specifications, standards, operating procedures, and the
Franchisee's Operations Manual and shall promptly notify Franchisee in
writing, with a copy and evaluation report to Franchisor, of any
deficiencies; provided, however, AD understands and acknowledges that its
inspections and reports are advisory only and that Franchisor shall have: (a)
all of the rights to inspect and ascertain compliance of all Franchisees as
if this Agreement were not in effect; (b) the sole right to send notices of
default to Franchisee; (c) the sole right to terminate a Franchise Agreement
for failure to cure such defaults (if an opportunity to cure is granted); and
(d) the sole right to take any legal action with respect to any violation of
a Franchise Agreement. If AD believes that any Franchisee in the Territory
has breached a Franchise Agreement with Franchisor, AD shall document in
writing all facts related to the alleged breach and request in writing that
Franchisor investigate such alleged breach. If, as a result of Franchisor's
investigation, Franchisor determines that there is a breach by Franchisee of
its Franchise Agreement with Franchisor, Franchisor may take such action as
it deems appropriate.
9.9. Obligations Under Prime Leases and Subleases. If AD receives
Franchisor's prior written approval (i) of the authority to act as a landlord
to a Franchisee pursuant to Section 3.1; and (ii) of a proposed Prime Lease,
which approval will not be unreasonably withheld, AD may enter into such
approved Prime Lease as tenant (subject to Franchisor's or its affiliate's
right to enter into a master lease with AD and then a sublease with the
Franchisee) and thereby lease Premises located in the Territory for the sole
purpose of subleasing the Premises at AD's cost or assigning AD's rights
under a Prime Lease to a Franchisee for a QUIZNO'S Restaurant. AD may sublet
the Premises to a Franchisee if AD obtains Franchisor's prior written
approval of the proposed Sublease, which approval will not be unreasonably
withheld. Alternatively, AD may assign its rights under a Prime Lease to a
Franchisee if AD obtains Franchisor's prior written approval of the proposed
Assignment, which approval will not be unreasonably withheld. If AD enters
into a Prime Lease, a Sublease, an Assignment, or some combination thereof,
AD shall be obligated promptly to pay all sums due under such Prime Lease
and/or Sublease and/or Assignment, if not paid by the Franchisee, and shall
otherwise comply with all terms and conditions of all Prime Leases,
Assignments, and Subleases executed by AD.
10 MARKS
10.1. Ownership and Goodwill of Marks. AD acknowledges that its right
to use the Marks is derived solely from this Agreement (unless such rights
are granted under a separate written agreement with Franchisor) and is
limited to use in operating as an AD pursuant to and in compliance with this
Agreement. Any unauthorized use of the Marks by AD shall constitute a breach
of this Agreement and an infringement of Franchisor's and TQC's rights in and
to the Marks. AD acknowledges and agrees that its usage of the Marks and any
goodwill established by that use shall inure to Franchisor's and TQC's
exclusive benefit and that this Agreement does not confer any goodwill or
other interests in the Marks upon AD.
10.2. Limitations on Use. AD shall not use any ▇▇▇▇ (a) with any
prefix, suffix, or other modifying words, terms, designs, or symbols (other
than logos licensed to AD under this Agreement), (b) in connection with
unauthorized services or products, (c) as part of any domain name or
electronic address maintained on the Internet, the World Wide Web, or any
other similar proprietary or common carrier electronic delivery system, or
(d) in any other manner not expressly authorized in writing by Franchisor.
AD agrees to give such notices of trademark and service ▇▇▇▇ registration as
Franchisor specifies and to use and obtain such fictitious or assumed name
registrations required by Franchisor or under applicable law. AD further
agrees that no service ▇▇▇▇ other than "QUIZNO'S" or such other Marks
specified by Franchisor shall be used in marketing, promoting, or operating
AD's Business.
AD has the right to use the trade name "QUIZNO'S" in the legal name of
the entity used to conduct the AD Business. AD may not register or attempt
to register in its own name any trade name using the word "QUIZNO'S." When
this Agreement expires or is terminated, AD must execute any assignment or
other documents Franchisor requires to transfer to Franchisor any rights AD
possesses in a trade name utilizing "QUIZNO'S" or any other ▇▇▇▇ Franchisor
owns.
10.3. Discontinuance of Use of Marks. If it becomes advisable at any
time for Franchisor to modify or discontinue use of any ▇▇▇▇ by AD or to
require AD to use one or more additional or substitute trade or service
marks, AD agrees to comply, at its own expense, with Franchisor's directions
to do so within a reasonable time after receiving notice. Franchisor need
not reimburse AD for its direct expenses of doing so, for any loss of revenue
due to any modified or discontinued ▇▇▇▇, or for AD's expenses of promoting a
modified or substitute trademark or service ▇▇▇▇.
10.4. Notification of Infringements and Claims. AD shall immediately
notify Franchisor of any apparent infringement of or challenge to AD's use of
any ▇▇▇▇, or claim by any person of any rights in any ▇▇▇▇, and AD shall not
communicate with any person other than Franchisor or its counsel in
connection with any such matter. AD may not settle any claim without
Franchisor's and TQC's prior written consent. Franchisor and TQC may take
such action as they deem appropriate and control exclusively any litigation,
U.S. Patent and Trademark Office proceeding, or other administrative
proceeding arising out of any such infringement, challenge, or claim or
otherwise relating to any ▇▇▇▇. AD agrees to execute any and all instruments
and documents, render such assistance, and perform such acts as, in the
opinion of Franchisor's and TQC's counsel, are necessary or advisable to
protect and maintain Franchisor's and TQC's interests in the Marks.
11 CONFIDENTIAL INFORMATION
11.1. Confidential Information. Franchisor and TQC possess certain
proprietary confidential information consisting of the methods, techniques,
formats, specifications, procedures, information, systems, methods of
business management, sales and promotion techniques, and knowledge of and
experience in operating and franchising QUIZNO'S Restaurants (the
"Confidential Information"). Franchisor shall disclose the Confidential
Information to AD in the training program, the AD Manual, and in guidance
furnished to AD during this Agreement's term. AD will not acquire any
interest in the Confidential Information, other than the right to utilize it
in the Territory in performing its duties during the term of this Agreement,
and AD acknowledges that the use or duplication of the Confidential
Information in any other business venture would constitute an unfair method
of competition. AD acknowledges and agrees that the Confidential Information
is proprietary, includes trade secrets of Franchisor and TQC, and is
disclosed to AD solely on the condition that AD agrees, and AD (and its
shareholders, partners, members, and managers, if AD is a corporation,
partnership, or limited liability company) does hereby agree that AD: (a)
shall not use the Confidential Information in any other business or capacity;
(b) shall maintain the absolute confidentiality of the Confidential
Information during and after the term of this Agreement; (c) shall not make
unauthorized copies of any portion of the Confidential Information disclosed
in written or other tangible form; and (d) shall adopt and implement all
reasonable procedures prescribed from time to time by Franchisor to prevent
unauthorized use or disclosure of the Confidential Information. All ideas,
concepts, techniques, or materials concerning a QUIZNO's Restaurant or AD
Business, whether or not protectable intellectual property and whether
created by or for AD or its owners or employees, must be promptly disclosed
to Franchisor and will be deemed Franchisor's and TQC's sole and exclusive
property, part of the QUIZNO'S System, and works made-for-hire for Franchisor
and TQC. To the extent any item does not qualify as a "work made-for-hire"
for Franchisor and TQC, AD assigns ownership of that item, and all related
rights to that item, to Franchisor and TQC and must sign whatever assignment
or other documents TQC requests to show ownership or to help TQC obtain
intellectual property rights in the item.
11.2. Nondisclosure and Noncompetition Agreement. Franchisor reserves
the right to require AD to have each of its shareholders, officers,
directors, partners, employees, members, and managers, and, if AD is an
individual, AD's spouse, execute a Nondisclosure and Noncompetition Agreement
in a form approved by Franchisor.
12 EXCLUSIVE RELATIONSHIP
12.1. Exclusive Relationship. Franchisor has entered into this
Agreement with AD on the condition that AD will deal exclusively with
Franchisor. AD acknowledges and agrees that Franchisor would be unable to
protect its and TQC's Confidential Information or to encourage a free
exchange of ideas and information among area directors and Franchisor if area
directors were permitted to hold interests in any Competitive Business, as
defined below. AD therefore agrees that, during this Agreement's term,
neither AD, AD's shareholders, members, owners, or partners who participate
in the management of AD, nor AD's spouse, nor, if applicable, the Managing
Owner, shall:
(a) have any direct or indirect interest as a disclosed or
beneficial owner in a "Competitive Business," wherever located or operating,
defined as a business operating, or granting franchises or licenses to others
to operate, a restaurant or other food service business deriving more than
ten percent (10%) of its gross receipts, excluding gross receipts relating to
the sale of alcoholic beverages, from the sale of submarine or other
sandwiches (excluding QUIZNO'S Restaurants operated under franchise
agreements with Franchisor);
(b) perform services as a director, officer, manager, employee,
consultant, representative, agent, or otherwise for a Competitive Business,
wherever located or operating;
(c) divert or attempt to divert any business related to, or any
customer or account of, the AD Business, Franchisor's business, or any other
QUIZNO'S area director's or Franchisee's business, by direct inducement or
otherwise, or divert or attempt to divert the employment of any employee of
Franchisor, TQC, or another area director or Franchisee to any Competitive
Business; or
(d) directly or indirectly solicit or employ any person who is
employed by Franchisor or TQC.
Notwithstanding the foregoing, (i) AD shall not be prohibited from
owning securities in a Competitive Business if such securities are listed on
a stock exchange or traded on the over-the-counter market and represent five
percent (5%) or less of that class of securities issued and outstanding; and
(ii) AD will not be deemed to be operating a Competitive Business, as that
term is defined above, if AD temporarily operates a QUIZNO'S Restaurant which
either had been sublet to a Franchisee under an approved Sublease or had been
assigned to a Franchisee under an approved Assignment for a period of not
more than ninety (90) consecutive days following the Franchisee's failure to
operate such QUIZNO'S Restaurant for a period of five (5) consecutive days or
a default by the Franchisee under the terms of its Sublease or Assignment.
If AD operates any QUIZNO'S Restaurant for a period longer than ninety (90)
consecutive days, then Franchisor will have the right to require AD to sign
Franchisor's then-current form of Franchise Agreement to govern AD's
operation of such Restaurant.
13. OPERATING STANDARDS
13.1. Standards of Service. AD shall at all times give prompt,
courteous, and efficient service to QUIZNO'S Restaurant Franchisees in the
Territory. AD shall, in all dealings with Franchisees, prospective
Franchisees, and the public, adhere to the highest standards of honesty,
integrity, fair dealing, and ethical conduct.
13.2. Compliance with Laws and Good Business Practices. AD shall
secure and maintain in force all required licenses, permits, and certificates
relating to AD's activities under this Agreement and operate in full
compliance with all applicable laws, ordinances, and regulations. AD
acknowledges being advised that many jurisdictions have enacted laws
concerning the advertising, sale, renewal, and termination of, and continuing
relationship between parties to, a franchise agreement, including, without
limitation, laws concerning disclosure requirements. AD agrees promptly to
become aware of, and to comply with, all such laws and legal requirements in
force in the Territory and to utilize only offering circulars that Franchisor
has approved for use in the applicable jurisdiction.
13.3. Accuracy of Information. Before it offers or sells any
franchise, AD shall each time take reasonable steps to confirm that the
information contained in any written materials, agreements, and other
documents related to the offer or sale of franchises is true, correct, and
not misleading at the time of such offer or sale and that the offer or sale
of such franchise will not at that time be contrary to or in violation of any
applicable state law related to the registration of the franchise offering.
Franchisor shall provide AD with any changes to its disclosure documents and
other agreements on a timely basis and, upon request, provide AD with
confirmation that the information contained in any written materials,
agreements, or documents being used by AD is true, correct, and not
misleading, except for information specifically relating to disclosures
regarding AD. If AD notifies Franchisor of an error in any information in
Franchisor's documents, Franchisor shall have a reasonable period of time to
attempt to correct any deficiencies, misrepresentations, or omissions in such
information.
13.4. Notification of Litigation. AD shall notify Franchisor in
writing within five (5) days after the commencement of any action, suit,
arbitration, proceeding, or investigation, or the issuance of any order,
writ, injunction, award, or decree, by any court, agency, or other
governmental instrumentality which names AD (or its Managing Owner) or
otherwise concerns the operation or financial condition of AD, AD's Business,
or any Franchisee.
13.5. Ownership and Management of Business. AD's Business shall at all
times be under the direct, day-to-day, full-time supervision of AD (or the
Managing Owner). AD shall at all times during the term of this Agreement own
and control the Business. Upon the request of Franchisor, AD shall promptly
provide satisfactory proof of such ownership. AD represents that the
Statement of Ownership, attached to this Agreement as Exhibit III, is true,
complete, and not misleading. AD shall promptly provide Franchisor with
written notification if the information contained in the Statement of
Ownership changes at any time during the term of this Agreement and comply
with the applicable transfer provision contained in Section 15. If AD is not
an individual, an individual or individuals designated by Franchisor shall
execute the Guaranty and Assumption of AD's Obligations attached hereto as
Exhibit II and incorporated in this Agreement by this reference.
13.6. Conflicting Interests. AD shall at all times faithfully,
honestly, and diligently perform its obligations under this Agreement and
continuously exert its best efforts to promote, enhance, and service QUIZNO'S
Restaurants in the Territory. AD shall not engage in any other business or
activity, directly or indirectly, including operating a QUIZNO'S Restaurant,
that requires any significant management responsibility or time commitments,
or otherwise may conflict with AD's obligations under this Agreement, without
the prior written approval of Franchisor.
13.7. Insurance. AD shall at all times during the term of this
Agreement maintain in force, at AD's sole expense, insurance for the AD
Business of the types, in the amounts, and with such terms and conditions as
Franchisor may from time to time prescribe in the AD Manual or otherwise.
All of the required insurance policies shall name Franchisor and TQC as
additional insureds, contain a waiver of the insurance company's right of
subrogation against Franchisor and TQC, and provide that Franchisor will
receive thirty (30) days' prior written notice of termination, expiration,
cancellation, or modification of any such policy.
13.8. Proof of Insurance Coverage. AD will provide proof of insurance
to Franchisor before beginning operations of its AD Business. This proof
will show that the insurer has been authorized to inform Franchisor in the
event any policies lapse or are canceled or modified. Franchisor has the
right to change the types, amounts, and terms of insurance that AD is
required to maintain by giving AD prior reasonable notice. Noncompliance
with these insurance provisions shall be deemed a material breach of this
Agreement; and, in the event of any lapse in insurance coverage, Franchisor
shall have the right, in addition to all other remedies, to demand that AD
cease operations of its AD Business until coverage is reinstated or, in the
alternative, to pay any delinquencies in premium payments and charge the same
back to AD.
13.9. Advertising in Territory. AD is required to spend monthly an
amount equal to the greater of (i) one half percent (½%) of the Population
Portion of AD's Initial Fee, or (ii) four hundred dollars ($400) on
advertising for prospective Franchisees in the Territory. If, at any time
during the term of this Agreement, the sum of the number of Restaurants open
and operating within the Territory plus the number of unopened Restaurants in
the Territory for which Franchise Agreements have been signed (the "Sum")
equals the Development Quota for the entire term of this Agreement, then AD
shall not be obligated to spend any additional amounts on advertising for
such time period that the Sum continues to exceed the aggregate Development
Quota. However, if the Sum declines for any reason below that aggregate
Development Quota at any time during this Agreement's term, then AD shall be
required to advertise as provided in this Section. AD shall submit to
Franchisor an accounting of the amounts spent on advertising within thirty
(30) days following the end of each quarter following the date of this
Agreement. In addition to the required amount spent on local advertising,
Franchisor reserves the right to require AD to participate, at AD's expense,
in a maximum of two (2) trade shows each year, such trade shows to be
selected by Franchisor. AD agrees to list its Business telephone numbers in
the white pages and in the yellow or classified telephone directories
distributed in the Territory.
13.10....Approval of Advertising. Prior to their use by AD, samples of
all advertising and promotional materials not prepared or previously approved
by Franchisor shall be submitted to Franchisor for approval, which approval
shall not be unreasonably withheld. AD shall not use any advertising or
promotional materials that Franchisor has disapproved. AD acknowledges and
understands that certain states require the filing of franchise sales
advertising materials with the appropriate state agency prior to
dissemination. AD agrees fully and timely to comply with such filing
requirements at AD's own expense unless such advertising has been previously
filed with the state by Franchisor. Franchisor may charge AD for the costs
incurred by Franchisor in printing large quantities of advertising and
marketing materials supplied by Franchisor to AD at AD's request.
13.11....Accounting, Bookkeeping and Records. AD shall maintain at its
business premises in the Territory all original invoices, receipts, checks,
contracts, licenses, acknowledgment of receipt forms, and bookkeeping and
business records Franchisor requires from time to time. AD shall furnish to
Franchisor, within one hundred twenty (120) days after the end of AD's fiscal
year, a balance sheet and profit and loss statement for AD's Business for
such year (or monthly or quarterly statement if required by Franchisor, in
which case such statements also shall reflect year-to-date information). In
addition, upon request of Franchisor, within ten (10) days after such returns
are filed, exact copies of federal and state income, sales, and any other tax
returns and such other forms, records, books, and other information as
Franchisor periodically requires regarding AD's Business shall be furnished
to Franchisor. AD shall maintain all records and reports of the business
conducted pursuant to this Agreement for at least two (2) years after the
date of termination or expiration of this Agreement.
13.12....Reports. AD shall, as often as required by Franchisor,
deliver to Franchisor a written report of its Business activities during such
period required in Sections 9.4 and 9.6, in such form and detail as
Franchisor may from time to time specify, including information about efforts
to solicit prospective Franchisees, the status of pending real estate
transactions, and the status of the Restaurants in the Territory. AD shall,
as often as required by Franchisor during the term of this Agreement, deliver
to Franchisor the quality assurance inspection reports required in Section
9.6 for each Franchisee in the Territory in such form and detail as
Franchisor may from time to time specify.
14. INSPECTIONS AND AUDITS
14.1. Inspections and Audits. To determine whether AD is complying
with this Agreement, Franchisor or its designee shall have the right at any
time during normal business hours, and without prior notice to AD, to enter
the premises in which AD is then keeping its business records and inspect,
and conduct an audit of, the business records, bookkeeping and accounting
records, invoices, payroll records, time cards, check stubs, bank deposits,
receipts, sales tax records and returns, and other business records and
documents of AD's Business. AD and its employees shall fully cooperate with
representatives of Franchisor making, conducting, supervising, or observing
any such inspection or audit.
15. TRANSFERS
15.1. Transfers by Franchisor. AD acknowledges that Franchisor
maintains a staff to manage and operate the QUIZNO's System and that staff
members can change from time to time. AD represents that it has not signed
this Agreement in reliance on any shareholder, director, officer, or employee
remaining with Franchisor in that capacity. Franchisor may change its
ownership or form and/or assign this Agreement and any other agreement
without restriction.
15.2. Transfers by Area Director. AD agrees that the rights and duties
created by this Agreement are personal to AD (or its shareholders, partners,
or members, if AD is a corporation, partnership, or limited liability
company) and that Franchisor has entered into this Agreement in reliance upon
Franchisor's perceptions of the individual or collective character, skill,
aptitude, attitude, business ability, and financial capacity of AD (or its
shareholders, members, managers, or partners). Accordingly, without the prior
written consent of Franchisor, which consent will not be unreasonably
withheld, neither this Agreement (or any interest herein) nor any part or all
of the ownership of AD may be transferred. Any unauthorized transfer shall
constitute a breach of this Agreement and be void and of no effect. As used
in this Agreement, the term "transfer" shall mean and include the voluntary,
involuntary, direct, or indirect assignment, sale, subfranchise, gift, or
other disposition by AD (or any of its owners) of any interest in: (1) this
Agreement; (2) the ownership of AD; or (3) the assets of the Business.
15.3. Conditions for Approval of Transfer. Franchisor shall not be
obligated to approve a proposed transfer unless AD (and its owners) are in
full compliance with this Agreement. Franchisor shall not unreasonably
withhold its approval of a proposed transfer that meets all the applicable
requirements of this Section. The proposed transferee and its owners must be
individuals of good moral character and otherwise meet Franchisor's then
applicable standards for area directors. If the transfer is of this
Agreement and the AD Business, or a Controlling Interest (as defined below)
in AD, or is one of a series of transfers (regardless of the time period over
which such transfers occur) which in the aggregate transfer this Agreement
and the AD Business or a Controlling Interest in AD, all of the following
conditions must be met before or concurrently with the effective date of the
transfer:
(a The transferee has sufficient business experience,
aptitude, and financial resources to act as an area director, agrees to be
bound by all of the terms and conditions of this Agreement (unless Franchisor
exercises its option under subparagraph (e) below to require the transferee
to sign its then current form of agreement), and, with its Managing Owner,
must have completed Franchisor's training program to Franchisor's
satisfaction;
(b AD has paid all amounts owed to Franchisor or its
affiliates and third party creditors and submitted to Franchisor all required
reports and statements;
(c AD or the transferee has paid Franchisor a transfer fee in
the amount of five thousand dollars ($5,000) to defray expenses Franchisor
incurs in connection with the transfer;
(d AD (and its transferring owners) executes a general
release, in form satisfactory to Franchisor, of any and all claims against
Franchisor and its affiliates and their respective shareholders, officers,
directors, employees, and agents;
(e The transferee signs an express written assumption of AD's
obligations pursuant to this Agreement or, at the option of Franchisor,
executes an Area Director Marketing Agreement in the form then-currently
offered by Franchisor, the duration of which will end on the expiration date
of this Agreement and the terms of which may differ materially from any and
all of the terms contained in this Agreement, and which shall supersede this
Agreement in all respects. If a new Area Director Marketing Agreement is
signed, however, the transferee will not be required to pay any additional
initial fee;
(f Franchisor approves the material terms and conditions of
such transfer, including, without limitation, that the price and terms of
payment are not so burdensome as to affect adversely the transferee's
business as an area director of Franchisor;
(g If AD (and the transferring owners) finances any part of
the sale price of the transferred interest, AD and its owners agree that all
obligations of the transferee under any promissory notes, agreements, or
security interests shall be subordinate to the transferee's obligation to pay
fees and other amounts due to Franchisor and its affiliates and otherwise to
comply with this Agreement; and
(h AD (and its transferring owners) executes a noncompetition
covenant in favor of Franchisor and the transferee with terms the same as
those set forth in Section 17.5.
A person will be deemed to have a "Controlling Interest" in AD if that person
has the right to vote twenty-five percent (25%) or more of the voting
securities or other forms of ownership interest of a corporation,
partnership, or other form of entity, or is entitled to receive twenty-five
percent (25%) or more of the net profits of any such entity, or is otherwise
able to direct or cause the direction of that entity's management or
policies.
15.4. Transfer to an Entity. If AD is in full compliance with this
Agreement, AD may transfer this Agreement with Franchisor's prior written
approval, which approval shall not be unreasonably withheld, to a corporation
or other entity of which AD owns not less than two-thirds (2/3) of the
ownership interest. The transfer fee described in Section 15.3(c) will be
waived by Franchisor, and all owners of such entity must sign a Guaranty and
Assumption of AD's Obligations attached as Exhibit II.
15.5. Franchisor's Approval of Transfer. Franchisor has thirty (30)
days from the date of the written notice to approve or disapprove in writing
AD's proposed transfer. Written notice shall mean and include all
documentation necessary to evaluate the transferee. AD acknowledges that the
proposed transferee shall be evaluated for approval by Franchisor based on
the same criteria as are currently being used to assess new area directors of
Franchisor and that such proposed transferee shall be provided, if
appropriate, with such disclosures required by state or federal law.
Franchisor may review all information regarding the Business that AD gives
the transferee and give the transferee copies of any reports that AD has
given Franchisor or Franchisor has made regarding the Business.
15.6. Death or Disability of Area Director. Upon the death or
permanent disability of AD (or a Managing Owner of AD), the personal
representative of such person shall transfer his or her interest in this
Agreement or such interest in AD to an approved third party. Such
disposition of this Agreement or such interest (including, without
limitation, transfer by bequest or inheritance) shall be completed within a
reasonable time, not to exceed six (6) months from the date of death or
permanent disability (unless extended by probate proceedings), and be subject
to all the terms and conditions applicable to transfers contained in this
Section. Failure to transfer the interest in this Agreement or such interest
in AD within said period of time shall constitute a breach of this
Agreement. The term "permanent disability" means a mental or physical
disability, impairment, or condition that prevents AD or the Managing Owner
from performing the essential functions of AD.
15.7. Right of First Refusal. In the event AD (or, if applicable, an
owner) wishes to sell, transfer, gift, assign, or otherwise dispose of any
interest in this Agreement or in AD, or all or a substantial portion of the
assets of the Business, AD agrees to grant to Franchisor a thirty (30) day
right of first refusal to purchase such rights, interest, or assets on the
same terms and conditions as are contained in the written offer to purchase
submitted to AD by a bona fide proposed purchaser; provided, however, the
following additional terms and conditions shall apply:
(a AD shall notify Franchisor of such offer by sending a
written notice to Franchisor enclosing a copy of the written offer signed by
the bona fide proposed purchaser;
(b The thirty (30) day right of first refusal period will run
concurrently with the period in which Franchisor has to approve or disapprove
the proposed transferee;
(c Such right of first refusal arises for each proposed
transfer, and any material change in the terms or conditions of the proposed
transfer, even if to the same bona fide proposed purchaser, shall be deemed a
separate offer for which a new thirty (30) day right of first refusal shall
be given to Franchisor;
(d If the consideration or manner of payment offered by a
third party is such that Franchisor could not reasonably be expected to
furnish the same, then Franchisor may purchase the interest which is proposed
to be sold for the reasonable cash equivalent. If the parties cannot agree
within a reasonable time on the cash consideration, an independent appraiser
shall be designated by Franchisor, whose determination will be binding upon
the parties. All expenses of the appraiser shall be paid for equally by
Franchisor and AD; and
(e If Franchisor chooses not to exercise its right of first
refusal, Franchisee shall be free to complete the sale, transfer, or
assignment, subject to compliance with Sections 15.3 and 15.5. Absence of a
reply to AD's notice of a proposed sale within the thirty (30) day period is
deemed a waiver of such right of first refusal but not a waiver of the
required compliance with Sections 15.3 and 15.5.
15.8. Transfers of Prime Lease or Sublease Interest. In the event of a
proposed transfer, as that term is defined in Section 15.2, of all or any
portion of the AD's interest in a Prime Lease or Sublease or an Assignment,
the AD agrees that Section 15 of this Agreement will apply to such proposed
transfer (other than the transfer fee) and agrees to be bound by such
provisions with respect to the transfer.
16. TERM AND EXPIRATION
16.1. Term. The primary term of this Agreement is for a period of ten
(10) years from the Effective Date, unless sooner terminated as provided
herein.
16.2. Renewal. At the end of the primary term, AD shall have the option
to renew its area director rights for an additional ten (10) year term, so
long as AD:
(a At least sixty (60) days prior to expiration of the term,
executes the form of Area Director Marketing Agreement then in use by
Franchisor, which agreement may contain terms materially different from those
in this Agreement; provided that AD shall not be required to pay a new
Initial Fee and commission percentages and definition of the Territory will
not be altered;
(b Has complied with all provisions of this Agreement during
the primary term, including the payment on a timely basis of all fees due.
"Compliance" shall mean, at a minimum, that AD has not received any written
notification from Franchisor of a breach of this Agreement more than three
(3) times during the primary term;
(c Is not in default or under notification of breach of this
Agreement at the time it gives notice under Section 16.4;
(d Executes a general release, in a form satisfactory to Franchisor,
of any and all claims against Franchisor and its affiliates, and their
respective shareholders, officers, directors, employees, and agents, arising
out of or relating to this Agreement; and
(e Has agreed on a new Development Quota for the additional
term in accordance with Section 16.3.
16.3. New Development Quota.
(a In addition to those items listed in Section 16.2, this
Agreement may be renewed only if AD and Franchisor have agreed on a new
Development Quota for the additional term at least ninety (90) days prior to
expiration of the primary term.
(b If Franchisor proposes a new Development Quota for the
additional term that results in excess of one (1) additional Restaurant per
twenty-five thousand (25,000) population in the Territory, AD may submit the
matter to arbitration before and in accordance with the rules of the American
Arbitration Association in order to determine whether the proposed new
Development Quota is reasonable. AD shall not have the right, however, to
submit this matter to arbitration if Franchisor proposes a new Development
Quota for the additional term that is less than or equal to one (1)
additional Restaurant per twenty-five thousand (25,000) population in the
Territory. The decision of the arbitrator shall be non-appealable,
conclusive, and binding on all parties. The arbitration fee shall be split
equally by Franchisor and AD. Each party shall be responsible for any other
expenses it incurs in association with such arbitration, including attorneys'
and expert witness fees, notwithstanding provisions of Section 19 to the
contrary. The arbitration shall be held in Denver, Colorado.
(c In the event that AD is not satisfied with the decision of
the arbitration, AD shall have fifteen (15) days from the date that the
arbitration decision is rendered to waive its option to renew its area
director rights.
(d If AD has notified Franchisor of its intent to renew as
provided in Section 16.4, and so long as a demand for arbitration has been
filed prior to the expiration of the primary term and the parties are
diligently pursuing such arbitration, this Agreement shall automatically be
extended until fifteen (15) days following the date that the arbitration
award is rendered.
16.4. Exercise of Renewal Option. AD may exercise its option to renew
by giving written notice of such exercise to Franchisor not more than one
hundred eighty (180) days nor less than one hundred twenty (120) days prior
to the expiration of the primary term.
16.5. Conditions of Refusal. Franchisor shall not be obligated to
offer AD renewal upon the expiration of this Agreement if AD fails to comply
with any of the above conditions of renewal. In such event, except for
failure to execute the then-current Area Director Marketing Agreement,
Franchisor shall give AD notice of expiration at least sixty (60) days prior
to the expiration of the term, and such notice shall set forth the reasons
for such refusal to offer renewal. Upon the expiration of this Agreement, AD
shall comply with the provisions of Section 17.3.
17. TERMINATION
17.1. By Area Director. AD may terminate this Agreement at any time
during its term with one hundred eighty (180) days' advance written notice to
Franchisor.
17.2. By Franchisor. Franchisor shall have the right to terminate this
Agreement, effective upon delivery of written notice of termination to AD,
unless otherwise noted below (subject to any state laws to the contrary, in
which case state law shall prevail), if AD (or any of its shareholders,
members, owners, managers, or partners or the Managing Owner):
(a Fails to satisfactorily complete the training program as
provided in Section 7.1;
(b Has made any material misrepresentation or omission in its
application to be an area director or in operating as an area director;
(c Fails to comply with any requirements under the federal and
state franchise laws, including, but not limited to, communicating in
written, verbal, or other form to any prospective Franchisee any information
or presentation which states or suggests a specific level or range of
potential or actual sales, income, gross or net profits, food costs, labor
costs, or other operating costs unless that information or presentation is
identical to that contained in Franchisor's offering circular and other
disclosure documents;
(d Fails to meet the Development Quota set forth in Exhibit I
and does not correct such failure within ninety (90) days after written
notice of such failure to comply is delivered to AD;
(e Fails to comply with any other provision of this Agreement
or any mandatory specification, standard, or operating procedure prescribed
by Franchisor and does not correct such failure within thirty (30) days after
written notice of such failure to comply is delivered to AD;
(f Surrenders, transfers control of, or makes an unauthorized
transfer of this Agreement or an ownership interest in AD or abandons or
fails actively to operate the Business;
(g Is convicted by a trial court of or pleads no contest to a
felony or any other crime or offense that is, in the opinion of Franchisor,
likely to affect adversely the goodwill associated with the Marks or engages
in any conduct which might adversely affect the reputation of QUIZNO'S
Restaurants or the goodwill associated with the Marks;
(h Is declared bankrupt or insolvent, voluntarily institutes a
bankruptcy proceeding under the Bankruptcy Code, or is adjudicated bankrupt
as a result of an involuntary petition in bankruptcy being filed against it.
(This provision might not be enforceable under federal bankruptcy law, 11
U.S.C. §101 et seq.);
(i Abandons or ceases to operate the AD Business for a period
of thirty (30) consecutive days or any shorter period that indicates an
intent by AD to discontinue operation of the AD Business, unless precluded
from doing so by an event beyond AD's reasonable control (other than for
financial reasons), or abandons any Franchised Location owned by AD;
(j Has received three (3) notices of default from Franchisor
within a twelve (12) month period, regardless of whether the defaults were
cured by AD;
(k Defaults under the terms and conditions of any Prime Lease,
Sublease, or Assignment and fails, upon request from Franchisor, to assign
all or a portion of the AD's interest in such Prime Lease and any related
Sublease or Assignment to Franchisor or one of its affiliates within five (5)
days after the Franchisor's notifying AD of such request. If AD fails to
assign all of its interest(s) as requested by Franchisor within five (5) days
after Franchisor's notification, Franchisor may act as Attorney in Fact with
respect to such assignment, and AD hereby appoints the Franchisor to act as
its attorney in fact for such assignment, which appointment is coupled with
an interest. In the event that any such leasehold interest is assigned to
Franchisor or one of its affiliates, all funds held by AD on behalf of a
Franchisee under a Sublease or an Assignment, including, but not limited to,
all security, damage, or other deposits, shall be transferred to Franchisor
immediately; or
(l Fails to pay any amounts due Franchisor or its affiliates
within ten (10) days after receiving notice that such fees or amounts are
overdue.
17.3. Rights and Obligations of Area Director Upon Termination or
Expiration. Upon termination of this Agreement, whether pursuant to Section
17.1 or 17.2, or upon expiration of this Agreement pursuant to Section 16, AD
agrees:
(a To pay Franchisor within fifteen (15) days after the
effective date of termination or expiration of this Agreement, or such later
date that the amounts due to Franchisor are determined, such fees, amounts
owed for purchases by AD from Franchisor or its affiliates, interest due on
any of the foregoing, and all other amounts owed to Franchisor or its
affiliates which are then unpaid;
(b To refrain from, directly or indirectly, at any time or in
any manner (except with respect to QUIZNO'S Restaurant franchises owned and
operated by AD), identifying itself or any business as a current area
director or authorized agent of Franchisor or its affiliates, using any ▇▇▇▇,
any colorable imitation thereof, or other indicia of a QUIZNO'S Restaurant in
any manner or for any purpose, or utilizing for any purpose any trade name,
trademark or service ▇▇▇▇, or other commercial symbol that suggests or
indicates a connection or association with Franchisor or its affiliates;
(c To immediately deliver to Franchisor all past and present
franchise sales leads and records and all contracts, acknowledgments of
receipt, and other information and records related to Franchisees of
Franchisor in the Territory;
(d To immediately deliver to Franchisor all advertising
materials, the AD Manual, and all other manuals, forms, offering circulars,
franchise sales brochures, and other materials containing any ▇▇▇▇ or
otherwise identifying or relating to the sale or service of QUIZNO'S
Restaurants;
(e To refrain from communicating in any manner with
Franchisees concerning Franchisor or obligations arising from this Agreement
or the Franchise Agreement, except as expressly authorized by Franchisor;
(f To take such action required to cancel all fictitious or
assumed names or equivalent registrations relating to AD's use of any ▇▇▇▇;
(g To notify the telephone company and all telephone directory
publishers of the termination or expiration of AD's right to use any
telephone number and any regular, classified, or other telephone directory
listings associated with any ▇▇▇▇ and to authorize their transfer to
Franchisor or its designee. AD acknowledges that, as between it and
Franchisor, Franchisor has the sole rights to and interest in all telephone,
telecopy, or facsimile machine numbers and directory listings associated with
any ▇▇▇▇. AD authorizes Franchisor, and hereby appoints Franchisor and any
of its officers as AD's attorney-in-fact, to direct the telephone company and
all telephone directory publishers to transfer any telephone, telecopy, or
facsimile machine numbers and directory listings relating to AD's Business to
Franchisor at its direction, should AD fail or refuse to do so, and the
telephone company and all telephone directory publishers may accept such
direction or this Agreement as conclusive evidence of Franchisor's exclusive
rights in such telephone numbers and directory listings and Franchisor's
authority to direct their transfer; and
(h Furnish Franchisor, within thirty (30) days after the
effective date of termination or expiration, with evidence satisfactory to
Franchisor of AD's compliance with the foregoing obligations.
17.4. Confidential Information. AD agrees that, upon termination or
expiration of this Agreement, AD shall immediately cease to use any
Confidential Information disclosed pursuant to this Agreement or as a result
of its relationship with Franchisor in any business or otherwise (except in
connection with the operation of a QUIZNO'S Restaurant pursuant to a
Franchise Agreement with Franchisor) and return to Franchisor all copies of
the AD Manual and any other confidential materials loaned to AD by Franchisor.
17.5. Covenant Not to Compete. Upon termination or expiration of this
Agreement, AD (and its shareholders, officers, directors, owners, members,
managers, or partners, and the spouses of these individuals and AD
(collectively, "Bound Parties")) agrees that, for two (2) years commencing on
the later of the effective date of termination or expiration or the date on
which AD and all Bound Parties begin to comply with this Section, neither AD
nor any Bound Party shall have any direct or indirect interest (through an
immediate family member of AD or any Bound Party or otherwise) as a disclosed
or beneficial owner, investor, partner, director, officer, employee,
consultant, representative, agent, or in any other capacity in any
Competitive Business located in any territory in which Franchisor or its
affiliates or area directors conduct business at the later of the time of
termination or expiration or the date on which AD and all Bound Parties begin
to comply with this Section. The restrictions of this Section shall not
apply to the ownership of shares of a class of securities listed on a stock
exchange or traded on the over-the-counter market that represent five percent
(5%) or less of the number of shares of that class of securities issued and
outstanding. AD and each Bound Party expressly acknowledge that they possess
skills and abilities of a general nature and have other opportunities for
exploiting such skills. Consequently, enforcement of the covenants made in
this Section will not deprive them of their personal goodwill or ability to
earn a living.
17.6. No Further Right to Payment. Upon expiration or termination of
this Agreement, AD forfeits all fees paid to Franchisor and remains liable to
Franchisor for all amounts then due to Franchisor. AD shall have no further
right to receive payment of commissions or Royalty Fees from Franchisor,
except for those commissions or Royalty Fees which have been fully earned by
AD up through the date of expiration or termination. For purposes of this
Agreement, "fully earned" commissions shall mean commissions due on franchise
sales for which all conditions described in Section 6.1 have been fulfilled
by AD for the purchase of a franchise for a QUIZNO'S Restaurant to be located
within the Territory. "Fully earned" Royalty Fees shall mean those Royalty
Fees which accrue up through the date of expiration or termination which are
otherwise owed to AD. Franchisor shall have the right immediately to assume
control of and manage all franchise sales in the Territory and to receive all
Royalty Fees from Franchisees in the Territory. Any fully earned commissions
or Royalty Fees which are due to AD will be paid in accordance with the
provisions of Section 6.
17.7. Continuing Obligations. All obligations of Franchisor and AD and
the Bound Parties that expressly or by their nature survive the expiration or
termination of this Agreement shall continue in full force and effect
subsequent to and notwithstanding its expiration or termination and until
they are satisfied or by their nature expire.
17.8. State and Federal Law. The parties acknowledge that, in the
event the terms of this Agreement regarding termination or expiration are
inconsistent with applicable state or federal law, such law shall govern AD's
rights regarding termination or expiration of this Agreement.
18. RELATIONSHIP OF THE PARTIES
18.1. Relationship of the Parties. It is understood and agreed by the
parties that this Agreement does not create a fiduciary relationship between
them, that the parties are independent contractors, that Franchisor appoints
AD as its special agent for a particular purpose, and that nothing in this
Agreement is intended to make either party a general agent, subsidiary, joint
venturer, partner, employee, or servant of the other for any purpose. AD
shall conspicuously identify itself in all dealings with Franchisees,
prospective Franchisees, lessors, contractors, suppliers, public officials,
and others as the owner of its own Business under an Area Director Marketing
Agreement with Franchisor and shall place the notices of independent
ownership required by Franchisor on signs, forms, stationery, advertising,
and other materials.
18.2. Payment of Third Party Obligations. Neither Franchisor nor AD
shall make any express or implied agreements, guaranties, or representations,
or incur any debt, in the name or on behalf of the other or represent that
their relationship is other than franchisor and special agent; neither
Franchisor nor AD shall be obligated by or have any liability under any
agreements or representations made by the other that are not expressly
authorized under this Agreement; nor shall Franchisor be obligated for any
damages to any person or property directly or indirectly arising out of the
operation of AD's Business, unless (and then only to the extent) caused by
Franchisor's negligent or willful action or failure to act.
18.3. Independent Contractors. AD may delegate its duties under this
Agreement to independent contractors provided that AD first receives written
approval from Franchisor and complies with all state laws which require
broker or other registrations for such persons. Franchisor reserves the
right at any time to withdraw the approval of any independent contractor
engaged by AD to fulfill its duties and obligations under this Agreement.
18.4. Indemnification. AD agrees to indemnify and reimburse Franchisor
and its affiliates, and their respective stockholders, directors, officers,
employees, agents, and assignees (the "Indemnified Parties") for, and hold
the Indemnified Parties harmless against, any loss, liability, taxes, or
damages (actual or consequential) and all reasonable costs and expenses of
defending any claim brought against any of them or any action in which any of
them is named as a party (including, without limitation, reasonable
accountants', attorneys', and expert witness fees, costs of investigation and
proof of facts, court costs, other litigation expenses, and travel and living
expenses), which any of them may suffer, sustain, or incur by reason of,
arising from, or in connection with any acts, omissions, or activities of AD
or any of its employees or independent contractors unless (and then only to
the extent) caused by the Indemnified Party's negligence. Each Indemnified
Party shall have the right to defend any such claim against it at AD's
expense and agree to settlements or take any other remedial, corrective, or
other actions. This indemnity shall continue in full force and effect
subsequent to and notwithstanding the expiration or termination of this
Agreement.
19. DISPUTES
19.1. Governing Law/Consent to Venue and Jurisdiction. Except to the
extent governed by the United States Trademark Act of 1946 (▇▇▇▇▇▇ Act, 15
U.S.C. § 1051 et seq.) or other federal law, this Agreement shall be
interpreted under the laws of the State of Colorado, and any dispute between
the parties, whether arising under this Agreement or from any other aspect of
the parties' relationship, shall be governed by and determined in accordance
with the substantive laws of the State of Colorado, which laws shall prevail
in the event of any conflict of law. AD and Franchisor have negotiated
regarding a forum in which to resolve any disputes arising between them and
have agreed to select a forum in order to promote stability in their
relationship. Therefore, if a claim is asserted in any legal proceeding
involving the AD or any Bound Party and Franchisor, the parties agree that
the exclusive venue for disputes between them shall be in the District Court
for the City & County of Denver, Colorado, or the United States District
Court for the District of Colorado, and each party waives any objection it
might have to the personal jurisdiction of or venue in such courts.
19.2. Waiver of Jury Trial. Franchisor, AD, and the Bound Parties each
waive their right to a trial by jury. AD, the Bound Parties, and Franchisor
acknowledge that the parties' waiver of jury trial rights provides the
parties with the mutual benefit of uniform interpretation of this Agreement
and resolution of any dispute arising out of this Agreement or any aspect of
the parties' relationship. AD, the Bound Parties, and Franchisor further
acknowledge the receipt and sufficiency of mutual consideration for such
benefit.
19.3. Limitation of Claims. AD and the Bound Parties agree not to
bring any claim asserting that any of the Marks are generic or otherwise
invalid. Except with regard to AD's obligation to pay Franchisor and its
affiliates amounts due pursuant to this Agreement or otherwise, any claims
between the parties must be commenced within one (1) year from the date on
which the party asserting the claim knew or should have known of the facts
giving rise to the claim, or such claim shall be barred. The parties
understand that such time limit might be shorter than otherwise allowed by
law. AD and the Bound Parties agree that their sole recourse for claims
arising between the parties shall be against Franchisor or its successors and
assigns. AD and the Bound Parties agree that the shareholders, directors,
officers, employees, and agents of Franchisor and its affiliates (other than
AD) shall not be personally liable nor named as a party in any action between
Franchisor and AD or any Bound Party. The parties further agree that, in
connection with any such proceeding, each must submit or file any claim which
would constitute a compulsory counterclaim (as defined by Rule 13 of the
Federal Rules of Civil Procedure) within the same proceeding as the claim to
which it relates. Any such claim which is not submitted or filed as
described above will be forever barred. The parties agree that any
proceeding will be conducted on an individual, not a class-wide, basis, and
that a proceeding between Franchisor and AD or the Bound Parties may not be
consolidated with any other proceeding between Franchisor and any other
person or entity. No party will be entitled to an award of punitive or
exemplary damages (provided that this limitation shall not apply to statutory
penalties such as those set forth in 15 U.S.C. § 1117(a)). No previous
course of dealing shall be admissible to explain, modify, or contradict the
terms of this Agreement. No implied covenant of good faith and fair dealing
shall be used to alter the express terms of this Agreement.
20. MISCELLANEOUS PROVISIONS
20.1. Invalidity. If any provision of this Agreement is held invalid
by any tribunal in a final decision from which no appeal is or can be taken,
such provision shall be deemed modified to eliminate the invalid element,
and, as so modified, such provision shall be deemed a part of this Agreement
as though originally included. The remaining provisions of this Agreement
shall not be affected by such modification.
20.2. Modification. No amendment, waiver, or modification of this
Agreement shall be effective unless it is in writing and signed by the party
or parties against whom such amendment or waiver is to be enforced. AD
acknowledges that Franchisor may modify its standards and specifications and
operating and marketing techniques set forth in the AD Manual unilaterally
under any conditions and to the extent to which Franchisor deems necessary to
protect, promote, or improve the Marks and the quality of the Licensed
Methods.
20.3. Attorneys' Fees. In the event of any default on the part of
either party to this Agreement, in addition to all other remedies, the party
in default will pay the prevailing party (as determined by the decision-maker
in the proceeding) all amounts due and all damages, costs, and expenses,
including reasonable attorneys' fees, incurred by the prevailing party in any
legal action or other proceeding as a result of such default, plus interest
at the lesser of two percent (2%) per month or the highest commercial
contract interest rate allowable by law accruing from the date of such
default.
20.4. Injunctive Relief. Nothing herein shall prevent Franchisor or AD
from seeking injunctive relief in appropriate cases to prevent irreparable
harm.
20.5. No Waiver. No waiver of any condition or covenant contained in
this Agreement, or failure to exercise a right or remedy, by AD or Franchisor
shall be considered to imply or constitute a further waiver by Franchisor or
AD of the same or any other condition, covenant, right, or remedy.
20.6. No Right to Set Off. AD shall not be allowed to set off amounts
owed to Franchisor for fees or other amounts due against any monies owed to
AD, which right of set off is hereby expressly waived by AD.
20.7. Effective Date. Regardless of the date first written above, this
Agreement shall not be effective until executed by Franchisor, as evidenced
by dating and signing by an officer of Franchisor.
20.8. Review of Agreement. AD acknowledges that it has had a copy of
Franchisor's UFOC in its possession for not less than ten (10) full business
days, and this Agreement in its possession for not less than five (5) full
business days, during which time AD has had the opportunity to submit the
same for review and advice by a professional of AD's choosing before freely
executing this Agreement.
20.9. Entire Agreement. This Agreement (which includes the attachments
and Exhibits expressly incorporated) contains the entire agreement between
the parties and supersedes any and all prior agreements concerning the
subject matter covered by this Agreement. AD agrees and understands that
Franchisor shall not be liable or obligated for any oral representations or
commitments made prior to this Agreement's execution or for claims of
negligent or fraudulent misrepresentation and that no modifications of this
Agreement shall be effective except those in writing signed by both parties.
Franchisor does not authorize and will not be bound by any representation of
any nature other than those expressed in this Agreement. AD further
acknowledges and agrees that no representations have been made to it by
Franchisor regarding projected sales volumes, market potential, revenues,
profits of AD's Business, or operational assistance other than as stated in
this Agreement or in any disclosure document provided in connection with this
Agreement. AD acknowledges and agrees that any delegation of Franchisor's
duties and obligations to area directors does not assign or confer any rights
under any Franchise Agreement (unless entered into between AD and Franchisor)
upon AD and that AD is not a third party beneficiary of any Franchise
Agreement between Franchisor and a Franchisee who is not also AD. Any
policies that Franchisor adopts and implements from time to time are subject
to change, are not a part of this Agreement, and are not binding on
Franchisor.
20.10....Notices. All notices required to be given under this
Agreement shall be given in writing, by certified mail, return receipt
requested, or by an overnight delivery service providing documentation of
receipt, to addresses set forth in the first paragraph of this Agreement or,
with respect to notices to AD, to the address of the AD Business, or at such
other addresses as Franchisor or AD may designate from time to time, and
shall be deemed delivered (a) on the date shown on the return receipt or in
the courier's records as the date of delivery or (b) on the date of first
attempted delivery, if actual delivery cannot for any reason be made.
20.11....Acknowledgment. BEFORE SIGNING THIS AGREEMENT, AD SHOULD READ
IT CAREFULLY WITH THE ASSISTANCE OF LEGAL COUNSEL. AD ACKNOWLEDGES THAT:
(A) THE SUCCESS OF THIS BUSINESS VENTURE INVOLVES SUBSTANTIAL
RISKS AND DEPENDS UPON AD'S ABILITY AS AN INDEPENDENT BUSINESS PERSON AND ITS
ACTIVE PARTICIPATION IN THE DAILY AFFAIRS OF THE BUSINESS, AND
(B) NO ASSURANCE OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN GIVEN
AS TO THE POTENTIAL SUCCESS OF SUCH BUSINESS VENTURE OR THE EARNINGS LIKELY
TO BE ACHIEVED, AND
(C) NO STATEMENT, REPRESENTATION, OR OTHER ACT, EVENT, OR
COMMUNICATION, EXCEPT AS SET FORTH IN THIS DOCUMENT AND IN ANY OFFERING
CIRCULAR SUPPLIED TO AD, IS BINDING ON FRANCHISOR IN CONNECTION WITH THE
SUBJECT MATTER OF THIS AGREEMENT.
[The remainder of this page is intentionally left blank.]
IN WITNESS WHEREOF, the parties have executed, sealed, and delivered
this Agreement in counterparts on the date first mentioned above.
THE QUIZNO'S FRANCHISE COMPANY, AREA DIRECTOR:
a Colorado corporation
By:___________________________ By:_________________________
Its:_____________________ Its:___________________
Date:_________________________ Date:_______________________
EXHIBIT I
RIDER
TO AREA DIRECTOR MARKETING AGREEMENT
BETWEEN THE QUIZNO'S FRANCHISE COMPANY
AND
DATED
1. Territory. The Territory referred to in Section 2.1 of the
Agreement shall be the following geographic area:
2. Initial Fee. The Initial Fee payable to Franchisor by AD under
Section 5.1 of the Agreement shall consist of the following amounts: (i) ten
thousand dollars ($10,000) which pays for the initial training program
("Training Portion"); and (ii) an amount equal to the product of the agreed
upon estimated population within the Territory and the price per unit of
population, which shall be $0.07 ("Population Portion"), calculated as
follows:
A. Population Estimate = ________________
B. Price Per Person
=
$0.07
C. (Population Portion) (AxB) =_________________
D. Plus $10,000
(Training Portion)
$10,000
E. Plus $1,000 Finance Administration Fee (If applicable) =
INITIAL FEE (C+D+E) = =================
Notwithstanding the foregoing, the price per unit of population may be
increased proportionately if there are existing Restaurants operating in the
Territory at the time AD signs this Agreement.
Unless otherwise agreed, the Initial Fee is payable in cash or
certified funds or by wire transfer. Franchisor and AD agree that the
Population Portion of the Initial Fee will not be subject to change for any
reason, including subsequent revisions of the Bureau of Census population
estimates.
3. Development Quota. AD shall meet the following Development Quota by
the last day of each Sales Quarter during the term of this Agreement:
Sales Year Sales Quarter Cumulative Number of
QUIZNO'S Restaurants to
be Open and in Operation
in the Territory
("Development Quota")
2001 First _______________________
Second _______________________
Third _______________________
Fourth _______________________
2002 First _______________________
Second _______________________
Third _______________________
Fourth _______________________
2003 First _______________________
Second _______________________
Third _______________________
Fourth _______________________
2004 First _______________________
Second _______________________
Third _______________________
Fourth _______________________
2005 First _______________________
Second _______________________
Third _______________________
Fourth _______________________
2006 First _______________________
Second _______________________
Third _______________________
Fourth _______________________
2007 First _______________________
Second _______________________
Third _______________________
Fourth _______________________
2008 First _______________________
Second _______________________
Third _______________________
2009 First _______________________
Second _______________________
Third _______________________
Fourth _______________________
2010 First _______________________
Second _______________________
Third _______________________
Fourth _______________________
2011 First _______________________
Second _______________________
Third _______________________
Fourth _______________________
TOTAL _______________________
QUIZNO'S Restaurants, QUIZNO'S Express Restaurants, and Company Owned
Restaurants count toward fulfillment of AD's cumulative Development Quota.
THE QUIZNO'S FRANCHISE COMPANY, AREA DIRECTOR
a Colorado corporation
(Print Name)
By:_______________________________ By:______________________________
Its: ________________________ Its:________________________
EXHIBIT II
GUARANTY AND ASSUMPTION OF
AREA DIRECTOR'S OBLIGATIONS
In consideration of, and as an inducement to, the execution of the
above Area Director Marketing Agreement (the "Agreement") by THE QUIZNO'S
FRANCHISE COMPANY ("Franchisor"), each of the undersigned ("Guarantors")
personally and unconditionally (1) guarantees to Franchisor and its
affiliates and their successors and assigns, for the term of the Agreement
and thereafter as provided in the Agreement, that Area Director defined in
the Agreement ("AD") shall punctually pay and perform each and every
undertaking, agreement, and covenant set forth in the Agreement and (2)
agrees personally to be bound by, and personally liable for the breach of,
each and every provision in the Agreement, including, but not limited to,
those specifically identified below.
1. Waiver. Each of the undersigned waives:
(a) acceptance and notice of acceptance by Franchisor and its
affiliates of the foregoing undertakings;
(b) notice of demand for payment of any indebtedness or
nonperformance of any obligations hereby guaranteed;
(c) protest and notice of default to any party with respect to
the indebtedness or nonperformance of any obligations hereby
guaranteed; and
(d) any right he or she may have to require that an action be
brought against AD or any other person as a condition of liability.
2. Consents. Each of the undersigned consents and agrees that:
(a) his or her direct and immediate liability under this
guaranty shall be joint and several;
(b) he or she shall render any payment or performance required
under the Agreement upon demand if AD fails or refuses punctually to do
so;
(c) such liability shall not be contingent or conditioned upon
pursuit by Franchisor or its affiliates of any remedies against AD or
any other person;
(d) such liability shall not be diminished, relieved, or
otherwise affected by any extension of time, credit, or other
indulgence which Franchisor or its affiliates may from time to time
grant to AD or to any other person, including, without limitation, the
acceptance of any partial payment or performance or the compromise or
release of any claims, none of which shall in any way modify or amend
this guaranty, which shall be continuing and irrevocable during the
term of the Agreement; and
(e) he or she shall be bound by the restrictive covenants,
confidentiality provisions, and indemnification provisions contained in
Sections 11, 12, 17.4, 17.5, and 18.4 of the Agreement; and
(f) the provisions contained in Section 19, and the costs and
attorneys' fees provision contained in Section 20.3, of the Agreement
shall govern this Guaranty, and such provisions are incorporated into
this Guaranty by this reference.
IN WITNESS WHEREOF, each of the undersigned has affixed his or her
signature, effective as of the ____ day of _______________________.
PERCENTAGE OF OWNERSHIP GUARANTOR(S)
INTERESTS IN AREA DIRECTOR
___________________________________
(Print Name)
___________________________________
Signature
___________________________________
___________________________________
___________________________________
Address
___________________________________
Telephone Number
___________________________________
___________________________________
___________________________________
(Print Name)
Signature
___________________________________
___________________________________
___________________________________
Address
___________________________________
Telephone Number
EXHIBIT III
STATEMENT OF OWNERSHIP
Area Director:_________________________________________________________________
_______________________________________________________________________________
Trade name (if different from above):__________________________________________
_______________________________________________________________________________
Form of Ownership
(Check One)
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_____ Individual _____ Partnership _____ Corporation _____ Limited Liability Company
_____ Other (List):
If a Partnership, provide name and address of each partner showing
percentage owned, whether active in management, and indicate the state in
which the partnership was formed.
If a Corporation, give the state and date of incorporation, the names
and addresses of each officer and director, and list the names and addresses
of every shareholder showing what percentage of stock is owned by each.
If a Limited Liability Company, give the state and date of formation,
the name and address of the manager, and list the names and addresses of
every member and the percentage of membership interest held by each member.
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
_______________________________________________________________________________
AD acknowledges that this Statement of Ownership applies to the
QUIZNO'S AD Business authorized under the Area Director Marketing Agreement.
Use additional sheets if necessary. Any and all changes to the above
information must be reported to (and in some cases first approved by)
Franchisor in writing.
Date: ______________________________ Name__________________________