FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
A Delaware Limited Liability Company
8001 Arista Place, Suite 600
Broomfield, CO 80021
(720) 599-3350
www.mrsfields.com
www.mrsfieldsfranchise.com
generalquestions@famousbrandsintl.com
As a franchisee, you will operate a Mrs. Fields Cookie Store that offers a variety of specially prepared food
items, such as cookies, brownies, muffins and beverages.
The total investment necessary to begin operation of a Mrs. Fields Cookie Store franchise ranges from
$200,000 to $430,500. This includes $17,500 to $27,500 that must be paid to us or an affiliate.
We also offer area director franchises within certain limited territories. If you qualify for an area director
franchise and enter into an area director agreement with us, you will provide certain sales services to us, and
certain site and support services to Mrs. Fields Cookie® franchisees, within a specific territory, in exchange
for a share of various franchise fees. The total investment necessary to begin operation of an area director
franchise is $101,000 to $1,037,000. This includes approximately $100,000 to $1 million that must be paid to
us or our Affiliates. This range reflects that the initial area director fee varies widely depending on variables
such as the size and population of the territory that you are granted. These ranges do not include any franchise
fees that would be payable to our Affiliates if you are simultaneously purchasing an area director franchise
from our affiliate, TCBY Systems, LLC.
This disclosure document summarizes certain provisions of your franchise agreement and other information in
plain English. Read this disclosure document and all accompanying agreements carefully. You must receive
this disclosure document at least 14 calendar days before you sign a binding agreement with, or make any
payment to, the franchisor or an affiliate in connection with the proposed franchise sale. Note, however, that
no governmental agency has verified the information contained in this document.
You may wish to receive your disclosure document in another format that is more convenient for you. To
discuss the availability of disclosures in different formats, contact our Development Department, at 8001
Arista Place, Suite 600, Broomfield, CO 80021, (888) 728-6999 or generalquestions@famousbrandsintl.com.
The terms of your contract will govern your franchise relationship. Don’t rely on the disclosure document
alone to understand your contract. Read all of your contract carefully. Show your contract and this disclosure
document to an advisor, like a lawyer or an accountant.
Buying a franchise is a complex investment. The information in this disclosure document can help you make
up your mind. More information on franchising, such as “A Consumer’s Guide to Buying a Franchise,” which
can help you understand how to use this disclosure document, is available from the Federal Trade
Commission. You can contact the FTC at 1-877-FTC-HELP or by writing to the FTC at 600 Pennsylvania
Avenue, NW, Washington, D.C. 20580. You can also visit the FTC’s home page at www.ftc.gov for
additional information. Call your state agency or visit your public library for other sources of information on
franchising.
There may also be laws on franchising in your state. Ask your state agencies about them.
Issuance Date: March 26, 2014, as amended July 16, 2014.
MFF FDD – 3/2014
i
STATE COVER PAGE
Your state may have a franchise law that requires a franchisor to register or file with a state franchise
administrator before offering or selling in your state. REGISTRATION OF A FRANCHISE BY A STATE
DOES NOT MEAN THAT THE STATE RECOMMENDS THE FRANCHISE OR HAS VERIFIED THE
INFORMATION IN THIS DISCLOSURE DOCUMENT.
Call the state franchise administrator listed in Exhibit A for information about the franchisor, or about
franchising in your state.
MANY FRANCHISE AGREEMENTS DO NOT ALLOW YOU TO RENEW UNCONDITIONALLY
AFTER THE INITIAL TERM EXPIRES. YOU MAY HAVE TO SIGN A NEW AGREEMENT WITH
DIFFERENT TERMS AND CONDITIONS IN ORDER TO CONTINUE TO OPERATE YOUR BUSINESS.
BEFORE YOU BUY, CONSIDER WHAT RIGHTS YOU HAVE TO RENEW YOUR FRANCHISE, IF
ANY, AND WHAT TERMS YOU MIGHT HAVE TO ACCEPT IN ORDER TO RENEW.
Please consider the following RISK FACTORS before you buy this franchise:
1.
THE FRANCHISE AGREEMENT REQUIRES YOU TO RESOLVE DISPUTES WITH US BY
LITIGATION ONLY IN BROOMFIELD, COLORADO. OUT-OF-STATE LITIGATION MAY
FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY
ALSO COST YOU MORE TO LITIGATE WITH US IN BROOMFIELD, COLORADO, THAN IN
YOUR OWN STATE.
2.
THE FRANCHISE AGREEMENT AND AREA DIRECTOR AGREEMENT EACH STATE THAT
COLORADO LAW GOVERNS THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE
SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE
THESE LAWS.
3.
THE AREA DIRECTOR AGREEMENT REQUIRES YOU TO RESOLVE DISPUTES WITH US
FIRST BY NON-BINDING MEDIATION, AND THEN BY LITIGATION, ONLY IN
BROOMFIELD, COLORADO. OUT-OF-STATE MEDIATION AND LITIGATION MAY FORCE
YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO
COST MORE FOR YOU TO MEDIATE OR LITIGATE WITH US IN COLORADO, THAN IN
YOUR OWN STATE.
4.
YOUR SPOUSE MAY BE REQUIRED TO SIGN A GUARANTY, MAKING YOUR SPOUSE
JOINTLY AND INDEPENDENTLY LIABLE FOR THE FINANCIAL OBLIGATIONS UNDER
THE FRANCHISE AGREEMENT OR AREA DIRECTOR AGREEMENT. THIS GUARANTY
PLACES YOUR SPOUSE’S MARITAL AND PERSONAL ASSETS AT RISK IF YOUR
FRANCHISE FAILS.
5.
PER THE AUDITED BALANCE SHEET DATED DECEMBER 28, 2013, SINCE ITS INCEPTION,
MFOC HAS LOST $73,662,000 CAUSING IT TO HAVE A DEFICIT NET WORTH OF
$27,936,000
6.
THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
We use the services of one or more FRANCHISE BROKERS or referral sources to assist us in selling
our franchise. A franchise broker or referral source represents us, not you. We pay this person a fee
for selling our franchise or referring you to us. You should be sure to do your own investigation of this
franchise.
Effective Date: See the next page for state effective dates
MFF FDD – 3/2014
ii
STATE EFFECTIVE DATES
The following states require that the disclosure document be registered or filed with the state, or be
exempt from registration: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New
York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin.
This disclosure document is registered, on file or exempt from registration in the following states having
franchise registration and disclosure laws, with the following effective dates:
State
Effective Date
State
Effective Date
California
July 28, 2014
New York
PENDING
Hawaii
Effective
North Dakota
July 25, 2014
Illinois
July 17, 2014
Rhode Island
July 17, 2014
Indiana
April 15, 2014
South Dakota
April 11, 2014
Maryland
June 6, 2014, as
amended July 31,
2014
Virginia
Michigan
April 14, 2014
Washington
July 17, 2014
Minnesota
July 23, 2014
Wisconsin
July 17, 2014
July 25, 2014
In all other states, the effective date of this disclosure document is the issuance date of March 26, 2014, as
amended July 16, 2014.
MFF FDD – 3/2014
iii
NOTICE REQUIRED BY
STATE OF MICHIGAN
THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS
THAT ARE SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE
FOLLOWING PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE
PROVISIONS ARE VOID AND CANNOT BE ENFORCED AGAINST YOU.
Each of the following provisions is void and unenforceable if contained in any
documents relating to a franchise:
(a)
A prohibition on the right of a franchisee to join an association of franchisees.
(b)
A requirement that a franchisee assent to a release, assignment, novation, waiver,
or estoppel which deprives a franchisee of rights and protections provided in this act. This
shall not preclude a franchisee, after entering into a franchise agreement, from settling any
and all claims.
(c)
A provision that permits a franchisor to terminate a franchise prior to the expiration
of its term except for good cause. Good cause shall include the failure of the franchisee to
comply with any lawful provision of the franchise agreement and to cure such failure after
being given written notice thereof and a reasonable opportunity, which in no event need be
more than 30 days, to cure such failure.
(d)
A provision that permits a franchisor to refuse to renew a franchise without fairly
compensating the franchisee by repurchase or other means for the fair market value at the
time of expiration of the franchisee’s inventory, supplies, equipment, fixtures, and
furnishings. Personalized materials which have no value to the franchisor and inventory,
supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the
franchise business are not subject to compensation. This subsection applies only if: (i) the
term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise
or other agreement from continuing to conduct substantially the same business under
another trademark, service mark, trade name, logotype, advertising, or other commercial
symbol in the same area subsequent to the expiration of the franchise or the franchisee does
not receive at least 6 months’ advance notice of franchisor’s intent not to renew the
franchise.
(e)
A provision that permits the franchisor to refuse to renew a franchise on terms
generally available to other franchisees of the same class or type under similar
circumstances. This section does not require a renewal provision.
THIS MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE
RESIDENTS OF MICHIGAN OR LOCATE THEIR FRANCHISES IN
MICHIGAN.
MFF FDD – 3/2014
iv
(f)
A provision requiring that arbitration or litigation be conducted outside this state.
This shall not preclude the franchisee from entering into an agreement, at the time of
arbitration, to conduct arbitration at a location outside this state.
(g)
A provision which permits a franchisor to refuse to permit a transfer of ownership
of a franchise, except for good cause. This subdivision does not prevent a franchisor from
exercising a right of first refusal to purchase the franchise. Good cause shall include, but is
not limited to:
(i)
The failure of the proposed transferee to meet the franchisor’s then current
reasonable qualifications or standards.
(ii)
The fact that the proposed transferee is a competitor of the franchisor or
subfranchisor.
(iii)
The unwillingness of the proposed transferee to agree in writing to comply with
all lawful obligations.
(iv)
The failure of the franchisee or proposed transferee to pay any sums owing to the
franchisor or to cure any default in the franchise agreement existing at the time of
the proposed transfer.
(h)
A provision that requires the franchisee to resell to the franchisor items that are not
uniquely identified with the franchisor. This subdivision does not prohibit a provision that
grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same
terms and conditions as a bona fide third party willing and able to purchase those assets, nor
does this subdivision prohibit a provision that grants the franchisor the right to acquire the
assets of a franchise for the market or appraised value of such assets if the franchisee has
breached the lawful provisions of the franchise agreement and has failed to cure the breach
in the manner provided in subdivision (c).
(i)
A provision which permits the franchisor to directly or indirectly convey, assign, or
otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless
provision has been made for providing the required contractual services.
The fact that there is a notice of this offering on file with the attorney general does not
constitute approval, recommendation, or endorsement by the attorney general.
Any questions regarding this notice should be directed to the Department of Attorney
General, State of Michigan, 670 Law Building, Lansing, Michigan 48913, telephone
(517) 373 - 7117.
THIS MICHIGAN NOTICE APPLIES ONLY TO FRANCHISEES WHO ARE RESIDENTS OF
MICHIGAN OR LOCATE THEIR FRANCHISES IN MICHIGAN.
MFF FDD – 3/2014
v
TABLE OF CONTENTS
Item
Page
ITEM 1. THE FRANCHISOR AND ANY PARENTS, PREDECESSORS, AND
AFFILIATES ................................................................................................................................ 1
ITEM 2. BUSINESS EXPERIENCE........................................................................................................... 6
ITEM 3. LITIGATION ................................................................................................................................ 6
ITEM 4. BANKRUPTCY............................................................................................................................ 7
ITEM 5. INITIAL FEES .............................................................................................................................. 9
ITEM 6. OTHER FEES ............................................................................................................................. 10
ITEM 7. ESTIMATED INITIAL INVESTMENT .................................................................................... 16
ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES...................................... 21
ITEM 9. FRANCHISEE’S OBLIGATIONS ............................................................................................. 25
ITEM 10. FINANCING ............................................................................................................................. 28
ITEM 11. FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS,
AND TRAINING ....................................................................................................................... 28
ITEM 12. TERRITORY ............................................................................................................................ 38
ITEM 13. TRADEMARKS ....................................................................................................................... 41
ITEM 14. PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION .................................. 42
ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE
FRANCHISE BUSINESS .......................................................................................................... 43
ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL ............................................ 44
ITEM 17. RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION ..................... 45
ITEM 18. PUBLIC FIGURES ................................................................................................................... 51
ITEM 19. FINANCIAL PERFORMANCE REPRESENTATIONS ......................................................... 51
ITEM 20. OUTLETS AND FRANCHISEE INFORMATION ................................................................. 52
ITEM 21. FINANCIAL STATEMENTS .................................................................................................. 59
ITEM 22. CONTRACTS ........................................................................................................................... 59
ITEM 23. RECEIPTS ................................................................................................................................ 59
EXHIBITS
EXHIBIT A
EXHIBIT B
EXHIBIT C
EXHIBIT D
EXHIBIT E
EXHIBIT F
EXHIBIT G
EXHIBIT H
EXHIBIT I
EXHIBIT J
EXHIBIT K
EXHIBIT L
EXHIBIT M
EXHIBIT N
EXHIBIT O
MFF FDD – 3/2014
STATE ADMINISTRATORS AND AGENTS FOR SERVICE OF PROCESS
FRANCHISE AGREEMENT (AND EXHIBITS)
AREA DIRECTOR DISCLOSURE ADDENDUM TO FRANCHISE DISCLOSURE
DOCUMENT
AREA DIRECTOR AGREEMENT (AND EXHIBITS)
CONFIDENTIALITY AGREEMENT
ASSIGNMENT, ASSUMPTION AND CONSENT
TERM PURCHASE ADDENDUM
LEASE ADDENDUM
SUBLEASE AGREEMENT; ASSIGNMENT AND ASSUMPTION OF SUBLEASE
OPERATING PROCEDURES MANUAL TABLE OF CONTENTS
FRANCHISEE INFORMATION
FINANCIAL STATEMENTS
GUARANTEE OF PERFORMANCE
RENEWAL ADDENDUM TO FRANCHISE AGREEMENT
STATE SPECIFIC ADDENDA TO DISCLOSURE DOCUMENT, FRANCHISE
AGREEMENT, AND AREA DIRECTOR AGREEMENT
vi
ITEM 1. THE FRANCHISOR AND ANY PARENTS, PREDECESSORS, AND AFFILIATES
Us; Our Parents and Affiliates; Certain Definitions.
To simplify the language, this disclosure documentuses “we” or “us” to mean Mrs. Fields
Franchising LLC, the franchisor. “You” means the individual, corporation, or other entity that buys a
Mrs. Fields franchise.
Franchisor, Parent and Affiliates
We conduct business under the name Mrs. Fields (and variations of that name). We are a
Delaware limited liability company organized on February 4, 2004.
We are a wholly-owned subsidiary of Mrs. Fields Famous Brands, LLC (“MFFB”). MFFB is a
wholly-owned subsidiary of Mrs. Fields’ Original Cookies, Inc. (“MFOC”), which is a wholly owned
subsidiary of MFC Holdco, Inc. (“Holdco”). In December 2011, as part of its refinance, MFOC became a
wholly-owned subsidiary of Holdco. Z Capital Partners, L.L.C. (“Z Capital”) is the sole owner of
Holdco. Though they are our parent companies, neither Holdco nor Z Capital are involved in franchising
activities.
We have two affiliates: (i) The Mrs. Fields’ Brand, Inc. (“MFBI”), which has owned the Mrs.
Fields trademarks since March 16, 2004; and (ii) TCBY Systems, LLC (“TCBY”), which is the franchisor
for TCBY retail locations. Their principal business address is 8001 Arista Place, Suite 600, Broomfield,
CO 80021.
Agents for Service of Process.
Our agent for service of process at our principal address is Joyce Hrinya. Please see Exhibit A to
this disclosure document for a list of the names and addresses of our agents for service of process in
various other states.
Predecessors.
MFOC is our predecessor and operated the Mrs. Fields franchise system from September 1996
until March 16, 2004. On March 16, 2004, MFOC and a number of its affiliates and related entities
contributed their franchising activities to MFFB and, ultimately, to newly formed subsidiaries of MFFB
(the “Contributions”). In anticipation of the Contributions, we were formed by MFFB to act as the
franchisor of the Mrs. Fields franchise system. As part of the Contributions, all franchise-related assets of
Mrs. Fields Cookies (Canada) Ltd, (“MFC-Canada”) if any, were transferred to us. MFC-Canada is a
wholly-owned subsidiary of MFOC.
As a result of the Contributions, we are the franchisor of the Mrs. Fields franchise system, and
MFOC remains on the lease of many formerly company-owned stores, including Mrs. Fields Cookie
Stores, that have since been franchised. MFOC currently operates two Mrs. Fields Cookie Stores and it
may, in the future, temporarily operate a small number of formerly company-owned stores, if, as a result
of being on the lease, MFOC reacquires the location from a franchisee.
Principal Business Address
We and each of the parent and affiliate entities listed above, with the exception of Z Capital, have a
principal address of 8001 Arista Place, Suite 600, Broomfield, CO 80021. Z Capital has a principal
address of Two Conway Park, 150 Field Drive, Suite 300, Lake Forest, Illinois 60045.
MFF FDD – 3/2014
1
Prior Experience: Us and Our Affiliates.
Since March 2004, we have granted licenses and franchises for the operation of retail snack,
desert, and beverage outlets selling any Mrs. Fields Products (“Mrs. Fields Cookie Stores” or “Stores”).
In addition, we grant area director franchises in certain limited territories to certain franchisees. We have
offered area director franchises since March 2013 and we offered them from January 2010 to December
2012. In some instances we will offer and grant area director franchises in conjunction with TCBY.
In addition to offering Mrs. Fields Cookie franchises, we and our affiliates have been engaged in
other businesses as described in this Item 1. Although we are the franchisor of the Mrs. Fields franchise
system, MFFB employees perform the day-to-day operations of our franchise systems, and provide
services to our franchisees at our direction. MFFB does not offer and has never offered franchises of any
kind.
From January 2006 to December 2008, we offered multiple unit franchises for the operation of
Mrs. Fields Cookie Stores under a Development Agreement and Franchise Agreement. We no longer
offer this program, although we may agree to sell more than one Mrs. Fields franchise to the same
franchisee.
We or one of our affiliates have entered into transactions for development of Mrs. Fields retail
outlets. The terms of these transactions are substantially different than those on which you would operate
a Store. These different locations include, but are not limited to (a) locations in countries other than the
United States of America, (b) certain airport, toll road plaza, and other unique locations which in certain
cases are operated under a joint venture agreement between us and either Sodexho Marriott, Inc., or HMS
Host (or their affiliates or successors), (c) certain sports arena or stadium locations controlled by the
operator of the facilities, (d) certain theme park locations controlled by the operator or owner of the
facilities, and (e) certain private sector food service locations (such as large plants and offices) controlled
by an operator or owner. We or one of our affiliates may enter into co-branding arrangements with other
snack food companies, establish a new business or franchise system, or acquire an existing business or
franchise system. We may also sell gifting items, shelf stable cookies, brownies, ice cream, ice cream
sandwiches, frozen dough, candles, scented sprays, lip gloss and other Mrs. Fields Products throughout
the United States and internationally for resale primarily to grocery stores and similar venues.
Our affiliate TCBY also offers franchises. TCBY was formed as part of a transaction where an
affiliate or related entity of MFOC purchased TCBY’s predecessor, TCBY Systems, Inc., which was then
the franchisor of the TCBY® franchise system. TCBY has been the franchisor of the TCBY franchise
system for more than 10 years. TCBY is now a wholly-owned subsidiary of MFFB. TCBY currently
offers single and multiple unit franchises for the operation of TCBY stores, which may operate under
either a full service or self service format. TCBY also has been in the business of granting area director
franchises in certain limited territories since January 2010.
From December 2005 to December 2007, TCBY offered single and multiple unit franchises for
the operation of Yovana® stores, in certain limited markets. During that period they sold three such
stores. These stores operated under the Yovanna® trademarks and other TCBY Marks. As of the
issuance date of this disclosure document, there were no franchised or company-owned Yovana® stores,
and TCBY does not anticipate franchising, owning or operating additional Yovana® stores during the
Effective Period, but is testing the Yovana® product in some TCBY Stores and the concept in a few
captive, licensed locations operated in airports by HMS Host.
In certain cases, TCBY may offer franchises to our franchisees to operate locations that are cobranded with Mrs. Fields Cookie Stores. Other of our affiliates have offered co-branding opportunities in
the past, and may do so in the future, but currently TCBY is our only affiliate that does so.
MFF FDD – 3/2014
2
Our former affiliates, PTF LLC and PMF LLC, formerly operated the Pretzel Time and
Pretzelmaker franchise systems and our former affiliates, GACCF LLC and GAMAN LLC formerly
operated the Great American Cookie Company franchise system. These former affiliates and various
predecessors of each were the franchisors or suppliers of their respective franchises for more than 10
years. These franchise systems were purchased by NexCen Asset Acquisition, LLC (“NexCen”) on
August 7, 2007 (Pretzel Time and Pretzelmaker) and on January 29, 2008 (Great American Cookie
Company). We are not affiliated with the current franchisors of these brands. PTF LLC, PMF LLC,
GACCF LLC and GAMAN LLC were dissolved on June 19, 2012. However, some of these brands
formerly franchised by our affiliates are operated by the franchisees of us or TCBY, sometimes as cobranded locations.
For more than 20 years, we or our predecessors and other of our affiliates, including Mrs. Fields
Cookies Australia, a Utah corporation incorporated in June 1983, have offered international master
franchise agreements, franchise agreements and other types of licensing agreements for Mrs. Fields
Cookie Stores and other franchised concepts in foreign countries. As of December 28, 2013, we and our
affiliates have developed 143 Mrs. Fields locations in 18 foreign countries, and 126 TCBY locations in 17
foreign countries. Going forward, we and some of our affiliates may offer international master franchise
agreements, franchise agreements and other types of licensing agreements in foreign countries for our and
their respective MFFB Franchised Concept. Licenses and franchises for Mrs. Fields Cookie Stores in
other countries may be under different terms and conditions than are described in this disclosure
document.
Although some of our affiliates have periodically operated company-owned stores and engaged in
similar businesses as described elsewhere in this Item 1, and we and they reserve the right to do so in the
future, we are engaged in the business of franchising and licensing systems and trademarks for the
delivery of goods and services. We are not in the same business as our franchisees, and our franchisees
are not our employees.
Except as qualified in Note 1, the table below indicates the number of franchises sold by us and
our respective affiliates or their predecessors which were in operation as of December 28, 2013. All of
these locations may compete with you.
Except as described in the table below and elsewhere in this Item 1, as of December 28, 2013,
neither we nor our affiliates have offered franchises in any other lines of business.
Franchisor
Us
TCBY
Concept
Mrs. Fields Cookie Stores (including
Mrs. Fields Bakery Cafes)
TCBY Stores
Number of
Franchises(1)
Number of
CompanyOwned Stores
(Operated by
MFOC)
195
345
5
1
(1) This column lists the number of franchises open and operating as of December 28, 2013. These
numbers include co-branded units so that the same location may be included in the total for more than
one concept.
Except as described above, no other parents, predecessors or affiliates are required to be disclosed in this
Item 1.
MFF FDD – 3/2014
3
Description of the Franchises Offered.
Store Franchises.
We offer franchises (the “Franchises”) for retail store fronts and kiosks that sell various Mrs.
Fields Products, including cookies, brownies, cookie cakes, other baked goods and specialty drinks in
accordance with the terms of our Franchise Agreement. A copy of the Franchise Agreement is attached to
this disclosure document as Exhibit B. If you enter into a Franchise Agreement, you will be authorized to
use the “Mrs. Fields System” under which Mrs. Fields Cookie Stores operate. The Mrs. Fields System
includes our business formats, signs, equipment, methods, procedures, designs, layouts, standards, and
specifications, including the use of the name and service mark “Mrs. Fields” and “Mrs. Fields Cookies,”
as well as other trademarks, trade names, service marks, logos and other commercial symbols we
designate for use by Mrs. Fields Cookie Stores (all referred to as the “Marks”) and any trade dress, all of
which we may change.
Area Director Franchises.
We have developed an area director program (“Area Director Program”) for the Mrs. Fields
Cookie franchise system. We currently offer area director franchises within certain territories.
We grant each area director (“Area Director”) the right within a specific territory (the “Area
Director Territory”) to: (i) solicit prospective Mrs. Fields Cookie franchisees and, as we request, assist in
the franchise sales process (“sales services”); (ii) perform certain site acquisition and development
services (“site services”); and (iii) render compliance and enforcement services for and on behalf of us,
and provide additional marketing, operational, training and field support services to Mrs. Fields Cookie
franchisees (“support services”). In some circumstances, an Area Director also may have a right of first
refusal to develop or find another franchisee to develop new Mrs. Fields Cookie Stores at approved
locations within its Area Director Territory. Area Directors are not authorized, and Area Director sales
services do not include the right, to approve prospects as Mrs. Fields franchisees, offer or sell franchises,
or negotiate or sign franchise agreements on our behalf.
If you qualify and desire to act as an Area Director in a territory where we are offering the Area
Director Program, you will sign an area director agreement (“Area Director Agreement”) with us. A copy
of the Area Director Agreement, which will control the relationship between you and us, if you and we
sign it, is attached to this disclosure document as Exhibit D. The Area Director Agreement grants you the
right to operate an “AD Business” (as defined in the Area Director Agreement) and offer the sales
services, site services and support services described above. The Area Director Agreement, however,
does not grant you the right to operate an individual Mrs. Fields Cookie Store, and you must sign the
applicable Mrs. Fields Cookie franchise agreement with us if you desire to own and operate a Mrs. Fields
Cookie Store within or outside of your Area Director Territory.
In exchange for Area Director services described above, we will pay you several different fees.
These fees include percentages of initial franchise fees, royalty and service fees, and may include
percentages of transfer fees and other fees that franchisees pay in connection with the purchase or
operation of a Mrs. Fields Cookie Store within your Area Director Territory, provided certain conditions
are met regarding the sale of the franchises and provided that you meet your obligations, all as further
described in your Area Director Agreement.
As a condition of maintaining your Area Director franchise, you must satisfy certain Development Quota for each
Development Period (as these terms are defined in Item 12) during the term of the Area Director Agreement.
Renewal of the Area Director Agreement is contingent upon we and you agreeing on a new Development Quota for
the renewal term. Further, at all times from and after the second Development Period, you must continuously own
and operate at least the number of Mrs. Fields Cookie Stores to be designated in your Area Director Agreement
MFF FDD – 3/2014
4
located within your Area Director Territory. See Item 12 for further information regarding these development
obligations. The Market.
The market for your Mrs. Fields Cookie Store business is the general public. Sales at Mrs. Fields
Cookie Stores tend to be seasonal, with the highest sales typically occurring during November and
December, although the difference in sales from season to season varies depending upon the climate
where a particular cookie store is located.
Laws and Regulations.
In addition to laws and regulations that apply to business generally, the Store’s business is subject
to federal, state, and local laws and regulations pertaining to food labeling, sanitation, and weights and
measurement. You should also be aware of federal, state, and local employment laws and regulations,
specifically including minimum age and wage requirements. Local law requirements vary by location.
Some states may require franchisees to obtain restaurant, business, occupational, food products,
and miscellaneous licenses. Some states also have laws regarding who may secure these licenses. You
may also have to obtain health licenses and to comply with health laws and regulations that apply to
restaurant and food product sales establishments. You should inquire about these laws and regulations.
Area Directors should be aware of Federal Trade Commission regulations and various state laws
that impact the sale of franchises and the relationshpi between franchisors and franchisees that may apply
when acting as our agent in soliciting prospective franchisees and in providing initial and ongoing sales
services, site services and support services. You may not solicit prospective Mrs. Fields Cookie
franchisees in any state that requires the registration of disclosure documents, unless we have a currently
effective registration in that state. You must comply with all local, state and federal laws that affect your
AD Business, including employment, workers’ compensation, corporate, tax, licensing and similar laws
and regulations.
Several state franchise disclosure and registration laws regard you to be our franchise broker in
the Area Director Territory to which you are appointed. Therefore, in accordance with applicable law,
you must, at your expense, and if required, register as our franchise broker and provide us with proof of
that registration. You are responsible for notifying us immediately of any material changes in the
information that you give to us for purposes of complying with franchise disclosure laws.
If your activities as our Area Director require you separately to register in your Area Director
Territory, you must prepare the necessary documents and submit the relevant filings at your expense. We
will provide you with information relating to us, which is necessary for your registration. As an
alternative, we may, at our option, agree to prepare and register in certain states joint disclosure
documents that include information not only about us, but also about you as our Area Director. In that
case, you agree to cooperate in providing us with information relating to you and your AD Business and,
upon demand, to pay to us or our designee the costs of preparing and registering those portions of
disclosure documents and ancillary documents which are applicable only to you and your AD Business.
Competition.
If you open a Store, your competition may include other stores offering baked goods, fast-service
and full-service restaurants offering baked goods, and stores offering other dessert and snack items.
Some of these competitive stores are or may be owned, managed, franchised or licensed by us or one of
our affiliates. Your competition includes other existing Mrs. Fields franchisees who may operate, or have
the right to operate, Mrs. Fields Cookie Stores under different formats or who have entered into franchise
agreements with us that contain terms significantly different than those in the Franchise Agreement. We
and our affiliates may enter into co-branding arrangements and these activities may compete with you.
MFF FDD – 3/2014
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ITEM 2. BUSINESS EXPERIENCE
Interim Chief Executive Officer: Joyce Hrinya
Ms. Hrinya has been the Interim Chief Executive Officer for MFFB since July 2014. Ms. Hrinya has also
served on the board of directors of MFFB since March 2014. Ms. Hrinya has also served as the Managing
Director and Operating Partner of Z Capital, located in Chicago, Illinois, since May 2014. Ms. Hrinya has
also served on the board of directors of Great Plains Communications, located in Blair, Nebraska, since
September 2009. Prior to that, Ms. Hrinya served as the Managing Partner of A&R Strategy Partners,
LLC, located in Kansas City, Missouri, from March 2010 to April 2014. Prior to that, Ms. Hrinya served
as the Senior Vice President, Marketing and Customer Satisfaction for Helzberg Diamonds, located in
North Kansas City, Missouri, from December 2004 to March 2010.
Chief Financial Officer: Michael Chao
Mr. Chao has been the Chief Financial Officer for MFFB since August of 2013. Mr. Chao served as Vice
President of Finance, Investor Relations and Treasury for Vail Resorts from October of 2009 to August of
2013. From August 2006 to October 2009, Mr. Chao was Director of Finance, Investor Relations and
Treasury for Vail Resorts.
Chief Operating Officer: David Bloom
Mr. Bloom has been the Chief Operating Officer for MFFB since March of 2014. Prior to that, he was
MFFB’s Senior Vice President of Strategic Development from October 2013 to March 2014. He served
as Senior Vice President of Brand Expansion for Hurricane Grill & Wings from May 2012 until October
of 2013. From October 2011 to May 2012 Mr. Bloom was Chief Operating Officer of Bridge
International Academies in Nairobi, Kenya. From June 2009 to September 2011, Mr. Bloom served as
Senior Vice President of Brand Expansion for Quiznos Subs in Denver, Colorado. From June 2008 to
June 2009 Mr. Bloom was President of Capital Idea Group in Sarasota, Florida. From January 2006 to
May 2008 Mr. Bloom was Vice President Franchise Sales for Clockwork Home Services in Sarasota,
Florida. From 1992 until 2006, Mr. Bloom served in various capacities for Quiznos Subs, including roles
as Senior Vice President of Brand Expansion in both the US and Canada. He was also a partner in Falcon
Ventures Ltd., a multi-unit owner and area developer of Quiznos Subs, as well as the owner of Rice Boxx
Restaurants.
ITEM 3. LITIGATION
Pending Litigation:
Mrs. Fields Franchising, LLC and Mrs. Fields’ Original Cookies, Inc. vs. ETS Group, Inc. and
Eun Sim Shin (Third Judicial District Court, Salt Lake County, State of Utah Case No. 080903024). On
February 20, 2008, we and MFOC filed an action against the defendants for breach of the franchise
agreement for failure to pay royalty and advertising fees and breach of a Sublease agreement for failure to
pay rents. ETS Group, Inc. and Eun Sim Shin filed an answer and counterclaim asserting breach of
fiduciary duty and breach of the covenant of good faith and fair dealing. In July of 2008 we and MFOC
filed a motion to dismiss the counterclaims. ETS Group, Inc. and Eun Sim Shin filed a Motion in
opposition to plaintiffs’ motion to dismiss several days after the deadline to file the responsive pleadings.
The court ruled in favor of us and MFOC on the motion to dismiss the counterclaims, and we and MFOC
filed a motion for summary judgment. On February 9, 2011, MFFB obtained a judgment against ETS
Group, Inc. and Eun Sim Shin for nearly $300,000. Shortly thereafter, MFFB began investigating
methods for collecting the judgment in California. Collection discussions and efforts are ongoing.
MFF FDD – 3/2014
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Franchisor-Initiated Litigation:
Mrs. Fields’ Original Cookies, Inc. v. Pacific Hospitality Partners, LLC, Civ. No. 100905620,
Third Judicial District Court, State of Utah. Pacific Hospitality Partners, LLC, a former franchisee, owed
Franchisor $1,475,816.34 for failure to make payments required under certain sublease agreements with
Mrs. Fields’ Original Cookies, Inc. Mrs. Fields filed a lawsuit against Pacific Hospitality Partners, LLC
and Babak Samini, Syed Jafrey and Andrew Yoo, the guarantors, alleging that the guarantors failed to
make payments required under the Guaranty. Mrs. Fields was awarded judgment against Babak Samini
for $120,000. A Settlement Agreement was signed on August 27, 2012 in which Babak Samini is to pay
this amount to Mrs. Fields in installments over a period of two years. Payment was to begin on October
15, 2012. Babak Samini failed to make payments. To be able to collect on the judgment against Babak
Samini, we have dismissed our claims against Syed Jafrey and Andrew Yoo, whom we haven’t been able
to find and serve. Our Utah judgment is now domesticated in California and we are currently seeking to
collect judgment against Babak Samini.
Concluded Litigation:
Mayfare Enterprises, Inc. v. Mrs. Fields Famous Brands, LLC, Mrs. Fields Franchising, LLC, et
al. (American Arbitration Association Case No. 77-1140046404-VSS). On December 29, 2004, Mayfare
Enterprises, Inc. (“Mayfare”), one of our former franchisees, brought this claim for damages in excess of
$50,000, alleging incomplete disclosures and breach of the covenant of good faith and fair dealing with its
purchase of franchises from us and from our affiliates, PMF and TCBY, for the development of a triple
concept location in Geneva, Illinois. On July 16, 2007, the parties reached a settlement of the arbitration
where the claims against MFFB and its affiliates were dismissed with prejudice, and MFFB and its
affiliates paid a $150,000 settlement to Mayfare. Mayfare also agreed to pay any outstanding fees
associated with the arbitration to the American Arbitration Association, and the parties agreed to pay their
own costs, expenses and attorneys’ fees incurred in or as a result of the arbitration.
Javed Bukhari vs. Mrs. Fields Franchising, LLC – (Boston, Massachusetts). We terminated
Javed Bukhari’s franchise agreement for failure to pay various outstanding accounts receivables balances.
In February 2006, we received a demand letter from the franchisee’s attorney pursuant to Mass. Gen. L.,
ch 93A alleging unfair deceptive acts and practices arising from Bukhari’s purchase of the franchise and
store assets from our parent, MFOC. We sent a response letter, and no further action has been taken. Mr.
Bukhari filed for bankruptcy in 2006.
RVC Enterprises Ltd vs. Mrs. Fields Franchising, LLC (International Chamber of Commerce
International Court of Arbitration, Case No. 15658/JEM). On June 4, 2008, RVC Enterprises Ltd
(“RVC”), the Mrs. Fields master franchisee for the territory of Hong Kong, filed a request for arbitration
with the International Chamber of Commerce International Court of Arbitration, a venue allowed under
its contract. The request for arbitration alleged: (i) wrongful changes in the recipes of the bakery or
cookie products; (ii) the receipt and/or taking of secret profits and/or rebates by us from RVC’s supplier;
and (iii) the charging and procuring the charging of extra sums on freight rates paid by RVC. On
December 15, 2009, the parties reached a settlement where RVC dismissed their claim with prejudice and
we paid a $400,000 settlement and agreed to amend certain provisions in the Master Franchise
Agreement.
Other than as described above, no litigation is required to be disclosed in this Item.
ITEM 4. BANKRUPTCY
As summarized in the chart below, we, MFFB, MFOC and 11 of our other affiliates each filed a
voluntary Chapter 11 bankruptcy case in the United States Bankruptcy Court for the District of Delaware
on August 24, 2008. All of the active entities below have a principal address of 8001 Arista Place, Suite
MFF FDD – 3/2014
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600, Broomfield, CO 80021, except for Mrs. Fields Gifts, Inc., which has a principal address of 1141
West 2400 South, Salt Lake City, Utah 84119.
Filing Entity
Relationship to
Franchisor
Bankruptcy Case Name and Number
Us
Franchisor
In re Mrs. Fields Franchising, LLC
Case Number 08-11956 (PJW)
MFOC
Predecessor and
Affiliate
In re Mrs. Fields Original Cookies, Inc.
Case Number 08-11953 (PJW)
(Jointly Administered Under this Case)
MFFB
Parent
In re Mrs. Fields Famous Brands, LLC
Case Number 08-11954 (PJW)
Mrs. Fields Financing Company,
Inc.
Affiliate
In re Mrs. Fields Financing Company, Inc.
Case Number 08-11955 (PJW)
PTF, LLC (Note 1)
Affiliate
In re PTF, LLC
Case Number 08-11957 (PJW)
PMF, LLC (Note 1)
Affiliate
In re PMF, LLC
Case Number 08-11958 (PJW)
GACCF, LLC (Note 1)
Affiliate
In re GACCF, LLC
Case Number 08-11959 (PJW)
GAMAN, LLC (Note 1)
Affiliate
In re GAMAN, LLC
Case Number 08-11960 (PJW)
The Mrs. Fields’ Brand, Inc.
Affiliate
In re Mrs. Fields’ Brand, Inc.
Case Number 08-11961 (PJW)
TCBY
Affiliate
In re TCBY Systems, LLC
Case Number 08-11962 (PJW)
Mrs. Fields Gifts, Inc.
Affiliate
In re Mrs. Fields Gifts, Inc.
Case Number 08-11963 (PJW)
Mrs. Fields Cookies Australia
Affiliate
In re Mrs. Fields Cookies Australia
Case Number 08-11964 (PJW)
TCBY International, Inc.
Affiliate
In re TCBY International, Inc.
Case Number 08-11965 (PJW)
TCBY of Texas, Inc. (Note 1)
Affiliate
In re TCBY of Texas, Inc.
Case Number 08-11966 (PJW)
Note 1: PTF, LLC, PMF, LLC, GACCF, LLC, and GAMAN, LLC were dissolved as of June 19, 2012.
TCBY of Texas was dissolved as of June 20, 2012.
We, MFFB, MFOC and our other affiliates listed in the chart above filed a Joint Prepackaged
Plan of Reorganization with the United States Bankruptcy Court for the District of Delaware on the day
we each filed our Chapter 11 bankruptcy cases. The Joint Prepackaged Plan of Reorganization, as
modified, was confirmed by the United States Bankruptcy Court for the District of Delaware on October
2, 2008, and we, MFFB, MFOC and our other affiliates all received discharges. Under the Joint
Prepackaged Plan of Reorganization, the holders of approximately $200 million in senior secured notes
exchanged those notes for a pro-rata share of the following: (i) $52,149,000 in new senior secured notes,
(ii) 87,851,000 in cash, and (iii) 87.5% of the new common stock of MFOC, issued after the cancellation
its old common stock. The new senior secured notes contain payment terms more favorable to MFFB,
including the option for the first 2 years of issuing additional notes as payment in kind of interest due
MFF FDD – 3/2014
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under the notes. The Joint Prepackaged Plan of Reorganization also established a new $10 million dollar
senior secured, 3-year term loan for MFFB.
Other than as described above, no bankruptcy is required to be disclosed in this Item.
ITEM 5. INITIAL FEES
Store Franchise
Initial Franchise Fee:
The initial franchise fee for a Mrs. Fields Cookie Store is typically $25,000. We will reduce the
initial franchise fee to $15,000 for a second and additional Mrs. Fields Cookie franchise during the
Effective Period.
We have the right to reduce or waive the initial franchisee fee in certain cases.
If you have obtained our approval of and secured the Premises for your Store at the time of
signing the Franchise Agreement, the entire initial franchise fee is payable to us when you sign the
Franchise Agreement. If you have not obtained our approval of and secured the Premises for your Store
at the time of signing the Franchise Agreement, you will pay us an initial franchise fee deposit of $5,000
when you sign the Franchise Agreement and the remaining balance when you obtain our written approval
of and secure the Premises for your Store. The $5,000 deposit is refundable until your lease is signed.
Once you sign your lease, the deposit and the remainder of the initial franchise fee are fully earned by us
and are due and fully payable. If you are unable locate and lease a space for your Store within 6 months
from the date of the Franchise Agreement, you or we have the right to terminate the Franchise Agreement
and refund your fee deposit.
If you or your initial store manager do not satisfactorily complete the initial training program, we
will refund the initial franchise fee, less all reasonable expenses incurred by us for any services performed
by us in establishing and developing your Store, up to 50% of the initial franchise fee. If you have paid
less than 50% of the full initial franchise fee at the time of the refund, no portion of that payment will be
refundable under any circumstances. If we terminate for failure to satisfactorily complete training after
you have secured your premises, we will keep the $5,000 deposit, although you will not be required to
pay to us the remaining balance of the initial franchise fee. You must sign all releases, waivers and other
agreements necessary to terminate the relationship between you and us before receiving your refund.
If you acquire an existing Store from another franchisee of ours, you will not pay an initial
franchise fee to us, but will pay us a transfer fee (currently $5,000).
Except as described in this Item 5, we do not offer refunds of the initial franchise fee under any
circumstances.
Other Initial Fees:
You must conduct a grand opening advertising and promotion program and must spend at least
$5,000 for the grand opening of your Store. We have the right to require you to purchase grand opening
advertising and promotional materials from us, our affiliates or our designees. Neither we nor an affiliate
refund any payments for these materials. You may also incur expenses from other vendors and suppliers
in your grand opening promotion.
From December 30, 2012 to December 28, 2013, our franchisees paid us or an affiliate initial fees
ranging from $0 to approximately $25,000.
MFF FDD – 3/2014
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Area Director Franchise
Initial Area Director Fee.
If you and we sign an Area Director Agreement, you will pay us an initial Area Director fee
negotiated between you and us. We estimate the initial Area Director fee will range from $100,000 to $1
million or more, but will vary widely and will be calculated based on a number of factors. These factors
will primarily consider the size and population of the Area Director Territory, but may also include the
number of Mrs. Fields Cookie Stores to be developed, the number of existing Mrs. Fields Cookie Stores
(if any) in the Territory, and the market for the products. The initial Area Director fee is fully earned
when you sign the Area Director Agreement and is non-refundable once paid. Typically the initial Area
Director fee is paid in full when you sign the Area Director Agreement. In some instances that we
approve in advance, however, you will pay us the initial Area Director fee on an installment basis. In that
case, we will retain the sales commissions you earn and apply the sales commissions towards the initial
Area Director fee until the fee is paid in full; provided that if, at any time before you have completed
paying us the initial Area Director fee, you fail to satisfy your Development Quota or the Area Director
Agreement is terminated, the unpaid balance of the initial Area Director fee is immediately due and
payable in cash or immediately available funds.
ITEM 6. OTHER FEES
STORE FRANCHISES
OTHER FEES
Type of Fee
Amount
Due Date
Remarks
Royalty
6% of monthly
Gross Revenues
Weekly on or before the
close of business on
Wednesday for the
immediately preceding
week
See the General Comments below
for a definition of Gross
Revenues.
Marketing fees
1% to 3% of Gross
Revenues
Same as Royalty fee
See Note 1
Cooperative
advertising
Up to 3% of Gross
Revenues
When due
See Note 2
Training fee
None currently, but
may be charged in
the future
When incurred
We may charge a fee for certain
training programs.
Refresher training
Then-current fees –
currently estimated
at $500 per day per
person plus travel
expenses
When incurred
We have the right to require you
and/or previously trained and
experienced managers and
employees to attend periodic
refresher courses at the times and
locations we designate.
Special assistance
Daily fees and
charges we establish
– currently estimated
at $500 per day per
When incurred
We do not charge for the operating
assistance and guidance we
provide to all of our franchisees.
However, we have the right to
MFF FDD – 3/2014
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OTHER FEES
Type of Fee
Amount
Due Date
person plus travel
expenses
Remarks
make special assistance programs
available to you for which you
must pay fees and charges that we
establish.
Late payment fee
$100 for each
delinquent payment.
When the delinquent
payment is due
Late reporting fee
$100 for each
delinquent report
When the delinquent
report is due and
continuing to be due for
each period that the report
remains delinquent
Interest expenses
Will vary under
circumstances
When due
You must pay all business debts,
liens and taxes when due. If you
fail to do so, we have the right to
pay the same and then be entitled
to immediate reimbursement from
you. Unpaid debts owed to us
bear interest from the due date
until paid at the lesser of 1.5% per
month or the maximum contract
rate permitted by state law.
Audit
Cost of financial
audit plus interest at
1.5% per month or
the highest legal rate
on any
underpayment currently the cost of
the audit is estimated
to be $5,000
15 days after receipt of
audit or inspection report
You must pay the costs of the
audit or inspection only if you fail
to furnish us with reports,
financial statements, tax returns or
schedules, or if the audit results
show an understatement of Gross
Revenues of more than 2% or if
the need for an audit was a result
of your default under the
Franchise Agreement in failing to
provide records and reports in a
timely manner.
Transfer Fee
$5,000 or the current
transfer fee,
whichever is greater;
$7,500 or the current
transfer fee,
whichever is greater,
to transfer a Store
co-branded with an
Affiliate’s concept
Payable before or upon
final closing of transfer
See Note 3
Additional Term
1/14th of thencurrent initial
franchise fee, or the
current fee charged,
whichever is greater,
Payable before transfer or
relocation
See Note 4
MFF FDD – 3/2014
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OTHER FEES
Type of Fee
Amount
Due Date
Remarks
for each year of
additional term
($1,785 per year in
2013)
Advertising,
Marketing and
Promotional
Materials
Will vary under
circumstances
When the materials are
ordered and/or delivered
See Note 5
Maintenance, Repair,
Replacement and
Refurbishment
Expenses
Actual costs
incurred.
When required by us, on
demand
If your Store, or any part of the
Store, does not meet our thencurrent System Standards, we will
notify you. If you fail or refuse to
initiate promptly and timely
complete the necessary actions
described in the notice, after
notice of default and 30-day
opportunity to cure, we have the
option to perform the necessary
repairs, replacements,
maintenance or refurbishment and
charge you for our costs.
Interim management
fees
10% of Gross
Revenues during the
period of
management
As incurred
Incurred if we elect to manage
your Store pending our purchase
of that Store, or we assume
management of your Store in the
case of your voluntary
abandonment.
UCC filing fees
As set by state law;
varies from state to
state
Upon signing of the
Franchise Agreement and
at the times UCC
continuation statements
are filed
We have a security interest in the
collateral required by the
Franchise Agreement. You must
sign the necessary UCC financing
statements and continuation
statement, and reimburse us for
the costs of filing those statements
with the appropriate governmental
agencies.
Costs and attorneys
fees, and
indemnification
Will vary under
circumstances
Upon occurrence
If we or an affiliate prevail in any
proceeding or litigation against
you, you must pay the costs and
attorneys’ fees incurred. You and
each of your Entity Owners also
have indemnification obligations
to us and our affiliates.
Depending on the circumstances,
you may pay these costs and fees
to attorneys and other third parties,
or reimburse us or our affiliates.
MFF FDD – 3/2014
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OTHER FEES
Type of Fee
Amount
Due Date
Remarks
Termination Fee
Will vary under
circumstances
When billed
See Note 6
National Conventions
and Regional
Meetings
Will vary under
circumstances –
currently estimated
at $1,500 per person
When incurred
See Note 7
Sublease
See Note 8
Monthly
See Note 8
General Comments:
Except as noted above or in Note 3, all fees are payable to us or an affiliate. These fees are nonrefundable except as explained in Note 5 below. Unless noted, all fees payable to us or an affiliate are
uniformly imposed. If we or an affiliate do not actually receive your payments on the due date, they will
be deemed delinquent. These fees do not include any initial fees that may be payable to an affiliate if you
are developing your Mrs. Fields Store as a co-brand with its MFFB Franchised Concept.
You must pay all continuing fees, marketing fees and other amounts owed to us or an affiliate by
pre-authorized electronic bank transfer from your general account. You must sign and complete the form
Authorization Agreement attached to the Franchise Agreement as Appendix B or any other
documentation we require periodically to permit the electronic transfer.
“Gross Revenues” means the aggregate amount of all sales of Mrs. Fields Products, other items,
and services made and rendered with the operation of the Mrs. Fields Cookie Store, including sales made
at or away from the Premises of your Store, whether for cash or credit, but excluding all federal, state or
municipal sales, use, or service taxes collected from customers and paid to the appropriate taxing
authority.
Specific Notes:
1.
The marketing fee during the Effective Period is 2.0% of Gross Revenues. We establish
the exact percentage of Gross Revenues you must pay as a marketing fee annually, and we will notify you
annually of this percentage, unless the percentage remains unchanged from the preceding year. Not all
Mrs. Fields Cookie Stores pay the same weekly marketing fee percentage.
2.
In addition to the marketing fee described in Note 2 above, if a local or regional
advertising cooperative is formed or organized for the market that includes your Store, we have the right
to require you to participate in and contribute to the advertising cooperative an amount of up to 3% of
your Gross Revenues. In that case, we will notify you of the amount you must pay to the advertising
cooperative and the timing of the payments, which may be as often as weekly. Each Mrs. Fields Cookie
Store located within an advertising cooperative, including any Stores owned by us or an affiliate, will be a
member of the advertising cooperative and have one vote per Store.
3.
We will not charge a transfer fee if the transfer is of ownership interests among your
existing owners and the names and identity of all owners remains the same following the transfer. Also
during the Effective Period, we may allow certain existing franchisees to transfer their franchise
agreements for a lower transfer fee with or without the payment of a corresponding documentation or
other administrative fee.
MFF FDD – 3/2014
13
4.
We have the right to require, as a condition of our approval of a proposed transfer, that
your transferee purchase additional term under the Franchise Agreement. Similarly, we have the right to
require, as a condition of our approval of a proposed relocation of your Store, that you purchase
additional term under the Franchise Agreement. Currently, we will not require your transferee or you to
purchase additional term if there are 4 or more years of term remaining under the Franchise Agreement at
the time of a proposed transfer or relocation. We will not require your transferee or you to purchase more
additional term than necessary to make the term remaining under the Franchise Agreement equal 7 years.
For the purposes of this disclosure document, “term remaining under the Franchise Agreement” means
the remainder of any initial term plus the remainder of any renewal term under the Franchise Agreement.
Upon the purchase of additional term, your transferee or you will enter into our then current form
of Term Purchase Addendum to the Franchise Agreement (“Term Purchase Addendum”). A copy of our
current Term Purchase Addendum is attached as Exhibit G to this disclosure document.
We have the right to change the fees we charge for additional term and our requirements for when
and how much additional term must be purchased upon a proposed transfer or relocation. In addition,
although the current requirements for when additional term must be purchased are the same for transfers
and relocations, we have the right to have different requirements in the future for these situations. We
also have the right to require you or your transferee to sign a new form of franchise agreement for a term
equal to the term remaining under the Franchise Agreement, plus any prepurchased term, in lieu of having
you or your transferee sign the Term Purchase Addendum.
5.
We may provide you with copies of advertising, marketing and promotional formats and
materials for use in your Store, which we have prepared using the marketing fees we collect. You only
must pay shipping and handling costs for these items or, if you want additional or replacement copies, our
direct cost of producing those items together with any related shipping, handling and storage charges. In
addition to these items, we may offer you the option of purchasing other advertising, marketing and
promotional formats and materials that we have prepared and that are suitable for use at local Mrs. Fields
Cookie Stores. We may provide samples, copies or information explaining these items to you
periodically. If you elect to purchase any of those items from us, we will provide them to you at our
direct cost of producing them plus any related shipping, handling and storage charges. In addition, we
have the right to develop and market special mandatory promotional items for Mrs. Fields Cookie Stores
and require you to maintain a representative inventory of these promotional items to meet public demand.
In that case, we will make these items available to you at our cost plus a reasonable mark-up and any
shipping, handling and storage charges.
6.
If we terminate the Franchise Agreement with cause, or you terminate the Franchise
Agreement without cause, you must pay us a termination fee equal to the present value (using the then
current 30 year Treasury Bond rate) of the continuing fees you would have paid us on the product of your
Store’s average monthly Gross Revenues during its most recent 12 months of operation (or shorter period
if open less than 12 months) before the termination multiplied by the number of months remaining in the
Franchise Agreement’s current term had we or you not terminated it. The termination fee is
compensation to us for anticipated and reasonably estimated lost profits.
7.
You (or one of your Entity Owners, if you are an entity) and, when requested by us, a
store manager (if the store manager is different from you) and/or an approved trainer (if you are a multiunit Mrs. Fields Cookie franchisee) must attend all national conventions and regional meetings that we
designate as mandatory. We will designate the locations for national conventions and regional meetings
and we have the right to charge you a reasonable fee for each of your attendees. If you fail to attend any
national convention or regional meeting we designate as mandatory, we have the right to charge you a
reasonable fee. You are responsible for all travel and living expenses and all other costs associated with
your attendees attending any national conventions or regional meetings.
MFF FDD – 3/2014
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8.
Currently, neither we nor any affiliate generally enters into any leases for new franchised
store locations; however, our affiliates, MFOC and MFFB, are currently on the lease for a number of
existing franchised store locations, including some for Mrs. Fields Cookie Stores. If you acquire a
franchise for one of these locations, you will sublease the Premises to be used as your Store from MFOC
or MFFB (sometimes referred to in this disclosure document as the “Sublessor”). In those situations, you
must sign a standard Sublease Agreement in the form included in Exhibit I of this disclosure document.
If you are an Entity, the Sublessor has the right to require that each of your Entity Owners sign a
Guaranty in the form attached to the Sublease Agreement. The rent and other amounts due under the
Sublease Agreement will be the same as the rent and other amounts due from the tenant under the
Sublessor’s lease (the “Master Lease”) of the Premises from the landlord. The rent due will vary with
the location of the Premises. Typically, monthly rental payments will be based on factors such as the
current market value of similar properties and the perceived market value of your Store based on its
location and traffic patterns, sales volumes, and so forth. You must pay the monthly rent under the
Sublease Agreement directly to us or the Sublessor, as designated by the Sublessor, and we or the
Sublessor will then pay the rent to the landlord under the Master Lease. However, we may require you to
make the payments to us or the Sublessor at least 30 days in advance of the date the payments are due
under the Master Lease (10 days in advance, for percentage rental payments). As described in the
General Comments above, rental payments must be paid to us or the Sublessor by electronic bank
transfer from your general account. Rental payments are typically non-refundable. Depending on our
and the Sublessor’s evaluation of your credit-worthiness, the Sublessor has the right to require you to pay
a security deposit (typically, the equivalent of one month’s rent) under the Sublease Agreement. Upon
termination of the Sublease Agreement, the Sublessor will refund the security deposit to you if you have
fulfilled all of your obligations under the Sublease Agreement.
OTHER FEES
AREA DIRECTOR FRANCHISES
Type of Fee
Amount
Due Date
Remarks
Advertising and
Recruiting Costs
$0 to $5,000 each calendar
quarter
Each calendar quarter
during the term of your
Area Director Agreement
Transfer Fee
An amount to cover our
administrative costs (not
to exceed then-current
Assignment Fee for an
individual Store) plus
reasonable training fee
Upon application for
consent to transfer
Renewal Fee
Our then-current initial
Area Director fee, not to
exceed the initial Area
Director fee paid for the
initial term
At renewal
Insurance
$5,000-$30,000 for
annual premiums
When premiums are due
See Note 2
Seminars and
Conferences
Our then-current fee, up
to $1,000
When offered
See Note 3
See Note 1 for more
information
General Comments:
Except as noted above, all fees are payable to us and all fees are non-refundable and uniformly
imposed.
MFF FDD – 3/2014
15
Specific Notes:
1. Advertising and Recruiting Costs. As an Area Director, you must spend an amount to
advertise for prospective Mrs. Fields Cookie franchisees within your Area Director Territory that will
allow you, in your reasonable opinion, to meet your Development Quota. We estimate that this amount
will typically range between $0 to $5,000 per calendar quarter, although you may determine that you need
to spend more than this estimated amount to meet your Development Quota.
2. Insurance. The estimate includes comprehensive general liability insurance with minimum
limits of 1,000,000 per occurrence and $2,000,000 in the aggregate. You pay insurance premiums
directly to third party insurers.
3. Seminars and Conferences. You or your Manging Owner and your Operations Manager must
attend any seminars, industry conventions or programs that we designate as mandatory. We will
designate the locations for these meetings and you must pay the cost of attendance, including all travel
and living expenses, for each of your attendees. If you fail to attend, we have the right to charge you a
reasonable fee, not to exceed $1,000 for each mandatory program missed.
ITEM 7. ESTIMATED INITIAL INVESTMENT
YOUR ESTIMATED INITIAL INVESTMENT
Type of Expenditure
Amount
Method of Payment
When Due
To Whom Payment
Is to Be Made
Initial franchise fee
(Note 1)
$15,000 to 25,000
(Note 1)
Lump Sum; Deposit
Paid If Premises Not
Approved Upon
Signing of Franchise
Agreement
Upon signing
Franchise Agreement;
if Deposit Paid,
Remainder Due Upon
Approval of Premises.
Us
Travel and living
expenses while
training
(Note 2)
$2,000 - $3,000
Lump sum, as
incurred
As incurred during
training
Airlines, hotels, and
restaurants
Real estate lease
Note 3
Note 3
Note 3
Note 3
Improvements and
Equipment, if
constructing a new
store (Note 4)
$150,000 - $350,000
As agreed with the
contractors and
suppliers providing
labor, materials, or
equipment
As incurred
Various independent
contractors and
suppliers (Note 4)
Opening Product and
Soft Goods Inventory
$1,000 - $5,000
(Note 5)
As agreed with
suppliers
As incurred
Suppliers
Grand opening
promotion, if opening
a new store
$5,000
(Note 6)
Lump sum
As incurred
Us, and various
vendors and suppliers
Security deposits,
utility deposits,
business licenses, and
other deposits and
$4,000 - $5,000
Lump sum
Before opening
Landlord, utility
companies, suppliers,
and government
MFF FDD – 3/2014
16
Type of Expenditure
Amount
Method of Payment
When Due
prepaid expenses
(Note 7)
To Whom Payment
Is to Be Made
agencies
Professional fees
(Note 8)
$9,000 - $10,000
Lump sum or as
arranged by providers
As incurred
Attorneys,
accountants, and other
consultants
Insurance (3 months)
(Note 9)
$2,500 - $3,500
Lump sum or
installments, as
determined by
insurance carriers
Before or upon
signing of Franchise
Agreement
Insurance carriers
Coffee preparation
and serving
equipment (3 months)
$2,500 - $10,000
Monthly
Monthly
Various vendors or
suppliers
Computer hardware
and software
(Note 10)
$3,500 - $4,500
Lump sum
As incurred
Various vendors or
suppliers
Additional funds (3
months)
(Note 11)
$8,000 - $12,000
Lump sum, as
incurred
As incurred
Employees, suppliers,
utilities and other
vendors
Totals
$200,000 - $430,500
General Comments:
We have based the estimates provided in the tables above upon our experience and the experience
of our predecessors in establishing and operating numerous Mrs. Fields Cookie Stores; however, we do
not guarantee that your costs will not be higher than described above. You should review these figures
carefully with a business adviser before making any decision to enter into a Franchise Agreement.
The estimates in the first table above assume that you are developing a single traditional Mrs.
Fields Cookie Store that will operate independently. All payments you make to us or an affiliate are nonrefundable unless otherwise stated. Payments you make to parties other than us or an affiliate may be
refundable at the option of the other party. Except where otherwise noted on this table, the table below,
or as described in Item 10, neither we nor an affiliate offer any financing, directly or indirectly, to
franchisees. The estimates in the tables above do not include continuing fees or marketing fees payable to
us during the operation of your Franchise since these fees are payable out of the Gross Revenues of your
Store.
Specific Notes:
1.
$25,000 is the standard initial franchise fee for a new Mrs. Fields Cookie Store franchise.
2.
You must pay any incidental expenses that you and your manager and any other trainees
incur while attending our initial training program, including car rental, gas, airline tickets, meals, hotel
room, entertainment, and salaries.
MFF FDD – 3/2014
17
3.
If you do not currently own adequate space, you must lease the space for your Store.
Typical locations are shopping malls and strip shopping centers. The average Mrs. Fields Cookie Store
requires between 600 and 900 square feet of space for an in-line store or between 200 and 300 square feet
for a modular, prefabricated store. You will make rental payments to the landlord and we cannot estimate
the amount of your monthly rental payments, since they vary greatly from site to site and are affected by a
number of factors, including location, size, visibility, accessibility, and competitive market conditions. In
addition to rental payments, your lease may require other payments to the landlord, such as payments for
shopping center or building operating expenses, common area maintenance expenses, food court
expenses, merchants’ association assessments, assessment for shopping center promotion and advertising,
and the like. Your lease may also require you to spend a certain amount on advertising and promotion for
your store. Because these payments vary widely from lease to lease, we cannot estimate the amount you
may be required to pay for these or other similar items.
4.
These estimates include construction costs (labor and material) for typical tenant
improvements and remodeling to prepare a site for operation of a Mrs. Fields Cookie Store as well as
estimated costs for necessary trade fixtures, such as display cases, signage, counters and work tables, and
equipment, such as ovens, refrigerators, beverage dispensers, coffee preparation and dispensing
equipment, small wares and cash registers. The estimates also include construction management costs,
general conditions, builders risk/liability insurance and financing costs. If you develop a new store, we
will provide you with prototypical plans and specifications at no additional cost to you, but you must also
employ and pay an architect or engineer to prepare a site plan and other construction documents to adapt
these plans and specifications to city, state and local building codes and to the specific site chosen for
your Store. We have the right to require you to use a commercial contractor and architect that we
approve. These estimates do not include lease costs. Your actual construction costs will depend on
numerous factors, such as the condition of the Premises, duration of the building process (delays), union
labor requirements, contractors’ fees, signage, availability of materials and equipment, interest rates, and
the insurance coverage you choose.
A modular, prefabricated store is a free-standing Mrs. Fields Cookie Store that is
operated within a mall, shopping center or other site, but is not a permanent, in-line structure. It is,
however, usually operated under a long-term lease. The modular unit is assembled using prefabricated
components built off-site, often at a savings over traditional construction methods. It is typically most
appropriate for high-traffic center court or corridors within larger metropolitan malls. If you find a site
that we approve for installation of this type of unit, you must purchase components from a vendor or
vendors we designate.
5.
This estimate includes supplies, opening inventory, accounting forms and systems, soft
goods, such as napkins, cups, and other paper goods, utensils, packaging materials and other items
required to operate under the Mrs. Fields System. The costs will vary depending upon your inventory
levels and storage space.
6.
If you are developing a new Mrs. Fields Cookie Store, you must spend at least $5,000 on
a grand opening advertising and promotional program, a portion of which may be paid to us or an affiliate
to cover the cost of materials that we or an affiliate may provide to you for the grand opening. You may
also incur expenses from other vendors and suppliers in conducting your grand opening promotion. We
may require you to submit a grand opening plan containing details about your planned grand opening
promotion, and obtain our approval of the plan before the event.
7.
You may be required to pay a security deposit under your real estate lease and other
deposits for utilities and insurance premiums. Lease security deposits are typically due upon signing and
can potentially be refundable if you do not default on your lease. Your lease may also require you to pay
the last month’s rent in advance. Deposits for utility services are typically required at the time the service
is applied for, and may or may not be refundable. You must confirm all of the specific deposits required.
MFF FDD – 3/2014
18
The amount for licenses and permits can vary significantly, and you should verify specific amounts with
local authorities.
8.
You may find it necessary to retain an attorney to review the real estate lease or sublease,
the franchise documents, or to assist in forming a corporation, partnership, or limited liability company.
You may also retain an accountant for advice in establishing and operating your franchise business and
filing necessary tax forms and returns.
9.
We require you to obtain and keep in force the following insurance coverages on a
primary non-contributory basis, with us and our affiliates named as an additional insured on each policy:
(a)
Property Insurance. Property insurance for all of your goods, fixtures, furniture,
equipment, and other personal property located on your Store Premises insuring 100% of the full
replacement cost against loss or damage from fire and other risks normally insured against in
special cause of loss coverage. You will also maintain business income and extra expense
coverage to cover loss of income and extra expenses for at least one year.
(b)
Liability Insurance. Liability insurance on an occurrence basis, insuring against
all liability resulting from damage, injury, or death occurring to persons or property in or about
your Store Premises (including products liability insurance and broad form contractual liability
coverage), the liability under this insurance to be at least $1,000,000 for one person injured,
$1,000,000 for any one accident, and $1,000,000 for property damage.
(c)
Workers’ Compensation and Employers’ Liability Insurance. You must maintain
and keep in force all workers’ compensation insurance on your employees that is required under
applicable laws of the state where your Store is located. You must also maintain and keep in
force employers’ liability insurance on your employees, with liability limits of no less than
$100,000 per accident for bodily injury by accident, and $100,000 per employee for bodily injury
by disease, with no less than a $500,000 policy limit for bodily injury by disease.
(d)
Other Insurance Policies. You must maintain any additional insurance policies
that a prudent franchisee in your position would maintain or as we reasonably require.
Your real estate lease may also impose additional requirements for insurance coverage. The first table
above contains the estimated cost of required insurance coverage for a 3 month start-up period; however,
the cost of insurance varies, depending upon the insurance company you select, lease requirements,
variances in the cost of insurance by location, and other factors. Whether insurance premiums are
refundable depends on individual insurance carriers and the terms of the insurance policies.
10.
In addition to this initial cost, you must pay to our designated supplier a monthly
maintenance and subscriber fee ranging from $100 to $125. We also currently require that you have
Internet access in your Store Premises, which will cost approximately $150 for installation and $600 per
year or more for a subscription. These fees are not included in the $3,500 to $4,500 initial costs described
above in this Note 10, though they are included in the ranges in the table.
11.
This amount represents the range of your initial start-up expenses over the first 3 months.
These figures include estimated payroll costs. However, they do not include the salary for the store
manager, on the assumption that you will manage the store. The figures also do not include inventory.
These figures are estimates and we cannot guarantee that you will not have additional expenses starting
your business. Your costs will depend upon factors such as how well you follow our methods and
procedures; your management skill, experience, and business acumen; local economic conditions; the
time of the year your Store is opened; the demand for specialty food and snack goods and services in your
area; the prevailing wage rates; competition; and the sales level reached during the initial period.
MFF FDD – 3/2014
19
YOUR ESTIMATED INITIAL INVESTMENT
FOR AN AREA DIRECTOR FRANCHISE
Type of
Expenditure
Initial Fee (1)
Amount
When Due
To Whom Payment
is to be Made
Us
$0 to $3,000
As Arranged
As we owe sales
commissions to
you, unless you
fail to meet your
Development
Quota or your
Area Director
Agreement
terminates, then
the balance is due
immediately
As Arranged
$0 to $3,000
As Arranged
As Arranged
Third Party Supplier
$0 to $5,000
$0 to $21,000
As Arranged
As Arranged
As Arranged
As Arranged
Third Party Supplier
Your Attorneys,
Accountants and
Franchise
Registration States
Additional Funds
(covers first 3
months) (6)
$1,000 to $5,000
As Arranged
As Arranged
Miscellaneous Third
Parties.
TOTAL (7)
$101,000 to $1,037,000
Vehicle
Lease/Purchase (2)
Computer
Hardware and
Software (3)
Advertising (4)
Area Director
Registration Costs
$100,000 to $1 million
or more, calculated
based on several
factors, primarily the
size and population of
the Area Director
Territory you are
granted
Method of
Payment
Credited towards
amounts we owe
you for sales
commission (5)
(5)
Third Party Supplier
Specific Notes:
1.
The initial Area Director fee will vary widely because it will be calculated based on a
number of factors unique to each Area Director Territory granted, primarily its size and population. See
Item 5 for more information.
2.
You will need the use of a vehicle in the operation of your AD Business, which you may
own or lease. We do not require that the vehicle you use meet any specific criteria, except that it must run
reliably enough to enable you to perform your obligations under the Area Director Agreement, such as
visiting Mrs. Fields Cookie Stores, and performing site services and support services. The lower end of
the estimate assumes you will use a vehicle that you already own and the higher end of the estimate
assumes you will lease a vehicle. The cost of your investment in a vehicle will vary depending on your
current assets, the cost of leasing and purchasing vehicles in your area, and the vehicle you choose.
3.
You will need a laptop computer for the operation of your AD Business. If you already
own a laptop computer, you may use it in the operation of your AD Business. The cost of your
investment in computer hardware will vary depending on your current assets, the cost of computer
hardware in your area, and the specific equipment you choose.
4.
See Items 6 and 11 for further information regarding your obligations to advertise for
prospective Mrs. Fields Cookie franchisees within your Area Director Territory.
MFF FDD – 3/2014
20
5.
You must, at your expense, register as our franchise broker and provide us with proof of
that registration if the laws in your Area Director Territory require broker registration, even though the
sales services you perform do not give you the right or authority to offer or sell franchises, or negotiate or
execute franchise agreements on our behalf. We estimate the cost of this registration to be up to $1,000.
In addition, if your activities as our Area Director require you separately to register in your Area Director
Territory, you must prepare the necessary documents and submit the relevant filings at your expense. As
an alternative, we may, at our option, agree to prepare and register in certain states joint disclosure
documents that include information not only about us, but also about you as our Area Director.
Regardless of whether you rely on your own FDD or a joint FDD, we estimate that the disclosure and
registration costs you will incur as an Area Director will be up to $20,000. These costs may include your
preparation of audited financial statements.
6.
We do not require that you rent commercial office space, nor do we impose specifications
for office decoration, fixtures, business equipment, insurance, minimum number of employees or
otherwise. You may locate the administrative office for your AD Business in your home. However, we
expect you will incur miscellaneous expenses to establish your AD Business. This table assumes you do
not incur any real estate leasing costs, but allows for the lease or purchase of home office furniture;
required expenditures such as a facsimile machine, telephone line, business cards and stationery;
insurance; travel costs for initial training and site development work in your Area Director Territory; and
legal and professional expenses to acquire the franchise and form a business entity to own the Area
Director franchise.
7.
This total is an estimate of your initial investment for the development of an AD Business
under the Area Director Agreement, not including the initial Area Director fee payable to us or our
Affiliates as more fully explained in Note 2 above. The estimated initial investment is based on our prior
experience in the development and support of Mrs. Fields Cookie Stores. You should review these
figures carefully with a business advisor before making any decision to enter into the Area Director
Agreement. Please note that the estimates do not include the estimated initial investment to develop
individual Mrs. Fields Cookie Stores. The estimated initial investment to develop a Mrs. Fields Cookie
Store is described in the first table of this Item 7.
ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
Purchases of Mrs. Fields Products and Other Items
You must purchase products approved or required by us periodically to be offered for sale from
Mrs. Fields retail outlets, including specialty snacks and other bakery items, desserts, and beverages (such
as cookies, brownies, cakes, muffins, bagels, croissants, cinnamon rolls, sticky buns, and coffee) and
other products approved by us or our affiliates (“Mrs. Fields Products”) from us or from third parties we
designate. We or our affiliates have licensed South Coast Baking, LLC. (“South Coast”), and may
license other manufacturers, to manufacture ready-to-bake dough products and other ready-to-complete
Mrs. Fields Product mixes. We or our affiliates may also license with various manufacturers or
distributors to produce branded or proprietary paper products that you must purchase for your Store.
These products are then sold to our current distributors, Dawn Food Products and Kaleel Bros., Inc. We
may designate in our Management Operations Manual and Daily Operations Manual (collectively,
“Operating Procedures Manual”) new or additional suppliers and distributors in the future (collectively,
“Distributors”), under license from us or our affiliates. Distributors sell the products described above to
all Mrs. Fields retail outlets and they charge the same prices to franchisees, our affiliates and us, although
the charges may vary based on location and quantity ordered. We and our affiliates may receive rebates
on purchases from Distributors as described below. Except for Coke products and beverages, and certain
items of equipment and supplies available through Venture Projects, Inc. dba Concept Services
(“Concept Services”), Tundra Services (“Tundra”), Halo (“Halo”) and Master Brands (“Master
Brands”) (as described below in this Item 8), you must purchase from Distributors all of your Mrs.
MFF FDD – 3/2014
21
Fields Products and all other items specified in the Operating Procedures Manual. South Coast and
Distributors are currently the only approved suppliers of Mrs. Fields Products.
Except for certain items that Concept Services and Tundra make available to you for purchase,
such as small wares, small equipment and promotional materials (as described below in this Item 8), Halo
and Master Brands are the only suppliers licensed to distribute soft goods and supplies displaying the
Mrs. Fields Marks and you must purchase these items from them. We have the right to appoint substitute
or add additional suppliers, but are not required to do so. Concept Services and Tundra are currently the
only approved suppliers of small wares, small equipment and promotional materials. Master Brands is
currently the only approved supplier of soft goods and supplies displaying the Mrs. Fields Marks.
You must use only the soft goods, utensils, cleaning supplies, novelty items and other
miscellaneous items that we require and have been approved for Mrs. Fields Cookie Stores, as meeting
our specifications and standards for quality, appearance, function and performance. Except as stated in
this Item 8 and in our Operating Procedures Manual, you may purchase these items from any supplier
who satisfies our standards and specifications, as contained in the Operating Procedures Manual and other
written or electronically transmitted materials that we or an affiliate furnish to you.
We and our affiliates participate in a nationwide marketing program sponsored by Coca-Cola
Fountain or its affiliates. You must participate in the program and purchase Coca-Cola post-mix soft
drink products and certain other beverages and products for use at your Store. You may purchase CocaCola products from any authorized Coca-Cola distributor. Coca-Cola Fountain or its affiliates currently
pays us or our affiliates amounts based on purchases by each franchisee. We may use these funds to
develop and implement marketing and promotional activities designed to benefit the entire system of Mrs.
Fields Cookie Stores, and to increase the sale of Coca-Cola products at all stores. These funds will not
reduce the payments you must make to us as marketing fee payments under the Franchise Agreement.
We or one of our affiliates may enter into co-branding arrangements with other snack-food
companies. In those cases, we or our affiliates may or may not allow you to offer the co-branded
products from your Store, depending on factors like the terms of the co-branding arrangement, the terms
of your Franchise Agreement, applicable geographic restrictions and our and our affiliates’ other rights
and obligations.
If we grant you the right to develop and operate a Mrs. Fields Cookie Store within an Area
Director Territory, or if we appoint an Area Director for an Area Director Territory that encompasses
your Mrs. Fields Cookie Store after you open it, we have the right to require you to obtain or receive
certain site services and support services from your Area Director and its agents and employees. These
services may include assisting you in finding a site for your Mrs. Fields Cookie Store, advising you
during the process of opening your Mrs. Fields Cookie Store for business, attending your grand opening
promotion, and making quality control and operations and enforcement visits to your Mrs. Fields Cookie
Store, all as we direct. Your Area Director may receive a portion of the initial franchise fee, royalty and
service fees and other fees you pay to us or our designee in consideration for providing services to you,
although you will not be required to pay any additional or greater initial franchise fee, royalty and service
fees to your Area Director in order to receive the services it provides. We estimate that the required
purchases contained in this Item 8 will be approximately 75-85% of the cost of establishing your business
and approximately 75-85% of the cost of operating your business.
We do not currently require you to purchase or lease goods, services, or supplies from any
specific suppliers in the establishment or operation of your Mrs. Fields AD Business.
Development of your Store
You must construct and develop your Store in accordance with prototypical plans and
specifications that we will provide to you, including requirements for exterior and interior materials and
MFF FDD – 3/2014
22
finishes, dimensions, design, image, interior layout, decor, fixtures, furnishings, equipment, color
schemes and signs. You must prepare all required construction plans and specifications based on the
prototypical plans and specifications, to suit the shape and dimensions of your site and to ensure that they
comply with applicable ordinances, building codes and permit requirements and with lease requirements
and restrictions. You must submit construction plans and specifications to us for our approval before you
begin construction of your Store, and you must submit all revised and “as built” plans and specifications
to us during the course of construction. You must purchase certain furniture, fixtures, and equipment
(“FF&E”), as well as services related to the build out of the stores you build from Concept Services. The
items and services you are required to purchase are listed below. You must use a professional contractor
and architect in developing your Store. You must use a contractor and architect that we designate or
approve.
Required Purchases from Suppliers for Build Out of Stores
Required purchases may include the following:
FF&E
•
•
•
•
•
Exterior sign package
Interior signs and graphics
Lighting package
POS system
Walk-in cooler and/or freezer
•
•
•
•
•
Casework
Equipment
Indoor furniture
Ovens
Small wares
•
Coordinate multiple deliveries and
installations to meet construction and
operational milestones
Job site visit during final installation
One year service program through inhouse service center
Continual sourcing on all elements of
store build-out (FF&E, small wares,
millwork, general contractors, etc.
Services
•
•
•
Order, ship, deliver, receive on-site and
arrange for installation of FF&E
Project management, supply chain
management, administration, architect
consultation, general contractor
consultation and coordination, vendor
and supplier management, and service
agent coordination
Installation work—walk-in
cooler/freezer, casework, equipment,
indoor furniture, outdoor furniture and
exterior sign package
•
•
•
Fixtures, Furnishings, Equipment and Signs
You must use only the fixtures, furnishings, equipment (including computer hardware and
software and signs) that we require and have approved. You may only display at your Store the signs,
emblems, lettering, logos and display materials that we approve in writing. We have the right to install all
required signs at the Store Premises at your expense, although our current practice is to allow you to
install the signs. You may purchase these items from any supplier who can satisfy our standards and
specifications. All standards and specifications will be contained in the Operating Procedures Manual
and other materials we furnish or make available to you. You may only purchase equipment from or
through Concept Services. Smallwares may only be purchased from Tundra , by placing an order through
Concept Services. In some instances our approved suppliers may be the only source of supply for certain
items of equipment that satisfy our standards and specifications.
We have designated a Computer System for use in your Store. While you may obtain the
hardware from any dealer authorized to sell the equipment we approve, we may negotiate with one or
MFF FDD – 3/2014
23
more vendors to provide discounts or incentives that may reduce your cost of purchasing the equipment.
We will provide you with details on any discount or preferred provider program as part of our process for
approving plans for constructing or remodeling your Store. You must purchase the software, and pay
service and access fees, to our designated supplier, currently Innovative Computer System (“ICS”). We
have the right to designate a different provider or providers in the future or to require you in the future to
purchase additional or different computer hardware and software from a supplier or suppliers we
designate, which may be us or an affiliate.
Standards and Specifications; Suppliers
In developing and operating your Store, you will use many supplies (“General Supplies”) other
than the food items to be incorporated into Mrs. Fields Products and the trademark-bearing soft goods.
The Operating Procedures Manual contains standards and specifications for many of the supplies that you
will use. We have the right to modify our standards and specifications in the future. Standards and
specifications for Mrs. Fields Products and the food items to be incorporated into these products are not
available to franchisees since these constitute our trade secrets.
If you wish to use General Supplies in your Store that are different from those specified in the
Operating Procedures Manual, you may request from us a detailed breakdown of our required
specifications. You may then submit to us the details and specifications of any substitute item or supply
you propose to use. We will advise you within 90 days of your submission if the substitute item is
acceptable to us. We do not charge any fee for evaluating substitute suppliers proposed by franchisees.
We have the right to periodically review and revoke our approval of suppliers. If we revoke our
approval of certain products or services a supplier provides, or of a supplier generally, within 30 days
after receiving notice from us, you must stop purchasing and must discontinue using those products and
services we designate, or all products and services, purchased from that supplier.
As described above in this Item 8, we have approved Countryside, Distributors, Concept
Services, Tundra, Master Brands, Coca-Cola and ICS as the only approved suppliers of certain items. We
have no procedures for franchisees to propose alternative suppliers of these items and we will not approve
any other suppliers of these items unless we terminate our relationship with one of the approved suppliers
identified above. We will then establish other supplier relationships and will advise you of the new
suppliers. Except as disclosed in this Item 8, neither we nor an affiliate receive payments from any
approved supplier because of transactions between the supplier and the franchisee.
We estimate that the cost of required purchases of products, supplies, fixtures, furnishings,
equipment, signs and leases from approved suppliers or otherwise will represent 90% or more of your
overall purchases of those items in establishing and operating your Store.
We and our affiliates have the right to receive rebates or other payments from distributors,
suppliers and other service providers, based (directly or indirectly) on sales to franchisees and companyowned stores. These payments have ranged or may range from less than 1% to 15% or more of the
amount of those purchases by franchisees.
During our 2013 fiscal year, we and our affiliates received approximately $904,811.31 from
suppliers and vendors, based on purchases by us, our affiliates, and our and their respective domestic
franchisees and licensees, and/or referrals from us or our affiliates of franchisees and licensees to
suppliers and vendors (excluding amounts received by our affiliates from suppliers and vendors based on
purchases of required yogurt products by TCBY franchisees). This amount represents approximately
2.1% of MFFB and its subsidiaries’ total revenues from all sources for 2013, which was approximately
$43,580,000.
MFF FDD – 3/2014
24
We do not negotiate purchase arrangements from suppliers or service providers for the benefit of
franchisees or participate in any purchasing or distribution cooperatives. We do not provide material
benefits to franchisees based on their purchase of particular products or services. There are no suppliers
in which one of our officers owns a material interest.
ITEM 9. FRANCHISEE’S OBLIGATIONS
This table lists your principal obligations under the franchise and other agreements. It will help
you find more detailed information about your obligations in these agreements and in other items
of this disclosure document.
Obligation
Section in Agreement(1)
Disclosure Document Item
a.
Site selection and
acquisition/lease
Sections 4.1 and 4.2; also see Sublease
Agreement and Assignment and
Assumption of Sublease
Items 6, 7, 8, 11 and 12
b.
Pre-opening
purchases/leases
Sections 4.2, 4.3, 4.4, 4.6 and 7.1
Items 5, 6, 7, and 8
c.
Site development and
other pre-opening
requirements
Sections 4.3, 4.4, 4.5, 7.1 and 7.8;
Items 6, 7 and 11
d.
Initial and ongoing
training
Article 5
Items 6, 7 and 11
e.
Opening
Sections 4.5 and 4.6
Items 5, 6, 7 and 11
f.
Fees
Sections 3.2, 4.6, 4.7, 5.1, 5.2, 5.3, 6.1,
6.2, 6.3, 6.4, 6.5, 8.3, 9.1, 9.3, 12.3(f),
13.5, 14.2, 14.6 and 16.2; Sections 1.4,
2.5, 3.4, Article 4, Article 5, and
Sections 12.3, 12.4, and 12.5 of
Sublease Agreement; also see Term
Purchase Addendum
Items 5, 6, 7, 11, and 17
g.
Compliance with
System Standards and
policies/Operating
Procedures Manual
Article 4 and Sections 5.1, 5.2, 5.3, 7.1,
7.2, 7.3, 7.4, 7.5, 8.1, 8.2, 9.2 and
Article 10
Items 6, 7, 8, 11, 13, 14, 15, and 16
h.
Marks and proprietary
information
Section 4.7, Article 10 and Sections
12.3(l), 13.1(d), 14.3 and 14.4; also see
Confidentiality Agreement
Items 8, 13, 14, and 17
i.
Restrictions on
products/services
offered
Sections 2.1, 7.1, 7.3, 9.2 and 10.7
Items 1, 8, 14, and 16
j.
Warranty and customer
service requirements
Sections 4.1, 4.2(d), 5.3, 7.1, 7.5, 15.2
and 15.6; Acknowledgment Addendum
to Franchise Agreement
Item 11
k.
Territorial development
Not Applicable
Item 12
MFF FDD – 3/2014
25
Obligation
Section in Agreement(1)
Disclosure Document Item
and sales quotas
l.
Ongoing
product/service
purchases
Sections 4.4 and 7.1
Items 8 and 11
m. Maintenance,
appearance, and
remodeling
requirements
Sections 3.2, 4.4, 4.6, 7.1, and 9.2;
Article 2 and Article 8 of Sublease
Agreement
Items 11, 13, and 17
n.
Insurance
Sections 4.5(e), 7.9 and 13.5; Article 8
of Sublease Agreement
Items 6, 7 and 11
o.
Advertising
Sections 4.6, 7.1, Article 9 and Article
10
Items 5, 6, 7, 11, and 13
p.
Indemnification
Sections 7.8, 10.5 and 15.6; Sections
2.5(a), 3.4, 6.7, 6.9 and 8.1 of Sublease
Agreement; Section 7 of Assignment,
Assumption and Consent
Item 6
q.
Owner’s participation/
management/staffing
Sections 5.1, 7.1, 7.2, 7.7, 7.8 and 13.5
Items 11 and 15
r.
Records and reports
Sections 7.1, 7.4, 7.6, 7.7, 8.1, 8.2 and
10.4
None
s.
Inspections and audits
Sections 7.5 and 8.3; Section 2.6 of
Sublease Agreement
Item 6
t.
Transfer
Section 4.7, Article 12 and Section
13.1(b); Article 11 of Sublease
Agreement; also see Assignment,
Assumption and Consent and Term
Purchase Addendum
Item 17
u.
Renewal
Section 3.2; Renewal Addendum
Item 17
v.
Post-termination
obligations
Sections 6.5, 7.8, 8.2, 8.3, 10.5, 10.8,
11.2, 12.3(j) and 12.3(1), Article 14,
Section 15.6, Article 16 and Article 18;
Sections 2.5(a), 3.2, 3.3, 3.4, 6.7, 6.9,
8.1 and 13.12 of Sublease Agreement
Item 17
w. Non-competition
covenants
Article 11 and Sections 12.3(j) and
12.5(c)
Item 17
x.
Dispute resolution
Articles 16 and 17
Item 17
y.
Other
Not Applicable
Not Applicable
(1)
Unless otherwise noted, Section references are to the Franchise Agreement.
MFF FDD – 3/2014
26
This table lists your principal obligations under the Area Director Agreement and other
agreements. It will help you find more detailed information about your obligations in these
agreements and in other items of this disclosure document.
Obligation
Section in Agreement(1)
Disclosure Document Item
a. Site selection and
acquisition/lease
Not Applicable
Items 7 and 11
b. Pre-opening
purchases/leases
Section 9.2
Items 5, 6, 7 and 8
c. Site development and other
pre-opening requirements
Section 9.2
Items 7, 8 and 11
d. Initial and ongoing training
Sections 7.1-7.4
Items 5, 6 and 11
e. Opening
Section 9.2
Items 5 and 11
f.
Sections 5.1, 6.1-6.5
Items 5, 6 and 7
g. Compliance with system
standards and
policies/Operating
Procedures Manual
Sections 8.1, 13
Items 6, 7, 8, 11, 14 and 16
h. Trademarks and proprietary
information
Sections 10, 11; also see
Confidentiality Agreement
Items 13 and 14
i.
Restrictions on
products/services offered
Sections 3, 4, 9.7
Items 6, 7, 8, 11, and 16
j.
Warranty and customer
service requirements
Sections 3.1, 9.7, 13.1
Items 6 and 11
k. Territorial development and
sales quotas
Section 4.1, Appendix A
Item 12
l.
Ongoing product/service
purchases
Not Applicable
Items 6, 7 and 8
m. Maintenance, appearance,
and remodeling requirements
Not Applicable
Items 8 and 11
n. Insurance
Section 13.7, 13.8
Items 6, 7 and 8
o. Advertising
Sections 13.9, 13.10
Items 6, 7 and 11
p. Indemnification
Section 18.4; also see Guaranty
None
q. Owner’s participation/
management/staffing
Sections 9.1, 13.5; also see
Guaranty
Items 11 and 15
r.
Section 13.11, 13.12
None
s. Inspections and audits
Section 14
Items 6 and 11
t.
Section 15
Items 6 and 17
u. Renewal
Sections 16.2-16.5
Items 6 and 17
v. Post-termination obligations
Sections 17.3-17.8
Item 17
w. Non-competition covenants
Sections 12.1, 17.5
Item 17
x. Dispute resolution
Section 19
Item 17
Fees
Records and reports
Transfer
MFF FDD – 3/2014
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Obligation
y. Other
Section in Agreement(1)
Not Applicable
Disclosure Document Item
Not Applicable
(1) Unless noted otherwise, references are to Sections of the Area Director Agreement.
ITEM 10. FINANCING
Except as described below, neither we nor an affiliate offer direct or indirect financing. Neither
we nor an affiliate guarantee your note, lease or obligation.
Our affiliate MFOC (sometimes referred to in this disclosure document as the “Sublessor”), may
sublease the Premises of your Store to you. In that case, you must sign a standard form of Sublease
Agreement included in Exhibit I to this disclosure document. If you are an Entity, Sublessor has the
right to require that each of your Entity Owners guarantee payment and performance of your obligations
under the Sublease Agreement by signing a Guaranty in the form attached to the Sublease Agreement.
The amount due under the Sublease Agreement will be the same amounts as the rent and other
amounts due from the tenant under the Master Lease of the Premises from the landlord (Article 1 and
Article 4 of the Sublease Agreement). You must always pay us or Sublessor, as directed by Sublessor,
the full amount of all rental payments due. The rent due will vary with the location of the Premises, and
neither we nor our affiliates can estimate that amount.
Sublessor has the right to require you to pay a security deposit under the Sublease Agreement
(Section 1.4(c) and Section 5.1 of the Sublease Agreement). Typically, a security deposit will be the
equivalent of one month’s rent. Other than this possible security deposit, there is no other security
interest required.
The Sublease Agreement does not contain any prepayment penalties.
If you do not make your rental payments within 10 days of the due date or if you commit another
breach of the Sublease Agreement or the Master Lease and do not remedy the breach within the time
periods specified in the Sublease Agreement, Sublessor has the right to re-enter the Premises and relet the
Premises and/or to sue you to collect any unpaid rent or other amounts due. Sublessor can collect our
costs of enforcement and collection, including court costs and attorneys’ fees. Sublessor also has the right
to charge a $100 late fee for each delinquent payment. In addition, late payments will bear interest from
the due date until paid at a rate equal to the lesser of the highest applicable legal rate for open account
business credit, or 1.5% per month (Section 12 of the Sublease Agreement).
Your breach of the Sublease Agreement and loss of possession of the Premises is also a default
under the Franchise Agreement and would permit us to terminate the Franchise Agreement
(Section 13.1(f) of the Franchise Agreement).
It is not our practice or intent to sell, assign or discount to a third party all or part of the sublease.
ITEM 11. FRANCHISOR’S ASSISTANCE, ADVERTISING,
COMPUTER SYSTEMS, AND TRAINING
Except as listed below, we are not required to provide you with any assistance.
If your store is located within an Area Director Territory, either at the time of opening or after
you open it, our Area Director will discharge some or all of the obligations that we describe in this
Item 11 for us, as allowed by the Franchise Agreement. The term “we” in this Item 11 refers
MFF FDD – 3/2014
28
interchangeably to us and to the Area Director whom we may appoint to service an Area Director
Territory that includes your Store. Ultimately, however, we are responsible for ensuring that we comply
with our obligations to you under your Franchise Agreement with us.
STORE FRANCHISES
Assistance Before Opening:
Before you open your Store, we or an affiliate will:
1.
Approve or disapprove a site that you propose for your Store within 30 days of the time
you submit a proposed site for our evaluation. In evaluating a proposed site, we may inspect the site and
may consider a variety of factors, including demographic characteristics, traffic patterns, parking,
character of the neighborhood, competition from other dessert, snack food and bakery outlets in the area,
the proximity to other businesses (including other Mrs. Fields retail outlets), the nature of other
businesses in proximity to the site and other commercial characteristics (including the purchase price,
rental obligations and other lease terms for the proposed site), and the size, appearance and other physical
characteristics of the proposed site (Franchise Agreement, Section 4.1). Our approval of a site is no
guarantee or assurance that you will be successful there.
2.
If you are developing a new Mrs. Fields Cookie Store, provide you with prototypical
plans and specifications on which to model the plans to build out your Store (Franchise Agreement,
Section 4.3(a)).
3.
Provide you, through the Operating Procedures Manual and other materials, the standards
and specifications for the fixtures, furnishings, equipment (including computer hardware and software)
and signs that you must use (Franchise Agreement, Sections 4.4 and 5.2.
4.
If you are developing a new store, provide you our standard marketing and public
relations programs and media and advertising materials for your grand opening at least 10 days before
store opening (Franchise Agreement, Section 4.6).
5. Provide an initial training program for you and for your initial store manager once you have signed your
Franchise Agreement. However, as described in Item 7, you will be responsible for all compensation and
expenses (including travel, meals and lodging) incurred due to any training programs (Franchise
Agreement, Section 5.1). This training is described in detail later in this Item 11. Assistance During
Operation:During the operation of your Store, we or an affiliate will:
1.
Loan you one copy of our Operating Procedures Manual, as described in Section 5.2
of the Franchise Agreement. We have the right, at our option, to furnish or make available to you the
Operating Procedures Manual in the form of a paper copy, or an electronic copy (on CD Rom or accessed
through the Internet or other communication systems). Exhibit J to this disclosure document contains the
Table of Contents of the Operating Procedures Manual, which lists the total number of pages and the
number of pages devoted to each subject as of December 28, 2013. As of December 28, 2013, the
Operating Procedures Manual contained a total of 275 pages.
2.
Provide training for any existing or replacement store managers, as explained above
(Franchise Agreement, Section 5.1).
3.
Furnish you guidance and operating assistance, at your request, about (a) methods,
standards, specifications and operating procedures; (b) purchasing required fixtures, furnishings,
equipment, signs, materials, supplies, Mrs. Fields Products; and (c) advertising and promotional
programs. Occasionally, we may make special assistance programs available to you, however, for which
you must pay the daily fees and charges that we establish (Franchise Agreement, Section 5.3).
MFF FDD – 3/2014
29
4.
Provide you with the System Standards (as defined in Section 1.2(n) of the Franchise
Agreement and discussed in Section 7.1 of the Franchise Agreement). We may modify the System
Standards periodically and the modifications may obligate you to invest additional capital in your Store
and to incur higher operating costs (Franchise Agreement, Section 7.1).
5.
Provide advertising and marketing services to you as explained below.
Time to Open
If you are developing a new Mrs. Fields Cookie Store, we estimate that it will take between 60 to
120 days between the date you obtain our approval of and secured the Premises, and the date you open
your Store. The interval may vary depending upon factors such as the weather, the location and condition
of the site, your ability to obtain any necessary financing and building, zoning or other permits and
approvals, construction delays, completion of required training and so forth. Also, you may not open
your Store for business until: (a) we approve the store for opening; (b) pre-opening training of you and
the store personnel has been completed to our satisfaction; (c) the initial franchise fee and all other
amounts then due to us have been paid in full; (d) the lease documentation has been signed and all other
documentation for development of your Store has been completed; and (e) we have been furnished with
copies of all required insurance policies or other evidence of insurance coverage and payment of
premiums we require.
Training
You (or one of your Entity Owners) and any manager of your Store must successfully complete
all phases of our training program to our satisfaction. After signing your Franchise Agreement but before
you can register for training, you will be required to take and pass (to our satisfaction) an online basic
skills test that includes verbal and quantitative questions. Training is provided only in English, so all of
your training attendees must be sufficiently proficient in the English language to successfully complete
our training program, to adequately communicate and correspond with us and your employees, customers,
manufacturers, suppliers, vendors and distributors, and to effectively fulfill their responsibilities to
manage and/or oversee the management of your Store. All training occurs at our classroom facility and
training kitchen located in Broomfield, Colorado, or any other location designated by us. Classes are held
periodically, and will last approximately 6 days. However, we may require you to continue training for a
longer period of time as we may deem reasonably necessary, not to exceed 15 days. In addition to the
training described below, a typical trainee will spend between 6 and 10 hours during the course on
recommended homework.
During the Effective Period, we require all franchisees to complete an annual training recertification. This consists of passing an online certification knowledge assessment managed by our
training department with a score of 90% or higher, achieving a compliant score on an in-store audit, and
attending all mandatory regional meetings and conventions. As long as franchisees certify annually under
this program, we will not require them to attend additional training classes in Broomfield, Colorado when
they purchase additional Stores of the same brand, although the additional Store must still be managed by
someone who has successfully completed our training in Broomfield or any other location designated by
us. We have the right to periodically change this certification program and additional training
requirements (Franchise Agreement, Section 5.1).
We distribute training materials, including our Operating Procedures Manual, at various times
during the training course. The training program is overseen by Renee Roozen, who has over 16 years of
food service and training experience. Other of our employees may also participate in providing and
conducting aspects of the training program. All instructors will have a minimum of one year of training
experience in the subject that they teach and have been employed by us for a minimum of 3 months. In
the case of a proposed transfer, we will provide training to the proposed transferee and its attendees at our
training facility in Broomfield or any other location we designate. The transferee and its attendees must
MFF FDD – 3/2014
30
attend training before a proposed transfer is completed, and before they can assume operations of the
transferring Mrs. Fields Store. Currently, neither we nor an affiliate charge you or your transferee a
separate fee for any training we provide or for the in-store work experience, but we have the right to do so
in the future.
The Mrs. Fields training course will include classroom, in-store/on-the-job, computer based
training and self-study. At least 30 hours will be conducted in a running store. Topics include:
Hours of
Classroom
Training
Hours of
“On the Job
Training”
Orientation: welcome, overview, company history,
vision and values, mission
3
0
Broomfield, CO or other
designated locations
Customer Service: sampling, suggestive selling,
complaint handling
1
15
Broomfield, CO or other
designated locations
Equipment: use and care
0
3
Broomfield, CO or other
designated locations
Product: cookies, brownies, beverages, decorating
2
11
Broomfield, CO or other
designated locations
Marketing; local store marketing, national programs,
social media, merchandising
2
2
Broomfield, CO or other
designated locations
People: hiring, training, coaching
3
3
Broomfield, CO or other
designated locations
Regulatory compliance: food safety, OSHA
compliance
2
3
Broomfield, CO or other
designated locations
Financial: POS usage, sales reporting, budgeting
2
3
Broomfield, CO or other
designated locations
Administrative: ordering, receiving, inventory
3
1
Broomfield, CO or other
designated locations
18
41
Subject
Location
Participants will be assessed using a variety of methods; assessment scores under a 90% may be required
to be completed again.
We provide training for you (or one of your Entity Owners, if you are an entity) and the initial
store manager (if different from you) free of charge; however, you must pay all travel and living expenses
incurred during the training program. Store manager training is mandatory and must be completed before
store opening. We reserve the right to charge you for any additional person you send for training. All
training must be completed to our satisfaction and must be completed no more than 60 days before the
opening of your Store. Replacement store managers must also complete the initial training. We currently
do not charge a fee for replacement store managers to attend training; however, you may be required to
pay a tuition fee for that training in the future (Franchise Agreement, Section 5.1). You are also
responsible for living and travel expenses of your replacement store managers during training. Under no
circumstances should you permit your Store to be managed by a person who has not been certified by us
as having completed all phases of our training program to our satisfaction (Franchise Agreement, Section
5.1). We have the right to require previously trained and experienced managers to attend periodic
refresher courses at the times and locations that we designate and to charge fees for refresher training
courses.
We require you (or one of your Entity Owners, if you are an entity) and the initial store manager
(if different from you) to complete an annual recertification program online. You are required to
MFF FDD – 3/2014
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complete this program to our satisfaction. It is an assessment that you should be able to complete within
2 hours and covers the following topics: operations, management, and customer service.
In the case of a proposed Transfer, we will provide training to the proposed transferee and its
attendees, as described above. We also may require the proposed transferee and its attendees to attend, an
in-store work experience at an existing Mrs. Fields Cookie Store. Currently, neither we or our affiliates,
nor the host franchisee plan to charge you or your transferee a fee for any training we provide or for the
in-store work experience, but we have the right to do so in the future. You must pay travel and living
expenses for your trainees.
Marketing and Advertising
Materials
We and our affiliates currently utilize point of purchase printed advertising for the sale of Mrs.
Fields Products, goods and services at Mrs. Fields retail outlets. We do not currently utilize electronic
media such as radio or television. We may also conduct coupon promotions. In that case, we may require
you to accept coupons that are issued by us or our affiliates and presented at your Store by your
customers. You will receive certain compensation for these coupons when you tender them to us in
accordance with our System Standards. We typically conduct coupon promotions on a regional basis.
We currently use national advertising firms for the production of advertising materials.
We may provide you with copies of advertising, marketing and promotional formats and
materials for use in your Store, which we have prepared using marketing fees we have collected from
Mrs. Fields Cookie Stores. In addition, we may also offer you the option of purchasing other advertising,
marketing and promotional formats and materials that we have prepared and that are suitable for use at
local Mrs. Fields Cookie Stores. For required advertising, you must pay only shipping and handling
costs. For optional materials or for additional or replacement copies of required items, you must pay our
direct cost of producing these items together with any related shipping, handling and storage charges.
You must participate in all mandatory promotions and product roll-outs. If you do not place minimum
orders of products and other items necessary for a mandatory promotion or product roll-out by a certain
date, we have the right to send, or direct suppliers to send, an automatic shipment of a specified minimum
quantity of these products and items to you, and you must accept and pay for them upon receipt. All
payments for the items described in this paragraph are nonrefundable and cannot be applied against the
weekly marketing fee of 1 to 3% of gross revenues that you must pay to us (Franchise Agreement,
Section 9.3).
We are not required to spend any particular amount on advertising in the area in which your Store
is located.
You may use advertising materials prepared by you if the materials (a) comply with the
requirements of Articles 9 and 10 of the Franchise Agreement, (b) are completely clear and factual and
not misleading, and (c) conform to the highest standards of ethical marketing and promotion policies
which we have the right to prescribe. Before use, you must submit to us for approval all press releases
and policy statements and samples of all local advertising, marketing and related materials, including
materials offering free Mrs. Fields Products, not prepared or previously approved by us. We will not
unreasonably withhold our approval. You may not advertise your Store or the Mrs. Fields Products over
the Internet (or any other form of electronic commerce) or establish a related World Wide Web Site
without our prior written consent. If we do not give you written approval of any advertising or other
promotional materials within 15 days from the date of receipt by us of the materials, we will be deemed to
have disapproved the submission. You may not use any advertising, marketing or related materials that
we have disapproved. You must list your Store in the principal telephone directories distributed in your
metropolitan area (Franchise Agreement, Section 9.2).
MFF FDD – 3/2014
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Marketing Fee
You must pay to us a weekly marketing fee of 1% to 3% of your Store’s Gross Revenues. The
marketing fee for 2013 is described in Note 2 to the table in Item 6 above. We establish the exact
percentage of Gross Revenues you must pay as a marketing fee annually, and we will notify you annually
of the percentage you must pay, except for any year in which the percentage remains unchanged from the
preceding year. Not all Mrs. Fields Cookie Stores pay the same weekly marketing fee percentage. The
fee may differ based on conditions we determine periodically, including where Stores are located and how
long they have been open. Mrs. Fields Cookie Stores owned by us or an affiliate contribute marketing
fees on the same basis as similarly situated Stores operated by franchisees, but that basis and the amount
of marketing fees paid may differ from yours (Franchise Agreement, Section 9.1(a)). You must pay
marketing fees weekly by pre-authorized electronic bank transfer, at the same time that you pay
continuing fees (Franchise Agreement, Sections 6.3, 6.4 and 9.1(a)).
We will administer the marketing fees we collect and direct all marketing programs financed by
the marketing fees, and have the right to determine the creative concepts, materials and endorsements
used and the geographic, market and media placement and allocation. We will account for the marketing
fees we collect separately from our other funds, although we are not required to establish a separate
marketing fund or bank account for those fees. We have the right to use the marketing fees we collect to
defray the salaries, administrative costs and overhead we and an affiliate may incur in activities related to
our marketing programs, including conducting market research, preparing advertising, promotion and
marketing materials and collecting and accounting for the marketing fees we collect. On your prior
written request made within the first quarter of any calendar year, we will make available to you no later
than 120 days after the end of each calendar year, an annual statement of moneys collected and costs
incurred for our marketing programs. No independent audit is required with this statement or the
marketing fees we collect. We have the right in the future to create a marketing fund to be operated by us
or through another form of entity separate from us (Franchise Agreement, Section 9.1(c)).
Generally, we feel we will expend all marketing fees we collect during the taxable year within
which the contributions and earnings are received. However, any marketing fees we collect but do not
spend in the fiscal year in which they were accrued will be carried forward to the following fiscal year.
We may spend in any fiscal year an amount greater or less than the aggregate marketing fees collected
from Mrs. Fields Cookie franchisees in that year and we may make loans on behalf of the marketing fund
bearing reasonable interest, not to exceed 10%, to cover any deficits in the amount of marketing fees
collected, and cause future collections to be applied first, at our discretion, to any outstanding loans we
have made on behalf of Mrs. Fields Cookie Store marketing programs.
Although we will endeavor to utilize the marketing fees to develop advertising and marketing
materials and programs and to place advertising that will benefit all Mrs. Fields Cookie Stores, we cannot
ensure you that our expenditure of marketing fees in or affecting any geographic area will be
proportionate or equivalent to the marketing fees paid to us by Mrs. Fields Cookie Stores operating in that
geographic area or that any Mrs. Fields Cookie Store will benefit directly or in proportion to the
marketing fees it pays to us from the development of advertising and marketing materials or the
placement of advertising (Franchise Agreement, Section 9.1(d)). Except as described in this Item 11, we
are not obligated to conduct any advertising programs for the franchised system.
In 2013, marketing fee contributions were used as follows: (i) production, printing, and
merchandising: 65%; (ii) administrative expenses (including salaries of advertising/marketing executives
and employees of ours): 31%; and (iii) other expenses, consisting primarily of market research and
product innovation: 4%. In 2013, we did not spend any of the marketing fee contributions that we
received for advertising that was used principally to solicit new franchise sales, nor do we intend to do so
in 2014. You may receive an accounting of the marketing fee, including how the funds were raised and
spent, by submitting a written request to us, as outlined in your Franchise Agreement.
MFF FDD – 3/2014
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In addition to the marketing fees you pay to us, you must also spend on advertising any amount
required under your lease or sublease. Those amounts typically vary from lease to lease, and therefore,
franchisees are not obligated to spend the same amount on local advertising and marketing (Franchise
Agreement, Section 9.2). If you are developing a new Mrs. Fields Cookie Store, you must also spend at
least $5,000 on a grand opening advertising and promotion program as explained above in this Item 11.
Advertising Cooperatives
As of the issuance date of this disclosure document, we do not form, organize, maintain or
otherwise make use of advertising cooperatives, nor do we require you to join one. We have the right,
however, in the future, to form, organize, maintain and otherwise make use of local or regional
advertising cooperatives. As described in Item 6 of this disclosure document, if a local or regional
advertising cooperative is formed or organized for the market that includes your Store, we have the right
to require you to participate in and contribute to the advertising cooperative an amount of up to 3% of
your Gross Revenues, which is in addition to your marketing fees and any lease-required advertising fees.
All franchisees will contribute at the same rate. Each Mrs. Fields Cookie Store located within an
advertising cooperative, including any Mrs. Fields Cookie Stores owned by us or an affiliate, will be a
member of the advertising cooperative and have one vote per Store. The members of each advertising
cooperative and their elected officers will be responsible for all administration of the advertising
cooperative. Each advertising cooperative will engage the services of a professional advertising agency,
public relations firm or similar service that meets with our approval and has expertise in their market.
Each advertising cooperative must have an independent CPA prepare quarterly and annual financial
statements, which will be made available to us and all Mrs. Fields Cookie franchisees in the advertising
cooperative. We have the right to require local and regional advertising cooperatives to be formed,
changed, dissolved or merged.
Advertising Committee
We have the power to form, create or dissolve any advertising committee, and to determine how
members of any committee we form or create are selected. In addition, any advertising committee we
form will serve in an advisory capacity only.
Point of Sale System/Computer System Requirements
As of the date of this disclosure document, we require you to purchase and use the Treatware
point-of-sale system by ICS (“ICS”) (and applicable hardware as specified by ICS or us) in the operation
of your Mrs. Fields Cookie Store. We also require you to participate in a prepaid/stored value tracking
system from a service managed managed by Opticard Payment Services, Inc. (“Opticard”). The pointof-sale system and prepad/stored value tracking system as upgraded or modified by current releases or
similar hardware and software constitute the current computer system requirements (“Computer System”).
The hardware operating with the ICS Treatware software also acts as your register for recording sales
trasactions and printing customer receipts. As of the date of this disclosure document, ICS is our only
designated point-of-sale system provider and Opticard is our only designated prepaid/stored value
tracking system provider, but we reserve the right to designate a different provider or providers in the
future. You must obtain service contracts and pay monthly service and access fees of $65-$95 to our
designated point-of-sale system service provider, and $30-$50 to our designated prepaid/stored value
tracking system provider. The initial costs associated with Computer System will range from $3,500 to
$4,500.
We also require that you have high-speed Internet access in your Store premises in order to
electronically submit to us Gross Revenues and financial statement reports for your Store, and to allow us
to access information directly from your Computer System. You will spend approximately $150 for the
initial Internet installation and approximately $50 per month for Internet access.
MFF FDD – 3/2014
34
In addition, we require you to establish and maintain a valid email address and authorize us to
communicate with you via e-mail at that address. Currently, you may use any Internet service provider
that allows you to access the Internet.
We have the right to require you in the future to purchase, install and use a different Computer
System and to designate in the future the supplier or suppliers (which may be or include us or an affiliate)
from whom you must purchase these items. You must purchase, install and begin using any required
computer hardware and software in your Store within 60 days of our notice to you. We have the right to
require you, at your sole expense to upgrade any required computer hardware and software to meet our
then-current standards and specifications. There is no limitation on the frequency and cost of this
requirement. We estimate tha the annual cost for any upgrades, maintenance, or updating will be up to
$500. We also have the right to independently access the information and data you collect and gather
using any required computer hardware and software, and there is no limitation on our right to access this
information.
AREA DIRECTOR FRANCHISE
Assistance Before Opening: Before you begin your AD Business, we will:
1.
Provide an initial training program to you or your Managing Owner and your Operations
Manager, if any (Area Director Agreement, Section 7.1). See Note 11 below in the “Area Director
Franchise” section of “Assistance During Operation” for information regarding training.
2.
Upon your request at the end of the initial training program, provide you or your
Managing Owner with additional training if you or your Managing Owner do not feel completely trained
in the operation of an AD Business after the initial training program (Area Director Agreement, Section
7.2).
Assistance During Operation: During the operation of your AD Business, we will:
1.
Loan you a copy of our Area Director Operating Procedures Manuals (“Area Director
Manuals”) when available (Area Director Agreement, Section 8.1). We are currently in the process of
developing our Area Director Manuals, which will consist of our operations, training and other manuals,
and related materials, as well as materials specific to the operation of an AD Business. The Area Director
Manuals will contain mandatory and suggested standards and operating procedures. The Area Director
Manuals may be provided in paper or electronic form. The Area Director Manuals are confidential and
remain our property. We will occasionally modify or supplement the Area Director Manuals, and you
must comply with current, mandatory standards and procedures in the Area Director Manuals. Until the
Area Director Manuals are complete, we will loan you a copy (in paper or electronic form) of our current
Operating Procedures Manual (as described in Note 1 above in the “Store Franchise” section of
“Assistance During Operation”) and other materials we, in our sole judgment, deem appropriate.
2.
Register, as applicable, and furnish to you a current copy of our disclosure document for
you to use as we may request periodically in identifying prospective Mrs. Fields franchisees in your Area
Director Territory (Area Director Agreement, Section 4.2).
3.
Provide an initial training program to replacement or additional Managing Owners,
Operations Managers and other management personnel. We reserve the right to charge a tuition fee in
advance of such training (Area Director Agreement, Section 7.3).
4.
Provide you with advice relating to franchise sales, franchisee support and assistance via
telephone consultation, upon your reasonable request (Area Director Agreement, Section 8.2).
MFF FDD – 3/2014
35
5.
Provide you with access to any franchise sales advertising and promotional materials that
we may (but are not required to) develop, the actual cost of which we may pass on to you (Area Director
Agreement, Section 8.2).
6.
Provide you with access to our point-of-sale, product promotions, coupons and other
marketing materials generally made available to Mrs. Fields Stores (Area Director Agreement,
Section 8.2).
Collect certain fees from Mrs. Fields franchisees within your Area Director Territory, and
remit commissions owed to you, as appropriate. Area Director commissions are summarized in the table
below:
7.
When Paid
Section(s) of
Area Director
Agreement
Commission
Amount
Sales Commissions
A percentage of Initial Franchise
Fees that will vary widely,
negotiated between the parties
based on several factors, including
the Development Quota and size
of the Area Director Territory
Within 30 days after
all conditions of
payment have been
met
Transfer
Commissions
If any, a percentage of transfer
fees paid by transferring
franchisees as negotiated between
the parties based on several
factors, including the
Development Quota, size of the
Area Director Territory and
number of existing Mrs. Fields
Stores in such Territory
Within 30 days after
completion of transfer
(if we ask you to
perform services in
connection with the
transfer) and after all
conditions have been
met
6.3
Commissions on
Royalty and
Service Fees
A percentage of royalty and
service fees that will vary widely,
negotiated between the parties
based on several factors, including
the Development Quota, size of
the Area Director Territory and
number of existing Mrs. Fields
Stores in such Territory
Within 10 business
days after the end of
each 4 or 5 week fiscal
month (excludes
advertising fees,
company-owned Mrs.
Fields Stores, and
certain other excluded
locations)
6.4
6.1, 6.2
General Note:
Conditions apply to payment of Area Director commissions. Refer to the Area Director
Agreement, attached to this disclosure document as Exhibit D, for more information. No commissions
are paid to you unless the underlying fees have been actually paid to us by Mrs. Fields franchisees within
your Area Director Territory and you have met all applicable conditions (Area Director Agreement,
Section 6).
Time to Open:
The typical length of time between the effective date of the Area Director Agreement and the
commencement of your AD Business is approximately 1 to 2 months, depending on our scheduling of Area Director
training programs, your training attendees’ ability to complete the training program and our ability register, as
applicable, and furnish to you a current copy of our disclosure document for you to use in your Area Director
Territory. Under the Area Director Agreement, you have 60 days from the effective date to complete our initial
MFF FDD – 3/2014
36
training program and commence operation of your AD Business. We will extend the time within which you must
commence operations for a reasonable period of time, if factors beyond your reasonable control prevent you from
meeting this schedule, if have made reasonable and continuing efforts to comply and you request an extension in
writing. If you fail to commence operation of your AD Business within 60 days from the effective date or before the
end of any agreed upon extension, we may terminate the Area Director Agreement (Area Director Agreement,
Section 9.2).
Training.
Before you commence operation of your AD Business, we will furnish an initial training program
to up to 2 people from your management staff. Currently, you must attend the initial management and
operational training program we offer to Mrs. Fields franchisees (as described in Note 5 above in the
“Store Franchise” section of “Assistance Before Opening”). We will work with you to provide further
training on topics we deem advisable, depending on your training needs and past experience. We will
furnish all training programs at the places and times we designate. In addition to the instructional
materials used in the Mrs. Fields Store initial training programs, training materials for Area Directors will
include our current disclosure document, advertising and marketing materials, and other Area Director
instructional materials. The initial training program for Area Directors will be supervised and taught by
the same individuals involved in the Mrs. Fields initial training program.
Training must be completed by you or your Managing Owner (if you are an entity) to our
satisfaction and may, at your option, be attended by your Operations Manager. “Managing Owner” and
“Operations Manager” are defined in Item 15. All training must be completed prior to your provision of
services to any Mrs. Fields franchisee or prospective franchisee (Area Director Agreement, Section 7.1).
You must pay for the salaries, wages, overtime, benefits, travel costs and expenses, and related
costs for persons associated with you who attend any of the training or other programs described in this
Note 11, but we do not collect a separate fee for you, your Managing Owner, or your Operations Manager
to attend initial training. After the initial training program, you or your Managing Owner may request
that we provide additional training, at no additional cost to you, provided that you request the training in
writing at the end of the initial training program (Area Director Agreement, Section 7.2).
At all times during the term of the Area Director Agreement, you must have at least one person
who has completed our initial training program to our satisfaction. We reserve the right to charge a
tuition fee for replacement or additional Operations Managers and other management personnel (Area
Director Agreement, Section 7.3).
We may require you or your Managing Owner to attend ongoing training, seminars, conventions,
and development programs. We have the right to charge you a reasonable fee for your attendance at such
programs. If you fail to attend any mandatory program we offer without our prior written approval, you
must make up the missed program at a time and place we designate, and may be charged a reasonable fee
not to exceed $1,000 for each program missed (Area Director Agreement, Section 7.4).
With our prior written consent and subject to our then-current certification and training
procedures, we may require or authorize you to implement a training program for your agents and
employees that provide services to Mrs. Fields franchisees within your Area Director Territory. We have
the right to designate and approve all of the content for any such training program we may require (Area
Director Agreement, Section 9.1).
Marketing and Advertising.
As further described in Item 6, you must spend an amount to advertise for prospective Mrs.
Fields franchisees within your Area Director Territory that will allow you, in your reasonable opinion, to
meet your Development Quota. Although we may provide you with promotional and recruiting materials
MFF FDD – 3/2014
37
to solicit prospective franchisees, you are responsible for arranging media placement and for all media
expenses. All advertising which you conduct, even using the recruiting materials that we create, is
subject to our prior approval, which you must obtain in the same manner as applies to local advertising by
Mrs. Fields franchisees. As a condition of our approval, you must permit us and other Area Directors that
we authorize to use the materials that we approve for your use, without compensation to you. You may
use materials that we approve only in the exact form that you submit them to us. You agree, at your
expense, to comply with all state filing requirements relating to the advertising you use, unless we have
previously filed the advertising with the particular state (Area Director Agreement, Sections 13.9 and
13.10).
Point of Sale System/Computer System Requirements.
You must purchase a laptop computer and computer software for the operation of your AD
Business. Although we do not require you to purchase computer hardware and software that meets any
particular specifications, we recommend that you purchase for use in the operation of your AD Business a
computer with sufficient processor speed and memory to efficiently operate, along with an up-to-date
operating system and Microsoft Office software package (Area Director Agreement, Section 9.2).
Currently, we estimate that the cost of the computer hardware and software ranges from $0 to $3,000 and
we estimate that you will spend up to $500 per year on optional maintenance, upgrades, updates or
support contracts.
ITEM 12. TERRITORY
STORE FRANCHISE
Territory
We will grant you a franchise for a specific location that we must approve. You will not receive
an exclusive territory. You may face competition from other franchisees, from outlets that we own, or
from other channels of distribution or competitive brands that we control.
You may not operate your Store at any other site without our prior written consent and you may
not build or relocate your Store until we have approved your location. In addition, you may only offer
and sell finished, approved Mrs. Fields Products over the counter to retail customers from your Store, and
may not sell approved Mrs. Fields Products or any materials, supplies, or inventory bearing the Mrs.
Fields Marks at any other location or through any alternative channel of distribution, including a food
cart, or through the Internet (or other form of electronic commerce), mail order, catalog, telemarketing
and direct marketing, without our prior written consent. You may, however, (1) offer and sell approved
Mrs. Fields Products as part of off-site catering events and company account programs, provided you
deliver (and do not engage a major carrier to deliver) Mrs. Field Products that meet System Standards for
freshness the same day they are made and the sales are not part of a mail order program; (2) offer samples
of approved Mrs. Fields Products at or directly in front of your Store or other locations near your Store as
approved by your landlord; or (3) upon our prior written approval, offer and sell approved Mrs. Fields
Products from a table, kiosk or cart at satellite locations that we approve. You may not sell to anyone any
materials, supplies, or inventory used in the preparation of any Mrs. Fields Products. Further, you may
not sell any Mrs. Fields Products to any person or entity purchasing the Mrs. Fields Products for resale
without our express written permission.
Your Franchise Agreement does not grant you any options, rights of first refusal or similar rights
to acquire additional franchises.
Relocation
MFF FDD – 3/2014
38
You may not relocate your Store unless you relocate your Store as a result of condemnation, the
exercise of a relocation right by your landlord or for some other reason approved by us in writing. We
will consent to your location to a site acceptable to us provided that: (1) you are in full compliance with
the Franchise Agreement; (2) you give us written notice of your desire to relocate at least 30 days prior to
the date your Store will close for relocation; (3) you find relocated Premises that meet all of our then
current site criteria for the development of new Mrs. Fields Cookie Stores and obtain our written
approval of the relocated Premises within 60 days after the date your Store will be closed for relocation
and before you sign a lease or sublease or begin construction of the relocated Premises, and you open the
relocated Store at the relocated Premises within 180 days after the date your Store closes for relocation;
(4) you construct and develop the relocated Store in accordance with all of our then current System
Standards for Mrs. Fields Cookie Stores; (5) you have sufficient term remaining under the Franchise
Agreement, or purchase from us sufficient additional term under the Franchise Agreement, to satisfy our
then current policy on remaining term requirements for relocations; (6) you pay to us our then current
relocation fee (if any); and (7) at our request, you execute a general release, in a form satisfactory to us, of
any and all claims against us or our affiliates and our and their respective officers, directors, attorneys,
shareholders and employees, and any other ancillary agreements we are then using for relocations, or, in
the event you are required to purchase additional term, you sign our then current form of Franchise
Agreement.
Our Reservation of Rights
We and our affiliates have the right, without compensation to you or any other franchisee, to do
the following: (1) franchise, license and/or own and operate Mrs. Fields retail outlets, TCBY Stores and
Yovana stores at any location and on any terms and conditions we or an affiliate deem appropriate; (2)
sell and license and franchise others to sell Mrs. Fields Products and any other products or services under
the Mrs. Fields Marks, or any trade names, trademarks, service marks, trade dress or other commercial
symbols of an affiliate, through alternative channels of distribution (as described above), the sale of
refrigerated ready-to-bake cookie dough, dough and other ingredients for making cookies to retail outlets,
and the sale of frozen yogurt, frozen yogurt mix, premium ice cream and ice cream specialty products to a
variety of customers; and (3) franchise, license and/or own and operate businesses (including dessert and
snack food businesses) at any locations, and on any terms and conditions we or an affiliate deem
appropriate, or distribute products or services through alternative channels of distribution which are
similar to the Mrs. Fields Products under trade names, trademarks, service marks, trade dress or other
commercial symbols other than the Mrs. Fields Marks or those owned by us or an affiliate. These
activities may compete with you. We will not pay you any compensation for soliciting or accepting
orders inside your Territory through alternative channels of distribution.
Further, we or an affiliate may acquire or actively seek to acquire businesses or franchise systems
that are your competitors and those competitors may have locations near your Store, including locations
within the same shopping mall. In addition, we or an affiliate may enter into co-branding arrangements.
These activities may compete with you.
We enter into licensing and franchising arrangements with other individuals and entities, granting
those individuals and entities exclusive territorial rights which may restrict your rights to locate your
Store in certain locations. Any restrictions in effect will be explained to you as part of the site selection
process for your Store.
AREA DIRECTOR FRANCHISE
Territory
We will grant you the right to perform sales services for us, and provide site services and support
services to Mrs. Fields franchisees within your Area Director Territory. You will not receive an exclusive
MFF FDD – 3/2014
39
territory. You may face competition from other franchisees, from outlets that we own, or from other
channels of distribution or competitive brands that we control.
As a condition of maintaining your Area Director franchise, you must satisfy certain development
obligations (“Development Quota”) for each “Development Period” during the term of the Area Director
Agreement. The Development Quota consists of the number of new Stores, as well as the cumulative
number of Stores that must be open and operating within your territory. We and you will mutually agree
upon the applicable Development Quota to be included in Appendix A to the Area Director Agreement
before you sign the Area Director Agreement. Area Director Development Quotas vary considerably.
We estimate, however, that the typical Development Quota will be a cumulative total of approximately 10
to 30 Mrs. Fields Stores open and operating at the end of the initial term of the Area Director Agreement.
In addition, at all times from and after the second Development Period, you must continuously
own and operate at least the minimum number of Mrs. Fields Cookie Stores that we designate within your
Area Director Territory. Further, renewal of the Area Director Agreement is contingent upon we and you
agreeing on a new Development Quota for the renewal term at least 90 days prior to the expiration of the
previous term.
You may only solicit prospective Mrs. Fields franchisees that reside, or maintain their principal
place of business, within your Area Director Territory. You may not solicit prospective Mrs. Fields
franchisees that reside, or maintain their principal place of business, outside of your Area Director
Territory.
If you provide site services and support services to a Mrs. Fields franchisee located within your
Area Director Territory, even to a Mrs. Fields Cookie Store whom we recruit, we will pay you a
percentage of the royalty and services fees that we collect from that Store, except we do not share royalty
and service fees from any Mrs. Fields Cookie Store that we or any affiliate owns or any Excluded
Locations.
Relocation
When we offer to sell you the Area Director franchise, we will identify the boundaries of your
Area Director Territory in Appendix A to the Area Director Agreement. The size may vary from one
Area Director to the next. Once established, you may not relocate your Area Director Territory.
Our Reservation of Rights
We and our employees, affiliates and designees reserve the right, without compensation to you
(unless otherwise specifically described below), to:
(a)
use, and license others to use, the Marks for the operation of Mrs. Fields Cookie Stores,
sale of proprietary products or any other business or endeavor at any location outside the Area Director
Territory or in any channel of distribution, including the Internet and other e-commerce;
(b)
solicit prospective Mrs. Fields franchisees and grant others the right to operate Mrs.
Fields Cookie Stores outside the Area Director Territory;
(c)
solicit prospective Mrs. Fields franchisees, with or without your involvement, and grant
other Mrs. Fields Cookie Store franchises in the Area Director Territory provided that (i) any new
prospective site will first be offered to you; (ii) new Mrs. Fields Cookie Stores open in the Area Director
Territory will count towards your Development Quota and (iii) you will receive your sales commission
and related fees for those Stores;
MFF FDD – 3/2014
40
(d)
own and operate Mrs. Fields Cookie Stores within the Area Director Territory without
payment of sales commissions or other fees in connection with those Stores;
(e)
solicit prospective Mrs. Fields franchisees and grant franchises or licenses to others to
open Mrs. Fields Cookie Stores or offer proprietary products at locations within the Area Director
Territory that are to be co-branded with stores that are part of a multi-unit chain or retailer, such as
Starbucks®, Subway®, Quiznos®, Schlotzsky’s®, Wal-Mart®, Blockbuster® or Build-a-Bear®, who
have the right or ability to add food service to one or more of their company-owned, franchised or
licensed locations, provided that (i) you will provide the services and support for those Stores within the
Area Director Territory as set forth in the Area Director Agreement; and (ii) you will receive your royalty
fees (but no sales commissions) for those Stores;
(f)
offer franchises or licenses to others to operate Mrs. Fields Cookie Stores or offer
proprietary products from any location with premium, priority, or exclusive access, including a grant to a
disadvantaged business entity (DBE), masterconcessionnaire, or master franchisee or operator who is
awarded a bid to operate stores or food outlets at an airport, commercial or corporate park, school,
hospital, food service court, stadium, toll stop or rest area, outlet or factory stores, or
masterconcessionnaire mall (“Excluded Locations”);
(g)
have the option, but not the obligation, to provide sales services, site services or support
services for franchised Mrs. Fields Cookie Stores within the Area Director Territory with no change in the
percentage of royalty and service fees commissions paid to you, unless you are in default under the Area
Director Agreement;
(h)
use and license others the use of trademarks other than the Marks in connection with the
operation of retail outlets or businesses featuring similar products as the Mrs. Fields Cookie Stores from
any location, including within the Area Director Territory; and
(i)
use any alternative channels of distribution, including the Internet and other e-commerce,
catalog or wholesale distribution, or branded and non-branded retail channels such as grocery, drug, club
or convenience stores, from any location, including within the Area Director Territory.
ITEM 13. TRADEMARKS
Under the Franchise Agreement, we grant you the right to operate a Mrs. Fields Store under the
Mrs. Fields name and Marks. You may also use our Marks, as approved by us, in or with your Mrs. Fields
Store. The following is the principal Mrs. Fields Mark registered on the Principal Register of the U.S.
Patent and Trademark Office (“USPTO”):
Principal Trademark
MRS. FIELDS
(Stylized)
U.S. Serial No.
Principal/Supplemental
Register of the United
States Patent and
Trademark Office
1,299,149
Principal
Date of Registration
October 2, 1984
We renewed this registration on October 12, 2004. We have filed all required affidavits with the
USPTO. There are no currently effective material determinations of the USPTO, Trademark Trial and
Appeal Board, the Trademark Administrator of any state, or any court, nor are there any pending
infringements, opposition or cancellation proceedings or any pending material litigation, involving the
Mrs. Fields Mark described above. There are no agreements currently in effect which significantly limit
our rights to use or franchise the use of this Mark.
MFF FDD – 3/2014
41
Your right to use the Mrs. Fields Marks is derived solely from the Franchise Agreement and is
limited to your conduct of business in compliance with the Franchise Agreement and all applicable
standards, specifications, operating procedures and rules that we require.
You must use the applicable Mrs. Fields Marks as the sole identification of your Store, and you
must identify yourself as the independent owner in the manner we require. You may not use any Mrs.
Fields Mark as part of any corporate or trade name or with any prefix, suffix or other modifying words,
terms, designs or symbols (other than logos franchised to you under the Franchise Agreement), or in any
modified form, including on any sites on the Internet or World Wide Web, as an Internet domain name, or
as part of an electronic mail address without prior written approval from us. You must follow all other
policies and procedures relating to the Marks, as contained in the Operating Procedures Manual. You
must display all applicable Mrs. Fields Marks in the manner we require, and you must use the registration
symbol “®” in using any of the registered Marks. You must refrain from any business or marketing
practice which may be injurious to our business and the good will associated with the Mrs. Fields Marks
or Mrs.Fields Cookie Stores. We have the right to require you to modify or discontinue use of any Mrs.
Fields Mark or use one or more additional or substitute trade or service marks if we determine that it
becomes advisable at any time.
You must immediately notify us of any apparent infringement of or challenge to your use of any
Mrs. Fields Mark or claim by any person of any rights in any Mark, and you must not communicate with
any person other than us or our counsel about the infringement, challenge or claim. We and our affiliates
have the right to take the action we deem appropriate and control exclusively any litigation, USPTO
proceeding or any other administrative or court proceeding concerning any Mrs. Fields Mark. You must
sign any instruments and documents, render assistance and do those things as, in the opinion of our legal
counsel, may be necessary or advisable to protect and maintain our interests in any litigation or USPTO or
other proceeding or otherwise to protect and maintain our interests in the Mrs. Fields Marks.
We will take the action we think appropriate. We will indemnify you against and reimburse you
for all damages for which you are held liable in any proceeding arising out of your authorized use of any
Mrs. Fields Mark and for all costs you reasonably incur in defending any claim brought against you or
any proceeding in which you are named as a party, if you have timely notified us of the claim or
proceeding and have otherwise complied with the requirements of the Franchise Agreement. At our
option, we and our affiliates are entitled to defend and control the defense of any proceeding arising out
of your authorized use of any Mrs. Fields Mark.
We do not know of any infringing uses that could materially affect your use of the Marks.
ITEM 14. PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION
Except as noted below, we and our affiliates do not own any patents or copyrights which are
material to the Franchise. As of the date of this disclosure document, there are no patents or copyrights
registered or pending, and no patent applications, that are material to the Franchise.
We claim copyrights in the Operating Procedures Manual and Area Director Manuals,
construction plans, specifications and materials, printed advertising, promotional, sales, training and
management materials and in related items you will use in operating your Franchise. We have not
registered these copyrights with the U.S. Registrar of Copyrights. You may use the Operating Procedures
Manual (or Area Director Manuals if you are an Area Director) and other materials during the term of the
Franchise Agreement (or the Area Director Agreement if you are an Area Director). We may also claim
certain rights to the Mrs. Fields Cookie Book, a collection of cookie recipes, and the Mrs. Fields I Love
Chocolate! Cookbook, a collection of dessert recipes, both published by Time Life Books, Inc.; however,
you will have no right to use any part of the books.
MFF FDD – 3/2014
42
There are currently no effective determinations of the U.S. Copyright Office or any court
regarding any of the copyrights. There are no agreements currently in effect which significantly limit our
rights to use or franchise the copyrighted materials. Also, there are no superior prior rights or infringing
uses actually known to us which could materially affect your use of the copyrighted materials in any state.
Your right to use the copyrights is derived solely from the Franchise Agreement and is limited to
your conduct of business in compliance with the Franchise Agreement and all applicable standards,
specifications, operating procedures and rules that we require. We have the right to require you to modify
or discontinue use of any of the materials in which we claim copyrights if we determine that it becomes
advisable at any time. In that case, you must comply with our directions to modify or discontinue the use
of those materials within a reasonable time after notice from us.
You must immediately notify us if you learn that any person may be using our copyrighted
materials without our consent or authorization. You must also immediately notify us of any challenge to
your use of any copyright or claim by any person of any rights in any copyright. You must not
communicate with any person other than us or our counsel about any challenge or claim to any copyright.
We and our affiliates have the right to take the action we deem appropriate and the right to control
exclusively any litigation, U.S. Copyright Office proceeding or any other administrative proceeding
concerning any copyright. You must sign any instruments and documents, render assistance and do those
things as, in the opinion of our legal counsel, may be necessary or advisable to protect and maintain our
interests in any litigation or Copyright Office or other proceeding or otherwise to protect and maintain our
interests in the copyrights.
We will compensate and reimburse you for all damages for which you are held liable in any
proceeding arising out of your authorized use of any copyright and for all costs you reasonably incur in
defending any claim brought against you or any proceeding in which you are named as a party, if you
have timely notified us of the claim or proceeding and have complied with your obligations under the
Franchise Agreement. At our option, we or our affiliates are entitled to defend and control the defense of
any proceeding arising out of your use of any copyright.
We also own the Confidential Information and claim copyrights in the Confidential Information.
The Confidential Information includes trade secrets and is our proprietary information. Portions of the
Confidential Information required in the operation of your business will be communicated to you.
However, you will not acquire any interest in any Confidential Information, other than the right to utilize
Confidential Information disclosed to you in operating your Store during the term of the Franchise
Agreement. You may only use the Confidential Information as outlined in the Franchise Agreement.
We and our affiliates will own and have the perpetual right to use and authorize other Mrs. Fields
Cookie Stores to use, and you must fully and promptly disclose to us, all ideas, concepts, formulas,
recipes, methods and techniques relating to the development and/or operation of a cookie bakery, dessert
or retail snack food business conceived or developed by you and/ or your employees during the term of
the Franchise Agreement. You agree that we shall have the perpetual right to use and authorize other
Mrs. Fields Cookie Stores to use such ideas, concepts, methods and techniques and, if incorporated in the
System for the development and/or operation of Mrs. Fields Cookie Stores, such ideas, concepts, methods
and techniques shall become our sole and exclusive property without any consideration to you. You must
not, however, test, offer or sell any new products without our prior written consent.
ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL
OPERATION OF THE FRANCHISE BUSINESS
We recommend that you participate personally in the direct operation of your Store, although the
Franchise Agreement does not specifically obligate you to do so. However, you must either manage your
Store yourself, or use a full time “on Premises” manager. The manager need not have an ownership
MFF FDD – 3/2014
43
interest in a franchisee that is an entity. Both you (or one of your Entity Owners, if you are an entity) and
the manager of your Store must be certified by us as having completed all phases of our training program
to our satisfaction and must participate in all other activities required to open your Store. Replacement
managers must also satisfactorily complete all phases of our training program.
If you are an entity, each Entity Owner must guarantee your obligations under the Franchise
Agreement by signing the Guaranty attached to the Franchise Agreement, a copy of which is included in
Exhibit B.
We have the right to require your training attendees (including you and any Entity Owner or
manager) to sign a Confidentiality Agreement in the form of Exhibit E. In addition, we have the right to
require each manager of a Mrs. Fields Cookie Store to agree to the non-competition covenants described
in Item 17 of this disclosure document.
During the term of the Franchise Agreement, you (or if you are an entity, an Entity Owner who
manages or oversees the management of your Store) and your on Premises manager must: (a) be
sufficiently proficient in the English language to adequately communicate and correspond with us and
your employees, customers, manufacturers, suppliers, vendors and distributors, and to effectively manage
and/or oversee the management of your Store; (b) be authorized to work in the U.S. without sponsorship
by us or one of our affiliates and provide proof satisfactory to us of your authority to work in the U.S.;
and (c) successfully pass a workplace appraisal test in the English language.
ITEM 16. RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
In operating your Store, you may offer for sale only those Mrs. Fields Products that we approve
for you to sell at the Premises. The Operating Procedures Manual explains the Mrs. Fields Products that
you are authorized to offer at your Store. Your lease may also impose other obligations or restrictions on
the types of products that you may offer from your Premises, and you must comply with those restrictions
and obligations even if they would prevent you from offering certain Mrs. Fields Products that we have
approved for you to offer.
We have the right to change the types of authorized products and services you may offer and sell
at your particular Store and there are no limits on our right to make changes.
You may not use your Store for any purpose other than the operation of a Mrs. Fields Cookie
Store in compliance with the Franchise Agreement. You may not: (a) offer Mrs. Fields Products or
materials, supplies, or inventory bearing the Mrs. Fields Marks at any site other than your Store Premises,
(b) offer for sale any materials, supplies or inventory used in the preparation of any of the Mrs. Fields
Products; or (c) sell any Mrs. Fields Products to any person or entity purchasing the Mrs. Fields Products
for resale. You may only sell Mrs. Fields Products to retail customers.
MFF FDD – 3/2014
44
ITEM 17. RENEWAL, TERMINATION, TRANSFER, AND DISPUTE RESOLUTION
THE FRANCHISE RELATIONSHIP
This table lists certain important provisions of the franchise and related agreements. You
should read these provisions in the agreements attached to this disclosure document.
Provision
Section in
Franchise or Other
Agreement(1)
Summary(1)
a.
Length of the franchise
term
Section 3.1
7 years from the date you have obtained our
approval of and secured the Premises for your
Store.
b.
Renewal or extension of
the term
Section 3.2; Renewal
Addendum to Franchise
Agreement; Term
Purchase Addendum
You have the right to renew for 1 additional 7-year
term if you are not in default. In certain
circumstances, you may also be required or allowed
to pre-purchase additional term under the Franchise
Agreement.
c.
Requirements for you to
renew or extend
Section 3.2
Give 180 days prior notice; sign then current
Franchise Agreement (which may contain
materially different terms and conditions than your
original Franchise Agreement) and our then current
Renewal Addendum; refurbish and remodel the
Premises at our request; remain in good standing
with us during the initial term; satisfy all monetary
obligations; retain the Premises for the renewal
term; follow our then current renewal process,
including any requirements for additional training
and delivery of certain financial statements and
records.
d.
Termination by you
Section 13.4
You have the right to terminate if we breach the
Agreement and fail to cure the breach.
e.
Termination by us
without cause
Not applicable.
Not applicable.
f.
Termination by us with
cause
Sections 13.1 and 13.2
We can terminate if you are in default of any
agreement with us or an affiliate; see also “17.o.”
below.
g.
“Cause” defined - curable
defaults
Sections 13.1 and 13.2
Curable defaults: (1) you have 48 hours to cure
failure to comply with certain System Standards
and health requirements; (2) you have 10 days to
cure failure to make payments; and (3) you have 30
days to cure any other default of Franchise
Agreement or any other agreement with us or an
affiliate not listed above or in “17.h.” below.
Involuntary bankruptcy or other involuntary
insolvency events are defaults if not discharged
within 60 days.
h.
“Cause” defined – non-
Sections 13.1 and 13.2
Non-curable defaults:
MFF FDD – 3/2014
45
Provision
Section in
Franchise or Other
Agreement(1)
curable defaults
Summary(1)
(1) voluntary bankruptcy or other voluntary
insolvency events; (2) unauthorized transfers; (3)
material misstatements or omissions; (4) you are
convicted or plead no contest to a felony; (5) you
engage in detrimental conduct; (6) unauthorized use
of the Mrs. Fields Marks or Confidential
Information; (7) abandonment of or failure to
actively operate your Store; (8) you are in breach of
your obligations under your lease or sublease of the
Store Premises or you lose the right of possession
of your Store Premises; (9) failure to pay
uncontested taxes; (10) repeated defaults, even if
cured; (11) you default on any financing
obligations; (12) failure to obtain our approval of
and secure Premises for your Store within 6 months
after date of Franchise Agreement; (13) possession
or use of unauthorized products; or (14) failure to
satisfactorily complete training.
i.
Your obligations on
termination/non-renewal
Sections 6.5, 7.8, 8.2, 8.3,
10.5, 10.8, 12.3(1), 14.2,
14.3, 14.4, 14.6, 14.7,
15.6 and Article 18
Pay all amounts due, including any late charges and
interest; pay termination fee; continue to honor all
guarantees, releases and waivers; retain records and
permit audits; not disclose Confidential
Information; discontinue use of Mrs. Fields Marks;
deliver to us all signs, equipment, supplies and
materials displaying the Mrs. Fields Marks; cancel
any fictitious or assumed name certificates; make
required changes to Premises; assign telephone
listings; dispose of non-returnable supplies and
materials; honor indemnification requirements; and
continue to honor and be bound by general
provisions; see also “17.o.” and “17.r.” below.
j.
Assignment of contract
by us
Section 12.1
No restriction on our right to transfer or assign.
k.
“Transfer” by you –
defined
Section 1.2(p)
Includes transfer of Franchise Agreement or
ownership change.
l.
Our approval of transfer
by you
Sections 4.7, 12.2, 12.3
and 12.4; Assignment,
Assumption and Consent
We have the right to approve all transfers but will
not unreasonably withhold approval if specified
requirements are met. Transfers to a wholly-owned
corporation or limited liability company do not
require our consent.
Section 12.3;
Assignment, Assumption
and Consent; Term
Purchase Addendum
Your Store is not closed for relocation; 60 day prior
written notice to us in a form satisfactory to us;
transferee qualifies; your obligations are paid and
you are not in default; transferee completes
training; you, transferee and us sign the
Assignment, Assumption and Consent, which
contains a release of claims against us; at our
option, transferee signs our then current Franchise
Agreement and guaranty (if applicable) for
m. Conditions for our
approval of transfer
MFF FDD – 3/2014
46
Provision
Section in
Franchise or Other
Agreement(1)
Summary(1)
remaining term of Franchise Agreement being
transferred; you or your transferee pays transfer fee;
we approve terms of transfer; you subordinate any
obligations of the transferee to you to the
transferee’s obligations to us; you obtain any
required landlord consents; you agree not to use the
Marks; you or your transferee agrees to any
refurbishment we require; you have sufficient term
under the Franchise Agreement, or the transferee
has agree to purchase from us sufficient additional
term under the Franchise Agreement, to meet our
standard for transfers; you and transferee use a
licensed escrow professional to conduct the closing
of the transfer; and you comply with any other
conditions we reasonably require; See also “17.r.”
below.
n.
Our right of first refusal
to acquire your business
Section 12.5
We can match any offer for your business or for a
controlling interest in you; see also “17.r.” below.
o.
Our option to purchase
your business
Section 14.5 and Article
16
We have the right, at our option, to purchase your
Store upon termination of Franchise Agreement
unless we are in default. Under the security
agreement contained in Article 16 of the Franchise
Agreement, we can foreclose and acquire the assets
of your Store if you default.
p.
Your death or disability
Section 12.6
Your successor must transfer your interest in the
Franchise Agreement or your controlling interest in
an entity developer within 6 months, to a transferee
approved by us.
q.
Non-competition
covenants during the
term of the franchise
Sections 11.1,
11.3, 11.4 and
18.1
No interest in or services for a competitive
business; no solicitation of employees.
r.
Non-competition
covenants after the
franchise is terminated or
expires
Sections 11.2, 11.3, 11.4,
12.3(j), 12.5(c) and 18.1
No interest in or services for a competitive business
within 10 miles of your Store or 10 miles of any
Mrs. Fields retail outlet, for 2 years, if we don’t
purchase your Store (see “17.o.” above) or for 3
years, if we do purchase your Store (including after
a transfer or exercise of your right of first refusal,
for a 3 year period).
s.
Modification of the
agreement
Sections 11.4, 18.1, 18.2
and 18.8
Subject to automatic modification to conform to
mandatory provisions of applicable law. Other
modifications require mutual consent.
t.
Integration/merger clause
Section 18.15; Section 10
of Assignment,
Assumption and Consent;
Section 12 of
Confidentiality
Only the terms of Franchise Agreement,
Assignment, Assumption and Consent, and
Confidentiality Agreement, are binding (subject to
state law). Any representations or promises outside
of the disclosure document, Franchise Agreement,
MFF FDD – 3/2014
47
Provision
Section in
Franchise or Other
Agreement(1)
Agreement
Summary(1)
Assignment, Assumption and Consent, and
Confidentiality Agreement may not be enforceable.
Any representations or promises outside of the
disclosure document and franchise agreement may
not be enforceable.
u.
Dispute resolution by
arbitration or mediation
Not applicable
v.
Choice of forum
Section 17.5
Disputes must be conducted in the State of
Colorado (subject to state law)
Section 17.4
Colorado law applies to Franchise Agreement and
Confidentiality Agreement, unless governed by
applicable federal or state law.
w. Choice of law
(1)
Unless otherwise noted, Section references and summaries are to the Franchise Agreement.
THE FRANCHISE RELATIONSHIP
AREA DIRECTORS
This table lists certain important provisions of the Area Director Agreement. You should read
these provisions in the agreements attached to this disclosure document.
Provision
Section in
Area Director or Other
Agreement(2)
Summary(2)
a.
Length of the franchise term
Section 16.1
5 years
b.
Renewal or extension of the
term
Section 16.2
You have the right to renew for 1 additional 5-year
term if you are not in default.
c.
Requirements for you to
renew or extend
Section 16.2
Give 60 days prior notice; sign then current Area
Director Agreement (which may contain materially
different terms and conditions than your original Area
Director Agreement); be in compliance with all
provisions of your original Area Director Agreement;
execute a general release, if permitted under state law;
agree to new Development Quota.
d.
Termination by you
Section 17.1
Upon 90 days written notice if we are unable to
provide registered and effective FDDs that allow you
to sell within your Territory for more than 90
consecutive days; you have the right to terminate if we
breach the Agreement and fail to cure the breach
within 90 days.
e.
Termination by us without
cause
MFF FDD – 3/2014
Not applicable.
Not applicable.
48
Provision
Section in
Area Director or Other
Agreement(2)
Summary(2)
f.
Termination by us with
cause
Section 17.2
We can terminate if you: fail to complete training;
intentionally make any material misrepresentation or
omission in your application; fail to comply with
federal and state franchise laws; fail to meet your
Development Quota; fail to comply with any provision
of your Area Director Agreement; surrender control or
fail to actively operate your business; convicted of a
felony or other crime as we determine; declare or are
adjudicated bankrupt or insolvent; abandon or cease to
operate your business for 30 consecutive days; receive
3 notices of default within a 12 month period; fail to
pay any amounts due to us within 30 days’ notice.
g.
“Cause” defined - curable
defaults
Sections 17.2
Curable defaults: (1) you have 90 days to cure failure
to meet your Development Quota (or 180 days if the
default is for the cumulative number of Stores to be
open and in operation in your Territory); (2) you have
30 days to cure failure to make payments; and (3) you
have 30 days to cure any other default of Area Director
Agreement or any other agreement with us or an
affiliate not listed above or in “17.h.” below.
h.
“Cause” defined – noncurable defaults
Sections 17.2
Non-curable defaults:
(1) bankruptcy or other insolvency events;
(2) unauthorized transfers; (3) material misstatements
or omissions; (4) you are convicted or plead no contest
to a felony; (5) you engage in detrimental conduct;
(6) abandonment of or failure to actively operate your
business; (7) repeated defaults, even if cured;
(8) failure to satisfactorily complete training; (9)
failure to comply with requirements under federal and
state franchise laws.
i.
Your obligations on
termination/non-renewal
Section 17.3
Pay all amounts due, including any late charges and
interest; refrain from identifying yourself as our
current area director; immediately deliver to us all past
and present franchise sales leads, records, contracts,
acknowledgments of receipt and other information and
records related to franchisees; immediately deliver all
advertising materials, manuals, forms, FDDs, sales
brochures and other materials displaying the Mrs.
Fields Marks; refrain from communicating with
franchisees; cancel all fictitious or assumed name or
equivalent registrations; furnish within 30 days proof
of compliance with the foregoing obligations; and
continue to honor and be bound by general provisions;
see also “17.r.” below.
j.
Assignment of contract by
us
Section 15.1
No restriction on our right to transfer or assign.
MFF FDD – 3/2014
49
Provision
Section in
Area Director or Other
Agreement(2)
Summary(2)
k.
“Transfer” by you - defined
Section 15.2
Includes the voluntary, involuntary, direct, or indirect
assignment, sale, subfranchise, gift or other disposition
of any interest in the Area Director Agreement, the
ownership of the Area Director, Stores operated by the
Area Director, or assets of the Area Director business.
l.
Our approval of transfer by
you
Sections 15.3, 15.4 and 15.5
We have the right to approve all transfers but will not
unreasonably withhold approval if specified
requirements are met.
m. Conditions for our approval
of transfer
Section 15.3
You are in full compliance with your Area Director
Agreement; transferee has sufficient business
experience, aptitude and financial resources and agrees
to be bound by the Area Director Agreement;
transferee has completed our training program to our
satisfaction and paid a reasonable training fee; you
have paid all amounts owed to us, our affiliates and
third party creditors and submitted all required reports
and statements; you or your transferee has paid a
transfer fee to us; you execute a general release, where
permitted under state law; transferee signs an
assumption of your obligations or a current Area
Director Agreement; we approve the material terms
and conditions of the transfer; you agree that all
obligations of the transferee under any promissory
note, agreement or security interest will be subordinate
to transferee’s obligation to pay amounts due to us
(where applicable); you execute a noncompetition
covenant; and you comply with any other conditions
we reasonably require; See also “17.r.” below.
n.
Our right of first refusal to
acquire your business
Section 15.7
We can match any offer for your business or for a
controlling interest in you; see also “17.r.” below.
o.
Our option to purchase your
business
Section 15.7
We have the right of first refusal to acquire your
business. See “17.n” above.
p.
Your death or disability
Section 12.6
Your personal representative must transfer your
interest in the Area Director Agreement or your entity
within 6 months, to a transferee approved by us.
q.
Non-competition covenants
during the term of the
franchise
r.
Non-competition covenants
after the franchise is
terminated or expires
MFF FDD – 3/2014
Section 12
Section17.5
You may not: have an interest in a competitive
business, perform services for a competitive business,
divert or attempt to divert business to a competitive
business, solicit or employ an employee of us or our
affiliates.
No interest in a competitive business in your territory
within 2 years.
50
Section in
Area Director or Other
Agreement(2)
Provision
s.
Modification of the
agreement
t.
Integration/merger clause
Section 20.11
Only the terms of the Area Director Agreement and its
attachments are binding (subject to federal and state
law). Any other promises may not be enforceable.
Any representations or promises outside of the
disclosure document and Area Director Agreement
may not be enforceable.
u.
Dispute resolution by
arbitration or mediation
Section 19.1
You agree to mediate any dispute that does not include
injunctive relief or specific performance actions;
mediator will be agreed to by all parties; you must
participate in good faith; if dispute is not resolved
within 30 days, the parties can pursues legal action.
v.
Choice of forum
Section 19.2
Disputes must be conducted in the State of Colorado
(subject to state law)
Section 19.2
Colorado law applies to Franchise Agreement and
Confidentiality Agreement, unless governed by
applicable federal or state law.
w. Choice of law
Sections 20.1 and 20.2
Summary(2)
Subject to automatic modification to conform to
mandatory provisions of applicable law. Other
modifications require mutual consent.
ITEM 18. PUBLIC FIGURES
We do not use any public figure to promote our Franchise.
ITEM 19. FINANCIAL PERFORMANCE REPRESENTATIONS
The FTC’s Franchise Rule permits a franchisor to provide information about the actual or
potential financial performance of its franchised and/or franchisor-owned outlets, if there is a reasonable
basis for the information, and if the information is included in the disclosure document. Financial
performance information that differs from that included in Item 19 may be given only if: (1) a franchisor
provides the actual records of an existing outlet you are considering buying; or (2) a franchisor
supplements the information provided in this Item 19, for example, by providing information about
possible performance at a particular location or under particular circumstances.
We do not make any representations about a franchisee’s future financial performance or the past
financial performance of company-owned or franchised outlets. We also do not authorize our employees
or representatives to make any such representations either orally or in writing. If you are purchasing an
existing outlet, however, we may provide you with the actual records of that outlet. If you receive any
other financial performance information or projections of your future income, you should report it to the
franchisor’s management by contacting Michael Chao, CFO, 8001 Arista Place, Suite 600, Broomfield,
CO 80021, (720) 599-3350, the Federal Trade Commission, and the appropriate state regulatory agencies.
MFF FDD – 3/2014
51
ITEM 20. OUTLETS AND FRANCHISEE INFORMATION
STORE FRANCHISES
TABLE NUMBER 1(2)(3)
Systemwide Mrs. Fields Cookie Stores Summary
For Years 2011 to 2013
Store Type
Franchised
Company-Owned
Total Stores
Year
Stores at the Start
of the Year
Stores at the End
of the Year
Net Change
2011
2012
2013 1
2011
2012
2013
2011
2012
2013 1
261
239
222
0
0
2
261
239
224
239
222
195
0
2
5
239
224
200
-22
-17
-27
0
2
3
-22
-15
-24
(1) Store 54005 Continental Airlines Arena was converted from a franchisee to a licensee in 2013.
(2) More than 30 Mrs. Fields Stores are co-branded locations with TCBY and 4 Mrs. Fields Stores are
co-branded locations with expanded menus operating as “Mrs. Fields Bakery Café”.
(3) The numbers throughout these Item 20 tables are as of December 28, 2013, December 29, 2012 and
December 31, 2011.
TABLE NUMBER 2
Transfers of Mrs. Fields Cookie Stores From Franchisee to New Owners
(Other than the Franchisor)
For Years 2011 to 2013
STATE
California
Colorado
Delaware
Florida
Illinois
MFF FDD – 3/2014
YEAR
NUMBER OF
TRANSFERS
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
1
5
5
0
0
1
0
1
0
0
1
0
0
0
3
0
52
STATE
Kansas
Michigan
Minnesota
New York
Ohio
Oregon
Pennsylvania
Virginia
TOTAL
YEAR
NUMBER OF
TRANSFERS
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
0
1
0
0
1
0
1
0
1
0
0
0
2
0
0
1
0
0
1
0
0
0
1
0
1
0
2
13
12
TABLE NUMBER 3
Status of Franchised Mrs. Fields Cookie Stores 2
(Other than Franchisor)
For Years 2011 to 2013
State
Alabama
Alaska
Arizona
California
MFF FDD – 3/2014
Year
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
Stores at
the Start
of the
Year (1)
Stores
Opened
1
1
0
1
1
1
4
4
3
71
64
0
0
0
0
0
0
0
0
0
0
2
Terminations
0
0
0
0
0
0
0
0
0
0
0
NonRenewals
0
0
0
0
0
0
0
0
0
0
0
Reacquired
by
Franchisor
Ceased
Operation
s/Other
Reasons
Stores at
the End of
the Year
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
1
1
7
4
1
0
0
1
1
1
4
3
2
64
62
(1)
53
State
Colorado
Connecticut
Delaware
Washington
DC
Florida
Idaho
Illinois
Indiana
Kansas
Louisiana
Maine
Maryland
Massachusett
s
Michigan
Minnesota
Missouri
Nevada
MFF FDD – 3/2014
Year
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
Stores at
the Start
of the
Year (1)
Stores
Opened
62
3
2
1
3
3
1
3
3
3
1
0
0
14
13
14
2
2
2
25
25
23
3
3
3
2
2
3
3
2
1
1
1
1
6
5
5
5
4
4
17
17
17
2
2
2
4
4
3
3
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
1
0
0
0
1
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Terminations
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
NonRenewals
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
0
1
Reacquired
by
Franchisor
Ceased
Operation
s/Other
Reasons
Stores at
the End of
the Year
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
1
1
0
0
2
0
0
0
0
1
0
0
1
1
0
0
0
0
1
2
3
0
0
1
0
0
0
1
1
0
0
0
0
1
0
2
0
0
0
0
0
3
0
0
0
0
1
1
0
60
2
1
1
3
1
1
3
3
3
0
0
0
13
14
15
2
2
2
25
23
20
3
3
2
2
3
3
2
1
1
1
1
1
5
5
3
4
4
4
17
17
14
2
2
2
4
3
2
2
(1)
54
State
New
Hampshire
New Jersey
New York
North
Carolina
North
Dakota
Ohio
Oklahoma
Oregon
Pennsylvania
South
Carolina
Tennessee
Texas
Utah
Virginia
Washington
Wisconsin
MFF FDD – 3/2014
Year
2012
2013
2011
2012
2013
2011
2012
2013 1
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
2011
2012
2013
Stores at
the Start
of the
Year (1)
Stores
Opened
2
2
1
1
1
10
9
7
19
18
16
2
2
1
1
1
1
5
3
3
3
3
3
4
2
2
6
4
4
2
2
2
1
1
0
9
8
8
5
5
5
5
5
3
7
8
8
7
7
7
0
0
0
0
0
0
0
0
2
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
2
0
1
0
0
0
Terminations
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
NonRenewals
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Reacquired
by
Franchisor
Ceased
Operation
s/Other
Reasons
Stores at
the End of
the Year
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
2
2
3
3
4
0
1
0
0
0
0
2
0
0
0
0
1
2
0
0
2
0
0
0
0
1
0
1
0
1
0
2
0
0
2
0
2
0
1
0
1
0
0
3
2
2
1
1
1
9
7
5
18
16
12
2
1
1
1
1
1
3
3
3
3
3
2
2
2
2
4
4
4
2
2
1
1
0
0
8
8
6
5
5
3
5
3
3
8
8
8
7
7
4
(1)
55
State
Year
Stores at
the Start
of the
Year (1)
Stores
Opened
261
239
222
5
6
2
2011
2012
2013
TOTAL
Terminations
0
0
0
NonRenewals
Reacquired
by
Franchisor
Ceased
Operation
s/Other
Reasons
Stores at
the End of
the Year
0
0
0
25
23
29
239
222
195
2
0
0
(1)
(1)
Store 54005 Continental Airlines Arena was converted from a franchisee to a licensee in 2013.
(2)
We generally include Stores that are closed temporarily as open and active for purposes of
consistency in this disclosure document, unless and until the stores close permanently. The
duration of closures for these stores varies widely from several days or weeks to several months.
The total "Stores at the End of the Year" for 2011 in this Table included 3 Mrs. Fields Stores that
were temporarily closed. There were no Mrs. Fields stores closed temporarily in 2012 or 2013.
TABLE NUMBER 4
Status of Company-Owned Mrs. Fields Cookie Stores (1)
For Years 2011 to 2013
State
Year
California
2011
2012
2013
2011
2012
2013
2011
2012
2013
Colorado
TOTAL
(1)
Stores at
the Start
of the
Year
0
0
1
0
0
1
0
0
2
Stores
Opened
0
1
2
0
1
1
0
2
3
Stores
Reacquired
From
Franchisees
0
0
0
0
0
0
0
0
0
Stores
Closed
Outlets
Sold to
Franchisees
Stores at
the End of
the Year
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
1
3
0
1
2
0
2
5
This Table shows Mrs. Fields Cookie Stores owned and operated by FOC and MFFB. It does not
include any locations owned by any other entity. MFOC remains on the lease as master tenant
and sublessor on several franchised Stores.
TABLE NUMBER 5
Projected Openings 1
As of December 28, 2013
State
Franchise
Agreements Signed
But Store Not
Opened
Projected New
Franchised Stores in
the Next Fiscal Year
Projected New
Company-Owned
Stores in the
Current Fiscal Year
California
Florida
Illinois
Maryland
Massachusetts
0
0
0
0
0
5
4
4
4
1
0
0
0
0
0
Missouri
0
1
0
MFF FDD – 3/2014
56
State
Franchise
Agreements Signed
But Store Not
Opened
Projected New
Franchised Stores in
the Next Fiscal Year
Projected New
Company-Owned
Stores in the
Current Fiscal Year
New Jersey
New York
Pennsylvania
Washington
TOTAL
0
1
0
4
5
2
4
2
5
32
0
0
0
0
0
As of December 28, 2013, there were 195 franchised Mrs. Fields Cookie Stores open and operating in the
United States, and 5 Mrs. Fields Cookie Stores operated by us in the United States.
AREA DIRECTOR BUSINESSES
TABLE NUMBER 1
System Wide Business Summary(1)(2)
For Years 2011 to 2013
Business Type
Franchised
Company-Owned
Total Outlets
Year
2011
2012
2013
2011
2012
2013
2011
2012
2013
Businesses at the
Start of the Year
1
1
1
0
0
0
1
1
1
Businesses at the
End of the Year
1
1
1
0
0
0
1
1
1
Net Change
0
0
0
0
0
0
0
0
0
(1) The numbers throughout these Item 20 tables are as of December 28, 2013, December 29, 2012
and December 31, 2011.
(2) This Table reflects 1 Area Director Business operated in 2 Area Director Territories (Hawaii and
Washington) under a single Area Director Agreement.
TABLE NUMBER 2
Transfers of Businesses from Franchisees to New Owners
(Other Than the Franchisor)
For years 2011 to 2013
MFF FDD – 3/2014
State
Year
TOTAL
2011
2012
2013
Number of
Transfers
0
0
0
57
TABLE NUMBER 3 1
Status of Franchised Businesses
For Years 2011 to 2013
State
Washington
TOTALS
Year
Businesses
at Start of
Year
Businesses
Opened
Terminated
NonRenewals
Reacquired
by
Franchisor
2011
2012
2013
2011
2012
2013
1
1
1
1
1
1
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
Ceased
Operations
Other
Reasons
0
0
0
0
0
0
Businesses
at End of
Year
1
1
1
1
1
1
(1) This Table reflects 1 Area Director Business operated in 2 Area Director Territories (Hawaii and
Washington) under a single Area Director Agreement.
TABLE NUMBER 4
Status of Company-Owned Businesses
For Years 2011 to 2013
State
Year
Businesses
at Start of
Year
TOTALS
2011
2012
2013
0
0
0
Businesses
Opened
0
0
0
Businesses
Reacquired
from
Franchisee
0
0
0
Businesses
Closed
Businesses
Sold to
Franchisee
Businesses at
End of the
Year
0
0
0
0
0
0
0
0
0
TABLE NUMBER 5
Projected Openings
As of December 28, 2013
State
Florida
Ohio
Pennsylvania
Virginia
TOTAL
Area Director
Agreements Signed
But Business Not
Opened
0
0
0
0
0
Projected New Area
Director Businesses In
The Next Fiscal Year
1
1
1
1
4
Projected New
Company-Owned
Businesses In The Next
Fiscal Year
0
0
0
0
0
Part 1 of Exhibit K to this disclosure document discloses all of the Mrs. Fields Cookie Stores
franchisees, addresses, and telephone numbers as of December 28, 2013. Part 2 of Exhibit K to this
disclosure document is a list of every Mrs. Fields franchisee who, during our 2013 fiscal year had a
Franchise Agreement terminated, not renewed, reacquired or who otherwise voluntarily or involuntarily
ceased to do business under the Franchise Agreement. Part 3 of Exhibit K to this disclosure document is
a list of every Mrs. Fields franchisee who, during our 2013 fiscal year transferred a franchise. In addition,
no franchisee has failed to communicate with us within 10 weeks of the date of this disclosure document.
MFF FDD – 3/2014
58
If you buy a Mrs. Fields Cookie Store franchise, your contact information may be disclosed to other
buyers when you leave the franchise system.
During the last 3 fiscal years, franchisees have signed confidentiality clauses. In some instances,
current and former franchisees sign provisions restricting their ability to speak openly about their
experience with the Mrs. Fields franchise system. You may wish to speak with current and former
franchisees, but be aware that not all such franchisees will be able to communicate with you.
The Mrs. Fields Franchisee Advisory Committee is an organization of franchisees that we created
and support. The committee does not have a specific address, but some of its members are as follows:
Jeri Ferbrache - sovnuggets@aol.com
Betty Huntsman - bhuntsman@netzero.net
Ed Forman - eforman@ffhospitality.net
Nancy Miller - knmtn@sbcglobal.net
Rami Kashkeesh - kashkeesh@yahoo.com
Mohammed Alamgir - alam81@comcast.net
Jerry Calvo - jerrycalvo@comcast.net
Trushit Bhatt - tbhatt71@yahoo.com
ITEM 21. FINANCIAL STATEMENTS
Attached as Exhibit L to this disclosure document are (i) the interim unaudited financial
statements for our affiliate and ultimate parent, MFOC, as of May 24, 2014; and (ii)the consolidated
balance sheets of our affiliate and ultimate parent, MFOC, as of December 28, 2013, December 29, 2012,
and December 31, 2011 and the related consolidated statements of operations and comprehensive loss,
stockholders’ deficit and cash flows for the year ended December 28, 2013, December 29, 2012, and
December 31, 2011, together with the Independent Auditors’ Report.
Separate stand-alone financial statements of us (Mrs. Fields Franchising, LLC) are not included
in this disclosure document. Should we fail to fulfill our obligations to our franchisees, however, MFOC
absolutely and unconditionally guarantees to fulfill those obligations. A copy of the written guarantee is
attached as Exhibit M.
ITEM 22. CONTRACTS
The following agreements proposed for use regarding the offering of a Mrs. Fields Franchise are
attached to this disclosure document:
Exhibit B Exhibit D Exhibit E Exhibit F Exhibit G Exhibit H Exhibit I Exhibit N -
Franchise Agreement (and Exhibits)
Area Director Agreement
Confidentiality Agreement
Assignment, Assumption and Consent
Term Purchase Addendum
Lease Addendum
Sublease Agreement; Assignment and Assumption of Sublease
Renewal Addendum
ITEM 23. RECEIPTS
The last two pages of this disclosure document are copies of a detachable acknowledgment of
receipt. Please sign and return to us our copy of the receipt (Copy for Mrs. Fields Franchising, LLC), and
sign and retain for your records your copy of the receipt (Copy for Prospective Franchisee).
MFF FDD – 3/2014
59
EXHIBIT A
LIST OF STATE ADMINISTRATORS AND
AGENTS FOR SERVICE OF PROCESS
STATE
California
STATE ADMINISTRATOR/AGENT
ADDRESS
th
CA Commissioner, Department of Business
Oversight
Commissioner of Securities
Dept. of Commerce and Consumer Affairs
Business Registration Division
Securities Compliance Branch
Illinois Attorney General
320 West 4 Street, Suite 750
Los Angeles, CA 90013-2344
335 Merchant Street
Room 203
Honolulu, HI 96813
Indiana
(State
Administrator)
Indiana
(Agent)
Indiana Securities Commissioner
Securities Division
302 West Washington Street, Room E111
Indianapolis, IN 46204
Indiana Secretary of State
302 West Washington Street, Room E018
Indianapolis, IN 46204
Maryland
(State
Administrator)
Maryland
(Agent)
Office of the Attorney General
Division of Securities
200 St. Paul Place
Baltimore, MD 21202-2020
Maryland Securities Commissioner
200 St. Paul Place
Baltimore, MD 21202-2020
Michigan
Michigan Department of Attorney General
Consumer Protection Division
Williams Building, 7th Floor
525 West Ottawa Street
Lansing, MI 48909
Minnesota
Commissioner of Commerce
Minnesota Department of Commerce
85 7th Place East, Suite 500
St. Paul, MN 55101-2198
New York (State
Administrator)
New York State Department of Law
Bureau of Investor Protection and Securities
120 Broadway, 23rd Floor
New York, NY 10271
New York
(Agent)
Secretary of State of the State of New York
41 State Street, Second Floor
Albany, NY 12231
North Dakota
Securities Commissioner
600 East Boulevard Avenue, Fifth Floor
Bismarck, ND 58505-0510
Rhode Island
Director, Department of Business Regulation,
Securities Division
1511 Pontiac Avenue
John O. Pastore Complex – Building 69-1
Cranston, RI 02920
South Dakota
Director Division of Securities
Division of Securities
445 East Capitol Avenue
Pierre, SD 57501
Virginia
(State
Administrator)
Virginia
(Agent)
Washington
Virginia State Corporation Commission
Division of Securities and Retail
1300 East Main Street, 9th Floor
Richmond, VA 23219-3630
Clerk of the State Corporation Commission
1300 East Main Street, 1st Floor
Richmond, VA 23219-3630
150 Israel Road SW
Tumwater, WA 98501
Department of Financial Institutions
Division of Securities
345 W. Washington Ave., 4th Floor
Madison, WI 53703
Hawaii
(State
Administrator)
Illinois
Wisconsin
Department of Financial Institutions
Securities Division
Commissioner of Securities
MFF FDD – 3/2014
Exhibit A: List of State Administrators
500 South Second Street
Springfield, IL 62706
EXHIBIT B
FRANCHISE AGREEMENT
MFDD – 3/14
Exhibit B: Franchise Agreement
i
MRS. FIELDS®
FRANCHISE AGREEMENT
BETWEEN
MRS. FIELDS FRANCHISING, LLC
8001 Arista Place
Suite 600
Broomfield, Colorado 80021
(720) 599-3350
AND
___________________________________________
___________________________________________
___________________________________________
Name(s) of Franchisee
___________________________________________
Street
___________________________________________
City
State Zip Code
(___)_______________________________________
Area Code
Telephone
Franchised Store:
____________________________________________
Street
____________________________________________
City
State Zip Code
(___)_______________________________________
Area Code
Telephone
Date of Franchise Agreement
_____________________________________, 20____
MFDD – 3/14
Exhibit B: Franchise Agreement
ii
MRS. FIELDS®
FRANCHISE AGREEMENT
TABLE OF CONTENTS
ARTICLE 1 - DEFINITIONS; PREAMBLES; AND ACKNOWLEDGMENTS ................................ 1
1.1 Date of Agreement .............................................................................................................................................. 1
1.2 Definitions .......................................................................................................................................................... 1
1.3 Preambles............................................................................................................................................................ 3
ARTICLE 2 - GRANT OF FRANCHISE................................................................................................. 3
2.1 Franchise ............................................................................................................................................................. 3
2.2 Reservation of Certain Rights ............................................................................................................................. 4
ARTICLE 3 - INITIAL TERM AND RENEWAL .................................................................................. 4
3.1 Initial Term of the Franchise Agreement ............................................................................................................ 4
3.2 Renewal .............................................................................................................................................................. 5
ARTICLE 4 - SITE SELECTION, LEASE OF PREMISES AND DEVELOPMENT OF
YOUR STORE .................................................................................................................. 6
4.1
4.2
4.3
4.4
4.5
4.6
4.7
Site Selection ...................................................................................................................................................... 6
Acquisition of the Premises ................................................................................................................................ 6
Franchised Store Development ........................................................................................................................... 7
Fixtures, Furnishings, Equipment, Signs and Computer Systems ...................................................................... 8
Franchised Store Opening ................................................................................................................................... 9
Grand Opening Promotion .................................................................................................................................. 9
Relocation ......................................................................................................................................................... 10
ARTICLE 5 - TRAINING AND GUIDANCE ....................................................................................... 11
5.1
5.2
5.3
5.4
Training ............................................................................................................................................................ 11
Operations Manual............................................................................................................................................ 11
Guidance and Operating Assistance ................................................................................................................. 11
National Conventions and Regional Meetings.................................................................................................. 12
ARTICLE 6 - FEES .................................................................................................................................. 12
6.1
6.2
6.3
6.4
6.5
6.6
6.7
Initial Franchise Fee ......................................................................................................................................... 12
Continuing Fees ................................................................................................................................................ 12
Date and Term of Payment ............................................................................................................................... 12
Payment by Pre-Authorized Bank Transfer ...................................................................................................... 13
Late Fees; Interest on Late Payments ............................................................................................................... 13
Application of Payments ................................................................................................................................... 13
No Right of Offset ............................................................................................................................................ 13
ARTICLE 7 - OBLIGATIONS RELATING TO OPERATIONS ....................................................... 13
7.1
7.2
7.3
7.4
7.5
System Standards .............................................................................................................................................. 13
Performance of Duties and Obligations ............................................................................................................ 14
Restrictions on Operations ................................................................................................................................ 14
Internet Use....................................................................................................................................................... 14
Our Right to Inspect Your Store ....................................................................................................................... 14
MFDD – 3/14
Exhibit B: Franchise Agreement
iii
7.6
7.7
7.8
7.9
Surveys ............................................................................................................................................................. 15
Entity Owners; Name Change .......................................................................................................................... 15
Guaranties by Entity Owners ............................................................................................................................ 15
Insurance ........................................................................................................................................................... 15
ARTICLE 8 - REPORTS AND RECORD KEEPING .......................................................................... 16
8.1 Accounting, Reports and Financial Statements ................................................................................................ 16
8.2 Retention of Records ........................................................................................................................................ 17
8.3 Our Right to Audit ............................................................................................................................................ 17
ARTICLE 9 - MARKETING AND PROMOTION .............................................................................. 18
9.1
9.2
9.3
9.4
Marketing Fees ................................................................................................................................................. 18
Advertising and Promotional Activities by You ............................................................................................... 19
Our Advertising Materials ................................................................................................................................ 19
Advertising Cooperatives ................................................................................................................................. 19
ARTICLE 10 - USE OF THE MARKS AND CONFIDENTIAL INFORMATION .......................... 20
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
Ownership and Goodwill of Marks................................................................................................................. 20
Limitations on Your Use of Marks ................................................................................................................. 20
Discontinuance of Use of Marks .................................................................................................................... 20
Notification of Infringements and Claims ...................................................................................................... 21
Our Indemnification of You ........................................................................................................................... 21
Copyrights ...................................................................................................................................................... 21
Concepts Developed by You .......................................................................................................................... 21
Confidential Information ................................................................................................................................ 21
ARTICLE 11 - COVENANTS NOT TO COMPETE ........................................................................... 22
11.1
11.2
11.3
11.4
In Term Non-Compete .................................................................................................................................... 22
Post Term Non-Compete ................................................................................................................................ 22
Shareholder Exception .................................................................................................................................... 22
Enforcement of Non-Competes ...................................................................................................................... 22
ARTICLE 12 - TRANSFERS .................................................................................................................. 23
12.1
12.2
12.3
12.4
12.5
12.6
12.7
12.8
Transfers by Us ............................................................................................................................................... 23
Restrictions on Transfers by You ................................................................................................................... 23
Conditions for Approval of Transfers by You ................................................................................................ 23
Transfer to a Wholly-Owned Corporation or Limited Liability Company ..................................................... 25
Our Right of First Refusal .............................................................................................................................. 25
Death or Permanent Disability........................................................................................................................ 26
Effect of Consent to Transfer.......................................................................................................................... 26
Preparation of a Financial Report by You ...................................................................................................... 26
ARTICLE 13 - DEFAULT AND TERMINATION ............................................................................... 27
13.1
13.2
13.3
13.4
13.5
Your Defaults ................................................................................................................................................. 27
Our Right to Terminate if You Default........................................................................................................... 28
Our Right to Terminate in Certain Other Circumstances................................................................................ 29
Your Right to Terminate if We Default .......................................................................................................... 30
Assumption of Management ........................................................................................................................... 30
ARTICLE 14 - POST TERM OBLIGATIONS ..................................................................................... 30
14.1 Reversion of Rights ........................................................................................................................................ 30
14.2 Payment of Amounts Owed to Us and Others following Termination or Expiration ..................................... 30
14.3 Discontinuance of the Use of the Marks following Termination or Expiration .............................................. 30
MFDD – 3/14
Exhibit B: Franchise Agreement
iv
14.4
14.5
14.6
14.7
Discontinuance of Use of Confidential Information following Termination or Expiration ............................ 31
Our Option to Purchase Franchised Stores ..................................................................................................... 31
Termination Fee .............................................................................................................................................. 33
Continuing Obligations ................................................................................................................................... 33
ARTICLE 15 - RELATIONSHIP OF THE PARTIES/INDEMNIFICATION .................................. 33
15.1
15.2
15.3
15.4
15.5
15.6
15.7
Independent Contractors ................................................................................................................................. 33
No Liability for the Act of Other Party ........................................................................................................... 33
Your Control ................................................................................................................................................... 33
Our Approval and Enforcement ...................................................................................................................... 34
Taxes............................................................................................................................................................... 34
Indemnification ............................................................................................................................................... 34
Waiver of Claims ............................................................................................................................................ 34
ARTICLE 16 - SECURITY AGREEMENT .......................................................................................... 34
16.1 Security Interest .............................................................................................................................................. 34
16.2 Requirements .................................................................................................................................................. 34
ARTICLE 17 - DISPUTE RESOLUTION ............................................................................................. 35
17.1
17.2
17.3
17.4
17.5
17.6
17.7
Injunctive Relief ............................................................................................................................................. 35
Rights of Parties Are Cumulative ................................................................................................................... 35
Costs and Attorneys’ Fees .............................................................................................................................. 35
Governing Law ............................................................................................................................................... 35
Consent to Jurisdiction ................................................................................................................................... 35
Waiver of Punitive Damages and Jury Trial ................................................................................................... 36
Limitation of Claims ....................................................................................................................................... 36
ARTICLE 18 - GENERAL PROVISIONS ............................................................................................ 36
18.1 Severability ..................................................................................................................................................... 36
18.2 Rights Provided by Law ................................................................................................................................. 36
18.3 Waivers by Either of Us ................................................................................................................................. 37
18.4 Certain Acts Not to Constitute Waivers.......................................................................................................... 37
18.5 Excusable Non-Performance .......................................................................................................................... 37
18.6 Interpretation of Rights and Obligations......................................................................................................... 37
18.7 Notice of Potential Profit to Us....................................................................................................................... 38
18.8 Binding Effect ................................................................................................................................................. 38
18.9 No Third Party Beneficiaries .......................................................................................................................... 38
18.10 Approvals...................................................................................................................................................... 38
18.11 Headings ....................................................................................................................................................... 38
18.12 Joint and Several Liability ............................................................................................................................ 38
18.13 Counterparts.................................................................................................................................................. 38
18.14 Notices and Payments ................................................................................................................................... 38
18.15 Entire Agreement .......................................................................................................................................... 38
Acknowledgement Addendum to Mrs. Fields® Franchise Agreement ................................................ 40
Ownership Addendum to Mrs. Fields® Franchise Agreement ............................................................ 42
Guaranty
.......................................................................................................................................... 43
Appendix A: Store Premises; Start Date................................................................................................... 45
Alternative Appendix A: Store Premises; Start Date ............................................................................. 46
Appendix B: Authorization Agreement for Prearranged Payments (Direct Debits)................................ 47
MFDD – 3/14
Exhibit B: Franchise Agreement
v
MRS. FIELDS® FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (the “Agreement”) is between MRS. FIELDS
FRANCHISING, LLC, a Delaware limited liability company, with its principal business address at 8001
Arista Place, Suite 600, Broomfield, Colorado 80021 (referred to in this Agreement as “we” and like
terms),
and
_______________________________________________________________,
a
_________________________________________________, whose principal business address is
_______________________________________ (referred to in this Agreement as “you” and like terms).
OUR AGREEMENT WITH YOU: By signing this Agreement, you and we agree to all of the
terms and provisions in this Agreement and in any exhibits, addenda and appendices to this Agreement.
By signing this Agreement, you are also affirming that you understand and accept the Preambles in
Article 1 of this Agreement. Finally, by signing the Acknowledgment Addendum attached hereto, you
are affirming that you understand and accept all of the acknowledgments and representations contained
therein.
ARTICLE 1
DEFINITIONS; PREAMBLES; AND ACKNOWLEDGMENTS
1.1.
Date of Agreement. The date of this Agreement is ___________, 20__.
1.2.
Definitions.
(a)
“Affiliate,” as used in relation to us, means any person or entity that directly or
indirectly owns or controls us, is directly or indirectly owned or controlled by us or is under
common control with us, now or in the future; and as used in relation to you, means any person or
entity that directly or indirectly owns or controls you, is directly or indirectly owned or controlled
by you or is under common control with you, now or in the future.
(b)
“Competitive Business” means any business operating, or granting franchises or
licenses to others to operate, a cookie, bakery, snack food or dessert restaurant or retail outlet or
any similar food service business, except for an existing cookie, bakery, snack food or dessert
restaurant or retail outlet or similar food service business owned and operated by you, which has
been disclosed to us in writing prior to execution of this Agreement.
(c)
“Confidential Information” means any information relating to the Mrs. Fields
Products or the development or operation of Mrs. Fields Cookie Stores, including site selection
criteria; recipes and methods for the preparation of Mrs. Fields Products; methods, techniques,
formats, standards, specifications, systems, procedures, sales and marketing techniques and
knowledge of and experience in the development and operation of Mrs. Fields Cookie Stores;
marketing programs for Mrs. Fields Cookie Stores; knowledge of specifications for and suppliers
of certain Mrs. Fields Products, materials, supplies, equipment, furnishings and fixtures; and
knowledge of the operating results and financial performance of Mrs. Fields Cookie Stores other than
the Franchised Store.
(d)
“Controlling Interest” means an interest, the ownership of which empowers the
holder to exercise a material influence over the management, policies or personnel of an Entity.
Ownership of 5% or more of the equity or voting securities of a corporation, limited liability
company or limited liability partnership or ownership of any general partnership interest in a
general or limited partnership will be deemed conclusively to constitute a Controlling Interest in
the corporation, limited liability company, or partnership, as the case may be.
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Exhibit B: Franchise Agreement
1
(e)
“Entity” means a corporation, general partnership, joint venture, limited
partnership, limited liability partnership, limited liability company, trust, estate or other business
entity.
(f)
“Entity Owner” means, with respect to an Entity, any shareholder owning
directly or beneficially 5% or more of any class of securities of the Entity; any general partner or
co-venturer in the Entity; any partner in a limited liability partnership or member in a limited
liability company owning directly or beneficially 5% or more of the ownership interests in the
limited liability partnership or limited liability company; the trustees or administrators of any
trust or estate; and any beneficiary of a trust or estate owning, directly or beneficially, 5% or
more of the interests in the trust or estate. If any Entity Owner within the scope of this definition
is itself an Entity (including an Entity Owner that is an Entity Owner because of this sentence),
the term “Entity Owner” also includes Entity Owners (as defined in the preceding sentence) in the
Entity. It is the intent of this definition to “trace back” and include within the definition of Entity
Owner all natural persons owning the requisite interests to qualify as Entity Owners.
(g)
“Gross Revenues” means the aggregate amount of all sales of Mrs. Fields
Products, other items, and services made and rendered in connection with the operation of the
Franchised Store (as defined in Section 2.1(a)), including sales made at or away from the
Premises of your Store, whether for cash or credit, but excluding all federal, state or municipal
sales, use, or service taxes collected from customers and paid to the appropriate taxing authority.
(h)
“Marks” means the trademarks, trade names, service marks, logos and other
commercial symbols which we authorize franchisees to use to identify the Mrs. Fields products
and/or services offered by Mrs. Fields Retail Outlets, including the trademarks and service marks
MRS. FIELDS® and MRS. FIELDS COOKIES® and the Trade Dress (as defined in
Section 1.2(o)) and the goodwill associated therewith; provided that we have the right to modify
and/or discontinue the use of such trademarks, trade names, service marks, logos and other
commercial symbols and the Trade Dress, and establish, in the future, additional or substitute
trademarks, trade names, service marks, logos, commercial symbols or Trade Dress.
(i)
“Mrs. Fields Cookie Store” means a retail snack, dessert, and beverage outlet
selling any Mrs. Fields Products and other products for off-premises consumption and services
specified by us. The term “Mrs. Fields Cookie Store” includes carts and kiosks selling the Mrs.
Fields Products. We have the right to approve all carts and kiosks. Mrs. Fields Cookie Stores
that are offering an expanded product line may also be designated as “Mrs. Fields Bakery
Cafés”.
(j)
“Mrs. Fields Retail Outlet” means any store or outlet, such as a Mrs. Fields
Cookie Store, a Mrs. Fields Bakery Cafés, a mail order outlet, or an in-store bakery outlet located
in a retail grocery, fast food, convenience or other retail store, which sells any of the Mrs. Fields
Products under the Marks or other trademarks or service marks. A Mrs. Fields Retail Outlet may
be owned or operated by us or our Affiliates or by franchisees or licensees of us or our Affiliates.
(k)
“Mrs. Fields Products” means products approved or required by us or our
Affiliates from time to time for sale at or from Mrs. Fields Retail Outlets, including specialty
snacks and other bakery items, desserts, and beverages (such as cookies, brownies, cakes,
muffins, bagels, croissants, cinnamon rolls, sticky buns, and coffee) and other products approved
by us or our Affiliates; provided that we have the right to modify and/or discontinue the use of the
foregoing products from time to time and include additional or substitute products.
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Exhibit B: Franchise Agreement
2
(l)
“Mrs. Fields System” means our business formats, signs, equipment, methods,
procedures, designs, layouts, standards and specifications, including the use of the Marks and the
Trade Dress, which we have the right to modify in the future.
(m)
“Restricted Person” means you; each of your Entity Owners, if you are an
Entity; and the spouses, natural and adopted children, and siblings of any of you and your Entity
Owners.
(n)
“System Standards” means the operating procedures, standards, requirements
and specifications, whether contained in the Operations Manual or elsewhere, which we have the
right to improve, further develop or modify from time to time and which are mandatory in nature
so as to comprise the requirements to be followed with respect to Mrs. Fields Cookie Stores and
the use of the Marks in connection therewith.
(o)
“Trade Dress” means the designs, color schemes, decor and images which we
authorize and require our franchisees to use in connection with the operation of Mrs. Fields
Cookie Stores, which we or our Affiliates have the right to revise and further develop from time
to time.
(p)
“Transfer” means the voluntary or involuntary, direct or indirect transfer,
assignment, sale, gift, pledge, mortgage, hypothecation or other disposition (including those
occurring by operation of law and a series of transfers that in the aggregate constitute a Transfer)
of any of your interest in this Agreement, your Mrs. Fields Cookie Store or a substantial portion
of its assets, the lease for your Mrs. Fields Cookies Store or a Controlling Interest in you.
1.3.
Preambles. Mrs. Fields Cookie Stores operate under distinctive business formats,
systems, methods, procedures, designs, layouts, standards and specifications, all of which we have the
right to improve, further develop or modify in the future. We and our Affiliates have expended a
considerable amount of time and effort in developing and refining the recipes for and the methods of
preparation of Mrs. Fields Products to obtain high product quality. We have the right to modify these
recipes and methods of preparation, and these modifications may require you to prepare cookies and other
Mrs. Fields Products from scratch mixes and to purchase prepared cookie dough or other prepared food
products from us or our Affiliates, or other approved suppliers. One of our Affiliates currently owns and
operates Mrs. Fields Retail Outlets, and we and our Affiliates may own and operate Mrs. Fields Retail
Outlets in the future. We or our Affiliates own the Marks. We and our Affiliates have franchised and
licensed and, in the future, have the right to continue to franchise and license others to operate Mrs. Fields
Retail Outlets.
ARTICLE 2
GRANT OF FRANCHISE
2.1.
Franchise.
(a)
Grant of Franchise. Subject to the terms and conditions of this Agreement, we
grant you a NON-EXCLUSIVE franchise (the “Franchise”) to own and operate a Mrs. Fields
Cookie Store (the “Franchised Store” or “Store”) at and only at the “Premises,” as described
below in this Section. If at the time of signing this Agreement you have obtained our approval of
and secured the Premises for your Store (as defined below in this Section), the Premises will be
identified in Appendix A attached to this Agreement. However, if at the time of signing this
Agreement you have not obtained our approval of and secured the Premises for your Store, you
will pay us an initial franchise fee deposit of $5,000, as further described in Section 6.1. You will
then have a period of 6 months from the date of this Agreement to obtain our approval of and
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Exhibit B: Franchise Agreement
3
secure the Premises for your Store. If you subsequently obtain our approval of and secure the
Premises for your Store within the 6-month period, we and you will sign Alternative Appendix A
identifying the Premises for your Store. If you fail to obtain our approval of and secure the
Premises for your Store within the 6-month period, however, we have the right to terminate this
Agreement and refund the initial franchise fee deposit unless a lease agreement has been signed.
You hereby accept the Franchise and undertake the obligation to operate your Store using the
Mrs. Fields System in accordance with the System Standards. The Franchise granted herein is
limited to the right to operate the one Franchised Store at the Premises, and does not include an
exclusive area or protected territory within which we or our Affiliates agree not to issue
franchises or operate competing businesses. We and our Affiliates have the right to issue
franchises or operate competing businesses for or at locations, as determined by us or our
Affiliates, near the Premises. You have no right to construct or operate any additional, expanded
or modified facilities on the Premises, nor any right to construct or operate a Mrs. Fields Cookie
Store at any location other than the Premises. In addition, you have no right to sublicense
pursuant to this Agreement. For purposes of this Agreement, “secured the Premises for your
Store” means that you have either (i) signed a lease or sublease we have approved (including any
required addenda thereto) for the Premises, as further described in Section 4.2(a) of this
Agreement, if you are leasing or subleasing the Premises, or (ii) taken possession of the Premises,
if you own the Premises.
(b)
Mrs. Fields Products. In operating your Store, you may offer for sale only those
Mrs. Fields Products that we approve from time to time for you to sell at the Premises. The Mrs.
Fields Products that you initially are authorized to offer at your Store are explained in the
Operations Manual referred to in Section 5.2. In the future, we have the right to change or add to
the Mrs. Fields Products that you are authorized to offer at the Premises and notify you of such
changes or additions, as we determine, through references to the Operations Manual, bulletins and
other written materials, electronic computer messages, telephonic conversations, and/or
consultations at our offices or at your Store. We typically base our determination on whether you
will be allowed to offer an expanded line of Mrs. Fields Products on our evaluation of your
compliance, over time, with the System Standards described in Section 7.1, particularly those
related to quality. We do not base our determinations on sales or marketing quotas, volumes or
results. Although the Mrs. Fields Products sold at Mrs. Fields Cookie Stores may vary from
Store to Store, you may only sell those Mrs. Fields Products that we authorize you to sell from
your Store.
2.2.
Reservation of Certain Rights. We and our Affiliates reserve all rights not expressly
granted to you in this Agreement, including but not limited to the rights to: (1) establish Mrs. Fields
Retail Outlets, including Mrs. Fields Cookie Store franchises, licenses or businesses owned by us or our
Affiliates, at any locations we deem appropriate; (2) distribute Mrs. Fields Products and any other
products or services through alternative channels of distribution using the Marks; and (3) establish
businesses which are franchised, licensed or owned by us or our Affiliates at any locations we deem
appropriate or distribute products or services through alternative channels of distribution which are
similar to the Mrs. Fields Products under trade names, trademarks, service marks, trade dress or other
commercial symbols other than the Marks.
ARTICLE 3
INITIAL TERM AND RENEWAL
3.1.
Initial Term of the Franchise Agreement. The initial term of this Agreement will be 7
years, commencing on the date of this Agreement. Notwithstanding the preceding sentence, if at the time
of signing this Agreement we have not identified the Premises on Appendix A attached to this
Agreement, the initial term will commence as of the date of this Agreement, and continue for a period of
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Exhibit B: Franchise Agreement
4
7 years from the date you and we sign Alternative Appendix A identifying the Premises for your Store,
unless otherwise terminated in accordance with the terms of this Agreement. This Agreement may be
renewed as provided in Section 3.2. This Agreement may be terminated prior to expiration of its term if:
(i) the lease or sublease of the Premises is terminated as provided in Section 4.2(c) and 13.1(f); (ii) the
lease or sublease of the Premises expires and you are unable to obtain a replacement lease or sublease, as
provided in Sections 4.2(c) and 13.1(f); or (iii) this Agreement is otherwise terminated in accordance with
Article 13. References in this Agreement to the term of this Agreement mean the initial term and any
properly exercised renewal term.
3.2.
Renewal. If you are not in default at the time of exercise of a renewal option and at the
time the prior term expires, you shall have the right to renew this Agreement for one additional 7-year
term, provided that:
(a)
You give us written notice of your intention to renew at least 180 days prior to
expiration of the then current term;
(b)
You sign our then current form of Franchise Agreement, which may include
different continuing fees and marketing fees, other fees and charges, and changes in performance
criteria and in other terms and conditions, and our then current Renewal Addendum to such
Franchise Agreement, which shall, among other things, establish that the Franchise Agreement is
for a renewal term with no additional renewal rights, and contain a general release of any and all
claims against us or our Affiliates and our and their respective officers, directors, attorneys,
shareholders and employees;
(c)
At our request, you refurbish, remodel, redecorate, and renovate your Store at the
commencement of the renewal term to meet our then current System Standards for Mrs. Fields
Cookie Stores, including designs and service systems, computer and point-of-sale equipment, and
Trade Dress;
(d)
You have complied with all of the terms and conditions of this Agreement or any
other agreement between you and us during the initial term;
(e)
All monetary obligations owed by you to us, our Affiliates or your suppliers or
creditors, whether pursuant to this Agreement or otherwise, have been satisfied prior to renewal,
and have been paid in a timely manner throughout the initial term;
(f)
You have the right to maintain the Premises for at least the duration of the
renewal term and provide a copy of the lease to us; and
(g)
You follow our then current renewal process, which may require you to deliver
certain financial statements and other records and reports to us, attend additional training and
cooperate in any audits and/or inspections we may conduct or require.
We will not charge any renewal fee in connection with any renewal under this Section 3.2. If we
determine that you have met all of the conditions described above prior to the expiration date, we will
provide you with an execution copy of the form of Franchise Agreement to be entered into for the renewal
term. If you do not execute and return the renewal Franchise Agreement to us within 30 days of receipt,
then you will be deemed to have withdrawn your notice of renewal, and this Agreement will terminate at
the end of the current term.
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Exhibit B: Franchise Agreement
5
ARTICLE 4
SITE SELECTION, LEASE OF PREMISES
AND DEVELOPMENT OF YOUR STORE
4.1.
Site Selection. You must obtain our written approval of the Premises before you sign a
lease or sublease for or begin construction of the Premises. Our approval of the Premises is based and
made in reliance upon information you furnish and representations you make to us (all of which we
assume you have carefully and fully considered in selecting the Premises and proposing the Premises to
us) with respect to the size, appearance and other physical characteristics of the Premises, photographs of
the Premises, and demographic characteristics, traffic patterns, competition from other businesses in the
area (including other Mrs. Fields Retail Outlets) and other commercial characteristics (including the
purchase price, rental obligations, and other lease terms). Our approval of the Premises and any
information communicated to you regarding the Premises do not constitute an express or implied
representation or warranty of any kind as to the suitability of the Premises for a Mrs. Fields Cookie Store
or for any other purpose. Our approval of the Premises indicates only that we believe that the Premises
falls within our criteria as of the time period encompassing the evaluation. Both you and we acknowledge
that application of criteria that have been effective with respect to other sites and premises may not
predict the potential results for a specific site and that, subsequent to our approval of a site and Premises,
demographic and/or economic factors, including competition from other cookie, bakery, snack food and
dessert restaurants and retail outlets and similar food service businesses, included in or excluded from our
criteria, could change, thereby altering the potential of a site. The uncertainty and instability of the
factors included in the criteria are beyond our control and we will not be responsible to you for the failure
of the Premises to meet expectations as to potential revenue or operational criteria. We may have
rendered certain assistance in connection with you obtaining the Premises, including identifying one or
more sites that we believe are available for development, recommending a real estate or business broker,
or utilizing any information, contacts, databases and referral networks to which we may have access.
Notwithstanding any such assistance, you acknowledge that you have conducted your own diligent
review of the site, and your acceptance of a Franchise for the operation of a Mrs. Fields Cookie Store at
the Premises is based on your own independent investigation of the suitability of the Premises.
4.2.
Acquisition of the Premises.
(a)
Your Obligation to Obtain Lease Unless you own the Premises, you agree to
obtain any necessary lease or sublease for the Premises. We may (but are not obligated to) assist
you in the process of obtaining and/or negotiating a lease or sublease for the Premises. In any
event, you agree to obtain our approval of the terms of the lease or sublease for the Premises prior
to your execution of the lease or sublease. You agree not to execute a lease or sublease which we
have disapproved, and you must deliver a copy of the signed, approved lease to us within 15 days
after its execution. Any lease or sublease must be in a form satisfactory to us. Prior to execution
of the lease or sublease, you must also sign, and obtain agreement from the landlord of the
Premises to sign, an addendum to the lease or sublease in a form that we provide or approve (the
“Lease Addendum”). The lease, sublease or Lease Addendum must:
(i)
Provide for notice to us of any default by you under the lease or sublease
and provide us with a right (but no obligation) to cure the default. If we cure any default,
the total amount of all costs and payments incurred by us in curing the default will be
immediately due and owing to us by you;
(ii)
Provide that you have the right to assign your interest under the lease or
sublease to us without the lessor’s or sublessor’s consent;
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Exhibit B: Franchise Agreement
6
(iii)
Authorize and require the lessor or sublessor to disclose to us, upon our
request, sales and other information that you furnish to the lessor or sublessor; and
(iv)
Provide that we, one of our Affiliates or, in the case that clause (4) below
is applicable, our assignee has the right to assume the lease or sublease:
(1)
(2)
sublease, or
Upon expiration or termination of this Agreement, or
If you fail to exercise any options to renew or extend the lease or
(3)
If you commit a default that gives the lessor or sublessor the
right to terminate the lease or sublease, or
(4)
If we or one of our Affiliates or our assignee purchases your
Store as permitted by Section 14.5.
(b)
Use of Premises Currently Under Lease to Us. If we or one of our Affiliates is
currently leasing the Premises and has the right under that lease to sublease the Premises to you,
and you desire to sublease the Premises from us or our Affiliate, and we or our Affiliate offer the
Premises to you, then you agree to execute our then current form of sublease and, if you are an
Entity, have each of your Entity Owners execute our then current form of guaranty. If we or one
of our Affiliates elects to assign an existing lease to you and you desire to obtain an assignment of
the existing lease, unless we otherwise agree, you agree to arrange for the release of us or our
Affiliate from all obligations under the assigned lease, as of the date of the assignment, and you
agree to obtain from the landlord any consents, agreements, and lease amendments as are required
so that the assigned lease satisfies the requirements of Section 4.2(a), as if the assigned lease were
a third-party lease.
(c)
Expiration or Termination of Lease. If a current lease or sublease will expire
prior to expiration of this Agreement, you may attempt to obtain a replacement lease or sublease.
We will have the right to approve any proposed replacement lease or sublease as otherwise
provided in this Article 4. If you are unable to obtain a replacement lease or sublease that meets
our approval prior to the expiration of the current lease or sublease, (i) you have the right to
terminate this Agreement, subject to your observation of all notice provisions and post-term
obligations set forth in this Agreement, including the continuing obligations described in
Section 14.7, or (ii) we have the right to terminate this Agreement in accordance with
Section 13.1(f). In addition, if the current lease or sublease is terminated for any reason prior to
its expiration, we have the right to terminate this Agreement in accordance with Section 13.1(f).
(d)
Effect of our Approval of Lease. Our approval of a lease or sublease for the
Premises or the granting by us or one of our Affiliates of a sublease or lease assignment for the
Premises does not constitute an express or implied warranty by us of the successful operation or
profitability of a Mrs. Fields Cookie Store operated at the Premises. The approval indicates only
that we believe the Premises and the terms of the lease fall within the acceptable criteria
established by us as of the time period encompassing the evaluation.
4.3.
Franchised Store Development.
(a)
Plans and Specifications. You are responsible for constructing and developing
your Store. We will furnish you with prototypical plans and specifications for a Mrs. Fields
Store, including requirements for exterior and interior materials and finishes, dimensions, design,
image, interior layout, decor, fixtures, equipment, signs, furnishings and color scheme. You must
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Exhibit B: Franchise Agreement
7
comply with these plans and specifications. You agree to have prepared all required construction
plans and specifications to suit the shape and dimensions of the Premises and to ensure that the
plans and specifications comply with applicable ordinances, building codes and permit
requirements and with lease requirements and restrictions. You acknowledge that construction
plans must be based on the prototypical plans and specifications. You agree to submit
construction plans and specifications to us for our approval before construction of your Store is
commenced, and you agree to submit all revised plans and specifications to us for our approval
during the course of construction. Unless specifically informed otherwise by us, you are required
to purchase certain furniture, fixtures and equipment we designate, as well as services related to
the build out of your store from Venture Projects, Inc. dba Concept Services, or other providers
we may designate from time to time in our discretion, for the construction and development of
your Store. You agree that we have the right to require you to use any other architect and
contractor that we designate or approve. Upon completion of construction, you also agree to
provide us with a set of “as built” plans and specifications. Further, you acknowledge and agree
that you assume all risk relating to the construction and development of your Store, and our
designation or approval of your architect, contractor, construction plans and specifications does
not constitute an express or implied representation or warranty of any kind as to the quality of
such construction or development or the success of your Store.
(b)
Development Obligations. You agree to do each of the following:
(i)
Secure all financing required to develop and operate your Store;
(ii)
Obtain all required building, utility, sign, health, sanitation, business,
environmental and other permits and licenses required for construction and operation of
your Store;
(iii)
Construct all required improvements to the Premises and decorate your
Store in compliance with plans and specifications that we approve;
(iv)
Purchase and install all fixtures, furnishings, equipment and signs
required for your Store in accordance with Section 4.4; and
(v)
supplies.
Purchase an opening inventory of Mrs. Fields Products, materials and
4.4.
Fixtures, Furnishings, Equipment, Signs and Computer Systems. In developing and
operating your Store, you agree to do each of the following:
(a)
Use only the fixtures, furnishings, equipment and signs that we require and have
approved for Mrs. Fields Cookie Stores as meeting our System Standards;
(b)
Place or display at the Premises (interior and exterior) only the signs, emblems,
lettering, logos and display materials that we approve in writing. However, we have the right to
install all required signs at the Premises at your sole expense; and
(c)
Use the computer equipment and operating software, including without limitation
any point of sale or electronic cash register (“Computer System”) that we specify from time to time.
We have the right to require you to obtain specified computer hardware and/or software and modify
specifications for and components of the Computer System from time to time. Our modification of
specifications for the Computer System’s components may require you to incur costs to purchase,
lease and/or license new or modified computer hardware and/or software, obtain service and support
for the Computer System during the term of this Agreement and pay any related connection fees.
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Exhibit B: Franchise Agreement
8
We have the right to require you in the future to purchase additional or different components of the
Computer System, including computer hardware and software and connection and other related
services, from a supplier or suppliers we designate, which may include us or our Affiliates. You
agree to incur the costs of obtaining the computer hardware and software comprising the Computer
System (or additions or modifications). Within 60 days after you receive notice from us, you agree
to obtain the components of the Computer System that we designate. We have the right to
independently access the information and data you collect and gather using any Computer System or
other data collection equipment (such as an electronic cash register) we require for your Store.
You agree that all fixtures, furnishings, equipment, signs and computer systems used in connection with
the operation of your Store will be free and clear of all liens, claims and encumbrances, except for liens,
claims or encumbrances asserted by us and except for third party purchase money security interests.
4.5.
Franchised Store Opening. You will not open your Store for business until:
(a)
We approve your Store for opening;
(b)
Pre-opening training of you and Franchised Store personnel has been completed
to our satisfaction;
(c)
The initial franchise fee and all other amounts then due to us have been paid in
full;
(d)
The lease documentation, including the Lease Addendum, has been executed and
all other documentation has been completed in connection with the development of your Store;
and
(e)
We have been furnished with copies of all insurance policies required by this
Agreement and evidence of payment of premiums.
Subject to your compliance with the conditions set forth in this Section 4.5, you agree to open your Store
for business by the “Start Date,” which is the date that is 120 days after either (i) the date of this
Agreement, if at the time of signing this Agreement we have identified the Premises on Appendix A
attached to this Agreement, or (ii) the date you and we sign Alternative Appendix A identifying the
Premises for your Store, if at the time of signing this Agreement we have not identified the Premises on
Appendix A attached to this Agreement. Your Start Date is listed on Appendix A or Alternative
Appendix A, as applicable. If you fail to open the Store by your Start Date, we have the right, at our
option, to charge a weekly fee of $200 for each week (or partial week) that the Store is not open after the
Start Date, or terminate this Agreement in accordance with Sections 13.1 and 13.2.
4.6.
Grand Opening Promotion. You agree to conduct a grand opening advertising and
promotion program for a newly developed Franchised Store for a period of at least 7 to 14 days,
commencing within 30 days after the opening of your Store. The grand opening program shall conform
to our requirements and shall utilize the media and advertising formats designated by us. We have the
right to require you to submit a grand opening plan that meets our approval containing details about the
grand opening promotion. You shall expend for the grand opening program an amount determined by us,
but not to exceed $5,000. We have the right to require you to purchase grand opening advertising and
promotional materials from us, our affiliates or our designees in advance of or during the grand opening
program. You may also make payments to other vendors and suppliers for grand opening advertising or
promotional materials. Payments to us or our affiliates for any grand opening advertising or promotional
materials are non-refundable.
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Exhibit B: Franchise Agreement
9
4.7.
Relocation. Should it become necessary, on account of the condemnation of the Premises or
the exercise of a relocation right by your landlord or for some other reason approved by us in writing to
relocate the Store, we will consent to such relocation at a site acceptable to us provided that:
(a)
You are in full compliance with this Agreement;
(b)
You give us written notice of your desire to relocate at least 30 days prior to the
date your Store will close for relocation;
(c)
You find relocated Premises that meet all of our then current site criteria for the
development of new Mrs. Fields Cookie Stores and obtain our written approval of the relocated
Premises within 60 days after the date your Store will be closed for relocation and before you
sign a lease or sublease or begin construction of the relocated Premises, and you open the
relocated Store at the relocated Premises within 180 days after the date your Store closes for
relocation;
(d)
You construct and develop the relocated Store in accordance with all of our then
current System Standards for Mrs. Fields Cookie Stores, including designs and service systems,
and Trade Dress;
(e)
You have sufficient term remaining under this Agreement, or purchase from us
sufficient additional term under this Agreement, to satisfy our then current policy on remaining
term requirements for relocations; and
(f)
At our request, you execute a general release, in a form satisfactory to us, of any
and all claims against us or our Affiliates and our and their respective officers, directors,
attorneys, shareholders and employees, and any other ancillary agreements we are then using for
relocations, or, in the event you are required to purchase additional term as set forth in
Section 4.7(e), you sign our then current form of Franchise Agreement, which may include
different continuing fees and marketing fees, other fees and charges, and changes in performance
criteria and in other terms and conditions, which will be effective for a period commencing on the
date you sign such agreement and ending upon the expiration of the additional purchased term.
In the event we consent to a relocation of your Store, you must, upon the closure of your former
Store and at your expense: (i) promptly remove from the former Store Premises any and all signs,
fixtures, furniture, posters, furnishings, equipment, menus, advertising materials, stationery supplies,
forms and other articles which display any of the Marks or any distinctive features or designs associated
with the System and either use them in your relocated Store or dispose of them as directed by us, and
(ii) immediately make such modifications or alterations as we deem necessary to distinguish the former
Store Premises from other Mrs. Fields Cookie Stores so as to prevent any possibility of confusion by the
public. If after consenting to a relocation of your Store you fail to comply with any of the conditions set
forth in this Section 4.7, we have the right to revoke our consent to such relocation and hold you in
default of this Agreement for abandonment. In addition, while your former Store is closed for relocation,
you may not Transfer your interest in this Agreement, and any such transfer will constitute a breach of
this Agreement and will be void and of no effect.
MFDD – 3/14
Exhibit B: Franchise Agreement
10
ARTICLE 5
TRAINING AND GUIDANCE
5.1.
Training.
(a)
Training for You and your Store Manager. Prior to your Store’s opening, we will
furnish an initial training program on the operation of Mrs. Fields Cookie Stores to you (or one of
your Entity Owners, if you are an Entity) and the initial store manager (if the store manager is
different from you). The training program will be furnished both online and at our designated
training facility, a Mrs. Fields Cookie Store owned and operated by one of our Affiliates, or any
other location designated by us. You (or one of your Entity Owners) and the manager of your
Store (if different from you) agree to complete all phases of the training program to our
satisfaction and to participate in all other activities required to open your Store. Subsequent
managers will also be required to satisfactorily complete all phases of our training program.
Under no circumstances shall you permit management of the Store by a person who has not been
certified by us as qualified to manage the Store by completing all phases of our training program
to our satisfaction. We will furnish the initial training program to you (or one of your Entity
Owners, if you are an Entity) and to the initial store manager (if different from you) free of
charge if it is conducted online and at our training facility or a Mrs. Fields Cookie Store owned
and operated by one of our Affiliates; however, if we agree to provide the training at any other
location, we may charge a reasonable fee to cover our costs, including living expenses during the
training for our employees or agents who provide the training. We have the right to charge a fee
for the training for subsequent managers, which you will be required to pay at least 10 days prior
to beginning of training.
(b)
Refresher Training. We have the right to require you and/or previously trained
and experienced managers to attend periodic refresher courses at the times and locations that we
designate. We have the right to charge fees for refresher training courses.
5.2.
Operations Manual. We will loan to you during the term of this Agreement one copy of
our operating procedures manual (the “Operations Manual”). We have the right, at our option, to
furnish or make available to you the Operations Manual in the form of a paper copy, an electronic copy
on computer diskette or CD Rom, or an electronic copy accessed through the Internet or other
communication systems. The Operations Manual contains mandatory and suggested specifications,
standards and operating procedures, including System Standards that we prescribe for Mrs. Fields Cookie
Stores and contain information relating to your other obligations under this Agreement. We have the
right to modify the Operations Manual in the future to reflect changes in the image, specifications,
standards, procedures, Mrs. Fields Products, Mrs. Fields System, and System Standards. You may not at
any time copy any part of the Operations Manual, either physically or electronically. If your copy of the
Operations Manual is lost, destroyed or significantly damaged, you will be obligated to obtain from us, at
our then applicable charge, a replacement copy of the Operations Manual.
5.3.
Guidance and Operating Assistance. Although we do not have an obligation to do so, we
may advise you from time to time of operating problems of your Store which come to our attention. At
your request, we will furnish to you guidance and operating assistance in connection with:
(a)
Methods, standards, specifications and operating procedures utilized by Mrs.
Fields Cookie Stores;
(b)
Purchasing required fixtures, furnishings, equipment, signs, Mrs. Fields Products,
materials and supplies; and
MFDD – 3/14
Exhibit B: Franchise Agreement
11
(c)
Advertising and promotional programs.
Any guidance and assistance we furnish or make available to you will be, at our option, in the form of
references to the Operations Manual, bulletins and other written materials, electronic computer messages,
telephonic conversations and/or consultations at our offices or at your Store. You agree that we will not
be liable to you or any other person, and you waive all claims for liability or damages of any type
(whether direct, indirect, incidental, consequential, or exemplary), on account of any guidance or
operating assistance offered by us in accordance with this Section 5.3, except to the extent caused by our
gross negligence or intentional misconduct. We will make no separate charge to you for such operating
assistance and guidance as we customarily provide to our franchisees generally. Occasionally, we may
make special assistance programs available to you, however, for which you will be required to pay the
daily fees and charges that we establish.
5.4.
National Conventions and Regional Meetings. You (or one of your Entity Owners, if you
are an Entity) and, when requested by us, a store manager (if the store manager is different from you)
and/or an approved trainer (if you are a multi-unit Mrs. Fields Cookie Store franchisee) must attend all
national conventions and regional meetings that we designate as mandatory. National conventions and
regional meetings shall take place at the locations we designate. We have the right to charge you a
reasonable fee for each of your attendees who attends any national convention or regional meeting. In
addition, if you fail to attend any national convention or regional meeting we designate as mandatory, we
have the right to charge you a reasonable fee. You are responsible for all travel and living expenses and
all other costs associated with your attendees attending any national conventions or regional meetings.
ARTICLE 6
FEES
6.1.
Initial Franchise Fee. You agree to pay us a nonrecurring initial franchise fee in the
amount of $__________. If at the time of signing this Agreement we have identified the Premises on
Appendix A attached to this Agreement, the entire initial franchise fee is payable upon your execution of
this Agreement. If at the time of signing this Agreement we have not identified the Premises on
Appendix A attached to this Agreement, you will pay us an initial franchise fee deposit of $5,000 when
you sign this Agreement. This $5,000 deposit is refundable until you secure our approval of and secure
the Premises for your Store. You will pay us the remaining balance of the initial franchise fee at the time
you obtain our approval of and secure the Premises for your Store, and you and we sign Alternative
Appendix A identifying the Premises for your Store. If you fail to obtain our approval of and secure the
Premises for your Store within the 6-month period described in Section 2.1(a) of this Agreement,
however, we have the right to terminate this Agreement, in accordance with Sections 13.1 and 13.2. If we
terminate this Agreement after you secure your Premises, we will keep the $5,000 deposit, although you
will not be required to pay to us the remaining balance of the initial franchise fee. The initial franchise
fee will be fully earned by us when paid and is not refundable, except as provided in Section 13.3(a).
6.2.
Continuing Fees. In addition to the initial franchise fee, you agree, for the entire term of
this Agreement, to pay us a weekly continuing fee of 6% of your Store’s Gross Revenues.
6.3.
Date and Term of Payment. You agree to pay the weekly continuing fees pursuant to
Section 6.2, and the marketing fees pursuant to Section 9.1, to us on or before the close of business on
Wednesday of each week for the preceding week by pre-authorized electronic bank transfer from your
account to our account or as otherwise directed by us. We expressly reserve the right to modify the
timing and method of payment of the fees from time to time during the term of this Agreement, provided
that the fees shall be payable no more frequently than weekly.
MFDD – 3/14
Exhibit B: Franchise Agreement
12
6.4.
Payment by Pre-Authorized Bank Transfer. You agree to execute and complete the form
Authorization Agreement attached as Appendix A to this Agreement, and/or such other documents as we
may require from time to time, to authorize and direct your bank or financial institution to pay and deposit
directly to our account, and to charge to your account, the amount of the continuing fees, marketing fees,
and other amounts due and payable by you pursuant to this Agreement. Your authorizations will permit
us to initiate debit entries and/or credit correction entries to your account for the amount of the continuing
fees, marketing fees and other amounts then payable to us from you. You agree to maintain, at all times
during the term of this Agreement, a balance in your account at your bank or financial institution
sufficient to allow the appropriate amount to be debited from your account for payment of the continuing
fees, marketing fees and other amounts payable by you for deposit in our account. The continuing fee and
marketing fee amount actually transferred from your account each week shall be based on the Gross
Revenue Report you provide to us for such week, as required in Section 8.1(a). If you do not provide us
with a Gross Revenue Report for any given week, we have the right to estimate in good faith your Store’s
Gross Revenues for the missing period and debit your account in an amount equal to the continuing fees
and marketing fees that would be due based on such estimation. In making our good faith estimate, we
may consider the last Gross Revenue Report that we received from you, any seasonal sales trends, and
any system-wide averages and other pertinent information available to us. You are responsible for any
penalties, fines or other similar expenses associated with the pre-authorized bank transfers described in
this Section 6.4.
6.5.
Late Fees; Interest on Late Payments. To compensate us for the increased administrative
expense of handling late payments and late reports, we have the right to charge a $100 late fee for each
delinquent payment, due when the delinquent payment is due, and a $100 late fee for each delinquent
report, due when the delinquent report is due. We will continue to charge a late fee for each period that
the report remains delinquent. These late fees are not interest or a penalty. They are only to compensate us
for increased administrative and management costs due to your late payment or late report. The late fees are
non-refundable. All continuing fees, amounts due for purchases by you from us or our Affiliates and other
amounts which you owe to us or our Affiliates will bear interest from their due date until paid at a rate
equal to the lesser of the highest applicable legal rate for open account business credit, or 1.5% per
month, payable when the corresponding delinquent payment is made. You agree that this Section 6.5
does not constitute our or our Affiliates’ agreement to accept payments after they are due or a
commitment by us or our Affiliates to extend credit to you or otherwise to finance the operation of your
Store.
6.6.
Application of Payments. Regardless of any designation by you, we have the right to
apply any payments by you to any of your past due indebtedness for continuing fees, marketing fees,
purchases from us or our Affiliates, interest or any other indebtedness or amounts owed to us or our
Affiliates.
6.7.
No Right of Offset. You have no right of “offset” and will not withhold payment, for any
reason, of any continuing fees, marketing fees or any other payment due to us under this Agreement or
any other agreement.
ARTICLE 7
OBLIGATIONS RELATING TO OPERATIONS
7.1.
System Standards. You acknowledge and agree that the operation of your Store in
accordance with the System Standards is the essence of this Agreement and is essential to preserve the
goodwill of the Marks and all Mrs. Fields Cookie Stores. Therefore, you agree that, at all times during
the term of this Agreement, you will maintain and operate your Store in accordance with each of the
System Standards. You agree that we have the right to modify the System Standards from time to time
and acknowledge that the modifications may obligate you to invest additional capital in your Store and to
MFDD – 3/14
Exhibit B: Franchise Agreement
13
incur higher operating costs. We agree not to obligate you to invest additional capital at a time when the
investment cannot in our reasonable judgment be amortized during the remaining term of this Agreement,
unless required by the lease or sublease for the Premises or applicable law.
If, at any time in our reasonable judgment, your Store or any part thereof, including without
limitation its design, finishes, fixtures, equipment, furniture, signs or utensils, do not meet our thencurrent System Standards, we will notify you, specifying in reasonable detail the actions to be taken by
you to comply with System Standards. If you fail or refuse to initiate promptly and timely complete the
necessary actions as set forth in the notice, you will be in default under this Agreement. In addition to
any of our other rights to enforce this Agreement, we will have the right (but not the obligation), pursuant
to Section 13.2(e), to enter upon your Store premises and complete the necessary actions described in the
notice, such as refurbishment, repairs, replacements and maintenance, and you will reimburse us for the
entire cost thereof upon demand. You agree to cooperate fully with us in connection with any of our
actions under this Section.
7.2.
Performance of Duties and Obligations. You will at all times faithfully, honestly and
diligently perform your obligations under this Agreement and you will continuously exert your best
efforts to promote and enhance the business of your Store. You will not engage in any other business or
activity that may conflict with your obligations under this Agreement.
7.3.
Restrictions on Operations. You may not operate your Store at any site other than the
Premises without our prior written consent. In addition, you may only offer and sell finished Mrs. Fields
Products that have been approved for sale, as provided in Section 2.1(b), over the counter to retail
customers from your Store, and may not sell approved Mrs. Fields Products or any materials, supplies, or
inventory bearing the Marks at any other location or through any alternative channel of distribution
without our prior written consent. “Alternative channels of distribution” includes, but is not limited to,
the operation of a food cart or kiosk, sales through the Internet (or any other form of electronic
commerce), mail order and telephone sales. Notwithstanding the above restrictions, you may: (i) offer
and sell approved Mrs. Fields Products as part of off-site catering events and company account programs,
provided you deliver (and do not engage a major carrier to deliver) Mrs. Fields Products that meet System
Standards for freshness the same day they are made and the sales are not part of a mail order program;
(ii) offer samples of approved Mrs. Fields Products at or directly in front of your Store or other locations
near your Store as approved by your landlord; or (iii) upon our prior written approval, offer and sell
approved Mrs. Fields Products from a table, kiosk or cart at satellite locations that we approve. You may
not sell to anyone any materials, supplies, or inventory used in the preparation of any Mrs. Fields
Products. Further, you may not sell any Mrs. Fields Products to any person or entity purchasing the Mrs.
Fields Products for resale.
7.4.
Internet Use. You acknowledge that the Internet is a powerful and expanding medium
through which business is conducted. You may not, however, advertise your Store or the Mrs. Fields
Products over the Internet (or any other form of electronic commerce) or establish a related World Wide
Web Site without our prior written consent. In addition, your general conduct on the Internet (or any
other form of electronic commerce) and specifically your use of the Marks is subject to the provisions of
this Agreement. Without limiting the foregoing, you agree to follow our policies and procedures as they
may be communicated to you periodically in the Operations Manual or otherwise regarding the use of
social media and similar methods of communication. Further, you acknowledge that we have the right to
require you to have access to the Internet from your Store Premises and submit reports, including Gross
Revenue Reports, to us over the Internet in accordance with System Standards. We also have the right to
require you to establish and maintain a valid email address and authorize us to communicate with you by
this method at such address.
7.5.
Our Right to Inspect Your Store. To determine whether you are complying with this
Agreement and with all System Standards and whether your Store is in compliance with the terms of this
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Exhibit B: Franchise Agreement
14
Agreement, we and our designated agents have the right to, at any reasonable time and without prior
notice to you:
(a)
Inspect the Premises;
(b)
Observe, photograph and video tape your Store’s operations for such consecutive
or intermittent periods as we deem necessary;
(c)
and analysis;
Remove samples of any Mrs. Fields Products, materials or supplies for testing
(d)
Interview personnel of your Store;
(e)
Interview customers of your Store; and
(f)
Access, inspect and copy any books, records and documents relating to the
operation of your Store.
You agree to cooperate fully with us in connection with any of our inspections, observations,
photographing, videotaping, product removal and interviews.
7.6.
Surveys. You will present to your customers such evaluation forms as we periodically
require and will participate in and request your customers to participate in any surveys performed by or
on our behalf.
7.7.
Entity Owners; Name Change. You agree, for the entire term of this Agreement, to
identify your Entity Owners, if any, on the Ownership Addendum attached to this Agreement and send us
prior notification of any change. Additionally, if you change your name, or your Entity changes its name
or entity type, but no Transfer occurs as a result, you must notify us promptly following the change,
provide us with any documentation we reasonably request to verify the name change, and pay us our thencurrent documentation fee to defray our costs associated with documenting the change, provided no fee
will be charged for the first name change during the Term of the Agreement..
7.8.
Guaranties by Entity Owners. If you are an Entity, you represent and warrant to us that
you are duly organized or formed and validly existing in good standing under the laws of the state of your
incorporation or formation, are qualified to do business in all states in which you are required to qualify
and have the authority to execute, deliver and carry out all of the terms of this Agreement. If you are an
Entity, each of your Entity Owners must execute our current form of Guaranty attached to this Agreement
prior to or upon the date of this Agreement. Any person or Entity that at any time after the date of this
Agreement becomes an Entity Owner pursuant to Article 12 or otherwise must, as a condition of
becoming an Entity Owner, execute our then current form of Guaranty.
7.9.
Insurance.
(a)
Property Insurance. You agree, at your sole cost and expense, at all times during
the term of this Agreement, to keep all of your goods, fixtures, furniture, equipment, and other
personal property located on your Store Premises insured to the extent of 100% of the full
replacement cost against loss or damage from fire and other risks normally insured against in
special cause of loss coverage. You will also maintain business income and extra expense
coverage to cover loss of income and extra expense for at least one year.
(b)
Liability Insurance. You agree, at your sole cost and expense, at all times during
the term of this Agreement, to maintain in force an insurance policy or policies, on an occurrence
MFDD – 3/14
Exhibit B: Franchise Agreement
15
basis, which will name both us and our Affiliates as additional insureds on a primary noncontributory basis, insuring against all liability resulting from damage, injury, or death occurring
to persons or property in or about your Store Premises (including products liability insurance and
broad form contractual liability insurance), the liability under such insurance to be not less than
$1,000,000 for one person injured, $1,000,000 for any one accident, and $1,000,000 for property
damage. The original of such policy or policies shall remain in your possession. However you
agree to give us a copy of the policy upon our request.
(c)
Workers’ Compensation and Employers Liability Insurance. You also agree to
maintain and keep in force all workers’ compensation and employers liability insurance on your
employees, if any, in the following amounts:
(i)
Workers Compensation: The amount required under the applicable
workers’ compensation laws of the state in which your Store is located.
(ii)
Employers Liability: No less than $100,000 per accident for bodily
injury by accident, no less than $100,000 per employee for bodily injury by disease and
no less than a $500,000 policy limit for bodily injury by disease.
(d)
Other Insurance Policies. At your sole cost, you agree, at all times during the
term of this Agreement, to maintain in force such other and additional insurance policies as a
prudent franchisee in your position would maintain or as we reasonably require.
(e)
Policy Requirements. The deductibles on all insurance policies required under
this Section 7.9 shall not exceed $5,000, and all insurance policies will contain provisions to the
effect that the insurance will not be canceled or modified without at least 30 days prior written
notice to us and that no modification will be effective unless approved in writing by us. All such
policies will be issued by a company or companies, rated “A-XII” or better by Best’s Insurance
Guide, responsible and authorized to do business in the state in which your Store is located, as
you may determine, and will be approved by us, which approval will not be unreasonably
withheld. You shall provide us with certificates of insurance for all insurance policies required
under this Section 7.9 at the time you procure the insurance. You agree to send the certificates of
insurance to Risk Management, Mrs. Fields Franchising LLC, at the address set forth above or as
we designate periodically.
(f)
Release of Insured Claims. You release and relieve us and our Affiliates, and all
of our and their officers, directors, shareholders, employees, agents, successors, assigns,
contractors, and invitees and waive your entire right of recovery against us and our Affiliates and
all of our officers, directors, shareholders, employees, agents, successors, assigns, contractors,
and invitees for loss or damage arising out of or incident to the perils required to be insured
against under this Section 7.9, which perils occur in, on or about your Store Premises or relate to
your business on the Premises, whether due to the negligence of us or our Affiliates or you or any
of our or your related parties.
ARTICLE 8
REPORTS AND RECORD KEEPING
8.1.
Accounting, Reports and Financial Statements. You agree to establish and maintain a
bookkeeping, accounting, record keeping and data processing system conforming to the requirements and
formats that we prescribe. You agree to furnish to us reports relating to your Store by the delivery
method (including without limitation via the Internet) and in such form and content as we have the right
to prescribe from time to time. These reports include, but are not limited to, the following:
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Exhibit B: Franchise Agreement
16
(a)
Gross Revenue Reports. On or before noon on Wednesday of each week, a
report of your Store’s Gross Revenues for the previous week;
(b)
Monthly Financial Reports. Within 25 days after the end of each fiscal calendar
month, a profit and loss statement for your Store for the previous fiscal calendar month and a
year-to-date statement of financial condition as of the end of the previous fiscal calendar month;
(c)
Semi-Annual Reports. Within 25 days after the end of each 6-fiscal calendar
month period, a balance sheet for your Store as of the end of that semi-annual period; and
(d)
Tax Returns. Within 10 days after the returns are filed, exact copies of federal
and state income, sales and any other tax returns and the other forms, records, books and other
information as we have the right to periodically require.
Each report and financial statement will be signed and verified by you in the manner we specify. We
have the right to disclose data derived from the sales reports to other franchisees and licensees. We also
have the right to require you to have audited or reviewed financial statements or other financial reports
that we reasonably designate prepared and submitted to us on an annual basis. In addition, we have the
right to charge you a late fee for each delinquent report due to us, for each period that such report remains
delinquent, as further described in Section 6.5.
8.2.
Retention of Records. You agree to keep full, complete and proper books, records and
accounts of Gross Revenues and of your operations at your Store or at your business office. All the
books, records and accounts will be kept in the English language and will be retained for a period of at
least 3 years following the end of each fiscal year. The books and records will include: tax returns (sales
and income); semi-annual balance sheets and monthly profit and loss statements; monthly inventories;
records of promotions and coupon redemptions; and such other records as we request.
8.3.
Our Right to Audit. At any time during business hours and without prior notice to you,
we and our representatives have the right to inspect and audit the business records, bookkeeping and
accounting records, sales and income tax records and returns and other records of your Store as well as
your books and records. You agree to fully cooperate with representatives and independent accountants
hired by us to conduct any inspection or audit. If an inspection or audit discloses an understatement of
your Store’s Gross Revenues, you will pay to us, within 15 days after receipt of the inspection or audit
report, the continuing fees due on the amount of the understatement, plus interest (at the rate and on the
terms provided in Section 6.5) from the date originally due until the date of payment. Further, if
inspection or audit is made necessary by your failure to furnish reports, supporting records or other
information as required by this Agreement, or to furnish the reports, records or information on a timely
basis, or if an understatement of Gross Revenues for the period of any audit is determined by the audit or
inspection to be greater than 2%, then within 15 days after receipt of the inspection or audit report, you
will reimburse us for the cost of the audit or inspection, including the charges of attorneys and any
independent accountants and the travel expenses, room and board and compensation of our employees. If
you fail to cooperate with our audit, or are unwilling or unable to provide us with sufficient records,
including the records and reports that you are required to maintain under this Agreement, to complete the
audit to our reasonable satisfaction, we may establish a reasonable estimation of your Gross Revenues
based on the data available to us (which may include records regarding product purchases, percentage rent
reports or other information obtained from third parties) and collect from you any estimated amount that
we deem was underreported or underpaid pursuant to this Agreement. These remedies are in addition to
our other remedies and rights under this Agreement or applicable law, and our right to audit will continue
for 2 years following termination of this Agreement.
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Exhibit B: Franchise Agreement
17
ARTICLE 9
MARKETING AND PROMOTION
9.1.
Marketing Fees.
(a)
Collection of Marketing Fees. You agree, for the entire term of this Agreement,
to pay to us a weekly marketing fee of 1% to 3% of your Store’s Gross Revenues. We will notify
you annually of the exact percentage you must pay as a marketing fee, except for any year in
which the percentage is to remain unchanged from the preceding year. Not all Mrs. Fields
Cookie Stores pay the same weekly marketing fee percentage. The fee may differ based on
conditions we determine periodically, including where Stores are located and how long they have
been open. Mrs. Fields Cookie Stores owned by us or an Affiliate contribute marketing fees on
the same basis as similarly situated Stores operated by franchisees, but that basis and the amount
of marketing fees paid may differ from yours. Marketing fees will be payable weekly by preauthorized bank transfers, together with the continuing fees, in accordance with Sections 6.3 and
6.4.
(b)
Right to Direct Operation of the Marketing Fees Collected. Marketing fees pay
for marketing programs. We will direct all marketing programs financed by the marketing fees
we collect, and have the right to determine the creative concepts, materials and endorsements
used and the geographic, market and media placement and allocation. You agree that we have the
right to use the marketing fees we collect to meet any and all costs of maintaining, administering,
directing and preparing advertising materials and marketing programs, including: preparing and
producing video, audio and advertising materials; administering and funding local, regional and
multi-regional marketing programs; purchasing direct mail and other media marketing;
employing advertising, promotion and marketing agencies; supporting public relations;
conducting market research; and other advertising, promotion and marketing activities. We have
the right, at our option, to use marketing fees to prepare, furnish and/or offer for sale to you
advertising, marketing and promotional formats and materials as described in Section 9.3.
(c)
Accounting for the Marketing Fees Collected. The marketing fees we collect
will be accounted for separately from our other funds, although we are not required to establish a
separate marketing fund or bank account for such fees. We have the right to use the marketing
fees we collect to defray the salaries, employee benefits, administrative costs and overhead we
and our Affiliates may incur in activities related to our marketing programs, including conducting
market research, preparing advertising, promotion and marketing materials and collecting and
accounting for the marketing fees we collect. Upon your prior written request made within the
first quarter of any calendar year, we will make available to you no later than 120 days after the
end of the calendar year, an annual statement of moneys collected and costs incurred for our
marketing programs. No independent audit is required in connection with this statement or the
marketing fees we collect. We and our Affiliates have no fiduciary obligation to Mrs. Fields
franchisees with respect to the collection and expenditure of marketing fees. We have the right to
create a marketing fund in the future to be operated by us or through an entity separate from us.
(d)
Benefits to Individual Stores. You understand and agree that our collection
expenditure of marketing fees is intended to maximize recognition of the Marks and patronage of
Mrs. Fields Cookie Stores. Although we will endeavor to utilize the marketing fees we collect to
develop advertising and marketing materials and programs and to place advertising that will
benefit all Mrs. Fields Cookie Stores, we cannot ensure you that our expenditure of marketing
fees in or affecting any geographic area will be proportionate or equivalent to the marketing fee
contributions by Mrs. Fields Cookie Stores operating in that geographic area or that any Mrs.
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Exhibit B: Franchise Agreement
18
Fields Cookie Store will benefit directly or in proportion to the marketing fees it pays to us from
the development of advertising and marketing materials or the placement of advertising.
9.2.
Advertising and Promotional Activities by You. In addition to marketing fees, you agree
that you will spend on marketing and related programs any amount that is required under your lease or
sublease. Those amounts cannot be applied against the weekly marketing fees you are required to pay us.
In addition, those amounts typically vary from lease to lease, and therefore, all Mrs. Fields Cookie Store
franchisees will not be obligated to spend the same amount on local advertising and marketing. You
agree that all advertising, promotion and marketing by you will comply with the requirements of
Article 10, will be completely clear and factual and not misleading, and will conform to the highest
standards of ethical marketing and promotion policies which we have the right to prescribe. Prior to use,
all press releases and policy statements and samples of all local advertising, marketing and related
materials not prepared or previously approved by us will be submitted to us for approval. Our approval
will not be unreasonably withheld. Pamphlets, brochures, cards or other promotional materials offering
free Products may only be used if prepared by us, unless otherwise approved in advance by us. However,
we will give favorable consideration to your use of free product cards developed by you, if the cards
clearly state that they may only be redeemed at Mrs. Fields Cookie Stores owned by you. If we do not
give you written approval of any advertising or other promotional materials within 15 days from the date
of receipt by us of the materials, we will be deemed to have disapproved the submission. You agree not
to use any advertising, marketing or related materials that we have disapproved. You also agree to list
your Store in the principal telephone directories distributed in your metropolitan area.
9.3.
Our Advertising Materials. From time to time, we will provide you with copies of
advertising, marketing and promotional formats and materials for use in your Store, which we have
prepared using marketing fees we have collected from Mrs. Fields Cookie Stores. You are only required
to pay shipping and handling costs for these items or, if you want additional or replacement copies, our
direct cost of producing such items together with any related shipping, handling and storage charges. In
addition to these items, we may offer you the option of purchasing other advertising, marketing and
promotional formats and materials that we have prepared and that are suitable for use at local Mrs. Fields
Cookie Stores. We may provide samples, copies or information explaining these items to you from time
to time. If you elect to purchase any such items from us, we will provide them to you at our direct cost of
producing them plus any related shipping, handling and storage charges. In addition, we have the right to
develop and market special mandatory promotional items for Mrs. Fields Cookie Stores and require you
to maintain a representative inventory of these promotional items to meet public demand. In such case,
we will make these items available to you at our direct cost plus a reasonable mark-up and any shipping,
handling and storage charges. You will have the right to purchase alternative promotional items if the
alternative items conform to the specifications and quality standards we establish and you obtain our prior
written approval. We also have the right to conduct coupon promotions. In such case, we have the right
to require you to accept coupons that are issued by us or our Affiliates and presented at your Store by
your customers. You will receive certain compensation for these coupons when you tender them to us in
accordance with our System Standards. You acknowledge and agree that all payments to us for the items
described in this Section 9.3 are nonrefundable and cannot be applied against the weekly marketing fee
you are required to pay to us. You must participate in all mandatory promotions and product roll-outs that
are agreed upon by the franchisee marketing committee (if the franchisee association has established that
committee or one performing a similar function) and us. If you do not place minimum orders of products
and other items necessary for a mandatory promotion or product roll-out by a certain date, we have the
right to send, or direct suppliers to send, an automatic shipment of a specified minimum quantity of such
products and items to you, and you must accept and pay for them upon receipt.
9.4.
Advertising Cooperatives. We have the right, at any time, to form, organize, maintain and
otherwise make use of, and require you to participate in, local advertising cooperatives that include your
Store. If we form or organize a local or regional advertising cooperative for the market that includes your
Store, we have the right to require you to participate in and contribute to the advertising cooperative an
MFDD – 3/14
Exhibit B: Franchise Agreement
19
amount of up to 3% of your Gross Revenues, which is in addition to your marketing fees and any leaserequired advertising fees. In such case, we will notify you from time to time of the amount you must pay
to the advertising cooperative and the timing of the payments, which may be as often as weekly. Each
Mrs. Fields Cookie Store located within your advertising cooperative, including Mrs. Fields Cookie
Stores owned by us or our Affiliates, will be a member of the advertising cooperative and have one vote
per Store. Your advertising cooperative will be required to adopt written governing documents that meet
our approval. The members of your advertising cooperative and their elected officers will be responsible
for all administration of the advertising cooperative. Your advertising cooperative will be required to
engage the services of a professional advertising agency, public relations firm or similar service that
meets with our approval and has expertise in their market, and to have an independent CPA prepare
quarterly and annual financial statements, which must be made available to us and all Mrs. Fields Cookie
Store franchisees in your advertising cooperative. We have the right to require local and regional
advertising cooperatives to be formed, changed, dissolved or merged.
ARTICLE 10
USE OF THE MARKS AND CONFIDENTIAL INFORMATION
10.1. Ownership and Goodwill of Marks. You acknowledge that we or our Affiliates are the
exclusive owners of the Marks and that your right to use the Marks is derived solely from this Agreement
and is limited to the conduct of business in compliance with this Agreement and all applicable System
Standards, specifications and operating procedures that we require. Any unauthorized use of the Marks
by you will constitute a breach of this Agreement and an infringement of our rights in the Marks. You
agree that your usage of the Marks and any goodwill established by that use will be for our and our
Affiliates’ exclusive benefit. This Agreement does not confer any past, present or future goodwill or
other interests in the Marks upon you, other than the right to operate a Mrs. Fields Cookie Store in
compliance with this Agreement. All provisions of this Agreement applicable to the Marks will apply to
any additional proprietary trade and service marks and commercial symbols we or our Affiliates authorize
for your use in the future.
10.2. Limitations on Your Use of Marks. You agree to use the Marks as the sole identification
of your Store. You will not use any Mark as part of any corporate or trade name or with any prefix, suffix
or other modifying words, terms, designs or symbols (other than logos licensed to you under this
Agreement), or in any modified form, nor may you use any Mark in connection with the performance or
sale of any unauthorized services or products or in any other manner not expressly authorized in writing
by us. You agree to display the Marks prominently at your Store, on supplies or materials designated by
us and in connection with packaging materials, forms, labels and advertising and marketing materials. All
Marks will be displayed in the manner we require. You agree to use the registration symbol “®” in
connection with your use of the Marks that are registered. You agree to refrain from any business or
marketing practice which may be injurious to our business and the goodwill associated with the Marks
and other Mrs. Fields Cookie Stores. You agree to give such notices of trade and service mark
registrations as we specify and to obtain such fictitious or assumed name registrations as may be required
under applicable law. You may not use any Mark as part of an electronic mail address or on any sites on
the Internet or World Wide Web. Without limiting the foregoing, you may not use or register the Marks
as an Internet domain name.
10.3. Discontinuance of Use of Marks. We have the right to require you to modify or
discontinue use of any Marks or use one or more additional or substitute trade or service marks if we
determine it becomes advisable to do so at any time. In such case, you agree to comply with our
directions to modify or discontinue the use of the Mark or use one or more additional or substitute trade
or service marks within a reasonable time after notice from us. We will reimburse you for your
reasonable direct expenses in modifying or discontinuing the use of a Mark and substituting a different
trademark or service mark. However, we will not be obligated to reimburse you for any loss of goodwill
MFDD – 3/14
Exhibit B: Franchise Agreement
20
associated with any modified or discontinued Mark or for any expenditures made by you to promote a
modified or substitute trademark or service mark.
10.4. Notification of Infringements and Claims. You agree to immediately notify us of any
apparent infringement of or challenge to your use of any Mark or claim by any person of any rights in any
Mark, and you will not communicate with any person other than us or our counsel in connection with the
infringement, challenge or claim. We and our Affiliates will have the right to take the action we deem
appropriate and control exclusively any litigation, U.S. Patent and Trademark Office proceeding or any
other administrative or court proceeding arising out of any such infringement, challenge or claim or
otherwise relating to any Mark. You agree to execute any instruments and documents, render such
assistance and do those things as, in the opinion of our legal counsel, may be necessary or advisable to
protect and maintain our interests in any litigation or U.S. Patent and Trademark Office or other
proceeding or otherwise to protect and maintain our interests in the Marks.
10.5. Our Indemnification of You. We agree to indemnify you against and to reimburse you
for all damages for which you are held liable in any proceeding arising out of your authorized use of any
Mark in compliance with this Agreement, provided that you have timely notified us of the claim or
proceeding and have otherwise complied with this Agreement. We and our Affiliates shall control the
defense of any proceeding arising out of your authorized use of any Mark.
10.6. Copyrights. We or our Affiliates claim copyrights in the Confidential Information, the
Operations Manual, our construction plans, specifications and materials, printed advertising and
promotional materials and in related items used in operating the Franchise. You may use the Operations
Manual and other materials during the term of the Franchise Agreement. The provisions of Sections 10.1,
10.3, 10.4 and 10.5 relating to Marks also apply to copyrights owned by us, as if copyrights were included
within the definition of Marks.
10.7. Concepts Developed by You. We and our Affiliates will have the perpetual right to own
and use and authorize other Mrs. Fields Cookie Stores to use, and you will fully and promptly disclose to
us, all ideas, concepts, formulas, recipes, methods, techniques and other materials relating to the
development or operation of a cookie, bakery, snack food or dessert restaurant or retail outlet or any
similar food service business conceived or developed by you or your employees during the term of this
Agreement. You may not test, offer, or sell any new products without our prior written consent.
10.8. Confidential Information. We may disclose certain Confidential Information to you in
training, the Operations Manual and in guidance furnished to you during the term of the Franchise. You
are not acquiring any interest in Confidential Information, other than the right to utilize Confidential
Information disclosed to you in the operation of your Store during the term of this Agreement. Your use
or duplication of any Confidential Information in any other business will constitute an unfair method of
competition and a violation of this Agreement. The Confidential Information is proprietary, includes our
trade secrets and is disclosed to you solely on the condition that you agree:
(a)
Not to use Confidential Information in any other business or capacity;
(b)
To maintain the absolute confidentiality of Confidential Information during and
after the term of this Agreement;
(c)
Not to make unauthorized copies of any portion of Confidential Information
disclosed in written or other tangible form; and
(d)
To adopt and implement all reasonable procedures that we prescribe to prevent
unauthorized use or disclosure of Confidential Information, including restrictions on disclosure of
MFDD – 3/14
Exhibit B: Franchise Agreement
21
Confidential Information to your employees and compliance with the requirement that certain key
employees execute confidentiality agreements as a condition of employment.
ARTICLE 11
COVENANTS NOT TO COMPETE
11.1. In Term Non-Compete. You agree and acknowledge that we would be unable to protect
the Confidential Information against unauthorized use or disclosure and would be unable to encourage a
free exchange of ideas and information among Mrs. Fields Cookie Stores if franchised owners of Mrs.
Fields Cookie Stores or the manager of your Store were permitted to hold interests in or perform services
for a Competitive Business. You also acknowledge and agree that we have granted the Franchise to you
in consideration of and reliance upon your agreement to deal exclusively with us. Therefore, during the
term of this Agreement, no Restricted Person and no manager of your Store will:
(a)
Have any direct or indirect interest in a Competitive Business, except other Mrs.
Fields Cookie Stores or other stores operated by you under franchise agreements with us or any of
our Affiliates;
(b)
Perform services as a director, officer, manager, employee, consultant,
representative, agent or otherwise for a Competitive Business, except other Mrs. Fields Cookie
Stores or other stores operated by you under franchise agreements with us or any of our
Affiliates; or
(c)
Recruit or hire any employee who, within the immediately preceding 6-month
period, was employed by us or any Mrs. Fields Cookie Stores operated by us, our Affiliates or
another franchisee or licensee of us, without obtaining the prior written permission of us or the
franchisee or licensee.
11.2. Post Term Non-Compete. Upon termination of this Agreement for any reason other than
as a result of our default, you agree that, for a period of 2 years (or 3 years if we purchase your Store as
provided in Section 14.5) commencing on the effective date of termination, no Restricted Person will
have any direct or indirect interest as an owner, investor, partner, director, officer, employee, consultant,
representative or agent or in any other capacity in any Competitive Business located or operating within
(a) 10 miles of your Store, or (b) 10 miles of any Mrs. Fields Retail Outlets, except Mrs. Fields Cookie
Stores that you operate under agreements with us or our Affiliates. You expressly acknowledge that you
and the other Restricted Persons possess skills and abilities of a general nature and have other
opportunities for exploiting those skills. Consequently, enforcement of the covenants made in this
Section 11.2 will not deprive you or any of the other Restricted Persons of their personal goodwill or
ability to earn a living.
11.3. Shareholder Exception. The restrictions of Sections 11.1 and 11.2 do 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 2% or less of the number of shares of that class of securities issued and outstanding.
11.4. Enforcement of Non-Competes. If any covenant in this Agreement which restricts
competitive activity is deemed unenforceable by virtue of its scope in terms of area, business activity
prohibited and/or length of time, but would be enforceable by reducing any part or all of the covenant,
you and we agree that the covenant will be enforced to the fullest extent permissible under the laws and
public policies applied in the jurisdiction in which enforcement is sought.
MFDD – 3/14
Exhibit B: Franchise Agreement
22
ARTICLE 12
TRANSFERS
12.1. Transfers by Us. This Agreement is fully transferable by us and will inure to the benefit
of any transferee or other legal successor to our interest in this Agreement.
12.2. Restrictions on Transfers by You. Your rights and duties created by this Agreement are
personal to you, and we have granted this Agreement to you in reliance upon our perceptions of the
individual or collective character, skill, aptitude, attitude, business ability and financial capacity of you
and, if you are not an individual, your Entity Owners. Accordingly, you must give us written notice in a
form satisfactory to us of your intention to accomplish any Transfer hereunder no less than 60 days prior
to the proposed Transfer, and no Transfer will be made without our prior written approval. Any Transfer
without our approval will constitute a breach of this Agreement and will be void and of no effect.
12.3. Conditions for Approval of Transfers by You. If you are in full compliance with this
Agreement and provide prior written notice to us in accordance with Section 12.2, we will not
unreasonably withhold our approval of a Transfer that meets all of the following requirements:
(a)
Character. The proposed transferee and the individuals ultimately owning the
transferee, if the transferee is an Entity, must be individuals of good moral character and
otherwise meet our then applicable standards for owners of Mrs. Fields Cookie Stores;
(b)
Business Experience. The transferee and, if the transferee is an Entity, its Entity
Owners must have sufficient business experience, aptitude and financial resources to purchase
under the terms and conditions proposed, own and operate the Store and its business and comply
with this Agreement;
(c)
Training. The proposed transferee and/or its senior management personnel have
completed to our satisfaction our then current training program for transferees after signing the
franchise documents set forth herein, but prior to assuming operations of the Store;
(d)
Satisfaction of Obligations. You have paid all amounts owed for purchases by
you from us and our Affiliates and all other amounts owed to us or our Affiliates and third-party
creditors;
(e)
Execution of Assignment and Assumption Agreement.
You and your
transferring Entity Owners, if you are an Entity, the transferee and its Entity Owners, if the
transferee is an Entity, and us have entered into our then current form of assignment and
assumption agreement, pursuant to which (i) the transferee has agreed to be bound by and has
expressly assumed all of the terms and conditions of this Agreement for the remainder of its term,
(ii) the transferee’s Entity Owners, if any, have executed our then current form of guaranty, and
(iii) you and your Entity Owners, if any, have agreed to release us and our Affiliates and our and
their respective officers, directors, employees and agents from any and all claims;
(f)
Execution of New Agreement at Our Option. In addition to entering into our
then current assignment and assumption agreement, at our option, the transferee has executed our
then current form of Franchise Agreement for a term equal to the remainder of current term of
this Agreement and any additional term purchased in accordance with Section 12.3(n), and if the
transferee is an Entity, each Entity Owner of the transferee has executed our then current form of
guaranty;
MFDD – 3/14
Exhibit B: Franchise Agreement
23
(g)
Payment of Transfer Fees. You or the transferee has paid our then current
transfer fee for a Franchise Agreement, a portion of which may be a non-refundable deposit that
you must pay to us when you submit your request for our consent to the Transfer. However, we
will not charge a transfer fee if the Transfer is among existing Entity Owners of you and the
names and identity of all Entity Owners remain the same following the Transfer. We reserve the
right to charge a reduced fee in certain circumstances, including a Transfer to a wholly-owned
corporation under Section 12.4 and may refund the transfer deposit if we do not approve the
transfer or in other circumstances that we agree to in writing;
(h)
Approval of Terms of Transfer. We have approved the material terms and
conditions of the Transfer, including, without limitation, the price and terms of payment.
However, our approval of a Transfer does not ensure the transferee’s success as a Mrs. Fields
Cookie Store franchisee nor should the transferee rely upon our approval of the Transfer in
determining whether to acquire your Store;
(i)
Subordination. If you (or your Entity Owners) finance any part of the sale price
of the transferred interest, you and the Entity Owners have agreed that all obligations of the
transferee under any promissory notes, agreements or security interests reserved by you (or your
Entity Owners) will be subordinate to the transferee’s obligations to us and our Affiliates;
(j)
Non-Competition Agreement. Each Restricted Person has executed a noncompetition agreement in our favor and in favor of the transferee agreeing that, for a period of 3
years commencing on the effective date of the transfer, no Restricted Person will acquire or hold
any direct or indirect interest as an owner, investor, partner, director, officer, manager, employee,
consultant, representative or agent, or in any other capacity, in a Competitive Business located
within (i) 10 miles of your Store, or (ii) 10 miles of any Mrs. Fields Retail Outlet, except Mrs.
Fields Cookie Stores that you operate under agreements with us or our Affiliates. The restrictions
of this Section 12.3(j) will 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 2% or less of the number
of shares of that class of securities issued and outstanding;
(k)
Landlord Consent. If consent is required, the lessor of the Premises consents to
the assignment or sublease of the Premises to the transferee;
(l)
Non-Use of Marks. You and your Entity Owners have agreed that you and they
will not directly or indirectly at any time or in any manner (except with respect to Mrs. Fields
Cookie Stores owned and operated by you or them) identify yourself or themselves or any of their
businesses as a current or former Mrs. Fields Cookie Store, or as a franchisee, licensee or dealer
of us or our Affiliates, use any Mark, any colorable imitation of any of the Marks or other indicia
of a Mrs. Fields Cookie Store in any manner or for any purpose or utilize for any purpose any
trade name, trade or service mark or other commercial symbol that suggests or indicates a
connection or association with us or our Affiliates;
(m)
Refurbishment. You or the transferee has agreed to any refurbishment of the
Store required by us to bring the Store in compliance with the then current System Standards and
Trade Dress;
(n)
Sufficient Term. You have sufficient term remaining under this Agreement, or
the transferee has agreed to purchase from us, pursuant to our then-current term pre-purchase
agreement, sufficient additional term under this Agreement to satisfy our then current policy on
remaining term requirements for transfers;
MFDD – 3/14
Exhibit B: Franchise Agreement
24
(o)
Licensed Escrow Professional. You and the transferee, at your cost, use a
licensed escrow professional or other qualified third party acceptable to us to conduct the closing
of the Transfer. We have the right to require that all documents and fees payable to us shall be
deposited into escrow prior to the time that your transferee attends our training program, together
with escrow instructions in form and content satisfactory to us providing for a final closing of the
Proposed Transfer after the transferee successfully completes all required training; and
(p)
Other Conditions. You and your transferring Entity Owners, if you are an Entity,
have complied with any other conditions that we reasonably require from time to time as part of
our transfer policies.
In connection with any assignment permitted under this Section 12.3, you will provide us with all
documents to be executed by you and the proposed transferee at least 30 days prior to execution.
12.4. Transfer to a Wholly-Owned Corporation or Limited Liability Company. If you are in
full compliance with this Agreement, you will have the right to transfer your rights in this Agreement to a
corporation or limited liability company which will conduct no business other than the business
contemplated by this Agreement, which you actually manage and in which you maintain management
control and own and control 100% of the equity and voting power of all issued and outstanding capital
stock or other ownership interests. Transfers of shares or other ownership interests of you will be subject
to the provisions of Sections 12.2 and 12.3. Even though a transfer is made under this Section 12.4, you
will remain personally liable under this Agreement as if the transfer to such corporation or limited
liability company had not occurred. The articles of incorporation, by-laws and other organizational
documents of the corporation or limited liability company will recite that the issuance and assignment of
any interest in the corporation or limited liability company is restricted by the terms of this Article 12, and
all issued and outstanding stock certificates and other documents representing ownership interests in you
will bear a legend reciting or referring to these restrictions.
12.5.
Our Right of First Refusal.
(a)
Submission of Offers to Us. If you or one or more of your Entity Owners desires
to make a Transfer, you or the Entity Owner will obtain a bona fide, executed written offer and an
earnest money deposit (in the amount of 5% or more of the offering price) from a responsible and
fully disclosed purchaser and will immediately submit to us a true and complete copy of such
offer, which will include details of the payment terms of the proposed sale and the sources and
terms of any financing for the proposed purchase price and a list of the owners of record and
beneficially of any offeror that is an Entity and the individuals ultimately owning or controlling
the offeror. If the offeror or an owner of the offeror is a publicly-held Entity, you will also
submit to us copies of the most current annual and quarterly reports of the publicly-held Entity.
To be a valid, bona fide offer, the proposed purchase price will be denominated in a dollar
amount. The offer must apply only to an interest in this Agreement or a Controlling Interest in
you and may not include an offer to purchase any other property or rights of you or your Entity
Owners. However, if the offeror proposes to buy any other property or rights from you or your
Entity Owners under a separate, contemporaneous offer, the price and terms of purchase offered
to you or your Entity owners for the interest in this Agreement or the Controlling Interest in you
will reflect the bona fide price offered for that interest and will not reflect any value for any other
property or rights.
(b)
Our Right to Purchase. We will have the right, exercisable by written notice
delivered to you or your Entity Owners within 30 days from the date of delivery of an exact copy
of the offer to us, to purchase the interest in this Agreement or such Controlling Interest in you
for the price and on the terms and conditions contained in the offer. However we have the right
to substitute cash for any form of payment proposed in the offer, our credit will be deemed equal
MFDD – 3/14
Exhibit B: Franchise Agreement
25
to the credit of any proposed purchaser, and we will have not less than 60 days to close the
purchase. Without regard to the representations and warranties demanded by the proposed
purchaser, if any, we will have the right to purchase the interest, receiving from you all customary
representations and warranties given by the seller of the assets of a business or equity interest in
an Entity, as applicable, including representations and warranties as to ownership, condition of
and title to assets, absence of liens and encumbrances relating to the ownership interest and
assets, and validity of contracts and liabilities affecting the assets being purchased, contingent or
otherwise.
(c)
Non-Competition Restriction. If we exercise our right of first refusal, you and
each other Restricted Person must execute a non-competition agreement in our favor agreeing to
the same restrictions described in Section 12.3(j). If we exercise our right of first refusal, you and
your Entity Owners further agree that you will abide by the restrictions of Section 12.3(l).
(d)
Non-Exercise by Us of Our Right of First Refusal. If we do not exercise our
right of first refusal, you (or your Entity Owners) may complete the sale to such purchaser
pursuant to and on the terms of such offer, subject to our approval as provided in Sections 12.2
and 12.3. However, if the sale to the purchaser is not completed within 120 days after delivery of
the offer to us, or if there is a material change in the terms of the sale, our right of first refusal will
be extended for 30 days after the expiration of the 120-day period or after the material change in
the terms of the sale.
12.6. Death or Permanent Disability. If you are an individual, upon your death or permanent
disability or, if you are an Entity, upon the death or permanent disability of an individual owner of a
Controlling Interest in you, the executor, administrator, conservator or other personal representative of
that person will transfer his interest in this Agreement or his Controlling Interest in you within a
reasonable time, not to exceed 6 months from the date of death or permanent disability, to a third party
approved by us. A transfer under this Section 12.6, including, without limitation, transfer by devise or
inheritance, will be subject to all of the terms and conditions for Transfers contained in Sections 12.2 and
12.3, and unless transferred by gift, devise or inheritance, subject to the terms of Section 12.5. Failure to
dispose of such interest within the specified period of time will constitute a breach of this Agreement.
For purposes of this Agreement, the term “permanent disability” will mean a mental or physical
disability, impairment or condition that is reasonably expected to prevent or actually does prevent you or
an owner of a Controlling Interest in you from supervising the operation of your Store for a period of 6
months from the onset of such disability, impairment or condition.
12.7. Effect of Consent to Transfer. Our consent to a Transfer will not constitute a waiver of
any claims we may have against the transferor nor be deemed a waiver of our right to demand full
compliance by the transferee with the terms or conditions of this Agreement.
12.8. Preparation of a Financial Report by You. We have the right to require you to prepare and
furnish to a prospective transferee and/or us such financial reports and other data relating to your Store and its
operations as we deem necessary or appropriate for the prospective transferee and/or us to evaluate the Store
and the proposed transfer. You agree that we have the right to confer with prospective transferees and furnish
them with information concerning your Store and proposed transfer without being held liable to you, except
for intentional misstatements made to any such transferee. Any such information furnished by us to
prospective transferees is for the sole purpose of permitting the transferees to evaluate your Store and the
proposed transfer and shall not be construed in any manner or form whatsoever as financial performance
representations, or representations or claims of success or failure.
MFDD – 3/14
Exhibit B: Franchise Agreement
26
ARTICLE 13
DEFAULT AND TERMINATION
13.1. Your Defaults. You will be in default under the terms of this Agreement if any of the
following occur:
(a)
Insolvency. You file a petition in bankruptcy or for reorganization or for an
arrangement pursuant to any federal or state bankruptcy law or any similar federal or state law, or
are adjudicated a bankrupt or make an assignment for the benefit of creditors or admit in writing
your inability to pay your debts generally as they become due, or if a petition or answer proposing
the adjudication of you as a bankrupt or your reorganization pursuant to any federal or state
bankruptcy law or any similar federal or state law is filed in any court and you consent to or
acquiesce in the filing thereof or such petition or answer is not discharged or denied within 60
days after the occurrence of any of the foregoing, or if a receiver, trustee or liquidator of you or of
all or substantially all of your assets or your interest in this Agreement is appointed in any
proceeding brought by you, or if any such receiver, trustee or liquidator is appointed in any
proceeding brought against you and is not discharged within 60 days after the occurrence thereof,
or if you consent to or acquiesce in such appointment (any such event described in this
Section 13.1(a) being referred to as an “Insolvency Event”);
(b)
Article 12;
Unauthorized Transfer. A Transfer occurs in violation of the provisions of
(c)
Misstatements and other Adverse Developments. You (or, if you are an Entity,
any Entity Owner of you) have made any material misrepresentation or omission in your
application for the rights conferred by this Agreement, are convicted by a trial court of or plead
no contest to a felony or to any other crime or offense that may adversely affect the goodwill
associated with the Marks, or if you engage in any conduct which may adversely affect the
reputation of any Mrs. Fields Cookie Store or the goodwill associated with the Marks;
(d)
Unauthorized Use of Marks or Confidential Information. You or an Entity
Owner of you make any unauthorized use of the Marks or any unauthorized use or disclosure of
Confidential Information;
(e)
Abandonment. You abandon or fail actively to operate your Store for 3
consecutive days unless your Store has been closed for a purpose approved in advance by us in
writing or because of fire, flood or other casualty or government order;
(f)
Breach of Lease; Loss of Right of Possession. You are in breach of any of your
obligations under your lease or sublease of the Premises or you lose the right to possession of the
Premises;
(g)
Failure to Comply with Certain System Standards and Health Requirements.
You fail or refuse to comply with System Standards relating to the cleanliness or sanitation of
your Store or violate any health, safety or sanitation law, ordinance or regulation;
(h)
Understatements of Gross Revenues. You understate your Store’s Gross
Revenues in any report or financial statement by an amount greater than 2%;
(i)
Failure to Make Payments. You or any of your Affiliates fail to make payments,
when due, of any amounts due to us or our Affiliates under this Agreement or any other
MFDD – 3/14
Exhibit B: Franchise Agreement
27
agreement with us or our Affiliates, or fail to make payments, when due, of any amounts due to
vendors, distributors, suppliers or landlords of the Store that relate to the Store’s operation;
(j)
Failure to Pay Taxes. You fail to pay any federal or state income, sales or other
taxes due with respect to your Store’s operations unless you are in good faith contesting your
liability for the taxes;
(k)
Failure of Inspection. You fail to achieve a passing score reasonably established
by us on two consecutive announced or unannounced store inspections conducted by us or our
agents;
(l)
Other Breaches. You fail to comply with any other provision of this Agreement
or any System Standard;
(m)
Repeated Breaches. You fail on 2 or more separate occasions within any period
of 12 consecutive months or on 3 occasions during the term of this Agreement to submit when
due reports or other data, information or supporting records or to pay when due the continuing
fees or other payments due to us or our Affiliates or otherwise fails to comply with this
Agreement, whether or not the failures to comply are corrected after notice thereof is delivered to
you;
(n)
Financing Defaults. You default with respect to any of your obligations to us or
any other lender under any financing provided to you in connection with this Franchise
Agreement or a purchase of Franchised Store assets; or
(o)
Default of any Other Agreement. You default in the performance or observance
of any of your obligations under any other agreement with us or our Affiliates.
(p)
Failure to Secure Store Premises. You fail to obtain our approval of and secure
the Premises for your Store within the 6-month period described in Section 2.1(a) of this
Agreement, if at the time of signing this Agreement we have not identified the Premises on
Appendix A attached to this Agreement.
(q)
Failure to Open Store by Start Date. You fail to open the Store by your Start
Date, as described in Section 4.5 of this Agreement.
(r)
Possession or Use of Unauthorized Products. You possess or use on the Premises
of your Store unauthorized products, as specified periodically by us in the Operations Manual or
otherwise.
13.2. Our Right to Terminate if You Default. We have the right to terminate this Agreement in
accordance with the following provisions:
(a)
Immediate Termination With No Opportunity to Cure. You will have no right or
opportunity to cure any of the defaults described in Sections 13.1(a), 13.1(b), 13.1(c), 13.1(d),
13.1(e), 13.1(f), 13.1(j), 13.1(m), 13.1(n), 13.1(p) and 13.1(r) and, upon the occurrence of one of
these defaults, this Agreement will terminate effective immediately on our issuance of written
notice of termination.
(b)
Immediate Termination After 48 Hours to Cure. You will have 48 hours after
written notice of default to cure a default relating to your failure to comply with certain System
Standards and health requirements, as described in Section 13.1(g). If you fail to cure or only
partially cure such a default within the 48-hour cure period, we will have good cause to terminate
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Exhibit B: Franchise Agreement
28
this Agreement and such termination will be effective immediately upon on our issuance of
written notice of termination.
(c)
Immediate Termination After 10 Days to Cure. You will have 10 days from the
date of written notice of default to cure a default relating to your failure to make payments, as
described in Section 13.1(i). If you fail to cure or only partially cure such a default within the 10day cure period, we will have good cause to terminate this Agreement and such termination will
be effective immediately upon on our issuance of written notice of termination.
(d)
Termination After Opportunity to Cure. Except as otherwise provided in
Sections 13.2(a), 13.2(b) and 13.2(c): (i) you will have 30 days from the date of written notice of
default to cure any default under this Agreement or, if the default cannot reasonably be cured
within 30 days from the date of written notice of default, provide proof acceptable to us of efforts
which are reasonably calculated to correct the default within a reasonable time, which will in no
event be more than 30 days from the date of written notice of default; (ii) your failure to fully
cure a default within the applicable cure period will provide us with good cause to terminate this
Agreement; (iii) the termination will be accomplished by mailing or delivering to you written
notice of termination that will identify the grounds for the termination; and (iv) the termination
will be effective 30 days after the date of written notice of termination.
(e)
Other Rights and Remedies. If you cure any default after the applicable cure
period has expired, we still have the right to terminate this Agreement. In any event, our right to
terminate this Agreement is in addition to whatever other rights and remedies are available to us.
Without limiting the foregoing, we reserve the right to interrupt your product shipments or
ordering privileges instead of or in addition to exercising our right to terminate this Agreement, or
require you to sign our then-current form of Franchise Agreement if we choose to rescind our
termination of this Agreement. We also reserve the right (but not the obligation) to take actions
necessary to cure the default at your sole expense and to establish reasonable conditions that you
must satisfy to cure any default, such as requiring you to pay for a year of monthly Store
inspections if you commit a default relating to Section 13.1(k).
(f)
Effect of Other Laws. The provisions of any valid, applicable law or regulation
prescribing permissible grounds, cure rights or minimum periods of notice for termination of this
Franchise will supersede any provision of this Agreement that is less favorable to you than such
law or regulation.
13.3.
Our Right to Terminate in Certain Other Circumstances.
(a)
Failure to Complete Training. If you or your initial store manager fails to
complete all phases of the initial training program to our satisfaction, we will have the right to
terminate this Agreement effective upon delivery of notice of termination to you. If we terminate
the Agreement as permitted by this provision, we will refund to you the initial franchise fee less
all reasonable expenses incurred by us in connection with (i) the preparation of this Agreement
and all related agreements, (ii) the grant of the Franchise, (iii) approval of the Premises, (iv)
selection of the Premises, and (v) any other services performed by us in connection with the
establishment and development of your Store. However, in no event will the refund exceed 50%
of the initial franchise fee. In addition, we will not refund any portion of the $5,000 deposit you
pay to us if at the time of signing this Agreement we have not identified the Premises on
Appendix A attached to this Agreement, as described in Section 6.1. The refund will be delivered
to you upon execution of all releases, waivers and other agreements necessary to terminate the
relationship between you and us.
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Exhibit B: Franchise Agreement
29
(b)
Failure to Open Your Store for Business. If you fail to open your Store for
business in compliance with Section 4.5, we will also have the right to terminate this Agreement
effective upon delivery of notice of termination to you. No refund of the initial franchise fee or
any deposits of the initial franchise fee will be made in these circumstances.
13.4. Your Right to Terminate if We Default. We will be in default under this Agreement if
we materially breach a provision contained herein. Our failure to either cure such a default within 30
days from the date of a written notice of default delivered to us or, if such default cannot reasonably cured
within 30 days, to provide proof to you of efforts which are reasonably calculated to cure such default
within a reasonable time (which will in no event be more than 60 days after notice), will give you good
cause to terminate this Agreement; provided you are in compliance with this Agreement. Termination will
be accomplished by delivering to us written notice of termination, which notice will state the grounds for
the termination and will be effective 10 days after delivery to us. Your right to terminate this Agreement
is in addition to whatever other rights and remedies are available to you.
13.5. Assumption of Management. If you are in default of this Agreement for abandonment
(as described in Section 13.1(e)), we have the right, at our option, to enter the Premises and assume the
management of your Store for any period of time we deem appropriate. If we assume management of
your Store, we will appoint a manager who will maintain Store operations. All funds from the operation
of your Store during the period of management by our appointed manager will be kept in a separate fund,
and all expenses of your Store, including compensation, other costs, and travel and living expenses of our
appointed manager, will be charged to such fund. As compensation for such management services, we
will charge such fund 10% of the Gross Revenues of your Store during the period of our management.
Operation of your Store during any such period will be on your behalf, provided that we will have a duty
only to utilize our good faith effort and will not be liable to you for any debts or obligations incurred by
your Store or to any of your creditors for any merchandise, materials, supplies or services purchased by
your Store during any period in which your Store is managed by our appointed manager. You will
maintain in force for your Store all insurance policies required by this Agreement. Our right to assume
management of your Store pursuant to this Section 13.5 is in addition to and does not affect our right to
terminate this Agreement under Section 13.2.
ARTICLE 14
POST TERM OBLIGATIONS
14.1. Reversion of Rights. You agree that upon termination or expiration of this Agreement,
all of your rights to use the Marks and all other rights and licenses granted herein and the right and license
to conduct business under the Marks at your Store and on the Premises shall revert to us without further
act or deed of any party. All right, title and interest of you in, to and under this Agreement shall become
our property.
14.2. Payment of Amounts Owed to Us and Others following Termination or Expiration. You
agree to pay us within 15 days after the date of termination or expiration of this Agreement, or such later
date as the amounts due to us are determined, the continuing fees, marketing fees, amounts owed for
purchases by you from us or our Affiliates, interest due on any of the foregoing and all other amounts
owed to us or our Affiliates which are then unpaid.
14.3. Discontinuance of the Use of the Marks following Termination or Expiration. You agree
that, upon termination or expiration of this Agreement, you will:
(a)
Not directly or indirectly at any time or in any manner (except with respect to
other Mrs. Fields Cookie Stores owned and operated by you) identify yourself or any business as
a current or former Mrs. Fields Cookie Store, or as a franchisee, licensee or dealer of us or our
MFDD – 3/14
Exhibit B: Franchise Agreement
30
Affiliates, use any Mark, any colorable imitation of a Mark or other indicia of a Mrs. Fields
Cookie Store in any manner or for any purpose or utilize for any purpose any trade name, trade or
service mark or other commercial symbol that suggests or indicates a connection or association
with us or our Affiliates;
(b)
Deliver to us all signs, sign-faces, sign-cabinets, marketing materials, forms,
invoices and other materials containing any Mark or otherwise identifying or relating to a Mrs.
Fields Cookie Store and allow us, without liability, to remove all such items from your Store;
(c)
Take such action as may be required to cancel all fictitious or assumed name or
equivalent registrations relating to your use of any Mark;
(d)
If we do not purchase your Store as provided in Section 14.5, make the changes
to the exterior and interior appearance of your Store to distinguish the Trade Dress as are
reasonably required by us;
(e)
Deliver all materials and supplies identified by the Marks in full cases or
packages to us for credit and dispose of all other materials and supplies identified by the Marks
within 30 days after the effective date of termination of this Agreement;
(f)
Notify the telephone company and all telephone directory publishers of the
termination of your right to use any telephone and telecopy numbers and any regular, classified or
other telephone directory listings associated with any Mark and to authorize transfer of those
rights to us, or at our direction, our designee. You agree that, as between you and us, we have the
right to and interest in all telephone and telecopy numbers and directory listings associated with
any Mark. You authorize us and appoint us and any of our officers as your attorney in fact, to
direct the telephone company and all telephone directory publishers to transfer any telephone and
telecopy numbers and directory listings relating to your Store to us, or our designee, should you
fail or refuse to do so, and the telephone company and all telephone directory publishers may
accept such direction or this Agreement as conclusive of our exclusive rights in the telephone and
telecopy numbers and directory listings and our authority to direct their transfer; and
(g)
Furnish us, within 30 days after the effective date of termination, with evidence
satisfactory to us of your compliance with the obligations in this Section 14.3.
You agree that if you fail to fulfill any of the obligations contained in this Section 14.3 upon
termination or expiration of this Agreement, we have the right, at our option, to perform such
obligations at your expense.
14.4. Discontinuance of Use of Confidential Information following Termination or Expiration.
You agree that, upon termination or expiration of this Agreement, you will immediately cease to use any
Confidential Information disclosed to you pursuant to this Agreement in any business or otherwise and
you will return to us all copies of the Operations Manual and any other confidential materials which we
have loaned to you.
14.5.
[list]Our Option to Purchase Franchised Stores.
(a)
Option to Purchase. Upon termination or expiration of this Agreement other than
as a result of our default, we or our assignee will have the right, at our option, exercisable by
giving written notice thereof within 60 days from the date of such termination or expiration, to
acquire from you the inventory of Mrs. Fields Products, materials, and supplies that are in good
and saleable condition and not obsolete or discontinued (the “Inventory”) and the equipment,
furnishings, signs, and the other tangible assets of your Stores (collectively, with the Inventory,
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Exhibit B: Franchise Agreement
31
the “Assets”). We will have the right to assign this option to purchase and our rights under this
Section 14.5. We will be entitled to all customary warranties and representations in connection
with our purchase, including, without limitation, representations and warranties as to ownership,
condition of and title to the Assets, no liens and encumbrances on the Assets, and validity of
contracts and agreements and liabilities benefiting us or affecting the Assets, contingent or
otherwise.
(b)
Purchase Price. The purchase price for the Assets will be equal to the greater of:
(i)
The sum of the book value of your Store’s Assets, other than Inventory,
amortized on a straight-line basis over a 7 year period, plus the lesser of cost and the
then-current wholesale market value of the Inventory, or
(ii)
The product of your Store’s average cash flow for the 2 most recently
completed fiscal years, multiplied by 2. “Cash flow” means your Store’s Gross
Revenues less all Franchised Store-related costs (i.e., cost of goods sold, labor,
occupancy and other Franchised Store expenses) as well as annual administrative costs of
$15,000, continuing fees and marketing fees, but not including interest and depreciation.
We will have the right to set off against and reduce the purchase price by any and all amounts
owed by you to us or our Affiliates. We have the right to exclude from the Assets purchased
any equipment, furnishings, signs, and usable inventory of Mrs. Fields Products, materials, or
supplies of your Stores that we have not approved as meeting our standards for Mrs. Fields
Cookie Stores, and the purchase price will be reduced by the replacement cost of such excluded
items which are required in the operation of your Stores being purchased.
(c)
Payment of Purchase Price. The purchase price will be paid in cash at the closing
of the purchase, which will take place no later than 90 days after your receipt of our notice of
exercise of this option to purchase your Stores, at which time you will deliver instruments
transferring to us good and merchantable title to the Assets purchased, free and clear of all liens
and encumbrances and with all sales and other transfer taxes paid by you, and with all licenses or
permits of your Stores which may be assigned or transferred. If the closing of the purchase does
not occur within the 90-day period because you fail to act diligently in connection with the
purchase, the purchase price will be reduced by 10%. The purchase price will be further reduced
by 10% per month for each subsequent month you fail to act diligently to consummate the
purchase. Prior to closing, you and we will comply with the applicable Bulk Sales provisions of
the Uniform Commercial Code as enacted in the state where your Store is located.
(d)
Lease of Premises. In connection with the purchase of the Assets of a Franchised
Store, you will also deliver to us an assignment of the lease for your Store Premises (or, if
assignment is prohibited, subleases for the full remaining term and on the same terms and
conditions as your lease). If you own the Premises of your Store, you agree to lease the Premises
to us pursuant to the terms of our standard lease, for a term of 5 years with two successive 5-year
renewal options at fair market rental during the initial and renewal terms.
(e)
Interim Management. If we exercise the option to purchase your Store, pending
the closing of such purchase, we have the right to appoint a manager to maintain the operation of
your Store or, at our option, require you to close your Store during such time period without
removing any assets. If we appoint a manager to maintain the operation of your Store pending
closing of such purchase, we will have the right to manage your Store under the same terms and
conditions as described in Section 13.5.
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Exhibit B: Franchise Agreement
32
(f)
Termination of Franchise Agreement. Upon the closing of the purchase of the
Assets and satisfaction by you of all of your obligations under this Agreement accruing through
the closing, this Agreement will terminate.
14.6. Termination Fee. Upon (i) our termination of this Agreement according to its terms and
conditions, except as a result of the circumstances set forth in Section 4.2(c), or (ii) your termination of
this Agreement prior to expiration of its current term, except for termination as a result of the
circumstances set forth in Section 4.2(c) or in accordance with Section 13.1(f), you agree to pay us within
thirty (30) days after the effective date of such termination, in addition to other amounts owed to us under
Section 14.2 hereof, a termination fee equal to the present value (using the then-current 30-year Treasury
Bond rate) of the continuing fees you would have paid on the product of the Store’s average Gross
Revenues during the twelve (12) months of operation (or the total number of months of operation if less
than twelve (12)) preceding the effective date of termination, multiplied by the number of months
remaining in the current term (without giving effect to any renewal rights) of this Agreement had it not
been terminated, as compensation to us for anticipated and reasonably estimated lost profits. You will not
be required to pay this termination fee if we exercise our option and purchase the Store under Section
14.5.
14.7. Continuing Obligations. All obligations of us and you which expressly or by their nature
survive the termination or expiration of this Agreement will continue in full force and effect subsequent to
and notwithstanding termination or expiration and until they are satisfied in full or by their nature expire.
Included in the obligations that will continue following termination or expiration of this Agreement are
the provisions of Sections 6.3, 7.9, 8.2, 8.3, 10.5, 10.8, 11.2, 12.3(m), 14.1, 14.2, 14.3, 14.4, 14.5, 14.6,
14.7, 15.6, 15.7, 16.1, and the provisions of Articles 17 and 18.
ARTICLE 15
RELATIONSHIP OF THE PARTIES/INDEMNIFICATION
15.1. Independent Contractors. This Agreement does not create a fiduciary relationship
between the parties. We and you are independent contractors and nothing in this Agreement is intended
to make either party a general or special agent, joint venturer, partner or employee of the other for any
purpose. You will conspicuously identify yourself in all dealings as the owner of your Store under a
franchise granted by us and will place such other notices of independent ownership on the forms, business
cards, stationery, marketing and other materials as we have the right to require from time to time. You
acknowledge that we are in the business of franchising and licensing systems and trademarks for the
delivery of goods and services, and we are not in the same business as you are.
15.2. No Liability for the Act of Other Party. You will not employ any of the Marks in signing
any contract or applying for any license or permit or in a manner that may result in our liability for any
indebtedness or obligations of you, nor may you use the Marks in any way not expressly authorized by us.
Neither we nor you will make any express or implied agreements, warranties, guarantees or
representations or incur any debt in the name or on behalf of the other or be obligated by or have any
liability under any agreements or representations made by the other. We will not be obligated for any
damages to any person or property directly or indirectly arising out of the operation of your business
authorized by or conducted pursuant to this Agreement.
15.3. Your Control. You have the sole right and responsibility for the manner and means by
which the day-to-day operation of your Store is determined and conducted and for achieving your
business objectives. Subject to any approval, inspection and enforcement rights reserved to us, this right
and responsibility includes the employment, supervision, setting the conditions of employment and
discharge for your employees at your Store, daily maintenance, safety concerns, and the achievement of
conformity with the System Standards.
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Exhibit B: Franchise Agreement
33
15.4. Our Approval and Enforcement. Our retention and exercise of the right to approve
certain matters, to inspect your Store and its operation and to enforce our rights, exists only to the extent
necessary to protect our interest in the Mrs. Fields System and the Marks for the benefit of us and the
Mrs. Fields System. Neither the retention nor the exercise is for the purpose of establishing any control,
or the duty to take control, over those matters which are clearly reserved to you, nor shall they be
construed to do so.
15.5. Taxes. We will have no liability for any sales, use, service, occupation, excise, gross
receipts, income, property or other taxes, whether levied upon you or your assets or upon us, arising in
connection with your sales or the business conducted by you pursuant to this Agreement, except for taxes
that we are required by law to collect from you with respect to purchases from us and except for our own
income taxes. Payment of all such taxes will be your responsibility.
15.6. Indemnification. You agree to indemnify, defend and hold harmless us, our parent
company, subsidiaries and Affiliates and each of our and their respective shareholders, directors, officers,
employees, agents, successors and assigns (the “Indemnified Parties”) against and to reimburse the
Indemnified Parties for any claims, liabilities, lawsuits, demands, actions, damages and expenses arising
from or out of (a) any breach of your agreements, covenants, representations, or warranties contained in
this Agreement, (b) any damages or injury to any person, including, but not limited to, your employees,
our employees and agents, your customers, and members of the public, suffered or incurred on or about
any Franchised Store owned or operated by you, (c) product liabilities claims or defective manufacturing
of Mrs. Fields Products by you, or (d) the activities under this Agreement of you or any of your officers,
owners, directors, employees, agents or contractors. For purposes of this indemnification, claims will
mean and include all obligations, actual, consequential, and incidental damages and costs reasonably
incurred in the defense of any claim against the Indemnified Parties, including reasonable accountants’,
arbitrators’, attorneys’ and expert witness fees, costs of investigation and proof of facts, court costs, other
litigation expenses and travel and living expenses. We will have the right to defend any such claim
against us. This indemnity will continue in full force and effect subsequent to and notwithstanding the
termination of this Agreement.
15.7. Waiver of Claims. You agree to waive all claims against us for damages to property or
injuries to persons arising out of the operation of your Store.
ARTICLE 16
SECURITY AGREEMENT
16.1. Security Interest. In order to secure full and prompt payment of the fees and other
charges to be paid by you to us, and to secure performance of your other obligations and covenants under
this Agreement, you hereby grant us a security interest in, lien upon, and right of set off against all of
your interest in the improvements, fixtures, inventory, goods, appliances and equipment now or hereafter
owned and located at your Store (whether annexed to the Premises or not) or used in connection with the
business conducted at the Premises, including all raw materials, work in process and finished goods, and
all replacements thereof, attachments, additions, and accessions thereto, and products and proceeds
thereof in any form, including but not limited to insurance proceeds and any claims against third parties
for loss or damage to or destruction of any or all of the foregoing (collectively, the “Collateral”).
16.2. Requirements. Without our prior written consent, you agree that no lien upon or security
interest in the Collateral or any item thereof will be created or suffered to be created and that no lease will
be entered into with respect to any item of Collateral. Without our prior written consent, you will not sell
or otherwise dispose of any item of Collateral, or remove any Collateral from the Premises, unless the
same is replaced by a similar item of equal or greater value, and except for the sales of inventory in the
ordinary course of business. You agree to give to us advance notice in writing of any proposed change in
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Exhibit B: Franchise Agreement
34
your name, identity, or structure and not to make any change without our prior written consent and
compliance with the provisions of this Agreement, including Article 12. You agree to execute for filing
the financing statements and continuation statements as we have the right to require from time to time.
You agree to pay all filing fees, including fees for filing continuation statements in connection with the
financing statements, and to reimburse us for all costs and expenses of any kind incurred in connection
therewith. If you default under this Agreement, we will have all the remedies and rights available as a
“secured party” with respect to the Collateral under the Uniform Commercial Code as in effect from time
to time in the state where the Premises are located. The grant of the security interest by you pursuant to
Section 16.1 will not be construed to derogate from or impair any other rights which we may have under
this Agreement or otherwise at law or equity. The provisions of this Section 16.2 shall survive the
termination of this Agreement.
ARTICLE 17
DISPUTE RESOLUTION
17.1. Injunctive Relief. Nothing in this Agreement will prohibit us or you from exercising the
right in a proper case to obtain specific performance, eviction from the Premises, temporary restraining
orders and temporary or preliminary injunctive relief from a court of competent jurisdiction. You agree
that we may have temporary or preliminary injunctive relief without bond, but upon due notice, and your
sole remedy in the event of the entry of such injunctive relief will be the dissolution of the injunctive
relief, if warranted, upon hearing duly had (all claims for damages by reason of the wrongful issuance of
any the injunction being expressly waived.
17.2. Rights of Parties Are Cumulative. Our and your rights under this Agreement are
cumulative and the exercise or enforcement of any right or remedy under this Agreement will not
preclude the exercise or enforcement by a party of any other right or remedy under this Agreement which
it is entitled by law or this Agreement to exercise or enforce.
17.3. Costs and Attorneys’ Fees. If we or you are required to enforce this Agreement in any
proceeding, the party prevailing in such proceeding will be entitled to reimbursement of its costs and
expenses, including reasonable court costs, accounting and legal fees, whether incurred prior to, in
preparation for or in contemplation of the filing of any written demand, claim, action, hearing or
proceeding to enforce the obligations of this Agreement. If we incur expenses in connection with your
failure to pay when due amounts owing to us, to submit when due any reports, information or supporting
records or otherwise to comply with this Agreement, including, but not limited to court costs, legal and
accounting fees, you will reimburse us for any such costs and expenses which we incur.
17.4. Governing Law. EXCEPT TO THE EXTENT GOVERNED BY THE UNITED
STATES TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR
OTHER FEDERAL LAW, THIS AGREEMENT AND THE RELATIONSHIP BETWEEN YOU AND
US WILL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO, EXCEPT THAT ANY
STATE LAW RELATING TO (1) THE OFFER AND SALE OF FRANCHISES (2) FRANCHISE
RELATIONSHIPS, OR (3) BUSINESS OPPORTUNITIES, WILL NOT APPLY UNLESS THE
APPLICABLE JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT
REFERENCE TO THIS PARAGRAPH.
17.5. Consent to Jurisdiction. WE MAY INSTITUTE ANY ACTION AGAINST YOU IN
ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF
COLORADO, AND YOU IRREVOCABLY SUBMIT TO THE JURISDICTION OF SUCH COURTS
AND WAIVE ANY OBJECTION YOU MAY HAVE TO EITHER THE JURISDICTION OF OR
VENUE IN SUCH COURTS.
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Exhibit B: Franchise Agreement
35
17.6. Waiver of Punitive Damages and Jury Trial. BOTH PARTIES AGREE THAT
NEITHER SHALL BE ENTITLED TO NOR SHALL EITHER DEMAND A JURY TRIAL IN
THE EVENT OF LITIGATION, AND EACH WAIVE THEIR RIGHT TO A TRIAL BY JURY.
The parties acknowledge that their 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. You and we further acknowledge the receipt and sufficiency of
mutual consideration for such benefit. Except as specifically provided in this Agreement, neither you nor
we are entitled to any compensation or reimbursement for loss of prospective profits, anticipated sales, or
other losses occasioned by cancellation or termination of this Agreement. You and we each
EXPRESSLY WAIVE ANY CLAIM FOR PUNITIVE, MULTIPLE, AND/OR EXEMPLARY
DAMAGES, except that we shall be free at any time hereunder to bring an action for willful
trademark infringement and, if successful, to receive an award of multiple damages as provided by
law. You and we each EXPRESSLY AGREE THAT NO PARTY BOUND HEREBY MAY
RECOVER DAMAGES FOR ECONOMIC LOSS ATTRIBUTABLE TO NEGLIGENT ACTS OR
OMISSIONS EXCEPT FOR CONDUCT WHICH IS DETERMINED TO CONSTITUTE GROSS
NEGLIGENCE OR AN INTENTIONAL WRONG. BY INITIALING HERE:
_________ [FRANCHISEE TO INITIAL HERE]
YOU ACKNOWLEDGE AND AGREE THAT YOU HAVE READ THIS SECTION, UNDERSTAND ITS
PROVISIONS, and that we have accorded you ample time and opportunity to consult with financial and legal
advisors of your own choosing about the effect of these provisions on your rights under this Agreement.
17.7. Limitation of Claims. Any and all claims arising out of or relating to this Agreement or
the relationship among the parties to this Agreement will be barred unless an action or proceeding is
commenced within one year from the date you or we knew or should have known of the facts giving rise
to such claim.
ARTICLE 18
GENERAL PROVISIONS
18.1. Severability. Each article, section, paragraph, term and provision of this Agreement will
be considered severable and if, for any reason, any provision of this Agreement is held to be invalid,
contrary to or in conflict with any applicable present or future law or regulation in a final, unappealable
ruling issued by any court, agency or tribunal with competent jurisdiction in a proceeding to which we are
a party, that ruling will not impair the operation of, or have any other effect upon, such other portions of
this Agreement as may remain otherwise intelligible, and such other portions will continue to be given
full force and effect and bind the parties, although any portion held to be invalid will be deemed not to be
a part of this Agreement from the date the time for appeal expires, if you are a party thereto, otherwise
upon your receipt of a notice of non-enforcement thereof from us.
18.2. Rights Provided by Law. If any applicable and binding law or rule of any jurisdiction
requires a greater prior notice of the termination or non-renewal of this Agreement than is required under
this Agreement, or the taking of some other action not required under this Agreement, or if, under any
applicable and binding law or rule of any jurisdiction, any provision of this Agreement is invalid or
unenforceable, the prior notice and/or other action required by such law or rule will be substituted for the
comparable provisions of this Agreement, and we will have the right to modify the invalid or
unenforceable provision to the extent required to be valid and enforceable. You agree to be bound by any
promise or covenant imposing the maximum duty permitted by law which is subsumed within the terms
of any provision of this Agreement, as though it were separately articulated in and made a part of this
Agreement, that may result from striking from any of the provisions of this Agreement any portion or
portions which a court may hold to be unenforceable in a final decision to which we are a party, or from
MFDD – 3/14
Exhibit B: Franchise Agreement
36
reducing the scope of any promise or covenant to the extent required to comply with such a court order.
Such modifications to this Agreement will be effective only in such jurisdiction, unless we elect to give
them greater applicability, and will be enforced as originally made and entered into in all other
jurisdictions.
18.3. Waivers by Either of Us. Either we or you may by written instrument unilaterally waive
or reduce any obligation of or restriction upon the other under this Agreement, effective upon delivery of
written notice of waiver to the other or such other effective date stated in the notice of waiver. Any
waiver granted by us will be without prejudice to any other rights we may have, will be subject to our
continuing review and may be revoked by us at any time and for any reason, effective upon delivery to
you of 10 days’ prior written notice.
18.4. Certain Acts Not to Constitute Waivers. Neither we nor you will be deemed to have
waived or impaired any right, power or option reserved by this Agreement (including, without limitation,
the right to demand exact compliance with every term, condition and covenant in this Agreement or to
declare any breach to be a default and to terminate this Agreement prior to the expiration of its term) by
virtue of (i) any custom or practice of the parties at variance with the terms of this Agreement; (ii) any
failure, refusal or neglect of us or you to exercise any right under this Agreement or to insist upon exact
compliance by the other with its obligations under this Agreement, including any waiver, forbearance,
delay, failure or omission by us to exercise any right, power or option, whether of the same, similar or
different nature, with respect to other Mrs. Fields Cookie Stores or franchise agreements; or (iii) our
acceptance of any payments due from you after any breach of this Agreement.
18.5. Excusable Non-Performance. Neither we nor you will be liable for loss or damage or
deemed to be in breach of this Agreement if the failure to perform obligations results from transportation
shortages; inadequate supplies of equipment, merchandise, supplies, labor, material or energy or the
voluntary suspension of the right to acquire or use any of those items in order to accommodate or comply
with the orders, requests, regulations, recommendations or instructions of any federal, state or municipal
government or any governmental department or agency; compliance with any law, ruling, order,
regulation, requirement or instruction of any federal, state or municipal government or any governmental
department or agency; acts of God; fires, strikes, embargoes, war or riot; or any other similar event or
cause beyond the reasonable control of the party. Any delay resulting from any of those causes will
extend performance accordingly or excuse performance, in whole or in part, as may be reasonable.
18.6. Interpretation of Rights and Obligations. The following provisions will apply to and
govern the interpretation of this Agreement, the parties’ rights under this Agreement, and the relationship
between the parties:
(a)
Our Rights. Whenever this Agreement provides that we have a certain right, that
right is absolute and the parties intend that our exercise of that right will not be subject to any
limitation or review. We have the right to operate, administrate, develop, and change the Mrs.
Fields System in any manner that is not specifically precluded by the provisions of this
Agreement.
(b)
Our Reasonable Business Judgment. Whenever we reserve or are deemed to
have reserved discretion in a particular area or where we agree or are deemed to be required to
exercise our rights reasonably or in good faith, we will satisfy our obligations whenever we
exercise Reasonable Business Judgment in making our decision or exercising our rights. A
decision or action by us will be deemed to be the result of Reasonable Business Judgment, even if
other reasonable or even arguably preferable alternatives are available, if our decision or action is
intended, in whole or significant part, to promote or benefit the Mrs. Fields system generally even
if the decision or action also promotes a financial or other individual interest of us. Examples of
items that will promote or benefit the Mrs. Fields system include, without limitation, enhancing
MFDD – 3/14
Exhibit B: Franchise Agreement
37
the value of the Marks, improving customer service and satisfaction, improving product quality,
improving uniformity, enhancing or encouraging modernization, and improving the competitive
position of the Mrs. Fields system. Neither you nor any third party (including, without limitation,
a trier of fact), shall substitute its judgment for our Reasonable Business Judgment.
18.7. Notice of Potential Profit to Us. We hereby advise you that we and/or our Affiliates have
the right from time to time to make available to you goods, products and/or services for use in your Store on
the sale of which we and/or our Affiliates may make a profit. We further advise you that we and/or our
Affiliates have the right from time to time to receive consideration from suppliers, distributors and/or
manufacturers related (directly or indirectly) to sales of goods, products or services to you, the promotion of
goods, products or services by the Mrs. Fields System or in consideration of services rendered or rights
licensed to such persons. You agree that we and/or our Affiliates shall be entitled to said profits and/or
consideration.
18.8. Binding Effect. Subject to the restrictions on Transfers contained in this Agreement, this
Agreement is binding upon the parties hereto and their respective executors, administrators, heirs, assigns
and successors in interest and will not be modified except by written agreement signed by both you and
us.
18.9. No Third Party Beneficiaries. Nothing in this Agreement is intended, nor will be
deemed, to confer any rights or remedies upon any person or legal entity not a party to this Agreement.
18.10. Approvals. Except where this Agreement expressly obligates us reasonably to approve or
not unreasonably to withhold our approval of any action or request by you, we have the right to refuse any
request by you or to withhold our approval of any action by you that requires our approval.
18.11. Headings. The headings of the several sections and paragraphs of this Agreement are for
convenience only and do not define, limit or construe the contents of such sections or paragraphs.
18.12. Joint and Several Liability. If you consist of 2 or more persons or Entities, whether or
not as partners, joint venturers, or co-owners, the obligations and liabilities of each person and Entity to
us are joint and several.
18.13. Counterparts. This Agreement may be executed in multiple copies, each of which will be
deemed an original.
18.14. Notices and Payments. All written notices and reports permitted or required to be
delivered by the provisions of this Agreement will be deemed so delivered at the time delivered by hand;
1 business day after transmission by telegraph, facsimile, or other electronic system; 1 business day after
being placed in the hands of a commercial courier service for next business day delivery; or 3 business
days after placement in the United States Mail by registered or certified mail, return receipt requested,
postage prepaid, and will be addressed to the parties at the addresses set forth on the first page of this
Agreement or to such other address as a party may specify in a written notice to the other party. Any
required payment or report not actually received by us during regular business hours on the date due (or
postmarked by postal authorities at least 2 days prior thereto) will be deemed delinquent.
18.15. Entire Agreement. The Preambles and any exhibits, addenda and appendices attached
hereto are a part of this Agreement. This Agreement constitutes the entire agreement of the parties except
as provided below in this Section 18.15, and there are no other oral or written understandings or
agreements between us and you relating to the subject matter of this Agreement, except that you
acknowledge that we justifiably have relied on your representations made prior to the execution of this
Agreement.
Nothing in this or in any related agreement, however is intended to disclaim the
representations we made in the franchise disclosure document that we furnished to you.
MFDD – 3/14
Exhibit B: Franchise Agreement
38
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the day
and year first above written. This Agreement is not valid until signed by our authorized officer.
MRS. FIELDS FRANCHISING, LLC,
a Delaware limited liability company
a
By:
By:
Title:
Title:
MFDD – 3/14
Exhibit B: Franchise Agreement
,
39
ACKNOWLEDGEMENT ADDENDUM TO
MRS. FIELDS® FRANCHISE AGREEMENT.
Acknowledgments and Representations.
1.
You acknowledge and represent that you have read this Agreement and our disclosure
document and understand and accept the provisions of this Agreement as being reasonably necessary to
maintain our high standards of quality and service and the uniformity of those standards at all Mrs. Fields
Cookie Stores franchised by us and to protect and preserve the goodwill of the Marks.
2.
You acknowledge that you have conducted an independent investigation of the business
venture contemplated by this Agreement and you recognize that, like any other business, the nature of the
business contemplated by this Agreement may change over time, that an investment in a Mrs. Fields
Cookie Store involves business risks, and that the success of the venture is largely dependent upon your
business abilities and efforts.
3.
You acknowledge and understand that any information relating to the sales, profits or
cash flows of Mrs. Fields Cookie Stores operated by us or our Affiliates, or our franchisees that may be
contained in our disclosure document and other materials is intended only to be an indication of historical
performance of certain Mrs. Fields Cookie Stores and NOT of potential future financial performance.
4.
Except for any financial performance information that may be included in our disclosure
document, we expressly disclaim the making of, and you acknowledge that you have not received or
relied on, any express or implied warranty or guarantee as to the revenues, profits or success of the
business venture contemplated by this Agreement.
5.
You acknowledge and understand that our officers, directors, employees and agents are
acting only in a representative and not a personal capacity in their dealings with you. You also
acknowledge and represent that you have not received or relied on any representations about us or our
franchise program or policies from us or our officers, directors, employees or agents that are contrary to
the statements made in our disclosure document or to the terms of this Agreement.
6.
You acknowledge and understand that the franchise granted under this Agreement is
limited to the right to operate one Mrs. Fields Cookie Store at the Premises, and does not include an
exclusive area or protected territory within which we or our Affiliates agree not to issue franchises or
operate competing businesses. Further, you acknowledge and understand that we and our Affiliates have
the right to establish competing franchises, licenses or businesses owned by us or our Affiliates, including
Mrs. Fields Retail Outlets, at any locations we deem appropriate, including locations near the Premises,
and distribute Mrs. Fields Products and other competitive products and services through alternative
channels of distribution, all consistent with the terms of Section 2.2 of this Agreement.
7.
You represent to us, as an inducement to your entry into this Agreement, that you satisfy
all requirements to qualify as a franchisee that may be set forth in our disclosure document, and that all
statements in your application for the rights granted in this Agreement are accurate and complete and that
you have made no misrepresentations or material omissions in obtaining these rights.
8.
You acknowledge that you received a copy of our disclosure document, as required under
federal and applicable state franchise disclosure law, at least fourteen (14) calendar days before signing
this Agreement or any other binding agreement, or paying any fees to us or our Affiliates. In addition, if
we materially altered the provisions of this Agreement, including any attachments relating thereto, or any
related agreements attached to our disclosure document (except as a result of negotiations you initiated),
MFDD – 3/14
Exhibit B: Franchise Agreement
40
you acknowledge that you received a copy of this Agreement or the related agreement at least seven (7)
calendar days before signing it.
a
By:
Title:
Date Signed:
*All representations requiring prospective franchisee to assent to a release, estoppel or waiver of liability
are not intended to nor shall they act as a release, estoppel or waiver of any liability incurred under the
Maryland Franchise Registration and Disclosure Law.
MFDD – 3/14
Exhibit B: Franchise Agreement
41
OWNERSHIP ADDENDUM TO MRS. FIELDS®
FRANCHISE AGREEMENT
1.
Entity Owners. You represent and warrant to us that your Entity Owners are as follows:
NAME
ADDRESS
PERCENTAGE
OF INTEREST
____________________________
____________________________
______________
____________________________
____________________________
______________
____________________________
____________________________
______________
____________________________
____________________________
______________
____________________________
____________________________
______________
____________________________
____________________________
______________
____________________________
____________________________
______________
____________________________
____________________________
______________
____________________________
____________________________
______________
2.
Change. You agree to immediately notify us in writing of any change in the information
contained in this Addendum and, at our request, prepare and sign a new Addendum containing the correct
information.
3.
Date of Addendum. The date of this Addendum is _______________, 20__.
Your Initials
MFDD – 3/14
Exhibit B: Franchise Agreement
Our Initials
42
GUARANTY
In consideration of, and as an inducement to, the execution by MRS. FIELDS FRANCHISING,
LLC (“Franchisor”) of the foregoing Mrs. Fields® Franchise Agreement (the “Franchise Agreement”)
with __________________________________________ (“Franchisee”) dated _________, 20___, and
for other good and valuable consideration, each of the undersigned for themselves, their heirs, legal
representatives, successors and assigns (collectively the “Guarantors”) do hereby unconditionally,
individually, jointly and severally guarantee to Franchisor, and to its successors and assigns, the full,
complete and timely payment and performance of each and all of the terms, covenants and conditions of
the Franchise Agreement (and any modification or amendment to the Franchise Agreement) to be kept
and performed by Franchisee during the term of the Franchise Agreement, including without limitation
the payment of all continuing license fees, marketing fees and all other fees and charges accruing
pursuant to the Franchise Agreement.
Each of the Guarantors further agrees as follows:
1.
The Guarantors, individually, jointly and severally, shall be personally bound by each and
every condition and term contained in the Franchise Agreement as though each of the Guarantors had
executed a franchise agreement containing the identical terms and conditions of the Franchise Agreement,
including without limitation the provisions of Section 10.8 and Article 11 relating to Confidential Information
and covenants not to compete. This Guaranty shall continue in favor of Franchisor notwithstanding any
extension, modification, or alteration of the Franchise Agreement, and notwithstanding any assignment of
the Franchise Agreement, with or without the Franchisor’s consent. No extension, modification,
alteration or assignment of the Franchise Agreement shall in any manner release or discharge the
Guarantors, and each of the Guarantors consents to any such extension, modification, alteration or
assignment.
2.
This Guaranty will continue unchanged by the occurrence of any Insolvency Event, as
defined in the Franchise Agreement, with respect to Franchisee or any assignee or successor of Franchisee
or by any disaffirmance or abandonment of the Franchise Agreement by a trustee in bankruptcy of
Franchisee. Each Guarantor’s obligation to make payment or render performance in accordance with the
terms of this Guaranty and any remedy for the enforcement of this Guaranty will not be impaired,
modified, changed, released or limited in any manner whatsoever by any impairment, modification,
change, release or limitation of the liability of Franchisee or its estate in bankruptcy or of any remedy for
the enforcement thereof, resulting from the operation of any present or future provision of the U.S.
Bankruptcy Act or other statute, or from the decision of any court or agency.
3.
Each Guarantor’s liability under this Guaranty is primary and independent of the liability
of Franchisee and any other Guarantors. Each Guarantor waives any right to require Franchisor to
proceed against any other person or to proceed against or exhaust any security held by Franchisor at any
time or to pursue any right of action accruing to Franchisor under the Franchise Agreement. Franchisor
may proceed against each Guarantor and Franchisee, jointly and severally or may, at its option, proceed
against each Guarantor without having commenced any action, or having obtained any judgment, against
Franchisee or any other Guarantor. Each Guarantor waives the defense of the statute of limitations in any
action under this Guaranty or for the collection of any indebtedness or the performance of any obligation
guaranteed pursuant to this Guaranty.
4.
The Guarantors unconditionally, individually, jointly and severally agree to pay all
attorneys’ fees and all costs and other expenses incurred in any collection or attempted collection of this
Guaranty or in any negotiations relative to the obligations guaranteed or in enforcing this Guaranty
against Franchisee.
MFDD – 3/14
Exhibit B: Franchise Agreement
43
5.
Each Guarantor waives notice of any demand by Franchisor, any notice of default in the
payment of any amounts contained or reserved in the Franchise Agreement, or any other notice of default
under the Franchise Agreement. Each Guarantor expressly agrees that the validity of this Guaranty and
its obligations shall in no way be terminated, affected or impaired by reason of any waiver by Franchisor,
or its successors or assigns, or the failure of Franchisor to enforce any of the terms, covenants or
conditions of the Franchise Agreement or this Guaranty, or the granting of any indulgence or extension of
time to Franchisee, all of which may be given or done without notice to the Guarantors.
6.
This Guaranty shall extend, in full force and effect, to any assignee or successor of
Franchisor and shall be binding upon the Guarantors and each of their respective successors and assigns.
7.
Until all obligations of Franchisee to Franchisor have been paid or satisfied in full, the
Guarantors have no remedy or right of subrogation and each Guarantor waives any right to enforce any
remedy which Franchisor has or may in the future have against Franchisee and any benefit of, and any
right to participate in, and security now or in the future held by Franchisor.
8.
All existing and future indebtedness of Franchisee to each Guarantor is hereby
subordinated to all indebtedness and other obligations guaranteed in this Guaranty and, without the prior
written consent of Franchisor, shall not be paid in whole or in part, nor will any Guarantor accept any
payment of or on account of any such indebtedness while this Guaranty is in effect.
9.
This Guaranty shall be construed in accordance with the laws of the State of Colorado,
without giving effect to its conflict of laws principles.
GUARANTOR(S)
STATE OF
COUNTY OF
)
) ss.
)
The foregoing instrument was acknowledged before me this _____ day of ____________, 20___
by ______________________________________________.
My Commission Expires:
NOTARY PUBLIC
______________________
Residing at
MFDD – 3/14
Exhibit B: Franchise Agreement
44
APPENDIX A
TO MRS. FIELDS® FRANCHISE AGREEMENT
STORE PREMISES; START DATE
If at the time of signing this Agreement you have obtained our approval of and secured the Premises for
your Store, the Premises for your Store and your applicable Start Date are identified below. However, if
at the time of signing this Agreement you have not obtained our approval of and secured the Premises for
your Store, we and you will sign an Alternative Appendix A identifying the Premises of your Store and
your applicable Start Date, assuming you obtain our approval of and secure the Premises for your Store
within the applicable 6-month period described in Section 2.1(a) of this Agreement.
1.
Premises. You and we agree that your Store will be located at and only at the following
Premises:
2.
Start Date. You and we agree that the following is the Start Date described in Section 4.5
of the Franchise Agreement:
MFDD – 3/14
Exhibit B: Franchise Agreement
45
ALTERNATIVE APPENDIX A
TO MRS. FIELDS® FRANCHISE AGREEMENT
STORE PREMISES; START DATE
This Exhibit, with a date of _______________, 20__, is attached to and is an integral part of the
Mrs. Fields® Franchise Agreement between you and us with a date of _______________, 20__ (the
“Franchise Agreement”).
1.
Premises. You and we agree that your Store will be located at and only at the following
Premises:
2.
Start Date. You and we agree that the following is the Start Date described in Section 4.5
of the Franchise Agreement:
3.
Defined Terms. All capitalized terms contained in this Exhibit and not defined in this
Exhibit will have the same meaning as provided in the Franchise Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this Exhibit on the day and
year first written above.
MRS. FIELDS FRANCHISING, LLC
_____________________________________
By: _________________________________
By: _________________________________
Title: _______________________________
Title: ________________________________
MFDD – 3/14
Exhibit B: Franchise Agreement
46
APPENDIX B
TO MRS. FIELDS® FRANCHISE AGREEMENT
AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS
(DIRECT DEBITS)
[Important Instructions for Completing this Form: Before we can process your Franchise Agreement, you
must sign and return this authorization. If, at the time you sign your Franchise Agreement, you do not have
your account set up, or if you do not yet know your account information, please show that you agree to the
terms of this authorization by signing this form, leaving the account information blank, and returning the
signed form with your Franchise Agreement. You can give us your account information when you receive it,
but we must have the information before you open your store. If you have any questions about what this
form means, you should get advice from your lawyer, your accountant or your bank.]
Your Name (or name of legal entity on Franchise Agreement):
_______
Your Social Security Number (or legal entity Federal Tax ID Number):
Name on Bank Account (if different than above):
The undersigned (“ACCOUNT HOLDER”) hereby authorizes Mrs. Fields Franchising, LLC (“COMPANY”) to
initiate debit entries and/or credit correction entries to ACCOUNT HOLDER’s checking and/or savings account(s)
listed below at the bank, credit union or other depository listed below (“BANK”) and to debit such account per
COMPANY’s instructions for any and all amounts due to COMPANY. The ACCOUNT HOLDER understands that
all amounts debited from the account below will be credited to COMPANY’s account. INSTEAD OF
COMPLETING THE INFORMATION REQUIRED ON THE FOLLOWING FOUR LINES, YOU MAY
ATTACH A CANCELLED OR VOIDED CHECK TO THIS AUTHORIZATION, BECAUSE A VOIDED
CHECK INCLUDES ALL OF THIS INFORMATION.
NAME OF BANK
Branch
City
State
Telephone Number of Bank
Contact Person at Bank
Bank Transit/ABA Number
Account Number
Zip Code
This authority is to remain in effect until BANK has received joint written notice from COMPANY and
ACCOUNT HOLDER of the ACCOUNT HOLDER’s termination. Any termination notice must be given in a way
as to give BANK a reasonable opportunity to act on it. If a debit entry is initiated to ACCOUNT HOLDER’s
account in error, ACCOUNT HOLDER shall have the right to have the amount of the error credited to the account
by BANK, if (a) within fifteen (15) calendar days following the date on which BANK sent to ACCOUNT HOLDER
a statement of account or a written notice regarding such entry or (b) forty-five (45) days after posting, whichever
occurs first, ACCOUNT HOLDER shall have sent to BANK a written notice identifying such entry, stating that
such entry was in error and requesting BANK to credit the amount thereof to such account. These rights are in
addition to any rights ACCOUNT HOLDER may have under federal and state banking laws.
ACCOUNT HOLDER
By:
Title:
Date:
MFDD – 3/14
Exhibit B: Franchise Agreement
47
EXHIBIT C
AREA DIRECTOR DISCLOSURE ADDENDUM TO
FRANCHISE DISCLOSURE DOCUMENT
MFDD – 03/14
Exhibit C: Area Director Disclosure
As of December 28, 2013
Area Director – State of Washington and the Island of Oahu in the State of Hawaii – Green Bowl
Time, Inc.
Owner, Director, CEO and President: Hyoungsoo Kim
Green Bowl Time, Inc., owned by Mr. Hyoungsoo Kim, is the Area Director for us and our
Affiliate, TCBY, for the entire State of Washington and the Island of Oahu in the State of
Hawaii. Green Bowl Time, Inc. is a Washington corporation organized in May 2009. Mr. Kim
has been the owner, Director, CEO and President of Green Bowl Time, Inc. since May 2009. He
has been the President of Cell Towns Business Group, a Washington corporation, since at least
January 2006. An affiliate of Green Bowl Time, Inc., is a franchisee of the Mrs. Fields and
TCBY franchise systems and is currently developing Mrs. Fields and TCBY Stores in
Washington State.
Contact Information: Green Bowl Time, Inc., Attn: Hyoungsoo Kim, 1000 2nd Avenue, Suite
1320, Seattle, Washington 98104, Telephone (206) 774-3800.
Based on the information provided to us by this Area Director, which we have not independently
verified, there are no disclosures that need to be made about this Area Director consistent with
the requirements of Items 3 and 4 of this disclosure document.
This Area Director is not our Affiliate.
MFDD – 03/14
Exhibit C: Area Director Disclosure
1
EXHIBIT D
AREA DIRECTOR AGREEMENT
MFDD – 03/14
Exhibit D: Area Director Agreement
MRS. FIELDS FRANCHISING, LLC,
as “FRANCHISOR”
AREA DIRECTOR AGREEMENT
AREA DIRECTOR
TERRITORY (as further defined in Appendix A)
MFDD – 03/14
Exhibit D: Area Director Agreement
1
TABLE OF CONTENTS
Section
1.
2.
Page
BACKGROUND AND PURPOSE..................................................................................... 1
DEFINITIONS .................................................................................................................... 1
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
2.12
2.13
2.14
2.15
2.16
2.17
Affiliate .................................................................................................................................................... 1
Applicable Laws ....................................................................................................................................... 1
Bound Parties ........................................................................................................................................... 2
Business Entity ......................................................................................................................................... 2
Company-Owned Stores........................................................................................................................... 2
Controlling Interest .................................................................................................................................. 2
Development Period ................................................................................................................................. 2
Excluded Location.................................................................................................................................... 2
Existing Stores.......................................................................................................................................... 2
Franchise Agreement ................................................................................................................................ 2
Franchisee ................................................................................................................................................ 2
Manuals .................................................................................................................................................... 2
Other Concepts Store ............................................................................................................................... 2
Primary Owner ......................................................................................................................................... 2
Proprietary Products ................................................................................................................................. 3
Territory ................................................................................................................................................... 3
Territory Franchisee ................................................................................................................................. 3
3.1
3.2
3.3
3.4
Appointment of Area Director/Scope of Operations ................................................................................ 3
Duty to Operate Stores ............................................................................................................................. 3
Rights and Limitations to Territory .......................................................................................................... 3
Reservation of Rights to Franchisor ......................................................................................................... 3
4.1
4.2
4.3
4.4
Development Quota.................................................................................................................................. 4
Franchise Registration and Disclosure ..................................................................................................... 4
Advertising, Recruiting, and Screening.................................................................................................... 5
Franchisor’s Approval of Prospective Franchisees .................................................................................. 5
5.1
Initial Territory Fee .................................................................................................................................. 5
6.1
6.2
6.3
6.4
6.5
6.6
6.7
6.8
6.9
Sales Commissions and Conditions of Payment ...................................................................................... 5
Sales Commission Payments .................................................................................................................... 6
Commissions on Transfers of Franchises ................................................................................................. 6
Royalty Fees ............................................................................................................................................. 6
Internet/Catalog Sales Program ................................................................................................................ 6
Commissions After Termination .............................................................................................................. 6
Application of Payments .......................................................................................................................... 6
Setoffs ...................................................................................................................................................... 7
Payment Verification................................................................................................................................ 7
7.1
7.2
7.3
7.4
Area Director Training ............................................................................................................................. 7
Length of Training ................................................................................................................................... 7
Additional Training .................................................................................................................................. 7
Seminars and Ongoing Training ............................................................................................................... 7
8.1
8.2
Manuals .................................................................................................................................................... 7
Operating Assistance ................................................................................................................................ 8
9.1
9.2
Hiring and Training of Employees of Area Director ................................................................................ 8
Commencement of AD Business.............................................................................................................. 8
3.
SCOPE OF APPOINTMENT ............................................................................................. 3
4.
FRANCHISE SALES PROCEDURES ............................................................................... 4
5.
PAYMENTS TO FRANCHISOR ....................................................................................... 5
6.
PAYMENTS TO AREA DIRECTOR ................................................................................ 5
7.
TRAINING ASSISTANCE ................................................................................................ 7
8.
FRANCHISOR’S OPERATING ASSISTANCE ............................................................... 7
9.
AREA DIRECTOR’S OBLIGATIONS .............................................................................. 8
MFDD – 03/14
Exhibit D: Area Director Agreement
2
9.3
9.4
9.5
9.6
9.7
9.8
10.
10.1
10.2
10.3
10.4
11.
11.1
11.2
12.
12.1
13.
13.1
13.2
13.3
13.4
13.5
13.6
13.7
13.8
13.9
13.10
13.11
13.12
14.
14.1
15.
15.1
15.2
15.3
15.4
15.5
15.6
15.7
16.
16.1
16.2
16.3
16.4
16.5
16.5
17.
17.1
17.2
17.3
17.4
17.5
17.6
17.7
17.8
Sales Services ........................................................................................................................................... 8
Site Services ............................................................................................................................................. 8
Pre-Opening and Opening Support Services ............................................................................................ 9
Ongoing Support Services ........................................................................................................................ 9
Dealings with Franchisees ........................................................................................................................ 9
Area Director’s Inspections ...................................................................................................................... 9
MARKS ............................................................................................................................. 10
Ownership and Goodwill of Marks ........................................................................................................ 10
Limitations on Use ................................................................................................................................. 10
Discontinuance of Use of Marks ............................................................................................................ 10
Notification of Infringements and Claims .............................................................................................. 10
CONFIDENTIAL INFORMATION ................................................................................. 10
Confidential Information ........................................................................................................................ 10
Nondisclosure and Noncompetition Agreement ..................................................................................... 11
EXCLUSIVE RELATIONSHIP ....................................................................................... 11
Exclusive Relationship ........................................................................................................................... 11
OPERATING STANDARDS ........................................................................................... 11
Standards of Service ............................................................................................................................... 11
Compliance with Laws and Good Business Practices ............................................................................ 11
Accuracy of Information ........................................................................................................................ 12
Notification of Litigation........................................................................................................................ 12
Ownership and Management of AD Business ........................................................................................ 12
Conflicting Interests ............................................................................................................................... 12
Insurance ................................................................................................................................................ 12
Proof of Insurance Coverage .................................................................................................................. 12
Advertising in Territory.......................................................................................................................... 12
Approval of Advertising ......................................................................................................................... 12
Accounting, Bookkeeping and Records ................................................................................................. 13
Reports ................................................................................................................................................... 13
INSPECTIONS AND AUDITS ........................................................................................ 13
Inspections and Audits ........................................................................................................................... 13
TRANSFERS .................................................................................................................... 13
Transfers by Franchisor .......................................................................................................................... 13
Transfers by Area Director ..................................................................................................................... 13
Conditions for Approval of Transfer ...................................................................................................... 14
Transfer to an Entity ............................................................................................................................... 14
Franchisor’s Approval of Transfer ......................................................................................................... 14
Death or Disability of Area Director ...................................................................................................... 15
Right of First Refusal ............................................................................................................................. 15
TERM AND EXPIRATION ............................................................................................. 15
Term ....................................................................................................................................................... 15
Renewal .................................................................................................................................................. 15
New Development Quota ....................................................................................................................... 16
Exercise of Renewal Option ................................................................................................................... 16
Conditions of Renewal ........................................................................................................................... 16
Transfer at End of Term ......................................................................................................................... 16
TERMINATION ............................................................................................................... 16
By Area Director .................................................................................................................................... 16
By Franchisor Upon AD’s Default ......................................................................................................... 16
Rights and Obligations of Area Director ................................................................................................ 17
Confidential Information ........................................................................................................................ 18
Covenant Not to Compete ...................................................................................................................... 18
No Further Right to Payment ................................................................................................................. 18
Continuing Obligations .......................................................................................................................... 18
Applicable Laws ..................................................................................................................................... 18
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Exhibit D: Area Director Agreement
3
18.
18.1
18.2
18.3
18.4
19.
19.1
19.2
19.3
19.4
20.
RELATIONSHIP OF THE PARTIES .............................................................................. 18
Relationship of the Parties ...................................................................................................................... 18
Payment of Third Party Obligations ....................................................................................................... 19
Independent Contractors......................................................................................................................... 19
Indemnification ...................................................................................................................................... 19
DISPUTES ........................................................................................................................ 19
Non-binding Mediation ........................................................................................................................... 19
Governing Law/Consent to Venue and Jurisdiction ............................................................................... 19
Waiver of Jury Trial ............................................................................................................................... 19
Limitation of Claims .............................................................................................................................. 20
MISCELLANEOUS PROVISIONS ................................................................................. 20
20.1
Invalidity ................................................................................................................................................ 20
20.2
Modification ........................................................................................................................................... 20
20.3
Force Majeure ........................................................................................................................................ 20
20.4
Attorneys’ Fees. ..................................................................................................................................... 20
20.5
Interpretation of Rights and Obligations ................................................................................................ 20
20.6
Injunctive Relief ..................................................................................................................................... 21
20.7
No Waiver .............................................................................................................................................. 21
20.8
No Right to Set Off ................................................................................................................................ 21
20.9
Effective Date ......................................................................................................................................... 21
20.10
Review of Agreement ............................................................................................................................. 21
20.11
Entire Agreement ................................................................................................................................... 21
20.12
Notices.................................................................................................................................................... 21
20.13 Acknowledgment ........................................................................................................................................... 21
APPENDICES
Appendix A - Rider to ADA (Territory, Quota, Existing Stores)
Appendix B - Guaranty and Assumption of Area Director’s Obligations
Appendix C - Statement of Ownership
Appendix D - Acknowledgment Addendum
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Exhibit D: Area Director Agreement
4
MRS. FIELDS FRANCHISING, LLC
AREA DIRECTOR AGREEMENT
AREA DIRECTOR:
ADDRESS:
EFFECTIVE DATE:
THIS AREA DIRECTOR AGREEMENT (the “Agreement”) is made and entered into between Mrs. Fields
Franchising, LLC, a Delaware limited liability company (“Mrs. Fields”), sometimes referred to herein as the “Franchisor,”
and the Area Director listed above (“Area Director” or “AD”), who agree as follows:
1.
BACKGROUND AND PURPOSE
1.1
Mrs. Fields is the franchisor of the Mrs. Fields franchise system (the “System”). Mrs. Fields and its
Affiliates have developed methods for establishing, operating, and promoting retail outlets (“Stores”) featuring a variety of
bakery products and beverages including cookies, brownies, muffins, coffee, frozen beverages and dessert items. These
methods feature the use and license of the trademark and service mark “Mrs. Fields®” and related trademarks and service
marks (collectively, the “Marks”) owned by an Affiliate of Mrs. Fields and licensed to Mrs. Fields, as well as Mrs. Fields’
distinctive plans for franchising, establishing, operating, and promoting Mrs. Fields Stores and related licensed methods of
doing business (the “Licensed Methods”).
1.2
Franchisor is in the business of granting to qualified individuals, or to entities with which such individuals
are affiliated, the right and license to develop and operate Stores using the Marks and Licensed Methods.
1.3
AD desires to own and operate its own business acting as a special agent for Franchisor within certain
geographic areas, enabling AD to assist Franchisor in identifying prospective franchisees to purchase franchises for Stores
from Franchisor, and to develop, support, and provide certain services to, Stores within such geographic areas under the
terms and conditions contained in this Agreement (“AD Business”).
1.4
Franchisor is willing to grant AD the right to operate the AD Business and serve as an area director,
enabling AD to assist Franchisor in identifying prospective franchisees to purchase franchises for Stores from Franchisor, and
to develop, support, and provide certain services to, Stores within certain geographic areas under the terms and conditions
contained in this Agreement.
2.
DEFINITIONS
In addition to capitalized terms in this Agreement which are defined elsewhere, the following terms are assigned
these definitions:
2.1
“Affiliate” includes each and every entity that controls, is controlled by, or is under common control with,
the applicable party.
2.2
“Applicable Laws” means and includes applicable common law and all applicable statutes, laws, rules,
regulations, ordinances, policies and procedures established by any governmental authority, governing the development or
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Exhibit D: Area Director Agreement
1
operation of a Store, including all franchise, immigration, labor, disability, food and drug laws, health and safety regulations,
as in effect on the Effective Date hereof, and as may be amended, supplemented or enacted from time to time.
2.3
“Bound Parties” mean each of the following persons: (i) the Business Entity executing this Agreement as
Area Director; (ii) each officer, director, shareholder, member, manager, trustee or general partner of Area Director and each
one of Area Director’s Affiliates; and (iii) each member of Area Director’s or any of the foregoing individuals’ immediate
family.
2.4
“Business Entity” means any limited liability company or partnership, and any association, corporation or
other entity which is not an individual.
2.5
its Affiliates.
“Company-Owned Stores” shall mean Stores within the Territory owned and operated by a Franchisor or
2.6
“Controlling Interest” means the possession, directly or indirectly, of power to direct, or cause a change in
the direction of, the management and policies of a Business Entity. Franchisor shall consider whether a transfer, either alone
or together with all other previous, simultaneous or proposed transfers, would have the effect of transferring, in the aggregate,
a sufficient number of the equity or voting interests of a Business Entity to enable the purchaser or transferee to direct, or
cause a change in the direction of, the management and policies of the Business Entity. For purposes of this Agreement, any
person who qualifies as Primary Owner shall be deemed to own a Controlling Interest.
2.7
“Development Period” means each 12-fiscal-month period during the term of this Agreement, commencing
with the Effective Date hereof.
2.8
“Excluded Location” has the meaning set forth in Section 3.4(f) below.
2.9
“Existing Stores” are Stores open and operating within the Territory as of the Effective Date, which are
listed on Appendix A.
2.10
“Franchise Agreement” means the forms of agreements (including franchise agreement and any appendices,
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 Stores. Area Director acknowledges that Area Director will use
Franchisor’s then-current forms of Franchise Agreement and Franchise Disclosure Document (“FDD”) in conducting any
franchise selling activities authorized or requested by Franchisor hereunder, and that Franchisor may from time to time
modify or amend in any respect the forms of FDD, Franchise Agreement and related agreements, including modifying or
waiving fees paid by Franchisees.
2.11
“Franchisee” means any person or Business Entity who has entered into a Franchise Agreement with
Franchisor, including Area Director.
2.12
“Manuals” means Franchisor’s operations and training manuals, training software, online programs and
related manuals and materials now or hereafter created by Franchisor for use in connection with the operation of a Store, as
the same may be amended and revised from time to time, including all bulletins, supplements and ancillary manuals. The
Manuals also may include materials that will be specific to an AD Business.
2.13
“Other Concepts Store” means a Mrs. Fields retail outlet that serves Proprietary Products or other products
and services bearing the Marks, which are co-branded and operated at or within locations of any brands or concepts other
than those offered by Franchisor, such as (without limitation) Starbucks®, Subway®, Quiznos®, Schlotzsky’s®, Wal-Mart®,
Blockbuster® or Build-a-Bear®. Except as expressly excluded or modified in this Agreement, Other Concepts Stores shall
be considered Stores for purposes of this Agreement.
2.14
“Primary Owner” refers to any person who owns at least 10% of the ownership interests of an Area
Director that is a Business Entity.
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Exhibit D: Area Director Agreement
2
2.15
“Proprietary Products” refers to all products and merchandise (i) manufactured by, or for, Franchisor or
Franchisor’s Affiliates in accordance with proprietary recipes, specifications or formulas, or (ii) bearing packaging or labels
displaying any of the Proprietary Marks and promoted as a Store brand item.
2.16
“Territory” is the geographical area described in the attached Appendix A.
2.17
“Territory Franchisee” means any approved Franchisee of Franchisor, other than Area Director, that enters
into a Franchise Agreement for the development and operation of a Store in the Territory, including Franchisees of Mrs.
Fields who have entered into Franchise Agreements for Existing Stores.
3.
SCOPE OF APPOINTMENT
3.1
Appointment of Area Director/Scope of Operations. Franchisor hereby appoints Area Director, and Area
Director hereby accepts appointment, 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 Stores to be located in the Territory and
assist Franchisor in completing franchise sales as requested by Franchisor (“Sales Services”); (2) perform certain site
acquisition and development services (“Site Services”); and (3) render compliance and enforcement services for and on
behalf of Franchisor and support to Territory Franchisees, including marketing and operational services (“Support
Services”) to Stores located within the Territory all on the further terms and conditions of this Agreement. Area Director
agrees that, during the term of this Agreement, it will at all times faithfully, honestly and diligently perform its obligations
hereunder in accordance with all Applicable Laws, and will continuously exert its best efforts to promote and enhance the
development and operation of Stores within the Territory.
3.2
Duty to Operate Stores. At all times from and after the second Development Period, Area Director is
required to own and operate a minimum of __ Stores in the Territory as a condition of Area Director’s appointment. Such
stores shall be located within the Territory as set forth on Appendix A. Area Director must sign Franchisor’s then-current
Franchise Agreement for each Store it owns and operates.
3.3
Rights and Limitations to Territory. During this Agreement’s term, Franchisor and its Affiliates will not
establish and license any other individual or Business Entity to act as area directors, master franchisees or 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 3.4.
3.4
Reservation of Rights to Franchisor. AD acknowledges that the rights granted by this Agreement are,
except as set forth in Section 3.3 above, nonexclusive, and Franchisor (and its employees, Affiliates and designees) retains
the right (without compensation or obligation whatsoever to AD unless specifically set forth herein):
(a)
to use, and to license others to use, the Marks and Licensed Methods for the operation of Stores,
AD Businesses, the sale of Proprietary Products, or any other business or endeavor at any location outside the Territory;
(b)
to solicit prospective Franchisees, and to grant others franchises to operate Stores, at such
locations outside of the Territory and on such terms and conditions as Franchisor deems appropriate;
(c)
to solicit prospective Franchisees, with or without the involvement of the AD, and to grant others
franchises to operate Stores at locations within the Territory (excluding, for all purposes of this subsection (c) any CompanyOwned Stores, Other Concepts Stores and, for clarity, Excluded Locations, which will be subject to subsections (d), (e) and
(f) below); provided that (i) any site for such new Store to be located within the Territory will be offered first to AD for
development by AD or its qualified applicant that is approved by Franchisor; (ii) such new Stores opened within the Territory
during the term shall be counted toward determining whether AD has met its Development Quota, and (iii) AD shall provide
the services and support for such Stores as set forth in this Agreement and shall receive its Sales Commission and Royalty
Fees for any such new Stores;
(d)
to itself own and operate for its own benefit Company-Owned Stores within the Territory without
applying such Company-Owned Stores toward AD’s Development Quota or paying AD any Sales Commissions or Royalty
Fees in connection with such Stores;
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Exhibit D: Area Director Agreement
3
(e)
to grant franchises or licenses to others to open and operate Other Concepts Stores within the
Territory; provided that at Franchisor’s written request only, AD shall perform the services and support for Other Concepts
Stores within the Territory and shall receive its Royalty Fees therefor, but shall not receive credit toward its Development
Quota or Sales Commissions on Other Concepts Stores opened by Franchisees and licensees other than AD or AD’s qualified
applicant that is approved by Franchisor;
(f)
to grant franchises or licenses to others to open Mrs. Fields retail outlets or serve Proprietary
Products or other products and services bearing the Marks, at locations within or outside the Territory to which such
Franchisee or licensee has premium, priority or exclusive access, such as (without limitation) a grant to a disadvantaged
business entity (DBE), master concessionaire, or master franchisee or operator who is awarded a bid to operate stores or food
outlets at an airport, commercial or corporate park, school, hospital, food service court, stadium, toll stop or rest area, outlet
or factory stores, or master concessionaire mall (each an “Excluded Location” which, for purposes of this Agreement, shall
NOT be considered a Store and shall fall outside the entire scope of this Agreement);
(g)
to have the option, but not the obligation, to provide Sales Services, Site Services and Support
Services for franchised Stores within the Territory (but with no adjustment or reduction in Royalty Fees payable to AD as a
result of rendering such services, unless AD is in default under this Agreement);
(h)
to use and license the use of proprietary marks or methods (other than the Marks and Licensed
Methods) in connection with the operation of retail outlets or business featuring products the same as, similar to or different
from the Proprietary Products but that do not bear the Marks, other food products, and related services, in any channel of
distribution or at any location and within any territory (including the Territory), which businesses may be the same as, similar
to, or different from that of the Stores; and
(i)
other than as set forth in Section 3.3 of this Agreement, to use the Marks and Licensed Methods in
connection with any or all of the same products and services offered by Stores, or other or different services and products,
promotional and marketing efforts or related items, in any channel of distribution other than Stores, including without
limitation, the Internet and other e-commerce, catalog or wholesale distribution, or branded and non-branded retail channels
such as grocery, drug, club or convenience stores, 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 Appendix A to this
Agreement (“Development Quota”) with respect to each Development Period. The determination as to whether AD has met
its development obligations under this Agreement shall be made based on the number of Stores sold, and the number of
Stores open and operating, at the end of a Development Period as described on Appendix A. For purposes of the
Development Quota, a Store, to be “sold,” must have a fully signed and effective Franchise Agreement and a fully paid initial
franchise fee; and to be considered “open and operating,” must be operating in compliance with the applicable Franchise
Agreement.
4.2
Franchise Registration and Disclosure. Neither AD nor any employee or representative of AD shall solicit
prospective Franchisees for Stores until Franchisor has registered its current FDD 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 Laws. Franchisor shall bear its costs of preparing and registering its
FDD. AD’s costs associated with the following obligations 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 required by Franchisor to prepare all requisite disclosure
documents and ancillary documents for the offering of franchises throughout the Territory;
(c)
execute all documents required by Franchisor for the purpose of registering AD as a representative
of Franchisor to offer franchises throughout the Territory; and
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Exhibit D: Area Director Agreement
4
(d)
pay to Franchisor, or its designee, upon demand, the costs of preparing and registering those
portions of disclosure documents and ancillary documents which are applicable only to AD.
AD agrees to review all information pertaining to AD prepared to comply with Applicable Laws 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 form of damages, 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,
pre-qualifying and, at Franchisor’s request, interviewing prospective Franchisees within the Territory. AD shall provide
prospective Franchisees with any written information designated and approved by Franchisor or communicate information
regarding Store franchises via the telephone, face-to-face meetings, or visits at other Stores within the Territory. Unless
otherwise agreed to in writing by Franchisor, AD shall submit each pre-screened applicant (“Applicant”) for a Store
franchise to Franchisor for proper and timely disclosure with Franchisor’s then-current FDD, and all Applicants shall be
subject to final approval by Franchisor. AD further agrees that all Applicants submitted to Franchisor by AD, if an
individual, or the Entity Owners (as defined in the Franchise Agreement) of the Applicant, if the Applicant is not an
individual, shall to AD’s knowledge be individuals who are of good character, have adequate financial resources, and meet
Franchisor’s criteria for Franchisees or Entity Owners of Franchisees. Each application for a franchise received by AD shall
be submitted to Franchisor with all information respecting the Applicant, the Principal 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 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, in its
sole discretion, shall approve or disapprove Applicants to become Store Franchisees. AD shall have NO AUTHORITY OR
ABILITY TO OFFER OR SELL A FRANCHISE, OR GRANT, SELL, NEGOTIATE OR EXECUTE any Franchise
Agreement on behalf of Franchisor. Franchisor agrees to exert its best efforts to deliver such notification to AD within 14
days after the later of: (a) receipt by Franchisor of a signed FDD receipt, complete application, financial statement, and
other materials regarding the Applicant requested by Franchisor; or (b) the interview of Applicant by Franchisor, if any.
Franchisor, in its sole discretion, 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 the full execution of the
then-current Franchise Agreement by Franchisor and the Applicant and Applicant’s successful completion of Franchisor’s
training program. AD understands and agrees that Franchisor’s trainers have the right in their sole discretion to reject any
Applicant trainee.
5.
PAYMENTS TO FRANCHISOR
5.1
Initial Territory Fee. The initial territory fee (“Initial Fee”) payable to Franchisor by AD in consideration
for AD’s appointment as AD within the Territory shall be ____________________________ ($____). The Initial Fee is
fully earned by Franchisor upon execution of this Agreement and is nonrefundable once paid. The Initial Fee shall be paid to
Franchisor in immediately available funds upon execution of this Agreement.
6.
PAYMENTS TO AREA DIRECTOR
6.1
Sales Commissions and Conditions of Payment. In consideration of the Sales Services and Site Services
rendered during the term of this Agreement, AD shall be paid a commission equal to ____% of the initial franchise fees paid
by each Franchisee (including AD) for the purchase of franchises for Stores to be located within the Territory (“Sales
Commissions”), subject to and upon fulfillment of the following conditions (“Franchise Sales Conditions”):
(a)
Franchisee executes a Franchise Agreement with Franchisor and the Store opens for business;
(b)
AD or its authorized representative attends the Store opening, collects the initial franchise fee from
Franchisee, promptly remits 100% of the initial franchise fee (without set off or deduction) to Franchisor, and Franchisor has
actually received the initial franchise fee (Franchisor shall not be deemed to have received any fees paid into escrow, if
applicable, until such fees actually have been remitted to Franchisor);
MFDD – 03/14
Exhibit D: Area Director Agreement
5
(c)
The sale for which the initial franchise fee has been paid is not a resale of any existing Store or any
interest in such Store, or paid in connection with the relocation of any Store; and
(d)
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, which shall acknowledge the
completion of the items in sections 6.1(a), (b) and (c) hereof.
6.2
Sales Commission Payments. Sales Commissions shall be payable to AD within 30 days after the
Franchise Sales Conditions have been fulfilled. AD shall not receive any Sales Commissions for or with respect to (a)
Existing Stores; (b) Company-Owned Stores; (c) Other Concepts Stores operated by Franchisees other than AD or AD’s
qualified applicant approved by Franchisor, as described in Section 3.4(e); or (d) Excluded Locations.
6.3
Commissions on Transfers of Franchises. If, during the term of this Agreement, (a) a Store located within
the Territory or an interest in the Store is resold to a different Franchisee and the sale results in the execution of a Franchise
Agreement or Assignment and Assumption Agreement and the payment of a transfer fee to Franchisor, and (b) Franchisor
asks AD to perform services in connection with the Transfer, including without limitation, pre-approval or interview of
transferee, site inspection or advice related to any required remodel; then AD will be paid a commission in the amount of
____% of the transfer fee paid and actually received by Franchisor, payable within 30 days after the completion of the
transfer, provided that AD has timely performed all services requested 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. Franchisor may
opt to conduct the transfer without assistance from AD, or may waive the transfer fee, in which case no commission shall be
due to AD in connection therewith.
6.4
Royalty Fees. In consideration of the Support Services, Franchisor shall pay to AD, within 10 business
days after the end of each 4- or 5-week fiscal month determined by Franchisor’s fiscal calendar, _____% of the royalty fees
(which excludes advertising fees) actually received by Franchisor from each Store located in the Territory (including Existing
Stores, approved Other Concepts Stores and other Stores owned and operated by AD and Territory Franchisees, but
excluding Company-Owned Stores and, for clarity, excluding Excluded Locations,) during the applicable period pursuant to
their Franchise Agreement (“Royalty Fees”). Notwithstanding the foregoing, if AD has failed to conduct the periodic
inspections described in Section 9.6 and to file a written report, or failed to perform in any material respect, with respect to
one 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 fiscal month, AD shall not be entitled to receive Royalty Fees with respect to
such Franchisees for the period during which reports or services were not provided. For clarity, all advertising fund
contributions received from Stores within the Territory shall be paid to Franchisor’s applicable advertising funds and used
and applied as provided in the Franchise Agreement, and AD shall receive no fees, commissions, credits or payments in
respect thereto.
6.5
Internet/Catalog Sales Program. AD shall have the right to participate on the same basis and upon the same
terms as any other of Franchisor’s franchisees, in any internet/catalog sales program it makes generally available its
franchisees.
6.6
Commissions After Termination. All payments under this Section 6 shall immediately and permanently
cease after the expiration or termination of this Agreement, except as set forth in Section 17.6. Further, 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. Further, in the event of termination of a Franchise Agreement for a
Store 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.
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Exhibit D: Area Director Agreement
6
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 Sales Commissions, Royalty Fees, or other
amounts due under this Agreement any monies owed to Franchisor by AD.
6.9
Payment Verification. AD shall, upon 10 days prior written notice to Franchisor, have access to
Franchisor’s books and records relating to the calculation and payment of any amounts due to AD hereunder. If AD’s
inspection of such records shall reveal any material discrepancy or failure to pay AD the proper amounts due under this
Agreement, AD shall promptly notify Franchisor of the same. Franchisor shall then have 30 days to review AD’s findings in
good faith and, if it concurs that an adjustment is due, shall make any necessary adjustment to the next payment paid to AD.
7.
TRAINING ASSISTANCE
7.1
Area Director Training. Franchisor shall furnish, and AD (or, if AD is a Business Entity, a Primary Owner
of AD and who has been approved and designated by Franchisor as AD’s “Managing Owner”) shall attend, and complete to
Franchisor’s satisfaction, an initial training program consisting of the training program applicable to Franchisor’s Store
franchisees and such further training as Franchisor deems advisable, which may include topics such as marketing, franchise
sales, franchise law compliance, site selection, and Store operations, furnished at such place and time as Franchisor
designates, prior to the opening of the first franchised Store in the Territory after the Effective Date. The AD may also
designate one additional member of the AD’s management staff (the “Operations Manager”), who may attend initial
training at no additional charge to the AD. Training must be completed prior to AD’s provision of services to franchisees or
prospective franchisees.
7.2
Length of Training. Franchisor shall determine the appropriate length of the AD training program. Other
than any portion of the Initial Fee that Franchisor may consider to be earned for training AD, 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 all training sessions offered or required by Franchisor.
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 AD 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 AD Business.
7.3
Additional Training. The initial training program will be made available to replacement or additional
Operations Managers and other management personnel of AD during the term of this Agreement. AD agrees that it shall
have at least one person who has satisfactorily completed the AD training program on staff at all times during the term of this
Agreement. Franchisor reserves the right to charge a tuition 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 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 and its Operations Manager shall, at
AD’s expense, 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 may be charged a reasonable fee of not to exceed $1,000 for each program
missed. Franchisor shall give AD at least 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 2 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
Manuals. Franchisor shall, in addition to the AD training program, loan to AD during the term of this
Agreement 1 copy of its Manuals to assist AD and its employees in conducting the AD Business. Franchisor may prescribe
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Exhibit D: Area Director Agreement
7
mandatory and suggested standards and operating procedures for AD in the Manuals, which may be modified from time to
time by Franchisor. AD shall keep its copy of the Manuals current. In the event of a dispute relating to the Manuals,
Franchisor’s master copy controls. AD may not at any time copy any part of the Manuals unless approved in writing by
Franchisor. In the event AD’s copy of the Manuals is lost, destroyed, or damaged, AD shall be obligated to obtain from
Franchisor, at no charge to AD, a replacement copy of the Manuals. The Manuals and other writings physically or
electronically communicated to AD shall constitute material provisions of this Agreement as if fully set forth within its text.
8.2
Agreement:
Operating Assistance. Franchisor will make available the following services during the term of this
(a)
Upon the reasonable request of AD, telephone consultation regarding advice related to franchise
sales, Franchisee support, and assistance;
(b)
Access to any franchise sales advertising and promotional materials that Franchisor may (but is
not required to) develop, the actual cost of which may be passed on to AD at Franchisor’s option; and
(c)
Access to Franchisor’s point-of-sale, product promotions, coupons, and other marketing materials
generally made available to Stores within Franchisor’s franchised system, at the same cost (if any) that is charged to other
franchisees.
9.
AREA DIRECTOR’S OBLIGATIONS
9.1
Hiring and Training of Employees of Area Director. AD shall be solely responsible for hiring all of AD’s
employees and shall be exclusively responsible for supervising such employees and for the terms and conditions of their
employment and compensation. AD shall be responsible for training its employees to enable AD to operate its AD Business.
9.2
Commencement of AD Business. Unless otherwise agreed to in writing by Franchisor and AD, AD has 60
days from the Effective Date of this Agreement within which to complete the first part of its initial training and commence
operation of its 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 AD Business established before the period lapses. The obligations of AD shall commence at the earlier to occur of the
date AD or its Managing Owner has satisfactorily completed Franchisor’s initial training program, or 60 days from the
Effective Date of this Agreement; provided, however, that AD shall not commence its Sales Services until Franchisor has
registered its FDD in accordance with Applicable Laws within the Territory. AD will also, at AD’s expense, purchase or
otherwise obtain for use in connection with the AD Business (a) computer hardware and computer software that comply with
the standards and specifications of Franchisor; (b) an office space 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; and
(d) business cards and stationery.
9.3
Sales Services. AD shall conduct the Sales Services as described in Section 3.1 and 4.3 above, including
advertising for, identifying and pre-qualifying prospective Territory Franchisees, providing sales assistance to Franchisor’s
sales agents, and seeking to obtain prospects by networking and conducting franchise sales promotional activities within the
Territory. AD is not authorized, and Sales Services do not include the right, to approve prospects as Mrs. Fields franchisees,
offer or sell franchises, or negotiate or sign Franchise Agreements on behalf of Franchisor.
9.4
Site Services. AD shall perform the following Site Services on behalf of Franchisor with respect to
Territory Franchisees:
(a)
Assist with Store location selection, which shall consist of providing each Franchisee with
Franchisor’s criteria for a Store site (which shall be approved by Franchisor in its sole discretion) and assisting each
Franchisee in completing a site submittal package (containing such demographic, commercial, and other information as
Franchisor may require in its Franchise Agreement) for each location at which Franchisee proposes to establish and operate a
Store, assist in negotiating lease terms, and coordinate the work of contractors and architects with respect to the development
of each Store in the Territory;
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Exhibit D: Area Director Agreement
8
(b)
Deliver to franchisees the standards and specifications for the build out, interior design, layout,
floor plan, signs, designs, color, and decor of the Store that Franchisor prescribes and provides to AD from time to time; and
(c)
Submit completed forms and reports to Franchisor as prescribed by Franchisor from time to time.
9.5
Pre-Opening and Opening Support Services. With respect to Territory Franchisees, AD shall perform the
following pre-opening and opening Support Services on behalf of Franchisor: AD shall assume and perform any and all of
Franchisor’s obligations, as set forth in the Franchise Agreement, to provide assistance to Territory Franchisees pertaining to
the timely opening of their Stores, including, without limitation, consultation, as the AD deems appropriate, with the
Territory Franchisee about hiring employees, preparing for and conducting the grand opening promotion, pre-opening
advertisement and promotion, purchasing required products, including Proprietary Products as set forth in the Franchise
Agreement, and adopting and complying with Franchisor’s system standards for opening the new Store. Additionally, one of
AD’s agents or employees shall attend the grand opening of each new Store in the Territory.
9.6
Ongoing Support Services. With respect to Franchisees of Stores located in the Territory, AD shall
perform the following ongoing Support Services on behalf of Franchisor:
(a)
Upon the reasonable request of Franchisee, provide telephone consultation regarding the
continuing operation and management of the Store and advice regarding Store 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 Store business, and related Licensed Methods, including, without limitation, information about special or
new services of Franchisor,
(c)
Provide advice and assistance to Territory Franchisees in connection with developing and
improving Franchisee’s Store;
(d)
Conduct the following site inspections in the manner required by Franchisor periodically, said
inspections to be verified by written reports in a form acceptable to Franchisor: (i) for the first three months following a new
Store’s opening in the Territory, at least 1 quality assurance inspection (or reinspection in the case of a failed first inspection)
of such Store every month; and (ii) for all other Stores in the Territory, at least 1 quality assurance inspection or reinspection
each calendar quarter;
(e)
At Franchisor’s written request, establish an advertising cooperative for all Stores located in the
Territory using forms and procedures supplied by Franchisor; and
(f)
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 Manuals 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 Territory Franchisees, 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 derived and exist 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 other than as set forth herein, 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
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Exhibit D: Area Director Agreement
9
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.
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 and to the extent such rights are granted under a separate Franchise Agreement or other 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 its Affiliates’ 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 its Affiliates’ 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 Mark (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, (d) in any legal name of a Business Entity used
to conduct the AD Business; or (e) in any other manner not expressly authorized in writing by Franchisor. AD agrees to give
such notices of trademark and service mark registration as Franchisor specifies and to use and obtain such fictitious or
assumed name registrations required by Franchisor or under applicable law.
10.3
Discontinuance of Use of Marks. If it becomes advisable at any time for Franchisor to modify or
discontinue use of any Mark 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 Mark, or for AD’s expenses of promoting a modified or substitute trademark or service mark.
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 Mark, or claim by any person of any rights in any Mark, 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 its Affiliates’ prior written consent. Franchisor and its Affiliates 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 Mark. 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 its Affiliates’ counsel, are necessary or advisable to protect and maintain Franchisor’s and its Affiliates’
interests in the Marks.
11.
CONFIDENTIAL INFORMATION
11.1
Confidential Information. Franchisor and its Affiliates 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 Stores (the
“Confidential Information”). Franchisor may disclose the Confidential Information to AD in the training program, the
Manuals, 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 its Affiliates, 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 Business Entity) does hereby agree that
AD: (a) shall not use the Confidential Information in any other business or capacity; (b) shall maintain the absolute
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Exhibit D: Area Director Agreement
10
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 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 Store 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 its Affiliates’ sole and exclusive property, part of the Licensed Methods and
Franchisor’s franchise system, and works made-for-hire for Franchisor and its Affiliates. To the extent any item does not
qualify as a “work made-for-hire” for Franchisor and its Affiliates, AD assigns ownership of that item, and all related rights
to that item, to Franchisor and its Affiliates and must sign whatever assignment or other documents Franchisor and its
Affiliates request to show ownership or to help Franchisor and its Affiliates 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 owners, 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 its
Affiliates’ 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, if applicable, the Managing Owner, nor any spouse of any of the foregoing, 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 store,
retail outlet or other food service business deriving more than 10% of its gross receipts from the sale of products the same as
or similar to Proprietary Products or other principal goods and services sold at the Stores (excluding Stores operated under
franchise agreements with Franchisor and its Affiliates, and any existing businesses of AD as disclosed in writing to
Franchisor prior to the Effective Date);
(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 of its 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, its Affiliates, 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 its Affiliates.
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 5% or less of that class
of securities issued and outstanding.
13.
OPERATING STANDARDS
13.1
Standards of Service. AD shall at all times give prompt, courteous, and efficient service to Territory
Franchisees. AD shall, in all dealings conducted hereunder or on behalf of Franchisor, 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.
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Exhibit D: Area Director Agreement
11
13.3
Accuracy of Information. Before it conducts any Sales Services, AD shall take reasonable steps to confirm
that the information contained in any written materials, agreements, and other documents related thereto is true, correct, and
not misleading, and will not be contrary to Applicable Laws. Franchisor shall provide AD with information regarding the
status of its FDD, any changes to its FDD 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 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 Territory Franchisee.
13.5
Ownership and Management of AD Business. The AD Business shall at all times be under the direct, dayto-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 AD 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 Appendix C 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 a Business Entity, an individual or individuals designated by Franchisor shall execute the
Guaranty and Assumption of AD’s Obligations attached hereto as Appendix B 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 Stores in the Territory. AD shall not
engage in any other business or activity, directly or indirectly, 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,
comprehensive general liability insurance with minimum limits of $1,000,000 per occurrence and $2,000,000 aggregate, or
other amounts, and with such terms and conditions as Franchisor may from time to time prescribe in the Manuals or
otherwise. All of the required insurance policies shall name Franchisor and Affiliates designated by Franchisor as additional
insureds, contain a waiver of the insurance company’s right of subrogation against Franchisor and the designated Affiliates,
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 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. In order to advertise for prospective Franchisees in the Territory, AD is required
to spend an amount equal to $______________ during each calendar quarter, commencing with the first full calendar quarter
hereunder, during the term of this Agreement. AD shall submit to Franchisor an accounting of the amounts spent on
advertising for its AD Business within 60 days following the end of each quarter during the term of this Agreement.
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 may be withheld for
any reason or no reason. AD shall not use any advertising or promotional materials that Franchisor has not approved or 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
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Exhibit D: Area Director Agreement
12
at AD’s own expense unless such advertising has been previously filed with the state by Franchisor. Franchisor may charge
AD for the actual, out-of-pocket 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 related to the AD Business that Franchisor requires from time to time. AD shall furnish to Franchisor, within 120
days after the end of AD’s fiscal year, a balance sheet and profit and loss statement for such year for its AD Business (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 30 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 the AD Business shall be furnished to Franchisor. AD shall maintain all records and reports
of the business conducted pursuant to this Agreement for at least 1 year after the date of termination or expiration of this
Agreement. The recordkeeping provisions of this Agreement, including this Section 13.11, shall apply only to the AD
Business conducted by AD hereunder, and shall not be deemed to give Franchisor access to any tax returns, records, or other
financial or business information of AD that is not related to the AD Business.
13.12 Reports. AD shall, as often as required by Franchisor, deliver to Franchisor a written report of its AD
Business activities during such period required in Sections 9.4, 9.6 and 9.8, 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 related to the AD Business, and the status of the Stores in the Territory. AD shall, as often as required by
Franchisor during the term of this Agreement, deliver to Franchisor the other quality assurance inspection reports required in
Section 9 for each Franchisee in the Territory in such form and detail as Franchisor may from time to time specify, and
timely deliver any other reports or information that Franchisor may request.
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, upon 72 hours prior notice to AD, to enter the
premises in which AD is then keeping its records pertaining to the AD Business, 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 pertaining to the AD 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 its
franchise 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 or any of its rights, interests and obligations herein and hereunder
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 Primary Owners, if AD is a Business Entity) and that Franchisor has entered into this Agreement in reliance upon
AD’s representations about and Franchisor’s perceptions of the individual or collective character, skill, aptitude, attitude,
business ability, and financial capacity of AD (or its Primary Owners). Accordingly, without the prior written consent of
Franchisor, which consent may be withheld for any reason or no reason, neither this Agreement or any interest herein nor any
part or all of any of the Primary 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; (3) the Stores operated by AD; or (4) the assets of
the AD Business. It also includes an assignment of day-to-day operational responsibilities for the AD Business pursuant to
an operating agreement or otherwise.
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Exhibit D: Area Director Agreement
13
15.3
Conditions for Approval of Transfer. Franchisor shall not be obligated to approve a proposed transfer
unless AD (and its Primary 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 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 and paid to Franchisor a reasonable training
fee (plus cover its own expenses for attending the training program);
(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 needed to defray expenses
Franchisor incurs in connection with the transfer (not to exceed Franchisor’s transfer fee for a Store as disclosed in its thencurrent FDD;
(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 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;
(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 17.6.
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 may be withheld for any reason or no reason, to a Business Entity of
which AD owns not less than two-thirds of the ownership interest. The transfer fee described in Section 15.3(c) will be
waived by Franchisor, and all owners of such Business Entity must sign a Guaranty and Assumption of AD’s Obligations
attached as Appendix B.
15.5
Franchisor’s Approval of Transfer. Franchisor has 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
MFDD – 03/14
Exhibit D: Area Director Agreement
14
regarding the AD 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 AD 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 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 AD Business,
AD agrees to grant to Franchisor a 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 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 30 day right of first refusal shall be given to Franchisor;
(d)
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 the applicable provisions of Section 15. Absence of a reply to
AD’s notice of a proposed sale within the 30 day period is deemed a waiver of such right of first refusal but not a waiver of
the required compliance with Section 15; and
(e)
Franchisor has the unrestricted right to assign this right of first refusal to a third party, who then
will have the rights described in this Section.
16.
TERM AND EXPIRATION
16.1
Term. The initial term of this Agreement is for a period of 5 years from the Effective Date, unless sooner
terminated as provided herein.
16.2
Renewal. At the end of the initial term, AD shall have the option to renew its area director rights for one
additional 5-year renewal term, so long as AD complies with the following requirements during the initial term of this
Agreement:
(a)
At least 60 days prior to expiration of the initial term, AD executes the form of Area Director
Agreement then in use by Franchisor, which agreement may contain terms materially different from those in this Agreement
or in the form of Area Director Agreement under which AD then is operating, including without limitation a new Initial Fee;
provided that any such Initial Fee cannot exceed the fee paid for the initial term hereunder, and commission percentages and
definition of the Territory will not be altered;
(b)
AD has complied with all provisions of this Agreement during its 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 the Agreement more than 3 times during the initial term;
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Exhibit D: Area Director Agreement
15
(c)
under Section 16.4;
AD is not in default or under notification of breach of this Agreement at the time it gives notice
(d)
AD 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)
AD has agreed on a new Development Quota (if any) for the renewal term in accordance with
Section 16.3.
16.3
New Development Quota. AD’s area director rights may be renewed only if AD and Franchisor have
agreed on a new Development Quota (if any) for the renewal term at least 90 days prior to expiration of the initial term of this
Agreement. If AD and Franchisor do not agree on a new Development Quota for the renewal term within this timeframe, AD
may only renew its area director rights upon agreeing to the same Development Quota applicable during the initial term.
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 180 days nor less than 90 days prior to the expiration of the initial term of this
Agreement.
16.5
Conditions of Renewal. 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 Agreement, Franchisor shall give AD notice of expiration at least 60 days prior to the expiration
of the initial 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.
16.6
Transfer at End of Term. If AD is not in breach or under notification of default of this Agreement, AD may
transfer its rights and obligations under this Agreement to another, at the conclusion of the initial or any renewal term,
provided that: (1) AD and the proposed transferee meet all requirements of Section 15 and (2) AD provides not more than
180 days nor less than 90 days’ notice of its intent to transfer. Franchisor may, at its sole option, extend the term of this
Agreement or the Area Director Agreement under which AD then is operating for a reasonable period (not to exceed 90 days)
to facilitate an end-of-term transfer, if Franchisor believes that AD is close to completing a transfer and is acting in good
faith.
17.
TERMINATION
17.1
By Area Director. AD may terminate this Agreement upon 90 days advance written notice if Franchisor is
unable to provide registered and effective FDDs or offer or sell franchises within the Territory for a period of more than 90
consecutive days within any Development Period. Further, AD may terminate this Agreement if Franchisor fails to comply
with any other provision of this Agreement and does not correct such failure within 90 days after written notice of such
failure to comply is delivered to Franchisor. AD must comply with all post-term obligations in the event it elects to terminate
the Agreement.
17.2
By Franchisor Upon AD’s Default. 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 intentionally 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, unless that
information or presentation is identical to that contained in Franchisor’s FDDs and other disclosure documents;
MFDD – 03/14
Exhibit D: Area Director Agreement
16
(d)
Fails to meet the Development Quota set forth in Appendix A and does not correct such failure
within 90 days after written notice of such failure to comply is delivered to AD if the default is for Stores sold or 180 days if
the default is for the cumulative number of Stores to be open and in operation in the Territory;
(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 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 AD 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 the Stores or the goodwill associated with the Marks;
(h)
To the extent enforceable under federal bankruptcy law, 11 U.S.C. § 101, 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;
(i)
Abandons or ceases to operate the AD Business for a period of 30 consecutive days, unless
precluded from doing so by an event beyond AD’s reasonable control (other than for financial reasons), or abandons any
Store owned by AD;
(j)
Has received 3 notices of default from Franchisor within a 12 month period under any agreement
between Franchisor and AD, regardless of whether the defaults were cured by AD; or
(k)
Fails to pay any amounts due Franchisor or its Affiliates within 30 days after receiving notice that
such fees or amounts are overdue.
17.3
Rights and Obligations of Area Director. Upon termination of this Agreement, whether pursuant to Section
17.1 or 17.2 or upon expiration without renewal of this Agreement pursuant to Section 16, AD agrees:
(a)
To pay Franchisor within 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 Store
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 Mark, any colorable imitation thereof, or other indicia of a Store in any manner or for
any purpose, or utilizing for any purpose any trade name, trademark or service mark, 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 Manuals, and all other
manuals, forms, FDDs, franchise sales brochures, and other materials containing any Mark or otherwise identifying or
relating to the sale or service of Stores;
(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 name or equivalent registrations
relating to AD’s use of any Mark; and
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Exhibit D: Area Director Agreement
17
(g)
Furnish Franchisor, within 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 Store pursuant to a Franchise
Agreement with Franchisor) and return to Franchisor all copies of the Manuals 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 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 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 Sales Commissions, Royalty Fees or other amounts 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 Store 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
Applicable Laws. The parties acknowledge that, in the event the terms of this Agreement regarding
termination or expiration are inconsistent with Applicable Laws, 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 acknowledges that Franchisor is in the
business of granting franchises and licenses to Franchisees and Area Directors for the operation of Stores and AD Businesses,
and notwithstanding the fact that Franchisor may engage in activities similar to the Sales Services, Site Services and Support
Services, Franchisor does not operate an AD Business and is not in the same business as AD. 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 AD Business under an Area Director Agreement with Franchisor and shall place the notices of
independent ownership required by Franchisor on signs, forms, stationery, advertising, and other materials.
MFDD – 03/14
Exhibit D: Area Director Agreement
18
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 the
AD Business.
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 that) the loss, liability, taxes, damages, and reasonable costs and expenses are
determined to be caused solely by the Indemnified Party’s negligence or willful misconduct in a final, unappealable ruling
issued by a court or arbitrator with competent jurisdiction. 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
The following provisions apply with respect to dispute resolution:
19.1
Non-binding Mediation. Before the filing of any legal proceeding or claim, the parties agree to mediate any
dispute that does not include injunctive relief or specific performance actions, provided that the party seeking mediation
notify the other party of its intent to mediate prior to the termination of this Agreement. Mediation will be conducted by a
mediator or mediation program agreed to by all parties. Persons authorized to settle the dispute must attend any mediation
session. The parties agree to participate in the mediation proceedings in good faith with the intention of resolving the dispute
if at all possible within 30 days of the notice from the party seeking to initiate the mediation procedures. If not resolved
within 30 days, the parties are free to pursue legal action. Mediation is a compromise negotiation for purposes of the federal
and state rules of evidence, and the entire process is confidential and shall be non-binding.
19.2
Governing Law/Consent to Venue and Jurisdiction. Except to the extent governed by the United States
Trademark Act of 1946 (Lanham Act, 15 U.S.C. § 1051) 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 that state,
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 County of Broomfield, State of Colorado,
or the Federal District Court for the Tenth District, and each party waives any objection it might have to the personal
jurisdiction of or venue in such courts.
19.3
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. BY INITIALING HERE:
MFDD – 03/14
Exhibit D: Area Director Agreement
19
_________ [AD TO INITIAL HERE]
AD ACKNOWLEDGES AND AGREES THAT AD HAS READ THIS SECTION, UNDERSTANDS ITS PROVISIONS,
and that Franchisor has accorded AD ample time and opportunity to consult with financial and legal advisors of AD’s own
choosing about the effect of these provisions on AD’s rights under this Agreement.
19.4
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 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 Manuals
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
Force Majeure. In the event any party fails of perform any obligation under this Agreement, the same shall
not be deemed a breach of this Agreement if it arose from a cause beyond the control of and without the negligence of said
party. Such causes include, but are not limited to, acts of God, actions of the elements, lockouts, strikes, wars, riots, civil
commotion, and acts of government except as may be specifically provided for elsewhere in this Agreement.
20.4
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 2% per month or the highest
commercial contract interest rate allowable by law accruing from the date of such default.
20.5
Interpretation of Rights and Obligations. The following provisions apply to and govern the interpretation of
this Agreement, the parties’ rights under this Agreement, and the relationship between the parties:
(a)
Franchisor’s Rights. Whenever this Agreement provides that Franchisor has a certain right, that
right is absolute and the parties intend that Franchisor’s exercise of that right will not be subject to any limitation or review.
Franchisor has the right to operate, administrate, develop, and change its Licensed Method and franchise system in any
manner that is not specifically precluded by the provisions of this Agreement.
MFDD – 03/14
Exhibit D: Area Director Agreement
20
(b)
Franchisor’s Reasonable Business Judgment. Whenever Franchisor reserves discretion in a
particular area or where Franchisor agrees to exercise its rights reasonably or in good faith, Franchisor will satisfy its
obligations whenever Franchisor exercises Reasonable Business Judgment in making its decision or exercising our rights.
Franchisor’s decisions or actions will be deemed to be the result of Reasonable Business Judgment, even if other reasonable
or even arguably preferable alternatives are available, if its decision or action is intended, in whole or significant part, to
promote or benefit its franchise System generally even if the decision or action also promotes Franchisor’s financial or other
individual interest. Examples of items that will promote or benefit the system include enhancing the value of the Proprietary
Marks, improving customer service and satisfaction, improving product quality, improving uniformity, enhancing or
encouraging modernization and improving the competitive position of the System.
20.6
Injunctive Relief. Nothing herein shall prevent Franchisor or AD from seeking injunctive relief in
appropriate cases to prevent irreparable harm.
20.7
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.
20.8
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.
20.9
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.
20.10 Review of Agreement. AD acknowledges that, where required by Applicable Laws, it has had a copy of
Franchisor’s FDD in its possession for not less than 14 full calendar days, and this Agreement in its possession for not less
than 7 full calendar 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. Where such disclosure is not required by Applicable
Laws, any FDD or other disclosure AD has received pertaining to such jurisdiction shall be deemed a courtesy disclosure by
Franchisor.
20.11 Entire Agreement. This Agreement (which includes the attachments and Appendices 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. However, nothing in this Agreement or any related agreement is intended to disclaim the representations
made in the disclosure document that was provided to AD. AD further acknowledges and agrees that no representations have
been made to it by Franchisor regarding projected sales volumes, market potential, revenues, profits of the AD Business, or
operational assistance other than as stated in this Agreement or in the FDD 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. This
Agreement shall not modify, affect or amend any Franchise Agreement entered into between AD and Franchisor. Any
policies that Franchisor adopts and implements from time to time to guide it in its decision-making are subject to change, are
not a part of this Agreement, and are not binding on Franchisor.
20.12 Notices. All notices required to be given under this Agreement shall be given in writing, by certified mail,
return receipt requested, or by any 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.
20.13 Acknowledgment. BEFORE SIGNING THIS AGREEMENT, AD SHOULD READ IT CAREFULLY
WITH THE ASSISTANCE OF LEGAL COUNSEL. AD ACKNOWLEDGES THAT:
MFDD – 03/14
Exhibit D: Area Director Agreement
21
(A)
THE SUCCESS OF THE AD 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 AD BUSINESS, AND
(B)
NO ASSURANCE OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN GIVEN AS TO
THE POTENTIAL SUCCESS OF SUCH AD 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 DISCLOSURE DOCUMENT SUPPLIED TO AD, IS
BINDING ON FRANCHISOR IN CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT.
IN WITNESS WHEREOF, the parties have executed, sealed, and delivered this Agreement in counterparts on the
date first mentioned above.
MRS. FIELDS FRANCHISING, LLC
AREA DIRECTOR
By:
By:
Its:
Its:
Date:
Date:
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Exhibit D: Area Director Agreement
22
APPENDIX A
RIDER
TO AREA DIRECTOR AGREEMENT
DATED ___________
1.
Territory. The Territory referred to in Section 2.14 of the Agreement shall be the
following geographic area:
_____________________________________________________________.
Existing Stores. The following Stores are Existing Stores by virtue of being opened and
operated by Franchisees within the Territory as of the Effective Date:
2.
[list Existing Mrs. Fields Stores]
3.
Development Quota.
(a)
AD shall meet the following Development Quota by the last day of each
Development Period during the term of this Agreement (to be completed before the execution of
this Agreement):
Development
Period
Number of New Stores
to be Opened by AD in Territory
or Sold to Territory Franchisees
Cumulative Number of
Stores (Excluding CompanyOwned Stores, Existing Stores,
Excluded Locations and any
other Stores or outlets excluded
or retained by Franchisor
pursuant to this Agreement*)
to be Open and in
Operation in the Territory**
1
2
3
4
5
*Of the new Stores opened and operating within the Territory, AD must, at the end of each Development Period from and
after the second Development Period, own at least __ Stores in the Territory. See Section 3.2 for further information.
**Provided that Franchisor has given its prior written approval for the development of such location, each “Limited Services
Location” or Other Concepts Store operated within the Territory by AD or AD’s qualified applicant approved by Franchisor
will count as 1/3 of 1 Store for purposes of determining whether AD has met its Development Quota. In other words, AD
must open 3 approved Limited Services Locations or Other Concepts Stores to receive credit for 1 Store under the
Development Quota. For purposes of this paragraph, a “Limited Services Location” is a limited menu Mrs. Fields-branded
presence (such as a cookie sales and display case or non-baking kiosk) located outside a traditional or Other Concepts Store
presence, such as within a gas station retail area. AD ACKNOWLEDGES AND AGREES THAT IT MAY NOT PURSUE
A LIMITED SERVICES LOCATION OR OTHER CONCEPTS STORE OPPORTUNITY WITHOUT THE PRIOR
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Exhibit D: Area Director Agreement
23
WRITTEN CONSENT OF FRANCHISOR, WHICH MAY BE GRANTED OR WITHHELD FOR ANY REASON OR NO
REASON, and that Other Concepts Stores and Limited Services Locations may, at Franchisor’s sole discretion, be
considered Excluded Locations hereunder.
(b)
The Development Quota that AD must satisfy during any renewal term of this
Agreement shall be determined in the manner and within the timeframe specified in Section 16.3
of this Agreement. AD and Franchisor shall revise this Appendix or its counterpart in the form
of Area Director Agreement that is executed by the parties, to reflect the new Development
Quota for any renewal term.
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Exhibit D: Area Director Agreement
24
APPENDIX B
GUARANTY AND ASSUMPTION OF
AREA DIRECTOR’S OBLIGATIONS
In consideration of, and as an inducement to, the execution of the above Area Director Agreement (the
“Agreement”) by __________________ (“Franchisor”), each of the undersigned (“Guarantors”) personally and
unconditionally (I) 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 20.4, of the Agreement shall govern this Guaranty, and such provisions are incorporated into this Guaranty
by this reference.
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Exhibit D: Area Director Agreement
25
IN WITNESS WHEREOF, each of the undersigned has affixed his or her signature, effective as of the ____ day of
_____________________.
PERCENTAGE OF OWNERSHIP
INTERESTS IN AREA DIRECTOR
GUARANTOR(S)
(Print Name)
(Signature)
Address
(Telephone)
(Print Name)
(Signature)
Address
(Telephone)
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Exhibit D: Area Director Agreement
26
APPENDIX C
STATEMENT OF OWNERSHIP
Area Director: _______________________________________________
Trade name (if different from above): ______________________
Form of Ownership
(Check One)
_____ 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 __________________ AD Business authorized
under the Area Director 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
AREA DIRECTOR
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Exhibit D: Area Director Agreement
27
APPENDIX D
ACKNOWLEDGMENT ADDENDUM TO
Mrs. Fields® AREA DIRECTOR AGREEMENT
As you know, you and we are entering into an Area Director Agreement for the operation of a Mrs. Fields® area director
franchise. The purpose of this Acknowledgment Addendum is to determine whether any statements or promises were made
to you that we have not authorized or that may be untrue, inaccurate or misleading, and to be certain that you understand the
limitations on claims that may be made by you by reason of the offer and sale of the franchise and operation of your area
director business. Please review each of the following questions carefully and provide honest responses to each question.
Acknowledgments and Representations*
1.
Except as exempted under Applicable Laws, did you receive a copy of our Disclosure Document (and all exhibits and
attachments) at least 14 calendar days prior to signing the Area Director Agreement? Check one: ( ) Yes ( ) No. If no,
please comment:
2.
Have you studied and reviewed carefully our Disclosure Document and Area Director Agreement? Check one: ( ) Yes
( ) No. If no, please comment:
3.
Except as exempted under Applicable Laws, did you receive a copy of the Area Director Agreement at least 7 calendar
days prior to the date on which the Area Director Agreement was executed? Check one: ( ) Yes ( ) No. If no, please
comment:
4.
If you answered no to question 3, but answered yes to question 1, were all of the changes to the Area Director Agreement
made
as
a
result
of
negotiations
that
you
initiated
with
us?
Check one: ( ) Yes ( ) No. If no, please comment:
5.
Did you understand all the information contained in both the Disclosure Document and Area Director Agreement?
Check one: ( ) Yes ( ) No. If no, please comment:
6.
Was any oral, written or visual claim or representation made to you which contradicted the disclosures in the Disclosure
Document? Check one: ( ) Yes ( ) No. If yes, please comment:
7.
Did any employee or other person speaking on behalf of Franchisor make any oral, written or visual representation,
claim, statement or promise to you that stated, suggested, predicted or projected financial performance, sales, revenues,
earnings, income or profit levels for any AD Business or Store location, or the likelihood of success of your franchised
business? Check one: ( ) Yes ( ) No. If yes, please state in detail the oral, written or visual representation:
MFDD – 03/14
Exhibit D: Area Director Agreement
28
8.
Do you understand that that the franchise granted is for the right to operate in the Territory, as stated in Subparagraph 3.3
of the Area Director Agreement, but that we and our Affiliates have the right to issue area director franchises outside of
your Territory and the right to issue Store franchises, operate company-owned Stores, and provide services to Store
franchisees both inside and outside of your Territory, as described in Subparagraph 3.4?
Check one: ( ) Yes
9.
( ) No. If no, please comment:
Do you understand that the Area Director Agreement contains the entire agreement between you and us concerning your
franchise, meaning that any prior oral or written statements not set out in the Area Director Agreement will not be
binding? Check one: ( ) Yes ( ) No. If no, please comment:
10. Do you understand that the success or failure of your business will depend in large part upon your skills and experience,
your business acumen, your location, the market for Stores and products in your Territory, interest rates, the economy,
inflation, the number of employees you hire and their compensation, competition and other economic and business
factors? Further, do you understand that the economic and business factors that exist at the time you begin operations
may change? Check one: ( ) Yes ( ) No. If no, please comment:
YOU UNDERSTAND THAT YOUR ANSWERS ARE IMPORTANT TO US AND THAT WE WILL RELY ON
THEM. BY SIGNING THIS ADDENDUM, YOU ARE REPRESENTING THAT YOU HAVE CONSIDERED
EACH QUESTION CAREFULLY AND RESPONDED TRUTHFULLY TO THE ABOVE QUESTIONS. IF MORE
SPACE IS NEEDED FOR ANY ANSWER, CONTINUE ON A SEPARATE SHEET AND ATTACH.
NOTE: IF THE RECIPIENT IS A CORPORATION, PARTNERSHIP, LIMITED LIABILITY COMPANY OR
OTHER ENTITY, EACH OF ITS PRINCIPAL OWNERS MUST EXECUTE THIS ACKNOWLEDGMENT.
*Such representations are not intended to nor shall they act as a release, estoppel or waiver of any liability incurred under the
Territory’s Franchise Disclosure Act, Franchise Registration and Disclosure Law and other Applicable Laws.
[Signatures on following page.]
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Exhibit D: Area Director Agreement
29
AREA DIRECTOR
AREA DIRECTOR
By:
By:
(signature)
(signature)
(Print Name)
(Print Name)
(Date)
(Date)
APPROVED ON BEHALF OF
__________________
By:
(signature)
(Print Name)
(Date)
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Exhibit D: Area Director Agreement
30
EXHIBIT E
CONFIDENTIALITY AGREEMENT
MFDD – 03/14
Exhibit E: Confidentiality Agreement
CONFIDENTIAL
Date: ___________
CONFIDENTIALITY AGREEMENT
This Confidentiality Agreement (the “Agreement”) is made as of this ___ day of _______________,
20___ (the “Effective Date”), by and between Mrs. Fields’ Franchising, LLC, and/or the subsidiary of Mrs.
Fields Famous Brands, LLC listed on the signature page below (collectively, “Company”), and
_____________________________ (hereinafter referred to as “You,” “you,” “your,” “yourself,” etc.).
Recitals
A.
You are an individual who is a franchisee or prospective franchisee of Company, or are
an individual who is an owner, officer, director, member, employee, agent and/or independent contractor
of an entity that is a franchisee or a prospective franchisee of Company (any such entity referred to herein
as “Guarantor”).
B.
As a result of being a franchisee or prospective franchisee of Company, or an owner,
officer, director, member, employee, agent and/or independent contractor of Guarantor, Company or its
affiliates may disclose certain Information (as defined below) to you, which is either non-public,
confidential or proprietary in nature.
C.
Disclosure of the Information may require that you travel to and/or enter onto the
property of Company and/or its affiliates, or their repsective agent(s) or designee(s).
D.
It is in the interest Company, you and any Guarantor that the Information be disclosed on
a confidential basis and otherwise pursuant to the terms set forth below.
Agreement
In light of the above recitals and for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, you, Company and any Guarantor agree as follows:
1.
Information which is either non-public, confidential or proprietary in nature delivered, in
whole or in part, before or after the date hereof in any form, including, without limitation, training
materials, product information, operations manuals, supplier and vendor lists, customer lists, videotapes,
films, drawings, diagrams and computer programs, together with analyses, compilations, studies, or other
documents prepared by Company, you or any Guarantor, or any of their respective owners, officers,
directors, members, employees, agents and/or advisers, which contain or otherwise reflect such
information, is hereinafter referred to as “Information.”
2.
If Company and you, or Company and any Guarantor, have entered into or shall hereafter
determine to enter into discussions or negotiations concerning a possible transaction involving Company
and you, or Company and any Guarantor, or an affiliate of Company or any Guarantor (a “Transaction”),
the existence and nature of such discussions and negotiations will also constitute Information for purposes
of this Agreement. In the case of a possible Transaction, each party hereto agrees to transmit Information
only to the owners, officers, directors, members, employees, agents and/or advisers of Company and any
Guarantor, who need to know the Information for the purpose of evaluating the Transaction and who are
informed of the confidential nature of the Information.
MFDD – 03/14
Exhibit E: Confidentiality Agreement
1
3.
All Information will be kept secret and confidential and will not be communicated,
divulged or disclosed to any other person or entity by the party receiving the Information (the “Receiving
Party”) in any manner whatsoever, in whole or in part, without the prior written consent of the party
providing the Information, (the “Disclosing Party”), and will not be used by the Receiving Party other
than in connection with evaluating or implementing a possible Transaction, or in the operation of a retail
store or outlet franchised by Company and operated by you or any Guarantor pursuant to a franchise
agreement with Company (a “Franchised Store”). The Receiving Party will be responsible for any breach
of any provision of this Agreement.
4.
All Information, and all copies thereof, including, without limitation, training materials,
product information, operations manuals, analyses, compilations, studies or other documents prepared by
the Receiving Party, and any of its owners, officers, directors, members, employees, agents or advisers,
will be returned to the Disclosing Party without retaining any copies thereof immediately upon written
request of the Disclosing Party.
5.
You will at all times treat the Information you receive from Company and its affiliates as
the sole and absolute property of Company and its affiliates.
6.
If, during the course of research and due diligence for assessing any possible Transaction,
or in connection with any training conducted by Company, you shall have occasion to visit Company or
any of its corporate offices or designated training facilities (each a “Visit”), then any information and
documentation obtained during such Visits shall be included in the definition of Information. You shall
bear any and all costs of Visits, including, without limitation, your airfare, lodging, living expenses,
wages and benefits, and costs of copying or obtaining Information. Company shall have no obligation to
reimburse you for any costs arising from Visits, whether or not Company and you, or Company and
Guarantor, eventually complete a Transaction. You assume all risks associated with your Visit and/or
your participation in any training conducted by Company, and you agree to defend and indemnify
Company and hold Company harmless from and against any and all claims, actions, damages, liability
and expenses arising from, out of or relating to your Visit and/or your participation in training. In
addition, except to the extent limited or prohibited by applicable law, you agree to release and forever
discharge Company and its affiliates, and all of their respective owners, officers, directors, members,
employees, agents, representatives, attorneys, insurers, successors, assigns, heirs and personal
representatives, from any and all claims, debts, covenants, liabilities, suits, judgments, damages, actions
and causes of action, whether known or unknown, direct or indirect, which you ever had, have or ever
may have or claim to have, arising out of or relating to any of your Visits or your participation in training.
7.
Nothing stated herein shall preclude the Receiving Party, and any of its owners, officers,
directors, members, employees, agents or advisers, from disclosing Information that it is legally
compelled (by deposition, interrogatory, request for documents, subpoena, civil investigative demand or
similar process) to disclose, provided that the procedures referred to in this paragraph 7 are satisfied. In
the event of a premature disclosure or any persons to whom Information pursuant to this Agreement is
made available becomes legally compelled to disclose Information, such party will provide the Disclosing
Party with prompt notice thereof so that the Disclosing Party may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this Agreement. In the event that
such protective order or other remedy is not obtained, or that the Disclosing Party waives compliance
with the provisions of this Agreement, any person legally compelled to disclose any Information will
furnish only that portion of such Information that such person is legally required to disclose and such
party shall use its reasonable best efforts to ensure that the information so disclosed is accorded
confidential treatment. In all events the parties agree to cooperate in determining what steps shall be
taken.
8.
The term “Information” does not include Information that (a) becomes generally
available to the public other than as a result of disclosure by the Receiving Party or anyone to whom the
MFDD – 03/14
Exhibit E: Confidentiality Agreement
2
Receiving Party transmits Information, (b) was available to the Receiving Party on a non-confidential
basis prior to its disclosure to the Receiving Party by the Disclosing Party, or (c) becomes available to the
Receiving Party on a non-confidential basis from a source other than the Disclosing Party who is not
bound by a confidentiality agreement or other obligation of secrecy with respect to such Information.
9.
For a period of two (2) years following the date of this Agreement, the parties hereto will
not, as a result of knowledge obtained from the Information, and will likewise direct any of their owners,
officers, directors, members, employees, agents, and advisors not to, use the Information to solicit or
recruit employees of the other parties hereto for employment or induce agents or employees of the other
parties hereto to terminate their employment. Nothing in this paragraph 9 shall prevent any of the parties
hereto from employing any employee of the other parties hereto if such employee contacts the one of the
other parties on his or her own initiative without any direct or indirect solicitation by or encouragement
from the other party (other than general solicitations in industry journals, national newspaper or similar
solicitations or publications).
10.
Neither the parties hereto nor their respective advisers makes any representation or
warranty as to the accuracy or completeness of Information or of any other written or oral communication
transmitted or made available pursuant to this Agreement, and each such party expressly disclaims any
and all liability based on such Information or communications or on omissions therefrom. Only those
representations or warranties that are made to a party in a Franchise Agreement executed between
Company and you, or Company or any Guarantor, or in a definitive Transaction Agreement (as
hereinafter defined) when, as and if it is executed, shall have any legal effect.
11.
This paragraph 11 applies if no Franchise Agreement nor definitive Transaction
Agreement has been executed between Company and you, or Company and any Guarantor. The parties
understand and agree that no contract or agreement shall be deemed to exist between the parties unless
and until a definitive Transaction Agreement has been executed. Until execution of such a definitive
Transaction Agreement, other than the obligations set forth in this Agreement, the parties have no legal
obligation of any kind with respect to any possible Transaction. Each party may conduct negotiations in
any manner as it reasonably determines, including entering into a Transaction Agreement with another
party or terminating negotiations with the other parties hereto. For purposes of this Agreement, a
definitive Transaction Agreement is not a letter of interest, term sheet or any other preliminary agreement
or understanding but only a final definitive agreement. Except as expressly set forth in this Agreement,
none of the parties hereto are committed in any way with respect to the matters discussed by them, unless
and until a definitive Transaction Agreement with respect thereto is executed, nor shall this Agreement be
construed as an obligation on the part of the parties hereto to negotiate such a definitive Transaction
Agreement, or be liable for any expenses of the other parties.
12.
The obligations in this Agreement shall be binding upon the parties as well as any
successor assigns.
13.
It is further understood and agreed that no failure or delay by any party to this Agreement
in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof nor
shall any single or partial exercise thereof preclude any other or further exercise of any right, power or
privilege hereunder. The provisions of this Agreement may be modified or waived only by a separate
writing, expressly modifying or waiving such provision, and executed by all parties to this Agreement.
14.
Each party recognizes that irreparable injury may result to a Disclosing Party and its
business and property if a Receiving Party breaches any provision of this Agreement and that money
damages would not be a sufficient remedy for any such breach. Each party therefore agrees that if any act
in violation of any provision hereof occurs, the Disclosing Party shall be entitled, in addition to such other
remedies, damages and relief as may be available under applicable law, to an injunction prohibiting the
MFDD – 03/14
Exhibit E: Confidentiality Agreement
3
Receiving Party from engaging in any such act or specifically enforcing this Agreement, as the case may
be.
15.
This Agreement is the complete and exclusive statement of the agreement between the
parties and supersedes all prior written and oral communications and agreements, if any relating to the
subject matter hereof.
16.
This Agreement shall be governed by and construed in accordance with the laws of the
State of Colorado, without giving effect to the principles of conflict of laws thereof. This Agreement may
be executed in counterparts, each of which when so executed and delivered shall be an original, but such
counterparts shall constitute one and the same instrument.
17.
If you are an owner, officer, director, member, employee, agent and/or independent
contractor of a Guarantor, Guarantor must sign the Undertaking and Guarantee; Release attached to this
Agreement.
The undersigned, by executing this Agreement, agree to be bound by the provisions of this Agreement as
of the date first above written.
[MFFB SUBSIDIARY]
YOU
By
By
Its
Its
Your Contact information: (Please Print)
Name:
Phone:
Relationship to Guarantor:
Address:
City:
State:
Fax:
email:
Zip:
Best time to contact:
MFDD – 03/14
Exhibit E: Confidentiality Agreement
4
UNDERTAKING AND GUARANTEE; RELEASE
Guarantor acknowledges and agrees that you are an owner, officer, director, member, employee,
agent and/or independent contractor of Guarantor, and are signing the foregoing Confidentiality
Agreement (the “Agreement”) as a benefit to and at the request of Guarantor. Accordingly, in
consideration of the execution of the Agreement by you, and for other good and valuable consideration,
Guarantor for itself, its heirs, legal representatives, successors and assigns hereby agrees to sign this
Undertaking and Guarantee; Release (the “Guarantee”) and guarantee the full and timely performance by
you of each of your obligations arising under the Agreement, including, without limitation, your obligations
to defend, indemnify and hold harmless Company and its affiliates in accordance with paragraph 6.
In addition, the Guarantor hereby agrees to be personally bound by each and every condition and
term contained in the Agreement as though the Guarantor had executed an agreement containing the identical
terms and conditions of the Agreement. The Guarantor agrees to pay all attorneys’ fees and costs and other
expenses incurred in connection with the enforcement of the Guarantee or with any negotiations related to
such enforcement.
Further, except to the extent limited or prohibited by applicable law, Guarantor agrees to release
and forever discharge Company and its affiliates, and all of their respective owners, officers, directors,
members, employees, agents, representatives, attorneys, insurers, successors, assigns, heirs and personal
representatives, from any and all claims, debts, covenants, liabilities, suits, judgments, damages, actions
and causes of action, whether known or unknown, direct or indirect, which Guarantor ever had, has or
ever may have or claim to have, arising out of or relating to any of your Visits or your participation in
training.
The Guarantor agrees that each and every provision, covenant, and condition of the Guarantee shall
inure to the benefit of Company’s successors and assigns.
GUARANTOR
By
Its
MFDD – 03/14
Exhibit E: Confidentiality Agreement
5
EXHIBIT F
ASSIGNMENT, ASSUMPTION AND CONSENT
MFDD – 03/14
Exhibit F: Assign, Assumption and Consent
[#/#
]
ASSIGNMENT, ASSUMPTION AND CONSENT
THIS ASSIGNMENT, ASSUMPTION AND CONSENT (the “Assignment”) is made and
entered into as of this _____ day of
, 20__, by and among
________________________________ (together with its predecessors-in-interest, the “Franchisor”),
whose principal address is 8001 Arista Place, Suite 600, Broomfield, Colorado 80021,
_____________________________ (individually or collectively “Assignor”), whose principal address is
____________________________, and _____________________ (individually or collectively
“Assignee”), whose principal address is _____________________.
A.
Assignor wishes to sell, assign or convey to Assignee that certain franchised location
described as: the ________ store located at or in ________________________________ (the “Store”),
currently identified by Franchisor as Store No. ________, and to transfer and convey to Assignee all of
Assignor’s rights, title, interest and obligations in and to that certain Franchise Agreement (the
“Franchise Agreement”) for the operation of the Store, dated as of _________________ (the
“Transfer”).
B.
Under the terms of the Franchise Agreement, Franchisor has the right to consent to the
Transfer before it occurs, and further has a right of first refusal pertaining to the Store and the Franchise
Agreement.
For good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1.
Agreement Assigned. Subject to Franchisor’s consent as provided herein, Assignor
hereby sells, assigns, transfers and conveys to Assignee all of its rights, title, interest and obligations in
and to the Franchise Agreement, to have and to hold said rights, title, interest and obligations for the term
of the Franchise Agreement and any renewal thereof consistent with its terms and conditions. Subject to
Franchisor’s consent as provided herein, Assignee hereby unconditionally assumes and accepts such
assignment and agrees to perform when and as due each and every obligation of Assignee thereunder.
Any capitalized terms not otherwise defined herein shall have the same meanings as set forth in the
Franchise Agreement.
2.
Representations.
(a)
Assignor and Assignee represent and warrant to Franchisor that they have
disclosed to Franchisor all of the material terms of the Transfer and that they have the authority to
execute this Assignment.
(b)
Assignee represents and warrants to Franchisor that it has independently
conducted all necessary due diligence to make an informed decision respecting the purchase of
assets and business related to the Store.
(c)
Assignor represents and warrants to Franchisor that Assignor owns all rights, title
and interest, free and clear of any mortgage, lien or claim, in and to the Franchise Agreement and
the business related to the Store, and has not assigned any or all of its interest in the Franchise
Agreement or the business related to the Store to any third party. Assignor represents and
warrants to Franchisor that Assignor will not retain any interest in the Store after the Closing.
MFDD – 03/14
Exhibit F: Assign, Assumption and Consent
1
(d)
Assignor further represents and warrants to Franchisor that Assignor is not in
default of any of the terms of the Franchise Agreement as of the Closing.
(e)
Assignor further represents and warrants to Franchisor that the owner of the
principal business premises for the Store has consented to the assignment, including Assignor’s
assignment to Assignee of the Lease, if any, for the Store premises.
3.
Franchisor’s Consent. Based on the information provided by Assignor and Assignee,
Franchisor hereby (a) waives its right of first refusal to acquire the Store and the Assignor’s interests in
the Franchise Agreement, and (b) gives its consent for the Transfer upon the terms and conditions set
forth herein; provided, however, that its consent does not constitute an express or implied warranty by
Franchisor of the successful operation or profitability of the Store by Assignee following the Transfer.
4.
Purchase and Sale Agreement; Conditions to Closing; Escrow. In consideration of the
Franchisor’s consent to the Transfer, Assignor and Assignee agree that the closing of the Transfer and
Assignee’s purchase of the Store from Assignor (the “Closing”) shall not occur, and Assignee shall not
take legal possession of the Store or accept assignment of the Franchise Agreement or the lease or
sublease pertaining to the Store premises (the “Lease”) until each of the following conditions have been
satisfied by them, or waived by the Franchisor:
(a)
The following items have been delivered to a licensed escrow agent or other third
party selected by Assignor and Assignee and acceptable to Franchisor no later than five (5) days
prior to the date that Assignee is scheduled to commence Franchisor’s training program (the
“Escrow Date”):
(1)
A check or certified funds in the amount equal to the total of:
(i)
All past-due royalty and service fees, continuing fees,
advertising fund contributions and any other amounts owed by Assignor to
Franchisor or any of its affiliates, pursuant to the Franchise Agreement,
Lease, or any other agreement between them;
(ii)
All past-due amounts owed to vendors or suppliers pertaining to
the Store if payment is necessary to accomplish the Closing in accordance
with any applicable bulk sales or similar laws, or where the consent of such
vendors or suppliers is required by Franchisor; and
(iii)
The Franchisor’s then-current Transfer Fee (or any balance
thereof not already paid to Franchisor).
(2)
The following documents, fully and properly signed by Assignor and/or
Assignee, to be effective as of the date of the Closing (the “Closing Date”)
without condition except as set forth herein:
(i)
This Assignment;
(ii)
The following Franchise Documents required by Franchisor
pertaining to the Closing:
[list]
(iii)
Instructions acceptable to the parties pertaining to disbursement
of all funds and documents upon the Closing Date, and removing all
MFDD – 03/14
Exhibit F: Assign, Assumption and Consent
2
conditions to the Closing except satisfaction of the conditions set forth in
Sections 4(b), (c) and (d) hereof; and
(iv)
Any other documents between Assignor and Assignee necessary
to complete the Closing as set forth herein.
(b)
Assignee has successfully completed Franchisor’s training program and has been
approved by Franchisor to complete the Transfer upon the proposed terms;
(c)
Assignor and/or Assignee have satisfied any other conditions to obtaining
Franchisor’s consent to the Transfer as set forth in or contemplated by the Franchise Agreement;
and
(d)
Assignor and/or Assignee has deposited into escrow any and all other documents
and funds necessary to complete the Closing as set forth herein, including without limitation, any
purchase price to be paid to Assignor at the Closing.
Unless otherwise agreed in writing by the Franchisor, the Closing Date shall occur no later than 15 days
following satisfaction of the conditions to Closing set forth in sections 4(b) and 4(c). Franchisor shall not
be required to sign any documentation until the later to occur of the Closing Date, or a date within 30
days after the Closing Date, provided in such case that Franchisor delivers into escrow no later than the
Closing Date a notice that Assignor and Assignee have met each of Franchisor’s conditions to obtaining
its consent to the Transfer. For the period of time from the Escrow Date to the Closing Date, Assignor
shall continue to operate the Store, or cause it to be operated, in compliance with Franchisor’s system
standards and the Franchise Agreement, and Franchisor may continue to enforce the terms of the
Franchise Agreement against Assignor. Without limiting the foregoing, during such period, Franchisor
shall have the right to draft Assignor’s account for any current royalties, continuing fees, advertising fund
contributions and other fees that become due under the Franchise Agreement.
5.
Agreement to Execute New Franchise Documents. Assignee acknowledges that
Franchisor may condition its consent to the Transfer upon Assignee’s agreement to execute Franchisor’s
current form of franchise agreement and related documents which, if fully executed, shall replace the
Franchise Agreement in its entirety. The new franchise agreement may contain terms that are materially
different from those set forth in the Franchise Agreement, including without limitation, different royalty,
service fees, continuing fees, advertising fund contributions, and other fees. Assignee acknowledges that
it has received Franchisor’s current form of disclosure document at least 14 calendar days prior to the
earlier to occur of the Escrow Date and the date on which this Assignment was executed. Assignee
further acknowledges that if Franchisor materially altered the provisions of the Franchise Agreement and
this Assignment (except as a result of negotiations you initiated) Assignee has received the agreements at
least 7 calendar days prior to the earlier to occur of the Escrow Date and the date on which this
Assignment was executed.
6.
Mutual Release. Subject to the full and complete occurrence of the Closing, and effective
as of the Closing Date, Assignor on Assignor’s behalf and for any of Assignor’s wholly-owned or
controlled corporation, subsidiary, and any shareholders, partners, officer, directors, employees agents,
successors, assigns, heirs, executors and administrators of any of them (the “Assignor Parties”), hereby
remise, release, and forever discharge generally the Franchisor and any affiliate, wholly-owned or
controlled corporation, subsidiary, successor or assign thereof and any shareholder, officer, director,
employee, or agent of any of them (the “Franchisor Parties”), and the Franchisor does hereby remise,
release, and forever discharge generally the Assignor Parties, from any and all claims, demands, damages,
and injuries, whether presently known or unknown, suspected or unsuspected, disclosed or undisclosed,
actual or potential, which any of the Assignor Parties or the Franchisor Parties may have, or may hereafter
claim to have had or to have acquired against the other of whatever kind or character arising out of or
MFDD – 03/14
Exhibit F: Assign, Assumption and Consent
3
related to the Transfer, the Store, the Franchise Agreement, any Lease or other agreements between the
Assignor and any of the Franchisor Parties related to the Store or the Franchise Agreement, and arising
from or related to any period prior to and including the date hereof (the “Released Claims”), including
generally any and all claims at law or in equity, those arising under the common law or state or federal
statutes, rules or regulations such as, by way of example only, franchising, securities and antitrust statutes,
rules or regulations, in any way arising out of or connected with the Released Claims, and further promise
never from this day forward, directly or indirectly, to institute, prosecute, commence, join in, or generally
attempt to assert or maintain any action arising from or related to the Released Claims against any of the
other parties, in any court or tribunal of the United States of America, any state thereof, or any other
jurisdiction. Not released by the Franchisor Parties are (1) current or past due debts on account,
owed either to the Franchisor or any affiliate of the Franchisor, and (2) unpaid principal and
accrued interest under any promissory note made by Assignor or Assignee and held by any of the
Franchisor Parties, or any holder to which any note may be negotiated or assigned. Not released by
the Franchisor Parties or the Assignor Parties against the other are (1) claims arising from their
obligations or performance under this Assignment, and (2) any claims arising from or related to
any relationship or agreement between them not included in the Released Claims.
7.
Indemnification.
(a)
Assignor, for itself, its heirs, successors and assigns, agrees to indemnify and
hold harmless each of the Franchisor Parties against any and all liabilities, damages, actions,
claims, costs (including reasonable attorneys’ fees) or expenses of any nature resulting, directly
or indirectly, from any of the following: (i) any misrepresentations or breach of warranty by
Assignor under this Assignment; (ii) the transfer of the Franchise Agreement; or (iii) any claim,
suit or proceeding initiated by or for a third party or third parties, now or in the future, that arises
out of or relates to Assignor’s operation of the Store prior to the Closing.
(b)
Assignee, for itself, its heirs, successors and assigns, agrees to indemnify and
hold harmless each of the Franchisor Parties against any and all liabilities, damages, actions,
claims, costs (including reasonable attorneys’ fees) or expenses of any nature resulting, directly
or indirectly, from any of the following: (i) any misrepresentations or breach of warranty by
Assignee under this Assignment; or (ii) the transfer of the Franchise Agreement.
8.
Assignor Post-Assignment and Post-Termination Obligations. Assignor acknowledges
and agrees that those obligations and duties which have effect on a post-assignment or a post-termination
basis and which are expressly set forth in the Franchise Agreement or implied by their nature therein shall
be performed and observed hereafter to the extent and for a term as expressed or implied in the Franchise
Agreement.
9.
Subordination. Assignor agrees to subordinate any right to receive any payment from
Assignee to any rights or claims of the Franchisor to receive or for payments from Assignee. Any
payments received by Assignor as a result of any sale of assets connected with or by virtue of this
Assignment shall be subject to settlement of all accounts Assignor has with the Franchisor, and Assignee
shall not pay any material portion of such purchase price to Assignor without first obtaining the
Franchisor's written consent.
10.
Miscellaneous. This Assignment, and the documents referred to herein, constitute the
entire agreement among the parties with respect to the subject matter hereof. No amendment will be
binding unless in writing and signed by the party against whom enforcement is sought. All
representations, warranties, agreements and all other provisions of this Assignment which by their terms
or by reasonable implication are intended to survive the closing of this Transfer will survive it.
MFDD – 03/14
Exhibit F: Assign, Assumption and Consent
4
11.
Counterparts. This Assignment may be executed in more than one counterpart, each of
which shall constitute an original copy.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have
executed this Assignment to be effective as of the date first set forth above.
Assignor:
By:
Title:
Assignee, as the purchaser of an existing franchised location in Franchisor’s franchise
system, by signing where indicated below, understands and acknowledges the absolute right of the
Franchisor, and companies affiliated with the Franchisor to sell Franchisor branded products and
similar products wherever the Franchisor, or any affiliated company, may from time to time deem
appropriate. Such products may include, but shall not be limited to, the products that franchisees,
including Assignee, are authorized to sell under their franchise agreements, and other products of
whatever type that the Franchisor or any affiliated company may from time to time deem
appropriate for sale through franchised, traditional, non-traditional or other distribution methods.
Such methods of distribution may include, but shall not necessarily be limited to, sales by
franchisees of the Franchisor or its affiliates, sales at sports arenas and stadiums, department
stores, airports, toll road travel plazas, hospitals, office buildings, schools and colleges, and other
non-store venues, as well as sales to wholesalers and/or distributors for resale.
Assignee:
By:
Title:
Not binding without execution by an authorized officer of the Franchisor.
Franchisor:
By:
Title:
MFDD – 03/14
Exhibit F: Assign, Assumption and Consent
5
EXHIBIT G
TERM PURCHASE ADDENDUM
MFDD – 03/14
Exhibit G: Term, Purchase Addendum
TERM PURCHASE ADDENDUM TO
FRANCHISE AGREEMENT
This is a Term Purchase Addendum (the “Addendum”) to the Franchise Agreement between the
parties described as follows:
Franchise
Renewal
Agreement
dated
___________________,
20__
between
_______________________________
(“you”
or
the
“Franchisee”)
and
__________________________ (“us”, “we” or “Franchisor”), dated __________________,
20__ (the “Franchise Agreement”)
This Addendum is considered to be part of the Franchise Agreement. All capitalized terms used in this
Addendum but not defined herein shall have the same the meaning as ascribed to them in the Franchise
Agreement. The Preambles set forth below are an integral part of this Addendum.
1.
Preambles. You own and operate a franchised location (the “Store”) under and by virtue
of the Franchise Agreement. The current (renewal) term (the “Term”) of the Franchise Agreement will
expire on _______________ (the “Expiration Date”). Prior to the Expiration Date, you wish to transfer
or relocate your Store, or extend the Term of the Franchise Agreement (the “Transaction”). You are
required by the Franchise Agreement to obtain our consent to the Transaction. We have evaluated the
Transaction and have determined that as a condition to providing our consent, you or your transferee (as
the case may be, the “Term Purchaser”) must purchase additional term for the operation of the Store
beyond the Expiration Date. You acknowledge that there may be other conditions to our consent, and that
this Addendum is not itself evidence of our consent to the Transaction. Its purpose is to allow you or
your transferee, as the Term Purchaser, to purchase at our standard term purchase rates as of the date of
this Addendum, additional term for operation of the Store beyond the Expiration Date, subject to
completion and final closing of the Transaction and pursuant to the other provisions of this Addendum.
2.
Term Purchase. No later than the date that we sign this Addendum, the Term Purchaser
will pay to us the amount of $__________________ (the “Purchase Price”). In consideration of full
payment of the Purchase Price, we hereby grant the Term Purchaser the right to extend the Franchise
Agreement for a period of [_____] months (the “Extended Term”) following the Expiration Date without
payment of any additional term purchase fee. Notwithstanding the foregoing, however, Term Purchaser’s
right to operate the Store for the Extended Term is subject to the Term Purchaser, no later than the
Expiration Date: (a) complying with all of our conditions of renewal as set forth in our then-current
Franchise Disclosure Document and then-current Franchise Agreement as of the Expiration Date (except
payment of any renewal fee); and (b) signing our then-current form of Franchise Agreement, modified as
necessary to reflect that it is an extension agreement only, and does not grant additional term or renewal
rights upon expiration of the Extended Term.
3.
Other Provisions. Our execution of this Addendum and/or our consent to the
Transaction does not constitute an express or implied representation or warranty by us of the
successful operation or profitability of the Store at its current or any relocated premises during the
Term, the Extended Term or any other period of operation, or the success or viability of the
Transaction. This Addendum may be signed in counterparts and/or by facsimile signature. The
Franchise Agreement shall remain in full force and effect according to its terms, as modified by this
Addendum.
MFDD – 03/14
Exhibit G: Term, Purchase Addendum
1
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the day
and year set forth below their signatures, to be effective as of the date the Franchisor signs below.
FRANCHISOR:
TERM PURCHASER:
___________________________________
a Delaware limited liability company
By:
By:
Its:
Its:
Date: _____________________________
Date: _______________________________
===========================================================================
To be completed by Franchisor:
Term Purchase in connection with:
______ Transfer;
______ Relocation; or
______ Approved Extension of Franchise Agreement
Term Purchaser is:
______ Current Franchisee; or
______ Transferee
Extended Term Expiration Date has been recorded in
Franchise Development Database by _________(initial)
MFDD – 03/14
Exhibit G: Term, Purchase Addendum
2
EXHIBIT H
LEASE ADDENDUM
MFDD – 03/14
Exhibit H: Lease Addendum
LEASE ADDENDUM – FRANCHISEE LEASE
FOR VALUE RECEIVED, the undersigned (“Assignor”) assigns, transfers and sets over to MRS.
FIELDS FRANCHISING, LLC, a wholly-owned subsidiary of MRS. FIELDS FAMOUS BRANDS, LLC, a
Delaware limited liability company (“Assignee”), all of Assignor’s right and title to and interest in that
certain lease, a copy of which is attached as Appendix A (the “Lease”), respecting premises commonly
known as ______________________________. This assignment is for collateral purposes only, and, except
as specified in this document, Assignee will have no liability or obligation of any kind whatsoever arising
from or in connection with this assignment or the Lease unless and until Assignee takes possession of the
premises the Lease demises according to the terms of this document and assumes Assignor’s obligations
under the Lease.
Assignor represents and warrants to Assignee that it has full power and authority to assign the Lease
and that Assignor has not previously assigned or transferred, and is not otherwise obligated to assign or
transfer, any of its interest in the Lease or the premises it demises.
Upon Assignor’s default under the Lease or under the franchise agreement for a retail outlet between
Assignee and Assignor (the “Franchise Agreement”), or in the event Assignor defaults under any document
or instrument securing the Franchise Agreement, Assignee has the right to take possession of the premises the
Lease demises and expel Assignor from the premises. In that event, Assignor will have no further right and
title to or interest in the Lease but will remain liable to Assignee for all past due rents Assignee is required to
pay Lessor to effectuate the assignment this document contemplates.
Assignor agrees that it will not suffer or permit any surrender, termination, amendment or
modification of the Lease without Assignee’s prior written consent. Throughout the term of the Franchise
Agreement, Assignor agrees that it will elect and exercise all options to extend the term of or renew the Lease
not less than thirty (30) days before the last day upon which the option must be exercised, unless Assignee
agrees otherwise in writing. Upon Assignee’s failure to agree otherwise in writing, and upon Assignor’s
failure to elect to extend or renew the Lease as required, Assignor appoints Assignee as its true and lawful
attorney-in-fact with the authority to exercise the extension or renewal options in the name, place and stead of
Assignor for the sole purpose of effecting the extension or renewal.
ASSIGNOR:
Dated:
ENTITY SIGNATURE:
a __________________________ corporation
By:
Its:
INDIVIDUAL SIGNATURE(S):
MFDD – 03/14
Exhibit H: Lease Addendum
1
CONSENT TO LEASE ADDENDUM AND AGREEMENT OF LESSOR
The undersigned Lessor under the Lease:
Agrees to notify Assignee in writing of, and upon Assignee’s failure to cure, any default by Assignor
under the Lease;
Agrees that Assignee will have the right, but not the obligation, to cure any default by Assignor
under the Lease within 30 days after Lessor’s delivery of notice of the default under section (a) above;
Consents to the collateral assignment in the Lease Addendum and agrees that, if Assignee takes
possession of the premises the Lease demises and confirms to Lessor that it has assumed the Lease as tenant,
Lessor will recognize Assignee as tenant under the Lease, provided that Assignee cures within the 30-day
period noted in section (b) above Assignor’s defaults under the Lease; and
Agrees that Assignee may further assign the Lease to or enter into a sublease with a person, firm or
corporation who agrees to assume the tenant’s obligations under the Lease and is reasonably acceptable to
Lessor and that, upon that assignment, Assignee will have no further liability or obligation under the Lease as
assignee, tenant or otherwise, other than to certify that the additional assignee or sublessee operates the
premises the Lease demises as a franchised retail outlet of Assignee.
DATED:
, Lessor
MFDD – 03/14
Exhibit H: Lease Addendum
2
EXHIBIT I
SUBLEASE AGREEMENT; ASSIGNMENT AND ASSUMPTION OF SUBLEASE
MFDD – 03/14
Exhibit I: Sublease Agreement
SUBLEASE AGREEMENT; ASSIGNMENT AND ASSUMPTION OF SUBLEASE
ASSIGNMENT AND ASSUMPTION
OF SUBLEASE AGREEMENT
THIS ASSIGNMENT AGREEMENT is made and entered into as of ________________, 20__, by and
among Mrs. Fields’ Original Cookies, Inc., a Delaware corporation (“Lessor”), having a principal place of
business at 8001 Arista Place, Suite 600, Broomfield, Colorado 80021, ___________________________, a
__________________________
(“Assignor”),
having
a
principal
place
of
business
at
___________________________________,
and
_____________________________,
a____________________________,
(“Assignee”),
having
a
principal
place
of
business
at
__________________________________________. Lessor, Assignor and Assignee are sometimes referred to
herein as the “parties.”
In exchange for the mutual covenants, consideration, warranties, and representations herein set forth, the
parties agree as follows:
1.
Assignment and Assumption. Assignor shall assign and Assignee shall assume all right,
title, interest, duties, covenants, and obligations under that certain Sublease Agreement between Lessor
and Assignor dated __________________________ (“Sublease”) and pertaining to the premises located
at
, referred to as Space # _______, containing
approximately _______ square feet, along with Storage Area Space # _______, containing approximately
_______ square feet (collectively, the “Premises”).
2.
Effective Date. The effective date of this Assignment Agreement shall be the closing of
the purchase of the franchised concepts at the Premises by Assignee from Assignor and the approval of
the purchase by Lessor.
3.
Acceptance of Premises. Upon assignment hereunder, Assignee shall accept the
Premises on an “AS IS, WHERE IS” basis provided the condition of the Premises is consistent with the
terms of the Sublease.
4.
Representations and Warranties. Both Lessor and Assignor, each for itself, hereby
represent and warranty to Assignee that (a) there are no defaults under the Master Lease (as defined in the
Sublease) that are known to them or that have been declared by either of them under the Lease, (b) except
for the current rent due to Lessor under the Sublease, which will be paid on or before execution of this
Assignment Agreement, there are no defaults, performance, or payments past due under the Sublease, (c)
the document attached hereto is the actual and complete Sublease Agreement evidencing the agreement
between the parties, (d) the monthly minimum rent paid by Assignor to Lessor each month is currently
$_________, and, (e) the Master Lease commenced on ____________ and will expire ___________.
Further, Assignee acknowledges that Lessor’s current policy is to require payment of the base rent on or
before the 25th day of each month, in advance for the following month.
5.
Successors and Assigns. The terms and conditions of this Assignment Agreement shall
be binding upon and inure to the benefit of any and all of the parties’ successors, assigns, heirs, executors,
administrators, affiliates, controlled corporations, subsidiaries, parent corporations, directors, officers,
shareholders, or employees, as the case may be, but may not be assigned by Assignor or Assignee without
Lessor’s prior written consent.
6.
Lessor’s Consent to Assignment; Assignor’s Guarantee in Event of Default. Lessor
hereby consents to this assignment and assumption; provided, however: (a) effective as of the date of this
Assignment Agreement, Assignee will fully perform under, observe and remain in compliance with each
of the terms of the Sublease and the Master Lease as tenant thereunder; and (b) for a period of ____
months from the date hereof (the “Guarantee Period”), Assignor will fully and unconditionally
MFDD – 03/14
Exhibit I: Sublease Agreement
1
guarantee Assignee’s full performance under the Sublease, including, without limitation, prompt payment
of all amounts due to Lessor thereunder and the obligation to operate the franchised concepts at the
Premises in accordance with the franchise agreements applicable thereto. Lessor agrees to give Assignor
the same notice of default that Lessor provides to Assignee under the Sublease during the Guarantee
Period, and provide Assignor with an additional 10 days beyond any cure period provided to Assignee in
such notice to cure or cause Assignee to cure any such default. At the end of the Guarantee Period,
provided that Assignee is then in material compliance under the Sublease, that certain Guaranty dated
____________, signed by Assignor’s principals in favor of Lessor pertaining to the Sublease, shall
automatically terminate.
7.
Security Deposit. Assignor releases all claims to any security deposit paid by Lessor or
Assignor on the Premises, and any such deposit shall be accounted for pursuant to the Sublease.
8.
Survival of Obligations. All obligations of the parties herein set forth, which by their
nature survive the closing of the transactions herein contemplated, shall continue in full force with full
effect until they are satisfied or by the nature expire.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, have
executed this Assignment Agreement in three (3) counterparts as of the date first above written.
ASSIGNEE:
LESSOR:
_______________________________,
a _____________________________
MRS. FIELDS’ ORIGINAL COOKIES, INC.,
a Delaware corporation
By:
Title:
By:
Title:
ASSIGNOR:
____________________________________,
a ___________________________
By:
Title:
By:
Title:
MFDD – 03/14
Exhibit I: Sublease Agreement
2
SUBLEASE
AND
MASTER LEASE
MFDD – 03/14
Exhibit I: Sublease Agreement
3
SUBLEASE AGREEMENT
THIS SUBLEASE (the “Sublease”) is between _________________________ [INSERT
APPROPRIATE AFFILIATE OF MRS. FIELDS FRANCHISING, LLC], a _________________
corporation, with its principal business address at 8001 Arista Place, Suite 600, Broomfield, Colorado
80021 (referred to in this Sublease as “Sublessor” and like terms) and
,a
with
its
principal
business address at
(referred to in this Sublease as “you” and like terms).
SUBLESSOR’S AGREEMENT WITH YOU: By signing this Sublease, you and Sublessor
agree to all of the terms and provisions in this Sublease and in the Exhibits to this Sublease. By signing
this Agreement, you are also affirming that you understand and accept the Statement of Facts,
Fundamental Terms, and Acknowledgements in Article 1 of this Agreement.
ARTICLE 1
STATEMENT OF FACTS; FUNDAMENTAL TERMS; AND ACKNOWLEDGMENTS
1.1.
Date of Sublease. The date of this Sublease is _______________, 20___.
1.2.
Franchise Agreement. Sublessor’s Affiliate, Mrs. Fields Franchising, LLC (“MFF”), a
Delaware limited liability company, is the franchisor of the Mrs. Fields franchise system. MFF, as
franchisor, and you, as franchisee, entered into a Franchise Agreement, dated __________, 20___ (the
“Franchise Agreement”), for a Mrs. Fields Cookie Store located at
(the “Premises”);
1.3.
The Master Lease. Sublessor, as tenant, and __________________________________, a
_____________________, as landlord (the “Master Landlord”), entered into a lease for the Premises,
dated ____________, _____ (the “Master Lease”). A copy of the Master Lease is attached to this
Sublease as Exhibit A.
1.4.
Certain Fundamental Provisions.
(a)
Base Rent. “Base Rent” means the minimum monthly rental amount payable by
the tenant pursuant to Section ____ of the Master Lease, as that amount may be adjusted from
time to time.
(b)
Percentage Rent. “Percentage Rent” means the percentage rent payable by the
tenant pursuant to Section ___ of the Master Lease.
(c)
Security Deposit. “Security Deposit” means the sum of $______________, to
be deposited with Sublessor as required by Section 5.1 of this Sublease.
1.5.
Acknowledgment. You acknowledge that you have read the Master Lease and
understand that the Master Lease contains duties and obligations in addition to the duties and obligations
of this Sublease and that you are liable to perform the duties and obligations of the tenant in the Master
Lease.
MFDD – 03/14
Exhibit I: Sublease Agreement
4
ARTICLE 2
SUBLEASE OF PREMISES
2.1.
Sublease of Premises to you. Sublessor is subleasing the Premises to you and you are
subleasing the Premises from Sublessor on the terms and conditions set forth in this Sublease.
2.2.
Acceptance of Premises; Possession.
(a)
Inspection and Acceptance.
Prior to entering into this Sublease, you
acknowledge that you made a full and complete inspection of the Premises. You agree that you
are subleasing the Premises and that you accept the Premises, “AS IS, WHERE IS”, with all
defects (patent, latent or otherwise) and with no representations or warranties by Sublessor as to
the fitness, suitability, habitability, or usability of the Premises, as to compliance of the Premises
with any laws, regulations, or ordinances, or as to the presence or absence of any Hazardous
Materials (as defined in Section 6.8) on, about or adjacent to the Premises. In addition, the
Premises are subleased subject to current taxes and assessments, reservations in patents and all
rights-of-way, easements, covenants, conditions, restrictions, obligations, liens, encumbrances,
and liabilities of record as of the date of this Sublease, and to all zoning and building code
requirements and other governmental laws, rules, and regulations.
(b)
this Sublease.
Possession. Possession of the Premises will be delivered to you on the date of
2.3.
Sublease Subject to Master Lease. Your rights and interests under this Sublease are
subject and subordinate to the Master Lease and to all renewals, replacements and extensions of the
Master Lease.
2.4.
Duties of the Master Landlord under the Master Lease. It is expressly understood and
agreed that Sublessor does not assume and will not have any of the obligations or liabilities of the Master
Landlord under the Master Lease and that Sublessor is not making any of the representations or
warranties made by the Master Landlord in the Master Lease. With respect to work, services, repairs and
restoration or the performance of other obligations required of the Master Landlord under the Master
Lease, Sublessor’s sole obligation with respect to such obligations is to request the same from the Master
Landlord upon written request from you and to use reasonable efforts to obtain the same from the Master
Landlord. Sublessor is not liable in damages, nor will rent abate under this Sublease, on account of any
failure by the Master Landlord to perform the obligations and duties imposed on the Master Landlord
under the Master Lease. Nothing contained in this Sublease will be construed to create privity of estate or
contract between you and the Master Landlord.
2.5.
Assumption of Duties under Master Lease.
(a)
Your Duties. As between you and Sublessor, you hereby assume and agree to be
bound by all of the covenants, obligations, and agreements of the tenant set forth in the Master
Lease and by any terms and limitations imposed upon the tenant under the Master Lease, except
as otherwise provided in Section 2.5(b) below. You agree to indemnify, defend (with counsel
acceptable to Sublessor), and hold Sublessor and its Affiliates (as this term is defined in the
Franchise Agreement), and Sublessor’s and its Affiliates’ Related Parties (as defined below)
harmless for, from and against any and all claims, demands, liabilities, obligations, damages,
penalties, causes of action, costs and expenses, including attorneys’ fees and expenses, imposed
upon, incurred by or asserted against Sublessor or its Affiliates, or any of Sublessor’s or its
Affiliates’ Related Parties which arise out of any violations under the Master Lease occurring as a
result of your acts or omissions or the acts or omissions of any of your Related Parties or any
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Exhibit I: Sublease Agreement
5
violations by you or any of your Related Parties of this Sublease or which may arise out of or are
in any manner connected with your or any of your Related Parties’ use and occupancy of the
Premises pursuant to this Sublease, a breach by you of this Sublease or a breach by you of the
provisions of the Master Lease. You agree that (a) the terms of this Sublease do not grant you
any rights of first refusal, any options to purchase, or any extensions or renewal rights with
respect to the Master Lease; and (b) you will not use or occupy the Premises in a manner contrary
to or inconsistent with any of the provisions of the Master Lease. You agree that Sublessor may
deliver to the Master Landlord any and all submissions, notices, or other information received by
Sublessor from you under this Sublease or the Franchise Agreement. As used in this Sublease,
“Related Parties” means the officers, directors, shareholders, employees, agents, successors,
assigns, contractors, and invitees of the particular person or entity.
(b)
Sublessor’s Duties. Sublessor is to timely make all Rent payments due to the
Master Landlord under the Master Lease, but only to the extent that you first make those
payments to Sublessor, as required under Article 4 of this Sublease.
2.6.
Sublessor’s Access to Premises. Sublessor and its agents will have free and full access to
the Premises at all reasonable times for the purpose of examining or inspecting the condition of the
Premises, for the purpose of determining if you are complying with this Sublease, for the purpose of
performing Sublessor’s obligations under this Sublease, and for the purpose of posting such reasonable
notices as Sublessor may desire to protect its rights.
2.7.
Quiet Enjoyment. Conditioned upon your payment of the Rent as provided for in this
Sublease and performing and fulfilling all the covenants, agreements, conditions, and provisions in this
Sublease to be kept, observed or performed by you, you may at all times during the Term, peaceably,
quietly, and exclusively have, hold, and enjoy the Premises, subject to the terms and conditions of this
Sublease and the Master Lease.
ARTICLE 3
TERM
3.1.
Term of Sublease.
(a)
Term of Sublease. The term of this Sublease (the “Term”) will commence on
the date of this Sublease and will end on the earlier of (i) the date of expiration (without renewal)
of the Franchise Agreement or (ii) that day which is one day prior to the expiration of the Master
Lease. However, the Sublease Term may be ended earlier as provided in Sections 8.8, 8.9 and
12.2 of this Sublease.
(b)
Extension of Master Lease. If the Master Lease term would expire before
expiration of the term of the Franchise Agreement and the Master Lease contains renewal
options, at your written request and if no Event of Default has occurred and is continuing under
this Sublease, Sublessor will cooperate with you to extend or replace the Master Lease; provided,
however, that any such extension or replacement lease must be in your name and release
Sublessor from all liability therefrom from the original date of expiration of the Master Lease.
Sublessor gives you no assurance that you will be able to obtain such an extension or replacement
lease.
3.2.
Surrender of Premises. Upon termination of this Sublease, you must immediately
surrender to Sublessor peaceable possession of the Premises, and all buildings, improvements and fixtures
then located on the Premises (ordinary depreciation, reasonable wear and tear, and casualty loss insured
under the casualty insurance required by Article 8 excepted), subject, however, to your rights of removal
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Exhibit I: Sublease Agreement
6
as provided in Section 3.3. All keys will be returned to Sublessor upon surrender. If you do not return all
keys, you must pay all necessary costs in changing the locks to the Premises.
3.3.
Removal of Personal Property and Fixtures. You may, if not in default under any of the
terms of this Sublease or the Master Lease and on or before the date of termination, remove from the
Premises any and all of your personal property, including furniture, equipment, and fixtures belonging to
you. However, you must repair any damage to any improvements on the Premises caused by such
removal.
3.4.
Holding Over. If the Premises are not surrendered at the end of the Term, you will
indemnify Sublessor and its Affiliates, and Sublessor’s and its Affiliates’ Related Parties for, from and
against any loss or liability resulting from delay by you in surrendering the Premises, including any
claims made by the Master Landlord or any succeeding tenant based on your delay. If you or any of your
Related Parties should remain in possession of the Premises after the expiration of the Term without
executing a new lease, then such holding over will be construed as a tenancy at will, subject to all the
covenants, terms, provisions and obligations of this Sublease except that the Base Rent (as defined below)
during any holdover tenancy will be equal to 200% of the original Base Rent. Nothing contained in this
Sublease will be construed as Sublessor’s permission for you to hold over or as limiting Sublessor’s
remedies against you as a holdover tenant.
ARTICLE 4
RENT
4.1.
Base Rent. You agree to pay the Base Rent to Sublessor. Base Rent will be prorated for
any calendar month of the Term which consists of only a portion of the month. Base Rent will adjust and
be payable in accordance with the terms of Section 4.4 below and otherwise in accordance with the terms
of Section 4.4 below and otherwise in accordance with the terms and conditions set forth in the Master
Lease.
4.2.
Percentage Rent. You agree to pay the Percentage Rent to Sublessor. Any Percentage
Rent due and owing under this Sublease shall be determined, computed, and shall be payable in
accordance with the terms of Section 4.4 below and otherwise in accordance with the terms and
conditions set forth in the Master Lease.
4.3.
Additional Rent and Charges. You also agree to pay to Sublessor all additional rent and
other charges which may be payable by the tenant under the Master Lease, including taxes, insurance,
deposits, common area maintenance charges, association dues, marketing fees, and utility charges (all of
which are collectively referred to in this Sublease as “Additional Rent”). As used in this Sublease, the
term “Rent” means Base Rent, Percentage Rent, Additional Rent and all other amounts otherwise due
and payable by you to Sublessor under this Sublease.
4.4.
Payment Date. You agree to pay the Base Rent and all Additional Rent at least 30 days
in advance of the date on which any of those payments are due to the Master Landlord under the Master
Lease. You agree to pay Percentage Rent at least 10 days in advance of the date on which any payment of
Percentage Rent is due to the Master Landlord under the Master Lease. All other Rent payments shall be
made at the times specified in this Sublease.
4.5.
No Offsets. All Rent will be paid without further notice or demand and without any
deduction, abatement, counterclaim or set-off.
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Exhibit I: Sublease Agreement
7
ARTICLE 5
SECURITY DEPOSIT
5.1.
Security Deposit. Upon the execution of this Sublease, you will deposit the Security
Deposit with Sublessor, as security for the full performance by you of your obligations under this
Sublease. If an Event of Default occurs, Sublessor will be entitled, at Sublessor’s option, to apply or
retain all or any part of the Security Deposit for the payment of any rent or other sum in default, any other
amount which Sublessor may spend or become obligated to spend because of your default, or to
compensate Sublessor for any other loss or damage which Sublessor may suffer because of your default.
If any portion of the Security Deposit is so used or applied, you will, within five days after written
demand from Sublessor, deposit cash with Sublessor in an amount sufficient to restore the Security
Deposit to its original amount. The Security Deposit is not a prepayment of any Rent or other amounts
payable by you under this Sublease. Sublessor is not required to keep the Security Deposit separate from
Sublessor’s and its Affiliates’ general funds, and you will not be entitled to interest on the Security
Deposit. If you fully and faithfully perform every provision of this Sublease, then within 30 days after
your surrender of the Premises, Sublessor will return the Security Deposit, or any remaining balance,
together with a written explanation of the application of the funds, to you. If Sublessor terminates its
interest in this Sublease, Sublessor will transfer the Security Deposit to its successor in interest, giving
notice to you. You agree that, upon a transfer of the Security Deposit, Sublessor will have no further
liability to return or account for it. Sublessor’s rights with respect to the Security Deposit are in addition
to and will not preclude concurrent, alternative or successive exercise of any other rights or remedies
available to Sublessor.
ARTICLE 6
USE; CONSTRUCTION; MAINTENANCE AND REPAIR
6.1.
Permitted Use. You agree that the Premises will be used exclusively for the purpose of
operating a franchised Mrs. Fields Cookie Store in accordance with the Franchise Agreement (the
“Permitted Use”) and for no other purpose. In addition, at all times, you will use the Premises in
accordance with the terms of the Master Lease and all applicable laws, rules, codes, regulations and
ordinances.
6.2.
Continuous Occupancy and Operation. You acknowledge that your continued occupancy
of the Premises and the regular conduct of your business in the Premises are of utmost importance to the
other tenants at the property of which the Premises are a part and to the Master Landlord for the efficient
and economic supply of services and utilities at such property and for the maintenance of Percentage
Rent. Accordingly, you agree that throughout the Term you will continuously and uninterruptedly
occupy, use and operate the entire Premises as a Mrs. Fields Cookie Store. You acknowledge that
Sublessor is executing the Sublease in reliance on this agreement, and that your agreement of continuous
occupancy and operation is a material element inducing Sublessor to execute this Sublease. You also
agree to use your best efforts to maximize sales at the Premises.
6.3.
No Waste; Compliance with Law. You agree not to commit or permit any waste of the
Premises. You agree to comply with all laws, ordinances, regulations, building permits, governmental
stipulations and conditions, covenants, conditions and restrictions, public or private, affecting the
Premises and not to suffer or permit any act to be done in or about the Premises in violation thereof.
6.4.
Alterations and Improvements. Any alterations or improvements to the Premises will be
at your expense and in full compliance with all of the terms and conditions of the Master Lease and the
Franchise Agreement. All such work will conform to all applicable building codes, zoning and other
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Exhibit I: Sublease Agreement
8
governmental regulations and restrictions and will be undertaken and completed diligently, in a good and
workmanlike manner.
6.5.
Maintenance, Repair, Construction and Restoration Obligations. During the Term, you, at
your sole cost and expense, will observe and perform all maintenance, repair, construction, and
restoration obligations imposed on the tenant by the Master Lease. All such work will conform to all
applicable building codes, zoning and other governmental regulations and restrictions, to the requirements
of the Franchise Agreement, and will be undertaken and completed diligently, in a good and workmanlike
manner.
6.6.
Mechanics’ Liens. The parties agree, and notice is hereby given, that you are not
Sublessor’s agent for the construction, alteration, maintenance, or repair of any improvements on the
Premises, the same being done at your sole direction and expense. All contractors, materialmen,
mechanics, and laborers are advised that they must look only to you for the payment of any charge for
work done or material furnished on the Premises during the Term. You have no right, authority, or power
to bind Sublessor or its interest in the Premises for the payment of any claim for labor or material, or for
any charge or expense, incurred by you as to improvements, alterations, maintenance, or repairs on or to
the Premises, and you will post notices on the Premises during all such work that Sublessor is not
responsible for any material and labor used on the Premises.
6.7.
Indemnification Provisions. You will hold harmless and indemnify Sublessor and its
Affiliates, and Sublessor’s and its Affiliates’ Related Parties for, from and against any costs, expenses and
liabilities for any mechanics’, laborers’ or materialmen’s liens which may be filed against the Premises
during the Term. You also agree to indemnify and hold Sublessor and its Affiliates, and Sublessor’s and
its Affiliates’ Related Parties harmless for, from and against any and all claims for damages on the part of
the owners, tenants, or occupants of adjacent lands, buildings, or space arising from the uses of the
Premises by or activities of you or any of your Related Parties pursuant to this Article 6, and you agree to
take all necessary, prudent and proper measures to protect the land, improvements, and space of such
adjacent owners, tenants and occupants from injury of any nature arising from any such use or activity.
6.8.
Environmental Compliance. You agree to comply with all environmental and industrial
hygiene laws, rules, and regulations relating to or affecting the Premises or any operations or
improvement on the Premises. You agree that you will not use, generate, manufacture, store or dispose
of, in, under or about the Premises or transport to or from the Premises any Hazardous Materials, other
than in compliance with all applicable law and after any and all necessary permits and licenses have been
obtained and are in force. For purposes of this Sublease, “Hazardous Materials” include (i) flammable,
explosive, or radioactive materials, hazardous wastes, toxic substances, or related materials and (ii) all
substances defined as “hazardous substances,” “hazardous materials,” or “toxic substances” in the
Comprehensive Environmental Response Compensation and Liability Act of 1980, as amended, 42
U.S.C. § 9601, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. §1901, et seq.; the
Resource Conservation and Recovery Act, 42 U.S.C. §6901, et seq; the regulations promulgated
thereunder and in corresponding provisions of state law.
6.9.
Environmental Indemnity. You will be solely responsible for, and will indemnify and
hold harmless Sublessor and its Affiliates, and Sublessor’s and its Affiliates’ Related Parties for, from and
against any loss, damage, cost, expense or liability directly or indirectly arising out of or attributable to
the use, generation, storage, release, threatened release, discharge, or disposal by you or any of your
Related Parties of Hazardous Materials on, under or about the Premises arising subsequent to the date on
which this Sublease was executed, including without limitation: (a) all consequential and incidental
damages; (b) the costs of any required or necessary repairs, cleanup or detoxification of the Premises, and
the preparation and implementation of any closure, remedial or other required plans; and (c) all
reasonable costs and expenses in connection with clauses (a) and (b), including but not limited to
attorneys’ fees.
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Exhibit I: Sublease Agreement
9
ARTICLE 7
LIENS AND ENCUMBRANCES
7.1.
Encumbering the Premises. During the Term, you will not cause or permit any lien,
claim, charge or encumbrance of any nature or description whatsoever to attach to or encumber your
interest in this Sublease, the Premises or any part thereof.
7.2.
Subordination.
(a)
Subordination. This Sublease, at Sublessor’s option, will be subordinate to any
mortgage, deed of trust, or any other hypothecation or security now or in the future placed by
Sublessor upon its interest in the Premises and to any and all advances made on the security
thereof and to all renewals, modifications, consolidations, replacements and extensions thereof.
If any mortgagee or trustee elects to have this Sublease prior to the lien of its mortgage or deed of
trust, and gives written notice of that election to you, this Sublease will be deemed prior to such
mortgage or deed of trust, whether this Sublease is dated prior or subsequent to the date of said
mortgage or deed of trust or the date of recording of that mortgage or deed of trust.
(b)
Execution of Certain Documents. You agree to execute any documents required
to effectuate an attornment or a subordination or to make this Sublease prior to the lien of any
mortgage or deed of trust, as the case may be. If you fail to execute such documents within ten
days after written demand, Sublessor may execute such documents on your behalf as your
attorney-in-fact. You hereby make, constitute and irrevocably appoint Sublessor as your
attorney-in-fact and in your name, place and stead, to execute such documents in accordance with
this Section 7.2(b).
ARTICLE 8
GENERAL INDEMNITY; INSURANCE; CASUALTY; CONDEMNATION
8.1.
Non-Liability and General Indemnity Provisions. You agree that Sublessor and its
Affiliates, and Sublessor’s and its Affiliates’ Related Parties are not liable for, are released from, and you
agree to indemnify and hold Sublessor and its Affiliates, and Sublessor’s and its Affiliates’ Related
Parties entirely harmless for, from and against each and every claim, demand, liability, loss, cost, damage
and expense, including attorneys’ fees and court costs, arising out of any accident or other occurrence
causing injury to or death of persons or damage to property by reason of construction or maintenance of
any improvements on the Premises, of any additions, alterations or renovations thereto, or due to the
condition of the Premises, or the use or neglect thereof by you or any of your Related Parties, or any other
person, or otherwise occurring upon the Premises. You further agree to indemnify and hold Sublessor
and its Affiliates, and Sublessor’s and its Affiliates’ Related Parties and Sublessor’s respective interests in
the Premises entirely harmless for, from and against all claims, demands, liabilities, damages and
penalties arising out of any failure of you to comply with any of your obligations under this Sublease,
including attorneys’ fees and court costs. These provisions, as well as all other indemnity provisions in
this Sublease, will survive the expiration of this Sublease or the earlier termination thereof.
8.2.
Casualty Insurance. You will, at all times during the Term and at your sole cost and
expense, keep all of your goods, fixtures, furniture, equipment, and other personal property on the
Premises insured to the extent of 100% of the full replacement cost against loss or damage from fire and
other risks normally insured against in extended risk coverage.
8.3.
Liability Insurance. You will, at all times during the Term and at your sole cost and
expense, maintain in force an insurance policy or policies which will name Sublessor and its Affiliates,
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Exhibit I: Sublease Agreement
10
and you as insureds, and the Master Landlord as an additional insured, insuring against all liability
resulting from injury or death occurring to persons in or about the Premises, the liability under such
insurance to be not less than $_________ for one person injured, $___________ for any one accident, and
$_________ for property damage. The original of such policy or policies will remain in your possession.
However, Sublessor will have the right to receive from you, upon written demand, a duplicate policy or
policies of any such insurance.
8.4.
Workmens’ Compensation Insurance. You will also maintain and keep in force all
employees’ and workmens’ compensation insurance on your employees as required under the applicable
workmen’s compensation laws of the state in which the Premises are located.
8.5.
Other Insurance. You agree, at your sole cost and expense and at all times during the
Term, to maintain in force such other and additional insurance policies as are required under the Master
Lease, the Franchise Agreement, or as a prudent tenant in your position would maintain, or as Sublessor
may reasonably require from time to time.
8.6.
Insurance Policy Requirements. All insurance policies required under this Article will
contain provisions to the effect that the insurance will not be canceled or modified without at least thirty
days prior written notice to Sublessor and that no modification will be effective unless approved in
writing by Sublessor. All such policies will be issued by a company or companies rated “A-XII” or better
by Best’s Insurance Guide and authorized to do business in the state in which the Premises are located.
8.7.
Mutual Waiver of Subrogation Rights. You and Sublessor each hereby release and
relieve the other and the Related Parties of the other, and waive their entire right of recovery against the
other and the Related Parties of the other, for loss or damage arising out of or incident to the perils
insured against under this Article 8, which perils occur in, on or about the Premises, whether due to the
negligence of Sublessor, its Affiliates or you or the respective Related Parties of Sublessor, its Affiliates
or you but only to the extent of insurance proceeds actually paid. You will, upon obtaining the policies of
insurance required hereunder, give notice to and obtain waiver of subrogation agreements or
endorsements from the insurance carrier or carriers concerning the foregoing mutual waiver of
subrogation.
8.8.
Fire and Other Casualty. If the improvements constituting part of the Premises are
damaged or destroyed, in whole or in part, by fire or other casualty at any time during the Term, Rent
shall be abated and this Sublease terminated only to the extent that Rent is abated under the Master Lease
or the Master Lease is terminated in such circumstances. Sublessor does not have any repair or
restoration obligations in such circumstances and you will be required to rely exclusively on the
obligations of the Master Landlord under the Master Lease.
8.9.
Condemnation. If the whole or any part of the Premises are taken or condemned under
the right of eminent domain (or agreement in lieu thereof), Rent shall be abated and this Sublease
terminated only to the extent that Rent is abated under the Master Lease or the Master Lease is terminated
in such circumstances. Sublessor does not have any repair or restoration obligations in such
circumstances and you will be required to rely exclusively on the obligations of the Master Landlord
under the Master Lease.
8.10. Compensation Awards. All compensation or damages awarded for any taking will
belong to and be the property of Sublessor and the Master Landlord, except for any specific award to you
for fixtures and improvements installed by you at your sole cost and expense.
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Exhibit I: Sublease Agreement
11
ARTICLE 9
UTILITIES
9.1.
Adequacy of Utility Services. You acknowledge that you have inspected the Premises
and the available utility services and have determined that the available utility services are adequate for
your purposes.
9.2.
Utility Charges. You agree to pay when due and prior to delinquency any and all charges
for water, gas, electricity, telephone service, sewage service, garbage service and any other utilities used
in or upon the Premises during the Term and agree not to permit any charges of any kind to accumulate or
become a lien against the Premises.
ARTICLE 10
TAXES AND ASSESSMENTS
10.1. Sales Taxes. You will pay to Sublessor, at the same time as any other Rent payment is
made to Sublessor, an amount equal to the amount of all gross proceeds taxes, transaction privilege taxes,
sales taxes, or like taxes now or hereafter levied or assessed by the United States, the state in which the
Premises are located, or any municipal corporation or political subdivision upon such Rent, or the
payment or receipt thereof, or which Sublessor will be caused to pay as a result of the receipt thereof,
except that you will not be obligated to pay to Sublessor any amount on account of its income taxes.
10.2. Ad Valorem Taxes. In addition to all other sums payable pursuant to this Sublease, you
will pay during the entire Term all ad valorem taxes, assessments, and charges and other governmental
levies and charges, general and special, ordinary and extraordinary, unforeseen as well as foreseen, of any
kind, which are assessed or imposed upon your trade fixtures, equipment, and other property located on
the Premises (the “Personal Property Taxes”). You agree to pay the Personal Property Taxes when due
and prior to any delinquency.
10.3. Other Taxes. You agree to pay any and all other governmental taxes, license fees,
assessments, or charges imposed on the business conducted by you on or from the Premises.
ARTICLE 11
ASSIGNMENT AND SUBLETTING; SALE OF LEASEHOLD BY SUBLESSOR
11.1. Assignments. You may not assign all or part of this Sublease without Sublessor’s prior
written consent, which consent will be at Sublessor’s sole and absolute discretion. Any attempted
assignment will be null and void, will constitute an immediate default under this Sublease (without any
cure period), and will, at Sublessor’s election, result in the immediate termination of this Sublease. Your
interest in this Sublease is not assignable by operation of law. Any transfer of a “Controlling Interest” in
you, as that term is defined in the Franchise Agreement, will be deemed to be an assignment of this
Sublease within the meaning of this Section 11.1. Any assignment permitted by this 11.1 will not release
you from your obligation to continue to perform all covenants contained in this Sublease after such
assignment, and you and the assignee will be required to sign an Assignment of Sublease in a form
acceptable to Sublessor and Master Landlord.
11.2. Subleases. You may not further sublet all or any portion or portions of the Premises
without first having obtained Sublessor’s written consent, which consent will be at Sublessor’s sole and
absolute discretion. Any attempted sublease will be null and void, will constitute an immediate default
under this Sublease (without any cure period), and will, at Sublessor’s election, result in the immediate
termination of this Sublease. Any such permitted sublease will not release you from your obligation to
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Exhibit I: Sublease Agreement
12
perform all covenants contained in this Sublease, and you and your subtenant will be required to sign a
sublease in a form acceptable to Sublessor and Master Landlord.
11.3. Sale of Leasehold by Sublessor. Sublessor may sell, transfer, assign or otherwise dispose
of all or any portion of Sublessor’s interest in the Premises or this Sublease without your consent. Upon
any such sale, transfer, assignment or disposal and assumption by the transferee of Sublessor’s
obligations under this Sublease, Sublessor will be automatically relieved of all obligations under this
Sublease after the date of transfer. This Sublease will not be affected by any such sale, transfer,
assignment or disposal of Sublessor’s interest, and you agree to attorn to Sublessor’s purchaser or
assignee.
ARTICLE 12
DEFAULTS AND REMEDIES
12.1. Events of Default. You will be in default under this Sublease if any of the following
occur (an “Event of Default”):
(a)
Failure to Pay Monetary Amounts. You fail to fully and timely pay any Rental or
other monetary amount due under this Sublease and such failure continues for a period of 10 days
beyond the due date for such payment;
(b)
Non-Monetary Breaches. You fail to fully and timely comply with any other
provision of this Sublease and, except as otherwise provided in Sections 11.1 and 11.2 or in this
Section 12.1, such failure continues for a period of 15 days after written notice of the failure is
delivered to you;
(c)
Breach of Master Lease. An act or event occurs which would constitute a default
by the tenant under the Master Lease (unless the default occurs as a result of Sublessor’s breach
of the provisions of Section 2.5(b) of this Sublease), regardless of any notice or cure period or of
whether or not the Master Landlord seeks to enforce the applicable default provision of the
Master Lease;
(d)
Breach of Franchise and Other Agreements. You are in default under any of the
provisions of the Franchise Agreement or any other notes or agreements between you and
Sublessor, MFF or any of Sublessor’s other Affiliates;
(e)
Repeated Breaches. If on two or more occasions during any twelve month period
or on five occasions during the term of this Sublease, you fail to fully and timely pay any required
amounts when due, without regard to any cure period provided in this Sublease;
(f)
Bankruptcy. You file a petition in bankruptcy or for reorganization or for an
arrangement pursuant to any federal or state bankruptcy law or any similar federal or state law, or
are adjudicated a bankrupt or make an assignment for the benefit of creditors or admit in writing
your inability to pay your debts generally as they become due, or if a petition or answer proposing
the adjudication of you as a bankrupt or your reorganization pursuant to any federal or state
bankruptcy law or any similar federal or state law is filed in any court and you consent to or
acquiesce in the filing thereof or such petition or answer is not discharged or denied within 60
days after the occurrence of any of the foregoing;
(g)
Other Insolvency Events. If a receiver, trustee or liquidator of you or of all or
substantially all of your assets or your leasehold interest in the Premises is appointed in any
proceeding brought by you, or if any such receiver, trustee or liquidator is appointed in any
proceeding brought against you and is not discharged within 60 days after the occurrence thereof,
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Exhibit I: Sublease Agreement
13
or if you consent to or acquiesce in such appointment (with any event described in this
Section 12.1(g) and 12.1(f) above being referred to as an “Insolvency Event”);
(h)
Abandonment or Failure to Continuously Operate. You abandon the Premises or
otherwise fail to continuously operate your business at the Premises, with your absence from the
Premises for a period for three consecutive days to be conclusive evidence that the Premises have
been abandoned and that you have breached the covenant of continuous operation and occupancy,
unless the Premises have been closed for a purpose approved by Sublessor in advance, in writing,
or because of fire, flood, or other casualty or government order.
12.2. Remedies. Upon the occurrence of an Event of Default, Sublessor may, at its option, reenter the Premises and repossess and enjoy the same and all the improvements thereon free of any claims
or interest of you whatsoever, with or without terminating this Sublease. In addition, Sublessor will be
entitled to avail itself of whatever remedies it may have at law or in equity for the collection of any
unpaid Rent, past and future, or for any damages that Sublessor may have sustained by reason of the
breach by you of the terms and conditions of this Sublease. No termination of this Sublease by forfeiture
nor taking or recovering possession of the Premises will deprive Sublessor of any other action, right, or
remedy against you.
12.3. Interest on Late Payments. All Rent not paid when due will bear interest from the due
date until paid at a rate equal to the lesser of the highest applicable legal rate for open account business
credit, or 1.5% per month. Interest is due and payable when the late payment is made.
12.4. Late Fees. To compensate Sublessor for the increased administrative expense of
handling late payments, you agree to pay a $100 late charge for each delinquent payment, such late
charge to be paid when the delinquent payment is made. This late charge is in addition to interest and
other collection costs and expenses.
12.5. Sublessor’s Right to Take Certain Actions. If you fail to comply with any of the terms of
this Sublease, Sublessor, in its sole judgment, but without any obligation to do so, may do any or all
things required of you by any of the provisions of this Sublease or the Master Lease and incur and pay
expenses in connection with its actions. Any amounts expended by Sublessor pursuant to this Section
will be immediately due and payable by you to Sublessor and will bear interest at a rate equal to the lesser
of the highest applicable legal rate for open account business credit, or 1.5% per month. Interest is due
and payable when the payment is made. Any action by Sublessor under this Section will not constitute a
waiver of any default by you and will be in addition to any other right or remedy available to Sublessor
pursuant to this Sublease or at law or in equity.
12.6. Waiver of Breach. No waiver by Sublessor or you of the breach of any provision of this
Sublease will be construed as a waiver of any preceding or succeeding breach of the same or any other
provision of this Sublease, nor will the acceptance of a Rent payment by Sublessor during any period of
time in which you are in default in any respect other than payment of that Rent be deemed to be a waiver
of such default. Only full payment of any amount, together with any applicable interest and late charges,
will satisfy your payment obligations with respect to the amount due. No endorsement or statement on
any check or any letter accompanying any check or payment made hereunder shall be deemed or
construed as an accord and satisfaction of the full amount due, and Sublessor may accept such check or
payment without prejudice to its right to recover the balance of such amount or pursue any remedy which
would otherwise be available.
MFDD – 03/14
Exhibit I: Sublease Agreement
14
ARTICLE 13
GENERAL PROVISIONS
13.1. Notices. Notices will be in writing and will be given by personal delivery, by deposit in
the United States mail, certified mail, return receipt requested, postage prepaid, or by express delivery
service, freight prepaid. Notices will be delivered or addressed to Sublessor and you at the addresses set
forth on the first page of this Sublease or at such other address as a party may designate in writing. The
date notice is deemed to have been given, received and become effective will be the date on which the
notice is delivered, if notice is given by personal delivery, or the date of actual receipt, if the notice is sent
through the United States mail or by express delivery service or by facsimile transmission.
13.2. Attorneys’ Fees. If any action is brought by any party to this Sublease in respect of its
rights under this Sublease, the prevailing party will be entitled to reasonable attorneys’ fees and court
costs as determined by the court. In the event that any person who is not be a party to this Sublease
institutes an action against you in which Sublessor are involuntarily and without cause joined as a party,
you will reimburse Sublessor for all attorneys’ fees incurred by it in connection therewith.
13.3.
Estoppel Certificates.
(a)
Agreement to Provide Estoppel Certificate. You will at any time upon 10 days’
prior written notice from Sublessor execute, acknowledge and deliver to Sublessor a statement in
writing (i) certifying that this Sublease is unmodified and in full force and effect (or, if modified,
stating the nature of such modifications and certifying that this Sublease, as so modified, is in full
force and effect) and the date to which the rent and other charges are paid in advance, if any; (ii)
acknowledging that there are not, to your knowledge, any uncured defaults on Sublessor’s part
under this Sublease, or specifying such defaults if any are claimed; and (iii) acknowledging that
you have unconditionally accepted the Premises, are in possession thereof, and no defense to
enforcement of the Sublease exists. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises.
(b)
Your Failure to Provide Certificate. At Sublessor’s option, Sublessor may treat
your failure to deliver such statement as conclusive evidence (i) that this Sublease is in full force
and effect, without modification, except as may be represented by Sublessor; (ii) that there are no
uncured defaults in Sublessor’s performance; (iii) that not more than one month’s rent has been
paid in advance; (iv) that you are in possession of the Premises; and (v) that no defenses exist to
the enforcement of the Sublease.
13.4. Severability. The invalidity of any provision of this Sublease, as determined by a court
of competent jurisdiction, will in no way affect the validity of any other provision of this Sublease.
13.5. Recording. Neither this Sublease nor any memorandum of this Sublease will be recorded
or filed without Sublessor’s prior written consent, which may be given or withheld by Sublessor in its
sole and absolute discretion.
13.6. Cumulative Remedies. No remedy or election hereunder will be deemed exclusive but
will, wherever possible, be cumulative with all other remedies under this Sublease or at law or in equity.
13.7. Construction. The titles which are used following the number of each Section are so used
only for convenience in locating various provisions of this Sublease and will not be deemed to affect the
interpretation or construction of such provisions. This Sublease will not be construed for or against
Sublessor or you. References in this Sublease to “Articles” and “Sections” refers to the Articles and
Sections of this Sublease, unless otherwise noted.
MFDD – 03/14
Exhibit I: Sublease Agreement
15
13.8. Successors. Subject to the restrictions contained in Article 11, this Sublease and all of
provisions hereof will be binding upon and inure to the benefit of the successors and assigns of Sublessor
and you.
13.9. Governing Law. The terms, conditions, covenants, and agreements herein contained will
be governed, construed, and controlled according to the laws of the state in which the Premises are
located.
13.10. Broker’s Commission. You and Sublessor represent and warrant to each other that there
are no claims for brokerage commissions or finder’s fees in connection with this Sublease and each agrees
to indemnify the other for, from and against all liabilities arising from any claims, including any
attorneys’ fees connected therewith, relating to claims arising out of the other’s actions.
13.11. Time is of the Essence. Time is of the essence of this Sublease and in the performance of
all of the covenants and conditions hereof.
13.12. Survival. All obligations of Sublessor and you which expressly or by their nature survive
the termination of this Sublease will continue in full force and effect subsequent to the termination until
they are satisfied in full or by their nature expire. Included in the obligations that will survive the
termination of this Lease are the indemnity provisions of Sections 2.5(a), 3.4, 6.7, 6.9 and 8.1.
13.13. Entire Agreement. This Sublease sets forth all the promises, inducements, agreements,
conditions, and understandings between Sublessor and you relative to the Premises, and there are no
promises, agreements, conditions, or understandings, either oral or written, express or implied, between
Sublessor and you other than as set forth in this Sublease. No subsequent alteration, amendment, change,
or addition to this Sublease will be binding upon Sublessor or you unless in writing and signed by both
Sublessor and you. Parol evidence will never be admissible in any court, tribunal, arbitration or
governmental agency to modify, amend or vary the terms of this Sublease.
IN WITNESS WHEREOF, you and Sublessor have executed this Sublease as of the day and
year written above.
SUBLESSOR:
SUBLESSEE:
__________________________________,
a _________________________________
_____________________________________.
a ____________________________________
By:
Its:
By:
Its:
STATE OF ________
COUNTY OF _________
)
: ss.
)
The foregoing instrument was acknowledged before me this _____ day of ____________, 20___,
by ____________________, the _______________ of ____________________, a _______________, on
behalf of the ____________________.
My Commission Expires:
______________________
MFDD – 03/14
Exhibit I: Sublease Agreement
__________________________________________
NOTARY PUBLIC
Residing at_________________________________
16
STATE OF ________________ )
: ss.
COUNTY OF ______________ )
The foregoing instrument was acknowledged before me this _____ day of ____________, 20___,
by ____________________, the _______________ of ____________________, a _______________, on
behalf of the ____________________.
My Commission Expires:
______________________
MFDD – 03/14
Exhibit I: Sublease Agreement
__________________________________________
NOTARY PUBLIC
Residing at_________________________________
17
EXHIBIT A TO SUBLEASE AGREEMENT
PRIME LEASE
[To be attached]
MFDD – 03/14
Exhibit I: Sublease Agreement
18
EXHIBIT B TO SUBLEASE AGREEMENT
GUARANTY
In consideration of, and as an inducement to, the execution by _________________________
[INSERT APPROPRIATE AFFILIATE OF MRS. FIELDS FRANCHISING, LLC] (“Sublessor”) of the
foregoing Sublease Agreement (the “Sublease Agreement”) with ________________________________
________________________________ (“Sublessee”) dated _________, 20___, and for other good and
valuable consideration, each of the undersigned for themselves, their heirs, legal representatives, successors
and assigns (collectively the “Guarantors”) do hereby unconditionally, individually, jointly and severally
guarantee to Sublessor, and to its successors and assigns, the full, complete and timely payment and
performance of each and all of the terms, covenants and conditions of the Sublease Agreement (and any
modification or amendment to the Sublease Agreement) to be kept and performed by Sublessee during the
term of the Sublease Agreement, including without limitation the payment of all rents and other fees and
charges accruing pursuant to the Sublease Agreement.
Each of the Guarantors further agrees as follows:
1.
The Guarantors, individually, jointly and severally, shall be personally bound by each and
every condition and term contained in the Sublease Agreement as though each of the Guarantors had
executed a sublease agreement containing the identical terms and conditions of the Sublease Agreement.
This Guaranty shall continue in favor of Sublessor notwithstanding any extension, modification, or
alteration of the Sublease Agreement, and notwithstanding any assignment of the Sublease Agreement,
with or without the Sublessor’s consent. No extension, modification, alteration or assignment of the
Sublease Agreement shall in any manner release or discharge the Guarantors, and each of the Guarantors
consents to any such extension, modification, alteration or assignment.
2.
This Guaranty will continue unchanged by the occurrence of any Insolvency Event, as
defined in the Sublease Agreement, with respect to Sublessee or any assignee or successor of Sublessee or
by any disaffirmance or abandonment of the Sublease Agreement by a trustee in bankruptcy of Sublessee.
Each Guarantor’s obligation to make payment or render performance in accordance with the terms of this
Guaranty and any remedy for the enforcement of this Guaranty will not be impaired, modified, changed,
released or limited in any manner whatsoever by any impairment, modification, change, release or
limitation of the liability of Sublessee or its estate in bankruptcy or of any remedy for the enforcement
thereof, resulting from the operation of any present or future provision of the U.S. Bankruptcy Act or
other statute, or from the decision of any court or agency.
3.
Each Guarantor’s liability under this Guaranty is primary and independent of the liability
of Sublessee and any other Guarantors. Each Guarantor waives any right to require Sublessor to proceed
against any other person or to proceed against or exhaust any security held by Sublessor at any time or to
pursue any right of action accruing to Sublessor under the Sublease Agreement. Sublessor may proceed
against each Guarantor and Sublessee, jointly and severally or may, at its option, proceed against each
Guarantor without having commenced any action, or having obtained any judgment, against Sublessee or
any other Guarantor. Each Guarantor waives the defense of the statute of limitations in any action under
this Guaranty or for the collection of any indebtedness or the performance of any obligation guaranteed
pursuant to this Guaranty.
4.
The Guarantors unconditionally, individually, jointly and severally agree to pay all
attorneys’ fees and all costs and other expenses incurred in any collection or attempted collection of this
Guaranty or in any negotiations relative to the obligations guaranteed or in enforcing this Guaranty
against Sublessee.
MFDD – 03/14
Exhibit I: Sublease Agreement
19
5.
Each Guarantor waives notice of any demand by Sublessor, any notice of default in the
payment of rents or any other any amounts contained or reserved in the Sublease Agreement, or any other
notice of default under the Sublease Agreement. Each Guarantor expressly agrees that the validity of this
Guaranty and its obligations shall in no way be terminated, affected or impaired by reason of any waiver
by Sublessor, or its successors or assigns, or the failure of Sublessor to enforce any of the terms,
covenants or conditions of the Sublease Agreement or this Guaranty, or the granting of any indulgence or
extension of time to Sublessee, all of which may be given or done without notice to the Guarantors.
6.
This Guaranty shall extend, in full force and effect, to any assignee or successor of
Sublessor and shall be binding upon the Guarantors and each of their respective successors and assigns.
7.
Until all obligations of Sublessee to Sublessor have been paid or satisfied in full, the
Guarantors have no remedy or right of subrogation and each Guarantor waives any right to enforce any
remedy which Sublessor has or may in the future have against Sublessee and any benefit of, and any right
to participate in, and security now or in the future held by Sublessor.
8.
All existing and future indebtedness of Sublessee to each Guarantor is hereby
subordinated to all indebtedness and other obligations guaranteed in this Guaranty and, without the prior
written consent of Sublessor, shall not be paid in whole or in part, nor will any Guarantor accept any
payment of or on account of any such indebtedness while this Guaranty is in effect.
9.
This Guaranty shall be construed in accordance with the laws of the State of Colorado,
without giving effect to its conflict of laws principles.
GUARANTOR(S)
STATE OF
COUNTY OF
)
) ss.
)
The foregoing instrument was acknowledged before me this _____ day of ____________, 20___
by ______________________________________________.
My Commission Expires:
______________________
MFDD – 03/14
Exhibit I: Sublease Agreement
NOTARY PUBLIC
Residing at
20
EXHIBIT J
OPERATING PROCEDURES MANUAL TABLE OF CONTENTS
MFDD – 3/14
Exhibit J: Operating Procedures Manual. Table of Contents
DAILY OPERATIONS MANUAL - -TABLE OF CONTENTS
MFDD – 3/14
Exhibit J: Operating Procedures Manual. Table of Contents
1
MFDD – 3/14
Exhibit J: Operating Procedures Manual. Table of Contents
2
MFDD – 3/14
Exhibit J: Operating Procedures Manual. Table of Contents
3
MFDD – 3/14
Exhibit J: Operating Procedures Manual. Table of Contents
4
MFDD – 3/14
Exhibit J: Operating Procedures Manual. Table of Contents
5
MANAGEMENT OPERATIONS MANUAL – TABLE OF CONTENTS
MFDD – 3/14
Exhibit J: Operating Procedures Manual. Table of Contents
6
MFDD – 3/14
Exhibit J: Operating Procedures Manual. Table of Contents
7
MFDD – 3/14
Exhibit J: Operating Procedures Manual. Table of Contents
8
EXHIBIT K
FRANCHISEE INFORMATION
MFDD –3/14
Exhibit K: Franchisee Information
EXHIBIT K - PART 1
Location City
Location State
Location Address
Location Space or
Alternate Address
Franchisee
Name
Concept
LIST OF CURRENT FRANCHISEES AS OF DECEMBER 28, 2013
Location Zip
Code
Location Phone
AK
99515-2039
(907)-522-2560
Chris French
MFC-F
800 East Dimond Ctr Spc 3116
Anchorage
Edward Daly
MFC-F
7700 W Arrowhead Towne Ctr
Glendale
AZ
85308-8641
(623)-215-0286
Atul Jain
BCC-F
7401 N La Cholla Blvd Ste 155
Tucson
AZ
85741-2329
(520)-531-8404
Sandy Liu
MFC-F
400 S Baldwin Ave Ste 352A
Arcadia
CA
91007-1907
(626)-446-0607
Ted Yang
MFC-F
2701 Ming Ave #255
Bakersfield
CA
93304-4415
(661)-832-2436
Ted Yang
MFC-F
2116 Brea Mall
Brea
CA
92821-5722
(714)-255-1429
Sarbjit Singh
MFC-F
201 E Magnolia Blvd
Burbank
CA
91502-1160
(818)-559-8662
Haroon Javed
MFC-F
6600 Topanga Canyon Dr
Canoga Park
CA
91303-2609
(818)-884-1626
Satish Gore
MFC-F
20700 Avalon Blvd Ste 4594
Carson
CA
90746-3715
(310)-324-4682
David Smith
MFC-F
6081 Sunrise Mall
Citrus Heights
CA
95610
(916)-721-3177
Bieu (Bill) Le
MFC-F
109 Sun Valley Mall #B133
Concord
CA
94520-5801
(925)-825-1780
Ted Yang
MFC-F
3333 Bristol St #139
Costa Mesa
CA
92626-1811
(714)-557-6423
Kulbir Kaur
MFC-F
6000 Sepulveda Blvd
Culver City
CA
90230-6401
(310)-398-2001
Frank Fu
MFC-F
10123 N Wolfe Rd Spc 2030
Cupertino
CA
95014-2510
(408)-255-2553
Sohn, Jong
MFC-F
3 Serramonte Ctr Spc 23
Daly City
CA
94015-2345
(650)-992-7077
Gulam Nabi
MFC-F
321 Stonewood St
Downey
CA
90241-3908
(562)-923-1896
Hala Awar
MFC-F
3451 S Dogwood Avenue Ste 1601
El Centro
CA
92243-9144
(760)-336-2773
Dave & Judy
Davis
Kulbir Singh
MFC-F
3300 Broadway Spc 32
Eureka
CA
95501-3809
(707)-444-2130
MFC-F
1350 Travis Blvd
Fairfield
CA
94533-4646
(707)-429-4495
Jose Sio
MFC-F
531 E Shaw Ave
Fresno
CA
93710-7701
(559)-222-1554
Kevin Lum
MFC-F
347 Southland Dr #66
Hayward
CA
94545-2131
(510)-887-5606
Bhajan
Dhaliwal
Fatimah Safari
BCC-F
24155 Laguna Hills Mall
Laguna Hills
CA
92653-3691
(949)-951-8550
MFC-F
505 S Flower St # B-7
Los Angeles
CA
90071-2101
(213)-622-8111
Michael Zreik
MFC-F
11740 San Vicente Blvd
Los Angeles
CA
90049-6610
(310)-207-1604
Dong Whi Lee
MFC-F
8500 Beverly Blvd Ste 858
Los Angeles
CA
90048-6203
(310)-659-4221
Subhash Chand
MFC-F
6081 Center Dr Ste 210
Los Angeles
CA
90045-8831
(310)-645-6081
Quang Tran
MFC-F
447 Great Mall Dr Spc #112
Milpitas
CA
95035-8041
(408)-262-4700
Sandy Liu
MFC-F
2043 Montebello Town Ctr
Montebello
CA
90640-2169
(323)-722-5030
Amar
Wadhawan
Phung Nguyen
MFC-F
22500 Town Cir Ste 209393
CA
92553-7516
(951)-653-6525
MFC-F
2086 Newpark Mall #1136
Moreno
Valley
Newark
CA
94560
(408)-823-0127
Kamyar
Lashgari
Srikanth &
Shobhna
MFC-F
9301 Tampa Ave
Northridge
CA
91324-2503
(818)-407-0404
MFC-F
2229 N Tustin Street
Orange
CA
92865
(714)-921-2031
MFDD –3/14
Exhibit K: Franchisee Information
Spc #1259
Fox Hills
Mall
Suite 1320
#185
1
Location City
Location State
Location Address
Location Space or
Alternate Address
Concept
Franchisee
Name
Location Zip
Code
Location Phone
Nataraj
Cherie CoulterWeith
Tea & Mija Yun
MFC-F
72840 Highway 111 Ste 339
Palm Desert
CA
92260-3337
(760)-346-4598
MFC-F
1233 West Ave P #909
Palmdale
CA
93551-3984
(661)-273-4202
Mary and
Betty Horton
Kevin Lum
MFC-F
394 E Colorado Blvd
Pasadena
CA
91101-2204
(626)-844-8783
MFC-F
1028 Stoneridge Mall Spc A114
Pleasanton
CA
94588-3218
(925)-463-9622
Braden & Luisa
Onishi
Lum, Laura
MFC-F
7834 Kew Ave
CA
91739
(909)-463-9276
MFC-F
1121 Hilltop Mall Rd #121
Rancho
Cucamonga
Richmond
CA
94806-1907
(510)-223-2355
Fatimah Safari
MFC-F
1170 Galleria at Tyler
Riverside
CA
92503-4135
(951)-354-5554
David Smith
MFC-F
1151 Galleria Blvd Spc 276
Roseville
CA
95678-1945
(916)-878-5418
David Smith
MFC-F
2380 Watt Ave Spc 330
Sacramento
CA
95825-0610
(916)-979-9851
Joenh Hee
Nam
Frank Fu
MFC-F
442 Inland Ctr
CA
92408-1923
(909)-381-5110
MFC-F
1150 El Camino Real Ste 262
San
Bernardino
San Bruno
CA
94066-2425
(650)-871-9688
Debbie & Mike
Mendoza
MFC-F
111 West Harbor Dr
San Diego
CA
92101-7822
(619)-818-4469
Jong
Sohn/Charles
Choi
Sohn, Jong
MFC-F
865 Market St
San Francisco
CA
94103-1900
(415)-974-1993
MFC-F
3251 20th Ave Spc #249
San Francisco
CA
94132-1940
(415)-661-9017
Sohn, Jong
MFC-F
Pier 39
San Francisco
CA
94113
(415)-989-1588
Thomas Fung
MFC-F
2200 Eastridge Loop Ste 2010
San Jose
CA
95122-1417
(408)-270-7700
Kirk Miyasaki
MFC-F
925 Blossom Hill Rd Spc 1222
San Jose
CA
95123-1244
(408)-281-7200
Zari & Mehdi
Mansouri
Frank Fu
MFC-F
15555 E 14th St #128
San Leandro
CA
94578-1974
(510)-278-5735
MFC-F
420 Hillsdale Mall
San Mateo
CA
94403-3427
(650)-573-6481
Ted Yang
MFC-F
2800 N Main St Spc 672
Santa Ana
CA
92705-6613
(714)-972-1128
Kevin Liu
MFC-F
2855 Stevens Creek Blvd J1096
Santa Clara
CA
95050-6709
(408)-249-2489
Andrew Lie
MFC-F
2101 Santa Rose Plaza
Santa Rosa
CA
95401-4915
(707)-525-9242
Ghazaleh
Shafazand
Byron & Jane
Lee
Sohn, Jong
MFC-F
15301 Ventura Blvd Spc P-9
CA
91403-5889
(818)-386-0082
MFC-F
14006 Riverside Dr
CA
91423-6300
(818)-990-7161
BCC-F
4950 Pacific Ave
Sherman
Oaks
Sherman
Oaks
Stockton
CA
95207-6307
(209)-474-3466
Mary E
Geraldine
Ferbrache
Jennifer Khun
MFC-F
40820 Winchester Rd #FC8
Temecula
CA
92591-5525
(951)-296-0853
MFC-F
378 W Hillcrest Dr #K010B
CA
91360-4210
(805)-496-7602
Fatimah Safari
MFC-F
21712 Hawthorne Blvd
Thousand
Oaks
Torrance
CA
90503
(310)-542-6233
Haroon Javed
MFC-F
363 South Mills Rd
Ventura
CA
93003-3437
(805)-658-8386
Yui Man Mak
MFC-F
603 Plaza Dr
West Covina
CA
91790-2837
(626)-960-7011
MFDD –3/14
Exhibit K: Franchisee Information
#1765
Open Only
to
Conventio
ners
Building B06
#86
#1206
2
Location City
Location State
Location Address
Location Space or
Alternate Address
Concept
Franchisee
Name
Location Zip
Code
Location Phone
Satish Gore
MFC-F
1025 Westminster Mall
Westminster
Suite 2066
CA
92683
(714)-891-3232
Dan and Heidi
Herrmann
Bhatt, Priti
MFC-F
8505 Park Meadows Center Dr
Lonetree
F-3B
CO
80124
(303)-768-0842
MFC-F
1500 New Britain Ave Ste B125
Farmington
CT
06032-3184
(860)-561-1538
Kenneth
Rebbro
Abdul Mannan
MFC-F
1365 N Dupont Hwy
Dover
DE
19901-8710
(302)-678-9797
MFC-F
231 Christiana Mall
Newark
Suite 1531
DE
19702-3203
(302)-283-1346
Rhoda Salem
MFC-F
1600 Ocean Outlets
Suite 1580
DE
19971
(302)-226-1314
Mike
D'Argenio
Mohammed
Alamgir
Gustavo
Saslafsky
Leon Wolfe
MFC-F
451 E Altamonte Drive
FL
32701-4613
(407)-644-1400
MFC-F
19501 Biscayne Blvd #1369
Rehoboth
Beach
Altamonte
Springs
Aventura
FL
33180-2342
(305)-932-3310
MFC-F
801 N Congress Ave
FL
33426-3315
(561)-737-8348
MFC-F
1230 S. Dixie Highway
Boynton
Beach
Coral Gables
FL
33146
(786)-433-8229
Gus Saslafsky
MFC-F
9581 B W Atlantic Blvd
Coral Springs
FL
33071-6947
(954)-755-1307
Merritt Pizitz
MFC-F
10562 Emerald Coast Pkwy West
Destin
Ste #101
FL
32550-7101
(850)-837-3988
Shawn Tolley
MFC-F
8076 Mediterranean Drive
Estero
Suite 113
FL
33928
(239)-992-8229
Gus Shukeireh
MFC-F
6251 W Newberry Rd # F21
Gainesville
FL
32605-4305
(352)-331-4420
Russel
Eichengreen
Huy Nguyen
MFC-F
3458 NW Federal Hwy
Jensen Beach
FL
34957-4440
(772)-692-1928
MFC-F
1700 W New Haven Ave Ste 1028
Melbourne
FL
32904-3981
(321)-727-7773
Shawn Tolley
MFC-F
8888 SW 136th St #280
Miami
FL
33176-5867
(305)-232-4280
Mohammed
Vaid
Mike
D'Argenio
Mohammed
Vaid
Jerry Calvo
MFC-F
4200 Conroy Rd Ste 239
Orlando
FL
32839-2440
(407)-363-0670
MFC-F
8200 Vineland Ave Ste 1238
Orlando
FL
32821-6828
(407)-238-9775
MFC-F
3101 PGA Blvd # 0-201
FL
33410-2820
(561)-626-4014
MFC-F
11401 Pines Blvd Ste 614
FL
33026-4107
(954)-437-9705
Gwon Hee Ko
MFC-F
350 N Milwaukee St Spc #1109
Palm Beach
Gardens
Pembroke
Pines
Boise
ID
83704-9134
(208)-376-0111
Mark Dunning
MFC-F
1948 West Pullman Rd #G24
Moscow
ID
83843-4013
(208)-883-1817
Ghanshyam I
Vyas
Smruti Shete
MFC-F
1650 Premium Outlet Blvd
Aurora
IL
60502-2911
(630)-898-9909
MFC-F
2172 Fox Valley Center Dr
Aurora
IL
60504
(630)-236-5555
Narendra Patel
MFC-F
117 Stratford Square Mall
Bloomingdale
IL
60108-2245
(630)-351-4636
Kenley
Kaisershot
Ghanu Vyas
MFC-F
1615 E Empire St Ste 44
Bloomington
IL
61701-3527
(309)-663-8231
MFC-F
635 E Boughton Rd Ste 140
Bolingbrook
IL
60440-2256
(630)-783-9090
Yousef
Kashkeesh
Nishit Shah
MFC-F
96 River Oaks Ctr Spc D19
Calumet City
IL
60409-5532
(708)-868-5678
MFC-F
500 W Madison St # F014
Chicago
IL
60661-4544
(312)-655-1931
Lomesh Amin
MFC-F
32 E Randolph St
Chicago
IL
60601
(312)-629-1001
Abdul Amine
MFC-F
444 Chicago Ridge Mall Drive
Chicago Ridge
IL
60415
(708)-422-0123
Lisa Walker
MFC-F
1345 Hickory Point Mall
Forsyth
IL
62535-2056
(217)-875-7226
MFDD –3/14
Exhibit K: Franchisee Information
Ste 1245
3
Location City
Location State
Location Address
Location Space or
Alternate Address
Concept
Franchisee
Name
Location Zip
Code
Location Phone
IL
60431-1057
(815)-577-1005
IL
60148-5507
(630)-627-9070
IL
60714-1217
(847)-699-1111
IL
60546-1436
(708)-447-5938
IL
60523-1838
(630)-368-1002
IL
60462
(708)-364-0123
IL
61613-0100
(309)-682-4901
Yousef
Kashkeesh
Lomesh Amin
MFC-F
3340 Mall Loop Dr # 9029
Joliet
MFC-F
121 Yorktown Shopping Ctr
Lombard
Harshad K.
Rami
Lomesh Amin
MFC-F
339 Golf Mill Ctr
Niles
MFC-F
7501 W Cermak Rd
Lomesh Amin
MFC-F
100 Oakbrook Center
North
Riverside
Oak Brook
Abdul Amine
MFC-F
412 Orland Square Drive
Orland Park
Khalid
Mohammed
Yousef
Kashkeesh
Yousef
Kashkeesh
Dilip Patel
MFC-F
4501 War Memorial Dr
Peoria
MFC-F
7200 Harrison Ave # PK15
Rockford
IL
61112-1017
(815)-332-6707
MFC-F
4999 Old Orchard Center
Skokie
IL
60077
(847)-677-0123
MFC-F
623 Hawthorn Ctr
Vernon Hills
IL
60061-1511
(847)-362-2333
Nirmal Singh
MFC-F
8702 Keystone Crossing
Indianapolis
IN
46240-7621
(317)-575-9820
James Sheets
MFC-F
2109 Southlake Mall, 600
Merrillville
IN
46410
(219)-738-2921
Ed Forman
MFC-F
845 Massachusetts St
Lawrence
KS
66044
(785)-856-6440
Mary McMinn
MFC-F
4841 W 135th St
Leawood
KS
66224-8901
(913)-897-6544
Mohammed
Vaid
Scott Ferris
MFC-F
11531 W. 95th Street
Overland Park
KS
66214
(913)-492-0767
MFC-F
1704 E Bert Kouns Indstrl Loop
Shreveport
LA
71105-5560
(318)-797-8229
Himanshu
Shah
Samir Dave'
MFC-F
1 Burlington Mall Rd Spc 1075
Burlington
MA
01803-4195
(781)-272-8601
MFC-F
50 Holyoke St
Holyoke
MA
01040-2709
(413)-534-1454
Sam Gerges
MFC-F
999 S Washington St
MA
02760-3656
(508)-643-0084
Himanshu
Shah
Yongkyu Kim
MFC-F
210 Andover St # W131
North
Attleboro
Peabody
MA
01960-1647
(978)-977-0711
MFC-F
7000 Arundel Mills Cir
Hanover
MD
21076-1282
(410)-799-7835
Jae Kweon
MFC-F
11301 Rockville Pike
Kensington
MD
20895-1060
(301)-984-2365
Ray Quresh
MFC-F
11110 Mall Cir # L01
Waldorf
MD
20603-4803
(301)-638-7147
Sam Gerges
MFC-F
713 Maine Mall #2165
ME
04106-3247
(207)-775-3738
Juliana Jong
MFC-F
257 Briarwood Cir Spc G-111
South
Portland
Ann Arbor
MI
48108-1603
(734)-996-0644
Gus Shukeireh
MFC-F
4262 Baldwin Rd Spc 554
Auburn Hills
MI
48326-1268
(248)-335-7322
Scott McIntee
MFC-F
5775 Beckley Rd Ste 539
Battle Creek
MI
49015-4175
(269)-979-2626
Gus & Ray
Shukeireh
Andrea
Hachem
MFC-F
18900 Michigan Ave
Dearborn
MI
48126-3904
(313)-271-9750
MFC-F
Northwest World Gateway
Detroit
MI
48242
(734)-229-0616
Gus Shukeireh
MFC-F
3319 S Linden Rd
Flint
MI
48507-3045
(810)-230-7511
Riad Shukeireh
MFC-F
18000 Vernier Rd Ste 109
MI
48225-1082
(313)-527-5005
Jodi Gagne
MFC-F
2121 N Monroe St
Harper
Woods
Monroe
MI
48162-5316
(734)-241-8312
MFDD –3/14
Exhibit K: Franchisee Information
Louis
Joliet Mall
Ste F1
CU02A
Bldg 830:
Cor 1:1>
Box 2544
4
MFC-F
27500 Novi Rd #K-111
Novi
MFC-F
21500 Northwestern Hwy
Southfield
Michael Burke
MFC-F
14600 Lakeside Cir
Ramzy A
Taweel
Mike & Dan
Muzlakovich
Mohammed
Vaid
Paul Yenish
MFC-F
23000 Eureka Rd
Sterling
Heights
Taylor
MFC-F
3200 S Airport Rd Ste 242
MFC-F
Thu Nguyen
Location State
Concept
Sumeer
Dosanjh
Riad Shukeireh
Location Space or
Alternate Address
Franchisee
Name
Location Zip
Code
Location Phone
MI
48377-3418
(248)-380-5077
MI
48075-5018
(248)-557-5720
MI
48313-1356
(586)-247-0280
MI
48180-6039
(734)-374-9111
Traverse City
MI
49684-6913
(231)-929-1018
2800 W Big Beaver Rd Ste Y-321
Troy
MI
48084-3224
(248)-614-5350
MFC-F
6415 Labeaux Ave NE Ste C80
Albertville
MN
55301-3862
(763)-497-7077
MFC-F
1042 Burnsville Center
Burnsville
MN
55036
(952)-435-7227
Bernard
Mazzoni
Bernard
Mazzoni
Dharmesh
Sethi
Jason Frueh
MFC-F
1600 Mid Rivers Mall Dr.
St Peters
MO
63376
(636)-278-2279
MFC-F
1155 Saint Louis Galleria
St. Louis
MO
63117-1159
(314)-726-4711
MFC-F
4325 Glenwood Ave
Raleigh
NC
27612-4532
(919)-783-5702
MFC-F
3902 13th Ave S Spc 521
Fargo
ND
58103-3357
(701)-277-3511
Sree Kumar
Menon
Ralph Garrow
MFC-F
310 Daniel Webster Hwy Ste 145
Nashua
NH
03060-5732
(603)-891-1413
MFC-F
2801 Pacific Avenue
Atlantic City
NJ
08401
(609)-348-2800
Bill Bori
MFC-F
Campo Jersey, Inc.
Eatontown
NJ
07724
(908)-616-0529
Tony Monterio
MFC-F
651 Kapkowski Rd Ste 1268
Elizabeth
NJ
07201-4904
(908)-353-8060
Anne Sum
MFC-F
3710 Route 9 South Spc 208
Freehold
NJ
07728-4801
(732)-577-1470
Avinas
Kulkarni
Frank Lai
MFC-F
112 Eisenhower Pkwy Ste 108
Livingston
NJ
07039-4990
(973)-535-8180
MFC-F
3680 S Maryland Pkwy Spc #117
Las Vegas
NV
89169-3069
(702)-369-8030
Ted Yang
MFC-F
4300 Meadows Ln Ste 133A
Las Vegas
NV
89107-3017
(702)-877-9165
Luther T
Robinson
Jui Trivedi
MFC-F
139 Flatbush Ave
Brooklyn
NY
11217-1450
(718)-230-7067
MFC-F
One Walden Galleria
Buffalo
204B
NY
14225
(716)-683-2192
John Guida
MFC-F
One McKinley Mall
Buffalo
#CC 1
NY
14219-2617
(716)-825-3922
Susan Dolata
MFC-F
3649 Erie Blvd
Dewitt
NY
13214-2738
(315)-449-4103
Marc Schein
MFC-F
90-15 Queens Blvd Spc 1036
Elmhurst
NY
11373-4914
(718)-271-7893
Mohammad
Aslam
Bhupinder
Sabharwal
Sanjiv Chand
MFC-F
8801 Queens Blvd
Elmhurst
NY
11373-4449
(718)-699-0780
MFC-F
630 Old Country Rd Spc 2055
Garden City
NY
11530-3430
(516)-746-1010
MFC-F
30 Rockefeller Plz
New York
NY
10112-0015
(212)-586-8060
Iqbal Kaknia
MFC-F
762 3rd Avenue
New York
NY
10017-2022
(212)-758-3700
Location Address
MFDD –3/14
Exhibit K: Franchisee Information
Location City
Space J707
Space
1242
Concourse
Level,
near 6th
Ave
Subway
Line
5
Location City
Location State
Location Address
Location Space or
Alternate Address
Concept
Franchisee
Name
Location Zip
Code
Location Phone
Jui Trivedi
MFC-F
220 Miracle Mile Dr
Rochester
NY
14623-5825
(585)-424-4841
Jui Trivedi
MFC-F
205 Eastview Mall Spc G-3
Victor
NY
14564-1014
(585)-223-6400
Jui Trivedi
MFC-F
665 Route 318 Space A025B
Waterloo
NY
13165
(585)-742-6235
Barry Solanki
MFC-F
948 Eastwood Mall
Niles
OH
44446
(330)-652-6841
Gus Shukeireh
MFC-F
4954 Great Northern Mall
OH
44070
(440)-777-0661
Sean Falk
MFC-F
4314 Milan Rd
North
Olmsted
Sandusky
OH
44870-5897
(419)-624-8383
Terry Duff
MFC-F
1901 NW Expressway #1889
OK
73118-9231
(405)-843-3813
Terry Duff
MFC-F
4901 N Kickapoo Ave Ste 1716
Oklahoma
City
Shawnee
OK
74804-1310
(405)-275-0434
Dean Nguyen
MFC-F
9487 SW Washington Square Rd
Tigard
OR
97223-4450
(503)-620-8300
David Young
Kim
Jennifer
Sharkey
Ritesh Patel
MFC-F
7403 SW Bridgeport Rd # K6
Tigard
OR
97224-7773
(503)-968-1000
MFC-F
160 North Gulph Rd
PA
19406-2937
(610)-265-9034
MFC-F
Route 22 & Mall Dr
King Of
Prussia
Monroeville
PA
15146
(412)-372-6227
Abu Taher or
Abul Karim
Joe Krenn
MFC-F
2385 W Cheltenham Ave Rm 327
Philadelphia
PA
19150-1506
(215)-887-1250
MFC-F
FC06 S Hills Vlg
Pittsburgh
PA
15241-1417
(412)-835-6160
Sandy Lam
MFC-F
2000 Coastal Grand Cir Ste 240
Myrtle Beach
SC
29577-9615
(843)-839-2888
John Jerman
MFC-F
3811 South Cooper St Spc 2138
Arlington
TX
76015-4137
(817)-472-5461
John Jerman
MFC-F
8687 N Central Expy Ste 746
Dallas
TX
75225-4565
(214)-750-5919
Tom LeSage
MFC-F
8401 Gateway Blvd W
El Paso
TX
79925-5657
(915)-778-3477
John Jerman
MFC-F
3000 Grapevine Mills Parkway
Grapevine
TX
76051-2008
(972)-874-2987
Ken Miller
MFC-F
6002 Slide Rd # B-8
Lubbock
TX
79414-4310
(806)-792-9386
Suresh Chand
BCC-F
2063 Town East Mall
Mesquite
TX
75150-4118
(972)-270-2550
Blane & Janae
Smith
Bryan
Piggott/Dale
Thompson
Chris/Michelle
Howey
Jong Kwan Bae
MFC-F
2070 Layton Hills Mall Ste 11
Layton
UT
84041-2157
(801)-544-5757
MFC-F
6191 S State St
Murray
UT
84107-7258
(801)-266-2140
MFC-F
10450 S State St Ste 2102
Sandy
UT
84070-3131
(801)-495-3005
MFC-F
4200 Portsmouth Blvd
Chesapeake
VA
23321-2167
(757)-465-5299
Hwa & Hyang
Lee
Jong Kwan Bae
MFC-F
21100 Dulles Town Cir Spc 260
Dulles
VA
20166-2441
(703)-421-5301
MFC-F
300 Monticello Ave Ste 199
Norfolk
VA
23510-4401
(757)-625-1177
Avinder Singh
MFC-F
2008 S Commons #C-7
Federal Way
WA
98003
(253)-839-3470
Jeffrey Chang
MFC-F
2520 NE Park Drive
Issaquah
WA
98029
(425)-394-4168
Naresh Dutt
MFC-F
3000 184th St SW Ste 358
Lynnwood
WA
98037-4740
(425)-778-1968
Kirpal Singh
MFC-F
400 Pine St #301
Seattle
WA
98101-1694
(206)-625-4311
Young Kim
MFC-F
1420 5th Ave
Seattle
WA
98101
(206)-420-7787
MFDD –3/14
Exhibit K: Franchisee Information
P.O. Box
68231
a.k.a.
Seatac
Mall
C-150
6
MFC-F
10315 Silverdale Way NW
Silverdale
MFC-F
985 Southcenter Mall
Tukwila
Young Kim
MFC-F
13804 NE 175th Street
Jong Suk Sohn
MFC-F
Lomesh Amin
MFC-F
Lisa Vanderlind
Devdatt Patel
Location State
Concept
Singh,
Palvinder
Joginder Singh
Location Space or
Alternate Address
Franchisee
Name
Location Zip
Code
Location Phone
WA
98383-7670
(360)-692-7080
WA
98188-2819
(206)-244-5857
Woodinville
WA
98072-3533
(425)-806-8088
2401 S Oneida St
Green Bay
WI
54304-5201
(920)-498-2805
5300 S 76th St Ste 735
Greendale
WI
53129-1131
(414)-421-8849
MFC-F
3800 State Rd 16 Spc 110
La Crosse
WI
54601-1898
(608)-779-1270
MFC-F
64 East Towne Mall
Madison
WI
53704-3711
(608)-244-8601
Location Address
MFDD –3/14
Exhibit K: Franchisee Information
Location City
P.O. Box
1051
7
EXHIBIT K – PART 2
LIST OF FRANCHISEES THAT WERE TERMINATED, NOT RENEWED OR REACQUIRED,
OR OTHERWISE VOLUNTARILY OR INVOLUNTARILY CEASED DOING BUSINESS
DURING 2013
Account
Developm
ent Status
55264
Factory Stores at
Park City
BCC-F
Closed
50726
Sikes Center Mall
MFC-F
Closed
55215
Taj Mahal Casino
MFC-F
55527
Greater Rochester
Intl Airport
50622
Location
State
Account Name
Location
City
Store #
Concept
If you buy this franchise, your contact information may be disclosed to other buyers when you leave the franchise
system.
Franchisee
Name
Franchisee Cell
Phone
Park City
UT
Jason Reeder
(435)-940-1200
Wichita
Falls
TX
Wayne Woods
(940)-696-3111
Closed
Atlantic City
NJ
Praveen Vig
(609)-348-9000
MFC-F
Closed
Rochester
NY
Jui Trivedi
(585)-742-6235
Herald Square
MFC-F
Closed
NY
NY
Mohamad
Aslam
(212)-967-1716
55526
Chicago Union
Station
MFC-F
Closed
Chicago
IL
Nishit Shah
(312)-234-9070
50013
Woodland Hills Mall
MFC-F
Closed
Tulsa
OK
Michael Schultz
(918)-252-2901
52375
Brookfield Square Kiosk
MFC-F
Closed
Brookfield
WI
Ed Krajcir
(262)-782-2232
55398
Plaza Camino Real
MFC-F
Closed
Carlsbad
CA
Soheila Kian
(760)-729-2613
55345
Fountains at Fry Road
MFC-F
Closed
Katy
TX
Ahmad
Ghalamdanchi
(281)-578-1077
55557
501 5th Avenue
MFC-F
Closed
NY
NY
Mohamad
Aslam
(212)-973-1035
55212
South County Mall
MFC-F
Closed
St. Louis
MO
Jeff Rosen
(314)-894-5859
52374
Mayfair Mall - Kiosk
MFC-F
Closed
Wauwatosa
WI
Ed Krajcir
(414)-847-0018
50998
University of
Michigan
MFC-F
Closed
Ann Arbor
MI
Juliana Jung
(734)-222-5280
55001
Port Authority
MFC-F
Closed
NY
NY
Nicholas Kitsios
(212)-695-1186
57248
Center at Salisbury
MFC-F
Closed
Salisbury
MD
Khayam Khalid
(410)-860-8882
MFDD –3/14
Exhibit K: Franchisee Information
8
Concept
Account
Developm
ent Status
50705
Evergreen Plaza
MFC-F
Closed
55255
Bellevue Square
MFC-F
Closed
55404
Westland Center
MFC-F
55343
Montgomery Mall
55497
Location
State
Account Name
Location
City
Store #
Franchisee
Name
Franchisee Cell
Phone
Evergreen
Park
IL
Yousef
Kashkeesh
(708)-422-2810
Bellevue
WA
Mustak
Colabawalla
(425)-454-1790
Closed
Westland
MI
Maya HabibGhader
(734)-421-7006
MFC-F
Closed
Bethesda
MD
Sung Yang
(301)-469-0728
Regency Mall
MFC-F
Closed
Racine
WI
Emmad
Jamaleddin
(262)-554-9080
50060
Arden Fair Mall
MFC-F
Closed
Sacramento
CA
David Smith
(916)-927-5483
55072
Newgate Mall
MFC-F
Closed
Ogden
UT
Blane & Janae
Smith
(801)-394-4491
55558
Southlake Mall
MFC-F
Closed
Merrill-ville
IN
Yousef
Kashkeesh
(219)-738-2921
50009
Tucson Mall
MFC-F
Closed
Tucson
AZ
David & Janet
Vakili
(520)-888-8600
55541
State Street
MFC-F
Closed
Chicago
IL
Mukesh Mehta
(312)-212-1313
52366
Myrtle Beach Mall
MFC-F
Closed
Myrtle
Beach
SC
James Rugg
(843)-272-7146
50003
Laurel Park Place
MFC-F
Closed
Livonia
MI
Kathleen Daiza
(734)-432-5123
54005
Continental Airlines
Arena
MFC-F
Licensee
East
Ruther-ford
NJ
Bill Bori
(201) 935-7307
MFDD –3/14
Exhibit K: Franchisee Information
9
EXHIBIT K – PART 3
LIST OF FRANCHISEES WHO TRANSFERRED A FRANCHISE DURING 2013
MFC-F
55095
Caroline Ngo
Sherman Oaks
CA
MFC-F
55098
Darwin Base
Ventura
CA
MFC-F
55463
Tracy Avooski
Rancho Cucamo
CA
MFC-F
55535
Christopher Windisch
Orange
CA
MFC-F
55481
Quang Tran
Newark
CA
MFC-F
50223
Janeen Roe
Lonetree
CO
MFC-F
55542
Yousef Kashkeesh
Chicago Ridge
IL
MFC-F
50545
Ghanu Vyas
Chicago
IL
MFC-F
55525
Yousef Kashkeesh
Orland Park
IL
MFC-F
54254
Yousef Kashkeesh
Merrillville
IN
MFC-F
55520
Kris & Leslie Miles
Overland Park
KS
MFC-F
50707
Joe Krenn
Monroeville
PA
MFDD –3/14
Exhibit K: Franchisee Information
10
EXHIBIT L
FINANCIAL STATEMENTS
MFDD –3/14
Exhibit L: Financial Statements
THESE FINANCIAL STATEMENTS ARE PREPARED WITHOUT AN AUDIT.
PROSPECTIVE FRANCHISEES OR SELLERS OF FRANCHISES SHOULD BE
ADVISED THAT NO CERTIFIED PUBLIC ACCOUNTANT HAS AUDITED THESE
FIGURES OR EXPRESSED HIS/HER OPINION WITH REGARD TO THE CONTENT
OR FORM.
MFDD –3/14
Exhibit L: Financial Statements
1
May 25,
Mrs. Fields' Original Cookies, Inc.
Monthly Financial Statements
May 2014
Mrs. Fields' Original Cookies, Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
May 24,
2014
ASSETS:
Cash and cash equivalents ....................................................................................................
Restricted cash ......................................................................................................................
Receivables, net ....................................................................................................................
Inventories ............................................................................................................................
Prepaid expenses and other ..................................................................................................
Deferred tax asset .................................................................................................................
Total current assets ...................................................................................................
$
Property and equipment, net .................................................................................................
Goodwill ...............................................................................................................................
Trade names and other intangible assets, net ........................................................................
Other assets ..........................................................................................................................
Total assets ............................................................................................................
LIABILITIES AND STOCKHOLDERS' DEFICIT:
Accounts payable .................................................................................................................
Accrued liabilities ................................................................................................................
Accrued restructure liabilities ...............................................................................................
Senior secured notes, current portion ...................................................................................
Current portion of other liabilities ........................................................................................
Total current liabilities .............................................................................................
2,707
450
4,206
2,178
383
179
10,103
December 28,
2013
$
3,417
7,651
18,135
440
5,337
400
6,691
2,322
467
179
15,396
3,471
7,651
18,827
442
$
39,746
$
45,787
$
2,638
4,248
317
6,297
488
13,988
$
4,572
5,450
141
6,297
688
17,148
Revolver ...............................................................................................................................
Term loan .............................................................................................................................
Senior secured notes .............................................................................................................
Deferred tax liabilities ..........................................................................................................
Other liabilities .....................................................................................................................
25,362
27,304
4,155
377
25,000
26,977
4,155
443
Total liabilities ......................................................................................................
71,186
73,723
Common stock ......................................................................................................................
Additional paid-in-capital ....................................................................................................
Accumulated deficit ..............................................................................................................
Accumulated other comprehensive income ..........................................................................
47,961
(79,427)
26
45,711
(73,662)
15
Total stockholders' deficit .....................................................................................
(31,440)
(27,936)
Total liabilities and stockholders' deficit ............................................................
$
39,746
$
45,787
Mrs. Fields' Original Cookies, Inc.
Consolidated Statements of Operations
(in thousands)
(unaudited)
4 Weeks
Ended
May 24,
2014
REVENUES:
Mrs. Fields Gifts ........................................................................................................
Mrs. Fields Branded Retail ........................................................................................
Mrs. Fields Franchising .............................................................................................
Mrs. Fields Licensing ................................................................................................
Total Mrs. Fields ....................................................................................................
$
4 Weeks
Ended
May 25,
2013
1,162
(38)
324
308
1,756
$
21 Weeks
Ended
May 24,
2014
1,319
(15)
349
352
2,005
$
6,502
(75)
1,780
1,589
9,796
21 Weeks
Ended
May 25,
2013
$
6,762
189
1,888
1,528
10,367
TCBY ........................................................................................................................
International Franchising ...........................................................................................
Total revenues .....................................................................................................
440
269
2,465
483
104
2,592
1,800
795
12,391
2,080
521
12,968
OPERATING COSTS AND EXPENSES:
Mrs. Fields Gifts ........................................................................................................
Mrs. Fields Branded Retail ........................................................................................
Mrs. Fields Franchising .............................................................................................
Mrs. Fields Licensing ................................................................................................
Total Mrs. Fields ....................................................................................................
1,245
201
17
1,463
1,436
8
269
33
1,746
7,173
1,283
104
8,560
7,528
370
1,490
181
9,569
TCBY ........................................................................................................................
International Franchising ...........................................................................................
351
85
348
75
1,853
320
2,178
322
General and administrative ........................................................................................
Depreciation and amortization ..................................................................................
Total operating costs and expenses ......................................................................
774
260
2,933
582
272
3,023
3,694
1,290
15,717
3,259
1,313
16,641
Income (loss) from operations .......................................................................
(468)
(431)
(3,326)
(3,673)
OTHER (EXPENSE) INCOME, NET:
Interest expense, net ..................................................................................................
(489)
(447)
(2,422)
(2,242)
Income (loss) before
and provision for income taxes ...................................................................
(957)
(878)
(5,748)
(5,915)
Provision for income taxes ........................................................................................
2
1
17
12
Net income (loss) ...........................................................................................
$
(959)
$
(879)
$
(5,765)
$
(5,927)
EBITDA from continuing operations ............................................................
$
(208)
$
(159)
$
(2,036)
$
(2,360)
Mrs. Fields' Original Cookies, Inc.
Consolidating Statements of Cash Flows
(in thousands)
(unaudited)
21 Weeks
Ended
May 24,
2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .................................................................................................................................
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ........................................................................................
Lease termination expense ..............................................................................................
Interest paid in kind ........................................................................................................
Changes in assets and liabilities:
Restricted cash .............................................................................................................
Receivables ..................................................................................................................
Inventories ...................................................................................................................
Prepaid expenses and other assets ................................................................................
Accounts payable .........................................................................................................
Accrued liabilities ........................................................................................................
Accrued restructuring liabilities ...................................................................................
Other liabilities ............................................................................................................
Net cash used in operating activities ......................................................................
$
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ...................................................................................
Net cash used in investing activities ......................................................................
(5,765)
21 Weeks
Ended
May 25,
2013
$
(5,927)
1,290
(47)
689
1,313
(33)
-
(50)
2,485
144
86
(1,934)
(1,202)
223
(266)
(4,347)
2,524
939
193
(2,897)
(1,306)
(613)
(64)
(5,871)
(544)
(544)
(1,094)
(1,094)
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on capital lease obligations ...................................................................
Capital contribution ..............................................................................................................
Net cash provided by financing activities ..............................................................
2,250
2,250
Effect of foreign exchange rate changes on cash .....................................................................
Net decrease in cash and cash equivalents ...............................................................................
Cash and cash equivalents at beginning of period ...................................................................
Cash and cash equivalents at end of period ..............................................................................
$
11
(2,630)
5,337
2,707
$
(7)
(6,986)
7,985
999
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest ............................................................................................................
$
2,258
$
2,688
(14)
(14)
MFDD –3/14
Exhibit L: Financial Statements
2
MFDD –3/14
Exhibit L: Financial Statements
3
MFDD –3/14
Exhibit L: Financial Statements
4
MFDD –3/14
Exhibit L: Financial Statements
5
MFDD –3/14
Exhibit L: Financial Statements
6
MFDD –3/14
Exhibit L: Financial Statements
7
MFDD –3/14
Exhibit L: Financial Statements
8
MFDD –3/14
Exhibit L: Financial Statements
9
MFDD –3/14
Exhibit L: Financial Statements
10
MFDD –3/14
Exhibit L: Financial Statements
11
MFDD –3/14
Exhibit L: Financial Statements
12
MFDD –3/14
Exhibit L: Financial Statements
13
MFDD –3/14
Exhibit L: Financial Statements
14
MFDD –3/14
Exhibit L: Financial Statements
15
MFDD –3/14
Exhibit L: Financial Statements
16
MFDD –3/14
Exhibit L: Financial Statements
17
MFDD –3/14
Exhibit L: Financial Statements
18
MFDD –3/14
Exhibit L: Financial Statements
19
MFDD –3/14
Exhibit L: Financial Statements
20
MFDD –3/14
Exhibit L: Financial Statements
21
MFDD –3/14
Exhibit L: Financial Statements
22
MFDD –3/14
Exhibit L: Financial Statements
23
MFDD –3/14
Exhibit L: Financial Statements
24
MFDD –3/14
Exhibit L: Financial Statements
25
MFDD –3/14
Exhibit L: Financial Statements
26
MFDD –3/14
Exhibit L: Financial Statements
27
MFDD –3/14
Exhibit L: Financial Statements
28
MFDD –3/14
Exhibit L: Financial Statements
29
MFDD –3/14
Exhibit L: Financial Statements
30
MFDD –3/14
Exhibit L: Financial Statements
31
MFDD –3/14
Exhibit L: Financial Statements
32
MFDD –3/14
Exhibit L: Financial Statements
33
MFDD –3/14
Exhibit L: Financial Statements
34
MFDD –3/14
Exhibit L: Financial Statements
35
MFDD –3/14
Exhibit L: Financial Statements
36
MFDD –3/14
Exhibit L: Financial Statements
37
MFDD –3/14
Exhibit L: Financial Statements
38
MFDD –3/14
Exhibit L: Financial Statements
39
MFDD –3/14
Exhibit L: Financial Statements
40
MFDD –3/14
Exhibit L: Financial Statements
41
MFDD –3/14
Exhibit L: Financial Statements
42
MFDD –3/14
Exhibit L: Financial Statements
43
MFDD –3/14
Exhibit L: Financial Statements
44
MFDD –3/14
Exhibit L: Financial Statements
45
MFDD –3/14
Exhibit L: Financial Statements
46
MFDD –3/14
Exhibit L: Financial Statements
47
MFDD –3/14
Exhibit L: Financial Statements
48
MFDD –3/14
Exhibit L: Financial Statements
49
KPMG LLP
Suite 1500
15 W. South Temple
Salt Lake City, UT 84101
Independent Auditors' Report
The Board of Directors and Shareholders
Mrs. Fields' Original Cookies, Inc.:
We have audited the accompanying consolidated balance sheets of Mrs. Fields Original Cookies, Inc. and
subsidiaries as of December 31, 2011 and January 1, 2011, and the related consolidated statements of
operations and comprehensive loss, stockholders' deficit, and cash flows for the years ended December 31,
2011, January 1, 2011, and January 2, 2010. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Mrs. Fields' Original Cookies, Inc. and subsidiaries as of December 31,
2011 and January 1, 2011, and the results of their operations and their cash flows for the years ended
December 31, 2011, January 1, 2011, and January 2, 2010, in conformity with U.S. generally accepted
accounting principles.
KPMG LLP
Salt Lake City, Utah
March 29, 2012
MFDD –3/14
Exhibit L: Financial Statements
50
Mrs. Fields' Original Cookies, Inc.
Consolidated Financial Statements
December 31, 2011 and January 1, 2011
Confidential Proprietary Information
MFDD –3/14
Exhibit L: Financial Statements
51
Mrs. Fields' Original Cookies, Inc.
Table of Contents
Independent Auditors Report .........................................................................................................................................1
Consolidated Balance Sheets .........................................................................................................................................2
Consolidated Statements of Operations and Comprehensive Loss ...............................................................................3
Consolidated Statements of Stockholders' Deficit .........................................................................................................4
Consolidated Statements of Cash Flows ........................................................................................................................5
Notes to Consolidated Financial Statements .................................................................................................................7
MFDD –3/14
Exhibit L: Financial Statements
52
Audit Opinion
MFDD –3/14
Exhibit L: Financial Statements
53
[This Page Intentionally Left Blank]
MFDD –3/14
Exhibit L: Financial Statements
54
Mrs. Fields' Original Cookies, Inc.
Consolidated Balance Sheets
(in thousands, except share information)
December 31,
2011
ASSETS
Cash and cash equivalents ...........................................................................
Restricted cash ................................................................................................
Receivables, net of allowance for doubtful accounts
of $1,422 and $1,201, respectively ............................................................
Inventories .......................................................................................................
Prepaid expenses and other ..........................................................................
Deferred tax asset ...........................................................................................
$
6,548
1,075
January 1,
2011
$
9,930
1,019
8,094
2,842
898
853
6,347
3,179
1,331
343
Total current assets ........................................................................
20,310
22,149
Property and equipment, net .........................................................................
Goodwill ...........................................................................................................
Trademarks and other intangible assets, net ..............................................
Other assets .....................................................................................................
3,830
7,789
22,377
394
4,100
7,789
24,038
554
Total assets .............................................................................
LIABILITIES AND STOCKHOLDERS' DEFICIT
Accounts payable ..........................................................................................
Accrued liabilities ...........................................................................................
Current portion of store closure reserve, capital lease obligations
and deferred revenues ...............................................................................
Current portion of term loan ..........................................................................
$
54,700
$
58,630
$
5,984
3,702
$
5,954
5,411
730
-
1,141
1,000
Total current liabilities ...................................................................
10,416
13,506
Revolving loan facility ...................................................................................
Term loan facility ............................................................................................
Senior secured notes ......................................................................................
Store closure reserve, capital lease obligations and deferred
revenues, net of current portion ...............................................................
Deferred tax liabilities .....................................................................................
Other liabilities ................................................................................................
14,000
26,977
6,297
6,800
65,837
54
7,190
843
112
4,567
1,020
Total liabilities .........................................................................
65,777
91,842
Common stock - $0.01 par value; 100 shares authorized and
outstanding in 2011 and $0.001 par value; 29,900,000 shares
authorized; 22,371,056 shares issued and outstanding in 2010 ...........
Additional paid-in-capital ..............................................................................
Accumulated deficit .......................................................................................
Accumulated other comprehensive income ...............................................
43,714
(54,799)
8
22
17,829
(51,065)
2
Total stockholders' deficit .............................................................
(11,077)
(33,212)
Commitments and contingencies
Total liabilities and stockholders' deficit .............................
MFDD –3/14
Exhibit L: Financial Statements
$
54,700
$
58,630
55
Mrs. Fields' Original Cookies, Inc.
Consolidated Statements of Operations and Comprehensive Loss
For the
Fiscal Year
Ended
December 31,
2011
REVENUES:
Mrs. Fields .................................................................................
TCBY ..........................................................................................
International Franchising ........................................................
$
58,189
5,951
1,741
For the
Fiscal Year
Ended
January 1,
2011
$
54,849
5,604
1,902
For the
Fiscal Year
Ended
January 2,
2010
$
52,376
5,871
1,499
Total revenues ......................................................................
65,881
62,355
59,746
OPERATING COSTS AND EXPENSES:
Mrs. Fields .................................................................................
TCBY ..........................................................................................
International Franchising ........................................................
49,065
4,546
644
45,570
3,255
604
42,960
2,438
494
General and administrative ......................................................
Executive severance, recruiting and compensation
costs .......................................................................................
Depreciation ...............................................................................
Amortization ..............................................................................
Impairment of goodwill and intangible assets ......................
Other expense (income), net ....................................................
5,852
8,023
8,077
1,158
1,660
51
1,065
1,093
1,660
4,976
(113)
445
1,169
1,660
14,191
(32)
Total operating costs and expenses ..................................
62,976
66,133
71,402
Income (loss) from operations ........................................
2,905
(3,778)
(11,656)
OTHER EXPENSES, NET:
Interest expense, net ................................................................
Gain on extinguishment of debt, net ......................................
Reversal of severance accrual ................................................
(8,183)
1,712
-
(8,513)
992
(8,087)
-
Income (loss) before provision (benefit) for
income taxes ................................................................
(3,566)
(11,299)
(19,743)
Provision (benefit) for income taxes ......................................
168
34
(3,017)
Net loss ..................................................................
$
(3,734)
$
(11,333)
$
(16,726)
COMPREHENSIVE INCOME (LOSS):
Net loss ......................................................................................
Foreign currency translation adjustment ..............................
$
(3,734)
6
$
(11,333)
(9)
$
(16,726)
5
Comprehensive loss .............................................
$
(3,728)
$
(11,342)
$
(16,721)
MFDD –3/14
Exhibit L: Financial Statements
56
Mrs. Fields' Original Cookies, Inc.
Consolidated Statements of Stockholders’ Deficit
(in thousands, except share information)
Shares
Balance at January 3, 2009 .............................
Foreign currency translation
adjustment ...................................................
Net loss ............................................................
Balance at January 2, 2010 .............................
Foreign currency translation
adjustment ...................................................
Net loss ............................................................
Balance at January 1, 2011 .............................
Foreign currency translation
adjustment ...................................................
Net loss ............................................................
Repurchase and cancellation of
common stock .............................................
Issuance of common stock ........................
Capital contribution on debt exchange,
net of income taxes of $2.0 million
and expenses of $6.5 million ......................
Balance at December 31, 2011 .......................
MFDD –3/14
Exhibit L: Financial Statements
Additional
Paid-in
Capital
Amount
22,371,056
$
-
$
-
22,371,056
22
-
-
22,371,056
22
-
-
(22,371,056)
100
(22)
-
100
22
-
$
(16,726)
17,829
(39,732)
-
(11,333)
17,829
(51,065)
-
(3,734)
26,087
$
(23,006)
-
(202)
-
$
17,829
Accumulated
Other
Accumulated Comprehensive
Deficit
Income (Loss)
43,714
$
$
6
Total
$
(5,149)
5
5
(16,726)
11
(21,870)
(9)
(9)
(11,333)
2
(33,212)
6
-
6
(3,734)
-
-
(224)
-
-
-
(54,799)
57
-
-
$
26,087
8
$
(11,077)
Mrs. Fields' Original Cookies, Inc.
Consolidated Statements of Cash Flows
For the
Fiscal Year
Ended
December 31,
2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ..............................................................................................................
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization ...............................................................
Amortization of deferred loan costs ......................................................
Impairment of goodwill and intangible assets .....................................
Reversal of excess severance accrual ...................................................
Gain on extinguishment of debt .............................................................
Loss (gain) on sales of assets ................................................................
Non-cash interest expense on Senior Secured Notes ........................
Deferred income taxes .............................................................................
Changes in assets and liabilities:
Receivables ...........................................................................................
Inventories ............................................................................................
Prepaid expenses and other assets ...................................................
Accounts payable ................................................................................
Accrued liabilities ................................................................................
Store closure reserve, deferred revenues and other liabilities ......
$
Total operating cash flows (used in) provided by
continuing operations .................................................................
Total operating cash flows used in
discontinued operations .............................................................
(3,734)
For the
Fiscal Year
Ended
January 1,
2011
$
(11,333)
For the
Fiscal Year
Ended
January 2,
2010
$
(16,726)
2,818
292
(1,712)
8
3,854
122
2,753
35
4,976
(992)
2
7,242
(8)
2,829
14,191
(40)
6,446
(2,353)
(1,751)
337
561
34
(1,709)
(577)
(323)
(646)
(788)
297
77
377
(1,047)
1,384
307
947
(1,947)
(149)
(1,457)
1,669
3,842
-
1,669
3,800
(42)
Net cash (used in) provided by operating activities ......
(1,457)
CASH FLOWS FROM INVESTING ACTIVITIES:
Change in restricted cash ...............................................................................
Proceeds from sales of assets ........................................................................
Purchases of property and equipment ..........................................................
(56)
(895)
469
(1,291)
(1,488)
6
(516)
Net cash used in investing activities ................................
(951)
(822)
(1,998)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from revolving loan facility ...........................................................
Proceeds from term loan ..................................................................................
Proceeds from term loan facility .....................................................................
Principal payments on term loan ....................................................................
Principal payments on senior secured notes ...............................................
Payment of debt financing costs ...................................................................
Debt exchange fees paid to shareholders ....................................................
Principal payments on capital lease obligations .........................................
Purchase and cancellation of common stock ...............................................
14,000
3,200
1,089
(11,000)
(1,089)
(4,387)
(2,500)
(69)
(224)
(2,200)
(67)
(63)
-
(63)
-
Net cash used in financing activities ................................
(980)
(2,330)
(63)
Effect of foreign exchange rate changes on cash ...........................................
6
Net (decrease) increase in cash and cash equivalents ...................................
Cash and cash equivalents at beginning of period ........................................
Cash and cash equivalents at end of period ....................................................
MFDD –3/14
Exhibit L: Financial Statements
(3,382)
9,930
$
6,548
$
(9)
5
(1,492)
11,422
1,744
9,678
9,930
$
11,422
58
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
For the
Fiscal Year
Ended
December 31,
2011
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest ..................................................................................
Refunds received for income taxes ...........................................................
Supplemental Disclosures of Noncash Investing
and Financing Activities:
Capital contribution on debt exchange, net of income taxes
of $2.0 million and expenses of $4.0 million .........................................
Increase in long-term debt related to non-cash interest expense .........
MFDD –3/14
Exhibit L: Financial Statements
For the
Fiscal Year
Ended
January 1,
2011
For the
Fiscal Year
Ended
January 2,
2010
$
5,135
-
$
1,311
(350)
$
1,578
(374)
$
28,587
-
$
7,242
$
6,446
59
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
1. Business
Description of the Business
Mrs. Fields' Original Cookies, Inc. ("MFOC") and its wholly-owned subsidiary Mrs. Fields Famous Brands, LLC
("MFFB", together with MFOC, the "Company") develops and franchises retail stores which sell core products
including cookies, brownies and frozen yogurt through two specialty branded concepts, Mrs. Fields and TCBY.
The Company operates two company-owned TCBY stores.
The Company markets and distributes products through catalogs and its website as well as affiliations with other
websites and sales to large corporate customers for gifting purposes and various retail channels.
The Company authorizes franchisees and third-party licensees to use certain business formats, systems, methods,
procedures, designs, layouts, specifications, trade names and trademarks in the United States of America (the
"United States") and other countries.
The Company licenses the use of its trademarks, logos and recipes to third parties for distribution of Mrs. Fields
and TCBY branded products through non-bakery stores and cafés.
Refinancing Transaction
On December 13, 2011, MFOC and its subsidiaries consummated an exchange offer/tender offer (the "Exchange")
pursuant to which (a) the holders of its 10 percent senior secured notes ( the "Senior Secured Notes") either (i)
exchanged their respective Senior Secured Notes for a portion of a new 10 percent term loan (the "Term Loan
Facility") in an aggregate principle amount of $27.0 million or (ii) tendered all of their Senior Secured Notes to
MFFB and Mrs. Fields Financing Company, Inc., for a certain cash purchase price (the "Note Purchase") and (b)
certain eligible holders of the Senior Secured Notes subscribed for interests in a new revolving loan facility (the
"Revolving Loan Facility", together with the Term Loan Facility, the "Credit Facilities") in an aggregate principle
amount of $20.0 million and additional interests in the Term Loan and common stock of MFOC Holdco Inc.
("Holdco"), the Company's ultimate parent, an entity organized under Delaware law. In addition, the Company
purchased all of the outstanding common shares of MFOC for $224,000 in cash and issued 100 shares of new
common stock to Holdco (the "Transactions").
In exchange for their total claims of $59.5 million, the holders of the Senior Secured Notes received at closing $1.1
in cash, $27.0 million of the new Term Loan Facility and 100 percent of the common stock of Holdco. Certain
holders of the Senior Secured Notes, aggregating $6.3 million, elected not to participate in the Exchange. The
initial lenders also provided the Company with the Credit Facilities. The retirement of the Senior Secured Notes
was accounted for as an extinguishment of debt with a portion deemed to be a troubled debt restructuring under
Accounting Standards Codification ("ASC") 470-60 (see Note 10).
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements of the Company have been prepared in accordance with U.S.
generally accepted accounting principles ("GAAP"). All intercompany accounts and transactions have been
eliminated in consolidation.
Accounting Periods
The Company operates using a 52/53 week fiscal year ending on the Saturday closest to December 31.
MFDD –3/14
Exhibit L: Financial Statements
60
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures of
contingent liabilities in the financial statements and accompanying notes. From time to time management
evaluates these estimates, including those that relate to allowances for bad debt, inventory valuation, fair value of
goodwill and intangible assets, long-lived asset impairments, deferred tax valuation allowances and contingencies.
The Company bases its estimates on historical experience and on various assumptions that it believes reasonable
under the circumstances, the results of which form the basis for making judgments about the carrying values of
assets and liabilities. Actual results could differ from those estimates.
Foreign Currency Translation
The balance sheet accounts of foreign subsidiaries are recorded in their local currency (the functional currency) and
translated into U.S. dollars using the applicable balance sheet date exchange rates, while revenues and expenses are
translated using the average exchange rates for the period presented.
Cash Equivalents
The Company considers all highly liquid investments purchased with initial maturities of three months or less to be
cash equivalents. The Company places its temporary cash investments with high credit quality financial
institutions. At times such investments may be in excess of the Federal Deposit Insurance Corporation insurance
limit. As of December 31, 2011 and January 1, 2011, the Company had cash equivalents of $14,000 and $13,000,
respectively.
Restricted Cash
Restricted cash of $1.1 million and $1.0 million at December 31, 2011 and January 1, 2011, respectively,
represents cash held in reserve accounts under agreements with the Company’s financial institutions to cover their
risk associated with the Company’s Automated Clearing House ("ACH") transactions, company credit card and 3rd
party credit card transactions.
Receivables
Most of the Company's receivables are due from domestic and international franchisees, distributors, licensees, as
well as corporate customers of Mrs. Fields Gifts and Mrs. Fields Branded Retail (see Note 14). These receivables
are comprised of normal trade accounts receivable and longer-term notes receivable. Service charges may be
assessed on past due invoices but any revenue associated with the service charges is only recognized when
collected. The Company maintains an allowance for doubtful accounts to cover potential losses. This allowance is
the Company's best estimate of the amount of probable collection losses in the Company's existing trade accounts
receivable. The Company determines the allowance based upon historical write-off experience and individual facts
and circumstances associated with individual debtors. If the assumptions that are used to determine the allowance
for doubtful accounts change, the Company may have to provide for a greater level of expense in future periods or
reverse amounts provided for in prior periods.
Inventories
Inventories, consisting of finished goods, novelties, packaging and raw materials, are stated at the lower of cost
(first-in, first-out method) or market value. In assessing the realizability of inventories, the Company makes
judgments as to future demand requirements and product expiration dates. The inventory requirements change
based on projected customer demand, which changes due to fluctuations in market conditions and product life
cycles.
MFDD –3/14
Exhibit L: Financial Statements
61
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
Property and Equipment
Additions of property and equipment are recorded at cost and depreciation is computed using the straight-line
method over the estimated useful lives of the assets. Leasehold improvements are capitalized and amortized over
the lesser of the life of the lease or the estimated useful life of the asset.
Expenditures that materially extend useful lives of property and equipment are capitalized. Routine maintenance,
repairs and renewal costs are expensed as incurred. Gains or losses from the sale or retirement of property and
equipment are recorded in current operations.
Goodwill, Trademarks and Other Intangible Assets
Goodwill and intangible assets with indefinite lives are not amortized, but are tested for impairment at least
annually and more frequently in the event of an impairment indicator. Intangible assets with definite useful lives
are amortized over their respective estimated useful lives and reviewed whenever events or circumstances indicate
an impairment may exist.
A two-step test must be performed to assess goodwill for impairment. First, the fair value of each reporting unit is
compared to its carrying value. Fair value is computed by the Company utilizing a discounted cash flow model. If
the estimated fair value of the reporting unit exceeds the carrying value, the reporting unit's goodwill is not
impaired and no further testing is performed. The second step is performed if the reporting unit's carrying value
exceeds its estimated fair value. The implied fair value of the reporting unit’s goodwill must be determined and
compared to the carrying value of the goodwill. If the carrying value of reporting unit’s goodwill exceeds its
implied fair value, an impairment loss equal to the difference is recorded.
Deferred Loan Costs
Deferred loan costs are amortized to interest expense over the period of the underlying indebtedness using
the effective interest rate method. As a result of its extinguishment of debt, the Company wrote-off unamortized
deferred loan costs associated with its old Term Loan of $457,000 which were deemed to be a reduction of the
capital contribution and were recorded to paid-in-capital in the consolidated statement of operations and
comprehensive loss for the year ended December 31, 2011.
As of December 31, 2011 and January 1, 2011, the Company had unamortized deferred loan costs of $0
and $32,000, respectively, which are included in other assets in the accompanying consolidated balance sheets.
During the years ended December 31, 2011, January 1, 2011 and January 2, 2010, the Company amortized deferred
loan costs of $292,000, $35,000 and $0, respectively.
Long-Lived Assets
Long-lived assets are reviewed for impairment when events or changes in circumstances indicate that the
book value of an asset may not be fully recovered. The Company uses an estimate of future undiscounted net cash
flows of the related asset or group of assets over the remaining life in measuring whether the assets are recoverable.
Impairment of long-lived assets is assessed at the lowest level for which there are identifiable cash flows that are
independent of other groups of assets. Impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets. The impairment of long-lived assets requires
judgments and estimates. If circumstances change, such estimates could also change.
Revenue Recognition
The Company recognizes revenues, net of state and local sales taxes, from gift sales at the time of shipment.
Revenues, net of sales discounts and allowances, from the sale of shelf stable cookies directly through various retail
channels are recognized upon delivery and are included in branded retail revenues.
MFDD –3/14
Exhibit L: Financial Statements
62
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
Revenues from initial franchising and licensing fees under domestic franchise agreements are recognized when all
material services or conditions relating to the franchising or licensing agreement have been substantially performed
or satisfied and collectability of the initial franchise fee is reasonably assured, which is generally upon the opening
of a location by a franchisee or licensee. The Company recognizes revenues from initial franchise fees under
domestic area director agreements and international master franchise agreements when substantially all of the
initial services required by the agreement have been met and collectability of the initial franchise fee is reasonably
assured.
Franchise and license royalties, which are based on a percentage of gross store sales, are recognized as earned net
of any amounts due under area director agreements. Royalties are generally earned upon sale of product by
franchisees or licensees. Minimum royalty payments under certain licensing agreements are deferred and
recognized on a straight-line basis over the term of the agreement. Revenues from the two company-owned TCBY
stores are recognized when payment is tendered at the time of sale.
The Company receives cash payments for product formulation fees and allowances from suppliers based on the
amount of product purchased directly by its distributors and franchisees. These product formulation fees include
cash payments to the Company for the right to use the Company's proprietary formulations and recipes to
manufacture the frozen dough and TCBY products these suppliers sell to the Company's franchisees. Formulation
fees and allowances are recorded as revenues within the Mrs. Fields Franchising, TCBY and International
Franchising operating segments upon shipment of product to the Company's distributors or franchisees.
Formulation fees and allowances for each of the operating segments are as follows (in thousands):
M rs. Fields ................................................
TCBY ........................................................
International Franchising ...........................
For the
Fiscal Year
Ended
December 31,
2011
$
1,248
3,643
260
$
5,151
For the
Fiscal Year
Ended
January 1,
2011
$
1,328
3,566
284
$
5,178
For the
Fiscal Year
Ended
January 2,
2010
$
1,343
4,024
179
$
5,546
Operating Expenses
Mrs. Fields Gifts operating expenses are comprised of costs incurred to generate gifting revenues which include
cost of sales for products sold, selling and promotional expenses, compensation and related costs and other direct
operating expenses of the gifts segment. Cost of sales includes inbound freight charges, purchasing and receiving
costs, inspection costs, warehousing costs, formulation fees and other costs of the Company's distribution network.
Mrs. Fields Branded Retail operating expenses are comprised of cost of sales for products sold, selling and
promotional expenses, compensation and related costs and other direct operating expenses of the branded retail
segment.
Operating expenses of the Company's franchising segments, including Mrs. Fields, TCBY and International
Franchising, are comprised of costs incurred to generate franchising revenues, which include operation and
supervision expenses wherein the Company provides support, direction and supervision to the franchisees;
development and support expenses including product development costs, expenses relating to new franchise
development, marketing and advertising, bad debt expense and other direct franchising expenses. TCBY operating
expenses also include the expenses related to its two company-owned stores.
Mrs. Fields Licensing operating expenses are comprised of costs incurred to generate licensing revenues, which
primarily are selling and promotional expenses, bad debt and other direct operating expenses of the licensing
segment. Selling expenses include compensation and related costs, outside commissions and professional fees.
MFDD –3/14
Exhibit L: Financial Statements
63
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
General and administrative expenses are comprised of compensation and related costs of corporate employees such
as executive, accounting, legal, human resources and information systems personnel; travel and travel-related
expenses of corporate employees; professional and legal fees, bank charges, insurance costs and facility costs not
related to the generation of revenues. These costs are associated with providing management support for all of the
Company's business segments.
Executive severance, recruiting and compensation costs are comprised of costs incurred during 2010 for
compensation and severance related to one of the Company's former Co-CEOs and President of Mrs. Fields
Division ("Co-CEO") and recruiting and relocation costs related to its Chief Executive Officer ("CEO"), hired in
May 2010.
Shipping and Handling Costs
The Company charges customers in its gifting segment for shipping and handling costs and records the amounts in
Mrs. Fields revenues. The costs for shipping and handling are included in Mrs. Fields operating costs and
expenses.
Sales Tax
The Company records revenues net of state and local sales taxes.
Income Taxes
Income taxes are accounted for under the asset and liability method. The Company recognizes deferred income tax
assets or liabilities for expected future income tax consequences of events that have been recognized in the
financial statements or income tax returns. Under this method, deferred income tax assets or liabilities are
determined based upon the difference between the financial statement and income tax bases of assets and liabilities
using enacted tax rates expected to apply when differences are expected to be settled or realized.
Advertising
The Company administers advertising funds (the "Ad Funds") collected from its domestic franchisees. The
Company directs the expenditures of the Ad Funds in connection with advertising and marketing campaigns for the
overall benefit of the respective concepts. The Ad Funds and their related activities are not included in the
accompanying consolidated financial statements.
General corporate advertising costs are expensed as incurred. During the years ended December 31, 2011, January
1, 2011 and January 2, 2010, the Company incurred advertising expenses, excluding the expenditures of the
advertising funds, totaling approximately $5.5 million, $5.3 million and $4.7 million, respectively, which are
included in the operating costs of Mrs. Fields and TCBY.
Legal and Regulatory
The Company records liabilities for legal and regulatory matters when the contingency is both probable and
estimable. The Company is involved in several legal and regulatory matters. After consultation with legal counsel,
the Company believes that the ultimate dispositions of these matters will not have a material adverse impact on its
financial position, liquidity or results of operations. However, there can be no assurance that the Company will be
successful in its efforts to satisfactorily resolve these matters and the ultimate outcome could result in a material
adverse impact on its financial position, liquidity or results of operations.
MFDD –3/14
Exhibit L: Financial Statements
64
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
New Accounting Pronouncements Not Yet Adopted
In September 2011, the FASB issued ASU No. 2011-08, "Intangibles—Goodwill and Other (ASC 350): Testing
Goodwill for Impairment," which specifies that an entity has the option to first assess qualitative factors to
determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount as
a basis for determining whether it is necessary to perform the two-step goodwill impairment test. An entity is not
required to calculate the fair value of a reporting unit unless the entity determines that it is more likely than not that
its fair value is less than its carrying amount. ASU No. 2011-08 is effective prospectively for fiscal years and
interim periods beginning after December 15, 2011. The Company's adoption of ASU No. 2011-08 is not expected
to have a significant impact on the Company's consolidated financial condition or results of operations.
In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income (Topic 220): Presentation of
Comprehensive Income". Under ASU 2011-05, an entity will have the option to present the components of net
income and comprehensive income in either one or two consecutive financial statements. The ASU eliminates the
option in U.S. GAAP to present other comprehensive income in the statement of changes in equity. An entity
should apply the ASU retrospectively. The ASU is effective for fiscal years ending after December 15, 2012 and
interim and annual periods thereafter. Early adoption is permitted. In December 2011, the FASB decided to defer
the effective date of those changes in ASU 2011-05 that relate only to the presentation of reclassification
adjustments in the statement of income by issuing ASU 2011-12, "Comprehensive Income (Topic 220): Deferral of
the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other
Comprehensive income in Accounting Standards Update 2011-05". The Company's adoption of ASU No. 2011-05
is not expected to have a significant impact on the Company's consolidated financial condition or results of
operations.
3. Fair Value Measurement
FASB authoritative guidance defines fair value as the exchange price that would be received for an asset or paid to
transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction
between market participants on the measurement date. It also establishes a fair value hierarchy which requires an
entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair
value. The standard describes three levels of inputs that may be used to measure fair value:
•
Level 1 – quoted prices for identical instruments in active markets;
•
Level 2 – quoted prices for similar instruments in active markets, quoted prices for identical or similar
instruments in markets that are not active and model-derived valuations in which all significant inputs and
significant value drivers are observable in active markets; and
•
Level 3 – valuations derived from valuation techniques in which one or more significant inputs or
significant value drivers are unobservable.
The Company applies fair value techniques on a non-recurring basis associated with valuing potential impairment
losses related to goodwill and other long-lived assets. Non-financial assets and liabilities measured at fair value on
a non-recurring basis are summarized below (in thousands):
Goodwill ...................................................
Other intangible assets ..............................
MFDD –3/14
Exhibit L: Financial Statements
Total
$
2,837
1,377
January 1, 2011
Level 1
Level 2
$
$
-
$
Level 3
2,837
1,377
65
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
4. Inventories
Inventories are comprised of the following (in thousands):
Finished goods ..........................................
Novelties ...................................................
Packaging ...................................................
Raw materials ............................................
December 31,
2011
$
1,386
704
529
223
$
2,842
January 1,
2011
$
1,625
664
488
402
$
3,179
5. Property and Equipment
Property and equipment are comprised of the following (in thousands):
Equipment and fixtures .............................
Leasehold improvements ..........................
Estimated
Useful Life's
up to 7 years
up to 10 years
December 31,
2011
$
3,678
3,583
January 1,
2011
$
7,261
(3,431)
Accumulated depreciation .........................
$
3,830
3,193
3,414
6,607
(2,507)
$
4,100
Property and equipment at December 31, 2011 and January 1, 2011 includes gross assets acquired under capital
leases of $315,000 and $318,000, respectively, and related accumulated depreciation of $217,000 and $151,000,
respectively.
Included in leasehold improvements at December 31, 2011 and January 1, 2011 is $1.1 million for tenant
improvements provided as a lease incentive by the lessors related to the leases for the Company's gifting operations
facility and the two company-owned TCBY stores, less accumulated depreciation of $461,000 and $309,000,
respectively. Deferred rent at December 31, 2011 and January 1, 2011 of $134,000 is included in accrued
liabilities and $467,000 and $601,000, respectively, in other liabilities relating to these lease incentives. The total
amount of these leasehold improvements and deferred rents are amortized over the life of the lease.
6. Goodwill and Other Intangible Assets
The Company performed its annual impairment analysis for goodwill as of December 31, 2011 and January 1, 2011
by comparing the fair value of each of the reporting units to the carrying amount of each reporting unit as of
December 31, 2011 and January 1, 2011.
As of December 31, 2011, management concluded that the fair value of its reporting units exceeded the carrying
amount of the reporting units, thus indicating no impairment. Accordingly, the Company recorded no impairment
charge for the fiscal year ended December 31, 2011.
As of January 1, 2011, management concluded that the carrying amount of its Mrs. Fields Franchising, Mrs. Fields
Licensing and TCBY reporting units exceeded the fair value of the reporting units, thus indicating an impairment.
Accordingly, the Company recorded an impairment charge of $5.0 million for the fiscal year ended January 1, 2011
As of January 2, 2010, management concluded that the carrying amount of its Mrs. Fields Branded Retail, Mrs.
Fields Franchising and Mrs. Fields Licensing reporting units exceeded the fair value of the reporting units, thus
indicating an impairment. Accordingly, the Company recorded an impairment charge of $6.2 million for the fiscal
year ended January 2, 2010.
MFDD –3/14
Exhibit L: Financial Statements
66
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
The Company performed its annual impairment analysis for indefinite-lived intangible assets, consisting of the
Mrs. Fields and TCBY trade names, for fiscal year 2011 and fiscal year 2010 by comparing the fair value of the
trade names to their carrying amount as of December 31, 2011 and January 1, 2011.
As of December 31, 2011, management concluded that the estimated fair value of its trade names exceeded the
carrying value and recorded no impairment charge for the fiscal year ended December 31, 2011.
As of January 1, 2011, management concluded that the carrying value of the TCBY trade names exceeded the
estimated fair value and recorded an impairment charge of $22,000 for the fiscal year ended January 1, 2011.
As of January 2, 2010, management concluded that the carrying value of the Mrs. Fields trade names exceeded the
estimated fair value and recorded an impairment charge of $8.0 million for the fiscal year ended January 2, 2010.
As a result of the impairment of goodwill and indefinite-lived intangible assets as of January 1, 2011 and January 2,
2010, the Company concluded that a triggering event had occurred. The Company performed an impairment test of
its definite-lived intangible assets and concluded that as of January 1, 2011 and January 2, 2010 its definite-lived
intangible assets were not impaired.
The following summarizes the Company's goodwill by operating segment (in thousands):
December 31,
2011
M rs. Fields Gifts ......................................
M rs. Fields Licensing ................................
TCBY ........................................................
International ..............................................
$
$
3,496
1,818
1,019
1,456
7,789
January 1,
2011
3,496
1,818
1,019
1,456
7,789
$
$
The following table summarizes the changes in goodwill (in thousands):
Goodwill
Balance at January 3, 2009 .......................
$
32,077
Accumulated
Impairment
Loss
$
(12,454)
Total
$
19,623
Reduction in goodwill resulting from
changes in income tax receivable ...........
Impairment loss ........................................
Balance at January 2, 2010 .......................
(724)
31,353
(4,954)
(18,610)
(724)
(4,954)
12,743
Impairment loss ........................................
Balance at January 1, 2011 .......................
31,353
(4,954)
(23,564)
(4,954)
7,789
Impairment loss ........................................
Balance at December 31, 2011 ..................
$
31,353
$
(23,564)
$
7,789
Other intangible assets are comprised of indefinite-lived and definite-lived assets (amortized over 10 years). The
following details the Company's other intangibles (in thousands):
MFDD –3/14
Exhibit L: Financial Statements
67
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
December 31, 2011
Gross
Accumulated
Amount
Amortization
Indefinite-lived intangibles
Trade names ..........................................
$
Definite-lived intangibles
Recipes ..................................................
Franchise relationships .........................
$
11,032
$
-
January 1, 2011
Gross
Accumulated
Amount
Amortization
$
11,032
$
-
5,063
11,594
1,629
3,683
5,063
11,594
1,126
2,525
16,657
5,312
16,657
3,651
27,689
$
5,312
$
27,689
$
3,651
The range of remaining useful lives and weighted average amortization period for the definite-lived intangible
assets at December 31, 2011 are as follows:
Recipes ......................................................
Franchise relationships .............................
Range of
Remaining
Estimated
Useful Lives
6.8 years
6.8 years
Weighted
Average
Amortization
Period
6.8 years
6.8 years
Future amortization expense of the definite-lived intangible assets as of December 31, 2011 is estimated to be as
follows (in thousands):
Fiscal Year
2012 ..........................................................................................
2013 ..........................................................................................
2014 ..........................................................................................
2015 ..........................................................................................
2016 ..........................................................................................
Thereafter ..................................................................................
$
$
MFDD –3/14
Exhibit L: Financial Statements
1,660
1,660
1,660
1,660
1,660
3,045
11,345
68
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
7. Accrued Liabilities
Accrued liabilities are comprised of the following (in thousands):
December 31,
2011
Compensation and benefits .......................
Gift cards and gift certificates ...................
Branded Retail trade spend .......................
Interest ......................................................
Professional fees .......................................
Deferred rent credits .................................
Occupancy ................................................
Severance ...................................................
Legal ..........................................................
Other .........................................................
$
$
1,117
934
454
342
190
134
116
415
3,702
January 1,
2011
$
$
979
700
435
1,418
227
134
121
311
292
794
5,411
Included in accrued compensation and benefits at December 31, 2011 and January 1, 2011 is $216,000 and
$220,000, respectively, for accrued commissions.
The activity in accrued severance is as follows (in thousands):
Beginning balance ......................................
Additions ..................................................
Reversal of accrual ....................................
Payments ..................................................
December 31,
2011
$
311
(311)
$
-
January 1,
2011
$
1,272
800
(992)
(769)
$
311
During June 2010, the Company agreed to a severance payment to its former CEO at an amount less than
originally provided. As a result, the Company reversed approximately $992,000 of severance accrual and included
it in a separate line item in the accompanying consolidated statements of operations and comprehensive loss.
8. Store Closure Reserve
At the date the Company ceases use of a property under an operating lease, the Company records a liability for any
remaining lease obligations, net of estimated sublease income. Lease termination costs include both settlement
payments and continued contractual payments over time under the original lease agreements where no settlement
can be reached with the landlord.
Management periodically assesses the remaining store closure reserve based on all available relevant data.
Reserves for closed stores that are settled on terms more favorable than were originally estimated and expensed
through the store closure provision are reversed through the store closure provision in the accompanying
consolidated statements of operations and comprehensive loss.
MFDD –3/14
Exhibit L: Financial Statements
69
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
The activity in the store closure reserve is as follows (in thousands):
Beginning balance ......................................
Additional reserves ...................................
Utilization of reserves ...............................
December 31,
2011
$
509
37
(406)
Less current portion ..................................
$
140
(126)
14
January 1,
2011
$
456
336
(283)
$
509
(502)
7
During fiscal year 2010, the Company recorded a specific reserve of $405,000 for certain locations where it holds
the primary obligation under the lease.
9. Deferred Revenues
Deferred revenues represent initial franchising and licensing fees received from customers under domestic and
international franchise agreements and amounts received from customers for merchandise to be shipped in
subsequent periods and are included in current liabilities in the accompanying consolidated balance sheets. Such
fees and revenues will be earned in subsequent periods in accordance with the Company's revenue recognition
policy.
Deferred revenues are comprised of the following (in thousands):
Initial franchise and licensing fees .............
Customer deposits ....................................
Royalties ...................................................
December 31,
2011
$
384
148
6
Less current portion ..................................
$
MFDD –3/14
Exhibit L: Financial Statements
538
(526)
12
January 1,
2011
$
353
196
21
$
570
(570)
-
70
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
10. Long-Term Debt and Capital Lease Obligations
Long-term debt is comprised of the following (in thousands):
December 31,
2011
Revolving Loan Facility, interest at 10 percent, payable
quarterly in arrears on M arch 31, June 30, September 30
and December 31; due December 13, 2014 with option to
extend to December 13, 2015 upon payment of an
extension fee ......................................................................
$
14,000
January 1,
2011
$
-
Term Loan Facility, interest at 10 percent, payable
quarterly in arrears on M arch 31, June 30, September 30
and December 31; due December 13, 2016 .......................
26,977
-
Senior Secured Notes and Additional Notes, interest at 10
percent, payable semi-annually in arrears on April 24 and
October 24; due October 24, 2014 ....................................
6,297
65,837
Term Loan, interest at adjusted LIBOR, plus applicable
margin of 12 percent, payable quarterly in arrears on
January 29, April 29, July 29 and October 29; due
October 23, 2011 ...............................................................
$
Less current portion ..................................................
$
-
$
7,800
47,274
73,637
-
(1,000)
47,274
$
72,637
In connection with the Transactions on December 31, 2011, the initial Lenders provided a Term Loan Facility to
the Company in an aggregate principal amount of $26,977,000 and a Revolving Loan Facility in an aggregate
principal amount of $20,000,000 under Credit Facilities, with an outstanding balance of $14,000,000 at December
31, 2011. The Credit Facilities carry interest on unpaid principal at 10 percent paid quarterly in arrears on the last
day of each fiscal quarter. The Revolving Loan Facility also requires interest on the unused portion at 0.5 percent
paid quarterly in arrears on the last day of each fiscal quarter. The Term Loan Facilities ranks senior in right of
payment to all subordinated indebtedness of the Company and is secured by a first priority lien on substantially all
of the tangible and intangible assets of the Company and its subsidiaries.
The Credit Facilities contain certain covenants that limit among other things, the ability of the Company and its
subsidiaries to:
•
incur additional indebtedness;
•
make certain investments or enter into sale and leaseback transactions;
•
pay dividends, redeem subordinated debt, repurchase the Company’s or its subsidiaries' stock or make any
other restricted payments as defined in the Indenture;
•
enter into certain transactions with affiliates;
•
create or incur liens;
•
transfer or sell assets;
•
make dividends, distributions or other payments from the Company’s subsidiaries;
MFDD –3/14
Exhibit L: Financial Statements
71
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
• consummate a merger, consolidation or sale of all or substantially all of its assets; and
•
engage in unrelated business.
The Credit Facilities limits the Company’s use of the proceeds from an asset sale to:
•
consideration at the time of the sale is at least equal to the fair market value of the assets sold or otherwise
disposed of;
•
at least 75 percent of the consideration received be in the form of cash or cash equivalents and is received
at the time of disposition;
•
apply the net cash proceeds related to the sale pursuant to Section 2.10(a) of the Credit Facilities
agreement;
•
make an investment within 365 days in long term productive assets of the general type used in the
Company's business; or
•
use the net proceeds to make an offer to pay down long-term debt.
The Credit Facilities also contain certain covenants whereby the Company must maintain a quarterly maximum
leverage ratio and limits capital expenditures to $3,000,000 for each fiscal year plus any unused amounts carried
forward from the preceding year.
Term Loan
The $10 million term loan (the "Term Loan"), as amended, carried interest on unpaid principal at a fluctuating
rate, at 90 day LIBOR or three percent, whichever is greater ("Adjusted LIBOR") plus an applicable margin of 12
percent, increased by two percent per annum every six months. The proceeds of the amended Term Loan were
used for general corporate purposes of the Company and its subsidiaries and to repay the $6,800,000 balance
under the previous Term Loan (including a prepayment premium required by the previous term loan agreement)
and to pay all fees, costs and expenses related to the Term Loan. Effective May 17, 2011, the Company entered
into a Second Amendment to the Credit and Guaranty Agreement (the "Second Amendment"). The Second
Amendment increased the Term Loan to $10 million and required loan costs of $707,000.
The outstanding
balance on the Term Loan was repaid in full on December 13, 2011 from the proceeds of the Revolving Loan
Facility in conjunction with the Transactions. As a result, the unamortized balance of these loan costs were
written off against interest expense.
Effective February 4, 2010, the Company, Bank of New York Mellon and the Requisite Lenders (as defined in the
credit agreement governing the Term Loan) entered into a First Amendment to the Credit and Guaranty
Agreement (the "First Amendment"). The First Amendment, among other items, revised the minimum
consolidated EBITDA targets and maximum capital expenditures set forth in section 6.12 of the Credit and
Guaranty Agreement and required a one-time payment of principal of $2.2 million, loan costs of $67,000 and an
additional one-time payment of principal of $1.0 million and additional loan costs of $10,000 that was paid in
January 2011.
Senior Secured Notes
The 10 percent senior secured notes and the additional notes (the "Additional Notes", together with the 10 percent
senior secured notes, the "Senior Secured Notes") are due October 24, 2014 and interest payments are payable
semiannually in arrears on October 24 and April 24, commencing April 24, 2009, until the principal thereof is paid
or made available for payment (see Note 10). The Company elected to pay interest from October 2008 to October
2010 by the issuance of Additional Notes at the rate of 12 percent per annum, in accordance to the provisions of the
Indenture and authorized by a board resolution. Interest is payable in cash after October 2010 at the rate of 10
percent until the principal is paid or made available for payment. The Additional Notes totaled $13.7 million at
January 1, 2011 and are included in Senior Secured Notes in the accompanying consolidated balance sheets.
MFDD –3/14
Exhibit L: Financial Statements
72
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
Pursuant to the indenture governing its Senior Secured Notes (the "Indenture"), the Company was required to make
a semiannual interest payment on April 24, 2011. The Company notified the Trustee and Note Holders that it
would not pay the required interest on that date. The Company paid the required interest payment on May 19,
2011, before the 30 day cure period expired in accordance to the Indenture.
The retirement of $59,540,000 of the Senior Secured Notes was accounted for as an extinguishment of debt with a
portion deemed to be a troubled debt restructuring under ASC 470-60 as outlined below. Certain holders of the
Senior Secured Notes, aggregating $6.3 million, elected not to participate in the Exchange.
Extinguishment of Debt
As a result of the Transactions on December 13, 2011, the Company exchanged $56,693,000 of its Senior Secured
Notes for interests in the Term Loan Facility of $25,833,000 and 100 percent of the common stock of Holdco, the
Company's ultimate parent, resulting in a capital contribution of $26,087,000, net of income taxes of $1,991,000
and including $3,669,000 of accrued interest and $6,451,000 of expenses. Because these note holders are the
controlling shareholders after the Transactions, the extinguishment embodies a capital transaction.
Transactions costs totaling $3,494,000 paid to third parties that were directly associated with the Transactions and
$457,000 of unamortized loan costs associated with its Term Loan were deemed to be reductions of the capital
contribution and were recorded to paid-in-capital in the accompanying consolidated balance sheets.
Troubled Debt Restructuring
As a result of the Transactions on December 13, 2011, the Company exchanged $2,726,000 of its Senior Secured
Notes for a cash payment of $1,089,000 and exchanged $121,000 for interests in the Term Loan Facility of $55,000
and recorded a $1,712,000 gain on extinguishment of debt, including $184,000 of accrued interest that was
forgiven, net of expenses of $175,000.
Subscription Rights
In connection with the Exchange, eligible holders were offered the right to subscribe for a pro rata share of
additional interests in the Term Loan Facility in aggregate principal amount equal to the funds necessary to pay the
consideration to those note holders that elected the cash option. Accordingly, the Company made a cash payment
of $1,089,000 which was funded by the eligible holders and increased their interests in the Term Loan Facility by
the same amount.
In conjunction with the Transactions, the Company entered into Supplemental Indenture No. 1 (the "Supplemental
Indenture"). The Supplemental Indenture amends the Indenture dated October 24, 2008 to eliminate certain
restrictions, covenants and reporting requirements.
Capital Lease Obligations
The Company has acquired equipment under various capital leases. Capital lease obligations are comprised of the
following (in thousands):
Capital lease obligations ............................................................
Less current portion of capital lease obligations .......................
December 31,
2011
$
105
(78)
$
MFDD –3/14
Exhibit L: Financial Statements
27
January 1,
2011
$
175
(70)
$
105
73
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
As of December 31, 2011, the future minimum lease payments, including interest, for capital lease obligations are
as follows (in thousands):
Fiscal Year
2012 ..........................................................................................
2013 ..........................................................................................
$
85
28
113
Less amount representing interest
(8)
Present value of net minimum lease payments
$
105
11. Income Taxes
The components of the provision (benefit) for income taxes are as follows (in thousands):
For the
Fiscal Year
Ended
December 31,
2011
Current
Federal ...................................................
Foreign ...................................................
$
Deferred
Federal ...................................................
State ........................................................
Allowance ..............................................
Total provision (benefit) for income
taxes ........................................................
MFDD –3/14
Exhibit L: Financial Statements
46
46
For the
Fiscal Year
Ended
January 1,
2011
$
5,518
1,129
(6,525)
122
$
168
42
42
For the
Fiscal Year
Ended
January 2,
2010
$
(1,878)
(384)
2,254
(8)
$
34
60
60
(4,514)
(923)
2,360
(3,077)
$
(3,017)
74
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
The differences between income taxes at the U.S. federal statutory income tax rate and income taxes reported in the
consolidated statements of operations and comprehensive loss are as follows (in thousands):
For the
Fiscal Year
Ended
December 31,
2011
Income taxes computed at federal
statutory rate .........................................
State income taxes ....................................
Foreign taxes .............................................
Goodwill .....................................................
Tax attribute reduction ............................
Cancellation of indebtedness .................
Equity contribution ..................................
Valuation allowance .................................
Other ...........................................................
$
$
(1,212)
14
46
10,328
(582)
(2,414)
(5,794)
(218)
168
For the
Fiscal Year
Ended
January 1,
2011
$
$
(3,842)
(253)
42
1,685
2,254
148
34
For the
Fiscal Year
Ended
January 2,
2010
$
$
(6,712)
(345)
40
2,093
1,959
(52)
(3,017)
The components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
MFDD –3/14
Exhibit L: Financial Statements
75
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
December 31,
2011
Deferred tax asset - current:
Allowance for doubtful accounts ..........
Accrued expenses ....................................
Other ...........................................................
Deferred tax assets - current ...............
Valuation allowance .............................
Net deferred tax
asset - current ...............................
Deferred tax asset - long-term:
Depreciation ..............................................
Net operating loss and carryforwards ...
Capital loss carry over .............................
Loan costs .................................................
Other ...........................................................
Deferred tax assets - long-term ...........
Valuation allowance .............................
Net deferred tax asset - long-term
$
545
219
89
853
-
$
452
267
112
831
(488)
$
853
$
343
$
463
727
188
1,378
1,378
$
Deferred tax liabilities -long-term:
Intangibles .................................................
Deferred tax liabilities - long-term ......
Net deferred tax
liabilities - long-term .....................
January 1,
2011
(8,568)
(8,568)
$
(7,190)
133
5,084
4,588
473
10,278
(6,037)
4,241
(8,808)
(8,808)
$
(4,567)
A valuation allowance is provided when it is more-likely-than-not that all or some of the deferred income tax assets
will not be realized. Based upon the level of historical taxable income and projections for future taxable income
over the periods in which the temporary differences are deductible, the Company has determined a valuation
allowance is necessary of $0 and $6.5 million at December 31, 2011 and January 1, 2011, respectively. The net
change in valuation allowance for the years ended December 31, 2011 and January 1, 2011, was a decrease of $6.5
million and an increase of $2.3 million.
The Company recognizes the impact of a tax position in the financial statements if that position is more likely than
not of being sustained on audit, based on the technical merits of the position. For fiscal year 2011 and fiscal year
2010, the Company had no unrecognized tax benefits.
The Company recognizes interest and penalties related to unrecognized tax benefits in interest expense. There have
been no interest or penalties recognized in the financial statements of the Company.
The Company was subject to an audit by the federal tax authority for fiscal years 2007 and 2008, which was closed
with no adjustments. The Company remains subject to income tax examinations for each of its open tax years,
which extend back to 2008 for federal income tax purposes and 2007 for state income tax purposes.
The Company realized income from the cancellation of indebtedness as a result of the Transactions to restructure
the Company's debt and capital structure. Because the Company was insolvent, the cancellation of indebtedness is
excluded from taxable income on the Company's federal income tax return for the year ended December 31, 2011.
However, the Company is required to reduce its tax attributes on the first day of the following tax period. As such,
MFDD –3/14
Exhibit L: Financial Statements
76
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
during the tax period ending December 29, 2012, the Company will reduce its estimated Net Operating Loss carry
forwards of $19.1 million and its estimated AMT Loss Carry Forwards of $20.5 million to zero. Capital Loss
Carry Forwards of $12.0 million will also be reduced to zero. The tax effect of the attribute reduction related to the
capital transaction of $2.0 million was recorded as an adjustment to equity.
12. Related Party Transactions
Services Agreement
In conjunction with the Transactions, The Company entered into a services agreement (the "Services
Agreement") with Carlyle Strategic Partners II, L.P and CSP II Co-Investment L.P. (together, "Carlyle") and Z
Capital Special Situations Fund Holdings I, L.P. ("Z Capital" and together with Carlyle, the "Advisors"). The
Services Agreement retains each of the Advisors to provide services, including but not limited to, accounting and
financial planning, market research, product development, risk assessments, information systems analysis and
transactional due diligence services to the Company on an ongoing basis in connection with the operation and
growth of the Company in the ordinary course of business.
The term of the Services Agreement, unless terminated earlier pursuant to the terms of the Services
Agreement, continues until the fourth anniversary of the date of the Services Agreement and thereafter will extend
automatically each year for one additional year, unless at least three months written notice is provided. In
consideration for the services provided as described above, the Company is required to pay a non-refundable
annual payment equal to five percent of consolidated EBITDA (as defined in the Credit Facilities agreement).
This fee will be allocated to the Advisors on a pro rata basis based on the number of shares of the Company's
common stock they each hold as of the last day of the fiscal year.
Fees Related to the Transactions
Carlyle and Z Capital entered into a backstop agreement (the "Backstop Agreement") in conjunction with
the Transactions (see Note 10). Pursuant to the Backstop Agreement, in exchange for an aggregate cash payment
of $1,350,000 (the "Backstop Fee") on December 13, 2011, Carlyle and Z Capital, severally and not jointly,
agreed to backstop the subscriptions rights by funding in the aggregate any portion of the Credit Facilities not
otherwise funded in accordance with the Subscription Rights. The Backstop Fee is in addition to any
corresponding subscription consideration they will receive in respect of the subscription rights covered thereby.
On December 13, 2011, The Company made an aggregate cash payment of $400,000 to Carlyle and Z
Capital for upfront fees on the aggregate revolving loan commitment (the "Loan Commitment Fee") on that date.
The Company is required to pay an additional commitment fee of 0.5 percent per annum times the daily average
undrawn portion of the Revolving Loan Facility, payable quarterly in arrears.
As the Backstop Fee and the Loan Commitment Fee were fees paid by the Company to Carlyle and Z
Capital, the note holders, these fees have been included with the extinguishment of the Senior Secured Notes. The
$2,500,000 reduced the capital contribution of $28,587,000, net of income taxes of $1,991,000, recorded as an
increase to paid-in-capital in the accompanying consolidated balance sheets and consolidated statements of
stockholders' deficit.
MFDD –3/14
Exhibit L: Financial Statements
77
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
13. Employee Benefit Plans
The Company sponsors the Mrs. Fields' Original Cookies, Inc. 401(k) Retirement Savings Plan (the "401k Plan")
for all eligible employees of the Company. Under the terms of the 401k Plan, employees make voluntary
contributions to the 401k Plan. A portion of the employee contributions to the 401k Plan were matched by
contributions from the Company at the rate of 100 percent of the first three percent of employee contributions plus
50 percent of the next two percent of employee contributions. The total matching contributions made by the
Company to the 401k Plan for the years ended December 31, 2011, January 1, 2011 and January 2, 2010 $0, $0
and $41,000, respectively.
During the first quarter of 2009, the 401k Plan was amended to eliminate all employer matching fund provisions.
14. Reportable Segments
Operating segments are components of the Company for which separate financial information is available that is
evaluated regularly by management in deciding how to allocate resources and assess performance. The segment
information is reported on the basis that it is used internally for evaluating segment performance.
The Company has the following six operating segments:
Mrs. Fields Gifts
Mrs. Fields Branded Retail
Mrs. Fields Franchising
Mrs. Fields Licensing
TCBY
International Franchising
(collectively "Mrs. Fields")
The accounting policies for the segments are the same as those discussed in the summary of significant accounting
policies (see Note 2). Sales and transfers between segments are eliminated in consolidation.
The Mrs. Fields Gifts operating segment includes sales generated from the Company's gift catalog and website as
well as affiliations with other websites and sales to large corporate customers for gifting purposes.
The Mrs. Fields Branded Retail operating segment includes sales generated from the sale of Mrs. Fields branded
products directly to various retail channels.
The Mrs. Fields Licensing operating segment includes licensing activity with third parties for the sale of products
bearing the Company's brand names.
The Mrs. Fields Franchising and TCBY operating segments include revenues received either directly or indirectly
from cookie and yogurt stores in the United States, which are owned and operated by third parties. These
domestic revenues include initial franchise or license fees, monthly royalties based on a percentage of a
franchisee's gross sales and certain product formulation fees and supplier allowances which are based upon sales
to franchisees. In addition, the operations of the two company-owned TCBY stores are included in the TCBY
operating segment.
MFDD –3/14
Exhibit L: Financial Statements
78
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
The International Franchising operating segment includes revenues received either directly or indirectly from
cookie and yogurt stores outside of the United States, which are owned and operated by third parties. These
international revenues include initial franchise or license fees, monthly royalties based on a percentage of a
franchisee's gross sales and certain product formulation fees and supplier allowances which are based upon sales
to franchisees.
The Company evaluates performance of each operating segment based on contribution. Contribution is computed
as the difference between the revenues generated by a reportable segment and the selling, cost of sales and direct
operating expenses related to that reportable operating segment. Contribution is used as a measure of the
operating performance of an operating segment. The Company does not allocate any general and administrative
expenses, interest expense, or depreciation and amortization to its reportable operating segments
Segment revenues and contribution are presented in the following table (in thousands):
For the
Fiscal Year
Ended
December 31,
2011
Revenues:
M rs. Fields
M rs. Fields
M rs. Fields
M rs. Fields
Gifts ..................................
Branded Retail ...................
Franchising ........................
Licensing ............................
$
Gifts ..................................
Branded Retail ...................
Franchising ........................
Licensing ............................
$
$
26,034
22,165
5,691
959
54,849
23,963
21,591
5,861
961
52,376
5,871
1,499
5,604
1,902
$
65,881
$
62,355
$
59,746
$
2,374
1,955
2,656
2,139
9,124
$
2,735
3,066
2,789
689
9,279
$
2,724
2,462
3,407
823
9,416
TCBY ....................................................
International Franchising .......................
$
MFDD –3/14
Exhibit L: Financial Statements
For the
Fiscal Year
Ended
January 2,
2010
5,951
1,741
TCBY ....................................................
International Franchising .......................
Contribution:
M rs. Fields
M rs. Fields
M rs. Fields
M rs. Fields
28,597
21,889
5,396
2,307
58,189
For the
Fiscal Year
Ended
January 1,
2011
1,405
1,097
11,626
$
2,349
1,298
12,926
$
3,433
1,005
13,854
79
Mrs. Fields' Original Cookies, Inc.
Notes to Consolidated Financial Statements
(continued)
_____________________________________________________________________________________________
The reconciliation of contribution to loss before reorganization items and provision (benefit) for income taxes is
as follows (in thousands):
Contribution ...................................................
General and administrative .............................
Executive severance, recruiting and
compensation costs ........................................
Depreciation and amortization .......................
Impairment of goodwill and intangible assets
Store closure provision ...................................
Other income, net ...........................................
Interest expense, net .......................................
Reversal of severance accrual .........................
Gain on extinguishment of debt ......................
Loss before provision (benefit)
for income taxes ......................................
For the
Fiscal Year
Ended
December 31,
2011
$ 11,626
(5,852)
For the
Fiscal Year
Ended
January 1,
2011
$ 12,926
(8,023)
For the
Fiscal Year
Ended
January 2,
2010
$ 13,854
(8,077)
(1,065)
(2,753)
(4,976)
113
(8,513)
992
-
(445)
(2,829)
(14,191)
32
(8,087)
-
(2,818)
(51)
(8,183)
1,712
$
(3,566)
$
(11,299)
$
(19,743)
Segment assets are presented in the following table (in thousands):
December 31,
2011
M rs. Fields Gifts ......................................
M rs. Fields Branded Retail .......................
M rs. Fields Franchising ............................
M rs. Fields Licensing ................................
Total M rs. Fields ..................................
$
10,235
3,564
18,662
2,448
34,909
January 1,
2011
$
9,877
3,587
18,464
2,220
34,148
TCBY ........................................................
International Franchising ...........................
8,087
1,729
8,706
1,859
Total segment identified assets .............
44,725
44,713
Non-segment identified assets ..............
9,975
13,917
Total assets .......................................
$
54,700
$
58,630
The assets of Mrs. Fields Gifts operating segment consists of fixed assets, receivables, inventories and goodwill.
The assets of the Mrs. Fields Franchising and TCBY operating segments consist of fixed assets, receivables,
inventories and other intangible assets. The TCBY operating segment also includes goodwill. The assets of the
Mrs. Fields Branded Retail operating segment consists of fixed assets, receivables and inventories. The assets of
the Mrs. Fields Licensing and International Franchising operating segments consist of receivables and goodwill.
MFDD –3/14
Exhibit L: Financial Statements
80
MRS. FIELDS' ORIGINAL COOKIES, INC.
Notes to Consolidated Financial Statements
(continued)
Segment Revenues
Revenues from franchisees, customers and licensees within the United States were $56.2 million, $52.7 million
and $52.6 million or 85.3 percent, 84.5 percent and 88.0 percent of total revenues for the years ended December
31, 2011, January 1, 2011 and January 2, 2010, respectively.
Revenues from international franchisees, customers and licensees were $9.7 million, $9.7 million and $7.1 million
or 14.7 percent, 15.5 percent and 12.0 percent of total revenues for the years ended December 31, 2011, January 1,
2011 and January 2, 2010, respectively. Revenues from any single foreign country were not material. Providing
geographical information regarding long-lived assets is impracticable.
The Mrs. Fields Gifts, Mrs. Fields Branded Retail and Mrs. Fields Licensing operating segments do not have any
single customers that account for more than ten percent of Company's total revenues.
The Mrs. Fields, TCBY and International Franchising business units are not dependent upon any single
franchisee.
15. Commitments and Contingencies
Legal Matters
The Company and its products are subject to regulation by numerous governmental authorities,
including, without limitation, federal, state and local laws and regulations governing franchising, health,
sanitation, environmental protection, safety and hiring and employment practices.
In the ordinary course of business, the Company is involved in routine litigation, including franchise
disputes and trademark disputes. The Company is not a party to any legal proceedings, except as noted below,
that, in the opinion of management, after consultation with legal counsel, is material to its business, financial
condition or consolidated results of operations.
Litigation Settlements
During the years ended December 31, 2011, January 1, 2011 and January 2, 2010, the Company recorded expenses,
net of insurance coverage, of $143,000, $99,000 and $475,000, respectively, related to the items discussed below.
These settlement amounts are included in general and administrative expenses in the accompanying consolidated
statements of operations and comprehensive loss.
On November 1, 2011, the Company settled a complaint with a former employee by entering into a settlement
agreement and general release. Pursuant to this agreement, the Company was required to pay the settlement on
January 6, 2012.
In December 2010, the Company entered into a separation agreement and general release with a former employee to
settle a claim. Under this agreement, the Company agreed to pay a lump sum severance payment and reimbursement
of six month's Cobra payments.
In December 2009, the Company entered into a settlement agreement representing a complete settlement
and release of a lawsuit filed against the Company for breach of contract. The settlement agreement also provides
for certain amendments to the original Master Franchise Agreement.
In October 2009, the Company entered into a settlement agreement representing a complete settlement
and release of a lawsuit filed against the Company for breach of contract. The settlement agreement also provides
for the termination of the TCBY Transnational Master Franchise Agreement.
MFDD –3/14
Exhibit L: Financial Statements
81
MRS. FIELDS' ORIGINAL COOKIES, INC.
Notes to Consolidated Financial Statements
(continued)
In September 2009, the Company entered into a settlement agreement representing a complete settlement
and release of a lawsuit filed against the Company. The settlement agreement also grants the plaintiff the
exclusive right to solicit leads and advertise the availability of a Master Franchise within India in the Company's
behalf for a period of 12 months from the date of the settlement agreement and on a non-exclusive basis for an
additional 12 months and entitles them to a finder's fee. The dispute resulted from the termination of the Master
Franchise Agreement for failure to comply with the development obligations under the agreement.
Operating Leases
The Company leases office space, facilities and equipment under long-term non-cancelable operating
lease agreements with remaining terms of one to ten years. Rent expense, net of sublease payments, was $1.7
million, $2.3 million and $2.3 million for the years ended December 31, 2011, January 1, 2011 and January 2,
2010, respectively.
Effective October 1, 2010, the Company entered into an Industrial Real Estate Lease (the "Lease") with
an unrelated third party for the lease of approximately 19,000 square feet of space in Salt Lake City, Utah. The
Lease carries a 66 month term and provides for monthly base rent payments of $4,651 for February and March of
2011 and $9,303 per month commencing April 1, 2011. The Lease also requires additional monthly payments for
common area expenses, maintenance, utilities, insurance and taxes, as well as a $9,303 security deposit. This
newly leased space replaces approximately 41,000 square feet of space the Company was leasing in the Salt Lake
City area for its Franchise Support Center and Corporate Headquarters.
On September 8, 2010, the Company entered into a lease termination agreement (the "Lease Termination
Agreement") with NOP Cottonwood 2855, LLC, which provided for the early termination of the assignment and
assumption of lease dated March 16, 2004. In accordance with the terms of the Lease Termination Agreement,
the Company paid an early termination fee of $95,000, which is included in general and administrative expenses
in the accompanying consolidated statements of operations and comprehensive loss.
As of December 31, 2011, the future minimum lease payments due under operating leases are as follows
(in thousands):
Fiscal Year
2012 ..........................................................................................
2013 ..........................................................................................
2014 ..........................................................................................
2015 ..........................................................................................
2016 ..........................................................................................
Thereafter .................................................................................
$
$
MFDD –3/14
Exhibit L: Financial Statements
3,953
2,612
2,228
1,851
646
440
11,730
82
MRS. FIELDS' ORIGINAL COOKIES, INC.
Notes to Consolidated Financial Statements
(continued)
As of December 31, 2011, the future minimum sublease payments due to the Company under these
operating leases are as follows (in thousands):
Fiscal Year
2012 ..........................................................................................
2013 ..........................................................................................
2014 ..........................................................................................
2015 ..........................................................................................
2016 ..........................................................................................
$
$
(2,151)
(915)
(588)
(203)
(63)
(3,920)
Contractual Arrangements
Frozen Dough
The Company has a product supply agreement (the "Frozen Dough Supply Agreement") to purchase
frozen dough products, which stipulates, among other things, minimum annual purchase commitments. These
annual purchase commitments are satisfied primarily through the direct purchase of frozen dough products by
franchisees.
The Company entered into a first amendment to the Frozen Dough Supply Agreement effective October
18, 2010. This amendment, among other items, revised the product price list, extended the term for a period of
five years and eliminated any annual product purchase commitments (see Note 16).
The supplier of the frozen dough product manufactures its products in one location. A production
disruption or the supplier’s inability to secure the raw materials used in the production of its products could
adversely affect the operating results of the Company and its franchisees. Although management believes that
other suppliers could provide similar products on comparable terms, a change in suppliers could cause a delay in
manufacturing and a possible loss of sales, which could adversely affect the financial position, results of
operations or liquidity of the Company and its franchisees.
Soft-Serve Frozen Yogurt
The Company has a supply agreement which provides for manufacturing of TCBY's soft-serve frozen
yogurt products (the "Soft-Serve Supply Agreement”). Under the Soft-Serve Supply Agreement, frozen yogurt
products are made available to TCBY's designated distributors, who purchase the products for resale to TCBY
franchisees. The Soft-Serve Supply Agreement has an initial term of three years with an automatic renewal for
one year unless notification of intent to terminate is not given within 180 days of the expiration of the Soft-Serve
Supply Agreement. The Soft-Serve Supply Agreement has been renewed for a one year term.
The Soft-Serve Supply Agreement was amended effective March 25, 2010 to reset the tolling fee and
establish a date 12 months from the date of execution to review the tolling fee. The tolling fee was not reset
during fiscal year 2011. The Soft-Serve Supply Agreement includes provisions related to licensing of TCBY's
trademarks for purposes of:
•
•
•
•
•
production; pricing, payment, invoicing and collection;
inventory controls;
quality standards and assurance;
indemnification; and
confidentiality.
MFDD –3/14
Exhibit L: Financial Statements
83
MRS. FIELDS' ORIGINAL COOKIES, INC.
Notes to Consolidated Financial Statements
(continued)
Credit Card Processing
Effective October 21, 2011, the Company entered into a Payment Processing Agreement (the " C/C Agreement")
with Cardservice International, Inc., ("Cardservice, Inc."). Under the C/C Agreement, Cardservice, Inc. will
provide credit card processing services for the Company's gifting segment as well as extend preferred pricing to its
franchised and company operated stores.
Hand-Scooped Frozen Yogurt
Effective July 22, 2011, TCBY Systems, LLC ("TCBY"), a wholly-owned subsidiary of the Company, entered into
a product supply agreement (the "Hand-Scooped Supply Agreement") with Hudsonville Creamery & Ice Cream
Company, LLC ("Hudsonville"). Under the Hand-Scooped Supply Agreement, Hudsonville will produce the
Company's proprietary hard-pack yogurt product that will then be made available to distributors designated by the
Company for resale to its franchise system. The Hand-Scooped Supply Agreement replaces a supply agreement
between TCBY and Yarnell Ice Cream Company, Inc., which was terminated for cause by the Company based on
the vendor’s material breach of its obligations thereunder.
The Hand-Scooped Supply Agreement outlines services to be performed and products to be provided by
Hudsonville, and describes production schedules, tolling fees, raw materials and manufacturing costs, product
pricing, quality standards and controls, use of trademarks, confidentiality and other provisions customarily included
in agreements of this nature. The Hand-Scooped Supply Agreement has an initial term of three years, unless
terminated earlier in accordance with provisions set forth in the Hand-Scooped Supply Agreement, and will
automatically renew for additional one-year periods unless either party gives at least 180 days' notice prior to the
end of the current term of its intent not to renew.
16. Subsequent Events
The Company has evaluated subsequent events through March 28, 2012, which is the date these financial statements
were available to be issued and determined the following subsequent events required disclosure:
On March 1, 2012, the Company entered into the second amendment (the "Second Amendment") to the Soft-Serve
Supply Agreement. Under the Soft-Serve Supply Agreement, frozen yogurt products are made available to TCBY's
designated distributors, who purchase the products for resale to the Company's TCBY franchisees. The Second
Amendment reset the tolling fee to be charged on all TCBY products and establishes a date 24 months from the
execution of the Second Amendment to review the tolling fee.
On February 17, 2012, the Company announced a reorganization of certain departments that provide support
functions for the operations of the Company. In order to focus on the its core competencies and its operations, the
Company has outsourced its legal, information technology and certain research and development functions to
various third party providers and eliminated certain positions within its organization.
On January 13, 2012, the Company signed a consent letter allowing Dawn Food Products, Inc., the successor-ininterests to Countryside Baking, Inc. ("Dawn") to assign the Frozen Dough Supply Agreement they had to provide
the Company's frozen dough products to South Coast Bakery, LLC ("South Coast"), as a result of Dawn entering
into an asset purchase agreement with South Coast.
MFDD –3/14
Exhibit L: Financial Statements
84
EXHIBIT M
GUARANTEE OF PERFORMANCE
MFDD – 3/14
Exhibit M: Guarantee of Performance
MFDD – 3/14
Exhibit M: Guarantee of Performance
1
EXHIBIT N
RENEWAL ADDENDUM TO FRANCHISE AGREEMENT
MFDD – 3/14
Exhibit N: Renewal Addendum
RENEWAL ADDENDUM TO MRS. FIELDS®
FRANCHISE AGREEMENT
This is an addendum (the “Renewal Addendum”) to the MRS. FIELDS® FRANCHISE
AGREEMENT between________________________________________________________ (“you” or
the “Franchisee”) and Mrs. Fields Franchising, LLC (“us”, “we” or “Mrs. Fields”), dated
__________________, 20__ (the “Agreement”) and is considered to be part of that Agreement. All
capitalized terms used in this addendum but not defined herein shall have the same meanings ascribed to
them in the Agreement.
1.
Preambles. You have owned and operated a Mrs. Fields store under and by virtue of a
franchise agreement dated _______________ made and entered into between you and Mrs. Fields (the
“Original Franchise Agreement”). The initial term of the Original Franchise Agreement has expired or
will soon expire, and the parties wish to renew the franchise relationship by entering into the Agreement,
as modified by this Renewal Addendum. The Renewal Addendum is necessary to modify the terms of
the standard form of Franchise Agreement to remove the right to renew for an additional term thereunder,
and to provide for a general mutual release of claims, a condition to renewal set forth in the Original
Franchise Agreement.
2.
Term. Article 3 of the Franchise Agreement is hereby deleted in its entirety and the
following is substituted in its place:
ARTICLE 3
TERM
3.1
Term of the Franchise Agreement. The term of this Agreement will be 7
years, commencing on the date of this Agreement. This Agreement is granted in
connection with the renewal of a predecessor franchise agreement entered into between
you and us. See the Renewal Addendum attached to this Agreement. References to the
term of this Agreement mean the 7-year renewal term granted hereunder, and
notwithstanding anything to the contrary contained in this Agreement or any related
exhibit or addenda, no additional right to renew is granted by virtue of this Agreement.
3.
Section 15.8:
Mutual Release. The following provision is hereby added to the Agreement as a new
15.8
Mutual Release of Claims. You (and your Entity Owners, if you are an
Entity), on behalf of you, your Entity Owners, your affiliates, wholly-owned or controlled
corporations, subsidiaries, parents, employees, agents, representatives consultants,
predecessors, successors, assigns, heirs, executors, and administrators (collectively the
“Franchisee Parties”), hereby remise, release, and forever discharge generally Mrs.
Fields and any affiliate, wholly-owned or controlled corporation, subsidiary, predecessor,
successor, or assign thereof and any shareholder, officer, director, employee, or agent of
any of them (collectively the “Mrs. Fields Parties”), and Mrs. Fields does hereby
remise, release, and forever discharge generally the Franchisee Parties from any and all
claims, demands, damages, and injuries, whether presently known or unknown, suspected
or unsuspected, disclosed or undisclosed, actual or potential, which any of the Franchisee
Parties or the Mrs. Fields Parties may now have, or may hereafter claim to have had or to
have acquired against the other, of whatever source of origin, which in any way arise out
of or are connected with the Store, or any franchise agreements or rights under which you
currently operate the Store, arising from any periods prior to and including the date
hereof, including generally any and all claims at law or in equity, those arising under the
MFDD – 3/14
Exhibit N: Renewal Addendum
1
common law or state or federal statutes, rules or regulations such as, by way of example
only, franchising, securities and antitrust statutes, rules or regulations (the “Released
Claims”). Further, each of the Franchisee Parties and the Mrs. Fields Parties agree never
from this day forward, directly or indirectly, to institute, prosecute, commence, join in, or
generally attempt to assert or maintain any action against the other, in any court or
tribunal of the United States of America, any state thereof, or any other jurisdiction in
connection with or related to the Released Claims.
NOT RELEASED BY THE MRS. FIELDS PARTIES ARE (1) CURRENT OR
PAST DUE DEBTS ON ACCOUNT OR UNDER ANY AGREEMENT, PAYABLE
EITHER TO MRS. FIELDS OR ANY OF OUR AFFILIATES, (2) THE
COLLECTION OF ANY CURRENT OR DELINQUENT REPORTS OR
RECORDS REQUIRED TO BE FILED BY YOU UNDER ANY AGREEMENT
BETWEEN YOU AND MRS. FIELDS OR ANY OF OUR AFFILIATES, AND (3)
ANY CLAIMS ARISING FROM OR RELATED TO MRS. FIELDS’ AUDIT
RIGHTS UNDER THE FRANCHISE AGREEMENT.
THIS IS A RELEASE. A RELEASE HAS LEGAL CONSEQUENCES. ANY
PARTY HERETO SHOULD CONSULT WITH AN ATTORNEY IF SUCH
PARTY DOES NOT FULLY UNDERSTAND WHAT A RELEASE IS OR THE
EFFECT OF THIS RELEASE.
THIS RELEASE MAY BE SUBJECT TO OR LIMITED BY LOCAL LAW IN
YOUR STATE. PLEASE REFER TO ANY STATE-SPECIFIC ADDENDA OR
RIDERS ATTACHED TO THE AGREEMENT.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on the day
and year first written above.
MRS. FIELDS FRANCHISING, LLC
______________________________________
By: _________________________________
By: ___________________________________
Title: _______________________________
Title: _________________________________
MFDD – 3/14
Exhibit N: Renewal Addendum
2
EXHIBIT O
STATE SPECIFIC ADDENDA TO DISCLOSURE DOCUMENT, FRANCHISE
AGREEMENT AND AREA DIRECTOR AGREEMENT
MFDD – 3/14
Exhibit O: State Specific Addenda
CALIFORNIA ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
NOTE: THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT A
COPY OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE
FRANCHISE BE DELIVERED TOGETHER WITH THE FRANCHISE DISCLOSURE
DOCUMENT.
As a supplement to the information disclosed in this disclosure document, the following
additional paragraphs are added:
1.
No person identified in Item 2 of the disclosure document is subject to any
currently effective order of any national securities association or national
securities exchange, as defined in the Securities Exchange Act of 1934, 15
U.S.C.A 78a et seq., suspending or expelling such person from membership in
such association or exchange.
2.
California Business and Professions Code Sections 20000 through 20043 provide
rights to you concerning termination or nonrenewal of a franchise. If the
Franchise Agreement contains a provision that is inconsistent with the law, the
law will control.
3.
The Franchise Agreement and Area Director Agreement provide for termination
upon bankruptcy. These provisions may not be enforceable under federal
bankruptcy law (11 U.S.C.A. Sec. 101 et seq.).
4.
The Franchise Agreement and Area Director Agreement contain a covenant not to
compete which extends beyond the termination of the franchise. These provisions
may not be enforceable under California Law.
5.
The Franchise Agreement and Area Director Agreement require litigation to occur
at Broomfield, Colorado, with the costs being borne by the non-prevailing party in
the litigation. You are encouraged to consult private legal counsel to determine
the applicability of California and federal laws (such as Business and Professions
Code Section 20040.5, Code of Civil Procedure Section 1281) to any provisions
of an agreement restricting venue to a forum outside the State of California.
6.
The Franchise Agreement and Area Director Agreement require application of the
laws of the State of Colorado. These provisions may not be enforceable under
California law.
7.
The Franchise Agreement and Area Director Agreement require the parties to
waive any and all rights to a trial by jury in the event of litigation. These
provisions may not be enforceable under California law.
8.
Payment of all initial fees is postponed until after all of franchisor’s obligations
are complete.
MFDD – 3/14
Exhibit O: State Specific Addenda
1
9.
You must sign a general release if you transfer your franchise. California
Corporations Code 31512 voids a waiver of your rights under the Franchise
Investment Law (California Corporations Code 31000 through 31516). Business
and Professions Code 20010 voids a waiver of your rights under the Franchise
Relations Act (Business and Professions Code 20000 through 20043).
10.
The Franchise Agreement contains a liquidated damages clause. Under California
Civil Code Section 1671, certain liquidated damages clauses are unenforceable.
11.
THE CALIFORNIA INVESTMENT LAW REQUIRES THAT A COPY OF
ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE
FRANCHISE BE DELIVERED TOGETHER WITH THE FRANCHISE
DISCLOSURE DOCUMENT.
SECTION 31125 OF THE FRANCHISE
INVESTMENT LAW REQUIRES US TO GIVE TO YOU A DISCLOSURE
DOCUMENT APPROVED BY THE COMMISSIONER OF CORPORATIONS
BEFORE WE ASK YOU TO CONSIDER A MATERIAL MODIFICATION OF
YOUR FRANCHISE AGREEMENT.
12.
OUR WEBSITE HAS NOT BEEN REVIEWED OR APPROVED BY THE
CALIFORNIA DEPARTMENT OF CORPORATIONS. ANY COMPLAINTS
CONCERNING THE CONTENT OF THIS WEBSITE MAY BE DIRECTED
TO THE CALIFORNIA DEPARTMENT OF CORPORATIONS AT
www.corp.ca.gov.
MFDD – 3/14
Exhibit O: State Specific Addenda
2
CALIFORNIA ADDENDUM TO FRANCHISE AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the Franchise Investment Law and the rules and regulations
promulgated thereunder, the Franchise Agreement is modified as follows:
1.
Payment of all fees is postponed until after all of franchisor’s obligations are complete
and franchisee is open for business.
2.
Subparagraph 14.6 of the Franchise Agreement contains a liquidated damages clause.
This provision may not be enforceable under California Civil Code Section 1671.
3.
Subparagraph 17.6 of the Franchise Agreement requires the parties to waive any and all
rights to a trial by jury in the event of litigation. This provision may not be enforceable
under California law.
4.
Except as expressly provided herein, the Franchise Agreement shall remain in full force
and effect.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC
By:
Its:
Dated:____________________
FRANCHISEE(S)
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
3
CALIFORNIA ADDENDUM TO AREA DIRECTOR AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the Franchise Investment Law and the rules and regulations promulgated
thereunder, the Area Director Agreement is modified as follows:
1.
Collection of the initial territory fee identified in Section 5.1 of the Area Director Agreement is
deferred until we have completed our initial obligations under the Area Director Agreement and
until the Area Director is open for business.
2.
Section 19.3 of the Area Director Agreement requires the parties to waive any and all rights to a
trial by jury in the event of litigation. This provision may not be enforceable under California
law.
3.
Except as expressly provided herein, the Area Director Agreement shall remain in full force and
effect.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC:
By
Its
Dated:____________________
AREA DIRECTOR(S):
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
4
HAWAII ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
As a supplement to the information disclosed in this disclosure document, the following
additional paragraph is added to Item 5:
“For those franchises governed by Hawaiian law, we will defer payment of the
initial fees described in Item 5 until we have completed our initial obligations
under the Franchise Agreement or Area Director Agreement.”
MFDD – 3/14
Exhibit O: State Specific Addenda
5
HAWAII ADDENDUM TO THE FRANCHISE AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the Hawaiian Franchise Investment Law and the rules and regulations
promulgated thereunder, the Franchise Agreement executed as of ____________, 20___, of Mrs.
Fields Franchising, LLC shall be modified as follows:
1.
Payment of the initial franchise fee identified in Section 6.1 of the Franchise Agreement
and any other fees described in Item 5 of the Franchise Disclosure Document are
deferred until we have completed our initial pre-opening obligations under the Franchise
Agreement.
MRS. FIELDS FRANCHISING, LLC
FRANCHISEE(S)
By:
Its:
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
6
HAWAII ADDENDUM TO THE AREA DIRECTOR AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the Hawaiian Franchise Investment Law and the rules and regulations
promulgated thereunder, the Area Director Agreement executed as of ____________, 20___, of Mrs.
Fields Franchising, LLC shall be modified as follows:
1.
Payment of the initial territory fee identified in Section 5.1 of the Area Director Agreement is
deferred until we have completed our initial pre-opening obligations under the Area Director
Agreement.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC:
By
Its
Dated:____________________
AREA DIRECTOR(S):
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
7
ILLINOIS ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
1.
The following is inserted after the third paragraph under the sub-heading “Risk Factors”
at the cover page of this disclosure document:
“The Risk Factors set forth above may be affected by Illinois law, 815 ILCS §§
705/4 and 705/41.”
2.
The following is added to Item 5:
“Based on our financial condition, the Illinois Attorney General has imposed a fee
deferral requirement with respect to the franchises governed by Illinois law. We
therefore will defer payment of the initial fees described in Item 5 until you have
commenced business pursuant to the Franchise Agreement or Area Director
Agreement.”
3.
The following paragraphs are inserted at the end of Item 17:
“The conditions under which your franchise can be terminated and your rights
upon non-renewal may be affected by Illinois law, 815 ILCS 705/19 and 705/20.”
“Provisions regarding jurisdiction and venue and choice of law may be affected
by Illinois law, 815 ILCS §§ 705/4 and 705/41, respectively.
MFDD – 3/14
Exhibit O: State Specific Addenda
8
ILLINOIS ADDENDUM TO FRANCHISE AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the Illinois Disclosure Franchise Act and the rules and regulations
promulgated thereunder, the Franchise Agreement executed as of ____________, 20___, of Mrs.
Fields Franchising, LLC shall be modified as follows:
1.
Payment of the initial franchise fee identified in Section 6.1 of the Franchise Agreement
and any other fees described in Item 5 of the Franchise Disclosure Document are
deferred until we have completed all of our pre-opening obligations and you commence
business pursuant to the Franchise Agreement.
2.
The following statement is added to the end of Section 13.2 and inserted as Section 13.3:
The conditions under which your license rights can be terminated and your rights upon
non-renewal may be affected by Illinois law, 815 ILCS 705/19 and 705/20.
3.
Section 17.4 is hereby deleted in its entirety, to the extent required under Illinois law, and
the following is substituted in its place:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK
ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER
FEDERAL LAW OR MATTERS ARISING UNDER THE ILLINOIS FRANCHISE
DISCLOSURE ACT WHICH SHALL BE GOVERNED BY ILLINOIS LAW, THIS
AGREEMENT, THE FRANCHISE AND THE RELATIONSHIP BETWEEN
COMPANY AND FRANCHISEE SHALL BE GOVERNED BY THE LAWS OF THE
STATE OF COLORADO, EXCEPT THAT ANY STATE LAW RELATING TO (1)
THE OFFER AND SALE OF FRANCHISES, (2) FRANCHISE RELATIONSHIPS OR
(3) BUSINESS OPPORTUNITIES, SHALL NOT APPLY UNLESS THE
APPLICABLE JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY
WITHOUT REFERENCE TO THIS PARAGRAPH.
4.
Section 17.5 is hereby deleted in its entirety, to the extent required under Illinois law.
5.
Section 17 is amended, to the extent required under Illinois law, to include the following:
Section 41 of the Illinois Franchise Disclosure Act states that “any condition, stipulation,
or provision purporting to bind any person acquiring any franchise to waive compliance
with any provision of this Act is void.”
6.
Section 17.7 is deleted in its entirety, to the extent required under Illinois law.
7.
The following Section 18.16 is added to the Agreement:
18.16 Certain Waivers Void. This Agreement is subject to Section 41 of the Illinois
Franchise Disclosure Act which states that “any condition, stipulation, or provision
purporting to bind any person acquiring any franchise to waive compliance with any
provision of this Act is void.”
MFDD – 3/14
Exhibit O: State Specific Addenda
9
8.
Paragraphs 4 and 5 of the Acknowledgement Addendum are deleted, to the extent
required under Illinois law.
MRS. FIELDS FRANCHISING, LLC
FRANCHISEE(S)
By:
Its:
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
10
ILLINOIS ADDENDUM TO AREA DIRECTOR AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the Illinois Disclosure Franchise Act and the rules and regulations promulgated
thereunder, the Area Director Agreement executed as of ____________, 20___, of Mrs. Fields
Franchising, LLC shall be modified as follows:
1.
Payment of the initial territory fee identified in Section 5.1 of the Area Director Agreement is
deferred until we have completed all of our pre-opening obligations and you have commenced
operation of your AD Business.
2.
The following statement is added to the end of Section 17.2:
The conditions under which your license rights can be terminated and your rights upon nonrenewal may be affected by Illinois law, 815 ILCS 705/19 and 705/20.
3.
Section 19.2 is hereby deleted in its entirety, to the extent required under Illinois law, and the
following is substituted in its place:
Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15
U.S.C. Sections 1051 Et Seq.) or other federal law or matters arising under the Illinois Franchise
Disclosure Act which shall be governed by Illinois law, this Agreement, the franchise and the
relationship between company and area director shall be governed by the laws of the state of
Utah, except that the Utah Business Opportunity Disclosure Act and any other state law relating
to (1) the offer and sale of franchises, (2) franchise relationships or (3) business opportunities,
shall not apply unless the applicable jurisdictional requirements are met independently without
reference to this paragraph.
4.
Section 19 is amended, to the extent required under Illinois law, to include the following:
Section 41 of the Illinois Franchise Disclosure Act states that “any condition, stipulation, or
provision purporting to bind any person acquiring any franchise to waive compliance with any
provision of this Act is void.”
5.
The following Section 20.14 is added to the Agreement:
20.14 Certain Waivers Void. This Agreement is subject to Section 41 of the Illinois Franchise
Disclosure Act which states that “any condition, stipulation, or provision purporting to bind any
person acquiring any franchise to waive compliance with any provision of this Act is void.”
6.
Paragraphs 6 and 7 of the Acknowledgement Addendum are deleted, to the extent required under
Illinois law.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC:
By
Its
Dated:____________________
AREA DIRECTOR(S)
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
11
MARYLAND ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
State Cover Page. The following language shall be added to Risk Factor 4 on the State Cover
Page:
IN ADDITION, WE WILL DEFER COLLECTION OF ALL INITIAL FEES DESCRIBED IN
ITEM 5 UNTIL WE HAVE COMPLETED OUR INITIAL OBLIGATIONS UNDER THE
FRANCHISE AGREEMENT UNTIL THE FRANCHISEE IS OPEN FOR BUSINESS.
The following language shall be added as Risk Factor 5 on the State Cover Page:
AS SUMMARIZED IN ITEM 4, WE, OUR PARENT, AND SEVERAL AFFILIATES EACH
FILED A VOLUNTARY CHAPTER 11 BANKRUPTCY IN 2008. YOU SHOULD
CAREFULLY REVIEW ITEM 4 BEFORE INVESTING IN THIS FRANCHISE.
Item 5. Item 5 is amended as follows:
1.
All initial fees and payments shall be deferred until such time as we complete out
initial obligations.
2.
All initial fees and payments under the Area Director Agreement shall be deferred
until such time as we complete our initial obligations and you commence operating
your AD Business.
3.
We will not require the signing of a release or waiver as a condition of any refund
of the initial franchise fee or initial territory fee.
4.
The general release required as a condition of renewal, relocation, sale and/or
assignment/transfer shall not apply to any liability under the Maryland Franchise
Registration and Disclosure Law.
Item 12. Item 12 is amended as follows:
1. The general release required as a condition of sale shall not apply to any liability under
the Maryland Franchise Registration and Disclosure Law.
Item 17. Item 17 is amended as follows:
1.
The Franchise Agreement and Area Director Agreement provide for termination
upon bankruptcy. These provisions may not be enforceable under federal
bankruptcy law (11 U.S.C.A. Sec. 101 et seq.)
2.
Any claims arising under the Maryland Franchise Registration and Disclosure
Law must be brought within 3 years after the grant of your franchise or AD
Business.
3.
You may sue in Maryland for claims arising under the Maryland Franchise
Registration and Disclosure law.
MFDD – 3/14
Exhibit O: State Specific Addenda
12
4.
The general release required as a condition of renewal, relocation, sale and/or
assignment/transfer shall not apply to any liability under the Maryland Franchise
Registration and Disclosure Law.
MFDD – 3/14
Exhibit O: State Specific Addenda
13
MARYLAND ADDENDUM TO FRANCHISE AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the requirements of the Maryland Franchise Registration and Disclosure
Law and the rules and regulations promulgated thereunder, the Franchise Agreement is modified
as follows:
1.
Release. Sections 3.2(b) (renewal), 4.7(g) (relocation) and 12.3(e) (transfer) of
the Franchise Agreement are amended to provide that any release required as a
condition of renewal, relocation, transfer, assignment or sale will not apply to any
liability under the Maryland Franchise Registration and Disclosure Law.
2.
Governing Law; Consent to Jurisdiction. The following is added at the end of
both Section 17.4 and 17.5:
NOTWITHSTANDING THE PRECEDING, YOU MAY BRING A
LAWSUIT IN MARYLAND FOR CLAIMS ARISING UNDER THE
MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE
LAW.
3.
Limitation of Claims. The following is added to the end of Section 17.7:
This 1 year limitation of claims shall not apply to any claims arising under
the Maryland Franchise Registration and Disclosure Law. Any claims
arising under the Maryland Franchise Registration and Disclosure Law
must be brought within 3 years after the grant of your franchise.
4.
Acknowledgement. Any provision in the Franchise Agreement that requires you to
disclaim the occurrence and/or acknowledge the non-occurrence of acts that would
constitute a violation of the Maryland Franchise Registration and Disclosure Law is
not intended to nor will it act as a release, estoppel or waiver of any liability
incurred under the Maryland Franchise Registration and Disclosure Law.
5.
Fee Deferral. All initial fees and payments shall be deferred until such time as we
(the franchisor) have completed our initial obligations.
6.
Construction. Except as expressly provided herein, the Franchise Agreement
shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Addendum in ______ counterparts on the day and year first above written.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC
By:
Its:
MFDD – 3/14
Exhibit O: State Specific Addenda
14
Dated:____________________
FRANCHISEE(S)
(Signature)
(SignatuMARYLAND ADDENDUM TO AREA DIRECTOR AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the requirements of the Maryland Franchise Registration and Disclosure Law
and the rules and regulations promulgated thereunder, the Area Director Agreement is modified as
follows:
1.
Release. Sections 15.3(d) (transfer) and 16.2(d) (renewal) of the Franchise Agreement
are amended to provide that any release required as a condition of renewal, transfer,
assignment or sale will not apply to any liability under the Maryland Franchise
Registration and Disclosure Law.
2.
Governing Law/Consent to Venue and Jurisdiction. The following is added at the end of
Section 19.2:
NOTWITHSTANDING THE PRECEDING PARAGRAPH, YOU MAY
BRING A LAWSUIT IN MARYLAND FOR CLAIMS ARISING UNDER THE
MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE LAW.
3.
Limitation of Claims. The following is added to the end of Section 19.4:
This 1 year limitation of claims shall not apply to any claims arising under the
Maryland Franchise Registration and Disclosure Law. Any claims arising under
the Maryland Franchise Registration and Disclosure Law must be brought within
3 years after the grant of your AD Business.
4.
Acknowledgment. Any provision in the Area Director Agreement that requires you to
disclaim the occurrence and/or acknowledge the non-occurrence of acts that would
constitute a violation of the Maryland Franchise Registration and Disclosure Law is not
intended to nor will it act as a release, estoppel or waiver of any liability incurred under the
Maryland Franchise Registration and Disclosure Law.
5.
Fee Deferral. All initial fees and payments shall be deferred until such time as we (the
franchisor) have completed our initial obligations and you (the Area Director) have
commenced operating your AD Business.
6.
Construction. Except as expressly provided herein, the Area Director Agreement shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Addendum in
______ counterparts on the day and year first above written.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC:
By
Its
MFDD – 3/14
Exhibit O: State Specific Addenda
15
Dated:____________________
AREA DIRECTOR(S):
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
16
MINNESOTA ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
As a supplement to the information disclosed in this disclosure document, the following
additional paragraphs are added:
1.
Any release executed in connection with the Franchise Agreement or Area
Director Agreement shall not apply to any claims arising under Minnesota Statutes 1973
Supplement, Sections 80C.01 to 80C.22, providing that a franchisee cannot be required to
assent to a release, assignment, or waiver that would relieve any person from liability
imposed by such statutes; provided, however that this shall not bar the voluntary
settlement of disputes.
2.
With respect to the franchises governed by Minnesota law, we will comply
with Minnesota Statute Sec. 80C.14, subdivisions 3, 4 and 5 which require, except in
certain specific cases, that we give you 90 days notice of termination (with 60 days to
cure) and 180 days notice for non-renewal of the franchise agreement.
3.
Minnesota Statute Sec. 80C.21 and Minnesota Rule 2860.4400J prohibit
us from requiring litigation to be conducted outside Minnesota. In addition, nothing in
the disclosure document, Franchise Agreement or Area Director Agreement can abrogate
or reduce any of your rights as provided for in Minnesota Statutes, Chapter 80C, or your
rights to a jury trial or any procedure, forum, or remedies provided for by the laws of the
jurisdiction.
4.
With respect to the franchises governed by Minnesota law, we will defer
payment of the initial fees described in Item 5 until we have completed our initial
obligations under the Franchise Agreement or Area Director Agreement.
MFDD – 3/14
Exhibit O: State Specific Addenda
17
MINNESOTA ADDENDUM TO FRANCHISE AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the Minnesota Franchise Act and the rules and regulations
promulgated thereunder, the Franchise Agreement is modified as follows:
1.
The following is added at the end of Section 12.3(e):
“except that any release shall not apply to any claims arising under the Minnesota
Statutes 1973 Supplement, Sections 80C.01 to 80.C.22, providing that a
franchisee cannot be required to assent to a release, assignment, or waiver that
would relieve any person from liability imposed by such statutes; provided,
however that this shall not bar the voluntary settlement of disputes;”
2.
The following sentence is added to the end of Section 13.2:
With respect to the franchises governed by Minnesota law, notwithstanding the
foregoing, Company will comply with Minnesota Statute Sec. 80C.14,
subdivisions 3, 4 and 5 which require, except in certain specific cases, that we
give you 90 days notice of termination (with 60 days to cure) and 180 days notice
for non-renewal of the franchise agreement.
3.
Section 17.5 is amended, to the extent required under Minnesota law, to provide that any
litigation or other court proceeding will take place in the state in which your Store is
located.
4.
Section 17.4 is deleted in its entirety, to the extent required under Minnesota law, and the
following language is substituted in its place:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES
TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET
SEQ.) OR OTHER FEDERAL LAW, OR MATTERS ARISING UNDER THE
MINNESOTA FRANCHISE ACT WHICH SHALL BE GOVERNED
THEREBY, THIS AGREEMENT AND THE RELATIONSHIP BETWEEN
YOU AND US WILL BE GOVERNED BY THE LAWS OF THE STATE OF
COLORADO, EXCEPT THAT ANY STATE LAW RELATING TO (1) THE
OFFER AND SALE OF FRANCHISES, (2) FRANCHISE RELATIONSHIPS,
OR (3) BUSINESS OPPORTUNITIES, WILL NOT APPLY UNLESS THE
APPLICABLE
JURISDICTIONAL
REQUIREMENTS
ARE
MET
INDEPENDENTLY WITHOUT REFERENCE TO THIS PARAGRAPH.
5.
The following sentence is added to the end of Section 17.1:
Pursuant to Minn. Stat. Sec. 80C.21 and Minn. Rule Part 2860.4400J, this Section shall
not in any way abrogate or reduce any of your rights as provided for in Minnesota
Statutes, Chapter 80C or your rights to a jury trial or any procedure, forum, or remedies
provided for by the laws of the jurisdiction.
MFDD – 3/14
Exhibit O: State Specific Addenda
18
6.
Section 17.6 is deleted in its entirety, to the extent required under Minnesota law.
7.
Payment of the initial franchise fee identified in Section 6.1 of the Franchise Agreement
and any other fees described in Item 5 of the Franchise Disclosure Document are
deferred until we have completed our initial obligations under the Franchise Agreement.
8.
Except as expressly provided herein, the Agreement shall remain in full force and effect.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC
By:
Its:
Dated:____________________
FRANCHISEE(S)
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
19
MINNESOTA ADDENDUM TO AREA DIRECTOR AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the Minnesota Franchise Act and the rules and regulations promulgated
thereunder, the Area Director Agreement is modified as follows:
1.
The following is added at the end of Section 15.3(d):
“except that any release shall not apply to any claims arising under the Minnesota
Statutes 1973 Supplement, Sections 80C.01 to 80.C.22, providing that a franchisee
cannot be required to assent to a release, assignment, or waiver that would relieve any
person from liability imposed by such statutes; provided, however that this shall not bar
the voluntary settlement of disputes;”
2.
The following sentence is added to the end of Section 17.2:
With respect to the franchises governed by Minnesota law, notwithstanding the
foregoing, Company will comply with Minnesota Statute Sec. 80C.14, subdivisions 3, 4
and 5 which require, except in certain specific cases, that we give you 90 days notice of
termination (with 60 days to cure) and 180 days notice for non-renewal of the franchise
agreement.
3.
Section 19.2 is deleted in its entirety, to the extent required under Minnesota law, and the
following language is substituted in its place:
Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act,
15 U.S.C. Sections 1051 et seq.) Or other federal law, or matters arising under the
Minnesota Franchise Act which shall be governed thereby, this agreement and the
relationship between you and us will be governed by the laws of the state of Utah, except
that the Utah Business Opportunity Disclosure Act and any other state law relating to (1)
the offer and sale of franchises, (2) franchise relationships, or (3) business opportunities,
will not apply unless the applicable jurisdictional requirements are met independently
without reference to this paragraph.
4.
Section 19.3 is deleted in its entirety, to the extent required under Minnesota law.
5.
Payment of the initial territory fee identified in Section 5.1 of the Area Director Agreement is
deferred until we have completed our initial obligations under the Area Director Agreement.
6.
Except as expressly provided herein, the Agreement shall remain in full force and effect.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC:
By
Its
Dated:____________________
AREA DIRECTOR(S):
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
20
NEW YORK ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
As a supplement to the information disclosed in this disclosure document, the following
additional paragraphs are added:
1.
Except as disclosed in Item 3 of the disclosure document, neither we, our
predecessors, affiliates nor any person identified in Item 2 of this disclosure
document:
A.
Has any administrative, criminal or material civil action (or a significant
number of civil actions irrespective of materiality) pending against it or
him alleging a violation of any franchise law, securities law, fraud,
embezzlement, fraudulent conversion, restraint of trade, unfair or
deceptive practices, misappropriation of property or comparable
allegations.
B.
Has been convicted of a felony or pleaded nolo contendere to a felony
charge or within the ten (10) year period immediately preceding the
application for registration, been convicted of a misdemeanor or pleaded
nolo contendere to a misdemeanor charge or been held liable in a civil
action by final judgment or been the subject of a material complaint or
other legal proceeding if such misdemeanor conviction or charge or civil
action, complaint or other legal proceeding involved violation of any
franchise law, securities law, fraud, embezzlement, fraudulent conversion,
restraint of trade, unfair or deceptive practices, misappropriation of
property or comparable allegations.
C.
Is subject to any currently effective injunctive or restrictive order or
decree relating to franchises or under any federal, state, or Canadian
franchise, securities, antitrust, trade regulation, trade practice law, or any
national securities association or national securities exchange (as defined
in the Securities and Exchange Act of 1934) suspending or expelling such
person from membership in such association or exchange as a result of a
concluded or pending action or proceeding brought by a public agency.
2.
Except as disclosed in Item 4 of the disclosure document, during the fifteen (15)
year period immediately preceding the date of this disclosure document, neither
we, our predecessors, affiliates or any person identified in Item 2 of this
disclosure document has been adjudged bankrupt or reorganized due to
insolvency or been a principal officer of any company or a general partner in any
partnership at or within 1 year of the time that such company or partnership was
adjudged bankrupt or reorganized due to insolvency or is otherwise subject to any
pending bankruptcy or reorganization proceeding.
3.
You will not be required to indemnify us for any claims arising out of a breach of
the Franchise Agreement or Area Director Agreement by us or other civil wrongs
committed by us.
MFDD – 3/14
Exhibit O: State Specific Addenda
21
4.
We will not make any changes to the Operations Manual or Area Director
Manuals which would impose an unreasonable economic burden on you or
unreasonably increase your obligations under the Franchise Agreement or Area
Director Agreement.
5.
However, we will not assign any of our rights under the Franchise Agreement or
Area Director Agreement except to an assignee who in our good faith and
judgment is willing and financially able to assume our obligations under the
Agreement.
6.
Any release executed in connection with the Franchise Agreement or Area
Director Agreement is subject to the proviso that all rights enjoyed by you and
any causes of action arising in your favor from the provisions of Article 33 of the
General Business Law of the State of New York and the regulations issued
thereunder shall remain in force; it being the intent of this proviso that the nonwaiver provisions of Sections 687.4 and 687.5 of the General Business Law of
New York State be satisfied.
7.
You may terminate the Franchise Agreement or Area Director Agreement and any
ancillary agreements on any grounds available by law.
8.
The summary in Item 17.w., Choice of Law, is amended to state the following:
Colorado law applies unless governed by applicable federal law. The foregoing
choice of law should not be considered a waiver of any right conferred upon the
franchisor or upon Franchisee or Area Director by the General Business Law of
the State of New York.
MFDD – 3/14
Exhibit O: State Specific Addenda
22
NEW YORK ADDENDUM TO FRANCHISE AGREEMENT
MRS. FIELDS FRANCHISING, LLC
1.
The following is added after the third sentence in Section 5.2:
However, we will make no changes to the Operations Manual which would impose an
unreasonable economic burden on you or unreasonably increase your obligations.
2.
Section 12.1 is amended by adding the following to the end of that Section:
However, we will make no assignment except to an assignee who, in our good faith
judgment, is willing and able to assume our obligations under this Agreement.
3.
The following language is added at the end of Section 12.3(e):
provided, however, that any release shall not apply to any claims arising under the
provisions of Article 33 of the General Business Law of the State of New York.
4.
The following sentence, to the extent required under New York law, is added to the end
of Section 15.6:
However, you will not be required to indemnify us for any claims arising out of a breach
of the Agreement by us or other civil wrongs of us.
5.
Section 17.4 is deleted in its entirety, to the extent required under New York law, and the
following is substituted in its place:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES TRADEMARK
ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.) OR OTHER
FEDERAL LAW OR MATTERS ARISING UNDER ARTICLE 33 OF THE GENERAL
BUSINESS LAW OF THE STATE OF NEW YORK WHICH SHALL BE GOVERNED
THEREBY, THIS AGREEMENT AND THE RELATIONSHIP BETWEEN YOU AND
US WILL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO,
EXCEPT THAT ANY STATE LAW RELATING TO (1) THE OFFER AND SALE OF
FRANCHISES, (2) FRANCHISE RELATIONSHIPS, OR (3) BUSINESS
OPPORTUNITIES, WILL NOT APPLY UNLESS THE APPLICABLE
JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT
REFERENCE TO THIS PARAGRAPH.
MFDD – 3/14
Exhibit O: State Specific Addenda
23
6.
Except as expressly provided herein, the Agreement shall remain in full force and effect.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC
By
Its
Dated:____________________
FRANCHISEE(S)
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
24
NEW YORK ADDENDUM TO AREA DIRECTOR AGREEMENT
MRS. FIELDS FRANCHISING, LLC
1.
Section 15.1 is amended by adding the following to the end of that Section:
However, we will make no assignment except to an assignee who, in our good faith judgment, is
willing and able to assume our obligations under this Agreement.
2.
The following language is added at the end of Section 15.3(d):
provided, however, that any release shall not apply to any claims arising under the provisions of
Article 33 of the General Business Law of the State of New York.
3.
The following sentence, to the extent required under New York law, is added to the end of
Section 18.4:
However, you will not be required to indemnify us for any claims arising out of a breach of the
Agreement by us or other civil wrongs of us.
4.
Section 19.2 is deleted in its entirety, to the extent required under New York law, and the
following is substituted in its place:
Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15
U.S.C. Sections 1051 et seq.) Or other federal law or matters arising under Article 33 of the
General Business Law of the state of New York which shall be governed thereby, this Agreement
and the relationship between you and us will be governed by the laws of the state of Utah, except
that the Utah Business Opportunity Disclosure Act and any other state law relating to (1) the offer
and sale of franchises, (2) franchise relationships, or (3) business opportunities, will not apply
unless the applicable jurisdictional requirements are met independently without reference to this
paragraph.
5.
Except as expressly provided herein, the Agreement shall remain in full force and effect.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC:
By
Its
Dated:____________________
AREA DIRECTOR(S):
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
25
NORTH DAKOTA ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
As a supplement to the information disclosed in this disclosure document, the following
additional paragraphs are added:
1.
Covenants not to compete upon termination or expiration of the Franchise
Agreement or Area Director Agreement are generally unenforceable in North Dakota,
except as provided by law.
2.
entirety.
The section entitled “Termination Fee” in the Item 6 chart is deleted in its
3.
Any release executed in connection with the Franchise Agreement or Area
Director Agreement will not apply to any claims that may arise under the North Dakota
Franchise Investment Law.
4.
Any litigation required by the Franchise Agreement or Area Director
Agreement will be conducted in the state where your Store or the territory for your AD
Business is or will be located.
5.
With respect to the franchises governed by North Dakota law, we will
defer payment of the initial fees described in Item 5 until we have fulfilled all of our
initial obligations under the Franchise Agreement or Area Director Agreement and you
have commenced doing business pursuant to the Agreement.
MFDD – 3/14
Exhibit O: State Specific Addenda
26
NORTH DAKOTA ADDENDUM TO FRANCHISE AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the North Dakota Franchise Act and the rules and regulations
promulgated thereunder, the Franchise Agreement is modified as follows:
1.
The following statement is added at the end of Sections 11.2, 12.3(j) and 12.5(c):
Covenants not to compete upon termination or expiration of a franchise agreement are
generally unenforceable in North Dakota, except as provided by law.
2.
The following statement is added at the end of Sections 12.3(e):
(To the extent required under North Dakota law, any release executed in connection
herewith will not apply to any claims that may arise under the North Dakota Franchise
Investment Law.)
3.
Section 14.6 of the Franchise Agreement is deleted in its entirety, to the extent required
under North Dakota law.
4.
Section 17.5 is amended, to the extent required under North Dakota law, to provide:
5.
a.
Litigation will occur in the state in which your Store is located.
b.
The judge will have the authority to award exemplary or punitive damages in a
proper case.
Section 17.4 is deleted in its entirety, to the extent required under North Dakota law, and
the following is substituted in its place:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES
TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.)
OR OTHER FEDERAL LAW OR MATTERS ARISING UNDER THE NORTH
DAKOTA FRANCHISE INVESTMENT LAW WHICH SHALL BE GOVERNED
THEREBY, THIS AGREEMENT AND THE RELATIONSHIP BETWEEN YOU AND
US WILL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO,
EXCEPT THAT ANY STATE LAW RELATING TO (1) THE OFFER AND SALE OF
FRANCHISES, (2) FRANCHISE RELATIONSHIPS, OR (3) BUSINESS
OPPORTUNITIES, WILL NOT APPLY UNLESS THE APPLICABLE
JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT
REFERENCE TO THIS PARAGRAPH.
7.
Section 17.6 is deleted in its entirety, to the extent required under North Dakota law.
8.
Payment of the initial franchise fee identified in Section 6.1 of the Franchise Agreement
and any other fees described in Item 5 of the Franchise Disclosure Document are
deferred until we have fulfilled all of our initial obligations under the Franchise
Agreement or other documents and you have commenced doing business pursuant to the
Franchise Agreement.
MFDD – 3/14
Exhibit O: State Specific Addenda
27
9.
Except as expressly provided herein, the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment in ______ counterparts on the day and year first above written.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC
By
Its
Dated:____________________
FRANCHISEE(S)
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
28
NORTH DAKOTA ADDENDUM TO AREA DIRECTOR AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the North Dakota Franchise Act and the rules and regulations promulgated
thereunder, the Area Director Agreement is modified as follows:
1.
The following statement is added at the end of Section 17.5:
Covenants not to compete upon termination or expiration of a franchise agreement are generally
unenforceable in North Dakota, except as provided by law.
2.
The following statement is added at the end of Sections 15.3(d):
(To the extent required under North Dakota law, any release executed in connection herewith will
not apply to any claims that may arise under the North Dakota Franchise Investment Law.)
3.
Section 19.2 is deleted in its entirety, to the extent required under North Dakota law, and the
following is substituted in its place:
Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15
U.S.C. Sections 1051 et seq.) or other federal law or matters arising under the North Dakota
Franchise Investment Law which shall be governed thereby, this Agreement and the relationship
between you and us will be governed by the laws of the state of Utah, except that the Utah
Business Opportunity Disclosure Act and any other state law relating to (1) the offer and sale of
franchises, (2) franchise relationships, or (3) business opportunities, will not apply unless the
applicable jurisdictional requirements are met independently without reference to this paragraph.
4.
Section 19.3 is deleted in its entirety, to the extent required under North Dakota law.
5.
Payment of the initial territory fee identified in Section 5.1 of the Area Director Agreement is
deferred until we have fulfilled all of our initial obligations under the Area Director Agreement or
other documents and you have commenced operating your AD Business.
6.
Except as expressly provided herein, the Agreement shall remain in full force and effect.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC:
Dated:____________________
By
Its
AREA DIRECTOR(S):
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
29
RHODE ISLAND ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
The following paragraph is added to the end of Item 17 of the disclosure document:
19-28.1-14 of the Rhode Island Franchise Investment Act provides that “A provision in a
franchise agreement restricting jurisdiction or venue to a forum outside this state or
requiring the application of the laws of another state is void with respect to a claim
otherwise enforceable under this act.”
MFDD – 3/14
Exhibit O: State Specific Addenda
30
RHODE ISLAND ADDENDUM TO FRANCHISE AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the requirements of the Rhode Island Franchise Investment Act and the
rules and regulations promulgated thereunder, the Franchise Agreement of Mrs. Fields
Franchising, LLC is modified as follows:
1.
Section 17.4 is hereby deleted in its entirety, to the extent required under Rhode Island
law, and the following is substituted in its place:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES
TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET
SEQ.) OR OTHER FEDERAL LAW AND EXCEPT WITH RESPECT TO
MATTERS ARISING UNDER THE RHODE ISLAND FRANCHISE
INVESTMENT ACT, WHICH MATTERS SHALL BE GOVERNED
THEREBY, THIS AGREEMENT, THE FRANCHISE AND THE
RELATIONSHIP BETWEEN COMPANY AND FRANCHISEE SHALL BE
GOVERNED BY THE LAWS OF THE STATE OF COLORADO, EXCEPT
THAT ANY STATE LAW RELATING TO (1) THE OFFER AND SALE OF
FRANCHISES, (2) FRANCHISE RELATIONSHIPS, OR (3) BUSINESS
OPPORTUNITIES, SHALL NOT APPLY UNLESS THE APPLICABLE
JURISDICTIONAL REQUIREMENTS ARE MET INDEPENDENTLY
WITHOUT REFERENCE TO THIS PARAGRAPH.
2.
Section 17.5 is hereby deleted in its entirety, to the extent required under Rhode Island
law.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC
By:
Its:
Dated:____________________
FRANCHISEE(S)
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
31
RHODE ISLAND ADDENDUM TO AREA DIRECTOR AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the requirements of the Rhode Island Franchise Investment Act and the rules
and regulations promulgated thereunder, the Area Director Agreement of Mrs. Fields Franchising, LLC is
modified as follows:
1.
Section 17.4 is hereby deleted in its entirety, to the extent required under Rhode Island law, and
the following is substituted in its place:
Except to the extent governed by the United States Trademark Act of 1946 (Lanham Act, 15
U.S.C. Sections 1051 et seq.) or other federal law and except with respect to matters arising under
the Rhode Island Franchise Investment Act, which shall be governed thereby, this Agreement and
the relationship between you and us will be governed by the laws of the state of Utah, except that
the Utah Business Opportunity Disclosure Act and any other state law relating to (1) the offer and
sale of franchises, (2) franchise relationships, or (3) business opportunities, will not apply unless
the applicable jurisdictional requirements are met independently without reference to this
paragraph.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC:
By
Dated:____________________
Its
AREA DIRECTOR(S):
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
32
SOUTH DAKOTA ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
As a supplement to the information disclosed in this disclosure document, the following
additional paragraphs are added:
With respect to the franchises governed by South Dakota law, we will defer payment of
the initial fees described in Item 5 until we have fulfilled all of our initial obligations
under the Franchise Agreement or Area Director Agreement and you have commenced
doing business pursuant to the Agreement.
MFDD – 3/14
Exhibit O: State Specific Addenda
33
SOUTH DAKOTA ADDENDUM TO FRANCHISE AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of South Dakota state law, the Franchise Agreement is modified as follows:
1.
Payment of the initial franchise fee identified in Section 6.1 of the Franchise Agreement
and any other fees described in Item 5 of the Franchise Disclosure Document are
deferred until we have fulfilled all of our initial obligations under the Franchise
Agreement or other documents and you have commenced doing business pursuant to the
Franchise Agreement.
2.
Except as expressly provided herein, the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment in ______ counterparts on the day and year first above written.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC
By
Its
Dated:____________________
FRANCHISEE(S)
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
34
SOUTH DAKOTA ADDENDUM TO AREA DIRECTOR AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of South Dakota state law, the Area Director Agreement is modified as follows:
1.
Payment of the initial territory fee identified in Section 5.1 of the Area Director Agreement is
deferred until we have fulfilled all of our initial obligations under the Area Director Agreement or
other documents and you have commenced operating your AD Business.
2.
Except as expressly provided herein, the Agreement shall remain in full force and effect.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC:
By
Its
Dated:____________________
AREA DIRECTOR(S):
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
35
VIRGINIA ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
As a supplement to the information described in this disclosure document, the following
additional paragraph is added to Item 5:
“The Virginia State Corporation Commission’s Division of Securities and Retail
Franchising requires us to defer payment of the initial franchise fee or initial
territory fee and other initial payments owed by franchisees or area directors to
the franchisor until the franchisor has completed its pre-opening obligations under
the Franchise Agreement or Area Director Agreement.”
The following paragraph is added to Item 17:
“Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is
unlawful for a franchisor to cancel a franchise without reasonable cause. If any
grounds for default or termination stated in the Franchise Agreement or Area
Director Agreement do not contain “reasonable cause,” as the term may be
defined in the Virginia Retail franchising Act or the laws of Virginia, that
provision may not be enforceable.”
MFDD – 3/14
Exhibit O: State Specific Addenda
36
VIRGINIA ADDENDUM TO FRANCHISE AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the Virginia Retail Franchising Act and the rules and regulations
promulgated thereunder, the Franchise Agreement executed as of ____________, 20___, of Mrs.
Fields Franchising, LLC shall be modified as follows:
1.
Section 6.1 of the Franchise Agreement is amended to provide:
“The Virginia State Corporation Commission’s Division of Securities and Retail
Franchising requires us to defer payment of the initial franchise fee and other initial
payments owed by franchisees to the franchisor until the franchisor has completed its preopening obligations under this Agreement.”
MRS. FIELDS FRANCHISING, LLC
FRANCHISEE(S)
By:
Its:
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
37
VIRGINIA ADDENDUM TO AREA DIRECTOR AGREEMENT
MRS. FIELDS FRANCHISING, LLC
In recognition of the Virginia Retail Franchising Act and the rules and regulations promulgated
thereunder, the Area Director Agreement executed as of ____________, 20___, of Mrs. Fields
Franchising, LLC shall be modified as follows:
1.
Section 5.1 of the Area Director Agreement is amended to provide:
“The Virginia State Corporation Commission’s Division of Securities and Retail Franchising
requires us to defer payment of the initial territory fee and other initial payments owed by area
directors to the franchisor until the franchisor has completed its pre-opening obligations under
this Agreement.”
Dated:____________________
MRS. FIELDS FRANCHISING, LLC:
By
Its
Dated:____________________
AREA DIRECTOR(S):
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
38
WASHINGTON ADDENDUM TO THE FRANCHISE DISCLOSURE DOCUMENT
MRS. FIELDS FRANCHISING, LLC
1.
In any litigation involving a franchise purchased in Washington, the litigation site shall
be either in the state of Washington, or in a place mutually agreed upon at the time of the
litigation.
2.
In the event of a conflict of laws, the provisions of the Washington Franchise Investment
Protection Act, Chapter 19.100 RCW, shall prevail.
3.
A release or waiver of rights executed by you shall not include rights under the
Washington Franchise Investment Protection Act except when executed pursuant to a
negotiated settlement after the agreement is in effect and where the parties are
represented by independent counsel. Provisions such as those which unreasonably
restrict or limit the statute of limitations period for claims under the Act, or rights or
remedies under the Act may not be enforceable.
4.
Transfer fees are collectable to the extent that they reflect our reasonable estimated or
actual costs in effecting a transfer.
MFDD – 3/14
Exhibit O: State Specific Addenda
39
WASHINGTON ADDENDUM TO FRANCHISE AGREEMENT
MRS. FIELDS FRANCHISING, LLC
1.
In any litigation involving a franchise purchased in Washington, the litigation shall take place
either in the state of Washington, or in a place mutually agreed upon by the parties, to the extent
required under Washington law.
2.
In the event of a conflict of laws, the provisions of the Washington Franchise Investment
Protection Act, Chapter 19.100 RCW, shall prevail.
3.
A release or waiver of rights executed by you shall not include rights under the Washington
Franchise Investment Protection Act except when executed pursuant to a negotiated settlement
after the agreement is in effect and where the parties are represented by independent counsel.
Provisions such as those which unreasonably restrict or limit the statute of limitations period for
claims under the Act, or rights or remedies under the Act may not be enforceable.
4.
Transfer fees are collectable to the extent that they reflect our reasonable estimated or actual costs
in effecting a transfer.
5.
Payment of the initial franchise fee identified in Section 6.1 of the Franchise Agreement and any
other fees described in Item 5 of the Franchise Disclosure Document are deferred until you have
received our initial training and open your Store for business.
6.
It shall be an unfair or deceptive act or practice or an unfair method of competition and therefore
unlawful and a violation of this chapter for any person to:
(i)
Refuse to renew a franchise without fairly compensating the franchisee for the fair
market value, at the time of expiration of the franchise, of the franchisee’s inventory,
supplies, equipment, and furnishings purchased from the franchisor, and good will,
exclusive of personalized materials which have no value to the franchisor, and inventory,
supplies, equipment and furnishings not reasonably required in the conduct of the
franchise business: Provided, That compensation need not be made to a franchisee for
good will if (i) the franchisee has been given one year’s notice of nonrenewal and (ii) the
franchisor agrees in writing not to enforce any covenant which restrains the franchisee
from competing with the franchisor: Provided further, That a franchisor may offset
against amounts owed to a franchisee under this subsection any amounts owed by such
franchisee to the franchisor.
(ii)
Terminate a franchise prior to the expiration of its term except for good cause. Good
cause shall include, without limitation, the failure of the franchisee to comply with lawful
material provisions of the franchise or other agreement between the franchisor and the
franchisee and to cure such default after being given written notice thereof and a
reasonable opportunity, which in no event need be more than thirty days, to cure such
default, or if such default cannot reasonably be cured within thirty days, the failure of the
franchisee to initiate within thirty days substantial and continuing action to cure such
default: Provided, That after three willful and material breaches of the same term of the
franchise agreement occurring within a twelve-month period, for which the franchisee
has been given notice and an opportunity to cure as provided in this subsection, the
franchisor may terminate the agreement upon any subsequent willful and material breach
of the same term within the twelve-month period without providing notice or opportunity
to cure: Provided Further, That a franchisor may terminate a franchise without giving
prior notice or opportunity to cure a default of the franchisee: (i) Is adjudicated a
MFDD – 3/14
Exhibit O: State Specific Addenda
40
bankrupt or insolvent; (ii) makes an assignment for the benefit of creditors or similar
disposition of the assets of the franchise business; (iii) voluntarily abandons the franchise
business; or (iv) is convicted of or pleads guilty or no contest to a charge of violating any
law relating to the franchise business. Upon termination for good cause, the franchisor
shall purchase from the franchisee at a fair market value at the time of termination, the
franchisee’s inventory and supplies, exclusive of (i) personalized materials which have no
value to the franchisor; (ii) inventory and supplies not reasonably required in the conduct
of the franchise business; and (iii) if the franchisee is to retain control of the premises of
the franchise business, any inventory and supplies not purchased from the franchisor or
on his express requirement: Provided, That a franchisor may offset against amounts
owed to a franchisee under this subsection any amounts owed by such franchisee to the
franchisor.
Dated:____________________
MRS. FIELDS FRANCHISING, LLC
By:
Its:
Dated:____________________
FRANCHISEE(S)
(Signature)
(Signature)
MFDD – 3/14
Exhibit O: State Specific Addenda
41
RECEIPT
This disclosure document summarizes certain provisions of the franchise agreement and other
information in plain language. Read this disclosure document and all agreements carefully.
If Mrs. Fields Franchising, LLC (“Mrs. Fields”) offers you a franchise, Mrs. Fields must provide this
disclosure document to you 14 calendar days before you sign a binding agreement with, or make a payment to,
Mrs. Fields or its affiliate in connection with the proposed franchise sale. Iowa, New York, Oklahoma and
Rhode Island require that Mrs. Fields gives you this disclosure document at the earlier of the first personal
meeting or 10 business days (or 14 calendar days in Iowa) before the execution of the franchise or other
agreement or the payment of any consideration that relates to the franchise relationship. Michigan and
Washington require that Mrs. Fields gives you this disclosure document at least 10 business days before the
execution of any binding franchise or other agreement or payment of any consideration, whichever occurs first.
If Mrs. Fields does not deliver this disclosure document on time or if it contains a false or misleading
statement, or a material omission, a violation of federal law and state law may have occurred and should
be reported to the Federal Trade Commission, Washington, D.C. 20580 and those state administrators
listed on Exhibit A.
The franchisor is Mrs. Fields Franchising, located at 8001 Arista Place, Suite 600, Broomfield, CO
80021. Its telephone number is (720) 599-3350.
Mrs. Fields’ franchise sellers involved in offering and selling the franchise to you are listed below (with
address and telephone number), or will be provided to you separately before you sign a franchise
agreement:_______________________________________________________________________________
_________________________________________________________________________________________
_______________________
Mrs. Fields authorizes the respective state agencies identified on Exhibit A to receive service of process for
Mrs. Fields in the particular state.
I have received a disclosure document with an issuance date of March 26, 2014, as amended July 16, 2014,
that included the following Exhibits:
A.
B.
C.
D.
E.
F.
G.
H
State Administrators/Agents for Service of
Process
Franchise Agreement (and Exhibits)
Area Director Disclosures
Area Director Agreement
Confidentiality Agreement
Assignment, Assumption and Consent
Term Purchase Addendum
Lease Addendum
I.
Sublease Agreement; Assignment and
Assumption of Sublease
J. Operating Procedures Manual Table of
Contents
K. Franchisee Information
L. Financial Statements
M. Guarantee of Performance
N. Renewal Addendum
O. State Specific Addenda to Disclosure
Document and Franchise Agreement
Date:
(Do not leave blank)
(Print Name of Prospective Franchisee (For Entity)
By:
Its:
Signature
(Print Name of Prospective Franchisee (For Individuals)
Signature
MFDD – 3/14
4817-7593-2952.v12
RECEIPT
This disclosure document summarizes certain provisions of the franchise agreement and other
information in plain language. Read this disclosure document and all agreements carefully.
If Mrs. Fields Franchising, LLC (“Mrs. Fields”) offers you a franchise, Mrs. Fields must provide this
disclosure document to you 14 calendar days before you sign a binding agreement with, or make a payment to,
Mrs. Fields or its affiliate in connection with the proposed franchise sale. Iowa, New York, Oklahoma and
Rhode Island require that Mrs. Fields gives you this disclosure document at the earlier of the first personal
meeting or 10 business days (or 14 calendar days in Iowa) before the execution of the franchise or other
agreement or the payment of any consideration that relates to the franchise relationship. Michigan and
Washington require that Mrs. Fields gives you this disclosure document at least 10 business days before the
execution of any binding franchise or other agreement or payment of any consideration, whichever occurs first.
If Mrs. Fields does not deliver this disclosure document on time or if it contains a false or misleading
statement, or a material omission, a violation of federal law and state law may have occurred and should
be reported to the Federal Trade Commission, Washington, D.C. 20580 and those state administrators
listed on Exhibit A.
The franchisor is Mrs. Fields Franchising, located at 8001 Arista Place, Suite 600, Broomfield, CO
80021. Its telephone number is (720) 599-3350.
Mrs. Fields’ franchise sellers involved in offering and selling the franchise to you are listed below (with
address and telephone number), or will be provided to you separately before you sign a franchise
agreement:_______________________________________________________________________________
_________________________________________________________________________________________
_______________________
Mrs. Fields authorizes the respective state agencies identified on Exhibit A to receive service of process for
Mrs. Fields in the particular state.
I have received a disclosure document with an issuance date of March 26, 2014, as amended July 16, 2014,
that included the following Exhibits:
A.
B.
C.
D.
E.
F.
G.
H
State Administrators/Agents for Service of
Process
Franchise Agreement (and Exhibits)
Area Director Disclosures
Area Director Agreement
Confidentiality Agreement
Assignment, Assumption and Consent
Term Purchase Addendum
Lease Addendum
I.
Sublease Agreement; Assignment and
Assumption of Sublease
J. Operating Procedures Manual Table of
Contents
K. Franchisee Information
L. Financial Statements
M. Guarantee of Performance
N. Renewal Addendum
O. State Specific Addenda to Disclosure
Document and Franchise Agreement
Date:
(Do not leave blank)
(Print Name of Prospective Franchisee (For Entity)
By:
Its:
Signature
(Print Name of Prospective Franchisee (For Individuals)
Signature
MFDD – 3/14
4817-7593-2952.v12