<PAGE> 1
Exhibit 10.2
UNIT # 0000
TACO BELL CORP.
FRANCHISE AGREEMENT
[TACO BELL CORP. - LOGO]
-----------------------
VOID - SAMPLE COPY
-----------------------
Revised 1/96
<PAGE> 2
TACO BELL CORP.
FRANCHISE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. RECITALS ............................................................................................1
GRANT OF LICENSE ......................................................................................1
1.0 Restaurant Location ...........................................................................1
1.1 Franchise Compliance with Agreement ..........................................................1
2. TERM ..................................................................................................2
3. RESTAURANT SYSTEMS AND PROCEDURES......................................................................2
3.0 Restaurant advice and assistance, pre-opening and continuing ..................................2
3.1 Franchisee's best efforts, location of residence, and days and hours of operation ............ 2
3.2 Compliance with Manual ....................................................................... 2
3.3 Revisions of Manual............................................................................2
3.4 Commitment to chain uniformity ................................................................2
3.5 Product and menu uniformity ...................................................................2
3.6 Company ownership of trade secrets ........................................................... 3
3.7 Company ownership of Manual....................................................................3
3.8 Franchisee conflicts of interest in similar businesses ........................................3
4. TRAINING ..............................................................................................3
4.0 Courses provided and required .................................................................3
4.1 Approved Manager...............................................................................3
4.2 Refresher courses .............................................................................3
4.3 Required employee training ....................................................................3
4.4 Cost of training courses ......................................................................3
5. RESTAURANT MAINTENANCE ................................................................................3
5.0 Conformity with System required ...............................................................3
5.1 Modernization .................................................................................4
5.2 Lease clause requiring de-identification at expiration or termination .........................4
6. ADVERTISING AND PUBLICITY..............................................................................4
6.0 Company development of advertising programs ...................................................4
6.1 (a) Universal Fund ............................................................................4
6.1 (b) Marketing fund policy .....................................................................4
6.1 (b)(i) Local media funds ......................................................................4
6.1 (b)(ii) Universal funds ...................................................................... 4
6.2 Company's right to invest monies...............................................................5
6.3 Compliance with manual.........................................................................5
6.4 Publicity .................................................................................... 5
7. FEES .................................................................................................5
7.0 (a) Initial fee and grand opening expense .................................................... 5
7.0 (b) Franchisee fee ............................................................................5
7.0 (c) Marketing fee .............................................................................5
7.1 Payment terms and late charges ................................................................5
7.2 Definition of "Gross Sales"....................................................................5
8. RECORD KEEPING ........................................................................................5
8.0 Company provided system .......................................................................5
8.1 Required reports ..............................................................................5
8.2 Annual statements by public accountant ........................................................6
8.3 Compliance with manual.........................................................................6
8.4 Franchisee Stock Register......................................................................6
8.5 Right to inspect records.......................................................................6
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
TABLE OF CONTENTS, CONTD................................................................................PAGE
<S> <C>
9. RESTAURANT INSPECTION ................................................................................6
9.0 Right to inspect premises......................................................................6
10. RELATIONSHIP OF PARTIES AND INDEMNIFICATION ..........................................................6
10.0 Independent contractors ......................................................................6
10.1 Indemnification ..............................................................................6
11. INSURANCE ............................................................................................7
11.0 Kind and amounts .............................................................................7
11.1 Certificates ................................................................................ 7
11.2 All-Risk Property Insurance...................................................................7
11.3 Company right to procure .....................................................................7
12. DEBTS AND TAXES ..................................................................................... 7
13. SALE AND ASSIGNMENT .................................................................................8
13.0 Conditions to consent.........................................................................8
13.1 Personal confidence in Franchisee.............................................................8
13.2 Restriction on transfer ..................................................................... 8
13.3 Corporate stock transfers ................................................................... 8
13.4 Franchisee death or incapacity ...............................................................9
13.5 Right of first refusal ...................................................................... 9
13.6 Company right to transfer ...................................................................9
14. TRADEMARKS .......................................................................................... 9
14.0 Company ownership ........................................................................... 9
14.1 Non-exclusive ............................................................................... 9
14.2 Company right to develop and sell consumer products .........................................10
14.3 Franchisee pre-packaging prohibited ........................................................ 10
14.4 Company right to goodwill....................................................................10
14.5 Trademark use consistent with image .........................................................10
14.6 Company right to change trademarks ..........................................................10
14.7 Infringements .............................................................................. 10
14.8 Franchisee's use of trademark................................................................10
15. EXPIRATION AND TERMINATION ......................................................................... 10
15.0 Company rights to terminate ................................................................ 10
15.1 De-identification .......................................................................... 11
15.2 Costs of legal proceedings; damages ........................................................ 11
15.3 Company option to purchase or lease ........................................................ 11
15.4 Liquidated Damages ......................................................................... 12
15.5 Condemnation ............................................................................... 12
16. MISCELLANEOUS ......................................................................................12
16.0 Waiver ..................................................................................... 12
16.1 Cumulative Remedies ........................................................................ 12
16.2 Partial Invalidity ......................................................................... 12
16.3 Choice of Law .............................................................................. 12
16.4 Jurisdiction and Venue ..................................................................... 12
16.5 Notices .....................................................................................12
16.6 Terms and Headings ......................................................................... 13
16.7 Compliance with laws ....................................................................... 13
16.8 Lease of Land and Building ................................................................. 13
16.9 Entire Agreement ........................................................................... 13
16.10 Amendment or Modification.................................................................. 13
SIGNATURES .............................................................................................. 13
APPENDIX I
</TABLE>
(ii)
<PAGE> 4
TACO BELL CORP.
FRANCHISE AGREEMENT
THIS AGREEMENT is made __________, 2000, by and between TACO BELL
CORP., a California corporation (the "Company"), and [Franch1] of [Res1],
and [Franch2] of [Res2] (the "Franchisee").
RECITALS
A. The Company is the originator of a distinctive concept for the
marketing, preparation and sale of certain Mexican and other style food products
(the "TACO BELL RESTAURANTS" or the "Restaurants").
B. The Company owns or controls various trademarks, service marks, trade
names, trade dress, designs (including product package designs), symbols,
emblems, logos, insignias, external and internal building designs and
architectural features and combinations of the foregoing (collectively, the
"Trademarks"), which are used by it, its franchisees and its licensees in
offering, selling and distributing its products and services. Some of the
Trademarks are set forth and described on Appendix 1 to this Agreement.
C. The Company has developed, owns and has adopted for its own use and
the use of its franchisees and licensees a unique system of quick service
restaurant operation (the "Taco Bell System" or the "System"), consisting of a
variety of distinctive sign and facility designs, equipment specifications and
layouts, recipes, methods of food presentation and service, business techniques,
copyrighted manuals and other materials, trade secrets, know-how and technology.
D. The Company has established, and is continuing to develop and
operate, a chain of quick service "Taco Bell" and "Taco Bell Express"
restaurants or units which are fundamentally uniform in image and in food style
and which share many fundamental menu items and methods of operation (the "Taco
Bell Chain").
E. The Taco Bell Chain enjoys widespread public acceptance due in part
to (1) uniform high standards for the preparation, presentation and service of
Taco Bell food; (2) an essentially uniform menu, image, appearance and methods
of operation in all Restaurants and units; (3) uniform use of the System and the
valuable and distinctive Trademarks; and (4) the Taco Bell franchisees' and
licensees' commitments to maintain and enhance the goodwill and public
acceptance of Taco Bell products, services and Restaurants by strict adherence
to these uniform standards as they now exist and may be revised from time to
time pursuant to this Agreement.
F. The Franchisee, aware of the above, has applied for a franchise and
desires to establish and operate a Taco Bell Restaurant upon the terms and
conditions set forth in this Agreement.
WITNESSETH
The parties hereby act and agree as follows:
SECTION 1: GRANT OF LICENSE
1.0 The Company hereby grants to the Franchisee a limited license
to use the Trademarks solely in direct connection with the sale of the food,
beverage and other products referred to in Subsection 3.5 from the TACO BELL
RESTAURANT to be established pursuant to this Agreement at the following
location:
Unit No. [UnitNo]
----------------------------
[Address]
----------------------------
[CityState]
----------------------------
(the "Restaurant").
The grant of this limited license to use the Trademarks is further subject to
the terms, conditions and limitations hereinafter set forth; including, among
others, those contained in Section 14 entitled "TRADEMARKS."
1 .1 Throughout the Term of this Agreement (as defined below),
Franchisee shall operate the Restaurant in strict accordance with the terms of
this Agreement and shall perform all other obligations of the Franchisee
provided for by this Agreement.
<PAGE> 5
SECTION 2: TERM
2.0 This Agreement shall continue for a term of twenty (20)
years, unless earlier terminated in accordance with the conditions and
provisions hereof, commencing with the date on which the Restaurant is opened
for business to the public or forty-five days from _______, whichever is earlier
(the "Term"). The opening date will be confirmed by a writing signed by the
parties and attached hereto.
SECTION 3: RESTAURANT SYSTEM AND PROCEDURES
3.0 To the extent deemed appropriate by the Company in its sole
discretion, based on the Franchisee's experience and performance at any
particular time during the Term, the Company will use commercially reasonable
efforts to furnish the Franchisee with advice and assistance in managing and
operating a TACO BELL RESTAURANT, including periodic visits by the Company's
representatives. A Company representative will assist the Franchisee in
coordinating the Restaurant pre-opening activities, and will be available to
assist with Restaurant operations throughout the opening week, as reasonably
needed. In addition, the Company will develop and present to the Franchisee, and
the Franchisee and the Company shall carry out, an advertising program designed
for the initial opening of the Restaurant.
3.1 The Franchisee shall devote his or her full time, best
efforts and constant personal attention to the day to day operation of the
Restaurant. In order to facilitate the devotion of such personal attention,
either the Franchisee or a qualified manager of the Restaurant shall maintain
his or her personal principal residence within a usual driving time of
approximately one hour from the Restaurant. Unless the Company shall have given
its prior advance written approval, the Franchisee shall have the Restaurant
open for business during such hours as are specified by the Company in the
Manual described in Subsection 3.2 below (the "Manual"). In addition, and
without limiting the generality of the foregoing responsibilities, the
Franchisee shall:
(a) Operate the Restaurant in a clean, safe and orderly
manner, providing courteous, first-class service to the public;
(b) Diligently promote and make every reasonable effort
to increase the business of the Restaurant;
(c) Advertise the business of the Restaurant by the use of
the Trademarks and such other insignia, slogans, emblems, symbols, designs and
other identifying characteristics as may be developed or established from time
to time by the Company and included in the Manual; and
(d) Prevent the use of the Restaurant for any immoral or
illegal purpose, or for any other purpose, business activity, use or function
which is not expressly authorized hereunder or in the Manual.
3.2 The Franchisee hereby acknowledges receipt and loan of a copy
of the Company's Franchise Operations Manual, and shall faithfully, completely
and continuously perform, fulfill, observe and follow all instructions,
requirements, standards, specifications, systems and procedures contained
therein; including, those dealing with the selection, purchase, storage,
preparation, packaging, service and sale (including menu content and
presentation) of all food and beverage products, and the maintenance and repair
of Restaurant buildings, grounds, furnishings, fixtures, and equipment, as well
as those relating to employee uniforms and dress, accounting, bookkeeping,
record retention and other business systems, procedures and operations. By this
reference, the Company's Franchise Operations Manual, as presently constituted
and as it may hereafter be amended and supplemented by the Company from time to
time (the "Manual") is incorporated in and made part of this Agreement. The
Franchisee acknowledges that the materials contained in the Manual are integral,
necessary and material elements of the System.
3.3 The Company shall have the right at any time and from time to
time, in the good faith exercise of its reasonable business judgment, consistent
with the overall best interests of TACO BELL RESTAURANTS generally, to revise,
amend, delete from and add to the System and the material contained in the
Manual. The Franchisee shall promptly comply with all such revisions,
amendments, deletions and additions.
3.4 The Franchisee understands, acknowledges and agrees that
strict conformity with the System, including the standards, specifications,
systems, procedures, requirements and instructions contained in this Agreement
and in the Manual, is vitally important to the success not only of the Company,
but to the collective success of all Taco Bell franchisees, including the
Franchisee, by reason of the benefits all franchisees and the Company will
derive from chain uniformity in food products, identity, quality, appearance,
facilities and service among all TACO BELL RESTAURANTS. Any failure to adhere to
the standards, specifications, requirements or instructions contained in this
Agreement or in the Manual shall constitute a material breach of this Agreement.
3.5 The Franchisee shall offer for sale only from the Restaurant
premises and at all times when the Restaurant is open for business all and only
the food, beverages and other products expressly described in the Manual, unless
the Franchisee shall have received the Company's prior written consent to any
exception. No food, beverage or other products shall be offered or sold at or
from the Restaurant under or in connection with any trademark or service mark
other than the Trademarks without the prior written authorization of the Company
in each case.
2
<PAGE> 6
3.6 The Franchisee further understands, acknowledges and agrees
that the Company is the owner of all rights in and to the System, including the
information and materials described or contained in the Manual, and that the
System, including such information and materials, constitutes trade secrets of
the Company which are revealed to the Franchisee in confidence, and that no
right is given to or acquired by the Franchisee to disclose, duplicate, license,
sell or reveal any portion thereof to any person, other than an employee of the
Franchisee required by his work to be familiar with relevant portions thereof.
The Franchisee hereby represents, warrants and promises to keep and respect such
confidences extended by the Company to the Franchisee, to obtain from each of
its Restaurant managers an agreement to keep and respect such confidences, and
to be responsible for compliance by said employees with such agreements.
3.7 The Manual and all such other materials furnished to the
Franchisee hereunder are and shall remain the property of the Company and shall
be returned by the Franchisee to the Company immediately upon the expiration or
earlier termination of this Agreement for any reason.
3.8 During the term of this Agreement, the Franchisee shall not,
without the prior express written consent of the Company, directly or
indirectly, perform any services for, engage in or acquire any financial,
beneficial or equity interest in, any business similar to that of the
Restaurant. In the event this Agreement is terminated by the Company for breach
by the Franchisee, the same restrictions shall apply for a period of one year
following such termination, but only with respect to similar businesses operated
within a ten mile radius of the Restaurant. For purposes of this subsection, a
"similar business" is a restaurant business which prepares or sells Mexican
style food products. Notwithstanding the foregoing, the Franchisee and his
family, collectively, may own up to ten percent (10%) of the stock of a publicly
traded company engaged in a similar business. If any court or other tribunal
having jurisdiction to determine the validity or enforceability of this
subsection determines that it would be invalid or unenforceable as written, then
in such event the provisions hereof shall be deemed modified to the extent
necessary to be valid and enforceable.
SECTION 4: TRAINING
4.0 The Company shall make available to the Franchisee and one
Restaurant manager, the Company's TACO BELL RESTAURANT operations training
course.
4.1 Before the Restaurant shall open for business, one person
from the Franchisee's organization who is designated to be the initial manager
of the Restaurant shall either: a) attend, for such period of time as the
Company shall deem reasonably necessary, and complete the Company's training
course to the reasonable satisfaction of the Company, or b) otherwise be
approved by the Company to manage the Restaurant. In the event this Agreement is
the first franchise agreement between the Company and the Franchisee, then
before the Restaurant shall open for business, the Franchisee shall also attend,
for such period of time as the Company shall deem reasonably necessary, and
complete the Company's training course to the reasonable satisfaction of the
Company. If the Franchisee fails to successfully complete the Company's training
course, then at the option of the Company this Agreement may be terminated upon
written notice to the Franchisee.
4.2 The Franchisee and at least one Restaurant manager shall,
from time to time as reasonably required by the Company, personally attend and
complete a Company-provided refresher course in TACO BELL RESTAURANT operations.
4.3 The Franchisee shall be responsible for the compliance of
Restaurant operations with the standards, methods, techniques and material
taught at the Company's operations training course, and shall cause the
Restaurant employees to be trained in such standards, methods and techniques as
are relevant to the performance of their respective duties.
4.4 Attendance of the Franchisee and one manager of the
Restaurant shall be tuition-free at all training courses, but at the
Franchisee's sole cost and expense, including, without limitation, the cost of
travel, lodging, meals and other related and incidental expenses.
SECTION 5: RESTAURANT MAINTENANCE
5.0 The Franchisee shall, at the Franchisee's sole cost and
expense, maintain and repair the Restaurant, related equipment, signage,
improvements, landscaping and the Restaurant premises in conformity with the
standards, specifications and requirements of the System, as the same may be
designated by the Company from time to time, and as appropriate replace any or
all of such items (other than the Restaurant building or premises). The
Franchisee shall replace equipment as necessary or desirable at the Franchisee's
cost and expense and obtain at his cost and expense any new or additional
equipment as may be reasonably required by the Company for new products,
procedures, administration, marketing or communication. Except as may be
expressly provided in the Manual, no alterations or improvements, or changes of
any kind in design, equipment or decor shall be made in, on or about the
Restaurant or Restaurant premises without the prior written approval of the
Company in each instance. The Franchisee shall at the Franchisee's sole cost and
expense, replace as necessary such equipment, signage, improvements and
landscaping in conformity with such standards, specifications and requirements
of the System.
3
<PAGE> 7
5.1 In order to assure the continued success of the Restaurant,
the Franchisee shall, from time to time as reasonably required by the Company
(taking into consideration the cost and then remaining term of this Agreement),
modernize or modify the image of the Restaurant building, premises and equipment
to the Company's then current, reasonable standards and specifications. The
Franchisee's obligations under this subsection are in addition to, and shall not
relieve the Franchisee from, any of its other obligations under this Agreement,
including those contained in the Manual. However, no such modernization or
re-imaging shall be required by the Company unless and until the Company has at
that time committed to implement such standards and specifications within the
then current or following calendar year in at least twenty-five percent (25%) of
those TACO BELL RESTAURANTS then operated by the Company within the United
States.
5.2 If the Franchisee is or becomes a lessee of the Restaurant
premises, the Franchisee shall provide the Company with a true and correct,
complete copy of any such lease, and shall have included therein provisions, in
form satisfactory to the Company, expressly permitting both the Franchisee and
the Company reasonable opportunity to take all actions and make all alterations
referred to under Subsection 15.1(b). Any such lease shall also require the
lessor thereunder to give the Company reasonable notice of any contemplated
termination and a reasonable time in which to take and make the above actions
and alterations and provide that the Franchisee has the unrestricted right to
assign such lease to the Company.
SECTION 6: ADVERTISING AND PUBLICITY
6.0 The Company shall develop and administer advertising and
sales promotion programs designed to promote and enhance the collective success
of all TACO BELL RESTAURANTS. It is expressly understood, acknowledged and
agreed that in all phases of such advertising and promotion, including, without
limitation, type, quantity, timing, placement and choice of media, market areas
and advertising agencies, the decisions of the Company made in good faith shall
be final and binding. The Franchisee shall have the right to participate
actively in all such advertising and sales promotion programs, but only in full
and complete accordance with such terms and conditions as may be established by
the Company for each such program.
6.1 (a) The Company will establish and maintain a fund (the
"Universal Fund") which will be kept separate from any Company accounts. Except
as expressly provided in the Marketing Fund Policy described below in Subsection
6.1(b), the Universal Fund is and shall be separate and distinct from the
existing Marketing Fund referred to in other Taco Bell franchise agreements. All
marketing fees received from the Franchisee pursuant to Subsection 7.0(c) below
will be deposited into the Universal Fund. The Company will also contribute each
four-week (or five-week) accounting period to, at its election, either the
existing Marketing Fund or the Universal Fund an amount equal to four and
one-half percent (4 1/2%) of the Gross Sales (as defined below) from Company
operations of TACO BELL RESTAURANTS in the United States. As part of the
administration of the Universal Fund, the Company will provide an annual
accounting of the Universal Fund to the Taco Bell franchise advisory council
("FRANMAC").
(b) The Company has and will in consultation with FRANMAC
develop, publish and modify from time to time as necessary a Marketing Fund
Policy which will set forth procedures and guidelines for disbursements and
expenditures from both the Marketing Fund and the Universal Fund and become part
of the Manual. All monies in the Universal Fund, including any interest or other
income earned from the investment of such monies must be spent and disbursed
only in accordance with this Agreement and the Marketing Fund Policy. Although
such Policy may be modified from time to time, the parties specifically agree
that of the marketing fees paid into the Universal Fund:
(i) Amounts equaling at least one and one-half percent
(1.5%) of Gross Sales from all those Taco Bell franchise and Company Restaurants
which both contribute to the Universal Fund and are in the association (the
"Local Association") of Taco Bell operators which the Company has approved for
advertising TACO BELL RESTAURANTS in the marketing area in which the
Franchisee's Restaurant is located (as specified by the Marketing Fund Policy)
will be designated as "Local Media Funds" and returned to the Local Association.
If no such Local Association exists, at least one and one-half percent (1.5%) of
Franchisee's Gross Sales will be refunded to Franchisee to be spent on approved
advertising. All refunded amounts must be spent in accordance with the Marketing
Fund Policy then in effect and may be spent for programs other than those
approved on a System basis only with the prior written approval of the Company's
Marketing Department.
(ii) Amounts equaling at least three percent (3.0%) of
Gross Sales from all Taco Bell franchise and Company Restaurants contributing to
the Universal Fund will be designated as "Universal Funds," which may be used by
the Company in its good faith determination to disseminate, improve and support
the public awareness and image of the Taco Bell brand, the Taco Bell System and
its goods and services available to the public, to increase System-wide sales,
to purchase advertising pursuant to the Marketing Fund Policy, and to pay for
the development, support, and dissemination of other marketing and media
programs on a regional or national basis pursuant to the Marketing Fund Policy,
including but not limited to promotions, public relations, event marketing,
research and clearance of programs, talent and residuals, and creation and
production of advertising; provided, however, in any given calendar year not
more than one-third of the aggregate of all marketing fees contributed to either
the Marketing Fund or the Universal Fund from franchise and Company Restaurants
in the United States of America shall be spent on the production and creation of
advertising. Any such amounts paid by the Franchisee as Universal Funds and not
used for such purposes shall be designated Local Media Funds and paid to the
Local Association or returned to the Franchisee as set forth in subparagraph (i)
above.
4
<PAGE> 8
6.2 The Company may temporarily invest any or all of the monies
held in the Universal Fund from time to time at the sole discretion of the
Company in accordance with the Marketing Fund Policy. All interest or other
income received from such investments may be used by the Company to pay for the
expenses of administering the Universal Fund. Any such amounts not used for this
purpose shall be designated Universal Funds and disbursed according to
subparagraph (ii) of Subsection 6.1(b) above.
6.3 All advertising copy and other materials shall be in strict
accordance and conformity with the standards, formats and specimens contained in
the Manual. In the event the Franchisee wishes to depart from the materials
contained in the Manual, the Franchisee shall submit, in each instance, the
proposed advertising copy and materials to the Company for approval in advance
of publication, and shall use only such advertising copy and materials as have
been approved in writing by the Company. In no event shall the Franchisee's
advertising contain any statement or material which may be considered (a) in bad
taste or offensive to the public or to any group of persons, or (b) defamatory
of any person or an attack on any competitor.
6.4 In order to maintain the high reputation of the Taco Bell
System and for the benefit of all of its operators, the Franchisee shall report
immediately by telephone to the Company the occurrence of any incident at or
concerning the Restaurant or the business conducted there which is or is likely
to become the subject of publicity through the news media or otherwise. The
Franchisee hereby acknowledges that the Company alone is authorized to speak or
make statements, public or private, on behalf of the Taco Bell brand or the Taco
Bell System, and the Franchisee shall in every instance consult and coordinate
with the Company in advance of communicating with the media or of creating
publicity for the brand or System outside the normal course of business.
SECTION 7: FEES
7.0 As partial consideration for the rights granted hereunder,
the Franchisee shall pay the Company throughout the Term:
(a) An initial franchise fee of forty-five thousand
dollars ($45,000.00) due upon execution hereof. The Franchisee acknowledges that
the granting of this franchise is the only consideration for the payment of this
initial franchise fee. The Franchisee shall spend five thousand dollars
($5,000.00) within six (6) months of opening the Restaurant in advertising and
promoting the opening of the Restaurant in accordance with the Company's opening
procedures for franchised restaurants. Upon receipt of paid invoices or other
proofs of expenditure, the Company will reimburse the Franchisee for the grand
opening expenses in an amount not to exceed $5,000.00. Any and all such paid
invoices or other proofs of expenditure must be submitted to the Company within
nine (9) months from the opening date of the Restaurant;
(b) A franchise fee for each of the Company's four-week
accounting periods (or five-week accounting periods, as determined from time to
time by the Company, each whether four or five weeks an "accounting period")
equal to five and one-half percent (5.5%) of Gross Sales (as defined below); and
(c) A marketing fee for each of the accounting periods
equal to four and one-half percent (4.5%) of Gross Sales (as defined below).
7.1 DUE DATES. Until notified otherwise by the Company, the
periodic fees required pursuant to Subsection 7.0 shall be paid by check mailed
and postmarked on or before the fifth (5th) business day immediately following
the four (or five) week accounting period (as designated by the Company) in
which such sales were made. When so notified by the Company, the periodic fees
required pursuant to Subsection 7.0 shall be paid by electronic funds transfer
received on or before the fifth (5th) business day immediately following the
last day of the pertinent accounting period (as designated by the Company) in
which such sales were made. Any payment which is not paid when due shall incur
the then-customary administrative charge and shall bear interest from and after
the due date at the rate of (i) eighteen percent (18%) per annum or (ii) the
highest rate permitted by law, whichever is less.
7.2 DEFINITION. The term "Gross Sales" as used in this Agreement
shall mean the total of all cash or other payments received for the sale of
food, beverages and other tangible property of every kind sold at, in, upon, or
from the Restaurant, and all amounts which shall be received as compensation for
any services rendered therefrom, excluding only sales taxes, employee meals,
overrings and refunds to customers.
SECTION 8: RECORD KEEPING
8.0 From time to time, the Company may provide the Franchisee
with a TACO BELL RESTAURANT record keeping system and forms, and the Franchisee
shall employ such system, without modification, in connection with the business
of the Restaurant.
8.1 The Franchisee shall complete and submit to the Company on a
regular, continuous basis:
5
<PAGE> 9
(a) Weekly Restaurant Reports, on or before the fifth
business day after each week in each accounting period;
(b) Period Restaurant Reports, on or before the fifth
business day after expiration of each accounting period; and
(c) Annual Restaurant Reports, on or before 90 days
following the end of each calendar year or the end of the Franchisee's fiscal
year, whichever is pertinent.
8.2 The Annual Restaurant Reports referred to above shall include
a balance sheet dated as of the end of the pertinent year and a profit and loss
statement for such year, together with such additional financial information as
the Company may reasonably request, all prepared in accordance with generally
accepted accounting principles. Such balance sheet and profit and loss statement
must be reviewed by an independent certified public accountant and be in
accordance with Statements on Standards for Accounting and Review Services and
must contain a signed opinion by such accountant to that effect. If the
Franchisee fails to provide the Company with any such financial statement, the
Company shall have the right to have an independent audit made of the
Franchisee's books and records, and the Franchisee shall promptly reimburse the
Company for the cost thereof.
8.3 Each of the Reports referred to in this section shall be
completed by the Franchisee or the Franchisee's accountant in the respective
specimen forms, and in accordance with the instructions, contained in the
Manual. Time is of the essence with respect to completion and submission of each
such Report. Franchisee hereby consents to the Company's release of information
regarding the Restaurant's sales to associations of franchisees, to consultants
of the Company, to advertising agencies and to other parties considered
appropriate by the Company.
8.4 If the Franchisee is a corporation, it shall maintain an
accurate stock register. In the event that the beneficial ownership of the
Franchisee's stock differs in any respect from record ownership, the Franchisee
shall also maintain a list of the names, addresses and interests of all
beneficial owners of its stock. The Franchisee shall produce its stock register
and any list of beneficial owners, certified by the corporation's secretary to
be correct, at the Restaurant at any reasonable time and from time to time after
ten days' prior written request by the Company. Company representatives shall
have the right to examine the stock register and any list of beneficial owners
and to reproduce all or any part thereof. In addition, all record and beneficial
stock holders of the Franchisee shall jointly and severally guaranty the full
and faithful performance of all agreements, duties and obligations required to
be performed, fulfilled or observed by the Franchisee under this Agreement.
8.5 Without limiting the generality of Subsection 9.0, below,
Company representatives shall have the right at all times during normal business
hours to confer with Restaurant employees and customers, and to inspect the
Franchisee's books, records and tax returns, or such portions thereof as pertain
to the operation of the Restaurant business. All such books, records and tax
returns shall be kept and maintained at the Restaurant premises or such other
place as may be agreed to from time to time in writing by the parties. If any
such inspection reveals that the Gross Sales reported in any report or statement
are less than the actual Gross Sales ascertained by such inspection, then the
Franchisee shall immediately pay the Company the additional amount of fees owing
by reason of the understatement of Gross Sales previously reported, together
with interest and administrative charges as provided in Subsection 7.1. In the
event that any report or statement understates Gross Sales by more than two
percent (2%) of the actual Gross Sales ascertained by the Company's inspection,
the Franchisee shall, in addition to making the payment provided for in the
immediately preceding sentence, pay and reimburse the Company for any and all
expenses incurred in connection with its inspection, including, but not limited
to, reasonable accounting and legal fees. Such payments shall be without
prejudice to any other rights or remedies the Company may have under this
Agreement or otherwise.
SECTION 9: RESTAURANT INSPECTION
9.0 The Company shall have the right at any time and from time to
time without notice to have its representatives enter the Restaurant premises
for the purpose of inspecting the condition thereof and the operation of the
Restaurant for compliance with the standards, specifications, requirements and
instructions contained in this Agreement and in the Manual, and for any other
reasonable purpose connected with the operation of the Restaurant.
SECTION 10: RELATIONSHIP OF PARTIES AND INDEMNIFICATION
10.0 The Franchisee is not, and shall not represent or hold
itself out as, an agent, legal representative, joint venturer, partner, employee
or servant of the Company for any purpose whatsoever and, where permitted by law
to do so, shall file a business certificate to such effect with the proper
recording authorities. The Franchisee is an independent contractor and is not
authorized to make any contract, agreement, commitment, warranty or
representation on behalf of the Company, or to create any obligation express or
implied on behalf of the Company. The Franchisee agrees that the Company is not,
and the Franchisee hereby covenants not to claim that the Company is, in any way
a "fiduciary" as regards the Franchisee. The Franchisee shall not use the name
TACO BELL or any similar words as part of or in association with any trade name
or name of any business entity directly or indirectly associated with the
Franchisee.
6
<PAGE> 10
10.1 The Franchisee shall exonerate and indemnify the Company and
its officers, directors, employees, agents, affiliates, successors and assigns
from and against (a) any and all claims based upon, arising out of, or in any
way related to the operation or condition of any part of the Restaurant or
Restaurant premises, the conduct of business thereat, the ownership or
possession of real or personal property, and any negligent act, misfeasance,
malfeasance or nonfeasance by the Franchisee or any of its agents, contractors,
servants, employees or licensees, and including, without limitation, all
obligations of the Franchisee incurred pursuant to any provisions of this
Agreement, and (b) any and all fees (including reasonable attorneys' fees),
costs and other expenses incurred by or on behalf of the Company in the
investigation of or defense against any and all such claims. The Company shall
have the right to select and appoint independent counsel to represent the
Company in any action covered by this indemnity. All reasonable attorneys' fees
and other expenses reasonably incurred by or on behalf of the Company in the
defense of any such claims shall be at the sole expense of the Franchisee.
SECTION 11: INSURANCE
11.0 The Franchisee shall procure before the commencement of
Restaurant operations and maintain in full force and effect during the entire
term of this Agreement, at its sole cost and expense, an insurance policy or
policies protecting the Franchisee and the Company against any and all loss,
liability or occurrence, arising out of or in connection with the condition,
operation, use or occupancy of the Restaurant or Restaurant premises. The
Company shall be named as an additional insured in all such policies, workers'
compensation excepted. Such policy or policies shall be written by an insurance
company or companies satisfactory to the Company and with a minimum Best's
Rating of A- or other such comparable rating and shall include coverage in at
least the following types and amounts:
KIND OF INSURANCE MINIMUM LIMITS OF LIABILITY
Workers' Compensation Statutory
Employers' Liability $2,000,000 per occurrence
Commercial General Liability $2,000,000 per occurrence
$5,000,000 annual aggregate
Products Liability per occurrence included in
Commercial General Liability,
separate annual aggregate of
$5,000,000
The insurance afforded by the policy or policies shall be primary with respect
to insurance maintained by the Company and shall not be limited in any way by
reason of any insurance which may be maintained by the Company. Subject to the
express prior written approval of the Company (which the Company may withhold in
its good faith discretion), that such program would not put the Company at any
greater risk or exposure than would coverage from insurers described above, and
to the Franchisee's full compliance with all pertinent laws and regulations, the
Franchisee may satisfy its obligations with respect to Workers' Compensation
coverage through a self-insurance program.
11.1 Within thirty (30) days after the execution of this
Agreement, but in no event later than one week before the Restaurant opens for
business, Certificates of Insurance showing compliance with the requirements of
Subsection 11.0 shall be furnished by the Franchisee to the Company for
approval. Such certificates shall state that the policy or policies shall not be
canceled or altered without at least thirty (30) days' prior written notice to
the Company. Maintenance of such insurance and the performance by the Franchisee
of its obligations under this Section 11 shall not relieve the Franchisee of
liability under the indemnity provisions of this Agreement or limit such
liability.
11.2 The Franchisee shall maintain an all-risk property insurance
(fire) policy on the Restaurant buildings and other improvements, equipment,
furnishings, fixtures, signage and any additions. The policy shall be written on
the basis of replacement cost of the property and shall include a minimum of six
months' coverage for business interruption. Such policy or policies shall be
written by an insurance company with a minimum Best's Rating of A- or other such
comparable rating.
11.3 Should the Franchisee, for any reason, not timely procure
and maintain the insurance coverage required by this section, then the Company
shall have the right and authority to immediately procure such insurance
coverage as part of or separate from its own policies, in its sole discretion,
and to charge the cost thereof to the Franchisee, which charges shall be paid
immediately upon notice and shall be subject to charges for late payments in the
manner set forth in Subsection 7.1.
SECTION 12: DEBTS AND TAXES
12.0 The Franchisee shall pay promptly when due all obligations
incurred directly or indirectly in connection with the Restaurant and its
operation, including, without limitation, all taxes and assessments that may be
assessed against the Restaurant land, building and other improvements,
equipment, fixtures, signs, furnishings and other property, and all liens and
encumbrances of every kind and character created or placed upon or against any
of said property (subject, however, to any conflicting provisions of any arms
length,
7
<PAGE> 11
bona fide lease or leases of any of the foregoing property), and all accounts
and other indebtedness of every kind and character incurred by or on behalf of
the Franchisee in the conduct of the Restaurant business.
SECTION 13: SALE AND ASSIGNMENT
13.0 The Franchisee's rights and interests under this Agreement
shall not be subject to sale, assignment, transfer or encumbrance (all of which
are hereinafter included within the term "transfer") in whole or in part in any
manner whatsoever without the prior express written consent of the Company. The
Company will not, however, unreasonably withhold its consent to any proposed
sale or assignment. In considering a request for transfer, the Company will
consider, among other things, the qualifications, apparent ability and credit
standing of the proposed transferee as if the same were a prospective, direct
franchisee of the Company. In addition, the Company shall require as a condition
precedent to the granting of its consent that:
(a) there shall be no existing default in the performance
or observance of any of the Franchisee's obligations under this Agreement or any
other agreement with the Company and the Restaurant shall be in condition and
appearance satisfactory to the Company and in accordance with its standards at
that time;
(b) the Franchisee shall have settled all outstanding
accounts with the Company and its affiliates and executed a Release in a form
satisfactory to the Company;
(c) the Franchisee shall have paid the Company its then
current transfer fee applicable to the type of transfer proposed. The amount of
the transfer fee will be set by the Company from time to time and will be
limited to the Company's good faith estimate of its costs and expenses expected
to be incurred in connection with investigating the qualifications of the
proposed transferee, training the proposed transferee and the direct
administrative costs of reviewing and effecting the transfer;
(d) unless already a Taco Bell franchisee, the proposed
transferee shall have personally attended and satisfactorily completed the
Company's tuition-free training program; and
(e) the proposed transferee shall have executed the
Company's then current form of Franchise Agreement for a term equal to the
remaining term of this Agreement but requiring no initial franchise fee and
requiring no greater periodic franchise fee than the applicable fee set forth in
Subsection 7.0(b) above.
Neither this Agreement nor any of the rights or interests conferred on the
Franchisee hereunder shall be retained by the Franchisee as security for the
payment of any obligation that may arise by reason of any such transfer.
13.1 It is acknowledged and agreed that a material part of the
consideration for the Company's entering into this Agreement is the personal
confidence reposed in the Franchisee, and no person shall succeed to any of the
rights of the Franchisee under this Agreement by virtue of any voluntary or
involuntary proceeding in foreclosure, bankruptcy, receivership, attachment,
execution, assignment for the benefit of creditors or other legal process.
13.2 Except as expressly provided for herein, any attempt by the
Franchisee to transfer any of its rights or interests under this Agreement shall
constitute a material breach of this Agreement and the Company shall have the
right to terminate this Agreement upon written notice to the Franchisee. The
Company shall not be bound by any attempted sale, assignment, transfer,
conveyance or encumbrance in any manner whatsoever, by law or otherwise, of any
of the Franchisee's rights or interests under this Agreement.
13.3 If the Franchisee desires to conduct business in a corporate
capacity, the Company will consent to the assignment of this Agreement to a
corporation approved by the Company, provided that the Franchisee complies with
the provisions hereinafter specified and any other condition which the Company
may require, including restrictions on the number, identity and legal status of
stockholders of the assignee corporation. Such assignee corporation shall be
closely held and shall not engage in any business activity other than that
directly related to the operation of TACO BELL RESTAURANTS franchised by the
Company.
If the Franchisee's rights are assigned to a corporation, the individual
Franchisee named herein or otherwise expressly designated in writing by the
Company shall at all times be the legal and beneficial owner of at least 51% of
the stock of the assignee corporation, and shall act as such corporation's
principal officer; provided, however, subject to the express prior written
consent of the Company, such stock may be held in trust by a trustee under a
trust indenture, with each trustee and beneficiary of such trust personally
guaranteeing all of the obligations of the Franchisee hereunder. Any issuance or
transfer of stock in such corporation shall be treated for the purposes of this
Agreement as a transfer of the Franchisee's rights under this Agreement
requiring the Company's consent as provided herein. The Franchisee must prior to
any issuance or transfer of any stock furnish the Company with a written notice
containing the details of such proposed issuance or transfer in advance thereof.
The Articles of Incorporation and the By-Laws of the assignee corporation shall
reflect that the issuance and transfer of shares of stock are restricted, and
all stock certificates shall bear the following legend, which shall be printed
legibly and conspicuously on the face of each stock certificate:
8
<PAGE> 12
"The transfer of this stock is subject to the terms and conditions of a
franchise agreement with Taco Bell Corp. Reference is made to said franchise
agreement and to restrictive provisions of the charter and by-laws of this
corporation."
The Franchisee acknowledges that the purpose of the aforesaid restriction is to
protect the Company's trademarks, service marks, trade secrets and operating
procedures as well as the Company's general, high reputation and image, and is
for the mutual benefit of the Company, the Franchisee and other franchisees of
the Company. The Company shall not unreasonably restrict the issuance or
transfer of shares of stock, provided that in no event shall any share of stock
of such assignee corporation be sold, transferred or assigned to a business
competitor of the Company.
13.4 The Franchisee shall at all times throughout the term of
this Agreement have on file with the Company the name of a designated successor
agent, approved by the Company, and authorized by the Franchisee to make,
subject to and immediately upon the death or legal incapacity of the Franchisee
(or if the Franchisee is not an individual, its designated agent), all operating
decisions with respect to the Restaurant business (including but not limited to
hiring and severance of employment, voting in the Local Association, purchasing,
maintenance, etc.). Not less often than once each calendar year, the Franchisee
shall confirm or change in writing such designated successor agent.
In the event of the death or legal incapacity of the Franchisee or, where the
Franchisee is a corporation, any person owning the legal or beneficial interest
in 10% or more of the outstanding stock of the Franchisee, the rights and
obligations of the Franchisee or of such stockholder hereunder shall inure to
the benefit of such of the executors, administrators, heirs, conservators or
legatees of the Franchisee or such stockholder (collectively the "Legatee") as
shall (i) elect, in a written notice received by the Company within one
hundred-twenty (120) days after the date of death, or the judicial determination
of legal incapacity, to perform all of the duties and obligations required to be
performed, fulfilled and observed by the Franchisee under this Agreement and
(ii) be determined by the Company, in its good faith discretion, to be able to
perform such duties and obligations. In the event the Company determines that
the Legatee is not capable of performing all of the duties and obligations
required to be performed by the Franchisee under this Agreement, the Legatee
shall use best efforts within the six (6) months from the date of written notice
from the Company to sell the subject interest hereunder to a bona fide purchaser
in accordance with and subject to all of the provisions of this Section 13. If
by the end of such six month period, the Legatee has not effectuated a transfer
of such interest in a transaction which meets the requirements of this Section
13, the Company shall have the option to purchase the subject interest in the
Restaurant and franchise at the fair market value thereof as determined in good
faith through negotiation or, failing that, upon written demand of either party,
by three appraisers, with the Company and the Legatee each selecting one
appraiser and the two appraisers so chosen selecting the third appraiser, with
their cost to be shared equally between Legatee and the Company.
13.5 Notwithstanding anything contained in this Agreement to the
contrary, if the Franchisee decides to transfer in any manner whatsoever, any
interest in or under this Agreement, or any interest in any of the Restaurant
land, building, equipment, fixtures or other things which are subject to the
provisions of this Agreement, or both, the Franchisee shall give at least ten
(10) business days written notice thereof to the Company before disclosing his
decision to any third party (including any prospective purchaser). The
Franchisee shall at no time offer (or contract) to transfer any interest in or
under this Agreement (or any interest in any of the Restaurant land, building,
equipment, fixtures or other things which are subject to the provisions of this
Agreement) where the transfer would in any manner be tied to the transfer of any
interest or obligation other than an interest in this Agreement or the
ownership, possession, use or operation of the Restaurant or the assets or
business pertaining thereto. In addition, the Company shall have a first right
of refusal such that before consummation of a transfer to any third party, the
Franchisee shall submit a copy of all such transfer documentation (signed by the
parties, but expressly by its own terms subject to the Company's right of first
refusal, together with all ancillary documentation provided to the third party
for evaluation of the proposed transfer) to the Company at least thirty (30)
days in advance of any proposed consummation or closing date for the Company's
review and comparison with the offer previously submitted to it. In the event
the consideration to the Franchisee under any such offer or contract with a
third party is other than cash, the Company may at its election pay the
reasonable equivalent in cash of such other consideration. The Company's right
of first refusal shall be unrestricted and absolute; the Company shall in all
cases have thirty (30) days to consider and act on each offer or any change in
terms and conditions of offer; and, in all cases, the Company shall have not
less than thirty (30) days after its acceptance of such offer to consummate the
transaction. Nothing contained in this Subsection 13.5 shall in any way be
deemed to impair the Company's discretion in considering, approving or
disapproving any request to transfer any interest under this Agreement.
13.6 This Agreement and the Company's rights, interests and
obligations hereunder shall inure to the benefit of any entity which succeeds to
the business of the Company and assumes the obligations of the Company
hereunder.
SECTION 14: TRADEMARKS
14.0 The Franchisee acknowledges the sole and exclusive right of
the Company (except for rights granted under existing and future franchise and
license agreements) to use the Trademarks in connection with the products and
services to which they are or may be applied by the Company, and represents,
warrants and agrees that neither during the Term of this Agreement nor after the
expiration or other termination hereof, shall the Franchisee directly or
indirectly contest or aid in contesting the validity, ownership or use of the
Trademarks by the Company or take any action whatsoever in derogation of the
rights claimed therein by the Company.
9
<PAGE> 13
14.1 The license granted to the Franchisee under this Agreement
to use the Trademarks is non-exclusive and the Company, in its sole and absolute
discretion, has the right to grant other licenses in, to and under the
Trademarks in addition to those licenses already granted, both within and
outside the Restaurant trading area, and to develop and license other names and
marks on any such terms and conditions as the Company deems appropriate.
14.2 The Franchisee understands and expressly acknowledges and
agrees that the Company has the exclusive, unrestricted right to engage directly
and indirectly, through its employees, representatives, licensees, assigns,
agents and others, at wholesale, retail and otherwise, within the Restaurant
trading area and elsewhere, in (a) the production, distribution and sale of food
products and beverages (including, without limitation, tacos, taco shells,
sauces and fillings, and other Mexican style food products) under the Trademarks
licensed hereunder or other marks; and (b) the use, in connection with such
production, distribution and sale, of any and all trademarks, trade names,
service marks, logos, insignia, slogans, emblems, symbols, designs and other
identifying characteristics as may be developed or used from time to time by the
Company, whether or not included in Appendix 1.
14.3 Except as expressly permitted by this Agreement and the
Manual, the license granted under this Agreement does not include any right or
authority of any kind whatsoever to pre-package or sell pre-packaged food
products or beverages under the Trademarks.
14.4 Nothing contained in this Agreement shall be construed to
vest in the Franchisee any right, title or interest in or to the Trademarks, the
goodwill now or hereafter associated therewith, or any right in the design or
any restaurant building, other than the rights and license expressly granted
herein for the Term. Any and all goodwill associated with or identified by the
Trademarks shall inure directly and exclusively to the benefit of the Company,
including without limitation any goodwill resulting from operation and promotion
of the Restaurant.
14.5 The Franchisee shall not use the Trademarks in connection
with any statement or material which may, in the judgment of the Company, be in
bad taste or inconsistent with the Company's public image, or tend to bring
disparagement, ridicule or scorn upon the Company, the Trademarks or the
goodwill associated therewith. The Franchisee, whether doing business as a
proprietorship, partnership, corporation or other entity, shall not adopt, use
or register (by filing a certificate or articles of incorporation, a fictitious
business name statement, or otherwise) any trade or business name, style or
design which includes, or is similar to, any of the Company's trademarks,
service marks, trade names, logos, insignia, slogans, emblems, symbols, designs
or other identifying characteristics.
14.6 The Company shall have the right at any time and from time
to time upon notice to the Franchisee to make additions to, deletions from, and
changes in the Trademarks, or any of them, all of which additions, deletions and
changes shall be as effective as if they were incorporated in this Agreement.
All such additions, deletions and changes shall be made in good faith, on a
reasonable basis and with a view toward the overall best interest of the Taco
Bell System. The Company will use commercially reasonable efforts to protect and
preserve the integrity and validity of the Trademarks, including the taking of
actions deemed by the Company to be appropriate in the event of any apparent
infringement of the Trademarks.
14.7 The Franchisee shall notify the Company promptly of any
claims or charges of trademark infringement against the Company or the
Franchisee, as well as any information the Franchisee may have of any suspected
infringement of the Trademarks. The Franchisee shall take no action with regard
to such matters without the prior written approval of the Company, but shall
cooperate fully with the Company in any such action.
14.8 The Franchisee shall adopt and use the Trademarks only in
the manner expressly approved by the Company from time to time during the Term.
SECTION 15: EXPIRATION AND TERMINATION
15.0 The Company shall have the right to terminate this Agreement
immediately upon written notice to the Franchisee:
(a) in the event of any breach or default under
Subsections 4.1, 9.0, 13.2 or 13.5;
(b) if a petition in bankruptcy, an arrangement for the
benefit of creditors, a petition for reorganization is filed by or against the
Franchisee, or if the Franchisee shall make any assignment for the benefit of
creditors, or if a receiver or trustee is appointed for the Restaurant, unless
such condition or conditions are remedied to the satisfaction of the Company
within twenty (20) days of such event;
(c) if the Franchisee for any reason loses its right to
possession of the Restaurant premises;
(d) if the Company discovers that the Franchisee has made
any material misrepresentation or omitted any material fact in the information
furnished by the Franchisee in connection with the grant of this Taco Bell
franchise;
10
<PAGE> 14
(e) if the Franchisee (or any shareholder if the
Franchisee is a corporation) is convicted of any felony or any crime involving
moral turpitude.
If the Franchisee defaults in the performance or observance of any of its other
obligations hereunder or under any other franchise agreement with the Company,
and such default continues for a period of thirty (30) days after written notice
to the Franchisee, the Company may at any time thereafter terminate this
Agreement as well as any other such franchise agreement upon written notice to
the Franchisee. A repetition within a one-year period of any default shall
justify the Company in terminating this Agreement upon written notice to the
Franchisee without allowance for any curative period. The foregoing provisions
of this Subsection 15.0 are subject to the provisions of any local statutes or
regulations which may prohibit the Company from terminating this Agreement
without good cause or without giving the Franchisee additional prior written
notice of termination and opportunity to cure any default. In the event of any
termination for failure of the Franchisee to successfully complete the Company's
TACO BELL RESTAURANT operations training course pursuant to Subsection 4.1, the
Company shall refund to the Franchisee the initial franchise fee payment
referred to in Subsection 7.0(a), less any expenses incurred and damages
sustained by the Company in connection with its performance hereunder prior to
the date of such termination.
15.1 Upon the expiration or earlier termination of this Agreement
for any reason, the Franchisee shall:
(a) immediately discontinue the use of the System and
Trademarks;
(b) if the Restaurant premises are owned by the Franchisee
or leased from a third party, upon demand by the Company, remove the Trademarks
from all buildings, signs, fixtures and furnishings, and alter and paint all
buildings and other improvements maintained pursuant to this Agreement to a
design and color which is basically different from any of the Company's
authorized building designs and painting schedules.
If the Franchisee shall fail to make or cause to be made any such removal,
alteration or repainting within thirty (30) days after written notice, then the
Company shall have the right to enter upon the Restaurant premises, without
being deemed guilty of trespass or any other tort, and make or cause to be made
such removal, alterations and repainting at the reasonable expense of the
Franchisee, which expense the Franchisee shall pay the Company upon demand; and
(c) not thereafter use any trademark, trade name, service
mark, logo, insignia, slogan, emblem, symbol, design or other identifying
characteristic that is in any way associated with the Company or similar to
those associated with the Company, or operate or do business under any name or
in any manner that might tend to give the public the impression that the
Franchisee is or was a licensee or franchisee of, or otherwise associated with,
the Company.
15.2 In the event that either party initiates any legal
proceeding to construe or enforce the terms, conditions and provisions of this
Agreement, including its termination provisions, or to obtain damages or other
relief to which either may be entitled by virtue of this Agreement, the
prevailing party shall be paid its reasonable attorneys' fees and costs by the
other party.
If the Franchisee refuses to comply with a written notice of termination sent by
the Company and a court later upholds such termination of this Agreement,
operation of the Restaurant by the Franchisee from and after the date of
termination stated in such notice shall constitute trademark infringement by the
Franchisee and the Franchisee shall be liable to the Company for damages
resulting from such infringements in addition to any royalties paid or payable
hereunder, including, without limitation, any profits of the Franchisee at the
Restaurant level (without deduction from sales revenues for any compensation or
charges payable to the Franchisee or any entity owned or controlled by the
Franchisee), which profits in no event shall be calculated as less than ten
percent (10%) of the Franchisee's Gross Sales. No such payment or obligation for
payment shall in any way imply or be construed to imply or reflect any right of
the Franchisee to operate the Restaurant after expiration or termination of this
Agreement.
15.3 (a) In the event that the premises at which the Franchisee
operates the Restaurant are owned by the Franchisee, then, upon termination of
this Agreement, whether it is terminated by the Franchisee or by the Company,
the Company shall have the option of immediately purchasing said premises from
the Franchisee. If the Company elects to exercise that option, the purchase
price to be paid by the Company to the Franchisee shall be the fair market value
of the Restaurant land, buildings, furnishings, and equipment owned by the
Franchisee. In the event that the parties are unable to agree as to such amount
or any other terms of purchase within thirty (30) days following cessation of
the Franchisee's operation of the licensed Restaurant at the premises, the
amount or other terms of purchase as to which the parties are unable to agree
shall be determined by three (3) appraisers, with each party selecting one
appraiser and the two appraisers so chosen selecting the third appraiser. If
appraisal occurs pursuant to this provision, following the announcement of the
appraiser's decision the Company shall have thirty (30) days within which to
elect whether or not to purchase the premises.
(b) In the event that the premises at which the Franchisee
operates the Restaurant are leased by the Franchisee from a third party, such
lease and any subsequent lease of those premises shall give the Franchisee the
right to assign such lease to the Company. Upon termination of this Agreement,
whether it is terminated by the Company or by the Franchisee, the
11
<PAGE> 15
Franchisee's rights and obligations under said lease shall, if the Company so
elects, automatically be assigned to the Company. If the Company exercises this
option, the Franchisee shall immediately vacate the premises, and the Company
shall be entitled to take possession of said premises, including all fixtures
and leasehold improvements. In such event the Company shall pay to Franchisee
the fair market value of the interests owned by the Franchisee in the
Restaurant's furnishings and equipment. Fair market value shall be determined in
the same manner as set forth in the immediately preceding paragraph.
15.4 If this Agreement is terminated as a result of repudiation,
default or other action by the Franchisee without material breach hereof by the
Company, the Franchisee (in addition to any other remedy or right the Company
may have) shall pay to the Company in lump sum as liquidated damages the greater
of the amount of eleven percent (11%) times the Restaurant's Gross Sales (as
defined in Subsection 7.2 above) for the twelve months immediately preceding
termination of this Agreement or $100,000.00. The parties hereby acknowledge and
agree that the precise amount of the Company's actual damages in such event
would be extremely difficult to ascertain and that the foregoing sum represents
a reasonable estimate of such actual damages, based upon the approximate time it
would take the Company to open another TACO BELL RESTAURANT in the vicinity.
Such liquidated damages shall not apply if the Company exercises one of the
options set forth in Subsection 15.3 above and either the Company or another
Taco Bell franchisee continues operation of the Restaurant as a TACO BELL
RESTAURANT following termination of this Agreement.
15.5 In the event that this Agreement is terminated prior to the
end of the term set forth in Section 2 hereof as a result of condemnation
proceedings or other action not within the control of the Franchisee or the
Company, the Company shall use commercially reasonable efforts to assist the
Franchisee in locating an alternative location for the Restaurant in the same
area to be used for the balance of the Term upon the same terms and conditions
as contained herein, and without the payment of any additional initial franchise
fee. This provision shall not be construed to limit the Franchisee from
receiving the full amount of any condemnation award or damages relating to the
closing of the Restaurant.
SECTION 16: MISCELLANEOUS
16.0 Waiver. The waiver by the Company of any breach or default,
or series of breaches or defaults, of any term, covenant or condition herein or
of any same or similar term, covenant or condition in any other agreement
between the Company and any franchisee or licensee, shall not be deemed a waiver
of any subsequent or continuing breach or default of the same or any other term,
covenant or condition contained in this Agreement, or in any other agreement
between the Company and any franchisee or licensee.
16.1 Cumulative Remedies. All rights and remedies of the Company
shall be cumulative and not alternative, in addition to and not exclusive of any
other rights or remedies provided for herein or which may be available at law or
in equity in case of any breach, failure or default or threatened breach,
failure or default of any term, provision or condition of this Agreement. The
rights and remedies of the Company shall be continuing and not exhausted by any
one or more uses thereof, and may be exercised at any time or from time to time
as often as may be expedient; and any option or election to enforce any such
right or remedy may be exercised or taken at any time and from time to time. The
expiration or earlier termination of this Agreement shall not discharge or
release the Franchisee from any liability or obligation then accrued or any
liability or obligation continuing beyond or arising out of the expiration or
earlier termination of this Agreement.
16.2 Partial Invalidity. If any part of this Agreement shall for
any reason be declared invalid, unenforceable or impaired in any way, the
validity of the remaining portions shall not be affected thereby and such
remaining portions shall remain in full force and effect as if this Agreement
had been executed with such invalid portion eliminated, and it is hereby
declared the intention of the parties that they would have executed the
remaining portion of this Agreement without including therein any such portions
which might be declared invalid; provided, however, that in the event any part
hereof relating to the payment of fees to the Company, or the ownership or
preservation of the Trademarks, trade secrets or secret formulae licensed or
disclosed hereunder is for any reason declared invalid or unenforceable, then
the Company shall have the option of terminating this Agreement upon written
notice to the Franchisee.
16.3 Choice of Law. The Franchisee acknowledges that the Company
will grant numerous licenses throughout the United States on terms and
conditions similar to those set forth in this Agreement and that it is of mutual
benefit to the Franchisee and to the Company that these terms and conditions be
uniformly interpreted. Therefore, to the extent that the law of the State of
California does not conflict with local franchise investment statutes, rules and
regulations, California law shall apply to the construction and enforcement of
this Agreement and govern all questions which arise with reference hereto.
16.4 Jurisdiction and Venue. With respect to any court proceeding
between the Franchisee and the Company concerning the enforcement, construction
or alleged breach or termination of this Agreement, the Franchisee hereby
submits to the personal jurisdiction and venue of the federal and California
state courts located in Orange County, California, for all such matters, and
promises not to commence against the Company any court proceeding concerning
such matters in any other courts.
16.5 Notices. All notices to be given hereunder shall be in
writing and shall be deemed given when first tendered or received, whether in
person, through United States mail or through reputable private delivery
service, during normal business hours for the
12
<PAGE> 16
locale of the addressee at the appropriate address set forth below, or such
other address as one party may hereafter provide to the other with not less than
three (3) days' notice.
THE COMPANY: TACO BELL CORP. THE FRANCHISEE: [Franch1] and [Franch2]
-----------------------
17901 Von Karman Avenue [Noticeaddress]
-----------------------
Irvine, California 92614-6221 [Noticecitystate]
-----------------------
Attn: General Counsel
16.6 Terms and Headings. Whenever any word is used in this
Agreement in one gender, it shall also be construed as being used in the other
genders, and singular usage shall include the plural and vice versa, all as the
context shall reasonably require. The headings inserted in this Agreement are
for reference purposes only and shall not affect the construction of this
Agreement or limit the generality of any of its provisions.
16.7 Compliance with Laws. The Franchisee shall at its own cost
and expense, promptly comply with all laws, ordinances, orders, rules,
regulations, and requirements of all federal, state and municipal governments
and appropriate departments, commissions, boards, and offices thereof. Without
limiting the generality of the foregoing, the Franchisee shall abide by all
applicable rules and regulations of any Public Health Department having
jurisdiction over the Restaurant.
16.8 Lease of Land and Building. In the event that the parties
have executed a Lease of land or building relating to the premises described in
Subsection 1.0 (the "Lease"), such Lease is hereby incorporated in this
Agreement by reference, and any failure on the part of the Franchisee (lessee
therein) to perform, fulfill or observe any of the covenants, conditions or
agreements contained therein shall constitute a material breach of this
Agreement. It is expressly understood, acknowledged and agreed by the Franchisee
that any termination of the Lease resulting in the Franchisee's loss of
possession of the Restaurant shall result in immediate termination of this
Agreement without further notice.
16.9 Entire Agreement. This Agreement and the
documents referred to herein constitute the entire agreement between the parties
and supersede and cancel any and all prior and contemporaneous agreements,
understandings, representations, inducements and statements, oral or written, of
the parties in connection with the subject matter hereof. THE FRANCHISEE
EXPRESSLY ACKNOWLEDGES THAT IT HAS ENTERED INTO THIS FRANCHISE AGREEMENT AS A
RESULT OF ITS OWN INDEPENDENT INVESTIGATION AND AFTER CONSULTATION WITH ITS OWN
ATTORNEY, AND NOT AS A RESULT OF ANY REPRESENTATIONS OF THE COMPANY, ITS AGENTS,
OFFICERS OR EMPLOYEES, EXCEPT AS CONTAINED HEREIN AND IN THE COMPANY'S FRANCHISE
OFFERING CIRCULAR(S) DATED _______________, 2000 AS AMENDED ON ______________,
ISSUED FOR THE STATE(S) OF ____________- DATED _______________________.
16.10 Amendment or Modification. Except as expressly authorized
herein, no amendment or modification of this Agreement shall be binding unless
executed in writing by both the Company and the Franchisee.
IN WITNESS WHEREOF, the parties personally or through their duly
authorized signatories have executed this Agreement in duplicate as of the day
and year first above written.
TACO BELL CORP. FRANCHISEE
By
------------------------------ ---------------------------------------
Its Vice President [Franch1] Date
----------------------------------------
[Franch2] Date
------------------
VOID - SAMPLE COPY
------------------
13
<PAGE> 17
DO NOT SIGN
UNLESS ALL BLANKS
HAVE BEEN FILLED IN
14
<PAGE> 18
APPENDIX I
TRADEMARKS
The Company has registered with the United States Patent Office the
following active trademarks:
MARK REGISTRATION NUMBER REGISTRATION DATE
Taco Bell (Name) 820,073 12/06/66
Boy on Bell (Name and Logo) 846,432 03/19/68
Taco Bell Blocks (Name and Logo) 856,207 09/03/68
Taco Bell (Ingredients - Taco Mix) 879,582 10/28/69
Enchirito 923,614 11/09/71
Building Design (Name and Logo) 929,759 02/22/72
Burrito Supreme 1,050,189 10/12/76
Taco Bell Sunburst Design 1,067,787 06/14/77
Bellbeefer 1,076,699 11/01/77
Taco BellGrande 1,294,757 09/11/84
Design of Bell No. 2 1,322,737 02/16/85
TACO BELL and Bell Design No. 2 in 1984 1,322,738 02/26/85
Logo
TACO BELL in 1984 Logo Distinctive 1,322,739 02/26/85
Lettering
Design of Bell No. 2 (in color) 1,330,236 04/09/85
Fiesta Meal 1,446,677 07/07/87
Nachos BellGrande 1,451,431 08/04/87
Cheesarito 1,470,835 12/29/87
Make A Run For The Border 1,523,982 02/07/89
MexiMelt (Class 30) 1,528,496 03/07/89
Soft Taco Supreme 1,551,516 08/08/89
Enchirito 1,597,700 05/22/90
Taco (Character Design) 1,603,157 06/19/90
Fiesta Fries 1,603,935 06/26/90
TACO BELL and Bell Design No. 2 in 1984
Logo 1,613,124 09/11/90
MexiMelt (Class 30) 1,615,940 10/02/90
Iceman (Character Design) 1,617,195 10/02/90
The Bell Rockers 1,630,445 01/01/91
Hedda Lettuce (Character Design) 1,634,523 02/05/91
Tomato Red (Character Design) 1,635,104 02/12/91
Cheddar Fred (Character Design) 1,635,105 02/12/91
Snow Buddies 1,635,809 02/19/91
Go For The Cheese 1,665,992 11/26/91
Fiesta Bean Burrito 1,677,775 03/03/92
MexiMelt 1,691,822 06/09/92
Fiesta Soft Taco 1,707,047 08/11/92
We're Great Late! 1,716,909 09/15/92
Flexstation 1,754,443 02/23/93
The Bell 1,765,386 04/13/93
TACO BELL in 1984 Logo (on one line) and 1,773,320 05/25/93
Swinging Bell Design
TACO BELL in 1984 Logo (on one line) w/ 1,774,587 06/01/93
Swinging Bell and Stripes Design
(in color)
TACO BELL Stripes Design 1,774,590 06/01/93
TACO BELL in 1984 Logo and Swinging 1,775,645 06/08/93
Bell Design
TACO BELL in 1984 Logo w/ Swinging Bell 1,775,646 06/08/93
and Stripes Design
TACO BELL in 1984 Logo (on one line) and 1,775,647 06/08/93
Swinging Bell Design (in color)
15
<PAGE> 19
TACO BELL in 1984 Logo and Swinging 1,775,648 06/08/93
Bell Design (in color)
TACO BELL in 1984 Logo w/ Swinging 1,775,649 06/08/93
Bell and Stripes Design (in color)
TACO BELL in 1984 Logo (on one line) w/ 1,776,937 06/15/93
Swinging Bell and Stripes Design
Run For The Border 1,781,957 07/13/93
TACO BELL Stripes Design (Class 42) 1,803,948 11/09/93
BellGrande Burritos 1,864,860 11/29/94
Bring Home The Best Of The Border 1,865,354 11/29/94
Taco Bell (Class 29) 1,868,941 12/20/94
TACO BELL in 1984 Logo and Swinging 1,868,949 12/20/94
Bell Design (all on one line)
Taco Bell (Class 30) 1,874,786 01/17/95
Border Combos 1,878,800 02/14/95
Wild Logo #1 1,880,779 02/28/95
Bring Home the Best of the Border 1,906,721 07/18/95
Taco Supreme 1,920,011 09/19/95
TACO BELL in 1984 Logo and Swinging Bell 1,921,077 09/19/95
Design (all on one line) (in color)
Cross The Border 1,910,633 08/08/95
TACO BELL Bell Design #5 w/ TACO BELL 1,923,878 10/03/95
in distinctive lettering #1 in color
Border Ices 1,935,110 11/14/95
TACO BELL Bell Design #5 in color 1,918,234 09/12/95
TACO BELL Bell Design #5 1,925,711 10/10/95
Crunch Zone 1,915,751 08/29/95
Taco Bell (Name) 1,924,335 10/03/95
There are also several trademarks that have been applied for by the
Company but have not yet been registered. They are as follows:
MARK SERIAL NUMBER APPLICATION DATE
TACO BELL Stripes Design (in color) 74/233870 12/27/91
TACO BELL in 1984 Logo and Swinging 74/383931 04/29/93
Bell Design (all on one line) (in color)
Get Late at The Bell (w/ Swinging 74/396432 06/01/93
Bell Design)
TACO BELL Stripes Design (in color) --------- 07/13/93
Chimayo Grill 74/556066 08/01/94
TACO BELL Bell Design #5 w/ TACO BELL 74/560894 08/15/94
in distinctive lettering #1 in color
Taco Supreme 74/615592 12/29/94
Border Lights 74/668756 05/01/95
TeenSupreme 74/626861 01/30/95
Baja Pitas 74/657501 04/07/95
Fast Food Doesn't Have to Be Fat Food 74/657503 04/07/95
Fast Food Not Fat Food 74/658898 04/10/95
Border Light 74/668757 05/01/95
Hot or Mild? 74/672838 05/12/95
The Border Calls 74/704193 07/21/95
Hot or Mild? 74/730617 09/18/95
Cup O' Fries 74/730932 09/18/95
Sun Up Sandwich 74/736249 09/29/95
Taco Bell Design No. 6 75/007805 10/18/95
The War On The Floor --------- --------
16
