FRANCHISE AGREEMENT SUMMARY MRJ Ventures Company, a corporation organized and existing under Philippine laws, having its principal place of business at Gaisano Grand Mall- Minglanilla Ward 2 Poblacion, Minglanilla
FRANCHISOR expressly disclaims the making of any warranty or guaranty, expressed or implied, as to the revenues, profits or success of the business venture contemplated by this Agreement. I.
APPOINTMENT AND FRANCHISEE FEE
B. FRANCHISOR is under no obligation to grant any of its franchisee a protected territory. FRANCHISEE may relocate the Franchised Facility only with the prior written approval of FRANCHISOR. C. Franchise fee of ONE MILLION PESOS (1,000,000.00), exclusive of Value-Added Tax (VAT) and all other taxes required to be withheld under applicable laws and regulations, upon execution of this Agreement. Said fee shall be deemed fully earned earned and non-refundable. D. Franchised Facility will service a minimum population of approximately fifty thousand (50,000) people. When justified by the demand within the Designated Area, at the option of FRANCHISOR, FRANCHISEE may be required either to expand the Franchised Facility or to set up additional franchised facilities within the Designated Area at locations approved by FRANCHISOR. For a particular mall or structure, FRANCHISEE will have the first option to open other outlets within that mall or structure, FRANCHISEE will have the first opti on to open other outlets within that specific location. When FRANCHISOR requires such expansion or the setting up of additional fra nchised facilities, FRANCHISEE shall, within fifteen (15) days from r eceipt of notice from FRANCHISOR, indicate its willingness or capability to do so. Should FRANCHISEE notify FRANCHISOR that it is unwilling or unable to do so, or if the fifteen (15)-day period provided herein expires without the FRANCHISEE giving the required noticed, FRANCHISOR may exercise an unrestricted right to set up or grant franchises to set up such additional franchised facilities within the Designated Area. E. FRANCHISOR specifically reserves the right and privilege, at its sole discretion and as it may deem in the best interests of all concerned in any specific instance, to vary standards for any System franchisee based upon the peculiarities of the particular particular site or circumstance, density of population, business potential, population of trade area, existing business practices or any other condition FRANCHISEE shall not be entitled to require FRANCHISOR to disclose disclose or grant to FRANCHISEE a like or similar variation hereunder. F. All fees payable to FRANCHISOR under this Agreement shall be net of taxes required to be withheld by the FRANCHISEE under existing and future laws and regulations. II.
TERM AND RENEWAL A. This Agreement shall be effective and blinding for an initial term of three (3) years from the date of its execution. B. FRANCHISEE may renew this franchise at the expiration of the initial term of the franchise for an additional period of five (5) years, provided that all of the following conditions have been fulfilled prior to each renewal term: (see enumeration)
C. If FRANCHISEE desires to renew this franchise at the expiration of this Agreement, FRANCHISEE shall give FRANCHISOR written notice of its desire to renew at least six (6) months, but not more than twelve (12) months, prior to the expiration of the initial or renewal term of this Agreement, as the case may be. Within ninety (90) days after its receipt of such timely notice, FRANCHISOR shall furnish FRANCHISEE with written notice of reasons which could cause FRANCHISORS not to grant a renewal to FRANCHISEE D. FRANCHISOR shall give FRANCHISEE written notice of its election not to renew the franchise at least one (1) month prior to the expiration of the initial term of this Agreement or at least one (1) month prior to the expiration of any renewal term. FRANCHISEE shall not be allowed to operate any business of the same nature as the subject of this Agreement, within two (2) years from the expiration of the initial term of this Agreement or of the terms of the subsequent renewals of this Agreement. E. During the term of this Agreement, and for a period of two (2) years after its expirations, the FRANCHISEE, shall not, without the written consent of the FRANCHISOR, be interested directly or indirectly, in any manner, as a partner, officer, director, shar eholder, advisor or consultant or in any other capacity in any other business similar to or in competition with the business of the FRANCHISOR III.
FACILITY LOCATION B. FRANCHISEE will be responsible for purchasing or leasing a suitable site in prime spaces in strategically located commercial or business areas for the principal location of the Franchised Facility.
FRANCHISOR shall provide FRANCHISEE with written notice of approval or disapproval of the proposed site within fifteen (15) days after FRANCHISOR completes its evaluation of the site. D. FRANCHISOR’s approval of the lease or purchase agreement may be conditioned upon inclusion in the lease of terms acceptable to FRANCHISOR and FRANCHISOR’s option, the lease shall contain such provision as FRANCHISOR may reasonable require, including, but not limited to: 1. A provision reserving to FRANCHISOR the right, at FRANCHISOR’s election, to receive an assignment of the leasehold interest upon termination or expiration of the franchise grant 2. A provision which expressly requires the lessor on the premises to provide FRANCHISOR all information it may have related to the operation of the Franchised Facility 3. A provision which requires the lessor concurrently to provide FRANCHISOR with a copy of any written notice of deficiency under the lease sent to FRANCHISEE 4. A provision which evidences the right of FRANCHISEE to display the Marks in accordance with the specification required by the Confidential Operations Manual; 5. A provision that the facility location shall be used only for the operation of a “TURKS” in -line, food kiosk, food stall, or take-out counters Franchised Facility; and 6. A provision which expressly states that any default under the lease shall constitute a default under the Franchise Agreement. F. In the event acceptable site is not found and approved by the parties within three (3) months from execution of this Agreement, upon written application from either party, this contract shall be terminated and the initial franchise fee receive by FRANCHISOR shall be returned to FRANCHISEE, less expenses incurred by FRANCHISOR H.
FRANCHISEE may be required to periodically make reasonable capital expenditures to remodel
FRANCHISEE shall be required to remodel, modernize, and redecorate the Franchised Facility Agreement and once for every renewal term, each at a cost not exceeding ONE HUNDRED FIFTY THOUSAND PESOS (PhP 150,000.00). IV.
EQUIPMENT, FIXTURES, AND FURNITURE FRANCHISOR shall provide FRANCHISEE with specification for brands and types of any equipment, fixtures, and furniture required for the Franchised Facility. Specifications may include minimum standards for performance, warranties, design, and appearance and local zoning, sign, and other restrictions. FRANCHISEE shall purchase the standard fixtures and equipment only form F RANCHISOR , and the letter’s authorized suppliers, or as otherwise permitted in writing by the FRANCHISOR. V.
SUPPLIES AND SERVICES D. FRANCHISEE is required to immediately inspect all supplies delivered for any damaged. FRANCHISEE must inform FRANCHISOR within one working day upon signing the delivery receipt of any discrepancy in or damaged to the supplies delivered E. The FRANCHISEE shall be billed on orders and purchases upon delivery. FRANCHISEE acknowledges that FRANCHISOR may adjust the prices of supplies in propor tion to changes. FRANCHISEE shall bear cost of freight or delivery, if any.
F. FRANCHISEE shall pay in fully, either in cash of the supplies delivered on the day following receipt of the corresponding billing from the FRANCHISOR (“Payment Date”). G. FRANCHISEE shall be liable to the FRANCHISOR for interest in unpaid sums beginning the day following Payment Date, without need of prior demand, at the rate of two percent (2%) per month for the first three (3) days of delay, and at the rate of three percent (3%) per month on a compounding rate thereafter. FRANCHISEE acknowledges that its failure to pay all amounts when due shall constitute grounds for termination of this Agreement, FRANCHISEE acknowledges FRANCHISOR ’s right, at its own discretion, to refuse delivery of new orders of supplies until outstanding or overdue accounts are settled. VI. TRAINING AND ASSISTANCE A. Training shall be conducted in two phases, and completed within thirty (30) days prior to the Franchised Facility. Phases one shall be one-day classroom/lecture type of training to be conducted at facility to be identified by the FRANCHISOR to a maximum of three (3) attendees composed of the FRANCHISEE/Owner and two (2) sales staff .. Phase two s hall be an on-site, hands-on training, conducted at a facility to be identified by the FRANCHISOR, and provided for three (3) days to a maximum of the t hree (3) attendees composed of the FRANCHISEE/Owner and two (2) sales staff.
1. FRANCHISOR, at its expenses, shall deploy at least one (1) of FRANCHISOR’s representative at the Franchised Facility, for the purpose of facilitating the opening of said Franchised Facility. 3. FRANCHISEE shall not be allowed to commence operations of the Franchised Facility until all trainees have successfully completed both phases of the training program. B. If FRANCHISOR determine, in its sole discretion, that FRANCHISSE and its employees are unable are to satisfactorily complete the training program described above, FRANCHISOR shall have the right to terminate this Agreement in the manner herein provide.
C. New, replacement or additional sales staff shall undergo the training program before deployment at the Franchised Facility, subject to a fee charged by the FRANCHISOR for costs of s uch training program plus a reasonable premium. FRANCHISEE shall be responsible for all expenses incurred by FRANCHISEE’s new, replacement or additional sales staff in attending any training program. VII.
PROPRIETARY MARKS A. Any unauthorized use of the Marks by FRANCHISEE is a breach of this Agreement and an infringement of the rights of FRANCHISOR and its affiliate in and to Marks
B. FRANCHISEE shall not use any Mark in connection with the sale of any unauthorized product or service or in any other manner not expressly authorized in writing by FRANCHISOR. C. FRANCHISEE shall promptly notify FRANCHISOR of any claim, demand, or cause of action based upon or arising from any attempt by any other person, firm or corporation to use the Marks or any colorable imitation thereof. FRANCHISEE shall notify relating to the Marks, within ten (1 0) days after FRANCHISEE receives notice of said action, claim, or demand. FRANCHISOR and its affiliate shall have the sole right to defend any such action. FRANCHISOR and its affiliates shall have the exclusive right to contest or bring action against any third party regarding the third party’s use of any of the Marks and shall exercise such right in its sole discretion. In any defense or prosecution of any litigation relating to the Marks or components of the S ystem undertaken by FRANCHISOR, XI. ADVERTISING A. FRANCHISEE will submit to FRANCHISOR or its designated agency, for its prior approval, all promotional materials and advertising to be used by FRANCHISEE. In the event written disapproval of said advertising and promotional materials is not given by FRANCHISOR to FRANCHISEE within five busi ness days from the date such material is received by FRANCHISOR, said materials shall be deemed approved. B At such time as FRANCHISOR elects to establish a corporate advertising and marketing fund, FRANCHISOR may require FRANCHISEE to contribute, on a weekly basis, an amount equivalent to two percent (2%) of the Franchising Facility`s gross sales 9. On or before the Monday following the close of each week, FRANCHISEE shall submit to the FRANCHISOR a statement of the Franchised Facility`s gross sales for the previous week. C.
The FRANCHISEE shall spend on local advertising and promotion each calendar month, an amount equivalent to one percent (1%) of the Franchised Facility`s gross sales for the immediately preceding calendar month.
1.
On or before the fifteenth (15 th) day following the close of each calendar month, FRANCHISEE shall furnish to the FRANCHISOR an accurate accounting of the previous month`s expenditures on local advertising and promotion.
D.
FRANCHISEE shall expend the sum of at least TEN THOUSAND PESOS(Php 10,000) on promotional activities to generate initial consumer awareness during the initial month of operation of the Franchised Facility. Such advertising and promotional items are to be designated as grand opening advertising and promotion.
E.
From time to time, FRANCHISOR may designate a local, regional or national advertising coverage area in which the Franchised Facility and at least one (1) other franchise is located for purposes of developing a cooperative local or regional advertising or promotional program. The cost of the program shall be allocated a mong locations in such area and each FRANCHISEE`s share shall be in proportion to its during the preceding twelve (12) -month period, or portion of said period, but the aggregated of such additional contribution by FRANCHISEE during any three (3)month period shall not exceed one quarter of one percent (0.25%) of the Franchised Facilty`s gross sales for the preceding three (3)-month period. Said contributions to cooperative advertising promotional programs will be credited toward the local advertising and promotional expenditure
XII. CONTINUING SERVICES AND ROYALTY FEES A. Royalty fee of up to five percent (5%) of gross sales of the Franchised Facility, exclusive of Value Added Tax (VAT) and all other taxes required to be withheld Said Royalty Fee shall be paid in the manner specified below: 1. On or before the Monday following the close of each week, FRANCHISEE shall pay the Royalty Fee and submit to the FRANCHISOR a statement of the of the Franchised Facility`s gross sales for the previous week. B. All royalty Fee payments, advertising contributions, amounts due for purshases by FRANCHISEE from FRANCHISOR shall bear interest after due date at the highest applicable legal legal rate for open account business credit, but in no case less than three p ercent (3%) per month. XIII. ACCOUNTING AND RECORDS B. FRANCHISEE shall supply to FRANCHISOR , on or before the fifteenth (15 th) day of each month, in the form approved by FRANCHISOR, a profit and loss statement and balance sheet for the last preceding calendar month. In addition, FRANCHISEE shall, at its expense, submit to FRANCHISOR its financial statements, including an income statement and balance sheet, within fifteen days (15) days after the end of each quarter, and within ninety (90) days after the end of each fiscal year during t he term of this Agreement. The financial statements shall be prepared in accordance with generally accepted accounting practices, and the year-end financial statements shall be reviewed by an independent certified public accountant. E. FRANCHISOR shall also have the right, at any time, to have an independent audit made of the books of FRANCHISEE at FRANCHISOR`s expense. If an inspection should reveal that any payments to FRANCHISOR have been understated in any report to FRANCHISOR, then FRANCHISEE shall immediately pay to FRANCHISOR the amount understated upon demand, in addition to interest from the date such amount was due until paid at the rate three percent (3%) per month. If an inspection discloses an understatement in any report of two percent (2%) or more, FRANCHISEE shall, in addition reimburse F. FRANCHISEE acknowledges that its failure to pay any amount when due shall constitute a material default and grounds for termination of this Agreement. XIV. STANDARD OF QUALITY AND PERFORMACE B. FRANCHISE shall commence operation of the Franchised Facility not later than thirty (30) days after execution of this Agreement. If FRANCHISEE for any reason fails to commence operation as herein
provided, such failure shall be considered a default and FRANCHISOR may terminate this Agreement as herein provided. D. FRANCHISEE shall make no material alterations to the premises of the Franchised Facility nor shall FRANCHISEE make material replacements of or alterations to the equip ment, fixtures, furniture or signs of the Franchised Facility without the prior written approval by FRANCHISOR. M. FRANCHISEE shall, at all times, maintain a buffer fund equivalent to ONE HUNDRED FIFTY THOUSAND PESOS (PhP 150,000.00) for the operation of the Franchised Facility, unless the Franchised Facility has been in operation for six (6) months, in which case the amount of the buffer fund shall be based on the actual average operating cash expenses of the Franchised Facility for the preceding six (6) months. If, at any time, the continued operation of the Franchised Facility requires any drawing from the buffer fund, the FRANCHISEE shall, within three (3) days from such drawing, replenish the buffer fund to its original level. XVI. INSURANCE A. FRANCHISEE shall procure, at its sole expense and maintain in full force and effect during the ter m of this Agreement, where the Franchised Facility is situated, arising or occurring upon or in connection with the Franchised Facility, including: 1.
Public Liability (Third Party) Policy with provisio ns on security and compensation for damages to persons and property of the Franchised Facility. The FRANCHEE shall procure insurance from an accredited insurance company of the FRANCHISOR at least thirty (30) days before the opening of the Franchised Facility.
2.
Fire Insurance (Non-Life) Policy with provisions to cover the vital equipment and premises of the Franchised Facility, inclusive of the building or any part thereof used and utilized for the Franchised Facility, with all the contents and implements therein.
D. Should FRANCHISEE, for any reason, not procure and maintain such insurance coverage as required by this Agreement, FRANCHISOR shall have the right and authority (without, however, any obligation to do so) immediately to procure such insurance coverage and to ch arge the same to the FRANCHISEE, which charges, together with a reasonable fee for expenses incurred by FRANCHISOR in connection with such procurement, shall be payable by FRANCHISEE immediately upon notice. XVII. DEFAULT AND TERMINATION A. If FRANCHISEE is in full compliance with this Agreement and FRANCHISOR materially breaches this Agreement and fails to cure such breach within a reasonable time after written notice thereof is delivered to FRANCHISOR, FRANCHISEE may terminate this Agreement. Such a termination shall be effective thirty (30) days after delivery to FRANCHISOR of notice that such breach has not been cured and FRANCHISEE elects to terminate Agreement. Termination of this Agreement by FRANCHISEE for any reason other breach of this Agreement by FRANCHISOR and FRANCHISOR’s failure to cure such breach within thirty (30) days from receipt of wiritten notice thereof shall be deemed a termination by FRANCHISEE without cause. B. This Agreement shall, at the option of FRANCHISOR, terminate automatically upon delivery of notice termination to FRANCHISEE, if FRANCHISEE or its owner(s), officer(s) or manager(s): (see enumeration) C. This Agreement shall terminate, at FRANCHISOR’s sole option, without further action by FRANCHISOR or notice to FRANCHISEE if FRANCHISEE or FRANCHISEE’s owner:
(see enumeration) XIX.
RIGHT AND DUTIES OF PARTIES UPON EXPIRATON OR TERMINATION Upon termination or expiration of this Agreement, all rights granted hereunder to FRANCHISEE shall forthwith terminate, and: (see enumeration) XX.
TRANSFERABILITY OF INTEREST A. This Agreement and all rights hereunder can be assigned and transferred by FRANCHISOR and, if so, shall be binding upon and inure to the benefit of F RANCHISOR’s successors and assigns;
B. This Agreement and all rights hereunder may be assigned and transferred by FRANCHISEE and, if so, shall be binding upon and inure to the benefit of F RANCHISEE’s succcessors and assigns, subject to the following conditions and requirement s, and FRANCHISOR’s right of first refusal as set forth herein: 1. No FRANCHISEE, without FRANCHISOR’s prior written consent, by operation of law or otherwise, shall sell, assign, transfer, convey, give away, or encumber to any person, form, or corporation, all or any part of its interest in this Agreement or its interest in the franchise granted hereby or its interest in any proprietorship, partnership or corporation. XXI. DEATH OR INCAPACITY OF FRANCHISEE A. In the event of the death or incapacity of an individual FRANCHISEE, or any partner of a FRANCHISEE which is a partnership or any shareholder owning fifty percent (50%) or more of the capital stock of a FRANCHISEE which is a corporation, the heirs who are relatives of the decedent to up to two degrees of consanguinity shall, within one hundred eighty (180) days of such event:
1. Apply to FRANCHISOR for the right to continue to operate the franchise for the duration of the term of this Agreement and any renewals hereof; or 2. Sell, assign, transfer, or convey FRANCHISEE’s interest provided, however, in the event a proper and timely application for the right to continue to operate has been made and rejected, the one hundred eighty (180) days to sell, assign, transfer or convey shall be computed from the date of said rejection. B. In the event of the death or incapacity of an individual FRANCHISEE, or any parner or shareholder of a FRANCHISEE which is partnership or corporation, at the option of FRANCHISOR, terminate forthwith and automatically revert to FRANCHISOR.
XXII.
RIGHT OF FIRST REFUSAL If FRANCHISEE or its owners propose to sell the Franchised Facility (or its assets) or p art or all of the ownership of FRANCHISEE, FRANCHISEE or its owners shall obtain and deliver a bona fide, executed written offer to sell the same to FRANCHISOR. FRANCHISOR shall, for a period of fifteen (15) days from the date of delivery of such offer, have the right, exercisable by written notice to FRANCHISEE or its owners, to purchase the Franchise Facility (or its assets) or such ownership for the price and on the terms and conditions conatined in such offer to FRANCHISOR, provided that FRANCHISOR may substitute cash for any form of payment proposed in such offer.
If FRANCHISOR does not exercise this right of first r efusal, the offer may be accepted b y FRANCHISEE or its owners, subject to the prior written approval of FRANCHISOR, , provided that if such offer is not so accepted within sixty (60) days of the date thereof, FRANCHISOR shall again have the right of first refusal herein described.
