Exhibit 10.3
Effective Date: _________________________ Reference:
Opening Date
KENTUCKY FRIED CHICKEN FRANCHISE AGREEMENT
dated ___________________
by and between KFC CORPORATION, a Delaware corporation ("KFC"), which has
its principal office at 1441 Gardiner Lane, Louisville, Kentucky, and
(the "Franchisee"),
with respect to the "Outlet" consisting of the premises, and all
structures, appurtenances, fixtures, equipment, facilities and entry,
exit, parking and other areas, now or at any time located on the real
property the dimensions and layout of which have previously been submitted
by plot plan to KFC and which bear the address:
In consideration of the premises, the Franchisee and KFC hereby agree as
follows:
1. Section Headings
The section headings listed below are for convenience of reference only
and shall not affect the interpretation of this Agreement.
Heading Page
1. Section Headings 1
2. Recitals - Caveat 2
3. License 2
4. New Agreement upon Expiration 4
5. Compliance with Standards, Etc. 5
6. Maintenance and Upgrading of Outlet 9
7. Services by KFC 9
8. Royalties 10
9. Gross Revenues 10
10. Advertising 11
11. Records and Audits 13
12. Purchase of Equipment, Supplies, Etc. 14
13. Insurance 15
14. Condemnation and Casualty 16
15. Restriction on Certain Activities 16
16. Assignment 17
17. Termination of License 19
18. National Franchisee Advisory Council 20
19. Right to Apply for New Franchised Outlets 20
20. Miscellaneous 20
21. Certain Representations by the Franchisee 22
2. Recitals - Caveat. KFC over the course of years has developed a
unique system for preparing and marketing fried chicken and other food
products pursuant to trade secrets, standards and specifications designed
to maintain a uniform high quality of product, service and national image.
KFC has also developed and owns certain trademarks and service marks which
enjoy a national reputation. Franchisee recognizes the value of the
system, the trademarks and continued uniformity of image to himself, to
KFC and to other franchisees of Kentucky Fried Chicken outlets. In order
to enhance the value of the system and trademarks and goodwill associated
therewith, this Agreement places detailed and substantial obligations on
the Franchisee including strict adherence to KFC's reasonable present and
future requirements regarding menu items, advertising, physical
facilities, etc. Future improvements may be required in the Outlet, and
certain provisions apply to other KFC outlets under common control with
the Outlet. The rights granted to the Franchisee are for a limited time.
Their value derives principally from certain KFC trademarks and associated
goodwill, designs, systems and processes developed at considerable expense
and effort. BEFORE SIGNING THIS AGREEMENT, THE FRANCHISEE SHOULD READ IT
CAREFULLY WITH THE ASSISTANCE OF LEGAL COUNSEL.
The Franchisee acknowledges that (1) THE SUCCESS OF THE BUSINESS VENTURE
CONTEMPLATED HEREIN INVOLVES SUBSTANTIAL RISKS AND DEPENDS UPON THE
ABILITY OF THE FRANCHISEE AS AN INDEPENDENT BUSINESSMAN AND HIS ACTIVE
PARTICIPATION IN THE DAILY AFFAIRS OF THE BUSINESS, AND (2) NO ASSURANCE
OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN GIVEN AS TO THE POTENTIAL
SUCCESS OF SUCH BUSINESS VENTURE OR THE GROSS REVENUES, VOLUME OR EARNINGS
LIKELY TO BE ACHIEVED, AND (3) NO STATEMENT, REPRESENTATION OR OTHER ACT,
EVENT OR COMMUNICATION, EXCEPT AS SET FORTH HEREIN, IS BINDING ON KFC IN
CONNECTION WITH THE SUBJECT MATTER OF THIS AGREEMENT.
3. License.
3.1 Subject to the limitations elsewhere in this Agreement, KFC hereby
grants to the Franchisee during the License Term the right and license
(the "License") to use at the Outlet certain trade names, trademarks and
service marks owned by KFC and to prepare and market Approved Products at
the Outlet (and only at the Outlet) only in connection with products and
services meeting KFC's quality standards through the use of processes and
trade secrets communicated by KFC. The Approved Products shall consist of
Required Products and Optional Products. Required Products are Colonel
Sanders' Kentucky Fried Chicken Original Recipe ("Original Recipe"),
Kentucky Fried Chicken Extra Tasty Crispy Chicken ("Extra Crispy"), or Hot
& Spicy Chicken, mashed potatoes, gravy, cole slaw, and other "fixin's"
and other products introduced into the system in accordance with
subsection 5.7.
Optional Products are products which are authorized for sale under KFC's
trademarks and service marks, but are not required to be sold. As
additional Optional Products are introduced by KFC, KFC will give notice
of the time and manner of introduction. Franchisee must seek the written
approval of KFC for Optional Products, and KFC may withhold such approval
if the Franchisee is not in compliance with the terms of this Agreement.
If KFC approves in writing, at its sole discretion, upon review of
Franchisee's specifications, Franchisee may also sell at the Outlet,
certain high quality food items for which KFC does not presently have
specifications. The initial Required Products and Optional Products and
the trade names, trademarks, and service marks presently authorized for
use in connection with them are shown on Exhibit A.
3.2 Subject to the termination provisions in this Agreement, the
Franchisee agrees to operate the Outlet during the License Term in
accordance with this Agreement.
3.3 The License Term shall expire on the 20th anniversary of the opening
date subject to earlier termination pursuant to this Agreement. KFC will
notify the Franchisee at least six months in advance of expiration of the
License Term. Should KFC fail to give such notice, then the License Term
shall be extended but only to the date six months from the date KFC does
give notice, and any renewal term granted pursuant to Section 4 shall
expire on the appropriate anniversary date as though KFC had given notice
when required.
3.4 Upon termination or expiration of the License, the Franchisee (and,
if Franchisee is a corporation, the officers, directors and shareholders
and agents of Franchisee) shall immediately discontinue use of all KFC
trademarks, service marks, trade names, trade secrets, and know-how and
processes developed and owned by KFC and shall immediately and at no cost
to KFC remove signs, menuboard inserts, point-of-sale material, red and
white stripes and any characteristically designed roof from the Outlet and
otherwise change its exterior and interior appearance so that it is no
longer confusingly similar to a Kentucky Fried Chicken outlet and no
longer bears any KFC trademarks, service marks or trade names or
designations or marks similar thereto. If the Franchisee fails to
immediately remove the signs and make such changes, KFC may do so by
entering the premises of the Outlet and the Franchisee shall pay to KFC
the costs it so incurs. Franchisee shall also return all confidential
operating manuals and other confidential materials to KFC and at KFC's
option, upon payment of the fair market value thereof by KFC, return to
KFC all supplies and any other materials bearing the trademarks, service
marks or trade names of KFC. This Agreement and the obligations of the
parties hereunder shall survive the termination or expiration of the
License except to the extent expressly otherwise provided herein.
3.5 The License does not include the right to sell any product for
resale, the right to sell any product at or from any place except the
Outlet, or the right to prepare or deliver any product at any place other
than the Outlet except for catering and special event sales made in strict
accordance with KFC's catering and special event procedures, which
procedures are subject to reasonable changes from time to time by KFC on
at least sixty (60) days' notice. Franchisee shall give KFC at least
thirty (30) days' (or such shorter period as may be reasonable under the
circumstances) advance notice of any special event sale (such as fairs,
athletic events and conventions).
3.6 Except as provided in subsection 3.8, during the License Term KFC
shall not use or license others to use any of the trademarks licensed
hereunder, in connection with the sale of any food products at any
location within a radius of one and one-half miles of the Outlet, unless:
(a) the sales are made at locations which (at the time KFC or any of its
affiliates commits to buy, lease or franchise any such location or
locations) are outside of a circular area having the Outlet as its center
and within which 30,000 people reside or, in case of a metropolitan area
containing more than 100,000 people, within which 30,000 people reside or
work, or both reside and work, or
(b) the sales are made in connection with special events, the occurrence
of which KFC notifies Franchisee with sufficient time for Franchisee to
meet the requirements of subsection 3.5, and Franchise chooses not to make
such sales. If Franchisee does not notify KFC of its intention to make
sales at a special event as provided in subsection 3.5, then KFC may make
such sales itself or license others to make them.
3.7 Franchisee will strictly comply with the requirements and
instructions of KFC regarding the use of the trademarks, trade names and
service marks in connection with the Approved Products and the Outlet.
The Franchisee acknowledges that the goodwill associated with KFC's
trademarks, service marks and trade names is and will remain the exclusive
property of KFC and that the Franchisee will derive no benefit from such
goodwill except through profit received from the operation or possible
sale of the Outlet during the License Term, which is subject to early
termination as set forth herein. Any enhancement of the goodwill
associated with KFC's trademarks, service marks and trade names during the
License Term will inure to the benefit of KFC except to the extent of such
profits, if any, realized by the Franchisee during the License Term,
following which no value shall be attributable to any goodwill of KFC's
trademarks, service marks and trade names acquired or enjoyed by the
Franchisee pursuant to this Agreement and all right to use KFC's
trademarks, etc. shall revert automatically to KFC at no cost to KFC.
3.8 KFC or any company affiliated with it may sell within the area
described in subsection 3.6, or grant franchises to others to sell,
through grocery stores or other quick-service restaurants or otherwise,
food products (other than chicken served in whole pieces) using the name
or likeness of Colonel Sanders and the trademarks historically associated
with the product "Kentucky Kandies", but which otherwise bear different
trade names, trademarks and service marks from those licensed hereunder.
KFC covenants, however, that it will not use, or permit the use of, the
name or the likeness of Colonel Sanders in connection with alcoholic or
tobacco products or poultry products other than Approved Products, or in
connection with quick-service restaurants other than Kentucky Fried
Chicken outlets, whether within or without the area described in
subsection 3.6.
4. New Agreement Upon Expiration. At the expiration of the term hereof,
Franchisee may extend this Agreement for successive ten (10) year periods,
provided that at the time of expiration of the term hereof or the then
current extended term:
(a) Franchisee shall not have failed to remedy any breach specified by
KFC in any notice then outstanding under subsection 17.3.
(b) Franchisee shall agree to make such capital expenditures as may be
reasonably required to renovate and modernize the Outlet and its signs and
equipment so as to reflect the image of Kentucky Fried Chicken outlets.
(c) If renovation and modernization of the Outlet is not possible or
feasible, Franchisee shall relocate the Outlet within the area described
in subsection 3.6 or such other area as may be approved by KFC in writing
in accordance with KFC's relocation procedures.
(d) Franchisee shall execute a new license agreement on the form then
being used by KFC, but without any increase in royalty fee or advertising
contributions or any change in renewal or assignment provisions or in the
protected territory provision contained in subsection 3.6.
(e) All monetary obligations owed to KFC and its subsidiaries and
affiliates must be current at the time of renewal.
(f) Franchisee shall pay to KFC $2,000, which amount will be adjusted to
reflect each 10% rise in the United States Department of Commerce
Composite Consumer Price Index (or the nearest comparable index should
that index no longer be prepared), hereinafter referred to as the
"Consumer Price Index," using June 1976 as the base period (such index
being 170.10), but in no event shall such amount exceed the renewal fee
then being provided for in contracts issued for new Kentucky Fried Chicken
franchises.
(g) Franchisee shall not have engaged in chronic repeated breaches of
this Agreement of a substantial nature within the preceding twenty-four
(24) months prior to renewal.
5. Compliance with Standards, Etc.
5.1 The Franchisee represents that the Outlet has in all respects been
constructed, established and prepared to conduct business in strict
compliance with all plans, specifications and requirements prescribed by
KFC, and that any material deviations from KFC's standard plans,
specifications, and requirements have been approved in writing by KFC. At
KFC's request made at any time within one year of the date of this
Agreement, the Franchisee will promptly correct any unapproved deviations.
5.2 The Franchisee shall, consistent with the terms of this Agreement,
diligently develop the business of the Outlet and use his best efforts to
market and promote the Required Products and the Optional Products which
are offered for sale at the Outlet.
5.3 During the License Term, the Franchisee will strictly comply with all
reasonable standards, specifications, processes, procedures, requirements,
and instructions of KFC regarding the operation of the business which now
exist or may be established from time to time, and Franchisee will take
such action and precautions as necessary to assure that:
(a) the Franchisee or a fully trained and qualified manager devotes his
full time to the supervision, management and operation of the Outlet.
(b) the Franchisee and employees at the Outlet attend and complete such
courses, programs and seminars at such locations, as KFC may from time to
time reasonably require, in order that such persons may be fully trained
and instructed on a continuing basis in various aspects of operating a KFC
outlet, provided that KFC shall not bear the salary, travel, hotel, meal
or other expenses of persons attending.
(c) all Approved Products offered for sale at the Outlet are prepared at
the Outlet for sale to customers at the Outlet, except that beverages,
"side items" or "fixin's," as authorized by KFC, may be prepared
elsewhere, but any such authorization shall be subject to change or
termination by KFC, in exercise of its reasonable business judgment, if it
is found by KFC that preparation elsewhere results in a lessening of the
high quality of food products required by KFC's specifications.
(d) each additional Required Product introduced into the franchised
system as provided in subsection 5.7, is offered for sale on a continuing
basis at the Outlet at the time and in the manner required by KFC.
(e) no sale of any product except Approved Products is solicited,
accepted or made at or from the Outlet, and that no products except
Approved Products are prepared at the Outlet, except when specifically
authorized in writing by KFC.
(f) the provisions of subsection 3.5 are adhered to.
(g) if requested by KFC on at least ninety (90) days' notice as part of a
general program or standardization effort by KFC, the marketing of any
Optional Product is discontinued, whereupon the discontinued product shall
cease to be an Approved Product, but Franchisee may continue to sell such
discontinued product with written approval of KFC, which approval shall
not be unreasonably withheld taking into consideration such factors as
Franchisee's investment in equipment used to prepare the Optional Product
and the potential loss in revenues to the Franchisee from discontinuing
the sale of such product.
(h) only signs and menuboards, advertising and promotional material,
equipment, supplies, uniforms, paper goods, packaging, furnishings,
fixtures, recipes, and food ingredients which meet KFC's standards and
specifications (as established from time to time) are used at the Outlet
or in connection with its business.
(i) all equipment, signs, menuboards, supplies and other items necessary
in connection with adding new Approved Products are acquired, installed
and utilized (and that the marketing of such new Approved Products begins)
at the Outlet as soon as possible consistent with the reasonable
requirements of KFC.
(j) equipment, signs, menuboards, supplies, and other items are added,
eliminated, substituted and modified at the Outlet as soon as practicable
in accordance with reasonable changes in KFC's specifications and
requirements.
(k) the Outlet and everything located at the Outlet are maintained in
first-class condition and repair and are kept clean, neat and sanitary;
the Outlet is adequately lighted and is operated in a clean, wholesome and
sanitary manner consistent with KFC's requirements; all maintenance,
repairs and replacements reasonably requested by KFC or needed in
connection with the Outlet are promptly made; and all employees are clean
and neat in appearance.
(l) no alterations of the Outlet affecting the image are made except at
KFC's request or with KFC's approval, and that any such alterations
strictly conform to specifications and requirements established or
approved by KFC.
(m) the Outlet and its business will comply with applicable laws,
ordinances and governmental rules, regulations and other requirements,
including but not limited to health and sanitation requirements, and that
KFC is advised promptly in the event of a conflict between this
requirement and any other requirement in or pursuant to this Agreement.
(n) such advertising materials as may be furnished to KFC or the National
Co-Op (hereafter defined) from time to time for use by the Franchisee are
used only in the manner and during the period specified by KFC or the
National Co-Op.
(o) the Outlet is open for business every day during the License Term
during the hours reasonably specified by KFC, except Christmas and
Thanksgiving and such days as the Outlet is closed for repairs pursuant to
Section 14 (Condemnation and Casualty).
(p) the employees, and the supplies and other items on hand at the
Outlet, are at all times sufficient to meet the anticipated volume of
business.
(q) all debts and taxes in connection with the Outlet and its business,
except those duly contested in a bona fide dispute, are paid when due,
including but not limited to debts payable to KFC and its affiliates.
(r) all necessary and appropriate measures are taken to avoid an
unsatisfactory or equivalent safety, sanitation or health rating at any
time from any governmental agency or authority, and that conditions or
practices disapproved by any such agency or authority are promptly
corrected except that, after consultation with KFC by Franchisee,
Franchisee may contest the action by such agency or authority as being
arbitrary, capricious, unfair and unwise.
5.4 In prescribing standards, specifications, processes, procedures,
requirements or instructions under subsection 5.3 or any other provision
of this Agreement, KFC shall take no part in determining the prices
charged by the Franchisee for products or services of any kind and shall
not have control over the day-to-day managerial operations of the Outlet.
5.5 KFC will deliver to the Franchisee a Confidential Operating Manual,
and the Franchisee will abide by and may rely upon the Confidential
Operating Manual, which shall be subject to and which shall be deemed to
include such reasonable supplements, revisions and later instructions as
may be issued from time to time by KFC. The Franchisee will treat the
Confidential Operating Manual and trade secrets and know-how of KFC as
confidential, and will not disclose any such information to anyone except
employees of the Franchisee as necessary for the proper operation of the
Outlet and except other persons authorized by KFC to receive such
information.
The Franchisee will take reasonable precautions to cause his employees to
keep such information confidential by entering into appropriate
agreements, in such form as approved by KFC, with those employees who have
access to such information. The Confidential Operating Manual and other
information furnished by KFC in connection with the business of KFC or the
Outlet will be and remain the property of KFC and, if in tangible form,
will be returned to KFC at the end of the License Term. The Franchisee
shall not copy, duplicate, record or otherwise reproduce all or any part
of the Confidential Operating Manual or any other material containing the
trade secrets or confidential information concerning KFC or its trademarks
or processes, and shall take all reasonable precautions to prevent his
employees from doing so.
5.6 KFC and its representatives shall have the right, during business
hours and at all other reasonable times, to enter and inspect the Outlet
and all other facilities used for the preparation, storage,
transportation, etc., of any Approved Products, to discuss with the
Franchisee or such other people as the Franchisee may designate,
concerning all matters that may pertain to compliance with this Agreement
and with standards, specifications, requirements, instructions and
procedures hereunder, to take photographs of the Outlet and such other
facilities, and to buy samples of food products and other items at the
Outlet and other points-of-sale. KFC and its representatives shall also
have the right, under the supervision of the Franchisee or his designee,
to collect samples at any other facilities under the control of the
Franchisee. The Franchisee will in all respects cooperate with KFC in its
exercise of rights under this subsection.
5.7 When an Optional Product is sold in the United States in stores owned
by two-thirds of the Kentucky Fried Chicken franchisees or when such
Optional Product is sold in the United States in three-fourths of the
Kentucky Fried Chicken stores franchised by KFC and owned by KFC and its
affiliates, then on advance notice of at least one year, KFC may specify
such Optional Product as a Required Product.
5.8 KFC shall not enforce against Franchisee the standards,
specifications, requirements, instructions and procedures set forth in
Sections 5 and 10 if they exceed the standards, specifications,
requirements, instructions and procedures enforced by KFC in Kentucky
Fried Chicken outlets owned and operated by KFC or its affiliates in the
market nearest the Outlet in which they have such outlets.
6. Maintenance and Upgrading of Outlet
6.1 Franchisee shall at all times comply, and cause the Outlet to comply
with all standards, specifications, processes, procedures, requirements
and reasonable instructions of KFC regarding the Outlet's physical
facilities, including the layout of furnishings and fixtures, and
facilities at which or by means of which the Franchisee is permitted by
KFC to store, handle, prepare or transport Approved Products or
ingredients to be used in preparing them.
6.2 Recognizing the value of uniform national standards to Franchisee,
KFC and the franchised system, Franchisee shall from time to time abide by
any reasonable requirement of KFC with regard to the remodeling and
upgrading of the Outlet to comply with standards then applicable to new
franchises and stores owned by KFC and its affiliates, provided, however,
that such requirements shall not impose an undue economic burden.
6.3 If any changes in or additions of equipment or changes in or
additions to the Outlet are required by KFC in connection with upgrading
or remodeling, the Franchisee will bear the entire cost thereof.
Similarly, Franchisee will bear the entire cost of adding equipment and
altering the Outlet for Optional Products which Franchisee desires to sell
or for Required Products which KFC requires Franchisee to sell pursuant to
subsection 5.7. KFC cannot foresee with precision what may become
Required Products in the future. Certain Optional Products may become
Required Products, and KFC is testing other food products which may become
Optional and then Required Products. Franchisee acknowledges that
possible additional investment may be called for pursuant to this
subsection.
6.4 KFC agrees that it will not enforce against Franchisee the provisions
of Section 6 if they exceed the reasonable remodeling or upgrading
standards that are applied to the Kentucky Fried Chicken outlets owned by
KFC or its affiliates in the market nearest the Outlet, in which they have
such outlets. In interpreting this subsection, the outlets of KFC or its
affiliates in such nearest market shall be considered as a whole so that
Franchisee may not deny his obligations under Section 6 by comparing the
Outlet to any single outlet of KFC or its affiliates in such nearest
market.
7. Services by KFC. The initial franchise fee and the royalties
hereunder are paid or payable for the License and not for services by KFC,
and any failure by KFC to provide services shall not excuse Franchisee
from paying the initial franchise fee or the royalties. KFC shall offer
to the Franchisee such initial and continuing services as KFC deems
necessary or advisable in connection with furthering the business of the
Franchisee and the KFC system and in connection with protecting the trade
names, trademarks, service marks and goodwill of KFC. Among such
continuing services shall be the furnishing of operating advice and
training at KFC's school or otherwise on a continuing basis through its
representatives; undertaking further refinement of products and equipment
and informing Franchisee of proven methods of quality control; informing
Franchisee of such engineering research and development which in KFC's
opinion may be beneficial to Franchisee's operations; recommending such
accounting and business procedures which KFC believes may be of value; and
scheduling and holding from time to time local, regional and national
meetings and seminars for the advancement and dissemination of its methods
in processing and marketing Approved Products. Although no charge is
presently made for services offered to franchisees generally, KFC may
charge for optional services which are in addition to the services
presently offered without charge. KFC expects to continue to offer
products for sale to its franchisees for use in their operations but is
not bound to do so, except for assuring (subject to causes or conditions
beyond KFC's control) a source of supply of items incorporating KFC trade
secrets which are essential in operating a KFC outlet.
8. Royalties
8.1 Franchisee shall pay to KFC royalties for the License at the rate of
4% of Gross Revenues (as defined in Section 9) for each month or partial
month that the store is in operation. Franchisee shall pay to KFC as a
minimum monthly royalty the sum of $600, said minimum to be adjusted for
every 10% increase in the Consumer Price Index, using June 1976 as the
base period (170.10), but in no event shall such minimum royalty exceed
the minimum royalty then being charged by KFC for new Kentucky Fried
Chicken franchises. If Franchisee is unable to operate from the Outlet
due to damage or loss to the Outlet caused or created by a casualty, act
of God or other condition over which Franchisee has no control, then the
minimum royalty referred to in the preceding sentence shall be waived,
provided, however, that such waiver shall not extend beyond the twelve-
month period commencing with the month the casualty occurs.
8.2 On or before the 20th day of each month, the Franchisee shall, with
or without notice from KFC, pay to KFC, or deposit in the mail addressed
for KFC, his royalty payments for the preceding month or partial month.
Each payment of royalties shall be accompanied by a statement as to the
relevant Gross Revenues, and the statement shall be in such form and
detail as may be furnished by KFC from time to time.
8.3 Although each failure to pay royalties when due will be a material
breach of this Agreement, to encourage prompt payment and to cover the
costs and expenses involved in handling and processing late payments, the
Franchisee shall also pay, upon demand, a late payment charge at the rate
of 1 1/2% of all royalties for each month or partial month cumulative
during which they are due and unpaid.
9. Gross Revenues
9.1 No mention of products or services in this section is intended to
mean or imply that such products or services are approved for sale at the
Outlet.
9.2 For purposes of this Agreement, Gross Revenues includes the total of
all monies and receipts derived from products prepared and services
performed at the Outlet, at special events or from catering and from all
sales and orders made, solicited or received at the Outlet or at special
events and from all other business whatsoever conducted at or from the
Outlet, whether such revenues are evidenced by cash, credit, checks, gift
certificates, scrip, food stamps, coupons (but see subsection 9.3(b)
below), services, property or other means of exchange, and whether such
sales are of food, beverages, tobacco products, vending machine items,
services, merchandise or products of any nature whatsoever.
9.3 However, Gross Revenues shall not include: (a) sales or merchants'
or other taxes measured on the basis of the gross revenues of the business
imposed by governmental authorities directly on sales and collected from
customers, provided the taxes are added to the selling price and are in
fact paid by the Franchisee to the appropriate governmental authorities,
or (b) promotional or discount coupons to the extent that the Franchisee
realizes no revenue therefrom through issuance, redemption or otherwise.
Cash refunded and credit given to customers, and receivables uncollectible
from customers, shall be deducted in computing Gross Revenues to the
extent that such cash, credit or receivables represent amounts previously
included in Gross Revenues on which royalties were paid.
9.4 Gross Revenues shall be deemed received by the Franchisee at the time
the products, merchandise or services from which they derive are delivered
or rendered or at the time the relevant sale takes place, whichever occurs
first. Gross Revenues consisting of property or services shall be valued
at the prices applicable, at the time such Gross Revenues are received, to
the products or services exchanged for such Gross Revenues.
10. Advertising
10.1 During the License Term, the Franchisee shall make such payments to
the KFC National Council and Advertising Cooperative Inc. (the "National
Co-Op") as shall be established by it from time to time, and shall spend
at least 3% of Gross Revenues on other advertising and marketing
activities, including participation in Approved Local Co-Ops, as more
fully provided in subsection 10.4 below. Franchisee shall submit all
advertising material, except material received from KFC or the National
Co-Op, to KFC's Legal Department 15 days prior to use and KFC shall have 5
working days to approve or disapprove the use, provided that if KFC takes
no action, Franchisee may use the material and provided further, that KFC
shall have no participation in establishing prices charged by the
Franchisee for products or services of any kind.
10.2 The Franchisee shall promptly join the National Co-Op and promptly
enter into with it, effective as of the date of this Agreement, an
Advertising Agreement in the form attached hereto (unless Franchisee shall
have already signed such an agreement for the Outlet). The Franchisee
shall, during the License Term, comply with all the terms of The
Advertising Agreement, maintain it in full force and effect, be and remain
a member in good standing of the National Co-Op, faithfully abide by its
rules and bylaws, and make payments to it in the amounts and at the times
established by it from time to time. Such payments shall be made with
respect to the Outlet and all other outlets which sell Kentucky Fried
Chicken and which are owned or controlled by or franchised to all or any
of the persons named herein as the Franchisee, or any person or persons
who control, are controlled by or are under common control with any person
or persons named herein as the Franchisee. The present National Co-Op
contribution rate is 2% subject to change in accordance with its bylaws.
Should the rate be changed to an amount exceeding 2%, then the amount to
be expended pursuant to subsection 10.3 below shall correspondingly
decrease so Franchisee will at no time be required by KFC to expend in
excess of 5% of Gross Revenues for advertising purposes. KFC will also
not require Franchisee to expend in excess of 5% of Gross Revenues for
advertising purposes pursuant to franchise agreements for other outlets to
which this section pertains. NOTE THAT THIS LIABILITY OF THE FRANCHISEE
TO CONTRIBUTE TO NATIONAL ADVERTISING EXTENDS TO OUTLETS OTHER THAN THE
ONE COVERED BY THIS AGREEMENT.
10.3 The Franchisee shall spend, during each full or partial calendar
year during the License Term at least 3% of Gross Revenues for such period
(subject to the provision set forth in subsection 10.2 above) on the
preparation, production, placement and dissemination of local advertising
of the Approved Products, all in a manner and using medial and materials
approved in advance by KFC. Such expenditures may include amounts paid to
Approved Local Co-Ops and monies expended in advertising and promotional
media such as television, radio, newspapers, magazines, billboards,
posters, handbills, direct mail, yellow pages, sports program booklet
advertising, collateral promotional and novelty items (e.g. matchbooks,
pens and pencils, bumper stickers, calendars) which prominently display
KFC's trademarks, advertising on public vehicles such as cabs and buses,
the cost of market research, the cost of producing materials necessary to
participate in these media, and agency commissions related to the
production of such advertising. Local advertising shall not include
payments to the National Co-Op nor payments in connection with permanent
on-premises signs, lighting, menus, menuboards, purchasing or maintaining
vehicles even though such vehicles display in some manner KFC's trademarks
(except the cost of the materials displayed are included), contributions
sponsorships (unless KFC's trademarks are prominently displayed by the
group or activity being sponsored), premium or similar offers such as
discounts, price reductions, special offers, free offers and sweepstake
offers (except that the media costs associated with promoting the premium
offers are included); employee incentive programs, and other similar
payments which KFC may determine in its sole discretion should not be
included in determining whether Franchisee has met his obligation to spend
3% of Gross Revenues for local advertising. Within sixty (60) days
following the close of the Franchisee's fiscal year, the Franchisee shall
pay to the National Co-Op, in addition to other payments to it, such
amount as may be necessary so that payments pursuant to this subsection
10.3 shall not be less than 3% of Gross Revenues for the preceding fiscal
year, unless he can demonstrate to KFC's satisfaction that sound business
judgment does not call for additional local advertising.
10.4 At the request of KFC, the Franchisee will promptly join, and during
the License Term faithfully participate in and make contributions to (at
rates and upon terms established from time to time by) one or more
Approved Local Co-Ops which, for purposes of this Agreement, are programs,
or groups or associations of operators of KFC outlets now or hereafter
from time to time designated and approved by KFC for the pooling of
resources to advertise or promote (or both) any of the Approved Products
in a locality or region designed by KFC for such purposes. The Franchisee
will subscribe to and abide by the bylaws and advertising agreements
adopted by such Approved Local Co-Ops.
The Franchisee may not be required to join more than one Approved Local
Co-Op if the contributions of the Franchisee to Approved Local Co-Ops
would exceed 3% of Gross Revenue solely by reason of belonging to more
than one such Co-Op. The Franchisee shall abide by all reasonable
determinations of an Approved Local Co-Op as to areas assigned to or
covered by it and as to allocations of program expenditures among its
participants based on relative media coverage within a given area. The
Franchisee's obligations hereunder shall not depend upon participation in
any Approved Local Co-Op by other KFC franchisees within the area designed
for the Co-Op. In the event of a dispute between two or more Approved
Local Co-Ops as to the extent of area coverage, KFC shall resolve the
dispute and assign the Outlet to one or more such Approved Local Co-Ops in
exercise of its reasonable business judgment.
Franchisee shall also join and faithfully participate in and make
contributions to Approved Local Co-Ops as may be designated by KFC from
time to time with respect to all other outlets which sell Kentucky Fried
Chicken and which are owned or controlled by or franchised to all or any
of the persons named herein as the Franchisee, or any person or persons
who control, are controlled by or are under common control with any person
or persons named herein as the Franchisee.
NOTE THAT THIS REQUIREMENT TO JOIN APPROVED LOCAL CO-OPS EXTENDS TO
OUTLETS OTHER THAN THE ONE COVERED BY THIS AGREEMENT.
10.05 No action taken by the National Co-Op or any Local Co-Op shall
diminish the Franchisee's obligations to KFC hereunder. The Franchisee's
obligations to the National Co-Op or to any Approved Local Co-Op shall be
for the benefit of, and may be enforced by, KFC, such Co-Op, or any
participant in such Co-Op.
11. Records and Audits
11.1 All Gross Revenues shall be recorded on cash registers. The
Franchisee shall, in a manner and form satisfactory to KFC, prepare on a
current basis (and preserve for no less than three years) complete and
accurate records concerning Gross Revenues and all financial, operating,
marketing and other aspects of the Outlet and the business conducted under
this Agreement, and maintain an accounting system which fully and
accurately reflects all aspects of the Outlet and such business. Such
records shall include but not be limited to books of account, tax returns,
daily reports, statements of Gross Revenues (to be prepared each month for
the preceding month), profit and loss statements (to be prepared at least
annually), and balance sheets (to be prepared at least annually).
Franchisee shall also submit to KFC current financial statements and such
other reports as KFC may reasonably request to evaluate or compile
research data on any aspects of the Outlet or its business.
11.2 From the date hereof until three years elapse following the end of
the License Term, KFC or its authorized agent shall have the right to
request, receive, inspect and audit, at all reasonable times, any or all
of the records referred to above wherever they may be located or at any
other mutually agreeable location. If any such inspection or audit
discloses a deficiency in the payment of any royalty, advertising or other
amount required to be paid under this Agreement, the Franchisee shall
immediately pay the deficiency in royalty to KFC and the deficiency in
advertising to the National Co-Op, provided the deficiency exceeds $50.
In addition, if the deficiency for any audit period equals or exceeds 2%
of the correct amount of royalties due, the Franchisee shall also
immediately pay to KFC the entire cost of such inspection or audit
(including but not limited to travel, lodging, meals, salaries and other
expenses of the inspecting or auditing personnel). For the purposes of
the preceding sentence, an audit period shall be each fiscal year of the
Franchisee and the current fiscal year of the Franchisee even if less than
a year. If the audit discloses an overpayment of royalties, KFC will
promptly pay the amount of such overpayment to Franchisee, provided that
the amount exceeds $50.
12. Purchase of Equipment, Supplies, Etc.
12.1 The Franchisee shall have the right to purchase directly from any
approved manufacturer or distributor the equipment, paper goods and other
products required by KFC to be utilized in the establishment or operation
of the Outlet.
12.2 KFC shall promptly (and in any event within 30 days) furnish to the
Franchisee at his request the then current standards and specifications
applicable to any equipment, supplies, trademarked paper goods or other
products required by KFC to be utilized in the establishment or operation
of the Outlet provided that KFC shall not be obligated to disclose any of
its trade secrets. In addition, KFC shall promptly (and in any event
within 30 days) furnish to the Franchisee at his request the names and
addresses of all manufacturers and distributors currently approved by KFC
from whom such equipment, supplies trademarked paper goods and other
products are available for sale to the Franchisee.
12.3 If the Franchisee desires to purchase the required products from a
manufacturer or distributor not then approved by KFC, the Franchisee shall
provide KFC with all information regarding such manufacturer or
distributor reasonably requested by KFC, and where appropriate, the
manufacturer or distributor may be required to provide KFC with samples of
the products that the Franchisee desires to purchase.
12.4 Any tests reasonably required by KFC to determine whether the
products meet current KFC standards and specifications shall be performed
by or under the direction or supervision of KFC but at the cost of the
manufacturer or distributor. On the completion of any such tests and any
other procedures reasonably required by KFC, and on completion of KFC's
determination as to whether the manufacturer or distributor possesses
adequate capacity and facilities to supply the Franchisee's needs in the
quantities and at the times and with the reliability requisite to an
efficient operation, KFC shall promptly notify the Franchisee and the
manufacturer or distributor whether KFC approves the manufacturer or
distributor as a source of supply of the products involved to the
Franchisee; and, if not, KFC shall advise the Franchisee and the
manufacturer or distributor of the basis for its decision. KFC shall not
be required to approve sources of equipment, paper goods or other products
which do not meet KFC's standards and specifications or which constitute
or embody seasoning or other trade secrets of KFC. KFC shall not be
arbitrary or capricious in establishing applicable standards and
specifications.
12.5 KFC may from time to time review the qualify of such
equipment, supplies, paper goods and other products produced or supplied by
approved manufacturers and distributors and their capacity and facilities,
and shall have the right to monitor the production, use and ultimate
disposition of items bearing KFC's trademarks. On the basis of such
review and monitoring, KFC may remove such manufacturers or distributors
from the list of approved sources. In such event, KFC shall promptly
advise Franchisee of such action.
13. Insurance. At all times during the License Term, the Franchisee
shall maintain in effect such insurance as may be required by the terms of
any lease or mortgage covering the Outlet, and in any event shall
maintain:
(a) Fire, extended, coverage and vandalism and malicious mischief at 80%
of actual cash value of building, contents and improvements.
(b) Employer's liability and workmen's compensation insurance as
prescribed by applicable law, and
(c) Comprehensive general liability and automobile insurance on an
occurrence basis naming KFC as an additional insured and underwritten by
any reputable insurance carrier approved by KFC, covering the following
risks in no less than the following amounts, subject to reasonable increase
by KFC after five years based on inflation or future experience with
claims asserted against food outlets:
Type of Risk Limit of Liability
Bodily injury to or death $300,000 each accident
of one or more persons or each person
Property damage or destruction $100,000 each accident
Public and product liability $300,000 each occurrence
Simultaneously herewith, annually hereafter and each time a change is made
in such insurance or insurance carrier, the Franchisee shall furnish KFC
with certifications by the insurance carrier evidencing the term and
coverage of the insurance in force and the persons insured. Such
certificates shall provide that the insurance coverage will not be
canceled, altered, or permitted to lapse or expire without 30 days' advance
written notice to KFC. KFC, or its insurer, shall have the right to
participate in discussions with the Franchisee's insurance company or any
claimant (in conjunction with Franchisee's insurance company) regarding
any product liability claim and the Franchisee agrees to adopt KFC's
reasonable recommendations to his insurance carrier regarding the
settlement of any such claims.
14. Condemnation and Casualty.
14.1 The Franchisee shall give KFC notice of any proposed taking through
the exercise of the power of eminent domain, at the earliest possible
time. If the Outlet or a substantial part thereof is to be taken, the
Outlet may be relocated within the area specified in subsection 3.5 or
elsewhere with KFC's written approval in accordance with KFC's relocation
procedures. If such relocation is authorized by KFC and the Franchisee
opens a new outlet at such other location in accordance with KFC's
specifications within one year of the closing of the old outlet, the new
outlet will thenceforth be deemed to be the Outlet licensed under this
Agreement. If such a condemnation takes place and a new Outlet does not,
for whatever reason, become the Outlet under this agreement in strict
accordance with this paragraph, then the License shall terminate forthwith
upon notice thereof by KFC to the Franchisee.
14.2 If the Outlet is damaged by fire or other casualty, the Franchisee
will expeditiously repair the damage. If the damage or repair requires
closing the Outlet, the Franchisee will immediately notify KFC, will
repair or rebuild the Outlet in accordance with KFC's specifications, and
will reopen the Outlet for continuous business operations as soon as
practicable (but in any event within one year after closing of the
outlet), giving KFC advance notice of the date of reopening. If the
Outlet is not reopened in accordance with this paragraph, the License will
forthwith terminate.
14.3 The License Term shall not be extended by any interruption in the
Outlet's operations except by an act of God that results in the Outlet
being closed not less than 60 days nor more than 365 days. Franchisee
must apply for any such extension within sixty (60) days following the
reopening of the Outlet. Except as provided in subsection 8.1, no event
during the License Term shall excuse the Franchisee from paying royalties
or minimum royalties as provided herein.
15. Restrictions on Certain Activities.
15.1 During the License Term, the Franchisee shall not (without the prior
written consent of KFC) directly or indirectly, through corporation, or
through partnerships, trusts, associations, joint ventures or other
unincorporated businesses, perform any services for, engage in or acquire
be an employee of, have any financial, beneficial or equity interest in,
or have any interest based on the profits or revenues of, any business
similar to the Outlet, except for other outlets franchised from KFC or its
affiliates. For one year following the License Term, the same
restrictions shall apply but only with respect to businesses operated
within ten miles of the Outlet. For purposes of this paragraph, a
"similar business" is a business which sells or prepares fried chicken or
other products similar to other Required Products or in which know-how
acquired by KFC franchisees could be used to the disadvantage of KFC or its
other franchisees. Nothing in this paragraph shall prevent the Franchisee
and his family, collectively from owning not more than a total of 10% of
the stock of a company engaged in a similar business, the stock of which
is publicly traded at the time of such ownership.
15.2 If any court or other tribunal having jurisdiction to determine the
validity or enforceability of the preceding subsection determines that,
strictly applied, it would be invalid or unenforceable, the definition of
"similar business" and the time and geographical provisions of the
preceding subsection shall be deemed modified to the extent necessary (but
only to that extent) so that the restrictions in that subsection, as
modified, will be valid and enforceable.
15.3 Franchisee covenants that as a KFC franchisee, he will have access
to KFC's trade secrets and confidential practices and therefore, is in a
unique position to use the special knowledge he will have gained while a
franchisee. Franchisee acknowledges that a breach of the covenants
contained in Section 15 will be deemed to threaten immediate and
substantial irreparable injury to KFC giving KFC the right to obtain
immediate injunctive relief without limiting any other rights or remedies
of KFC.
16. Assignment
16.1 General. None of the Franchisee's rights under this Agreement, all
of which are personal in nature, may be the subject of any pledge, lien,
levy, attachment, or security interest or arrangement, or acquired through
execution, foreclosure, or like action or event. Without KFC's prior
written consent and compliance in all other respects with the terms in
this Section, none of the Franchisee's rights or obligations under this
Agreement are assignable or transferable. Any purported transaction,
interest or action contrary to this Section will be a breach of this
Agreement and will be void.
Upon and after each valid assignment of the License pursuant to this
Section 16, the assignee or assignees shall be deemed to be the Franchisee
hereunder and shall be bound by and liable for all existing and future
obligations of the Franchisee. No stockholder in any corporation which
becomes the Franchisee shall have any rights in or under this Agreement by
reason of his stock ownership, and the name of such corporation shall not
include any of the names, trademarks, or service marks of KFC, without
KFC's prior written consent.
16.2 Approved Assignments and Transfers. This Agreement may not be
assigned or transferred, whether by sale, by death of Franchisee, or
otherwise, except:
(a) to a corporation in which the Franchisee is the 'Control Person,' or
(b) to an individual who is determined by KFC to meet the requirements of
an individual assignee or transferee under subsection 16.3(b) below; or
(c) to a corporation in which the 'Control Person' is determined by KFC to
meet the requirements of a 'Control Person' under subsection 16.3(b)
below.
Any change in the 'Control Person' thereof shall be deemed to be a
transfer for purposes of this subsection 16.2.
If the initial Franchisee named on page 1 hereof is a corporation, an
assignment of this Agreement shall be deemed to have been made to such
corporation and a 'Control Person' shall be established for such
corporation as hereinabove provided.
As used in this Agreement, the term 'Control Person' means the individual
who has the authority to, and does in fact, actively direct the business
affairs of a corporation with respect to the Outlet. Such authority may
arise by reason of the ability to vote a majority of the voting stock of
the corporation, by contract, or as otherwise may be determined by KFC.
16.3 Conditions to Assignments and Transfers.
(a) No assignment or transfer of this Agreement shall be approved by KFC
unless and until all accrued obligations of Franchisee to KFC under this
Agreement shall have been satisfied in full. KFC may conduct an
investigation and audit under Section 11 (Records and Audits) in order to
determine the extent of accrued obligations.
(b) A proposed 'Control Person' or a proposed individual assignee or
transferee must demonstrate to KFC's satisfaction that he meets in all
respects KFC's high standards applicable to new franchisees regarding
experience in the food business, personal and financial reputation and
stability, willingness and ability to devote adequate time and best
efforts to the operation of the Outlet, and such other criteria and
conditions as KFC may reasonably apply in evaluating new franchisees. KFC
must be provided such information about the proposed individual as it may
reasonably require.
(c) A proposed assignee or transferee must agree in a writing
satisfactory to KFC to assume all of the obligations of Franchisee under
the Agreement and demonstrate to KFC's satisfaction that he meets in all
respects KFC's standards applicable to new franchisees regarding financial
resources. In addition, the proposed assignee or transferee (or its
'Control Person,' if the proposed assignee or transferee is a corporation)
must meet the requirements of a 'Control Person' Specified in Clause (b)
above.
16.4 Anything herein to the contrary notwithstanding, no assignment of
the franchise or of a majority of the capital stock of a corporate
franchisee shall be made for value to any person other than the
Franchisee's relatives by blood or marriage unless and until (a) the
parties to the proposed transaction have entered a binding agreement with
respect thereto, subject only to the rights of KFC hereunder, (b) KFC has
been furnished a copy of the said binding agreement, and (c) KFC has been
offered in writing a 30 day period in which to acquire the said franchise
or capital stock upon the same or equivalent terms and conditions
specified in the said agreement.
The Franchisee will advise each prospective transferee of this provision
and the other terms of this Agreement.
16.5 Upon any transfer or assignment of this Agreement, (other than a
transfer deemed to occur upon a change in the Control Person), Franchisee
shall pay to KFC the sum of $2,000 as an assignment expense charge;
provided, however, that if several assignments are made simultaneously, to
the same party, the aggregate assignment expense charge will be reduced by
KFC to a reasonable amount. The assignment expense charge shall be $1,000
when a transfer to an existing Kentucky Fried Chicken franchisee occurs.
The assignment expense charge shall be adjusted to reflect any 10%
increase in the Consumer Price Index using June 1976 as the base period
(170.10).
17. Termination of License.
17.1 Termination by Notice from Franchisee. If the Franchisee desires to
permanently close the Outlet and cease doing business, he may terminate
the License by giving 30 days advance notice to KFC, provided the Outlet
is permanently closed simultaneously with such termination of the License.
17.2 Termination by KFC without Notice. Unless KFC promptly after
discovery of the relevant facts notifies the Franchisee to the contrary in
writing, the License will immediately terminate without notice (or in the
event notice is required by law, immediately upon the giving of such
notice or at the earliest time thereafter permitted by applicable law) in
the event that:
(a) the Franchisee is adjudicated bankrupt, or files any petition or
pleading under Chapter XI of the Federal Bankruptcy Law or any other state
or federal bankruptcy or insolvency laws, or an involuntary petition is
filed with respect to the Franchisee under any such laws and is not
dismissed within 30 days after it is filed, or a permanent or temporary
receiver or trustee for the Outlet or all or substantially all of the
Franchisee's property is appointed by any court, or any such appointment
is acquiesced in, consented to, or not opposed through legal action, by
the Franchisee, or the Franchisee makes a general assignment for the
benefit of his creditors or makes a written statement to the effect that
he is unable to pay his debts as they become due, or a levy of execution
is made upon the Franchise, or an attachment or lien remains on the Outlet
for 30 days unless the attachment or lien is being duly contested in good
faith by the Franchisee and KFC is so advised, or
(b) the Franchisee loses possession or the right of possession of all or a
significant part of the Outlet through condemnation or casualty and the
Outlet is not relocated or reopened as provided in Section 14
(Condemnation and Casualty), or
(c) the Franchisee contests in any court or proceeding the validity of, or
KFC's ownership of, any of the trademarks, service marks or other rights
licensed hereunder, or
(d) a breach of Section 16 (Assignment) occurs, or
(e) if the Franchisee is a corporation any action is taken which purports
to merge, consolidate, dissolve or liquidate the Franchisee without KFC's
prior written consent.
17.3 Termination With Notice from KFC. The License will terminate on
notice in certain circumstances as provided in Section 14 (Condemnation
and Casualty). The License will terminate on the termination date
specified in any notice by KFC to the Franchisee (without any further
notice of termination unless required by law), provided that (i) the
notice is hand-delivered or mailed at least 30 days (or such longer period
as may be required by law) in advance of the termination date, (ii) the
notice reasonably identifies one or more breaches or defaults in the
Franchisee's obligations or performance hereunder, (iii) the notice
specifies the manner in which the breach(es) or default(s) may be
remedied, and (iv) the breach(es) or default(s) are not fully remedied
before, and as of, the termination date. The period given to remedy
breaches and defaults shall, if permitted by law, be 10 days instead of 30
days if the Franchisee shall have engaged in repeated breaches or defaults
of this Agreement within the then preceding 24 months for which he shall
have received notice of termination and termination failed to take effect
because the breaches or defaults were remedied.
18. National Franchisee Advisory Counsel. KFC will encourage the
continuance of the Kentucky Fried Chicken National Franchisee Advisory
Council (now incorporated within the National Co-Op) and will urge such
Council to maintain in operation procedures whereby Franchisee may, as an
absolute right, submit to Council members any matter to which, in any
Council member's reasonable judgment, KFC should have, but has not,
responded through normal channels. KFC will respond with reasonable
promptness to any such matter which the Council member forwards to KFC,
stating its position on all such matters, and on any recommendations made
by a Council member thereon, together with a full and complete written
explanation of the reasons for KFC's position. KFC shall assist the
Council in establishing procedures for submission to KFC of matters of
general interest to franchisees for discussion with, and investigation and
consideration by, KFC.
19. Right to Apply for New Franchised Outlets. Before permitting the
establishment of any new franchised outlet (defined below) at a location
closer to the Outlet than to any other franchised outlet (except pursuant
to commitments made before the Effective Date of this Agreement), KFC
shall be obligated to give Franchisee 30 days prior written notice of such
proposed action. During such 30-day period, Franchisee may apply to KFC
for a franchise to operate an outlet at such proposed new location and KFC
shall negotiate in food faith with Franchisee regarding said application,
taking into consideration all relevant factors, including, without
limitation: (a) the established past and present operational performance
and financial capacities of Franchisee, (b) whether he is currently in
compliance with financial and other obligations to KFC and under this and
other franchise agreements, and (c) efforts of Franchisee that have
contributed to the development o consumer demand for Kentucky Fried
Chicken locally and elsewhere. As used herein "new franchised outlet"
means an outlet not previously in existence, whether franchised or owned
by KFC or its affiliates, and which will not be owned by KFC or its
affiliates.
20. Miscellaneous
20.1 No Agency, Etc. The Franchisee shall neither have nor exercise any
authority, express, implied, or apparent, to act on behalf of or as an
agent of KFC or any of its affiliates or subsidiaries for any purpose, and
shall take no action which might tend to create an apparent employer-
employee or agency relationship between KFC and the Franchisee. No
fiduciary relationship exists between KFC and the Franchisee. The
Franchisee is, and shall remain, an independent contractor responsible for
all obligations and liabilities of, and for all loss or damage to, the
Outlet and its business and for all claims and demands based on damages or
destruction of property or based on an injury, illness or death of any
person or persons, directly or indirectly arising from or in connection
with the operation of the Outlet. KFC shall neither have nor exercise the
right to control the day-to-day managerial operations of the Outlet or to
manage the business of the Outlet or to hire, fire, or discipline persons
employed by the Franchisee or at the Outlet.
20.2 No Conflict with Other Agreements. The Franchisee represents that he
is not a party to or subject to agreements which might conflict with the
terms of this Agreement and agrees not to enter into any such agreement
during the License Term.
20.3 Cost of Enforcement. If KFC institutes and prevails entirely in any
action at law or in equity against the Franchisee based entirely or in
part on the terms of this Agreement, KFC shall be entitled to recover, in
addition to any judgment entered in its favor, reasonable attorney's fees,
court costs and all of KFC's expenses in connection with the litigation.
If the Franchisee prevails entirely in the claim instituted by KFC, he
will be entitled to such fees, costs and expenses. If neither side
prevails entirely, each will bear his own costs.
20.4 Non-Waiver. No failure, forbearance, neglect or delay of any kind
or extent on the part of KFC in connection with the enforcement or
exercise of any rights under this Agreement shall affect or diminish KFC's
right to strictly enforce and take full benefit of each provision of this
Agreement at any time, whether at law for damages, in equity for
injunctive relief of specific performance, or otherwise. No custom,
usage, concession or practice with regard to this Agreement, the
Franchisee or KFC's other franchisees shall preclude at any time the
strict enforcement of this Agreement (upon due notice) in accordance with
its literal terms. No waiver by KFC of performance of any provision of
this Agreement shall constitute or be implied as a waiver of KFC's right
to enforce such provisions at any future time.
20.5 Scope of Agreement, Changes, Consents, Etc.. This Agreement
constitutes the entire understanding and agreement of the parties
concerning the outlet and supersedes all prior and contemporaneous
understandings and agreements of the parties, whether oral or written,
pertaining to the Outlet, except for any express obligations of the
Franchisee under the franchise option agreement for the Outlet and except
for any written "master" agreement that may be in force between KFC and
the Franchisee. No interpretation, change, termination or waiver of any
provision hereof, and no consent or approval hereunder, shall be binding
upon the other party or effective unless in writing and signed by
Franchisee and KFC's President, Vice President in charge of franchising or
franchise services or General Counsel, except that a waiver need be signed
only by the party waiving.
20.6 Severability. All provisions of this Agreement shall be severable
and no such provision shall be affected by he invalidity of any other such
provisions to the extent that such invalidity does not also render such
other provision invalid. In the event of the invalidity of any provision,
this Agreement shall be interpreted and enforced as if all provisions
thereby rendered invalid were not contained herein.
20.7 Trademark Infringement. Franchisee shall immediately inform KFC of
any suspected or known infringement of or challenge to KFC's trademarks
and systems by others and assist and cooperate with KFC in taking such
action at KFC's own expense as KFC in its sole discretion deems
appropriate.
20.8 governing Law. This Agreement has been made and accepted in
Kentucky, and it shall be interpreted in accordance with and governed by
the laws of the State of Kentucky and any applicable state franchise laws.
20.9 Notices. All notices and other communications provided for herein
must be in writing and shall be sufficiently given if delivered in person
or mailed by certified or other receipted mail, if to the Franchisee, at
his address shown on page 23 or, if to KFC at Post Office Box 32070,
Louisville, Kentucky, 40232, Attention: Vice President-Franchising.
Either party, by such notice, may change the address to which notices
shall be sent. Notices delivered in person shall be deemed given when
delivered and mailed notices shall be deemed given when mailed. If a
corporation or more than one individual is in the Franchisee, then the
Franchisee will authorize one natural person as correspondent with
authority to bind Franchisee.
20.10 Certain References. References to weeks and months mean calendar
weeks and calendar months. References to persons mean legal entities as
well as natural person. Whenever the pronoun "he" or "his" is used
herein, it is understood that such usage is the common gender and refers
to masculine, feminine and neuter genders an also singular and plural.
21. Certain Representations by the Franchisee. The Franchisee represents
that:
(a) the Franchisee received a copy of the form of this Agreement at least
15 working days before signing it and has had ample opportunity to consult
with his attorney with respect thereto, and
(b) no representation has been made by KFC as to the anticipated
profitability of the Outlet, and
(c) before signing this Agreement, the Franchisee either had experience
working in a KFC outlet or investigated KFC and outlets franchised by KFC
and had ample opportunity to contact existing KFC franchisees.
IN WITNESS WHEREOF, the parties hereto set their hands and seals, in
duplicate, the day and year in this instrument first above written.
Attest: KFC CORPORATION
________________________________ BY_______________________________
Assistant Secretary Vice President
The address of Franchisee is: