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EXHIBIT 10.6
This Area Development Agreement is made by and between,
JUTLAND FOOD GROUP, INC.
9 LAW DR.
FAIRFIELD, NJ 07006
the Company,
and,
Izak Lieber
2415 Waterfall La.
Columbus, OH 43209
The Franchisee;
This Agreement describes a business relationship between the parties by which
the Franchisee will become an Area Developer responsible for the expansion of
the Company's bagel chains in a specific area. It is an Amendment to a
Franchise Agreement executed by the parties on March 13, 1995, and is intended
to expand the relationship described in that Agreement. In addition to the
terms and conditions outlined in the franchise agreement, the parties agree to
the following terms and conditions under which franchisee will operate as Area
Developer and exclusive representative of the company. Other than as
expressly outlined in this addendum, all terms and conditions of that
agreement remain in effect.
1. Nature of Representation
Subject to the mutual performance criteria and other terms and conditions
outlined in the franchise agreement and this addendum, Franchisor hereby
grants to Franchisee the sole and exclusive right to represent Franchisor in
the development of the company's bagel chains in the State of Ohio. During
the term of this agreement the Company shall be prohibited from developing its
bagel chains or pursuing any aspect of the retail or wholesale bagel business,
other than through Franchisee; but the Company may continue to operate its own
Company owned store in Columbus, Ohio.
This Agreement shall apply to any bagel concept acquired or developed by the
Franchisor, and to its successors and assigns.
2. The Territory, Development Schedule, and Fee
Franchise shall operate as Area Developer for the State of Ohio, and agrees to
develop a minimum number of stores within the territory as outlined int he
development schedule below.
From the date of the execution of this agreement to:
the end of total stores opened and operating
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9 months 2
18 months 5
24 months 6
2
36 months 9
48 months 11
60 months 14
thereafter not less than 15
All stores opened and operating in the territory as of the above dates,
whether owned by Franchisee or by a sub Franchisee, and including any stores
opened as of the execution of this Agreement, shall count in the maintenance
of the development schedule.
Franchise acknowledges that the continuance of this exclusive rights to
represents the company is expressly dependent on the maintenance of this
development schedule. Failure to comply with this schedule for any reason,
other than the failure of the Company to maintain a current Uniform Franchise
Offering Circular, shall cause Franchisee to forfeit his right of exclusive
representation.
Franchisee agrees to purchase the rights of the above territory by the payment
of an Area developer fee in the amount of $160,000 payable as follows:
Upon the execution of this agreement, a total of $90,000; the balance to
be paid by the Company withholding from Area Developer, 50% of all
compensation due Area Developer as described in paragraph 3 below.
In the event Area Developer fails to maintain the store development schedule
outlined above, the Company shall have the right to cancel Area developer's
exclusive relationship with the Company; such cancellation to be effective
immediately upon receipt by Area developer of written notice of such
cancellation by Franchiser. Such cancellation shall result in the
cancellation of Area Developer's exclusive relationship with the Company, a
forfeiture of Area Developer's right to sell franchises; but shall not cancel
Area Developers right to continue to open stores for its own account by the
execution of a standard franchise agreement with the Company, and shall not
cancel Franchisee's right to receive compensation for continuing to provide
supervision to stores existing at the time of such cancellations, (including
unopened stores for which the franchise fee has already been paid.)
3. Rights and Obligations of Area Developer, Compensation
Franchisee, as Area Developer, shall have the exclusive right to develop the
territory for the company, including the right to assist the company in
locating other franchisees, who shall become sub franchisees of Area
Developer/
For additional stores developed within the territory after the establishment
of franchise's initial store, and in accordance with procedures established by
the Company, Area Developer shall be responsible for assisting sub franchisees
in the building and opening of stores, the training of store managers and sub
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franchisees; and shall further be responsible for the monitoring of sub
franchisee's compliance with all franchise agreements, company manuals, and
operating procedures.
Area Developer's compensation for providing assistance in the sale and
development of franchised stores, and for monitoring the performance of sub
franchises, shall consist of 50% of all franchise fees and franchise royalties
received by the company from the territory, such compensation to be paid to
Area Developer within 20 days of receipt by the Company. Such compensation
includes franchise fees and franchise royalties collected by the Company on
stores owned and operated by Area Developer, and any stores opened as of the
date of this Agreement.
For stores owned by the Area Developer for its own account, the net franchise
royalties shall be forwarded to Franchisor; for stores owned by sub
franchisees, the full royalty payments shall be forwarded to the Franchisor,
who shall remit Area Developer's share within 20 days of receipt by
Franchisor.
Area Developer shall not be entitled to any portion of advertising or
promotional fees collected by the Company, or to any portion of other earnings
of the company, other than as expressly denoted above.
4. Supply of Bagels
With respect to the supply of bagels to stores operating under the Company's
Sammy's New York Bagels chain, the parties area that the Company will supply
bagels to all stores at a price of .11 per bagel including delivery.
In addition, for the purpose of supplying the Sammy's stores in Ohio directly
from his own facility, Area Developer may build a commissary for the purpose,
providing the following conditions are met:
Area Developer is in compliance with all Area Developer and store
franchise Agreements with the Company;
The commissary is built to the Company's specifications, including
the Company's requirements concerning the proper equipment and procedures;
The commissary is built and operating in a manner consistent with
the Kof K Kosher certification, and the costs of obtaining and maintaining
such kosher certification are paid by Area developer.
In the event the above conditions are met, Area Developer may build a bagel
producing commissary in lieu of purchasing bagels from the Company.
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5. Franchise and Advertising Fees
For the first six Sammy's stores built by Area Developer for his own account,
the Company agrees that the franchisee fee will be reduced to $15,000, and
that Area Developer will be entitled to 50% of that as Area Developer
compensation.
Notwithstanding any other provision to the contrary, each store in the
territory, whether owned by Area Developer or a sub Franchise, shall
contribute 1% of gross sales to the Company's national advertising and
promotional fund. In addition, the Area Developer may, with the approval of
75% of the sub franchisees in any specific market as defined by the national
ADI, establish a regional advertising cooperative, to which all stores will
contribute an additional 1% of gross sales.
In the State of Ohio, Franchisor agrees not to change the Franchise Fee or
Franchise royalty now charged pursuant to its store Franchise Agreement
without the consent of Area Developer.
6. The Company's Existing Store
The parties acknowledge that the Company now operates a retail store in
Columbus, Ohio, which shall be including in the provisions of this Agreement.
It shall count towards the fulfillment of Area Developer's store development
schedule, Area developer shall have the obligation to supervise the store and
shall receive his standard compensations for such supervision; further, the
Company agrees that it shall not use said store for the establishment of
wholesale bagel sales, and is prohibited from opening and additional stores in
Ohio, during the term of this Agreement.
7. Termination
Termination of this Area Development Agreement shall result in the forfeiture
by Area Developer of its exclusive relationship with the Company, and the
company shall have the right, effective immediately after providing written
notification of such cancellation, of marketing franchises on its own or
through other agents or representatives as it may chose; but such cancellation
will not eliminate Area Developer's obligation to continue with its service
and supervisory responsibilities with respect to stores established prior to
such cancellation. Provided Franchisee continues to provide such services
satisfactorily, Franchise shall continue to receive its pro rata portion of
royalties from such stores, including stores not open as of the date of
cancellation, provided such stores have executed a valid franchise agreement
and fully paid the appropriate franchise fee.
8. Regulatory Responsibility
The parties agree that in carrying out his responsibilities as Area Developer,
Area Developer shall operate solely as an agent and representative of
Franchiser, and Franchiser shall be solely responsible for maintaining all
regulatory aspects of franchising, including, but limited to maintaining a
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current Uniform Franchise Offering Circular. Franchiser agrees to indemnify
and hold harmless Franchisee and assigns from any act arising from
Franchiser's failure to maintain necessary franchise documents.
9. Assignability
Franchisor agrees that Area Developer may assign this Agreement to a corporate
or partnership entity of his choosing, without the imposition of any transfer
fee, providing that each shareholder or partner of such entity agrees in
writing to the non compete, confidentially, and other personally binding
provisions of this Agreement and the Franchise Agreement.
10. Other Terms and Conditions
All other terms and conditions of the store franchise agreement of which is
addendum is part, expressly including, but not limited to, covenants not to
compete, use of trademarks and other proprietary information, and requirements
to follow the Company's operating procedures, and recipes, are also a part of
the Franchisee's agreement to serve as Area Developer under the terms of this
addendum.
The Company acknowledges that for each individual store franchise in Ohio,
whether operated by Area Developer or a third party, the Company is
responsible for the payment of any monthly fee required for the maintenance of
the Kosher supervision of the store.
All terms of that Franchise Agreement not expressly modified by this Agreement
shall have the same meaning as in the Franchise Agreement, unless expressly
modified by this Area Developer Agreement, the terms and provisions of that
Agreement shall govern the rights and obligations of the parties, and the Area
Developer Agreement and the Franchise Agreement shall be construed as one
instrument.
Signed this 13th day of March, 1996.
/s/ ANDREW THORBURN /s/ [SIG]
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Andrew Thorburn Witness
Jutland Food Group, Inc.
/s/ [SIG] /s/ [SIG]
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Area Developer Witness
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As previous principals of Sammy's, we hereby individually acknowledge our
Agreement with the provisions of this Area Developer Agreement.
/s/ ARTHUR TURKEL /s/ [SIG]
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Arthur Turkel Witness
/s/ SAM PULLANO /s/ [SIG]
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Sam Pullano Witness