Article 6. FRANCHISEE’S FEES AND OTHER PAYMENTS
6.1 Initial Franchise Fee. $100.00
6.2 Monthly Service Fee and Minimum Payment. In consideration of the franchise granted, you are required to pay me a continuing Monthly Royalty Fee of $25.00 for every $100k of annual gross sales for each restaurant that you own under Freakie Fries during the term of the franchise agreement. This Fee is due and payable by the 10th calendar day of each month. This Fee is uniform for all franchisees.
6.3 Gross Sales Defined. The term “gross sales” is defined to include all sums or things of value received by you in and from your business from all sales of services, goods, and products whether for cash, check, credit, barter or otherwise without reserve or deduction for inability or failure to collect same including, without limitation, such sales and services where the orders thereof originated at or accepted by you at one location but delivered or performance thereof made from or at any other location. Gross sales do not include refunds to customers or the amount of any sales taxes or any similar taxes collected from subscribers to be paid to any federal, state or local taxing authority. All such items, including non-collectible accounts which are claimed as deductions to gross sales, must be supported by proper documentation.
6.4 Local Advertising and Possible Cooperatives. You shall also be required to spend a minimum percentage of your monthly gross sales on local advertising enhancing the reputation of your service on a local level. The amount will be according to a majority vote of the Freakie Fries Franchise Association, but I will start it at $25. per month for every 100k annual gross. All local advertising must be approved by me until The Freakie Fries Franchise Association elects a board of directors to assume that task. You are required to substantiate the minimum advertising required by supplying such written information as we may require on a weekly, monthly, quarterly, annual or other basis.
The Association may establish areas of local or regional cooperative advertising and all franchisees are required to become active members with maximum contributions determined by a majority vote of the cooperative members but, as previously mentioned, in no event less than $25. per month for every 100k annual gross. Once an advertising cooperative is established, all participating franchisees will contribute their fee to the cooperative fund as managed by at least one person chosen by each cooperative with The Association's approval. A regional cooperative must have a minimum of two (2) franchisees at all times in order to qualify for approval as a cooperative by us.
All advertising by you shall first be approved by us in writing, and our consent will not be unreasonably withheld. Failure to participate in such cooperative advertising shall be deemed cause for termination.
Statewide and nationwide advertising will be implemented when appropriate and will be handled in the same manner as above, by majority vote and with an established minimum.
6.5 Transfer Fee. None, except that all training fees for new persons will be at their expense and the amount of training will be determined by The Association.
6.6 Renewal Fee. None, and the term is indefinite but conditional to meeting minimum standards as set by The Association.
6.7 Yellow Page Advertising by Franchisee. At your discretion, unless The Association, through majority vote deems it necessary. For example, in conjunction with the other franchisees in your area, whereby you would be obligated to go along and pay your share of the ad with the others in your area.
This, according to our specifications as to copy and size, which shall be a minimum of a single column ad measuring approximately one and one-half inches by one and three quarter inches in such directory. This also will be determined by majority vote.
6.8 Training Expenses. The amount according to a majority vote by the Association, the Franchisee pays all expenses. You are required to pay all personal expenses for yourself and/or your employee(s). Special or additional training programs may be implemented by the Association at the special request of you, but at our sole discretion, to help you effectively succeed in the franchised business where we deem a particular franchisee or franchisees are in need of such training. The expenses for special or additional training programs will be borne by you including all expenses for instructors, facilities and training manuals in addition to you, or your designees’s personal expenses including travel, meals or lodging. These expenses will not be uniform, but will vary according to your location or in relation to the training facilities and other variables
To start, the nearest Freakie Fries restaurant that wants to train, that the Association feels is qualified to do so, and meets your approval, will be your training facility. Some training may also be done at your store by the same trainer. You will pay the training fee, amount and terms as set by the Association's majority vote, will be paid directly to your trainer.
A central and comprehensive training facility may be in our future
6.9 Audit and Late Payment Fee.
I favor flat fees so as to avoid the necessity and expense of audits.
However, the franchise agreement grants the Association the right to verify the information contained in your reports to us by inspecting and auditing your records. If any such inspection or audit discloses a deficiency in payments exceeding 2% due to us under the franchise agreement, you must immediately pay the deficiency and you must also pay travel, lodging, meals, salaries and reasonable professional service fees and other expenses of the inspecting or auditing personnel. Such payments are not refundable under any circumstances If any such inspection or audit discloses an overpayment we will credit the overpayment to your account. Any payment owed to us but not paid when due bears interest at a rate equal to the maximum contract rate allowed by the governing state law.
6.10 Delinquent Payments and Fees. Any payment or fee not received on time payable from you to us shall bear interest at the rate equal to the maximum contract rate allowed by governing state law from the date due until the date received by us.
6.11 Insurance. At all times during the term of the franchise agreement, you shall maintain in effect a policy or policies of insurance naming us as an additional insured on the face of each policy at your sole cost and expense subject to change from time to time including:
1. Professional public liability policy that includes comprehensive general liability, errors and omissions coverages in the amount of $1,000,000 per occurrence.
2. Any additional insurance including worker’s compensation insurance and unemployment compensation for any employees you may choose to hire.
3. All insurance coverages required by city, county, state or federal agencies.
6.12
Acceptable Insurance Companies. All insurance shall be with insurers acceptable to us. Insurance amounts may be changed from time to time upon receipt of written demand from us. All policies of insurance shall be renewed timely and copies of all policies and certificates together with evidence of payment of premiums shall be delivered to us at least 30 days prior to the expiration of such policies by certified mail or by hand delivery with receipt6.13 Customer Disputes. You shall use your best efforts to resolve satisfactorily any customer disputes and refund any amounts disputed by the customer for services that the customer deems unsatisfactory.
6.14 Reports, Agencies, and Organizations. You are also required to compile and report certain information to us as required by our written directives or the Confidential Business Operation Manual. You also must maintain any membership and/or filing requirements with agencies and organizations necessary to enable your continued functioning as a franchisee. You must file duplicate copies of reports with us when filed with any agency or organization.
6.15 Monthly Financial Statements. I prefer flat fees for all items, and will endeavor to avoid the following, however, you may be required to submit monthly profit and loss statements to us. If so, you must submit to us, no later than the 10th day of each month during the term of the franchise agreement, a monthly profit and loss statement on forms prescribed by us accurately reflecting all gross sales during the preceding month and such other data and information regarding the operation of the franchised business as we may require.
6.16 Annual Financial Statements. Annually within 60 days after the close of your fiscal year, you may be required to submit to us an income and expense statement and a balance sheet for your business as it stands at the end of the fiscal year, setting forth in each case corresponding figures in comparative form for the preceding year and compiled by you or by your accountant. All statements must be in reasonable detail and in accordance with generally accepted accounting practices and accompanied by a declaration from you that same are true and correct to the best of your knowledge. We may supply you with reports of information required by us each year for completion by you.
6.17Franchisee’s Tax Returns. Annually within 60 days after the close of your fiscal year, you may be required to submit to us a copy of your federal and state tax returns and all amendments thereto prepared for the franchised business and a letter from you or your accountant stating as applicable whether or not (1) all payroll tax returns have been filed and payroll taxes paid to the end of the fiscal period, (2) all federal income tax returns have been filed and taxes paid, and (3) all state income tax returns have been filed and any payments due have been paid.
6.18 Cost of Accounting Services. The cost of accounting services are your responsibility and may vary substantially depending upon your size and location, but the requirements are imposed uniformly on all franchisees.