Form Of Chesapeake Bagel Franchise Agreement

EXHIBIT 10.76


CHESAPEAKE BAGEL BAKERY
FRANCHISE AGREEMENT


BETWEEN


AFC ENTERPRISES, INC.


AND


___________________________________


Unit No.: ______
Dev. Agr. No.: ______
Dated: _____________


AFC ENTERPRISES, INC.


CHESAPEAKE BAGEL BAKERY


FRANCHISE AGREEMENT


TABLE OF CONTENTS


I. APPOINTMENT..........................................2


II. TERM............................................... 3


III. FEES............................................... 5


IV. ACCOUNTING AND RECORDS............................. 7


V. PROPRIETARY MARKS.................................. 9


VI. OBLIGATIONS OF CORPORATE OR PARTNERSHIP FRANCHISEE. 12


VII. CONFIDENTIAL OPERATING STANDARDS MANUAL............ 13


VIII. TRAINING........................................... 13


IX. DUTIES OF THE FRANCHISOR........................... 14


X. DUTIES OF THE FRANCHISEE........................... 15


XI. INSURANCE.......................................... 21


XII. CONFIDENTIAL INFORMATION........................... 24


XIII. COVENANTS.......................................... 24


XIV. TRANSFERABILITY OF INTEREST........................ 27


XV. TERMINATION........................................ 30


XVI. EFFECT OF TERMINATION OR EXPIRATION................ 33


XVII. TAXES, PERMITS, AND INDEBTEDNESS................... 36


XVIII. INDEPENDENT CONTRACTOR AND INDEMNIFICATION......... 36


XIX. APPROVALS AND WAIVERS.............................. 37


XX. NOTICES............................................ 38


XXI. SEVERABILITY AND CONSTRUCTION...................... 38


XXII. ENTIRE AGREEMENT: SURVIVAL........................ 39


XXIII. ACKNOWLEDGMENTS.................................... 40


XXIV. APPLICABLE LAW: VENUE............................. 41


XXV. CORPORATE FRANCHISEE............................... 42


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AFC ENTERPRISES, INC.


CHESAPEAKE BAGEL BAKERY
FRANCHISE AGREEMENT


THIS AGREEMENT (the "Agreement") is made this _______ day of _________, 19___, by and between AFC ENTERPRISES, INC. (f/k/a America's Favorite Chicken Company), a Minnesota corporation, having its principal place of business at Six Concourse Parkway, Suite 1700, Atlanta, Georgia, 30328-5352, U.S.A. ("Franchisor" or "Chesapeake Bagel Bakery") and ________________________________ ____________________________________, [jointly and severally where more than one], ("Franchisee").


WITNESSETH:


WHEREAS, Franchisor has developed and owns a unique system for opening and operating specializing in bagels, breads, sandwiches, salads and other bakery products and other menu items developed and owned by Franchisor (the "Chesapeake Bagel Bakery System" or "CBB System");


WHEREAS, the distinguishing characteristics of Franchisor's Chesapeake Bagel Bakery System include, without limitation, the name "Chesapeake Bagel Bakery"; specially designed buildings, distinctive interior and exterior layouts, decor, color schemes, and furnishings; confidential food formulae and recipes used in the preparation of food products and, particularly, formulas and specifications for baking bagels, breads and other bakery products; specialized menus; standards and specifications for equipment, equipment layouts, products, operating procedures, and management programs, all of which may be changed, improved, and further developed by Franchisor from time to time;


WHEREAS, Franchisor identifies the Chesapeake Bagel Bakery System by means of certain trade names, service marks, trademarks, logos, emblems, and other indicia of origin, including, but not limited to, the mark "Chesapeake Bagel Bakery" and such other trade names, service marks, trademarks and trade dress as are now, or may hereafter, be designated by Franchisor for use in connection with the Chesapeake Bagel Bakery System (collectively referred to as the "Proprietary Marks");


WHEREAS, Franchisor continues to develop, use, and control the use of such Proprietary Marks in order to identify for the public the source of services and products marketed thereunder in the Chesapeake Bagel Bakery System and to represent the System's high standards of quality, appearance, and service;


WHEREAS, Franchisee wishes to be assisted, trained, and licensed by Franchisor as a Chesapeake Bagel Bakery franchisee and licensed to use, in connection therewith, the Chesapeake Bagel Bakery System;


WHEREAS, Franchisee understands the importance of the Chesapeake Bagel Bakery System and Chesapeake Bagel Bakery high and uniform standards of quality, cleanliness, appearance, and service, and the necessity of opening and operating Chesapeake Bagel Bakery Restaurants in conformity with the Chesapeake Bagel Bakery System;


NOW, THEREFORE, the parties hereto agree as follows:


I. APPOINTMENT


1.01. Franchisor grants to Franchisee a franchise to open and operate a Chesapeake Bagel Bakery restaurant (the "Unit", "Franchised Unit", "Franchised Business" or "Restaurant") at one location only, such location to be described as:


Store Number:
---------------------------------
Address:
---------------------------------


---------------------------------


---------------------------------


---------------------------------


upon the terms and conditions herein contained and subject to the terms and conditions contained in the development agreement between Franchisor and Franchisee, dated , (the "Development Agreement"), which is incorporated herein by reference; and a license to use in connection therewith Franchisor's Proprietary Marks and the Chesapeake Bagel Bakery System.


1.02. Protected Territory.


1. Subject to the terms and conditions of this Agreement
and provided Franchisee is not otherwise in default of
this Agreement and/or any other Agreement between
Franchisor (or any parent, subsidiary or affiliate of
Franchisor) and Franchisee (or any parent, subsidiary or
affiliate of Franchisee), Franchisor shall not
establish, nor franchise another to establish a
restaurant under the Chesapeake Bagel Bakery System, for
the term of this Agreement, within the area described in


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Exhibit "C" of this Agreement (the "Protected Area"),
without Franchisee's prior written consent.
Notwithstanding the foregoing, Franchisor may, from time
to time during the term hereof, reduce or modify the
Protected Area to encompass a geographic area
immediately surrounding the Franchised Unit which shall
include a population (residential and/or daytime
business or commercial) of no less than 50,000 people,
which modification shall become effective upon
Franchisee's receipt of written notice from Franchisor
to Franchisee.


2. The provisions of Section 1.02 (A) hereof shall not
apply with respect to the following types of locations
within the Protected Area, at which Franchisor retains
the right, in its sole discretion, to franchise and/or
operate Chesapeake Bagel Bakery restaurants, and to
distribute by any means Chesapeake Bagel Bakery
products:


1. Existing Franchised Units and/or Franchised
Units for which Franchise Agreements were
previously executed
2. Transportation facilities (including
airports, train stations, bus stations,
etc.)
3. Toll roads and major thoroughfares
4. Educational facilities (including schools,
colleges and universities)
5. Institutional feeding facilities (including,
but not limited to, airports, hospitals,
hotels, and corporate or school cafeterias
6. Government institutions and facilities
7. Enclosed shopping malls
8. Military bases
9. Casinos
10. Amusement and/or theme parks


1.03. Except as otherwise set forth herein, (a) the franchise granted to Franchisee under this Agreement is non-exclusive, and grants to Franchisee the rights to establish and operate the Franchised Unit at only the specific location set forth hereinabove, (b) no exclusive, protected or other territorial rights in the contiguous area or market of such Franchised Unit or otherwise is hereby granted or to be inferred and (c) Franchisor and/or its affiliates have the right to operate and grant as many other franchises for the operation of Chesapeake Bagel Bakery restaurants, anywhere in the world, as they shall, in their sole discretion, elect.


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II. TERM


2.01. Except as otherwise provided in this Agreement, the initial term of this Franchise Agreement (the "Term") shall expire on the twentieth (20th) anniversary of the date of commencement of operation of the Franchised Unit. For all purposes under this Agreement, the date of commencement of operation of the Franchised Unit shall be the date verified in writing by Franchisor and delivered to Franchisee in a form substantially similar to the "Notice" attached hereto as Exhibit "A". Franchisee agrees and shall be obligated to operate the Franchised Unit and perform hereunder for the full Term of this Agreement.


2.02. Franchisee may, at its option, renew this franchise for one (1) additional period of ten (10) years, provided that, at the time of renewal:


A. Franchisee gives Franchisor written notice of such election
to renew not less than six (6) months nor more than twelve
(12) months prior to the end of the initial term;


B. Franchisee executes Franchisor's then-current standard form
of franchise agreement, which may include, without
limitation, a higher royalty fee and a higher advertising
contribution, if any, than that contained in this Agreement;
and the term of which shall be the renewal term as specified
in Section 2.02. hereof, but shall contain no further
renewal rights;


C. Franchisee executes a general release in a form prescribed
by Franchisor of any and all claims against Franchisor and
its subsidiaries, and affiliates, and their respective
officers, directors, agents, and employees;


D. Franchisee is not in default of any provision of this
Agreement, or any amendment hereof or successor hereto, or
any other agreement between Franchisee and Franchisor, or
any subsidiary or affiliate of Franchisor, and Franchisee
has fully and faithfully performed all of Franchisee's
obligations throughout the term of this Agreement;


E. Franchisee has paid or otherwise satisfied all monetary
obligations owed by Franchisee to Franchisor and its
subsidiaries and affiliates and any indebtedness of
Franchisee which is guaranteed by Franchisor, and Franchisee
has timely paid or otherwise satisfied these obligations
throughout the term of this Agreement;


F. Franchisee agrees, at its sole cost and expense, to reimage,
renovate, refurbish and modernize the Franchised Unit,
within the time frame required by Franchisor, including the
building design, parking lot, landscaping, equipment, signs,
interior and exterior decor items, fixtures, furnishings,


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trade dress, color scheme, presentation of trademarks and
service marks, supplies and other products and materials to
meet Franchisor's then-current standards, specifications and
design criteria for Chesapeake Bagel Bakery restaurants, as
contained in the then-current franchise agreement,
Confidential Operating Standards Manual (as defined herein),
or otherwise in writing, including, without limitation, such
structural changes, remodeling and redecoration and such
modifications to existing improvement as may be necessary to
do so.


G. Franchisee shall pay to Franchisor a renewal fee equal to
fifty percent (50%) of Franchisor's standard initial
franchise fee in effect at the date of renewal.


III. FEES


3.01. In consideration of the franchise granted to Franchisee herein, Franchisee shall pay to the Franchisor the following:


A. A franchise fee of ________________________ Dollars ($XXX)
payable upon execution of this Agreement by Franchisee. Such
franchise fee shall be fully earned by Franchisor upon
execution of this Agreement by Franchisee and is in addition
to any development fees paid to Franchisor by Franchisee.


B. A recurring, non-refundable royalty fee of four percent(4%)
of Gross Sales (as defined herein) during the term of this
Agreement, payable weekly (or on such other basis as may be
set forth in the Confidential Operating Standards Manual (as
defined herein) or otherwise agreed to in writing by
Franchisor) on the Gross Sales of the preceding week. The
royalty fee shall increase to five percent (5%) of Gross
Sales effective January 1, 1999.


3.02. In addition to the payments provided for in Section 3.01. hereof, Franchisee, recognizing the value of advertising and the importance of the standardization of advertising and promotion to the goodwill and public image of the System, agrees to pay to the Chesapeake Bagel Bakery national creative and production fund (the "NCP Fund) a recurring, non-refundable contribution ("NCP Fund Contribution") in an amount to be determined by Franchisor, in its sole discretion, not to exceed two percent (2%) of the Gross Sales for the preceding week, payable weekly (or on such other basis as may be set forth in the Confidential Operating Standards Manual or otherwise agreed to in writing by Franchisor). The NCP Fund Contribution shall be expended by the NCP Fund for national, regional, and/or local advertising and promotional materials and market research for the Chesapeake Bagel Bakery System, under the following conditions and limitations:


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A. The NCP Fund, all contributions thereto, and any earnings thereon,
shall be used exclusively to pay any and all costs of maintaining,
administering, directing, producing and preparing market research,
advertising, marketing materials and/or promotional activities for
the Chesapeake Bagel Bakery System. Franchisee shall pay the NCP
Fund Contribution by separate check made payable to the NCP Fund.
All sums paid by the Franchisee to the NCP Fund shall be maintained
in an account separate from other funds of Franchisor and shall not
be used to defray any of Franchisor's expenses except as provided
herein, and as Franchisor may incur in activities reasonably related
to the administration or direction of the NCP Fund and advertising
and marketing programs for franchisees and the Chesapeake Bagel
Bakery System. The NCP Fund and its earnings shall not otherwise
inure to the benefit of Franchisor. Franchisor shall maintain a
separate bookkeeping account for the NCP Fund.

B. The selection of media and locale for media placement shall be at
the sole discretion of the Franchisor.


C. All reasonable costs incurred by Franchisor or charged to Franchisor
by third parties for market research and the production and
dissemination of advertising, marketing and promotional materials
may be charged to the NCP Fund.


D. Franchisor, upon request, shall provide Franchisee with an annual
accounting of receipts and disbursements of the NCP Fund.


E. It is anticipated that all contributions to and earnings of the NCP
Fund will be expended for market research, costs of creating and
producing advertising materials, marketing and/or promotional
purposes during the taxable year in which contributions and earnings
are received. If, however, excess amounts remain in the NCP Fund at
the end of a taxable year, all expenditures in the following taxable
year(s) shall be made first out of accumulated earnings from
previous years, next out of earnings in the current year, and
finally from contributions.


F. The NCP Fund is not, and shall not be, an asset of Franchisor.
Although the NCP Fund is intended to be of perpetual duration,
Franchisor maintains the right to terminate the NCP Fund; provided,
however, that the NCP Fund shall not be terminated until all monies
in the NCP Fund have been expended for the purposes stated herein.


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G. Franchisee understands that such advertising and marketing is
intended to maximize the public's awareness of the Franchised Units
and the System, and that Franchisor accordingly undertakes no
obligation to insure that any individual Franchisee benefits
directly or on a pro rata basis from the placement, if any, of such
advertising or marketing in its local market. Franchisee further
acknowledges that its failure to derive any such benefit, whether
directly or indirectly, shall not be cause for Franchisee's
nonpayment or reduction of the required contributions to the NCP
Fund.


3.03. If any monetary obligations owed by Franchisee to Franchisor and its subsidiaries and affiliates are more than seven (7) days overdue, Franchisee shall, in addition to such obligations, pay to Franchisor a sum equal to one and one-half percent (1 1/2%) of the overdue balance per month, or the highest rate permitted by law, whichever is less, from the date said payment is due.


3.04. For the purposes of this Agreement, the term "Gross Sales" shall mean all revenues generated by Franchisee's business conducted upon, from or with respect to the Franchised Unit, whether such sales are evidenced by cash, check, credit, charge, account, barter or exchange. Gross Sales shall include, without limitation, monies or credit received from the sale of food and merchandise, from tangible property of every kind and nature, promotional or otherwise, and for services performed from or at the Franchised Unit, including without limitation such off-premises services as catering and delivery. Gross Sales shall not include the sale of food or merchandise for which refunds have been made in good faith to customers, the sale of equipment used in the operation of the Franchised Unit, nor shall it include sales, meals, use or excise tax imposed by a governmental authority directly on sales and collected from customers; provided that the amount for such tax is added to the selling price or absorbed therein, and is actually paid by Franchisee to such governmental authority.


3.05. In addition to the payments provided for in Sections 3.01 and 3.02 hereof, Franchisee agrees to pay to the Local Media Fund (the "Local Media Fund") a recurring non-refundable contribution (the "Local Media Fund Contribution") in an amount to be determined by Franchisor, in its sole discretion, not to exceed three percent (3%) of the gross Sales of the Franchised Unit, payable weekly on the Gross Sales for the preceding week. Franchisee's Local Media Fund Contribution shall be reduced by an amount equal to Franchisee's actual contribution, for the corresponding period, to a local advertising cooperative established pursuant to Section 10.05 of this Agreement. The Local Media Fund contribution shall be expended by the Local Media Fund for advertising and promotions in the DMA in which the Franchised Unit is located. Franchisor will consider requests from Franchisee for reimbursement from the Local Media Fund, for costs incurred by Franchisee related to local advertising conducted by Franchisee in the DMA in which the Franchised Unit is located, provided (i) such advertising has been approved, in advance, by Franchisor and is consistent with the most recent marketing plan of the Local Media Fund, (ii)


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the costs expended by Franchisee on local advertising are verified by invoice and/or such other documentation as Franchisor shall require and (iii) the amount reimbursed shall not exceed the amount of Franchisee's contribution to the Local Media Fund.


IV. ACCOUNTING AND RECORDS


4.01. Accurate Books and Records. During the Term of this Agreement, Franchisee shall maintain and preserve, for at least three (3) years from the dates of their preparation, full, complete and accurate books, records and accounts in accordance with generally accepted accounting principles and in the form and the manner prescribed by Franchisor from time-to-time in the Confidential Operating Standards Manual or otherwise in writing. These records shall include, without limitation, cash register sales tape (including non- resettable readings), meals, sales and other tax returns, duplicate deposit slips and other evidence of Gross Sales and all other business transactions.


4.02. Royalty Reports. Franchisee shall submit to Franchisor, no later than the date each weekly royalty payment is due during the Term of this Agreement, a report on forms prescribed by Franchisor, accurately reflecting all Gross Sales during the preceding week and such other forms, reports, records, financial statements or information as Franchisor may reasonably require in the Confidential Operating Standards Manual, or otherwise in writing.


4.03. Quarterly Statement. Franchisee shall, at its expense, submit to Franchisor quarterly, within thirty (30) days following the end of each quarter during the Term hereof, an unaudited financial statement with such detail as Franchisor may reasonably require (hereinafter, "Quarterly Statement") together with a certificate executed by Franchisee stating that such financial statement is true and accurate. Upon Franchisor's request, Franchisee shall submit to Franchisor, with each Quarterly Statement, copies of any state or local sales tax returns ("Sales Tax Returns") filed by Franchisee for the period included in the Quarterly Statement. In the event Franchisee prepares financial statements on the basis of thirteen (13), four (4) week periods ("Periods"), the Quarterly Statements shall be submitted within thirty (30) days following the end of the third (3rd), sixth (6th), ninth (9th) and thirteenth (13th) Periods.


4.04. Annual Financial Statements. Franchisee shall, at its expense, submit to Franchisor within ninety (90) days following the end of each calendar or fiscal year during the Term of this Agreement, an unaudited financial statement for the preceding calendar or fiscal year, together with a certificate executed by Franchisee certifying that such financial statement is true and accurate (hereinafter, "Annual Financial Statements") and such other information in such form as Franchisor may reasonably require. Upon written request from Franchisor, the foregoing Annual Financial Statement shall include both a profit and loss statement and a balance sheet, and shall be prepared in accordance with generally accepted accounting principles. In the event Franchisee defaults under this Agreement, Franchisor may require, upon written notice to Franchisee, that all Annual Financial Statements submitted thereafter include a "Review Report" prepared by an independent Certified Public Accountant.


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4.05. Other Reports. Franchisee shall also submit to Franchisor, for review or auditing, such other forms, financial statements, reports, records, information and data as Franchisor may reasonably designate, in the form and at the times and places reasonably required by Franchisor, upon request and as specified from time-to-time in the Confidential Operating Standards Manual or otherwise in writing. If Franchisee has combined or consolidated financial information relating to the Franchised Unit with that of any other business or businesses, including a business licensed by Franchisor, Franchisee shall simultaneously submit to Franchisor, for review or auditing, the forms, reports, records and financial statements (including, but not limited to the Quarterly Statements and Annual Financial Statements) which contain the detailed financial information relating to the Franchised Unit, separate and apart from the financial information of such other businesses. Franchisee hereby authorizes all of its suppliers and distributors to release to Franchisor, upon Franchisor's request, any and all of its books, records, accounts or other information relating to goods, products and supplies sold to Franchisee and/or the Franchised Unit.


4.06. Equipment. Franchisee shall record all sales on cash registers or other point-of-sale equipment approved, in writing, by Franchisor (hereinafter "POS ...