<PAGE>
                                                                    EXHIBIT 10.1




                        ROCKY MOUNTAIN CHOCOLATE FACTORY


                               FRANCHISE AGREEMENT




























                                           Franchisee:
                                                       ------------------------
                                           Date:
                                                 ------------------------------
                                           Franchised Location:
                                                                ---------------

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


<PAGE>

                     ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
                               FRANCHISE AGREEMENT
                                TABLE OF CONTENTS


<Table>
<S>                                                                                                              <C>
1.    PURPOSE.....................................................................................................1

2.    GRANT OF FRANCHISE..........................................................................................1
         2.1.         Grant of Franchise..........................................................................1
         2.2.         Scope of Franchise Operations...............................................................1

3.    FRANCHISED LOCATION AND DESIGNATED AREA.....................................................................2
         3.1.         Franchised Location.........................................................................2
         3.2.         Limitation on Franchise Rights; Relocation..................................................2
         3.3.         Franchisor's Reservation of Rights..........................................................2

4.    INITIAL FRANCHISE FEE.......................................................................................3
         4.1.         Initial Franchise Fee.......................................................................3

5.    DEVELOPMENT OF FRANCHISED LOCATION..........................................................................3
         5.1.         Approval of Lease...........................................................................3
         5.2.         Conversion and Design.......................................................................4
         5.3.         Signs.......................................................................................4
         5.4.         Equipment...................................................................................4
         5.5.         Permits and Licenses........................................................................4
         5.6.         Commencement of Operations..................................................................5

6.    TRAINING....................................................................................................5
         6.1.         Initial Training Program....................................................................5
         6.2.         Length of Training..........................................................................6
         6.3.         Additional Training.........................................................................6

7.    DEVELOPMENT ASSISTANCE......................................................................................6
         7.1.         Franchisor's Development Assistance.........................................................6

8.    OPERATIONS MANUAL...........................................................................................7
         8.1.         Operations Manual...........................................................................7
         8.2.         Confidentiality of Operations Manual Contents...............................................7
         8.3.         Changes to Operations Manual................................................................7

9.    OPERATING ASSISTANCE........................................................................................8
         9.1.         Franchisor's Services.......................................................................8
         9.2.         Additional Franchisor Services..............................................................8

10.   FRANCHISEE'S OPERATIONAL COVENANTS..........................................................................8
         10.1.        Store Operations............................................................................8

11.   ROYALTIES..................................................................................................11
         11.1.        Monthly Royalty............................................................................11
         11.2.        Gross Retail Sales.........................................................................12
         11.3.        Royalty Payments...........................................................................12

12.   ADVERTISING................................................................................................12
         12.1.        Approval of Advertising....................................................................12
         12.2.        Local Advertising..........................................................................13
         12.3.        Marketing and Promotion Fee................................................................13
         12.4.        Regional Advertising Programs..............................................................14
</Table>


<PAGE>

<Table>
<S>                                                                                                              <C>
         12.5.        Marketing Services.........................................................................14

13.   QUALITY CONTROL............................................................................................14
         13.1.        Compliance with Operations Manual..........................................................14
         13.2.        Standards and Specifications...............................................................14
         13.3.        Inspections................................................................................15
         13.4.        Restrictions on Services and Products......................................................15
         13.5.        Approved Suppliers.........................................................................15
         13.6.        Request to Change Supplier.................................................................15
         13.7.        Approval of Intended Supplier..............................................................16

14.   TRADEMARKS, TRADE NAMES AND PROPRIETARY INTERESTS..........................................................16
         14.1.        Marks......................................................................................16
         14.2.        No Use of Other Marks......................................................................16
         14.3.        Licensed Methods...........................................................................16
         14.4.        Effect of Termination......................................................................16
         14.5.        Mark Infringement..........................................................................17
         14.6.        Franchisee's Business Name.................................................................17
         14.7.        Change of Marks............................................................................17
         14.8.        Creative Ownership.........................................................................17

15.   REPORTS, RECORDS AND FINANCIAL STATEMENTS..................................................................18
         15.1.        Franchisee Reports.........................................................................18
         15.2.        Annual Financial Statements................................................................18
         15.3.        Verification...............................................................................18
         15.4.        Books and Records..........................................................................19
         15.5.        Audit of Books and Records.................................................................19
         15.6.        Failure to Comply with Reporting Requirements..............................................19
         15.7.        Shopping Service...........................................................................19

16.   TRANSFER...................................................................................................19
         16.1.        Transfer by Franchisee.....................................................................19
         16.2.        Pre-Conditions to Franchisee's Transfer....................................................20
         16.3.        Franchisor's Approval of Transfer..........................................................20
         16.4.        Right of First Refusal.....................................................................21
         16.5.        Types of Transfers.........................................................................21
         16.6.        Transfer by the Franchisor.................................................................22
         16.7.        Franchisee's Death or Disability...........................................................22

17.   TERM AND EXPIRATION........................................................................................22
         17.1.        Term.......................................................................................22
         17.2.        Continuation...............................................................................22
         17.3.        Rights Upon Expiration.....................................................................22
         17.4.        Exercise of Option for Successor Franchise.................................................23
         17.5.        Conditions of Refusal......................................................................23

18.   DEFAULT AND TERMINATION....................................................................................23
         18.1.        Termination by Franchisor - Effective Upon Notice..........................................23
         18.2.        Termination by Franchisor - Thirty Days Notice.............................................24
         18.3.        Franchisor's Remedies......................................................................25
         18.4.        Right to Purchase..........................................................................26
         18.5.        Obligations of Franchisee Upon Termination or Expiration...................................27
         18.6.        State and Federal Law......................................................................28
</Table>


<PAGE>

<Table>
<S>                                                                                                              <C>
19.   BUSINESS RELATIONSHIP......................................................................................28
         19.1.        Independent Businesspersons................................................................28
         19.2.        Payment of Third Party Obligations.........................................................28
         19.3.        Indemnification............................................................................28

20.   RESTRICTIVE COVENANTS......................................................................................29
         20.1.        Non-Competition During Term................................................................29
         20.2.        Post-Termination Covenant Not to Compete...................................................29
         20.3.        Confidentiality of Proprietary Information.................................................30
         20.4.        Confidentiality Agreement..................................................................30

21.   INSURANCE..................................................................................................30
         21.1.        Insurance Coverage.........................................................................30
         21.2.        Proof of Insurance Coverage................................................................30

22.   MISCELLANEOUS PROVISIONS...................................................................................31
         22.1.        Governing Law/Consent to Venue and Jurisdiction............................................31
         22.2.        Cumulative Rights..........................................................................31
         22.3.        Modification...............................................................................31
         22.4.        Entire Agreement...........................................................................31
         22.5.        Delegation by the Franchisor...............................................................32
         22.6.        Effective Date.............................................................................32
         22.7.        Review of Agreement........................................................................32
         22.8.        Attorneys' Fees............................................................................32
         22.9.        Injunctive Relief..........................................................................32
         22.10.       No Waiver..................................................................................32
         22.11.       No Right to Set Off........................................................................32
         22.12.       Invalidity.................................................................................33
         22.13.       Notices....................................................................................33
         22.14.       Payment of Taxes...........................................................................33
         22.15.       Acknowledgement............................................................................33
</Table>


         EXHIBITS

I.       Addendum to Franchise Agreement - Location Approval

II.      Personal Guaranty

III.     Statement of Ownership

IV.      Authorization Agreement for Prearranged Payments

V.       Permit, License and Construction Certificate

VI.      Confidentiality and Noncompetition Agreement


<PAGE>

                     ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
                               FRANCHISE AGREEMENT


         THIS AGREEMENT (the "AGREEMENT") is made this ____ day of ___________,
20___, by and between ROCKY MOUNTAIN CHOCOLATE FACTORY, INC., a Colorado
corporation, located at 265 Turner Drive, Durango, Colorado 81303 (the
"FRANCHISOR") and _______________________________________________, located at
_______________________________ ________________________________________ (the
"FRANCHISEE"), who, on the basis of the following understandings and agreements,
agree as follows:

                                   1. PURPOSE

         1.1 The Franchisor has developed methods for establishing, operating
and promoting retail stores selling gourmet chocolates and other premium
confectionery products ("ROCKY MOUNTAIN CHOCOLATE FACTORY STORES" or "STORES")
using the service mark "ROCKY MOUNTAIN CHOCOLATE FACTORY" and related trade
names and trademarks ("MARKS") and the Franchisor's proprietary methods of doing
business (the "LICENSED METHODS").

         1.2. The Franchisor grants the right to others to develop and operate
ROCKY MOUNTAIN CHOCOLATE FACTORY Stores, under the Marks and pursuant to the
Licensed Methods.

         1.3. The Franchisee desires to establish a ROCKY MOUNTAIN CHOCOLATE
FACTORY Store at a location identified herein or to be later identified, and the
Franchisor desires to grant the Franchisee the right to operate a ROCKY MOUNTAIN
CHOCOLATE FACTORY Store at such location under the terms and conditions which
are contained in this Agreement.

                             2. GRANT OF FRANCHISE

2.1.     GRANT OF FRANCHISE.

         The Franchisor grants to the Franchisee, and the Franchisee accepts
from the Franchisor, the right to use the Marks and Licensed Methods in
connection with the establishment and operation of a ROCKY MOUNTAIN CHOCOLATE
FACTORY Store, at the location described in Article 3 of this Agreement. The
Franchisee agrees to use the Marks and Licensed Methods, as they may be changed,
improved, and further developed by the Franchisor from time to time, only in
accordance with the terms and conditions of this Agreement.

2.2.     SCOPE OF FRANCHISE OPERATIONS.

         The Franchisee agrees at all times to faithfully, honestly and
diligently perform the Franchisee's obligations hereunder, and to continuously
exert best efforts to promote the ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The
Franchisee agrees to utilize the Marks and Licensed Methods to operate all
aspects of the business franchised hereunder in accordance with the methods and
systems developed and prescribed from time to time by the Franchisor, all of
which are a part of the Licensed Methods. The Franchisee's ROCKY MOUNTAIN
CHOCOLATE FACTORY Store shall offer such products and services as the Franchisor
shall designate and shall be restricted from manufacturing, offering or selling
any products or services not previously approved by the Franchisor in writing.
The Franchisee is required to devote a minimum of 50% of all retail display
space to ROCKY MOUNTAIN CHOCOLATE FACTORY brand assorted bulk chocolates and
boxed and packaged candies. The Franchisee's ROCKY MOUNTAIN CHOCOLATE FACTORY
Store must feature ROCKY


                                       1
<PAGE>

MOUNTAIN CHOCOLATE FACTORY brand candy manufactured by the Franchisor or its
designees ("FACTORY CANDY") and related nonconfectionery items ("ITEMS")
approved by the Franchisor in writing. Depending on the retail environment and
the configuration of the Store, the Franchisee may also be permitted to make,
offer and sell store-made candies ("STORE CANDY") prepared in accordance with
recipes and techniques set forth in the Operations Manual, as that term is
defined in Section 8.1. Some Stores do not offer Store Candy.

                   3. FRANCHISED LOCATION AND DESIGNATED AREA

3.1.     FRANCHISED LOCATION.

         The Franchisee is granted the right and franchise to own and operate
one ROCKY MOUNTAIN CHOCOLATE FACTORY Store at the address and location which
shall be set forth in Exhibit I, attached hereto ("FRANCHISED LOCATION"). The
type of Store configuration shall also be set forth in Exhibit I, attached
hereto. Some smaller Stores are designated as "KIOSKS" or "KIOSK STORES" in this
Agreement and all references to "Stores" include Kiosk Stores.

3.2.     LIMITATION ON FRANCHISE RIGHTS; RELOCATION.

         The rights that are hereby granted to the Franchisee are for the
specific Franchised Location and cannot be transferred to an alternative
Franchised Location, or any other location, without the prior written approval
of the Franchisor. If the Franchisee has operated a ROCKY MOUNTAIN CHOCOLATE
FACTORY Store for not less than 12 months and desires to relocate it to an
alternative site, the Franchisee must set forth its reasons for requesting the
relocation in writing to the Franchisor, along with a proposed new location. The
Franchisor will have 30 days from receipt of the Franchisee's written request to
respond. If the Franchisor approves the relocation and the proposed new
location, and if the ownership of the Franchisee does not change in any respect
from the ownership of the Franchisee before the relocation, then the Franchisee
may move its Store to the new approved location, provided that the Franchisee
signs the Franchisor's then current form of Franchise Agreement and opens the
Store at the new location within 12 months after the Store closes at its former
Franchised Location. In addition, the Franchisee will be required to pay a
nonrefundable design fee of $2,500 to the Franchisor for the Franchisor's Store
designers to design the layout of the Franchisee's new Store location. A similar
design fee will also apply if the Franchisee requests design assistance in
remodeling its Store at any time during the term of this Agreement. See Section
5.2 below. The Marks and Licensed Methods are licensed to the Franchisee for the
operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store only at the Franchised
Location; therefore, the Franchisee may not operate food carts, participate in
food festivals or offer any other type of off-site food services using the Marks
and Licensed Methods without the prior written consent of the Franchisor, in
which case the Franchisor and the Franchisee shall execute an addendum to this
Agreement relating to the operation of "SATELLITE STORES" (if this Agreement
governs the operation of a traditional Store, any Satellite Store(s) shall be
governed by separate Franchise Agreements) or "TEMPORARY STORES."

3.3.     FRANCHISOR'S RESERVATION OF RIGHTS.

         The Franchisee acknowledges that the franchise granted hereunder is
non-exclusive and that the Franchisor retains the rights, among others: (1) to
use, and to license others to use, the Marks and Licensed Methods for the
operation of ROCKY MOUNTAIN CHOCOLATE FACTORY Stores, Kiosk Stores, Satellite
Stores and Temporary Stores, at any location other than at the Franchised
Location; (2) to use the Marks and Licensed Methods to identify services and
products, promotional and marketing efforts or related items, and to identify
products and services similar to those which the Franchisee will sell, but made
available through alternative channels of distribution other than through
traditional ROCKY


                                       2
<PAGE>

MOUNTAIN CHOCOLATE FACTORY Stores, at any location other than at the Franchised
Location, including, but not limited to, through Satellite Stores, Temporary
Stores, Kiosk Stores, by way of mail order, (including electronic mail order),
the Internet, catalog, television, retail store display or through the wholesale
sale of its products to unrelated retail outlets or to candy distributors or
outlets located in stadiums, arenas, airports, turnpike rest stops or
supermarkets; and (3) to use and license the use of other proprietary marks or
methods in connection with the sale of products and services similar to those
which the Franchisee will sell or in connection with the operation of retail
stores selling gourmet chocolates or other premium confectionery products, at
any location other than at the Franchised Location, which stores are the same
as, or similar to, or different from a traditional ROCKY MOUNTAIN CHOCOLATE
FACTORY Store or a Satellite Store, a Temporary Store or a Kiosk Store, on any
terms and conditions as the Franchisor deems advisable, and without granting the
Franchisee any rights therein.

                            4. INITIAL FRANCHISE FEE

4.1.     INITIAL FRANCHISE FEE.

         In consideration for the right to develop and operate one ROCKY
MOUNTAIN CHOCOLATE FACTORY Store, the Franchisee agrees to pay to the Franchisor
an initial franchise fee in the amount set forth in Exhibit I attached hereto,
$5,000 of which is due and payable as of the date of execution of this
Agreement, with the balance due and payable at the earlier of (a) 120 days from
the date this Agreement is executed or (b) the date that a lease is executed for
a Franchised Location that has been approved by the Franchisor. The Franchisee
acknowledges and agrees that the initial franchise fee represents payment for
the initial grant of the rights to use the Marks and Licensed Methods, that the
Franchisor has earned the initial franchise fee upon receipt thereof and that
the fee is under no circumstances refundable to the Franchisee after it is paid,
unless otherwise specifically set forth in this Agreement. If a transfer occurs,
no initial franchise fee shall be due at the time that the Franchisee transfers
the Store to another party, but a transfer fee will apply as set forth in
Section 16.2 of this Agreement.

                     5. DEVELOPMENT OF FRANCHISED LOCATION

5.1.     APPROVAL OF LEASE.

         The Franchisee shall obtain the Franchisor's prior written approval
before executing any lease or purchase agreement for the Franchised Location.
Any lease for the Franchised Location shall, at the option of the Franchisor,
contain provisions including: (1) allowing for assignment of the lease to the
Franchisor in the event that this Agreement is terminated or not renewed for any
reason; (2) giving the Franchisor the right to cure any default by the
Franchisee under such lease; and/or (3) providing the Franchisor with the right,
exercisable upon and as a condition of the approval of the Franchised Location,
to execute the lease agreement or other document providing entitlement to the
use of the Franchised Location in its own name or jointly with the Franchisee as
lessee and, upon the exercise of such option, the Franchisor shall provide the
Franchisee with the right to use the premises as its sublessee, assignee, or
other similar capacity upon the same terms and conditions as obtained by the
Franchisor. The Franchisor may choose to hire a third party professional to
negotiate the Franchisee's lease and the Franchisee agrees to reimburse the
Franchisor for its actual costs associated with any such negotiation. The
Franchisee shall deliver a copy of the signed lease for the Franchised Location
to the Franchisor within 15 days of its execution. The Franchisee acknowledges
that approval of a lease for the Franchised Location by the Franchisor does not
constitute a recommendation, endorsement or guarantee by the Franchisor of the
suitability of the location or the lease and the Franchisee should take all
steps necessary to ascertain whether such location and lease are acceptable to
the Franchisee.


                                       3
<PAGE>

5.2. CONVERSION AND DESIGN.

         The Franchisee acknowledges that the layout, design, decoration and
color scheme of ROCKY MOUNTAIN CHOCOLATE FACTORY Stores are an integral part of
the Franchisor's proprietary Licensed Methods and accordingly, the Franchisee
shall convert, design and decorate the Franchised Location in accordance with
the Franchisor's plans and specifications which are contained in a Design and
Construction Manual that is considered, for the purposes of this Agreement, to
be a part of the Operations Manual, defined in Section 8.1. The Franchisee shall
hire an architect/designer to prepare written plans for the Store's layout and
construction, which plans shall be submitted to the Franchisor for its prior
written approval. Throughout the term of this Agreement, the Franchisee shall
also obtain the Franchisor's written consent to any remodeling or decoration of
the premises before remodeling or decorating begins, recognizing that such
remodeling, decoration and any related costs are the Franchisee's sole
responsibility. If the Franchisee remodels its Store at any time during the term
of this Agreement, the Franchisee shall pay the Franchisor $2,500 for the
Franchisor's design services.

5.3.     SIGNS.

         The Franchisee shall purchase or otherwise obtain for use at the
Franchised Location and in connection with the ROCKY MOUNTAIN CHOCOLATE FACTORY
Store, signs which comply with the standards and specifications of the
Franchisor as set forth in the Operations Manual, as that term is defined in
Section 8.1. It is the Franchisee's sole responsibility to insure that any signs
comply with applicable local ordinances, building codes and zoning regulations.
Any modifications to the Franchisor's standards and specifications for signs
that must be made due to local ordinances, codes or regulations shall be
submitted to the Franchisor for prior written approval. The Franchisee
acknowledges the Marks, or any other name, symbol or identifying marks on any
signs shall only be used in accordance with the Franchisor's standards and
specifications and only with the prior written approval of the Franchisor.

5.4.     EQUIPMENT.

         The Franchisee shall purchase or otherwise obtain for use at the
Franchised Location and in connection with the ROCKY MOUNTAIN CHOCOLATE FACTORY
Store, equipment of a type and in an amount which complies with the standards
and specifications of the Franchisor. The Franchisee acknowledges that the type,
quality, configuration, capability and/or performance of the equipment are all
standards and specifications which are a part of the Licensed Methods and
therefore such equipment must be purchased, leased, or otherwise obtained in
accordance with the Franchisor's standards and specifications and only from
suppliers or other sources approved by the Franchisor. The Franchisee must
purchase a facsimile machine and connect it to a phone line that is separate
from the main phone number for the Store. The Franchisee shall equip the Store
with an integrated store information system ("SYSTEM"), computer hardware and
software, printers and other designated equipment consistent with the standards
and specifications of the Franchisor. The Franchisor requires that it be given
reasonable access to information and data regarding the Franchisee's ROCKY
MOUNTAIN CHOCOLATE FACTORY Store by computer modem with a separate phone line
dedicated to such modem, or by another form of electronic transmission. The
Franchisor also requires the Franchisee to obtain and maintain an account with
an Internet service provider that meets the Franchisor's standards and
specifications to facilitate electronic communication.

5.5.     PERMITS AND LICENSES.

         The Franchisee agrees to obtain all such permits and certifications as
may be required for the lawful construction and operation of the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store together with all certifications from government
authorities having jurisdiction over the site, that


                                       4
<PAGE>

all requirements for construction and operation have been met, including without
limitation, zoning, access, sign, health, safety requirements, building and
other required construction permits, licenses to do business and fictitious name
registrations, sales tax permits, health and sanitation permits and ratings and
fire clearances. The Franchisee agrees to obtain all customary contractors'
sworn statements and partial and final lien waivers for construction,
remodeling, decorating and installation of equipment at the Franchised Location.
The Franchisee shall sign and deliver to the Franchisor the Permit, License and
Construction Certificate set forth as Exhibit V to this Agreement, to confirm
Franchisee's compliance with the Americans with Disabilities Act and other
provisions of this Section 5.5 not later than 30 days prior to the date the
Store begins operating. Copies of all inspection reports, warnings, certificates
and ratings issued by any governmental entity during the term of this Agreement
in connection with the conduct of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store
which indicates the Franchisee's failure to meet or maintain the highest
governmental standards, or less than full compliance by the Franchisee with any
applicable law, rule or regulation, shall be forwarded to the Franchisor within
five days of the Franchisee's receipt thereof.

5.6.     COMMENCEMENT OF OPERATIONS.

         Unless otherwise agreed in writing by the Franchisor and the
Franchisee, the Franchisee has 180 days from the date of this Agreement within
which to complete the initial training program, described in Section 6.1 of this
Agreement, develop the Franchised Location and commence operation of the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store. Failure to commence operations within this
time frame shall constitute grounds for termination under Article 18 of this
Agreement. The Franchisor will extend the time in which the Franchisee has to
commence operations for a reasonable period of time in the event factors beyond
the Franchisee's reasonable control prevent the Franchisee from meeting this
development schedule, so long as the Franchisee has made reasonable and
continuing efforts to comply with such development obligations and the
Franchisee requests, in writing, an extension of time in which to have its ROCKY
MOUNTAIN CHOCOLATE FACTORY Store established before such development period
lapses. However, notwithstanding the Franchisor's written agreement to extend
the Franchisee's development period, if more than 270 days elapse between the
date of this Agreement and the commencement of operation of the Store, the
Franchisor reserves the right, in its sole discretion, to require the Franchisee
to execute the Franchisor's then current form of Franchise Agreement or an
amendment to this Agreement to conform this Agreement with the terms of the then
current Franchise Agreement.

                                  6. TRAINING

6.1.     INITIAL TRAINING PROGRAM.

         After the Franchisee executes a lease for the Franchised Location, the
Franchisee or, if the Franchisee is not an individual, the person designated by
the Franchisee to assume primary responsibility for the management of the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store, ("GENERAL MANAGER") is required to attend and
successfully complete the initial training program which is offered by the
Franchisor at one of the Franchisor's designated training facilities. Up to
three individuals are eligible to participate in the Franchisor's initial
training program without charge of a tuition or fee. The Franchisee shall be
responsible for any and all traveling and living expenses incurred in connection
with attendance at the training program. At least one individual must
successfully complete the initial training program prior to the Franchisee's
commencement of operation of its ROCKY MOUNTAIN CHOCOLATE FACTORY Store.


                                       5
<PAGE>

6.2. LENGTH OF TRAINING.

         The initial training program shall consist of 7 days of instruction at
a location designated by the Franchisor; provided, however, that the Franchisor
reserves the right to waive a portion of the training program or alter the
training schedule, if in the Franchisor's sole discretion, the Franchisee or
General Manager has sufficient prior experience or training.

6.3.     ADDITIONAL TRAINING.

         From time to time, the Franchisor may present seminars, conventions or
continuing development programs or conduct meetings for the benefit of the
Franchisee. The Franchisee or its General Manager shall be required to attend
any ongoing mandatory seminars, conventions, programs or meetings as may be
offered by the Franchisor. The Franchisor shall give the Franchisee at least 30
days prior written notice of any ongoing seminar, convention or program that is
deemed mandatory. The Franchisor shall not require that the Franchisee attend
any ongoing training more often than once a year. All mandatory training will be
offered without charge of a tuition or fee; provided, however, the Franchisee
will be responsible for all traveling and living expenses which are associated
with attendance at the same.

                           7. DEVELOPMENT ASSISTANCE

7.1.     FRANCHISOR'S DEVELOPMENT ASSISTANCE.

         The Franchisor shall provide the Franchisee with assistance in the
initial establishment of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store as follows:

                  a. Provision of the initial training program to be conducted
         at the Franchisor's designated training facilities or at another
         location designated by the Franchisor, as described in Article 6 above.

                  b. Provision of written guidelines for a Franchised Location
         that shall include, without limitation, specifications for space
         requirements and build out. The Franchisee acknowledges that the
         Franchisor shall have no other obligation to provide assistance in the
         selection and approval of a Franchised Location other than the
         provision of such written specifications and approval or disapproval of
         a proposed Franchised Location, which approval or disapproval shall be
         based on information submitted to the Franchisor in a form sufficient
         to assess the proposed location as may be required by the Franchisor,
         in the Franchisor's sole discretion, and on information gathered by the
         Franchisor.

                  c. Direction regarding the required conversion, design and
         decoration of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store premises, plus
         specifications concerning signs, decor and equipment.

                  d. Direction regarding the selection of suppliers of
         equipment, items and materials used and inventory offered for sale in
         connection with the ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The
         Franchisor will determine the Franchisee's initial inventory of Factory
         Candy that the Franchisee will purchase, depending on the size and
         configuration of the Store. After execution of this Agreement, the
         Franchisor will provide the Franchisee with a list of approved
         suppliers, if any, of such equipment, items, materials and inventory
         and, if available, a description of any national or central purchase
         and supply agreements offered by such approved suppliers for the
         benefit of ROCKY MOUNTAIN CHOCOLATE FACTORY franchisees.


                                       6
<PAGE>

                  e. Provision of an Operations Manual in accordance with
         Section 8.1 below.

                  f. As the Franchisor may reasonably schedule, and depending on
         availability of personnel, the Franchisor will make available to the
         Franchisee at or close to the opening of the Franchisee's ROCKY
         MOUNTAIN CHOCOLATE FACTORY Store, a representative ("SITE
         REPRESENTATIVE") who will be present for up to five days beginning
         approximately three days prior to the opening of the Franchisee's ROCKY
         MOUNTAIN CHOCOLATE FACTORY Store. If the Franchisee's Store opens on or
         near a holiday, however, the Site Representative shall not begin the
         in-Store assistance until three days after the holiday. Holidays shall
         include, but not be limited to, New Years Day, Valentines Day, Easter,
         Memorial Day, Fourth of July, Labor Day, Thanksgiving, Hanukkah and
         Christmas. There will be no charge to the Franchisee for this service
         provided by the Franchisor. The Site Representative will assist the
         Franchisee's employees in opening the Store, unless in the Franchisor's
         determination, the Franchisee or the General Manager have sufficient
         prior training or experience.

                              8. OPERATIONS MANUAL

8.1.     OPERATIONS MANUAL.

         The Franchisor agrees to loan to the Franchisee one or more manuals,
technical bulletins, cookbooks and recipes and other written materials
(collectively referred to as "OPERATIONS MANUAL") covering Factory Candy
ordering, Store Candy manufacturing, processing and stocking and other operating
and in-store marketing techniques for the ROCKY MOUNTAIN CHOCOLATE FACTORY
Store. The Franchisee agrees that it shall comply with the Operations Manual as
an essential aspect of its obligations under this Agreement, that the Operations
Manual shall be deemed to be incorporated herein by reference and failure by the
Franchisee to substantially comply with the Operations Manual may be considered
by the Franchisor to be a breach of this Agreement.

8.2.     CONFIDENTIALITY OF OPERATIONS MANUAL CONTENTS.

         The Franchisee agrees to use the Marks and Licensed Methods only as
specified in the Operations Manual. The Operations Manual is the sole property
of the Franchisor and shall be used by the Franchisee only during the term of
this Agreement and in strict accordance with the terms and conditions hereof.
The Franchisee shall not duplicate the Operations Manual nor disclose its
contents to persons other than its employees or officers who have signed the
form of Confidentiality and Noncompetition Agreement attached hereto as Exhibit
VI and incorporated herein by reference. The Franchisee shall return the
Operations Manual to the Franchisor upon the expiration, termination or transfer
of this Agreement.

8.3.     CHANGES TO OPERATIONS MANUAL.

         The Franchisor reserves the right to revise the Operations Manual from
time to time as it deems necessary to update or change operating and marketing
techniques, standards and specifications for all components of the Licensed
Methods and approved Factory Candy, Items and Store Candy offered by Stores. The
Franchisee, within 30 days of receiving any updated information, shall in turn
update its copy of the Operations Manual as instructed by the Franchisor and
shall conform its operations with the updated provisions within a reasonable
time after receipt of such updated information. The Franchisee acknowledges that
a master copy of the Operations Manual maintained by the Franchisor at its
principal office shall be controlling in the event of a dispute relative to the
content of any Operations Manual.


                                       7
<PAGE>

                            9. OPERATING ASSISTANCE

9.1.     FRANCHISOR'S SERVICES.

         The Franchisor agrees that, during the Franchisee's operation of the
ROCKY MOUNTAIN CHOCOLATE FACTORY Store, the Franchisor shall make available to
the Franchisee the following services:

                  a. Upon the reasonable request of the Franchisee, consultation
         by telephone and electronic mail regarding the continued operation and
         management of a ROCKY MOUNTAIN CHOCOLATE FACTORY Store and advice
         regarding the retail services, product quality control, inventory
         issues, customer relations issues and similar advice.

                  b. Access to advertising and promotional materials as may be
         developed by the Franchisor, the cost of which may be passed on to the
         Franchisee at the Franchisor's option.

                  c. On-going updates of information and programs regarding the
         candy industry, the ROCKY MOUNTAIN CHOCOLATE FACTORY concept and
         related Licensed Methods, including, without limitation, information
         about special or new products which may be developed and made available
         to ROCKY MOUNTAIN CHOCOLATE FACTORY franchisees.

                  d. Depending on availability, allow replacement or additional
         General Managers to attend the initial training program. The Franchisor
         reserves the right to charge a tuition or fee in an amount payable in
         advance, commensurate with the Franchisor's then current published
         prices for such training. The Franchisee shall be responsible for all
         travel and living expenses incurred by its personnel during the
         training program. Further, the availability of the training program
         shall be subject to space considerations and prior commitments to new
         ROCKY MOUNTAIN CHOCOLATE FACTORY franchisees.

9.2.     ADDITIONAL FRANCHISOR SERVICES.

         Although not obligated to do so, upon the reasonable request of the
Franchisee, the Franchisor may make its employees or designated agents available
to the Franchisee for on-site advice and assistance in connection with the
on-going operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store governed by
this Agreement. In the event that the Franchisee requests such additional
assistance and the Franchisor agrees to provide the same, the Franchisor
reserves the right to charge the Franchisee for all travel, lodging, living
expenses, telephone charges and other identifiable expenses associated with such
assistance, plus a fee based on the time spent by each employee on behalf of the
Franchisee, which fee will be charged in accordance with the then current daily
or hourly rates being charged by the Franchisor for assistance.

                     10. FRANCHISEE'S OPERATIONAL COVENANTS

10.1.    STORE OPERATIONS.

         The Franchisee acknowledges that it is solely responsible for the
successful operation of its ROCKY MOUNTAIN CHOCOLATE FACTORY Store and that the
continued successful operation thereof is, in part, dependent upon the
Franchisee's compliance with this Agreement and the Operations Manual. In
addition to all other obligations contained in this Agreement and in the
Operations Manual, the Franchisee covenants that:


                                       8
<PAGE>

                  a. The Franchisee shall maintain clean, efficient and high
         quality ROCKY MOUNTAIN CHOCOLATE FACTORY Store operations and shall
         operate the business in accordance with the Operations Manual and in
         such a manner as not to detract from or adversely reflect upon the name
         and reputation of the Franchisor and the goodwill associated with the
         ROCKY MOUNTAIN CHOCOLATE FACTORY name and Marks.

                  b. The Franchisee will operate its ROCKY MOUNTAIN CHOCOLATE
         FACTORY Store in compliance with all applicable laws, health department
         regulations and other ordinances. In connection therewith, the
         Franchisee will be solely and fully responsible for obtaining any and
         all licenses to operate the ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The
         Franchisee shall promptly forward to the Franchisor copies of all
         health department, fire department, building department and other
         similar reports of inspections as and when they become available.

                  c. The Franchisee and all persons who work behind the counter
         at the Store in any capacity, whether or not they are employees of the
         Franchisee ("PERSONNEL"), shall conduct themselves in such a manner so
         as to promote a good image to the public and to the business community.
         At no time shall any of the Personnel engage in unreasonable or
         disrespectful behavior toward anyone, including using offensive or rude
         language or gestures. The Franchisee shall at all times require its
         Personnel to follow the Code of Conduct as set forth in the Operations
         Manual.

                  d. The Franchisee acknowledges that proper management of the
         ROCKY MOUNTAIN CHOCOLATE FACTORY Store is important and shall insure
         that the Franchisee or a designated General Manager who has completed
         the Franchisor's initial training program be responsible for the
         management of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store after
         commencement of Store operations and be present at the Franchised
         Location during operation of the Store.

                  e. The Franchisee shall offer only authorized products and
         services as are more fully described in the vendor lists which are a
         part of the Operations Manual, which may include, without limitation,
         Factory Candy, Store Candy, Items and other authorized confectionery
         food and beverage products. The Franchisee shall offer only the types
         of products and services as from time to time may be prescribed by the
         Franchisor and shall refrain from offering any other types of products
         or services, from or through the ROCKY MOUNTAIN CHOCOLATE FACTORY
         Store, including, without limitation, filling "Wholesale Orders",
         defined below, selling Factory Candy, Store Candy, Items or other
         authorized products through the Internet, or catering or other
         off-premises sales, without the prior written consent of the
         Franchisor. "WHOLESALE ORDERS" are defined as those orders or sales
         where the principal purpose of the purchase is for resale, not
         consumption, or any sale other than those sold over the counter at a
         price other than that price charged to the general public; provided,
         however, that volume discounted sales made on the premises at the
         Franchised Location to a single purchaser, not for resale, and
         discounted sales made on the premises at the Franchised Location to
         charitable organizations for fund-raising purposes shall be permitted.
         Factory Candy, Store Candy and Items shall never be sold in containers
         or bags other than those approved and supplied by the Franchisor or
         other supplier approved by the Franchisor.

                  f. The Franchisee shall promptly pay when due all taxes and
         other obligations owed to third parties in the operation of the ROCKY
         MOUNTAIN CHOCOLATE FACTORY Store, including without limitation,
         unemployment and sales taxes, and any and all accounts or other
         indebtedness of every kind incurred by the Franchisee in the conduct of
         the ROCKY


                                       9
<PAGE>

         MOUNTAIN CHOCOLATE FACTORY Store. In the event of a bona fide dispute
         as to the liability for taxes assessed or other indebtedness, the
         Franchisee may contest the validity or the amount of the tax or
         indebtedness in accordance with procedures of the taxing authority or
         applicable law; however, in no event shall the Franchisee permit a tax
         sale or seizure by levy or execution or similar writ or warrant, or
         attachment by a creditor to occur against the premises of the
         Franchised Location, or any improvement thereon.

                  g. The Franchisee shall subscribe for and maintain not fewer
         than two or three separate telephone numbers for its ROCKY MOUNTAIN
         CHOCOLATE FACTORY Store at the Franchised Location, depending on the
         size and configuration of the Store or Kiosk. One number shall be used
         exclusively for voice communication, the second shall be used
         exclusively for the modem that is included in the System. If a third
         telephone number is required, it shall be used exclusively for a
         facsimile machine. The telephone number and, if applicable, the
         facsimile machine number, shall be listed and identified exclusively
         with the ROCKY MOUNTAIN CHOCOLATE FACTORY Store in all official
         telephone directories and in all advertising in which such numbers
         appear and shall be separate and distinct from all other telephone
         numbers subscribed for by the Franchisee.

                  h. The Franchisee shall comply with all agreements with third
         parties related to the ROCKY MOUNTAIN CHOCOLATE FACTORY Store
         including, in particular, all provisions of any lease for the
         Franchised Location.

                  i. The Franchisee and all employees of the Franchisee shall
         adhere to strict grooming and dress code guidelines, as described in
         the Code of Conduct set forth in the Operations Manual, while on duty
         at the Franchised Location. The Franchisee is required, at the
         Franchisee's expense, to purchase specified apparel from suppliers
         approved by the Franchisor. All General Managers, employees of the
         Franchisee, the Franchisee and its owners shall wear the specified
         apparel at all times while working at the Franchised Location. The
         Franchisor has the right, in its sole and absolute discretion, to
         change or modify such grooming and dress code guidelines in the
         Operations Manual.

                  j. The Franchisee agrees to renovate, refurbish, remodel or
         replace, at its own expense, the personal property and equipment used
         in the operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, when
         reasonably required by the Franchisor in order to comply with the
         image, standards of operation and performance capability established by
         the Franchisor from time to time. If the Franchisor changes its image
         or standards of operation, it shall give the Franchisee a reasonable
         period of time within which to comply with such changes.

                  k. The Franchisee shall be responsible for training all of its
         Personnel who work in any capacity in the ROCKY MOUNTAIN CHOCOLATE
         FACTORY Store. The Franchisee must conduct its Personnel training in
         the manner and according to the standards as prescribed in the
         Operations Manual. All Personnel who do not satisfactorily complete the
         training shall not work in any capacity in the Franchisee's ROCKY
         MOUNTAIN CHOCOLATE FACTORY Store.

                  l. The Franchisee shall at all times during the term of this
         Agreement own and control the ROCKY MOUNTAIN CHOCOLATE FACTORY Store
         authorized hereunder. The Franchisee shall not operate any other
         business or profession from or through the Store. If the Franchisee is
         an entity, the entity shall only operate the ROCKY MOUNTAIN CHOCOLATE
         FACTORY Store governed by this Agreement and no other business, unless
         the Franchisee receives the Franchisor's prior written approval. Upon
         request of the Franchisor, the Franchisee


                                       10
<PAGE>

         shall promptly provide satisfactory proof of such ownership to the
         Franchisor. The Franchisee represents that the Statement of Ownership,
         attached hereto as Exhibit III and by this reference incorporated
         herein, is true, complete, accurate and not misleading, and, in
         accordance with the information contained in the Statement of
         Ownership, the controlling ownership of the ROCKY MOUNTAIN CHOCOLATE
         FACTORY Store is held by the Franchisee. The Franchisee shall promptly
         provide the Franchisor with a written notification if the information
         contained in the Statement of Ownership changes at any time during the
         term of this Agreement and shall comply with the applicable transfer
         provisions contained in Article 16 herein. In addition, if the
         Franchisee is an entity, all of the owners of the Franchisee shall sign
         the Personal Guaranty attached hereto as Exhibit II.

                  m. The Franchisee shall at all times during the term of this
         Agreement keep its ROCKY MOUNTAIN CHOCOLATE FACTORY Store open during
         the business hours designated by the Franchisor from time to time in
         the Operations Manual.

                  n. Unless notified in writing otherwise by the Franchisor, all
         Factory Candy and related products shall be sold and shipped to the
         Franchisee on a net 30-day basis, or according to the then current
         payment terms set by the Franchisor or its designated suppliers. The
         Franchisor reserves the right to charge interest at the rate of 1.5%
         per month if the Franchisee fails to pay for its orders on time and the
         Franchisor reserves the right to discontinue shipment of Factory Candy
         and related products to the Franchisee if the Franchisee is repeatedly
         delinquent in paying for its Factory Candy and related products, in the
         Franchisor's sole discretion. The Franchisee may be required to
         "prepay" Factory Candy orders, notwithstanding the payment policy set
         forth above, in the event of poor payment performance. The Franchisor
         reserves the right to change payment terms and policies at any time.
         The Franchisor also reserves the right to change the price for Factory
         Candy and related products from time to time as may be set forth in the
         most recent price bulletin sent to all franchisees or the then current
         Operations Manual.

                                 11. ROYALTIES

11.1.    MONTHLY ROYALTY.

         The Franchisee agrees to pay to the Franchisor a monthly royalty
("ROYALTY") equal to 5% of its Gross Retail Sales generated from or through its
ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The Franchisee also agrees to pay a
quarterly Royalty based on Adjusted Gross Retail Sales during each calendar
quarter. The amount of monthly Royalty paid during each quarter shall be
credited toward the amount of quarterly Royalty owed. Within 15 days following
the end of each calendar quarter, the Franchisor shall calculate the amount of
the Franchisee's Adjusted Gross Retail Sales during the previous quarter and the
Franchisee shall owe the Franchisor a quarterly Royalty equal to 10% of its
Adjusted Gross Retail Sales. "ADJUSTED GROSS RETAIL SALES" shall be calculated
as the amount of "Gross Retail Sales," defined in Section 11.2 below, minus a
fixed dollar amount for each pound of Factory Candy purchased from the
Franchisor and minus a multiple of the wholesale price, as specified by the
Franchisor, on certain Store Candy ingredients, packaging and other products and
supplies purchased from the Franchisor during the previous calendar quarter. The
Franchisee shall be notified of any credits from or amounts owing to the
Franchisor for the quarterly Royalty based on Adjusted Gross Retail Sales. Any
credits or amounts owed will be added to or deducted from the following month's
monthly Royalty payment.


                                       11
<PAGE>

11.2. GROSS RETAIL SALES.

         "GROSS RETAIL SALES" shall be defined as receipts and income of any
kind from all products or services sold from or through the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store, including any such sale of products or services made
for cash or upon credit, or partly for cash and partly for credit, regardless of
collection of charges for which credit is given, less returns for which refunds
are made, provided that the refund shall not exceed the sales price and
exclusive of discounts, sales taxes and other taxes, amounts received in
settlement of a loss of merchandise, shipping expenses paid by the customer and
discount sales to corporations or to charities for fund-raising purposes. "Gross
Retail Sales" shall also include the fair market value of any services or
products received by the Franchisee in barter or in exchange for its services
and products.

11.3.    ROYALTY PAYMENTS.

         The Franchisee agrees that Royalty payments shall be paid monthly and
sent to the Franchisor, post-marked no later than the 15th of each month based
on Gross Retail Sales for the immediately preceding month. Royalty payments
shall be accompanied by monthly reports, as more fully described in Article 15
hereof, and standard transmittal forms containing information regarding the
Franchisee's Gross Retail Sales and such additional information as may be
requested by the Franchisor. The Franchisor reserves the right to require
Royalty payments be made on a weekly or bi-weekly basis if the Franchisee does
not timely or fully submit the required payments or reports. The Franchisor also
reserves the right to require that Royalty payments, late charges and payment of
the Marketing and Promotion Fee and late charges (as set forth in Section 12.3
below) be made by means of electronic funds transfer and the Franchisee agrees
to provide the information and sign the documents necessary to implement such
transfer payments within 30 days of receiving notice that such a program is
being implemented. The Franchisee must sign the Franchisor's form of
Authorization Agreement for Prearranged Payments attached to this Agreement as
Exhibit IV. The Franchisor shall have the right to verify such Royalty payments
from time to time as it deems necessary, in any reasonable manner. In the event
that the Franchisee fails to pay any Royalties within 14 days after they are
due, the Franchisee shall, in addition to such Royalties, pay a late charge
equivalent to 18% of the late Royalty payment; provided, however, in no event
shall the Franchisee be required to pay a late payment at a rate greater than
the maximum interest rate permitted by applicable law. If the Franchisee pays
Royalties with a check returned for non-sufficient funds more than one time in
any calendar year, in addition to all other remedies which may be available, the
Franchisor shall have the right to require that Royalty payments be made by
certified or cashier's checks.

                                12. ADVERTISING

12.1.    APPROVAL OF ADVERTISING.

         The Franchisee shall obtain the Franchisor's prior written approval of
all advertising or other marketing or promotional programs published by any
method, including print, broadcast and electronic media, regarding the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store, including, without limitation, "Yellow Pages"
advertising, newspaper ads, flyers, brochures, coupons, direct mail pieces,
specialty and novelty items, radio, television, Internet and World Wide Web
advertising. The Franchisee acknowledges and agrees that the Franchisor may
disapprove of any advertising, marketing or promotional programs submitted to
the Franchisor, for any reason, in the Franchisor's sole discretion. The
Franchisee shall also obtain the Franchisor's prior written approval of all
promotional materials provided by vendors. The proposed written advertising or a
description of the marketing or promotional program shall be submitted to the
Franchisor at least 10 days prior to publication, broadcast or use. The
Franchisee acknowledges that advertising and promoting the ROCKY MOUNTAIN
CHOCOLATE


                                       12
<PAGE>

FACTORY Store in accordance with the Franchisor's standards and specifications
is an essential aspect of the Licensed Methods, and the Franchisee agrees to
comply with all advertising standards and specifications. The Franchisee shall
display all required promotional materials, signs, point of purchase displays
and other marketing materials in its ROCKY MOUNTAIN CHOCOLATE FACTORY Store in
the manner prescribed by the Franchisor. The Franchisee shall not, under any
circumstances, use handwritten signs in the operation of its Store.

12.2.    LOCAL ADVERTISING.

         The Franchisor reserves the right to require the Franchisee to spend up
to 1% of monthly Gross Retail Sales on local advertising to create public
awareness of the Franchisee's ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The
Franchisee will submit to the Franchisor an accounting of the amounts spent on
advertising within 30 days following the end of each calendar quarter. If the
Franchisor requires its franchisees to advertise locally as described above, all
Franchisor-owned Stores will be required to spend money for local advertising on
an equal percentage basis with all franchised Stores. If the Franchisee's lease
requires it to advertise locally, the Franchisor may, in its sole discretion,
count such expenditures toward the Franchisee's local advertising expenditure
required by this Section 12.2. The Franchisee shall obtain the Franchisor's
prior written approval of all written advertising and promotional materials
before publication, in accordance with Section 12.1 above.

12.3.    MARKETING AND PROMOTION FEE.

         The Franchisee shall pay to the Franchisor, in addition to Royalties, a
fee of 1% of the total amount of the Franchisee's Gross Retail Sales ("MARKETING
AND PROMOTION FEE"). The Marketing and Promotion Fee shall be in addition to and
not in lieu of the Franchisee's expenditures for local advertising, as described
in Section 12.2 above. The following terms and conditions will apply:


                  a. The Marketing and Promotion Fee shall be payable
         concurrently with the payment of the Royalties, and transmitted to the
         Franchisor in accordance with Section 11.3 above, for all Marketing and
         Promotion Fees for the immediately preceding month.

                  b. The Marketing and Promotion Fees will be subject to the
         same late charges as the Royalties, in an amount and manner set forth
         in Section 11.3 above.

                  c. Upon written request by the Franchisee, the Franchisor will
         make available to the Franchisee, no later than 120 days after the end
         of each fiscal year, an annual financial statement which indicates how
         the Marketing and Promotion Fees have been spent.

                  d. The Marketing and Promotion Fees will be administered by
         the Franchisor, in its sole discretion, and may be used for production
         and placement of point of purchase advertising, in-store signage,
         in-store promotions, media advertising, direct mailings, brochures,
         collateral material advertising, surveys of advertising effectiveness,
         packaging development, logo, design or other advertising or public
         relations expenditures relating to advertising the Franchisee's
         products and services.

                  e. The Franchisor may reimburse itself for independent audits,
         reasonable accounting, bookkeeping, reporting and legal expenses, taxes
         and other reasonable direct and indirect expenses as may be incurred by
         the Franchisor or its authorized representatives in connection with the
         programs funded by the Marketing and Promotion Fees. The Franchisor
         will


                                       13
<PAGE>

         not be liable for any act or omission with respect to such Marketing
         and Promotion Fees that is consistent with this Agreement and is done
         in good faith.

12.4.    REGIONAL ADVERTISING PROGRAMS.

         Although not obligated to do so, the Franchisor reserves the right to
allocate up to 50% of the Marketing and Promotion Fees as may be collected in
accordance with Section 12.3 above toward a regional advertising program for the
benefit of ROCKY MOUNTAIN CHOCOLATE FACTORY franchisees located within a
particular region. The Franchisor has the right, in its sole discretion, to
determine the composition of all geographic territories and market areas for the
implementation of such regional advertising and promotion campaigns and to
require that the Franchisee participate in such regional advertising programs as
and when they may be established by the Franchisor. If a regional advertising
program is implemented on behalf of a particular region by the Franchisor, the
Franchisor, to the extent reasonably calculable, will only use contributions
from ROCKY MOUNTAIN CHOCOLATE FACTORY franchisees within such region for the
particular regional advertising program. The Franchisor also reserves the right
to establish a co-operative for a particular region to enable the co-operative
to self-administer the regional advertising program. If a regional advertising
co-operative is established by the Franchisor, the Franchisee agrees that it
will participate in it. If the Franchisor creates a regional advertising
program, either as a co-operative or otherwise, the Franchisor has the right to
charge the program for the actual costs of forming and administering the
program.

12.5.    MARKETING SERVICES.

         The Franchisor may, in its sole discretion, offer marketing and
merchandising services to the Franchisee at rates that are competitive with
those charged by third parties offering similar services. The Franchisee may
utilize such services, if they are offered, at the Franchisee's option. Services
offered by the Franchisor may include marketing consulting, graphic design,
copywriting, advertising, public relations and merchandising consultations.

                              13. QUALITY CONTROL

13.1.    COMPLIANCE WITH OPERATIONS MANUAL.

         The Franchisee agrees to maintain and operate the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store in compliance with this Agreement and the standards and
specifications contained in the Operations Manual, as the same may be modified
from time to time by the Franchisor.

13.2.    STANDARDS AND SPECIFICATIONS.

         The Franchisor will make available to the Franchisee standards and
specifications for products and services offered at or through the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store and specifically, for the recipes for Store
Candy, display cases, uniforms, materials, forms, menu boards, items and
supplies used in connection with the Store. The Franchisor reserves the right to
change standards and specifications for services and products offered at or
through the ROCKY MOUNTAIN CHOCOLATE FACTORY Store and for the recipes for Store
Candy, display cases, uniforms, materials, forms, items and supplies used in
connection with the Store upon 30 days prior written notice to the Franchisee.
The Franchisee shall strictly adhere to all of the Franchisor's current
standards and specifications for the ROCKY MOUNTAIN CHOCOLATE FACTORY Store as
prescribed from time to time.


                                       14
<PAGE>

13.3.    INSPECTIONS.

         The Franchisor shall have the right to examine the Franchised Location,
including the inventory, products, equipment, materials and supplies, to ensure
compliance with all standards and specifications set by the Franchisor. The
Franchisor shall conduct such inspections during regular business hours and the
Franchisee may be present at such inspections. The Franchisor, however, reserves
the right to conduct the inspections without prior notice to the Franchisee.

13.4.    RESTRICTIONS ON SERVICES AND PRODUCTS.

         The Franchisee will be required to purchase all of its Factory Candy
for its ROCKY MOUNTAIN CHOCOLATE FACTORY Store from the Franchisor or its
designee. Factory Candy shall consist of any and all varieties from time to time
made available to the Franchisor's franchisees by the Franchisor and its
designated suppliers. The parties hereby acknowledge the uniqueness and
importance of Factory Candy being prepared by the Franchisor or its designee in
order to maintain the uniformity, quality and uniqueness of Factory Candy, and
therefore the Franchisor and its designees are hereby appointed the Franchisee's
exclusive source of Factory Candy. The Franchisee is prohibited from offering or
selling any products or services not authorized by Franchisor, including,
without limitation, operating a catering or wholesale business or offering
Factory Candy, Items, Store Candy or other authorized products for sale on the
Internet, as part of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store. However, if the
Franchisee proposes to offer, conduct or utilize any products, services,
materials, forms, items or supplies for use in connection with or sale through
the ROCKY MOUNTAIN CHOCOLATE FACTORY Store which are not previously approved by
the Franchisor as meeting its specifications, the Franchisee shall first notify
the Franchisor in writing requesting approval. The Franchisor may, in its sole
discretion, for any reason whatsoever, elect to withhold such approval. In order
to make such determination, the Franchisor may require submission of
specifications, information, or samples of such products, services, materials,
forms, items or supplies. The Franchisor will advise the Franchisee within a
reasonable time whether such products, services, materials, forms, items or
supplies meet its specifications.

13.5.    APPROVED SUPPLIERS.

         The Franchisee shall purchase all products, services, supplies and
materials required for the operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY
Store licensed herein, from manufacturers, suppliers or distributors designated
by the Franchisor or, if there is no designated supplier for a particular
product, service, supply or material, from such other suppliers who meet all of
the Franchisor's specifications and standards as to quality, composition,
finish, appearance and service, and who shall adequately demonstrate their
capacity and facilities to supply the Franchisee's needs in the quantities, at
the times, and with the reliability requisite to an efficient operation.

13.6.    REQUEST TO CHANGE SUPPLIER.

         In the event the Franchisee desires to purchase products, services,
supplies or materials from manufacturers, suppliers or distributors other than
those previously approved by the Franchisor, the Franchisee shall, prior to
purchasing any such products, services, supplies or materials, give the
Franchisor a written request by certified mail, return receipt requested, to
change supplier. In the event the Franchisor rejects the Franchisee's requested
new manufacturer, supplier or distributor, the Franchisor must, within 60 days
of the receipt of the Franchisee's request to change supplier, notify the
Franchisee of its rejection. Failure to notify the Franchisee within such time
period shall not constitute approval or a waiver of objections. The Franchisor
may continue from time to time to inspect any manufacturer's, supplier's, or
distributor's facilities and products to assure proper production, processing,
storing and


                                       15
<PAGE>

transportation of products, services, supplies or materials to be purchased from
the manufacturer, supplier or distributor by the Franchisee. Permission for such
inspection shall be a condition of the continued approval of such manufacturer,
supplier or distributor.

13.7.    APPROVAL OF INTENDED SUPPLIER.

         The Franchisor may at its sole discretion, for any reason whatsoever,
elect to withhold approval of the manufacturer, supplier or distributor;
however, in order to make such determination, the Franchisor may require that
samples from a proposed new supplier be delivered to the Franchisor for testing
prior to approval and use. A charge not to exceed the actual cost of the test
may be made by the Franchisor and shall be paid by the Franchisee.

         14. TRADEMARKS, TRADE NAMES AND PROPRIETARY INTERESTS

14.1.    MARKS.

         The Franchisee hereby acknowledges that the Franchisor has the sole
right to license and control the Franchisee's use of the ROCKY MOUNTAIN
CHOCOLATE FACTORY service mark and other of the Marks, and that such Marks shall
remain under the sole and exclusive ownership and control of the Franchisor. The
Franchisee acknowledges that it has not acquired any right, title or interest in
such Marks except for the right to use such Marks in the operation of its ROCKY
MOUNTAIN CHOCOLATE FACTORY Store as it is governed by this Agreement. Except as
permitted in the Operations Manual, the Franchisee agrees not to use any of the
Marks as part of an electronic mail address, or on any sites on the Internet or
World Wide Web and the Franchisee agrees not to use or register any of the Marks
as a domain name on the Internet.

14.2.    NO USE OF OTHER MARKS.

         The Franchisee further agrees that no service mark other than "ROCKY
MOUNTAIN CHOCOLATE FACTORY" or such other Marks as may be specified by the
Franchisor shall be used in the marketing, promotion or operation of the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store.

14.3.    LICENSED METHODS.

         The Franchisee hereby acknowledges that the Franchisor owns and
controls the distinctive plan for the establishment, operation and promotion of
the ROCKY MOUNTAIN CHOCOLATE FACTORY Store and all related licensed methods of
doing business, previously defined as the "LICENSED METHODS", which include, but
are not limited to, gourmet chocolate specialty recipes and cooking methods,
confectionery ordering, processing, manufacturing, stocking and inventory
control, technical equipment standards, order fulfillment methods and customer
relations, marketing techniques, written promotional materials, advertising, and
accounting systems, all of which constitute trade secrets of the Franchisor, and
the Franchisee acknowledges that the Franchisor has valuable rights in and to
such trade secrets. The Franchisee further acknowledges that it has not acquired
any right, title or interest in the Licensed Methods except for the right to use
the Licensed Methods in the operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY
Store as it is governed by this Agreement.

14.4.    EFFECT OF TERMINATION.

         In the event this Agreement is terminated for any reason, the
Franchisee shall immediately cease using any of the Licensed Methods and Marks,
trade names, trade dress, trade secrets, copyrights or any other symbols used to
identify the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, and all rights


                                       16
<PAGE>

the Franchisee had to the same shall automatically terminate. The Franchisee
agrees to execute any documents of assignment as may be necessary to transfer
any rights the Franchisee may possess in and to the Marks.

14.5.    MARK INFRINGEMENT.

         The Franchisee agrees to notify the Franchisor in writing of any
possible infringement or illegal use by others of a trademark the same as or
confusingly similar to the Marks which may come to its attention. The Franchisee
acknowledges that the Franchisor shall have the right, in its sole discretion,
to determine whether any action will be taken on account of any possible
infringement or illegal use. The Franchisor may commence or prosecute such
action in the Franchisor's own name and may join the Franchisee as a party
thereto if the Franchisor determines it to be reasonably necessary for the
continued protection and quality control of the Marks and Licensed Methods. The
Franchisor shall bear the reasonable cost of any such action, including
attorneys' fees. The Franchisee agrees to fully cooperate with the Franchisor in
any such litigation.

14.6.    FRANCHISEE'S BUSINESS NAME.

         The Franchisee acknowledges that the Franchisor has a prior and
superior claim to the ROCKY MOUNTAIN CHOCOLATE FACTORY trade name. The
Franchisee shall not use the phrase or two or more of the words "ROCKY MOUNTAIN
CHOCOLATE FACTORY" or abbreviations thereof in the legal name of its
corporation, partnership or any other business entity used in conducting the
business provided for in this Agreement. The Franchisee also agrees not to
register or attempt to register a trade name using the phrase or two or more of
the words "ROCKY MOUNTAIN CHOCOLATE FACTORY" or abbreviations thereof in the
Franchisee's name or that of any other person or business entity, without the
prior written consent of the Franchisor. When this Agreement is terminated, the
Franchisee shall execute any assignment or other document the Franchisor
requires to transfer to itself any rights the Franchisee may possess in a trade
name utilizing any or all of the words "ROCKY MOUNTAIN CHOCOLATE FACTORY," any
abbreviations thereof or any other Mark owned by the Franchisor. The Franchisee
further agrees that it will not identify itself as being "Rocky Mountain
Chocolate Factory, Inc." or as being associated with the Franchisor in any
manner other than as a franchisee or licensee. The Franchisee further agrees
that in all advertising and promotion and promotional materials it will display
its business name only in obvious conjunction with the phrase "ROCKY MOUNTAIN
CHOCOLATE FACTORY Licensee" or "ROCKY MOUNTAIN CHOCOLATE FACTORY Franchisee" or
with such other words and in such other phrases as may from time to time be
prescribed in the Operations Manual, in the Franchisor's sole discretion.

14.7.    CHANGE OF MARKS.

         In the event that the Franchisor, in its sole discretion, shall
determine it necessary to modify or discontinue use of any proprietary Marks, or
to develop additional or substitute marks, the Franchisee shall, within a
reasonable time after receipt of written notice of such a modification or
discontinuation from the Franchisor, take such action, at the Franchisee's sole
expense, as may be necessary to comply with such modification, discontinuation,
addition or substitution.

14.8.    CREATIVE OWNERSHIP.

         All copyrightable works created by the Franchisee or any of its owners,
officers or employees in connection with the Store shall be the sole property of
the Franchisor. The Franchisee assigns all proprietary rights, including
copyrights, in these works to the Franchisor without additional consideration.
The Franchisee hereby assigns and will execute such additional assignments or
documentation to


                                       17
<PAGE>

effectuate the assignment of all intellectual property, inventions, copyrights
and trade secrets developed in part or in whole in relation to the Store, during
the term of this Agreement, as the Franchisor may deem necessary in order to
enable it, at its expense, to apply for, prosecute and obtain copyrights,
patents or other proprietary rights in the United States and in foreign
countries or in order to transfer to the Franchisor all right, title, and
interest in said property. The Franchisee shall promptly disclose to the
Franchisor all inventions, discoveries, improvements, recipes, creations,
patents, copyrights, trademarks and confidential information relating to the
Store which it or any of its owners, officers or employees has made or may make
solely, jointly or commonly with others and shall promptly create a written
record of the same. In addition to the foregoing, the Franchisee acknowledges
and agrees that any improvements or modifications, whether or not copyrightable,
directly or indirectly related to the Store, shall be deemed to be a part of the
Licensed Methods and shall inure to the benefit of the Franchisor.

                 15. REPORTS, RECORDS AND FINANCIAL STATEMENTS

15.1.    FRANCHISEE REPORTS.

         The Franchisee shall establish and maintain at its own expense a
bookkeeping and accounting system which conforms to the specifications which the
Franchisor may prescribe from time to time, including the Franchisor's current
"Standard Code of Accounts" as described in the Operations Manual. The
Franchisee shall supply to the Franchisor such reports in a manner and form as
the Franchisor may from time to time reasonably require, including:

                  a. Monthly summary reports, in a form as may be prescribed by
         the Franchisor, mailed to the Franchisor postmarked no later than the
         15th day of the month and containing information relative to the
         previous month's operations; and

                  b. Quarterly financial statements, prepared in accordance with
         generally accepted accounting principles ("GAAP"), and consisting of a
         profit and loss statement and balance sheet for the ROCKY MOUNTAIN
         CHOCOLATE FACTORY Store, mailed to the Franchisor postmarked no later
         than the 15th day following the end of the calendar quarter, based on
         operating results of the prior quarter, which shall be submitted in a
         form approved by the Franchisor and shall be certified by the
         Franchisee to be correct.

The Franchisor reserves the right to disclose data derived from such reports,
without identifying the Franchisee, except to the extent identification of the
Franchisee is required by law.

15.2.    ANNUAL FINANCIAL STATEMENTS.

         The Franchisee shall, within 90 days after the end of its fiscal year,
provide to the Franchisor annual unaudited financial statements, compiled or
reviewed by an independent certified public accountant acceptable to and
approved by the Franchisor and prepared in accordance with GAAP, and state and
federal income tax returns prepared by a certified public accountant. If these
financial statements or tax returns show an underpayment of any amounts owed to
the Franchisor, these amounts shall be paid to the Franchisor concurrently with
the submission of the statements or returns.

15.3.    VERIFICATION.

         Each report and financial statement to be submitted to the Franchisor
hereunder shall be signed and verified by the Franchisee.


                                       18
<PAGE>
15.4.    BOOKS AND RECORDS.

         The Franchisee shall maintain all books and records for its ROCKY
MOUNTAIN CHOCOLATE FACTORY Store in accordance with GAAP, consistently applied,
and preserve these records for at least five years after the fiscal year to
which they relate.

15.5.    AUDIT OF BOOKS AND RECORDS.

         The Franchisee shall permit the Franchisor to inspect and audit the
books and records of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store at any
reasonable time, at the Franchisor's expense. If any audit discloses a
deficiency in amounts for payments owed to the Franchisor pursuant to this
Agreement, then such amounts shall become immediately payable to the Franchisor
by the Franchisee, with interest from the date such payments were due at the
lesser of 1 1/2% per month or the maximum rate allowed by law. In addition, if
it is found by such audit that the Gross Retail Sales of the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store have been understated by five percent (5%) or more
during the period audited, the Franchisee shall pay all reasonable costs and
expenses the Franchisor incurred in connection with such audit.

15.6.    FAILURE TO COMPLY WITH REPORTING REQUIREMENTS.

         If the Franchisee fails to prepare and submit any statement or report
as required under this Article 15, then the Franchisor shall have the right to
treat the Franchisee's failure as good cause for termination of this Agreement.
In addition to all other remedies available to the Franchisor, in the event that
the Franchisee fails to prepare and submit any statement or report required
under this Article 15 for two consecutive reporting periods, the Franchisor
shall be entitled to make an audit, at the expense of the Franchisee, of the
Franchisee's books, records and accounts, including the Franchisee's bank
accounts, which in any way pertain to the Gross Retail Sales or the Adjusted
Gross Retail Sales of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The statements
or reports not previously submitted shall be prepared by or under the direction
and supervision of an independent certified public accountant selected by the
Franchisor.

15.7.    SHOPPING SERVICE.

         The Franchisor reserves the right to use third party shopping services
from time to time to evaluate the conduct of the Franchisee's ROCKY MOUNTAIN
CHOCOLATE FACTORY Store, including such things as customer service, cleanliness,
merchandising and proper use of registers. The Franchisor may use such shopping
services to inspect the Franchisee's ROCKY MOUNTAIN CHOCOLATE FACTORY Store at
any time at the Franchisor's expense, without prior notification to the
Franchisee. The Franchisor may make the results of any such service evaluation
available to the Franchisee, in the Franchisor's sole discretion.

                                  16. TRANSFER

16.1.    TRANSFER BY FRANCHISEE.

         The franchise granted herein is personal to the Franchisee and, except
as stated below, the Franchisor shall not allow or permit any transfer,
assignment, subfranchise or conveyance of this Agreement or any interest
hereunder. As used in this Agreement, the term "TRANSFER" includes the
Franchisee's voluntary, involuntary, direct or indirect assignment, sale, gift
or other disposition of any interest in: (1) this Agreement; (2) the Franchisee
entity; (3) the Store governed by this Agreement; or (4) all or a substantial
portion of the assets of the Store.


                                       19
<PAGE>

16.2.    PRE-CONDITIONS TO FRANCHISEE'S TRANSFER.

         The Franchisee shall not engage in a transfer unless the Franchisee
obtains the Franchisor's written consent and the Franchisee and the proposed
transferee comply with the following requirements:

                  a. All amounts due and owing pursuant to this Agreement by the
         Franchisee to the Franchisor or its affiliates or to third parties
         whose debts or obligations the Franchisor has guaranteed on behalf of
         the Franchisee, if any, are paid in full;

                  b. The proposed transferee agrees to operate the Store as a
         ROCKY MOUNTAIN CHOCOLATE FACTORY Store and agrees to satisfactorily
         complete the initial training program described in this Agreement,
         which training must be completed to the Franchisor's satisfaction prior
         to the effectiveness of the transfer;

                  c. The proposed transferee agrees to execute the then current
         form of Franchise Agreement which shall supersede this Agreement in all
         respects. If a new Franchise Agreement is signed, the terms thereof may
         differ from the terms of this Agreement; provided, however, the
         transferee will not be required to pay any initial franchise fee;

                  d. The Franchisee provides written notice to the Franchisor 30
         days' prior to the proposed effective date of the transfer, and
         includes information reasonably detailed to enable the Franchisor to
         evaluate the terms and conditions of the proposed transfer and which at
         a minimum includes a written offer from the proposed transferee;

                  e. The proposed transferee provides information to the
         Franchisor sufficient for the Franchisor to assess the proposed
         transferee's business experience, aptitude and financial qualification,
         and the Franchisor approves the proposed transferee as a franchisee;

                  f. The Franchisee executes a general release, in a form
         satisfactory to the Franchisor, of any and all claims against the
         Franchisor, its affiliates and their respective officers, directors,
         employees and agents;

                  g. The Franchisee or the proposed transferee pay a
         nonrefundable transfer fee of $2,500 before the proposed transferee
         attends the initial training program; provided, however, that no
         transfer fee will be charged for a transfer by the Franchisee to a
         corporation wholly-owned by the Franchisee, between partners of a
         partnership Franchisee or to a spouse of a Franchisee upon the death or
         disability of the Franchisee;

                  h. The Franchisee remodels the Store and upgrades equipment,
         including installing the Franchisor's then current System, fixtures,
         furnishings and signage, if the Franchisor so requires; and

                  i. The Franchisee agrees to abide by all post-termination
         covenants set forth herein, including, without limitation, the covenant
         not to compete in Section 20.2 below.

16.3.    FRANCHISOR'S APPROVAL OF TRANSFER.

         The Franchisor has 30 days from the date of the written notice to
approve or disapprove in writing, of the Franchisee's proposed transfer, which
approval shall not be unreasonably withheld. The Franchisee acknowledges that
the proposed transferee shall be evaluated for approval by the Franchisor


                                       20
<PAGE>

based on the same criteria as is currently being used to assess new franchisees
of the Franchisor and that the Franchisor shall provide such proposed
transferee, if appropriate, with such disclosures as may be required by state or
federal law. If the Franchisee and its proposed transferee comply with all
conditions for transfer set forth herein and the Franchisor has not given the
Franchisee notice of its approval or disapproval within such period, approval is
deemed granted.

16.4.    RIGHT OF FIRST REFUSAL.

         In the event the Franchisee wishes to engage in a transfer, the
Franchisee agrees to grant to the Franchisor a 30 day right of first refusal to
purchase such rights, interest or assets on the same terms and conditions as are
contained in the written notice set forth in Section 16.2.d; provided, however,
the following additional terms and conditions shall apply:

                  a. The 30 day right of first refusal period will run
         concurrently with the period in which the Franchisor has to approve or
         disapprove the proposed transferee;

                  b. The right of first refusal will be effective for each
         proposed transfer and any material change in the terms or conditions of
         the proposed transfer shall be deemed a separate offer on which the
         Franchisor shall have a new 30 day right of first refusal;

                  c. If the consideration or manner of payment offered by a
         proposed transferee is such that the Franchisor may not reasonably be
         required to furnish the same, then the Franchisor may purchase the
         interest which is proposed to be sold for the reasonable cash
         equivalent. If the parties cannot agree within a reasonable time on the
         cash consideration, each of the Franchisor and the Franchisee shall
         designate an independent appraiser who, in turn, shall designate a
         third independent appraiser. The third appraiser's determination will
         be binding upon the parties. All expenses of the appraiser shall be
         paid for equally between the Franchisor and the Franchisee; and

                  d. If the Franchisor chooses not to exercise its right of
         first refusal, the Franchisee shall be free to complete the transfer
         subject to compliance with Sections 16.2 and 16.3 above. Absence of a
         reply to the Franchisee's notice of a proposed transfer within the
         30-day period may be deemed a waiver of such right of first refusal.

16.5.    TYPES OF TRANSFERS.

         The Franchisee acknowledges that the Franchisor's right to approve or
disapprove of a proposed transfer as provided for above, shall apply (1) if the
Franchisee is a partnership, corporation or other business association, (i) to
the addition or deletion of a partner, shareholder or members of the association
or the transfer of any ownership interest among existing partners, shareholders
or members; (ii) to any proposed transfer of 25% or more of the interest
(whether stock, partnership interest or membership interest) to a third party,
whether such transfer occurs in a single transaction or several transactions;
and (2) if the Franchisee is an individual, to the transfer from such individual
or individuals to a corporation or other entity controlled by them, in which
case the Franchisor's approval will be conditioned upon: (i) the continuing
personal guarantee of the individual (or individuals) for the performance of
obligations under this Agreement; and (ii) a limitation on the corporation's or
other entity's business activity to that of operating the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store and related activities provided that with respect to
such transfer, the Franchisor's right of first refusal to purchase shall not
apply and the Franchisor will not charge any transfer fee.


                                       21
<PAGE>

16.6. TRANSFER BY THE FRANCHISOR.

         This Agreement is fully assignable by the Franchisor and shall inure to
the benefit of any assignee or other legal successor in interest, and the
Franchisor shall in such event be fully released from the same.

16.7.    FRANCHISEE'S DEATH OR DISABILITY.

         Upon the death or permanent disability of the Franchisee (or individual
owning 25% or more of, or controlling the Franchisee entity), the personal
representative of such person shall transfer the Franchisee's interest in this
Agreement or such interest in the Franchisee entity to an approved third party.
Such disposition of this Agreement or such interest (including, without
limitation, transfer by bequest or inheritance) shall be completed within a
reasonable time, not to exceed 120 days from the date of death or permanent
disability (unless extended by probate proceedings), and shall be subject to all
terms and conditions applicable to transfers contained in this Article 16.
Provided, however, that for purposes of this Section 16.7, there shall be no
transfer fee charged by the Franchisor. Failure to transfer the interest within
said period of time shall constitute a breach of this Agreement. For the
purposes hereof, the term "PERMANENT DISABILITY" shall mean a mental or physical
disability, impairment or condition that is reasonably expected to prevent or
actually does prevent the Franchisee (or the owner of 25% or more of, or
controlling, the Franchisee entity) from supervising the management and
operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store for a period of 120 days
from the onset of such disability, impairment or condition.

                            17. TERM AND EXPIRATION

17.1.    TERM.

         The term of this Agreement begins on the date this Agreement is fully
executed and ends ten years later, unless sooner terminated as provided herein.

17.2.    CONTINUATION.

         If, for any reason, the Franchisee continues to operate the Store
beyond the term of this Agreement or any subsequent renewal period, it shall be
deemed to be on a month-to-month basis under the terms of this Agreement and
subject to termination upon 30 days notice or as required by law. If said
holdover period exceeds 90 days, this Agreement is subject to immediate
termination unless applicable law requires a longer period. Upon termination
after any holdover period, the Franchisee and those in active concert with the
Franchisee, including family members, officers, directors, partners and managing
agents, are subject to the terms of Articles 20 and 22 and Section 18.5 of this
Agreement and all other applicable post-termination obligations contained in
this Agreement.

17.3.    RIGHTS UPON EXPIRATION.

         At the end of the initial term hereof the Franchisee shall have the
option to renew its franchise rights for one additional ten year term, by
acquiring successor franchise rights, if the Franchisor does not exercise its
right not to offer a successor franchise in accordance with Section 17.5 below
and if the Franchisee:

                  a. At least 30 days prior to expiration of the term, executes
         the form of Franchise Agreement then in use by the Franchisor;


                                       22
<PAGE>

                  b. Has complied with all provisions of this Agreement during
         the current term, including the payment on a timely basis of all
         Royalties and other fees due hereunder. "COMPLIANCE" shall mean, at a
         minimum, that the Franchisee has not received any written notification
         from the Franchisor of breach hereunder more than four times during the
         term hereof;

                  c. Upgrades and/or remodels the ROCKY MOUNTAIN CHOCOLATE
         FACTORY Store and its operations at the Franchisee's sole expense (the
         necessity of which shall be in the sole discretion of the Franchisor)
         to conform with the then current Operations Manual;

                  d. Executes a general release, in a form satisfactory to the
         Franchisor, of any and all claims against the Franchisor and its
         affiliates, and their respective officers, directors, employees and
         agents arising out of or relating to this Agreement; and

                  e. Pays a successor franchise fee of $100.

17.4.    EXERCISE OF OPTION FOR SUCCESSOR FRANCHISE.

         The Franchisee may exercise its option for a successor franchise by
giving written notice of such exercise to the Franchisor not less than 90 days
prior to the scheduled expiration of this Agreement. If the Franchisee fails to
provide such notice to the Franchisor within the time frame set forth in the
preceding sentence, but notifies the Franchisor of its desire to obtain a
successor franchise prior to the expiration of the then-current term of this
Agreement, the Franchisee shall pay the Franchisor a penalty of $1,000 for every
30-day period that the Franchisee was late, plus attorneys' and administrative
fees and expenses attributable to such late renewal. The Franchisee's successor
franchise rights shall become effective by signing the Franchise Agreement then
currently being offered to new franchisees of the Franchisor.

17.5.    CONDITIONS OF REFUSAL.

         The Franchisor shall not be obligated to offer the Franchisee a
successor franchise upon the expiration of this Agreement if the Franchisee
fails to comply with any of the above conditions of renewal. In such event,
except for failure to execute the then current Franchise Agreement or pay the
successor franchise fee, the Franchisor shall give notice of expiration at least
180 days prior to the expiration of the term, and such notice shall set forth
the reasons for such refusal to offer successor franchise rights. Upon the
expiration of this Agreement, the Franchisee shall comply with the provisions of
Section 18.5 below.

                          18. DEFAULT AND TERMINATION

18.1.    TERMINATION BY FRANCHISOR - EFFECTIVE UPON NOTICE.

         The Franchisor shall have the right, at its option, to terminate this
Agreement and all rights granted the Franchisee hereunder, without affording the
Franchisee any opportunity to cure any default (subject to any state laws to the
contrary, where state law shall prevail), effective upon receipt of notice by
the Franchisee, addressed as provided in Section 22.12, upon the occurrence of
any of the following events:

                  a. ABANDONMENT. If the Franchisee ceases to operate the ROCKY
         MOUNTAIN CHOCOLATE FACTORY Store or otherwise abandons the ROCKY
         MOUNTAIN CHOCOLATE FACTORY Store for a period of five consecutive days,
         or any shorter period that indicates an intent by the Franchisee to
         discontinue operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store,
         unless and only to the extent that full operation of the ROCKY


                                       23
<PAGE>

         MOUNTAIN CHOCOLATE FACTORY Store is suspended or terminated due to
         fire, flood, earthquake or other similar causes beyond the Franchisee's
         control and not related to the availability of funds to the Franchisee;

                  b. INSOLVENCY; ASSIGNMENTS. If the Franchisee becomes
         insolvent or is adjudicated a bankrupt; or any action is taken by the
         Franchisee, or by others against the Franchisee under any insolvency,
         bankruptcy or reorganization act, (this provision may not be
         enforceable under federal bankruptcy law, 11 U.S.C. Sections 101 et
         seq.), or if the Franchisee makes an assignment for the benefit of
         creditors, or a receiver is appointed by the Franchisee;

                  c. UNSATISFIED JUDGMENTS; LEVY; FORECLOSURE. If any material
         judgment (or several judgments which in the aggregate are material) is
         obtained against the Franchisee and remains unsatisfied or of record
         for 30 days or longer (unless a supersedeas or other appeal bond has
         been filed); or if execution is levied against the Franchisee's
         business or any of the property used in the operation of the ROCKY
         MOUNTAIN CHOCOLATE FACTORY Store and is not discharged within five
         days; or if the real or personal property of the Franchisee's business
         shall be sold after levy thereupon by any sheriff, marshal or
         constable;

                  d. CRIMINAL CONVICTION. If the Franchisee is convicted of a
         felony, a crime involving moral turpitude, or any crime or offense that
         is reasonably likely, in the sole opinion of the Franchisor, to
         materially and unfavorably affect the Licensed Methods, Marks, goodwill
         or reputation thereof;

                  e. FAILURE TO MAKE PAYMENTS. If the Franchisee fails to pay
         any amounts due the Franchisor or affiliates, including any amounts
         which may be due as a result of any subleases or lease assignments
         between the Franchisee and the Franchisor, within 10 days after
         receiving notice that such fees or amounts are overdue;

                  f. MISUSE OF MARKS. If the Franchisee misuses or fails to
         follow the Franchisor's directions and guidelines concerning use of the
         Franchisor's Marks and fails to correct the misuse or failure within
         ten days after notification from the Franchisor;

                  g. UNAUTHORIZED DISCLOSURE. If the Franchisee intentionally or
         negligently discloses to any unauthorized person the contents of or any
         part of the Franchisor's Operations Manual or any other trade secrets
         or confidential information of the Franchisor;

                  h. REPEATED NONCOMPLIANCE. If the Franchisee has received two
         previous notices of default from the Franchisor and is again in default
         of this Agreement at any time during the term of this Agreement,
         regardless of whether the previous defaults were cured by the
         Franchisee; or

                  i. UNAUTHORIZED TRANSFER. If the Franchisee sells, transfers
         or otherwise assigns the Franchise, an interest in the Franchise or the
         Franchisee entity, this Agreement, the ROCKY MOUNTAIN CHOCOLATE FACTORY
         Store or a substantial portion of the assets of the ROCKY MOUNTAIN
         CHOCOLATE FACTORY Store owned by the Franchisee without complying with
         the provisions of Article 16 above.

18.2.    TERMINATION BY FRANCHISOR - THIRTY DAYS NOTICE.

         The Franchisor shall have the right to terminate this Agreement
(subject to any state laws to the contrary, where state law shall prevail),
effective upon 30 days written notice to the Franchisee, if the


                                       24
<PAGE>

Franchisee breaches any other provision of this Agreement and fails to cure the
default during such 30-day period. In that event, this Agreement will terminate
without further notice to the Franchisee, effective upon expiration of the
30-day period. Defaults shall include, but not be limited to, the following:

                  a. FAILURE TO MAINTAIN STANDARDS. The Franchisee fails to
         maintain the then-current operating procedures and adhere to the
         specifications and standards established by the Franchisor as set forth
         herein or in the Operations Manual or otherwise communicated to the
         Franchisee;

                  b. DECEPTIVE PRACTICES. The Franchisee engages in any
         unauthorized business or practice or sells any unauthorized product or
         service under the Franchisor's Marks or under a name or mark which is
         confusingly similar to the Franchisor's Marks;

                  c. FAILURE TO OBTAIN CONSENT. The Franchisee fails, refuses or
         neglects to obtain the Franchisor's prior written approval or consent
         as required by this Agreement;

                  d. FAILURE TO COMPLY WITH MANUAL. The Franchisee fails or
         refuses to comply with the then-current requirements of the Operations
         Manual; or

                  e. BREACH OF RELATED AGREEMENT. The Franchisee defaults under
         any term of the lease, sublease or lease assignment for the Franchised
         Location, any equipment lease or any other agreement material to the
         ROCKY MOUNTAIN CHOCOLATE FACTORY Store or any other Franchise Agreement
         between the Franchisor and the Franchisee and such default is not cured
         within the time specified in such lease, sublease, other agreement or
         other Franchise Agreement. Provided, however, so long as financing from
         the United States Small Business Administration remains outstanding,
         the Franchisee will be given the same opportunity to cure defaults
         under any agreement between the Franchisor or its affiliates and the
         Franchisee, as the Franchisee is given under this Agreement

Notwithstanding the foregoing, if the breach is curable, but is of a nature
which cannot be reasonably cured within such 30-day period and the Franchisee
has commenced and is continuing to make good faith efforts to cure the breach
during such 30-day period, the Franchisee shall be given an additional
reasonable period of time to cure the same, and this Agreement shall not
automatically terminate without written notice from the Franchisor.

18.3.    FRANCHISOR'S REMEDIES.

                  a. FAILURE TO PAY. In addition to all other remedies that may
         be exercised by the Franchisor upon a default by the Franchisee under
         the terms of this Agreement, the Franchisor reserves the right to
         collect amounts due from the Franchisee to any third party and to pay
         the third party directly. If the Franchisor collects any such amounts,
         the Franchisor may, in its sole discretion, charge the Franchisee an
         administrative fee to reimburse the Franchisor for its costs of
         collecting and paying such amounts. Any administrative fee charged
         would not exceed 15% of the total amount of money collected.
         Additionally, in the event this Agreement is terminated by the
         Franchisor prior to its expiration as set forth in Sections 18.1 or
         18.2 above, the Franchisee acknowledges and agrees that in addition to
         all other available remedies, the Franchisor shall
         have the right to recover lost future Royalties during any period in
         which the Franchisee fails to pay such Royalties through and including
         the remainder of the then current term of this Agreement.


                                       25
<PAGE>

                  b. LIQUIDATED DAMAGES. Franchisee acknowledges that, if there
         is any act in violation of Sections 18.1 or 18.2 of this Agreement, it
         will be impossible to determine with specificity the damage to
         Franchisor. Therefore, for purposes of this Agreement, as liquidated
         damages and not as a penalty, for each day that Franchisee is in
         violation of Sections 18.1 or 18.2 of this Agreement, Franchisee shall
         pay to Franchisor the sum of $500.

18.4.    RIGHT TO PURCHASE.

         Upon termination or expiration of this Agreement for any reason, the
Franchisor shall have the option to purchase some or all of the assets of the
ROCKY MOUNTAIN CHOCOLATE FACTORY Store, which may include, at the Franchisor's
option, all of the Franchisee's interest, if any, in and to the real estate upon
which the ROCKY MOUNTAIN CHOCOLATE FACTORY Store is located, and all buildings
and other improvements thereon, including leasehold interests, at fair market
value, less any amount apportioned to the goodwill of the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store which is attributable to the Franchisor's Marks and
Licensed Methods, and less any amounts owed to the Franchisor by the Franchisee.
The following additional terms shall apply to the Franchisor's exercise of this
option:

                  a. The Franchisor's option hereunder shall be exercisable by
         providing the Franchisee with written notice of its intention to
         exercise the option given to the Franchisee no later than the effective
         date of termination, in the case of termination, or at least 90 days
         prior to the expiration of the term of the franchise, in the case of
         non-renewal. Such notice shall include a description of the assets the
         Franchisor will purchase.

                  b. In the event that the Franchisor and the Franchisee cannot
         agree to a fair market value for the assets of the ROCKY MOUNTAIN
         CHOCOLATE FACTORY Store, then the fair market value shall be determined
         by an independent third party appraisal. The Franchisor and the
         Franchisee shall each select one independent, qualified appraiser, and
         the two so selected shall select a third appraiser, all three to
         determine the fair market value of the ROCKY MOUNTAIN CHOCOLATE FACTORY
         Store. The purchase price shall be the median of the fair market values
         as determined by the three appraisers.

                  c. The Franchisor and the Franchisee agree that the terms and
         conditions of this right and option to purchase may be recorded, if
         deemed appropriate by the Franchisor, in the real property records and
         the Franchisor and the Franchisee further agree to execute such
         additional documentation as may be necessary and appropriate to
         effectuate such recording.

         The closing for the purchase of the assets of the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store will take place no later than 60 days after the
termination or nonrenewal date. The Franchisor will pay the purchase price in
full at the closing, or, at its option, in five equal consecutive monthly
installments with interest at a rate of 10% per annum. The Franchisee must sign
all documents of assignment and transfer as are reasonably necessary for
purchase of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store by the Franchisor.

         In the event that the Franchisor does not exercise the Franchisor's
right to purchase the assets of the Franchisee's ROCKY MOUNTAIN CHOCOLATE
FACTORY Store as set forth above, the Franchisee will be free to keep or to
sell, after such termination or expiration, to any third party, all of the
assets of its ROCKY MOUNTAIN CHOCOLATE FACTORY Store; provided, however, that
all appearances of the Marks are first removed in a manner approved in writing
by the Franchisor. The Franchisor will only be obligated to purchase any assets
of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store in the event and to the extent it
is required by applicable state or federal law.


                                       26
<PAGE>

18.5.    OBLIGATIONS OF FRANCHISEE UPON TERMINATION OR EXPIRATION.

         The Franchisee is obligated upon termination or expiration of this
Agreement to immediately:

                  a. Pay to the Franchisor all Royalties, other fees, and any
         and all amounts or accounts payable then owed the Franchisor or its
         affiliates pursuant to this Agreement, or pursuant to any other
         agreement, whether written or oral, including subleases and lease
         assignments, between the parties;

                  b. Cease to identify itself as a ROCKY MOUNTAIN CHOCOLATE
         FACTORY Franchisee or publicly identify itself as a former Franchisee
         or use any of the Franchisor's trade secrets, signs, symbols, devices,
         trade names, trademarks, or other materials.

                  c. Immediately cease to identify the Franchised Location as
         being, or having been, associated with the Franchisor, and immediately
         cease using any proprietary mark of the Franchisor or any mark in any
         way associated with the ROCKY MOUNTAIN CHOCOLATE FACTORY Marks and
         Licensed Methods;

                  d. Deliver to the Franchisor all Factory Candy, Store Candy
         and Items of inventory that bear the ROCKY MOUNTAIN CHOCOLATE FACTORY
         trade name or logo, signs, sign-faces, advertising materials, forms and
         other materials bearing any of the Marks or otherwise identified with
         the Franchisor and obtained by and in connection with this Agreement;

                  e. Immediately deliver to the Franchisor the Operations Manual
         and all other information, documents and copies thereof which are
         proprietary to the Franchisor;

                  f. Promptly take such action as may be required to cancel all
         fictitious or assumed names or equivalent registrations relating to its
         use of any Marks which are under the exclusive control of the
         Franchisor or, at the option of the Franchisor, assign the same to the
         Franchisor;

                  g. Notify the telephone company and all telephone directory
         publishers of the termination or expiration of the Franchisee's right
         to use any telephone number and any regular, classified or other
         telephone directory listings associated with any Mark and to authorize
         transfer thereof to the Franchisor or its designee. The Franchisee
         acknowledges that, as between the Franchisee and the Franchisor, the
         Franchisor has the sole rights to and interest in all telephone,
         telecopy or facsimile machine numbers and directory listings associated
         with any Mark. The Franchisee authorizes the Franchisor, and hereby
         appoints the Franchisor and any of its officers as the Franchisee's
         attorney-in-fact, to direct the telephone company and all telephone
         directory publishers to transfer any telephone, telecopy or facsimile
         machine numbers and directory listings relating to the ROCKY MOUNTAIN
         CHOCOLATE FACTORY Store to the Franchisor or its designee, should the
         Franchisee fail or refuse to do so, and the telephone company and all
         telephone directory publishers may accept such direction or this
         Agreement as conclusive of the Franchisor's exclusive rights in such
         telephone numbers and directory listings and the Franchisor's authority
         to direct their transfer;

                  h. Abide by all restrictive covenants set forth in Article 20
         of this Agreement;

                  i. Sign a general release, in a form satisfactory to the
         Franchisor, of any and all claims against the Franchisor, its
         affiliates and their respective officers, directors, employees and
         agents; and


                                       27
<PAGE>

                  j. If applicable, take such action as may be required to
         remove from the Internet all sites referring to the Franchisee's former
         ROCKY MOUNTAIN CHOCOLATE FACTORY Store or any of the Marks and to
         cancel or assign to the Franchisor, in the Franchisor's sole
         discretion, all rights to any domain names for any sites on the
         Internet that refer to the Franchisee's former ROCKY MOUNTAIN CHOCOLATE
         FACTORY Store or any of the Marks.

18.6.    STATE AND FEDERAL LAW.

         THE PARTIES ACKNOWLEDGE THAT IN THE EVENT THE TERMS OF THIS AGREEMENT
REGARDING TERMINATION OR EXPIRATION ARE INCONSISTENT WITH APPLICABLE STATE OR
FEDERAL LAW, SUCH LAW SHALL GOVERN THE FRANCHISEE'S RIGHTS REGARDING TERMINATION
OR EXPIRATION OF THIS AGREEMENT.

                  19. BUSINESS RELATIONSHIP

19.1.    INDEPENDENT BUSINESSPERSONS.

         The parties agree that each of them are independent businesspersons,
that their only relationship is by virtue of this Agreement and that no
fiduciary relationship is created hereunder. Neither party is liable or
responsible for the other's debts or obligations, nor shall either party be
obligated for any damages to any person or property directly or indirectly
arising out of the operation of the other party's business authorized by or
conducted pursuant to this Agreement. The Franchisor and the Franchisee agree
that neither of them will hold themselves out to be the agent, employer or
partner of the other and that neither of them has the authority to bind or incur
liability on behalf of the other.

19.2.    PAYMENT OF THIRD PARTY OBLIGATIONS.

         The Franchisor shall have no liability for the Franchisee's obligations
to pay any third parties, including without limitation, any product vendors, or
any sales, use, service, occupation, excise, gross receipts, income, property or
other tax levied upon the Franchisee, the Franchisee's property, the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store or upon the Franchisor in connection with the
sales made or business conducted by the Franchisee (except any taxes the
Franchisor is required by law to collect from the Franchisee with respect to
purchases from the Franchisor).

19.3.    INDEMNIFICATION.

         The Franchisee agrees to indemnify, defend and hold harmless the
Franchisor, its subsidiaries and affiliates, and their respective shareholders,
directors, officers, employees, agents, successors and assignees, (the
"INDEMNIFIED PARTIES") against, and to reimburse them for all claims,
obligations and damages described in this Section 19.3, any and all third party
obligations described in Section 19.2 and any and all claims and liabilities
directly or indirectly arising out of the operation of the ROCKY MOUNTAIN
CHOCOLATE FACTORY Store or arising out of the use of the Marks and Licensed
Methods in any manner not in accordance with this Agreement. For purposes of
this indemnification, claims shall mean and include all obligations, actual and
consequential damages and costs reasonably incurred in the defense of any claim
against the Indemnified Parties, including, without limitation, reasonable
accountants', attorneys' and expert witness fees, costs of investigation and
proof of facts, court costs, other litigation expenses and travel and living
expenses. The Franchisor shall have the right to defend any such claim against
it. This indemnity shall continue in full force and effect subsequent to and
notwithstanding the expiration or termination of this Agreement.


                                       28
<PAGE>

                           20. RESTRICTIVE COVENANTS

20.1.    NON-COMPETITION DURING TERM.

         The Franchisee acknowledges that, in addition to the license of the
Marks hereunder, the Franchisor has also licensed commercially valuable
information which comprises and is a part of the Licensed Methods, including
without limitation, recipes, operations, marketing, advertising and related
information and materials and that the value of this information derives not
only from the time, effort and money which went into its compilation, but from
the usage of the same by all the franchisees of the Franchisor using the Marks
and Licensed Methods. The Franchisee therefore agrees that other than the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store licensed herein, neither the Franchisee nor any
of the Franchisee's officers, directors, shareholders or partners, nor any
member of his or their immediate families, shall during the term of this
Agreement:

                  a. have any direct or indirect controlling interest as a
         disclosed or beneficial owner in a "Competitive Business" as defined
         below;

                  b. perform services as a director, officer, manager, employee,
         consultant, representative, agent or otherwise for a Competitive
         Business; or

                  c. divert or attempt to divert any business related to, or any
         customer or account of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store, the
         Franchisor's business or any other ROCKY MOUNTAIN CHOCOLATE FACTORY
         franchisee's business, by direct inducement or otherwise, or divert or
         attempt to divert the employment of any employee of the Franchisor or
         another franchisee licensed by the Franchisor to use the Marks and
         Licensed Methods, to any Competitive Business by any direct inducement
         or otherwise.

The term "COMPETITIVE BUSINESS" as used in this Agreement shall mean any
business operating, or granting franchises or licenses to others to operate, a
retail, wholesale, distribution or manufacturing business deriving more than 10%
of its gross receipts from the sale, processing or manufacturing of chocolate
candies and other non-chocolate confectionery items, Items or other products
which are offered in ROCKY MOUNTAIN CHOCOLATE FACTORY Stores and which
constitute 10% or more of the Gross Retail Sales of any ROCKY MOUNTAIN CHOCOLATE
FACTORY Store; provided, however, the Franchisee shall not be prohibited from
owning securities in a Competitive Business if such securities are listed on a
stock exchange or traded on the over-the-counter market and represent 5% or less
of that class of securities issued and outstanding.

20.2.    POST-TERMINATION COVENANT NOT TO COMPETE.

         Upon termination or expiration of this Agreement for any reason, the
Franchisee and its officers, directors, shareholders, and/or partners agree
that, for a period of two years commencing on the effective date of termination
or expiration, or the date on which the Franchisee ceases to conduct business,
whichever is later, neither Franchisee nor its officers, directors,
shareholders, and/or partners shall have any direct or indirect interest
(through a member of any immediate family of the Franchisee or its Owners or
otherwise) as a disclosed or beneficial owner, investor, partner, director,
officer, employee, consultant, representative or agent or in any other capacity
in any Competitive Business, defined in Section 20.1 above, located or operating
within a 10-mile radius of the Franchised Location or within a 10-mile radius of
any other franchised or company-owned ROCKY MOUNTAIN CHOCOLATE FACTORY Store.
The restrictions of this Section shall not be applicable to the ownership of
shares of a class of securities listed on a stock exchange or traded on the
over-the-counter market that represent 5% or less of the number of


                                       29
<PAGE>

shares of that class of securities issued and outstanding. The Franchisee and
its officers, directors, shareholders, and/or partners expressly acknowledge
that they possess skills and abilities of a general nature and have other
opportunities for exploiting such skills. Consequently, enforcement of the
covenants made in this Section will not deprive them of their personal goodwill
or ability to earn a living.

20.3.    CONFIDENTIALITY OF PROPRIETARY INFORMATION.

         The Franchisee shall treat all information it receives which comprises
or is a part of the Licensed Methods licensed hereunder as proprietary and
confidential and will not use such information in an unauthorized manner or
disclose the same to any unauthorized person without first obtaining the
Franchisor's written consent. The Franchisee acknowledges that the Marks and the
Licensed Methods have valuable goodwill attached to them, that the protection
and maintenance thereof is essential to the Franchisor and that any unauthorized
use or disclosure of the Marks and Licensed Methods will result in irreparable
harm to the Franchisor.

20.4.    CONFIDENTIALITY AGREEMENT.

         The Franchisor requires that the Franchisee cause each of its officers,
directors, partners, shareholders, and General Manager, and, if the Franchisee
is an individual, immediate family members, to execute a confidentiality and
noncompetition agreement containing the above restrictions, in the form attached
hereto as Exhibit VI and incorporated herein by reference.

                                 21. INSURANCE

21.1.    INSURANCE COVERAGE.

         The Franchisee shall procure, maintain and provide evidence of (i)
comprehensive general liability insurance for the Franchised Location and its
operations with a limit of not less than $1,000,000 combined single limit, or
such greater limit as may be required as part of any lease agreement for the
Franchised Location; (ii) automobile liability insurance covering all employees
of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store with authority to operate a motor
vehicle in an amount not less than $1,000,000 or, with the prior written consent
of the Franchisor, such lesser amount as may be available at a commercially
reasonable rate, but in no event less than any statutorily imposed minimum
coverage; (iii) unemployment and worker's compensation insurance with a broad
form all-states endorsement coverage sufficient to meet the requirements of the
law; and (iv) all-risk personal property insurance in an amount equal to at
least 100% of the replacement costs of the contents and tenant improvements
located at the ROCKY MOUNTAIN CHOCOLATE FACTORY Store. All of the required
policies of insurance shall name the Franchisor as an additional named insured
and shall provide for a 30-day advance written notice to the Franchisor of
cancellation.

21.2.    PROOF OF INSURANCE COVERAGE.

         The Franchisee will provide proof of insurance to the Franchisor prior
to commencement of operations at its ROCKY MOUNTAIN CHOCOLATE FACTORY Store.
This proof will show that the insurer has been authorized to inform the
Franchisor in the event any policies lapse or are cancelled. The Franchisor has
the right to change the minimum amount of insurance the Franchisee is required
to maintain by giving the Franchisee prior reasonable notice, giving due
consideration to what is reasonable and customary in the similar business. The
Franchisee's failure to comply with the insurance provisions set forth herein
shall be deemed a material breach of this Agreement. In the event of any lapse
in insurance coverage, in addition to all other remedies, the Franchisor shall
have the right to demand that the Franchisee cease operations of the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store until


                                       30
<PAGE>

coverage is reinstated, or, in the alternative, pay any delinquencies in premium
payments and charge the same back to the Franchisee.

                          22. MISCELLANEOUS PROVISIONS

22.1.    GOVERNING LAW/CONSENT TO VENUE AND JURISDICTION.

         Except to the extent governed by the United States Trademark Act of
1946 (Lanham Act, 15 U.S.C. Sections 1051 et seq.) or other federal law, this
Agreement shall be interpreted under the laws of the state of Colorado and any
disputes between the parties shall be governed by and determined in accordance
with the substantive laws of the state of Colorado, which laws shall prevail in
the event of any conflict of law. The Franchisee and the Franchisor have
negotiated regarding a forum in which to resolve any disputes that may arise
between them and have agreed to select a forum in order to promote stability in
their relationship. Therefore, if a claim is asserted in a legal proceeding
involving the Franchisee, its officers, directors, partners or managers
(collectively, "FRANCHISEE AFFILIATES") and the Franchisor, its officers,
directors or sales employees (collectively, "FRANCHISOR AFFILIATES"), all
parties agree that the exclusive venue for disputes between them shall be in the
state courts in La Plata County, Colorado and federal courts located in Colorado
and each waive any objections they may have to the personal jurisdiction of or
venue in the state courts in La Plata County and federal courts located in
Colorado. The Franchisor, the Franchisor Affiliates, the Franchisee and the
Franchisee Affiliates each waive their rights to a trial by jury.

22.2.    CUMULATIVE RIGHTS.

         The rights and remedies of the Franchisor and the Franchisee hereunder
are cumulative and no exercise or enforcement by either of them of any right or
remedy hereunder shall preclude the exercise or enforcement by either of them of
any other right or remedy hereunder which they are entitled by law to enforce.

22.3.    MODIFICATION.

         The Franchisor and/or the Franchisee may modify this Agreement only
upon execution of a written agreement between the two parties. The Franchisee
acknowledges that the Franchisor may modify its standards and specifications and
operating and marketing techniques set forth in the Operations Manual
unilaterally under any conditions and to the extent in which the Franchisor, in
its sole discretion, deems necessary to protect, promote, or improve the Marks
and the quality of the Licensed Methods, but under no circumstances will such
modifications be made arbitrarily without such determination.

22.4.    ENTIRE AGREEMENT.

         This Agreement, including all exhibits and addenda hereto, contains the
entire agreement between the parties and supersedes any and all prior agreements
concerning the subject matter hereof. The Franchisee agrees and understands that
the Franchisor shall not be liable or obligated for any oral representations or
commitments made prior to the execution hereof or for claims of negligent or
fraudulent misrepresentation based on any such oral representations or
commitments and that no modifications of this Agreement shall be effective
except those in writing and signed by both parties. The Franchisor does not
authorize and will not be bound by any representation of any nature other than
those expressed in this Agreement. The Franchisee further acknowledges and
agrees that no representations have been made to it by the Franchisor regarding
projected sales volumes, market potential, revenues, profits of the Franchisee's
ROCKY MOUNTAIN CHOCOLATE FACTORY Store, or operational


                                       31
<PAGE>

assistance other than as stated in this Agreement or in any disclosure document
provided by the Franchisor or its representatives.

22.5.    DELEGATION BY THE FRANCHISOR.

         From time to time, the Franchisor shall have the right to delegate the
performance of any portion or all of its obligations and duties hereunder to
third parties, whether the same are agents of the Franchisor or independent
contractors which the Franchisor has contracted with to provide such services.
The Franchisee agrees in advance to any such delegation by the Franchisor of any
portion or all of its obligations and duties hereunder.

22.6.    EFFECTIVE DATE.

         This Agreement shall not be effective until accepted by the Franchisor
as evidenced by dating and signing by an officer of the Franchisor.

22.7.    REVIEW OF AGREEMENT.

         The Franchisee acknowledges that it had a copy of this Agreement in its
possession for a period of time not fewer than 10 full business days, during
which time the Franchisee has had the opportunity to submit same for
professional review and advice of the Franchisee's choosing prior to freely
executing this Agreement.

22.8.    ATTORNEYS' FEES.

         In the event of any dispute between the parties to this Agreement,
including any dispute involving an officer, director, employee or managing agent
of a party to this Agreement, in addition to all other remedies, the
non-prevailing party will pay the prevailing party all costs and expenses,
including reasonable attorneys' fees, incurred by the prevailing party in any
legal action, arbitration or other proceeding as a result of such dispute.

22.9.    INJUNCTIVE RELIEF.

         Nothing herein shall prevent the Franchisor or the Franchisee from
seeking injunctive relief to prevent irreparable harm, in addition to all other
remedies. If the Franchisor seeks an injunction, the Franchisor will not be
required to post a bond in excess of $500.

22.10.   NO WAIVER.

         No waiver of any condition or covenant contained in this Agreement or
failure to exercise a right or remedy by the Franchisor or the Franchisee shall
be considered to imply or constitute a further waiver by the Franchisor or the
Franchisee of the same or any other condition, covenant, right, or remedy.

22.11.   NO RIGHT TO SET OFF.

         The Franchisee shall not be allowed to set off amounts owed to the
Franchisor for Royalties, fees or other amounts due hereunder, against any
monies owed to Franchisee, nor shall the Franchisee in any event withhold such
amounts due to any alleged nonperformance by the Franchisor hereunder, which
right of set off is hereby expressly waived by the Franchisee.


                                       32
<PAGE>

22.12. INVALIDITY.

         If any provision of this Agreement is held invalid by any tribunal in a
final decision from which no appeal is or can be taken, such provision shall be
deemed modified to eliminate the invalid element and, as so modified, such
provision shall be deemed a part of this Agreement as though originally
included. The remaining provisions of this Agreement shall not be affected by
such modification.

22.13.   NOTICES.

         All notices required to be given under this Agreement shall be given in
writing, by certified mail, return receipt requested, or by an overnight
delivery service providing documentation of receipt, at the address set forth in
the first paragraph of this Agreement or at such other addresses as the
Franchisor or the Franchisee may designate from time to time, and shall be
effectively given when deposited in the United States mail, postage prepaid, or
when received via overnight delivery, as may be applicable.

22.14.   PAYMENT OF TAXES.

         The Franchisee shall reimburse the Franchisor, or its affiliates and
designees, promptly and when due, the amount of all sales taxes, use taxes,
personal property taxes and similar taxes imposed upon, required to be collected
or paid by the Franchisor, or its affiliates or designees, on account of
services or goods furnished by the Franchisor, its affiliates or designees, to
the Franchisee through sale, lease or otherwise, or on account of collection by
the Franchisor, its affiliates or designees, of the initial franchise fee,
Royalties, Marketing and Promotion Fees or any other payments made by the
Franchisee to the Franchisor required under the terms of this Agreement.

22.15.   ACKNOWLEDGEMENT.

         BEFORE SIGNING THIS AGREEMENT, THE FRANCHISEE SHOULD READ IT CAREFULLY
WITH THE ASSISTANCE OF LEGAL COUNSEL. THE FRANCHISEE ACKNOWLEDGES THAT:

         (A) THE SUCCESS OF THE BUSINESS VENTURE CONTEMPLATED HEREIN INVOLVES
SUBSTANTIAL RISKS AND DEPENDS UPON THE FRANCHISEE'S ABILITY AS AN INDEPENDENT
BUSINESS PERSON AND ITS ACTIVE PARTICIPATION IN THE DAILY AFFAIRS OF THE
BUSINESS, AND

         (B) NO ASSURANCE OR WARRANTY, EXPRESS OR IMPLIED, HAS BEEN GIVEN AS TO
THE POTENTIAL SUCCESS OF SUCH BUSINESS VENTURE OR THE EARNINGS LIKELY TO BE
ACHIEVED, AND

         (C) NO STATEMENT, REPRESENTATION OR OTHER ACT, EVENT OR COMMUNICATION,
EXCEPT AS SET FORTH IN THIS DOCUMENT, AND IN ANY OFFERING CIRCULAR SUPPLIED TO
THE FRANCHISEE, IS BINDING ON THE FRANCHISOR IN CONNECTION WITH THE SUBJECT
MATTER OF THIS AGREEMENT.


                                       33
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above set forth.

                                             ROCKY MOUNTAIN CHOCOLATE
                                             FACTORY, INC.


Date:                                        By:
     ---------------------                       ------------------------------
                                             Title:
                                                   ----------------------------

                                             FRANCHISEE:

Date:
     ---------------------                   ----------------------------------
                                             Individually

                                             AND:

                                             (if a corporation or partnership)


                                             ----------------------------------
                                             Company Name

Date:                                        By:
     ---------------------                       ------------------------------
                                             Title:
                                                    ---------------------------



                                       34
<PAGE>

                                                                       EXHIBIT I
                                                          TO FRANCHISE AGREEMENT



               ADDENDUM TO ROCKY MOUNTAIN CHOCOLATE FACTORY, INC.
                               FRANCHISE AGREEMENT

         1. Franchised Location. The Franchised Location, set forth in Section
3.1 of the Agreement shall
be:_____________________________________________________________________________
________________________________________________________________________________
and the Store configuration shall be:__________________________________________.

         2. Initial Franchise Fee. The amount of the initial franchise fee, set
forth in Section 4.1 of the Agreement, shall be: $_________________________.

         Fully executed this ____ day of ________________, 20____.

                                             ROCKY MOUNTAIN CHOCOLATE
                                             FACTORY, INC.


                                             By:
                                                 ------------------------------
                                             Title:
                                                    ---------------------------



                                             FRANCHISEE:


                                             ----------------------------------
                                             Individually

                                             AND:

                                             (if a corporation or partnership)


                                             ----------------------------------
                                             Company Name

                                             By:
                                                 ------------------------------
                                             Title:
                                                    ---------------------------


<PAGE>

                                                                      EXHIBIT II
                                                          TO FRANCHISE AGREEMENT

               GUARANTY AND ASSUMPTION OF FRANCHISEE'S OBLIGATIONS


         In consideration of, and as an inducement to, the execution of the
above Franchise Agreement (the "AGREEMENT") by Rocky Mountain Chocolate Factory,
Inc. ("THE FRANCHISOR"), each of the undersigned hereby personally and
unconditionally:

         Guarantees to the Franchisor and its successors and assigns, for the
term of this Agreement, including renewals thereof, that the franchisee, as that
term is defined in the Agreement ("FRANCHISEE"), shall punctually pay and
perform each and every undertaking, agreement and covenant set forth in the
Agreement; and

         Agrees to be personally bound by, and personally liable for the breach
of, each and every provision in the Agreement.

Each of the undersigned waives the following:

         1. Acceptance and notice of acceptance by the Franchisor of the
foregoing undertaking;

         2. Notice of demand for payment of any indebtedness or nonperformance
of any obligations hereby guaranteed;

         3. Protest and notice of default to any party with respect to the
indebtedness or nonperformance of any obligations hereby guaranteed;

         4. Any right he or she may have to require that any action be brought
against Franchisee or any other person as a condition of liability; and

         5. Any and all other notices and legal or equitable defenses to which
he or she may be entitled.

Each of the undersigned consents and agrees that:

         1. His or her direct and immediate liability under this guaranty shall
be joint and several;

         2. He or she shall render any payment or performance required under the
Agreement upon demand if Franchisee fails or refuses punctually to do so;

         3. Such liability shall not be contingent or conditioned upon pursuit
by the Franchisor of any remedies against Franchisee or any other person; and

         4. Such liability shall not be diminished, relieved or otherwise
affected by any extension of time, credit or other indulgence which the
Franchisor may from time to time grant to Franchisee or to any other person,
including without limitation the acceptance of any partial payment or
performance, or the compromise or release of any claims, none of which shall in
any way modify or amend this guaranty, which shall be continuing and irrevocable
during the term of the Agreement, including renewals thereof.


<PAGE>

         IN WITNESS WHEREOF, each of the undersigned has affixed his or her
signature effective on the same day and year as the Agreement was executed.

WITNESS                                                GUARANTOR(S)


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

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

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

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


                                        2
<PAGE>

                                                                     EXHIBIT III
                                                          TO FRANCHISE AGREEMENT

                             STATEMENT OF OWNERSHIP

Franchisee:
            -------------------------------------------------------------------

Trade Name (if different from above):
                                      -----------------------------------------

                                Form of Ownership
                                   (Check One)
                                                                      Limited
______  Individual  ______  Partnership                        ______ Liability
                                          ______  Corporation         Company

If a Partnership, provide name and address of each partner showing percentage
owned, whether active in management, and indicate the state in which the
partnership was formed.

If a Limited Liability Company, provide name and address of each member and each
manager showing percentage owned and indicate the state in which the Limited
Liability Company was formed.

If a Corporation, give the state and date of incorporation, the names and
addresses of each officer and director, and list the names and addresses of
every shareholder showing what percentage of stock is owned by each.

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

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

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

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

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

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

Franchisee acknowledges that this Statement of Ownership applies to the ROCKY
MOUNTAIN CHOCOLATE FACTORY Store authorized under the Franchise Agreement.

Use additional sheets if necessary. Any and all changes to the above information
must be reported to the Franchisor in writing.


--------------------------                           --------------------------
Date                                                 Signature

                                                     --------------------------
                                                     Print Name


<PAGE>

                                                                      EXHIBIT IV
                                                          TO FRANCHISE AGREEMENT

                AUTHORIZATION AGREEMENT FOR PREARRANGED PAYMENTS
                                 (DIRECT DEBITS)

The undersigned depositor ("DEPOSITOR") hereby (1) authorizes Rocky Mountain
Chocolate Factory, Inc. ("COMPANY") to initiate debit entries and/or credit
correction entries to the undersigned's checking and/or savings account
indicated below and (2) authorizes the depository designated below
("DEPOSITORY") to debit such account pursuant to Company's instructions.


--------------------------------                 ------------------------------
Depository                                                    Branch


--------------------------------                 ------------------------------
City                                             State                 Zip Code


-------------------------------------------------------------------------------
Bank Transit/ABA Number                                          Account Number


This authority is to remain in full force and effect until Depository has
received joint written notification from Company and Depositor of the
Depositor's termination of such authority in such time and in such manner as to
afford Depository a reasonable opportunity to act on it. Notwithstanding the
foregoing, Depository shall provide Company and Depositor with 30 days' prior
written notice of the termination of this authority. If an erroneous debit entry
is initiated to Depositor's account, Depositor shall have the right to have the
amount of such entry credited to such account by Depository, if (a) within 15
calendar days following the date on which Depository sent to Depositor a
statement of account or a written notice pertaining to such entry or (b) 45 days
after posting, whichever occurs first, Depositor shall have sent to Depository a
written notice identifying such entry, stating that such entry was in error and
requesting Depository to credit the amount thereof to such account. These rights
are in addition to any rights Depositor may have under federal and state banking
laws.

--------------------------------                 ------------------------------
DEPOSITOR (Print Name)                           DEPOSITORY (Print Name)



By:                                              By:
   -----------------------------                    ---------------------------
Its:                                             Its:
    ----------------------------                     --------------------------
Date:                                            Date:
     ---------------------------                      -------------------------


<PAGE>

                                                                       EXHIBIT V
                                                      TO THE FRANCHISE AGREEMENT


                  PERMIT, LICENSE AND CONSTRUCTION CERTIFICATE

         Franchisor and Franchisee are parties to a Franchise Agreement dated
____________, 20____ for the development and operation of ROCKY MOUNTAIN
CHOCOLATE FACTORY Store located at _________________________ (the "FRANCHISED
LOCATION"). In accordance with Section 5.5 of the Franchise Agreement,
Franchisee certifies to Franchisor that the Franchised Location complies with
all applicable federal, state and local laws, statutes, codes, rules,
regulations and standards including, but not limited to, the federal Americans
with Disabilities Act and any similar state or local laws. The Franchisee has
obtained all such permits and certifications as may be required for the lawful
construction and operation of the ROCKY MOUNTAIN CHOCOLATE FACTORY Store,
together with all certifications from government authorities having jurisdiction
over the site that all requirements for construction and operation have been
met, including without limitation, zoning, access, sign, health, safety
requirements, building and other required construction permits, licenses to do
business, sales tax permits, health and sanitation permits and ratings and fire
clearances. The Franchisee has obtained all customary contractors' sworn
statements and partial and final lien waivers for construction, remodeling,
decorating and installation of equipment at the Franchised Location. The
Franchisee acknowledges that it is an independent contractor and that the
requirement of this certification does not constitute ownership, control,
leasing or operation of the Store or the Franchised Location by the Franchisor,
but rather provides notice to Franchisor that the Franchisee has complied with
all applicable laws. The Franchisee asserts that Franchisor may justifiably rely
on the information contained in this certificate.


                                               FRANCHISEE:


                                               --------------------------------
                                               Individually

                                               AND:

                                               (if a corporation or partnership)


                                               --------------------------------
                                               Company Name

                                               By:
                                                   ----------------------------
                                               Title:
                                                      -------------------------


<PAGE>

                                                                      EXHIBIT VI
                                                          TO FRANCHISE AGREEMENT


                  CONFIDENTIALITY AND NONCOMPETITION AGREEMENT


         AGREEMENT, dated __________, 20__, by and between Rocky Mountain
Chocolate Factory, Inc. ("FRANCHISOR") and __________ , a(n) [directors,
officer, partner, principal, employee, agent or stockholder] of ______________
(the "FRANCHISEE"). All capitalized terms not otherwise defined herein shall
have the meanings set forth in the Franchise Agreement, defined below.

         The Franchisor has granted to the Franchisee, pursuant to that certain
Franchise Agreement dated ________________, 20__, (the "FRANCHISE AGREEMENT"),
the right to operate a ROCKY MOUNTAIN CHOCOLATE FACTORY Store. The undersigned,
in consideration of the receipt and/or use of the Operations Manual and other
information proprietary to the Franchisor, including but not limited to methods,
strategies and techniques developed by the Franchisor relating to operations,
marketing, training, advertising, trade secrets, recipes and other confidential
data (collectively referred to as "PROPRIETARY INFORMATION"), agrees with the
Franchisor as follows:

         (1) The undersigned acknowledges that the Operations Manual and other
Proprietary Information now or hereafter provided to Franchisee by the
Franchisor is proprietary to the Franchisor and must be held in the utmost and
strictest confidence.

         (2) The undersigned represents and agrees that the undersigned will
not, without the prior written consent of the Franchisor, either:

                  (i) Duplicate or otherwise reproduce the Operations Manual or
         other Proprietary Information;

                  (ii) Deliver or make available the Operations Manual or other
         Proprietary Information to any person other than an authorized
         representative of the Franchisor;

                  (iii) Discuss or otherwise disclose the contents of the
         Operations Manual or other Proprietary Information to any person other
         than an authorized representative of the Franchisor; or

                  (iv) Use the Operations Manual or other Proprietary
         Information to his, her or its commercial advantage other than in
         connection with the operation of the franchise created and granted by
         the Franchise Agreement.

         (3) While the Franchise Agreement is in effect, neither the
undersigned, nor any member of his or her immediate family, shall engage in, or
participate as an owner, officer, partner, director, agent, employee,
shareholder or otherwise in any other Competitive Business without having first
obtained the Franchisor's written consent. For the purposes of this Agreement,
"COMPETITIVE BUSINESS" shall mean any business deriving more than 10% of its
gross sales receipts from the sale, processing or manufacturing of chocolate
candies and other non-chocolate confectionery items, Items or other products
offered in ROCKY MOUNTAIN CHOCOLATE FACTORY Stores and which constitute 10% or
more of the Gross Retail Sales of any ROCKY MOUNTAIN CHOCOLATE FACTORY Store.


<PAGE>

         (4) The undersigned has acquired from the Franchisor confidential
information regarding Franchisor's trade secrets and franchised methods which,
in the event of a termination of the Franchise Agreement, could be used to
injure the Franchisor. As a result, neither the undersigned, nor any member of
his or her immediate family, shall, for a period of 2 years from the date of
termination, transfer or expiration of the Franchise Agreement, without having
first obtained the Franchisor's written consent, engage in or participate as an
owner, officer, partner, director, agent, employee, shareholder or otherwise in
any Competitive Business which is located or operating, as of the date of such
termination, transfer or expiration, within a 10-mile radius of the Franchisee's
former Franchised Location as defined in the Franchise Agreement, or within a
10-mile radius of any other franchised or company-owned ROCKY MOUNTAIN CHOCOLATE
FACTORY Store, unless such right is granted pursuant to a separate agreement
with the Franchisor.

         (5) The undersigned agrees that during the term of the Franchise
Agreement, and for a period of 2 years thereafter, it shall in no way divert or
attempt to divert the business of customers, or interfere with the business
relationship established with customers of the Franchisee's ROCKY MOUNTAIN
CHOCOLATE FACTORY Store or of any Competitive Business.

         IN WITNESS WHEREOF, this Agreement has been executed by the undersigned
as of the date set forth above.

                                            AGREED TO BY:




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

                                            ROCKY MOUNTAIN CHOCOLATE
                                            FACTORY, INC.


                                            By:
                                                -------------------------------
                                            Title:
                                                   ----------------------------


                                       2