Source: http://www.freefranchisedocs.com/gymboree-UFOC.php
Timestamp: 2019-04-23 16:40:41+00:00

Document:
The franchisee will operate a nontherapeutic sensory-motor child-parent play and music program. Programs are presently for children from birth through four years.
The Initial Franchise is $35,000 for the first franchise site and is discounted for subsequent sites purchased under the initial market plan and the payment plan selected by the franchisee as described in Item 5 of this circular. Additionally, you must pay Gymboree approximately $5t5QG6,400 for purchases of Gymboree's product for resale and program aids for the Gymboree Program and approximately $23t39925,700 for certain equipment. The franchisee's total initial investment is estimated at $71,20276,692 to $214,155 per site depending upon numerous factors.
1. THE FRANCHISE AGREEMENT ONLY PERMITS THE FRANCHISEE TO INSTITUTE ANY JUDICIAL PROCEEDING TO ENFORCE THIS AGREEMENT AGAINST GYMBOREE IN CALIFORNIA, EXCEPT AS DESCRIBED IN THE STATE ADDENDA. OUT-OF-STATE JUDICIAL PROCEEDINGS MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO LITIGATE WITH GYMBOREE IN CALIFORNIA THAN IN YOUR HOME STATE.
2. THE PURCHASE OF A GYMBOREE PLAY AND MUSIC CENTER FRANCHISE INVOLVES BUSINESS RISKS AND THE SUCCESS OF YOUR GYMBOREE PLAY AND MUSIC CENTER IS LARGELY DEPENDENT UPON YOUR OWN BUSINESS ABILITIES AND SUCCESS CANNOT BE GUARANTEED.
3. THE POSSIBLE SUCCESS OF YOUR GYMBOREE PLAY AND MUSIC CENTER MAY BE DEPENDENT UPON THE LOCATION YOU CHOOSE FOR IT. THE MARKET PLAN YOU AGREE TO WITH GYMBOREE DOES NOT GUARANTY THE SUCCESS OR SUITABILITY OF YOUR FRANCHISE; IT IS YOUR OWN BUSINESS ABILITY IN DEVELOPING A MARKET PLAN, SELECTING LOCATION, YOUR FINANCIAL RESOURCES, AND IN OPERATING THE GYMBOREE PLAY AND MUSIC CENTER THAT IS INSTRUMENTAL TO YOUR SUCCESS.
4. THE FRANCHISE AGREEMENT PERMITS GYMBOREE TO OFFER PROGRAMS OTHER THAN THE GYMBOREE PROGRAM UNDER THE GYMBOREE MARKS. THERE IS A RISK THAT THESE OTHER PRODUCTS AND PROGRAMS MAY COMPETE WITH YOUR GYMBOREE PLAY AND MUSIC CENTER.
5. THE FRANCHISE AGREEMENT PROHIBITS YOU FROM BEING INVOLVED WITH A SIMILAR BUSINESS DURING THE FRANCHISE TERM AND FOR 2 YEARS AFTER EXPIRATION, TRANSFER, TERMINATION, OR REPURCHASE OF FRANCHISE.
6. UNDER THE FRANCHISE AGREEMENT, GYMBOREE AND YOU WAIVE ANY RIGHT TO TRIAL BY JURY AND, TO THE EXTENT PERMITTED BY LAW, ANY RIGHT TO OR CLAIM FOR PUNITIVE OR EXEMPLARY DAMAGES AGAINST THE OTHER.
7. WE RETAIN THE RIGHT, IN OUR SOLE AND ABSOLUTE DISCRETION, TO AWARD, OR NOT AWARD, A GYMBOREE PLAY AND MUSIC PROGRAM FRANCHISE TO ANY PROSPECTIVE FRANCHISEE, REGARDLESS OF THE STAGE OF THE FRANCHISE AWARD PROCESS, COSTS EXPENDED BY THE PROSPECTIVE FRANCHISEE OR OTHERWISE.
8. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
Registration of this franchise with the state does not mean that the state recommends it or has verified the information in this offering circular. If you learn that anything in this offering circular is untrue, contact the Federal Trade Commission and the applicable state administrators listed in Exhibit G.
Gymboree and Its Predecessors. Gymboree Play Programs, Inc., a California corporation ("Gymboree," "us," "we" or "our") does business under its name and the name "Gymboree," and it is a wholly-owned subsidiary of The Gymboree Corporation, a Delaware corporation (the "Parent"). The Parent and Gymboree's principal business address is 700 Airport Blvd., Suite 200, Burlingame, California 94010.
Joan Barnes, the founder of and a predecessor of Gymboree, began operating a sensory-motor play program for children in a partnership with TransGlobal Enterprises in September, 1976, until she became the sole proprietor in November, 1977. At that time she operated the business as Kindergym of California. Two other predecessors of Gymboree are: Barnston Partners, a partnership, now dissolved, of which Joan Barnes was a principal and which operated a business of the type here offered from January, 1979 until July, 1980, and Rabarnes Partners Kindergym, a partnership, now dissolved, of which Joan Barnes was a principal and which operated a business of the type here offered from March, 1979 until April, 1980. The addresses of Kindergym of California were: 151 Elm Avenue, Mill Valley, California 94941 and 1344 Vancouver Avenue, Burlingame, California 94010. On October 4, 1979, The Gymboree Corporation, a California corporation, was incorporated. That corporation's principal business addresses were 577 Airport Blvd., Suite 400, Burlingame, California 94010 and 700 Airport Blvd., Suite 200, Burlingame, California 94010. On June 3, 1992, the Parent's California predecessor corporation incorporated the Parent as a wholly owned subsidiary in Delaware. On or about December 31, 1992, the California predecessor merged into the Parent, with the Parent surviving. The Parent's common stock is listed on the National Market System of NASDAQ under the symbol GYMB. On July 6, 1994, the Parent incorporated Gymboree Play Programs, Inc. as a wholly owned subsidiary in California, and on March 31, 1995, the Parent assigned to Gymboree and Gymboree assumed all of the Parent's prospective rights and obligations under all of its current Franchise Agreements.
Gym-Mark, Inc. ("Gym-Mark") is a subsidiary of The Gymboree Corporation and the owner of certain trademarks and service marks which are used by The Gymboree Corporation and its subsidiaries, including Gymboree. Gym-Mark licenses Gymboree to franchise certain Gymboree service marks as described below in Item 13.
Gymboree's agent for service of process is disclosed in Exhibit G.
Gymboree's Business. For a number of years, Gymboree and its predecessors have sold franchises for the operation of a "play center" business involving nontherapeutic sensory motor child-parent play programs, birthday parties, theme parties, and story line parties, and in 1999, added an early childhood music program ("Gymboree Music") and an art program in 2002 for children in Gymboree | specified age ranges, using specially designed equipment and program aids (the "Gymboree Program"). The Gymboree Program currently includes programs for infants and children from birth through 4 years old. Gymboree periodically test-markets other programs both for its franchisees and for its own exclusive use. Franchisees may be required to offer programs for children in any age range specified by Gymboree. Parent participation is mandatory in all of the play programs.
Gymboree has developed a mobile play program (the "Gymboree On The Go") which brings a play program, which includes components of the Gymboree Program, directly to certain institutions with children, like preschools and day care centers.
As of February 21, 3092-2003, Gymboree's most recent fiscal year end, Gymboree operated a total of 25-23 company-owned play centers in California in Santa Clara, San Mateo, Alameda, Contra Costa, Solano, San Diego, Los Angeles, Monterey, Orange, Riverside, San Joaquin, and San Francisco and Marin Counties.
The Gvmboree Franchise. The Gymboree franchise consists of a license to use the name "Gymboree" for the operation of the Gymboree Program as described in this Offering Circular. Each franchisee must follow Gymboree's commercial site design guidelines which are available from Gymboree and may be modified at Gymboree's discretion. The Gymboree Program brings children and their parents together in sensory-motor play,~aft4 music and art activities. The objective is to provide social | interaction, sensory motor and music activities in a positive play environment.
The Gymboree franchise also consists of a license to use the name "Gymboree" for the operation of Gymboree On The Go in accordance with the guidelines in the Operations Manual.
The franchise does not include the marketing of consumer or other products under the mark and name "Gymboree" or the other marks and names of Gymboree. You have no right or license to anything not specifically included in the Gymboree Program. Gymboree may operate or license others to operate, within or outside of your territory, under the Gymboree Marks or under other marks, other types of programs which may be similar to or contain elements of the Gymboree Program. The franchise does not include the marketing or offering of other services under the mark and name "Gymboree" or the other marks and names of Gymboree, such as programs for handicapped children, day-care programs, after-school children's programs, formal educational programs, exercise programs, programs for parents and children in age ranges other than offered in the Gymboree Program, programs for parents only or pre-natal care programs. While franchisees are currently required to carry certain consumer products (such as tee-shirts, puppets, etc)/ Gymboree may discontinue marketing those items through its franchisees and may market those products and other products under the mark and name "Gymboree" or other marks of Gymboree itself and through other distributors and retailers. Gymboree and Gym-Mark also have all other rights to the mark and name "Gymboree" and the other marks and names of Gymboree, including the right to provide and license others to provide other services and products under the mark and name "Gymboree" or other marks and names of Gymboree within or outside a franchisee's territory, including programs for handicapped children, daycare programs, after-school children's programs, formal educational programs, exercise programs, programs for parents and children in age ranges other than those currently offered in the Gymboree Program, programs for parents only, pre-natal care programs, programs which are included components of the Gymboree Program and programs for children only. Gymboree also has the right to market the Gymboree Program and the other programs developed by Gymboree from time to time, through alternative channels of distribution within or outside of your territory.
A Gymboree franchise offers its products and services to the general public. You will have to compete with other individuals, corporations and other entities that may offer products and services similar to the Gymboree Program, including other franchise programs.
Gymboree is unaware of any laws or regulations specific to the play program business, although, franchisees must comply with general local business laws and regulations.
Jewish Community Center in San Rafael, California. Among Gymboree's predecessors, only Joan Barnes, dba Kindergyms of California, the Parent's California corporate predecessor, and the Parent have offered franchises. Barnes did this from July, 1979 to March, 1980, the Parent's California corporate predecessor did this from January, 1980 to December, 1992 and the Parent did it from December, 1992 to March, 1995. Gymboree has offered franchises for play centers since May 1995. As noted above, the Parent's California corporate predecessor, which has offered franchises since January, 1980, merged into the Parent on or about December 31, 1992, with the Parent surviving, and on March 31, 1995, the Parent assigned its prospective rights and obligations under its Franchise Agreements to Gymboree. Gymboree continues to operate the business of its Parent and its Parent's California corporate predecessor. Neither Gymboree nor its predecessors have offered franchises in other lines of business. Ms. Barnes is no longer employed by Gymboree.
This Offering Circular sets forth the terms and conditions on which we currently offer franchises in this state. We may have in the past offered franchises under different economic and other terms and conditions and we reserve the right, now and/or in the future, to offer franchises in other states and/or countries on different economic and other terms and conditions.
This Offering Circular contains a summary of various provisions of the Franchise Agreement, Addendum and other documents, in relatively brief language, briefness being a legal requirement. We've summarized the main features of our program above and further information appears at appropriate points throughout this Offering Circular. Of course, the descriptions in this Offering Circular of various documents and their provisions are for general informational purposes only, in many cases (in the interests of brevity and understandability) only excerpts or summaries of documents are discussed, the actual provisions of the documents will control in any case and you should read the entire Franchise Agreement, Addendum and other documents for more complete information.
Naturally, a franchised Gymboree Program (like any other enterprise) involves business risks. Your volume, possible profit and success are primarily dependent on your ability and efforts as an independent business operator, and success can't be guaranteed. You'll be responsible for an aggressive, proactive local marketing effort using the techniques and methods of the Gymboree System.
Finally, we think ifs important for you to understand the following business realities: You're entering into a particular business which is, incidentally, franchised and entry into any business venture (whether franchised or not) involves some unavoidable risk of loss or failure. While the purchase of a franchise may improve your chances for success, the purchase of a Gymboree (or any other) franchise is a speculative investment, significant investment beyond that outlined in this Offering Circular may be required to succeed, there's no guaranty against possible loss and the most important factors in the success of any Gymboree Franchise, including the ones operated by you, are your personal business, marketing, management, judgment and other skills, along with your willingness to work hard and follow the Gymboree System.
The following is a list of certain persons currently affiliated with Gymboree. There can be no assurance that these persons will remain affiliated with Gymboree indefinitely or for any period of time, or that the scope of their involvement will not change.
Mr. Moldaw also servos as diroeter to several other companies.
e+k 4/98Present Gymboree Play Programs, Inc.
Franchise Development (12/00 - Present).
8/96 - 9/01 Gymboree Play Programs, Inc.
9/01 - Present Gymboree Play Programs, Inc.
Doe I. etal. v. The Gap, etal U.S. District Court, Central District of California [Case No. 99-00329 CAS (AJWx)] Filed January 13, 1999. This Is-was a class action filed on behalf of former and current garment workers in Saipan against a number of United States garment retailers (the "Retailer Defendants"), including (among many others) The Gymboree Corporation, our Parent. We are not a defendant in the lawsuit.
Our Parent has published its Terms of Engagement and is a signatory to the National Retail Federation Statement of Principles on Supplier Legal Compliance. Both the Terms of Engagement and the National Retail Federation Statement of Principles on Supplier Legal Compliance express our Parent's policy in support of good working and living conditions for all employees of companies which manufacture clothing for it.
aided and abetted, and conspired with, the Saipan companies; and that there was an agency relation. The plaintiffs-have-asked for an injunction against continuation of the alleged practices, a declaration of | the parties' rights and liabilities, damages according to proof, treble damages, punitive damages, interest and attorney's fees and costs, all unspecified in amount. Tho case is in the pro trial stage. The plaintiffs | and The Gymboree Corporation, our Parent, agreed upon the material terms of a Settlement Agreement on August 9, 1999. The terms of tho Settlement Agreement, including tho dollar amount to bo paid by our Parent thereunder, rcqtHrc court opprovalOur Parent agreed to a settlement payment of $165,606 which was approved by the court in April 2003. Our Parent did not admit any liability in the settlement.
It is our Parent's position that many of the allegations in the lawsuit are-were untrue, that other allegations ape-were misleading and that many of the main legal theories of the case fail to meet required legal standards. The case does did not contain any reference, directly or indirectly, to franchise matters.
Gvmboree Plav Programs, Inc., et al. v. Dorothy Martin et al.. Case No. C 00-9191 JCS in the U.S. District Court, Northern District of California. On April 5, 2000, Gymboree Play Programs, Inc. filed a complaint against Dorothy Martin and Pierre Martin, the owners of several Gymboree franchises located in Massachusetts (the "Defendants"). The complaint alleged that on or about September 1999, despite Gymboree's prior notices and demands to Defendants requiring that they cease the opening an operation of a Gymboree Play and Music site in Waltham, Massachusetts (the "Site"), the Defendants did in fact open and operate the Site using Gymboree's trademarks and programs. The complaint included causes of action for, among other things, trademark infringement, unfair competition and breach of contract. The complaint sought damages in an unspecified amount, an accounting and injunctive relief enjoining Defendants from identifying the Site as an authorized Gymboree Play and Music Center and requiring the Defendants to fully comply with all obligations contained in their franchise agreements.
On August 31, 2000, Gymboree and the Defendants entered into a settlement of the lawsuit pursuant to which: (i) the Defendants executed a promissory note agreeing to make 6 annual payments, with interest, to Gymboree, (ii) the parties entered into a new franchise agreement amending the Defendants' territory to include the city of Waltham, (iii) the Defendants agreed to pay Gymboree an amount equal to 8.25% of the gross receipts earned by the Site through June 30, 2000, as well as all fees due and owing under the new franchise agreement as of July 1, 2000, (iv) the parties entered into a mutual release, (v) the parties agreed that Defendants' franchise agreements will immediately terminate if the Defendants violate any agreements between Defendants and Gymboree beyond applicable cure periods, and (vi) Gymboree agreed to dismiss the lawsuit against the Defendants. The case was dismissed with prejudice on September 13, 2000.
for its legal fees and costs incurred, the Parent agreed to reinstate plaintiffs' franchises and both parties agreed to dismiss their lawsuits against the other.
Bennett B. Mann and Rhonda L. Mitchell-Mann, v. The Gymboree Corporation, et al.. Action No. 693236, in the Superior Court of the State of California for the County of San Diego. On October 10, 1995, plaintiffs Bennett B. Mann and Rhonda L. Mitchell-Mann filed a complaint against Gymboree, Robert B. Campbell ("Campbell"), Richard and Lisa Percell (the "Percells"), Image-N-This, Inc. ("Image"), Gregson International Incorporated and VR Business Brokers (collectively, the "Broker") and Mark Gregson ("Gregson"). Percells are the owners and principals of Image. Image is a former Gymboree franchisee. Image's franchise consisted of two locations in San Diego County. The complaint alleged that the Broker was the Percells' and Image's "business broker."
The franchise agreement between Gymboree and Image granted Gymboree a right of first refusal to repurchase Image's franchise on the same terms and conditions that Image agreed to sell the franchise to a third party. Plaintiffs alleged that they entered into negotiations with Image and the Percells in February 1995 to purchase the franchise and that a purchase agreement between the parties was executed March 7, 1995, which was subsequently amended (the "Percell-Mann agreement"). Plaintiffs further allege that Gymboree was also a party to the Percell-Mann agreement through an "agency relationship" with Image and the Percells. In the complaint, the plaintiffs claim, among other things, that the defendants failed to inform them of the right of first refusal granted to Gymboree under the franchise agreement and that Gymboree improperly exercised that right of first refusal and wrongfully interfered with their right under the Percell-Mann agreement to purchase the Image franchise. Plaintiffs' complaint, as drafted, sought from all defendants collectively $8,750 in restitution damages and "in excess of $1,000,000" in other purported damages, including loss of future profits.
The specific causes of action asserted in the complaint against Gymboree are for "breach of written contract," "breach of implied contract," "intentional misrepresentation," negligent misrepresentation," "unfair business practices," "franchise investment law violations," "inducing breach of contract," "intentional interference with contractual relations," "intentional interference with prospective economic advantage," "negligent interference with contractual relationship," "conspiracy to defraud," "reliance damages based on promissory estoppel," "common count of unjust enrichment," and "breach of implied covenant of good faith and fair dealing."
Gymboree demurred to the complaint. Plaintiffs thereafter filed a First Amended Complaint on December 11, 1995. The Amended Complaint contained the same causes of action as the original complaint. On January 17, 1996, Gymboree answered the Amended Complaint denying all material allegations of the Amended Complaint. In its Answer, Gymboree alleged as an affirmative defense, inter alia, that plaintiffs failed to state a material cause of action against Gymboree. On January 17, 1996, Gymboree also filed a Cross-Complaint against plaintiffs and Donald Mitchell, Joanne Marie Gavino, and Donald Yee for declaratory relief and attorney's fees. In the Cross-Complaint, Gymboree sought a declaration of the court that Gymboree was not a party to, nor liable to plaintiffs under, the Percell-Mann agreement and that Gymboree should be awarded its attorney's fees and costs under that agreement against the plaintiffs as the prevailing party in this action. Cross-defendants Donald Mitchell, Joanne Marie Gavino and Donald Yee (collectively, the "Cross-Defendants") were added as additional parties to the Cross-Complaint along with the plaintiffs because the Cross-Defendants were, at various times, parties to the Percell-Mann agreement along with the plaintiffs. On March 25,1996 plaintiffs and all defendants entered into a settlement of the lawsuit pursuant to which Gymboree paid to the Manns $4,000 and the Percells paid to the Manns $3,500 and all the parties released each other. The action was dismissed with prejudice on April 25,1996.
Canha v. Gvmboree Corp. eta/. (No. 95-5110, Middlesex Superior Court, Mass., Filed August 31, 1995) Canha, a Franchisee, filed a complaint against us, another Franchisee and that other Franchisee's sister-in-law, based on the operation by the sister-in-law of a competing non-Gymboree play center (which closed in mid-1996) in Canha's territory. Gymboree was sued for breach of contract, breach of the implied covenant of good faith and fair dealing and violation of the Massachusetts unfair practices act, the plaintiff requesting damages in unspecified amounts, treble damages, expenses, costs and attorney's fees. The court dismissed the plaintiff's daims against Gymboree for breach of contract and interference with contractual relations. On January 7, 1997, Gymboree gave the Franchisee a notice of termination of her franchise. The rase against Gymboree was concluded by means of a settlement agreement (and related stipulation for judgment for Gymboree) in which the Franchisee agreed to pay $666.67 to the Gymboree Regional Co-operative, pay Gymboree all royalties and National Advertising Cooperative fees due as of December 31,1996, pay Gymboree all royalties due from January 1, 1997, to the date of the settlement agreement, the Franchisee dismissed her lawsuit against Gymboree, the parties executed mutual releases, the Franchisee's franchise was reinstated, and the Franchisee was given the right to purchase an additional franchise for the standard initial franchise fee, subject to satisfying various conditions, Gymboree agreeing to not sell the franchise to anyone else for a specified period.
Charles Thacker, et al. v. The Gvmboree Corp.. et al. (Los Angeles County Superior Court Case No. BC-166-563). On February 26, 1997, Charles Thacker, Diana Thacker and GalleriaGymGym, Inc., a California corporation, filed a complaint against the Parent, Gymboree and Gym-Mark. Charles and Diana Thacker are the principals of GalleriaGymGym, Inc., which was a Gymboree franchisee. The complaint contained causes of action for, among other things, breach of contract, breach of the covenant of good faith and fair dealing, negligence and violations of the Uniform Franchise Relations Act stemming from Gymboree's delivery of a notice of termination to the Thackers and GalleriaGymGym, Inc. Gymboree terminated plaintiffs' Franchise Agreement based upon excessive customer complaints and the offering of unapproved services. Plaintiffs sought, among other things, damages in an undisclosed amount and to enjoin the termination of the Franchise Agreement. On April 16, 1997, Gymboree and Gym-Mark, the owner of the Gymboree Marks, filed a cross-complaint against plaintiffs for unfair competition and trademark infringement, unfair business practices and breach of contract and sought damages in an unspecified amount, an accounting and injunctive relief declaring that the franchise relationship had been terminated. On September 23,1998, the court issued a ruling in favor of the Parent, Gymboree and Gym-Mark with respect to the claims against them, stating that Gymboree was justified in terminating the plaintiffs' franchise as a result of: the plaintiffs offering unauthorized programs, an excessive number of customer complaints and conduct which reflected materially and unfavorably on the operation of the franchised business. The court also stated that the franchise provisions were clear, material and reasonably related to legitimate business purposes and granted a permanent injunction prohibiting the plaintiffs from using the Gymboree Marks in the future, among other things. The court did not award Gymboree or Gym-Mark any damages on their cross-complaint. Subsequent to the ruling, the plaintiffs filed a Notice of Appeal. The parties thereafter reached a settlement, pursuant to (1) plaintiffs paid a sum of money to Gymboree; (2) the Parent, Gymboree and Gym-Mark waived their rights to seek recovery in excess of the agreed-on sum (3) plaintiffs dropped their appeal; and (4) the parties entered into mutual general releases.
Union of Needletrades Industrial and Textile Employees, AFL-CIO etal. v. The Gap, Inc. etal. California Superior Court, San Francisco (Case No. 300474) Filed January 13, 1999. This is a case which was brought by a labor union and several other organizations alleging unlawful business practices and acts and unfair competition under Sections 17200 et seq. of the California Business and Professions Code, as well as mislabeling in violation of Sections 17500 et seq. of the same code. The case was filed against a number of United States garment retailers, including (among many others) The Gymboree Corporation, our Parent. We were not a defendant in the lawsuit.
The factual allegations of this case are similar to those of the Doe I, et al. v. The Gap, et a/. federal case discussed above. The plaintiffs alleged that: clothes made in Saipan were misleadingly labeled as to origin, even though labeled in accordance with the law. The plaintiffs claim that such labeling, combined with the defendant's alleged aiding and abetting of the alleged working conditions, the sale of goods manufactured under such alleged conditions, and the defendant's policy that employees of suppliers work and live in good conditions and to have in place compliance programs to ensure that such alleged conditions do not exist, have a tendency to mislead the public, are unfair and violate California law. The plaintiffs asked for an injunction against the alleged practices, payment of restitution, disgorgement of profits, interest and reasonable attorney's fees and costs, all unspecified in amount. The plaintiffs and The Gymboree Corporation, our Parent, settled the case on August 9, 1999, pursuant to an agreement reached in the Doe I, et ai. v. The Gap federal case discussed above. Our Parent did not admit any liability in the Settlement. The Court dismissed the lawsuit with prejudice on February 15, 2000. The case did not contain any reference, directly or indirectly, to franchise matters.
Other than the 9 actions above, no litigation is required to be disclosed in this Offering Circular.
Gymboree determines the initial franchise fee by the minimum number of sites in the market plan at which you will be offering the Gymboree Program. Before entering into the franchise agreement, you and Gymboree will together devise a market development plan appropriate to the territory for which you are granted a license (the "Territory"). Gymboree may offer you certain demographic information within its possession; alternatively, a third party may provide information to you for a fee. Based on demographic information and other factors, your market development plan will determine the number of sites which Gymboree and you agree can feasibly operate in your Territory and the dates for opening these locations. The initial franchise fee is then set according to the fee schedule. Except as described in this Offering Circular, this fee schedule will be uniform as to all United States franchisees currently purchasing a franchise.
The execution of the Franchise Agreement will constitute, and you (and each affiliate of yours) will, as a condition to the granting of this and any future or other Franchise execute, in a form prescribed by us, a general release, of any and all claims, liabilities and/or obligations, of any nature whatsoever, however arising, known or unknown, against us and/or any or all of the Franchisor-Related Entities, excepting only (where so required by applicable law) those claims solely related to the offer and sale of the new Franchise, you agreeing that it would be inappropriate from a business standpoint to enter into further franchise relationships with us while there might be a possibility of claims based on a prior relationship. For example, if you own Franchises Nos. 1 and 2 and are being granted Franchise No. 3, the release by you would cover all matters other than (where so required by applicable law) those solely related to the offer and sale of Franchise No. 3. We can make no assurance as to whether additional or future franchises may be granted to you or the prices, terms or conditions relating thereto. If we should, through inadvertence or otherwise, fail to require such separate release at any time, the execution of the Franchise Agreement, and each subsequent Franchise Agreement after this one, will be regarded as the equivalent of the granting of such releases.
When devising a market development plan for your Territory, Gymboree uses demographic information to determine the number of children through the age of four years in the Territory, currently not counting any children in census tracts where the median household income is below $35,000 per annum. Gymboree also takes into account geographic, socioeconomic and psychographic factors which are specific to the Territory and which are usually communicated by you. Demographic studies are not an exact method of predicting business success. In addition, the ability to successfully open and operate an agreed-upon number of sites within a territory includes a number of other variables, such as your performance level and competition within the Territory. Accordingly, Gymboree can give no assurance that any site will be successful and you should make your own determination of the number of sites that should be included within the market development plan before signing the Franchise Agreement.
The fees per site referred to above apply only to sites agreed upon in the initial market development plan. If in the future you want to open, and obtain Gymboree's approval to open, an additional site or sites within or outside your Territory, you must pay to Gymboree additional franchise fees in the amount specified in the then-current or most recent franchise offering circular. The current fee for an additional site (within your existing Territory but not included in the initial market development plan) is $15,000. If you change your Territory or market plan, Gymboree may require you to enter into the form of Franchise Agreement or agreements then offered by Gymboree to new franchisees. These new Franchise Agreement(s) would cover your entire Territory and market plan and replace any old Franchise Agreement.
The franchise fee is payable on signing of the Franchise Agreement, and it is not refundable.
Once Gymboree and you have agreed upon the Territory, the number of sites to be included in the Territory, and the market plans for opening the sites, then Gymboree will furnish to you a completed Franchise Agreement and other franchise related documents for your approval. You will have at least 5 business days to review the proposed agreements before signing them and returning them to Gymboree.
You must also purchase from Gymboree consumer products for resale and certain equipment and program aids and computer software, as described in Items 8 and 11. The approximate cost of the consumer products is $2,3§&300, the approximate cost of the program aids is $37*504,100, and the approximate cost of the equipment is $23t30025,700. These amounts are not refundable.
If we, in our sole and absolute discretion, determine that you (or a managing partner or shareholder consented to by us) have not successfully completed (or are not making satisfactory progress in) your initial training, we may cancel all of your rights (and all of our obligations) under the Agreement and/or any other agreements with you and return the Initial Franchise Fee (less $10,000) to cover our sales, training and other expenses, among other things) to you, and you will return all manuals and you (and each affiliate of yours) execute documentation providing for a general release, in a form prescribed by us, of any and all claims, liabilities and/or obligations, of any nature whatsoever, however arising, known or unknown, against us and/or any or all of the Franchisor-Related Entities and we will provide you with a similar release, except that your indemnity, non-competition, confidentiality obligations, and the dispute avoidance and resolution provisions of the Agreement, including those of Article 11, together with the provisions of Article 13, will be preserved. Since the possibility of termination exists, you understand that if you make any investments or sign any documents prior to completion of training, you are at risk. Alternatively, we can (in our sole and absolute discretion) require you to hire a substitute manager and arrange for him/her to complete the training program to our satisfaction. (Franchise Agreement, Section 2.3 [b]).
In our sole and absolute discretion, we may reduce, or defer payment of a portion of, the Initial Franchise Fee, where an additional franchise is awarded to an existing Gymboree® Franchisee. Initial Franchise Fees charged by us for franchises outside the United States may be, and may have been, significantly different.
For license and on-going IT support.
such insurance coverage within 10 days of receipt of notice, Gymboree may terminate the Franchise Aqreement.

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