Source: http://www.freefranchisedocs.com/manhattan-bagel-UFOC.php
Timestamp: 2019-04-23 16:16:34+00:00

Document:
To protect you, we've required your franchisor to give you this information. We havent checked it and dont know if it's correct. It should help you make up your mind. Study it carefully. While it includes some information about your contract, dont rely on it alone to understand your contract. Read all of your contract carefully. Buying a franchise is a complicated investment. Take your time to decide. If possible, show your contract and this information to an advisor like a lawyer or an accountant. If you find anything you think may be wrong or anything important that's been left out, you should let us know about it. It may be against the law.
THIS OFFERING CIRCULAR WAS ISSUED ON MARCH 31, 2006 IN ORDER TO MEET THE REQUIREMENTS OF THE FEDERAL TRADE COMMISSION. THE STATES OF CALIFORNIA, MARYLAND, NEW YORK, AND RHODE ISLAND REQUIRE FRANCHISORS TO MAKE ADDITIONAL DISCLOSURES RELATED TO THE INFORMATION CONTAINED IN THIS OFFERING CIRCULAR. IF APPLICABLE, THESE ADDITIONAL DISCLOSURES WILL BE FURNISHED TO YOU IN AN ADDENDUM TO THIS OFFERING CIRCULAR, AND WILL BE EFFECTIVE IN THOSE STATES AS OF THE DATE LISTED IN EXHIBIT A.
A "Manhattan Bagel" franchisee will operate a business (a "Manhattan Bagel Restaurant") that specializes in the sale of fresh-baked bagels, muffins, cookies, cream cheese and other spreads, specialty coffees and teas, and creative soups, salads and sandwiches, among other things.
Development Agreement. We offer to enter into area development agreements with qualified parties to establish and operate an agreed-upon number of Manhattan Bagel restaurants at specific locations under the terms of a separate franchise agreement for each location. The development fee will be $5,000 for each restaurant to be developed (which means that the development fee will vary depending on the number of restaurants to be developed), although the fee may be credited toward the franchise fee if the development schedule is satisfied.
Franchise Agreement. The initial franchise fee is $25,000 for a single, full producing Manhattan Bagel Restaurant. Your initial purchase of opening inventory (from us or our affiliate) is estimated to range from $10,000 to $20,000. The initial investment for a restaurant is estimated to range from $251,500 to $604,500. Please refer to Items 5, 6 and 7 in this offering circular for details.
Deposit Agreement. If you enter into a Deposit Agreement, you will be asked to provide a deposit in the amount of $10,000. Unless you terminate the Deposit Agreement or it expires, this amount will be credited to your initial franchise fee if you sign a franchise agreement.
COLORADO. OUT OF STATE LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO LITIGATE WITH THE FRANCHISOR IN COLORADO THAN IN YOUR HOME STATE.
THE AGREEMENT, AND THIS LAW MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
*3. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
LOCAL LAW MAY SUPERSEDE THESE FRANCHISE AGREEMENT PROVISIONS. CERTAIN STATES REQUIRE THE SUPERSEDING PROVISIONS TO APPEAR IN AN ADDENDUM IN THIS OFFERING CIRCULAR.
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 state administrators listed in Exhibit F.
This offering circular was issued on March 31, 2006 to meet the requirements of the Federal Trade Commission. Certain states require franchisors to make additional disclosures related to the information contained in this offering circular. If applicable, these additional disclosures will be furnished to you in an addendum, effective as of the date shown in Exhibit A.
Manhattan Bagel Company, Inc. ("us", "our" or "we") is the franchisor. We maintain our principal place of business at 1687 Cole Boulevard Golden, Colorado 80401 (303.568.8000). We do not maintain sales offices at any location other than our principal place of business. We do not use any sales brokers or other sales organizations.
We are a New Jersey corporation, and were originally incorporated in 1987. We conduct business under the names and marks "Manhattan Bagel Company, Inc." and "Manhattan Bagel," and do not conduct business under any other name.
We franchise the right to operate a "Manhattan Bagel" restaurant (the "Restaurant"). We began to offer these franchises in 1991. We have operated company-owned "Manhattan Bagel" restaurants since 1987. We or our affiliates also produce bagels which are sold to our franchised restaurants and which may be sold to our affiliates and their franchisees (see below). We do not offer any franchise other than as described in this offering circular, and, except for the manufacture of bagels described above, we do not engage in any business activity other than the franchising and operation of restaurants using the "Manhattan Bagel" names and marks. As of January 3, 2006, we had 109 franchised "Manhattan Bagel" restaurants, but we did not operate any "Manhattan Bagel" restaurants.
Our corporate parent company is New World Restaurant Group, Inc. ("NWR"), a Delaware corporation, whose principal place of business is also at 1687 Cole Boulevard Golden, Colorado 80401 (303.568.8000). NWR was incorporated on October 21,1992 as New World Coffee, Inc. Later, NWR's name was changed to New World Coffee & Bagels, Inc., then to New World Coffee-Manhattan Bagel, Inc., and, lastly, to New World Restaurant Group, Inc.
Our agents for service of process are listed in Exhibit G to this offering circular.
On November 19, 1997, we filed a petition to reorganize under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of New Jersey. We emerged from bankruptcy on November 25,1998, when we were purchased by NWR.
On May 12, 2000 NWR acquired 17 New York Bagel Enterprises, Inc. ("NY Bagel") company-owned stores located in Oklahoma and Kansas in a Chapter 11 Bankruptcy sale. The acquisition included the rights to the franchise agreements for 13 existing NY Bagel franchises, but NWR does not intend to exercise its rights regarding the franchises. On July 12, 2000, NWR acquired 6 Lots' A Bagels, Inc. ("LAB") stores, an affiliate of NY Bagel. NWR has closed these stores. NWR will not sell franchises or open any new stores under the NY Bagel or LAB names.
In addition to owning our company, our corporate parent, NWR also owns and operates other bagel and coffee-based manufacturing operations, products and retail restaurant systems. Its-retail locations operate under tradenames and trademarks other than ours, including "Einstein Bros.," "Noah's New York Bagels," "Chesapeake Bagel Bakery," and "New World Coffee." As mentioned below, NWR operates, and has offered franchises to others to operate restaurants since 1992. NWR will sell coffee to you.
As of January 3, 2006, there were 67 licensed and 360 company-owned "Einstein Bros." retail stores, 3 licensed and 73 company-owned "Noah's New York Bagels" or "Noah's Bagels" retail stores, 8 franchised and no company-owned "Chesapeake Bagel Bakery" or "Chesapeake Bagel" restaurants, and 4 franchised and 2 company-owned "New World Coffee" stores. (This offering circular does not provide for the offer of franchises under those names, marks, and franchise systems. Information about those systems, to the extent that they are currently engaged in the offer and sale of franchises, can be found in other offering circulars that we will make available to you upon request.) In addition, NWR may directly and indirectly sell products under the names "Manhattan Bagel", "Chesapeake Bagels", "Einstein Bros.", "New World Coffee", and "Noah's" in other settings such as supermarkets and over the internet. Until October 2004, NWR also owned and operated four Willoughby's Coffee & Tea restaurants in Connecticut; NWR discontinued operating those units in October 2004.
Our affiliates are described below. Except for "Einstein Bros." and "Noah's New York Bagels," which operate from our corporate office in Golden, Colorado (and through a satellite office in Walnut Creek, California for the "Noah's New York Bagels" system), all of these affiliates operate out of our satellite office at 100 Horizon Center Blvd., Hamilton, New Jersey 08691 (800.859.3090). We do not offer franchises for our affiliates' other concepts under this offering circular (additional information concerning those systems may be available from NWR's corporate offices or through a separate offering circular).
NWR owns all of the stock of Einstein and Noah Corp. ("ENC"), a Delaware corporation. ENC in turn owns and franchises restaurants under the "Einstein Bros." and "Noah's New York Bagels" marks and franchise system.
NWR formed ENC on May 11, 2001 (as "Einstein Acquisition Corp".) and an affiliated entity, Greenlight New World, LLC, for the purpose of seeking to acquire the Einstein and Noah Restaurant System from Einstein/Noah Bagel Corp. ("ENBC") and its affiliates, Einstein/Noah Bagel Partners, L.P. ("ENBP") and Einstein/Noah Bagel Partners, Inc. ("ENBPI"), the predecessor entities that owned the marks and restaurants that operated using the "Einstein Bros.", "Noah's New York Bagels" and "Noah's Bagels" names (together, the "Einstein and Noah Restaurant System"). As part of the Acquisition, described below, Greenlight New World, LLC, assigned to ENC all of its acquisition-related rights regarding the Einstein and Noah Restaurant System.
Acquisition Corp.) changed its name to "Einstein and Noah Corp." on November 2, 2001. ENC has operated the restaurants comprising the Einstein and Noah Restaurant System since the date of the Acquisition, June 19, 2001, and ENC is not currently franchising "Einstein Bros." or "Noah's New York Bagels" restaurants.
As discussed above, ENC also operates restaurants under the "Noah's New York Bagels" and "Noah's Bagels" marks and system.
NWR owns all of the stock of Chesapeake Bagel Franchise Corp. ("CBFC"), formerly known as CBB Acquisition Corp. CBB Acquisition Corp., a New Jersey corporation, was formed on July 16, 1999 for the purpose of acquiring from AFC Enterprises, Inc. ("AFC") the "Chesapeake Bagel" marks and franchise system. Through CBB Acquisition Corp., now known as CBFC, NWR acquired the Chesapeake Bagel marks and franchise system from AFC on August 31, 1999. AFC operated, and offered franchises to others to operate, "Chesapeake Bagel" restaurants from May 1997 to August 1999. CBFC has operated, and offered franchises to others to operate, "Chesapeake Bagel" restaurants since August 1999. "Chesapeake Bagel" restaurants feature bagels and cream cheese, coffee, and related menu items as part of their core menu offerings.
NWR operates, and has offered franchises to others to operate, "New World Coffee & Bagel" restaurants since 1992. "New World Coffee" and "New World Coffee & Bagel" restaurants feature coffee and related menu items as part of their core menu offerings.
A Restaurant is operated in a building that bears our trade dress (interior, exterior, or both). A Restaurant specializes in the sale of Proprietary Items, including fresh-baked bagels, cream cheese and other spreads, specialty coffees and teas, muffins, and creative soups, salads and sandwiches, and other additional products as we may specify periodically, as well as nonproprietary Items such as sandwiches, salads, soups, and other beverage items for on-premises and carry-out consumption (collectively, the "Products").
We offer to qualified companies (a "Developer" or "you") the right (and they accept the obligation) to develop an agreed-upon number of Restaurants within a specific geographic area ("Development Area") under our area development agreement (the "Area Development Agreement") (a copy can be found at Exhibit C to this offering circular). Under an Area Development Agreement, you will be required to establish an agreed-upon number of Restaurants within the Development Area, at specific locations (to be specified in separate Franchise Agreements)(as explained below). An important part of the Area Development Agreement is a development schedule (the "Development Schedule"), which spells out the number of Restaurants that you agree to have established by certain benchmark dates.
We offer to enter into franchise agreements ("Franchise Agreements") with qualified corporations and persons ("you") that wish to establish and operate Restaurants (a copy of the Franchise Agreement is attached as to this offering circular as Exhibit B). (In this offering circular, "you" means the person or legal entity with whom we enter into an agreement. The term "you" also refers to the direct and indirect owners of a corporation, partnership, limited liability company, or limited liability partnership that signs a Franchise Agreement as the "franchisee".) Under a Franchise Agreement, we will grant you the right (and you will accept the obligation) to operate a Restaurant at an agreed-upon specified location (the "Approved Location").
Before we enter into a Franchise Agreement with you, we will ask you to enter into a Deposit Agreement and provide us with a deposit. Under a Deposit Agreement, we will agree with you on a specific area within which you can look for a site at which to develop a Restaurant. You will have to provide us with a $10,000 deposit, which we will fully credit against your initial franchise fee if and when you sign the Franchise Agreement. If we sign a Deposit Agreement, neither you nor we will be obligated to sign a Franchise Agreement. If, during the term of the Deposit Agreement, you do not find a site for the Restaurant that is acceptable to us, if for any other reason (other than our failure to evaluate a proposed site) you cannot find an approved site for a Restaurant, or if at any time you choose to terminate the Deposit Agreement and notify us in writing, then the Deposit Agreement will terminate, and we will refund the deposit to you less our actual out-of-pocket costs (up to $5,000). If, during the term of the Deposit Agreement, we terminate the Deposit Agreement for any reason, then the Deposit Agreement will terminate, and we will refund your entire deposit. The limited area that is described under the Deposit Agreement will not have any relationship to any protected territory that you may have under a Franchise Agreement.
You must operate your Restaurant in accordance with our standards and procedures, as set out in our Confidential Operating Manual (the "Manual"). We will lend you a copy of the Manual for the duration of the Franchise Agreement. In addition, we will grant you the right to use our marks, including the mark "Manhattan Bagel" and any other trade names and marks that we designate in writing for use with the System (the "Proprietary Marks").
Previously, in some states, we offered a Master Franchise program. These "Master Franchisees" were sub-franchisors who sold franchises and performed certain obligations in their exclusive territories. We currently have no Master Franchisees and no longer offer the Master Franchisee program.
In 1993, we offered franchises in a chicken concept known as "Broadway Chicken." We sold 5 of these franchises, none of which are currently operating. We no longer offer these franchises.
You can expect to compete in your market with locally-owned businesses, as well as with national and regional chains, that offer bagels, coffee, breads, sandwiches, breakfast items, lunch items, and related products, which may compete with the products offered at a Restaurant. The market for these items is well-established and very highly competitive. Bagel and coffee restaurants, and breakfast and lunch businesses, compete on the basis of many factors, such as price, service, store location, product quality, and store promotions and marketing programs. These businesses are often affected by other factors as well, such as changes in consumer taste, economic conditions, seasonal population fluctuation, and travel patterns. To the extent that customers may be able to buy "Manhattan Bagel" brand products from other sources (for example, from other restaurants, our website, supermarkets), you may appear to, or actually, compete with other sellers of these branded products. In addition, to the extent that customers may be able to buy bagels, coffee, and other products under the "Einstein Bros.," "Noah's New York Bagels," "Chesapeake Bagel Bakery," and "New World Coffee" names, you may appear to, or actually, compete with these sellers of products.
Unless otherwise indicated, the location of the employer is Golden, Colorado. Also, unless otherwise explained, the individuals listed below also hold the same position and have the same responsibilities for us as they do for our parent, NWR and for our affiliates CBFC and ENC (starting when NWR acquired us in December 1998, CBFC in August 1999, and ENC in June 2001).
Mr. Carolan has served as our Senior Vice President of Franchising since July 2005. From November 2000 to July 2005, he was a Regional Vice President for Aramark Corporation in Dallas, Texas.
2004. Ms. Coors was Legal Counsel at Graphic Packaging Corporation (f/k/a ACX Technologies, Inc.) from September 1998 to September 2003, in Golden, Colorado and Bow, New Hampshire.
Mr. Ammons has served as our Vice President of Marketing since April 2000. He also currently serves in the same capacity with NWR. From September 1996 to February 1999, Mr. Ammons was employed by Allied Domecq U.S. Retailing in Randolph, Massachusetts as a Director of Field Marketing for the Dunkin' Donuts, Baskin Robbins, and Togo's brands. From March 1999 to March 2000, Mr. Ammons acted as a restaurant consultant for Marketing, Advertising & Research Solutions, LLC, located in Yardley, Pennsylvania.
Mr. Donatiello has served as Vice President of Operations since April 2005. From December 2003 to April 2005 Mr. Donatiello was our Director of Operations. From 2000 to December 2003, Mr. Donatiello owned and operated a manufacturing facility named Big G Foods located in Shrewsbury, New Jersey. From 1987 to 2000, Mr. Donatiello was employed by us in various capacities such as Store Opener, Franchise Consultant, Director of Operations and Distribution and Manufacturing.
Ms. Schricker joined ENBC in April 1995. She served as Human Resource Manager for its Einstein Bros/Sunbelt Bagels/Progressive Bagel Concepts Incorporated group (in Salt Lake City) from April 1995 to January 2000, as Director of Human Resources from January 2000 to May 2002, Senior Director of Human Resources from May 2002 to November 2003, and since November 2003, as Vice President - Human Resources. She has served MBC as well since June 2001.
Manufacturing. He has served MBC as well in that capacity since June 2001.
Overand v. Manhattan Bagel Co.. Inc. (U.S. District Court for the District of New Jersey, Case No. CV-96-9597). The named plaintiff (Overand) was a shareholder of MBC, and filed a class action suit claiming various securities laws violations involving the public sale in March 1996 of MBC stock, including failure to disclose material facts and violation of SEC Rule 10b-5. Overand sought damages in an unspecified amount. Overand filed a claim in MBC's Chapter 11 case (the "MBC Bankruptcy Proceeding"). The lawsuit and claim were consolidated with Copeland v. Grumet (described below) and was resolved as described below.
C.P.R. Fashions. Inc. v. Broadway Chicken. Inc. (Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-830-96). On February 28, 1996 C.P.R. Fashions, Inc., the plaintiff, a former franchisee of Broadway Chicken, Inc., brought this action for breach of contract and violation of the New Jersey Consumer Fraud Act. The plaintiff claimed that services were not performed under the franchise agreement and sought damages in an unspecified amount. MBC (which had purchased Broadway Chicken, Inc.) counterclaimed for royalties and advertising monies owed and for construction monies due on work performed in building the store. The plaintiff filed a claim in the MBC Bankruptcy Proceeding, to which MBC objected. The plaintiff's lawsuit was dismissed and its claim was denied.
Manhattan Industries, Inc. v. Manhattan Bagel Co.. Inc. and Karen Steamer (Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-644-96). On February 15, 1996, Manhattan Industries, Inc. (the plaintiff), a franchisee of MBC, brought this action against MBC and MBC's Florida Master Franchisee, for breach of contract and misrepresentation. The plaintiff alleged breach of the franchise agreement and various untrue statements during the purchase of the franchise. The plaintiff sought damages in an unspecified amount, punitive damages, and rescission of the franchise agreement. In March 1996, MBC filed an answer that denied the allegations, and counterclaimed for fraud and misrepresentation, and also instituted a third party action against the plaintiff's principals for breach of contract and fraud. The plaintiff filed a claim in the MBC Bankruptcy Proceeding, to which MBC objected. The lawsuit was resolved through a settlement in the MBC Bankruptcy Proceeding on January 11, 1999, which included a requirement that the master franchisee relinquish its territory to MBC, and granted the plaintiff an unsecured claim of $125,000.
Manhattan Bagel Co., Inc. v. Fleming Bagel LLC (U.S. District Court of New Jersey, CV-96-3123). In June 1996, MBC filed an action for a declaratory judgment against Fleming Bagel LLC, a former developer, asking the court to declare that defendants' master franchise rights in Texas and Louisiana were terminated, and seeking damages and other relief. The Court entered an order agreeing to terminate the master franchise rights but did not address MBC's other claims. The defendants filed a counterclaim alleging default by MBC under the contract. The defendants later filed a claim in the MBC Bankruptcy Proceeding, to which MBC objected. The lawsuit was resolved through a settlement in the MBC Bankruptcy Proceeding dated June 29, 1999, which included a requirement that the master franchisee relinquish its territory to MBC, and granted the plaintiff an unsecured claim of $15,000.
HalRob, Inc. v. Manhattan Bagel Co.. Inc. (Superior Court of New Jersey, Camden County, Chancery Division, C-16-97). In February 1997, HalRob Inc., the plaintiffs (who were franchisees of Specialty Bakeries, Inc., which MBC acquired in 1996) alleged violation of a restrictive covenant, and sought injunctive relief and other damages. This action was stayed and the plaintiffs were ordered to arbitrate their claims (see description below under Specialty Bakeries. Inc. v. HalRob. Inc.). The plaintiffs filed a claim in the MBC Bankruptcy Proceeding to which MBC objected. The lawsuit and claim was resolved through the MBC Bankruptcy Proceeding on July 17, 2001 by the allowance of an unsecured claim of $335,000 against the MBC bankruptcy estate, and payment of an administrative claim of $7,500.
Specialty Bakeries. Inc. v. HalRob. Inc. (U.S. District Court for the Eastern District of Pennsylvania, Case No. CV-97-1057). In February 1997, MBC sought an order from the federal court requiring HalRob, Inc., the defendants (franchisees of Specialty Bakeries, Inc.) to arbitrate the claims they asserted in the Superior Court of New Jersey (see description above under HalRob. Inc. v Manhattan Bagel Co.. Inc.). In March 1997, the court ordered the defendants to arbitrate their claims and in April 1997, the court enjoined the defendants from proceeding with the lawsuit filed in the Superior Court of New Jersey. The arbitration proceeding was stayed by the filing by MBC of its Chapter 11 bankruptcy proceeding in November 1997. In November 1997, the U.S. Court of Appeals for the Third Circuit affirmed the District Court's orders. The lawsuit was resolved through the MBC Bankruptcy Proceeding as described above.
Naphtalie Deutsch. as Trustee of the JMB Irrevocable Trust dated June 4. 1979 v. Manhattan Bagel Co.. Inc. (U.S. District Court for the District of Central California, Case No. CV97-0276-RAP (ANX)). Naphtalie Deutsch, the plaintiff, filed a claim alleging that MBC failed to comply with contractual obligations under an Agreement and Plan of Merger dated as of May 10, 1995, as amended, which was entered into by MBC, DAB Acquisition Corp., DAB Industries, Inc., and Allen Boren, regarding the obligations to register shares owned by the plaintiffs for public sale by them all as part of MBC's acquisition of the "I'N Joy Bagel" system in 1995. The plaintiffs filed a claim in the MBC Bankruptcy Proceeding, to which MBC objected. The lawsuit and claim were resolved through allowance of an unsecured claim against the MBC bankruptcy estate.
Monticito Market Place Assoc, v. Bay Area Bagel. Inc.. (Superior Court of California, Marin County, Docket No. 171501). In August 1997, Monticito Market Place Assoc, the plaintiff, filed a lawsuit alleging breach of contract, conspiracy to induce breach of contract, fraud, breach of fiduciary duty and other allegations based on a lease agreement with Bay Area Bagel, Inc., a subsidiary of MBC. MBC filed an Answer to the Complaint denying the allegations. The plaintiff dismissed its complaint with prejudice on June 2,1999.
In re Manhattan Bagel Co., Inc., Wha Dong and Boo Young Kim v. Manhattan Bagel Co.. Inc. (U.S. Bankruptcy Court, District of New Jersey, Adversary Proceeding No. 98-3599). In November 1998, Wha Dong and Boo Young Kim, the plaintiffs, started an adversary proceeding in the MBC Bankruptcy Proceeding, alleging breach of contract, breach of covenant not to compete, intentional interference with economic advantage and violations of the New Jersey Unfair Trade Practices and Consumer Protection Law by MBC. The plaintiffs also filed a claim in the MBC Bankruptcy Proceedings. MBC filed an answer and objected to the plaintiffs' claim. The lawsuit and claim were resolved in the MBC Bankruptcy Proceeding on March 20, 2000 by granting them an unsecured claim against the MBC bankruptcy estate.
Q.E.D. Ventures. Inc., Patricia Maher Wangsness. and David S. Wangsness v. Manhattan Bagel Co.. Inc. and Sanford Nacht, (Superior Court of New Jersey, Monmouth County, Law Division, Case No. MON-L-5354-99). This complaint was filed November 1999 by a Manhattan Bagel franchisee in Virginia alleging violation of the franchise agreement because NWR acquired the Chesapeake Bagel Bakery chain in August 1999. This lawsuit also named as a defendant Sanford Nacht, in both his individual capacity and as President and Chief Operating Officer of MBC (at the time of filing). MBC filed counterclaims. The matter was settled on November 30, 2000 by the payment of $22,500 to the plaintiffs.
Manhattan Bagel Co.. Inc. v. Osborn. (American Arbitration Association, New Jersey, Case No. 18-E-114-00428-99) This arbitration was begun in July 1999 by MBC against Albert J. and Lisa J. Osborn, franchisees of a Manhattan Bagel franchised store in Williamsville, New York, seeking termination of franchisee's franchise agreement and collection of overdue royalties and other charges in the amount of $13,090. The Osborns filed a counterclaim seeking rescission of the franchise agreement, damages of $49,200, and attorneys' fees. After the Bankruptcy Court granted MBC's motion for summary judgment, the matter was settled on December 28, 2000 by the Osborns' payment to MBC in the amount of $16,471.
damages. After the Bankruptcy Court granted MBC's motion for summary judgment, the matter was settled on December 28, 2000 by the franchisee's payment to MBC in the amount of $18,315.
Manhattan Bagel Co.. Inc. v. Klein (Superior Court of New Jersey, Monmouth County, Law Division, Case No. MON-L-3478-99). MBC filed this complaint in July 1999 against Kevin and Susan Klein, who were franchisees of a Manhattan Bagel franchised store in Hamburg, New York, seeking termination of the Klein's franchise agreement and collection of overdue royalties and other charges in the sum of $9,236. The Kleins counterclaimed, seeking rescission of the franchise agreement, attorneys' fees, and $50,000 in damages. The Kleins have appealed the final order entered in March 2002, denying franchisee's cross-motion for summary judgment. MBC will continue pursuit of its claims against these franchisees.
John W. Manqan. Ill, and The Manqan Group f/k/a MBSE. Inc.. v. Manhattan Bagel Co.. Inc.. and New World Coffee-Manhattan Bagel. Inc. (North Carolina Superior Court, Mecklenburg County, No. 01-CVSA-13874). The plaintiff in this action (which was filed on July 16, 2001) was a former Manhattan Bagel master franchisee and its principal owner. The plaintiffs sought payment on a consulting agreement and other amounts due as part of a settlement agreement involving MBC's recapture of the master franchise territory. The action was settled through MBC's completion of its compliance under the October 24, 2001 settlement agreement, under which MBC agreed to pay approximately $314,000 in damages and fees.
Hiqgs v. Manhattan Bagel Co.. Inc., John/Jane Does # 1-10; and ABC Corporations #1-10 (Superior Court of New Jersey, Case No. MON-C- 40-02). In February 2001, Robert Higgs, a franchisee of Manhattan Bagel stores at Route 37 East, Toms River, New Jersey and Eric Plaza Shopping Center, Forked River, New Jersey, filed a complaint against MBC and its officers, agents and related corporations for breach of contract, breach of fiduciary duties, tortious interference, and violations of the New Jersey franchise law. Higgs did not seek any specified amount of damages, but requested punitive damages, costs, and attorneys' fees. The matter was settled on July 23, 2003 by the payment of $40,000 to the plaintiff.
Goldstein v. Einstein and Noah Corp. (Superior Court for the State of California, County of San Francisco, Case No. CGC-02-410967A). On July 31, 2002, Tristan Goldstein, a former store manager, and Valerie Bankhordar, a current store manager, filed a putative class action against ENC. The plaintiffs allege that ENC failed to pay overtime wages to managers and assistant managers of ENC's California stores, whom it is alleged were improperly designated as exempt employees in violation of California wage and hour laws and Business Profession Code Section 17200. In a mediation conducted on April 7, 2004, the parties agreed to a settlement of $1 million. The agreement was approved by the court in January 2006 and the settlement was paid in February 2006.
materially adverse financial information. The plaintiffs claimed that ENBC should not have treated its former area developers as separate legal entities and that ENBC should have consolidated its own financial results with those of the area developers. The plaintiffs alleged that the failure to consolidate the financial results made ENBC's financial reports untrue and misleading, violating Sections 11 and 12(2) of the Securities Act of 1933 (because the alleged violations occurred in the context of ENBC's initial public offering.) The plaintiffs asserted an additional claim against defendants Goldston, Carlborg, and Beck on the grounds that they acted as controlling persons of ENBC within the meaning of Section 15 of the Securities Act. The plaintiffs alleged that by reason of their positions as directors or officers of ENBC, these individuals (defendants Goldston, Carlborg, and Beck) had the power and authority to cause ENBC to engage in the wrongful conduct alleged in the complaint. In addition, the complaint alleged violations of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, as well as claims arising under the Colorado Securities Act against all defendants. Plaintiffs sought the following relief: (a) certification of the complaint as a class action for all persons who purchased or otherwise acquired the common stock of ENBC between August 2, 1996 and July 15, 1997; (b) an award of compensatory damages, interest and costs to all members of the class; and (c) equitable relief available under federal and state law.
Meduri v. Einstein/Noah Bagel Corp.. Mark R. Goldston, Eric Carlborg and Scott A. Beck (U.S. District Court for the District of Colorado, Case No. 97-N-1712). Filed August 8, 1997.
Drake v. Einstein/Noah Bagel Corp.. Mark R. Goldston, Eric Carlborg and Scott A. Beck (U.S. District Court for the District of Colorado, Case No. 97-N-1713). Filed August 8, 1997.
Eisenfeld v. Einstein/Noah Bagel Corp., Mark R. Goldston. Eric Carlborg and Scott A. Beck. (U.S. District Court for District of Colorado, Case No. 97-N-1823). Filed August 21, 1997.
These actions were consolidated as In re Einstein/Noah Bagel Corp. Securities Litigation (U.S. District Court for District of Colorado, Case No. 97-N-1614). The plaintiffs later amended the complaint to change the alleged class period to the period from August 2, 1996 to October 29, 1997. In addition to the cases described above, Drake v. Einstein/Noah Bagel Corp.. Mark R.
Goldston, W. Eric Carlborg and Scott A. Beck (Division 5, Jefferson County District Court, State of Colorado, Case No. 97-CV-2697), was filed in Colorado state court on September 19,1997. The complaint alleged substantially the same claims and causes of action arising under Colorado state securities laws as the plaintiffs in the Benit case, but this case was not consolidated in the others. In February 1999, ENBC and the individual defendants in all of the cases described above entered into a settlement agreement under which ENBC paid (in the aggregate) $8.5 million and all parties signed mutual releases and dismissed all claims with prejudice. ENBC funded the settlement with proceeds of director and officer liability insurance policies. The U.S. District Court for the District of Colorado approved the settlement in June 1999.
Butler v. Einstein/Noah Bagel Corp. (Superior Court of the State of Arizona, Maricopa County, Case No. CV-98-16651; case removed to U.S. District Court for the District of Arizona, Case No. CIV-99-239-PHX-EHC). Butler, who filed this lawsuit on January 8, 1999, is a former store general manager for one of ENBC's former area developers. Butler alleges that ENBC breached an oral contract to make him an "owner/operator" of the Einstein Bros. Bagels restaurants in the Phoenix area, under which he claims he would have earned between $240,000 and $400,000 per year. The complaint alleges breach of contract, breach of implied covenant of good faith and fair dealing, promissory estoppel, fraud, negligent misrepresentation and intentional infliction of emotional distress. The complaint sought damages in an unspecified amount, interest and attorney's fees and costs. As a consequence of the Chapter 11 bankruptcy filing made by ENBC and ENBP on April 27, 2000, the claims arising under this complaint became subject to the jurisdiction of the United States Bankruptcy Court, District of Arizona. On June 25, 2002, the Administrator of the ENBC and ENBP bankruptcy estates entered into a settlement with Butler, allowing the assertion of an unsecured claim of $250,000 against the ENBP bankruptcy estate.
Sarqente v. New World Coffee & Bagels, Inc.. Ramin Kamfar and Jerold Novack, (American Arbitration Association, New York, Case No. 13-114-01091-99) This arbitration was initiated in December 1999 by Valerie Sargente, the franchisee of a New World Coffee store located at 1159 Third Avenue, New York, New York, alleging fraudulent inducement, violations of the New York franchise law, and breach of contract, and also seeking rescission of the Franchise Agreement, damages of $500,000, and attorneys' fees against NWR. The New York franchise law claims were also asserted against R. Ramin Kamfar and Jerold E. Novack in their individual capacities (Messrs. Kamfar and Novack are former officers of our company and of NWR). NWR filed a counterclaim against the franchisee for amounts owed for royalties, product purchases, rent obligations, and loan obligations in the sum of $275,000. After completion of the plaintiffs case in the arbitration, all of the defendants moved to dismiss the demand for arbitration. The Arbitrator granted the motion to dismiss filed by Messrs. Kamfar and Novack, and substantially granted NWR's motion to dismiss. This case was settled on November 30, 2001. Under the settlement, NWR is to pay Sargente approximately $90,000 over time. In addition, NWR paid a $50,000 guaranty NWR executed for a loan given to Sargente (see the Commercial Capital Corp. case below).
Commercial Capital Corp. v. VM Sarqente, Inc., Valerie Sarqente and New World Coffee-Manhattan Bagel. Inc. (N.Y. Supreme Court, New York County, No. 601421/00). This action was filed in May 2000 against NWR by Commercial Capital Corp., the bank that issued a loan to former franchisee Valerie Sargente (see Valerie Sargente v. New World Coffee & Bagels, Inc.. et al. above) in an effort to collect on NWR's $50,000 guaranty of the franchisee's loan. The bank also asserted a claim that NWR fraudulently procured the loan and Sargente asserted a cross-claim against NWR for contribution and indemnification. This matter was settled in October 2001. Under the settlement, NWR paid its $50,000 guaranty of Sargente's loan, as was already required under NWR's guaranty of the bank loan.
New World Coffee & Bagels. Inc. v. Abrams (American Arbitration Association, New York, Case No. 13-114-00854-99). This arbitration was begun by NWR in September 1999 against Lidia Abrams, the former franchisee of a New World Coffee store in Chatham, New Jersey, seeking damages for breach of the franchise agreement, as well as recovery from Abrams of unpaid fees and other charges in the sum of $166,954. Abrams filed a counterclaim alleging fraudulent inducement, breach of contract and violations of the New York franchise law, and also seeking rescission of the franchise agreement, damages of $1.0 million, and attorneys' fees. The New York franchise law claims were also asserted against Ramin Kamfar and Jerold Novack in their individual capacities. Upon a motion filed by NWR and Messrs. Kamfar and Novack, the arbitrator issued an Order dismissing most of Abrams' claims. The arbitrator later denied Abrams' motion for reconsideration. This matter was settled on December 8, 2001. Under the settlement, NWR paid Abrams approximately $10,000.
dismiss all of the claims in the amended complaint. The court granted defendants' motion, dismissing the plaintiffs' RICO claims with prejudice and the plaintiffs' other claims without prejudice.
New World Coffee of Forest Hills. Inc. v. New World Coffee & Bagels, Inc., (American Arbitration Association, New York, Case No. 13-114-00237-00). This arbitration was begun in February 2000 by New World Coffee of Forest Hills, Inc., the former franchisee of a New World Coffee store located at 107-24 Continental Avenue, Forest Hills, New York, alleging fraudulent inducement, violations of the New York franchise law, and seeking damages of $750,000 plus interest and costs. NWR asserted a counterclaim seeking unpaid rent and overdue amounts for royalties, product purchases, and advertising fees in an amount of approximately $200,000. The parties settled all disputes in the arbitration, and to settle the matter, NWR agreed not to enforce its judgment for $222,981 against Forest Hills, and NWR reimbursed Forest Hills $15,000.
Three Beans & Bagel Corp. v. New World Coffee & Bagels, Inc.. Ramin Kamfar and Jerold Novack. (American Arbitration Association, New York, Case No. 13-114-00389-00). This arbitration was begun in April 2000 by Three Beans & Bagel Corp., the franchisee of a New World Coffee store at 102 Westwood Avenue, Westwood, New Jersey, alleging fraudulent inducement, violations of the New York franchise law, and breach of contract, and also seeking rescission of the franchise agreement, damages of $500,000, and attorneys' fees against NWR. The New York franchise law claims were also asserted against Ramin Kamfar and Jerold Novack in their individual capacities. NWR asserted a counterclaim for collection of royalties and other overdue charges in an amount of approximately $12,000. This matter was settled in June 2001. Under the settlement, NWR is to pay the franchisee approximately $60,000, over time, including stock and royalty and product discounts.
Noureddine Solhi and Hadria. Inc. v. New World Coffee & Bagels. Inc.. Ramin Kamfar and Jerold Novack (American Arbitration Association, New York, Case No. 13-114-00389-00). This arbitration was begun in September 2000 by Noureddine Solhi and Hadria, Inc., the franchisees of a New World Coffee store at 126 Rockland Plaza, Nanuet, New York, alleging fraudulent inducement, violations of the New York franchise law, and breach of contract, and also seeking rescission of the franchise agreement, damages of $140,000, and attorneys' fees against NWR. The New York franchise law claims were also asserted against Ramin Kamfar and Jerold Novack in their individual capacities. NWR asserted a counterclaim for unpaid royalties, payment for product purchases, and rent in an amount equal to approximately $40,000. This matter was settled on July 24, 2001. Under the settlement, NWR is to pay the franchisee $35,000 over time.
company abandoned all of their claims, agreed to do all of the things that we asked for in our counterclaim, and in which we compensated the Gennusas a certain amount to defray some of the cost of transitioning their company's business so that it no longer sold bagels to our franchisees.
Related to the Gennusa action, above, was another action encaptioned Kaufman v. New World Restaurant Group, Inc. (Superior Court of New Jersey, Monmouth County, Chancery Division, No. MON-C-158-03, filed June 2, 2003). This action was joined with the Gennusa lawsuit, noted above. This action was filed by four franchisees seeking the right to buy bagels from the Gennusas' company, and alleged breach of contract, fraud, violation of the New Jersey Franchise Practices Act, and constructive termination. We responded and sought a dismissal of the complaints. Before the court could hold a hearing, the plaintiffs dismissed all of their claims with prejudice.
Manhattan Bagel of Northeast, Inc. and Ellen Fishlevich v. Manhattan Bagel Company. Inc. and New World Restaurant Group. Inc. (Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-3166-04, filed August 11, 2004). This is a lawsuit filed by former franchisee (who was a plaintiff in the Kaufman case, above, and whose claims were dismissed with prejudice in that action) who later claimed that MBC engaged in fraud by not disclosing changes to its product formulation. We filed a motion to stay their action pending arbitration, and the plaintiffs counsel consented. Although the case (including our claims seeking to recover $150,000 that the plaintiff owes to us) is pending in the arbitration proceeding, the plaintiffs have since sought protection under the U.S. Bankruptcy Code, and the arbitration proceeding has been stayed pending the outcome of those bankruptcy proceedings.
03803 (FB)(RML) (the case was originally filed on August 4, 2005 in the Supreme Court of New York, County of Queens, Index No. 16412/05, and removed to U.S. District Court on August 10, 2005).. Both of these cases remain pending.
On November 19, 1997, we filed a Chapter 11 bankruptcy petition (U.S. Bankr. Court for the District of New Jersey, Case 97-53360) and remained in possession of our assets as a Debtor in Possession. On November 20, 1998, the court confirmed our First Amended Joint Plan of Reorganization. Under the terms of the First Amended Joint Plan of Reorganization, NWR purchased us and our assets. Since then, NWR has owned and operated MBC as a wholly-owned subsidiary.
Before ENC's acquisition of the Einstein system, its predecessor, ENBC, filed a Chapter 11 bankruptcy petition on April 27, 2000. ENBP also filed a Chapter 11 bankruptcy petition. Both cases were filed in the United States Bankruptcy Court, District of Arizona. (U.S. Bankr. Court for the District of Arizona, jointly administered Case Nos. 00-04447-ECF-CGC and 00-4448-ECF-CGG). ENBC and ENBP remained in possession of their respective assets as Debtors in Possession. In February 2001, ENBC and ENBP filed a joint motion in their bankruptcy cases to sell substantially all of their assets, including the Einstein and Noah Restaurant System. On June 1, 2001, the Bankruptcy Court approved and entered an Order approving the sale to us of the Einstein and Noah Restaurant System and related assets that MBC and ENBP were selling through these proceedings. On June 19, 2001, ENBC and ENBP consummated a sale of substantially all of their assets (including 100% ownership of ENBPI) to ENC. On August 5, 2003, the U.S. Bankruptcy Court in Arizona granted the motion for entry of final decree closing the bankruptcy cases filed by ENBC and ENBP. The Chapter 11 cases were closed on August 20, 2003.
Other than these actions, no person previously identified in Item 1, or officer identified in Item 2, of this offering circular has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item.
The initial franchise fee will be fully earned when paid, must be paid in one lump-sum amount (excluding any required deposits) and (except as described below under the heading 'Deposit') will not be refundable under any circumstances.
In some instances, before we enter into a Franchise Agreement with you, and in order to conduct additional evaluation about your qualifications to become one of our franchisees, we may ask you to enter into a Deposit Agreement (a copy of which is attached as Exhibit D). We do not ask all franchisees to enter into a Deposit Agreement. Under a Deposit Agreement, you will have to provide us with a $10,000 deposit, which we will credit against your initial franchise fee when you sign the Franchise Agreement. If, during the term of the Deposit Agreement, you do not find a site for the Restaurant that is acceptable to us, if for any other reason (other than our failure to evaluate a proposed site) you cannot find an approved site for a Restaurant, or if at any time you choose to terminate the Deposit Agreement and notify us in writing, then the Deposit Agreement will terminate, and we will refund your deposit, less our actual out-of-pocket costs (up to $5,000) to compensate us (among other things) for our time and effort for your application, within 60 days. If, during the term of the Deposit Agreement, we terminate the Deposit Agreement for any reason, then the Deposit Agreement will terminate, and we will refund your entire deposit within 60 days. Your deposit is a sign of your good faith and will be used to cover some of our costs in evaluating you if you do not sign a Franchise Agreement, and other expenses that we will incur related to your application. The Deposit Agreement does not confer upon you any franchise or territorial rights.
In addition to the fees described above, you must also purchase certain items from us or our affiliates, directly or indirectly (for example, through distributors). These include, among other things, your opening inventory of proprietary products and marketing materials. Your purchases of these items are likely to total approximately $10,000 to $20,000 (depending on the format and size of your Restaurant). There are additional items that you will have to buy as part of your initial outlays, as described in Item 7 below.
of the costs we may incur as a result of: (1) advertising and recruiting new franchisees; (2) screening and approving prospective franchisees; (3) providing advice and assistance to franchisees; (4) incurring legal fees, accounting fees, and other costs to comply with the federal and state laws governing this offering; (5) developing, registering, and protecting the Proprietary Marks; (6) prior research and development under the System; (7) prior development of our training programs; new restaurant training, or on-going training; and (8) marketing and general administrative expenses.
Within 6 months of the opening of your Restaurant.
Spent to promote the grand opening of your restaurant. You must submit a marketing plan for our approval. We may require you to deposit the funds with us to distribute as necessary to conduct the Grand Opening Advertising Program.
Greater of $10,000 or 2% of the total selling price paid by transferee.
Under the Area Development Agreement, we will conduct one on-site evaluation for each proposed Restaurant. If there are any additional on-site evaluations needed, you will have to reimburse us for our reasonable out-of-pocket expenses incurred in connection with those additional on-site evaluations (including for example the costs of travel, lodging, wages, and meals).
If you propose a new supplier of products, and we inspect the supplier or test the supplier's products, we may charge you or the supplier for our costs in conducting those inspections or running those tests.
You must indemnify us, and reimburse us for our costs (including our attorneys' fees): (a) if we are sued or held liable in any case having anything to do with your business operations; or (b) for any securities offering you propose or undertake.
If you engage in a public or private securities offering, you must reimburse us for our reasonable costs and expenses (including legal and accounting fees) to evaluate your proposed offering and you also must indemnify us (see above).
If you ask that we send trainers to your restaurant for additional training, and we do so, then you will have to pay our trainers' expenses and our then-current per diem charge for extra training. Our current per diem charge is $400 per trainer per day (we reserve the right to change our per diem rate in the future).
Due only if you decide to renew the franchise on the terms that are described in the agreement. The renewal fee is instead of a new initial franchise fee.
Our current policy is not to ask you to pay more than $500 in any calendar year for mystery shoppers' services and reports.
You must take ServSafe® training. You can choose to contract with the National Restaurant Association Educational Foundation to obtain this training, or you can ask us to provide the training. We will charge a fee for this training and reserve the right to change the fee periodically.
1. All fees are payable to us, and are non-refundable.
2. You must pay your royalties and advertising fund contributions us by the third business day of each week. For this purpose, the term "week" means the period beginning with the start of business on Monday and ending at the close of business on the following Sunday (or, if the Restaurant is not open on a Sunday, the immediately preceding business day). We have the right to designate in writing any other period of at least 7 days to be a "week" under the Franchise Agreement. We also have the right to require that you make these payments to us by EFT (electronic fund transfer).
3. We require different kinds of advertising and promotional efforts depending upon where you will operate your Restaurant (for example, in a city, a suburban area, or in a resort community). Additional details about the applicable advertising and promotional requirements can be found in Item 11, under the subheading "Advertising."
4. Interest starts to accrue when your payment was initially due. Interest rates will not exceed any maximum rate that may be imposed under applicable law.
personnel on your own. If that occurs, we will retrain you and train your new Restaurant Manager (or other Restaurant personnel), and you will have to pay us the fee indicated.
6. We do not currently charge a systems support fee, but we reserve the right to do so in the future. The cost per Restaurant per accounting period may fluctuate based upon the number of restaurants open and operating in the System, but we estimate that the system support fee will probably range between $275-400 for an "accounting period" (see below). The systems support fee will cover certain of the cost of operating our software help/support desk (which presently operates 7 days a week, 16 hours a day), as well as our remote installation to your computer of software upgrades that are provided by the vendor (as long as your computer conforms to our standards and that you meet our communication requirements so that we can do these things). An "accounting period" will be a four or five week period (or calendar month), as long as there are not more than 13 accounting periods in a given calendar year or 26 accounting periods over a two-year stretch.
7. As described in Item 11 below, you will have to purchase and use a specific POS system. In order to operate the POS system and to facilitate the transmission of information from the POS system to us, you also must enter into a software license agreement with us (the "Software License Agreement"). The current Software License Agreement is attached to this offering circular as Exhibit E. The software licensed to you under the Software License Agreement will be installed on the POS system prior to or at the same time the POS system is delivered to you. You are not required to pay us an initial fee under the Software License Agreement, but you are required to pay us an annual software maintenance fee, which is currently $322.40 a year.
None of the fees or costs estimated in this Item 7 are refundable except to the extent that you can negotiate with vendors, and except as otherwise described in Note 1.
Please note that we do not offer direct or indirect financing to you for any items. The availability and terms of financing from other sources will likely depend on factors such as the availability of financing generally, your creditworthiness, and the policies of lending institutions.
1. CONSTRUCTION/LEASEHOLD IMPROVEMENTS. You will need to construct improvements, or "build out," the premises at which you will operate the Restaurant. Generally, you will take the premises from the landlord in "vanilla box" condition (e.g., primed drywall ready to be painted, but without improvements). Among other things, you will likely need to arrange for proper wiring and plumbing, floor covering, wall covering, partitions, heat, air conditioning, lighting, storefront modifications, painting, cabinetry, bathroom facilities, and the like. You will need to hire an architect and licensed contractor (who we must find acceptable). Costs are likely to vary, and may be much higher, if you wish to establish your Restaurant in an area where special requirements of any kind (e.g., historical, architectural, or preservation requirements) will apply. Landlords often provide tenant improvement allowances for tenant improvements. Tenant improvement allowance figures are not included in the Item 7 chart because they can vary widely.
2. KITCHEN/COMPUTER EQUIPMENT & LIGHTING. The estimate is for the equipment you will need to operate the Restaurant, such as baking equipment, proofers, refrigeration, freezers, sandwich lines, a point-of-sale (POS) system and software, shelving and lighting. You will need to obtain these items of equipment, fixtures, and other fixed assets from sources of your own choosing, as long as the items you purchase meet our specifications and are from approved or designated vendors (where there are approved or designated vendors). The amount you will have to spend for equipment, fixtures, trade fixtures, and other fixed assets will vary depending upon the Restaurant's size, style, and the volume of products to be offered in the Restaurant. You will pay suppliers for equipment, fixtures, trade fixtures, and other fixed assets.
3. FURNITURE. FIXTURES & MILLWORK. The estimate is for the furniture, fixtures and millwork you will need to operate the Restaurant. You will need to obtain these items and other fixed assets from sources of your own choosing, so long as the items you purchase meet our specifications and are from approved or designated vendors (where there are approved or designated vendors). The amount spent for furniture, fixtures and millwork will vary for each Restaurant depending upon the Restaurant's size, style, and the volume of products to be offered in the Restaurant. You will pay suppliers directly for these items.
4. SIGNAGE & GRAPHICS The cost of signage and graphics will vary from location to location depending on lease requirements, local ordinances and restrictions, store frontage, and related factors. In addition, other considerations - such as zoning ordinances, as well as historical and architectural design standards - may affect your costs (both in terms of materials as well as professional fees that you will incur to get approval of your proposed signs). We will provide assistance to you in designing your signs; the final design must be submitted to us for our review and approval. You will pay suppliers directly for these items.
5. PROFESSIONAL FEES. The estimate is for legal, j^feeoj^tinQr^administcaJtlvei permitting, traffic studies, demographic studies, brokerage and miscellaneous. otner'profess'iDnah fees that you may incur before you open for business, including (amon^oiFre^ifilfig9)Qo:Fa'Siist you in reviewing the Franchise Agreement. Your actual costs may vary,*for example, depending on the degree to which you rely upon your advisors.
6. INITIAL FRANCHISE FEE. The details of the initial franchise fee are described in Item 5, including the amount and the conditions under which the initial franchise fee is refundable. Please see the information provided above in Item 5 regarding the Deposit Agreement. If you have also signed a Development Agreement, and you are in compliance with your obligations under the Development Agreement and all of your Franchise Agreements, then we will apply a credit from your development fee toward the initial franchise fee. The amount of the credit will be $5,000 for each Restaurant, so long as the total amount of all credits that we extend to you does not exceed the amount that you paid us as a development fee under the Development Agreement. See Item 5 for more details.
7. REAL ESTATE LEASING. If you do not own a location for your Restaurant, you must purchase or lease a space. You will probably need to lease a space at least four months in advance; however, you may attempt to negotiate an abatement from the landlord. Restaurant locations and sizes vary. Locations for a Restaurant are those that are typically described as "prime retail."
Restaurant sizes vary from 1,800 to 2,400 square feet (2,000 square feet is optimal) and satellite Restaurants typically range in size from 1,000 to 2,000 square feet (1,500 square feet is optimal).
The estimate provided assumes that you pay in a range from no security deposit, to a security deposit equal to 6 months of rent. The rent that we have used in preparing the estimates in the chart ranges from $20 to $45 per square foot per year.
Rent varies considerably from market to market, and from location to location within each market. Rents may vary beyond the range that we have provided, based on factors such as market conditions in the relevant area, the type and nature of improvements needed to the premises, the size of the Restaurant, the terms of the lease, and the desirability of the location. If you decide to purchase the property for the location of your Restaurant, you will incur additional costs that we cannot estimate.
8. OPENING INVENTORY. SMALLWARES & SUPPLIES. Items of inventory, smallwares, uniforms and supplies which you are required to obtain from us or from our designated sources of supply are paid for at standard prices and terms. All items of inventory which you obtain from sources of your own choosing are paid for directly to the supplier of those inventory items at prices agreed upon by you and the supplier. Terms vary from vendor to vendor, but are more typically paid for on the first delivery before you establish credit, although either we or other vendors may require that payment be made on a C.O.D. basis. Start-up inventory of products, smallwares, uniforms and supplies will vary based on expected volume of business and size of storage areas in the building. This estimate is for the initial inventory only.
9. GRAND OPENING ADVERTISING AND PROMOTION. We will assist you in tailoring an advertising plan appropriate to your market. The amount in the table is for the initial promotion and advertising efforts you are required to make under the Franchise Agreement.
Additional details regarding advertising and promotion can be found in Item 11, under the subheading "Advertising."
10. INSURANCE. The estimate is for the annual premium for the policies required under the Franchise Agreement. Insurance costs will vary depending upon factors such as the size and location of the Restaurant. You must obtain general liability insurance and product liability insurance with minimum limits of $1 million per occurrence, and an umbrella liability policy with minimum limits of $5 million per occurrence, which you will have to obtain through third parties, such as your own insurance agent. Your insurance obligations are more fully described in Item 8.
11. TRAVEL AND ACCOMMODATIONS FOR TRAINING. For the initial training period, the "low" estimate assumes that you are located within commuting distance of our training facilities and that you do not incur per diem expenses. The "high" estimate assumes travel, meals, auto and lodging for two individuals, for eight weeks. The cost you incur will vary depending upon factors such as the distance traveled, mode of transportation, travel preferences (such as air travel or ground transportation), nature of accommodations, per diem expenses actually incurred, and the number of persons who will attend training. If you send more than two persons to attend training, we estimate that the additional cost, on a per person basis, will range from $250 to $3,000 per person.
12. LEGAL AND ACCOUNTING. The estimate is for legal, accounting, administrative, traffic studies, demographic studies, and miscellaneous other professional fees that you may incur before you open for business, including (among other things) to assist you in reviewing the Franchise Agreement. Your actual costs may vary, for example, depending on the degree to which you rely upon your advisors.
13. BUSINESS LICENSES. Local, municipal, county, and state regulations vary on what licenses and permits are required by you to operate. These fees are paid to governmental authorities before starting business.
14. SECURITY DEPOSITS. The figure is the estimated cost of telephone and utility deposits.
15 ADDITIONAL FUNDS. You will need additional capital to support on-going expenses, such as payroll and utilities, to the extent that these costs are not covered by sales revenue. New businesses often generate a negative cash flow. We estimate that the amount given will be sufficient to cover on-going expenses for the start-up phase of the business, which we calculate to be three months. This is only an estimate, however, and there is no assurance that additional working capital will not be necessary during this start-up phase or after.
Your credit history could impact the amount (and cost) of funds needed during the startup phase. If you have no credit history or a weak credit history suppliers may give you less favorable lending and payment terms, which might increase the amount of funds you will need during this period. You will need to have staff on-hand before opening to prepare the Restaurant for opening, for training, orientation, and related purposes. We estimate that you will need approximately 80 hours of staff time, at $7.00 per hour (or more, if the minimum wage is higher in your state), to get ready for your opening.
the local market for the Restaurant; the prevailing wage rate; competition; the sales level achieved during the initial period of operation; and your management and training experience, skill, and business acumen.
You should review these figures carefully on your own, with a business advisor of your choosing, before making any decision to purchase the franchise. You should take into account the cash outlays and probable losses that you may incur while you are trying to get established. Extensive start-up costs may be involved, depending upon your circumstances.
16 TOTAL. We relied on our own experience when preparing these figures.
To insure that the highest degree of quality and service is maintained, you must operate the Restaurant in strict conformity with the methods, standards, and specifications as we may periodically prescribe in the Manual or otherwise in writing.
- stop selling and offering for sale any Products that we have later disapproved.
If you deviate (or propose to deviate) from our standards and specifications, whether or not we have approved, the deviation will become our exclusive property.
above, we have the right to designate only one supplier for certain items (such as distribution of products, soft drinks, etc.) in order to take advantage of marketplace efficiencies.
If you want to buy any Products or any other items (except for Proprietary Items, which are discussed below) from an unapproved supplier, you first must submit to us a written request asking for our approval to do so. You may not purchase from any proposed new supplier until we have reviewed and, if we think it is appropriate, approved in writing the proposed new supplier. Among other things, we will have the right to require that our representatives be permitted to inspect the proposed new supplier's facilities, and that samples from that supplier be delivered either to us or to an independent laboratory that we designate for testing. Either you or the proposed new supplier must pay us a charge (which will not exceed the reasonable cost of the inspection and the actual cost of the tests). We also may require that the proposed new supplier comply with certain other requirements that we may deem appropriate, including for example payment of reasonable continuing inspection fees and administrative costs, or other payment to us by the supplier on account of their dealings with you or other franchisees, for use, without restriction (unless otherwise instructed by the supplier) and for services that we may render to our suppliers. We reserve the right, at our option, to periodically re-inspect the facilities and products of any approved supplier and to revoke our approval if the supplier does not continue to meet any of our then-current criteria.
Although the Franchise Agreement does not obligate us to notify you of our approval or disapproval of a supplier within a specified time, we estimate that we will notify you of approval or disapproval within 30 days of our receipt of your written request. This is only an estimate, and the actual approval time may be shorter or longer than 30 days; in any event, we will notify you of supplier approval or disapproval within 90 days from our receipt of your written request. Similarly, we estimate that the charge associated with our approval of a proposed supplier will not exceed $1,000, and in any event will not exceed $5,000.
The Franchise Agreement also provides that you may not use any item bearing our trademarks without our prior written approval.
We may periodically establish food commissaries and distribution facilities, and we may designate these as approved (or required) manufacturers, suppliers, or distributors.
We estimate that your purchases from approved suppliers and in accordance with our specifications will represent approximately 100% of your total purchases in establishing the Restaurant, and approximately 100% in the continuing operation of the Restaurant. We also estimate that your purchases from designated suppliers will represent approximately 100% of your total purchases in establishing the Restaurant, and approximately 100% of your total purchases in the continuing operation of the Restaurant.
You must allow us or our agents, at any reasonable time, to remove samples of Products offered in your Restaurant, without payment, in amounts reasonably necessary for testing by us or an independent laboratory to determine whether those samples meet our then-current standards and specifications. We may require you to bear the cost of that testing if we did not previously approve in writing the supplier of the item or if the sample that we take from your Restaurant fails to conform to our specifications.
You will not be permitted to offer or sell, or allow anyone else to offer or sell, beer, wine, or any form of liquor, unless we have given you our advance written approval (which we will have the right to withhold).
We may establish strategic alliances or preferred vendor programs with suppliers that are willing to supply some products or services to some or all of the Restaurants in our system. If we do establish those types of alliances or programs, we may limit the number of approved suppliers with whom you may deal, we may designate sources that you must use for some or all Products and other products and services, and we may refuse to approve proposals from franchisees to add new suppliers if we believe that action would be in the best interests of the System or the franchised network of Restaurants.
We reserve the right to collect and retain certain manufacturing allowances, marketing allowances, rebates, credits, monies, payments and benefits (collectively, "Allowances") offered to us or to our affiliates by manufacturers, suppliers and distributors based upon your purchases of Products and other goods and services. During our last fiscal year (FY2005), we did not retain any allowances.
Currently, there are no purchasing or distribution cooperatives in existence.
You must buy all of your requirements for bagels, muffins, cookies, cream cheese, cream cheese spreads, coffee, coffee beans, and paper goods bearing the Proprietary Marks ("Proprietary Items") only from us, our affiliate, our parent company, or from our designee(s), as described below. We will have the right to periodically introduce additional Proprietary Items. Proprietary Items are considered integral components of the Manhattan Bagel franchise and are inextricably interrelated with the Proprietary Marks and the System.
The Proprietary Items that are offered and sold in Restaurants are manufactured in accordance with the secret blends, standards, and specifications that we or our affiliates own. In order to maintain the high standards of quality, taste, and uniformity associated with Proprietary Items sold at all Restaurants in the System, you must purchase Proprietary Items only from us, our affiliate, our parent company, or our designees, and you may not offer or sell any Proprietary Item that has not been purchased from us, our affiliate, our parent company, or our designated supplier at or from the Restaurant. We estimate that your purchases of Proprietary Items will represent approximately 1.0% percent of your total purchases in establishing the Restaurant, and approximately 25% of your total purchases in the continuing operation of the Restaurant (on an average weekly basis). The prices charged for Proprietary Items may vary by geographic area.
During our fiscal year ended January 3, 2006, our revenue from the sale of Proprietary Items and Products, including sales to our franchisees and company-owned restaurants, was $5,467,626, or approximately 65% of our total revenues of $8,429,511.
Except as described in this Item 8, we do not provide any material benefits to you based on your use of designated or approved suppliers.
business interruption insurance to cover at least your obligations for leases, royalties, advertising fund obligations, fixed costs, and other recurring expenses for a period at least six months after an interruption of business operations.
- all other insurance that we require in the Manual or that is required by law or by the lease or sublease for the Restaurant.
Each insurance policy required under the Franchise Agreement must be issued by an issuer we approve, who must have a rating of at least "A -" in the most recent Key Rating Guide published by the A.M. Best Company (or another rating that we reasonably designate if A.M. Best Company no longer publishes the Key Rating Guide) and must be licensed to do business in the state in which the Restaurant is located. All liability and property damage policies must name us as additional insureds and must provide that each policy cannot be cancelled unless we are given thirty days' prior written notice. We may periodically increase required coverage limits or require additional or different coverage to reflect inflation, identification of new risks, changes in the law or standards of liability, higher damage awards and other relevant changes in circumstances. You must deliver to us (and in the future maintain on file with us) valid and current certificates of insurance showing that all required insurance is in full force and effect.
We do not offer direct or indirect financing. We will not guarantee your note, lease, or other obligations.
We are required by the Franchise Agreement to provide certain assistance and service to you.
We are not required by the Franchise Agreement to furnish any other service or assistance to you before the opening of your Restaurant.
Neither the Franchise Agreement, nor any other agreement, requires us to provide any other assistance or services to you during the operation of the Restaurant.
There are no site selection requirements under a Franchise Agreement because the Franchise Agreement will be signed only after you have found a location for the Restaurant. We will approve a proposed location only if it meets our standards and is otherwise acceptable to us. However, you will be solely responsible for the choice of a location, and the fact that we approve a location will not mean that we have made any direct or implied promise or guarantee of your success at the location.
We estimate that the time period between the signing of the Franchise Agreement and the start of operations will be approximately three to six months. You must open the Restaurant within six months after securing the necessary authorization and approval for permits and certificates.
The factors we will evaluate in considering whether to approve a site include: general location and neighborhood; pedestrian traffic volume and patterns; demographic and traffic patterns, volume, and speed; size and ease of access to the proposed site; the proposed lease or sublease; utilities; and zoning issues.
ownership interest in Franchisee, and who has signed the Guarantee, Indemnification and Acknowledgement that is attached to the Franchise Agreement.
In addition to attending our initial training program, the Operating Partner and the Restaurant Manager must have Sen/Safe® certification. You may obtain this certification by (i) contacting the National Restaurant Association Educational Foundation to schedule attendance at a ServSafe® Food Safety Training, or (ii) requesting that we provide you with course materials (for which we will charge you an additional fee) and the ServSafe® Food Safety Training course to be provided immediately after completion of the initial training program. All training requirements must be met before your restaurant opens.
The Restaurant must be under the active full-time management of either you or the Operating Partner who successfully completed (to our satisfaction) our initial training program.
If either of you (or the Operating Partner) or the Restaurant Manager (collectively, the "Highly Trained Personnel") cease active management or employment at the Restaurant, then you must enroll a qualified replacement (who must be reasonably acceptable to us) in our initial training program not more than 30 days after the end of the former person's full-time employment or management responsibilities. The replacement must attend and successfully complete the basic management training program, to our reasonable satisfaction, as soon as it is practical to do so.
We may require that any or all of the Highly Trained Personnel attend refresher courses, seminars, and other training programs periodically.
We will bear the cost of all training (instruction and required materials) (except for the cost of materials for the ServSafe® training if you ask that we provide that training to you). You will bear all other expenses incurred in attending training, such as the costs of transportation, lodging, meals, wages, and worker's compensation insurance (see Items 6 and 7 of this offering circular).
If you ask that we provide additional on-site training, and we are able to do so, then you will pay us our then-current per diem charges and out-of-pocket expenses. Our per diem charges will be specified in our Manual, and the current amount is described in Item 6 of this offering circular.
The subjects covered in the initial training program are described below.
Training will be conducted over a three-week period at locations of our choosing (typically, but not always, this includes two and one-half weeks at a training facility that we designate -presently, we conduct training in Hamilton, New Jersey-and then one-half week at your Restaurant) before you open. Training is conducted as frequently as we determine it necessary to hold a training class.
All of our instructors are our employees. Our Director of Training is Larry Carter, and he is assisted by other members of our staff. Mr. Carter has been a training administrator and District Manager for us since April 1996 and has been conducting training classes since March 1997.
As described in Item 6 above, for each week during the term of the Franchise Agreement, you will be required to make an Advertising Contribution. The Advertising Contribution will be in an amount not to exceed 5% of the Gross Sales of your Restaurant during the preceding week. (See Item 6, note 2, for the definition of the term "week.") We occasionally may lower the Advertising Contribution by giving you written notice of the amount and length of the reduction.
The Advertising Contribution will be allocated between the Manhattan Bagel National Advertising Fund (the "NAF") and a designated Market Ad Fund (the "MAF") for your region, in the proportions as we will have the right to designate periodically. We may also require you spend a proportion of the Advertising Contribution on Local Advertising and Promotion (the "Local Advertising Expenditure"). There are different advertising needs in different types of markets. For example, Restaurants that operate in resort or vacation areas may need a different kind and volume of advertising than do Restaurants that operate in suburban areas or in cities. We reserve the right, in certain markets, to suspend a portion of these requirements (for example, the MAF and local advertising and promotion requirements).
We will determine how the Advertising Contribution will be allocated between: (1) the NAF; (2) a designated MAF; and (3) Local Advertising Expenditures. No matter how we determine to split your Advertising Contribution, the total amount you must pay or spend will not exceed the amount of the Advertising Contribution, and the portion that you will be required to pay to the NAF will not exceed 4% of the Gross Sales of your Restaurant. (Section 10.2 of Franchise Agreement).
None of the amounts collected or held by the NAF will be used for advertising that is principally a solicitation for the sale of franchises. We do not receive payment for providing goods or services to the NAF. A statement of the NAF's operations, as shown on our books, will be prepared annually, and that statement will be made available to you upon request. As described below, we are not required to spend any particular amount on advertising in the area where your Restaurant is located. As also described below, if amounts are unspent in the NAF at fiscal year-end, those amounts will be carried over by the Fund for expenditure in the following year(s).
(a) We (or our designee) will direct all advertising programs, with the sole right to decide the concepts, materials, and media used in these programs and the placement and allocation of the programs. The NAF is intended to maximize general public recognition, acceptance, and use of the System. Neither we nor our designee will be obligated to make expenditures for you that are equivalent or proportionate to your contribution, or to ensure that any particular franchisee benefits directly or pro rata from expenditures by the NAF.
(b) The NAF, and all contributions to and earnings from the NAF, will be used exclusively to meet the costs of marketing and any other activities that we believe will enhance the System's image and, in our sole discretion, promote general public awareness of and favorable support for the System.
(c) You must contribute to the NAF by electronic fund transfer (EFT) by the third business day of each week (see also Item 6, note 2). All sums you pay to the NAF will be maintained in an account separate from our other monies.
(d) We will have the right to charge the NAF for the reasonable administrative costs and overhead that we incur in activities reasonably related to the direction and implementation of the NAF and advertising programs for you and the System (for example, costs of personnel for creating and implementing, associated overhead, advertising, merchandising, promotional and marketing programs). The NAF and its earnings will not otherwise inure to our benefit or be used to solicit the sale of franchises. We or our designee will maintain separate bookkeeping accounts for the NAF.
(e) The NAF is not and will not be our asset.
(f) Although the NAF is intended to be of perpetual duration, we maintain the right to terminate the NAF. The NAF will not be terminated, however, until all monies in the NAF have been spent for advertising or promotional purposes.
We will have the right, as we see fit, to establish an MAF for your region. The purpose of an MAF is to conduct advertising campaigns for the Restaurants located in that region.
(a) MAF's will be established in the form and manner that we have approved in advance.
(b) MAF's will be for the exclusive purpose of executing regional and market-wide advertising programs and developing (subject to our approval) standardized promotional materials for use by the members in local advertising and promotion.
(c) MAF's may not use advertising, promotional plans, or materials without our prior written approval, as described below.
(d) You must submit your required contribution to the MAF by the third business day of each week, based on your Gross Sales for the preceding week. At the same time, you will have to submit the reports that we require. We may require you to submit this payment by EFT or by check. We also may require that your payments and reports to the MAF be made to us for distribution to the MAF.
Restaurants contributing to a MAF are closed, any balance remaining in that MAF will be transferred to the NAF.
(f) We have the right to change or merge any MAF's.
We may or may not also require you spend a proportion of the Advertising Contribution (as a portion of your Gross Sales of your restaurant as we will periodically designate) during the preceding month on local advertising and promotion (the "Local Advertising Expenditure"). The Local Advertising Expenditure must be in a form that we approve, and we may require you to provide us with applicable receipts, copies of promotional materials, or other materials we may reasonably require to prove that you are complying with the Local Advertising Expenditure requirement.
Certain criteria will apply to any local advertising and promotion that you conduct. All of your local advertising and promotion must be dignified, must conform to our standards and requirements, and must be conducted in the media, type, and format that we have approved. You may not use any advertising or promotional plans that we have not approved in writing. You must submit to us samples of all proposed plans and materials (unless, within the previous six months, we prepared or already approved the plans or materials). You are not required to obtain our approval of the prices you intend to charge. We will ordinarily provide you with our response (whether approval or disapproval) to the proposed plans or materials within two months; but if we do not give our approval within fifteen days, we will have been deemed to disapprove the plans or materials.
As discussed in Item 7, in addition to (and not in place of) the Advertising Contribution, you must spend at least $5,000 on local advertising and promotion conducted for the Restaurant's grand opening advertising program (the "Grand Opening Advertising Program"), in accordance with our specifications for that program. You must complete the Grand Opening Advertising Program no later than six months after the Restaurant first opens for business. All materials used in the Grand Opening Advertising Program will be subject to our prior written approval, as described above. The Grand Opening Advertising Program is considered "local advertising and promotion" and is therefore subject to the restrictions described below. We will work with you to tailor your Grand Opening Advertising Program to your market. We reserve the right to require you to deposit with us the funds for the Grand Opening Advertising Program so that we may distribute the funds for the Grand Opening Advertising Program, and if so, and funds not spent within six months after your Restaurant opening will be deposited in the MAF for your area.
In addition to the plans and promotions that we otherwise provide to you under the Franchise Agreement, we will periodically make available to you, for purchase, certain advertising plans and promotional materials for your use in local advertising and promotion.
(d) The cost of food items or promotional merchandise (i.e.. mugs).
Our current policy is to contribute to the NAF and any MAF's on the same basis as is required of our franchisees; however, we are not obligated to do so and reserve the right to change that policy. If we do establish company-owned Restaurants, and we contribute to a MAF's, we will have the same rights for our Restaurants as do our franchisees for their Restaurants.
Websites (as defined below) are considered as "advertising" under the Franchise Agreement, and are subject (among other things) to our review and prior written approval before they may be used (as described above). As used in the Franchise Agreement, the term "Website" means an interactive electronic document, contained in a network of computers linked by communications software, that you operate or authorize others to operate and that refers to the Restaurant, Proprietary Marks, us, or the System. The term Website includes, but is not limited to, Internet and World Wide Web home pages. For any Website, the Franchise Agreement provides that you may not establish a Website, nor may you offer, promote, or sell any products or services, or make any use of the Proprietary Mark, through the Internet without our prior written approval. As a condition to granting our consent, we will have the right to establish any requirement that we deem appropriate, including among other things a requirement that your only presence on the Internet will be through one or more webpages that we establish on our website.
You are required to purchase and use the New World Restaurant Group Inc. approved point of sale (POS) and back office computer. This is a Microsoft Windows-based package that will generate on-line, real-time reports such as item sales, financial, department, hourly sales, time keeping and labor information for the Restaurant. The current approved POS system is the InFusion system from ParTech, Inc. This system will be purchased directly from ParTech Inc. We do not receive any financial payment from ParTech, Inc for the purchase of the POS system.
As described in Item 6 above, you must enter into the Software License Agreement in order to use the software that, among other things, will run the POS system and facilitate the transmission of information from the POS system to us. The Software License Agreement is attached to this offering circular as Exhibit E.
The table of contents of the Manual is attached as Exhibit K.
- sell and distribute, directly or indirectly, or license others to sell and distribute, directly or indirectly, any Products, from any location or to any purchaser (including, among other methods, to sales made at retail locations, supermarkets, gourmet shops, mail order, and on the Internet), as long as these sales are not conducted from a Restaurant operated from a location inside the Protected Territory (excluding an Institutional Facility).
The term "Co-Branded Location" includes, among other things, businesses of any sort within which a "Manhattan Bagel" facility is established and operated, including for example book stores, department stores, restaurants, and supermarkets. The term "Institutional Facility" includes, among other things: airports; bus stations; factories; federal, state or local government facilities (including military bases); hospitals and other health-care facilities; recreational facilities; schools, colleges and other academic facilities; seasonal facilities; shopping malls; theaters; train stations; and workplace cafeterias.
The term "delivery customers" means customers that are located within the Protected Territory that purchase products for delivery to (and consumption in) their home or office.
The term "wholesale customers" means customers that: (a) purchase products totaling $1,000 or more a month from you; (b) are not in the business of selling bagels; and (c) do not, in turn, use any of our Proprietary Marks for serving or reselling Products that they buy from you. If you make a written request to us asking that we waive some or all of the conditions in the preceding sentence for one or more proposed wholesale customers, we will have the right to grant or withhold consent, in writing, to that waiver.
and even though those restaurants may appear to (or actually) have an impact on sales at your Restaurant.
- sell and distribute, directly or indirectly, or license others to sell and distribute, directly or indirectly, any Products from any location or to any purchaser (including, but not limited to, sales made at retail locations, supermarkets, gourmet shops, mail order, and on the Internet), so long as the sales are not conducted from a retail Restaurant operated from a location inside the Development Area.
If you sign a deposit agreement, we will describe an area within which you can look for a site for a new restaurant. This area is not meant to be an "exclusive" area, and we will be able to pursue and engage in any business opportunities in the area.
TRADEMARKS, SERVICE MARKS. TRADE NAMES.
No affidavit or renewal filings are due yet for these registrations.
Your right to use the Proprietary Marks is limited to the uses that are authorized under the Franchise Agreement, and any unauthorized use of the Proprietary Marks will infringe upon our rights. You may not use any Proprietary Mark: (1)as part of any corporate name or other business name; (2) with any prefix, suffix, or other modifying words, terms, designs, or symbols, or in any modified form; (3) for performing or selling any unauthorized services or products; (4) as part of any domain name, electronic address or search engine or in any other manner for a Website without our prior written approval; or (5) in any other manner that we do not expressly authorize in writing. You must identify yourself as the independent owner and operator of your business and Restaurants in the manner we specify (such as on invoices, order forms, receipts, and contracts). You must also give the trademark registration notices that we designate, and obtain any assumed business name registrations that applicable law requires.
There are no currently effective material determinations of the USPTO, the Trademark Trial and Appeal Board, the trademark administrator of any state, or any court, and no pending infringement, opposition, or cancellation proceeding, or any pending material litigation, involving the Proprietary Marks. Based on a settlement with a prior user of the Manhattan Bagel name, we are not permitted to operate or franchise any Restaurants using the Proprietary Marks in Kentucky until 2045. Except as described above, no agreement significantly limits our rights to use or license the Proprietary Marks in any state in a manner material to the franchise, and we know of no superior prior rights or infringing uses that could materially affect your use of the Proprietary Marks in any state.
own costs and share pro rata in our recovery up to the amount of your share of the recovery. We will defend and indemnify you for damages you incur in any claim, action or proceeding brought by any person claiming to have rights to the Proprietary Marks (other than a person's claims to prior common law trademark rights), but only if you complied with the Franchise Agreement and that Agreement is still in effect.
If it becomes advisable at any time in our sole judgment for you to modify or discontinue using any Proprietary Mark or for you and the Restaurant to use one or more additional or substitute trade or service marks, you will have to immediately comply with our directions. Neither we nor our affiliates will have any obligation to reimburse you for any expenditures you make because of any discontinuance or modification.
No patents are material to the operation of your Restaurant.
We claim copyright protection covering various materials used in our business and the development and operation of Manhattan Bagel Restaurants, including the Manual, advertising and promotional materials, and similar materials. We have not registered these materials with the United States Registrar of Copyrights but we are not required to do so.
There are no currently effective determinations of the United States Copyright Office or any court, nor any pending litigation or other proceedings, regarding any copyrighted materials. No agreement limits our rights to use or allow franchisees to use the copyrighted materials. We do not know of any superior prior rights or infringing uses that could materially affect your use of the copyrighted materials. No agreement requires us to protect or defend our copyrights or to indemnify you for any expenses or damages you incur in any judicial or administrative proceedings involving the copyrighted materials. No provision in the Franchise Agreement requires you to notify us of claims by others of rights to, or infringements of, the copyrighted materials. If we require, you must immediately modify or discontinue using the copyrighted materials. Neither we nor our affiliates will have any obligation to reimburse you for any expenditures you make because of any discontinuance or modification.
any time became a part of the public domain, through publication or communication by others having the right to do so.
In addition, we may require you, your Operating Partner and your Restaurant Manager to sign a Non-Disclosure and Non-Competition Agreement. Every one of these agreements must provide that the person signing will maintain the confidentiality of information that they receive in their employment or affiliation with you or the Restaurant. These agreements must be in a form that we find satisfactory, and must include, among other things, specific identification of our company as a third party beneficiary with the independent right to enforce the covenants. Our current form for this Non-Disclosure and Non-Competition Agreement is attached to the Franchise Agreement as Exhibit F.
In order to protect our reputation and goodwill and to maintain high standards of operation under our Proprietary Marks, you must conduct your business in accordance with the Manual. We will lend you one set of our Manual for the term of the Franchise Agreement.
You must always treat in a confidential manner the Manual, any other manuals we create (or that we approve) for use with the Restaurant, and the information contained in the Manual. You must use best efforts to maintain this information as secret and confidential. You may not copy, duplicate, record, or otherwise reproduce the Manual and the related materials, or any part (except for the parts of the Manual that are meant for you to copy, which we will clearly mark), nor may you otherwise let any unauthorized person have access to these materials. The Manual will always be our sole property. You must always keep the Manual in a secure place at the Restaurant's premises.
We may periodically revise the contents of the Manual, and you must make corresponding revisions to your copy of the Manual and comply with each new or changed standard. If there is ever a dispute as to the contents of the Manual, our master copy of the Manual (maintained at our home office) will be controlling.
The Franchise Agreement requires that you or your Operating Partner devote full time, energy, and best efforts to the management of the Restaurant.
The Operating Partner must supervise the operation of the Restaurant and must be someone whom we have approved. We also must approve the Restaurant Manager. All persons that afterward serve in the positions of Operating Partner and Restaurant Manager will be subject to our prior written approval and must also attend and successfully complete our manager training program (which is described in Item 11 of this offering circular).
The Franchise Agreement does not require you to participate personally in the direct operation of the Restaurant, although we encourage and recommend your active participation. We do, however, require that you or your Operating Partner devote full time, energy, and best efforts to the management of the Restaurant.
If you are a corporation or a partnership, a Operating Partner must supervise the operation of the Restaurant whom we have approved ahead of time. The person who serves as Restaurant Manager will also be subject to our prior written approval. Our approval will be based on whether the proposed Operating Partner and Restaurant Manager have a good business reputation, are not competitors of ours, and whether they can successfully complete our training program. Operating Partners and Restaurant Managers must be able to speak the English language to attend and complete our training course. After the initial Operating Partner and Restaurant Manager, any replacements will also be subject to our reasonable approval, and are required to attend and successfully complete our training program. See Items 11 and 17 for a description of these obligations. We require your principals (including the Operating Partner), supervisors and managers to sign a Non-Disclosure and Non-Competition Agreement, the form of which is attached to the Franchise Agreement as Exhibit F. We do not impose any other restrictions on your managers.
You may sell and provide only products and services that conform to our standards and specifications (which are described in Item 8 above). You also will have certain obligations to offer for sale particular items (which are described in Item 9 above). We have the right, without limit, to change the types of authorized products and services.
As noted above in Item 12, you may only offer and sell products to retail customers for consumption on the Restaurant's premises, for personal carry-out consumption, and for delivery service in a manner that complies with our standards. You may also sell products to end-users and other entities that do not resell the products. You may not sell products to gift shops and similar type stores. We will have the right to review and approve (or not approve) any proposed sale of the products to a hotel or a restaurant (which may be required to comply with our standards in order to feature or give away Manhattan Bagel brand products). All sales will be counted in "Gross Sales."
The Approved Location for the Restaurant will be specified in the Franchise Agreement. You may not relocate the Restaurant without our prior written approval.
Notice, satisfaction of monetary obligations, compliance with Franchise Agreement, release, sign new Franchise Agreement, and others; see §§ 2.2.1 -2.2.8 in Franchise Agreement.
We each have the right to terminate the Deposit Agreement at any time, with or without cause, by providing written notice to the other party.
Default under Franchise Agreement, bankruptcy, abandonment, and other grounds; see § 14 of the Franchise Agreement. Under the U.S. Bankruptcy Code, we may be unable to terminate the agreement merely because you make a bankruptcy filing.
Cease operating Restaurant, payment of amounts due, and others; see§§ 15.1-15.9 of the Franchise Agreement.
There are no limits on our right to assign the Franchise Agreement.
Includes transfer of any interest.
We have the right to approve transfers.
Release, signature of new Franchise Agreement, payment of transfer fee, and others; see §§ 13.5.1 -13.5.10 of the Franchise Agreement.
We can match any offer.
We can acquire any interest which you have in any lease or sublease for the premises and purchase your furnishings, equipment, material, or inventory at cost or fair market value.
Your estate must transfer your interest in the Restaurant to a third party we have approved, within a year after death or 6 months after the onset of disability.
Includes prohibition on engaging in any other business which is the same or similar to the Restaurant and others; see §§ 16.2 -16.4 of the Franchise Agreement.
Includes an 18 month prohibition similar to "q" (above), within 5 miles of the Approved Location, or within 5 miles of any other Restaurant then-operating under the System.
Only the final written terms of the Franchise Agreement are binding.
Before bringing an action in court, the parties must first submit the dispute to non-binding mediation (except for injunctive relief).
Connecticut [Gen. Stat. Sections 42-133e to 42-133h]; Delaware [Code Sections 2551 to 2556]; Hawaii [Rev. Stat. Section 482E-6]; Illinois [815 ILCS 705/1-44]; Indiana [Stat. Sections 23-2.5-1 and 23-2-2.7]; Iowa [Code Sections 523H.1 to 523H.17; Michigan [Stat. Section 19.854(27); Minnesota [Stat. Section 80C.14]; Mississippi [Code Sections 75-24-51 to 87-410; Missouri [Rev. Stat. Sections 407.400 to 407.410]; Nebraska [Rev. Stat. Sections 87-401 to 87-^10]; New Jersey [Rev. Stat. Section 56:10-1 to 56:10-12]; South Dakota [Codified Laws Section 37-5a-51]; Virginia [Code 13.1-557 through 13.1-574]; Washington [Code Section 19.100.180]; and Wisconsin [Stat. Section 135.01 to 135.07]. These and other states may have other statutes and court decisions that may supersede the franchise agreement in your relationship with us including the areas of termination and renewal of your franchise.
In addition to the provisions noted in the table above, the Franchise Agreement and Development Agreement contain a number of provisions that may affect your legal rights, including a waiver of a jury trial, waiver of punitive or exemplary damages, and limitations on when claims may be raised. See Sections 25.6, 25.7 and 25.8 in the Franchise Agreement, and Sections 15.6 and 15.7 in the Development Agreement. We recommend that you carefully review all of these provisions, and the entire contracts, with a lawyer.
* Please refer to the disclosure addenda and contractual amendments appended to this offering circular for additional terms that may be required under applicable state law.
We do not use any public figures to promote our franchise.
We do not furnish or authorize our employees, salespersons, or any other representations to furnish any oral or written information concerning the actual or potential sales, costs, income, or profits of a Restaurant. Actual results vary from unit to unit, and neither we nor our employees, salespersons, nor any other representative can estimate the results of any particular franchise.
1. All numbers are as of our fiscal years ended January 3, 2006 (which was the last day in our FY2005), December 28, 2004 (which was the last day in our FY2004), and December 30, 2003 (which was the last day in our FY2003).
2. Numbers may not add up because a single franchise may be listed in more than one category.
We did not have any company-owned restaurants during any of the past three fiscal years.
The names, addresses, and telephone numbers of our franchisees as of January 3, 2006 are listed in Exhibit H.
The name and last known home address and telephone number of every one of our franchisees who has had an agreement terminated, canceled, not renewed, or who otherwise voluntarily or involuntarily ceased to do business under a Franchise Agreement during the one-year period ending January 3, 2006, or who has not communicated with us within ten weeks of the date of this offering circular are also listed in Exhibit H. Exhibit I lists our company-owned units (currently there are none).
NWR's* consolidated balance sheets as of January 3, 2006 (which was the last day in NWR's FY2005) and December 28, 2004 (which was the last day in NWR's FY2004); and NWR's* consolidated statements of operations, statements of changes in stockholders' equity, and statements of cash flows for the years ended January 3, 2006, December 28, 2004, and December 30, 2003.
The last two pages of this offering circular (Exhibit P) are identical pages acknowledging receipt of this entire document (including the exhibits). Please sign and return to us one copy; please keep the other copy along with this offering circular.

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