Source: http://www.freefranchisedocs.com/coffee-beanery-UFOC.php
Timestamp: 2019-04-19 19:09:39+00:00

Document:
You may have elected to receive an electronic version of your disclosure document. If so, you may wish to print or download the disclosure document for future reference. You have a right to receive a paper copy of the disclosure document up until the time of sale. To obtain a paper copy, contact Stacy Peterson at 3429 Pierson Place, Flushing, Michigan 48433, (810) 733-1020.
There also may be laws on franchising in your state. Ask your state agencies about them.
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 TO THIS OFFERING CIRCULAR.
IN ACCORDANCE WITH THE REQUIREMENTS OF THE FEDERAL TRADE COMMISSION, THIS OFFERING CIRCULAR WAS ISSUED ON SEPTEMBER 30, 2006. STATE VARIATIONS OF THIS OFFERING CIRCULAR ARE EFFECTIVE ON THE DATE LISTED IN THE ADDENDUM FOR SUCH STATE.
The Franchise offered is for the operation of a COFFEE BEANERY Traditional Coffee Store or Cafe offering for retail sale over various types of coffee, coffee beans, tea, spices, related products and food items, for on or off-site consumption.
The initial franchise fee varies depending upon the concept you select and whether you are currently operating a coffee shop or restaurant. For a Cafe and Traditional Store, the initial franchise fee is Twenty-Seven Thousand Five Hundred Dollars ($27,500.00). The initial franchise fee is Six Thousand Eight Hundred and Seventy Five Dollars ($6,875) ) if you are currently operating a coffee shop business that you convert to our brand. The initial franchise fee is Thirteen Thousand Seven Hundred Fifty Dollars ($13,750) if you wish to operate a Coffee Beanery store as part of a co-branded relationship. You are also required to purchase an opening inventory of specialty Coffee Beanery coffee which is between Five Thousand Dollars ($5,000) and Thirty Thousand Dollars ($30,000). You are also required to deposit the sum of between Two Thousand Five Hundred Dollars ($2,500) and Seven Thousand Five Hundred Dollars ($7,500) with us to cover grand opening advertising depending upon the location or type of Store you operate. The total of all fees to us ranges from Fourteen Thousand Three Hundred and Seventy Five Dollars ($14,375) and Sixty Two Thousand Five Hundred Dollars ($62,500) including the initial franchise fee, the deposit for grand opening advertising and opening inventory. The estimated total initial investment ranges from Sixty One Thousand Three Hundred and Seventy Five Dollars ($61,375.00) to Five Hundred Nineteen Thousand Dollars ($519,000.00).
Coffee Beanery may, in some instances, offer to franchisees the right to become an area franchisee, for which a fee is negotiated on a case-by-case basis as further described in Item 5, and which is likely to range from $100,000.00 to $250,000.00. In addition to this fee, the initial investment required for becoming an area franchisee ranges from $111,500 to $277,500 as described in Item 7.
Coffee Beanery also may, in some instances, offer development rights to developers which enable them to open a certain number of Stores within a specified area under individual franchise agreements. The development fee is $27,500.00 for the first Store to be established and $3,437.50 for each additional Store to be developed.
1. THE FRANCHISE AGREEMENT, AREA FRANCHISE AGREEMENT AND AREA DEVELOPMENT AGREEMENT STATES THAT MICHIGAN LAW GOVERNS THE AGREEMENT UNLESS A PROVISION IS NOT ENFORCEABLE UNDER THE LAWS OF MICHIGAN AND YOUR STORE OR TERRITORY IS LOCATED IN A STATE WHERE THE PROVISION IS ENFORCEABLE. THE LAWS OF MICHIGAN MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
SUE ONLY IN THE JUDICIAL DISTRICT IN WHICH WE HAVE OUR PRINCIPAL PLACE OF BUSINESS. CURRENTLY, THIS IS IN FLUSHING, MICHIGAN. OUT-OF-STATE MEDIATION, ARBITRATION, AND LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO MEDIATE, ARBITRATE, AND SUE US IN MICHIGAN THAN IN YOUR HOME STATE.
3. THE FRANCHISE AGREEMENT DOES NOT GRANT YOU AN EXCLUSIVE TERRITORY OR AREA. WE OR OUR AFFILIATES MAY ESTABLISH OTHER FRANCHISED OR COMPANY-OWNED LOCATIONS THAT MAY COMPETE WITH YOUR FRANCHISE AT LOCATIONS DETERMINED APPROPRIATE BY US.
4. THERE MAY BE OTHER RISKS CONCERNING THE FRANCHISE.
LOCAL LAW MAY SUPERSEDE THESE AGREEMENT PROVISIONS. CERTAIN STATES REQUIRE THE SUPERSEDING PROVISIONS TO APPEAR IN AN ADDENDUM TO THIS OFFERING CIRCULAR.
Information comparing franchises is available. Call the state administrators listed in Exhibit H or your public library for sources of information.
Registration of this franchise by a state does not mean that the state recommends it or has verified the information in this Offering Circular. If you learn anything in the offering circular is untrue, contact the Federal Trade Commission and applicable State authority listed in Exhibit H.
The initial franchise fee varies depending upon the concept you select and whether you are currently operating a coffee shop or restaurant. For Cafe and Traditional Store the initial franchise fee is Twenty-Seven Thousand Five Hundred Dollars ($27,500.00). The initial franchise fee is Six Thousand Eight Hundred and Seventy Five Dollars ($6,875) if you are currently operating a coffee shop business that you convert to our brand. The initial franchise fee is Thirteen Thousand Seven Hundred and Fifty Dollars ($13,750) if you wish to operate a Coffee Beanery store as part of a co-branded relationship. You are also required to purchase an opening inventory of specialty Coffee Beanery coffee which is between Five Thousand Dollars ($5,000) and Thirty Thousand Dollars ($30,000). You are also required to deposit the sum of between Two Thousand Five Hundred Dollars ($2,500) and Seven Thousand Five Hundred Dollars ($7,500) with us to cover grand opening advertising depending upon the location or type of Store you operate. The total of all fees to us ranges from Fourteen Thousand Three Hundred Seventy Five Dollars ($14,375) and Sixty Two Thousand Five Hundred Dollars ($62,500). The estimated total initial investment ranges from Sixty One Thousand Three Hundred and Seventy Five Dollars ($61,375.00) and Five Hundred Nineteen Thousand Dollars ($519,000.00).
EXCEPT IN MARYLAND, THE FRANCHISE AGREEMENT, AREA FRANCHISE AGREEMENT AND AREA DEVELOPMENT AGREEMENT STATES THAT MICHIGAN LAW GOVERNS THE AGREEMENT UNLESS A PROVISION IS NOT ENFORCEABLE UNDER THE LAWS OF MICHIGAN AND YOUR STORE OR TERRITORY IS LOCATED IN A STATE WHERE THE PROVISION IS ENFORCEABLE. THE LAWS OF MICHIGAN MAY NOT PROVIDE THE SAME PROTECTIONS AND BENEFITS AS LOCAL LAW. YOU MAY WANT TO COMPARE THESE LAWS.
2. THE FRANCHISE AGREEMENT, AREA FRANCHISE AGREEMENT AND AREA DEVELOPMENT AGREEMENT PERMITS YOU TO MEDIATE, ARBITRATE, AND SUE ONLY IN THE JUDICIAL DISTRICT IN WHICH WE HAVE OUR PRINCIPAL PLACE OF BUSINESS. CURRENTLY, THIS IS IN FLUSHING, MICHIGAN. OUT-OF-STATE MEDIATION, ARBITRATION, AND LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR DISPUTES. IT MAY ALSO COST MORE TO MEDIATE, ARBITRATE, AND SUE US IN MICHIGAN THAN IN YOUR HOME STATE.
a. A prohibition on the right of a franchisee to join an association of franchisees.
b. A requirement that a franchisee assent to a release, assignment, novation, waiver, or estoppel which deprives a franchisee of rights and protection provided in this act. This shall not preclude a franchisee, after entering into a franchise agreement, from settling any and all claims.
c. A provision that permits a franchisor to terminate a franchise prior to the expiration of its term except for good cause. Good cause shall include the failure of the franchisee to comply with any lawful provision of the franchise agreement and to cure such failure after being given written notice thereof and a reasonable opportunity, which in no event need be more than 30 days, to cure such failure.
d. A provision that permits a franchisor to refuse to renew a franchise without fairly compensating the franchisee by repurchase or other means for the fair market value at the time of expiration of the franchisee's inventory, supplies, equipment, fixtures, and furnishings. Personalized materials which have no value to the franchisor and inventory, supplies, equipment, fixtures, and furnishings not reasonably required in the conduct of the franchise business are not subject to compensation. This subsection applies only if: (i) The term of the franchise is less than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from continuing to conduct substantially the same business under another trademark, service mark, trade name, logotype, advertising, or other commercial symbol in the same area subsequent to the expiration of the franchise or the franchisee does not receive at least 6 months advance notice of franchisor's intent not to renew the franchise.
e. A provision that permits the franchisor to refuse to renew a franchise on terms generally available to other franchisees of the same class or type under similar circumstances. This section does not require a renewal provision.
f. A provision requiring that arbitration or litigation be conducted outside this state. This shall not preclude the franchisee from entering into an agreement, at the time of arbitration, to conduct arbitration at a location outside this state.
(1) The failure of the proposed transferee to meet the franchisor's then current reasonable qualifications or standards.
(2) The fact that the proposed transferee is a competitor of the franchisor or subfranchisor.
(3) The unwillingness of the proposed transferee to agree in writing to comply with all lawful obligations.
(4) The failure of the franchisee or proposed transferee to pay any sums owing to the franchisor or to cure any default in the franchise agreement existing at the time of the proposed transfer.
uniquely identified with the franchisor. This subdivision does not prohibit a provision that grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same terms and conditions as a bona fide third party willing and able to purchase those assets, nor does this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a franchise for the market or appraised value of such assets if the franchisee has breached the lawful provisions of the franchise agreement and has failed to cure the breach in the manner provided in subdivision (c).
otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless provision has been made for providing the required contractual services.
If the franchisor's most recent financial statements are unaudited and show a net worth of less than $100,000.00, the franchisee may request the franchisor to arrange for the escrow of initial investment and other funds paid by the franchisee until the obligations, if any, of the franchisor to provide real estate, improvements, equipment, inventory, training or other items included in the franchise offering are fulfilled. At the option of the franchisor, a surety bond may be provided in place of escrow.
THE FACT THAT THERE IS A NOTICE OF THIS OFFERING ON FILE WITH THE ATTORNEY GENERAL DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION, OR ENFORCEMENT BY THE ATTORNEY GENERAL.
The Coffee Beanery Ltd. ("we", "us" "our" or "CBL") is the franchisor of the franchise program described in this Offering Circular. We were incorporated in Michigan on March 22, 1976. We began offering franchises on May 18, 1985 for specialty retail coffee stores or businesses in a variety of forms and locations, including kiosks, counters, malls and neighborhood cafe locations commencing on different dates over our history. Our principal business address is 3429 Pierson Place, Flushing, Michigan 48433. We do not conduct business under any other name. . Our agents for service of process in various states, including those requiring franchise registration are listed in Exhibit I to this Offering Circular.
Unless otherwise noted, we will refer to a prospective franchisee, area franchisee or developer as "you," whether you are an individual, a partnership, a corporation or other entity, including the owner or owners of those entities.
We are affiliated with two (2) other companies. We are wholly owned by a company called The Shaw Coffee Company which is a Michigan corporation. The Shaw Coffee Company is a holding company and does not conduct daily business activities. We have a sister company called Shaw Services, Inc. which is also a Michigan corporation and is also wholly owned by The Shaw Coffee Company. Shaw Services, Inc. provides wholesale coffee, tea and associated product and does not offer franchises although it may enter into product distribution agreements, including possible multilevel product distribution agreements, under which the distributors will offer product using the Coffee Beanery Proprietary Marks to non-profit organizations or other businesses or organizations.
We are in the business of operating and franchising specialty coffee retail stores and cafes. For ease of reference, all of these will be referred to in this Offering Circular as "Stores" unless otherwise noted. Our Stores sell espresso based and other specialty beverages, fresh-brewed coffee, coffee beans, bakery items, tea, related products such as mugs and coffee makers. Cafe Stores also sell toasted sandwiches, soups and fresh salads. Generally, the business of granting franchises involves development and implementation of a marketing system which creates a certain product image in the minds of customers, a business strategy for getting and keeping customers, and a distribution method for products and services. We have developed all of these as part of the operating system ("System") which you are granted a franchise to use.
We identify businesses by means of certain trade names, service marks, trademarks, logos, emblems, and indicia of origin owned by us, including the trade name "The Coffee Beanery, Ltd." (collectively, "Proprietary Marks").
off-premises consumption. Many of our Stores offer products for either on-premises or off-premises consumption.
The market for our products is well-established as fresh-brewed coffee, coffee beans and related items may be found most anywhere. Our business is seasonal, but the degree of seasonality depends upon the location of the Store. For example, Stores located in regional shopping malls generally experience higher sales during November and December simply because there is higher pedestrian traffic in the mall during these months. We do not offer franchises in any other lines of business. None of our affiliates offer franchises, although Shaw Services may enter into product distribution agreements for the sale of products carrying Coffee Beanery Proprietary Marks in the future.
The franchise agreement ("Franchise Agreement") (a copy of which is attached to this Offering Circular as Exhibit A) gives you the right to establish and operate a Store. Most Stores will be located in high traffic areas that provide ample parking, significant foot traffic, and exposure to a public thoroughfare. We also offer to existing independent businesses who provide coffee and coffee related services to the public, the opportunity to convert their businesses to Coffee Beanery stores. To be eligible to convert, you must have operated your coffee store or shop for at least six (6) months at the time of conversion ("Conversion Owners")- Conversion Owners will sign, in addition to a Franchise Agreement, an Addendum for Conversion Owners, which is Attachment D to the Franchise Agreement. Conversion Owners must conform their business premises to our prototype plans and specifications, use our Proprietary Marks, and complete our training as described in Item 11 below.
We may, on occasion, offer to certain franchisees the right to become an Area Franchisee under an area franchise agreement ("Area Agreement"). Area Franchisees will have the right to service and monitor certain Stores operated by franchisees in an exclusive territory ("Territory") defined in the Area Franchise Agreement. Area Franchisees will also have the obligation to promote franchisees in accordance with a schedule set forth in the Area Franchise Agreement. Our Area Franchise Agreement is attached to the offering circular as Exhibit B.
We may also, on occasion, offer you the right to become a Developer under a area development agreement ("Development Agreement") which grants the right to establish and operate a certain number of Stores in a specified area ("Development Area"). A Developer will sign a separate Franchise Agreement for each Store in accordance with the Development Schedule set forth in the Development Agreement. Each Store must be established and operated by the Developer or by an entity controlling, controlled by, or under common control with, the Developer. Our Development Agreement is attached to this offering circular as Exhibit C.
We also offer qualified businesses the right to operate a Coffee Beanery store in conjunction with other approved products or services pursuant to a "Co-Branded Addendum." The Co-Branded Addendum allows a franchisee to sell our products along with other products or service subject to our approval, but is otherwise identical to our routine franchising program.
Finally, we may periodically enter into license or similar agreements with the operators of unique venues such as airport concessions or sports and entertainment venues. Wherever possible, these agreements will be similar to those offered by our general franchising program, but the unique character of the venues may result in certain differences between these agreements and our routine franchise agreement.
stores, bulk food stores and department stores. All of these businesses to varying degrees, sell coffee and it will be important for you to market your products and services and provide outstanding service to your customers in order to compete.
We have entered into a distributorship agreement with The Consolidation Group, Inc. This agreement provides the Consolidation Group with the right to purchase from us and distribute all packaged brands of flavored and unflavored styles of Coffee Beanery whole bean and ground coffee and all "ready to drink" prepackaged Coffee Beanery products throughout the United States except for sales within Michigan. Depending upon the methods of distribution and the locations for sale chosen by The Consolidation Group, it is possible that you may have to compete with The Consolidation Group, Inc. for those products that they market.
We have also entered into agreements that provide for the distribution of Coffee Beanery brewed coffee and flavored Coffee Beanery syrups through KMart K Cafes. In addition, we are currently testing on-demand brewed and specialty Coffee Beanery coffees in sixty (60) K Cafes and Sears Grand Cafes. Depending upon the location of the KMart and Sears stores, you may also have to compete with these locations for the Coffee Beanery products that they market.
From time to time, we also act as a representative for various food manufacturers and food and related businesses and we intend to do so in the future. We receive a commission arising from the sale of these coffee and other food products by the manufacturer to the customer. This representation does not involve the sale of products to the Coffee Beanery system or our franchisees.
There are no regulations specific to the operation of a retail specialty coffee store, although you will be required to comply with all local, state and federal health and sanitation laws in the operation of your Store. There may be other laws applicable to your business and we urge you to make further inquiries about these laws.
President and Director; JoAnne Shaw. Chairman of the Board: Julius L. Shaw.
From 1976 to the present, JoAnne Shaw and Julius L. Shaw have jointly operated and managed The Coffee Beanery, Ltd. ("CBL") and its predecessors. Their joint responsibilities include the operation and general management of CBL Stores currently owned by us. Further, they have been and continue to be responsible for new Store planning, personnel training, franchising and development and financial planning for us. JoAnne Shaw has served as an officer and Director of CBL since 1976, and as President since 1979. JoAnne Shaw has served as President of the Specialty Coffee Association of America during 1997, as Chairman of the International Franchise Association during 2000 and as a member of the board of directors of Dale Carnegie. Julius L. Shaw has served as an officer and Director of CBL since 1976, and as Secretary-Treasurer from 1979 to 1996. In 1996, Julius L. Shaw was appointed Chairman of the Board. Julius Shaw has also acted as Chairman of the National Coffee Service Association during 1994.
Michigan. In addition, from 1978 to 1994, JoAnne Shaw and Julius L. Shaw owned and operated S & S Snacks, Flint, Michigan, an on-premises customer snack service. Ye Olde Coffee Service is currently operated by Shaw Services, Inc., a Michigan corporation, which is solely owned by the holding company named The Shaw Coffee Company. S & S Snacks was sold in 1994.
Vice President of Real Estate: Kevin Shaw.
Kevin Shaw, who has been employed by CBL since 1985, began his career with us as Store Manager at THE COFFEE BEANERY, LTD. - RENAISSANCE, a position he held until 1986, when he became Warehouse Manager. He served in various franchise development roles between 1987 and 1994. He became a Director of CBL in November 1991. He became Vice President of Real Estate in 2002 and continues to serve in this role.
Vice President of Franchise Sales and Development: Kurt Shaw.
6 S Snack and changed the name of the two divisions to Shaw Services, of which he became General Manager. Presently, he is President of Shaw Services which holds only Ye Olde Coffee Service. As Vice President of Franchise Sales for CBL, Kurt is responsible for marketing and selling franchised opportunities. In February, 2006 he also assume responsibility for new store development. He holds a degree from Michigan State University in Management with an emphasis in Purchasing.
Executive Vice President and Chief Financial Officer: Ken Coxen.
Kenneth Coxen joined CBL in August of 1994 as General Manager of Production and Distribution. Prior to that, Ken had a twenty-year career as part owner of a specialty chemical manufacturing and distribution company, was a franchisee with the Little Caesar's organization, and founded a consulting business specializing in manufacturing management. He became Executive Vice-President in January 2001 and Chief Financial Officer in June 2003.
Vice President of New Business Development: Owen Stern.
Owen Stern came aboard in May 2001. He was in charge of International and Domestic Operations. Mr. Stern is the founder of My Favorite Muffin and has been a team member of companies such as Big Apple Bagel and Brewster's Cafe. He has extensive knowledge of franchise systems. Mr. Stem has been involved in acquiring International Development Agreements for CBL in various countries. He was appointed to the position of Vice President of New Business Development in May, 2005.
Walter Pilon: Vice President of Brand Building and System Support.
Walter Pilon joined The Coffee Beanery, Ltd. in January, 1997 as Corporate Training Manager in the southeastern Michigan area. He was promoted to Director of Merchandising in June, 1999 and later promoted to Vice President of Brand Building during October 2001 continuing to work at our corporate headquarters in southeast Michigan. In January, 2006 he also assumed responsibility for system support. He has a BBS in Business Administration from Central Michigan University.
Dale Link: Director of Training.
Dale Link was hired as our Director of Training in February 2002. Prior to his employment by The Coffee Beanery, Ltd., he served as Director of Personnel and Training for Sybra, Inc., an area developer for Arby's and served as Director of Training for Sbarro for 2 years.
Marvin Leeck was hired to work in our warehousing operations in December 1991. Between April 1992 and September 2003, he served as a route sales representative for our affiliate, Shaw Services. In September 2003, he was promoted to Vice President of Shaw Services. In July, 2005, he became our Franchise Sales and New Business Development Representative. Mr. Leek is a graduate of Hill Mcloy High School in Monroe, Michigan and attended Baker College in Flint, Michigan studying marketing. During his employment with us and our affiliates, he has resided in Flint, Davison and Millington, Michigan.
The Business Alliance, Inc., a Georgia business corporation, located at 100 Hartsfield Centre, Suite 500, Atlanta, Georgia 30354 [(404) 763-2244] From April 1999 to the present, Daniel Prechtel has served as president of The Business Alliance, Inc. at the address noted above. From 1992 to 1999, Mr. Prechtel was a sole proprietor, doing business as Business Alliance located in Duluth, Georgia.
NeoColumbus Consulting Group is a New York based franchise marketing and consulting group. Mathew Kim is the President and Principal of NeoColumbus which is located at the Empire State Building, 350 South 5th Avenue, Suite 5715, New York, New York 10118. Mr. Kim was a director for FI Consulting from 1999-2002, a Senior Consultant for Franchise Consulting Network from 2002-2005 and with NeoColumbus after 2005, all in the metropolitan New York City area.
Administrative Proceeding before the Securities Commissioner of Maryland v. The Coffee Beanery, Ltd. And Kevin Shaw. Order to Show Cause. Case No. 2005-0244.
On or about January 19, 2006, the Securities Commissioner for the state of Maryland filed an Order to Show Cause arising from an investigation of the Coffee Beanery's sale of a franchise to Richard Welshans, as described below. The Order to Show Cause stated that the Securities Commissioner found grounds to allege that Coffee Beanery and Kevin Shaw have violated the disclosure and antifraud provisions of the Maryland Franchise Registration and Disclosure Law. The Coffee Beanery, Ltd. and Kevin Shaw filed an answer to the Order to Show Cause denying its material allegations and asked for an Administrative Hearing on the allegations of the Order to Show Cause. On September 12, 2006, we entered into a Consent Order with the Securities Commissioner under which we agreed to cease offering franchises in Maryland in violation of Maryland law and to offer rescission to Richard Welshans and one other Maryland Coffee Beanery franchisee on the terms described in the Consent Order.
District Court for the District of Maryland (Case no. 05-cv-03360). Coffee Beanery, Ltd. et al v. WWLLC. et al. United Stated District Court. E.D. Michigan (Case no. 06-10408).
In January, 2005, WWLLC filed a demand for mediation and arbitration seeking declaratory relief, damages, rescission and attorneys fees in an amount not exceeding $75,000. This demand alleged fraud, negligent and fraudulent misrepresentation, negligent and fraudulent nondisclosure, breach of contract and a covenant of good faith and fair dealing, violations of the Maryland Franchise Registration and Disclosure Law and the Michigan Franchise Investment and Consumer Protection Acts. The arbitrator has been selected and the proceeding is in pre-hearing procedures. The owners of WWLLC also filed a complaint with the Securities Division of the Office of the Attorney General for the state of Maryland making similar allegations that is described immediately above. On December 15, 2005, WWLLC, Deborah Williams and Richard Welshans also filed a lawsuit in the United States District Court in Maryland alleging violations of the Maryland Franchise Act, Detrimental Reliance and Intentional and Negligent Misrepresentation against The Coffee Beanery and its officers individually seeking $1,000,000 in damages. CBL filed a motion to stay the Maryland litigation. The court in Maryland granted CBL's motion to stay and administratively closed the case on March 23, 2006. The Coffee Beanery also filed a motion to compel the arbitration filed by the Welshans in the United States District Court for the Eastern District of Michigan and WWLLC filed a motion to stay the arbitration in the same matter. On July 18, 2006, the court granted CBL's motion to compel arbitration and denied WWLLC motion to stay arbitration. The arbitration remains pending and is scheduled for hearing in early 2007. The Coffee Beanery denies the allegations made by WWLLC in the arbitration.
The Coffee Beanerv. Ltd. v William Albert. Michael Yurick and Hartland Coffee Beanery. LLC. Case No. 02-1899-CK. in the 44th Circuit Court for Livingston County. Michigan.
On January 18, 2002, The Coffee Beanery, Ltd. brought a lawsuit against its franchisees, Michael Yurick and William Albert, as well as a business entity operating the franchisees' business (Hartland Coffee Beanery, LLC), asserting causes of action seeking payment for the delivery of equipment delivered to the defendants and a court declaration relating to the validity of the franchise agreement. On March 8, 2002, the defendants answered the complaint via written answer denying that the sums were owed. On April 8, 2002, the defendants additionally filed a counter complaint against the Coffee Beanery, Ltd. alleging fraud, intentional and negligent misrepresentation, breach of contract, a demand for an accounting and violations of the Michigan Franchise Investment Law. In the counter complaint, the defendants sought to rescind the franchise agreement, and actual and exemplary damages in amounts between $25,000 and $1,200,000. Coffee Beanery answered the counter complaint denying the allegations of the defendant's counter complaint. Michael Yurick and Mr. Albert also filed complaints with the Michigan Attorney General making similar allegations. On June 30, 2004, the trial court granted Coffee Beanery's motion for summary judgment and denied all of the Defendant's motions for summary judgment. On October 20, 2004, the Court entered judgment in favor of The Coffee Beanery, Ltd. for $82,518.89 and denied all claims of Yurick, Albert and the Hartland Beanery LLC against The Coffee Beanery. On November 8, 2004, Yurick, Albert and the Hartland Beanery LLC appealed the decision of the trial court to the Michigan Court of Appeals. The Michigan Court of Appeals affirmed the trial court's decision on May 16, 2006 and denied a motion for reconsideration on June 29, 2006. Mr. Yurick and Mr. Albert asked the Michigan Supreme Court for leave to appeal on August 10, 2006. No decision has been made on their motion.
Stephen and Renee Klarberg and Buddy's Cappuccino. Inc.. v. The Coffee Beanery. Ltd. Case No. 95-02131.
damages and rescission of their Franchise and License Agreement with us. We responded by denying any knowledge that the sales figures were false and further denying that the plaintiffs had suffered any damages. We agreed to resolve the matter by re-purchasing the Store located in Miami Lakes - Main Street in Miami, Florida for the sum of $225,000.00. We simultaneously resold the Store to another franchisee. The lawsuit has been dismissed with prejudice.
The Coffee Beanery. Ltd. v. William Andrew Powell, et ah. and William Andrew Powell v. The Coffee Beanery. Ltd.. United States District Court, Eastern District of Michigan. Southern Division. Civil Action Nos. 96-40087. 96-40202.
On March 1, 1996, The Coffee Beanery, Ltd. brought an action against William Powell and John Powell in the United States District Court, Eastern District of Michigan, Southern Division, alleging various causes of action, including breach of contract, trademark infringement, and tortious interference, seeking injunctive relief and damages in excess of $800,000.00. William Powell instituted an action against The Coffee Beanery, Ltd. on February 21, 1996, in the Superior Court of the State of California, for the County of Los Angeles, alleging negligent misrepresentation and violation of California franchise law, and sought damages in excess of $150,000 and rescission of the franchise agreements entered into between The Coffee Beanery, Ltd. and William Powell. On March 12, 1996, William Powell's action was removed to the United States District Court for the Central District of California, and then transferred to the United States District Court for the Eastern District of Michigan. During discovery, management of The Coffee Beanery, Ltd. determined that the cost of continuing litigation exceeded probable recovery. In June, 1998, The Coffee Beanery, Ltd. paid the sum of $5,000.00 to William Powell's Michigan attorneys. All parties then signed mutual releases and both lawsuits were dismissed with prejudice.
The Coffee Beanery. Ltd. v Southwest Coffee. Ltd. and James Knapp. Superior Court of the State of California. County of Los Angeles. Case No. YC 031510. Filed February 5. 1998.
The Coffee Beanery, Ltd. has filed suit against Southwest Coffee, Ltd. and Jim Knapp alleging breach of an agreement with the Company to manage its corporate location at Media City Center in Burbank, CA. Knapp is a principal of Southwest and also is a franchisee at the Del Amo Mall location in the Los Angeles area. Under the management agreement, Southwest agreed to pay all of the operating expenses of the store, but has failed to do so. In response to the suit, Knapp and Southwest threatened to file a cross-claim against The Coffee Beanery, Ltd. and some of its principals, JoAnne Shaw, David Gausden and Kevin Shaw, alleging various violations of California franchise law, but d not been granted permission by the Court to file the cross claim. The Coffee Beanery, Ltd. sought damages in its filed complaint in excess of $25,000. In November 1998, the parties settled the case by exchanging mutual releases and by making nominal payments for product and out-of-pocket expenses.
The Coffee Beanery. Ltd. v Bandringa. United States District Court. Eastern District of Michigan. Case No. 98-70556. Filed April 30. 1998.
The Coffee Beanery, Ltd. filed suit against Gary Bandringa, its franchisee at two locations, Dadeland Mall and Main Street - Miami Lakes, both in Miami, FL. The suit alleged numerous breaches of the relevant Franchise and License Agreements, and in the case of the Dadeland location, the Franchise and License Agreement expired but Bandringa continued to hold himself out as a franchisee of The Coffee Beanery, Ltd. The suit sought injunctive relief for violation of the Company's trademarks. On July 8, 1998 the Court entered a default judgment in favor of The Coffee Beanery, Ltd. in the amount of $59,031.97.
The Coffee Beanery. Ltd. v Richard and Janet Beidleman/Richard and Janet Beidleman v The Coffee Beanery. Ltd.. Case No. 98-72040 United States District Court for the Eastern District of Michigan. Filed May 18. 1998.
Agreement and their failure to pay rent under their sublease for the franchised location where The Coffee Beanery, Ltd. was the primary tenant. The Beidlemans filed a counterclaim alleging various breaches of the Franchise and License Agreement. Each party sought payment of money damages. In April 2000, Beidleman paid The Coffee Beanery, Ltd. Nineteen Thousand Three Hundred Dollars ($19,300.00) and the parties exchanged mutual releases in settlement of the matter.
The Coffee Beanery, Ltd. filed suit against its former franchisee in Southfield, Michigan, John Andler. The suit arises from Andler's failure to pay for royalties and product pursuant to the relevant Franchise and License Agreement and his failure to pay for equipment on a lease which The Coffee Beanery, Ltd. guaranteed. Andler has filed a counterclaim alleging various violations of the Franchise and License Agreement. Each party sought payment of money damages. In April 1999, Andler paid The Coffee Beanery, Ltd. Twenty Thousand Dollars ($20,000.00) and the parties exchanged mutual releases in settlement of the matter.
The Coffee Beanery, Ltd. v Anthony Esposito. Case No. 99-60630. in the United States District Court for the Eastern District of Michigan; The Coffee Beanery. Ltd. v. Anthony Esposito. Case No. 00-23833-BKC-PGH. in the United States Bankruptcy Court for the Southern District of Florida.
On October 18, 1999, The Coffee Beanery, Ltd. brought an action against its franchisee, Anthony Esposito, alleging various causes of action including breach of contract, failure to pay royalties, advertising fond and product purchases, trademark infringement, unfair competition, and seeking damages and injunctive relief. Esposito had operated Coffee Beanery franchises at Magnolia Shoppes in Coral Springs, Florida and at Las Olas Boulevard in Ft. Lauderdale, Florida. On February 4, 2000, the United States District Court for the Eastern District of Michigan entered a Default Judgment in favor of The Coffee Beanery, Ltd. and against Esposito in the sum of $57,287.41, plus interest. On June 5, 2000, the same court entered an Order for injunctive relief, which among other things, prohibited Esposito from violating The Coffee Beanery, Ltd.'s trademark rights, prohibited him from unfairly competing with The Coffee Beanery, Ltd., and directed that he assign the leases for and surrender the Stores to The Coffee Beanery, Ltd. In an effort to avoid the District Court's Judgment and its Order, Esposito filed for bankruptcy protection on June 16, 2000. The Coffee Beanery, Ltd. filed pleadings requesting the Bankruptcy Court to lift its automatic stay and thus allow enforcement of the Order for injunctive relief issued by the District Court in Michigan. The Bankruptcy Court proceeding is administratively closed.
Other than these eight actions, no litigation is required to be disclosed in this Offering Circular.
No person identified in Item 1 or officer identified in Item 2 has been involved as a debtor in proceedings under the U.S. Bankruptcy Code required to be disclosed in this Item 4.
fee is Thirteen Thousand Seven Hundred and Fifty Dollars ($13,750) which is payable in full when you sign the Franchise Agreement and is non-refundable. The initial franchise fee for the second and each subsequent Store operated by a Franchisee is twenty five percent (25%) of the then current initial franchise fee.
(a) The second installment of the initial franchise fee, $10,000.00, is due when we grant approval of your site and is non-refundable. The initial franchise fee for the second and each subsequent Store operated by a Franchisee is twenty five percent (25%) of the then current initial franchise fee.
(b) The initial franchise fee (or portion thereof) you have paid will be not be refunded to you even if you are not able to find an approved location.
Coffee Beanery is a member of the International Franchise Association (IFA) and participates in the IFA's VetFran Program, which provides a fifteen (15%) percent discount on initial franchise fees to veterans of U. S. Armed Forces who otherwise meet the requirements of the VetFran Program and have been honorably discharged.
We have occasionally abated or returned all or a portion of the initial franchise fee as an economic incentive for a franchisee to open a location, with the determination made on a case by case review of all relevant economic factors.
Prior to opening a Store, you are required to purchase your opening coffee inventory from us and you may purchase other goods or services from us. The range of costs for the required and optional purchases are described in Items 6, 7 and 8 of this Offering Circular. In addition, we require you to deposit the sum of between $2,500 and $7,500 (depending upon the type of Store) with us for grand opening advertising and will expend these funds for local grand opening advertising when you open your Store. If you never open your Store, we will refund this deposit. These costs are also described in Items 6, 7 and 8 of this Offering Circular.
If you sign an Area Franchise Agreement, you must pay us a non-refundable fee when you sign it. This fee will vary among Area Franchisees and will be based on factors such as the size of the Territory (as described in Item 12), the market for customers of Stores, the number of Stores potentially to be franchised in the Territory, income levels, availability of locations, competition from businesses similar to Stores, and related factors. We estimate that Area Franchise Fees are likely to range from $100,000 to $250,000.
If you sign a Development Agreement, you must pay a development fee of $27,500.00 for the first store to be developed and $3,437.50 for each additional Store. The development fee is payable in full when the Development Agreement is signed, and is not refundable; however, we will credit $3,437.50 towards the initial franchise fee to be paid at the time you sign a Franchise Agreement for each additional Store to be opened under the Development Agreement. The number of Stores to be developed will be set forth in the Development Schedule which is a part of the Development Agreement.
Prior to the opening of your Store, Franchisees and Area Franchisees must attend and complete our Initial Training Program, as described in detail in Item 11, which will take place at our offices in Flushing, Michigan and at your Store. For training at your Store, you must reimburse us for all of the expenses of our trainers in providing this training, including travel, lodging and meal costs incurred during training. For training at our location, you must pay all travel, lodging and meal costs incurred during training. We estimate that these costs will range from $3,000 to $5,000. We provide additional training for area franchisees and we estimate that the costs for this additional training will range from $1,000 to $2,000. We do not provide a training program for Developers.
6% of the gross sales * of the Store.
Submit with documents we request.
Same time and manner as royalty.
See Item 11 for a detailed discussion of the Brand Building Fund.
We require you to deposit between $2,500 and $7,500 (depending on the type of Store) with us when you pay the second installment of your initial franchise fee.
We will expend this deposit for local advertising sources as incurred during the 2 months before and 6 months after Store opening. We refund any unused deposit for grand opening advertising to you. See Item 11.
Amount to be established by local cooperative but CBL may require up to two percent (2%) to be paid to local cooperative without vote.
Established by vote of Stores in cooperative not to exceed eight percent (8%).
Franchisees and the company will form an advertising cooperative and establish local advertising fees if required by Coffee Beanery. Company owned Stores may vote in these cooperatives on the same basis as franchise Stores.
fifteen (15) days of billing.
Standard warehouse terms as set forth in Warehouse Agreement, Attachment C to the Franchise Agreement apply.
We provide initial training at no charge beyond your initial franchise fee. We may charge for additional persons or additional training.
Paid each year to defray our costs associated with conducting the convention.
Reasonable expenses not to exceed 25% of the then current initial franchise fee but not less than $2,500.
Payable when you apply for transfer of the Franchise Agreement, the franchise, the store or its assets.
$1,500, subject to the right of CBL to increase the fee on a uniform basis in the future.
Payable when we approve renewal of your franchise.
The renewal fee is non-refundable.
2.5% of gross sales price, less inventory.
Payable if you request us to find a purchaser for your store and we do so.
If you don't maintain sufficient inventory for your Store, we can provide it and charge you for it.
Payable if you do not maintain the condition and appearance of the Store or refurbish in accordance with standards or purchase the required insurance and we do so on your behalf.
If we terminate your Franchise Agreement due to your default, you cure the default, request to be reinstated and we agree (in our sole discretion) to reinstate your Franchise Agreement, you must pay us the $2,500 reinstatement fee.
Payable if we prevail in a judicial or arbitration proceeding or if we are required to engage a lawyer in connection with your failure to comply with the Franchise Agreement.
Cost of audit, understatement plus interest.
Payable immediately upon receipt of audit report.
Costs of audit payable only if understatement greater than 5%.
Lesser of 1.5% per month or highest contract rate of interest allowed by law.
Payable on all overdue accounts.
You have to reimburse us if we are held liable for claims, damages or obligations arising from unauthorized agreements or representations, your operation of the Store and your business and certain taxes.
For system-wide marketing programs, you are required to pay for and use these materials. We may offer other materials, the cost of which is payable if you elect to purchase these from us and we elect to charge for them.
As provided by the sublease.
Payable under the terms of the sublease.
'All fees, except grand opening advertising, which are paid to third parties, are imposed by and payable to us. All fees are non-refundable.
2We require weekly payment of royalties and to the Brand Building fund via electronic fund transfer ("EFT").
3We do not routinely sublease Stores and do not guarantee or financially assist you in with your Store rental. For some Stores where we were originally the tenant, you may sublease from us during the current term. We will not renew the lease and you will be responsible to renegotiate the lease after the lease term ends.
(1) Your franchise fee of $27,500.00 is paid in two (2) installments: $17,500.00 when you sign the Franchise Agreement plus $10,000.00 when we approve your site for Cafe or Traditional Store locations. The franchise fee for a Co-Branded Store Stores ($13,750) is paid in full when you sign the Franchise Agreement. The franchise fee for a Conversion Store ($6,875) is paid in full when you sign the Franchise Agreement. The initial franchise fee is refundable only under the circumstances set forth in Item 5. If you qualify for the IFA's VetFran Program, your initial franchise fee will be discounted by fifteen percent (15%). We do periodically reduce or refund a portion of the initial franchise fee on a case by case basis as an economic incentive for certain operators to open a Coffee Beanery location. See Item 5 of this Offering Circular. We also require you to deposit between $2,500 and $7,500 with us when you pay the second installment of your franchise fee to be expended for grand opening and first year Brand Building. See Items 6 and 11 of this Offering Circular.
(2) This item includes typical equipment, fixtures, signage, and leasehold improvements for each concept. The range of cost for these items is attributable to such factors as size, configuration, and location of the Store, as well as price differences between suppliers.
(3) This item covers expenses you will pay to the third parties to advertise and promote your new business during the two (2) months before and the six (6) months after opening.
(4) The amount of the first month's rent and security deposit will depend on the size, condition and locations of the premises, and the demand for the premises among prospective lessees. The lease may impose other charges for percentage rent, real estate taxes, utilities, maintenance, advertising and promotion or other expenses. If we sublease to you, The Coffee Beanery Ltd. may impose a security deposit even if it was not required to pay one under the master lease.
(5) This item covers miscellaneous opening costs and expenses such as installation of telephones, deposits for and temporary utilities, business licenses, legal and accounting expenses, insurance premiums, register cash, initial bank deposits for checking account.
(6) This estimates your initial start up expenses. These expenses include payroll costs. These figures are estimates and we cannot guarantee that you will not have additional expenses starting the business. Your costs will depend on factors such as: how much you follow our methods and procedures; your management skill, experience and business acumen; local economic conditions; the local market for our product; the prevailing wage rate; competition; and the sales level reached during the initial period. Like any new business, it should be expected that your business will not generate positive cash flow for a significant period after your opening. You should be prepared, therefore, to invest additional sums to support operations during this initial start up phase.
(7) We relied on our over twenty (20) years of experience in the coffee business to compile these estimates but they are not exact. Conversion Owners will incur lower costs since they will have already made the investment associated with commencing business. In addition, Co-Branded Store operators may incur additional costs relating to the other products or services sold which we are unable to estimate. You should carefully review these figures with a business advisor to determine if they are reasonable before making any decision to purchase the franchise.
(8) We do not offer direct or indirect financing to franchisees for any items. The expenses disclosed in Item 7 do not include debt service since we do not know whether and to what extent you will obtain financing for any part of your investment.
Except as described below, all fees are non-refundable.
1. This fee varies among Area Franchisees, depending on a variety of factors, as described in Item 5. Neither we nor any affiliate provides financing for the Area Franchise Fee.
2. The cost range varies greatly depending upon the distance traveled, the mode of transportation, the cost of meals and accommodations selected, and the duration of the training course. This estimate is for one person. Area Franchisee training is described in Item 11.
3. You will be required to comply with federal and state laws and regulations relating to the sales of franchises, including creation of appropriate disclosure documents, UFOCs and similar documents and, if applicable, state laws requiring registration prior to any offer or sale of a franchise. The estimates provided are based upon the necessity to retain qualified accounting and legal counsel to complete these documents.
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To insure that the highest degree of quality and service is maintained, you must operate the Store in strict conformity with the methods, standards, and specifications that we set forth in the Operating Manual ("Manual") or otherwise in writing. You must not (i) deviate from these standards, specifications, and procedures without our prior written consent, or (ii) otherwise operate in any manner which reflects adversely on our Proprietary Marks or the System.
You must purchase and install at your expense, maintain in sufficient supply, and use at all times, only fixtures, furnishings, equipment, signs, and supplies that conform to the standards and specifications described in the Manual or otherwise in writing; you must not use nonconforming items. In addition, you must sell or offer for sale only products and services that we have expressly approved for sale in the Manual or otherwise in writing and discontinue selling any products or services that we, in our discretion, determine may adversely affect the System. You must not offer any unapproved products or services.
You are required to purchase all coffee, coffee related and certain products carrying our Proprietary Marks exclusively from us. You are not required to purchase or lease from us or our designees, any goods, services, supplies, fixtures, equipment, inventory, or real estate for the establishment or operation of the Store. You must, however, purchase all products, equipment, supplies, and materials used or sold by the Store, solely from suppliers (including manufacturers, wholesalers, and distributors) (i) who demonstrate, to our continuing reasonable satisfaction, the ability to meet our reasonable standards and specifications for these items; (ii) who possess adequate quality controls and capacity to supply your needs promptly and reliably; (iii) whose approval would enable the System, in our opinion, to take advantage of marketplace efficiencies; and (iv) who have been approved by us in the Manual or otherwise in writing and not later disapproved. The items you are required to purchase or lease from approved suppliers include equipment such as various restaurant and coffee brewing equipment, computers and software; coffee and other retail product inventory and fixed assets such as counters, cabinets and signs.
We are an approved supplier of goods and services to you. According to our audited financial statements for the 2006 fiscal year, we had total revenues of $13,990,965 of which amount $ 7,446,469 approximately fifty three percent (53%) consisted of revenues from the sale of products to our franchisees. We estimate that approximately forty percent (40%) of your initial investment will be from the sale of products by us and approximately twenty-five percent (25%) of annual operating expenses will be purchases from us.
Approved suppliers do not make payments to us on account of transactions with you or other franchisees, except as disclosed below. We do attempt to obtain volume discounts from approved suppliers based upon the combined buying power of our franchise system. These discounts, when obtained, may result in lower prices for the items being purchased. We have negotiated purchase arrangements with suppliers under which our franchisees obtain discounts of five percent (5%) to seventy percent (70%) from standard prices for items such as shipping costs, inventory, equipment, insurance and credit card processing. We have not negotiated any contracts with suppliers which gives us a better price than the price the supplier charges to franchisees.
One of our approved suppliers, Pepsi Cola Company, the exclusive approved supplier for soft drinks, provides soft drinks to our stores and paid us an amount that ranges from $0.45 to $0.70 per gallon of Store purchases of Pepsi Cola products. An advance payment of part of this amount was previously deposited in our Marketing Fund, part was used to offset expenses associated with our National Convention and part was used to offset expenses related to placing Pepsi Cola products in our franchised and corporate stores.
We have negotiated purchase arrangements with two of our approved suppliers that provide that rebates or incentives shall be paid to the Coffee Beanery by such suppliers for purchases made by us and our franchisees. These rebates or incentives have been paid by the Coffee Beanery to the Brand Building Fund described in Item 11 below. No portion of these rebates are retained by us. The amount of these rebates / incentives in the past fiscal year is $434.
We have also entered into a representation agreement with Ronin LLC under which we will market Ronin products. We anticipate that some of the Ronin products will be sold to our franchisees, although our representation of these products is not limited to the Coffee Beanery franchise system. The Coffee Beanery will receive a 1% commission on all Ronin products sold, including those products sold to our franchisees. We will retain this commission as compensation for our services in the sale of Ronin products.
Periodically, we will update the list of approved suppliers in the Manual and provide you with the updated list. If you desire to use a supplier that has not been approved by us, that supplier may become an approved supplier if that supplier's products meet our specifications and requirements. To secure approval, you must submit a written request to us to approve the supplier, together with evidence of conformity with our specifications as we may reasonably require. We may charge a fee for the evaluation of the proposed supplier. We generally respond to a request for an additional approved supplier within seven (7) days. Our written approval must be received before you use products that were not purchased from an approved supplier. We may revoke our approval at any time if we determine, in our discretion, that the supplier no longer meets our standards. When you receive written notice of a revocation, you must stop selling any disapproved products, and stop purchasing from any disapproved supplier.
We consider a variety of factors when determining whether to renew or grant additional franchises. Among the factors we consider is compliance with the requirements described above. We do not provide any material benefits to any franchisees (for example, additional franchise rights or renewal rights) based on their use of designated or approved suppliers.
Programs, promotions and site amenities.
We retain the discretion to require you to participate in certain system wide promotions and programs. These programs may include your mandatory participation in gift card programs, in participation in national utilities, such as satellite TV or radio, and similar national identity programs. We currently require franchisees to participate in a national Gift Card Program offered by Gift Card Solutions at your expense. The approximate cost of the equipment to participate in the Gift Card Program is $500 and is included in the basic computer equipment package and we anticipate that the annual cost of participating in the Gift Card Program is $100 plus transaction fees. In addition, we currently require certain locations to provide background music via a programming service of some type. Your reception of radio programming will require you to pay an installation and a monthly service fee that we anticipate to cost approximately $750 and $28 respectively. We retain the right to require you to use a particular music provider or to implement additional promotional activities.
THIS TABLE LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE, AREA FRANCHISE AND DEVELOPMENT AGREEMENTS. IT WILL HELP YOU FIND MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THESE AGREEMENTS AND IN ITEMS OF THIS OFFERING CIRCULAR.
Note: If an Agreement section is not listed for the obligation, then the Agreement does not contain a specific provision related to the obligation.
We do not presently offer either direct or indirect financing. We do not guarantee your note, lease or other obligation.
1. Provide assistance to Area Franchisees in Territory in finding an Approved Location for in which to locate the initial Store.
Within six weeks of execution of a Franchise Agreement, you must participate in our "Orientation Training" consisting of one (1) to three (3) days which is intended to assist you in becoming familiar with our system requirements, basic business planning, obtaining financing for your Store, site selection and store construction.
Your Operations Training program will last for anywhere from seven to twenty-eight (7-28) calendar days (at our discretion) depending upon the type of Store you will be operating. Training for Traditional Coffee Beanery locations generally lasts twenty-one (21) calendar days and Cafe locations twenty-eight (28) calendar days. This training normally occurs thirty (30) to sixty (60) days prior to the Store opening and must be attended by you (or, if a corporation or partnership, a principal of the business acceptable to us) and/or your designated store manager. Operations Training will be held in Flushing, Michigan and will consist of both classroom and in store training, covering business basics, customer service and Store operations. We will provide training instructors, a training manual, and other materials without charge. You will be responsible for all other expenses incurred during the Operations Training program, such as travel, lodging, and meal costs for both you and your store manager (if applicable). Conversion Owners will receive abbreviated training that reflects their current business experience.
Your On Site Training program will be held at your Store at the time it is scheduled to open. The program is provided to you and those employees selected by you who will be involved in the daily operation of the Store. You are required to be present at your Store during all On Site Training. Such training will cover, among other things: equipment set up, merchandising set up, daily operational procedures, preventive maintenance of equipment, service fulfillment and local marketing. Training, depending on concept, will last up to fourteen (14) calendar days, beginning three to five (3-5) calendar days prior to the Store opening and lasting up to ten (10) days after Store opening date (at our discretion). We will provide the trainer, a training manual, and other materials without charge. If we are unable to complete the On-Site training as scheduled due to your lack of preparation for such training, you will be required to pay us $350 per day for each day we spend in our attempt to provide the On Site Training.
We modify the On Site Training program for Conversion Owners and franchisees who sign additional Franchise Agreements to reflect their prior experience and knowledge of our System. The modified program will last approximately one to three (1-3) calendar days, at our discretion.
Within one hundred and eighty (180) days following the opening of your Store, we will provide, at our discretion, one on-site follow-up training visit. Such training shall consist of a minimum of one and a maximum of one and a half (1-1/2) calendar days. We will provide, without charge, the trainer and other training materials for the follow-up training visit and you must be present during all such training.
Certain vendors also may provide instruction and hands-on training at your Store. The time spent during this training is not reflected in either the Operations Training or On Site Training programs.
Prior to acting as an Area Franchisee, you (or, if you are a corporation or partnership, your principal) and, at your discretion, up to two of your employees, must complete our training program for Area Franchisees, which will take place in Flushing, Michigan. We will provide training, instructors, the Area Franchise Manual, and other materials without charge. You will be responsible for all other expenses, including travel, lodging, and meal costs of you or your principal and your employee(s). This training will take place at times that we designate, and will cover network expansion and Store development. The training will last approximately one (1) to two (2) weeks, and is held quarterly.
You must also successfully attend and complete our annual training program each year at the time and place that we designate. We will provide training, instructors, and materials for this program without charge. You will be responsible for all expenses you incur in attending this training, including travel, lodging, and meal costs. You and your employees, as we may designate, must also attend and complete, at your expense and to our satisfaction, any other additional training programs that we may require from time to time.
The subjects covered in Area Franchisee training are described below.
We do not provide a training program for Developers.
All training shall be completed using our corporate officers as described in Item 2.
attributes of the proposed location, including access, visibility, parking convenience, location of competition, and other factors that may be relevant to your market.
The typical time between the execution of a Franchise Agreement and the opening of a Store is one hundred eighty (180) to three hundred sixty (360) days. Factors such as the ability to obtain a lease, construction of required improvements to the site and obtaining financing affect the time it takes to open a Store. If the Store will be newly constructed rather than renovated, it is likely that more than three hundred sixty (360) days will be required.
We previously established the Brand Building Fund, and have the right, in our discretion, to maintain and administer the Fund.
from the advertising or promotion that we conduct under the Fund. (Franchise Agreement Section 9.3.2) We will provide you with a summary of receipts and disbursements of the Brand Building Fund on request. Of the monies expended in Fiscal Year 2006, approximately twenty seven percent (27%) was expended on printing, sixteen percent (16%) on creative development, fifteen percent (15%) on administrative expense, eleven percent (11%) on operational expenses, fifteen percent (15%) on media placement, five percent (5%) on travel for our personnel, , eight percent (8%) for local advertising reimbursement and three percent 3%) on miscellaneous expenses.
One of the Brand Building Fund programs provides for reimbursement of a portion of local advertising expenses incurred by certain franchisees. For franchisees and local advertising cooperatives that demonstrate a consistent local marketing program and presence and have remained fully compliant with their obligations under their franchise agreements, we may provide a 30% match of expenditures for local advertising from the Brand Building Fund after prior approval from the funds budgeted for that year. We reserve the right to terminate the matching funds at any time.
You must make your Brand Building contribution by electronic funds transfer to the Brand Building Fund. We separately account for sums paid for the Fund in separate bookkeeping accounts., We will not use the Brand Building contribution to defray any of our expenses, except for our reasonable costs and overhead, if any, incurred in activities reasonably related to the administration of the Fund, including, costs of personnel and/or agency for creating and implementing advertising, promotional, and marketing programs. If we do not use all of the fees in the Brand Building Fund in the year in which they received, they will be the first monies expended in the next year. The Brand Building Fund and earnings on the Fund will not otherwise benefit us. (Franchise Agreement Section 9.3.3) We do not use any money from the Brand Building Fund for advertising that is principally a solicitation for the sale of franchises. Neither we nor an affiliate receives any payment for providing goods or services to the Brand Building Fund.
If there are sufficient numbers of Stores in the geographic vicinity of your Store, you may be required to participate in a local advertising cooperative. These local advertising cooperatives will determine the advertising programs and expenditures to be made on a local basis. Corporate and franchise stores will be entitled to vote on an equal basis in determination of these programs subject to CBL's right to approve all advertising to be conducted by local cooperatives.
then, we prohibit their use in a written notice furnished to you. We also can prohibit their continued use, effective when you receive our written notice that you must stop using the plans and materials.
You must conduct an initial local advertising and grand opening promotion program and the amounts will vary based upon the type of Store you open but will be between $2,500 and $7,500. Prior to opening your Store, and at the same time that you pay the second installment of your initial franchise fee, you must deposit the sums designated (either $2,500 or $7,500 depending upon the type of Store) with us for grand opening promotion. We will use this deposit to conduct a grand opening promotion program, and to oversee, during the first year of your Store's operations your local marketing and promotional activities. This will include the development and implementation, by us and/or third parties, of appropriate local advertising and promotional activities for your Store. We expect that these activities will include programs such as newspaper inserts, direct mail, and other similar promotional programs. These will either be conducted by us or third parties as we determine appropriate for your Store. Within 30 days after the conclusion of the twelve month period commencing when we start grand opening promotion, we will refund to you any money remaining from your original deposit. (Franchise Agreement Section 4.6 and 9.5).
Area Franchisees do contribute to the Brand Building Fund in the same manner as other franchisees arising from the operation of their Stores, but do not contribute to any Fund arising solely from their Area Franchise Agreements., Area Franchisees must also advertise Coffee Beanery franchises through sales presentations and other means (such as local seminars and franchise expositions, and local newspapers) and spend at least the minimum amounts (up to $3,000 per month) which we specify. (Area Franchise Agreement Section 5.2.1). You also must use the Proprietary Marks only in ways that conform to the standards set out in the Manual or the Area Franchise Manual. (Area Franchise Agreement Section 8). Please refer to the Section "Advertising for Franchisees" in this Item with respect to any Franchise Agreement signed by an Area Franchisee.
Developers make no marketing contributions arising solely from their Developer's Agreement and have no additional marketing obligations. Please refer to the Section "Advertising for Franchisees" in this Item with respect to any Franchise Agreement signed by a Developer.
lines, modem(s), printer(s), and other computer-related accessories or peripheral equipment as we specify in the Manual or otherwise in writing. Your computer systems must have the capacity to electronically exchange information, messages, and other data with other computers, by such means (including but not limited to the Internet), and using such protocols (e.g., TCP/IP), as we may reasonably prescribe in the Manual or otherwise in writing. We have the unlimited right to retrieve data and information from your computer system and use it for any purpose both during and after the term of this Agreement. You must keep your point of sale equipment and computer system in good maintenance and repair and, at your expense, promptly install such additions, changes, modifications, substitutions, and/or replacements to the computer hardware, software, firmware, telephone and power lines, and other computer-related facilities, as we direct. You must not update, modify, enhance, or upgrade any computer hardware or software without our prior written consent. You also may not establish any computer web site including Internet and World Wide Web home pages, without Coffee Beanery's prior written approval. Any web site must comply with standards specified in the Manual or otherwise in writing. We may require you to establish your web site as part of any web site established by us.
In addition, from time to time we may modify the component specifications for the point of sale system and computer system. As part of such point of sale system and computer system, we may require you to obtain specified computer hardware and/or software, including, without limitation, a license to use proprietary software developed by us or others. Modification of such specifications for the components of the point of sale system may require you to incur costs to purchase, lease and/or license new or modified point of sale or computer hardware and/or software to obtain service and support for the point of sale and computer system during the term of the Franchise Agreement. There are no contractual limits on our right to require you to upgrade or update the cash register and computer system during the term of the Franchise Agreement and we may be a supplier of either computer equipment and software and updates, enhancements, and telephone support.
Positouch Point of Sale Package: This package includes point of sale terminals, heavy duty cash drawers, thermal receipt printers, kitchen video displayers, back office server, back office PC with flat panel display, APC/PowerVar surge with battery backups, I-Control internet package, credit card and gift card interface.
1. Office 2003 Small Business edition or Professional (you must have Word and Excel). This software is included with the Positouch Back Office System.
2. The most recent Quickbooks Single user version. This can be purchased on your own or from Positouch (Hospitality Data Systems) at the time of your POS system purchase.
3. I-Control Enterprise Software Reporting tool. A five year agreement for this software is included with the Positouch Back Office System.
Hospitality Data Systems is our exclusive supplier for the POSitouch POS system. The cost of the entire system with included installation and one year hardware and software maintenance is $18,000.
Gift card program: We require you to participate in a gift card program under which customers can purchase gift cards from you and purchases are charged against the card as made. The approximate cost of equipment to participate in this program is $500 which is included in the computer system described above. You will also incur monthly and transaction charges, currently $7 per month and $0.11 per transaction, which are paid to the gift card provider.
Background music: You are also required to have background music in your Store. This will vary with the service provider, but the current approximate cost of such music is $750 for equipment on installation and an annual fee of about $300.
2. DSL - check with your local phone provider to see if DSL is available in your area.
3. WISP - Wireless internet service providers are becoming more and more prevalent. This is a last resort if you cannot obtain cable or DSL internet connectivity.
computer website for your Store.
We provide our operations, design and other manuals in electronic version, although we reserve the right to provide them in a paper version. We provide you, on loan, one copy of the manual that contain our mandatory specifications, standards and operating procedures. All manuals are confidential and remain our property and must be returned to us upon expiration or termination of the Agreement. We may modify the manuals.
Our Area Franchise Manual is provided to you in an electronic version, although we reserve the right to prepare and utilize a paper version. We will provide you, on loan, one copy of our Area Franchise Manual, which contains mandatory specifications, standards, and operating procedures. (Area Franchise Agreement Section 3.3.5) The Area Franchise Manual is confidential and remains our property. We may modify the Area Franchise Manual, but the modifications will not alter your current status and rights under the Area Franchise Agreement.
We do not have a Manual for Developers.
We may, in the future, substitute a paper version of our Franchisee Manuals for our current electronic versions.
The Franchise Agreement designates the Approved Location for the Store. If no Approved Location has been selected when you sign the Franchise Agreement, we will describe the Approved Location in a site approval letter sent to you after you locate the Approved Location. You may not relocate the Store without our prior written consent.
The only Store concept where we will provide you with an exclusive territory is for a Cafe Store. For a Cafe Store, during the term of the Franchise Agreement, neither we nor any affiliate will establish or operate, or franchise any entity to establish or operate a Cafe Store using our Proprietary Marks and System at any location within the area described in the Franchise Agreement ("Protected Territory"). The size of the Protected Territory will likely differ among franchisees, and will be determined by the demographics of the area in which the Cafe Store is situated. As a general rule, the Protected Territory in an urban setting will be approximately two (2) city blocks, a suburban setting will be approximately one-half mile radius and a rural setting will be approximately one mile from your approved location. You do not receive the right to acquire additional Stores within the Protected Territory. However, you do have the right to sign additional Franchise Agreements and your additional franchise may be in your Protected Territory.
fund raising sales or mail order sales, or license others to sell or distribute, any products which bear any proprietary marks, including the Proprietary Marks, regardless of their proximity to the Approved Location or their impact on Store Owner's Store.
As indicated in Item 1, we reserve the right to market products using the Proprietary Marks through alternative distribution formats, including direct sales and multi-level marketing distributorships and we have done so. For some Products using the Proprietary Marks, these sales formats likely will compete with your Store. Except as described in this paragraph, we have not established or presently intend to establish other franchises or company-owned outlets selling similar products or services under a different trade name or trademark. However, we have retained the right to do so and currently monitor and explore opportunities that arise from time to time on this subject.
If you become an Area Franchisee, you will be assigned a Territory for which only you will be authorized to promote, evaluate, and screen individuals seeking to open a franchised Store. In the event you receive any inquiries regarding the establishment of a Store outside of the Territory, you must refer the inquiry to us. In the event we receive any inquiry regarding the establishment of a Store within the Territory, we must refer the inquiry to you. Neither we nor anyone licensed by us will promote the sale of franchised Stores, perform Servicing Responsibilities or monitor the performance of franchised Stores within your Territory. However, your territorial protections and your rights and obligations as an Area Franchisee have the following exceptions and limitations; (i) franchised Stores located outside of the Territory; (ii) franchised Stores in business prior to the date that you become an Area Franchisee; (iii) franchisees of any other franchise system with which we or any affiliate may now or subsequently have any interest or affiliation; and (iv) franchised Stores with whom you or any of your officers, directors, members, partners, or shareholders have any legal or equitable interest. You will not have any territorial protection or rights or obligations with respect to any of the five above-described types of businesses.
The sizes of Territories may vary, and we have no minimum area. Factors we use to determine a Territory include county limits, population, demographics, your ability to service and monitor Coffee Beanery franchisees in the Territory in accordance with the Area Franchise Agreement, and similar factors.
Your right to remain an Area Franchisee under the Area Franchise Agreement is contingent on your compliance with the Development Schedule and all other obligations of the agreement. Failure to do so may result in termination of the Area Franchise Agreement. We also have the right, but not the obligation, in lieu of terminating the Area Franchise Agreement, to assume ourselves or delegate to a third-party, all future Servicing Responsibilities, in which event, you will not receive a percentage of any franchisees' royalty payments whose Servicing Responsibilities have been transferred.
The Area Development Agreement will describe your Development Area. We determine Development Area boundaries by your development capabilities, population, political boundaries, and the number of Stores desired. Depending upon the kind of Store, Stores developed under the Area Development Agreement may have its own Protected Territory, as described in this Item 12. The Protected Territory, if any, for each Cafe Store will be a smaller part of the Development Area.
During the term of the Area Development Agreement, we will not establish or operate, or franchise other persons to establish or operate, a Store which is located within your Development Area. Except as specifically provided in the preceding sentence, your rights under the Development Agreement are not exclusive, and we retain the same rights within the Development Area that are described above in subparagraphs (1) through (3) under the subheading "Franchise Agreement."
We have not established or presently intend to establish other franchises or company-owned outlets selling similar products or services under a different trade name or trademark. However, we have retained the right to do so and currently monitor and explore opportunities that arise from time to time on this subject.
The Franchise Agreement grants you the non-exclusive right and license to use the System, which System includes the use of the Proprietary Marks and any other proprietary marks that we may use during the term of the Franchise Agreement in operating the System. Your use of the Proprietary Marks is limited solely to the operation of the Store at the Approved Location and only in accordance with the System.
BUT SHOULD NEVER BE ORDINARY"
"THE RIGHT ROAST AND DESIGN"
"THE COFFEE BEANERY CAFE and DESIGN"
The trademark in 1982 consisted of a picture of a coffee mill and tree, with the words "THE COFFEE BEANERY". The trademark registered in 1985 consists of a coffee cup formed by using the letters "C" and "B", with or without the words "The Coffee Beanery Ltd." printed below the coffee cup. The trademark registered in August 1990 consists of the words "The Coffee Beanery, Ltd." standing alone.
All required affidavits have been filed.
There are no currently effective material determinations of the Patent and Trademark Office, Trademark Trial and Appeal Board, the trademark administrator of this state, or any court; no pending infringement, opposition, or cancellation proceedings; nor any pending material litigation involving the Proprietary Marks. There are no agreements currently in effect that significantly limit our rights to use, or license the use of, any of the Proprietary Marks in a manner material to the franchised business.
There are no infringing uses either actually known to us or of which we are aware that could materially affect your use of the Proprietary Marks in this state or in the state in which the Store is located We are not obligated by the Franchise Agreement or otherwise to protect any rights granted to you to use any Proprietary Marks. You must promptly notify us of any suspected unauthorized use of or challenge to the validity of the Proprietary Marks. We have the sole right to direct and control any administrative proceeding or litigation involving the Proprietary Marks, including any settlement of the action. We have the right, but not the obligation, to take action against uses by others that may constitute infringement of the Proprietary Marks.
We will defend you against any third-party claim, suit, or demand arising out of your use of the Proprietary Marks. If we, in our discretion, determine that you have used the Proprietary Marks in accordance with the Franchise Agreement, we will bear the cost of defending you, including the cost of any judgment or settlement. If we, in our discretion, determine that you have not used the Proprietary Marks in accordance with the Franchise Agreement, you must bear the cost of the defense, including the cost of any judgment or settlement. If there is litigation concerning your use of the Proprietary Marks, you must execute all documents and do any acts that we believe are necessary to carry out the defense or prosecution, including becoming a nominal party to any legal action. Except to the extent that the litigation resulted from your use of the Proprietary Marks in a manner inconsistent with the terms of the Franchise Agreement, we agree to reimburse you for your out-of-pocket litigation costs in cooperating with us on the litigation.
We reserve the right to substitute different proprietary marks for use in identifying the System and the businesses operating under the System if the Proprietary Marks no longer can be used, or if we, in our discretion, determine that substitution of different proprietary marks will be beneficial to the System. The Franchise Agreement will govern the use of the substituted proprietary marks. We will not compensate you for the substitution and will bear only the costs of modifying your signs and advertising materials to conform to our new proprietary marks.
We do not own any right in or to any patents or copyrights that are material to the franchise. We do, however, claim common law copyright protection for our literature, marketing materials, and our Manuals.
You must operate the Store in accordance with the standards, methods, policies, and procedures specified in the Manual, as we may revise it. You must treat the Manual, and the information contained in it, as confidential, and use all reasonable efforts to maintain the information as secret and confidential. You must not at any time copy, duplicate, record, or otherwise reproduce any materials in the Manual, or otherwise make the material available to any unauthorized person. The Manual will at all times remain our sole property, and you must ensure that access to the Manual is restricted to authorized persons.
You must not, during or after the term of the Franchise Agreement, communicate, divulge, or use for the benefit of any other person, persons, partnership, association, or corporation, any confidential information, knowledge, or know-how concerning the methods of operation of the Store which we may communicate to you or which you may be apprised by virtue of your operation under the Franchise Agreement. You may divulge confidential information only to those employees who must have access to it in order to perform their employment responsibilities. All matters, information, knowledge, know-how, and techniques which we designate as confidential will be deemed confidential for purposes of the Franchise Agreement unless and until you demonstrate that the information has become public knowledge.
Certain individuals associated with you, such as shareholders, officers and directors, and all employees who may have access to our confidential information must, at our request, execute covenants that they will maintain the confidentiality of information they receive during their association with you. The current form of covenant is attached to this Offering Circular at Exhibit G. We may require that certain individuals execute these covenants at the time you sign the Franchise Agreement.
Unless we otherwise approve in writing, you or your designated Store manager, must devote full-time and best efforts to the management and operation of the Store. You or your Store manager and other employees you may designate are required to attend and satisfactorily complete our training programs applicable to pre-opening training before opening the Store for business. You or your Store manager and other employees you may designate, also must attend and satisfactorily complete refresher training courses at our reasonable request. You are not obligated to grant an equity interest to any employee. You must inform us of the identity of the Store manager, but we do not have the right to disapprove the manager. Your store manager must possess the ability to operate your Store professionally and in compliance with the System and Manuals. We require you to obtain signed covenants of confidentiality and non-competition from certain persons associated with you. For a description of the covenants and the persons from whom the covenants are required, see Items 14 and 17.
You, or a manager that we approve in writing, must devote enough time in operating as an Area Franchisee in order to fulfill your development obligations under the Area Franchise Agreement. We require you to obtain signed covenants of confidentiality and non-competition from certain persons associated with you. For a description of the covenants and the persons from whom the covenants are required, see Items 14 and 17.
offer. You must abide by any additions, deletions, and modifications, but only if the changes do not materially and unreasonably increase your obligations under the Franchise Agreement.
You may not sell any menu item, product, service, or program that is not part of the Coffee Beanery system without our prior written approval. You may not use the Coffee Beanery name or the Proprietary Marks for any other business. You may not conduct any business other than the business contemplated by the Franchise Agreement from your facility without first obtaining our written consent.
You may sell only Coffee Beanery products and services (or other approved products) at retail from your Store, and you may not engage in the wholesale sale or distribution of any Coffee Beanery product, services, equipment or other component, or any related product or service, without first obtaining our written consent. You may not sell products through the internet or using any channel of distribution other than your Store without first obtaining our written consent.
You may not sell, barter, or exchange any Proprietary Products or other proprietary items at wholesale or retail under any condition. If you engage in any wholesale or retail sale, barter or exchange of any quantity of Proprietary Products or other proprietary items to another Coffee Beanery franchisee or to any other person or entity, we can terminate the Franchise Agreement immediately on notice to you.
In preparing, dispensing and selling Coffee Beanery products, you may use only product components, ingredients, flavoring and garnishes that meet our then current requirements and specifications. You must prepare all Coffee Beanery products in strict accordance with our standards, specifications, techniques and procedures. In dispensing the Coffee Beanery products, you may use only containers, cartons, bags, boxes, napkins and other paper goods and packaging bearing our then-currently approved text and designs, and that otherwise meet our then-current requirements, specifications and quality standards..
See Item 8 for a description of certain restrictions and controls over the purchase of items which you may use or sell.
Except as described in this Item 16, you are not restricted by the Franchise Agreement or any of our practices or customs regarding the products or services you offer for sale or to whom you may sell.
You must comply with all reasonable requirements if we supplement, improve, or modify the System, including offering and selling new or different services and products that we specify. We have the right to change the types of authorized goods and services, and there are no limits on our right to make changes.
This table lists important provisions of the franchise and related agreements. You should read these provisions in the agreements attached to this Offering Circular.
If you satisfy requirements and complete a renewal application, you may renew for consecutive terms of fifteen (15) years each.
Give timely written notice, make repairs/renovations as needed, not be in default, be current in debt obligations, submit a renewal application, execute new Franchise Agreement, execute with us a general release of claims, pay renewal fee of Fifteen Hundred Dollars ($1,500).
By written notice to us, you may terminate if there is no Approved Location one (1) year after executing Franchise Agreement.
Bankruptcy, failure to open Store, abandonment of Store, certain breaches of the Franchise Agreement, material misrepresentations, repeated defaults after cure, trademark misuse, unapproved transfers, nonpayment of fees and debts, failure to execute covenants, non-renewal of lease, criminal conviction, false books and records, no insurance, five percent (5%) understatement of payments or two (2) understatements in two (2) years, failure to find Approved Location by one (1) year after executing Franchise Agreement.
All defaults not specified in Sections 13.1 and 13.2; curable within thirty (30) days of written notice from us.
Bankruptcy, failure to open Store, abandonment of Store, certain breaches of the Franchise Agreement, material misrepresentations, repeated defaults after cure, trademark misuse, unapproved transfers, nonpayment of fees and debts, failure to execute covenants, non-renewal of lease, criminal conviction, false books and records, no insurance, five percent (5%) understatement of payments or two (2) understatements in two (2) years, unless we determine otherwise.
Cease operation of Store and use of Proprietary Marks and Manual, de-identification of Store, payment of amounts due, return Manual, covenant not to compete and other covenants described in Section 15.
Includes transfer of your rights under Franchise Agreement, transfers that change your ownership, transfers of assets of Store.
We have the right to approve all tram!a; and w .!i not unreasonably withhold consent if you satisfy Section 12.2.1 requirements.
You are not in default under agreements with us; all monetary obligations are satisfied; mutual general release is executed; transferee signs our then-current form of franchise agreement for a fifteen (15) year initial term; transferee satisfies our conditions for franchisee; transferee completes training and upgrades Store; and you reimburse us for our costs in reviewing and approving transfer and providing training.
We have the right only in the context of an assignment under the United States Bankruptcy Code.
We have the right to purchase certain assets as described in Section 14.9 of the Franchise Agreement. We also have the right to purchase or lease any real property associated with the Store operations as described in Section 14.10 of the Franchise Agreement.
Your interest must be transferred within six (6) months to a third party approved by us. If your heir or beneficiary cannot satisfy our conditions, executor or administrator has reasonable time to transfer.
Prohibition against owning, operating, advising, working in, being associated with, and making loans to a business that provides similar products and services. Certain individuals also must sign the Confidentiality and Non-Competition Covenant (Exhibit G) at the time vou sign the Franchise Agreement.
Prohibition for one (1) year on engaging in similar business at Approved Location or within a 10-mile radius of your Store(s). Exception if you are less than a 5% owner of certain companies registered with the Securities and Exchange Commission. Certain individuals also must sign the Confidentiality and Non-Competition Covenant (Exhibit G) at the time vou sign the Franchise Agreement.
You must pay us liquidated damages equal to 60 months (or the number of months in the remaining term of the Franchise Agreement if less) of royalty fees if the agreement is terminated unless we have committed a material breach.
Must be in writing signed by both parties.
■ -»... if I .
Except as provided in Section 23.4, you must arbitrate all disputes under the rules of the American Arbitration Association. Before arbitration may begin, you must first mediate disputes.
All arbitration and mediation must occur where we have our principal place of business at the time when the arbitration or mediation commences. At present, our principal place of business is Flushing, Michigan.
Michigan law applies except for provisions relating to the offering of franchises unless conditions met independently (subject to state law).
Date set in the Development Schedule as the date on which the final Store must be opened.
We can purchase your interest in any or all Stores and terminate all of your existing Franchise Agreements if the Area Development Agreement is terminated because of a default by you.
Includes prohibition on association with any business which offers the same or similar products or services as those offered by a Store or diverting business from a Store, without our approval. Certain individuals also must sign the Confidentiality and Non-Competition Covenant (Exhibit G) at the time you sign the Area Development Agreement.
1 year prohibition of any association with a business which offers similar products or services as those offered by the Store and which is located within a 20-mile radius of the Development Area. Some individuals also must sign a Confidentiality and Non-Competition Covenant (Exhibit G) when you sign the Development Agreement.
APPLICABLE STATE LAW MAY REQUIRE ADDITIONAL DISCLOSURES RELATED TO THE INFORMATION IN THIS OFFERING CIRCULAR. THESE ADDITIONAL DISCLOSURES, IF ANY, APPEAR IN AN ADDENDUM. SEE EXHIBIT K TO THIS OFFERING CIRCULAR FOR THESE ADDENDA.
We do not use any public figures to promote Coffee Beanery franchises.
We do not make any representations or statements of actual, average, projected, or forecasted sales, profits, or earnings to franchisees with respect to our franchises under Franchise Agreements. We do not furnish or authorize our salespersons to furnish to you any oral or written information concerning the actual, average, projected, forecasted, or potential sales, costs, income, or profits of a Store or a Franchise.
We specifically instruct our sales personnel, agents, employees, and officers that they may not make claims or statements as to the earnings, sales or profits, or prospects or chances of success, nor are they authorized to represent or estimate dollar figures as to a franchisee's operation. Any representations as to earnings, sales, profits, or prospects or chances of success is unauthorized. Actual results vary from franchise to franchise, and we cannot estimate the results of a particular franchise. We recommend that you make your own independent investigation to determine whether or not the franchise may be profitable, and consult an attorney and other advisors before executing the Franchise Agreement.
A list of franchised and corporate outlets for the fiscal year ending June 30, 2006, June 30, 2005 and June 30, 2004, including projected openings, are described in the following pages with separate detail for Cafe' and Traditional Stores.
A list of our Area Franchisees and Area Developers for the fiscal year 2006, 2005 and 2004 , including projected openings are described in the following pages. .
Following on the next page is a list of the name and last known home address and telephone number of every franchisee who has had an outlet terminated, canceled, not renewed, or otherwise voluntarily or involuntarily ceased to do business under the Franchise Agreement during the period July 1, 2005 through June 30, 2006, or has not communicated with us within ten (10) weeks of our application date.
1) The numbers in the "Total" column may exceed the number of Stores affected because several events may have affected the same Store. For example, the same Store may have had multiple owners, and a transferred franchise would also appear as a terminated franchise.
2) The names, addresses and telephone numbers of our franchisees on June 30, 2006 are attached to this Offering Circular as Exhibit P.
3) We did not have any franchisees terminated during the past three (3) years in any state not listed in the table.
4) We do not intend to open any franchised Store in any state not listed in these tables.
Our audited financial statement dated August 23, 2006 for the years ended June 30, 2006, June 30, 2005, and June 30, 2004 appears in Exhibit E to this Offering Circular.
The last page of this Offering Circular is a detachable document, in duplicate. Please detach, sign, date and return one (1) copy of the Receipt to us, acknowledging that you received this Offering Circular. Please keep the second copy for your records.

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