Source: http://www.freefranchisedocs.com/wetzels-pretzels-UFOC.php
Timestamp: 2019-06-19 13:47:38
Document Index: 155521579

Matched Legal Cases: ['art9', '§ 7', '§ 7', '§ 5', '§ 7', '§ 3', '§ 7', '§ 7', '§ 5', '§ 7', '§ 4', '§ 5', '§ 7', '§ 3', '§ 7', '§3', '§ 7', '§ 8', '§ 7', '§ 7', '§ 6', '§ 4', '§ 10', '§ 8', '§ 11', '§ 7', '§ 5', '§ 5', '§ 5', '§ 5', '§ 5', '§ 5', '§ 5', '§ 5', '§ 5', '§ 7', '§ 5', '§5', '§9', '§ 20000', '§ 101', '§ 11', '§ 11', '§ 80', 'art 2860', '§ 80', 'art 2860']

Wetzels Pretzels: UFOC
Wetzel's W Pretzels
MAR0 2 2006
TO PROTECT YOU, WE'VE REQUIRED YOUR FRANCHISOR TO GIVE YOU THIS INFORMATION. WE HAVEN'T CHECKED IT, AND DON'T KNOW IF IT'S CORRECT. IT SHOULD HELP YOU MAKE UP YOUR MIND. STUDY IT CAREFULLY. BUYING A FRANCHISE IS A COMPLICATED INVESTMENT. TAKE YOUR TIME TO DECIDE. IF POSSIBLE, SHOW YOUR CONTRACT AND THIS INFORMATION TO AN ADVISOR, LIKE A LAWYER OR AN ACCOUNTANT. IF YOU FIND ANYTHING YOU THINK MAY BE WRONG OR ANYTHING IMPORTANT THAT'S LEFT OUT, YOU SHOULD LET US KNOW ABOUT IT. IT MAY BE AGAINST THE LAW.
Wetzel's Pretzels, LLC 35 Hugus Alley, Suite 300 Pasadena, CA91103 Telephone: (626) 432-6900 Fax: (626) 432-6904 http://www.wetzels.com
Offering Circular Dated:
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Telephone: (626) 432-6900
Fax: (626) 432-6904
The franchisee will operate one or more bakeries specializing in hand-rolled soft fresh-baked pretzels.
The initial franchise fee for a single franchise is $30,000. Before opening, you will purchase a portion of your initial inventory from us which is unlikely to exceed $1,500. If you enter into a Satellite Cart Addendum, you will pay a cart fee of $1,000. The estimated initial investment for each bakery is between $129,650 and $353,250.
Information about comparisons of franchisors is available. Call the State Administrators listed in Exhibit A-1 or your public library for sources of information.
Registration of this franchise with the State does not mean that the State recommends it or has verified the information in this offering circular. If you learn that anything in this offering circular is untrue, contact the Federal Trade Commission and the State Administrator for this State listed in Exhibit A-1.
ITEM 1. THE FRANCHISOR, ITS PREDECESSOR AND AFFILIATES.......................... 1
ITEM 2. BUSINESS EXPERIENCE ..................................................... 2
ITEM 3. LITIGATION................................................................. 4
ITEM 4. BANKRUPTCY .............................................................. 4
ITEM 5. INITIAL FRANCHISE FEE ..................................................... 4
ITEM 6. OTHER FEES............................................................... 5
ITEM 7. INITIAL INVESTMENT ........................................................ 7
ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICE ...................... 8
ITEM 9. FRANCHISEE'S OBLIGATIONS................................................ 10
ITEM 10. FINANCING .............................................................. 11
ITEM 11. FRANCHISOR'S OBLIGATIONS .............................................. 11
ITEM 12. TERRITORY .............................................................. 16
ITEM 13. TRADEMARKS ............................................................ 18
ITEM 14. PATENTS, COPYRIGHTS, AND PROPRIETARY INFORMATION .................... 20
ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF
THE FRANCHISED BUSINESS ............................................... 20
ITEM 16. RESTRICTIONS ON WHAT YOU MAY SELL..................................... 21
ITEM 17. RENEWAL, TERMINATION, RESALE AND DISPUTE RESOLUTION ................. 21
ITEM 18. PUBLIC FIGURES.......................................................... 23
ITEM 19. EARNINGS CLAIMS ............... ........................................ 24
ITEM 20. LIST OF BAKERIES ........................................................ 27
ITEM 21. FINANCIAL STATEMENTS................................................... 29
ITEM 22. CONTRACTS ............................................................. 30
ITEM 23. RECEIPT................................................................. 30
ADDENDUM - STATE SPECIFIC DISCLOSURES
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Cart Addendum
Roster of Franchisees
Company Bakeries
Roster of Former Franchisees and Transferred Franchises
Your Copy of Receipt
Wetzel's Pretzels' Receipt
NOTE: EXCEPT FOR THE WORDS "YOU," "WE" AND "US," TERMS THAT ARE DEFINED IN THE FRANCHISE AGREEMENT OR OTHER ATTACHED AGREEMENTS ALWAYS BEGIN WITH CAPITAL LETTERS IN THIS OFFERING CIRCULAR.
WETZEL'S PRETZELS® UNIFORM FRANCHISE OFFERING CIRCULAR
ITEM 1. THE FRANCHISOR, ITS PREDECESSOR AND AFFILIATES
The purpose of this offering circular is to give you important information about Wetzel's Pretzels, LLC, a franchisor, and the franchise it offers. To simplify the language, we will refer to the franchisor as "Wetzel's Pretzels," "we" or "us," and the person or company that buys a franchise from us as "you." "You" does not include your owners or partners. We will call them "Related Parties."
The word "Predecessor" means a company from which we, within the past ten years, acquired, directly or indirectly, the major portion of our assets. "Affiliate" means a company controlled by, controlling, or under common control with us which offers franchises in any line of business or which provides products or services to our franchisees. We have a Predecessor but no Affiliates.
We were organized in California on August 7, 1995. Our Predecessor, Wetzel's, Inc., was incorporated in California on August 5, 1994 and dissolved on December 31, 1996. Our principal business office is at 35 Hugus Alley, Suite 300, Pasadena, CA 91103. The name and address of our agent for service of process in this State is stated in Exhibit A-2 to this offering circular.
We have been offering franchises since April 1996. Our Predecessor began operating a business similar to the franchised business in November 1994. We now have three company stores. We also sell frozen products at wholesale under the name "Wetzel's Pretzels Express" to selected food service accounts for on-site consumption.
A The business you will operate under the franchise agreement is a WETZEL'S
PRETZELS® Bakery selling hand-rolled soft fresh-baked pretzels to the public through a retail outlet.A With your lessor's consent, you may also operate a satellite cart in the same mall where your Bakery is located.
The market for your product will consist of shoppers in shopping malls or other busy pedestrian magnets. Your business will be largely dependent upon foot traffic generated by other retail outlets in the place where your Bakery is located.
Your business will be subject to state and local health and safety laws and regulations generally applicable to food service facilities. Your primary competitors will be
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members of other franchise systems that specialize in soft pretzels. Some competition is also presented by frozen soft pretzel dough sold in supermarkets.
Neither we nor our Predecessor has ever sold another type of franchise.
William L. Phelps, Chairman and Managing Partner
William L. Phelps is one of our founders. He has been chairman and a managing partner of the company since we were organized on August 7, 1995. He was also the chairman of the board, vice president, and treasurer of our Predecessor, Wetzel's, Inc., since its incorporation on August 5, 1994, until its dissolution in 1996. His responsibilities include oversight of finance and operations. Mr. Phelps was also vice-president of sales, Nestle Refrigerated Food Company, Glendale, California, from September 1993 to December 1994. Before that, he served as director of marketing, Nestle Food Company, Glendale, California, from June 1990 to September 1993. From August 1983 to May 1990 he was vice-president and general manager of Superior Brands, Boston, Massachusetts, (acquired by Nestle).
Richard M. Wetzel. President and Managing Partner
Richard M.Wetzel, also one of our founders, has been president and a managing partner of the company since our organization in August 1995. He was also president and secretary of our Predecessor. He has overall responsibility for marketing and store construction. From January 1989 to August 1995, he held several marketing management positions at Nestle Food Company, including brand manager, and ending as director of marketing, Nestle Refrigerated Food Company.
Anthony S. Parete. Executive Vice-President
AAnthonv S. Parete joined us in May 1997 as Vice President of Franchise Development and was promoted to Executive Vice-President in March 1998. He is responsible for franchise development of Wetzel's Pretzels' bakeries throughout the United States and internationally. From September 1990 to May 1997, Mr. Parete was Vice President of New Store Development for Swensen's Ice Cream, Ronkonkoma, New York, where he was responsible for franchise development, real estate acquisition and store design and construction of co-branding retail units of Swensen's Ice Cream, Steve's Ice Cream and Heidi's Frozen Yogurt in the United States and internationally.
Donald P. Wells. Vice-President of Finance
Donald P. Wells became our Vice-President of Finance in July 1997, bringing with him more than 25 years of experience in business finance. He is responsible for financial reporting and controls, budgeting, and cash flow planning. He was most recently employed
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as AChief financial AOfficer of Merchandising Resources, Inc., Norcross, Georgia, from 1991 to 1997.
Vincent Joseph Montanelli. Senior Vice-President of Operations
Vincent Joseph Montanelli became our Senior Vice-President of Operations in October 2004. Before joining us, he was Regional Manager of Jamba Juice, Inc., from July 2003 to October 2004, in San Francisco, California. From January 1995 until July 2003, he was Director of Retail Operations for Allied Domecq, Inc. (Baskin & Robbins), Los Angeles, California.
Richard B. Gunn. Director of Development
Richard B. Gunn joined us as Director of Development in March 2005. Before coming to us, he was President of Charter Real Estate, Buffalo, New York, from January 1994 to March 2005. During this period, from June 1998 to June 2003, he was also Director of Real Estate for Montana Mills Bread Co., Rochester, New York.
John A. Davis. Director
John A. Davis has been a member of our Board of Directors since July 1997. He has also been Chairman and a Producer at Davis Entertainment Company, Los Angeles, California, since 1985.
Michael J. Seibert Director
Michael J. Seibert joined Aour Board of Directors in July 1997. He has also been Senior Vice President of Davis Companies, Los Angeles, California, since August 1989, a Director of Delta Radio Holdings NV, Netherland, Antilles, since April 1997, Chief Operating Officer of Davis Television, Los Angeles, California, since January 1999, a Director of Thinkbox Media, Glendale, California, since February 2000, Managing Director of Stone Canyon Venture Partners, Los Angeles, California since January 2001, and a Director of Pasta Pomadoro, San Francisco, California, since June 2001.
On September 30, 2005, the Minnesota Commissioner of Commerce issued Aa consent order against Wetzel's Pretzel's LLC, #FR2504361/BD, under which we paid a civil penalty of $4,000 and agreed not to offer or sell franchises in Minnesota without first registering or qualifying for exemption from registration in that State. The order was based on an allegation that we had offered and sold two franchises in Minnesota during a period when our franchise offering was not registered in that State-In a family matter not involving Wetzel's Pretzels, on October 18, 2005, Patricia Ravnes Davis filed Case No. CV05-6740 ABC (Ctx) in the U.S. District Court for the Central District of California against her brother John A. Davis, who is one of our Directors, together with her father and mother, other brothers and sisters, her former attorney, a business
advisor and the Davis Companies, alleging that her father, with the knowledge and cooperation of the other defendants, had mishandled a trust fund set up for her by her grandfather. The complaint includes allegations of fraud, deceit, concealment, negligent misrepresentation and receipt of stolen property. On January 23. 2006. the Court ordered that all discovery and non-dispositive motion work in the action be staved pending arbitration of the plaintiffs claims against the business advisor.
Otherwise, no litigation is required to be disclosed in this offering circular.
No person identified in Items 1 or 2 of this offering circular has been involved as a debtor in proceedings under the U. S. Bankruptcy Code required to be disclosed in this Item.
If you enter into an option agreement with us, you will pay $5,000 for an exclusive option to enter into a franchise agreement with us for any location that becomes available for lease at a specified mall and is approved by us in accordance with our usual site approval criteria. As a condition of exercising the option, you must reimburse us for any out-of-pocket expenses we have incurred in negotiating the lease and securing the site. If you enter into a franchise agreement for the optioned location, the option fee is fully applicable against the initial franchise fee. If you do not sign the franchise agreement and pay the remainder of the initial franchise fee and any sums required to reimburse us within one week after expiration of any applicable disclosure period under state or federal franchise law, we may grant the franchise for that location to another prospective franchisee or may proceed to develop the site ourselves.
When you sign a franchise agreement, you will pay us the initial franchise fee in cash or other form of payment that will make the funds immediately available to us (such as wire transfer or cashier's check). The initial franchise fee is $30,000. You must sign a separate Franchise Agreement for each franchise you purchase. The initial fee is uniform for all franchisees. It is not refundable.
Portion of Initial Inventory
Before opening, you will purchase a portion of your initial inventory, mainly consisting of Proprietary Products such as tee-shirts and mugs bearing the WETZEL'S PRETZELS® Marks, from us. In addition, certain smallwares that you will be required to
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use are conveniently available only from us. The total cost of all such items purchased from us is unlikely to exceed $1,500.
Satellite Cart Fee
If you and your landlord agree that you may operate a satellite cart within the shopping mall or shopping center where your Bakery is located, we will grant you a license to operate the cart under a Satellite Cart Addendum, Attachment 6 to the Franchise Agreement. The Satellite Cart Fee, payable when you sign the Addendum, is $1,000. This fee is not refundable and is uniform as to all franchises currently being sold.
6% of Adjusted Gross Revenue
On Wednesday (or any other weekday designated by us) of each week
1 % of Adjusted Gross Revenue
All expenses of audit if underpayment exceeds 3% orif audit was undertaken because you did not submit annual financial statements in a timely manner
Secret Shopper Fee
Reimburses us for cost of service
Repeat Inspection Fee
Only assessed if previous inspection revealed material default
$1,000 plus incidental costs to attend
We will debit your account for this fee whether or not you attend
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Ongoing Training Fees and Initial Training for New Managers
On signing Satellite Cart Addendum
25% ofcurrent initial fee
$30,000 during the first 12 months. A$15.000 thereafter
With notice of intention to Resell
Will be partially refunded if Resale denied
Cart Resale Fee
V2 current Satellite Cart Fee
Before resale complete
Upon purchase of option
Fully applicable to initial franchise fee on additional Bakery
Lower of 18% per year or highest rate allowed bylaw
Compensation for loss of use of money
None of these fees or costs are refundable. All of them are payable to us. All may be debited from your bank account under the Authorization Agreement for Prearranged Payment attached to the Franchise Agreement. This chart does not include expenses that you will pay third parties who are not affiliated with us.
"Adjusted Gross Revenue" is defined in Article 3 of the Franchise Agreement as "the total amount of money received by you and your Related Parties for all goods sold and services rendered from the Approved Location or the Trade Name or Marks, less sales tax, returns, and discounts, within an accounting period."
Also, iftheunderpaymentexceeds3%ofthemoneyowed, we may require that from then on your annual financial statements be audited and certified at your own expense. Audit costs are not refundable.
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Satellite Cart Fee3
A$_Q
At signing of Cart Addendum
Business Premises4
At lease opening
Food Preparation Equipment5
Utility Deposits, Licenses, Permits6
Equipment Lessors & Utilities
Point-of-Sale Cash Register System
Initial Inventory & Small wares
Us and Suppliers
Training Fee for Additional Trainee 7
Professional Fees8
Architect Engineers & Const. Manager
Satellite Cart9
Cart Manufacturers, Lessor, Utilities
Additional Funds10
Employees, others
THESE FIGURES ARE ONLY ESTIMATES
1: Item shows all expenses through third month of operation. If you select a site on which we have
already begun development, you will reimburse us for any of the costs described in this table that we have already incurred.
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2: If you have an option on a particular location, your $5,000 option fee is fully applicable to the initial
franchise fee. The Initial franchise fee is $30,000.
3: If you enter into a Satellite Cart Addendum to the Franchise Agreement, as described in Item 5,
you will pay us a Satellite Cart Fee of $1,000 at the time you sign the Addendum.
4: Figures are based on assumption that premises will be rented and that lessor will require an initial
payment of one month's rent and, in some cases, a security deposit of one month's rent. If you sublease the premises from us, you must pay us a security deposit equal to two months' rent. The premises will probably be located in a mall or shopping center; the size will range from 300 to 1,000 square feet, with 15 to 20 linear feet of frontage.
5: This category includes such items as food preparation equipment and janitorial equipment/
6: This category includes sales tax deposits or bonds, construction permit, sewer hookup charges,
and utility deposits.
7: The fee for training the first four people is included in the initial franchisee fee. An additional
training fee is assessed for each additional trainee. Your Designated Manager must attend the initial training program. Attendance by others is optional.
8: This figure includes attorney review and negotiation of the lease for the franchised bakery. If we
have paid for lease review while developing your site, you will reimburse us for this expense rather than pay the attorney directly.
9: If you and your landlord agree that you will operate a satellite cart in the same shopping center or
mall where your Bakery is located and we grant you a license to do so, you will incur costs of between $12,000 and $20,000 for manufacture and installation of the cart and for deposits required by utilities and the landlord.
10: This category includes 90 days' wages for 3 full-time and 6 part-time employees, opening cash,
and other miscellaneous expenses incurred during the first 90 days of the franchised business' operations. We relied on our internal pro forma in estimating this figure. You should review these figures carefully in light of local conditions and the economy, consulting a business advisor if necessary.
ITEM 8. RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICE
In some instances, we will locate a site that you may accept as assignee or sublessee. Otherwise, you must, on your own initiative and at your own expense, locate the site for the Bakery before signing a franchise agreement. If we did not locate your site, you must submit a "site package" in a form specified by us in the Manual or elsewhere in writing and obtain our prior written approval.
You must employ a qualified construction manager whom we have approved to oversee the buildout of your business premises.
We have designated only one supplier of our proprietary pretzel dough mix which you are required to use exclusively in your WETZEL'S PRETZELS® Bakery. We are an approved supplier, but not the sole approved supplier, of required toppings and condiments. You may purchase proprietary food items, of which a growing number are being developed, from us only. At present, we have approved only one supplier of WETZEL'S PRETZELS® hats, tee-shirts, cups, paper goods, and other items bearing the
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WETZEL'S PRETZELSCg) Marks. Although you may seek approval from us of other suppliers for these items, you will probably find that quantity production enables us to offer the best prices for many of them.
On occasion we may receive a payment, discount, or other advantage from a supplier based on that supplier's sales to WETZEL'S PRETZELS® franchisees. Aside from our proprietary products which you must buy from us or our designated supplier, you will not be required to purchase from any such suppliers. Instead, you may buy from another approved supplier or may obtain approval of another supplier whose products meet specifications set by us.
In 200A§, our total revenue was AS9.030,A241. Of this, $A196.A301. or about 2A2%. was received in payment for required purchases by franchisees. Payments for required purchases will constitute about 95% of your start-up costs and 50% of your ongoing costs.
We will give you, during the initial training program, a written list of names and addresses of suppliers of goods and services that currently meet our standards and specifications. In advising you of suppliers which meet our standards and specifications, we expressly disclaim any warranties or representations as to the condition of the goods or services, including, but not limited to, expressed or implied warranties as to merchantability or fitness for any intended purpose. You agree to look solely to the manufacturer of goods or the supplier of services for the remedy for any defect in the goods or services.
We evaluate and approve suppliers upon the basis of their ability to meet quality specifications and to replicate the products and services provided by currently approved suppliers. If you wish to use or sell any product not previously certified by us to meet our specifications or which is sold by a supplier not previously approved by us, you must give written notice to us of this fact and, upon our request, give us product specifications, sample products, and/or information about the supplier. We will communicate to you either our approval or our reasons for withholding our approval within a maximum of 14 days. Silence may not be construed as consent. As a condition of approving a supplier or product, we will require you to reimburse us for any expenses we reasonably incur in inspecting the supplier's premises, checking the supplier's credentials, or testing the product. The cost is unlikely to exceed $500. As a condition of approving a supplier of any product that bears the Trade Name or Marks, we may require that the supplier sign our License Agreement. We may withdraw our approval of a supplier or product if either or both no longer meet our standards or specifications. If this occurs, we will notify you in writing.
We negotiate purchase arrangements with suppliers on behalf of franchisees and company-owned Bakeries. These usually take the form of system-wide quantity discounts. There are currently no purchasing or distribution cooperatives. We do not provide benefits based on your use of approved sources.
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THE TABLE BELOW LISTS YOUR PRINCIPAL OBLIGATIONS UNDER THE FRANCHISE AGREEMENT AND ANY RELATED AGREEMENTS. IT WILL HELP YOU LOCATE MORE DETAILED INFORMATION ABOUT YOUR OBLIGATIONS IN THE AGREEMENTS AND IN OTHER PARTS OF THIS OFFERING CIRCULAR.
Franchise Agreement § 7.2.2
Franchise Agreement §§ 7.2.2, 7.2.3
5,7, 11,12
Franchise Agreement §§ 5.2.1, 6.6
Franchise Agreement §§ 7.2.3. 7.4.1,7.7.1
Franchise Agreement 6; Cart Addendum § 3.3
5,6,7, 11,12
Franchise Agreement §§ 7.2.4, 7.3.2
Franchise Agreement §§ 7.1.2, 8.1
Franchise Agreement §§ 5.6, 5.7, 7.2.5
Franchise Agreement §§ 7.2.6
Franchise Agreement § 4.2, Attachment 1
Franchise Agreement §§ 5.7, 6.7, 7.2.5
m. Maintenance, appearance remodeling requirements
Franchise Agreement §§ 7.1.2, 7.2.4; Cart Addendum § 3.5
Franchise Agreement § 7.6; ACart Addendum §3.6
Franchise Agreement §§ 7.1.3, 7.4
Franchise Agreement § 8.5
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Franchise Agreement §§ 7.3.1, 7.3.2
Franchise Agreement § 7.5.1
Franchise Agreement §§ 6.4, 7.2.7, 7.5.1
t. Resale
Franchise Agreement §_9
Franchise Agreement § 4.5.2
Franchise Agreement § 10.4
Franchise Agreement § 8.6, Attachment 3
Franchise Agreement §§ 11.7, 11.8,11.9
We do not directly or indirectly offer financing. We will not guarantee your note, lease, or obligation.
We are not required to offer you any assistance that is not described below. Pre-Qpening Services
If we do not locate a site that you may accept as assignee or sublessee, you must, on your own initiative and at your own expense, locate the site for the Bakery before signing a franchise agreement. If we did not locate your site, you must submit a "site package" in a form specified by us in the Manual or elsewhere in writing and obtain our approval in writing. (Franchise Agreement, § 7.2.2.) We will inspect the proposed site, evaluate the site and its environment in terms of suitability for a WETZEL'S PRETZELS® Bakery, and review the lease before you sign it. We undertake these activities on our own behalf, although you may incidentally benefit, too. Site approval will be based on the following criteria, among others:
a. The site must conform to the general guidelines for suitable franchise premises
that are set out in the Manual; and
b. The lease must contain terms that are satisfactory to us and you. If we are not
the lessee, the lease must provide that we are granted an option, without cost or expense to us, to assume or authorize our assignee to assume the lease if the Franchise Agreement is terminated for any reason or if you should be in default under the lease.
The factors that we consider in approving a site include the volume of foot traffic generated by nearby stores, availability of parking, cost to conform premises to health laws and regulations, and demographics of the area. We will respond to your request for approval of a site within 60 days. If you and we cannot agree about a site, you must find another site.
We estimate that the length of time between signing of the franchise agreement and opening of the WETZEL'S PRETZELS® Bakery will be about four months. Factors that may affect the length of time before you are ready to open your Bakery include obtaining government permits and construction delays.
The initial training program will cover the following:
Operations/Receipts
Personnel/Scheduling
Suppliers/Specifications
Sta rt- up_Proced u res
^Manual
The training program will be conducted as often as needed to ensure that each franchise owner completes the course at least 10 days before opening. It will be taught in our corporate training center and one or more company-owned WETZEL'S PRETZELS® Bakeries in Southern California. Additional training will be administered later at your Bakery. Training material will primarily consist of a training manual and the Operations Manual.
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The training program will be supervised by Bill Phelps. His experience is described in Item 2 of this Offering Circular.
A Your Designated Manager (defined in the Franchise Agreement as you in your
role as general manager of a WETZEL'S PRETZELS® Bakery or a person whom you have appointed as general manager) must attend and successfully complete the training program to our satisfaction before you may open a WETZEL'S PRETZELS® Bakery. You may send as many as three members of your management to training at no additional charge. If you send more than three people to training, we will assess a training fee of $750 for each additional person. You must pay your own incidental expenses, such as travel, lodging and parking, and those of your employees in connection with training. If the employment of a Designated Manager is terminated, you must employ a new Designated Manager within 30 days who must successfully complete the initial training program before starting work. (Franchise Agreement §§ 5.2.1A and 6.6A)
We will offer continuing education programs at the Annual Convention. Your attendance at the Annual Convention is important and mandatory. Because planning and funding the Convention requires a substantial advance financial commitment on our part, we have the right to debit your bank account for a registration fee of $1,000 (whether or not you attend. Failure to attend is a breach of the Franchise Agreement. (Franchise Agreement §§ 5.2.A2 and 6.7A)
We will offer continuing education programs on matters related to the operation or promotion of the WETZEL'S PRETZELS® Bakery on an optional or mandatory basis, as we consider appropriate. We will offer these programs at our cost plus an administrative fee of 20% of cost. (Franchise Agreement §§ 5.2.2A and 6.6A)
We will not pay any compensation to trainees for work performed during any training program.
We will lend you a Manual containing explicit instructions for use of the Marks, specifications for goods that will be used in or sold by the WETZEL'S PRETZELS® Bakery, sample business forms, information on marketing, management, and administration methods developed by us for use in the WETZEL'S PRETZELS® Bakery, names of approved suppliers, and other information that we believe may be necessary or helpful to you in your operation of the WETZEL'S PRETZELS® Bakery. We will revise the Manual periodically to conform to the changing needs of the Franchise Network and will distribute up-dated pages containing these revisions to you. (Franchise Agreement § 5.4A)
You may review the Manual under the supervision of our employee or agent before signing the Franchise Agreement. The viewing will be held at a mutually convenient time and place.
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Selection and Installation of Point of Sale Equipment
You must purchase the following;
1 or more CRS (brand) A4000 (model) point-of-sale electronic cash register terminals
1 Citizen (brand) 3541 (model) electronic receipt printer or compatible printer
1 GVC (brand) V.32 (model) electronic modem or compatible modem
You must obtain and pay for supplier installation and training in the use of the above and installation and maintenance of a dedicated telephone line.
The cash register system is the proprietary product of Horrocks Cash Register Systems, 5913 East Washington Boulevard, Los Angeles, California 90040-2412, telephone (213) 721-5102. No alternative product has been identified or approved.
You are contractually obligated to leave the cash register in the proper mode each evening so that we can poll the data. Doing this gives us access to sales data on which a variety of sales reports may be based and upon which your royalty and advertising fund contributions will be calculated. You may obtain copies of these reports upon request from us. There is no contractual limitation upon our right to access this data, but we will be physically unable to do so without your cooperation.
You must upgrade the hardware at your own expense whenever we inform you that it is necessary. These is no limit in the contract on the frequency at which you may be required to upgrade or on the annual cost of doing so. However, in the more than four year period during which we have used the system, no upgrade has been necessary.
Lav-out and Decor
We will give you a construction manual to guide you in constructing tenant improvements to, furnishing, and equipping your WETZEL'S PRETZELS® Bakery. (Franchise Agreement, § 5.1A)
WeA will use our best efforts to make our personnel available to you for consultation throughout the term of the franchise in a timely manner for no additional charge except reimbursement of direct costs. (Franchise Agreement § 5.3A)
Proprietary Products Availability
We will use our best efforts to ensure that we, our Affiliate, or a designated supplier will at all times have a supply of Proprietary Product^ for sale to you. (Franchise Agreement § 5.8A)
You will not be required to participate in a local or regional advertising cooperative.
We will administer an Advertising Fund, which will be accounted for separately on the general ledger. The purpose of the Fund is to pool our advertising money and that of each of our franchisees so as to achieve greater benefits for all in promoting the Trade Name and Marks. Company bakeries and franchised bakeries will contribute to the Fund an equal percentage of their Gross Sales. The Fund may be used to pay for market research and creative development and production of advertising materials. In addition, the Fund may be used to pay for point-of-purchase materials or public relations projects. Twenty percent of Fund money will be paid to us as compensation for our administration of the Fund.
We will distribute to our franchisees, once a year, an Advertising Fund report which will set out the total amounts of money collected and spent by the Fund during the past year and list, by general category, the manner in which the money was spent. The books of the Advertising Fund will be audited as part of the general annual audit of our books. We will give you a copy of our audited financial statements once a year upon request once the statements have been released by the auditor.
Because the relative benefits of various types of advertising and promotion are difficult to measure with precision, we reserve the unqualified right to determine, in our sole discretion, how Advertising Fund money may be spent; the only condition is that the money must be used in a manner that is reasonably related to the general promotion of the Trade Name and Marks. (Franchise Agreement § 5.5.2A)
The advertising program will primarily use point-of-purchase materials. In addition, we.may make use of event marketing, radio, and free standing inserts. (Franchise Agreement § 5.5.1A) In 200A5, A16% of the Fund expenditures were for production, A43% for media, 20% for administration, and A21% for other costs, including public relations and shipping of point-of-purchase material.
We currently use an outside advertising agency to supplement the efforts of our marketing personnel.
On Wednesday of each week (or any other weekday specified by us) during the term of the Franchise Agreement, you will pay the Advertising Fund a weekly contribution of one percent of the Gross Sales received by you in the immediately preceding week, ending at close of business on Sunday.
There are no franchisees who contribute to the Advertising Fund at a different rate or who do not have to contribute.
You agree to submit to us copies of all advertising materials that you propose to use at least two weeks before the first time they are broadcast or published. We will review
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the materials within a reasonable time and will promptly notify you or the regional advertising cooperative, as appropriate, whether we approve or reject them. We may not withhold our approval unreasonably. For purposes of this paragraph, advertising materials that differ from previously approved materials only in such variables as date or price will be considered to be previously approved. Even if we have approved specified materials, we may later withdraw our approval if we reasonably believe it necessary to make the advertising conform to changes in the System or to correct unacceptable features of the advertising, including but not limited to any misrepresentation in the advertising material. (Franchise Agreement § 7.1.3A)
We do not have an advertising council composed of franchisee representatives to advise us on advertising policies.
If all Advertising Fund Contributions are not spent in the year in which they are collected, they will be retained in the Fund for use in the following year. There is no requirement that we spend any minimum amount of the Advertising Fund money in your geographic region. We will not use any of the Advertising Fund money to pay for advertising that principally solicits sale of franchises.A (Franchise Agreement § 5.5.3)
Each WETZEL'S PRETZELS® franchise is granted for a specific location that is described in the Franchise Agreement. We grant to you and you accept from us a franchise to operate a WETZEL'S PRETZELS® Bakery (defined in Article A3 of the Franchise Agreement as "a retail outlet exclusively selling Proprietary Products and related items to the general public under the Trade Name, Marks, and System at an Approved Location"). You may not engage in or solicit sales except for over-the-counter retail sales at the Approved Location and, if you have signed a cart addendum, from a satellite cart within your Protected Area. You are not granted the right to engage in wholesale, computer, or mail-order marketing.
We agree not to authorize any other company- or franchisee-owned WETZEL'S PRETZELS® Bakery or cart to operate within a Protected Area consisting of the smaller of the area within a one-half mile radius of the Approved Location of the shopping center or mall where the Approved Location is operated, nor allow any other franchisee or company-owned Bakery using the Trade Name or System to relocate to a site within the Protected Area as long as you are in Good Standing, as defined in Article 3 of the Franchise Agreement. The "Protected Area" does not include sites in hotels, airports, sports arenas, train stations, casinos, theme parks, military installations, movie theaters, grocery stores, or college and university campuses located within its borders.
We reserve all rights in the Trade Name, Marks and System that are not expressly granted to you in the Franchise Agreement including the right to sell Proprietary Products within the Protected Area through any means of distribution other than
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over-the-counter retail sales at a WETZEL'S PRETZELS® Bakery. ("Proprietary Product" is defined by the Franchise Agreement as "any product that has been manufactured in accordance with our secret recipes or specifications or that has been packaged or labeled with the WETZEL'S PRETZELS® Marks.") We expressly retain the rights to engage in grocery or club store sales or licensing, wholesale, computer, and mail-order sales within the Protected Area.
A You may relocate the WETZEL'S PRETZELS® Bakery within the Protected Area
only with our prior written consent, which will be granted only if the following conditions are fulfilled:
a. You and your Affiliates are in Good Standing under the Franchise Agreement, any other Agreement between us or our Affiliate and you, and the Manual;
b. You and any Affiliates that have signed the original Franchise Agreement have signed a copy of the Franchise Agreement that is currently effective at the time of relocation;
c. You agree to plan, construct, equip, fixturize, and decorate your new WETZEL'S PRETZELS® Bakery so that the premises meet the standards of appearance and function applicable to the premises of new WETZEL'S PRETZELS® Bakeries at the time of relocation;
d. You and any Affiliates that are parties to the Franchise Agreement have signed a release of claims in a form satisfactory to us with respect to past dealings with us and our Affiliates;
e. You have paid us a relocation fee of $5,000 to defray the cost to us of site inspection and construction design review; and
f. We have given our prior written approval to the new site and the provisions of the lease for the new premises.
You may not solicit or accept orders outside your Protected Area, because your franchise is strictly limited to the right to engage in over-the-counter retail sales. You will have no right of first refusal to acquire an additional franchise outside your own Protected Area. However, we may, at our sole discretion, offer you an exclusive one-year option to enter into a franchise for a Bakery in a specific mall or shopping center, if and when, within the option period, a site becomes available. Options may not be available for all locations and to all franchisees and our criteria in offering them may vary at different locations and times.
Except for the company-owned Bakeries, neither we nor any Affiliate compete with WETZEL'S PRETZELS® franchisees through a competitive retail business or under another trade name or marks. Neither we nor our affiliates are restricted from establishing other franchises or company-owned outlets or other channels of distribution selling or
leasing similar products or services under a different mark either inside or outside your Protected Area. Neither we nor any Affiliate has the present intention of doing so.
You are not required to meet any quota or conditions to maintain your rights in your Protected Area.
There are no circumstances, other than those described above, under which we would be permitted to modify your respective territorial rights under the Franchise Agreement while the agreement remains in effect.
We claim proprietary rights in our Marks, including the words "WETZEL'S PRETZELS." AWe also claimA rights in the names for the various types of pretzels used on our menu boards. These claims are based upon federal registration of the Marks and upon first use in interstate commerce.
On October 1, 2002, the U.S. Patent and Trademark Office ("USPTO") granted our application for registration of our Mark, WETZEL'S PRETZELS®, on the principal register for use in connection with restaurant services, registration number 2627228. Earlier, on December 23, 1997, the USPTO granted our application for registration of the words WETZEL'S PRETZELS and design on the principal register for use in connection with restaurant services, registration number 2123891.
There is no other currently effective determination of the Patent Office, the trademark administrator of this State or any court, nor any pending interference, opposition or cancellation proceeding, nor any pending material litigation involving the Marks described above.
No agreements limit our rights to use or license the use of its Marks or Trade Name.A
You may use the Trade Name and Marks only in the operation of a WETZEL'S PRETZELS® Bakery in accordance with the WETZEL'S PRETZELS® System at an Approved Location. Your use of the Trade Name and Marks must conform to the guidelines for their use in the Manual. You may not use any other trade name or marks in connection with a WETZEL'S PRETZELS® Bakery. You may not use the Trade Name as part of your legally registered corporate name, limited partnership name, or limited liability company name. If you misuse the Marks or the System or engage in conduct which reflects materially and unfavorably upon the goodwill associated with them or if you use in a WETZEL'S PRETZELS® Bakery any names, marks, systems, logotypes or symbols that We have not authorized you to use, we have the right to terminate your franchise immediately upon written notice.
You agree to notify us immediately in writing if you become aware of any unauthorized use of our Trade Name, Marks, or System or of use of marks that are
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confusingly similar to the Marks or of claims of rights to use the Marks by a person or company that is not a member of the WETZEL'S PRETZELS® Network, you must promptly notify us. You will promptly notify us in writing of any claim, demand, or suit against you or against your principals based upon or arising in connection with your use of the Trade Name, Marks, or System. If any of these events occur, we have the right, in our sole discretion, to decide whether to oppose, settle, or ignore the claim and whether or not it is appropriate, in the specific circumstances under which the claim arose, to defend you, indemnify you, or both. In any action or proceeding arising from or in connection with a claim, demand, or suit involving the Marks or System, you agree that we may select legal counsel and has the right to control the proceedings.
You will indemnify and hold us harmless from all expenses and liabilities of any kind arising from or in any way connected to any activity of yours. If we are made a party to a legal proceeding in connection with your act or omission, we may hire counsel to protect our interests and bill you for all costs and expenses we incur. You must promptly reimburse us.
We have invested substantial time, energy, and money in the promotion and protection of our Trade Name and other Marks as they exist on the Start Date. We have no present intention of altering them. However, we recognize that rights in intangible property such as the Trade Name and Marks are often difficult to establish and defend. The prospect of settling a third-party claim or lawsuit or changes in the cultural and economic environment within which the System operates may make changes in the Trade Name and Marks desirable or necessary. We therefore reserve the right to change our Trade Name and Marks and the specifications for each when we believe that these changes will benefit the Franchise Network. You agree that you will promptly conform, at your own expense, to any such changes. You will not have any rights against us if we require you and the other members of the WETZEL'S PRETZELS® Network to modify or discontinue use of the Trade Name or other Mark because of a legal proceeding, settlement of a dispute, or any other reason.
We are not aware of any superior prior rights or infringing uses of our Trade Name or Marks that could materially affect your use of the principal Marks.
We have not registered any patents or copyrights. We claim common law copyrights for our advertising materials and Manual.
We consider much of the information contained in the Manual to be confidential and, accordingly, require Franchisee's Affiliates to sign confidentiality agreements in regard to its contents as well as in regard to specified trade secrets subject to explicit non-disclosure provisions in the Franchise Agreement We also maintain that our recipes
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and food preparation processes are valuable trade secrets and expect you to protect their secrecy.
ITEM 15. OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE
You must personally supervise your WETZEL'S PRETZELS® Bakery. There is no requirement that your Designated Manager have an equity interest in the Bakery. There are no limitations on whom you may hire as a Designated Manager. Your managers must sign a Nondisclosure and Noncompetition Agreement in the form of Attachment 3 to the Franchise Agreement.
You or the person you have employed as your Designated Manager must devote all his or her productive time and effort to the on-premises management and operation of the WETZEL'S PRETZELS® Bakery, in the minimum amount of 40 hours per week. The Designated Manager or another employee who has successfully completed our initial training program must be present at the Approved Location whenever the WETZEL'S PRETZELS® Bakery is open for business. If we, in our sole discretion, determine that a Designated Manager is not properly performing his duties, we will advise you and you must immediately take steps to correct the situation. You must keep us informed as to the identity of your Designated Manager. Upon the termination of employment of a Designated Manager, you must appoint a successor within 30 days. Any successor Designated Manager must successfully complete our training program before starting work in the Bakery.
ITEM 16. RESTRICTIONS ON WHAT YOU MAY SELL
You must offer and sell all the products and services and only the products and services that we have authorized you to provide. You must operate the WETZEL'S PRETZELS® Bakery in complete compliance with the standards and specifications set out in the Manual. We may make changes in these standards and specifications, when, in our sole discretion, change is needed for the continued success and development of the Franchise Network. These changes may necessitate the purchase of equipment, supplies, furnishings or other goods, completion of additional training by your employees, or other cost to you. You must promptly conform to the modified standards and specifications at your own expense.
There is no restriction on the customers to whom you may sell.
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ITEM 17. RENEWAL, TERMINATION, RESALE AND DISPUTE RESOLUTION
The table below briefly summarizes certain important provisions of the Franchise Agreement and related agreements. You should read the complete provisions in the documents attached to this offering circular.
Ten years or the length of the lease, whichever is shorter^ cart term is shorter of term of Bakery lease or temporary space lease
If you meet the Franchise Agreement conditions, you can add an additional 10-year term
4.5. (a)-ra)
Be in Good Standing, notify us 120 days in advance, sign new Franchise Agreement, remodel, renew lease, sign release if permitted by applicable law (see Addendum for this State) and pay renewal fee
Termination upon 60 days' notice to us if post-termination conditions are fulfilled in timely manner
We can terminate only if you default
10.2.2 (a)-(d)
You have five days to cure nonpayment defaults; you have 30 days to cure other curable defaults
10.2.1(e)-(p)
Noncurable defaults include failure to complete training, misuse of marks, competition with Franchise Network, unapproved Resale, misrepresentation in securing franchise, acting without required consent, abandonment, repeated defaults, termination of another agreement between you or your Related Party and us or our Related PartyA, insolvency and conviction of felony
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10.4(b)-(h)
Obligations include complete deidentification, payment of amounts due, honoring option to purchase or lease, assigning phone numbers, and more
j. Resale of contract by Wetzel's Pretzels
May assign to company that assumes obligations and meets conditions
k. "Resale" by you - definition
Includes Resale of contract or assets or ownership change
1. Our approval of your Resale
We have the right to approve ail Resales but will not unreasonably withhold approval
m. Conditions for our approval of Resale
New franchisee qualifies, Resale fee paid, purchase agreement approved, training undertaken, premises remodeled, release signed by you, new franchisee signs current franchise agreement
n. Our right of first
refusal to buy your business
We have the right to match any offer to buy your business
o. Our option to buy your business
10-4jn
We have option to buy your business upon Termination
Heirs must qualify or have 6 months to sell
q. Noncompetition covenants during term of franchise
8.6; Attachment 3
No involvement in any competing business
r. Noncompetition covenants after franchise is terminated or expires
No involvement in competing business for two years located in the United States or Canada
Modification only by agreement of parties; Manual may change if consistent with Agreement
Agreement is only what is written in franchise agreement; other promises are not enforceable
11.7, 11.8
Parties will try mediation first; arbitration if that does not work in Los Angeles County, California
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California law applies*
*Note: Please see "Specific State Disclosures" attached to this Offering Circular for important information concerning your rights under state law, including your rights in connection with choice of law, choice of forum, termination and renewal.
A**REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
2004 Store P&L Numbers
27,443,249
5,733,352
7,451,637
422,203.83
88,205.41
20.9% 114,641
27.2% 83,571 | 19.8%
Notes to Items in Table:
1. Chart includes A2 Bakeries that were open for the 12 months ended December 31, 200A4- There were 7A9 Bakeries operating during this period. We omitted A7 Bakeries that did not report cost of goods or labor. Of the A72 Bakeries reporting, A§5 were in California, A§ in Arizona, 4 in AColorado, 3 in Florida, 3 in Georgia. 3 in Maryland. 3 in New Jersey. 2 in Connecticut. 2 in Texas. 2 in Michigan, 2 in ANevada, and 1 each in ^Illinois, Kansas, Mississippi. Missouri. New York. Oregon and Tennessee. Three of the Bakeries included above were company-owned the entire year and A§9 were franchised. The franchises are substantially similar to those being offered in this offering circular. Of the franchised stores, A23% exceeded the average revenue shown.
2. The cost of goods numbers presented represent all food, paper, and supplies used by the store.
3. The labor numbers presented represent all salaries and wages paid plus payroll taxes and worker's compensation insurance.
4. The figures for franchised Bakeries were provided to us by franchised store owners. In Asome cases we were able to verify the sales figures through polling the stores' cash registers. In all cases these sales figures have been used as the basis for collection of royalties.
5. AOne of the Bakeries included in the above table Ai§ atj street locationA and Athree are in airports. We believe that mall locations are far more suitable for our bakeries than street locations and are unlikely to approve a street location in the future. Certain expenses associated with mall locations will be higher on average than similar expenses at street locations. However, we are convinced that higher sales volumes at mall locations will more than offset these increased expenses in most cases.
6. AYour Bakery's sales and expenses are likely to be affected by national, state, and local economic conditions, including rate of inflation, level of employment, and degree of consumer confidence.
7. Each of the Bakeries used in compiling the figures above had been in operation for at least 12 months. In most cases results are materially less favorable during a Bakery's first 12 months of operation.
8. The earnings claims figures reflect some, but not all, of the costs or expenses that must be deducted from the gross revenue or gross sales figures to obtain your net income or profit. You should conduct an independent investigation of the costs and expenses you will incur in operating your franchised Bakery. Franchisees or former franchisees, listed in the offering circular, may be one source of this information.
9. We will show you substantiation of the data used in preparing the table above in response to your reasonable request.
10. You should regard the information shown above only as an indication of historical performance and not as a prediction of future performance. Actual results are likely to vary from one Bakery to another. The results of your franchised Bakery may differ substantially from those shown above.
ITEM 20. LIST OF BAKERIES
The following table gives the status of Bakeries in each state where we have Bakeries as of the end of each of the last three years:
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FRANCHISED STORE STATUS SUMMARY FOR YEARS 2005 / 2004 / 2003A
TOTAL FROM COLUMNS TO LEFT
BAKERIES OPERATING AT YEAR END
A11/9/7
A3/11/5
A1/0/0
M/11/6
52/50/41
"0/1/1
A3/2/2
3/A3/2
1/1/Ai
1/M/0
Alndiana
■ o/o/o
0/0/A0
"0/1/0
1/1/A1
0/A0/1
A1/0/1
A2/2/3
2/A2/0
1/1/A1_
A3/3/4
A2/3/2
A0/3/1
A9/8/6
■ 0/0/0.
4/A4/0
A8/17/10
A0/0/4
M/3/0
113/109/87
1 Figures may include multiple resales of a single store and may include figures for stores also tallied in other columns.
COMPANY STORE STATUS SUMMARY FOR YEARS 2005 / 2004 / 2003A
Attached to this Offering Circular as Exhibit D-1 is a list of the names of all franchisees under franchise agreements with us of December 31, 200A5, with the addresses and phone numbers of each of their Bakeries.
The following table gives our estimate of openings, by state, for the year 200A6:
ESTIMATED OPENINGS IN 200A6
BUT BAKERY NOT YET
OPENINGS IN 200A6
OPENING IN 200*6".
* Indian a
Marviand
ESTIMATED NEW FRANCHISED BAKERY OPENINGS IN 200*6 ,
OPENING IN 200A6
Attached to this Offering Circular as Exhibit D-3 is the name and last known home address and telephone number of each franchisee whose WETZEL'S PRETZELS® franchise has, during the most recently completed fiscal year been Terminated, canceled, not renewed, or who has otherwise voluntarily or involuntarily ceased to do business under the franchise agreement or who has not communicated with us during the past ten weeks.
Attached to this Offering Circular as Exhibit B are our audited financial statements for the years ended December 31, A2005. 2004, and 2003.
The following agreements are offered for use in this state: Franchise Agreement, Authorization Agreement for Prearranged Payments, Nondisclosure and Noncompetition Agreement, Cart Addendum, Assignment of Telephone Numbers, Release of Claims and Option Agreement.
Attached, as the last page of this Offering Circular (Exhibit E-2), is a Receipt to be signed by you and returned to us. A duplicate copy of the Receipt is also attached for your records.
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Sections 13 and 14 of the Alberta Franchises Act provide that if we fail to give you this offering circular at least 14 days before you sign any agreement related to the franchise or pay any money to the franchisor, whichever is earlier, you have a right to cancel the franchise agreement by giving notice of cancellation to us. We must compensate you for any net losses that you have suffered in buying, setting up, and operating the franchised business within 30 days after receiving your notice of cancellation. Your right to cancel the franchise in this manner expires at the earlier of 60 days after you receive the offering circular or two years after the franchise is granted to you.
Section 9 of the Alberta Franchises Act provides that if you suffer a loss because of a misrepresentation contained in this offering circular, you have a right of action for damages against any or all of us and every person who signed the offering circular.
Under Section 18 of the Alberta Franchises Act, any waiver or release by a franchisee of a right given by the Act or the regulations pertaining to the Act or a requirement of the Act or regulations is void.
Neither the franchisor, nor any person or franchise broker identified in Item 2 of this offering circular is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities Exchange Act of 1934, 15 U.S.CA 78a et seq., suspending or expelling the person from membership in the association or exchange.
California Business and Professions Code §§ 20000 through 20043 provide rights to the franchisee concerning termination or non-renewal of a franchise. If the franchise agreement contains a provision that is inconsistent with the law, the law will control.
The franchise agreement provides for termination upon bankruptcy. This provision may not be enforceable under federal bankruptcy law (11 U.S.CA. Sec. 101 et seq.).
The franchise agreement contains a covenant not to compete that extends beyond the termination of the franchise. This provision may not be enforceable under California law.
Section 31125 of the California Corporations Code requires the franchisor to give the franchisee a special disclosure document in the form that the Corporations Commissioner requires before soliciting a proposed material modification of an existing franchise.
You must sign a release if you renew or transfer your franchise. Under California Corporations Code section 31512 (California Corporations Code sections 31000 through 31516) a waiver of your rights under the Franchise Investment Law is void. Under
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Business and Professions Code section 20010 (Business and Professions Code sections 20000 through 20043) a waiver of your rights under the California Franchise Relations Act is void.
THE CALIFORNIA FRANCHISE INVESTMENT LAW REQUIRES THAT COPIES OF ALL PROPOSED AGREEMENTS RELATING TO THE SALE OF THE FRANCHISE BE DELIVERED TOGETHER WITH THE OFFERING CIRCULAR.
OUR WEB ADDRESS IS HTTP://WWW.WETZELS.COM. OUR WEBSITE HAS NOT BEEN REVIEWED OR APPROVED BY THE CALIFORNIA DEPARTMENT OF CORPORATIONS. ANY COMPLAINTS CONCERNING THE CONTENT OF THE WEBSITE MAY BE DIRECTED TO THE CALIFORNIA DEPARTMENT OF CORPORATIONS AT http://WWW.CORP.CA.GOV.
Many states have statutes concerning the relationship between franchisor and franchisee. These statutes deal with such matters as renewal and termination of franchises. Provisions of this sort will prevail over inconsistent terms in a franchise agreement. Illinois has such a statute (815 ILCS 705/19 and 705/20).
The franchise agreement provides for termination upon bankruptcy. A provision in a franchise agreement that terminates the franchise upon bankruptcy of the franchisee may not be enforceable under Title 11, U.S. Code § 101.
The franchise agreement includes a choice of law clause designating another state's law as the governing law. Under Illinois law, a franchise agreement may not provide for a choice of law of any state other than Illinois. Accordingly, Item A17w is amended to state "none" under the heading for "Section in Franchise Agreement" and "none" under the heading for "Summary." The franchise agreement is amended to omit § 11.2.
The franchise agreement requires you to sign a release of claims as a condition of relocation, transfer, or renewal of the franchise. Under the law of Illinois, any provision that purports to bind a person acquiring a franchise to waive compliance with the franchise disclosure law of Illinois is void. Accordingly, insofar as the franchise agreement requires you to waive your rights under the Illinois franchise law, these requirements are deleted from the franchise agreement. This provision will not prevent the franchisor from requiring you to sign a release of claims as part of a negotiated settlement of a dispute.
Amendments to Item 17 of the UFOC:
The Franchise Agreement says that we may require you to sign a release of claims as a condition of renewal or Transfer of your franchise. Under Maryland law, this condition
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may not apply to any liability under the Maryland Franchise Registration and Disclosure Law. Our release of claims specifically excludes claims under applicable franchise laws.
Under § 11.16 of the Franchise Agreement, you are required to disclaim the occurrence and/or acknowledge the non-occurrence of acts that would constitute a violation of the Maryland franchise law. These agreements are amended to state that the representations are not intended to nor do they act as a release, estoppel or waiver of any liability incurred under the Maryland Franchise Registration and Disclosure Law.
Any claims arising under the Maryland Franchise Registration and Disclosure law must be brought within three years after the franchise is granted.
The Franchise Agreement requires binding arbitration. The arbitration will occur in another state than Minnesota, with costs being borne by the non-prevailing party. Under Minnesota Statutes § 80C.21 and Minnesota Rule Part 2860.4400J, this section may not in any way invalidate or reduce any of the franchise owner's rights that are listed in Chapter 80C of the Minnesota Statutes.
The Franchise Agreement requires application of the laws of a state other than Minnesota. Under Minnesota Statutes § 80C.21 and Minnesota Rule Part 2860.4400J, this section may not in any way invalidate or reduce any of the franchise owner's rights that are listed in Chapter 80C of the Minnesota Statutes.
The following language is added to Item 13 of the Minnesota offering circular: We will protect your right to use the WETZEL'S PRETZELS Marks and Trade Name or will indemnify you against any loss, costs, or expenses arising out of any claim, suit, or demand regarding your use of the Marks or Trade Name.
Item 3 is amended to read as follows:
Neither the franchisor, its predecessor, a person identified in item 2, nor an affiliate offering franchises under the franchisor's principal trademark:
A. Has an administrative, criminal or civil action pending against that person alleging: a felony; a violation of a franchise, antitrust or securities law; fraud, embezzlement, fraudulent conversion, misappropriation of property; unfair or deceptive practices or comparable civil or misdemeanor allegations or other actions, other than routine litigation incidental to the business, which are significant in the context of the number of franchisees and the size, nature or financial condition of the franchise system or its business operations.
B. Has been convicted of a felony or pleaded nolo contendere to a felony charge or, within the ten-year period immediately preceding the application for registration, has been convicted of or pleaded nolo contendere to a misdemeanor charge or
@PFDesktop\::ODMA/WORLDOX/W:/WDOX/CLIENTS/WTZ/007/00012088.WPD Specific State Disclosures February 24, 2006
has been the subject of a civil action alleging: violation of a franchise, antifraud or securities law; fraud, embezzlement, fraudulent conversion or misappropriation of property, or unfair or deceptive practices or comparable allegations.
C. Is subject to a currently effective injunctive or restrictive order or decree relating to the franchise, or under a federal, State or Canadian franchise, securities, antitrust, trade regulation or trade practice law, resulting from a concluded or pending action or proceeding brought by a public agency; or is subject to any currently effective order of any national securities association or national securities exchange, as defined in the Securities and Exchange Act of 1934, suspending or expelling such person from membership in such association or exchange; or is subject to a currently effective injunctive or restrictive order relating to any other business activity as a result of an action brought by a public agency or department, including, without limitation, actions affecting a license as a real estate broker or sales agent. If so, disclose the name of the person; the public agency, association, or exchange; the court, or other forum; a summary of the allegations or facts found by the agency, association, exchange or court; and the date, nature, terms and conditions of the order or decree.
Item 4 is amended to read as follows:
Neither the franchisor, its affiliate, its predecessor, officers, nor general partner during the 10-year period immediately before the date of the offering circular: (a) filed as debtor (or had filed against it) a petition to start an action under the U.S. Bankruptcy Code; (b) obtained a discharge of its debts under the bankruptcy code; or (c) was a principal officer of a company or a general partner in a partnership that either filed as a debtor (or had filed against it) a petition to start an action under the U.S. Bankruptcy Code or that obtained a discharge of its debts under the U.S. Bankruptcy Code during or within 1 year after the officer or general partner of the franchisor held this position in the company or partnership.
The introduction to Item 17 is amended to read as follows:
The Summary column of Item 17d is amended to read: "You may terminate upon any grounds permitted by law."
The Summary column of Item 17j is amended to read: "Ay\/e may assign only to financially responsible assignee that we reasonably believe capable of performing its obligations under the franchise agreement and which expressly assumes these obligations in writing."
The Summary column of Item 17s is amended to add the following: "Revisions to the Manual will not unreasonably affect your obligations, including your economic obligations, under the Franchise Agreement."
The Summary column of Item 17w is amended to add the following: The foregoing choice of law should not be considered a waiver of any right conferred upon you by the General Business Law of the State of New York, Article 33."
The State of Washington has a statute, RCW 19.100.180, that may supersede the franchise agreement in your relationship with the franchisor including the areas of termination and renewal of your franchise. There may also be court decisions which may supersede the franchise agreement in your relationship with the franchisor, including the areas of termination and renewal of the franchise.
In any arbitration involving a franchise purchased in Washington, the arbitration site will be either in the State of Washington or in a place mutually agreed upon at the time of the arbitration or as determined by the arbitrator.
In Washington, provisions of the Franchise Agreement which unreasonably limit the statute of limitations or remedies under the Washington Franchise Investment Act, such as the right to jury trial, may not be enforceable.
The Franchise Agreement requires application of the laws of a state other than Washington. If there is a conflict of laws, the provisions of the Washington Franchise Investment Protection Act, Chap. 19.100 RCW, will prevail.
The Franchise Agreement requires you to sign a release of claims as a condition of renewing or reselling the franchise. A release or waiver of rights signed by a franchise owner may not include rights under the Washington Franchise Investment Protection Act. This will not prevent a franchisor from requiring you to sign a release of claims as part of a negotiated settlement of a dispute after the agreement is in effect and when you are represented by independent counsel.
Under Washington law, resale fees may be collected only to the extent that they reflect the franchisor's reasonable estimated or actual costs in connection with the resale.
@PFDesktop\::ODMA/WORLDOX/W:WDOX/CLIENTS/WTZ/007/00012088.WPD Specific State Disclosures February 24, 2006