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Canadian franchisors, appoint a master franchisee who will sell franchises for you with this Master Franchise Agreement for Canada. - The master franchisee will operate on a non-exclusive basis within a specified territory. - The master franchisee has the right and license to use the proprietary business marks of Franchisor, to establish and operate franchise centres within the territory and to license other franchisees to operate those franchise centres. - A franchise fee will be paid for each franchise sold, plus a continuing royalty. - The franchisor will provide an initial training program. - The master franchisee is responsible for ensuring each franchisee operates in accordance with the system developed by Franchisor, including purchase and sale of products, operating standards of quality, etc. - Provisions concerning design and construction of franchise centres. - Confidentiality provisions. - Events of default and procedure for termination. This Master Franchise Agreement for Canada is provided as a downloadable MS Word template, and is fully editable to fit your specific circumstances.
MASTER FRANCHISE AGREEMENT FOR CANADA [Franchisor] -2- TABLE OF CONTENTS GRANT ....................................................................................................................................................................3 TERM, RENEWAL AND DEVELOPMENT OF THE TERRITORY.................................................................4 FEES .......................................................................................................................................................................5 DUTIES OF [Franchisor] ........................................................................................................................................6 DUTIES OF MASTER FRANCHISEE ..................................................................................................................8 CONSTRUCTION OF LEASEHOLD IMPROVEMENTS ............................................................................... 11 PROPRIETARY MARKS ...................................................................................................................................... 12 CONFIDENTIAL MANUALS AND INFORMATION ................................................................................... 14 ADVERTISING ..................................................................................................................................................... 15 INSURANCE ......................................................................................................................................................... 17 ACCOUNTING AND RECORDS ...................................................................................................................... 18 TRANSFER OF INTEREST .................................................................................................................................. 19 DEFAULT AND TERMINATION ...................................................................................................................... 20 OBLIGATIONS UPON TERMINATION OR EXPIRATION .......................................................................... 22 COVENANTS........................................................................................................................................................ 24 MASTER FRANCHISEE AS A CORPORATION ............................................................................................. 25 TAXES, PERMITS AND INDEBTEDNESS ....................................................................................................... 25 INDEPENDENT CONTRACTOR; INDEMNIFICATION; THIRD PARTY RIGHTS ................................. 26 MISCELLANEOUS............................................................................................................................................... 26 APPLICABLE LAW; DISPUTE RESOLUTION ................................................................................................ 27 EFFECTIVE DATE; GOVERNMENTAL APPROVALS .................................................................................. 28 ATTACHMENTS & EXHIBITS -3- MASTER FRANCHISE AGREEMENT FOR CANADA THIS AGREEMENT is made and entered into on [franchise agreement date] by and between [Franchisor] (“[Franchisor]”), a corporation organized under the laws of the Province of [province], and [MASTER FRANCHISEE], a company incorporated under the laws of the Province of [province] (“Master Franchisee”). WHEREAS: A. [Franchisor], as the result of the expenditure of time, skill, effort, and money, has developed and owns a unique and distinctive system relating to the establishment and operation of [description of franchise business], [using the unique operating system and tools developed and maintained by [Franchisor] to [description] and using the proprietary software program designed by [Franchisor] and made available to its franchisees to assist in the management of the franchise business (“System”); B. The distinguishing characteristics of the System include without limitation a distinctive design and layout, and training management, and promotional assistance, in connection with the establishment and ongoing operation of [franchise business] Centres, all of which may be changed, improved, and further developed by [Franchisor] from time to time; C. [Franchisor] identifies the System, in the Province(s) of [provinces] (“Territory”), by means of certain trade names, trademarks, logos, and indicia of origin, including the mark [TRADE MARK] and such other trade names and trademarks as are now designated or may hereafter by designated by [Franchisor] in writing, for use in connection with the System (“Proprietary Marks”); D. Master Franchisee wishes to obtain the right and license to use the Proprietary Marks and the exclusive right to grant franchises to other persons (“Franchisees”) to establish and operate [franchise business] Centres using the Proprietary Marks and System (“[Franchisor] Centres) in the Territory; and wishes to receive the training and other assistance provided by [Franchisor] in connection therewith; and E. Master Franchisee understands and acknowledges the importance of [Franchisor]‘s high standards of quality, appearance, and service, and the necessity of operating the [Franchisor] Centres in conformity with [Franchisor]‘s standards and specifications. NOW, THEREFORE, the parties agree as follows: 1. GRANT 1.1 [Franchisor] grants to Master Franchisee the right, in the Territory, and Master Franchisee accepts the obligations, pursuant to the terms and conditions of this Agreement, and in accordance with the development schedule described in Section 2.3 hereof: (a) The right and license to use the Proprietary Marks in connection with the business to be conducted by Master Franchisee pursuant to the provisions of this Agreement: and (b) To license Franchisees (“FRANCHISEE(S)”) to establish and operate Franchised Centres pursuant to a separate Franchise Agreement for each such Franchised Centre unit as -4- described in Section 2 hereof. Master Franchisee owned centres, and Franchised Centres shall be referred to collectively in this agreement ([Franchisor] Centre(s)”); and 1.2 Except as otherwise described in Section 2.8 hereof, neither [Franchisor] nor any affiliate of [Franchisor] shall establish or operate, or franchise any entity to establish or Operate, a business using the Proprietary Marks and System at any location within the Territory. 1.3 Master Franchisee expressly acknowledges and agrees that the rights granted hereunder are non- exclusive. [Franchisor] shall retain the right among others, for itself or through any affiliate, and in any manner and on any terms and conditions [Franchisor] deems advisable, and without granting Master Franchisee any rights therein: (a) To own acquire, establish and/or operate, and license others to establish and operate, businesses using the Proprietary Marks, or other Proprietary Marks, and System outside the Territory (which business may solicit customers inside the Territory); (b) To own, acquire, establish and/or operate, and license others to establish and operate, businesses under other Proprietary Marks, or other systems, provided such businesses are not similar to or related to the business carried out at the [Franchisor] Centres, at any location within or outside the Territory; and (c) To sell or distribute, at retail or wholesale directly or indirectly, or license others to sell or distribute, any products which bear any Proprietary Marks, including the Proprietary Marks, outside the Territory. (i) In the event that [Franchisor] wishes to sell or distribute products which bear any of the Proprietary Marks within the Territory through channels of distribution that are different from [Franchisor] Centres, [Franchisor] shall so advise Master Franchisee, and [Franchisor] and Master Franchisee agree that they will in good faith negotiate the manner in which such products may be sold or distributed in [province(s)] and an equitable apportionment of the benefits resulting from the sale and distribution of such products. 2. TERM, RENEWAL AND DEVELOPMENT OF THE TERRITORY 2.1 Except as otherwise provided herein, the term of this Agreement shall commence on the Effective Date described in Section 21 hereof and shall expire ten (10) years from the date of its execution. 2.2 Master Franchisee may, at its option renew this Master Franchise Agreement for additional terms of ten (10) years each, subject to the following preconditions: (a) Master Franchisee shall give [Franchisor] written notice of Master Franchisee’s election to renew no fewer than twelve (12) months prior to the end of the then-current term; (b) Master Franchisee shall not be in default of any provision of this Agreement or any other Agreement between Master Franchisee and [Franchisor] or [Franchisor]‘s affiliates and Master Franchisee shall have complied with all such Agreements throughout the term of this Agreement. 2.3 Master Franchisee undertakes that there shall be open and in operation no fewer than the minimum cumulative number of [Franchisor] Centres described in the “Minimum Cumulative Number of [Franchisor] Centres Open and in Operation” in the Development Schedule attached as Exhibit A hereto; provided however that Master Franchisee shall have at least one (1) Master Franchisee-owned -5- Centre in operation for at least three (3) months prior to entering into a Franchise Agreement with any Franchisee, unless otherwise approved by [Franchisor]. The first [Franchisor] Centre opened for business in the Territory in accordance with the foregoing will hereinafter be referred to as the “Pilot Centre.” 2.4 Each [Franchisor] Centre, including any [Franchisor] Centre established and operated by the Master Franchisee in accordance with the provisions of Section 1.2 hereof, shall be established and operated pursuant to a unit franchise agreement (“Franchise Agreement”) prepared by [Franchisor]. 2.5 [Franchisor] shall provide Master Franchisee with an executed copy of each Franchise Agreement within fourteen (14) days of execution. 2.6 Master Franchisee shall provide [Franchisor] with the date of opening of each [Franchisor] Centre at least thirty (30) days prior to opening. 2.7 Master Franchisee’s failure to adhere to the Development Schedule shall result in a loss of the exclusivity provided in Section 1.3 hereof. In such event [Franchisor] shall thereafter have the right itself to establish and operate, or to grant others the right to establish and operate, [Franchisor] Centres under the System and the Proprietary Marks in the Territory, provided however that this Agreement shall otherwise continue in effect and Master Franchisee’s other rights and obligations hereunder shall remain in full force and effect. 3. FEES 3.1 Master Franchisee shall pay to [Franchisor] an initial Master Franchisee fee of [franchise fee] Dollars ($ ) payable as follows: Dollars ($ ) upon the execution of each Franchise Agreements with [Franchisor] Centre franchisees, until the full [franchise fee] Dollars ($ ) is paid. 3.2 In addition to the fees described in Section 3.1, Master Franchisee shall pay [Franchisor]: percent ( %) of each and every initial franchise fee paid by each Franchisee to Master Franchisee shall be paid to [Franchisor] upon the execution of each Franchise Agreement for each [Franchisor] Centre except for the initial Pilot Centre for which no portion of the initial franchise fee shall be payable to [Franchisor]. 3.3 Master Franchisee shall pay to [Franchisor] monthly, during the term hereof, an ongoing royalty fee in the amount of percent ( %) of the Gross Sales of all [Franchisor] Centres subject to Section 13.3 hereof. [Franchisor] shall receive and account for all royalties from all Franchisees and retain its percent ( %) and forward the balance, representing percent ( %) of Gross sales, to the Master Franchisee’s bank account via automatic electronic transfer. 3.4 Master Franchisee shall require all Franchisees to pay a royalty of percent ( %) of Gross Sales at any Franchised Centre and the Pilot Centre, directly to [Franchisor]. 3.5 “Gross Sales” shall mean revenue from the sale of all products and services and all other income or consideration of every kind and nature, received by the [Franchisor] Centres, as appropriate, whether for cash or credit and regardless of collection in the case of credit, less: (i) any sales taxes or other taxes collected by Franchisees from its customers and thereafter paid directly to the appropriate taxing authority. -6- 3.6 Master Franchisee shall, during the term hereof cause Franchisees and the Pilot Centre to pay percent ( %) into the national advertising fund. Such fund will be managed on behalf of all Franchisees by [Franchisor]. 3.7 All payments by Master Franchisee to [Franchisor] shall be made without any deduction for any taxes, except that Master Franchisee shall in a timely fashion deduct and pay to the appropriate taxing authorities, on behalf of [Franchisor], any amount which Master Franchisee is required to withhold under any laws in the Territory on payments made by Master Franchisee to [Franchisor] Master Franchisee shall transmit, in a timely fashion to [Franchisor] official receipts for payment of all taxes withheld. If Master Franchisee fails to withhold or pay such taxes, it shall indemnify [Franchisor] for the full amount of such taxes and for any loss or liability occasioned by Master Franchisee’s failure to withhold as required by law, including, but not limited to, any penalties, interest, and expenses incurred by [Franchisor]. All other taxes imposed on payments by Master Franchisee to [Franchisor], including, but not limited to, value-added taxes, consumption taxes, and sales taxes, which may be imposed now or in the future under the laws of the Territory or any taxing authority therein, shall be Master Franchisee’s sole responsibility, and Master Franchisee shall transmit such taxes to the appropriate fiscal authorities. Such taxes shall not affect Master Franchisee’s obligation to make payments to [Franchisor] as required under this Agreement. 3.8 In the event that any governmental authority having jurisdiction in the Territory imposes restrictions on the transfer of funds or currency to places outside of the Territory, [Franchisor], in its sole discretion, shall have the option to require that Master Franchisee deposit all payments required under this Master Franchise Agreement to a designated account in the Territory, and that payment of such accumulated amounts be made to [Franchisor]. 4. DUTIES OF [Franchisor] 4.1 [Franchisor] shall offer an initial training program, in [city], [province], to such individuals described in Section 5.2 hereof. Such training shall consist of a minimum of two (2) weeks at [Franchisor]‘s reasonable discretion in the areas of franchise sales and marketing, site selection, store layout and design, store development, coordination of products and services, franchisee training and support, and on-going marketing, merchandising and product development. (a) [Franchisor] shall at its own cost and expense, provide on-site training of not more than ten (10) days within the Territory at the Pilot Centre. Such training will consist of equipment operations, marketing, store policies and daily operation. (b) [Franchisor], when requested by Master Franchisee and upon reasonable notice to [Franchisor], provide an initial training program to each of the first Franchisees or a designated employee of each such Franchisees. Such training (i) shall take place in [city], [province], unless otherwise approved by [Franchisor]; (i) shall be for such duration as and similar in content to the training provided to franchisees in other areas of Canada: (iii) shall be appropriate for operations within the Territory. (c) In the event of such training by [Franchisor], Master Franchisee shall pay [Franchisor] a fee which has been pre-approved by [Franchisor], for providing training instructions, and materials, All other expenses incurred during such initial training will be the responsibility of Master Franchisee or Franchisees. 4.2 [Franchisor] shall loan to Master Franchisee for the duration of this Agreement one copy of [Franchisor]’s Operating Manual, and such other manuals as [Franchisor] may develop and issue, all of which are collectively referred to as the “Manual”, which shall document the system. -7- 4.3 [Franchisor] shall make available, at no charge to Master Franchisee, standard plans (in the form of “blue-line drawings”), costing and specifications provided to all franchisees for the construction of the interior design and layout of [Franchisor] Centres. 4.4 If requested by Master Franchisee and at no cost to Master Franchisee, [Franchisor] shall offer such assistance to Master Franchisee, as [Franchisor] deems reasonable and necessary, in selecting the initial site for the Pilot Centre. In the event that a [Franchisor] employee is required by Master Franchisee to provide an on-site evaluation for subsequent sites, Master Franchisee shall pay [Franchisor] a fee of [per diem] Dollars ($ ) per day for such employees of [Franchisor] providing such site selection assistance plus reasonable expenses, including, without limitation, the cost of transportation, meals, and lodging. Master Franchisee acknowledges and agrees that [Franchisor]‘s approval of a site is not, and shall not be construed as, a guarantee or assurance that such Centre will be profitable or successful. 4.5 [Franchisor] shall assist in developing, at no cost to Master Franchisee, a grand opening promotional kit consisting of a variety of items, such as a grand opening banner and camera-ready items and slicks for Master Franchisee’s use in preparing grand opening invitations, printed materials, and promotional flyers. 4.6 [Franchisor] shall assist in the development of shipping labels and forms and other miscellaneous supplies required in the daily operation of a [Franchisor] Centre. 4.7 [Franchisor] shall provide, at no charge to Master Franchisee, such initial and continuing advise and assistance to Master Franchisee in the operation and promotion of the business licensed hereunder as a reasonable and appropriate. 4.8 [Franchisor] shall conduct, when and as frequently as it deems advisable, inspections of the business premises of [Franchisor] Centres in the Territory and evaluations of Master Franchisee’s operations, in order to assist Master Franchisee and to maintain the System’s standards of quality appearance, and service. 4.9 [Franchisor] shall provide Master Franchisee with the name of the vendor of the computer system and proprietary software currently used within the [Franchisor] System. 4.10 [Franchisor] shall make available to Master Franchisee, as and when developed, all new or improved products, services, methods and procedures developed by [Franchisor] for use by its franchisees. Moreover, Master Franchisee acknowledges that the System must continue to evolve in order to reflect the changing market, to meet new changing consumer demands and in order to benefit from new knowledge and experience acquired by [Franchisor] with regard to improved techniques, products and operations of the System, Accordingly, Master Franchisee agrees that [Franchisor] may from time to time hereafter, upon notice, acting reasonably and taking into account commercial usages and practices in the Territory and, in particular, the impact of such changes on Franchisees, modify the System including, without limitation, the adoption and use of new and modified products, as well as new techniques and methodologies. Accordingly, and provided that such modifications will not result in Master Franchisee being in conflict with or be otherwise in breach of any rule or law or statutory provisions and regulations in force from time to time in the Territory, Master Franchisee agrees to accept, all such modifications to the System and to implement same within the Territory within a reasonable time frame. [Franchisor] shall have the right to modify the Manual from time to time in order to reflect such modifications to the System. 4.11 Master Franchisee shall from time to time submit for review by [Franchisor] any modifications which it proposes to make to the System to the extent that such modifications are necessary to comply with applicable laws, ordinances, rules, regulations, administrative orders, decrees and policies of any -8- government authority within the Territory, [Franchisor] agrees to incorporate all such modifications and to make all changes to the Manual in order to reflect each such modification to the system. 4.12 In addition, Master Franchisee may, from time to time submit for review and approval by [Franchisor] any modifications which it proposes to make to the System to the extent such modifications may be necessary to comply with current commercial usage, custom, practice and market characteristics within the Territory, [Franchisor] agrees to consider each such proposed modification within a reasonable time after there is a submission to [Franchisor]. However, Master Franchisee acknowledges the importance of maintaining, to the extent possible, the uniformity of the System. Accordingly, [Franchisor] shall have full discretion in approving or disapproving such proposed modification, provided [Franchisor] exercises such discretion in good faith as set forth above and no such proposed medications shall be effective without the prior written consent of [Franchisor]. [Franchisor] agrees to make all changes to the Manual in order to reflect modifications to the System that it has so approved. Master Franchisee further acknowledges and agrees that the System and Manual are and shall at all times remain the sole and exclusive property of [Franchisor]. 4.13 Master Franchisee acknowledges and agrees that the System and the Manual as well as any and all modifications made thereto by Master Franchisee are and shall at all times remain the sole and exclusive property of [Franchisor]. 4.14 [Franchisor] shall make available to Master Franchisee, as and when developed, a copy of its advertising and promotional materials and art work on an “as is” basis. 5. DUTIES OF MASTER FRANCHISEE 5.1 Master Franchisee understands and acknowledges that every detail of the System and the [Franchisor] Centres is essential to Master Franchisee, [Franchisor], Franchisees and other System Master Franchisees and Franchisees in order to: (i) develop and maintain quality operating standards (ii) increase the demand for the products and services sold by all Master Franchisees and franchisees operating under the System; and (iii) protect [Franchisor]‘s reputation and goodwill. Master Franchisee shall maintain [Franchisor]’s high standards with respect to facilities, services, products, and operations. 5.2 Persons designated by Master Franchisee shall attend and complete to [Franchisor]’s satisfaction, the initial training program offered by [Franchisor] in [city], [province]. Each such person shall be fluent in the English language. [Franchisor] shall provide training, instructors, and other materials without charge, and Master Franchisee shall be responsible for any and all other expenses incurred during the initial training program. 5.3 Master Franchisee shall employ a trainer fluent in the English language who shall complete, to [Franchisor]’s satisfaction, [Franchisor]’s training program. Such trainer shall provide training to Master Franchisee and Franchisee’s employees at such Pilot Centre or other reasonable location as Master Franchisee shall designate. When one (1) [Franchisor] Centre has been established in the Territory, Master Franchisee shall, at its sole cost and expense, provide equipment and commence operation of a training program, using such trainer or replacement trainer which will obtain the same results in training to [Franchisor]’s training program in the [city], [province], for the purpose of providing training as required under each franchise Agreement. From time to time [Franchisor] may conduct an audit of the Master Franchisee’s training program. If [Franchisor], in its sole and substantive judgment, determines there are deficiencies in Master Franchisee’s training program, Master Franchisee shall take such action as is required by [Franchisor] to correct such deficiencies, including replacing the Master Franchisee’s trainer. Master Franchisee shall upon [Franchisor]’s request, timely furnish to [Franchisor] its training records demonstrating compliance with the training requirements in this Section. -9- 5.4 Master Franchisee shall adapt and translate if necessary for use in the Territory materials [Franchisor] provides to Master Franchisee, including without limitation materials provided pursuant to Section 4.5 and 4.6 hereof. 5.5 Master Franchisee shall cause each Franchisee to use and occupy the premises of each [Franchisor] Centre solely for the operation of the business franchised hereunder; to refrain from using or permitting the use of any such premises for any other purpose or activity, and shall require that each [Franchisor] Centre be open and in normal operation for at least such minimum hours and days as [Franchisor] may specify in the Manual or otherwise in writing, and as may be required by the lease for the premises of each [Franchisor] Centre. 5.6 To insure that the highest degree of quality and service is maintained, Master Franchisee shall cause each Franchisee to operate their [Franchisor] Centres in strict conformity with such methods, standards and specifications as may from time to time be prescribed in the Manual or otherwise in writing. Master Franchisee shall cause its franchisees to refrain from: (a) deviating from such standards, specifications, and procedures without [Franchisor]’s prior written consent; and (b) otherwise operating in any manner which reflects adversely on the Proprietary Marks or the System. (a) Master Franchisee shall cause each Franchisee to purchase and install, at each Franchisee’s expense, and to maintain in sufficient supply and use at all times, only such fixtures, furnishings, equipment signs and supplies which conform to standards and specifications as set forth in the Manual or otherwise in writing; and to refrain from using non-conforming items. (b) Master Franchisee shall cause each Franchisee to sell or offer for sale only such products and services as have been expressly approved for sale in the Manual or otherwise in writing; shall require Franchisees to discontinue selling, any products or services which are not provided for in the Manual and shall require [Franchisor] Centres to refrain, from offering any unapproved products or services (c) Master Franchisee acknowledges and agrees that [Franchisor] may, from time to time revise the Manual to incorporate System changes as described in Sections 4.10., 4.11 and 4.12 of this Agreement. Master Franchisee shall require all Franchisees to implement such changes in Franchised Centres and complete their implementation within such time as [Franchisor] may reasonably specify. 5.7 Master Franchisee shall cause each Franchisee to purchase all products, equipment, supplies and materials used or sold from suppliers (including manufactures, wholesales and distributors) who have the ability to meet [Franchisor]‘s reasonable standards and specifications for such items; who possess adequate quality controls and capacity to supply Master Franchisee’s needs promptly and reliably; whose approval would enable the System, in [Franchisor]‘s reasonable opinion, to take advantage of marketplace efficiencies; and who have been approved by [Franchisor] in the Manual or otherwise in writing or otherwise not thereafter disapproved. 5.8 Master Franchisee shall protect the integrity of the System and Proprietary Marks in the Territory, including without limitation, by fulfilling all of its obligations imposed on it in its capacity as Franchisor under each Franchise Agreement, by supervising the manner in which the Trade Marks are used and the System is implemented and otherwise take all such steps, including, where reasonable and appropriate, the commencement and diligent prosecution of legal proceedings at its sole cost and expense, as may be necessary to cause each Franchised Centre in the Territory to observe and perform in a timely fashion all of its obligations under each relevant Franchise Agreement. - 10 - 5.9 Master Franchisee shall maintain a sufficient number of qualified personnel including persons qualified and experienced to train and supervise Franchisees in the operation of a [Franchisor] Centre, as well as office facilities, accounting services and the like, within the Territory all of which shall be devoted to the performance of Master Franchisee’s obligations under this Agreement and to perform all of the services required to be performed by Master Franchisee pursuant to each Franchise Agreement. 5.10 Master Franchisee shall cause each [Franchisor] Centre in the Territory to be established and operated pursuant to a Franchise Agreement previously approved by [Franchisor], including all [Franchisor] Centres operated by an Affiliate or Master Franchisee. In the event that Master Franchisee wishes to grant to a Franchisee the right to operate more than one [Franchisor] Centre, Master Franchisee shall nevertheless cause each such Franchisee to enter into a Franchise Agreement for each [Franchisor] Centre. 5.11 In dealing with Franchisees and otherwise conducting its business, Master Franchisee shall comply with all applicable laws and regulations in the Territory, including those applicable to the solicitation of prospective franchisees and the offering and grant of franchisees by Master Franchisee. 5.12 [Franchisor] shall have the right at all reasonable times to inspect the premises from which Master Franchisee conducts its business. Furthermore, [Franchisor] shall have the right accompanied at all times by Master Franchisee, to inspect [Franchisor] Centres and the equipment and fixtures therein and the products and services being sold and generally to investigate the manner in which Franchisees are conducting their business; in the event of any such inspections, Master Franchisee and its employees shall cooperate fully and use its best efforts to cause Franchisees and their employees to cooperate fully with [Franchisor]. 5.13 Master Franchisee shall furnish [Franchisor] with a copy of any executed lease for each [Franchisor] Centre within ten (10) days after execution thereof. 5.14 Master Franchisee shall furnish to [Franchisor] within three (3) days after receipt thereof, a copy of any notice alleging Master Franchisee’s or any Franchisee’s failure to comply with any law, ordinance, or regulation. 5.15 Master Franchisee and Franchisees shall have the right to advertise and sell all products and services at any prices Master Franchisee or the Franchisees may determine , in the sole and absolute discretion of each such party, and shall in no way be bound by any price which may be recommended or suggested by [Franchisor]. 5.16 In dealing with prospective Franchisees, Master Franchisee shall: (a) Carefully screen and evaluate prospective Franchisees pursuant to the standards prescribed by [Franchisor]; and (b) For each Franchisee, Master Franchisee shall, at its sole expense, fulfill all its duties, and enforce all the terms and conditions, under each Franchise Agreement, including, without limitation, to: (i) Provide site selection counseling and assistance, on site inspections, site evaluations, and site recommendations, without any guarantee that any Centre will be profitable or successful; (ii) Provide initial training required, and optional training programs, seminars and workshops; (iii) Assist in review of contracts and leases, and furnish advise to Franchisee concerning lease negotiations, if applicable; - 11 - (iv) Provide to Franchisees standard plans (in the form of “blue-line drawings”) and specifications for the construction of the interior design and layout of the Franchised Centre (adapted by Master Franchisee for use in the Territory as required in Section 6.1 hereof), advise and consult with the Franchisee regarding the construction and/or renovation of the Franchised Centre, conduct on-site inspections during construction and/or renovation, and ensure upon completion of construction and/or renovation that construction and/or renovation has been completed in accordance with the plans and specifications; (v) Upon completion of construction and/or renovation, inspect the Franchised Centre to confirm that it has been equipped in accordance with approved plans and specifications; (vi) Provide a Manual and all updates thereto, translated into the required language or languages of the Territory; (vii) Furnish the grand opening promotional program and the initial set of business forms , shipping and product labels, and other miscellaneous supplies adapted for use in the Territory; (viii) Provide such opening assistance, and other assistance as designated by [Franchisor]; (ix) Visit each Franchised Centre in the Territory once each quarter during the term of the relevant Franchise Agreement and any renewals thereof, in order to provide continuing assistance as reasonably determined by Master Franchisee, inspect the premises of such [Franchisor] Centre to determine whether Franchisee’s continued operation is in conformity with [Franchisor]‘s procedures, standards and specifications, and verify compliance by Franchisee and Franchisee’s employees with all applicable laws, rules, regulations, and procedures; (x) Monitor and submit to [Franchisor], at [Franchisor]’s request, written reports on such forms and at such times as [Franchisor] may request and, upon [Franchisor]’s request, promptly take all steps necessary to remedy any and all matters reasonably requested by [Franchisor] and as would a reasonable and responsible Franchisor, including without limitation: A. Any apparent deficiencies and problems concerning the uniformity and quality of service provided by the Franchisee; B. Any apparent opportunities for the Franchisee to improve its performance; C. Any apparent deviations from [Franchisor]’s operating procedures, standards, and specifications provided for in the Manual or from proper usage of the Proprietary Marks; and D. Any apparent violations of applicable laws, rules or regulations. 6. CONSTRUCTION OF LEASEHOLD IMPROVEMENTS 6.1 Master Franchisee shall, at its expense, modify the blue-line drawings described in Section 4.3 hereof for use in the Territory including adaptation to applicable national and local laws regulations, and ordinances. - 12 - 6.2 Master Franchisee shall employ a qualified architect or engineer to prepare final plans and specifications for constructing the premises for [Franchisor] Centres based upon the plans and specifications furnished by [Franchisor] and adapted by Master Franchisee. 6.3 Master Franchisee shall submit to [Franchisor] final plans for the Pilot Centre and not proceed with any construction until [Franchisor]’s written approval has been received. 6.4 Master Franchisee shall prepare or shall cause its Franchisees to prepare final plans and specifications based on the standard plans and specifications for constructing the premises for [Franchisor] Centres approved by [Franchisor] and will not permit any Franchisee to deviate, from any final plans and specifications without Master Franchisee’s prior written approval. 6.5 Master Franchisee shall not open the Pilot Centre for business without the written authorization of [Franchisor], which authorization may be conditional upon Master Franchisee’s strict compliance with the specifications of the approved final plans. 7. PROPRIETARY MARKS 7.1 [Franchisor] represents with respect to the Proprietary Marks that: (a) Application has been made for registration of the Proprietary Marks identified in Exhibit B hereto. Master Franchisee acknowledges and agrees that [Franchisor] may be unable to obtain registration of some or all of the Proprietary Marks for which application has been made and further acknowledges and agrees that, if [Franchisor] is unable to obtain any such registrations, [Franchisor] shall incur no liability therefor to Master Franchisee, except as provided for in Sections 7.2 and 7.3 herein; (b) [Franchisor] shall take all steps reasonably necessary to preserve and protect the validity of the Proprietary Marks; and (c) [Franchisor] shall permit Master Franchisee to use the Proprietary Marks only in accordance with the System and the standard and specifications attendant thereto which underlie the goodwill associated with and symbolized by the Proprietary Marks. 7.2 With respect to Master Franchisee’s use of the Proprietary Marks, Master Franchisee agrees that: (a) Master Franchisee shall use only the Proprietary Marks designated by [Franchisor], and shall use them only in the manner authorized and permitted by [Franchisor]; (b) Master Franchisee shall not apply to register any of the Proprietary Marks or any trademarks or service marks confusingly similar to the Proprietary Marks in any country in the world; (c) Master Franchisee shall use the Proprietary Marks for the purpose of carrying on its business and in conjunction with the operation of the Centres and in conjunction with advertising and marketing for [Franchisor] Centres; (d) Unless otherwise authorized or required by [Franchisor], Master Franchisee shall operate the business licensed hereunder and cause Franchisees to operate and advertise the [Franchisor] Centres only under the name “[Franchisor],” without prefix or suffix; (e) Master Franchisee shall identify itself as an independent entity at the premises at which it carries on hereunder in conjunction with any use of the Proprietary Marks and shall - 13 - place a written notice to such effect, in a form approved by [Franchisor], in a conspicuous location on such premises; (f) Master Franchisee’s right to use the Proprietary Marks is limited to such uses as are authorized under this Agreement, and any unauthorized use thereof shall constitute and infringement; (g) Master Franchisee shall not use the Proprietary Marks to incur any obligation or indebtedness on behalf of [Franchisor]; (h) Master Franchisee shall promptly execute any documents deemed necessary by [Franchisor] or its affiliates to obtain protection for the Proprietary Marks or to maintain their continued validity and enforceability, including, without limitation, executing such registered user agreement(s) as [Franchisor] shall request; (i) Master Franchisee shall promptly notify [Franchisor] of any suspected unauthorized use of, or any challenge to the validity or use of, the Proprietary Marks. Master Franchisee acknowledges that [Franchisor] shall have the sole right to direct and control any administrative proceeding or litigation involving the Proprietary Marks, including any settlement thereof. [Franchisor] agrees to consult with Master Franchisee with respect to responding to each infringement or violation. [Franchisor] shall have the right, but not the obligation, to take action against uses by others that may constitute infringement of the Proprietary Marks. [Franchisor] shall defend Master Franchisee and any Franchisee against any third party claim, suit, or demand arising out of Master Franchisee’s or Franchisee’s use of the Proprietary Marks. If Master Franchisee and any Franchisee have used the Proprietary Marks in accordance with this Agreement and the Franchisee’s Franchise Agreement, as appropriate, the cost of such defense, including the cost of any judgment or settlement, shall be borne by [Franchisor]. If Master Franchisee or any Franchisee has not used the Proprietary Marks in accordance with this Agreement, and the Franchise Agreement and the Franchisee’s Franchise Agreement, as appropriate, the cost of such defense, including the cost of any judgment or settlement, shall be borne by Master Franchisee or such Franchisee. In the event of any litigation relating to Master Franchisee’s or a Franchisee’s use of the Proprietary Marks, Master Franchisee or such Franchisee shall execute any and all documents and do such acts as may in the opinion of [Franchisor]’s counsel, be necessary to carry out such defense or prosecution including, but not limited to, becoming a nominal party to any legal action. Except to the extent that such litigation is the result of Master Franchisee’s or a Franchisee’s use of the Proprietary Marks, [Franchisor] agrees to reimburse Master Franchisee or such Franchisee for its out of-pocket litigation costs in cooperating with [Franchisor] with respect to the litigation; and (j) Notwithstanding the foregoing, if [Franchisor] declines to institute legal proceedings, Master Franchisee may institute legal proceedings at its sole cost and expense provided, however that such proceedings do not detract from or compromise the quality or integrity of the Proprietary Marks and System. [Franchisor] shall always be free, at its own cost and expense, to subsequently join in any pending proceedings. Master Franchisee agrees that any relief (such as, injunctive) other than the monetary one which is requested to protect the Proprietary Marks shall be sought for and on behalf of and shall be designated to the benefit of [Franchisor]. “Legal Proceedings” as used herein shall include demand letters, negotiation and settlement of disputes, as well as the filing of formal legal actions with a court of proper jurisdiction. - 14 - Under no circumstances shall Master Franchisee have the authority to settle or compromise a matter which in any way mitigates, lessens, or restricts [Franchisor]’s ownership in the Proprietary Marks or [Franchisor]’s right to use the Proprietary Marks without [Franchisor]’s written approval and any action which does shall be a breach of this Agreement. 7.3 Master Franchisee shall not use the Proprietary Marks as part of its corporate or other legal names. 7.4 Master Franchisee expressly understands and acknowledges that: (a) The Proprietary Marks are valid and serve to identify the System and those who are franchised under the System; and (b) During the term of this Agreement and after its expiration or termination, Master Franchisee shall not directly or indirectly contest the validity or ownership of the Proprietary Marks, nor take any other action which may tend to jeopardize [Franchisor]’s rights therein, or [Franchisor]’s right to use and to license others to use the Proprietary Marks; and (c) Master Franchisee’s use of Proprietary Marks does not give Master Franchisee any ownership interest or other interest in or to the Proprietary Marks other than the license granted by this Agreement; and (d) Any and all goodwill arising from Master Franchisee’s use of the Proprietary Marks shall enure solely and exclusively to the benefit of [Franchisor]. Upon expiration or termination of this Agreement, no monetary amount shall be assigned as attributable to any goodwill associated with Master Franchisee’s use of the System or Proprietary Marks; and (e) Except as specified in Section 1.3 hereof, [Franchisor] shall have and retains the rights among others: (a) to use the Proprietary Marks themselves in connection with selling products and services; (b) to grant other licenses for the Proprietary Marks, in addition to those licenses already granted; and (c) to develop and establish other systems using the Proprietary Marks, similar to Proprietary Marks, or any other Proprietary Marks, and to grant licenses or Master Franchises thereto without providing any rights therein to Master Franchisee; and (f) [Franchisor] reserves the right to substitute different Proprietary Marks for use in identifying the System and the businesses operating thereunder in the Territory if the Proprietary Marks cannot be used, or if [Franchisor], in its sole discretion, determines that substitution of different Proprietary Marks in the Territory will be beneficial to the System. In such circumstances, the use of the substituted Proprietary Marks shall be governed by the terms of this Agreement, and [Franchisor] shall not compensate Master Franchisee for such substitution and shall bear only the cost of modifying Master Franchisee and Franchisees signs, printed materials and advertising materials to conform to [Franchisor]’s new Proprietary Marks. Master Franchisee shall promptly implement any such substitution. 8. CONFIDENTIAL MANUALS AND INFORMATION 8.1 In order to protect the reputation and goodwill of [Franchisor] and to maintain high standards of operation under the Proprietary Marks and the System, Master Franchisee shall conduct its business in accordance with the Manual, one copy of which (in the English language), Master Franchisee - 15 - acknowledges receipt. Master Franchisee shall treat the Manual, and the information contained therein, as confidential, and shall use all reasonable efforts to maintain such information as secret and confidential. Except for provision of the Manual to Franchisees and key employees who require access to the Manual for the purpose of discharging their responsibilities, Master Franchisee shall not at any time copy, duplicate, record or otherwise reproduce the foregoing materials, in whole or in part, nor otherwise make the same available to any unauthorized person. The Manual and any translation or adaptation thereof including any copyright therein shall at all times remain the sole property of [Franchisor]. 8.2 Master Franchisee shall translate the Manuals into any required language for use in the Territory, and, prior to any use, shall promptly provide a copy of such translation to [Franchisor] for [Franchisor]’s approval. Master Franchisee may propose changes in the Manual to conform the Manual to the laws and customs of, and market characteristics in, the Territory; provided, however, that no changes may be made without [Franchisor]’s prior written approval. Master Franchisee shall pay all costs and expenses in translating and adapting the Manual for use in the Territory. [Franchisor] shall use its best efforts to approve or disapprove all changes in the Manual and any translation thereof prepared by Master Franchisee within thirty (30) days of receipt of such changes or translation. 8.3 Master Franchisee shall ensure that its Manual is kept current; and, in the event of any dispute as to the contents of the Manual, the terms of the master copy of the Manual maintained by [Franchisor] (in the English language) shall be controlling. 8.4 Except as specifically authorized herein, Master Franchisee shall not, during or after the term hereof, 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 any [Franchisor] Centre which may be communicated to Master Franchisee or of which Master Franchisee may be apprised by virtue of Master Franchisee’s operation to those employees of Master Franchisees and Franchisees who must have access to it in order to perform their responsibilities. Any and all information, knowledge, know-how, and techniques, which [Franchisor] designates as confidential, shall be deemed confidential for purposes hereof. The foregoing undertaking shall not apply to any such information, knowledge, know-how and techniques which Master Franchisee can demonstrate was in the public domain at the time of disclosure of such information to Master Franchisee by [Franchisor] or subsequently thereafter becoming public knowledge. 8.5 Master Franchisee acknowledges that any failure to comply with the requirements of this Section 8 will cause [Franchisor] irreparable injury for which no adequate remedy at law may be available, and Master Franchisee agrees that [Franchisor] may seek, and Master Franchisee agrees to pay, all court cost and reasonable attorneys’ fees incurred by [Franchisor] in obtaining, without posting, a bond, an order for injunctive or other legal or equitable relief with respect to the requirements of this Section 8. 8.6 Master Franchisee shall require and obtain execution of confidentiality covenants similar to those set forth in Section 8.4 hereof, as required pursuant to Section 15.7 hereof. 9. ADVERTISING Recognizing the value of advertising and promotion, and the importance of the standardization of advertising and promotional programs to the furtherance of the goodwill and public image of the System, the parties agree as follows: 9.1 [Franchisor] shall create and administer a System-wide advertising fund (“National Advertising Fund”) for the Territory. Each month, each [Franchisor] Centre will contribute percent ( %) of Gross Sales (“Advertising contribution”) to the System-wide fund. Except as otherwise described herein, [Franchisor] shall utilize the Advertising contribution as described in Section 9.5 hereof. - 16 - 9.2 Master Franchisee shall also ensure that all [Franchisor] Centres in the Territory contribute percent ( %) of Gross Sales to a local advertising fund (“Cooperative”) as described in Section 9.6 hereof. 9.3 All Advertising and promotion by Master Franchisee and Franchisees shall be conducted in a dignified manner, conform to such standards as [Franchisor] shall establish in the Manual or otherwise in writing. Master Franchisee shall submit to [Franchisor] (in the manner prescribed in Section 19) samples of all advertising and promotional plans and materials used by Master Franchisee or any Franchisee not previously approved by [Franchisor] within seven (7) days of first use. Master Franchisee and such Franchisees may continue use of such plans or materials, unless [Franchisor] prohibits further use of such materials effective immediately upon receipt of written notice by Master Franchisee. 9.4 In addition to the advertising expenditure required in Section 9.1 hereof, immediately preceding and following the opening of each [Franchisor] Centre in the Territory, Master Franchisee shall required each Franchisee to conduct an initial local advertising and promotion program. Master Franchisee shall require that each Franchisee spend the equivalent of at least Dollars ($ ) for such program. 9.5 All [Franchisor] Centres shall, at their expense, in accordance with any standards established in the Manual, and in addition to its expenditures for advertising required by Section 9.1 hereof, obtain listings in the principal telephone directory serving each area in which a [Franchisor] Centre is located. In the event that more than one [Franchisor] Centre is located within the geographic area served by the principal telephone directory, then, in such event, the [Franchisor] Centre shall join with the [Franchisor] Centre or such other [Franchisor] Centres in a single directory listing of all such [Franchisor] Centres and pay the pro-rata share of the cost of such listing. 9.6 Master Franchisee shall establish, maintain, and administer a Cooperative Fund in the Territory and shall forthwith advise [Franchisor] of the establishment of such Cooperative Fund. The following provisions shall apply to the Cooperative Fund: (a) The Cooperative Fund, all contributions thereto and any earnings thereon, shall be used exclusively to meet any and all costs of maintaining, administering, directing, conducting, and developing the preparation of advertising, marketing, public relations, and/or promotional programs and materials, and any other activities which Master Franchisee believes will benefit the System in Territory, including, among other things, the costs of preparing and conducting advertising campaigns in various media; preparation of direct mail advertising; market research; employing advertising and/or public relations agencies to assist therein; purchasing promotional items; conducting and administering in-store promotions; providing promotional and other marketing materials and services to the businesses operating under the System; and point-of-purchase materials; (b) Master Franchisee shall direct all advertising and promotional programs, with approval of [Franchisor], regarding the creative concepts, materials, and media used in such programs, and the placement and allocation thereof; (c) All payments of the Cooperative Fund shall be made by [Franchisor] Centres by separate cheque payable to the [Franchisor] Cooperative Fund. All sums paid to the Cooperative Fund shall be maintained in an account separate from the other monies of Master Franchisee, and shall not be used to defray any expenses of Master Franchisee, except for such reasonable cost, and overhead, if any, as may be incurred in activities reasonably related to the administration or direction of the advertising programs and the Cooperative Fund, including, among other things, costs of personnel for creating and - 17 - implementing advertising, promotional, and marketing programs. The Cooperative Fund and any earnings thereon shall not otherwise enure to the benefit of Master Franchisee, Master Franchisee shall maintain separate bookkeeping accounts for the Cooperative Fund; and (d) A statement of the operations of the Cooperat
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