Franchise Disclosure Document for Smashburger Franchising, LLC
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Transcript of Franchise Disclosure Document for Smashburger Franchising, LLC
Smashburger
06/2012 FDD
1031.002.006/46510.2
®
FRANCHISE DISCLOSURE DOCUMENT ®
SMASHBURGER FRANCHISING LLC
a Delaware Limited Liability Company
1515 Arapahoe St.
Tower One, 10th Floor
Denver, CO 80202
(303) 633-1500
www.smashburger.com
The franchisor will grant the right to establish and operate one or more Smashburger restaurants
featuring hamburgers, sandwiches, salads, other food items and beverages.
The total investment necessary to begin operation of a SMASHBURGER RESTAURANT
ranges from $317,500 to $789,500. This sum includes the initial franchise fee of $40,000 and a
lease review fee of $1,500. The total investment necessary under the Multi-Unit Development
Agreement equals $20,000 multiplied by the total number of restaurants to be developed (except
for the first restaurant). This amount is payable to us. We credit the initial development fee
against the initial franchise fee for each restaurant after the first one. See Items 5-7 of this
Disclosure Document for further explanation concerning the total investment.
This Disclosure Document summarizes certain provisions of your franchise agreement and other
information in plain English. Read this Disclosure Document and all accompanying agreements
carefully. You must receive this Disclosure Document at least 14 calendar days before you sign
a binding agreement with, or make any payment to, the franchisor or an affiliate in connection
with the proposed franchise sale. Note, however, that no government agency has verified the
information contained in this document.
You may wish to receive your Disclosure Document in another format that is more convenient
for you. To discuss the availability of disclosures in different formats, contact Smashburger
Franchising LLC, 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado, 80202,
(303) 633-1500.
The terms of your contract will govern your franchise relationship. Don’t rely on this Disclosure
Document alone to understand your contract. Read all of your contract carefully. Show your
contract and this Disclosure Document to an advisor, like a lawyer or an accountant.
Buying a franchise is a complex investment. The information in this Disclosure Document can
help you make up your mind. More information on franchising, such as “A Consumer’s Guide
to Buying a Franchise,” which can help you understand how to use this Disclosure Document, is
available from the Federal Trade Commission. You can contact the FTC at 1-877-FTC-HELP or
by writing to the FTC at 600 Pennsylvania Avenue, NW, Washington, D.C. 20580. You can also
visit the FTC’s home page at www.ftc.gov for additional information. Call your state agency or
visit your public library for other sources of information on franchising.
There may also be laws on franchising in your state. Ask your state agencies about them.
ISSUANCE DATE: February 28, 2012; as amended June 14, 2012.
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STATE COVER PAGE
Your state may have a franchise law that requires a franchisor to register or file with a state
franchise administrator before offering or selling in your state. REGISTRATION OF A
FRANCHISE BY A STATE DOES NOT MEAN THAT THE STATE RECOMMENDS THE
FRANCHISE OR HAS VERIFIED THE INFORMATION IN THIS DISCLOSURE
DOCUMENT.
Call the state franchise administrator listed in Exhibit A for information about the franchisor, or
about franchising in your state.
MANY FRANCHISE AGREEMENTS DO NOT ALLOW YOU TO RENEW
UNCONDITIONALLY AFTER THE INITIAL TERM EXPIRES. YOU MAY HAVE TO
SIGN A NEW AGREEMENT WITH DIFFERENT TERMS AND CONDITIONS IN ORDER
TO CONTINUE TO OPERATE YOUR BUSINESS. BEFORE YOU BUY, CONSIDER
WHAT RIGHTS YOU HAVE TO RENEW YOUR FRANCHISE, IF ANY, AND WHAT
TERMS YOU MIGHT HAVE TO ACCEPT IN ORDER TO RENEW.
Please consider the following RISK FACTORS before you buy this franchise:
1. THE MULTI-UNIT DEVELOPMENT AGREEMENT AND FRANCHISE
AGREEMENT REQUIRES YOU TO RESOLVE DISPUTES WITH US BY ARBITRATION
OR LITIGATION ONLY IN COLORADO. OUT OF STATE ARBITRATION OR
LITIGATION MAY FORCE YOU TO ACCEPT A LESS FAVORABLE SETTLEMENT FOR
DISPUTES. IT MAY ALSO COST YOU MORE TO ARBITRATE OR LITIGATE WITH US
IN COLORADO THAN IN YOUR HOME STATE.
2. THE MULTI-UNIT DEVELOPMENT AGREEMENT AND FRANCHISE
AGREEMENT STATES THAT COLORADO LAW GOVERNS THE AGREEMENT, AND
THIS LAW MAY NOT PROVIDE THE SAME PROTECTION AND BENEFITS AS LOCAL
LAW. YOU MAY WANT TO COMPARE THESE LAWS.
3. SOME STATE FRANCHISE LAWS PROVIDE THAT CHOICE OF LAW AND
CONSENT TO JURSIDICTION PROVISIONS ARE VOID OR SUPERSEDED. YOU MAY
WANT TO INVESTIGATE WHETHER YOU ARE PROTECTED BY A STATE FRANCHISE
LAW. YOU SHOULD REVIEW ANY ADDENDA OR RIDERS ATTACHED TO THIS
DISCLOSURE DOCUMENT FOR DISCLOSURES REGARDING STATE FRANCHISE
LAWS.
4. UNDER SERVICING AGREEMENTS DATED MARCH 5, 2008, OUR AFFILIATES,
SMASHBURGER SERVICING AND SMASHBURGER PURCHASING WILL PERFORM
CERTAIN OF OUR OBLIGATIONS UNDER FRANCHISE AGREEMENTS WE ISSUE.
5. YOU ARE NOT GRANTED AN EXCLUSIVE TERRITORY UNDER THE
FRANCHISE AGREEMENT.
6. THERE MAY BE OTHER RISKS CONCERNING THIS FRANCHISE.
We use the services of one or more franchise brokers or referral sources to assist us in
selling our franchise. A franchise broker or referral source represents us, not you. We pay
this person a fee for selling our franchise or referring you to us. You should be sure to do
your own investigation of the franchise.
Effective Date: See the next page for state effective dates.
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STATE EFFECTIVE DATES
The following states require that the Disclosure Document be registered or filed with the state, or be exempt from registration: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Rhode Island, South Dakota, Virginia, Washington and Wisconsin.
This disclosure document is registered, on file or exempt from registration in the following states having franchise registration and disclosure laws, with the following effective dates:
Hawaii March 21, 2012; as amended ________, 2012
Illinois February 29, 2012; as amended June 15, 2012
Indiana February 29, 2012; as amended June 14, 2012
Maryland March 7, 2012; as amended ________, 2012
Michigan February 29, 2012; as amended June 14, 2012
Minnesota March 2, 2012; as amended ________, 2012
New York March 2, 2012; as amended ________, 2012
North Dakota March 8, 2012; as amended ________, 2012
Rhode Island March 30, 2012; as amended ________, 2012
South Dakota February 29, 2012; as amended June 14, 2012
Virginia February 29, 2012; as amended ________, 2012
Washington March 6, 2012; as amended ________, 2012
Wisconsin February 29, 2012; as amended June 15, 2012
In all other states that do not require registration, the effective date of this Disclosure Document
is the issuance date of February 28, 2012; as amended June 14, 2012.
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THE FOLLOWING APPLY TO TRANSACTIONS GOVERNED BY
MICHIGAN FRANCHISE INVESTMENT LAW ONLY
THE STATE OF MICHIGAN PROHIBITS CERTAIN UNFAIR PROVISIONS THAT ARE
SOMETIMES IN FRANCHISE DOCUMENTS. IF ANY OF THE FOLLOWING
PROVISIONS ARE IN THESE FRANCHISE DOCUMENTS, THE PROVISIONS ARE VOID
AND CANNOT BE ENFORCED AGAINST YOU.
(a) A prohibition on the right of a franchisee to join an association of franchisees.
(b) A requirement that a franchisee assent to a release, assignment, novation, waiver,
or estoppel which deprives a franchisee of rights and protections provided in the Michigan
Franchise Investment Act. This shall not preclude a franchisee, after entering into a franchise
agreement, from settling any and all claims.
(c) A provision that permits a franchisor to terminate a franchise prior to the
expiration of its term except for good cause. Good cause shall include the failure of the
franchisee to comply with any lawful provision of the franchise agreement and to cure such
failure after being given written notice thereof and a reasonable opportunity, which in no event
need be more than 30 days, to cure such failure.
(d) A provision that permits a franchisor to refuse to renew a franchise without fairly
compensating the franchisee by repurchase or other means for the fair market value at the time of
expiration of the franchisee’s inventory, supplies, equipment, fixtures, and furnishings.
Personalized materials which have no value to the franchisor and inventory, supplies, equipment,
fixtures, and furnishings not reasonably required in the conduct of the franchise business are not
subject to compensation. This subsection applies only if: (i) the term of the franchise is less
than 5 years and (ii) the franchisee is prohibited by the franchise or other agreement from
continuing to conduct substantially the same business under another trademark, service mark,
trade name, logotype, advertising, or other commercial symbol in the same area subsequent to
the expiration of the franchise or the franchisee does not receive at least 6 months advance notice
of franchisor’s intent not to renew the franchise.
(e) A provision that permits the franchisor to refuse to renew a franchise on terms
generally available to other franchisees of the same class or type under similar circumstances.
This section does not require a renewal provision.
(f) A provision requiring that arbitration or litigation be conducted outside this state.
This shall not preclude the franchisee from entering into an agreement, at the time of arbitration,
to conduct arbitration at a location outside this state.
(g) A provision which permits a franchisor to refuse to permit a transfer of ownership
of a franchise, except for good cause. This subdivision does not prevent a franchisor from
exercising a right of first refusal to purchase the franchise. Good cause shall include, but is not
limited to:
(i) The failure of the proposed transferee to meet the franchisor’s then current
reasonable qualifications or standards.
(ii) The fact that the proposed transferee is a competitor of the franchisor or
subfranchisor.
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(iii) The unwillingness of the proposed transferee to agree in writing to comply
with all lawful obligations.
(iv) The failure of the franchisee or proposed transferee to pay any sums owing
to the franchisor or to cure any default in the franchise agreement existing at the time of
the proposed transfer.
(h) A provision that requires the franchisee to resell to the franchisor items that are
not uniquely identified with the franchisor. This subdivision does not prohibit a provision that
grants to a franchisor a right of first refusal to purchase the assets of a franchise on the same
terms and conditions as a bona fide third party willing and able to purchase those assets, nor does
this subdivision prohibit a provision that grants the franchisor the right to acquire the assets of a
franchise for the market or appraised value of such assets if the franchisee has breached the
lawful provisions of the franchise agreement and has failed to cure the breach in the manner
provided in subdivision (c).
(i) A provision which permits the franchisor to directly or indirectly convey, assign,
or otherwise transfer its obligations to fulfill contractual obligations to the franchisee unless
provision has been made for providing the required contractual services.
If the franchisor’s most recent financial statements are unaudited and show a net worth of
less than $100,000, the franchisor shall, at the request of a franchisee, arrange for the escrow of
initial investment and other funds paid by the franchisee until the obligations to provide real
estate, improvements, equipment, inventory, training, or other items included in the franchise
offering are fulfilled. At the option of the franchisor, a surety bond may be provided in place of
escrow.
THE FACT THAT THERE IS A NOTICE OF THIS OFFERING ON FILE WITH THE
ATTORNEY GENERAL DOES NOT CONSTITUTE APPROVAL, RECOMMENDATION,
OR ENFORCEMENT BY THE ATTORNEY GENERAL.
Any questions regarding this notice should be directed to:
State of Michigan
Consumer Protection Division
Attn: Franchise
670 G. Mennen Williams Building
525 West Ottawa
Lansing, Michigan 48933
Telephone Number: (517) 373-7117
Note: Despite subparagraph (f) above, we intend, and we and you agree to fully enforce the
arbitration provisions of the Multi-Unit Development Agreement and Franchise Agreement. We
believe that paragraph (f) is unconstitutional and cannot preclude us from enforcing these
arbitration provisions. You acknowledge that we will seek to enforce this section as written.
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TABLE OF CONTENTS
ITEM Page
ITEM 1 THE FRANCHISOR AND ANY PARENTS, PREDECESSORS, AND
AFFILIATES .................................................................................................................1
ITEM 2 BUSINESS EXPERIENCE ...........................................................................................3
ITEM 3 LITIGATION .................................................................................................................6
ITEM 4 BANKRUPTCY ..........................................................................................................12
ITEM 5 INITIAL FEES.............................................................................................................12
ITEM 6 OTHER FEES ..............................................................................................................13
ITEM 7 ESTIMATED INITIAL INVESTMENT .....................................................................18
ITEM 8 RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES ......................23
ITEM 9 FRANCHISEE’S OBLIGATIONS .............................................................................25
ITEM 10 FINANCING................................................................................................................27
ITEM 11 FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND
TRAINING ..................................................................................................................27
ITEM 12 TERRITORY ...............................................................................................................35
ITEM 13 TRADEMARKS ..........................................................................................................38
ITEM 14 PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION ......................40
ITEM 15 OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION OF THE
FRANCHISE BUSINESS ...........................................................................................41
ITEM 16 RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL ..............................42
ITEM 17 RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION.........42
ITEM 18 PUBLIC FIGURES ......................................................................................................52
ITEM 19 FINANCIAL PERFORMANCE REPRESENTATIONS ...........................................52
ITEM 20 OUTLETS AND FRANCHISEE INFORMATION ...................................................53
ITEM 21 FINANCIAL STATEMENTS .....................................................................................59
ITEM 22 CONTRACTS ..............................................................................................................59
ITEM 23 RECEIPTS ...................................................................................................................59
EXHIBIT A State Administrators/Agents for Service of Process
EXHIBIT B Multi-Unit Development Agreement
EXHIBIT C Franchise Agreement
EXHIBIT D List of Franchisees
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EXHIBIT E List of Franchisees Who Have Left the System or Not Communicated
EXHIBIT F Financial Statements
EXHIBIT G Table of Contents to Standards of Operations Manual
EXHIBIT H Representations and Acknowledgement Statement
EXHIBIT I Sample General Release
EXHIBIT J State Addenda and Agreement Riders
EXHIBIT K Receipts
APPLICABLE STATE LAW MIGHT REQUIRE ADDITIONAL DISCLOSURES RELATED
TO THE INFORMATION CONTAINED IN THIS DISCLOSURE DOCUMENT, AND
MIGHT REQUIRE A RIDER TO THE FRANCHISE AGREEMENT. THESE ADDITIONAL
DISCLOSURES AND RIDERS, IF ANY, APPEAR IN EXHIBIT J.
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ITEM 1
THE FRANCHISOR, AND ANY PARENTS, PREDECESSORS, AND AFFILIATES
The Franchisor. The Franchisor is Smashburger Franchising LLC. To simplify the
language in this franchise disclosure document (this “Disclosure Document”), we use the terms
“Franchisor,” “we,” “us,” “Company,” or “SMASHBURGER” to refer to Smashburger
Franchising LLC. When we refer to our affiliates, we will refer to them by their names. “You”
means the person or entity that buys the franchise. If you are a corporation, partnership, limited
liability company or other entity, certain provisions of the Franchise Agreement (defined below),
Multi-Unit Development Agreement (defined below) and related agreements will also apply to
your owners.
We were originally formed in the State of Delaware on March 5, 2008 and began offering
franchises of the type described in this Disclosure Document as of April 8, 2008. We do
business under our corporate name and as “Smashburger.” We do not do business under any
other name. Our principal business address is 1515 Arapahoe Street, Tower One, 10th
Floor,
Denver, Colorado 80202, (303) 633-1500. Our agents for service of process in certain states are
listed in Exhibit A.
Our Parent, Predecessors and Affiliates. In December 2010, we went through an
internal corporate reorganization, which resulted in Smashburger Master LLC, a Delaware
limited liability company formed on January 3, 2008 (“Smashburger Master”), becoming our
parent. Smashburger Master has been licensed the right to use and sublicense the use of the
Marks (defined below) from our affiliate, Icon Burger Development Company LLC, parent of
Smashburger Master and a Delaware limited liability company formed on September 13, 2006
(“Icon Burger”). Icon Burger owns the trademarks and other intellectual property used in the
operation of SMASHBURGER RESTAURANTS (defined below). Smashburger Master has, in
turn, licensed us the right to use and sublicense the use of the Marks. Our affiliate, The
Smashburger Servicing Company LLC, a subsidiary of Smashburger Master and a Delaware
limited liability company formed on March 5, 2008 (“Smashburger Servicing”), under a
servicing agreement dated March 5, 2008 with us, will perform certain of our obligations under
Franchise Agreements we issue, including negotiating supplier contracts for certain services sold
to franchisees. Our affiliate, Smashburger Purchasing Company LLC (“Smashburger
Purchasing”), a subsidiary of Smashburger Master and a Delaware limited liability company
formed on April 5, 2010, negotiates supplier contracts for certain goods and products sold to
franchisees.
In connection with providing these services to us, Smashburger Servicing and
Smashburger Purchasing use the services of certain individuals and employees associated or
employed with our affiliates, Icon Burger Acquisition LLC (“IBA”), a subsidiary of
Smashburger Master, formed September 13, 2006, and Consumer Capital Partners Management
LLC (“CCP”), formed October 9, 2008. Those individuals or employees that have management
responsibility for the sale or operation of the franchises offered by this Disclosure Document are
listed in Item 2. Our affiliate, Smashburger AFT Inc. (formed December 18, 2008) is the trustee
of the Smashburger Marketing Fund (see Item 11). Our affiliate, Smashburger Gift Card LLC,
an Arizona limited liability company formed on August 29, 2008, provides stored value card
services to franchisees. Our parent and all of the affiliates described above share our principal
business address and phone number. We have no predecessors.
Agents for Service of Process. We disclose our agents for service of process in
Exhibit A.
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Prior Experience. We have developed and operate using certain specified and distinct
business formats, methods, procedures, signs, designs, layouts, standards, specifications and
marks (the “Franchise System”) for the establishment, development and operation of restaurants
with a menu featuring gourmet burgers, sandwiches, salads, other food items, shakes, floats, and
other beverages in a casual atmosphere (“SMASHBURGER RESTAURANTS”).
We have not operated SMASHBURGER RESTAURANTS such as the ones being
franchised in this Disclosure Document. Our affiliates have operated SMASHBURGER
RESTAURANTS since June 18, 2007, and, as of January 1, 2012, operated 59
SMASHBURGER RESTAURANTS. (See Item 20) Other than as provided above, we and our
affiliates do not engage in, or offer franchises for, any other business activities.
The Franchises We Offer. We will primarily offer the right to enter into a Multi-Unit
Development Agreement which grants you the right to acquire, and under which you agree to
acquire, multiple franchises to develop and operate an agreed upon number of SMASHBURGER
RESTAURANTS within a specifically described geographic territory according to a
development schedule (the “Multi-Unit Development Agreement”). The form of Multi-Unit
Development Agreement you will sign is attached as Exhibit B to this Disclosure Document.
Your obligation to acquire franchises may be satisfied by you or by an entity controlled by you
or your owners that meets our then applicable standards and requirements for franchise owners
(an “Approved Affiliate”). To acquire a franchise, either you or an Approved Affiliate must
enter into our then current form of Franchise Agreement (the “Franchise Agreement”). Our
current form of Franchise Agreement is attached as Exhibit C to this Disclosure Document.
Each SMASHBURGER RESTAURANT that you or an Approved Affiliate develops and
operates (each a “Restaurant”) must be governed by a Franchise Agreement signed by you or
the Approved Affiliate. We may choose not to enter into a Franchise Agreement with single unit
operators. However, we may consider it under limited circumstances, such as for Special Venue
Restaurants. For purposes of this Disclosure Document, a “Special Venue Restaurant” is (1)
any kiosk, mobile facility or similar location or type of operation which, because of its inherent
operational limitations, is required to offer a limited menu or have a materially different
operating format as compared to a traditional SMASHBURGER RESTAURANT, (2) any
location in which foodservice is or may be provided by a master concessionaire, (3) any location
which is situated within or as part of a larger venue or facility (other than a mall or shopping
center) and, as a result, is likely to draw the predominance of its customers from those persons
who are using or attending events in the larger venue or facility (for example,
colleges/universities, convention centers, airports, hotels, sports facilities, theme parks, hospitals,
transportation facilities, convenience stores, and other similar captive market locations), or (4)
any distribution channel other than a SMASHBURGER RESTAURANT (including the Internet,
grocery stores, supermarkets, and mail order) through which products and services associated
with or sold through SMASHBURGER RESTAURANTS are or may be sold.
Market Competition. The market for food products and services SMASHBURGER
RESTAURANTS offer is highly competitive, as is the market for obtaining locations for
SMASHBURGER RESTAURANTS. Your competition includes all restaurant concepts,
particularly quick service restaurants serving hamburgers. However, we believe we offer a
unique opportunity in the restaurant industry. SMASHBURGER RESTAURANTS offer high
quality hamburgers, which are smashed and grilled, and other food and beverages.
Regulations. You should consider that certain aspects of the restaurant business are
heavily regulated by federal, state and local laws, rules and ordinances. The U.S. Food and Drug
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3
Administration, the U.S. Department of Agriculture, and various state and local departments of
health and other agencies have laws and regulations concerning the preparation of food and
sanitary conditions and restaurant facilities. State and local agencies routinely conduct
inspections for compliance with these requirements. Certain provisions of these laws impose
limits on emissions resulting from commercial food preparation. You will need to understand
and comply with these laws in operating the Restaurant. You must also obtain a liquor license to
sell wine and beer, and you may have liability imposed on you by Dram Shop Laws. There may
be other laws applicable to your business. We urge you to make further inquiries about these
laws.
Financial Requirements. You must maintain, and prove to us that you have, sufficient
working capital reserves, as we determine to be necessary and appropriate to comply with your
obligations under each Franchise Agreement. We may periodically designate the maximum
amount of debt that we will allow franchisees to service. In addition, the 1st and 2
nd
SMASHBURGER RESTAURANTS developed pursuant to Franchise Agreements signed under
a Multi-Unit Development Agreement must be developed with cash equity and without the
proceeds from any loans made by the franchisee (or its owners), its affiliates (or their owners) or
any other third party. Further, under the Multi-Unit Development Agreement, a developer must
always maintain sufficient liquidity to meet its obligations under the Multi-Unit Development
Agreement and, in any event, the liquidity of the developer and all of its affiliates who sign
Franchise Agreements, combined, must not at any time fall below the amount identified in Item
7 as the total estimated initial investment to open one Restaurant ($789,500). (See Item 10) We
reserve the right to review these liquidity requirements, and you must comply with such
minimum liquidity requirements that we reasonably impose.
ITEM 2
BUSINESS EXPERIENCE
Chief Executive Officer: David Prokupek
Mr. Prokupek became our Chief Executive Officer in February 2010. From November
2007 to February 2010, he served as our Chief Investment Officer. He has also served as the
chief executive officer of Smashburger Master LLC, Icon Burger Acquisition LLC, and other
related entities, all located in Denver, Colorado, since February 2010 and their President from
July 2010 to October 2011. Since July 2009, he has also been the Chairman of Icon Burger
Development Company, LLC located in Denver, Colorado. He has also been the Chief
Investment Officer of The Cervantes Holding Company (“Cervantes”) and CCP, and other
related entities, all located in Denver, Colorado, since November 2007 and their President since
January 2010. He was also appointed the Managing Director of Cervantes and CCP in January
2010. From July 2002 to December 2009, he was the Chief Executive Officer and owner of
Geronimo Financial in Denver, Colorado. Mr. Prokupek also served as a member of the Board of
Managers of QCE Holding LLC (“QCEH”) from December 2007 to October 2011.
President: Greg Creighton
Mr. Creighton is employed by our affiliate, Icon Burger Acquisition LLC, and has been
our President since July 2011. From June 2010 to June 2011, Mr. Creighton was our Chief
Operating Officer; from May 2009 to June 2010, he was our Executive Vice President of
Operations; and from September 2008 through April 2009, he served as our Regional Vice
President. From March 2007 to September 2008, Mr. Creighton was self employed as a
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consultant in Minneapolis, Minnesota. From January 1998 to March 2007, he was President and
Chief Operating Officer of Leann Chin, Inc. in Bloomington, Minnesota.
Chief Development Officer: Scott Crane
Mr. Crane is employed by our affiliate, CCP, and has been our Chief Development
Officer since December 2011. From November 2007 to June 2010, Mr. Crane was our
President. Mr. Crane has also been President of IBA in Denver, Colorado, since November
2007. From April 2007 to October 2007 and from June 2005 to December 2005, he was a real
estate developer for Cook Properties in Wichita, Kansas. From January 2006 to March 2007, he
was a consultant for Ted’s Montana Grill in Atlanta, Georgia.
Chief Legal Officer: Patrick Meyers
Mr. Meyers is employed by our affiliate, CCP, and has been our Chief Legal Officer
since March 2012. He has held the same position with Icon Burger Development Company
LLC, Smashburger Master LLC and other related entities, all located in Denver, Colorado, since
March 2012. He also has served as the Chief Legal Officer, Executive Vice President and a
member of the Board of Directors of CCP and its predecessor, Cervantes, located in Denver,
Colorado, since May 2006. From May 2006 to January 2012, he served as a member of the
Board of Managers of QCEH, and from October 2000 to January 2012, he served in various
executive roles with QFA Royalties LLC, the franchisor of the Quiznos concepts and its various
affiliated and predecessor companies (“QFA”), including General Counsel and a member of the
board of directors.
Chief Accounting Officer: Christina Carlson
Ms. Carlson is employed by our affiliate, Icon Burger Acquisition LLC, and has been our
Chief Accounting Officer since April 2012. From June 2005 to March 2012, she was Vice
President and Controller of Red Robin Gourmet Burgers in Greenwood Village, Colorado.
Operating Partner/Vice President of Training: Janice Branam
Ms. Branam is employed by our affiliate, Icon Burger Acquisition LLC, and has been our
Operating Partner and Vice President of Training in Denver, Colorado since January 2009 and
has also been employed by our affiliate, IBA in Denver, Colorado, since that time. Prior to
joining us, from August 1996 to March 2008, Ms. Branam has held various positions with
Quizno’s in Denver, Colorado, including Senior Vice President, Training; Vice President, Small
Market Development; Vice President, Development and Ops; Senior Vice President, AD
Development; Senior Vice President, Curriculum Development; Senior Vice President, Ops
Systems and Training; Vice President, Corporate Ops and Training; Vice President, Training and
Director of Training. Ms. Branam was an independent consultant in Boulder, Colorado from
March 2008 to January 2009.
Sr. Vice President of Finance and Strategy: Christopher Chang
Mr. Chang is employed by our affiliate, CCP, and has been our Sr. Vice President of
Finance and Strategy since June 2011. From November 2008 to June 2011, he was Vice
President of CCP in Denver, Colorado. From March 2007 to November 2008, Mr. Chang was
Director of Corporate Development for Vail Resorts in Broomfield, Colorado. From March
2006 to March 2007, he was a Director of Western Union in Centennial, Colorado.
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Sr. Vice President of Marketing & Consumer Insights: Jeremy Morgan
Mr. Morgan is employed by our affiliate, Icon Burger Acquisition LLC, and has been our
Sr. Vice President of Marketing & Consumer Insights since May 2011. From June 2010 through
April 2011, he served as our Vice President – Strategy. From October 2006 to May 2010, Mr.
Morgan was Case Team Leader for Bain & Co. in Chicago, Illinois.
Sr. Vice President of Franchise Sales: Brett Willis
Mr. Willis is employed by our affiliate, Icon Burger Acquisition LLC, and has been our
Sr. Vice President of Franchise Sales since May 2012. From May 2011 to May 2012, he was
Vice President of Franchise Sales for The Johnny Rockets Group in Aliso Viejo, California.
From October 2005 to May 2011, he served in various capacities (most recently as Vice
President of Franchise Development) for Arby’s Restaurant Group in Atlanta, Georgia.
Vice President of Real Estate: Jesse Yuran
Mr. Yuran is employed by our affiliate, Icon Burger Acquisition LLC, and has been our
Vice President of Real Estate since August 2011. From February 2002 to August 2011, he was
Vice President for Legend Retail Group, LLC in Denver, Colorado.
Vice President of Real Estate: Michael Ganzle
Mr. Ganzle is employed by our affiliate, Icon Burger Acquisition LLC, and has been our
Vice President of Real Estate since April 2012. From August 2007 to March 2012, he was Vice
President/Director of Real Estate for J.P. Morgan Chase in Denver, Colorado. From September
2005 to July 2007, he was Development Manager for Starbucks in Denver, Colorado.
Vice President of Real Estate: Jesse Heathcock
Mr. Heathcock is employed by our affiliate, Icon Burger Acquisition LLC, and has been
our Vice President of Real Estate since April 2012. From March 2008 to April 2012 he was
Vice President for Jones Lang LaSalle in Chicago, Illinois. From August 1998 to February 2008
he was Real Estate Manager for Brinker International in Dallas, Texas.
OTHER INDIVIDUALS WITH MANAGEMENT RESPONSIBILITY
The following individuals do not hold any office with us, but they do have certain management
responsibility in connection with the sale and operation of Franchises offered by this Disclosure
Document. The offices shown are offices they hold with the designated entity.
Richard E. Schaden
Richard E. Schaden is one of our investors and is neither employed by us nor holds an
office with us. From May 2006 to October 2010, he was the Chief Executive Officer of CCP and
its predecessor, Cervantes, in Denver, Colorado. From October 2000 to October 2010, Mr.
Schaden served in various roles (including Chief Executive Officer) for QFA.
Managing Partner and Chief Concept Officer: Thomas Ryan
Mr. Ryan has been the Chief Concept Officer of CCP and its predecessor, Cervantes, in
Denver, Colorado since May 2007. He was a member of the Board of Managers of QCEH from
August 2008 to January 2012 and from July 2003 to May 2007, he was Executive Vice President
- Branding for Quizno’s in Denver, Colorado.
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ITEM 3
LITIGATION
PENDING:
There is no pending litigation against us, our officers (as designated in Item 2 above) or
involving the Smashburger Franchise System. The litigation referred to below relates to certain
persons who, while not our officers, directors or employees, are listed in Item 2 as having
management responsibility for the sale or operation of franchises.
MKJA, Inc., et al. v. 123 Fit Franchising, LLC et al. and DOES 1-25, Case No. GIN055734
(Superior Court of California, County of San Diego, North District). On September 27, 2006,
MKJA, Inc. and certain current and former 123 Fit franchisees and their principals, filed a
statement of claim against 123 Fit Franchising, LLC, 123 Fit Services, LLC and Richard E.
Schaden (referred to in the remainder of this Item 3 as “Schaden”), among others, asserting
claims for failure to comply with the disclosure requirements of the California Franchise
Investment Law, breach of contract, breach of the implied covenant of good faith and fair
dealing, violation of the California Business and Professions Code, and fraud in the inducement.
Plaintiffs alleged that these claims arose out of failure by the defendants to disclose, among other
things, information relating to the initial investment required for the franchise. The claim seeks
an unspecified amount of damages, injunctive relief, attorneys’ fees, and costs. On October 31,
2007, the court ordered the parties to arbitrate this dispute. On September 10, 2009, the court
lifted the stay which would allow the suit to proceed before the court rather than in arbitration.
On January 4, 2011, the California Court of Appeals reversed the court’s order lifting the stay of
the lawsuit, and on April 20. 2011, the California Supreme Court denied plaintiffs’ petition for
review of that decision. Although the case remains on the Superior Court’s docket, the parties
are awaiting the plaintiffs’ initiation of arbitration in Colorado, but no formal action has yet been
taken in that respect. The defendants intend to defend this lawsuit if arbitration is initiated.
Ballwin Food Beverage, Inc., et al., v. Quiznos Franchising II LLC, et al, Case No.
2010CV3711 (District Court, City and County of Denver, State of Colorado). Between May 7,
2010 and October 12, 2010, the following 18 separate complaints were filed by current and
former QUIZNOS franchisees against QFA and certain of its affiliates, Schaden, Patrick E.
Meyers (our Chief Legal Officer) (referred to in the remainder of this Item 3 as “Meyers”) and
certain current and former QUIZNOS officers, directors and employees: Neptune Group Inc., et
al. v. Quizno’s Franchising LLC, et al. (Case No. 2010cv3716, District Court, City and County
of Denver, State of Colorado, filed May 7, 2010 and amended June 4, 2010); Harry G. Pappas
III. v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s Corporation, et al. (Case No.
2010cv3740, District Court, City and County of Denver, State of Colorado, filed May 7, 2010
and amended June 9, 2010); SK7 Inc., et al. v. Quizno’s Franchising II LLC, et al. (Case No.
2010cv4484, District Court, City and County of Denver, State of Colorado; filed and amended
June 3, 2010); BC-Q LLC, et al. v. Quizno’s Franchising LLC, et al. (Case No. 2010cv03920,
District Court, City and County of Denver, State of Colorado, filed and amended June 3, 2010);
SAP & NSD Inc., et al. v. Quizno’s Franchising LLC, et al. (Case No. 2010cv4551, District
Court, City and County of Denver, State of Colorado, filed and amended June 4, 2010); O.T.I.S.
Enterprise LLC, et al. v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s Corporation,
et al. (Case No. 2010cv4540, District Court, City and County of Denver, State of Colorado, filed
June 4, 2010); Too Bee Foods LLC, et al. v. Quizno’s Franchising LLC, et al. (Case No.
2010cv4571, District Court, City and County of Denver, State of Colorado, filed June 7, 2010);
Ballwin Food & Beverage Inc., et al. v. Quizno’s Franchising LLC, et al. (Case No. 2010cv3711,
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District Court, City and County of Denver, State of Colorado, filed June 8, 2010); Dr. P’s LLC,
et al. v. Quizno’s Franchising LLC, et al. (Case No. 2010cv3714, District Court, City and County
of Denver, State of Colorado, filed and amended May 9, 2010); K.R. & K Enterprises LLC, et al.
v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s Corporation, et al. (Case No.
2010cv4669, District Court, City and County of Denver, State of Colorado, filed June 10, 2010);
Sub-Thing Great Inc., et al. v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s
Corporation, et al. (Case No. 2010cv3905, District Court, City and County of Denver, State of
Colorado, filed and amended June 10, 2010); Lop Duk Wong v. Quizno’s Franchising II LLC, et
al. (Case No. 2010cv4797, District Court, City and County of Denver, State of Colorado, filed
June 14, 2010); VDS LLC, et al. v. Quizno’s Franchising II LLC, et al. (Case No. 2010cv4906,
District Court, City and County of Denver, State of Colorado, filed June 15, 2010); Cascade
Enterprises L.C., et al. v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s
Corporation, et al. (Case No. 2010cv4871, District Court, City and County of Denver, State of
Colorado, filed June 16, 2010); College Park Foods Inc., et al. v. The Quizno’s Franchise
Company LLC f/k/a The Quizno’s Corporation, et al. (Case No. 2010cv4889, District Court,
City and County of Denver, State of Colorado, filed June 17, 2010); Abi-Sam Foods LLC, et al.
v. The Quizno’s Franchise Company LLC f/k/a The Quizno’s Corporation, et al. (Case No.
2010cv4888, District Court, City and County of Denver, State of Colorado, filed June 17, 2010);
Michael Gatas, et al. v. Quizno’s Franchising LLC, et al. (Case No. 2010CV8128, District Court,
City and County of Denver, State of Colorado, filed October 12, 2010); and Mark Rosenberg, et
al. v. Quizno’s Franchising LLC, et al. (Case No. 2010CV8129, District Court, City and County
of Denver, State of Colorado, filed October 12, 2010). In each of the above 18 lawsuits, at least
one party in the plaintiff group has claimed to have opted out of the Siemer v. The Quizno’s
Franchise Company LLC national class action settlement agreement that was granted final
approval by the United States District Court for the Northern District of Illinois on August 13,
2010.
Except where noted below, all of the 18 lawsuits allege the following claims: (1)
violations of the Colorado Organized Crime Control Act, C.R.S. 18-17-101 et seq., including
fraudulent scheme to sell mandated essential goods at inflated prices, fraudulent scheme to sell
franchise agreements, and unlawful control over franchisees through a pattern of racketeering
activity; (2) violation of the Colorado Consumer Protection Act; (3) conspiracy to violate the
Colorado Consumer Protection Act; (4) aiding and abetting the violation of the Colorado
Consumer Protection Act; (5) breach of contract; (6) breach of the implied covenant of good
faith and fair dealing; (7) unjust enrichment; (8) fraud in the inducement; (9) conspiracy to
commit fraud in the inducement; (10) aiding and abetting fraud in the inducement; (11)
promissory fraud; (12) conspiracy to commit promissory fraud; (13) aiding and abetting
promissory fraud; (14) illusory contract; (15) breach of fiduciary duty; (16) conspiracy to breach
fiduciary duty; (17) aiding and abetting breach of fiduciary duty; (18) declaratory judgment; (19)
violation of Colorado’s Civil Theft Act; (20) conspiracy to commit civil theft; and (21) aiding
and abetting civil theft. The Cascade Enterprises L.C., Abi-Sam Foods LLC, Pappas, Ballwin
Food & Beverage Inc., and Dr. P’s LLC lawsuits add an additional claim for economic duress.
All 18 lawsuits seek preliminary and permanent injunction relief, an order declaring
certain provisions of the plaintiffs’ franchise agreements unconscionable and therefore
unenforceable, an order declaring the plaintiffs’ franchise agreements illusory, compensatory,
consequential and statutory damages, disgorgement of defendants illegally-obtained profits,
attorneys’ fees and costs, and rescission of plaintiffs’ franchise agreements.
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On July 27, 2010, the QUIZNOS entities filed motions to dismiss the above lawsuits
(except for the Gatas and Rosenberg lawsuits which were filed subsequent to the QUIZNOS
entities’ motions to dismiss) in their entirety and also filed separate motions to dismiss the
individual defendants from these 16 lawsuits. On November 22, 2010, the court granted the
QUIZNOS entities’ motions to strike plaintiffs’ jury demand and motion to dismiss with respect
to plaintiffs’ claim for economic duress, but denied the QUIZNOS entities’ motions to dismiss
with respect to plaintiffs’ remaining claims. In accordance with the court’s orders on September
13, 2010 and November 29, 2010, the above 18 lawsuits, including the Gatas and Rosenberg
lawsuits, have been consolidated under the Ballwin Food & Beverage Inc. lawsuit for pre-trial
purposes only. Consequently, the QUIZNOS entities’ motions and the court’s orders with
respect to such motions apply to all 18 cases, including the subsequently filed Gatas and
Rosenberg lawsuits. On December 14, 2010, the QUIZNOS entities (excluding the individually
named defendants) filed an answer to each lawsuit, and for the following lawsuits filed a
counterclaim against plaintiff(s) and certain additional parties who acted as guarantors for breach
of contract arising out of the closure of their QUIZNOS Restaurant: Neptune Group Inc.;
Pappas; BC-Q LLC; SAP & NSD Inc.; Too Bee Foods LLC; Ballwin Food & Beverage Inc.; Dr.
P’s LLC; Wong; VDS LLC; Cascade Enterprises L.C.; College Park Foods Inc.; Abi-Sam Foods
LLC; Gatas; and Rosenberg. Plaintiffs in the previously listed cases filed an answer to the
QUIZNOS entities’ counterclaims on January 11, 2011. On January 25, 2011, the court denied
the QUIZNOS entities’ motions to dismiss the individual defendants. On February 8, 2011, the
individually named defendants filed an answer to each of the 18 lawsuits. On June 12, 2012, the
QUIZNOS entities and the other defendants filed motions for summary judgment as to the claims
of all 18 plaintiff groups. Trial for all lawsuits has been set for September 2012. Defendants
intend to defend these lawsuits and prosecute their counterclaims.
COMPLETED:
Thin N’ Out Fitness Inc., et al, v. 123 Fit Franchising LLC, et al, No. 75 114 00131
08 (American Arbitration Association, Seattle, Washington). On April 10, 2008, claimants, a
former 123 Fit franchisee and its principals, filed a demand for arbitration against 123 Fit
Franchising LLC, Schaden, and certain other unaffiliated entities and individuals, asserting
claims for violation of the Washington Franchise Investment Practices Act. The demand sought
rescission of the plaintiffs’ franchise agreement, or in the alternative, an unspecified amount of
damages, fees, and costs. The parties signed a settlement agreement and the case was dismissed
in February 2010. The terms of the settlement, which included mutual general releases, required
123 Fit to cause a payment to the plaintiffs in the amount of $27,826.
William H. Nickerson, et al v. The Quizno’s Corporation, et al., Case No. 04 CV
04CV0455 (District Court for the City and County of Denver, Colorado). On January 20, 2004,
plaintiff, a former shareholder of The Quizno’s Corporation (“TQC”), filed suit against TQC and
its board of directors seeking damages allegedly arising in connection with TQC’s
November 2000 tender offer to purchase all outstanding shares of its common stock at a price of
$8.00 per share. Plaintiff alleged that TQC’s board of directors breached its fiduciary duties to
TQC’s shareholders, that TQC was unjustly enriched at the expense of its shareholders, and that
defendants violated certain Colorado state securities laws. The case was settled, and as part of
the settlement, on June 14, 2004, TQC disbursed $5.8 million to shareholders who submitted a
valid claim. The court approved the settlement on September 27, 2004, and the settlement
became effective on November 15, 2004.
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Moiez Al-Harazi and Sawson Shoraan v. The Quizno’s Canada Restaurant
Corporation, et al., Court File No. 05-CV-302670 (Ontario Superior Court of Justice). On
January 5, 2006, 2 franchisees of Quizno’s Canada Restaurant Corporation (“QCRC”) without
open QUIZNOS Restaurants, filed an amended statement of claim on behalf of themselves and
other similarly-situated franchisees against QCRC and certain of its affiliates, Schaden, Meyers,
and certain current and former employees of QCRC, asserting claims for violation of the Wishart
Act. The claim sought compensation for loss of income and foregone opportunity cost or
damages. A settlement was reached between the representative plaintiffs and defendants. 164
members of the class were entitled to a partial refund of the initial franchise fee (in which case
their underlying franchise agreements were terminated) ranging from 25% to 50% of the initial
franchise fee paid by the class member (approximately $6,500CAD and $13,000CAD).
Alternatively, a class member could remain a QCRC franchisee, which election had to be
approved by QCRC, and the class member was entitled to receive a $26,630CAD credit toward
the purchase price of equipment and supplies necessary to open a QUIZNOS Restaurant. On
July 7, 2007, the class was certified for settlement purposes only and the terms of the settlement
were approved by the court.
Edward C. Sebesta, et al v. The Quizno’s Corporation, Case No. 01CV6281 (District
Court for the City and County of Denver, Colorado). On November 13, 2001, a shareholder of
TQC, filed suit against TQC and its board of directors seeking to prevent a proposed transaction
by which TQC would become a private company and all publicly-traded shares of TQC would
be repurchased. Plaintiffs alleged that TQC’s board of directors breached its fiduciary duties to
TQC’s shareholders. The case settled, and the trial court entered judgment for approval of the
settlement on April 15, 2004. The maximum aggregate amount that could be received by the
plaintiffs in this case is approximately $1.8 million. A hearing was held on July 17, 2008,
whereby the court granted approval to distribute a settlement amount to the class members of
approximately $293,600, which was completed at the end of the 3rd
quarter of 2008.
Esmat “Sam” Elhilu and Haytham Kafouf, et al. v. Quizno’s Franchising Company,
LLC, et al., Case No. CV 06 7855 FMC (CTx) (United States District Court for the Central
District of California), filed in California state court (and subsequently removed) on
November 14, 2006, as a putative class action by 2 QUIZNOS franchisees. The defendants are
QFA and certain of its affiliates including Schaden. Plaintiffs asserted claims for violation of the
California Franchise Investment Law, conspiracy based on alleged misrepresentations relating to
site selection and violations of the California unfair competition and false advertising laws. The
complaint sought, among other things, an unspecified amount of damages, costs, and attorneys
fees. The parties entered into a settlement agreement on March 30, 2009, which was approved
by the court on December 8, 2009. Under the settlement, approximately 260 members of the
class who have non-terminated QUIZNOS franchise agreements are entitled to payments
between $50 and $8,175 in exchange for a termination of their franchise agreements.
Alternatively, franchisees in this group can elect to remain franchisees and receive a credit equal
to the initial franchise fee toward equipment and other purchases. Another 300 class members
whose franchise agreements had been terminated were entitled to payments ranging from $250 to
$500.
Gause v. Geronimo Financial, Inc. and David Prokupek, Civil Action No. 08CV1458
(District Court for the City and County of Denver, Colorado). On March 4, 2008, Marshall
Gause, a former employee of Geronimo Financial, Inc. (“Geronimo”), filed a complaint against
Geronimo and David Prokupek, asserting several claims related to the termination of his
employment, and he later amended his complaint to include a claim that debt re-payments made
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by Geronimo to Mr. Prokupek constituted a fraudulent conveyance. Without admitting liability,
the parties entered into a Confidential Settlement and Release Agreement on September 3, 2009,
in which Gause agreed to dismiss the lawsuit against Geronimo and Mr. Prokupek in exchange
for a payment of $300,000.
On August 13, 2010, the United States District Court for the Northern District of Illinois
granted final approval of the settlement agreement the parties in the following 4 cases entered
into on October 27, 2009 affecting all 4 cases:
Raymond Bonanno, et al., individually and on behalf of others similarly
situated v. The Quizno’s Master LLC, et al., Civil Action No. 1:06-cv-2358-WYD-
BNB (United States District Court for the District of Colorado), (filed on February 16,
2006, as a putative class action by 6 QUIZNOS franchisees who never opened
Restaurants. The defendants were QFA and certain of its affiliates, Schaden and certain
former QUIZNOS employees. The plaintiffs asserted claims for fraudulent inducement,
violation of the covenant of good faith and fair dealing, duty, unjust enrichment, breach
of contract, violation of the Colorado Consumer Protection Act, common law conspiracy
and economic duress. The complaint sought, among other things, an unspecified amount
of damages, rescission of plaintiffs’ franchise agreements, and injunctive relief to prevent
future sales of QUIZNOS franchises in New Jersey.
Fred N. and Michana A. Westerfield, et al. v. The Quizno’s Franchise
Company LLC, et al., Case No. 06-C-1210 (United States District Court for the Eastern
District of Wisconsin, Green Bay Division), originally filed, as a putative class action, on
November 20, 2006 by 12 current and former QUIZNOS franchisees. The defendants
were QFA and certain of its affiliates, Meyers, Cervantes, Cervantes Master LLC,
Schaden, and Richard F. Schaden. The complaint asserted claims for violation of the
federal RICO statute, Section 1 of the Sherman Act, the Wisconsin Fair Dealership Law,
the Wisconsin Deceptive Trade Practices Act, Wisconsin Statute Section 895.446
(property damage or loss), Wisconsin Statute Section 134.01 (injury to business), the
Wisconsin Franchise Investment Law, fraud in the inducement, breach of contract,
fraudulent concealment, breach of the implied covenant of good faith and fair dealing,
unjust enrichment, promissory fraud, strict liability misrepresentation, economic duress,
illusory contract, breach of fiduciary duty, and declaratory judgment, all allegedly arising
out of the sale of franchises and the subsequent sale to franchisees of certain products or
services. The complaint sought unspecified preliminary and permanent injunctive relief,
and an unspecified amount of damages.
Ilene Siemer, et al. v. The Quizno’s Franchise Company LLC, et al., Case No.
07 CV 2170 (United Stated District Court for the Northern District of Illinois), filed on
April 19, 2007, as a putative class action by 5 current and former QUIZNOS franchisees.
The defendants were QFA and certain of its affiliates, Meyers, Cervantes and Cervantes
Master LLC, Schaden and Richard F. Schaden. The plaintiffs asserted claims for
violation of the federal RICO statute, the Illinois Franchise Disclosure Act, the Illinois
Consumer Fraud and Deceptive Business Practices Act, conspiracy, unjust enrichment,
promissory fraud, economic duress, illusory contract, breach of fiduciary duty, and
declaratory judgment and for fraud in the inducement, breach of contract, and breach of
the covenant of good faith and fair dealing, all allegedly arising out of the sale of
franchises and the subsequent sale to franchisees of certain products or services. The
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complaint sought unspecified preliminary and permanent injunctive relief, and an
unspecified amount of damages.
Bonnie Brunet, et al. v. The Quizno’s Franchise Company LLC, et al., Case
No. 1:07-cv-01717-EWN-KLM (United States District Court for the District of
Colorado), filed on August 14, 2007, as a putative class action by 15 current and former
QUIZNOS franchisees. The defendants were QFA and certain of its affiliates, Cervantes
Capital LLC, Schaden, Richard F. Schaden, Meyers, Cervantes and Cervantes Master
LLC. The complaint asserted claims for violation of the federal RICO statute, the
Colorado Consumer Protection Act, common law fraud, breach of contract, breach of the
implied covenant of good faith and fair dealing, economic duress declaratory judgment,
unjust enrichment, promissory fraud, illusory contract, and breach of fiduciary duty. The
complaint sought unspecified preliminary and permanent injunctive relief, declaratory
relief, and unspecified compensatory, consequential and statutory damages and
exemplary, punitive and treble damages.
By the terms of the settlement agreement, putative class members of Bonnano v. The
Quizno’s Master LLC (the “SNO Class Action”) who previously executed a release against
QUIZNOS are entitled to receive a settlement payment between $250 to $500. Settlement
payments for the remaining putative SNO Class Action members who choose to exit the system
range from approximately $500 to $8,175, representing 5% to 32.7% of the initial franchise fee
paid. Alternatively, putative SNO Class Action members who elect to remain franchisees are
entitled to receive a credit towards equipment and supplies for their QUIZNOS Restaurant in an
amount equal to the amount of the initial franchise fee paid. Settlement payments for putative
class members of Westerfield v. The Quizno’s Franchise Company LLC, Siemer v. The Quizno’s
Franchise Company LLC, and Brunet v. The Quizno’s Franchise Company LLC range from $475
to $3,150 per franchise agreement. In addition to the above settlement payments to qualified
class members, under the settlement agreement, QUIZNOS agreed to make certain modifications
to its franchise model and business practices. The above cases were dismissed with prejudice on
August 18, 2010 (Bonanno), August 17, 2010 (Westerfield), August 16, 2010 (Brunet) and
August 13, 2010 (Siemer), respectively.
Joe Martrano, et al, v. The Quizno’s Franchise Company LLC, et al, Case No. 08-cv-
00932 (United States District Court for the Western District of Pennsylvania), filed by 7 current
and former QUIZNOS franchisees on July 3, 2008, as a putative class action. The defendants
were QFA and certain of its affiliates, Cervantes Capital LLC, Schaden, and Richard F. Schaden.
The complaint asserted claims for violation of the federal RICO statute, Section 1 of the Sherman
Act, certain Pennsylvania statutes, for fraud in the inducement, breach of contract, and for breach
of the covenant of good faith and fair dealing, all allegedly arising out of the sale of franchises
and the subsequent sale to franchisees of certain products or services. The complaint sought
unspecified preliminary and permanent injunctive relief, and an unspecified general, multiple,
and treble amount of damages. On June 15, 2009, the court denied defendants’ motion to
dismiss plaintiff’s second amended complaint. Defendants filed counterclaims against plaintiffs
for breach of contract on July 14, 2009. On June 8, 2010, plaintiffs filed a motion to withdraw
class certification, which motion was granted on June 9, 2010. Defendants filed amended
counterclaims against plaintiffs on December 31, 2010. In February 2011, the parties stipulated
to the dismissal of 1 of the 13 plaintiff parties, and in June 2011, the defendants filed motions for
summary judgment with respect to all claims of each of the 12 remaining plaintiffs, and the
plaintiffs filed a motion for summary judgment against the defendants’ counterclaims. On
January 4, 2012, defendants entered into a settlement agreement with 11 of the plaintiff parties,
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which included mutual general releases, and defendants additionally agreed to pay such plaintiff
parties $500,000. Also on January 4, 2012, defendants entered into a settlement agreement with
the remaining plaintiff party, which included mutual general releases, and defendants also agreed
to waive the post-termination covenant not to compete contained in the plaintiff party’s franchise
agreement. On January 6, 2012, the court dismissed the plaintiff parties’ and defendants’ claims
against each other with prejudice.
Other than the above disclosed actions, no litigation is required to be disclosed in this
Item.
ITEM 4
BANKRUPTCY
No bankruptcy is required to be disclosed in this Item.
ITEM 5
INITIAL FEES
Development Fee. Under the Multi-Unit Development Agreement, you agree to pay us a
multi-unit development fee upon signing the Multi-Unit Development Agreement. The multi-
unit development fee (“Development Fee”) equals $20,000 multiplied by the number of
Restaurants (other than the first Restaurant) required to be developed under the Multi-Unit
Development Agreement. Typically, a Multi-Unit Developer should expect to develop 2 to 25
Restaurants, depending on the size of the Development Area, and the range of the Development
Fee for the developed Restaurants will range from $40,000 to $520,000. We credit the
Development Fee, in $20,000 increments, toward the initial franchise fee that is due as Franchise
Agreements are signed (excluding the first Franchise Agreement) until the aggregate amount of
such credits equals the Development Fee. Depending on the number of Restaurants to be
developed, the Multi-Unit Developer will have between 3 to 5 years to complete the
Development Schedule. We will fully earn the Development Fee when you pay it, and you must
pay us the fees in one lump sum. These fees are non-refundable.
Initial Franchise Fees. When you sign the Multi-Unit Development Agreement, you
also sign the Franchise Agreement and pay the initial franchise fee of $40,000 for the first
Franchise that you are required to acquire under the Multi-Unit Development Agreement. For
each other Restaurant, once we approve the site and before you execute a lease or otherwise gain
possession of the site, you or an Approved Affiliate must sign the Franchise Agreement and pay
an initial franchise fee. Under your Multi-Unit Development Agreement, the amount of the
initial franchise fee for each Franchise Agreement you enter into with us during the original term
of the Multi-Unit Development Agreement will be the lower of our then-current initial franchise
fee or the standard initial franchise charged by us as of the date you sign the Multi-Development
Agreement. We will fully earn the initial franchise fee due under each Franchise Agreement
when you pay it, and you must pay us the fee in one lump sum. These fees are non-refundable.
If you are executing a Franchise Agreement for an existing SMASHBURGER
RESTAURANT that you are buying from another franchisee, we will not charge an initial
franchise fee, but you or the seller of the existing SMASHBURGER RESTAURANT must pay
the transfer fee due under the seller’s Franchise Agreement.
Lease Review Fee. Under the Franchise Agreement, you must pay us or our designated
supplier (which may be an affiliate of ours) a lease review fee of $1,500. If you fail or you
refuse to sign the approved lease and then submit one or more subsequent leases for us to review
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and approve, for each such subsequent lease, you will pay an additional Lease Review Fee of $1,500. The Lease Review Fee covers the expenses incurred to review and negotiate your lease (if we choose to do so). Our approval of your lease is required and the Lease Review Fee is not refundable under any circumstances.
ITEM 6 OTHER FEES
TYPE OF FEE1 AMOUNT DUE DATE REMARKS
Royalty5 Paid at 5% of Gross Sales subject to the following adjustment: (1) if Gross Sales during a fiscal year exceed $1,200,000, the Royalty rate, as of the 1st day of the immediately succeeding fiscal year, will be 6% of Gross Sales; and (2) if Gross Sales during a fiscal year are $1,200,000 or less, the Royalty rate, as of the 1st day of the immediately succeeding fiscal year, will be 5% of Gross Sales6
Weekly, but with the quarterly adjustment (if any) due within 10 days after the end of the calendar quarter
“Gross Sales” include all revenue derived from operating the Restaurant, but (1) excludes sales, use, or service taxes and (2) documented refunds, credits and discounts to customers and employees. Gift certificate, gift card or similar program payments are included when the gift certificate, gift card, other instrument or applicable credit is redeemed. Gross Sales also include all insurance proceeds received for loss of business due to a casualty to or similar event.
Lease Review Fee $1,500 As incurred Fee for review and if we choose, the negotiation of certain provision of premises lease. Fee is charged for each subsequent lease review, if you refuse to sign the approved lease and, as a result, we are required to review additional leases.
Proprietary Software Fee
We do not currently charge this fee. We estimate that this fee will range between $150 to $250 per month if implemented
Monthly If developed, fee for proprietary software or technology licensed to you. The amount shown is merely an estimate as we currently do not have proprietary software that we license to you.
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TYPE OF FEE1 AMOUNT DUE DATE REMARKS
On-site Opening
Assistance
$1,000 to $5,500 As incurred We will bear the expenses for the 1st
two SMASHBURGER
RESTAURANT opened by you or
your affiliates; if, in our judgment, we
determine it to be necessary to also
send a representative to the site to
provide grand opening assistance for
the third or subsequent Restaurants,
you will be responsible for
reimbursing us the costs and expenses
incurred by our representative,
including the costs of travel, lodging,
meals and a per diem to cover the
representative’s salary.
Marketing Fund 1% to 4% of Gross Sales2 Weekly
Local Advertising
Cooperative3
Up to 3% of Gross Sales Weekly Co-op will administer advertising
programs and develop advertising,
marketing and promotional materials
for an area with more than 2
SMASHBURGER RESTAURANTS.
The total amount that you will be
required to spend for Marketing Fund,
local advertising and Local
Advertising Cooperative will not
exceed 5% of Gross Sales.
Website
Maintenance Fee
We do not currently charge
this fee. We estimate that
this fee will be $50 per month
if implemented.
Monthly You must provide required
information and updates. If you are in
default of the Franchise Agreement,
your website may be removed until
defaults are cured.
Interest on Late
Payment
2% per month or the
maximum rate allowed by
applicable state law,
whichever is lower.
$100 per returned check
As incurred You pay interest on amounts owed
after due date. Service fee of $100 per
occurrence for checks returned due to
insufficient funds.
Transfer Fee –
Franchise
Agreement
50% of then-current initial
franchise fee for each
Restaurant
As incurred See Section 12.C (9) of the Franchise
Agreement.
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TYPE OF FEE1 AMOUNT DUE DATE REMARKS
Transfer Fee –
Multi-Unit
Development
Agreement
(i) the greater of 10% of the
purchase price or $35,000,
plus applicable goods and
services taxed thereon; or (ii)
the greater of 5% of the
purchase price or $25,000,
plus applicable goods and
services taxed thereon4
As incurred See Section 6(A)(1)(h) of the Multi-
Unit Development Agreement.
Renewal Fee 50% of then-current initial
franchise fee
Upon renewal See Section 13 of the Franchise
Agreement.
Inspection and
Audit Fee
Costs of inspection
(estimated to be between
$1,000 to $15,000)
Within 15
days of report
receipt
You pay fee if examination was done
because you failed to provide required
reports or reveals a Royalty or
Marketing Fund contribution
understatement exceeding 2% of the
amount that you actually reported.
Management Fee 10% of Gross Sales plus costs
and expenses
As incurred We may assume management of your
Restaurant, if: (1) you abandon or fail
to actively operate your Restaurant;
(2) you fail to comply with any
provision of this Agreement or any
System Standard and do not cure the
failure within the specified time
period; or (3) this Agreement expires
or is terminated and we are deciding
whether to exercise our option to
purchase your Restaurant. We will
exercise our right to assume
management in 90-day increments,
renewable for up to 1 year, in the
aggregate. We will periodically
discuss with you the results of
operation during the time we manage
the Restaurant.
Product testing Variable (estimated to be
between $0 to $250)
As incurred Fee charged for testing samples of
proposed new suppliers.
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TYPE OF FEE1 AMOUNT DUE DATE REMARKS
Additional training Then-current per diem
charge, currently $250
As incurred Initial training is provided for up to 3
people. However, if additional
training is required or re-training is
required, you must pay additional
training fee. We may charge you for
training newly-hired personnel; for
refresher training courses; and for
additional or special assistance or
training you need or request.
Recruiting Fee 200% of the annual salary of
such person recruited
As incurred Fee is due to us if you recruit or hire
any person then employed, or who was
employed within the immediate
preceding 24 months, as a general
manager or assistant manager at any
SMASHBURGER RESTAURANT or
as our district manager, regional
manager or corporate executive. See
Section 7(c) of the Franchise
Agreement.
Insurance $5,000 to $15,000 As incurred If you fail to obtain and maintain
insurance, we may, at our option,
obtain or reinstate the insurance for
you and you must promptly reimburse
us for the cost of the insurance plus a
reasonable fee for our services and our
out of pocket expenses.
Indemnification Will vary under
circumstances
As incurred You must reimburse us and our
affiliates if any of us are held liable for
claims related to your Restaurant’s
operations.
Costs and
Attorneys’ Fees
Will vary under
circumstances
As incurred Payable only if you do not comply
with the Franchise Agreement or
Multi-Unit Development Agreement.
Marketing Will vary under
circumstances
As incurred We may, with your approval,
advertise, market and promote your
Restaurant on your behalf. In the
event that we undertake such
activities, you must reimburse us for
all costs we incur.
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TYPE OF FEE1 AMOUNT DUE DATE REMARKS
Music Fee Currently ranges from $37.95
to $47.95 (plus applicable
taxes) per month
Monthly For music services provided by the
required vendor to your Restaurant.
Smashburger Purchasing pays the
vendor directly, then initiates an ACH
from your bank account to reimburse
it for the amount owed.
Pest Control
Services
Currently ranges from $46.95
to $77.95 (plus applicable
taxes) per month
Monthly For pest control services provided by
the required vendor to your
Restaurant. Smashburger Purchasing
pays the vendor directly, then initiates
an ACH from your bank account to
reimburse it for the amount owed.
Customer Survey Currently $40 per month Monthly For customer survey services provided
by the required vendor to your
Restaurant. Smashburger Purchasing
pays the vendor directly, then initiates
an ACH from your bank account to
reimburse it for the amount owed.
Gift Card Service Currently $80 to $90 per
month
Monthly The cost of managing the gift card
program and replenishing your supply
of gift cards. Smashburger Purchasing
pays the vendor directly, then initiates
an ACH from your bank account to
reimburse it for the amount owed.
NOTES
1. All fees are imposed by and payable to us. All fees are non-refundable. These fees may
not be uniform for franchisees signing the Franchise Agreement. Unless otherwise indicated, fees
are due under the Franchise Agreement.
2. Initially, you will contribute 1% of Gross Sales to the Marketing Fund. However, at any
time and on notice to you, we may increase the amount you must contribute to the Marketing
Fund, up to 4% of Gross Sales, provided that in no event will you be required to contribute or
spend, in the aggregate, more than 5% of Gross Sales on Marketing Fund contributions, local
marketing requirement, and the required contribution to a Local Advertising Cooperative
contributions.
3. If a Local Advertising Cooperative is established for a geographic area that includes the
Restaurant, you must contribute to it. Generally, the maximum you would be required to
contribute to a Local Advertising Cooperative is 3% of Gross Sales. However, we reserve the
right, on notice, to require you to pay to us or our designee any monies you are required to spend
on local marketing, in which case, we or our designee would spend those monies, in accordance
with local Restaurant marketing guidelines and programs we develop from time to time, to
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advertise and promote the Restaurant on your behalf. We also have the right to contribute those
monies to the Marketing Fund or to a Local Advertising Cooperative.
4. If the sale is completed prior to the 3rd
anniversary of the effective date of the Multi-
Unit Development, the amount calculated under clause (i) would be due; if the sale is completed
on or after the 3rd
anniversary of the effective date of the Multi-Unit Development Agreement,
the amount calculated under clause (ii) would be due.
5. If you sign a Multi-Unit Development Agreement, the amount of the royalty for each
Franchise Agreement you or an Approved Affiliate signs during the original term of the Multi-
Unit Development Agreement will be the lower of our then-current royalty or the standard
royalty charged by us as of the date you signed the Multi-Unit Development Agreement.
6. If the Restaurant begins operation on or after November 1 of a calendar year, its Gross
Sales shall not be considered for purposes of adjustment until the 2nd full fiscal year after it
began operations.
ITEM 7
ESTIMATED INITIAL INVESTMENT1
YOUR ESTIMATED INITIAL INVESTMENT
(MULTI-UNIT DEVELOPMENT AGREEMENT)
TYPE OF
EXPENDITURE AMOUNT
METHOD OF
PAYMENT WHEN DUE
TO WHOM
PAYMENT IS
MADE
Initial Fee for first
Restaurant
$40,000 As incurred When you sign
the Multi-Unit
Development
Agreement.
Us
Fee for Multiple
Restaurants (See
Item 5)1
$20,000 multiplied
by the number of
Restaurants under
the Development
Schedule (less the
first Restaurant)
Lump Sum When you sign
the Multi-Unit
Development
Agreement.
Us
Total Estimated
Initial Investment2
$80,000
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NOTES
1. Your actual costs will depend on the number of Restaurants you are to develop under the
Development Schedule. Assuming you are to develop and open 3 Restaurants, the total
estimated initial investment equals $80,000 ($40,000 for first restaurant plus the sum of $20,000
multiplied by 2 additional Restaurants). We apply this fee, in $20,000 increments, toward the
Initial Franchise Fee due under each Franchise Agreement (excluding the first Franchise
Agreement) signed by you or an Approved Affiliate in accordance with the Development
Agreement.
2. We make no representation that your costs will come within the ranges estimated and
cannot guarantee that you will not incur additional expenses entering into a Multi-Unit
Development Agreement.
YOUR ESTIMATED INITIAL INVESTMENT
(FRANCHISE AGREEMENT)
TYPE OF
EXPENDITURE AMOUNT
METHOD
OF
PAYMENT
WHEN DUE
TO WHOM
PAYMENT IS TO BE
MADE
Initial Franchise Fee1 $40,000 Upon signing
Franchise
Agreement
Lump Sum Us
Leasehold
Improvements2
$100,000 –
$325,000
As Invoiced As arranged Landlord/Affiliates
/Contractors
Furniture, Fixtures
and Equipment3
$100,000 –
$180,000
Before
Opening
As Invoiced Affiliate or Approved
Supplier
Signage $8,000 –
$20,000
Before
Opening
As Invoiced Affiliate or Approved
Supplier
IT, POS System $15,000 –
$30,000
Before
Opening
As Invoiced Affiliate or Approved
Supplier
Three Month’s Rent4 $6,000 -
$33,000
Landlord
Security Deposit,
Business Licenses5, 8
$5,000 –
$15,000
As incurred As invoiced Landlord and
Suppliers,
Professional Svc.
Firms
Opening Inventory
and Supplies6
$5,000 –
$10,000
Before
Opening
As Invoiced Affiliate or Approved
Supplier
Grand Opening
Advertising7
$10,000 -
$25,000
Before
Opening
As Invoiced Affiliate or Approved
Supplier
Training Expenses8, 9
$5,000 –
$35,000
Before
Opening
As Invoiced Affiliate or Approved
Supplier
Miscellaneous
Opening Costs9
$500 –
$10,000
Before
Opening
As Invoiced Affiliate or Approved
Supplier
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TYPE OF EXPENDITURE
AMOUNT METHOD
OF PAYMENT
WHEN DUE TO WHOM
PAYMENT IS TO BE MADE
Professional Fees $5,000 – $15,000
Before Opening
As Invoiced Affiliate or Approved Supplier
Insurance Premium10 $5,000 – $15,000
Before Opening
As Invoiced Insurance Carrier
Liquor Licensing11 $1,500 – $15,000
Before Opening
As Invoiced Affiliate or Approved Supplier
Lease Review Fee $1,500 Before Opening
Upon Submission of Lease for Review
Us, Affiliate or Approved Supplier
Additional Funds - 3 months12
$10,000 – $20,000
As incurred As invoiced Suppliers and Employees
TOTAL ESTIMATED INITIAL INVESTMENT13
$317,500 - $789,500
NOTES
1. The initial franchise fee is non-refundable under the terms of the Franchise Agreement (See Item 5).
2. Our estimate for leasehold improvements does not include any tenant improvement allowance that may be granted by landlords towards leasehold improvements. Tenant improvement allowances are site specific and dependent upon several variables, including rent, occupancy levels and local market conditions, which are beyond our control.
3. This estimate includes freight, installation, and applicable state and local taxes.
4. The cost of acquiring or leasing a location for your Restaurant will vary significantly depending upon the market in which the proposed site is located. A suitable building for a free standing Restaurant will range in size from approximately 1,600 square feet to 2,200 square feet and will likely cost from $15 to $60 per square foot per year. Local market conditions, changes in the economy and inflation will all contribute to your real property costs. The location of the parcel of real property, its relationship to and the nature of any adjoining uses, and its accessibility will affect both its size and price. Lease agreements vary, but usually require the lessee to pay for maintenance, insurance, taxes and any other charges or expenses for the land and building and the operation of the Restaurant or they may require that the Lessee reimburse the Lessor for its proportionate share of these payments (plus interest) made on behalf of the lessee and pay minimum monthly rent or percentage rent. You must get our approval of your proposed lease before signing it.
5. The rent deposit may be refundable under the terms of the lease.
6. Due to differences in local laws, prices, suppliers, geography and commercial practices, you may elect to carry a larger inventory. Local costs will greatly affect this investment.
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7. You must spend a minimum of $10,000 on an approved grand opening advertising
program, but we reserve the right to require you to spend up to $25,000 on the grand opening
advertising program depending on factors such as whether your Restaurant is located in an urban
or rural location.
8. This estimate covers the associated cost for payroll of management and staff training
before the opening of your Restaurant. This includes 4 weeks of training for a managing owner
and a non-owner manager. In addition, for the first 2 SMASHBURGER RESTAURANTS
opened by you or your affiliates, we will send a training team (the identity and composition of
which will be in our discretion) to your Restaurant to assist with the grand opening. We will
bear the expense of providing that representative. If, in our judgment, we determine it to be
necessary to also send a representative to the Restaurant to provide grand opening assistance for
the third or subsequent Restaurants, you will be responsible for reimbursing us the costs and
expenses incurred by our representative, including the costs of travel, lodging, meals and a per
diem to cover the representative’s salary. The estimated budget also takes into consideration the
travel budget for training. Salaries will vary substantially by geographic areas and local market
conditions. The estimated initial investment is subject to substantial variance due to delays and
the securing of the required permits and license to train and operate the business as well as
geographic location (See Item 11).
9. Typical pre-opening expenses include salaries and living expenses for you and your
managers in training, training expenses incurred for staff, pre-opening training menus, related
pre-opening marketing and personnel ads. Additionally, you will likely have to prepay or make
deposits for various utilities such as gas, electricity, sewer, water, telephone, and garbage
disposal. We estimate that these prepaid expenses and deposits will be between $500 and
$5,000. You must obtain state and local licenses, including liquor licenses (see Note 11),
business licenses, vending machine licenses, and games licenses. You may have to post bonds in
order to obtain certain governmental permits.
10. You must, at your own expense, keep in force insurance policies for each Restaurant. We
reserve the right to change types and amounts of coverage. This estimate is based on our current
requirements which are: comprehensive business owners coverage (including contents insurance,
loss of business income, employee dishonesty, money coverage, comprehensive general liability
and liquor liability) for a minimum of $1 million per occurrence and $2 million in the aggregate;
hired/non owned auto liability for a minimum of $1 million; employee practices liability for a
minimum of $1 million; boiler and machinery coverage with a coverage rating of $500,000;
umbrella coverage for a minimum of $1 million; building coverage for at least 80% of
replacement costs (amount dependent upon building value, construction value, and whether
owned or leased property) for building of leased/owned premises; and auto liability for a
minimum of $1 million. You also must maintain workers’ compensation insurance for your
employees. You must provide us with a certificate of insurance naming us and our designated
affiliates as additional insureds and provide us with 30 days prior written notice of material
changes to or cancellation of the policy. Your lease agreement may require higher insurance
limits than those stated above. You will likely have to prepay all or a portion of the first year’s
premiums for insurance.
11. The cost to obtain a liquor license varies greatly depending on the licensing authority
involved and the local liquor license resale market, if any. In our recent experience with our
affiliate-owned restaurants, the cost to obtain a liquor license has run between $1,500 and
$15,000 (including legal fees). Generally, liquor-licensing systems fall into two categories: (a)
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quota-based systems, and (b) non-quota-based systems. In quota-based systems, the total
number of licenses available in a municipality, county or other defined territory is set according
to the number of people within the territory. For example, state law may limit the total number
of licenses available to one per every two thousand persons. Once the licensing authority has
issued the total number of licensees according to the population, the licensing agency will not
issue any additional new licenses until a new census is taken that shows an increase in population
or until an existing permit expires or is revoked. Most often in quota-based systems, parties
seeking licenses will not wait for the next census or wait for a license to expire. Instead, they
will purchase a license from an existing licensee. In such situations, the cost of obtaining a
license can be substantially greater than the cost of obtaining a license directly from the licensing
authority. The new licensee will not only pay fixed license fees to the state, but it will also pay
the purchase price to the transferor plus fees for attorney’s services and service providers. The
licensing agency may or may not regulate the price. The price may simply be set by the market
for licenses in a particular location, and that could inflate the price significantly. You should
carefully review the system of liquor licensing in your state and review the expected range of
costs, if your Restaurant is located in a quota state. In state systems that are not quota-based, the
cost of obtaining a state license is usually limited to the fee prescribed by statute or
administrative regulation, plus fees for attorney’s services and service providers. However, there
may be additional costs imposed by a need to obtain a municipal and/or county liquor license,
conditional use permit or other governmental approval. There are also Federal tax permits
required.
12. Our estimates of the amounts needed to cover your expenses for the start-up phase (i.e., 3
months from the date the Restaurant opens for business) of your business include: replenishing
your inventory, lease payments, initial advertising and promotional expenditures, payroll for
managers and other employees, uniforms, utilities and other variable costs. These figures are
estimates and we cannot assure you there will not be additional expenses. Your actual cost will
depend on factors including management skill, experience, business acumen, local economic
conditions, local market for casual dining, prevailing wage rates, competition and the sales level
reached during the start-up phase. These amounts do not include any estimates for debt service
on loans that you obtain to finance your business.
13. We make no representation that your costs will come within the ranges estimated and
cannot guarantee that you will not incur additional expenses starting a SMASHBURGER
RESTAURANT. Your actual costs will depend on factors such as: geography, the availability of
sites; your Restaurant size and location; construction costs; your discretionary expenditures; the
availability of leasing or financing arrangements; your credit rating; and other factors.
The estimated initial investment figures shown above for constructing and opening a
Restaurant are based primarily on the costs incurred by our affiliates in opening
SMASHBURGER RESTAURANTS in the past four and a half years. Because these figures are
only estimates, it is possible both to reduce and to exceed costs in any of the areas listed above.
Actual costs will vary depending on physical size and current condition of the premises. In
addition, actual costs may substantially exceed these estimates in a major metropolitan market.
To avoid excessive construction costs, we require that you pick contractors carefully by
obtaining several competitive bids beforehand. These estimates do not include extensive exterior
renovations. You should review all figures in this Item 7 carefully with a business advisor
before you decide to purchase the franchise. Neither we nor our affiliates offer financing directly
or indirectly for any part of the initial investment. The availability and terms of financing
depend on the availability of financing generally, your creditworthiness and collateral, and
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lending policies of financial institutions. The estimate does not include any finance charge,
interest, or debt service obligation.
ITEM 8
RESTRICTIONS ON SOURCES OF PRODUCTS AND SERVICES
In order to maintain the quality and uniformity of all food products, menu items,
ingredients, services, products, materials, forms, items, supplies, fixtures, furnishings and
equipment utilized in or by SMASHBURGER RESTAURANTS, you must purchase all food
products, ingredients, condiments, fixtures, furnishings, equipment, decor items and signage
from suppliers approved by us in writing. We may designate ourselves or an affiliate as an
approved supplier of food and related products and services. We will provide a list of approved
suppliers and approved food products, ingredients and condiments, including designation by
brand and our standards and specifications, as contained in the Standards of Operations Manual
(see Item 11) or otherwise in writing. You must strictly comply with the standards and
specifications and comply with all required purchases of products and services from approved
suppliers and in conformity with our standards and specifications. All menu items and food
products must be prepared in strict compliance with the recipes and the procedures we specify in
the Standards of Operations Manual, or otherwise in writing. You must offer and sell all, and
you are permitted to offer and sell only, those food products and menu items and services that we
have specifically approved in writing. You may not deviate from our approved menu items
without prior written approval from us. As of the date of this Disclosure Document, none of our
officers owns an interest in any approved suppliers.
In constructing and operating the Restaurant, you must use only those types of food
items, condiments, construction and decorative materials, fixtures, equipment, furniture and
signs (“Operating Assets”) that we have approved according to our specifications and standards
for appearance, function and performance. We develop the specifications and standards in our
sole discretion. We will not issue to you or to our approved suppliers (except as we deem
necessary for purposes of production) the specifications and standards for proprietary Operating
Assets. We will communicate the approved Operating Assets to you in the prototype
architectural plans for a SMASHBURGER RESTAURANT, in the Standards of Operations
Manual, and otherwise in writing.
You may purchase approved Operating Assets from (and only from) any supplier
approved or designated by us (which may include us or our affiliates). You must purchase
computer hardware and software from our designated suppliers. We, our affiliates or our officers
are not currently designated suppliers of approved Operating Assets, but we reserve the right to
do so in the future. We or our affiliates may derive revenue or profit from such transactions. We
maintain approved supplier criteria; however, we do not issue these criteria to you.
If you propose to purchase any unapproved Operating Assets from any supplier or any
item which has not been specifically approved by us in writing, you must first notify us in
writing, using our vendor approval process and application, and submit to us sufficient
specifications, photographs, drawings and other information or samples for us to determine
whether the proposed Operating Assets comply with our specifications and standards, and the
supplier meets our approved supplier criteria, which determination will be made and
communicated in writing to you within a reasonable time, typically within 30 days after receipt
of the information from you or from the proposed supplier. We may charge you a fee for testing
and evaluating suppliers and may impose limits on the number of approved suppliers. We will
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make an effort to communicate our approval or denial within a reasonable time after completion
of the investigation of the proposed supplier/vendor.
We have developed and may continue to develop for use by SMASHBURGER
RESTAURANTS certain products that are prepared from confidential secret recipes and other
proprietary products that bear our Marks. If those products become a part of the Franchise
System, we may require you to purchase those items solely from us, our affiliate or from another
designated supplier. We and our affiliates do not currently sell any products to franchisees, but
we reserve the right to do so in the future.
In order to standardize and enhance the customers’ experience in SMASHBURGER
RESTAURANTS, we require you to use our designated vendors (i) for music services, (ii) pest
control services, (iii) customer satisfaction surveys, and (iv) gift card management services. In
each case, we or our affiliates have negotiated system-wide agreements with the vendors for an
agreed upon price per restaurant. We or our affiliates pay the vendors directly, then ACH your
bank account for your restaurant’s respective cost.
In some cases, we or our affiliates will negotiate purchase arrangements, including prices
and terms, with designated and approved suppliers on behalf of SMASHBURGER
RESTAURANTS. We or our affiliates may derive revenue from those arrangements, typically
in the form of marketing support payments or rebates based on purchases made by us, our
affiliates or our franchisees of the products or services supplied by the approved supplier. The
basis for rebates paid to us or our affiliates will depend on the type of product or service
supplied, but currently they range from $0.02 to $6.25 per unit (that is, a case, gallon, container
or other purchase unit) for food, beverage and other products and services, and from $100 to
$1,300 per piece of equipment purchased for use in the development and operation of the
restaurant. During 2011, our total revenue was $6,851,000, and we did not receive any revenue
or other consideration from purchases made by our franchisees from approved vendors.
However, during this period, our affiliate, Smashburger Purchasing, received $1,973,444 in
rebates from approved vendors and, in turn, contributed $237,635 back to franchisees under its
franchisee rebate programs. In addition, during 2011, our approved vendors contributed
$245,149 to the Marketing Fund.
As of the date of this Disclosure Document, there are no purchasing or distribution
cooperatives for any of the items described above. All advertising and promotional materials,
signs, decorations, paper goods (including menus and all forms and stationery used in the
Restaurant) and other items we designate must bear the Marks (see Item 13) in the form, color,
location and manner we prescribe. No unauthorized logos, symbols or marks may be placed,
used or displayed on any advertising, menus or promotional items without our express written
consent. Before you may use any advertising or promotional materials, you must submit them to
us and we must approve them in writing.
We estimate that 95% to 100% of your initial investment and 95% to 100% of your
ongoing expenditures will be directed to purchase products and services that will be restricted by
us in some manner. Except as disclosed above, we do not currently receive or derive revenue or
other material consideration from vendors as a result of purchases or leases we require
franchisees to make.
Other than as described above, we do not provide any material benefits to franchisees
based on their use of designated or approved suppliers.
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ITEM 9
FRANCHISEE’S OBLIGATIONS
This table lists your principal obligations under the franchise and other agreements.
It will help you find more detailed information about your obligations in these agreements
and in other items of this Disclosure Document.
OBLIGATION SECTION IN AGREEMENTS
ITEM IN
DISCLOSURE
DOCUMENT
A. Site selection and
acquisition/lease
Section 2 in Multi-Unit Development Agreement.
Sections 2.A and 2.B in Franchise Agreement
Items 8 and 11
B. Pre-opening
purchases/leases
Not applicable
Sections 2.E and 2.F in Franchise Agreement.
Items 5, 7, 8, and 11
C. Site development
and other pre-
opening
requirements
Section 2 in Multi-Unit Development Agreement.
Section 2 in Franchise Agreement.
Items 7, 8, and 11
D. Initial and ongoing
training
Section 4.A in Franchise Agreement. Item 11
E. Opening Section 2.F in Franchise Agreement. Item 11
F. Fees Section 3 in Multi-Unit Development Agreement.
Section 3 in Franchise Agreement.
Items 5, 6 and 7
G. Compliance with
standards and
policies/ Standards
of Operations
Manual
Sections 4.B, 4.C and 8 in Franchise Agreement. Items 8, 11 and 14
H. Trademarks and
proprietary
information
Section 4 in Multi-Unit Development Agreement.
Section 5 in Franchise Agreement.
Items 13 and 14
I. Restriction on
products/services
offered
Section 8.B in Franchise Agreement. Items 8 and 16
J. Warranty and
customer service
requirements
Section 10.C in Multi-Unit Development
Agreement.
Section 8.E in Franchise Agreement.
None.
K. Territorial
development and
sales quotas
Sections 2.C and 2.D in Multi-Unit Development
Agreement
Item 12
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OBLIGATION SECTION IN AGREEMENTS
ITEM IN
DISCLOSURE
DOCUMENT
L. Ongoing
product/service
purchases
Sections 8.B and 8.D in Franchise Agreement. Item 8
M. Maintenance,
appearance and
remodeling
requirements
Sections 8.A and 8.I in Franchise Agreement. Item 11
N. Insurance Section 8.F in Franchise Agreement. Item 7
O. Advertising Section 9 in Franchise Agreement. Items 6, 8 and 11
P. Indemnification Sections 8.B and 9.B in Multi-Unit Development
Agreement
Sections 5.E, 16.D and 17.J in Franchise
Agreement.
Item 6
Q. Owner’s
participation,
management, and
staffing
Section 1.D in Multi-Unit Development
Agreement.
Section 8.C in Franchise Agreement.
Items 11 and 15
R. Records/reports Section 2.E in Multi-Unit Development
Agreement.
Section 10 in Franchise Agreement.
Items 6 and 11
S. Inspections/audits Section 11 in Franchise Agreement. Items 6 and 11
T. Transfer Section 6 in Multi-Unit Development Agreement.
Section 12 in Franchise Agreement.
Items 6 and 17
U. Renewal Section 1.B in Multi-Unit Development
Agreement.
Section 13 in Franchise Agreement.
Item 17
V. Post-termination
obligations
Sections 7.B and 7.C in Multi-Unit Development
Agreement.
Section 15 in Franchise Agreement.
Item 17
W. Non-competition
covenants
Section 7.C in Multi-Unit Development
Agreement.
Sections 7 and 15.D in Franchise Agreement.
Item 17
X. Dispute resolution Section 9 in Multi-Unit Development Agreement.
Section 17 in Franchise Agreement.
Item 17
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ITEM 10 FINANCING
We do not offer direct or indirect financing. We do not guarantee your promissory notes, mortgages, leases or other obligations.
Under the Multi-Unit Development Agreement and Franchise Agreement, you agree that we may periodically designate the maximum amount of debt that SMASHBURGER RESTAURANTS may service and you (and any Approved Affiliates that execute Franchise Agreements) agree not to borrow more than any such prescribed maximum allowed debt. Currently, the maximum amount of debt we allow a franchisee to service is up to 50% of the estimated total initial investment amount. We periodically may change this amount for SMASHBURGER RESTAURANTS. In addition, you agree that the first 2 SMASHBURGER RESTAURANTS developed pursuant to Franchise Agreements signed under the Multi-Unit Development Agreement must be developed with cash equity and without the proceeds from any loans made by you (or your owners), your affiliates (or their owners) or any other third party. We impose this requirement because excess debt and debt service will adversely affect a SMASHBURGER RESTAURANT’s operational results.
If you sign a Multi-Unit Development Agreement, you must always maintain sufficient liquidity to meet your obligations under the Multi-Unit Development Agreement and, in any event, the liquidity of you and all of our affiliates who sign Franchise Agreements, combined, must not at any time fall below the amount shown in Item 7 of this Disclosure Document as the total estimated initial investment to open one Restaurant ($789,500). We reserve the right to review these liquidity requirements from time to time, and you must comply with such minimum liquidity requirements that we reasonably impose.
ITEM 11 FRANCHISOR’S ASSISTANCE, ADVERTISING, COMPUTER SYSTEMS, AND
TRAINING
Except as listed below, we are not required to provide you with any assistance.
Our Assistance:
We will devote resources to fulfill our obligations to you. However, except as listed below, we need not provide any assistance to you.
Our Pre-opening Obligations.
Before you open the Restaurant, we will provide you the following assistance:
1) Consultation on and approval of sites (Franchise Agreement – Section 2.A; Multi-Unit Development Agreement - Section 2.A)
2) Review and approval of the lease (Franchise Agreement – Section 2.B)
3) Initial training up to 3 persons (including your Designated Manager (defined in Item 15)) at our headquarters or another location designated by us. This training will last at least 4 weeks. (Franchise Agreement – Section 4.A).
4) For the first 2 SMASHBURGER RESTAURANTS opened by your or your affiliates, we will send a training team (the identity and composition of which will be in our discretion)
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to your Restaurant to assist with the grand opening. We will bear the expense of providing
that representative. If, in our judgment, we determine it to be necessary to also send a
representative to the Restaurant to provide grand opening assistance for the third or
subsequent Restaurants, you will be responsible for reimbursing us the costs and expenses
incurred by our representative(s), including the costs of travel, lodging, meals and a per diem
to cover the representative’s salary. (Franchise Agreement – Section 4.A)
5) One set of our Standards of Operations Manuals (as defined below) (Franchise
Agreement – Section 4.C)
6) Specifications for all required equipment (including computer system), furniture,
fixtures, and signs and lists of approved suppliers or vendors (Franchise Agreement –
Sections 2.B, 4.B and 8.D)
Our Post-Opening Obligations.
During the operation of your Restaurant:
1) we will provide you with standards, specifications (for non-proprietary Operating
Assets), and operating procedures and methods that SMASHBURGER RESTAURANTS use
(Franchise Agreement – Section 4.B)
2) we will advise you of what purchasing is required and what authorized Operating
Assets and other products and services are required (Franchise Agreement – Section 4.B)
3) we will provide you assistance with advertising and marketing materials and
programs and approve the same (See “Advertising and Promotion” below) (Franchise
Agreement – Sections 4.B and 9.A through D)
4) we will maintain a website for the promotion of SMASHBURGER RESTAURANTS
(Franchise Agreement – Section 9.E)
5) we will provide you with a list of authorized vendors and suppliers for the products,
goods, merchandise, supplies, signs, furniture, fixtures, equipment and services (Franchise
Agreement – Section 8.D)
Our affiliate, Smashburger Servicing, will perform certain of our obligations listed above.
Advertising and Promotion:
A. Marketing Fund.
You must contribute to a marketing fund for SMASHBURGER RESTAURANTS
(the “Marketing Fund”) an amount equal to 1% of your Gross Sales, payable in the same
manner as the royalty. However, we have the right, at any time and on notice to you, to
increase the amount you must contribute to the Marketing Fund, to up to 4% of Gross Sales.
However, in no event will you be required to contribute or spend, in the aggregate, more than
5% of Gross Sales on Marketing Fund contributions, local marketing requirement, and Local
Advertising Cooperative contributions (defined below). SMASHBURGER
RESTAURANTS that we or our affiliates own in the United States do not contribute to the
appropriate Marketing Fund on the same percentage basis as franchisees. In 2011, our
affiliate, Smashburger Master, made voluntary contributions to the Marketing Fund in the
amount of $1,048,571. We or our affiliates may, but will not be required to, make this kind
of voluntary contribution in the future. During 2011, the Marketing Fund was used to pay for
media production such as website, menu development and branding (16%), media placement
such as promotions, advertising, sponsorships and marketing (71%), other expenses such as
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research (3%) and administrative expenses (10%). No portion of the Marketing Fund was
used to solicit new franchisees. At the end of our fiscal year 2011, there were no excess
funds in the Marketing Fund.
We or our affiliates or other designees will direct all programs that are developed or
presented by the Marketing Fund, with sole control over the creative concepts, materials, and
endorsements used and their geographic, market, and media placement and allocation. The
Marketing Fund may pay for preparing and producing video, audio, and written materials and
electronic media; developing, implementing, and maintaining a Franchise System website
and related strategies; administering regional and multi-regional marketing and advertising
programs, including purchasing trade journal, direct mail, and other media advertising and
using advertising, promotion, and marketing agencies and other advisors to provide
assistance; and supporting public relations, market research, and other advertising,
promotion, and marketing activities. The Marketing Fund will give you samples of
advertising, marketing, and promotional formats and materials at no cost. We will sell you
multiple copies of these materials at our direct cost of producing them, plus any related
shipping, handling, and storage charges.
We will account for the Marketing Fund separately from our other funds and not use
the Marketing Fund for any of our general operating expenses. However, we may use the
Marketing Fund to reimburse ourselves or our affiliates for the reasonable salaries and
benefits of personnel who manage and administer the Marketing Fund, the Marketing Fund’s
other administrative costs, travel expenses of personnel while they are on Marketing Fund
business, meeting costs, overhead relating to Marketing Fund business, and other expenses
that we incur in activities reasonably related to administering or directing the Marketing
Fund and its programs, including conducting market research, public relations, preparing
advertising, promotion, and marketing materials, and collecting and accounting for
Marketing Fund contributions.
The Marketing Fund will not be our asset. We do not owe any fiduciary obligation to
you for administering the Marketing Fund or any other reason. We will hold all Marketing
Fund contributions for the benefit of the contributors. The Marketing Fund may spend in any
fiscal year more or less than the total Marketing Fund contributions in that year, borrow from
us or others (paying reasonable interest) to cover deficits, or invest any surplus for future use.
We will use all interest earned on the Marketing Fund contributions to pay costs before using
the Marketing Fund’s other assets. We will prepare an annual, unaudited statement of
Marketing Fund collections and expenses and give you the statement upon written request.
We may have the Marketing Fund audited annually, at the Marketing Fund’s expense, by an
independent certified public accountant. We may incorporate the Marketing Fund or operate
it through a separate entity whenever we deem appropriate.
We intend for the Marketing Fund to promote recognition of the applicable Marks
and patronage of SMASHBURGER RESTAURANTS generally. Although we will try to
use the Marketing Fund to develop advertising and marketing materials and programs, and to
place advertising and marketing, that will benefit all SMASHBURGER RESTAURANTS
contributing to the Marketing Fund, we need not ensure that Marketing Fund expenditures in
or affecting any geographic area are proportionate or equivalent to Marketing Fund
contributions by SMASHBURGER RESTAURANTS operating in that geographic area or
that any SMASHBURGER RESTAURANT benefits directly or in proportion to its
Marketing Fund contribution from the development of advertising and marketing materials or
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the placement of advertising and marketing. We have the right, but no obligation, to use
collection agents and institute legal proceedings to collect Marketing Fund contributions at
the Marketing Fund’s expense. We also may forgive, waive, settle, and compromise all
claims by or against the Marketing Fund. Except as provided in the Franchise Agreement,
we assume no direct or indirect liability or obligation to you for collecting amounts due to,
maintaining, directing, or administering the Marketing Fund.
We may at any time defer or reduce contributions of a SMASHBURGER
RESTAURANT franchise owner and, upon 30 days’ prior notice to you, reduce or suspend
Marketing Fund contributions and operations for one or more periods of any length and
terminate (and, if terminated, reinstate) the Marketing Fund. If we terminate the Marketing
Fund, we will distribute all unspent monies to our franchise owners who contribute to the
Marketing Fund, and to us and our affiliates, in proportion to their, and our, respective
Marketing Fund contributions during the preceding 12 month period.
B. Cooperative Advertising.
We or our affiliates may establish or direct the establishment of a local advertising
cooperative (“Local Advertising Cooperative”) in geographical areas in which 2 or more
SMASHBURGER RESTAURANTS are operating. The Local Advertising Cooperative will
be organized and governed by written documents in a form and manner, and begin operating
on a date, that we determine in advance. Such written documents will be available for
participating franchisees to review. We may change, dissolve and merge Local Advertising
Cooperatives. Each Local Advertising Cooperative’s purpose is, with our approval, to
administer advertising programs and develop advertising, marketing and promotional
materials for the area that the Local Advertising Cooperative covers. If, as of the time you
sign the Franchise Agreement, we have established a Local Advertising Cooperative for the
geographic area in which your Restaurant is located, or if we establish a Local Advertising
Cooperative in that area during the Franchise Agreement’s term, you must sign the
documents we require to become a member of the Local Advertising Cooperative and to
participate in the Local Advertising Cooperative as those documents require.
If we establish a Local Advertising Cooperative in your geographic area, you must
pay us a weekly Local Advertising Cooperative contribution of up to 3% of your Gross Sales.
Your Local Advertising Cooperative contribution is payable in the same manner as the
royalty. These contributions may be capped based on the provisions of the by-laws adopted
by the local advertising cooperative, subject to our approval. You will pay these monies to
us electronically and we will remit them periodically to the Local Advertising Cooperative.
SMASHBURGER RESTAURANTS that we or our affiliates own in the United States do not
contribute to the appropriate Local Advertising Cooperative on the same percentage basis as
franchisees.
Each SMASHBURGER RESTAURANT contributing to a Local Advertising
Cooperative will have 1 vote on matters involving the activities of the particular Local
Advertising Cooperative. The Local Advertising Cooperative may not use any advertising,
marketing or promotional plans or materials without our prior written consent. We will assist
in the formulation of marketing plans and programs, which will be implemented under the
direction of the Local Advertising Cooperative. Subject to our approval, the Local
Advertising Cooperative will have sole discretion over the creative concepts, materials and
endorsements used by it. The Local Advertising Cooperative assessments may be used to
pay the costs of preparing and producing video, audio and written advertising and direct sales
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materials for SMASHBURGER RESTAURANTS in your geographic area; purchasing direct
mail and other media advertising for SMASHBURGER RESTAURANTS in that geographic
area; and implementing direct sales programs, and employing marketing, advertising and
public relations firms to assist with the development and administration of marketing
programs for SMASHBURGER RESTAURANTS in such geographic area.
The monies collected by us on behalf of a Local Advertising Cooperative will be
accounted for separately by us from our other funds received by us under the Franchise
Agreement and will not be used to defray any of our general operating expenses. You must
submit to us and the Local Advertising Cooperative any reports that we or the Local
Advertising Cooperative requires. Local Advertising Cooperatives are not required to
prepare annual financial statements, nor are they required to provide any prepared financial
statements to participating franchisees for their review.
You understand and acknowledge that your Restaurant may not benefit, either
directly or in proportion to its contribution to the Local Advertising Cooperative, from the
development and placement of advertising and the development of marketing materials.
Local Advertising Cooperatives for SMASHBURGER RESTAURANTS will be developed
separately and no cooperative will be intended to benefit the others. We will have the right,
but not the obligation, to use collection agents and to institute legal proceedings to collect
amounts owed to the Local Advertising Cooperative on behalf of and at the expense of the
Local Advertising Cooperative and to forgive, waive, settle and compromise all claims by or
against the Local Advertising Cooperative. Except as expressly provided in the Franchise
Agreement, we assume no direct or indirect liability or obligation to you with respect to the
maintenance, direction or administration of the Local Advertising Cooperative.
C. Other Advertising Obligations.
You must list and advertise your Restaurant on all major internet search engines (for
example, Google Local and CitySearch) and on all major internet consumer review websites
(for example, Yelp and Urban Spoon) listed in the Standards of Operations Manual and in at
least 1 recommended online or classified telephone directory distributed within the market
area of your Restaurant (in the business classifications we prescribe from time to time) and to
use the form of classified telephone directory advertisement approved by us. If other
SMASHBURGER RESTAURANTS are located within the directory’s distribution area, we
may require you to participate in a collective advertisement with those other
SMASHBURGER RESTAURANTS and to pay your share of that collective advertisement.
You must spend, beginning after you complete your grand opening advertising obligations
discussed below, at least 1% of your Gross Sales each calendar quarter to advertise and
promote your Restaurant (this may include costs of yellow pages advertising); provided,
however, that if you operate 2 or more Restaurants, you must spend at least 3% of your Gross
Sales each calendar quarter to advertise and promote your Restaurants. Any amount of Local
Advertising Cooperative contribution you make will be set off against amounts required to be
spent by you for local advertising. Within 30 days after the end of each month, you must
send to us, in the manner we prescribe, an accounting of your expenditures for local
advertising and promotion during the preceding month. Your local advertising and
promotion must follow our guidelines.
We reserve the right, at any time, to issue you a notice that the amounts required to be
spent by you toward local marketing shall, instead, be paid to us or our designee. If we
exercise this option, we or our designee will spend such amounts, in accordance with local
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SMASHBURGER RESTAURANT marketing guidelines and programs that we develop
from time to time, to advertise and promote the Restaurant on your behalf. We may, in our
discretion, contribute any of these amounts to the Marketing Fund or to a Local Advertising
Cooperative, in which case, the offsets described above will not be applicable.
Your advertising, promotion, and marketing must be completely clear, factual, and
not misleading and conform to both the highest standards of ethical advertising and
marketing and the advertising and marketing policies that we prescribe from time to time. At
least 20 days before you use them, you must send to us for approval samples of all
advertising, promotional, and marketing materials which we have not prepared or previously
approved. If you do not receive written disapproval within 10 days after we receive the
materials, they are deemed to be disapproved. Once we approve the materials, you are
permitted to use them. However, we may, in our discretion, withdraw our approval if a
regulatory or other issue arises that, in our opinion, makes such withdrawal in our or the
Franchise System’s best interest. You may not use any advertising, promotional, or
marketing materials that we have not approved or have disapproved. In addition to your
other advertising obligations, you must spend at least $10,000 and may be required to spend
up to $25,000 (depending on factors such as whether your Restaurant is located in an urban
or rural location) for a grand opening marketing program for your Restaurant to take place on
the dates we designate before and after your Restaurant opens. You must use the media and
materials we develop or approve in connection with the grand opening advertising program.
You may not engage in any promotional or similar activities, directly or indirectly, through
or on the Internet, the World Wide Web, or any other similar proprietary or common carrier
electronic delivery system unless approved by us.
We do not have a franchisee advisory council that advises us on advertising policies,
though we reserve the right to establish such a council in the future.
Computer Hardware and Software
You must purchase an entire computing system approved by us and used by us and other
franchisees to ensure compliance with the standards we specify from time to time in the
Standards of Operations Manual (the “System Standards”). The system currently consists of
software, POS terminals, cash drawers, printers, a personal computer including Microsoft Office,
kitchen video monitors, remote printers, magnetic swipe cards, and DSL or other high speed
connections, firewall, and office printer, related cabling and a maintenance contract.
You must purchase all of the above items from our approved vendor, and currently there
is only one approved vendor, BEC, who is located at 5610 Ward Rd. Suite 200, Arvada, CO
80002, (303) 623-1143. Your computer system will enable you to collect information about
customer orders, sales by hour/day/period and inventory. We will have the ability to access your
cash system and computer. There are no contractual limitations on our and our affiliates’ right to
access this information and data.
Your cost to purchase the entire system will range between $15,000 and $30,000,
depending on many factors. A one year warranty is currently included in the initial purchase.
You will be responsible for paying for access to Menulink and Aloha Help desk for an annual
amount of approximately $1,300 per year. The annual cost of hosting from Menulink will be
approximately $780 per year, although this amount may change from time to time.
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You must upgrade your hardware and software when we decide it to be necessary and at your own cost. We reserve our right to update System Standards, which includes computer hardware and software from time to time and there are no contractual limitations on these rights.
Standards of Operations Manual
We provide guidance through manuals and bulletins, including the operations manual (the “Standards of Operations Manual”), which may include one or more separate manuals as well as audiotapes, videotapes, compact discs, computer software, information available on an Internet site, other electronic media, or written materials. The current Standards of Operations Manual is comprised of 680 pages. The table of contents to the current Standards of Operations Manual is attached as Exhibit G.
Opening of Your Restaurant
You must open your Restaurant within 150 days after you sign a lease for the premises of your Restaurant or one year after you sign the Franchise Agreement, whichever occurs first. If you fail to open your Restaurant within this time, we may terminate the Franchise Agreement and retain the entire franchise fee. Factors that affect this time include obtaining a satisfactory site, financing arrangements, lease negotiations, local ordinances, liquor license, delivery and installation of equipment, and renovation of the premises.
Site Selection
You must obtain and maintain a site acceptable to us for your Restaurant. We will consult with you on a site, which we will approve or disapprove based on factors such as business count, traffic count, accessibility, parking, visibility, competition and liquor license availability. When you have given us all the necessary information on the site you have selected, we generally will approve or disapprove the site within 30 days. Once we approve, and before you obtain possession of the site, you must sign a Franchise Agreement. If you fail to sign a Franchise Agreement within a reasonable time after our approval, we may revoke approval of the site. We will assist you by reviewing the lease and making recommendations regarding terms in the lease, but we recommend that you retain an attorney to assist you. You may not sign a lease without our approval. Our approval of a site or lease is not a guarantee of the success or profitability of the site. If you do not locate and sign a lease or purchase document for an acceptable site within 180 days of signing the Franchise Agreement, we may terminate the Franchise Agreement. We typically do not own or lease the site where your Restaurant is located.
Training
The initial training program involves approximately 4 weeks of training at one of our principal offices (currently, Denver Colorado) or at another location we designate and, for the first Restaurant opened by you or your affiliates, on-site training at your Restaurant immediately before the scheduled opening. We may change the location of the initial training program to another location we designate. You must complete the initial training program before you open your Restaurant. We may lengthen, shorten or restructure the contents of this program. The on-site training at your Restaurant will not commence until all improvements have been completed, a certificate of occupancy has been issued and the required liquor license has been applied for.
The initial training program is mandatory for you and your Designated Manager or your Designated Manager and 1 additional manager. Training materials include management training program materials, team member training materials and the Standards of Operations Manuals.
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You and your Designated Manager or your Designated Manager and 1 additional manager, must
complete the program to our satisfaction. We will schedule the program based on your and our
availability and the projected opening date for your Restaurant. Your expenditures for such
mandatory training will vary depending on the cost of hotel and travel at the time such training
occurs.
The initial training program is designed to cover all phases of the operation of
SMASHBURGER RESTAURANTS. Any individual attending the training who has not signed
the form of Guarantee and Assumption of Obligations attached to the Franchise Agreement must
execute a confidentiality agreement in the form provided by us.
We may require you (or Designated Manager and 1 additional manager) and previously
trained and experienced employees to attend and satisfactorily complete various training courses
that we periodically choose to provide at times and locations that we designate. We will not
require attendance at more than 2 such courses, or for more than a total of 5 business days,
during any calendar year. Besides attending these courses, you agree to attend an annual
meeting of all SMASHBURGER RESTAURANT franchise owners at a location we designate.
Attendance will not be required for more than 3 days during any calendar year.
We do not charge a fee for your Designated Manager, 1 additional manager and 1
additional person (total of 3) for your first 2 SMASHBURGER RESTAURANTS to attend our
initial training program. You will be solely responsible for the compensation, travel, lodging and
living expenses you and your managers incur while attending our initial training program or any
refresher training course.
As of the date of this Disclosure Document, we provide the following initial training:
TRAINING PROGRAM
SUBJECT
Hours of
Classroom
Training
Hours of On-
The-Job
Training
Location
Restaurant
Operations
Listed
below
Listed below At training facility we
designate
Orientation/Training
Overview
5 0 At training facility we
designate
Back of House
Functional Training
N/A 42 At training facility we
designate
Front of House
Functional Training
N/A 42 At training facility we
designate
Restaurant
Management Training
N/A 80 At training facility we
designate
POS/Menulink Training N/A 15 At training facility we
designate
New Restaurant
Opening Procedures
N/A 5 At training facility we
designate
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The hours devoted to each manager positions are estimates and may vary based on how
quickly trainees learn the material, their prior experience with the subject, and scheduling.
On-the-job training includes cross training in all subject areas of the business.
Janice Branam will oversee all training programs. Ms. Branam has been associated with
us and our affiliate, Icon Burger Acquisition LLC since January 2009. She has 26 years of
experience in restaurant operations and 17 years experience in training the subjects taught.
Certain other employees of ours and of our affiliates may also participate in the training
programs.
In addition to the training schedule provided above, for the first 2 SMASHBURGER
RESTAURANTS opened by your or your affiliates, we will send a training team (the identity
and composition of which will be in our discretion) to your Restaurant to assist with the grand
opening. We will bear the expense of providing that representative. If, in our judgment, we
determine it to be necessary to also send a representative to the Restaurant to provide grand
opening assistance for the third or subsequent Restaurants, you will be responsible for
reimbursing us the costs and expenses incurred by our representative, including the costs of
travel, lodging, meals and a per diem to cover the representative’s salary.
ITEM 12
TERRITORY
MULTI-UNIT DEVELOPMENT AGREEMENT
The Multi-Unit Development Agreement grants you the right to acquire franchises to
develop, own and operate SMASHBURGER RESTAURANTS within a designated geographic
area (the “Development Area”) to be described in Exhibit A attached to the Multi-Unit
Development Agreement. However, your Multi-Unit Development Agreement rights do not
include the right to acquire franchises for Special Venue Restaurants, unless we provide our
separate prior written consent with respect to each such proposed Special Venue Restaurant. The
boundaries of the Development Area will be described by counties, states, or other boundaries
when appropriate, or by an area encompassed within a circle having a radius of a specific length.
We will determine in our discretion the Development Area we will offer to you before you sign
the Multi-Unit Development Agreement. We determine the size of the Development Area based
on multiple factors, including demographics, traffic patterns, competition, your capacity to
recruit and provide services in the Development Area, and site availability among other
economic and market factors. The Multi-Unit Development Agreement expires on the required
opening date specified on the Development Schedule for the last Restaurant you are required to
develop under the Multi-Unit Development Agreement. When the Multi-Unit Development
Agreement expires or is terminated, the grant of Multi-Unit Development rights, including the
area protection conferred by the Multi-Unit Development Agreement, terminates. Your right to
use the Franchise System will be limited to those SMASHBURGER RESTAURANTS operating
under Franchise Agreements you (or an Approved Affiliate) may have entered into before the
expiration or termination of the Multi-Unit Development Agreement.
Unless otherwise indicated in the Multi-Unit Development Agreement, you will not
receive an exclusive or protected territory with respect to the Development Area. You may face
competition from other franchisees, from SMASHBURGER RESTAURANTS that we own or
from other channels of distribution or competitive brands that we control. We will be free,
within the Development Area, to grant development rights to others, to grant franchises to others,
and to ourselves to own or operate SMASHBURGER RESTAURANTS, in any event, without
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regard to whether such rights will be in competition with the rights granted to you. Without such
exclusivity, you may be in competition with us or with others to whom we have granted or may
in the future grant development rights or franchises for the Development Area, including with
respect to locating and securing sites for the development of SMASHBURGER
RESTAURANTS.
However, we may in certain circumstances, grant franchisees exclusivity with respect to
the development rights in the Development Area. In the event we grant you such exclusivity, we
will not, except as provided below, establish or license others to establish SMASHBURGER
RESTAURANTS within your Development Area during the term of the Multi-Unit
Development Agreement, so long as you are in compliance with the Multi-Unit Development
Agreement and all your Franchise Agreements. Your failure to comply with the Development
Schedule will be a material breach of the Multi-Unit Development Agreement, which may result
in our terminating the Multi-Unit Development Agreement. You may not engage in any
promotional or similar activities, directly or indirectly, through or on the Internet without our
consent.
Under the Multi-Unit Development Agreement, in addition to our rights described above
if you have not been granted exclusivity, we and our affiliates retain the right to (1) establish,
operate and license others to establish and operate anywhere in the world, Special Venue
Restaurants using the name “Smashburger” and Marks (defined in Item 13 below) and the
Franchise System and System Standards in which SMASHBURGER RESTAURANTS are
developed and operated, offering products and services which are identical or similar to products
and services offered by SMASHBURGER RESTAURANTS, (2) establish, operate and allow
others to establish and operate, SMASHBURGER RESTAURANTS using the Marks and the
Franchise System, at any location outside the Development Area on such terms and conditions
we deem appropriate; (3) establish, operate, and allow others to establish and operate,
restaurants, that may offer products and services which are identical or similar to products and
services offered by SMASHBURGER RESTAURANTS, under other trade names, trademarks,
service marks and commercial symbols different from the Marks; (4) operate or license others to
operate a SMASHBURGER RESTAURANT that we or our designee acquires from a franchisee
as a result of the exercise of our right of first refusal or right to purchase as provided in the
Franchise Agreement, and (5) establish, operate and allow others to establish and operate other
businesses and distribution channels (including, but not limited to, the Internet), wherever
located or operating and regardless of the nature or location of the customers with whom such
other businesses and distribution channels do business, that operate under the Marks or any other
trade names, trademarks, service marks or commercial symbols that are the same as or different
from SMASHBURGER RESTAURANTS, and that sell products or services that are identical or
similar to, or competitive with, those that SMASHBURGER RESTAURANTS customarily sell.
In addition, we specifically retain the right under the Multi-Unit Development Agreement to (1)
acquire the assets or ownership interests of one or more businesses including Competitive
Businesses (as defined in Item 17), and franchising, licensing or creating similar arrangements
with respect to such businesses once acquired, wherever these businesses (or the franchisees or
licensees of these businesses) are located or operating (including in the Development Area), (2)
be acquired (whether through acquisition of assets, ownership interests or otherwise, regardless
of the form of transaction), by any Competitive Business, even if such business operates,
franchises or licenses such businesses in the Development Area, (3) operate or grant a third party
the right to operate any SMASHBURGER RESTAURANTS that we or our designees acquire as
a result of an exercise of a right of first refusal or purchase right under a Franchise Agreement,
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and(4) engage in all other activities not expressly prohibited by the Multi-Unit Development
Agreement.
We are not required to pay you if we exercise any of the rights specified above inside or
outside your Development Area.
FRANCHISE AGREEMENT
You will not receive an exclusive or protected territory. You may face competition from
other franchisees, from SMASHBURGER RESTAURANTS that we own or from other channels
of distribution or competitive brands that we control. The Franchise Agreement grants you the
right to operate a SMASHBURGER RESTAURANT at a single location, within the
Development Area granted you by the Multi-Unit Development Agreement, that you select and
we approve. You must operate the Restaurant only at the approved location and may not
relocate the Restaurant without first obtaining our written consent. You may not establish or
operate another Restaurant unless you enter into a separate Franchise Agreement for that
Restaurant.
SMASHBURGER RESTAURANTS, whether franchised or company-owned, are free to
advertise, solicit and accept orders from any customers regardless of the location of your
Restaurant. We do not grant you any exclusive rights or territorial protection for your
Restaurant. You may not engage in any promotional or similar activities, directly or indirectly,
through or on the Internet without our consent.
Under the Franchise Agreement, we retain the right to (1) establish and operate, and
allow others to establish and operate, SMASHBURGER RESTAURANTS using the Marks and
the Franchise System, at any location on such terms and conditions we deem appropriate; (2)
establish and operate, and allow others to establish and operate, restaurants, that may offer
products and services which are identical or similar to products and services offered by
SMASHBURGER RESTAURANTS, under other trade names, trademarks, service marks and
commercial symbols different from the Marks; (3) establish, and allow others to establish, other
businesses and distribution channels (including the Internet), wherever located or operating and
regardless of the nature or location of the customers with whom such other businesses and
distribution channels do business, that operate under the Marks or any other trade names,
trademarks, service marks or commercial symbols that are the same as or different from
SMASHBURGER RESTAURANTS, and that sell products or services that are identical or
similar to, or competitive with, those that SMASHBURGER RESTAURANTS customarily sell;
(4) acquire the assets or ownership interests of one or more businesses, including Competitive
Businesses, and franchising, licensing or creating similar arrangements with respect to such
businesses once acquired, wherever these businesses (or the franchisees or licensees of these
businesses) are located or operating; (5) be acquired (whether through acquisition of assets,
ownership interests or otherwise, regardless of the form of transaction), by any other business,
including a Competitive Business, even if such business operates, franchises or licenses such
businesses in close proximity to the Restaurant; (6) operate or grant any third party the right to
operate any Smashburger Restaurant that we or our designees acquire as a result of the exercise
of a right of first refusal or purchase right that we have under this Agreement, any other franchise
agreement or any other agreements; and (7) engage in all other activities not expressly prohibited
by the Franchise Agreement.
While we are not required to do so, we will consider your request to incorporate a right of
first refusal with respect to any sites we might desire to develop or have developed as a
SMASHBURGER RESTAURANT during the term of the Franchise Agreement that fall within
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an agreed upon distance from your Restaurant (the distance would vary depending primarily on
whether your Restaurant is located in a rural or an urban market). If we agree to incorporate that
right into your Franchise Agreement, it will be subject to your being in compliance with the
Franchise Agreement, your being able to acquire the right to occupy the proposed premises, and
your timely execution of our then-current form of franchise agreement and payment of the
required initial franchise fee.
If, at any time during the term of the Franchise Agreement, you determine that, despite
using your good faith efforts, it is no longer economically feasible to operate the Restaurant at
the previously approved location, we will consider, in good faith, your request to relocate the
Restaurant to a new site within the Development Area described in the Multi-Unit Development
Agreement. However, we will not be required to consider any request to relocate the Restaurant
if you are not then in compliance with the Franchise Agreement. Any right to relocate the
Restaurant shall be subject to our approval of the proposed new site, and your development of
the new Restaurant at the new approved site in accordance with the terms and conditions of the
Franchise Agreement and in accordance with a timetable to which we agree at the time we grant
our approval (including a timetable for closing of the Restaurant at the existing location and re-
opening the Restaurant at a new site.) Any request for relocation and any approvals we grant in
connection must be in writing.
We are not required to pay you if we exercise any of the rights specified above inside or
outside the Development Area.
ITEM 13
TRADEMARKS
We grant you the non-exclusive right and obligation to use the trademarks under the
Franchise Agreement. By “trademark” we mean trade names, trademarks, service marks and
logos we authorize to identify SMASHBURGER RESTAURANTS (the “Marks”). You must
use the Marks as we require. You may not use any of the Marks as part of your firm or corporate
name. You may not use the Marks in the sale of unauthorized products or services or in any
manner we do not authorize. You may not use the Marks in any advertising for the transfer, sale
or other disposition of the SMASHBURGER RESTAURANT or any interest in the franchise.
The Marks are owned by our affiliate, Icon Burger, which, under an Intellectual Property License
Agreement, dated March 5, 2008, granted a license to our affiliate, Smashburger Master, to use
and sublicense the use of the Marks. That license agreement has a term of 99 years from March
5, 2008, and can be terminated on 30-days’ notice if Smashburger Master fails to maintain
certain minimum quality standards or ceases to be an affiliate of Icon Burger. Smashburger
Master has, in turn, granted us a license to use and sublicense the use of the Marks. Under our
Intellectual Property and Products Designation License Agreement with Smashburger Master,
dated March 5, 2008 (the “License Agreement”), Smashburger Master exclusively licensed us
the right to use and to sublicense the use of the Marks in granting new SMASHBURGER
RESTAURANT franchises to our franchisees in the United States and Puerto Rico. The License
Agreement has a term of 99 years from March 5, 2008. We must maintain minimum quality and
usage standards for the Marks. The License Agreement may be terminated before the end of its
99-year term if we cease to be an affiliate of Smashburger Master (resulting in the loss of our
right to use and to sublicense the use of the Marks). All rights in and goodwill from the use of
the Marks accrue to us and our affiliates.
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The following table sets forth the status of registrations and applications with the U.S.
Patent and Trademark Office (“PTO”) for federal registration of our principal trademarks. All
Marks are registered or have applications for registration pending on the Principal Register.
Mark Registration
Number Registration Date
Smashburger logo
3,531,758 November 11, 2008
SMASH BURGER 3,531,675 November 11, 2008
SMASH.SIZZLE.SAVOR 3,432,241 May 20, 2008
3,648,448 June 30, 2009
SMASH 3,644,558 June 23, 2009
HOME OF THE SMASHBURGER 4,045,713 October 25, 2011
All required affidavits of use have been filed in a timely manner.
We may establish new Marks in the future and you must use and display these marks in
accordance with specifications and bear all costs associated with changes to Marks or
introduction of new Marks. You must follow our rules when you use these Marks. You cannot
use a Mark as part of a corporate name or with modifying words, designs or symbols except with
our consent which we may withhold in our absolute discretion. You may not use our Marks in
the sale of an unauthorized product or service or in any manner we do not authorize in writing.
You may not use any other mark, name, commercial symbol or logotype in connection with the
operation of the Restaurant. You may not use the Marks as part of any user name, screen name
or profile in connection with any social networking sites or blogs.
There is presently no effective determination of the PTO, the Trademark Trial and
Appeal Board, the trademark administrator of any state, or any court, nor (except as noted below)
any pending infringement, opposition or cancellation proceeding or any pending material
litigation involving our principal trademarks, service marks, trade names, logo-types or other
commercial symbols.
You must not contest, directly or indirectly, our ownership of the Marks, trade secrets,
methods and procedures that are a part of the Franchise System. You must not register, seek to
register or contest our sole right to register, use and license others to use the Marks, names,
information and symbols.
Any goodwill associated with Marks, including any goodwill which might be deemed to
have arisen through your activities, inures directly and exclusively to the benefit of
SMASHBURGER.
There are no agreements currently in effect which significantly limit the rights of
SMASHBURGER to use or license the use of any trademarks, service marks, trade names, logo-
types or other commercial symbols.
You must notify us immediately in writing of any apparent infringement of or challenge
to your use of any Mark, or claim by any person of any rights in any Mark or any similar trade
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name, trademark or service mark of which you become aware. You may not communicate with
any person other than SMASHBURGER and its counsel regarding any infringement, challenge
or claim. We have sole discretion to take any action we deem appropriate and we have the right
to exclusively control any litigation, PTO proceeding or other administrative proceeding arising
out of any infringement, challenge or claim or otherwise relating to any Mark. You must execute
all documents, render assistance and do such things as we deem or our counsel deems advisable
to protect and maintain our interests.
Under the Franchise Agreement, we must indemnify you against, and reimburse you for,
all damages for which you are held liable in any proceeding in which your use of any Mark in
compliance with the Franchise Agreement is held to constitute trademark infringement, unfair
competition or dilution, and for all reasonable costs you incur in the defense of any claim
brought against you or in any proceeding in which you are named as a party, only if you have
timely notified us of the claim or proceeding and have otherwise complied with the Franchise
Agreement and only if you have given us the opportunity to defend the claim. If we defend the
claim, we have no obligation to indemnify or reimburse you for any fees or disbursements to any
attorney retained by you.
If it becomes advisable, in our opinion, at any time for us to require you to modify or
discontinue use of any Mark, or to use one or more additional or substitute trademarks or service
marks, you must comply within a reasonable time after notice by us, and our sole obligation in
such event shall be to reimburse you for the out-of-pocket costs of complying with this
obligation.
Other than as stated above, we do not know of any superior rights or infringing uses that
could materially affect your use of the Marks in this state or in any state where the Restaurant is
to be located.
ITEM 14
PATENTS, COPYRIGHTS AND PROPRIETARY INFORMATION
PATENTS AND COPYRIGHTS
We do not now own any rights to any patent that is material to the franchise. However,
our affiliate, Smashburger Master, is the applicant under a provisional patent application, bearing
the title “System and Method for Preparing Food,” for a process that is used in the operation of
Smashburger Restaurants. The application was filed with the PTO on April 11, 2012 (numbers
61/622,839) by Tom Ryan, who is described in Item 2 of this Disclosure Document and who has
assigned the application to Smashburger Master.
We or our affiliates claim copyright protection for the Standards of Operations Manual
and for any other written materials we develop to assist you in the development and operation of
the Restaurant. There are no determinations of the U.S. Copyright Office (Library of Congress)
or any court, nor are there any pending infringement, opposition or cancellation proceedings or
material litigation, involving the copyrighted materials which are relevant to their use by our
franchisees. No agreements limit our right to use or license the use of our copyrighted materials.
We are not obligated under any agreement to protect or defend our copyrights, although we
intend to do so. We do not know of any infringing uses of or superior rights in our copyrighted
materials.
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CONFIDENTIAL INFORMATION
We possess, develop and will continue to develop certain proprietary and confidential
information, including trade secrets relating to the operation of SMASHBURGER
RESTAURANTS. This proprietary and confidential information includes processes, methods,
techniques, recipes, ingredients, training materials, checklists and other information that is
valuable and treated by SMASHBURGER as confidential information. Much of this
confidential information is included or referenced in our Operation Manual. You and your
owners will not acquire any interest in the confidential information other than the right to use it
in operating the Restaurant. You must maintain the absolute confidentiality of the confidential
information during and after the expiration or termination of the Franchise Agreement. You and
your owners can divulge this confidential information only to individuals or entities specifically
authorized by us in advance, or to your employees or contractors who must have access to it to
operate the Restaurant, however, such individuals or entities must be under a duty of
confidentiality no less restrictive than your obligations to us under the Franchise Agreement. We
may require you to have your employees and contractors execute individual undertakings and
shall have the right to regulate the form of and be a party to or third-party beneficiary under any
such agreements. Neither you nor your owners are permitted to make unauthorized copies,
record or otherwise reproduce the materials or information or make them available to any
unauthorized person.
ITEM 15
OBLIGATION TO PARTICIPATE IN THE ACTUAL OPERATION
OF THE FRANCHISE BUSINESS
MULTI-UNIT DEVELOPMENT AGREEMENT
Either you or, if you are at any time a corporation, a limited liability company, a general,
limited or limited liability partnership, or another form of business entity, an individual that
directly or indirectly owns at least 25% of the ownership interest in you (the “Managing
Owner”), approved by us must devote an amount of his or her business time and efforts to the
operation, promotion and enhancement of the business under the Multi-Unit Development
Agreement which is reasonable given your undertakings in this Agreement and in light of the
business that the Multi-Unit Development Agreement contemplates. You or the Managing
Owner must supervise the development and operations of SMASHBURGER RESTAURANTS
franchised under the Multi-Unit Development Agreement.
FRANCHISE AGREEMENT
The Restaurant must be, at all times, under the day-to-day, full-time management
supervision of the person you designate to assume primary responsibility for managing the
Restaurant (“Designated Manager”). The Designated Manager must assume responsibilities on
a full-time basis and may not engage in any other business or other activity, directly or indirectly,
that requires any significant management responsibility, time commitment, or otherwise may
conflict with his or her obligations to operate and manage the Restaurant.
Your Managing Owner must supervise the management and operation of the Restaurant
and continuously exert best efforts to promote and enhance the Restaurant.
If, at any time, the Restaurant is not being managed by a Designated Manager who has
satisfactorily completed the training program, we may, but are not required to, immediately
appoint a manager to manage the operation of the Restaurant on your behalf. Our appointment
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of a manager of the Restaurant will not relieve you of your obligations under the Franchise
Agreement or constitute a waiver of our right to terminate the franchise. We are not liable for
any debts, losses, costs or expenses you incur in the operation of the Restaurant while it is
managed by our appointed manager. We also will have the right to charge a reasonable fee for
our management services and we may cease to provide such management services at any time, in
our sole discretion.
If you are a legal entity, each owner must sign a guaranty of the franchise entity’s
obligations under the Multi-Unit Development Agreement and all Franchise Agreements signed
under the Multi-Unit Development Agreement and the Franchise Agreement (the forms are
attached as exhibits to the Multi-Unit Development Agreement and Franchise Agreement). Each
person signing a guaranty assumes and agrees to discharge all of your obligations (i.e., the
developer’s or franchisee’s) under each of the Multi-Unit Development Agreements and
Franchise Agreements. If you are an individual, your spouse must consent in writing to your
execution of the guaranty. Each person signing the guaranty agrees to be bound to provisions of
the agreement applicable to such person.
ITEM 16
RESTRICTIONS ON WHAT THE FRANCHISEE MAY SELL
You must sell or offer for sale all menu items, food products, beverages, and other
products and services we require, in the manner and style we require. You must sell only
approved menu items, and other products and services that we expressly authorize in the
Standards of Operations Manual or otherwise in writing. You must not deviate from our
standards and specifications without first obtaining our written consent. You must discontinue
selling and offering for sale any unapproved menu items, products or services. We have the right
to change the authorized menu items, products and services and their respective standards,
specifications and requirements in our sole discretion. We may periodically set the maximum
and minimum price that you may charge for services and products. You must promptly comply
with such changes.
ITEM 17
RENEWAL, TERMINATION, TRANSFER AND DISPUTE RESOLUTION
THE FRANCHISE RELATIONSHIP
This table lists certain important provisions of the Franchise Agreement and related
agreements. You should read these provisions in the agreements attached to this
Disclosure Document.
PROVISION SECTION IN
AGREEMENT SUMMARY
a. Length of the
franchise term
Section 1.B in Multi-Unit
Development Agreement
Section 1.D in Franchise
Agreement
Term in Multi-Unit Development Agreement ends on the
scheduled opening date of the last Restaurant as specified
on the Development Schedule.
Term of Franchise Agreement is 15 years.
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PROVISION SECTION IN
AGREEMENT SUMMARY
b. Renewal or
extension of the term
Section 1.F in Multi-Unit
Development Agreement
Section 13.A in Franchise
Agreement
If you are granted exclusivity with respect to your
development rights, you will be allowed to extend the term,
subject, in each case, to, among other things, our agreeing
on a new Development Schedule for the renewal term and
your paying a new Development Fee. The length of the
extension term will depend on the number of Restaurants
that you and we agree will be opened during the extension
term.
If you are in substantial compliance with the Franchise
Agreement, you may extend the term for 15 years.
c. Requirements for
franchisee to renew
or extend
Section 1.F in Multi-Unit
Development Agreement
Section 13 in Franchise
Agreement
You must have complied with the Development Schedule
and complied with all other obligations; you must give us
written notice by the earlier of (i) 30 days following the
opening of the Restaurant which causes you to achieve 80%
of the openings required under the Development Schedule
or (ii) the start of the second-to-last development period;
you and we must agree on a new Development Schedule;
you must pay a new Development Fee; and you and your
owners must sign a general release.
You must give at least 180 days, but no more than 270 days
notice, repair, replace and update equipment and Restaurant
premises to our current standards, not be in breach of any
agreement with us or our affiliates, satisfy all monetary
obligations, have the right to remain in possession of the
Restaurant premises, pay a renewal fee of 50% of then-
current franchise fee, execute then-current Franchise
Agreement and general release (unless prohibited by law)
and comply with current qualifications and training
requirements. The then-current Franchise Agreement may
contain terms and conditions materially different from those
in your previous Franchise Agreements, such as different
fee requirements.
d. Termination by
franchisee
Not Applicable in Multi-
Unit Development
Agreement
Section 14.A in Franchise
Agreement
You may terminate Franchise Agreement if we materially
breach the agreement and do not cure default after notice
from you.
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PROVISION SECTION IN
AGREEMENT SUMMARY
e. Termination by
franchisor without
cause
Not applicable We may not terminate the Franchise Agreement or the
Multi-Unit Development Agreement without cause.
f. Termination by
franchisor with cause
Section 7.A in Multi-Unit
Development Agreement
AND
Section 14.B in Franchise
Agreement
Only if you or your owners commit one of several
violations.
g. “Cause” defined –
curable defaults
Section 7.A in Multi-Unit
Development Agreement
Section 14.B in Franchise
Agreement
Under Multi-Unit Development Agreement, you have 5
days to cure monetary defaults; 10 days to cure failure to
furnish reports, financial statements, tax returns or any other
documentation required; and 7 days to cure any failure to
observe, perform or comply with any other of the terms of
conditions of the Multi-Unit Development Agreement; and
applicable cure period for defaults under Franchise
Agreement.
Under Franchise Agreement, you have 10 days to cure
monetary defaults and failure to maintain required
insurance; 30 days to cure operational defaults and other
defaults not listed in (h) below; 15 days to cure quality
assurance audits; and applicable cure period for monetary
defaults owed to third parties.
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PROVISION SECTION IN
AGREEMENT SUMMARY
h. “Cause” defined –
non-curable defaults
Section 7.A in Multi-Unit
Development Agreement
Non-curable defaults under the Multi-Unit Development
Agreement include ceasing or threatening to cease to carry
on the business; liquidation of your assets; failure to pay
any debts or other amounts incurred by you in operating the
business when such debts or amounts are due and payable;
failure to comply with the development schedule; an
assignment for the benefit of creditors; appointment of a
trustee or receiver; 3 or more repeated violations during any 12-
month period; 2 or more repeated violations during any 6 month
period; in the event you are an entity, liquidation or
dissolution or amalgamation; or if you lose your charter by
expiration, forfeiture or otherwise; material
misrepresentations or omissions; conviction of a felony;
dishonest or unethical conduct; and unapproved transfers of
the Multi-Unit Development Agreement or an ownership
interest in you.
Section 14.B in Franchise
Agreement
Non-curable defaults under the Franchise Agreement
include material misrepresentations or omissions; failure to
secure site for the Restaurant within 180 days after
Franchise Agreement’s effective date; failure to open your
Restaurant within 150 days after you sign a lease for your
premises or one year after the Franchise Agreement’s
effective date, whichever is first; failure to complete
training; abandonment; unapproved transfers; conviction of
a felony; dishonest or unethical conduct; unauthorized use
or disclosure of the Standards of Operations Manual or
other confidential information; failure to pay taxes;
understating Gross Sales; repeated defaults (even if cured);
an assignment for the benefit of creditors; appointment of a
trustee or receiver; failure to comply with anti-terrorism
laws; and failure to comply with other agreements with us
or our affiliate and do not correct such failure within the
applicable cure period, if any.
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PROVISION SECTION IN
AGREEMENT SUMMARY
i. Franchisee’s
obligations on
termination/non-
renewal
Section 7.B in Multi-Unit
Development Agreement
Section 15 in Franchise
Agreement
Under the Multi-Unit Development Agreement, you must:
cease using the Marks and Franchise System; return all
forms, documents and information; completely de-identify
the business; cancel all fictitious or assumed names; cease
operating a similar restaurant; notify telephone company of
termination of rights to use telephone number; return the
Standards of Operations Manual and software and other
proprietary materials; comply with confidentiality
requirements; and at our option, sell or assign to us your
rights in the Restaurant premises and the assets used in the
business.
Under the Franchise Agreement, you must: cease operating
the Restaurant and using the Marks and Franchise System;
return all forms, documents and information; completely de-
identify the business within 30 days; cancel all fictitious or
assumed names; cease operating a similar restaurant; notify
telephone company of termination of rights to use telephone
number and transfer number to our designee; return the
Standards of Operations Manual and software and other
proprietary materials; comply with confidentiality
requirements; and at our option, sell or assign to us your
rights in the Restaurant premises and the assets used in the
business.
j. Assignment of
contract by franchisor
Section 6 in Multi-Unit
Development Agreement
AND
Section 12.A in Franchise
Agreement
No restriction on our right to assign.
k. “Transfer” by
franchisee-definition
Section 6.A in Multi-Unit
Development Agreement
AND
Section 12.B in Franchise
Agreement
Includes voluntary or involuntary sale, assignment,
subdivision, sub-franchising; grant of mortgage, charge, lien
or security interest; merger or consolidation; sale or
exchange of voting securities; or transfer caused by divorce
or death.
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PROVISION SECTION IN
AGREEMENT SUMMARY
l. Franchisor’s
approval of transfer
by franchisee
Sections 6.A in Multi-
Unit Development
Agreement
AND
Sections 12.B and 12.C in
Franchise Agreement
We have the right to approve all transfers by you or your
owners but will not unreasonably withhold or delay
approval. However, transfers among current owners of
ownership interests only require prior notice so long as
Managing Owner remains the same and there is no change
in control.
m. Conditions for
franchisor approval
of transfer
Section 6.A(1) in Multi-
Unit Development
Agreement
Section 12.C in Franchise
Agreement
Transferee must meet qualifications; satisfactorily complete
training and pay required fee; have no financial or other
interest in Competitive Business; enter into all then-current
forms of agreement required by us; you must have fulfilled
all your financial obligations; must execute general release;
pay expenses and applicable fees; you must repair your
place of business
Transferee must meet qualifications; all monetary
obligations must be paid; you must not be in default of any
provisions of agreement; transferor and its owners (and
transferee and its owners) must sign general release (unless
prohibited by law); transferee must not have any ownership
interest in Competitive Business; landlord must transfer
lease to the Premises; upgrade Restaurant to current
specifications within 120 days; at our request, transferee
signs then-current forms of agreements; transferee or
designated manager must satisfactorily complete training at
its own expense; pay transfer fee; transferor must execute
non-compete agreement; we approve purchase price,
amount of debt and payment terms; transferor agree to
subordinate its rights against the assignee to our rights
against the assignee.
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PROVISION SECTION IN
AGREEMENT SUMMARY
n. Franchisor’s right
of first refusal to
acquire franchisee’s
Franchised Business
Section 6.B in Multi-Unit
Development Agreement
Section 12.G in Franchise
Agreement
If you receive and offer to sell or transfer an interest, direct
or indirect, in the Multi-Unit Development Agreement, your
business operated under the Multi-Unit Development
Agreement or an ownership interest in you, we have a right
of first refusal to purchase such interest offered for the price
and on the terms and conditions contained in the offer with
certain provisions; if this right is not exercised within 30
days of our receipt of notice of such intention to sell or
transfer, then you may sell or transfer in accordance with
items k through m of this Table.
If you receive and offer to sell or transfer an interest, direct
or indirect, in the Franchise Agreement, your Restaurant or
an ownership interest in you, we have a right of first refusal
to purchase such interest offered for the price and on the
terms and conditions contained in the offer with certain
provisions; if this right is not exercised within 30 days of
our receipt of notice of such intention to sell or transfer,
then you may sell or transfer in accordance with items k
through m of this Table. If your Restaurant has been used
as collateral for an SBA-guaranteed loan (which requires
our prior consent), we will not, while such loan remains
unpaid, exercise our right of first refusal with respect to a
transfer of part of the ownership interests in you unless in
connection with our exercise of the right of first refusal we
are paying off the SBA-guaranteed loan; however, we
reserve the right to assign our right of first refusal with
respect to such transfers to an unaffiliated third-party.
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PROVISION SECTION IN
AGREEMENT SUMMARY
o. Franchisor’s
option to purchase
franchisee’s business
Sections 6.A, B and E of
Multi-Unit Development
Agreement
Section 15.E in Franchise
Agreement.
In the case of your default, we may purchase any of your
existing SMASHBURGER RESTAURANTS within 30
days of your receipt of our notice of your default.
We may purchase the assets of your Restaurant upon the
expiration of the Franchise Agreement and any successor
franchise granted to you, or the termination of the Franchise
Agreement by you without cause or by us with cause
(except where the sole cause for termination was your or
your Approved Affiliate’s failure to comply with the
development schedule set forth in the Multi-Unit
Development Agreement) (each a “Termination Event”). In
the case of a Termination Event, we have 30 days from the
Termination Event to provide you with written notice of our
election to purchase your Restaurant. We also have the
right to purchase the assets of your Restaurant upon a
termination of the Multi-Unit Development Agreement, a
change in control of us, or if there is a public offering of our
(or certain of our affiliates’ or parents’) securities (each a
“Control Event”). Control Event also includes when the
Multi-Unit Development Agreement expires because you
are permitted to extend, but fail to timely complete the
extension requirements, unless the sole reason for your not
completing such requirements is that we would grant you
the extension only if you agreed to open during the
extension term more than 40% of the total number of
Restaurants required to be open during the expiring term.
In the case of a Control Event, we have until the 3rd
anniversary of the occurrence of a Control Event to provide
you with written notice of our election to purchase your
Restaurant. If we elect to purchase your Restaurant upon a
Control Event, we will do so only if we also exercise our
similar options to purchase under the other Franchise
Agreements entered into by you or your Approved
Affiliates under the Multi-Unit Development Agreement.
Smashburger
06/2012 FDD 1031.002.006/46510.2
50
PROVISION SECTION IN
AGREEMENT SUMMARY
p. Death or
disability
Section 6.A in Multi-Unit
Development Agreement
Section 12.B in Franchise
Agreement
Death of franchisee (or any of its owners) is a transfer
requiring our consent. See (k) above. However, our
approval will not be unreasonably withheld or delayed so
long as at least one of the Managing Owners continues to be
the designated Managing Owner. If, as a result of the death
or incapacity of the transferor, a transfer is proposed to be
made to the transferor’s spouse, and if we do not approve
the transfer, the trustee or administrator of the transferor’s
estate will have 9 months after our refusal to consent to the
transfer to the transferor’s spouse within which to transfer
the transferor’s interests to another party whom we approve.
q. Non-competition
covenants during the
term of the franchise
Section 5.A and 5.B in
Multi-Unit Development
Agreement
AND
Section 7 Franchise
Agreement
Neither you, nor any of your owners or their immediate
family members, may have any involvement, directly or
indirectly, in a “Competitive Business.” “Competitive
Business” means any restaurant, food service or other
business (other than a SMASHBURGER RESTAURANT):
(i) whose gross receipts from the sale of hamburgers
represent, at any time, at least 10% of the business’ total
gross receipts (excluding receipts from the sale of alcoholic
beverages), (ii) whose menu, concept, business model or
method of operation is similar to that employed by
restaurant units operated, franchised or licensed by us, (iii)
that offers or sells goods or services that are generally the
same as or similar to the goods or services being offered by
businesses owned, operated, franchised or licensed by us, or
(iv) that grants franchises or licenses for the operation of
any of the foregoing or provides services to the franchisor
or licensor of any of the foregoing. In addition, without our
prior consent, you must not operate, directly or indirectly,
any business marketed by a franchisor or chain under a
locally, regionally, or nationally known or registered
trademark or service mark. Further, you may not, without
permission: recruit or hire general manager or assistant
manager of ours, our affiliates, franchisees or developers, or
district or regional manager or any of our or our affiliates’
officers; nor interfere with vendor/supplier/consultant
relationships nor engage in activities that would harm our
Marks or Franchise System
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06/2012 FDD 1031.002.006/46510.2
51
PROVISION SECTION IN
AGREEMENT SUMMARY
r. Non-competition
covenants after the
franchise is
terminated or expires
Section 7.C in Multi-Unit
Development Agreement
Section 15.D in Franchise
Agreement
You may not have any involvement, directly or indirectly,
in a Competitive Business for 24 months in developer’s
Development Area, Development Area of any other
SMASHBURGER developer, or within a 5 mile radius of
any SMASHBURGER RESTAURANT in existence or
under development at time of termination or expiration of
Multi-Unit Development Agreement.
You may not have any involvement, directly or indirectly,
in a Competitive Business for 24 months within 5 mile
radius of the premises of your Restaurant or any
SMASHBURGER RESTAURANT in existence or under
development at time of termination or expiration of
Franchise Agreement.
s. Modification of
the agreement
Section 10.L in Multi-
Unit Development
Agreement
AND
Section 17.L in Franchise
Agreement
No modifications except in writing and signed by both you
and us.
t. Integration/
merger clause
Section 10.L in Multi-
Unit Development
Agreement
Section 17.O in Franchise
Agreement
Only the written terms of the agreement are binding (subject
to state law). Any other promises are not enforceable.
Any representation or promises outside of the Disclosure
Document, Multi-Unit Development Agreement and
Franchise Agreement may not be enforceable. However,
nothing in the Franchise Agreement is intended to disclaim
the representations we made in the Disclosure Document
that we furnished to you.
u. Dispute
resolution by
arbitration or
mediation
Section 9.A in Multi-Unit
Development Agreement
Section 17.G in Franchise
Agreement
We and you must arbitrate all disputes at a location in or
within 50 miles of our current principal place of business
(currently, Denver, Colorado) (subject to state law).
Smashburger
06/2012 FDD 1031.002.006/46510.2
52
PROVISION SECTION IN
AGREEMENT SUMMARY
v. Choice of forum Section 9.A in Multi-Unit
Development Agreement
AND
Section 17.I in Franchise
Agreement
You must sue us in the state where our corporate
headquarters are located (currently Colorado) (subject to
state law).
w. Choice of law Section 10.F in Multi-
Unit Development
Agreement
AND
Section 17.H in Franchise
Agreement
Colorado law (subject to state law)
In addition to the provisions noted in the charts above, the Multi-Unit Development Agreement
and Franchise Agreement contain a number of provisions that may affect your legal rights,
including a waiver of a right to a jury trial, waiver of punitive damages or exemplary damages,
and limitations on whether claims may be raised. (Multi-Unit Development Agreement –
Sections 9.B and 9.C; Franchise Agreement – Sections 17.J and 17.K). We recommend that you
carefully review all of these provisions, and the entire contract, with a lawyer.
ITEM 18
PUBLIC FIGURES
We do not use any public figure to promote the Franchise System.
ITEM 19
FINANCIAL PERFORMANCE REPRESENTATIONS
The FTC’s Franchise Rule permits a franchisor to provide information about the actual or
potential financial performance of its franchised and/or franchisor-owned outlets, if there is a
reasonable basis for the information, and if the information is included in the Disclosure
Document. Financial performance information that differs from that included in Item 19 may be
given only if: (1) a franchisor provides the actual records of an existing outlet you are
considering buying; or (2) a franchisor supplements the information provided in this Item 19, for
example, by providing information about possible performance at a particular location or under
particular circumstances.
As of January 1, 2012 (the end of our fiscal year), there were 142 SMASHBURGER
RESTAURANTS in operation, 87 of which had been in operation for the entire 2011 fiscal year
(excluding transfers). Of the 87 locations, 41 were owned and operated by our affiliates, and 46
were owned and operated by unaffiliated franchisees. The following is a chart of certain
financial performance information for the 87 SMASHBURGER RESTAURANTS that were
operating for the full 2011 fiscal year.
Smashburger
06/2012 FDD 1031.002.006/46510.2
53
NUMBER OF
LOCATIONS
AVG. ANNUAL SALES FOR
FISCAL YEAR 2011
87 $1,024,847
NOTES:
(1) 41 of the 87 SMASHBURGER RESTAURANTS (47%) met or exceeded the
Average Annual Sales number, and 46 of the 87 SMASHBURGER RESTAURANTS (53%)
were below the average. The 87 SMASHBURGER RESTAURANTS used to compute the
Average Annual Sales had a range of Annual Sales for the period of $541,717 to $1,979,485.
(2) “Annual Sales” was calculated in the same manner as “Gross Sales” (as defined
in the Franchise Agreement) would be calculated and on which your Royalty would be paid.
(3) These numbers do not reflect either gross or net profits.
(4) The sales data for SMASHBURGER RESTAURANTS owned by unaffiliated
franchisees was obtained through polling the franchisees’ point of sales systems in the normal
course. We have not audited or verified the accuracy of that information.
We will provide written substantiation for these financial performance representations to
prospective franchisees upon reasonable request. Except as disclosed in this Item 19, we do not
furnish or authorize our sales persons to furnish any oral or written information concerning the
actual or potential sales, costs, income or profits of a SMASHBURGER RESTAURANT.
Actual results vary from restaurant to restaurant and we cannot estimate the results of any
particular franchise restaurant location. Location is always a determining factor in the success of
a restaurant, as are day-to-day management skill, business skill, and marketing, advertising and
public relations initiatives of the franchisee.
NEW FRANCHISEES’ FINANCIAL RESULTS ARE LIKELY TO DIFFER
FROM THE FINANCIAL INFORMATION CONTAINED IN THIS ITEM 19. THERE
IS NO ASSURANCE THAT YOU WILL DO AS WELL, AND THE INFORMATION
CONTAINED IN THIS ITEM 19 SHOULD NOT BE CONSIDERED TO BE THE
ACTUAL OR PROBABLE RESULTS THAT YOU WOULD REALIZE.
ITEM 20
OUTLETS AND FRANCHISEE INFORMATION
TABLE NO. 1
SYSTEMWIDE SMASHBURGER RESTAURANTS SUMMARY FOR
YEARS 2009 to 20111
Outlet Type Year
SMASHBURGER
RESTAURANTS at
the Start of the Year
SMASHBURGER
RESTAURANTS at
the End of the Year Net Change
Franchised 2009 0 13 +13
2010 13 52 +39
2011 52 83 +31
Company Owned or
Managed2
2009 10 30 +20
2010 30 41 +11
2011 41 593 +18
Smashburger
06/2012 FDD 1031.002.006/46510.2
54
Outlet Type Year
SMASHBURGER
RESTAURANTS at
the Start of the Year
SMASHBURGER
RESTAURANTS at
the End of the Year Net Change
Total Businesses 2009 10 43 +33
2010 43 93 +50
2011 93 142 +49
1/ The numbers in this table are for the 12 month periods ended January 1, 2012, December
26, 2010, and December 27, 2009.
2/ Company-owned includes affiliate-owned or managed.
3/ As of January 1, 2012, our affiliates owned and operated 59 SMASHBURGER
RESTAURANTS.
TABLE NO. 2
TRANSFERS OF SMASHBURGER RESTAURANTS FROM FRANCHISEES TO
NEW OWNERS (OTHER THAN FRANCHISOR OR AN AFFILIATE)
FOR YEARS 2009 to 20111
State Year Number of Transfers
Total 2009 0
2010 2
2011 0
1/ The numbers in this table are for the 12 month periods ended January 1, 2012, December
26, 2010, and December 27, 2009.
TABLE NO. 3
STATUS OF FRANCHISED SMASHBURGER RESTAURANTS
FOR YEARS 2009 to 20111
State Year
SMASHBURGER
RESTAURANTS
at Start of Year
SMASHBURGER
RESTAURANTS
Opened Terminations
Non-
Renewals
Reacquired
by
Franchisor
Ceased
Operations-
Other Reasons
SMASHBURGER
RESTAURANTS
at End of Year
AZ 2009 0 1 0 0 0 0 1
2010 1 4 0 0 0 0 5
2011 5 2 0 0 0 0 7
CA 2009 0 0 0 0 0 0 0
2010 0 3 0 0 0 0 3
2011 3 5 0 0 0 0 8
CO 2009 0 2 0 0 0 0 2
2010 2 1 0 0 0 1 2
2011 2 1 0 0 0 2 1
Smashburger
06/2012 FDD 1031.002.006/46510.2
55
State Year
SMASHBURGER
RESTAURANTS
at Start of Year
SMASHBURGER
RESTAURANTS
Opened Terminations
Non-
Renewals
Reacquired
by
Franchisor
Ceased
Operations-
Other Reasons
SMASHBURGER
RESTAURANTS
at End of Year
FL 2009 0 0 0 0 0 0 0
2010 0 0 0 0 0 0 0
2011 0 1 0 0 0 0 1
GA 2009 0 0 0 0 0 0 0
2010 0 0 0 0 0 0 0
2011 0 5 0 0 0 0 5
IA 2009 0 2 0 0 0 0 2
2010 2 0 0 0 0 0 2
2011 2 1 0 0 0 0 3
KS 2009 0 0 0 0 0 0 0
2010 0 6 0 0 0 1 5
2011 5 0 0 0 2 2 1
KY 2009 0 0 0 0 0 0 0
2010 0 2 0 0 0 0 2
2011 2 2 0 0 0 0 4
LA 2009 0 0 0 0 0 0 0
2010 0 1 0 0 0 0 1
2011 1 1 0 0 0 0 2
MI 2009 0 0 0 0 0 0 0
2010 0 1 0 0 0 0 1
2011 1 3 0 0 0 0 4
MO 2009 0 0 0 0 0 0 0
2010 0 0 0 0 0 0 0
2011 0 2 0 0 0 0 2
NC 2009 0 0 0 0 0 0 0
2010 0 0 0 0 0 0 0
2011 0 1 0 0 0 0 1
ND 2009 0 0 0 0 0 0 0
2010 0 1 0 0 0 0 1
2011 1 0 0 0 0 0 1
NE 2009 0 2 0 0 0 0 2
2010 2 1 0 0 0 0 3
2011 3 0 0 0 0 0 3
NJ 2009 0 1 0 0 0 0 1
2010 1 4 0 0 0 0 5
2011 5 2 0 0 0 0 7
Smashburger
06/2012 FDD 1031.002.006/46510.2
56
State Year
SMASHBURGER
RESTAURANTS
at Start of Year
SMASHBURGER
RESTAURANTS
Opened Terminations
Non-
Renewals
Reacquired
by
Franchisor
Ceased
Operations-
Other Reasons
SMASHBURGER
RESTAURANTS
at End of Year
NV 2009 0 0 0 0 0 0 0
2010 0 4 0 0 0 0 4
2011 4 0 0 0 0 0 4
NY 2009 0 0 0 0 0 0 0
2010 0 0 0 0 0 0 0
2011 0 1 0 0 0 0 1
OH 2009 0 1 0 0 0 0 1
2010 1 2 0 0 0 0 3
2011 3 3 0 0 0 0 6
OK 2009 0 0 0 0 0 0 0
2010 0 0 0 0 0 0 0
2011 0 2 0 0 0 0 2
TX 2009 0 4 0 0 0 0 4
2010 4 10 0 0 0 0 14
2011 14 4 0 0 0 0 18
UT 2009 0 0 0 0 0 0 0
2010 0 1 0 0 0 0 1
2011 1 0 0 0 0 0 1
Totals 2009 0 13 0 0 0 0 13
2010 13 41 0 0 0 2 52
2011 52 37 0 0 2 4 83
1/ The numbers in this table are for the 12 month periods ended January 1, 2012, December
26, 2010, and December 27, 2009.
TABLE NO. 4
STATUS OF AFFILIATE-OWNED SMASHBURGER RESTAURANTS1
FOR YEARS 2009 to 20112
State Year
Affiliate-Owned
SMASHBURGER
RESTAURANTS
at Start of Year
Affiliate-Owned
SMASHBURGER
RESTAURANTS
Opened
Affiliate-Owned
SMASHBURGER
RESTAURANTS
Reacquired from
Franchisee
Affiliate-Owned
SMASHBURGER
RESTAURANTS
Closed
Affiliate-Owned
SMASHBURGER
RESTAURANTS
Sold to
Franchisee
Affiliate-Owned
SMASHBURGER
RESTAURANTS
at End of Year
CA 2009 0 0 0 0 0 0
2010 0 2 0 0 0 2
2011 2 2 0 0 0 4
CO 2009 8 5 0 0 0 13
2010 13 2 0 0 0 15
2011 15 0 0 0 0 15
Smashburger
06/2012 FDD 1031.002.006/46510.2
57
State Year
Affiliate-Owned
SMASHBURGER
RESTAURANTS
at Start of Year
Affiliate-Owned
SMASHBURGER
RESTAURANTS
Opened
Affiliate-Owned
SMASHBURGER
RESTAURANTS
Reacquired from
Franchisee
Affiliate-Owned
SMASHBURGER
RESTAURANTS
Closed
Affiliate-Owned
SMASHBURGER
RESTAURANTS
Sold to
Franchisee
Affiliate-Owned
SMASHBURGER
RESTAURANTS
at End of Year
FL 2009 0 0 0 0 0 0
2010 0 0 0 0 0 0
2011 0 2 0 0 0 2
ID 2009 0 1 0 0 0 1
2010 1 1 0 0 0 2
2011 2 0 0 0 0 2
IL 2009 0 0 0 0 0 0
2010 0 1 0 0 0 1
2011 1 9 0 0 0 10
KS 2009 1 1 0 0 0 2
2010 2 0 0 0 2 0
2011 0 0 2 0 0 2
MN 2009 0 4 0 0 0 4
2010 4 2 0 0 0 6
2011 6 2 0 0 0 8
OK 2009 0 2 0 0 0 2
2010 2 0 0 0 0 2
2011 2 0 0 0 0 2
TX 2009 1 5 0 0 0 6
2010 6 3 0 0 0 9
2011 9 1 0 0 0 10
UT 2009 0 2 0 0 0 2
2010 2 2 0 0 0 4
2011 4 0 0 0 0 4
Totals 2009 10 20 0 0 0 30
2010 30 13 0 0 2 41
2011 41 16 2 0 0 59
1/ These businesses were owned by our affiliates.
2/ The numbers in this table are for the 12 month periods ended January 1, 2012, December
26, 2010, and December 27, 2009.
Smashburger
06/2012 FDD 1031.002.006/46510.2
58
TABLE NO. 5
PROJECTED OPENINGS
AS OF JANUARY 1, 2012 FOR 2012
State
Franchise Agreements
Signed But Franchised
Business Not Opened
Projected New
Franchised Businesses in
the Next Fiscal Year
Projected New Affiliate-
Owned Franchised
Businesses in the Next
Fiscal Year
Alabama 1 1 0
Arizona 0 5 0
California 0 5 4
Colorado 0 1 0
Connecticut 1 3 0
Florida 0 0 2
Georgia 0 1 0
Illinois 0 1 0
Kentucky 0 4 0
Louisiana 0 2 0
Minnesota 0 0 1
Michigan 0 1 0
New Jersey 0 3 0
New York 1 2 0
Nevada 0 3 0
North Carolina 0 1 0
Pennsylvania 2 1 0
Tennessee 1 1 0
Texas 1 8 6
Utah 0 1 0
Totals 7 44 13
Exhibit D is a list of the names of all Franchisees and the addresses and telephone
numbers of their Restaurants as of January 1, 2012. Exhibit D also includes Franchisees who
had not opened a Restaurant as of January 1, 2012. Exhibit E is a list of the names, cities and
states and business telephone numbers (or, if unknown, the last known home telephone numbers)
of every Franchisee who had an outlet terminated, cancelled, not renewed, or who otherwise
voluntarily or involuntarily ceased to do business under a Franchise Agreement during the period
from December 26, 2010 through January 1, 2012, or who has not communicated with us within
10 weeks of the issuance date of this Disclosure Document.
If you buy this franchise, your contact information may be disclosed to other buyers
when you leave the franchise system.
Smashburger
06/2012 FDD 1031.002.006/46510.2
59
If you buy this franchise, your contact information may be disclosed to other buyers
when you leave the franchise system. There is no trademark-specific organization associated
with the franchise system being offered.
In some instances, current and former franchisees sign provisions restricting their ability
to speak only about their experience with Smashburger Franchising LLC. You may wish to
speak with current and former franchisees, but be aware that not all such franchisees will be able
to communicate with you.
ITEM 21
FINANCIAL STATEMENTS
Attached as Exhibit F are the audited financial statements of Smashburger Franchising
Company LLC as of January 1, 2012 and December 26, 2010, and for the 53 weeks ended
January 1, 2012, the 52 weeks ended December 26, 2010, and the 52 weeks ended December 27,
2009. Our fiscal year is 52 or 53 weeks ending on the Sunday closest to December 31. Fiscal
year 2011 included 53 weeks and fiscal years 2010 and 2009 included 52 weeks.
ITEM 22
CONTRACTS
The following contracts are attached as exhibits to this Disclosure Document:
Exhibit B – Multi-Unit Development Agreement
Exhibit C - Franchise Agreement
Exhibit H – Representations and Acknowledgment Statement
Exhibit I – Sample General Release
ITEM 23
RECEIPTS
Exhibit K contains detachable documents acknowledging your receipt of this Disclosure
Document.
Smashburger 06/2012 FDD
2012 Ex. A – State Agencies 1031.002.006/46338.1
EXHIBIT "A"
STATE AGENCIES/AGENTS FOR SERVICE OF PROCESS
Smashburger 06/2012 FDD
2012 Ex. A – State Agencies 1031.002.006/46338.1
EXHIBIT “A”
STATE AGENCIES/AGENTS FOR SERVICE OF PROCESS
STATE REGISTRATION EFFECTIVE DATES
Listed here are the names, addresses and telephone numbers of the state agencies having
responsibility for the franchising disclosure/registration laws. We may not yet be registered to sell
franchises in any or all of these states.
CALIFORNIA
Department of Corporations:
1 (866) 275-2677
Los Angeles
Suite 750
320 West 4th Street
Los Angeles, California 90013
(213) 576-7505
Sacramento
1515 K Street, Suite 200
Sacramento, California 95814-4052
(916) 445-7205
San Diego
1350 Front Street
San Diego, California 92101
(619) 525-4044
San Francisco
One Sansome Street, Ste. 600
San Francisco, CA 94104
(415) 972-8559
HAWAII
(state administrator)
Business Registration Division
Department of Commerce and Consumer Affairs
P.O. Box 40
Honolulu, Hawaii 96810
(808) 586-2722
(agent for service of process)
Commissioner of Securities of the
Department of Commerce and Consumer Affairs
335 Merchant Street
Honolulu, Hawaii 96813
(808) 586-2722
ILLINOIS
Franchise Bureau
Office of the Attorney General
500 South Second Street
Springfield, Illinois 62706
(217) 782-4465
INDIANA
(state administrator)
Indiana Secretary of State
Securities Division, E-111
302 West Washington Street
Indianapolis, Indiana 46204
(317) 232-6681
Smashburger 06/2012 FDD
2012 Ex. A – State Agencies
1031.002.006/46338.1
2
(agent for service of process)
Indiana Secretary of State
201 State House
200 West Washington Street
Indianapolis, Indiana 46204
(317) 232-6531
MARYLAND
(state administrator)
Office of the Attorney General
Securities Division
200 St. Paul Place
Baltimore, Maryland 21202-2021
(410) 576-6360
(agent for service of process)
Maryland Securities Commissioner
at the Office of the Attorney General
Securities Division
200 St. Paul Place
Baltimore, Maryland 21202-2021
(410) 576-6360
MICHIGAN
(state administrator)
Consumer Protection Division
Antitrust and Franchise Unit
Michigan Department of Attorney General
670 G. Mennen Williams Building, 1st Floor
525 West Ottawa
Lansing, Michigan 48933
(517) 373-7177
(agent for service of process)
Michigan Department of Commerce,
Corporations and Securities Bureau
P.O. Box 30054
6546 Mercantile Way
Lansing, Michigan 48909
MINNESOTA
Minnesota Department of Commerce
85 7th Place East, Suite 500
St. Paul, Minnesota 55101
(651) 296-6328
NEW YORK
(state administrator)
New York State Department of Law
Bureau of Investor Protection
and Securities
120 Broadway
New York, New York 10271
(212) 416-8000
(agent for service of process)
Secretary of State of New York
41 State Street
Albany, New York 12231
(518) 474-4750
NORTH DAKOTA
North Dakota Securities Department
600 East Boulevard Avenue
State Capitol - Fifth Floor
Bismarck, North Dakota 58505
(701) 328-4712
OREGON
Department of Insurance and Finance
Corporate Securities Section
Labor and Industries Building
Salem, Oregon 97310
(503) 378-4387
RHODE ISLAND
Division of Securities
1511 Pontiac Avenue
Cranston, Rhode Island 02920
(401) 462-9582
Smashburger 06/2012 FDD
2012 Ex. A – State Agencies
1031.002.006/46338.1
3
SOUTH DAKOTA
Department of Labor and Regulation
Division of Securities
445 East Capitol
Pierre, South Dakota 57501
(605) 773-4013
VIRGINIA
(state administrator)
State Corporation Commission
Division of Securities
and Retail Franchising
1300 East Main Street, Ninth Floor
Richmond, Virginia 23219
(804) 371-9051
(agent for service of process)
Clerk, State Corporation Commission
1300 East Main Street, 1st Floor
Richmond, Virginia 23219
(804) 371-9733
WASHINGTON
(state administrator)
Department of Financial Institutions
Securities Division
P.O. Box 9033
Olympia, Washington 98507-9033
(360) 902-8760
(agent for service of process)
Director
Department of Financial Institutions
Securities Division
150 Israel Road, S.W.
Tumwater, Washington 98501
WISCONSIN
Securities and Franchise Registration
Wisconsin Securities Commission
345 West Washington Avenue, 4th Floor
Madison, Wisconsin 53703
(608) 266-3431
Smashburger – 06/2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
EXHIBIT "B"
MULTI-UNIT DEVELOPMENT AGREEMENT
Smashburger – 06/2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
SMASHBURGER FRANCHISING LLC
MULTI-UNIT DEVELOPMENT AGREEMENT
MULTI-UNIT DEVELOPER
DATE OF AGREEMENT
_____________________________
DEVELOPMENT AREA
Smashburger – 06/2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
TABLE OF CONTENTS
Page
1. Preambles and Grant of Rights. ...........................................................................................1 A. Preambles. ................................................................................................................1
B. Grant of Rights; Exclusivity; Term..........................................................................1 C. Rights We Reserve. ..................................................................................................2 D. Best Efforts/Business Entity. ...................................................................................3 E. Financing; Maximum Borrowing Limits; Liquidity. ...............................................4 F. Extension Of Term; Trigger Of Option To Purchase. .............................................5
2. Exercise Of Development Rights.........................................................................................6 A. Proposed Sites For Smashburger Restaurants..........................................................6
B. Execution Of Franchise AgreementS.......................................................................6 C. Development Schedule. ...........................................................................................7 D. Failure to Comply With Development Schedule. ....................................................7 E. Records And Reporting............................................................................................7
3. Fees. .....................................................................................................................................8 A. Your Initial Fee To Us. ............................................................................................8
B. Method of Payment. .................................................................................................8
4. Confidential Information. ....................................................................................................9
5. Exclusive Relationship During Term...................................................................................9 A. Covenants Against Competition. .............................................................................9
B. Non-Solicitation and Non-Interference. .................................................................10 C. Covenants from Others. .........................................................................................10 D. Innovations. ............................................................................................................11
6. Transfer. .............................................................................................................................11 A. Sale or Encumbrance. ............................................................................................11
B. First Right of Refusal. ............................................................................................14 C. Public or Private Offerings. ...................................................................................14
7. Termination of Agreement. ................................................................................................15 A. Events of Termination............................................................................................15
B. Effects of Termination. ..........................................................................................16 C. Covenant Not to Compete / Non-Solicitation. .......................................................17 D. Survival of Covenants. ...........................................................................................18
8. Relationship of the Parties/Indemnification. ......................................................................18
A. Independent Contractors. .......................................................................................18 B. Indemnification. .....................................................................................................18
9. Enforcement; Arbitration. ..................................................................................................19
A. Arbitration ..............................................................................................................19
Page
ii Smashburger – 06/2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
B. Consent to Jurisdiction. ..........................................................................................21 C. Waiver of Punitive Damages and Jury Trial. .........................................................21 D. Injunctive Relief.....................................................................................................21 E. Limitation of Claims. .............................................................................................22
F. Attorney’s Fees And Costs. ...................................................................................22
10. MISCELLANEOUS. .........................................................................................................22 A. Joint and Several Obligation. .................................................................................22 B. Severability. ...........................................................................................................22 C. No Warranty or Representation. ............................................................................22
D. Notice. ....................................................................................................................23
E. Headings. ...............................................................................................................23
F. Applicable Law. .....................................................................................................23 G. Time of Essence. ....................................................................................................23 H. Waiver. ...................................................................................................................23 I. Assignment by Us. .................................................................................................24
J. Agreement Effective. .............................................................................................24 K. Further Assurances.................................................................................................24
L. Entire Agreement. ..................................................................................................24 M. Lawful Attorney. ....................................................................................................24 N. Acknowledgments..................................................................................................25
O. Binding Agreement. ...............................................................................................25
EXHIBITS
EXHIBIT A - DEVELOPMENT AREA AND DEVELOPMENT SCHEDULE
EXHIBIT B - OWNERS AND MANAGING OWNER
EXHIBIT C - GUARANTY AND ASSUMPTION OF OBLIGATIONS
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SMASHBURGER FRANCHISING LLC
MULTI-UNIT DEVELOPMENT AGREEMENT
THIS MULTI-UNIT DEVELOPMENT AGREEMENT (this “Agreement”) is made and
entered between SMASHBURGER FRANCHISING LLC, a Delaware limited liability company
with its principal business address at 1515 Arapahoe Street, Tower One, 10th
Floor, Denver, Colorado
80202 (“we,” “us” or “our”), and _______________________________, whose principal business
address is __________________________________ (“you” or “your”), as of the date signed by us
and set forth below our signature on this Agreement (the “Effective Date”).
1. PREAMBLES AND GRANT OF RIGHTS.
A. PREAMBLES.
(1) We grant franchises (each a “Franchise”), to persons or entities who we
determine meet our qualifications, for the development and operation of specialty restaurants
operating under the name Smash Burger® (each a “Smashburger Restaurant”). Each
Franchise is granted solely pursuant to a written franchise agreement and related documents
and agreements signed by us and a franchisee (each a “Franchise Agreement”).
(2) We also grant rights, to persons or entities who we determine meet certain
additional qualifications and who are willing to commit, to acquire multiple Franchises for the
development and operation of Smashburger Restaurants within a defined area (the
“Development Area”) pursuant to an agreed upon schedule (the “Development Schedule”).
(3) You and, if you are an Entity (defined below), your owners have requested that
we grant you such rights, and we are willing to do so in reliance on all of the information,
representations, warranties and acknowledgements you and, if applicable, your owners have
provided to us in support of your request, and subject to the terms and conditions set forth in
this Agreement.
B. GRANT OF RIGHTS; EXCLUSIVITY; TERM.
We grant you the right, and you undertake the obligation, either yourself or through your
approved Affiliates (defined below), to acquire Franchises to develop, own and operate Smashburger
Restaurants (the “Development Rights”). The Development Rights must be exercised in strict
compliance with the Development Schedule and may only be exercised during the Term (defined
below) and for Smashburger Restaurants to be developed and operated within the Development Area.
The Development Rights do not include the right, and may not be exercised to acquire Franchises for,
Special Venue Restaurants unless we provide our separate prior written consent with respect to each
such proposed Special Venue Restaurant. A “Special Venue Restaurant” is (1) any kiosk, mobile
facility or similar location or type of operation which, because of its inherent operational limitations, is
required to offer a limited menu or have a materially different operating format as compared to a
traditional Smashburger Restaurant, (2) any location in which foodservice is or may be provided by a
master concessionaire, (3) any location which is situated within or as part of a larger venue or facility
(other than a mall or shopping center) and, as a result, is likely to draw the predominance of its
customers from those persons who are using or attending events in the larger venue or facility (for
example, colleges/universities, convention centers, airports, hotels, sports facilities, theme parks,
hospitals, transportation facilities, convenience stores, and other similar captive market locations), and
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(4) any distribution channel other than a Smashburger Restaurant (including, but not limited to, the
Internet, grocery stores, supermarkets, and mail order) through which products and services associated
with or sold through Smashburger Restaurants are or may be sold.
Unless otherwise indicated on Exhibit A, you are not granted any exclusivity with respect to the
Development Area, and we will be free, within the Development Area, to grant Development Rights to
others, to grant Franchises to others, and to ourselves own or operate Smashburger Restaurants, in any
event, without regard to whether such rights will be in competition with the Development Rights
granted to you. Without such exclusivity, you may be in competition with us or with others to whom
we have granted or hereafter grant Development Rights or Franchises for the Development Area,
including with respect to locating and securing sites for the development of Smashburger Restaurants.
You agree that this lack of exclusivity will not excuse your failure to comply with the Development
Schedule.
If, as indicated on Exhibit A, we have granted you exclusivity with respect to the Development
Rights in the Development Area, then, except as described in Section 1.C below, and provided you and
your Affiliates are in full compliance with this Agreement and all Franchise Agreements and other
agreements with us (or any of our affiliates), we will not, during the Term, (1) own and operate
Smashburger Restaurants in the Development Area or (2) grant or authorize the grant to any other
person or entity of Development Rights for the Development Area.
An “Affiliate” is an Entity (defined below) in which you or your owners (i) own more than
51% of the issued and outstanding ownership interest and voting rights or (ii) have the right and power
to control and determine the Entity’s management and policies.
The Development Rights may be exercised from the Effective Date and, unless sooner
terminated as provided herein, continuing through the earlier of (1) the date on which the last
Smashburger Restaurant which is required to be opened in order to satisfy the Development Schedule
opens for regular business or (2) the last day of the last Development Period (the “Term”).
C. RIGHTS WE RESERVE.
You acknowledge and agree that the Development Rights are limited to the rights to acquire
Franchises in accordance with this Agreement as described in Section 1.B. You acknowledge that the
rights to develop Smashburger Restaurants and to use the Marks and any copyrights, inventions, and
patents owned by us or our affiliates are granted only pursuant to individual Franchise Agreements,
and you agree that the Development Rights do not include any such rights. You also acknowledge that
we grant rights only pursuant to the expressed provisions of written agreements and not in any other
manner, including, without limitation, orally or by implication, innuendo, extension or extrapolation.
Without limiting the foregoing and in addition to the rights we have as described in Section 1.B above
if the rights granted hereunder are not exclusive, we specifically reserve the right to do, and you
acknowledge and agree that the Development Rights do not include the right to do, the following:
(1) establish, operate and license others to establish and operate, anywhere in the
world, Special Venue Restaurants using the name and mark Smash Burger® and any other
marks that are licensed under Franchise Agreements (collectively, the “Marks”) and the
system and system standards under which Smashburger Restaurants are developed and
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operated (the “Franchise System”), offering products and services which are identical or
similar to products and services offered by Smashburger Restaurants;
(2) establish, operate and allow others to establish and operate Smashburger
Restaurants using the Marks and the Franchise System, at any location outside the
Development Area on such terms and conditions we deem appropriate;
(3) establish, operate and allow others to establish and operate restaurants, that may
offer products and services which are identical or similar to products and services offered by
Smashburger Restaurants, under trade names, trademarks, service marks and commercial
symbols which are different from the Marks;
(4) establish, operate and allow others to establish and operate other businesses and
distribution channels (including, but not limited to, the Internet), wherever located or operating
and regardless of the nature or location of the customers with whom such other businesses and
distribution channels do business, that operate under the Marks or any other trade names,
trademarks, service marks or commercial symbols that are the same as or different from
Smashburger Restaurants, and that sell products and/or services that are identical or similar to,
and/or competitive with, those that Smashburger Restaurants customarily sell;
(5) acquire the assets or ownership interests of one or more businesses, including
Competitive Businesses (defined below), and franchising, licensing or creating similar
arrangements with respect to such businesses once acquired, wherever these businesses (or the
franchisees or licensees of these businesses) are located or operating (including in the
Development Area);
(6) be acquired (whether through acquisition of assets, ownership interests or
otherwise, regardless of the form of transaction), by any other business, including a
Competitive Business, even if such business operates, franchises and/or licenses such
businesses in the Development Area; and
(7) operate or grant any third party the right to operate any Smashburger Restaurant
that we or our designees acquire as a result of the exercise of a right of first refusal or purchase
right that we have under this Agreement or any Franchise Agreement.
We have the right to engage in all other activities not expressly prohibited by this Agreement.
D. BEST EFFORTS/BUSINESS ENTITY.
You must at all times faithfully, honestly and diligently perform your obligations and fully
exploit the Development Rights during the Term and throughout the entire Development Area. You
must perform all of your obligations under this Agreement, and you may not subcontract or delegate
any of those obligations to any third parties. If you are at any time a corporation, a limited liability
company, a general, limited, or limited liability partnership, or another form of business entity
(collectively, an “Entity”), you agree and represent that:
(1) your organizational documents, operating agreement, or partnership agreement
will recite that this Agreement restricts the issuance and transfer of any ownership interests in
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you, and all certificates and other documents representing ownership interests in you will bear a
legend referring to this Agreement’s restrictions;
(2) Exhibit B to this Agreement lists all of your owners and their interests in you as
of the Effective Date and that you and your owners will sign and deliver to us a revised
Exhibit B to reflect any permitted changes in the information that Exhibit B now contains;
(3) such persons as we designate at any time during the Term, which may include
each of your owners and their spouses, will execute an agreement, in the form set forth in
Exhibit C to this Agreement, under which such persons undertake personally to be bound,
jointly and severally, by all provisions of this Agreement and any ancillary agreements between
you and us. We confirm that a spouse who signs Exhibit C solely in his or her capacity as a
spouse (and not as an owner) is signing that agreement merely to acknowledge and consent to
the execution of the guaranty by his or her spouse and to bind the assets of the marital estate as
described therein and for no other purpose (including, without limitation, to bind the spouse’s
own separate property);
(4) the business that this Agreement contemplates and the Smashburger Restaurants
you and your Affiliates operate under Franchise Agreements, will be the only businesses you
operate (although your owners may have other, non-competitive business interests);
(5) an individual whom we approve (the “Managing Owner”) must directly or
indirectly own at least 25% of the ownership interests in you and must devote an amount of his
or her business time and efforts to the operation, promotion and enhancement of the business
under this Agreement which is reasonable given your undertakings in this Agreement and in
light of the business that this Agreement contemplates. The Managing Owner’s name is listed
on Exhibit B; and
(6) the Managing Owner is authorized, on your behalf, to exercise the Development
Rights and perform your other obligations under this Agreement and to deal with us in respect
of all matters whatsoever which may arise in respect of this Agreement; any decision made by
the Managing Owner will be final and binding upon you, and we will be entitled to rely solely
upon the decision of the Managing Owner in any such dealings without the necessity of any
discussions with any other party named in this Agreement as you; and we will not be held
liable for any actions taken by you or otherwise, based upon any decision or actions of the
Managing Owner.
E. FINANCING; MAXIMUM BORROWING LIMITS; LIQUIDITY.
You acknowledge and agree that:
(1) we may from time to time designate the maximum amount of debt that
Smashburger Restaurants may service, and you will ensure that you and your Affiliates that
execute Franchise Agreements pursuant to this Agreement will comply with such limits;
(2) we require that the first (1st) two (2) Smashburger Restaurants developed under
Franchise Agreements executed pursuant to this Agreement be developed with cash equity and
without proceeds from any loans made by you, your owners, your Affiliates or their owners, or
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any other third party. You will ensure that you and your Affiliates who sign Franchise
Agreements pursuant to this Agreement will have sufficient cash, through equity capital
contributed to you by your or your Affiliates’ owners, to comply with this requirement; and
(3) we have granted the Development Rights to you based, in part, on your
representations to us, and our assessment of, your levels of liquidity as of the Effective Date.
You will ensure that, throughout the Term, you will maintain sufficient liquidity to meet your
obligations under this Agreement and, in any event, will not permit the liquidity of you and
your Affiliates who have signed Franchise Agreements pursuant to this Agreement, in the
aggregate, at any time to fall below the amount identified in Item 7 of our most current
Franchise Disclosure Document as the total estimated initial investment to open one
Smashburger Restaurant. We reserve the right review these liquidity requirements from time to
time, and you agree to comply with such minimum liquidity requirements that we reasonably
impose.
F. EXTENSION OF TERM; TRIGGER OF OPTION TO PURCHASE.
If the Development Rights are exclusive as to the Development Area (as indicated on Exhibit
A) and you have been in compliance with the Development Schedule and your other obligations under
this Agreement throughout the Term (regardless of whether we exercised our right to issue a notice of
default or termination), you may, at your option and subject to your compliance with the provisions of
this Section 1.F, extend the Term for successive terms as follows:
(1) If you wish to exercise your option to extend the Term, you must provide us
with written notice by the earlier of (i) 30 days following the opening of the Restaurant which
causes you to achieve 80% of the openings required under the Development Schedule or (ii) the
start of the second-to-last Development Period;
(2) Within 15 days following our receipt of your notice, we will advise whether and
on what basis we believe that you have failed to qualify for an extension if any;
(3) By not later than the last day of the Term:
a. You and we must agree on a new development schedule
for the extended term;
b. You and your owners must have executed a general
release and non-disparagement agreement, in form satisfactory to us, of
any and all claims against us and our affiliates, and our and their
respective members, managers, officers, directors, employees and
agents; and
c. You must have paid a new Development Fee for the
extended term, calculated as described in our then-current multi-unit
program.
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(4) All fees due under Franchise Agreements signed during the extended term will
be as set forth in our multi-unit program at the time of completion of the requirements for the
extension as described above; and
(5) The length of the extension term will depend on the number of Restaurants that
you and we agree will be opened during the extension term, with one Restaurant being required
to open each 6-month period unless you and we agree otherwise.
If you are not entitled to an extension of the Term or if you and we do not timely complete the
requirements described in paragraph (3) above, the Term will expire as provided in Section 1.B above.
If you are entitled to an extension of the Term but fail to timely complete the requirements described in
paragraph (3) above, the expiration of this Agreement will be deemed a “Control Event,” and we will
have the option to purchase all Restaurants, as set forth in Section 15.E. of the Franchise Agreements
executed pursuant to this Agreement, unless the sole reason for your not completing such requirements
is that we would grant you the extension only if you agreed to open during the extension term more
than 40% of the total number of Restaurants required to be open during the expiring term.
All of the foregoing provisions shall be applicable to each extended term and shall govern your
right to each such extension.
2. EXERCISE OF DEVELOPMENT RIGHTS.
A. PROPOSED SITES FOR SMASHBURGER RESTAURANTS.
You agree to give us all information and materials we request to assess each proposed
Smashburger Restaurant site as well as your and your proposed Affiliate’s financial and operational
ability to develop and operate each proposed Smashburger Restaurant. We have the absolute right to
disapprove any site or any Affiliate (a) that does not meet our criteria or (b) if you or your Affiliates
are not then in compliance with any existing Franchise Agreements executed pursuant to this
Agreement or operating your or their Smashburger Restaurants in compliance with the System
Standards (as defined in the Franchise Agreement). We agree to use our reasonable efforts to review
and approve or disapprove the sites you propose within 30 days after we receive all requested
information and materials. If we approve a proposed site, you or your approved Affiliate must sign a
separate Franchise Agreement as described in Section 2.B. If you or your approved Affiliate fails to
do so within 15 days after we provide you with an execution copy of the Franchise Agreement, we
may withdraw our approval.
B. EXECUTION OF FRANCHISE AGREEMENTS.
Simultaneously with signing this Agreement, you or an approved Affiliate must sign and
deliver to us a Franchise Agreement and related documents representing the first Franchise you are
obligated to acquire under this Agreement. You or your approved Affiliate must thereafter open and
operate a Smashburger Restaurant according to the terms of that Franchise Agreement. Thereafter,
once we have approved a site, and prior to signing a lease or to otherwise securing possession of the
site, you or an approved Affiliate must sign our then-current form of Franchise Agreement and related
documents, the terms of which, with the exceptions provided hereunder, may differ substantially from
the terms contained in the Franchise Agreement in effect on the Effective Date. The Initial Fee and
Royalty rate provided for in the Franchise Agreement shall not exceed the amounts reflected in the
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standard Franchise Agreement in use by us as of the Effective Date. The Franchise Agreement will
govern the development and operation of the Smashburger Restaurant at the approved site identified
therein.
C. DEVELOPMENT SCHEDULE.
Exhibit A to this Agreement sets forth the Development Area and the Development Schedule.
Each period described in the Development Schedule is a “Development Period.” You or your
approved Affiliates must acquire Franchises and open and operate Smashburger Restaurants in the
Development Area pursuant to the Franchise Agreements as necessary to satisfy the requirements of
each Development Period, but you shall not be required to open, in total, more than the cumulative
number of Smashburger Restaurants shown for the last Development Period. The Development
Schedule is not our representation, express or implied, that the Development Area can support, or that
there are or will be sufficient sites for, the number of Smashburger Restaurants specified in the
Development Schedule or during any particular Development Period. We are relying on your
representation that you have conducted your own independent investigation and have determined that
you can satisfy the development obligations under each Development Period of the Development
Schedule.
We will count a Smashburger Restaurant toward the Development Schedule only if it actually
is operating in the regular course within the Development Area and substantially complying with the
terms of its Franchise Agreement as of the end of the Development Period. However, a Smashburger
Restaurant which is, with our approval or because of fire or other casualty, permanently closed during
the last 90 days of a Development Period, after having been open and operating, will be counted
toward the development obligations for the Development Period in which it closed, but not thereafter.
D. FAILURE TO COMPLY WITH DEVELOPMENT SCHEDULE.
Time is of the essence with respect to your agreement to comply with the Development
Schedule. If you fail to comply with the Development Schedule as of the end of any Development
Period, in addition to terminating this Agreement, as provided under Section 7, we may (but need not)
elect either or both of the following:
(1) terminate the exclusivity of the rights granted under Section 1.B; and/or
(2) reduce the Development Area to a lesser area that we determine.
E. RECORDS AND REPORTING.
You agree to provide us with the following records and reports:
(1) within 60 days after the Effective Date, you must prepare and give us, a business
plan covering your projected revenues, costs and operations under this Agreement. This
business plan will include your detailed projections of costs for Smashburger Restaurant
development and detailed revenue projections for your activities under this Agreement and
Smashburger Restaurants. Within 60 days after the start of each calendar year during the Term,
you must update the business plan each year to cover both actual results for the previous year
and projections for the then current year. You acknowledge and agree that, while we may
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review and provide comments on the business plan and any updates you submit to us,
regardless of whether we approve, disapprove, require revisions or provide other comments
with respect to the business plan or any updated business plan, we take no responsibility for
and make no guarantees or representations, expressed or implied, with respect to your ability to
meet the business plan or to achieve the results set forth therein. You bear the entire
responsibility for achievement of the business plan you develop;
(2) within 7 days after the end of each month during the Term, you must send us a
report of your business activities during that month, including information about your efforts to
find sites for Smashburger Restaurants in the Development Area and the status of development
and projecting openings for each Smashburger Restaurant under development in the
Development Area;
(3) within 28 days after the end of each calendar quarter, you must provide us with a
balance sheet and profit and loss statement for you and your Affiliates covering that quarter and
the year-to-date; and
(4) within 60 days after the end of each calendar year, you must provide us with an
annual profit and loss and source and use of funds statements and a balance sheet for you and
your Affiliates covering the previous year.
Each of the foregoing shall be in the form and format that we reasonably specify, shall be delivered to
us in the manner we specify, and shall be certified as correct by you or, if you are not a natural person,
by your Managing Owner.
3. FEES.
A. YOUR INITIAL FEE TO US.
In addition to paying the Initial Fee due under the first Franchise Agreement referenced in
Section 2.B, you must pay us, on your execution of this Agreement and in consideration of the grant of
the Development Rights, a nonrecurring and nonrefundable development fee in an amount equal to (1)
$20,000 multiplied by (2) the number of Smashburger Restaurants required to be opened pursuant to
the Development Schedule, less one (the “Development Fee”). The Development Fee is fully earned
by us when you and we sign this Agreement and is nonrefundable. We will apply the Development
Fee as a credit against the Initial Fees due under each Franchise Agreement (subsequent to the first
Franchise Agreement) which you or your Affiliates execute pursuant to this Agreement, subject to a
maximum credit under any Franchise Agreement of $20,000 and a maximum credit for all such
Franchise Agreements, in the aggregate, equal to the total Development Fee.
B. METHOD OF PAYMENT.
All amounts payable by you pursuant to this Agreement will, unless otherwise directed in
writing by us, be paid by way of certified check or bank draft delivered to us at the address set out
herein or at such other place as we designate in writing.
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4. CONFIDENTIAL INFORMATION.
All information furnished to you by us, whether orally or by means of written material,
including without limitation the Franchise Agreements, this Agreement, the Franchise System, plans,
specifications, financial or business data or projections, all documents, data, information, materials,
reports, proposals, procedures, financial information, compensation information, job descriptions,
employee biographies, recipes, proposed advertising, advertising and marketing plans, operations
manuals, formulas, samples, improvements, models, drawings, programs, compilations, devices,
methods, designs, techniques and specifications, inventions, know-how, processes, recipes, business
plans, marketing techniques, customer information, purchasing techniques, supplier lists, supplier
information, advertising strategies, operations, our trade secrets, or any other forms of business
information, whether or not marked as confidential (the “Proprietary Information”): (i) shall be
deemed proprietary and shall be held by you in strict confidence; (ii) shall not be disclosed or revealed
or shared with any other person except to your employees or contractors who have a need to know
such Proprietary Information for purposes of this Agreement and who are under a duty of
confidentiality no less restrictive than your obligations hereunder, or to individuals or entities
specifically authorized by us in advance; and (iii) shall not be used except to the extent necessary to
exercise the Development Rights or as permitted under Franchise Agreements, and then only in
circumstances of confidence and in accordance with the obligations set forth in the Franchise
Agreements. You will protect the Proprietary Information from unauthorized use, access, or disclosure
in the same manner as you protect your own confidential or proprietary information of a similar nature
and with no less than reasonable care.
All such Proprietary Information will at all times remain our sole property. You shall return to
us or destroy, at our election, all Proprietary Information in your possession or control and
permanently erase all electronic copies of such Proprietary Information promptly upon our request or
upon the expiration or termination of this Agreement, whichever comes first. At our request, you will
certify in writing signed by one of your officers that you have fully complied with the foregoing
obligations.
In the event of your alleged or actual breach of any of the provisions of this Section 4, we shall
be entitled to equitable relief, including in the form of injunctions and orders for specific performance,
in addition to all other remedies available at law or equity.
The obligations under this Section 4 shall survive any expiration or termination of the
Agreement.
5. EXCLUSIVE RELATIONSHIP DURING TERM.
A. COVENANTS AGAINST COMPETITION.
You acknowledge that we have granted you the Development Rights in consideration of and
reliance upon your agreement to deal exclusively with us. You therefore agree that, during the Term,
neither you, your Affiliates nor any of your or their owners or the immediate family members of any of
the foregoing will:
(a) have any direct or indirect interest as an owner – whether of record, beneficially,
or otherwise – in a Competitive Business (defined below), wherever located or operating, other
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than equity ownership of less than 5% of a Competitive Business whose stock or other forms of
ownership interest are publicly traded on a recognized United States stock exchange;
(b) perform services as a director, officer, manager, employee, consultant,
representative, or agent for a Competitive Business, wherever located or operating;
(c) divert or attempt to divert any actual or potential business, sites or customers of
your business associated with this Agreement to a Competitive Business; or
(d) directly or indirectly, appropriate, use or duplicate the Franchise System or any
portion thereof, in any business in which such person may have any interest of any kind
(whether directly or indirectly) or in which such person is otherwise employed.
The term “Competitive Business” means any restaurant, food service or other business (other
than a Smashburger Restaurant): (i) whose gross receipts from the sale of hamburgers represent, at any
time, at least 10% of the business’ total gross receipts (excluding receipts from the sale of alcoholic
beverages), (ii) whose menu, concept, business model or method of operation is similar to that
employed by restaurant units operated, franchised or licensed by us, (iii) that offers or sells goods or
services that are generally the same as or similar to the goods or services being offered by businesses
owned, operated, franchised or licensed by us, or (iv) that grants franchises or licenses for the
operation of any of the foregoing or provides services to the franchisor or licensor of any of the
foregoing.
B. NON-SOLICITATION AND NON-INTERFERENCE.
You further agree that, during the Term, neither you nor any of your owners, your or your
owners’ Affiliates, or the officers, directors, managers or immediate family members of any of the
foregoing, will:
(a) without obtaining the employer's or former employer’s prior written permission,
recruit or hire any person who is then or was, within the immediately preceding 24 months,
employed by us, any of our affiliates, or a franchise owner as (1) a general manager or assistant
manager at any Smashburger Restaurant, (2) a district or regional manager or any other such
person having responsibility for overseeing or supervising the operation of multiple
Smashburger Restaurants or (3) any of our or our affiliates’ officers; or
(b) interfere with the relationships we have from time to time with vendors,
suppliers or consultants; or
(c) engage in any other activity which might injure the goodwill of the Marks
and/or the Franchise System.
C. COVENANTS FROM OTHERS.
You agree to obtain similar covenants from the personnel we specify, including officers,
directors, managers, and other employees attending our training program or having access to
Proprietary Information. We have the right to regulate the form of agreement that you use and to be a
third party beneficiary of that agreement with independent enforcement rights. You must require all
employees performing managerial or supervisory functions and all employees receiving training from
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us to execute non-disclosure and non-solicitation covenants similar to those set out in this Section 5, in
the form supplied or approved by us. Contemporaneously with the signing this Agreement, you must
deliver to us, properly executed non-disclosure, non-solicitation and non-competition covenants similar
to those as set out in this Section 5, in the form supplied or approved by us, from all of your partners,
directors, officers, shareholders and Affiliates and from all partners, directors, officers, and
shareholders of such Affiliates who, in each case, are not a party to this Agreement or who have not
signed the Guaranty and Assumption of Obligations attached hereto as Exhibit C. In addition, you
must cause each new Affiliate of yours and each new partner, director, officer and shareholder of yours
and such Affiliates to deliver to us properly executed non-disclosure, non-solicitation and
non-competition covenants similar to those set out in this Section 5 immediately upon their becoming a
shareholder or partner, or upon their appointment or election as a director or officer, of you or such
Affiliate.
D. INNOVATIONS.
As between the parties, you acknowledge and agree that we are the sole owner of all right, title,
and interest in and to the Franchise System and any Proprietary Information. All improvements,
developments, derivative works, enhancements, or modifications to the Franchise System and any
Proprietary Information (collectively, “Innovations”) made or created by you, your employees or your
contractors, whether developed separately or in conjunction with us, shall be owned solely by us. You
represent, warrant, and covenant that your employees and contractors are bound by written agreements
assigning all rights in and to any Innovations developed or created by them to you. To the extent that
you, your employees or your contractors are deemed to have any interest in such Innovations, you
hereby agree to assign, and do assign, all right, title and interest in and to such Innovations to us. To
that end, you shall execute, verify, and deliver such documents (including, without limitation,
assignments) and perform such other acts (including appearances as a witness) as we may reasonably
request for use in applying for, obtaining, perfecting, evidencing, sustaining, and enforcing such
ownership rights in and to the Innovations, and the assignment thereof. Your obligation to assist us
with respect to such ownership rights shall continue beyond the expiration or termination of this
Agreement. In the event we are unable for any reason, after reasonable effort, to secure your signature
on any document needed in connection with the actions specified in this Section 5.D, you hereby
irrevocably designate and appoint us and our duly authorized officers and agents as your agent and
attorney in fact, which appointment is coupled with an interest and is irrevocable, to act for and on
your behalf to execute, verify, and file any such documents and to do all other lawfully permitted acts
to further the purposes of this Section 5.D with the same legal force and effect as if executed by you.
The obligations of this Section 5.D shall survive any expiration or termination of the Agreement.
6. TRANSFER.
A. SALE OR ENCUMBRANCE.
You acknowledge that we have granted you the rights pursuant to this Agreement based upon,
among other things, the character, background and other qualifications and abilities personal to you or,
if applicable, your owners. Accordingly, you agree that this Agreement, ownership interests in you or,
any interests in this Agreement, the Development Rights or all or any part of the business operated
under this Agreement will not be sold, assigned, donated or otherwise transferred, including as a result
of death (each a “Sale”), to any person or Entity (hereinafter referred to specifically in this Section 6 as
the “Recipient”) without our prior written consent; provided, however, that transfers among your
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current owners of ownership interests in you will require prior notice to us but will not require our
consent as long as the Managing Owner and Control of you are not changed as a result of such transfer.
For purposes of the preceding sentence, “Control” means the right and power to direct or cause the
direction of your management and policies You further agree that you will not enter into any proposed
mortgage, pledge, hypothecation, encumbrance or giving of a security interest in or which affects the
Development Rights and your other rights under this Agreement (a “Security Interest”) without our
prior written consent. The Development Rights may not be transferred separate and apart from the
entirety of this Agreement, and a proposed transfer of this Agreement may not be made separately
from or independently of a transfer to the same Recipient of all of the Franchise Agreements (and the
Smashburger Restaurants operated pursuant thereto) executed pursuant to this Agreement.
Our approval of a transfer of ownership interests in you as a result of the death or incapacity of
the proposed transferor will not be unreasonably withheld or delayed so long as at least one of the
Managing Owners designated on Exhibit A continues to be the designated Managing Owner. If, as a
result of the death or incapacity of the transferor, a transfer is proposed to be made to the transferor’s
spouse, and if we do not approve the transfer, the trustee or administrator of the transferor’s estate will
have nine months after our refusal to consent to the transfer to the transferor’s spouse within which to
transfer the transferor’s interests to another party whom we approve in accordance with this Section
6.A.
We may withhold our consent to a Sale or grant of a Security Interest for any reason, and we
will not be required to consider a proposed Sale or Security Interest unless you comply with the
following requirements either at the time the request is made or, if applicable, by the completion of the
Sale or grant of the Security Interest:
(1) with respect to any proposed Sale:
(a) you must submit an application in writing to us requesting our consent.
Such application must set out: (i) the exact terms of the proposed Sale and a copy of a
duly signed bona fide written offer; (ii) information relating to the business reputation
and qualifications of the Recipient to carry on business; (iii) suitable credit and financial
information of the Recipient to allow us to make a reasonable decision as to the credit
worthiness and financial position of the Recipient and such information will include as
an appendix thereto, a personal net worth statement of the Recipient or in the event the
Recipient is an Entity, a personal net worth statement of its controlling shareholder(s) or
member(s); (iv) such other information as you may have knowledge and would
reasonably be considered of a relevant nature to us in determining whether or not to
grant our consent, and (v) such other information as we may require;
(b) the Recipient must arrange for and successfully complete to our
satisfaction, all or such training in the operations of the multi-unit development business
and a Smashburger Restaurant, at its or your sole expense, as we deem necessary; prior
to the commencement of the training by the Recipient, you must deliver to us, the sum
of $2,500 by means of cash or certified check, which amount will be non-refundable,
except that if the Sale is successfully completed, the entire amount will be applied by us
against the amount payable by you pursuant to Section 6.A(1)(h) below, or such other
amounts as may be owing by you to us pursuant to this Agreement;
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(c) the Recipient and its immediate family members (and, if it is not a
natural person, its owners and immediate family members of its owners) must not have
an interest or be engaged in activities which would violate the restrictions regarding
Competitive Businesses as described in Sections 5.A and 5.B;
(d) the Recipient must enter into any and all agreements and covenants
(including a new multi-unit development agreement) which we are then requiring of
new multi-unit developers, and if the Recipient is an Entity, the Recipient must provide
such personal guarantees or other assurances of its shareholders or members or others as
we may require;
(e) you must have discharged and/or satisfied all of your obligations
(financial or otherwise) to us and our affiliates incurred in connection with the business
operated under this Agreement, as of the date of the completion of the said Sale;
(f) you, and if you are an Entity, your partners, officers, directors,
shareholders or members, will execute and deliver to us and our officers, directors,
shareholders, employees and our and their heirs, executors, administrators, successors
and assigns, a general release in a form approved by us, releasing us and the
aforementioned from all claims, demands, liabilities, actions, damages, costs or
expenses which you and any of your officers, directors, shareholders or members and
your heirs, executors, administrators, successors and assigns, may have as a result of
this Agreement, the business operated hereunder, or the relationship between you and us
created by this Agreement;
(g) you must pay all of our expenses incurred in connection with the Sale,
whether or not such Sale is completed, up to a maximum amount of $3,000 plus
disbursements and applicable taxes thereon; in this regard, you must deliver to us
together with the original application submitted for approval of the Sale, the sum of
$1,500 towards such expenses plus applicable goods and services taxes thereon and pay
the balance upon completion of the approved Sale;
(h) you must pay to us, an amount equal to the following: (a) if the Sale is
completed prior to the 3rd
anniversary of the Effective Date, you must pay to us, an
amount equal to the greater of (i) 10% of the purchase price to be paid and/or other
consideration to be received from and/or debt to be assumed by the Recipient, or (ii)
$35,000, plus, in either case, applicable goods and services taxed thereon; or (b) if the
Sale is completed on or after the 3rd
anniversary of the Effective Date, you must pay to
us, an amount equal to the greater of (i) 5% of the purchase price to be paid and/or other
consideration to be received from and/or debt to be assumed by the Recipient, or (ii)
$25,000, plus, in either case, applicable goods and services taxes thereon; and
(i) we must first agree, in writing, on the date of the completion of the Sale;
(2) with respect to any proposed grant of a Security Interest:
(a) you must submit an application in writing to us, requesting our consent.
Such application must set out the proposed business terms and any security to be given
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by you, and must include a copy of any loan agreements, security agreements or other
documents proposed to be executed by or on your behalf;
(b) the purpose of the giving of such security must be to obtain financing for
use in the business operated hereunder; and
(c) you may not at the time of giving any security be in default of any of the
terms and conditions of this Agreement.
B. FIRST RIGHT OF REFUSAL.
Notwithstanding anything contained in this Section 6, in the event you make or receive (and
intend to accept) an offer of Sale, without in any way derogating from our right to grant or not grant
our consent thereto, we will have the option, to be exercised by notice in writing delivered to you
within 30 days of receipt of your application referred to in Section 6.A.(1)(a) hereof, to acquire the said
rights and the business operated hereunder upon the same terms and conditions as set out in the said
application except as provided hereinafter. If we exercise our option, we will complete the Sale upon
the same terms and conditions as set out in the said application save and except that we will be entitled
to deduct from the purchase price (i) the amount of any sales or other commissions (if any) which
would have been payable by you had the Sale been completed with the Recipient and (ii) an amount
equal to that amount to which we are entitled pursuant to Section 6.A.(1)(h) hereof, and save and
except we will have the right to substitute cash for any other form of consideration specified in the
offer accompanying the application and the right to pay in full, the entire amount of the purchase price
at the time of closing. If we do not exercise our option, we may then, in our discretion, determine if
we will consent to the proposed Sale to the Recipient; we will notify you of our decision within 30
days of receipt of said application. The sale, assignment, transfer, donation or other dealing must be
completed within 60 days of the receipt by us of your original application, failing which, you must
again make application to us in the manner set out in Section 6.A.(1)(a) hereof, and in all such events
the provisions of this Section 6.B. will apply anew, and such procedure will continue to be repeated so
often as you desire to complete any Sale. If we do not notify you of our intention to consent within
such 30-day period, we will be deemed not to have given our consent.
C. PUBLIC OR PRIVATE OFFERINGS.
You acknowledge that the publication or dissemination of written information used to raise or
secure funds can reflect upon us and the Franchise System. Therefore, you acknowledge and agree
that you may not engage in a public offering of securities without our prior written consent. If you
desire to request that we consent to any such event, you must submit any written information intended
to be used for that purpose to us before inclusion in any registration statement, prospectus or similar
offering memorandum. Should we object to any reference to us or our affiliates or any of our business
in the offering literature or prospectus, the literature or prospectus shall not be used until our objections
are withdrawn or resolved.
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7. TERMINATION OF AGREEMENT.
A. EVENTS OF TERMINATION.
Notwithstanding anything otherwise contained in this Agreement, we will have the right to
terminate this Agreement at any time and without notice, upon the happening of any one or more of the
following events:
(1) if default is made in the payment of any amount payable under this Agreement
or any Franchise Agreement with us when and as same becomes due and payable, and such
default continues for a period of 5 days after written notice thereof has been given by us to you;
(2) if you cease or threaten to cease to carry on the business granted to you under
this Agreement, or take or threaten to take any action to liquidate your assets, or if you do not
pay any debts or other amounts incurred by you in operating the business hereunder when such
debts or amounts are due and payable;
(3) if you fail to comply with the Development Schedule;
(4) if you make or purport to make a general assignment for the benefit of creditors;
or if you hereto institute any proceeding under any statute or otherwise relating to insolvency or
bankruptcy, or should any proceeding under any such statute or otherwise be instituted against
you; or if a custodian, receiver, manager or any other person with like powers is appointed to
take charge of all or any part of the business granted hereunder or of the shares or documents of
title owned by any of your shareholders or title holders; or if you commit or suffer any default
under any contract of conditional sale, mortgage or other security instrument in respect of the
business being operated hereunder or of the shares or documents of title owned by any of your
shareholders or title holders; or if any of your goods, chattels or assets or of the business are
seized or taken in execution or in attachment by a creditor, or if a writ of execution is issued
against any of such goods, chattels, or assets; or if a judgment or judgments for the payment of
money in amounts in excess of $20,000, is rendered by any court of competent jurisdiction
against you;
(5) if you fail to furnish reports, financial statements, tax returns or any other
documentation required by the provisions of this Agreement and do not correct such failure
within 10 days following notice;
(6) if you are an Entity, (i) if an order is made or a resolution passed or any
proceedings taken towards your winding up or liquidation or dissolution or amalgamation; or
(ii) if you lose your charter by expiration, forfeiture or otherwise;
(7) if you or any of your owners have made any material misrepresentation or
omission in your or their application and the documents and other information provided to us to
support your or their application to acquire the rights granted in this Agreement;
(8) if you or your owners transfer or attempt to transfer any interest in the business
operated hereunder, you, or this Agreement, without complying with the transfer provisions
contained in Section 6;
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(9) if you (or any of your owners) are (a) convicted of or plead guilty or “no-
contest” to a felony, (b) convicted of or plead guilty or “no contest” to any crime or other
offense likely to adversely affect the reputation of Smashburger Restaurants or the goodwill of
the Marks, or (c) engage in any conduct which, in our opinion, adversely affects or, if you were
to continue as a multi-unit developer under this Agreement, is likely to adversely affect the
reputation of the business you conduct pursuant to this Agreement, the reputation and goodwill
of Smashburger Restaurants generally or the goodwill associated with the Marks;
(10) we provide written notice of your (or any of your owners’) failure (a) on three
(3) or more separate occasions within any 12 consecutive month period to comply with this
Agreement, or (b) on two (2) or more separate occasions within any six (6) consecutive month
period to comply with the same obligation under this Agreement, in any case, whether or not
you correct the failures after our delivery of notice to you; or
(11) if you or your Affiliates fail to comply with any provision of any Franchise
Agreement and do not cure such failures within the applicable cure period, if any; or
(12) if you fail to observe, perform or comply with any other of the terms or
conditions of this Agreement not listed in items (1) through (11) above, and such failure
continues for a period of 7 days after written notice thereof has been given by us to you.
Further, in Section 15.E of each Franchise Agreement, we have a separate, distinct right to
purchase the Restaurant identified therein under certain circumstances delineated in that
Section (the “Call Right”). We have agreed that, if we exercise the Call Right under one
Franchise Agreement, we will do so with respect to all Franchise Agreements under which we
have the right to do so. If we exercise the Call Right as to all Franchise Agreements then in
effect and executed pursuant to this Agreement, this Agreement will, automatically and without
further action, expire as of the Closing of our purchase under the Call Right (as defined in the
Franchise Agreement).
B. EFFECTS OF TERMINATION.
(1) Effects. Upon the termination of this Agreement for any reason whatsoever, the
following provisions apply:
(a) all of your rights under this Agreement, including without limitation, the
Development Rights, will cease, and thereafter you must cease conducting the business
granted hereunder or holding yourself out to the public as being a developer of
Smashburger Restaurants except as permitted under Franchise Agreements;
(b) you must deliver to us, all forms, documents, or information provided to
you pursuant to this Agreement together with all copies thereof;
(c) you must cease use of all telephone numbers and listing services in any
way connected with the business you currently operate hereunder, and subject to our
direction, you must immediately cancel such numbers and listings or direct that same be
transferred to us, at which time we will then have the exclusive right to use such
numbers and listings and/or authorize others to use same; you hereby irrevocably
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appoint us as your lawful attorney to instruct the telephone company or listing service to
cancel or transfer all such numbers or listings to us or as we may direct; and
(d) without limiting any other rights or remedies to which we may be
entitled, you must pay all amounts owing to us pursuant to this Agreement up to the
date of termination.
C. COVENANT NOT TO COMPETE / NON-SOLICITATION.
(1) Non-Competition. Upon termination or expiration of this Agreement, you and
your owners agree that, for 2 years beginning on the effective date of termination or expiration
or the date on which all persons restricted by this Section 7.C begin to comply with this Section
7.C, whichever is later, neither you nor your Affiliates, nor any of your or their owners (or your
or their immediate family members) will have any direct or indirect interest as an owner
(whether of record, beneficially, or otherwise), investor, partner, director, officer, employee,
consultant, representative, or agent in any Competitive Business (as defined in Section 5 above)
located or operating:
(a) within the Development Area; and
(b) within a 5-mile radius of any Smashburger Restaurant in operation or
under construction on the later of the effective date of the termination or expiration of
this Agreement or the date on which all persons restricted by this Section 7.C begin to
comply with this Section 7.C.
These restrictions also apply after transfers, as provided in Section 6 above. If any
person restricted by this Section 7.C refuses voluntarily to comply with these obligations, the 2-
year period for that person will commence with the entry of a court order enforcing this
provision. You expressly acknowledge that you, your Affiliates, your and their owners and the
immediate family members of each possess skills and abilities of a general nature and have
other opportunities for exploiting these skills. Consequently, our enforcing the covenants made
in this Section 7.C will not deprive you or them of any personal goodwill or ability to earn a
living.
(2) Non-Solicitation. You further agree that, for two (2) years beginning on the
effective date of termination or expiration, neither you nor any of your owners, your or your
owners’ Affiliates, or the officers, directors, managers or immediate family members of any of
the foregoing, will:
(a) recruit or hire any person who is then or was, within the immediately
preceding 24 months, employed by us, any of our affiliates, or a franchise owner as (a)
a general manager or assistant manager at any Smashburger Restaurant, (b) a district or
regional manager or any other such person having responsibility for overseeing or
supervising the operation of multiple Smashburger Restaurants or (c) any of our or our
affiliates’ officers;
(b) interfere or attempt to interfere with our or our affiliates’ relationships
with any vendors or consultants; or
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(c) engage in any other activity which might injure the goodwill of the
Marks and/or the Franchise System.
If you fail to comply with paragraph (a) above, you agree to pay us an amount equal to
200% of the annual salary of such person.
D. SURVIVAL OF COVENANTS.
Notwithstanding the termination or other expiration of this Agreement for any reason
whatsoever, or any Sale, all covenants and agreements to be performed or observed by you will survive
any such termination, expiration or Sale.
8. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.
A. INDEPENDENT CONTRACTORS.
We and you hereby acknowledge and agree that each of us is an independent contractor, that
neither of us is considered to be the agent, representative, master or servant of the other for any
purpose whatsoever, and that neither of us has any authority to enter into any contract, to assume any
obligations or to give any warranties or representations on behalf of the other. Nothing in this
Agreement may be construed to create a relationship of partners, joint venturers, fiduciaries, agency or
any other similar relationship between us and you.
B. INDEMNIFICATION.
You agree to indemnify, defend, and hold harmless us, our affiliates, and our and their
respective shareholders, members, directors, officers, employees, agents, successors, and assignees
(the “Indemnified Parties”) against, and to reimburse any one or more of the Indemnified Parties for,
all claims, obligations, and damages directly or indirectly arising out of the operation of the business
you conduct under this Agreement, or your breach of this Agreement, including, without limitation,
those alleged to be caused by the Indemnified Party’s negligence, unless (and then only to the extent
that) the claims, obligations, or damages are determined to be caused solely by the Indemnified Party’s
intentional misconduct in a final, unappealable ruling issued by a court with competent jurisdiction.
For purposes of this indemnification, “claims” include all obligations, damages (actual, consequential,
or otherwise), and costs that any Indemnified Party reasonably incurs in defending any claim against it,
including, without limitation, reasonable accountants’, arbitrators’, attorneys’, and expert witness fees,
costs of investigation and proof of facts, court costs, travel and living expenses, and other expenses of
litigation or alternative dispute resolution, regardless of whether litigation or alternative dispute
resolution is commenced. Each Indemnified Party may defend any claim against it at your expense
and agree to settlements or take any other remedial, corrective, or other actions. This indemnity will
continue in full force and effect subsequent to and notwithstanding this Agreement’s expiration or
termination. An Indemnified Party need not seek recovery from any insurer or other third party, or
otherwise mitigate its losses and expenses, in order to maintain and recover fully a claim against you
under this subparagraph. You agree that a failure to pursue a recovery or mitigate a loss will not
reduce or alter the amounts that an Indemnified Party may recover from you under this Section 8.B.
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9. ENFORCEMENT; ARBITRATION.
A. ARBITRATION
We and you agree that all controversies, disputes, or claims between us and our affiliates, and
our and their respective shareholders, officers, directors, agents, or employees, and you (or your
owners, guarantors, Affiliates, or employees) arising out of or related to:
(1) this Agreement or any other agreement between you (or your owners) and us (or
our affiliates);
(2) our relationship with you; or
(3) the scope or validity of this Agreement or any other agreement between you (or
your owners) and us (or our affiliates) or any provision of any of such agreements (including
the validity and scope of the arbitration obligation under this Section 9.A, which we and you
acknowledge is to be determined by an arbitrator, not a court),
must be submitted for binding arbitration, on demand of either party, to the American Arbitration
Association. The arbitration proceedings will be conducted by one arbitrator and, except as this
Section otherwise provides, according to the then-current Commercial Arbitration Rules of the
American Arbitration Association. All proceedings will be conducted at a suitable location chosen by
the arbitrator in or within 50 miles of our then-current principal place of business (currently, Denver,
Colorado). All matters relating to arbitration will be governed by the Federal Arbitration Act (9 U.S.C.
§§ 1 et seq.). Judgment upon the arbitrator’s award may be entered in any court of competent
jurisdiction.
The arbitrator shall issue only a standard decision and not a reasoned decision. The arbitrator
has the right to award or include in his or her award any relief which he or she deems proper,
including, without limitation, money damages (with interest on unpaid amounts from the date due),
specific performance, injunctive relief, and attorneys’ fees and costs, provided that the arbitrator may
not declare any of the trademarks owned by us or our affiliates generic or otherwise invalid or, except
as expressly provided in this Article 9, award any punitive, exemplary, or multiple damages against
either party (we and you hereby waiving to the fullest extent permitted by law, except as expressly
provided in this Article 9, any right to or claim for any punitive, exemplary, or multiple damages
against the other).
We and you agree to be bound by the provisions of any limitation on the period of time in
which claims must be brought under applicable law or under this Agreement, whichever expires
earlier. We and you further agree that, in any arbitration proceeding, each party must submit or file
any claim which would constitute a compulsory counterclaim (as defined by Rule 13 of the Federal
Rules of Civil Procedure) within the same proceeding as the claim to which it relates. Any claim
which is not submitted or filed as required is forever barred. The arbitrator may not consider any
settlement discussions or offers that might have been made by either you or us.
We reserve the right, but have no obligation, to advance your share of the costs of any
arbitration proceeding in order for such arbitration proceeding to take place and by doing so shall not
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be deemed to have waived or relinquished our right to seek the recovery of those costs in accordance
with the Attorneys’ Fees and Costs provisions of this Agreement (Section 9.F below).
We and you agree that arbitration will be conducted on an individual, not a class-wide, basis
and that an arbitration proceeding between us and our affiliates, and our and their respective
shareholders, officers, directors, agents, or employees, and you (or your owners, guarantors, affiliates,
or employees) may not be commenced, conducted or consolidated with any other arbitration
proceeding between us and any other person. Notwithstanding the foregoing or anything to the
contrary in this Section, if any court or arbitrator determines that all or any part of the preceding
sentence is unenforceable with respect to a dispute that otherwise would be subject to arbitration under
this Section, then all parties agree that this arbitration clause shall not apply to that dispute and that
such dispute shall be resolved in a judicial proceeding in accordance with the dispute resolution
provisions of the Agreements.
Despite our and your agreement to arbitrate, we and you each have the right in a proper case to
seek temporary restraining orders and temporary or preliminary injunctive relief from a court of
competent jurisdiction; provided, however, that we and you must contemporaneously submit our
dispute for arbitration on the merits as provided in this section.
You and we agree that, in any arbitration arising as described in this Section, requests for
documents shall be limited to documents that are directly relevant to significant issues in the case or to
the case’s outcome; shall be restricted in terms of time frame, subject matter and persons or entities to
which the requests pertain; and shall not include broad phraseology such as “all documents directly or
indirectly related to.” You and we further agree that there shall be no interrogatories or requests to
admit. With respect to any electronic discovery, you and we agree that:
(a) production of electronic documents need only be from sources used in the ordinary
course of business. No such documents shall be required to be produced from back-up servers,
tapes or other media;
(b) the production of electronic documents shall normally be made on the basis of generally
available technology in a searchable format which is usable by the party receiving the documents
and convenient and economical for the producing party. Absent a showing of compelling need, the
parties need not produce metadata, with the exception of header fields for email correspondence;
(c) the description of custodians from whom electronic documents may be collected shall
be narrowly tailored to include only those individuals whose electronic documents may reasonably
be expected to contain evidence that is material to the dispute; and
(d) where the costs and burdens of electronic discover are disproportionate to the nature of
the dispute or to the amount in controversy, or to the relevance of the materials requested, the
arbitrator shall either deny such requests or order disclosure on condition that the requesting party
advance the reasonable cost of production to the other side, subject to allocation of costs in the
final award as provided herein.
In any arbitration arising out of or related to this Agreement, each side may take three
discovery depositions. Each side’s depositions are to consume no more than a total of 15 hours. There
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are to be no speaking objections at the depositions, except to preserve privilege. The total period for
the taking of depositions shall not exceed six weeks.
The provisions of this Section are intended to benefit and bind certain third party non-
signatories and will continue in full force and effect subsequent to and notwithstanding the expiration
or termination of the Agreements.
Any provisions of this Agreement below that pertain to judicial proceedings shall be subject to
the agreement to arbitrate contained in this Section.
B. CONSENT TO JURISDICTION.
SUBJECT TO THE AGREEMENT TO ARBITRATE (SECTION 9.A ABOVE) AND
THE PROVISIONS BELOW, YOU AND YOUR OWNERS AGREE THAT ALL ACTIONS
ARISING UNDER THIS AGREEMENT OR OTHERWISE AS A RESULT OF THE
RELATIONSHIP BETWEEN YOU AND US MUST BE COMMENCED IN A COURT OF
GENERAL JURISDICTION NEAREST TO OUR THEN CURRENT PRINCIPAL PLACE OF
BUSINESS (CURRENTLY DENVER, COLORADO), AND YOU (AND EACH OWNER)
IRREVOCABLY SUBMIT TO THE JURISDICTION OF THAT COURT AND WAIVE ANY
OBJECTION YOU (OR THE OWNER) MIGHT HAVE TO EITHER THE JURISDICTION
OF OR VENUE IN THAT COURT.
C. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.
EXCEPT FOR YOUR OBLIGATION TO INDEMNIFY US FOR THIRD PARTY
CLAIMS UNDER SECTION 8.B., AND EXCEPT FOR PUNITIVE, EXEMPLARY OR
MULTIPLE DAMAGES AVAILABLE TO EITHER PARTY UNDER UNITED STATES
FEDERAL LAW, WE AND YOU (AND YOUR OWNERS) WAIVE TO THE FULLEST
EXTENT PERMITTED BY LAW ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE,
EXEMPLARY OR MULTIPLE DAMAGES AGAINST THE OTHER AND AGREE THAT, IN
THE EVENT OF A DISPUTE BETWEEN US AND YOU, THE PARTY MAKING A CLAIM
WILL BE LIMITED TO EQUITABLE RELIEF AND TO RECOVERY OF ANY ACTUAL
DAMAGES IT SUSTAINS.
WE AND YOU IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY, BROUGHT
BY EITHER PARTY.
D. INJUNCTIVE RELIEF.
Nothing in this Agreement bars our right to obtain specific performance of the provisions of
this Agreement and injunctive relief against conduct that threatens to injure or harm us, our or our
affiliates’ trademarks, or the Franchise System, under customary equity rules, including applicable
rules for obtaining restraining orders and preliminary injunctions. You agree that we may obtain such
injunctive relief. You agree that we will not be required to post a bond to obtain injunctive relief and
that your only remedy if an injunction is entered against you will be the dissolution of that injunction,
if warranted, upon due hearing, and you hereby expressly waive any claim for damages caused by such
injunction.
22 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
E. LIMITATION OF CLAIMS.
EXCEPT FOR CLAIMS ARISING FROM YOUR NON-PAYMENT OR
UNDERPAYMENT OF AMOUNTS YOU OWE TO US PURSUANT TO THIS AGREEMENT,
ANY AND ALL CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
OUR RELATIONSHIP WITH YOU WILL BE BARRED UNLESS A JUDICIAL
PROCEEDING IS COMMENCED WITHIN ONE (1) YEAR FROM THE DATE ON WHICH
THE PARTY ASSERTING SUCH CLAIM KNEW OR SHOULD HAVE KNOWN OF THE
FACTS GIVING RISE TO SUCH CLAIMS.
THE PARTIES AGREE THAT ANY PROCEEDING WILL BE CONDUCTED ON AN
INDIVIDUAL, NOT A CLASS-WIDE, BASIS.
YOU AND YOUR OWNERS AGREE THAT OUR AND OUR AFFILIATES’ OWNERS,
DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS SHALL NOT BE PERSONALLY
LIABLE NOR NAMED AS A PARTY IN ANY ACTION BETWEEN US OR OUR
AFFILIATES AND YOU OR YOUR OWNERS.
F. ATTORNEYS’ FEES AND COSTS.
If either party initiates an arbitration, judicial or other proceeding, the party prevailing in such
proceeding shall be entitled to recovery of its costs and expenses, including reasonable attorneys’ fees.
10. MISCELLANEOUS.
A. JOINT AND SEVERAL OBLIGATION.
If either you or we are comprised of more than one individual, or Entity, the obligations of each
such individual and Entity will be joint and several.
B. SEVERABILITY.
If for any reason whatsoever, any term or condition of this Agreement is, to any extent declared
to be invalid or unenforceable, all other terms and conditions of this Agreement, other than those as to
which it is held invalid or unenforceable, will not be affected thereby and each term and condition of
this Agreement will be separately valid and enforceable to the fullest extent permitted by law.
C. NO WARRANTY OR REPRESENTATION.
You hereby acknowledge that we and our agents, affiliates, officers, directors, shareholders,
employees and other representatives have not made or given to you any warranties, representations,
undertakings, commitments, covenants or guarantees respecting the subject matter of this Agreement
except as expressly stated in this Agreement, and specifically without limiting the generality of the
foregoing, you hereby acknowledge and agree that we and our agents, affiliates, officers, directors,
shareholders, employees and other representatives have not made or given any warranty,
representation, undertaking, commitment, covenant or guarantee in respect of sales or profit to be
derived or costs or expenses to be incurred by you and that you are not relying upon any warranties,
representations, undertakings, commitments, covenants or guarantees of us and our officers, directors,
shareholders, employees and other representatives except as provided in this Agreement.
23 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
D. NOTICE.
All notices, consents, approvals, statements, documents or other communications required or
permitted to be given hereunder must be in writing, and must be delivered personally or mailed by
registered mail, postage prepaid, to the said parties at their respective addresses set forth in the opening
paragraph of this Agreement to the attention of the person indicated below:
If to us: Attention: Legal Department
If to you: Attention:
or at any such other address or addresses as the party to whom such notice, consent approval,
statement, documentation or other communication is to be given, may designate by notice in writing so
given to the other parties hereto as provided hereinbefore. If any one of the said parties is comprised
of more than one person or Entity, any notice, consent, approval, statement, document or other
communication may be given by or to any one thereof, and it will have the same force and effect as if
given by or to all thereof. Any notices, consents, approvals, statements, documents or other
communications, if mailed will be deemed to have been given on the second business day (except
Saturdays and Sundays) following such mailing, or, if delivered personally, will be deemed to have
been given on the day of delivery.
E. HEADINGS.
Headings preceding the text, sections and subsections hereof have been inserted solely for
convenience of reference and will not be construed to affect the meaning, construction or effect of this
Agreement.
F. APPLICABLE LAW.
This Agreement will be construed and interpreted under the laws of the State of Colorado,
without regard to its conflicts of laws rules, except to the extent governed by the United States
Trademark Act of 1946 (Lanham Act, 15 U.S.C. Section 1051 et seq.).
G. TIME OF ESSENCE.
Time is of the essence of this Agreement and of each and every part hereof.
H. WAIVER.
The waiver by either you or us, of a breach of any term or condition contained in this
Agreement will not be deemed to be a waiver of such term or condition or any subsequent breach of
the same or any other term or condition herein contained unless such waiver is expressly set forth in
writing. Our failure to exercise any right of ours to demand your exact compliance, nor any custom of
practice of you and us at variance with the terms and conditions of this Agreement will constitute a
waiver of our right to demand exact compliance with the terms and conditions hereof. Our subsequent
acceptance of any amount payable hereunder, will not be deemed to be a waiver of any preceding
breach of any term or condition of this Agreement, other than the failure to pay the particular amount
so accepted, regardless of our knowledge of such preceding breach at the time of acceptance of such
amount.
24 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
I. ASSIGNMENT BY US.
In the event of a sale, transfer or assignment by us of our interest in this Agreement or any
interest herein, to the extent that the purchaser or assignee assumes our covenants and obligations
under this Agreement, we will thereupon and without further agreement, be freed and relieved of all
liabilities with respect to such covenants and obligations. In no event will anything, including without
limitation, anything contained in this Agreement, prevent us from selling, transferring or assigning any
interest we may have in the Franchise System or the Marks or any part thereof, and notwithstanding we
have no obligations to you under or pursuant to this Agreement, if for any reason it is determined
otherwise by a governmental authority, legislative act, court of competent jurisdiction or in any other
manner whatsoever, upon completion of any such sale, transfer or assignment, we will be freed and
relieved of all your liability whatsoever.
J. AGREEMENT EFFECTIVE.
This Agreement shall not be effective until accepted by us as evidenced by dating and signing
by an officer or other duly-authorized representative of ours. Notwithstanding that this Agreement
shall not be effective until signed by us, we reserve the right to make the effective date of this
Agreement the date on which you signed the Agreement.
K. FURTHER ASSURANCES.
You and we agree to execute and deliver such further and other agreements, assurances,
undertakings, acknowledgements or documents, cause such meetings to be held, resolutions passed and
by-laws enacted, exercise our vote and influence and do and perform and cause to be done and
performed any further and other acts and things as may be necessary or desirable in order to give full
effect to this Agreement and every part hereof.
L. ENTIRE AGREEMENT.
This Agreement and all schedules attached hereto constitute the entire agreement of the parties
hereto and all prior negotiations, commitments, representations, warranties, agreements and
undertakings made prior hereto are hereby merged. There are no other inducements, representations,
warranties, agreements, undertakings, or promises, (oral or otherwise) among you and us relating to the
subject matter of this Agreement. No subsequent alteration, amendment, change or addition to this
Agreement or any schedules will be binding upon the parties hereto unless reduced to writing and
signed by us and you or our and your respective heirs, executors, administrators, successors or assigns.
Nothing contained herein shall be deemed a waiver of any right you may have to rely on the franchise
disclosure document.
M. LAWFUL ATTORNEY.
Notwithstanding anything otherwise contained in this Agreement, if you do not execute and
deliver any documents or other assurances so required of you pursuant to this Agreement and/or if we
take over the management or operation of the business operated hereunder on your behalf for any
reason, you hereby irrevocably appoint us as your lawful attorney with full power and authority, to
execute and deliver in your name any such documents and assurances, and/or to manage or operate the
business on your behalf, and/or to do all other acts and things, all in such discretion as we may desire,
25 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
and you hereby agree to ratify and confirm all of our acts as your lawful attorney and to indemnify and
save us harmless from all claims, liabilities, losses, or damages suffered in so doing. You also hereby
appoint us as your attorney-in-fact to receive and inspect your confidential sales and other tax records
and hereby authorize all tax authorities to provide such information to us for all tax periods during the
term of this Agreement.
N. ACKNOWLEDGMENTS.
You acknowledge and agree that you have conducted an independent investigation of all
aspects relating to the business being granted hereunder and recognize that the business venture
contemplated by this Agreement involves business risks and that its success will be largely dependent
upon your skills and ability as an independent business person or organization. You acknowledge that
you have received, read and understand this Agreement, the attachments hereto and agreements
relating hereto, and that we have accorded you ample time and opportunity to consult with advisors of
your own choosing about the potential benefits and risks of entering into this Agreement.
O. BINDING AGREEMENT.
This Agreement will inure to the benefit of and be binding upon us and our successors and
assigns and will be binding upon you and your heirs, executors, administrators, successors and
authorized assigns.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement in
Denver, Colorado, effective as of the Effective Date.
SMASHBURGER FRANCHISING
LLC, a Delaware limited liability
company
By:
Name: ____________________________
Title:
*Date:____________________________ *(This is the Effective Date)
MULTI-UNIT DEVELOPER:
[Name]
By:
Name: ____________________________
Title: _____________________________
Dated:
A-1 Smashburger – 06/2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
EXHIBIT A
DEVELOPMENT AREA AND DEVELOPMENT SCHEDULE
1. THE DEVELOPMENT RIGHTS GRANTED HEREIN ARE (INSERT
“EXCLUSIVE” OR “NOT EXCLUSIVE” AS APPLICABLE): _____________________.
2. The Development Area is comprised of: _
, as depicted on the map attached hereto. If the Development Area is identified by
counties or other political subdivisions, political boundaries will be considered fixed as of the
date of this Agreement and will not change, notwithstanding a political reorganization or change
to the boundaries or regions.
3. The Development Schedule is as follows:
Development Period
Number of New Smashburger
Restaurants to be Opened
During Development Period
Cumulative Number of
Smashburger Restaurants to
be Operating by End of
Development Period
Effective Date to ____ __________ __________
_____ to _____ __________ __________
_____ to _____ __________ __________
_____ to _____ __________ __________
_____ to _____ __________ _____ ____
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By:
Name: ____________________________
Title:
Date: _____________________________
MULTI-UNIT DEVELOPER:
[Name]
By:
Name: ____________________________
Title: _____________________________
Date:
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Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
MAP OF DEVELOPMENT AREA
B-1 Smashburger – 06/2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
EXHIBIT B
OWNERS AND MANAGING OWNER
1. Business Form of Developer.
(a) Individual Proprietorship. Your owner(s) (is) (are) as follows:
(b) Corporation, Limited Liability Company or Partnership. You were
incorporated or formed on _________, 20__, under the laws of the State of
_____________. You have not conducted business under any name other than your
corporate, limited liability company, or partnership name unless indicated in the
following: _______________.
2. Owners. The following identifies the owner that you have designated as, and that
we approve to be, the Managing Owner and lists the full name of each person who is one of your
owners and fully describes the nature of each owner’s interest.
Owner’s Name Type and %-age of Interest
Managing Owner: ___%
Other Owners: ___%
___%
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By:
Name: ____________________________
Title:
Date: _____________________________
MULTI-UNIT DEVELOPER:
[Name]
By:
Name: ____________________________
Title: _____________________________
Date:
C-1 Smashburger – 06/2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
EXHIBIT C
GUARANTY AND ASSUMPTION OF OBLIGATIONS
THIS GUARANTY AND ASSUMPTION OF OBLIGATIONS is given this _____
day of ______________, 20__, by the persons indicated below who have executed this
Agreement.
In consideration of, and as an inducement to, the execution of that certain Multi-Unit
Development Agreement (the “Agreement”) on this date by Smashburger Franchising LLC, a
Delaware limited liability company (“we,” “us,” or “our”), each of the undersigned personally
and unconditionally (a) guarantees to us and our successors and assigns, for the term of the
Agreement (including extensions) and afterward as provided in the Agreement, that
_____________________________ (“Developer”) will punctually pay and perform each and
every undertaking, agreement, and covenant set forth in the Agreement (including any
amendments or modifications of the Agreement) and (b) agrees to be personally bound by, and
personally liable for the breach of, each and every provision in the Agreement (including any
amendments or modifications of the Agreement), both monetary obligations and obligations to
take or refrain from taking specific actions or to engage or refrain from engaging in specific
activities, including the non-competition, confidentiality, and transfer requirements.
Each of the undersigned consents and agrees that: (1) his or her direct and immediate
liability under this Guaranty will be joint and several, both with Developer and among other
guarantors; (2) he or she will render any payment or performance required under the Agreement
upon demand if Developer fails or refuses punctually to do so; (3) this liability will not be
contingent or conditioned upon our pursuit of any remedies against Developer or any other
person; (4) this liability will not be diminished, relieved, or otherwise affected by any extension
of time, credit, or other indulgence which we may from time to time grant to Developer or to any
other person, including, without limitation, the acceptance of any partial payment or performance
or the compromise or release of any claims (including the release of other guarantors), none of
which will in any way modify or amend this Guaranty, which will be continuing and irrevocable
during the term of the Agreement (including extensions), for so long as any performance is or
might be owed under the Agreement by Developer or its owners, and for so long as we have any
cause of action against Developer or its owners; and (5) this Guaranty will continue in full force
and effect for (and as to) any extension or modification of the Agreement and despite the transfer
of any interest in the Agreement or Developer, and each of the undersigned waives notice of any
and all renewals, extensions, modifications, amendments, or transfers.
Each of the undersigned waives: (i) all rights to payments and claims for reimbursement
or subrogation which any of the undersigned may have against Developer arising as a result of
the undersigned’s execution of and performance under this Guaranty; and (ii) acceptance and
notice of acceptance by us of his or her undertakings under this Guaranty, notice of demand for
payment of any indebtedness or non-performance of any obligations hereby guaranteed, protest
and notice of default to any party with respect to the indebtedness or nonperformance of any
obligations hereby guaranteed, and any other notices to which he or she may be entitled.
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Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
Each of the undersigned acknowledges and represents that he or she has had an
opportunity to review the Agreement and agrees that the provisions of Article 9 (Enforcement;
Arbitration) have been reviewed by the undersigned and are incorporated, by reference, into and
shall govern this Guaranty and Assumption of Obligations and any disputes between the
undersigned and us. Nonetheless, each of the undersigned agrees that we may also enforce this
Guaranty and Assumption of Obligations and awards in the courts of the state or states in which
he or she is domiciled.
By signing below, the undersigned spouse of the Guarantor indicated below,
acknowledges and consents to the guaranty given herein by his/her spouse. Such consent also
serves to bind the assets of the marital estate to Guarantor’s performance of this Guaranty. We
confirm that a spouse who signs this Guaranty solely in his or her capacity as a spouse (and not
as an owner) is signing that merely to acknowledge and consent to the execution of the Guaranty
by his or her spouse and to bind the assets of the marital estate as described therein and for no
other purpose (including, without limitation, to bind the spouse’s own separate property).
IN WITNESS WHEREOF, each of the undersigned has affixed his or her signature on
the same day and year as the Agreement was executed.
GUARANTOR(S) SPOUSE(S)
#1:
Name: ___________________________
Sign:
#1:
Name:
Sign:
#2:
Name: ___________________________
Sign:
#2:
Name:
Sign:
#3:
Name: ___________________________
Sign:
#3:
Name:
Sign:
Smashburger –06/2012 FDD
Ex. C – Franchise Agreement 1031.002.006/46339.6
EXHIBIT "C"
FRANCHISE AGREEMENT
Smashburger –06/2012 FDD
Ex. C – Franchise Agreement 1031.002.006/46339.6
SMASHBURGER FRANCHISING LLC
FRANCHISE AGREEMENT
Franchisee:
Developer (if different):
Store Number:
Store Address:
Smashburger –06/2012 FDD Ex. C – Franchise Agreement
1031.002.006/46339.6
i
TABLE OF CONTENTS
Page
1. Preambles, Acknowledgments, and Grant of Franchise. .....................................................1
A. Preambles. ................................................................................................................1
B. Acknowledgements. .................................................................................................2
C. Corporation, Limited Liability Company, or Partnership. .......................................3
D. Grant of Franchise....................................................................................................4
E. No Exclusivity and Reservation of Rights. ..............................................................4
F. The Exercise of our Judgment. ................................................................................5
2. Site Selection, Lease of Premises, and Development and Opening of Your
Restaurant. ...........................................................................................................................6
A. Site Selection. ..........................................................................................................6
B. Lease of Premises. ...................................................................................................6
C. Development of Your Restaurant. ...........................................................................7
D. Financing; Maximum Borrowing Limits; Liquidity. ...............................................7
E. Operating Assets. .....................................................................................................8
F. Computer System. ....................................................................................................8
G. Business Opening.....................................................................................................9
3. Fees. .....................................................................................................................................9
A. Initial Fees. ...............................................................................................................9
B. Royalty Fee. .............................................................................................................9
C. Definition of “Gross Sales”. ..................................................................................10
D. Interest on Late Payments. .....................................................................................10
E. Application of Payments. .......................................................................................10
F. Method of Payment. ...............................................................................................11
G. Change in Law. ......................................................................................................11
4. Training and Assistance. ....................................................................................................11
A. Training. .................................................................................................................11
B. General Guidance...................................................................................................13
C. Standards of Operations Manual. ...........................................................................13
D. Delegation of Performance. ...................................................................................14
5. Marks. ................................................................................................................................14
A. Ownership and Goodwill of Marks........................................................................14
B. Limitations on Your Use of Marks. .......................................................................14
C. Notification of Infringements and Claims. ............................................................15
D. Discontinuance of Use of Marks............................................................................15
E. Indemnification for Use of Marks..........................................................................15
6. Confidential Information. ..................................................................................................15
7. Exclusive Relationship During Term.................................................................................17
TABLE OF CONTENTS
(Continued)
Page
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1031.002.006/46339.6
ii
A. Covenants Against Competition: Branded Business. ............................................17
B. Non-solicitation and Non-Interference. .................................................................18
8. Business Operations and System Standards. .....................................................................18
A. Condition and Appearance of Your Restaurant. ....................................................18
B. Products and Services Your Restaurant Offers. .....................................................19
C. Management of Your Restaurant. ..........................................................................19
D. Approved Products, Services, and Suppliers. ........................................................19
E. Compliance with Laws and Good Business Practices. ..........................................20
F. Insurance. ...............................................................................................................21
G. Pricing. ...................................................................................................................21
H. Restaurant Telephone Numbers and Listings. .......................................................22
I. Compliance with System Standards.......................................................................22
9. Marketing. ..........................................................................................................................23
A. Grand Opening Advertising. ..................................................................................23
B. Marketing Fund. .....................................................................................................23
C. Local Marketing Expenditures. ..............................................................................25
D. Local Advertising Cooperative. .............................................................................26
E. Franchise System Website. ....................................................................................27
10. Records, Reports, and Financial Statements. .....................................................................28
11. Inspections and Audits. ......................................................................................................29
A. Our Right to Inspect Your Restaurant. ..................................................................29
B. Our Right to Audit. ................................................................................................29
12. Transfer. .............................................................................................................................30
A. By Us. ....................................................................................................................30
B. By You. ..................................................................................................................30
C. Conditions for Approval of Transfer. ....................................................................31
D. Transfer to a Wholly-Owned Corporation or Limited Liability Company............33
E. Effect of Consent to Transfer. ................................................................................33
F. Public or Private Offering. .....................................................................................33
G. Our Right of First Refusal......................................................................................34
13. Expiration of this Agreement. ............................................................................................35
A. Your Right to Acquire a Successor Franchise. ......................................................35
B. Grant of a Successor Franchise. .............................................................................36
C. Agreements/Releases. ............................................................................................37
14. Termination of Agreement. ................................................................................................37
A. By You. ..................................................................................................................37
B. By Us. ....................................................................................................................37
C. Assumption of Management. .................................................................................39
TABLE OF CONTENTS
(Continued)
Page
Smashburger –06/2012 FDD Ex. C – Franchise Agreement
1031.002.006/46339.6
iii
15. Our and your Rights and Obligations Upon Termination or Expiration of this
Agreement. .........................................................................................................................40
A. Payment of Amounts Owed to Us. ........................................................................40
B. De-Identification. ...................................................................................................40
C. Confidential Information. ......................................................................................41
D. Covenant Not to Compete / Non-Solicitation. .......................................................41
E. Our Right to Purchase Your Restaurant.................................................................42
F. Remedies. ...............................................................................................................46
G. Continuing Obligations. .........................................................................................46
16. Relationship of the Parties/Indemnification. ......................................................................46 A. Independent Contractors. .......................................................................................46 B. No Liability To Or for Acts of Other Party. ..........................................................46 C. Taxes. .....................................................................................................................47
D. Indemnification. .....................................................................................................47
17. Enforcement. ......................................................................................................................47
A. Security Interest. ....................................................................................................47
B. Severability and Substitution of Valid Provisions. ................................................48
C. Waiver of Obligations. ...........................................................................................48
D. Costs and Attorneys‟ Fees. ....................................................................................49
E. You May Not Withhold Payments Due to Us. ......................................................49
F. Rights of Parties are Cumulative. ..........................................................................49
G. Arbitration. .............................................................................................................49
H. Governing Law. .....................................................................................................51
I. Consent to Jurisdiction. ..........................................................................................52
J. Waiver of Punitive Damages and Jury Trial. .........................................................52
K. Injunctive Relief.....................................................................................................52
L. Binding Effect. .......................................................................................................53
M. Limitations of Claims. ...........................................................................................53
N. Agreement Effectiveness. ......................................................................................53
O. Construction. ..........................................................................................................53
P. Lawful Attorney. ....................................................................................................55
18. Notices and Payments. .......................................................................................................55
19. Electronic Mail...................................................................................................................55
EXHIBIT A Listing of Ownership Interests
EXHIBIT B Addendum to Lease
EXHIBIT C Collateral Assignment of Telephone Numbers, Telephone Listings and
Internet Addresses
EXHIBIT D Guaranty and Assumption of Obligations
Smashburger –06/2012 FDD
Ex. C – Franchise Agreement 1031.002.006/46339.6
SMASHBURGER FRANCHISING LLC
FRANCHISE AGREEMENT
THIS FRANCHISE AGREEMENT (this “Agreement”) is made and entered into by
and between SMASHBURGER FRANCHISING LLC, a Delaware limited liability company
with its principal business address at 1515 Arapahoe Street, Tower One, 10th
Floor, Denver,
Colorado 80202 (“we,” “us,” or “our”), and
, whose principal business address is
(“you” or “your”), as of the date signed by us and set forth below our signature on this Agreement
(the “Effective Date”).
1. PREAMBLES, ACKNOWLEDGMENTS, AND GRANT OF FRANCHISE.
A. PREAMBLES.
(1) We and our affiliates have developed (and will continue to develop and
modify) a system for the operation of restaurants featuring hamburgers, sandwiches,
salads, other food items and beverages, and related products and services authorized by us
from time to time (individually, a “Smashburger Restaurant” and collectively,
“Smashburger Restaurants”). Smashburger Restaurants are developed and operate
using certain specified and distinct business formats, methods, procedures, designs,
layouts, standards, and specifications, all of which we may improve, further develop, or
otherwise modify from time to time.
(2) We and our affiliates use, promote, and license others to use and promote
certain trademarks, service marks, and other commercial symbols in operating
Smashburger Restaurants, including, without limitation, the Smash Burger®
marks, and
may create, use, and license other trademarks, service marks, and commercial symbols to
identify Smashburger Restaurants and the products and services offered by Smashburger
Restaurants (collectively, the “Marks”).
(3) We grant to persons who we determine satisfactorily meet our
qualifications, and who confirm their willingness to undertake the investment and effort, a
franchise to own and operate a Smashburger Restaurant offering the products and services
we authorize and using our and our affiliates‟ business formats, methods, procedures,
signs, designs, layouts, standards, specifications, and Marks (the “Franchise System”).
(4) You have applied for a franchise to own and operate a Smashburger
Restaurant and have provided us with certain information in support of your application.
Smashburger –06/2012 FDD Ex. C – Franchise Agreement
1031.002.006/46339.6
2
B. ACKNOWLEDGEMENTS.
You acknowledge that:
(1) you have independently investigated this franchise opportunity and
recognize that, like any other business, the nature of the business a Smashburger
Restaurant conducts may, and probably will, evolve and change over time.
(2) we do not guarantee the success of Smashburger Restaurants, and being
part of a franchise system does not alter the fact that an investment in a Smashburger
Restaurant involves business risks that could result in the loss of a significant portion or all
of your investment.
(3) among other things, your business abilities and efforts are vital to your
success and the success of your Restaurant (as defined in Section 1.D).
(4) attracting customers for your Restaurant will require you to make consistent
marketing efforts in your community through various methods, including media
advertising, direct mail advertising and networking, and display and use of in-store
promotional materials.
(5) retaining customers for your Restaurant will require you to have a high
level of customer service and to adhere strictly to the Franchise System and our System
Standards (as defined in Section 4.C) and that you are committed to maintaining System
Standards.
(6) you have not received from us, and are not relying upon, any
representations or guarantees, express or implied, as to the potential volume, sales, income,
or profits of a Smashburger Restaurant, that any information you have acquired from other
Smashburger Restaurant franchise owners regarding their sales, profits, or cash flows was
not information obtained from us, and that we make no representation about that
information‟s accuracy.
(7) in all of their dealings with you, our officers, directors, employees, and
agents act only in a representative, and not in an individual, capacity and that business
dealings between you and them as a result of this Agreement are deemed to be only
between you and us.
(8) you have represented to us, to induce our entry into this Agreement, that all
statements you have made and all materials you have given us are accurate and complete
and that you have made no misrepresentations or material omissions in obtaining the
franchise.
(9) you (and your owners) meet the requirements to obtain a liquor license for
the Smashburger Restaurant you will operate under this Agreement.
(10) you have read this Agreement and our Franchise Disclosure Document and
understand and accept that this Agreement‟s terms and covenants are reasonably necessary
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for us to maintain our high standards of quality and service, as well as the uniformity of
those standards at each Smashburger Restaurant, and to protect and preserve the goodwill
of the Marks.
(11) we have not made, and you have not relied on, any representation, warranty,
or other claim regarding this franchise opportunity, other than those made in this
Agreement and our Franchise Disclosure Document, and that you have independently
evaluated this opportunity, including by using your business professionals and advisors,
and have relied solely upon those evaluations in deciding to enter into this Agreement.
(12) you have been afforded an opportunity to ask any questions you have and to
review any materials of interest to you concerning this franchise opportunity.
(13) you have been afforded an opportunity, and have been encouraged by us, to
have this Agreement and all other agreements and materials we have given or made
available to you reviewed by an attorney and have either done so or elected not to do so.
(14) you have a net worth which is sufficient to make the investment in the
franchise opportunity represented by this Agreement, and you will have sufficient funds to
meet all of your obligations under this Agreement.
C. CORPORATION, LIMITED LIABILITY COMPANY, OR
PARTNERSHIP.
If you are at any time a corporation, limited liability company, or partnership (each, an
“Entity”), you agree and represent that:
(1) You will have the authority to execute, deliver, and perform your
obligations under this Agreement and all related agreements and are duly organized or
formed and are and will, throughout this Agreement‟s term, remain validly existing and in
good standing under the laws of the state of your incorporation or formation;
(2) Your organizational documents, operating agreement, or partnership
agreement, as applicable, will recite that this Agreement restricts the issuance and transfer
of any ownership interests in you, and all certificates and other documents representing
ownership interests in you will bear a legend referring to this Agreement‟s restrictions;
(3) Exhibit A to this Agreement completely and accurately describes all of your
owners and their interests in you as of the Effective Date;
(4) Each of your direct and indirect owners during this Agreement‟s term and
your and their spouses will execute a guaranty in the form we prescribe undertaking
personally to be bound, jointly and severally, by all provisions of this Agreement and any
ancillary agreements between you and us. Our current form of guaranty is attached herein
as Exhibit D. We confirm that a spouse who signs Exhibit D solely in his or her capacity as
a spouse (and not as an owner) is signing that agreement merely to acknowledge and
consent to the execution of the guaranty by his or her spouse and to bind the assets of the
marital estate as described therein and for no other purpose (including, without limitation,
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to bind the spouse‟s own separate property). Subject to our rights and your obligations
under Section 12, you and your owners agree to sign and deliver to us revised Exhibits A to
reflect any permitted changes in the information that Exhibit A now contains;
(5) You must identify on Exhibit A one of your owners who is a natural person
with at least 25% ownership interest and voting power in you and who will have the
authority of a chief executive officer (the “Managing Owner”). You agree to deliver to us
a revised Exhibit A to accurately identify the Managing Owner should the identity of that
person change during the term of this Agreement as permitted hereunder.
(6) The Managing Owner is authorized, on your behalf, to deal with us in
respect of all matters whatsoever which may arise in respect of this Agreement. Any
decision made by the Managing Owner will be final and binding upon you, and we will be
entitled to rely solely upon the decision of the Managing Owner in any such dealings
without the necessity of any discussions with any other party named in this Agreement, and
we will not be held liable for any actions taken by you or otherwise, based upon any
decision or actions of the Managing Owner.
D. GRANT OF FRANCHISE.
You have applied for a franchise to own and operate a Smashburger Restaurant at the
specific location which has been or will be approved by us pursuant to Section 2 of this Agreement
(the “Premises”) and identified in paragraph 4 of Exhibit A. If the Premises have not been
approved when you sign this Agreement, you and we will revise Exhibit A to identify the Premises
once approved. Subject to this Agreement‟s terms, we grant you a franchise (the “Franchise”) to
operate a Smashburger Restaurant solely at the Premises (your “Restaurant”), and to use the
Franchise System in its operation, for a term beginning on the Effective Date and expiring 15 years
from that date, unless sooner terminated under Section 14.
You agree to, at all times, faithfully, honestly, and diligently perform your obligations
under this Agreement and to use your best efforts to promote your Restaurant. You may use the
Premises only for your Restaurant. You agree not to conduct the business of your Restaurant at
any location other than the Premises and to conduct delivery and catering services pursuant to
terms authorized by us from time to time. You may not promote or sell any products or services,
whether directly or indirectly, through or on the Internet, the World Wide Web, or any other
similar proprietary or common carrier electronic delivery system.
E. NO EXCLUSIVITY AND RESERVATION OF RIGHTS.
You acknowledge and agree that you have no exclusive rights and no territorial protection
for your Restaurant. You further acknowledge that we grant rights only by expressed provisions of
written agreements and not by implication, inference or innuendo. We (and our affiliates) retain
the right at all times during and after this Agreement‟s term to engage in any and all activities that
we (and they) deem appropriate and that have not been expressly granted to you in this Agreement,
wherever and whenever we (and they) desire, and whether or not such activities compete with your
Restaurant, including, without limitation, the right to:
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(1) establish and operate, and allow others to establish and operate,
Smashburger Restaurants using the Marks and the Franchise System, at any location on
such terms and conditions we deem appropriate;
(2) establish and operate, and allow others to establish and operate, restaurants,
that may offer products and services which are identical or similar to products and services
offered by Smashburger Restaurants, under other trade names, trademarks, service marks
and commercial symbols different from the Marks;
(3) establish, and allow others to establish, other businesses and distribution
channels (including, but not limited to, the Internet), wherever located or operating and
regardless of the nature or location of the customers with whom such other businesses and
distribution channels do business, that operate under the Marks or any other trade names,
trademarks, service marks or commercial symbols that are the same as or different from
Smashburger Restaurants, and that sell products or services that are identical or similar to,
or competitive with, those that Smashburger Restaurants customarily sell;
(4) acquire the assets or ownership interests of one or more businesses,
including Competitive Businesses (defined below), and franchising, licensing or creating
similar arrangements with respect to such businesses once acquired, wherever these
businesses (or the franchisees or licensees of these businesses) are located or operating;
(5) be acquired (whether through acquisition of assets, ownership interests or
otherwise, regardless of the form of transaction), by any other business, including a
Competitive Business, even if such business operates, franchises or licenses such
businesses in close proximity to the Restaurant; and
(6) operate or grant any third party the right to operate any Smashburger
Restaurant that we or our designees acquire as a result of the exercise of a right of first
refusal or purchase right that we have under this Agreement, any other franchise agreement
or any other agreements.
We may, at our option, engage in all other activities not expressly prohibited by this Agreement.
F. THE EXERCISE OF OUR JUDGMENT.
We have the right to operate, develop, and change the Franchise System in any manner that
is not specifically prohibited by this Agreement. Whenever we have reserved in this Agreement a
right to take or to withhold an action, to grant or decline to grant you a right to take or withhold an
action, or to provide or withhold approval or consent, we may, except as otherwise specifically
provided in this Agreement, make our decision or exercise our rights based on information readily
available to us and on our judgment of what is in our or the Franchise System‟s best interests at the
time our decision is made.
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2. SITE SELECTION, LEASE OF PREMISES, AND DEVELOPMENT AND
OPENING OF YOUR RESTAURANT.
A. SITE SELECTION.
If you have not yet located a site for the Premises as of the Effective Date, then, within 180
days after the Effective Date, you agree to purchase, or sign a lease for, a suitable site for your
Restaurant. You agree to obtain our written approval of a proposed site for your Restaurant before
signing any lease, sublease, or other document for the site. Our determination to approve or
disapprove a site may be based on various criteria which may change from time to time in our
discretion. You agree to send us information we require for the proposed site. You may operate
your Restaurant only at the Premises.
You acknowledge and agree that, if we recommend or give you information regarding a
site for the Premises, that is not a representation or warranty of any kind, express or implied, of the
site‟s suitability for a Smashburger Restaurant or any other purpose. Our recommendation
indicates only that we believe that the site meets our then acceptable criteria which have been
established for our own purposes and are not intended to be relied on by you as an indicator of
likely success. Applying criteria that have appeared effective with other sites and premises might
not accurately reflect the potential for all sites and premises, and demographic or other factors
included in or excluded from our criteria could change, even after our approval of the Premises or
your development of the Restaurant, altering the potential of a site and premises. The uncertainty
and instability of these criteria are beyond our control, and we are not responsible if a site and
premises we recommend fail to meet your expectations. You acknowledge and agree that your
acceptance of the Franchise and selection of the Premises are based on your own independent
investigation of the site‟s suitability for the Premises.
B. LEASE OF PREMISES.
We have the right to approve the terms of any lease or sublease for the Premises (the
“Lease”) before you sign it. The Lease shall contain certain provisions we require, including
without limitation, collateral assignment of lease, pursuant to the form of lease addendum attached
as Exhibit B hereto. You acknowledge and agree that any of our involvement in the lease
negotiations, review and approval of locations are for our sole benefit and the benefit of the
Franchise System. You agree that you are not relying on our lease negotiations, lease review or
approval, or site approval for your benefit. You further acknowledge that you have been advised
to obtain the advice of your own professional advisors before you sign a lease. If you do not agree
with the lease provisions that we have approved or negotiated, you may elect not to sign the lease,
but you would have to find another suitable site for the Premises. If you reject a site we approve
because you do not agree with the lease provisions that we or our representatives have negotiated,
we may permit another franchisee to enter into a lease for such site, whether on the terms you
rejected or on other terms. You will then have to search for another suitable site. You must not
enter into a lease or any other contract for the premises of your Smashburger Restaurant without
our prior written consent.
Upon submission of a proposed Lease for the Restaurant, you must pay us or our
designated supplier (which may be our affiliate) a lease review fee of One Thousand Five Hundred
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Dollars ($1,500) ("Lease Review Fee"). The Lease Review Fee pays the expenses incurred to
review and (if we so choose) to negotiate certain provisions of the Lease. You are not a third-party
beneficiary of any lease negotiation or review that we conduct. You agree that we do not
guarantee that the terms, including rent, will represent the most favorable terms available in that
market. We will charge you only one (1) Lease Review Fee unless you refuse to sign a Lease that
we have certified as acceptable for the Premises, and we then are required to engage in one or more
additional lease reviews for the Premises (or for a different location if you refuse to sign any lease
for the first proposed Premises). In such event, you will pay us or our designated supplier a Lease
Review Fee for the first lease review as well as a Lease Review Fee for each additional lease
review.
C. DEVELOPMENT OF YOUR RESTAURANT.
Within 150 days after the date you sign a lease for the Premises or one year after the
Effective Date, whichever occurs first, you agree at your expense to do the following: (a) obtain
and submit to us for approval detailed construction plans and specifications and space plans for
your Restaurant that comply with any design specifications provided by us and all applicable
ordinances, building codes, permit requirements, and lease requirements and restrictions; (b)
obtain all required zoning changes, planning consents, building, utility, sign and business permits
and licenses, liquor license and any other consents, permits and licenses necessary to lawfully
open and operate your Restaurant; (c) construct all required improvements in compliance with
construction plans and specifications approved by us; (d) decorate your Restaurant in compliance
with plans and specifications approved by us; (e) purchase and install all required equipment
(including the Computer System (as defined in Section 2.F below)), furniture, fixtures and signs
(collectively the “Operating Assets”); and (f) obtain all customary contractors‟ sworn statements
and partial and final waivers of lien for construction, remodeling, decorating and installation
services. You agree to use the vendor(s) we select, if any (which may include us or our affiliates),
for design, engineering, construction management and purchasing services in connection with the
development of your Restaurant.
D. FINANCING; MAXIMUM BORROWING LIMITS; LIQUIDITY.
You acknowledge and agree that:
(1) you will, at all times, maintain sufficient working capital reserves as
necessary and appropriate to comply with your obligations under this Agreement. On our
request, you will provide us with evidence of working capital availability. We reserve the
right, from time to time, to establish certain levels of working capital reserves, and you will
comply with such requirements;
(2) we may from time to time designate the maximum amount of debt that
Smashburger Restaurants may service, and you will ensure that you will comply with such
limits; and
(3) we require that the first two Smashburger Restaurants developed by our
franchisees and their affiliates be developed with cash equity and without proceeds from
any loans made by such franchisees, their owners, their affiliates, their affiliates‟ owners or
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any other third party. You will ensure that, if the Restaurant to be developed under this
Agreement is the 1st or 2
nd Smashburger Restaurant developed by you or your Affiliates,
you will have sufficient cash, through equity capital contributed to you by your owners, to
comply with this requirement. As used in this Agreement, an “Affiliate” is a person or
other legal entity in which you or your owners (i) own more than 51% of the issued and
outstanding ownership interest and voting rights or (ii) have the right and power to control
and determine the Affiliate‟s management and policies.
E. OPERATING ASSETS.
You agree to use in operating your Restaurant only those Operating Assets we approve for
Smashburger Restaurants as meeting our specifications and standards for quality, design,
appearance, function, and performance. You agree to place or display at the Premises (interior and
exterior) only the signs, emblems, lettering, logos, and display materials we approve from time to
time. You agree to purchase or lease approved brands, types, or models of Operating Assets only
from suppliers we designate or approve (which may include or be limited to us or our affiliates).
F. COMPUTER SYSTEM.
You agree to obtain and use specified integrated computer hardware and software,
including an integrated computer-based order-entry system (the “Computer System”). We may
modify specifications for, and components of, the Computer System. You also agree to maintain a
functioning e-mail address and all specified points of high-speed Internet connection. Our
modification of specifications for the Computer System, and other technological developments or
events, might require you to purchase, lease, or license new or modified computer hardware or
software and to obtain service and support for the Computer System. Although we cannot estimate
the future costs of the Computer System or required service or support, and although these costs
might not be fully amortizable over this Agreement‟s remaining term, you agree to incur the costs
of obtaining the computer hardware and software comprising the Computer System (or additions
and modifications) and required service or support. We have no obligation to reimburse you for
any Computer System costs. Within 60 days after you receive notice from us, you agree to obtain
the Computer System components that we designate and to ensure that your Computer System, as
modified, is functioning properly.
You agree that we or our affiliates may condition any license of proprietary software to
you, or your use of technology that we or our affiliates develop or maintain, on your signing a
software license agreement or similar document that we or our affiliates prescribe to regulate your
use of, and our and your respective rights and responsibilities with respect to, the software or
technology. We and our affiliates may charge you a monthly or other fee for any proprietary
software or technology that we or our affiliates license to you and for other maintenance and
support services that we or our affiliates provide during this Agreement‟s term.
Although you agree to buy, use, and maintain the Computer System according to our
standards and specifications, you will have sole and complete responsibility for: (1) the
acquisition, operation, maintenance, and upgrading of the Computer System; (2) the manner in
which your Computer System interfaces at our specified levels of connection speed with our and
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any third party‟s computer system; and (3) any and all consequences if the Computer System is not
properly operated, maintained, and upgraded.
G. BUSINESS OPENING.
You agree not to open your Restaurant until:
(1) we notify you in writing that your Restaurant meets our standards and
specifications;
(2) you have obtained all applicable licenses and permits, including, without
limitation, a liquor license;
(3) you and, if you will not be supervising the day-to-day management of the
Restaurant, the person you have designated to assume primary responsibility for the
day-to-day supervision of the operation of the Restaurant (the “Designated Manager”)
satisfactorily complete training;
(4) you pay the initial franchise fee and other amounts then due to us; and
(5) you give us certificates for all required insurance policies.
Subject to your compliance with these conditions, you agree to open your Restaurant for business
within 150 days after you sign a lease for the Premises or the one year anniversary of the Effective
Date, whichever occurs first.
3. FEES.
A. INITIAL FEES.
You agree to pay us a nonrecurring and, except as specifically provided in this Agreement,
nonrefundable initial franchise fee of $40,000. If you are signing this Agreement pursuant to a
multi-unit development agreement with us and this is not the first Franchise Agreement signed
pursuant thereto, the nonrefundable deposit you paid under such multi-unit development
agreement for this Franchise shall be applied to the initial franchise fee payable hereunder as
described therein. If you are purchasing an existing Smashburger Restaurant in connection with
the execution of this Agreement, you are not required to pay the initial franchise fee, provided that
you or the seller of the Smashburger Restaurant pay the transfer fee required under the seller‟s
franchise agreement. You acknowledge that the initial franchise fee is due, and fully earned by us,
when you sign this Agreement and not refundable to you after it is paid.
B. ROYALTY FEE.
You agree to pay us on or before Tuesday of each week, in the manner
provided below (or as the Standards of Operations Manual otherwise prescribes), a
weekly royalty fee (the “Royalty”) equal to five percent (5%) of the weekly Gross
Sales (defined in Section 3.C below) during the preceding week (beginning on
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Monday and ending on Sunday), subject to the possibility of adjustments annually
as follows:
(1) if the Gross Sales of the Restaurant during a fiscal year
exceed $1,200,000, the Royalty rate shall, as of the 1st day of the
immediately succeeding fiscal year, be six percent (6%) of the weekly
Gross Sales of the Restaurant; and
(2) if the Gross Sales of the Restaurant during a fiscal year are
$1,200,000 or less, the Royalty Rate shall, as of the 1st day of the
immediately succeeding fiscal year, be five percent (5%) of the weekly
Gross Sales of the Restaurant.
If the Restaurant begins operation on or after November 1 of a calendar year, its Gross
Sales shall not be considered for purposes of the foregoing adjustments until the 2nd full fiscal
year after it began operations.
C. DEFINITION OF “GROSS SALES”.
As used in this Agreement, the term “Gross Sales” means all revenue that you derive from
operating your Restaurant (whether or not in compliance with this Agreement), whether from cash,
check, credit and debit card, barter exchange, trade credit, or other credit transactions, but (1)
excluding all federal, state, or municipal sales, use, or service taxes collected from customers and
paid to the appropriate taxing authority and (2) reduced by the amount of any documented refunds,
credits and discounts your Restaurant in good faith gives to customers and your employees. We
include gift certificate, gift card or similar program payments in Gross Sales when the gift
certificate, gift card, other instrument or applicable credit is redeemed. Gross Sales also include all
insurance proceeds you receive for loss of business due to a casualty to or similar event at the
Restaurant.
D. INTEREST ON LATE PAYMENTS.
All amounts which you owe us for any reason will bear interest accruing as of their due
date at two percent (2%) per month or the highest commercial contract interest rate the law allows,
whichever is less. We will charge a service fee of One Hundred Dollars ($100) per occurrence for
checks returned to us due to insufficient funds or in the event there are insufficient funds in the
business account you designate to cover our withdrawals. We may debit your bank account
automatically for the service charge and interest. You acknowledge that this Section 3.D is not our
agreement to accept any payments after they are due or our commitment to extend credit to, or
otherwise finance your operation of, your Restaurant.
E. APPLICATION OF PAYMENTS.
Despite any designation you make, we may apply any of your payments to any of your past
due indebtedness to us. We may set off any amounts you or your owners owe us or our affiliates
against any amounts we or our affiliates owe you or your owners.
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F. METHOD OF PAYMENT.
You hereby authorize us to debit your checking, savings or other account automatically for
the Royalty, Marketing Fund (as defined in Section 9.B) contributions, and other amounts due to
us or our affiliates (the “EFT Authorization”). You agree to sign and deliver to us any documents
we require for such EFT Authorization. Such EFT Authorization shall remain in full force and
effect during the term of this Agreement. We will debit the account you designate for these
amounts on their due dates (or the subsequent business day if the due date is a national holiday or a
weekend day). You agree to ensure that funds are available in your designated account to cover
our withdrawals.
If you fail to report the Gross Sales, we may debit your account for one hundred ten percent
(110%) of the average of the last three Royalty and Marketing Fund contributions that we debited.
If the amounts that we debit from your account are less than the amounts you actually owe us (once
we have determined the true and correct Gross Sales), we will debit your account for the balance
on the day we specify. If the amounts that we debit from your account are greater than the amounts
you actually owe us, we will credit the excess against the amounts we otherwise would debit from
your account during the following week.
We may require you to pay any amounts due under this Agreement or otherwise by means
other than automatic debit (e.g., by check) whenever we deem appropriate, and you agree to
comply with our payment instructions.
G. CHANGE IN LAW.
If a law is enacted during the term of this Agreement which prohibits or restricts in any way
your ability to pay and our ability to collect Royalty or other amounts based on Gross Sales derived
from the sale of alcoholic products, then we reserve the right to modify your payment obligations
to us under this Agreement and revise the applicable provisions hereunder in order to provide the
same basic economic effect to both us and you as currently provided in this Agreement. In such
event, you agree to execute the appropriate document(s) in the form we prescribe to give effect to
or take account of such revisions. If we determine in good faith that the effect of any law enacted
hereafter will be materially detrimental to our interests, we may terminate this Agreement by
delivering written notice thereof to you.
4. TRAINING AND ASSISTANCE.
A. TRAINING.
After you sign this Agreement and no later than 60 days before you open your Restaurant,
you or your Managing Owner and Designated Manager (if other than you) must complete, to our
satisfaction, initial training conducted by us on the material aspects of operating a Smashburger
Restaurant. We will provide approximately four weeks of training at our principal offices or at a
designated training facility of our choice. You or your Managing Owner and Designated Manager
must satisfactorily complete initial training prior to operating your Restaurant. Scheduling of the
training is based on your or your Managing Owner‟s and Designated Manager‟s availability,
training restaurant availability and the projected opening date for your Restaurant which is finally
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determined by us. We reserve the right to require up to two additional managers to satisfactorily
complete initial training. If we determine that you (or your Managing Owner) or your Designated
Manager and, if required by us, the manager(s), cannot complete initial training to our satisfaction,
we may terminate this Agreement.
Although we provide initial training for no additional fee for up to three people, you agree
to pay for all travel and living expenses which you (or your Managing Owner), your Designated
Manager and your additional managers incur and for your employee's wages and workers'
compensation insurance while attending training.
You or your Managing Owner (or your Designated Manager) may request additional
training at the end of the initial training program, to be provided at our then current per diem
charges, if you (or your Managing Owner) or your Designated Manager do not feel sufficiently
trained in the operation of a Smashburger Restaurant. We and you will jointly determine the
duration of this additional training. However, if you (or your Managing Owner) and your
Designated Manager satisfactorily complete our initial training program, and have not expressly
informed us in writing at the end of that program that you (or your Designated Manager) do not
feel sufficiently trained in the operation of a Smashburger Restaurant, then you will be deemed to
have been trained sufficiently to operate a Smashburger Restaurant.
When your Restaurant is ready to open for business, we will without any additional
training fee and at our expense, send a training team (the identity and composition of which will be
in our discretion) to your Restaurant to assist with the grand opening of your Restaurant if this is
the first or second Smashburger Restaurant opened by you or your Affiliates. If this is not the first
or second Smashburger Restaurant opened by you or your Affiliates, and if we determine it to be
necessary to send our representative to the site to assist with the grand opening of the Restaurant,
we will do so, at our discretion, and you will be responsible for all travel and living expenses and
related costs incurred by us in providing such assistance, including, without limitation, salary
expenses. The representative shall determine in his or her absolute sole discretion the amount of
required time and support necessary to have your staff prepared for your grand opening.
We may require you, your Managing Owner, your Designated Manager and previously
trained and experienced employees to attend and satisfactorily complete various training courses
that we periodically choose to provide at the times and locations that we designate. We will not
require attendance at more than two such courses, or for more than a total of five business days,
during a calendar year. Besides attending these courses, your Managing Owner and Designated
Manager agree to attend an annual meeting of all Smashburger Restaurant franchise owners at a
location we designate. Attendance at the annual meeting will not be required for more than four
days during any calendar year. You agree to pay all costs to attend.
If you have a new Designated Manager during this Agreement's term, the new Designated
Manager must satisfactorily complete our then current initial training program. We may charge
reasonable fees for training new Designated Managers. You also agree to pay all travel and living
expenses which your Designated Manager incurs during all training courses and programs.
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You understand and agree that any specific ongoing training or advice we provide does not
create an obligation (whether by course of dealing or otherwise) to continue to provide such
specific training or advice, all of which we may discontinue and modify from time to time.
B. GENERAL GUIDANCE.
We will advise you from time to time regarding the operation of your Restaurant based on
your reports or our inspections and will guide you with respect to:
(1) standards, specifications, and operating procedures and methods that
Smashburger Restaurants use;
(2) purchasing required and authorized Operating Assets and other products
and services;
(3) advertising and marketing materials and programs; and
(4) employee training.
We will furnish to you the standards for the operation of your Restaurant. These standards
will be furnished in the form of our operations manual for the operation of Smashburger
Restaurants (the “Standards of Operations Manual”), which may include one or more separate
manuals as well as audiotapes, videotapes, compact discs, computer software, information
available on an Internet site, other electronic media, or written materials. We may also provide
guidance via telephonic conversations or consultation at our offices. If you request, and we agree
to provide, additional or special guidance, assistance, or training, we may charge you our then
applicable fee, including our personnel‟s per diem charges and travel and living expenses.
C. STANDARDS OF OPERATIONS MANUAL.
We will loan you during the term of this Agreement one copy of the Standards of
Operations Manual. The Standards of Operations Manual contains mandatory and suggested
specifications, standards, operating procedures, and rules that we periodically prescribe for
operating Smashburger Restaurants (“System Standards”) and information on your other
obligations under this Agreement. We may modify the Standards of Operations Manual
periodically to reflect changes in System Standards, including, without limitation, in the form of
memoranda and newsletters. You agree to keep your copy of the Standards of Operations Manual
current and in a secure location at your Restaurant. If there is a discrepancy between our copy of
the Standards of Operations Manual and yours, our copy of the Standards of Operations Manual
controls. You agree that the Standards of Operations Manual‟s contents are confidential, that you
will keep it in a secure location which will not be accessible to persons who are not authorized to
review it, and that you will not disclose the Standards of Operations Manual to any person other
than your employees who need to know its contents. You may not at any time copy, duplicate,
record, or otherwise reproduce any part of the Standards of Operations Manual. If your copy of the
Standards of Operations Manual is lost, destroyed, or significantly damaged, you agree to obtain a
replacement copy at our then applicable charge.
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At our option, we may post some or all of the Standards of Operations Manual on a
restricted Website or extranet to which you will have access. (For purposes of this Agreement,
“Website” means an interactive electronic document contained in a network of computers linked
by communications software, including, without limitation, the Internet and World Wide Web
home pages). If we do so, you agree to monitor and access the Website or extranet for any updates
to the Standards of Operations Manual or System Standards. Any passwords or other digital
identifications necessary to access the Standards of Operations Manual on a Website or extranet
will be deemed to be part of Confidential Information (as defined in Section 6).
D. DELEGATION OF PERFORMANCE.
You agree that we have the right to delegate the performance of any portion or all of our
obligations under this Agreement to third-party designees, whether these designees are our agents
or independent contractors with whom we have contracted to perform these obligations.
5. MARKS.
A. OWNERSHIP AND GOODWILL OF MARKS.
Our affiliate, Icon Burger Development Company, LLC (“Icon Burger”), is the owner of
the Marks, and we have been granted the license to use, and to sublicense, the Marks in connection
with the development and operation of Smashburger Restaurants. Your right to use the Marks is
derived only from this Agreement and limited to your operating your Restaurant according to this
Agreement and all System Standards we prescribe during its term. Your unauthorized use of the
Marks is a breach of this Agreement and infringes our, Icon Burger‟s and our other affiliates‟
rights in the Marks. You acknowledge and agree that your use of the Marks and any goodwill
established by that use are exclusively for our, our other affiliates‟ (as their interests may appear)
and Icon Burger‟s benefit and that this Agreement does not confer any goodwill or other interests
in the Marks upon you (other than the right to operate your Restaurant under this Agreement). All
provisions of this Agreement relating to the Marks apply to any additional proprietary trade and
service marks we authorize you to use. You may not at any time during or after this Agreement‟s
term contest or assist any other person in contesting the validity of, or our rights to, the Marks.
B. LIMITATIONS ON YOUR USE OF MARKS.
You agree to use the Marks as the sole identification of your Restaurant, except that you
agree to identify yourself as its independent owner in the manner we prescribe. You may not use
any Mark (1) as part of any corporate or legal business name, (2) with any prefix, suffix, or other
modifying words, terms, designs, or symbols (other than logos we have licensed to you), (3) in
selling any unauthorized services or products, (4) as part of any domain name, homepage,
electronic address, or otherwise in connection with a Website (unless in connection with our
approved Franchise System Website), (5) in any user name, screen name or profile in connection
with any social networking sites such as, but not limited to, Facebook, MySpace, YouTube and
LinkedIn, or (6) in any other manner that we have not expressly authorized in writing. You may
not use any Mark in advertising the transfer, sale, or other disposition of your Restaurant or an
ownership interest in you without our prior written consent. You agree to display the Marks
prominently as we prescribe at your Restaurant and on forms, advertising, supplies, and other
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materials we designate. You agree to give the notices of trade and service mark registrations that
we specify and to obtain any fictitious or assumed name registrations required under applicable
law.
C. NOTIFICATION OF INFRINGEMENTS AND CLAIMS.
You agree to notify us immediately of any apparent infringement or challenge to your use
of any Mark, or of any person‟s claim of any rights in any Mark, and not to communicate with any
person other than us, Icon Burger, our attorneys, and your attorneys, regarding any infringement,
challenge, or claim. We, our other affiliates and Icon Burger may take the action we deem
appropriate (including no action) and control exclusively any litigation, U.S. Patent and
Trademark Office proceeding, or other administrative proceeding arising from any infringement,
challenge, or claim or otherwise concerning any Mark. You agree to sign any documents and take
any other reasonable action that, in the opinion of our, our affiliates‟ and Icon Burger‟s attorneys,
are necessary or advisable to protect and maintain our, our affiliates‟ and Icon Burger‟s interests in
any litigation or U.S. Patent and Trademark Office or other proceeding or otherwise to protect and
maintain our, our affiliates and Icon Burger‟s interests in the Marks. We will reimburse you for
your costs of taking any action that we, our affiliates or Icon Burger has asked you to take.
D. DISCONTINUANCE OF USE OF MARKS.
If it becomes advisable, in our opinion, at any time for us to require you to modify or
discontinue using any Mark or to use one or more additional or substitute trademarks or service
marks, you agree to comply with our directions within a reasonable time after receiving notice.
We need not reimburse you for your direct expenses of changing the signs of your Restaurant, for
any loss of revenue due to any modified or discontinued Mark, or for your expenses of promoting
a modified or substitute trademark or service mark.
Our rights in this Section 5.D apply to any and all of the Marks (and any portion of any
Mark) that we authorize you to use in this Agreement. We, our other affiliates and Icon Burger
may exercise these rights at any time and for any reason, business or otherwise, that we, our other
affiliates and Icon Burger think best. You acknowledge both our right to take this action and your
obligation to comply with our directions.
E. INDEMNIFICATION FOR USE OF MARKS.
We agree to reimburse you for all damages and expenses that you incur in any trademark
infringement proceeding disputing your authorized use of any Mark under this Agreement if you
have timely notified us of, and comply with our directions in responding to, the proceeding. At our
option, we, our other affiliates and Icon Burger may defend and control the defense of any
proceeding arising from your use of any Mark under this Agreement.
6. CONFIDENTIAL INFORMATION.
We and our affiliates possess (and will continue to develop and acquire) certain
confidential information, some of which constitutes trade secrets under applicable law (the
“Confidential Information”), relating to developing and operating Smashburger Restaurants,
whether or not marked confidential, including (without limitation):
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(1) site selection criteria;
(2) training and operations materials and manuals, including, without
limitation, recipes and the Standards of Operations Manual;
(3) the System Standards and other methods, formats, specifications, standards,
systems, procedures, techniques, sales and marketing techniques, knowledge, and
experience used in developing, promoting and operating Smashburger Restaurants;
(4) market research, promotional, marketing and advertising programs for
Smashburger Restaurants;
(5) knowledge of specifications for, and suppliers of, Operating Assets and
other products and supplies;
(6) any computer software or similar technology which is proprietary to us, our
affiliates, or the Franchise System, including, without limitation, digital passwords and
identifications and any source code of, and data, reports, and other printed materials
generated by, the software or similar technology;
(7) knowledge of the operating results and financial performance of
Smashburger Restaurants, other than your Restaurant; and
(8) customer data.
All Confidential Information furnished to you by us or on our behalf, whether orally or by
means of written material (i) shall be deemed proprietary, (ii) shall be held by you in strict
confidence, (iii) shall not be copied, disclosed or revealed to or shared with any other person
except to your employees or contractors who have a need to know such Confidential Information
for purposes of this Agreement and who are under a duty of confidentiality no less restrictive than
your obligations hereunder, or to individuals or entities specifically authorized by us in advance,
and (iv) shall not be used in connection with any other business or capacity. You will not acquire
any interest in Confidential Information other than the right to use it as we specify in operating
your Restaurant during this Agreement‟s term. You agree to protect the Confidential Information
from unauthorized use, access or disclosure in the same manner as you protect your own
confidential or proprietary information of a similar nature and with no less than reasonable care.
We may require you to have your employees and contractors execute individual undertakings and
shall have the right to regulate the form of and to be a party to or third-party beneficiary under any
such agreements.
You acknowledge and agree that, as between us and you, we are the sole owner of all right,
title, and interest in and to the Franchise System and any Confidential Information. All
improvements, developments, derivative works, enhancements, or modifications to the Franchise
System and any Confidential Information (collectively, “Innovations”) made or created by you,
your employees or your contractors, whether developed separately or in conjunction with us, shall
be owned solely by us. You represent, warrant, and covenant that your employees and contractors
are bound by written agreements assigning all rights in and to any Innovations developed or
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created by them to you. To the extent that you, your employees or your contractors are deemed to
have any interest in such Innovations, you hereby agree to assign, and do assign, all right, title and
interest in and to such Innovations to us. To that end, you shall execute, verify, and deliver such
documents (including, without limitation, assignments) and perform such other acts (including
appearances as a witness) as we may reasonably request for use in applying for, obtaining,
perfecting, evidencing, sustaining, and enforcing such ownership rights in and to the Innovations,
and the assignment thereof. Your obligation to assist us with respect to such ownership rights shall
continue beyond the expiration or termination of this Agreement. In the event we are unable for
any reason, after reasonable effort, to secure your signature on any document needed in connection
with the actions specified in this Section 6, you hereby irrevocably designate and appoint us and
our duly authorized officers and agents as your agent and attorney in fact, which appointment is
coupled with an interest and is irrevocable, to act for and on your behalf to execute, verify, and file
any such documents and to do all other lawfully permitted acts to further the purposes of this
Section 6 with the same legal force and effect as if executed by you. The obligations of this
Section 6 shall survive any expiration or termination of the Agreement.
7. EXCLUSIVE RELATIONSHIP DURING TERM.
A. COVENANTS AGAINST COMPETITION: BRANDED BUSINESS.
(1) You acknowledge that we have granted you the Franchise in consideration
of and reliance upon your agreement to deal exclusively with us. You therefore agree that,
during this Agreement‟s term, neither you, any of your owners, nor any of your or your
owners‟ immediate family members will:
(i) have any direct or indirect interest as an owner – whether of record,
beneficially, or otherwise – in a Competitive Business (defined below), wherever
located or operating (except that equity ownership of less than five percent (5%) of
a Competitive Business whose stock or other forms of ownership interest are
publicly traded on a recognized United States stock exchange will not be deemed to
violate this subparagraph);
(ii) perform services as a director, officer, manager, employee,
consultant, representative, or agent for a Competitive Business, wherever located
or operating; or
(iii) divert or attempt to divert any actual or potential business or
customer of your Restaurant to a Competitive Business.
(2) The term “Competitive Business” means any restaurant, food service or
other business (other than a Smashburger Restaurant): (i) whose gross receipts from the
sale of hamburgers represent, at any time, at least 10% of the business‟ total gross receipts
(excluding receipts from the sale of alcoholic beverages), (ii) whose menu, concept,
business model or method of operation is similar to that employed by restaurant units
operated, franchised or licensed by us, (iii) that offers or sells goods or services that are
generally the same as or similar to the goods or services being offered by businesses
owned, operated, franchised or licensed by us, or (iv) that grants franchises or licenses for
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the operation of any of the foregoing or provides services to the franchisor or licensor of
any of the foregoing. You agree to obtain similar covenants from the personnel we specify,
including officers, directors, managers, and other employees attending our training
program or having access to Confidential Information. We have the right to regulate the
form of agreement that you use and to be a third party beneficiary of that agreement with
independent enforcement rights.
(3) Further, you agree that, during the term of this Agreement, you will not
operate, directly or indirectly, any other Branded Business without our written
consent. The term "Branded Business" means any business marketed by a franchisor or
chain under a locally, regionally, or nationally known or registered trademark or service
mark.
B. NON-SOLICITATION AND NON-INTERFERENCE.
(1) You further agree that, during the Term, neither you nor any of your
owners, your or your owners‟ Affiliates, or the officers, directors, managers or immediate
family members of any of the foregoing, will:
(i) recruit or hire any person who is then or was, within the
immediately preceding 24 months, employed by us, any of our affiliates, or a
franchise owner as (a) a general manager or assistant manager at any Smashburger
Restaurant, (b) a district or regional manager or any other such person having
responsibility for overseeing or supervising the operation of multiple Smashburger
Restaurants or (c) any of our or our affiliates‟ officers, in any case without our
consent or that of the relevant employer;
(ii) interfere or attempt to interfere with our or our affiliates‟
relationships with any vendors or consultants; or
(iii) engage in any other activity which might injure the goodwill of the
Marks or the Franchise System.
(2) If you fail to comply with paragraph (i) above, you agree to pay us an
amount equal to 200% of the annual salary of such person. Nothing contained herein shall
be deemed a waiver of our right to terminate pursuant to Section 14.B of this Agreement.
8. BUSINESS OPERATIONS AND SYSTEM STANDARDS.
A. CONDITION AND APPEARANCE OF YOUR RESTAURANT.
You agree that you will not use any part of the Premises for any purpose other than
operating a Smashburger Restaurant in compliance with this Agreement, and that you will place or
display at the Premises (interior and exterior) only those signs, emblems, designs, artwork,
lettering, logos and display and advertising materials that we approve from time to time. You
further agree to maintain the condition and appearance of your Restaurant, its Operating Assets
and the Premises in accordance with the System Standards and, consistent with the image of
Smashburger Restaurants, as an efficiently operated business offering high quality products and
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services and observing the highest standards of cleanliness and efficient, courteous service.
Therefore, you agree to take, without limitation, the following actions during this Agreement‟s
term at your expense: (a) thorough cleaning, repainting and redecorating of the interior and
exterior of the Premises at intervals that we may prescribe; (b) interior and exterior repair of the
Premises as needed; and (c) repair or replacement, at our direction, of damaged, worn-out or
obsolete Operating Assets at intervals that we may prescribe (or, if we do not prescribe an interval
for replacing any Operating Asset, as that Operating Asset needs to be repaired or replaced).
In addition to the foregoing, you agree to renovate, refurbish, remodel, or replace, at your
own expense, the real and personal property and equipment used in operating the Restaurant when
reasonably required by us in order to comply with the image, standards of operation, and
performance capability we establish from time to time. If we change our image or standards of
operation, we shall give you a reasonable period of time within which to comply with such
changes.
B. PRODUCTS AND SERVICES YOUR RESTAURANT OFFERS.
You agree that you (1) will offer and sell from your Restaurant all of the products and
services that we periodically specify; (2) will not offer or sell at your Restaurant, the Premises or
any other location any products or services we have not authorized; and (3) will discontinue selling
and offering for sale any products or services that we at any time disapprove.
C. MANAGEMENT OF YOUR RESTAURANT.
Your Restaurant shall be managed by the Designated Manager. Your Designated Manager
agrees to work full-time at your Restaurant, to supervise the day-to-day operations of your
Restaurant. You (or your Managing Owner) must supervise the management and operation of
your Restaurant and continuously exert best efforts to promote and enhance your Restaurant.
D. APPROVED PRODUCTS, SERVICES, AND SUPPLIERS.
If you propose to offer, conduct, or utilize any services, products, materials, forms, items,
or supplies in connection with or for sale through your Restaurant that are not approved by us, you
shall first notify us in writing requesting approval. We may withhold such approval for any reason
at our sole discretion; however, in order to make such determination, we may require submission
of specifications, information, or samples of such services, products, materials, forms, items, or
supplies. We will advise you within a reasonable time whether such products, supplies, or services
meet our specifications. A charge not to exceed the actual cost of the review may be made by us
and shall be paid by you. If, at any time (including after our initial approval), we determine that
you fail to meet our specifications and standards in connection with the provision of any products
or services, including, without limitation, delivery services, we may permanently or temporarily
terminate your right to offer such products or services; provided that nothing contained herein
shall be deemed a waiver of our right to terminate pursuant to Section 14 hereof.
We and our affiliates reserve the right to approve or designate, from time to time,
manufacturers, vendors, distributors, suppliers, and producers (collectively referred to herein as
“vendors”), terms, and distribution methods for any goods or services (which include, but are not
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limited to, services, insurance, products, equipment, supplies, and materials). You shall purchase
all goods and services required for the operation of your Restaurant from such approved or
designated vendors (which may be only one vendor for any given good or service) under terms, in
the manner, and from the source designated by us or any of our affiliates. If we or any of our
affiliates designate such goods and services are to be purchased through approved or designated
third party distributors, then you shall purchase such goods and services from such distributors
pursuant to the terms and in the manner approved by us and or our affiliates. We or any of our
affiliates may be a supplier, distributor, or otherwise party to these transactions, and may derive
revenue or profit from such transactions. We and any of our affiliates may use such revenue or
profit without restriction.
In the event you desire to purchase equipment, products, services, supplies, or materials
from vendors other than those previously approved by us and our affiliates, you shall, prior to
purchasing any such equipment, products, services, supplies, or materials, give us a written request
to change vendor. We shall notify you in writing of the approval or rejection of the proposed
vendor within a reasonable time after completion of the investigation of the proposed vendor
should we choose to conduct an investigation. We and our affiliates may from time to time inspect
any vendor‟s facilities and products to assure proper production, processing, storing, and
transportation of equipment, products, services, supplies, or materials to be purchased from the
vendor by you. Permission for such inspection shall be a condition of the continued approval of
such vendor. We and our affiliates may, for any reason whatsoever at our or their sole discretion,
elect to withhold or revoke approval of the vendor. In order to make such determination, we and
our affiliates may, at any time, require that samples from the vendor or a proposed new vendor be
delivered for testing. A charge not to exceed the actual cost of the test may be made by us and shall
be paid by you. You acknowledge that we and our affiliates are likely to reject your request for a
new vendor without conducting any investigation if we and our affiliates already have designated
an exclusive vendor for the equipment, products, services, supplies, or materials proposed to be
offered by the new vendor as permitted in this Section.
E. COMPLIANCE WITH LAWS AND GOOD BUSINESS PRACTICES.
You must secure and maintain in force throughout this Agreement‟s term all required
licenses, permits and certificates relating to the operation of your Restaurant and operate your
Restaurant in full compliance with all applicable laws, ordinances and regulations. You agree to
comply and assist us in our compliance efforts, as applicable, with any and all laws, regulations,
Executive Orders or otherwise relating to anti terrorist activities, including without limitation the
U.S. Patriot Act, Executive Order 13224, and related U.S. Treasury or other regulations. In
connection with such compliance efforts, you agree not to enter into any prohibited transactions
and to properly perform any currency reporting and other activities relating to your Restaurant as
may be required by us or by law. You confirm that you are not listed in the Annex to Executive
Order 13224 and agree not to hire any person so listed or have any dealing with a person so listed
(the Annex is currently available at http://www.treasury.gov). You are solely responsible for
ascertaining what actions must be taken by you to comply with all such laws, orders or regulations,
and specifically acknowledge and agree that your indemnification responsibilities as provided in
Section 16.D pertain to your obligations hereunder.
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Your Restaurant must in all dealings with its customers, suppliers, us and the public adhere
to the highest standards of honesty, integrity, fair dealing and ethical conduct. You agree to refrain
from any business or advertising practice which might injure our business or the goodwill
associated with the Marks or other Smashburger Restaurants. You must notify us in writing within
three business days of: (1) the commencement of any action, suit or proceeding relating to your
Restaurant; (2) the issuance of any order, writ, injunction, award or decree of any court, agency or
other governmental instrumentality relating to your Restaurant; (3) any notice of violation of any
law, ordinance or regulation relating to your Restaurant; (4) receipt of any notice of complaint
from the Better Business Bureau, any local, state or federal consumer affairs department or
division, or any other government or independent third party involving a complaint from a client or
potential client relating to your Restaurant; and (5) written complaints from any client or potential
client. You must immediately provide to us copies of any documentation you receive of events in
(1) through (5) above and resolve the matter in a prompt and reasonable manner in accordance
with good business practices.
F. INSURANCE.
During the term of this Agreement you must maintain in force at your sole expense
comprehensive business owners coverage (including contents insurance, loss of business income,
employee dishonesty, money coverage, comprehensive general liability and liquor liability)
hired/non owned auto liability, boiler and machinery coverage, umbrella coverage, building
coverage, and auto liability coverage, all containing the minimum liability coverage we prescribe
from time to time. You also must maintain workers‟ compensation insurance for your employees
in accordance with laws applicable in the state in which the Restaurant is operated. We may
periodically increase the amounts of coverage required under these insurance policies or require
different or additional insurance coverages (including reasonable excess liability insurance) at any
time to reflect inflation, identification of new risks, changes in law or standards of liability, higher
damage awards or other relevant changes in circumstances. These insurance policies must name
us and any affiliates we designate as additional named insureds and provide for 30 days‟ prior
written notice to us of a policy‟s material modification, cancellation or expiration. You routinely
must furnish us copies of your Certificate of Insurance or other evidence of your maintaining this
insurance coverage and paying premiums. If you fail or refuse to obtain and maintain the
insurance we specify, in addition to our other remedies, we may (but need not) obtain such
insurance for you and your Restaurant on your behalf, in which event you shall cooperate with us
and reimburse us for all premiums, costs and expenses we incur in obtaining and maintaining the
insurance, plus a reasonable fee for our time incurred in obtaining such insurance.
G. PRICING.
Unless prohibited by applicable law, we may periodically set a maximum or minimum
price that you may charge for products and services offered by Smashburger Restaurants. If we
impose such a maximum or minimum price for any product or service, you may charge any price
for the product or service up to and including the maximum price we impose or down to and
including the minimum price we impose, but may not charge any price in excess of the maximum
price, or below the minimum price, set by us.
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H. RESTAURANT TELEPHONE NUMBERS AND LISTINGS.
You will keep all telephone numbers for the Restaurant separate from telephone numbers
you use in any other business operations and from your personal telephone numbers. You will use
the telephone numbers for the Restaurant only for business authorized by this Agreement. Upon
the expiration or termination of this Agreement, you will (a) stop using all Restaurant telephone
numbers regardless of our intention to use them, (b) promptly inform the telephone service
provider of your discontinued use of the telephone numbers unless we request that the numbers be
transferred to us or our designee, and (c) execute all documents that we request in order to transfer
to us or our designee all Restaurant telephone numbers. You acknowledge and agree that, as
between us and you, we have the sole rights to, and interest in, all telephone numbers, facsimile
numbers, directory listings and Internet addresses which you use in the operation or promotion of
the Restaurant. You hereby irrevocably appoint us, with full power of substitution, as your true
and lawful attorney-in-fact, which appointment is coupled with an interest, to execute such
directions and authorizations as may be necessary or prudent to accomplish the foregoing. To
evidence and confirm such appointment, you must execute the form of Collateral Assignment of
Telephone Numbers, Telephone Listings and Internet Addresses which is attached hereto as
Exhibit C.
I. COMPLIANCE WITH SYSTEM STANDARDS.
You acknowledge and agree that operating and maintaining your Restaurant according to
System Standards are essential to preserve the goodwill of the Marks and the goodwill of all
Smashburger Restaurants. Therefore, you agree at all times to operate and maintain your
Restaurant according to each and every System Standard, as we periodically modify and
supplement them. Though we retain the right to establish and periodically modify System
Standards which you have agreed to maintain in the operation of your Restaurant, you retain the
right and sole responsibility for the day-to-day management and operation of your Restaurant and
the implementation and maintenance of System Standards at your Restaurant. System Standards
may regulate any aspect of the operation and maintenance of your Restaurant, including, but not
limited to, any one or more of the following:
(1) sales, marketing, advertising and promotional programs and materials and
media used in these programs;
(2) staffing levels for your Restaurant and employee qualifications, training,
dress and appearance (although you have sole responsibility and authority concerning
employee selection and promotion, hours worked, rates of pay and other benefits, work
assigned and working conditions);
(3) use and display of the Marks;
(4) days and hours of operation;
(5) methods of payment that your Restaurant may accept from customers;
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(6) participation in market research and testing and product and service
development programs;
(7) participations in gift card programs;
(8) menus;
(9) bookkeeping, accounting, data processing and record keeping systems and
forms; formats, content and frequency of reports to us of sales, revenue, and financial
performance and condition; and giving us copies of tax returns and other operating and
financial information concerning the Franchise (we will use reasonable efforts to keep such
records confidential);
(10) types, amounts, terms and conditions of insurance coverage required for
your Restaurant, including criteria for your insurance carriers; and
(11) any other aspects of operating and maintaining your Restaurant that we
determine to be useful to preserve or enhance the efficient operation, image or goodwill of
the Marks and Smashburger Restaurants.
You agree that System Standards we prescribe in the Standards of Operations Manual, or
otherwise communicate to you in writing or another form, are part of this Agreement as if fully set
forth within its text. All references to this Agreement include all System Standards as periodically
modified. You acknowledge that our periodic modification of the System Standards (including,
without limitation, changes and additions to restaurant equipment and hardware and software
required for the Computer System), which may accommodate regional or local variations, may
obligate you to invest additional capital in your Restaurant and incur higher operating costs.
9. MARKETING.
A. GRAND OPENING ADVERTISING.
You must spend at least $10,000 for a grand opening marketing program for your
Restaurant to take place on the dates we designate before and after your Restaurant opens. We
reserve the right, in our discretion, to increase the required grand opening advertising required
under this Section 9.A to $25,000 depending on factors such as whether your Restaurant is in an
urban or rural market. You agree to use the media, materials, programs and strategies we develop
or approve in connection with the grand opening advertising program.
B. MARKETING FUND.
You agree to contribute to a marketing fund for Smashburger Restaurants (the “Marketing
Fund”) an amount equal to one percent (1%) of Gross Sales, payable in the same manner as the
Royalty. However, we have the right, at any time and on notice to you, to increase the amount you
must contribute to the Marketing Fund, to up to four percent (4%) of Gross Sales, provided that in
no event will we be entitled to require that the aggregate amount of the required Marketing Fund
contribution, the local marketing requirement pursuant to Section 9.C below, and the required
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contribution to a Local Advertising Cooperative (as defined in Section 9.D below) exceed five
percent (5%) of Gross Sales.
We or our affiliates or other designees will direct all programs that the Marketing Fund
finances, with sole control over the creative concepts, materials, and endorsements used and their
geographic, market, and media placement and allocation. The Marketing Fund may pay for
preparing and producing video, audio, and written materials and electronic media; developing,
implementing, and maintaining a Franchise System Website (as defined in Section 9.D below) and
related strategies; administering regional and multi-regional marketing and advertising programs,
including, without limitation, purchasing trade journal, direct mail, and other media advertising
and using advertising, promotion, and marketing agencies and other advisors to provide
assistance; and supporting public relations, market research, and other advertising, promotion, and
marketing activities. The Marketing Fund will give you a sample of advertising, marketing, and
promotional formats and materials at no cost. We will sell you multiple copies of these materials
at our direct cost of producing them, plus any related shipping, handling, and storage charges.
We will account for the Marketing Fund separately from our other funds and not use the
Marketing Fund for any of our general operating expenses. However, we may use the Marketing
Fund to reimburse us or our affiliates or designees for the reasonable salaries and benefits of
personnel who manage and administer the Marketing Fund, the Marketing Fund‟s other
administrative costs, travel expenses of personnel while they are on Marketing Fund business,
meeting costs, overhead relating to Marketing Fund business, and other expenses that we incur in
activities reasonably related to administering or directing the Marketing Fund and its programs,
including, without limitation, conducting market research, public relations, preparing advertising,
promotion, and marketing materials, and collecting and accounting for Marketing Fund
contributions.
The Marketing Fund will not be our asset. We do not owe any fiduciary obligation to you
for administering the Marketing Fund or any other reason. We will hold all Marketing Fund
contributions for the benefit of the contributors and use contributions for the purposes described in
this Section 9.B. The Marketing Fund may spend in any fiscal year more or less than the total
Marketing Fund contributions in that year, borrow from us or others (paying reasonable interest) to
cover deficits, or invest any surplus for future use. We may use all interest earned on the
Marketing Fund contributions to pay costs before using the Marketing Fund‟s other assets. We
will prepare an annual, unaudited statement of Marketing Fund collections and expenses and give
you the statement upon written request. We may have the Marketing Fund audited annually, at the
Marketing Fund‟s expense, by an independent certified public accountant. We may incorporate
the Marketing Fund or operate it through a separate entity whenever we deem appropriate. The
successor entity will have all of the rights and duties specified in this Section 9.B.
We intend for the Marketing Fund to promote recognition of the applicable Marks and
patronage of Smashburger Restaurants generally. Although we will try to use the Marketing Fund
to develop advertising and marketing materials and programs, and to place advertising and
marketing, that will benefit all Smashburger Restaurants contributing to the Marketing Fund, we
need not ensure that Marketing Fund expenditures in or affecting any geographic area are
proportionate or equivalent to Marketing Fund contributions by Smashburger Restaurants
operating in that geographic area or that any Smashburger Restaurant benefits directly or in
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proportion to its Marketing Fund contribution from the development of advertising and marketing
materials or the placement of advertising and marketing. We have the right, but no obligation, to
use collection agents and institute legal proceedings to collect Marketing Fund contributions at the
Marketing Fund‟s expense. We also may forgive, waive, settle, and compromise all claims by or
against the Marketing Fund. Except as expressly provided in this Section 9.B, we assume no direct
or indirect liability or obligation to you for collecting amounts due to, maintaining, directing, or
administering the Marketing Fund.
We may at any time defer or reduce contributions of a Smashburger Restaurant franchise
owner and, upon 30 days‟ prior notice to you, reduce or suspend Marketing Fund contributions and
operations for one or more periods of any length and terminate (and, if terminated, reinstate) the
Marketing Fund. If we terminate the Marketing Fund, we will distribute all unspent monies to our
franchise owners who contribute to the Marketing Fund, and to us and our affiliates, in proportion
to their, and our, respective Marketing Fund contributions during the preceding 12-month period.
C. LOCAL MARKETING EXPENDITURES.
In addition to your obligations under Section 9.A and Section 9.B above, you agree to
spend money, as required in this Section 9.C, to promote your Restaurant. You agree to list and
advertise your Restaurant on all major internet search engines (for example, Google Local and
CitySearch) and all major internet consumer review websites (for example, Yelp and Urban
Spoon) set forth in the Standards of Operations Manual and in at least one recommended classified
telephone directory distributed within the market area of your Restaurant (in the business
classifications we prescribe from time to time) and to use form of classified telephone directory
advertisement approved by us. If other Smashburger Restaurants are located within the directory‟s
distribution area, we may require you to participate in a collective advertisement with those other
Smashburger Restaurants and to pay your share of that collective advertisement. You also agree to
spend, beginning after you complete your grand opening advertising obligations in Section 9.A
above, at least one percent (1%) of the Restaurant‟s Gross Sales each calendar quarter to advertise
and promote your Restaurant (this may include costs of yellow pages advertising); provided,
however, that if you or your Affiliates operate two or more Restaurants, we may require you to
spend at least three percent (3%) of your Gross Sales each calendar quarter to advertise and
promote your Restaurants. Any amount of Local Advertising Cooperative contribution you make
will be set off against amounts required to be spent by you under this Section 9.C. Within 30 days
after the end of each calendar quarter, you agree to send us, in the manner we prescribe, an
accounting of your expenditures for local advertising and promotion during the preceding calendar
quarter. Your local advertising and promotion must follow our guidelines.
You agree that your advertising, promotion, and marketing will be completely clear,
factual, and not misleading and conform to both the highest standards of ethical advertising and
marketing and the advertising and marketing policies that we prescribe from time to time. At least
20 days before you intend to use them, you agree to send us for approval samples of all advertising,
promotional, and marketing materials which we have not prepared or previously approved. If you
do not receive written disapproval within 10 days after we receive the materials, they are deemed
to be disapproved. Once we approve the materials, you are permitted to use them; provided,
however, that we may, in our discretion, withdraw our approval if a regulatory or other issue arises
that, in our opinion, makes such withdrawal in our or the System‟s best interests. You may not use
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any advertising, promotional, or marketing materials that we have not approved or have
disapproved.
We reserve the right, at any time, to issue you a notice that the amounts required to be spent
by you under this Section 9.C shall, instead, be paid to us or our designee. If we exercise this
option, we will then spend such amounts, in accordance with local Restaurant marketing
guidelines and programs that we develop from time to time, to advertise and promote the
Restaurant on your behalf. We may instead, in our discretion, contribute any such amounts to the
Marketing Fund or to a Local Advertising Cooperative in accordance with and as required under
Section 9.D below. We may also elect, on one or more occasions and without prejudice to our
rights to issue further notices, to temporarily or permanently cease conducting such marketing
activities on your behalf and, instead, to require you to conduct such marketing activities yourself
in accordance with this Section 9.C.
D. LOCAL ADVERTISING COOPERATIVE.
Subject to the terms and conditions of this Section 9.D, you agree that we or our affiliates
or designees may establish or direct the establishment of a local advertising cooperative (“Local
Advertising Cooperative”) in geographical areas (as determined by us) in which two or more
Smashburger Restaurants are operating. The Local Advertising Cooperative will be organized and
governed in a form and manner, and begin operating on a date, that we determine in advance. We
may change, dissolve and merge Local Advertising Cooperatives. Each Local Advertising
Cooperative‟s purpose is, with our approval, to administer advertising programs and develop
advertising, marketing and promotional materials for the area that the Local Advertising
Cooperative covers. If, as of the time you sign this Agreement, we have established a Local
Advertising Cooperative for the geographic area in which your Restaurant is located, or if we
establish a Local Advertising Cooperative in that area during this Agreement‟s term, you agree to
sign the documents we require to become a member of the Local Advertising Cooperative and to
participate in the Local Advertising Cooperative as those documents require.
If we establish a Local Advertising Cooperative in your geographic area pursuant to this
Section 9.D, you agree to pay us a weekly Local Advertising Cooperative contribution in the
amount we establish for the particular Local Advertising Cooperative, which amount will not
exceed three percent (3%) of the Gross Sales. Your Local Advertising Cooperative contribution is
payable in the same manner as the Royalty. These contributions may be capped based on the
provisions of the by-laws adopted by the Local Advertising Cooperative, subject to our approval.
You will pay these monies to us electronically and we will remit them periodically to the Local
Advertising Cooperative.
Each Smashburger Restaurant contributing to a Local Advertising Cooperative will have
one vote on matters involving the activities of the particular Local Advertising Cooperative. The
Local Advertising Cooperative may not use any advertising, marketing or promotional plans or
materials without our prior written consent. We agree to assist in the formulation of marketing
plans and programs, which will be implemented under the direction of the Local Advertising
Cooperative. You acknowledge and agree that, subject to our approval and subject to availability
of funds, the Local Advertising Cooperative will have sole discretion over the creative concepts,
materials and endorsements used by it. You agree that the Local Advertising Cooperative
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assessments may be used to pay the costs of preparing and producing video, audio and written
advertising and direct sales materials for Smashburger Restaurants in your geographic area;
purchasing direct mail and other media advertising for Smashburger Restaurants in that
geographic area; and implementing direct sales programs, and employing marketing, advertising
and public relations firms to assist with the development and administration of marketing
programs for Smashburger Restaurants in such area.
The monies collected by us on behalf of a Local Advertising Cooperative will be accounted
for separately by us from our other funds and will not be used to defray any of our general
operating expenses. You agree to submit to us and the Local Advertising Cooperative any reports
that we or the Local Advertising Cooperative requires.
You understand and acknowledge that your Restaurant might not benefit directly or in
proportion to its contribution to the Local Advertising Cooperative from the development and
placement of advertising and the development of marketing materials. Local Advertising
Cooperatives for Smashburger Restaurants will be developed separately and no cooperative will
be intended to benefit the others. We will have the right, but not the obligation, to use collection
agents and to institute legal proceedings to collect amounts owed to the Local Advertising
Cooperative on behalf of and at the expense of the Local Advertising Cooperative and to forgive,
waive, settle and compromise all claims by or against the Local Advertising Cooperative. Except
as expressly provided in this Section 9.D, we assume no direct or indirect liability or obligation to
you with respect to the maintenance, direction or administration of the Local Advertising
Cooperative.
E. FRANCHISE SYSTEM WEBSITE.
We have established a Website to advertise, market, and promote Smashburger
Restaurants, the products and services that they offer and sell, or the Smashburger Restaurant
franchise opportunity (a “Franchise System Website”). We may, but are not obligated to,
provide you with a webpage on the Franchise System Website that references your Restaurant. If
we provide you with a webpage on the Franchise System Website, you must: (i) provide us the
information and materials we request to develop, update, and modify your webpage; (ii) notify us
whenever any information on your webpage is not accurate; and (iii) pay our then current initial
fee and monthly maintenance fee for the webpage. We will own all intellectual property and other
rights in the Franchise System Website, including your webpage, and all information they contain
(including, without limitation, the domain name or URL for your webpage, the log of “hits” by
visitors, and any personal or business data that visitors supply).
We will maintain the Franchise System Website and may use the Marketing Fund‟s assets
to develop, maintain, and update the Franchise System Website. We periodically may update and
modify the Franchise System Website (including your webpage). You acknowledge that we have
final approval rights over all information on the Franchise System Website (including your
webpage). We may implement and periodically modify System Standards relating to the
Franchise System Website.
Even if we provide you a webpage on our Franchise System Website, we will only
maintain such webpage while you are in full compliance with this Agreement and all System
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Standards we implement (including, without limitation, those relating to the Franchise System
Website). If you are in default of any obligation under this Agreement or our System Standards,
then we may, in addition to our other remedies, temporarily remove your webpage from the
Franchise System Website until you fully cure the default. We will permanently remove your
webpage from the Franchise System Website upon this Agreement‟s expiration or termination.
All advertising, marketing, and promotional materials that you develop for your Restaurant
must contain notices of the Franchise System Website‟s domain name in the manner we designate.
You may not develop, maintain, or authorize any other Website or create or use a screen name,
user name or profile on any social networking site that mentions or describes you or your
Restaurant or displays any of the Marks.
10. RECORDS, REPORTS, AND FINANCIAL STATEMENTS.
You agree to establish and maintain at your own expense a bookkeeping, accounting, and
recordkeeping system conforming to the requirements and formats we prescribe from time to time.
We may require you to use a Computer System to maintain certain sales data and other
information. We may also require you to use a third party approved by us for accounting and
bookkeeping services. You agree to give us in the manner and format that we prescribe from time
to time:
(a) on or before the 5th
day of each accounting period specified by us from time
to time (each an “Accounting Period”), a report on the Gross Sales of your Restaurant
during the preceding Accounting Period;
(b) within 30 days after the end of each accounting quarter specified by us from
time to time (each an “Accounting Quarter”), the operating statements, financial
statements, statistical reports, purchase records, and other information we request
regarding you and your Restaurant covering the previous Accounting Quarter and the
fiscal year to date;
(c) within 90 days after the end of each fiscal year, annual profit and loss and
source and use of funds statements and a balance sheet for your Restaurant as of the end of
that calendar year, prepared in accordance with generally accepted accounting principles
or, at our option, international accounting standards and principles. We reserve the right to
require that you have these financial statements and the financial statements of any prior
fiscal years audited by an independent accounting firm designated by us in writing;
(d) within 10 days after our request, exact copies of federal and state income
tax returns, sales tax returns, and any other forms, records, books, and other information we
periodically require relating to your Restaurant and the Franchise; and
(e) by July 15 and January 15 of each calendar year, reports on the status
(including the outstanding balance, then-current payment amounts, and whether such loan
is in good standing) of any loans outstanding as of the previous June 30 and December 31,
respectively, for which the Restaurant or any of the Restaurant‟s equipment is collateral.
You must also deliver to us, within five days after your receipt, copies of any default
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notices you receive from any of such lenders. You agree that we or our affiliates may
contact your banks, other lenders, and vendors to obtain information regarding the status of
loans of the type described herein and your accounts (including payment histories and any
defaults), and you hereby authorize your bank, other lenders, and vendors to provide such
information to us and our affiliates.
You agree to verify and sign each report and financial statement in the manner we prescribe. We
may disclose data derived from these reports. Moreover, we may, as often as we deem appropriate
(including on a daily basis), access the Computer System and retrieve all information relating to
the operation of your Restaurant. You agree to preserve and maintain all records in a secure
location at your Restaurant for at least three years (including, but not limited to, sales checks,
purchase orders, invoices, payroll records, customer lists, check stubs, sales tax records and
returns, cash receipts and disbursement journals, and general ledgers).
11. INSPECTIONS AND AUDITS.
A. OUR RIGHT TO INSPECT YOUR RESTAURANT.
To determine whether you and your Restaurant are complying with this Agreement and all
System Standards, we and our designated agents or representatives, may at all times and without
prior notice to you:
(1) inspect your Restaurant;
(2) photograph your Restaurant and observe and videotape the operation of
your Restaurant for consecutive or intermittent periods we deem necessary;
(3) remove samples of any products and supplies;
(4) interview the personnel and customers of your Restaurant; and
(5) inspect and copy any books, records, and documents relating to the
operation of your Restaurant.
You agree to cooperate with us fully. If we exercise any of these rights, we will not interfere
unreasonably with the operation of your Restaurant. You agree to present to your customers the
evaluation forms that we periodically prescribe and to participate and request your customers to
participate in any surveys performed by or for us.
B. OUR RIGHT TO AUDIT.
We and our designated agents or representatives may at any time during your business
hours, and without prior notice to you, examine your Restaurant, bookkeeping, and accounting
records for your Restaurant, and sales and income tax records and returns, and other records. You
agree to cooperate fully with our representatives and independent accountants in any examination.
If any examination discloses an understatement of the Gross Sales, you agree to pay us, within 15
days after receiving the examination report, the Royalty and Marketing Fund contributions due on
the amount of the understatement, plus our service charges and interest on the understated amounts
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from the date originally due until the date of payment. Furthermore, if an examination is necessary
due to your failure to furnish reports, supporting records, or other information as required, or to
furnish these items on a timely basis, or if our examination reveals a Royalty or Marketing Fund
contribution understatement exceeding two percent (2%) of the amount that you actually reported
to us for the period examined, you agree to reimburse us for the costs of the examination,
including, without limitation, the charges of attorneys and independent accountants and the travel
expenses, room and board, and compensation of our employees. These remedies are in addition to
our other remedies and rights under this Agreement and applicable law.
12. TRANSFER.
A. BY US.
You acknowledge that we maintain a staff to manage and operate the Franchise System and
that staff members can change as employees come and go. You represent that you have not signed
this Agreement in reliance on any particular manager, owner, director, officer, or employee
remaining with us in any capacity. We may change our ownership or form or assign this
Agreement and any other agreement to a third party without restriction.
B. BY YOU.
You understand and acknowledge that the rights and duties this Agreement creates are
personal to you (or to your owners if you are an Entity) and that we have granted you the Franchise
in reliance upon our perceptions of your (or your owners‟) individual or collective character, skill,
aptitude, attitude, business ability, and financial capacity. Accordingly, neither this Agreement (or
any interest in this Agreement), your Restaurant or substantially all of its assets, any direct or
indirect ownership interest in you (regardless of its size), nor any ownership interest in any of your
owners (if such owners are legal entities) may be transferred without our prior written approval,
which consent will not be unreasonably withheld or delayed; provided, however, that transfers
among your current owners of ownership interests in you will require prior notice to us but will not
require our consent as long as the Managing Owner and Control (defined in Section 17.O below)
of you are not changed as a result of such transfer.
You further agree that you will not enter into any proposed mortgage, pledge,
hypothecation, encumbrance or giving of a security interest in or which affects the Restaurant, this
Agreement or your rights under this Agreement without our prior written consent. A transfer of
your Restaurant ownership, possession, or control, or substantially all of its assets, may be made
only with a transfer of this Agreement. Any transfer without our approval is a breach of this
Agreement and has no effect. In this Agreement, the term “transfer” includes a voluntary,
involuntary, direct, or indirect assignment, sale, gift, or other disposition of any interest in:
(1) this Agreement;
(2) you;
(3) your Restaurant or substantially all of its assets; or
(4) your owners (if such owners are legal entities).
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An assignment, sale, gift, or other disposition includes the following events:
(a) transfer of ownership of capital stock, a partnership or membership interest,
or another form of ownership interest;
(b) merger or consolidation or issuance of additional securities or other forms
of ownership interest;
(c) any sale of a security convertible to an ownership interest;
(d) transfer of an interest in you, this Agreement, your Restaurant or
substantially all of its assets, or your owners in a divorce, insolvency, or entity dissolution
proceeding or otherwise by operation of law;
(e) if you, one of your owners, or an owner of one of your owners dies, a
transfer of an interest in you, this Agreement, your Restaurant or substantially all of its
assets, or your owner by will, declaration of or transfer in trust, or under the laws of
intestate succession; and
(f) pledge of this Agreement (to someone other than us) or of an ownership
interest in you or your owners as security, foreclosure upon your Restaurant, or your
transfer, surrender, or loss of the possession, control, or management of your Restaurant.
C. CONDITIONS FOR APPROVAL OF TRANSFER.
If you (and your owners) are in full compliance with this Agreement, then, subject to the
other provisions of this Section 12, we will approve a transfer that meets all of the requirements in
this Section 12.C. A non-controlling ownership interest in you or your owners (determined as of
the date on which the proposed transfer will occur) may be transferred if the proposed transferee
and its direct and indirect owners (if the transferee is an Entity) are of good character, meet our
then applicable standards for Smashburger Restaurant franchise owners (including no ownership
interest in or performance of services for a Competitive Business and assuming the your liquor
license can be transferred), and you (and, if they are already an owner or operator of a
Smashburger Restaurant, the transferee and its owners) execute a general release as described in
paragraph (9) of this Section 12.C. If the proposed transfer is of this Agreement, of the Managing
Owner‟s ownership interest in you or a controlling ownership interest in you or one of your
owners, or is one of a series of transfers (regardless of the time period over which these transfers
take place) which in the aggregate transfer this Agreement or a controlling ownership interest in
you or one of your owners, then, in addition to the foregoing requirements, all of the following
conditions must be met before or concurrently with the effective date of the transfer:
(1) you have paid all Royalty, Marketing Fund and advertising cooperative
contributions, and other amounts owed to us, our affiliates, and third party vendors and
have submitted all required reports and statements;
(2) you have not violated any provision of this Agreement, the Lease, or any
other agreement with us during both the 60-day period before you requested our consent to
the transfer and the period between your request and the effective date of the transfer;
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(3) neither the transferee nor its owners (if the transferee is an Entity) or
affiliates have an ownership interest (direct or indirect) in or perform services for a
Competitive Business;
(4) the transferee (or its Designated Manager) satisfactorily complete our
training program;
(5) your landlord allows you to transfer the Lease or sublease the Premises to
the transferee;
(6) the transferee agrees (if the transfer is of this Agreement) to upgrade,
remodel, and refurbish your Restaurant in accordance with our current requirements and
specifications for Smashburger Restaurants within 120 days after the effective date of the
transfer (we will advise the transferee before the effective date of the transfer of the
specific actions that it must take within this time period);
(7) the transferee, at our request, signs our then current form of franchise
agreement and related documents, any and all of the provisions of which may differ
materially from any and all of those contained in this Agreement;
(8) you or the transferee pays us 50% of our then current initial franchise fee.
However, no transfer fee is due if, upon a spouse‟s death, that spouse‟s interest in this
Agreement and your Restaurant, or ownership in you, is transferred to the surviving
spouse, provided that such transfer is subject to the terms and conditions of this Section 12;
(9) you (and your transferring owners) sign a general release, in a form
satisfactory to us, of any and all claims against us and our affiliates and our and their
owners, officers, directors, employees, and agents;
(10) we have approved the purchase price, amount of debt and payment terms,
and, if you or your owners finance any part of the purchase price, you and your owners
agree that all of the transferee‟s obligations under promissory notes, agreements, or
security interests reserved in your Restaurant are subordinate to the transferee‟s obligation
to pay Royalty, Marketing Fund contributions, and other amounts due to us, our affiliates,
and third party vendors and otherwise to comply with this Agreement;
(11) you and your transferring owners (and your and their immediate family
members) will not, for two years beginning on the transfer‟s effective date, engage in any
of the activities proscribed in Section 15.D. below; and
(12) you and your transferring owners will not directly or indirectly at any time
or in any manner (except with respect to other Smashburger Restaurants you own and
operate) identify yourself or themselves or any business as a current or former
Smashburger Restaurant or as one of our franchise owners; use any Mark, any colorable
imitation of a Mark, or other indicia of a Smashburger Restaurant in any manner or for any
purpose; or utilize for any purpose any trade name, trade or service mark, or other
commercial symbol that suggests or indicates a connection or association with us.
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We may review all information regarding your Restaurant that you give the transferee, correct any
information that we believe is inaccurate, and give the transferee copies of any reports that you
have given us or we have made regarding your Restaurant.
Our approval of a transfer of ownership interests in you as a result of the death or
incapacity of the proposed transferor will not be unreasonably withheld or delayed so long as at
least one of the Managing Owners designated on Exhibit A continues to be the designated
Managing Owner. If, as a result of the death or incapacity of the transferor, a transfer is proposed
to be made to the transferor‟s spouse, and if we do not approve the transfer, the trustee or
administrator of the transferor‟s estate will have nine months after our refusal to consent to the
transfer to the transferor‟s spouse within which to transfer the transferor‟s interests to another
party whom we approve in accordance with this Section 12.C.
D. TRANSFER TO A WHOLLY-OWNED CORPORATION OR LIMITED
LIABILITY COMPANY.
Notwithstanding Section 12.C above, if you are in full compliance with this Agreement,
you may transfer this Agreement to a corporation or limited liability company which conducts no
business other than your Restaurant and, if applicable, other Smashburger Restaurants, in which
you maintain management control, and of which you own and control one hundred percent (100%)
of the economic interests, equity and voting power of all issued and outstanding ownership
interests, provided that all of the assets of your Restaurant are owned, and the business of your
Restaurant is conducted, only by that single corporation or limited liability company. The
corporation or limited liability company must expressly assume all of your obligations under this
Agreement. Transfers of ownership interests in the corporation or limited liability company are
subject to Section 12.C above. You agree to remain personally liable under this Agreement as if
the transfer to the corporation or limited liability company did not occur.
E. EFFECT OF CONSENT TO TRANSFER.
Our consent to a transfer of this Agreement and your Restaurant, or any interest in you or
your owners, is not a representation of the fairness of the terms of any contract between you and
the transferee, a guarantee of your Restaurant or transferee‟s prospects of success, or a waiver of
any claims we have against you (or your owners) or of our right to demand full compliance by you
and the transferee with this Agreement.
F. PUBLIC OR PRIVATE OFFERING.
You acknowledge that the written information used to raise or secure funds can reflect
upon us and the Franchise System. You agree to submit any written information intended to be
used for that purpose to us before inclusion in any registration statement, prospectus or similar
offering memorandum. Should we object to any reference to us or our affiliates or any of our
business in the offering literature or prospectus, the literature or prospectus shall not be used until
our objections are withdrawn. Notwithstanding the foregoing, you acknowledge and agree that
you may not engage in a public offering of securities without our prior written consent.
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G. OUR RIGHT OF FIRST REFUSAL.
If you (or any of your owners) at any time determine to sell or transfer for consideration an
interest in this Agreement and your Restaurant, or a direct or indirect ownership interest in you
(except to or among your current owners, which is not subject to this Section 12.G), in a
transaction that otherwise would be allowed under Sections 12.B and C above, you (or your
owners) agree to obtain from a responsible and fully disclosed buyer, and send us, a true and
complete copy of a bona fide, executed written offer (which may include a letter of intent) relating
exclusively to an interest in you or in this Agreement and your Restaurant. The offer must include
details of the payment terms of the proposed sale and the sources and terms of any financing for the
proposed purchase price. To be a valid, bona fide offer, the proposed purchase price must be in a
dollar amount, and the proposed buyer must submit with its offer an earnest money deposit equal
to five percent (5%) or more of the offering price. The right of first refusal process will not be
triggered by a proposed transfer that would not be allowed under Sections 12.B and C above. We
may require you (or your owners) to send us copies of any materials or information sent to the
proposed buyer or transferee regarding the possible transaction.
We may, by written notice delivered to you or your selling owner(s) within 30 days after
we receive both an exact copy of the offer and all other information we request, elect to purchase
the interest offered for the price and on the terms and conditions contained in the offer, provided
that:
(1) we may substitute cash for any form of payment proposed in the offer (such
as ownership interests in a privately-held entity);
(2) our credit will be deemed equal to the credit of any proposed buyer
(meaning that, if the proposed consideration includes promissory notes, we or our designee
may provide promissory notes with the same terms as those offered by the proposed
buyer);
(3) we will have an additional 30 days to prepare for closing after notifying you
of our election to purchase; and
(4) we must receive, and you and your owners agree to make, all customary
representations and warranties given by the seller of the assets of a business or the
ownership interests in a legal entity, as applicable, including, without limitation,
representations and warranties regarding:
(a) ownership and condition of and title to ownership interests or assets;
(b) liens and encumbrances relating to ownership interests or assets;
and
(c) validity of contracts and the liabilities, contingent or otherwise, of
the entity whose assets or ownership interests are being purchased.
If we exercise our right of first refusal, you and your selling owner(s) (and your and their
immediate family members) agree that, for two years beginning on the closing date, you and they
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will be bound by the non-competition covenant contained in Section 15.D. below. We have the
unrestricted right to assign this right of first refusal to a third party, who then will have the rights
described in this Section 12.G.
If we do not exercise our right of first refusal, you or your owners may complete the sale to
the proposed buyer on the original offer‟s terms, but only if we otherwise approve the transfer in
accordance with, and you (and your owners) and the transferee comply with the conditions in,
Sections 12.B and 12.C above. This means that, even if we do not exercise our right of first refusal
(whether or not it is properly triggered as provided above), if the proposed transfer otherwise
would not be allowed under Sections 12.B and 12.C above, you (or your owners) may not move
forward with the transfer at all.
If you do not complete the sale to the proposed buyer within 60 days after we notify you
that we do not intend to exercise our right of first refusal, or if there is a material change in the
terms of the sale (which you agree to tell us promptly), we or our designee will have an additional
right of first refusal during the 30-day period following either the expiration of the 60-day period
or our receipt of notice of the material change(s) in the sale‟s terms, either on the terms originally
offered or the modified terms, at our or our designee‟s option.
Notwithstanding the foregoing, if your Restaurant has been used as collateral for an
SBA-guaranteed loan (which is subject to our consent as described in Section 12), we will not,
while such loan remains unpaid, exercise our right of first refusal under this Section 12.G with
respect to a transfer of part of the ownership interests in you unless, in connection with our
exercise of the right of first refusal, we are paying off the SBA-guaranteed loan. However, we
retain the right to assign our right of first refusal with respect to such transfers to an unaffiliated
third-party.
13. EXPIRATION OF THIS AGREEMENT.
A. YOUR RIGHT TO ACQUIRE A SUCCESSOR FRANCHISE.
When this Agreement expires:
(1) if you (and each of your owners) have substantially complied with this
Agreement during its term; and
(2) if you (and each of your owners) are, both on the date you give us written
notice of your election to acquire a successor franchise (as provided in Section 13.B.
below) and on the date on which the term of the successor franchise would commence, in
full compliance with this Agreement and all System Standards; and
(3) provided that (a) you maintain possession of and agree (regardless of cost)
to remodel or expand your Restaurant, add or replace improvements and Operating Assets,
and otherwise modify your Restaurant as we require to comply with System Standards then
applicable for new Smashburger Restaurants, or (b) at your option, you secure a substitute
premises that we approve and you develop those premises according to System Standards
then applicable for Smashburger Restaurants,
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then you may acquire a successor franchise to operate your Restaurant as a Smashburger
Restaurant for one additional 15-year term. You agree to sign the franchise agreement we then use
to grant franchises for Smashburger Restaurants (modified as necessary to reflect the fact that it is
for a successor franchise), which may contain provisions that differ materially from any and all of
those contained in this Agreement; provided that we will waive the initial franchise fee. However,
you must pay a renewal fee in an amount equal to fifty percent (50%) of our then current initial
franchise fee. If you (and each of your owners) are not, both on the date you give us written notice
of your election to acquire a successor franchise and on the date on which the term of the successor
franchise commences, in full compliance with this Agreement and all System Standards, you
acknowledge that we need not grant you a successor franchise, whether or not we had, or chose to
exercise, the right to terminate this Agreement during its term under Section 14.B.
B. GRANT OF A SUCCESSOR FRANCHISE.
You agree to give us written notice of your election to acquire a successor franchise no
more than 270 days and no less than 180 days before this Agreement expires. We agree to give
you written notice (“Our Notice”), not more than 90 days after we receive your notice, of our
decision:
(1) to grant you a successor franchise;
(2) to grant you a successor franchise on the condition that you correct existing
deficiencies of your Restaurant or in your operation of your Restaurant;
(3) not to grant you a successor franchise based on our determination that you
and your owners have not substantially complied with this Agreement during its term or
were not in full compliance with this Agreement and all System Standards on the date you
gave us written notice of your election to acquire a successor franchise; or
(4) not to grant you a successor franchise because we are no longer granting
franchises for Smashburger Restaurants.
If applicable, Our Notice will:
(a) describe the remodeling, expansion, improvements, or modifications
required to bring your Restaurant into compliance with then applicable System Standards
for new Smashburger Restaurants; and
(b) state the actions you must take to correct operating deficiencies and the time
period in which you must correct these deficiencies.
If we elect not to grant you a successor franchise, Our Notice will describe the reasons for
our decision. If we elect to grant you a successor franchise, your right to acquire a successor
franchise is subject to your full compliance with all of the terms and conditions of this Agreement
through the date of its expiration, in addition to your compliance with the obligations described in
Our Notice.
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C. AGREEMENTS/RELEASES.
In order to acquire a successor franchise, you must satisfy all of the other conditions for a
successor franchise and you and your owners agree to execute the form of franchise agreement and
any ancillary agreements we then customarily use in granting franchises for Smashburger
Restaurants (modified as necessary to reflect the fact that it is for a successor franchise), which
may contain provisions that differ materially from any and all of those contained in this
Agreement. You and your owners further agree to sign general releases, in a form satisfactory to
us, of any and all claims against us and our affiliates and our and their owners, officers, directors,
employees, agents, successors, and assigns. We will consider your or your owners‟ failure to sign
these agreements and releases and to deliver them to us for acceptance and execution (together
with the successor franchise fee) within 30 days after their delivery to you to be an election not to
acquire a successor franchise.
14. TERMINATION OF AGREEMENT.
A. BY YOU.
If you and your owners are fully complying with this Agreement and we materially fail to
comply with this Agreement and do not correct the failure within 30 days after you deliver written
notice of the material failure to us or if we cannot correct the failure within 30 days and we fail to
give you within 30 days after your notice reasonable evidence of our effort to correct the failure
within a reasonable time, you may terminate this Agreement effective an additional 30 days after
you deliver to us written notice of termination. Your termination of this Agreement other than
according to this Section 14.A. will be deemed a termination without cause and a breach of this
Agreement.
B. BY US.
We may terminate this Agreement, effective upon delivery of written notice of termination
to you, if:
(1) you (or any of your owners) have made or make any material
misrepresentation or omission in acquiring the Franchise or operating your Restaurant;
(2) you do not locate, and sign a Lease or purchase document for, an acceptable
site for the Premises within 180 days after the Effective Date;
(3) you do not open your Restaurant for business within the deadline set forth in
Section 2.G;
(4) we determine if you (or your Designated Manager) are not capable or
qualified to satisfactorily complete initial training;
(5) you abandon or fail actively to operate your Restaurant for three or more
consecutive business days, unless you close your Restaurant for a purpose we approve;
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(6) you (or any of your owners) are or have been convicted by a trial court of, or
plead or have pleaded no contest or guilty to, a felony;
(7) you fail to maintain the insurance we require and do not correct the failure
within 10 days after we deliver written notice of that failure to you;
(8) you (or any of your owners) engage in any conduct which, in our opinion,
adversely affects the reputation of your Restaurant or the goodwill associated with the
Marks;
(9) you (or any of your owners) make or attempt to make an unauthorized
transfer (as defined in section 12.B);
(10) you lose the right to occupy the Premises;
(11) you (or any of your owners) knowingly make any unauthorized use or
disclosure of any part of the Standards of Operations Manual or any other Confidential
Information;
(12) you violate any law, ordinance, rule or regulation of a governmental agency
in connection with the operation of your Restaurant and fail to correct such violation within
72 hours after you receive notice from us or any other party;
(13) you fail to pay us or our affiliates any amounts due and do not correct the
failure within 10 days after written notice of that failure has been delivered or fail to pay
any third party obligations owed in connection with your ownership or operation of the
Restaurant and do not correct such failure within any cure periods permitted by the person
or Entity to whom such obligations are owed;
(14) you fail to pay when due any federal or state income, service, sales, use,
employment or other taxes due on or in connection with the operation of your Restaurant,
unless you are in good faith contesting your liability for these taxes;
(15) you understate the Gross Sales three times or more during this Agreement‟s
term;
(16) you (or any of your owners) (a) fail on three or more separate occasions
within any 12 consecutive month period to comply with this Agreement, whether or not we
notify you of the failures, and, if we do notify you of the failures, whether or not you
correct the failures after our delivery of notice to you; or (b) fail on two or more separate
occasions within any six consecutive month period to comply with the same obligation
under this Agreement, whether or not we notify you of the failures, and, if we do notify you
of the failures, whether or not you correct the failures after our delivery of notice to you;
(17) you make an assignment for the benefit of creditors or admit in writing your
insolvency or inability to pay your debts generally as they become due; you consent to the
appointment of a receiver, trustee, or liquidator of all or the substantial part of your
property; your Restaurant is attached, seized, subjected to a writ or distress warrant, or
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levied upon, unless the attachment, seizure, writ, warrant, or levy is vacated within 30
days; or any order appointing a receiver, trustee, or liquidator of you or your Restaurant is
not vacated within 30 days following the order‟s entry;
(18) you (or any of your owners) file a petition in bankruptcy or a petition in
bankruptcy is filed against you;
(19) you (or any of your owners) fail to comply with anti-terrorism laws,
ordinances, regulations and Executive Orders;
(20) you create or allow to exist any condition in or at the Smashburger
Restaurant‟s Premises which we reasonably determine to present a health or safety concern
for the Smashburger Restaurant‟s customers or employees;
(21) you fail to pass quality assurance audits, and do not cure such failure within
15 days after we deliver written notice of failure to you;
(22) you (or any of your owners) fail to comply with any other provision of this
Agreement or any System Standard, and do not correct the failure within 30 days after we
deliver written notice of the failure to you; or
(23) you or an Affiliate fails to comply with any other agreement with us or our
affiliate and do not correct such failure within the applicable cure period, if any.
C. ASSUMPTION OF MANAGEMENT.
We have the right (but not the obligation), under the circumstances described below, to
enter the Premises and assume the management of your Restaurant (or to appoint a third party to
assume its management) for any period of time we deem appropriate but not to exceed 90-day
increments, renewable for up to one year, in the aggregate. We will periodically discuss with you
the results of operation of the Restaurant during the time that we manage it. If we (or a third party)
assume the management of your Restaurant under subparagraphs (1) and (2) below, you agree to
pay us (in addition to the Royalty, Marketing Fund contributions, and other amounts due under this
Agreement) an amount equal to ten percent (10%) of Gross Sales, plus our (or the third party‟s)
direct out-of-pocket costs and expenses, for any period we deem appropriate. If we (or a third
party) assume the management of your Restaurant, you acknowledge that we (or the third party)
will have a duty to utilize only reasonable efforts and will not be liable to you or your owners for
any debts, losses, or obligations your Restaurant incurs, or to any of your creditors for any
supplies, products, or other assets or services your Restaurant purchases, while we (or the third
party) manage your Restaurant.
We (or a third party) may assume the management of your Restaurant under the following
circumstances:
(1) if you abandon or fail to actively operate your Restaurant;
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(2) if you fail to comply with any provision of this Agreement or any System
Standard and do not cure the failure within the time period we specify in our notice to you;
or
(3) if this Agreement expires or is terminated and we are deciding whether to
exercise our option to purchase your Restaurant under Section 15.E. below.
If we exercise our rights under subparagraphs (1) or (2) above, that will not affect our right
to terminate this Agreement under Section 14.B. above.
15. OUR AND YOUR RIGHTS AND OBLIGATIONS UPON TERMINATION OR
EXPIRATION OF THIS AGREEMENT.
A. PAYMENT OF AMOUNTS OWED TO US.
You agree to pay us within 15 days after this Agreement expires or is terminated, or on any
later date that we determine the amounts due to us, the Royalty, Marketing Fund contributions,
interest, and all other amounts owed to us (and our affiliates) which then are unpaid.
B. DE-IDENTIFICATION.
When this Agreement expires or is terminated for any reason:
(1) you may not directly or indirectly at any time or in any manner (except with
other Smashburger Restaurants you own and operate) identify yourself or any business as a
current or former Smashburger Restaurant or as one of our current or former franchise
owners; use any Mark, any colorable imitation of a Mark, or other indicia of a Smashburger
Restaurant in any manner or for any purpose; or use for any purpose any trade name, trade
or service mark, or other commercial symbol that indicates or suggests a connection or
association with us;
(2) you agree to take the action required to cancel all fictitious or assumed
name or equivalent registrations relating to your use of any Mark;
(3) you agree to deliver to us, at your expense, within 30 days all signs,
sign-faces, sign-cabinets, marketing materials, forms, and other materials containing any
Mark or otherwise identifying or relating to a Smashburger Restaurant that we request and
allow us, without liability to you or third parties, to remove these items from your
Restaurant;
(4) if we do not have or do not exercise an option to purchase your Restaurant
under Section 15.E below, you agree promptly and at your own expense to make the
alterations we specify in the Standards of Operations Manual (or otherwise) to distinguish
your Restaurant clearly from its former appearance and from other Smashburger
Restaurants in order to prevent public confusion and in order to comply with the
non-competition provisions set forth in Section 15.D;
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(5) you agree to comply with your obligations with respect to the telephone
numbers, telephone listings and Internet Addresses as described in Section 8.H; and
(6) you agree to give us, within 30 days after the expiration or termination of
this Agreement, evidence satisfactory to us of your compliance with these obligations.
C. CONFIDENTIAL INFORMATION.
You agree that, when this Agreement expires or is terminated, you will immediately cease
using any of our Confidential Information (including computer software or similar technology and
digital passwords and identifications that we have licensed to you or that otherwise are proprietary
to us or the Franchise System) in any business or otherwise and return to us all copies of the
Standards of Operations Manual and any other confidential materials that we have loaned you.
D. COVENANT NOT TO COMPETE / NON-SOLICITATION.
(1) Non-Competition. Upon termination or expiration of this Agreement, you
and your owners agree that, for two years beginning on the effective date of termination or
expiration or the date on which all persons restricted by this Section 15.D begin to comply
with this Section 15.D, whichever is later, neither you nor any of your owners (or their
immediate family members) will have any direct or indirect interest as an owner (whether
of record, beneficially, or otherwise), investor, partner, director, officer, employee,
consultant, representative, or agent in any Competitive Business (as defined in Section 7
above) located or operating:
(i) within a 5-mile radius of the Premises; and
(ii) within a 5-mile radius of any other Smashburger Restaurant in
operation or under construction on the later of the effective date of the termination
or expiration of this Agreement or the date on which all persons restricted by this
Section 15.D begin to comply with this Section 15.D.
These restrictions also apply after transfers, as provided in Section 12.C(11) above.
If any person restricted by this Section 15.D refuses voluntarily to comply with these
obligations, the two year period for that person will commence with the entry of a court
order enforcing this provision. You and your owners expressly acknowledge that you
possess skills and abilities of a general nature and have other opportunities for exploiting
these skills. Consequently, our enforcing the covenants made in this Section 15.D will not
deprive you of your personal goodwill or ability to earn a living.
(2) Non-Solicitation. You further agree that, for two years beginning on the
effective date of termination or expiration, neither you nor any of your owners, your or
your owners‟ Affiliates, or the officers, directors, managers or immediate family members
of any of the foregoing, will:
(i) recruit or hire any person who is then or was, within the
immediately preceding 24 months, employed by us, any of our affiliates, or a
franchise owner as (a) a general manager or assistant manager at any Smashburger
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Restaurant, (b) a district or regional manager or any other such person having
responsibility for overseeing or supervising the operation of multiple Smashburger
Restaurants or (c) any of our or our affiliates‟ officers, in any case without our
consent or that of the relevant employer;
(ii) interfere or attempt to interfere with our or our affiliates‟
relationships with any vendors or consultants; or
(iii) engage in any other activity which might injure the goodwill of the
Marks or the Franchise System.
If you fail to comply with paragraph (i) above, you agree, in addition to all other
remedies we have as a result of your failure, to pay us an amount equal to 200% of the
annual salary of such person.
E. OUR RIGHT TO PURCHASE YOUR RESTAURANT.
(1) Purchase Option. In addition to any other rights to purchase we have
under this Agreement or under any multi-unit development agreement between us and you
or your Affiliates, we have the right to purchase your Restaurant, as described in this
Section 15.E (the “Purchase Option”), upon the occurrence of either a “Termination
Event” or a “Control Event.” We have the unrestricted right to assign the Purchase Option
in our discretion.
A “Termination Event” is either the expiration of this Agreement and any
successor franchise granted pursuant to Section 13 or the termination of this Agreement by
you without cause or by us as permitted under Section 14.B (except where the sole cause
for termination was your or your associate‟s failure to comply with the development
schedule set forth in the multi-unit development agreement pursuant to which this
Agreement was executed).
A “Control Event” is:
(a) our termination of the multi-unit development agreement between
us and you or your Affiliate pursuant to which this Agreement was executed or the
expiration of such agreement following a failure to complete an extension of the
term under the circumstances described therein;
(b) a Change of Control (as defined below); or
(c) the signing of an underwriting agreement between a managing
underwriter or underwriters and us or our affiliate, the receiving of a highly
confident or similar letter from an underwriter to us or an affiliate to sell our or a
Designated Entity‟s shares in a public offering, or the filing of a registration
statement filed under the Securities Act of 1933, as amended, in which our or our
direct or indirect parent‟s equity interests are directly or indirectly proposed to be
sold in a public offering.
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A “Change of Control” means any transaction or a series of related transactions
that result in (a) a merger, consolidation, recapitalization, sale of equity securities or any
similar transaction as a result of which any person other than one or more of the current
members of Icon Burger or their affiliates (“Permitted Holders”) (i) has the power, directly
or indirectly, to elect or determine the outcome of the election of our governing board or
manager or of a similar governing body of a Designated Entity; or (ii) has the right, directly
or indirectly, to receive more than twenty percent (20%) of our or a Designated Entity‟s
assets upon our or such entity‟s liquidation, or (b) a sale of all or substantially all of our or
a Designated Entity‟s assets in to any person who is not a Permitted Holder. A
“Designated Entity” is Icon Burger, Smashburger Master LLC or any direct or indirect
parent of either.
(2) Purchase Option Triggered by a Termination Event. We may exercise
the Purchase Option based on a Termination Event by giving you written notice of our
election by not later than 30 days after the occurrence of the Termination Event. The
purchase price for your Restaurant will be the net realizable value of the tangible assets in
accordance with the liquidation basis of accounting (not the value of your Restaurant as a
going concern) (“Liquidation Value”). Closing of the purchase will take place, as
described in paragraph (5) below, on a date we select which is within 90 days after the
purchase price is determined by us or, if you dispute the calculation of the purchase price,
as determined pursuant to paragraph (4) below.
(3) Purchase Option Triggered by a Control Event. We may exercise the
Purchase Option based on a Control Event by providing you with written notice (the
“Option Notice”) at any time after, but prior to the 3rd
anniversary of, the occurrence of the
Control Event (the “Option Period”); provided, however, that we have the right to rescind
our election after the purchase price is determined but prior to Closing. Closing on the
purchase (the “Closing Date”) will take place 90 days after the Option Notice (or if the 90th
day falls on a holiday or weekend, on the next business day); provided, however, that if the
purchase price cannot be calculated prior to the scheduled Closing Date because either you
have not provided the financial and other information we reasonably require in order to
make such a determination (including audited financial statements) or you dispute the
purchase price calculation, Closing shall take place not later than 45 days following the
final determination of the purchase price.
The purchase price for your Restaurant under this paragraph (3) will be determined as
follows.
a. If, when we issue the Option Notice, the Restaurant has operated for
at least a full Fiscal Year (that is, the 52 or 53 Accounting Periods that make up our
fiscal year), the purchase price will be six times the Restaurant‟s EBITDA (defined
below) for the full Fiscal Year ending on the last day of the last full Accounting
Period immediately preceding our issuing the Option Notice;
b. If, when we issue the Option Notice, the Restaurant has operated for
more than three but fewer than 12 full Accounting Periods, the purchase price will
be six times the Restaurant‟s annualized EBITDA (based on its EBITDA for the
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number of Accounting Periods that it operated prior to our issuing the Option
Notice); and
c. If, when we issue the Option Notice, the Restaurant has operated for
not more than three full Accounting Periods, the purchase price will be the actual
costs expended by you for development of the Restaurant plus twenty percent
(20%) of such costs.
“EBITDA” means net income, calculated using generally accepted accounting
principles (including, without limitation, all direct or indirect costs of operations including
pre-opening expenses, Royalty payments, Marketing Fund contributions and any local
marketing expenditures or Local Advertising Cooperative expenditures), before interest,
income taxes, depreciation, and amortization.
We may exclude from the assets to be purchased any operating assets or other items
that are not reasonably necessary (in function or quality) to the operation of your
Restaurant or that we have not approved as meeting System Standards for Smashburger
Restaurants, and the purchase price will reflect these exclusions. No liabilities, contingent
or otherwise, and no ownership interests will be assumed in connection with our purchase
of your Restaurant under this Section. We may set off against the purchase price, and
reduce the purchase price by, any and all amounts you or your owners owe us or our
affiliates or to any landlords, taxing authorities, vendors or other third parties who we
determine, as a result of monies owed to them, might have a claim or encumbrance against
the Restaurant or the assets we are purchasing.
If, due to a Control Event, we exercise our right under Section 10(c) to require you
to have your financial statements audited for prior fiscal years, you agree to fully cooperate
in such audit and to require your auditors to complete the audit as soon as possible after we
notify you of the required audit, but in any event not later than 6 months after such notice.
If we elect to exercise the Purchase Option under this Section 15.E(3) as a result of
a Control Event, we will do so only if we also exercise our similar options to purchase
under other franchise agreements executed by you or your Affiliates pursuant to the
Development Agreement.
(4) Disputes Regarding Purchase Price Calculation. If you dispute the
calculation of the purchase price, the purchase price will be determined by
one independent accredited appraiser designated by us who will calculate the purchase
price applying the criteria specified above. We agree to select the appraiser within 15 days
after we receive the financial and other information necessary to calculate the purchase
price (if you and we have not agreed on the purchase price before then). You and we will
share equally the appraiser‟s fees and expenses. The appraiser must complete its
calculation within 30 days after its appointment. The purchase price will be the appraiser‟s
determination of the value, applying the appropriate mechanism as described
above. Notwithstanding the foregoing, if the Restaurant is used as collateral for an
SBA-guaranteed loan (which requires our consent under Section 12.B), if, while such loan
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remains unpaid, we and you cannot agree on the purchase price, the purchase price will be
determined by three independent accredited appraisers, one of whom will be designated
and paid for by us, one of whom will be designated and paid for by you, and the third who
will designated by your and our appointee and paid for by you and us equally. Each
appointed appraiser will calculate the purchase price, applying the appropriate mechanism
described above, and the determination of at least two of the appraisers shall be the
purchase price. You and we will select our respective appraisers within 15 days after we
receive the financial and other information necessary to calculate the purchase price (if you
and we have not agreed on the calculation of the purchase price, as described above, before
then), and the third appraiser must be appointed within 15 days after the appointment of
your and our appraisers. The appraisers must complete their calculations within 30 days
after their appointment.
(5) Closing. You will continue to operate the Restaurant in accordance with
this Agreement through the Closing. Prior to closing, you agree to cooperate with us in
conducting due diligence, including providing us with access to your business and
financial records, relevant contracts and all other information relevant to the Restaurant.
At the closing, we (or our assignee) will pay the purchase price in cash. You agree to
execute and deliver to us (or our assignee):
(a) an Asset Purchase Agreement and all related agreements, in form
and substance acceptable to us and in which you provide all customary warranties
and representations, including, without limitation, representations and warranties
as to ownership and condition of and title to assets, liens and encumbrances on
assets, validity of contracts and agreements, and liabilities affecting the assets,
contingent or otherwise;
(b) a transfer of good and merchantable title to the assets purchased,
free and clear of all liens and encumbrances (other than liens and security interests
acceptable to us), with all sales and other transfer taxes paid by you;
(c) an assignment of all of the licenses and permits for your Restaurant
which may be assigned or transferred;
(d) an assignment of the Lease;
(e) general releases, in form and substance satisfactory to us, of any and
all claims you and your owners have against us and our shareholders, officers,
directors, employees, agents, successors, and assigns; and
(f) an agreement, in form and substance satisfactory to us, voluntarily
terminating this Agreement under which you and your owners agree to comply
with all post-term obligations set forth in Sections 15.A-15.D and with all other
obligations which, either expressly or by their nature, are intended to survive
termination or expiration of this Agreement.
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F. REMEDIES.
In the event this Agreement is terminated because of your default, you and we agree that it
would be difficult if not impossible to determine the amount of damages that we would suffer.
You and we agree that a reasonable estimate of those damages is the then net present value of the
Royalty fees, Marketing Fund contributions and Local Advertising Cooperative contributions that
would have become due from the date of termination to the scheduled expiration date of this
Agreement. For this purpose, Royalty fees, Marketing Fund contributions and Local Advertising
Cooperative contributions shall be calculated based on Gross Sales of the Restaurant for the 12
months preceding the effective date of termination. In the event the Restaurant has not been in
operation for at least 12 months preceding the termination date, Royalty fees, Marketing Fund
contributions and Local Advertising Cooperative contributions will be calculated based on the
average monthly gross sales of all Smashburger Restaurants during our fiscal year immediately
preceding the termination date.
G. CONTINUING OBLIGATIONS.
All of our and your (and your owners‟) obligations which expressly or by their nature
survive this Agreement‟s expiration or termination will continue in full force and effect
subsequent to and notwithstanding its expiration or termination and until they are satisfied in full
or by their nature expire.
16. RELATIONSHIP OF THE PARTIES/INDEMNIFICATION.
A. INDEPENDENT CONTRACTORS.
You and we understand and agree that this Agreement does not create a fiduciary
relationship between you and us, that you and we are and will be independent contractors, and that
nothing in this Agreement is intended to make either you or us a general or special agent, joint
venturer, partner, or employee of the other for any purpose. You agree to identify yourself
conspicuously in all dealings with customers, suppliers, public officials, your personnel, and
others as the owner of your Restaurant under a franchise we have granted and to place notices of
independent ownership on the forms, business cards, stationery, advertising, and other materials
we require from time to time.
You also acknowledge that you will have a contractual relationship only with us and may
look only to us to perform under this Agreement. Icon Burger is not a party to this Agreement and
has no obligations under it. You may not look to Icon Burger for performance. However, because
Icon Burger is the owner of the Marks, you and we agree that Icon Burger will be a third party
beneficiary of those provisions in this Agreement relating to usage of the Marks, with the
independent right to enforce such provisions against you and to seek damages from you for your
failure to comply with those provisions.
B. NO LIABILITY TO OR FOR ACTS OF OTHER PARTY.
We and you may not make any express or implied agreements, warranties, guarantees, or
representations, or incur any debt, in the name or on behalf of the other or represent that our
respective relationship is other than franchisor and franchise owner. We will not be obligated for
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any damages to any person or property directly or indirectly arising out of the operation of your
Restaurant or the business you conduct under this Agreement. We will have no liability for your
obligations to pay any third parties, including any product vendors.
C. TAXES.
We will have no liability for any sales, use, service, occupation, excise, gross receipts,
income, property, or other taxes, whether levied upon you or your Restaurant, due to the business
you conduct (except for our income taxes). You are responsible for paying these taxes and must
reimburse us for any such taxes that we must pay to any state taxing authority on account of your
operation or payments that you make to us.
D. INDEMNIFICATION.
You agree to indemnify, defend, and hold harmless us, our affiliates, and our and their
respective shareholders, members, directors, officers, employees, agents, successors, and
assignees (the “Indemnified Parties”) against, and to reimburse any one or more of the
Indemnified Parties for, all claims, obligations, and damages directly or indirectly arising out of
the operation of your Restaurant, the business you conduct under this Agreement, or your breach
of this Agreement, including, without limitation, those alleged to be caused by the Indemnified
Party‟s negligence, unless (and then only to the extent that) the claims, obligations, or damages are
determined to be caused solely by the Indemnified Party‟s intentional misconduct in a final,
unappealable ruling issued by a court with competent jurisdiction. For purposes of this
indemnification, “claims” include all obligations, damages (actual, consequential, or otherwise),
and costs that any Indemnified Party reasonably incurs in defending any claim against it,
including, without limitation, reasonable accountants‟, arbitrators‟, attorneys‟, and expert witness
fees, costs of investigation and proof of facts, court costs, travel and living expenses, and other
expenses of litigation or alternative dispute resolution, regardless of whether litigation or
alternative dispute resolution is commenced. Each Indemnified Party may defend any claim
against it at your expense and agree to settlements or take any other remedial, corrective, or other
actions. This indemnity will continue in full force and effect subsequent to and notwithstanding
this Agreement‟s expiration or termination. An Indemnified Party need not seek recovery from
any insurer or other third party, or otherwise mitigate its losses and expenses, in order to maintain
and recover fully a claim against you under this subparagraph. You agree that a failure to pursue a
recovery or mitigate a loss will not reduce or alter the amounts that an Indemnified Party may
recover from you under this subparagraph.
17. ENFORCEMENT.
A. SECURITY INTEREST.
As security for the performance of your obligations under this Agreement, including
payments owed to us for purchase by you, you hereby collaterally assign to us the Lease and grant
us a security interest in all of the Operating Assets and all other assets of your Restaurant,
including but not limited to inventory, accounts, supplies, contracts, and proceeds and products of
all those assets. You agree to execute such other documents as we may reasonably request in order
to further document, perfect and record our security interest. If you default in any of your
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obligations under this Agreement, we may exercise all rights of a secured creditor granted to us by
law, in addition to our other rights under this Agreement and at law. If the Restaurant is not the 1st
or 2nd
Smashburger Restaurant developed by you or your Affiliates and if a third party lender
requires that we subordinate our security interest in the assets of your Restaurant as a condition to
lending you working capital for the construction or operation of your Restaurant, we will agree to
subordinate pursuant to terms and conditions determined by us. This Agreement shall be deemed
to be a Security Agreement and Financing Statement and may be filed for record as such in the
records of any county and state that we deem appropriate to protect our interests.
B. SEVERABILITY AND SUBSTITUTION OF VALID PROVISIONS.
Except as expressly provided to the contrary in this Agreement, each section, paragraph,
term, and provision of this Agreement is severable, and if, for any reason, any part is held to be
invalid or contrary to or in conflict with any applicable present or future law or regulation in a
final, unappealable ruling issued by any court, agency, or tribunal with competent jurisdiction, that
ruling will not impair the operation of, or otherwise affect, any other portions of this Agreement,
which will continue to have full force and effect and bind the parties.
If any covenant which restricts competitive activity is deemed unenforceable by virtue of
its scope in terms of area, business activity prohibited, or length of time, but would be enforceable
if modified, you and we agree that the covenant will be enforced to the fullest extent permissible
under the laws and public policies applied in the jurisdiction whose law determines the covenant‟s
validity.
If any applicable and binding law or rule of any jurisdiction requires more notice than this
Agreement requires of this Agreement‟s termination or of our refusal to enter into a successor
franchise agreement, or some other action that this Agreement does not require, or if, under any
applicable and binding law or rule of any jurisdiction, any provision of this Agreement or any
System Standard is invalid, unenforceable, or unlawful, the notice or other action required by the
law or rule will be substituted for the comparable provisions of this Agreement, and we may
modify the invalid or unenforceable provision or System Standard to the extent required to be valid
and enforceable or delete the unlawful provision in its entirety. You agree to be bound by any
promise or covenant imposing the maximum duty the law permits which is subsumed within any
provision of this Agreement, as though it were separately articulated in and made a part of this
Agreement.
C. WAIVER OF OBLIGATIONS.
We and you may by written instrument unilaterally waive or reduce any obligation of or
restriction upon the other under this Agreement, effective upon delivery of written notice to the
other or another effective date stated in the notice of waiver. Any waiver granted will be without
prejudice to any other rights we or you have, will be subject to continuing review, and may be
revoked at any time and for any reason effective upon delivery of 10 days‟ prior written notice.
We and you will not waive or impair any right, power, or option this Agreement reserves
(including, without limitation, our right to demand exact compliance with every term, condition,
and covenant or to declare any breach to be a default and to terminate this Agreement before its
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term expires) because of any custom or practice at variance with this Agreement‟s terms; our or
your failure, refusal, or neglect to exercise any right under this Agreement or to insist upon the
other‟s compliance with this Agreement, including, without limitation, any System Standard; our
waiver of or failure to exercise any right, power, or option, whether of the same, similar, or
different nature, with other Smashburger Restaurants; the existence of franchise agreements for
other Smashburger Restaurants which contain provisions different from those contained in this
Agreement; or our acceptance of any payments due from you after any breach of this Agreement.
No special or restrictive legend or endorsement on any check or similar item given to us will be a
waiver, compromise, settlement, or accord and satisfaction. We are authorized to remove any
legend or endorsement, which then will have no effect.
D. COSTS AND ATTORNEYS’ FEES.
If either party initiates an arbitration, judicial or other proceeding, the prevailing party will
be entitled to reasonable costs and expenses (including attorneys‟ fees incurred in connection with
such judicial or other proceeding).
E. YOU MAY NOT WITHHOLD PAYMENTS DUE TO US.
You agree that you will not withhold payment of any amounts owed to us on the grounds of
our alleged nonperformance of any of our obligations under this Agreement or for any other
reason, and you specifically waive any right you may have at law or in equity to offset any funds
you may owe us or to fail or refuse to perform any of your obligations under this Agreement.
F. RIGHTS OF PARTIES ARE CUMULATIVE.
Our and your rights under this Agreement are cumulative, and our or your exercise or
enforcement of any right or remedy under this Agreement will not preclude our or your exercise or
enforcement of any other right or remedy which we or you are entitled by law to enforce.
G. ARBITRATION.
We and you agree that all controversies, disputes, or claims between us and our affiliates,
and our and their respective shareholders, officers, directors, agents, and employees, and you (and
your owners, guarantors, Affiliates, and employees) arising out of or related to:
(1) this Agreement or any other agreement between you (or your owners) and
us (or our affiliates);
(2) our relationship with you;
(3) the scope or validity of this Agreement or any other agreement between you
(or your owners) and us (or our affiliates) or any provision of any of such agreements
(including the validity and scope of the arbitration obligation under this Section 17.G,
which we and you acknowledge is to be determined by an arbitrator, not a court); or
(4) any System Standard,
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must be submitted for binding arbitration, on demand of either party, to the American Arbitration
Association. The arbitration proceedings will be conducted by one arbitrator and, except as this
Section otherwise provides, according to the then-current Commercial Arbitration Rules of the
American Arbitration Association. All proceedings will be conducted at a suitable location
chosen by the arbitrator in or within 50 miles of our then-current principal place of business
(currently, Denver, Colorado). All matters relating to arbitration will be governed by the Federal
Arbitration Act (9 U.S.C. §§ 1 et seq.). Judgment upon the arbitrator‟s award may be entered in
any court of competent jurisdiction.
The arbitrator shall issue only a standard decision and not a reasoned decision. The
arbitrator has the right to award or include in his or her award any relief which he or she deems
proper, including, without limitation, money damages (with interest on unpaid amounts from the
date due), specific performance, injunctive relief, and attorneys‟ fees and costs, provided that the
arbitrator may not declare any of the trademarks owned by us or our affiliates generic or otherwise
invalid or, except as expressly provided in this Article 17, award any punitive, exemplary, or
multiple damages against either party (we and you hereby waiving to the fullest extent permitted
by law, except as expressly provided in this Article 17, any right to or claim for any punitive,
exemplary, or multiple damages against the other).
We and you agree to be bound by the provisions of any limitation on the period of time in
which claims must be brought under applicable law or under this Agreement, whichever expires
earlier. We and you further agree that, in any arbitration proceeding, each party must submit or
file any claim which would constitute a compulsory counterclaim (as defined by Rule 13 of the
Federal Rules of Civil Procedure) within the same proceeding as the claim to which it relates. Any
claim which is not submitted or filed as required is forever barred. The arbitrator may not consider
any settlement discussions or offers that might have been made by either you or us.
We reserve the right, but have no obligation, to advance your share of the costs of any
arbitration proceeding in order for such arbitration proceeding to take place and by doing so shall
not be deemed to have waived or relinquished our right to seek the recovery of those costs in
accordance with the Attorney‟s Fees and Costs provisions of this Agreement (Section 17.D
above).
We and you agree that arbitration will be conducted on an individual, not a class-wide,
basis and that an arbitration proceeding between us and our affiliates, and our and their respective
shareholders, officers, directors, agents, and employees, and you (and your owners, guarantors,
affiliates, and employees) may not be commenced, conducted or consolidated with any other
arbitration proceeding between us and any other person. Notwithstanding the foregoing or
anything to the contrary in this Section, if any court or arbitrator determines that all or any part of
the preceding sentence is unenforceable with respect to a dispute that otherwise would be subject
to arbitration under this Section, then all parties agree that this arbitration clause shall not apply to
that dispute and that such dispute shall be resolved in a judicial proceeding in accordance with the
dispute resolution provisions of the Agreements.
Despite our and your agreement to arbitrate, we and you each have the right in a proper
case to seek temporary restraining orders and temporary or preliminary injunctive relief from a
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court of competent jurisdiction; provided, however, that we and you must contemporaneously
submit our dispute for arbitration on the merits as provided in this section.
You and we agree that, in any arbitration arising as described in this Section, requests for
documents shall be limited to documents that are directly relevant to significant issues in the case
or to the case‟s outcome; shall be restricted in terms of time frame, subject matter and persons or
entities to which the requests pertain; and shall not include broad phraseology such as “all
documents directly or indirectly related to.” You and we further agree that there shall be no
interrogatories or requests to admit. With respect to any electronic discovery, you and we agree
that:
(a) production of electronic documents need only be from sources used in the ordinary
course of business. No such documents shall be required to be produced from back-up servers,
tapes or other media;
(b) the production of electronic documents shall normally be made on the basis of
generally available technology in a searchable format which is usable by the party receiving
the documents and convenient and economical for the producing party. Absent a showing of
compelling need, the parties need not produce metadata, with the exception of header fields for
email correspondence;
(c) the description of custodians from whom electronic documents may be collected
shall be narrowly tailored to include only those individuals whose electronic documents may
reasonably be expected to contain evidence that is material to the dispute; and
(d) where the costs and burdens of electronic discovery are disproportionate to the
nature of the dispute or to the amount in controversy, or to the relevance of the materials
requested, the arbitrator shall either deny such requests or order disclosure on condition that
the requesting party advance the reasonable cost of production to the other side, subject to
allocation of costs in the final award as provided herein.
In any arbitration arising out of or related to this Agreement, each side may take three
discovery depositions. Each side‟s depositions are to consume no more than a total of 15 hours.
There are to be no speaking objections at the depositions, except to preserve privilege. The total
period for the taking of depositions shall not exceed six weeks.
The provisions of this Section are intended to benefit and bind certain third party
non-signatories and will continue in full force and effect subsequent to and notwithstanding the
expiration or termination of the Agreements.
Any provisions of this Agreement below that pertain to judicial proceedings shall be
subject to the agreement to arbitrate contained in this Section.
H. GOVERNING LAW.
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES
TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET SEQ.), OR
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OTHER UNITED STATES FEDERAL LAW, THIS AGREEMENT, THE FRANCHISE,
AND ALL CLAIMS ARISING FROM THE RELATIONSHIP BETWEEN US AND YOU
WILL BE GOVERNED BY THE LAWS OF THE STATE OF COLORADO, WITHOUT
REGARD TO ITS CONFLICT OF LAWS RULES, EXCEPT THAT (1) ANY
COLORADO LAW REGULATING THE SALE OF FRANCHISES OR GOVERNING
THE RELATIONSHIP OF A FRANCHISOR AND ITS FRANCHISEE WILL NOT
APPLY UNLESS ITS JURISDICTIONAL REQUIREMENTS ARE MET
INDEPENDENTLY WITHOUT REFERENCE TO THIS SECTION, AND (2) THE
ENFORCEABILITY OF THOSE PROVISIONS OF THIS AGREEMENT WHICH
RELATE TO RESTRICTIONS ON YOU AND YOUR OWNERS’ COMPETITIVE
ACTIVITIES WILL BE GOVERNED BY THE LAWS OF THE STATE IN WHICH
YOUR RESTAURANT IS LOCATED.
I. CONSENT TO JURISDICTION.
SUBJECT TO THE OBLIGATION TO ARBITRATE UNDER SECTION 17.G
ABOVE AND THE PROVISIONS BELOW, YOU AND YOUR OWNERS AGREE THAT
ALL ACTIONS ARISING UNDER THIS AGREEMENT OR OTHERWISE AS A
RESULT OF THE RELATIONSHIP BETWEEN YOU AND US MUST BE
COMMENCED IN A COURT OF GENERAL JURISDICTION NEAREST TO OUR
THEN CURRENT PRINCIPAL PLACE OF BUSINESS (CURRENTLY DENVER,
COLORADO), AND YOU (AND EACH OWNER) IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THAT COURT AND WAIVE ANY OBJECTION YOU (OR THE
OWNER) MIGHT HAVE TO EITHER THE JURISDICTION OF OR VENUE IN THAT
COURT.
J. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL.
EXCEPT FOR YOUR OBLIGATION TO INDEMNIFY US FOR THIRD PARTY
CLAIMS UNDER SECTION 16.D, AND EXCEPT FOR PUNITIVE, EXEMPLARY OR
MULTIPLE DAMAGES AVAILABLE TO EITHER PARTY UNDER UNITED STATES
FEDERAL LAW, WE AND YOU (AND YOUR OWNERS) WAIVE TO THE FULLEST
EXTENT PERMITTED BY LAW ANY RIGHT TO OR CLAIM FOR ANY PUNITIVE,
EXEMPLARY OR MULTIPLE DAMAGES AGAINST THE OTHER AND AGREE
THAT, IN THE EVENT OF A DISPUTE BETWEEN US AND YOU, THE PARTY
MAKING A CLAIM WILL BE LIMITED TO EQUITABLE RELIEF AND TO
RECOVERY OF ANY ACTUAL DAMAGES IT SUSTAINS.
WE AND YOU IRREVOCABLY WAIVE TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM, WHETHER AT LAW OR IN EQUITY,
BROUGHT BY EITHER OF US.
K. INJUNCTIVE RELIEF.
Nothing in this Agreement bars our right to obtain specific performance of the provisions
of this Agreement and injunctive relief against conduct that threatens to injure or harm us, the
Marks or the Franchise System, under customary equity rules, including applicable rules for
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obtaining restraining orders and preliminary injunctions. You agree that we may obtain such
injunctive relief. You agree that we will not be required to post a bond to obtain injunctive relief
and that your only remedy if an injunction is entered against you will be the dissolution of that
injunction, if warranted, upon due hearing, and you hereby expressly waive any claim for damages
caused by such injunction.
L. BINDING EFFECT.
This Agreement is binding upon us and you and our and your respective executors,
administrators, heirs, beneficiaries, permitted assigns, and successors in interest. Subject to our
right to modify the Standards of Operations Manual and System Standards, this Agreement may
not be modified except by a written agreement signed by our and your duly-authorized officers.
M. LIMITATIONS OF CLAIMS.
You and your owners agree not to bring any claim asserting that any of the Marks are
generic or otherwise invalid. Except with regard to your obligation to pay us and our affiliates
Royalty payments, the Marketing Fund contributions, Local Advertising Cooperative
contributions and other advertising fees, and other payments due from you pursuant to this
Agreement or otherwise, any claims between the parties must be commenced within one year from
the date on which the party asserting the claim knew or should have known of the facts giving rise
to the claim, or such claim shall be barred. The parties understand that such time limit might be
shorter than otherwise allowed by law. You and your owners agree that your and their sole
recourse for claims arising between the parties shall be against us or our successors and assigns.
You and your owners agree that our and our affiliates‟ members, managers, shareholders,
directors, officers, employees, and agents shall not be personally liable nor named as a party in any
action between us or our affiliates and you or your owners. The parties agree that claims of any
other party or parties shall not be joined with any claims asserted in any action or proceeding
between us and you. No previous course of dealing shall be admissible to explain, modify, or
contradict the terms of this Agreement. No implied covenant of good faith and fair dealing shall be
used to alter the express terms of this Agreement.
N. AGREEMENT EFFECTIVENESS.
This Agreement shall not be effective until accepted by us as evidenced by dating and
signing by an officer or other duly authorized representative of ours. Notwithstanding that this
Agreement shall not be effective until signed by us, we reserve the right to make the effective date
of this Agreement the date on which you signed the Agreement.
O. CONSTRUCTION.
The preambles and exhibits are a part of this Agreement which, together with the System
Standards contained in the Standards of Operations Manual (which may be periodically modified,
as provided in Sections 4.C, 8.I, and 17.L above), constitutes our and your entire agreement, and
there are no other oral or written understandings or agreements between us and you, or oral or
written representations by us, relating to the subject matter of this Agreement, the franchise
relationship, or your Restaurant (any understandings or agreements reached, or any
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representations made, before this Agreement are superseded by this Agreement). Nothing
contained herein shall be deemed a waiver of any rights you may have to rely on the Franchise
Disclosure Document. Any policies that we adopt and implement from time to time to guide us in
our decision-making are subject to change, are not a part of this Agreement, and are not binding on
us. Except as provided in Section 16.D., nothing in this Agreement is intended or deemed to
confer any rights or remedies upon any person or legal entity not a party to this Agreement.
Except where this Agreement expressly obligates us reasonably to approve or not
unreasonably to withhold our approval of any of your actions or requests, we have the absolute
right to refuse any request you make or to withhold our approval of any of your proposed, initiated,
or completed actions that require our approval. The headings of the sections and paragraphs are
for convenience only and do not define, limit, or construe the contents of these sections or
paragraphs.
References in this Agreement to “we,” “us,” and “our,” with respect to all of our rights and
all of your obligations to us under this Agreement, include any of our affiliates with whom you
deal. The term “affiliate” means any person or entity directly or indirectly owned or controlled by,
under common control with, or owning or controlling you or us. “Control” means the power to
direct or cause the direction of management and policies.
If two or more persons are at any time the owners of the Franchise and your Restaurant,
whether as partners or joint venturers, their obligations and liabilities to us will be joint and
several. References to “owner” mean any person holding a direct or indirect ownership interest
(whether of record, beneficially, or otherwise) or voting rights in you (or a transferee of this
Agreement and your Restaurant or an ownership interest in you), including, without limitation,
any person who has a direct or indirect interest in you (or a transferee), this Agreement, the
Franchise, or your Restaurant and any person who has any other legal or equitable interest, or the
power to vest in himself or herself any legal or equitable interest, in their revenue, profits, rights, or
assets. References to a “controlling ownership interest” in you or one of your owners (if an Entity)
mean the percent of the voting shares or other voting rights that results from dividing one hundred
percent (100%) of the ownership interests by the number of owners. In the case of a proposed
transfer of an ownership interest in you or one of your owners, the determination of whether a
“controlling ownership interest” is involved must be made as of both immediately before and
immediately after the proposed transfer to see if a “controlling ownership interest” will be
transferred (because of the number of owners before the proposed transfer) or will be deemed to
have been transferred (because of the number of owners after the proposed transfer). “Person”
means any natural person, corporation, limited liability company, general or limited partnership,
unincorporated association, cooperative, or other legal or functional entity.
Unless otherwise specified, all references to a number of days shall mean calendar days
and not business days.
The term “your Restaurant” includes all of the assets of Smashburger Restaurant you
operate under this Agreement, including its revenue and the Lease.
This Agreement may be executed in multiple copies, each of which will be deemed an
original.
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P. LAWFUL ATTORNEY.
Notwithstanding anything otherwise contained in this Agreement, if you do not execute
and deliver any documents or other assurances so required of you pursuant to this Agreement or if
we take over the management or operation of the business operated hereunder on your behalf for
any reason, you hereby irrevocably appoint us as your lawful attorney with full power and
authority, to execute and deliver in your name any such documents and assurances, and to manage
or operate the business on your behalf, and to do all other acts and things, all in such discretion as
we may desire, and you hereby agree to ratify and confirm all of our acts as your lawful attorney
and to indemnify and save us harmless from all claims, liabilities, losses, or damages suffered in so
doing. You also hereby appoint us as your attorney-in-fact to receive and inspect your confidential
sales and other tax records and hereby authorize all tax authorities to provide such information to
us for all tax periods during the term of this Agreement.
18. NOTICES AND PAYMENTS.
All written notices, reports, and payments permitted or required to be delivered by this
Agreement or the Standards of Operations Manual will be deemed to be delivered on the earlier of
the date of actual delivery or one of the following:
(a) at the time delivered via computer transmission and, in the case of the
Royalty, Marketing Fund contributions, and other amounts due, at the time we actually
receive payment;
(b) one business day after transmission by facsimile or other electronic system
if the sender has confirmation of successful transmission;
(c) one business day after being placed in the hands of a nationally recognized
commercial courier service for next business day delivery; or
(d) three business days after placement in the United States Mail by Registered
or Certified Mail, Return Receipt Requested, postage prepaid;
(e) and must be addressed to the party to be notified at its most current principal
business address of which the notifying party has notice. Any required payment or report
which we do not actually receive during regular business hours on the date due (or
postmarked by postal authorities at least two days before then) will be deemed delinquent.
19. ELECTRONIC MAIL.
You acknowledge and agree that exchanging information with us by e-mail is efficient and
desirable for day-to-day communications and that we and you may utilize e-mail for such
communications. You authorize the transmission of e-mail by us and our employees, vendors, and
affiliates (“Official Senders”) to you during the term of this Agreement.
You further agree that: (a) Official Senders are authorized to send e-mails to those of your
employees as you may occasionally authorize for the purpose of communicating with us; (b) you
will cause your officers, directors and employees to give their consent to Official Senders‟
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transmission of e-mails to them; (c) you will require such persons not to opt out or otherwise ask to
no longer receive e-mails from Official Senders during the time that such person works for or is
affiliated with you; and (d) you will not opt out or otherwise ask to no longer receive e-mails from
Official Senders during the term of this Agreement.
This consent given in this Section 19 shall not apply to the provision of notice by either
party under this Agreement pursuant to Section 18 unless we and you otherwise agree in a written
document manually signed by both parties.
20. RELOCATION.
If, at any time during the Term of this Agreement, you determine that, despite using your
good faith efforts, it is no longer economically feasible to operate the Restaurant at the Premises,
we will consider, in good faith, your request to relocate the Restaurant to a new site within the
Development Area described in the Development Agreement. We will not be required to consider
any request to relocate the Restaurant under this Section 20 if you are not then in compliance with
this Agreement. Further, your right to relocate the Restaurant shall be subject to our approval of
the proposed new site as described in Section 2 of this Agreement, and your development of the
new Smashburger Restaurant at the new approved site in accordance with this Agreement and in
accordance with a timetable to which we agree at the time we grant our approval (including a
timetable for closing of the Restaurant at the existing Premises and re-opening the Restaurant at a
new site.) Any request for relocation and any approvals we grant in connection therewith shall be
in writing. When the Restaurant is closed at the current Premises and is re-opened at the new
approved site, this Agreement shall be deemed to reflect the new address as the Premises.
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on
the dates noted below, to be effective as of the Effective Date.
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By:
Name:
Title:
EFFECTIVE DATE:
FRANCHISE OWNER:
__________________________________
[Name]
By:
Name:
Title:
Date: ______________________________
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EXHIBIT A
TO FRANCHISE AGREEMENT
1. Form of Owner.
(a) Individual Proprietorship. Your owner(s) (is) (are) as follows:
________________________
________________________
(b) Corporation, Limited Liability Company, or Partnership. You were
incorporated or formed on , under the laws of the State of
_____________. You have not conducted business under any name other than your
corporate, limited liability company, or partnership name unless indicated in the following:
_________.
2. Owners. The following identifies the owner that you have designated as, and that we approve
to be, the Managing Owner and lists the full name of each person who is one of your owners (as
defined in the Franchise Agreement), or an owner of one of your owners, and fully describes
the nature of each owner‟s interest (attach additional pages if necessary).
Owner’s Name Type / %-age of Interest Managing Owner: %
Other Owners: %
%
%
3. Restaurant Premises:
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By: _______________________________
Name: _____________________________
Title: ______________________________
Date: ______________________________
FRANCHISE OWNER:
__________________________________
[Name]
By: ________________________________
Name: ______________________________
Title: _______________________________
Date: ______________________________
B-1
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EXHIBIT B
TO THE FRANCHISE AGREEMENT
SMASHBURGER FRANCHISING LLC’S
REQUIRED LEASE ADDENDUM
RIDER AND SPECIAL STIPULATIONS
TO LEASE AGREEMENT DATED ____________________
BY AND BETWEEN
______________________________________, AS "LANDLORD"
AND
_____________________________________________, AS "TENANT" FOR THE DEMISED
PREMISES ("PREMISES") DESCRIBED THEREIN
This Rider and the provisions hereof are hereby incorporated into the body of the lease to which
this Rider is attached (the "Lease"), and the provisions hereof shall be cumulative of those set forth in the
Lease, but to the extent of any conflict between any provisions of this Rider and the provisions of the Lease,
this Rider shall govern and control.
1. Consent to Collateral Assignment to Franchisor; Disclaimer. Landlord acknowledges that Tenant
intends to operate a Smashburger®
restaurant in the Premises, and that Tenant's rights to operate a Smashburger
® restaurant and to use the Smashburger
® name, trademarks and service marks are solely
pursuant to a franchise agreement ("Franchise Agreement'') between Tenant and Smashburger Franchising
LLC (“Franchisor”). Tenant's operations at the Premises are independently owned and operated. Landlord
acknowledges that Tenant alone is responsible for all obligations under the Lease unless and until
Franchisor or another franchisee expressly, and in writing, assumes such obligations and takes actual
possession of the Premises. Notwithstanding any provisions of this Lease to the contrary, Landlord hereby
consents, without payment of a fee and without the need for further Landlord consent, to (i) the collateral
assignment of Tenant's interest in this Lease to Franchisor to secure Tenant's obligations to Franchisor
under the Franchise Agreement, or (ii) Franchisor's succeeding to Tenant's interest in the Lease as a result
of Franchisor's exercise of rights remedies under such collateral assignment or as a result of Franchisor‟s
termination of, or exercise of rights or remedies granted in or under, any other agreement between
Franchisor and Tenant, or (iii) Tenant‟s, Franchisor‟s or any other franchisee of Franchisor‟s assignment of
the Lease to another franchisee of Franchisor with whom Franchisor has executed its then-standard
franchise agreement. Landlord, Tenant and Franchisor agree and acknowledge that simultaneously with
such assignment pursuant to the immediately preceding sentence, Franchisor shall be released from all
liability under the Lease or otherwise accruing after the date of such assignment (in the event Franchisor is
acting as the assignor under such assignment), but neither Tenant nor any other franchisee shall be afforded
such release in the event Tenant/such franchisee is the assignor unless otherwise agreed by Landlord.
Landlord further agrees that all unexercised renewal or extension rights shall not be terminated in the event
of any assignment referenced herein, but shall inure to the benefit of the applicable assignee.
B-2
Smashburger –06/2012 FDD
Ex. C – Franchise Agreement 1031.002.006/46339.6
2. Use of Premises. Without limitation of uses permitted under the Lease, but in expansion thereof,
Tenant shall have the right to use the Premises for purposes of an eat-in/take-out/delivery restaurant selling
featuring hamburgers, sandwiches, salads, other food items and beverages, and related products and
services sold in Smashburger® stores, and retail sales and other ancillary purposes associated therewith.
3. Compliance of Premises With Applicable Law; Parking. Landlord represents and warrants that as
of the date hereof the Premises are in compliance with all applicable law, including without limitation
parking sufficient to comply with the use of the Premises as provided in paragraph 2 above. Tenant shall
have the right to use parking spaces for its guests, invitees and employees in an amount at least sufficient to
comply with applicable zoning and other laws. The use of the parking spaces is provided by Landlord to
Tenant without additional charge.
4. Radius/Relocation. Any radius restrictions or relocation provisions found in the Lease are hereby
deleted and of no further force or effect.
5. Tenant‟s Signage. Notwithstanding anything in the Lease contained to the contrary or in conflict,
Landlord hereby grants and approves the following signage rights:
5.1. Landlord agrees to allow Tenant to use Franchisor‟s standard sign and awning package to
the maximum extent permitted by local governmental authorities.
5.2 Tenant shall be provided, at Tenant‟s sole cost and expense, with a panel on any
pylon/monument/directory sign for the development in which the Premises is located, and shall be
permitted to install a standard sign thereon as approved by Franchisor, including without limitation
Franchisor‟s logo.
6. Notice and Cure Rights to Franchisor. Prior to exercising any remedies hereunder (except in the
event of imminent danger to the Premises), Landlord shall give Franchisor written notice of any default by
Tenant, and commencing upon receipt thereof by Franchisor, Franchisor shall have 10 additional days to
the established cure period as is given to Tenant under the Lease for such default, provided that in no event
shall Franchisor have a cure period of less than (i) 10 days after Franchisor's receipt of such notice as to
monetary defaults or (ii) 30 days after Franchisor's receipt of such notice as to non-monetary defaults.
Landlord agrees to accept cure tendered by Franchisor as if the same was tendered by Tenant, but
Franchisor has no obligation to cure such default. The initial address for notices to Franchisor is as follows:
Smashburger Franchising LLC
Attention: Franchise Legal Department
1515 Arapahoe St.
Tower One, 10th Floor
Denver, CO 80202
7. Non-disturbance from Mortgage Lenders. Notwithstanding anything contained in the Lease to the
contrary or in conflict, it shall be a condition of the Lease being subordinated to any mortgage, deed of trust,
deed to secure debt or similar encumbrance on the Premises that the holder of such encumbrance agree not
to disturb Tenant's rights under this Lease or Tenant's possession of the Premises, so long as Tenant is not in
default of its obligations hereunder beyond an applicable grace or cure period provided herein (as may be
extended from time to time pursuant to paragraph 6 immediately above).
B-3
Smashburger –06/2012 FDD
Ex. C – Franchise Agreement 1031.002.006/46339.6
CHECK THE FOLLOWING PARAGRAPH THAT APPLIES. CHECK ONLY ONE. IF NONE IS
CHECKED, THEN CLAUSE a) BELOW WILL BE APPLICABLE, AND CLAUSE b) BELOW WILL
BE DEEMED DELETED
A) Landlord represents and warrants that on the date hereof no mortgage, deed of
trust, deed to secure debt or similar encumbrance encumbers the Premises.
B) A mortgage, deed of trust or deed to secure debt currently encumbers the Premises.
It is a condition precedent to Tenant's obligations under this Lease that the holder of such encumbrance
enter into a written subordination and non-disturbance agreement with Tenant, in form acceptable to
Franchisor.
8. Financing of Trade Fixtures by Franchisor and Security Interest. Any security interest or
Landlord's lien in Tenant's trade fixtures, „trade dress‟, equipment and other personal property in the
Premises is hereby subordinated to any security interest and pledge granted to Franchisor in such items.
The parties acknowledge that there may be certain personal property in the Premises which are not owned
by Tenant, which property shall not be subject to any lien of Landlord. Upon request, Landlord shall grant
the party who owns such property reasonable access to the Premises for the sole purpose of removing such
property, provided such party repairs any damage caused by such removal and otherwise complies with
Landlord‟s reasonable requirements with respect to such access.
9. Tenant Approvals. Notwithstanding anything in the Lease to the contrary, if Tenant is unable to
obtain licenses, building permits, signage permits, variances, subdivision approvals, special use permits and
other governmental approvals necessary to construct and operate a Smashburger®
restaurant (all of the
foregoing licenses, permits and approvals are hereinafter referred to as the "Tenant Approvals") within
________days after Landlord's approval of Tenant's Plans, Tenant may terminate this Lease by written
notice to Landlord, effective as of the date of delivery of written notice to Landlord thereof and any
remaining security deposit shall be returned to Tenant, and any rentals paid in advance shall be prorated
accordingly.
10. Beer, Wine and Liquor License. Notwithstanding anything in the Lease to the contrary, unless
Franchisor has waived, in writing, Tenant‟s obligation to serve alcoholic beverages in the restaurant, if a
license for beer, wine and liquor sales at the Premises has not been unconditionally issued to Tenant within
_________ days after Landlord's approval of Tenant's Plans, Tenant may terminate this Lease by written
notice to Landlord, effective as of the date of delivery of written notice to Landlord thereof and any
remaining security deposit shall be returned to Tenant, and any rentals paid in advance shall be prorated
accordingly.
11. Third Party Beneficiary. For so long as Franchisor holds a collateral assignment of the Lease,
Franchisor is a third party beneficiary of the Lease, including, without limitation, this Rider, and as a result
thereof, shall have all rights (but not the obligation) to enforce the same.
12. Franchisor Right to Enter. Landlord acknowledges that, under the Franchise Agreement,
Franchisor or its appointee has the right to assume the management and operation of the Tenant‟s business,
on Tenant‟s behalf, under certain circumstances (to-wit: Tenant‟s abandonment, Tenant‟s failure to timely
cure its default of the Franchise Agreement, and while Franchisor evaluates its right to purchase the
restaurant). Landlord agrees that Franchisor or its appointee may enter upon the Premises for purposes of
assuming the management and operation of Tenant‟s restaurant as provided in the Franchise Agreement
and, if it chooses to do so, it will do so in the name of the Tenant and without assuming any direct liability
under the Lease. Further, upon the expiration or earlier termination of this Lease or the Franchise
Agreement, Franchisor or its designee may enter upon the Premises for the purpose of removing all signs
B-4
Smashburger –06/2012 FDD
Ex. C – Franchise Agreement 1031.002.006/46339.6
and other material bearing the Smashburger®
name or trademarks, service marks or other commercial
symbols of Franchisor.
13. Amendments. Tenant agrees that the Lease may not be terminated, modified or amended
without Franchisor‟s prior written consent, nor shall Landlord accept surrender of the Premises
without Franchisor‟s prior written consent. Tenant agrees to promptly provide Franchisor with
copies of all proposed modifications or amendments and true and correct copies of the signed
modifications and amendments.
14. Copy of Lease. Landlord agrees to provide Franchisor with a copy of the fully-executed
Lease within 10 days of its full execution by Landlord and Tenant to the address shown in
paragraph 6 above.
15. Counterparts. This Rider may be executed in one or more counterparts, each of which shall
cumulatively constitute an original. PDF/Faxed signatures of this Rider shall constitute originals of the
same.
AGREED and executed and delivered under seal by the parties hereto as of the day and year of the
Lease.
LANDLORD: ____________________
By: Name: Title:
TENANT: ______________________
By: Name: Title:
C-1 Smashburger –06/2012 FDD
Ex. C – Franchise Agreement 1031.002.006/46339.6
EXHIBIT C
TO THE FRANCHISE AGREEMENT
COLLATERAL ASSIGNMENT OF TELEPHONE NUMBERS,
TELEPHONE LISTINGS AND INTERNET ADDRESSES
THIS COLLATERAL ASSIGNMENT is entered into this __ day of ,20__,
in accordance with the terms of the Smashburger Franchising LLC Franchise Agreement
("Franchise Agreement") between Smashburger Franchising LLC ("Franchisor") and
("Franchisee"), executed concurrently with this Assignment, under
which Franchisor granted Franchisee the right to own and operate a Smashburger Restaurant
("Franchise Business") located at .
FOR VALUE RECEIVED, Franchisee hereby assigns to Franchisor (1) those certain
telephone numbers and regular, classified or other telephone directory listings (collectively, the
"Telephone Numbers and Listings") and (2) those certain Internet website addresses ("URLs")
associated with Franchisor's trade and service marks and used from time to time in connection with
the operation of the Franchise Business at the address provided above. This Assignment is for
collateral purposes only and, except as specified herein, Franchisor shall have no liability or
obligation of any kind whatsoever arising from or in connection with this Assignment, unless
Franchisor shall notify the telephone company and the listing agencies with which Franchisee has
placed telephone directory listings (all such entities are collectively referred to herein as
"Telephone Company") and Franchisee's Internet service provider ("ISP") to effectuate the
assignment pursuant to the terms hereof.
Upon termination or expiration of the Franchise Agreement (without extension),
Franchisor shall have the right and is hereby empowered to effectuate the assignment of the
Telephone Numbers and Listings and the URLs, and, in such event, Franchisee shall have no
further right, title or interest in the Telephone Numbers and Listings and the URLs, and shall
remain liable to the Telephone Company and the ISP for all past due fees owing to the Telephone
Company and the ISP on or before the effective date of the assignment hereunder.
Franchisee agrees and acknowledges that as between Franchisor and Franchisee, upon
termination or expiration of the Franchise Agreement, Franchisor shall have the sole right to and
interest in the Telephone Numbers and Listings and the URLs, and Franchisee irrevocably
appoints Franchisor as Franchisee's true and lawful attorney-in-fact, which appointment is coupled
with an interest, to direct the Telephone Company and the ISP to assign same to Franchisor, and
execute such documents and take such actions as may be necessary to effectuate the assignment.
Upon such event, Franchisee shall immediately notify the Telephone Company and the ISP to
assign the Telephone Numbers and Listings and the URLs to Franchisor. If Franchisee fails to
promptly direct the Telephone Company and the ISP to assign the Telephone Numbers and
Listings and the URLs to Franchisor, Franchisor shall direct the Telephone Company and the ISP
to effectuate the assignment contemplated hereunder to Franchisor. The parties agree that the
Telephone Company and the ISP may accept Franchisor's written direction, the Franchise
Agreement or this Assignment as conclusive proof of Franchisor's exclusive rights in and to the
Telephone Numbers and Listings and the URLs upon such termination or expiration and that such
C-2 Smashburger –06/2012 FDD
Ex. C – Franchise Agreement 1031.002.006/46339.6
assignment shall be made automatically and effective immediately upon Telephone Company's
and ISP's receipt of such notice from Franchisor or Franchisee. The parties further agree that if the
Telephone Company or the ISP requires that the parties execute the Telephone Company's or the
ISP's assignment forms or other documentation at the time of termination or expiration of the
Franchise Agreement, Franchisor's execution of such forms or documentation on behalf of
Franchisee shall effectuate Franchisee's consent and agreement to the assignment. The parties
agree that at any time after the date hereof they will perform such acts and execute and deliver such
documents as may be necessary to assist in or accomplish the assignment described herein upon
termination or expiration of the Franchise Agreement.
THUS SIGNED this as of the day and date shown on the first page hereof.
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By: _______________________________
Name: _____________________________
Title: ______________________________
Date: ______________________________
FRANCHISEE:
__________________________________
[Name]
By: ________________________________
Name: ______________________________
Title: _______________________________
Date: ______________________________
Smashburger –06/2012 FDD
Ex. C – Franchise Agreement 1031.002.006/46339.6
EXHIBIT D
TO THE FRANCHISE AGREEMENT
GUARANTY AND ASSUMPTION OF OBLIGATIONS
THIS GUARANTY AND ASSUMPTION OF OBLIGATIONS is given this _____ day
of , 20 __, by
.
In consideration of, and as an inducement to, the execution of that certain Franchise
Agreement (the “Agreement”) on this date by SMASHBURGER FRANCHISING LLC (“us,”
“we,” or “our”), each of the undersigned personally and unconditionally (a) guarantees to us and
our successors and assigns, for the term of the Agreement and afterward as provided in the
Agreement, that ________________________________________ (“Franchise Owner”) will
punctually pay and perform each and every undertaking, agreement, and covenant set forth in the
Agreement and (b) agrees to be personally bound by, and personally liable for the breach of, each
and every provision in the Agreement, both monetary obligations and obligations to take or refrain
from taking specific actions or to engage or refrain from engaging in specific activities, including
the non-competition, confidentiality, and transfer requirements.
Each of the undersigned consents and agrees that: (1) his or her direct and immediate
liability under this Guaranty will be joint and several, both with Franchise Owner and among other
guarantors; (2) he or she will render any payment or performance required under the Agreement
upon demand if Franchise Owner fails or refuses punctually to do so; (3) this liability will not be
contingent or conditioned upon our pursuit of any remedies against Franchise Owner or any other
person; and (4) this liability will not be diminished, relieved, or otherwise affected by any
extension of time, credit, or other indulgence which we may from time to time grant to Franchise
Owner or to any other person, including, without limitation, the acceptance of any partial payment
or performance or the compromise or release of any claims, none of which will in any way modify
or amend this Guaranty, which will be continuing and irrevocable during the term of the
Agreement.
Each of the undersigned waives: (i) all rights to payments and claims for reimbursement or
subrogation which any of the undersigned may have against Franchise Owner arising as a result of
the undersigned‟s execution of and performance under this Guaranty; and (ii) acceptance and
notice of acceptance by us of his or her undertakings under this Guaranty, notice of demand for
payment of any indebtedness or non-performance of any obligations hereby guaranteed, protest
and notice of default to any party with respect to the indebtedness or nonperformance of any
obligations hereby guaranteed, and any other notices to which he or she may be entitled.
Each of the undersigned represents and warrants that, if no signature appears below for
such undersigned‟s spouse, such undersigned is either not married or, if married, is a resident of a
state which does not require the consent of both spouses to encumber the assets of a marital estate.
The provisions contained in Section 17 (Enforcement) of the Agreement, including
Section 17.G (Arbitration), Section 17.I (Consent to Jurisdiction) and Section 17.D (Costs and
Smashburger –06/2012 FDD
Ex. C – Franchise Agreement 1031.002.006/46339.6
Attorneys‟ Fees) of the Agreement are incorporated into this Guaranty by reference and shall
govern this Guaranty and any disputes between the undersigned and us. If we are required to
engage legal counsel in connection with any failure by the undersigned to comply with this
Guaranty, the undersigned shall reimburse us for any of the above-listed costs and expenses we
incur.
By signing below, the undersigned spouse of the Guarantor indicated below, acknowledges
and consents to the guaranty given herein by his/her spouse. Such consent also serves to bind the
assets of the marital estate to Guarantor‟s performance of this Guaranty. We confirm that a spouse
who signs this Guaranty solely in his or her capacity as a spouse (and not as an owner) is signing
merely to acknowledge and consent to the execution of the Guaranty by his or her spouse and to
bind the assets of the marital estate as described therein and for no other purpose (including,
without limitation, to bind the spouse‟s own separate property).
IN WITNESS WHEREOF, each of the undersigned has affixed his or her signature on
the same day and year as the Agreement was executed.
GUARANTORS
DEVELOPER (If Different than Franchise Owner):____________________________
Sign:______________________________
Name: ____________________________
Title:______________________________
OTHER GUARANTOR(S) SPOUSE(S)
#1:
Name: ___________________________
Sign:
#1:
Name:
Sign:
#2:
Name: ___________________________
Sign:
#2:
Name:
Sign:
#3:
Name: ___________________________
Sign:
#3:
Name:
Sign:
Smashburger 06/2012 FDD
Ex. D – List of Franchisees 1031.002.006/46341.1
EXHIBIT "D"
LIST OF FRANCHISEES
Smashburger 06/2012 FDD
Ex. D – List of Franchisees 1031.002.006/46341.1
LIST OF FRANCHISEES AS OF 1/1/2012
Sunwest Burgers, LLC 9915 W. McDowell Rd. Suite 101 Avondale AZ 85392 (623) 936-3020
Sunwest Burgers, LLC 5870 W Thunderbird Rd. Glendale AZ 85306 (602) 439-4050
Sunwest Burgers, LLC 1949 E Camelback RD #164 Phoenix AZ 85016 (602) 279-0757
Sunwest Burgers, LLC 2440 W. Happy Valley Rd., F-101 Phoenix AZ 85085 (623) 780-1884
Sunwest Burgers, LLC 777 S College Ave., Ste 105 Tempe AZ 85281 (480) 829-3750
Sunwest Burgers, LLC 815 E Baseline Rd., Ste B-113 Tempe AZ 85283 (602) 838-9933
Sunwest Burgers, LLC 2000 E. Rio Salado Pkwy, Ste 1155 Tempe AZ 85281 (480) 894-3469
Smash Bros Del Mar, LLC 1555 Camino Del Mar Del Mar CA 92014 (858) 461-4105
Smash Bros, LLC 1000 Prospect St. La Jolla CA 92037 (858) 750-2531
Smash Bros Oceanside, LLC 3460 Marron Rd. Oceanside CA 92056 (760) 729-1686
Smash Bros, LLC 7610 Hazard Center, Ste 507 San Diego CA 92108 (619) 684-1550
Smash Bros Market Street, LLC 801 Market St. San Diego CA 92101 (619) 241-2207
Smash Bros Rancho P, LLC 13219 Black Mountain Rd. San Diego CA 92129 (858) 780-9300
Smash Bros Kearny Mesa, LLC 3737 Murphy Canyon Rd San Diego CA 92056 (858) 268-9301
Smash Bros Vista, LLC 1711 University Dr Vista CA 92083 (760) 630-0005
Smash Werks, LLC 1419 N Denver Ave Loveland CO 80538 (970) 461-0188
American Food Service Group LLC 630 Atlantic Blvd., Spc #B-105 Neptune Beach FL 32266 (904) 241-2666
Rising Star, Inc 5530 Windward Pkwy., Suite C310 Alpharetta GA 30004 (770) 754-0554
Rising Star, Inc 2625 Piedmont Rd., Ste 34A Atlanta GA 30324 (404) 237-2374
Rising Star, Inc 9775 Medlock Bridge Rd., Suite A Johns Creek GA 30097 (770) 497-6274
Smash Atlanta I, Inc 440 Ernest W Barrett Pkwy Kennesaw GA 30144 (770) 427-4141
Smash Atlanta I, Inc 6080 Rosewell Rd Sandy Springs GA 30328 (404) 257-1557
Smashguys, LLC 2010 SE Delaware Suites 222-224 Ankeny IA 50021 (515) 963-5100
Reload, LLC 3617 Denmark Dr., Ste 200 Council Bluffs IA 51501 (712)256-7676
Smashguys, LLC 1821 E 22nd Street Des Moines IA 50315 (515) 661-6666
Douglas G Cekander & Jayme M Cekander 2661 Chatham Rd Springfield IL 62704 (217) 787-3700
KC Smash 01, LLC 501 N 3rd Place Bld O Manhattan KS 66502 (785) 587-8485
Burgers R Us NKU, Inc 2517 Wilson Ave. Highland Heights KY 41076 (859) 441-2800
Bluegrass Burgers I, LLC 535 S Upper St Lexington KY 40508 (859) 280-2202
Bluegrass Burgers I, LLC 3695 Nicholasville Rd., Ste 120 Lexington KY 40503 (859) 271-0411
Jones Group SB, LLC 9409 Shelbyville Rd Louisville KY 40222 (502) 326-4141
Shreveport Sizzle, LLC 2300 Airline Dr., Ste 600 Bossier City LA 71111 (318) 746-7420
Shreveport Sizzle, LLC 7503 Youree Dr., Suite 500 Shreveport LA 71105 (318) 797-1988
Smash One LLC 25 Michigan St., Ste 1300 Grand Rapids MI 49503 (616) 451-9570
Smash Two LLC 2650 E. Beltline SE Grand Rapids MI 49546 (616) 575-0070
Smash Venture, LLC 4315 W Main St. Kalamazoo MI 49006 (269) 492-9400
Smashburger 06/2012 FDD Ex. D – List of Franchisees
1031.002.006/46341.1
2
LIST OF FRANCHISEES AS OF 1/1/2012
MI Smash, LLC 6919 Orchard Lake Rd W. Bloomfield MI 48322 (248) 737-2960
STL Smash, LLC 1670 Clarkson Rd Chesterfield MO 63017 (636) 536-3066
STL Smash, LLC 1981 Zumbehl Rd St. Charles MO 63303 (636) 724-6777
Killybegs Management LLC 7804 Rea Rd., Ste B & C, Bldg E3 Charlotte NC 28277 (704) 544-5355
River Smash, LLC 1801 45th St SW Fargo ND 58103 (701) 478-2111
Reload, LLC 3811 Twin Creek Dr. Bellevue NE 68046 (402) 991-4800
Reload, LLC 12330 K Plaza #101 Omaha NE 68137 (402) 933-7300
Reload, LLC 7204 Jones St. Omaha NE 68144 (402) 934-4400
Smash Enterprises, LLC 700 Route 3 West Clifton NJ 07013 (973) 777-3600
Smash Enterprises, LLC 187 Columbia Turnpike Florham Park NJ 07932 (973) 520-8717
Smash Enterprises, LLC 989 Bloomfield Ave., Tenant 1c Glenridge NJ 07028 (973) 433-7343
Smash Enterprises, LLC 390 Hackensack Ave., Space 169 Hackensack NJ 07601 (201) 343-1488
Smash Enterprises, LLC 1260 Springfield Ave. New Providence NJ 07974 (908) 286-0100
Smash Enterprises, LLC Newark International Airport, Terminal C, Level 2, Gate 130 Newark NJ 07114 (973) 622-1166
Smash Enterprises, LLC 556 Rte 17 North Paramus NJ 07652 (973) 520-8717
SB Las Vegas, LLC 9101 W Sahara Ave. Las Vegas NV 89117 (702) 462-5500
SB Las Vegas, LLC 5655 Centennial Center Blvd., Suite 170 Las Vegas NV 89149 (702) 462-5503
SB Las Vegas, LLC 4725 S Maryland Pkwy. Las Vegas NV 89119 (702) 385-0043
SB Las Vegas, LLC 7541 W. Lake Mead Blvd. Suite 2 Las Vegas NV 89128 (702) 982-0009
SB Team Brooklyn LLC 74 Dekalb Ave Brooklyn NY 11201 (718) 222-1101
SBR-FOUR, LLC 4752 Cornell Rd. Blue Ash OH 45242 (513) 376-7565
Rodenkirch Management Group, LLC 2315 Miamisburg-Centerville Rd Dayton OH 45459 (937) 938-9888
SBR-TWO, LLC 1200 Brown St. Ste 190 Dayton OH 45409 (937) 985-9262
SBR-FIVE, LLC 6731 Miller Lane Dayton OH 45414 (937) 387-6564
SBR-SIX, LLC 3397 Princeton Rd., Suite 105 Fairfield OH 45011 (513) 737-1222
SBR-THREE, LLC 7598 Cox Lane West Chester OH 45069 (513) 847-4840
KCG Smash Outlet, LLC 7642 W. Reno Ave., Ste 470 Oklahoma City OK 73128 (405) 787-5700
KCG Smash Memorial Plaza, LLC 2127 W. Memorial Oklahoma City OK 73134 (405) 418-8416
Bigg Capital Holdings LLC 4980 Belt Line Road, Suite 140 Addison TX 75254 (214) 884-1124
Cowtown Sizzle, LLC 5005 S. Cooper St. Ste. 163 Arlington TX 76017 (817) 557-5554
Cowtown Sizzle, LLC 1505 Wilshire Blvd., Ste 610 Burleson TX 76028 (817) 447-4302
Bigg Capital Holdings LLC 2222 McKinney Avenue, Suite 280 Dallas TX 75201 (469) 341-3394
Bigg Capital Holdings LLC 6959 Lebanon Rd., Ste 123 Frisco TX 75034 (214) 705-0031
Phase Next Hospitality 1611 Haan Rd., Space K-123 Ft Bliss TX 79906 (915) 565-9464
Cowtown Sizzle, LLC 1605 South University Dr. Ft. Worth TX 76107 (817)810-9612
Cowtown Sizzle, LLC 6314 Camp Bowie Blvd Ft. Worth TX 76116 (817) 731-0263
Smashburger 06/2012 FDD Ex. D – List of Franchisees
1031.002.006/46341.1
3
LIST OF FRANCHISEES AS OF 1/1/2012
Bigg Capital Holdings LLC 975 W John Carpenter Freeway, Ste 118 Irving TX 75039 (214) 302-2681
SB Sizzle, LLC 3080 N Eastman Rd Suite 115 Longview TX 75605 (903) 663-2319
Bigg Capital Holdings LLC 6100 W. Park Plano TX 75093 (972) 407-5800
SB Alamo Development, LLC 21025 US HWY 281 N San Antonio TX 78258 (210) 497-4479
SB Alamo Park North, LLC 842 NW Loop 410 San Antonio TX 78216 (210) 541-0836
SB Alamo Bandera, LLC 11309 Bandera Rd., #30901 SA San Antonio TX 78250 (210) 680-0987
SB Alamo Richland, LLC 8802 Potranco Rd., #101 San Antonio TX 78251 (210) 521-1750
SB Alamo McAllen I, LLC N 10th St @ Nolana Loop San Antonio TX 78504 (956) 631-5300
SB Sizzle, LLC 3314 Troup Hwy Tyler TX 75701 (903) 526-7982
SB Sizzle, LLC 7484 S Broadway Blvd Tyler TX 75703 (903) 534-3719
SB Las Vegas, LLC 158 N Red Cliff Dr., Suite A2 St George UT 84790 (435)656-9815
Smashburger 06/2012 FDD
Ex. D – List of Franchisees 1031.002.006/46341.1
LIST OF FRANCHISEES WHO HAVE SIGNED BUT NOT OPENED RESTAURANTS AS OF 1/1/2012
Modern Foods Co, LTD Location to be determined
Ashish Parikh Location to be determined
NOLA Smash, Inc. Location to be determined
QSR International, L.D.C. Location to be determined
Al Taqa Al Alia Lilestithmar Company Location to be determined
Yousef Sh. Y Alessa Location to be determined Kuwait
Smash Partners 1, Inc Location to be determined NY
ISK Long Island, LLC 180 Old Country Rd Hicksville NY 11801 (516) 605-2235
Aurora Burgers, LLC Location to be determined PA
Winding River Restaurants, LLC 415 N. Thompson Ln. Murfreesboro TN 37129 (615) 809-2226
Cowtown Sizzle, LLC Location to be determined Abilene TX
Texmash 3008 S. 31st St. Temple TX 76502 (254) 742-0746
SB Sizzle, LLC 117 Richmond Road Texarkana TX
Cowtown Sizzle, LLC Location to be determined Wichita Falls TX
If you buy this franchise, your contact information may be disclosed to other buyers when you leave the franchise system.
Smashburger 06/2012 FDD
Ex. E – EEs Who Left System 1031.002.006/46342.1
EXHIBIT "E"
LIST OF FRANCHISEES WHO HAVE
LEFT THE SYSTEM OR NOT COMMUNICATED
Smashburger 06/2012 FDD Ex. E – EEs Who Left System 1031.002.006/46342.1
E-1
FRANCHISEES WHO HAVE LEFT THE SYSTEM
AS OF 12/25/2011
Name of Franchisee City State Phone Number
Jim Cagle Grand Junction Colorado 970-261-0343
Ed Graefe & James Mitch Douglassville Pennsylvania 215-241-8888
Smashburger 06/2012 FDD
Ex. F – Financial Statements 1031.002.006/46343.1
EXHIBIT "F"
FINANCIAL STATEMENTS
Smashburger
Franchising LLC Financial Statements as of January 1, 2012 and December 26, 2010, and for the 53 Weeks Ended January 1, 2012, 52 Weeks Ended December 26, 2010, and 52 Weeks Ended December 27, 2009, and Independent Auditors’ Report
INDEPENDENT AUDITORS’ REPORT
To the Managing Member of
Smashburger Franchising LLC
Denver, Colorado
We have audited the accompanying balance sheets of Smashburger Franchising LLC (the “Company”) as
of January 1, 2012 and December 26, 2010, and the related statement of operations, members’ equity, and
cash flows for the 53 weeks ended January 1, 2012, the 52 weeks ended December 26, 2010, and the 52
weeks ended December 27, 2009. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of
America. Those standards require that we plan and perform the audits to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit includes consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s
internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, such financial statements present fairly, in all material respects, the financial position of
the Company as of January 1, 2012 and December 26, 2010, and the results of its operations and its cash
flows for the fiscal years ended January 1, 2012, December 26, 2010, and December 27, 2009, in
conformity with accounting principles generally accepted in the United States of America.
February 24, 2012
Deloitte & Touche LLP Suite 3600 555 Seventeenth Street Denver, CO 80202-3942 USA
Tel: 1 303 292 5400 Fax: 1 303 312 4000 www.deloitte.com
Member of Deloitte Touche Tohmatsu Limited
- 2 -
SMASHBURGER FRANCHISING LLC
BALANCE SHEETS
AS OF JANUARY 1, 2012 AND DECEMBER 26, 2010
2011 2010ASSETS
CURRENT ASSETS: Cash and cash equivalents 530,000$ 694,000$ Accounts receivable 129,000 103,000 Accounts receivable, related party 70,000 - Prepaid expense 23,000 24,000 Restricted asset — Marketing Fund 37,000 16,000
Total current assets 789,000 837,000
NOTE RECEIVABLE, RELATED PARTY 606,000 -
DEFERRED COSTS 5,615,000 3,450,000
TOTAL 7,010,000$ 4,287,000$
LIABILITIES AND MEMBER’S EQUITY
CURRENT LIABILITIES: Accounts payable 27,000$ - $ Related party payable 809,000 301,000 Liability — Marketing Fund 37,000 16,000
Total current liabilities 873,000 317,000
DEFERRED REVENUE 5,730,000 3,670,000
Total liabilities 6,603,000 3,987,000
MEMBER’S EQUITY: Contributed capital 250,000 250,000 Retained earnings 157,000 50,000
Total member’s equity 407,000 300,000
TOTAL 7,010,000$ 4,287,000$
See notes to financial statements.
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SMASHBURGER FRANCHISING LLC
STATEMENTS OF OPERATIONS
FOR THE FISCAL YEARS ENDED JANUARY 1, 2012, DECEMBER 26, 2010, AND DECEMBER 27, 2009
2011 2010 2009
REVENUES: Royalty fees 4,644,000$ 2,496,000$ 518,000$ Franchise fees 2,207,000 1,425,000 625,000
Total revenue 6,851,000 3,921,000 1,143,000
COST AND EXPENSES: Servicing expense — affiliate 6,508,000 3,725,000 1,086,000 Intellectual property licensing expense — affiliate 206,000 118,000 34,000 General and administrative expense 31,000 29,000 24,000
Total costs and expenses 6,745,000 3,872,000 1,144,000
OTHER INCOME — Interest income 1,000 - 1,000
NET INCOME 107,000$ 49,000$ - $
See notes to financial statements.
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SMASHBURGER FRANCHISING LLC
STATEMENTS OF MEMBER'S EQUITY
FOR THE FISCAL YEARS ENDED JANUARY 1, 2012, DECEMBER 26, 2010, AND DECEMBER 27, 2009
Contributed Retained
Capital Earnings Total
BALANCE — December 28, 2008 250,000$ 1,000$ 251,000$
Net income - - -
BALANCE — December 27, 2009 250,000 1,000 251,000
Net income - 49,000 49,000
BALANCE — December 26, 2010 250,000 50,000 300,000
Net income - 107,000 107,000
BALANCE — January 1, 2012 250,000$ 157,000$ 407,000$
See notes to financial statements.
- 5 -
SMASHBURGER FRANCHISING LLC
STATEMENTS OF CASH FLOWS
FOR THE FISCAL YEARS ENDED JANUARY 1, 2012, DECEMBER 26, 2010, AND DECEMBER 27, 2009
2011 2010 2009
CASH FLOWS FROM OPERATING ACTIVITIES: Net income 107,000$ 49,000$ - $ Changes in operating assets and liabilities: Accounts receivable (26,000) (12,000) 177,000 Accounts receivable — related party (70,000) - - Prepaid expenses 1,000 2,000 (26,000) Restricted asset — Marketing Fund (21,000) 27,000 (149,000) Deferred franchise costs (2,165,000) (1,514,000) (1,363,000) Accounts payable 27,000 - - Related party payable 508,000 292,000 (35,000) Liability — Marketing Fund 21,000 (27,000) 149,000 Deferred franchise revenue 2,060,000 1,670,000 1,175,000
Net cash (used in) provided by operating activities 442,000 487,000 (72,000)
CASH FLOWS FROM INVESTING ACTIVITIES — Issuance of notes receivable, related party (606,000) - -
Net cash used in investing activities (606,000) - -
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (164,000) 487,000 (72,000)
CASH AND CASH EQUIVALENTS: Beginning of year 694,000 207,000 279,000
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SMASHBURGER FRANCHISING LLC
NOTES TO FINANCIAL STATEMENTS AS OF JANUARY 1, 2012 AND DECEMBER 26, 2010, AND FOR THE YEARS ENDED JANUARY 1, 2012, DECEMBER 26, 2010, AND DECEMBER 27, 2009
1. SUMMARY OF THE ORGANIZATION
Smashburger Franchising LLC (the “Company”) was formed in the state of Delaware on March 5, 2008.
The Company is primarily engaged in franchising, fast casual “better burger” restaurants which offer
hand-crafted burgers, grilled or crispy chicken sandwiches, freshly prepared salads, handspun shakes
and an array of signature sides under the service mark Smashburger™. As of January 1, 2012, the
Company has franchised restaurants in 24 states. In addition, the Company is party to international area
development agreements and master franchise agreements under which area developers and master
franchise owners purchase the right to develop and provide operational support to Smashburger
restaurants in a specific geographic region or territory.
The Company primarily generates revenues from the sale of new Smashburger franchise agreements and
from on-going royalty fees earned under Smashburger franchise agreements.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation — The accompanying financial statements have been prepared in accordance
with U.S. generally accepted accounting principles.
Fiscal Year — The Company’s fiscal year is 52 or 53 weeks ending on the Sunday closest to
December 31. Fiscal year 2011 includes 53 weeks and fiscal years 2010 and 2009 each include 52
weeks.
Use of Estimates — The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the
disclosures of contingencies. Actual results could differ materially from these estimates.
Cash and Cash Equivalents — The Company considers all highly liquid instruments purchased with
an original maturity of three months or less to be cash equivalents.
Accounts Receivable — The Company’s accounts receivable consist primarily of franchise fees and
royalties receivable. The Company evaluates the collectability of its receivables based on a combination
of factors, including length of time the receivables are past due, historical performance and the
probability of collection. No allowance for doubtful accounts was considered necessary as of January 1,
2012 or December 26, 2010.
Deferred Franchise Costs — The Company has a franchise servicing agreement with a related party
which provides pre and post opening services required under the franchise agreement. Amounts paid to
the related party for pre opening services are deferred and expensed when all material services and
conditions have been substantially completed, generally when the franchised restaurant commences
operations. The cost associated with post opening services are expensed as incurred.
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For the years ended January 1, 2012, December 26, 2010, and December 27, 2009, servicing fees paid
were approximately $8.3 million, $4.9 million, and $2.96 million, respectively. Additionally, the
Company expensed approximately $6.5 million, $3.7 million, and $1.1 million of servicing fees for the
years ended January 1, 2012, December 26, 2010, and December 27, 2009, respectively.
The Company licenses intellectual property from a related party. Under this agreement, the Company
pays a fee based on initial franchise fees, ongoing royalties and other fees paid to the Company by the
franchise owners. The costs paid to the related party associated with initial franchise fees are deferred
until all material services and conditions have been substantially completed, generally until the franchise
restaurant commences operations. The cost associated with royalties and other fees are expensed as
incurred.
For the years ended January 1, 2012, December 26, 2010, and December 27, 2009, $95,000, $155,000,
and $94,000, respectively, of intellectual property license fees were paid to the related party and
$206,000, $118,000, and $34,000, respectively, were expensed under the license agreement.
The total deferred costs related to payments to related parties for servicing and intellectual property
license fees as of January 1, 2012 and December 26, 2010, are approximately $5.6 million and
$3.5 million, respectively, and are included within deferred costs on the balance sheets.
Revenue Recognition — Pursuant to the various franchise agreements, franchise owners are required to
pay the Company royalty fees based on a percentage of sales ranging from 4 – 6%. Royalties are accrued
based on a percent of gross sales less discounts, as reported by the franchise owners and are included in
accounts receivable.
Initial franchise fees collected by the Company are recognized as revenue when all material services and
conditions required to be performed by the Company have been substantially completed, which is
generally when the restaurant commences operations. Initial franchise fees collected by the Company
before all material franchised services and conditions are substantially performed are recorded as
deferred revenue.
Income Taxes — The Company has elected to be treated as a partnership for income tax purposes.
Accordingly, taxable income and losses of the Company are reported on the income tax return of the
Company’s Member and no provision for income taxes has been recorded on the accompanying
financial statements.
Fair Value of Financial Instruments — The carrying amounts of cash and cash equivalents, accounts
receivable, and payables approximate fair value due to the nature of and short maturities of these
instruments.
3. RELATED PARTY TRANSACTIONS
Marketing Fund Trust — Under the franchise agreements, the Company has the right to collect a
percentage of restaurant sales from its franchise owners which is required to be utilized only for
marketing activities. The Company established the Smashburger Marketing Fund Trust (“Marketing
Fund Trust”) to collect and administer these marketing funds collected from franchise owners. The
Company has elected a related party to serve as the trustee of the Marketing Fund Trust, a variable
interest entity. Other affiliates of the Company make discretionary contributions to the Marketing Fund.
If the Company elected to not require its franchise owners to contribute any monies for marketing
activities, the Company would be required to refund any cumulative unspent monies to the franchise
owners. As of January 1, 2012, no such refund obligation exists.
- 8 -
As of January 1, 2012 and December 26, 2010, restricted assets of $37,000 and $16,000, respectively,
consisted of receivables from franchise owners designated for contributions to the Marketing Fund
Trust. Since the Company has the obligation to immediately contribute the amounts collected to the
Marketing Fund Trust, as of January 1, 2012 and December 26, 2010, corresponding restricted liabilities
were recorded.
Through December 26, 2010, the Company consolidated the accounts of the Marketing Fund Trust and
accounted for itself as an in-substance agent with regards to these funds. During 2011, the Company
reviewed the related party relationships and contractual rights surrounding the Marketing Fund Trust,
including the rights to collect marketing fees and the role of the trustee and other related parties. In
accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 810,
Consolidation, the Company performed an analysis and determined it does not have a controlling
financial interest in the Marketing Fund Trust and therefore it should not be consolidated with the
Company. As a result, the Company determined it had incorrectly accounted for the Marketing Fund
Trust in prior periods. The Marketing Fund Trust’s assets and liabilities were presented as restricted
assets and restricted liabilities. The Marketing Fund Trust’s expenses were presented net of the amounts
collected from franchise owners in the Company’s statement of operations. The effect of correcting the
balance sheet for this matter was to decrease both the restricted asset and liability by $106,000 at
December 26, 2010.
Note Receivable — During 2011, the Company issued a revolving note receivable with a related party.
The note earns interest at the greater of 1.25% or the short term Applicable Federal Rate. As of
January 1, 2012, the applicable interest rate was 1.25%. The note matures on December 31, 2015. For
the year ended January 1, 2012, interest income earned from the related party was $1,000.
4. SUBSEQUENT EVENTS
The Company has evaluated subsequent events for recognition or disclosure through February 24, 2012,
which was the date these financial statements were considered available to be issued.
* * * * * *
Smashburger 06/2012 FDD Ex. G – Manual TOC
1031.002.006/46345.1
1.
EXHIBIT "G"
TABLE OF CONTENTS TO OPERATIONS MANUAL
smashburger Operations Manual ©2009 Smashburger Franchising LLC
smashburger.com Version 1109
Table of Contents
StandardS of operationSHow To Use the Standards of Operations Manual ............................................................... StOps_3
Legal and Regulatory......................................................................................................StOps_3
Systems Compliance .......................................................................................................StOps_3
Insurance Requirements .................................................................................................StOps_4
Brand Identity Standards ...................................................................................................... StOps_5Brand Book.....................................................................................................................StOps_5
Logo Usage ....................................................................................................................StOps_5
Trademark Information ...................................................................................................StOps_5
Restaurant Design and Furnishing ..................................................................................StOps_5
Signage, Menu Boards, and Point of Purchase (POP) materials .......................................StOps_5
New Restaurant Openings ................................................................................................... StOps_6Mystery Shop Programs .................................................................................................StOps_6
Ticket Times ...................................................................................................................StOps_6
Steps to SIZZLE...............................................................................................................StOps_6
Phone Standards ............................................................................................................StOps_7
No Smoking Policy .........................................................................................................StOps_7
Music .............................................................................................................................StOps_7
Guest Complaints: LAST Strategy ...................................................................................StOps_7
Hours of Operations .......................................................................................................StOps_7
Product Standards ............................................................................................................... StOps_8Product Specification ......................................................................................................StOps_8
The Smash and Sear .......................................................................................................StOps_8
Cook Times and Temperatures ........................................................................................StOps_8
Food Safety ....................................................................................................................StOps_9
Temperature Zones .......................................................................................................StOps_10
Product Labeling ..........................................................................................................StOps_10
Sanitizer buckets...........................................................................................................StOps_10
Prep Recipes and Procedures Manual ................................................................................ StOps_11
Menu Recipes and Procedures Manual .............................................................................. StOps_11
Equipment Standards ......................................................................................................... StOps_12Approved equipment and vendors ................................................................................StOps_12
Maintenance ................................................................................................................StOps_12
Telephone Lines, Internet Access and E-mail .................................................................StOps_12
POS Systems and Back Office Systems .........................................................................StOps_12
Music Systems ..............................................................................................................StOps_12
Systems Standards ............................................................................................................. StOps_13Back Office System (MenuLink) Utilization ...................................................................StOps_13
The Red Book ...............................................................................................................StOps_13
Store level Daily and Weekly Reporting ........................................................................StOps_13
People Standards ............................................................................................................... StOps_14Manager and Assistant Manager Training .....................................................................StOps_14
Grand Opening Training .................................................................................................... StOps_14Smash Training Team ....................................................................................................StOps_14
smashburger Operations Manual ©2009 Smashburger Franchising LLC
Version 1109
TOC_4
New Restaurant Opening Training ..................................................................................... StOps_15Schedule.......................................................................................................................StOps_15
NRO Training Materials ................................................................................................StOps_15
Certified Training Restaurant and Certified Training Manager Process...........................StOps_16
Certified Training Restaurant Criteria ............................................................................StOps_16
Certified Training Manager Process ..............................................................................StOps_16
Shift leader Training ......................................................................................................StOps_16
Team Member Training.................................................................................................StOps_16
Restaurant Safety and Security .....................................................................................StOps_17
Hiring Regulations ........................................................................................................StOps_17
Uniforms ......................................................................................................................StOps_17
Communication Standards ................................................................................................. StOps_18E-mail /Voice Mail ........................................................................................................StOps_18
Communication Board ..................................................................................................StOps_18
Manager Meetings ............................................................................................................ StOps_18
Accounting and Finance Standards .................................................................................... StOps_19Cash Handling ..............................................................................................................StOps_19
Back Office...................................................................................................................StOps_19
Cashiers........................................................................................................................StOps_20
Cash Skims ...................................................................................................................StOps_21
Cash Paper Trail ............................................................................................................StOps_21
Gift Cards .....................................................................................................................StOps_22
Paid Outs .....................................................................................................................StOps_22
Weekly Tip Pay Out .....................................................................................................StOps_22
House Accounts & Trades .............................................................................................StOps_23
Cost Controls ...............................................................................................................StOps_23
Labor Costs ..................................................................................................................StOps_23
Food and Beverage Cost...............................................................................................StOps_23
Inventory Process .........................................................................................................StOps_23
Par Levels .....................................................................................................................StOps_24
Comps and Voids .........................................................................................................StOps_24
Manager Controls ........................................................................................................StOps_24
Armored Truck Pick-Up ................................................................................................StOps_25
Invoicing ......................................................................................................................StOps_25
Chart of Accounts ........................................................................................................StOps_26
smashburger Chart of Accounts ....................................................................................StOps_26
Budgets and Forecasts ..................................................................................................StOps_29
Code and Key Policy.....................................................................................................StOps_29
Security and Control of Manager Access Cards .............................................................StOps_30
Crisis Management Standards ............................................................................................ StOps_30
smashburger.com
TOC_5
Brand BookConfidentiality Notice ...........................................................................................................brand_1
CriSiS GuideTable of Contents .................................................................................................................. crisis_2
Crisis Guide ........................................................................................................................... crisis_3
Key Corporate Crisis Team Members ..................................................................................... crisis_4
Organizing a Local Crisis Communications Team ................................................................... crisis_4
Basic Media Guidelines When the Media Calls ....................................................................... crisis_5When The Media Calls/Appears .......................................................................................crisis_5
Crime & Security .................................................................................................................... crisis_6First Steps .........................................................................................................................crisis_6
Crisis Team Responsibilities ...............................................................................................crisis_7
Demonstrations or Riots ........................................................................................................ crisis_8First Steps .........................................................................................................................crisis_8
Crisis Team Responsibilities ...............................................................................................crisis_9
Guest Illness ........................................................................................................................ crisis_10First Steps .......................................................................................................................crisis_10
Crisis Team Responsibilities .............................................................................................crisis_11
Team Member Illness ........................................................................................................... crisis_12First Steps .......................................................................................................................crisis_12
Crisis Team Responsibilities .............................................................................................crisis_13
Bomb Threat ........................................................................................................................ crisis_14First Steps .......................................................................................................................crisis_14
Crisis Team Responsibilities .............................................................................................crisis_15
Foreign Object Claims ......................................................................................................... crisis_16First Steps .......................................................................................................................crisis_16
Crisis Team Responsibilities .............................................................................................crisis_17
Guest Claims: Non-Food Related ......................................................................................... crisis_18First Steps .......................................................................................................................crisis_18
Crisis Team Responsibilities .............................................................................................crisis_19
RUMORS ............................................................................................................................ crisis_20First Steps .......................................................................................................................crisis_20
Crisis Team Responsibilities .............................................................................................crisis_21
GOVERNMENT AGENCY VISITS ......................................................................................... crisis_22First Steps .......................................................................................................................crisis_22
Crisis Team Responsibilities .............................................................................................crisis_23
Appendix A: Media Guidelines ............................................................................................. crisis_24When The Media Calls/Appears .....................................................................................crisis_24
If Media Comes to the Restaurant ..................................................................................crisis_25
Responses for Guests......................................................................................................crisis_25
Responses for Media ......................................................................................................crisis_25
Media tips for Multi-Unit Leaders ...................................................................................crisis_26
Top 5 Reasons we have a Media Policy ..........................................................................crisis_27
Appendix B: Demonstration Guidelines ................................................................................ crisis_28Demonstration ...............................................................................................................crisis_28
Demonstration Guidelines: Media On Site ......................................................................crisis_29
Demonstration Guidelines: Vandalism or Violence ..........................................................crisis_30
Violent Demonstrations or Acts of Violence ....................................................................crisis_30
smashburger Operations Manual ©2009 Smashburger Franchising LLC
Version 1109
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Appendix C: Natural Disasters ............................................................................................. crisis_31Action Plan: Hurricanes ..................................................................................................crisis_31
Action Plan: Tornados .....................................................................................................crisis_32
Action Plan: Floods .........................................................................................................crisis_33
Action Plan: Earthquakes ................................................................................................crisis_34
Power Outage Plan ........................................................................................................crisis_35
Cold Climates/Freezing Weather ....................................................................................crisis_35
APPENDIX D: Death or Serious Injury Reaction Plan ............................................................ crisis_36RESPONSIBILITIES: .........................................................................................................crisis_36
APPENDIX E: Bomb Threats — Crisis Team .......................................................................... crisis_41
BOMB THREAT CHECKLIST ................................................................................................ crisis_42Caller’s Identity ...............................................................................................................crisis_42
Pretend difficulty with hearing. Keep caller talking. If caller will answer questions, ask: ..crisis_42
Voice Characteristics .......................................................................................................crisis_42
Speech ...........................................................................................................................crisis_42
Language Skills ...............................................................................................................crisis_42
Accent ............................................................................................................................crisis_42
Manner ..........................................................................................................................crisis_42
Background Noises .........................................................................................................crisis_42
smashburger.com
TOC_7
Menu reCipeS & proCedureSTable of Contents ...............................................................................................................menuR_2
Commonly Used Steps ........................................................................................................menuR_3Station Setup ................................................................................................................menuR_3
Selling items .................................................................................................................menuR_3
Prep Procedures ..................................................................................................................menuR_4Station Setup ................................................................................................................menuR_4
Grill Drawers Setup.......................................................................................................menuR_5
smashburger & Chicken Specialties .....................................................................................menuR_7Tools Needed ...............................................................................................................menuR_7
Food Item(s) Needed ....................................................................................................menuR_7
Cheese & Toppings .............................................................................................................menuR_9Tools Needed ...............................................................................................................menuR_9
Food Item(s) Needed ....................................................................................................menuR_9
Make Table Set-Up .....................................................................................................menuR_10
Toasting Buns ...................................................................................................................menuR_13Tools Needed .............................................................................................................menuR_13
Food Item(s) Needed ..................................................................................................menuR_13
Procedures & Steps .....................................................................................................menuR_13
Dressing Buns ...................................................................................................................menuR_14Tools Needed .............................................................................................................menuR_14
Food Item(s) Needed ..................................................................................................menuR_14
Station Setup ..............................................................................................................menuR_14
smashburger and Chicken Sandwich Building Process .......................................................menuR_15
All American smashburger ................................................................................................menuR_16
Classic smashburger ..........................................................................................................menuR_17
BBQ, Bacon & Cheese ......................................................................................................menuR_18
Spicy Baja Burger / Chicken ..............................................................................................menuR_19
Mushroom Swiss ..............................................................................................................menuR_21
Classic smashchicken ........................................................................................................menuR_23
CYO smashburger or Classic smashchicken .......................................................................menuR_25
Baja Cobb Salad ................................................................................................................menuR_26
Ranch Chicken Club Salad ................................................................................................menuR_27
The smashwedge ..............................................................................................................menuR_28
Side smashwedge .............................................................................................................menuR_29
French Fries ......................................................................................................................menuR_30
smashfries .........................................................................................................................menuR_31
Haystack Onions ..............................................................................................................menuR_32
Veggie Frites .....................................................................................................................menuR_33
Beefy Chili ........................................................................................................................menuR_34
Shakes and Malts ..............................................................................................................menuR_35
Root Beer Float .................................................................................................................menuR_36
Kids smashburger .............................................................................................................menuR_38
Kids Chicken Strips ...........................................................................................................menuR_39
Kids Grilled Cheese ...........................................................................................................menuR_40
Kid’s Dog ..........................................................................................................................menuR_41
Fried Egg ..........................................................................................................................menuR_42
smashburger Operations Manual ©2009 Smashburger Franchising LLC
Version 1109
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Chicago Dog ....................................................................................................................menuR_43
Chili Cheese Dog ..............................................................................................................menuR_44
Classic Dog .......................................................................................................................menuR_45
To-Go Guide .....................................................................................................................menuR_46
Regional: Arizona Devil Dog .............................................................................................menuR_47
Regional: Arizona smashburger and smashchicken ............................................................menuR_48
Regional: Beehive smashburger and smashchicken ...........................................................menuR_49
Regional: Blueberry/Huckleberry Blend .............................................................................menuR_50
Regional: Buckeye smashburger/smashchicken .................................................................menuR_51
Regional: Cactus Shake .....................................................................................................menuR_52
Regional: Cheese Fries ......................................................................................................menuR_53
Regional: Chili Cheese Fries ..............................................................................................menuR_54
Regional: Chili Fries ..........................................................................................................menuR_55
Regional: Colorado smashburger and smashchicken .........................................................menuR_57
Regional: Colorado Dog ...................................................................................................menuR_58
Regional: Cornhusker smashburger/smashchicken ............................................................menuR_59
Regional: Devil Dog ..........................................................................................................menuR_60
Regional: Fried Banana Peppers ........................................................................................menuR_61
Regional: Fried Green Chiles .............................................................................................menuR_62
Regional: Fried Pickles ......................................................................................................menuR_63
Regional: Huckleberry Shake ............................................................................................menuR_64
Regional: Idaho smashburger and smashchicken ...............................................................menuR_65
Regional: Iowa smashburger and smashchicken ................................................................menuR_66
Regional: KS (Shocker) smashburger and smashchicken ....................................................menuR_67
Regional: Oklahoma smashburger and smashchicken .......................................................menuR_68
Regional: Spicy Baja ..........................................................................................................menuR_69
Regional: State Fair smashbrat ..........................................................................................menuR_70
Regional: Twin Cities Burger .............................................................................................menuR_71
Regional: Wichita Kids Meal .............................................................................................menuR_72
smashburger.com
TOC_9
prep reCipeS & proCedureSTable of Contents ................................................................................................................ prepR_2
Critical Control Points .......................................................................................................... prepR_3
Shelf Life ............................................................................................................................. prepR_3
Hand Washing ..................................................................................................................... prepR_9
Wearing Disposable Gloves................................................................................................ prepR_10
Personal Hygiene ............................................................................................................... prepR_10
Receiving Food .................................................................................................................. prepR_11
Product Storage ................................................................................................................. prepR_12
Wearing a Cutting Glove ................................................................................................... prepR_17
Commonly Used Steps ....................................................................................................... prepR_18
Meats ................................................................................................................................ prepR_19
Chicken ............................................................................................................................. prepR_21
Tomatoes — Sliced ............................................................................................................ prepR_22
Tomatoes — Diced ............................................................................................................ prepR_23
Using the Nemco Slicer ...................................................................................................... prepR_24
Red Onions — Sliced for smashburgers and smashchicken ................................................ prepR_25
Red Onions — Quarter Sliced for Salads ............................................................................ prepR_26
Yellow Onions — Sliced for Haystacks ............................................................................... prepR_27
Yellow Onions — Diced for Hot Dogs ................................................................................ prepR_28
Yellow Onions — Quarter Sliced for Grilled Onions ........................................................... prepR_29
Leaf Lettuce — smashburgers and Classic smashchicken .................................................... prepR_30
Iceberg Lettuce — Wedge ................................................................................................. prepR_31
Mushrooms — Sliced ......................................................................................................... prepR_32
Jalapeños — Sliced ............................................................................................................ prepR_33
Lemons — Wedges ........................................................................................................... prepR_34
Veggie Frites — Pre-Weighed ............................................................................................ prepR_35
Chili — Reheat Procedure .................................................................................................. prepR_36
Smash Sauce ...................................................................................................................... prepR_37
Haystack Onion Batter ....................................................................................................... prepR_38
Haystack Onion Flour ........................................................................................................ prepR_39
Handling Dressings ............................................................................................................ prepR_40
Ice Cream .......................................................................................................................... prepR_42
Butter ................................................................................................................................ prepR_43
Bacon ................................................................................................................................ prepR_44
Bacon — Diced for Salads .................................................................................................. prepR_46
smashburger Herb Oil ........................................................................................................ prepR_47
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nro GuideIntroduction .......................................................................................................................nro_1
Who Uses This Guide? .......................................................................................................nro_1
NRO Guide Overview ........................................................................................................nro_1
Opening Food Order ............................................................................................................... nro_2Opening Food Order ..........................................................................................................nro_2
NRO Pre-Opening Checklist Templates.................................................................................... nro_7Pre-Opening Checklist Template: ACCOUNTING ...............................................................nro_8
Pre-Opening Checklist Template: CONSTRUCTION ...................................................... NRO_10
Pre-Opening Checklist Template: MARKETING ............................................................. NRO_12
Pre-Opening Checklist Template: IT .................................................................................nro_12
Pre-Opening Checklist Template: HR ................................................................................nro_13
Pre-Opening Checklist Template: OPERATIONS ............................................................ NRO_14
Pre-Opening Checklist Template-Training .........................................................................nro_16
National Vendor List .........................................................................................................nro_16
Local Vendor Contact Information Template .....................................................................nro_17
Hiring Information ................................................................................................................. nro_18Management Team ..........................................................................................................nro_18
Team Members ................................................................................................................nro_18
Core Competencies ..........................................................................................................nro_19
Hiring Pars........................................................................................................................nro_19
Internet Recruiting............................................................................................................nro_19
Competitive Wage Rates ..................................................................................................nro_19
GM On-Site Agendas ............................................................................................................ nro_20Four Weeks Out ...............................................................................................................nro_20
Three Weeks Out .............................................................................................................nro_20
Two weeks Out ................................................................................................................nro_20
One Week Out Agenda ...................................................................................................nro_21
Pre-Opening Training ............................................................................................................ nro_22Training Teams .................................................................................................................nro_22
Training Schedules ............................................................................................................nro_23
Standard Training Schedule ..............................................................................................nro_23
Friends and Family and VIP events ...................................................................................nro_23
NRO Manager Tool Box ...................................................................................................nro_24
Hiring Packet ....................................................................................................................nro_24
Trainer’s Guides and Trainee Workbooks ..........................................................................nro_24
Team Member Roster and Availability ...............................................................................nro_25
Prep Sheet ........................................................................................................................nro_27
Nightly Inventory Procedures ...........................................................................................nro_28
Ticket Times .....................................................................................................................nro_34
Aloha & MenuLink Help Desks .........................................................................................nro_36
Aloha/MenuLink Frequently Asked Questions ..................................................................nro_37
Credit card EDC ................................................................................................................nro_59
smashburger.com
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Grand openinG GuideGrand Opening Checklist ......................................................................................................grand_1
Grand Opening Details .........................................................................................................grand_2Grand Opening in a Box .................................................................................................grand_2
Public Relations ..............................................................................................................grand_3
VIP and Friends & Family Events.....................................................................................grand_3
Media Outreach Campaign ............................................................................................grand_4
What If I Have Trouble Finding A PR Firm? ...........................................................................grand_6Charity Event (for 1st store in a market) .........................................................................grand_6
Direct Mail .....................................................................................................................grand_6
Radio (for 1st store in a market) .....................................................................................grand_7
Street Teams .........................................................................................................................grand_9
The Dos & Don’ts ...............................................................................................................grand_10
Key Contacts ......................................................................................................................grand_12
appendixSample Press Releases .........................................................................................................grand_13
Example 1: ...................................................................................................................grand_13
Example 2: ...................................................................................................................grand_14
Example 3: ...................................................................................................................grand_16
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nro HirinG paCketAffirmative Action Information ................................................................................................hire_3
Confidentiality Agreement .......................................................................................................hire_5
Direct Deposit ..........................................................................................................................hire_9
Team Member New Hire Audit ..............................................................................................hire_11
New Team Member Information ............................................................................................hire_13
Team Member Internet Usage Policy .....................................................................................hire_15
Team Member Acknowledgments..........................................................................................hire_17
Reconocimientos Del Empleado .............................................................................................hire_19
smashburger Harassment Policy .............................................................................................hire_21
smashburger Política del Hostigamiento .................................................................................hire_23
Form I-9, Employment Eligiblity Verification ...........................................................................hire_25
Team Member Welcome Packet ............................................................................................hire_27
Tip Reporting and Tip Allocation ............................................................................................hire_29
Form W-4 ..............................................................................................................................hire_31
smashburger.com
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Sizzle nro trainee WorkBookTable of Contents ........................................................................................................... NROszEE_2
Orientation ..................................................................................................................... NROszEE_3Introduce Management Team and Trainers ................................................................NROszEE_3
That’s Us… Who Are You? ........................................................................................NROszEE_3
Team Member Handbook ..........................................................................................NROszEE_3
Welcome Letter from the President ...........................................................................NROszEE_3
Why We’re Called “smashburger” ............................................................................NROszEE_3
Why “Smashing” a Burger is Better ...........................................................................NROszEE_3
smash.sizzle.savor.® ..................................................................................................NROszEE_4
Company Code of Conduct ............................................................................................ NROszEE_5TM Code of Conduct ................................................................................................NROszEE_5
Safety and Sanitation ...................................................................................................... NROszEE_6Handwashing Basics ..................................................................................................NROszEE_6
Floor..........................................................................................................................NROszEE_6
Hot Surfaces/Hot Products ........................................................................................NROszEE_6
Tools & Equipment ....................................................................................................NROszEE_7
Knives .......................................................................................................................NROszEE_7
Working with Food ...................................................................................................NROszEE_7
Store Tour .................................................................................................................NROszEE_7
Day One: Sizzle Training ................................................................................................. NROszEE_8Menu Knowledge ......................................................................................................NROszEE_8
Steps to SIZZLE.......................................................................................................NROSZEE_10
Shakes or Malts .......................................................................................................NROszEE_12
Introduction to Order Taking ...................................................................................NROszEE_12
AM Shift..................................................................................................................NROszEE_12
PM Shift ..................................................................................................................NROszEE_12
Day Two: Sizzle Training ............................................................................................... NROszEE_13Food Show ..............................................................................................................NROszEE_13
Volume Simulations/Menu Knowledge ....................................................................NROszEE_14
Guest Complaints: LAST Strategy ............................................................................NROszEE_16
Alcohol Guidelines ...................................................................................................NROszEE_17
AM Shift..................................................................................................................NROszEE_18
PM Shift ..................................................................................................................NROszEE_18
Day Three: Sizzle Training ............................................................................................. NROszEE_19Menu Knowledge ....................................................................................................NROszEE_19
Kids Meals ...............................................................................................................NROszEE_19
Salads ......................................................................................................................NROszEE_20
Assembling To-go orders .........................................................................................NROszEE_21
Debrief ....................................................................................................................NROszEE_21
AM Shift..................................................................................................................NROszEE_21
PM Shift ..................................................................................................................NROszEE_21
Day Four: Sizzle Training ............................................................................................... NROszEE_22Telephone Procedures..............................................................................................NROszEE_22
AM Shift..................................................................................................................NROszEE_22
PM Shift ..................................................................................................................NROszEE_22
smash.sizzle.savor.® Awards .....................................................................................NROszEE_23
Day One: Sizzle Quiz .................................................................................................... NROszEE_25
Day 2: Sizzle Quiz ......................................................................................................... NROszEE_26
Day 3: Sizzle Quiz ......................................................................................................... NROszEE_28
Day 4: Sizzle Quiz ......................................................................................................... NROszEE_30
To Go Guide ................................................................................................................. NROszEE_31
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Sizzle nro trainer’S GuideTable of Contents ...........................................................................................................NROszER_2
Orientation .....................................................................................................................NROszER_3Introduce Management Team and Trainers ............................................................... NROszER_3
That’s Us… Who Are You? ....................................................................................... NROszER_3
Team Member Handbook ......................................................................................... NROszER_3
Welcome Letter from the President .......................................................................... NROszER_3
Why We’re Called “smashburger” ........................................................................... NROszER_3
Why “Smashing” a Burger is Better .......................................................................... NROszER_3
smash.sizzle.savor.® .................................................................................................. NROszER_4
Company Code of Conduct ............................................................................................NROszER_5TM Code of Conduct ............................................................................................... NROszER_5
Safety and Sanitation ......................................................................................................NROszER_6Handwashing Basics ................................................................................................. NROszER_6
Floor......................................................................................................................... NROszER_6
Hot Surfaces/Hot Products ....................................................................................... NROszER_6
Tools & Equipment ................................................................................................... NROszER_7
Knives ...................................................................................................................... NROszER_7
Working with Food .................................................................................................. NROszER_7
Store Tour ................................................................................................................ NROszER_7
Day One: Sizzle Training .................................................................................................NROszER_8Menu Knowledge ..................................................................................................... NROszER_8
Steps to SIZZLE...................................................................................................... NROSZER_10
Shakes or Malts ...................................................................................................... NROszER_12
Introduction to Order Taking .................................................................................. NROszER_12
AM Shift................................................................................................................. NROszER_12
PM Shift ................................................................................................................. NROszER_12
Day Two: Sizzle Training ...............................................................................................NROszER_13Food Show ............................................................................................................. NROszER_13
Volume Simulations/Menu Knowledge ................................................................... NROszER_14
Guest Complaints: LAST Strategy ........................................................................... NROszER_16
Alcohol Guidelines .................................................................................................. NROszER_17
AM Shift................................................................................................................. NROszER_18
PM Shift ................................................................................................................. NROszER_18
Day Three: Sizzle Training .............................................................................................NROszER_19Menu Knowledge ................................................................................................... NROszER_19
Kids Meals .............................................................................................................. NROszER_19
Salads ..................................................................................................................... NROszER_20
Assembling To-go orders ........................................................................................ NROszER_20
Debrief ................................................................................................................... NROszER_21
AM Shift................................................................................................................. NROszER_21
PM Shift ................................................................................................................. NROszER_21
Day Four: Sizzle Training ...............................................................................................NROszER_22Telephone Procedures............................................................................................. NROszER_22
AM Shift................................................................................................................. NROszER_23
PM Shift ................................................................................................................. NROszER_23
smash.sizzle.savor.® Awards .................................................................................... NROszER_23
Day One: Sizzle Quiz ....................................................................................................NROszER_25
Day 2: Sizzle Quiz .........................................................................................................NROszER_26
Day 3: Sizzle Quiz .........................................................................................................NROszER_28
Day 4: Sizzle Quiz .........................................................................................................NROszER_30
To Go Guide .................................................................................................................NROszER_31
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SMaSH nro trainee WorkBookTable of Contents ..........................................................................................................NROsmEE_2
Orientation ....................................................................................................................NROsmEE_3Introduce Management Team and Trainers .............................................................. NROsmEE_3
That’s Us… Who Are You? ...................................................................................... NROsmEE_3
Team Member Handbook ........................................................................................ NROsmEE_3
Welcome Letter from the President ......................................................................... NROsmEE_3
Why We’re Called “smashburger” .......................................................................... NROsmEE_3
Why “Smashing” a Burger is Better ......................................................................... NROsmEE_3
smash.sizzle.savor.® ................................................................................................. NROsmEE_4
Company Code of Conduct ...........................................................................................NROsmEE_5TM Code of Conduct .............................................................................................. NROsmEE_5
Safety and Sanitation .....................................................................................................NROsmEE_6Handwashing Basics ................................................................................................ NROsmEE_6
Floor........................................................................................................................ NROsmEE_6
Hot Surfaces/Hot Products ...................................................................................... NROsmEE_6
Tools & Equipment .................................................................................................. NROsmEE_7
Knives ..................................................................................................................... NROsmEE_7
Working with Food ................................................................................................. NROsmEE_7
Store Tour ............................................................................................................... NROsmEE_7
Day One: Smash Training ..............................................................................................NROsmEE_8Daily Prep................................................................................................................ NROsmEE_8
Intro to Smashing .................................................................................................... NROsmEE_8
Managing the Grill .................................................................................................. NROsmEE_9
Intro to Fry Station .................................................................................................. NROsmEE_9
Intro to Dressing and Selling .................................................................................... NROsmEE_9
Intro to Burgers, Fries, smashfries .......................................................................... NROsmEE_10
AM Shift................................................................................................................ NROsmEE_11
PM Shift ................................................................................................................ NROsmEE_11
Day Two: Smash Training .............................................................................................NROsmEE_12Food Show ............................................................................................................ NROsmEE_12
Cook Haystack Onions — 4 easy steps .................................................................. NROsmEE_14
Cook Veggie Frites ................................................................................................ NROsmEE_14
AM Shift................................................................................................................ NROsmEE_14
PM Shift ................................................................................................................ NROsmEE_14
Day Three: Smash Training ..........................................................................................NROsmEE_15Prepare Kids Meals ................................................................................................ NROsmEE_15
Salads .................................................................................................................... NROsmEE_16
Assembling To-Go Orders ..................................................................................... NROsmEE_17
Debrief .................................................................................................................. NROsmEE_17
AM Shift................................................................................................................ NROsmEE_17
PM Shift ................................................................................................................ NROsmEE_17
Day Four: Smash Training ............................................................................................NROsmEE_18Debrief .................................................................................................................. NROsmEE_18
AM Shift................................................................................................................ NROsmEE_18
PM Shift ................................................................................................................ NROsmEE_18
smash.sizzle.savor.® Awards ................................................................................... NROsmEE_18
Day One: Smash Quiz .................................................................................................NROsmEE_19
Day 2: Smash Quiz ......................................................................................................NROsmEE_20
Day 3: Smash Quiz ......................................................................................................NROsmEE_22
Day 4: Smash Quiz ......................................................................................................NROsmEE_23
To Go Guide ................................................................................................................NROsmEE_24
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SMaSH nro trainer’S GuideTable of Contents ......................................................................................................... NROsmER_2
Orientation ................................................................................................................... NROsmER_3Introduce Management Team and Trainers ..............................................................NROsmER_3
That’s Us… Who Are You? ......................................................................................NROsmER_3
Team Member Handbook ........................................................................................NROsmER_3
Welcome Letter from the President .........................................................................NROsmER_3
Why We’re Called “smashburger” ..........................................................................NROsmER_3
Why “Smashing” a Burger is Better .........................................................................NROsmER_3
smash.sizzle.savor.® .................................................................................................NROsmER_4
Company Code of Conduct .......................................................................................... NROsmER_5TM Code of Conduct ..............................................................................................NROsmER_5
Safety and Sanitation .................................................................................................... NROsmER_6Handwashing Basics ................................................................................................NROsmER_6
Floor........................................................................................................................NROsmER_6
Hot Surfaces/Hot Products ......................................................................................NROsmER_6
Tools & Equipment ..................................................................................................NROsmER_7
Knives .....................................................................................................................NROsmER_7
Working with Food .................................................................................................NROsmER_7
Store Tour ...............................................................................................................NROsmER_7
Day One: Smash Training ............................................................................................. NROsmER_8Daily Prep................................................................................................................NROsmER_8
Intro to Smashing ....................................................................................................NROsmER_8
Managing the Grill ..................................................................................................NROsmER_9
Intro to Fry Station ..................................................................................................NROsmER_9
Intro to Dressing and Selling ....................................................................................NROsmER_9
Intro to Burgers, Fries, smashfries ..........................................................................NROsmER_10
AM Shift................................................................................................................NROsmER_11
PM Shift ................................................................................................................NROsmER_11
Day Two: Smash Training ............................................................................................ NROsmER_12Food Show ............................................................................................................NROsmER_12
Cook Haystack Onions — 4 easy steps ..................................................................NROsmER_14
Cook Veggie Frites ................................................................................................NROsmER_14
AM Shift................................................................................................................NROsmER_14
PM Shift ................................................................................................................NROsmER_14
Day Three: Smash Training ......................................................................................... NROsmER_15Prepare Kids Meals ................................................................................................NROsmER_15
Salads ....................................................................................................................NROsmER_16
Assembling To-Go Orders .....................................................................................NROsmER_17
Debrief ..................................................................................................................NROsmER_17
AM Shift................................................................................................................NROsmER_17
PM Shift ................................................................................................................NROsmER_17
Day Four: Smash Training ........................................................................................... NROsmER_18Debrief ..................................................................................................................NROsmER_18
AM Shift................................................................................................................NROsmER_18
PM Shift ................................................................................................................NROsmER_18
smash.sizzle.savor.® Awards ...................................................................................NROsmER_18
Day One: Smash Quiz ................................................................................................ NROsmER_19
Day 2: Smash Quiz ..................................................................................................... NROsmER_20
Day 3: Smash Quiz ..................................................................................................... NROsmER_22
Day 4: Smash Quiz ..................................................................................................... NROsmER_23
To Go Guide ............................................................................................................... NROsmER_24
smashburger.com
TOC_17
SMaSHBurGer teaM MeMBer HandBookTable of Contents ...........................................................................................................smburTM_2
Acknowledgement of Receipt .........................................................................................smburTM_3
Acknowledgement of Receipt .........................................................................................smburTM_5
Welcome ........................................................................................................................smburTM_7
Handbook Purpose .........................................................................................................smburTM_9
At-Will Employment .......................................................................................................smburTM_9
Then There’s smashburger ............................................................................................smburTM_10OK, it’s not really magic… but it is magical. ............................................................ smburTM_10
Our Reason for Being ...................................................................................................smburTM_11
Steps to Sizzle ...............................................................................................................smburTM_11
Sizzle 20 .......................................................................................................................smburTM_11
Company Code of Conduct ..........................................................................................smburTM_12Equal Opportunity Employer .................................................................................. smburTM_12
Harassment Policy ........................................................................................................smburTM_13Verbal Harassment ................................................................................................. smburTM_13
Physical Harassment ............................................................................................... smburTM_13
Visual Harassment .................................................................................................. smburTM_13
Sexual Harassment ................................................................................................. smburTM_13
Reporting ............................................................................................................... smburTM_14
Investigation........................................................................................................... smburTM_14
Retaliation .............................................................................................................. smburTM_14
Harassment & Discrimination Policy Posting ........................................................... smburTM_15
Complaint Resolution and Problem Solving ............................................................ smburTM_15
Complaint Resolution Procedure ............................................................................. smburTM_15
Confidentiality ..............................................................................................................smburTM_16
Team Member Code of Conduct ..................................................................................smburTM_17Food Safety ............................................................................................................ smburTM_17
Safety/Reporting Of Injury ...........................................................................................smburTM_18
Guest Liability Incidents ................................................................................................smburTM_18
Vendor Relationships ....................................................................................................smburTM_19
Competition .................................................................................................................smburTM_19
Drugs and Alcohol ........................................................................................................smburTM_20Drug Testing ........................................................................................................... smburTM_20
Alcoholic Beverages ................................................................................................ smburTM_21
Team Member Fraternization ........................................................................................smburTM_22
Business Ethics ..............................................................................................................smburTM_22
Violence Protection/Security .........................................................................................smburTM_23
Smoking .......................................................................................................................smburTM_23
Personal Telephone Calls ..............................................................................................smburTM_23Cell Phone Usage ................................................................................................... smburTM_23
Computers and Software ..............................................................................................smburTM_24Email Use ............................................................................................................... smburTM_24
Internet Use ........................................................................................................... smburTM_24
Team Member Conduct and Work Rules ......................................................................smburTM_25
Discipline ......................................................................................................................smburTM_25
Employment Practices ...................................................................................................smburTM_26Team Member Classifications ................................................................................. smburTM_26
Exempt/Non exempt .............................................................................................. smburTM_26
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Attendance and Punctuality ..........................................................................................smburTM_26
Holidays .......................................................................................................................smburTM_26
Team Member Leave ....................................................................................................smburTM_27Family/Medical Leaves ........................................................................................... smburTM_27
Other Leaves .......................................................................................................... smburTM_27
Looking Good ...............................................................................................................smburTM_29
Pay Practices .................................................................................................................smburTM_30Work Week ............................................................................................................ smburTM_30
Timekeeping ........................................................................................................... smburTM_30
Working off the Clock ............................................................................................ smburTM_30
Breaks and Meal Periods ......................................................................................... smburTM_30
Authorization of Overtime...................................................................................... smburTM_30
Overtime ................................................................................................................ smburTM_31
Paydays .................................................................................................................. smburTM_31
Payroll Advances .................................................................................................... smburTM_31
Payroll Deductions .................................................................................................. smburTM_31
Return of Company Property ........................................................................................smburTM_31
Personnel Records and Data Changes ...........................................................................smburTM_31
Tipping .........................................................................................................................smburTM_32
Performance Evaluation and Merit Increases .................................................................smburTM_32
Inclement Weather/Restaurant Closings .......................................................................smburTM_32
Termination/Resignation ...............................................................................................smburTM_33
Re-Hire .........................................................................................................................smburTM_33
Team Member Benefits .................................................................................................smburTM_34Meal Benefits ......................................................................................................... smburTM_34
Smashcash.............................................................................................................. smburTM_34
Save ....................................................................................................................... smburTM_35
Balance Life & Work ............................................................................................... smburTM_35
Recognize............................................................................................................... smburTM_35
Benefits .................................................................................................................. smburTM_36
smashburger.com
TOC_19
SMaSH teaM MeMBer WorkBookTable of Contents ...........................................................................................................smashTM_2
Orientation .....................................................................................................................smashTM_3Team Member Handbook ......................................................................................... smashTM_3
Orientation Video ..................................................................................................... smashTM_3
Why We’re Called “smashburger” ........................................................................... smashTM_3
Why “Smashing” a Burger is Better .......................................................................... smashTM_3
Training Overview .................................................................................................... smashTM_4
Restaurant Tour ..............................................................................................................smashTM_5
Kitchen Tour ...................................................................................................................smashTM_6
Safety and Sanitation ......................................................................................................smashTM_7Handwashing Basics ................................................................................................. smashTM_7
Floor......................................................................................................................... smashTM_7
Hot Surfaces/Hot Products ....................................................................................... smashTM_7
Tools & Equipment ................................................................................................... smashTM_7
Knives ...................................................................................................................... smashTM_8
Working with Food .................................................................................................. smashTM_8
Food Show .....................................................................................................................smashTM_9
Daily Prep .....................................................................................................................smashTM_10
Intro to Smashing .........................................................................................................smashTM_11Cook times: ............................................................................................................ smashTM_11
Managing the Grill ........................................................................................................smashTM_12
Intro to Dressing and Selling .........................................................................................smashTM_13
Intro to Fry Station .......................................................................................................smashTM_18smashfries .............................................................................................................. smashTM_18
Cook Haystack Onions ........................................................................................... smashTM_18
Smash Test ...................................................................................................................smashTM_19
Sizzle Skills Proficiency Checklist ...................................................................................smashTM_25
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Sizzle teaM MeMBer WorkBookTable of Contents .............................................................................................................. sizzlTM_2
Orientation ........................................................................................................................ sizzlTM_3Team Member Handbook ......................................................................................... smashTM_3
Orientation Video ..................................................................................................... smashTM_3
Why We’re Called “smashburger” .............................................................................. sizzlTM_3
Why “Smashing” a Burger is Better ............................................................................. sizzlTM_3
Training Overview ....................................................................................................... sizzlTM_4
Restaurant Tour ................................................................................................................. sizzlTM_5
Dining Room Tour ............................................................................................................. sizzlTM_6
Safety and Sanitation ......................................................................................................... sizzlTM_7Handwashing Basics .................................................................................................... sizzlTM_7
Floor............................................................................................................................ sizzlTM_7
Hot Surfaces/Hot Products .......................................................................................... sizzlTM_7
Tools & Equipment ...................................................................................................... sizzlTM_7
Knives ......................................................................................................................... sizzlTM_8
Working with Food ..................................................................................................... sizzlTM_8
Food Show ........................................................................................................................ sizzlTM_9
Day 1: All About The Guest ............................................................................................. sizzlTM_10Steps to SIZZLE........................................................................................................ SIZZLTM_10
Only YOU Can Give The Sizzle To Our Guests! ......................................................... sizzlTM_12
Menu Knowledge ...................................................................................................... sizzlTM_13
Table Touches/Running Food .................................................................................... sizzlTM_17
Day 2 .............................................................................................................................. sizzlTM_18Teachback the Food Show ......................................................................................... sizzlTM_18
Shakes and Floats ...................................................................................................... sizzlTM_18
Shadow Your Trainer On The Register ....................................................................... sizzlTM_18
Guest Complaints: LAST Strategy .............................................................................. sizzlTM_19
Alcohol Guidelines ..................................................................................................... sizzlTM_20
Register Practice During Non-Peak ............................................................................ sizzlTM_20
Day 3: Register Practice ................................................................................................... sizzlTM_21Opening or Closing Duties ........................................................................................ sizzlTM_21
Day 4: Register Practice ................................................................................................... sizzlTM_22
Sizzle Test ........................................................................................................................ sizzlTM_23
Sizzle Skills Proficiency Checklist ...................................................................................... sizzlTM_29
smashburger.com
TOC_21
SMaSHManaGMent trainee WorkBookTable of Contents .......................................................................................................... smashMG_2
smashburger Reason for Being ....................................................................................... smashMG_3
Orientation .................................................................................................................... smashMG_3Typical Schedule ...................................................................................................... smashMG_4
Why Position Training? .................................................................................................. smashMG_5As a Manager, why do you need to spend time learning each position? .................. smashMG_5
Day 1: Orientation, Inventory and Intro to BOH ............................................................ smashMG_5Smashculture ........................................................................................................... smashMG_6
Brand Promise ......................................................................................................... smashMG_8
Call Outs ................................................................................................................. smashMG_8
Consumer Brand Positioning Statement ................................................................. smashMG_10
Call Outs ............................................................................................................... smashMG_10
smashburger Key Messaging: Internal & Team Members ....................................... smashMG_10
Safety and Sanitation............................................................................................. smashMG_11
Smash Training Objectives ..................................................................................... smashMG_13
Day 1 Quiz .................................................................................................................. smashMG_14
Day 2: Prep, Grill and Cheese ...................................................................................... smashMG_15Food Show ............................................................................................................ smashMG_16
Day 2 Quiz .................................................................................................................. smashMG_17
Day 3: Prep, Grill and Cheese ...................................................................................... smashMG_18
Day 3 Quiz .................................................................................................................. smashMG_19
Day 4: Set .................................................................................................................... smashMG_20
Day 4 Quiz .................................................................................................................. smashMG_21
Day 5: Set .................................................................................................................... smashMG_23
Day 5 Quiz .................................................................................................................. smashMG_24
Day 6: Fry .................................................................................................................... smashMG_25
Day 6 Quiz .................................................................................................................. smashMG_26Prep List ................................................................................................................ smashMG_26
BOH Skills Proficiency Checklist ............................................................................. smashMG_27
Sizzle Training Objectives ...................................................................................... smashMG_27
Day 7: EOW Admin, Expo ........................................................................................... smashMG_28
Day 7 Quiz .................................................................................................................. smashMG_29
Day 8: Expo ................................................................................................................. smashMG_30
Day 8 Quiz .................................................................................................................. smashMG_31
Day 9: Cashier ............................................................................................................. smashMG_32Steps to Sizzle........................................................................................................ smashMG_32
LAST Strategy........................................................................................................ smashMG_34
Alcohol Guidelines ................................................................................................. smashMG_35
Telephone Procedures............................................................................................ smashMG_36
Day 9 Quiz .................................................................................................................. smashMG_37
Day 10: Cashier ........................................................................................................... smashMG_38
Day 10 Quiz ................................................................................................................ smashMG_39FOH Skills Proficiency Checklist ............................................................................. smashMG_40
Management and Administrative Objectives ......................................................... smashMG_40
Day 11: MOD ............................................................................................................. smashMG_41
Day 11 Quiz ................................................................................................................ smashMG_41
Day 12: MOD ............................................................................................................. smashMG_42
Day 12 Quiz ................................................................................................................ smashMG_43
smashburger Operations Manual ©2009 Smashburger Franchising LLC
Version 1109
TOC_22
Day 13: MOD ............................................................................................................. smashMG_44
Day 14: MOD ............................................................................................................. smashMG_45
Day 15: MOD ............................................................................................................. smashMG_46
Day 16: MOD ............................................................................................................. smashMG_47
Day 17: MOD ............................................................................................................. smashMG_48
Day 18: MOD ............................................................................................................. smashMG_49MOD Skills Proficiency Checklist ........................................................................... smashMG_50
Smashburger 06/2012 FDD
Ex H – Representations and Acknowledgement 1031.002.006/46347.1
EXHIBIT "H"
REPRESENTATIONS AND ACKNOWLEDGEMENT STATEMENT
Smashburger 06/2012 FDD
Ex H – Representations and Acknowledgement
1031.002.006/46347.1
REPRESENTATIONS AND ACKNOWLEDGMENT STATEMENT
The purpose of this Statement is to demonstrate to SMASHBURGER FRANCHISING
LLC (“Franchisor”) that the person(s) signing below (“I,” “me” or “my”), whether acting
individually or on behalf of any legal entity established to acquire the multi-unit development
and/or franchise rights (“Franchisee”), (a) fully understands that the purchase of a
SMASHBURGER Restaurant franchise is a significant long-term commitment, complete with its
associated risks, and (b) is not relying on any statements, representations, promises or assurances
that are not specifically set forth in Franchisor’s Franchise Disclosure Document and Exhibits
(collectively, the “FDD”) in deciding to purchase the franchise.
In that regard, I represent to Franchisor and acknowledge that:
I understand that buying a franchise is not a guarantee of success.
Purchasing or establishing any business is risky, and the success or failure of the
franchise is subject to many variables such as my skills and abilities (and those
of my partners, officers, employees), the time my associates and I devote to the
business, competition, interest rates, the economy, inflation, operation costs,
location, lease terms, the market place generally and other economic and
business factors. I am aware of and am willing to undertake these business
risks. I understand that the success or failure of my business will depend
primarily upon my efforts and not those of Franchisor.
INITIAL:
I received a copy of the FDD, including the Franchise Agreement and
Multi-Unit Development Agreement, at least 14 calendar days (10 business days
in Michigan, New York, and Rhode Island) before I executed the Franchise
Agreement and/or the Multi-Unit Development Agreement, as applicable. I
understand that all of my rights and responsibilities and those of Franchisor in
connection with the franchise are set forth in these documents and only in these
documents. I acknowledge that I have had the opportunity to personally and
carefully review these documents and have, in fact, done so. I have been
advised to have professionals (such as lawyers and accountants) review the
documents for me and to have them help me understand these documents. I
have also been advised to consult with other franchisees regarding the risks
associated with the purchase of the franchise.
INITIAL:
Neither the Franchisor nor any of its officers, employees or agents
(including any franchise broker) has made a statement, promise or assurance to
me concerning any matter related to the franchise (including those regarding
advertising, marketing, training, support service or assistance provided by
Franchisor) that is contrary to, or different from, the information contained in
the FDD.
INITIAL:
2 Smashburger 06/2012 FDD
Ex H – Representations and Acknowledgement
1031.002.006/46347.1
My decision to purchase the franchise has not been influenced by any
oral representations, assurances, warranties, guarantees or promises whatsoever
made by the Franchisor or any of its officers, employees or agents (including
any franchise broker), including as to the likelihood of success of the franchise.
INITIAL:
I have made my own independent determination as to whether I have the
capital necessary to fund the business and my living expenses, particularly
during the start-up phase.
INITIAL:
I have not received any information from the Franchisor or any of its
officers, employees or agents (including any franchise broker) concerning
actual, average, projected or forecasted sales, revenues, income, profits or
earnings of the franchise business (including any statement, promise or
assurance concerning the likelihood of my success) except as contained in the
FDD or as indicated below (write “None” if none provided):
________________________________________________________________
________________________________________________________________.
INITIAL:
Prohibited Parties Clause. I acknowledge that Franchisor, its employees and its agents
are subject to U.S. laws that prohibit or restrict (a) transactions with certain parties, and (b) the
conduct of transactions involving certain foreign parties. These laws include, without limitation,
U.S. Executive Order 13224, the U.S. Foreign Corrupt Practices Act, the Bank Secrecy Act, the
International Money Laundering Abatement and Anti-terrorism Financing Act, the Export
Administration Act, the Arms Export Control Act, the U.S. Patriot Act, and the International
Economic Emergency Powers Act, and the regulations issued pursuant to these and other U.S.
laws. As part of the express consideration for the purchase of the franchise, I represent that
neither I nor any of my employees, agents, or representatives, nor any other person or entity
associated with me, is now, or has been listed on:
1. the U.S. Treasury Department’s List of Specially Designated Nationals;
2. the U.S. Commerce Department’s Denied Persons List, Unverified List, Entity
List, or General Orders;
3. the U.S. State Department’s Debarred List or Nonproliferation Sanctions; or
4. the Annex to U.S. Executive Order 13224.
I warrant that neither I nor any of my employees, agents, or representatives, nor any other
person or entity associated with me, is now, or has been: (i) a person or entity who assists,
sponsors, or supports terrorists or acts of terrorism; or (ii) is owned or controlled by terrorists or
sponsors of terrorism. I warrant that I am now, and have been, in compliance with U.S. anti-
money laundering and counter-terrorism financing laws and regulations, and that any funds
provided by me to Franchisor were legally obtained in compliance with these laws.
3 Smashburger 06/2012 FDD
Ex H – Representations and Acknowledgement
1031.002.006/46347.1
I further covenant that neither I nor any of my employees, agents, or representatives, nor
any other person or entity associated with me, will, during the term of the Franchise Agreement,
become a person or entity described above or otherwise become a target of any anti-terrorism
law.
FRANCHISEE:
Sign here if you are taking the franchise as an
INDIVIDUAL(S)
(Note: use these blocks if you are an
individual or a partnership but the
partnership is not a separate legal entity)
___________________________________
Signature
Print Name: _________________________
Date: ______________________________
___________________________________
Signature
Print Name: _________________________
Date: ______________________________
Sign here if you are taking the franchise as a
CORPORATION, LIMITED LIABILITY
COMPANY OR PARTNERSHIP
____________________________________ Print Name of Legal Entity
By: ________________________________
Signature Print Name: __________________________
Title: _______________________________
Date: _______________________________
___________________________________
Signature
Print Name: _________________________
Date: ______________________________
___________________________________
Signature
Print Name: _________________________
Date: ______________________________
Smashburger 06/2012 FDD
Ex. I – General Release 1031.002.006/46348.1
EXHIBIT "I"
SAMPLE GENERAL RELEASE
Smashburger 06/2012 FDD
Ex. I – General Release 1031.002.006/46348.1
SMASHBURGER FRANCHISING LLC
GRANT OF FRANCHISOR CONSENT AND [FRANCHISEE] OR [MULTI-UNIT
DEVELOPER] RELEASE
Smashburger Franchising LLC (“we,” “us,” or “our”) and the undersigned [franchisee or multi-
unit developer],
(“you” or “your”), currently are parties to a certain [franchise
agreement or multi-unit developer agreement] (the “[Franchise Agreement or Multi-Unit Developer
Agreement]”) dated , 20 . You have asked us to take the following action
or to agree to the following request: [insert as appropriate for renewal or transfer situation]
. We have the right under the [Franchise Agreement or Multi-Unit Developer
Agreement] to obtain a general release from you (and, if applicable, your owners) as a condition of taking
this action or agreeing to this request. Therefore, we are willing to take the action or agree to the request
specified above if you (and, if applicable, your owners) give us the release and covenant not to sue
provided below in this document. You (and, if applicable, your owners) are willing to give us the release
and covenant not to sue provided below as partial consideration for our willingness to take the action or
agree to the request described above.
Consistent with the previous introduction, you, on your own behalf and on behalf of your
successors, heirs, executors, administrators, personal representatives, agents, assigns, partners,
shareholders, members, directors, officers, principals, employees, and affiliated entities (collectively, the
"Releasing Parties"), hereby forever release and discharge us and our current and former officers,
directors, members, principals, employees, agents, representatives, affiliated entities, successors, and
assigns (collectively, the "Smashburger Parties") from any and all claims, damages (known and
unknown), demands, causes of action, suits, duties, liabilities, and agreements of any nature and kind
(collectively, “Claims”) that you and any of the other Releasing Parties now has, ever had, or, but for this
document, hereafter would or could have against any of the Smashburger Parties, including without
limitation, (1) arising out of or related to the Smashburger Parties' obligations under the [Franchise
Agreement or Multi-Unit Developer Agreement] or (2) otherwise arising from or related to your and the
other Releasing Parties' relationship, from the beginning of time to the date of your signature below, with
any of the Smashburger Parties. You, on your own behalf and on behalf of the other Releasing Parties,
further covenant not to sue any of the Smashburger Parties on any of the Claims released by this
paragraph and represent that you have not assigned any of the Claims released by this paragraph to any
individual or entity who is not bound by this paragraph.
We also are entitled to a release and covenant not to sue from your owners. By his, her, or their
separate signatures below, your owners likewise grant to us the release and covenant not to sue provided
above.
If the franchise is located in Maryland or if you are a resident of Maryland, the following shall apply:
Any general release provided for hereunder shall not apply to any liability under the
Maryland Franchise Registration and Disclosure Law.
[Signature Page Follows]
Smashburger 06/2012 FDD
Ex. I – General Release 1031.002.006/46348.1
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement on
the date stated below.
SMASHBURGER FRANCHISING LLC,
an Delaware limited liability company
By:
Name:
Title:
Dated:
[FRANCHISEE OR MULTI-UNIT
DEVELOPER]:
(IF YOU ARE A CORPORATION,
LIMITED LIABILITY COMPANY, OR
PARTNERSHIP):
By:
Name:
Title:
(IF YOU ARE AN INDIVIDUAL AND
NOT A LEGAL ENTITY):
[Signature]
[Print Name]
[Signature]
[Print Name]
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider 1031.002.006/46349.1
EXHIBIT "J"
STATE ADDENDA AND AGREEMENT RIDERS
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider 1031.002.006/46349.1
ADDITIONAL DISCLOSURES FOR THE
MULTI-STATE FRANCHISE OFFERING CIRCULAR OF
SMASHBURGER FRANCHISING LLC
The following are additional disclosures for the Franchise Disclosure Document of
Smashburger Franchising LLC required by various state franchise laws. Each provision of these
additional disclosures will only apply to you if the applicable state franchise registration and
disclosure law applies to you.
ILLINOIS
1. The "Summary" section of Item 17(v), entitled Choice of forum, is deleted.
2. The "Summary" section of Item 17(w), entitled Choice of law, is deleted and
replaced with the following:
Except to the extent the Lanham Act applies, the laws of the State of Illinois
apply.
MARYLAND
1. The following is added to the end of the "Summary" sections of Item 17(c),
entitled Requirements for franchisee to renew or extend, and Item 17(m), entitled Conditions
for franchisor approval of transfer:
However, pursuant to COMAR 02.02.08.16L, any release required as a condition
of renewal and/or assignment/transfer will not apply to claims arising under the
Maryland Franchise Registration and Disclosure Law.
2. The following is added to the end of the "Summary" section of Item 17(h),
entitled "Cause" defined - defaults which cannot be cured:
The Multi-Unit Development Agreement and Franchise Agreement provides for
termination upon bankruptcy. This provision might not be enforceable under
federal bankruptcy law (11 U.S.C. Sections 101 et seq.), but we will enforce it to
the extent enforceable.
3. The "Summary" sections for the Multi-Unit Development Agreement and
Franchise Agreement of Item 17(v), entitled Choice of forum, and 17(w), entitled Choice of
law, are amended to add the following:
, except for claims arising under the Maryland Franchise Registration and
Disclosure Law.
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider 2 1031.002.006/46349.1
MINNESOTA
1. Renewal, Termination, Transfer and Dispute Resolution. The following is
added at the end of the chart in Item 17:
With respect to franchises governed by Minnesota law, we will comply
with Minn. Stat. Sec. 80C.14, Subds. 3, 4 and 5 which require, except in certain
specified cases, that you be given 90 days' notice of termination (with 60 days to
cure) of the Multi-Unit Development Agreement and Franchise Agreement and
180 days' notice for non-renewal of the Multi-Unit Development Agreement and
Franchise Agreement.
Minn. Stat. Sec. 80C.21 and Minn. Rule 2860.4400J might prohibit us
from requiring litigation to be conducted outside Minnesota, requiring waiver of a
jury trial or requiring the Multi-Unit Developer or Franchisee to consent to
liquidated damages, termination penalties or judgment notes. In addition, nothing
in the Disclosure Document, Multi-Unit Development Agreement or Franchise
Agreement can abrogate or reduce any of Multi-Unit Developer’s or Franchisee’s
rights as provided for in Minnesota Statutes, Chapter 80C, or Multi-Unit
Developer’s or Franchisee’s rights to any procedure, forum or remedies provided
for by the laws of the jurisdiction.
Any release required as a condition of renewal or transfer/assignment will
not apply to the extent prohibited by applicable law with respect to claims arising
under Minn. Rule 2860.4400D.
NEW YORK
1. The following information is added to the cover page of the offering circular:
INFORMATION COMPARING FRANCHISORS IS AVAILABLE. CALL
THE STATE ADMINISTRATORS LISTED IN EXHIBIT A OR YOUR
PUBLIC LIBRARY FOR SOURCES OF INFORMATION.
REGISTRATION OF THIS FRANCHISE BY NEW YORK STATE DOES
NOT MEAN THAT NEW YORK STATE RECOMMENDS IT OR HAS
VERIFIED THE INFORMATION IN THIS DISCLOSURE DOCUMENT.
IF YOU LEARN THAT ANYTHING IN THE DISCLOSURE DOCUMENT
IS UNTRUE, CONTACT THE FEDERAL TRADE COMMISSION AND
NEW YORK STATE DEPARTMENT OF LAW, BUREAU OF INVESTOR
PROTECTION AND SECURITIES, 120 BROADWAY, 23RD FLOOR,
NEW YORK, NEW YORK 10271.
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider 3 1031.002.006/46349.1
THE FRANCHISOR MAY, IF IT CHOOSES, NEGOTIATE WITH YOU
ABOUT ITEMS COVERED IN THE DISCLOSURE DOCUMENT.
HOWEVER, THE FRANCHISOR CANNOT USE THE NEGOTIATING
PROCESS TO PREVAIL UPON A PROSPECTIVE DEVELOPER OR
FRANCHISEE TO ACCEPT TERMS WHICH ARE LESS FAVORABLE
THAN THOSE SET FORTH IN THIS DISCLOSURE DOCUMENT.
2. The following is added at the end of Item 3:
With regard to us, our predecessor, the persons identified in Item 2, or an affiliate
offering franchises under our principal trademark:
A. There is no pending administrative, criminal, or civil action alleging: a
felony; 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.
B. No such party has been convicted of a felony or pleaded nolo contendere
to a felony charge or, within the 10 year period immediately preceding the
application for registration, has been convicted of or pleaded nolo
contendere to a misdemeanor charge or been held liable in a civil action
alleging: violation of a franchise, antitrust, or securities law; fraud;
embezzlement; fraudulent conversion; misappropriation of property;
unfair or deceptive practices; or comparable allegations.
C. No such party is subject to a currently effective injunctive or restrictive
order or decree relating to the franchise, or under any federal, state, or
Canadian franchise, securities, antitrust, trade regulation, or trade practice
law, as a result of 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 franchise as a
real estate broker or sales agent.
3. The following is added to the end of Item 4:
Except as disclosed above, neither we nor any of our predecessors, affiliates,
officers, or general partners have, during the 10 year period immediately
preceding 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
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider 4 1031.002.006/46349.1
discharge of its debts under the U.S. 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 that officer or general partner of
ours held this position in the company or partnership.
4. The following is added to the end of the "Summary" sections of Item 17(c),
entitled Requirements for franchisee to renew or extend, and Item 17(m), entitled Conditions
for franchisor’s approval of transfer:
However, to the extent required by applicable law, all rights you enjoy and any
causes of action arising in your favor from the provisions of Article 33 of the
General Business Law of the State of New York and the regulations issued
thereunder shall remain in force; it being the intent of this proviso that the
non-waiver provisions of General Business Law Sections 687.4 and 687.5 be
satisfied.
5. The following is added to the end of the "Summary" section of Item 17(j), entitled
Assignment of contract by us:
However, to the extent required by applicable law, no assignment will be made
except to an assignee who, in our good faith judgment, is willing and able to
assume our obligations under the Multi-Unit Development Agreement or
Franchise Agreement.
6. The following is added to the end of the "Summary" sections of Item 17(v),
entitled Choice of forum, and Item 17(w), entitled Choice of law:
However, the governing choice of law and choice of forum shall not be
considered a waiver of any right conferred upon you by the provisions of Article
33 of the General Business Law of the State of New York.
NORTH DAKOTA
1. The following is added to the end of the "Summary" sections of Item 17(c),
entitled Requirements for franchisee to renew or extend, and Item 17(m), entitled Conditions
for franchisor’s approval of transfer:
However, any release required as a condition of renewal and/or
assignment/transfer will not apply to the extent prohibited by the North Dakota
Franchise Investment Law.
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider 5 1031.002.006/46349.1
2. The following is added to the end of the "Summary" section of Item 17(r), entitled
Non-competition covenants after the franchise is terminated or expires:
Covenants not to compete such as those mentioned above are generally
considered unenforceable in the State of North Dakota; however, we and you will
enforce the covenants to the maximum extent the law allows.
2. The "Summary" section of Item 17(u), entitled Dispute resolution by arbitration or
mediation is deleted and replaced with the following:
To the extent required by the North Dakota Franchise Investment Law (unless
such requirement is preempted by the Federal Arbitration Act), arbitration will be
at a site to which we and you mutually agree.
3. The "Summary" section of Item 17(v), entitled Choice of forum, is deleted and
replaced with the following:
Litigation generally must be in the state where our then current principal place of
business is located (currently Denver, Colorado), except that, subject to your
arbitration obligation, and to the extent required by North Dakota Franchise
Investment Law you may bring an action in North Dakota.
4. The "Summary" section of Item 17(w), entitled Choice of law, is deleted and
replaced with the following:
Except as otherwise required by North Dakota law, the laws of the State of
Colorado shall apply.
RHODE ISLAND
1. The "Summary" section of Item 17(v), entitled Choice of forum, is deleted and
replaced with the following:
You must sue us in the state where our then current principal place of business is
located (currently Denver, Colorado), except to the extent otherwise required by
applicable law for claims arising under the Rhode Island Franchise Investment
Act.
2. The "Summary" section of Item 17(w), entitled Choice of law, is deleted and
replaced with the following:
The laws of the State of Colorado apply, except to the extent otherwise required
by applicable law with respect to claims arising under the Rhode Island Franchise
Investment Act.
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider 6 1031.002.006/46349.1
VIRGINIA
1. The following is added as a “Risk Factor” to the State Cover Page:
We may periodically set a maximum or minimum price you may charge for products and
services.
2. The "Summary" section of Item 17(h), entitled Cause defined – non curable
defaults, is amended by adding the following:
Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful
for a franchisor to cancel a franchise without reasonable cause. If any grounds for
default or termination stated in the Franchise Agreement does not constitute
"reasonable cause," as that term may be defined in the Virginia Retail Franchising
Act or the laws of Virginia, that provision may not be enforceable.
3 The “Summary” section of Item 17(o), entitled Franchisor’s option to purchase
franchisee’s business is amended by adding the following:
Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful
for a franchisor to cancel a franchise without reasonable cause. If any grounds for
default or termination stated in the Multi-Unit Development Agreement or
Franchise Agreement does not constitute "reasonable cause," as that term may be
defined in the Virginia Retail Franchising Act or the laws of Virginia, that
provision may not be enforceable.
Pursuant to Section 13.1-564 of the Virginia Retail Franchising Act, it is unlawful
for a franchisor to use undue influence to induce a franchisee to surrender any
right given to him under the franchise. If any provision of the Multi-Unit
Development Agreement or Franchise Agreement involves the use of undue
influence by the franchisor to induce a franchisee to surrender any rights given to
him under the franchise, that provision may not be enforceable.
WASHINGTON
1. The following paragraph is added at the end of Item 17:
If any of the provisions in this Disclosure Document, Multi-Unit Development
Agreement or Franchise Agreement are inconsistent with the relationship
provisions of Revised Code of Washington Section 19.100.180 or any other
requirements of the Washington Franchise Investment Protection Act (the "Act"),
the provisions of the Act will prevail over the inconsistent terms of the Disclosure
Document, Multi-Unit Development Agreement or Franchise Agreement.
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1
THE FOLLOWING PAGES IN THIS EXHIBIT ARE
STATE-SPECIFIC RIDERS TO THE
MULTI-UNIT DEVELOPMENT AGREEMENT
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1
RIDER TO THE SMASHBURGER FRANCHISING LLC
MULTI-UNIT DEVELOPMENT AGREEMENT
FOR USE IN ILLINOIS
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and __________________________________________________, whose principal
business address is (“you” or “your”).
1. BACKGROUND. We and you are parties to that certain Multi-Unit
Development Agreement dated __________________________, 20___ (the " Multi-Unit
Development Agreement") that has been signed concurrently with the signing of this Rider. This
Rider is annexed to and forms part of the Multi-Unit Development Agreement. This Rider is
being signed because (a) any of the offering or sales activity relating to the Multi-Unit
Development Agreement occurred in Illinois and the SMASHBURGER RESTAURANT that
you will developed under the Multi-Unit Development Agreement will be located in Illinois,
and/or (b) you are domiciled in Illinois.
2. CONSENT TO JURISDICTION. The following is added to Section 9.B of the
Multi-Unit Development Agreement.
Section 41 of the Illinois Franchise Disclosure Act (Act) provides that any
condition, stipulation, or provision purporting to bind any person acquiring any
franchise to waive compliance with any provision of the Act or any other law of
the State of Illinois is void.
3. APPLICABLE LAW. Section 10.F of the Multi-Unit Development Agreement
is deleted and replaced with the following:
This Agreement will be construed and interpreted under the laws of the State of
Colorado, without regard to its conflicts of laws rules, except to the extent
governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C.
Section 1051 et seq.) and all claims arising from the relationship between us and
you will be governed by the laws of the State of Illinois without regard to its
conflict of laws rules.
4. LIMITATIONS OF CLAIMS. The first paragraph of Section 9.E of the Multi-
Unit Development Agreement is deleted and replaced with the following:
EXCEPT FOR CLAIMS ARISING FROM YOUR NON-PAYMENT OR
UNDERPAYMENT OF AMOUNTS YOU OWE TO US PURSUANT TO
THIS AGREEMENT, ANY AND ALL CLAIMS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR OUR RELATIONSHIP WITH
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1 2
YOU WILL BE BARRED UNLESS A JUDICIAL PROCEEDING IS
COMMENCED WITHIN ONE (1) YEAR FROM THE DATE ON WHICH
THE PARTY ASSERTING SUCH CLAIM KNEW OR SHOULD HAVE
KNOWN OF THE FACTS GIVING RISE TO SUCH CLAIMS.
HOWEVER, NOTHING CONTAINED IN THIS SECTION SHALL
CONSTITUTE A CONDITION, STIPULATION, OR PROVISION
PURPORTING TO BIND ANY PERSON TO WAIVE COMPLIANCE
WITH ANY PROVISION OF THE ILLINOIS FRANCHISE DISCLOSURE
ACT OR ANY OTHER LAW OF THE STATE OF ILLINOIS, TO THE
EXTENT APPLICABLE.
5. ENTIRE AGREEMENT. Section 10.L of the Multi-Unit Development
Agreement is deleted and replaced with the following:
This Agreement and all schedules attached hereto constitute the entire agreement
of the parties hereto and all prior negotiations, commitments, representations,
warranties, agreements and undertakings made prior hereto are hereby merged.
Other than the representations in the Disclosure Document you received from us,
there are no other inducements, representations, warranties, agreements,
undertakings, or promises, (oral or otherwise) among you and us relating to the
subject matter of this Agreement. No subsequent alteration, amendment, change
or addition to this agreement or any schedules will be binding upon the parties
hereto unless reduced to writing and signed by us and you or our and your
respective heirs, executors, administrators, successors or assigns. Nothing
contained herein shall be deemed a waiver of any right you may have to rely on
the franchise disclosure document.
6. ILLINOIS FRANCHISE DISCLOSURE ACT. The following language is
added as Section 10.P of the Multi-Unit Development Agreement:
P. ILLINOIS FRANCHISE DISCLOSURE ACT. Section 41 of the
Illinois Franchise Disclosure Act states that any condition, stipulation, or
provision purporting to bind any person acquiring any franchise to waive
compliance with any provision of the Act or any other law of Illinois is void.
[The remainder of this page is intentionally left blank.]
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1 3
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Multi-Unit Development
Agreement.
SMASHBURGER
FRANCHISING LLC, a Delaware
limited liability company
By:
Title:
Dated:____________________________
MULTI-UNIT DEVELOPER
(if a corporation, limited liability or
partnership):
[Name]
By:
[Name] Title: _____________________________
Dated:
(IF INDIVIDUALS):
[Signature]
[Print Name]
Dated:
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Ex. J – State Addenda/Rider
1031.002.006/46349.1
RIDER TO THE SMASHBURGER FRANCHISING LLC
MULTI-UNIT DEVELOPMENT AGREEMENT
FOR USE IN MARYLAND
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and __________________________________________________, whose principal
business address is (“you” or “your”).
1. BACKGROUND. We and you are parties to that certain Multi-Unit
Development Agreement dated __________________________, 20___ (the "Multi-Unit
Development Agreement") that has been signed concurrently with the signing of this Rider. This
Rider is annexed to and forms part of the Multi-Unit Development Agreement. This Rider is
being signed because (a) you are domiciled in Maryland, and/or (b) the SMASHBURGER
RESTAURANT that you will develop under the Multi-Unit Development Agreement will be
located in Maryland.
2. RELEASES. The following is added to the end of Sections 1.B(5), 6.A.(1)(f)
and 6.E of the Multi-Unit Development Agreement:
Pursuant to COMAR 02.02.08.16L, any release required as a condition of renewal
and/or assignment/transfer will not apply to claims arising under the Maryland
Franchise Registration and Disclosure Law.
3. INSOLVENCY. The following is added to the end of Section 7.A(4) of the
Multi-Unit Development Agreement:
; however, we and you acknowledge that certain aspects of this provision might
not be enforceable under federal bankruptcy law (11 U.S.C. Sections 101 et seq.).
4. APPLICABLE LAW. Section 10.F of the Multi-Unit Development Agreement
is deleted and replaced with the following:
This Agreement will be construed and interpreted under the laws of the State of
Colorado, without regard to its conflicts of laws rules, except to the extent
governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C.
Section 1051 et seq.), except to the extent required by applicable law, Maryland
law will apply to claims arising under the Maryland Franchise Registration and
Disclosure Law.
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1031.002.006/46349.1 2
5. CONSENT TO JURISDICTION. Section 9.B of the Multi-Unit Development
Agreement is deleted and replaced with the following:
SUBJECT TO THE PROVISIONS BELOW, YOU AND YOUR OWNERS
AGREE THAT ALL ACTIONS ARISING UNDER THIS AGREEMENT
OR OTHERWISE AS A RESULT OF THE RELATIONSHIP BETWEEN
YOU AND US MUST BE COMMENCED IN A COURT OF GENERAL
JURISDICTION NEAREST TO OUR THEN CURRENT PRINCIPAL
PLACE OF BUSINESS (CURRENTLY DENVER, COLORADO), AND
YOU (AND EACH OWNER) IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THAT COURT AND WAIVE ANY OBJECTION
YOU (OR THE OWNER) MIGHT HAVE TO EITHER THE
JURISDICTION OF OR VENUE IN THAT COURT.
NOTWITHSTANDING THE FOREGOING, YOU MAY BRING AN
ACTION IN MARYLAND FOR CLAIMS ARISING UNDER THE
MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE LAW.
6. LIMITATIONS OF CLAIMS. The following is added to the end of the first
paragraph of Section 9.E of the Multi-Unit Development Agreement:
; PROVIDED, HOWEVER, THAT THIS LIMITATION OF CLAIMS
SHALL NOT ACT TO REDUCE THE 3 YEAR STATUTE OF
LIMITATIONS AFFORDED YOU FOR BRINGING A CLAIM UNDER
THE MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE
LAW.
[The remainder of this page is intentionally left blank.]
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1031.002.006/46349.1 3
IN WITNESS WHEREOF, the parties have executed and delivered this Rider
on the dates noted below, to be effective as of the effective date of the Multi-Unit Development
Agreement.
SMASHBURGER
FRANCHISING LLC, a Delaware
limited liability company
By:
Title:
Dated:____________________________
MULTI-UNIT DEVELOPER
(if a corporation, limited liability or
partnership):
[Name]
By:
[Name] Title: _____________________________
Dated:
(IF INDIVIDUALS):
[Signature]
[Print Name]
Dated:
Smashburger 06/2012FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1
RIDER TO THE SMASHBURGER FRANCHISING LLC
MULTI-UNIT DEVELOPMENT AGREEMENT
FOR USE IN MINNESOTA
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and __________________________________________________, whose principal
business address is (“you” or “your”).
1. BACKGROUND. We and you are parties to that certain Multi-Unit
Development Agreement dated __________________________, 20___ (the "Multi-Unit
Development Agreement") that has been signed concurrently with the signing of this Rider. This
Rider is annexed to and forms part of the Multi-Unit Development Agreement. This Rider is
being signed because (a) the SMASHBURGER RESTAURANT that you will develop under the
Multi-Unit Development Agreement will be located in Minnesota; and/or (b) any of the offering
or sales activity relating to the Multi-Unit Development Agreement occurred in Minnesota.
2. RELEASES. The following is added to the end of Sections 1.B(5), 6.A.(1)(f)
and 6.E of the Multi-Unit Development Agreement:
Any release required as a condition of renewal and/or assignment/transfer will not
apply to the extent prohibited by the Minnesota Franchises Law.
3. INJUNCTIVE RELIEF. Section 9.D of the Multi-Unit Development
Agreement is deleted and replaced with the following:
Nothing in this Agreement bars our right to obtain specific performance of the
provisions of this Agreement and injunctive relief against threatened conduct that
will cause us, the Marks, and/or the Franchise System loss or damage, under
customary equity rules, including applicable rules for obtaining restraining orders
and preliminary injunctions. You agree that we may seek such injunctive relief in
addition to such further or other relief as may be available at law or in equity.
You agree that your only remedy if an injunction is entered against you will be
the dissolution of that injunction, if warranted, upon due hearing (all claims for
damages by injunction being expressly waived hereby). Also, a court will
determine if a bond is required.
4. LIMITATIONS OF CLAIMS. The following is added to the end of the first
paragraph of Section 9.D of the Multi-Unit Development Agreement:
; PROVIDED, HOWEVER, THAT MINNESOTA LAW PROVIDES THAT NO
ACTION MAY BE COMMENCED UNDER MINN. STAT. SEC. 80C.17
MORE THAN 3 YEARS AFTER THE CAUSE OF ACTION ACCRUES.
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1031.002.006/46349.1 2
5 MINNESOTA LAW. Notwithstanding anything to the contrary contained in the
Multi-Unit Development Agreement, Minn. Stat. Sec. 80C.21 and Minn. Rule 2860.4400J
prohibit us from requiring you to waive your rights to a jury trial or to waive your rights to any
procedure, forum or remedies provided for by the laws of the jurisdiction, or to consent to
liquidated damages, termination penalties or judgment notes.
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Multi-Unit Development
Agreement.
SMASHBURGER
FRANCHISING LLC, a Delaware
limited liability company
By:
Title:
Dated:____________________________
MULTI-UNIT DEVELOPER
(if a corporation, limited liability or
partnership):
[Name]
By:
[Name] Title: _____________________________
Dated:
(IF INDIVIDUALS):
[Signature]
[Print Name]
Dated:
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1031.002.006/46349.1
RIDER TO THE
SMASHBURGER FRANCHISING LLC
MULTI-UNIT DEVELOPMENT AGREEMENT FOR USE IN THE
STATE OF NEW YORK
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and __________________________________________________, whose principal
business address is (“you” or “your”).
1. BACKGROUND. We and you are parties to that certain Multi-Unit
Development Agreement dated _______________________________, (the "Multi-Unit
Development Agreement") that has been signed concurrently with this Rider. This Rider is
being signed because (a) your are domiciled in the State of New York and the SMASHBURGER
RESTAURANT that you will develop under the Multi-Unit Development Agreement will be
located in New York, and/or (b) any of the offering or sales activity relating to the Multi-Unit
Development Agreement occurred in New York.
2. ASSIGNMENT BY US. The following language is added to the end of
Section 10.I of the Multi-Unit Development Agreement:
However, to the extent required by applicable law, no transfer will be made
except to an assignee who, in our good faith judgment, is willing and able to
assume our obligations under this Agreement.
3. RELEASES. The following is added to the end of Sections 1.B(5), 6.A.(1)(f)
and 6.E of the Multi-Unit Development Agreement:
Notwithstanding the foregoing all rights enjoyed by you and any causes of action
arising in your favor from the provisions of Article 33 of the General Business
Law of the State of New York and the regulations issued thereunder shall remain
in force to the extent required by the non-waiver provisions of GBL Sections
687.4 and 687.5, as amended.
4. APPLICABLE LAW. The following statement is added at the end of
Section 10.F of the Multi-Unit Development Agreement:
This Section shall not be considered a waiver of any right conferred upon you by
the provisions of Article 33 of the New York State General Business Law, as
amended, and the regulations issued thereunder.
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1031.002.006/46349.1 2
5. CONSENT TO JURISDICTION. The following is added to the end of
Section 9.B of the Multi-Unit Development Agreement:
This Section shall not be considered a waiver of any right conferred upon you by
the provisions of Article 33 of the New York State General Business Law, as
amended, and the regulations issued thereunder.
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Multi-Unit Development
Agreement.
SMASHBURGER
FRANCHISING LLC, a Delaware
limited liability company
By:
Title:
Dated:____________________________
MULTI-UNIT DEVELOPER
(if a corporation, limited liability or
partnership):
[Name]
By:
[Name] Title: _____________________________
Dated:
(IF INDIVIDUALS):
[Signature]
[Print Name]
Dated:
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Ex. J – State Addenda/Rider
1031.002.006/46349.1
RIDER TO THE SMASHBURGER FRANCHISING LLC
MULTI-UNIT DEVELOPMENT AGREEMENT
FOR USE IN NORTH DAKOTA
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and __________________________________________________, whose principal
business address is (“you” or “your”).
1. BACKGROUND. We and you are parties to that certain Multi-Unit
Development Agreement dated __________________________, 20___ (the "Multi-Unit
Development Agreement") that has been signed concurrently with the signing of this Rider. This
Rider is annexed to and forms part of the Multi-Unit Development Agreement. This Rider is
being signed because (a) you are a resident of North Dakota and the SMASHBURGER
RESTAURANT that you will develop under the Multi-Unit Development Agreement will be
located or operated in North Dakota; and/or (b) any of the offering or sales activity relating to the
Multi-Unit Development Agreement occurred in North Dakota.
2. RELEASES. The following is added to the end of Sections 1.B(5), 6.A.(1)(f)
and 6.E of the Multi-Unit Development Agreement:
Any release required as a condition of renewal and/or assignment/transfer will not
apply to the extent prohibited by the North Dakota Franchise Investment Law.
3. COVENANT NOT TO COMPETE/NON SOLICITATION. The following is
added to the end of Section 7.C of the Multi-Unit Development Agreement:
Covenants not to compete such as those mentioned above are generally
considered unenforceable in the State of North Dakota; however, we will enforce
the covenants to the maximum extent the law allows.
4. ARBITRATION. The first paragraph of Section 9.A of the Multi-Unit
Development Agreement is amended to read as follows:
A. ARBITRATION. We and you agree that all controversies,
disputes, or claims between us and our affiliates, and our and their respective
shareholders, officers, directors, agents, or employees, and you (or your owners,
guarantors, Affiliates, or employees) arising out of or related to:
(1) this Agreement or any other agreement between you (or your
owners) and us (or our affiliates);
(2) our relationship with you; or
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1 2
(3) the scope or validity of this Agreement or any other agreement
between you (or your owners) and us (or our affiliates) or any
provision of any such agreements (including the validity and scope
of the arbitration obligation under this Section 9.A, which we and
you acknowledge is to be determined by an arbitrator, not a court),
must be submitted for binding arbitration, on demand of either party, to the American
Arbitration Association. The arbitration proceedings will be conducted by one arbitrator
and, except as this Section otherwise provides, according to the then current Commercial
Arbitration Rules of the American Arbitration Association. All proceedings will be
conducted at a suitable location chosen by the arbitrator in or within 50 miles of our then
current principal place of business (currently, Denver, Colorado); provided, however, that
to the extent otherwise required by the North Dakota Franchise Investment Law (unless
such a requirement is preempted by the Federal Arbitration Act), arbitration shall be held
at a site to which we and you mutually agree. All matters relating to arbitration will be
governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.).
5. APPLICABLE LAW. Section 10.F of the Multi-Unit Development Agreement
is deleted and replaced with the following:
This Agreement will be construed and interpreted under the laws of the State of
Colorado, without regard to its conflicts of laws rules, except to the extent
governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C.
Section 1051 et seq.) and except as otherwise required by North Dakota Law.
6. CONSENT TO JURISDICTION. The following is added to the end of Section
9.B of the Multi-Unit Development Agreement:
NOTWITHSTANDING THE FOREGOING, TO THE EXTENT
REQUIRED BY THE NORTH DAKOTA FRANCHISE INVESTMENT
LAW, YOU MAY BRING AN ACTION IN NORTH DAKOTA FOR
CLAIMS ARISING UNDER THE NORTH DAKOTA FRANCHISE
INVESTMENT LAW.
7. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL. To the extent
required by the North Dakota Franchise Investment Law, Section 9.C of the Multi-Unit
Development Agreement is deleted.
8. LIMITATIONS OF CLAIMS. The following is added to the end of the first
paragraph of Section 9.E of the Multi-Unit Development Agreement:
THE STATUTES OF LIMITATIONS UNDER NORTH DAKOTA LAW
APPLIES WITH RESPECT TO CLAIMS ARISING UNDER THE NORTH
DAKOTA FRANCHISE INVESTMENT LAW.
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1 3
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Multi-Unit Development
Agreement.
SMASHBURGER
FRANCHISING LLC, a Delaware
limited liability company
By:
Title:
Dated:____________________________
MULTI-UNIT DEVELOPER
(if a corporation, limited liability or
partnership):
[Name]
By:
[Name] Title: _____________________________
Dated:
(IF INDIVIDUALS):
[Signature]
[Print Name]
Dated:
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1
RIDER TO THE SMASHBURGER FRANCHISING LLC
MULTI-UNIT DEVELOPMENT AGREEMENT
FOR USE IN RHODE ISLAND
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and __________________________________________________, whose principal
business address is (“you” or “your”).
1. BACKGROUND. We and you are parties to that certain Multi-Unit
Development Agreement dated __________________________, 20____ (the "Multi-Unit
Development Agreement") that has been signed concurrently with the signing of this Rider. This
Rider is annexed to and forms part of the Multi-Unit Development Agreement. This Rider is
being signed because (a) you are domiciled in Rhode Island and the SMASHBURGER
RESTAURANT that you will develop under the Multi-Unit Development Agreement will be
located in Rhode Island; and/or (b) any of the offering or sales activity relating to the Multi-Unit
Development Agreement occurred in Rhode Island.
2. APPLICABLE LAW. Section 10.F of the Multi-Unit Development Agreement
is deleted and replaced with the following:
This Agreement will be construed and interpreted under the laws of the State of
Colorado, without regard to its conflicts of laws rules, except to the extent
governed by the United States Trademark Act of 1946 (Lanham Act, 15 U.S.C.
Section 1051 et seq.) and except that to the extent required by applicable law,
Rhode Island law will apply to claims arising under the Rhode Island Franchise
Investment Act.
3. CONSENT TO JURISDICTION. The following is added at the end of
Section 9.B of the Multi-Unit Development Agreement:
NOTWITHSTANDING THE FOREGOING, TO THE EXTENT
REQUIRED BY APPLICABLE LAW, YOU MAY BRING AN ACTION IN
RHODE ISLAND FOR CLAIMS ARISING UNDER THE RHODE ISLAND
FRANCHISE INVESTMENT ACT
[The remainder of this page is intentionally left blank.]
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1031.002.006/46349.1 2
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Multi-Unit Development
Agreement.
SMASHBURGER
FRANCHISING LLC, a Delaware
limited liability company
By:
Title:
Dated:____________________________
MULTI-UNIT DEVELOPER
(if a corporation, limited liability or
partnership):
[Name]
By:
[Name] Title: _____________________________
Dated:
(IF INDIVIDUALS):
[Signature]
[Print Name]
Dated:
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1031.002.006/46349.1
RIDER TO THE SMASHBURGER FRANCHISING LLC
MULTI-UNIT DEVELOPMENT AGREEMENT
FOR USE IN WASHINGTON
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and __________________________________________________, whose principal
business address is (“you” or “your”).
1. BACKGROUND. We and you are parties to that certain Multi-Unit
Development Agreement dated __________________________, 20____ (the "Multi-Unit
Development Agreement") that has been signed concurrently with the signing of this Rider. This
Rider is annexed to and forms part of the Multi-Unit Development Agreement. This Rider is
being signed because (a) you are domiciled in Washington; and/or (b) the SMASHBURGER
RESTAURANT that you will develop under the Multi-Unit Development Agreement will be
located or operated in Washington; and/or (c) any of the offering or sales activity relating to the
Multi-Unit Development Agreement occurred in Washington.
2. WASHINGTON LAW. The following paragraphs are added to the end of the
Multi-Unit Development Agreement:
In recognition of the requirements of the Washington Franchise
Investment Protection Act (the “Act”) and the rules and regulations promulgated
thereunder, the Franchise Agreement shall be modified as follows:
The State of Washington has a statute, RCW 19.100.180, which might
supersede this Agreement in your relationship with us, including the areas of
termination and renewal of your franchise. There might also be court decisions
which supersede this Agreement in your relationship with us, including
termination and renewal of your franchise.
In the event of a conflict of laws, to the extent required by the Act, the
provisions of the Act, Chapter 19.100 RCW, shall prevail.
To the extent required by the Act, a release or waiver of rights executed by
Franchisee shall not include rights under the Act, except when executed pursuant
to a negotiated settlement after the Franchise Agreement is in effect and where the
parties are represented by independent counsel. Provisions such as those which
unreasonably restrict or limit the statute of limitations period for claims under the
Act, or rights or remedies under the Act, such as a right to a jury trial, might not
be enforceable.
To the extent required by the Act, transfer fees are collectable to the extent
that they reflect Franchisor's reasonable estimate or actual costs in effecting a
transfer.
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1031.002.006/46349.1 2
IN WITNESS WHEREOF, the parties have executed and delivered this Rider
on the dates noted below, to be effective as of the effective date of the Multi-Unit Development
Agreement.
SMASHBURGER
FRANCHISING LLC, a Delaware
limited liability company
By:
Title:
Dated:____________________________
MULTI-UNIT DEVELOPER
(if a corporation, limited liability or
partnership):
[Name]
By:
[Name] Title: _____________________________
Dated:
(IF INDIVIDUALS):
[Signature]
[Print Name]
Dated:
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1031.002.006/46349.1
THE FOLLOWING PAGES IN THIS EXHIBIT ARE
STATE-SPECIFIC RIDERS TO THE
FRANCHISE AGREEMENT
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RIDER TO THE SMASHBURGER FRANCHISING LLC
FRANCHISE AGREEMENT
FOR USE IN ILLINOIS
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and __________________________________________________, whose principal
business address is (“you” or “your”).
1. BACKGROUND. We and you are parties to that certain Franchise Agreement
dated __________________________, 20___ (the "Franchise Agreement") that has been signed
concurrently with the signing of this Rider. This Rider is annexed to and forms part of the
Franchise Agreement. This Rider is being signed because (a) any of the offering or sales activity
relating to the Franchise Agreement occurred in Illinois and the SMASHBURGER
RESTAURANT that you will operate under the Franchise Agreement will be located in Illinois,
and/or (b) you are domiciled in Illinois.
2. GOVERNING LAW. Section 17.H of the Franchise Agreement is deleted and
replaced with the following:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES
TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051 ET
SEQ.), OR OTHER UNITED STATES FEDERAL LAW, THIS AGREEMENT,
THE FRANCHISE, AND ALL CLAIMS ARISING FROM THE RELATIONSHIP
BETWEEN US AND YOU WILL BE GOVERNED BY THE LAWS OF THE
STATE OF ILLINOIS WITHOUT REGARD TO ITS CONFLICT OF LAWS
RULES, EXCEPT THAT (1) ANY LAW REGULATING THE SALE OF
FRANCHISES OR GOVERNING THE RELATIONSHIP OF A FRANCHISOR
AND ITS FRANCHISEE WILL NOT APPLY UNLESS ITS JURISDICTIONAL
REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT REFERENCE TO
THIS SECTION, AND (2) THE ENFORCEABILITY OF THOSE PROVISIONS
OF THIS AGREEMENT WHICH RELATE TO RESTRICTIONS ON YOU AND
YOUR OWNERS’ COMPETITIVE ACTIVITIES WILL BE GOVERNED BY
THE LAWS OF THE STATE IN WHICH YOUR RESTAURANT IS LOCATED.
3. CONSENT TO JURISDICTION. Section 17.I of the Franchise Agreement is
deleted in its entirety.
4. LIMITATIONS OF CLAIMS. Section 17.M of the Franchise Agreement is
amended by adding the following:
However, nothing contained in this section shall constitute a condition, stipulation, or
provision purporting to bind any person to waive compliance with any provision of the
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Ex. J – State Addenda/Rider
1031.002.006/46349.1 2
Illinois Franchise Disclosure Act or any other law of the State of Illinois, to the extent
applicable.
5. CONSTRUCTION. The first paragraph of Section 17.O of the Franchise
Agreement is deleted and replaced with the following:
The preambles and exhibits are a part of this Agreement which, together with the System
Standards contained in the Standards of Operations Manual (which may be periodically
modified, as provided in Sections 4.C, 8.H, and 17.K above), constitutes our and your
entire agreement. Other than the representations in the Disclosure Document you
received from us, there are no other oral or written understandings or agreements between
us and you, or oral or written representations by us, relating to the subject matter of this
Agreement, the franchise relationship, or your Restaurant (any understandings or
agreements reached, or any representations made, before this Agreement are superseded
by this Agreement). Any policies that we adopt and implement from time to time to
guide us in our decision-making are subject to change, are not a part of this Agreement,
and are not binding on us. Except as provided in Section 16.D., nothing in this
Agreement is intended or deemed to confer any rights or remedies upon any person or
legal entity not a party to this Agreement.
6. ILLINOIS FRANCHISE DISCLOSURE ACT. The following language is
added as Section 17.Q of the Franchise Agreement:
Q. ILLINOIS FRANCHISE DISCLOSURE ACT. Section 41 of the Illinois
Franchise Disclosure Act states that any condition, stipulation, or provision purporting to
bind any person acquiring any franchise to waive compliance with any provision of the
Act or any other law of Illinois is void.
[The remainder of this page is intentionally left blank.]
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1031.002.006/46349.1 3
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Franchise Agreement.
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By:
Name:
Title:
DATE:
FRANCHISE OWNER
(IF YOU ARE A CORPORATION,
LIMITED LIABILITY COMPANY, OR
PARTNERSHIP):
By:
Name:
Title:
(IF YOU ARE AN INDIVIDUAL AND
NOT A LEGAL ENTITY):
[Signature]
[Print Name]
Dated:
[Signature]
[Print Name]
Dated:
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RIDER TO THE SMASHBURGER FRANCHISING LLC
FRANCHISE AGREEMENT
FOR USE IN MARYLAND
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and __________________________________________________, whose principal
business address is (“you” or “your”).
1. BACKGROUND. We and you are parties to that certain Franchise Agreement
dated __________________________, 20___ (the "Franchise Agreement") that has been signed
concurrently with the signing of this Rider. This Rider is annexed to and forms part of the
Franchise Agreement. This Rider is being signed because (a) you are domiciled in Maryland,
and/or (b) the SMASHBURGER RESTAURANT that you will operate under the Franchise
Agreement will be located in Maryland.
2. NON-WAIVER. The following is added to the end of Section 1.B of the
Franchise Agreement:
To the extent so required by applicable law, these acknowledgments are not
intended to act, nor shall they act, as a release, estoppel or waiver of any liability
incurred under the Maryland Franchise Registration and Disclosure Law.
3. RELEASES. The following is added to the end of Sections 12.C(9) and 13.C of
the Franchise Agreement:
Pursuant to COMAR 02.02.08.16L, any release required as a condition of renewal
and/or assignment/transfer will not apply to claims arising under the Maryland
Franchise Registration and Disclosure Law.
4. INSOLVENCY. The following is added to the end of Section 14.B(18) of the
Franchise Agreement:
; however, we and you acknowledge that certain aspects of this provision might
not be enforceable under federal bankruptcy law (11 U.S.C. Sections 101 et seq.).
5. GOVERNING LAW. Section 17.H of the Franchise Agreement is deleted and
replaced with the following:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES
TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051
ET SEQ.), OR OTHER UNITED STATES FEDERAL LAW, THIS
AGREEMENT, THE FRANCHISE, AND ALL CLAIMS ARISING FROM
THE RELATIONSHIP BETWEEN US AND YOU WILL BE GOVERNED
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1
2
BY THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD
TO ITS CONFLICT OF LAWS RULES, EXCEPT THAT (1) ANY
COLORADO LAW REGULATING THE SALE OF FRANCHISES OR
GOVERNING THE RELATIONSHIP OF A FRANCHISOR AND ITS
FRANCHISEE WILL NOT APPLY UNLESS ITS JURISDICTIONAL
REQUIREMENTS ARE MET INDEPENDENTLY WITHOUT
REFERENCE TO THIS SECTION, AND (2) TO THE EXTENT
REQUIRED BY APPLICABLE LAW, MARYLAND LAW WILL APPLY
TO CLAIMS ARISING UNDER THE MARYLAND FRANCHISE
REGISTRATION AND DISCLOSURE LAW.
6. CONSENT TO JURISDICTION. Section 17.I of the Franchise Agreement is
deleted and replaced with the following:
SUBJECT TO THE PROVISIONS BELOW, YOU AND YOUR OWNERS
AGREE THAT ALL ACTIONS ARISING UNDER THIS AGREEMENT
OR OTHERWISE AS A RESULT OF THE RELATIONSHIP BETWEEN
YOU AND US MUST BE COMMENCED IN A COURT OF GENERAL
JURISDICTION NEAREST TO OUR THEN CURRENT PRINCIPAL
PLACE OF BUSINESS (CURRENTLY DENVER, COLORADO), AND
YOU (AND EACH OWNER) IRREVOCABLY SUBMIT TO THE
JURISDICTION OF THAT COURT AND WAIVE ANY OBJECTION
YOU (OR THE OWNER) MIGHT HAVE TO EITHER THE
JURISDICTION OF OR VENUE IN THAT COURT.
NOTWITHSTANDING THE FOREGOING, YOU MAY BRING AN
ACTION IN MARYLAND FOR CLAIMS ARISING UNDER THE
MARYLAND FRANCHISE REGISTRATION AND DISCLOSURE LAW.
7. LIMITATIONS OF CLAIMS. The following is added to the end of
Section 17.M of the Franchise Agreement:
; provided, however, that this limitation of claims shall not act to reduce the
3 year statute of limitations afforded you for bringing a claim under the Maryland
Franchise Registration and Disclosure Law.
[The remainder of this page is intentionally left blank.]
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1
3
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Franchise Agreement.
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By:
Name:
Title:
DATE:
FRANCHISE OWNER
(IF YOU ARE A CORPORATION,
LIMITED LIABILITY COMPANY, OR
PARTNERSHIP):
By:
Name:
Title:
(IF YOU ARE AN INDIVIDUAL AND
NOT A LEGAL ENTITY):
[Signature]
[Print Name]
Dated:
[Signature]
[Print Name]
Dated:
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1
RIDER TO THE SMASHBURGER FRANCHISING LLC
FRANCHISE AGREEMENT
FOR USE IN MINNESOTA
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and __________________________________________________, whose principal
business address is (“you” or “your”).
1. BACKGROUND. We and you are parties to that certain Franchise Agreement
dated __________________________, 20___ (the "Franchise Agreement") that has been signed
concurrently with the signing of this Rider. This Rider is annexed to and forms part of the
Franchise Agreement. This Rider is being signed because (a) the SMASHBURGER
RESTAURANT that you will operate under the Franchise Agreement will be located in
Minnesota; and/or (b) any of the offering or sales activity relating to the Franchise Agreement
occurred in Minnesota.
2. RELEASES. The following is added to the end of Section 12.C(9) and
Section 13.C of the Franchise Agreement:
Any release required as a condition of renewal and/or assignment/transfer will not
apply to the extent prohibited by the Minnesota Franchises Law.
3. RENEWAL AND TERMINATION. The following is added to the end of
Sections 13.B and 14.B of the Franchise Agreement:
However, with respect to franchises governed by Minnesota law, we will comply
with Minn. Stat. Sec. 80C.14, Subds. 3, 4 and 5 which require, except in certain
specified cases, that you be given 90 days' notice of termination (with 60 days to
cure) and 180 days' notice of non-renewal of this Agreement.
4. REMEDIES. The following language is added to the end of Section 15.F of the
Franchise Agreement
We and you acknowledge that certain parts of this provision might not be
enforceable under Minn. Rule Part 2860.4400J. However, we and you agree to
enforce the provision to the extent the law allows.
5. INJUNCTIVE RELIEF. Section 17.K of the Franchise Agreement is deleted
and replaced with the following:
Nothing in this Agreement bars our right to obtain specific performance of the
provisions of this Agreement and injunctive relief against threatened conduct that
will cause us, the Marks and/or the Franchise System loss or damage, under
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1
2
customary equity rules, including applicable rules for obtaining restraining orders
and preliminary injunctions. You agree that we may seek such injunctive relief in
addition to such further or other relief as may be available at law or in equity.
You agree that your only remedy if an injunction is entered against you will be
the dissolution of that injunction, if warranted, upon due hearing (all claims for
damages by injunction being expressly waived hereby). Also, a court will
determine if a bond is required.
6. LIMITATIONS OF CLAIMS. The following is added to the end of
Section 17.M of the Franchise Agreement:
; provided, however, that Minnesota law provides that no action may be
commenced under Minn. Stat. Sec. 80C.17 more than 3 years after the cause of
action accrues.
7. MINNESOTA LAW. Notwithstanding anything to the contrary contained in the
Franchise Agreement, Minn. Stat. Sec. 80C.21 and Minn. Rule 2860.4400J prohibit us from
requiring you to waive your rights to a jury trial or to waive your rights to any procedure, forum
or remedies provided for by the laws of the jurisdiction, or to consent to liquidated damages,
termination penalties or judgment notes.
[The remainder of this page is intentionally left blank.]
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1
3
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Franchise Agreement.
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By:
Name:
Title:
DATE:
FRANCHISE OWNER
(IF YOU ARE A CORPORATION,
LIMITED LIABILITY COMPANY, OR
PARTNERSHIP):
By:
Name:
Title:
(IF YOU ARE AN INDIVIDUAL AND
NOT A LEGAL ENTITY):
[Signature]
[Print Name]
Dated:
[Signature]
[Print Name]
Dated:
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1
RIDER TO THE
SMASHBURGER FRANCHISING LLC
FRANCHISE AGREEMENT FOR USE IN THE
STATE OF NEW YORK
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and __________________________________________________, whose principal
business address is (“you” or “your”).
1. BACKGROUND. We and you are parties to that certain Franchise Agreement
dated _______________________________, (the "Franchise Agreement") that has been signed
concurrently with this Rider. This Rider is being signed because (a) your are domiciled in the
State of New York and the SMASHBURGER RESTAURANT that you will operate under the
Franchise Agreement will be located in New York, and/or (b) any of the offering or sales activity
relating to the Franchise Agreement occurred in New York.
2. TRANSFER BY US. The following language is added to the end of
Section 12.A of the Franchise Agreement:
However, to the extent required by applicable law, no transfer will be made
except to an assignee who, in our good faith judgment, is willing and able to
assume our obligations under this Agreement.
3. RELEASES. The following language is added to the end of Sections 12.C(9)
and 13.C of the Franchise Agreement:
Notwithstanding the foregoing all rights enjoyed by you and any causes of action
arising in your favor from the provisions of Article 33 of the General Business
Law of the State of New York and the regulations issued thereunder shall remain
in force to the extent required by the non-waiver provisions of GBL Sections
687.4 and 687.5, as amended.
4. TERMINATION OF AGREEMENT - BY YOU. The following language is
added to the end of Section 14.A of the Franchise Agreement:
You also may terminate this Agreement on any grounds available by law under
the provisions of Article 33 of the General Business Law of the State of New
York.
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1 2
5. GOVERNING LAW. The following statement is added at the end of
Section 17.H of the Franchise Agreement:
This Section shall not be considered a waiver of any right conferred upon you by
the provisions of Article 33 of the New York State General Business Law, as
amended, and the regulations issued thereunder.
6. CONSENT TO JURISDICTION. The following is added to the end of
Section 17.I of the Franchise Agreement:
This Section shall not be considered a waiver of any right conferred upon you by
the provisions of Article 33 of the New York State General Business Law, as
amended, and the regulations issued thereunder.
[The remainder of this page is intentionally left blank.]
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1 3
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Franchise Agreement.
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By:
Name:
Title:
DATE:
FRANCHISE OWNER
(IF YOU ARE A CORPORATION,
LIMITED LIABILITY COMPANY, OR
PARTNERSHIP):
By:
Name:
Title:
(IF YOU ARE AN INDIVIDUAL AND
NOT A LEGAL ENTITY):
[Signature]
[Print Name]
Dated:
[Signature]
[Print Name]
Dated:
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1
RIDER TO THE SMASHBURGER FRANCHISING LLC
FRANCHISE AGREEMENT
FOR USE IN NORTH DAKOTA
THIS RIDER is made and entered into as of the _____day of ________________,
20___ (the “Effective Date”) (regardless of the dates of the parties’ signatures) by and between
SMASHBURGER FRANCHISING LLC, a Colorado limited liability company with its
principal business address at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado
80202 ("we," “us,” or “our”), and _________________________________________________,
whose principal business address is (“you”
or “your”).
1. BACKGROUND. We and you are parties to that certain Franchise Agreement
dated __________________________, 20___ (the "Franchise Agreement") that has been signed
concurrently with the signing of this Rider. This Rider is annexed to and forms part of the
Franchise Agreement. This Rider is being signed because (a) you are a resident of North Dakota
and the SMASHBURGER RESTAURANT that you will operate under the Franchise Agreement
will be located or operated in North Dakota; and/or (b) any of the offering or sales activity
relating to the Franchise Agreement occurred in North Dakota.
2. RELEASES. The following is added to the end of Sections 12.C(9) and 13.C of
the Franchise Agreement:
Any release required as a condition of renewal and/or assignment/transfer will not
apply to the extent prohibited by the North Dakota Franchise Investment Law.
3. COVENANT NOT TO COMPETE. The following is added to the end of
Section 15.D of the Franchise Agreement:
Covenants not to compete such as those mentioned above are generally
considered unenforceable in the State of North Dakota; however, we will enforce
the covenants to the maximum extent the law allows.
4. REMEDIES. The following language is added to the end of Section 15.F of the
Franchise Agreement:
We and you acknowledge that certain parts of this provision might not be
enforceable under the North Dakota Franchise Investment Law. However, we
and you agree to enforce the provision to the extent the law allows.
5. ARBITRATION. The first paragraph of Section 17.G of the Franchise
Agreement is amended to read as follows:
A. ARBITRATION. We and you agree that all controversies,
disputes, or claims between us and our affiliates, and our and their respective
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1 2
shareholders, officers, directors, directors, agents, and employees, and you (and
your owners, guarantors, Affiliates, and employees) arising out of or related to:
(1) this Agreement or any other agreement between you (or your
owners) and us (or our affiliates);
(2) our relationship with you;
(3) the scope or validity of this Agreement or any other agreement
between you (or your owners) and us (or our affiliates) or any
provision of any such agreements (including the validity and scope
of the arbitration obligation under this Section 17.G, which we and
you acknowledge is to be determined by an arbitrator, not a court);
or
(4) any System Standard,
must be submitted for binding arbitration, on demand by either party, to the American
Arbitration Association. The arbitration proceedings will be conducted by one arbitrator
and, except as this Section otherwise provides, according to the then-current Commercial
Arbitration Rules of the American Arbitration Association. All proceedings will be
conducted at a suitable location chosen by the arbitrator in or within 50 miles of our then
current principal place of business (currently, Denver, Colorado); provided, however, that
to the extent otherwise required by the North Dakota Franchise Investment Law (unless
such a requirement is preempted by the Federal Arbitration Act), arbitration shall be held
at a site to which we and you mutually agree. All matters relating to arbitration will be
governed by the Federal Arbitration Act (9 U.S.C. §§ 1 et seq.).
5. GOVERNING LAW. Section 17.H of the Franchise Agreement is deleted and
replaced with the following:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES
TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051
ET SEQ.), OR OTHER UNITED STATES FEDERAL LAW, AND EXCEPT
AS OTHERWISE REQUIRED BY NORTH DAKOTA LAW, THIS
AGREEMENT, THE FRANCHISE, AND ALL CLAIMS ARISING FROM
THE RELATIONSHIP BETWEEN US AND YOU WILL BE GOVERNED
BY THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD
TO ITS CONFLICT OF LAWS RULES, EXCEPT THAT ANY STATE
LAW REGULATING THE SALE OF FRANCHISES OR GOVERNING
THE RELATIONSHIP OF A FRANCHISOR AND ITS FRANCHISEE
WILL NOT APPLY UNLESS ITS JURISDICTIONAL REQUIREMENTS
ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS
PARAGRAPH.
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1 3
6. CONSENT TO JURISDICTION. The following is added to the end of Section
17.I of the Franchise Agreement:
NOTWITHSTANDING THE FOREGOING, TO THE EXTENT
REQUIRED BY THE NORTH DAKOTA FRANCHISE INVESTMENT
LAW, AND SUBJECT TO YOUR ARBITRATION OBLIGATIONS, YOU
MAY BRING AN ACTION IN NORTH DAKOTA FOR CLAIMS ARISING
UNDER THE NORTH DAKOTA FRANCHISE INVESTMENT LAW.
7. WAIVER OF PUNITIVE DAMAGES AND JURY TRIAL. To the extent
required by the North Dakota Franchise Investment Law, Section 17.J of the Franchise
Agreement is deleted.
8. LIMITATIONS OF CLAIMS. The following is added to the end of
Section 17.M of the Franchise Agreement:
The statutes of limitations under North Dakota Law applies with respect to claims
arising under the North Dakota Franchise Investment Law.
[The remainder of this page is intentionally left blank.]
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1 4
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Franchise Agreement.
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By:
Name:
Title:
DATE:
FRANCHISE OWNER
(IF YOU ARE A CORPORATION,
LIMITED LIABILITY COMPANY, OR
PARTNERSHIP):
By:
Name:
Title:
(IF YOU ARE AN INDIVIDUAL AND
NOT A LEGAL ENTITY):
[Signature]
[Print Name]
Dated:
[Signature]
[Print Name]
Dated:
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1
RIDER TO THE SMASHBURGER FRANCHISING LLC
FRANCHISE AGREEMENT
FOR USE IN RHODE ISLAND
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and _________________________________________________________, whose
principal business address is (“you” or
“your”).
1. BACKGROUND. We and you are parties to that certain Franchise Agreement
dated __________________________, 20____ (the "Franchise Agreement") that has been
signed concurrently with the signing of this Rider. This Rider is annexed to and forms part of
the Franchise Agreement. This Rider is being signed because (a) you are domiciled in Rhode
Island and the SMASHBURGER RESTAURANT that you will operate under the Franchise
Agreement will be located in Rhode Island; and/or (b) any of the offering or sales activity
relating to the Franchise Agreement occurred in Rhode Island.
2. GOVERNING LAW. Section 17.H of the Franchise Agreement is deleted and
replaced with the following:
EXCEPT TO THE EXTENT GOVERNED BY THE UNITED STATES
TRADEMARK ACT OF 1946 (LANHAM ACT, 15 U.S.C. SECTIONS 1051
ET SEQ.), OR OTHER UNITED STATES FEDERAL LAW, THIS
AGREEMENT, THE FRANCHISE, AND ALL CLAIMS ARISING FROM
THE RELATIONSHIP BETWEEN US AND YOU WILL BE GOVERNED
BY THE LAWS OF THE STATE OF COLORADO, WITHOUT REGARD
TO ITS CONFLICT OF LAWS RULES, EXCEPT THAT (1) ANY STATE
LAW REGULATING THE SALE OF FRANCHISES OR GOVERNING
THE RELATIONSHIP OF A FRANCHISOR AND ITS FRANCHISEE
WILL NOT APPLY UNLESS ITS JURISDICTIONAL REQUIREMENTS
ARE MET INDEPENDENTLY WITHOUT REFERENCE TO THIS
SECTION, AND (2) TO THE EXTENT REQUIRED BY APPLICABLE
LAW, RHODE ISLAND LAW WILL APPLY TO CLAIMS ARISING
UNDER THE RHODE ISLAND FRANCHISE INVESTMENT ACT.
3. CONSENT TO JURISDICTION. The following is added at the end of
Section 17.I of the Franchise Agreement:
NOTWITHSTANDING THE FOREGOING, TO THE EXTENT
REQUIRED BY APPLICABLE LAW, YOU MAY BRING AN ACTION IN
RHODE ISLAND FOR CLAIMS ARISING UNDER THE RHODE ISLAND
FRANCHISE INVESTMENT ACT
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1 2
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Franchise Agreement.
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By:
Name:
Title:
DATE:
FRANCHISE OWNER
(IF YOU ARE A CORPORATION,
LIMITED LIABILITY COMPANY, OR
PARTNERSHIP):
By:
Name:
Title:
(IF YOU ARE AN INDIVIDUAL AND
NOT A LEGAL ENTITY):
[Signature]
[Print Name]
Dated:
[Signature]
[Print Name]
Dated:
Smashburger 06/2012 FDD Ex. J – State Addenda/Rider
1031.002.006/46349.1
RIDER TO THE SMASHBURGER FRANCHISING LLC
FRANCHISE AGREEMENT
FOR USE IN WASHINGTON
THIS RIDER is made and entered into by and between SMASHBURGER
FRANCHISING LLC, a Colorado limited liability company with its principal business address
at 1515 Arapahoe Street, Tower One, 10th Floor, Denver, Colorado 80202 ("we," “us,” or
“our”), and _________________________________________________________, whose
principal business address is (“you” or
“your”).
1. BACKGROUND. We and you are parties to that certain Franchise Agreement
dated __________________________, 20____ (the "Franchise Agreement") that has been
signed concurrently with the signing of this Rider. This Rider is annexed to and forms part of
the Franchise Agreement. This Rider is being signed because (a) you are domiciled in
Washington; and/or (b) the SMASHBURGER RESTAURANT that you will operate under the
Franchise Agreement will be located or operated in Washington; and/or (c) any of the offering or
sales activity relating to the Franchise Agreement occurred in Washington.
2. WASHINGTON LAW. The following paragraphs are added to the end of the
Franchise Agreement:
In recognition of the requirements of the Washington Franchise
Investment Protection Act (the “Act”) and the rules and regulations promulgated
thereunder, the Franchise Agreement shall be modified as follows:
The State of Washington has a statute, RCW 19.100.180, which might
supersede this Agreement in your relationship with us, including the areas of
termination and renewal of your franchise. There might also be court decisions
which supersede this Agreement in your relationship with us, including
termination and renewal of your franchise.
In the event of a conflict of laws, to the extent required by the Act, the
provisions of the Act, Chapter 19.100 RCW, shall prevail.
To the extent required by the Act, a release or waiver of rights executed by
Franchisee shall not include rights under the Act, except when executed pursuant
to a negotiated settlement after the Franchise Agreement is in effect and where the
parties are represented by independent counsel. Provisions such as those which
unreasonably restrict or limit the statute of limitations period for claims under the
Act, or rights or remedies under the Act, such as a right to a jury trial, might not
be enforceable.
To the extent required by the Act, transfer fees are collectable to the extent
that they reflect Franchisor's reasonable estimate or actual costs in effecting a
transfer.
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1 2
IN WITNESS WHEREOF, the parties have executed and delivered this Rider on the
dates noted below, to be effective as of the effective date of the Franchise Agreement.
SMASHBURGER FRANCHISING LLC,
a Delaware limited liability company
By:
Name:
Title:
DATE:
FRANCHISE OWNER
(IF YOU ARE A CORPORATION,
LIMITED LIABILITY COMPANY, OR
PARTNERSHIP):
By:
Name:
Title:
(IF YOU ARE AN INDIVIDUAL AND
NOT A LEGAL ENTITY):
[Signature]
[Print Name]
Dated:
[Signature]
[Print Name]
Dated:
Smashburger 06/2012 FDD
Ex. J – State Addenda/Rider
1031.002.006/46349.1
NEW YORK REPRESENTATIONS PAGE
FRANCHISOR REPRESENTS THAT THIS PROSPECTUS DOES NOT KNOWINGLY
OMIT ANY MATERIAL FACT OR CONTAIN ANY UNTRUE STATEMENT OF A
MATERIAL FACT.
Smashburger 06/2012 FDD
Ex. K – Receipts 1031.002.006/46351.1
ITEM 23
RECEIPT
This Disclosure Document summarizes certain provisions of the Multi-Unit Development Agreement and Franchise
Agreement and other information in plain language. Read this Disclosure Document and all agreements carefully.
If Smashburger Franchising LLC offers you a franchise, it must provide this Disclosure Document to you 14
calendar-days before you sign a binding agreement with, or make a payment to, the franchisor or an affiliate in
connection with the proposed franchise sale. Under Iowa law, we must give you this disclosure document at the earlier
of our 1st personal meeting or 14 calendar days before you sign an agreement with, or make a payment to, us or an
affiliate in connection with the proposed franchise sale. Under New York and Rhode Island law, we must provide this
Disclosure Document at the earlier of the 1st personal meeting or 10 business days before you sign a binding
agreement with, or make a payment to, us or an affiliate in connection with the proposed franchise sale.
Michigan requires that we give you this Disclosure Document at least 10 business days before the execution of any
binding franchise, development or other agreement or the payment of any consideration, whichever occurs first.
If Smashburger Franchising LLC does not deliver this Disclosure Document on time or if it contains a false or
misleading statement, or a material omission, a violation of federal and state law may have occurred and should be
reported to the Federal Trade Commission, Washington, D.C. 20580 and the appropriate state agency identified on
Exhibit A.
The Franchisor is Smashburger Franchising LLC, located at 1515 Arapahoe Street, Tower One, 10th
Floor, Denver, Colorado
80202. Its telephone number is (303) 633-1500.
Issuance date: February 28, 2012; as amended June 14, 2012. (The effective dates in the franchise registration states are
noted on the third page of this Disclosure Document.)
Franchise sellers offering the franchise: SMASHBURGER FRANCHISING LLC, 1515 Arapahoe St., Tower One, 10th
Floor, Denver, CO 80202, (303) 633-1500. In addition, please identify the individual franchise seller who offered you a
Smashburger franchise in the space provided below:
Brett Willis
Smashburger Franchising LLC
1515 Arapahoe St.
Tower One, 10th Floor
Denver, CO 80202
(303) 633-1500
Amy Weasler
Smashburger Franchising LLC
1515 Arapahoe St.
Tower One, 10th Floor
Denver, CO 80202
(303) 633-1500
____________________
Smashburger Franchising LLC
1515 Arapahoe St.
Tower One, 10th Floor
Denver, CO 80202
(303) 633-1500
____________________
Smashburger Franchising LLC
1515 Arapahoe St.
Tower One, 10th Floor
Denver, CO 80202
(303) 633-1500
We authorize the respective parties identified on Exhibit A to receive service of process for Smashburger Franchising LLC in
the particular state.
I received a disclosure document dated February 28, 2012; as amended June 14, 2012 that included the following Exhibits:
EXHIBIT A State Administrators/Agents for Service of
Process
EXHIBIT B Multi-Unit Development Agreement
EXHIBIT C Franchise Agreement
EXHIBIT D List of Franchisees
EXHIBIT E List of Franchisees Who Have Left the
System or Not Communicated
EXHIBIT F Financial Statements
EXHIBIT G Table of Contents to Operations Manual
EXHIBIT H Representations and Acknowledgement
Statement
EXHIBIT I Sample General Release
EXHIBIT J State Addenda and Agreement Riders
EXHIBIT K Receipts
PROSPECTIVE FRANCHISEE:
If a business entity: If an individual:
Name of Business Entity (Print Name):
By:
Its: Dated:
(Print Name):
Dated:
Smashburger 06/2012 FDD
Ex. K – Receipts 1031.002.006/46351.1
ITEM 23
RECEIPT
This Disclosure Document summarizes certain provisions of the Multi-Unit Development Agreement and Franchise
Agreement and other information in plain language. Read this Disclosure Document and all agreements carefully.
If Smashburger Franchising LLC offers you a franchise, it must provide this Disclosure Document to you 14
calendar-days before you sign a binding agreement with, or make a payment to, the franchisor or an affiliate in
connection with the proposed franchise sale. Under Iowa law, we must give you this disclosure document at the earlier
of our 1st personal meeting or 14 calendar days before you sign an agreement with, or make a payment to, us or an
affiliate in connection with the proposed franchise sale. Under New York and Rhode Island law, we must provide this
Disclosure Document at the earlier of the 1st personal meeting or 10 business days before you sign a binding
agreement with, or make a payment to, us or an affiliate in connection with the proposed franchise sale.
Michigan requires that we give you this Disclosure Document at least 10 business days before the execution of any
binding franchise, development or other agreement or the payment of any consideration, whichever occurs first.
If Smashburger Franchising LLC does not deliver this Disclosure Document on time or if it contains a false or
misleading statement, or a material omission, a violation of federal and state law may have occurred and should be
reported to the Federal Trade Commission, Washington, D.C. 20580 and the appropriate state agency identified on
Exhibit A.
The Franchisor is Smashburger Franchising LLC, located at 1515 Arapahoe Street, Tower One, 10th
Floor, Denver, Colorado
80202. Its telephone number is (303) 633-1500.
Issuance date: February 28, 2012; as amended June 14, 2012. (The effective dates in the franchise registration states are
noted on the third page of this Disclosure Document.)
Franchise sellers offering the franchise: SMASHBURGER FRANCHISING LLC, 1515 Arapahoe St., Tower One, 10th
Floor, Denver, CO 80202, (303) 633-1500. In addition, please identify the individual franchise seller who offered you a
Smashburger franchise in the space provided below:
Brett Willis
Smashburger Franchising LLC
1515 Arapahoe St.
Tower One, 10th Floor
Denver, CO 80202
(303) 633-1500
Amy Weasler
Smashburger Franchising LLC
1515 Arapahoe St.
Tower One, 10th Floor
Denver, CO 80202
(303) 633-1500
____________________
Smashburger Franchising LLC
1515 Arapahoe St.
Tower One, 10th Floor
Denver, CO 80202
(303) 633-1500
____________________
Smashburger Franchising LLC
1515 Arapahoe St.
Tower One, 10th Floor
Denver, CO 80202
(303) 633-1500
We authorize the respective parties identified on Exhibit A to receive service of process for Smashburger Franchising LLC in
the particular state.
I received a disclosure document dated February 28, 2012; as amended June 14, 2012 that included the following Exhibits:
EXHIBIT A State Administrators/Agents for Service of
Process
EXHIBIT B Multi-Unit Development Agreement
EXHIBIT C Franchise Agreement
EXHIBIT D List of Franchisees
EXHIBIT E List of Franchisees Who Have Left the
System or Not Communicated
EXHIBIT F Financial Statements
EXHIBIT G Table of Contents to Operations Manual
EXHIBIT H Representations and Acknowledgement
Statement
EXHIBIT I Sample General Release
EXHIBIT J State Addenda and Agreement Riders
EXHIBIT K Receipts
PROSPECTIVE FRANCHISEE:
If a business entity: If an individual:
Name of Business Entity (Print Name):
By:
Its: Dated:
(Print Name):
Dated: