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 [email protected]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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Franchise Disclosure Document for Smashburger Franchising, LLC
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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.
i
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TABLE OF CONTENTS
ITEM Page
ITEM 1 THE FRANCHISOR AND ANY PARENTS, PREDECESSORS, AND
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
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.
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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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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).
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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
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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
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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
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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.
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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
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
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
Smashburger – 06/2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
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
2 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
(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
3 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
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
4 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
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
5 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
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.
6 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
(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
7 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
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
8 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
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.
9 Smashburger –06/ 2012 FDD
Ex. B - Multi-Unit Development Agmt 1031.002.006/46340_6
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,
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
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
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.
- 4 -
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
- 6 -
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
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
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
Communication Standards ................................................................................................. StOps_18E-mail /Voice Mail ........................................................................................................StOps_18
Communication Board ..................................................................................................StOps_18
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
Crisis Team Responsibilities .............................................................................................crisis_11
Team Member Illness ........................................................................................................... crisis_12First Steps .......................................................................................................................crisis_12
Crisis Team Responsibilities .............................................................................................crisis_13
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 D: Death or Serious Injury Reaction Plan ............................................................ crisis_36RESPONSIBILITIES: .........................................................................................................crisis_36
APPENDIX E: Bomb Threats — Crisis Team .......................................................................... crisis_41
Menu reCipeS & proCedureSTable of Contents ...............................................................................................................menuR_2
Commonly Used Steps ........................................................................................................menuR_3Station Setup ................................................................................................................menuR_3
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
National Vendor List .........................................................................................................nro_16
Local Vendor Contact Information Template .....................................................................nro_17
Hiring Information ................................................................................................................. nro_18Management Team ..........................................................................................................nro_18
Team Members ................................................................................................................nro_18
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
Credit card EDC ................................................................................................................nro_59
smashburger.com
TOC_11
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
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
TOC_13
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
Company Code of Conduct ............................................................................................ NROszEE_5TM Code of Conduct ................................................................................................NROszEE_5
Safety and Sanitation ...................................................................................................... NROszEE_6Handwashing Basics ..................................................................................................NROszEE_6
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
Day Two: Sizzle Training ............................................................................................... NROszEE_13Food Show ..............................................................................................................NROszEE_13
Day Three: Sizzle Training ............................................................................................. NROszEE_19Menu Knowledge ....................................................................................................NROszEE_19
Day Four: Sizzle Training ............................................................................................... NROszEE_22Telephone Procedures..............................................................................................NROszEE_22
AM Shift..................................................................................................................NROszEE_22
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
Company Code of Conduct ............................................................................................NROszER_5TM Code of Conduct ............................................................................................... NROszER_5
Safety and Sanitation ......................................................................................................NROszER_6Handwashing Basics ................................................................................................. NROszER_6
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
Day Two: Sizzle Training ...............................................................................................NROszER_13Food Show ............................................................................................................. NROszER_13
Day Three: Sizzle Training .............................................................................................NROszER_19Menu Knowledge ................................................................................................... NROszER_19
Day Four: Sizzle Training ...............................................................................................NROszER_22Telephone Procedures............................................................................................. NROszER_22
AM Shift................................................................................................................. 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
smashburger.com
TOC_15
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
Company Code of Conduct ...........................................................................................NROsmEE_5TM Code of Conduct .............................................................................................. NROsmEE_5
Safety and Sanitation .....................................................................................................NROsmEE_6Handwashing Basics ................................................................................................ NROsmEE_6
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
Day Two: Smash Training .............................................................................................NROsmEE_12Food Show ............................................................................................................ NROsmEE_12
Day Three: Smash Training ..........................................................................................NROsmEE_15Prepare Kids Meals ................................................................................................ NROsmEE_15
Day Four: Smash Training ............................................................................................NROsmEE_18Debrief .................................................................................................................. NROsmEE_18
AM Shift................................................................................................................ NROsmEE_18
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
Company Code of Conduct .......................................................................................... NROsmER_5TM Code of Conduct ..............................................................................................NROsmER_5
Safety and Sanitation .................................................................................................... NROsmER_6Handwashing Basics ................................................................................................NROsmER_6
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
Day Two: Smash Training ............................................................................................ NROsmER_12Food Show ............................................................................................................NROsmER_12
Day Three: Smash Training ......................................................................................... NROsmER_15Prepare Kids Meals ................................................................................................NROsmER_15
Day Four: Smash Training ........................................................................................... NROsmER_18Debrief ..................................................................................................................NROsmER_18
AM Shift................................................................................................................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
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
Company Code of Conduct ..........................................................................................smburTM_12Equal Opportunity Employer .................................................................................. smburTM_12
Team Member Code of Conduct ..................................................................................smburTM_17Food Safety ............................................................................................................ smburTM_17
Safety/Reporting Of Injury ...........................................................................................smburTM_18
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
Team Member Leave ....................................................................................................smburTM_27Family/Medical Leaves ........................................................................................... smburTM_27
Other Leaves .......................................................................................................... smburTM_27
Looking Good ...............................................................................................................smburTM_29
Team Member Benefits .................................................................................................smburTM_34Meal Benefits ......................................................................................................... smburTM_34
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
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
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
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
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
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
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
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
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):